SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended October 29, 1994
Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from to
Commission File Number 1-10218
COLLINS & AIKMAN CORPORATION
(formerly Collins & Aikman Holdings Corporation)
A Delaware Corporation (IRS Employer Identification
No. 13-3489233)
701 McCullough Drive
Charlotte, North Carolina 28262
Telephone (704) 548-2350
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No .
As of November 29, 1994, the number of outstanding shares of the Registrant's
common stock, $.01 par value, was 70,520,900 shares.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except for per share data)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
October 29, October 30, October 29, October 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . $ 403,722 $ 334,629 $1,153,917 $ 963,366
Cost of goods sold . . . . . . . . . . . . . 310,746 250,184 872,630 738,743
Selling, general and administrative
expenses . . . . . . . . . . . . . . . . . 46,391 50,028 149,454 151,610
Goodwill amortization and write-off . . . . . - 130,780 - 132,630
357,137 430,992 1,022,084 1,022,983
Operating income (loss) . . . . . . . . . . . 46,585 (96,363) 131,833 (59,617)
Interest expense, net . . . . . . . . . . . . (10,178) (28,233) (64,793) (83,267)
Loss on sale of receivables . . . . . . . . . (2,466) - (5,176) -
Dividends on preferred stock of subsidiary . - (1,129) (2,258) (3,386)
Income (loss) from continuing
operations before income taxes . . . . . . 33,941 (125,725) 59,606 (146,270)
Income taxes . . . . . . . . . . . . . . . . 2,975 4,096 8,563 9,652
Income (loss) from continuing operations . . 30,966 (129,821) 51,043 (155,922)
Discontinued operations:
Loss from operations, net of income taxes - (50) - (4,775)
Loss on disposal, net of income taxes . . - - - (127,673)
Income (loss) before extraordinary item . . . 30,966 (129,871) 51,043 (288,370)
Extraordinary loss, net of income taxes . . . - - (106,528) -
Net income (loss) . . . . . . . . . . . . . . $ 30,966 $ (129,871) $ (55,485) $ (288,370)
Dividends and accretion on preferred stock . - (6,032) (14,408) (17,473)
Excess of redemption cost over book value of
preferred stock . . . . . . . . . . . . . - - (82,022) -
Income (loss) applicable to common
shareholders . . . . . . . . . . . . . . . $ 30,966 $ (135,903) $ (151,915) $ (305,843)
Per primary and fully diluted common share:
Continuing operations . . . . . . . . . . $ .43 $ (4.99) $ (.97) $ (6.36)
Discontinued operations . . . . . . . . . - - - (4.86)
Extraordinary item . . . . . . . . . . . . - - (2.29) -
Net income (loss) . . . . . . . . . . . . . . $ .43 $ (4.99) $ (3.26) $ (11.22)
Average common shares outstanding . . . . . . 72,109 27,260 46,577 27,260
</TABLE>
See accompanying notes.
I-1
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
October 29, January 29,
1994 1994
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents . . . . . . . . . . . $ 2,744 $ 81,373
Accounts and notes receivable, net . . . . . . 81,731 200,368
Inventories . . . . . . . . . . . . . . . . . . 190,983 176,062
Receivable from sale of business . . . . . . . - 70,000
Other . . . . . . . . . . . . . . . . . . . . . 37,452 48,397
Total current assets . . . . . . . . . . . . 312,910 576,200
Property, plant and equipment, at cost less
accumulated depreciation and amortization of
$273,820 and $240,514 . . . . . . . . . . . . . 288,898 292,600
Other assets . . . . . . . . . . . . . . . . . . . 63,410 50,025
$ 665,218 $ 918,825
LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
Current Liabilities:
Notes payable . . . . . . . . . . . . . . . . . $ 1,793 $ 3,789
Current maturities of long-term debt . . . . . 11,209 25,895
Accounts payable . . . . . . . . . . . . . . . 85,712 85,591
Accrued expenses . . . . . . . . . . . . . . . 135,592 145,022
Total current liabilities . . . . . . . . . 234,306 260,297
Long-term debt . . . . . . . . . . . . . . . . . . 559,785 897,659
Deferred income taxes . . . . . . . . . . . . . . . 607 640
Other, including postretirement benefit obligation 300,661 339,768
Commitments and contingencies . . . . . . . . . . .
Redeemable preferred stock of subsidiary, at
carrying value . . . . . . . . . . . . . . . . - 132
Preferred stock of subsidiary, at carrying value . - 181
Redeemable preferred stock, at carrying value . . . - 122,368
Common stock (70,521 and 28,164 shares issued and
outstanding) . . . . . . . . . . . . . . . . . 705 282
Other paid-in capital . . . . . . . . . . . . . . . 586,157 160,317
Accumulated deficit . . . . . . . . . . . . . . . . (1,001,252) (849,337)
Foreign currency translation adjustments . . . . . (8,004) (5,735)
Pension equity adjustment . . . . . . . . . . . . . (7,747) (7,747)
Total common stockholders' deficit . . . . . (430,141) (702,220)
$ 665,218 $ 918,825
</TABLE>
See accompanying notes.
I-2
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
October 29, October 30, October 29, October 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Income (loss) from continuing operations . . $ 30,966 $(129,821) $ 51,043 $(155,922)
Adjustments to derive cash flow from
continuing operating activities:
Depreciation . . . . . . . . . . . . . . 11,713 11,533 34,945 34,965
Goodwill amortization and write-off . . - 130,780 - 132,630
Amortization of other assets &
liabilities . . . . . . . . . . . . . 449 3,098 4,829 9,956
Increase in accounts and notes
receivable . . . . . . . . . . . . . . (44,292) (40,558) (31,363) (28,892)
Decrease (increase) in inventories . . . 4,656 (7,248) (14,921) (4,457)
Increase (decrease) in accounts payable 13,081 4,594 121 (3,596)
Increase (decrease) in interest and
dividends payable . . . . . . . . . . 3,045 12,875 (14,958) 9,142
Other, net . . . . . . . . . . . . . . . 1,964 12,030 (4,007) 25,097
Net cash provided by (used in)
continuing operating activities . . 21,582 (2,717) 25,689 18,923
Cash provided by (used in) discontinued
operations . . . . . . . . . . . . . . . . (8,930) 38,753 (24,087) (18,342)
INVESTING ACTIVITIES
Additions to property, plant and equipment . (21,402) (13,502) (55,533) (35,334)
Sales of property, plant and equipment . . . 119 622 190 1,173
Proceeds from sale/leaseback arrangement . . 22,557 - 22,557 -
Net proceeds from (used in) disposition of
discontinued operations . . . . . . . . . (6,041) (250) 61,726 48,993
Other, net . . . . . . . . . . . . . . . . . (3,418) 34,438 (3,487) 30,392
Net cash provided by (used in)
investing activities . . . . . . . . (8,185) 21,308 25,453 45,224
FINANCING ACTIVITIES
Issuance of common stock . . . . . . . . . . - - 232,436 -
Issuance of long-term debt . . . . . . . . . 841 6,248 671,719 73,657
Proceeds from sales of a participating
interest in accounts receivable, net of
redemptions . . . . . . . . . . . . . . . 25,000 - 150,000 -
Redemption of preferred stock . . . . . . . . - - (219,110) -
Repayment and defeasance of long-term debt . (1,737) (5,955) (882,163) (57,433)
Net borrowings (repayments) on revolving
credit facilities . . . . . . . . . . . . (40,000) 10,250 (56,750) (6,750)
Net borrowings (repayments) on short-term
obligations . . . . . . . . . . . . . . . 49 (294) (2,071) (8,336)
Other, net . . . . . . . . . . . . . . . . . 395 (367) 255 (7,639)
Net cash provided by (used in)
financing activities . . . . . . . . (15,452) 9,882 (105,684) (6,501)
Net increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . . . . (10,985) 67,226 (78,629) 39,304
Cash and cash equivalents at beginning of
period . . . . . . . . . . . . . . . . . . 13,729 55,766 81,373 83,688
Cash and cash equivalents at end of period . $ 2,744 $ 122,992 $ 2,744 $ 122,992
</TABLE>
See accompanying notes.
I-3
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OTHER PAID-IN CAPITAL
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
October 29, October 30, October 29, October 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Balance at beginning of period . . . . . . $ 587,328 $ 133,581 $ 160,317 $ 133,581
Management equity plan . . . . . . . . . . (1,171) - (919) -
Issuance of common stock . . . . . . . . . - - 426,759 -
Balance at end of period . . . . . . . . . $ 586,157 $ 133,581 $ 586,157 $ 133,581
</TABLE>
CONSOLIDATED STATEMENTS OF ACCUMULATED DEFICIT
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
October 29, October 30, October 29, October 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Balance at beginning of period . . . . . $(1,032,218) $ (717,890) $ (849,337) $ (547,950)
Net income (loss) . . . . . . . . . . . . 30,966 (129,871) (55,485) (288,370)
Redeemable preferred stock dividends . . - (5,628) (12,380) (16,261)
Accretion of difference between
redemption value and fair value
at date of issuance of redeemable
preferred stock . . . . . . . . . . . - (404) (2,028) (1,212)
Excess of redemption cost over book
value of preferred stock . . . . . . . - - (82,022) -
Balance at end of period . . . . . . . . $(1,001,252) $ (853,793) $(1,001,252) $ (853,793)
</TABLE>
I-4
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT
(Unaudited)
A. Organization:
Collins & Aikman Corporation (the "Company") (formerly Collins &
Aikman Holdings Corporation and before that WCI Holdings Corporation)
is a Delaware corporation. Prior to July 13, 1994, the Company was a
wholly-owned subsidiary of Collins & Aikman Holdings II Corporation
("Holdings II") (formerly WCI Holdings II Corporation). In connection
with an initial public offering of common stock and a recapitalization
(described below), Holdings II was merged into the Company.
Concurrently, Collins & Aikman Group, Inc., a wholly- owned
subsidiary of the Company ("Group") (formerly Wickes Companies, Inc.),
was merged into its wholly-owned subsidiary, Collins & Aikman
Corporation. On July 7, 1994, the Company changed its name from
Collins & Aikman Holdings Corporation to Collins & Aikman Corporation
and Collins & Aikman Corporation changed its name to Collins & Aikman
Products Co. ("C&A Products").
B. Basis of Presentation:
The condensed consolidated financial statements include the accounts of
the Company and its subsidiaries. In the opinion of management,
the accompanying condensed consolidated financial statements 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. Certain
reclassifications have been made to the statements of operations for
the quarter and nine months ended October 30, 1993 and the statements of
cash flows for the quarter and nine months ended October 30, 1993 to
conform to the fiscal 1994 presentation.
C. Initial Public Offering and Recapitalization:
On July 13, 1994, the Company completed an initial public offering (the
"Offering") of 15.0 million shares of common stock of the Company
("Common Stock") at an initial public offering price of $10.50 per
share. The net proceeds to the Company from the Offering and from
the sale by the Company of an aggregate of approximately 8.8 million
shares of Common Stock to affiliates of the Company's principal
shareholders, Wasserstein Perella Partners, L.P. ("WP Partners") and
Blackstone Capital Partners L.P. ("Blackstone Partners"), together
with proceeds under certain new credit facilities aggregating $775
million (the "New Credit Facilities") and available cash, were used to
effect a defeasance and redemption or repayment of virtually all
outstanding indebtedness and all outstanding preferred stock of the
Company and its subsidiaries (the "Recapitalization"). In
addition, the Company's $204.5 million of Subordinated PIK Bridge Notes
were extinguished with approximately $9.7 million redeemed in cash
and approximately $194.8 million exchanged for approximately 18.5
million shares of Common Stock. After the Offering and
Recapitalization, approximately 70.5 million shares of Common Stock were
outstanding.
The New Credit Facilities consist of (i) term loans in an aggregate
principal amount of $475 million (including a $45 million Canadian
loan) with a term of eight years, which were drawn in full on the
closing date (the "Term Loan Facilities"), (ii) a revolving credit
facility in an aggregate principal amount of up to $150 million with
a term of seven years (the "Revolving Facility") and (iii) a
receivables facility in an aggregate face amount of up to $150 million
with a term of seven years (the "Receivables Facility"). The New Credit
Facilities contain restrictive covenants including maintenance of
EBITDA (i.e. earnings before interest, taxes, depreciation and
amortization) and interest coverage ratios, leverage and liquidity
tests and various other restrictive covenants which are typical for
such facilities. The Company's obligations under the Term Loan
Facilities and the Revolving Facility are secured by a pledge of the
stock of C&A Products and its significant subsidiaries.
I-5
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (Continued)
(Unaudited)
The New Credit Facilities prohibit the payment of dividends on the
Common Stock or any preferred stock of the Company until the third
fiscal quarter of 1995, and then limit the payment of dividends to
$3 million in the aggregate per quarter, unless certain conditions
are met (including there being less than $350 million outstanding
under the Term Loan Facilities). In addition, C&A Products is
prohibited from paying dividends or making other distributions to the
Company except to the extent necessary to allow the Company to pay
taxes, ordinary expenses, permitted dividends on the Common Stock,
the repurchase price for shares or options pursuant to contractual
obligations and permitted investments in finance, foreign or acquired
subsidiaries. The Company does not believe such prohibition will
have a material adverse impact on the Company because all the
Company's operations are conducted, and all the Company's debt
obligations are issued, by C&A Products and its subsidiaries.
D. Receivables Facility:
In connection with the Recapitalization, on July 13, 1994, C&A Products
and certain of its subsidiaries (the "Sellers") transferred $190
million of customer receivables to Carcorp, Inc., a wholly-owned,
bankruptcy remote subsidiary of C&A Products ("Carcorp"), which, in
turn, on July 13, 1994, sold an undivided senior interest in the
receivables pool for $136.8 million to Chemical Bank ("Chemical" and,
together with a syndicate of financial institutions if Chemical so
elects at any time, the "Buyers") pursuant to a Receivables Transfer
and Servicing Agreement ("RTA") with Chemical, as administrative
agent. In connection with the receivables sale, a loss of $2.5
million and $5.2 million was incurred in the third quarter and the
first nine months of 1994, respectively. Of this loss, $1.3 million
related to fees and expenses associated with the sales and $3.9 million
related to discounts on the receivables sold. Carcorp continues
to purchase, on a revolving basis, all trade receivables generated
by the Sellers. The Sellers will continue to service the
receivables for Carcorp. Carcorp may sell to the Buyers undivided
senior interests of up to $150 million in receivables at any time,
subject to among other things the sufficiency of the underlying
receivables and the qualification of the underlying receivables as
"Eligible Receivables" under the RTA. The Receivables Facility
terminates July 13, 2001 or earlier if a defined liquidation event
occurs.
As of October 29, 1994, Carcorp's total receivables pool was $227.5
million. As of October 29, 1994, Chemical possessed a $150 million
undivided senior interest in Carcorp's receivables pool and,
accordingly, such receivables were not reflected in the Company's
accounts receivable balance as of that date. Carcorp owns a
subordinated interest in the receivables pool.
E. Sale Leaseback Transaction:
On September 30, 1994, the Company entered into a master equipment
lease agreement with NationsBanc Leasing Corporation of North
Carolina for the sale and leaseback of manufacturing equipment.
Pursuant to that agreement the Company has sold and leased back for a
term of 10.5 years equipment utilized in its Automotive Products
and Interior Furnishings segments. The aggregate net book values of
the equipment totaling $22.1 million have been removed from the
balance sheet and the gain realized on the sale totaling $.5
million has been deferred and is being recognized as adjustments to
rent expense over the lease term. The Company's rental payments on the
leased equipment amount to $2.9 million annually and commence in March
1995. The Company has a purchase option on the equipment at the end of
the lease term based on the fair market value of the equipment and has
additional options to cause the sale of some or all of the
equipment or to purchase some or all of the equipment at prices
determined under the agreement. The Company has classified the lease
as an operating lease. The
I-6
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO
CONDENSED CONSOLIDATED FINANCIAL REPORT (Continued)
(Unaudited)
Company may sell and lease back additional equipment in the future
under the same master lease agreement.
F. Interest Rate Protection Program:
During September 1994, the Company entered into a program designed to
reduce its exposure to changes in the cost of its variable rate
borrowings by the use of interest rate cap and corridor agreements.
Under these agreements, the Company has limited its exposure on
notional principal amounts as follows:
Protection Period Notional Principal Amount Average LIBOR Strike Price
October 1994 thru
October 1995 $ 300,000,000 6.92%
October 1995 thru
October 1996 $ 250,000,000 7.50%
The costs of these agreements are amortized over the periods of protection.
G. Discontinued Operations:
As of the end of fiscal 1992, the Company reclassified its Builders
Emporium home improvement retail chain and the Engineering Group as
discontinued operations. In March 1993, the Engineering Group was sold
for approximately $51 million. 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 ten owned and four leased real estate
properties and self-insured workers compensation liabilities, which
continue to be liquidated.
The Company's former Kayser-Roth Corporation subsidiary
("Kayser-Roth") was reclassified as a discontinued operation at the
end of the quarter ended October 30, 1993 and was sold on January 28,
1994 for a total price of $170 million, subject to a post-closing
purchase price adjustment of $5.1 million, which was paid to the
purchaser of Kayser-Roth on September 1, 1994. A portion of the
proceeds was used to repay $66 million of borrowings under a
Kayser-Roth credit facility. In connection with the sale, the
Company received a 90-day $70 million senior unsecured bridge note
from the purchaser, which was collected with accrued interest on April
27, 1994.
In the quarter and nine months ended October 30, 1993, revenues
derived from discontinued operations were $267.6 million and $704.9
million, respectively.
The majority of Builders Emporium's leased properties have been
assigned to third parties. In addition, C&A Products has assigned
leases in connection with the divestiture of Kayser-Roth, the
Engineering Group, Wickes Manufacturing Company and other divested
businesses. Although C&A Products has obtained releases from the
lessors of certain properties, C&A Products remains contingently
liable under most of the leases. C&A Products' 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.
I-7
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (Continued)
(Unaudited)
During the first quarter of 1994, the Company incurred expenses of $2.5
million for services performed by affiliates of 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. In addition, the Company incurred a $100,000
fee during the first quarter of 1994 for advisory services performed by
an affiliate of Blackstone Partners in connection with the sale of
Builders Emporium's inventory, real estate and other assets. In
addition, in September 1993 an affiliate of Blackstone Partners
negotiated with Arkaid, Incorporated, a real estate consultant
("Arkaid"), to receive 20% of the incentive fees payable to Arkaid by
the Company in connection with the resolution of lease liabilities of
Builders Emporium. Blackstone Partners received $441,800 in fees during
the third quarter of 1994 pursuant to this arrangement and is expected
to receive approximately $20,000 in additional fees.
H. Inventories:
Inventory balances are summarized as follows (in thousands):
October 29, January 29,
1994 1994
Raw materials . . . . . . . . . . . . . . . .$ 73,343 $ 70,762
Work in process . . . . . . . . . . . . . . . 29,159 24,739
Finished goods . . . . . . . . . . . . . . . 88,481 80,561
$ 190,983 $ 176,062
I. Interest Expense, Net:
Interest expense for the quarters ended October 29, 1994 and October 30,
1993 is net of interest income of $.8 million and $1.2 million,
respectively. Interest expense for the nine months ended October 29,
1994 and October 30, 1993 is net of interest income of $5.7 million and
$3.7 million, respectively.
Interest expense has been allocated to discontinued operations based on
the ratio of net book value (including reserves for loss on disposal) of
discontinued operations to C&A Products' consolidated invested capital.
Interest allocated to discontinued operations was $2.3 million and
$11.1 million for the quarter and nine months ended October 30, 1993. No
interest was allocated to discontinued operations for the quarter and
nine months ended October 29, 1994.
J. Related Party Transactions:
During the first quarter of 1994, the Company incurred expenses of $2.75
million for services performed by affiliates of WP Partners and $3.25
million for services performed by affiliates of 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" for the first quarter of 1994.
Additionally under the Amended and Restated Stockholders Agreement
among the Company, C&A Products, Blackstone Partners and WP Partners,
the Company pays Blackstone Partners and WP Partners each a quarterly
monitoring fee of $250,000 which commenced in the quarter ended
October 29, 1994.
I-8
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (Continued)
(Unaudited)
For additional information, including information regarding the Offering
and Recapitalization, see Note C to Condensed Consolidated Financial
Report and "PART I - FINANCIAL INFORMATION, Item 2. Management's
Discussion and Analysis of Financial Condition and Results of
Operations" elsewhere herein.
K. Information About Segments of the Company's Operations:
Information about the Company's segments for the third quarter and first
nine months of fiscal 1994 and 1993 follows (in thousands):
<TABLE>
<CAPTION>
Quarter Ended Net Gross Operating Capital
October 29, 1994 Sales Margin Income (Loss) Expenditures
<S> <C> <C> <C> <C>
Automotive Products . . . $ 245,970 $ 44,651 $ 31,642 $ 14,823
Interior Furnishings . . 102,029 30,250 13,740 4,796
Wallcoverings . . . . . . 55,723 18,075 2,243 1,476
403,722 92,976 47,625 21,095
Corporate items . . . . . - - (1,040) 307
$ 403,722 $ 92,976 $ 46,585 $ 21,402
Quarter Ended Net Gross Operating Capital
October 30, 1993 Sales Margin Loss (b) Expenditures
Automotive Products . . . $ 173,145 $ 32,049 $ (49,903) $ 9,063
Interior Furnishings . . 104,807 29,488 (18,805) 2,567
Wallcoverings . . . . . . 56,677 22,908 (23,217) 1,874
334,629 84,445 (91,925) 13,504
Corporate items . . . . . - - (4,438) 76
$ 334,629 $ 84,445 $ (96,363) $ 13,580
Nine Months Ended Net Gross Operating Capital
October 29, 1994 Sales Margin Income (Loss) Expenditures
Automotive Products . . . $ 675,834 $ 133,711 $ 94,771 $ 38,133
Interior Furnishings . . 311,927 93,820 41,877 12,422
Wallcoverings . . . . . . 166,156 53,756 8,247 4,369
1,153,917 281,287 144,895 54,924
Corporate items . . . . . - - (13,062)(a) 609
$1,153,917 $ 281,287 $ 131,833 $ 55,533
Nine Months Ended Net Gross Operating Capital
October 30, 1993 Sales Margin Loss (b) Expenditures
Automotive Products . . . $ 491,657 $ 84,942 $ (26,009) $ 19,129
Interior Furnishings . . 301,859 80,736 (2,441) 6,293
Wallcoverings . . . . . . 169,850 58,945 (17,549) 3,927
963,366 224,623 (45,999) 29,349
Corporate items . . . . . - - (13,618) 544
$ 963,366 $ 224,623 $ (59,617) $ 29,893
</TABLE>
a) Corporate items for the nine months ended October 29, 1994
include $6.0 million related to services performed by affiliates of
WP Partners and of Blackstone Partners in connection with the
Company's review of refinancing and strategic alternatives as well as
certain other advisory services.
b) Included in operating loss for the quarter and nine months
ended October 30, 1993 was the Company's write-off of goodwill of
$129,854. The goodwill written off by operating segment was $68,379
at Automotive Products, $31,604 at Interior Furnishings, and
$29,871 at Wallcoverings.
I-9
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (Concluded)
(Unaudited)
L. Commitments and Contingencies:
See "PART II - OTHER INFORMATION, Item 1. Legal Proceedings." 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.
See also "PART I - FINANCIAL INFORMATION, Item 2. Management's
Discussion and Analysis of Financial Condition and Results of
Operations - Environmental Matters" and Note G to Condensed
Consolidated Financial Report elsewhere herein.
M. Earnings Per Share:
Earnings (loss) per common share is based on the weighted average number
of shares of Common Stock outstanding during each period and the
assumed exercise of employee stock options less the number of
treasury shares assumed to be purchased from the proceeds, including
applicable compensation expense. In connection with the merger of
Holdings II into the Company, the 35,035,000 shares of Common Stock of
the Company outstanding prior to the Recapitalization were canceled and
approximately 28,164,000 shares of Common Stock were issued in exchange
for the common stock of Holdings II. All historical amounts and
earnings per share computations have been adjusted to reflect the
merger. Net loss has been adjusted by dividends and accretion
requirements on preferred stock and the excess of redemption cost over
book value of preferred stock to compute the loss applicable to
common shareholders.
I-10
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
INITIAL PUBLIC OFFERING AND RECAPITALIZATION
On July 13, 1994, the Company completed an initial public offering 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 Offering
and from the sale by the Company of an aggregate of approximately 8.8
million shares of Common Stock to affiliates of the Company's
principal shareholders, WP Partners and Blackstone Partners, together
with proceeds under the New Credit Facilities and available cash,
were used to effect a defeasance and redemption or repayment of
virtually all outstanding indebtedness and all outstanding preferred
stock of the Company and its subsidiaries. In addition, the Company's
$204.5 million of Subordinated PIK Bridge Notes were extinguished with
approximately $9.7 million redeemed in cash and approximately $194.8
million exchanged for approximately 18.5 million shares of Common
Stock. After the Offering and Recapitalization, approximately 70.5
million shares of Common Stock were outstanding.
The Recapitalization was 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. In connection with the
Recapitalization, Holdings II, formerly the sole common stockholder
of the Company, was merged into the Company and the Company
changed its name to Collins & Aikman Corporation. Concurrently,
Group was merged into its wholly-owned subsidiary, Collins & Aikman
Corporation, which changed its name to Collins & Aikman Products Co.
GENERAL
The Company's continuing business segments consist of Automotive
Products, which supplies interior trim products to the North
American automotive industry; Interior Furnishings, which
manufactures residential upholstery and commercial floorcoverings in
the United States; and Wallcoverings, which produces residential
wallcoverings in North America. The Company's net sales in the third
quarter of fiscal 1994 were $403.7 million, with approximately $246.0
million (60.9%) in Automotive Products, $102.0 million (25.3%) in
Interior Furnishings, and $55.7 million (13.8%) in Wallcoverings. 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.
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.
I-11
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (Continued)
RESULTS OF OPERATIONS
Discussion of results of each of the Company's operating segments
follows:
Automotive Products
Quarter Ended
October 29, 1994 October 30, 1993
Amount Percent Amount Percent
(amounts in thousands)
Net sales $ 245,970 100.0% $ 173,145 100.0%
Cost of goods sold 201,319 81.8 141,096 81.5
Gross margin 44,651 18.2 32,049 18.5
Selling, general & administrative
expenses 13,009 5.3 13,086 7.5
Goodwill write-off - - 68,379 39.5
Goodwill amortization - - 487 .3
Operating income (loss) $ 31,642 12.9% $ (49,903) (28.8)%
Nine Months Ended
October 29, 1994 October 30, 1993
Amount Percent Amount Percent
(amounts in thousands)
Net sales $ 675,834 100.0% $ 491,657 100.0%
Cost of goods sold 542,123 80.2 406,715 82.7
Gross margin 133,711 19.8 84,942 17.3
Selling, general & administrative
expenses 38,940 5.8 41,111 8.4
Goodwill write-off - - 68,379 13.9
Goodwill amortization - - 1,461 .3
Operating income (loss) $ 94,771 14.0% $ (26,009) (5.3)%
Net Sales: Automotive Products' net sales increased 42.1% to
approximately $246.0 million in the third quarter of 1994, up $72.8
million over the third quarter of 1993. The overall increase is
attributable to increased sales volume and reflects the impact of a
22.5% increase in North American automobile and light truck build in
the third quarter of 1994 from the third quarter of 1993. Of the
sales increase, 52% related to automotive bodycloth, 20% related to
convertible top and topstack products and 12% related to molded
floor carpet. The
I-12
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (Continued)
remainder related to other automotive products.
The bodycloth increase was due primarily to the Company's jacquard
velvets product line currently utilized in such high volume models
as the General Motors C/K Truck Line. Additional product placements,
which contributed to the overall increase in bodycloth volume, were
the Chevrolet Lumina, Pontiac Grand Am, the Ford Aerostar Van and
F-Series Truck and Chrysler Minivans.
The molded floor carpet increase was due to a 19% increase in unit
shipments principally related to increased production of high
volume lines including Cadillac Deville, Oldsmobile Aurora, Buick
Riviera, General Motors C/K Truck Line, Chrysler Minivans, Ford
Mustang, Toyota Camry, Honda Accord and the Dodge T-300 and Dakota
Trucks.
The convertible top and topstack increase resulted from Ford's full
production of the Mustang convertible.
For the first nine months Automotive Products' net sales of $675.8
million were $184.2 million higher than the comparable period in 1993.
For the first nine month period the North American automobile and light
truck build increased 13.7% from the comparable period of 1993.
Of Automotive Products' sales increase for the nine month period,
50% related to automotive bodycloth, 26% related to convertible top and
topstack products and 14% related to molded floor carpet. The remainder
related to other automotive products.
These increases primarily related to the vehicle lines discussed
above as well as increased volume during the first six months of 1994
for such vehicles as the Ford Escort, Chevrolet Camaro and Cavalier and
the Chrysler full size van. These factors resulted in the Company's
average revenue per North American-produced vehicle of approximately $52
for the nine month period ended October 29, 1994 compared to
approximately $43 for all of fiscal 1993.
Gross Margin: For the third quarter ended October 29, 1994, gross
margin was 18.2%, down from 18.5% in the comparable period in 1993,
and for the first nine months of 1994 Automotive Products' gross
margin rose to 19.8% of sales from 17.3% in 1993. During the third
quarter, the Company incurred premium freight costs related to capacity
constraints for certain automotive seat fabrics. These premium freight
costs offset the improvements in gross margin which resulted from
spreading fixed costs over higher production volume in both the
bodycloth and automotive carpet product lines and continued benefits of
reducing costs of nonconforming products. The Company expects
costs related to capacity constraints for automotive seat fabrics to
continue to offset benefits of high production volume in the fourth
quarter.
Selling, General and Administrative Expenses: Automotive Products'
selling, general and administrative expenses decreased .6% in the
third quarter of 1994. For the first nine months selling, general and
administrative expenses of $38.9 million was $2.2 million lower than
the comparable period in 1993. The reduction is attributable to lower
styling and product development costs in the segment's automotive
carpet product line and reduced administrative expenses resulting from
reductions in administrative head count and changes in postretirement
plan provisions.
I-13
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (Continued)
Interior Furnishings
Quarter Ended
October 29, 1994 October 30, 1993
Amount Percent Amount Percent
(amounts in thousands)
Net sales $ 102,029 100.0% $ 104,807 100.0%
Cost of goods sold 71,779 70.4 75,319 71.9
Gross margin 30,250 29.6 29,488 28.1
Selling, general & administrative
expenses 16,510 16.2 16,465 15.7
Goodwill write-off - - 31,604 30.1
Goodwill amortization - - 224 .2
Operating income (loss) $ 13,740 13.4% $ (18,805) (17.9)%
Nine Months Ended
October 29, 1994 October 30, 1993
Amount Percent Amount Percent
(amounts in thousands)
Net sales $ 311,927 100.0% $ 301,859 100.0%
Cost of goods sold 218,107 69.9 221,123 73.3
Gross margin 93,820 30.1 80,736 26.7
Selling, general & administrative
expenses 51,943 16.7 50,898 16.8
Goodwill write-off - - 31,604 10.5
Goodwill amortization - - 675 .2
Operating income (loss) $ 41,877 13.4% $ (2,441) (.8)%
Net Sales: Interior Furnishings' net sales decreased 2.7% to $102.0
million in the third quarter of 1994, down $2.8 million over the
third quarter of 1993. For the first nine months net sales of $311.9
million was $10.1 million higher than the comparable period in 1993.
During the third quarter, segment sales declined primarily due to the
Company's redeployment of manufacturing capacity from certain
Decorative Fabrics velvet furniture products to automotive seat
fabrics and to softness in the Mastercraft product line early in the
third quarter. These factors offset the increases in Decorative
Fabrics' sales which occurred during the first six months of 1994.
During the second quarter of 1994, the Company introduced its
"Advantage Fabrics" line which is specifically designed for the
promotional
I-14
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (Continued)
furniture lines. Since its introduction, the line has had modest sales
activity. The Floorcoverings group experienced increased net sales of
$3.8 million and $10.8 million, respectively, for the quarter and nine
month periods ended October 29, 1994 compared to the 1993 periods. The
Floorcoverings group net sales increase in the nine month period is
largely attributable to a 17% increase in volume, primarily in six foot
roll sales to the education and corporate markets.
Gross Margin: For the third quarter ended October 29, 1994, gross
margin was 29.6%, up from 28.1% in the comparable period, and for
the first nine months of 1994 Interior Furnishings' gross margin
rose to 30.1% of sales from 26.7% in 1993. The increase reflects
improvements in manufacturing efficiencies in the Decorative
Fabrics group resulting from the Mastercraft loom modernization program
and improved sales margins in the Floorcoverings group.
Selling, General and Administrative Expenses: Interior Furnishings'
selling, general and administrative expenses remained unchanged in the
third quarter of 1994 from the third quarter of 1993. For the first
nine months selling, general and administrative expenses of $51.9
million were $1.0 million higher than the comparable period in 1993.
The increases are primarily due to increased selling expenses related
to sales volume increases in the Floorcoverings group as well as
planned expansion of the group's sales staff.
Wallcoverings
Quarter Ended
October 29, 1994 October 30, 1993
Amount Percent Amount Percent
(amounts in thousands)
Net sales $ 55,723 100.0% $ 56,677 100.0%
Cost of goods sold 37,648 67.6 33,769 59.6
Gross margin 18,075 32.4 22,908 40.4
Selling, general & administrative
expenses 15,832 28.4 16,041 28.3
Goodwill write-off - - 29,871 52.7
Goodwill amortization - - 213 .4
Operating income (loss) $ 2,243 4.0% $ (23,217) (41.0)%
I-15
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (Continued)
Nine Months Ended
October 29, 1994 October 30, 1993
Amount Percent Amount Percent
(amounts in thousands)
Net sales $ 166,156 100.0% $ 169,850 100.0%
Cost of goods sold 112,400 67.6 110,905 65.3
Gross margin 53,756 32.4 58,945 34.7
Selling, general & administrative
expenses 45,509 27.4 45,983 27.1
Goodwill write-off - - 29,871 17.6
Goodwill amortization - - 640 .3
Operating income (loss) $ 8,247 5.0% $ (17,549) (10.3)%
Net Sales: Wallcoverings' net sales decreased 1.7% to $55.7 million in
the third quarter of 1994, down $1.0 million over the third quarter of
1993. For the first nine months net sales of $166.2 million was $3.7
million lower than the comparable period in 1993. The overall
decrease in net sales continues to reflect a modest unit
increase in the independent retailer ("dealer") and converter
businesses offset by a planned reduction in sales to independent
distributors and by a decrease in unit shipments to chain businesses.
The Company believes that the decrease in the chain business
reflects delayed product replenishment by the chain stores.
Gross Margin: For the third quarter ended October 29, 1994, gross margin
of 32.4% was down from 40.4% in the comparable period. For the first
nine months of 1994, Wallcoverings' gross margin dropped to 32.4% of
sales from 34.7% in 1993. The decrease in gross margin reflects
manufacturing inefficiencies early in the third quarter of 1994 related
to labor and materials utilization and the impact of spreading fixed
costs over reduced production volume. The above factors offset
improvements recognized in the first six months related to reductions
in product close-out costs and improved absorption of fixed costs due
to increased production of new product lines.
Selling, General and Administrative Expenses: Wallcoverings'
selling, general and administrative expenses decreased 1.3% to $15.8 million
in the third quarter of 1994, down $.2 million over the third quarter of 1993.
For the first nine months selling, general and administrative expenses of
$45.5 million was $.5 million lower than the comparable period in 1993.
The decrease was due to planned increases in sample and product
development costs offset by lower administrative and selling expenses.
Company As A Whole
Net Sales: Net sales increased 20.6% to $403.7 million in the third
quarter of 1994, up $69.1 million over the third quarter of 1993.
For the first nine months net sales of $1,153.9 million was $190.6
million higher than the comparable period in 1993. The overall net
sales increases reflect continued sales increases in the Company's
Automotive Products and Interior Furnishings segments offset by
continued sales decreases in the Wallcoverings segment as discussed
above.
I-16
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (Continued)
Gross Margin: Gross margin increased to $93.0 million in the third
quarter of 1994 or 23.0% of sales, up from $84.4 million or 25.2% of
sales in the third quarter of 1993. The third quarter decrease in
gross margin as a percent of sales results primarily from premium
freight costs in the Automotive Products segment incurred because of
capacity constraints and from manufacturing inefficiencies in the
Wallcoverings segment. For the first nine months of 1994, gross
margin rose to 24.4% from 23.3% in 1993. The increases in the gross
margin for the nine month period relate primarily to increased
volume in the Company's Automotive Products segment, which resulted in
lower fixed costs per unit, and manufacturing efficiencies in the
Interior Furnishings segment, offset by premium freight charges in the
Automotive Products segment and manufacturing inefficiencies in the
Wallcoverings segment, as described above.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses decreased in the third quarter of 1994 to
$46.4 million and were $3.6 million lower than the comparable period in
1993. The improvement is primarily attributable to the $3.4 million
or 77% reduction in unallocated corporate expenses to $1.0 million in
the third quarter of 1994 compared to the third quarter of 1993. The
decrease in the third quarter unallocated corporate expenses primarily
reflects a $1.4 million reduction in compensation expense related to
the Company's management equity plan and a reduction in fees to
Blackstone Partners and WP Partners of $.8 million. For the first
nine months of 1994 selling, general and administrative expenses of
$149.5 million were $2.2 million lower than the comparable period in
1993. For the first nine months of 1994, unallocated corporate
expenses of $13.1 million were $.6 million lower than the comparable
period in 1993. The overall decrease in unallocated corporate
expenses relates to the items discussed above, offset by fees for
services performed by affiliates of Blackstone Partners and of WP
Partners in connection with the Company's evaluation of refinancing and
strategic alternatives and certain other advisory services, as well
as an increase in second quarter compensation expense related to
options issued under the 1994 Employee Stock Option Plan during the
first quarter of 1994.
Goodwill Write-off and Amortization: During the third quarter ended
October 30, 1993, the Company wrote off its remaining goodwill of
$129.9 million. The write-off was based on management's assessment of
the Company's financial condition given the Company's capital
structure 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 at that
time, 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 at
October 30, 1993.
Goodwill amortization was $.9 million and $2.8 million in the quarter
and nine months ended October 30, 1993, respectively. No goodwill
amortization was recorded in the quarter and nine months ended October
29, 1994 as a result of the write-off of goodwill at October 30, 1993.
Interest Expense: Interest expense allocated to continuing operations,
net of interest income of $5.7 million in the first nine months of 1994
and $3.7 million in the first nine months of 1993, decreased to $64.8
million from $83.3 million in the comparable 1993 period. For the
first nine months of 1994 interest expense, including amounts
allocated to discontinued operations and excluding interest income,
decreased to $70.5 million from $102.5 million for the first nine
months of 1993. The overall decrease in interest expense was due to the
Recapitalization which reduced the overall outstanding indebtedness
and replaced higher fixed rate indebtedness with variable rate
borrowings.
I-17
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (Continued)
Loss on the Sale of Receivables: On July 13, 1994, the Company,
as part of the Recapitalization, sold through its Carcorp subsidiary,
an undivided senior interest in a pool of accounts receivable to
Chemical. In connection with the receivables sale, a loss of $2.5
million and $5.2 million was incurred in the third quarter and the
first nine months of 1994, respectively. Of this loss, $1.3 million
related to fees and expenses associated with the sales and $3.9 million
related to discounts on the receivables sold. See Note D to Condensed
Consolidated Financial Report.
Income Taxes: In the third quarter and nine months ended October 29,
1994, the provisions for income taxes were $3.0 million and $8.6
million compared with $4.1 million and $9.7 million, respectively for
the comparable 1993 period. In all periods income tax expense
consisted of foreign, state and franchise taxes.
Discontinued Operations: The Company's loss from discontinued
operations, including loss on disposals, was $132.4 million for the
first nine months of 1993. This loss principally related to the
accrual of additional reserves (i) 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 and (ii) to provide for
employee severance and other costs.
Extraordinary Loss on the Extinguishment of Debt: On July 13, 1994 the
Company as part of the Recapitalization recognized a loss on the
extinguishment of debt of $106.5 million. The second quarter 1994
loss consisted of $9.6 million of premiums paid to redeem
indebtedness and $96.9 million of unamortized discounts, deferred
financing charges and defeasance costs.
Net Income: The combined effect of the foregoing resulted in net
income of $31.0 million in the third quarter of 1994 compared to a net
loss of $129.9 million for the comparable period of 1993 and a net loss
of $55.5 million for the first nine months of 1994 compared to a net
loss of $288.4 million for the comparable period of 1993.
Earnings before interest, taxes, depreciation and amortization
("EBITDA"): For the quarter and nine month periods ended October 29,
1994 and October 30, 1993, EBITDA, which is operating income plus
depreciation and amortization and the non-cash portion of non-
recurring charges attributable to continuing operations for the Company,
is as follows (in thousands):
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
October 29, October 30, October 29, October 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Automotive Products $ 38,334 $ 25,455 $ 114,358 $ 63,349
Interior Furnishings 17,098 16,179 52,128 39,317
Wallcoverings 3,567 8,202 12,326 17,313
Corporate items (701) (3,886) (12,034) (12,001)
$ 58,298 $ 45,950 $ 166,778 $ 107,978
</TABLE>
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
I-18
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (Continued)
operations as determined by generally accepted accounting principles.
Pro Forma Results: The following unaudited pro forma results (in
thousands except for per share data) assume the Recapitalization had
occurred at the beginning of each fiscal year.
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
October 29, October 30, October 29, October 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales . . . . . . . . . . . $ 403,722 $ 334,629 $1,153,917 $ 963,366
Cost of goods sold . . . . . . 310,746 250,184 872,630 738,743
Selling, general and
administrative expenses . . . 46,391 49,278 147,954 149,360
Goodwill amortization and
write-off . . . . . . . . . . - 130,780 - 132,630
357,137 430,242 1,020,584 1,020,733
Operating income (loss) . . . . 46,585 (95,613) 133,333 (57,367)
Interest expense, net . . . . . (9,498) (6,342) (27,586) (19,680)
Loss on sale of receivables . . (2,466) (1,975) (7,315) (5,896)
Income (loss) from continuing
operations before income taxes 34,621 (103,930) 98,432 (82,943)
Income taxes . . . . . . . . . 2,975 3,976 8,323 9,292
Income (loss) from continuing
operations . . . . . . . . . $ 31,646 $ (107,906) $ 90,109 $ (92,235)
Per primary and fully diluted
common share:
Continuing operations . . . $ .44 $ (1.55) $ 1.25 $ (1.32)
Average common shares
outstanding . . . . . . . . . 72,109 69,617 72,147 69,617
EBITDA . . . . . . . . . . . . $ 58,298 $ 46,701 $ 168,278 $ 110,229
</TABLE>
The pro forma results 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, or to
project the Company's results of operations at any future date or for
any future period.
I-19
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (Continued)
LIQUIDITY AND CAPITAL RESOURCES
The Company and its subsidiaries had cash and cash equivalents
totalling $2.7 million and $81.4 million at October 29, 1994 and
January 29, 1994, respectively. The decrease in the Company's cash
balance is primarily due to the Recapitalization which occurred in
July 1994.
During the fourth quarter of 1993, the Company sold Kayser-Roth for
approximately $170 million (before the post-closing purchase price
adjustment described below) including a $70 million note. A portion of
the proceeds was used to repay $66 million of borrowings under a
Kayser-Roth credit facility. The Company's Engineering Group,
which was discontinued in 1992, was sold during the first quarter of
1993 for approximately $51 million. Additionally, the Company has
nearly completed the disposition of the real estate, inventory and
other assets of Builders Emporium, which the Company discontinued as of
the end of 1992. On April 27, 1994, the Kayser-Roth note was paid
with accrued interest resulting in cash proceeds of $71.2 million to
the Company. A post-closing purchase price adjustment of $5.1
million was paid to the purchaser of Kayser-Roth on September 1,
1994.
As part of the Recapitalization, the Company entered into the New
Credit Facilities on July 13, 1994. The New Credit Facilities
consist of (i) the Term Loan Facilities, comprised of term loans in
an aggregate principal amount of $475 million (including a $45 million
Canadian loan) and having a term of eight years, which were drawn in
full on the closing date, (ii) the Revolving Facility, which is in an
aggregate principal amount of up to $150 million and has a term of
seven years and (iii) the Receivables Facility, which is in an
aggregate face amount of up to $150 million and has a term of seven
years. The New Credit Facilities contain restrictive covenants
including maintenance of EBITDA (i.e. earnings before interest, taxes,
depreciation and amortization including the non cash write-off of goodwill)
and interest coverage ratios, leverage and liquidity tests and various
other restrictive covenants which are typical for such facilities. In
addition, C&A Products is prohibited from paying dividends or making
other distributions to the Company except to the extent necessary to
allow the Company to pay taxes, ordinary expenses, permitted
dividends on the Common Stock, the repurchase price for shares or
options pursuant to contractual obligations and permitted
investments in finance, foreign or acquired subsidiaries. The
Company does not believe such prohibition will have a material adverse
impact on the Company because all the Company's operations are
conducted, and all the Company's debt obligations are issued, by C&A
Products and its subsidiaries.
On September 30, 1994, the Company entered into a master equipment lease
agreement for a maximum of $50 million of machinery and equipment. As
part of the agreement, the Company sold and leased back $22.6 million of
machinery and equipment utilized in the Automotive Products and Interior
Furnishings segments. At October 29, 1994, the Company has $27.4 million
of availability under this lease agreement for future equipment
requirements of the Company.
The Company's principal sources of funds are cash generated from
continuing operating activities, borrowings under the Revolving
Facility and the sale of receivables under the Receivables Facility.
Net cash provided by the operating activities of the Company's
continuing operations was $21.6 million for the quarter ended October
29, 1994. Additionally, the Company generated $22.6 million of
cash in the sale/leaseback transaction discussed above. The
Company had a total of $84.5 million of borrowing availability
under its credit arrangements as of October 29, 1994. The total is
comprised of $75 million under the Revolving Facility and
approximately $9.5 million under a bank demand line of credit in
I-20
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (Continued)
Canada.
The Company's principal uses of funds for the next several years will
be to fund interest and principal payments on its indebtedness, net
working capital increases and capital expenditures. At October 29,
1994, the Company had total outstanding indebtedness of $572.8 million
(excluding approximately $10.9 million of outstanding letters of credit)
at an average interest rate of 6.9% per annum. Of the total
outstanding indebtedness, $550 million relates to the Term Loan
Facilities and the Revolving Facility.
Indebtedness under the Term Loan Facilities and Revolving Facility bears
interest at a per annum rate equal to the Company's choice of (i)
Chemical's Alternate Base Rate (which is the highest of Chemical's
announced prime rate, the Federal Funds Rate plus .5% 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 ("LIBOR") of
one, two, three, six, nine or twelve months, as selected by the Company,
plus the LIBOR Margin. Pursuant to the terms of the Term Loan
Facilities and the Revolving Facility, the "ABR Margin" is
initially .75% and the "LIBOR Margin" is initially 1.75%. The
weighted average rate of interest on the Term Loan Facilities and the
Revolving Facility at October 29, 1994 is 6.93%. The purchases by
the Buyers of participating interests in the receivables under the
Receivables Facility are made at an initial interest cost (for the
first 270 days) equal, at Carcorp's election, to LIBOR plus .625% per
annum or ABR. After the first 270 days, the interest cost under the
Receivables Facility, if it is not replaced with another receivables
facility, will match the interest rate on the other New Credit
Facilities. The weighted average interest rate on the sold interests
under the Receivables Facility at October 29, 1994 is 6.2%. Cash
interest paid during the quarters ended October 29, 1994 and October
30, 1993 was $15.3 million and $10.5 million, respectively. Cash
interest paid during the first nine months of 1994 and 1993 aggregated
approximately $66.2 million ($16.0 million of which was paid in
connection with the Recapitalization), and $64.0 million,
respectively. Due to the variable interest rates associated with
indebtedness under the New Credit Facilities, the Company is sensitive
to increases in interest rates. Accordingly, the Company during
September 1994 entered into a program to reduce its exposure to
increases in interest rates through the use of interest rate cap and
corridor agreements. Under these agreements, the Company has limited
its exposure through October 17, 1995 on $300 million of notional
principal amount at an average LIBOR strike price of 6.92% and on $250
million of notional principal amount from October 17, 1995 through
October 17, 1996 at an average LIBOR strike price of 7.50%.
Based upon amounts outstanding at October 29, 1994, a .5% increase in
LIBOR (5.6% at October 29, 1994) would impact interest costs by
approximately $2.75 million annually on the Term Loan Facilities and
the Revolving Facility and $.75 million annually on the Receivables
Facility.
The current maturities of long-term debt primarily consist of the
current portion of the Term Loan Facilities, vendor financing,
industrial revenue bonds and other miscellaneous debt. Repayments
of indebtedness under the New Credit Facilities commence in the third
fiscal quarter of 1995. The maturities of long-term debt of the
Company during the remainder of fiscal 1994 and for 1995, 1996, 1997
and 1998 are $.9 million, $17.8 million, $42.8 million, $60.8 million
and $76.2 million, respectively. In addition, the New Credit Facilities
provide for mandatory prepayments with certain excess cash flow of the
Company, net cash proceeds of certain asset sales or other
dispositions by the Company, net cash proceeds of certain sale/leaseback
transactions and net cash proceeds of certain issuances of debt
obligations.
I-21
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (Continued)
The Company makes capital expenditures on a recurring basis for
replacements and improvements. As of October 29, 1994, the Company
had approximately $19.8 million in outstanding capital expenditure
commitments. During 1994, the Company anticipates capital expenditures
will aggregate approximately $85 million as compared to $44.9
million in 1993. The increase is due primarily to the 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. Secondarily, this increase is due to the planned completion
of Automotive Products facilities in Mexico for approximately $9.5
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 is sensitive to price movements in its raw material
supply base. Although the price trends for many materials appear to be
increasing, the Company has not experienced an upward trend in its
major raw materials through the quarter ended October 29, 1994. The
Company may not be able to pass on future raw material price increases to
its customers due to pricing pressure from its customers.
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
(excluding the $5.1 million post-closing purchase price adjustment and
expenses related to the sale of Kayser-Roth) will be approximately
$27.5 million for 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 and into 1995 by net cash provided by operating activities from
continuing operations and by borrowings under existing bank credit
facilities.
From time to time, the Company evaluates acquisitions. The Company
expects to fund any future acquisitions with net cash provided by
operating activities from continuing operations, borrowings under bank
credit facilities or the issuance of securities.
Tax Matters
During the third quarter of 1994, the Company finalized its 1993 tax
return which adjusted its outstanding NOLs (net operating loss
carryforwards) as of January 29, 1994 to approximately $381.0 million
for Federal income tax purposes. These NOLs 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
I-22
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (Continued)
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. Because of the merger of Group and C&A Products, such
NOLs and credits may be used against the income and apportioned tax
liability of C&A Products, which the Company believes will have
sufficient taxable income and apportioned tax liability to fully use
such NOLs and to use a substantial portion of such tax credits.
The Recapitalization did 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 principal shareholders, or changes in the
composition of the principal shareholders, 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 had challenged the availability of $176.6 million of
the Company's approximately $381.0 million of NOLs. The IRS has
withdrawn $108.6 million of the proposed adjustments, but has raised
additional issues which bring the total amount being challenged to
$293.2 million. 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 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 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. 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, released by the Environmental
Protection Agency, the professional judgment of the Company's
environmental experts, outside environmental specialists and other
experts, and the likelihood that other parties which have
I-23
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. (Concluded)
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 11 additional sites
where the Company is alleged to be responsible for costs of
investigation or remediation. As of October 29, 1994, the Company's
estimate of its liability for these 26 sites is approximately
$31.4 million. As of October 29, 1994, the Company has established
reserves of approximately $33.5 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.
For additional information regarding the foregoing, see "PART
II - OTHER INFORMATION, Item 1. Legal Proceedings" elsewhere herein.
I-24
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There have been no material developments in legal proceedings involving
the Company or its subsidiaries since those reported in the Company's
Annual Report on Form 10-K for the fiscal year ended January 29, 1994
and the Company's Quarterly Report on Form 10-Q for the quarter ended
July 30, 1994, except as described below.
Derivative Litigation. On October 12, 1994, the Court approved
the stipulation of discontinuance with prejudice.
Insurance Coverage Litigation. On November 22, 1994, the Company
was served with a complaint filed by National Union Fire Insurance
Company of Pittsburgh, PA ("National Union") in the United States
District Court for the Central District of California. The complaint
seeks declaratory relief and the return of approximately $10 million
paid by National Union in defense costs and indemnity in respect of
a class action, captioned Glass, Molders, Pottery, Plastics and Allied
Workers International Union, AFL-CIO et al. v. Wickes Companies,
Inc. (the "OCF Action"), which was commended against Wickes
Companies, Inc. (the predecessor by merger to C&A Products) in or
about July 1988 and settled pursuant to an order entered in or about
October 1993. The complaint by National Union alleges, among other
things, that National Union did not have a duty to defend or indemnify
Wickes and that Wickes was unjustly enriched. On November 21,
1994, C&A Products filed suit against National Union in the United
States District Court for the Southern District of New York seeking
declaratory relief and damages relating to the amounts paid by
National Union in respect of the OCF Action.
Item 5. Other Information
On October 17, 1994, the Company announced the appointment of Anthony
Hardwick as Acting Chief Financial Officer, replacing Mark O. Remissong
who resigned on October 14, 1994, until a Chief Financial Officer is
appointed. Effective October 31, 1994, Robert C. Clark, Dean of Harvard
Law School, joined the Board of Directors of the Company, filling a
Board vacancy.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Please note that in the following description of exhibits, the title of
any document entered into, or filing made, prior to July 7, 1994
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 Collins & Aikman Holdings Corporation,
Collins & Aikman Group, Inc., WCI Holdings II Corporation, WCI
Holdings Corporation or Wickes Companies, Inc., if such documents and
filings were made prior to July 7, 1994.
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
4.1 - Restated Certificate of Incorporation of the Company is hereby incorporated by
reference to Exhibit 4.1 of Collins & Aikman Corporation's Report on Form 10-Q
for the fiscal quarter ended July 30, 1994.
4.2 - By-laws of the Company, as amended, are hereby incorporated by reference to
Exhibit 4.2 of Collins & Aikman Corporation's Report on Form 10-Q for the
fiscal quarter ended July 30, 1994.
II-1
<PAGE>
Exhibit
Number Description
4.3 - Specimen Stock Certificate for the Common Stock is hereby incorporated by
reference to Exhibit 4.3 of Amendment No. 3 to Collins & Aikman Holdings
Corporation's Registration Statement on Form S-2 (Registration No. 33-53179)
filed June 21, 1994.
4.4 - Indenture dated as of May 1, 1985, pursuant to which 11 3/8% Usable
Subordinated Debentures due 1997 of Collins & Aikman Products Co. (the
successor by merger to Collins & Aikman Group, Inc. and 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 - Credit Agreement dated as of June 22, 1994 between Collins & Aikman Products
Co. (formerly Collins & Aikman Corporation) as Borrower, WCA Canada, Inc., as
Canadian Borrower, the Company as Guarantor, the lenders named therein,
Continental Bank, N.A., and NationsBank, N.A. as Managing Agents, and Chemical
Bank as Administrative Agent is hereby incorporated by reference to Exhibit
4.5 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal
quarter ended July 30, 1994.
Collins & Aikman Corporation agrees to furnish to the Commission upon request
in accordance with Item 601(b)(4)(iii)(A) of Regulation S-K copies of
instruments defining the rights of holders of long-term debt of Collins &
Aikman Corporation or any of its subsidiaries, which debt does not exceed 10%
of the total assets of Collins & Aikman Corporation and its subsidiaries on a
consolidated basis.
10.1 - Amended and Restated Stockholders Agreement dated as of June 29, 1994 among
the Company, Collins & Aikman Group, Inc., Blackstone Capital Partners L.P.
and Wasserstein Perella Partners, L.P. is hereby incorporated by reference to
Exhibit 10.1 of Collins & Aikman Corporation's Report on Form 10-Q for the
fiscal quarter ended July 30, 1994.
10.2 - Employment Agreement dated as of June 16, 1989 between Wickes Companies, Inc.
and a former executive officer is hereby incorporated by reference to Exhibit
10.1 of Wickes Companies, Inc.'s Report on Form 10-K for the fiscal year ended
January 27, 1990.
10.3 - First Amendment to Employment Agreement dated as of March 20, 1990 between
Wickes Companies, Inc. and a former executive officer is hereby incorporated
by reference to Exhibit 10.2 of Wickes Companies, Inc.'s Report on Form 10-K
for the fiscal year ended January 27, 1990.
10.4 - Employment Agreement dated as of July 18, 1990 between Wickes Companies, Inc.
and an executive officer is hereby incorporated by reference to Exhibit 10.3
of Wickes Companies, Inc.'s Report on Form 10-K for the fiscal year ended
January 26, 1991.
10.5 - 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.
10.6 - Employment Agreement dated as of May 1, 1991 between Kayser-Roth Corporation
and a former 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.
II-2
<PAGE>
Exhibit
Number Description
10.7 - First Amendment to Employment Agreement dated as of May 1, 1991 between
Kayser-Roth Corporation and a former executive officer is hereby incorporated
by reference to Exhibit 10.9 of Collins & Aikman Holdings Corporation's Report
on Form 10-Q for the fiscal quarter ended July 31, 1993.
10.8 - Letter Agreement dated as of May 16, 1991 and Employment Agreement dated as of
July 22, 1992 between Collins & Aikman Corporation and an executive officer is
hereby incorporated by reference to Exhibit 10.7 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 February 24, 1994 between
Collins & Aikman Corporation and an executive officer is hereby incorporated
by reference to Exhibit 10.7 of Collins & Aikman Holdings Corporation's
Registration Statement on Form S-2 (Registration No. 33-53179) filed April 19,
1994.
10.10 - Letter Agreements dated as of May 16, 1991 between Collins & Aikman
Corporation and certain executive officers are hereby incorporated by
reference to Exhibit 10.14 of Collins & Aikman Holdings Corporation's
Registration Statement on Form S-2 (Registration No. 33-53179) filed April 19,
1994.
10.11 - Employment Agreement dated as of March 23, 1992 between Collins & Aikman
Group, Inc. and a former 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.
10.12 - First Amendment dated as of April 4, 1994 to Agreement dated as of March 23,
1992 between Collins & Aikman Group, Inc. and a former 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.
10.13 - Employment Agreement dated as of April 27, 1992 between Collins & Aikman
Corporation and an executive officer is hereby incorporated by reference to
Exhibit 10.16 of Collins & Aikman Holdings Corporation's Registration
Statement on Form S-2 (Registration No. 33-53179) filed April 19, 1994.
10.14 - Letter Agreement dated as of August 12, 1992 between Collins & Aikman Group,
Inc. and a former 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.
10.15 - Employment Agreement dated as of March 1, 1993 between Imperial Wallcoverings,
Inc. and an executive officer is hereby incorporated by reference to Exhibit
10.17 of Collins & Aikman Holdings Corporation's Registration Statement on
Form S-2 (Registration No.33-53179) filed April 19, 1994.
10.16 - Employment Agreement dated as of October 1, 1993 between Collins & Aikman
Corporation and a former executive officer is hereby incorporated by reference
to Exhibit 10.18 of Collins & Aikman Holdings Corporation's Registration
Statement on Form S-2 (Registration No. 33-53179) filed April 19, 1994.
10.17 - The Wickes Equity Share Plan is hereby incorporated by reference to Exhibit
10.11 of Collins & Aikman Holdings Corporation's Report on Form 10-K for the
fiscal year ended January 30, 1993.
II-3
<PAGE>
Exhibit
Number Description
10.18 - Collins & Aikman Corporation 1994 Executive Incentive Compensation Plan is
hereby incorporated by reference to Exhibit 10.22 of Amendment No. 4 to
Collins & Aikman Holdings Corporation's Registration Statement on Form S-2
(Registration No. 33-53179) filed June 27, 1994.
10.19 - Collins & Aikman Corporation Supplemental Retirement Income Plan is hereby
incorporated by reference to Exhibit 10.23 of Amendment No. 5 to Collins &
Aikman Holdings Corporation's Registration Statement on Form S-2 (Registration
No. 33-53179) filed July 6, 1994.
10.20 - 1993 Employee Stock Option Plan is hereby incorporated by reference to Exhibit
10.12 of the Registration Statement on Form S-2 of Collins & Aikman Holdings
Corporation (File No. 33-53179) filed April 19, 1994.
10.21 - 1994 Employee Stock Option Plan is hereby incorporated by reference to Exhibit
10.13 of the Registration Statement on Form S-2 of Collins & Aikman Holdings
Corporation (File No. 33-53179) filed April 19, 1994.
10.22 - 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.
10.23 - Warrant Agreement dated as of January 28, 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.
10.24 - Receivables Sale Agreement dated as of July 13, 1994 among Collins & Aikman
Products Co., Ack-Ti-Lining, Inc., 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 Carcorp, Inc. is hereby incorporated
by reference to Exhibit 10.24 of Collins & Aikman Corporation's Report on Form
10-Q for the fiscal quarter ended July 30, 1994.
10.25 - Receivables Transfer and Servicing Agreement dated as of July 13, 1994 among
Carcorp, Inc., Collins & Aikman Products Co., 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 is
hereby incorporated by reference to Exhibit 10.25 of Collins & Aikman
Corporation's Report on Form 10-Q for the fiscal quarter ended July 30, 1994.
10.26 - Lease, executed as of the 1st day of June 1987, between Dura Corporation and
Dura Acquisition Corp. is hereby incorporated by reference to Exhibit 10.24 of
Amendment No.5 to Collins & Aikman Holdings Corporation's Registration
Statement on Form S-2 (Registration No. 33-53179) filed July 6, 1994.
10.27 - Master Equipment Lease Agreement dated as of September 30, 1994, between
NationsBanc Leasing Corporation of North Carolina and Collins & Aikman
Products Co.
10.28 - Retention/Severance Agreement dated as of September 26, 1994 between Collins &
Aikman Products Co. and a former executive officer.
II-4
<PAGE>
Exhibit
Number Description
10.29 - Agreement dated as of October 17, 1994 among Collins & Aikman Products Co. and
a former executive officer.
11. - Computation of Earnings Per Share.
27. - Financial Data Schedule.
99. - Voting Agreement between Blackstone Capital Partners L.P. and Wasserstein
Perella Partners, L.P. is hereby incorporated by reference to Exhibit 99 of
Amendment No. 4 to Collins & Aikman Holdings Corporation's Registration
Statement on Form S-2 (Registration No. 33-53179) filed June 27, 1994.
(b) Reports on Form 8-K.
No current reports on Form 8-K were filed during the quarter for which this
report on Form 10-Q is filed.
</TABLE>
II-5
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
COLLINS & AIKMAN CORPORATION
(Registrant)
Dated: November 30, 1994 By: /s/ ANTHONY HARDWICK
Anthony Hardwick
Vice President, Controller and
Acting Chief Financial Officer
(On behalf of the Registrant and as
Principal Financial and Accounting Officer)
MASTER EQUIPMENT LEASE AGREEMENT
BETWEEN
NATIONSBANC LEASING CORPORATION
OF NORTH CAROLINA
AND
COLLINS & AIKMAN PRODUCTS CO.
September 30, 1994
<PAGE>
TABLE OF CONTENTS
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Agreement for Lease of Equipment; Covenant of Quiet Enjoyment . . . 7
3. Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . 7
(a) Initial Lease Supplement . . . . . . . . . . . . . . . . . . 7
(b) Subsequent Lease Supplements . . . . . . . . . . . . . . . . 8
(c) Additional Requirements . . . . . . . . . . . . . . . . . . . 9
4. Delivery and Acceptance of Equipment . . . . . . . . . . . . . . . 9
5. Interim Term; Basic Term; Early Termination . . . . . . . . . . . . 10
6. End of Term Delivery of Equipment . . . . . . . . . . . . . . . . . 11
7. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(a) Basic Payments . . . . . . . . . . . . . . . . . . . . . . . 11
(b) Supplemental Payments . . . . . . . . . . . . . . . . . . . . 11
(c) Method of Payment . . . . . . . . . . . . . . . . . . . . . . 11
8. Net Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
9. Lessor's Title; True Lease . . . . . . . . . . . . . . . . . . . . 12
(a) Lessor's Title . . . . . . . . . . . . . . . . . . . . . . . 12
(b) True Lease . . . . . . . . . . . . . . . . . . . . . . . . . 12
10. Use of Equipment; Compliance with Laws . . . . . . . . . . . . . . 12
11. Operation and Maintenance of Equipment . . . . . . . . . . . . . . 13
12. Replacement of Parts; Alterations; Modifications; Additions; and
Vendor-Financed Heads on Dornier Looms . . . . . . . . . . . . . . 13
13. Identification; Inspection; Reports; Change of Chief Executive
Office and/or Name . . . . . . . . . . . . . . . . . . . . . . . . 14
(a) Identification . . . . . . . . . . . . . . . . . . . . . . . 14
(b) Inspection . . . . . . . . . . . . . . . . . . . . . . . . . 14
(c) Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(d) Change of Chief Executive Office and/or Name . . . . . . . . 14
14. Assignment, Sublease or Transfer by Lessee; Assignment by Lessor;
Mergers, Consolidations, Sales of Assets and Acquisitions . . . . . 15
(a) Assignment, Sublease or Other Transfer by Lessee . . . . . . 15
(b) Assignment By Lessor . . . . . . . . . . . . . . . . . . . . 15
(c) Mergers, Consolidations, Sales of Assets and Acquisitions . . 16
15. Liens; Permitted Contests . . . . . . . . . . . . . . . . . . . . . 16
16. Loss, Damage or Destruction . . . . . . . . . . . . . . . . . . . . 17
(a) Risk of Loss, Damage or Destruction . . . . . . . . . . . . . 17
(b) Event of Loss with Respect to Equipment . . . . . . . . . . . 17
(c) Application of Other Payments Upon Event of Loss . . . . . . 18
(d) Application of Payments Not Relating to an Event of Loss . . 19
17. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(a) Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(b) Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(c) Evidence of Insurance . . . . . . . . . . . . . . . . . . . . 21
(d) Annual Insurance Certificate . . . . . . . . . . . . . . . . 21
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18A. General Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . 21
(a) Indemnity Obligation . . . . . . . . . . . . . . . . . . . . 21
(b) Contests . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(c) Refunds . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(d) Reports, Returns and Payments . . . . . . . . . . . . . . . . 22
(e) Survival . . . . . . . . . . . . . . . . . . . . . . . . . . 22
18B. Special Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . 22
(a) Assumptions . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Representations, Warranties and Covenants . . . . . . . . . . 23
(c) Indemnity Payment Conditions . . . . . . . . . . . . . . . . 24
(d) Right to Contest . . . . . . . . . . . . . . . . . . . . . . 24
(e) Survival of Indemnities . . . . . . . . . . . . . . . . . . . 25
19. General Indemnity . . . . . . . . . . . . . . . . . . . . . . . . 25
20. NO WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
21. Lessee's Representations, Warranties and Covenants . . . . . . . . 27
(a) Due Organization and Existence . . . . . . . . . . . . . . . 27
(b) Power and Authority . . . . . . . . . . . . . . . . . . . . . 27
(c) Due Authorization . . . . . . . . . . . . . . . . . . . . . . 27
(d) Enforceability . . . . . . . . . . . . . . . . . . . . . . . 27
(e) No Consents . . . . . . . . . . . . . . . . . . . . . . . . . 28
(f) No Liens . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(g) (intentionally omitted) . . . . . . . . . . . . . . . . . . . 28
(h) Financial Statements . . . . . . . . . . . . . . . . . . . . 28
(i) No Litigation . . . . . . . . . . . . . . . . . . . . . . . . 28
(j) Income Tax Return . . . . . . . . . . . . . . . . . . . . . . 28
(k) (intentionally omitted) . . . . . . . . . . . . . . . . . . . 29
(l) Investment Company . . . . . . . . . . . . . . . . . . . . . 29
(m) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(n) No Offer to Sell or Assign . . . . . . . . . . . . . . . . . 29
(o) Invoices . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(p) Adverse Contract . . . . . . . . . . . . . . . . . . . . . . 29
(q) Misrepresentation . . . . . . . . . . . . . . . . . . . . . . 29
(r) (intentionally omitted) . . . . . . . . . . . . . . . . . . . 29
(s) Chief Executive Office . . . . . . . . . . . . . . . . . . . 29
(t) Trade Names . . . . . . . . . . . . . . . . . . . . . . . . . 29
22. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . 29
(a) Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(b) Certain Covenants . . . . . . . . . . . . . . . . . . . . . . 29
(c) Other Covenants . . . . . . . . . . . . . . . . . . . . . . . 29
(d) Default under Other Documents - Lessee . . . . . . . . . . . 30
(e) Bankruptcy; Insolvency - Lessee . . . . . . . . . . . . . . . 30
(f) Misrepresentation - Lessee . . . . . . . . . . . . . . . . . 30
23. Remedies Upon Default . . . . . . . . . . . . . . . . . . . . . . . 30
(a) Return of Equipment . . . . . . . . . . . . . . . . . . . . . 30
(b) Sell, Use, Lease or Otherwise Employ Equipment . . . . . . . 30
(c) Excess of Casualty Loss Value over Fair Market Sales Value . 31
(d) Excess of Casualty Loss Value over Sales Proceeds . . . . . . 31
(e) Rescission . . . . . . . . . . . . . . . . . . . . . . . . . 31
24. Lessor's Right to Perform for Lessee . . . . . . . . . . . . . . . 31
25. Late Charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
26. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . 32
27. Transaction Costs, Fees and Expenses . . . . . . . . . . . . . . . 32
28. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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29. End of Term Purchase Options . . . . . . . . . . . . . . . . . . . 32
(a) Election Procedure . . . . . . . . . . . . . . . . . . . . . 32
(b) Lessee's Purchase . . . . . . . . . . . . . . . . . . . . . . 33
(c) Settlement Terms . . . . . . . . . . . . . . . . . . . . . . 33
30. Federal and State Tax Consequences . . . . . . . . . . . . . . . . 34
31. Financial Information . . . . . . . . . . . . . . . . . . . . . . . 34
32. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
33. Interest Rate Calculations . . . . . . . . . . . . . . . . . . . . 35
34. Personal Property Taxes . . . . . . . . . . . . . . . . . . . . . . 35
Exhibits
A - Lease Supplement and Acceptance Certificate
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<PAGE>
MASTER EQUIPMENT LEASE AGREEMENT
THIS MASTER EQUIPMENT LEASE AGREEMENT dated as of September 30, 1994 (as
supplemented, amended modified, restated or replaced from time to time the
"Agreement") is between NATIONSBANC LEASING CORPORATION OF NORTH CAROLINA, a
North Carolina corporation (the "Lessor"), having its principal place of
business at NationsBank Corporate Center, 100 North Tryon Street,
NC1007-12-01, Charlotte, North Carolina 28255-0001 and COLLINS & AIKMAN
PRODUCTS CO., a Delaware corporation (the "Lessee"), having its principal
place of business at 701 McCullough Drive, Charlotte, North Carolina 28262.
WITNESSETH:
WHEREAS, Lessee has requested Lessor to purchase the Equipment (as
defined hereinafter) and, simultaneously with such acquisition, to lease the
Equipment to Lessee for use in its operations; and
WHEREAS, Lessor is willing to purchase and lease the Equipment subject
to the terms and conditions hereinafter set forth, and Lessee has agreed to
lease the Equipment from Lessor on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
SECTION 1. Definitions. Unless the context otherwise requires, the
following terms shall have the following meanings for all purposes of this
Agreement and shall be equally applicable to both the singular and the plural
forms of the terms herein defined:
"Acceptance Date" means, with respect to any Equipment, the date on
which Lessor enters into the Overall Transaction and Lessee unconditionally
accepts such items of Equipment for lease hereunder, as evidenced by the
execution and delivery of such Lease Supplement related to such Equipment and
dated such date.
"Acquisition Cost" means, with respect to any Equipment, an amount equal
to the sum of (a) the total cost paid by Lessor for such Equipment, plus (b)
all excise, sales and use taxes and registration fees paid by Lessor on or
with respect to the acquisition of such Equipment, less (c) the total cost
paid by Lessor for or in connection with any such particular items of
Equipment which have been the subject of an Event of Loss and for which an
amount equal to the Casualty Loss Value for such particular items of Equipment
has been paid in full to Lessor.
"Acquisition Expiration Date" means the date set forth in the applicable
Lease Supplement with respect to such Equipment.
"Affiliate" means a Person which directly or indirectly through one or
more intermediaries controls or is controlled by, or is under common control
with, any Person or a Subsidiary of such Person. The term "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through
ownership of voting stock, by contract or otherwise.
"Appraisal Procedure" means the following procedure for determining the
Fair Market Sales Value or the Fair Market Rental Value of any property as the
case may be or any other amount which may, pursuant to any provision of any
Transaction Document, be determined by such procedure: if either party to
this Agreement shall have given written notice to the other party requesting
determination of such value by the Appraisal Procedure, the parties shall
consult for the purpose of appointing a qualified independent appraiser by
mutual agreement. If no such appraiser is so appointed within fifteen (15)
<PAGE>
days after such notice is given, each party shall appoint a qualified
independent appraiser within twenty (20) days of the giving of such notice.
If one (1) party, but not the other, appoints an appraiser pursuant to the
preceding sentence, then the appropriately appointed appraiser shall conduct
the appraisal. Any appraiser or appraisers appointed pursuant to the
foregoing procedure shall be instructed to determine such value within thirty
(30) days after his or their appointment. If the parties shall have appointed
a single appraiser, his determination of values shall be final. If two (2)
appraisers shall be appointed, the values determined shall be averaged. The
parties shall share equally the costs and expenses of the appraiser or the
appraisers, as the case may be.
"Assignee" means any Person to whom Lessor or any assignee has made any
assignment, sale or transfer referred to in Section 14(b) hereof.
"Basic Payment" means the amounts payable for the Equipment during the
Basic Term pursuant to Section 7(a) hereof.
"Basic Payment Date" means, with respect to any Equipment, each of the
dates set forth on the appropriate Lease Supplement with respect to such
Equipment.
"Basic Payment Factor" means, with respect to any Equipment, the Basic
Payment Factor set forth on each Lease Supplement with respect to such
Equipment.
"Basic Payment Period" means, with respect to any Equipment, each
quarterly period from the date immediately succeeding a Basic Payment Date to
the next occurring Basic Payment Date, except that the initial Basic Payment
Period under each Lease Supplement shall also begin on the date of execution
of such Lease Supplement.
"Basic Payment Reduced Factor" means, with respect to any Equipment, the
reduced payment factor achieved pursuant to the terms of Section 7(a) hereof
and set forth on the appropriate Lease Supplement with respect to such
Equipment.
"Basic Term" means, with respect to any Equipment, the Basic Term set
forth in each Lease Supplement with respect to such Equipment.
"Business Day" means any day other than a Saturday, a Sunday or any
other day on which banking institutions in Charlotte, North Carolina are
authorized by law to be closed.
"C&A" means Collins & Aikman Corporation, a Delaware corporation, and
its successors.
"C&A Credit Agreement" means the Credit Agreement dated as of June 22,
1994, as such has been amended, modified or supplemented to the date hereof
and as the same may be further amended, modified, supplemented, restated
and/or replaced from time to time, currently among Lessee, WCA Canada Inc.,
C&A, the financial institutions listed in Schedule 2.01 thereto, Continental
Bank, N.A. (now known as Bank of America Illinois) and NationsBank of North
Carolina, N.A., as managing agent and Chemical Bank, as administrative agent.
"C&A Credit Agreement Event of Default" means an Event of Default, as
such term is defined in the C&A Credit Agreement.
"Casualty Loss Value" means as of any Casualty Loss Value Date during
the Term an amount determined by multiplying (a) the sum of the Acquisition
Cost for all Equipment subject to an Event of Loss for which a payment of
Casualty Loss Value has not been previously made under this Agreement by (b)
the percentage set forth opposite such Casualty Loss Value Date on Annex B to
the Lease Supplement executed on the Acceptance Date for such Equipment.
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<PAGE>
"Casualty Loss Value Date" means the last day of each Basic Payment
Period.
"Code" means the Internal Revenue Code of 1986, as supplemented,
amended, modified, restated or replaced from time to time, and all rules and
regulations promulgated thereunder.
"Consolidated Subsidiary" means at any date any Subsidiary or other
entity the accounts of which would be consolidated with those of any Person in
its consolidated financial statements if such statements were prepared as of
such date.
"Default" means any event which with the giving of notice or the passage
of time or both would result in an Event of Default.
"Early Buyout Option Date" means the date set forth in the applicable
Lease Supplement.
"Early Termination Date" means the date set forth in the applicable
Lease Supplement.
"Equipment" means all items of equipment described in Annex A to the
various Lease Supplements executed by Lessor and Lessee in connection with
this Agreement, together with any Parts (including without limitation
replacement Parts) which may from time to time be incorporated in such
equipment and title to which shall have vested in Lessor, excluding any
vendor-financed head on any Dornier loom.
"Event of Default" shall have the meaning given to such term in Section
22 hereof.
"Event of Loss" means, with respect to any Equipment, any of the
following events: (a) loss of any Equipment or of the use thereof (for a
period equal to the lesser of ninety (90) days or the then remaining portion
of the Term) due to theft or disappearance during the Term, or the non-
existence of any Equipment at the expiration or termination of the Term, (b)
destruction, damage beyond repair, or rendition of any Equipment permanently
or temporarily for longer than a commercially reasonable period of time, unfit
for normal use for any reason whatsoever, (c) any damage to any Equipment
which results in an insurance settlement with respect to such Equipment on the
basis of a total loss or (d) the condemnation, confiscation, seizure, or
requisition of use or title to any Equipment (for a period equal to the lesser
of twelve (12) months or the then remaining portion of the Term) by any
governmental authority under the power of eminent domain or otherwise.
"Expiration Date" means, with respect to any Equipment, the last day of
the Term.
"Fair Market Rental Value" means, the value which would obtain in an
arm's length transaction between an informed and willing lessee and an
informed and willing lessor, each under no compulsion to enter into such
lease. If the parties are unable to agree on the Fair Market Rental Value
within 120 days prior to the Expiration Date, such Fair Market Rental Value
shall be determined by the Appraisal Procedure.
"Fair Market Sales Value" means, with respect to any Equipment, the
value which would obtain in an arm's length transaction between an informed
and willing buyer (other than a lessee currently in possession or a used
equipment dealer) and an informed and willing seller under no compulsion,
respectively, to buy or sell. If the parties are unable to agree on the Fair
Market Sales Value within thirty (30) days of Lessor's giving of notice as
specified in Section 23(c) hereof, such Fair Market Sales Value shall be
determined by the Appraisal Procedure.
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<PAGE>
"Improvement" shall have the meaning given to such term in Section 12
hereof.
"Indemnified Party" shall have the meaning given to such term in Section
18A hereof.
"Interim Term" means, with respect to each item of Equipment, the period
of time from and including the Acceptance Date to and including the Interim
Term Expiration Date.
"Interim Term Expiration Date" shall have the meaning given to such term
in the applicable Lease Supplement.
"Lease Supplement" means a Lease Supplement and Acceptance Certificate
substantially in the form of Exhibit A hereto, to be executed by Lessor and
Lessee covering each item of the Equipment accepted under the terms of this
Agreement on each Acceptance Date, in accordance with the provisions of
Section 4 hereof.
"Lien" means any interest in property securing any obligation owed to,
or claimed by, a Person other than the owner of the property, whether such
interest is based on the common law, statute or contract, and including,
without limitation, the lien or security interest arising from a mortgage,
encumbrance, pledge, security agreement, conditional sale or trust receipt or
a lease, consignment or bailment for security purposes.
"Lessor Lien" means any Lien upon the Equipment arising as a result of
(a) claims against Lessor not related to the ownership, leasing, use or
operation of the Equipment or to any transactions contemplated by any of the
Transaction Documents, (b) acts in breach of a covenant or agreement of Lessor
contained in any Transaction Document, (c) Taxes or Other Impositions imposed
against Lessor which are not indemnified against by Lessee pursuant to any
Transaction Document or (d) claims against Lessor arising out of the transfer,
whether voluntary or involuntary, by Lessor of all or any portion of its
interest in the Equipment or the Transaction Documents.
"Net Proceeds of Sale" means the net amount received by Lessor from a
Third Party Purchaser of all (but not less than all) the Equipment described
on a particular Lease Supplement pursuant to a sale of all (but not less than
all) such Equipment under Section 23(b) or Section 29 hereof.
"Overall Transaction" means all of those transactions referred to in,
provided for in, or contemplated by, this Agreement, including, without
limitation, the financing, operation and management of the Equipment.
"Overdue Rate" means the lesser of the maximum rate permitted by
applicable law and a per annum interest rate equal to the Prime Rate plus two
percent (2%).
"Parts" means all appliances, parts, instruments, appurtenances,
accessories and miscellaneous property of whatever nature that may from time
to time be incorporated or installed in or attached to or otherwise part of
the Equipment.
"Payments" means, collectively, Basic Payments and Supplemental
Payments.
"Permitted Contest" means any contest pursued by Lessee, at its expense,
in good faith and by appropriate proceedings with respect to any Permitted
Lien or any Taxes or Other Impositions that Lessee and Lessor reasonably
believe may be contested in a manner that would not result in (a) the
collection of, or other realization upon, the Permitted Lien or any Taxes or
Other Impositions so contested, (b) the sale, forfeiture or loss of any item
of Equipment, any Part, the Payments or any portion thereof, or under any
document, instrument, agreement or contract entered into in relation hereto or
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<PAGE>
otherwise in relation to the Equipment, (c) any interference with the use of
any item of Equipment or any Part thereof, or (d) any interference with the
payment of the Payments or any portion thereof.
"Permitted Lien" means a Lien permitted by the provisions of Section 15
hereof.
"Permitted Sublease" means a sublease (a) to which Lessor has given its
prior written consent (which consent shall not be unreasonably withheld), (b)
the sublessee with respect to which shall be organized under the laws of the
United States or any state thereof and shall have its principal place of
business in the United States, (c) the term of which shall in no event exceed
the then remaining portion of the Term and (d) which shall be subordinate in
all respects to this Agreement; provided, however, notwithstanding the
foregoing, the definition of "Permitted Sublease" shall also include a
sublease of any item of the Equipment between Lessee and an Affiliate of
Lessee which sublease may be entered into without obtaining the prior written
consent of Lessor to the extent (i) such Affiliate satisfies the requirements
of subsection (b) of this definition and (ii) the sublease to such Affiliate
satisfies the requirements of subsections (c) and (d) of this definition.
"Person" means any individual, corporation, partnership, joint venture,
association, joint stock company, trust, trustee(s) of a trust, unincorporated
organization, or government or governmental authority, agency or political
subdivision thereof.
"Prime Rate" means the rate of interest publicly announced by
NationsBank of North Carolina, N.A. in Charlotte, North Carolina as its "prime
rate". The Prime Rate is not necessarily the best or lowest rate of interest
offer by NationsBank of North Carolina, N.A.
"Replacement" shall have the meaning given to such term in Section 12
hereof.
"Replacement Item" means any item of equipment conveyed to Lessor
pursuant to Section 16(b) hereof in replacement of any item of Equipment.
"Required Alteration" shall have the meaning given to such term in
Section 12 hereof.
"Sales Expenses" means (a) all property, excise, sales and use taxes and
other taxes (as such may be applicable to the sale or transfer of the
Equipment), (b) all reasonable fees, costs and expenses of such sale or
transfer of the Equipment (including, without limitation, registration fees
and fees, reasonable costs and expenses of attorneys or those reasonably
associated with transportation, storage, security or insurance) incurred by
Lessor and (c) any and all other amounts reasonably incurred in connection
with such sale or transfer of the Equipment for which, if not paid, Lessor
would be liable or which, if not paid, would constitute a Lien on the
Equipment, or any Part.
"Seller" means each seller executing a Warranty Bill of Sale in favor of
Lessor with respect to any Equipment.
"Subsidiary" of any Person means any corporation of which more than
fifty percent (50%) of the voting rights of the outstanding capital stock at
the time of determination is owned directly or indirectly by such Person or
one of the Subsidiaries of such Person.
"Supplemental Payments" means all amounts, liabilities and obligations
which Lessee assumes or agrees to pay hereunder to Lessor or others,
including, without limitation, payments of Casualty Loss Value and
indemnities, but excluding Basic Payments.
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<PAGE>
"Taxes or Other Impositions" shall have the meaning given to such term
in Section 18A hereof.
"Term" means Interim Term and the Basic Term, unless this agreement is
sooner terminated pursuant to the provisions hereof.
"Termination Value" means, with respect to any Equipment, an amount
determined by multiplying the Acquisition Cost of such Equipment by the
Termination Value Percentage for such Equipment as of the Expiration Date;
provided, however, to the extent this Agreement expires on a date which is not
a Basic Payment Date, the Termination Value Percentage shall be determined as
of the immediately preceding Basic Payment Date.
"Termination Value Percentage" means each termination value percentage
identified on Annex C to each Lease Supplement for the applicable Basic
Payment Date.
"Third Party Purchaser" means a third party purchaser of the Equipment
which is selected by Lessee, is financially capable of purchasing the
Equipment and is not an Affiliate of Lessee.
"Transaction Costs" means all the costs, fees and expenses referenced in
Section 27 hereof.
"Transaction Documents" means this Agreement, each Lease Supplement,
each Warranty Bill of Sale and the Uniform Commercial Code financing
statements (and with respect to each of the foregoing, all supplements,
amendments and modifications thereto) whether heretofore, now or hereafter
executed.
"Warranty Bill of Sale" means each warranty bill of sale, in form and
substance reasonably satisfactory to Lessor, referring to the various items of
the Equipment duly executed by a Seller thereof in favor of Lessor and dated
as of the Acceptance Date for such Equipment.
The words "this Agreement", "herein", "hereunder", "hereof", or other
like words mean and include this Agreement and the Lease Supplements and any
amendments and supplements hereto or thereto.
SECTION 2. Agreement for Lease of Equipment; Covenant of Quiet
Enjoyment. Subject to, and upon all of the terms and conditions of this
Agreement, Lessor hereby agrees to lease to Lessee and Lessee hereby agrees to
lease from Lessor, each item of the Equipment from and including the
Acceptance Date therefor for the duration of the Term. Provided that no Event
of Default has occurred and is continuing, Lessor agrees that it shall not
interfere with Lessee's (or any sublessee pursuant to a Permitted Sublease)
quiet enjoyment, operation, use or possession of the Equipment during the
Term.
SECTION 3. Conditions Precedent.
(a) Initial Lease Supplement. The obligations of Lessor to
purchase the Equipment specified on the Lease Supplement dated as of the date
hereof and to lease the same to Lessee and enter into the Overall Transaction
are subject to the delivery to Lessor on or prior to the date hereof the
following documents each in form and substance reasonably satisfactory to
Lessor:
(i) an officer's certificate or certificates from Lessee:
(A) certifying Lessee's certificate of incorporation, by-laws and
resolutions, with such resolutions authorizing the Overall Transaction
and Lessee's execution, delivery and performance of this Agreement; (B)
containing an incumbency certification of Lessee with the name(s),
title(s) and specimen signature(s) of the person or persons authorized
on behalf of Lessee to execute this Agreement; (C) stating that no
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<PAGE>
material adverse change has occurred in the condition of Lessee
(financial or otherwise) since July 30, 1994 which would materially
impair the ability of Lessee to pay and perform its obligations under
this Agreement; and (D) stating that no Default or Event of Default
shall have occurred and be continuing as of such date;
(ii) (intentionally omitted);
(iii) a written opinion of counsel for Lessee;
(iv) a certificate of insurance evidencing the coverages
required under Section 17 hereof with respect to the Equipment
referenced in the Lease Supplement dated as of the date hereof;
(v) the Lease Supplements, duly executed by Lessee, and
dated as of the date hereof with respect to the Equipment accepted by
Lessee and subjected to the terms of this Agreement as of the date
hereof;
(vi) Uniform Commercial Code filings listed on Schedule 1
hereto duly executed by Lessee;
(vii) a Warranty Bill of Sale specifically covering each
item of the Equipment referenced in the Lease Supplements dated as of
the date hereof;
(viii) good standing certificates from the Secretary of State
of Lessee's state of incorporation, the state of Lessee's principal
place of business and the state where the Equipment shall be initially
located as designated in the respective Lease Supplement;
(ix) UCC-11 lien search results and all releases of liens
as reasonably required by Lessor;
(x) tax lien searches against Lessee and all releases of
such liens as reasonably required by Lessor; and
(xi) judgment lien searches against Lessee and all releases
of such liens as reasonably required by Lessor.
(b) Subsequent Lease Supplements. The obligations of Lessor to
purchase Equipment on the respective Acceptance Date(s) therefor after the
date hereof and to enter into the Lease Supplement with respect thereto is
subject to the delivery to Lessor on such Acceptance Date of the following
documents each in form and substance reasonably satisfactory to Lessor:
(i) the Lease Supplement, duly executed by Lessee and
dated such Acceptance Date with respect to the Equipment accepted by
Lessee and subjected to the terms of this Agreement on such Acceptance
Date;
(ii) Uniform Commercial Code filings as deemed appropriate
by Lessor's counsel duly executed by Lessee;
(iii) a Warranty Bill of Sale specifically referring to each
item of the Equipment accepted by Lessee and subjected to the terms of
this Agreement on such date, duly executed by the Seller thereof in
favor of Lessor and dated such Acceptance Date;
(iv) a certificate dated as of such Acceptance Date from an
officer of Lessee stating that there has been no material adverse change
in the business, conditions or operations (financial or otherwise) of
Lessee and its Consolidated Subsidiaries since July 30, 1994, that no
Default or Event of Default has occurred and is continuing from the date
of the Agreement to the respective Acceptance Date and that the
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representations and warranties of Lessee in the Agreement are true and
correct as of such date, except to the extent that such representations
and warranties relate exclusively to an earlier point in time;
(vi) a certificate of insurance evidencing the coverages
required under Section 17 hereof with respect to the Equipment
referenced in the Lease Supplement dated as of such Acceptance Date;
(vii) UCC-11 lien search results and all releases of liens
as reasonably required by Lessor;
(viii) tax lien searches against Lessee and all releases of
such liens as reasonably required by Lessor; and
(ix) judgment lien searches against Lessee and all releases
of such liens as reasonably required by Lessor.
(c) Additional Requirements. The obligations of Lessor to
purchase the items of Equipment on the respective Acceptance Dates therefor
and to enter into the respective Lease Supplement are also subject to:
(i) the absence on the Acceptance Date of any Liens on the
Equipment, other than any Permitted Lien;
(ii) the aggregate Acquisition Cost of all Equipment
financed hereunder on any given date will not exceed the amount
specified in Lessor's credit approval for such Equipment;
(iii) the Acceptance Date shall be a date between and
inclusive of the date hereof and the Acquisition Expiration Date;
(iv) Lessee shall have paid all fees and expenses due and
owing to Lessor with respect to the Overall Transaction;
(v) in its sole discretion, Lessor shall have agreed in
writing to purchase items of Equipment in addition to those referenced
in the previously executed Lease Supplement(s) and Lessor shall have
obtained all internal approvals as Lessor shall have deemed necessary
and/or appropriate; and
(vi) Lessor shall have received such other documents,
appraisals, certificates, financing statements and other items, in form
and substance satisfactory to Lessor, as Lessor may reasonably require.
SECTION 4. Delivery and Acceptance of Equipment. Lessor shall not be
liable to Lessee for any failure or delay in obtaining the Equipment or making
delivery thereof. Lessor hereby appoints Lessee as Lessor's agent for the
sole and limited purpose of accepting delivery of each item of the Equipment.
On the Acceptance Date for such Equipment Lessee shall promptly inspect each
item of Equipment, and unless Lessee gives Lessor prompt written notice of any
defect in or other proper objection to any item of such Equipment, Lessee
shall promptly upon completion of such inspection execute and deliver to
Lessor the Lease Supplement, dated the Acceptance Date. Lessor shall pay to
the Seller the Acquisition Cost of the Seller's Equipment referenced in the
applicable Lease Supplement if all of the conditions precedent specified in
Section 3 hereof have been fulfilled to Lessor's reasonable satisfaction. The
execution of the Lease Supplement by Lessee and Lessor shall evidence that
each item of Equipment has been accepted under this Agreement, upon and
subject to all of the terms, conditions and provisions hereof and shall
constitute Lessee's unconditional and irrevocable acceptance of the Equipment
for all purposes under this Agreement. Lessee's execution of the Lease
Supplement shall constitute Lessee's acknowledgement and agreement that, as
between Lessor and Lessee, each item of Equipment has been inspected to
Lessee's satisfaction, is in good operating order, repair and condition, is of
a size, design, capacity and manufacture selected by Lessee, that each item of
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Equipment is duly certified or licensed by any governmental entity which is
charged with issuing such certificates or licenses and that Lessee has
unconditionally accepted each item of Equipment under this Agreement.
SECTION 5. Interim Term; Basic Term; Early Termination.
(a) Interim Term. There shall be an Interim Term for that
portion of the Equipment leased on the Acceptance Date with respect to
such Equipment and such term shall end on the Interim Term Expiration
Date with respect thereto, both dates inclusive. During the Interim
Term no Basic Payments pursuant to the provisions of Section 7 of this
Agreement shall be due.
(b) Basic Term. The Basic Term for lease of each item of the
Equipment hereunder shall commence and end on the dates set forth in the
applicable Lease Supplement therefor.
(c) Early Termination; Early Buy Out Option.
(i) Assuming there exists no Event of Default, the Lessee may
terminate this Agreement with respect to all but not less than all of
the Equipment (or with Lessor's consent which shall not be unreasonably
withheld, Lessee may exercise such right with respect to certain Lessee-
designated items of the Equipment having an aggregate Acquisition Cost
of no less than $250,000) by: (A) giving to Lessor forty-five (45) days
written notice prior to an Early Termination Date as set forth in the
applicable Lease Supplement, (B) providing to Lessor a certificate
executed by an officer of the Lessee certifying that the Equipment has
become obsolete or surplus to its needs, (C) paying to Lessor an amount
equal to all Basic Payments and Supplemental Payments then due and owing
or accrued and (D) selling the pertinent Equipment for cash to a Third
Party Purchaser and paying the sales proceeds to the Lessor. In the
event such sale proceeds are less than Termination Value for such
Equipment, then Lessee shall pay the Lessor the difference between the
sale proceeds and Termination Value for such Equipment. Lessor shall
retain any sale proceeds in excess of such Termination Value. Lessee
shall also pay all Sales Expenses incurred in connection with the
transfer of such Equipment. Upon payment by Lessee of the amounts
specified above, the Term shall end and Lessor shall transfer all of its
right, title and interest in and to the Equipment to Third Party
Purchaser on an "as-is", "where-is" basis without recourse,
representation or warranty by Lessor except as to the absence of Lessor
Liens.
(ii) Assuming there exists no Event of Default, the Lessee may
terminate this Agreement and purchase all but not less than all of the
Equipment (or with Lessor's consent which shall not be unreasonably
withheld, Lessee may exercise such right with respect to certain Lessee-
designated items of the Equipment having an aggregate Acquisition Cost
of no less than $250,000) by: (A) giving to Lessor forty-five (45) days
written notice prior to the Early Buyout Option Date set forth in the
applicable Lease Supplement and (B) paying to Lessor an amount equal to
the sum of (1) with respect to the Equipment, all Basic Payments and
Supplemental Payments then due and owing or accrued plus (2) an amount
equal to the Acquisition Cost multiplied by (x) 40.77% for Equipment
with a five-year recovery period pursuant to Section 168(c)(1) of the
Code and (y) 41.21% for Equipment with a seven-year recovery period
pursuant to Section 168(c)(1) of the Code. Lessee shall also pay all
Sales Expenses incurred in connection with the purchase of such
Equipment. Upon payment by Lessee of the amounts specified above, the
Term shall end and Lessor shall transfer all of its right, title and
interest in and to the Equipment to Lessee on an "as-is", "where-is"
basis without recourse, representation or warranty by Lessor except as
to the absence of Lessor Liens.
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SECTION 6. End of Term Delivery of Equipment.
If this Agreement shall be in full force and effect and Lessee shall not
have purchased the Equipment prior to the Expiration Date or elected to
purchase the Equipment in accordance with Section 29 hereof, then on the
Expiration Date Lessee shall deliver, at Lessee's expense, all requested
Equipment to Lessor to a location or locations within the southeastern United
States within 500 miles of the original location of the Equipment as specified
in writing by Lessor. At the time of such return to Lessor or delivery to the
third party, each item of Equipment (and each part or component thereof) shall
(i) be in good operating order, and in the repair and condition as when
originally delivered to Lessee, ordinary wear and tear from proper use thereof
excepted, (ii) be capable of being operated without further inspection,
repair, replacement, alteration or improvement, (iii) be in accordance and
compliance with any and all material statutes, laws, ordinances, rules and
regulations of any federal, (with respect to the state and local jurisdictions
where the Equipment is last operated by Lessee prior to the Expiration Date)
state or local governmental body, agency or authority applicable to the use
and operation of such item of Equipment, and (iv) be free and clear of all
Liens, other than Lessor Liens.
SECTION 7. Payments.
(a) Basic Payments. Lessee hereby agrees to pay Lessor Basic
Payments for the Equipment from and including the commencement date of the
Basic Term as set forth in the applicable Lease Supplement for each item of
Equipment and throughout the Basic Term, in consecutive quarterly installments
on each Basic Payment Date, with each installment in an amount equal to the
Basic Payment Factor set forth on the Lease Supplement applicable to such
items of Equipment hereto multiplied by the Acquisition Cost thereof. In the
event the Lessee achieves a senior debt rating of Baa3 or better from Moody's
Investors Services, Inc. or a debt rating of BBB- or better from Standard &
Poor's Corporation and notifies Lessor in writing of the achievement of either
such rating for Lessee's senior debt, the Basic Payment Factor for each item
of Equipment set forth in the applicable Lease Supplement shall decrease to
the Basic Payment Reduced Factor set forth in the applicable Lease Supplement.
The Basic Payment Reduced Factor shall become effective for the next occurring
full Basic Payment Period following Lessee's notice to Lessor of the
achievement of either such rating for Lessee's senior debt, and the Basic
Payment Reduced Factor shall be multiplied by the Acquisition Cost for such
Equipment to compute the Basic Payments for the then remaining portion of the
Term. Basic Payments shall remain payable in consecutive quarterly
installments on each Basic Payment Date.
(b) Supplemental Payments. Lessee agrees to pay Lessor, or to
whomsoever shall be entitled thereto as expressly provided herein, all
Supplemental Payments promptly as the same shall become due and owing, and in
the event of any failure on the part of Lessee to pay any such Supplemental
Payment hereunder Lessor shall have all rights, powers and remedies provided
for herein or by law or equity or otherwise in the case of nonpayment of Basic
Payments.
(c) Method of Payment. If the date that any Payment is due is
other than on a Business Day, the Payment otherwise payable on such date shall
be payable on the next succeeding Business Day. All Basic Payments and
Supplemental Payments required to be made by Lessee to Lessor hereunder shall
be made in immediately available funds and in United States dollars. In the
event of any assignment to an Assignee pursuant to Section 14(b) hereof, all
payments which are assigned to such Assignee, whether Basic Payments,
Supplemental Payments or otherwise, shall be paid in the same manner specified
herein for payments to Lessor at such address as shall be designated in
writing by such Assignee. Time is of the essence in connection with the
payment of Basic Payments and Supplemental Payments.
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SECTION 8. Net Lease. This Agreement is a net lease and Lessee
acknowledges and agrees that Lessee's obligations hereunder, including,
without limitation, its obligations to pay all Payments payable hereunder,
shall be absolute and unconditional under any and all circumstances and shall
be paid without notice or demand and without any abatement, reduction,
diminution, setoff, defense, counterclaim or recoupment whatsoever, including,
without limitation, any abatement, reduction, diminution, setoff, defense,
counterclaim or recoupment due or alleged to be due to, or by reason of, any
past, present or future claims which Lessee may have against Lessor, any
Assignee, or the manufacturer of any item of the Equipment, any Part or unit
or component of the Equipment, or any other Person for any reason whatsoever.
Except to the extent expressly provided herein, and without in any manner
limiting the generality of the foregoing sentence, the obligations and
liabilities of Lessee hereunder shall in no way be released, discharged or
otherwise affected for any reason, including, without limitation: (a) any
defect in any item of the Equipment, any Part or unit or component of the
Equipment, or the condition, design, operation or fitness for use thereof; (b)
any damage to, or any loss, abandonment, salvage, scrapping or destruction of,
any item of the Equipment, any Part or unit or component of the Equipment; (c)
any Liens or rights of others with respect to any item of the Equipment, any
Part or unit or component of the Equipment; (d) any prohibition or
interruption of or other restriction against Lessee's use, operation or
possession of any item of the Equipment, any Part or unit or component of the
Equipment, for any reason whatsoever, or any interference with such use,
operation or possession by any Person or entity; (e) any failure by Lessor to
perform any of its obligations herein contained; (f) any other indebtedness or
liability, howsoever and whenever arising, of Lessor or of any Assignee or of
Lessee to any other Person; (g) any insolvency, bankruptcy or similar
proceedings by or against Lessor, any Assignee, any guarantor of Lessee's
obligations or Lessee; or (h) any other reason whatsoever, whether similar or
dissimilar to any of the foregoing, any present or future law to the contrary
notwithstanding; it being the intention of the parties hereto that the Basic
Payments and Supplemental Payments payable by Lessee hereunder shall continue
to be payable in all events and in the manner and at the times herein
provided, without notice or demand, unless the obligation to pay the same
shall be terminated pursuant to the express provisions of this Agreement.
SECTION 9. Lessor's Title; True Lease. (a) Lessor's Title. Title to
the Equipment shall at all times remain in Lessor and at no time during the
Term shall title become vested in Lessee.
(b) True Lease. This Agreement is a lease intended as a true
lease and not as a lease intended as security. Lessee will make no claim nor
assert any right to the Equipment or any component thereof inconsistent with
Lessor's ownership thereof and will make appropriate entries upon its books
and records reflecting Lessor's ownership of the Equipment and each component
thereof.
SECTION 10. Use of Equipment; Compliance with Laws. Lessee agrees that
each item of Equipment will be used and operated only (a) for purposes or
operations in the ordinary course of its business and at the location(s) set
forth on the applicable Lease Supplement (or at such other locations as Lessee
may notify Lessor of in writing but in any event within the United States) and
(b) in the manner set forth in, and in accordance with, the terms, conditions
and provisions of the insurance policy or policies providing the coverages
specified in Section 17 hereof. In no event shall Lessee use or operate any
item of Equipment, or knowingly permit any item of Equipment to be used or
operated, for any purpose for which such item of Equipment is not designed or
reasonably suitable, or in any fashion that may reasonably subject such item
of Equipment to any Liens, other than Permitted Liens, or in any area excluded
from coverage by any such insurance policy or policies. Lessee further agrees
that each item of Equipment will be used and operated in the conduct of
Lessee's business and in compliance with all material statutes, law,
ordinances, rules and regulations of any federal, state or local governmental
authority having jurisdiction with respect to the use, operation, maintenance,
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condition and occupancy of any item of Equipment (including, without
limitation, all zoning, environmental protection, pollution, sanitary and
safety laws). Lessee will not load, use, operate, or store any item of
Equipment, or knowingly permit the loading, using, operating or storing of any
item of Equipment, in a negligent manner or otherwise in violation of this
Agreement or so as to void any of the insurance coverages specified in Section
17 hereof respecting any item of Equipment. Lessee shall procure and maintain
in effect all material licenses, certificates, permits, approvals and consents
required by federal, state, local or foreign laws or by any governmental body,
agency or authority, in connection with the delivery, use, operation,
maintenance, condition and occupancy of each item of Equipment. The Equipment
will at all times be and remain in the control of Lessee except as Lessee's
relinquishment of control of an item of Equipment is specifically permitted by
this Agreement and except while an item of Equipment is undergoing
maintenance. To the extent that any applicable law requires the licensing or
certification of an operator of any item of the Equipment, each such operator
shall be duly licensed and currently certificated and qualified to operate
such item of Equipment and authorized by the terms of (in accordance with the
provisions and requirements of) the insurance policy or policies providing the
coverages specified in Section 17 hereof.
SECTION 11. Operation and Maintenance of Equipment. Lessee agrees, at
its own cost and expense, to keep, repair, maintain and preserve the Equipment
in good order and operating condition, ordinary wear and tear excepted, and in
compliance with (x) the greater of (i) reasonable manufacturer's
recommendations, (ii) the maintenance and repair standards of Lessee for
similar equipment and (iii) prudent industry standards and (y) all material
requirements of law applicable to the maintenance and condition of the
Equipment except (a) to the extent valid variances, exemptions or similar
exceptions have been obtained in writing from the necessary authority, (b)
where non-compliance would have no material adverse effect on Lessor's
ownership rights or the use, operation or maintenance of the Equipment by the
Lessee or on the business, operations or other condition of Lessee or (c) for
violations of any such laws the validity of which is being contested by Lessee
in good faith by appropriate proceedings and violation of such laws which
Lessee is diligently proceeding to correct. Lessee shall, at its own cost and
expense, supply the necessary power and other items required in the operation
of the Equipment. Lessee hereby waives, to the extent permitted by applicable
law, any right now or hereafter conferred by law to make repairs on the
Equipment at the expense of Lessor.
SECTION 12. Replacement of Parts; Alterations; Modifications;
Additions; and Vendor-Financed Heads on Dornier Looms. In case any Part,
component or unit of the Equipment is required to be altered, added, replaced
or modified on any item of Equipment in order to comply with the requirements
of Sections 10 and 11 hereof ("Required Alteration"), Lessee agrees to make
such Required Alteration at its own expense; provided, however, Lessee shall
not be obligated to replace any such Part, component, unit or appliance
respecting the Equipment if the failure to replace such Part, component, unit
or appliance respecting the Equipment will not materially decrease the value,
utility or expected useful life of such Equipment. Such Required Alteration
shall immediately be and become the property of Lessor hereunder and subject
to the terms of this Agreement. Lessee agrees that, within thirty (30) days
after the close of any calendar month in which Lessee has made any material
Required Alteration, Lessee will give written notice thereof to Lessor
describing, in reasonable detail, the Required Alteration and specifying the
cost thereof and the date or dates when made. All Parts, Equipment and
appliances incorporated or installed in or attached to any item of Equipment
in connection with servicing, repairing, maintaining and overhauling any item
of Equipment pursuant to the requirements of Sections 10 or 11 hereof
("Replacement") shall be considered accessions to such item of Equipment and
shall immediately, without further act, be and become the property of Lessor
and part of the Equipment. Lessee may, without the prior written consent of
Lessor, affix or install any accessory, equipment or device on the Equipment
or make any improvement or addition thereto other than a Required Alteration
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or Replacement ("Improvement"); provided that, (a) a nonremovable Improvement
may only be made to the Equipment if such Improvement does not reduce the
value, utility or remaining economic useful life of the Equipment and (b) any
other Improvement may only be made to the Equipment if such Improvement is
readily removable without causing damage to the Equipment or impairing the
value, utility, remaining economic useful life or condition the Equipment
would have had if such Improvement had not been so affixed or installed.
Nonremovable Improvements shall be considered accessions to the Equipment and
shall immediately without further act, be and become the property of Lessor
and part of the Equipment. Title to removable Improvements shall remain with
Lessee, provided that, to the extent Lessor is retaining the Equipment, Lessor
shall have the option to purchase such removable Improvements for cash at Fair
Market Sales Value at the end of the Term and such purchase shall be on an
"as-is," "where-is" basis without representation, recourse or warranty,
express or implied, by Lessee (except as to the absence of Liens, except
Lessor Liens) and provided, further, that if any removable Improvement is not
removed by Lessee on or prior to the date of expiration or earlier termination
of this Agreement, title to such removable Improvement shall, without further
action, vest with Lessor. At the time title to any replacement Part,
equipment or appliance has become vested in Lessor pursuant to the provisions
of this Section 12, title to the part, equipment or appliance replaced thereby
shall thereupon vest in Lessee.
Notwithstanding the foregoing provisions of this Section 12, each
vendor-financed head on a Dornier loom, which heads are specifically excluded
from the definition of "Equipment", shall at all times remain the property of
Lessee and shall not be considered an accession to the Equipment or a Part or
an Improvement. Lessee shall repair, at its own cost and expense, any damage
to the Equipment caused by Lessee's detachment of any such head from any
Dornier loom.
SECTION 13. Identification; Inspection; Reports; Change of Chief
Executive Office and/or Name.
(a) Identification. Lessee shall, to the extent feasible,
promptly after each Acceptance Date, mark each item of the Equipment accepted
under this Agreement on such date so as to identify that such item is owned by
Lessor.
(b) Inspection. Lessor shall have the right on any Business Day
during normal business hours and upon reasonable notice to Lessee to inspect
(i) the Equipment (wherever located) and (ii) Lessee's records with respect
thereto; provided, however, Lessor will conduct no such inspection which is
reasonably likely to disrupt Lessee's business operations. Upon receipt of
Lessor's notice requesting to inspect certain Equipment, Lessee shall promptly
notify Lessor of the location of the Equipment and shall make all necessary
arrangements to facilitate the inspection.
(c) Reports. Upon Lessor's written request, Lessee shall
furnish Lessor within a reasonable period of time after such request with an
accurate statement showing the then current location of each item of the
Equipment.
(d) Change of Chief Executive Office and/or Name. Lessee shall
give Lessor prior written notice of any change in (i) Lessee's chief executive
office from the address referenced therefor in this Agreement and/or (ii)
Lessee's name.
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SECTION 14. Assignment, Sublease or Transfer by Lessee; Assignment by
Lessor; Mergers, Consolidations, Sales of Assets and Acquisitions.
(a) Assignment, Sublease or Other Transfer by Lessee. LESSEE
WILL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR (WHICH SHALL NOT BE
UNREASONABLY WITHHELD), ASSIGN, SUBLEASE OR OTHERWISE TRANSFER ITS RIGHTS OR
OBLIGATIONS WITH RESPECT TO ANY OF THE EQUIPMENT, HEREUNDER OR UNDER ANY OF
THE OTHER TRANSACTION DOCUMENTS AND ANY ATTEMPTED ASSIGNMENT, SUBLEASE OR
OTHER TRANSFER BY LESSEE WITHOUT SUCH LESSOR CONSENT SHALL BE NULL AND VOID.
Lessee shall not enter into any sublease of the Equipment unless such
sublease is a Permitted Sublease. No such sublease by Lessee will reduce any
of the obligations of Lessee hereunder or the rights of Lessor hereunder, and
all of the obligations of Lessee hereunder shall be and remain primary and
shall continue in full force and effect as the obligations of a principal and
not of a guarantor or surety.
(b) Assignment By Lessor. Lessor may at any time (i) assign,
sell or transfer to any Affiliate or successor of Lessor, in whole or in part,
Lessor's right, title and interest in, to and under this Agreement and any
Lease Supplement, including, without limitation, the right to receive any or
all Payments payable under this Agreement and under any Lease Supplement with
respect to the Equipment and (ii) sell or transfer to any Affiliate or
successor of Lessor all of Lessor's right, title and interest in and to the
Equipment; provided, however, with (but only with) the prior written consent
of Lessee, which consent shall not be unreasonably withheld, Lessor may at any
time (x) assign, sell or transfer to any Person (excepting any Affiliate or
successor of Lessor), in whole or in part, Lessor's right, title and interest
in, to and under this Agreement (as it relates to Lease Supplement Nos. 1-7)
and Lease Supplement Nos. 1-7, including, without limitation, the right to
receive any or all Payments payable thereunder with respect to the Equipment
described in Lease Supplement Nos. 1-7 and (y) sell or transfer to any other
Person (excepting any Affiliate or successor of Lessor) all of Lessor's right,
title and interest in and to the Equipment described in Lease Supplement
Nos. 1-7. Any such assignee, purchaser or transferee of Lessor's rights (an
"Assignee") shall have all of Lessor's right, title and interest hereunder to
the extent that the same relate to the interest of the Assignee covered by the
assignment, including, without limitation, the right to receive such
Assignee's portion of the Basic Payments payable for the Equipment sold or
transferred for all Basic Payment Periods commencing on or after the date of
such assignment, the right to receive such Assignee's portion of the
Supplemental Payments which are payable as a result of acts or events which
occur on or after the date of such assignment and the right to enforce, either
in such Assignee's name or in Lessor's name, but without cost or expense to
Lessor, all of Lessor's rights hereunder assigned to such Assignee. An
Assignee may re-assign all or a portion of its right, title and interest
received in accordance with the terms hereof. Any such assignment shall be
subject to Lessee's rights hereunder so long as no Event of Default has
occurred and is continuing hereunder, provided, that, upon the effective date
of such assignment, sale or transfer, Lessee shall be deemed to have released
Lessor from and any and all liabilities under the Agreement arising on or
after such effective date. Lessee shall be under no obligation to any
Assignee except upon written notice of such assignment, sale or transfer from
Lessor. Upon written notice from Lessor to Lessee of such assignment, sale or
transfer, Lessee agrees to pay the Basic Payments and Supplemental Payments to
the Assignee in accordance with the terms of this Agreement supplemented by
the instructions specified in such notice, to give all notices which are
required or permitted to be given by Lessee to Lessor hereunder to the
Person(s) specified to receive the same in such notice of assignment, sale or
transfer and to otherwise comply with all reasonable notices, directions and
demands which may be given by such Assignee in accordance with the provisions
of this Agreement. Lessee agrees to deliver to any Assignee an
acknowledgement of the assignment, sale or transfer; provided, however, all
reasonable out-of-pocket fees and expenses incurred by Lessee in connection
with the production or delivery of such acknowledgement shall be for the
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account of Lessor or such Assignee, as agreed to by such parties; provided,
further, Lessor or such Assignee, as agreed to by such parties, shall pay any
sales or transfer tax which becomes due and payable as a result of an
assignment, sale or transfer under this Section 14(b). The obligations of
Lessee shall not be materially increased due to any assignment, sale or
transfer by Lessor or any subsequent Assignee under this Section 14(b).
Lessor may also transfer all, but not less than all, of Lessor's right,
title and interest in, to and under the other Transaction Documents to the
Assignee and after the effective date of such transfer, the Assignee shall
have all of Lessor's right, title and interest under such other Transaction
Documents.
(c) Mergers, Consolidations, Sales of Assets and Acquisitions.
Section 6.08 of the C&A Credit Agreement is hereby incorporated into this
Agreement by reference with the same effect as if set forth herein in its
entirety. If such Section 6.08 is hereafter amended, modified or supplemented
in accordance with the provisions of the C&A Credit Agreement, then such
Section 6.08 shall be deemed to be amended, modified or supplemented in the
same manner. If the C&A Credit Agreement shall be restated and/or replaced by
another credit agreement, then so long as NationsBank of North Carolina, N.A.
shall be a party thereto, such Section 6.08 incorporated herein shall be
amended, and deemed to be replaced by, such replacement section appearing in
the restated and/or replaced credit agreement. If, for any reason,
NationsBank of North Carolina, N.A. ceases to be a party to the C&A Credit
Agreement or the C&A Credit Agreement is terminated and not restated and/or
replaced, then such Section 6.08 incorporated herein shall be identical to the
applicable section of the C&A Credit Agreement as of the date (i) NationsBank
of North Carolina, N.A. ceases to be a party to the C&A Credit Agreement or
(ii) the C&A Credit Agreement is terminated and not restated and/or replaced.
Upon any consolidation or merger in which Lessee is not the surviving
corporation, or any conveyance, transfer or lease of substantially all the
stock or assets of Lessee as an entirety, in each case in accordance with this
Section 14(c), the successor corporation formed by such consolidation or into
which Lessee is merged or to which such conveyance, transfer or lease is made
shall succeed to, and be substituted for (but without release of Lessee from
any of its obligations hereunder with respect to any conveyance, transfer or
lease of substantially all the stock or assets of Lessee as an entirety), and
may exercise every right and power of, Lessee under this Agreement with the
same effect as if such successor corporation had been named as a Lessee
herein.
SECTION 15. Liens; Permitted Contests. Lessee will not directly or
indirectly create, incur, assume or suffer to exist any Lien on or with
respect to any item of Equipment, or Lessor's title thereof, except the
following (collectively, the "Permitted Liens"): (a) any Lien granted to
Lessor hereunder or granted or placed thereon by Lessor as a result of an
assignment pursuant to Section 14(b) hereof, (b) the Lien in favor of Lessee
arising as a result of its rights under this Agreement, (c) any Lien in favor
of a sublessee arising as a result of its rights under any Permitted Sublease,
(d) any Lessor Lien, (e) any Lien for Taxes or Other Impositions either not
yet delinquent or which are the subject of a Permitted Contest, (f) any Lien
respecting a judgment, to the extent such judgment is appealable and is the
subject of a Permitted Contest and (g) any materialmen's, mechanics',
workmen's, repairmen's or employees' lien or any other like Lien arising in
the ordinary course of business, which is not delinquent or is the subject of
a Permitted Contest. Lessee, at its own expense, will promptly pay, satisfy
and otherwise take such actions as may be necessary to keep each item of
Equipment free and clear of, and to duly discharge or eliminate or bond in a
manner satisfactory to Lessor, any such Lien not excepted above if the same
shall arise at any time. To the extent this Agreement is hereafter deemed to
be a lease intended as security and not as a true lease, Lessee will maintain
each Lien on the Equipment granted hereunder in favor of Lessor as a first
priority, perfected security interest. Lessee will notify Lessor and any
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Assignee in writing promptly upon becoming aware of any Taxes or Other
Impositions or other Lien (other than any Lien excepted above) that shall
attach to any item of Equipment and of the full particulars thereof.
SECTION 16. Loss, Damage or Destruction.
(a) Risk of Loss, Damage or Destruction. Lessee hereby assumes
all risk of loss, damage, theft, taking, destruction, confiscation,
requisition or commandeering, partial or complete, of or to the Equipment,
however caused or occasioned (except for the gross negligence or wilful
misconduct of Lessor or any of its agents or employees), such risk to be borne
by Lessee with respect to the Equipment from the Acceptance Date therefor, and
continuing until the Equipment has been delivered in accordance with the
provisions of Section 6 hereof or has been purchased by Lessee or a third
party in accordance with the provisions of Section 5(c) or Section 29 hereof.
(b) Event of Loss with Respect to Equipment. (i) Upon the
occurrence of an Event of Loss with respect to any item of Equipment during
the Term, Lessee shall forthwith (and in any event within sixty (60) days
after such occurrence) give Lessor written notice of such Event of Loss and of
its election to perform one of the following options (it being agreed that if
Lessee shall not have given Lessor notice of such election within such sixty
(60) days after such occurrence, Lessee shall be deemed to have elected to
perform the option set forth in the following clause (B)), provided that
Lessee shall not have the right to select the option set forth in the
following clause (A) and if Event of Default shall have occurred and be
continuing and in such circumstance shall be deemed to have selected the
option set forth in the following clause (B):
(A) As promptly as practicable, and in any event within ninety
(90) days of the occurrence of such Event of Loss, Lessee shall convey
or cause to be conveyed to Lessor pursuant to Section 16(b)(ii), and to
be leased by Lessee hereunder in replacement for such item of Equipment,
a replacement item (the "Replacement Item"), such Replacement Item to be
free and clear of all Liens (other than Permitted Liens) and to have a
value and utility at least equal to, and be in as good operating
condition as, the item of Equipment with respect to which such Event of
Loss occurred, assuming such item of Equipment was of the value and
utility and in the condition and repair required by the terms hereof
immediately prior to the occurrence of such Event of Loss; provided
that, if Lessee shall not perform its obligation to effect such
replacement under this clause (A) during the period of time provided
herein, then Lessee shall promptly give notice to Lessor, and shall be
deemed (whether or not Lessee shall have so given such notice) to have
elected to perform the option set forth in clause (B) below by the date
and pursuant to the terms specified in said clause. (Notwithstanding
such Event of Loss, Lessee's obligation to pay Basic Payments shall
continue.)
(B) On the Casualty Loss Value Date next following the earlier
of ninety (90) days after the occurrence of such Event of Loss and the
date of receipt of insurance proceeds in respect of such occurrence,
Lessee shall pay Lessor the sum of (i) the Casualty Loss Value (computed
as of the Casualty Loss Value Date next following the date of such Event
of Loss) for all the Equipment then subject to the Event of Loss, plus
(ii) all accrued and unpaid Basic Payments (and/or any pro rata portion
thereof) owing for all Basic Payment Periods (and/or any pro rata
portion thereof) prior to such Casualty Loss Value Date, plus (iii) all
Supplemental Payments then accrued and unpaid or due and owing. Upon
payment in full of amounts specified in clauses (i) through (iii) of the
preceding sentence, (A) the obligation of Lessee to pay Basic Payments
hereunder, with respect to such item of Equipment for all Basic Payment
Periods commencing after the occurrence of such Event of Loss shall
terminate, (B) the Term shall end with respect to such item of
Equipment, and (C) Lessor shall transfer to Lessee, or Lessee's
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designee, its title to such item of Equipment consistent with the
settlement terms of Section 29(c) hereof.
(ii) Conveyance of Replacement Equipment. Prior to or at
the time of any conveyance of a Replacement Item, Lessee, at its own
expense, will furnish, or cause to be furnished, to the Lessor the
following documents (in form and substance reasonably satisfactory to
Lessor) which shall have been duly authorized, executed and delivered by
the respective parties thereto and shall be in full force and effect on
the date of such conveyance:
(A) with respect to any such Replacement Item, a full
warranty bill of sale and Uniform Commercial Code financing
statements;
(B) a supplement to this Agreement, and if a Permitted
Sublease is in force and effect to such Permitted Sublease, in
each case covering such Replacement Item, duly executed by Lessee
and the sublessee under the Permitted Sublease, if any;
(C) certificates of insurance, with respect to such
Replacement Item evidencing compliance with Sections 17(a) and
17(b)(i-vii) hereof, executed by the insurer or its duly
authorized agent;
(D) (intentionally omitted); and
(E) such other documents and evidence with respect to
Lessee as Lessor or its counsel, may reasonably request in order
to establish the consummation of the transactions contemplated by
this Section 16(b), the taking of all corporate proceedings in
connection with and compliance with the conditions set forth in
this Section 16(b), in each case in form and substance
satisfactory to Lessor.
Upon full compliance by Lessee with the terms of this Section 16(b),
Lessor shall convey to Lessee, at Lessee's cost and expense, all of Lessor's
right, title and interest, as-is, where-is, without recourse or warranty,
express or implied (except as to the absence of Lessor Liens), in and to such
replaced item of Equipment, with respect to which Event of Loss occurred. No
Event of Loss with respect to an item of Equipment under the circumstances
contemplated by the terms of this Section 16(b) shall result in any reduction
in Basic Payments or Lessee's obligation to pay Basic Payments hereunder.
Lessee further agrees to take such further action as Lessor may
reasonably request with respect to such Replacement Item to perfect the
interest of Lessor in such Replacement Item.
(c) Application of Other Payments Upon Event of Loss. Any
payments for damages to the Equipment (including, without limitation,
insurance proceeds) received at any time by Lessor or by Lessee from any
insurer, governmental authority or other party as a result of the occurrence
of an Event of Loss will be applied as follows: (i) any such payments received
at any time by Lessee shall be promptly paid to Lessor for application
pursuant to the following provisions of this Section 16(c); (ii) so much of
such payments as shall not exceed the amounts required to be paid by Lessee
pursuant to Section 16(b) hereof shall be applied in reduction of Lessee's
obligation to pay such amount, if not already paid by Lessee, or, if already
paid by Lessee, shall be applied to reimburse Lessee for its payment of such
amount, unless an Event of Default shall have occurred and be continuing; and
(iii) the balance, if any, of such payments remaining thereafter shall be paid
to or retained by Lessee, unless an Event of Default shall have occurred and
be continuing.
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(d) Application of Payments Not Relating to an Event of Loss.
Any payments (including, without limitation, insurance proceeds) received at
any time by Lessor or Lessee from any insurer, governmental authority or other
party with respect to any condemnation, confiscation, theft or seizure of, or
requisition of title to or use of, or loss or damage to, any item of the
Equipment not constituting an Event of Loss, will be applied (if no Event of
Default shall have occurred and be continuing) directly in payment of repairs
or for replacement of property in accordance with the provisions of Sections
11 and 12 hereof, if not already paid by Lessee, or if already paid by Lessee
and if no Event of Default shall have occurred and be continuing, shall be
applied to reimburse Lessee for such payment, and any balance remaining after
compliance with said Sections 11 and 12 with respect to such loss or damage
shall be paid to or retained by Lessor.
SECTION 17. Insurance.
(a) Coverage. Lessee shall:
(i) maintain or cause to be maintained property damage
insurance for the Equipment in an amount not less than the greater of
the then applicable replacement value or Casualty Loss Value of the
Equipment for all property damage and loss including, without
limitation, loss, vandalism, malicious mischief, damage from fire, and
normal extended coverage perils customarily included in policies
available with respect to property comparable to the Equipment;
(ii) maintain or cause to be maintained comprehensive
general public liability, including blanket contractual, personal
injury, property damage and loss of use of property of others, insurance
applicable to the Equipment in such amounts usually carried by Lessee
but in any event with a combined single limit of not less than
$10,000,000 or such other amount as is mutually agreed to by Lessee and
Lessor, as such agreement shall be reflected in the Lease Supplement
applicable to certain Equipment; and
(iii) maintain or cause to be maintained such other
insurance with respect to the Equipment in such amounts and against such
insurable hazards as is usually carried by Lessee, but any loss of the
type customarily covered by the policies described in Sections 17(a)(i)
and (ii) whether actually covered in whole or in part by such policies,
shall be the responsibility of Lessee and the absence of such coverage
shall not relieve Lessee from any of its obligations under any of the
documents or agreements related to the Overall Transaction.
All insurance policies carried in accordance with this Section 17(a)
(excepting any self-insurance permitted under this Agreement) shall be
maintained with insurers of recognized responsibility and standing in the
industry.
Any insurance policies carried in accordance with this Section 17 shall
be subject only to (A) exclusions of the sort existing in the insurance
policies in effect on the Acceptance Date and (B) deductible amounts and/or
retentions not in excess of $1,000,000 per occurrence with respect to
comprehensive general public liability insurance.
Notwithstanding anything to the contrary in this Section 17, (i) Lessee
shall at all times maintain insurance with respect to the Equipment in
accordance with its standard corporate minimum practice with respect to other
similar equipment and (ii) any loss of the type customarily covered by the
policies described in Sections 17(a), whether actually covered in whole or in
part by such policies, shall be the responsibility of Lessee and the absence
of such coverage shall not relieve Lessee from any of its obligations under
any of the documents or agreements related to the Overall Transaction.
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(b) Policy. Any insurance policy maintained by Lessee pursuant
to Section 17(a) hereof (excepting any self-insurance permitted under this
Agreement) shall:
(i) specify Lessor, as its interest may appear, as a loss
payee with respect to property damage insurance and as an additional
insured with respect to liability insurance;
(ii) include effective waivers by the insurer of all claims
for insurance premiums or commissions or (if such policies provide for
the payment thereof) additional premiums or assessments against Lessor;
(iii) provide that in respect of the interests of Lessor
such policies shall not be invalidated by any action or inaction of
Lessee, any sublessee, or their respective agents, employees, officers,
directors, stockholders, successors, assigns and servants shall insure
the rights and interests of Lessor regardless of, and any claims for
losses shall be payable notwithstanding:
(A) any act of negligence by Lessee, any sublessee, or
their respective agents, employees, officers, directors,
stockholders, successors, assigns and servants including, without
limitation, any breach of any condition or warranty in any policy
of insurance by Lessee or any other Person;
(B) the use of the Equipment by Lessee, any sublessee, or
their respective agents, employees, officers, directors,
stockholders, successors, assigns and servants for purposes more
hazardous than permitted by the terms of the policy;
(C) any foreclosure or other proceeding or notice of sale
relating to the Equipment; or
(D) any change in the title to or ownership of the
Equipment;
(iv) provide that such insurance shall be primary insurance
and that the insurers under such insurance policies shall be liable
under such policies without right of contribution from any other
insurance coverage effected by or on behalf of Lessor under any other
insurance policies covering a loss that is also covered under the
insurance policies maintained by Lessee pursuant to this Section 17 and
shall expressly provide that all provisions thereof, except the limits
of liability (which shall be applicable to all insureds as a group) and
liability for premiums (which shall be solely a liability of the
Lessee), shall operate in the same manner as if there were a separate
policy covering each insured;
(v) provide that any material adverse change therein shall
not be effective as to Lessor until at least thirty (30) days after
receipt by Lessor of written notice thereof and provide that any
cancellation thereof shall not be effective as to Lessor until receipt
by Lessor of written notice of cancellation at thirty (30) days before
the effective date of cancellation;
(vi) waive any right of subrogation of the insurers against
Lessor and waive any right of the insurers to any setoff or counterclaim
or any other deduction, whether by attachment or otherwise, in respect
of any liability of Lessor;
(vii) provide that the whole or any part of the right, title
and interest of Lessor or Lessee therein may be assigned; and
(viii) subject to Section 17(a) hereof, be reasonably
satisfactory to Lessor in all other material respects.
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(c) Evidence of Insurance. Lessee shall deliver to Lessor by
the Acceptance Date for each item of the Equipment certificates of insurance
evidencing the provisions described in Sections 17(a) and 17(b)(i-vii) hereof
executed by the insurer or its duly authorized agent.
(d) Annual Insurance Certificate. By the annual anniversary of
the Acceptance Date for each item of the Equipment of each year commencing
with September 30, 1995, and within thirty (30) days after any material
adverse change (including, without limitation, any material increase in
deductible and/or retention amounts) in the information set forth in the
certificates provided pursuant to Section 17(c) hereof, Lessee shall deliver
to Lessor a certificate of insurance with respect to the same items as
described in Section 17(c).
SECTION 18A. General Tax Indemnity.
(a) Indemnity Obligation. Lessee hereby assumes liability for,
and does hereby agree, to indemnify, protect, save, defend, exonerate, pay and
hold harmless Lessor, each Assignee and each of their respective officers,
directors, stockholders, successors, assigns, agents and servants (each such
party may be referred to herein as an "Indemnified Party") on an after-tax
basis (at the then highest marginal federal and applicable state, local and
foreign income tax rates) from, any and all federal, state, local and foreign
taxes, fees, withholdings, levies, imposts, duties, assessments and charges of
any kind and nature whatsoever, together with any penalties, fines or interest
therein (herein called "Taxes or Other Impositions") howsoever imposed,
whether levied or imposed upon or asserted against an Indemnified Party,
Lessee or the Equipment by any federal, state or local government or taxing
authority in the United States, or by any taxing authority or governmental
subdivision of a foreign country, upon or with respect to (a) the Equipment,
(b) the manufacture, construction, ordering, purchase, acceptance or
rejection, ownership, delivery, leasing, re-leasing, wet leasing, subleasing,
possession, use, operation, maintenance, storage, registration or re-
registration, titling or re-titling, licensing or re-licensing, documentation,
removal, return, sale (including, without limitation, sale to Lessee by an
Indemnified Party pursuant to the terms hereof) or other applications or
dispositions thereof, (c) the payments, receipts or earnings arising from the
Equipment, (d) any Permitted Contest or (e) this Agreement, any document,
instrument, agreement or contract entered into in relation hereto or otherwise
in relation to the Equipment or any payments payable by Lessee or to an
Indemnified Party hereunder or pursuant to any document, instrument, agreement
or contract entered into in relation hereto or otherwise in relation to the
Equipment; provided, however, that the foregoing indemnity shall not apply to
any taxes imposed solely as the result of the gross negligence or willful
misconduct of an Indemnified Party, or to the extent based upon or measured by
an Indemnified Party's net income and which are imposed or levied by any
federal, state or local taxing authority in the United States (other than net
income taxes attributable to Lessor's receipt or accrual of an indemnity
payable hereunder).
(b) Contests. Each Indemnified Party shall furnish Lessee with
copies of any requests for information received by such Indemnified Party from
any taxing authority relating to any Taxes or Other Impositions with respect
to which Lessee is required to indemnify hereunder, and if a claim is made
against such Indemnified Party for any such Taxes or Other Impositions with
respect to which Lessee is liable for a payment or indemnity hereunder, such
Indemnified Party shall give Lessee notice in writing within 30 days of
receipt of such claim (but failure of an Indemnified Party to so notify Lessee
shall not relieve Lessee of its obligations hereunder except to the extent
that such failure shall have materially prejudiced the ability to contest such
claim). Lessee may, at its sole cost and expense, either in its own name or,
if permitted by law, in the name of such Indemnified Party, contest the
validity, applicability or amount of any such Taxes or Other Impositions by
means of a Permitted Contest; provided, however, such Indemnified Party shall
in all cases control all such contests, but (except as provided further below
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in this Section 18A(b)) termination of any Permitted Contest shall require the
consent of Lessee, which shall not be unreasonably withheld or delayed. If
Lessee shall have duly complied with all the terms of this Section 18A(b), and
Lessee shall reasonably withhold in writing its consent to all or part of such
assessment or settlement based upon its evaluation of the merits, Lessor still
may terminate or settle the contest, but Lessee shall not be obligated to
indemnify Lessor for the portion of such assessment or settlement to which
Lessee has reasonably withheld its consent. Lessee shall pay, and save such
Indemnified Party harmless on an after tax basis against, any and all losses,
judgments, decrees and costs (including, without limitation, all reasonable
attorneys' fees and expenses) in connection with any Permitted Contest and
shall promptly after the final settlement, compromise or determination
(including, without limitation, any appeals) of such Permitted Contest, fully
pay and discharge the amounts which shall be levied, assessed, charged or
imposed or be determined to be payable therein or in connection therewith,
together with all penalties, fines, interests, costs and expenses thereof or
in connection therewith, and perform all acts, the performance of which shall
be ordered or decreed as a result thereof.
(c) Refunds. If an Indemnified Party shall obtain a refund of
any amount paid by Lessee pursuant to this Section 18A, such Indemnified Party
shall pay to Lessee within 30 days the amount of such refund, together with
the amount of any interest actually received by such Indemnified Party on
account of such refund; provided, however, that the aggregate amount of all
payments pursuant to this sentence by such Indemnified Party with respect to
any Tax or Other Imposition shall not exceed the aggregate amount of all
payments made by Lessee pursuant to this Section 18A with respect to such Tax
or Other Imposition, and, provided further, that such Indemnified Party shall
have no obligation to pay such refund to Lessee as long as a Default or an
Event of Default has occurred and is continuing.
(d) Reports, Returns and Payments. Lessee will promptly notify
the appropriate Indemnified Party of all reports or returns required to be
made with respect to any Taxes or Other Impositions with respect to which
Lessee is required to indemnify hereunder, and will promptly provide such
Indemnified Party with all information necessary for the making and timely
filing of such reports or returns by such Indemnified Party. If an
Indemnified Party requests that any such reports or returns be prepared and
filed by Lessee, Lessee will prepare and file the same if permitted by
applicable law to file the same, and if not so permitted, Lessee shall prepare
such reports or returns for signature by such Indemnified Party, and shall
forward the same, together with immediately available funds for payment of any
Taxes or Other Impositions due, to such Indemnified Party, at least 10 days in
advance of the date such payment is to be made. Upon written request, Lessee
shall furnish an Indemnified Party with copies of all paid receipts or other
appropriate evidence of payment for all Taxes or Other Impositions paid by
Lessee pursuant to this Section 18A.
(e) Survival. The provisions of this Section 18A and all of the
indemnities and obligations of Lessee contained in this Section 18A shall
apply to the Equipment and each component thereof and shall apply from the
date of execution of this Agreement and shall continue in full force and
effect notwithstanding the expiration or earlier termination of this Agreement
or any other documents, instruments, agreements or contracts entered into in
relation hereto or otherwise in relation to the Equipment or any component of
the Equipment and are expressly made for the benefit of, and shall be
enforceable by, each Indemnified Party.
SECTION 18B. Special Tax Indemnity.
(a) Assumptions. Lessor and Lessee have made the following
assumptions regarding the characterization of this Agreement for federal
income tax purposes (the "Tax Assumptions"): (i) Lessor will be treated as
the purchaser, owner, and lessor of the Equipment; (ii) the Equipment will be
treated as placed in service on the date or dates as indicated in the
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applicable Lease Supplements, and Lessor's basis in the Equipment under
Section 1012 of the Code will be equal to the total actual cost to Lessor of
the Equipment; (iii) for federal tax purposes, Lessor will be entitled to
claim depreciation deductions with respect to one hundred percent (100%) of
the total actual cost of the Equipment computed (A) by using the applicable
recovery period for the Equipment within the meaning of Section 168(c)(1) of
the Code (the "Applicable Recovery Period") as set forth in the applicable
Lease Supplements; (B) by using the two hundred percent (200%) declining
balance method, switching to a straight line method for the first taxable year
of Lessor for which such method yields a larger allowance, (C) assuming
salvage value is zero, and (D) using the half-year convention under Section
168(d)(4)(A) of the Code (the "Depreciation Deductions"); (iv) the only
amounts that Lessor will be required to include in gross income with respect
to this Agreement will be (A) rents of all types as paid under this Agreement,
(B) payments as a consequence of a sale or other disposition of the Equipment,
and (C) any indemnity pursuant to this Section 18B ("Anticipated Lease
Income"); (v) Lessor will be able to amortize over the Term all of its
Transaction Costs which are not currently deductible (the "Transaction Expense
Deductions"); (vi) all items of income and expense will be treated as derived
from or allocable to sources within the United States; (vii) Lessor's taxable
year is the calendar year, and all items of income and expense will be treated
on an accrual basis; (viii) Lessor will have at all relevant times sufficient
federal and applicable state and local taxable income against which to apply
the Depreciation Deductions, Transaction Expense Deductions, and any other
deductible tax benefits relating to the ownership of the Equipment or to the
transactions contemplated by this Agreement; (ix) Lessor's federal corporate
income tax rate will be thirty-five percent (35%), and its combined federal
and state income tax rate will be 40.04% during each year of this Agreement
(the "Combined Tax Rate"); and (x) no portion of the Depreciation Deductions
will be recaptured under Section 1245 of the Code or otherwise disallowed
during the Term.
(b) Representations, Warranties and Covenants. Lessee hereby
represents, warrants and covenants to Lessor as follows: (i) at no time
during the Term will the Equipment be used "predominantly outside the United
States" within the meaning of Sections 168(g)(1)(A) and 168(g)(4) of the Code;
(ii) assuming Lessor is treated as the owner of the Equipment for federal
income tax purposes, the Tax Assumptions set forth in Section 18B(a)(ii)-(vi)
are correct; (iii) under current law, neither the Equipment nor any component
thereof constitutes "limited use property" within the meaning of Revenue
Procedure 76-30, 1976-2 C.B. 647; (iv) Lessee (including any Affiliate of
Lessee) will not claim any depreciation or cost recovery deductions with
respect to the Equipment, will not use the Equipment in any manner that will
cause the Equipment to cease to qualify for use of the Applicable Recovery
Period as set forth in the applicable Lease Supplements, and has not taken and
will not take any other action in connection with filing its or their federal
income tax returns that would cause any of the Tax Assumptions to be
incorrect; (v) as of each delivery date with respect to the Equipment, such
Equipment will not require any improvement, modification or addition in order
to be rendered complete for its intended use by Lessee; (vi) all written
information supplied, caused to be supplied, or to be supplied to any
appraiser by or on behalf of Lessee or any Affiliate of Lessee with respect to
the Equipment was or will be, as the case may be, true and accurate when
supplied; (vii) at no time during the Term will the Equipment constitute "tax-
exempt use property" within the meaning of Section 168(h) of the Code; (viii)
at the end of the Basic Term, the Equipment will have a remaining economic
useful life of at least 20% of the total economic useful life as measured from
the Closing Date; (ix) at the end of the Basic Term, the Equipment will have a
residual value of at least 20% of the total actual cost of the Equipment
without including in such residual value any increase or decrease for
inflation or deflation during the Basic Term and after subtracting from such
residual value the cost, if any, to Lessor for removal and delivery of
possession of the property to Lessor at the end of the Basic Term; and (x)
based on all facts known by Lessee as of the Acceptance Date with respect to
each applicable Lease Supplement, it is reasonable to expect that, as of the
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Early Buyout Option Date as set forth in such Lease Supplement, the fair
market value of the Equipment will be less than or equal to the Early Buyout
Option Price as set forth in such Lease Supplement.
(c) Indemnity Payment Conditions. If, by reason of any act or
omission of Lessee or by any other Person in possession of the Equipment or by
reason of the inaccuracy or breach by Lessee of any of the representations,
warranties and covenants contained in this Section 18B, the Depreciation
Deductions or Transaction Expense Deductions are lost, disallowed, eliminated,
reduced, recaptured, compromised, delayed or otherwise made unavailable to
Lessor (a "Loss") or Lessor incurs a tax detriment because it is required to
include amounts in income other than Anticipated Lease Income (an
"Inclusion"), Lessee shall, upon notice by Lessor, promptly pay to Lessor on
demand in immediately available funds, as an indemnity an amount which, after
deduction of the amount of all taxes required to be paid by Lessor in respect
of the receipt or accrual of such amount under the laws of any federal, state,
local or foreign government or other taxing authority and any applicable
foreign withholding taxes, shall be equal to the sum of (x) the increase in
federal, state, local and foreign income tax liability for the respective
taxable year attributable to such Loss or Inclusion plus (y) the amounts of
interest, penalties or additions to tax (including, without limitation, any
additions to tax because of underpayment of estimated tax), which are assessed
against Lessor for such taxable year by the Internal Revenue Service ("IRS")
or any relevant state, local or foreign taxing authority and which are
attributable to such Loss or Inclusion. In calculating any amount payable to
Lessor pursuant to this Section 18B(c), such amount shall be determined by
applying the Tax Assumptions, and it shall be assumed that all income of
Lessor is subject to tax at the Combined Tax Rate and that all deductions may
be utilized at the Combined Tax Rate; provided, however, that (i) the amount
of any taxes payable as the result of income giving rise to an Inclusion and
(ii) the amount of taxes payable as the result of payments to Lessor pursuant
to this Section 18B(c) (i.e. the amount of any applicable "gross-up"), shall
be determined based upon the then highest marginal federal, state, local and
foreign income tax rates applicable to Lessor for the relevant taxable year
with respect to such payments.
(d) Right to Contest. Lessor shall notify Lessee in writing of
any actual or proposed claim, adjustment, or other action of any tax authority
received by Lessor in writing with respect to which Lessee may be required to
provide indemnification under this Section 18B ("Proposed Adjustment") (but
failure of Lessor to so notify Lessee shall not relieve Lessee of its
obligations hereunder except to the extent that such failure shall have
materially prejudiced the ability to contest the Proposed Adjustment). If
Lessee shall request in writing within thirty (30) days after Lessor's notice
described above that the Proposed Adjustment be contested, Lessor shall
contest the Proposed Adjustment; provided, however, that: (i) prior to taking
such action, Lessee shall have furnished Lessor with an opinion of independent
tax counsel or an internationally recognized accounting firm chosen by Lessee
and reasonably acceptable to Lessor, to the effect that Lessor has a
reasonable basis for contesting the claim; (ii) prior to taking such action,
Lessee shall have (A) acknowledged its obligation to indemnify Lessor
hereunder in the event Lessor does not prevail in such contest and (B) agreed
to reimburse Lessor, promptly on demand, all reasonable costs and expenses
that Lessor may incur in connection with contesting such claim, including
without limitation reasonable attorneys' and accountants' fees and expenses;
(iii) Lessor shall not be obligated to contest any proposed amount that is
less than $30,000.00; and (iv) Lessor shall in all events control the contest,
but (except as provided below in this Section 18B(d)) termination of any
contest shall require the consent of Lessee which shall not be unreasonably
withheld or delayed. Lessee shall not have any right to inspect the books and
records of Lessor, but shall have reasonable opportunity to review and comment
on portions of documentation, protests, memoranda or briefs relating
exclusively to a Proposed Adjustment. In the event Lessor shall pay the tax
claimed and then seek a refund, Lessor may require Lessee to advance funds
sufficient to pay the tax that would be indemnified by Lessee hereunder if the
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claim were resolved adversely to Lessor, in which case, to the extent the
refund claim is successful, such funds received from the taxing authority and
attributable thereto, to the extent not required to be applied to an indemnity
payable hereunder, shall be refunded to Lessee with any interest received by
Lessor with such refund. Notwithstanding anything to the contrary in this
Section 18B, Lessor may at any time decline to take any further action with
respect to a Proposed Adjustment or may settle any contest without the consent
of Lessee; provided, however, that if Lessee shall have duly complied with all
the terms of this Section 18B(d), and Lessee shall reasonably withhold in
writing its consent to all or part of such assessment or settlement based upon
its evaluation of the merits, Lessee shall not be obligated to indemnify
Lessor for the portion of such assessment or settlement to which Lessee has
reasonably withheld its consent.
(e) Survival of Indemnities. All of the indemnities contained
in this Section 18B shall apply to the Equipment and each component thereof
and shall continue in full force and effect, notwithstanding the expiration or
other termination of the Term and are expressly made for the benefit of, and
shall be enforceable by, Lessor and each Assignee.
SECTION 19. General Indemnity. Lessee hereby assumes liability for,
and does hereby agree, whether or not any of the transactions contemplated
hereby are consummated, to indemnify, protect, save, defend, exonerate, pay
and hold harmless each Indemnified Party on a net after-tax basis (at the then
highest marginal federal and applicable state, local and foreign income tax
rates) from and against any and all obligations, fees, liabilities, losses,
interest, damages, punitive damages, penalties, fines, claims, demands,
actions, suits, judgments, costs and expenses, including, without limitation,
reasonable legal fees and expenses (including, without limitation, such legal
fees and expenses incurred in connection with the enforcement of this
Agreement or any other Transaction Document), of every kind and nature
whatsoever imposed on, incurred by, or asserted against any Indemnified Party,
in any way relating to or arising out of (a) the manufacture, construction,
ordering, purchase, acceptance or rejection, ownership, delivery, leasing, re-
leasing, wet leasing, subleasing, possession, use, operation, maintenance,
storage, registration or re-registration, titling or re-titling, licensing or
re-licensing, documentation, removal, return, sale (including, without
limitation, sale by an Indemnified Party to Lessee pursuant to the terms
hereof) or other applications or dispositions thereof, including, without
limitation, any of such as may arise from (i) loss or damage to any property
or death or injury to any Person, (ii) patent or latent defects in the
Equipment (whether or not discoverable by Lessee or any Indemnified Party),
(iii) any claims based on strict liability in tort or otherwise, (iv) any
claims based on patent, trademark or copyright infringement, and (v) any
claims based on liability arising under the applicable environmental or noise
or pollution control law or regulation of the United States, (b) any failure
on the part of Lessee to perform or comply with any of the terms of this
Agreement or any document, instrument, agreement or contract entered into in
relation hereto or otherwise in relation to the Equipment but excluding any
claim based upon any failure on the part of an Indemnified Party to comply
with its obligations under this Agreement or any document, instrument,
agreement or contract entered into by such Indemnified Party in relation
hereto or otherwise in relation to the Equipment or (c) any claims,
encumbrances, security interests, liens or legal processes regarding such
Indemnified Party's title to or interest in the Equipment, except for Lessor
Liens. Lessee shall not be required to indemnify any Indemnified Party for
any claims (t) resulting from acts which would constitute the willful
misconduct or gross negligence of such Indemnified Party, (u) arising out of
acts or events occurring after the termination of this Agreement and
redelivery of the Equipment (to the extent relating to such redelivered
Equipment), (v) arising out of any Lessor Lien, (w) arising out of the
transfer by Lessor of all or any portion of its rights in the Equipment or the
Transaction Documents (except with the consent of Lessee or in connection with
Lessor's exercise of remedies hereunder), (x) or expenses which an Indemnified
Party is required to bear or pay under the express provisions of any of the
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Transaction Documents, (y) constituting Taxes or Other Impositions or (z)
resulting from the breach by such Indemnified Party's covenants,
representations or warranties contained in any Transaction Documents. Lessee
shall give each Indemnified Party prompt notice of any occurrence, event or
condition known to Lessee as a consequence of which any Indemnified Party is
or is reasonably likely to be entitled to indemnification hereunder. If an
Indemnified Party shall receive notice of any claim or asserted liability
which, in such Indemnified Party's good faith judgment, may result in an
obligation by Lessee to indemnify hereunder, such Indemnified Party shall
promptly give notice thereof to Lessee but Lessee's indemnity obligations
hereunder shall not be modified in any manner unless such Indemnified Party's
failure to give such notice materially and adversely affects Lessee's ability
to raise a defense to such claim or asserted liability. The indemnification
provided in this Section 19 shall not be impaired in any manner by the
existence of any industrial or worker's compensation laws. Lessee shall
promptly upon request of any such Indemnified Party (but in any event within
45 days of such request) reimburse such Indemnified Party for amounts expended
by it in connection with any of the foregoing or pay such amounts directly.
Lessee shall be subrogated to an Indemnified Party's rights in any matter with
respect to which Lessee has actually reimbursed such Indemnified Party for
amounts expended by it or has actually paid such amounts directly pursuant to
this Section 19. In case any action, suit or proceeding is brought against
any Indemnified Party in connection with any claim indemnified against
hereunder, such Indemnified Party will, after receipt of notice of the
commencement of such action, suit or proceeding, promptly notify Lessee
thereof, enclosing a copy of all papers served upon such Indemnified Party
(but failure of an Indemnified Party to so notify Lessee shall not relieve
Lessee of its obligations hereunder except to the extent that such failure
shall have materially prejudiced the ability to contest such claim). Lessee
may, and upon such Indemnified Party's request will, at Lessee's expense,
resist and defend such action, suit or proceeding, or cause the same to be
resisted or defended by counsel selected by Lessee and reasonably satisfactory
to such Indemnified Party and in the event of any failure by Lessee to do so,
Lessee shall pay all costs and expenses (including, without limitation,
reasonable attorney's fees and expenses) reasonably incurred by such
Indemnified Party in connection with such action, suit or proceeding. The
Indemnified Party shall supply Lessee with such information requested by
Lessee as in the reasonable opinion of Lessee's counsel is necessary or
advisable for Lessee to control any such action, suit or proceeding; provided,
however, such Indemnified Party shall have no obligation to provide Lessee
with its confidential information unless Lessee shall execute a
confidentiality agreement, in form and substance reasonably satisfactory to
such Indemnified Party. The provisions of this Section 19, and all of the
indemnities and the obligations of Lessee under this Section 19, shall apply
to the Equipment and each component thereof and shall apply from the date of
the execution of this Agreement and shall survive the expiration or earlier
termination of this Agreement and all documents, instruments, agreements and
contracts entered into in relation hereto or otherwise in relation to the
Equipment or any component of the Equipment and are expressly made for the
benefit of, and shall be enforceable by, each Indemnified Party.
SECTION 20. NO WARRANTIES. LESSOR LEASES THE EQUIPMENT TO LESSEE ON AN
AS-IS, WHERE-IS BASIS AND EXCEPT AS OTHERWISE EXPRESSLY STATED IN THIS
AGREEMENT LESSOR EXPRESSLY DISCLAIMS AND MAKES NO REPRESENTATION OR WARRANTY,
EITHER EXPRESSED OR IMPLIED, AS TO ANY MATTER WHATSOEVER, INCLUDING, WITHOUT
LIMITATION, THE EQUIPMENT, THE DESIGN OR CONDITION OF EQUIPMENT, ITS
MERCHANTABILITY, DURABILITY, SUITABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE, THE QUALITY OF THE MATERIAL OR WORKMANSHIP OF THE EQUIPMENT, OR THE
CONFORMITY OF THE EQUIPMENT TO THE PROVISIONS AND SPECIFICATIONS OF ANY
PURCHASE ORDER OR ORDERS RELATING THERETO, OR ANY OTHER MATTER CONCERNING, ANY
ITEM OF THE EQUIPMENT OR THE FINANCING THEREOF (WHICH DISCLAIMER LESSEE HEREBY
ACKNOWLEDGES). LESSEE HEREBY WAIVES ANY CLAIM (INCLUDING, WITHOUT LIMITATION,
INCIDENTAL OR CONSEQUENTIAL DAMAGE) OR EXPENSE CAUSED BY ANY ITEM OF THE
EQUIPMENT OR BY LESSEE'S LOSS OF USE THEREOF FOR ANY REASON WHATSOEVER.
WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, LESSOR SHALL NOT BE LIABLE
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OR RESPONSIBLE FOR ANY DEFECTS, EITHER PATENT OR LATENT (WHETHER OR NOT
DISCOVERABLE BY LESSEE), IN ANY ITEM OF THE EQUIPMENT, OR FOR ANY DIRECT OR
INDIRECT DAMAGE TO PERSONS OR PROPERTY RESULTING THEREFROM, OR FOR LESSEE'S
LOSS OF USE OF ANY ITEM OF THE EQUIPMENT OR FOR ANY INTERRUPTION IN LESSEE'S
BUSINESS CAUSED BY LESSEE'S INABILITY TO USE ANY ITEM OF THE EQUIPMENT FOR ANY
REASON WHATSOEVER. Lessor hereby assigns to Lessee whatever claims and rights
Lessor may have (to the extent Lessor may validly assign such claims and
rights) under all manufacturer's and supplier's warranties with respect to the
Equipment, provided, that all such assignments shall be of no further force or
effect, and all proceeds of such claims and rights shall be paid over to or
retained by Lessor if an Event of Default shall have occurred and be
continuing or upon the return of the Equipment to Lessor. So long and only so
long as all of the Equipment described in a particular Lease Supplement shall
be subject to this Agreement and Lessee shall be entitled to possession of the
Equipment hereunder, Lessor authorizes Lessee, at Lessee's sole expense, to
assert for Lessor's account, all rights and powers of Lessor under any
manufacturer's, vendor's or dealer's warranty on any item of Equipment;
provided, however, that Lessee shall indemnify, protect, save, defend and hold
harmless Lessor from and against any and all claims, and all costs, expenses,
damages, losses and liabilities incurred or suffered by Lessor in connection
therewith, as a result of, or incident to, any action by Lessee pursuant to
this sentence.
SECTION 21. Lessee's Representations, Warranties and Covenants.
Lessee hereby represents, warrants and covenants to Lessor that:
(a) Due Organization and Existence. Lessee is a corporation
duly organized, validly existing and in good standing under the laws of the
state of its incorporation, and is qualified to do business in each
jurisdiction in which such qualification is necessary except where the failure
to so qualify would not have a material adverse effect on the ability of
Lessee to perform its obligations under the Transactions Documents;
(b) Power and Authority. Lessee has the corporate power and
authority to execute and perform this Agreement and the other Transaction
Documents in effect as of the date hereof to which Lessee is a party and to
lease the Equipment hereunder, and has duly authorized the execution, delivery
and performance of this Agreement and the other Transaction Documents in
effect as of the date hereof to which Lessee is a party;
(c) Due Authorization. The leasing of the Equipment from Lessor
by Lessee, the execution and delivery by Lessee of this Agreement and each
Transaction Document in effect as of the date hereof to which it is a party,
and the compliance by Lessee with the terms hereof and thereof, and the
payment and performance by Lessee of all of its obligations hereunder and
thereunder (i) have been duly and legally authorized by appropriate corporate
action taken by Lessee, (ii) are not in contravention of, and will not result
in a violation or breach of, any of the terms of Lessee's certificate of
incorporation, by-laws or of any provisions of any agreements relating to
shares of the capital stock of Lessee, and (iii) will not violate or
constitute a breach of any provisions of law applicable to Lessee, any order,
writ, injunction, decree, determination or award of any court or other agency
of government applicable to Lessee, or any indenture, agreement or other
instrument to which Lessee is a party, or by or under which Lessee or any of
Lessee's property is bound, or be in conflict with, result in a breach of, or
constitute (with due notice or lapse of time) a default under any such
indenture, agreement or any instrument, or result in the creation or
imposition of any Lien upon any of Lessee's property or assets, except where
there will be no material adverse effect on the ability of Lessee to perform
its obligations under the Transaction Documents;
(d) Enforceability. This Agreement, each Lease Supplement, and
every other Transaction Document in effect as of the date hereof have been (or
in the case of future Lease Supplements, will be) executed by the duly
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authorized officer or officers of Lessee and delivered to Lessor and
constitute (or in the case of future Lease Supplements, will constitute) the
legal, valid and binding obligation of Lessee, enforceable in accordance with
its terms, except as enforceability may be limited by bankruptcy, insolvency,
moratorium or other similar laws affecting the rights of creditors generally
and except as enforceability may be limited by general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity
or at law);
(e) No Consents. Except as set forth in subsection (g) below,
neither the execution and delivery by Lessee of this Agreement or any other
Transaction Document in effect as of the date hereof nor the payment and
performance by Lessee of all of its obligations hereunder and thereunder, nor
the sale of the Equipment by any Seller to Lessor for the purpose of leasing
the same to Lessee under this Agreement requires the consent or approval of,
the giving of notice to, the registration, filing or recording with or the
taking of any action that has not already been taken and completed in respect
of, any federal, state, local or foreign government or governmental authority
or agency;
(f) No Liens. No mortgage, deed of trust, or other Lien (other
than Permitted Liens) which now covers or affects, or which may hereafter
cover or affect, any property, or interest therein of Lessee, now attaches or
hereafter will attach to any item of Equipment, or in any manner materially
affects or will materially affect adversely Lessor's rights and interests
therein;
(g) (intentionally omitted);
(h) Financial Statements. All balance sheets, statements of
profit and loss and other financial data that have been delivered to Lessor
with respect to C&A (and its Consolidated Subsidiaries, including without
limitation Lessee) (i) are complete and correct in all material respects, (ii)
accurately present the financial condition of C&A (and its Consolidated
Subsidiaries, including without limitation Lessee) on the dates for which, and
the results of their respective operations for the periods for which, the same
have been furnished and (iii) have been prepared in accordance with generally
accepted accounting principles consistently followed throughout the periods
covered thereby; all balance sheets disclose all known material liabilities,
direct and contingent, as of their respective dates to the extent required by
generally accepted accounting principles, and there has been no change in the
condition of C&A (and its Consolidated Subsidiaries, including without
limitation Lessee), financial or otherwise, since the date of the most recent
financial statements delivered to Lessor with respect to C&A (and its
Consolidated Subsidiaries, including without limitation Lessee), other than
changes which, either separately or in the aggregate, have not been materially
adverse;
(i) No Litigation. There is no material litigation or any other
proceedings now pending or, to the knowledge of Lessee, threatened, against or
affecting Lessee in any court or before any regulatory commission, board or
other administrative governmental agency which would directly or indirectly
adversely affect or impair the title and interest of Lessor in and to the
Equipment, or which, in the reasonable opinion of Lessee's management, is
likely to affect materially and adversely, the business, properties,
operations or condition of Lessee (financial or otherwise), other than as
disclosed in C&A's Form 10-K as of December 31, 1993 filed with the Securities
and Exchange Commission or C&A's Form 10-Q as of July 30, 1994 filed with the
Securities and Exchange Commission.
(j) Income Tax Return. Lessee and has filed all United States
income tax returns which are required to be filed, and has paid, or made
provisions for the payment of, all taxes which have or may become due pursuant
to said returns or pursuant to any assessment received by Lessee, except such
taxes, if any, as are being contested by means of a Permitted Contest;
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(k) (intentionally omitted);
(l) Investment Company. Lessee is not an "investment company",
or a company "controlled" by an "investment company", within the meaning of
the Investment Company Act of 1940, as amended;
(m) Taxes. All sales, use, documentation or similar taxes, fees
or other charges due and payable prior to or as of the date of each Lease
Supplement shall be paid prior to or as of the date of each Lease Supplement
to the extent such are in connection with the sale to and purchase by Lessor
of the Equipment or the leasing of the Equipment by Lessor to Lessee;
(n) No Offer to Sell or Assign. Lessee has not offered any
interest in this Agreement, the Payments, or the Equipment or any similar
security for sale to, or solicited offers to buy any thereof from, or
otherwise approached or negotiated with respect thereto with, any prospective
purchaser, other than Lessor;
(o) Invoices. In connection with each Lease Supplement, Lessee
shall deliver or cause to be delivered to Lessor true, correct and complete
copies of all purchase agreements, offering documents and invoices for the
Equipment;
(p) Adverse Contract. Lessee is not a party to, or bound by,
any contract, agreement or instrument or subject to any corporate restriction
that would conflict with this Agreement or any other Transaction Document in
effect as of the date hereof;
(q) Misrepresentation. Neither this Agreement nor any other
Transaction Document in effect as of the date hereof contains any
misrepresentation or untrue statement of material fact or omits to state any
material fact necessary to make any of such Transaction Documents in effect as
of the date hereof not misleading;
(r) (intentionally omitted);
(s) Chief Executive Office. The chief executive office of
Lessee is located at 701 McCullough Drive, Charlotte, North Carolina 28262 and
has been located at such address for no less than the four (4) months prior to
the date hereof;
(t) Trade Names. Lessee has not, and does not, use any trade
name or any other name in the conduct of its business except for its name set
forth on the signature page hereof and those listed on Schedule 2 hereto; and
SECTION 22. Events of Default. Any of the following events shall
constitute an "Event of Default" (whether any such event shall be voluntary or
involuntary, or come about or be effected by operation of law or pursuant to
or in compliance with any judgment, decree or order of any court or any order,
rule or regulation of any administrative or governmental body):
(a) Payment. Lessee shall fail to make (i) any Basic Payments
within five (5) Business Days after the same is due and payable or (ii) any
Supplemental Payment within ten (10) days after receipt of written notice to
Lessee that the same is due and payable; or
(b) Certain Covenants. Lessee shall fail to observe or perform
any of the covenants or agreements of Lessee set forth in Sections 8 or 17
hereof; or
(c) Other Covenants. Lessee shall fail to perform or observe
any other covenant, condition, or agreement to be performed or observed by it
under this Agreement, or in any agreement or certificate furnished to Lessor
in connection herewith, and such failure shall continue unremedied for thirty
(30) days after written notice to Lessee specifying such failure and demanding
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the same to be remedied; provided, however, that if Lessee shall have
undertaken to cure any such failure and, notwithstanding the reasonable
diligence of Lessee in attempting to cure such failure, such failure is not
cured within said thirty (30) day period but is curable with future due
diligence, there shall exist no Event of Default under this Section 22 for
such further time, not to exceed sixty (60) days, as may reasonably be
required to effect such cure, so long as Lessee is proceeding with due
diligence to cure such failure; or
(d) Default under Other Documents - Lessee. A C&A Credit
Agreement Event of Default shall have occurred and no effective waiver shall
have been obtained with respect thereto; provided, however, the foregoing
shall not constitute an Event of Default hereunder until twelve (12) months
have passed during which Lessee has diligently pursued such a waiver by
appropriate means and no such waiver has been obtained in such period; or
(e) Bankruptcy; Insolvency - Lessee. Lessee shall become
insolvent or bankrupt or make an assignment for the benefit of creditors or
consent to the appointment of a trustee or receiver; or a trustee or a
receiver shall be appointed for Lessee or for a substantial part of its
property without its consent and shall not be dismissed for a period of sixty
(60) days; or any petition for the relief, reorganization or arrangement of
Lessee or any other petition in bankruptcy or for the liquidation, insolvency
or dissolution of Lessee shall be filed by or against Lessee and, if filed
against Lessee shall be consented to or be pending and not dismissed for a
period of sixty (60) days; or an order for relief under any bankruptcy or
insolvency law shall be entered by any court or governmental authority of
competent jurisdiction with respect to Lessee; or
(f) Misrepresentation - Lessee. Any representation, warranty,
statement or certification made by Lessee under this Agreement or in any other
Transaction Document in effect as of the date hereof to which Lessee is a
party (or in any document or certificate furnished to Lessor in connection
herewith or pursuant hereto) shall prove to be untrue or incorrect when made
in any material respect, or shall be breached in any material respect.
SECTION 23. Remedies Upon Default. Upon the occurrence of any Event of
Default, and at any time thereafter, Lessor may exercise one or more of the
following remedies with respect to the Equipment or any part thereof as Lessor
in its sole discretion shall elect:
(a) Return of Equipment. Lessor may cause Lessee, upon the
demand of Lessor and at Lessee's expense, to, and Lessee shall, promptly
return the Equipment (or any item thereof) as Lessor may demand to Lessor at
such location, in the manner and condition required by, and otherwise in
accordance with all the provisions of, Section 6 hereof as if the Equipment
were being returned at the end of the Term; or Lessor, at its option, may
enter upon the premises where the Equipment is located or believed to be
located and take immediate possession of and remove the Equipment (or any
items thereof) without the necessity for first instituting proceedings, or by
summary proceedings or otherwise, and Lessee shall comply therewith, all
without liability to Lessor for or by reason for such entry or taking
possession, whether for the restoration of damage to property caused by such
taking or otherwise;
(b) Sell, Use, Lease or Otherwise Employ Equipment. Lessor may
(i) sell or otherwise dispose of the Equipment, at public or private sale and
with or without notice to Lessee or advertisement, as Lessor may determine or
(ii) hold, use, operate, lease to others or keep idle all or any part of the
Equipment as Lessor, in its sole discretion, may determine, in the case of (i)
or (ii) of this Section 23(b) free and clear of any rights of Lessee except as
hereinafter set forth in this Section 23 and without any duty to account to
Lessee with respect to such action or inaction or for any proceeds with
respect thereto except to the extent required by Section 23(d) hereof in the
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event Lessor elects to exercise its rights under said Section 23(d) in lieu of
its rights under Section 23(b) hereof;
(c) Excess of Casualty Loss Value over Fair Market Sales Value.
Whether or not Lessor shall have exercised, or shall thereafter at any time
exercise, any of its rights under Sections 23(a) or (b) hereof with respect to
the Equipment, Lessor, by notice to Lessee specifying a payment date not
earlier than the next Basic Payment Date, may cause Lessee to pay to Lessor,
and Lessee shall pay to Lessor, on the payment date specified in such notice,
as liquidated damages for loss of a bargain and not as a penalty (in lieu of
the Basic Payments for the Equipment due after the specified payment date),
any Payments with respect to the Equipment due on or before or accrued as of
such payment date plus an amount equal to the excess, if any, of (i) the
Casualty Loss Value for all the Equipment, determined as of such payment date
over (ii) the Fair Market Sales Value for all the Equipment, computed as of
the payment date specified pursuant to this Section 23(c), together with
interest, to the extent permitted by applicable law, at the Overdue Rate on
such Payments and the amount of such excess, if any, from such payment date
specified pursuant to this Section 23(c), to the date of actual payment of all
such Payments and other amounts;
(d) Excess of Casualty Loss Value over Sales Proceeds. In the
event Lessor, pursuant to Section 23(b) hereof, shall have sold the Equipment,
Lessor in lieu of exercising its rights under Section 23(c) hereof with
respect to the Equipment, may, if it shall so elect, cause Lessee to pay
Lessor, and Lessee shall pay to Lessor, on the date of such sale, as
liquidated damages for loss of a bargain and not as a penalty (in lieu of the
Basic Payments for the Equipment due after the date on which such sale
occurs), any Payments with respect to the Equipment due on or before or
accrued as of such date of sale, plus the amount of any deficiency of the net
proceeds of such sale below the Casualty Loss Value of all the Equipment,
determined as of the date of such sale, together with interest, to the extent
permitted by applicable law, at the Overdue Rate on all such Payments and the
amount of such deficiency from the date of such sale to the date of actual
payment of all such Payments and other amounts; or
(e) Rescission. Rescind this Agreement as to the Equipment or
exercise any other right or remedy which may be available under applicable law
or proceed by appropriate court action to enforce the terms hereof or to
recover damages for the breach hereof.
In addition, Lessee shall be liable for any and all Supplemental
Payments due hereunder before or after any termination hereof, including all
costs and expenses (including, without limitation, reasonable attorney's fees
and disbursements) incurred by reason of the occurrence of any Event of
Default or the exercise of Lessor's remedies with respect thereto including
all costs and expenses incurred in connection with the return of the Equipment
in accordance with the terms of Section 6 hereof or any appraisal of the
Equipment. At any sale of the Equipment, Lessor may bid for and purchase such
property. Except as otherwise expressly provided above, no remedy referred to
in this Section 23 is intended to be exclusive, but each shall be cumulative
and in addition to any other remedy referred to above or otherwise available
to Lessor at law or in equity; and the exercise or beginning of exercise by
Lessor of any one or more of such remedies shall not preclude the simultaneous
or later exercise by Lessor of any or all such other remedies. No express or
implied waiver by Lessor of any Event of Default hereunder shall in any way be
or be construed to be, a waiver of any future or subsequent Event of Default.
SECTION 24. Lessor's Right to Perform for Lessee. If Lessee fails to
make any Supplemental Payment required to be made by it hereunder or fails to
perform or comply with any of its agreements contained herein, Lessor may
itself, make such payment or perform or comply with such agreement, and the
amount of such payment and the amount of the expenses of Lessor reasonably
incurred in connection with such payment or the performance of or compliance
with such agreement, as the case may be, together with interest thereon at the
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rate specified in Section 25 hereof, shall, if not paid by Lessee to Lessor on
demand, be deemed a Supplemental Payment hereunder; provided, however, that no
such payment, performance or compliance by Lessor shall be deemed to cure any
Event of Default hereunder.
SECTION 25. Late Charges. Lessee shall pay to Lessor, upon demand, to
the extent permitted by applicable law, interest on any Basic Payment not paid
when due, and on any Supplemental Payment or other amount payable under this
Agreement which is not paid when due, for any period for which any of the same
is overdue (without regard to any grace period) at a rate equal to the Overdue
Rate.
SECTION 26. Further Assurances. Lessor and Lessee agree to cooperate
in good faith and to execute and deliver such documents and further assurances
consistent with and in clarification of the characterization and intent of the
parties with respect to the Overall Transactions.
SECTION 27. Transaction Costs, Fees and Expenses. Lessee shall pay all
out-of-pocket costs, fees and expenses of Lessor and Lessee in connection with
the negotiation, preparation, execution, delivery and enforcement of the
Transaction Documents (and all amendments, modifications and supplements
thereto in connection with each Acceptance Date after the date hereof) and all
other such reasonable costs, fees and expenses of Lessor and Lessee in
connection with the Overall Transaction including without limitation such
costs, fees and expenses (a) of Moore & Van Allen in connection with the
initial closing hereunder, in an amount as agreed pursuant to a side letter
from Lessor and acknowledged by Lessee and (b) associated with any and all
filings, searches and recordations necessary or appropriate in connection with
the Transaction Documents or the Overall Transaction.
SECTION 28. Notices. All notices provided for or required under the
terms and provisions hereof shall be in writing, and any such notice shall be
deemed given when personally delivered or when deposited with a nationally
recognized overnight delivery service, with the cost therefor prepaid, or in
the United States mails, with proper postage prepaid, for first class
certified mail, return receipt requested, addressed (a) if to Lessor or
Lessee, at their respective addresses as set forth herein or at such other
address as either of them shall, from time to time, designate in writing to
the other, and (b) if to any Assignee, to the address of such Assignee as such
Assignee shall designate, from time to time, in writing to Lessor and Lessee.
If to Lessor: NationsBanc Leasing Corporation
of North Carolina
NationsBank Corporate Center
100 North Tryon Street, NC1007-12-01
Charlotte, North Carolina 28255-0001
Attention: Manager of Corporate Lease
Administration
Telephone: (704) 386-7783
Telecopy: (704) 386-0892
If to Lessee: Collins & Aikman Products Co.
701 McCullough Drive
Charlotte, North Carolina 28262
Attention: Mark O. Remissong
Telephone: (704) 548-2145
Telecopy: (704) 548-2330
SECTION 29. End of Term Purchase Options.
(a) Election Procedure. If this Agreement shall not have been
earlier terminated, Lessee, upon written notice to Lessor delivered not later
than ninety (90) days prior to the end of the Term, shall elect either to
deliver the Equipment to Lessor pursuant to the terms of Section 6 hereof or
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purchase the Equipment pursuant to the terms of Section 29(b) hereof. Lessee
shall be deemed to have elected the option described in Section 29(b) hereof
if Lessor has not received notice ninety (90) days prior to the end of the
Term. Upon the making of one of the above-referenced elections, Lessee may
not revoke such election.
(b) Lessee's Purchase. On the Expiration Date, Lessee shall
have the option to purchase all (but not less than all) of the Equipment for
an amount equal to the Fair Market Sales Value as of such date. Lessee shall
also pay to (i) Lessor all other Basic Payments then due and owing or accrued
and (ii) to the appropriate parties, all other Supplemental Payments then due
and owing or accrued. Lessee shall also pay all Sales Expenses in connection
with its purchase of the Equipment. Lessor's sale of the Equipment shall be
on an as-is, where-is basis, without recourse to or representation or warranty
by Lessor except as to the absence of Lessor Liens. If Lessee has exercised
its purchase option, but has not prior to the Expiration Date paid all amounts
for which it is obligated under this Section 29(b), then Lessor shall delay
the sale of the Equipment to Lessee until Lessee has paid all amounts for
which it is obligated under Section 29(b); provided, however, Lessor may in
its discretion elect not to sell the Equipment to Lessee in the event any
dispute regarding outstanding amounts from Lessee is not resolved to Lessor's
reasonable satisfaction within six months of the Expiration Date. During such
period of delay, (x) Lessor and Lessee shall in good faith attempt to resolve
any dispute between them as to outstanding amounts from Lessee and (y) Lessee
shall continue to pay Lessor an amount after the Expiration Date equal to the
pro rata portion of the Basic Payments until Lessee has paid or caused to be
paid all such amounts; provided, however, this provision shall not be
interpreted to grant Lessee a right to retain the Equipment after the
Expiration Date.
(c) Settlement Terms. In the event that Lessee purchases any
Equipment from Lessor pursuant to Section 16(b)(i)(B) or Section 29(b) hereof,
Lessor and Lessee hereby agree that the following provisions shall apply:
(i) Representations and Warranties of Lessee. Lessee
shall represent, warrant, covenant and agree with Lessor as of the date
of any sale of such Equipment by Lessor to Lessee, except where specific
reference is made to another date or dates, that:
(A) Lessee has the full right, power and authority to
purchase such Equipment from Lessor as provided in this Agreement
and to carry out Lessee's obligations under this Agreement (as
such pertain to the sale of such Equipment), and all requisite
action necessary to authorize Lessee to enter into the purchase of
such Equipment and to carry out Lessee's obligations with respect
thereto has been, or on or before the date of any sale of such
Equipment to Lessee, will have been, taken;
(B) Lessee acknowledges that:
(1) Lessee is purchasing such Equipment, and such
Equipment shall be conveyed and transferred to the Lessee,
"AS-IS, WHERE-IS, AND WITH ALL FAULTS AND SPECIFICALLY AND
EXPRESSLY WITHOUT ANY RECOURSE OR WARRANTIES,
REPRESENTATIONS, COVENANTS OR GUARANTEES, EXPRESSED OR
IMPLIED, OF ANY KIND, NATURE, OR TYPE WHATSOEVER FROM OR ON
BEHALF OF LESSOR", provided, that Lessor shall represent
that there are no Lessor Liens. Lessee acknowledges that it
has not relied, and is not relying, on any information,
document, sales brochures, or other literature, sketches,
projection, pro forma, statement, representation, guarantee,
or warranty (whether express or implied, or oral or written,
or material or immaterial) that may have been given by, or
made by, or on behalf of, Lessor;
-33-
<PAGE>
(2) Lessee shall not be entitled to, and should not
rely on, Lessor or Lessor's agents as to (a) the quality,
nature, adequacy, or physical condition of such Equipment;
(b) the quality of any labor or materials relating in any
way to such Equipment; or (c) the condition of title to such
Equipment;
(3) EXCEPT AS EXPRESSLY SET FORTH IN THE PROVISO IN
SUBPARAGRAPH (1) ABOVE, LESSOR HAS NOT, DOES NOT, AND WILL
NOT, WITH RESPECT TO SUCH EQUIPMENT, MAKE ANY WARRANTIES OR
REPRESENTATIONS, EXPRESS OR IMPLIED, OR ARISING BY OPERATION
OF LAW, INCLUDING BUT NOT IN ANY WAY LIMITED TO, ANY
WARRANTY OF CONDITION, MERCHANTABILITY, HABITABILITY, OR
FITNESS FOR A PARTICULAR USE, OR WITH RESPECT TO THE VALUE,
PROFITABILITY, OR MARKETABILITY OF SUCH EQUIPMENT; and
(4) Without in any way limiting the generality of
the preceding subparagraphs (1) through (3), Lessee
specifically acknowledges and agrees that Lessee hereby
waives, releases, and discharges any claim Lessee has, might
have had, or may have against Lessor with respect to the
condition of such Equipment, patent or latent, the actual or
potential income or profits to be derived from such
Equipment, and any other state of facts which exists with
respect to such Equipment.
(ii) Survival Beyond Closing. The representations and
warranties of Lessee contained in this Agreement as set forth in Section
29(e)(i) shall survive the closing of the sale of any Equipment to the
Lessee.
(iii) Seller. At the sale of any Equipment to Lessee, Lessor
shall deliver or cause to be delivered to Lessee, at Lessee's sole cost
and expense (except as provided to the contrary), a bill of sale of such
Equipment, duly executed by Lessor.
SECTION 30. Federal and State Tax Consequences. It is expressly agreed
that for federal and state income tax purposes the parties entered into the
transaction contemplated by this Agreement intending such transaction to be
characterized as a true lease and for Lessor to be considered the owner of the
Equipment for such tax purposes; provided, however, Lessee makes no
representation or warranty as to the availability of such tax treatment.
Consistent with this, Lessor intends to claim the cost recovery deductions
associated with the Equipment, and Lessee agrees not to take an inconsistent
position on its federal or state income tax returns.
SECTION 31. Financial Information. Lessee agrees to furnish Lessor (a)
as soon as available, and in any event within ninety (90) days after the last
day of each fiscal year of C&A, (i) a copy of the consolidated balance sheet
of C&A (and its Consolidated Subsidiaries, including without limitation
Lessee) and consolidating balance sheet of Lessee as of the end of such fiscal
year, and related consolidated statements of income and retained earnings of
C&A (and its Consolidated Subsidiaries, including without limitation Lessee)
and consolidating statements of income and retained earnings of Lessee for
such fiscal year with such consolidated financial information certified by an
independent certified public accounting firm of recognized standing, each on a
comparative basis with corresponding statements for the prior fiscal year, or
(ii) a copy of C&A's Form 10-K filed with the Securities and Exchange
Commission for such fiscal year (if C&A is subject to the reporting
requirements under the rules and regulations promulgated by the Securities and
Exchange Commission), and (b) within forty-five (45) days after the last day
of each fiscal quarter of C&A (except the last such fiscal quarter), (i) a
copy of the consolidated balance sheet as of the end of such quarter, and
related consolidated statements of income and retained earnings covering the
fiscal year to date of C&A (and its Consolidated Subsidiaries, including
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<PAGE>
without limitation Lessee) and a copy of the consolidating balance sheet as of
the end of such quarter, and related consolidating statements of income and
retained earnings covering the fiscal year to date of Lessee, each on a
comparative basis with the corresponding period of the prior year, all in
reasonable detail and certified by the treasurer or principal financial
officer of C&A, or (ii) if C&A is subject to the reporting requirements under
the rules and regulations promulgated by the Securities and Exchange
Commission, a copy of C&A's Form 10-Q filed with the Securities and Exchange
Commission and all such other financial statements and reports as C&A shall
send to the Securities and Exchange Commission.
SECTION 32. Miscellaneous. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating or diminishing Lessor's rights under the
remaining provisions hereof, and any such prohibition or unenforceability in
any jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction. No term or provision of this Agreement may be
amended, altered, waived, discharged or terminated orally, but only by an
instrument in writing signed by a duly authorized officer or the party against
which the enforcement of the amendment, alteration, waiver, discharge or
termination is sought. A waiver on any one occasion shall not be construed as
a waiver on a future occasion. All of the covenants, conditions and
obligations contained in this Agreement shall be binding upon and shall inure
to the benefit of the respective successors and assigns of Lessor and (subject
to the restrictions of Section 14 hereof) Lessee. This Agreement may be
executed in as many counterparts as shall be determined by the parties hereto
when so executed, each such counterpart shall be binding on both parties
hereto, notwithstanding that both parties are not signatories to the same
counterpart. This Agreement, each Lease Supplement and each related
instrument, document, agreement and certificate collectively constitute the
entire agreement of Lessor and Lessee with respect to the financing of the
Equipment, and cancel and supersede any and all prior oral or written
understandings with respect thereto. THIS AGREEMENT AND EACH OTHER
TRANSACTION DOCUMENT SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NORTH CAROLINA, INCLUDING,
WITHOUT LIMITATION, ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
LESSEE AND LESSOR HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION,
AND THE VENUE, OF A NORTH CAROLINA STATE OR FEDERAL COURT LOCATED IN
MECKLENBURG COUNTY, NORTH CAROLINA FOR ANY ACTION OR PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT. LESSEE AND
LESSOR HEREBY IRREVOCABLY AGREE THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD OR DETERMINED IN SUCH NORTH CAROLINA COURT, OR TO THE
EXTENT PERMITTED BY LAW, SUCH FEDERAL COURT. LESSEE AND LESSOR HEREBY
IRREVOCABLY WAIVE, TO THE FULLEST EXTENT THEY MAY EFFECTIVELY DO SO, THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF ANY ACTION OR
PROCEEDING.
SECTION 33. Interest Rate Calculations. All rate calculations made
pursuant to this Agreement (including, without limitation, any calculation of
a late charge, the Overdue Rate) shall be computed on the basis of the actual
number of days elapsed over a year of 360 days.
SECTION 34. Personal Property Taxes. Lessor and Lessee hereby agree
that to the extent permitted by law (a) Lessee will file all returns and other
appropriate documentation in regard to personal property taxes on the
Equipment, (b) pay all such personal property taxes and (c) reimburse Lessor
for any and all such personal property taxes previously paid by Lessor.
[The remainder of this page has been intentionally left blank.]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.
NATIONSBANC LEASING CORPORATION
OF NORTH CAROLINA
By: (Signature of Herbert T. Thurau)
Name: Herbert T. Thurau
Title: Vice President
COLLINS & AIKMAN PRODUCTS CO.
By: (Signature of Mark O. Remissong)
Name: Mark O. Remissong
Title: Senior Vice President
COUNTERPART NO. 5 OF 6 SERIALLY NUMBERED MANUALLY EXECUTED
COUNTERPARTS. TO THE EXTENT IF ANY THAT THIS DOCUMENT CONSTITUTES CHATTEL
PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST IN THIS DOCUMENT
MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER
THAN COUNTERPART NO. 1.
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<PAGE>
EXHIBIT A
LEASE SUPPLEMENT AND ACCEPTANCE CERTIFICATE
This Lease Supplement and Acceptance Certificate is dated September 30,
1994 and is executed by NATIONSBANC LEASING CORPORATION OF NORTH CAROLINA, a
North Carolina corporation ("Lessor") and COLLINS & AIKMAN PRODUCTS CO., a
Delaware corporation ("Lessee") pursuant to Section 4 of the Master Equipment
Lease Agreement, dated as of September 30, 1994 between Lessee and Lessor (the
"Agreement"). All capitalized terms used herein but not defined herein shall
have the meanings given to such terms in the Agreement.
Lessee hereby acknowledges and agrees that the equipment specified on
Annex A hereto (the "Equipment") has been delivered to Lessee on the date
hereof at the delivery place described below, and that, as between Lessor and
Lessee, the Equipment (a) has been inspected to the complete satisfaction of
Lessee, (b) is in good operating order, repair and condition, (c) is of a
size, design, capacity and manufacture selected by Lessee, (d) is suitable for
Lessee's purposes, (e) has been unconditionally accepted by Lessee on the date
hereof, for all purposes of the Agreement, and (f) is subject to all of the
terms, conditions and provisions of the Agreement. Lessee further
acknowledges, agrees and certifies that Lessor has made no representation,
warranty, covenant or guarantee of any type or kind, expressed or implied,
with respect to the Equipment and that the insurance policies, certificates or
other documents evidencing the coverages required under the Agreement have
been delivered to Lessor.
Lessee hereby leases from Lessor the Equipment, and Lessor and Lessee
further agree and state as follows:
1. Delivery Place for the Equipment: _______________________.
2. As of the date hereof, the aggregate Acquisition Cost is $__________.
3. The Acquisition Expiration Date for the Equipment described in Annex A
hereto is __________________.
4. The Interim Term Expiration Date for the Equipment described in Annex A
hereto is ___________________.
5. Pursuant to Section 168(c)(1) of the Code, the applicable recovery
period for the Equipment shall be ____ years.
6. The Basic Term for the Equipment commences on ___________________, and
ends on ___________________, both dates inclusive, unless sooner terminated in
accordance with the provisions of the Agreement.
7. With respect to the Equipment described in Annex A hereto, the Early
Termination Date is any Basic Payment Date occurring on or after
___________________.
8. With respect to the Equipment described in Annex A hereto, the Early
Buyout Option Date is ____________________.
9. The Basic Payment Factor is _____%.
10. If such ever becomes applicable under the provisions of Section 7(a) of
the Agreement, the Basic Payment Reduced Factors shall be as set forth on
Annex D hereto.
11. The Basic Payment Dates are _________, __________, _____________ and
____________ of each year during the Term, commencing on ________________.
Each Basic Payment shall be payable in arrears on the last day of each Basic
Payment Period to which such Basic Payment corresponds.
<PAGE>
12. The Basic Payment for the Equipment for each quarterly period is in an
amount equal to the Basic Payment Factor multiplied by the aggregate
Acquisition Cost for the Equipment described in Annex A hereto.
13. The Casualty Loss Value percentages for the Equipment during the Basic
Term are set forth on Annex B hereto.
14. The Termination Value Percentages for the Equipment during the Basic
Term are set forth on Annex C hereto.
15. This Lease Supplement and Acceptance Certificate may be executed in as
many counterparts as shall be determined by the parties hereto when so
executed, and each such counterpart shall be binding on both parties hereto,
notwithstanding that both parties are not signatories to the same counterpart.
16. The liability insurance coverage referenced in Section 17(a)(ii) of the
Agreement and applicable exclusively to the Equipment identified in this Lease
Supplement shall be maintained in any event with a combined single limit of
not less than $___________.
[The remainder of this page has been intentionally left blank.]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Lease Supplement
and Acceptance Certificate to be executed by their duly authorized
representatives as of the date first above written.
NATIONSBANC LEASING CORPORATION
OF NORTH CAROLINA
By:_______________________________
Name: ________________________
Title: ________________________
COLLINS & AIKMAN PRODUCTS CO.
By:_______________________________
Name: ________________________
Title: ________________________
<PAGE>
Annex A to
Lease Supplement
(Equipment Description)
<PAGE>
Annex B to
Lease Supplement
(Casualty Loss Value)
Casualty Loss Casualty Loss
Value Date Value Percentage*
*Expressed as a percentage of Acquisition Cost (on a per unit basis) for the
Equipment described in Annex A.
<PAGE>
Annex C to
Lease Supplement
(Termination Value)
Termination Value
Expiration Date Percentage *
*Expressed as a percentage of aggregate Acquisition Cost (on a per unit basis)
for the Equipment described in Annex A.
<PAGE>
Annex D to
Lease Supplement
(Basic Payment Reduced Factor)
Basic Payment
Basic Payment Date Reduced Factor Percentage*
*Expressed as a percentage of Acquisition Cost (on a per unit basis) for the
Equipment described in Annex A.
<PAGE>
Schedule 1
(List of UCC Filings)
1. Office of the Secretary of State of North Carolina
2. Office of Register of Deeds for Mecklenburg County, North Carolina
3. Office of Register of Deeds for Person County, North Carolina
4. Office of Register of Deeds for Stanly County, North Carolina
5. Office of Register of Deeds for McDowell County, North Carolina
6. Office of Register of Deeds for Montgomery County, North Carolina
7. Office of Register of Deeds for Pitt County, North Carolina
8. Office of Register of Deeds for Chatham County, North Carolina
<PAGE>
Schedule 2
(List of Trade Names)
Collins & Aikman Floor Coverings Corporation*
Collins & Aikman Corporation*
Mastercraft Fabrics Corporation
* Discontinued
<PAGE>
LEASE SUPPLEMENT AND ACCEPTANCE CERTIFICATE NO.1
Person County - 7 Year Equipment
This Lease Supplement and Acceptance Certificate is dated September 30,
1994 and is executed by NATIONSBANC LEASING CORPORATION OF NORTH CAROLINA, a
North Carolina corporation ("Lessor") and COLLINS & AIKMAN PRODUCTS CO., a
Delaware corporation ("Lessee") pursuant to Section 4 of the Master Equipment
Lease Agreement, dated as of September 30, 1994 between Lessee and Lessor (the
"Agreement"). All capitalized terms used herein but not defined herein shall
have the meanings given to such terms in the Agreement.
Lessee hereby acknowledges and agrees that the equipment specified on
Annex A hereto (the "Equipment") has been delivered to Lessee on the date
hereof at the delivery place described below, and that, as between Lessor and
Lessee, the Equipment (a) has been inspected to the complete satisfaction of
Lessee, (b) is in good operating order, repair and condition, (c) is of a
size, design, capacity and manufacture selected by Lessee, (d) is suitable for
Lessee's purposes, (e) has been unconditionally accepted by Lessee on the date
hereof, for all purposes of the Agreement, and (f) is subject to all of the
terms, conditions and provisions of the Agreement. Lessee further
acknowledges, agrees and certifies that Lessor has made no representation,
warranty, covenant or guarantee of any type or kind, expressed or implied,
with respect to the Equipment and that the insurance policies, certificates or
other documents evidencing the coverages required under the Agreement have
been delivered to Lessor.
Lessee hereby leases from Lessor the Equipment, and Lessor and Lessee
further agree and state as follows:
1. Delivery Place for the Equipment: 1803 N. Main Street, Roxboro, Person
County, North Carolina.
2. As of the date hereof, the aggregate Acquisition Cost is $7,649,453.94.
3. The Acquisition Expiration Date for the Equipment described in Annex A
hereto is September 30, 1994.
4. The Interim Term Expiration Date for the Equipment described in Annex A
hereto is December 28, 1994.
5. Pursuant to Section 168(c)(1) of the Code, the applicable recovery
period for the Equipment shall be 7 years.
6. The Basic Term for the Equipment commences on December 29, 1994, and
ends on March 29, 2005, both dates inclusive, unless sooner terminated in
accordance with the provisions of the Agreement.
7. With respect to the Equipment described in Annex A hereto, the Early
Termination Date is any Basic Payment Date occurring on or after December 29,
1997.
8. With respect to the Equipment described in Annex A hereto, the Early
Buyout Option Date is September 29, 2003.
9. The Basic Payment Factor is 3.266893%.
10. If such ever becomes applicable under the provisions of Section 7(a) of
the Agreement, the Basic Payment Reduced Factors shall be as set forth on
Annex D.
11. The Basic Payment Dates are March 29, June 29, September 29 and December
29 of each year during the Term, commencing on March 29, 1995. Each Basic
Payment shall be payable in arrears on the last day of each Basic Payment
Period to which such Basic Payment corresponds.
<PAGE>
12. The Basic Payment for the Equipment for each quarterly period is in an
amount equal to the Basic Payment Factor multiplied by the aggregate
Acquisition Cost for the Equipment described in Annex A hereto.
13. The Casualty Loss Value percentages for the Equipment during the Basic
Term are set forth on Annex B hereto.
14. The Termination Value Percentages for the Equipment during the Basic
Term are set forth on Annex C hereto.
15. This Lease Supplement and Acceptance Certificate may be executed in as
many counterparts as shall be determined by the parties hereto when so
executed, and each such counterpart shall be binding on both parties hereto,
notwithstanding that both parties are not signatories to the same counterpart.
[The remainder of this page has been intentionally left blank.]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Lease Supplement
and Acceptance Certificate to be executed by their duly authorized
representatives as of the date first above written.
NATIONSBANC LEASING CORPORATION
OF NORTH CAROLINA
By: (Signature of Herbert T. Thurau)
Name: Herbert T. Thurau
Title: Vice President
COLLINS & AIKMAN PRODUCTS CO.
By: (Signature of Mark O. Remissong)
Name: Mark O. Remissong
Title: Senior Vice President
-3-
<PAGE>
LEASE SUPPLEMENT AND ACCEPTANCE CERTIFICATE NO.2
Person County - 5 Year Equipment
This Lease Supplement and Acceptance Certificate is dated September 30,
1994 and is executed by NATIONSBANC LEASING CORPORATION OF NORTH CAROLINA, a
North Carolina corporation ("Lessor") and COLLINS & AIKMAN PRODUCTS CO., a
Delaware corporation ("Lessee") pursuant to Section 4 of the Master Equipment
Lease Agreement, dated as of September 30, 1994 between Lessee and Lessor (the
"Agreement"). All capitalized terms used herein but not defined herein shall
have the meanings given to such terms in the Agreement.
Lessee hereby acknowledges and agrees that the equipment specified on
Annex A hereto (the "Equipment") has been delivered to Lessee on the date
hereof at the delivery place described below, and that, as between Lessor and
Lessee, the Equipment (a) has been inspected to the complete satisfaction of
Lessee, (b) is in good operating order, repair and condition, (c) is of a
size, design, capacity and manufacture selected by Lessee, (d) is suitable for
Lessee's purposes, (e) has been unconditionally accepted by Lessee on the date
hereof, for all purposes of the Agreement, and (f) is subject to all of the
terms, conditions and provisions of the Agreement. Lessee further
acknowledges, agrees and certifies that Lessor has made no representation,
warranty, covenant or guarantee of any type or kind, expressed or implied,
with respect to the Equipment and that the insurance policies, certificates or
other documents evidencing the coverages required under the Agreement have
been delivered to Lessor.
Lessee hereby leases from Lessor the Equipment, and Lessor and Lessee
further agree and state as follows:
1. Delivery Place for the Equipment: 1803 N. Main Street, Roxboro, Person
County, North Carolina.
2. As of the date hereof, the aggregate Acquisition Cost is $137,759.28.
3. The Acquisition Expiration Date for the Equipment described in Annex A
hereto is September 30, 1994.
4. The Interim Term Expiration Date for the Equipment described in Annex A
hereto is December 28, 1994.
5. Pursuant to Section 168(c)(1) of the Code, the applicable recovery
period for the Equipment shall be 5 years.
6. The Basic Term for the Equipment commences on December 29, 1994, and
ends on March 29, 2005, both dates inclusive, unless sooner terminated in
accordance with the provisions of the Agreement.
7. With respect to the Equipment described in Annex A hereto, the Early
Termination Date is any Basic Payment Date occurring on or after December 29,
1997.
8. With respect to the Equipment described in Annex A hereto, the Early
Buyout Option Date is September 29, 2003.
9. The Basic Payment Factor is 3.191613%.
10. If such ever becomes applicable under the provisions of Section 7(a) of
the Agreement, the Basic Payment Reduced Factors shall be as set forth on
Annex D.
11. The Basic Payment Dates are March 29, June 29, September 29 and December
29 of each year during the Term, commencing on March 29, 1995. Each Basic
Payment shall be payable in arrears on the last day of each Basic Payment
Period to which such Basic Payment corresponds.
<PAGE>
12. The Basic Payment for the Equipment for each quarterly period is in an
amount equal to the Basic Payment Factor multiplied by the aggregate
Acquisition Cost for the Equipment described in Annex A hereto.
13. The Casualty Loss Value percentages for the Equipment during the Basic
Term are set forth on Annex B hereto.
14. The Termination Value Percentages for the Equipment during the Basic
Term are set forth on Annex C hereto.
15. This Lease Supplement and Acceptance Certificate may be executed in as
many counterparts as shall be determined by the parties hereto when so
executed, and each such counterpart shall be binding on both parties hereto,
notwithstanding that both parties are not signatories to the same counterpart.
[The remainder of this page has been intentionally left blank.]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Lease Supplement
and Acceptance Certificate to be executed by their duly authorized
representatives as of the date first above written.
NATIONSBANC LEASING CORPORATION
OF NORTH CAROLINA
By: (Signature of Herbert T. Thurau)
Name: Herbert T. Thurau
Title: Vice President
COLLINS & AIKMAN PRODUCTS CO.
By: (Signature of Mark O. Remissong)
Name: Mark O. Remissong
Title: Senior Vice President
-3-
<PAGE>
LEASE SUPPLEMENT AND ACCEPTANCE CERTIFICATE NO.3
Stanly County - 5 Year Equipment
This Lease Supplement and Acceptance Certificate is dated September 30,
1994 and is executed by NATIONSBANC LEASING CORPORATION OF NORTH CAROLINA, a
North Carolina corporation ("Lessor") and COLLINS & AIKMAN PRODUCTS CO., a
Delaware corporation ("Lessee") pursuant to Section 4 of the Master Equipment
Lease Agreement, dated as of September 30, 1994 between Lessee and Lessor (the
"Agreement"). All capitalized terms used herein but not defined herein shall
have the meanings given to such terms in the Agreement.
Lessee hereby acknowledges and agrees that the equipment specified on
Annex A hereto (the "Equipment") has been delivered to Lessee on the date
hereof at the delivery place described below, and that, as between Lessor and
Lessee, the Equipment (a) has been inspected to the complete satisfaction of
Lessee, (b) is in good operating order, repair and condition, (c) is of a
size, design, capacity and manufacture selected by Lessee, (d) is suitable for
Lessee's purposes, (e) has been unconditionally accepted by Lessee on the date
hereof, for all purposes of the Agreement, and (f) is subject to all of the
terms, conditions and provisions of the Agreement. Lessee further
acknowledges, agrees and certifies that Lessor has made no representation,
warranty, covenant or guarantee of any type or kind, expressed or implied,
with respect to the Equipment and that the insurance policies, certificates or
other documents evidencing the coverages required under the Agreement have
been delivered to Lessor.
Lessee hereby leases from Lessor the Equipment, and Lessor and Lessee
further agree and state as follows:
1. Delivery Place for the Equipment: 313 Bethany Road, Albemarle, Stanly
County, North Carolina.
2. As of the date hereof, the aggregate Acquisition Cost is $373,161.71.
3. The Acquisition Expiration Date for the Equipment described in Annex A
hereto is September 30, 1994.
4. The Interim Term Expiration Date for the Equipment described in Annex A
hereto is December 28, 1994.
5. Pursuant to Section 168(c)(1) of the Code, the applicable recovery
period for the Equipment shall be 5 years.
6. The Basic Term for the Equipment commences on December 29, 1994, and
ends on March 29, 2005, both dates inclusive, unless sooner terminated in
accordance with the provisions of the Agreement.
7. With respect to the Equipment described in Annex A hereto, the Early
Termination Date is any Basic Payment Date occurring on or after December 29,
1997.
8. With respect to the Equipment described in Annex A hereto, the Early
Buyout Option Date is September 29, 2003.
9. The Basic Payment Factor is 3.191613%.
10. If such ever becomes applicable under the provisions of Section 7(a) of
the Agreement, the Basic Payment Reduced Factors shall be as set forth on
Annex D.
11. The Basic Payment Dates are March 29, June 29, September 29 and December
29 of each year during the Term, commencing on March 29, 1995. Each Basic
Payment shall be payable in arrears on the last day of each Basic Payment
Period to which such Basic Payment corresponds.
<PAGE>
12. The Basic Payment for the Equipment for each quarterly period is in an
amount equal to the Basic Payment Factor multiplied by the aggregate
Acquisition Cost for the Equipment described in Annex A hereto.
13. The Casualty Loss Value percentages for the Equipment during the Basic
Term are set forth on Annex B hereto.
14. The Termination Value Percentages for the Equipment during the Basic
Term are set forth on Annex C hereto.
15. This Lease Supplement and Acceptance Certificate may be executed in as
many counterparts as shall be determined by the parties hereto when so
executed, and each such counterpart shall be binding on both parties hereto,
notwithstanding that both parties are not signatories to the same counterpart.
[The remainder of this page has been intentionally left blank.]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Lease Supplement
and Acceptance Certificate to be executed by their duly authorized
representatives as of the date first above written.
NATIONSBANC LEASING CORPORATION
OF NORTH CAROLINA
By: (Signature of Herbert T. Thurau)
Name: Herbert T. Thurau
Title: Vice President
COLLINS & AIKMAN PRODUCTS CO.
By: (Signature of Mark O. Remissong)
Name: Mark O. Remissong
Title: Senior Vice President
-3-
<PAGE>
LEASE SUPPLEMENT AND ACCEPTANCE CERTIFICATE NO.4
McDowell County - 5 Year Equipment
This Lease Supplement and Acceptance Certificate is dated September 30,
1994 and is executed by NATIONSBANC LEASING CORPORATION OF NORTH CAROLINA, a
North Carolina corporation ("Lessor") and COLLINS & AIKMAN PRODUCTS CO., a
Delaware corporation ("Lessee") pursuant to Section 4 of the Master Equipment
Lease Agreement, dated as of September 30, 1994 between Lessee and Lessor (the
"Agreement"). All capitalized terms used herein but not defined herein shall
have the meanings given to such terms in the Agreement.
Lessee hereby acknowledges and agrees that the equipment specified on
Annex A hereto (the "Equipment") has been delivered to Lessee on the date
hereof at the delivery place described below, and that, as between Lessor and
Lessee, the Equipment (a) has been inspected to the complete satisfaction of
Lessee, (b) is in good operating order, repair and condition, (c) is of a
size, design, capacity and manufacture selected by Lessee, (d) is suitable for
Lessee's purposes, (e) has been unconditionally accepted by Lessee on the date
hereof, for all purposes of the Agreement, and (f) is subject to all of the
terms, conditions and provisions of the Agreement. Lessee further
acknowledges, agrees and certifies that Lessor has made no representation,
warranty, covenant or guarantee of any type or kind, expressed or implied,
with respect to the Equipment and that the insurance policies, certificates or
other documents evidencing the coverages required under the Agreement have
been delivered to Lessor.
Lessee hereby leases from Lessor the Equipment, and Lessor and Lessee
further agree and state as follows:
1. Delivery Place for the Equipment: Highway 70 East, Old Fort, McDowell
County, North Carolina.
2. As of the date hereof, the aggregate Acquisition Cost is $809,439.65.
3. The Acquisition Expiration Date for the Equipment described in Annex A
hereto is September 30, 1994.
4. The Interim Term Expiration Date for the Equipment described in Annex A
hereto is December 28, 1994.
5. Pursuant to Section 168(c)(1) of the Code, the applicable recovery
period for the Equipment shall be 5 years.
6. The Basic Term for the Equipment commences on December 29, 1994, and
ends on March 29, 2005, both dates inclusive, unless sooner terminated in
accordance with the provisions of the Agreement.
7. With respect to the Equipment described in Annex A hereto, the Early
Termination Date is any Basic Payment Date occurring on or after December 29,
1997.
8. With respect to the Equipment described in Annex A hereto, the Early
Buyout Option Date is September 29, 2003.
9. The Basic Payment Factor is 3.191613%.
10. If such ever becomes applicable under the provisions of Section 7(a) of
the Agreement, the Basic Payment Reduced Factors shall be as set forth on
Annex D.
11. The Basic Payment Dates are March 29, June 29, September 29 and December
29 of each year during the Term, commencing on March 29, 1995. Each Basic
Payment shall be payable in arrears on the last day of each Basic Payment
Period to which such Basic Payment corresponds.
<PAGE>
12. The Basic Payment for the Equipment for each quarterly period is in an
amount equal to the Basic Payment Factor multiplied by the aggregate
Acquisition Cost for the Equipment described in Annex A hereto.
13. The Casualty Loss Value percentages for the Equipment during the Basic
Term are set forth on Annex B hereto.
14. The Termination Value Percentages for the Equipment during the Basic
Term are set forth on Annex C hereto.
15. This Lease Supplement and Acceptance Certificate may be executed in as
many counterparts as shall be determined by the parties hereto when so
executed, and each such counterpart shall be binding on both parties hereto,
notwithstanding that both parties are not signatories to the same counterpart.
[The remainder of this page has been intentionally left blank.]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Lease Supplement
and Acceptance Certificate to be executed by their duly authorized
representatives as of the date first above written.
NATIONSBANC LEASING CORPORATION
OF NORTH CAROLINA
By: (Signature of Herbert T. Thurau)
Name: Herbert T. Thurau
Title: Vice President
COLLINS & AIKMAN PRODUCTS CO.
By: (Signature of Mark O. Remissong)
Name: Mark O. Remissong
Title: Senior Vice President
-3-
<PAGE>
LEASE SUPPLEMENT AND ACCEPTANCE CERTIFICATE NO.5
Montgomery County - 7 Year Equipment
This Lease Supplement and Acceptance Certificate is dated September 30,
1994 and is executed by NATIONSBANC LEASING CORPORATION OF NORTH CAROLINA, a
North Carolina corporation ("Lessor") and COLLINS & AIKMAN PRODUCTS CO., a
Delaware corporation ("Lessee") pursuant to Section 4 of the Master Equipment
Lease Agreement, dated as of September 30, 1994 between Lessee and Lessor (the
"Agreement"). All capitalized terms used herein but not defined herein shall
have the meanings given to such terms in the Agreement.
Lessee hereby acknowledges and agrees that the equipment specified on
Annex A hereto (the "Equipment") has been delivered to Lessee on the date
hereof at the delivery place described below, and that, as between Lessor and
Lessee, the Equipment (a) has been inspected to the complete satisfaction of
Lessee, (b) is in good operating order, repair and condition, (c) is of a
size, design, capacity and manufacture selected by Lessee, (d) is suitable for
Lessee's purposes, (e) has been unconditionally accepted by Lessee on the date
hereof, for all purposes of the Agreement, and (f) is subject to all of the
terms, conditions and provisions of the Agreement. Lessee further
acknowledges, agrees and certifies that Lessor has made no representation,
warranty, covenant or guarantee of any type or kind, expressed or implied,
with respect to the Equipment and that the insurance policies, certificates or
other documents evidencing the coverages required under the Agreement have
been delivered to Lessor.
Lessee hereby leases from Lessor the Equipment, and Lessor and Lessee
further agree and state as follows:
1. Delivery Place for the Equipment: Glenn Road, Troy, Montgomery County,
North Carolina.
2. As of the date hereof, the aggregate Acquisition Cost is $713,324.45.
3. The Acquisition Expiration Date for the Equipment described in Annex A
hereto is September 30, 1994.
4. The Interim Term Expiration Date for the Equipment described in Annex A
hereto is December 28, 1994.
5. Pursuant to Section 168(c)(1) of the Code, the applicable recovery
period for the Equipment shall be 7 years.
6. The Basic Term for the Equipment commences on December 29, 1994, and
ends on March 29, 2005, both dates inclusive, unless sooner terminated in
accordance with the provisions of the Agreement.
7. With respect to the Equipment described in Annex A hereto, the Early
Termination Date is any Basic Payment Date occurring on or after December 29,
1997.
8. With respect to the Equipment described in Annex A hereto, the Early
Buyout Option Date is September 29, 2003.
9. The Basic Payment Factor is 3.266893%.
10. If such ever becomes applicable under the provisions of Section 7(a) of
the Agreement, the Basic Payment Reduced Factors shall be as set forth on
Annex D.
11. The Basic Payment Dates are March 29, June 29, September 29 and December
29 of each year during the Term, commencing on March 29, 1995. Each Basic
Payment shall be payable in arrears on the last day of each Basic Payment
Period to which such Basic Payment corresponds.
<PAGE>
12. The Basic Payment for the Equipment for each quarterly period is in an
amount equal to the Basic Payment Factor multiplied by the aggregate
Acquisition Cost for the Equipment described in Annex A hereto.
13. The Casualty Loss Value percentages for the Equipment during the Basic
Term are set forth on Annex B hereto.
14. The Termination Value Percentages for the Equipment during the Basic
Term are set forth on Annex C hereto.
15. This Lease Supplement and Acceptance Certificate may be executed in as
many counterparts as shall be determined by the parties hereto when so
executed, and each such counterpart shall be binding on both parties hereto,
notwithstanding that both parties are not signatories to the same counterpart.
[The remainder of this page has been intentionally left blank.]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Lease Supplement
and Acceptance Certificate to be executed by their duly authorized
representatives as of the date first above written.
NATIONSBANC LEASING CORPORATION
OF NORTH CAROLINA
By: (Signature of Herbert T. Thurau)
Name: Herbert T. Thurau
Title: Vice President
COLLINS & AIKMAN PRODUCTS CO.
By: (Signature of Mark O. Remissong)
Name: Mark O. Remissong
Title: Senior Vice President
-3-
<PAGE>
LEASE SUPPLEMENT AND ACCEPTANCE CERTIFICATE NO.6
Pitt County - 5 Year Equipment
This Lease Supplement and Acceptance Certificate is dated September 30,
1994 and is executed by NATIONSBANC LEASING CORPORATION OF NORTH CAROLINA, a
North Carolina corporation ("Lessor") and COLLINS & AIKMAN PRODUCTS CO., a
Delaware corporation ("Lessee") pursuant to Section 4 of the Master Equipment
Lease Agreement, dated as of September 30, 1994 between Lessee and Lessor (the
"Agreement"). All capitalized terms used herein but not defined herein shall
have the meanings given to such terms in the Agreement.
Lessee hereby acknowledges and agrees that the equipment specified on
Annex A hereto (the "Equipment") has been delivered to Lessee on the date
hereof at the delivery place described below, and that, as between Lessor and
Lessee, the Equipment (a) has been inspected to the complete satisfaction of
Lessee, (b) is in good operating order, repair and condition, (c) is of a
size, design, capacity and manufacture selected by Lessee, (d) is suitable for
Lessee's purposes, (e) has been unconditionally accepted by Lessee on the date
hereof, for all purposes of the Agreement, and (f) is subject to all of the
terms, conditions and provisions of the Agreement. Lessee further
acknowledges, agrees and certifies that Lessor has made no representation,
warranty, covenant or guarantee of any type or kind, expressed or implied,
with respect to the Equipment and that the insurance policies, certificates or
other documents evidencing the coverages required under the Agreement have
been delivered to Lessor.
Lessee hereby leases from Lessor the Equipment, and Lessor and Lessee
further agree and state as follows:
1. Delivery Place for the Equipment: Highway 264 Bypass, Farmville, Pitt
County, North Carolina.
2. As of the date hereof, the aggregate Acquisition Cost is $6,504,190.00.
3. The Acquisition Expiration Date for the Equipment described in Annex A
hereto is September 30, 1994.
4. The Interim Term Expiration Date for the Equipment described in Annex A
hereto is December 28, 1994.
5. Pursuant to Section 168(c)(1) of the Code, the applicable recovery
period for the Equipment shall be 5 years.
6. The Basic Term for the Equipment commences on December 29, 1994, and
ends on March 29, 2005, both dates inclusive, unless sooner terminated in
accordance with the provisions of the Agreement.
7. With respect to the Equipment described in Annex A hereto, the Early
Termination Date is any Basic Payment Date occurring on or after December 29,
1997.
8. With respect to the Equipment described in Annex A hereto, the Early
Buyout Option Date is September 29, 2003.
9. The Basic Payment Factor is 3.191613%.
10. If such ever becomes applicable under the provisions of Section 7(a) of
the Agreement, the Basic Payment Reduced Factors shall be as set forth on
Annex D.
11. The Basic Payment Dates are March 29, June 29, September 29 and December
29 of each year during the Term, commencing on March 29, 1995. Each Basic
Payment shall be payable in arrears on the last day of each Basic Payment
Period to which such Basic Payment corresponds.
<PAGE>
12. The Basic Payment for the Equipment for each quarterly period is in an
amount equal to the Basic Payment Factor multiplied by the aggregate
Acquisition Cost for the Equipment described in Annex A hereto.
13. The Casualty Loss Value percentages for the Equipment during the Basic
Term are set forth on Annex B hereto.
14. The Termination Value Percentages for the Equipment during the Basic
Term are set forth on Annex C hereto.
15. This Lease Supplement and Acceptance Certificate may be executed in as
many counterparts as shall be determined by the parties hereto when so
executed, and each such counterpart shall be binding on both parties hereto,
notwithstanding that both parties are not signatories to the same counterpart.
[The remainder of this page has been intentionally left blank.]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Lease Supplement
and Acceptance Certificate to be executed by their duly authorized
representatives as of the date first above written.
NATIONSBANC LEASING CORPORATION
OF NORTH CAROLINA
By: (Signature of Herbert T. Thurau)
Name: Herbert T. Thurau
Title: Vice President
COLLINS & AIKMAN PRODUCTS CO.
By: (Signature of Mark O. Remissong)
Name: Mark O. Remissong
Title: Senior Vice President
-3-
<PAGE>
LEASE SUPPLEMENT AND ACCEPTANCE CERTIFICATE NO.7
Chatham County - 7 Year Equipment
This Lease Supplement and Acceptance Certificate is dated September 30,
1994 and is executed by NATIONSBANC LEASING CORPORATION OF NORTH CAROLINA, a
North Carolina corporation ("Lessor") and COLLINS & AIKMAN PRODUCTS CO., a
Delaware corporation ("Lessee") pursuant to Section 4 of the Master Equipment
Lease Agreement, dated as of September 30, 1994 between Lessee and Lessor (the
"Agreement"). All capitalized terms used herein but not defined herein shall
have the meanings given to such terms in the Agreement.
Lessee hereby acknowledges and agrees that the equipment specified on
Annex A hereto (the "Equipment") has been delivered to Lessee on the date
hereof at the delivery place described below, and that, as between Lessor and
Lessee, the Equipment (a) has been inspected to the complete satisfaction of
Lessee, (b) is in good operating order, repair and condition, (c) is of a
size, design, capacity and manufacture selected by Lessee, (d) is suitable for
Lessee's purposes, (e) has been unconditionally accepted by Lessee on the date
hereof, for all purposes of the Agreement, and (f) is subject to all of the
terms, conditions and provisions of the Agreement. Lessee further
acknowledges, agrees and certifies that Lessor has made no representation,
warranty, covenant or guarantee of any type or kind, expressed or implied,
with respect to the Equipment and that the insurance policies, certificates or
other documents evidencing the coverages required under the Agreement have
been delivered to Lessor.
Lessee hereby leases from Lessor the Equipment, and Lessor and Lessee
further agree and state as follows:
1. Delivery Place for the Equipment: Highway 64 Bypass, Siler City,
Chatham County, North Carolina.
2. As of the date hereof, the aggregate Acquisition Cost is $6,369,267.07.
3. The Acquisition Expiration Date for the Equipment described in Annex A
hereto is September 30, 1994.
4. The Interim Term Expiration Date for the Equipment described in Annex A
hereto is December 28, 1994.
5. Pursuant to Section 168(c)(1) of the Code, the applicable recovery
period for the Equipment shall be 7 years.
6. The Basic Term for the Equipment commences on December 29, 1994, and
ends on March 29, 2005, both dates inclusive, unless sooner terminated in
accordance with the provisions of the Agreement.
7. With respect to the Equipment described in Annex A hereto, the Early
Termination Date is any Basic Payment Date occurring on or after December 29,
1997.
8. With respect to the Equipment described in Annex A hereto, the Early
Buyout Option Date is September 29, 2003.
9. The Basic Payment Factor is 3.266893%.
10. If such ever becomes applicable under the provisions of Section 7(a) of
the Agreement, the Basic Payment Reduced Factors shall be as set forth on
Annex D.
11. The Basic Payment Dates are March 29, June 29, September 29 and December
29 of each year during the Term, commencing on March 29, 1995. Each Basic
Payment shall be payable in arrears on the last day of each Basic Payment
Period to which such Basic Payment corresponds.
<PAGE>
12. The Basic Payment for the Equipment for each quarterly period is in an
amount equal to the Basic Payment Factor multiplied by the aggregate
Acquisition Cost for the Equipment described in Annex A hereto.
13. The Casualty Loss Value percentages for the Equipment during the Basic
Term are set forth on Annex B hereto.
14. The Termination Value Percentages for the Equipment during the Basic
Term are set forth on Annex C hereto.
15. This Lease Supplement and Acceptance Certificate may be executed in as
many counterparts as shall be determined by the parties hereto when so
executed, and each such counterpart shall be binding on both parties hereto,
notwithstanding that both parties are not signatories to the same counterpart.
[The remainder of this page has been intentionally left blank.]
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Lease Supplement
and Acceptance Certificate to be executed by their duly authorized
representatives as of the date first above written.
NATIONSBANC LEASING CORPORATION
OF NORTH CAROLINA
By: (Signature of Herbert T. Thurau)
Name: Herbert T. Thurau
Title: Vice President
COLLINS & AIKMAN PRODUCTS CO.
By: (Signature of Mark O. Remissong)
Name: Mark O. Remissong
Title: Senior Vice President
-3-
<PAGE>
RETENTION/SEVERANCE AGREEMENT
THIS RETENTION/SEVERANCE AGREEMENT (the "Agreement") is made as
of September 26, 1994, between Collins & Aikman Products Co., a
Delaware corporation (the "Company"), and Paul W. Meeks
("Employee").
W I T N E S S E T H
WHEREAS, Employee is currently employed by the Company; and
WHEREAS, the Company wishes to retain Employee's services by
providing Employee with the benefits set forth in this Agreement.
NOW, THEREFORE, in consideration of Employee's continued
employment and the mutual agreements contained herein, the
parties agree as follows:
1. Term of Employment; Base Salary; Duties; Bonus
(a) The Company agrees to continue to employ Employee,
and Employee hereby accepts such continued employment, until
October 31, 1994 (the "Scheduled Termination Date"), subject to
the terms and conditions of this Agreement. Employee's
employment with the Company shall end on the Scheduled
Termination Date (if not previously terminated by Employee or by
the Company for Cause, as hereinafter defined) unless otherwise
agreed to by the parties.
(b) Until October 31, 1994, the Company shall pay
Employee a base salary at the rate as in effect on the date of
this Agreement.
(c) Until October 31, 1994, Employee shall be Vice
President and Treasurer of the Company and shall report to the
Chief Financial Officer of the Company and perform such services
for the Company and its subsidiaries as may be assigned to him
from time to time by the Chief Financial Officer of the Company,
either of its Vice-Chairmen or any other executive officer of the
Company; it being understood that during the period from August
1, 1994 until October 31, 1994, Employee shall be permitted to
devote a substantial portion of his time to a job search. During
the term of Employee's employment hereunder, the Company shall
continue to furnish Employee with an office and a telephone and
Employee shall continue to receive assistance from a secretary
serving one or more employees of the Company.
(d) Employee shall receive a bonus for the fiscal year
ending January 28, 1995 ("Fiscal 1994") equal to 75% of the bonus
which Employee would have received had his employment not
<PAGE>
2
terminated prior to the end of Fiscal 1994 under the Collins &
Aikman Corporation 1994 Executive Incentive Compensation Plan
(the "Bonus Plan"). Employee's Target Bonus for such purposes
shall remain at 30% of his base compensation and his bonus shall
be determined by the compensation committee of the Company.
Subject to the provisions of the Bonus Plan, in no event shall
Employee's bonus be reduced below 75% of the bonus as calculated
pursuant to this paragraph. Any bonus granted to Employee shall
be payable on or before April 1, 1995.
2. Notice of Termination of Employment. The Company may
terminate Employee's employment with the Company (i) for Cause at
any time without notice or (ii) on the Scheduled Termination
Date. "Cause" means (A) an act of fraud, embezzlement,
misappropriation of business or theft committed by Employee in
the course of his employment or any intentional or negligent
misconduct of Employee which injures the business or reputation
of the Company or any affiliate of the Company; (B) intentional
or negligent damage committed by Employee to the property of the
Company or any affiliate of the Company; (C) Employee's willful
failure or refusal to perform the customary duties and
responsibilities of his position with the Company or any
affiliate of the Company; (D) Employee's breach of fiduciary duty
or representation to the Company or any affiliate of the Company;
(E) Employee's intentional or negligent violation of any written
policy of the Company; (F) Employee's willful failure or refusal
to act in accordance with any specific lawful instructions of a
majority of the Board of Directors of the Company; or (G)
conviction of Employee of a felony or a crime involving moral
turpitude.
3. Severance. In the event Employee's employment with the
Company ends on the Scheduled Termination Date or Employee
voluntarily terminates his employment with the Company at any
time after July 31, 1994, Employee shall be entitled to receive
(i) as of the date on which Employee's employment with the
Company terminates, cash in a lump sum for (x) any unused
vacation days for the entire calendar year of 1994 and (y) any
unused vacation days accrued by Employee under the Wickes
Companies, Inc. vacation policy and (ii) as severance his base
salary as in effect on the date his employment terminates for a
fifteen-month period following the date his employment
terminates. Such severance shall be paid on a periodic basis
over such fifteen-month period in accordance with normal pay
practice, provided, however, that if Employee commences
employment with another employer prior to the expiration of such
fifteen-month period, the balance of any severance due to him
shall be paid in a lump sum as soon as practicable thereafter.
In addition, until the expiration of such fifteen-month period
or, if earlier, the date on which Employee commences employment
with another employer, (i) Employee shall participate in the
medical, vision and dental plans of the Company on the same basis
as if Employee was still employed and Employee shall be obligated
to pay the monthly associate deduction in order to continue such
benefits,
<PAGE>
3
which deduction shall be taken from the amount due to
Employee pursuant to the first sentence of this paragraph 3, (ii)
Employee shall receive basic life insurance coverage under the
Company's life insurance plan on the same basis as if Employee
was still employed (but no optional coverage), (iii) Employee
shall continue to participate in the Company's profit-sharing,
pension and 401(k) savings plans to the same extent as other
former employees of the Company on severance receiving salary
continuation, (iv) Employee shall receive $400 per month as an
automobile allowance and up to $150 per month for automobile
maintenance and shall continue to be covered under the Company's
automobile insurance policy, and (v) Employee shall be entitled
to outplacement services at an outplacement agency designated by
Employee, provided that the cost to the Company for such
outplacement services shall not exceed an aggregate of $5,000.
In addition, Employee shall continue to be covered under the
Company's long term disability plan for a period of 12 weeks from
the date Employee's employment with the Company terminates or
until the date Employee commences employment with another
employer, if earlier. The amount due to Employee pursuant to
clause (ii) of the first sentence of this paragraph 3 shall be
reduced by the amount of any payments that Employee or his estate
or legal representative may be entitled to receive by reason of
Employee's disability under any disability insurance plan of the
Company or any of its subsidiaries.
4. Non-Disclosure; Insider Trading Policy.
(a) Employee recognizes and acknowledges that in the
course of his employment and as a result of the position of trust
he holds with the Company he has obtained private or confidential
information and proprietary data relating to the Company and its
affiliates, including without limitation financial information.
All of such private or confidential information and proprietary
data is referred to herein as "Confidential Information";
provided, however, that Confidential Information will not include
any information known generally to the public (other than as a
result of unauthorized disclosure by Employee).
(b) Employee agrees that he will not, during his
employment or any time thereafter, either directly or indirectly,
disclose or use Confidential Information, except as necessary in
order to fulfill his duties of employment with the Company or any
affiliate of the Company or with the prior written consent of the
Co-Chairmen or Chairman of the Company. The covenants of
Employee set forth in this paragraph 4 constitute agreements
independent of any other provisions of this Agreement and
Employee acknowledges that his failure to comply with the
provisions of this paragraph 4 will result in irreparable and
continuing damage for which there will be no adequate remedy at
law and that, in the event of a failure of Employee so to comply,
the Company shall be entitled, without the necessity of proving
actual damages or securing or posting any bond, to injunctive
relief in addition to all other
<PAGE>
4
remedies which may otherwise be available to the Company and
to such other and further relief as may be proper and necessary
to ensure compliance with the provisions of this paragraph.
(c) During the period of his employment hereunder and
for a period of six months thereafter, Employee shall comply with
the policy of the Company regarding the use or disclosure of
inside information as set forth in a policy statement dated June
23, 1994, as such policy statement may be revised from time to
time.
5. Cooperation. During his employment and at any time
thereafter, Employee shall promptly notify the Company of any
threatened, pending or completed investigation, claim, action,
suit or proceeding, whether civil, criminal, administrative or
investigative ("Proceeding"), in which he may be involved, whether
as an actual or potential party or witness or otherwise, or with
respect to which he may receive requests for information, by
reason of his future, present or past association with the
Company or any affiliate of the Company. Employee shall
cooperate fully with the Company and any affiliate of the Company
in connection with any Proceeding at no expense to the Company or
any affiliate of the Company other than the reimbursement of
Employee's reasonable out-of-pocket expenses. Employee shall not
disclose any confidential or privileged information in connection
with any Proceeding without the written consent of the Company
and shall give prompt notice to the Company of any request
therefor.
6. Employment Tax Withholding. Employee agrees that
Company may withhold and deduct from any compensation payable
under this Agreement any amounts that the Company in good faith
believes may be required to be withheld pursuant to any law or
governmental regulation or ruling heretofore or hereinafter
enacted.
7. Binding Effect. This Agreement will inure to the
benefit of and be binding upon the Company and its successors and
assigns, including, without limitation, any person (i) which may
acquire all or virtually all the Company's assets or (ii) with or
into which the Company may be liquidated, consolidated, merged or
otherwise combined, and will inure to the benefit of and be
binding upon Employee, his heirs, distributees, and personal
representatives.
8. Severability. If any provision of this Agreement is
held to be invalid, illegal, or unenforceable, in whole or in
part, such invalidity, illegality or unenforceability will not
affect any other provision, and all other valid, legal and
enforceable provisions will remain in full force and effect.
9. Survival of Certain Provisions. Notwithstanding
anything herein to the contrary, the obligations of Employee and
the Company under paragraphs 4 and 5 will remain operative and in
full force and effect regardless of the expiration or termination
of this Agreement.
<PAGE>
5
10. Titles. The titles preceding the text of the
paragraphs of this Agreement have been inserted solely for
convenience of reference and do not constitute a part of this
Agreement or affect its meaning, interpretation or effect.
11. Entire Agreement; Modification. This Agreement
supersedes all previous agreements, negotiations, or
communications between Employee and the Company (including,
without limitation, the letter agreement dated August 12, 1992
between Collins & Aikman Group, Inc. (which was merged into the
Company) and Employee (the "Prior Agreement")) and contains the
complete and exclusive expression of the understanding between
the parties. This Agreement cannot be amended, modified, or
supplemented in any respect except by a subsequent written
agreement entered into by both parties. The failure of either
party to insist in any one of more instances upon performance of
any terms, covenants of conditions of this Agreement will not be
construed as a waiver of future performance of any such term,
covenant, or condition and the obligations of either party with
respect to such term, covenant or condition will continue in full
force and effect.
12. No Employment Right; Release. This Agreement does not
affect the right of the Company to terminate Employee's
employment at any time in accordance with paragraph 2 hereof.
For good and valuable consideration, Employee unconditionally
releases the Company and its affiliates and partners, directors,
officers and employees thereof, from any and all claims,
liabilities and obligations of any nature pertaining to
termination of employment other than those explicitly provided
for by this Agreement including, without limitation, any claims
arising out of (i) the Prior Agreement, (ii) the Company's Equity
Share Plan, which was terminated in October 1993, (iii) the
Company's 1993 Employee Stock Option Plan, (iv) the Company's
1994 Employee Stock Option Plan or (v) any alleged legal
restrictions on the Company's rights to terminate its employees,
such as any implied contract of employment or termination
contrary to public policy or to laws prohibiting discrimination
(including, without limitation, the Age Discrimination in
Employment Act). Notwithstanding anything to the contrary
contained herein, the Company shall not be obligated to pay
Employee any amount pursuant to paragraph 2 hereof unless
Employee executes and delivers to the Company a new release,
dated the date of his termination of employment, containing the
substance of the foregoing release and such other provisions as
the Company may request to effect the purposes of the foregoing
release.
13. Governing Law. This Agreement will be construed and
enforced in accordance with the internal laws of the State of New
York.
IN WITNESS WHEREOF, the parties have executed this Agreement
<PAGE>
6
as of the date and year first above written.
COLLINS & AIKMAN PRODUCTS CO.
By (Signature of Harold R. Sunday)
Name: Harold R. Sunday
Title: Vice President -
Human Resources
By (Signature of Paul W. Meeks)
Paul W. Meeks
AGREEMENT, dated as of October 17, 1994 (this "Agreement"),
among COLLINS & AIKMAN PRODUCTS CO. (the "Company") and MARK O.
REMISSONG ("Employee").
WHEREAS the Company and Employee are parties to an Agreement
dated as of October 1, 1993 (the "Prior Agreement");
WHEREAS on October 14, 1994 (the "Termination Date"),
Employee resigned from all positions held with Collins & Aikman
Corporation ("Parent"), the Company and all subsidiaries of the
Company and ceased to be an officer, employee or director of any
such entity;
NOW, THEREFORE, in consideration of the premises
and mutual covenants contained herein and for other good and
valuable consideration, the parties hereto hereby agree as
follows:
1. Termination of Prior Agreement. The Company and
Employee hereby terminate the Prior Agreement and their
respective rights and obligations thereunder as of the
Termination Date.
2. Severance.
Subject to Employee's satisfaction on a timely basis of
the provision set forth in Section 5:
(a) Employee shall receive as severance his base
salary of $230,000 for the period through October 31, 1995. Such
severance shall be paid on a periodic basis over such period in
accordance with normal pay practice.
(b) In addition, until October 31, 1995 or, if
earlier, the date on which Employee commences employment with
another employer, to the extent permitted by law and consistent
with the
<PAGE>
terms of the Company's employee benefit programs and the
administration thereof, (i) Employee shall participate in the
medical, vision and dental plans of the Company on the same basis
as if the Employee were still employed and Employee shall be
obligated to pay the monthly associate deduction in order to
continue such benefits, which deduction shall be taken from the
amount due to Employee pursuant to paragraph (a) of this Section
2 and (ii) Employee shall receive basic life insurance coverage
under the Company's life insurance plan on the same basis as if
Employee were still employed (but no optional coverage). In
addition, until December 31, 1994 or, if earlier, the date on
which Employee commences employment with another employer,
Employee shall be entitled to use the Company car currently in
his possession, shall be reimbursed for reasonable maintenance
(as determined by the Company) of such car and shall continue to
be covered under the Company's automobile insurance policy. At
the end of such period, Employee shall return such car to the
Company or purchase it from the Company at fair market value (as
determined by the Company).
(c) Employee shall also receive a supplemental payment
of $100,000 within three months of the end of the Company's
current fiscal year, which ends January 28, 1995.
Notwithstanding anything to the contrary contained herein,
Employee shall not be entitled to receive any such supplemental
payment unless Employee executes and delivers to the Company a
new release substantially in the form set forth in Section 9
hereof, such release to be dated the date of payment of such
supplemental payment and to contain the provisions set forth in
Section 18.
2
<PAGE>
3. Moving Expenses. The Company will reimburse Employee
for the moving expenses set forth in Appendix A and not any other
moving expenses.
4. Withholding. Employee agrees that the Company may
deduct and withhold from any payments made under this Agreement
the amounts the Company in good faith believes may be required to
be deducted and withheld under the provisions of any statute,
law, regulation or ordinance heretofore or hereafter enacted.
5. Loan Repayment. No later than 10:00 A.M. Tuesday,
October 18, 1994, Employee shall repay to the Company $205,000,
without setoff or deduction of any kind.
6. No Other Payments or Benefits. Except as expressly set
forth in this Agreement, Employee shall not be entitled to any
salary, bonus, benefits, stock options, equity payments,
compensation or payments of any kind.
7. Representations and Covenants of Employee.
7.1 No Violation. Employee represents and warrants that he
has not disclosed any confidential information or trade secrets
concerning any former employer in violation of any obligations to
such former employer during the term of his employment by the
Company.
7.2 No Conflicts. Employee represents and warrants that
the terms of this Agreement do not conflict with any other
agreement, written or oral, to which Employee is a party or by
which Employee is bound.
7.3 Conduct. Employee and his representatives and agents
shall at all times refrain from taking any action or making any
3
<PAGE>
statements, written or oral, which are intended to or are likely
to disparage the goodwill or reputation of Parent, the Company or
any of the Company's subsidiaries or affiliates or any directors,
officers, partners, employees or stockholders of Parent, the
Company or any of the Company's subsidiaries or affiliates or
which are intended to or are likely to adversely affect the
morale of employees of any of the foregoing entities, except as
may be required in a judicial or administrative proceeding.
7.4 Non-Competition.
(a) Employee agrees that for a period of six months
from the Termination Date Employee shall not engage, directly or
indirectly, in any business in the United States that materially
competes with any business of the Company. Further, Employee
agrees that during such period he shall not solicit to hire any
employee of the Company or encourage any employee of the Company
to leave the employment of the Company.
(b) Notwithstanding paragraph (a) of this Section 7.4,
nothing in this Agreement shall prohibit or penalize the
ownership by Employee of shares of a business that are registered
under Section 12 of the Securities Exchange Act of 1934 and
constitute, together with all such shares owned by any immediate
family member or affiliate of, or person acting in concert with,
Employee, less than 2% of the outstanding registered shares of
such business.
7.5 Company Information. Employee agrees that (whether or
not the restrictions of Section 7.4 are or continue to be
applicable), Employee shall keep confidential all confidential
information and trade secrets of Parent, the Company or any of the
4
<PAGE>
Company's subsidiaries or affiliates and shall not disclose
such information to any person without the prior written approval
of the Board of Directors of the Company or use such information
for any purpose. Employee shall return any documents, records,
data, books or materials of Parent, the Company or the Company's
subsidiaries or affiliates in his possession or control and any
of his workpapers containing confidential information or trade
secrets of Parent, the Company or the Company's subsidiaries or
affiliates. It is understood that for purposes of this Agreement
the term "confidential information" is to be construed broadly to
include all nonpublic or proprietary information. This Section 7.5
shall survive any termination of this Agreement.
7.6 Cooperation. Employee shall promptly notify the
Company of any threatened, pending or completed investigation,
claim, action, suit or proceeding, whether civil, criminal,
administrative or investigative ("Proceeding"), in which he may
be involved, whether as an actual or potential party or witness
or otherwise, or with respect to which he may receive requests
for information, by reason of his future, present or past
association with Parent, the Company or any of the Company's
subsidiaries or affiliates. Employee shall cooperate fully with
Parent, the Company and the Company's subsidiaries and affiliates in
connection with any Proceeding at no expense to Parent, the
Company or any of the Company's subsidiaries or affiliates other
than the reimbursement of Employee's reasonable out-of-pocket
expenses. This Section 7.6 shall survive any termination of this
Agreement. Employee shall not disclose any confidential or
privileged information in
5
<PAGE>
connection with any Proceeding without the consent of the Company
and shall give prompt notice to the Company of any request
therefor.
8. Insider Trading Policy. For a period of six months
after the Termination Date, Employee shall comply with the policy
of Parent regarding the use or disclosure of inside information
as set forth in a policy statement dated June 23, 1994.
9. Release. For good and valuable consideration in
connection with this Agreement, Employee unconditionally releases
Parent, the Company and the Company's subsidiaries and affiliates
and the directors, officers, partners, employees and stockholders
of Parent, the Company and each of the Company's subsidiaries and
affiliates, from any and all claims, liabilities and obligations
of any nature whatsoever, including without limitation claims,
liabilities and obligations pertaining to his employment, the
termination of his employment, the Prior Agreement or the 1994
Employee Stock Option Plan of Parent, other than those explicitly
provided for by this Agreement. Without limiting the generality
of the foregoing, Employee acknowledges that among the claims
released are those arising under the Age Discrimination in
Employment Act.
10. Governing Law. The validity, interpretation and
perfor- mance of this Agreement shall be governed by the laws of
the State of North Carolina, regardless of the laws that might be
applied under applicable principles of conflicts of laws. Each
of the parties hereby waives any right such party may have to a
trial by jury. The parties hereto agree that the language of
this Agreement shall be construed neutrally and not strictly for
or against either
6
<PAGE>
of the parties.
11. Entire Agreement. This Agreement constitutes the
entire agreement and contains the complete and exclusive
expression of the understanding between the parties hereto with
respect to the matters referred to herein and supersedes all
prior agreements, negotiations, communications and understandings
between Employee and the Company or Employee and Parent or any
subsidiary or affiliate of the Company or any representative,
agent or attorney of any such entities with respect to the
termination of employment of Employee and any other matters
referred to herein, including without limitation the Prior
Agreement.
12. Notice. Any written notice required to be given by
one party to the other party hereunder shall be deemed effective
if mailed by registered mail:
To the Company c/o:
Collins & Aikman Products Co.
701 McCullough Drive
Charlotte, NC 28262
Attention: Mr. Thomas E. Hannah
To Employee at:
Mr. Mark O. Remissong
2100 Sutton Springs Road
Charlotte, NC 28226
or such other address as may be stated in notice given under this
Section 12.
13. Severability. The invalidity, illegality or
unenforceability of any provision of this Agreement in any
jurisdiction shall not affect the validity, legality or
enforceability of the remainder of this Agreement in such
jurisdiction or the validity, legality or enforceability of this
7
<PAGE>
Agreement or such provision in any other jurisdiction, it being
the intent of the parties hereto that all rights and obligations
of the parties hereto under this Agreement shall be enforceable
to the fullest extent permitted by law. Without limiting the
foregoing, the covenants of Employee set forth in Sections 7.4
and 7.5, respectively, constitute agreements independent of any
other provisions of this Agreement and Employee acknowledges that
his failure to comply with the provisions of Sections 7.4 and 7.5
will result in irreparable and continuing damage for which there
will be no adequate remedy at law and that, in the event of a
failure of Employee so to comply, the Company shall be entitled,
without the necessity of notice or proving actual damages or
securing or posting any bond, to injunctive relief in addition to
all other remedies which may otherwise be available to the
Company and to such other and further relief as may be proper and
necessary to ensure compliance with the provisions of Sections
7.4 and 7.5. If any covenants contained in Section 7.4 shall be
deemed to be invalid, illegal or unenforceable as written by
reason of the extent, duration or geographical scope thereof, or
otherwise, the determining body or authority making such
determination shall be empowered to reduce such covenants so as
to be enforceable to the greatest extent possible and, as so
reduced, such covenants shall then be deemed to be rewritten and
enforced as reduced.
14. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, and,
in the case of the Company, its successors and assigns, and
Section 9 shall also inure to the benefit of the other persons
and entities
8
<PAGE>
identified therein; provided, however, that Employee
shall not, without the prior written consent of the Company,
transfer, assign, convey, pledge or encumber this Agreement or
any interest under this Agreement.
15. Amendment. This Agreement may be amended or canceled
only by an instrument in writing duly executed and delivered by
each party to this Agreement.
16. Headings. Headings contained in this Agreement are for
convenience only and shall not limit this Agreement or affect the
interpretation thereof.
17. Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the
same agreement, and shall become effective when one or more such
counterparts have been signed by each of the parties and
delivered to the other party.
18. Miscellaneous. In executing this Agreement, Employee
has not relied upon any statement, representation or promise,
whether written or oral, of the Parent, the Company or any of the
Company's subsidiaries or affiliates, or of any representative,
agent or attorney for the Parent, the Company or any of the
Company's subsidiaries or affiliates, except for statements
expressly set forth in this Agreement. Each of the parties has
read this Agreement carefully, has been (or is hereby) encouraged
to seek the assistance of his own legal counsel, and knows and
understands the contents hereof, including, without limitation,
in the case of Employee the release set forth in Section 9
hereof.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
(Signature of Mark O. Remissong) [L.S.]
MARK O. REMISSONG
COLLINS & AIKMAN PRODUCTS CO.
By (Signature of Thomas E. Hannah)
Thomas E. Hannah
Chief Executive Officer
10
Collins & Aikman Corporation
Computation of Earnings Per Share Exhibit 11
In thousands, except per share data
(Unaudited)
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
October 29, October 30, October 29, October 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Average shares outstanding during the period . . . . . . . . . . . . . . . 70,521 28,164 44,943 28,164
Incremental shares under stock options
computed under the treasury stock
method using the average market
price of issuer's stock during the
periods . . . . . . . . . . . . . . . 1,588 (904) 1,634 (904)
Total shares for EPS . . . . . . 72,109 27,260 46,577 27,260
Income (loss) applicable to common shareholders:
Continuing operations (1) . . . . . . $30,966 $(135,853) $ (45,387) $(173,395)
Discontinued operations . . . . . . . - (50) - (132,448)
Extraordinary item . . . . . . . . . - - (106,528) -
Net income (loss) . . . . . . . . $30,966 $(135,903) $(151,915) $(305,843)
Income (loss) per common share:
Continuing operations . . . . . . . . $ .43 $ (4.99) $ (.97) $ (6.36)
Discontinued operations . . . . . . . - - - (4.86)
Extraordinary item . . . . . . . . . - - (2.29) -
Net income (loss) . . . . . . . . $ .43 $ (4.99) $ (3.26) $ (11.22)
</TABLE>
Notes:
(1) Income (loss) from continuing operations has been adjusted for
dividends and accretion requirements on redeemable preferred stock
of $14,408 for the nine months ended October 29, 1994 and $6,032 and
$17,473 for the quarter and nine months ended October 30, 1993,
respectively. In addition, loss from continuing operations for the
nine months ended October 30, 1994 has been adjusted for the loss
on redemption of preferred stock of $82,022.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE COMPANY'S CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF
OPERATIONS AT AND FOR THE QUARTER AND NINE MONTHS ENDED OCTOBER 29, 1994
AND SUCH IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-29-1995
<PERIOD-END> OCT-29-1994
<CASH> 2,744
<SECURITIES> 0
<RECEIVABLES> 87,951
<ALLOWANCES> 6,220
<INVENTORY> 190,983
<CURRENT-ASSETS> 312,910
<PP&E> 562,718
<DEPRECIATION> 273,820
<TOTAL-ASSETS> 665,218
<CURRENT-LIABILITIES> 234,306
<BONDS> 559,785
<COMMON> 705
0
0
<OTHER-SE> (430,846)
<TOTAL-LIABILITY-AND-EQUITY> 665,218
<SALES> 1,153,917
<TOTAL-REVENUES> 1,153,917
<CGS> 872,630
<TOTAL-COSTS> 872,630
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 427
<INTEREST-EXPENSE> 64,793
<INCOME-PRETAX> 59,606
<INCOME-TAX> 8,563
<INCOME-CONTINUING> 51,043
<DISCONTINUED> 0
<EXTRAORDINARY> (106,528)
<CHANGES> 0
<NET-INCOME> (55,485)
<EPS-PRIMARY> (3.26)
<EPS-DILUTED> (3.26)
</TABLE>
