REGISTRATION NO. 33-53179
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 6, 1994
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 5
TO
FORM S-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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COLLINS & AIKMAN HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3489233
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
8320 University Executive Park, Suite 102, Charlotte, North Carolina 28262 Tel.
(704) 548-2350
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
ELIZABETH R. PHILIPP, ESQ.
Executive Vice President, General Counsel and Secretary
COLLINS & AIKMAN HOLDINGS CORPORATION
210 Madison Avenue, 6th Floor
New York, New York 10016
Tel. (212) 578-1331
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
Copies to:
<TABLE>
<S> <C>
ROBERT ROSENMAN, ESQ. ROBERT A. PROFUSEK, ESQ.
CRAVATH, SWAINE & MOORE JONES, DAY, REAVIS & POGUE
825 Eighth Avenue 599 Lexington Avenue
New York, New York 10019 New York, New York 10022
</TABLE>
------------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box. / /
If the Registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item
11(a)(1) of this Form, check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
Common Stock, par value
$.01 per share.............. 28,750,000 $17.00 $488,750,000 $176,466.75
</TABLE>
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<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
CROSS-REFERENCE SHEET SHOWING LOCATION
IN THE PROSPECTUS OF THE RESPONSES
TO ITEMS OF FORM S-2
------------------------
(PURSUANT TO ITEM 501(B) OF REGULATION S-K)
<TABLE><CAPTION>
FORM S-2 ITEM LOCATION
NUMBER AND CAPTION IN PROSPECTUS
----------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus....................... Forepart of the Registration Statement; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus................................ Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges................. Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Prospectus Summary; Use of Proceeds and Consolidation
5. Determination of Offering Price...................... Underwriting
6. Dilution............................................. Dilution
7. Selling Security Holders............................. *
8. Plan of Distribution................................. Outside Front Cover Page of Prospectus; Underwriting
9. Description of Securities to be Registered........... Outside Front Cover Page of Prospectus; Prospectus
Summary; Description of the Capital Stock
10. Interests of Named Experts and Counsel............... *
11. Information with Respect to the Registrant........... Prospectus Summary; Dividends; Selected Financial
Data; Management's Discussion and Analysis of
Financial Condition and Results of Operations;
Business
12. Incorporation of Certain Information by
Reference.......................................... Incorporation of Certain Documents by Reference
13. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................... *
</TABLE>
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* Item not applicable or requires a negative response.
<PAGE>
EXPLANATORY NOTES
The prospectus relating to the Common Stock being registered hereby to be
used in connection with a United States offering (the "U.S. Prospectus") is set
forth following this page. The prospectus to be used in a concurrent
international offering (the "International Prospectus") will consist of
alternate pages set forth following the U.S. Prospectus and the balance of the
pages included in the U.S. Prospectus for which no alternatives are provided.
The contents of the U.S. Prospectus and the International Prospectus are
identical except for the front and back pages, the section captioned
"Underwriting" and the additional section under the caption "Certain United
States Tax Consequences to Non-United States Holders" in the International
Prospectus. Alternate pages for the International Prospectus are separately
designated.
Prior to the consummation of the Offerings, Collins & Aikman Holdings
Corporation will be renamed Collins & Aikman Corporation.
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 6, 1994
[LOGO] 15,000,000 SHARES
COLLINS & AIKMAN CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
---------------------
Of the 15,000,000 shares of Common Stock offered, 12,000,000 shares are
being offered hereby in the United States and 3,000,000 shares are being offered
in a concurrent international offering outside the United States. The initial
public offering price and the aggregate underwriting discount per share will be
identical for both Offerings. See "Underwriting". All shares of Common Stock
offered hereby are being issued and sold by the Company.
As a condition to the closing of the Offerings, affiliates of Blackstone
Capital Partners L.P. and Wasserstein Perella Partners, L.P. will purchase from
the Company 6,560,000 shares of Common Stock at $ per share (equal to the
initial public offering price less the underwriting discount). See "Sale of
Common Stock to the Purchasing Partners".
Prior to the Offerings, there has been no public market for the Common
Stock of the Company. For factors considered in determining the initial public
offering price, as well as a discussion of the requirement that the initial
public offering price be recommended by a qualified independent underwriter, see
"Underwriting".
SEE "RISK FACTORS" FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN
THE COMMON STOCK.
The Common Stock will be listed on the New York Stock Exchange under the
symbol "CKC".
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
<TABLE><CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY (2)
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<S> <C> <C> <C>
Per Share............................................ $ $ $
Total(3)............................................. $ $ $
</TABLE>
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting".
(2) Before deducting estimated expenses of $1,393,000 payable by the Company.
(3) The Company has granted the U.S. Underwriters an option for 30 days to
purchase up to an additional 1,800,000 shares at the initial public offering
price per share, less the underwriting discount, solely to cover
over-allotments. Additionally, the Company has granted the International
Underwriters an option for 30 days to purchase up to an additional 450,000
shares at the initial public offering price per share, less the underwriting
discount, solely to cover over-allotments. If such options are exercised in
full, the total initial public offering price, underwriting discount and
proceeds to the Company will be $ , $ and $ ,
respectively. See "Underwriting".
Affiliates of Blackstone Capital Partners L.P. and Wasserstein Perella
Partners, L.P. have agreed to purchase from the Company up to an aggregate
of 2,250,000 shares of Common Stock at the initial public offering price
less the underwriting discount to the extent the Underwriters'
over-allotment options are not exercised. As a result, the Company will
receive the same net proceeds that it would have received had the
Underwriters' over-allotment options been exercised for 2,250,000 shares of
Common Stock. See "Sale of Common Stock to the Purchasing Partners".
---------------------
The shares offered hereby are offered severally by the U.S. Underwriters,
as specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York, on
or about , 1994.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
WASSERSTEIN PERELLA SECURITIES, INC.
THE NIKKO SECURITIES CO.
INTERNATIONAL, INC.
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The date of this Prospectus is , 1994.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
<PAGE>
[INSIDE FRONT COVER]
Automotive
Products
Collins & Aikman is the largest
supplier of interior trim products to
the North American automotive
industry. At least one of the
Company's five major products
(pictured here) is used on 87% of all North
American produced vehicle line.
[PHOTO]
Seat Fabric
[PHOTO]
Headliner fabric Convertible top stacks
and molded headliners
Molded Hood [OUTLINE OF CAR] Molded package shelves
insulator pads Molded floor carpets
[PHOTO]
Accessory floor mats Foam laminated door fabrics
[PHOTO] and carpet trim
Luggage compartment trim [PHOTO]
<PAGE>
["C&A" LOGO] Collins & Aikman
The table below shows all the North American-produced vehicle lines for which
Collins & Aikman supplies at least one of its five major automotive products.
An asterisk identifies recently awarded placements on new or redesigned vehicle
lines or models.
General Motors
Achieva
Aurora*
Beretta
Blazer*
Bonneville
Brougham
Camaro*
Caprice
Cavalier*
Century
Ciera
C-K Truck/10/30
C-K Truck/15/35
Corvette
DeVille/Concours*
Olds '88
Eldorado
Firebird
Grand Am
Grand Prix
LeSabre
Lumina-Van*
Lumina-Car*
Monte Carlo*
Olds '98
Park Avenue
Regal
Riviera*
S-10*
S-10 Blazer
S-15 Jimmy
Safari
Saturn
Seville
Silhouette
Skylark
Sonoma
Chevy Suburban
GMC Suburban
Sunbird*
Supreme*
TransSport
Yukon
Ford
Aerostar
Bronco
Contour*
Cougar
Explorer*
Mustang*
Mystique*
Probe
Quest
Ranger
Taurus
Tempo
Thunderbird
Topaz
Windstar*
<PAGE>
Chrysler
Acclaim
Caravan
Cirrus*
Concord*
Dakota
Daytona
Eagle Talon
Grand Cherokee
Intrepid
LeBaron/J/JX*/LHS*
Mini Ram Van
Neon*
New Yorker LHS*
Plymouth Neon
Ram Van/Ram
Shadow
Spirit
Stratus*
Sundance
Town & Country
T-300 Pickup
Vision*
Voyager
Wagoneer
Transplants
Fuji/Isuzu Legacy
Fuji/Isuzu Passport
Fuji/Isuzu Rodeo
Geo Metro
Geo Prism
Honda Accord*
Honda Civic*
Honda Mini-Van*
Hyundai Elantra
Isuzu Pickup*
Mazda MX-6
Mazda Pickup
Mazda 626
Mitsubishi Eclipse
Mitsubishi Galant
Nissan Pickup
Nissan Sentra
Suzuki Sidekick
Suzuki Swift
Suzuki Tracker
Toyota Avalon*
Toyota Camry
Toyota Corolla
Toyota Pickup*
Volvo 740/760
<PAGE>
------------------------
IN CONNECTION WITH THESE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
AVAILABLE INFORMATION
Collins & Aikman Corporation (the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934 (the "Exchange
Act") and, in accordance therewith, files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports and other
information filed by the Company may be inspected and copied at public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices located at 7
World Trade Center, New York, New York 10048 and 500 West Madison Street,
Chicago, Illinois 60661. Copies of such materials can be obtained upon written
request from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Company's 15 1/2%
Cumulative Exchangeable Redeemable Preferred Stock, par value $0.01 per share
(the "Merger Preferred Stock"), is listed for trading on the American Stock
Exchange (the "AMEX"). Reports and other information concerning the Company may
also be inspected and copied at the offices of the AMEX, 86 Trinity Place, New
York, New York 10006.
This Prospectus constitutes a part of a registration statement on Form S-2
(herein, together with all exhibits thereto, referred to as the "Registration
Statement") filed by the Company with the Commission under the Securities Act of
1933 (the "Securities Act") with respect to the Common Stock. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. Reference is hereby made to the Registration Statement and
related exhibits for further information with respect to the Company and the
Common Stock offered hereby. Statements contained herein concerning the
provisions of documents are necessarily summaries of such documents, and each
statement is qualified in its entirety by reference to the copy of the
applicable document filed with the Commission.
Prior to the date of this Prospectus, reports and other information were
filed under the Company's former name "Collins & Aikman Holdings Corporation"
and, prior to July 15, 1992, reports and other information were filed under the
name "WCI Holdings Corporation".
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which were previously filed by the Company with
the Commission (File No. 1-10218) pursuant to Section 13 of the Exchange Act,
are incorporated herein by reference: the Company's Annual Report on Form 10-K,
as amended, for the fiscal year ended January 29, 1994 and the Company's
Quarterly Report on Form 10-Q for the thirteen weeks ended April 30, 1994.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified shall not be deemed to constitute a part of this
Prospectus, except as so modified, and any statement so superseded shall not be
deemed to constitute part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any document incorporated herein by reference
(other than exhibits to such documents unless such exhibits are specifically
incorporated by reference into the documents that this Prospectus incorporates).
Requests for such copies should be directed to Corporate Communications, Collins
& Aikman Corporation, 8320 University Executive Park, Suite 102, Charlotte,
North Carolina 28262 (telephone: (704) 548-2350).
3
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus and is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus or incorporated herein by
reference. The capitalized terms used herein and not otherwise defined have the
meanings ascribed to them elsewhere in this Prospectus. Except where otherwise
indicated, (i) the information in this Prospectus assumes that affiliates of
Blackstone Partners (defined below) and WP Partners (defined below; such
affiliates, collectively, the "Purchasing Partners") purchase from the Company
an aggregate of 6,560,000 shares of Common Stock at the initial public offering
price per share less the underwriting discount, that the over-allotment options
granted to the Underwriters (defined below) are not exercised, and that the
Purchasing Partners purchase from the Company an additional aggregate of
2,250,000 shares of Common Stock at the initial public offering price per share
less the underwriting discount, (ii) 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, (iii) references to the North
American automotive industry include the U.S. and Canadian markets and products
manufactured in Mexico for export to the U.S. and Canadian markets, (iv)
references to the Company include its direct and indirect subsidiaries and
predecessors, as appropriate, and (v) with respect to market or competitive
information, references to the Company as "a leader" or "one of the leading"
manufacturers in a particular product category mean that the Company is one of
the principal manufacturers in that product category and references to the
Company as "the leader," "the largest" or "the leading" manufacturer in a
particular product category mean that the Company has the largest market share
based on dollar sales volume in that product category.
THE COMPANY
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. Within these three segments,
the Company estimates it holds a number one or number two market share position
in each of its eight major product lines, which together comprised approximately
82% of its 1993 net sales of $1,305.5 million. See "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a discussion of the risks inherent in the Company's businesses
and the Company's financial performance over the last three years, including its
history of net losses, competitive factors affecting the Company, the Company's
substantial leverage, contingent liabilities and other risks inherent in an
investment in the Common Stock.
AUTOMOTIVE PRODUCTS
Automotive Products, with 1993 net sales of $677.9 million, is a leading
designer and manufacturer of products for automobile OEMs. The segment's primary
products include four major interior trim products--automotive seat fabric,
molded floor carpet, accessory floor mats and luggage compartment trim--and
convertible top stacks. Management believes that Automotive Products offers a
wider variety of interior trim products and has a broader, more uniform
penetration of the OEMs than any of its competitors. Management estimates that
Automotive Products holds a number one or number two market share position in
each of its five major product categories. At least one of the Company's five
major automotive products is used on approximately 87% of all North
American-produced vehicle lines. Management estimates that Automotive Products'
1993 market share in its five major products was approximately 26% at Ford, 40%
at General Motors, 51% at Chrysler and 36% among the Transplants. Management
believes that Automotive Products' size and broad customer penetration
constitute a competitive advantage.
4
<PAGE>
INTERIOR FURNISHINGS
Interior Furnishings, which is comprised of the Decorative Fabrics and
Floorcoverings groups, had 1993 net sales of $407.2 million. Decorative Fabrics,
with 1993 net sales of $313.6 million, is a leading designer and manufacturer of
residential and commercial upholstery fabric in the U.S. Decorative Fabrics
supplies middle to high-end woven fabrics to furniture manufacturers and fabric
distributors. Management estimates that Decorative Fabrics' share of the U.S.
upholstery fabric market is approximately 15%. Decorative Fabrics' primary
division, Mastercraft, is the number one supplier of flat-woven upholstery
fabrics and is also the industry leader in the fast-growing Jacquard segment of
that market. Mastercraft had 1993 net sales of $268.9 million. Mastercraft's
premier design and manufacturing expertise enables it to offer a significantly
greater variety of patterns than any of its competitors.
Floorcoverings, with 1993 net sales of $93.6 million, is a leading
manufacturer of high-end specified contract carpeting products for institutional
and commercial customers with high-traffic applications. Differentiated from
competitors by its patented Powerbond RS(R) adhesive system and by its products'
durability characteristics, Floorcoverings occupies a leading position within
this niche sector.
WALLCOVERINGS
Wallcoverings, which operates under the name "Imperial", is a leading
manufacturer and distributor of wallcoverings for the residential and commercial
sectors and had 1993 net sales of $220.4 million. Management estimates that in
1993 Imperial had a 22% market share in the larger residential wallcoverings
sector and held the number one market share position in each of this sector's
two primary distribution channels--chains and dealers.
BUSINESS STRATEGY
FOCUS ON HIGH MARKET SHARE PRODUCTS. Management focuses on developing
products that have high market share potential. Management estimates that each
of the Company's eight major product lines holds a number one or number two
market share position. Together these product lines comprised approximately 82%
of the Company's 1993 net sales. These market positions were achieved primarily
through internal growth and reflect a long-term, Company-wide commitment to
excellence in styling, engineering, product development, value-added
manufacturing and customer service.
<TABLE><CAPTION>
1993
NET SALES
(IN 1993 MARKET
PRODUCT LINE MILLIONS) POSITION
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<S> <C> <C>
Automotive Products
Automotive seat fabric................................................. $ 221.2 #1
Molded floor carpet.................................................... 181.1 2
Accessory floor mats................................................... 73.4 1
Luggage compartment trim............................................... 37.6 2*
Convertible top stacks................................................. 28.2 1
Interior Furnishings
Flat-woven furniture fabrics........................................... 268.9 1
Six-foot commercial carpet............................................. 60.3 1
Wallcoverings (residential).............................................. 196.0 1
------------
Subtotal................................................................. $ 1,066.7
Percent of net sales................................................... 82%
Net sales................................................................ $ 1,305.5
</TABLE>
-------------------------------
* Management believes that the Company and a competitor are tied
for the number two market share position.
5
<PAGE>
MAINTAIN BROAD PRODUCT OFFERINGS TO SUPPORT CUSTOMER BASE. The Company
consistently strives to offer a wide variety of products and to become the
primary supplier to each of its customers.
MAINTAIN LOW-COST POSITION. Management's strategy is to maintain the
Company's low-cost position and flexible manufacturing capabilities in order to
protect operating margins from competitive pricing pressures and economic
downturns, while maximizing the benefits of operating leverage during cyclical
upturns.
MAXIMIZE BENEFITS FROM HIGH OPERATING LEVERAGE. Management believes that
substantial available production capacity and high operating leverage have
enabled the Company to benefit from the recent cyclical upturn in its served
markets. The Company has substantial manufacturing capacity to support further
growth.
OFFER VALUE-ADDED PRODUCTS. A key element of the Company's strategy is to
increase market share and unit selling prices by developing increasingly higher
value-added products through innovations in materials construction, product
design and styling.
MAINTAIN PRODUCT DESIGN AND STYLING LEADERSHIP. Design and styling are key
differentiating factors in consumer purchasing decisions. Management believes
that the Company's product design and styling capabilities are currently an
important competitive advantage and intends to devote resources to maintain the
Company's position in these areas.
CONTINUE TO DELEVERAGE. The Recapitalization is designed to increase
operating and financial flexibility by reducing the Company's indebtedness and
significantly lowering its cost of borrowing. Management expects this financial
deleveraging to be enhanced through the application of operating cash flow
augmented by the use of the Company's net operating loss carryforwards and other
favorable tax attributes. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" and "--Tax
Matters".
HISTORY OF THE COMPANY
The Company was formed in 1988 by Blackstone Capital Partners L.P. and
Wasserstein Perella Partners, L.P. to acquire Wickes Companies, Inc. for
approximately $2.6 billion, including the assumption of indebtedness (the "1988
Acquisition"). Since the 1988 Acquisition, the Company has divested 27
businesses for approximately $1.6 billion. By the end of 1993, the Company had
streamlined its operations into its three existing business segments in which it
enjoys a competitive advantage.
The Company's principal executive offices are located at 8320 University
Executive Park, Suite 102, Charlotte, North Carolina 28262. Its telephone number
at that location is (704) 548-2350.
6
<PAGE>
THE OFFERINGS
<TABLE>
<S> <C>
U.S. Offering....................... 12,000,000 shares
International Offering.............. 3,000,000 shares
Total........................ 15,000,000 shares
Sale to Purchasing Partners......... 8,810,000 shares
Common Stock to be outstanding after
the Offerings..................... 70,520,900 shares(1)
Use of proceeds..................... The net proceeds to the Company from the Offerings (defined below) and the
sales to the Purchasing Partners, together with borrowings under the New
Credit Facilities (defined below) and available cash of the Company, will
be used to effect a defeasance and redemption, or repayment, of an
aggregate of $788.4 million principal amount of debt and an aggregate of
$208.1 million liquidation amount of preferred stock. See "Use of Proceeds
and Consolidation".
Proposed New York Stock Exchange
("NYSE") Symbol................... CKC
</TABLE>
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(1) Does not include 6,100,000 shares of Common Stock reserved for issuance
under the Company's stock option plans, including approximately 3,200,000
shares subject to outstanding options. See "Management--The Company's Option
Plans".
The offering of shares of Common Stock initially being offered in the
United States (the "U.S. Offering") and the offering of shares of Common Stock
initially being offered outside the United States (the "International Offering")
are referred to herein collectively as the "Offerings". The closing of the
International Offering is conditioned upon the closing of the U.S. Offering, and
vice versa. See "Underwriting". The Purchasing Partners' agreement to purchase
from the Company an aggregate of 2,250,000 shares of Common Stock (assuming that
the over-allotment options are not exercised), at the initial public offering
price per share less the underwriting discount, within 35 days after the
effective date of the Registration Statement, will be supported by irrevocable
letters of credit, in an aggregate amount equal to the purchase price for such
shares, issued by Chemical Bank for the benefit of the Company. The Offerings
and the sales to the Purchasing Partners are part of the Recapitalization
(described below).
7
<PAGE>
THE RECAPITALIZATION
The recapitalization (the "Recapitalization") is designed to reduce the
Company's indebtedness, significantly lower interest expense, improve operating
and financial flexibility and provide liquidity for operations and other general
corporate purposes. The Recapitalization involves three principal sources of
capital: (i) the sale of 15,000,000 shares of Common Stock pursuant to the
Offerings, (ii) the sale by the Company of an aggregate of 8,810,000 shares of
Common Stock to the Purchasing Partners and (iii) the establishment of certain
new credit facilities (the "New Credit Facilities"). The proceeds from the New
Credit Facilities, together with the net proceeds from the Offerings and the
available cash of the Company, will be used to effect a defeasance and
redemption, or repayment, of virtually all indebtedness and all preferred stock
of the Company and its subsidiaries. See "New Credit Facilities".
The following table sets forth a summary of the estimated sources and
anticipated uses of funds in the Recapitalization (assuming the Recapitalization
occurs on July 13, 1994):
SOURCES OF FUNDS
<TABLE><CAPTION>
(IN
MILLIONS)
------------
<S> <C>
Sale of Common Stock in the Offerings(1)....................................... $ 148.8
Sale of Common Stock to the Purchasing Partners(2)............................. 87.4
Proceeds from the New Credit Facilities(3)..................................... 728.0
Available cash................................................................. 100.0
------------
Total..................................................................... $ 1,064.2
------------
------------
</TABLE>
USES OF FUNDS
<TABLE>
<S> <C>
Repayment and redemption of long-term debt (including current maturities)(4)... $ 788.4
Redemption of preferred stock.................................................. 208.1
Accrued interest and dividends as of July 13, 1994............................. 22.0
Redemption premiums............................................................ 13.4
Defeasance costs............................................................... 11.0
Fees and expenses(5)........................................................... 21.3
------------
Total..................................................................... $ 1,064.2
------------
------------
</TABLE>
- ---------------
(1) The net proceeds to the Company from the sale of Common Stock in the
Offerings are computed based on an assumed initial public offering price of
$10.50 per share less underwriting discounts.
(2) Based upon the sale by the Company of 6,560,000 shares as a condition to the
Offerings and 2,250,000 shares assuming the over-allotment options are not
exercised. See "Sale of Common Stock to the Purchasing Partners".
(3) Includes $150 million of proceeds from the sale of an undivided interest in
a pool of receivables under the Receivables Facility. See "New Credit
Facilities".
(4) Does not include $194.8 million of PIK Notes being exchanged for Common
Stock in connection with the consummation of the Offerings.
(5) Includes bank commitment, financial advisory, legal and accounting fees and
other expenses in connection with the Recapitalization, excluding
underwriting discounts.
Following the Offerings, the Partners and their affiliates will
beneficially own or have the right to vote, in the aggregate, 76.2% of the
outstanding Common Stock. See "Principal Stockholders and Certain
Relationships".
8
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
(IN THOUSANDS)
The following table presents summary historical financial data derived from
the Company's Consolidated Financial Statements and operating data for the
periods indicated. All information contained in the following table should be
read in conjunction with "Selected Financial Data", "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements of the Company and the notes thereto included elsewhere in
this Prospectus.
<TABLE><CAPTION>
THIRTEEN WEEKS ENDED YEAR ENDED
----------------------- ---------------------------------------------------------------
APRIL 30, JANUARY 29, JANUARY 30, JANUARY 25, JANUARY 26, JANUARY 27,
1994 MAY 1, 1993 1994 1993(1) 1992 1991 1990
---------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $ 390,446 $ 339,043 $ 1,305,517 $ 1,277,500 $ 1,184,316 $ 1,232,403 $ 1,276,442
Gross profit............ $ 100,954 $ 78,948 $ 309,727 $ 299,027 $ 257,499 $ 270,782 $ 262,121
Selling, general and
administrative
expenses................ 55,356 51,872 196,585 218,441 202,690 192,002 209,619
Management equity plan
expense................. 36 -- 26,736 -- -- -- --
Restructuring costs..... -- -- -- 10,000 -- 17,275 --
Goodwill amortization
and write-off......... -- 924 132,630 3,702 3,702 3,798 3,798
---------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income
(loss).................. $ 45,562 $ 26,152 $ (46,224) $ 66,884 $ 51,107 $ 57,707 $ 48,704
Interest expense,
net(2).................. 29,061 27,225 111,291 110,867 107,974 106,099 136,292
Income (loss) from
continuing operations
before income taxes..... 15,372 (2,202) (162,048) (48,497) (61,382) (52,907) (92,102)
Income (loss) from
continuing operations
after income taxes...... 12,754 (5,473) (173,325) (45,341) (73,336) (57,386) (92,109)
Income (loss) before
extraordinary items..... 12,754 (9,069) (277,664) (263,658) (89,701) (86,983) (142,913)
Net Income (loss)....... 12,754 (9,069) (277,664) (263,658) (133,810) (57,908) (15,435)
BALANCE SHEET DATA:
Total assets............ $ 934,048 $ 1,143,689 $ 918,825 $ 1,141,434 $ 1,300,304 $ 1,412,790 $ 1,777,339
Long-term debt,
including current
portion................. 922,243 1,003,975 923,554 982,205 941,838 930,065 1,123,325
Redeemable preferred
stock................... 129,454 104,222 122,368 98,602 79,754 69,240 73,711
Stockholder's equity
(deficit)............... (698,148) (434,859) (702,220) (421,460) (130,921) 18,821 81,075
OTHER DATA (FROM
CONTINUING
OPERATIONS):
EBITDA(3)............... $ 56,689 $ 38,801 $ 155,374 $ 118,748 $ 98,708 $ 106,067 $ 97,072
Capital expenditures.... 15,286 7,267 44,923 38,209 38,928 42,885 44,872
Depreciation............ 11,127 11,725 42,232 45,463 43,899 42,532 44,570
</TABLE>
- ---------------
(1) 1992 was a 53-week year.
(2) Excludes amounts related to discontinued operations of $5,749 in the first
quarter of 1993, $18,871 in 1993, $23,010 in 1992, $25,062 in 1991, $33,040
in 1990 and $112,153 in 1989.
(3) EBITDA is operating income plus depreciation and amortization and the
non-cash portion of non-recurring charges attributable to continuing
operations. EBITDA reflects the Company's ability to satisfy principal and
interest obligations with respect to its indebtedness and to utilize cash
for other purposes. In addition, certain covenants in the New Credit
Facilities are based upon calculations using EBITDA. EBITDA does not
represent and should not be considered as an alternative to net income or
cash flow from operations as determined by generally accepted accounting
principles.
9
<PAGE>
SUMMARY PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table presents unaudited summary pro forma financial and
other data that are derived from, and should be read in conjunction with, the
pro forma consolidated financial data included elsewhere in this Prospectus. The
following unaudited summary pro forma financial data illustrate the estimated
effects of the Recapitalization. The unaudited summary pro forma operating data
for the thirteen weeks ended April 30, 1994 and May 1, 1993 and for the year
ended January 29, 1994 present the results of operations of the Company as if
the Recapitalization had occurred as of the beginning of each period presented.
The unaudited summary pro forma financial and other data do not purport to
represent what the Company's results of operations would actually have been if
the Recapitalization had occurred as of the beginning of each period presented,
nor do they purport to project the Company's results of operations for any
future period. See "Unaudited Pro Forma Consolidated Financial Data."
<TABLE><CAPTION>
THIRTEEN WEEKS ENDED YEAR ENDED
----------------------------- JANUARY 29,
APRIL 30, 1994 MAY 1, 1993 1994
--------------- ------------ ------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................................... $ 390,446 $ 339,043 $ 1,305,517
Gross profit................................................. 100,954 78,948 309,727
Selling, general and administrative expenses................. 54,642 51,122 193,585
Non-recurring charges(1)..................................... -- 924 159,366
--------------- ------------ ------------
Operating income (loss)...................................... 46,312 26,902 (43,224)
Interest expense, net(2)..................................... 7,844 6,764 25,582
Loss on sale of receivables(3)............................... 3,088 2,632 7,195
--------------- ------------ ------------
Income (loss) from continuing operations before income
taxes........................................................ 35,380 17,506 (76,001)
Income taxes(4).............................................. 2,498 3,151 10,797
--------------- ------------ ------------
Income (loss) from continuing operations..................... $ 32,882 $ 14,355 $ (86,798)
--------------- ------------ ------------
--------------- ------------ ------------
OTHER DATA:
Total debt(5)(6)............................................. $ 578,354 (9) (9)
EBITDA(7).................................................... 57,439 39,551 158,374
Income (loss) from continuing operations per share of common
stock........................................................ .46 .21 (1.25)
Average common shares outstanding(8)......................... 72,166 69,617 69,617
</TABLE>
- ---------------
(1) Includes, for 1993, the write-off and amortization of goodwill of $132,630
and compensation expense of $26,736 related to the 1993 Plan and, for the
thirteen weeks ended May 1, 1993, goodwill amortization of $924.
(2) Reflects adjustments for the elimination of interest expense related to the
defeasance and redemption, repayment or exchange for Common Stock of certain
of the outstanding indebtedness of the Company in connection with the
Offerings and the Recapitalization. See Note (2) to the Unaudited Pro Forma
Consolidated Statements of Operations.
(3) The loss on sale of receivables arises from the sale, on a revolving basis,
of an undivided interest in trade receivables. See Note (3) to the Unaudited
Pro Forma Consolidated Statements of Operations.
(4) Reflects a reduction of state and foreign income taxes due to an
organizational restructuring and to increased borrowings in Canada in
connection with the Recapitalization.
(5) Includes $555,142 of borrowings under the New Credit Facilities and $23,212
of miscellaneous debt.
(6) Excludes $150,000 of off-balance sheet financing provided by the Company's
sale of a participating interest in trade receivables under the terms of the
Receivables Purchase Agreement (see "New Credit Facilities").
(7) EBITDA is operating income plus depreciation and amortization and the
non-cash portion of non-recurring charges attributable to continuing
operations. EBITDA reflects the Company's ability to satisfy principal and
interest obligations with respect to its indebtedness and to utilize cash
for other purposes. In addition, certain covenants in the New Credit
Facilities are based upon calculations using EBITDA. EBITDA does not
represent and should not be considered as an alternative to net income or
cash flow from operations as determined by generally accepted accounting
principles.
(8) Includes (i) shares currently outstanding, (ii) shares to be issued in the
Offerings, (iii) shares to be issued to the Purchasing Partners, (iv) shares
to be issued in exchange for the PIK Notes, and (v) the assumed exercise of
outstanding stock options, using the treasury method. Unrecognized
compensation on employee stock options is considered as proceeds in
determining the assumed repurchase of shares into treasury.
(9) Pro forma balance sheet data is only required as of April 30, 1994.
10
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully in evaluating an
investment in the Common Stock offered hereby.
CYCLICALITY OF INDUSTRIES
The Company's business segments are highly cyclical. Downturns in North
American automotive production, consumer spending, commercial and residential
construction and renovation could have a material adverse effect on the Company.
DEPENDENCE ON SIGNIFICANT AUTOMOTIVE CUSTOMERS AND CAR MODELS
The Company's sales are dependent on certain significant customers. Sales
to General Motors Corporation ("General Motors"), Chrysler Corporation
("Chrysler") and Ford Motor Company ("Ford") accounted for approximately 16%,
10% and 8%, respectively, of the Company's 1993 net sales. In addition, certain
of the Company's customers are unionized and have in the past experienced labor
disruptions. The loss of one or more significant customers or a prolonged
disruption in their production could have a material adverse effect on the
Company.
The Company principally competes for new business at the design stage of
new models and upon the redesign of existing models. There can be no assurance
that the Company will continue to be able to obtain such new business or to
improve or maintain its gross margins on such new business. In addition, the
Company may not be able to pass on raw material price increases to its customers
due to pricing pressure from its customers. A decrease in demand for the models
that generate the most sales for the Company, the failure of the Company to
obtain purchase orders for new or redesigned models and pricing pressure from
the major automotive companies could have a material adverse effect on the
Company. See "Business--Automotive Products".
VULNERABILITY TO CHANGES IN CONSUMER TASTES
Consumer tastes in automotive seat fabrics, interior furnishings and
wallcoverings change over time. A shift in consumer preferences away from the
products that the Company produces or has the capability to produce could have a
material adverse effect on the Company.
COMPETITION
The industries in which the Company operates are highly competitive. There
can be no assurance that the Company's products will compete successfully with
those of its competitors. Several competitors are larger and have greater
financial and other resources available to them. There can be no assurance that
the Company will be able to maintain its operating margins if the competitive
environment changes. See "Business".
SUBSTANTIAL LEVERAGE
The Recapitalization is designed to reduce indebtedness, significantly
lower interest expense, improve the Company's operating and financial
flexibility and provide liquidity for operations and other general corporate
purposes. However, the substantial indebtedness of the Company and its
subsidiaries following the Recapitalization could have important consequences to
holders of Common Stock, including the following: (i) the ability of the Company
and its subsidiaries to obtain additional financing in the future to refinance
maturing debt or for working capital, capital expenditures, acquisitions,
general corporate or other purposes could be impaired; (ii) a substantial
portion of the cash flow from operations of the Company and its subsidiaries
must be dedicated to the payment of the principal of and interest on existing
indebtedness, which will have the effect of decreasing the amount available for
working capital, capital expenditures, acquisitions, general
11
<PAGE>
corporate or other purposes; (iii) the Company and its subsidiaries could be
more highly leveraged than certain of their competitors, which may place the
Company and its subsidiaries at a competitive disadvantage; (iv) a significant
portion of the borrowings of the Company and its subsidiaries are expected to be
at variable rates of interest, and consequently the Company and its subsidiaries
will be vulnerable to increases in interest rates; and (v) the high degree of
leverage of the Company and its subsidiaries may make the Company more
vulnerable to economic downturns. After giving effect to the Recapitalization,
the Company will have an aggregate of approximately $611.6 million of
indebtedness outstanding (excluding approximately $140.0 million in off-balance
sheet financing under the Receivables Facility) and unused borrowing
availability of approximately $33.1 million under the Revolving Facility and
$10.8 million in Canada under a Canadian Working Capital Facility. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations-- Liquidity and Capital Resources" and "New Credit Facilities".
LIMITATIONS IMPOSED BY THE NEW CREDIT FACILITIES
The New Credit Facilities are expected to contain a number of restrictive
covenants which, among other things, will limit the ability of the Company and
its subsidiaries to incur other indebtedness, to incur liens and to make certain
restricted payments, and which will require the Company to maintain certain
specified financial ratios. A failure by the Company to maintain such financial
ratios or to comply with the restrictions contained in the New Credit Facilities
could result in a default thereunder, which in turn could result in such
indebtedness being declared immediately due and payable. See "New Credit
Facilities".
HISTORICAL LOSSES
The Company has experienced net losses since its inception. Even though the
Company will be operating with lower interest charges after the
Recapitalization, there can be no assurance as to whether or when the Company's
operations will become profitable. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
CONTROL BY AFFILIATES AND CERTAIN TRANSACTIONS WITH AFFILIATES
After giving effect to the Offerings and the sales to the Purchasing
Partners, Blackstone Capital Partners L.P. ("Blackstone Partners") and
Wasserstein Perella Partners, L.P. ("WP Partners", and collectively with
Blackstone Partners, the "Partners") and their respective affiliates will
beneficially own or have the right to vote 76.2% of the outstanding Common Stock
of the Company. Although the Partners intend to elect two directors who are
neither officers nor employees of the Partners or their affiliates, the
Company's Board of Directors has been, and is expected to continue to be,
comprised entirely of designees of the Partners. As a result, the Partners and
their affiliates will continue to have the ability to determine the policies of
the Company, the persons constituting its management, the outcome of corporate
actions requiring stockholder approval by majority action and the future
direction of the Company.
The Partners and the Company will enter into an Amended and Restated
Stockholders Agreement (the "Stockholders Agreement") relating to governance and
management of the Company, and the Partners will enter into a Voting Agreement
(the "Voting Agreement") relating to voting for nominees affiliated with each
other. The Restated Certificate of Incorporation will provide that a nominating
committee of the Board of Directors consisting of the nonemployee directors will
have exclusive power to nominate directors on behalf of the Board of Directors
and will have exclusive power to fill any vacancies on the Board of Directors.
See "Principal Stockholders and Certain Relationships".
In the past, the Partners and certain of their affiliates (in such
capacity, the "Managers-Advisors") have been paid fees in connection with
management and advisory services performed
12
<PAGE>
by the Managers-Advisors for the Company and its subsidiaries. The
Managers-Advisors will continue to be paid fees in connection with services to
be provided in the future. It is anticipated that each of the Managers-Advisors
will receive a $1 million annual monitoring fee and the reimbursement of
expenses from the Company pursuant to the Stockholders Agreement and that any
transaction with affiliates not contemplated by the Stockholders Agreement will
be passed upon by the independent directors. See "Principal Stockholders and
Certain Relationships".
ANTI-TAKEOVER PROVISIONS
The Restated Certificate of Incorporation and the Bylaws of the Company,
which will be effective upon consummation of the Offerings, will contain
provisions which could delay or frustrate the removal of incumbent directors and
could make more difficult a merger, tender offer or proxy contest involving the
Company. The Company will also be subject to provisions of Delaware corporate
law restricting certain business combinations with certain stockholders. See
"Description of the Capital Stock".
COLLECTIVE BARGAINING AGREEMENTS
The Company is a party to collective bargaining agreements with respect to
hourly employees at seven of its 51 U.S. facilities, its five Canadian
facilities and its three Mexican facilities. Of the Company's 12,000 employees,
approximately 2,200 employees, all of whom are employed in Automotive Products
and Wallcoverings, are covered by such agreements. One such agreement covering
approximately 365 Wallcoverings employees has been extended through July 1994
while negotiations are ongoing, and the remainder of such agreements have terms
of two to five years and expire from 1995 to 1997. The Company has not
experienced any significant labor disruptions during the past five years.
Although management believes that its relationship with the employees covered by
collective bargaining agreements is good, there can be no assurance that the
Company will be able to negotiate new agreements on favorable terms. See
"Business--Employees".
ENVIRONMENTAL MATTERS AND OTHER CONTINGENCIES
The Company is subject to increasingly stringent Federal, state and local
laws and regulations concerning the environment. Changes to environmental laws
and regulations may require the Company to make substantial capital expenditures
and to incur substantial expenses with respect to its ongoing and divested
operations and properties. In addition, the Company has received notices that it
is a potentially responsible party ("PRP") in a number of proceedings for
cleanup of hazardous substances at various sites. The Company may be named as a
PRP at other sites in the future. It is difficult to estimate the total cost of
investigation and remediation due to various factors including incomplete
information regarding particular sites and other PRPs, 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 the 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 liabilities arising from the
activities or properties of the Company, its present and former subsidiaries and
their corporate predecessors. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Environmental Matters".
The Company has significant financial and legal obligations with respect to
certain divested and acquired businesses. In connection with the sale and
acquisition of certain businesses, the Company has indemnified the purchasers
and sellers for certain environmental liabilities, lease obligations and other
matters. In addition, the Company is contingently liable with respect to certain
lease and other obligations assumed by certain purchasers and may be required to
honor such
13
<PAGE>
obligations if such purchasers are unable or unwilling to do so. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Environmental Matters" and Notes 6 and 19 to Consolidated Financial
Statements.
PENDING TAX MATTERS
In the course of an examination of the Company's Federal income tax
returns, the Internal Revenue Service ("IRS") has challenged the availability of
$176.6 million of the Company's approximately $434.0 million net operating loss
carryforwards ("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 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 major portion of
such position were to be upheld in litigation, the amount of NOLs available to
the Company in future years would be materially reduced. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Tax
Matters".
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offerings, there has been no public market for shares of the
Common Stock. The Common Stock has been approved for listing on the NYSE.
However, there can be no assurance as to the liquidity of any markets that may
develop for the Common Stock or the price at which holders would be able to sell
their Common Stock. The initial public offering price for the Common Stock was
determined by negotiations between the Company and the representatives of the
Underwriters. There can be no assurance that the market price of the Common
Stock after the Offerings will equal or exceed the initial public offering
price. In addition, broad market fluctuations and general economic and political
conditions may adversely affect the market price of the Common Stock, regardless
of the Company's actual performance. For a description of the factors which were
considered in determining the initial public offering price, see "Underwriting".
SHARES ELIGIBLE FOR FUTURE SALE
Following the Offerings, there will be 55,520,900 shares of Common Stock
outstanding eligible for future sale in the public market (excluding
approximately 3,200,000 shares issuable upon exercise of outstanding options).
No prediction can be made as to the effect, if any, that market sales of shares
of Common Stock or the availability of shares of Common Stock for sale will have
on the prevailing market price of Common Stock from time to time. Sales of a
significant number of shares of Common Stock in the public market following the
Offerings could adversely affect the prevailing market price of the Common Stock
and could materially impair the Company's future ability to raise capital
through an offering of equity securities. See "Description of Capital Stock--
Shares Eligible for Future Sale". See "Underwriting" for a description of
agreements by the Company and certain of the existing stockholders of the
Company not to sell shares of Common Stock owned by them for a period of 180
days after the date of this Prospectus without the prior written consent of the
representatives of the Underwriters.
DILUTION
The negative net tangible book value of the Company as of April 30, 1994,
was approximately $480.2 million or $6.81 per share after giving effect to the
Offerings, the sales to the Purchasing Partners and the Recapitalization.
Persons purchasing shares of Common Stock in the Offerings will incur immediate
dilution in net tangible book value of $17.31 per share. See "Dilution".
14
<PAGE>
DIVIDENDS
The Company has not declared or paid cash dividends on Common Stock since
its incorporation in 1988. The Company currently intends to retain future
earnings, if any, to fund the development and growth of its businesses and,
therefore, does not anticipate paying any cash dividends in the near future. The
New Credit Facilities limit the payment of dividends and certain other payments
in respect of equity securities. See "New Credit Facilities". If the Company
does not have sufficient surplus, under Delaware law the Company could be
prohibited from paying any dividends on Common Stock even after the limitations
under the New Credit Facilities no longer apply.
Under applicable Delaware law, dividends on the Common Stock may only be
paid out of the Company's surplus (defined as the excess of the Company's assets
over the sum of its liabilities and the aggregate par value of its stock) or out
of net profits for the fiscal year in which the dividends are declared and/or
the preceding fiscal year. At April 30, 1994, the Company had a negative surplus
based on its historical financial statements and on a pro forma basis, after
giving effect to the Consolidation and the Recapitalization. However, under
Delaware law, a corporation's board of directors may determine the availability
of surplus based on the actual, current value of its assets and liabilities
rather than their historical book values. The Company's Board of Directors has
in the past relied on this non-book, "revaluation" surplus in the payment of
dividends on the Merger Preferred Stock.
DILUTION
The negative net tangible book value of the Company as of April 30, 1994,
was $20.44 per share of Common Stock. Net tangible book value per share is
determined by dividing the number of outstanding shares of Common Stock into the
net tangible book value of the Company (total assets less net intangible assets
less total liabilities and preferred stock). After giving effect to the sale of
the 15,000,000 shares of Common Stock offered hereby, at an assumed initial
public offering price of $10.50 per share, the sale by the Company of an
aggregate of 8,810,000 shares of Common Stock to the Purchasing Partners at the
assumed initial public offering price per share of $10.50 less the underwriting
discount, the Recapitalization and the conversion of the PIK Notes into shares
of Common Stock, the pro forma negative net tangible book value of the Company
as of April 30, 1994 would have been $6.81 per share. This represents an
immediate increase of $13.63 per share to existing stockholders (with respect to
their existing holdings) and an immediate dilution of $17.31 per share to
purchasers in the Offerings. The following table illustrates the per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $ 10.50
Net tangible book value per share as of April 30, 1994, before the
Offerings and the Recapitalization................................... $ (20.44)
Increase in net tangible book value per share attributable to the
Offerings and the sales to the Purchasing Partners(1).............. 13.63
----------
Pro forma net tangible book value per share after the Offerings and
the Recapitalization................................................. (6.81)
----------
Dilution per share to purchasers in the Offerings(2)................. $ 17.31
----------
----------
</TABLE>
- ---------------
(1) Determined after deducting the underwriting discounts, estimated offering
expenses and effects of the non-recurring charges resulting from the
Recapitalization. See "Unaudited Pro Forma Consolidated Financial Data".
(2) Dilution is determined by subtracting the pro forma net tangible book value
per share after completion of the Offerings from the initial public offering
price paid by a new investor for a share of Common Stock.
15
<PAGE>
USE OF PROCEEDS AND CONSOLIDATION
The net proceeds from the Offerings (estimated to be approximately $148.8
million) and the sales to the Purchasing Partners (estimated to be approximately
$87.4 million) will be used, together with $728.0 million of proceeds from the
total available funds of $775 million under the New Credit Facilities, as
described under "New Credit Facilities", and available cash of the Company, to
effect a defeasance and redemption, or repayment, of the indebtedness and
preferred stock described below.
The consummation of the Offerings, the sales to the Purchasing Partners and
the borrowings under the New Credit Facilities are conditioned (i) upon each
other, (ii) upon the Purchasing Partners' purchase from the Company of an
aggregate of 6,560,000 shares of Common Stock at the initial public offering
price per share less the underwriting discount, (iii) upon the Purchasing
Partners' agreement to purchase from the Company up to an aggregate of 2,250,000
shares of Common Stock, at the initial public offering price per share less the
underwriting discount, and providing the Company with irrevocable letters of
credit that support such obligation and (iv) upon the simultaneous prepayment or
defeasance and irrevocable notice of redemption of the indebtedness and
preferred stock listed below at a total cost of approximately $1,042.9 million,
including interest or dividends accrued to July 13, 1994 and applicable
redemption premiums and defeasance costs, and excluding estimated fees and
expenses of $21.3 million.
The following table sets forth a summary of the estimated sources and
anticipated uses of funds in the Recapitalization (assuming the Recapitalization
occurs on July 13, 1994):
<TABLE><CAPTION>
(IN MILLIONS)
--------------
<S> <C>
SOURCES OF FUNDS
Sale of Common Stock in the Offerings(1).................................... $ 148.8
Sale of Common Stock to the Purchasing Partners(2).......................... 87.4
Proceeds from the New Credit Facilities(3).................................. 728.0
Available cash.............................................................. 100.0
--------------
Total.................................................................. $ 1,064.2
--------------
--------------
USES OF FUNDS
Repayment of indebtedness outstanding under a subsidiary credit facility.... $ 122.6
Defeasance and redemption of:
Merger Preferred Stock................................................... 162.9
Series A Preferred Stock................................................. 45.1
Intermediate Preferred Stock............................................. 0.1
14% Subordinated PIK Bridge Notes due December 2, 1996 (which were not
exchanged for Common Stock)............................................ 9.7
7 1/2%/10% Debentures due January 31, 2005............................... 138.7
11 7/8% Debentures due June 1, 2001...................................... 347.4
15% Notes due May 1, 1995................................................ 137.4
11 3/8% Debentures due May 1, 1997....................................... 24.5
Miscellaneous indebtedness............................................... 8.1
Accrued interest and dividends as of July 13, 1994....................... 22.0
Redemption premiums...................................................... 13.4
Defeasance costs......................................................... 11.0
Fees and expenses(4)..................................................... 21.3
--------------
Total.................................................................. $ 1,064.2
--------------
--------------
</TABLE>
- ---------------
(1) The net proceeds to the Company from the sale of Common Stock in the
Offerings are computed based on an assumed initial public offering price of
$10.50 per share less underwriting discounts.
(2) Based upon the sale by the Company of 6,560,000 shares as a condition to the
Offerings and 2,250,000 shares assuming the over-allotment options are not
exercised. See "Sale of Common Stock to the Purchasing Partners".
(3) Includes $150 million of proceeds from the sale of an undivided interest in
a pool of receivables under the Receivables Purchase Agreement. See "New
Credit Facilities."
(4) Includes bank commitment, financial advisory, legal and accounting fees and
other expenses incurred in connection with the Recapitalization, but
excludes the underwriting discount.
In connection with the Recapitalization, and prior to the consummation of
the Offerings, Collins & Aikman Holdings II Corporation ("Holdings II"),
currently the sole stockholder of the Company, will be merged into the Company.
Concurrently, Collins & Aikman Group, Inc., the Company's wholly owned
subsidiary ("Group"), will be merged into its wholly owned subsidiary Collins &
Aikman Products Co., formerly called Collins & Aikman Corporation ("C&A Co.").
These mergers are referred to herein as the "Consolidation".
16
<PAGE>
CAPITALIZATION
(IN THOUSANDS)
The following table sets forth the capitalization of the Company and its
subsidiaries (i) at April 30, 1994 and (ii) as adjusted to give effect to the
Recapitalization and the application of the proceeds of the Offerings as if the
Recapitalization had occurred as of April 30, 1994. This table should be read in
conjunction with the Consolidated Financial Statements of the Company included
elsewhere in this Prospectus. See "Use of Proceeds and Consolidation" and
"Unaudited Pro Forma Consolidated Financial Data".
<TABLE><CAPTION>
APRIL 30, 1994
-------------------------
ACTUAL AS ADJUSTED
---------- -------------
<S> <C> <C>
Short-Term Debt.................................................................................... $ 3,043 $ 3,043
Current Portion of Long-Term Debt(1)............................................................... 163,715 3,480
---------- -------------
Total............................................................................................ $ 166,758 $ 6,523
---------- -------------
---------- -------------
Long-Term Debt (excluding current portion)(1)(2):
New Credit Facilities............................................................................ $ -- $ 555,142
Senior Indebtedness.............................................................................. 235,512 16,689
Senior Subordinated Indebtedness................................................................. 301,801 --
Subordinated Indebtedness........................................................................ 22,483 --
PIK Notes........................................................................................ 198,732 --
---------- -------------
Total Long-Term Obligations.................................................................... 758,528 571,831
---------- -------------
Preferred Stock and Redeemable Preferred Stock of Subsidiary(3).................................... 313 --
Redeemable Preferred Stock(3)...................................................................... 129,454 --
Stockholder's Deficit:
Common Stock (35,035 actual shares issued and outstanding, 70,521 shares issued and outstanding
on a pro forma basis)(4)........................................................................... 350 705
Other Paid-In Capital(4)......................................................................... 160,285 579,584
Accumulated Deficit(5)........................................................................... (843,669) (1,029,583)
Foreign Currency Translation Adjustments......................................................... (7,367) (7,367)
Pension Equity Adjustment........................................................................ (7,747) (7,747)
---------- -------------
Total Stockholder's Deficit.................................................................... (698,148) (464,408)
---------- -------------
Total Capitalization............................................................................... $ 190,147 $ 107,423
---------- -------------
---------- -------------
</TABLE>
- ---------------
<TABLE>
<S> <C>
(1) Reflects (i) the redemption or repayment of an aggregate book amount of $712,824 of outstanding indebtedness utilizing
the net proceeds of the Offerings, borrowings of $555,142 under the Credit Agreement Facilities and $150,000 of net
proceeds on the sale of a participating interest in receivables and (ii) the exchange of the PIK Notes for Common Stock
as follows:
</TABLE>
<TABLE>
<S> <C> <C>
Debt Extinguished:
Subsidiary Credit Facility..................................................................... $ 127,581
7 1/2%-10% Senior Debentures (face value $138,694 net of discount of $33,063).................. 105,631
11 7/8% Senior Subordinated Debentures (face value $347,414 net of discount of $45,613)........ 301,801
15% Subordinated Notes (face value $137,359 net of discount of $244)........................... 137,115
11 3/8% Subordinated Debentures (face value $24,500 net of discount of $2,017)................. 22,483
PIK Notes ($9,482 redeemed and $189,250 exchanged for Common Stock)............................ 198,732
Miscellaneous Debt............................................................................. 8,731
----------
Debt Extinguished.......................................................................... 902,074
New Credit Facilities............................................................................ (555,142)
----------
Reduction in Outstanding Indebtedness...................................................... $ 346,932
----------
----------
Allocated to:
Current Portion................................................................................ $ 160,235
Long-term Portion.............................................................................. 186,697
----------
$ 346,932
----------
----------
</TABLE>
<TABLE>
<S> <C>
(2) Excludes $150,000 of off-balance sheet financing provided by the Company's sale of receivables under the terms of the
Receivables Sale Agreement (see "New Credit Facilities").
(3) Reflects the redemption of the 15 1/2% Junior Cumulative Exchangeable Redeemable Preferred Stock (" Intermediate
Preferred Stock") of Group, $2.50 Series A Convertible Preferred Stock ("Series A Preferred Stock") of Group and the
Merger Preferred Stock with an aggregate book value of $129,767 with funds provided by the Offerings and the
Recapitalization.
(4) The as adjusted amounts reflect the issuance of 15,000 shares of Common Stock in connection with the Offerings, the sale
by the Company of an aggregate of 8,810 shares of Common Stock to the Purchasing Partners and the exchange of the PIK
Notes for shares of Common Stock. The increases reflect (i) $142,987 for shares of Common Stock to be sold in the
Offerings, net of discounts and commissions and associated expenses, (ii) $87,417 for shares of Common Stock to be sold
by the Company to the Purchasing Partners and (iii) $189,250 on exchange of PIK Notes for shares of Common Stock.
(5) Reflects charges for (i) write-off of deferred debt expense and debt discounts of $92,812, (ii) premiums paid in
connection with the redemption of existing indebtedness in the amount of $9,625, (iii) premiums paid in connection with
the redemption of the Intermediate Preferred Stock of Group, the Series A Preferred Stock of Group and the Merger
Preferred Stock of the Company in the amount of $82,077 and (iv) loss of $1,400 on the sale of a $150,000 participating
interest in trade receivables.
</TABLE>
17
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS)
The following table sets forth selected consolidated financial information
for the Company at and for the periods indicated. The selected consolidated
financial information for the years ended January 29, 1994, January 30, 1993,
January 25, 1992, January 26, 1991 and January 27, 1990 have been derived from
the Company's consolidated financial statements which have been audited by
Arthur Andersen & Co. The selected consolidated financial information for the
thirteen weeks ended April 30, 1994 and May 1, 1993 have been derived from
unaudited consolidated financial statements, which in the opinion of management,
reflect all adjustments necessary for a fair presentation of such data. The
statement of operations and balance sheet data have been restated to reflect
discontinued operations (see Note 6 to the 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 3 and 13 to the 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 selected financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and notes
thereto appearing elsewhere in this Prospectus.
<TABLE><CAPTION>
THIRTEEN WEEKS ENDED YEAR ENDED
----------------------- --------------------------------------------------
APRIL 30, JANUARY 29, JANUARY 30, JANUARY 25, JANUARY 26,
1994 MAY 1, 1993 1994 1993(1) 1992 1991
---------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales:
Automotive Products(2)................. $ 222,991 $ 174,695 $ 677,867 $ 643,827 $ 610,325 $ 657,404
Interior Furnishings(2)................ 107,129 102,998 407,201 391,778 336,773 339,528
Wallcoverings(2)....................... 60,326 61,350 220,449 241,895 237,218 235,471
---------- ----------- ----------- ----------- ----------- -----------
Total Net Sales...................... $ 390,446 $ 339,043 $ 1,305,517 $ 1,277,500 $ 1,184,316 $ 1,232,403
---------- ----------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- ----------- -----------
Gross profit............................. $ 100,954 $ 78,948 $ 309,727 $ 299,027 $ 257,499 $ 270,782
Selling, general and administrative
expenses................................... 55,356 51,872 196,585 218,441 202,690 192,002
Management equity plan expense........... 36 -- 26,736 -- -- --
Restructuring costs...................... -- -- -- 10,000 -- 17,275
Goodwill amortization and write-off...... -- 924 132,630 3,702 3,702 3,798
---------- ----------- ----------- ----------- ----------- -----------
Operating income (loss).................. $ 45,562 $ 26,152 $ (46,224) $ 66,884 $ 51,107 $ 57,707
Interest expense, net(3)................. 29,061 27,225 111,291 110,867 107,974 106,099
Income (loss) from continuing operations
before income taxes........................ 15,372 (2,202) (162,048) (48,497) (61,382) (52,907)
Income (loss) from continuing operations
after income taxes......................... 12,754 (5,473) (173,325) (45,341) (73,336) (57,386)
Income (loss) before extraordinary
items...................................... 12,754 (9,069) (277,664) (263,658) (89,701) (86,983)
Net Income (loss)........................ 12,754 (9,069) (277,664) (263,658) (133,810) (57,908)
BALANCE SHEET DATA:
Total assets............................. $ 934,048 $ 1,143,689 $ 918,825 $ 1,141,434 $ 1,300,304 $ 1,412,790
Long-term debt, including current
portion.................................... 922,243 1,003,975 923,554 982,205 941,838 930,065
Redeemable preferred stock............... 129,454 104,222 122,368 98,602 79,754 69,240
Stockholder's equity (deficit)........... (698,148) (434,859) (702,220) (421,460) (130,921) 18,821
OTHER DATA (FROM CONTINUING OPERATIONS):
EBITDA(4)................................ $ 56,689 $ 38,801 $ 155,374 $ 118,748 $ 98,708 $ 106,067
Capital expenditures..................... 15,286 7,267 44,923 38,209 38,928 42,885
Depreciation............................. 11,127 11,725 42,232 45,463 43,899 42,532
<CAPTION>
JANUARY 27,
1990
-----------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales:
Automotive Products(2)................. $ 661,749
Interior Furnishings(2)................ 358,988
Wallcoverings(2)....................... 255,705
-----------
Total Net Sales...................... $ 1,276,442
-----------
-----------
Gross profit............................. $ 262,121
Selling, general and administrative
expenses................................... 209,619
Management equity plan expense........... --
Restructuring costs...................... --
Goodwill amortization and write-off...... 3,798
-----------
Operating income (loss).................. $ 48,704
Interest expense, net(3)................. 136,292
Income (loss) from continuing operations
before income taxes........................ (92,102)
Income (loss) from continuing operations
after income taxes......................... (92,109)
Income (loss) before extraordinary
items...................................... (142,913)
Net Income (loss)........................ (15,435)
BALANCE SHEET DATA:
Total assets............................. $ 1,777,339
Long-term debt, including current
portion.................................... 1,123,325
Redeemable preferred stock............... 73,711
Stockholder's equity (deficit)........... 81,075
OTHER DATA (FROM CONTINUING OPERATIONS):
EBITDA(4)................................ $ 97,072
Capital expenditures..................... 44,872
Depreciation............................. 44,570
</TABLE>
- ---------------
(1) 1992 was a 53-week year.
(2) The Company's business segments have been redefined from those presented in
filings with the Commission prior to April 1994. See Note 18 to the
Consolidated Financial Statements.
(3) Excludes amounts related to discontinued operations of $5,749 in the first
quarter of 1993, $18,871 in 1993, $23,010 in 1992, $25,062 in 1991, $33,040
in 1990 and $112,153 in 1989.
(4) EBITDA is operating income plus depreciation and amortization and the
non-cash portion of non-recurring charges attributable to continuing
operations. EBITDA reflects the Company's ability to satisfy principal and
interest obligations with respect to its indebtedness and to utilize cash
for other purposes. In addition, certain covenants in the New Credit
Facilities are based upon calculations using EBITDA. EBITDA does not
represent and should not be considered as an alternative to net income or
cash flow from operations as determined by generally accepted accounting
principles.
18
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following Unaudited Pro Forma Consolidated Statements of Operations for
the year ended January 29, 1994 and for the thirteen week periods ended April
30, 1994 and May 1, 1993, and the Unaudited Pro Forma Consolidated Balance Sheet
as of April 30, 1994 (collectively, the "Pro Forma Statements") were prepared to
illustrate the estimated effects of the Recapitalization. The Unaudited Pro
Forma Consolidated Statements of Operations present the results of operations of
the Company as if the Recapitalization had occurred as of the beginning of each
period presented. The Unaudited Pro Forma Consolidated Balance Sheet as of April
30, 1994 reflects the impact of the Recapitalization as if it had occurred on
that date. The Pro Forma Statements are presented for informational purposes
only and are based on currently available information and upon certain
assumptions that management believes are reasonable under the circumstances. The
Pro Forma Statements and accompanying footnotes should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and related notes thereto
included elsewhere in this Prospectus. The Pro Forma Statements do not purport
to represent what the Company's financial position or results of operations
would actually have been if the Recapitalization had occurred on April 30, 1994
or as of the beginning of each period presented, or to project the Company's
financial position or results of operations at any future date or for any future
period.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 29, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE><CAPTION>
AS ADJUSTED FOR
ACTUAL THE RECAPITALIZATION PRO FORMA
-------------- -------------------- --------------
<S> <C> <C> <C>
Net sales........................................................ $ 1,305,517 $ -- $ 1,305,517
-------------- --------------
Cost of goods sold............................................... 995,790 -- 995,790
Selling, general and administrative expenses..................... 196,585 (3,000)(1) 193,585
Goodwill amortization and write-off.............................. 132,630 -- 132,630
Management equity plan expense................................... 26,736 -- 26,736
-------------- -------------------- --------------
Total operating expenses....................................... 1,351,741 (3,000) 1,348,741
Operating income (loss).......................................... (46,224) 3,000 (43,224)
Interest expense, net............................................ 111,291 (85,709)(2) 25,582
Loss on sale of receivables...................................... -- 7,195(3) 7,195
Dividends on preferred stock of subsidiary....................... 4,533 (4,533)(4) --
-------------- -------------------- --------------
Income (loss) from continuing operations before income taxes..... (162,048) 86,047 (76,001)
Income taxes..................................................... 11,277 (480)(5) 10,797
-------------- -------------------- --------------
Loss from continuing operations.................................. (173,325) 86,527 (86,798)
Preferred stock dividends and accretion.......................... 23,723 (23,723)(4) --
-------------- -------------------- --------------
Income (loss) available for common stock......................... $ (197,048) $ 110,250 $ (86,798)
-------------- -------------------- --------------
-------------- -------------------- --------------
Average common shares outstanding................................ 34,131 69,617(6)
Loss from continuing operations per share of common stock........ $ (5.77) $ (1.25)
</TABLE>
The following are included in the Unaudited Pro Forma Consolidated
Statement of Operations for the period:
<TABLE>
<S> <C>
Depreciation........................................................................... $ 42,232
Amortization of deferred debt expense.................................................. 1,929
Fees and discount on initial sale of receivables....................................... 2,038
</TABLE>
19
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED APRIL 30, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE><CAPTION>
AS ADJUSTED FOR
ACTUAL THE RECAPITALIZATION PRO FORMA
------------- -------------------- -------------
<S> <C> <C> <C>
Net sales.............................................. $ 390,446 $ -- $ 390,446
------------- -------------
Cost of goods sold..................................... 289,492 -- 289,492
Selling, general and administrative expenses........... 55,356 (750)(1) 54,606
Management equity plan expense......................... 36 -- 36
------------- -------------------- -------------
Total operating expenses............................. 344,884 (750) 344,134
Operating income....................................... 45,562 750 46,312
Interest expense, net.................................. 29,061 (21,217)(2) 7,844
Loss on sale of receivables............................ -- 3,088(3) 3,088
Dividends on preferred stock of subsidiary............. 1,129 (1,129)(4) --
------------- -------------------- -------------
Income from continuing operations before income
taxes.................................................. 15,372 20,008 35,380
Income taxes........................................... 2,618 (120)(5) 2,498
------------- -------------------- -------------
Income from continuing operations...................... 12,754 20,128 32,882
Preferred stock dividends and accretion................ 7,086 (7,086)(4) --
------------- -------------------- -------------
Income available for common stock...................... $ 5,668 $ 27,214 $ 32,882
------------- -------------------- -------------
------------- -------------------- -------------
Average common shares outstanding...................... 36,680 72,166(6)
Income from continuing operations per share of common
stock.................................................. $ .15 $ .46
</TABLE>
The following are included in the Unaudited Pro Forma Consolidated
Statement of Operations for the period:
<TABLE>
<S> <C>
Depreciation................................................................ $ 11,127
Amortization of deferred debt expense....................................... 533
Fees and discount on initial sale of receivables............................ 1,400
</TABLE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED MAY 1, 1993
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE><CAPTION>
AS ADJUSTED FOR
ACTUAL THE RECAPITALIZATION PRO FORMA
------------- -------------------- -------------
<S> <C> <C> <C>
Net sales.............................................. $ 339,043 $ -- $ 339,043
------------- -------------
Cost of goods sold..................................... 260,095 -- 260,095
Selling, general and administrative expenses........... 51,872 (750)(1) 51,122
Goodwill amortization.................................. 924 -- 924
------------- -------------------- -------------
Total operating expenses............................. 312,891 (750) 312,141
Operating income....................................... 26,152 750 26,902
Interest expense, net.................................. 27,225 (20,461)(2) 6,764
Loss on sale of receivables............................ -- 2,632(3) 2,632
Dividends on preferred stock of subsidiary............. 1,129 (1,129)(4) --
------------- -------------------- -------------
Income (loss) from continuing operations before income
taxes.................................................. (2,202) 19,708 17,506
Income taxes........................................... 3,271 (120)(5) 3,151
------------- -------------------- -------------
Income (loss) from continuing operations............... (5,473) 19,828 14,355
Preferred stock dividends and accretion................ 5,620 (5,620)(4) --
------------- -------------------- -------------
Income (loss) available for common stock............... $ (11,093) $ 25,448 $ 14,355
------------- -------------------- -------------
------------- -------------------- -------------
Average common shares outstanding...................... 34,131 69,617(6)
Income (loss) from continuing operations per share of
common stock........................................... $ (.32) $ .21
</TABLE>
The following are included in the Unaudited Pro Forma Consolidated
Statement of Operations for the period:
<TABLE>
<S> <C>
Depreciation................................................................ $ 11,725
Amortization of deferred debt expense....................................... 533
Fees and discount on initial sale of receivables............................ 1,288
</TABLE>
20
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEK PERIODS ENDED
APRIL 30, 1994 AND MAY 1, 1993, AND THE YEAR ENDED JANUARY 29, 1994
(IN THOUSANDS)
The following adjustments reflect the effects of the Recapitalization:
<TABLE>
<S> <C>
(1) Management and financial advisory fees payable to the Managers-Advisors will be reduced by $3,000 per
annum, or $750 per quarter, effective as of the first quarter commencing after the consummation of the
Offerings in accordance with the Stockholders Agreement.
(2) Assumes the following related to interest expense:
</TABLE>
<TABLE>
<S> <C>
(i) The pro forma adjustments to interest expense consist of the following:
</TABLE>
<TABLE><CAPTION>
THIRTEEN WEEKS ENDED
------------------------------ YEAR ENDED
APRIL 30, 1994 MAY 1, 1993 JANUARY 29, 1994
--------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
(1) Elimination of interest and
deferred debt expense related to
retirement
of debt and conversion
of PIK Notes (net of
interest income of $2,355,
$1,000 and $4,434,
respectively).................... $ (28,772) $ (26,960) $ (110,232)
(2) Interest on borrowings under
Credit Agreement Facilities (net
of interest income of $399, $177
and $986, respectively).......... 7,057 6,001 22,734
(3) Amortization of deferred debt
expense related to Credit
Agreement Facilities............. 498 498 1,789
--------------- ------------- ------------------
Interest expense
adjustment....................... $ (21,217) $ (20,461) $ (85,709)
--------------- ------------- ------------------
--------------- ------------- ------------------
</TABLE>
Net proceeds of $104.0 million from the sale of Kayser-Roth
Corporation ("Kayser-Roth") on January 28, 1994 are being used to
effect the Recapitalization and, for purposes of calculating pro
forma interest expense for the periods ended May 1, 1993 and January
29, 1994, are assumed to have been received by the Company on
January 31, 1993. On a pro forma basis as of January 31, 1993, the
total amount of cash generated from the net proceeds of the
Offerings, total available borrowings under the Credit Agreement
Facilities and the proceeds from the Receivables Facility, without
giving effect to the net proceeds from the sale of Kayser-Roth,
would have been insufficient to complete the Recapitalization.
21
<PAGE>
<TABLE>
<S> <C>
(ii) Base interest rates (average LIBOR in effect during the periods) and weighted average credit
spreads shown below have been used in calculating the pro forma interest on borrowings under
the Credit Agreement Facilities.
</TABLE>
<TABLE><CAPTION>
THIRTEEN WEEKS ENDED
------------------------------ YEAR ENDED
APRIL 30, 1994 MAY 1, 1993 JANUARY 29, 1994
--------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Base interest rate............... 3.87% 3.27% 3.35%
Average credit spread............ 1.75% 1.75% 1.75%
A 0.5% change in the interest rate on the Credit Agreement Facilities would result in
changes to pro forma interest expense of:
Year ended January 29, 1994..................................................$2,325
Thirteen weeks ended April 30, 1994.............................................663
Thirteen weeks ended May 1, 1993................................................607
As of June 30, 1994, the 90-day LIBOR rate was 4.81%. If this rate had been in effect
during the periods presented, interest expense would have increased by:
Year ended January 29, 1994..................................................$7,267
Thirteen weeks ended April 30, 1994...........................................1,383
Thirteen weeks ended May 1, 1993..............................................1,908
</TABLE>
<TABLE>
<S> <C>
(3) The loss on sale of receivables arises from the sale, on a revolving basis, of an undivided
interest in the Company's trade receivables. This loss also includes financing costs computed using
a base interest rate (average LIBOR in effect during the periods) and weighted average credit
spread, as follows:
</TABLE>
<TABLE><CAPTION>
THIRTEEN WEEKS ENDED
------------------------------ YEAR ENDED
APRIL 30, 1994 MAY 1, 1993 JANUARY 29, 1994
--------------- ------------- ------------------
<S> <C> <C> <C> <C> <C>
Base interest rate............... 3.87% 3.27% 3.35%
Average credit spread............ .63% .63% .63%
A 0.5% change in the interest rate on the Receivables Facility would result in changes to pro
forma loss on sale of receivables of:
Year ended January 29, 1994......................................................$756
Thirteen weeks ended April 30, 1994...............................................296
Thirteen weeks ended May 1, 1993..................................................278
As of June 30, 1994 the base LIBOR rate was 4.81%. If this had been in effect, the loss on the
sale of receivables would have increased by:
Year ended January 29, 1994....................................................$2,365
Thirteen weeks ended April 30, 1994...............................................618
Thirteen weeks ended May 1, 1993..................................................866
</TABLE>
<TABLE>
<S> <C>
(4) Represents the elimination of dividends related to Series A Preferred Stock and the Intermediate
Preferred Stock of Group and amortization of the discount related to the Intermediate Preferred
Stock. All preferred stock will be redeemed as part of the Recapitalization.
</TABLE>
<TABLE>
<S> <C>
(5) Represents a reduction of state and foreign income taxes due to an organizational restructuring and
to increased borrowings in Canada in connection with the Recapitalization.
</TABLE>
<TABLE>
<S> <C>
(6) Includes (i) shares currently outstanding, (ii) shares to be issued in the Offerings, (iii) shares
to be issued in exchange for the PIK Notes and (iv) the assumed exercise of outstanding stock
options, using the treasury method. Unrecognized compensation on employee stock options is
considered as proceeds in the assumed repurchase of shares into treasury.
</TABLE>
Note: The Unaudited Pro Forma Consolidated Statements of Operations do not
include approximately $185,914 of (i) non-recurring charges consisting of,
(x) premiums paid in connection with redemption of existing debt
securities and (y) the write-off of unamortized deferred financing charges
related to the repayment of a subsidiary credit facility and certain
miscellaneous debt and (ii) a reduction of retained earnings and income
available for common stock representing the difference between the
respective redemption prices of the Series A Preferred Stock of Group,
Intermediate Preferred Stock of Group and Merger Preferred Stock in the
aggregate, and their aggregate carrying value.
22
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF APRIL 30, 1994
(IN THOUSANDS)
<TABLE><CAPTION>
AS ADJUSTED FOR
ACTUAL THE RECAPITALIZATION PRO FORMA
------------ -------------------- --------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................ $ 139,282 $ (129,282)(1) $ 10,000
Accounts and notes receivable, net................... 212,708 (150,952)(2) 61,756
Inventories.......................................... 189,709 -- 189,709
Other................................................ 44,832 -- 44,832
------------ -------------------- --------------
Total current assets............................ 586,531 (280,234) 306,297
Property, plant and equipment, net..................... 294,684 -- 294,684
Other assets........................................... 52,833 3,524(3) 56,357
------------ -------------------- --------------
$ 934,048 $ (276,710) $ 657,338
------------ -------------------- --------------
------------ -------------------- --------------
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities:
Notes payable........................................ $ 3,043 $ -- $ 3,043
Current maturities of long-term debt................. 163,715 (160,235)(4) 3,480
Accounts payable..................................... 78,188 -- 78,188
Accrued expenses..................................... 159,778 (33,751)(5) 126,027
Other................................................ 4,097 -- 4,097
------------ -------------------- --------------
Total current liabilities....................... 408,821 (193,986) 214,835
Long-term debt......................................... 758,528 (186,697)(4) 571,831
Deferred income taxes.................................. 640 -- 640
Other, including postretirement benefit obligation..... 334,440 -- 334,440
Redeemable preferred stock of subsidiary (aggregate
preference in liquidation $129)........................ 132 (132)(6) --
Preferred stock of subsidiary (aggregate preference in
liquidation $45,145)................................... 181 (181)(6) --
Redeemable preferred stock (aggregate preference in
liquidation $162,861).................................. 129,454 (129,454)(6) --
Common stock (150,000 shares authorized, 35,035 shares
issued and outstanding, 70,521 shares issued and
outstanding
on a pro forma basis)................................ 350 355(7) 705
Other paid-in capital.................................. 160,285 419,299(7) 579,584
Accumulated deficit.................................... (843,669) (185,914)(8) (1,029,583)
Foreign currency translation adjustments............... (7,367) -- (7,367)
Pension equity adjustment.............................. (7,747) -- (7,747)
------------ -------------------- --------------
Total common stockholder's deficit.............. (698,148) 233,740 (464,408)
------------ -------------------- --------------
$ 934,048 $ (276,710) $ 657,338
------------ -------------------- --------------
------------ -------------------- --------------
</TABLE>
23
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF APRIL 30, 1994
(IN THOUSANDS)
The following adjustments reflect the effects of the Recapitalization:
<TABLE>
<S> <C>
(1) Reflects the amount of existing cash to be used in the Recapitalization.
(2) Reflects the sale of a $150,000 participating interest in accounts receivable in connection with the New
Credit Facilities.
(3) Reflects (i) the impact of recording additional deferred debt expense of $15,400 associated with the New
Credit Facilities and (ii) the write-off of $11,876 deferred debt expenses related to the indebtedness
retired.
(4) Reflects (i) the retirement or repayment of an aggregate book amount of $712,824 of outstanding
indebtedness utilizing a portion of the net proceeds of the Offerings and borrowings of $555,142 under
the Credit Agreement Facilities and $150,000 of net proceeds on the sale of a participating interest in
receivables and (ii) the exchange of the PIK Notes for Common Stock as follows:
</TABLE>
<TABLE>
<S> <C>
Debt Extinguished:
Subsidiary credit facility................................................... $ 127,581
7 1/2%-10% Debentures (face value $138,694 net of discount of $33,063)....... 105,631
11 7/8% Debentures (face value $347,414 net of discount of $45,613) 301,801
15% Notes (face value of $137,359 net of discount of $244)................... 137,115
11 3/8% Debentures (face value $24,500 net of discount of $2,017)............ 22,483
14% PIK Notes ($9,482 redeemed and $189,250 exchanged for Common Stock)...... 198,732
Miscellaneous Debt........................................................... 8,731
------------
Debt Extinguished......................................................... 902,074
New Credit Facilities.......................................................... (555,142)
------------
Reduction of Outstanding Indebtedness..................................... $ 346,932
------------
------------
Allocated to:
Current portion.............................................................. $ 160,235
Long-term debt............................................................... 186,697
------------
$ 346,932
------------
------------
</TABLE>
<TABLE>
<S> <C>
(5) Reflects the payment of accrued interest and dividends in the amount of $33,751.
(6) Reflects the redemption of the Intermediate Preferred Stock of Group, Series A Preferred Stock of Group
and the Merger Preferred Stock with an aggregate book value of $129,767 with funds provided by the
Offerings and the Recapitalization.
(7) Reflects the issuance of 15,000 shares of Common Stock in connection with the Offerings, the sale by the
Company of an aggregate of 8,810 shares of Common Stock to the Purchasing Partners and the exchange of
the PIK Notes for shares of Common Stock. Increases reflect (i) $142,987 for shares of Common Stock to
be sold in the Offerings, net of discounts and commissions and associated expenses, (ii) $87,417 for
shares of Common Stock to be sold by the Company to the Purchasing Partners and (iii) $189,250 on
exchange of PIK Notes for 18,024 shares of Common Stock, based on an assumed initial public offering
price of $10.50 per share.
(8) Reflects charges for (i) write-off of deferred debt expense and debt discounts of $92,812, (ii) premiums
paid in connection with the redemption of existing indebtedness in the amount of $9,625, (iii) premiums
paid in connection with the redemption of the Intermediate Preferred Stock of Group, the Series A
Preferred Stock of Group and the Merger Preferred Stock of the Company in the amount of $82,077 and (iv)
loss of $1,400 on the sale of a $150,000 participating interest in trade receivables.
</TABLE>
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Selected
Financial Data" and the Consolidated Financial Statements of the Company and the
notes thereto, included elsewhere in this Prospectus.
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
accordingly divested 27 business units which in 1988 contributed 73% of net
sales. The aggregate proceeds from these divestitures were approximately $1.6
billion, and enabled the Company to reduce total indebtedness from approximately
$2.2 billion in late 1988 to $927.3 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 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 the Company's Builders Emporium division, (iii) the sale
of Kayser-Roth, and (iv) the decision to retain Dura Convertible Systems
("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 a
result of the foregoing, this discussion is not comparable to the previous
discussions of the Company's operations. See Note 6 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. Wallcovering products, which were previously part of the Home
Furnishings segment, have been reclassified as Wallcoverings. Industry segment
information has been restated for the years 1992 and 1991. See Note 18 to the
Consolidated Financial Statements.
Given the current state of the capital markets, the Company believes that
it is in its best interests to restructure the Company's debt and capitalization
by increasing its equity capital and decreasing its interest expense. The
Company believes that the Recapitalization will benefit the Partners by
increasing the value of the Common Stock of the Company.
25
<PAGE>
RESULTS OF OPERATIONS
The Company's operating results were adversely affected by a $129.9 million
goodwill write-off and a $26.7 million management equity plan charge in 1993 and
$10.0 million of restructuring charges in 1992. Operating expenses include these
charges, as well as goodwill amortization expense which will not occur after
1993 because of the write-off.
<TABLE><CAPTION>
YEAR ENDED
THIRTEEN WEEKS ENDED ----------------------------------------
------------------------------ JANUARY 29, JANUARY 30, JANUARY 25,
APRIL 30, 1994 MAY 1, 1993 1994 1993 1992
--------------- ------------- ------------ ------------ ------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales......................... $ 390.4 $ 339.0 $ 1,305.5 $ 1,277.5 $ 1,184.3
Cost of goods sold................ 289.5 260.1 995.8 978.5 926.8
--------------- ------------- ------------ ------------ ------------
Gross profit...................... 100.9 78.9 309.7 299.0 257.5
Selling, general and
administrative expenses........... 55.4 51.9 196.5 218.4 202.7
Non-recurring charges(1).......... -- 0.9 159.4 13.7 3.7
--------------- ------------- ------------ ------------ ------------
Operating income (loss)........... 45.5 26.1 (46.2) 66.9 51.1
Interest expense, net............. (29.0) (27.2) (111.3) (110.9) (108.0)
Dividends on preferred stock
of subsidiary................... (1.1) (1.1) (4.5) (4.5) (4.5)
Income taxes...................... (2.6) (3.3) (11.3) 3.2 (11.9)
--------------- ------------- ------------ ------------ ------------
Income (loss) from continuing
operations...................... $ 12.8 $ (5.5) $ (173.3) $ (45.3) $ (73.3)
--------------- ------------- ------------ ------------ ------------
--------------- ------------- ------------ ------------ ------------
Income (loss) from continuing
operations per share of common
stock............................. $ .15 $ (.32) $ (5.77) $ (1.88) $ (2.61)
--------------- ------------- ------------ ------------ ------------
--------------- ------------- ------------ ------------ ------------
Gross profit percentage........... 25.8% 23.3% 23.7% 23.4% 21.7%
Operating margin percentage....... 11.7% 7.7% (3.5)% 5.2% 4.3%
</TABLE>
- ---------------
(1) Non-recurring charges are:
<TABLE><CAPTION>
YEAR ENDED
THIRTEEN WEEKS ENDED ----------------------------------------
------------------------------ JANUARY 29, JANUARY 30, JANUARY 25,
APRIL 30, 1994 MAY 1, 1993 1994 1993 1992
--------------- ------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Management equity plan
expense........................... $ -- $ -- $ 26.7 $ -- $ --
Goodwill write-off and
amortization...................... -- 0.9 132.7 3.7 3.7
Restructuring charges...... -- -- -- 10.0 --
--------------- ------------- ------------ ------------ ------------
Total................. $ -- $ 0.9 $ 159.4 $ 13.7 $ 3.7
--------------- ------------- ------------ ------------ ------------
--------------- ------------- ------------ ------------ ------------
</TABLE>
26
<PAGE>
Operating expenses allocated to the Company's three business segments
include the $129.9 million goodwill write-off in 1993 and $10.0 million of
restructuring charges in 1992 as well as goodwill amortization expense which
will not occur after 1993 because of the 1993 goodwill write-off. Management
believes that the segment operating income data presented below are important to
obtaining an understanding of the segments' comparative results in 1993, 1992
and 1991 and in the first quarters of 1994 and 1993.
<TABLE><CAPTION>
AUTOMOTIVE PRODUCTS INTERIOR FURNISHINGS WALLCOVERINGS
------------------------------------- ------------------------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
------------------------------------- ------------------------------------- ------------------------
JANUARY 29, JANUARY 30, JANUARY 25, JANUARY 29, JANUARY 30, JANUARY 25, JANUARY 29 JANUARY 30,
1994 1993 1992 1994 1993 1992 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $677.9 $643.8 $610.3 $407.2 $391.8 $336.8 $220.4 $241.9
Cost of goods sold....... 555.4 532.1 505.8 294.7 282.5 248.9 145.7 163.8
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross margin............. 122.5 111.7 104.5 112.5 109.3 87.9 74.7 78.1
Selling, general and
administrative
expenses................. 54.9 57.1 47.0 68.0 70.8 58.7 62.1 66.1
Goodwill amortization,
write-off and other
non-recurring
charges(1)............... 69.9 1.9 1.9 32.3 0.9 0.9 30.5 10.9
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Segment operating income
(loss)(2)................ $(2.3) $52.7 $55.6 $12.2 $37.6 $28.3 $(17.9) $1.1
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross margin
percentages.............. 18.1% 17.3% 17.1% 27.6% 27.9% 26.0% 33.9% 32.3%
Operating margin
percentages.............. (0.3)% 8.2% 9.1% 3.0% 9.6% 8.4% (8.1 )% 0.5%
<CAPTION>
JANUARY 25,
1992
-----------
<S> <C>
Net sales................ $237.2
Cost of goods sold....... 172.2
-----------
Gross margin............. 65.0
Selling, general and
administrative
expenses................. 70.3
Goodwill amortization,
write-off and other
non-recurring
charges(1)............... 0.9
-----------
Segment operating income
(loss)(2)................ $(6.2)
-----------
-----------
Gross margin
percentages.............. 27.4%
Operating margin
percentages.............. (2.6 )%
</TABLE>
- ---------------
(1) Goodwill amortization and write-off and other non-recurring charges include:
<TABLE><CAPTION>
AUTOMOTIVE PRODUCTS INTERIOR FURNISHINGS WALLCOVERINGS
------------------------------------- ------------------------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
------------------------------------- ------------------------------------- ------------------------
JANUARY 29, JANUARY 30, JANUARY 25, JANUARY 29, JANUARY 30, JANUARY 25, JANUARY 29, JANUARY 30,
1994 1993 1992 1994 1993 1992 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Goodwill
amortization and
write-off................ $69.9 $1.9 $1.9 $32.3 $0.9 $0.9 $30.5 $0.9
Restructuring
charges.................. -- -- -- -- -- -- -- 10.0
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total............ $69.9 $1.9 $1.9 $32.3 $0.9 $0.9 $30.5 $10.9
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<PAGE>
<CAPTION>
JANAURY 25,
1992
-----------
<S> <C>
Goodwill
amortization and
write-off................ $0.9
Restructuring
charges.................. --
-----------
Total............ $0.9
-----------
-----------
</TABLE>
(2) Excludes $38.3 million, $24.5 million and $26.7 million of unallocated
corporate expense in 1993, 1992 and 1991, respectively. See Note 18 to
Consolidated Financial Statements.
<TABLE><CAPTION>
AUTOMOTIVE PRODUCTS INTERIOR FURNISHINGS WALLCOVERINGS
---------------------- ---------------------- -----------
THIRTEEN WEEKS ENDED THIRTEEN WEEKS ENDED THIRTEEN
WEEKS ENDED
---------------------- ---------------------- -----------
APRIL 30, MAY 1, APRIL 30, MAY 1, APRIL 30,
1994 1993 1994 1993 1994
----------- --------- ----------- --------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales.......................................................... $223.0 $174.7 $107.1 $103.0 $60.3
Cost of goods sold................................................. 174.8 143.5 75.3 75.4 39.4
----------- --------- ----------- --------- -----------
Gross margin....................................................... 48.2 31.2 31.8 27.6 20.9
Selling, general and administrative expenses....................... 12.8 14.2 18.1 17.6 15.8
Goodwill amortization.............................................. -- 0.5 -- 0.2 --
----------- --------- ----------- --------- -----------
Segment operating income(1)........................................ $35.4 $16.5 $13.7 $9.8 $5.1
----------- --------- ----------- --------- -----------
----------- --------- ----------- --------- -----------
Gross margin percentages........................................... 21.6% 17.9% 29.7% 26.8% 34.7%
Operating margin percentages....................................... 15.9% 9.4% 12.8% 9.5% 8.5%
<CAPTION>
MAY 1, 1993
-----------
<S> <C>
Net sales.......................................................... $61.3
Cost of goods sold................................................. 41.3
-----------
Gross margin....................................................... 20.0
Selling, general and administrative expenses....................... 15.6
Goodwill amortization.............................................. 0.2
-----------
Segment operating income(1)........................................ $4.2
-----------
-----------
Gross margin percentages........................................... 32.6%
Operating margin percentages....................................... 6.9%
</TABLE>
- ---------------
(1) Excludes $8.6 million and $4.5 million of unallocated corporate expenses in
the thirteen weeks ended April 30, 1994 and May 1, 1993, respectively.
27
<PAGE>
FIRST QUARTER OF 1994 COMPARED TO FIRST QUARTER OF 1993
NET SALES. Net sales increased 15.2% to $390.4 million in the first quarter
of 1994 from $339.0 million in the corresponding period of 1993. 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 27.6% in the first quarter of 1994
to $223.0 million as compared to $174.7 million in the first quarter of 1993.
Approximately 45% of the increase is due to a 12.0% increase in North American
auto build as compared to the first quarter of 1993. The remaining net sales
increase was due primarily to a 175% increase in net sales of the Company's
convertible top stacks.
Interior Furnishings' net sales increased 4.0% in the first quarter of 1994
to $107.1 million as compared to $103.0 million in the first quarter of 1993 as
a result of increases at both the Decorative Fabrics and Floorcoverings groups.
Net sales of the Decorative Fabrics group increased as a result of a 2.9%
increase in average selling price at the Mastercraft division, reflecting a
shift to higher priced Jacquard fabrics. Floorcoverings' net sales increased
9.1% to $22.9 million as a result of increased installations.
Wallcoverings' net sales decreased 1.7% in the first quarter of 1994 to
$60.3 million as compared to $61.3 million in the first quarter of 1993 due to
sluggish demand by chain stores, which was partially offset by modest growth in
independent retailer ("dealer") business. Management believes that the growth in
dealer business reflects benefits of the initiative begun in late 1993 to
increase product offerings.
GROSS MARGIN AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Automotive
Products' gross margin increased to 21.6% in the first quarter of 1994 from
17.9% in the first quarter of 1993. Of this 3.7% improvement, 1.9% was due to
the absorption of fixed costs over a greater sales volume and 0.7% was due to
improved labor and materials yields. Selling, general and administrative
expenses as a percent of net sales decreased from 8.1% to 5.7% due primarily to
the absorption of fixed costs over a greater sales volume. Approximately 0.6% of
such decrease was due to reduced product development expenses and administrative
overhead.
Interior Furnishings' gross margin increased to 29.7% in the first quarter
of 1994 from 26.8% in the first quarter of 1993. Of this 2.9% improvement, 1.0%
was due to manufacturing cost improvements and the remainder was principally due
to increased sales of higher priced Jacquard fabrics. Selling, general and
administrative expenses remained flat relative to sales.
Wallcoverings' gross margin increased to 34.7% in the first quarter of 1994
from 32.6% in the first quarter of 1993. Of this 2.1% increase, 1.7% was due to
improved absorption of fixed manufacturing costs resulting from increased
production for new product lines and the remainder was principally due to
reduced line closeout costs. Selling, general and administrative expenses
remained flat but increased as a percent of net sales to 26.2% from 25.4%,
reflecting the 1.7% reduction of sales volume.
TOTAL OPERATING EXPENSES. Total operating expenses were $344.9 million and
$312.9 million in the first quarter of 1994 and the first quarter of 1993,
respectively, including $8.6 million and $4.5 million of unallocated corporate
expenses, respectively. Unallocated corporate expenses in the first quarter of
1994 include $3.2 million of expenses incurred for the performance of services
by Blackstone Partners and $2.8 million for the performance of services by WP
Partners in connection with the Company's review of refinancing and other
strategic alternatives as well as certain other advisory services. Operating
expenses allocated to the Company's three business segments totaled $336.3
million or 86.1% of sales in the first quarter of 1994 compared to $308.4
million or 91.0% of sales in the first quarter of 1993. This 4.9 percentage
point improvement is primarily the
28
<PAGE>
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. Operating expenses in the first quarter of 1993
included $0.9 million of goodwill amortization.
INTEREST EXPENSE. Interest expense allocated to continuing operations, net
of interest income of $2.4 million in the first quarter of 1994 and $1.0 million
in the first quarter of 1993, increased to $29.1 million during the first
quarter of 1994 compared to $27.2 million in the first quarter of 1993. Interest
expense, including amounts allocated to discontinued operations in 1993 and
excluding interest income, decreased to $31.4 million during the first quarter
of 1994 compared to $34.0 million in the first quarter of 1993. The decrease in
interest expense was due primarily to a decrease in the Company's average
borrowings.
INCOME TAXES. In the first quarter of 1994 income taxes of $2.6 million
consisted of foreign and state taxes. This amount compared to a foreign and
state tax provision of $3.3 million in the first quarter of 1993.
DISCONTINUED OPERATIONS. The Company's loss from discontinued operations,
including losses on disposals of $2.2 million, was $3.6 million for the first
quarter of 1993.
NET INCOME. The combined effect of the foregoing resulted in net income of
$12.8 million in the first quarter of 1994 compared to a net loss of $9.1
million in the first quarter of 1993.
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, the net sales growth appears to reflect cyclical
trends. Since late 1993, U.S. light vehicle sales have accelerated, reflecting
what management believes to be a cyclical upturn. See "Business--Automotive
Products--Industry". Second, in recent years, foreign manufacturers have shifted
production from off-shore auto plants to newly built or expanded Transplant
facilities located in North America. As a consequence, North American production
has risen faster than retail sales. The Company has benefitted from this trend.
Third, the Company won placement of its products on a number of new and
redesigned vehicle lines in 1993. For example, the Company was awarded the
automotive fabric order for the Ford Explorer and displaced one of its bodycloth
competitors on the General Motors "W" and "N" body lines. Fourth, the average
sales content per vehicle of the five principal automotive products produced by
the Company increased in 1993 as it has in each of the last five years. (See
"Business--Automotive Products--Automotive Products Segment Growth Strategy").
In 1993, the Company continued to benefit from this trend. For example, in 1993
General Motors' Cadillac division began using the Company's technically advanced
"foam-in-place" carpet system, which provides significant acoustical benefits
and sells at a significantly higher price than traditional molded floor carpet.
These factors were offset by decreased demand for products for certain key
models in the second quarter due to customers' 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 increase in U.S. upholstered
furniture shipments in 1993 and increased sales of the Company's patented
Powerbond RS(R) 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. These sales increases were
offset by decrease s in net sales of the lower-end woven velvet product line and
the Greeff product line.
29
<PAGE>
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 a reduction in shelf space and market share due 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.
GROSS MARGIN AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Automotive
Products' gross margin increased to 18.1% in 1993 from 17.3% in 1992 as a result
of improved product mix mainly due to new fabric placements and as a result of
improved absorption of fixed manufacturing costs over a larger sales volume.
Selling, general and administrative expenses as a percent of net sales decreased
to 8.1% in 1993 from 8.9% in 1992. Of this 0.8% decrease, 0.5% was due to the
absorption of fixed costs over a greater sales volume with the remainder
relating principally to cost reductions from reduced product development
activities.
Interior Furnishings' gross margin decreased to 27.6% in 1993 from 27.9% in
1992 due to price deterioration in the lower-end woven velvet product line of
the Decorative Fabrics group. Selling, general and administrative expenses as a
percent of net sales decreased to 16.7% from 18.1% primarily due to cost
reduction initiatives aimed at streamlining marketing efforts in the Greeff
product line.
Wallcoverings' gross margin increased to 33.9% in 1993 from 32.3% in 1992
as a result of manufacturing cost reduction initiatives aimed at improving
product quality and streamlining production processes. Selling, general and
administrative expenses were reduced by 1.8% of net sales due to the elimination
of outside information systems processing. An 8.9% reduction in net sales
resulted in an increase in selling, general, and administrative expenses as a
percent of net sales to 28.2% from 27.3%.
TOTAL OPERATING EXPENSES. Total operating expenses were $1,351.7 million
and $1,210.6 million in 1993 and 1992, respectively, including $38.3 million
($26.7 million of which was a one-time charge related to the 1993 Plan) and
$24.5 million of unallocated corporate expenses, respectively. Operating
expenses allocated to the Company's three business segments totaled $1,313.5
million and $1,186.1 million in 1993 and 1992, respectively. These operating
expenses in 1993 included certain non-recurring charges relating to the
write-off of goodwill in the amount of $129.9 million in the quarter ended
October 30, 1993 and goodwill amortization of $2.8 million for the nine months
prior to the write-off of goodwill. Operating expenses in 1992 included $10.0
million of charges relating to Wallcoverings' downsizing program and $3.7
million of goodwill amortization. See Notes 4 and 5 to the Consolidated
Financial Statements.
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 and cumulative future net income would not be sufficient to recover the
Company's remaining goodwill balance of $129.9 million. Accordingly, the Company
wrote off such balance during the third quarter ended October 30, 1993.
Management's analysis has changed since October 30, 1993 because of the
prospects of altering the Company's capital structure in 1994 through the
Recapitalization, which as of October 31, 1993, was not considered reasonably
likely to occur. See Note 4 to the Consolidated Financial Statements.
INTEREST EXPENSE. Interest expense allocated to continuing operations, net
of interest income of $4.4 million in 1993 and $4.0 million in 1992, increased
to $111.3 million during 1993 compared to $110.9 million in 1992. Interest
expense, including amounts allocated to discontinued operations and excluding
interest income, decreased to $135.1 million during 1993 compared to $138.3
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 interest rate.
30
<PAGE>
INCOME TAXES. In 1993 income taxes of $11.3 million consisted of foreign
and state taxes. This amount compares with a 1992 tax benefit of $3.2 million
which was comprised of a foreign and state tax provision of $3.5 million offset
by a Federal tax benefit of approximately $6.7 million.
DISCONTINUED OPERATIONS. The Company's loss from discontinued operations
was $104.3 million for 1993 and $218.3 million for 1992, including losses on
disposals of $99.6 million and $168.0 million, respectively.
The 1993 loss is primarily attributable to the $125.5 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. This was offset by a $28.1 million gain on the sale of Kayser-Roth. The
1992 loss reflected primarily the expected losses on the anticipated disposition
of Builders Emporium.
NET INCOME. The combined effect of the foregoing resulted in a net loss of
$277.7 million in 1993 compared to a net loss of $263.7 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 sales volume from the full utilization of excess
manufacturing capacity acquired with Doblin. Second, Floorcoverings' net sales
increased 17.7%, which was primarily attributable to restyled product offerings
in the six foot roll product line.
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 product distribution channels and its downsizing program.
GROSS MARGIN AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Automotive
Products' gross margin improved slightly due to greater fixed cost absorption
because of the 5.5% increase in sales volume in 1992. Selling, general and
administrative expenses, as a percent of net sales, increased to 8.9% in 1992
from 7.7% in 1991 due to increased product development and marketing activities.
Interior Furnishings' gross margin improved to 27.9% from 26.0% due to
improved Decorative Fabrics product mix related to the Doblin acquisition and
due to improved Floorcoverings product mix related to restyled product offerings
in the six foot roll product line. Selling, general and administrative expenses
as a percent of net sales increased to 18.1% from 17.4% due to product
development activities in Decorative Fabrics.
Wallcoverings' gross margin increased to 32.3% in 1992 from 27.4% in 1991
due to manufacturing material cost reduction. Selling, general and
administrative expenses decreased as a percent of net sales to 27.3% in 1992
from 29.6% in 1991, due to reduced sample book program costs.
31
<PAGE>
TOTAL OPERATING EXPENSES. Total operating expenses were $1,210.6 million
and $1,133.2 million in 1992 and 1991, respectively, including $24.5 million and
$26.7 million of unallocated corporate expense. Operating expenses allocated to
the Company's three business segments totaled $1,186.1 million and $1,106.5
million in 1992 and 1991, respectively. Operating expenses in 1992 included
$10.0 million of restructuring costs.
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 writedowns 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 $7.3 million in 1991, increased to
$110.9 million during 1992 compared to $108.0 million in 1991. Interest expense,
including amounts allocated to discontinued operations and excluding interest
income, decreased to $138.3 million during 1992 compared to $141.5 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 tax benefit of $3.2 million includes a
foreign and state tax provision of $3.5 million, offset by a Federal tax benefit
of approximately $6.7 million. In 1991, income taxes of $12.0 million consisted
of foreign and state taxes of $11.7 million and Federal income taxes of $0.3
million.
DISCONTINUED OPERATIONS. As previously discussed, loss from discontinued
operations, net of taxes and including loss on disposals, was $218.3 million in
1992 compared to the loss from discontinued operations of $16.4 million in 1991.
The 1992 loss reflected primarily 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. Loss on early retirement of
indebtedness, net of taxes, was $1.8 million in 1991. See Note 11 to the
Consolidated Financial Statements.
The cumulative effect on prior years of the change in accounting for
postretirement benefits other than pensions was $42.3 million in 1991. See Note
13 to the Consolidated Financial Statements.
NET INCOME. The combined effect of the foregoing resulted in a net loss of
$263.7 million in 1992 compared to a net loss of $133.8 million in 1991.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1994, the Company and its subsidiaries had cash and cash
equivalents totaling $139.3 million compared to $81.4 million and $83.7 million
at January 29, 1994 and January 30, 1993, respectively. Included in cash and
cash equivalents at April 30, 1994 was $135.3 million held by Group. The
increase in the Company's cash balance is principally due to the receipt of the
cash proceeds of $71.2 million from the payment of the Kayser-Roth note referred
to below. The Company's principal sources of funds are cash generated from
continuing operating activities and borrowings under bank credit facilities. Net
cash provided by the operating activities of its continuing operations was $22.9
million in 1993 and $16.6 million for the quarter ended April 30, 1994. C&A Co.
had $59.5 million of borrowing availability under a credit facility at April 30,
1994. Based on financial covenants in that credit facility, approximately $42
million could be paid to Group as a dividend. The Company's Canadian
subsidiaries had $8.1 million of borrowing availability under a bank demand line
of credit at April 30, 1994. Restrictions on the payment of dividends contained
in various debt agreements of Group prevented the payment of dividends by Group
to the Company in 1993 and 1992. See Note 11 to Consolidated Financial
Statements.
During 1993, the Company sold Kayser-Roth for approximately $170 million,
including a $70 million note. The Company's Engineering Group, which was
discontinued in 1992, was sold
32
<PAGE>
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. On April 27, 1994, the Kayser-Roth note was paid with
accrued interest. The Kayser-Roth sale is subject to post-closing purchase price
adjustments.
At April 30, 1994, outstanding long-term indebtedness (substantially all of
which will be defeased and redeemed, or repaid, in connection with the
Recapitalization) amounted to $922.2 million (including current portion of
$163.7 million) at varying interest rates between 5% and 15% per annum. At
January 29, 1994, $512.3 million of debt was due within the succeeding five year
period. See Note 11 to Consolidated Financial Statements. Cash interest paid
during the thirteen weeks ended April 30, 1994 and May 1,1993 was $8.5 million
and $14.7 million, respectively, and during 1993, 1992 and 1991 was $101.5
million, $105.0 million and $120.6 million, respectively.
The Company's principal uses of funds for the next several years will be to
fund principal and interest payments on its indebtedness, net working capital
increases and capital expenditures. The Company makes capital expenditures on a
recurring basis for replacement and improvements. As of April 30, 1994, the
Company had approximately $43.0 million in outstanding capital commitments.
During 1994, the Company anticipates capital expenditures will aggregate
approximately $80 million as compared to $44.9 million, $38.2 million and $38.9
million during 1993, 1992 and 1991, respectively. This increase is due primarily
to the planned acquisition of additional machinery and equipment at Decorative
Fabrics' Mastercraft division as part of an $85 million five-year capital
investment plan that was initiated this year for the purpose of expanding
production capacity at Mastercraft to accommodate anticipated growth (see
"Business--Decorative Fabrics--Mastercraft Growth Plan"). Secondarily, this
increase is due to the planned completion of an Automotive Products facility in
Mexico for approximately $6.0 million. The Company's capital expenditures in
future years will depend upon demand for the Company's products and changes in
technology. The Company currently estimates that capital expenditures in 1995
will exceed $60 million.
The Company has significant obligations relating to postretirement,
casualty, environmental, lease and other liabilities of discontinued operations.
In connection with the sale and acquisition of certain businesses, the Company
has indemnified the purchasers and sellers for certain environmental
liabilities, lease obligations and other matters. In addition, the Company is
contingently liable with respect to certain lease and other obligations assumed
by certain purchasers and may be required to honor such obligations if such
purchasers are unable or unwilling to do so. Management anticipates that the net
cash requirements of its discontinued operations will be approximately $20.9
million during 1994. However, because the requirements of the Company's
discontinued operations are largely a function of contingencies, 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
the Company's needs relating to discontinued operations can be adequately funded
in 1994 by net cash provided by operating activities from continuing operations
and by additional borrowings under the New Credit Facilities. The Company's NOLs
and unused Federal tax credits may minimize the cash requirement for Federal
income taxes during certain future periods. See "--Tax Matters".
In connection with the Recapitalization, the Company will effect a
defeasance and redemption, or repayment, of all its outstanding indebtedness and
preferred stock, other than (i) $23.6 million of mortgage and other debt which
will remain outstanding and (ii) $204.5 million of PIK Notes, of which
approximately $9.7 million will be redeemed and approximately $194.8 million
will be exchanged for Common Stock of the Company. These amounts are inclusive
of $12.6 million of accrued PIK interest from January 29, 1994 through July 13,
1994. See "Use of Proceeds and Consolidation".
33
<PAGE>
In connection with the Recapitalization, the Company will also enter into
the New Credit Facilities, which will consist of (i) the Closing Date Term Loan
Facility (defined below) in an aggregate principal amount of $450 million with a
term of eight years, (ii) the Delayed Draw Term Loan Facility (defined below) in
an aggregate principal amount of $25 million with a term of eight years, (iii)
the Revolving Facility (defined below) in an aggregate principal amount of up to
$150 million with a term of seven years and (iv) the Receivables Facility
(defined below) in an aggregate amount of up to $150 million with a term of
seven years. These facilities will include various restrictive covenants
including maintenance of EBITDA and interest coverage ratios, leverage and
liquidity tests and various other restrictive covenants which are typical for
such facilities. See "New Credit Facilities".
The Company does not believe that inflation has had a material impact on
sales or income during the three years ended January 29, 1994.
After the Recapitalization, the Company will have approximately $33.1
million available and undrawn under the New Credit Facilities. Management
believes that cash flow from operations and funds available under the New Credit
Facilities will be sufficient to fund the Company's long-and short-term
liquidity requirements, including working capital, capital expenditures and debt
service requirements.
TAX MATTERS
As of January 29, 1994, the Company had NOLs of approximately $434.0
million for Federal income tax purposes, which expire over the period from 1996
to 2008. The Company also has unused Federal tax credits of approximately $18.9
million, $11.9 million of which expire during 1994 to 2003. The Company
anticipates that additional Federal income tax deductions of approximately $37.7
million will be generated during 1994 as a result of write-offs of unamortized
debt discounts and deferred financing costs relating to debt repaid in
connection with the Recapitalization. In addition, the Company estimates that it
will generate tax deductions of approximately $75.4 million in connection with
the ultimate disposition of assets and liabilities of its discontinued
businesses during the period 1994 to 1996, which were previously accrued for
financial reporting purposes prior to January 29, 1994. The Company anticipates
that utilization of these NOLs, tax credits and deductions will result in
minimal Federal income taxes until these NOLs and tax credits are exhausted.
Approximately $134.0 million of the Company's NOLs and $11.9 million of the
Company's unused Federal tax credits may be used only against the income and
apportioned tax liability of the specific corporate entity that generated such
losses or credits or its successors. After giving effect to the Consolidation,
such NOLs and credits may be used against the income and apportioned tax
liability of C&A Co., which the Company believes will have sufficient taxable
income and apportioned tax liability to fully use such NOLs and tax credits. The
Recapitalization will not constitute a "change in control" that would result in
annual limitations on the Company's use of its NOLs and unused tax credits.
However, future sales of Common Stock by the Company or the Partners, or changes
in the composition of the Partners, could constitute such a "change in control".
Management cannot predict whether such a "change in control" will occur. If such
a change of control were to occur, the resulting annual limitations on the use
of NOLs and tax credits will depend on the value of the equity of the Company
and the amount of "built-in gain" or "built-in loss" in the Company's assets at
the time of the "change in control", which cannot be known at this time.
In the course of an examination of the Company's Federal income tax
returns, the IRS has challenged the availability of $176.6 million of the
Company's approximately $434.0 million of 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 the NOLs should be available (subject to the potential
limitations noted above) to offset its income, if any, in the future. If the IRS
were to maintain its position and all or a major portion of such
34
<PAGE>
position were to be upheld in litigation, the amount of NOLs available to the
Company in future years would be materially reduced.
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 otherwise 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 such 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. In estimating the total cost
of investigation and remediation, the Company has considered, among other
things, the Company's prior experience in remediating contaminated sites,
remediation efforts by other parties, data released by the EPA, the professional
judgment of the Company's environmental experts, outside environmental
specialists and other experts, and the likelihood that other parties which have
been named as PRPs will have the financial resources to fulfill their
obligations at sites where they and the Company may be jointly and severally
liable. Under the scheme of joint and several liability, the Company could be
liable for the full costs of investigation and remediation even if additional
parties are found to be responsible under the applicable laws. 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. Excluding sites at which the Company's
participation is anticipated to be de minimis or otherwise insignificant or
where the Company is being indemnified by a third party for the liability, there
are 15 sites where the Company is participating in the investigation or
remediation of the site, either directly or through financial contribution, and
nine additional sites where the Company is alleged to be responsible for costs
of investigation or remediation. The Company's current estimate of its liability
for these 24 sites is approximately $29.5 million. 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.
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. See "Item 3. Legal Proceedings--Environmental
Proceedings" incorporated by reference to the Company's Annual Report on Form
10-K for the fiscal year ended January 29, 1994.
35
<PAGE>
QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly financial
information for 1994, 1993 and 1992. In the opinion of management, this
information has been prepared on the same basis as the information in the
Consolidated Financial Statements and includes normal recurring adjustments
which management considers necessary for a fair presentation of the information
shown when read in conjunction with the Consolidated Financial Statements,
including the notes thereto, appearing elsewhere in this Prospectus. The
operating results for any quarter are not necessarily indicative of results for
the entire year or for any future period.
<TABLE><CAPTION>
1994 1993 1992
--------- ------------------------------------------ --------------------------------------------
FIRST FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER(1)
--------- --------- --------- --------- --------- --------- --------- --------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.............. $ 390.4 $ 339.0 $ 289.7 $ 334.6 $ 342.2 $ 319.5 $ 319.7 $ 314.9 $ 323.4
Gross profit........... 101.0 79.0 61.2 84.4 85.1 72.6 74.1 70.8 81.6
Operating income
(loss)(2).............. 45.6(3) 26.2 10.6 (96.4)(4) 13.4(5) 20.2 18.1 19.2 9.4(6)
</TABLE>
- ---------------
<TABLE>
<S> <C>
(1) The fourth quarter of 1992 includes fourteen weeks.
(2) Includes $0.9 million of goodwill amortization through the third quarter of 1993.
(3) Operating income for the first quarter of 1994 includes $6.0 million of operating expenses for services
performed by Blackstone Partners and WP Partners in connection with the Company's review of refinancing and
strategic alternatives, as well as certain other advisory services.
(4) Operating loss for the third quarter of 1993 includes a $129.9 million write-off of goodwill.
(5) Operating income for the fourth quarter of 1993 includes a $26.7 million charge for the 1993 Plan. See Notes
5 and 15 to the Consolidated Financial Statements.
(6) Operating income for the fourth quarter of 1992 reflects a $10.0 million restructuring charge.
</TABLE>
For a discussion of the operating results for the first quarter of 1994,
see "--First Quarter of 1994 Compared to First Quarter of 1993."
The first quarter of 1993 reflects increased net sales from Automotive
Products which followed an increase in automotive industry unit sales (a trend
which began in the fourth quarter of 1992) and increased net sales from the
Mastercraft division of Interior Furnishings. This increase was offset by a
modest net sales decline at Wallcoverings. Gross profit margin increased
slightly reflecting margin improvement across all business segments. Net sales
in the second quarter of 1993 declined 9.4% from the same period in 1992,
reflecting sales declines across all business segments, particularly at
Automotive Products and Wallcoverings. The decline at Automotive Products was
primarily due to decreased demand for product during model changeovers of
certain key models including the Chrysler C/Y body and the Honda Accord.
Wallcoverings' net sales declined partly as a result of its downsizing and the
reduction in sample book placements. Gross margin declined during the second
quarter of 1993 compared to the second quarter of 1992 primarily as a result of
a lower absorption of fixed costs due to lower sales volumes.
Net sales in the third quarter of 1993 increased by 6.3% versus the prior
year due to increased net sales at Automotive Products and Interior Furnishings
offset by a net sales decline at Wallcoverings. Despite a downturn in the
automotive build, Automotive Products net sales increased due to the completion
of changeovers at Honda, strong orders for the segment's Jacquard automotive
seat fabric and the initiation of model year 1994 Ford Mustang production.
Interior Furnishings' net sales increased reflecting general improvements in the
retail furniture market. Company wide gross profit margin increased 2.7
percentage points, reflecting improved margins across all segments, particularly
Wallcoverings due to the fixed cost reductions associated with the previously
discussed downsizing. Net sales in the thirteen-week fourth quarter of 1993
increased 5.8% over the fourteen-week fourth quarter of 1992. Net sales
increased at both Automotive Products and Interior Furnishings, offset by
further net sales declines at Wallcoverings. Automotive Products net sales
outpaced the automotive build, reflecting continued strong demand for bodycloth
and the ramp-up of the 1994 model Ford Mustang, which uses Dura's convertible
top systems.
36
<PAGE>
BUSINESS
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. Within these three segments,
the Company estimates it holds a number one or number two market share position
in each of its eight major product lines which together comprised approximately
82% of 1993 net sales of $1,305.5 million. With respect to market or competitive
information, references to the Company as "a leader" or "one of the leading"
manufacturers in a particular product category mean that the Company is one of
the principal manufacturers in that product category and references to the
Company as "the leader," "the largest" or "the leading" manufacturer in a
particular product category mean that the Company has the largest market share
based on dollar sales volume in that product category. See "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a discussion of the risks inherent in the Company's businesses
and the Company's financial performance over the last three years, including its
history of net losses, competitive factors affecting the Company, the Company's
substantial leverage, contingent liabilities and other risks inherent in an
investment in Common Stock.
COLLINS & AIKMAN CORPORATION
AND SUBSIDIARIES
<TABLE>
<S> <C> <C> <C>
AUTOMOTIVE INTERIOR
PRODUCTS FURNISHINGS WALLCOVERINGS
. AUTOMOTIVE SEAT FABRIC
. RESIDENTIAL AND COMMERICAL
WALLCOVERINGS
. MOLDED FLOOR CARPETS
. ACCESSORY FLOOR MATS
. LUGGAGE COMPARTMENT TRIM
DECORATIVE
FABRICS FLOORCOVERINGS
. CONVERTIBLE TOP STACKS
. SIX-FOOT CARPET
. MODULAR CARPET TILE
</TABLE>
<TABLE>
<S> <C> <C> <C>
MASTERCRAFT CAVEL GREEFF WARNER
. FLAT-WOVEN . VELVETS . PRINTS . PRINTS
JACQUARDS AND
DOBBIES
</TABLE>
See Note 18 to the Consolidated Financial Statements for financial information
with respect to the three segments for each of the last three fiscal years.
37
<PAGE>
BUSINESS STRATEGY
Management believes the Company is well-positioned to achieve continued
growth in each of its three segments as a result of its pursuit of the following
strategic objectives:
FOCUS ON HIGH MARKET SHARE PRODUCTS. Management focuses on developing
products that have high market share potential. Management estimates that each
of the Company's eight major product lines holds a number one or number two
market share position. Together these product lines comprised approximately 82%
of the Company's 1993 net sales. These market positions were achieved primarily
through internal growth and reflect a long-term, Company-wide commitment to
excellence in styling, engineering, product development, value-added
manufacturing and customer service.
The table below sets forth management's estimates of the Company's 1993
market share positions in its eight major product lines.
<TABLE><CAPTION>
1993 1993 MARKET
NET SALES SHARE
Product Line (MILLIONS) POSITION
- -------------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Automotive Products
Automotive Seat Fabric................................................... $ 221.2 #1
Molded Floor Carpets..................................................... 181.1 2
Accessory Floor Mats..................................................... 73.4 1
Luggage Compartment Trim................................................. 37.6 2*
Convertible Top Stacks................................................... 28.2 1
Interior Furnishings
Flat-woven Furniture Fabrics............................................. 268.9 1
Six-foot Commercial Carpet............................................... 60.3 1
Wallcoverings (Residential)................................................ 196.0 1
-----------
Subtotal................................................................... $ 1,066.7
Percent of net sales..................................................... 82%
Net sales.................................................................. $ 1,305.5
</TABLE>
-------------------------------
* Management believes that the Company and a competitor are tied
for the number two market share position.
MAINTAIN BROAD PRODUCT OFFERINGS TO SUPPORT CUSTOMER BASE. The Company
consistently strives to offer a wide variety of products and to become the
primary supplier to each of its customers. The breadth and variety of fabrics
and styles offered by Decorative Fabrics supports the Company's goal of being
the primary supplier to its customers. Wallcoverings has manufacturing
capabilities in all types of printing technologies, utilizes a vast library of
designs and color concepts and supports the most extensive dealer network in the
industry, selling to approximately 15,000 dealers and most of the leading retail
chains in the country.
Automotive Products offers a wide variety of interior trim products and
thereby maintains a broader, more uniform sales penetration at foreign owned
North American automotive production and assembly facilities ("Transplants") and
U.S. automotive original equipment manufacturers (together with Transplants,
"OEMs") than any of its competitors. Management estimates that for 1993
Automotive Products' overall share in its five major automotive product lines
was 26% at Ford Motor, 40% at General Motors and 51% at Chrysler, and that its
share was 36% among the Transplants.
38
<PAGE>
MAINTAIN LOW-COST POSITION. Management's strategy is to maintain the
Company's low-cost position and flexible manufacturing capabilities in order to
protect operating margins from competitive pricing pressures and economic
downturns, while maximizing the benefit from cyclical upturns. The Company
established its low-cost position through a systematic long-term focus on
improving materials yields and labor productivity and reducing overhead
expenses. These initiatives helped offset the impact of volume declines on
operating margins during the recent economic recession and position the Company
to take full advantage of industry upturns.
MAXIMIZE BENEFITS FROM HIGH OPERATING LEVERAGE. Management believes that
substantial available production capacity and high operating leverage have
enabled the Company to benefit from the recent cyclical upturn in its served
markets. In addition, the Company has substantial available manufacturing
capacity to support further growth.
Over the past several years, the Company has made considerable investments
in product development, MIS upgrades and other areas of capital improvement. The
Company does not currently anticipate the need to make significant capital
expenditures to expand capacity to meet cyclical increases in demand, with the
exception of an $85 million five-year capacity expansion program planned for the
Mastercraft division of Interior Furnishings. Future capital expenditures are
currently targeted primarily toward further cost reduction and modernization.
Recently, sales and production volumes have been increasing rapidly in the
Company's served markets. During the second half of 1993, the seasonally
adjusted annual rate of U.S. light vehicle sales was 14% higher than during the
1991 recession lows, and the seasonally adjusted annual rate of U.S. furniture
sales for the second half of 1993 was 19% higher than in 1991. If the current
upward trends in the Company's businesses continue, management believes that the
Company may continue to achieve higher capacity utilization rates, which
generally result in higher operating margins.
OFFER VALUE-ADDED PRODUCTS. A key element of the Company's strategy is to
increase market share and unit selling prices by developing increasingly higher
value-added products through innovations in materials construction, product
design and styling. The Company produces virtually no inventory or commodity
type products other than in Wallcoverings. The Company recently developed the
"Top-in-a-Box" convertible top assembly, enabling the Company to capture
substantial additional materials and assembly value in its unit selling price by
shipping a fully-assembled module directly to the OEMs. Previously, convertible
top systems were assembled on high-cost OEM assembly lines or in specialty
conversion shops. In recent years, through these and other innovations, the
Company has realized higher unit sales prices.
MAINTAIN PRODUCT DESIGN AND STYLING LEADERSHIP. Design and styling are key
differentiating factors in consumer purchasing decisions. Management believes
that the Company's product styling and design capabilities are currently an
important competitive advantage and intends to devote resources to maintain the
Company's position in these areas. The Decorative Fabrics group introduces more
than twice as many designs each year as its largest competitors and has a design
library built by such well known designers as Wesley Mancini, Carl Miller and
Stanley King. Similarly, Wallcoverings has a leading in-house design staff and
also licenses designs from industry leaders such as Laura Ashley, Mario Buatta
and Clarence House. Automotive Products operates a technical design center with
state-of-the-art, computer-aided design/computer-aided manufacturing ("CAD/CAM")
systems.
CONTINUE TO DELEVERAGE. The Recapitalization is designed to increase
operating and financial flexibility by reducing the Company's indebtedness and
significantly lowering its cost of borrowing, thereby freeing more cash for debt
repayment, continued reinvestment in the Company's businesses and the pursuit of
niche acquisitions. Management expects this financial deleveraging to be
39
<PAGE>
enhanced through the application of operating cash flow augmented by the use of
the Company's NOLs, which management believes will total approximately $434.0
million, and by other favorable tax attributes. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "--Tax Matters".
COMPLETE STRATEGIC RESTRUCTURING OF WALLCOVERINGS. In late 1993, a newly
installed management team instituted a restructuring plan at Wallcoverings
designed to rebuild the segment's product offerings, to increase its sample book
introduction rate through aggressive marketing and design and to improve
utilization of its extensive distribution network and manufacturing
capabilities. Management is also expanding Wallcoverings' quick-ship and
in-stock programs and enhancing its order processing systems. Management
believes that the results of the restructuring are becoming evident in the
segment's financial results, as the operating income margin increased to 8.5% in
the first quarter of 1994 from a 6.9% operating income margin in the first
quarter of 1993.
AUTOMOTIVE PRODUCTS
GENERAL
The Company is a leading designer and manufacturer of automotive products
with 1993 net sales 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 trim--and convertible top
stacks. Management estimates that Automotive Products holds a number one or
number two market share position in each of its five major product categories.
At least one of its five major automotive products is used on approximately 87%
of all North American-produced vehicle lines. Automotive Products has supplied
interior trim products to the automotive industry for over 60 years. Management
estimates that the total market for Automotive Products' five major product
lines in 1993 was approximately $1.4 billion. Accordingly, management believes
that Automotive Products' 1993 sales of $541.5 million in these product lines
represents a market share of approximately 37%. 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 the OEMs than any of its competitors.
INDUSTRY
Automotive industry demand historically has been influenced by both
cyclical factors and long-term growth trends. Since nearly all of the historic
growth in the stock of light vehicles has been associated with increases in the
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.
Vehicle replacement demand is significantly influenced by the overall
health of the economy and consumer confidence generally. Management believes
that light vehicle sales may also be influenced by scrappage rates and the
average fleet age. Currently, the average age of the U.S. passenger car fleet is
at a modern high of nearly 8.0 years per vehicle compared to 7.1 years in the
early 1980's and to 6.3 years in 1970. This trend may give rise to replacement
demand for the aging vehicles still in use.
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. In the first quarter
of 1994, U.S. light vehicles sold at a 15.6 million annualized rate, a level 27%
higher than during the lowpoint of 1991.
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In 1993, approximately 95% of Automotive Product's sales related to North
American-produced vehicles rather than imported units. In recent years, the
share of retail sales accounted for by North American-produced vehicles has
risen from a low of approximately 72% in 1987 to approximately 78% in 1991 and
to approximately 84% in 1993. This trend reflects the shift of production by
foreign manufacturers from off-shore auto plants to Transplant facilities
located in North America. Based on announced production schedules, management
anticipates that the three largest traditional vehicle importers, Toyota, Honda
and Nissan, will build approximately 60% of their combined North American sales
volume in Transplant facilities during the current calendar year compared to
approximately 49% in 1992 and to approximately 10% in 1986. As a consequence of
the increased share of import "nameplates" produced in Transplant facilities,
North American production has risen faster than retail sales. Between 1991 and
1993, for example, North American production increased by 22% compared to a 13%
increase in U.S. light vehicle sales during the same period. Management believes
this trend provides the Company with additional sales opportunities. In 1993,
the Company sold nearly $100 million of its major auto product lines to
Transplants, with its business spread among virtually all such assembly plants
then in production.
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. The following table sets forth Automotive
Products' net sales by product line for the past three years.
<TABLE><CAPTION>
1991 1992 1993
---------------------- ----------------------- ----------------------
% OF % OF % OF
NET TOTAL NET TOTAL NET TOTAL
PRODUCT LINE SALES SALES SALES SALES SALES SALES
- ------------------------------------------- ----------- --------- ------------ --------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
(IN
MILLIONS)
Automotive Seat Fabric..................... $ 188.3 30.8% $ 191.1 29.7% $ 221.2 32.6%
Molded Floor Carpets....................... 161.9 26.5 173.1 26.9 181.1 26.7
Accessory Floor Mats....................... 73.0 12.0 79.9 12.4 73.4 10.8
Luggage Compartment Trim................... 25.4 4.2 26.8 4.2 37.6 5.6
Convertible Top Stacks..................... 19.9 3.3 20.8 3.2 28.2 4.2
Other...................................... 141.8 23.2 152.1 23.6 136.4 20.1
----------- --------- ------------ --------- ----------- ---------
Total................................. $ 610.3 100.0% $ 643.8 100.0% $ 677.9 100.0%
----------- --------- ------------ --------- ----------- ---------
----------- --------- ------------ --------- ----------- ---------
</TABLE>
AUTOMOTIVE SEAT FABRIC. Automotive Products manufactures a wide variety of
bodycloth, including flat-wovens, velvets and knits. Automotive Products also
laminates foam to bodycloth. Management believes that in 1993 Automotive
Products was the largest supplier of bodycloth to OEMs with net sales and
estimated market share of $221.2 million and 38%, respectively.
MOLDED FLOOR CARPETS. Molded floor carpets includes polyethylene,
barrier-backed and molded urethane underlay carpet. Management believes that in
1993 Automotive Products was the second largest producer of molded floor carpets
with net sales and estimated market share of $181.1 million and 35%,
respectively. 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.
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<PAGE>
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.
Management believes that in 1993 Automotive Products was the market leader in
this product line with net sales of $58.1 million, representing approximately
47% of all mats sold to OEMs. In addition, in 1993 Automotive Products sold
approximately $15.3 million of accessory mats to vehicle importers.
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. Management believes that
in 1993 Automotive Products was tied with another competitor as the second
largest supplier of luggage compartment trim to OEMs with net sales and
estimated market share of $37.6 million and 25%, respectively.
CONVERTIBLE TOP STACKS. Automotive Products designs, manufactures and
distributes convertible top stacks through Dura. Management believes that in
1993 Dura was the market leader in convertible top stacks with net sales and
estimated market share of approximately $28.2 million and 75%, respectively. In
October 1993, Dura began shipping its "Top-in-a-Box" product for Ford'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, molded package shelves, molded hood insulator
pads, foam laminated door fabrics and carpet trim 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.
AUTOMOTIVE PRODUCTS SEGMENT GROWTH STRATEGY
The Company's business objective is to achieve strong growth in sales and
earnings through a three-pronged approach. First, the Company pursues
innovations in styling, materials construction and product performance, which
add value and revenue yield to its products. Second, the Company seeks to obtain
increased product placements on OEM vehicle lines. Third, the Company intends to
capitalize on an industry-wide increase in interior trim content per vehicle.
First, Automotive Products seeks to increase market share and selling
prices through product innovation. For example, the Company recently developed a
new, distinctive Jacquard velvet fabric which provides OEMs with a diversity of
pattern and color not available in traditional plain velours. Management
believes this new fabric will generate a significantly higher sales content per
vehicle than the traditional velours it will replace. To date, the Company has
been awarded 20 vehicle line placements for its new Jacquard velvet.
Second, the Company has succeeded in capitalizing on its deep OEM
relationship network to win product placements on new vehicle lines in addition
to increasing placements on lines currently supplied by the Company. In the case
of the new Ford Mustang, which was launched in model year 1994, the Company is
supplying all five of its major products, resulting in an average sales content
of approximately $400 per Mustang produced.
The Company's strategy is to focus its substantial styling, engineering and
product development capabilities on the design phase of new vehicle lines and on
each OEM's model changeover cycle. Typically, car and truck model lines are
replaced or substantially redesigned at four to eight year intervals. The
Company's experience has been, with few exceptions, that business awarded on
such new or redesigned model lines has been retained until the next changeover.
Over the last several years, the Company has been successful in placing one
or more of its products on new or redesigned OEM vehicle lines. The Company has
won product placements on
42
<PAGE>
23 new or redesigned North American vehicle lines, some of which have multiple
models, launched in model year 1994 or scheduled for launch over the next 18
months. The Company supplies three or more products to 10 of the 23 new or
redesigned vehicle lines. Six of the 23 lines use all four major interior trim
products. Two of the 23 use all five of the Company's major automotive products.
Third, the Company intends to capitalize on certain industry trends. In
recent years, OEMs have sought to differentiate their vehicles by strengthening
their consumer appeal through the increased use of interior trim. As a
consequence, the average sales content per vehicle of the five principal
automotive products produced by the Company has increased each year over the
last five years. Management estimates that in 1988 the total North American OEM
market for its five major products was $1.2 billion, resulting in an average
interior trim sales content for the market of $89 per vehicle. By 1993,
according to management estimates, OEM purchases of these products had increased
to $105 per vehicle, representing a 3.3% per year compound growth rate. This
trend has been accelerated by the growing popularity of mini vans and sports
utility vehicles in the light truck category. Because of their size, these
vehicles generally use more interior trim than traditional passenger vehicles.
In addition, automobile manufacturers are upgrading the interiors of these
vehicles by using higher-value fabrics, carpet and other trim materials than
were used previously in such vehicles.
This continuing upgrade of interior trim and convertible applications is
enabling the Company to achieve strong gains in its sales content per North
American vehicle produced. In 1993, its net sales of automotive products to
North American OEMs totalled $568 million, reflecting an average sales content
per North American-produced vehicle of approximately $43.
43
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The table below shows all the North American-produced vehicle lines for
which Automotive Products supplies at least one of its five major products. An
asterisk identifies recently awarded placements on new or redesigned vehicle
lines or models.
Vehicle Lies Supplied
COMPANY MODELS
- ------------ -----------------------------------------------------------------
General Achieva C-K Truck/10/30 Lumina-Car* Seville
Motors Aurora* C-K Truck/15/35 Monte Carlo* Silhouette
Beretta Corvette Olds '98 Skylark
Blazer* Deville/Concours* Park Avenue Sonoma
Bonneville Olds '88 Regal Chevy Suburban
Brougham Eldorado Riviera * GMC Suburban
Camaro * Firebird S-10* Sunbird *
Caprice Grand Am S-10 Blazer Supreme*
Cavalier* Grand Prix S-15 Jimmy TransSport
Century LeSabre Safari Yukon
Ciera Lumina-Van * Saturn
Ford
Aerostar Explorer * Quest Thunderbird
Bronco Mustang * Ranger Topaz
Contour * Mystique * Taurus Windstar *
Cougar Probe Tempo
Chrysler
Acclaim Grand Cherokee Plymouth Neon T-300 Pickup
Caravan Intrepid Ram Van/Ram Vision *
Cirrus* LeBaron/J/JX* Shadow Voyager
Concord * LHS * Spirit Wagoneer
Dakota Mini Ram Van Stratus*
Daytona Neon * Sundance
Eagle Talon New Yorker Town & Country
LHS *
Transplants
Fuji/Isuzu Honda Accord* Mitsubishi Suzuki Swift
Legacy Honda Civic * Eclipse Suzuki Tracker
Fuji/Isuzu Honda Mini-Van* Mitsubishi Toyota Avalon*
Passport Hyundai Elantra Galant Toyota Camry
Fuji/Isuzu Isuzu Pickup * Nissan Pickup Toyota Corolla
Rodeo Mazda MX-6 Nissan Sentra Toyota Pickup*
Geo Metro Mazda Pickup Suzuki Sidekick Volvo 740 / 760
Geo Prism Mazda 626
Broad OEM Penetration
Management believes that the Company is strategically well-positioned to
capitalize on the auto industry's current upturn due to its broad product
offering coupled with its high penetration of every North American OEM. In
recent years, the Company has broadened and balanced its sales base by means of
additional placements with the Transplants. Consequently, in 1993, the Company's
net sales to Transplants amounted to $72 per vehicle at Toyota, $60 per vehicle
at Honda, $75 per vehicle at AAI (Ford/Mazda) and $64 per vehicle at SIA
(Subaru/Isuzu), compared to $41 per vehicle at General Motors, historically its
largest customer.
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<PAGE>
Net sales by customer for 1993 are set forth below (in millions):
<TABLE><CAPTION>
1993
------------------------
% OF
NET SALES NET SALES
----------- -----------
<S> <C> <C>
General Motors...................................................... $ 210.2 31.0%
Chrysler............................................................ 130.1 19.2
Ford................................................................ 102.4 15.1
Transplants......................................................... 111.1 16.4
Other............................................................... 124.1 18.3
----------- -----------
Net Sales...................................................... $ 677.9 100.0%
----------- -----------
----------- -----------
</TABLE>
VALUE-ADDED MANUFACTURING AND QUALITY
Most OEMs require deliveries on a "just-in-time" ("JIT") basis to meet
precise production schedules. The most stringent requirement demands
color-sequenced JIT delivery of parts within four hours. To meet these
requirements, the Company has instituted a JIT manufacturing process to
complement its customers' manufacturing processes, thereby minimizing
inventories and administrative and materials handling costs and simplifying the
production process for both the Company and the OEMs.
In response to OEM-mandated price reductions, the Company has implemented
value analysis and value engineering programs to reduce costs. Management has
established a standardized format for monitoring cost of nonconformance
throughout the Company.
In addition, OEMs expect suppliers to take on increased design and
engineering responsibilities. The Company's participation with customers in the
early phase of product design and engineering enables it to improve the quality
of its products as well as to meet its customers' cost targets and design
service requirements. The Company has made substantial investments in product
technology and product design capability to support its products and to provide
its customers with value-added engineering and design services. For example, the
Company operates a technical design center with state-of-the-art,
computer-aided-design/computer-aided-manufacturing ("CAD/CAM") systems.
Automotive Products' CAD systems are linked to the design and engineering
systems of its principal customers. These systems enable the Company to simulate
numerous three-dimensional designs for rapid submission to customers, thereby
increasing customer service and lowering development costs.
The Company's goal is to continue to manufacture its products to meet the
exacting standards of its customers. The Company has been recognized as a
quality supplier to the automotive industry as evidenced by numerous awards from
virtually all OEM's, including the Transplants.
ACQUISITIONS/STRATEGIC ALLIANCES
The Company pursues niche acquisitions and strategic alliances that would
further serve to broaden the Company's customer base and products. In 1993, the
Company acquired a Mexican-based molded floor carpet manufacturer and began
construction of a new facility in Mexico to take advantage of opportunities in
the Mexican market.
COMPETITION
The automotive supply business is highly competitive. The primary
competitors in molded floor carpet are Masland Corporation and JPS Automotive
Products Corp. The primary competitor in bodycloth is Milliken & Company. In
accessory floor mats, the Company competes primarily against Pretty Products
Company. Automotive Products' primary competition in luggage compartment trim is
Masland Corporation and Gates Corporation. In convertible top stacks, Automotive
Products competes primarily against American Sunroof Corporation.
FACILITIES
Automotive Products has 28 manufacturing facilities located in the U.S.,
Canada and Mexico. Approximately 90% of the total square footage of these
facilities is owned and the remainder is leased. Many facilities are
strategically located to provide JIT inventory delivery to the Company's
customers. Capacity at any plant depends, among other things, on the product
produced, the processes and equipment used and tooling. This varies
periodically, depending on demand and shifts in production between plants. The
Company currently estimates that its Automotive Products
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<PAGE>
plants generally operate at between 50% and 100% of capacity on a six-day basis.
The Company's capacity utilization in this segment is generally in line with its
past experience in similar economic situations, and the Company believes that
its existing facilities are sufficient to meet both this segment's existing
needs and its anticipated growth requirements. The Company does not anticipate
any circumstances that would render its facilities inadequate for its projected
needs.
The following list provides certain information regarding the Automotive
Products' manufacturing facilities:
<TABLE><CAPTION>
SQUARE
FOOTAGE OWNED/
LOCATION (000) LEASED FUNCTION
- --------------------------------- ----------- --------- ----------------------------------------------------------
<S> <C> <C> <C>
Farmville, NC.................... 508 Owned Knit Manufacturing
Roxboro, NC(*)................... 545 Owned Auto Upholstery--Dyeing and Finishing
Roxboro, NC(*)................... 330 Owned Auto Upholstery--Weaving
Roxboro, NC(*)................... 137 Owned Auto Upholstery--Knitting
Roxboro, NC(*)................... 67 Owned Auto Upholstery--Warehouse
Albemarle, NC.................... 585 Owned Auto Carpet Tufting/Finishing
Old Fort, NC..................... 375 Owned Auto Carpet Molding
Old Fort, NC..................... 60 Owned Mold Manufacturing
Clinton, OK...................... 158 Owned Auto Carpet Molding
Salisbury, NC.................... 106 Owned Die Cut/Sewing
Troy, NC......................... 98 Owned Non-Woven Carpet
Troy, NC......................... 153 Owned Yarn Spinning Mill
Norwood, NC...................... 275 Owned Yarn Spinning Mill
St. Clair, MI.................... 100 Owned Auto Carpet Molding
Canton, OH....................... 146 Owned Manufacturing--Rubber/Mats
Holmesville, OH.................. 84 Owned Manufacturing--Mats
Ravenna, OH...................... 204 Owned Manufacturing--Rubber
Zanesville, OH................... 599 Owned Manufacturing--Mats
Farnham, Quebec.................. 266 Owned Auto Carpet--Tufting and Finishing/Non-Woven
Lacolle, Quebec.................. 107 Owned Auto Carpet--Molding
Ingersoll, Ontario............... 104 Owned Auto Carpet--Molding
Elmira, Ontario.................. 133 Owned Sliver Knit Carpet Manufacturing
Queretaro, Mexico................ 93 Owned Auto Carpet--Molding
-----------
Total Owned............... 5,233
-----------
Farmville, NC.................... 138 Leased Warehouse
Roxboro, NC(*)................... 88 Leased Warehouse
Roxboro, NC...................... 42 Leased Warehouse
Barberton, OH.................... 41 Leased Manufacturing--Mats
Orange, CA....................... 10 Leased Warehouse
Adrian, MI(East)................. 155 Leased Convertible Tops--Manufacturing
Adrian, MI(West)................. 34 Leased Convertible Tops--Engineering
Plymouth, MI..................... 16 Leased Convertible Tops--Manufacturing
Bloomfield Hills, MI............. 8 Leased Sales Office
Vallejo, Mexico.................. 102 Leased Auto Carpet--Molding
Monterrey, Mexico................ 35 Leased Non-Woven Carpet
-----------
Total Leased.............. 669
-----------
Total..................... 5,902
-----------
-----------
</TABLE>
- ---------------
(*) Also utilized by Decorative Fabrics.
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<PAGE>
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, Interior
Furnishings had net sales of $407.2 million. Net sales by products are set forth
below (in millions):
<TABLE><CAPTION>
1991 1992 1993
------------------------ ------------------------ ------------------------
% OF % OF % OF
PRODUCT LINE NET SALES NET SALES NET SALES NET SALES NET SALES NET SALES
- ---------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Decorative Fabrics
Flat-Woven.................................. $ 214.5 63.7% $ 254.7 65.0% $ 268.9 66.0%
Other....................................... 47.0 14.0 48.5 12.4 44.7 11.0
Floorcoverings................................ 75.3 22.3 88.6 22.6 93.6 23.0
----------- ----------- ----------- ----------- ----------- -----------
Net sales................................... $ 336.8 100.0% $ 391.8 100.0% $ 407.2 100.0%
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
DECORATIVE FABRICS
GENERAL. Interior Furnishings' Decorative Fabrics group is the largest
designer and manufacturer of upholstery fabrics in the U.S., with 1993 net sales
of $313.6 million. Management estimates that its share of the U.S. upholstery
fabric market is approximately 15%, based on data published in the May 1994
edition of Furniture Today, a leading trade publication. 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 and had 1993 net sales of $268.9 million. Management believes that
Mastercraft has substantially more Jacquard looms and styling capacity dedicated
to upholstery fabrics, and offers more patterns (approximately 13,000) 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.
INDUSTRY. The three primary types of upholstery fabric are flat-wovens,
velvets and prints. Based upon published industry estimates, management believes
that flat-woven fabrics were the fastest growing sector in the upholstery
fabrics industry over the last five years and accounted for approximately 53% of
the estimated $1.7 billion upholstery fabric industry in 1993. Flat-woven
fabrics are made in two major styles: Jacquard, which is produced on high-speed
computerized looms capable of weaving and knitting 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. After a period of slow
growth during the 1991 recession, the dollar value of U.S. upholstered furniture
shipments (including both fabric and leather) increased by 7.4% in 1992 and
13.4% in 1993, according to the American Furniture Manufacturers Association. In
the first quarter of 1994, according to that source, U.S. upholstered furniture
shipments increased by 7.8% as compared to the corresponding period for the
prior year. Mastercraft is currently operating at approximately 100% capacity.
In order to accommodate anticipated growth, the Company recently initiated a
plan to invest $85 million in Mastercraft between 1994 and 1998. See
"--Mastercraft Growth Plan".
Management believes there are three significant trends within the U.S.
furniture marketplace that have affected and may continue to affect Decorative
Fabrics. First, fabric design is being increasingly used by residential
furniture manufacturers as a differentiating characteristic for their products.
Jacquard fabric has become increasingly popular due to its incorporation of
intricate designs. A proliferation of Jacquard patterns and styles has been made
possible by recent
47
<PAGE>
technological developments in the electronic Jacquard loom, which has made the
rapid introduction of new designs significantly less expensive.
Second, the consolidation in both the furniture manufacturing and retailing
industries has resulted in fewer and larger buyers of upholstery fabrics. These
manufacturers and retailers generally are interested in purchasing fabrics from
suppliers that can provide a broad spectrum of their fabric requirements. The
wide range of products offered by Decorative Fabrics enables it to be a primary
supplier to the majority of its customers.
Third, management believes that furniture manufacturers and retailers are
shifting from item-by-item selling to complete room presentations, thus creating
a demand for furniture fabric suppliers that offer a broad array of coordinating
fabrics.
Management believes that Decorative Fabrics is well positioned to benefit
from these trends because it is one of the few industry participants able to
deliver the breadth of styles and quantity of fabrics needed to satisfy the
increasing demands of furniture manufacturers and retailers.
STYLE AND DESIGN. Management believes that the continued development of
superior product designs and styles is the most critical strategic objective of
Decorative Fabrics. The pattern and style of a particular fabric are considered
to be strong influences in the purchasing decision of consumers. Decorative
Fabrics utilizes a combination of in-house design studios, independent signature
designers and consultants to create innovative product designs and styles
utilizing CAD technology. Its product design flexibility also enables Decorative
Fabrics to offer custom fabric designs to its largest customers. Decorative
Fabrics creates approximately 2,000 new designs and styles per year,
substantially more than any of its competitors.
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.
MASTERCRAFT DIVISION. Mastercraft is Decorative Fabrics' largest division.
Mastercraft focuses on the medium-to-upper price range, and its products had an
average wholesale price per yard of $6.38 in 1993. Management estimates that
Mastercraft's share of the U.S. flat-woven upholstery fabric market is
approximately 22%, based on data published in the May 1994 edition of Furniture
Today. Over the last ten years, Mastercraft's net sales grew at a compound
annual rate of approximately 14%. Mastercraft serves the diverse furniture
industry through the following four separate product lines which emphasize
different styles and price points:
Mastercraft Fabrics is the largest of the four product lines offered by the
Mastercraft division, currently offering approximately 8,000 designs. Management
believes that this Jacquard product line is the most diverse in style. The
principal product offerings range from a wholesale price of $3.50 to $12.00 per
yard.
Home Fabrics is a leading line of traditionally styled Jacquard fabrics.
The design focus is on the middle-to-upper wholesale price ranges of $5.50 to
$14.00 per yard and is under the direction of Wesley Mancini Studios, a
world-renowned designer of classic, formal and traditional styles. The products
are known for their color, quality and innovation. Mancini designs fabrics
exclusively for the Home Fabrics product line and the Greeff division. Mancini's
15-person design staff creates approximately 500 designs per year for Home
Fabrics.
Doblin is a Jacquard product line renowned for its natural fibers and
elegant designs and constructions. It is targeted at the upper-end of the
market. Doblin's studio consists of twelve design professionals (both in-house
and external) who create approximately 300 designs annually.
Mastercraft Contract serves the wall panel, wallcovering and office seating
markets and the product line features approximately 50 Jacquard fabric designs
annually. The eight-member design
48
<PAGE>
team focuses on Jacquard yarn-dyed and patterned fabrics, which management
believes to be an increasingly favored fabric in the wall panel, wallcovering
and office seating markets.
MASTERCRAFT GROWTH PLAN. Management's strategy is to continually shift its
product mix toward higher price ranges and to increase its manufacturing
capacity in the fast growing Jacquard market. Due to the resulting high sales
volumes, Mastercraft has experienced a "sold-out" order position for nearly
every quarter during the last five years. Its capacity utilization rate has
consistently averaged nearly 100% on a six-day basis. 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.
Following the anticipated completion of the Company's current capital
investment plan in 1998, management expects that Mastercraft's production
capacity will have been materially enlarged, and that up to 75% of its weaving
equipment will consist of the latest generation, high-speed Jacquard looms with
electronic heads. Management anticipates that this program will result in higher
labor productivity, reduced materials loss, lower overhead expense and higher
volumes of finished product than presently achieved.
Consistently high capacity utilization rates, as well as demand for
higher-priced products, have also enabled Mastercraft to gradually shift its
product mix toward the higher price ranges, further enhancing operating profit.
The average wholesale price per yard for its fabrics has increased from $5.58 in
1989 to $6.38 in 1993.
OTHER DECORATIVE FABRICS DIVISIONS. With 1993 net sales of $39.6 million,
the Cavel division is a leading manufacturer of velvets. Cavel manufactures both
Dobby and Jacquard velvets. Cavel manufactures fabrics for home furnishings,
recreational vehicles and specialized industrial products such as paint rollers.
Cavel's 13-person design staff produces approximately 250 designs annually for
these markets. The two smaller divisions of Decorative Fabrics, Greeff and
Warner, supply the interior design and specialty retailer markets in the U.S.
and the U.K., 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 materials and finished goods inventory required and
greatly reduces product returns, thereby improving profit margins.
CUSTOMER SERVICE. Decorative Fabrics invests significant capital resources
in customer service technology. Key service-related objectives include providing
custom-tailored design capabilities to large customers, reducing lead time for
orders and providing consistent, on-time delivery.
To enhance customer satisfaction, Decorative Fabrics began implementation
of a computerized material requirements' inventory system, MRP II, in 1992.
Implementation of the MRP II system has significantly improved inventory control
and enabled the Company to reduce manufacturing lead times. The completion of
the MRP II project in 1993 also provided significant enhancements to Decorative
Fabrics' electronic data interchange ("EDI") systems. The improved use and
availability of EDI allows customers to place orders faster and significantly
reduces order processing time.
MARKETING AND SALES. Fabrics are sold domestically by 31 commissioned sales
representatives who exclusively represent the Mastercraft and Cavel divisions of
Decorative Fabrics. The Mastercraft and Cavel divisions maintain showrooms in
seven key locations throughout the United
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States. Products are presented in collections which suggest a complete room
environment using the Company's diverse mix of fabrics.
Mastercraft's 1993 export sales were $30.5 million, or 11.3% of its net
sales. Export sales have increased at a compound annual growth rate of 30% since
1988. All export fabrics are sold through commissioned sales representatives and
agents in key countries. Major export regions include the United Kingdom,
Scandinavia, Europe, the Middle East, Australia, New Zealand, the Far East,
Canada and South America.
MANUFACTURING. Decorative Fabrics invests significant capital resources to
upgrade manufacturing facilities and continually improve productivity.
Management believes that continued commitment to technological improvements is
essential to remain competitive in the decorative fabrics business. All plants
typically operate on a six-day, three-shift schedule and operate an adjustable
schedule on the seventh day in order to balance production and customer demand.
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
Corporation, Culp, Inc., Joan Fabrics Corp. and the Burlington House Upholstery
Division of Burlington Industries, Inc.
FACILITIES. Mastercraft owns and operates four weaving plants and one
finishing plant in North Carolina. Cavel shares manufacturing capacity with
Automotive Products at three plants in Roxboro, North Carolina. Greeff and
Warner are designers and distributors, subcontracting all manufacturing. During
the last three years, the Company's capacity utilization in the Mastercraft
division of the Decorative Fabrics group has consistently averaged nearly 100%
on a six-day basis. The Company believes that its existing facilities are
sufficient to meet the Decorative Fabrics group's existing needs and, after
taking into account Mastercraft's five-year capital investment plan (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources"), anticipated growth requirements.
Assuming the completion of Mastercraft's five-year capital investment plan, the
Company does not anticipate any circumstances that would render its Decorative
Fabrics facilities inadequate for its projected needs.
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, net sales were $93.6 million.
Floorcoverings differentiates itself from its competitors in part by its
patented Powerbond RS(R) adhesive system and by its products' durability
characteristics. It is currently the largest manufacturer of six-foot wide rolls
and the third-largest supplier of modular carpet tiles in the U.S.
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 believes that Floorcoverings' niche market position in the high
performance specified sector, differentiated value-added products and
proprietary patented technology provide it with a competitive advantage.
INDUSTRY. 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
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facilities rather than to commercial market customers. Management believes that
government, healthcare and educational customers are stable, growth sectors, as
illustrated by the fact that new construction spending in these areas has
increased by 7% per year since 1987. As a result of these two factors, sales of
six-foot wide rolls and modular carpet tiles have doubled since 1987 while the
U.S. commercial construction market has been flat.
PRODUCTS. Floorcoverings' key competitive advantage is in its patented
Powerbond RS(R) adhesive technology, which has 14 years of patent protection
remaining. Because the Powerbond RS(R) system uses a peel-and-stick adhesive as
opposed to a wet adhesive, 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. By contrast, conventional carpet installation requires a more costly
and disruptive removal of old carpet and a curing period for the wet adhesive
before the facility can be returned to use. 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.
FACILITIES. Floorcoverings owns and operates four facilities in Dalton,
Georgia. The Company currently estimates that Floorcoverings' plants operate at
between 35% and 80% of capacity on a six-day basis. The Company's capacity
utilization in the Floorcoverings group is generally in line with its past
experience in similar economic situations, and the Company believes that its
existing facilities are sufficient to meet both this group's existing needs and
its anticipated growth requirements. The Company does not anticipate any
circumstances that would render its Floorcoverings facilities inadequate for its
projected needs.
WALLCOVERINGS
GENERAL
Wallcoverings, which operates under the name "Imperial", had 1993 net sales
of $220.4 million. It is a leading manufacturer and distributor of a full range
of wallcoverings for the residential and commercial sectors of the wallcoverings
market. Management estimates that in 1993 Imperial had a 22% market share in the
larger residential wallcoverings sector and held the number one market share
position in each of this sector's two primary distribution channels--chains and
dealers. 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.
INDUSTRY
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 1986-87. 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
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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 over-stocked retailers.
From 1991 to 1993, the industry's physical shipment volumes increased at a
compound annual growth rate of 3.0%.
Management estimates that in 1993, total sales for the U.S. wallcovering
market were approximately $1.1 billion on a wholesale basis. The wallcoverings
market can generally be divided into the residential and commercial sectors. The
residential sector is the larger of the two sectors, with estimated total 1993
U.S. sales of $748.0 million. The two primary distribution channels within the
residential sector are dealers and retail chains.
STRATEGIC RESTRUCTURING
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 approximately
10%. 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. For example, in 1993 Imperial introduced a guaranteed
shipment program on 15 of its best selling collections. Through the program
called "On Time Or On Us", free product is offered to dealers for orders
unfilled within 48 hours. The number of collections covered by this program was
increased to 26 in the first quarter of 1994. Imperial also implemented a number
of other MIS and service initiatives designed to enhance customer service and
distribution.
In 1994, Imperial is implementing a plan to improve sales momentum in the
chain store channel, including a tripling of its product development budget for
the national chains, consolidating order entry and customer service activities
under dedicated national account teams, developing innovative product/packaging
approaches for warehouse clubs, and broadening its product offerings with newly
licensed products such as borders featuring National Hockey League and National
Collegiate Athletic Association logos and insignias.
PRODUCT
Management believes Imperial has maintained its 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,
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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. Imperial's products
sell at the retail level from $5 per single roll to more than $100 per single
roll, with most products selling in the $8 to $14 range.
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.
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 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.
MANUFACTURING
Imperial is the only manufacturer of wallcoverings that is vertically
integrated from paper production to the design and distribution of finished
wallcoverings. Management estimates that Imperial accounts for approximately 30%
of wallpaper manufacturing capacity in North America. Imperial's objective is to
be the lowest cost manufacturer in the industry. In pursuit of this objective,
Imperial has completed several manufacturing efficiency programs over the past
several years, including significantly reducing the set up times in gravure
printing through implementation of single-minute-exchange-of-die techniques.
COMPETITION
As a result of the recent economic downturn in the wallcoverings industry,
many weaker competitors withdrew from the U.S. wallcoverings market. In
addition, further contraction is expected to occur as sales of wallcoverings
shift to chain stores, which along with other retailers prefer working with
fewer, larger suppliers. Imperial is well positioned to benefit from these
developments.
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 owns and operates five manufacturing facilities in the United
States and three in Canada, as well as three distribution centers in the United
States. The Company currently estimates that its Wallcoverings facilities that
produce surface print paper generally operate at approximately 35% of capacity
on a five-day basis and its facilities that produce gravure paper generally
operate between approximately 80% and 100% of capacity on a five-day basis. The
Company's capacity utilization in this segment is generally in line with its
past experience in similar economic situations, and the Company believes that
its existing facilities are sufficient to meet both this segment's existing
needs and its anticipated growth requirements. The Company does not anticipate
any circumstances that would render its Wallcoverings facilities inadequate for
its projected needs.
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. See "Risk Factors--Collective Bargaining Agreements".
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
As of the consummation of the Offerings and giving effect to the
Recapitalization, the executive officers and directors of the Company, and their
ages as of April 10, 1994, will be as follows:
<TABLE><CAPTION>
NAME AGE POSITIONS
- ------------------------------------ ----------- ---------------------------------------------------------------------
<S> <C> <C>
Thomas E. Hannah.................... 55 Chief Executive Officer and Director
William J. Brucchieri............... 51 President of Imperial Wallcoverings
John D. Moose....................... 57 President of North American Auto Group
Harry F. Schoen III................. 58 President of Mastercraft Division
Elizabeth R. Philipp................ 37 Executive Vice President, General Counsel and Secretary
Mark O. Remissong................... 41 Senior Vice President and Chief Financial Officer
Paul W. Meeks....................... 41 Vice President and Treasurer
David A. Stockman................... 47 Co-Chairman of the Board of Directors
Bruce Wasserstein................... 46 Co-Chairman of the Board of Directors
James R. Birle...................... 58 Director
John P. McNicholas.................. 31 Vice Chairman
Stephen A. Schwarzman............... 47 Director
Randall J. Weisenburger............. 35 Vice Chairman and Director
W. Townsend Ziebold, Jr............. 32 Director
</TABLE>
Set forth below is certain information about each of the Company's
executive officers and directors. Unless otherwise indicated, positions listed
are with the Company. Following the Offerings, the Company expects to elect two
additional directors who are not affiliated with the Company or the Partners.
Pursuant to the Restated Certificate of Incorporation, the Board of Directors
will be classified into three classes consisting of three directors each. Each
class of directors of the Company will be elected at an annual meeting of
stockholders on staggered three-year terms, such that only one class of
directors will be elected each year. See "Description of the Capital
Stock--Anti-takeover Provisions".
THOMAS E. HANNAH. Chief Executive Officer of the Company as of the
consummation of the Offerings. President and Chief Executive Officer of the
Collins & Aikman Textile and Wallcoverings Group from November 1991 to
consummation of the Offerings, and named an executive officer of the Company 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.
WILLIAM J. BRUCCHIERI. President of Imperial Wallcoverings since February
1993 and named an executive officer of the Company in April 1994. Executive Vice
President of Imperial from March 1992 to January 1993. Executive Vice President
of the Mastercraft division from January 1990 to February 1992. Vice President,
Operations of the Mastercraft division from August 1989 to January 1990. Mr.
Brucchieri joined a wholly-owned subsidiary of the Company in 1988.
JOHN D. MOOSE. President of the North American Auto Group since June 1989,
and named an executive officer of the Company in April 1994. Mr. Moose joined a
wholly-owned subsidiary of the Company in 1960.
HARRY F. SCHOEN III. President of the Mastercraft division since January
1993 and named an executive officer of the Company in April 1994. Executive Vice
President and Chief Operating Officer of the Mastercraft division from April
1992 to December 1992. General Manager of Milliken & Company's Greige Fine Goods
Group prior to that.
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ELIZABETH R. PHILIPP. Executive Vice President, General Counsel and
Secretary of the Company since April 1994. Vice President, General Counsel and
Secretary of the Company 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. Senior Vice President and Chief Financial Officer of the
Company as of the consummation of the Offerings. Since December 1993, Senior
Vice President and Chief Financial Officer of a wholly-owned subsidiary of the
Company and an executive officer of the Company. Vice President of Finance for
Burlington Industries from 1989 until December 1993.
PAUL W. MEEKS. Vice President and Treasurer of the Company since September
1992. Assistant Treasurer of the Company from April 1988 to September 1992. Mr.
Meeks joined a wholly-owned subsidiary of the Company in 1982.
DAVID A. STOCKMAN. Co-Chairman of the Board of Directors of the Company
since July 1993 and a Director of the Company since October 1988. General
Partner of Blackstone Group Holdings L.P. (the "Blackstone Group") since 1988.
Mr. Stockman is also a director of Edward J. DeBartolo Corporation.
BRUCE WASSERSTEIN. Co-Chairman of the Board of Directors of the Company
since June 1992. Chief Executive Officer and Chairman or President of
Wasserstein Perella Group, Inc. ("WP Group") since 1988 and Chairman and Chief
Executive Officer of Wasserstein Perella Management Partners, Inc. ("WP
Management") since June 1992. Mr. Wasserstein is also Chairman of the Board of
Maybelline, Inc.
JAMES R. BIRLE. A Director of the Company since 1988 and Co-Chairman of the
Board of Directors of the Company from October 1988 until July 1993. 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.
JOHN P. MCNICHOLAS. Vice Chairman of the Company since April 1994. Deputy
Chairman of the Company from July 1992 to April 1994. Vice President of the
Blackstone Group since January 1992; Associate of the Blackstone Group from
November 1990 to December 1991; Associate, Merchant Banking Group--Merrill Lynch
Capital Markets from August 1989 to November 1990.
STEPHEN A. SCHWARZMAN. A Director of the Company since October 1988 and
President of the Company from its inception to consummation of the Offerings.
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.
RANDALL J. WEISENBURGER. Vice Chairman of the Company since April 1994 and
a Director of the Company since 1989. Deputy Chairman of the Company from July
1992 until April 1994. Managing Director of Wasserstein Perella & Co., Inc.
("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 Maybelline, Inc. and Chairman of the Yardley Lentheric
Group.
W. TOWNSEND ZIEBOLD, JR. Director of the Company since 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.
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<PAGE>
COMPENSATION OF DIRECTORS
Effective upon consummation of the Offerings, each director (or the Partner
who designates such director to the Board of Directors) will receive an annual
fee of $40,000, payable quarterly.
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
of C&A Co., with a target bonus of 75% of base salary then in effect up to a
maximum of 150% of base salary. Under the executive bonus plan currently in
effect, Mr. Hannah is to receive the target bonus with respect to any fiscal
year in which the Company achieves all the goals set by the Company's Board of
Directors or an appropriate committee thereof for such year. Financial goals for
the current fiscal year relate to earnings before interest and taxes. The
executive bonus plan may change at any time. 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 year and a pro rata
portion of any bonus he would have received had he been employed for the entire
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 within
three months prior to or one year following a change of control (as defined) of
C&A Co.. In 1993, Mr. Hannah received a base salary of $415,000, a cash bonus of
$783,960, and payouts under the Equity Share Plan referred to below and other
compensation aggregating $2,339,388.
THE COMPANY'S OPTION PLANS
In 1988, Group implemented the Wickes Equity Share Plan (the "Equity Share
Plan") for the purposes of attracting, retaining and motivating key employees of
Group and its subsidiaries. In October 1993, the Equity Share Plan was
terminated in accordance with its terms. Concurrently, Group announced its
intention to implement a new stock option plan. Accordingly, the Company created
a special purpose 1993 Employee Stock Option Plan (the "1993 Plan") to provide
for the one-time award of options to purchase shares of Common Stock to active
key employees in recognition of their prior service. In addition, the 1994
Employee Stock Option Plan (the "1994 Plan") was created as a successor to the
1993 Plan to facilitate future awards of Options to key employees and to
consultants. The term "Option" as used herein refers to either a NQSO or an ISO
(each as defined below), as the case may be.
Each of the Company's stock option plans is administered, and options
thereunder are granted, by a duly authorized committee (the "Committee") of the
Board of Directors (the members of which shall be disinterested (as defined in
Rule 16b-3 under the Exchange Act), unless otherwise determined by the Board),
or by the Board if there is no such committee.
Based on the assumed initial public offering price, the estimated fair
market value of a share of Common Stock underlying an Option as of July 6, 1994
was $10.50.
1993 EMPLOYEE STOCK OPTION PLAN
The Company adopted the 1993 Plan effective January 28, 1994 (the
"Effective Date of the 1993 Plan").
SHARES SUBJECT TO OPTIONS. The 1993 Plan authorizes the issuance of up to
3,119,466 shares of Common Stock (with no more than 1,000,000 shares to any
employee in any calender year) upon the exercise of non-qualified stock options
("NQSOs") granted to certain key employees of the
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Company. Key employees are those active executive officers and other valuable
employees of the Company that are selected by the Committee to participate in
the 1993 Plan. Under the 1993 Plan no Options may be granted after December 31,
1995.
OPTIONS. Options issued pursuant to the 1993 Plan will be exercisable at
such price, not less than the par value of the Common Stock purchasable
thereunder, as may be fixed by the Committee. Shares of Common Stock purchased
pursuant to the exercise of Options shall be paid for at the time of exercise as
follows: (i) in cash or by check, bank draft or money order; (ii) if the Common
Stock is traded on a national securities exchange, through the delivery of
instructions to a broker to deliver the purchase price; or (iii) on other terms
acceptable to the Committee (which may include payment by transfer of shares
owned by the participant for at least six months or the surrender of Options).
Options granted under the 1993 Plan are subject to restrictions on transfer
and exercise. No Option granted under the 1993 Plan may be exercised prior to
the earlier of the closing of a Public Offering (as defined in the 1993 Plan) or
the expiration of two years from the Effective Date of the 1993 Plan, subject to
acceleration in the event of a Change in Control of the Company (as defined in
the 1993 Plan) and subject to the authority of the Committee to permit earlier
exercise in its sole discretion. The Committee may set a schedule of
exerciseability with regard to each Option grant, subject to acceleration in the
event of a Change in Control of the Company. Also, no Option may be exercisable
after the expiration of ten years from the date of its grant. Moreover, no
Option may be transferred, assigned, pledged or hypothecated in any way except
by will or under applicable laws of descent and distribution. Shares of Common
Stock purchased upon exercise of an Option ("Shares") may not be transferred for
a period of two years following the initial Public Offering of the Company, or
such shorter time as the Committee may in its sole discretion determine.
In consideration of the grant of Options, an employee shall be required to
agree not to engage, without the written consent of the Committee, in any
Competitive Activity (as defined in the 1993 Plan) during the participant's
employment by the Company and, in the event any Options shall vest, for a period
of one year following termination of employment. Options that were exercisable
upon a participant's termination of employment by the Company other than for
cause remain exercisable following such termination for a period of: (a) one
year, in the case of death or disability, (b) 90 days, in the case of retirement
or termination by the Company other than for cause and (c) in all other
instances, 30 days following such termination, in each case subject to extension
by the Committee. Except as otherwise determined by the Committee, Options that
were not exercisable at the time of a participant's termination of employment by
the Company shall automatically be canceled upon such termination. The Committee
has the discretion under the 1993 Plan to impose in a participant's Option
Agreement such other conditions, limitations and restrictions as it determines
are appropriate in its sole discretion, including any waivers of rights which a
participant may have.
The 1993 Plan provides for the Committee to have the right to make
appropriate adjustments in the number and kind of securities receivable upon the
exercise of Options or the exercise price in the event of a stock split, stock
dividend, merger, consolidation, reorganization, spinoff, partial or complete
liquidation or other similar changes in the capital structure or other corporate
transactions. The 1993 Plan also gives the Committee the option to terminate all
outstanding Options effective upon the consummation of a merger or consolidation
in which the Company is not the surviving entity or of any other transaction
that results in the acquisition of substantially all of the Company's
outstanding Common Stock by a single person or entity or by a group of persons
and/or entities acting in concert, or upon the consummation of the sale or
transfer of all of the Company's assets (any such event an "Acquisition Event"),
subject to the right of participants to exercise all outstanding Options prior
to the effective date of the Acquisition Event.
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As of the date hereof, Options for approximately 3,000,000 Shares granted
to approximately 60 employees are outstanding. At the date the 1993 Plan was
adopted, approximately 65 employees were eligible to participate in the 1993
Plan.
1994 EMPLOYEE STOCK OPTION PLAN
The Company adopted the 1994 Plan effective April 15, 1994 (the "Effective
Date of the 1994 Plan").
SHARES SUBJECT TO OPTIONS. The 1994 Plan authorizes the issuance of up to
2,980,534 shares of Common Stock (with no more than 1,000,000 shares to any
employee or consultant in any calender year, with any unused portion thereof
carried forward) upon the exercise of Incentive Stock Options ("ISOs") and NQSOs
granted to certain key employees and NQSOs granted to executive consultants of
the Company. Key employees are those active executive officers or other valuable
employees of the Company that are selected by the Committee to participate in
the 1994 Plan. Executive consultants are those executive-level consultants of
the Company that are selected by the Committee to participate in the 1994 Plan.
No Options may be granted after ten years from the Effective Date of the 1994
Plan.
OPTIONS. In the case of ISOs, the exercise price of an Option may not be
less than 100% of the Fair Market Value (as defined in the 1994 Plan) of a share
of Common Stock at the time of grant (or 110% of such Fair Market Value if the
grantee owns more than 10% of the shares of Common Stock outstanding at the time
of grant (a "Ten Percent Shareholder")). NQSOs issued pursuant to the 1994 Plan
will be exercisable at such price, not less than the Fair Market Value of a
share of Common Stock at the time of grant, as may be fixed by the Committee,
provided, that, prior to the initial Public Offering of the Company, Options may
be issued with an exercise price below the Fair Market Value of a share of
Common Stock at the time of the grant. Shares purchased pursuant to the exercise
of Options shall be paid for at the time of exercise as follows: (i) in cash or
by check, bank draft or money order; (ii) if the Shares are traded on a national
securities exchange, through the delivery of instructions to a broker to deliver
the purchase price; or (iii) on other terms acceptable to the Committee (which
may include payment by transfer of shares owned by the participant for at least
six months or the surrender of Options).
Options granted under the 1994 Plan are subject to restrictions on transfer
and exercise. No Option granted under the 1994 Plan may be exercised prior to
the earlier of the closing of a Public Offering (as defined in the 1994 Plan) or
the expiration of five years from the Effective Date of the 1994 Plan, subject
to acceleration in the event of a Change in Control of the Company (as defined
in the 1994 Plan) and subject to the authority of the Committee to permit
earlier exercise in its sole discretion. In addition, the Committee may set a
schedule of exerciseability with regard to each Option grant, subject to
acceleration in the event of a Change in Control of the Company. Also, no Option
may be exercisable after the expiration of ten years from the date of its grant
(or five years, in the case of ISOs granted to a Ten Percent Shareholder).
Moreover, no Option may be transferred, assigned, pledged or hypothecated in any
way except by will or under applicable laws of descent and distribution. Shares
of Common Stock purchased upon exercise of an Option may not be transferred for
a period of two years following the initial Public Offering of the Company, or
such shorter time as the Committee may in its sole discretion determine.
In consideration of the grant of Options, each employee will be required to
agree not to engage, without the written consent of the Committee, in any
Competitive Activity (as defined in the 1994 Plan) during the participant's
employment by the Company, and in the event any Options shall vest, for a period
of one year following termination of employment. Options that were exercisable
upon a participant's termination of employment or consultancy by the Company
other than for cause remain exercisable following such termination for a period
of: (a) one year, in the case of death or disability, (b) 90 days, in the case
of retirement or termination other than for cause and (c) in all
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other instances, 30 days following such termination, in each case subject to
extension by the Committee. Except as otherwise determined by the Committee,
Options that were not exercisable at the time of a participant's termination of
employment or consultancy by the Company shall automatically be canceled upon
such termination. The Committee has the discretion under the 1994 Plan to impose
in a participant's Option Agreement such other conditions, limitations and
restrictions as it determines are appropriate in its sole discretion, including
any waivers of rights which a participant may have.
The 1994 Plan provides for the Committee to have the right to make
appropriate adjustments in the number and kind of securities receivable upon the
exercise of Options or the exercise price in the event of a stock split, stock
dividend, merger, consolidation, reorganization, spinoff, partial or complete
liquidation or other similar changes in the capital structure or other corporate
transactions. The 1994 Plan also gives the Committee the option to terminate all
outstanding Options effective upon the consummation of a merger or consolidation
in which the Company is not the surviving entity or of any other transaction
that results in the acquisition of substantially all of the Company's
outstanding Common Stock by a single person or entity or by a group of persons
and/or entities acting in concert, or upon the consummation of the sale or
transfer of all of the Company's assets (any such event an "Acquisition Event"),
subject to the right of participants to exercise all outstanding Options prior
to the effective date of the Acquisition Event.
As of the date hereof, Options for approximately 200,000 Shares granted to
seven employees are outstanding, leaving Options for approximately 2,800,000
Shares available for grant to employees and consultants in the future. At the
date the 1994 Plan was adopted, approximately 500 employees were eligible to
participate in the 1994 Plan.
FEDERAL INCOME TAX CONSEQUENCES
Under Federal income tax law as currently in effect, neither ISOs nor NQSOs
require an optionee to recognize income at the time of grant. However, upon the
exercise of a NQSO, the optionee will recognize ordinary income in an amount
equal to the excess of the fair market value of the Common Stock over the
aggregate exercise price. With respect to an ISO, no income is recognized by the
optionee in connection with the exercise, although the excess of the fair market
value of the Common Stock at exercise over the aggregate exercise price results
in alternative minimum taxable income which is used in determining for the
optionee alternative minimum tax liability. The optionee will be subject to
taxation at the time Shares acquired upon the exercise of an ISO are sold. If
the sale occurs at least two years after the date the ISO was granted and at
least one year after the date it was exercised, the optionee generally will
recognize capital gain in an amount equal to the excess of the proceeds of the
sale over the aggregate exercise price of the Shares sold. If the optionee
disposes of such Shares within two years of the date an Option was granted or
within one year of receipt of the Shares pursuant to the exercise of an ISO, the
optionee will recognize ordinary income, in an amount equal to the excess of the
fair market value of the Shares on the date of the exercise over the exercise
price. The excess, if any, of the amount realized upon disposition of such
Shares over the fair market value of the Shares on the date of exercise will be
long or short term capital gain, depending upon the holding period of the
Shares, providing the optionee holds the shares as a capital asset at the time
of disposition. If such disposition of the Shares by the optionee within two
years of the date of grant of the Option is a sale or exchange with respect to
which a loss (if sustained) would be recognized by the optionee, then the amount
which is includable in the gross income of the optionee shall not exceed the
excess (if any) of the amount realized on the sale or exchange over the adjusted
basis of such Shares.
The Company's tax consequences will also depend upon whether an option is
an ISO or a NQSO. In the case of a NQSO, the Company will be entitled, subject
to the possible application of Sections 162(m) and 280G of the Code as discussed
below, to a deduction in connection with the
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optionee's exercise in an amount equal to the income recognized by the optionee,
provided that the Company complies with applicable withholding tax requirements,
if any. If the Option is an ISO, however, the Company will not be entitled to a
deduction if the optionee satisfies holding period requirements and recognizes
capital gain. If those requirements are not satisfied, the Company will be
entitled to a deduction corresponding to the ordinary income recognized by the
optionee, subject to the possible application of Section 162(m) of the Code as
discussed below. Section 162(m) of the Code denies a deduction to any
corporation, whose common shares are publicly held, for compensation paid to
certain covered employees in a taxable year to the extent that such compensation
exceeds $1 million. Covered employees are a company's chief executive officer on
the last day of the taxable year and any other individual whose compensation is
required to be reported to shareholders under the Exchange Act by reason of
being among the four highest compensated officers in office at the end of the
taxable year. The amount of ordinary income recognized by an optionee in the
year of exercise (or in the case of an ISO, disqualifying sale) is considered in
determining whether a covered employee's compensation exceeds $1 million.
Compensation paid under certain qualified performance based compensation
arrangements, which provide for compensation based on preestablished performance
goals established by a compensation committee that is comprised solely of two or
more outside directors and which is disclosed to, and approved by, the majority
of the company's shareholders, is not considered in determining whether a
covered employee's compensation exceeds $1 million. The legislative history to
Section 162(m) and the proposed regulations recently issued under Section 162(m)
provide that compensation attributable to options which provide for an exercise
price less than the fair market value of the underlying shares on the date of
grant ("discount options") will not be treated as paid pursuant to a qualified
performance based compensation arrangement. The proposed regulations generally
provide, although the matter is not entirely clear, that option plans (and any
options issued thereunder) that were adopted prior to the time a company
publicly offers its common equity securities will not be subject to the Section
162(m) limitation, provided such plan is adequately disclosed by the company in
a prospectus issued in connection with a public offering of common equity
securities. Since the 1993 Plan and the 1994 Plan were adopted prior to the
effective date of the Registration Statement of which this Prospectus is a part,
the 1993 Plan and the 1994 Plan (and any options issued thereunder) may be
exempt from the application of Section 162(m). The Company intends to review
this issue (including any additional guidance which may hereafter be issued by
the Internal Revenue Service or the courts) at the time any employee exercises
options, the compensation element of which, when combined with other
compensation received by such employee during the taxable year, exceeds $1
million, and consider whether and to what extent the 1993 Plan and the 1994 Plan
and the options at issue are subject to the Section 162(m) limitation.
If there is an acceleration of the exercisability of Options upon a change
of ownership or control of the Company or a change in the ownership of a
substantial portion of the assets of the Company (within the meaning of Section
280G of the Code), all or a portion of the income realized by the optionee (from
the exercise of Options and from any other payments made to the optionee by the
Company) may constitute "excess parachute payments" under Section 280G. The
optionee receiving excess parachute payments incurs an excise tax of 20% of the
amount of the payments in excess of the employee's average annual compensation
for the five calendar years preceding the year of the event causing the
acceleration and the Company is not entitled to a deduction for such excess
amounts.
NEW PLAN BENEFITS
The table below shows Options that have been granted or will be granted
prior to the consummation of the Offerings under the 1993 Plan and the 1994 Plan
to (i) any Named Executive Officer (as defined below), (ii) any executive
officer who is a member of the continuing management group and who is not a
Named Executive Officer, (iii) all current executive officers as a group and
(iv) all employees, including all current officers who are not executive
officers, as a group. The term
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"Named Executive Officer" is defined for these purposes to include (i) Mr.
Stockman and Mr. Wasserstein, the Company's Co-Chairmen of the Board, Mr.
Schwarzman, the Company's President prior to the consummation of the Offerings,
Mr. Birle, the Company's former Co-Chairman of the Board, and 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 at the end of the fiscal year ended January 29, 1994, none of
whom has been granted any Options, and (ii) the Company's four most highly
compensated 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.
EMPLOYEE STOCK OPTION GRANTS
<TABLE><CAPTION>
NUMBER OF
PER SHARE SHARES
EXERCISE UNDERLYING EXPIRATION
NAME AND POSITION AFTER THE OFFERINGS PRICE OPTIONS DATE PLAN
- ------------------------------------------------------------- ----------- ------------ --------------- ----------
<S> <C> <C> <C> <C>
Thomas E. Hannah............................................. $ 3.99 841,230 (1) 1993
Chief Executive Officer 8.26 140,205 (1) 1993
William J. Brucchieri........................................ 3.99 77,184 (1) 1993
President of Imperial Wallcoverings 8.26 61,757 (1) 1993
John D. Moose................................................ 3.99 146,555 (1) 1993
President of North American Auto Group 8.26 50,074 (1) 1993
Harry F. Schoen III.......................................... 3.99 97,998 (1) 1993
President of Mastercraft Division 8.26 66,007 (1) 1993
Elizabeth R. Philipp......................................... 3.99 83,508 (1) 1993
Executive Vice President, General Counsel and Secretary 8.26 8,345 (1) 1993
Mark O. Remissong............................................ 4.43 44,735 (2) 1994
Senior Vice President and Chief Financial Officer 8.26 33,267 (2) 1994
Paul W. Meeks................................................ 3.99 11,403 (1) 1993
Vice President and Treasurer
Executive Group--1993 Plan................................... 3.99 1,257,878 (1) 1993
8.26 326,388 (1) 1993
Executive Group--1994 Plan................................... 4.43 44,735 (2) 1994
8.26 33,267 (2) 1994
Non-Executive Employee Group--1993 Plan...................... 3.99 1,292,465 (1) 1993
4.43 67,261 (1) 1993
8.26 92,220 (1) 1993
Non-Executive Employee Group--1994 Plan...................... 4.43 76,507 (2) 1994
8.26 15,125 (2) 1994
</TABLE>
- ---------------
(1) January 28, 2004
(2) April 15, 2004
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PRINCIPAL STOCKHOLDERS
AND CERTAIN RELATIONSHIPS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock by the existing holders of
Common Stock in excess of 5% after giving effect to the Recapitalization
(including the exchange by Blackstone Partners and WP Partners of $95.1 million
and $99.7 million, respectively, of the PIK Notes of the Company held by them
for shares of Common Stock), (i) before the Offerings and the sales to the
Purchasing Partners and (ii) as adjusted to give effect to the Offerings and the
sales to the Purchasing Partners. All information with respect to beneficial
ownership has been furnished by the respective stockholder. Unless otherwise
indicated below, immediately after the Offerings the persons named below (or
their affiliated Purchasing Partner) have sole voting and investment power with
respect to the number of shares set forth opposite their names.
<TABLE><CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
BEFORE THE OFFERINGS AFTER THE OFFERINGS
AND SALES TO THE PURCHASING AND SALES TO THE PURCHASING
PARTNERS PARTNERS
------------------------------- --------------------------------
NAME AND ADDRESS
OF PRINCIPAL STOCKHOLDER NUMBER PERCENTAGE NUMBER PERCENTAGE
- --------------------------------- -------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Blackstone Capital 21,726,381 46.5% 26,131,381 37.1%
Partners L.P.(1)(2)
118 North Bedford Road
Suite 300
Mount Kisco, NY 10549
Wasserstein Perella 23,224,748 49.7% 27,629,748 39.1%
Partners, L.P.(3)
31 West 52nd Street
New York, NY 10019
</TABLE>
- ---------------
(1) Includes 1,055,877 shares of Common Stock owned of record by Blackstone
Family Investment Partnership II L.P. and 93,268 shares of Common Stock
owned of record by Blackstone Advisory Directors Partnership L.P., each an
affiliate of Blackstone Partners. Blackstone Partners possesses an
irrevocable proxy to vote these shares.
(2) Blackstone Partners is a Delaware limited partnership formed for the purpose
of, among other things, (i) committing capital to facilitate corporate
restructurings, 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 Management Associates L.P. ("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.
(3) 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 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.
Prior to the consummation of the Recapitalization, each of Blackstone
Partners and WP Partners beneficially owns, through Holdings II, 50% of the
outstanding voting Common Stock of the Company. In connection with the
Recapitalization, the Purchasing Partners have agreed to purchase from the
Company, at the initial public offering price less the underwriting discount, an
aggregate number of shares of Common Stock equal to (i) 6,560,000 plus (ii) (x)
2,250,000 minus (y) the number of shares as to which the Underwriters'
over-allotment option is exercised. See "Sale of Common Stock to the Purchasing
Partners". After consummation of the Recapitalization,
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the issuance of shares of Common Stock in the Offerings and assuming the
purchase of 8,810,000 shares of Common Stock of the Company by the Purchasing
Partners, each of Blackstone Partners and its affiliates and WP Partners will
beneficially own 37.1% and 39.1%, respectively, of the outstanding Common Stock
and will be in a position to control the Company. It is also expected that the
Partners and their respective affiliates may in the future act in various
capacities in connection with transactions to which the Company is a party.
In each of 1993 and 1994, Group paid each of the Managers-Advisors an
annual operating management fee of $1 million. Group also has paid each of the
Managers-Advisors an annual management and financial advisory services fee of
$1.5 million, paid quarterly in advance. Group also has reimbursed the
Managers-Advisors for out-of-pocket expenses in connection with their management
services. Following the consummation of the Recapitalization, the annual
operating management fee and the annual management and financial advisory
services fee will no longer be payable, and the Managers-Advisors will not be
required to refund any portion of such fees already paid at the time of the
Recapitalization.
Since the beginning of 1993, in connection with the divestiture of the
Engineering Group, Group has paid divestiture fees (i) to Blackstone Management
Partners L.P., an affiliate of Blackstone ("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 1993, in connection with
the consummation of two credit agreements by 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 1993, Group
has paid $1,394,000 to each of the Managers-Advisors 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 its Builders Emporium division. The agreement provides
for reimbursement of out-of-pocket expenses plus payment of fees to be paid by
Group to Blackstone of (i) $100,000 per month, commencing with the month ending
September 25, 1993 and ending with the month ending January 29, 1994 and (ii)
$100,000 for the quarter commencing January 30, 1994 and ending April 30, 1994.
Since the beginning of 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
Group 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.
The Board of Directors of Group has authorized the investment by Group 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 0.3% of the amount invested, plus nominal out-of-pocket
expenses. Since the beginning of 1993, Group has paid to BlackRock Financial
Management L.P. fees of approximately $13,000.
During the first quarter of 1994, the Company incurred expenses of $2.5
million for services performed by Blackstone Partners and WP Partners in
connection with a comprehensive review of the Company's liabilities associated
with discontinued operations, including surplus real estate, postretirement and
workers compensation liabilities. During the first quarter of 1994, the Company
incurred expenses of $3.25 million for services performed by Blackstone Partners
and $2.75 million for services performed by WP Partners in connection with the
Company's review of refinancing and strategic alternatives as well as certain
other advisory services.
It is anticipated that each of the Managers-Advisors will receive a $1
million annual monitoring fee and the reimbursement of expenses from the Company
pursuant to the Stockholders Agreement, which will be effective as of the
consummation of the Recapitalization, and that any
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<PAGE>
transaction with affiliates not contemplated by the Stockholders Agreement will
be passed upon by the independent directors.
Pursuant to the Stockholders Agreement, each Partner and the Company has a
right of first refusal with regard to sales of Common Stock by each Partner
(with certain exceptions). Each Partner also has the right to sell along with
the other (with certain exceptions). The Prudential Insurance Company of America
and certain of its affiliates, which upon consummation of the Offerings will own
approximately 1,407,817 shares of Common Stock, have certain rights to
participate in any sale by Blackstone Partners.
The Stockholders Agreement provides that each Partner has the right to
require the Company to effect up to five (but no more than two in any
twelve-month period) registration statements covering sales of Common Stock by
such Partner. All expenses of such demand registration shall be paid by the
Company, except for underwriting commissions and certain other expenses which
shall be paid by the selling Partner. Each Partner also has unlimited rights to
"piggyback" on any Company registration or a demand registration of the other
Partner. No demand registration may be requested prior to January 1, 1995,
unless waived by the Company.
The Restated Certificate of Incorporation will provide that a nominating
committee of the Board of Directors consisting of the nonemployee directors will
have exclusive power to nominate directors on behalf of the Board of Directors
and will have exclusive power to fill any vacancies on the Board of Directors.
Under certain circumstances, such as resignation of a director, the Company is
required to replace the director with an individual affiliated with the same
Partner as the former director.
Pursuant to the Voting Agreement, each Partner will be obligated to vote
for nominees to the Board of Directors that are affiliated with the other
Partner (and in certain circumstances its transferee).
SALE OF COMMON STOCK TO
THE PURCHASING PARTNERS
In connection with the Recapitalization, (i) as a condition to the closing
of the Offerings, the Purchasing Partners will purchase from the Company
6,560,000 shares of Common Stock at $
(equal to the initial public offering price less the underwriting discount) and
(ii) the Purchasing Partners have agreed to purchase from the Company, at the
initial public offering price less the underwriting discount, within 35 days
after the effective date of the Registration Statement, an aggregate number of
shares of Common Stock equal to (x) 2,250,000 minus (y) the number of shares as
to which the Underwriters' over-allotment option is exercised. The obligation of
the Purchasing Partners to purchase such 2,250,000 shares of Common Stock from
the Company is supported by irrevocable letters of credit, in an aggregate
amount equal to the purchase price for such shares, issued by Chemical Bank for
the benefit of the Company.
The Purchasing Partners have agreed, during the period beginning from the
date of this Prospectus and continuing to and including the date 180 calendar
days after the date of this Prospectus, not to offer, sell, contract to sell or
otherwise dispose of any of the shares of Common Stock they purchase from the
Company in connection with the Recapitalization (other than to their respective
affiliates). After such time, the Purchasing Partners may be deemed to be
underwriters under the Act in connection with any future resales of such shares
of Common Stock.
NEW CREDIT FACILITIES
The Company has entered into a new credit agreement (the "New Credit
Agreement") with Chemical Bank ("Chemical") and the lenders named therein, and a
receivables transfer and servicing agreement (the "Receivables Transfer
Agreement") with Chemical, providing for the New Credit Facilities in an
aggregate amount of $775 million.
The New Credit Facilities will consist of (i) an eight-year senior secured
term loan facility (the "Closing Date Term Loan Facility") in an aggregate
principal amount of $450 million, which will be
64
<PAGE>
drawn in full on the Closing Date, (ii) an eight-year senior secured term loan
facility (the "Delayed Draw Term Loan Facility") in an aggregate principal
amount of $25 million, which may be drawn in full or in part on or prior to the
first anniversary of the Closing Date, (iii) a seven-year senior secured
revolving credit facility (the "Revolving Facility", together with the Closing
Date Term Loan Facility and the Delayed Draw Term Loan Facility, the "Credit
Agreement Facilities") in an aggregate principal amount of up to $150 million
and (iv) a seven-year receivables facility (the "Receivables Facility") in an
aggregate amount of up to $150 million.
The proceeds of loans under the Closing Date Term Loan Facility will be
used by the Company, together with the net proceeds of the Offerings and the
sales to the Purchasing Partners, borrowings under the Revolving Facility,
proceeds of loans under the Delayed Draw Term Loan Facility, proceeds of the
Receivables Facility and the Company's existing cash, to refinance existing
indebtedness and preferred stock of the Company and certain of its subsidiaries.
See "Use of Proceeds and Consolidation". Borrowings may be effected under the
Delayed Draw Term Loan Facility during the one-year period following the date of
the inital funding under the Credit Agreement Facilities (the "Closing Date").
The proceeds of loans under the Delayed Draw Term Loan Facility (other than as
set forth in the first sentence of this paragraph) will be used by the Company
(i) if the Company establishes an ESOP following the completion of the
Offerings, to finance purchases of shares by such ESOP or (ii) to finance
acquisitions permitted by the terms of the New Credit Agreement. The proceeds of
loans under the Revolving Facility (other than as set forth in the first
sentence of this paragraph) will be used by the Company for general corporate
purposes, including working capital and acquisitions.
CREDIT AGREEMENT FACILITIES
The Company's wholly-owned subsidiary, C&A Co., is the borrower (the
"Borrower") under the Credit Agreement Facilities, although a portion of the
Closing Date Term Loan Facility will be available for loans to a Canadian
subsidiary of the Borrower. Loans outstanding under the Credit Agreement
Facilities will bear interest, which will be due quarterly, at a rate equal to
the Borrower's choice of (i) Chemical's Alternate Base Rate (which is the
highest of Chemical's announced prime rate, the Federal Funds Rate plus 1/2% and
Chemical's base certificate of deposit rate plus 1%) ("ABR") plus the ABR Margin
per annum or (ii) the offered rates for Eurodollar deposits for one, two, three,
six, nine, or twelve months (as selected by the Borrower) appearing on page 3750
(or any successor page) of the Dow Jones Telerate Screen as of 11:00 am, London
time, on the day that is two business days prior to the first day of the
applicable interest period ("LIBOR") plus the LIBOR Margin per annum. Pursuant
to the terms of the New Credit Agreement, the "ABR Margin" initially will be
3/4% and the "LIBOR Margin" initially will be 1 3/4%. Such margins will be
subject to step-downs in certain circumstances and will increase by 1/4% over
the margins then in effect on the fifth anniversary of the Closing Date.
Loans under the Closing Date Term Loan Facility will amortize on an equal
quarterly basis in annual amounts equal to (i) $25 million in the second year
following the Closing Date, (ii) $45 million in the third year following the
Closing Date, (iii) $65 million in the fourth year following the Closing Date,
(iv) $75 million in the fifth year following the Closing Date and (v) $80
million in the sixth, seventh and eighth years following the Closing Date. Loans
under the Delayed Draw Term Loan Facility will amortize on an equal quarterly
basis in annual amounts, which are ratably based on the annual payments of the
Closing Date Term Loan Facility. The Revolving Facility will mature on the
seventh anniversary of the Closing Date. In addition, the New Credit Agreement
provides for mandatory prepayments of the Credit Agreement Facilities with
certain excess cash flow of the Company, net cash proceeds of certain asset
sales or other dispositions by the Company and its subsidiaries, net cash
proceeds of sale/leaseback transactions, net cash proceeds of certain issuances
of debt obligations and net cash proceeds received by the Company in connection
with loans to the ESOP. Mandatory prepayments will be applied pro rata across
remaining scheduled maturities. Loans under the Credit Agreement Facilities will
be voluntarily prepayable by the
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Borrower at any time without penalty. Voluntary prepayments will be applied
against the most current scheduled maturities.
The Credit Agreement Facilities are guaranteed by the Company and each
existing and subsequently acquired or organized United States subsidiary of the
Company (other than certain unrestricted subsidiaries and, except for loans to
the Canadian subsidiary, the Borrower) subject to certain exceptions. The Credit
Agreement Facilities and the Guarantees are secured by a first priority pledge
of all the capital stock of the Borrower and each subsidiary (other than certain
unrestricted subsidiaries) of the Borrower (or, in the case of any foreign
subsidiary, 65% of the capital stock of such subsidiary) and certain
intercompany indebtedness.
The New Credit Agreement contains certain conditions precedent to the
Credit Agreement Facilities, including without limitation the following
conditions: (i) consummation of the Recapitalization simultaneously with the
Closing, (ii) receipt by the Company of at least $250,000,000 in gross cash
proceeds (which, for Common Stock sold to the Purchasing Partners, shall be
deemed to include an amount equal to the underwriting discount at the rate per
share charged in the Offerings) in connection with the Offerings (which may
include up to $23,625,000 of such proceeds received by the Company after the
Closing Date in connection with Common Stock sold to the Purchasing Partners),
(iii) after giving effect to the Recapitalization, the Company and its
subsidiaries having no obligations for borrowed money other than loans under the
New Credit Agreement and industrial revenue bonds and other debt in an aggregate
amount not to exceed $23,000,000, (iv) satisfaction of the conditions precedent
under the Receivables Facility, (v) receipt by the Lenders of certain audited
and pro forma consolidated financial statements for the Company and its
subsidiaries for the fiscal years ended January 29, 1994 and January 30, 1993,
(vi) the Lenders' satisfaction (a) that the Company will have sufficient sources
of funds to effect the Recapitalization and pay related fees and expenses, (b)
with the Company's tax position, (c) with the amount and nature of the Company's
and its subsidiaries' environmental and employee health and safety exposures,
(d) with the sufficiency of the amount available under the Revolving Facility to
meet the ongoing working capital requirements of the Company and the Borrower
following the Recapitalization and (e) with all material legal, tax and
accounting matters relating to the Recapitalization, (vii) the Administrative
Agent's reasonable satisfaction with the Company's cash management procedures,
(viii) receipt of all requisite governmental and third party approvals and (ix)
absence of outstanding material litigation.
The New Credit Agreement contains various restrictive covenants typical for
facilities and transactions of this type (with customary qualifications and
exceptions), including limitations on indebtedness of the Company and its
subsidiaries, limitations on dividends and on redemptions and repurchases of
capital stock; limitations on prepayments, redemptions and repurchases of debt;
limitations on liens and sale/leaseback transactions; limitations on loans and
investments; limitations on capital expenditures; a prohibition on the Company's
direct ownership of any subsidiary other than C&A Co. or certain unrestricted
subsidiaries; limitations on mergers, acquisitions and asset sales; limitations
on transactions with affiliates and stockholders; limitations on fundamental
changes in business conducted; limitations on the amendment of debt and other
material agreements and licenses. In addition to the foregoing, the New Credit
Agreement contains covenants requiring the Company and its subsidiaries to
maintain a minimum EBITDA level, a minimum ratio of EBITDA to cash interest
expense, a maximum ratio of indebtedness to EBITDA and a minimum ratio of
current assets to current liabilities, in each case tested at the end of each
fiscal quarter of the Company. Based upon pro forma results for the quarter
ended April 30, 1994 and the pro forma balance sheet as of April 30, 1994, the
Company is currently in compliance with all covenants in the New Credit
Agreement, and the Company has no reason to expect that it will not continue to
remain in compliance for the term of the New Credit Agreement. The Company does
not anticipate that such covenants will materially impact the Company's ability
to operate its business in the manner in which it is presently conducted.
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The New Credit Agreement also contains various events of default typical
for facilities and transactions of this type (with customary qualifications and
exceptions), including nonpayment of principal or interest; violation of
covenants; material breaches of representations and warranties; cross default
and cross acceleration; bankruptcy; material undischarged judgments; certain
ERISA events; invalidity of security documents; invalidity of subordination
provisions; and Change in Control. "Change In Control" is defined in the New
Credit Agreement to require (a) a majority of the board of directors of the
Company to be comprised of Continuing Directors (defined as any director of the
Company who either (x) was a member of the board of directors on the Closing
Date or (y) after the Closing Date became a member of the board of directors and
whose election was approved by a vote of a majority of the Continuing Directors
then on the board of directors of the Company), (b) that no person or group
(other than WP Partners, Blackstone Partners and additional designated persons)
beneficially own, directly or indirectly, shares representing more than 25% of
the aggregate ordinary voting power represented by the outstanding capital stock
of the Company at any time that WP Partners, Blackstone Partners and additional
designated persons do not beneficially own, free and clear of liens and claims,
shares representing at least 50% of the aggregate ordinary voting power
represented by the outstanding capital stock of the Company, and (c) that the
Company maintain direct ownership of the Borrower, free of liens and claims. In
addition, it is an event of Default under the New Credit Agreement if on or
prior to the date that is 35 days after the Closing Date the Company shall not
have received $250,000,000 as gross proceeds (which, for Common Stock sold to
the Purchasing Partners, shall be deemed to include an amount equal to the
underwriting discount at the rate per share charged in the Offerings) from the
sale of Common Stock.
In addition to the foregoing, the New Credit Agreement contains other
miscellaneous provisions, including provisions concerning (i) assignments by
lenders, (ii) indemnification by the Borrower of each lender from and against
any losses, claims or other expenses and (iii) payment by the Borrower of
certain fees and expenses of the lenders and their respective advisors and
consultants.
RECEIVABLES FACILITY
In connection with establishing the Receivables Facility, C&A Co. has
formed and capitalized a wholly owned, bankruptcy-remote subsidiary (the
"Receivables Company"). The Receivables Company will purchase, on a revolving
basis, all trade receivables generated by certain subsidiaries of the Company
(such subsidiaries, the "Sellers"). The Receivables Company will purchase such
receivables from the Sellers pursuant to a receivables sale agreement (the
"Receivables Sale Agreement"), at purchase prices equal to the face amount of
such receivables less a discount factor to reflect collection risks, finance
costs and similar matters. The Receivables Company will finance its initial
purchase of receivables in part with the initial capital contribution received
from C&A Co. and in part through the Receivables Transfer Agreement entered into
with Chemical and, if Chemical elects at any time, a syndicate of financial
institutions (together with Chemical, the "Buyers"). Ongoing purchases of
receivables by the Receivables Company will be financed in part from collections
in respect of receivables, in part with new purchases made by the Buyers, in
part through the issuance of subordinated promissory notes to the Sellers or C&A
Co., in part with additional capital contributions from C&A Co. and in part
through offsets against certain repurchase obligations of the Sellers to the
Receivables Company.
The purchases by the Buyers of interests in the receivables under the
Receivables Facility will be made with limited recourse and at an initial
interest cost to the Receivables Company equal to, at the Receivables Company's
election, LIBOR plus 5/8% per annum or ABR. The Buyers' interest in receivables
of up to $150 million will be an undivided senior interest in all receivables
owned by the Receivables Company. The Receivables Company will retain a
subordinated interest in the receivables that will vary from time to time. If at
any point in time the Sellers generate insufficient receivables, or the
character of the receivables purchased by the Receivables Company do not
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satisfy customary eligibility criteria (such as no bankruptcy, no delinquency
and no excessive concentration levels), the investment of the Buyers may be less
than $150 million.
The proceeds received by the Receivables Company from purchases by the
Buyers pursuant to the Receivables Transfer Agreement will be dividended or
distributed from time to time to C&A Co. to be used on the Closing Date in
connection with financing the Recapitalization and thereafter for working
capital purposes.
The Receivables Sale Agreement contains certain restrictions on the Sellers
customary for facilities of this type, including but not limited to limitations
on liens on the Sellers' receivables; limitations on modifications of the terms
of the Sellers' receivables; limitations on changes from historical credit and
collection practices; and limitations on changes in payment instructions. The
Sellers will continue to service the receivables (including all billing and
collection activities) and will receive a customary servicing fee from the
Receivables Company for providing such services. C&A Co. will act as a master
servicer, overseeing the servicing activities of the Sellers.
The Receivables Transfer Agreement contains certain restrictions customary
for facilities of this type, but will restrict the Receivables Company only. In
addition, the Board of Directors of the Receivables Company will include at all
times at least one independent director not affiliated with the Company.
The Receivables Transfer Agreement also contains certain conditions
precedent customary for facilities of this type, including the satisfaction or
waiver of all conditions precedent to the Credit Agreement Facilities;
Chemical's satisfaction with the arrangements for the collection of receivables;
Chemical's satisfaction with the original purchase of receivables by the
Receivables Company and Chemical's receipt of an agreed-upon procedures letter
of the Receivables Company's independent accountants.
The commitments under the Receivables Facility will terminate on the
earlier of (i) seven years following the date of the initial purchases by the
Buyers thereunder and (ii) upon the occurrence of certain termination events,
including but not limited to nonpayment of amounts when due; violation of
covenants; bankruptcy; change in control of the Receivables Company; material
judgments; and invalidity of the Receivables Transfer Agreement.
The Company anticipates that the Receivables Facility will be replaced by a
similar facility under which the Receivables Company will issue asset-backed
commercial paper, medium-term notes or other securities. If the Receivables
Facility has not then been replaced, the interest rate on the Receivables
Facility will increase to a rate equal to the then-applicable rate on the Credit
Agreement Facilities 270 days after the date of the initial purchases by the
Buyers thereunder.
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DESCRIPTION OF THE CAPITAL STOCK
The authorized capital stock of the Company consists of 150 million shares
of Common Stock, par value $.01 per share, and 16 million shares of Preferred
Stock, par value $.01 per share. Reference is made to the Restated Certificate
of Incorporation and Bylaws which are included as exhibits to the Registration
Statement of which this Prospectus forms a part (the "Restated Certificate of
Incorporation" and "Bylaws", respectively) for a more complete description of
the capital stock of the Company. See "Principal Stockholders and Certain
Relationships" for a description of certain rights and restrictions relating to
the capital stock of the Company.
COMMON STOCK
Subject to the rights of holders of Preferred Stock then outstanding,
holders of Common Stock are entitled to receive such dividends as may from time
to time be declared by the Board. See "Dividends". Holders of Common Stock are
entitled to one vote per share on all matters on which the holders of Common
Stock are entitled to vote. Because holders of Common Stock do not have
cumulative voting rights, the holders of the majority of the shares of Common
Stock represented at a meeting can select all the directors. In the event of
liquidation, dissolution or winding up of the Company, holders of Common Stock
would be entitled to share ratably in all assets of the Company available for
distribution to the holders of the Common Stock.
Upon full payment of the purchase price therefor, shares of Common Stock
will not be liable to further calls or assessments by the Company. There are no
preemptive rights for the Common Stock in the Restated Certificate of
Incorporation.
The Transfer Agent and Registrar for the Common Stock is First Union
National Bank of North Carolina.
PREFERRED STOCK
At April 30, 1994, the Company had outstanding approximately 6,514,000
shares of Merger Preferred Stock. All of the shares of Merger Preferred Stock
will be redeemed in connection with the consummation of the Recapitalization.
Pursuant to the Restated Certificate of Incorporation of the Company, the
Board is authorized, subject to any limitations prescribed by law, to provide
for the issuance of the shares of Preferred Stock in series and to establish
from time to time the number of shares to be included in each such series and to
fix the designation, powers, preferences and rights of the shares of each such
series and any qualifications, limitations or restrictions thereof. Because the
Board has the power to establish the preferences and rights of each series, it
may afford the holders of any Preferred Stock preferences, powers and rights
(including voting rights) senior to the rights of the holders of Common Stock.
No shares of Preferred Stock will be outstanding following the consummation of
the Recapitalization, and the Company has no present intention to issue such
shares. The issuance of shares of Preferred Stock, or the issuance of rights to
purchase such shares, could be used to discourage an unsolicited acquisition
proposal.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings, the Company will have outstanding
70,520,900 shares of Common Stock. Of these shares, the 15,000,000 shares sold
in the Offerings (17,250,000 shares if the Underwriters' over-allotment options
are exercised in full) will be freely tradeable without
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restriction or further registration under the Securities Act except for shares
purchased by "affiliates" of the Company, as such term is defined in Rule 144
under the Securities Act (which may generally be sold only in compliance with
Rule 144 or Rule 701 under the Securities Act or pursuant to a subsequent
registration). Upon completion of the Offerings, 55,520,900 shares of Common
Stock outstanding upon completion of the Offerings will be deemed "restricted
securities" as defined in Rule 144 under the Securities Act and may not be
resold without registration under the Securities Act or pursuant to an exemption
from such registration, including exemptions provided by Rule 144 under the
Securities Act. Of the 55,520,900 shares of "restricted" Common Stock referred
to above, 1,759,771 shares are held by investors who may sell such shares after
the completion of the Offerings without limitation under Rule 144. With respect
to registration rights of certain investors, see "Principal Stockholders and
Certain Relationships."
In general, Rule 144 provides that, subject to its provisions and other
applicable Federal and state securities law requirements, any person (or persons
whose shares are aggregated), including any person who may be deemed an
"affiliate" of the Company, who has beneficially owned "restricted securities"
for at least two years is entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of 1% of the total number of
outstanding shares of the same class or the average weekly trading volume of the
same class during the four calendar weeks preceding the sale. A person who is
not deemed to have been an "affiliate" of the Company at any time during the 90
days preceding the sale and who has beneficially owned "restricted securities"
for at least three years is entitled to sell such shares under Rule 144 without
regard to any of the limitations described above.
The holders of 53,761,129 shares of Common Stock have agreed that they will
not offer, sell or otherwise dispose of any shares for a period of 180 days from
the date of this Prospectus without the prior written consent of the
representatives of the Underwriters. If such consent is given, the Company will
make a public announcement thereof. See "Underwriting."
ANTI-TAKEOVER PROVISIONS
The Restated Certificate of Incorporation and the Bylaws of the Company
contain certain provisions that may delay, defer or prevent a change in control
of the Company and make removal of management more difficult. These provisions
are intended to enhance the likelihood of continuity and stability in the
composition of the Board and in the policies formulated by the Board and to
discourage certain types of transactions which may involve an actual or
threatened change of control of the Company. The provisions are designed to
reduce the vulnerability of the Company to an unsolicited proposal for a
takeover of the Company that does not contemplate the acquisition of all its
outstanding shares or an unsolicited proposal for the restructuring or sale of
all or part of the Company. The provisions also are intended to discourage
certain tactics that may be used in proxy fights.
Set forth below is a description of such provisions in the Restated
Certificate of Incorporation and the Bylaws.
The Restated Certificate of Incorporation may be amended only by the
affirmative vote of the holders of 66 2/3% or more of the combined voting power
of the then outstanding shares of voting stock, voting together as a single
class. In addition, such a vote is required for the Company to effect (i) any
merger or consolidation of the Company, (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of all or substantially all the
assets of the Company, or (iii) the adoption of any plan or proposal for the
liquidation, dissolution, spinoff, splitup, splitoff, or winding up of the
affairs of the Company.
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Pursuant to the Restated Certificate of Incorporation, the Board will be
divided into three classes serving staggered three-year terms. Directors can be
removed from office only for cause and only by the affirmative vote of the
holders of a majority of the combined voting power of the then outstanding
shares of voting stock, voting together as a single class. The Nominating
Committee, consisting of the nonemployee directors, will have exclusive power to
nominate directors on behalf of the Board of Directors and will have exclusive
power to fill any newly created directorships or any other vacancies on the
Board of Directors. Under certain circumstances, such as resignation of a
director, the Company is required to replace the director with an individual
affiliated with the same Partner as the former director. The Restated
Certificate of Incorporation provides that the number of directors, which shall
not exceed nine, will be fixed by, or in the manner provided in, the Bylaws. The
Bylaws provide that the whole Board will consist of such number of members,
which shall not exceed nine, as fixed from time to time by the Board.
Accordingly a stockholder could be delayed from obtaining majority
representation on the Board.
The Bylaws establish an advance notice procedure with regard to the
nomination, other than by or at the direction of the Nominating Committee, of
candidates for election as directors and with regard to certain matters to be
brought before an annual meeting of stockholders of the Company. In general,
notice as to any such stockholder nomination or other proposal must be received
by the Company with respect to annual meetings not less than 90 nor more than
120 days prior to the anniversary of the immediately preceding annual meeting
and must contain certain specified information concerning the person to be
nominated or the matters to be brought before the meeting and concerning the
stockholder submitting the proposal.
Subject to the terms of any Preferred Stock, any action required or
permitted to be taken by the stockholders of the Company may be taken only at a
duly called annual or special meeting of stockholders and may not be taken by
written consent without a meeting. Special meetings of the stockholders may be
called only by the Chairman or one of the Co-Chairmen of the Board or a majority
of the entire Board, and the business transacted at any special meeting will be
confined to the matters specified in the notice of meeting.
The foregoing provisions, together with the ability of the Board to issue
Preferred Stock without further stockholder action, could delay or frustrate the
removal of incumbent directors or the assumption of control by the holder of a
large block of the Company's Common Stock even if such removal or assumption
would be beneficial, in the short term, to stockholders of the Company. The
provisions could also discourage or make more difficult a merger, tender offer
or proxy contest even if such event would be favorable to the interests of
stockholders.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 of Delaware General Corporate Law ("DGCL") prevents an
"interested stockholder" (defined in Section 203, generally, as a person owning
15% or more of a corporation's outstanding voting stock), from engaging in a
"business combination" (as defined in Section 203) with a publicly held Delaware
corporation for three years following the date such person became an interested
stockholder unless (i) before such person became an interested stockholder, the
board of directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the business
combination; (ii) upon consummation of the transaction that resulted in the
interested stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers of the corporation and by employee stock plans
that do not provide employees with the rights to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer); or (iii) following the transaction in which such person became an
interested
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stockholder, the business combination is approved by the board of directors of
the corporation and authorized at a meeting of stockholders by the affirmative
vote of the holders of two-thirds of the outstanding voting stock of the
corporation not owned by the interested stockholder. The provisions of Section
203 will apply to the Company upon the consummation of the Offerings and may
have the effect of delaying, deferring or preventing a change of control of the
Company. Blackstone Partners and WP Partners will be interested stockholders
following consummation of the Offerings; however, Section 203 will not apply to
them because Holdings II has held in excess of 15% of the Company's outstanding
voting stock for more than three years and because the Board of Directors of the
Company has approved the acquisition by Blackstone Partners and WP Partners of a
direct ownership interest in the Company in connection with the
Recapitalization.
DIRECTORS' LIABILITY AND INDEMNIFICATION
The Restated Certificate of Incorporation contains a provision which
eliminates the personal liability of the Company's directors for monetary
damages resulting from breaches of their fiduciary duty to the fullest extent
permitted by the DGCL. Under the DGCL, the Company may not eliminate directors'
liability for breaches of the duty of loyalty, acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
violations under Section 174 of the DGCL or any transaction from which the
director derived an improper personal benefit. This provision also has no effect
on the ability of stockholders to seek equitable relief, such as an injunction,
that may be available to redress a breach of fiduciary duty, even though such
stockholders could not seek monetary damages from the directors for such breach.
The Bylaws contain provisions requiring, subject to certain procedures, the
indemnification of the Company's directors and officers to the fullest extent
permitted by Section 145 of the DGCL, including circumstances in which
indemnification is otherwise discretionary, and provide for the mandatory
advancement of litigation expenses incurred in defense of a claim upon the
receipt by the Company of any undertaking required by law. The Board of
Directors of the Company is further authorized, in its discretion, to provide
such rights to employees and agents of the Company. In addition, the Company may
enter into indemnification agreements with its directors and executive officers
that generally provide for similar rights to indemnification and advancement of
expenses. Management believes that these provisions are necessary to attract and
retain qualified persons as directors and officers.
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the U.S. Underwriters named below, and
each of such U.S. Underwriters, for whom Goldman, Sachs & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Wasserstein Perella Securities, Inc. and
The Nikko Securities Co. International, Inc., are acting as representatives, has
severally agreed to purchase from the Company, the respective number of shares
of Common Stock set forth opposite its name below:
<TABLE><CAPTION>
NUMBER OF
SHARES OF
COMMON
UNDERWRITER STOCK
- ----------------------------------------------------------------------------- --------------
<S> <C>
Goldman, Sachs & Co..........................................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................................
Wasserstein Perella Securities, Inc..........................................
The Nikko Securities Co.
International, Inc.........................................................
--------------
Total........................................................... 12,000,000
--------------
--------------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus, and in part to certain securities dealers at such
price less a concession of $ per share. The U.S. Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the representatives.
The Company has entered into an underwriting agreement (the "International
Underwriting Agreement") with the underwriters of the International Offering
(the "International Underwriters") providing for the concurrent offer and sale
of 3,000,000 shares of Common Stock in an international offering outside the
United States. The initial public offering price and aggregate underwriting
discounts and commissions per share for the two offerings are identical. The
closing of the offering made hereby is a condition to the closing of the
International Offering, and vice versa. The representatives of the International
Underwriters are Goldman Sachs International, Merrill Lynch International
Limited, Wasserstein Perella Securities, Inc. and Nikko Europe Plc.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution of
the shares offered hereby and subject to certain
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exceptions, it will offer, sell or deliver the shares of Common Stock, directly
or indirectly, only in the United States of America (including the States and
the District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction (the "United States") and to U.S. persons, which
term shall mean, for purposes of this paragraph: (i) any individual who is a
resident of the United States or (ii) any corporation, partnership or other
entity organized in or under the laws of the United States or any political
subdivision thereof and whose office most directly involved with the purchase is
located in the United States. Each of the International Underwriters has agreed
pursuant to the Agreement Between that, as a part of the distribution of the
shares offered as a part of the International Offering, and subject to certain
exceptions, it will (i) not, directly or indirectly, offer, sell or deliver
shares of Common Stock (a) in the United States or to any U.S. persons or (b) to
any person who it believes intends to reoffer, resell or deliver the shares in
the United States or to any U.S. persons, and (ii) cause any dealer to whom it
may sell such shares at any concession to agree to observe a similar
restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any share so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
The Company has granted the U.S. Underwriters an option exercisable for 30
days after the date of this Prospectus to purchase up to an aggregate of
1,800,000 additional shares of Common Stock solely to cover over-allotments, if
any. If the U.S. Underwriters exercise their overallotment option, the U.S.
Underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof that the number of shares to be
purchased by each of them, as shown in the foregoing table, bears to the
16,800,000 shares of Common Stock offered. The Company has granted the
International Underwriters a similar option to purchase up to an aggregate of
450,000 additional shares of Common Stock.
The Company and the Partners have agreed, during the period beginning from
the date of this Prospectus and continuing to and including the date 180
calendar days after the date of the Prospectus, not to offer, sell, contract to
sell or otherwise dispose of any securities of the Company (other than pursuant
to employee stock option plans existing, or on the conversion or exchange of
convertible or exchangeable securities outstanding, on the date of this
Prospectus) which are substantially similar to the shares of the Common Stock or
which are convertible or exchangeable into securities which are substantially
similar to the shares of the Common Stock, without the prior written consent of
the representatives, except for the shares of Common Stock offered in common
with the concurrent U.S. and International Offerings. The Company has informed
the representatives of the Underwriters that, if such consent is given, the
Company will make a public announcement thereof.
At the Company's request, the Underwriters have reserved up to 210,000
shares of Common Stock for sale at the initial public offering price to
officers, directors, employees and certain other persons associated with the
Company. The number of shares of Common Stock available for sale to the general
public will be reduced to the extent that these persons purchase such reserved
shares. Any reserved shares not purchased will be offered by the Underwriters to
the general public on the same basis as the other shares offered hereby.
The provisions of Schedule E to the By-Laws of the National Association of
Securities Dealers, Inc. apply to the offering because Wasserstein Perella
Securities, Inc. may be deemed to be an affiliate of the Company for purposes of
Schedule E. In addition, The Nikko Securities Co. International, Inc. ("Nikko")
may be deemed to be an affiliate of the Company for purposes of
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Schedule E because affiliates of Nikko have limited partnership interests in an
affiliate of Blackstone Partners, which, prior to the Offerings, owns or has the
power to vote 50.0% of the outstanding voting Common Stock. See "Principal
Stockholders and Certain Relationships". Accordingly, the initial public
offering price can be no higher than that recommended by a "qualified
independent underwriter" meeting certain standards. In accordance with this
requirement, Goldman, Sachs & Co. has served in such role and has recommended a
price in compliance with the requirements of Schedule E. Goldman, Sachs & Co. in
its role as qualified independent underwriter has performed due diligence
investigations and reviewed and participated in the preparation of this
Prospectus and the Registration Statement of which this Prospectus forms a part.
The representatives of the U.S. Underwriters have informed the Company that the
U.S. Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority, except in accordance with the provisions of
Schedule E.
Prior to the Offerings, there has been no public market for the Common
Stock. The initial public offering price was negotiated among the Company and
the representatives of the U.S. Underwriters and the International Underwriters.
Among the factors considered in determining the initial public offering price of
the Common Stock, in addition to prevailing market conditions, was the Company's
historical performance, estimates of the business potential and earnings
prospects of the Company, an assessment of the Company's management and the
consideration of the above factors in relation to market valuation of companies
in related businesses.
The Common Stock has been approved for listing on the New York Stock
Exchange. In order to meet one of the requirements for listing the Common Stock
on the New York Stock Exchange, the U.S. Underwriters have undertaken to sell
lots of 100 or more shares to a minimum of 2,000 beneficial holders.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act.
Affiliates of Wasserstein Perella Securities, Inc. will serve on the Board
of Directors and on the Nominating Committee, which is empowered to nominate
persons for election to the Board of Directors and exclusively empowered to fill
any newly created directorships or any other vacancies on the Board of
Directors. See "Principal Stockholders and Certain Relationships." Messrs.
Wasserstein, Weisenburger and Ziebold are currently serving as directors of the
Company. See "Management".
From time to time, Goldman, Sachs & Co. has provided financial advisory
services to Blackstone Partners with respect to matters unrelated to the
Company, for which Goldman, Sachs & Co. has received customary fees in the
ordinary course of business. From time to time, each of Merrill Lynch & Co. and
Wasserstein Perella Securities, Inc. has provided financial advisory services to
certain affiliates of the Partners, with respect to matters unrelated to the
Company, for which each has received customary fees in the ordinary course of
business.
In addition, in 1992 Merrill Lynch & Co. and Wasserstein Perella & Co.,
Inc., an affiliate of Wasserstein Perella Securities, Inc., each provided
financial advisory services relating to the solicitation by Group of consents
from the holders of Group's 11 7/8% Senior Subordinated Debentures due 2001, for
which each received fees of approximately $300,000. In 1991, Wasserstein Perella
Securities, Inc. received fees of approximately $400,000 in connection with
repurchases by the Company on the open market of certain securities of the
Company. For further information with respect to financial advisory and other
services provided and the fees received by and the ownership interests of
certain affiliates of Wasserstein Perella Securities, Inc., see "Principal
Stockholders and Certain Relationships".
75
<PAGE>
LEGAL OPINIONS
The validity of the Common Stock will be passed upon for the Company by
Cravath, Swaine & Moore, New York, New York, and for the Underwriters by Jones,
Day, Reavis & Pogue, New York, New York. From time to time, Jones, Day, Reavis &
Pogue provides legal services to the Company and other entities in which the
Partners have an interest.
EXPERTS
The consolidated financial statements included in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen &
Co., independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the reports of said firm and
upon the authority of said firm as experts in accounting and auditing.
76
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES (TO BE RENAMED COLLINS &
AIKMAN CORPORATION):
As of April 30, 1994 (unaudited), January 29, 1994, and January 30, 1993,
and for the thirteen weeks ended April 30, 1994 (unaudited) and May 1, 1993
(unaudited) and for the fiscal years ended January 29, 1994, January 30, 1993,
and January 25, 1992:
<TABLE>
<S> <C>
Report of Independent Public Accountants......................................................... F-2
Consolidated Statements of Operations............................................................ F-3
Consolidated Balance Sheets...................................................................... F-4
Consolidated Statements of Other Paid-in Capital................................................. F-5
Consolidated Statements of Accumulated Deficit................................................... F-5
Consolidated Statements of Cash Flows............................................................ F-6
Notes to Consolidated Financial Statements....................................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Collins & Aikman Holdings Corporation:
We have audited the accompanying consolidated balance sheets of
Collins & Aikman Holdings Corporation (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 consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Collins & Aikman Holdings Corporation 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 3 and 13 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-2
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED FISCAL YEAR ENDED
------------------------ -------------------------------------------
APRIL 30, MAY 1, JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1994 1993 1992
----------- ----------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.................................. $ 390,446 $ 339,043 $ 1,305,517 $ 1,277,500 $ 1,184,316
----------- ----------- ------------- ------------- -------------
Cost of goods sold......................... 289,492 260,095 995,790 978,473 926,817
Selling, general and administrative
expenses................................. 55,356 51,872 196,585 218,441 202,690
Management equity plan expense............. 36 -- 26,736 -- --
Restructuring costs........................ -- -- -- 10,000 --
Goodwill amortization and write-off........ -- 924 132,630 3,702 3,702
----------- ----------- ------------- ------------- -------------
344,884 312,891 1,351,741 1,210,616 1,133,209
----------- ----------- ------------- ------------- -------------
Operating income (loss).................... 45,562 26,152 (46,224) 66,884 51,107
Interest expense, net of interest income of
$2,355, $1,000, $4,434, $4,012 and
$7,299................................... 29,061 27,225 111,291 110,867 107,974
Dividends on preferred stock of
subsidiary............................... 1,129 1,129 4,533 4,514 4,515
----------- ----------- ------------- ------------- -------------
Income (loss) from continuing operations
before income taxes...................... 15,372 (2,202) (162,048) (48,497) (61,382)
Income taxes (benefit)..................... 2,618 3,271 11,277 (3,156) 11,954
----------- ----------- ------------- ------------- -------------
Income (loss) from continuing operations... 12,754 (5,473) (173,325) (45,341) (73,336)
Discontinued operations:
Income (loss) from operations, net of
income taxes of $0, $570, $584, $5,700
and $2,951............................ -- (1,359) (4,775) (50,317) 3,635
Loss on disposals, net of income tax
benefit of $0, $0, $344, $0 and $0.... -- (2,237) (99,564) (168,000) (20,000)
----------- ----------- ------------- ------------- -------------
Income (loss) before extraordinary items... 12,754 (9,069) (277,664) (263,658) (89,701)
Extraordinary loss on early retirement of
debt, net of income taxes of $0.......... -- -- -- -- (1,793)
Cumulative effect on prior years (to
January 26, 1991) of change in accounting
principle, net of income taxes of $0..... -- -- -- -- (42,316)
----------- ----------- ------------- ------------- -------------
Net income (loss).......................... $ 12,754 $ (9,069) $ (277,664) $ (263,658) $ (133,810)
----------- ----------- ------------- ------------- -------------
----------- ----------- ------------- ------------- -------------
Income (loss) available to common
shareholders............................. $ 5,668 $ (14,689) $ (301,387) $ (282,506) $ (149,617)
Per common share:
Continuing operations.................... $ .15 $ (.32) $ (5.77) $ (1.88) $ (2.61)
Discontinued operations.................. -- (.11) (3.06) (6.40) (.48)
Extraordinary item....................... -- -- -- -- (.05)
Cumulative effect of accounting change... -- -- -- -- (1.24)
----------- ----------- ------------- ------------- -------------
Net income (loss)........................ $ .15 $ (.43) $ (8.83) $ (8.28) $ (4.38)
----------- ----------- ------------- ------------- -------------
----------- ----------- ------------- ------------- -------------
Average shares outstanding................. 36,680 34,131 34,131 34,131 34,131
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-3
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 30, JANUARY 29, JANUARY 30,
1994 1994 1993
------------ ------------ --------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................................... $ 139,282 $ 81,373 $ 83,688
Accounts and notes receivable, net................................ 212,708 200,368 164,655
Inventories....................................................... 189,709 176,062 165,864
Receivable from sale of business.................................. -- 70,000 --
Net assets of discontinued operations............................. -- -- 190,177
Other............................................................. 44,832 48,397 23,131
------------ ------------ --------------
Total current assets......................................... 586,531 576,200 627,515
Property, plant and equipment, net.................................. 294,684 292,600 292,434
Goodwill............................................................ -- -- 132,630
Other assets........................................................ 52,833 50,025 88,855
------------ ------------ --------------
$ 934,048 $ 918,825 $ 1,141,434
------------ ------------ --------------
------------ ------------ --------------
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities:
Notes payable..................................................... $ 3,043 $ 3,789 $ 9,067
Current maturities of long-term debt.............................. 163,715 25,895 61,287
Accounts payable.................................................. 78,188 85,591 75,996
Accrued expenses.................................................. 159,778 142,351 169,002
Other............................................................. 4,097 2,671 343
------------ ------------ --------------
Total current liabilities.................................... 408,821 260,297 315,695
Long-term debt...................................................... 758,528 897,659 920,918
Deferred income taxes............................................... 640 640 4,823
Other, including postretirement benefit obligation.................. 334,440 339,768 222,510
Commitments and contingencies (Note 19).............................
Redeemable preferred stock of subsidiary (aggregate preference in
liquidation $129)................................................. 132 132 165
Preferred stock of subsidiary (aggregate preference in liquidation
$45,145).......................................................... 181 181 181
Redeemable preferred stock (aggregate preference in liquidation
$162,861)......................................................... 129,454 122,368 98,602
Common stock (150,000 shares authorized, 35,035 shares issued and
outstanding)...................................................... 350 350 350
Other paid-in capital............................................... 160,285 160,249 133,513
Accumulated deficit................................................. (843,669) (849,337) (547,950)
Foreign currency translation adjustments............................ (7,367) (5,735) (4,870)
Pension equity adjustment........................................... (7,747) (7,747) (2,503)
------------ ------------ --------------
Total common stockholder's deficit........................... (698,148) (702,220) (421,460)
------------ ------------ --------------
$ 934,048 $ 918,825 $ 1,141,434
------------ ------------ --------------
------------ ------------ --------------
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-4
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
CONSOLIDATED STATEMENTS OF OTHER PAID-IN CAPITAL
(IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTEEN FISCAL YEAR ENDED
WEEKS ENDED ----------------------------------------
APRIL 30, JANUARY 29, JANUARY 30, JANUARY 25,
1994 1994 1993 1992
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Balance at beginning of period.......................... $ 160,249 $ 133,513 $ 133,733 $ 133,108
Management equity plan.................................. 36 26,736 -- --
Other................................................... -- -- (220) 625
------------ ------------ ------------ ------------
Balance at end of period................................ $ 160,285 $ 160,249 $ 133,513 $ 133,733
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
CONSOLIDATED STATEMENTS OF ACCUMULATED DEFICIT
(IN THOUSANDS)
THIRTEEN FISCAL YEAR ENDED
WEEKS ENDED ----------------------------------------
APRIL 30, JANUARY 29, JANUARY 30, JANUARY 25,
1994 1994 1993 1992
------------ ------------ ------------ ------------
(UNAUDITED)
Balance at beginning of period......................... $ (849,337) $ (547,950) $ (265,444) $ (115,827)
Net income (loss)...................................... 12,754 (277,664) (263,658) (133,810)
Redeemable preferred stock dividends................... (6,072) (22,107) (18,988) (17,167)
Accretion of difference between redemption value and
fair value at date of issuance of redeemable
preferred stock...................................... (1,014) (1,616) 140 1,360
------------ ------------ ------------ ------------
Balance at end of period............................... $ (843,669) $ (849,337) $ (547,950) $ (265,444)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-5
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED FISCAL YEAR ENDED
---------------------- ----------------------------------------
APRIL 30, MAY 1, JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1994 1993 1992
---------- ---------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Income (loss) from continuing operations........... $ 12,754 $ (5,473) $ (173,325) $ (45,341) $ (73,336)
Adjustments to derive cash flow from continuing
operating activities:
Goodwill write-off............................... -- -- 129,854 -- --
Management equity plan expense................... 36 -- 26,736 -- --
Restructuring costs.............................. -- -- -- 10,000 --
Depreciation and amortization.................... 13,461 15,807 58,037 62,273 61,222
Increase in accounts and notes receivable........ (12,340) (24,747) (32,982) (149) (7,166)
Decrease (increase) in inventories............... (13,647) 689 (6,952) 4,308 23,936
Increase (decrease) in accounts payable.......... (7,403) 626 14,145 130 (2,874)
Other, net....................................... 23,758 12,438 7,398 (6,456) (16,737)
---------- ---------- ------------ ------------ ------------
Net cash provided by (used in) continuing
operating activities...................... 16,619 (660) 22,911 24,765 (14,955)
---------- ---------- ------------ ------------ ------------
Loss from discontinued operations.................. -- (3,596) (104,339) (218,317) (16,365)
Adjustments to derive cash flow from discontinued
operating activities:
Loss on disposals................................ -- 2,237 99,564 168,000 20,000
Depreciation and amortization.................... -- 5,249 17,337 22,559 22,919
Net change in receivables, inventory and
accounts payable............................... -- (14,854) 70,162 24,163 5,634
Other, net....................................... (8,540) (26,806) (150,141) (9,863) (18,653)
---------- ---------- ------------ ------------ ------------
Net cash provided by (used in) discontinued
operating activities...................... (8,540) (37,770) (67,417) (13,458) 13,535
---------- ---------- ------------ ------------ ------------
INVESTING ACTIVITIES
Additions to property, plant and equipment......... (15,286) (7,267) (56,278) (54,181) (61,899)
Sales of property, plant and equipment............. 4,519 815 22,710 10,347 7,522
Proceeds from businesses sold...................... 67,212 49,243 148,743 -- 5,598
Other, net......................................... 3,769 (2,659) 43,983 9,223 27,444
---------- ---------- ------------ ------------ ------------
Net cash provided by (used in) investing
activities................................ 60,214 40,132 159,158 (34,611) (21,335)
---------- ---------- ------------ ------------ ------------
FINANCING ACTIVITIES
Issuance of long-term debt......................... 1,037 36,689 76,135 60,128 157,587
Reduction of long-term debt........................ (10,335) (23,800) (179,861) (54,376) (180,841)
Short-term borrowings (repayments), net............ (821) (6,300) (5,899) 3,554 (1,057)
Other, net......................................... (265) (6,990) (7,342) (2,918) (7,046)
---------- ---------- ------------ ------------ ------------
Net cash provided by (used in) financing
activities................................ (10,384) (401) (116,967) 6,388 (31,357)
---------- ---------- ------------ ------------ ------------
Increase (decrease) in cash and cash equivalents... 57,909 1,301 (2,315) (16,916) (54,112)
Cash and cash equivalents at beginning of period... 81,373 83,688 83,688 100,604 154,716
---------- ---------- ------------ ------------ ------------
Cash and cash equivalents at end of period......... $ 139,282 $ 84,989 $ 81,373 $ 83,688 $ 100,604
---------- ---------- ------------ ------------ ------------
---------- ---------- ------------ ------------ ------------
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-6
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND ACQUISITION:
Collins & Aikman Holdings Corporation (the "Company") (formerly WCI
Holdings Corporation) is a Delaware corporation and a wholly-owned subsidiary of
Collins & Aikman Holdings II Corporation ("Holdings II") (formerly WCI Holdings
II Corporation), a corporation jointly owned by Blackstone Capital Partners L.P.
("Blackstone Partners") and Wasserstein Perella Partners, L.P. ("WP Partners")
(both of which are Delaware limited partnerships), and their respective
affiliates. The Company was formed on September 21, 1988 to acquire all the
outstanding common stock of Collins & Aikman Group, Inc. ("Group") (formerly
Wickes Companies, Inc.). On April 13, 1989, Group became a wholly-owned
subsidiary of the Company. The acquisition of Group has been accounted for as a
purchase and the results of operations have been included from the effective
date of the acquisition.
2. INITIAL PUBLIC OFFERING AND RECAPITALIZATION:
The Company plans to proceed with initial public offerings ("Offerings") of
15.0 million shares of common stock at an initial public offering price of
$10.50 per share. The net proceeds to the Company from the Offerings together
with proceeds from the sale by the Company of an aggregate of 8.8 million shares
of Common Stock to affiliates of WP Partners and Blackstone Partners (assuming
that the over-allotment options are not exercised), borrowings under certain new
credit facilities aggregating $775 million and available cash will be used to
effect a defeasance and redemption or repayment of certain indebtedness and
preferred stock of the Company and certain of its subsidiaries. In addition, at
the expected time of the Offerings (assumed to be July 13, 1994 at an initial
public offering price of $10.50 per share) all but approximately $9.8 million of
the Company's Subordinated PIK Notes will be exchanged for shares of Common
Stock. After the Offerings and Recapitalization, it is expected that
approximately 70.5 million shares of Common Stock will be outstanding (before
the exercise of any outstanding stock options). In connection with the Offerings
and Recapitalization, Holdings II, currently the sole stockholder of the
Company, will be merged into the Company. Concurrently, Group will be merged
into its wholly-owned subsidiary, Collins & Aikman Corporation ("C&A Co."). The
Company intends to change its name from Collins & Aikman Holdings Corporation to
Collins & Aikman Corporation and C&A Co. will change its name to Collins &
Aikman Products Co.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
FISCAL YEAR--The fiscal year of the Company ends on the last Saturday of
January. Fiscal 1993 and fiscal 1991 were the 52-week years which ended on
January 29, 1994 and January 25, 1992, respectively. Fiscal 1992 was the 53-week
year which ended on January 30, 1993.
INTERIM FINANCIAL PRESENTATION--The financial statements as of April 30,
1994 and for the thirteen weeks ended April 30, 1994 and May 1, 1993 are
unaudited. In the opinion of management, the unaudited financial statements as
of April 30, 1994 and for the thirteen weeks ended April 30, 1994 and May 1,
1993 reflect all adjustments (consisting of only normal recurring adjustments)
necessary for a fair presentation of financial position and results of
operations. Results of operations for interim periods are not necessarily
indicative of results for the full year.
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
F-7
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
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 $42.3 million as of the beginning of fiscal 1991.
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 16.)
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 $69.8
million held by Group and $8.6 million held by C&A Co.
INVENTORIES--Inventories are valued 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.
INSURANCE DEPOSITS--Other current assets at January 29, 1994 include $22.8
million which is on deposit with an Insurer to cover the self-insured portion of
the Company's workers compensation, automotive and general liabilities. The
Company's reserves for these claims are determined based upon actuarial analyses
and aggregated $36.5 million at January 29, 1994, $10.6 million of which is
classified in current liabilities.
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 ranging from 3 to
40 years. Leasehold improvements are amortized over the lesser of the lease term
or the estimated useful lives of the improvements.
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 operations in assessing the
recoverability of property, plant and equipment and other long-lived assets.
When the foregoing considerations suggest that a long-term deterioration in the
Company's operations has occurred, management evaluates its long-lived assets
for impairment using its forecasted business unit results to determine whether
the cost of such assets can be recovered through future operations. Further, net
asset costs are also reduced, if required, to net realizable value at the time a
disposition is planned.
GOODWILL--Until the write-off of goodwill as of October 30, 1993, goodwill
was being amortized by the straight-line method over 40 years. Amortization
applicable to continuing operations
F-8
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
was $2.8 million, $3.7 million and $3.7 million for fiscal 1993, 1992 and 1991,
respectively. Accumulated amortization was $16.3 million at January 30, 1993.
(See also Note 4.)
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 recovery will be realized.
INCOME (LOSS) PER COMMON SHARE--Income (loss) per common share is based on
the weighted average number of shares outstanding during each period and the
assumed exercise of all employee stock options less the number of treasury
shares assumed to be purchased from the proceeds, including applicable
compensation expense, using the assumed initial public offering price of $10.50
per share. The assumed exercise of all employee stock options results in a
decrease in the weighted average number of shares outstanding in each of the
three fiscal years in the period ended January 29, 1994 and the thirteen week
period ended May 1, 1993. Income (loss) per common share data is also adjusted
for dividends and accretion requirements on redeemable preferred stock.
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.
NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS--The Financial Accounting Standards
Board has issued Statement of Financial Accounting Standards No. 112 "Employers'
Accounting for Postemployment Benefits" and certain other accounting
pronouncements which are not yet effective. The adoption of these pronouncements
will not have a material effect on the Company's consolidated financial
condition or results of operations.
4. GOODWILL:
At October 30, 1993, before giving effect to the write-off described below,
the Company had $129.9 million of goodwill which arose as a result of the
acquisition of Group in December 1988. 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 Systems 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 35 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 capital structure at that
F-9
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. GOODWILL:--(CONTINUED)
time. In spite of the fact that the results reflected in the forecasts showed
improvement over the historical results achieved during the past few years, the
result was a cumulative net loss. Accordingly, the Company wrote off its
remaining goodwill balance of $129.9 million during the third quarter ended
October 30, 1993.
In early 1994, the Company is again exploring the feasibility of a debt
recapitalization and an initial public equity offering. (See Note 2.) The
holders of $182.7 million of PIK Notes as of January 29, 1994 have now agreed,
at the option of the Company exercisable prior to September 15, 1994, to
exchange those Notes for shares of Common Stock (which will be restricted stock
within the meaning of rule 144 of the Securities Act), subject to certain
conditions including an initial public equity offering by the Company. Due to
this agreement, to improvements in the Company's performance based largely on
accelerating North American auto build rates and to increasing receptivity to
cyclical industries in the equity markets, the Company's financial advisers have
indicated that a debt recapitalization and initial public equity offering may be
feasible in fiscal 1994. If a refinancing or initial public equity offering is
not accomplished during fiscal 1994, the Company expects that it will have
adequate liquidity to meet cash requirements through the end of fiscal 1994 and
into fiscal 1995. Beyond that, the Company expects that it will require
alternative financings or asset sales to meet its cash requirements.
5. RESTRUCTURING COSTS:
During fiscal 1992, the Company incurred certain identifiable costs in
connection with the restructuring of Wallcoverings. The restructuring costs,
aggregating $10 million, principally related to the closure of certain
manufacturing and distribution facilities.
6. 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 $168 million in the fourth
quarter of fiscal 1992 principally to provide for the expected loss on the 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
$125.5 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's inventory, real
estate and other assets, (ii) provide for employee severance and other costs and
(iii) realize a previously unrecognized loss as a result of the decision to
retain Dura. 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 $170 million (subject to post-closing purchase price
adjustment). A portion of the proceeds was used to repay $66 million of
borrowings under a Kayser-Roth credit facility. In connection with the sale,
Group received a 90-day $70 million senior unsecured bridge note from the
purchaser which was paid with
F-10
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. DISCONTINUED OPERATIONS:--(CONTINUED)
accrued interest on April 27, 1994. The gain on disposal of $28.1 million in the
fourth quarter relates to the sale of Kayser-Roth.
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 the 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.
Summarized statements of operations for periods prior to units being
classified as discontinued operations follow (in thousands):
<TABLE>
<S> <C> <C> <C>
FISCAL YEAR ENDED
------------------------------------------
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
------------ ------------ --------------
Sales............................................................... $ 274,297 $ 977,098 $ 1,042,377
Costs and expenses, other than interest............................. 268,083 998,705 1,010,729
Interest expense.................................................... 10,405 23,010 25,062
------------ ------------ --------------
Income (loss) before income taxes................................... (4,191) (44,617) 6,586
Income taxes........................................................ 584 5,700 2,951
------------ ------------ --------------
Income (loss) from discontinued operations.......................... $ (4,775) $ (50,317) $ 3,635
------------ ------------ --------------
------------ ------------ --------------
</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 $22.1 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 Group's 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. Interest allocated to discontinued operations
was $5.0 million for the quarter ended May 1, 1993. No interest was allocated to
discontinued operations in the quarter ended April 30, 1994.
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.
The Company incurred fees to Blackstone Partners and WP Partners for
services related to divestitures aggregating $4.3 million and $500,000 during
fiscal 1993 and 1992, respectively. Amounts in fiscal 1993 related principally
to divestiture fees on the sales of Kayser-Roth and the Engineering Group, and
advisory services in connection with the sale of Builders Emporium's inventory,
real estate and other assets. Fees incurred during the first quarter of 1994
included $100,000 to Blackstone Partners for advisory services in connection
with the sale of Builders Emporium's inventory, real estate and other assets. In
addition, during the first quarter of 1994 the Company incurred expenses of $2.5
million for services performed by Blackstone Partners and WP Partners in
connection with a comprehensive review of the Company's liabilities associated
F-11
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. DISCONTINUED OPERATIONS:--(CONTINUED)
with discontinued operations, including surplus real estate, postretirement and
workers compensation liabilities.
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.
7. ACCOUNTS AND NOTES RECEIVABLE, NET:
Accounts and notes receivable, net, are summarized below (in thousands):
<TABLE><CAPTION>
APRIL 30, JANUARY 29, JANUARY 30,
1994 1994 1993
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Accounts and notes receivable.................... $ 219,811 $ 207,439 $ 171,403
Less allowance for doubtful accounts............. (7,103) (7,071) (6,748)
------------ ------------ ------------
$ 212,708 $ 200,368 $ 164,655
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
8. INVENTORIES:
Inventory balances are summarized below (in thousands):
<TABLE><CAPTION>
APRIL 30, JANUARY 29, JANUARY 30,
1994 1994 1993
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Raw materials.................................... $ 73,592 $ 70,762 $ 62,663
Work in process.................................. 27,038 24,739 26,121
Finished goods................................... 89,079 80,561 77,080
------------ ------------ ------------
$ 189,709 $ 176,062 $ 165,864
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
9. PROPERTY, PLANT AND EQUIPMENT, NET:
Property, plant and equipment, net, are summarized below (in thousands):
<TABLE><CAPTION>
APRIL 30, JANUARY 29, JANUARY 30,
1994 1994 1993
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Land and improvements............................ $ 28,320 $ 28,347 $ 20,747
Buildings........................................ 108,891 109,275 115,406
Machinery and equipment.......................... 371,652 372,208 332,946
Leasehold improvements........................... 1,897 1,421 1,431
Construction in progress......................... 35,127 21,863 20,733
------------ ------------ ------------
545,887 533,114 491,263
Less accumulated depreciation and amortization... (251,203) (240,514) (198,829)
------------ ------------ ------------
$ 294,684 $ 292,600 $ 292,434
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
Depreciation and amortization expense of property, plant and equipment
applicable to continuing operations was $11.1 million and $11.7 million for the
thirteen weeks ended April 30, 1994 and May 1, 1993, respectively, and $42.2
million, $45.5 million and $43.9 million for fiscal 1993, 1992 and 1991,
respectively.
F-12
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. ACCRUED EXPENSES:
Accrued expenses are summarized below (in thousands):
<TABLE><CAPTION>
APRIL 30, JANUARY 29, JANUARY 30,
1994 1994 1993
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Payroll and employee benefits.................... $ 34,273 $ 42,063 $ 39,633
Interest......................................... 33,029 19,242 24,107
Insurance........................................ 17,100 15,152 25,122
Other............................................ 75,376 65,894 80,140
------------ ------------ ------------
$ 159,778 $ 142,351 $ 169,002
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
11. LONG-TERM DEBT:
Long-term debt is summarized below (in thousands):
<TABLE><CAPTION>
APRIL 30 JANUARY 29, JANUARY 30,
1994 1994 1993
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Senior indebtedness of Group and its subsidiaries:
Mortgage notes...................................................... $ 1,324 $ 1,464 $ 1,841
Notes payable to banks.............................................. 7,344 7,595 7,891
Notes payable to others............................................. 8,674 8,266 4,744
C&A Co. credit facility, average interest rate of 5.6%, 5.5% and
5.3%.............................................................. 127,581 137,129 191,155
Debentures due 2005, interest rate 7 1/2% through January 31, 1994,
and 10% thereafter................................................ 138,694 138,694 138,694
Sinking fund debentures due 1994, interest rate 12%................. -- -- 40,982
Industrial revenue bonds due through 2006, interest rates from 5% to
7 5/8%............................................................ 11,558 11,648 12,754
Unamortized debt discount........................................... (33,063) (33,397) (38,833)
------------ ------------ ------------
262,112 271,399 359,228
------------ ------------ ------------
Senior subordinated indebtedness of Group:
Senior subordinated debentures due 2001, interest rate 11 7/8%...... 347,414 347,414 347,414
Unamortized debt discount........................................... (45,613) (46,532) (49,840)
------------ ------------ ------------
301,801 300,882 297,574
------------ ------------ ------------
Subordinated indebtedness of Group:
Subordinated notes due 1995, interest rate 15%...................... 137,359 137,359 137,359
Subordinated debentures due 1997, interest rate 11 3/8%............. 24,500 24,500 24,500
Unamortized debt discount........................................... (2,261) (2,446) (3,131)
------------ ------------ ------------
159,598 159,413 158,728
------------ ------------ ------------
Indebtedness of the Company:
Subordinated PIK Notes due December 2, 1996, replacement notes
issuable at option of Company through maturity date of December
1998, interest rate 14%.......................................... 198,732 191,860 166,675
------------ ------------ ------------
Total debt............................................................ 922,243 923,554 982,205
Less current maturities............................................... (163,715) (25,895) (61,287)
------------ ------------ ------------
$ 758,528 $ 897,659 $ 920,918
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-13
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. LONG-TERM DEBT:--(CONTINUED)
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. As
of April 30, 1994 dividends under the C&A Co. Credit Agreement were limited to
approximately $42 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.
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 the Company
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, Group 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
F-14
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. LONG-TERM DEBT:--(CONTINUED)
11 7/8% Indenture) is equal to or less than $700 million on the last day of any
fiscal quarter (the "Minimum Equity Test"), Group 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. Group 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. Group has previously
delivered for cancellation $1,033 million in aggregate principal amount of 11
7/8% Securities, which are available for such purpose. Group satisfied the
Minimum Equity Test at the end of fiscal 1993. On that date, Adjusted Net Worth
was $753.7 million. If Group 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 Group 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.
All the consolidated long-term debt of the Company other than the
Subordinated PIK Notes is debt of Group and its subsidiaries. At January 29,
1994, Blackstone Partners and WP Partners were holders of approximately $89.2
million and $93.5 million, respectively, of the Company's Subordinated PIK
Notes, including accrued interest. The remainder of the Subordinated PIK Notes
outstanding aggregated approximately $9.2 million at January 29, 1994. At April
30, 1994, Blackstone Partners and WP Partners were holders of approximately
$92.4 million and $96.9 million, respectively, of the Subordinated PIK Bridge
Notes. The Subordinated PIK Notes mature December 2, 1996, unless extended by
the holders. The Company anticipates that, at least if certain debt of Group
continues to be outstanding or is refinanced with similarly restrictive debt,
the Company will not have sufficient cash to pay the Subordinated PIK Notes in
cash at maturity in 1996 and, unless such maturity is extended by the holders,
the Company will issue replacement notes as permitted by the terms of the
Subordinated PIK Notes. If issued, each replacement note will mature December 8,
1998, with sinking fund payments equal to one-third of the outstanding principal
amount due December 1996 and 1997. The Company's ability to satisfy the sinking
fund payments and the final payment at maturity of the replacement notes, if
issued, will depend on the availability of cash at the Company. The Company
anticipates that, at least if certain debt of Group continues to be outstanding
or is refinanced with similarly restrictive debt, the Company will not have
sufficient cash to satisfy the sinking fund payments or the final payment at
maturity of the replacement notes, if issued, unless the sinking fund and final
maturity dates are extended by the holders. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" elsewhere herein. The
Company is not permitted to pay cash dividends on the common stock of the
Company until payment in full of the Subordinated PIK Notes, unless waived by
the holders. The Company may purchase or redeem shares of its common stock so
long as the aggregate equity investment in the common stock of the Company is at
least $75 million.
In April 1994, WP Partners and Blackstone Partners agreed, at the option of
the Company exercisable prior to September 15, 1994, to exchange the
Subordinated PIK Notes held by them for
F-15
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. LONG-TERM DEBT:--(CONTINUED)
shares of Common Stock, subject to certain conditions including an initial
public equity offering by the Company.
During the first quarter of 1994, the Company incurred expenses of $2.75
million for services performed by WP Partners and $3.25 million for services
performed by Blackstone Partners in connection with the Company's review of
refinancing and strategic alternatives as well as certain other advisory
services. These fees are included in "selling, general and administrative
expenses".
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
Group's option.
Debt discount applicable to securities issued by Group is based on the
present values of amounts to be paid determined at market interest rates in
effect at the time the Company acquired Group.
Maturities of long-term debt during each of the five fiscal years
subsequent to January 29, 1994 are $25.9 million, $170.9 million, $127.2
million, $103.8 million and $84.5 million, respectively. Total interest paid by
the Company on all indebtedness was $101.5 million, $105.0 million and $120.6
million for fiscal 1993, 1992 and 1991, respectively.
12. LONG-TERM LEASES AND LEASE COMMITMENTS:
Group 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, Group 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):
FISCAL YEAR ENDING
- ----------------------------------
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
----------
----------
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 capital leases are not significant.
13. EMPLOYEE BENEFIT PLANS:
Subsidiaries of the Company 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
F-16
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. EMPLOYEE BENEFIT PLANS:--(CONTINUED)
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 include 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......................................... (1,836) (9,298) 5,869
------------ ------------ ------------
$ 3,905 $ 2,981 $ 3,285
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
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 obligations:
Vested benefit obligation.............................. $ (21,352) $ (82,248) $ (15,096) $ (76,493)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Accumulated benefit obligation......................... $ (22,214) $ (86,450) $ (15,580) $ (80,023)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Projected benefit obligation........................... $ (24,317) $ (89,433) $ (17,314) $ (82,658)
Plan assets at fair value............................ 24,761 66,794 20,089 72,929
------------- ------------- ------------- -------------
Projected benefit obligation less than (in excess of)
plan assets............................................ 444 (22,639) 2,775 (9,729)
Unrecognized net loss.................................... 1,855 20,431 147 19,489
Prior service cost not yet recognized in net periodic
pension cost........................................... 416 (9,208) 441 (14,336)
Adjustment required to recognize minimum liability....... -- (7,841) -- (2,639)
------------- ------------- ------------- -------------
Pension asset (pension liability) recognized in the
consolidated balance sheets............................ $ 2,715 $ (19,257) $ 3,363 $ (7,215)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</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
F-17
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. EMPLOYEE BENEFIT PLANS:--(CONTINUED)
of SFAS 87, the consolidated balance sheets at January 29, 1994 and January 30,
1993 include an intangible pension asset of $94,000 and $136,000; an additional
minimum pension liability of $7.8 million and $2.6 million; and a contra-equity
balance of $7.7 million and $2.5 million, respectively.
Subsidiaries of the Company sponsor defined contribution plans covering
employees who meet eligibility requirements. Subsidiary 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 for
fiscal 1993, 1992 and 1991, respectively.
Subsidiaries of the Company have provided postretirement life, health and
medical coverage for certain retirees under plans currently in effect. Many of
the subsidiaries' 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. The Company has 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 amount 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>
F-18
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. EMPLOYEE BENEFIT PLANS:--(CONTINUED)
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 inflation of health care costs will be limited
to 6% per year through March 31, 1998. Subsequent to March 1998, the Company
will not provide coverage for inflation in healthcare costs.
14. COMMON STOCK AND PREFERRED STOCK:
At January 29, 1994 and January 30, 1993, 1,000 shares of $1.00 par value
common stock were authorized, issued and outstanding. The Company's Certificate
of Incorporation was amended on April 27, 1994 to authorize 150 million shares
of common stock, to reduce the par value of the common stock from $1.00 to $.01
per share and to authorize a 35,035 for 1 stock split of all outstanding shares
of common stock. The stock split was effective April 27, 1994. In connection
therewith, the common stock and other paid-in capital accounts were adjusted for
all periods to reflect the effect of the stock split.
In connection with the 1989 merger of a wholly owned subsidiary of the
Company into Group, approximately 4,250,000 shares of 15 1/2% Cumulative
Exchangeable Redeemable Preferred Stock ("Merger Preferred Stock"), par value
$.01 (authorized 16,000,000 shares), were issued. In addition, approximately
6,500 shares of Merger Preferred Stock may be issued upon exchange of
outstanding shares of Group's 15 1/2% Junior Cumulative Exchangeable Redeemable
Preferred Stock ("Intermediate Preferred Stock"), at the holder's option. Each
share of preferred stock has a liquidation preference of $25. To the extent the
Company shall have funds legally available therefor, the preferred stock is
required to be fully redeemed on April 13, 1999 at its liquidation preference
per share together with all accrued and unpaid dividends, whether or not
declared. Each share is exchangeable, at the Company's option, for 15 1/2%
subordinated debentures with a principal amount equal to the liquidation
preference of the shares being exchanged (plus accrued and unpaid dividends).
Dividends on the Merger Preferred Stock are payable quarterly and dividends
accruing on or prior to February 1, 1995 may be paid, at the option of the
Company, in cash (at the rate of $3.875 per year) or in additional shares of
Merger Preferred Stock (at the rate of .04 shares for each $1 of dividends not
paid in cash). Dividends accruing after February 1, 1995 may be paid only in
cash. To date, all dividends have been paid in additional shares of Merger
Preferred Stock and at April 30, 1994, January 29, 1994 and January 30, 1993
approximately 6,514,000, 6,268,000 and 5,183,000 shares, respectively, were
outstanding. Since January 25,
F-19
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. COMMON STOCK AND PREFERRED STOCK:--(CONTINUED)
1992, and as of January 29, 1994, and April 30, 1994, total liabilities of the
Company exceeded total assets based on its balance sheet and therefore, under
Delaware law, the payment of dividends on the Merger Preferred Stock required a
determination by the Board of Directors, based on a current valuation of the
Company's assets and liabilities, that adequate surplus exists under Delaware
law for the purpose of paying dividends. The Board of Directors made that
determination with respect to the dividend paid May 2, 1994, but it is not
possible to predict whether or not such a determination will be able to be made
with respect to future dividends. In addition, the Company's ability to pay cash
dividends on the Merger Preferred Stock will depend on the availability of cash
at the Company. As discussed in Note 11, since January 26, 1991, no additional
cash dividends to the Company have been permitted under the most restrictive
provisions in the existing debt agreements of Group, and the Company does not
expect Group to be permitted to pay dividends during fiscal 1994 or in the
foreseeable future beyond fiscal 1994, at least so long as the 11 7/8%
Securities are outstanding. Even if the 11 7/8% Securities are refinanced, there
can be no assurance that any new debt would not contain similarly restrictive
covenants. Dividends accrued during the thirteen weeks ended April 30, 1994 and
during fiscal 1993, 1992 and 1991, including accretion for difference between
redemption value and fair value at date of issuance, aggregated approximately
$7.1 million, $23.7 million, $18.8 million and $15.8 million, respectively.
At April 30, 1994, January 29, 1994 and January 30, 1993, 30,000,000 shares
of $.10 par value preferred stock of Group were authorized and approximately
1,806,000 shares of convertible preferred stock, Series A were outstanding. Each
share of Series A preferred stock of Group, which has an annual dividend of
$2.50 per share, is convertible into 0.50 shares of Merger Preferred Stock of
the Company, subject to subsequent adjustment pursuant to its terms.
15. STOCK OPTION PLANS:
Effective on January 28, 1994, the Company adopted the 1993 Employee Stock
Option Plan ("1993 Plan") for certain key employees. The 1993 Plan was created
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. Effective on January 28, 1994, the Company
granted options to acquire approximately 3.1 million 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 the 1994 Employee Stock Option Plan
("1994 Plan") was adopted as a successor to the 1993 Plan to facilitate awards
to 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 approximately
170,000 shares of Common Stock at an average exercise price of $5.52 per share
were granted in April 1994. Management equity plan expense of $1.6 million will
be recognized as the options ratably vest over the next three years, $36,000 of
which was recognized in the first quarter of 1994.
As of April 30, 1994, employee stock options for a total of approximately
3.2 million shares were outstanding and subject to future vesting.
Upon a change of control, as defined, all of the above options become fully
vested and exercisable.
F-20
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. 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................................ $ 69,358 $ 68,825
Net operating loss carryforwards................................................... 151,913 91,817
Investment tax credit carryforwards................................................ 11,900 14,567
Alternative minimum tax credits.................................................... 7,000 9,523
Other liabilities and reserves..................................................... 130,056 133,586
Valuation allowance................................................................ (296,624) (248,224)
------------ ------------
Total deferred tax asset...................................................... 73,603 70,094
------------ ------------
Deferred tax liabilities:
Property, plant and equipment...................................................... 51,258 50,213
Unamortized debt discount.......................................................... 22,985 24,704
------------ ------------
Total deferred tax liability.................................................. 74,243 74,917
------------ ------------
Net deferred tax liability........................................................... $ 640 $ 4,823
------------ ------------
------------ ------------
</TABLE>
The valuation allowances of $296.6 million at January 29, 1994 and $248.2
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.
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............................................................. $ -- $ (6,677) $ 315
State and local..................................................... 6,462 4,896 5,470
Foreign............................................................. 7,697 5,739 2,193
------------ ------------ ------------
14,159 3,958 7,978
------------ ------------ ------------
Deferred
State and local..................................................... (16) (5,936) 3,339
Foreign............................................................. (2,866) (1,178) 637
------------ ------------ ------------
(2,882) (7,114) 3,976
------------ ------------ ------------
Income taxes (benefit)........................................... $ 11,277 $ (3,156) $ 11,954
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-21
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. INCOME TAXES:--(CONTINUED)
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.............................................................. $ (172,183) $ (60,966) $ (69,454)
Foreign............................................................... 10,135 12,469 8,072
------------ ------------ ------------
$ (162,048) $ (48,497) $ (61,382)
------------ ------------ ------------
------------ ------------ ------------
</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....................................... $ (56,717) $ (16,489) $ (20,870)
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................................. 46,421 1,258 1,368
Valuation allowance.................................................... 16,095 15,103 --
Net operating loss generated........................................... -- -- 26,146
Other.................................................................. (2,035) (456) (590)
------------ ------------ ------------
Income taxes (benefit)............................................... $ 11,277 $ (3,156) $ 11,954
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
In addition, the valuation allowance was increased by $38.4 million in
fiscal 1993 and $79.0 million in fiscal 1992 to offset deferred tax assets
arising from the losses of discontinued operations.
At January 29, 1994, the Company 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
Preacquisition, subject to limitations............................................. $ 134,000 1996-2003
Postacquisition, unrestricted...................................................... 300,000 2006-2008
------------
$ 434,000
------------
------------
Net operating losses--alternative minimum tax
Preacquisition, subject to limitations............................................. $ 118,000 1996-2002
Postacquisition, unrestricted...................................................... 236,000 2006-2008
------------
$ 354,000
------------
------------
Investment tax and other credits
Preacquisition, subject to limitations............................................. $ 11,900 1994-2003
------------
------------
Alternative minimum tax credits...................................................... $ 7,000 No limit
------------
------------
</TABLE>
F-22
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. INCOME TAXES:--(CONTINUED)
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 Group
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 $434.0 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 major portion 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 has entered into a tax sharing agreement with Group and its
subsidiaries. The tax sharing agreement provides for payments to (from) the
Company for utilization of the Company's tax losses by Group and its
subsidiaries. The agreement provides for tax sharing payments calculated in
accordance with Federal tax regulations. Tax sharing payments received from
Group during fiscal 1993, 1992 and 1991 were $0, $4.5 million and $7.2 million,
respectively. The Company's tax sharing payable to Group 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 payable to Group is currently expected
to be settled through offset against future years tax sharing receivable
amounts.
Income taxes paid, net of refunds, were $3.3 million, $16.8 million and
$19.0 million for fiscal 1993, 1992 and 1991, respectively.
F-23
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
17. 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 AND LONG-TERM INVESTMENTS--Fair value
approximates carrying value.
LONG-TERM DEBT--The fair value of Group's publicly-traded long-term debt is
based upon the quoted market price of the issues. The fair value of the
remaining long-term debt of the Company approximates the carrying value.
PREFERRED STOCK--The fair value of the Company's redeemable preferred stock
and the Series A Preferred Stock of Group is based upon the quoted market price.
The fair value of the redeemable preferred stock of Group 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 FAIR CARRYING ESTIMATED
AMOUNT VALUE AMOUNT FAIR VALUE
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
Receivable from sale of business........................ $ 70,000 $ 70,000 $ -- $ --
Long-term investments................................... 1,046 1,046 29,344 29,344
Long-term debt.......................................... 923,554 1,017,927 982,205 997,450
Preferred stock......................................... 122,681 161,200 98,948 75,650
</TABLE>
18. 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 floorcovering business was
part of the Specialty Textiles segment. Wallcovering 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.
F-24
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
18. INFORMATION ABOUT SEGMENTS OF THE COMPANY'S OPERATIONS:--(CONTINUED)
Information about the Company's segments for fiscal 1993, 1992 and 1991
follows (in thousands):
<TABLE><CAPTION>
OPERATING DEPRECIATION
FISCAL YEAR ENDED NET INCOME AND CAPITAL
JANUARY 29, 1994 SALES (LOSS)(B) AMORTIZATION(E) ASSETS(B) EXPENDITURES
- ------------------------------------- -------------- ----------- ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Automotive Products.................. $ 677,867 $ (2,261) $ 25,873 $ 379,637 $ 29,208
Interior Furnishings................. 407,201 12,175 12,521 226,417 11,768
Wallcoverings........................ 220,449 (17,856) 6,229 125,387 3,751
-------------- ----------- -------------- -------------- --------------
1,305,517 (7,942)(c) 44,623 731,441 44,727
Corporate items...................... -- (38,282)(d) 384 187,384 196
-------------- ----------- -------------- -------------- --------------
1,305,517 (46,224) 45,007 918,825 44,923
Discontinued operations.............. -- -- 16,340 -- 11,355
-------------- ----------- -------------- -------------- --------------
$ 1,305,517 $ (46,224) $ 61,347 $ 918,825 $ 56,278
-------------- ----------- -------------- -------------- --------------
-------------- ----------- -------------- -------------- --------------
OPERATING DEPRECIATION
FISCAL YEAR ENDED NET INCOME AND CAPITAL
JANUARY 30, 1993(A) SALES (LOSS)(B) AMORTIZATION(E) ASSETS(B) EXPENDITURES
- ------------------------------------- -------------- ----------- -------------- -------------- --------------
Automotive Products.................. $ 643,827 $ 52,684 $ 29,419 $ 403,148 $ 20,563
Interior Furnishings................. 391,778 37,520 13,003 240,292 14,295
Wallcoverings........................ 241,895 1,141 6,545 170,516 3,045
-------------- ----------- -------------- -------------- --------------
1,277,500 91,345(c) 48,967 813,956 37,903
Corporate items...................... -- (24,461)(d) 198 137,301 306
-------------- ----------- -------------- -------------- --------------
1,277,500 66,884 49,165 951,257 38,209
Discontinued operations.............. -- -- 22,541 190,177 15,972
-------------- ----------- -------------- -------------- --------------
$ 1,277,500 $ 66,884 $ 71,706 $ 1,141,434 $ 54,181
-------------- ----------- -------------- -------------- --------------
-------------- ----------- -------------- -------------- --------------
OPERATING DEPRECIATION
FISCAL YEAR ENDED NET INCOME AND CAPITAL
JANUARY 25, 1992 SALES (LOSS)(B) AMORTIZATION(E) ASSETS(B) EXPENDITURES
- ----------------------------------- -------------- ----------- -------------- -------------- --------------
Automotive Products................ $ 610,325 $ 55,598 $ 26,843 $ 421,958 $ 24,220
Interior Furnishings............... 336,773 28,278 13,915 241,980 9,519
Wallcoverings...................... 237,218 (6,088) 6,628 196,238 5,093
-------------- ----------- -------------- -------------- --------------
1,184,316 77,788 47,386 860,176 38,832
Corporate items.................... -- (26,681)(d) 215 131,467 96
-------------- ----------- -------------- -------------- --------------
1,184,316 51,107 47,601 991,643 38,928
Discontinued operations............ -- -- 22,915 308,661 22,971
-------------- ----------- -------------- -------------- --------------
$ 1,184,316 $ 51,107 $ 70,516 $ 1,300,304 $ 61,899
-------------- ----------- -------------- -------------- --------------
-------------- ----------- -------------- -------------- --------------
- ---------------
</TABLE>
<TABLE>
<S> <C>
(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-off and other costs, from revenues. Operating expenses do not include interest expense. Assets of the
business segments at January 30, 1993 and January 25, 1992 include goodwill. Operating income reflects
related amortization.
(Footnotes continued on following page)
</TABLE>
F-25
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
18. INFORMATION ABOUT SEGMENTS OF THE COMPANY'S OPERATIONS:--(CONTINUED)
(Footnotes continued from preceding page)
<TABLE>
<S> <C>
(c) The segment operating loss of $7.9 million in 1993 includes the write-off of goodwill of $129.9 million;
$68.4 million of which is included in the $2.3 million operating loss of the Automotive Products segment;
$31.6 million of which is included in the $12.2 million operating income of the Interior Furnishings segment,
and $29.9 million of which is included in the $17.9 million operating loss of the Wallcovering segment.
Segment operating income in 1992 includes restructuring costs of $10.0 million which relate to the
wallcoverings business.
(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 the Company
of $5.0 million.
(e) Depreciation and amortization excludes the amortization of deferred financing costs and debt discount which
do not impact operating income.
</TABLE>
19. 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 Group. Among other things, this
complaint asserts claims on behalf of certain of Group's former preferred
stockholders alleging a conspiracy to manipulate the price of stock in 1986 for
the purpose of triggering a redemption of certain outstanding preferred stock of
Group. In 1992, Advanced Development & 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 the Company's former Kayser-Roth 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. The Company 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. In estimating the total cost of investigation and remediation, the
Company has considered, among other things, the Company's prior experience in
remediating contaminated sites, remediation efforts by other parties, data
released by the
F-26
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
19. COMMITMENTS AND CONTINGENCIES:--(CONTINUED)
EPA, the professional judgment of the Company's environmental experts, outside
environmental specialists and other experts, and the likelihood that other
parties which have been named as PRPs will have the financial resources to
fulfill their obligations at sites where they and the Company may be jointly and
severally liable. Under the scheme of joint and several liability, the Company
could be liable for the full costs of investigation and remediation even if
additional parties are found to be responsible under the applicable laws. 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. Where it is probable that an environmental
liability has been incurred and the amount of loss can be reasonably estimated
within a range, the Company selects as the best estimate of the liability an
estimate at the high end of the range based upon all information available to
the Company, including the professional judgment of the Company's environmental
experts, outside environmental specialists and other experts. Excluding sites at
which the Company's participation is anticipated to be de minimis or otherwise
insignificant or where the Company is being indemnified by a third party for the
liability, there are 15 sites where the Company is participating in the
investigation or remediation of the site either directly or through financial
contribution, and nine additional sites where the Company is alleged to be
responsible for costs of investigation or remediation. The Company's current
estimate of its liability for these 24 sites is $29.5 million. 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.
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.
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 such 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.
F-27
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
20. QUARTERLY FINANCIAL DATA (UNAUDITED):
Summarized quarterly financial data for fiscal 1994, 1993 and 1992 follows
(in thousands):
<TABLE><CAPTION>
INCOME FROM
CONTINUING OPERATIONS
--------------------------
BEFORE AFTER INCOME
FISCAL YEAR ENDING JANUARY 28, 1995 NET SALES GROSS PROFIT INCOME TAXES TAXES NET INCOME
- --------------------------------------- -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
First Quarter.......................... $ 390,446 $ 100,954 $ 15,372 $ 12,754 $ 12,754
-------------- ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------
LOSS FROM
CONTINUING OPERATIONS
--------------------------
BEFORE AFTER INCOME NET INCOME
FISCAL YEAR ENDED JANUARY 29, 1994 NET SALES GROSS PROFIT INCOME TAXES TAXES (LOSS)
- --------------------------------------- -------------- ------------ ------------ ------------ ------------
First Quarter.......................... $ 339,043 $ 78,948 $ (2,202) $ (5,473) $ (9,069)
Second Quarter......................... 289,694 61,230 (18,343) (20,628) (149,430)
Third Quarter.......................... 334,629 84,445 (125,725) (129,821) (129,871)
Fourth Quarter......................... 342,151 85,104 (15,778) (17,403) 10,706
-------------- ------------ ------------ ------------ ------------
$ 1,305,517 $ 309,727 $ (162,048) $ (173,325) $ (277,664)
-------------- ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------
LOSS FROM
CONTINUING OPERATIONS
--------------------------
BEFORE AFTER INCOME
FISCAL YEAR ENDED JANUARY 30, 1993 NET SALES GROSS PROFIT INCOME TAXES TAXES NET LOSS
- --------------------------------------- -------------- ------------ ------------ ------------ ------------
First Quarter.......................... $ 319,488 $ 72,564 $ (8,507) $ (11,385) $ (17,655)
Second Quarter......................... 319,713 74,081 (9,846) (12,524) (17,059)
Third Quarter.......................... 314,873 70,819 (9,380) (7,452) (16,723)
Fourth Quarter (a)..................... 323,426 81,563 (20,764) (13,980) (212,221)
-------------- ------------ ------------ ------------ ------------
$ 1,277,500 $ 299,027 $ (48,497) $ (45,341) $ (263,658)
-------------- ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------
</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.
The third quarter of 1993 has been restated to exclude a restructuring
charge of $24.0 million that was previously recorded in error and the fourth
quarter of 1993 has been restated to exclude the previously reported reversal
of this charge. The Company previously reported income (loss) from continuing
operations before income taxes, income (loss) from continuing operations after
income taxes and net income (loss) for the thirteen weeks ended October 30, 1993
of ($149.7) million, ($153.8) million and ($153.9) million, respectively, and
$8.2 million, $6.6 million and $34.7 million for the thirteen weeks ended
January 29, 1994, respectively.
Loss from continuing operations before income taxes in the third quarter of
fiscal 1993 includes the write-off of goodwill of $129.9 million. The fourth
quarter of fiscal 1993 includes management equity plan expense of $26.7 million.
Net loss in fiscal 1993 includes provisions for loss (gain) on disposal of
discontinued operations of $2.2 million, $125.4 million and ($28.1) million in
the first, second and fourth 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 $168.0 million in the fourth
quarter.
The Company's operations are not subject to significant seasonal
influences.
F-28
<PAGE>
[INSIDE BACK COVER]
[PHOTO]
Interior Furnishings
Decorative Fabrics: Collins & Aikman manufactures a broad collection of
upholstery for the furniture industry, offering the largest selection of
styles and constructions. The Mastercraft Division is the number one
supplier of flat-woven upholstery fabrics and is also the industry leader in
the fast-growing Jacquard segment of the market. [PHOTO]
Floorcoverings: The Company's
patented Powerbound RS(REGISTERED SYMBOL) carpet
products feature an
exclusive peel and stick
adhesive system. These products
are designed for heavy traffic
applications such as schools,
hospitals, airline terminals
and public buildings.
Wallcoverings [PHOTO]
Built on the Imperial name,
Collins & Aikman is the largest
residential wallcovering
manufacturer in the U.S.,
with a wide selection of designs
and constructions. Collections
feature the efforts of
imperial's in-house studio
and those of well-known
designers.
<PAGE>
================================================================================
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE><CAPTION>
PAGE
-----------
<S> <C>
Available Information.............................. 3
Incorporation of Certain Documents
by Reference..................................... 3
Prospectus Summary................................. 4
Risk Factors....................................... 11
Dividends.......................................... 15
Dilution........................................... 15
Use of Proceeds and Consolidation.................. 16
Capitalization..................................... 17
Selected Financial Data............................ 18
Unaudited Pro Forma Consolidated Financial Data.... 19
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........................ 25
Business........................................... 37
Management......................................... 54
Principal Stockholders and Certain Relationships... 62
Sale of Common Stock to the Purchasing Partners.... 64
New Credit Facilities.............................. 64
Description of the Capital Stock................... 69
Underwriting....................................... 73
Legal Opinions..................................... 76
Experts............................................ 76
Index to Financial Statements...................... F-1
</TABLE>
------------------------
UNTIL , 1994 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
<PAGE>
15,000,000 SHARES
COLLINS & AIKMAN
CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
[LOGO]
------------------------
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
WASSERSTEIN PERELLA
SECURITIES, INC.
THE NIKKO SECURITIES CO.
INTERNATIONAL, INC.
REPRESENTATIVES OF THE UNDERWRITERS
================================================================================
- --------------------------------------------------------------------------------
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION, DATED JULY 6, 1994
[LOGO] 15,000,000 SHARES
COLLINS & AIKMAN CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
---------------------
Of the 15,000,000 shares of Common Stock offered, 3,000,000 shares are
being offered hereby in an international offering outside the United States and
12,000,000 shares are being offered in a concurrent United States offering. The
initial public offering price and the aggregate underwriting discount per share
will be identical for both Offerings. See "Underwriting". All shares of Common
Stock offered hereby are being issued and sold by the Company.
As a condition to the closing of the Offerings, affiliates of Blackstone
Capital Partners L.P. and Wasserstein Perella Partners, L.P. will purchase from
the Company 6,560,000 shares of Common Stock at $ (equal to the initial
public offering price less the underwriting discount). See "Sale of Common Stock
to the Purchasing Partners".
Prior to the Offerings, there has been no public market for the Common
Stock of the Company. For factors considered in determining the initial public
offering price, as well as a discussion of the requirement that the initial
public offering price be recommended by a qualified independent underwriter, see
"Underwriting".
SEE "RISK FACTORS" FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN
THE COMMON STOCK.
The Common Stock will be listed on the New York Stock Exchange under the
symbol "CKC".
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
<TABLE><CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY(2)
-------------- ------------ --------------
<S> <C> <C> <C>
Per Share.............................................. $ $ $
Total(3)............................................... $ $ $
</TABLE>
- ---------------
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933. See
"Underwriting".
(2) Before deducting estimated expenses of $1,393,000 payable by the Company.
(3) The Company has granted the International Underwriters an option for 30 days
to purchase up to an additional 450,000 shares at the initial public
offering price per share, less the underwriting discount, solely to cover
over-allotments. Additionally, the Company has granted the U.S. Underwriters
an option for 30 days to purchase up to an additional 1,800,000 shares at
the initial public offering price per share, less the underwriting discount,
solely to cover over-allotments. If such options are exercised in full, the
total initial public offering price, underwriting discount and proceeds to
the Company will be $ , $ and $ , respectively.
See "Underwriting".
Affiliates of Blackstone Capital Partners L.P. and Wasserstein Perella
Partners, L.P. have agreed to purchase from the Company up to an aggregate
of 2,250,000 shares of Common Stock at the initial public offering price
less the underwriting discount to the extent the Underwriters'
over-allotment options are not exercised. As a result, the Company will
receive the same net proceeds that it would have received had the
Underwriters' over-allotment options been exercised for 2,250,000 shares of
Common Stock. See "Sale of Common Stock to the Purchasing Partners".
---------------------
The shares offered hereby are offered severally by the International
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that certificates for the shares will be ready for delivery in New York, New
York, on or about , 1994.
GOLDMAN SACHS INTERNATIONAL
MERRILL LYNCH INTERNATIONAL LIMITED
WASSERSTEIN PERELLA SECURITIES, INC.
NIKKO EUROPE PLC
---------------------
The date of this Prospectus is , 1994.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
This is a general discussion of certain U.S. Federal income and estate tax
consequences of the ownership and disposition of Common Stock by a non-U.S.
holder. A "non-U.S. holder" is a person or entity that, for U.S. Federal income
tax purposes, is a non-resident alien individual or a foreign corporation
partnership, estate or trust. An individual may be deemed to be a resident of
the United States in several circumstances, including being present in the
United States on at least 31 days in the calendar year and for an aggregate of
183 days taken into account during the three-year period ending with the current
calendar year. For purposes of this determination, all of the days present in
the United States during the current year, one-third of the days present during
the immediately preceding year, and one-sixth of the days present during the
second preceding year are taken into account. Resident aliens are subject to
U.S. Federal tax as if they were U.S. citizens and residents.
This discussion is based on the U.S. Internal Revenue Code of 1986 and
administrative and judicial interpretations as of the date hereof, all of which
may be changed. This discussion does not address all the aspects of U.S. Federal
income and estate taxation that may be relevant to non-U.S. holders in light of
their particular circumstances. Nor does it address tax consequences under the
laws of any U.S. state, municipality or other taxing jurisdiction or under the
laws of any country other than the United States.
Prospective holders should consult their own tax advisors about the
particular tax consequences to them of holding and disposing of Common Stock.
DIVIDENDS
Generally, dividends paid to a non-U.S. holder of Common Stock that are not
effectively connected with the holder's conduct of a trade or business within
the United States (or attributable to a U.S. permanent establishment of the
holder, if an income tax treaty applies) will be subject to Federal withholding
tax at a 30% rate or such lower rate as may be specified by an applicable income
tax treaty. Under current U.S. Treasury regulations, such dividends paid to an
address outside the United States in a foreign country may be presumed to be
paid to a resident of such country for purposes of the withholding tax. Under
current interpretation of U.S. Treasury regulations, unless the payor has
knowledge to the contrary the same presumption applies to determine the
applicability of a reduced rate of withholding under a U.S. tax treaty. Thus,
non-U.S. holders receiving dividends at addresses outside the United States are
not currently required to file forms with the United States Internal Revenue
Service (the "IRS") in order to obtain the benefit of an applicable treaty rate.
If there is excess withholding on a person eligible for a treaty benefit, the
person can file for a refund with the IRS.
Under U.S. Treasury regulations which were proposed in 1984 but are not
currently in effect, to claim the benefits of a tax treaty a non-U.S. holder of
Common Stock would have to file certain forms accompanied by statements from a
competent authority of the country of his residence attesting to the holder's
eligibility to claim treaty benefits.
Generally, upon the filing of a Form 4224 by a non-U.S. holder with the
Company, no withholding is required on dividends that are effectively connected
with the non-U.S. holders's conduct of a trade or business within the United
States. Instead, the effectively connected dividends are subject to tax at rates
applicable to U.S. citizens and U.S. corporations. Effectively connected
dividends received by a non-U.S. corporation may be subject to an additional
"branch profits tax" at a 30% rate (or a lower rate under an applicable income
tax treaty) when such dividends are deemed repatriated from the United States.
73
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
GAIN ON DISPOSITION OF COMMON STOCK
Generally, a non-U.S. holder will not be subject to U.S. Federal income tax
on gain realized from a sale or other disposition of Common Stock unless (i) the
gain is effectively connected with the holder's conduct of a U.S. trade or
business and is attributable to such holder's office or other fixed place of
business within the United States, (ii) the Company is (or has been within the
preceding five years) a "U.S. real property holding corporation," or (iii) in
the case of a non-U.S. holder who is a non-resident alien individual and holds
Common Stock as a capital asset, such holder is present in the United States for
183 or more days during the taxable year of sale and either (a) such holder's
"tax home" for U.S. federal income tax purposes is within the United States or
(b) the gain is attributable to such holder's office or other fixed place of
business within the United States and no treaty exemption applies. The Company
is not, has at no time been, and does not anticipate becoming, a "U.S. real
property holding corporation." Any gain subject to U.S. Federal income tax will
be taxed under the regime applicable to U.S. citizens and U.S. corporations.
Non-U.S. corporations might be subject to the "branch profits tax" regime as
well.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
Generally, the Company must report to the IRS the amount of dividends paid,
the name and address of the recipient and the amount, if any, of tax withheld. A
similar report is sent to the holder. Pursuant to tax treaties or other
agreements, the IRS may make such reports available to tax authorities in the
recipient's country of residence. No further information reporting and no backup
withholding is required with respect to dividends paid on Common Stock to a
non-U.S. holder at an address outside the United States.
If the proceeds of a disposition of Common Stock are paid over by or
through a U.S. office of a broker, the payment is subject to information
reporting and possible backup withholding at a flat 31% rate unless the
disposing holder certifies as to his name, address and non-U.S. status or
otherwise establishes an exemption. Generally, United States information
reporting and backup withholding will not apply to a payment of disposition
proceeds if the payment is made outside the United States through a non-U.S.
office of a non-U.S. broker. However, U.S. information reporting requirements
(but not backup withholding) will apply to a payment of disposition proceeds
outside the United States if (A) the payment is made through an office outside
the United States of a broker that either (i) is a U.S. person, (ii) derives 50%
or more of its gross income for certain periods from the conduct of a trade or
business in the United States or (iii) is a "controlled foreign corporation" for
United States Federal income tax purposes, (B) the broker fails to maintain
documentary evidence that the holder is a non-U.S. holder and that certain
conditions are met, and (C) the holder fails to establish that it otherwise is
entitled to an exemption.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained.
FEDERAL ESTATE TAXES
Common Stock held at death by an individual who is neither a citizen nor a
resident of the United States for U.S. Federal estate tax purposes will be
subject to U.S. Federal estate tax, unless an applicable estate tax treaty
provides otherwise. Estates of nonresident aliens are generally allowed a
statutory credit which is the equivalent of an exclusion of $60,000 of assets
from the U.S. estate tax. Tax treaties may permit a larger credit.
74
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the International Underwriters named
below, and each of such International Underwriters, for whom Goldman Sachs
International, Merrill Lynch International Limited, Wasserstein Perella
Securities, Inc. and The Nikko Europe, Co. Plc are acting as representatives,
has severally agreed to purchase from the Company, the respective number of
shares of Common Stock set forth opposite its name below:
<TABLE><CAPTION>
NUMBER OF
SHARES OF
COMMON
UNDERWRITER STOCK
- ------------------------------------------------------------------------------- ------------
<S> <C>
Goldman Sachs International....................................................
Merrill Lynch International Limited............................................
Wasserstein Perella Securities, Inc............................................
Nikko Europe Plc...............................................................
------------
Total........................................................... 3,000,000
------------
------------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
International Underwriters are committed to take and pay for all of the shares
offered hereby, if any are taken.
The International Underwriters propose to offer the shares of Common Stock
in part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus, and in part to certain securities dealers at
such price less a concession of $ per share. The International
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to certain brokers and dealers. After the shares of
Common Stock are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the representatives.
The Company has entered into an underwriting agreement (the "U.S.
Underwriting Agreement") with the underwriters of the U.S. offering (the "U.S.
Underwriters") providing for the concurrent offer and sale of 12,000,000 shares
of Common Stock in a U.S. offering in the United States. The initial public
offering price and aggregate underwriting discounts and commissions per share
for the two offerings are identical. The closing of the International Offering
made hereby is a condition to the closing of the U.S. Offering, and vice versa.
The representatives of the U.S. Underwriters are Goldman, Sachs & Co., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Wasserstein Perella Securities, Inc.
and The Nikko Securities Co. International, Inc.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
International Underwriters has agreed that, as a part of the distribution of the
shares offered hereby and subject to certain exceptions, it will (i) not,
directly or indirectly, offer, sell or deliver shares of Common Stock (a) in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") or to any U.S. persons or (b) to any person who it
believes intends to reoffer, resell or deliver the shares in the United States
or to any U.S. persons, and (ii) cause any dealer to whom it may sell such
shares at any concession to agree to observe a similar restriction. The term
U.S. person shall mean, for purposes of this paragraph: (a) any individual who
is a resident of the United States or (b) any corporation, partnership or other
entity organized in or under the laws of the United States or any political
subdivision thereof and whose office most directly involved with the purchase is
located in the United States. Each of the U.S. Underwriters named herein has
agreed pursuant to the Agreement Between that, as a part of the distribution of
the shares offered as a part of the U.S. Offering, and
75
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
subject to certain exceptions, it will only offer, sell or deliver shares of
Common Stock, directly or indirectly, in the United States and to U.S. persons.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
The Company has granted the International Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of 450,000 additional shares of Common Stock solely to cover
over-allotments, if any. If the International Underwriters exercise their
over-allotment option, the International Underwriters have severally agreed,
subject to certain conditions, to purchase approximately the same percentage
thereof that the number of shares to be purchased by each of them, as shown in
the foregoing table, bears to the 3,000,000 shares of Common Stock offered. The
Company has granted the U.S. Underwriters a similar option to purchase up to an
aggregate of 1,800,000 additional shares of Common Stock.
The Company and the Partners have agreed, during the period beginning from
the date of this Prospectus and continuing to and including the date 180
calendar days after the date of the Prospectus, not to offer, sell, contract to
sell or otherwise dispose of any securities of the Company (other than pursuant
to employee stock option plans existing, or on the conversion or exchange of
convertible or exchangeable securities outstanding, on the date of this
Prospectus) which are substantially similar to the shares of Common Stock or
which are convertible or exchangeable into securities which are substantially
similar to the shares of the Common Stock without the prior written consent of
the representatives, except for the shares of Common Stock offered in connection
with the concurrent U.S. and International Offerings. The Company has informed
the representatives of the Underwriters that, if such consent is given, the
Company will make a public announcement thereof.
Each International Underwriter has also agreed that (a) it has not offered
or sold, and will not offer or sell, in the United Kingdom, by means of any
document, any shares of Common Stock other than to persons whose ordinary
business it is to buy or sell shares or debentures, whether as principal or
agent, or in circumstances which do not constitute an offer to the public within
the meaning of the Companies Act 1985 of Great Britain, (b) it has complied, and
will comply with, all applicable provisions of the Financial Services Act of
1986 of Great Britain with respect to anything done by it in relation to the
shares of Common Stock in, from or otherwise involving the United Kingdom, and
(c) it has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issuance of the
shares of Common Stock to a person who is of a kind described in Article 9(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1988 (as amended) of Great Britain or is a person to whom the document may
otherwise lawfully be issued or passed on.
Buyers of shares of Common Stock offered hereby may be required to pay
stamp taxes and other charges in accordance with the laws and practice of the
country of purchase in addition to the initial public offering price.
At the Company's request, the Underwriters have reserved up to 210,000
shares of Common Stock for sale at the initial public offering price to
officers, directors, employees and certain other persons associated with the
Company. The number of shares of Common Stock available for sale to the general
public will be reduced to the extent that these persons purchase such reserved
shares. Any reserved shares not purchased will be offered by the Underwriters to
the general public on the same basis as the other shares offered hereby.
The provisions of Schedule E to the By-Laws of the National Association of
Securities Dealers, Inc. apply to the offering because Wasserstein Perella
Securities, Inc. may be deemed to be an affiliate of the Company for purposes of
Schedule E. In addition, Nikko Europe Plc ("Nikko") could be deemed to be an
affiliate of the Company for purposes of Schedule E because affiliates of Nikko
76
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
have limited partnership interests in an affiliate of Blackstone Partners,
which, prior to the Offerings, owns or has the power to vote 50.0% of the
outstanding voting Common Stock. See "Principal Stockholders and Certain
Relationships". Accordingly, the initial public offering price can be no higher
than that recommended by a "qualified independent underwriter" meeting certain
standards. In accordance with this requirement, Goldman, Sachs & Co. has served
in such role and has recommended a price in compliance with the requirements of
Schedule E. Goldman, Sachs & Co. in its role as qualified independent
underwriter has performed due diligence investigations and reviewed and
participated in the preparation of this Prospectus and the Registration
Statement of which this Prospectus forms a part. The representatives of the U.S.
Underwriters have informed the Company that the U.S. Underwriters do not intend
to confirm sales to any account over which they exercise discretionary
authority, except in accordance with the provisions of Schedule E.
Prior to the Offerings, there has been no public market for the Common
Stock. The initial public offering price was negotiated among the Company and
the representatives of the U.S. Underwriters and the International Underwriters.
Among the factors considered in determining the initial public offering price of
the Common Stock, in addition to prevailing market conditions, was the Company's
historical performance, estimates of the business potential and earnings
prospects of the Company, an assessment of the Company's management and the
consideration of the above factors in relation to market valuation of companies
in related businesses.
Application has been made to list the Common Stock on the New York Stock
Exchange. In order to meet one of the requirements for listing the Common Stock
on the New York Stock Exchange, the U.S. Underwriters have undertaken to sell
lots of 100 or more shares to a minimum of 2,000 beneficial holders.
The Company has agreed to indemnify the several Underwriters against
certain liabilities, including liabilities under the Securities Act.
Affiliates of Wasserstein Perella Securities, Inc. will serve on the Board
of Directors and on the Nominating Committee, which is empowered to nominate
persons for election to the Board of Directors and exclusively empowered to fill
any newly created directorships or any other vacancies on the Board of
Directors. See "Principal Stockholders and Certain Relationships". Messrs.
Wasserstein, Weisenburger and Ziebold are currently serving as directors of the
Company. See "Management".
From time to time, Goldman, Sachs & Co. has provided financial advisory
services to Blackstone Partners with respect to matters unrelated to the
Company, for which Goldman, Sachs & Co. has received customary fees in the
ordinary course of business. From time to time, each of Merrill Lynch & Co. and
Wasserstein Perella Securities, Inc. has provided financial advisory services to
certain affiliates of the Partners, with respect to matters unrelated to the
Company, for which each has received customary fees in the ordinary course of
business.
In addition, in 1992 Merrill Lynch & Co. and WP & Co. each provided
financial advisory services relating to the solicitation by Group of consents
from the holders of Group's 11 7/8% Senior Subordinated Debentures due 2001, for
which each received fees of $300,000. In 1991, Wasserstein Perella Securities,
Inc. received fees of approximately $400,000 in connection with repurchases by
the Company on the open market of certain securities of the Company. For further
information with respect to financial advisory and other services provided and
the fees received by and the ownership interests of certain affiliates of
Wasserstein Perella Securities, Inc., see "Principal Stockholders and Certain
Relationships".
77
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
LEGAL OPINIONS
The validity of the Common Stock will be passed upon for the Company by
Cravath, Swaine & Moore, New York, New York, and for the Underwriters by Jones,
Day, Reavis & Pogue, New York, New York. From time to time, Jones, Day, Reavis &
Pogue provides legal services to the Company and other entities in which the
Partners have an interest.
EXPERTS
The consolidated financial statements included in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen &
Co., independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the reports of said firm and
upon the authority of said firm as experts in accounting and auditing.
78
<PAGE>
[ALTERNATIVE WRAP FOR INTERNATIONAL PROSPECTUS]
================================================================================
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
PAGE
-----------
Available Information.............................. 3
Incorporation of Certain Documents
by Reference..................................... 3
Prospectus Summary................................. 4
Risk Factors....................................... 11
Dividends.......................................... 15
Dilution........................................... 15
Use of Proceeds and Consolidation.................. 16
Capitalization..................................... 17
Selected Financial Data............................ 18
Unaudited Pro Forma Consolidated Financial Data.... 19
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........................ 25
Business........................................... 37
Management......................................... 54
Principal Stockholders and Certain Relationships... 62
Sale of Common Stock to the Purchasing Partners.... 64
New Credit Facilities.............................. 64
Description of the Capital Stock................... 69
Certain United States Tax Consequences to
Non-United States Holders.......................... 73
Underwriting....................................... 75
Legal Opinions..................................... 77
Experts............................................ 78
Index to Financial Statements...................... F-1
</TABLE>
------------------------
UNTIL , 1994 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS),
ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
<PAGE>
15,000,000 SHARES
COLLINS & AIKMAN
CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
[LOGO]
------------------------
GOLDMAN SACHS INTERNATIONAL
MERRILL LYNCH INTERNATIONAL LIMITED
WASSERSTEIN PERELLA SECURITIES, INC.
NIKKO EUROPE PLC
REPRESENTATIVES OF THE UNDERWRITERS
================================================================================
- --------------------------------------------------------------------------------
<PAGE>
[ALTERNATE COVER FOR PARTNER PROSPECTUS]
SUBJECT TO COMPLETION, DATED JULY 6, 1994
[LOGO]
COLLINS & AIKMAN CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
---------------------
This Prospectus covers the sale by the Company to affiliates of Blackstone
Capital Partners L.P. and Wasserstein Perella Partners, L.P. (the "Purchasing
Partners") of (i) 6,560,000 shares of Common Stock as a condition to the
closing of the concurrent United States and International Offerings of an
aggregate of 15,000,000 shares of Common Stock to the public and (ii) up to
2,250,000 shares of Common Stock to the Purchasing Partners in connection with
the Offerings. The exact number of shares to be sold to the Purchasing Partners
will equal 6,560,000 plus 2,250,000 minus the number of shares as to which the
over-allotment option is exercised by the Underwriters in the Offerings (see
"Underwriting"). The purchase price to be paid by each Purchasing Partner
for all shares so purchased will be $ per share (equal to the initial
public offering price of $10.50) less the underwriting discount.
Prior to the Offerings, there has been no public market for the Common
Stock of the Company. For factors considered in determining the initial public
offering price, as well as a discussion of the requirement that the initial
public offering price be recommended by a qualified independent underwriter, see
"Underwriting".
SEE "RISK FACTORS" FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN
THE COMMON STOCK.
The Common Stock will be listed on the New York Stock Exchange under the
symbol "CKC".
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------------
The date of this Prospectus is , 1994.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY STATE.
<PAGE>
[Alternate wrap for Partner Prospectus]
================================================================================
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION COLLINS & AIKMAN THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE CORPORATION COMPANY SINCE THE
DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
PAGE
-----------
Available Information.............................. 3
Incorporation of Certain Documents
by Reference..................................... 3
Prospectus Summary................................. 4
Risk Factors....................................... 11
Dividends.......................................... 15
Dilution........................................... 15
Use of Proceeds and Consolidation.................. 16
Capitalization..................................... 17
Selected Financial Data............................ 18
Unaudited Pro Forma Consolidated Financial Data.... 19
Management's Discussion and
Analysis of Financial Condition
and Results of Operations........................ 25
Business........................................... 37
Management......................................... 54
Principal Stockholders and Certain Relationships... 62
Sale of Common Stock to the Purchasing Partners....
Sale of Common Stock to the Purchasing Partners.... 64
New Credit Facilities.............................. 64
Description of the Capital Stock................... 69
Underwriting....................................... 73
Legal Opinions..................................... 76
Experts............................................ 76
Index to Financial Statements...................... F-1
------------------------
<PAGE>
COLLINS & AIKMAN
CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
------------------------
[LOGO]
------------------------
================================================================================
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses of the Company in
connection with the issuance and distribution of the securities being
registered, other than underwriting compensation and subject to further
contingencies:
<TABLE>
<S> <C>
SEC Registration Fee...................................................... $ 176,466.75
NASD Filing Fee........................................................... 30,500.00
NYSE Listing Fee.......................................................... 319,100.00
Legal Fees and Expenses................................................... 350,000.00
Transfer Agent and Registrar Fee.......................................... 2,000.00
Blue Sky Fees and Expenses................................................ 10,000.00
Accounting Fees and Expenses.............................................. 250,000.00
Printing and Engraving Expenses........................................... 250,000.00
Miscellaneous............................................................. 5,000.00
-----------------
Total................................................................... $ 1,393,066.75
-----------------
-----------------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware (the "DGCL")
authorizes the Company to indemnify each director and officer of the Company
against expenses (including attorney's fees, judgments, fines and amounts paid
in settlement) actually and reasonably incurred in connection with the defense
or settlement of any threatened, pending or completed legal proceedings in which
he is involved by reason of the fact that he is or was a director or officer of
the Company or is or was serving as a director, officer, employee or agent of
another corporation or organization at the request of the Company, provided that
he acted in good faith and in a manner that he reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, provided he had no reasonable cause to believed
that his conduct was unlawful. The determination whether a director or officer
has met the applicable standard of conduct may be made by (1) the Board of
Directors by vote of a quorum consisting of directors who were not parties to
such action, suit or proceedings, or (2) if such a quorum is not obtainable, or
even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel, in a written opinion, or (3) by the stockholders.
Indemnification is mandatory in any instance in which the director or officer is
successful on the merits or otherwise in the defense of any proceeding or any
claim, issue or matter thereof. If the legal proceeding, however, is by or in
the right of the Company, Section 145 provides that the director or officer may
not be indemnified in respect to any claim, issue or matter as to which he shall
have been adjudged to be liable to the Company unless a court determines
otherwise. Section 145 also authorizes the payment of expenses incurred in
defense of any proceeding in advance of its final disposition upon the receipt
by the Company of an undertaking of the director or officer to repay the amounts
so advanced if it is ultimately determined that he is not entitled to indemnity.
It further provides that the power to indemnify includes the power to indemnify
persons who served as directors and officers of Holdings II prior to its merger
into the Company, as well as persons who cease to be directors or officers of
the Company.
Article Eighth of the Restated Certificate, provides that, to the fullest
extent permitted by the DGCL, as now or hereafter in effect, no director of the
Company shall be personally liable to the Company or its stockholders for
monetary damages for any breach of his fiduciary duty as a director. However,
under Section 102(b)(7) of the DGCL, a director cannot be absolved from
liability (1) for any breach of his duty of loyalty to the Company or its
stockholders, (2) for acts or omissions that are not in good faith or involve
intentional misconduct or a knowing violation of the
II-1
<PAGE>
law, (3) under Section 174 of the DGCL, or (4) for any transaction from which
the director derived an improper personal benefit.
Article VIII of the Company's By-Laws, a copy of which is filed as Exhibit
4.2, provides that any person made a party to, threatened to be made a party to,
or otherwise involved in, any action, suit or proceeding by reason of the fact
that he is or was a director or officer of the Company or is or was a director,
officer, employee or agent of any corporation for which he served as such at the
request of the Company (including service with respect to employee benefit
plans), shall be indemnified by the Company to the fullest extent authorized by
the DGCL against all expenses, including attorneys' fees, reasonably incurred by
him in connection therewith except for expenses incurred in connection with
certain proceedings (or parts thereof) initiated by the indemnitee. Such right
of indemnification includes the right to be paid, in advance, all expenses
incurred in connection with the defense of a proceeding (upon receipt of any
required undertaking) and grants to an indemnitee the right to bring suit to
enforce the rights to indemnification and to the advancement of expenses
provided in Article VIII. The rights to indemnification and to the advancement
of expenses provided therein shall not be deemed exclusive of any other rights
to which such director or officer may be entitled apart from the indemnification
provisions of said Article VIII of the Company's By-Laws. Additionally, the
Company intends to maintain directors and officers liability insurance that
insures the directors and officers of the Company against any expense, liability
or loss to the extent such insurance is available at prices the Company
determines are reasonable.
ITEM 16. EXHIBITS.
(a) Exhibits. See Exhibit Index on page E-1.
(b) Financial Statement Schedules. See Index to Financial Statement
Schedules on page S-1.
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of Prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in The City of New York, State of New York, on the 6th day of
July 1994.
COLLINS & AIKMAN
HOLDINGS CORPORATION
By: /s/ DAVID A.
STOCKMAN
..................................
David A. Stockman
Co-Chairman of the
Board of Directors
By: /s/ BRUCE
WASSERSTEIN
..................................
Bruce Wasserstein
Co-Chairman of the Board
of Directors
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE><CAPTION>
NAME TITLE DATE
------ ----- ----
<S> <C> <C>
* Co-Chairman of the Board of Directors July 6, 1994
..............................................
David A. Stockman
* Co-Chairman of the Board of Directors July 6, 1994
..............................................
Bruce Wasserstein
* President and Director July 6, 1994
.............................................. (Principal Executive Officer)
Stephen A. Schwarzman
* Principal Financial and Accounting Officer July 6, 1994
..............................................
David J. McKittrick
/s/ RANDALL J. WEISENBURGER Vice Chairman and Director July 6, 1994
..............................................
Randall J. Weisenburger
* Director July 6, 1994
..............................................
James R. Birle
* Director July 6, 1994
..............................................
W. Townsend Ziebold, Jr.
*By: /s/ RANDALL J. WEISENBURGER
..............................................
Randall J. Weisenburger
Attorney-in-Fact
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
Please note that in the following description of exhibits, the title of any
document entered into, or filing made, prior to 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 July 15, 1992.
<TABLE><CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION NUMBER
- --------- ----------- ---------------
<S> <C> <C>
+1.1 Form of Underwriting Agreement (U.S. Version).
+1.2 Form of Underwriting Agreement (International Version).
+1.3 Form of Purchase Agreement between the Company, Blackstone Group Holdings L.P. and
Wasserstein Perella Partners, L.P.
4.1 Certificate of Incorporation of the Company, as amended, is hereby incorporated by
reference to Exhibit 4.1 to the Company's Registration Statement on Form S-8
(Registration No. 33-53321) filed April 28, 1994.
4.2 By-laws of the Company is hereby incorporated by reference to Exhibit 3.1 to the Company's
Report on Form 10-Q for the fiscal quarter ended April 30, 1994.
4.3 Specimen Stock Certificate for the Common Stock.
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 Form of New Credit Agreement to be entered into by Collins & Aikman Products Co. (formerly
Collins & Aikman Corporation) and a syndicate of banks and other financial institutions
for whom Chemical Bank will act as agent.
4.6 Form of Restated Certificate of Incorporation of the Company
4.7 Form of Restated By-laws of the Company
4.8 Form of Stockholders Agreement among the Company, Collins & Aikman Group, Inc., Blackstone
Capital Partners L.P. and Wasserstein Perella Partners, L.P.
5. Opinion of Cravath, Swaine & Moore as to the legality of the shares being issued.
10.1 Employment Agreements dated as of June 16, 1989 between Wickes Companies, Inc. and certain
executive officers are hereby incorporated by reference to Exhibit 10.1 of Wickes
Companies, Inc. Form 10-K for the fiscal year ended January 27, 1990.
10.2 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 Form 10-K for the fiscal year ended January 27,
1990.
10.3 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. Form 10-K for the fiscal year ended January 26, 1991.
10.4 Agreement dated as of March 23, 1992 between Collins & Aikman Group, Inc. and an executive
officer is hereby incorporated by reference to Exhibit 10.6 of Collins & Aikman Holdings
Corporation's Report on Form 10-K for the fiscal year ended January 30, 1993.
</TABLE>
E-1
<PAGE>
<TABLE><CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION NUMBER
- --------- ------------------------------------------------------------------------------------------ ---------------
<S> <C> <C>
10.5 First Amendment to Agreement, dated as of April 4, 1994 between Collins & Aikman Group,
Inc. and an executive officer is hereby incorporated by reference to Exhibit 10.14 of
Collins & Aikman Holdings Corporation's Report on Form 10-K for the fiscal year ended
January 29, 1994.
10.6 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 are hereby
incorporated by reference to Exhibit 10.7 of Collins & Aikman Holdings Corporation's
report on Form 10-K for the fiscal year ended January 30, 1993.
10.7 First Amendment to Employment Agreement dated as of February 24, 1994 between Collins &
Aikman Corporation and an executive officer.
10.8 Employment Agreement dated as of May 1, 1991 between Kayser-Roth Corporation and an
executive officer is hereby incorporated by reference to Exhibit 10.8 of Collins &
Aikman Holdings Corporation's Report on Form 10-K for the fiscal year ended January 30,
1993.
10.9 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 10.9
of Collins & Aikman Holdings Corporation's Quarterly Report on Form 10-Q for the quarter
ended July 31, 1993.
10.10 Letter Agreement dated as of August 12, 1992 between Collins & Aikman Group, Inc. and an
executive officer is hereby incorporated by reference to Exhibit 10.9 of Collins &
Aikman Holdings Corporation's Report on Form 10-K for the fiscal year ended January 30,
1993.
10.11 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 are hereby
incorporated by reference to Exhibit 10.10 of Collins & Aikman Holdings Corporation's
Report on Form 10-K for the fiscal year ended January 30, 1993.
10.12 1993 Employee Stock Option Plan.
10.13 1994 Employee Stock Option Plan.
10.14 Letter Agreements dated as of May 16, 1991 between Collins & Aikman Corporation and
certain executive officers.
10.15 Employment Agreement dated as of April 27, 1992 between Collins & Aikman Corporation and
an executive officer.
10.16 Employment Agreement dated as of March 1, 1993 between Imperial Wallcoverings, Inc. and an
executive officer.
10.17 Employment Agreement dated as of October 1, 1993 between Collins & Aikman Corporation and
an executive officer.
10.18 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 Report on Form 10-K for the fiscal year ended
January 29, 1994.
10.19 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 Holdings Corporation's Current Report on Form 8-K dated February 10, 1994.
10.20 Form of Receivables Sale Agreement among the Company, Collins & Aikman Products Co.
(formerly Collins & Aikman Corporation), WCA Canada, Inc., Imperial Wallcoverings
(Canada), Inc., Imperial Wallcoverings, Inc., The Akro Corporation, Dura Acquisition
Corp., each of the other subsidiaries of Collins & Aikman Products Co. from time to time
parties thereto and C&A Receivables Company.
</TABLE>
E-2
<PAGE>
<TABLE><CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION NUMBER
- --------- ------------------------------------------------------------------------------------------ ---------------
<S> <C> <C>
10.21 Form of Receivables Transfer and Servicing Agreement among C&A Receivables Company,
Collins & Aikman Products Co. (formerly Collins & Aikman Corporation), each of the
subsidiaries of Collins & Aikman Products Co. from time to time parties thereto, the
several financial institutions from time to time parties thereto and Chemical Bank.
10.22 Collins & Aikman Corporation 1994 Executive Incentive Compensation Plan
+10.23 Collins & Aikman Corporation Supplemental Retirement Income Plan.
+10.24 Lease, executed as of the 1st day of June 1987, between Dura Corporation and Dura
Acquisition Corp.
+11. Computation of Earnings Per Share.
21. Subsidiaries.
23.1 Consent of Cravath, Swaine & Moore is contained in Exhibit 5.
+23.2 Consent of Arthur Andersen & Co.
24. Power of attorney (contained in the signature section of this Registration Statement).
99. Voting Agreement between Blackstone Capital Partners L.P. and Wasserstein Perella
Partners, L.P.
</TABLE>
- ---------------
+ Filed herewith.
E-3
Collins & Aikman Corporation
Common Stock
(par value $0.01 per share)
___________
Underwriting Agreement
(U.S. Version)
July __, 1994
Goldman, Sachs & Co.,
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Wasserstein Perella Securities, Inc.
The Nikko Securities Co. International, Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004
Dear Sirs:
Collins & Aikman Corporation, a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated
herein, to issue and sell to the Underwriters named in Schedule I
hereto (the "Underwriters") an aggregate of 12,000,000 shares
(the "Firm Shares") of Common Stock, par value $0.01 per share
("Stock"), of the Company, and, at the election of the
Underwriters, up to 1,800,000 additional shares (the "Optional
Shares") of Stock. The Firm Shares and the Optional Shares which
the Underwriters elect to purchase pursuant to Section 2 hereof
are herein collectively called the "Shares".
It is understood and agreed to by all parties that the
Company is concurrently entering into an agreement (the
"International Underwriting Agreement") providing for the sale by
the Company of up to a total of 3,450,000 shares of Stock (the
"International Shares"), including the overallotment option
thereunder, through arrangements with certain underwriters
outside the United States (the "International Underwriters"), for
whom Goldman Sachs International, Merrill Lynch International
Limited, Wasserstein Perella Securities, Inc. and Nikko Europe
Plc are acting as lead managers. Anything herein or therein to
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the contrary notwithstanding, the respective closings under this
Agreement and the International Underwriting Agreement are hereby
expressly made conditional on one another. The Underwriters
hereunder and the International Underwriters are simultaneously
entering into an Agreement between U.S. and International
Underwriting Syndicates (the "Agreement between Syndicates")
which provides, among other things, for the transfer of shares of
Stock between the two syndicates. Two forms of prospectus are to
be used in connection with the offering and sale of shares of
Stock contemplated by the foregoing, one relating to the Shares
hereunder and the other relating to the International Shares.
The latter form of prospectus will be identical to the former
except for certain substitute pages as included in the
registration statement and amendments thereto as mentioned below.
Except as used in Sections 2, 3, 4, 9 and 11 herein, and except
as the context may otherwise require, references hereinafter to
the Shares shall include all the shares of Stock which may be
sold pursuant to either this Agreement or the International
Underwriting Agreement, and references herein to any prospectus
whether in preliminary or final form, and whether as amended or
supplemented, shall include both the U.S. and the international
versions thereof.
1. (a) The Company represents and warrants to, and agrees
with, each of the Underwriters that:
(i) A registration statement in respect of the Firm
Shares and the Optional Shares has been filed with the
Securities and Exchange Commission (the "Commission"); such
registration statement and any post-effective amendment
thereto, each in the form heretofore delivered to you, and,
excluding exhibits thereto but including all documents
incorporated by reference in the prospectus contained
therein, to you for each of the other Underwriters, have
been declared effective by the Commission in such form; no
other document with respect to such registration statement
or document incorporated by reference therein has heretofore
been filed with the Commission; and no stop order suspending
the effectiveness of such registration statement has been
issued and no proceeding for that purpose has been initiated
or threatened by the Commission (any preliminary prospectus
included in such registration statement or filed with the
Commission pursuant to Rule 424(a) of the rules and
regulations of the Commission under the Securities Act of
1933, as amended (the "Act"), is hereinafter called a
"Preliminary Prospectus"; the various parts of such
registration statement, including all exhibits thereto and
including (i) the information contained in the form of final
prospectus filed with the Commission pursuant to Rule 424(b)
under the Act in accordance with Section 5(a) hereof and
deemed by virtue of Rule 430A under the Act to be part of
the registration statement at the time it was declared
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effective and (ii) the documents incorporated by reference
in the prospectus contained in the registration statement at
the time such part of the registration statement became
effective, each as amended at the time such part of the
registration statement became effective, are hereinafter
collectively called the "Registration Statement"; such final
prospectus, in the form first filed pursuant to Rule 424(b)
under the Act, is hereinafter called the "Prospectus"; and
any reference herein to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item
12 of Form S-2 under the Act, as of the date of such
Preliminary Prospectus or Prospectus, as the case may be);
(ii) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission,
and each Preliminary Prospectus, at the time of filing
thereof, conformed in all material respects to the
requirements of the Act and the rules and regulations of the
Commission thereunder, and did not contain an untrue
statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however,
that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in
conformity with information furnished in writing to the
Company by an Underwriter through you expressly for use
therein;
(iii) The documents incorporated by reference in the
Prospectus, when they were filed with the Commission,
conformed in all material respects to the requirements of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the
Commission thereunder, and none of such documents contained
an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading;
(iv) The Registration Statement conforms, and the
Prospectus and any further amendments or supplements to the
Registration Statement or the Prospectus will conform, in
all material respects to the requirements of the Act and the
rules and regulations of the Commission thereunder and do
not and will not, as of the applicable effective date as to
the Registration Statement and any amendment thereto and as
of the applicable filing date as to the Prospectus and any
amendment or supplement thereto, contain an untrue statement
of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this
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representation and warranty shall not apply to any
statements or omissions made in reliance upon and in
conformity with information furnished in writing to the
Company by an Underwriter through you expressly for use
therein;
(v) Neither the Company nor any of its subsidiaries
has sustained since the date of the latest audited financial
statements included or incorporated by reference in the
Prospectus any material loss or interference with its
business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the
Prospectus; and, since the respective dates as of which
information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital
stock or long-term debt of the Company or any
of its subsidiaries or any material adverse change, or any
development involving a prospective material adverse change,
in or affecting the general affairs, management, financial
position, stockholders' equity, results of operations of the
Company and its subsidiaries, otherwise than as set forth or
contemplated in the Prospectus;
(vi) The Company and its subsidiaries have good and
marketable title in fee simple to all real property and good
and marketable title to all personal property owned by them,
in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or
such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be
made of such property by the Company and its subsidiaries;
and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the
Company and its subsidiaries;
(vii) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Delaware, with power and authority
(corporate and other) to own its properties and conduct its
business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of
business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties, or
conducts any business, so as to require such qualification,
or is subject to no material liability or disability by
reason of the failure to be so qualified in any such
jurisdiction; and each subsidiary of the Company has been
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duly incorporated and is validly existing as a corporation
in good standing under the laws of its jurisdiction of
incorporation;
(viii) The Company has an authorized capitalization as
set forth in the Prospectus, and all of the issued shares of
capital stock of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable;
and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable.
Except for certain preferred shares which will be redeemed
prior to the sale of the Firm Shares contemplated hereby,
all such shares of capital stock of each subsidiary of the
Company are owned beneficially and of record by the Company
or one of its subsidiaries, free and clear of all liens,
encumbrances, equities or claims (other than such of the
foregoing as arise under the Credit Agreements);
(ix) The unissued Shares to be issued and sold by the
Company to the Underwriters hereunder and under the
International Underwriting Agreement have been duly and
validly authorized and, when issued and delivered against
payment therefor as provided herein and therein, will be
duly and validly issued and fully paid and non-assessable
and will conform to the description of the Stock contained
in the Prospectus;
(x) The issue and sale of the Shares to be sold by the
Company hereunder and under the International Underwriting
Agreement and the compliance by the Company with all of the
provisions of this Agreement and the International
Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not
conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which the Company or any
of its subsidiaries is bound or to which any of the property
or assets of the Company or any of its subsidiaries is
subject, except for such conflicts, breaches or violations
which, individually or in the aggregate, would not have a
material adverse effect on the general affairs, management,
financial position, business prospects, stockholders' equity
or results of operations of the Company and its subsidiaries
(a "Material Adverse Effect"), nor will such action result
in any violation of the provisions of the Certificate of
Incorporation or By-Laws of the Company or any statute or
any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties; and no
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consent, approval, authorization, order, registration or
qualification of or with any such court or governmental
agency or body is required for the issue and sale of the
Shares or the consummation by the Company of the
transactions contemplated by this Agreement and the
International Underwriting Agreement, except the
registration under the Act of the Shares and such consents,
approvals, authorizations, registrations or qualifications
as may be required under state securities or Blue Sky laws
in connection with the purchase and distribution of the
Shares by the Underwriters and the International
Underwriters;
(xi) Neither the Company nor any of its subsidiaries
is in violation of its charter or in default in the
performance or observance of any material obligation,
agreement, covenant or condition contained in any indenture,
mortgage, loan agreement or note or any material contract,
lease or other instrument to which it is a party or by which
it or any of them or their properties may be bound;
(xii) The statements made in the Prospectus under the
caption "Description of Capital Stock" insofar as they
purport to constitute a summary of the terms of the Stock,
under the caption "Certain United States Tax Consequences to
Non-United States Holders," and under the captions "The New
Credit Facilities" and "Underwriting", insofar as they
describe the provisions of the matters therein described,
are accurate and fair summaries;
(xiii) Other than as set forth in the Prospectus,
there are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or
of which any property of the Company or any of its
subsidiaries is the subject which, if determined adversely
to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse
Effect; and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(xiv) The Credit Agreement, dated as of the date of
this Agreement, among Collins & Aikman Products Co.
(presently known as Collins & Aikman Corporation and
referred to herein as "C&A Products"), WCA Canada Inc.
("WCA"), the Company, the lenders named therein, Continental
Bank, N.A. and NationsBank, N.A. as Managing Agents, and
Chemical Bank, as Administrative Agent (the "Credit
Agreement"), has been duly authorized, executed and
delivered by the Company and its subsidiaries that are
parties thereto, and constitutes a valid and binding
obligation of the Company and such subsidiaries, enforceable
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in accordance with its terms, subject, as to enforcement, to
applicable bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting
creditors' rights and to general equitable principles; and
immediately prior to or simultaneously with the First Time
of Delivery the Company will effect the transactions
described under the caption "Use of Proceeds and
Consolidation" in the Prospectus;
(xv) The transactions described under the caption "Use
of Proceeds and Consolidation" in the Prospectus (the
"Transactions"), including, without limitation, the merger
of Collins & Aikman Holdings II Corporation ("Holdings II")
with and into the Company (the "Holdings II Merger") and the
merger of Collins & Aikman Group, Inc. ("Group") with and
into C&A Products (the "Group Merger", and collectively with
the Holdings II Merger, the "Consolidation"), have been duly
authorized, will be consummated simultaneously with the
First Time of Delivery and, assuming the consummation of the
sale of the Firm Shares pursuant to this Agreement and the
International Underwriting Agreement, the consummation of
the borrowings under the Credit Agreement described under
the caption "Use of Proceeds and Consolidation" in the
Prospectus, and the application of the net proceeds of the
foregoing as described under the caption "Use of Proceeds
and Consolidation" in the Prospectus, the consummation of
the Transactions will not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries is bound or
to which any of the property or assets of the Company or any
of its subsidiaries is subject, except for such conflicts,
breaches or violations which, individually or in the
aggregate, would not have a Material Adverse Effect, nor
will such action result in any violation of the provisions
of the respective Certificate of Incorporation or By-laws of
the Company, or any statute or any order, rule or regulation
of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or
any of their properties; and no consent, approval,
authorization, order, registration or qualification of or
with any such court or governmental agency or body is
required for the consummation of the Transactions, except
for the filing of certificates of merger in accordance with
Delaware law;
(xvi) The Company and its subsidiaries have filed all
federal or state income or franchise tax returns required to
be filed and have paid all taxes shown thereon as due
(except taxes being contested in good faith as to which
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adequate provisions have been made to the extent required by
generally accepted accounting principles ("GAAP")), and
there is no material tax deficiency which has been or might
reasonably be expected to be asserted against the Company or
any of its subsidiaries (except such of the foregoing as
have been adequately provided for on the books of the
Company and its subsidiaries);
(xvii) Neither the Company, any of its subsidiaries,
any predecessor of any of the foregoing nor, to the
knowledge of the Company, any entity as to which any of the
foregoing has any indemnity or similar obligation has
authorized or conducted or has knowledge of the generation,
transportation, storage, use, treatment, disposal or release
of any hazardous substance, hazardous waste, hazardous
material, hazardous constituent, toxic substance, pollutant,
contaminant, petroleum product (including crude oil or any
fraction thereof), natural gas, liquefied gas or synthetic
gas defined or regulated under any environmental law
(collectively, "Hazardous Materials") on, in or under any
real property leased, owned, used, operated or by any means
controlled by the Company or any subsidiary (the "Real
Property") which, in the case of any of the foregoing, is
required to be disclosed (directly or by incorporation by
reference) in the Prospectus, or in any of the Company's
filings required under the Exchange Act, and which is not so
disclosed in accordance with such requirements; the Real
Property and the Company's, each subsidiary's and, to the
knowledge of the Company, each such other entity's, as the
case may be, operations are in compliance in all material
respects with all federal, state and local laws, ordinances,
rules and regulations relating to health, safety and the
environment (collectively, "Environmental Laws"), and the
Company, each subsidiary and, to the knowledge of the
Company, each such other entity has all licenses, permits
and authorizations required to be had under any
Environmental Law, and is and has operated in compliance
therewith, except for such of the foregoing as, individually
or in the aggregate, would not have a Material Adverse
Effect; except as described in the Prospectus, neither the
Company, any of its subsidiaries nor, to the knowledge of
the Company, any such other entity has received any written
or oral notice from any governmental entity or third party,
and there is no pending or, to the best knowledge of the
Company or any subsidiary, threatened, and, to the knowledge
of the Company or any subsidiary there are no circumstances
with respect to the Real Property or the operations of the
Company or its subsidiaries that could reasonably be
anticipated to form the basis of, any claim, litigation or
any administrative agency proceeding that: (1) alleges a
violation of any Environmental Laws by the Company or any
subsidiary, (2) alleges the Company, any subsidiary or any
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predecessor of any of the foregoing nor any entity as to
which any of the foregoing has any indemnity or similar
obligation is a liable party under the Comprehensive
Environmental Response, Compensation, and Liability Act, 42
U.S.C. Sec.Sec. 9601, et seq. or any state superfund law, (3)
alleges possible contamination of the environment by the
Company or any subsidiary, or (4) alleges possible
contamination of the Real Property, except for such of the
foregoing as, individually or in the aggregate, would not
have a Material Adverse Effect;
(xviii) No labor dispute with the employees of, or
representatives of employees of, the Company or any of its
subsidiaries exists or, to the knowledge of the Company or
any of its subsidiaries, is imminent, and the Company is not
aware of any existing or reasonably foreseeable labor
disturbance by the employees of any of its principal
suppliers, manufacturers or contractors which, in any such
case, might be expected to result in any Material Adverse
Effect;
(xix) The Company and its subsidiaries each owns or
possesses, or can acquire on reasonable terms, the patents,
patent rights, licenses, inventions, copyrights, know how
(including trade secrets and other unpatented and
unpatentable proprietary or confidential information,
systems or procedures), trade marks, service marks and trade
names presently employed by it in connection with the
business now operated by them, and neither the Company nor
any subsidiary has received any notice of infringement of or
conflict with asserted rights of others with respect to any
of the foregoing which, individually or in the aggregate, if
the subject of an unfavorable decision, ruling or finding,
would result in any Material Adverse Effect;
(xx) There are no transactions with affiliates, as
defined in Rule 405 under the Act, which are required to be
disclosed in a Prospectus that are not fairly disclosed
therein;
(xxi) The Company is not and, after giving effect to
the offering and sale of the Shares, will not be an open-end
investment company, unit investment trust or face-amount
certificate company that is or is required to be registered
under the Investment Company Act of 1940, as amended (the
"Investment Company Act"); and neither the Company nor any
affiliated entity is directly or indirectly controlled by or
acting on behalf of any person that is such a company or
trust;
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(xxii) The Shares have been approved for listing on
the New York Stock Exchange (the "Exchange"), subject only
to official notice of issuance, under the symbol "CKC";
(xxiii) Neither the Company nor any of its affiliates
does business with the government of Cuba or with any person
or affiliate located in Cuba within the meaning of Section
517.075 of Florida Statutes (Chapter 92-198, Laws of
Florida); and
(xxiv) Arthur Andersen & Co., who have certified
certain financial statements of the Company and its
subsidiaries, are independent public accountants as required
by the Act and the rules and regulations of the Commission
thereunder.
(b) Holdings II represents and warrants to, and agrees
with, each of the Underwriters that the Holdings II Merger has
been duly authorized, and the consummation thereof will not
conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which Holdings II or any of its
subsidiaries is a party or by which Holdings II or any of its
subsidiaries is bound or to which any of the property or assets
of Holdings II or any of its subsidiaries is subject, nor will
such action result in any violation of the provisions of the
respective Certificates of Incorporation or By-laws of Holdings
II or any statute or any order, rule or regulation of any court
or governmental agency or body having jurisdiction over Holdings
II or any of its subsidiaries or any of their properties; and no
consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or
body is required for the consummation of the Holdings II Merger,
except for the filing of certificates of merger in accordance
with Delaware law.
2. Subject to the terms and conditions herein set forth,
(a) the Company agrees to issue and sell to each of the
Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company, at a purchase price
per share of $............, the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I hereto and
(b) in the event and to the extent that the Underwriters shall
exercise the election to purchase Optional Shares as provided
below, the Company agrees to issue and sell to each of the
Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company, at the purchase price
per share set forth in clause (a) of this Section 2, that portion
of the number of Optional Shares as to which such election shall
have been exercised (to be adjusted by you so as to eliminate
fractional shares) determined by multiplying such number of
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Optional Shares by a fraction the numerator of which is the
maximum number of Optional Shares which such Underwriter is
entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is
the maximum number of the Optional Shares which all of the
Underwriters are entitled to purchase hereunder.
The Company hereby grants to the Underwriters the right to
purchase at their election up to 1,800,000 Optional Shares, at
the purchase price per share set forth in the immediately
preceding paragraph, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election
to purchase Optional Shares may be exercised by written notice
from you to the Company, given within a period of 30 calendar
days after the date of this Agreement and setting forth the
aggregate number of Optional Shares to be purchased and the date
on which such Optional Shares are to be delivered, as determined
by you but in no event earlier than the First Time of Delivery
(as defined in Section 4 hereof) or, unless you and the Company
otherwise agree in writing, earlier than two or later than ten
business days after the date of such notice.
3. Upon the authorization by you of the release of the Firm
Shares, the several Underwriters propose to offer the Firm Shares
for sale upon the terms and conditions set forth in the
Prospectus.
4. Certificates in definitive form for the Shares to be
purchased by each Underwriter hereunder, and in such denomina-
tions and registered in such names as Goldman, Sachs & Co. may
request upon at least forty-eight hours' prior notice to the
Company, shall be delivered by or on behalf of the Company to you
for the account of such Underwriter, against payment by such
Underwriter or on its behalf of the purchase price therefor by
certified or official bank check or checks, payable to the order
of the Company, in Federal (same day) funds, all at the offices
of Jones, Day, Reavis & Pogue, 599 Lexington Avenue, New York,
New York 10022, or at such other place as shall be agreed upon
by the Company and you. The time and date of such delivery and
payment shall be, with respect to the Firm Shares, 9:30 a.m., New
York City time, on July ...., 1994 or such other time and date as
you and the Company may agree upon in writing, and, with respect
to the Optional Shares, 9:30 a.m., New York City time, on the
date specified by you in the written notice given by you of the
Underwriters' election to purchase such Optional Shares, or such
other time and date as you and the Company may agree upon in
writing. Such time and date for delivery of the Firm Shares is
herein called the "First Time of Delivery". Such time and date
for delivery of the Optional Shares, if not the First Time of
Delivery, is herein called the "Second Time of Delivery", and
each such time and date for delivery is herein called a "Time of
Delivery". Such certificates will be made available for checking
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and packaging at least twenty-four hours prior to each Time of
Delivery at the office of Goldman, Sachs & Co., 85 Broad Street,
New York, New York 10004. The Company agrees to reimburse
Goldman, Sachs & Co. for its overnight cost of funds in
connection with borrowings incurred to make payment to the
Company in Federal (same day) funds of the purchase price of the
Shares. Such payment shall be made by or on behalf of the
Company by wire transfer of Federal (same day) funds to the
account specified by Goldman, Sachs & Co. Such payment will be
made by 9:30 a.m., New York City time, on the New York Business
Day next following the Time of Delivery and will be in the amount
determined by Goldman, Sachs & Co. in its sole discretion to be
its cost of funds for such borrowings and notified to the Company
in writing prior to 4:00 p.m., New York City time, on the day
prior to such payment.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and
to file such Prospectus pursuant to Rule 424(b) under the Act not
later than the Commission's close of business on the second
business day following the execution and delivery of this
Agreement, or, if applicable, such earlier time as may be
required by Rule 430A(a)(3) under the Act; to make no further
amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you promptly after
reasonable notice thereof; to advise you, promptly after it
receives notice thereof, of the time when the Registration
Statement, or any amendment thereto, has been filed or becomes
effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish you with copies thereof;
to advise you, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Shares
for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any
request by the Commission for the amending or supplementing of
the Registration Statement or Prospectus or for additional
information; and, in the event of the issuance of any stop order
or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such
qualification, promptly to use its best efforts to obtain its
withdrawal;
(b) Promptly from time to time to take such action as you
may reasonably request to qualify the Shares for offering and
sale under the securities laws of such jurisdictions as you may
request and to comply with such laws so as to permit the
continuance of sales and dealings therein in such jurisdictions
for as long as may be necessary to complete the distribution of
the Shares, provided that in connection therewith the Company
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shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
(c) To furnish the Underwriters with copies of the
Prospectus in such quantities as you may from time to time
reasonably request, and, if the delivery of a prospectus is
required at any time prior to the expiration of nine months after
the time of issue of the Prospectus in connection with the
offering or sale of the Shares and if at such time any events
shall have occurred as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made when such Prospectus is
delivered, not misleading, or, if for any other reason it shall
be necessary during such same period to amend or supplement the
Prospectus in order to comply with the Act, to notify you and
upon your request to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as you
may from time to time reasonably request of an amended Prospectus
or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance, and in case any
Underwriter is required to deliver a prospectus in connection
with sales of any of the Shares at any time nine months or more
after the time of issue of the Prospectus, upon your request but
at the expense of such Underwriter, to prepare and deliver to
such Underwriter as many copies as you may request of an amended
or supplemented Prospectus complying with Section 10(a)(3) of the
Act;
(d) To make generally available to its security holders as
soon as practicable, but in any event not later than eighteen
months after the effective date of the Registration Statement (as
defined in Rule 158(c) under the Act), an earnings statement of
the Company and its subsidiaries (which need not be audited)
complying with Section 11(a) of the Act and the rules and
regulations of the Commission thereunder (including at the option
of the Company Rule 158 under the Act);
(e) During the period beginning from the date hereof and
continuing to and including the date 180 calendar days after the
date of the Prospectus, not to offer, sell, contract to sell or
otherwise dispose of, except as provided hereunder or under the
International Underwriting Agreement, any securities of the
Company that are substantially similar to the Shares, including
but not limited to any securities that are convertible into or
exchangeable for or that represent the right to receive the
Shares or any such substantially similar securities (other than
pursuant to employee stock option plans existing on, or upon the
conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Agreement or pursuant to that
certain Stock Purchase Agreement, dated the date hereof, between
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the Company and Blackstone Capital Partners L.P. and Wasserstein
Perella Partners, L.P.) without your prior written consent;
(f) To furnish to its stockholders as soon as practicable
after the end of each fiscal year an annual report (including a
balance sheet and statements of income, stockholders' equity and
cash flows of the Company and its consolidated subsidiaries
certified by independent public accountants) and, as soon as
practicable after the end of each of the first three quarters of
each fiscal year (beginning with the fiscal quarter ending after
the effective date of the Registration Statement), consolidated
summary financial information of the Company and its subsidiaries
for such quarter in reasonable detail;
(g) During a period of five years from the effective date
of the Registration Statement, to furnish to you copies of all
reports or other communications (financial or other) furnished to
stockholders, and deliver to you (i) as soon as they are
available, copies of any reports and financial statements
furnished to or filed with the Commission or any national
securities exchange on which any class of securities of the
Company is listed and (ii) such additional information concerning
the business and financial condition of the Company as you may
from time to time reasonably request (such financial statements
to be on a consolidated basis to the extent the accounts of the
Company and its subsidiaries are consolidated in reports
furnished to its stockholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of
the Shares pursuant to this Agreement and the International
Underwriting Agreement in the manner specified in the Prospectus
under the caption "Use of Proceeds and the Consolidation"; and
(i) To use its best efforts to list, subject to notice of
issuance, the Shares on the Exchange.
6. The Company covenants and agrees with the several
Underwriters that the Company will pay or cause to be paid the
following: (i) the fees, disbursements and expenses of the
Company's counsel and accountants in connection with the
registration of the Shares under the Act and all other expenses
in connection with the preparation, printing and filing of the
Registration Statement, any Preliminary Prospectus and the
Prospectus and amendments and supplements thereto and the mailing
and delivering of copies thereof to the Underwriters and dealers;
(ii) the cost of printing or producing any Agreement among
Underwriters, this Agreement, the International Underwriting
Agreement, the Agreement between Syndicates, the Selling
Agreements, the Blue Sky Memorandum and any other documents in
connection with the offering, purchase, sale and delivery of the
Shares; (iii) all expenses in connection with the qualification
of the Shares for offering and sale under state securities laws
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as provided in Section 5(b) hereof, including the fees and
disbursements of counsel for the Underwriters in connection with
such qualification and in connection with the Blue Sky survey;
(iv) the filing fees incident to securing any required review by
the National Association of Securities Dealers, Inc. of the terms
of the sale of the Shares; (v) the cost of preparing stock
certificates; (vi) the cost and charges of any transfer agent or
registrar; and (vii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise
specifically provided for in this Section. It is understood,
however, that, except as provided in this Section, Section 8 and
Section 11 hereof, the Underwriters will pay all of their own
costs and expenses, including the fees of their counsel, stock
transfer taxes on resale of any of the Shares by them and any
advertising expenses connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the
Shares to be delivered at each Time of Delivery, shall be
subject, in their discretion, to the condition that all
representations and warranties and other statements of the
Company herein are, at and as of such Time of Delivery, true and
correct, the condition that the Company shall have performed all
of its obligations hereunder theretofore to be performed, and the
following additional conditions:
(a) The Prospectus shall have been filed with the
Commission pursuant to Rule 424(b) within the applicable time
period prescribed for such filing by the rules and regulations
under the Act and in accordance with Section 5(a) hereof; no stop
order suspending the effectiveness of the Registration Statement
or any part thereof shall have been issued and no proceeding for
that purpose shall have been initiated or threatened by the
Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your
reasonable satisfaction;
(b) Jones, Day, Reavis & Pogue, counsel for the
Underwriters, shall have furnished to you such opinion or
opinions, dated such Time of Delivery, with respect to the
matters covered in paragraphs (i), (ii), (iii), (v) and (vi) of
subsection (c) below, as well as such other matters relating to
the transactions contemplated hereby as you may request, and such
counsel shall have received such papers and information as they
may reasonably request to enable them to pass upon such matters;
(c) Cravath, Swaine & Moore, counsel for the Company,
shall have furnished to you their written opinion, dated such
Time of Delivery, in form and substance satisfactory to you, to
the effect that:
(i) The Company is duly incorporated and validly
existing as a corporation in good standing under the
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laws of the State of Delaware, with corporate power and
authority to own its properties and conduct its
business as described in the Prospectus;
(ii) The Company has an authorized capitalization
as set forth in the Prospectus, and all of the issued
shares of capital stock of the Company (including the
Shares being delivered at such Time of Delivery) have
been duly and validly authorized and issued and are
fully paid and non-assessable;
(iii) This Agreement and the International
Underwriting Agreement have been duly authorized,
executed and delivered by the Company;
(iv) No consent, approval, authorization, order,
registration or qualification of or with any such court
or governmental agency or body is required for the
issue and sale of the Shares or the consummation by the
Company of the transactions contemplated by this
Agreement and the International Underwriting Agreement,
except the registration under the Act of the Shares,
and such consents, approvals, authorizations,
registrations or qualifications as may be required
under state securities or Blue Sky laws in connection
with the purchase and distribution of the Shares by the
Underwriters and the International Underwriters;
(v) The statements made in the Prospectus under
the caption "Description of Capital Stock", insofar as
they purport to constitute summaries of the terms of
the Stock, under the caption "Certain United States Tax
Consequences to Non-United States Holders", insofar as
they purport to describe the material tax consequences
of an investment in Common Stock, and under the caption
"The New Credit Facilities", insofar as they describe
the provisions of the documents therein described,
fairly summarize the matters therein described;
(vi) Although they do not assume any
responsibility for the accuracy, completeness or
fairness of the statements contained in the
Registration Statement or the Prospectus, except for
those covered by their opinion in subsection (v) of
this Section 7(c), they have no reason to believe that
the Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the
Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as
to which such counsel need express no opinion) do not
comply as to form in all material respects with the
requirements of the Act and the rules and regulations
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thereunder (including, without limitation, requirements
thereunder relating to the filing of any amendment to
the Registration Statement); and they have no reason to
believe that, as of its effective date, the
Registration Statement or any further amendment thereto
made by the Company prior to such Time of Delivery
(other than the financial statements and related
schedules therein, as to which such counsel need
express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading or that, as of its
date, the Prospectus or any further amendment or
supplement thereto made by the Company prior to such
Time of Delivery (other than the financial statements
and related schedules therein, as to which such counsel
need express no opinion) contained an untrue statement
of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of
the circumstances in which they were made, not
misleading or that, as of such Time of Delivery, either
the Registration Statement or the Prospectus or any
further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as
to which such counsel need express no opinion) contains
an untrue statement of a material fact or omits to
state a material fact necessary to make the statements
therein, in light of the circumstances in which they
were made, not misleading;
(vii) The Consolidation has been duly and validly
effected in accordance with the General Corporation Law
of the State of Delaware; and
(viii) The Credit Agreement has been duly
authorized, executed and delivered by the Company and
its subsidiaries that are parties thereto, and
constitutes a valid and binding obligation of the
Company and such subsidiaries, enforceable in
accordance with its terms, except to the extent that
the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or
similar laws relating to or affecting the
enforceability of creditors rights generally and
subject to general equitable principles.
In rendering such opinion, such counsel may state that they
express no opinion as to the laws of any jurisdiction outside the
United States;
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<PAGE>
(d) Elizabeth R. Philipp, General Counsel of the
Company, shall have furnished to you her written opinion, dated
such Time of Delivery, in form and substance satisfactory to you,
to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing
under the laws of the State of Delaware, with corporate
power and authority to own its properties and conduct
its business as described in the Prospectus;
(ii) The Company has an authorized capitalization
as set forth in the Prospectus, and all of the issued
shares of capital stock of the Company (including the
Shares being delivered at such Time of Delivery) have
been duly and validly authorized and issued and are
fully paid and non-assessable; and the Shares conform
to the description of the Stock contained in the
Prospectus;
(iii) The Company has been duly qualified as a
foreign corporation for the transaction of business and
is in good standing under the laws of each other
jurisdiction in which it owns or leases properties, or
conducts any business, so as to require such
qualification, or is subject to no material liability
or disability by reason of failure to be so qualified
in any such jurisdiction (such counsel being entitled
to rely in respect of the opinion in this clause upon
opinions of local counsel; provided that such counsel
shall state that she believes that such local counsel
is qualified to render an opinion of the nature of the
opinions on which she has relied);
(iv) Each significant subsidiary of the Company
has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its
jurisdiction of incorporation; and all of the issued
shares of capital stock of each such subsidiary have
been duly and validly authorized and issued, are fully
paid and non-assessable and are owned beneficially and
of record by the Company or one of its subsidiaries,
free and clear of all liens, encumbrances, equities or
claims other than those arising under the Credit
Agreements (such counsel being entitled to rely in
respect of the opinion in this clause upon opinions of
local counsel; provided that such counsel shall state
that she believes that such local counsel is qualified
to render an opinion of the nature of the opinions on
which she has relied);
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<PAGE>
(v) To such counsel's knowledge and other than as
set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company
or any of its subsidiaries is a party or of which any
property of the Company or any of its subsidiaries is
the subject which such counsel has reasonable cause to
believe would individually or in the aggregate have a
material adverse effect on the consolidated financial
position, stockholder's equity or results of operations
of the Company and its subsidiaries; and, to such
counsel's knowledge, no such proceedings are threatened
or contemplated by governmental authorities or
threatened by others;
(vi) This Agreement and the International
Underwriting Agreement have been duly authorized,
executed and delivered by the Company;
(vii) The issue and sale of the Shares being
delivered at such Time of Delivery to be sold by the
Company and the compliance by the Company with all of
the provisions of this Agreement and the International
Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not
conflict with or result in a breach or violation of any
of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument known to
such counsel to which the Company or any of its
subsidiaries is a party or by which the Company or any
of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its
subsidiaries is subject, which would have a Material
Adverse Effect; nor will such action result in any
violation of the provisions of the Certificate of
Incorporation or By-Laws of the Company or any statute
or any order, rule or regulation known to such counsel
of any court or governmental agency or body having
jurisdiction over the Company or any of its
subsidiaries or any of their properties;
(viii) Neither the Company nor any of its
significant subsidiaries is in violation of its charter
or in default in the performance or observance of any
material obligation, agreement, covenant or condition
contained in any indenture, mortgage, loan agreement or
note or material contract, lease or other instrument
known to such counsel to which it is a party or by
which it or any of them or their properties may be
bound;
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<PAGE>
(ix) The documents incorporated by reference in
the Prospectus (other than the financial statements and
related schedules therein, as to which such counsel
need express no opinion), when they were filed with the
Commission, complied as to form in all material
respects with the requirements of the Exchange Act and
the rules and regulations of the Commission thereunder;
and she has no reason to believe that any of such
documents, when such documents were so filed, contained
an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the
statements therein, in the light of the circumstances
under which they were made when such documents were so
filed, not misleading; and
(x) Although she does not assume any
responsibility for the accuracy, completeness or
fairness of the statements contained in the
Registration Statement or the Prospectus, she has no
reason to believe that the Registration Statement and
the Prospectus and any further amendments and
supplements thereto made by the Company prior to such
Time of Delivery (other than the financial statements
and related schedules therein, as to which such counsel
need express no opinion) does not comply as to form in
all material respects with the requirements of the Act
and the rules and regulations thereunder (including,
without limitation, requirements thereunder relating to
the filing of any amendment to the Registration
Statement); and she has no reason to believe that, as
of its effective date, the Registration Statement or
any further amendment thereto made by the Company prior
to such Time of Delivery (other than the financial
statements and related schedules therein, as to which
such counsel need express no opinion) contained an
untrue statement of a material fact or omitted to state
a material fact required to be stated therein or
necessary to make the statements therein not misleading
or that, as of its date, the Prospectus or any further
amendment or supplement thereto made by the Company
prior to such Time of Delivery (other than the
financial statements and related schedules therein, as
to which such counsel need express no opinion)
contained an untrue statement of a material fact or
omitted to state a material fact necessary to make the
statements therein, in light of the circumstances in
which they were made, not misleading or that, as of
such Time of Delivery, either the Registration
Statement or the Prospectus or any further amendment or
supplement thereto made by the Company prior to such
Time of Delivery (other than the financial statements
and related schedules therein, as to which such counsel
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need express no opinion) contains an untrue statement
of a material fact or omits to state a material fact
necessary to make the statements therein, in light of
the circumstances in which they were made, not
misleading, and she does not know of any contracts or
other documents of a character required to be filed as
an exhibit to the Registration Statement or required to
be incorporated by reference into the Prospectus or
required to be described in the Registration Statement
or the Prospectus which are not filed or incorporated
by reference or described as required.
In rendering such opinion, such counsel may state that she
expresses no opinion as to the laws of any jurisdiction outside
the United States, and, in respect of certain matters of fact,
she may rely upon certificates of officers of the Company or its
subsidiaries;
(e) At 10:00 a.m., New York City time, on the effective
date of the Registration Statement and the effective date of the
most recently filed post-effective amendment to the Registration
Statement and also at each Time of Delivery, Arthur Andersen &
Co. shall have furnished to you a letter or letters, dated the
respective date of delivery thereof, in form and substance
satisfactory to you, to the effect set forth in Annex I hereto;
(f) (i) Neither the Company nor any of its subsidiaries
shall have sustained since the date of the latest audited
financial statements included or incorporated by reference in the
Prospectus any loss or interference with its business from fire,
explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or
contemplated in the Prospectus, and (ii) since the respective
dates as of which information is given in the Prospectus there
shall not have been any change in the capital stock or long-term
debt of the Company or any of its subsidiaries or any change, or
any development involving a prospective change, in or affecting
the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and
its subsidiaries, otherwise than as set forth or contemplated in
the Prospectus, the effect of which, in any such case described
in Clause (i) or (ii), is in your judgment so material and
adverse as to make it impracticable or inadvisable to proceed
with the public offering or the delivery of the Shares being
delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;
(g) On or after the date hereof (i) no downgrading shall
have occurred in the rating accorded the Company's existing or
proposed debt securities or preferred stock by any "nationally
recognized statistical rating organization," as that term is
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defined by the Commission for purposes of Rule 436(g)(2) under
the Act, and (ii) no such organization shall have publicly
announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Company's debt
securities or preferred stock;
(h) On or after the date hereof there shall not have
occurred any of the following: (i) a suspension or material
limitation in trading in securities generally on the Exchange;
(ii) a suspension or material limitation in trading in the
securities of the Company or any of its subsidiaries on the
American Stock Exchange; (iii) a general moratorium on commercial
banking activities in New York declared by either Federal or New
York State authorities; or (iv) the outbreak or escalation of
hostilities involving the United States or the declaration by the
United States of a national emergency or war if the effect of any
such event specified in this Clause (iv) in your judgment makes
it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares being delivered at such
Time of Delivery on the terms and in the manner contemplated in
the Prospectus;
(i) The Shares to be sold by the Company at such Time of
Delivery shall have been duly listed, subject to notice of
issuance, on the Exchange;
(j) The Company has obtained and delivered to the
Underwriters executed copies of an agreement from each principal
stockholder of the Company to the effect that, except in
connection with the transactions described in the Prospectus
under the caption "Use of Proceeds and Consolidation", from the
date hereof and continuing to and including the date 180 calendar
days after the date of the Prospectus, such stockholder will not,
directly or indirectly, offer, sell, contract to sell or
otherwise dispose of any shares of Stock or securities of the
Company that are substantially similar to the Stock, including
but not limited to any securities that are convertible into or
exchangeable for or that represent the right to receive shares of
Stock or any such substantially similar securities (other than
pursuant to employee stock option plans existing on, or upon the
conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Agreement) without your prior
written consent;
(k) The Consolidation shall have been effected as
described in the Prospectus;
(l) There shall not have occurred or be continuing any
default or breach under the Credit Agreement and immediately
prior to the First Time of Delivery (A) there shall be no non-
compliance or failure to satisfy any condition to borrowing under
the Credit Agreement other than the sale of the Shares hereunder
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and (B) the Company shall have consummated the borrowings and
effected the other transactions referenced under the caption "Use
of Proceeds and Consolidation" in the Prospectus;
(m) That certain Stock Purchase Agreement, dated the
date hereof, between the Company, Blackstone Capital Partners L.P
and Wasserstein Perella Partners, L.P. shall have been duly
executed and delivered and shall remain in full force and effect,
the purchase of an aggregate of 6,560,000 shares of Common Stock
thereunder shall have been consummated immediately prior to or
simultaneously with the First Time of Delivery, and irrevocable
letters of credit, in an aggregate amount equal to the purchase
price for the remaining 2,250,000 of shares of Stock purchasable
thereunder, shall have been issued by Chemical Bank for the
benefit of the Company; and
(n) The Company shall have furnished or caused to be
furnished to you at such Time of Delivery certificates of
officers of the Company, satisfactory to you as to the accuracy
of the representations and warranties of the Company herein at
and as of such Time of Delivery, as to the performance by the
Company of all of their respective obligations hereunder to be
performed at or prior to such Time of Delivery, and as to such
other matters as you may reasonably request, and the Company
shall have furnished or caused to be furnished certificates as to
the matters set forth in subsections (a) and (f) of this Section,
and as to such other matters as you may reasonably request.
8. (a) The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending
any such action or claim as such expenses are incurred; provided,
however, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by any
Underwriter through you expressly for use therein.
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(b) Each Underwriter will indemnify and hold harmless the
Company against any losses, claims, damages or liabilities to
which the Company may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by such
Underwriter through you expressly for use therein; and will
reimburse the Company for any legal or other expenses reasonably
incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party under such
subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which
it may have to any indemnified party otherwise than under such
subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of
the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (which shall not, except
with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying
party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to
such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection
with the defense thereof other than reasonable costs of
investigation.
(d) If the indemnification provided for in this Section 8
is unavailable to or insufficient to hold harmless an indemnified
party under subsection (a), (b) or (c) above in respect of any
losses, claims, damages or liabilities (or actions in respect
thereof) referred to therein, then each indemnifying party shall
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contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other from
the offering of the Shares. If, however, the allocation provided
by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the
notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also
the relative fault of the Company on the one hand and the
Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on
the other shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Shares purchased
under this Agreement (before deducting expenses) received by the
Company bear to the total underwriting discounts and commissions
received by the Underwriters with respect to the Shares purchased
under this Agreement, in each case as set forth in the table on
the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or the
Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if
contributions pursuant to this subsection (d) were determined by
pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation
which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at
which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages
which such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11 (f) of the
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Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute
are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this Section 8
shall be in addition to any liability which the Company may
otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any
liability which the respective Underwriters may otherwise have
and shall extend, upon the same terms and conditions, to each
officer and director of the Company (including any person who,
with his consent, is named in the Registration Statement as about
to become a director of the Company) and to each person, if any,
who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation
to purchase the Shares which it has agreed to purchase hereunder
at a Time of Delivery, you may in your discretion arrange for you
or another party or other parties to purchase such Shares on the
terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company shall be entitled (but shall not
have an obligation) to a further period of thirty-six hours
within which to procure another party or other parties
satisfactory to you to purchase such Shares on such terms. In
the event that, within the respective prescribed periods, you
notify the Company that you have so arranged for the purchase of
such Shares, or the Company notifies you that it has so arranged
for the purchase of such Shares, you or the Company shall have
the right to postpone such Time of Delivery for a period of not
more than seven days, in order to effect whatever changes may
thereby be made necessary in the Registration Statement or the
Prospectus, or in any other documents or arrangements, and the
Company agrees to file promptly any amendments to the
Registration Statement or the Prospectus which in your opinion
may thereby be made necessary. The term "Underwriter" as used in
this Agreement shall include any person substituted under this
Section with like effect as if such person had originally been a
party to this Agreement with respect to such Shares.
(b) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or
Underwriters by you and the Company as provided in subsection (a)
above, the aggregate number of such Shares which remains
unpurchased does not exceed one-eleventh of the aggregate number
of all the Shares to be purchased at such Time of Delivery, then
the Company shall have the right to require each non-defaulting
Underwriter to purchase the number of Shares which such
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<PAGE>
Underwriter agreed to purchase hereunder at such Time of Delivery
and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which
such Underwriter agreed to purchase hereunder) of the Shares of
such defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing herein shall relieve
a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or
Underwriters by you and the Company as provided in subsection (a)
above, the aggregate number of such Shares which remains
unpurchased exceeds one-eleventh of the aggregate number of all
the Shares to be purchased at such Time of Delivery, or if the
Company shall not exercise the right described in subsection (b)
above to require non-defaulting Underwriters to purchase Shares
of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligations
of the Underwriters to purchase and of the Company to sell the
Optional Shares) shall thereupon terminate, without liability on
the part of any non-defaulting Underwriter or the Company except
for the expenses to be borne by the Company and the Underwriters
as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its
default.
10. The respective indemnities, agreements,
representations, warranties and other statements of the Company
and the several Underwriters, as set forth in this Agreement or
made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person
of any Underwriter, or the Company, or any officer or director or
controlling person of the Company, and shall survive delivery of
and payment for the Shares.
11. If this Agreement shall be terminated pursuant to
Section 9 hereof, the Company shall not then be under any
liability to any Underwriter except as provided in Section 6 and
Section 8 hereof; but, if for any other reason any Shares are not
delivered by or on behalf of the Company as provided herein, the
Company will reimburse the Underwriters through you for all
out-of-pocket expenses approved in writing by you, including fees
and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and
delivery of the Shares not so delivered, but the Company shall
then be under no further liability to any Underwriter in respect
of the Shares not so delivered except as provided in Section 6
and Section 8 hereof.
-27-
<PAGE>
12. In all dealings hereunder, you shall act on behalf of
each of the Underwriters, and the parties hereto shall be
entitled to act and rely upon any statement, request, notice or
agreement on behalf of any Underwriter made or given by you
jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives.
All statements, requests, notices and agreements hereunder
shall be in writing, and if to the Underwriters shall be
delivered or sent by mail, telex or facsimile transmission to you
as the representatives in care of Goldman, Sachs & Co., at 85
Broad Street, New York, N.Y. 10004, Attention: Registration
Department; and if to the Company shall be delivered or sent by
mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter
pursuant to Section 8(c) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its
address set forth in its Underwriters' Questionnaire or telex
constituting such Questionnaire, which address will be supplied
to the Company by you upon request. Any such statements,
requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely
to the benefit of, the Underwriters, the Company and, to the
extent provided in Sections 8 and 10 hereof, the officers and
directors of the Company and each person who controls the
Company, or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other
person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Shares from any
Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
14. Time shall be of the essence of this Agreement. As
used herein, the term "business day" shall mean any day when the
Commission's office in Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
16. This Agreement may be executed by any one or more of
the parties hereto in any number of counterparts, each of which
shall be deemed to be an original, but all such counterparts
shall together constitute one and the same instrument.
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<PAGE>
If the foregoing is in accordance with your understanding,
please sign and return to us eight counterparts hereof, and upon
the acceptance hereof by you, on behalf of each of the
Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement among each of the Underwriters and
the Company. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is pursuant to the
authority set forth in a form of Agreement among Underwriters
(U.S. Version), the form of which shall be submitted to the
Company for examination upon request, but without warranty on
your part as to the authority of the signers thereof.
Very truly yours,
Collins & Aikman Corporation
By:.............................
Name:
Title:
Collins & Aikman Holdings II Corporation
By:.............................
Name:
Title:
Accepted as of the date hereof
at New York, New York:
Goldman, Sachs & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Wasserstein Perella Securities, Inc.
The Nikko Securities Co. International, Inc.
By:.............................
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
-29-
<PAGE>
SCHEDULE I
Number of Optional
Total Number Shares to be
of Firm Purchased if
Shares to be Maximum Option
Underwriter Purchased Exercised
----------- --------- ---------
Goldman, Sachs & Co. . . . . .
Merrill Lynch, Pierce, Fenner &
Smith
Incorporated. . . . .
Wasserstein Perella Securities,
Inc. . . . . . . . . . . . . .
The Nikko Securities Co.
International, Inc. . . . .
Total . . . . . . . . . . 12,000,000 1,800,000
========== =========
<PAGE>
ANNEX I
Pursuant to Section 7(f) of the Underwriting Agreement, the
accountants shall furnish letters to the Underwriters to the
effect that:
(i) They are independent certified public accountants
with respect to the Company and its subsidiaries within the
meaning of the Act and the applicable published rules and
regulations thereunder;
(ii) In their opinion, the financial statements, any
supplementary financial information and schedules and pro
forma financial information examined by them and included or
incorporated by reference in the Registration Statement or
the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act or
the Exchange Act, as applicable, and the related rules and
regulations thereunder; and they have made a review in
accordance with standards established by the American
Institute of Certified Public Accountants of the
consolidated interim financial statements, selected
financial data, pro forma financial information and
condensed financial statements derived from audited
financial statements of the Company for the periods
specified in such letter, as indicated in their reports
thereon, copies of which have been furnished to the
representatives of the Underwriters (the "Representatives");
(iii) The unaudited selected financial information
with respect to the consolidated results of operations and
financial position of the Company for the five most recent
fiscal years included in the Prospectus and included or
incorporated by reference in Item 6 of the Company's Annual
Report on Form 10-K for the most recent fiscal year agrees
with the corresponding amounts in the audited consolidated
financial statements for such five fiscal years which were
included or incorporated by reference in the Company's
Annual Reports on Form 10-K for such fiscal years;
(iv) On the basis of limited procedures, not
constituting an examination in accordance with generally
accepted auditing standards, consisting of a reading of the
unaudited financial statements and other information
referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its
subsidiaries since the date of the latest audited financial
statements included or incorporated by reference in the
Prospectus, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting
matters and such other inquiries and procedures as are
customarily made or carried out by such firm in connection
with public offerings and sales of equity securities (such
<PAGE>
inquiries and procedures to be specified in such letter),
nothing came to their attention that caused them to believe
that:
(A) the unaudited condensed consolidated
statements of income, consolidated balance sheets and
consolidated statements of cash flows included or
incorporated by reference in the Company's Quarterly
Reports on Form 10-Q incorporated by reference in the
Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of
the Exchange Act as it applies to Form 10-Q and the
related published rules and regulations thereunder or
are not in conformity with generally accepted
accounting principles applied on a basis substantially
consistent with the basis for the audited consolidated
statements of income, consolidated balance sheets and
consolidated statements of cash flows included or
incorporated by reference in the Company's Annual
Report on Form 10-K for the most recent fiscal year;
(B) any other unaudited income statement data and
balance sheet items included in the Prospectus do not
agree with the corresponding items in the unaudited
consolidated financial statements from which such data
and items were derived, and any such unaudited data and
items were not determined on a basis substantially
consistent with the basis for the corresponding amounts
in the audited consolidated financial statements
included or incorporated by reference in the Company's
Annual Report on Form 10-K for the most recent fiscal
year;
(C) the unaudited financial statements which were
not included in the Prospectus but from which were
derived the unaudited condensed financial statements
referred to in Clause (A) and any unaudited income
statement data and balance sheet items included in the
Prospectus and referred to in Clause (B) were not
determined on a basis substantially consistent with the
basis for the audited financial statements included or
incorporated by reference in the Company's Annual
Report on Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated
condensed financial statements included or incorporated
by reference in the Prospectus do not comply as to form
in all material respects with the applicable accounting
requirements of the Act and the published rules and
regulations thereunder or the pro forma adjustments
have not been properly applied to the historical
amounts in the compilation of those statements;
<PAGE>
(E) as of a specified date not more than five
days prior to the date of such letter, there have been
any changes in the consolidated capital stock (other
than issuances of capital stock upon exercise of
options and stock appreciation rights which were
outstanding on the date of the latest balance sheet
included or incorporated by reference in the
Prospectus) or any increase in the consolidated
long-term debt of the Company and its subsidiaries, or
any decreases in consolidated net current assets or net
assets or other items specified by the Representatives,
or any increases in any items specified by the
Representatives, in each case as compared with amounts
shown in the latest balance sheet included or
incorporated by reference in the Prospectus, except in
each case for changes, increases or decreases which the
Prospectus discloses have occurred or may occur or
which are described in such letter; and
(F) for the period from the date of the latest
financial statements included or incorporated by
reference in the Prospectus to the specified date
referred to in Clause (E), there were any decreases in
consolidated net revenues or operating profit or the
total or per share amounts of consolidated net income
or other items specified by the Representatives, or any
increases in any items specified by the
Representatives, in each case as compared with the
comparable period of the preceding year and with any
other period of corresponding length specified by the
Representatives, except in each case for increases or
decreases which the Prospectus discloses have occurred
or may occur or which are described in such letter; and
(v) In addition to the examination referred to in
their reports included or incorporated by reference in the
Prospectus and the limited procedure, inspection of minute
books, inquiries and other procedures referred to in
paragraphs (iii) and (iv) above, they have carried out
certain specified procedures, not constituting an
examination in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and
financial information specified by the Representatives which
are derived from the general accounting records of the
Company and its subsidiaries which appear in the Prospectus
and have compared certain of such amounts, percentages and
financial information with the accounting records of the
Company and its subsidiaries and have found them to be in
agreement.
Collins & Aikman Corporation
Common Stock
(par value $.01 per share)
____________
Underwriting Agreement
(International Version)
July __, 1994
Goldman Sachs International,
Merrill Lynch International Limited
Wasserstein Perella Securities, Inc.
Nikko Europe Plc
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman Sachs International
8-10 New Fetter Lane,
London EC4A 1DB, England
Dear Sirs:
Collins & Aikman Corporation, a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated
herein, to issue and sell to the Underwriters named in Schedule I
hereto (the "Underwriters") an aggregate of 3,000,000 shares (the
"Firm Shares"), par value $.01 per share ("Stock"), of the
Company, and, at the election of the Underwriters, up to 450,000
additional shares (the "Optional Shares") of Stock. The Firm
Shares and the Optional Shares which the Underwriters elect to
purchase pursuant to Section 2 hereof are herein collectively
called the "Shares".
It is understood and agreed to by all parties that the
Company is concurrently entering into an agreement, a copy of
which is attached hereto (the "U.S. Underwriting Agreement"),
providing for the sale by the Company of up to a total of
13,800,000 shares of Stock (the "U.S. Shares"), including the
over allotment option thereunder, through arrangements with
certain underwriters in the United States (the
"U.S. Underwriters"), for whom Goldman, Sachs & Co., Merrill
Lynch & Co., Wasserstein Perella Securities, Inc. and The Nikko
Securities Co. International, Inc. are acting as representatives.
Anything herein or therein to the contrary notwithstanding, the
respective closings under this Agreement and the
U.S. Underwriting Agreement are hereby expressly made conditional
on one another. The Underwriters hereunder and the
U.S. Underwriters are simultaneously entering into an Agreement
<PAGE>
between U.S. and International Underwriting Syndicates (the
"Agreement between the Syndicates") which provides, among other
things, for the transfer of shares of Stock between the two
syndicates and for consultation by the Lead Managers hereunder
with Goldman, Sachs & Co. prior to exercising the rights of the
Underwriters under Section 7 hereof. Two forms of prospectus are
to be used in connection with the offering and sale of shares of
Stock contemplated by the foregoing, one relating to the Shares
hereunder and the other relating to the U.S. Shares. The latter
form of prospectus will be identical to the former except for
certain substitute pages as included in the registration
statement and amendments thereto as mentioned below. Except as
used in Sections 2, 3, 4, 9 and 11 herein, and except as the
context may otherwise require, references hereinafter to the
Shares shall include all the shares of Stock which may be sold
pursuant to either this Agreement or the U.S. Underwriting
Agreement, and references herein to any prospectus whether in
preliminary or final form, and whether as amended or
supplemented, shall include both the U.S. and the international
versions thereof.
In addition, this Agreement incorporates by reference
certain provisions from the U.S. Underwriting Agreement
(including the related definitions of terms, which are also used
elsewhere herein) and, for purposes of applying the same,
references (whether in these precise words or their equivalent)
in the incorporated provisions to the "Underwriters" shall be to
the Underwriters hereunder, to the "Shares" shall be to the
Shares hereunder as just defined, to "this Agreement" (meaning
therein the U.S. Underwriting Agreement) shall be to this
Agreement (except where this Agreement is already referred to or
as the context may otherwise require) and to the representatives
of the Underwriters or to Goldman, Sachs & Co. shall be to the
addressees of this Agreement and to Goldman Sachs International
("GSI"), and, in general, all such provisions and defined terms
shall be applied mutatis mutandis as if the incorporated
provisions were set forth in full herein having regard to their
context in this Agreement as opposed to the U.S. Underwriting
Agreement.
1. The Company and Collins & Aikman Holdings II
Corporation, a Delaware corporation ("Holdings II"), hereby make
to the Underwriters the same respective representations,
warranties and agreements as are set forth in Section 1 of the
U.S. Underwriting Agreement, which Section is incorporated herein
by this reference.
2. Subject to the terms and conditions herein set forth,
(a) the Company agrees to issue and sell to each of the
Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company, at a purchase price
per share of $........, the number of Firm Shares (to be adjusted
by you so as to eliminate fractional shares) as set forth
opposite the name of such Underwriter in Schedule I hereto and
-2-
<PAGE>
(b) in the event and to the extent that the Underwriters shall
exercise the election to purchase Optional Shares as provided
below, the Company agrees to issue and sell to each of the
Underwriters, and each of the Underwriters agrees, severally and
not jointly, to purchase from the Company, at the purchase price
per share set forth in clause (a) of this Section 2, that portion
of the number of Optional Shares as to which such election shall
have been exercised (to be adjusted by you so as to eliminate
fractional shares) determined by multiplying such number of
Optional Shares by a fraction the numerator of which is the
maximum number of Optional Shares which such Underwriter is
entitled to purchase as set forth opposite the name of such
Underwriter in Schedule I hereto and the denominator of which is
the maximum number of the Optional Shares which all of the
Underwriters are entitled to purchase hereunder.
The Company hereby grants, severally and not jointly, to the
Underwriters the right to purchase at their election up to
450,000 Optional Shares, at the purchase price per share set
forth in the paragraph above, for the sole purpose of covering
overallotments in the sale of the Firm Shares. Any such election
to purchase Optional Shares may be exercised only by written
notice from you to the Company, given within a period of 30
calendar days after the date of this Agreement and setting forth
the aggregate number of Optional Shares to be purchased and the
date on which such Optional Shares are to be delivered, as
determined by you but in no event earlier than the First Time of
Delivery (as defined in Section 4 hereof) or, unless you and the
Company otherwise agree in writing, earlier than two or later
than ten business days after the date of such notice.
3. Upon the authorization by GSI of the release of the Firm
Shares, the several Underwriters propose to offer the Firm Shares
for sale upon the terms and conditions set forth in the
Prospectus and in the forms of Agreement among Underwriters
(International Version) and Selling Agreements, which have been
previously submitted to the Company by you. Each Underwriter
hereby makes to and with the Company the representations and
agreements of such Underwriter as a member of the selling group
contained in Sections 3(d) and 3(e) of the form of Selling
Agreement.
4. Certificates in definitive form for the Shares to be
purchased by each Underwriter hereunder, and in such
denominations and registered in such names as GSI may request
upon at least forty-eight hours' prior notice to the Company,
shall be delivered by or on behalf of the Company to you for the
account of such Underwriter, against payment by such Underwriter
or on its behalf of the purchase price therefor by certified or
official bank check or checks, payable to the order of the
Company and the Custodian, as their interests may appear, in
Federal (same day) funds, all at the offices of Jones, Day,
Reavis & Pogue, 599 Lexington Avenue, New York, New York 10022,
or at such other place as shall be agreed upon by the Company and
-3-
<PAGE>
you. The time and date of such delivery and payment shall be,
with respect to the Firm Shares, 9:30 a.m., New York City time,
on July ..., 1994 or such other time and date as you and the
Company may agree upon in writing, and, with respect to the
Optional Shares, 9:30 a.m., New York City time, on the date
specified by you in the written notice given by you of the
Underwriters' election to purchase such Optional Shares, or at
such other time and date as you and the Company may agree upon in
writing. Such time and date for delivery of the Firm Shares is
herein called the "First Time of Delivery", such time and date
for delivery of the Optional Shares, if not the First Time of
Delivery, is herein called the "Second Time of Delivery", and
each such time and date for delivery is herein called a "Time of
Delivery." Such certificates will be made available for checking
and packaging at least twenty four hours prior to each Time of
Delivery at the office of Goldman, Sachs & Co., 85 Broad Street,
New York, New York 10004. The Company agrees to reimburse GSI
for its overnight cost of funds in connection with borrowings
incurred to make payment to the Company in Federal (same day)
funds of the purchase price of the Shares. Such payment shall be
made by or on behalf of the Company by wire transfer of Federal
(same day) funds to the account specified by GSI. Such payment
will be made by 9:30 a.m., New York City time, on the New York
Business Day next following the Time of Delivery and will be in
the amount determined by GSI in its sole discretion to be its
costs of funds for such borrowings and notified to the Company in
writing prior to 4:00 p.m., New York City time, on the day prior
to such payment.
5. The Company hereby makes with the Underwriters the same
agreements as are set forth in Section 5 of the U.S. Underwriting
Agreement, which Section is incorporated herein by this
reference.
6. The Company and the Underwriters hereby agree with
respect to certain expenses on the same terms as are set forth in
Section 6 of the U.S. Underwriting Agreement, which Section is
incorporated herein by this reference.
7. Subject to the provisions of the Agreement between, the
obligations of the Underwriters hereunder shall be subject, in
their discretion, at each Time of Delivery to the condition that
all representations and warranties and other statements of the
Company herein are, at and as of such Time of Delivery, true and
correct, the condition that the Company shall have performed all
of their respective obligations hereunder theretofore to be
performed, and additional conditions identical to those set forth
in Section 7 of the U.S. Underwriting Agreement, which Section is
incorporated herein by this reference.
8. (a) The Company will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims,
-4-
<PAGE>
damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending
any such action or claim as such expenses are incurred; provided,
however, that the Company shall not be liable in any such case to
the extent that any such loss, claim, damage or liability arises
out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by any
Underwriter through GSI expressly for use therein.
(b) Each Underwriter will indemnify and hold harmless the
Company against any losses, claims, damages or liabilities to
which the Company may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by such
Underwriter through GSI expressly for use therein; and will
reimburse the Company for any legal or other expenses reasonably
incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party under such
subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which
it may have to any indemnified party otherwise than under such
subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of
the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall
-5-
<PAGE>
wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (who shall not, except
with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying
party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to
such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection
with the defense thereof other than reasonable costs of
investigation.
(d) If the indemnification provided for in this Section 8
is unavailable to or insufficient to hold harmless an indemnified
party under subsection (a), (b) or (c) above in respect of any
losses, claims, damages or liabilities (or actions in respect
thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other from
the offering of the Shares. If, however, the allocation provided
by the immediately preceding sentence is not permitted by
applicable law or if the indemnified party failed to give the
notice required under subsection (c) above, then each
indemnifying party shall contribute to such amount paid or
payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also
the relative fault of the Company on the one hand and the
Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other
relevant equitable considerations. The relative benefits
received by the Company on the one hand and the Underwriters on
the other shall be deemed to be in the same proportion as the
total net proceeds from the offering of the Shares purchased
under this Agreement (before deducting expenses) received by the
Company bear to the total underwriting discounts and commissions
received by the Underwriters with respect to the Shares purchased
under this Agreement, in each case as set forth in the table on
the cover page of the Prospectus. The relative fault shall be
determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or the
Underwriters on the other and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the
Underwriters agree that it would not be just and equitable if
contributions pursuant to this subsection (d) were determined by
pro rata allocation (even if the Underwriters were treated as one
entity for such purpose) or by any other method of allocation
-6-
<PAGE>
which does not take account of the equitable considerations
referred to above in this subsection (d). The amount paid or
payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to
include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending
any such action or claim. Notwithstanding the provisions of this
subsection (d), no Underwriter shall be required to contribute
any amount in excess of the amount by which the total price at
which the Shares underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages
which such Underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or
alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11 (f) of the
Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute
are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company under this Section 8
shall be in addition to any liability which the Company may
otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls any Underwriter
within the meaning of the Act; and the obligations of the
Underwriters under this Section 8 shall be in addition to any
liability which the respective Underwriters may otherwise have
and shall extend, upon the same terms and conditions, to each
officer and director of the Company (including any person who,
with his consent, is named in the Registration Statement as about
to become a director of the Company) and to each person, if any,
who controls the Company within the meaning of the Act.
9. (a) If any Underwriter shall default in its obligation
to purchase the Shares which it has agreed to purchase hereunder
at a Time of Delivery, you may in your discretion arrange for you
or another party or other parties to purchase such Shares on the
terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company shall be entitled to a further
period of thirty-six hours within which to procure another party
or other parties satisfactory to you to purchase such Shares on
such terms. In the event that, within the respective prescribed
periods, you notify the Company that you have so arranged for the
purchase of such Shares, or the Company notifies you that it has
so arranged for the purchase of such Shares, you or the Company
shall have the right to postpone such Time of Delivery for a
period of not more than seven days, in order to effect whatever
changes may thereby be made necessary in the Registration
Statement or the Prospectus, or in any other documents or
arrangements, and the Company agrees to file promptly any
amendments to the Registration Statement or the Prospectus which
-7-
<PAGE>
in your opinion may thereby be made necessary. The term
"Underwriter" as used in this Agreement shall include any person
substituted under this Section with like effect as if such person
had originally been a party to this Agreement with respect to
such Shares.
(b) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or
Underwriters by you and the Company as provided in subsection (a)
above, the aggregate number of such Shares which remains
unpurchased does not exceed one-eleventh of the aggregate number
of all the Shares to be purchased at such Time of Delivery, then
the Company shall have the right to require each non-defaulting
Underwriter to purchase the number of shares which such
Underwriter agreed to purchase hereunder at such Time of Delivery
and, in addition, to require each non-defaulting Underwriter to
purchase its pro rata share (based on the number of Shares which
such Underwriter agreed to purchase hereunder) of the Shares of
such defaulting Underwriter or Underwriters for which such
arrangements have not been made; but nothing herein shall relieve
a defaulting Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or
Underwriters by you and the Company as provided in subsection (a)
above, the aggregate number of such Shares which remains
unpurchased exceeds one-eleventh of the aggregate number of all
the Shares to be purchased at such Time of Delivery, or if the
Company shall not exercise the right described in subsection (b)
above to require non-defaulting Underwriters to purchase Shares
of a defaulting Underwriter or Underwriters, then this Agreement
(or, with respect to the Second Time of Delivery, the obligation
of the Underwriters to purchase and of the Company to sell the
Optional Shares) shall thereupon terminate, without liability on
the part of any non-defaulting Underwriter or the Company, except
for the expenses to be borne by the Company and the Underwriters
as provided in Section 6 hereof and the indemnity and
contribution agreements in Section 8 hereof; but nothing herein
shall relieve a defaulting Underwriter from liability for its
default.
10. The respective indemnities, agreements,
representations, warranties and other statements of the Company
and the several Underwriters, as set forth in this Agreement or
made by or on behalf of them, respectively, pursuant to this
Agreement, shall remain in full force and effect, regardless of
any investigation (or any statement as to the results thereof)
made by or on behalf of any Underwriter or any controlling person
of any Underwriter, or the Company, or any officer or director or
controlling person of the Company, and shall survive delivery of
and payment for the Shares.
11. If this Agreement shall be terminated pursuant to
Section 9 hereof, the Company shall not then be under any
-8-
<PAGE>
liability to any Underwriter except as provided in Section 6 and
Section 8 hereof; but, if for any other reason, any Shares are
not delivered by or on behalf of the Company as provided herein,
the Company will reimburse the Underwriters through GSI for all
out-of-pocket expenses approved in writing by GSI, including fees
and disbursements of counsel, reasonably incurred by the
Underwriters in making preparations for the purchase, sale and
delivery of the Shares not so delivered, but the Company shall
then be under no further liability to any Underwriter in respect
of the Shares not so delivered except as provided in Section 6
and Section 8 hereof.
12. In all dealings hereunder, you shall act on behalf of
each of the Underwriters, and the parties hereto shall be
entitled to act and rely upon any statement, request, notice or
agreement on behalf of any Underwriter made or given by you
jointly or by GSI on behalf of you as the representatives of the
Underwriters.
All statements, requests, notices and agreements hereunder
shall be in writing, and if to the Underwriters shall be
delivered or sent by mail, telex or facsimile transmission to the
Underwriters in care of GSI, Peterborough Court, 133 Fleet
Street, London EC4A 2BB, England, Attention: Equity Capital
Markets, Telex No. 94012165, facsimile transmission No. (071)
774-1550; and if to the Company shall be delivered or sent by
mail, telex or facsimile transmission to the address of the
Company set forth in the Registration Statement, Attention:
Secretary; provided, however, that any notice to an Underwriter
pursuant to Section 8(d) hereof shall be delivered or sent by
mail, telex or facsimile transmission to such Underwriter at its
address set forth in its Underwriters' Questionnaire, or telex
constituting such Questionnaire, which address will be supplied
to the Company by GSI upon request. Any such statements,
requests, notices or agreements shall take effect upon receipt
thereof.
13. This Agreement shall be binding upon, and inure solely
to the benefit of, the Underwriters, the Company and, to the
extent provided in Section 8 and Section 10 hereof, the officers
and directors of the Company and each person who controls the
Company or any Underwriter, and their respective heirs,
executors, administrators, successors and assigns, and no other
person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of any of the Shares from any
Underwriter shall be deemed a successor or assign by reason
merely of such purchase.
14. Time shall be of the essence of this Agreement.
15. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, United States
of America.
16. This Agreement may be executed by any one or more of
the parties hereto in any number of counterparts, each of which
shall be deemed to be an original, but all such counterparts
shall together constitute one and the same instrument.
-9-
<PAGE>
If the foregoing is in accordance with your understanding,
please sign and return to us eight counterparts hereof, and upon
the acceptance hereof by you, on behalf of each of the
Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement among each of the Underwriters and
the Company. It is understood that your acceptance of this
letter on behalf of each of the Underwriters is pursuant to the
authority set forth in a form of Agreement among Underwriters
(International Version), the form of which shall be furnished to
the Company for examination upon request, but without warranty on
your part as to the authority of the signers thereof.
Very truly yours,
Collins & Aikman Corporation
By:..............................
Name:
Title:
Collins & Aikman Holdings II Corporation
By:..............................
Name:
Title:
Accepted as of the date hereof at
New York, New York:
Goldman Sachs International
Merrill Lynch International Limited
Wasserstein Perella Securities, Inc.
Nikko Europe Plc
By: Goldman Sachs International
By:..........................
(Attorney-in-fact)
On behalf of each of the Underwriters
-10-
<PAGE>
SCHEDULE I
Number of
Total Optional Shares
Number of to be
Firm Shares Purchased if
to be Maximum Option
Underwriter Purchased Exercised
----------- --------- ---------
Goldman Sachs International .
Merrill Lynch International
Limited . . . . . . . . . . .
Wasserstein Perella
Securities, Inc . . . . . . .
Nikko Europe Plc. . . . . . .
Total 3,000,000 450,000
========= =======
July , 1994
Collins & Aikman Holdings Corporation
8320 University Executive Park
Suite 102
Charlotte, North Carolina 28262
Common Stock Purchase Agreement
-------------------------------
Dear Sirs:
The undersigned, Blackstone Capital Partners L.P.
("BCP") and Wasserstein Perella Partners, L.P. ("WPP", and
together with BCP, the "Stockholders"), understand that Collins &
Aikman Holdings Corporation (the "Company") proposes to effect a
recapitalization pursuant to which, among other things, the
Company would issue in a registered public offering 15,000,000
shares of its Common Stock, par value $.01 per share ("Common
Stock"), and utilize the proceeds, along with the proceeds of new
bank credit facilities, to redeem all the outstanding preferred
stock of the Company and its subsidiaries and to redeem or
defease substantially all the currently outstanding long-term
debt of it and its subsidiaries. Each of the Stockholders has
been furnished with a copy of the Company's registration
statement on Form S-2 (Registration No. 33-53179) as amended by
Amendments 1 through 5, relating to such public offering (the
"Registration Statement"), which more fully describes the
proposed recapitalization and other transactions relating
thereto. Capitalized terms used but not defined herein shall
have the meanings assigned to them in the Registration Statement.
The terms of the Company's New Credit Agreement require
that, in connection with the proposed recapitalization, the
Company receive certain specified proceeds from the sale of
Common Stock. Accordingly, each Stockholder severally agrees
that it will cause one of its affiliates (each, a "Partner"),
subject to the terms and conditions hereof, to purchase from the
Company, (a) on the Closing Date, 3,280,000 shares of Common
Stock and (b) no later than the 35th day (or, if such day is not
<PAGE>
2
a Business Day, the next succeeding Business Day) following the
time on which the Registration Statement is declared effective by
the Securities and Exchange Commission (the "Effective Date"),
(i) in the event the Underwriters' over-allotment option is not
exercised, an aggregate of 1,125,000 shares of Common Stock and
(ii) in the event the Underwriters' over-allotment option is
exercised, an aggregate number of shares of Common Stock equal to
(x) 1,125,000 minus (y) 50% of the number of shares as to which
-----
the over-allotment option is exercised. The purchase price per
share shall be paid in cash and shall be equal to the public
offering price for a share of Common Stock in the Offerings less
the per share Underwriting discount in the Offerings. It is
understood that the shares purchased hereunder will be shares
which have been registered for sale by the Company under the
Registration Statement.
Each Partner's obligation to purchase shares of Common
Stock pursuant to this letter agreement shall be conditioned upon
and subject to consummation of the Offerings.
Each Stockholder represents that it has arranged for,
and is providing to the Company upon the execution of this letter
agreement, a letter of credit with Chemical Bank for the benefit
of the Company in support of the obligations of such
Stockholder's affiliate under clause (b) above. The Company
agrees that if it effects any drawing under either such letter of
credit, the proceeds of such drawing shall be deemed to represent
payment by the applicable Partner of the purchase price for
shares of Common Stock under clause (b) above, and the Company
will promptly deliver the shares purchased with such proceeds to
such Partner. The Company further agrees that upon either
(i) the exercise in full of the Underwriters' over-allotment
option or (ii) the performance in full by a Partner of its
purchase obligation under clause (b) above, the Company will
forthwith surrender the letters of credit (or, in the case of
clause (ii) of this sentence, the letter of credit provided in
respect of such Partner) to Chemical Bank for cancellation,
without effecting any draw thereunder. Each Stockholder agrees
that it will not permit its affiliated Partner to sell or
otherwise dispose of any of the shares of Common Stock purchased
by such Partner hereunder for a period of 180 days following the
date of the Prospectus; provided that a Partner may sell or
--------
transfer shares to its affiliates during such period.
Notwithstanding anything to the contrary contained
herein, this agreement shall become effective and be binding on
the parties hereto only upon the occurrence of the Effective
Date.
<PAGE>
3
If the foregoing correctly sets forth our
understanding, please indicate your agreement to this letter by
executing two counterparts hereof in the space provided below and
returning one such counterpart to each of us. By signing below,
you confirm that the Company has full power and authority to
issue the shares of Common Stock to be purchased by the Partners
pursuant to this letter agreement.
Very truly yours,
BLACKSTONE CAPITAL PARTNERS L.P.
by
___________________________
Title:
WASSERSTEIN PERELLA PARTNERS, L.P.
by WASSERSTEIN PERELLA MANAGEMENT
PARTNERS, INC., its general
partner
by
____________________________
Title:
Agreed and accepted:
COLLINS & AIKMAN HOLDINGS
CORPORATION,
by
_____________________
Title:
Execution Copy
--------------
=================================================================
CREDIT AGREEMENT
Dated as of June 22, 1994
Among
COLLINS & AIKMAN PRODUCTS CO.,
as Borrower,
WCA CANADA INC.,
as Canadian Borrower,
COLLINS & AIKMAN CORPORATION,
as Guarantor,
THE LENDERS NAMED HEREIN,
CONTINENTAL BANK, N.A.,
NATIONSBANK, N.A.,
as Managing Agents,
And
CHEMICAL BANK,
as Administrative Agent
=================================================================
<PAGE>
TABLE OF CONTENTS
Article Section Page
I. DEFINITIONS
SECTION 1.01. Defined Terms. . . . . . . . . . . . . 1
SECTION 1.02. Terms Generally . . . . . . . . . . . 19
II. THE CREDITS
SECTION 2.01. Commitments. . . . . . . . . . . . . . 20
SECTION 2.02. Loans . . . . . . . . . . . . . . . . 22
SECTION 2.03. Notice of Borrowings . . . . . . . . . 23
SECTION 2.04. Notes; Repayment of Loans . . . . . . 24
SECTION 2.05. Fees. . . . . . . . . . . . . . . . . 24
SECTION 2.06. Interest on Loans . . . . . . . . . . 25
SECTION 2.07. Default Interest . . . . . . . . . . . 25
SECTION 2.08. Alternate Rate of Interest . . . . . . 26
SECTION 2.09. Termination and Reduction of
Commitments . . . . . . . . . . . . . . . . . . . . 26
SECTION 2.10. Conversion and Continuation of
Delayed Draw Term,
Term and Canadian Term Borrowings . . . 26
SECTION 2.11. Repayment of Term and Delayed Draw
Term Borrowings . . . . . . . . . . . . . . . . . . 28
SECTION 2.12. Prepayment . . . . . . . . . . . . . . 28
SECTION 2.13. Reserve Requirements; Change in
Circumstances . . . . . . . . . . . . . . . . . . . 30
SECTION 2.14. Change in Legality . . . . . . . . . . 31
SECTION 2.15. Indemnity . . . . . . . . . . . . . . 31
SECTION 2.16. Pro Rata Treatment . . . . . . . . . . 32
SECTION 2.17. Payments . . . . . . . . . . . . . . . 32
SECTION 2.18. Taxes . . . . . . . . . . . . . . . . 32
SECTION 2.19. Issuance of Letters of Credit . . . . 35
SECTION 2.20. Participations; Unconditional
Obligations . . . . . . . . . . . . . . . . . . . . 35
SECTION 2.21. Letter of Credit Fee . . . . . . . . . 36
SECTION 2.22. Agreement To Repay Letter of Credit
Disbursements . . . . . . . . . . . . . . . . . . . 36
SECTION 2.23. Letter of Credit Operations . . . . . 37
SECTION 2.24. Cash Collateralization . . . . . . . . 37
SECTION 2.25. Termination and Reduction of Letter
of Credit Commitment . . . . . . . . . . . . . . . 37
III. REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Organization, Corporate Powers . . . . 38
SECTION 3.02. Authorization . . . . . . . . . . . . 38
SECTION 3.03. Enforceability . . . . . . . . . . . . 38
SECTION 3.04. Recapitalization . . . . . . . . . . . 39
SECTION 3.05. Use of Proceeds . . . . . . . . . . . 39
SECTION 3.06. Federal Reserve Regulations . . . . . 39
i
<PAGE>
Article Section Page
SECTION 3.07. Capitalization of the Borrower and
Holdings . . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.08. Pledge Agreement . . . . . . . . . . . 40
SECTION 3.09. Financial Statements . . . . . . . . . 40
SECTION 3.10. No Material Adverse Change . . . . . . 40
SECTION 3.11. Title to Properties; Possession
Under Leases . . . . . . . . . . . . . . . . . . . 40
SECTION 3.12. Subsidiaries . . . . . . . . . . . . . 41
SECTION 3.13. Litigation; Compliance with Laws . . . 41
SECTION 3.14. Agreements . . . . . . . . . . . . . . 41
SECTION 3.15. Investment Company Act . . . . . . . . 41
SECTION 3.16. Public Utility Holding Company Act . . 41
SECTION 3.17. Tax Returns . . . . . . . . . . . . . 42
SECTION 3.18. No Material Misstatements . . . . . . 42
SECTION 3.19. Employee Benefit Plans . . . . . . . . 42
SECTION 3.20. Labor Matters . . . . . . . . . . . . 43
SECTION 3.21. Environmental Matters . . . . . . . . 43
SECTION 3.22. Solvency . . . . . . . . . . . . . . . 44
SECTION 3.23. Absence of Certain Restrictions . . . 44
SECTION 3.24. No Foreign Assets Control Regula-
tion Violation . . . . . . . . . . . . . . . . . . 45
SECTION 3.25. Insurance . . . . . . . . . . . . . . 45
SECTION 3.26. Certain Other Representations . . . . 45
IV. CONDITIONS
SECTION 4.01. All Credit Events . . . . . . . . . . 45
SECTION 4.02. First Borrowing . . . . . . . . . . . 46
V. AFFIRMATIVE COVENANTS
SECTION 5.01. Existence; Businesses and Proper-
ties . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 5.02. Insurance . . . . . . . . . . . . . . 50
SECTION 5.03. Taxes . . . . . . . . . . . . . . . . 50
SECTION 5.04. Financial Statements, Reports,
Amendments, etc. . . . . . . . . . . . . . . . . . 50
SECTION 5.05. Litigation and Other Notices . . . . . 52
SECTION 5.06. ERISA . . . . . . . . . . . . . . . . 52
SECTION 5.07. Maintaining Records; Access to
Properties and Inspections . . . . . . . . . . . . 52
SECTION 5.08. Use of Proceeds . . . . . . . . . . . 52
SECTION 5.09. Further Assurances . . . . . . . . . . 53
SECTION 5.10. Change in Ownership . . . . . . . . . 53
SECTION 5.11. Fiscal Year; Accounting . . . . . . . 53
SECTION 5.12. Dividends . . . . . . . . . . . . . . 53
SECTION 5.13. Rate Protection Agreements . . . . . . 54
SECTION 5.14. Corporate Separateness . . . . . . . . 54
SECTION 5.15. Business of Restricted
Subsidiaries. . . . . . . . . . . . . . . . . . . . . 54
VI. NEGATIVE COVENANTS
SECTION 6.01. Indebtedness . . . . . . . . . . . . . 54
ii
<PAGE>
Article Section Page
SECTION 6.02. Dividends and Distributions . . . . . 56
SECTION 6.03. Capital Expenditures . . . . . . . . . 57
SECTION 6.04. Liens . . . . . . . . . . . . . . . . 57
SECTION 6.05. Priority of Loan Payments . . . . . . 59
SECTION 6.06. Sale and Lease-Back Transactions . . . 60
SECTION 6.07. Investments, Loans and Advances . . . 60
SECTION 6.08. Mergers, Consolidations, Sales of
Assets and Acquisitions . . . . . . . . . . . . . . 61
SECTION 6.09. Transactions with Affiliates and
Stockholders . . . . . . . . . . . . . . . . . . . 62
SECTION 6.10. Subordinated Indebtedness . . . . . . 62
SECTION 6.11. Amendment of Constitutive Docu-
ments; Change in Corporate Structure . . . . . . . 63
SECTION 6.12. Business of Holdings and Restricted
Subsidiaries . . . . . . . . . . . . . . . . . . . 63
SECTION 6.13. Restrictive Agreements . . . . . . . . 63
SECTION 6.14. Interest Coverage Ratio . . . . . . . 63
SECTION 6.15. EBITDA . . . . . . . . . . . . . . . . 63
SECTION 6.16. Leverage Ratio . . . . . . . . . . . . 63
SECTION 6.17. Current Ratio . . . . . . . . . . . . 64
SECTION 6.18. Tax Sharing . . . . . . . . . . . . . 64
SECTION 6.19. Significant Subsidiaries . . . . . . . 64
SECTION 6.20. Inactive Subsidiaries . . . . . . . . 64
VII. EVENTS OF DEFAULT
VIII. THE ADMINISTRATIVE AGENT
IX. MISCELLANEOUS
SECTION 9.01. Notices . . . . . . . . . . . . . . . 69
SECTION 9.02. Survival of Agreement . . . . . . . . 69
SECTION 9.03. Binding Effect . . . . . . . . . . . . 70
SECTION 9.04. Successors and Assigns . . . . . . . . 70
SECTION 9.05. Expenses; Indemnity . . . . . . . . . 72
SECTION 9.06. Right of Setoff; Sharing . . . . . . . 73
SECTION 9.07. Applicable Law . . . . . . . . . . . . 74
SECTION 9.08. Waivers; Amendment . . . . . . . . . . 74
SECTION 9.09. Interest Rate Limitation . . . . . . . 75
SECTION 9.10. Entire Agreement . . . . . . . . . . . 75
SECTION 9.11. Waiver of Jury Trial . . . . . . . . . 75
SECTION 9.12. Severability . . . . . . . . . . . . . 75
SECTION 9.13. Counterparts . . . . . . . . . . . . . 75
SECTION 9.14. Headings . . . . . . . . . . . . . . . 75
SECTION 9.15. Jurisdiction; Consent to Service of
Process . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 9.16. Conversion of Currencies . . . . . . . 76
SECTION 9.17. Confidentiality . . . . . . . . . . . 76
iii
<PAGE>
Exhibits
Exhibit A-1Revolving Credit Note
Exhibit A-2Delayed Draw Term Note
Exhibit A-3Term Note
Exhibit A-4Swingline Note
Exhibit A-5Canadian Term Note
Exhibit A-6Intercompany Note
Exhibit BAssignment and Acceptance
Exhibit CAdministrative Questionnaire
Exhibit DForm of Guarantee Agreement
Exhibit EForm of Pledge Agreement
Exhibit FForm of Opinion of Cravath, Swaine & Moore,
Elizabeth R. Philipp, Esq. and Stikeman, Elliott
Exhibit G
Form of Compliance Certificate
Exhibit H
Form of Intercreditor Agreement
Schedules
1.01(A) Applicable Margin
1.01(B) Applicable Prepayment Percentage
1.01(C) Additional Designated Persons
1.01(D) Subordination Terms
2.01 Commitments
2.11(a) Term Loan Amortization Schedule; Canadian Term Loan
Amortization Schedule
3.07(b)(1)Holdings Common Stock By Designated Persons
3.07(b)(2)Options and Rights Regarding Holdings
Capital Stock
3.12(a) Subsidiaries of Holdings
3.12(b) Outstanding Commitments Relating to Capital Stock
3.17 Tax Matters
4.02(o) Indebtedness to be repaid on Closing Date
6.01 Existing Indebtedness
6.04 Existing Liens
6.07 Existing Investments
iv
<PAGE>
CREDIT AGREEMENT dated as of June 22, 1994, among
COLLINS & AIKMAN PRODUCTS CO., a Delaware corporation
(the "Borrower"), WCA CANADA INC., a Canadian corporation
(the "Canadian Borrower"), COLLINS & AIKMAN CORPORATION,
a Delaware corporation ("Holdings"), the financial
institutions listed in Schedule 2.01 hereto (the
"Lenders"), and CHEMICAL BANK, a New York banking
corporation ("Chemical"), as administrative agent for the
Lenders and the Issuing Banks (in such capacity, the
"Administrative Agent").
The Borrower has requested the Lenders to extend credit in
order to enable (a) the Borrower, subject to the terms and
conditions of this Agreement, to borrow (i) on a term basis, on
the Closing Date (as defined herein), an aggregate principal
amount not in excess of $405,000,000, (ii) on a term basis, at
any time during the Delayed Draw Availability Period (as defined
herein), an aggregate principal amount not in excess of
$25,000,000 and (iii) on a revolving basis, at any time and from
time to time prior to the Revolving Credit Maturity Date (as
defined herein), an aggregate principal amount at any time
outstanding not in excess of $150,000,000 and (b) the Canadian
Borrower, subject to the terms and conditions of this Agreement,
to borrow on a term basis, on the Closing Date, an aggregate
principal amount not in excess of $45,000,000. The Borrower also
has requested the Issuing Banks to issue letters of credit for
the account of the Borrower (with the exposure on such letters of
credit being limited to $50,000,000 and resulting in a reduction
to the availability of borrowings on a revolving basis). The
proceeds of such borrowings and such letters of credit are to be
used as described herein. The Lenders are willing to extend such
credit to the Borrower and the Canadian Borrower on the terms and
subject to the conditions set forth herein.
Accordingly, the Borrower, the Canadian Borrower, Holdings,
the Lenders, the Issuing Banks and the Administrative Agent agree
as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01. Defined Terms. In addition to the terms
defined above, as used in this Agreement the following terms
shall have the meanings specified below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR
Loans.
"ABR Canadian Term Loan" shall mean any Canadian Term
Loan bearing interest at a rate determined by reference to
the Alternate Base Rate in accordance with the provisions of
Article II.
<PAGE>
2
"ABR Delayed Draw Term Loan" shall mean any Delayed Draw
Term Loan bearing interest at a rate determined by reference
to the Alternate Base Rate in accordance with the provisions
of Article II.
"ABR Loan" shall mean any ABR Term Loan, ABR Delayed Draw
Term Loan, ABR Revolving Loan, ABR Canadian Term Loan or
Swingline Loan.
"ABR Revolving Loan" shall mean any Revolving Loan
bearing interest at a rate determined by reference to the
Alternate Base Rate in accordance with the provisions of
Article II.
"ABR Term Loan" shall mean any Term Loan bearing interest
at a rate determined by reference to the Alternate Base Rate
in accordance with the provisions of Article II.
"Adjusted LIBO Rate" shall mean, with respect to any
Eurodollar Borrowing for any Interest Period, an interest
rate per annum (rounded upwards, if necessary, to the next
1/16 of 1%) equal to the product of (a) the LIBO Rate in
effect for such Interest Period and (b) Statutory Reserves.
For purposes hereof, (a) if at least two offered rates for
deposits in dollars for a period comparable to the
applicable Interest Period appear on page 3750 (or any
successor page) of the Dow Jones Telerate Screen as of 11:00
a.m., London time, on the day that is two Business Days
prior to the first day of such Interest Period, the term
"LIBO Rate" shall mean the arithmetic mean of all such
offered rates and (b) if fewer than two such offered rates
so appear on page 3750 (or any successor page) of the Dow
Jones Telerate Screen, the term "LIBO Rate" shall mean the
rate (rounded upwards, if necessary, to the next 1/16 of 1%)
at which dollar deposits approximately equal in principal
amount to Chemical's portion (or, if Chemical shall not have
any portion, the portion of the Lender having the largest
applicable Type of Loan) of the applicable Eurodollar
Borrowing and for a period comparable to the applicable
Interest Period are offered to Chemical's office in which
its eurodollar operations in respect of eurodollar loans are
being conducted in immediately available funds in the
eurodollar market at approximately 11:00 a.m., New York
time, on the day that is two Business Days prior to the
first day of such Interest Period.
"Administrative Questionnaire" shall mean an
Administrative Questionnaire substantially in the form of
Exhibit C.
"Affiliate" shall mean, when used with respect to a
specified person, another person that directly, or indi-
rectly through one or more intermediaries, Controls or is
<PAGE>
3
Controlled by or is under common Control with the person
specified.
"Agency Fees" shall have the meaning assigned to such
term in Section 2.05(c).
"Agents" shall mean the collective reference to the
Administrative Agent and the Managing Agents.
"Alternate Base Rate" shall mean, for any day, a rate per
annum (rounded upwards, if necessary, to the next 1/16 of
1%) equal to the greatest of (a) the Prime Rate in effect on
such day, (b) the Base CD Rate in effect on such day plus 1%
and (c) the Federal Funds Effective Rate in effect on such
day plus 1/2 of 1%. For purposes hereof, "Prime Rate" shall
mean the rate of interest per annum publicly announced from
time to time by Chemical as its prime rate in effect at its
principal office in New York City; each change in the Prime
Rate shall be effective on the date such change is publicly
announced as being effective. "Base CD Rate" shall mean the
sum of (a) the product of (i) the Three-Month Secondary CD
Rate and (ii) Statutory Reserves and (b) the Assessment
Rate. "Three-Month Secondary CD Rate" shall mean, for any
day, the secondary market rate for three-month certificates
of deposit reported as being in effect on such day (or, if
such day shall not be a Business Day, the next preceding
Business Day) by the Board through the public information
telephone line of the Federal Reserve Bank of New York
(which rate will, under the current practices of the Board,
be published in Federal Reserve Statistical Release
H.15(519) during the week following such day), or, if such
rate shall not be so reported on such day or such next
preceding Business Day, the average of the secondary market
quotations for three-month certificates of deposit of major
money center banks in New York City received at
approximately 10:00 a.m., New York City time, on such day
(or, if such day shall not be a Business Day, on the next
preceding Business Day) by the Administrative Agent from
three New York City negotiable certificate of deposit
dealers of recognized standing selected by it. "Federal
Funds Effective Rate" shall mean, for any day, the weighted
average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by
Federal funds brokers, as published on the next succeeding
Business Day by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day which is a
Business Day, the average of the quotations for the day of
such transactions received by the Administrative Agent from
three Federal funds brokers of recognized standing selected
by it. If for any reason the Administrative Agent shall
have determined (which determination shall be conclusive
absent manifest error) that it is unable to ascertain the
Base CD Rate or the Federal Funds Effective Rate or both for
any reason, including the inability or failure of the
<PAGE>
4
Administrative Agent to obtain sufficient quotations in
accordance with the terms thereof, the Alternate Base Rate
shall be determined without regard to clause (b) or (c), or
both, of the first sentence of this definition, as
appropriate, until the circumstances giving rise to such
inability no longer exist. Any change in the Alternate Base
Rate due to a change in the Prime Rate, the Base CD Rate or
the Federal Funds Effective Rate shall be effective on the
effective date of such change in the Prime Rate, the Base CD
Rate or the Federal Funds Effective Rate, respectively.
"Applicable Level" shall mean at any time the highest of
Level I, Level II, Level III and Level IV in effect
determined in accordance with Schedule 1.01(A).
"Applicable Margin" means (i) for any date on or after
the Closing Date to but excluding the first day of the
second full fiscal quarter commencing after the Closing
Date, with respect to Eurodollar Loans, 1-3/4%, and with
respect to ABR Loans, 3/4 of 1%, and (ii) for any date on or
after the first day of the second full fiscal quarter
commencing after the Closing Date, with respect to any
Eurodollar Loans or ABR Loans, as the case may be, the
applicable margin set forth on Schedule 1.01(A) opposite the
Applicable Level, in each case as of the last day of the
Borrower's fiscal quarter most recently ended as of such
date. Notwithstanding anything herein to the contrary, from
and after the fifth anniversary of the Closing Date the
Applicable Margin shall be 1/4 of 1% higher than the rate
otherwise determined pursuant to this definition.
"Applicable Percentage" shall mean, with respect to any
Revolving Lender, the percentage of the aggregate Revolving
Credit Commitments represented by such Revolving Lender's
Revolving Credit Commitment.
"Applicable Prepayment Percentage" shall mean at any time
75% or, if the Applicable Level is higher than Level I, the
percentage set forth in Part I of Schedule 1.01(B) opposite
the Applicable Level in effect at such time.
Notwithstanding the foregoing, if the Term Loans and
Canadian Term Loans have been repaid in the amounts set
forth in Part II of Schedule 1.01(B), the Applicable
Prepayment Percentage shall be the percentage set forth in
Part I of Schedule 1.01(B) opposite the Applicable Level
determined by increasing the current Applicable Level by the
number of additional Levels set forth opposite such amount
of Term Loans and Canadian Term Loans so repaid in Part II
of Schedule 1.01(B).
"Assessment Rate" shall mean for any date the annual rate
(rounded upwards, if necessary, to the next 1/100 of 1%)
most recently estimated by the Administrative Agent as the
then current net annual assessment rate that will be
<PAGE>
5
employed in determining amounts payable by Chemical to the
Federal Deposit Insurance Corporation (or any successor) for
insurance by such Corporation (or such successor) of time
deposits made in dollars at Chemical's domestic offices.
"Assignment and Acceptance" shall mean an assignment and
acceptance entered into by a Lender and an assignee, and
accepted by the Administrative Agent, substantially in the
form of Exhibit B or such other form as shall be approved by
the Administrative Agent.
"Blackstone" shall mean Blackstone Capital Partners L.P.,
a Delaware limited partnership.
"Blackstone Entities" shall mean Blackstone, Blackstone
Group, Blackstone Management Partners, L.P., Blackstone
Management Associates, L.P. or any of their Affiliates.
"Blackstone Group" shall mean The Blackstone Group L.P.,
a Delaware limited partnership.
"Board" shall mean the Board of Governors of the Federal
Reserve System of the United States (or any successor).
"Borrower Common Stock" shall have the meaning assigned
to that term in Section 3.07(a).
"Borrowing" shall mean a group of Loans of a single Type
made to the Borrower or the Canadian Borrower on a single
date and as to which a single Interest Period is in effect.
"Business Day" shall mean any day (other than a day which
is a Saturday, Sunday or legal holiday in the State of New
York) on which banks are open for business in New York City;
provided, however, that, when used in connection with a
Eurodollar Loan, the term "Business Day" shall also exclude
any day on which banks are not open for dealings in dollar
deposits in the London interbank market.
"Canadian Term Borrowing" shall mean a Borrowing
comprised of Canadian Term Loans.
"Canadian Term Loan Commitment" shall mean, with respect
to each Lender, the commitment, if any, of such Lender to
make Canadian Term Loans hereunder as set forth in Schedule
2.01, as the same may be reduced from time to time pursuant
to Section 2.09.
"Canadian Term Loan Maturity Date" shall mean the eighth
anniversary of the Closing Date.
"Canadian Term Loan Repayment Date" shall have the
meaning assigned to such term in Section 2.11.
<PAGE>
6
"Canadian Term Loans" shall mean the term loans made to
the Canadian Borrower pursuant to Section 2.01(e). Each
Canadian Term Loan shall be a Eurodollar Canadian Term Loan
or an ABR Canadian Term Loan.
"Canadian Term Note" shall mean a promissory note of the
Canadian Borrower, substantially in the form of Exhibit A-5,
evidencing Canadian Term Loans.
"Capital Expenditures" shall mean, for any person in any
period, the aggregate amount of all capital expenditures of
such person during such period (but not including Permitted
Business Acquisitions). For the purposes hereof, the amount
of any Capital Expenditure shall not include (i) an amount
equal to that portion of the proceeds received upon any
sale, transfer or other disposition of assets or properties
pursuant to Section 6.08(a), (g) or (i) which is applied to
the purchase of replacement assets or properties used for
the same purpose as the assets or properties disposed of
within 12 months of the receipt thereof, (ii) expenditures
that are accounted for as capital expenditures of such
person and that actually are paid for by a third party
(excluding Holdings or any subsidiary thereof) and for which
neither Holdings nor any subsidiary thereof has provided or
is required to provide, directly or indirectly, any
consideration to such third party or any other person
(whether before, during or after such period), (iii) the
book value of any asset owned by such person prior to or
during such period to the extent that such book value is
included as a capital expenditure during such period as a
result of such person reusing or beginning to reuse such
asset during such period without a corresponding expenditure
actually having been made in such period, provided that any
expenditure necessary in order to permit such asset to be
reused shall be included as a Capital Expenditure during the
period that such expenditure actually is made or (iv)
expenditures of insurance proceeds or condemnation awards
received in connection with the loss, damage, destruction or
condemnation of property of Holdings or its subsidiaries.
"Capital Lease Obligations" of any person shall mean the
obligations of such person to pay rent or other amounts
under any lease of (or other arrangement conveying the right
to use) real or personal property, or a combination thereof,
which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such
person under GAAP and, for the purposes hereof, the amount
of such obligations at any time shall be the capitalized
amount thereof at such time determined in accordance with
GAAP.
"Cash Interest Expense" shall mean Interest Expense paid
or required to be paid in cash (but excluding any
<PAGE>
7
amortization of debt discounts and fees included in the
calculation of Interest Expense).
A "Change in Control" shall be deemed to have occurred if
(a) Holdings shall cease to directly own, beneficially and
of record, free and clear of any and all Liens (other than
Liens in favor of the Collateral Agent pursuant to the
Pledge Agreement), 100% of the issued and outstanding
capital stock of the Borrower; (b) any person or group
(within the meaning of Rule 13d-5 of the Securities and
Exchange Commission as in effect on the date hereof) (other
than (i) any Designated Person or (ii) any combination of
Designated Persons) shall own beneficially, directly or
indirectly, shares representing more than 25% of the
aggregate ordinary voting power represented by the issued
and outstanding capital stock of Holdings at a time when
Designated Persons or any combination of Designated Persons
do not own, beneficially, free and clear of Liens, shares
representing at least 50% of the aggregate ordinary voting
power represented by the issued and outstanding capital
stock of Holdings; or (c) the Continuing Directors shall
cease to occupy a majority of the seats (excluding vacant
seats) on the Board of Directors of Holdings. For purposes
of clause (b) of this definition, the term "Designated
Person" shall be deemed to include any other holder or
holders of shares of Holdings having ordinary voting power
if any Blackstone Entity or WP Entity shall hold the
irrevocable general proxy of each such holder in respect of
the shares held by such holder.
"Charges" shall have the meaning assigned to that term in
Section 9.09.
"Closing Date" shall mean the date on which the first
Loan is made pursuant to this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as
amended from time to time.
"Collateral Agent" shall mean Chemical, as Collateral
Agent under the Pledge Agreement and the Guarantee
Agreement.
"Commitment" shall mean, with respect to any Lender, such
Lender's Term Loan Commitment, Delayed Draw Term Loan
Commitment, Swingline Loan Commitment, Canadian Term Loan
Commitment and Revolving Credit Commitment.
"Commitment Fee" shall have the meaning assigned to such
term in Section 2.05(a).
"Compliance Certificate" shall have the meaning assigned
to such term in Section 5.04(c).
<PAGE>
8
"Contaminants" means those substances which are regulated
by or form the basis of liability under any Environmental
Law, including asbestos, polychlorinated biphenyls,
Hazardous Materials, pollutants or solid wastes.
"Continuing Directors" shall mean the collective
reference to (i) all members of the Board of Directors of
Holdings who have held office continuously since the Closing
Date and (ii) all members of the Board of Directors of
Holdings who assumed office after the Closing Date and whose
election and nomination for election by Holdings'
shareholders was approved by a vote of a majority of the
then Continuing Directors.
"Control" shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of
the management or policies of a person, whether through the
ownership of voting securities, by contract or otherwise,
and "Controlling" and "Controlled" shall have meanings
correlative thereto.
"Credit Agreement Creditors" shall mean the
Administrative Agent, the Issuing Banks and the Lenders.
"Current Assets" shall mean, with respect to any person
at any date, the consolidated aggregate amount of all assets
of such person which would be classified as current assets
at such date, other than cash and cash equivalents.
"Current Liabilities" shall mean, with respect to any
person at any date, the consolidated aggregate amount of all
liabilities of such person (including tax and other proper
accruals) which would be classified as current liabilities
at such date, other than (without duplication) (i) the
current portion of long-term debt, (ii) accruals of Interest
Expense (excluding Interest Expense which is due and unpaid)
and losses or expenses on the sale of receivables to the
Finance Subsidiary, (iii) Revolving Loans classified as
current, (iv) accruals of transaction costs resulting from
the Recapitalization Transactions and (v) accruals of any
costs or expenses related to severance or termination of
employees accrued prior to the date hereof.
"Current Ratio" shall mean, with respect to Holdings on
any date, the ratio of (a) Current Assets plus (without
duplication) the accounts receivable owned by any Finance
Subsidiary to (b) Current Liabilities.
"Default" shall mean any event or condition which upon
notice, lapse of time or both would constitute an Event of
Default.
<PAGE>
9
"Delayed Draw Availability Period" shall mean the period
from and including the Closing Date to and including the
first anniversary of the Closing Date.
"Delayed Draw Borrowing" shall mean a Borrowing comprised
of Delayed Draw Term Loans.
"Delayed Draw Term Loan Commitment" shall mean, with
respect to each Lender, the commitment, if any, of such
Lender to make Delayed Draw Term Loans hereunder as set
forth in Schedule 2.01, as the same may be reduced from time
to time pursuant to Section 2.09.
"Delayed Draw Term Loan Maturity Date" shall mean the
eighth anniversary of the Closing Date.
"Delayed Draw Term Loan Repayment Date" shall have the
meaning assigned to such term in Section 2.11.
"Delayed Draw Term Loans" shall mean the delayed draw
term loans made to the Borrower pursuant to Section 2.01(b).
Each Delayed Draw Term Loan shall be a Eurodollar Delayed
Draw Term Loan or an ABR Delayed Draw Term Loan.
"Delayed Draw Term Note" shall mean a promissory note of
the Borrower, substantially in the form of Exhibit A-2,
evidencing Delayed Draw Term Loans.
"Designated Persons" shall mean any one or more of the
Blackstone Entities, the WP Entities and the persons listed
on Schedule 1.01(C).
"Dividend Condition" shall mean that the Applicable Level
is at least Level II and the outstanding principal amount of
the Term Loans and Canadian Term Loans is less than
$350,000,000.
"dollars" or "$" shall mean lawful money of the United
States of America. All Loans and Letters of Credit shall be
denominated in dollars and all payment obligations of the
Borrower and the Canadian Borrower under the Loan Documents
shall be in dollars.
"Domestic Restricted Subsidiary" means any Restricted
Subsidiary incorporated or organized under the laws of the
United States of America or any state thereof at least 90%
of the capital stock of which is owned directly or
indirectly by the Borrower.
"EBITDA" shall mean, without duplication, for any fiscal
period, the sum of the amounts for such fiscal period of (i)
Net Income, (ii) provision for taxes based on income, (iii)
depreciation expense, (iv) total interest expense (whether
shown as interest expense or as loss and expenses on sales
<PAGE>
10
of receivables), (v) amortization expense and (vi) other
non-cash items reducing Net Income, all as determined on a
consolidated basis for Holdings and its Restricted
Subsidiaries in conformity with GAAP.
"Environmental Claim" means any written accusation,
allegation, notice of violation, claim, demand, order,
directive, cost recovery action or proceeding by any
Governmental Authority or, if any Responsible Officer of
Holdings has knowledge of it, by any person for damages,
injunctive or equitable relief, personal injury (including
sickness, disease or death), remedial action costs, tangible
or intangible property damage, damage to the environment or
natural resources, nuisance, pollution, contamination or
other adverse effects on the environment, or for fines,
penalties or restrictions, resulting from or based upon (i)
the existence, or the continuation of the existence, of a
Release (including sudden or non-sudden, accidental or
non-accidental Releases) of, or exposure to, any Contaminant
or odor, (ii) the presence, use, handling, transportation,
storage, treatment or the disposal of Contaminants in
connection with the operation of the facilities to which
such Release relates or (iii) the violation or alleged
violation of any Environmental Law.
"Environmental Law" means any and all applicable
treaties, laws, regulations, enforceable requirements,
binding determinations, orders, decrees, judgments,
injunctions, permits, approvals, authorizations, licenses,
variances, permissions, notices or binding agreements
issued, promulgated or entered by any Governmental
Authority, relating to the environment, preservation or
reclamation of natural resources or to the management,
Release or threatened Release of Contaminants or noxious
odor, including the Hazardous Materials Transportation Act,
49 U.S.C. Sec.Sec. 1801 et seq., Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended
by the Superfund Amendments and Reauthorization Act of 1986,
42 U.S.C. Sec.Sec. 9601 et seq., Solid Waste Disposal Act, as
amended by the Resource Conservation and Recovery Act of
1976 and Hazardous and Solid Waste Amendments of 1984, 42
U.S.C. Sec.Sec. 6901, et seq., Federal Water Pollution Control
Act, as amended by the Clean Water Act of 1977, 33 U.S.C.
Sec.Sec. 1251 et seq., Clean Air Act of 1970, as amended 42.
U.S.C. Sec.Sec. 7401 et seq., Toxic Substances Control Act of
1976, 15 U.S.C. Sec.Sec. 2601 et seq., Emergency Planning and
Community Right-to-Know Act of 1986, 42 U.S.C. Sec.Sec. 11001 et
seq., National Environmental Policy Act of 1975, 42 U.S.C.
Sec.Sec. 4321 et seq., Safe Drinking Water Act of 1974, as
amended, 42 U.S.C. Sec.Sec. 300(f) et seq., and any similar or
implementing state or foreign law, and all amendments or
regulations promulgated thereunder.
<PAGE>
11
"Environmental Permit" means any permit, approval,
authorization, license, variance, or permission required
from any Governmental Authority pursuant to any applicable
Environmental Law.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as the same may be amended from time
to time.
"ERISA Affiliate" with respect to any person shall mean
any trade or business (whether or not incorporated) that is
a member of a group of which such person is a member and
which is treated as a single employer under Section 414 of
the Code.
"ESOP" shall mean any employee stock ownership plan to be
established by the Borrower or a subsidiary Guarantor
thereof to make the ESOP Investment.
"ESOP Investment" shall mean the issuance and sale of
shares of Holdings Common Stock to, or the purchase of
shares of Holdings Common Stock in open market or privately
negotiated transactions by, the ESOP from time to time.
"ESOP Loans" shall mean a loan or loans to be made from
time to time by the Borrower to the ESOP in an aggregate
amount not to exceed $25,000,000, solely to enable the ESOP
to effect the ESOP Investment.
"Eurodollar Borrowing" shall mean a Borrowing comprised
of Eurodollar Loans.
"Eurodollar Canadian Term Loan" shall mean any Canadian
Term Loan bearing interest at a rate determined by reference
to the Adjusted LIBO Rate in accordance with the provisions
of Article II.
"Eurodollar Delayed Draw Term Loan" shall mean any
Delayed Draw Term Loan bearing interest at a rate determined
by reference to the Adjusted LIBO Rate in accordance with
the provisions of Article II.
"Eurodollar Loan" shall mean any Eurodollar Term Loan,
Eurodollar Delayed Draw Term Loan, Eurodollar Canadian Term
Loan or Eurodollar Revolving Loan.
"Eurodollar Revolving Loan" shall mean any Revolving Loan
bearing interest at a rate determined by reference to the
Adjusted LIBO Rate in accordance with the provisions of
Article II.
"Eurodollar Term Loan" shall mean any Term Loan bearing
interest at a rate determined by reference to the Adjusted
LIBO Rate in accordance with the provisions of Article II.
<PAGE>
12
"Event of Default" shall have the meaning assigned to
such term in Article VII.
"Excess Cash Flow" shall mean for any period (i) the Net
Income for such period plus (minus) (ii) the amount of
depreciation, depletion, amortization of intangibles,
deferred taxes, accreted and zero coupon bond interest and
other noncash expenses (revenues) which, pursuant to GAAP,
were deducted (added) in determining such Net Income minus
(plus) (iii) additions (reductions, other than reductions
attributable solely to Specified Asset Sales) to working
capital for such period (i.e., the increase or decrease in
Current Assets of Holdings and the Restricted Subsidiaries
minus Current Liabilities of Holdings and the Restricted
Subsidiaries from the beginning to the end of such period,
as adjusted to exclude reductions attributable solely to
Specified Asset Sales) minus (iv) the amount of Capital
Expenditures for such period paid by Holdings and the
Restricted Subsidiaries in cash from funds other than from
the proceeds of Borrowings minus (v) the sum of (a)
scheduled Term Loan, Canadian Term Loan and Delayed Draw
Term Loan repayments made during such period pursuant to
Section 2.11, (b) optional prepayments of the Term Loans,
the Canadian Term Loans and the Delayed Draw Term Loans made
during such period pursuant to Section 2.12(a) and (c)
Revolving Loan repayments made during such period that were
required to be made as a result of voluntary reductions of
the Revolving Commitment pursuant to Section 2.09(b) minus
(vi) scheduled mandatory payments of principal of
Indebtedness of Holdings and the Restricted Subsidiaries
other than the Loans made during such period minus (vii)
fees and expenses paid in cash in connection with the
Recapitalization Transactions to the extent not deducted in
determining Net Income and provided that such amounts are
paid from reserves established therefor by the Borrower on
the Closing Date minus (viii) amounts paid in cash for
liabilities relating to discontinued operations which were
discontinued prior to the Closing Date to the extent not
deducted in determining Net Income, provided that such
amounts are paid from reserves established by the Borrower
for such liabilities prior to the Closing Date.
"Executive Officer" of any corporation shall mean the
president, any senior vice president or any vice president
of such person.
"Existing Credit Agreement" shall mean the Credit
Agreement dated as of May 15, 1991, as amended, among the
Borrower and certain of its subsidiaries and the financial
institutions named therein.
"Fees" shall mean the Agency Fees, the Participation
Fees, the Fronting Fees, the Commitment Fees and the Letter
of Credit Fees.
<PAGE>
13
"Finance Subsidiary" shall mean any wholly-owned
subsidiary of the Borrower that is formed for the sole
purpose of engaging in Permitted Receivables Financings.
"Financial Officer" of any corporation shall mean the
chief financial officer, Senior Vice President-Finance and
Accounting, Vice President-Finance, Controller, or Treasurer
of such corporation.
"Fronting Fees" shall have the meaning assigned to such
term in Section 2.05(d).
"Funded Debt" shall mean, as applied to any person, all
Indebtedness for borrowed money (including, without
limitation, Capital Lease Obligations and unreimbursed
drawings under letters of credit) or evidenced by a note,
bond, debenture or similar instrument of that person (it
being understood that all Loans shall at all times
constitute "Funded Debt" for all purposes hereunder).
"GAAP" shall mean United States generally accepted
accounting principles.
"Governmental Authority" shall mean any international,
Federal, state, regional, local or foreign court or
governmental agency, authority, instrumentality or
regulatory body.
"Guarantors" shall mean Holdings and each Restricted
Subsidiary (other than Inactive Subsidiaries) incorporated
or organized under the laws of the United States or any
State thereof.
"Guarantee" of or by any person shall mean (i) any
obligation, contingent or otherwise, of such person guaran-
teeing or having the economic effect of guaranteeing any
Indebtedness of any other person (the "primary obligor") in
any manner, whether directly or indirectly, and including
any obligation of such person, direct or indirect, (a) to
purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness (whether arising by virtue
of partnership arrangements, by agreement to keep well, to
purchase assets, goods, securities or services, to take-
or-pay or otherwise) or to purchase (or to advance or supply
funds for the purchase of) any security for the payment of
such Indebtedness, (b) to purchase property, securities or
services for the purpose of assuring the owner of such
Indebtedness of the payment of such Indebtedness, (c) to
maintain working capital, equity capital or other financial
statement conditions or liquidity of the primary obligor so
as to enable the primary obligor to pay such Indebtedness or
(d) entered into for the purpose of assuring in any other
manner the holders of such Indebtedness of the payment
thereof or to protect such holders against loss in respect
<PAGE>
14
thereof (in whole or in part), or (ii) any Lien on any
assets of such person securing any Indebtedness of any other
person, whether or not such Indebtedness is assumed by such
person; provided, however, that the term Guarantee shall not
include endorsements for collection or deposit, in either
case in the ordinary course of business.
"Guarantee Agreement" shall mean the Guarantee Agreement
substantially in the form attached as Exhibit D, as amended
and in effect from time to time.
"Hazardous Materials" means all explosive or regulated
radioactive materials or substances, hazardous or toxic
wastes or substances, petroleum (including crude oil or any
fraction thereof) or petroleum distillates, asbestos or
material containing asbestos and all materials regulated
pursuant to any Environmental Law, including materials
listed in 49 C.F.R. Section 172.101 and materials defined as
hazardous pursuant to Section 101(14) of the Comprehensive
Environmental Response, Compensation and Liability Act of
1980, as amended.
"Holdings Common Stock" shall mean the Common Stock, par
value $.01 per Share, of Holdings.
"Holdings Underwriting Agreement" shall mean the
Underwriting Agreement to be entered into among Holdings and
Goldman, Sachs & Co., Merrill Lynch & Co., Wasserstein
Perella Securities, Inc. and The Nikko Securities Co., as
Representatives of the several underwriters listed therein,
relating to the Public Offering, in substantially the form
filed with the Securities and Exchange Commission prior to
the date of this Agreement or in such other form as shall be
satisfactory to the Agents.
"Inactive Subsidiary" shall mean the Restricted
Subsidiaries listed as Inactive Subsidiaries on Schedule
3.12(a) and which Restricted Subsidiaries (i) individually
and in the aggregate have no material net assets and (ii) do
not engage in any operating activity (other than payroll or
the leasing of immaterial property).
"Indebtedness" of any person shall mean, without
duplication, (a) all indebtedness of such person for
borrowed money or for the deferred purchase price of
property or services (other than current trade liabilities
incurred in the ordinary course of business), (b) any other
indebtedness of such person which is evidenced by a note,
bond, debenture or similar instrument, (c) all Capital Lease
Obligations of such person, (d) all obligations of such
person in respect of bankers' acceptances issued or created
for the account of such person, (e) all Indebtedness of
others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise,
<PAGE>
15
to be secured by) any Lien on any property owned or acquired
by such person even though such person has not assumed or
otherwise become liable for the payment thereof, (f) all
obligations of such person in respect of Interest Rate
Agreements which, in accordance with the definition of
Interest Rate Agreement, constitute (or would upon early
termination constitute) Indebtedness and (g) all Guarantees
by such person of Indebtedness of others. The Indebtedness
of any person shall include the Indebtedness of any
partnership in which such person is a general partner;
provided that, if the sole asset of such person is its
general partnership interest in such partnership, the amount
of such Indebtedness shall be deemed equal to the value of
such general partnership interest and the amount of any
Indebtedness in respect of any Guarantee of such partnership
Indebtedness shall be limited to the same extent as such
Guarantee may be limited.
"Indemnitee" shall have the meaning assigned to that term
in Section 9.05(b).
"Intercompany Loan" shall mean a loan made by any
subsidiary of the Borrower to the Borrower or any Domestic
Restricted Subsidiary or by any Restricted Subsidiary to any
Domestic Restricted Subsidiary, evidenced by an Intercompany
Note pledged pursuant to the Pledge Agreement in the case of
such loans from any such person to another such person
aggregating more than $10,000,000.
"Intercreditor Agreement" shall mean the Master
Collateral and Intercreditor Agreement substantially in the
form attached as Exhibit H, as amended in effect from time
to time.
"Intercompany Note" shall mean an intercompany note
evidencing Indebtedness owed by the Borrower or any of its
wholly-owned subsidiaries to the Borrower or any of its
wholly-owned subsidiaries and pledged pursuant to the Pledge
Agreement in accordance with Section 6.01(d), in
substantially the form of Exhibit A-6 annexed hereto.
"Interest Coverage Ratio" shall mean, for any period of
four (or, if less, the number of full fiscal quarters ending
after the Closing Date) consecutive fiscal quarters, the
ratio of (a) EBITDA on a consolidated basis for such period
to (b) the sum of Cash Interest Expense of Holdings and the
Restricted Subsidiaries on a consolidated basis for such
period and losses or expenses on the sale of receivables to
the Finance Subsidiary.
"Interest Expense" shall mean, with respect to any person
for any period, the gross interest expense of such person
for such period determined on a consolidated basis in
accordance with GAAP consistently applied, including (a) the
<PAGE>
16
amortization of debt discounts, (b) the amortization of all
fees (including fees with respect to interest rate protec-
tion agreements) payable in connection with the incurrence
of Indebtedness to the extent included in interest expense
and (c) the portion of any payments or accruals with respect
to Capital Lease Obligations allocable to interest expense,
net of all interest income for such period (except for pur-
poses of the definition of Cash Interest Expense, in which
case only interest income paid or required to be paid in
cash shall be netted against cash interest expense). For
purposes of the foregoing, gross interest expense shall be
determined after giving effect to any net payments made or
received by such person with respect to interest rate pro-
tection agreements entered into as a hedge against interest
rate exposure.
"Interest Payment Date" shall mean, (a)(i) with respect
to any Eurodollar Loan, the last day of the Interest Period
applicable to the Borrowing of which such Loan is a part
and, in the case of a Eurodollar Borrowing with an Interest
Period of more than three months' duration, each day that
would have been an Interest Payment Date had successive
Interest Periods of three months' duration been applicable
to such Borrowing, and, in addition, the date of any
prepayment, refinancing or conversion of such Borrowing with
or to a Borrowing of a different Type and (ii) with respect
to any ABR Loan or Swingline Loan, the last day of each
March, June, September and December, commencing September
30, 1994 and (b) the Revolving Credit Maturity Date, the
Delayed Draw Term Loan Maturity Date, the Canadian Term Loan
Maturity Date or the Term Loan Maturity Date, as applicable.
"Interest Period" shall mean (a) as to any Eurodollar
Borrowing, the period commencing on the date of such
Borrowing or on the last day of the immediately preceding
Interest Period applicable to such Borrowing, as the case
may be, and ending on the numerically corresponding day (or,
if there is no numerically corresponding day, on the last
day) in the calendar month that is 1, 2, 3 or 6 (or, subject
to availability (as determined by all applicable Lenders), 9
or 12) months thereafter, as the Borrower or the Canadian
Borrower, as the case may be, may elect and (b) as to any
ABR Borrowing or Swingline Loan, the period commencing on
the date of such Borrowing or Loan or on the last day of the
immediately preceding Interest Period applicable to such
Borrowing or Loan, as the case may be, and ending on the
earliest of (i) the next succeeding March 31, June 30,
September 30 or December 31, (ii) the Revolving Credit
Maturity Date, the Delayed Draw Term Loan Maturity Date, the
Canadian Term Loan Maturity Date or the Term Loan Maturity
Date, as applicable, and (iii) the date such Borrowing is
converted to a Borrowing of a different Type in accordance
with Section 2.10 or repaid or prepaid in accordance with
Section 2.01(d), 2.11 or 2.12; provided, however, that if
<PAGE>
17
any Interest Period would end on a day other than a Business
Day, such Interest Period shall be extended to the next
succeeding Business Day unless, in the case of a Eurodollar
Borrowing only, such next succeeding Business Day would fall
in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day.
Interest shall accrue from and including the first day of an
Interest Period to but excluding the last day of such
Interest Period.
"Interest Rate Agreement" shall mean any interest rate
swap agreement, interest rate cap agreement, interest rate
collar agreement, currency hedge agreement or other similar
agreement or arrangement designed to protect the Borrower or
any of its Restricted Subsidiaries against fluctuations in
interest rates or currency exchange rates; provided that the
calculation of payments for early termination shall be made
on a reasonable basis in accordance with customary industry
practices; provided further that all obligations to make
such payments for early termination (guaranteed or
unguaranteed) shall, to the extent matured, constitute
Indebtedness.
"Issuing Bank" shall mean, with respect to any Letter of
Credit, the Revolving Lender which has agreed to issue such
Letter of Credit.
"Letter of Credit" shall mean any letter of credit issued
by an Issuing Bank pursuant to Section 2.19(a).
"Letter of Credit Commitment" shall mean $50,000,000, as
the same may be reduced from time to time pursuant to
Section 2.25.
"Letter of Credit Disbursement" shall mean a payment or
disbursement made by an Issuing Bank pursuant to a Letter of
Credit.
"Letter of Credit Exposure" shall mean at any time the
sum of (a) the aggregate undrawn amount of all outstanding
Letters of Credit and (b) the aggregate amount of all Letter
of Credit Disbursements not yet reimbursed by the Borrower
as provided in Section 2.22.
"Letter of Credit Fee" shall have the meaning assigned to
such term in Section 2.21.
<PAGE>
18
"Leverage Ratio" shall mean, with respect to Holdings and
the Restricted Subsidiaries on any date, the ratio of (a)
Funded Debt of Holdings and the Restricted Subsidiaries as
of such date to (b) the product of (i) EBITDA for the period
of twelve (or, if less, the number of full consecutive
fiscal months ending after the Closing Date) consecutive
fiscal months then ended and (ii) twelve divided by the
number of months in such period.
"Lien" shall mean, with respect to any asset, (a) any
mortgage, deed of trust, lien, pledge, encumbrance, charge
or security interest in or on such asset, (b) the interest
of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relat-
ing to such asset and (c) in the case of securities, any
purchase option, call or similar right of a third party with
respect to such securities.
"Loans" shall mean the Revolving Loans, the Delayed Draw
Term Loans, the Swingline Loans, the Canadian Term Loans and
the Term Loans.
"Loan Documents" shall mean this Agreement and the Notes,
the Letters of Credit (and any instrument or document
executed by the Borrower relating to any Letter of Credit),
the Pledge Agreement, the Guarantee Agreement and, if and
when executed and delivered, the Intercreditor Agreement.
"Managing Agents" shall mean NationsBank, N.A. and
Continental Bank, N.A.
"Margin Stock" shall have the meaning assigned to such
term under Regulation U.
"Material Adverse Effect" shall mean (a) a materially
adverse effect on the business, assets, properties,
operations or financial condition of Holdings and the
Restricted Subsidiaries, taken as a whole, (b) a material
impairment of the ability of Holdings or any Subsidiary of
Holdings to perform any of its material obligations under
any Loan Document to which it is or will be a party or to
consummate the Recapitalization Transactions or (c) an
impairment of the validity or enforceability of, or material
impairment of the rights, remedies or benefits available to
the Credit Agreement Creditors under, any Loan Document.
"Maximum Rate" shall have the meaning assigned to such
term in Section 9.09.
"Multiemployer Plan" with respect to any person shall
mean a multiemployer plan as defined in Section 4001(a)(3)
of ERISA to which such person or any ERISA Affiliate of such
person (other than one considered an ERISA Affiliate only
pursuant to subsection (m) or (o) of Section 414 of the
<PAGE>
19
Code) is making or accruing an obligation to make
contributions, or has within any of the preceding five plan
years made or accrued an obligation to make contributions.
"Net Income" shall mean, for any fiscal period, the net
income (or loss) of Holdings and its Restricted Subsidiaries
and the Finance Subsidiary on a consolidated basis for such
fiscal period taken as a single accounting period determined
in conformity with GAAP; provided that there shall be
excluded (i) the income (or loss) of any Unrestricted
Subsidiary (other than the Finance Subsidiary) or any person
(other than a Restricted Subsidiary) in which any other
person (other than Holdings or any of the Restricted
Subsidiaries) has a joint interest, but shall include the
amount of dividends or other distributions (including return
of capital or any other cash receipt in respect of ownership
or beneficial interest) actually paid to Holdings or any of
the Restricted Subsidiaries by such Unrestricted Subsidiary
or such person during such period, (ii) the income (or loss)
of any person accrued prior to the date it becomes a
Restricted Subsidiary of Holdings or is merged into or
consolidated with Holdings or any of the Restricted
Subsidiaries or that person's assets are acquired by
Holdings or any of the Restricted Subsidiaries and (iii) the
income of any Restricted Subsidiary of Holdings to the
extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that
income is not at the time permitted by operation of the
terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation
after tax gains or losses attributable to Specified Asset
Sales; provided further, that, solely for the purposes of
determining EBITDA, there shall be excluded any charges,
losses, fees or expenses to Net Income incurred in
connection with the consummation of the Recapitalization
Transactions.
"Net Proceeds" shall mean with respect to any sale,
transfer or other disposition (including by casualty, loss
or condemnation) of any assets or properties or any other
Prepayment Event (a "Proceeds Transaction") (i) the gross
amount of any cash paid to or received by Holdings or any of
the Restricted Subsidiaries in respect of such Proceeds
Transaction (including insurance proceeds, condemnation
awards and payments from time to time in respect of
installment obligations, if applicable), less (ii) the
amount, if any, of (a) Holdings' good faith best estimate of
all taxes attributable to such Proceeds Transaction which it
in good faith expects to be paid in the taxable year in
which such Proceeds Transaction shall occur or in the next
taxable year, (b) reasonable and customary fees, discounts,
commissions, costs and other expenses (other than those
payable to Holdings or any Affiliate of Holdings, except
that Blackstone and WP and their respective Affiliates may
<PAGE>
20
receive customary fees on terms no less favorable to
Holdings or any of the Restricted Subsidiaries than would be
obtained in a comparable arm's-length transaction for acting
as financial advisor in connection with such Proceeds
Transaction) which are incurred in connection with such
Proceeds Transaction and are payable by Holdings or any of
the Restricted Subsidiaries and (c) in the case of a
Proceeds Transaction that is a sale, transfer or other
disposition of assets or properties, proceeds required to
discharge Liens in respect of such assets or properties
permitted by Section 6.04; provided, however, that Net
Proceeds shall not include (1) any amount that otherwise
would constitute Net Proceeds to the extent such amount is
excluded from the definition of the term "Capital
Expenditures" pursuant to clause (i) or (iv) of the second
sentence thereof; or (2) any amount being reserved for
application as contemplated in clause (i) or (iv) of such
second sentence, except that in the event any amount so
reserved is not in fact so applied or contractually
committed to be applied within the permitted 12-month
period, such amount shall be deemed for all purposes
(including the definition of Excess Cash Flow and Section
2.12(f)) to be Net Proceeds of a Proceeds Transaction
received upon such Proceeds Transaction.
"Notes" shall mean the Term Notes, the Delayed Draw Term
Notes, the Canadian Term Notes, the Swingline Note and the
Revolving Credit Notes.
"Obligations" shall mean all obligations defined as
"Guaranteed Obligations" in the Guarantee Agreement and
"Secured Obligations" in the Pledge Agreement in each case
owing by the Borrower, the Canadian Borrower and the other
Guarantors, or any of them, as the context may require, to
any Credit Agreement Creditor.
"Operating Lease" shall mean a lease which is not
required to be accounted for or classified as a capital
lease under GAAP. The "amount" of any Operating Lease shall
be the amount that, if such Operating Lease were accounted
for as a Capital Lease Obligation, would be recorded as a
liability in accordance with GAAP.
"Other Taxes" shall have the meaning assigned to such
term in Section 2.18.
"Overallotment Option" shall mean the option granted to
the underwriters in connection with the Public Offering
pursuant to which the underwriters may elect to purchase
pursuant to the Holdings Underwriting Agreement up to
2,250,000 additional shares of Holdings Common Stock to
cover overallotments.
<PAGE>
21
"Participation Fees" shall have the meaning assigned to
such term in Section 2.05(b).
"PBGC" shall mean the Pension Benefit Guaranty
Corporation referred to and defined in ERISA (or any such
successor).
"Permitted Acquisition Indebtedness" shall mean
Indebtedness of the Borrower permitted by Section 6.01(l).
"Permitted Business Acquisitions" shall mean acquisitions
of all or substantially all of the assets of, or shares or
other equity interests in, a person or division or line of
business of a person engaged in the same business as
Holdings and the Restricted Subsidiaries or in a related
business if immediately after giving effect thereto: (i) no
Default or Event of Default shall have occurred and be
continuing, (ii) all transactions related thereto shall be
consummated in accordance with applicable laws, (iii) at
least 90% of the outstanding capital stock or other
ownership interests of any acquired or newly formed
corporation or other entity must be owned directly by the
Borrower or a Domestic Restricted Subsidiary and such
corporation or entity shall become a Restricted Subsidiary
and a Guarantor and execute a counterpart to the Guarantee
Agreement, and all capital stock or other equity interest
created or acquired in connection with such acquisition
shall be duly and validly pledged to the Collateral Agent
for the ratable benefit of the Lenders, and (iv) (A)
Holdings shall be in compliance, on a pro forma basis, with
the covenants contained in Sections 6.14, 6.16 and 6.17
recomputed as at the last day of the most recently ended
fiscal quarter of Holdings, and the Borrower shall have
delivered to the Administrative Agent an officers'
certificate to such effect, together with all relevant
financial information for such acquired corporation, entity
or assets, and (B) the acquired corporation or entity shall
not be liable for any Indebtedness (except for Indebtedness
permitted by Section 6.01 and the Guarantee Agreement). For
purposes of Section 6, any Restricted Subsidiary satisfying
the requirements of clause (iii) above shall be deemed to be
a "wholly owned subsidiary".
"Permitted Debt Redemption Price" shall have the meaning
ascribed thereto in Section 5.08(a).
<PAGE>
22
"Permitted Investments" shall mean:
(a) direct obligations of, or obligations the principal
of and interest on which are unconditionally guaranteed by,
the United States of America (or by any agency thereof to
the extent such obligations are backed by the full faith and
credit of the United States of America), in each case
maturing within one year from the date of acquisition
thereof;
(b) marketable general obligations issued by any state
of the United States of America or any political subdivision
of any such state or any public instrumentality thereof
maturing within six months from the date of acquisition
thereof and, at the time of acquisition, having one of the
two highest ratings generally obtainable from either
Standard & Poor's Ratings Group or Moody's Investors
Service, Inc.;
(c) investments in commercial paper maturing no more
than six months from the date of acquisition thereof and
having, at such date of acquisition, a credit rating of A-1
or higher from Standard & Poor's Ratings Group or P-1 or
higher from Moody's Investors Service, Inc.;
(d) investments in domestic and Eurodollar certificates
of deposit, banker's acceptances and time deposits maturing
within six months from the date of acquisition thereof
issued or guaranteed by or placed with, and money market
deposit accounts issued or offered by (w) any domestic
office of any commercial bank organized or licensed under
the laws of the United States of America or any State
thereof which has a combined capital and surplus and
undivided profits of not less than $500,000,000, (x) any
Lender, (y) any branch of any Lender or any commercial bank
organized under the laws of the United Kingdom, Canada,
France or Japan having combined capital, surplus and
undivided profits (less any undivided losses) of not less
than $500,000,000 or (z) other than in the case of banker's
acceptances, any domestic commercial bank whose deposits are
guaranteed by the Federal Deposit Insurance Corporation (or
any successor) and with whom deposits maintained by Holdings
or any of its subsidiaries do not exceed the amount so
guaranteed; and
(e) investments in money market funds or other mutual
funds that invest in the types of Permitted Investments
described in clauses (a) through (d) above.
"Permitted Preferred Stock Redemption Price" shall have
the meaning ascribed thereto in Section 5.08(a).
"Permitted Receivables Financing" shall mean any sale by
the Borrower or a Restricted Subsidiary of accounts
<PAGE>
23
receivable to a Finance Subsidiary in a true sale
transaction with customary limited recourse based upon the
collectibility of the receivables sold and the corresponding
sale or pledge of such accounts receivable (or an interest
therein) by the Finance Subsidiary, in each case without any
Guarantee by Holdings or any other subsidiary thereof;
provided, however, that the terms, conditions and structure
(including the legal and organizational structure of the
Finance Subsidiary and the restrictions imposed on its
activities) of and the documentation incident to such
transactions must be reasonably acceptable to the
Administrative Agent.
"Permitted Subordinated Indebtedness" shall mean
unsecured subordinated indebtedness of the Borrower or
Holdings having no amortization of principal and a scheduled
final maturity no earlier than June 30, 2003 and having
subordination terms at least as favorable to the Lenders as
set forth on Schedule 1.01(D) and other terms and conditions
(including, covenants, events of default, interest rate) as
shall be reasonably satisfactory to the Required Lenders in
the exercise of their sole discretion.
"Permitted Tax Payment" means for any taxable year of the
Borrower in which it joins in filing a consolidated federal
income tax return with Holdings, a payment by the Borrower
to Holdings in an amount not in excess of the amount
required to be paid by the Borrower under the Tax Sharing
Agreement, dated as of November 1, 1989, between Holdings
and the Borrower, as in effect on the date hereof, as
amended solely to reflect the mergers described in clauses
(iii) of the definition of Recapitalization Transactions;
provided that within 20 days of receipt of such payment
Holdings applies the amount thereof to satisfy such tax
liability or its obligations under the Tax Sharing
Agreement.
"person" shall mean any natural person, corporation,
business trust, joint venture, association, company,
partnership or government, or any agency or political
subdivision thereof.
"Plan" with respect to any person shall mean any pension
plan (other than a Multiemployer Plan) subject to the
provisions of Title IV of ERISA or Section 412 of the Code
which is maintained for employees of such person or any
ERISA Affiliate of such person.
"Pledge Agreement" shall mean the Pledge Agreement
substantially in the form of Exhibit E, as amended and in
effect from time to time.
"Pledged Securities" shall have the meaning assigned to
such term in the Pledge Agreement.
<PAGE>
24
"Preliminary Prospectus" shall mean the preliminary
prospectus of Holdings dated June 2, 1994, filed with the
Securities and Exchange Commission in connection with the
Public Offering, as amended or supplemented from time to
time.
"Prepayment Event" shall mean (i) any Specified Asset
Sale, (ii) any Sale and Lease-Back Transaction deemed to be
a Prepayment Event pursuant to Section 6.06, and (iii) the
incurrence by Holdings or any Restricted Subsidiary of any
Indebtedness (other than Indebtedness permitted by Section
6.01), provided, however, that for purposes of Section
2.12(e) (a) a Prepayment Event shall not be deemed to occur
until the aggregate Net Proceeds from Prepayment Events not
yet applied pursuant to Section 2.12(e) by reason of this
proviso equals or exceeds $5,000,000, at which time a
Prepayment Event shall, except as set forth in clause (b)
below, be deemed to occur having Net Proceeds equal to the
aggregate Net Proceeds from Prepayment Events not yet so
applied and (b) with respect to Specified Asset Sales, a
Prepayment Event shall be deemed to occur only with respect
to that portion of the Net Proceeds thereof required to be
repaid pursuant to Section 6.08(i).
"Private Placement" shall mean the sale of shares of
Holdings Common Stock pursuant to one or more private
placements in connection with the Public Offering. Gross
proceeds received by Holdings in connection with the
Private Placement shall be deemed to include an amount
equal to an underwriters' commission on shares of Holdings
Common Stock purchased in the Priavte Placement at the rate
charged in the Public Offering.
"Public Offering" shall mean the underwritten public
offering of shares of Holdings Common Stock contemplated by
the Preliminary Prospectus.
"Purchase Money Indebtedness" shall mean Indebtedness
incurred for capital expenditures, which may be secured in
compliance with Section 6.04(i).
"Recapitalization Transactions" shall mean:
(i) the execution, delivery and performance of each
Loan Document;
(ii) the borrowings under this Agreement and the
issuance of Letters of Credit pursuant to this Agreement;
(iii) the merger of Collins & Aikman Holdings II
Corporation into Holdings with Holdings as the surviving
corporation and the merger of Collins & Aikman Group,
Inc. into Collins & Aikman Corporation with the Borrower
as the surviving corporation;
(iv) the grant of security interests and other Liens
pursuant to the Pledge Agreement;
(v) the conversion of approximately $191,500,000 of
the 14% Subordinated Pay-in-Kind Bridge Notes of Holdings
(the "Holdings Subordinated PIK Notes") held by WP and
Blackstone to Holdings Common Stock and the conversion to
Holdings Common Stock or redemption of the remaining
<PAGE>
25
approximately $9,400,000 of Holdings Subordinated PIK
Notes;
(vi) the issuance and sale of Holdings Common Stock
pursuant to the Holdings Underwriting Agreement;
(vii) the consummation of the Public Offering and the
sale, if any, of Holdings Common Stock pursuant to the
Overallotment Option, all as contemplated by the
Preliminary Prospectus and the consummation of the other
transactions contemplated by the Preliminary Prospectus,
and the sale of Holdings Common Stock pursuant to the
Private Placement;
(viii) the entering into a Permitted Receivables
Financing providing commitments of at least $150,000,000
and the initial funding thereunder;
(ix) the repayment in full of all amounts owed under
and in respect of the Existing Credit Agreement, the
release of all Liens in respect thereof and the
termination of the Existing Credit Agreement;
(x) irrevocable notice of the redemption of all
outstanding shares of preferred stock of Holdings and the
Borrower shall have been given to each holder of
preferred stock of Holdings and the Borrower at an
aggregate redemption price not greater than the Permitted
Preferred Stock Redemption Price;
(xi) the redemption or defeasance of all public senior
and subordinated debt of Holdings, the Borrower and their
subsidiaries set forth on Schedule 4.02(o) at a
redemption price not greater than the Permitted Debt
Redemption Price; and
(xii) the consummation of the other transactions
contemplated by the Loan Documents, the Preliminary
Prospectus and the Holdings Underwriting Agreement.
"Register" shall have the meaning given such term in
Section 9.04(d).
Regulation D" shall mean Regulation D of the Board as
from time to time in effect and all official rulings and
interpretations thereunder or thereof.
"Regulation G" shall mean Regulation G of the Board as
from time to time in effect and all official rulings and
interpretations thereunder or thereof.
"Regulation T" shall mean Regulation T of the Board as
from time to time in effect and all official rulings and
interpretations thereunder or thereof.
<PAGE>
26
"Regulation U" shall mean Regulation U of the Board as
from time to time in effect and all official rulings and
interpretations thereunder or thereof.
"Regulation X" shall mean Regulation X of the Board as
from time to time in effect and all official rulings and
interpretations thereunder or thereof.
"Release" means any release, spill, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal,
leaching, emanation or migration in, into, onto or through
the environment (including ambient air, surface water,
ground water, land surface, subsurface strata or workplace),
including the movement of any Contaminant through or in the
air, soil, surface water or ground water.
"Remedial Action" means (i) "remedial action" as such
term is defined in 42 U.S.C. Section 9601(24) and (ii) all
other actions required or voluntarily undertaken to (x)
clean up, remove, treat, abate or in any other way address
any Contaminant in the environment or workplace, (y) prevent
the Release or threat of Release, or minimize the further
Release of any Contaminant so it does not migrate or
endanger or threaten to endanger public health or welfare of
the environment or workplace, or (z) perform studies and
investigations in connection with (x) or (y) above.
"Reportable Event" shall mean any reportable event as
defined in Section 4043(b) of ERISA or the regulations
issued thereunder with respect to a Plan (other than a Plan
maintained by an ERISA Affiliate which is considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of
Section 414 of the Code).
"Required Lenders" shall mean, at any time, Lenders with
Loans (other than Swingline Loans), Letter of Credit
Exposure and unused Commitments representing at least a
majority of the sum of the aggregate principal amount of the
Loans (other than Swingline Loans) outstanding, the
aggregate amount of the Letter of Credit Exposure and unused
Commitments at such time.
"Responsible Officer" of any corporation shall mean any
Executive Officer or Financial Officer of such corporation
and any other officer or similar official thereof
responsible for the administration of the obligations of
such corporation in respect of this Agreement. Unless the
context otherwise requires, Responsible Officer shall mean a
Responsible Officer of Holdings.
"Restricted Subsidiary" shall mean each Subsidiary in
existence as of the Closing Date and any direct or indirect
Subsidiary formed or acquired after the Closing Date, in
each case, other than Unrestricted Subsidiaries.
<PAGE>
27
"Revolving Credit Borrowing" shall mean a Borrowing
comprised of Revolving Loans.
"Revolving Credit Commitment" shall mean, with respect to
each Lender, the commitment, if any, of such Lender to make
Revolving Loans hereunder as set forth in Schedule 2.01, as
the same may be reduced from time to time pursuant to
Section 2.09.
"Revolving Credit Maturity Date" shall mean the seventh
anniversary of the Closing Date.
"Revolving Credit Note" shall mean a promissory note of
the Borrower, substantially in the form of Exhibit A-1,
evidencing Revolving Loans.
"Revolving Lender" shall mean any Lender with a Revolving
Credit Commitment.
"Revolving Loans" shall mean the revolving loans made to
the Borrower pursuant to Section 2.01(c). Each Revolving
Loan shall be a Eurodollar Revolving Loan or an ABR
Revolving Loan.
"Sale and Lease-Back Transaction" shall have the meaning
assigned to that term in Section 6.06.
"Secured Parties" shall mean the Credit Agreement
Creditors and any holders, if any, of any Permitted
Acquisition Indebtedness which have executed and delivered
to the Collateral Agent an Acknowledgement to the
Intercreditor Agreement in the form of Exhibit A thereto.
"Significant Subsidiary" shall mean the Borrower, the
Canadian Borrower and any subsidiary of Holdings that at the
date of any determination (i) accounts for 5% or more of the
consolidated assets of Holdings, (ii) has accounted for 5%
or more of the consolidated EBITDA of Holdings for each of
the two consecutive periods of four fiscal quarters
immediately preceding the date of determination or (iii) has
been designated by the Borrower in writing to the
Administrative Agent as a Significant Subsidiary.
"Specified Asset Sale" shall mean any sale, lease,
transfer, assignment or other disposition of assets,
business units or property of Holdings or any of its
subsidiaries for Net Proceeds in excess of $100,000 in any
transaction or series of related transactions described in
paragraph (i) of Section 6.08.
"Statutory Reserves" shall mean a fraction (expressed as
a decimal), the numerator of which is the number one and the
denominator of which is the number one minus the aggregate
of the maximum reserve percentages (including any marginal,
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28
special, emergency or supplemental reserves) expressed as a
decimal established by the Board and any other banking
authority to which the Administrative Agent is subject (a)
with respect to the Base CD Rate (as such term is used in
the definition of "Alternate Base Rate"), for new negotiable
nonpersonal time deposits in dollars of over $100,000 with
maturities approximately equal to three months, and (b) with
respect to the Adjusted LIBO Rate, for Eurocurrency
Liabilities (as defined in Regulation D of the Board). Such
reserve percentages shall include those imposed pursuant to
such Regulation D. Eurodollar Loans shall be deemed to
constitute Eurocurrency Liabilities and to be subject to
such reserve requirements without benefit of or credit for
proration, exemptions or offsets which may be available from
time to time to any Lender under such Regulation D.
Statutory Reserves shall be adjusted automatically on and as
of the effective date of any change in any reserve
percentage.
"subsidiary" shall mean, with respect to any person
(herein referred to as the "parent"), any corporation,
partnership, association or other business entity (a) of
which securities or other ownership interests representing
more than 50% of the equity or more than 50% of the ordinary
voting power or more than 50% of the general partnership
interests are, at the time any determination is being made,
owned, controlled or held, or (b) which is, at the time any
determination is made, otherwise Controlled, by the parent
or one or more subsidiaries of the parent or by the parent
and one or more subsidiaries of the parent.
"Subsidiary" shall mean any subsidiary of Holdings.
"Swingline Lender" shall mean Chemical, in its capacity
as Swingline Lender hereunder and under the other Loan
Documents.
"Swingline Loan Commitment" shall mean the commitment of
the Swingline Lender to make Swingline Loans as set forth in
Section 2.01(d).
"Swingline Loans" shall mean the swingline loans made by
the Swingline Lender to the Borrower pursuant to
Section 2.01(d).
"Swingline Note" shall mean a promissory note of the
Borrower, substantially in the form of Exhibit A-4,
evidencing the Swingline Loans.
"Taxes" shall have the meaning assigned to such term in
Section 2.18.
"Term Borrowing" shall mean a Borrowing comprised of Term
Loans.
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29
"Term Loan Commitment" shall mean, with respect to each
Lender, the commitment, if any, of such Lender to make Term
Loans hereunder as set forth in Schedule 2.01, as the same
may be reduced from time to time pursuant to Section 2.09.
"Term Loan Maturity Date" shall mean the 30th quarterly
anniversary of the Closing Date.
"Term Loan Repayment Date" shall have the meaning
assigned to such term in Section 2.11.
"Term Loans" shall mean the term loans made to the
Borrower pursuant to Section 2.01(a). Each Term Loan shall
be a Eurodollar Term Loan or an ABR Term Loan.
"Term Note" shall mean a promissory note of the Borrower,
substantially in the form of Exhibit A-3, evidencing Term
Loans.
"Total Indebtedness" shall mean, without duplication, all
outstanding Indebtedness of Holdings and its subsidiaries,
on a consolidated basis.
"Transactions" shall have the meanings assigned to such
term in Section 3.02.
"Type", when used in respect of any Loan or Borrowing,
shall refer to the Rate by reference to which interest on
such Loan or on the Loans comprising such Borrowing is
determined. For purposes hereof, "Rate" shall include the
Adjusted LIBO Rate and the Alternate Base Rate.
"UCC" shall mean the Uniform Commercial Code of New York.
"Unrestricted Subsidiary" shall mean (i) each Finance
Subsidiary, Collins & Aikman de Mexico, S.A. de C.V. and
Warner Fabrics plc, (ii) any Subsidiary of Holdings (other
than the Borrower) none of the Capital Stock or other
ownership interest of which is owned by the Borrower or any
of its Subsidiaries, provided that Holdings has notified the
Administrative Agent of its acquisition or creation of such
Subsidiary and its ownership interest therein concurrently
with such acquisition or creation and the intended purposes
of such Subsidiary and (iii) any Subsidiary of an
Unrestricted Subsidiary. Each Unrestricted Subsidiary,
other than a non-U.S. Unrestricted Subsidiary, shall have
entered into the existing Tax Sharing Agreement with
Holdings and the Borrower (or another tax sharing agreement
containing terms which, in the reasonable judgment of the
Administrative Agent, are customary in similar circumstances
to provide an appropriate allocation of tax liabilities and
benefits).
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30
The Unrestricted Subsidiaries shall be capitalized
solely from the following sources: (a) any Investment in
such Unrestricted Subsidiary by any Person other than
Holdings and the Restricted Subsidiaries; (b) Indebtedness
issued by such Unrestricted Subsidiary, or proceeds thereof;
(c) capital stock of any Unrestricted Subsidiary, or
proceeds thereof; (d) capital stock of Holdings issued by
Holdings after the Closing Date, or proceeds thereof; and
(e) Investments permitted to be made in Unrestricted
Subsidiaries pursuant to Section 6.07(l).
"Withdrawal Liability" shall mean liability to a
Multiemployer Plan as a result of a complete or partial
withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.
"WP" shall mean Wasserstein Perella Partners, L.P.
"WP Entities" shall mean WP, WPMP or any of their
Affiliates.
"WPMP" shall mean Wasserstein Perella Management
Partners, Inc.
SECTION 1.02. Terms Generally. The definitions in Section
1.01 shall apply equally to both the singular and plural forms of
the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter
forms. The words "include", "includes" and "including" shall be
deemed to be followed by the phrase "without limitation". All
references herein to Articles, Sections, Exhibits and Schedules
shall be deemed references to Articles and Sections of, and
Exhibits and Schedules to, this Agreement unless the context
shall otherwise require. For all purposes of this Agreement
(other than preparation of the financial statements to be
delivered pursuant to Section 5.04), all terms of an accounting
or financial nature shall be construed in accordance with GAAP,
as in effect on the date of this Agreement applied on a basis
consistent with the application used in preparing Holdings'
audited financial statements for its fiscal year ended
January 29, 1994 referred to in Section 3.09.
<PAGE>
31
ARTICLE II.
THE CREDITS
SECTION 2.01. Commitments. (a) Subject to the terms and
conditions and relying upon the representations and warranties
set forth herein, each Lender with a Term Loan Commitment agrees,
severally and not jointly, to make a Term Loan to the Borrower on
the Closing Date in a principal amount not to exceed its Term
Loan Commitment set forth opposite its name in Schedule 2.01, as
the same may be reduced from time to time pursuant to Section
2.09. Amounts paid or prepaid in respect of Term Loans may not
be reborrowed.
(b) Subject to the terms and conditions and relying upon
the representations and warranties set forth herein, each Lender
with a Delayed Draw Term Loan Commitment agrees, severally and
not jointly, to make Delayed Draw Term Loans to the Borrower at
any time and from time to time during the Delayed Draw
Availability Period or until the earlier termination of its
Delayed Draw Term Loan Commitment in accordance with the terms
hereof, in an aggregate principal amount not to exceed its
Delayed Draw Term Loan Commitment set forth opposite its name in
Schedule 2.01, as the same may be reduced from time to time
pursuant to Section 2.09. Amounts paid or prepaid in respect of
Delayed Draw Term Loans may not be reborrowed.
(c) Subject to the terms and conditions and relying upon
the representations and warranties set forth herein, each
Revolving Lender agrees, severally and not jointly, to make
Revolving Loans to the Borrower, at any time and from time to
time on or after the Closing Date and until the earlier of the
Revolving Credit Maturity Date and the termination of the
Revolving Credit Commitment of such Lender in accordance with the
terms hereof, in an aggregate principal amount at any time
outstanding not to exceed the excess of (i) its Revolving Credit
Commitment set forth opposite its name in Schedule 2.01, as the
same may be reduced from time to time pursuant to Section 2.09,
minus (ii) its Applicable Percentage of the Letter of Credit
Exposure and Swingline Loans at such time. Within the foregoing
limits, the Borrower may borrow, pay or prepay and reborrow
Revolving Loans on or after the Closing Date and prior to the
Revolving Credit Maturity Date, subject to the terms, conditions
and limitations set forth herein. As provided in Section 2.19,
up to $50,000,000 of the Revolving Credit Commitment may be
utilized for the issuance of Letters of Credit.
(d) (i) The Swingline Lender hereby agrees, subject to
the limitations set forth below with respect to the maximum
amount of Swingline Loans permitted to be outstanding from time
to time, to make a portion of the Revolving Credit Commitments
available to the Borrower from time to time during the period
from the Closing Date through and excluding the earlier of
Revolving Credit Maturity Date and the termination of the
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32
Revolving Credit Commitments in an aggregate principal amount not
to exceed the Swingline Loan Commitment, by making Swingline
Loans to the Borrower. Swingline Loans may be made
notwithstanding the fact that such Swingline Loans, when
aggregated with the Swingline Lender's outstanding Revolving
Loans and outstanding Swingline Loans, may exceed the Swingline
Lender's Revolving Credit Commitment. The Swingline Lender's
commitment to make Swingline Loans to the Borrower pursuant to
this Section 2.01(d) is herein called its "Swingline Loan
Commitment." The original amount of the Swingline Lender's
Swingline Loan Commitment is $10,000,000. The Swingline Lender's
Swingline Loan Commitment shall expire on the date the Revolving
Credit Commitments are terminated and all Swingline Loans and all
other amounts owed hereunder with respect to Swingline Loans
shall be paid in full no later than that date. Amounts borrowed
under this Section 2.01(d) may be repaid and reborrowed to but
excluding the date of termination of the Revolving Credit
Commitments.
(ii) In no event shall (a) the aggregate principal amount
of Swingline Loans outstanding at any time exceed the aggregate
Swingline Loan Commitment in effect at such time, (b) the
aggregate principal amount of Revolving Loans and Swingline Loans
outstanding at any time exceed the Revolving Credit Commitments
as reduced by the aggregate Letter of Credit Exposure at such
time or (c) the aggregate Swingline Loan Commitment exceed at any
time the aggregate Revolving Loan Commitments in effect at such
time. Swingline Loans may only be made as ABR Loans.
(iii) With respect to any Swingline Loans which have not
been voluntarily prepaid by the Borrower, the Swingline Lender
(by request to the Administrative Agent) or Administrative Agent
at any time may, on one Business Day's notice, require each
Lender, including the Swingline Lender, and each Lender hereby
agrees, subject to the provisions of this Section 2.01(d), to
make a Revolving Loan (which shall be funded as an ABR Loan) in
an amount equal to such Lender's Applicable Percentage of the
amount of the Swingline Loans ("Refunded Swingline Loans")
outstanding on the date notice is given which Swingline Lender
requests the Lenders to prepay; provided that so long as no
Default or Event of Default shall have occurred and be
continuing, Lenders shall not be required to make such Revolving
Loans if the aggregate principal amount of Swingline Loans
outstanding as of any Tuesday of each week (or the first Business
Day occurring after any such Tuesday if such Tuesday is not a
Business Day) is less than $1,000,000.
(iv) In the case of Revolving Loans made by Lenders other
than the Swingline Lender under the immediately preceding
paragraph (iii), each such Lender shall make the amount of its
Revolving Loan available to the Administrative Agent, in same day
funds, at the office of the Administrative Agent located at 270
Park Avenue, New York, New York, not later than 1:00 P.M. (New
York time) on the Business Day next succeeding the date such
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33
notice is given. The proceeds of such Revolving Loans shall be
immediately delivered to the Swingline Lender (and not to the
Borrower) and applied to repay the Refunded Swingline Loans. On
the day such Revolving Loans are made, the Swingline Lender's
Applicable Percentage of the Refunded Swingline Loans shall be
deemed to be paid with the proceeds of a Revolving Loan made by
the Swingline Lender and such portion of Swingline Loans deemed
to be so paid shall no longer be outstanding as Swingline Loans
and shall be outstanding as Revolving Loans of Lenders. The
Borrower authorizes the Administrative Agent and the Swingline
Lender to charge the Borrower's account with Administrative Agent
(up to the amount available in such account) in order to pay
immediately to the Swingline Lender the amount of such Refunded
Swingline Loans to the extent amounts received from Lenders,
including amounts deemed to be received from the Swingline
Lender, are not sufficient to repay in full such Refunded
Swingline Loans. If any portion of any such amount paid (or
deemed to be paid) to the Swingline Lender should be recovered by
or on behalf of the Borrower from the Swingline Lender in
bankruptcy, by assignment for the benefit of creditors or
otherwise, the loss of the amount so recovered shall be ratably
shared among all Lenders in the manner contemplated by Section
9.06(b). Subject to the proviso contained in the first sentence
of the preceding paragraph and to the compliance by the Swingline
Lender with the provisions of Section 2.01(d)(vii), each Lender's
obligation to make the Revolving Loans referred to in this
paragraph shall be absolute and unconditional and shall not be
affected by any circumstance, including, without limitation, (i)
any setoff, counterclaim, recoupment, defense or other right
which such Lender may have against the Swingline Lender, the
Borrower or any other Person for any reason whatsoever; (ii) the
occurrence or continuance of an Event of Default or a Default;
(iii) any adverse change in the condition (financial or
otherwise) of Holdings or any of its subsidiaries; (iv) any
breach of this Agreement by Holdings, the Borrower or any other
Lender; or (v) any other circumstance, happening or event
whatsoever, whether or not similar to any of the foregoing.
Nothing in this Section 2.01(d) shall be deemed to relieve any
Lender from its obligation to fulfill its Commitments hereunder
or to prejudice any rights that the Borrower may have against any
Lender as a result of any default by such Lender hereunder.
(v) A copy of each notice given by the Swingline Lender
or the Administrative Agent pursuant to this Section 2.01(d)
shall be promptly delivered by the Swingline Lender to the
Administrative Agent and the Borrower. Upon the making of a
Revolving Loan by a Lender pursuant to this Section 2.01(d), the
amount so funded shall no longer be owed in respect of Swingline
Loans.
(vi) If as a result of any bankruptcy or similar
proceeding, Revolving Loans are not made pursuant to this Section
2.01(d) sufficient to repay any amounts owed to the Swingline
Lender as a result of a nonpayment of outstanding Swingline
<PAGE>
34
Loans, each Lender agrees to purchase, and shall be deemed to
have purchased, a participation in such outstanding Swingline
Loans in an amount equal to its Applicable Percentage of the
unpaid amount together with accrued interest thereon. Upon one
Business Day's notice from the Swingline Lender, each Lender
shall deliver to the Swingline Lender an amount equal to its
respective participation in same day funds at the office of the
Swingline Lender in New York, New York. In order to evidence
such participation each Lender agrees to enter into a
participation agreement at the request of the Swingline Lender in
form and substance reasonably satisfactory to all parties. In
the event any Lender fails to make available to the Swingline
Lender the amount of such Lender's participation as provided in
this Section 2.01(d), the Swingline Lender shall be entitled to
recover such amount on demand from such Lender together with
interest at the customary rate set by the Swingline Lender for
correction of errors among banks in New York City for one
Business Day and thereafter at the Alternate Base Rate plus the
Applicable Margin then in effect.
(vii) Notwithstanding anything herein to the contrary, the
Swingline Lender shall not make any Swingline Loans after the
occurrence and during the continuation of a Default or Event of
Default of which it is aware unless the Required Lenders have
consented thereto.
(e) Subject to the terms and conditions and relying upon
the representations and warranties set forth herein, each Lender
with a Canadian Term Loan Commitment agrees, severally and not
jointly, to make a Canadian Term Loan to the Canadian Borrower on
the Closing Date in a principal amount not to exceed its Canadian
Term Loan Commitment set forth opposite its name in Schedule
2.01, as the same may be reduced from time to time pursuant to
Section 2.09. Amounts paid or prepaid in respect of Canadian
Term Loans may not be reborrowed.
SECTION 2.02. Loans. (a) Each Loan shall be made as part
of a Borrowing consisting of Loans made by the Lenders ratably in
accordance with their respective Term Loan Commitments, Delayed
Draw Term Loan Commitments, Revolving Credit Commitments,
Canadian Term Loan Commitments or Swingline Commitment, as the
case may be; provided, however, that the failure of any Lender to
make any Loan shall not in itself relieve any other Lender of its
obligation to lend hereunder (it being understood, however, that
no Lender shall be responsible for the failure of any other
Lender to make any Loan required to be made by such other
Lender). The Loans comprising each ABR Borrowing shall be in an
aggregate principal amount which is an integral multiple of
$1,000,000 (or, in the case of Swingline Loans, $500,000) and not
less than $5,000,000 (or, in the case of Swingline Loans,
$500,000) (or an aggregate principal amount equal to the
remaining balance of the Term Loan Commitments, Canadian Term
Loan Commitments, Delayed Draw Term Loan Commitments or Revolving
Credit Commitments, as the case may be); provided that the
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35
aggregate amount of any Loans comprising a Eurodollar Borrowing
shall be subject to a minimum principal amount of $5,000,000 and
shall be an integral multiple of $1,000,000.
(b) Each Borrowing shall be comprised of ABR Loans, or
(except in the case of Swingline Loans) Eurodollar Loans, as the
Borrower or the Canadian Borrower, as the case may be, may
request pursuant to Section 2.03. Each Lender may at its option
fulfill its Commitment with respect to any Eurodollar Loan by
causing any domestic or foreign branch or Affiliate of such
Lender to make such Loan; provided that any exercise of such
option shall not affect the obligation of the Borrower or the
Canadian Borrower, as the case may be, to repay such Loan in
accordance with the terms of this Agreement and the applicable
Note. Borrowings of more than one Type may be outstanding at the
same time; provided, however, that (except in the case of
Swingline Loans) the Borrower or the Canadian Borrower, as the
case may be, shall not be entitled to request any Borrowing
which, if made, would result in an aggregate of more than 15
separate Loans of any Lender being outstanding hereunder at any
one time. For purposes of the foregoing, Loans having different
Interest Periods, regardless of whether they commence on the same
date, shall be considered separate Loans.
(c) Subject to paragraph (e) below, each Lender shall make
a Loan in the amount of its pro rata portion, as determined under
Section 2.16, of each Borrowing hereunder on the proposed date
thereof by wire transfer of immediately available funds to the
Administrative Agent in New York, New York, not later than 11:00
a.m., New York City time, and the Administrative Agent shall
credit the amounts so received to the general deposit account of
the Borrower or the Canadian Borrower, as the case may be, with
the Administrative Agent or, if a Borrowing shall not occur on
such date because any condition precedent herein specified shall
not have been met, return the amounts so received to the
respective Lenders. Unless the Administrative Agent shall have
received notice from a Lender prior to the date of any Borrowing
that such Lender will not make available to the Administrative
Agent such Lender's portion of such Borrowing, the Administrative
Agent may assume that such Lender has made such portion available
to the Administrative Agent on the date of such Borrowing in
accordance with this paragraph (c) and the Administrative Agent
may, in reliance upon such assumption, make available to the
Borrower or the Canadian Borrower, as the case may be, on such
date a corresponding amount. If and to the extent that such
Lender shall not have made such portion available to the
Administrative Agent, such Lender and the Borrower or the
Canadian Borrower, as the case may be, severally agree to repay
to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day
from the date such amount is made available to the Borrower or
the Canadian Borrower, as the case may be, until the date such
amount is repaid by either the Borrower or the Canadian Borrower,
as the case may be, or such Lender to the Administrative Agent at
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36
(i) in the case of the Borrower or the Canadian Borrower, the
interest rate applicable at the time to the Loans comprising such
Borrowing and (ii) in the case of such Lender, the Federal Funds
Effective Rate. If such Lender shall repay to the Administrative
Agent such corresponding amount together with the applicable
interest thereon, such amount shall constitute such Lender's Loan
as part of such Borrowing for purposes of this Agreement and the
Borrower's or the Canadian Borrower's obligations under the
preceding sentence shall terminate. If the Borrower or the
Canadian Borrower, as the case may be, shall repay to the
Administrative Agent such corresponding amount together with the
applicable interest thereon, then such amount shall not
constitute a Loan hereunder and the Borrower or the Canadian
Borrower shall have no further obligations hereunder in respect
thereof.
(d) Notwithstanding any other provision of this Agreement,
the Borrower shall not be entitled to request any Revolving
Credit Borrowing if the Interest Period requested with respect
thereto would end after the Revolving Credit Maturity Date.
(e) The Borrower may refinance all or any part of any
Revolving Credit Borrowing with a Revolving Credit Borrowing of
the same or a different Type, subject to the conditions and
limitations set forth in this Agreement. Any Revolving Credit
Borrowing or part thereof so refinanced shall be deemed to be
repaid or prepaid in accordance with Section 2.04 or 2.12, as
applicable, with the proceeds of a new Revolving Credit
Borrowing, and the proceeds of the new Revolving Credit
Borrowing, to the extent they do not exceed the principal amount
of the Revolving Credit Borrowing being refinanced, shall not be
paid by the Lenders to the Administrative Agent or by the
Administrative Agent to the Borrower pursuant to paragraph (c)
above.
(f) If the Administrative Agent has not received from the
Borrower the payment required by Section 2.22(a) by 12:00 noon,
New York City time, on the date on which an Issuing Bank has
notified the Borrower and the Administrative Agent that payment
of a draft presented under any Letter of Credit will be made (or
such later time permitted by Section 2.22(a)), as provided in
Section 2.22, the Administrative Agent will promptly notify such
Issuing Bank and each Revolving Lender of the Letter of Credit
Disbursement and, in the case of each such Lender, its Applicable
Percentage of such Letter of Credit Disbursement. Each Revolving
Lender (other than the applicable Issuing Bank) will pay to the
Administrative Agent not later than 2:00 p.m., New York City
time, on such date (or, if payment by the Borrower is not
required until after 11:00 a.m., New York City time, on such
date, by 10:00 a.m. on the immediately following Business Day)
such Lender's Applicable Percentage of such Letter of Credit
Disbursement, which the Administrative Agent will promptly pay to
such Issuing Bank. The Administrative Agent will promptly remit
to each Revolving Lender its Applicable Percentage of any amounts
<PAGE>
37
subsequently received by the Administrative Agent from the
Borrower in respect of such Letter of Credit Disbursement.
SECTION 2.03. Notice of Borrowings. The Borrower or the
Canadian Borrower, as the case may be, shall give the
Administrative Agent written notice (or telephone notice promptly
confirmed in writing) (a) in the case of a Eurodollar Borrowing,
not later than 12:00 noon, New York City time, three Business
Days before a proposed borrowing and (b) in the case of an ABR
Borrowing, not later than 12:00 noon, New York City time, one
Business Day before a proposed borrowing. Such notice shall be
irrevocable and shall in each case refer to this Agreement and
specify (i) whether the Borrowing then being requested is to be a
Term Borrowing, a Delayed Draw Borrowing, a Canadian Term
Borrowing or a Revolving Credit Borrowing, and whether such
Borrowing is to be a Eurodollar Borrowing or an ABR Borrowing;
(ii) the date of such Borrowing (which shall be a Business Day)
and the amount thereof; and (iii) if such Borrowing is to be a
Eurodollar Borrowing, the Interest Period with respect thereto.
If no election as to the Type of Borrowing is specified in any
such notice, then the requested Borrowing shall be an ABR
Borrowing. If no Interest Period with respect to any Eurodollar
Borrowing is specified in any such notice, then the Borrower or
the Canadian Borrower, as the case may be, shall be deemed to
have selected an Interest Period of one month's duration. If the
Borrower shall not have given notice in accordance with this
Section 2.03 of its election to refinance a Revolving Credit
Borrowing prior to the end of the Interest Period in effect for
such Borrowing, then the Borrower shall (unless such Borrowing is
repaid at the end of such Interest Period) be deemed to have
given notice of an election to refinance such Borrowing with an
ABR Borrowing. The Administrative Agent shall promptly advise
the Lenders of any notice given pursuant to this Section 2.03 and
of each Lender's portion of the requested Borrowing.
SECTION 2.04. Notes; Repayment of Loans. (a) The Borrower
hereby unconditionally promises to pay to the Administrative
Agent for the account of each Lender (i) the then unpaid
principal amount of each Revolving Loan and Swingline Loan of
such Lender on the Revolving Credit Maturity Date (or such
earlier date on which the Revolving Loans and Swing Line Loans
become due and payable pursuant to Article VII), and (ii) the
principal amount of the Term Loan and Delayed Draw Term Loan of
such Lender, in 26 and 28 consecutive quarterly installments,
respectively, payable on each quarterly anniversary of the
Closing Date, commencing on the fifth quarterly anniversary of
the Closing Date in accordance with Section 2.11 (or the then
unpaid principal amount of such Term Loan and Delayed Draw Term
Loan, on the date that the Term Loans and the Delayed Draw Term
Loans become due and payable pursuant to Article VII). The
Canadian Borrower hereby unconditionally promises to pay to the
Administrative Agent for the account of each Lender the principal
amount of the Canadian Term Loan of such Lender, in 3 consecutive
quarterly installments, payable on each quarterly anniversary of
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38
the Closing Date, commencing on the 30th quarterly anniversary of
the Closing Date (or the then unpaid principal amount of such
Canadian Term Loan on the date that the Canadian Term Loans
become due and payable pursuant to Article VII). Each of the
Borrower and the Canadian Borrower hereby further agrees to pay
interest on the unpaid principal amount of the Loans made to it
from time to time outstanding from the date hereof until payment
in full thereof at the rates per annum, and on the dates, set
forth in Section 2.06.
(b) Each Lender shall maintain in accordance with its
usual practice an account or accounts evidencing indebtedness of
the Borrower and the Canadian Borrower to such Lender resulting
from each Loan of such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender
from time to time under this Agreement.
(c) The Administrative Agent shall maintain the Register
pursuant to Section 9.04(d), and a subaccount therein for each
Lender, in which shall be recorded (i) the amount of each
Revolving Credit Loan, Swingline Loan, Delayed Draw Term Loan,
Canadian Term Loan and Term Loan made hereunder, the Type thereof
and each Interest Period applicable thereto, (ii) the amount of
any principal or interest due and payable or to become due and
payable from the Borrower or the Canadian Borrower to each Lender
hereunder and (iii) both the amount of any sum received by the
Administrative Agent hereunder from the Borrower or the Canadian
Borrower and each Lender's share thereof.
(d) The entries made in the Register and the accounts of
each Lender maintained pursuant to Section 2.04(b) shall, to the
extent permitted by applicable law, be prima facie evidence of
the existence and amounts of the obligations of the Borrower and
the Canadian Borrower therein recorded; provided, however, that
the failure of any Lender or the Administrative Agent to maintain
the Register or any such account, or any error therein, shall not
in any manner affect the obligation of the Borrower or the
Canadian Borrower to repay (with applicable interest) the Loans
made to the Borrower or the Canadian Borrower by such Lender in
accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the
Administrative Agent by any Lender, the Borrower will execute and
deliver to such Lender (i) a Revolving Credit Note with
appropriate insertions as to date and principal amount, and/or
(ii) a Delayed Draw Term Note with appropriate insertions as to
date and principal amount, and/or (iii) a Term Note with
appropriate insertions as to date and principal amount, and/or
(iv) in the case of the Swingline Lender, a Swingline Note with
appropriate insertions as to date and principal amount. The
Canadian Borrower agrees that, upon the request to the
Administrative Agent by any Lender, the Canadian Borrower will
execute and deliver to such Lender a Canadian Term Note with
appropriate insertions as to date and principal amount.
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39
SECTION 2.05. Fees. (a) The Borrower agrees to pay to
each Lender, through the Administrative Agent, on the Closing
Date, thereafter on the last day of March, June, September and
December in each year, and on the date on which the Commitment of
such Lender shall be terminated as provided herein, a commitment
fee (a "Commitment Fee") of 1/2 of 1% per annum on the average
daily unused amount of the Term Loan Commitment, the Canadian
Term Loan Commitment and the Revolving Commitment of such Lender,
and 5/8 (or, prior to the Closing Date, 1/2) of 1% per annum on
the average daily unused amount of the Delayed Draw Term Loan
Commitment of such Lender, in each case during the preceding
quarter (or shorter period ending with the Closing Date, the
Revolving Credit Maturity Date or the date on which the
Commitment of such Lender shall be terminated). All Commitment
Fees shall be computed on the basis of the actual number of days
elapsed in a year of 365 or 366 days. For purposes of
calculating any Lender's Commitment Fee, the outstanding
Swingline Loans during the period for which such Lender's
Commitment Fee is calculated shall be deemed to be zero. The
Commitment Fee due to each Lender commenced on an allocation date
agreed to among such Lender, the Borrower and Chemical, or, if
later, the date such entity becomes a Lender pursuant to Section
9.04, and shall cease to accrue on the date on which the
Commitment of such Lender shall be terminated as provided herein.
(b) The Borrower agrees to pay to the Lenders, through
the Administrative Agent, on the Closing Date, the participation
fees (the "Participation Fees") in the amounts previously agreed
to be payable to the Lenders.
(c) The Borrower agrees to pay to the Administrative
Agent, for its own account, on the Closing Date and thereafter at
the times previously agreed, the fees (the "Agency Fees") in the
amounts previously agreed to be payable to the Administrative
Agent for its own account in accordance with the fee letter
between Chemical and Holdings.
(d) The Borrower agrees to pay to each Issuing Bank, for
its own account, a fronting fee for each Letter of Credit issued
by such Issuing Bank, in the amount agreed upon between the
Borrower and such Issuing Bank, payable as agreed to by the
Borrower and such Issuing Bank for such Letter of Credit, and
negotiation, amendment, issuing, payment and other customary fees
(collectively, the "Fronting Fees") in the amounts separately
agreed to by such Issuing Bank and the Borrower.
(e) All Fees shall be paid on the dates due, in
immediately available funds, to the Administrative Agent for
distribution, if and as appropriate, among the Lenders or to the
applicable Issuing Banks, as the case may be. Once paid, none of
the Fees shall be refundable under any circumstances.
SECTION 2.06. Interest on Loans. (a) Subject to the
provisions of Section 2.07, the Loans comprising each ABR
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40
Borrowing and Swingline Loans shall bear interest (computed on
the basis of the actual number of days elapsed over a year of 365
or 366 days, as the case may be, when determined by reference to
the Prime Rate and over a year of 360 days at all other times) at
a rate per annum equal to the Alternate Base Rate plus the
Applicable Margin.
(b) Subject to the provisions of Section 2.07, the Loans
comprising each Eurodollar Borrowing shall bear interest
(computed on the basis of the actual number of days elapsed over
a year of 360 days) at a rate per annum equal to the Adjusted
LIBO Rate for the Interest Period in effect for such Borrowing
plus the Applicable Margin.
(c) Interest on each Loan shall be payable on the Interest
Payment Dates applicable to such Loan and as otherwise provided
in this Agreement. The applicable Alternate Base Rate and
Adjusted LIBO Rate for each Interest Period or day within an
Interest Period, as the case may be, shall be determined by the
Administrative Agent, and such determination shall be conclusive
absent manifest error.
(d) For purposes of the Interest Act (Canada) (i) whenever
any interest or fee under this Agreement with respect to the
Canadian Term Loan Commitments, or credit extended thereunder, is
calculated using a rate based on a year of 360 days, such rate
determined pursuant to such calculation, when expressed as an
annual rate, is equivalent to (x) the applicable rate based on a
year of 360 days multiplied by (y) the actual number of days in
the calendar year in which the period for which such interest or
fee is payable (or compounded) ends, and (z) divided by 360 and
(ii) the principle of deemed reinvestment of interest does not
apply to any such interest calculation under this Agreement, and
(iii) the rates of interest stipulated in this Agreement are
intended to be nominal rates and not effective rates or yields.
SECTION 2.07. Default Interest. If the Borrower or the
Canadian Borrower, as the case may be, shall default in the
payment of the principal of or interest on any Loan or any other
amount becoming due hereunder, by acceleration or otherwise, the
Borrower or the Canadian Borrower, as the case may be, shall on
demand from time to time pay interest, to the extent permitted by
law, on such defaulted amount up to (but not including) the date
of actual payment (after as well as before judgment) at a rate
per annum (computed on the basis of the actual number of days
elapsed over a year of 365 or 366 days, as the case may be, when
determined by reference to the Prime Rate and over a year of 360
days at all other times) equal to the Alternate Base Rate plus
the Applicable Margin plus 2% per annum.
<PAGE>
41
SECTION 2.08. Alternate Rate of Interest. In the event,
and on each occasion, that on the day two Business Days prior to
the commencement of any Interest Period for a Eurodollar
Borrowing the Administrative Agent shall have determined that
dollar deposits in the principal amounts of the Loans comprising
such Borrowing are not generally available in the interbank
eurodollar market, or that the rates at which such dollar
deposits are being offered will not adequately and fairly reflect
the cost to any Lender of making or maintaining its Eurodollar
Loan during such Interest Period, or that reasonable means do not
exist for ascertaining the Adjusted LIBO Rate, the Administrative
Agent shall, as soon as practicable thereafter, give written or
telex or telecopy notice of such determination to the Borrower,
the Canadian Borrower and the Lenders. In the event of any such
determination, any request by the Borrower or the Canadian
Borrower, as the case may be, for a Eurodollar Borrowing pursuant
to Section 2.03 or 2.10 shall, until the Administrative Agent
shall have advised the Borrower, the Canadian Borrower and the
Lenders that the circumstances giving rise to such notice no
longer exist, be deemed to be a request for an ABR Borrowing.
Each determination by the Administrative Agent hereunder shall be
conclusive absent manifest error.
SECTION 2.09. Termination and Reduction of Commitments.
(a) All Commitments shall automatically terminate at 5:00 p.m.,
New York City time, on September 15, 1994, unless the Closing
Date occurs on or prior to such date. The Term Loan Commitments
and the Canadian Term Loan Commitments shall be automatically
terminated at 5:00 p.m., New York City time, on the Closing Date.
The Delayed Draw Term Loan Commitments shall be automatically
terminated at 5:00 p.m., New York City time, on the last day of
the Delayed Draw Availability Period. The Revolving Credit
Commitments shall be automatically terminated on the Revolving
Credit Maturity Date. The Letter of Credit Commitment shall be
automatically terminated at 5:00 p.m., New York City time, on the
date that is five Business Days prior to the Revolving Credit
Maturity Date.
(b) Upon at least three Business Days' prior irrevocable
written notice to the Administrative Agent, the Borrower or the
Canadian Borrower, as the case may be, may at any time in whole
permanently terminate, or from time to time in part permanently
reduce, any of the Term Loan Commitments, the Delayed Draw Term
Loan Commitments, the Canadian Term Loan Commitments or the
Revolving Credit Commitments; provided, however, that (i) each
partial reduction of any such Commitments shall be in an integral
multiple of $1,000,000 and in a minimum principal amount of
$5,000,000 and (ii) the Revolving Credit Commitments shall not be
reduced to an amount which is less than the Letter of Credit
Exposure and the outstanding Revolving Credit Loans and Swingline
Loans at such time.
(c) Each reduction in the Commitments hereunder shall be
made ratably among the applicable Lenders in accordance with
<PAGE>
42
their respective applicable Commitments. The Borrower shall pay
to the Administrative Agent for the account of the applicable
Lenders, on the date of each termination or reduction, the
Commitment Fees on the amount of the Commitments so terminated or
reduced accrued through the date of such termination or
reduction.
SECTION 2.10. Conversion and Continuation of Delayed Draw
Term, Term and Canadian Term Borrowings. The Borrower or the
Canadian Borrower, as the case may be, shall have the right at
any time upon prior irrevocable notice to the Administrative
Agent (i) not later than 12:00 (noon), New York City time, one
Business Day prior to conversion, to convert any Eurodollar Term
Borrowing into an ABR Term Borrowing, or to convert any
Eurodollar Delayed Draw Term Borrowing into an ABR Delayed Draw
Term Borrowing, or to convert any Eurodollar Canadian Term
Borrowing into an ABR Canadian Term Borrowing, (ii) not later
than 10:00 a.m., New York City time, three Business Days prior to
conversion or continuation, to convert any ABR Term Borrowing
into a Eurodollar Term Borrowing, or convert any ABR Delayed Draw
Term Borrowing into a Eurodollar Delayed Draw Term Borrowing, or
convert any ABR Canadian Term Borrowing to a Eurodollar Canadian
Term Borrowing or to continue any Eurodollar Term Borrowing or
Eurodollar Delayed Draw Term Borrowing or Eurodollar Canadian
Term Borrowing as a Eurodollar Term Borrowing or Eurodollar
Delayed Draw Term Borrowing or Eurodollar Canadian Term
Borrowing, as applicable, for an additional Interest Period and
(iii) not later than 10:00 a.m., New York City time, three
Business Days prior to conversion, to convert the Interest Period
with respect to any Eurodollar Term Borrowing or Eurodollar
Delayed Draw Term Borrowing or Eurodollar Canadian Term Borrowing
to another permissible Interest Period, subject to the following
conditions:
(a) each conversion or continuation shall be made pro
rata among the applicable Lenders in accordance with the
respective principal amounts of the Loans comprising the
converted or continued Borrowing;
(b) if less than all the outstanding principal amount
of any Borrowing shall be converted or continued, the
aggregate principal amount of such Borrowing converted or
continued shall be an integral multiple of $1,000,000 and
not less than $5,000,000; provided that the aggregate
principal amount of each Eurodollar Borrowing resulting from
any such conversion or continuation shall not be less than
$5,000,000 and shall be an integral multiple of $1,000,000;
(c) each conversion shall be effected by each
applicable Lender by such Lender converting its applicable
Loan (or portion thereof), and accrued interest on a Loan
(or portion thereof) being converted shall be paid by the
Borrower or the Canadian Borrower, as the case may be, at
the time of conversion;
<PAGE>
43
(d) if any Eurodollar Borrowing is converted at a time
other than the end of the Interest Period applicable
thereto, the Borrower shall pay, upon demand, any amounts
due to the applicable Lenders pursuant to Section 2.15;
(e) any portion of a Borrowing maturing or required to
be repaid in less than one month may not be converted into
or continued as a Eurodollar Borrowing;
(f) any portion of a Eurodollar Borrowing which cannot
be converted into or continued as a Eurodollar Borrowing by
reason of clause (e) above shall be automatically converted
at the end of the Interest Period in effect for such
Borrowing into an ABR Borrowing;
(g) no Interest Period may be selected for any
Eurodollar Borrowing that would end later than a Term Loan
Repayment Date, Canadian Term Loan Repayment Date or Delayed
Draw Term Loan Repayment Date, as applicable, occurring on
or after the first day of such Interest Period if, after
giving effect to such selection, the aggregate outstanding
amount of (i) the Eurodollar Term Borrowings, the Eurodollar
Canadian Term Borrowings or the Eurodollar Delayed Draw Term
Borrowings, as the case may be, with Interest Periods ending
on or prior to such Term Loan Repayment Date, Canadian Term
Loan Repayment Date or Delayed Draw Term Loan Repayment Date
and (ii) the ABR Term Borrowings, ABR Canadian Term
Borrowings or ABR Delayed Draw Term Borrowings, as the case
may be, would not be at least equal to the principal amount
of Term Borrowings, Canadian Term Borrowings or Delayed Draw
Borrowings to be paid on such Term Loan Repayment Date,
Canadian Term Loan Repayment Date or Delayed Draw Term Loan
Repayment Date; and
(h) a Borrowing may not be converted into or continued
as a Eurodollar Borrowing if a Default or an Event of
Default has occurred and is continuing and the Required
Lenders have determined such conversion or continuation is
not appropriate.
Each notice pursuant to this Section 2.10 shall be
irrevocable and shall refer to this Agreement and specify (i) the
identity and amount of the Borrowing that the Borrower or the
Canadian Borrower, as the case may be, requests be converted or
continued, (ii) whether such Borrowing is to be converted to or
continued as a Eurodollar Borrowing or an ABR Borrowing, (iii) if
such notice requests a conversion, the date of such conversion
(which shall be a Business Day) and (iv) if such Borrowing is to
be converted to or continued as a Eurodollar Borrowing, the
Interest Period with respect thereto. If no Interest Period is
specified in any such notice with respect to any conversion to or
continuation as a Eurodollar Borrowing, the Borrower shall be
deemed to have selected an Interest Period of one month's
duration. The Administrative Agent shall promptly advise the
<PAGE>
44
other Lenders of any notice given pursuant to this Section 2.10
and of each Lender's portion of any converted or continued
Borrowing. If the Borrower or the Canadian Borrower, as the case
may be, shall not have given notice in accordance with this
Section 2.10 to continue any Borrowing into a subsequent Interest
Period (and shall not otherwise have given notice in accordance
with this Section 2.10 to convert such Borrowing), such Borrowing
shall, at the end of the Interest Period applicable thereto
(unless repaid pursuant to the terms hereof), automatically be
continued into a new Interest Period as an ABR Borrowing.
SECTION 2.11. Repayment of Term and Delayed Draw Term
Borrowings. (a) The Term Borrowings shall be payable as to
principal in such number of consecutive installments, payable on
such dates (each a "Term Loan Repayment Date") and in such
amounts as set forth on Schedule 2.11(a), based upon the
aggregate principal amount of Term Loans advanced on the Closing
Date.
(b) The Delayed Draw Term Borrowings shall be payable as
to principal on each Term Loan Repayment Date and Canadian Term
Loan Repayment Date (each a "Delayed Draw Term Loan Repayment
Date") and in such amounts (expressed as a percentage of the
aggregate principal amount of Delayed Draw Term Borrowings
outstanding on the last day of the Delayed Draw Availability
Period) equal to the same percentage as the percentage of the
original aggregate Term Loans and Canadian Term Loans required to
be repaid on such Delayed Draw Term Loan Repayment Date.
(c) The Canadian Term Borrowings shall be payable as to
principal in such number of consecutive installments, payable on
such dates (each a "Canadian Term Loan Repayment Date") and in
such amounts as set forth on Schedule 2.11(a), based upon the
aggregate principal amount of Canadian Term Loans advanced on the
Closing Date.
(d) To the extent not previously paid, all Term Borrowings
shall be due and payable on the Term Loan Maturity Date, all
Canadian Term Borrowings shall be due and payable on the Canadian
Term Loan Maturity Date and all Delayed Draw Term Borrowings
shall be due and payable on the Delayed Draw Term Loan Maturity
Date. Each payment of Eurodollar Term Borrowings, Canadian
Eurodollar Term Borrowings or Delayed Draw Eurodollar Term
Borrowings repaid pursuant to this Section 2.11 shall be
accompanied by accrued interest on the principal amount paid to
but excluding the date of payment.
SECTION 2.12. Prepayment. (a) The Borrower or the
Canadian Borrower, as the case may be, shall have the right at
any time and from time to time to prepay any Borrowing, in whole
or in part, upon, in the case of Eurodollar Borrowings, at least
three Business Days', and in the case of ABR Borrowings, at least
one Business Day's, prior written notice (or telephone notice
promptly confirmed by written notice) to the Administrative
<PAGE>
45
Agent; provided, however, that (i) each partial prepayment (other
than of a Swingline Loan) of ABR Loans shall be in a minimum
principal amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof and of Eurodollar Loans shall be in
a minimum principal amount of $5,000,000 or an integral multiple
of $1,000,000 in excess thereof and (ii) any prepayment by the
Borrower (other than of a Revolving Credit Borrowing or Swingline
Loan) shall be applied to the Term Loans and the Delayed Draw
Term Loans ratably according to the respective outstanding
principal amounts thereof.
(b) On the date of any termination or reduction of the
Revolving Credit Commitments pursuant to Section 2.09, the
Borrower shall pay or prepay so much of, first, the Swingline
Loans and, second, the Revolving Credit Borrowings as shall be
necessary in order that the aggregate principal amount of the
Revolving Loans and Swingline Loans outstanding will not exceed
the excess, if any, of (i) the aggregate Revolving Credit
Commitments after giving effect to such termination or reduction,
minus (ii) the Letter of Credit Exposure at the time.
(c) The Borrower and the Canadian Borrower shall prepay
the Borrowings at the times and in the amounts required pursuant
to Section 2.12(e) and 2.12(f). Each prepayment of the
Borrowings required to be made pursuant to Section 2.12(e) and
2.12(f) shall be applied, first, to prepay in full outstanding
Term Borrowings and Delayed Draw Borrowings pro rata in
accordance with the respective outstanding principal amounts of
such Borrowings and, second, to prepay in full outstanding
Canadian Term Borrowings.
(d) The Borrower's and the Canadian Borrower's prepayment
obligations under any paragraph of this Section 2.12 shall be in
addition to, and shall not be discharged by the performance of,
its obligations under any other such paragraph. Each notice of
prepayment shall specify the prepayment date and the principal
amount of each Borrowing (or portion thereof) to be prepaid,
shall be irrevocable and shall commit the Borrower or the
Canadian Borrower, as the case may be, to prepay such Borrowing
by the amount stated therein on the date stated therein. All
prepayments under this Section 2.12 shall be subject to Section
2.15 but otherwise without premium or penalty. All prepayments
under this Section 2.12 shall be accompanied by accrued interest
on the principal amount being prepaid to the date of payment.
(e) In the event and on each occasion that a Prepayment
Event occurs, the Borrower or the Canadian Borrower, as the case
may be, shall apply an amount equal to the Applicable Prepayment
Percentage of the Net Proceeds therefrom to prepay the Loans in
accordance with this Section 2.12(e) and Section 2.12(g) below.
Substantially simultaneously with (and in any event not later
than the Business Day next following) the occurrence of a
Prepayment Event, the Borrower or the Canadian Borrower, as the
case may be, shall pay to the Administrative Agent (for
<PAGE>
46
application to the prepayment of Loans in accordance with Section
2.12(g)) an amount equal to the Applicable Prepayment Percentage
of the Net Proceeds from such Prepayment Event.
(f) Not later than 90 days after the end of each fiscal
year, the Borrower or the Canadian Borrower, as the case may be,
shall pay to the Administrative Agent (for application to the
prepayment of Loans in accordance with Section 2.12(g)) an amount
equal to the Applicable Prepayment Percentage (as of the last day
for the fiscal year for which Excess Cash Flow is calculated) of
the amount of the Excess Cash Flow for such fiscal year.
(g) Each prepayment of principal of the Term Borrowings
or the Delayed Draw Term Borrowings pursuant to this Section 2.12
shall be applied to reduce scheduled payments of principal of the
applicable Borrowings due under paragraph (a) or (b), as
applicable, of Section 2.11 after the date of such prepayment pro
rata in accordance with the remaining scheduled amount of each
such payment; provided, however, that in the case of any
prepayment of the Term Borrowings and the Delayed Draw Term
Borrowings pursuant to Section 2.12(c) that is required pursuant
to Section 2.12(f) or pursuant to Section 2.12(a), the principal
amount of such prepayment shall be applied to reduce scheduled
payments of principal due under Section 2.11 after the date of
such prepayment in the chronological order of maturity. Each
prepayment of principal of the Canadian Term Borrowings pursuant
to this Section 2.12 shall be applied to reduce scheduled
payments of principal of the Canadian Term Borrowings due under
paragraph (c) of Section 2.11 after the date of such prepayment
pro rata in accordance with the remaining scheduled amount of
each such payment; provided, however, that in the case of any
prepayment of the Canadian Term Borrowings pursuant to Section
2.12(c) that is required pursuant to Section 2.12(f) or pursuant
to Section 2.12(a), the principal amount of such prepayment shall
be applied to reduce scheduled payments of principal due under
Section 2.11 after the date of such prepayment in the
chronological order of maturity.
(h) Notwithstanding anything herein to the contrary, the
Canadian Borrower shall not have any mandatory obligation under
this Section 2.12 (i) to prepay any Canadian Term Loans until
such time as the Delayed Draw Term Loans and Term Loans have been
repaid in full or (ii) to prepay more than 25% of the original
principal amount of the Canadian Term Loans prior to the fifth
anniversary of the Closing Date. Any mandatory prepayment of the
Canadian Term Loans which would be made but for the provisions of
clause (ii) of the preceding sentence shall be due and payable on
the first Business Day following the fifth anniversary of the
Closing Date.
(i) In the event the amount of any prepayment required to
be made above shall exceed the aggregate principal amount of the
applicable outstanding ABR Loans (the amount of any such excess
being called the "Excess Amount"), the Borrower or the Canadian
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47
Borrower, as the case may be, shall have the right, in lieu of
making such prepayment in full, to prepay all the outstanding
applicable ABR Loans and to deposit an amount equal to the Excess
Amount with the Collateral Agent in a cash collateral account
maintained (pursuant to documentation satisfactory to the
Administrative Agent) by and in the sole dominion and control of
the Collateral Agent. Any amounts so deposited shall be held by
the Collateral Agent as collateral for the Obligations and
applied to the prepayment of the applicable Eurodollar Loans at
the end of the current Interest Periods applicable thereto. On
any Business Day on which (x) collected amounts remain on deposit
in or to the credit of such cash collateral account after giving
effect to the payments made on such day pursuant to this Section
2.12(i) and (y) the Borrower or the Canadian Borrower, as the
case may be, shall have delivered to the Collateral Agent a
written request or a telephonic request (which shall be promptly
confirmed in writing) that such remaining collected amounts be
invested in the Permitted Investments specified in such request,
the Collateral Agent shall use its reasonable efforts to invest
such remaining collected amounts in such Permitted Investments;
provided, however, that the Collateral Agent shall have
continuous dominion and full control over any such investments
(and over any interest that accrues thereon) to the same extent
that it has dominion and control over such cash collateral
account and no Permitted Investment shall mature after the end of
the Interest Period for which it is to be applied. Neither the
Borrower nor the Canadian Borrower shall have the right to
withdraw any amount from such cash collateral account until the
applicable Eurodollar Loans and accrued interest thereon are paid
in full or if a Default or Event of Default then exists or would
result.
SECTION 2.13. Reserve Requirements; Change in
Circumstances. (a) Notwithstanding any other provision herein,
if after the date of this Agreement any change in applicable law
or regulation or in the interpretation or administration thereof
by any governmental authority charged with the interpretation or
administration thereof (whether or not having the force of law)
shall change the basis of taxation of payments to any Lender or
any Issuing Bank in respect of any Letter of Credit or of the
principal of or interest on any Eurodollar Loan made by such
Lender or any Fees or other amounts payable hereunder (other than
changes in respect of (i) taxes imposed on the overall net income
of such Lender or such Issuing Bank by the jurisdiction in which
such Lender or such Issuing Bank has its principal office or by
any political subdivision or taxing authority therein and (ii)
any Taxes described in Section 2.18), or shall impose, modify or
deem applicable any reserve, special deposit or similar
requirement against assets or deposits with or for the account of
or credit extended by or, in the case of the Letters of Credit,
participated in by such Lender (except any such reserve
requirement which is reflected in the Adjusted LIBO Rate) or such
Issuing Bank or shall impose on such Lender or such Issuing Bank
or the interbank eurodollar market any other condition affecting
<PAGE>
48
this Agreement, any Letter of Credit (or any participation with
respect thereto), the Letter of Credit Exposure, the Letter of
Credit Commitment or Eurodollar Loans made by such Lender, and
the result of any of the foregoing shall be to increase the cost
to such Lender or such Issuing Bank of making or maintaining the
Letter of Credit Exposure, the Letter of Credit Commitment or any
Eurodollar Loan (or, in the case of such Issuing Bank, of making
any payment or maintaining the Letter of Credit Commitment) or to
reduce the amount of any sum received or receivable by such
Lender or such Issuing Bank hereunder or under the Notes (whether
of principal, interest or otherwise) by an amount deemed by such
Lender or such Issuing Bank to be material, then the Borrower
will pay to such Lender or such Issuing Bank upon demand such
additional amount or amounts as will compensate such Lender or
such Issuing Bank for such additional costs incurred or reduction
suffered.
(b) If any Lender or Issuing Bank shall have determined
that the adoption after the date hereof of any law, rule,
regulation or guideline regarding capital adequacy, or any change
after the date hereof in any of the foregoing or in the
interpretation or administration of any of the foregoing by any
Governmental Authority, central bank or comparable agency charged
with the interpretation or administration thereof, or compliance
by any Lender (or any lending office of such Lender) or Issuing
Bank or any Lender's or Issuing Bank's holding company with any
request or directive regarding capital adequacy (whether or not
having the force of law) made or issued after the date hereof by
any such authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on such
Lender's or Issuing Bank's capital or on the capital of such
Lender's or Issuing Bank's holding company, if any, as a
consequence of this Agreement or its obligations pursuant hereto
to a level below that which such Lender or Issuing Bank or such
Lender's or Issuing Bank's holding company would have achieved
but for such adoption, change or compliance (taking into
consideration such Lender's or Issuing Bank's policies and the
policies of such Lender's or Issuing Bank's holding company with
respect to capital adequacy) by an amount deemed by such Lender
or Issuing Bank to be material, then from time to time the
Borrower shall pay to such Lender or Issuing Bank such additional
amount or amounts as will compensate such Lender or Issuing Bank
or such Lender's or Issuing Bank's holding company for any such
reduction suffered.
(c) A certificate of each Lender or Issuing Bank setting
forth such amount or amounts as shall be necessary to compensate
such Lender or Issuing Bank or its holding company as specified
in paragraph (a) or (b) above, as the case may be, shall be
delivered to the Borrower through the Administrative Agent and
shall be conclusive absent manifest error. The Borrower shall
pay each Lender or Issuing Bank the amount shown as due on any
such certificate delivered by it within 10 days after its receipt
of the same.
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49
(d) In the event any Lender or Issuing Bank delivers a
notice pursuant to paragraph (e) below, the Borrower may require,
at the Borrower's expense and subject to Section 2.15, such
Lender or Issuing Bank to assign, at par plus accrued interest
and fees, without recourse (in accordance with Section 9.04) all
its interests, rights and obligations hereunder (including, in
the case of a Lender, all of its Commitment and the Loans at the
time owing to it and its Notes and participations in Letters of
Credit held by it and its obligations to acquire such
participations) to a financial institution specified by the
Borrower provided that (i) such assignment shall not conflict
with or violate any law, rule or regulation or order of any court
or other Governmental Authority, (ii) the Borrower shall have
received the written consent of the Administrative Agent, which
consent shall not unreasonably be withheld, to such assignment,
(iii) the Borrower shall have paid to the assigning Lender or
Issuing Bank all monies accrued and owing hereunder to it
(including pursuant to this Section) and (iv) in the case of a
required assignment by an Issuing Bank, all outstanding Letters
of Credit issued by such Issuing Bank shall be canceled and
returned to such Issuing Bank.
(e) Promptly after any Lender or Issuing Bank has
determined, in its sole judgment, that it will make a request for
increased compensation pursuant to this Section, such Lender or
Issuing Bank will notify the Borrower thereof. Failure on the
part of any Lender or Issuing Bank so to notify the Borrower or
to demand compensation for any increased costs or reduction in
amounts received or receivable or reduction in return on capital
with respect to any period shall not constitute a waiver of such
Lender's or Issuing Bank's right to demand compensation with
respect to such period or any other period; provided that the
Borrower shall not be under any obligation to compensate any
Lender or Issuing Bank under Section 2.13(b) with respect to
increased costs or reductions with respect to any period prior to
the date that is six months prior to such request if such Lender
or the Issuing Bank knew or could reasonably have been expected
to be aware of the circumstances giving rise to such increased
costs or reductions and of the fact that such circumstances would
in fact result in such increased costs or reduction; provided,
further, that, the foregoing limitation shall not apply to any
increased costs or reductions arising out of the retroactive
application of any law, regulation, rule, guideline or directive
as aforesaid within such six month period. The protection of
this Section shall be available to each Lender and Issuing Bank
regardless of any possible contention of the invalidity or
inapplicability of the law, rule, regulation, guideline or other
change or condition which shall have occurred or been imposed.
SECTION 2.14. Change in Legality. (a) Notwithstanding any
other provision herein, if the adoption of or any change in any
law or regulation or in the interpretation thereof by any
Governmental Authority charged with the administration or
interpretation thereof shall make it unlawful for any Lender to
<PAGE>
50
make or maintain any Eurodollar Loan or to give effect to its
obligations as contemplated hereby with respect to any Eurodollar
Loan, then, by written notice to the Borrower and to the
Administrative Agent, such Lender may:
(i) declare that Eurodollar Loans will not thereafter be
made by such Lender hereunder, whereupon any request by the
Borrower for a Eurodollar Borrowing shall, as to such Lender
only, be deemed a request for an ABR Loan unless such
declaration shall be subsequently withdrawn; and
(ii) require that all outstanding Eurodollar Loans made
by it be converted to ABR Loans, in which event all such
Eurodollar Loans shall be automatically converted to ABR
Loans as of the effective date of such notice as provided in
paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or
(ii) above, all payments and prepayments of principal which would
otherwise have been applied to repay the Eurodollar Loans that
would have been made by such Lender or the converted Eurodollar
Loans of such Lender shall instead be applied to repay the ABR
Loans made by such Lender in lieu of, or resulting from the
conversion of, such Eurodollar Loans.
(b) For purposes of this Section 2.14, a notice to the
Borrower by any Lender shall be effective as to each Eurodollar
Loan, if lawful, on the last day of the Interest Period currently
applicable to such Eurodollar Loan; in all other cases such
notice shall be effective on the date of receipt by the Borrower.
SECTION 2.15. Indemnity. The Borrower shall indemnify each
Lender against any loss or expense (other than taxes) which such
Lender may sustain or incur as a consequence of (a) any failure
by the Borrower or the Canadian Borrower to fulfill on the date
of any Borrowing or proposed Borrowing hereunder the applicable
conditions set forth in Article IV, (b) any failure by the
Borrower or the Canadian Borrower to borrow or to refinance,
convert or continue any Loan hereunder after irrevocable notice
of such Borrowing, refinancing, conversion or continuation has
been given pursuant to Section 2.03 or 2.10, (c) any payment,
prepayment or conversion of a Eurodollar Loan required by any
other provision of this Agreement or otherwise made or deemed
made on a date other than the last day of the Interest Period
applicable thereto, (d) any default in payment or prepayment of
the principal amount of any Loan or any part thereof or interest
accrued thereon, as and when due and payable (at the due date
thereof, whether by scheduled maturity, acceleration, irrevocable
notice of prepayment or otherwise) or (e) the occurrence of any
Event of Default, including, in each such case, any loss or
reasonable expense sustained or incurred or to be sustained or
incurred in liquidating or employing deposits from third parties
acquired to effect or maintain such Loan or any part thereof as a
Eurodollar Loan. Such loss or reasonable expense shall exclude
<PAGE>
51
loss of margin hereunder but shall include an amount equal to the
excess, if any, as reasonably determined by such Lender, of (i)
its cost of obtaining the funds for the Loan being paid, prepaid,
converted or not borrowed, converted or continued (assumed to be
the Adjusted LIBO Rate applicable thereto) for the period from
the date of such payment, prepayment, conversion or failure to
borrow, convert or continue to the last day of the Interest
Period for such Loan (or, in the case of a failure to borrow,
convert or continue, the Interest Period for such Loan which
would have commenced on the date of such failure) over (ii) the
amount of interest (as reasonably determined by such Lender) that
would be realized by such Lender in reemploying the funds so
paid, prepaid, converted or not borrowed, converted or continued
for such period or Interest Period, as the case may be. A
certificate of any Lender setting forth any amount or amounts
which such Lender is entitled to receive pursuant to this Section
(and the reasons therefor) shall be delivered to the Borrower
through the Administrative Agent and shall be conclusive absent
manifest error.
SECTION 2.16. Pro Rata Treatment. Except as required under
Section 2.14, each Borrowing, each payment or prepayment of
principal of any Borrowing, each payment of interest on the
Loans, each payment of the Commitment Fees or Letter of Credit
Fees, each reduction of the Term Loan Commitments, the Delayed
Draw Term Loan Commitments, the Canadian Term Loan Commitments or
the Revolving Credit Commitments and each refinancing of any
Borrowing with, conversion of any Borrowing to or continuation of
any Borrowing as a Borrowing of any Type shall be allocated
(except in the case of Swingline Loans) pro rata among the
Lenders in accordance with their respective applicable
Commitments (or, if such Commitments shall have expired or been
terminated, in accordance with the respective principal amounts
of their applicable outstanding Loans). Each Lender agrees that
in computing such Lender's portion of any Borrowing to be made
hereunder, the Administrative Agent may, in its discretion, round
each Lender's percentage of such Borrowing, computed in
accordance with Section 2.01, to the next higher or lower whole
dollar amount.
SECTION 2.17. Payments. (a) Each of the Borrower and the
Canadian Borrower shall make each payment without set-off or
counterclaim (including principal of or interest on any Borrowing
or any Fees or other amounts) required to be made by it hereunder
and under any other Loan Document not later than 12:00 noon, New
York City time, on the date when due in dollars to the
Administrative Agent at its offices at 270 Park Avenue, New York,
New York, Attention of Wholesale Loan Services, in immediately
available funds, for credit to Chemical Bank, ABA Number
021000128, Account Number 323-5-02059.
(b) Whenever any payment (including principal of or
interest on any Borrowing or any Fees or other amounts) hereunder
or under any other Loan Document shall become due, or otherwise
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52
would occur, on a day that is not a Business Day, such payment
may be made on the next succeeding Business Day (except in the
case of payment of principal of a Eurodollar Borrowing if the
effect of such extension would be to extend such payment into the
next succeeding month, in which event such payment shall be due
on the immediately preceding Business Day), and such extension of
time shall in such case be included in the computation of
interest or Fees, if applicable.
SECTION 2.18. Taxes. (a) Any and all payments by the
Borrower and the Canadian Borrower to the Administrative Agent,
the Issuing Banks or the Lenders hereunder or under the other
Loan Documents shall be made, in accordance with Section 2.17
free and clear of and without deduction for any and all present
or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, excluding
(i) in the case of each Lender, each Issuing Bank and the
Administrative Agent, taxes that would not be imposed but for a
connection between such Lender, such Issuing Bank or the
Administrative Agent (as the case may be) and the jurisdiction
imposing such tax, other than a connection arising solely by
virtue of the activities of such Lender, such Issuing Bank or the
Administrative Agent (as the case may be) pursuant to or in
respect of this Agreement or under any other Loan Document,
including, without limitation, entering into, lending money or
extending credit pursuant to, receiving payments under, or
enforcing, this Agreement or any other Loan Document, and (ii) in
the case of each Lender, each Issuing Bank and the Administrative
Agent, any United States withholding taxes payable with respect
to payments hereunder or under the other Loan Documents under
laws (including, without limitation, any statute, treaty, ruling,
determination or regulation) in effect on the Initial Date (as
hereinafter defined) for such Lender, such Issuing Bank or the
Administrative Agent, as the case may be, but not excluding any
United States withholding taxes payable solely as a result of any
change in such laws occurring after the Initial Date (all such
non-excluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as
"Taxes"). For purposes of this Section 2.18, the term "Initial
Date" shall mean (i) in the case of the Administrative Agent, any
Issuing Bank or any Lender, the date on which such person became
a party to this Agreement and (ii) in the case of any assignment
including any assignment by a Lender or an Issuing Bank to a new
lending office, the date of such assignment. If any Taxes shall
be required by law to be deducted from or in respect of any sum
payable hereunder or under any other Loan Document to any Lender,
any Issuing Bank or the Administrative Agent (i) the sum payable
by the Borrower or the Canadian Borrower, as the case may be,
shall be increased as may be necessary so that after making all
required deductions (including deductions applicable to
additional sums payable under this Section 2.18) such Lender,
such Issuing Bank or the Administrative Agent (as the case may
be) receives an amount equal to the sum it would have received
had no such deductions been made, (ii) the Borrower or the
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53
Canadian Borrower, as the case may be, shall make such
deductions and (iii) the Borrower or the Canadian Borrower, as
the case may be, shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with
applicable law. The Borrower and the Canadian Borrower shall
not, however, be required to pay any amounts pursuant to clause
(i) of the preceding sentence to any Lender, any Issuing Bank or
the Administrative Agent (in the case of payments to be made by
the Borrower) not organized under the laws of the United States
of America or a state thereof (or, in the case of payments to be
made by the Canadian Borrower, not organized under the laws of
Canada) if such Lender, such Issuing Bank or the Administrative
Agent fails to comply with the requirements of paragraphs (f) or
(g), as the case may be, and paragraph (h) of this Section 2.18.
(b) In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from the execution,
delivery or registration of, or otherwise with respect to, this
Agreement or any other Loan Document (hereinafter referred to as
"Other Taxes").
(c) The Borrower will indemnify each Lender, each Issuing
Bank and the Administrative Agent for the full amount of Taxes
and Other Taxes (including any Taxes or Other Taxes imposed by
any jurisdiction on amounts payable under this Section 2.18) paid
by such Lender, such Issuing Bank or the Administrative Agent, as
the case may be, and any liability (including penalties, interest
and expenses) arising therefrom or with respect thereto whether
or not such Taxes or Other Taxes were correctly or legally
asserted. Such indemnification shall be made within 10 days
after the date any Lender, any Issuing Bank or the Administrative
Agent, as the case may be, makes written demand therefor. If a
Lender, an Issuing Bank or the Administrative Agent shall become
aware that it is entitled to receive a refund or is reasonably
requested by the Borrower to pursue a claim for a refund in
respect of Taxes or Other Taxes, it shall promptly notify the
Borrower of the availability of such refund (unless instructed to
pursue a claim by the Borrower) and shall, within 30 days after
receipt of a request by the Borrower, pursue or timely claim such
refund at the Borrower's expense. If any Lender, any Issuing
Bank or the Administrative Agent receives a refund in respect of
any Taxes or Other Taxes for which such Lender, such Issuing Bank
or the Administrative Agent has received payment from the
Borrower hereunder, it shall promptly notify the Borrower of such
refund and shall, within 30 days after receipt of a request by
the Borrower (or promptly upon receipt, if the Borrower has
requested application for such refund pursuant hereto), repay
such refund (plus any interest received) to the Borrower,
provided that the Borrower, upon the request of such Lender, such
Issuing Bank or the Administrative Agent, agrees to return such
refund (plus any penalties, interest or other charges required to
be paid) to such Lender, such Issuing Bank or the Administrative
<PAGE>
54
Agent in the event such Lender, such Issuing Bank or the
Administrative Agent is required to repay such refund.
(d) Within 30 days after the date of any payment of Taxes
or Other Taxes withheld by the Borrower or the Canadian Borrower,
as the case may be, in respect of any payment to any Lender, any
Issuing Bank or the Administrative Agent, the Borrower or the
Canadian Borrower, as the case may be, will furnish to the
Administrative Agent, at its address referred to in Schedule
2.01, the original or a certified copy of a receipt evidencing
payment thereof.
(e) Without prejudice to the survival of any other
agreement contained herein, the agreements and obligations
contained in this Section 2.18 shall survive the payment in full
of principal and interest hereunder and the termination of the
Commitments.
(f) In the case of any Borrowing by the Borrower, this
paragraph (f) shall apply. Each Lender, each Issuing Bank and
the Administrative Agent that is not organized under the laws of
the United States of America or a state thereof agrees that at
least 10 days prior to the first Interest Payment Date following
the Initial Date in respect of such Issuing Bank or such Lender,
it will deliver to the Borrower and the Administrative Agent (if
appropriate) two duly completed copies of either (i) United
States Internal Revenue Service Form 1001 or 4224 or successor
applicable form, as the case may be, certifying in each case that
the Issuing Bank or such Lender or the Administrative Agent, as
the case may be, is entitled to receive payments under this
Agreement and the Notes payable to it without deduction or
withholding of any United States federal income taxes and backup
withholding taxes or is entitled to receive such payments at a
reduced rate pursuant to a treaty provision or (ii) in the case
of a Lender that is not a "bank" within the meaning of Section
881(c)(3) of the Code, United States Internal Revenue Service
Form W-8 or successor applicable form and a statement from such
Lender certifying to the fact that interest payable to it
hereunder (A) will not be described in Section 871(h)(3)(A) or
Section 881(c)(3)(A), (B) or (C) of the Code and (B) will not be
effectively connected with a trade or business carried on in the
United States by such Lender. Each Lender, each Issuing Bank and
the Administrative Agent required to deliver to the Borrower and
the Administrative Agent a Form 1001, 4224 or W-8 pursuant to the
preceding sentence further undertakes to deliver to the Borrower
and the Administrative Agent (if appropriate) two further copies
of Form 1001, 4224 or W-8, or successor forms, or other similar
manner of certification and such extensions or renewals thereof
as may reasonably be requested by the Borrower and, in the case
where a Form W-8 has been delivered, a further statement
certifying to the fact set forth in clause (B) of the preceding
sentence (i) at the times reasonably requested by the Borrower,
(ii) after the occurrence of an event requiring a change in the
most recent form or statement previously delivered by it to the
<PAGE>
55
Borrower or (iii) in the case of Form 1001, 4224 or W-8, on or
before the date that any such form expires or becomes obsolete,
and, in the case of Form 1001 or 4224, certifying that such
Issuing Bank or such Lender is entitled to receive payments under
this Agreement without deduction or withholding of any United
States federal income taxes and backup withholding taxes or is
entitled to receive such payments at a reduced rate pursuant to a
treaty provision, unless such Issuing Bank or such Lender advises
the Borrower that it is unable lawfully to provide such forms and
other certifications and notifies the Borrower to such effect.
Unless the Borrower and the Administrative Agent have received
forms, certificates and other documents satisfactory to them
indicating that payments hereunder or under or in respect of the
Notes or the Letters of Credit to or for any Issuing Bank or
Lender not incorporated under the laws of the United States or a
state thereof are not subject to United States withholding tax or
are subject to such tax at a rate reduced by an applicable tax
treaty, the Borrower or the Administrative Agent shall withhold
such taxes from such payments at the applicable statutory rate.
(g) In the event the Canadian Borrower is required to pay
additional amounts pursuant to this Section 2.18, this paragraph
(g) shall apply. Each Lender, each Issuing Bank and the
Administrative Agent that is not incorporated within or under the
laws of Canada and that is claiming such additional amounts
agrees that within a reasonable period of time following the
request of the Canadian Borrower, it will, to the extent it is
legally entitled to a reduction in the rate of or exemption from
Canadian withholding taxes, deliver to the Canadian Borrower and
the Administrative Agent (if appropriate) any form or document
required under the laws, regulations, official interpretations or
treaties enacted by, made or entered into with Canada properly
completed and duly executed by such Issuing Bank, such Lender or
Administrative Agent establishing that any payments hereunder are
exempt from Canadian withholding tax or subject to a reduced rate
of Canadian withholding tax, as the case may be; provided that,
in the sole determination of such Lender, such Issuing Bank or
the Administrative Agent, such form or document shall not be
otherwise disadvantageous to such Lender, such Issuing Bank or
the Administrative Agent.
(h) Any Issuing Bank and any Lender claiming any
additional amounts payable pursuant to this Section 2.18 shall
use reasonable efforts (consistent with legal and regulatory
restrictions) to file any certificate or document requested by
the Borrower or the Canadian Borrower to change the jurisdiction
of its applicable lending office if the making of such a filing
or change would avoid the need for or reduce the amount of any
such additional amounts which may thereafter accrue and would
not, in the sole determination of such Issuing Bank or such
Lender, be otherwise disadvantageous to such Issuing Bank or such
Lender.
<PAGE>
56
SECTION 2.19. Issuance of Letters of Credit.
(a) Each Issuing Bank agrees, upon the terms and subject
to the conditions herein set forth, to issue Letters of Credit,
in a form reasonably acceptable to the Administrative Agent and
such Issuing Bank, appropriately completed, for the account of
the Borrower, at any time and from time to time on and after the
Closing Date until the earlier of the date five Business Days
prior to the Revolving Credit Maturity Date and the termination
of the Letter of Credit Commitment in accordance with the terms
hereof; provided, however, that any Letter of Credit shall be
issued by an Issuing Bank only if, and each request by the
Borrower for the issuance of any Letter of Credit shall be deemed
a representation and warranty of the Borrower that, immediately
following the issuance of any such Letter of Credit, (i) the
Letter of Credit Exposure shall not exceed the Letter of Credit
Commitment in effect at the time and (ii) the sum of the Letter
of Credit Exposure and the aggregate principal amount of
outstanding Revolving Loans and Swingline Loans shall not exceed
the aggregate Revolving Credit Commitments in effect at the time.
In determining whether the issuance of a Letter of Credit will
comply with clauses (i) and (ii) of the preceding sentence, each
Issuing Bank may rely conclusively on information obtained from
the Administrative Agent regarding the aggregate principal amount
of outstanding Revolving Loans and the aggregate Revolving Credit
Commitments, Letter of Credit Exposure and Swingline Loans.
(b) Each Letter of Credit shall expire no later than the
fifth Business Day preceding the Revolving Credit Maturity Date,
unless such Letter of Credit expires by its terms on an earlier
date. Each Letter of Credit shall provide for payments of
drawings in dollars. Each Letter of Credit shall reduce
availability under the Revolving Credit Commitments.
(c) Each issuance of any Letter of Credit shall be made on
at least three Business Days' prior written notice from the
Borrower to the applicable Issuing Bank and the Administrative
Agent (which shall give prompt notice thereof to each Revolving
Lender) specifying the date of issuance, the date on which such
Letter of Credit is to expire (which shall not be later than the
earlier of (i) the fifth Business Day preceding the Revolving
Credit Maturity Date and (ii) subject to extension, two years
after the date of any such Letter of Credit), the amount of such
Letter of Credit, the name and address of the beneficiary of such
Letter of Credit and such other information as may be necessary
or desirable to complete such Letter of Credit. Such Issuing
Bank will give the Administrative Agent and the Administrative
Agent shall give each Revolving Lender prompt notice of the
issuance and amount of each Letter of Credit and the expiration
of each Letter of Credit.
(d) No Issuing bank shall be required to issue a Letter of
Credit unless it has agreed with the Borrower upon the Fronting
Fees to be paid by the Borrower in connection with such Letter of
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57
Credit and the form of such Letter of Credit is reasonably
acceptable to such Issuing Bank.
(e) Holdings has identified to the Administrative Agent
certain letters of credit aggregating not more than $11,000,000
(the "Existing Letters of Credit") which were issued for the account
of Holdings or certain of its subsidiaries prior to the Closing
Date by financial institutions which are Lenders under
this Agreement. The parties hereto wish to treat the Existing
Letters of Credit as if they had been issued under this
Agreement. Therefore, the Existing Letters of Credit shall
be deemed to be Letters of Credit issued on the Closing Date
for all purposed of this Agreement, including, without
limitation, Section 2.20. The Borrower agrees to take any
action reasonably requested by the applicable Issuing Bank
(including delivering new letter of credit applications) in
order to implement this paragraph (e) and make the Borrower
the account party of record for the Existing Letters of Credit.
SECTION 2.20. Participations; Unconditional Obligations.
(a) By the issuance of a Letter of Credit and without any
further action on the part of the applicable Issuing Bank or the
Revolving Lenders in respect thereof, each Issuing Bank hereby
grants to each Revolving Lender, and each Revolving Lender hereby
agrees to acquire from such Issuing Bank, a participation in such
Letter of Credit equal to such Revolving Lender's Applicable
Percentage of the face amount of such Letter of Credit, effective
upon the issuance of such Letter of Credit. In consideration and
in furtherance of the foregoing, each Revolving Lender hereby
absolutely and unconditionally agrees to pay to the
Administrative Agent, for the account of such Issuing Bank, in
accordance with Section 2.02(f), such Revolving Lender's
Applicable Percentage of each Letter of Credit Disbursement made
by such Issuing Bank; provided, however, that the Revolving
Lenders shall not be obligated to make any such payment to an
Issuing Bank with respect to any wrongful payment or disbursement
made as a result of the gross negligence or willful misconduct of
such Issuing Bank in determining whether documents presented in
connection with such Letter of Credit Disbursement conform to the
requirements of the applicable Letter of Credit.
(b) Each Revolving Lender acknowledges and agrees that its
obligation to acquire participations pursuant to paragraph (a) in
respect of Letters of Credit is absolute and unconditional and
shall not be affected by any circumstance whatsoever, including
the occurrence and continuance of an Event of Default or Default
hereunder, and that each such payment shall be made without any
offset, abatement, withholding or reduction whatsoever other than
in the case of any wrongful payment made as a result of the gross
negligence or willful misconduct of the Issuing Bank in
determining whether documents presented in connection with such
Letter of Credit conform to the requirements of the applicable
Letter of Credit.
SECTION 2.21. Letter of Credit Fee. The Borrower agrees to
pay to the Administrative Agent for the account of the Revolving
Lenders for each calendar quarter (or shorter period commencing
with the Closing Date or ending with the first date on which the
Letter of Credit Commitment shall have expired or been terminated
and there shall be no outstanding Letters of Credit) a fee (the
"Letter of Credit Fee") on the average daily amount of the
outstanding Letters of Credit at a per annum rate equal to the
Applicable Margin at such time for Eurodollar Borrowings;
provided that with respect to any Letter of Credit as to which
the Borrower has failed to make a payment required by Section
2.22, interest calculated at the rate set forth in Section 2.07
from the date such payment was due through the date such payment
is made shall be paid by the Borrower in lieu of the Letter of
Credit Fee on the date such payment is made. The Letter of
Credit Fee shall be computed on the basis of the actual number of
<PAGE>
58
days elapsed over a year of 360 days. The Administrative Agent
agrees to disburse to each Revolving Lender its pro rata portion
of such Letter of Credit Fee promptly upon receipt. The Letter
of Credit Fee shall be paid in arrears on the last day of March,
June, September and December of each year and on the Revolving
Credit Maturity Date (or the first date on which the Letter of
Credit Commitment shall have expired or been terminated and there
shall be no outstanding Letters of Credit, if earlier),
commencing on the first such date following the Closing Date.
Once paid the Letter of Credit Fee paid or payable shall not be
refundable in any circumstances whatsoever, absent manifest
error.
SECTION 2.22. Agreement To Repay Letter of Credit
Disbursements. (a) If an Issuing Bank shall pay any draft
presented under a Letter of Credit, the Borrower shall pay to the
Administrative Agent, on behalf of such Issuing Bank, an amount
equal to the amount of such draft before 11:00 a.m., New York
City time, on the Business Day on which such Issuing Bank shall
have notified the Borrower that payment of such draft will be
made (or such later time as is not later than one hour after the
Borrower shall have received such notice or, if the Borrower
shall have received such notice later than 4:00 p.m., New York
City time, on any Business Day, not later than 10:00 a.m., New
York City time, on the immediately following Business Day). The
Administrative Agent will promptly pay any such amounts received
by it to such Issuing Bank.
(b) The Borrower's obligation to repay each Issuing Bank
for payments and disbursements made by such Issuing Bank under
the outstanding Letters of Credit shall be absolute,
unconditional and irrevocable under any and all circumstances and
irrespective of:
(i) any lack of validity or enforceability of any Letter
of Credit;
(ii) the existence of any claim, setoff, defense or other
right which the Borrower or any other person may at any time
have against the beneficiary under any Letter of Credit, any
Issuing Bank, the Administrative Agent or any Lender (other
than the defense of payment in accordance with the terms of
this Agreement or a defense based on the gross negligence or
wilful misconduct of any Issuing Bank) or any other person
in connection with this Agreement or any other agreement or
transaction;
(iii) any draft or other document presented under a Letter
of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being
untrue or inaccurate in any respect; provided that payment
by an Issuing Bank under such Letter of Credit against
presentation of such draft or document shall not have
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59
constituted gross negligence or wilful misconduct of such
Issuing Bank;
(iv) payment by an Issuing Bank under a Letter of Credit
against presentation of a draft or other document which does
not comply with the terms of such Letter of Credit; provided
that such payment shall not have constituted gross
negligence or wilful misconduct of such Issuing Bank; and
(v) any other circumstance or event whatsoever, whether
or not similar to any of the foregoing; provided that such
other circumstance or event shall not have been the result
of gross negligence or wilful misconduct of the applicable
Issuing Bank.
It is understood that in making any payment under a Letter
of Credit (x) each Issuing Bank's exclusive reliance on the
documents presented to it under such Letter of Credit as to any
and all matters set forth therein, including reliance on the
amount of any draft presented under such Letter of Credit,
whether or not the amount due to the beneficiary equals the
amount of such draft and whether or not any document presented
pursuant to such Letter of Credit proves to be insufficient in
any respect, if such document on its face appears to be in order,
and whether or not any other statement or any other document
presented pursuant to such Letter of Credit proves to be forged
or invalid or any statement therein proves to be inaccurate or
untrue in any respect whatsoever and (y) any noncompliance in any
immaterial respect of the documents presented under a Letter of
Credit with the terms thereof shall, in each case, not be deemed
willful misconduct or gross negligence of such Issuing Bank.
SECTION 2.23. Letter of Credit Operations. Each Issuing
Bank shall, promptly following its receipt thereof, examine all
documents purporting to represent a demand for payment under an
outstanding Letter of Credit to ascertain that the same appear on
their face to be in substantial conformity with the terms and
conditions of such outstanding Letter of Credit. Such Issuing
Bank shall (i) as promptly as possible after such demand for
payment give oral notification, confirmed by telecopy, to the
Administrative Agent and the Borrower of such demand for payment
and (ii) as promptly as possible after such Issuing Bank
determines whether such demand for payment was in accordance with
the terms and conditions of such outstanding Letter of Credit,
give notice in the same manner to the Administrative Agent and
the Borrower as to such determination and as to whether such
Issuing Bank has made or will make a Letter of Credit
Disbursement thereunder, provided that the failure to give such
notices shall not relieve the Borrower of its obligation to
reimburse such Issuing Bank with respect to any such Letter of
Credit Disbursement, and the Administrative Agent shall promptly
give each Revolving Lender notice thereof.
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60
SECTION 2.24. Cash Collateralization. If any Event of
Default shall occur and be continuing, the Borrower shall, on the
Business Day it receives notice from the Administrative Agent or
the Required Lenders therefor, deposit in an account with the
Collateral Agent, for the benefit of the Lenders, an amount in
cash equal to its Letter of Credit Exposure as of such date.
Such deposit shall be held by the Collateral Agent as collateral
for the payment and performance of the Obligations. So long as
such Event of Default is continuing, the Collateral Agent shall
have exclusive dominion and control, including the exclusive
right of withdrawal, over such account. Other than any interest
earned on the investment of such deposits in Permitted
Investments, which investments shall be made at the option and
sole discretion of the Collateral Agent, such deposits shall not
bear interest. Interest or profits, if any, on such investments
shall accumulate in such account. Moneys in such account shall
automatically be applied by the Collateral Agent to reimburse the
applicable Issuing Bank and the Revolving Lenders for Letter of
Credit Disbursements and, if the maturity of the Loans has been
accelerated, to satisfy the Obligations. All remaining amounts
on deposit shall be returned to the Borrower within three
Business Days after all Events of Default have been cured or
waived.
SECTION 2.25. Termination and Reduction of Letter of Credit
Commitment. (a) Notwithstanding any other provision hereof, in
the event that any restrictions or limitations are imposed upon
or determined or held to be applicable to any Issuing Bank, any
Revolving Lender or the Borrower by, under or pursuant to any law
or regulation (Federal, state or local) now or hereafter in
effect or by reason of any interpretation thereof by any court or
Governmental Authority (including any interpretation by the
Comptroller of the Currency as to the applicability of 12 U.S.C.
Sec. 84 or any substitute statute, as now or hereafter in effect, to
the transactions contemplated hereby), which would prevent such
Revolving Lender from legally incurring liability under or in
connection with a Letter of Credit issued or to be issued
pursuant hereto, then such Revolving Lender shall give prompt
written notice thereof to the Administrative Agent (which shall
notify the Borrower, each Issuing Bank and each other Revolving
Lender thereof as soon as reasonably practicable), whereupon the
obligation of each Issuing Bank to issue additional Letters of
Credit pursuant hereto shall be reduced by the Applicable
Percentage of such Revolving Lender (and, as to any Letter of
Credit thereafter issued, the Applicable Percentages of the other
Revolving Lenders shall be determined as though such Revolving
Lender does not have a Revolving Credit Commitment) until the
Administrative Agent shall be advised that such event is no
longer continuing or until such Revolving Lender shall have
assigned its Commitment pursuant to the provisions of this
Agreement.
(b) The Borrower may permanently terminate, or from time
to time in part permanently reduce, the Letter of Credit
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61
Commitment, in each case upon at least three Business Days' prior
written or telex notice to the Administrative Agent; provided
that the Letter of Credit Commitment shall not be reduced to an
amount that is less than the Letter of Credit Exposure at the
time.
(c) In the event that the Revolving Credit Commitments are
at any time reduced pursuant to Section 2.09 to an amount that is
less than the Letter of Credit Commitment, the Letter of Credit
Commitment shall be permanently reduced to an amount equal to the
Revolving Credit Commitments.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Each of Holdings, the Canadian Borrower and the Borrower
represents and warrants to each of the Lenders and each Issuing
Bank that:
SECTION 3.01. Organization, Corporate Powers. Each of
Holdings and each Restricted Subsidiary (i) is a corporation duly
organized, validly existing and in good standing under the laws
of the jurisdiction in which it is incorporated, (ii) has all
requisite corporate power and authority, and all material
licenses, permits, franchises, consents and approvals, to own or
lease its property and assets and to carry on its business as now
conducted and as proposed to be conducted, (iii) is qualified and
in good standing as a foreign corporation to do business in every
jurisdiction where such qualification is necessary, except where
the failure so to qualify would not have a Material Adverse
Effect and (iv) has the corporate power and authority to execute,
deliver and perform each of the Loan Documents and each agreement
or instrument contemplated hereby or thereby to which it is or
will be a party. None of Holdings or any Restricted Subsidiary
of Holdings has any assets or business, or is a party to any
material contract within the meaning of Item 6.01(b)(10) of
Regulation S-K of the Securities and Exchange Commission, other
than as disclosed or referred to in the registration statement of
which the Preliminary Prospectus is a part or as contemplated
hereby and thereby.
SECTION 3.02. Authorization. The execution, delivery and
performance of each of the Loan Documents, the borrowings
hereunder and the consummation of the Recapitalization
Transactions and the other transactions contemplated by any of
the foregoing (collectively, the "Transactions") (i) have been
duly authorized by all requisite corporate and, if required,
stockholder action and (ii) will not (x) violate (A) any
provision of law, statute, rule or regulation (including, without
limitation, Regulations G, T, U and X) or the certificate of
incorporation or by-laws (or similar governing documents) of any
of Holdings and the Restricted Subsidiaries, (B) any applicable
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62
order of any court or any rule, regulation or order of any
Governmental Authority or (C) any indenture, certificate of
designation for preferred stock, agreement or other instrument to
which any of Holdings or any Restricted Subsidiary is a party or
by which any of them or any of their property is bound, (y) be in
conflict with, result in a breach of or constitute (with notice
or lapse of time or both) a default under any such indenture,
agreement or other instrument where any such conflict, violation,
breach or default referred to in clause (ii)(x) or (ii)(y) of
this Section, individually or in the aggregate, would have a
Material Adverse Effect or (z) result in the creation or imposi-
tion of any Lien upon any property or assets of Holdings or any
subsidiary of Holdings, except for Liens created by the Pledge
Agreement.
SECTION 3.03. Enforceability. This Agreement has been duly
executed and delivered by each of Holdings, the Canadian Borrower
and the Borrower and constitutes, and each other Loan Document
when executed and delivered by any of Holdings, the Borrower, the
Canadian Borrower or the Subsidiary Guarantors that is or is to
be a party thereto will constitute, a legal, valid and binding
obligation of such party enforceable against such party in
accordance with its terms, except as enforceability may be
limited by bankruptcy, insolvency, moratorium, reorganization or
other similar laws affecting creditors' rights generally and
except as enforceability may be limited by general principles of
equity (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
SECTION 3.04. Recapitalization. (a) All consents and
approvals of, filings and registrations with, and other actions
in respect of, all Governmental Authorities required in order to
make or consummate the Recapitalization Transactions have been
obtained, given, filed or taken and are in full force and effect,
other than (i) filings and other actions required pursuant to the
Securities Act of 1933, the Securities Exchange Act of 1934 and
the respective rules and regulations thereunder, and filings and
other actions required pursuant to state securities or blue sky
laws, in each case to the extent that such filings and other
actions are not required to have been made or taken prior to the
date hereof, and (ii) any such consents, approvals, filings or
other actions, the failure to obtain or make which could not
reasonably be expected to result in a Material Adverse Effect.
(b) The Preliminary Prospectus at the time of its
dissemination to the public did not and on the Closing Date will
not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements
therein, in the light of the circumstances under which they are
made, not misleading. Copies of the Preliminary Prospectus have
been delivered to the Lenders.
(c) The final prospectus filed with the Securities and
Exchange Commission in connection with the Public Offering and
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63
any amendments or supplements thereto will not at the time of its
dissemination to the public or on the Closing Date contain any
untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not
misleading. Copies of such final prospectus and any amendments
or supplements thereto will be delivered to the Lenders promptly
following the time they are made available to the public or filed
with the Securities and Exchange Commission.
SECTION 3.05. Use of Proceeds. The Borrower and the
Canadian Borrower will use the proceeds of the Loans only for the
purposes set forth in Section 5.08.
SECTION 3.06. Federal Reserve Regulations. (a) None of
Holdings or any subsidiary of Holdings 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.
(b) The making of the Loans hereunder and the use of the
proceeds thereof as contemplated hereby and the other
Transactions will not violate or be inconsistent with the
provisions of the Regulations of the Board, including Regulations
G, T, U and X.
SECTION 3.07. Capitalization of the Borrower and Holdings.
(a) The authorized capital stock of the Borrower consists of
2,000 shares of common stock, par value $1.00 per share
("Borrower Common Stock"), of which 1,000 shares will be issued
and outstanding as of the Closing Date (after giving effect to
the Recapitalization Transactions). All such outstanding shares
of Borrower Common Stock are fully paid and nonassessable and, on
and after the Closing Date (after giving effect to the
Recapitalization Transactions), will be owned beneficially and of
record by Holdings and, on and after the Closing Date, shall be
free and clear of all Liens and encumbrances whatsoever (other
than the Lien of the Pledge Agreement). Except for the Pledge
Agreement, there are no outstanding subscriptions, options,
warrants, calls, rights (including preemptive rights) or other
agreements or commitments of any nature relating to any capital
stock of the Borrower.
(b) The authorized capital stock of Holdings consists of
(i) 150,000,000 shares of Holdings Common Stock, of which
approximately 66,710,900 shares will be issued and outstanding as
of the Closing Date (assuming no exercise of the Overallotment
Option) and (ii) 16,000,000 shares of preferred stock, par value
$0.01 per share, of which no shares will be outstanding as of the
Closing Date (after giving effect to the Recapitalization
Transactions). On the Closing Date, all such outstanding shares
of Holdings Common Stock will be fully paid and nonassessable.
On the Closing Date, after giving effect to the Recapitalization
Transactions (but assuming no exercise of the Overallotment
Option), each Designated Person (or group of Designated Persons)
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will be the owner, beneficially and of record, of the number of
shares of Holdings Common Stock specified on Schedule 3.07(b)(1).
Except as provided in Schedule 3.07(b)(2) hereto, neither
Holdings nor any Subsidiary is a party to any outstanding
subscriptions, options, warrants, calls, rights (including
preemptive rights) or other agreements or commitments (other than
stock options granted to employees, consultants or directors and
directors' qualifying shares) of any nature relating to any
capital stock of Holdings.
(c) The authorized capital stock of the Canadian Borrower
consists of an unlimited number of common shares without par
value ("Canadian Borrower Common Stock"), of which 3,694 shares
will be issued and outstanding as of the Closing Date and an
unlimited number of 5% non-cumulative, redeemable preferred
shares, without par value, no shares of which will be issued and
outstanding as of the Closing Date. All such outstanding shares
of Canadian Borrower Common Stock are fully paid and nonass-
essable and, on and after the Closing Date, will be owned
directly or indirectly, beneficially and of record by the
Borrower and, on and after the Closing Date, shall be free and
clear of all Liens and encumbrances whatsoever.
SECTION 3.08. Pledge Agreement. The security interests
created in favor of the Collateral Agent, for the benefit of the
Lenders, under the Pledge Agreement will at all times constitute
first-priority, perfected security interests in the Pledged
Securities, and such Pledged Securities will be subject to no
Liens or security interests of any other person. No filings or
recordings are or will be required in order to perfect the
security interests in the Pledged Securities created under the
Pledge Agreement.
SECTION 3.09. Financial Statements. (a) (i) Holdings has
heretofore furnished to each of the Lenders consolidated balance
sheets and consolidated statements of income and cash flow of
Holdings and its consolidated subsidiaries as of and for the
fiscal years ended January 29, 1994 and January 30, 1993,
certified by Arthur Andersen & Co., independent public
accountants for Holdings and (ii) Holdings has heretofore
furnished to each of the Lenders consolidated balance sheets and
consolidated statements of income and cash flow of Holdings and
its consolidated subsidiaries as of and for the thirteen weeks
ended April 30, 1994. Such balance sheets and statements of
income and cash flows present fairly the financial condition and
results of operations of Holdings and its consolidated
subsidiaries on a consolidated basis as of the dates and for the
periods indicated. Except as disclosed in the Preliminary
Prospectus, neither Holdings nor any of its Subsidiaries had, at
the date of the most recent balance sheet referred to above, any
material Guarantee, contingent liability or liability for taxes,
or any long-term lease or unusual forward or long-term
commitment, including, without limitation, any interest rate or
foreign currency swap or exchange transaction, which is not
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65
reflected in the foregoing statements or in the notes thereto.
The financial statements referred to in this Section 3.09(a) have
been prepared in accordance with GAAP applied on a consistent
basis.
(b) The pro forma consolidated balance sheet of Holdings
as of April 30, 1994 included in the Preliminary Prospectus is
the unaudited consolidated balance sheet of Holdings as of such
date, adjusted to give effect (as if such events had occurred on
such date) to all the Recapitalization Transactions and other
identified pro forma adjustments set forth in the Preliminary
Prospectus, including the payment of all fees and expenses
expected to be incurred in connection therewith (as estimated at
the time of the preparation of such balance sheet), based upon
the assumptions specified therein. Such pro forma consolidated
balance sheet presents fairly, on a pro forma basis, the
consolidated financial position of Holdings as of such date
assuming that the events specified in the preceding sentence had
actually occurred or are true, as the case may be, on such date
and has been prepared based upon reasonable assumptions and in
accordance with GAAP applied on a consistent basis.
SECTION 3.10. No Material Adverse Change. There has been
no material adverse change in the business, properties, assets,
operations or financial condition of Holdings and its Restricted
Subsidiaries, taken as a whole, since January 29, 1994.
SECTION 3.11. Title to Properties; Possession Under Leases.
(a) Each of Holdings, the Borrower and the Significant
Subsidiaries has good and marketable title to, or valid leasehold
interests in, or easements on or other limited property interests
in, all their respective material properties and assets, except
for minor defects in title and limitations on property interests
that do not interfere with their respective ability to conduct
their respective business as currently conducted or to utilize
such properties and assets for their intended purposes. All such
material properties and assets are free and clear of Liens, other
than Liens expressly permitted by Section 6.04.
(b) Each of Holdings, the Borrower and the Significant
Subsidiaries has complied with all obligations under all material
leases to which it is a party, except where the failure to comply
would not have a Material Adverse Effect, and all such leases are
in full force and effect, except leases in respect of which the
failure to be in full force and effect would not have a Material
Adverse Effect. Each of Holdings, the Borrower and the
Significant Subsidiaries enjoys peaceful and undisturbed
possession under all such material leases.
(c) Each of Holdings, the Borrower and the Significant
Subsidiaries owns or possesses, or could obtain ownership or
possession of, on terms not materially adverse to it, all
patents, trademarks, service marks, trade names, copyrights,
licenses and rights with respect thereto necessary for the
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66
present conduct of its business, without any known conflict with
the rights of others, and free from any burdensome restrictions,
except where such conflicts and restrictions would not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.12. Subsidiaries. (a) Schedule 3.12(a) sets
forth as of the Closing Date a list of all Subsidiaries of
Holdings and the percentage ownership interest of Holdings
therein and whether such Subsidiaries are Significant
Subsidiaries.
(b) There are no outstanding subscriptions, options,
warrants, calls, rights or other agreements or commitments (other
than stock options granted to employees, consultants or directors
and directors' qualifying shares) of any nature relating to any
capital stock of any subsidiary of Holdings, except for the
Pledge Agreement or as provided in Schedule 3.12(b).
SECTION 3.13. Litigation; Compliance with Laws. (a)
Except as described in the registration statement of which the
Preliminary Prospectus is a part, there are not any actions,
suits or proceedings at law or in equity or by or before any
court or Governmental Authority now pending or, to the knowledge
of Holdings, the Borrower or the Canadian Borrower, threatened
against or affecting Holdings or any of its subsidiaries or any
property or rights of Holdings or any of its subsidiaries as to
which there is a reasonable possibility of an adverse
determination and which (i) if adversely determined, could
individually or in the aggregate result in a Material Adverse
Effect or (ii) involve the Loan Documents or (iii) if adversely
determined could materially adversely affect the Recapitalization
Transactions.
(b) None of Holdings or any of its Subsidiaries is in
default with respect to any law, order, judgment, writ,
injunction, decree, rule or regulation of any Governmental
Authority where such default could have a Material Adverse
Effect. The Borrowings hereunder, the use of the proceeds
thereof as described in Section 5.08 and the other
Recapitalization Transactions will not violate any applicable law
or regulation or violate or be prohibited by any judgment, writ,
injunction, decree or order of any court or Governmental
Authority or subject Holdings or any of its subsidiaries to any
civil or criminal penalty or fine.
SECTION 3.14. Agreements. (a) None of Holdings or any of
its Subsidiaries is a party to any agreement or instrument or
subject to any corporate restriction that has resulted or could
reasonably be expected to result in a Material Adverse Effect.
(b) None of Holdings or any of its Subsidiaries is in
default in any manner under any provision of any indenture or
other agreement or instrument evidencing Indebtedness or any
other material agreement or instrument to which it is a party or
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by which it or any of its properties or assets are or may be
bound, in either case where such default could result in a
Material Adverse Effect. After giving effect to the
Recapitalization Transactions, no Default or Event of Default
shall have occurred and be continuing.
SECTION 3.15. Investment Company Act. None of Holdings or
any of its Subsidiaries is an "investment company" or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
SECTION 3.16. Public Utility Holding Company Act. None of
Holdings or any of its Subsidiaries is 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 3.17. Tax Returns. Each of Holdings and its
Subsidiaries has filed or caused to be filed all Federal, and all
material state and local, tax returns required to have been filed
by it and has paid or caused to be paid all taxes shown thereon
to be due and payable, and any assessments in excess of
$2,000,000 in the aggregate received by it, except taxes that are
being contested in accordance with Section 5.03 and taxes,
assessments, charges, levies or claims in respect of property
taxes for property that Holdings or one of its Subsidiaries has
determined to abandon where the sole recourse for such tax,
assessment, charge, levy or claim is to such property. Each of
Holdings and its Subsidiaries has paid in full or made adequate
provision (in accordance with GAAP) for the payment of all taxes
due with respect to the periods ending on or before January 29,
1994, which taxes, if not paid or adequately provided for, would
have a Material Adverse Effect. The tax returns of Holdings and
its Subsidiaries have been examined by relevant Federal tax
authorities for all periods through January 26, 1985, and all
deficiencies asserted as a result of such examinations have been
paid. Except as set forth on Schedule 3.17 or in the Preliminary
Prospectus, as of the Closing Date, with respect to each of
Holdings and its Subsidiaries, (i) no material claims are being
asserted in writing with respect to any taxes, (ii) no presently
effective waivers or extensions of statutes of limitation with
respect to taxes have been given or requested, (iii) no tax
returns are being examined by, and no written notification of
intention to examine has been received from, the Internal Revenue
Service or any other taxing authority and (iv) no currently
pending issues have been raised in writing by the Internal
Revenue Service or any other taxing authority. For purposes
hereof, "taxes" shall mean any present or future tax, levy,
impost, duty, charge, assessment or fee of any nature (including
interest, penalties and additions thereto) that is imposed by any
Governmental Authority.
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SECTION 3.18. No Material Misstatements. (a) The
information, reports, financial statements, exhibits and sched-
ules furnished by or on behalf of Holdings or any of its
Subsidiaries or Affiliates to the Administrative Agent or any
Lender in connection with the negotiation of any Loan Document or
included therein or delivered pursuant thereto (including the
Preliminary Prospectus), when taken as a whole, did not contain,
and as they may be amended, supplemented or modified from time to
time, will not contain, as of the Closing Date any material
misstatement of fact and did not omit, and as they may be
amended, supplemented or modified from time to time, will not
omit, to state as of the Closing Date any material fact necessary
to make the statements therein, in the light of the circumstances
under which they were, are or will be made, not materially
misleading in their presentation of the Recapitalization
Transactions or of Holdings and its Subsidiaries taken as a
whole.
(b) All financial projections concerning Holdings and its
Subsidiaries that are or have been made available to the
Administrative Agent or any Lender by Holdings or any of its
Subsidiaries or Affiliates, unless otherwise disclosed, have been
or will be prepared in good faith based upon assumptions believed
by Holdings and the Borrower to be reasonable.
SECTION 3.19. Employee Benefit Plans. Each of Holdings and
the Restricted Subsidiaries and each of their ERISA Affiliates is
in compliance in all material respects with the applicable
provisions of ERISA and the regulations and published
interpretations thereunder except for such noncompliance which
would not be expected to result in a Material Adverse Effect. No
Reportable Event has occurred as to which Holdings or any of the
Restricted Subsidiaries or any of their ERISA Affiliates was
required to file a report with the PBGC, other than reports for
which the 30 day notice requirement is waived, reports that have
been filed and reports the failure of which to file would not
result in a Material Adverse Effect and as of the Closing Date,
the present value of all benefit liabilities under each Plan of
Holdings and the Restricted Subsidiaries or any of their ERISA
Affiliates (on a termination basis and based on those assumptions
used to fund such Plan) did not, as of the last annual valuation
report applicable thereto, exceed by more than $7,500,000 the
value of the assets of such Plan. None of Holdings or any of the
Restricted Subsidiaries or any of their ERISA Affiliates has
incurred or could reasonably be expected to incur any Withdrawal
Liability that could result in a Material Adverse Effect. None
of Holdings or any of the Restricted Subsidiaries or any of their
ERISA Affiliates has received any notification that any
Multiemployer Plan is in reorganization or has been terminated
within the meaning of Title IV of ERISA, and no Multiemployer
Plan is reasonably expected to be in reorganization or to be
terminated where such reorganization or termination has resulted
or could reasonably be expected to result, through increases in
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the contributions required to be made to such Plan or otherwise,
in a Material Adverse Effect.
SECTION 3.20. Labor Matters. There are no strikes against
Holdings or any of its Subsidiaries pending, other than any
strikes which, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect.
The hours worked and payment made to employees of Holdings and
each of its Subsidiaries have not been in violation in any
material respect of the Fair Labor Standards Act or any other
applicable law dealing with such matters. All material payments
due from Holdings or any of its Subsidiaries, or for which any
claim may be made against Holdings or any of its Subsidiaries, on
account of wages and employee health and welfare insurance and
other benefits have been paid or accrued as a liability on the
books of Holdings or such subsidiary to the extent required by
GAAP. The consummation of the Recapitalization Transactions will
not give rise to a right of termination or right of renegotiation
on the part of any union under any collective bargaining
agreement to which Holdings or any of its Subsidiaries (or any
predecessor) is a party or by which Holdings or any of its
subsidiaries (or any predecessor) is bound, other than collective
bargaining agreements which, individually or in the aggregate,
are not material to Holdings and its Subsidiaries taken as a
whole.
SECTION 3.21. Environmental Matters. (a) Except as
disclosed in writing to the Administrative Agent, each Lender and
the Issuing Bank prior to the date of this Agreement, which
disclosed matters individually and in the aggregate are not
reasonably expected by Holdings or the Borrower to have a
Material Adverse Effect, (i) Holdings and each of its
Subsidiaries has complied in all respects with all applicable
Federal, state, local and other statutes, ordinances, orders,
judgments, rulings and regulations relating to environmental
pollution or to environmental regulation or control, except to
the extent of any failure so to comply which alone and together
with other such failures is not reasonably expected to result in
a Material Adverse Effect; (ii) none of Holdings or any
Subsidiary of Holdings has received notice of any failure so to
comply which alone or together with other such failures is
reasonably expected to result in a Material Adverse Effect; and
(iii) none of Holdings or any of its Subsidiaries manages,
transports or stores any hazardous wastes, hazardous substances,
hazardous materials, toxic substances or toxic pollutants, as
those terms are used in the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response Compensation and
Liability Act, the Hazardous Materials Transportation Act, the
Toxic Substance Control Act, the Clean Air Act or the Clean Water
Act, in violation of any applicable regulations promulgated
pursuant thereto or of any other applicable law where such
violation is reasonably likely to result, individually or
together with other violations, in a Material Adverse Effect.
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(b) Except with respect to matters that, individually and
in the aggregate, Holdings and the Borrower reasonably believe
would not have a Material Adverse Effect, as of the Closing Date:
(i) the operations of Holdings and each of its Subsidiaries
comply in all respects with all Environmental Laws and, to the
knowledge of Holdings, the Canadian Borrower or the Borrower
after inquiry, no conditions exist (including at properties
leased or subleased to third persons) which would subject
Holdings or its Subsidiaries to damages, liabilities, penalties,
injunctive relief or clean-up costs under any Environmental Law
or which require or are reasonably likely to require any Remedial
Action under any Environmental Law; (ii) each of Holdings and its
Subsidiaries has obtained all Environmental Permits necessary for
its operation or required by any Environmental Law, and all such
Environmental Permits are in good standing, and none of Holdings
or its Subsidiaries has been cited by a Governmental Authority
for violating any terms or conditions of such Environmental
Permits within the five-year period prior to the Closing Date;
(iii) none of Holdings or its Subsidiaries is subject or a party
to any Environmental Claim; (iv) with respect to present
facilities and operations, none of Holdings or its Subsidiaries,
or, to the knowledge of Holdings, the Canadian Borrower or the
Borrower, any predecessor of such persons, is subject to any
outstanding written order or agreement with any Governmental
Authority or private party respecting (A) any Environmental Law,
(B) any Remedial Action under any Environmental Law, or (C) any
Environmental Claim; (v) to the knowledge of Holdings, the
Canadian Borrower or the Borrower, none of the operations of any
of Holdings or its Subsidiaries is the subject of any
investigation by a Governmental Authority evaluating whether any
Remedial Action under any Environmental Law is needed; (vi) none
of Holdings or its Subsidiaries or, to the knowledge of Holdings,
the Canadian Borrower or the Borrower, any predecessor of such
persons has filed any notice under any Environmental Law
indicating past or present treatment, storage or disposal of a
hazardous waste as defined under 40 C.F.R. Parts 260 through 270
(in effect as of the Closing Date) or any state equivalent, or
reporting a Release of a Contaminant; (vii) to the knowledge of
Holdings, the Canadian Borrower or the Borrower except as
permitted under any Environmental Law, none of Holdings or its
Subsidiaries has experienced a Release of any Contaminant, and
there has been no voluntary disposal, use, storage, recycling or
treatment on, under or at any property of such person (or in
tanks or other facilities thereon) of any Contaminant which, if
known to be present on such property, or present in soils or
groundwater, would require Remedial Action under any
Environmental Law; and (viii) no Lien in favor of any
Governmental Authority for (A) any liability under any
Environmental Law or (B) damages arising from or costs incurred
by such Governmental Authority in response to a Release of a
Contaminant into the environment has been recorded with respect
to any property of Holdings or any of its Subsidiaries. For
purposes of this Section 3.21(b), "knowledge" means the actual
knowledge of any Responsible Officer of Holdings or any
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71
Restricted Subsidiary, any officer of Holdings or any Restricted
Subsidiary with responsibility for environmental compliance, or
any plant or facilities manager with responsibility for overall
management of such plant or facility of Holdings or any of its
Subsidiaries.
(c) Each of Holdings and its Subsidiaries reasonably
believes that Holdings and its Subsidiaries on a consolidated
basis have made adequate provision (in accordance with GAAP) for
all damages, liabilities, penalties or costs that they reasonably
expect to incur in connection with any Environmental Claim or any
Remedial Action existing or, to the knowledge of Holdings or the
Borrower, reasonably anticipated as of the date of this
Agreement.
SECTION 3.22. Solvency. (a) The fair salable value of the
assets of each of the Borrower and, as of the Closing Date, the
Canadian Borrower exceeds the amount that will be required to be
paid on or in respect of the existing debts and other liabilities
(including contingent liabilities) of the Borrower and, as of the
Closing Date, the Canadian Borrower, respectively, as they
mature. The assets of each of the Borrower and, as of the
Closing Date, the Canadian Borrower do not constitute
unreasonably small capital to carry out its business as conducted
or as proposed to be conducted. Neither the Borrower nor, as of
the Closing Date, the Canadian Borrower intends to, or believes
that it will, incur debts beyond its ability to pay such debts as
they mature (taking into account the Recapitalization
Transactions but assuming that the Overallotment Option is not
exercised).
(b) Upon consummation of the Recapitalization
Transactions (irrespective of whether the Overallotment Option is
exercised), the fair salable value of the assets of each of the
Borrower and its subsidiaries taken as a whole and, as of the
Closing Date, of the Canadian Borrower and its subsidiaries taken
as a whole will exceed the amount that will be required to be
paid on or in respect of the existing debts and other liabilities
(including contingent liabilities) of the Borrower and its
subsidiaries and, as of the Closing Date, of the Canadian
Borrower and its subsidiaries, respectively.
(c) The assets of each of the Borrower and its sub-
sidiaries taken as a whole and, as of the Closing Date, the
Canadian Borrower and its subsidiaries taken as a whole do not,
and upon consummation of the Recapitalization Transactions (but
assuming that the Overallotment Option is not exercised) will
not, constitute unreasonably small capital for the Borrower and
its subsidiaries and, as of the Closing Date, the Canadian
Borrower and its subsidiaries, respectively, to carry out their
respective businesses as now conducted and as proposed to be
conducted including the capital needs of the Borrower and its
subsidiaries and, as of the Closing Date, the Canadian Borrower
and its subsidiaries taking into account the particular capital
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72
requirements of the business conducted by the Borrower and each
of its subsidiaries, and projected capital requirements and
capital availability thereof.
(d) Neither the Borrower nor, as of the Closing Date,
the Canadian Borrower intends to, or intends to permit any of its
subsidiaries to, incur debts beyond their respective ability to
pay such debts as they mature, taking into account the timing and
amounts of cash to be received by the Borrower and each of such
subsidiaries, and of amounts to be payable on or in respect of
debt of the Borrower and each of such subsidiaries.
SECTION 3.23. Absence of Certain Restrictions. No
indenture, certificate of designation for preferred stock,
agreement or other instrument to which Holdings or any Restricted
Subsidiary is a party will prohibit or materially restrain, or
have the effect of prohibiting or materially restraining, or
imposing materially adverse conditions upon, the incurrence of
Indebtedness, the granting of Liens, the provision of Guarantees
or the payment of dividends by subsidiaries of Holdings except
for restrictions (a) on the granting of Liens on assets that are
encumbered by Liens permitted under clause (a), (b), (i), (k),
(l) or (r) of Section 6.04, to the extent that such restrictions
apply only to the assets so encumbered and are imposed by the
agreements under which such Liens were granted or (b) contained
in agreements relating to Indebtedness not in excess of
$10,000,000 in the aggregate.
SECTION 3.24. No Foreign Assets Control Regulation
Violation. None of the Recapitalization Transactions will result
in a violation of any of the foreign assets control regulations
of the United States Treasury Department, 31 C.F.R., Subtitle B,
Chapter V, as amended (including the Foreign Assets Control
Regulations, the Transaction Control Regulations, the Cuban
Assets Control Regulations, the Foreign Funds Control
Regulations, the Iranian Assets Control Regulations, the
Nicaraguan Trade Control Regulations, the South African
Transactions Regulations, the Libyan Sanctions Regulations, the
Soviet Gold Coin Regulations, the Panamanian Transactions
Regulations, the Kuwaiti Assets Control Regulations and the Iraqi
Sanctions Regulations contained in said Chapter V), or any ruling
issued thereunder or any enabling legislation or Presidential
Executive Order granting authority therefor, nor will the
proceeds of the Loans be used by the Borrower in a manner that
would violate any thereof.
SECTION 3.25. Insurance. Each of Holdings and the
Restricted Subsidiaries carries and maintains with respect to its
insurable properties insurance (including self insurance) with
financially sound and reputable insurers of the types, to such
extent and against such risks as is customary with companies in
the same or similar businesses, including fire and other risks
insured against by extended coverage and public liability
insurance against claims for personal injury or death or property
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73
damages occurring upon, in, about or in connection with the use
of any properties owned, occupied or controlled by it.
SECTION 3.26. Certain Other Representations. All
representations and warranties contained in any other Loan
Document and made by any of Holdings or any of its Subsidiaries
are true and correct as of the date made or deemed to have been
made.
ARTICLE IV.
CONDITIONS
The obligations of the Lenders to make Loans hereunder and
the obligation of the Issuing Bank to issue Letters of Credit
hereunder are subject to the satisfaction of the following
conditions:
SECTION 4.01. All Credit Events. On the date of each
Borrowing, other than a Borrowing in which Revolving Credit Loans
are refinanced with new Revolving Credit Loans (without any
increase in the aggregate principal amount of Revolving Credit
Loans outstanding) as contemplated by Section 2.02(e), and on the
date of each issuance or renewal of a Letter of Credit:
(a) The Administrative Agent shall have received a
notice of such Borrowing as required by Section 2.03, or the
Administrative Agent and the applicable Issuing Bank shall
have received a notice regarding the issuance or renewal of
such Letter of Credit as required by Section 2.19(c), as
applicable.
(b) The representations and warranties set forth in
each Loan Document shall be true and correct in all material
respects on and as of the date of such Borrowing, issuance
or renewal with the same effect as though made on and as of
such date, except to the extent such representations and
warranties expressly relate to an earlier date.
(c) At the time of and immediately after such
Borrowing, issuance or renewal no Event of Default or
Default shall have occurred and be continuing.
(d) If such Borrowing is of Delayed Draw Term Loans (i)
the gross proceeds received by Holdings from the Public
Offering and the Private Placement (after giving effect to the
arrangements described in Section 4.02(s)) shall have been as
described in Section 4.02(c), and (ii) if the proceeds of such
Borrowing will be used to fund an ESOP Loan, the Agents shall
be reasonably satisfied with the loan documentation executed
in connection therewith (which loan documentation shall provide
that the ESOP shall, to the extent permitted by law, repay
the ESOP
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74
Loan upon receipt by the ESOP of cash distributions in
respect of the ESOP Investment).
Each Borrowing and each issuance or renewal of a Letter of Credit
shall be deemed to constitute a representation and warranty by
the Borrower on the date of such Borrowing as to the matters
specified in paragraphs (b) and (c) of this Section 4.01.
SECTION 4.02. First Borrowing. On the Closing Date (except
as provided in paragraph (c) below):
(a) Each Lender, if it so requests in accordance with
subsection 2.04(e), shall have received a duly executed
Revolving Credit Note, Delayed Draw Term Note and Term Note
and the Swingline Lender, if it so requests in accordance
with subsection 2.04(e), shall have received a Swingline
Note, in each case, complying with the provisions of Section
2.04. Each Lender, if it so requests in accordance with
subsection 2.04(a), shall have received a duly executed
Canadian Term Note, complying with the provisions of Section
2.04.
(b) The Administrative Agent shall have received all
Fees and other amounts due and payable on or prior to the
Closing Date, including reimbursement of any out-of-pocket
expenses referred to in Section 9.05 (to the extent that
notice thereof is given to the Borrower prior to the Closing
Date).
(c) The issuance by Holdings of its Common Stock in the
Public Offering and the Private Placement for aggregate gross
proceeds of not less than $250,000,000 (which may include up
to $30,000,000 of gross proceeds received by Holdings after
the Closing Date as described in paragraph (q) of Article VII)
shall have occurred or shall occur simultaneously with the
initial Borrowing hereunder. The Lenders shall have received
copies of the Holdings Underwriting Agreement and the Agents
shall be satisfied with the terms and conditions thereof.
(d) The Administrative Agent shall have received the
favorable written opinions of (i) Cravath, Swaine & Moore,
special counsel for Holdings and its subsidiaries, (ii)
Elizabeth R. Philipp, Esq., general counsel for Holdings and
its subsidiaries, and (iii) Stikeman, Elliott special
Canadian Counsel for the Canadian Borrower, each dated the
Closing Date and addressed to the Lenders, and in form and
substance satisfactory to the Administrative Agent and
covering the matters set forth in Exhibit F. In addition,
the Administrative Agent shall have received the favorable
written opinions of such local counsel (including Canadian
counsel) with respect to legal matters relating hereto as
the Administrative Agent may reasonably have requested, in
such form and to such effect as shall be satisfactory to the
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75
Lenders and to Simpson Thacher & Bartlett, special counsel
for the Administrative Agent.
(e) The Administrative Agent shall have received (i) a
copy of the certificate or articles of incorporation,
including all amendments thereto, of each of the Borrower,
the Canadian Borrower and each Guarantor, certified as of a
recent date by the Secretary of State of the state of its
organization (or, in the case of the Canadian Borrower, the
Ministry of Consumer and Commercial Relations of the
Province of Ontario), and a certificate as to the good
standing of each of the Borrower, the Canadian Borrower and
each Guarantor as of a recent date, from such Secretary of
State (or, in the case of the Canadian Borrower, the
Ministry of Consumer and Commercial Relations of the
Province of Ontario); (ii) a certificate of the Secretary or
Assistant Secretary of each of the Borrower, the Canadian
Borrower and each Guarantor dated the Closing Date and
certifying (A) that attached thereto is a true and complete
copy of the by-laws of such entity as in effect on the
Closing Date and at all times since a date prior to the date
of the resolutions described in clause (B) below, (B) that
attached thereto is a true and complete copy of resolutions
duly adopted by the Board of Directors of such entity
authorizing the execution, delivery and performance of the
Loan Documents to which it is a party, the granting of the
Liens thereunder and, in the case of the Borrower and the
Canadian Borrower, the borrowings hereunder, and that such
resolutions have not been modified, rescinded or amended and
are in full force and effect, (C) that the certificate or
articles of incorporation of such entity have not been
amended since the date of the last amendment thereto shown
on the certificate of good standing furnished pursuant to
clause (i) above, and (D) as to the incumbency and specimen
signature of each officer executing any Loan Document or any
other document delivered in connection herewith on behalf of
such entity; (iii) a certificate of another officer as to
the incumbency and specimen signature of the Secretary or
Assistant Secretary executing the certificate pursuant to
(ii) above; (iv) a certificate or equivalent documentation
from the Secretary of State of each state (or, in the case
of the Canadian Borrower, the Ministry of Consumer and
Commercial Relations of the Province of Ontario and the
Inspector General of Financial Institutions of the Province
of Quebec) in which any of the Borrower , the Canadian
Borrower or the Guarantors conducts material business or
owns material assets as to the qualification of such entity
to do business and its good standing in such state; and (v)
such other documents as the Lenders or their counsel or
Simpson Thacher & Bartlett, special counsel for the
Administrative Agent, may reasonably request.
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76
(f) The Administrative Agent shall have received a
certificate, dated the Closing Date and signed by a
Financial Officer of Holdings and the Borrower, confirming
compliance with the conditions precedent set forth in
paragraphs (b) and (c) of Section 4.01 and those set forth
in paragraphs (c), (h), (k), (l), (m), (n), and (o) of this
Section 4.02 (disregarding, for this purpose, the provisions
of any such paragraph that refer to the satisfaction of the
Administrative Agent, its counsel or the Lenders with any
matter).
(g) The Pledge Agreement shall have been duly executed
by Holdings and each Restricted Subsidiary listed therein
and delivered to the Collateral Agent and shall be in full
force and effect, all outstanding shares of capital stock of
the Borrower and each domestic subsidiary thereof, 65% of
the outstanding shares of capital stock of each foreign
subsidiary owned directly by the Borrower or a domestic
subsidiary of the Borrower and all inter-company obligations
in excess of $10,000,000 held by Holdings, the Borrower or
any subsidiary of the Borrower and evidenced by notes, bonds
or other instruments shall have been duly and validly
pledged to the Collateral Agent for the benefit of the
Secured Parties and certificates representing all such
shares and the instruments representing all such obligations
shall be in the actual possession of the Collateral Agent.
(h) A Permitted Receivables Financing providing
commitments of at least $150,000,000 shall have become
effective and the initial funding thereunder shall have been
consummated.
(i) The Collateral Agent shall have received each
document (including Uniform Commercial Code financing
statements) required by law or reasonably requested by the
Collateral Agent to be filed, registered or recorded in
order to create in favor of the Collateral Agent for the
benefit of the Secured Parties a valid, legal and perfected
first priority security interest in or lien on the
Collateral that is the subject of the Pledge Agreement.
(j) The Guarantee Agreement shall have been duly
executed by Holdings and each other Guarantor and delivered
to the Collateral Agent and shall be in full force and
effect on such date.
(k) Except as contemplated by the Recapitalization
Transactions, there shall not have occurred any material
change in the capitalization (whether in debt or equity),
corporate structure or assets of Holdings or any of its
subsidiaries, or any changes in the certificate of
incorporation or by-laws of Holdings or any of its
Subsidiaries.
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(l) The Recapitalization Transactions, including the
extensions of credit (including in particular the incurrence
of the Loans), Guarantees, Liens and ability to make
dividend payments contemplated hereby (including the
unsubordinated ranking of all obligations under the Loan
Documents and the Liens created by the Pledge Agreement),
and the consummation of the Public Offering and repayment,
redemption or defeasance of the Indebtedness and preferred
stock contemplated by the Recapitalization Transactions and
the Preliminary Prospectus, shall have been approved or
exempted by all requisite Governmental Authorities, and all
such approvals or exemptions, including any conditions
imposed thereby, shall be in form and substance acceptable
to the Required Lenders in their sole discretion. No action
shall have been taken by any Governmental Authority which
restrains or prevents or seeks to restrain or prevent, or
imposes or seeks to impose materially adverse conditions
upon, any of the Recapitalization Transactions. Without
limiting the generality of the foregoing, the Required
Lenders shall be satisfied, in their sole discretion, that
all governmental approvals have been obtained which, if not
obtained, could render the obligations to the Lenders under
the Loan Documents either void or voidable or subordinate
them to other claims or obligations or could impair or
subject to subordination the security interests of, or the
exercise of remedies by, the Lenders.
(m) No action, suit, litigation or similar proceeding
at law or in equity or by or before any court or
Governmental Authority shall exist or, in the case of
litigation by a Governmental Authority, be threatened, with
respect to any of the Recapitalization Transactions which
would in the reasonable opinion of the Required Lenders be
likely to have a Material Adverse Effect.
(n) The exchange of at least $191,400,000 principal
amount (including all amounts owned by the WP Entities and
the Blackstone Entities) of Holdings' 14% Subordinated Pay-
in-Kind Bridge Notes for shares of Holdings Common Stock
shall have occurred or shall occur simultaneously with the
initial Borrowing hereunder.
(o) Holdings and the Borrower shall, on a basis that is
reasonably satisfactory to the Administrative Agent and is
substantially contemporaneous with the first Borrowing
hereunder on the Closing Date (i)(A) have repaid in full the
principal of and accrued interest on all loans and other
amounts outstanding under the Existing Credit Agreement, (B)
have terminated the Existing Credit Agreement and all
commitments thereunder and (C) have obtained the release and
termination (or assignment to the Collateral Agent) of all
liens securing obligations thereunder (including the
execution, delivery and filing of all necessary releases and
termination or assignment statements, in form and substance
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satisfactory to the Administrative Agent), (ii)(A) have
called all outstanding shares of Holdings preferred stock
for redemption at an aggregate redemption price not to
exceed the Permitted Preferred Stock Redemption Price at the
earliest practical date following the Closing Date, (B) have
deposited with the Collateral Agent on the Closing Date,
pursuant to arrangements satisfactory to the Administrative
Agent, an amount equal to such redemption price in order to
provide for payment of such redemption price and (C) have
made arrangements satisfactory to the Administrative Agent
for the cancellation of all such shares when so redeemed and
(iii)(A) have called all outstanding Indebtedness of
Holdings and its subsidiaries listed on Schedule 4.02(o) for
redemption at an aggregate redemption price not to exceed
the Permitted Debt Redemption Price at the earliest
practical date following the Closing Date, (B) have
deposited with the trustees for such Indebtedness or the
Collateral Agent, acting as trustee, and on competitive
terms on the Closing Date, pursuant to arrangements
satisfactory to the Administrative Agent, an amount equal to
the redemption price in order to provide for payment of such
redemption price and (C) have made arrangements satisfactory
to the Administrative Agent for the cancellation of all such
Indebtedness when so redeemed.
(p) The Closing Date shall occur prior to September 15,
1994.
(q) The Agents shall be satisfied that the Revolving
Credit Commitments will be sufficient to fund the ongoing
working capital requirements of the Borrower and the other
Restricted Subsidiaries.
(r) Each Lender and the Administrative Agent shall have
received the pro forma consolidated balance sheet of
Holdings described in Section 3.09(b) and the same shall be
satisfactory to the Required Lenders.
(s) The Administrative Agent shall have received copies
of arrangements in form and substance satisfactory to it and
Simpson Thacher & Bartlett, special counsel for the
Administrative Agent, between Holdings and the Selling
Stockholders (as defined in the Preliminary Prospectus)
providing that, if Holdings raises less than $300,000,000 in
gross proceeds from the issuance of common stock in the
Public Offering and the Private Placement and the Overallotment
Option is exercised, the Selling Stockholders will assign
(without cost to Holdings) to Holdings their obligation to
deliver to the underwriters pursuant to the Holdings
Underwriting Agreement, and the related right to receive payment
therefor, shares of Holdings Common Stock, so that after
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giving effect thereto Holdings will have received the lesser
of (A) the amount of net proceeds attributable to gross
Public Offering and Private Placement proceeds of $300,000,000
and (B) the aggregate net proceeds from the Public Offering
(including the Overallotment Option but excluding the proceeds
of up to 5,000,000 shares of Holdings Common Stock which may be
sold by the Selling Stockholders (other than pursuant to the
Overallotment Option)), and such arrangements shall be in
full force and effect.
(t) The Administrative Agent shall be reasonably
satisfied with the existing cash management procedures for
Holdings and its subsidiaries and the proposed cash
management procedures for Holdings and its subsidiaries
following the Closing Date.
(u) All aspects of the structure and documentation of
the Recapitalization Transactions and all corporate and
other proceedings taken or to be taken in connection
therewith and all documents incidental thereto shall be
reasonably satisfactory in form and substance to the
Administrative Agent and to Simpson Thacher & Bartlett,
special counsel for the Administrative Agent, and each
Lender shall have received copies of all such documents as
such Lender, acting through the Administrative Agent, may
reasonably request. All legal matters incident to this
Agreement and the borrowings hereunder shall be reasonably
satisfactory to the Agents and to Simpson Thacher &
Bartlett, special counsel for the Administrative Agent.
Each of Holdings, the Borrower and the Canadian Borrower
hereby directs its counsel referred to in clause (d) above to
deliver the opinions to be delivered by such counsel pursuant to
such paragraph, it being understood that the Lenders will and may
rely thereon.
ARTICLE V.
AFFIRMATIVE COVENANTS
Each of Holdings, the Canadian Borrower and the Borrower
covenants and agrees that from and after the Closing Date, so
long as this Agreement or any Letter of Credit shall remain in
effect or the principal of or interest on any Loan, any Fees or
any other expenses or amounts payable under or in respect of any
Loan Document or Letter of Credit shall be unpaid, unless the
Required Lenders shall otherwise consent in writing, Holdings,
the Canadian Borrower and the Borrower will, and will cause each
of the Restricted Subsidiaries to:
SECTION 5.01. Existence; Businesses and Properties. (a)
Do or cause to be done all things necessary to preserve, renew
and keep in full force and effect its legal existence, except as
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otherwise expressly permitted under Section 6.08 and except for
the liquidation or dissolution of Restricted Subsidiaries (other
than Significant Subsidiaries) if the assets of such corporations
to the extent they exceed estimated liabilities are acquired by a
wholly owned Restricted Subsidiary in such liquidation or
dissolution; provided that Subsidiaries which are Guarantors may
not be liquidated into Subsidiaries that are not Guarantors and
domestic Subsidiaries may not be liquidated into foreign
Subsidiaries.
(b) Do or cause to be done all things necessary to obtain,
preserve, renew, extend and keep in full force and effect the
rights, licenses, permits, franchises, authorizations, patents,
copyrights, trademarks and trade names material to the conduct of
its business; comply in all material respects with all applicable
laws, rules, regulations and orders of any Governmental
Authority, whether now in effect or hereafter enacted; and at all
times maintain and preserve all property material to the conduct
of such business and keep such property in good repair, working
order and condition and from time to time make, or cause to be
made, all needful and proper repairs, renewals, additions,
improvements and replacements thereto necessary in order that the
business carried on in connection therewith, if any, may be
properly conducted at all times.
(c) Without limiting the generality of the provisions of
Section 5.01(b), each of Holdings, the Canadian Borrower and the
Borrower shall (i)(A) undertake reasonable efforts to comply, and
to cause each Subsidiary to comply, in all material respects with
all Environmental Laws and any order, decree or similar
requirements of any Governmental Authority concerning (1) a
material violation of any Environmental Law, (2) a financial
contribution by Holdings or any of its Subsidiaries under any
Environmental Law or (3) a Remedial Action by or on the part of
Holdings or any of its Subsidiaries under any Environmental Law
and (B) undertake reasonable efforts to remedy and to cause each
of its Subsidiaries to remedy, as soon as reasonably practicable,
any material violation of Environmental Laws, except in any case
that compliance or remedy shall not be required insofar as any
failure to undertake such efforts cannot reasonably be expected
by Holdings, the Canadian Borrower or the Borrower to have a
Material Adverse Effect, or so long as (x) the validity of the
same shall be contested diligently and in good faith, (y) the
subject property does not contain a material plant or other
facility or shall then be in no danger of being sold, forfeited
or lost pursuant to such contest and (z) reserves have been
established in accordance with GAAP by Holdings or such
subsidiary in connection therewith; and (ii) undertake reasonable
efforts to require and to cause each of its subsidiaries to
require, to the extent practicable and appropriate, that a lease
for any renewing or new tenant contain terms substantially
equivalent to those of clause (i) above.
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SECTION 5.02. Insurance. Keep its insurable properties
insured (including through self-insurance) at all times by
financially sound and reputable insurers in such amounts as shall
be customary for similar businesses and maintain such other
insurance, of such types, to such extent and against such risks,
as is customary with companies in the same or similar businesses,
including insurance against fire and other risks insured against
by extended coverage and public liability insurance against
claims for personal injury or death or property damage occurring
upon, in, about or in connection with the use of any properties
owned, occupied or controlled by it; and maintain such other
insurance as may be required by law.
SECTION 5.03. Taxes. Pay and discharge promptly all taxes,
assessments and governmental charges or levies imposed upon it or
upon its income or profits or in respect of its property, before
the same shall become delinquent or in default, as well as all
lawful claims for labor, materials and supplies or otherwise
which, if unpaid, might give rise to a Lien upon such properties
or any part thereof; provided, however, that such payment and
discharge shall not be required with respect to any such tax,
assessment, charge, levy or claim so long as (a) the validity or
amount thereof shall be contested in good faith by appropriate
proceedings and Holdings or any Restricted Subsidiary, as
applicable, shall set aside on its books adequate reserves as
required by GAAP with respect thereto, (b) such tax, assessment,
charge, levy or claim is in respect of property taxes for
property that Holdings or one of the Restricted Subsidiaries has
determined to abandon and the sole recourse for such tax,
assessment, charge, levy or claim is to such property or (c) the
amount of such taxes assessments, charges, levies and claims and
interest and penalties thereon does not exceed $1,000,000 in the
aggregate.
SECTION 5.04. Financial Statements, Reports, Amendments,
etc. In the case of Holdings, furnish to each Credit Agreement
Creditor:
(a) within 90 (or, in the case of clause (ii) below,
105) days after the end of each fiscal year (x) consolidated
balance sheets and related statements of income and cash
flows, showing the consolidated financial condition of each
of (i) Holdings and its Subsidiaries and (ii) Holdings and
the Restricted Subsidiaries, in each case as of the close of
such fiscal year and the results of their operations during
such year, audited in the case of clause (i) above by Arthur
Andersen & Co. or other independent public accountants of
recognized national standing (who shall be reasonably
acceptable to the Administrative Agent) and accompanied by
(1) in the case of clause (i), an opinion of such
accountants (which shall not be qualified in any material
respect) to the effect that such consolidated financial
statements fairly present the financial condition and
results of operations of Holdings and its consolidated
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subsidiaries and Holdings and the Restricted Subsidiaries,
respectively, in accordance with GAAP and (2) a certificate
of a Financial Officer certifying that such consolidated
financial statements fairly present the financial condition
and results of operations of Holdings and its consolidated
subsidiaries and Holdings and the Restricted Subsidiaries,
respectively, in accordance with GAAP consistently applied
(except as disclosed in such certificate, in reasonable
detail, which detail shall be reasonably acceptable to the
Administrative Agent) and (y) a statement of stockholders'
equity of Holdings, presented on a basis consistent with the
financial statements furnished pursuant to clause (x) above,
and certified by one of Holdings' Financial Officers as
fairly presenting the stockholders' equity of Holdings in
accordance with GAAP consistently applied (except as
disclosed in such certificate in reasonable detail, which
detail shall be reasonably acceptable to the Administrative
Agent);
(b) within 45 (or, in the case of clause (ii) below,
60) days after the end of each of the first three fiscal
quarters of each fiscal year, the consolidated balance
sheets and related statements of income and cash flows,
showing the consolidated financial condition of each of (i)
Holdings and its Subsidiaries and (ii) Holdings and the
Restricted Subsidiaries, in each case as of the close of
such fiscal quarter and the results of their operations
during such fiscal quarter and the then elapsed portion of
the fiscal year, together with the balance sheets and
related statements of income and cash flows as of the
corresponding dates and for the corresponding periods in the
prior year, all certified by one of its Financial Officers
as fairly presenting the consolidated financial condition
and results of operations of Holdings and its consolidated
subsidiaries and Holdings and the Restricted Subsidiaries,
respectively, in accordance with GAAP (other than the
absence of footnotes in accordance with GAAP) consistently
applied (except as disclosed in such certificate in
reasonable detail, which detail shall be reasonably
acceptable to the Administrative Agent), subject to normal
year-end audit adjustments;
(c) concurrently with any delivery of financial
statements under (a) or (b) above, a certificate (a
"Compliance Certificate") of the accounting firm or
Financial Officer (which certificate shall be in the form of
Exhibit G if delivered by a Financial Officer) opining on or
certifying such statements (which certificate, when
furnished by an accounting firm, may be limited to
accounting matters and disclaim responsibility for legal
interpretations) (i) certifying that no Default or Event of
Default has occurred or, if such Default or Event of Default
has occurred, specifying the nature and extent thereof and
any corrective action taken or proposed to be taken with
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respect thereto and (ii) setting forth computations in
reasonable detail (which detail shall be reasonably
satisfactory to the Administrative Agent) demonstrating
compliance with the covenants contained in Sections 6.14,
6.15, 6.16 and 6.17 and showing the Applicable Level;
(d) if, as a result of any change in accounting
principles and policies from those as in effect on the date
of this Agreement, the consolidated financial statements of
Holdings and the Subsidiaries or Holdings and the Restricted
Subsidiaries, as the case may be, delivered pursuant to
clauses (a) and (b) above will differ in any material
respect from the consolidated financial statements that
would have been delivered pursuant to such clauses had no
such change in accounting principles and policies been made,
then, together with the first delivery of financial
statements pursuant to clauses (a) and (b) above following
such change, a schedule prepared by a Financial Officer
reconciling such changes to what the financial statements
would have been without such changes;
(e) promptly after the same become publicly available,
copies of all periodic reports and proxy statements and, to
the extent requested by the Administrative Agent, any other
materials filed by Holdings or any of its Subsidiaries with
the Securities and Exchange Commission under the Securities
Exchange Act of 1934, or any Governmental Authority
succeeding to any of or all the functions of said
Commission, or with any national securities exchange, or
distributed to its shareholders generally, as the case may
be;
(f) within 90 days after the beginning of each fiscal
year, a copy of the annual income and capital expenditure
budget for such fiscal year;
(g) promptly, from time to time, such other information
regarding the operations, business affairs and financial
condition of Holdings or any of its Restricted Subsidiaries,
or compliance with the terms of any Loan Document, as any
Credit Agreement Creditor, acting through the Administrative
Agent, may reasonably request;
(h) promptly, a copy of any amendment or waiver of any
provisions of any agreement which amendment or waiver is
described in Section 6.10 or 6.11;
(i) promptly following the creation or acquisition of
any Subsidiary, a certificate from a Responsible Officer,
identifying such new Subsidiary and the ownership interest
of Holdings and its Subsidiaries therein; and promptly
following any Investment in an Unrestricted Subsidiary, a
description of such Investment and the amount thereof;
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(j) if requested by the Administrative Agent, within
105 days following the end of any fiscal year of any
Unrestricted Subsidiary, a balance sheet and related
statements of income and cash flow for such Unrestricted
Subsidiary at the end of and for such fiscal year; and
(k) promptly, a copy of all reports submitted in
connection with any interim or special audit made by
independent accountants of the books of Holdings or any of
its Subsidiaries.
SECTION 5.05. Litigation and Other Notices. Furnish to
each Credit Agreement Creditor prompt written notice of the
following:
(a) any Default or Event of Default, specifying the
nature and extent thereof and the corrective action (if any)
proposed to be taken with respect thereto;
(b) the filing or commencement of any action, suit or
proceeding, whether at law or in equity or by or before any
Governmental Authority, against Holdings or any Subsidiary
in respect of which there is a reasonable possibility of an
adverse determination and which, if adversely determined,
could reasonably be expected to result in a Material Adverse
Effect; and
(c) any development specific to Holdings and its
Subsidiaries and not otherwise publicly disclosed known to a
Responsible Officer that has resulted in, or could
reasonably be anticipated to result in, a Material Adverse
Effect.
SECTION 5.06. ERISA. (a) Comply in all material respects
with the applicable provisions of ERISA and (b) furnish to each
Credit Agreement Creditor (i) as soon as possible, and in any
event within 30 days after any Responsible Officer of the
Borrower, any Guarantor or any ERISA Affiliate of any of them
knows or has reason to know that any Reportable Event has
occurred that alone or together with any other Reportable Event
could reasonably be expected to result in liability of the
Borrower, any Guarantor or any of their ERISA Affiliates to the
PBGC in an aggregate amount exceeding $10,000,000, a statement of
a Financial Officer setting forth details as to such Reportable
Event and the action proposed to be taken with respect thereto,
together with a copy of the notice, if any, of such Reportable
Event given to the PBGC, (ii) promptly after any Responsible
Officer learns of receipt thereof, a copy of any notice the
Borrower or any Guarantor or any of their ERISA Affiliates may
receive from the PBGC relating to the intention of the PBGC to
terminate any Plan or Plans (other than a Plan maintained by any
of their ERISA Affiliates which is considered an ERISA Affiliate
only pursuant to subsection (m) or (o) of Section 414 of the
Code) or to appoint a trustee to administer any Plan or Plans,
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85
(iii) within 20 days after the due date for filing with the PBGC
pursuant to Section 412(n) of the Code a notice of failure to
make a required installment or other payment with respect to a
Plan, a statement of a Financial Officer setting forth details as
to such failure and the action proposed to be taken with respect
thereto, together with a copy of such notice given to the PBGC
and (iv) promptly after any Responsible Officer learns thereof
and in any event within 30 days after receipt thereof by the
Borrower, any Guarantor or any ERISA Affiliate from the sponsor
of a Multiemployer Plan, a copy of each notice received by the
Borrower, any Guarantor or such ERISA Affiliate concerning (A)
the imposition of Withdrawal Liability or (B) a determination
that a Multiemployer Plan is, or is expected to be, terminated or
in reorganization, in each case within the meaning of Title IV of
ERISA.
SECTION 5.07. Maintaining Records; Access to Properties and
Inspections. Maintain all financial records in accordance with
GAAP and permit any persons designated by the Administrative
Agent (or, during the continuance of an Event of Default, any
Lender) to visit and inspect the financial records and the
properties of Holdings or any Restricted Subsidiary at reasonable
times, upon reasonable notice and as often as reasonably
requested and to make extracts from and copies of such financial
records, and permit any persons designated by the Administrative
Agent (or, during the continuance of an Event of Default, any
Lender) to discuss the affairs, finances and condition of
Holdings or any Restricted Subsidiary with the officers thereof
and independent accountants therefor (subject to reasonable
requirements of confidentiality, including requirements imposed
by law or by contract).
SECTION 5.08. Use of Proceeds. (a) Use the proceeds of
the Term Loans, the Canadian Term Loans and the Public Offering
solely (i) to repay the principal of and accrued interest on all
loans and all other amounts outstanding under the Existing Credit
Agreement, (ii) to redeem Holdings, Group and Borrower
outstanding preferred stock at an aggregate redemption price not
greater than its face value plus any premium payable upon
redemption plus accrued and unpaid dividends to the date of
redemption (the "Permitted Preferred Stock Redemption Price"),
which is approximately $220,000,000 as of June 30, 1994, (iii) to
redeem or defease outstanding Indebtedness of Holdings and its
Subsidiaries listed on Schedule 4.02(o) at an aggregate
redemption price not greater than the principal amount thereof
plus accrued and unpaid interest to the date of redemption plus
any required redemption premium (the "Permitted Debt Redemption
Price"), which is approximately $821,000,000 as of June 30, 1994
(excluding the Holdings Subordinated PIK Notes to be converted to
Holdings Common Stock) and (iv) to fund transaction costs related
to the Recapitalization Transactions.
(b) Use the proceeds of Delayed Draw Term Loans solely (i)
to make ESOP Loans, (ii) to the extent not used to make ESOP
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Loans, to finance Permitted Business Acquisitions and (iii) for
the purposes described in clause (a) above.
(c) Use the proceeds of Revolving Loans made on the
Closing Date solely for the purposes set forth in Section 5.08(a)
and thereafter for general corporate purposes (including to make
Permitted Business Acquisitions).
(d) Use Letters of Credit solely for general corporate
purposes in the ordinary course of business of the Borrower and
its subsidiaries.
(e) Use the proceeds of the Canadian Term Loans only to
pay a dividend to the Borrower, which proceeds will be used for
the purposes described in clause (a) above.
SECTION 5.09. Further Assurances. Execute any and all
further documents, financing statements, agreements and
instruments, and take all further action (including filing UCC
financing statements, mortgages and deeds of trust), which may be
required under applicable law, or which the Collateral Agent may
reasonably request, in order to effectuate the transactions
contemplated by the Loan Documents, in order to release the
security interests securing obligations in respect of the
Existing Credit Agreement and in order to grant, preserve,
protect and perfect the validity and first priority (subject to
Liens permitted by Section 6.04) of the security interests
created or intended to be created pursuant to the Pledge
Agreement. In addition, from time to time, Holdings and the
Restricted Subsidiaries will, at their cost and expense, subject
to the obtaining of any required regulatory authorizations (which
Holdings and Borrower agree to use their best efforts to obtain)
promptly secure the Obligations by causing the following to
occur: (i) promptly upon creating or acquiring any additional
subsidiary, the stock of such subsidiary will (unless such
subsidiary is a subsidiary of an Unrestricted Subsidiary) be
pledged pursuant to the Pledge Agreement, provided that no more
than 65% of the capital stock of any foreign subsidiary shall be
required to be pledged pursuant to this Section 5.09, and (ii)
such subsidiary will (unless such subsidiary is an Unrestricted
Subsidiary or a foreign subsidiary) become a party to the
Guarantee Agreement. All such security interests and Liens will
be created under the Pledge Agreement and other security
agreements and other instruments and documents in form and
substance reasonably satisfactory to the Collateral Agent, and
Holdings and the Restricted Subsidiaries shall deliver or cause
to be delivered to the Administrative Agent all such instruments
and documents (including legal opinions and lien searches) as the
Required Lenders shall reasonably request to evidence compliance
with this Section 5.09. Holdings and the Restricted Subsidiaries
agree to provide such evidence as the Administrative Agent shall
reasonably request as to the perfection and priority status of
each such security interest and Lien.
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SECTION 5.10. Change in Ownership. In the case of
Holdings, own directly at all times, legally and beneficially,
100% of the capital stock of the Borrower, free of Liens except
Liens in favor of the Collateral Agent; and, in the case of
Borrower, own (a) directly at all times, legally and
beneficially, 100% of the capital stock of the Finance Subsidiary
free of Liens except Liens in favor of the Collateral Agent and
(b) directly or indirectly at all times, legally and
beneficially, 100% of the capital stock of the Canadian Borrower
free of Liens except Liens, if any, in favor of the Collateral
Agent.
SECTION 5.11. Fiscal Year; Accounting. In the case of each
of Holdings and its subsidiaries, cause its respective fiscal
year to end on the last Saturday in January.
SECTION 5.12. Dividends. In the case of the Borrower,
permit its subsidiaries to pay dividends and cause such dividends
to be paid to the extent required to pay the monetary
Obligations.
SECTION 5.13. Rate Protection Agreements. As promptly as
practicable and in any event within 90 days after the Closing
Date, enter into, and thereafter maintain in effect, one or more
interest rate protection agreements (including interest rate
swaps, caps, collars and other interest rate hedging
transactions) with any of the Lenders or other financial
institutions reasonably satisfactory to the Administrative Agent,
the effect of which shall be to limit for at least two years the
interest payable by the Borrower in connection with Indebtedness
under this Agreement having an aggregate outstanding principal
amount not less than an amount equal to 40% of the aggregate
principal amount of the Loans projected to be outstanding during
such period on terms and conditions reasonably acceptable, taking
into account current market conditions, to the Administrative
Agent and deliver evidence of the execution and delivery thereof
to the Administrative Agent.
SECTION 5.14. Corporate Separateness. Cause the
management, business and affairs of each of Holdings and the
Subsidiaries to be conducted in such a manner so that each of
Holdings and the Unrestricted Subsidiaries will be perceived as a
legal entity separate and distinct from each other and the
Restricted Subsidiaries.
SECTION 5.15. Business of Restricted Subsidiaries. Cause
all of the business and activities of the Restricted Subsidiaries
to be performed and conducted by the Borrower and Restricted
Subsidiaries which are subsidiaries of the Borrower.
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ARTICLE VI.
NEGATIVE COVENANTS
Each of Holdings, the Canadian Borrower and the Borrower
covenants and agrees that from and after the Closing Date, so
long as this Agreement or any Letter of Credit shall remain in
effect or any monetary Obligation shall be unpaid, unless the
Required Lenders shall otherwise consent in writing, Holdings,
the Canadian Borrower and the Borrower will not, and will not
cause or permit any Restricted Subsidiary to:
SECTION 6.01. Indebtedness. Incur, create, assume or
permit to exist any Indebtedness, except:
(a) Indebtedness of the Borrower and the Restricted
Subsidiaries for borrowed money in an amount not to exceed
$23,000,000 under agreements existing on the date of this
Agreement and set forth in Schedule 6.01 and other
Indebtedness existing on the Closing Date, but not any
extensions, renewals or refinancings of such Indebtedness
except (i) renewals and extensions expressly provided for in
the agreements evidencing any such Indebtedness as the same
are in effect on the date of this Agreement and (ii)
refinancings and extensions of any such Indebtedness if the
interest rate with respect thereto and other terms thereof
are no less favorable than the Indebtedness being refinanced
or extended and the average life to maturity thereof is
greater than or equal to the Indebtedness being refinanced
or extended (provided that such Indebtedness permitted under
clause (i) or clause (ii) above shall not be (A)
Indebtedness of an obligor that was not an obligor with
respect to the Indebtedness being extended, renewed or
refinanced, (B) in a principal amount which exceeds the
Indebtedness being renewed, extended or refinanced or (C)
incurred, created or assumed if any Default or Event of
Default has occurred and is continuing or would result
therefrom);
(b) Indebtedness of the Borrower consisting of
contingent liabilities arising from indemnities and other
contractual obligations of the Borrower existing on the date
hereof from the sale of properties prior to the date hereof
by Holdings and the Borrower and their predecessors;
(c) So long as immediately after giving effect to the
incurrence thereof: (i) no Default or Event of Default
shall have occurred and be continuing and (ii) the
outstanding principal amount of the Term Loans and Canadian
Term Loans is less than $350,000,000, Permitted Subordinated
Indebtedness;
(d) Indebtedness of (i) the Borrower to any subsidiary
of the Borrower evidenced, if the amount of such
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Indebtedness exceeds $10,000,000, by an Intercompany Note
pledged to the Collateral Agent under the Pledge Agreement,
(ii) any Domestic Restricted Subsidiary to the Borrower
evidenced, if the amount of such Indebtedness exceeds
$10,000,000, by an Intercompany Note pledged to the
Collateral Agent under the Pledge Agreement and (iii) any
Domestic Restricted Subsidiary to any other Restricted
Subsidiary evidenced, if the amount of such Indebtedness
exceeds $10,000,000, by an Intercompany Note pledged to the
Collateral Agent under the Pledge Agreement; provided that
no Indebtedness may be incurred under this paragraph (d) by
any subsidiary of the Borrower that is not a Guarantor;
(e) Capital Lease Obligations and Purchase Money
Indebtedness incurred by the Borrower prior to or within 270
days after a Capital Expenditure permitted under Section
6.03 in order to finance such Capital Expenditure, and
extensions, renewals and refinancings thereof if the
interest rate with respect thereto and other terms thereof
are no less favorable than the Indebtedness being refinanced
and the average life to maturity thereof is greater than or
equal to the Indebtedness being refinanced (provided that
such Indebtedness shall not be (A) Indebtedness of an
obligor that was not an obligor with respect to the
Indebtedness being extended, renewed or refinanced, (B) in a
principal amount which exceeds the Indebtedness being
renewed, extended or refinanced or (C) incurred, created or
assumed if any Default or Event of Default has occurred and
is continuing or would result therefrom);
(f) Capital Lease Obligations incurred by the Borrower
or any Restricted Subsidiary in respect of any Sale and
Leaseback Transaction that is permitted under Section 6.06;
(g) Indebtedness of the Borrower and its subsidiaries
in the nature of Interest Rate Agreements and other interest
rate and foreign currency hedging transactions entered into
in order to fix the effective rate of interest, or to hedge
against currency fluctuations, on the Loans and other
Indebtedness (it being understood that such transactions
shall be entered into for business purposes and not for the
purpose of speculation);
(h) Indebtedness of a Domestic Restricted Subsidiary
which represents the assumption by such Domestic Restricted
Subsidiary of Indebtedness of a Restricted Subsidiary in
connection with the merger of such Restricted Subsidiary
with or into the assuming Domestic Restricted Subsidiary or
the purchase of all or substantially all the assets of such
other Restricted Subsidiary;
(i) Indebtedness of the Restricted Subsidiaries in
respect of performance bonds, bid bonds, appeal bonds,
bankers acceptances, letters of credit and surety bonds
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provided in the ordinary course of business, and any
extension, renewal or refinancing thereof to the extent not
provided to secure the repayment of other Indebtedness and
to the extent that the amount of refinancing Indebtedness is
not greater than the amount of Indebtedness being
refinanced;
(j) Indebtedness arising from the honoring by a bank or
other financial institutions of a check, draft or similar
instrument drawn against insufficient funds in the ordinary
course of business; provided that such Indebtedness is
extinguished within two Business Days of its incurrence;
(k) Indebtedness of a Restricted Subsidiary acquired
after the date hereof and Indebtedness of a corporation
merged or consolidated with or into a Restricted Subsidiary
after the date hereof, which Indebtedness exists at the time
of such acquisition, merger or consolidation and is not
created in contemplation of such event and such acquisition,
merger or consolidation is permitted by this Agreement,
provided that the aggregate principal amount of Indebtedness
under this clause (k) shall not exceed $50,000,000;
(l) Indebtedness of the Borrower incurred after the
date hereof, which Indebtedness is created or incurred at
the time of any Permitted Business Acquisition to finance
such acquisition; provided that the aggregate principal
amount of Indebtedness which may be created or incurred
under this paragraph (l) together with Indebtedness
permitted by paragraph (k) above shall not exceed
$150,000,000;
(m) Indebtedness owed to (including obligations in
respect of letters of credit for the benefit of) any person
providing worker's compensation, health, disability or other
employee benefits, property, casualty, liability or other
insurance to Holdings or any Subsidiary, pursuant to
reimbursement or indemnification obligations to such person;
(n) (i) Indebtedness represented by the Loans, the
Letters of Credit and the Guarantees thereof by the
Guarantors pursuant to the Guarantee Agreement and (ii)
Indebtedness represented by the Guarantees of Indebtedness
permitted under clause (l) above by the Guarantors pursuant
to the Guarantee Agreement;
(o) other Capital Lease Obligations of the Restricted
Subsidiaries in an aggregate principal amount at any time
outstanding not in excess of $10,000,000;
(p) other unsecured Indebtedness of the Borrower and
the Canadian Borrower in an aggregate principal amount at
any time outstanding not in excess of $40,000,000 and
unsecured Guarantees by the Borrower of any Indebtedness of
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the Canadian Borrower incurred in accordance with this
clause (p);
(q) other Indebtedness of the Borrower together with
Indebtedness listed on Schedule 6.01 (as such Indebtedness
may be refinanced as permitted by Section 6.01(a)) in an
aggregate principal amount outstanding at any time not to
exceed $35,000,000; and
(r) all premium (if any), interest (including
post-petition interest), fees, expenses, indemnities,
charges and additional or contingent interest on obligations
described in clauses (a) through (q) above.
SECTION 6.02. Dividends and Distributions. Declare or pay,
directly or indirectly, any dividend or make any other
distribution (by reduction of capital or otherwise), whether in
cash, property, securities or a combination thereof, with respect
to any shares of its capital stock (other than dividends and
distributions on Holdings Common Stock payable solely by the
issuance of additional shares of Holdings Common Stock) or
directly or indirectly redeem, purchase, retire or otherwise
acquire for value (or permit any Restricted Subsidiary to
purchase or acquire) any shares of any class of its capital stock
or any option, warrant or other right to acquire shares of such
stock or set aside any amount for any such purpose; provided,
however, that:
(a) the foregoing shall not prohibit the Recapi-
talization Transactions;
(b) any Subsidiary may declare and pay dividends or make
other distributions to the Borrower or to wholly owned
Restricted Subsidiaries;
(c) if at the time thereof and after giving effect
thereto no Default or Event of Default shall have occurred
and be continuing, Holdings may, commencing with the fifth
full fiscal quarter following the Closing Date, pay
dividends in cash on its common stock or any preferred stock
in any fiscal quarter in an amount not to exceed $3,000,000;
(d) if at the time thereof and after giving effect
thereto no Default or Event of Default shall have occurred
and be continuing and the Dividend Condition shall have been
met, Holdings may pay dividends in cash on its common stock
or any preferred stock in any fiscal year in an amount not
to exceed in the aggregate 25% of Net Income for the prior
fiscal year less the amount of dividends paid in such
current fiscal year pursuant to clause (c) above;
(e) if at the time thereof and after giving effect
thereto no Default or Event of Default shall have occurred
and be continuing, Holdings may repurchase director's
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qualifying shares of Holdings and capital stock of Holdings
and options therefor of employees and directors of Holdings
and the Restricted Subsidiaries provided that (i) no such
repurchase may be made unless Holdings is obligated to do so
at the time of repurchase pursuant to contractual agreements
between Holdings and the applicable officer or director and
(ii) the aggregate amount paid by Holdings in connection
with such repurchases at any time shall not exceed
$3,000,000 plus the aggregate amount (but only to the extent
such amount is simultaneously contributed by Holdings to the
Borrower) received by Holdings from the sale or issuance of
its capital stock or options therefor to officers and
directors of Holdings and the Restricted Subsidiaries after
the Closing Date;
(f) the Borrower may pay dividends or make other
distributions to Holdings in amounts sufficient to allow
Holdings to pay (i) expenses incurred in connection with the
Recapitalization Transactions, Permitted Tax Payments and
state and local taxes and other governmental charges, and
administrative and routine expenses required to be paid by
Holdings in the ordinary course of its business, (ii) the
dividends and other amounts contemplated by clauses (c) and
(d) above; provided that such dividends pursuant to clause
(ii) are used by Holdings for such purposes within 20 days
of the receipt of such dividends by Holdings, (iii) the
repurchase price for the capital stock and options therefor
of Holdings contemplated by clause (e) above provided that
such dividends pursuant to clause (iii) are used by Holdings
for such purpose within 20 days of the receipt of such
dividends by Holdings and (iv) the amount of any Investment
in an Unrestricted Subsidiary if the Borrower and the
Restricted Subsidiaries could have made such Investment in
Unrestricted Subsidiaries pursuant to Section 6.07 (l) (but
on the assumption that the Borrower could otherwise invest
in such Unrestricted Subsidiary); provided that such
dividends pursuant to clause (iv) are used by Holdings for
such purpose within 20 days of receipt of such dividends by
Holdings; provided further that no dividend may be paid to
Holdings pursuant to clause (ii) or (iii) or (iv) if at the
time of such dividend or after giving effect thereto a
Default or Event of Default shall have occurred and be
continuing; and
(g) the foregoing shall not prohibit the ESOP
Investment.
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SECTION 6.03. Capital Expenditures. Permit Capital
Expenditures of the Restricted Subsidiaries on a consolidated
basis during any calendar year to be greater than the amount set
forth below for such year:
Calendar Year Amount
1994 $85,000,000
1995 85,000,000
1996 80,000,000
1997 80,000,000
1998 80,000,000
1999 80,000,000
2000 80,000,000
2001 80,000,000
2002 80,000,000
provided, however, that (i) to the extent Capital Expenditures
made in any year are less than the amount set forth above
opposite such year, Restricted Subsidiaries shall be permitted to
carry forward the unused amount to the succeeding calendar years
so long as such aggregate Capital Expenditures in any fiscal year
do not exceed $130,000,000; and (ii) Capital Expenditures may not
be made by Holdings.
SECTION 6.04. Liens. Create, incur, assume or permit to
exist any Lien on any property or assets (including stock or
other securities) now owned or hereafter acquired by it or on any
income or rights in respect of any thereof, except:
(a) Liens on property or assets of the Restricted
Subsidiaries existing on the date of this Agreement and, in
the case of Liens securing Indebtedness for borrowed money,
set forth in Schedule 6.04; provided that such Liens shall
secure only those obligations which they secure on such date
(and extensions, renewals and refinancings of such
obligations permitted by Section 6.01(a)) and do not
subsequently apply to any other property or assets of
Holdings or any Restricted Subsidiary;
(b) any Lien on any property or asset used by a
Restricted Subsidiary in the ordinary course of business,
which Lien existed prior to the acquisition thereof by such
subsidiary; provided that (i) such Lien is not created in
contemplation of or in connection with such acquisition and
(ii) such Lien does not apply to any other property or
assets of any other Restricted Subsidiary;
(c) any Lien on any property or asset of a Restricted
Subsidiary securing Indebtedness permitted by Section
6.01(k), provided that such Lien does not apply to any other
property or assets of Holdings or any Restricted Subsidiary
not securing such Indebtedness at the date of acquisition of
such property or asset;
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(d) Liens for taxes, assessments or other governmental
charges or levies not yet due, or which are for less than
$1,000,000 in the aggregate, or which are being contested in
compliance with Section 5.03 or for property taxes for
property that the Borrower or one of its Restricted
Subsidiaries has determined to abandon if the sole recourse
for such tax, assessment, charge, levy or claim is to such
property;
(e) carriers', warehousemen's, mechanics',
materialmen's, repairmen's or other like Liens arising in
the ordinary course of business and securing obligations
which are not due or which are being contested in good faith
by appropriate proceedings and in respect of which, if
applicable, Holdings or the relevant Restricted Subsidiary
shall have set aside on its books reserves in accordance
with GAAP;
(f) pledges and deposits made in the ordinary course of
business in compliance with the Federal Employers Liability
Act or any other workmen's compensation, unemployment insur-
ance and other social security laws or regulations and
deposits securing liability to insurance carriers under
insurance or self-insurance arrangements;
(g) deposits to secure the performance of bids, trade
contracts (other than for Indebtedness), leases (other than
Capital Lease Obligations), statutory obligations, surety
and appeal bonds, performance bonds and other obligations of
a like nature incurred in the ordinary course of business;
(h) zoning restrictions, easements, trackage rights,
leases (other than Capital Lease Obligations), licenses,
special assessments, rights-of-way, restrictions on use of
real property and other similar encumbrances incurred in the
ordinary course of business which, in the aggregate, are not
substantial in amount and do not materially detract from the
value of the property subject thereto or interfere in any
material respect with the ordinary conduct of the business
of any Restricted Subsidiary;
(i) purchase money security interests in real property,
improvements thereto or equipment hereafter acquired (or, in
the case of improvements, constructed) by any Restricted
Subsidiary (including without limitation, the interests of
vendors and lessors under conditional sale and title
retention agreements); provided that (i) such security
interests secure Indebtedness permitted by Section 6.01,
(ii) such security interests are incurred, and the
Indebtedness secured thereby is created, within 270 days
after such acquisition (or construction), (iii) the
Indebtedness secured thereby does not exceed 100% of the
cost of such real property, improvements or equipment at the
time of such acquisition (or construction), (iv) such
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expenditures are Capital Expenditures permitted under
Section 6.03 and (v) such security interests do not apply to
any other property or assets of any Restricted Subsidiary
(other than to accessions to such real property,
improvements or equipment and provided that individual
financings of equipment provided by a single lender may be
cross-collateralized to other financings of equipment
provided solely by such lender);
(j) Liens created in favor of the Collateral Agent for
the benefit of the Secured Parties;
(k) Liens securing reimbursement obligations in respect
of commercial letters of credit permitted under Section 6.01
and covering the goods (or the documents of title in respect
of such goods) financed by such letters of credit;
(l) Liens arising out of capitalized or operating lease
transactions permitted under Section 6.06, so long as such
Liens (i) attach only to the property sold in such
transaction and any accessions thereto and (ii) do not
interfere with the business of Holdings and the Restricted
Subsidiaries in any material respect;
(m) any Lien on assets of a person securing
Indebtedness of such person permitted by Section 6.01(q);
(n) any Lien arising by operation of law pursuant to
Section 107(1) of the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Sec. 9607(l), or
pursuant to analogous state law, for costs or damages which
are not yet due (by virtue of a written demand for payment
by a Governmental Authority) or which are being contested in
compliance with Section 5.03, or on property that a
Restricted Subsidiary has determined to abandon if the sole
recourse for such costs or damages is to such property,
provided that the liability of Holdings and the Restricted
Subsidiaries with respect to the matter giving rise to such
Lien shall not, in the reasonable estimate of the Borrower
(in light of all attendant circumstances, including the
likelihood of contribution by third parties), exceed
$7,500,000;
(o) any leases or subleases to other persons of
properties or assets owned or leased by a Restricted
Subsidiary;
(p) Liens consisting of interests of lessors under
capital leases permitted by Section 6.01;
(q) Liens securing judgements for the payment of money
in an aggregate amount not in excess of $7,500,000 (to the
extent not covered by insurance) which judgements shall not
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96
be undischarged or stayed for a period of more than 30
consecutive days;
(r) the replacement, extension or renewal of any Lien
permitted by clause (b), (c) or (i) above, provided that
such replacement, extension or renewal Lien shall not cover
any property other than the property that was subject to
such Lien prior to such replacement, extension or renewal
and provided further that the Indebtedness and other
obligations secured by such replacement, extension or
renewal Lien are permitted by this Agreement; and
(s) other Liens with respect to property or assets not
constituting collateral for the Obligations with an
aggregate fair market value of not more than $25,000,000 at
any time.
SECTION 6.05. Priority of Loan Payments. (a) Until the
Commitments have been terminated and the Obligations have been
indefeasibly paid in full, directly or indirectly, make any
payment, retirement, repurchase or redemption on account of the
principal of any Permitted Subordinated Indebtedness or directly
or indirectly prepay any Permitted Subordinated Indebtedness
prior to the stated maturity date of such Permitted Subordinated
Indebtedness, make any payment or prepayment of any Permitted
Subordinated Indebtedness which would violate the terms of this
Agreement or of such Permitted Subordinated Indebtedness, any
agreement or document evidencing, related to or securing the
payment or performance of the Permitted Subordinated Indebtedness
or any subordination agreement applicable to such Permitted
Subordinated Indebtedness.
(b) Until the Commitments have been terminated and the
Obligations have been indefeasibly paid in full, repay any Funded
Debt of Holdings and the Restricted Subsidiaries except:
(i) the Obligations;
(ii) payments of Funded Debt made in conformity with the
regularly scheduled maturity thereof or mandatory prepayment
provisions thereof;
(iii) if no Default or Event of Default has occurred and
is continuing or would result therefrom, refinancings
permitted by Section 6.01;
(iv) if no Default or Event of Default has occurred and
is continuing or would result therefrom, prepayments by a
Restricted Subsidiary of its Funded Debt acquired in
connection with a Permitted Business Acquisition; and
(v) if no Default or Event of Default has occurred and
is continuing or would result therefrom, prepayments of up
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97
to $10,000,000 in the aggregate of other Funded Debt of the
Restricted Subsidiaries.
SECTION 6.06. Sale and Lease-Back Transactions. Enter into
any arrangement, directly or indirectly, with any person whereby
Holdings or any Restricted Subsidiary shall sell or transfer any
property, real or personal, used or useful in its business,
whether now owned or hereafter acquired, and thereafter rent or
lease such property or other property which it intends to use for
substantially the same purpose or purposes as the property being
sold or transferred (a "Sale and Lease-Back Transaction"), other
than any Sale and Lease-Back Transaction which involves a sale by
the Borrower or a Restricted Subsidiary solely for cash con-
sideration on terms not less favorable than would prevail in an
arms'-length transaction and which (a) results in a Capital Lease
Obligation or an Operating Lease, in either case entered into to
finance a Capital Expenditure permitted by Section 6.03
consisting of the initial acquisition by such subsidiary of the
property sold or transferred in such Sale and Lease-Back
Transaction, provided that such Sale and Lease-Back Transaction
occurs within 270 days after such acquisition or (b) results in a
Capital Lease Obligation or an Operating Lease entered into for
any other purpose (provided that any such Sale and Lease-Back
Transaction in reliance upon this clause (b) shall be deemed to
be a Prepayment Event).
SECTION 6.07. Investments, Loans and Advances. Purchase,
hold or acquire any capital stock, evidences of indebtedness or
other securities of, make or permit to exist any loans or
advances to, or make or permit to exist any investment or any
other interest in (collectively, an "Investment"), any other
person, except:
(a) Permitted Investments and Investments that were
Permitted Investments when made;
(b) Investments by Holdings in the Borrower and
Investments by a Restricted Subsidiary in another Domestic
Restricted Subsidiary;
(c) Investments arising out of the receipt by the
Borrower of noncash consideration for the sale of assets
permitted under Section 6.08 provided that such
consideration (if the stated amount or value thereof is in
excess of $1,000,000) is pledged upon receipt pursuant to
the Pledge Agreement;
(d) Intercompany Loans permitted to be incurred as
Indebtedness under Section 6.01(d);
(e) Investments by a wholly-owned Restricted Subsidiary
constituting Permitted Business Acquisitions;
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98
(f) (i) loans and advances to employees of any
Restricted Subsidiary not to exceed $300,000 at any time
outstanding to any one employee and not to exceed $2,000,000
in the aggregate at any time outstanding and (ii) advances
of payroll payments and expenses to employees in the
ordinary course of business;
(g) accounts receivable arising and trade credit
granted in the ordinary course of business and any
securities received in satisfaction or partial satisfaction
thereof from financially troubled account debtors to the
extent reasonably necessary in order to prevent or limit
loss;
(h) an Investment by the Borrower or any of the
Restricted Subsidiaries in any Finance Subsidiary that the
Borrower is incorporating, but only to the extent necessary
to incorporate such Finance Subsidiary and acquire its
capital stock and subordinated indebtedness in connection
with sales of receivables, all with the minimum
capitalization necessary;
(i) investments, other than investments listed in
clauses (a) through (h) of this Section, existing on the
Closing Date and set forth on Schedule 6.07;
(j) the ESOP Loans;
(k) Investments the sole consideration for which by
Holdings and the Restricted Subsidiaries is capital stock of
Holdings provided that, after giving effect thereto, no
Default or Event of Default under paragraph (m) of Article
VII shall have occurred;
(l) if no Default or Event of Default exists
immediately before or after giving effect to such
Investment, other Investments, including joint ventures,
currency hedges and Investments in Unrestricted
Subsidiaries, provided that (i) the consideration for
Investments other than Investments in Unrestricted
Subsidiaries (whether cash or property, as valued at the
time of such Investment) does not exceed (net of any return
representing return of capital of (but not return on) any
such Investment) at any time $75,000,000 in the aggregate
less one half of the amount of all Investments pursuant to
clause (ii) below in Unrestricted Subsidiaries and (ii) the
consideration for Investments in Unrestricted Subsidiaries
(whether cash or property, as valued at the time of such
Investment) does not exceed (net of any return representing
return of capital of (but not return on) any such
Investment) at any time $50,000,000 in the aggregate; and
(m) Investments resulting from pledges and deposits
referred to in Section 6.04(f).
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None of Holdings and the Restricted Subsidiaries may make any
Investment in Unrestricted Subsidiaries except as described in
the definition of "Unrestricted Subsidiaries" set forth in
Section 1.01.
SECTION 6.08. Mergers, Consolidations, Sales of Assets and
Acquisitions. Merge into or consolidate with any other person,
or permit any other person to merge into or consolidate with it,
or sell, transfer, lease or otherwise dispose of (in one
transaction or in a series of transactions) all or any part of
its assets (whether now owned or hereafter acquired) or any
capital stock of any subsidiary, or purchase, lease or otherwise
acquire (in one transaction or a series of transactions) all or
any substantial part of the assets of any other person, except
that this Section 6.08 shall not prohibit:
(a) the purchase and sale of property and assets in the
ordinary course of business by any Restricted Subsidiary;
(b) Sale and Lease-Back Transactions permitted by
Section 6.06;
(c) Permitted Business Acquisitions;
(d) sales, leases or transfers from one Restricted
Subsidiary of the Borrower to the Borrower or to a Domestic
Restricted Subsidiary;
(e) sales, leases or other dispositions of (i)
inventory of the Restricted Subsidiaries determined by the
Board of Directors of the Borrower to be no longer useful or
necessary in the operation of the businesses of the
Restricted Subsidiaries and (ii) assets of operations that
were discontinued prior to the Closing Date;
(f) any Permitted Receivables Financing;
(g) sales, leases or other dispositions of equipment or
real property of the Restricted Subsidiaries determined by
the Board of Directors of the Borrower to be no longer
useful or necessary in the operation of the business of the
Restricted Subsidiaries, provided that the Net Proceeds
thereof in excess of $1,000,000 shall be used to prepay the
Term Loans, Delayed Draw Term Loans and the Canadian Term
Loans in accordance with Section 2.12(e) or used to purchase
replacement assets or properties used for the same purpose
as the equipment or real property disposed of within 12
months of the receipt thereof;
(h) any Restricted Subsidiary may merge with any other
Restricted Subsidiary, provided that (i) at the time of and
immediately after giving effect to any such merger no
Default or Event of Default shall have occurred, (ii) the
Borrower shall be the surviving corporation of any merger
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involving the Borrower, and the Canadian Borrower shall be
the surviving corporation of any merger involving the
Canadian Borrower and (iii) no Restricted Subsidiary
organized under the laws of a jurisdiction outside the
United States may merge with a Domestic Restricted
Subsidiary unless the Domestic Restricted Subsidiary is the
surviving corporation; and
(i) the Restricted Subsidiaries may sell or otherwise
dispose of assets having a fair market value, for all such
transactions, not in excess of 25% of the fair market value
as determined by the Board of Directors of the Borrower of
the assets of the Restricted Subsidiaries at the Closing
Date, provided that (i) each such sale shall be for a
consideration determined in good faith by the Board of
Directors of the Borrower to be at least equal to the fair
market value (if any) of the asset sold, (ii) the aggregate
amount of all noncash consideration included in such sale
proceeds may not exceed 15% of the fair market value of the
aggregate amount of all such sale proceeds; provided,
however, that obligations of the type referred to in clauses
(a) and (b) of the definition of "Permitted Investments"
(without regard to the maturity or the credit rating
thereof) shall not be deemed non-cash proceeds if such
obligations are promptly sold for cash and the proceeds of
such sale are included in the calculation of Net Proceeds
from such sale, (iii) the aggregate Net Proceeds of all such
sales and dispositions under this clause (i) in excess of
$50,000,000 are applied to repay the Term Loans, the
Canadian Term Loans and the Delayed Draw Term Loans in
accordance with Section 2.12(e) and the first $50,000,000
of such aggregate Net Proceeds are either applied to the
purchase of assets or properties used in the business of the
Borrower and its Restricted Subsidiaries as permitted by
Section 6.12 within 12 months of the receipt thereof or are
applied to repay the Term Loans, the Canadian Term Loans and
the Delayed Draw Term Loans in accordance with Section
2.12(e) and (iv) no Default or Event of Default shall have
occurred and be continuing immediately prior to or after
such sale. Upon receipt by Holdings or any Restricted
Subsidiary of Net Proceeds of any Specified Asset Sale
occurring after the Closing Date, Borrower shall promptly
deliver a certificate of a Responsible Officer to the
Administrative Agent setting forth the amount of the Net
Proceeds which Borrower expects to reinvest in replacement
assets or property during the subsequent 12-month period
which are not required to be applied to the repayment of the
Term Loans, the Canadian Term Loans and the Delayed Draw
Term Loans. On the first anniversary of the receipt of such
Net Proceeds, Borrower shall (i) deliver a certificate of a
Responsible Officer to the Administrative Agent certifying
as to the amount and use of such Net Proceeds actually
reinvested in replacement assets or property during the
preceding 12-month period and (ii) deliver to the
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Administrative Agent, for application in accordance with
Section 2.12(e), an amount equal to the remaining uninvested
Net Proceeds; and
(j) Investments permitted by Section 6.07.
SECTION 6.09. Transactions with Affiliates and
Stockholders. Sell or transfer any property or assets to, or
purchase or acquire any property or assets of, or otherwise
engage in any other transactions with, any of its Affiliates
(including Unrestricted Subsidiaries but excluding Domestic
Restricted Subsidiaries) or any known holder of 10% or more of
any class of capital stock of Holdings or any Unrestricted
Subsidiary, except that Holdings or any of the Restricted
Subsidiaries may engage in any of the foregoing transactions at
prices and on terms and conditions not less favorable to each
than would prevail on an arm's-length basis from unrelated third
parties; provided that Holdings and the Restricted Subsidiaries
may not pay any fees to an Affiliate (including an Unrestricted
Subsidiary) for the provision of financial or advisory services
if after giving effect thereto a Default or Event of Default
shall have occurred and is continuing.
SECTION 6.10. Subordinated Indebtedness. Amend or modify
any instruments, agreements or documents evidencing or related to
any Permitted Subordinated Indebtedness, unless, in the judgement
of the Required Lenders, any such amendment or modification does
not substantially affect either the rights or security interests
granted to the Credit Agreement Creditors or the Collateral Agent
or the first and superior position of the Obligations owed to the
Credit Agreement Creditors relative to the second and inferior
position of the holders of the notes or other instruments
evidencing the Permitted Subordinated Indebtedness (without
limiting the generality of the foregoing, it is understood that
any increase in interest, fees or other amounts payable in
connection therewith, or any amendment that imposes additional
covenants or events of default or makes more restrictive the
covenants or events of default contained therein, shall require
the consent of the Required Lenders).
SECTION 6.11. Amendment of Constitutive Documents; Change
in Corporate Structure. (i) Permit any amendment or
modification to be made to the certificate of incorporation or
By-laws of Holdings or of any Restricted Subsidiary if such
amendment or modification is materially adverse to the interests
of the Lenders or (ii) permit any Restricted Subsidiary to issue
any capital stock or other equity interest to any person other
than the Borrower or its wholly owned subsidiaries.
SECTION 6.12. Business of Holdings and Restricted
Subsidiaries. (a) Engage at any time in any business or business
activity other than the business currently conducted by it and
business activities reasonably incidental or related thereto or
(b) fail to maintain and operate such business in substantially
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the manner in which it is presently conducted and operated (other
than as contemplated herein) if such failure would materially
adversely affect the Credit Agreement Creditors; provided,
however, that the activities of Holdings shall be limited to (i)
the ownership of the stock of the Borrower together with
activities directly related thereto, (ii) the ownership of the
stock of Unrestricted Subsidiaries described in clause (ii) of
the definition of such term set forth in Section 1.01 together
with activities directly related thereto, (iii) performance of
its obligations under the Loans Documents and (iv) actions
required by law to maintain its status as a public company.
SECTION 6.13. Restrictive Agreements. Enter into any
indenture, agreement, instrument or other arrangement which,
directly or indirectly, prohibits or restrains, or has the effect
of prohibiting or restraining, or imposes materially adverse
conditions upon, the granting of Liens, the provision of
Guarantees or the payment of dividends or the making of loans or
advances or transfers of property or assets by Holdings or any of
the Restricted Subsidiaries other than restrictions (i) on the
granting of Liens on assets that are encumbered by Liens
permitted under clauses (b), (i), (k), (l) or (r) of Section 6.04
or (ii) contained in agreements relating to Indebtedness not in
excess of $10,000,000 in the aggregate.
SECTION 6.14. Interest Coverage Ratio. In the case of
Holdings, permit the Interest Coverage Ratio for any period of
four (or, if less, the number of full fiscal quarters ending
after the Closing Date) consecutive fiscal quarters to be less
than the ratio set forth below opposite the period which includes
the last day of such period of consecutive fiscal quarters:
Period: Amount:
August 1, 1994 - April 30, 1995 3.00 to 1.00
May 1, 1995 - January 31, 1996 3.25 to 1.00
February 1, 1996 - January 31, 1997 3.75 to 1.00
February 1, 1997 - January 31, 1998 4.25 to 1.00
Thereafter 4.75 to 1.00
SECTION 6.15. EBITDA. In the case of Holdings, until such
time as $175,000,000 of the Term Loans and Canadian Term Loans
have permanently and irrevocably been repaid, permit its EBITDA
for any fiscal year to be less than $175,000,000.
SECTION 6.16. Leverage Ratio. In the case of Holdings,
permit the Leverage Ratio as of the last day of any fiscal
quarter occurring during any period set forth below to be greater
than the ratio set forth below for such period:
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Quarter Ending:Ratio:
October 31, 1994 3.75 to 1.00
January 31, 1995 3.50 to 1.00
April 30, 1995 3.50 to 1.00
July 31, 1995 3.50 to 1.00
October 31, 1995 3.25 to 1.00
January 31, 1996 3.25 to 1.00
February 1, 1996 - January 31, 1997 3.00 to 1.00
February 1, 1997 - January 31, 1998 2.75 to 1.00
February 1, 1998 - January 31, 1999 2.50 to 1.00
Thereafter 2.25 to 1.00
SECTION 6.17. Current Ratio. In the case of Holdings,
permit the Current Ratio to be less than 1.25:1.00 on the last
day of any fiscal quarter.
SECTION 6.18. Tax Sharing. File or consent to the filing of
any consolidated income tax return with any person (other than
Holdings, the Restricted Subsidiaries and Unrestricted
Subsidiaries that have entered into the existing Tax Sharing
Agreements).
SECTION 6.19. Significant Subsidiaries. Permit the
Significant Subsidiaries to account for less than 85% of the
consolidated assets of Holdings at any time or 90% of the
consolidated EBITDA of Holdings for any two consecutive periods
of four fiscal quarters.
SECTION 6.20. Inactive Subsidiaries. Permit any Inactive
Subsidiary, at any time, to fail to satisfy any of the criteria
set forth in the definition of Inactive Subsidiary in Section
1.01.
ARTICLE VII.
EVENTS OF DEFAULT
In case of the happening of any of the following events
("Events of Default"):
(a) any representation or warranty made or deemed made
in any Loan Document, or any representation, warranty,
statement or information contained in any report, cer-
tificate, financial statement or other instrument furnished
in connection with or pursuant to any Loan Document, shall
prove to have been false or misleading in any material
respect when so made, deemed made or furnished;
(b) default shall be made in the payment of any
principal of any Loan when and as the same shall become due
and payable, whether at the due date thereof or at a date
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104
fixed for prepayment thereof or by acceleration thereof or
otherwise;
(c) default shall be made in the payment of any
interest on any Loan or reimbursement of any Letter of
Credit Disbursement or any Fee or any other amount (other
than an amount referred to in (b) above) due under any Loan
Document, when and as the same shall become due and payable,
and such default shall continue unremedied for a period of
five Business Days;
(d) default shall be made in the due observance or
performance by the Borrower, the Canadian Borrower or
Holdings or any subsidiary thereof of any covenant,
condition or agreement contained in Section 2.12(e),
5.01(a), 5.05(a), 5.08 or 5.10 or in Article VI;
(e) default shall be made in the due observance or
performance by the Borrower, the Canadian Borrower or
Holdings or subsidiary thereof of any covenant, condition or
agreement contained in any Loan Document (other than those
specified in (b), (c) or (d) above) and such default shall
continue unremedied for a period of 30 days in the case of
Sections 5.01(b), 5.02, 5.09 and 5.13 and 15 days in the
case of all others, in each case after notice thereof from
the Administrative Agent or any Lender to Holdings, the
Canadian Borrower or the Borrower;
(f) Holdings, any Restricted Subsidiary or any
Significant Subsidiary shall (i) fail to pay any principal
or interest, regardless of amount, due in respect of
Indebtedness having an aggregate principal or notional
amount in excess of $7,500,000, when and as the same shall
become due and payable, or (ii) fail to observe or perform
any other term, covenant, condition or agreement contained
in any agreements or instruments evidencing or governing any
Indebtedness having an aggregate principal amount in excess
of $7,500,000 if the effect of any failure referred to in
this clause (ii) is to cause, or to permit the holder or
holders of such Indebtedness or a trustee on its or their
behalf to cause, such Indebtedness to become due prior to
its stated maturity; or a termination event or comparable
event shall occur under the documents governing the
Permitted Receivables Financing entitling the persons
financing the receivables owned by the Finance Subsidiary to
stop funding the purchase of receivables of all sellers of
receivables to the Finance Subsidiary;
(g) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of the Borrower
or Holdings or any Significant Subsidiary, or of a
substantial part of the property or assets of the Borrower
or Holdings or any Significant Subsidiary, under Title 11 of
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105
the United States Code, as now constituted or hereafter
amended, or any other Federal or state bankruptcy,
insolvency, receivership or similar law or comparable
foreign law, (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for
the Borrower or Holdings or any Significant Subsidiary or
for a substantial part of the property or assets of the
Borrower or Holdings or any Significant Subsidiary or (iii)
the winding-up or liquidation of the Borrower or Holdings or
any Significant Subsidiary; and such proceeding or petition
shall continue undismissed for 60 days or an order or decree
approving or ordering any of the foregoing shall be entered;
(h) the Borrower or Holdings or any Significant
Subsidiary shall (i) voluntarily commence any proceeding or
file any petition seeking relief under Title 11 of the
United States Code, as now constituted or hereafter amended,
or any other Federal or state bankruptcy, insolvency,
receivership or similar law or comparable foreign law, (ii)
consent to the institution of, or fail to contest in a
timely and appropriate manner, any proceeding or the filing
of any petition described in (g) above, (iii) apply for or
consent to the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for
the Borrower or Holdings or any Significant Subsidiary or
for a substantial part of the property or assets of the
Borrower or Holdings or any Significant Subsidiary, (iv)
file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors, (vi) become
unable, admit in writing its inability or fail generally to
pay its debts as they become due or (vii) take any action
for the purpose of effecting any of the foregoing;
(i) one or more judgments for the payment of money in
an aggregate amount in excess of $7,500,000 (to the extent
not covered by insurance) shall be rendered against
Holdings, any Restricted Subsidiary or any Significant
Subsidiary or any combination thereof and the same shall
remain undischarged or stayed for a period of 30 consecutive
days during which execution shall not be effectively stayed,
or any action shall be legally taken by a judgment creditor
to levy upon assets or properties of Holdings or any
Restricted Subsidiary to enforce any such judgment;
(j) a Reportable Event or Reportable Events, or a
failure to make a required installment or other payment
(within the meaning of Section 412(n)(1) of the Code), shall
have occurred with respect to any Plan or Plans that
reasonably could be expected to result in liability of the
Borrower, any Guarantor or any of their ERISA Affiliates to
the PBGC or to a Plan in an aggregate amount exceeding
$5,000,000 and, within 30 days after the reporting of any
such Reportable Event to the Administrative Agent or after
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the receipt by the Administrative Agent of the statement
required pursuant to Section 5.06(b)(iii), the
Administrative Agent shall have notified the Borrower in
writing that (i) the Required Lenders have made a
determination that, on the basis of such Reportable Event or
Reportable Events or the failure to make a required payment,
there are reasonable grounds (A) for the termination of such
Plan or Plans by the PBGC, (B) for the appointment by the
appropriate United States District Court of a trustee to
administer such Plan or Plans or (C) for the imposition of a
lien in favor of a Plan and (ii) as a result thereof an
Event of Default exists hereunder; or a trustee shall be
appointed by a United States District Court to administer
any such Plan or Plans; or the PBGC shall institute
proceedings to terminate any Plan or Plans;
(k) (i) the Borrower, any Guarantor or any of their
ERISA Affiliates shall have been notified by the sponsor of
a Multiemployer Plan that it has incurred Withdrawal
Liability to such Multiemployer Plan, (ii) the Borrower, any
Guarantor or such ERISA Affiliate does not have reasonable
grounds for contesting such Withdrawal Liability or is not
in fact contesting such Withdrawal Liability in a timely and
appropriate manner and (iii) the amount of the Withdrawal
Liability specified in such notice, when aggregated with all
other amounts required to be paid to Multiemployer Plans in
connection with Withdrawal Liabilities (determined as of the
date or dates of such notification), exceeds $7,500,000 or
requires payments exceeding $7,500,000 in any year;
(l) the Borrower, any Guarantor or any of their ERISA
Affiliates shall have been notified by the sponsor of a
Multiemployer Plan that such Multiemployer Plan is in
reorganization or is being terminated, within the meaning of
Title IV of ERISA, if solely as a result of such
reorganization or termination the aggregate annual
contributions of the Borrower, the Guarantors and their
ERISA Affiliates to all Multiemployer Plans that are then in
reorganization or have been or are being terminated have
been or will be increased over the amounts required to be
contributed to such Multiemployer Plans for their most
recently completed plan years by an amount exceeding
$7,500,000;
(m) there shall have occurred a Change in Control;
(n) (i) any Loan Document shall for any reason be
asserted by Holdings or any of its subsidiaries not to be a
legal, valid and binding obligation of the respective
parties thereto, (ii) any security interest or Lien
purported to be created by the Pledge Agreement and to
extend to assets which are not immaterial to Holdings and
its subsidiaries on a consolidated basis shall for any
reason (except to the extent resulting from the negligent or
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107
wilful failure of the Collateral Agent to retain possession
of the applicable collateral) cease to be, or any security
interest or Lien purported to be created by the Pledge
Agreement and to extend to any assets of Holdings or its
subsidiaries shall for any reason be asserted by Holdings or
any of its subsidiaries not to be, a valid, first priority
perfected security interest (subject to no Liens other than
Liens not prohibited by any applicable provision of the Loan
Documents) in such collateral (other than cash proceeds
which are not identifiable proceeds) or (iii) the
Obligations and the guarantees thereof pursuant to the
Guarantee Agreement shall cease to constitute senior
indebtedness under the subordination provisions of any
document or instrument evidencing any Permitted Subordinated
Indebtedness or such subordination provisions shall be
invalidated or otherwise cease to be a legal, valid and
binding obligation of the parties thereto, enforceable in
accordance with its terms;
(o) any Selling Stockholder shall fail to comply with
any provision of the arrangements described in Section
4.02(s);
(p) the Finance Subsidiary shall engage in any business
or activity other than the purchase of receivables from the
Restricted Subsidiaries and the sale of such receivables and
activities incidental thereto; or
(q) on or prior to the date which is 35 days after the
Closing Date Holdings shall not have received as gross
proceeds from the sale of Holdings Common Stock after the
Closing Date to Blackstone and WP or to other persons an
amount equal to the excess, if any, of (i) $250,000,000
over (ii) the aggregate gross proceeds from the issuance by
Holdings of its Common Stock in the Public Offering and the
Private Placement (with the result that the gross proceeds
received by Holdings from the issuance of its Common Stock
in the Public Offering and the Private Placement equal at
least $250,000,000);
then, and in every such event (other than an event with respect
to the Borrower or the Canadian Borrower described in paragraph
(g) or (h) above), and at any time thereafter during the
continuance of such event, the Administrative Agent may, and at
the request of the Required Lenders, shall, by notice to the
Borrower and the Canadian Borrower, take either or both of the
following actions, at the same or different times: (i) terminate
forthwith the Commitments and (ii) declare the Loans then
outstanding to be forthwith due and payable in whole or in part,
whereupon the principal of the Loans so declared to be due and
payable, together with accrued interest thereon and any unpaid
accrued Fees and all other liabilities of the Borrower and the
Canadian Borrower accrued hereunder and under any other Loan
Document, shall become forthwith due and payable, without
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108
presentment, demand, protest or any other notice of any kind, all
of which are hereby expressly waived by the Borrower and the
Canadian Borrower, anything contained herein or in any other Loan
Document to the contrary notwithstanding; and in any event with
respect to the Borrower or the Canadian Borrower described in
paragraph (g) or (h) above, the Commitments shall automatically
terminate and the principal of the Loans then outstanding,
together with accrued interest thereon and any unpaid accrued
Fees and all other liabilities of the Borrower and the Canadian
Borrower accrued hereunder and under any other Loan Document,
shall automatically become due and payable, without presentment,
demand, protest or any other notice of any kind, all of which are
hereby expressly waived by the Borrower and the Canadian
Borrower, anything contained herein or in any other Loan Document
to the contrary notwithstanding.
ARTICLE VIII.
THE ADMINISTRATIVE AGENT
In order to expedite the transactions contemplated by this
Agreement, Chemical Bank is hereby appointed to act as
Administrative Agent and Collateral Agent on behalf of the
Lenders and the Issuing Banks. Each of the Lenders, and each
subsequent holder of any Note by its acceptance thereof, and each
Issuing Bank hereby irrevocably authorizes the Administrative
Agent to take such actions on behalf of such Lender or holder or
the Issuing Bank, as applicable, and to exercise such powers as
are specifically delegated to the Administrative Agent by the
terms and provisions hereof and of the other Loan Documents
(including the power to execute and deliver the Intercreditor
Agreement if and when requested to do so by any holders of any
Permitted Acquisition Indebtedness), together with such actions
and powers as are reasonably incidental thereto. The
Administrative Agent is hereby expressly authorized by the
Lenders and the Issuing Banks, without hereby limiting any
implied authority, (a) to receive on behalf of the Lenders all
payments of principal of and interest on the Loans and all other
amounts due to the Lenders hereunder, and promptly to distribute
to each Lender its proper share of each payment so received; (b)
to give notice on behalf of each of the Lenders to the Borrower
or the Canadian Borrower of any Event of Default specified in
this Agreement of which the Administrative Agent has actual
knowledge acquired in connection with its agency hereunder; and
(c) to distribute to each Lender and Issuing Bank copies of all
notices, financial statements and other materials delivered by
the Borrower or the Canadian Borrower pursuant to this Agreement
as received by the Administrative Agent. In acting as Collateral
Agent Chemical Bank shall be entitled to the rights and benefits,
and subject to the obligations, set forth for the Administrative
Agent under this Article VII, mutatis mutandis, which Article is
hereby incorporated by reference, mutatis mutandis, in each of
the Guarantee Agreement and the Pledge Agreement.
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109
Neither the Administrative Agent nor any Issuing Bank nor
any of their respective affiliates, directors, officers,
employees or agents shall be liable as such for any action taken
or omitted by any of them except for its or his own gross
negligence or wilful misconduct, or be responsible for any
statement, warranty or representation herein or the contents of
any document delivered in connection herewith, or be required to
ascertain or to make any inquiry concerning the performance or
observance by the Borrower or the Canadian Borrower or any
Guarantor of any of the terms, conditions, covenants or
agreements contained in any Loan Documents. The Administrative
Agent shall not be responsible to the Lenders or the holders of
the Notes or the Issuing Bank for the due execution (other than
by the Administrative Agent), genuineness, validity,
enforceability (other than against the Administrative Agent) or
effectiveness of this Agreement, the Notes or any other Loan
Documents or other instruments or agreements. The Administrative
Agent may deem and treat the payee of any Note as the owner
thereof for all purposes hereof until it shall have received from
the payee of such Note notice, given as provided herein, of the
transfer thereof in compliance with Section 9.04. The
Administrative Agent shall in all cases be fully protected in
acting, or refraining from acting, in accordance with written
instructions signed by the Required Lenders (and the Issuing
Banks, with respect to Letters of Credit) and, except as
otherwise specifically provided herein, such instructions and any
action or inaction pursuant thereto shall be binding on all the
Lenders and each subsequent holder of any Note and the Issuing
Banks. The Administrative Agent shall, in the absence of
knowledge to the contrary, be entitled to rely on any instrument
or document believed by it in good faith to be genuine and
correct and to have been signed or sent by the proper person or
persons. Neither the Administrative Agent nor the Issuing Banks
nor any of their respective directors, officers, employees or
agents shall have any responsibility to the Borrower or the
Canadian Borrower on account of the failure of or delay in
performance or breach by any Lender (or, in the case of the
Administrative Agent, by any Issuing Bank) of any of its
obligations hereunder or to any Lender (or, in the case of the
Administrative Agent, to any Issuing Bank) on account of the
failure of or delay in performance or breach by any other Lender
or the Borrower, the Canadian Borrower or any Guarantor of any of
their respective obligations hereunder or under any other Loan
Document or in connection herewith or therewith. Each of the
Administrative Agent and each Issuing Bank may execute any and
all duties hereunder by or through agents or affiliates and shall
be entitled to rely upon the advice of legal counsel selected by
it with respect to all matters arising hereunder and shall not be
liable for any action taken or suffered in good faith by it in
accordance with the advice of such counsel.
The Lenders hereby acknowledge that neither the
Administrative Agent nor any Issuing Bank shall be under any duty
to take any discretionary action permitted to be taken by it
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110
pursuant to the provisions of this Agreement unless it shall be
requested in writing to do so by the Required Lenders.
Subject to the appointment and acceptance of a successor
Administrative Agent as provided below, the Administrative Agent
may resign at any time by notifying the Lenders, the Issuing
Bank, the Canadian Borrower and the Borrower. Upon any such
resignation, the Required Lenders shall have the right to appoint
a successor, with the consent of the Borrower (not to be
unreasonably withheld). If no successor shall have been so
appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative
Agent gives notice of its resignation, then the retiring
Administrative Agent may, on behalf of the Lenders, appoint a
successor Administrative Agent, with the consent of the Borrower
(not to be unreasonably withheld), which shall be a bank with an
office in New York, New York, having a combined capital and
surplus of at least $500,000,000 or an Affiliate of any such bank
which is also a bank. Upon the acceptance of any appointment as
Administrative Agent hereunder by a successor bank, such
successor shall succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Administrative
Agent and the retiring Administrative Agent shall be discharged
from its duties and obligations hereunder. After the
Administrative Agent's resignation hereunder, the provisions of
this Article and Section 9.05 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by
it while it was acting as Administrative Agent.
With respect to the Loans made by it hereunder and the Notes
issued to it and the Letter of Credit
participations acquired by it, each of the Administrative Agent
and each Issuing Bank in its individual capacity and not as
Administrative Agent or Issuing Bank, as the case may be, shall
have the same rights and powers as any other Lender and may
exercise the same as though it were not the Administrative Agent
or an Issuing Bank, as the case may be, and the Administrative
Agent and its Affiliates and each Issuing Bank and its Affiliates
may accept deposits from, lend money to and generally engage in
any kind of business with the Borrower, the Canadian Borrower or
any subsidiary or other Affiliate thereof as if it were not the
Administrative Agent or an Issuing Bank, as the case may be.
Each Lender recognizes that applicable laws, rules,
regulations or guidelines of Governmental Authorities may require
the Administrative Agent to determine whether the transactions
contemplated hereby should be classified as "highly leveraged" or
assigned any similar or successor classification, and that such
determination may be binding upon the other Lenders. Each Lender
understands that any such determination shall be made solely by
the Administrative Agent based upon such factors (which may
include, without limitation, the Administrative Agent's internal
policies and prevailing market practices) as the Administrative
Agent shall deem relevant and agrees that the Administrative
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111
Agent shall have no liability for the consequences of any such
determination.
Each Lender agrees (i) to reimburse each of the
Administrative Agent and, if such Lender is a Revolving Lender,
each Issuing Bank, on demand, in the amount of its pro rata share
(based on its Commitments hereunder or its Revolving Credit
Commitment, if any, in the case of reimbursement of any Issuing
Bank) of any reasonable expenses incurred for the benefit of the
Lenders by the Administrative Agent or, if applicable, such
Issuing Bank, including counsel fees and compensation of agents
and employees paid for services rendered on behalf of the
Lenders, which shall not have been reimbursed by the Borrower and
(ii) to indemnify and hold harmless each of the Administrative
Agent and, if such Lender is a Revolving Lender, each Issuing
Bank and any of their respective directors, officers, employees
or agents, on demand, in the amount of such pro rata share, from
and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be
imposed on, incurred by or asserted against it in its capacity as
the Administrative Agent or an Issuing Bank, as the case may be,
or any of them in any way relating to or arising out of this
Agreement or any other Loan Document or any action taken or
omitted by it or any of them under this Agreement or any other
Loan Document, to the extent the same shall not have been
reimbursed by the Borrower or the Canadian Borrower; provided
that no Lender shall be liable to the Administrative Agent or any
Issuing Bank for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the gross negligence or
wilful misconduct of the Administrative Agent or such Issuing
Bank, as the case may be, or any of their directors, officers,
employees or agents.
Each Lender acknowledges that it has, independently and
without reliance upon the Administrative Agent, any Issuing Bank
or any other Lender and based on such documents and information
as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance
upon the Administrative Agent, any Issuing Bank or any other
Lender and based on such documents and information as it shall
from time to time deem appropriate, continue to make its own
decisions in taking or not taking action under or based upon this
Agreement or any other Loan Document, any related agreement or
any document furnished hereunder or thereunder.
The Managing Agents shall have no rights or duties except as
expressly set forth in this Agreement. The Lead Managers shall
have no rights or duties under the Loan Documents.
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112
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01. Notices. Notices and other communications
provided for herein shall be in writing and shall be delivered by
hand or overnight courier service, mailed or sent by telex or
telecopy, as follows:
(a) if to Holdings or to the Borrower, to it at 701
McCullough Drive, Charlotte, North Carolina 28262, Attention
of Chief Financial Officer (Telecopy No. 704-548-2330) with
copies to 210 Madison Avenue, 6th Floor, New York, New York
10016, Attention of General Counsel (Telecopy No.
212-578-1269);
(b) if to the Canadian Borrower, to it at 150 Collins
Street, Farnham, Quebec, J2N 2R6, Canada, Attention
Controller (Telecopy No. 514-293-6657) with copies to the
Borrower, Attention of Chief Financial Officer (Telecopy No.
704-548-2330) and Elizabeth R. Phillipp (Telecopy No. 212-
578-1269);
(c) if to the Administrative Agent, to it at 270 Park
Avenue (10th Floor), New York, New York 10017, Attention of
Susan Kjorlien (Telecopy No. 212-270-3277);
(d) if to a Lender, to it at its address (or telecopy
number) set forth in Schedule 2.01 or in the Assignment and
Acceptance pursuant to which such Lender shall have become a
party hereto.
All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed
to have been given on the date of receipt if delivered by hand or
overnight courier service or sent by telex or telecopy, or on the
date five Business Days after dispatch by certified or registered
mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 9.01 or in
accordance with the latest unrevoked direction from such party
given in accordance with this Section 9.01.
SECTION 9.02. Survival of Agreement. All covenants,
agreements, representations and warranties made by the Borrower,
the Canadian Borrower and the Guarantors herein and in the
certificates or other instruments prepared or delivered in
connection with or pursuant to this Agreement or any other Loan
Document shall be considered to have been relied upon by the
Lenders and shall survive the making by the Lenders of the Loans,
and the execution and delivery to the Lenders of the Notes
evidencing such Loans, and the issuance of the Letters of Credit,
regardless of any investigation made by the Lenders or on their
behalf, and shall continue in full force and effect as long as
the principal of or any accrued interest on any Loan or any Fee
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113
or any other amount payable under this Agreement or any other
Loan Document is outstanding and unpaid and so long as the
Commitments have not been terminated. Without prejudice to the
survival of any other agreements contained herein,
indemnification and reimbursement obligations contained herein
(including pursuant to Sections 2.13, 2.15 and 9.05) shall
survive the payment in full of the principal and interest
hereunder and the termination of the Commitments or this
Agreement.
SECTION 9.03. Binding Effect. This Agreement shall become
effective when it shall have been executed by the Borrower, the
Canadian Borrower, Holdings and the Administrative Agent and when
the Administrative Agent shall have received copies hereof which,
when taken together, bear the signatures of each Lender, and
thereafter shall be binding upon and inure to the benefit of the
Borrower, Holdings, each Issuing Bank, the Administrative Agent
and each Lender and their respective successors and assigns,
except that none of the Borrower, the Canadian Borrower or
Holdings shall have the right to assign its rights hereunder or
any interest herein without the prior consent of all the Lenders.
SECTION 9.04. Successors and Assigns. (a) Whenever in
this Agreement any of the parties hereto is referred to, such
reference shall be deemed to include the successors and assigns
of such party; and all covenants, promises and agreements by or
on behalf of the Borrower, the Canadian Borrower, Holdings, the
Administrative Agent, the Issuing Banks or the Lenders that are
contained in this Agreement shall bind and inure to the benefit
of their respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or
a portion of its interests, rights and obligations under this
Agreement (including all or a portion of its Commitment and the
Loans at the time owing to it and the Notes and participations in
Letters of Credit held by it, it being understood that Lenders
shall not be required to assign pro rata amounts of their
Revolving Credit Commitments, Delayed Draw Term Commitments,
Canadian Term Commitments and Term Commitments); provided,
however, that (i) except in the case of an assignment to a Lender
or an Affiliate of such Lender, the Borrower and the
Administrative Agent must give their prior written consent to
such assignment (which consents shall not be unreasonably
withheld or delayed), (ii) after giving effect to such
assignment, the aggregate amount of the Loans owing to, and the
Letter of Credit Exposure and unused Commitments of, the assignee
and its Affiliates and of the assignor (unless the assignor
ceases to be a Lender) and its Affiliates shall not be less than
10/625ths of the sum of the aggregate amount of outstanding
Loans, the Letter of Credit Exposure and the unused Commitments
at such time, (iii) the parties to each such assignment shall
execute and deliver to the Administrative Agent an Assignment and
Acceptance, together with the Note or Notes subject to such
assignment and a processing and recordation fee of $3,500 and
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114
(iv) the assignee, if it shall not be a Lender, shall deliver to
the Administrative Agent an Administrative Questionnaire. Upon
acceptance and recording pursuant to paragraph (e) of this
Section 9.04, from and after the effective date specified in each
Assignment and Acceptance, which effective date shall be at least
five Business Days after the execution thereof unless agreed
otherwise by the Administrative Agent, (A) the assignee
thereunder shall be a party hereto and, to the extent of the
interest assigned by such Assignment and Acceptance, have the
rights and obligations of a Lender under this Agreement and (B)
the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion
of an assigning Lender's rights and obligations under this
Agreement, such Lender shall cease to be a party hereto but shall
continue to be entitled to the benefits of Sections 2.13, 2.15,
2.18 and 9.05, as well as to any Fees accrued for its account and
not yet paid).
(c) By executing and delivering an Assignment and
Acceptance, the assigning Lender thereunder and the assignee
thereunder shall be deemed to confirm to and agree with each
other and the other parties hereto as follows: (i) such assigning
Lender warrants that it is the legal and beneficial owner of the
interest being assigned thereby free and clear of any adverse
claim and that its Term Loan Commitment, Delayed Draw Term Loan
Commitment, Canadian Term Commitment and Revolving Credit
Commitment, and the outstanding balances of its Term Loans,
Delayed Draw Term Loans, Canadian Term Loans and Revolving Loans,
in each case without giving effect to assignments thereof which
have not become effective, are as set forth in such Assignment
and Acceptance, (ii) except as set forth in (i) above, such
assigning Lender makes no representation or warranty and assumes
no responsibility with respect to any statements, warranties or
representations made in or in connection with this Agreement, or
the execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement, any other Loan Document
or any other instrument or document furnished pursuant hereto, or
the financial condition of the Borrower, the Canadian Borrower or
any Guarantor or the performance or observance by the Borrower,
the Canadian Borrower or any Guarantor of any of its obligations
under this Agreement, any other Loan Document or any other
instrument or document furnished pursuant hereto; (iii) such
assignee represents and warrants that it is legally authorized to
enter into such Assignment and Acceptance; (iv) such assignee
confirms that it has received copies of this Agreement, together
with copies of the most recent financial statements delivered
pursuant to this Agreement and such other documents and
information as it has deemed appropriate to make its own credit
analysis and decision to enter into such Assignment and
Acceptance; (v) such assignee will independently and without
reliance upon the Administrative Agent, any Issuing Bank, such
assigning Lender or any other Lender and based on such documents
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115
and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking
action under this Agreement; (vi) such assignee appoints and
authorizes the Administrative Agent to take such action as agent
on its behalf and to exercise such powers under this Agreement as
are delegated to the Administrative Agent by the terms hereof,
together with such powers as are reasonably incidental thereto;
and (vii) such assignee agrees that it will perform in accordance
with their terms all the obligations which by the terms of this
Agreement are required to be performed by it as a Lender.
(d) The Administrative Agent shall maintain at its address
referred to in subsection 9.01 a copy of each Assignment and
Acceptance delivered to it and a register (the "Register") for
the recordation of the names and addresses of the Lenders and the
Commitments of, and principal amount of the Loans owing to, each
Lender from time to time. The Administrative Agent shall
separately record the names and addresses of each Lender that
holds Notes in the Register. The Administrative Agent shall also
record the amount of the Commitments of, and the aggregate
principal amount of Loans owing to, and the Letter of Credit
Exposure of, such Lender in the Register. The entries in the
Register shall be conclusive, in the absence of manifest error,
and the Borrower, the Canadian Borrower, the Administrative Agent
and the Lenders shall treat each person whose name is recorded in
the Register as the owner of the Notes, the Commitments and the
Loans and Letter of Credit Exposures recorded therein for all
purposes of this Agreement. The Register shall be available for
inspection by the Borrower, the Canadian Borrower the Issuing
Bank and any Lender, at any reasonable time and from time to time
upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and
Acceptance executed by an assigning Lender and an assignee
together with the Note or Notes subject to such assignment, an
Administrative Questionnaire completed in respect of the assignee
(unless the assignee shall already be a Lender hereunder), the
processing and recordation fee referred to in paragraph (b) above
and, if required, the written consent of the Borrower and the
Administrative Agent to such assignment, the Administrative Agent
shall (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give
prompt notice thereof to the Lenders. Within five Business Days
after receipt of notice, the Borrower or the Canadian Borrower,
as the case may be, at its own expense, shall execute and deliver
to the Administrative Agent, in exchange for the surrendered Note
or Notes, a new Note or Notes to the order of such assignee in a
principal amount equal to the applicable Commitment assumed by it
pursuant to such Assignment and Acceptance and, if the assigning
Lender has retained a Commitment, a new Note to the order of such
assigning Lender in a principal amount equal to the applicable
Commitment retained by it. Such new Note or Notes shall be in an
aggregate principal amount equal to the aggregate principal
amount of such surrendered Note; such new Notes shall be dated
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116
the date of the surrendered Notes which they replace and shall
otherwise be in substantially the form of Exhibit A-1, A-2, A-3,
A-4 or A-5 hereto, as appropriate. Canceled Notes shall be
returned to the Borrower or the Canadian Borrower, as the case
may be. Notwithstanding anything to the contrary contained
herein, no assignment under Section 9.04(b) of any rights or
obligations under or in respect of the Notes or Loans evidenced
by the Notes shall be effective unless and until the
Administrative Agent shall have recorded such assignment in the
Register. The Administrative Agent shall record the name of the
transferor, the name of the transferee, and the amount of the
transfer in the Register after receipt of all documents required
pursuant to this Section 9.04, including, without limitation, the
Notes being assigned in connection with such transfer, and such
other documents as the Administrative Agent may reasonably
request.
(f) Each Lender may without the consent of the Borrower,
the Canadian Borrower, any Issuing Bank or the Administrative
Agent sell participations to one or more banks or other entities
in all or a portion of its rights and obligations under this
Agreement (including all or a portion of its Commitment and the
Loans owing to it and the Notes and participations in Letters of
Credit held by it); provided, however, that (i) such Lender's
obligations under this Agreement shall remain unchanged, (ii)
such Lender shall remain solely responsible to the other parties
hereto for the performance of such obligations, (iii) the
participating banks or other entities shall be entitled to the
benefit of the cost protection provisions contained in Sections
2.13, 2.15, 2.18 and 9.06(a) to the same extent as if they were
Lenders, provided, that no such participating bank or entity
shall be entitled to receive any greater amount pursuant to such
Sections than a Lender would have been entitled to receive in
respect of the amount of the participation sold by such Lender to
such participating bank or entity had no sale occurred, and (iv)
the Borrower, the Canadian Borrower, the Administrative Agent,
the Issuing Banks and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement, and such
Lender shall retain the sole right to enforce the obligations of
the Borrower or the Canadian Borrower, as the case may be,
relating to the Loans and participations in Letters of Credit and
to approve any amendment, modification or waiver of any provision
of this Agreement or any other Loan Document (other than
amendments, modifications or waivers decreasing any fees payable
hereunder or the amount of principal of or the rate at which
interest is payable on the Loans, extending any final maturity
date, in each case in respect of an Obligation in which the
relevant participating bank or entity is participating, or
releasing all or substantially all of the Pledged Securities or
any Guarantor from the Guarantee Agreement unless all or
substantially all of the capital stock of such subsidiary is sold
in a transaction permitted by this Agreement). Each Lender will
disclose the identity of its participants to the Borrower and
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Administrative Agent if requested by the Borrower or the
Administrative Agent.
(g) Any Lender or participant may, in connection with any
assignment or participation or proposed assignment or
participation pursuant to this Section 9.04, disclose to the
assignee or participant or proposed assignee or participant any
information relating to the Borrower or the Canadian Borrower
furnished to such Lender by or on behalf of the Borrower or the
Canadian Borrower; provided that, prior to any such disclosure,
each such assignee or participant or proposed assignee or
participant shall execute an agreement whereby such assignee or
participant shall agree to be bound by Section 9.17.
(h) Any Lender may at any time assign all or any portion
of its rights under this Agreement and the Notes issued to it to
a Federal Reserve Bank; provided that no such assignment shall
release a Lender from any of its obligations hereunder.
(i) None of the Borrower, Holdings or the Canadian
Borrower shall assign or delegate any of its rights or duties
hereunder.
SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees
to pay all reasonable out-of-pocket expenses incurred by the
Administrative Agent in connection with the preparation of this
Agreement and the other Loan Documents, or by the Administrative
Agent in connection with the syndication of the Commitments or
the administration of this Agreement, or in connection with any
amendments, modifications or waivers of the provisions hereof or
thereof (whether or not the transactions hereby contemplated
shall be consummated) or incurred by the Administrative Agent or
any Lender in connection with the enforcement or protection of
their rights in connection with this Agreement and the other Loan
Documents or in connection with the Loans made or the Notes
issued hereunder, including the reasonable fees, charges and
disbursements of Simpson Thacher & Bartlett, counsel for the
Administrative Agent, and, in connection with any such
enforcement or protection, the reasonable fees, charges and
disbursements of any other counsel (including the reasonable
allocated costs of internal counsel if a Lender elects to use
internal counsel in lieu of outside counsel) for the
Administrative Agent, any Issuing Bank or any Lender (but no more
than one such counsel for any Lender).
(b) The Borrower agrees to indemnify the Administrative
Agent, each Issuing Bank, each Lender and each of their
respective directors, officers, employees and agents (each such
person being called an "Indemnitee") against, and to hold each
Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable counsel
fees, charges and disbursements, incurred by or asserted against
any Indemnitee arising out of, in any way connected with, or as a
result of (i) the execution or delivery of this Agreement or any
<PAGE>
118
other Loan Document or any agreement or instrument contemplated
thereby, the performance by the parties thereto of their
respective obligations thereunder or the consummation of the
Recapitalization Transactions and the other transactions
contemplated thereby, (ii) the use of the proceeds of the Loans
or the use of any Letter of Credit or (iii) any claim,
litigation, investigation or proceeding relating to any of the
foregoing, whether or not any Indemnitee is a party thereto;
provided that such indemnity shall not, as to any Indemnitee, be
available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment to
have resulted from the gross negligence or wilful misconduct of
such Indemnitee (treating, for this purpose only, any Lender and
its directors, officers, employees and agents as a single
Indemnitee). Subject to and without limiting the generality of
the foregoing sentence, the Borrower agrees to indemnify each
Indemnitee against, and hold each Indemnitee harmless from, any
Environmental Claim, and any and all losses, claims, damages,
liabilities and related expenses, including reasonable counsel or
consultant fees, charges and disbursements, incurred by or
asserted against any Indemnitee (and arising out of, or in any
way connected with or as a result of, any of the events described
in clause (i), (ii) or (iii) of the preceding sentence) arising
out of, in any way connected with, or as a result of (i) any
Environmental Claim, (ii) any violation of any Environmental Law,
or (iii) any act, omission, event or circumstance (including the
actual, proposed or threatened, release, removal, disposition,
discharge or transportation, storage, holding, existence,
generation, processing, abatement, handling or presence on, into,
from or under any present, past or future property of Holdings or
any of its subsidiaries of any Contaminant), regardless of
whether the act, omission, event or circumstance constituted a
violation of Environmental Law at the time of its existence or
occurrence; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such Environmental
Claim is, or such, losses, claims, damages, liabilities or
related expenses are, determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted
from the gross negligence or wilful misconduct of such Indemnitee
or any of its employers, officers, directors, employees or
agents.
(c) The Borrower shall be entitled to assume the defense
of any action for which indemnification is sought hereunder with
counsel of its choice at its expense (in which case the Borrower
shall not thereafter be responsible for the fees and expenses of
any separate counsel retained by an Indemnitee except as set
forth below); provided, however, that such counsel shall be
reasonably satisfactory to each such Indemnitee. Notwithstanding
the Borrower's election to assume the defense of such action,
each Indemnitee shall have the right to employ separate counsel
and to participate in the defense of such action, and the
Borrower shall bear the reasonable fees, costs, and expenses of
<PAGE>
119
such separate counsel, if (i) the use of counsel chosen by the
Borrower to represent such Indemnitee would present such counsel
with a conflict of interest; (ii) the actual or potential
defendants in, or targets of, any such action include both the
Borrower and such Indemnitee and such Indemnitee shall have
reasonably concluded that there may be legal defenses available
to it that are different from or additional to those available to
the Borrower (in which case the Borrower shall not have the right
to assume the defense or such action on behalf of such
Indemnitee); (iii) the Borrower shall not have employed counsel
reasonably satisfactory to such Indemnitee to represent it within
a reasonable time after notice of the institution of such action;
or (iv) the Borrower shall authorize such Indemnitee to employ
separate counsel at the Borrower's expense. The Borrower will
not be liable under this Agreement for any amount paid by an
Indemnitee to settle any claims or actions if the settlement is
entered into without the Borrower's consent, which consent may
not be withheld unless such settlement is unreasonable in light
of such claims or actions against, and defenses available to,
such Indemnitee.
(d) Holdings, the Canadian Borrower and the Borrower shall
not, and shall not permit any of their subsidiaries to, bring any
demand, claim, cost recovery or other action they may now or
hereafter have against any Indemnitee resulting from any
Environmental Claim; provided that this paragraph (d) shall not,
as to any Indemnitee, apply to the extent that such Environmental
Claim has been determined by a court of competent jurisdiction by
final and nonappealable judgment to have resulted from the gross
negligence or wilful misconduct of such Indemnitee or any of its
employers, directors, officers, employees or agents.
(e) Notwithstanding anything to the contrary in this
Section 9.05, this Section 9.05 shall not apply to taxes, it
being understood that the Borrower's only obligations with
respect to taxes shall arise under Sections 2.13 and 2.18 and
Section 19 of the Guarantee Agreement.
(f) The provisions of this Section 9.05 shall remain
operative and in full force and effect regardless of the
expiration of the term of this Agreement, the consummation of the
transactions contemplated hereby, the repayment of any of the
Obligations, the invalidity or unenforceability of any term or
provision of this Agreement or any other Loan Document, or any
investigation made by or on behalf of the Administrative Agent,
any Issuing Bank or any Lender. All amounts due under this
Section 9.05 shall be payable on written demand therefor.
SECTION 9.06. Right of Setoff; Sharing. (a) If an Event
of Default shall have occurred and be continuing, each Lender
(including each Issuing Bank) is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to
set off and apply any and all deposits (general or special, time
or demand, provisional or final) at any time held and other
<PAGE>
120
indebtedness at any time owing by such Lender to or for the
credit or the account of the Borrower or the Canadian Borrower
against any of and all the obligations of the Borrower or the
Canadian Borrower now or hereafter existing under this Agreement
and other Loan Documents held by such Lender, irrespective of
whether or not such Lender shall have made any demand under this
Agreement or such other Loan Document and although such
obligations may be unmatured. The rights of each Lender under
this Section are in addition to other rights and remedies
(including other rights of setoff) which such Lender may have.
(b) If any Lender (a "benefitted Lender") shall at any
time receive any payment of all or part of its Loans or interest
in Letters of Credit, or interest thereon, then due, or receive
any collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of
the nature referred to in paragraph (g) or (h) of Article VII, or
otherwise), in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of
such other Lender's Loans and interests in Letters of Credit, or
interest thereon, then due, such benefitted Lender shall purchase
for cash from the other Lenders a participating interest in such
portion of each such other Lender's Loans and interests in
Letters of Credit, or shall provide such other Lenders with the
benefits of any such collateral, or the proceeds thereof, as
shall be necessary to cause such benefitted Lender to share the
excess payment or benefits of such collateral or proceeds ratably
with each of the Lenders; provided, however, that if all or any
portion of such excess payment or benefits is thereafter
recovered from such benefitted Lender, such purchase shall be
rescinded, and the purchase price and benefits returned, to the
extent of such recovery, but without interest.
SECTION 9.07. Applicable Law. THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAWS OF THE STATE OF NEW YORK.
SECTION 9.08. Waivers; Amendment. (a) No failure or delay
of the Administrative Agent, the Issuing Bank or any Lender in
exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such
right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further
exercise thereof or the exercise of any other right or power.
The rights and remedies of the Administrative Agent, the Issuing
Banks and the Lenders hereunder and under the other Loan
Documents are cumulative and are not exclusive of any rights or
remedies which they would otherwise have. No waiver of any
provision of this Agreement or any other Loan Document or consent
to any departure by the Borrower, the Canadian Borrower or
Holdings therefrom shall in any event be effective unless the
same shall be permitted by paragraph (b) below, and then such
waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice or
<PAGE>
121
demand on the Borrower, the Canadian Borrower or Holdings in any
case shall entitle the Borrower to any other or further notice or
demand in similar or other circumstances.
(b) Neither this Agreement nor any provision hereof may be
waived, amended or modified except pursuant to an agreement or
agreements in writing entered into by the Borrower, the Canadian
Borrower and the Required Lenders; provided, however, that no
such agreement shall (i) decrease the principal amount of, or
extend the final maturity of, or waive or excuse any such payment
or any part thereof, or decrease the rate of interest on any Loan
or any Letter of Credit Disbursement, without the prior written
consent of each Lender affected thereby, (ii) extend any Term
Loan Repayment Date or Delayed Draw Term Loan Repayment Date or
Canadian Term Loan Repayment Date (other than, in each case,
final maturity) or any other date on which principal of the Loans
is due, or extend any date on which payment of interest on any
Loan or reimbursement of any Letter of Credit Disbursement is
due, without the prior written consent of (A) in the case of Term
Loans, Canadian Term Loans or Delayed Draw Terms Loans, Lenders
with Term Loans, Canadian Term Loans or Delayed Draw Term Loans,
as the case may be, representing at least 80% of the aggregate
principal amount of the Term Loans, Canadian Term Loans and
Delayed Draw Term Loans then outstanding or (B) in the case of
Loans under the Revolving Credit Commitments and Letter of Credit
Disbursements, Lenders with Revolving Credit Commitments
representing at least 80% of the aggregate Revolving Credit
Commitments then in effect, (iii) increase or extend the
Commitment or decrease the Commitment Fees or Letter of Credit
Fees or other fees of any Lender without the prior written
consent of such Lender, or (iv) amend or modify the provisions of
Section 2.09(c) or 2.16, the provisions of this Section or the
definition of "Required Lenders", or release substantially all
the Pledged Securities from the Lien of the Pledge Agreement or
release any Guarantor from the Guarantee Agreement unless all or
substantially all of the capital stock of such subsidiary is sold
in a transaction permitted by this Agreement, without the prior
written consent of each Lender or (v) waive, amend or modify paragraph
(q) of Article VII without the prior written consent of each Lender;
provided further that no such agreement shall amend, modify or
otherwise affect the rights or duties of the Administrative Agent
or the Issuing Banks hereunder without the prior written consent of
the Administrative Agent or the Issuing Banks acting as such at the
effective date of such agreement, as the case may be. Each Lender
and each holder of a Note shall be bound by any waiver, amendment or
modification authorized by this Section regardless of whether its Note
shall have been marked to make reference thereto, and any consent by
any Lender or holder of a Note pursuant to this Section shall
bind any person subsequently acquiring a Note from it, whether or
not such Note shall have been so marked.
SECTION 9.09. Interest Rate Limitation. Notwithstanding
anything herein or in the Notes to the contrary, if at any time
the applicable interest rate, together with all fees and charges
which are treated as interest under applicable law (collectively
<PAGE>
122
the "Charges"), as provided for herein or in any other document
executed in connection herewith, or otherwise contracted for,
charged, received, taken or reserved by any Lender, shall exceed
the maximum lawful rate (the "Maximum Rate") which may be
contracted for, charged, taken, received or reserved by such
Lender in accordance with applicable law, the rate of interest
payable under the Note held by such Lender, together with all
Charges payable to such Lender, shall be limited to the Maximum
Rate, provided that such excess amount shall be paid to such
Lender on the subsequent payment dates to the extent not
exceeding the legal limitation.
SECTION 9.10. Entire Agreement. This Agreement, the other
Loan Documents and the agreements regarding certain Fees referred
to herein constitute the entire contract between the parties
relative to the subject matter hereof. Any previous agreement
among or representations from the parties with respect to the
subject matter hereof is superseded by this Agreement and the
other Loan Documents. Nothing in this Agreement or in the other
Loan Documents, expressed or implied, is intended to confer upon
any party other than the parties hereto and thereto any rights,
remedies, obligations or liabilities under or by reason of this
Agreement or the other Loan Documents.
SECTION 9.11. Waiver of Jury Trial. Each party hereto
hereby waives, to the fullest extent permitted by applicable law,
any right it may have to a trial by jury in respect of any
litigation directly or indirectly arising out of, under or in
connection with this Agreement or any of the other Loan
Documents. Each party hereto (a) certifies that no
representative, agent or attorney of any other party has
represented, expressly or otherwise, that such other party would
not, in the event of litigation, seek to enforce the foregoing
waiver and (b) acknowledges that it and the other parties hereto
have been induced to enter into this Agreement and the other Loan
Documents, as applicable, by, among other things, the mutual
waivers and certifications in this Section 9.11.
SECTION 9.12. Severability. In the event any one or more
of the provisions contained in this Agreement or in any other
Loan Document should be held invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the
remaining provisions contained herein and therein shall not in
any way be affected or impaired thereby. The parties shall
endeavor in good-faith negotiations to replace the invalid,
illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of
the invalid, illegal or unenforceable provisions.
SECTION 9.13. Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall constitute an
original but all of which when taken together shall constitute
but one contract, and shall become effective as provided in
Section 9.03.
<PAGE>
123
SECTION 9.14. Headings. Article and Section headings and
the Table of Contents used herein are for convenience of
reference only, are not part of this Agreement and are not to
affect the construction of, or to be taken into consideration in
interpreting, this Agreement.
SECTION 9.15. Jurisdiction; Consent to Service of Process.
(a) Each of the Borrower, the Canadian Borrower and Holdings
hereby irrevocably and unconditionally submits, for itself and
its property, to the nonexclusive jurisdiction of any New York
State court or Federal court of the United States of America
sitting in New York City, and any appellate court from any
thereof, in any action or proceeding arising out of or relating
to this Agreement or the other Loan Documents, or for recognition
or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by
law, in such Federal court. Each of the parties hereto agrees
that a final judgment in any such action or proceeding shall be
conclusive and may be enforced in other jurisdictions by suit on
the judgment or in any other manner provided by law. Nothing in
this Agreement shall affect any right that any Lender may
otherwise have to bring any action or proceeding relating to this
Agreement or the other Loan Documents against the Borrower or
Holdings or their properties in the courts of any jurisdiction.
(b) Each of the Borrower, the Canadian Borrower and
Holdings hereby irrevocably and unconditionally waives, to the
fullest extent they may legally and effectively do so, any
objection which it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or
relating to this Agreement or the other Loan Documents in any New
York State or Federal court. Each of the parties hereto hereby
irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such
action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section
9.01. Nothing in this Agreement will affect the right of any
party to this Agreement to serve process in any other manner
permitted by law.
SECTION 9.16. Conversion of Currencies. (a) If, for the
purpose of obtaining judgment in any court, it is necessary to
convert a sum due hereunder or under any other Loan Document in
dollars into another currency, the parties hereto agree, to the
fullest extent that they may legally and effectively do so, that
the rate of exchange used shall be that at which in accordance
with normal banking procedures the Administrative Agent could
purchase dollars with such other currency in New York, New York,
on the Business Day immediately preceding the day on which final
judgment is given.
<PAGE>
124
(b) The obligation of each of the Borrower and the
Canadian Borrower in respect of any sum due to the Administrative
Agent, any Lender or any Issuing Bank hereunder or under any
other Loan Document in US dollars shall, to the extent permitted
by applicable law, notwithstanding any judgment in a currency
other than US dollars, be discharged only to the extent that on
the Business Day following receipt of any sum adjudged to be so
due in the judgment currency the Administrative Agent, such
Lender or such Issuing Bank may in accordance with normal banking
procedures purchase US dollars in the amount originally due to
the Administrative Agent, such Lender or such Issuing Bank with
the judgment currency. If the amount of US dollars so purchased
is less than the sum originally due to the Administrative Agent,
such Lender or such Issuing Bank, the Borrower agrees, as a
separate obligation and notwithstanding any such judgment, to
indemnify the Administrative Agent, such Lender or such Issuing
Bank against the resulting loss.
SECTION 9.17. Confidentiality. Each of the Lenders, the
Issuing Banks and the Administrative Agent agrees that it shall
maintain in confidence any information relating to the Borrower
and the Canadian Borrower furnished to it by or on behalf of the
Borrower or the Canadian Borrower (other than information that
(x) has become generally available to the public other than as a
result of a disclosure by such party, (y) has been independently
developed by such party without violating this Section or (z) was
available to such party from a third party having, to such
party's knowledge, no obligation of confidentiality to the
Borrower or the Canadian Borrower) and shall not reveal the same
other than (i) to its directors, officers, employees and advisors
with a need to know and (ii) as contemplated by Section 9.04(g),
except: (a) to the extent necessary to comply with law or any
legal process or the requirements of any Governmental Authority
or of any securities exchange on which securities of the
disclosing party or any Affiliate of the disclosing party are
listed or traded, (b) as part of normal reporting or review
procedures to Governmental Authorities or its parent companies,
Affiliates or auditors and (c) in order to enforce its rights
under any Loan Document in a legal proceeding.
IN WITNESS WHEREOF, the Borrower, the Canadian Borrower
Holdings, the Administrative Agent, and the Lenders have caused
this Agreement to be duly executed by their respective authorized
officers as of the day and year first above written.
COLLINS & AIKMAN PRODUCTS CO.
by
--------------------------
Name:
Title:
<PAGE>
125
COLLINS & AIKMAN CORPORATION
by
--------------------------
Name:
Title:
WCA CANADA INC.
by
---------------------------
Name:
Title:
CHEMICAL BANK, as
Administrative Agent
and Collateral Agent and as
a Lender
by
--------------------------
Name:
Title:
CONTINENTAL BANK, N.A., as
Managing Agent
and as a Lender
by
--------------------------
Name:
Title:
<PAGE>
126
NATIONSBANK, N.A., as Managing
Agent
and as a Lender
by
--------------------------
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
& SAVINGS
ASSOCIATION, as Lead Manager
and as a Lender
by
--------------------------
Name:
Title:
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH, as Lead Manager and
as a Lender
by
--------------------------
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN,
LTD.,
as Lead Manager and as a
Lender
by
--------------------------
Name:
Title:
<PAGE>
127
THE LONG-TERM CREDIT BANK OF
JAPAN,
LTD., as Lead Manager and as
a Lender
by
--------------------------
Name:
Title:
THE TORONTO-DOMINION BANK,
as Lead Manager and as a
Lender
by
--------------------------
Name:
Title:
THE FIRST NATIONAL BANK OF
BOSTON,
as a Lender
by
--------------------------
Name:
Title:
BANK OF SCOTLAND, as a Lender
by
--------------------------
Name:
Title:
THE BANK OF TOKYO TRUST
COMPANY,
as a Lender
by
--------------------------
Name:
Title:
<PAGE>
128
BANQUE PARIBAS, as a Lender
by
--------------------------
Name:
Title:
BARCLAYS BANK PLC, as a Lender
by
--------------------------
Name:
Title:
BRANCH BANKING AND TRUST
COMPANY,
as a Lender
by
--------------------------
Name:
Title:
CIBC Inc., as a Lender
by
--------------------------
Name:
Title:
COMPAGNIE FINANCIERE DE CIC ET
DE
L'UNION EUROPEENE, as a
Lender
by
--------------------------
Name:
Title:
THE NIPPON CREDIT BANK, LTD.,
as a Lender
by
--------------------------
Name:
Title:
<PAGE>
129
SOCIETE GENERALE, as a Lender
by
--------------------------
Name:
Title:
SOCIETY NATIONAL BANK, as a
Lender
by
--------------------------
Name:
Title:
THE TRAVELERS INSURANCE
COMPANY,
as a Lender
by
--------------------------
Name:
Title:
THE TRAVELERS INDEMNITY
COMPANY
by
--------------------------
Name:
Title:
WACHOVIA BANK OF NORTH
CAROLINA,
N.A., as a Lender
by
--------------------------
Name:
Title:
WELLS FARGO BANK, as a Lender
by
--------------------------
Name:
Title:
<PAGE>
130
VAN KAMPEN MERRIT PRIME RATE
INCOME
TRUST, as a Lender
by
--------------------------
Name:
Title:
ARAB BANKING CORPORATION, as a
Lender
by
--------------------------
Name:
Title:
BANK OF IRELAND
Cayman Branch, as a Lender
by
--------------------------
Name:
Title:
THE BANK OF NEW YORK, as a
Lender
by
--------------------------
Name:
Title:
CREDITANSTALT CORPORATE
FINANCE, INC.,
as a Lender
by
--------------------------
Name:
Title:
by
--------------------------
Name:
Title:
<PAGE>
131
CRESTAR BANK, as a Lender
by
--------------------------
Name:
Title:
FIRST UNION NATIONAL BANK OF
NORTH
CAROLINA, as a Lender
by
--------------------------
Name:
Title:
FUJI BANK, as a Lender
by
--------------------------
Name:
Title:
GIROCREDIT BANK, as a Lender
by
--------------------------
Name:
Title:
MIDLAND BANK, as a Lender
by
--------------------------
Name:
Title:
THE MITSUBISHI TRUST AND
BANKING
CORPORATION, as a Lender
by
--------------------------
Name:
Title:
<PAGE>
132
NATIONAL CITY BANK, as a
Lender
by
--------------------------
Name:
Title:
NBD BANK, N.A., as a Lender
by
--------------------------
Name:
Title:
THE SUMITOMO TRUST & BANKING
CO., LTD.
New York Branch, as a Lender
by
--------------------------
Name:
Title:
UNITED STATES NATIONAL BANK OF
OREGON, as a
Lender
by
--------------------------
Name:
Title:
THE YASUDA TRUST & BANKING
CO., LTD.,
as a Lender
by
--------------------------
Name:
Title:
CRESCENT/MACH 1 PARTNERS, L.P.
By its General Partner
CRESCENT MACH 1 G.P.
CORPORATION
<PAGE>
133
By its attorney-in-fact
CRESCENT CAPITAL CORPORATION
by
--------------------------
Name:
Title:
<PAGE>
SCHEDULE 1.01(A) TO
CREDIT AGREEMENT
Applicable Margin
Eurodollar
Ratios Loan Margin ABR Loan Margin
------ --------------- ---------------
Leverage Ratio 1-3/4% 3/4% of 1%
greater than 2.75:1
or
Interest Coverage
Ratio less than 4.00
("Level I")
Leverage Ratio less 1-1/2% 1/2 of 1%
than or equal to
2.75:1
and
Interest Coverage
Ratio greater than
or equal to 4.00
("Level II")
Leverage Ratio less 1-1/4% 1/4 of 1%
than or equal to
2.25:1
and
Interest Coverage
Ratio greater than
5.75:1 ("Level III")
Leverage Ratio less 1% 0%
than or equal to
2.00:1
and
Interest Coverage
Ratio greater than
or equal to 6.75:1
("Level IV")
For purposes of the foregoing, the Applicable Margin for any
date shall be determined by reference to the Leverage Ratio
and Interest Coverage Ratio as of the last day of the
Borrower's fiscal quarter most recently ended as of such date
and any change in the Applicable Margin shall become
effective upon the delivery to the Administrative Agent of a
certificate of a Responsible Officer of the Borrower (which
certificate may be delivered prior to delivery of the
relevant financial statements) with respect to the financial
statements to be delivered, pursuant to Section 5.04 for the
<PAGE>
2
most recently ended fiscal quarter (a) setting forth in
reasonable detail the calculation of the Interest Coverage
Ratio and Leverage Ratio for and at the end of such fiscal
quarter and (b) stating that the signer has reviewed the
terms of this Agreement and other Loan Documents and has
made, or caused to be made under his or her supervision, a
review in reasonable detail of the transactions and condition
of Holdings and its Subsidiaries during the accounting
period, and that the signer does not have knowledge of the
existence as at the date of such officers' certificate of any
Event of Default or Default and shall apply (i) to ABR Loans
outstanding on such delivery date or made on and after such
delivery date and (ii) to Eurodollar Loans made on and after
such delivery date; provided, however, that if the proceeds
of such Loans are used to finance a Permitted Business
Acquisition, and either the Leverage Ratio or Interest
Coverage Ratio, after giving effect to such Permitted
Business Acquisition on a pro forma basis, would result in a
change in the Applicable Margin, such change shall become
effective for all purposes simultaneously with the making of
such Loans and shall apply (i) to ABR Loans outstanding on
such date or made on or after such date and (ii) to
Eurodollar Loans made on or after such date. It is
understood that the foregoing certificate of a Responsible
Officer shall be permitted to be delivered prior to, but in
no event later than, the time of the actual delivery of the
financial statements required to be delivered pursuant to
Section 5.04. Notwithstanding the foregoing, at any time
during which the Borrower has failed to deliver the
Compliance Certificate with respect to a fiscal quarter
following the date the delivery thereof is due, the Leverage
Ratio and Interest Coverage Ratio shall be deemed, solely for
the purposes of this definition, to be greater than 2.75:1
and less than 4.00:1, respectively, until such time as
Borrower shall deliver such Compliance Certificate.
<PAGE>
SCHEDULE 1.01(B) TO
CREDIT AGREEMENT
Applicable Prepayment Percentage
Part I
Applicable Prepayment
Applicable Level Percentage
---------------- ------------------------
Level I 75%
Level II 50%
Level III 25%
Level IV 10%
Part II
Notwithstanding the foregoing, if the principal of the Term Loans
and Canadian Term Loans is permanently repaid in the amounts set
forth below, the Applicable Prepayment Percentage shall be based
on the current Applicable Level increased by the number of
additional Levels set forth below (but not above Applicable Level
IV):
Aggregate Term Loans
and Canadian Term Number of Additional
Loans Repaid Levels
-------------------- --------------------
$150,000,000 1
225,000,000 2
325,000,000 3
<PAGE>
SCHEDULE 2.11(a) TO
CREDIT AGREEMENT
Term Loan Amortization Schedule
Term Loan Repayment Date Aggregate
---------
Repayment
---------
Quarterly Anniversary of Closing Date
-------------------------------------
5 $ 6,250,000
6 6,250,000
7 6,250,000
8 6,250,000
9 11,250,000
10 11,250,000
11 11,250,000
12 11,250,000
13 16,250,000
14 16,250,000
15 16,250,000
16 16,250,000
17 18,750,000
18 18,750,000
19 18,750,000
20 18,750,000
21 20,000,000
22 20,000,000
23 20,000,000
24 20,000,000
25 20,000,000
26 20,000,000
27 20,000,000
28 20,000,000
29 20,000,000
30 15,000,000
Canadian Term Loan Amortization Schedule
Canadian Term Loan Repayment Date Aggregate
Quarterly Anniversary of Closing Date Repayment
------------------------------------- ---------
30 5,000,000
31 20,000,000
32 20,000,000
As Amended
July 8, 1987
------------
COLLINS & AIKMAN CORPORATION
----------------------------
SUPPLEMENTAL RETIREMENT INCOME PLAN
-----------------------------------
ARTICLE I
---------
PURPOSE
-------
The Company recognizes that certain employees of the
Company possess an intimate knowledge of the business and affairs
of the Company and its policies, methods, personnel and problems
and that the contributions of these employees are essential to
the Company's continued growth and success. Accordingly, in
order to induce these employees to remain employed by the Company
until their retirement, the Company has adopted this Plan whereby
it will provide Participating Employees a minimum guaranteed
level of post-retirement income if they remain employed by the
Company until Retirement. The purpose of this Plan is to provide
a supplemental retirement income to Participating Employees whose
retirement income from all applicable sources is less than the
guaranteed minimum level specified under this Plan.
ARTICLE II
----------
DEFINITIONS
-----------
1. "Plan" means the Supplemental Retirement Income
Plan, as described in this instrument.
2. "Company" means Collins & Aikman Corporation or
any successor company thereafter or any subsidiary of Collins &
Aikman Corporation or of any such successor.
3. "Total Annual Compensation" means the basic salary
paid to a Participating Employee during the Company's fiscal year
in which his Retirement occurs, plus the average annual amount of
the bonuses paid to him for the three preceding fiscal years.
4. "Participating Employee" means any employee who
meets the participating requirements set forth in Article
III.
5. "Retirement" means termination of employment with
the Company anytime after a Participating Employee attains age 62.
<PAGE>
6. Years of Service" means the full years and
fraction (counting completed months) of employment of a
Participating Employee with the Company from his date of hire to
the earlier of his Retirement or his date of termination.
ARTICLE III
-----------
PARTICIPATION
-------------
No employee shall be considered a Participating Employee of
this Plan unless:
1. He has been designated as a Participating Employee
by action of the Board of Directors of Collins & Aikman
Corporation, and
2. The employee has executed a participation
agreement in the form attached hereto and made a part hereof.
ARTICLE IV
----------
BENEFITS
--------
1. If a Participating Employee is continuously
employed by the Company from the date of his entry into the Plan
until he attains age 62, the Participating Employee may retire
from active, daily employment as of his 62nd birthday, or upon
such later date as may be mutually agreed upon by the
Participating Employee and the Company.
2. Commencing upon his Retirement, the Company will
pay a Participating Employee a supplemental retirement income for
his services rendered prior to Retirement if his other sources of
retirement income from the Company and its other benefit plans
are less than the minimum guaranteed level under this Plan. The
annual amount of such supplemental retirement income shall be
equal to (i) minus (ii) and minus (iii) as follows:
(i) The amount determined by the following table:
Years of % of Participating Employee's
Service Total Annual Compensation
-------- -----------------------------
1 25.7%
2 27.6
3 29.4
4 31.2
5 33
6 34.8
7 36.6
8 38.4
9 40.2
10 42
<PAGE>
Years of % of Participating Employee's
Service Total Annual Compensation
-------- -----------------------------
11 43.8
12 45.6
13 47.4
14 49.2
15 51
16 52.8
17 54.6
18 56.4
19 58.2
20 or more 60
(ii) The annual benefit payable to the Participating
Employee under the Company's qualified pension plan, the profit
sharing plan, and the Company's excess benefit plan, if
applicable. For purposes of this computation only, the Company
account balance payable under the profit sharing plan is to be
converted into an annual benefit for the Participating Employee's
lifetime using the 1971 Group Annuity Table and interest at 7.5%.
(iii) The Participating Employee's annual primary
Social Security benefit.
3. In the event of the termination of employment of a
Participating Employee prior to age 62 for any reason, or a
revocation of participation prior to age 62, no benefit will be
payable to the Participating Employee under this Plan.
4. A Participating Employee may continue his
employment beyond age 62 by mutual agreement between the Company
and the Participating Employee. The amount of supplemental
retirement income payable to such Participating Employee on
Retirement will be determined in accordance with sub-paragraph
(2) above. In such instance, for the purpose of computing the
amount of benefit under sub-paragraph (2), the Participating
Employee's post-age 62 Years of Service (subject to the 20 year
maximum) and Total Annual Compensation at Retirement shall be
taken into account.
5. The supplemental retirement income will be payable
in equal monthly installments commencing with the first day of
the month following Retirement for the lifetime of a
Participating Employee unless he chooses one of the following
alternative payment options:
<PAGE>
i. 50% Joint and Survivor Annuity Option -- The
-------------------------------------
Participating Employee will receive an actuarially
reduced benefit for his lifetime. At his death,
his spouse will receive one-half of that amount
until her subsequent death.
ii. 75% Joint and Survivor Annuity Option -- The
-------------------------------------
Participating Employee will receive an actuarially
reduced benefit for his lifetime. At his death,
his spouse will receive three-fourths of that
amount until her subsequent death.
iii. 100% Joint and Survivor Annuity Option -- The
--------------------------------------
Participating Employee will receive an actuarially
reduced benefit for his lifetime and his spouse
will receive the same benefit amount until her
subsequent death.
iv. 5-Year Certain and Continuous Annuity Option -- The
--------------------------------------------
Participating Employee will receive an actuarially
reduced benefit for his lifetime with guaranteed
payments for five years.
v. 10-Year Certain and Continuous Annuity Option --
---------------------------------------------
The Participating Employee will receive an
actuarially reduced benefit for his lifetime with
guaranteed payments for ten years.
The actuarial reduction will be determined using the
1971 Group Annuity Table and 7 1/2% interest.
6. The benefits provided for Participating Employees
under this Plan are in addition to any other plan or program of
the Company, and, except as otherwise expressly provided for
herein, the benefits of this Plan will supplement and will not
supersede any other Plan or agreement between the Company and the
Participating Employee or any provisions contained herein.
ARTICLE V
---------
DISCONTINUANCE OR AMENDMENT
---------------------------
The Plan shall become effective upon its adoption by the
Board. The Board of Directors of Collins & Aikman Corporation
may discontinue this Plan at any time, and may amend it from time
to time. Otherwise the terms of this Plan shall be binding upon
the Company and its successor(s).
<PAGE>
ARTICLE VI
----------
NON-QUALIFIED PLAN
------------------
The Plan is not intended to be an employee benefit plan
subject to the provisions of the Employment Retirement Income
Security Act of 1974, as amended.
Adopted by the Board of Directors of
Collins & Aikman Corporation on August
25, 1983; amended on January 27, 1987
and July 8, 1987
----------------------------------
Ronald T. Lindsay
Vice President, General Counsel
and Secretary
<PAGE>
As Amended
July 8, 1987
------------
COLLINS & AIKMAN CORPORATION
----------------------------
SUPPLEMENTAL RETIREMENT INCOME PLAN
-----------------------------------
PARTICIPATION AGREEMENT
-----------------------
AGREEMENT made the __th day of (month), (yr), by and between
Collins & Aikman Corporation, (hereinafter, collectively with the
subsidiaries of Collins & Aikman Corporation, referred to
as the "Company") and (name) , (hereinafter
-----------------
referred to as the "Participating Employee").
WHEREAS, the Participating Employee possesses an intimate
knowledge of the business and affairs of the Company and its
policies, methods, personnel and problems; and
WHEREAS, the Company recognizes that the contribution of the
Participating Employee is essential to the Company's continued
growth and success; and
WHEREAS, the Company desires to ensure Participating
Employee a certain minimum amount of post- retirement income in
order to induce Participating Employee to remain employed by the
Company until Retirement.
NOW THEREFORE, in consideration of the continuing employment
of Participating Employee by the Company and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Supplemental Retirement Income Plan Benefit
-------------------------------------------
Commencing upon Retirement, the Company will pay the
Participating Employee supplemental retirement income for his
services prior to Retirement in an amount determined by and
pursuant to the terms and conditions of the Company's
Supplemental Retirement Income Plan dated August 25, 1983, as
amended, a copy of which Plan is attached hereto and made a part
hereof.
2. Participating Employee's Contribution
-------------------------------------
Participating Employee acknowledges that he has not
been required to make any monetary investment in the Company nor
give any consideration, other than employment, to the Company in
return for this Agreement.
<PAGE>
3. Company's Funding
-----------------
The Company will not be required to fund its potential
obligations under this Agreement or to pledge assets as security
for its performance hereunder.
4. Termination of Employment
-------------------------
This Agreement represents participation in the
Supplemental Retirement Income Plan only and does not in any way
constitute an employment agreement between the Participating
Employee and the Company and does not obligate the Company to
continue the employment of the Participating Employee with the
Company, nor will this Agreement limit the right of the Company
to terminate the Participating Employee's employment with the
Company for any reason. Termination of the Participating
Employee's employment with the Company for any reason, whether by
action of the Company, the Participating Employee or in any other
manner, will immediately terminate this Agreement and all of the
Company's obligations hereunder, except as may otherwise be
specifically provided in the Plan.
5. Assignment
----------
Neither the Participating Employee, his beneficiary nor
his heirs will have any right to commute, sell, transfer, assign
or otherwise convey the right to receive any payment under the
terms of this Agreement. Any such attempted assignment or
transfer will terminate this Agreement and the Company shall have
no further liability hereunder.
6. Notices
-------
Any notice which will be or may be given hereunder will
be in writing and will be mailed by certified mail postage
prepaid, addressed as follows:
(a) Notice to Employee:
name
address
city, state, zip
(b) Notice to Company:
Collins & Aikman Corporation
P.O. Box 32665
Charlotte, N.C. 28232
Any party hereto may from time to time change the address to
which notices to it will be mailed by giving notice thereof in
the manner provided for herein.
<PAGE>
7. Miscellaneous
-------------
(a) This Agreement will be binding upon and inure
to the benefit of the parties hereto, their respective heirs,
executors, administrators, successors and, to the extend
permitted hereunder, assigns.
(b) This Agreement represents the entire
understanding between the parties hereto and may be amended only
by an instrument in writing signed by such parties.
(c) The parties hereto consent to the exclusive
jurisdiction of the courts of the State of New York in any and
all action arising hereunder.
(d) This Agreement will be governed and construed
under the laws of the State of New York as in effect at the time
of the execution of this Agreement.
(e) All headings preceding the text of the several
paragraphs hereof are inserted solely for reference and will not
constitute a part of this Agreement, nor affect its meaning,
construction or effect.
IN WITNESS WHEREOF, the parties hereto have duly executed
this Agreement on the date and year first herein set forth.
ATTEST: COLLINS & AIKMAN CORPORATION
_______________________ By__________________________
Ronald T. Lindsay Thomas E. Hannah
WITNESS:
_______________________ _________________________
Harold R. Sunday (name)
EXHIBIT O - MICHIGAN
LEASE
-----
THIS LEASE, executed as of the 1st day of June 1987, between Dura
Corporation, a Michigan corporation, having an office at Omni
Center, 26877 Northwestern Highway, Southfield, Michigan 48076
("Lessor"), and Dura Acquisition Corp., a Delaware corporation,
having an office at 26261 Evergreen Road, Southfield, Michigan
48076 ("Lessee");
WHEREAS, Lessor and Lessee hereby desire to agree to the terms
and conditions of a Lease to be effective as provided in Article
II below;
WITNESSETH:
-----------
That Lessor, for and in consideration of the rent, covenants and
agreement hereinafter specified to be paid, kept and performed by
Lessee, hereby leases to Lessee, and Lessee hereby leases from
Lessor, the premises hereinafter described upon the terms and
conditions herein set forth.
I. DESCRIPTION OF PREMISES
-----------------------
1. The Leased Premises is located at 1365 E. Beecher, in the
City of Adrian and State of Michigan, more fully described in the
legal description on Exhibit "A" attached hereto and outlined in
red on the survey attached hereto as Exhibit "B," and made a part
hereof.
2. The above described premises, together with any and all
buildings and improvements, are herein referred to as the "Leased
Premises".
Included in the term "Leased Premises" are also all machinery,
equipment and fixtures necessary for the general operation and
maintenance of the Leased Premises, whether installed by Lessor
or by Lessee; without limiting the generality of the foregoing,
heating, lighting and air conditioning equipment shall be
considered necessary to the general operation and maintenance of
the Leased Premises. Such fixtures are the property of Lessor
and are listed on Exhibit "C" attached hereto and made a part
hereof. Machinery, equipment and fixtures not necessary for the
general operation and maintenance of the Leased Premises and
installed by the Lessee in the conduct of its business are not
included in this Lease, shall remain the property of Lessee and
may be removed by Lessee at any time during the term of this
Lease. At the expiration of the term of this Lease, or any
earlier termination of this Lease, Lessee shall remove such
-1-
<PAGE>
machinery, equipment and fixtures not necessary for the general
operation and maintenance of the Leased Premises and any damage
caused by such removal shall be repaired by Lessee at its own
expense. If Lessee does not remove such machinery, equipment and
fixtures within 45 days after the expiration or termination of
the Lease, such items shall be deemed abandoned by Lessee and
shall, at the option of Lessor, become the sole and exclusive
property of Lessor.
II. TERM OF LEASE
-------------
1. The term of this Lease shall be for a period of fifteen
(15) years, commencing on June 1, 1987 and terminating on May 31,
2002 unless said term shall be sooner terminated or renewed as
hereinafter provided.
III. RENT
----
1. Lessee agrees to pay to Lessor an annual rental of One
Hundred Fifty Thousand and 00/100 (150,000.00) Dollars in equal
monthly installments of Twelve Thousand Five Hundred and 00/100
($12,500.00) Dollars. It is the intention of Lessor and Lessee
that the rent herein specified shall be absolutely net to Lessor
in each year during the term of this Lease. Accordingly, all
costs, expenses, and obligations of every kind relating to the
Leased Premises (except as otherwise specifically provided in
this Lease) which may arise or become due during the term of this
Lease shall be paid by Lessee, and Lessor shall be indemnified by
Lessee against such costs, expenses, and obligations.
2. The rent shall be paid to Lessor without notice or demand
and without abatement, deduction, or setoff, except as otherwise
specifically provided in this Lease. The rent shall be paid in
equal monthly installments in advance on the first day of each
calendar month during the term of this Lease at the office of
Lessor or at such other place as Lessor may designate in writing.
In the event the Lease commences on a date that is not the first
day of the month, the first and last month's rent shall be
prorated and the Lease shall terminate fifteen (15) years from
the commencement date.
3. (a) If: (i) Lessor becomes liable to Lessee or any
affiliate of Lessee under the terms of the Purchase Agreement of
even date herewith between Lessor and lessee (the "Purchase
Agreement"); (ii) a court of competent jurisdiction enters a
judgment against Lessor in favor of Lessee or any affiliate of
Leasee or any affiliate of Lessee on account of such liability;
(iii) such judgment becomes final as a result of Lessor losing
all of its appeals or failing to appeal within the applicable
time limits; and (iv) Lessor fails to satisfy the judgment within
-2-
<PAGE>
fifteen days after the date the judgment is final, then Lessee
shall have the right to set off against the rent due under this
Lease an amount not to exceed $100,000 a year for a period of
three years. Such three year period shall run from the
expiration of the aforementioned fifteen (15) day period.
(b) In addition to the right of setoff set forth in
Section 3(a), Lessee shall have the right to set off against the
rent due under this Lease any amount which Lessee or any
affiliate of Lessee is required to pay in satisfaction of any
"product liability" (as defined in Section 4.2(v) of the Purchase
Agreement) claim for personal injury or injury to property
arising out of any occurrence prior to the date hereof which is
allegedly caused by any product manufactured or sold by Lessor or
any predecessor of Lessor. The right of setoff granted in this
clause (b) may be exercised without compliance with any
preconditions set forth in clause (a). The amount of setoff
permitted hereunder shall not (including any amount set off under
clause (a)) exceed $100,000 per year during the first three years
after the payment of any such claim and $150,000 per year
thereafter until Lessee has been repaid in full. Lessee shall
give Lessor prompt notice of such claim and shall tender the
defense of such claim to Lessor in accordance with the procedure
set forth in Sections 11.6 and 11.7 of the Purchase Agreement.
(c) The right of setoff under this Section 3 shall run
only against the rent due under this Lease and Lessee shall,
while exercising such right, continue to make payments of all
other amounts due under this Lease.
4. Lessee shall pay all taxes, assessments, and other public
charges of whatsoever kind, which may hereafter be levied or
assessed upon or against the building, fixtures or improvements
now or hereafter located thereon, or which may arise from or by
virtue of the occupancy, use or possession of the Leased
Premises, or which may be levied or assessed by any taxing
authority upon or against the income from the Leased Premises in
lieu of property taxes upon the Leased Premises, all of which
taxes, assessments and charges are hereinafter referred to as
"taxes". Lessee shall pay the taxes on the later of the date
that Lessor submits statements to Lessee or ten (10) days prior
to the due date. In the event the Leased Premises shall
hereafter be included within any local improvement district
created by any governmental authority, Lessee shall be obligated
to pay to Lessor the amount required to pay in full all
installments of such assessments thereafter accruing, except in
the event of the termination of this Lease. All taxes assessed
prior to, but payable in whole or in installments after, the
effective date of the Lease term, and all taxes assessed during
the term but payable in whole or in installments after the Lease
term, shall be adjusted and prorated, so that Lessor shall pay
its prorated share for the period prior to and for the period
-3-
<PAGE>
subsequent to the Lease term and the Lessee shall pay its
prorated share for the Lease term.
5. Lessee shall have the right before any delinquency occurs
to contest or object to the amount or validity of any such taxes
by appropriate legal proceedings but this shall not be deemed or
construed in any way as relieving, modifying, or extending
Lessee's covenant to pay any such taxes at the time and in the
manner in this Article provided, unless the legal proceedings
shall operate to prevent the sale of the Leased Premises or any
part thereof or the placing of any lien thereon to satisfy such
taxes prior to the final determination of such proceedings or
shall deposit with Lessor, who agrees to deposit the same in an
interest bearing account for the benefit of Lessee in a member of
a national banking association, as security for the payment of
such taxes, either money in an amount sufficient in the
reasonable judgment of Lessee to pay said taxes together with all
interest and penalties in connection therewith, and all charges
that may or might be assessed against or become a charge on the
Leased Premises or any part thereof, in said legal proceedings or
a surety bond to cover said amount. Upon the termination of such
legal proceedings, said money so deposited shall be applied to
the payment, removal and discharge of said taxes, if any, then
payable and the interest and penalties in connection therewith,
and the charges accruing in such legal proceeding, the balance,
if any, shall be paid to Lessee. Lessor shall, if required, join
in any proceedings in order to prosecute such proceedings
properly; provided, however, that Lessor shall not be subjected
to any liability for the payment of any costs or expenses in
connection with any such proceedings brought by Lessee to contest
the validity of any such taxes or assessments and Lessee
covenants to indemnify and save Lessor harmless from any such
costs or expenses. As between the parties hereto, Lessee, in its
own name or in the name of Lessor if so required, shall have the
duty of attending to, making or filing any declaration, statement
or report which may be provided or required by law as the basis
of or in connection with the determination, equalization,
reduction or payment of any and every taxes which is to borne or
paid or which may become payable by Lessee under the provisions
of this Article III.
6. Lessee shall pay all premiums which become due during the
term of this Lease for fire, extended coverage and additional
extended coverage insurance and for liability insurance, as
required by Article IV hereof.
7. Lessee shall also pay all charges for water, electricity,
gas, telephone and other utility services furnished to the Leased
Premises. Lessor shall not be required to furnish Lessee any
such facilities or services of any kind.
-4-
<PAGE>
8. Lessee shall pay and indemnify Lessor against all legal
costs and charges, including counsel fees lawfully and reasonably
incurred, in obtaining possession of the Leased Premises after a
default of Lessee or after Lessee's default in surrendering
possession upon the expiration or earlier termination of the term
of the Lease or enforcing any covenant of Lessee in this Lease.
9. Each and every payment required to be made by Lessee
pursuant to this Article III shall be made before such payment
becomes delinquent. Lessee shall furnish Lessor with evidence
that such payments were made within ten days after Lessor
requests the same in writing.
IV. INSURANCE
---------
1. Lessee shall, during the entire term hereof, keep in force
and effect a policy of public liability and property damage
insurance with respect to the Leased Premises, and the business
operated by Lessee and any sub-tenant of Lessee in the Leased
Premises providing protection to Lessor with a $3,000,000
combined single limit of liability for bodily injury or property
damage arising out of one occurrence. Lessee also shall, during
the entire term hereof, carry insurance for fire, windstorm, and
special extended coverage (as determined by Lessor, including,
without limitation, boiler and machinery insurance with limits
sufficient to protect all objects at the Leased Premises)
insuring the improvements located within the Leased Premises
(including, without limitation, Lessee's trade fixtures,
furnishings, inventory, and other personal property) at the then
replacement cost thereof. Lessor shall not be liable to Lessee
for any loss or damage suffered by Lessee which is not covered by
such insurance. Such insurance policies shall name Lessor, any
other parties-in-interest designated by Lessor, and Lessee, as
insured, and shall contain: (a) a clause that the insurer will
not cancel or change the insurance policies without first giving
Lessor 30 days' prior written notice, and (b) a waiver of
subrogation. Such insurance policies shall be written on an
"occurrence" basis, and not on a "claims made" basis. Such
insurance policies shall not contain an "aggregate" claims
limitation. The insurance shall be written by an insurance
company approved by Lessor and authorized to do business by the
state where the Leased Premises are located, and copies of the
paid-up policies evidencing such insurance or a certificate of
insurance certifying to the issuance of such policies shall be
delivered to Lessor simultaneously with the execution of this
Lease and upon renewals, no less than 30 days prior to the
expiration of such coverage.
2. Lessee will not do or suffer to be done, or keep or suffer
to be kept, anything in, upon or about the Leased Premises which
will contravene the insurance policies required hereunder or
-5-
<PAGE>
which will prevent Lessor (in the event of a default by Lessee)
from procuring such policies in companies acceptable to Lessor.
Lessee indemnifies Lessor and agrees to hold it harmless from and
against any and all claims, damages, liabilities and expenses in
connection with (a) loss of life, personal injury or damage to
property arising from or out of any occurrence in, upon or at the
Leased Premises, including the person and property of Lessee, and
its employees and all persons in the Leased Premises at its or
their invitation or with their consent, (b) the occupancy or use
by Lessee of the Leased Premises or any part thereof, or (c)
occasioned wholly or in part by any act or omission of Lessee,
its agents, contractors, employees, servants, customers or
licensees. All property kept, stored, or maintained in the
Leased Premises shall be so kept, stored, or maintained at the
risk of Lessee only. If Lessor shall, without fault on its part,
be made a party to any litigation commenced by or against Lessee,
then Lessee shall hold Lessor harmless and shall pay all costs,
expenses and reasonable attorneys, fees incurred or paid by
Lessor in connection with such litigation, upon demand by Lessor.
3. Each party hereto does hereby release and discharge the
other party hereto and any officer, agent, employee or
representative of such party, of and from any liabilities
whatsoever hereafter arising from loss, damage or injury caused
by fire or other casualty for which insurance (permitting waiver
of liability and containing a waiver of subrogation) is carried
at the time of such loss, damage or injury to the extent of any
recovery by the insured party under such insurance.
V. USE AND MAINTENANCE OF LEASED PREMISES
--------------------------------------
1. At the commencement of the term, Lessee shall accept the
building, improvements, and any equipment on or in the Leased
Premises, in their existing condition. No representation,
statement or warranty, express or implied, has been made by or on
behalf of Lessor as to such condition, or as to the use that may
be made of such property. Any warranties for any equipment on or
in the Leased Premises that is assignable by Lessor is hereby
assigned to Lessee.
2. Lessee shall have the peaceful and quiet enjoyment of the
Leased Premises without hindrance on the part of Lessor, and
Lessor will warrant and defend Lessee in such peaceful and quiet
enjoyment of the Leased Premises against the lawful claims of all
persons claiming by, through or under Lessor.
3. Lessee agrees to make all necessary repairs to the roof and
structural parts of the Leased Premises. Lessee covenants
throughout the term hereof, at its sole cost and expense, to keep
and maintain the Leased Premises and all fixtures and equipment
therein, including all plumbing, sprinkler, heating, air
-6-
<PAGE>
conditioning, electrical, gas and like fixtures and equipment,
also the window glass, and the ceilings, doors and door frames,
windows and window frames, and inside walls of the Leased
Premises, and all signs of Lessee erected outside of the Leased
Premises, in good repair, order and condition, making all repairs
thereto as may be required, all repairs to be of the same
quality, design and class as the original work. At the
expiration of this Lease, Lessee shall surrender the Leased
Premises in the condition in which they existed on the date
hereof, and broom clean, reasonable wear and tear, acts of God
and other such casualties excepted. Lessor shall not be required
to make any improvements or repairs of any kind upon the Leased
Premises, except improvements or repairs required by law which do
not arise as a result of Lessee's particular use of the Leased
Premises.
4. Lessee may place and maintain in and about the Leased
Premises such neat and appropriate signs advertising its business
as it shall desire. Upon the termination of this Lease, Lessee
shall remove all signs and repair any damage to the Leased
Premises caused by the erection, maintenance, or removal of the
signs.
5. Lessee may use and occupy the Leased Premises for any
lawful purpose and may conduct thereon any lawful business.
Except as otherwise provided in the Purchase Agreement in
relation to environmental matters which are the responsibility of
Lessor, Lessee shall comply with and observe all laws, ordinances
or regulations of duly constituted public authorities, which are
now or which may hereafter be enacted or promulgated, and which
in any manner affect the Leased Premises or the use thereof
including, without limitation, any federal, state, county, or
municipal authority law, ruling order, decree, regulation, permit
or other environmental or hazardous waste requirement relating to
health, safety, pollution, hazardous or toxic waste, materials or
substances, environmental or other similar matters. Lessee shall,
however, be entitled to a reasonable opportunity to contest the
validity of any such laws, ordinances or regulations adversely
affecting its use or occupancy of the Leased Premises, provided
Lessee shall give such reasonable security to Lessor as may be
reasonably demanded by Lessor to insure against any loss which
might be suffered by Lessor by reason of such contest. Lessee
shall, in all events, indemnify and hold harmless Lessor from the
consequence of any violation of such laws, ordinances or
regulations. Lessee, at its own expense, shall install and
maintain fire extinguishers and such other fire protection and
health and safety devices as may be required from time to time by
any governmental agency having jurisdiction thereof and the
insurance underwriters insuring the Leased Premises. Lessee
further agrees to comply with any and all other present or future
requirements of the insurance underwriters insuring the Leased
Premises.
-7-
<PAGE>
6. Lessee shall not permit any mechanic's, laborer's,
materialmen's or other liens to remain outstanding against the
Leased Premises for any labor performed or material furnished to
or at the instance of Lessee, or claimed to have been so
performed or furnished. Lessee, or claimed to have been
performed or furnished. Lessee may, however, contest the
validity of any such lien or claim, provided Lessee shall give
reasonable security to Lessor as may be reasonably demanded by
Lessor to insure the payment of such lien or claimed lien and to
prevent any sale, foreclosure or forfeiture of the Leased
Premises or any part thereof by reason of such lien or claim, and
to indemnify Lessor against any loss, reasonable attorney's fees
or other costs and expense suffered or incurred by Lessor as a
result of such contest of such lien or claim. Upon the final
determination of the validity of any such lien or claim, Lessee
shall immediately pay any judgment or decree rendered in favor of
the lienor or claimant.
7. During the last six (6) months of this Lease, Lessee shall
permit Lessor to exhibit the Leased Premises to prospective
tenants and to place upon the exterior and in the front window a
"For Rent" or "For Lease" sign.
VI. ALTERATIONS, ADDITIONS AND IMPROVEMENTS
---------------------------------------
1. Lessee shall not make or cause to be made any alterations,
repairs, additions or improvements in or to the Leased Premises
or add, disturb or in any way change any plumbing or wiring
therein without the prior written consent of Lessor as to the
character of the alterations, additions or improvements to be
made, the manner of doing the work, and the persons to do the
work; provided, however, if no damage to Lessor's Fixtures will
result, then Lessor's written consent shall not be required for
alterations, additions and improvements not exceeding $100,000,
or for the installation of new machinery and equipment which
Lessee deems necessary or expedient. Lessee shall in any event
surrender the Leased Premises at the time of the expiration or
sooner termination of this Lease in the condition existing prior
to the making of any such unauthorized alteration, addition or
improvement. Lessee shall in all events be responsible for
repairing any damage caused to the Leased Premises by virtue of
any alteration, addition or improvement installed by or on behalf
of Lessee. Lessee indemnifies and agrees to hold Lessor harmless
from any liability, loss, cost, damages or expenses (including
attorneys' fees) by reason of any alterations, repairs, additions
or improvements made by Lessee to the Leased Premises shall be
deemed to have attached to the leasehold and to have become the
property of Lessor upon such attachment, and upon expiration of
this Lease or any renewal term thereof, Lessee shall not remove
any of such alterations, additions and improvements, except that
trade fixtures installed by Lessee may be removed if all rents
-8-
<PAGE>
due hereunder are paid in full and Lessee is not otherwise in
default hereunder; provided, however, that Lessor may designate
by written notice to Lessee those alterations and additions which
shall be removed by Lessee at the expiration or termination of
this Lease and Lessee shall promptly remove the same and repair
any damage to the Leased Premises caused by such removal. Lessee
retains all rights to utilize depreciation deductions with
respect to all alterations, additions or improvements made at
Lessee's expense.
2. All alterations, additions or improvements not constituting
leasehold improvements and any leasehold improvements excluded
from this Lease by written notice by Lessee to Lessor given prior
to their installation shall remain the property of Lessee, shall
not be subject to this Lease, and may be removed at any time.
Lessee retains all rights to utilize depreciation deductions with
respect to all alterations, additions or improvements made at
Lessee's expense.
VII. DESTRUCTION OR CONDEMNATION OF PREMISES
---------------------------------------
1. If the Leased Premises are totally or partially destroyed
or rendered substantially unfit for their accustomed use by fire
or other casualty, then Lessee, at its own cost and expense,
shall restore or repair the Leased Premises as soon as
practicable to at least as good a condition as existed
immediately prior to such casualty, and for that purpose shall be
entitled to the benefit of all insurance provided for by Article
IV hereof covering such destruction or damage. All such
restorations and repairs shall be made upon terms and conditions
satisfactory to Lessor and approved in writing by Lessor. If
Lessee has not begun to adjust and compromise any claims under
the insurance provided for by Article IV hereof within 15 days
after the occurrence of such casualty, or does not diligently
pursue the adjustment and compromise of such claims or the
collection and receipt of the same, Lessor shall have the right,
but not the obligation, to adjust and compromise any claims under
such insurance, collect and receive the proceeds thereof, and
execute and deliver all proofs of loss, receipts, vouchers and
releases in connection with such claims. Lessee shall pay to
Lessor, upon demand, all costs and expenses (including, without
limitation, attorneys' and fees and disbursements) incurred by
Lessor in connection with obtaining such proceeds. If Lessor
collects and receives the proceeds of such insurance, then Lessor
shall have the option, in its sole discretion, to terminate this
Lease or to promptly repair the damage to the Leased Premises as
soon as practicable to at least as good a condition as existed
immediately prior to such casualty. In no event shall Lessor be
required to repair or replace Lessee's inventory, trade fixtures,
furnishings, equipment or other personal property. If the amount
of the insurance proceeds (whether used by Lessee or by Lessor to
-9-
<PAGE>
repair the damage to the Leased Premises) is insufficient to pay
the costs of necessary repairs, replacement or rebuilding the
Leased Premises, then Lessee shall pay any additional amount
required, including, without limitation, all costs and expenses
incurred by Lessor, if Lessor has the right and elects to repair,
replace, or rebuild the Leased Premises. Except during the last
year of the Lease term, or the last year of any extended term,
damage to or destruction of any material portion of the Leased
Premises so that Lessee is unable to continue the use of the
Leases Premises as contemplated herein by fire, the elements, or
any other casualty or cause whatsoever shall not terminate this
Lease, or entitle Lessee to surrender the Leased Premises, or to
any abatement of or reduction in rent payable by Lessee
Hereunder, or otherwise affect the respective rights and
obligations of the parties hereto, except as specifically
provided in this Section.
2. If the whole of the Lease Premises shall be taken by any
public authority under the power of eminent domain, or if less
than the whole shall be taken and the remaining portion thereof
shall be unfit for use by Lessee for its purposes ( or for such
other use as was being made of the Leased Premises at the time of
such condemnation), then the term of this Lease shall cease as of
the date possession shall be taken by such public authority and
the rent shall be paid up to that date with a proportionate
refund by Lessor of such rent as may have been paid in advance
for a period subsequent to the date of the taking. If less than
the whole shall be taken by any public authority under the power
of eminent domain, leaving a remaining portion sufficient for use
by Lessee for its purposes, then the term of this Lease shall
cease only on the part so taken as of the date possession shall
be taken by such public authority and Lessee shall pay rent up to
that date, with an appropriate refund by Lessor of such rent as
may have been paid in advance for a period subsequent to the date
of taking, and Lessee shall continue in possession of the
remainder of the Leased Premises and all of the terms herein
provided shall continue in effect, except that the annual rent
shall be reduced in proportion to the amount of the Leased
Premises taken. All damages awarded for such taking under the
power of eminent domain, whether for the whole or a part of the
Leased Premises, shall belong to and be the property of Lessor,
whether such damages shall be awarded as compensation for
diminution in value to the leasehold or to the fee of the Leased
Premises; provided, however, that Lessor shall not be entitled to
the award make for depreciation to, and costs or removal of
Lessee's inventory, trade fixtures, equipment, or other personal
property and relocation expenses. Notwithstanding anything to
the contrary contained in this section, Lessor shall have the
right to sell the Leased Premises to the condemning public
authority prior to any actual taking and terminate this Lease.
-10-
<PAGE>
lll. ASSIGNMENTS AND SUB-LEASES
---------------------------
1. Lessee shall not assign or transfer this Lease or sublease
the whole or any part of the Leased Premises to a person not an
affiliate of Lessee without prior written consent of the Lessor,
which consent shall not be unreasonably delayed or withheld.
2. Lessor shall have the right at any time and without prior
notice to Lessee to sell, dispose of, or encumber the Leased
Premises, subject, however, to all of the terms, covenants and
conditions of this Lease, except as otherwise provided herein.
IX. DEFAULTS AND REMEDIES
---------------------
1. If Lessee, at any time during the term of this Lease (and
regardless of the pendency of any bankruptcy, reorganization,
receivership, insolvency, or other legal or equitable
proceedings, which have or might have the effect of preventing
Lessee from complying with the terms of this Lease), (a) shall
default in the payment of any installment of rent or other sum
required to be paid by Lessee under the provisions hereof for a
period of ten (10) days; (b) shall default in the performance or
observance of any of the terms, covenants, conditions or
obligation hereunder, and such default shall have not been cured
or the cure of such default shall not have commenced within
thirty (30) days after Lessor shall have given written notice to
Lessee specifying such default or defaults, or (c) (1) files or
has filed against it a petition in bankruptcy under federal or
state law, (2) applies or has an application filed against it for
the appointment of a receiver for all or substantially all of its
assets, (3) makes a general assignment for the benefit of
creditors, or (4) fails generally to pay its debts as they become
due, then, Lessor, besides other rights or remedies it may have,
it shall have the right to declare this Lease terminated and the
term ended, and shall have the immediate right or reentry and may
remove all persons and property from the Leased Premises and such
property may be removed and stored in a public warehouse or
elsewhere at the cost of, and for the account of Lessee, with
evidence of notice and resort to legal process. If Lessor elects
to reenter as herein provided, or should it take possession
pursuant to legal proceedings or pursuant to any notice provided
for by law, it may from time to time, without terminating this
Lease, make such alterations and repairs as may be necessary in
order to relet the Leased Premises or any part thereof for such
term or terms (which may be for a term extending beyond the term
of this Lease) and at such rental or rentals and upon such other
terms and conditions as Lessor in its sole discretion may deem
advisable. Upon each such reletting, all rent and other amounts
received by Lessor from such reletting shall be applied, first to
the payment of any indebtedness other than rent due hereunder
from Lessee to Lessor; second, to the payment of any costs and
-11-
<PAGE>
expenses of such reletting, including reasonable brokerage fees
and attorneys' fees and of costs of such alterations and repairs;
third, to the payment of rent and other charges due and unpaid
hereunder; and the remainder, if any, shall be held by Lessor and
applied in payment of future rent as the same may become due and
payable hereunder. If such rent and other amounts received form
such reletting during any month be less than that to be paid
during the month by Lessee hereunder, Lessee shall pay such
deficiency to Lessor. Such deficiency shall be calculated and
paid monthly. No such reentry or taking possession of the Leased
Premises by Lessor shall be construed as and election on its part
to terminate this Lease unless a written notice of intention be
given to Lessee or unless the termination thereof be decreed by a
court of competent jurisdiction. Notwithstanding any such
reletting without termination, Lessor may, at any time hereafter,
elect to terminated this Lease for such previous breach. If
Lessee at any time terminates this Lease for any breach, in
addition to any other remedies it may have, it may recover from
Lessee all damages it may incur by reason of such breach,
including the cost of recovering the Leased Premises, reasonable
attorneys' fees, and including the worth at the time of such
termination of the excess, if any, of the amount of rent and
charges equivalent to rent reserved in this Lease for the
remainder of the stated term over the then reasonable rental
value of the Leased Premises for the remainder of the stated
term, all of which amounts shall be immediately due and payable
from Lessee to Lessor, In determining the rent which will be
payable by Lessee hereunder, subsequent to default, the annual
rent for each year of the unexpired term shall be equal to the
annual rent, together with the average of all other charges
payable hereunder. Lessor shall also have the right, without
reentering the Leased Premises or terminating this Lease, to sue
for and recover all rent and other amounts, including damages, at
any time or from time to time accruing hereunder.
2. No right or remedy granted or reserved to Lessor hereunder
shall be deemed to be exclusive of any other or additional right
or remedy available to Lessor at law or in equity or under
statute.
3. If Lessee shall default in the performance of any of the
terms, covenants, agreements or conditions to be performed by
Lessee under the provisions hereof, Lessor may, at its election
perform such covenant, agreement or condition for the account,
and at the expense, of Lessee, after first giving written notice
to Lessee of its intention so to do. If Lessor at any time
elects to pay any sum or do any act which requires the payment of
any sum or entails any expense by reason of the failure of Lessee
to perform such covenant or condition, or if Lessor is compelled
to incur any expense, including reasonable attorney's fees, in
commencing, prosecuting or defending any action or proceeding
instituted by reason of any default of Lessee, the sum or sums so
-12-
<PAGE>
paid and the expenses and reasonable attorney's fees so incurred
shall be due from Lessee, on the date next following the
incurring of such expenses or the payment of such sum or sums,
upon which a monthly installment of rent is due under the terms
hereof.
4. If Lessee holds over or remains in possession of the Leased
Premises after the expiration of the term of this Lease, or after
any prior termination thereof, without any written agreement
being made or entered into between Lessor and Lessee, such
holding over or continued possession shall be deemed to be a
tenancy from month to month at the same monthly rental payable
hereunder for the month immediately preceding the month in which
this Lease expires or terminates, together with such additional
costs and charges as were payable by Lessee for such preceding
month, and otherwise upon the terms and conditions of this Lease,
and such tenancy shall be terminable at the end of any month by
either party upon notice as provided by law then applicable to
month to month tenancies.
X. INDEMNIFICATION AND EXONERATION
-------------------------------
1. Lessee shall defend, indemnify and hold Lessor harmless
form and against any claim, loss, expense or damage to any person
or property in or upon the Leased Premises arising out of
Lessee's use or occupancy of said Leased Premises, or any act or
neglect of Lessee or Lessee's servants, employees or agents, or
any change, alteration or improvement made by Lessee in the
Leased Premises unless caused by or resulting from the negligence
of Lessor or its agents, servants, or employees in the operation
or maintenance of the Leased Premises.
2. All of the Lessee's personal property of every kind which
may at any time be in the Leased Premises shall be at Lessee's
sole risk, or at the risk of those claiming under Lessee.
XI. NOTICES
-------
Any notice provided for herein shall be given by Certified Mail,
Return Receipt Requested, with postage prepaid, addressed as
follows if to Lessor: Omni Center, 26877 Northwestern Highway,
Southfield, Michigan 48076, and if to Lessee: to the Leased
Premises with a copy to : Wickes Companies, Inc., 3340 Ocean
Park Boulevard, Suite 2000, Santa Monica, California 90495,
Attention: Ronald D. Strongwater, Senior Vice President; Wickes
Companies, Inc., 1400 South Wolf Road, Building 200, Wheeling,
Illinois 60090.
The address to which notices shall be mailed may be changed from
time to time by either party upon written notice to the other.
-13-
<PAGE>
XII. MODIFICATION-SUCCESSORS IN INTEREST
-----------------------------------
This Lease shall not be modified, nor shall any of the terms and
conditions hereof in any manner be changed, suspended,or
cancelled, except by written agreement signed by the Parties
hereto. This Lease shall be binding upon and inure to the
benefit of the successors in interest of the parties hereto.
XIII.CONSENTS
--------
All consents and/or approvals required to be given by Lessor or
Lessee shall not be unreasonably withheld or delayed.
XIV. TWO RENEWAL TERMS
-----------------
1. Lessee shall have an option to renew this Lease for two
consecutive terms of five (5) years upon the same terms and
conditions, except for rent, as are provided herein.
2. Each of said options shall be exercised by Lessee giving
notice by certified mail to Lessor, return receipt requested, at
least six (6) months before the expiration of the then-existing
term. It shall be a condition of the exercise of either or the
foregoing options that at the time of the exercise of said option
Lessee shall not be in default hereunder.
3. During the renewal terms, Lessee agrees to pay to Lessor
annual rent to the computed as follows:
(a) "The United State Bureau of Labor Statistics Price
Index For All Items for the City of Toledo, Ohio" hereinafter
referred to as the "index" shall be used to determine the annual
rent payable to Lessor during the renewal terms.
(b) To determine the rent during the first renewal term,
the average index for the first six months or the original term
of this Lease shall be used as the denominator; the average index
for the last six months of the fourteenth (14th) year of the
original term of this Lease shall be used as the numerator; this
fraction shall be multiplied by the annual rent set forth in
Article III. The resulting amount shall be the amount of the
annual rent during the first renewal term except that it shall
not be less than the annual rent set forth in Article III.
(c) To determine the annual rent for the second renewal
term, the average index for the first six months of the first
renewal term of this Lease shall be used as the denominator; the
average index for the last six months of the fourth (4th) year of
the first renewal term of this Lease shall be used as the
numerator; this fraction shall be multiplied by the annual rent
-14-
<PAGE>
during the first renewal term. The resulting amount shall be the
amount of the annual rent during the second renewal term except
that it shall not be less than the annual rent during the first
renewal term.
XV. RIGHT OF FIRST REFUSAL
----------------------
1. If at any time during the term of this Lease, Lessor shall
receive a bona fide offer from any other person, partnership,
corporation or trust to purchase the Leased Premises, Lessor
shall send Lessee a copy of the proposed contract (except for the
name of the buyer) and notify Lessee of the intention of Lessor
to accept the same. Lessee shall have the right within twenty
(20) days to accept the terms of the said contract in its own
name or in the name of a nominee, for the gross purchase price
and on the terms specified in said contract. If Lessee shall not
so elect within the said period, Lessor may then sell the Leased
Premises to said buyer provided the said sale is on the same
terms and conditions and as for the price set forth in the said
contract sent to Lessee.
2. In the event Lessee fails to execute the aforesaid right of
first refusal in connection with a proposed sale, then such right
shall be extinguished upon the consummation of said sale;
however, if such sale is not consummated within six months, the
right of first refusal shall remain in effect.
XVI. NON-DISTURBANCE
---------------
So long as Lessee pays the rent reserved under this Lease and
fulfills the obligations on its part to be performed hereunder,
Lessor shall not make Lessee a party in any action to terminate
this Lease or to remove or evict Lessee and Lessee shall enjoy
the Leased Premises without Interruption by Lessor, any
mortgagee, or any other person, firm or corporation claiming
under either of them.
XVII.ATTORNMENT AND SUBORDINATION
----------------------------
1. Lessee shall, in the event any proceedings are brought for
the foreclosure of or in the event of exercise of the power of
sale under any mortgage made by Lessor covering the Leased
Premises, attorn to the Purchaser upon any such foreclosure or
sale and recognize such Purchaser as Lessor under this Lease.
2. Lessee agrees that this Lease shall, at the request of
Lessor, be subordinated to any mortgages that may hereafter be
place upon the Leased Premises and to any and all advances to be
made thereunder, and to the interest thereon, and all renewals,
-15-
<PAGE>
replacements and extensions thereof, provided the mortgagees
named in such mortgages shall agree to recognize this Lease in
the event of foreclosure if Lessee is not in default hereunder.
Lessee agrees that upon the request of Lessor or any mortgagee of
Lessor, it shall execute whatever instruments may be required to
carry out the intent of this paragraph.
3. Lessee agrees, within 10 days after request hereof by
Lessor, to execute in recordable form and deliver to Lessor a
statement, in writing, certifying to Lessor, any mortgagee of
Lessor, or any purchaser of the Leased Premises; (a) that this
Lease is in full force and effect; (b) the term of this Lease;
(c) that rent is paid currently without any set-off or defense
thereto; (d) the amount of rent, if any, paid in advance; (e)
that there are no uncured defaults by Lessor or stating those
claimed by Lessee; and (f) such other information as Lessor may
reasonable request; provided that, in fact, such facts are
accurate and ascertainable.
4. Failure of Lessee to execute any of the instruments set
forth in this article XVII within 15 days of the mailing of a
written request to do so by Lessor, shall constitute a breach of
this Lease and Lessor may, at its option, cancel this Lease and
terminate Lessee's interest herein.
XVIII.MISCELLANEOUS
-------------
1. One or more waivers of any covenant or condition by Lessor
shall not be construed as a waiver of a subsequent breach of the
same covenant or condition, and the consent or approval by Lessor
to or of any act by Lessee requiring Lessor's consent or approval
shall not be deemed to render unnecessary Lessor's consent or
approval to or of any subsequent similar act by Lessee. No breach
of a covenant or a condition of this Lease shall be deemed to
have been waived by Lessor, unless such waiver shall be in
writing signed by Lessor.
2. This Lease and all attachments hereto and the Purchase
Agreement and the Promissory Agreement of even date herewith
given by Wickes Companies, Inc. to Lessor, set forth all of the
covenants, promises, agreements, conditions and understandings
between Lessor and Lessee concerning the Lease Premises, and
there are no covenants, promises, agreements, conditions or
understandings, either oral or written, between the parties other
than are set forth herein and the Purchase Agreement of even date
herewith between Lessor and Lessee.
3. If Lessor transfers its interest in the Leased Premises,
the transferor shall be automatically relieved of any and all
obligations on the part of Lessor accruing form and after the
date of such transfer provided that notice of such sale or
transfer shall be delivered to Lessee as required by law.
-16-
<PAGE>
4. Any amount due form Lessee to Lessor hereunder which is not
paid when due shall bear interest at rate or 12% per annum form
the date due until paid. The payment of such interest shall not
excuse or cure any default by Lessee under this Lease.
5. This Lease shall be governed by, and construed in
accordance with, the laws of the state where the Leased Premises
are located. Whenever possible, each provision of this Lease
shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Lease is held
to be prohibited by or invalid under applicable law, such
provision will be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Lease, unless
the intent of this Lease will be substantially frustrated by such
partial invalidation.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed in duplicate by their respective officers
thereunto duly authorized as of the day and year first above
written.
-17-
EXHIBIT 11
COLLINS & AIKMAN HOLDINGS CORPORATION
COMPUTATION OF EARNINGS PER SHARE
<TABLE><CAPTION>
FISCAL YEAR ENDED
----------------------------------------
(IN THOUSANDS, EXCEPT PER
THIRTEEN WEEKS ENDED SHARE DATA)
---------------------- ----------------------------------------
APRIL 30, MAY 1, JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1994 1993 1992
---------- ---------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Shares outstanding.................................... 35,035 35,035 35,035 35,035 35,035
---------- ---------- ------------ ------------ ------------
---------- ---------- ------------ ------------ ------------
Shares issued upon exercise of options
1993 Plan........................................... 3,036 3,036 3,036 3,036 3,036
1994 Plan........................................... 170 170 170 170 170
---------- ---------- ------------ ------------ ------------
3,206 3,206 3,206 3,206 3,206
---------- ---------- ------------ ------------ ------------
---------- ---------- ------------ ------------ ------------
Proceeds from exercise of options
1993 Plan........................................... $ 13,875 $ 13,875 $ 13,875 $ 13,875 $ 13,875
1994 Plan........................................... 937 937 937 937 937
---------- ---------- ------------ ------------ ------------
14,812 14,812 14,812 14,812 14,812
---------- ---------- ------------ ------------ ------------
Applicable compensation expense
1993 Plan........................................... -- 26,736 26,736 26,736 26,736
1994 Plan........................................... 1,572 1,608 1,608 1,608 1,608
---------- ---------- ------------ ------------ ------------
1,572 28,344 28,344 28,344 28,344
---------- ---------- ------------ ------------ ------------
Amount available to buy back shares................... $ 16,384 $ 43,156 $ 43,156 $ 43,156 $ 43,156
---------- ---------- ------------ ------------ ------------
---------- ---------- ------------ ------------ ------------
Per share price..................................... $ 10.50 $ 10.50 $ 10.50 $ 10.50 $ 10.50
---------- ---------- ------------ ------------ ------------
---------- ---------- ------------ ------------ ------------
Shares repurchased under Treasury Stock Method...... (1,560) (4,110) (4,110) (4,110) (4,110)
---------- ---------- ------------ ------------ ------------
Increase (decrease) in total shares................... 1,645 (904) (904) (904) (904)
---------- ---------- ------------ ------------ ------------
Total shares for EPS............................. 36,680 34,131 34,131 34,131 34,131
---------- ---------- ------------ ------------ ------------
---------- ---------- ------------ ------------ ------------
Income (Loss) Applicable to Common Shareholders
Continuing operations(1)............................ $ 5,668 $ (11,093) $ (197,048) $ (64,189) $ (89,143)
Discontinued operations............................. -- (3,596) (104,339) (218,317) (16,365)
Extraordinary items................................. -- -- -- -- (1,793)
Cumulative effect of accounting change.............. -- -- -- -- (42,316)
---------- ---------- ------------ ------------ ------------
Net Income (Loss)................................ $ 5,668 $ (14,689) $ (301,387) $ (282,506) $ (149,617)
---------- ---------- ------------ ------------ ------------
---------- ---------- ------------ ------------ ------------
Income (Loss) Per Common Share
Continuing operations............................... $ .15 $ (.32) $ (5.77) $ (1.88) $ (2.61)
Discontinued operations............................. -- (.11) (3.06) (6.40) (.48)
Extraordinary item.................................. -- -- -- -- (.05)
Cumulative effect of accounting change.............. -- -- -- -- (1.24)
---------- ---------- ------------ ------------ ------------
Net Income (Loss)................................ $ .15 $ (.43) $ (8.83) $ (8.28) $ (4.38)
---------- ---------- ------------ ------------ ------------
---------- ---------- ------------ ------------ ------------
</TABLE>
- ---------------
Notes:
(1) Income (loss) from continuing operations has been adjusted for dividends and
accretion requirements on redeemable preferred stock of $7,086 and $5,620
for the thirteen weeks ended April 30, 1994 and May 1, 1993, respectively,
and $23,723, $18,848 and $15,807 for fiscal years 1993, 1992 and 1991,
respectively.
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN & CO.
Charlotte, North Carolina,
July 5, 1994.
<PAGE>
APPENDIX A
GRAPHIC AND IMAGE MATERIALS
Photographic material, see inside front and
back covers for narrative description.
