AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 19, 1994
REGISTRATION NO. 33-[ ]
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
COLLINS & AIKMAN HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 13-3489233
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
8320 University Executive Park, Suite 102, Charlotte, North Carolina 28262 Tel.
(704) 548-2350
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
ELIZABETH R. PHILIPP, ESQ.
Executive Vice President, General Counsel and Secretary
COLLINS & AIKMAN HOLDINGS CORPORATION
210 Madison Avenue, 6th Floor
New York, New York 10016
Tel. (212) 578-1331
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
Copies to:
ROBERT ROSENMAN, ESQ. ROBERT A. PROFUSEK, ESQ.
CRAVATH, SWAINE & MOORE JONES, DAY, REAVIS & POGUE
825 Eighth Avenue 599 Lexington Avenue
New York, New York 10019 New York, New York 10022
------------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box. / /
If the Registrant elects to deliver its latest annual report to security
holders, or a complete
and legible facsimile thereof, pursuant to Item 11(a)(1) of this Form, check the
following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE><CAPTION>
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PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, par value
$.01 per share.............. 23,000,000 $18.00 $414,000,000 $142,759.62
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</TABLE>
(1) Includes 3,000,000 shares issuable upon the exercise of the Underwriters'
options to purchase shares solely to cover over-allotment options, if any.
(2) Estimated solely for the purpose of calculating the registration fee.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
EXPLANATORY NOTE
The prospectus relating to the Common Stock being registered hereby to be
used in connection with a United States offering (the "U.S. Prospectus") is set
forth following this page. The prospectus to be used in a concurrent
international offering (the "International Prospectus") will consist of
alternate pages set forth following the U.S. Prospectus and the balance of the
pages included in the U.S. Prospectus for which no alternatives are provided.
The contents of the U.S. Prospectus and the International Prospectus are
identical except for the front and back pages, the section captioned
"Underwriting" and the additional section under the caption "Certain United
States Tax Consequences to Non-United States Holders" in the International
Prospectus. Alternate pages for the International Prospectus are separately
designated.
Prior to the consummation of the Offerings, Collins & Aikman Holdings
Corporation will be renamed Collins & Aikman Corporation.
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
CROSS-REFERENCE SHEET SHOWING LOCATION
IN THE PROSPECTUS OF THE RESPONSES
TO ITEMS OF FORM S-2
------------------------
(PURSUANT TO ITEM 501(B) OF REGULATION S-K)
<TABLE><CAPTION>
FORM S-2 ITEM LOCATION
NUMBER AND CAPTION IN PROSPECTUS
<S> <C> <C>
----------------------------------------------------- -----------------------------------------------------
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus..................... Forepart of the Registration Statement; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus................................ Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges................. Prospectus Summary; Certain Considerations
4. Use of Proceeds...................................... Prospectus Summary; Use of Proceeds and Consolidation
5. Determination of Offering Price...................... Underwriting
6. Dilution............................................. Dilution
7. Selling Security Holders............................. Principal Stockholders and Certain Relationships
8. Plan of Distribution................................. Outside Front Cover Page of Prospectus; Underwriting
9. Description of Securities to be Registered........... Outside Front Cover Page of Prospectus; Prospectus
Summary; Description of the Capital Stock
10. Interests of Named Experts and Counsel............... *
11. Information with Respect to the Registrant........... Prospectus Summary; Selected Financial Data;
Management's Discussion and Analysis of Financial
Condition and Results of Operations; Business
12. Incorporation of Certain Information by
Reference.......................................... Incorporation of Certain Documents by Reference
13. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................... *
</TABLE>
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* Item not applicable or requires a negative response.
<PAGE>
SUBJECT TO COMPLETION, DATED APRIL 19, 1994
20,000,000 SHARES
COLLINS & AIKMAN CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
---------------------
Of the 20,000,000 shares of Common Stock offered, 16,000,000 shares are
being offered hereby in the United States and 4,000,000 shares are being offered
in a concurrent international offering outside the United States. Assuming no
exercise of the Underwriters' over-allotment options, all of the shares of
Common Stock offered are being sold by the Company. The initial public offering
price and the aggregate underwriting discount per share will be identical for
both Offerings. See "Underwriting".
Prior to the Offerings, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price per share of Common Stock will be between $15 and $18. For factors to be
considered in determining the initial public offering price, see "Underwriting".
SEE "CERTAIN CONSIDERATIONS" FOR CERTAIN CONSIDERATIONS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK.
Application has been made to list the Common Stock on the New York Stock
Exchange under the symbol "CKC".
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
<TABLE><CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY (2)
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<S> <C> <C> <C>
Per Share...................................... $ $ $
Total(3)....................................... $ $ $
</TABLE>
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(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting".
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Selling Stockholders have granted the U.S. Underwriters an option for 30
days to purchase up to an additional 2,400,000 shares at the initial public
offering price, less the underwriting discount, solely to cover
over-allotments. Additionally, the Selling Stockholders have granted the
International Underwriters an option for 30 days to purchase up to an
additional 600,000 shares at the initial public offering price, less the
underwriting discount, solely to cover over-allotments. If such options are
exercised in full, the total initial public offering price, underwriting
discount and proceeds to the Selling Stockholders will be $ ,
$ and $ , respectively. See "Underwriting".
---------------------
The shares offered hereby are offered severally by the U.S. Underwriters,
as specified herein, subject to receipt and acceptance by them and subject to
their right to reject any order in whole or in part. It is expected that
certificates for the shares will be ready for delivery in New York, New York, on
or about , 1994.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
WASSERSTEIN PERELLA SECURITIES, INC.
---------------------
The date of this Prospectus is , 1994.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
AVAILABLE INFORMATION
Collins & Aikman Corporation (the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934 (the "Exchange
Act") and, in accordance therewith, files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports and other
information filed by the Company may be inspected and copied at public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices located at 7
World Trade Center, New York, New York 10048 and 500 West Madison Street,
Chicago, Illinois 60661. Copies of such materials can be obtained upon written
request from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Company's 15 1/2%
Cumulative Exchangeable Redeemable Preferred Stock, par value $0.01 per share
(the "Merger Preferred Stock"), is listed for trading on the American Stock
Exchange (the "AMEX"). Reports and other information concerning the Company may
also be inspected and copied at the offices of the AMEX, 86 Trinity Place, New
York, New York 10006.
This Prospectus constitutes a part of a registration statement on Form S-2
(herein, together with all exhibits thereto, referred to as the "Registration
Statement") filed by the Company with the Commission under the Securities Act of
1933 (the "Securities Act"), with respect to the Common Stock. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. Reference is hereby made to the Registration Statement and
related exhibits for further information with respect to the Company and the
Common Stock offered hereby. Statements contained herein concerning the
provisions of documents are necessarily summaries of such documents, and each
statement is qualified in its entirety by reference to the copy of the
applicable document filed with the Commission.
Prior to the date of this Prospectus, reports and other information were
filed under the Company's former name "Collins & Aikman Holdings Corporation",
and prior to July 15, 1992, reports and other information were filed under the
name "WCI Holdings Corporation".
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following document, which was previously filed by the Company with the
Commission (File No. 1-10218) pursuant to Section 13 of the Exchange Act, is
incorporated herein by reference: the Company's Annual Report on Form 10-K for
the fiscal year ended January 29, 1994.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified shall not be deemed to constitute a part of this
Prospectus, except as so modified, and any statement so superseded shall not be
deemed to constitute part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any document incorporated herein by reference
(other than exhibits to such documents unless such exhibits are specifically
incorporated by reference into the documents that this Prospectus incorporates).
Requests for such copies should be directed to Corporate Communications, Collins
& Aikman Corporation, 8320 University Executive Park, Suite 102, Charlotte,
North Carolina 28262 (telephone: (704) 548-2350).
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus and is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus or incorporated herein by
reference. The capitalized terms used herein and not otherwise defined have the
meanings ascribed to them elsewhere in this Prospectus. Except where otherwise
indicated, (i) the information in this Prospectus assumes that the
over-allotment options granted to the Underwriters (defined below) are not
exercised, (ii) all references to a year with respect to the Company refer to
the fiscal year of the Company which ends on the last Saturday of January of the
following year, (iii) references to the North American automotive industry
include the U.S. and Canadian markets and products manufactured in Mexico for
export to the U.S. and Canadian markets and (iv) references to the Company
include its direct and indirect subsidiaries and predecessors, as appropriate.
THE COMPANY
The Company is a leader in each of its three business segments: Automotive
Products, the largest supplier of interior trim products to the North American
automotive industry; Interior Furnishings, the largest manufacturer of
residential upholstery fabrics in the U.S.; and Wallcoverings, the largest
producer of residential wallcoverings in the U.S. Within these three segments,
the Company holds a number one or number two market share position in each of
its eight major product lines, which together comprised approximately 81% of its
1993 net sales of $1,305.5 million.
AUTOMOTIVE PRODUCTS
Automotive Products, with 1993 net sales of $677.9 million, is a leading
designer and manufacturer of products for automobile OEMs. The segment's primary
products include four major interior trim products--automotive seat fabric,
molded floor carpet, accessory floor mats and luggage compartment liner--and
convertible top stacks. Management believes that Automotive Products offers a
wider variety of interior trim products and has a broader, more uniform
penetration of the OEMs than any of its competitors. Management estimates that
Automotive Products holds a number one or number two market share position in
each of its five major products. At least one of the Company's five major
automotive products is used on approximately 87% of all North American produced
vehicle lines. Management estimates that Automotive Products' 1993 market share
in its five major products was approximately 26% at Ford, 40% at GM, 51% at
Chrysler and 36% among the Transplants. Management believes that Automotive
Products' size and broad customer penetration constitute a competitive
advantage.
INTERIOR FURNISHINGS
Interior Furnishings, which is comprised of the Decorative Fabrics and
Floorcoverings groups, had 1993 net sales of $407.2 million. Decorative Fabrics,
with 1993 net sales of $313.6 million, is a leading designer and manufacturer of
residential and commercial upholstery fabric in the U.S. Decorative Fabrics
supplies middle to high-end woven fabrics to furniture manufacturers and fabric
distributors. Management estimates that Decorative Fabrics' share of the U.S.
upholstery fabric market is approximately 15%. Decorative Fabrics' primary
division, Mastercraft, is the number one supplier of flat-woven upholstery
fabrics and is also the industry leader in the fast-growing Jacquard segment of
that market. Mastercraft had 1993 net sales of $268.9 million. Mastercraft's
premier design and manufacturing expertise enables it to offer a significantly
greater variety of patterns than any of its competitors.
3
<PAGE>
Floorcoverings, with 1993 net sales of $93.6 million, is a leading
manufacturer of high-end specified contract carpeting products for institutional
and commercial customers with high-traffic applications. Differentiated from
competitors by its patented Powerbond RS(R) adhesive system and by its products'
demonstrably superior performance characteristics, Floorcoverings occupies a
leading position within this niche sector.
WALLCOVERINGS
Wallcoverings, which operates under the name "Imperial", is a leading
manufacturer and distributor of wallcoverings for the residential and commercial
sectors and had 1993 net sales of $220.4 million. Management believes that in
1993 Imperial had a leading 22% market share in the larger residential
wallcoverings sector and held the number one market share position in each of
this sector's two primary distribution channels.
BUSINESS STRATEGY
FOCUS ON HIGH MARKET SHARE PRODUCTS. Management focuses on developing
products that have high market share potential. Management believes that each of
the Company's eight major product lines holds a number one or number two market
share position. Together these product lines comprised 81% of 1993 net sales.
These industry leading positions were achieved almost exclusively through
internal growth and reflect a long-term, Company-wide commitment to excellence
in styling, engineering, product development, value-added manufacturing and
customer service.
<TABLE><CAPTION>
1993
NET SALES 1993 MARKET
PRODUCT LINE (MILLIONS) POSITION
------------ ----------- -------------
<S> <C> <C>
Automotive Products
Automotive seat fabric................................................... $ 218.4 #1
Molded floor carpet...................................................... 180.5 2
Accessory floor mats..................................................... 73.4 1
Luggage compartment trim................................................. 37.4 2*
Convertible top stacks................................................... 28.1 1
Interior Furnishings
Flat-woven furniture fabrics............................................. 268.9 1
Six-foot commercial carpet............................................... 60.3 1
Wallcoverings (residential)................................................ 196.0 1
-----------
Subtotal................................................................. $ 1,063.0
Percent of net sales..................................................... 81%
Net sales................................................................ $ 1,305.5
</TABLE>
-------------------------------
* Management believes that the Company and a competitor are tied
for the number two market share position.
MAINTAIN BROAD PRODUCT OFFERINGS TO SUPPORT CUSTOMER BASE. The Company
consistently strives to offer a wider variety of products to each of its
customers and thereby become the primary supplier to each of its customers.
MAINTAIN LOW-COST POSITION. Management's strategy is to maintain the
Company's low-cost position and flexible manufacturing capabilities in order to
protect operating margins from competitive pricing pressures and economic
downturns, while maximizing the benefits of operating leverage during cyclical
upturns.
4
<PAGE>
MAXIMIZE BENEFITS FROM HIGH OPERATING LEVERAGE. Management believes that
substantial available production capacity and high operating leverage have
enabled the Company to benefit from the recent cyclical upturn in its served
markets. The Company has substantial manufacturing capacity to support further
growth.
OFFER VALUE-ADDED PRODUCTS. A key element of the Company's strategy is to
increase market share and unit selling prices by developing increasingly higher
value-added products through innovations in materials construction, product
design and styling leadership.
MAINTAIN PRODUCT DESIGN AND STYLING LEADERSHIP. The Company is a leader in
design and styling in all three of its business segments. Design and styling are
key differentiating factors in consumer purchasing decisions. Management
believes that the Company's product design and styling capabilities are
currently an important competitive advantage and intends to devote resources to
maintain the Company's leadership position in these areas.
CONTINUE TO DELEVERAGE. The Recapitalization is designed to increase
operating and financial flexibility by reducing the Company's indebtedness and
significantly lowering its cost of borrowing. Management expects to continue to
pursue financial deleveraging through the application of operating cash flows
augmented by the Company's significant net operating loss carryforwards and
other favorable tax attributes. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Tax Matters".
HISTORY OF THE COMPANY
The Company was formed in 1988 by Blackstone Capital Partners L.P. and
Wasserstein Perella Partners, L.P. to acquire Wickes Companies, Inc. for
approximately $2,607 million, including the assumption of indebtedness (the
"1988 Acquisition"). Since the 1988 Acquisition, the Company has divested 27
businesses for approximately $1,643 million. By the end of 1993, the Company had
streamlined its operations into its three existing business segments in which it
enjoys a competitive advantage.
The Company's principal executive offices are located at 8320 University
Executive Park, Suite 102, Charlotte, North Carolina 28262. Its telephone number
at that location is (704) 548-2350.
5
<PAGE>
THE OFFERINGS
<TABLE>
<S> <C>
U.S. Offering....................... 16,000,000 shares
International Offering.............. 4,000,000 shares
Total........................ 20,000,000 shares
Common Stock to be outstanding after
the Offerings..................... 66,710,900 shares*
Use of proceeds..................... The net proceeds to the Company from the Offerings (defined below) and the
New Credit Facilities (defined below) will be used to effect a defeasance
and redemption, or repayment, of an aggregate of $804.4 million principal
amount of debt and an aggregate of $208.1 million liquidation amount of
preferred stock and to make funds available for general corporate purposes.
The Company will not receive the proceeds from the sale of shares by the
Selling Stockholders upon the exercise by the Underwriters of their
over-allotment options. See "Use of Proceeds and Consolidation".
Proposed New York Stock Exchange
("NYSE") Symbol................... CKC
</TABLE>
- - ---------------
* Does not include 6,100,000 shares of Common Stock reserved for issuance under
the Company's stock option plans. See "Management--The Company's Option
Plans".
The offering of shares of Common Stock initially being offered in the
United States (the "U.S. Offering") and the offering of shares of Common Stock
initially being offered outside the United States (the "International Offering")
are referred to herein collectively as the "Offerings". The closing of the
International Offering is conditioned upon the closing of the U.S. Offering, and
vice versa. The Offerings are part of the Recapitalization (described below).
6
<PAGE>
THE RECAPITALIZATION
The recapitalization (the "Recapitalization") is designed to reduce the
Company's indebtedness, significantly lower interest expense, improve operating
and financial flexibility and provide liquidity for operations and other general
corporate purposes. The Recapitalization involves two principal sources of
capital: (i) the sale by the Company of 20,000,000 shares of Common Stock
pursuant to the Offerings and (ii) the establishment of certain new credit
facilities (the "New Credit Facilities"). The proceeds of borrowings under the
New Credit Facilities, together with the net proceeds of the Offerings and the
available cash of the Company, will be used to effect a defeasance and
redemption, or repayment, of certain indebtedness and preferred stock of the
Company and certain of its subsidiaries. See "New Credit Facilities".
The following table sets forth a summary of the estimated sources and
anticipated uses of funds in the Recapitalization:
SOURCES OF FUNDS
<TABLE>
(IN
MILLIONS)
------------
<S> <C>
Sale of Common Stock in the Offerings(1)....................................... $ 311.8
Borrowings under the New Credit Facilities..................................... 653.7
Available cash................................................................. 114.8
------------
Total..................................................................... $ 1,080.3
------------
------------
</TABLE>
USES OF FUNDS
<TABLE>
<S> <C>
Repayment and redemption of long-term debt (including current maturities)...... $ 804.4
Redemption of preferred stock.................................................. 208.1
Accrued interest and dividends as of June 15, 1994............................. 13.8
Redemption premiums............................................................ 13.4
Defeasance costs............................................................... 8.8
Fees and expenses(2)........................................................... 31.8
------------
Total..................................................................... $ 1,080.3
------------
------------
</TABLE>
- - ---------------
(1) The net proceeds to the Company from the sale of Common Stock in the
Offerings are computed based on an assumed initial public offering price of
$16.50 per share (the midpoint of the estimated range of the initial public
offering price) less underwriting discounts.
(2) Includes bank commitment, financial advisory, legal and accounting fees and
other expenses in connection with the Recapitalization, excluding
underwriting discounts.
Following the Offerings, the Partners and their affiliates will
beneficially own, in the aggregate, 69.4% of the outstanding Common Stock. See
"Principal Stockholders and Certain Relationships".
7
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
(IN THOUSANDS)
The following table presents summary historical financial data derived from
the Company's Consolidated Financial Statements and operating data for the
periods indicated. Such summary historical financial data has been derived from
the Company's consolidated financial statements which have been audited by
Arthur Andersen & Co. All information contained in the following table should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
of the Company and the notes thereto, included elsewhere in this Prospectus.
<TABLE><CAPTION>
YEAR ENDED
------------------------------------------------------------------------------
JANUARY 29, JANUARY 30, JANUARY 25, JANUARY 26, JANUARY 27,
1994 1993(1) 1992 1991 1990
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................ $ 1,305,517 $ 1,277,500 $ 1,184,316 $ 1,232,403 $ 1,276,442
Gross profit..................... 309,727 299,027 257,499 270,782 262,121
Selling, general and
administrative expenses.......... 199,361 222,143 206,392 195,800 213,417
Non-recurring charges(2)......... 156,590 10,000 -- 17,275 --
Operating income (loss).......... (46,224) 66,884 51,107 57,707 48,704
Interest expense(3).............. 111,291 110,867 107,974 106,099 136,292
Loss before taxes and
extraordinary items.............. (162,048) (48,497) (61,382) (52,907) (92,102)
Income taxes..................... 11,277 (3,156) 11,954 4,479 4,934
Loss from continuing
operations....................... (173,325) (45,341) (73,336) (57,386) (97,036)
Net loss......................... (277,664) (263,658) (133,810) (57,908) (15,435)
BALANCE SHEET DATA:
Total assets..................... $ 918,825 $ 1,141,434 $ 1,300,304 $ 1,412,790 $ 1,777,339
Long-term debt, including current
portion.......................... 923,554 982,205 941,838 930,065 1,123,325
Redeemable preferred stock....... 122,368 98,602 79,754 69,240 73,711
Stockholders' equity (deficit)... (702,220) (421,460) (130,921) 18,821 81,075
OTHER DATA (FROM CONTINUING
OPERATIONS):
EBITDA(4)........................ $ 155,374 $ 118,748 $ 98,708 $ 106,067 $ 97,072
Capital expenditures............. 44,923 37,914 38,928 42,885 44,872
Depreciation expense............. 42,232 45,463 43,899 42,532 44,570
</TABLE>
- - ---------------
(1) Fiscal 1992 was a 53-week year.
(2) Includes the $129,854 associated with the write-off of goodwill, see
footnote 4 to the Consolidated Financial Statements, and a one-time non-cash
charge of $26,736 associated with the 1993 Plan, see footnote 15 to the
Consolidated Financial Statements.
(3) Excludes amounts related to discontinued operations of $18.9 million in
1993, $23.0 million in 1992, $25.1 million in 1991.
(4) EBITDA is operating income plus depreciation and amortization and the
non-cash portion of non-recurring charges attributable to continuing
operations. EBITDA reflects the Company's ability to satisfy principal and
interest obligations with respect to its indebtedness and to utilize cash
for other purposes. In addition, certain covenants in the New Credit
Facilities are based upon calculations using EBITDA. EBITDA does not
represent and should not be considered as an alternative to net income or
cash flow from operations as determined by generally accepted accounting
principles.
8
<PAGE>
SUMMARY PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table presents unaudited summary pro forma financial and
other data that is derived from, and should be read in conjunction with, the pro
forma consolidated financial data included elsewhere in this Prospectus. The
following unaudited summary pro forma financial data illustrate the estimated
effects of (i) the Recapitalization and (ii) the elimination of certain non-
recurring charges described in Note 1 below (the "Non-Recurring Charges"). The
unaudited summary pro forma operating data for the year ended January 29, 1994
presents the results of operations of the Company as if the Recapitalization had
occurred as of the beginning of the year ended January 29, 1994 and the
Non-Recurring Charges had not been incurred during that year.
The unaudited summary pro forma financial and other data do not purport to
represent what the Company's results of operations would actually have been if
the Recapitalization had occurred immediately prior to, and the Non-Recurring
Charges had not been incurred during, the period indicated below, nor do they
purport to project the Company's results of operations for any future period.
<TABLE><CAPTION>
YEAR ENDED
JANUARY 29, 1994
------------------
STATEMENT OF OPERATIONS DATA:
<S> <C>
Net sales..................................................................................... $ 1,305,517
Gross profit.................................................................................. 309,727
Selling, general and administrative expenses(1)............................................... 188,885
------------------
Operating income.............................................................................. 120,842
Interest expense(2)........................................................................... 31,671
------------------
Income before income taxes.................................................................... 89,171
Income taxes(3)............................................................................... 10,077
------------------
Income from continuing operations............................................................. $ 79,094
------------------
------------------
OTHER DATA:
Total debt(4)................................................................................. $ 650,896
EBITDA(5)..................................................................................... 163,074
Income from continuing operations per share of common stock................................... 1.19
Average common shares outstanding(6).......................................................... 66,711
</TABLE>
- - ---------------
(1) Reflects the elimination of the Non-Recurring Charges related to the
write-off of goodwill of $129,854, compensation expense of $26,736 related
to the 1993 Plan, amortization of goodwill of $2,776 for the periods prior
to the aforementioned write-off of goodwill and post-retirement medical plan
costs which were $4,700 higher, on an annual basis, than expected in future
periods due to the implementation of changes in plan provisions which were
effective April 1, 1994.
(2) Reflects adjustments for the elimination of interest expense related to the
defeasance and redemption, repayment or exchange for Common Stock of certain
of the outstanding indebtedness of the Company prior to the Offerings and
the Recapitalization. See Note (b) to the Unaudited Pro Forma Consolidated
Statement of Operations.
(3) Reflects a reduction of state and foreign income taxes due to increased
borrowings in Canada in connection with the Recapitalization.
(4) Includes $643,837 of borrowings under the New Credit Facilities and $7,059
of miscellaneous debt.
(5) EBITDA is pro forma operating income plus depreciation and amortization
allocable to continuing operations. EBITDA does not represent and should not
be considered as an alternative to net income or cash flow from operations
as determined by generally accepted accounting principles.
(6) Includes (i) shares currently outstanding, (ii) shares to be issued in the
Offerings, and (iii) shares to be issued in exchange for the PIK Notes.
9
<PAGE>
CERTAIN CONSIDERATIONS
In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully in evaluating an
investment in the Common Stock offered hereby.
CYCLICALITY OF INDUSTRIES
The Company's business segments are highly cyclical. Downturns in North
American automotive production, consumer spending, commercial and residential
construction and renovation could have a material adverse effect on the Company.
DEPENDENCE ON SIGNIFICANT AUTOMOTIVE CUSTOMERS AND CAR MODELS
The Company's sales are dependent on certain significant customers. Sales
to General Motors Corporation ("General Motors"), Chrysler Corporation
("Chrysler") and Ford Motor Company ("Ford") accounted for approximately 16%,
10% and 8%, respectively, of the Company's 1993 net sales. In addition, certain
of the Company's customers are unionized and have in the past experienced labor
disruptions. The loss of one or more significant customers or a prolonged
disruption in their production could have a material adverse effect on the
Company.
The Company principally competes for new business at the design stage of
new models and upon the redesign of existing models. There can be no assurance
that the Company will continue to be able to obtain such new business or to
improve or maintain its gross margins on such new business. In addition, the
Company may not be able to pass on raw material price increases to its
customers. A decrease in demand for the models that generate the most sales for
the Company, the failure of the Company to obtain purchase orders for new or
redesigned models and pricing pressure from the major automotive companies could
have a material adverse effect on the Company. See "Business--Automotive
Products".
VULNERABILITY TO CHANGES IN CONSUMER TASTES
Consumer tastes in automotive seat fabrics, interior furnishings and
wallcoverings change over time. A shift in consumer preferences away from the
products that the Company produces or has the capability to produce could have a
material adverse effect on the Company.
COMPETITION
The industries in which the Company operates are highly competitive. There
can be no assurance that the Company's products will compete successfully with
those of its competitors. Several competitors are larger and have greater
financial and other resources available to them. There can be no assurance that
the Company will be able to maintain its operating margins if the competitive
environment changes. See "Business".
SUBSTANTIAL LEVERAGE
The Recapitalization is designed to reduce indebtedness, significantly
lower interest expense, improve the Company's operating and financial
flexibility and provide liquidity for operations and other general corporate
purposes. However, the substantial indebtedness of the Company and its
subsidiaries following the Recapitalization could have important consequences to
holders of Common Stock, including the following: (i) the ability of the Company
and its subsidiaries to obtain additional financing in the future to refinance
maturing debt or for working capital, capital expenditures, acquisitions,
general corporate or other purposes could be impaired; (ii) a substantial
portion of the cash flow from operations of the Company and its subsidiaries
must be dedicated to the payment of the principal of and interest on existing
indebtedness; (iii) the Company and its subsidiaries could be more highly
leveraged than certain of their competitors, which may place the
10
<PAGE>
Company and its subsidiaries at a competitive disadvantage; (iv) a significant
portion of the borrowings of the Company and its subsidiaries are expected to be
at variable rates of interest, and consequently the Company and its subsidiaries
will be vulnerable to increases in interest rates; and (v) the high degree of
leverage of the Company and its subsidiaries may make the Company more
vulnerable to economic downturns. After giving effect to the Recapitalization,
the Company will have an aggregate of approximately $660.7 million of
indebtedness outstanding and unused borrowing availability of approximately
$121.3 million. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources" and "New Credit
Facilities".
LIMITATIONS IMPOSED BY THE NEW CREDIT FACILITIES
The New Credit Facilities are expected to contain a number of restrictive
covenants which, among other things, will limit the ability of the Company and
its subsidiaries to incur other indebtedness, to incur liens and to make certain
restricted payments, and which will require the Company to maintain certain
specified financial ratios. A failure by the Company to maintain such financial
ratios or to comply with the restrictions contained in the New Credit Facilities
could result in a default thereunder, which in turn could result in such
indebtedness being declared immediately due and payable. See "New Credit
Facilities".
HISTORICAL LOSSES
The Company has experienced net losses since its inception. Even though the
Company will be operating with lower interest charges after the
Recapitalization, there can be no assurance as to whether or when the Company's
operations will become profitable. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations".
CONTROL BY AFFILIATES; ANTI-TAKEOVER PROVISIONS
After giving effect to the Offerings, 69.4% of the outstanding Common Stock
of the Company will be held by Blackstone Capital Partners L.P. ("Blackstone
Partners") and Wasserstein Perella Partners, L.P. ("WP Partners", and
collectively with Blackstone Partners, the "Partners") and their affiliates. As
a result, the Partners and their affiliates will continue to have the ability to
determine the policies of the Company, the persons constituting its management
and the outcome of corporate actions requiring stockholder approval by majority
action. The Partners and the Company have entered into an Amended and Restated
Stockholders Agreement (the "Stockholders Agreement") relating to governance and
management of the Company. In the past, the Partners and certain of their
affiliates have been paid fees in connection with management and advisory
services provided to the Company, and it is anticipated that the Partners and
certain of their affiliates will continue to be paid fees in connection with
such services to be provided in the future. See "Principal Stockholders and
Certain Relationships".
The Certificate of Incorporation and the Bylaws of the Company, which will
be effective upon consummation of the Offerings, will contain provisions which
could delay or frustrate the removal of incumbent directors and could make more
difficult a merger, tender offer or proxy contest involving the Company. The
Company will also be subject to provisions of Delaware corporate law restricting
certain business combinations with certain stockholders. See "Description of the
Capital Stock".
COLLECTIVE BARGAINING AGREEMENTS
The Company is a party to collective bargaining agreements with respect to
hourly employees at seven of its 51 U.S. facilities, its five Canadian
facilities and its three Mexican facilities. Of the Company's 12,000 employees,
approximately 2,200 employees, all of whom are employed in Automotive Products
and Wallcoverings, are covered by such agreements. Each of the agreements
11
<PAGE>
expires during the course of the next three years. Although management believes
that its relationship with these employees is good, there can be no assurance
that the Company will be able to negotiate new agreements on favorable terms.
See "Business--Employees".
ENVIRONMENTAL MATTERS AND OTHER CONTINGENCIES
The Company is subject to increasingly stringent Federal, state and local
laws and regulations concerning the environment. Changes to environmental laws
and regulations may require the Company to make substantial capital expenditures
and to incur substantial expenses with respect to its ongoing and divested
operations and properties. In addition, the Company has received notices that it
is a potentially responsible party ("PRP") in a number of proceedings for
cleanup of hazardous substances at various sites. The Company may be named as a
PRP at other sites in the future. It is difficult to estimate the total cost of
investigation and remediation due to various factors including incomplete
information regarding particular sites and other PRPs, uncertainty regarding the
extent of environmental problems and the Company's share, if any, of liability
for such problems, the selection of alternative compliance approaches, the
complexity of the environmental laws and regulations and changes in cleanup
standards and techniques. When it has been possible to provide reasonable
estimates of the Company's liability with respect to environmental sites,
provisions have been made in accordance with generally accepted accounting
principles. However, there can be no assurance that the Company has identified
or properly assessed all potential environmental liabilities arising from the
activities or properties of the Company, its present and former subsidiaries and
their corporate predecessors. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Environmental Matters".
The Company has potentially significant financial and legal obligations
with respect to certain divested and acquired businesses. In connection with the
sale and acquisition of certain businesses, the Company has indemnified the
purchasers and sellers for certain environmental liabilities, lease obligations
and other matters. In addition, the Company is contingently liable with respect
to certain lease and other obligations assumed by certain purchasers and may be
required to honor such obligations if such purchasers are unable or unwilling to
do so. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Environmental Matters" and Notes 6 and 19 to Consolidated
Financial Statements.
PENDING TAX MATTERS
In the course of an examination of the Company's Federal income tax
returns, the Internal Revenue Service ("IRS") has challenged the availability of
$176.6 million of the Company's approximately $470.0 million net operating loss
carryforwards ("NOLs") after giving effect to the Recapitalization. The
examination is at a preliminary stage and management believes that the basis for
the IRS' position is unclear. Management disputes the IRS' challenge and
believes that substantially all of the NOLs should be available (subject to
certain limitations) to offset its income, if any, in the future. If the IRS
were to maintain its position and all or a majority of such position were to be
upheld in litigation, the amount of NOLs available to the Company in future
years would be materially reduced. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Tax Matters".
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offerings, there has been no public market for shares of the
Common Stock. The Company has applied for listing of the Common Stock on the
NYSE. However, there can be no assurance as to the liquidity of any markets that
may develop for the Common Stock or the price at which holders would be able to
sell their Common Stock. The initial public offering price for the Common Stock
was determined by negotiations between the Company, the Selling Stockholders and
representatives of the Underwriters. There can be no assurance that the market
price of the
12
<PAGE>
Common Stock after the Offerings will equal or exceed the initial public
offering price. In addition, broad market fluctuations and general economic and
political conditions may adversely affect the market price of the Common Stock,
regardless of the Company's actual performance. For a description of the factors
which were considered in determining the initial public offering price, see
"Underwriting".
SHARES ELIGIBLE FOR FUTURE SALE
Following the Offerings, there will be 46,710,900 shares of Common Stock
outstanding eligible for future sale in the public market (excluding 3,289,100
shares issuable upon exercise of outstanding options). No prediction can be made
as to the effect, if any, that market sales of shares of Common Stock or the
availability of shares of Common Stock for sale will have on the prevailing
market price of Common Stock from time to time. Sales of a significant number of
shares of Common Stock in the public market following the Offerings could
adversely affect the prevailing market price of Common Stock and could
materially impair the Company's future ability to raise capital through an
offering of equity securities. See "Description of Capital Stock--Shares
Eligible for Future Sale". See "Underwriting" for a description of agreements by
the Company and certain of the existing stockholders of the Company not to sell
shares of Common Stock owned by them for a period of 180 days after the date of
this Prospectus without the prior written consent of the representatives of the
Underwriters.
DILUTION
The negative net tangible book value of the Company as of January 29, 1994,
was approximately $439.6 million or $6.58 per share after giving effect to the
Offerings and the Recapitalization (based upon an assumed initial public
offering price of $16.50 per share). Persons purchasing shares of Common Stock
in the Offerings will incur immediate dilution in net tangible book value of
$23.08 per share. See "Dilution".
DIVIDENDS
The Company has not declared or paid cash dividends on Common Stock since
its incorporation in 1988. The Company currently intends to retain future
earnings, if any, to fund the development and growth of its businesses and,
therefore, does not anticipate paying any cash dividends in the near future. The
New Credit Facilities limit the payment of dividends and certain other payments
in respect of equity securities. If the Company does not have sufficient
surplus, under Delaware law the Company could be prohibited from paying any
dividends on Common Stock even after the limitations under the New Credit
Facilities no longer apply.
Under applicable Delaware law, dividends on the Common Stock may only be
paid out of the Company's surplus (defined as the excess of the Company's assets
over the sum of its liabilities and the aggregate par value of its stock) or out
of net profits for the fiscal year in which the dividends are declared and/or
the preceding fiscal year. At January 29, 1994, the Company had a negative
surplus based on its historical financial statements and on a pro forma basis,
after giving effect to the Consolidation and the Recapitalization. However,
under Delaware law, a corporation's board of directors may determine the
availability of surplus based on the actual, current value of its assets and
liabilities rather than their historical book values. The Company's Board of
Directors has in the past relied on this non-book, "revaluation" surplus in the
payment of dividends on the Merger Preferred Stock.
13
<PAGE>
DILUTION
The negative net tangible book value of the Company as of January 29, 1994,
was $20.43 per share of Common Stock. Net tangible book value per share is
determined by dividing the number of outstanding shares of Common Stock into the
net tangible book value of the Company (total assets less net intangible assets
less total liabilities and preferred stock). After giving effect to the sale of
the 20,000,000 shares of Common Stock offered by the Company (at an assumed
initial public offering price of $16.50 per share), the Recapitalization and the
conversion of the PIK Notes into shares of Common Stock, the pro forma negative
net tangible book value of the Company as of January 29, 1994 would have been
$6.58 per share. This represents an immediate increase of $13.85 per share to
existing stockholders and an immediate dilution of $23.08 per share to new
investors. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $ 16.50
Negative net tangible book value per share as of January 29, 1994,
before the Offerings and the Recapitalization...................... $ (20.43)
Increase in net tangible book value per share attributable to new
investors(1)......................................................... 13.85
----------
Pro forma net tangible book value per share after the Offerings...... (6.58)
-----------
Dilution per share to new investors(2)............................... $ 23.08
----------
----------
</TABLE>
- - ---------------
(1) Determined after deducting the underwriting discounts, estimated offering
expenses and effects of the nonrecurring extraordinary charges resulting
from the Recapitalization. See "Unaudited Pro Forma Consolidated Financial
Data".
(2) Dilution is determined by subtracting the pro forma net tangible book value
per share after completion of the Offerings from the initial public offering
price paid by a new investor for a share of Common Stock.
14
<PAGE>
USE OF PROCEEDS AND CONSOLIDATION
The net proceeds from the Offerings (estimated to be approximately $311.8
million) will be used, together with $653.7 million of borrowings from the total
available funds of $775 million under the New Credit Facilities, as described
under "New Credit Facilities", to effect a defeasance and redemption, or
repayment of the preferred stock and indebtedness described below.
The consummation of the Offerings and the borrowings under the New Credit
Facilities are conditioned upon each other and upon the simultaneous prepayment
or defeasance and irrevocable notice of redemption of the indebtedness and
preferred stock listed below at a total cost of approximately $1,048.5 million,
including interest or dividends accrued to June 15, 1994 and applicable
redemption premiums, and defeasance costs, and excluding fees and expenses of
$31.8 million.
The following table sets forth a summary of the estimated sources and
anticipated uses of funds in the Recapitalization:
<TABLE><CAPTION>
(IN MILLIONS)
--------------
SOURCES OF FUNDS
<S> <C>
Sale of Common Stock in the Offerings(1)................................... $ 311.8
Borrowings under the New Credit Facilities................................. 653.7
Available cash............................................................. 114.8
--------------
Total................................................................. $ 1,080.3
--------------
--------------
<CAPTION>
USES OF FUNDS
Repayment of indebtedness outstanding under a subsidiary credit facility... $ 122.6
Defeasance and redemption of:
Merger Preferred Stock.................................................. 162.9
Series A Preferred Stock................................................ 45.1
Intermediate Preferred Stock............................................ 0.1
14% Subordinated PIK Bridge Notes due December 2, 1996 (which were not
exchanged for Common Stock)........................................... 9.7
7 1/2%/10% Debentures due January 31, 2005.............................. 138.7
11 7/8% Debentures due June 1, 2001..................................... 347.4
15% Notes due May 1, 1995............................................... 137.4
11 3/8% Debentures due May 1, 1997...................................... 24.5
Miscellaneous indebtedness.............................................. 24.1
Accrued interest and dividends as of June 15, 1994...................... 13.8
Redemption premiums..................................................... 13.4
Defeasance costs........................................................ 8.8
Fees and expenses(2).................................................... 31.8
--------------
Total................................................................. $ 1,080.3
--------------
--------------
</TABLE>
- - ---------------
(1) The net proceeds to the Company from the sale of Common Stock in the
Offerings are computed based on an assumed initial public offering price of
$16.50 per share (the midpoint of the estimated range of the initial public
offering price) less underwriting discounts.
(2) Includes bank commitment, financial advisory, legal and accounting fees and
other expenses incurred in connection with the Recapitalization, but
excludes the underwriting discount.
In connection with the Recapitalization, and prior to the consummation of
the Offerings, Collins & Aikman Holdings II Corporation ("Holdings II"),
currently the sole stockholder of the Company, will be merged into the Company.
Concurrently, Collins & Aikman Group, Inc., the Company's wholly owned
subsidiary ("Group"), will be merged into its wholly owned subsidiary, formerly
called Collins & Aikman Corporation ("C&A Co."). These mergers are referred to
herein as the "Consolidation".
15
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company and its
subsidiaries (i) at January 29, 1994 and (ii) as adjusted to give effect to the
Recapitalization and the application of the proceeds of the Offerings as if the
Recapitalization had occurred as of January 29, 1994. This table should be read
in conjunction with the Consolidated Financial Statements of the Company
included elsewhere in this Prospectus. See "Use of Proceeds and Consolidation"
and "Pro Forma Financial Data".
<TABLE><CAPTION>
JANUARY 29, 1994
-------------------------
ACTUAL AS ADJUSTED
---------- -------------
(IN THOUSANDS)
<S> <C> <C>
Short-Term Debt.................................................................................... $ 3,789 $ 3,789
Current Portion of Long-Term Debt(1)............................................................... 25,895 316
---------- -------------
Total............................................................................................ $ 29,684 $ 4,105
---------- -------------
---------- -------------
Long-Term Debt (excluding current portion):(1)
New Credit Facilities............................................................................ $ -- $ 643,837
Senior Indebtedness.............................................................................. 245,504 2,954
Senior Subordinated Indebtedness................................................................. 300,882 --
Subordinated Indebtedness........................................................................ 159,413 --
PIK Notes........................................................................................ 191,860 --
---------- -------------
Total Long-Term Obligations.................................................................... 897,659 646,791
---------- -------------
Redeemable Preferred Stock of Subsidiary(2)........................................................ 313 --
Redeemable Preferred Stock(2)...................................................................... 122,368 --
Stockholders' Deficit:
Common Stock(3).................................................................................. 350 667
Other Paid-In Capital(3)......................................................................... 160,249 639,138
Accumulated Deficit(4)........................................................................... (849,337) (1,048,537)
Foreign Currency Translation Adjustments......................................................... (5,735) (5,735)
Pension Equity Adjustment........................................................................ (7,747) (7,747)
---------- -------------
Total Stockholders' Deficit.................................................................... (702,220) (422,214)
---------- -------------
Total Capitalization............................................................................... $ 318,120 $ 224,577
---------- -------------
---------- -------------
</TABLE>
- - ---------------
<TABLE>
<S> <C> <C>
(1) Reflects (i) the redemption or repayment of an aggregate book amount
of $737,578 of outstanding indebtedness utilizing the net proceeds of
the Offerings and borrowings of $643,837 under the New Credit
Facilities and (ii) the exchange of the PIK Notes for common stock as
follows:
Debt Extinguished:
Subsidiary Credit Facility.................................................................... $ 137,129
7 1/2%-10% Senior Debentures (face value $138,694 net of discount of $33,397)................. 105,297
11 7/8% Senior Subordinated Debentures (face value $347,414 net of discount of $46,532)....... 300,882
15% Subordinated Notes (face value $137,359 net of discount of $298).......................... 137,061
11 3/8% Subordinated Debentures (face value $24,500 net of discount of $2,148)................ 22,352
PIK Notes ($9,154 redeemed and $182,706 exchanged for Common Stock)........................... 191,860
Miscellaneous Debt............................................................................ 25,703
----------
Debt Extinguished......................................................................... 920,284
New Credit Facilities........................................................................... (643,837)
----------
Reduction in Outstanding Indebtedness..................................................... $ 276,447
----------
----------
Allocated to:
Current Portion............................................................................... 25,579
Long-term Portion............................................................................. 250,868
----------
$ 276,447
----------
----------
</TABLE>
(2) Reflects the redemption of the Intermediate Preferred Stock of Group,
Series A Preferred Stock of Group and the Merger Preferred Stock with
an aggregate book value of $122,681 with funds provided by the
Recapitalization.
(3) The as adjusted amounts reflect the issuance of 20,000 shares of
Common Stock in connection with the Offerings and the exchange of the
PIK Notes for shares of Common Stock. The increases reflect (i)
$296,500 for shares of Common Stock to be sold in the Offerings, net
of discounts and commissions and associated expenses and (ii)
$182,706 on exchange of PIK Notes for shares of Common Stock.
(4) Reflects charges for (i) write-off of deferred debt expense of
$13,079; (ii) loss incurred in connection with the refinancing of
existing indebtedness in the amount of $94,451 and (iii) premiums
paid in connection with the redemption of the Preferred Stock of
Subsidiary and the Redeemable Preferred Stock in the amount of
$91,670.
16
<PAGE>
SELECTED FINANCIAL DATA
The following table sets forth selected consolidated financial information
for the Company at and for each of the five years indicated. Such selected
consolidated financial information has been derived from the Company's
consolidated financial statements which have been audited by Arthur Andersen &
Co. The statement of operations and balance sheet data have been restated to
reflect discontinued operations (see Note 6 to the Consolidated Financial
Statements). As a result of an acquisition in 1991, and the recognition of a
cumulative adjustment in 1991 to adopt the accrual basis of accounting for
postretirement benefits (see Notes 3 and 13 to Consolidated Financial
Statements), the financial information set forth below is not comparable for the
periods presented and should not be considered indicative of current or future
operations or income.
The following summary financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and notes thereto
appearing elsewhere in this Prospectus.
<TABLE><CAPTION>
YEAR ENDED
--------------------------------------------------------------------
JANUARY 29, JANUARY 30, JANUARY 25, JANUARY 26, JANUARY 27,
1994 1993(1) 1992 1991 1990
------------ ------------ ------------ ------------ ------------
(IN THOUSANDS)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C>
Net sales:
Automotive Products(2)..................... $ 677,867 $ 643,827 $ 610,325 $ 657,404 $ 661,749
Interior Furnishings(2).................... 407,201 391,778 336,773 339,528 358,988
Wallcoverings(2)........................... 220,449 241,895 237,218 235,471 255,705
------------ ------------ ------------ ------------ ------------
Total Net Sales......................... $ 1,305,517 $ 1,277,500 $ 1,184,316 $ 1,232,403 $ 1,276,442
------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------
Gross profit................................. $ 309,727 $ 299,027 $ 257,499 $ 270,782 $ 262,121
Selling, general and administrative
expenses................................... 199,361 222,143 206,392 195,800 213,417
Management equity plan expense............... 26,736 -- -- -- --
Restructuring costs.......................... -- 10,000 -- 17,275 --
Goodwill write-off........................... 129,854 -- -- -- --
------------ ------------ ------------ ------------ ------------
Operating income (loss)...................... $ (46,224) $ 66,884 $ 51,107 $ 57,707 $ 48,704
Interest expense, net(3)..................... 111,291 110,867 107,974 106,099 136,292
Loss from continuing operations before income
taxes...................................... (162,048) (48,497) (61,382) (52,907) (92,102)
Loss from continuing operations after income
taxes...................................... (173,325) (45,341) (73,336) (57,386) (97,036)
Loss before extraordinary items.............. (277,664) (263,658) (89,701) (86,983) (142,913)
Net loss..................................... (277,664) (263,658) (133,810) (57,908) (15,435)
BALANCE SHEET DATA:
Total assets................................. $ 918,825 $ 1,141,434 $ 1,300,304 $ 1,412,790 $ 1,777,339
Long-term debt (including current
maturities)................................ 923,554 982,205 941,838 930,065 1,123,325
Redeemable preferred stock................... 122,368 98,602 79,754 69,240 73,711
Common stockholders' equity (deficit)........ (702,220) (421,460) (130,921) 18,821 81,075
OTHER DATA (FROM CONTINUING OPERATIONS):
EBITDA(4).................................... $ 155,374 $ 118,748 $ 98,708 $ 106,067 $ 97,072
Capital expenditures......................... 44,923 37,914 38,928 42,885 44,872
Depreciation................................. 42,232 45,463 43,899 42,532 44,570
</TABLE>
- - ---------------
(1) Fiscal 1992 was a 53-week year.
(2) The Company's business segments have been redefined from those presented in
previous filings. See Note 18 to the Consolidated Financial Statements.
(3) Excludes amounts related to discontinued operations of $18.9 million in
1993, $23.0 million in 1992 and $25.1 million in 1991.
(4) EBITDA reflects the Company's ability to satisfy principal and interest
obligations with respect to its indebtedness and to utilize cash for other
purposes. In addition, certain covenants in the New Credit Facilities are
based upon calculations using EBITDA. EBITDA does not represent and should
not be considered as an alternative to net income or cash flow from
operations as determined by generally accepted accounting principals.
17
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following Unaudited Pro Forma Consolidated Statement of Operations for
the year ended January 29, 1994 and Unaudited Pro Forma Consolidated Balance
Sheet as of January 29, 1994 (collectively, the "Pro Forma Statements") were
prepared to illustrate the estimated effects of (i) the Recapitalization and
(ii) the elimination of certain Non-Recurring Charges. The Unaudited Pro Forma
Consolidated Statement of Operations for the year ended January 29, 1994
presents the results of operations of the Company as if the Recapitalization had
occurred as of the beginning of the year ended January 29, 1994 and the
Non-Recurring Charges had not been incurred during the year. The Unaudited Pro
Forma Consolidated Balance Sheet as of January 29, 1994 reflects the impact of
the Recapitalization as if it had occurred on that date.
The Pro Forma Statements are presented for informational purposes only and
are based on currently available information and upon certain assumptions that
management believes are reasonable under the circumstances.
The Pro Forma Statements and accompanying footnotes should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and related
notes thereto included elsewhere in this Prospectus. THE PRO FORMA STATEMENTS DO
NOT PURPORT TO REPRESENT WHAT THE COMPANY'S FINANCIAL POSITION OR RESULTS OF
OPERATIONS WOULD ACTUALLY HAVE BEEN IF THE RECAPITALIZATION HAD OCCURRED
IMMEDIATELY PRIOR TO, AND THE NON-RECURRING CHARGES HAD NOT BEEN INCURRED DURING
THE PERIOD INDICATED BELOW, OR TO PROJECT THE COMPANY'S FINANCIAL POSITION OR
RESULTS OF OPERATIONS AT ANY FUTURE DATE OR FOR ANY FUTURE PERIOD.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 29, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE><CAPTION>
AS ADJUSTED FOR
---------------------------------
THE NON-RECURRING
ACTUAL RECAPITALIZATION CHARGES PRO FORMA
-------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Net sales......................................... $ 1,305,517 $ -- $ -- $ 1,305,517
-------------- --------------
Cost of goods sold................................ 995,790 -- -- 995,790
Selling, general and administrative expenses...... 199,361 (3,000)(a) (7,476)(e) 188,885
Goodwill write-off................................ 129,854 -- (129,854)(f) --
Management equity plan expense.................... 26,736 -- (26,736)(g) --
-------------- ---------------- --------------- --------------
1,351,741 (3,000) (164,066) 1,184,675
Operating income (loss)........................... (46,224) 3,000 164,066 120,842
Interest expense, net............................. 111,291 (79,620)(b) -- 31,671
Dividends on preferred stock of subsidiary........ 4,533 (4,533)(c) -- --
-------------- ---------------- --------------- --------------
Income (loss) from continuing operations before
income taxes.................................... (162,048) 87,153 164,066 89,171
Income taxes...................................... 11,277 (1,200)(d) -- 10,077
-------------- ---------------- --------------- --------------
Income (loss) from continuing operations.......... (173,325) 88,353 164,066 79,094
Preferred stock dividends and accretion........... 23,723 (23,723)(c) -- --
-------------- ---------------- --------------- --------------
Income (loss) available for common stock.......... $ (197,048) $ 112,076 $ 164,066 $ 79,094
-------------- ---------------- --------------- --------------
-------------- ---------------- --------------- --------------
Average common shares outstanding................. 35,035(h) 66,711(h)
Income (loss) from continuing operations per share
of common stock................................. $ (5.62) $ 1.19
</TABLE>
The following are included in the Unaudited Pro Forma Consolidated
Statement of Operations for 1993:
<TABLE>
<S> <C>
Depreciation............................................................... $ 42,232
Amortization of deferred debt expense...................................... 2,082
</TABLE>
18
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 29, 1994
(IN THOUSANDS)
The following adjustments reflect the effects of the Recapitalization:
<TABLE>
<S> <C>
(a) Management and financial advisory fees payable to the Managers-Advisors will be reduced by $3,000 per
annum effective as of the consummation of the Offerings in accordance with the Stockholders Agreement.
(b) Assumes the following related to interest expense:
</TABLE>
<TABLE>
<S> <C>
(i) The $330,000 gross proceeds from the sale of 20,000 shares at an assumed initial public offering
price of $16.50 per share, net of underwriting discounts and other costs of the Offerings of
$33,500, the $643,837 of borrowings under the New Credit Facilities and the $71,373 of existing
cash to be used to retire existing debt securities and to repay a subsidiary credit facility and
certain miscellaneous debt (excluding $182,706 of the PIK Notes) and to pay all premiums and fees
associated with such retirements,
(ii) All but $9,154 of principal amount of PIK Notes will be exchanged for shares of Common Stock;
(iii) A base interest rate of 3.25% (average LIBOR in effect during the year) has been utilized assuming
a weighted average credit spread of 1.60% in calculating the pro forma interest on borrowings under
the New Credit Facilities. A 0.5% change in the interest rate on the New Credit Facilities would
result in changes to pro forma interest expense of $3,400.
(iv) The pro forma adjustments to interest expense consist of the following:
</TABLE>
<TABLE>
<S> <C> <C>
(1) Elimination of interest related to:
Subsidiary credit facility................................................. $ (9,161)
7 1/2%-10% Debentures...................................................... (14,852)
11 7/8% Debentures......................................................... (41,531)
15% Notes.................................................................. (20,749)
11 3/8% Debentures......................................................... (3,262)
14% PIK Notes.............................................................. (25,185)
Miscellaneous debt (net of interest income eliminated)..................... (4,947)
(2) Elimination of deferred debt expense related to indebtedness described in
(1) above................................................................ (4,034)
(3) Interest allocated to discontinued operations.............................. 13,100
-----------
Interest eliminated from continuing operations........................ (110,621)
(4) Interest on New Credit Facilities (net of interest income of $1,236)....... 28,919
(5) Amortization of deferred debt expense related to the New Credit
Facilities................................................................. 2,082
-----------
$ (79,620)
-----------
-----------
</TABLE>
<TABLE>
<S> <C>
(c) The elimination of (i) dividends related to Series A Preferred Stock in the amount of $4,533, (ii)
dividends related to the Redeemable Preferred Stock in the amount of $22,107 and (iii) amortization of
the discount related to the Redeemable Preferred Stock in the amount of $1,616 all of which are to be
redeemed as part of the Recapitalization.
(d) Represents a $1,200 reduction of state and foreign income taxes due to increased borrowings in Canada in
connection with the Recapitalization.
</TABLE>
19
<PAGE>
<TABLE>
<S> <C>
The following adjustments reflect the elimination of the Non-Recurring Charges related to:
(e) A reduction in selling, general & administrative expenses for: (i) goodwill amortization of $2,776
recorded for nine months prior to the Company's write-off of goodwill in the third quarter ended October
30, 1993 and (ii) post-retirement medical plan costs which were $4,700 higher, on an annual basis, than
expected in future periods due to the implementation of changes in plan provisions which were effective
April 1, 1994.
(f) Write-off of goodwill in the amount of $129,854, which occurred at October 30, 1993.
(g) Compensation expense related to the 1993 Plan effective as of January 28, 1994.
(h) Includes (i) shares currently outstanding, (ii) shares to be issued in the Offerings, and (iii) shares
to be issued in exchange for the PIK Notes.
</TABLE>
Note: The Unaudited Pro Forma Consolidated Statement of Operations for the year
ended January 29, 1994 does not include (i) non-recurring extraordinary
charges estimated to be approximately $107,530 representing, in the
aggregate, (x) premiums paid in connection with redemption of existing
debt securities and (y) the write-off of unamortized deferred financing
charges related to the repayment of a subsidiary credit facility and
certain miscellaneous debt and (ii) a reduction of retained earnings and
income available for common stock of $91,670 representing the difference
between the respective redemption prices of the Series A Preferred Stock
and the Redeemable Preferred Stock of $214,351, in the aggregate, and
their aggregate carrying value of $122,681.
20
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JANUARY 29, 1994
(IN THOUSANDS)
<TABLE><CAPTION>
AS ADJUSTED FOR THE
ACTUAL RECAPITALIZATION PRO FORMA
-------------- -------------------- ---------------
<S> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents............................. $ 81,373 $ (71,373)(a) $ 10,000
Accounts and notes receivable, net.................... 200,368 -- 200,368
Inventories........................................... 176,062 -- 176,062
Other................................................. 48,397 -- 48,397
-------------- -------------------- ---------------
Total current assets............................. 506,200 (71,373) 434,827
Property, plant & equipment, net........................ 292,600 -- 292,600
Other assets............................................ 120,025 (66,579)(b) 53,446
-------------- -------------------- ---------------
$ 918,825 $ (137,952) $ 780,873
-------------- -------------------- ---------------
-------------- -------------------- ---------------
Liabilities and Stockholders' Deficit
Current liabilities:
Notes payable......................................... $ 3,789 $ -- $ 3,789
Current maturities of long-term debt.................. 25,895 (25,579)(c) 316
Accounts payable...................................... 85,591 -- 85,591
Accrued expenses...................................... 142,351 (18,830)(d) 123,521
Other................................................. 2,671 -- 2,671
-------------- -------------------- ---------------
Total current liabilities........................ 260,297 (44,409) 215,888
Long-term debt.......................................... 897,659 (250,868)(c) 646,791
Deferred income taxes................................... 640 -- 640
Other, including postretirement benefit obligation...... 339,768 -- 339,768
Redeemable preferred stock of subsidiary................ 132 (132)(e,h) --
Preferred stock of subsidiary........................... 181 (181)(e,h) --
Redeemable preferred stock.............................. 122,368 (122,368)(e,h) --
Common stock............................................ 350 317(f) 667
Other paid-in capital................................... 160,249 478,889(f) 639,138
Accumulated deficit..................................... (849,337) (199,200)(g) (1,048,537)
Foreign currency translation adjustments................ (5,735) -- (5,735)
Pension equity adjustment............................... (7,747) -- (7,747)
-------------- -------------------- ---------------
Total common stockholders' deficit............... (702,220) 280,006 (422,214)
-------------- -------------------- ---------------
$ 918,825 $ (137,952) $ 780,873
-------------- -------------------- ---------------
-------------- -------------------- ---------------
</TABLE>
21
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JANUARY 29, 1994
(IN THOUSANDS)
<TABLE>
<S> <C>
(a) Reflects the amount of existing cash to be used in the Recapitalization.
(b) Reflects (i) the impact of recording additional deferred debt expense of $16,500 associated with the New
Credit Facilities, (ii) the write-off of $13,079 deferred debt expenses related to the indebtedness
retired and (iii) collection of a senior unsecured bridge note of $70,000.
(c) Reflects (i) the retirement or repayment of an aggregate book amount of $737,578 of outstanding
indebtedness utilizing a portion of the net proceeds of the Offerings and borrowings of $643,837 under
the New Credit Facilities and (ii) the exchange of the PIK Notes for Common Stock as follows:
</TABLE>
<TABLE>
<S> <C> <C>
Debt Extinguished:
Subsidiary credit facility................................................... $ 137,129
7 1/2%-10% Debentures (face value $138,694 net of discount of $33,397)....... 105,297
11 7/8% Debentures (face value $347,414 net of discount of $46,532).......... 300,882
15% Notes (face value $137,359 net of discount of $298)...................... 137,061
11 3/8% Debentures (face value $24,500 net of discount of $2,148)............ 22,352
14% PIK Notes ($9,154 redeemed and $182,706 exchanged for Common Stock)...... 191,860
Miscellaneous Debt........................................................... 25,703
------------
Debt Extinguished....................................................... 920,284
New Credit Facilities.......................................................... (643,837)
------------
Reduction in Outstanding Indebtedness................................... $ 276,447
------------
------------
Allocated to:
Current portion.............................................................. 25,579
Long-term debt............................................................... 250,868
------------
$ 276,447
------------
------------
</TABLE>
<TABLE>
<S> <C>
(d) Reflects the payment of accrued interest and dividends in the amount of $18,830.
(e) Reflects the redemption of the Intermediate Preferred Stock of Group, Series A Preferred Stock of Group
and the Redeemable Preferred Stock with an aggregate book value of $122,681 with funds provided by the
Recapitalization.
(f) Reflects the issuance of 20,000 shares of Common Stock in connection with the Offerings and the exchange
of the PIK Notes for shares of Common Stock. Increases reflect (i) $296,500 for shares of Common Stock
to be sold in the Offerings, net of discounts and commissions and associated expenses and (ii) $182,706
on exchange of PIK Notes for shares of Common Stock.
(g) Reflects charges for (i) write-off of deferred debt expense and debt discounts of $95,455, (ii) premiums
paid in connection with the redemption of existing indebtedness in the amount of $12,075 and (iii)
premiums paid in connection with the redemption of the preferred stock of subsidiary and the Redeemable
Preferred Stock in the amount of $91,670.
</TABLE>
22
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Selected
Financial Data" and the Consolidated Financial Statements of the Company and the
notes thereto, included elsewhere in this Prospectus.
GENERAL
After the 1988 Acquisition, the Company implemented a restructuring plan
designed to focus on certain businesses in which it enjoyed a competitive
advantage and to eliminate unnecessary corporate overhead. The Company
accordingly divested 27 business units which in 1988 contributed 73% of net
sales. The aggregate proceeds from these divestitures were $1,643 million, and
enabled the Company to reduce total indebtedness from $2,483 million at December
8, 1988 to $927.3 million at the end of 1993. In addition, the Company reduced
and consolidated corporate staffs. Throughout this period, the Company made
substantial investments to enhance the competitive position of its three
continuing business segments and to strengthen its position as a low-cost
producer.
The Company's continuing business segments consist of Automotive Products,
Interior Furnishings and Wallcoverings. The Company's 1993 net sales were
$1,305.5 million, with approximately $677.9 million (51.9%) in Automotive
Products, $407.2 million (31.2%) in Interior Furnishings, and $220.4 million
(16.9%) in Wallcoverings.
The industries in which the Company competes are cyclical. Automotive
Products is influenced by the level of North American vehicle production.
Interior Furnishings is primarily influenced by the level of residential,
institutional and commercial construction and renovation. Wallcoverings is also
influenced by construction, renovation and trends in home remodeling.
During 1993, the Company disposed of several businesses and reclassified
one subsidiary as a continuing business. Accordingly, the Company's 1993
financial statements reflect (i) the sale of the Engineering Group, (ii) the
disposition of Builders Emporium, (iii) the sale of Kayser-Roth Corporation
("Kayser-Roth"), and (iv) the decision to retain Dura Convertible Systems
("Dura"). The results of the Engineering Group, Builders Emporium and
Kayser-Roth are classified as discontinued operations for all periods. The
results of Dura are now classified in Automotive Products and prior reporting
periods have been restated to reflect Dura as a continuing operation. As a
result of the foregoing, this discussion is not comparable to the previous
discussions of the Company's operations. See Note 6 to Consolidated Financial
Statements.
The Company reclassified its industry segments during 1993 to realign its
products based on primary customer groups. Businesses related to the automotive
industry which were part of Specialty Textiles have been reclassified as
Automotive Products. The decorative fabrics and floorcoverings businesses have
been reclassified as Interior Furnishings. Previously, the floorcovering
business was part of the Specialty Textiles segment. Wallcovering products which
were previously part of the Home Furnishing segment have been reclassified as
Wallcoverings. Industry segment information has been restated for the years 1992
and 1991. See Note 18 to the Consolidated Financial Statements.
1993 COMPARED TO 1992
NET SALES
Net sales increased 2.2% to $1,305.5 million in 1993 (a 52-week year) from
$1,277.5 million in 1992 (a 53-week year). The overall increase in net sales
reflected improvement in Automotive Products and Interior Furnishings offset by
a decrease in net sales at Wallcoverings.
23
<PAGE>
Automotive Products net sales increased 5.3% in 1993 to $677.9 million. Net
sales growth increased, primarily during the second half of 1993, due to a
number of factors. First, growth in the North American vehicle build accelerated
due in part to increased production by the Transplants. Second, the Company won
placement of its products on a number of new and existing vehicle lines in 1993.
For example, the Company was awarded the automotive fabric order for the Ford
Explorer and displaced one of its bodycloth competitors on the General Motors
"W" and "N" body lines. Third, the Company continued to benefit from increasing
sales content per vehicle. For example, in 1993 General Motors' Cadillac
division began using the Company's technically advanced "foam-in-place" carpet
system, which provides significant acoustical benefits and sells at a
significantly higher price than traditional molded floor carpet. These factors
were offset by OEM model changeovers of certain key models during the second
quarter.
Interior Furnishings' net sales increased 3.9% in 1993 to $407.2 million.
The increase in net sales was attributable to an industry-wide strengthening of
furniture sales in 1993 (somewhat offset by an industry-wide decline in sales
volume during the third quarter of 1993) and increased sales of the Company's
patented Powerbond RS(R) floorcovering products. Net sales increased by 5.6% at
both Mastercraft, which represents 66.0% of Interior Furnishings' sales, and
Floorcoverings due largely to volume increases.
Wallcoverings' net sales decreased 8.9% in 1993 to $220.4 million. The
decrease in sales was due primarily to the consolidation of certain product
distribution channels and to Wallcoverings' downsizing program. In the fourth
quarter, management responded to these reduced sales by aggressively rebuilding
independent retailer ("dealer") shelf space. As a result, sample book placements
in the dealer market increased.
OPERATING EXPENSES
Total operating expenses were $1,351.7 million and $1,210.6 million in 1993
and 1992, respectively, including $38.3 million ($26.7 million of which was a
one-time charge related to the 1993 Plan) and $24.4 million of unallocated
corporate expenses, respectively. Operating expenses allocated to the Company's
three business segments totaled $1,313.5 million and $1,186.2 million in 1993
and 1992, respectively. These operating expenses in 1993 included certain
non-recurring charges relating to (i) the write-off of goodwill in the amount of
$129.9 million in the quarter ended October 30, 1993, (ii) goodwill amortization
of $2.8 million for the nine months prior to the write-off of goodwill, and
(iii) post-retirement medical plan costs, which were $4.7 million higher, on an
annual basis, than expected in future periods due to changes in plan provisions
which became effective April 1, 1994. Operating expenses in 1992 included (i)
$10.0 million of charges relating to Wallcoverings' downsizing program (ii) $3.7
million of goodwill amortization and (iii) post-retirement medical plan costs,
which were $5.0 million higher, on an annual basis, than expected in future
periods due to changes in plan provisions which became effective April 1, 1994.
See Notes 4 and 5 to the Consolidated Financial Statements.
Excluding the goodwill write-off in 1993 and the restructuring charges in
1992, 1993 operating expenses allocated to the segments were $1,183.6 million or
90.7% of sales compared to $1,176.2 million or 92.1% of sales in 1992. This is
the result of the allocation of fixed costs over a larger sales volume, improved
manufacturing productivity, and continuing cost reduction initiatives at both
the operating and corporate level.
At the end of the third quarter of 1993, the Company recorded a
restructuring charge of $24.0 million, principally related to the write-down of
certain surplus or under-utilized assets of Automotive Products and
Wallcoverings and to provide for the obsolescence of certain manufacturing
processes as a result of shifts in customer demand. During the fourth quarter of
1993 management reevaluated its plan to restructure these manufacturing
facilities. Based on changes in product mix and underlying improvement in
certain of the Company's businesses, management has concluded that the assets
and facilities identified previously can be utilized at a level of production
that would
24
<PAGE>
not result in the impairment of the asset values. Accordingly, in the fourth
quarter of 1993 management has revised its estimate and reversed these charges.
INTEREST EXPENSE
Interest expense for continuing operations, net of interest income of $4.4
million in 1993 and $4.0 million in 1992, increased to $111.3 million during
1993 compared to $110.9 million in 1992. Interest expense, including amounts
allocated to discontinued operations and excluding interest income, decreased to
$135.1 million during 1993 compared to $138.3 million in 1992. The decrease in
interest expense was due to the additional week in 1992 and a reduction in the
Company's weighted average interest rate.
INCOME TAXES
In 1993 income taxes of $11.2 million consisted of foreign and state taxes.
This amount compares with a 1992 tax benefit of $3.2 million which was comprised
of a foreign and state tax provision of $3.5 million offset by a Federal tax
benefit of approximately $6.7 million.
DISCONTINUED OPERATIONS
The Company's loss from discontinued operations was $104.4 million for 1993
and $218.3 million for 1992, including losses on disposals of $99.6 million and
$168.0 million, respectively.
The 1993 loss is primarily attributable to the $125.5 million additional
charge arising from the Company's determination as of the end of the second
quarter of 1993 that it would be unable to sell Builders Emporium as an ongoing
entity. This was offset by a $28.1 million gain on the sale of Kayser-Roth. The
1992 loss reflected primarily the expected losses on the anticipated sale of
Builders Emporium.
NET INCOME
The combined effect of the foregoing resulted in a net loss of $277.7
million in 1993 compared to a net loss of $263.7 million in the prior year.
25
<PAGE>
PRO FORMA 1993 COMPARED TO PRO FORMA 1992
Cost of goods sold and selling, general and administrative expenses
allocated to the three business segments in 1993 and 1992 included certain
non-recurring charges. Management believes that the pro forma operating income
figures are more illustrative of the Company's performance. As illustrated
below, pro forma operating income prior to these charges for each of the
Company's three business segments increased in 1993 compared to 1992. Between
1992 and 1993, pro forma segment operating margins increased to 10.3% from 8.8%
in Automotive Products, to 11.2% from 10.1% in Interior Furnishings and to 6.3%
from 5.5% in Wallcoverings.
<TABLE><CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
AUTOMOTIVE PRODUCTS INTERIOR FURNISHINGS
WALLCOVERINGS TOTAL
-------------------- -------------------- -------------------- ----------------------
1993 1992 1993 1992 1993 1992 1993 1992
--------- --------- --------- --------- --------- --------- ---------- ----------
(IN MILLIONS)
Net sales............................... $ 677.9 $ 643.8 $ 407.2 $ 391.8 $ 220.4 $ 241.9 $ 1,305.5 $ 1,277.5
Segment operating income(1)............. $ (2.3) $ 52.7 $ 12.2 $ 37.5 $ (17.9) $ 1.1 (8.0) 91.3
Goodwill write-off...................... 68.4 -- 31.6 -- 29.9 -- 129.9 --
Restructuring charges................... -- -- -- -- -- 10.0 -- 10.0
--------- --------- --------- --------- --------- --------- ---------- ----------
Segment operating income before
restructuring charges and the
write-off of goodwill................. 66.1 52.7 43.8 37.5 12.0 11.1 121.9 101.3
Goodwill amortization................... 1.5 1.9 0.7 0.9 0.6 0.9 2.8 3.7
Prospective post-retirement medical plan
changes............................... 2.2 2.3 1.3 1.3 1.2 1.4 4.7 5.0
--------- --------- --------- --------- --------- --------- ---------- ----------
Pro forma operating income(2)........... $ 69.8 $ 56.9 $ 45.8 $ 39.7 $ 13.8 $ 13.4 $ 129.4 $ 110.0
--------- --------- --------- --------- --------- --------- ---------- ----------
--------- --------- --------- --------- --------- --------- ---------- ----------
Pro forma operating margin.............. 10.3% 8.8% 11.2% 10.1% 6.3% 5.5% 9.9% 8.6%
</TABLE>
- - ---------------
(1) See Note 18 to the Consolidated Financial Statements.
(2) Excludes $8.6 million and $21.4 million of unallocated pro forma corporate
expense in 1993 and 1992, respectively.
1992 COMPARED TO 1991
NET SALES
Net sales increased 7.9% to $1,277.5 million in 1992 (a 53-week year) from
$1,184.3 million in 1991 (a 52-week year).
Automotive Products net sales increased 5.5% to $643.8 million in 1992 from
$610.3 million in 1991, reflecting the impact of a modest increase in the North
American vehicle build as well as an improvement in Automotive Products' product
mix. The molded carpet product line experienced the largest net sales increase.
Interior Furnishings net sales increased 16.3% to $391.8 million in 1992
from $336.8 million in 1991 principally due to two factors. First, 1992 net
sales reflected the full year impact of the acquisition of Doblin, a
manufacturer of high-end Jacquard fabric, in the third quarter of 1991, as well
as substantial incremental sales volume from the full utilization of excess
Doblin manufacturing capacity. Second, Floorcoverings' sales increased 17.7%
primarily attributable to restyled product offerings.
Wallcoverings net sales increased 2.0% to $241.9 million in 1992 from
$237.2 million in 1991. The net sales increase reflected a combination of two
offsetting factors. During the first quarter of 1992, the Company benefited from
the increase in industry demand for wallcoverings. However, this increase was
offset by reduced sales due primarily to Wallcoverings' efforts during 1992 to
consolidate certain distribution channels and its downsizing program.
26
<PAGE>
OPERATING EXPENSES
Total operating expenses were $1,210.6 million and $1,133.2 million in 1992
and 1991, respectively, including $24.4 million and $26.7 million of unallocated
corporate expense. Operating expenses allocated to the Company's three business
segments totaled $1,186.2 million and $1,106.5 million in 1992 and 1991,
respectively. Operating expenses in 1992 included $10.0 million of restructuring
costs. Prior to these charges, 1992 operating expenses allocated to the segments
were $1,176.2 million or 92.1% of sales, versus $1,106.5 million or 93.4% of
sales in 1991, representing a 1.3 percentage point improvement.
RESTRUCTURING CHARGES
In 1992, the Company reevaluated the distribution methods as well as
certain manufacturing and product lines in Wallcoverings. This reevaluation
resulted in a restructuring charge of $10.0 million for the closure of certain
manufacturing facilities. Of this amount, $2.7 million related to asset
writedowns and $7.3 million related to the consolidation of Wallcoverings'
operations.
INTEREST EXPENSE
Interest expense for continuing operations, net of interest income of $4.0
million in 1992 and $7.3 million in 1991, increased to $110.9 million during
1992 compared to $108.0 million in 1991. Interest expense, including amounts
allocated to discontinued operations and excluding interest income, decreased to
$138.3 million during 1992 compared to $141.5 million in 1991 principally as a
result of the reduction in the Company's weighted average cost of borrowings.
INCOME TAXES
The Company's 1992 tax benefit of $3.2 million includes a foreign and state
tax provision of $3.5 million, offset by a Federal tax benefit of approximately
$6.7 million. In 1991, income taxes of $12.0 million consisted of foreign and
state taxes of $11.7 million and Federal income taxes of $0.3 million.
DISCONTINUED OPERATIONS
As previously discussed, loss from discontinued operations, net of taxes
and including loss on disposals, was $218.3 million in 1992 compared to the loss
from discontinued operations of $16.4 million in 1991. The 1992 loss reflected
the expected losses on the anticipated sales of Builders Emporium and the
Engineering Group. The 1991 loss was attributable to the discontinuation of the
remaining businesses of Wickes Manufacturing.
EXTRAORDINARY ITEM AND CHANGE IN ACCOUNTING
Loss on early retirement of indebtedness, net of taxes, was $1.8 million in
1991. See Note 11 to the Consolidated Financial Statements.
The cumulative effect on prior years of the change in accounting for
post-retirement benefits other than pensions was $42.3 million in 1991. See Note
13 to the Consolidated Financial Statements.
NET INCOME
The combined effect of the foregoing resulted in a net loss of $263.7
million in 1992 compared to a net loss of $133.8 million in 1991.
LIQUIDITY AND CAPITAL RESOURCES
At January 29, 1994, the Company and its subsidiaries had cash and cash
equivalents totaling $81.4 million compared to $83.7 million at January 30,
1993. Included in cash and cash equivalents at January 29, 1994 was $69.8
million held by Group. An additional $8.6 million was held by Group's
27
<PAGE>
C&A Co. subsidiary. The Company's principal sources of funds are cash generated
from operating activities and borrowings under bank credit facilities. Net cash
provided by the operating activities of its continuing operations in 1993 was
$22.9 million. C&A Co. had $54.8 million of borrowing availability under a
credit facility. Based on financial covenants in that credit facility,
approximately $47 million could be paid to Group as a dividend. The Company's
Canadian subsidiaries had $8.5 million of borrowing availability under a bank
demand line of credit. Restrictions on the payment of dividends contained in
various debt agreements of Group prevented the payment of dividends by Group to
the Company in 1993 and 1992. See Note 11 to Consolidated Financial Statements.
During 1993, the Company sold Kayser-Roth for approximately $170 million,
including a $70 million senior unsecured bridge note. The Company's Engineering
Group, which was discontinued in 1992, was sold during 1993 for approximately
$51 million. Additionally, the Company has nearly completed the disposition of
the real estate, inventory and other assets of its Builders Emporium home
improvement retail chain which the Company discontinued at the end of 1992.
During 1993, the Company used cash from the aforementioned sources to repay
$148.7 million of outstanding indebtedness.
At January 29, 1994, outstanding long-term indebtedness (substantially all
of which will be defeased and redeemed, or repaid, in connection with the
Recapitalization) amounted to $923.6 million (including current portion of $25.9
million) at varying interest rates between 5% and 15% per annum of which $512.3
million is due within the succeeding five year period. See Note 11 to
Consolidated Financial Statements. Cash interest paid during 1993, 1992 and 1991
was $101.5, $105.0 and $120.6 million, respectively.
The Company's principal uses of funds for the next several years will be to
fund principal and interest payments on its indebtedness, net working capital
increases and capital expenditures. The Company makes capital expenditures on a
recurring basis for replacement and improvements. As of April 19, 1994, the
Company had approximately $43.0 million in outstanding capital commitments.
During 1994 the Company anticipates capital expenditures will exceed the $44.9
million, $37.9 million and $38.9 million spent by its continuing businesses
during 1993, 1992 and 1991, respectively. This increase is due primarily to the
acquisition of additional machinery and equipment to expand the productive
capacity of Decorative Fabrics' Mastercraft division, as well as ongoing capital
expenditures in each of the Company's three segments.
Management anticipates that the net cash requirements of its discontinued
operations will be approximately $20.9 million during 1994. However, it is
possible that the actual net cash requirements of the Company's discontinued
operations could differ materially from management's estimates. Management
believes that such needs can be adequately funded in 1994 by net cash provided
by operating activities and by additional borrowings under the New Credit
Facilities. The Company's NOLs and unused Federal tax credits may minimize the
cash requirement for Federal income taxes during certain future periods. See
"Net Operating Loss Carryforwards".
In connection with the Recapitalization, the Company will effect a
defeasance and redemption of all of its outstanding indebtedness and preferred
stock, other than (i) $7.0 million of mortgage and other debt which will remain
outstanding and (ii) $202.3 million of PIK Notes, of which $9.7 million will be
redeemed and $192.6 million will be exchanged for Common Stock of the Company.
These amounts are inclusive of $10.4 million of accrued PIK interest from
January 29, 1994 through June 15, 1994. See "Use of Proceeds and Consolidation".
In connection with the Recapitalization, the Company will also enter into
the New Credit Facilities which will consist of (i) the Closing Date Term Loan
Facility in an aggregate principal amount of $475 million with a term of eight
years, (ii) the Delayed Draw Term Loan Facility in an aggregate principal amount
of $25 million with a term of eight years and (iii) the Revolving Facility in an
aggregate principal amount of up to $275 million with a term of seven years.
These facilities will
28
<PAGE>
include various restrictive covenants including maintenance of EBITDA and
interest coverage, leverage and liquidity tests and various other restrictive
covenants which are typical for such facilities. See "New Credit Facilities".
The Company does not believe that inflation has had a material impact on
sales or income during the three years ended January 29, 1994.
After the Recapitalization, the Company will have approximately $121.3
million available and undrawn under the New Credit Facilities. Management
believes that cash flow from operations and bank borrowing will be sufficient to
fund the Company's operating requirements, including working capital, capital
expenditures and debt service requirements (primarily consisting of interest)
for the foreseeable future.
TAX MATTERS
As of January 29, 1994, the Company had NOLs of approximately $434.0
million for Federal income tax purposes, which expire over the period from 1996
to 2008. The Company also has unused Federal tax credits of approximately $18.9
million, $11.9 million of which expire during 1994 to 2003. The Company
anticipates that additional Federal income tax deductions of approximately $37.7
million will be generated during 1994 as a result of write-offs of unamortized
debt discounts and deferred financing costs relating to debt repaid in
connection with the Recapitalization. In addition, the Company estimates it will
generate tax deductions of approximately $75.4 million in connection with the
ultimate disposition of assets and liabilities of its discontinued businesses
during the period 1994 to 1996, which were previously accrued for financial
reporting purposes prior to January 29, 1994. The Company anticipates that
utilization of these NOLs, tax credits and deductions will result in minimal
Federal income taxes until these NOLs and tax credits are exhausted. Certain
restrictions apply to the use of a portion of the NOLs and tax credits described
above. After giving effect to the Recapitalization, the Company believes that
such restrictions will not prevent utilization of such restricted losses and tax
credits.
Future sales of Common Stock by the Company or by the Partners, or changes
in the composition of the Partners, could result in limitations on the Company's
ability to use its NOLs and tax credits. Management cannot predict at this time
whether any such limitations will apply.
In the course of an examination of the Company's Federal income tax
returns, the IRS has challenged the availability of $176.6 million of the
Company's approximately $470.0 million NOLs (inclusive of additional Federal
income tax deductions of approximately $37.7 million that will be generated
during 1994 as a result of the write-offs of unamortized debt discounts and
deferred financing costs relating to debt repaid in connection with the
Recapitalization). The examination is at a preliminary stage and management
believes that the basis for the IRS' position is unclear. Management disputes
the IRS' challenge and believes that substantially all of the NOLs should be
available (subject to 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 majority 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.
29
<PAGE>
The Company is legally or contractually responsible or alleged to be
responsible for the investigation and remediation of contamination at various
sites. It also has received notices that it is a PRP in a number of proceedings.
The Company may be named as a PRP at other sites in the future, including with
respect to divested and acquired businesses. It is a normal risk of operating a
manufacturing business that liability may be incurred for investigating and
remediating on-site and off-site contamination. The Company is currently engaged
in investigation or remediation at certain sites. It is difficult to estimate
the total cost of investigation and remediation due to various factors including
incomplete information regarding particular sites and other PRP's, uncertainty
regarding the extent of environmental problems and the Company's share, if any,
of liability for such problems, the selection of alternative compliance
approaches, the complexity of environmental laws and regulations and changes in
cleanup standards and techniques. When it has been possible to provide
reasonable estimates of the Company's liability with respect to environmental
sites, provisions have been made in accordance with generally accepted
accounting principles. However, there can be no assurance that the Company has
identified or properly assessed all potential environmental liability arising
from the activities or properties of the Company, its present and former
subsidiaries and their corporate predecessors. As of January 29, 1994, the
Company has established reserves of approximately $30.8 million for the
estimated future costs related to all its environmental sites. In the opinion of
management, based on the facts presently known to it, the environmental costs
and contingencies will not have a material adverse effect on the Company's
consolidated financial condition or results of operations. See "Item 3. Legal
Proceedings-- Environmental Proceedings" incorporated by reference to the
Company's Annual Report on Form 10-K for the fiscal year ended January 29, 1994.
QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly financial
information for 1993 and 1992. In the opinion of management, this information
has been prepared on the same basis as the information in the Consolidated
Financial Statements and includes normal recurring adjustments which management
considers necessary for a fair presentation of the information shown when read
in conjunction with the Consolidated Financial Statements, including the notes
thereto, appearing elsewhere in this Prospectus. The operating results for any
quarter are not necessarily indicative of results for the entire year or for any
future period.
<TABLE><CAPTION>
1992 1993
-------------------------------------------- ------------------------------------------
FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER(1) QUARTER QUARTER QUARTER QUARTER
--------- --------- --------- ----------- --------- --------- --------- ---------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.......................... $ 319.5 $ 319.7 $ 314.9 $ 323.4 $ 339.0 $ 289.7 $ 334.6 $ 342.2
Gross profit....................... 72.6 74.1 70.8 81.6 79.0 61.2 84.4 85.1
Operating income (loss)............ 20.2 18.1 19.2 9.4(2) 26.2 10.6 (120.4)(3) 37.4(4)
</TABLE>
- - ---------------
<TABLE>
<S> <C>
(1) The fourth quarter of 1992 includes fourteen weeks.
(2) Operating income for the fourth quarter of 1992 reflects a $10.0 million restructuring charge.
(3) Operating loss for the third quarter of 1993 includes a $129.9 million write-off of goodwill and a $24.0
million restructuring charge.
(4) Operating income for the fourth quarter of 1993 includes a $26.7 million charge for the 1993 Option Plan
offset by the reversal of the third quarter restructuring charge. See Note 15 to the Consolidated Financial
Statements. This reversal resulted from management's reevaluation of its restructuring plan as a result of
changes in product mix and underlying improvement in certain of the Company's businesses. See Note 5 to the
Consolidated Financial Statements.
</TABLE>
The first quarter of 1993 reflects increased net sales from Automotive
Products which followed an increase in automotive industry unit sales (a trend
which began in the fourth quarter of 1992) and increased net sales from the
Mastercraft division of Interior Furnishings. This increase was offset
30
<PAGE>
by a modest net sales decline at Wallcoverings. Gross profit margin increased
slightly reflecting margin improvement across all business segments. Operating
income of $26.2 million for the quarter was 29.4% higher than for the first
quarter of 1992. Net sales in the second quarter of 1993 declined 9.4% from the
same period in 1992, reflecting sales declines across all business segments,
particularly at Automotive Products and Wallcoverings. The decline at Automotive
Products was primarily due to OEM model changeovers of certain key models
including the Chrysler C/Y body and the Honda Accord. Wallcoverings' net sales
declined partly as a result of its downsizing and the reduction in sample book
placements. Gross margin declined during the second quarter of 1993 compared to
the second quarter of 1992 primarily as a result of a lower absorption of fixed
costs due to lower sales volumes. These factors also lead to a reduction of
operating income to $10.6 million, or a 41.3% decrease versus the second quarter
of 1992.
Net sales in the third quarter of 1993 increased by 6.3% versus the prior
year due to increased net sales at Automotive Products and Interior Furnishings
offset by a net sales decline at Wallcoverings. Despite a downturn in the
automotive build, Automotive Products net sales increased due to the completion
of changeovers at Honda, strong orders for the segment's Jacquard automotive
seat fabric and the initiation of model year 1994 Ford Mustang production.
Interior Furnishings' net sales increased reflecting general improvements in the
retail furniture market. Company wide gross profit margin increased 2.7
percentage points, reflecting improved margins across all segments, particularly
Wallcoverings which reflected the fixed cost reductions associated with the
previously discussed downsizing. As a result, operating income before
restructuring charges and the write-off of goodwill increased to $33.5 million
versus $19.2 million in 1992, a 74.1% increase. Net sales in the thirteen-week
fourth quarter of 1993 increased 5.8% over the fourteen-week fourth quarter of
1992. Net sales increased at both Automotive Products and Interior Furnishings,
offset by further net sales declines at Wallcoverings. Automotive Products net
sales outpaced the automotive build, reflecting continued strong demand for
bodycloth and the ramp-up of the 1994 model Ford Mustang's convertible top
systems at Dura. Operating income before restructuring charges and 1993 Plan
expense for the fourth quarter was $40.1 million, a 107.1% increase over the
fourth quarter of 1992.
31
<PAGE>
BUSINESS
The Company is a leader in each of its three business segments: Automotive
Products, the largest supplier of interior trim products to the North American
automotive industry; Interior Furnishings, the largest manufacturer of
residential upholstery fabrics in the U.S.; and Wallcoverings, the largest
producer of residential wallcoverings in the U.S. Within these three segments,
the Company holds a number one or number two market share position in each of
its eight major product lines which together comprised approximately 81% of 1993
net sales of $1,305.5 million.
COLLINS & AIKMAN CORPORATION
AND SUBSIDIARIES
AUTOMOTIVE INTERIOR WALLCOVERINGS
PRODUCTS FURNISHINGS
. AUTOMOTIVE SEAT FABRIC . RESIDENTIAL AND COMMERICAL
WALLCOVERINGS
. MOLDED FLOOR CARPETS
. ACCESSORY FLOOR MATS
. LUGGAGE COMPARTMENT TRIM DECORATIVE FLOORCOVERINGS
FABRICS
. CONVERTIBLE TOP STACKS . SIX-FOOT CARPET
. MODULAR CARPET TILE
MASTERCRAFT CAVEL GREEFF WARNER
. FLAT-WOVEN . VELVETS . PRINTS . PRINTS
JACQUARDS AND
DOBBIES
See Note 18 to the Consolidated Financial Statements.
BUSINESS STRATEGY
Management believes the Company is well-positioned to achieve continued
growth in each of its three segments as a result of its pursuit of the following
strategic objectives:
FOCUS ON HIGH MARKET SHARE PRODUCTS. Management focuses on developing
products that have high market share potential. Management believes that each of
the Company's eight major product lines holds the number one or number two
market share position. Together these product lines comprised approximately 81%
of 1993 net sales. These industry leading positions were achieved almost
exclusively through internal growth and reflect a long-term, Company-wide
commitment to excellence in styling, engineering, product development,
value-added manufacturing and customer service.
32
<PAGE>
The table below sets forth management's estimates of the Company's 1993
market share positions in its eight major product lines.
<TABLE><CAPTION>
1993 1993 MARKET
NET SALES SHARE
Product Line (MILLIONS) POSITION
- - -------------------------------------------------------------------------------- ----------- -------------
<S> <C> <C>
Automotive Products
Automotive Seat Fabric................................................... $ 218.4 #1
Molded Floor Carpets..................................................... 180.5 2
Accessory Floor Mats..................................................... 73.4 1
Luggage Compartment Trim................................................. 37.4 2*
Convertible Top Stacks................................................... 28.1 1
Interior Furnishings
Flat-woven Furniture Fabrics............................................. 268.9 1
Six-foot Commercial Carpet............................................... 60.3 1
Wallcoverings (Residential)................................................ 196.0 1
-----------
Subtotal................................................................. $ 1,063.0
Percent of net sales..................................................... 81%
Net sales................................................................ $ 1,305.5
</TABLE>
-------------------------------
* Management believes that the Company and a competitor are tied
for the number two market share position.
In 1993, Automotive Products and Interior Furnishings had operating margins
before the write-off of goodwill of 9.8% and 10.8%, respectively. These high
operating margins and high market shares have provided the Company with the
funds necessary to maintain high levels of investment and customer service.
MAINTAIN BROAD PRODUCT OFFERINGS TO SUPPORT CUSTOMER BASE. The Company
consistently strives to offer a wider variety of products to each of its
customers and thereby become the primary supplier to each of its customers. The
breadth and variety of fabrics and styles offered by Decorative Fabrics supports
the Company's goal of being the primary supplier to its customers. Wallcoverings
has manufacturing capabilities in all types of printing technologies, utilizes a
vast library of designs and color concepts and supports the most extensive
dealer network in the industry, selling to approximately 15,000 dealers and most
of the leading retail chains in the country.
Automotive Products offers a wide variety of interior trim products and
thereby maintains a broader, more uniform sales penetration at foreign owned
North American production and assembly facilities ("Transplants") and U.S.
automotive equipment manufacturers (together with Transplants, "OEMs") than any
of its competitors. Management estimates that for 1993 Automotive Products'
overall share in its five major automotive product lines was 26% at Ford Motor,
40% at General Motors and 51% at Chrysler, and that its share was 36% among the
Transplants.
MAINTAIN LOW-COST POSITION. Management's strategy is to maintain the
Company's low-cost position and flexible manufacturing capabilities in order to
protect operating margins from competitive pricing pressures and economic
downturns, while maximizing the benefit from cyclical upturns. The Company
established its low-cost position through a systematic long-term focus on
improving materials yields and labor productivity and reducing overhead
expenses. These initiatives helped offset the impact of volume declines on
operating margins during the recent economic recession and position the Company
to take full advantage of any economic upturns.
33
<PAGE>
MAXIMIZE BENEFITS FROM HIGH OPERATING LEVERAGE. Management believes that
substantial available production capacity and high operating leverage have
enabled the Company to benefit from the recent cyclical upturn in its served
markets. In addition, the Company has substantial available manufacturing
capacity to support further growth.
Over the past several years, the Company has made considerable investments
in product development, MIS upgrades and other areas of capital improvement. The
Company does not currently anticipate the need to make significant capital
expenditures to expand capacity to meet cyclical increases in demand, with the
exception of an $85 million capacity expansion program planned for the
Mastercraft division of Interior Furnishings. Future capital expenditures are
currently targeted primarily toward further cost reduction and modernization.
Recently, sales and production volumes have been increasing rapidly in the
Company's served markets. During the second half of 1993, the seasonally
adjusted annual rate of U.S. light vehicles sales was 14% higher than during the
1991 recession lows and the seasonally adjusted annual rate of U.S. furniture
sales for the second half of 1993 was 19% higher than in 1991. As a result, the
Company's operating income before the write-off of goodwill from continuing
operations increased by approximately 90.7% during the second half of 1993 over
the same period in 1992. If the current upward trends in the Company's
businesses continue, management believes that the Company may continue to
achieve higher capacity utilization rates, which generally result in higher
operating margins.
OFFER VALUE-ADDED PRODUCTS. A key element of the Company's strategy is to
increase market share and unit selling prices by developing increasingly higher
value-added products through innovations in materials construction, product
design and styling leadership. The Company produces virtually no inventory or
commodity type products other than in Wallcoverings. The Company recently
developed the "Top-in-a-Box" convertible top assembly, enabling the Company to
capture substantial additional materials and assembly value in its unit selling
price by shipping a fully-assembled module directly to the OEMs. Previously,
convertible top systems were assembled on high-cost OEM assembly lines or in
specialty conversion shops. In recent years, through these and other
innovations, the Company has realized higher unit sales prices.
MAINTAIN PRODUCT DESIGN AND STYLING LEADERSHIP. The Company is a leader in
design and styling in all three of its business segments. Design and styling are
key differentiating factors in consumer purchase decisions. Management believes
that the Company's product styling and design capabilities are currently an
important competitive advantage and intends to devote resources to maintain the
Company's leadership position in these areas. The Decorative Fabrics group
introduces more than twice as many designs each year as its largest competitors,
and has a design library built by such well known designers as Wesley Mancini,
Carl Miller, and Stanley King. Similarly, Wallcoverings has a leading in-house
design staff and also licenses designs from industry leaders such as Laura
Ashley, Mario Buatta and Clarence House. Automotive Products operates a
technical design center with state-of-the-art, computer-aided
design/computer-aided manufacturing ("CAD/CAM") systems.
CONTINUE TO DELEVERAGE. The Recapitalization is designed to increase
operating and financial flexibility by reducing the Company's total indebtedness
and significantly lowering its cost of borrowing, thereby freeing more cash for
debt repayment, continued reinvestment in the Company's businesses and the
pursuit of niche acquisitions. Management expects this financial deleveraging to
be enhanced through the application of operating cash flow augmented by the use
of the Company's NOLs, which management believes will total approximately $470.0
million after the Recapitalization, and by other favorable tax attributes. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Tax Matters".
34
<PAGE>
COMPLETE STRATEGIC RESTRUCTURING OF WALLCOVERINGS. In late 1993, a newly
installed management team instituted a restructuring plan at Wallcoverings
designed to rebuild the segment's product offerings, to increase its sample book
introduction rate through aggressive marketing and design and to improve
utilization of its extensive distribution network and manufacturing
capabilities. Management is also expanding Wallcoverings' quick-ship and
in-stock programs and enhancing its order processing systems. Management
believes that the results of the restructuring are becoming evident in the
segment's financial results, as 1993 operating income margins before the
write-off of goodwill increased to 6.0% in the second half of 1993 from a 3.3%
1992 operating income margin, before restructuring charges and the write-off of
goodwill, in the second half of 1992.
AUTOMOTIVE PRODUCTS
GENERAL
The Company is a leading designer and manufacturer of automotive products
with 1993 net sales of $677.9 million and operating income (before restructuring
charges and the write-off of goodwill) of $66.1 million. Automotive Products
supplies four major interior trim products--automotive seat fabric
("bodycloth"), molded floor carpets, accessory floor mats and luggage
compartment liner--and convertible top stacks. Management estimates that
Automotive Products holds a number one or number two market share position in
each of its five major products. At least one of its five major automotive
products is used on approximately 87% of all North American vehicle lines.
Automotive Products has supplied interior trim products to the automotive
industry for over 60 years. Management estimates that the total market for
Automotive Products' five major product lines in 1993 was approximately $1.4
billion. Accordingly, management believes that Automotive Products 1993 sales of
$537.8 million in these product lines represents a market share of approximately
37%. While some interior trim suppliers have sales volumes equivalent to or
greater than that of the Company in a single product line, management believes
that the Company sells a wider variety of interior trim products, has products
on more vehicle lines and has a broader, more uniform sales penetration at the
OEMs than any of its competitors.
INDUSTRY
Automotive industry demand historically has been influenced by both
cyclical factors and long-term growth trends. During the last three decades, the
stock of U.S. light vehicles (passenger cars, pickups, mini vans and sports
utility vehicles) grew at a 3.2% compound annual rate, and at a 2.4% compound
annual rate since 1980. Since nearly all of the historic growth in the stock of
light vehicles has been associated with increases in the driving age population
and real per capita income, the Company anticipates that the fleet of light
vehicles will continue to grow at rates consistent with these factors.
Management believes that the relationship between long-term growth in the
vehicle fleet and new car and truck sales is influenced by scrappage rates and
the average age of the fleet. Currently, the average age of the U.S. passenger
car fleet is at a modern high of nearly 8.0 years per vehicle compared to 6.5
years in the early 1980's, and to 5.5 years in 1970. This trend may give rise to
replacement demand for the aging vehicles still in use. When such replacement
demand has materialized in the past, it has tended to boost new car and truck
sales rates relative to the long-term growth rate of the fleet.
Annual new car and truck sales historically have been cyclical. In the most
recent cycle, U.S. light vehicle sales declined from an average of 15.4 million
units per year in 1986-1988 to a low of 12.3 million units in 1991. Since late
1993, however, U.S. light vehicles sales have accelerated
35
<PAGE>
strongly, reflecting what management believes to be the early phase of a
cyclical upturn. Cyclical upturns in the auto cycle generally have lasted three
to five years.
In the first quarter of 1994, U.S. light vehicles sold at a 15.6 million
annualized rate, a level 27% higher than during the lowpoint of 1991. Based on
the limited duration of the auto recovery to date and the age of the fleet, the
Company anticipates that the recent strength in vehicle sales may be sustainable
for some time. However, the Company cannot predict the timing, depth or duration
of the next downturn in light vehicle sales.
In 1993, approximately 95% of the Company's sales to automotive customers
were attributable to North American produced vehicles rather than to imported
units. In recent years, the share of retail sales accounted for by North
American produced vehicles has risen sharply. From a low of approximately 72% in
1987, the North American produced share of light vehicle sales increased to
approximately 78% in 1991 and to approximately 84% in 1993.
This trend reflects the shift of production by foreign manufacturers from
off-shore auto plants to newly built or expanded Transplant facilities located
in North America. Based on announced production schedules, management
anticipates that the three largest traditional vehicle importers, Toyota, Honda
and Nissan, will build approximately 60% of their combined North American sales
volume in such Transplant facilities during the current calendar year compared
to approximately 49% in 1992, and approximately 10% in 1986.
As a consequence of the rapidly rising share of import "nameplates" being
produced in Transplant facilities, North American production has been rising
faster than retail sales. Between 1991 and 1993, for example, North American
production increased by 22% compared to a 13% increase in U.S. light vehicle
sales during the same period.
Management believes this trend may mitigate a weakening of North American
vehicle sales, and could provide the Company with additional sales
opportunities. In 1993, the Company sold nearly $100 million of its major auto
product lines to Transplants, with its business spread among virtually all such
assembly plants then in production.
PRODUCTS
Automotive Products manufactures five principal products: automotive seat
fabric, molded floor carpets, accessory floor mats, luggage compartment trim and
convertible top stacks. Automotive Products also produces a variety of other
automotive and nonautomotive products. The following table sets forth Automotive
Products' net sales by product line for the past three years.
<TABLE><CAPTION>
1991 1992 1993
---------------------- ----------------------- ----------------------
% OF % OF % OF
NET TOTAL NET TOTAL NET TOTAL
PRODUCT LINE SALES SALES SALES SALES SALES SALES
- - ------------------------------------------- ----------- --------- ------------ --------- ----------- ---------
(IN
MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Automotive Seat Fabric..................... $ 189.8 31.1% $ 191.1 29.7% $ 218.4 32.2%
Molded Floor Carpets....................... 161.9 26.5 173.1 26.9 180.5 26.6
Accessory Floor Mats....................... 73.1 12.0 79.5 12.3 73.4 10.8
Luggage Compartment Trim................... 25.4 4.2 26.8 4.2 37.4 5.6
Convertible Top Stacks..................... 19.9 3.3 20.9 3.2 28.1 4.1
Other...................................... 140.2 22.9 152.4 23.7 140.1 20.7
----------- --------- ------------ --------- ----------- ---------
Total................................. $ 610.3 100.0% $ 643.8 100.0% $ 677.9 100.0%
----------- --------- ------------ --------- ----------- ---------
----------- --------- ------------ --------- ----------- ---------
</TABLE>
36
<PAGE>
AUTOMOTIVE SEAT FABRIC. Automotive Products manufactures a wide variety of
bodycloth, including flat-wovens, velvets and knits. Automotive Products also
laminates foam to bodycloth. Management believes that in 1993 Automotive
Products was the largest supplier of bodycloth to OEMs with net sales and
estimated market share of $218.4 million and 38%, respectively.
MOLDED FLOOR CARPETS. Molded floor carpets includes polyethylene,
barrier-backed and molded urethane underlay carpet. Management believes that in
1993 Automotive Products was the second largest producer of molded floor carpets
with net sales and estimated market share of $180.5 million and 35%,
respectively. In the Company's automotive molded floor product line, it has
developed a "foam-in-place" process to provide floor carpeting with enhanced
acoustical and fit characteristics, resulting in a substantial gain in unit
selling prices.
ACCESSORY FLOOR MATS. Automotive Products produces carpeted automotive
accessory floor mats for both North American produced vehicles and imported
vehicles. In 1993, management estimates that approximately 63% of all vehicles
produced in North America included accessory mats as original equipment.
Management believes that in 1993 Automotive Products was the market leader in
this product line with net sales of $58.1 million, representing approximately
47% of all mats sold to OEMs. In addition, in 1993 Automotive Products sold
approximately $15.3 million of accessory mats to vehicle importers.
LUGGAGE COMPARTMENT TRIM. Luggage compartment trim includes one-piece
molded trunk systems and assemblies, wheelhouse covers, seatbacks, tireboard
covers, center pan mats and other trunk trim products. Management believes that
in 1993 Automotive Products was the second largest supplier of luggage
compartment trim to OEMs with net sales and estimated market share of $37.4
million and 25%, respectively.
CONVERTIBLE TOP STACKS. Automotive Products designs, manufactures and
distributes convertible top stacks through Dura. Management believes that in
1993 Dura was the market leader in convertible top stacks with net sales and
estimated market share of approximately $28.1 million and 75%, respectively. In
October 1993, Dura began shipping its "Top-in-a-Box" product for Ford's
redesigned Mustang vehicle.
OTHER. Automotive Products also produces a variety of other auto products,
including die cuts for automotive interior trim applications, convertible power
train units, headliner fabric, and roll goods for export and domestic
consumption. Small volumes of certain products, such as residential floor mats,
casket and tie linings and sliver knits, are sold to other commercial and
industrial markets.
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<PAGE>
AUTOMOTIVE PRODUCTS SEGMENT GROWTH STRATEGY
The Company's business objective is to achieve strong growth in sales and
earnings through a three-pronged approach. First, the Company pursues
innovations in styling, materials construction and product performance, which
add value and revenue yield to its products. Second, the Company seeks to obtain
increased product placements on OEM vehicle lines. Third, the Company intends to
capitalize on an industry-wide increase in content per vehicle.
Automotive Products seeks to increase market share and selling prices
through product innovation. For example, the Company recently developed a new,
distinctive Jacquard velvet fabric which provides OEMs with a diversity of
pattern and color not available in traditional plain velours. Therefore,
management believes this new fabric will generate a significantly higher sales
content per vehicle than the traditional velours it will replace. To date, the
Company has been awarded 20 vehicle line placements for its new Jacquard velvet.
Second, the Company has succeeded in capitalizing on its deep OEM
relationship network to win product placements on new vehicle lines in addition
to increasing placements on lines currently supplied by the Company. In the case
of the new Ford Mustang, which was launched in model year 1994, the Company is
supplying all five of its major products, resulting in an average sales content
of approximately $400 per Mustang produced.
The Company's strategy is to focus its substantial styling, engineering and
product development capabilities on the design phase of new vehicle lines and on
each OEM's model changeover cycle. Typically, car and truck model lines are
replaced or substantially redesigned at four to eight year intervals. The
Company's experience has been, with few exceptions, that business awarded on
such new or redesigned model lines has been retained until the next changeover.
Over the last several years, the Company has been successful in placing one
or more of its products on new OEM vehicle lines. The Company has won product
placements on 23 new North American vehicle lines, some of which have multiple
models, launched in model year 1994 or scheduled for launch over the next 18
months. The Company supplies three or more products to 10 of the 23 new vehicle
lines. Six of the 23 lines use all four major interior trim products. Two of the
23 use all five of the Company's major automotive products.
Third, the company intends to capitalize on certain industry trends. In
recent years, OEMs have sought to differentiate their vehicles by strengthening
their consumer appeal through the increased use of interior trim. As a
consequence, the average sales content per vehicle of the five principal
automotive products produced by the Company has increased each year over the
last five years. Management estimates that in 1988 the total North American OEM
market for its five major products was $1.4 billion, resulting in an average
sales content for the market of $89 per vehicle. By 1993, according to
management estimates, OEM purchases of these products had increased to $105 per
vehicle, representing a 3.3% per year compound growth rate. This trend has been
accelerated by the growing popularity of mini vans and sports utility vehicles
in the light truck category. Because of their size, these vehicles generally use
more interior trim than traditional passenger vehicles. In addition, automobile
manufacturers are upgrading the interiors of these vehicles by using
higher-value fabrics, carpet and other trim materials than were used previously
in such vehicles.
This continuing upgrade of interior trim and convertible applications is
enabling the Company to achieve strong gains in its sales content per North
American vehicle produced. In 1993, its net sales of automotive products to
North American OEMs totalled $568 million, reflecting an average sales content
per vehicle of approximately $43.
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<PAGE>
The table below shows all the vehicle lines for which Automotive Products
supplies at least one of its five major products. An asterisk identifies the
new vehicle lines or models.
<TABLE><CAPTION>
VEHICLE LINES SUPPLIED
COMPANY MODELS
------- ------
<S> <C> <C> <C> <C>
General Motors
Achieva C-K Truck/10/30 Lumina-Car* Seville
Aurora* C-K Truck/15/35 Monte Carlo* Silhouette
Beretta Corvette Olds '98 Skylark
Blazer* Deville/Concours* Park Avenue Sonoma
Bonneville Olds '88 Regal Chevy Surbanan
Brougham Eldorado Riviera* GMC Suburban
Camaro* Firebird S-10* Sunbird*
Caprice Grand Am S-10 Blazer Supreme*
Cavalier* Grand Prix S-15 Jimmy TransSport
Century LeSabre Safari Yukon
Ciera Lumina-Van* Saturn
Ford
Aerostar Explorer* Quest Thunderbird
Bronco Mustang* Ranger Topaz
Contour* Mystique* Taurus Winstar*
Cougar Probe Tempo
Chrysler
Acclaim Grand Cherokee Plymouth Neon T-300 Pickup
Caravan Intrepid Ram Van/Ram Vision*
Cirrus* LeBaron/J/JX* Shadow Voyager
Concord* LHS* Spirit Wagoneer
Dakota Mini Ram Van Stratus*
Daytona Neon* Sundance
Eagle Talon New Yorker Town & Country
LHS*
Transplants
Fuji/Isuzu Honda Accord* Mitsubishi Suzuki Swift
Legacy Honda Civic* Eclipse Suzuki Tracker
Fuji/Isuzu Honda Mini-Van* Mitsubishi Toyota Avalon*
Passport Hyundai Elantra Galant Toyota Camry
Fuji/Isuzu Isuzu Pickup* Nissan Pickup Toyota Corolla
Rodeo Mazda MX-6 Nissan Sentra Toyota Pickup*
Geo Metro Mazda Pickup Suzuki Sidekick Volvo 740/760
Geo Prism Mazda 626
</TABLE>
BROAD OEM PENETRATION
Management believes that the Company is strategically well-positioned to
capitalize on the auto industry's current upturn due to its broad product
offering coupled with its high penetration of every North American OEM. In
recent years, the Company has broadened and balanced its sales base by means
of additional placements with the Transplants. Consequently, in 1993, the
Company's net sales to Transplants amounted to $72 per vehicle at Toyota, $60
per vehicle at Honda, $75 per vehicle at AAI (Ford/Mazda) and $64 per vehicle
at SIA (Subaru/Isuzu), compared to $41 per vehicle at General Motors,
historically its largest customer.
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<PAGE>
Net sales by customer for 1993 are set forth below (in millions):
<TABLE><CAPTION>
1993
------------------------
% OF
NET SALES NET SALES
----------- -----------
<S> <C> <C>
General Motors...................................................... $ 211.5 31.2%
Chrysler............................................................ 130.0 19.2
Ford................................................................ 102.4 15.1
Transplants......................................................... 118.0 17.4
Other............................................................... 116.0 17.1
----------- -----------
Net Sales...................................................... $ 677.9 100.0%
----------- -----------
----------- -----------
</TABLE>
Based on business currently awarded for 1994 and future years, management
believes that the Company's relative dependence on General Motors will continue
to decline.
VALUE-ADDED MANUFACTURING
Most OEMs require deliveries on a JIT basis to meet precise production
schedules. The most stringent requirement demands color-sequenced JIT delivery
of parts within four hours. To meet these requirements, the Company has
instituted a JIT manufacturing process to complement its customers'
manufacturing processes, thereby minimizing inventories and administrative and
materials handling costs and simplifying the production process for both the
Company and the OEMs.
In response to OEM-mandated price reductions, the Company has successfully
implemented value analysis and value engineering programs to reduce costs
further. Management has established a standardized format for monitoring cost of
nonconformance ("CONC") throughout the Company. CONC measures the cost of
manufacturing products which do not meet standards of first quality. Over a
four-year period ending in 1993, the Company's cumulative CONC savings
approximated $71 million. As evidence of the Company's successful cost reduction
program, the Company was recognized by Ford for attaining the 1993 Supplier
Purchasing Engineering Cost Savings goal.
In addition, OEMs expect suppliers to take on increased design and
engineering responsibilities. The Company's participation with customers in the
early phase of product design and engineering enables it to improve the quality
of its products as well as to meet its customers' cost targets and design
service requirements. The Company has made substantial investments in product
technology and product design capability to support its products and to provide
its customers with value-added engineering and design services. For example, the
Company operates a technical design center with state-of-the-art,
computer-aided-design/computer-aided-manufacturing ("CAD/CAM") systems.
Automotive Products' CAD systems are linked to the design and engineering
systems of its principal customers. These systems enable the Company to simulate
numerous three-dimensional designs for rapid submission to customers, thereby
increasing customer service and lowering development costs.
QUALITY
The Company's goal is to continue to manufacture its products to meet the
exacting standards of its customers. The Company has been recognized as a
quality supplier to the automotive industry as evidenced by its numerous awards
from every OEM. Numerous of the Company's individual plants have received one or
more of the following customer quality awards since 1990:
<TABLE>
<S> <C>
General Motors Supplier of the Year Nissan First Team Supplier
General Motors Mark of Excellence Nissan Outstanding Supplier Award
Ford Q1 Award Subaru/Isuzu Superior Quality Award
Chrysler Pentastar Award Toyota Motor Sales Distinguished Supplier Award
Chrysler Quality Excellence Award Toyota Motor Superior Quality Award
Honda of America 10 year Service Award Toyota Motor Excellent VE/VA Award
Mitsubishi Diamond Quality Vendor Award Toyota Outstanding Supplier Award
</TABLE>
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<PAGE>
ACQUISITIONS/STRATEGIC ALLIANCES
The Company pursues niche acquisitions and strategic alliances that would
further serve to broaden the Company's customer base and products. In 1993, the
Company acquired a Mexican-based molded floor carpet manufacturer and began
construction of a new facility in Mexico to take advantage of opportunities in
the Mexican market.
COMPETITION
The automotive supply business is highly competitive. The primary
competitors in molded floor carpet are Masland Corporation and JPS Automotive
Products Corp. The primary competitor in bodycloth is Milliken & Company. In
accessory floor mats, the Company competes primarily against Pretty Products
Company. Automotive Products' primary competition in luggage compartment trim is
Masland Corporation and Gates Corporation. In convertible top stacks, Automotive
Products competes primarily against American Sunroof Corporation.
FACILITIES
Automotive Products has 30 manufacturing facilities located in the U.S.,
Canada and Mexico. Approximately 90% of the total square footage of these
facilities is owned and the remainder is leased. Many facilities are
strategically located to provide JIT inventory delivery to the Company's
customers.
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<PAGE>
The following list provides certain information regarding the Automotive
Products' manufacturing facilities:
<TABLE><CAPTION>
SQUARE
FOOTAGE OWNED/
LOCATION (000) LEASED FUNCTION
- - --------------------------------- ----------- --------- ----------------------------------------------------------
<S> <C> <C> <C>
Farmville, NC.................... 508 Owned Knit Manufacturing
Roxboro, NC(*)................... 545 Owned Auto Upholstery--Dyeing and Finishing
Roxboro, NC(*)................... 330 Owned Auto Upholstery--Weaving
Roxboro, NC(*)................... 137 Owned Auto Upholstery--Knitting
Roxboro, NC(*)................... 67 Owned Auto Upholstery--Warehouse
Albemarle, NC.................... 585 Owned Auto Carpet Tufting/Finishing
Old Fort, NC..................... 375 Owned Auto Carpet Molding
Old Fort, NC..................... 60 Owned Mold Manufacturing
Clinton, OK...................... 158 Owned Auto Carpet Molding
Salisbury, NC.................... 106 Owned Die Cut/Sewing
Troy, NC......................... 98 Owned Non-Woven Carpet
Troy, NC......................... 153 Owned Yarn Spinning Mill
Norwood, NC...................... 275 Owned Yarn Spinning Mill
St. Clair, MI.................... 100 Owned Auto Carpet Molding
Canton, OH....................... 146 Owned Manufacturing--Rubber/Mats
Holmesville, OH.................. 84 Owned Manufacturing--Mats
Ravenna, OH...................... 204 Owned Manufacturing--Rubber
Zanesville, OH................... 599 Owned Manufacturing--Mats
Farnham, Quebec.................. 266 Owned Auto Carpet--Tufting and Finishing/Non-Woven
Lacolle, Quebec.................. 107 Owned Auto Carpet--Molding
Ingersoll, Ontario............... 104 Owned Auto Carpet--Molding
Elmira, Ontario.................. 133 Owned Sliver Knit Carpet Manufacturing
Queretaro, Mexico................ 93 Owned Auto Carpet--Molding
-----------
Total Owned............... 5,233
-----------
Farmville, NC.................... 138 Leased Warehouse
Roxboro, NC(*)................... 88 Leased Warehouse
Roxboro, NC...................... 42 Leased Warehouse
Barberton, OH.................... 41 Leased Manufacturing--Mats
Orange, CA....................... 10 Leased Warehouse
Adrian, MI(East)................. 155 Leased Convertible Tops--Manufacturing
Adrian, MI(West)................. 34 Leased Convertible Tops--Engineering
Plymouth, MI..................... 16 Leased Convertible Tops--Manufacturing
Bloomfield Hills, MI............. 8 Leased Sales Office
Vallejo, Mexico.................. 102 Leased Auto Carpet--Molding
Monterey, Mexico................. 35 Leased Non-Woven Carpet
-----------
Total Leased.............. 669
-----------
Total..................... 5,902
-----------
-----------
</TABLE>
- - ---------------
(*) Also utilized by Decorative Fabrics.
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<PAGE>
INTERIOR FURNISHINGS
Interior Furnishings designs and manufactures residential and commercial
upholstery fabrics through its Decorative Fabrics group and high-end specified
contract floorcoverings through its Floorcoverings group. In 1993, Interior
Furnishings had net sales of $407.2 million and operating income before the
write-off of goodwill of $43.8 million. Net sales by products are set forth
below (in millions):
<TABLE><CAPTION>
1991 1992 1993
------------------------ ------------------------ ------------------------
% OF % OF % OF
PRODUCT LINE NET SALES NET SALES NET SALES NET SALES NET SALES NET SALES
- - ---------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Decorative Fabrics
Flat-Woven.................................. $ 214.5 63.7% $ 254.7 65.0% $ 268.9 66.0%
Other....................................... 47.0 14.0 48.5 12.4 44.7 11.0
Floorcoverings................................ 75.3 22.3 88.6 22.6 93.6 23.0
----------- ----------- ----------- ----------- ----------- -----------
Net sales................................... $ 336.8 100.0% $ 391.8 100.0% $ 407.2 100.0%
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
DECORATIVE FABRICS
GENERAL. Interior Furnishings' Decorative Fabrics group is the largest
designer and manufacturer of upholstery fabrics in the U.S., with 1993 net sales
of $313.6 million. Management estimates that its share of the U.S. upholstery
fabric market is approximately 15%, based on data published in the May 1993
edition of Furniture Today, a leading trade publication. Decorative Fabrics
strives to be the preferred supplier of middle to high-end flat-woven upholstery
fabrics to furniture manufacturers and fabric distributors. This group's primary
division, Mastercraft, is the leading manufacturer of flat-woven upholstery
fabrics and had 1993 net sales of $268.9 million. Management believes that
Mastercraft has substantially more Jacquard looms and styling capacity dedicated
to upholstery fabrics, and offers more patterns (approximately 14,000) in a
greater range of price points than any of its competitors. The breadth and size
of Mastercraft's manufacturing and design capabilities provide it with
exceptional flexibility to respond to changing customer demands and to develop
innovative product offerings.
INDUSTRY. The three primary types of upholstery fabric are flat-wovens,
velvets and prints. Based upon published industry estimates, management believes
that flat-woven fabrics were the fastest growing sector in the upholstery
fabrics industry over the last five years and accounted for approximately 53% of
the estimated $1.7 billion upholstery fabric industry in 1993. Flat-woven
fabrics are made in two major styles: Jacquard, which is produced on high-speed
computerized looms capable of weaving and knitting intricate designs into the
fabric, and Dobby, a plain fabric produced on standard looms.
Demand for upholstery fabric generally varies with economic conditions,
particularly sales of new and existing homes, and is directly associated with
sales of upholstered furniture at the retail level. After a period of slow
growth during the 1991 recession, the dollar value of U.S. upholstered furniture
shipments (including both fabric and leather) increased by 6.2% in 1992 and
12.2% in 1993, according to the American Furniture Manufacturers Association.
According to that source, in the first quarter of 1994, total U.S. furniture
shipments (including both upholstered and unupholstered) increased by 7.1% as
compared to the corresponding period for the prior year. Mastercraft is
currently operating at approximately 100% capacity. In order to accommodate
anticipated growth, the Company recently initiated a plan to invest $85 million
in Mastercraft between 1994 and 1998. See "--Mastercraft Growth Plan".
Management believes there are three significant trends within the U.S.
furniture marketplace that have affected and may continue to affect Decorative
Fabrics. First, fabric design is being increasingly used by residential
furniture manufacturers as a differentiating characteristic for their products.
Jacquard fabric has become increasingly popular due to its incorporation of
intricate designs. A proliferation of Jacquard patterns and styles has been made
possible by recent
43
<PAGE>
technological developments in the electronic Jacquard loom, which has made the
rapid introduction of new designs significantly less expensive.
Second, the consolidation in both the furniture manufacturing and retailing
industries has resulted in fewer and larger buyers of upholstery fabrics. These
manufacturers and retailers generally are interested in purchasing fabrics from
suppliers that can provide a broad spectrum of their fabric requirements. The
wide range of products offered by Decorative Fabrics enables it to be a primary
supplier to the majority of its customers.
Third, management believes that furniture manufacturers and retailers are
shifting from item-by-item selling to complete room presentations, thus creating
a demand for furniture fabric suppliers that offer a broad array of coordinating
fabrics.
Management believes that Decorative Fabrics is well positioned to benefit
from these trends because it is one of the few industry participants able to
deliver the breadth of styles and quantity of fabrics needed to satisfy the
increasing demands of furniture manufacturers and retailers.
STYLE AND DESIGN. Management believes that the continued development of
superior product designs and styles is the most critical strategic objective of
Decorative Fabrics. The pattern and style of a particular fabric are considered
to be strong influences in the purchasing decision of consumers. Decorative
Fabrics utilizes a combination of in-house design studios, independent signature
designers and consultants to create innovative product designs and styles
utilizing computer-aided-design ("CAD") technology. Its product design
flexibility also enables Decorative Fabrics to offer custom fabric designs to
its largest customers. Decorative Fabrics creates approximately 2,000 new
designs and styles per year, substantially more than any of its competitors.
PRODUCTS. Decorative Fabrics' four operating divisions are Mastercraft,
Cavel, Warner and Greeff. Mastercraft and Cavel design and manufacture
Jacquards, velvets and other woven fabrics for the furniture, interior design,
commercial, recreational vehicle and industrial markets. Greeff and Warner
design and distribute high-end designer fabrics to interior designers and
specialty retailers in the U.S. and the U.K., respectively.
MASTERCRAFT DIVISION. Mastercraft is Decorative Fabrics' largest division.
Mastercraft focuses on the medium-to-upper price range and its products had an
average wholesale price per yard of $6.38 in 1993. Management estimates that
Mastercraft's share of the U.S. flat-woven upholstery fabric market is
approximately 22%, based on data published in the May 1993 edition of Furniture
Today. Over the last ten years, Mastercraft's net sales grew at a compound
annual rate of approximately 14%. Mastercraft serves the diverse furniture
industry through the following four separate product lines which emphasize
different styles and price points:
Mastercraft Fabrics is the largest of the four product lines offered by the
Mastercraft division, currently offering over 8,000 designs. Management believes
that this Jacquard product line is the most diverse in style. The product
offerings range from a wholesale price of $3.50 to $12.00 per yard.
Home Fabrics is a leading line of traditionally styled Jacquard fabrics.
The design focus is on the middle-to-upper wholesale price ranges of $5.50 to
$14.00 per yard and is under the direction of Wesley Mancini Studios, a
world-renowned designer of classic, formal and traditional styles. The products
are known for their color, quality and innovation. Mancini designs fabrics
exclusively for the Home Fabrics product line and the Greeff division. Mancini's
15-person design staff creates approximately 500 designs per year for Home
Fabrics. In 1993, Metropolitan Home magazine named Wesley Mancini and Home
Fabrics in its Design Top 100.
Doblin is a Jacquard product line renowned for its natural fibers and
elegant designs and constructions. It is targeted at the upper-end of the
market. Doblin's studio consists of twelve design professionals (both in-house
and external) who create approximately 300 designs annually.
44
<PAGE>
Mastercraft Contract serves the wall panel, wallcovering and office seating
markets and the product line features approximately 50 Jacquard fabric designs
annually. The eight-member design team focuses on Jacquard yarn-dyed and
patterned fabrics, which management believes to be an increasingly favored
fabric in the wall panel, wallcovering and office seating markets.
MASTERCRAFT GROWTH PLAN. Management's strategy is to continually shift its
product mix toward higher price ranges and to increase its manufacturing
capacity in the fast growing Jacquard market. Due to the resulting high sales
volumes, Mastercraft has experienced a "sold-out" order position for nearly
every quarter during the last five years. Its capacity utilization rate has
consistently averaged nearly 100%. In order to accommodate anticipated growth,
the Company recently initiated a plan to invest $85 million in Mastercraft
between 1994 and 1998. Investment is targeted toward the purchase of high-speed
looms to increase capacity and productivity, new electronic Jacquard heads to
reduce pattern changeover times, and computer monitoring systems to provide
information about the manufacturing processes and to improve quality,
productivity and capacity.
Following the anticipated completion of the Company's current capital
investment plan in 1998, management expects that Mastercraft's production
capacity will have been materially enlarged, and that up to 75% of its weaving
equipment will consist of the latest generation, high-speed Jacquard looms with
electronic heads. Management anticipates that this program will result in higher
labor productivity, reduced materials loss, lower overhead expense and higher
volumes of finished product than presently achieved.
Consistently high capacity utilization rates, as well as demand for
higher-priced products, have also enabled Mastercraft to gradually shift its
product mix toward the higher price ranges, further enhancing operating profit.
The average wholesale price per yard for its fabrics has increased from $5.58 in
1989 to $6.38 in 1993.
OTHER DECORATIVE FABRICS DIVISIONS. With 1993 net sales of $39.6 million,
the Cavel division is a leading manufacturer of velvets. Cavel manufactures both
Dobby and Jacquard velvets. Cavel manufactures fabrics for home furnishings,
recreational vehicles and specialized industrial products such as paint rollers.
Cavel's 13-person design staff produces approximately 250 designs annually for
these markets. The two smaller divisions of Decorative Fabrics, Greeff and
Warner, supply the interior design and specialty retailer markets in the U.S.
and the U.K., respectively.
CUSTOMERS. Decorative Fabrics is a primary supplier to virtually all major
furniture manufacturers in the U.S., including La-Z-Boy, Ethan Allen,
Thomasville, Flexsteel, Bassett, Broyhill, Baker, Henredon, Rowe and Robert
Allen. Due to the breadth of its product offerings, strong design capabilities
and superior customer service, the Company has developed close relationships
with many of Decorative Fabrics' over 1,000 customers.
Nearly all of Decorative Fabrics' products are made to customer order. This
reduces the amount of raw materials and finished goods inventory required and
greatly reduces product returns, all of which improve profit margins.
CUSTOMER SERVICE. Decorative Fabrics offers superior customer service in
order to achieve total customer satisfaction. The group invests significant
capital resources in customer service technology. Key service-related objectives
include providing custom-tailored design capabilities to large customers,
reducing lead time for orders and providing consistent, on-time delivery.
To enhance customer satisfaction, Decorative Fabrics began implementation
of a computerized material requirements' inventory system, MRP II, in 1992.
Implementation of the MRP II system has significantly improved inventory control
and enabled the Company to reduce manufacturing lead times. The completion of
the MRP II project in 1993 also provided significant enhancements to Decorative
Fabrics' electronic data interchange ("EDI") systems. The improved use and
availability of EDI allows customers to place orders faster and significantly
reduces order processing time.
45
<PAGE>
MARKETING AND SALES. Fabrics are sold domestically by 31 commissioned sales
representatives who exclusively represent the Mastercraft and Cavel divisions of
Decorative Fabrics. The Mastercraft and Cavel divisions maintain showrooms in
seven key locations throughout the United States. Products are presented in
collections which suggest a complete room environment using the Company's
diverse mix of fabrics.
The Mastercraft division exports to virtually every region of the world
with the exception of Eastern Europe. Mastercraft's 1993 export sales were $30.5
million, or 11.3% of its net sales. Export sales have increased at a compound
annual growth rate of 30% since 1988. All export fabrics are sold through
commissioned sales representatives and agents in key countries. Major export
regions include the U.K., Scandinavia, Europe, the Middle East, Australia, New
Zealand, the Far East, Canada and South America.
MANUFACTURING. Decorative Fabrics invests significant capital resources to
upgrade manufacturing facilities and continually improve productivity.
Management believes that continued commitment to technological improvements is
essential to remain competitive in the decorative fabrics business. All plants
typically operate on a six-day, three-shift schedule and operate an adjustable
schedule on the seventh day in order to balance production and customer demand.
COMPETITION. The U.S. upholstery fabrics market is highly competitive.
Manufacturers compete on the basis of design, quality, price and customer
service. Decorative Fabrics' primary competitors include Quaker Fabric
Corporation, Culp, Inc., Joan Fabrics Corp. and the Burlington House Upholstery
Division of Burlington Industries, Inc.
FACILITIES. Mastercraft owns and operates four weaving plants and one
finishing plant in North Carolina. Cavel shares manufacturing capacity with
Automotive Products at three plants in Roxboro, North Carolina. Greeff and
Warner are designers and distributors, subcontracting all manufacturing.
FLOORCOVERINGS
GENERAL. The Floorcoverings group of the Interior Furnishings segment is a
leading producer of high-end specified contract carpeting products for
institutional and commercial customers. In 1993, net sales were $93.6 million
and operating income before the write-off of goodwill was $15.9 million,
reflecting a 17.0% operating margin. Floorcoverings differentiates itself from
its competitors in part by its patented Powerbond RS(R) adhesive system and by
its products' demonstrably superior performance characteristics. It is currently
the largest manufacturer of six-foot wide rolls and the third-largest supplier
of modular carpet tiles in the U.S. Floorcoverings produces virtually no product
for inventory or for commodity markets.
Since 1990, Floorcoverings has repositioned its product offerings, shedding
those products in which it lacked either a low-cost position or proprietary
product advantage. By focusing on areas of competitive advantage, Floorcoverings
has prospered, notwithstanding a significant downturn in commercial construction
and renovation, and increased its average selling price per square yard by over
13%.
Management believes that Floorcoverings' niche market position in the high
performance specified sector, differentiated value-added products and
proprietary patented technology provide it with a competitive advantage.
INDUSTRY. Management estimates that 70% of the Company's floorcoverings
business is based on renovation rather than new construction projects.
Historically, renovation activity has been significantly less cyclical than new
construction. Also, approximately 60% of Floorcoverings 1993 net sales were to
institutional customers such as government, healthcare, and education facilities
rather than to commercial market customers. Management believes that government,
healthcare and educational customers are stable, growth sectors, as illustrated
by the fact that new construction spending in these areas has increased by 7%
per year since 1987. As a result of
46
<PAGE>
these two factors, sales of six-foot wide rolls and modular carpet tiles have
doubled since 1987 while the U.S. commercial construction market has been flat.
PRODUCTS. Floorcoverings' key competitive advantage is in its patented
Powerbond RS(R) adhesive technology, which has 14 years of patent protection
remaining. Because the Powerbond RS(R) system does not use wet adhesives, it
permits the installation of floorcoverings directly on floor surfaces, including
existing carpeting, with substantially reduced labor costs and without the fumes
of conventional wet adhesives. This allows for less disruptive and less
time-consuming installation and, for this reason, is particularly attractive to
institutions such as schools and hospitals. By contrast, conventional carpet
installation requires a more costly and disruptive removal of old carpet and a
curing period for the wet adhesive before the facility can be returned to use.
In addition to reducing installation downtime for customers to as little as one
day, management believes Floorcoverings' product exhibits demonstrably superior
durability and cleaning characteristics ideally suited for high-traffic areas
such as airline terminals and customers such as Discovery Zone and Blockbuster.
COMPETITION. The commercial carpet industry is highly competitive, and
several of Floorcoverings' competitors have substantially greater commercial
carpet sales in the commodity segments of the industry, segments in which
Floorcoverings does not compete. Floorcoverings' niche products have demanding
specifications and generally cannot be manufactured using the equipment which
currently supplies most of the industry's commodity products. The Company's
primary competitors are Interface, Milliken & Company, Mohawk Industries and
Shaw Industries, Inc.
FACILITIES. Floorcoverings owns and operates four facilities in Dalton,
Georgia.
WALLCOVERINGS
GENERAL
Wallcoverings, which operates under the name "Imperial", had 1993 net sales
of $220.4 million and operating income before the write-off of goodwill of $12.0
million. It is a leading manufacturer and distributor of a full range of
wallcoverings for the residential and commercial sectors of the wallcoverings
market. Management believes that in 1993 Imperial had a leading 22% share of the
larger residential sector of the industry. It is the only producer of
wallcoverings in the U.S. that is fully integrated from paper production through
design and distribution. In addition, management believes that Imperial has a
competitive advantage due to its extensive in-house design expertise and
licensing arrangements, its low cost, vertically-integrated manufacturing
capability, and its advanced customer ordering and service network.
INDUSTRY
The wallcoverings industry experienced significant and consistent growth
from the early 1980s through 1987. This growth resulted in part from increases
in new construction starts and existing home sales which peaked in 1986-87. In
addition, a one-time surge in demand created a new industry-wide layer of
inventory as a result of the rapid growth of large in-stock retailers. Between
1983 and 1987, the industry's physical shipment volume increased from 137
million to 200 million rolls of wallpaper per year, a 9.9% annual growth rate.
Between 1987 and 1990, the industry underwent a contraction, with volume
declining dramatically from 200 million rolls in 1987 to 174 million rolls in
1990, a 4.5% annual decline. This resulted from a slowdown in the overall
economy, particularly in the housing market, coupled with a reduction in
inventory by over-stocked retailers. From 1991 to 1993, the industry's physical
shipment volumes increased at a compound annual growth rate of 3.0%.
Management estimates that in 1993, total sales for the U.S. wallcovering
market were approximately $1.1 billion on a wholesale basis. The wallcoverings
market can generally be divided into the residential and commercial sectors. The
residential sector is the larger of the two sectors,
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with estimated total 1993 U.S. sales of $748.0 million. The two primary
distribution channels within the residential sector are dealers and retail
chains.
STRATEGIC RESTRUCTURING
The industry contraction of the late 1980s and early 1990s left Imperial
with unutilized manufacturing capacity, an oversized distribution network and
excess product offerings. Between 1989 and 1992, Imperial implemented a
comprehensive downsizing program designed to bring Imperial's high fixed-cost
structure into better alignment with the changed industry environment. Imperial
closed 22 showrooms and 12 warehouses and reduced fixed costs by nearly 15%.
Imperial also substantially reduced the annual introduction rate of new
collections and virtually eliminated its use of independent distributors in
favor of exclusive captive distribution. This restructuring program improved
manufacturing efficiencies, but it adversely affected sales and led to a
reduction in shelf space and market share. As a result, Imperial's sales
declined during 1992 and into 1993, despite what management now believes to have
been a moderate upturn in industry conditions.
A new management team installed in February 1993 determined that the
reduction in new collections had been too severe. Accordingly, in late 1993,
management instituted a second restructuring program to bolster its new product
introduction rate through aggressive product design efforts. This product line
renewal led to 62 collections being introduced in 1993 and 70 collections being
planned for introduction in 1994, compared to 45 in 1992. Management is also
broadening its selection of in-stock programs and improving its order
fulfillment capabilities. For example, in 1993 Imperial introduced a guaranteed
shipment program on 15 of its best selling lines. Through the program called "On
Time Or On Us", free product is offered to dealers for orders unfilled within 48
hours. The number of lines covered by this program was increased to 26 in the
first quarter of 1994. Imperial also implemented a number of other MIS and
service initiatives designed to enhance customer service and distribution.
In 1994, Imperial is implementing a plan to improve sales momentum in the
chain store channel, including a tripling of its product development budget for
the national chains, consolidation of order entry and customer service
activities under dedicated national account teams, development of innovative
product/packaging approaches for warehouse clubs, and a broadening of its
product offerings with newly licensed products such as borders featuring
National Hockey League and National Collegiate Athletic Association logos and
insignias.
PRODUCT
Management believes Imperial has maintained its leading market position due
to its competitive edge in color and design. Its in-house studio of
approximately 35 artists represents a major strategic investment by Imperial
which is supplemented by an active licensing program under which Imperial
licenses proven designs from well-known designers. Imperial is continuously
introducing new designs and color concepts that supplement its already vast
library.
Imperial offers a large number of well-known brand names, including
Imperial, United, Sterling Prints, Katzenbach & Warren, Greeff, Albert Van Luit
and Plexus. In addition to these in-house brands, Imperial licenses a number of
well-known brand names, including Gear, Laura Ashley, Pfaltzgraff, Croscill,
Mario Buatta, David and Dash, Louis Nichole, Clarence House and Carlton Varney,
for which it converts home furnishing designs into wallcovering designs.
Imperial also distributes the lines of John Wilman, Great Britain's largest
wallcoverings designer and manufacturer. Imperial's products sell at the retail
level from $5 per single roll to more than $100 per single roll, with most
products selling in the $8 to $14 range.
In recent years, there has been increasing demand for wallcoverings
coordinated with decorative accessories such as window treatments, bedding,
upholstery fabric and other textile products. To satisfy this demand from
upscale home furnishings customers, Imperial provides fabrics, which it
generally purchases outside the Company, that are coordinated with its
wallcovering designs. Some of these fabrics are supplied by the Mastercraft and
Greeff divisions of the Company.
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CUSTOMERS
Dealers and chains account for the largest portion of Imperial's customer
base. Management believes that the Company has the leading share in each of
these channels. Management believes that Imperial has the most extensive dealer
network in the U.S., selling to approximately 15,000 dealers. Imperial also
sells to many of the leading chains in the country, including Home Depot, Lowes,
Sears, Sherwin Williams and Target.
MANUFACTURING
Imperial is the only manufacturer of wallcoverings that is vertically
integrated from paper production to the design and distribution of finished
wallcoverings. Management estimates that Imperial accounts for approximately 30%
of wallpaper manufacturing capacity in North America. Imperial's objective is to
be the lowest cost manufacturer in the industry. In pursuit of this objective,
Imperial has completed several manufacturing efficiency programs over the past
several years, including significantly reducing the set up times in gravure
printing through implementation of single-minute-exchange-of-die techniques.
COMPETITION
As a result of the recent economic downturn in the wallcoverings industry,
many weaker competitors withdrew from the U.S. wallcoverings market. In
addition, further contraction is expected to occur as sales of wallcoverings
shift to chain stores, which along with other retailers prefer working with
fewer, larger suppliers. Imperial is well positioned to benefit from these
developments.
Competition in the wallcoverings industry is based on design, price and
customer service. Imperial's principal competitors are Borden, GenCorp, F.S.
Schumacher and Seabrook Wallcoverings.
FACILITIES
Imperial owns and operates five manufacturing facilities in the United
States and three in Canada, as well as three distribution centers in the United
States.
EMPLOYEES
As of January 29, 1994, the Company's subsidiaries employed approximately
12,000 persons on a full-time or full-time equivalent basis. Approximately 2,200
of such employees are represented by labor unions. Management believes that the
Company's relations with its employees and with the unions that represent
certain of them are good.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
As of the consummation of the Offerings and giving effect to the
Recapitalization, the executive officers and directors of the Company, and their
ages as of April 10, 1994, will be as follows:
<TABLE><CAPTION>
NAME AGE POSITIONS
- - ------------------------------------ ----------- ---------------------------------------------------------------------
<S> <C> <C>
Thomas E. Hannah.................... 55 Chief Executive Officer and Director
William J. Brucchieri............... 51 President of Imperial Wallcoverings
Andrew Major........................ 72 President of Decorative Fabrics Group
John D. Moose....................... 57 President of North American Auto Group
Harry F. Schoen III................. 58 President of Mastercraft Division
Elizabeth R. Philipp................ 37 Executive Vice President, General Counsel and Secretary
Mark O. Remissong................... 41 Senior Vice President and Chief Financial Officer
Paul W. Meeks....................... 41 Vice President and Treasurer
David A. Stockman................... 47 Co-Chairman of the Board of Directors
Bruce Wasserstein................... 46 Co-Chairman of the Board of Directors
James R. Birle...................... 58 Director
John P. McNicholas.................. 31 Vice Chairman
Stephen A. Schwarzman............... 47 Director
Randall J. Weisenburger............. 35 Vice Chairman and Director
W. Townsend Ziebold, Jr............. 32 Director
</TABLE>
Set forth below is certain information about each of the Company's
executive officers and directors. Unless otherwise indicated, positions listed
are with the Company. Following the Offerings, the Company expects to expand its
Board of Directors to include two additional directors who are not affiliated
with the Company or the Partners and to adopt a charter provision creating a
classified Board consisting of three classes of three directors each. Each class
of directors of the Company will be elected at an annual meeting of stockholders
on staggered three-year terms, such that only one class of directors will be
elected each year. See "Description of the Capital Stock-- Anti-takeover
Provisions".
THOMAS E. HANNAH. Chief Executive Officer of the Company as of the
consummation of the Offerings. President and Chief Executive Officer of the
Collins & Aikman Textile and Wallcoverings Group from November 1991 to
consummation of the Offerings, and named an executive officer of the Company in
April 1993. President and Chief Executive Officer of the Collins & Aikman
Textile Group from February 1989 to November 1991. President of Milliken &
Company's Finished Apparel Division prior to that.
WILLIAM J. BRUCCHIERI. President of Imperial Wallcoverings since February
1993 and named an executive officer of the Company in April 1994. Executive Vice
President of Imperial from March 1992 to January 1993. Executive Vice President
of the Mastercraft division from January 1990 to February 1992. Vice President,
Operations of the Mastercraft division from August 1989 to January 1990. Mr.
Brucchieri joined a wholly-owned subsidiary of the Company in 1988.
ANDREW MAJOR. President of the Decorative Fabrics Group since 1987, named
an executive officer of the Company in April 1994. Mr. Major joined a
wholly-owned subsidiary of the Company in 1976.
JOHN D. MOOSE. President of the North American Auto Group since June 1989,
and named an executive officer of the Company in April 1994. Mr. Moose joined a
wholly-owned subsidiary of the Company in 1960.
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HARRY F. SCHOEN III. President of the Mastercraft division since January
1993 and named an executive officer of the Company in April 1994. Executive Vice
President and Chief Operating Officer of the Mastercraft division from April
1992 to December 1992. General Manager of Milliken & Company's Greige Fine Goods
Group prior to that.
ELIZABETH R. PHILIPP. Executive Vice President, General Counsel and
Secretary of the Company since April 1994. Vice President, General Counsel and
Secretary of the Company from April 1993 to April 1994. Vice President and
General Counsel from September 1990 to April 1993. Prior to that, associated
with the law firm of Cravath, Swaine & Moore.
MARK O. REMISSONG. Senior Vice President and Chief Financial Officer of the
Company as of the consummation of the Offerings. Since December 1993, Senior
Vice President and Chief Financial Officer of a wholly-owned subsidiary of the
Company and an executive officer of the Company. Vice President of Finance for
Burlington Industries from 1989 until December 1993.
PAUL W. MEEKS. Vice President and Treasurer of the Company since September
1992. Assistant Treasurer of the Company from April 1988 to September 1992. Mr.
Meeks joined a wholly-owned subsidiary of the Company in 1982.
DAVID A. STOCKMAN. Co-Chairman of the Board of Directors of the Company
since July 1993 and a Director of the Company since December 1988. General
Partner of The Blackstone Group ("Blackstone") since 1988. Mr. Stockman is also
a director of Edward J. DeBartolo Corporation.
BRUCE WASSERSTEIN. Co-Chairman of the Board of Directors of the Company
since June 1992. Chairman, President and Chief Executive Officer of Wasserstein
Perella Group, Inc. and Chairman and Chief Executive Officer of Wasserstein
Perella & Co., Inc. ("WP&Co.") since 1988. Mr. Wasserstein is also Chairman of
the Board of Maybelline, Inc.
JAMES R. BIRLE. A Director of the Company since 1988 and Co-Chairman of the
Board of Directors of the Company from October 1988 until July 1993. General
Partner of Blackstone since 1988. Mr. Birle is also a director of Connecticut
Mutual Life Insurance Co., Great Lakes Dredge & Dock Corporation, and Transtar,
Inc.
JOHN P. MCNICHOLAS. Vice Chairman of the Company since April 1994. Deputy
Chairman of the Company from July 1992 to April 1994. Vice President of
Blackstone since January 1992; Associate of Blackstone from November 1990 to
December 1991; Associate, Merchant Banking Group-- Merrill Lynch Capital Markets
from August 1989 to November 1990.
STEPHEN A. SCHWARZMAN. A Director of the Company since October 1988 and
President of the Company from its inception to consummation of the Offerings.
Co-Founding Partner of Blackstone Group Holdings L.P. and President and Chief
Executive Officer of Blackstone since 1985. Mr. Schwarzman is also a director of
Great Lakes Dredge & Dock Corporation and Transtar, Inc.
RANDALL J. WEISENBURGER. Vice Chairman of the Company since April 1994 and
a Director of the Company since 1989. Deputy Chairman of the Company from July
1992 until April 1994. Managing Director of WP&Co. since December 1993; Director
of WP&Co. from December 1992 to December 1993; Vice President of WP&Co. from
December 1989 to December 1992; Associate of WP&Co. from 1988 to December 1989.
Mr. Weisenburger is also Vice Chairman of the Board of Maybelline, Inc. and
Chairman of the Yardley Lentheric Group.
W. TOWNSEND ZIEBOLD, JR. Director of the Company since December 1992.
Director of WP&Co. since December 1993; Vice President of WP&Co. from December
1991 to December 1993; Associate of WP&Co. from 1988 to December 1991. Mr.
Ziebold is also a director of Maybelline, Inc.
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COMPENSATION OF DIRECTORS
Effective upon consummation of the Offerings, each director (or the Partner
who designates such director to the Board of Directors) will receive an annual
fee of $40,000, payable quarterly, for serving as, or in the case of a Partner
designating, a director of the Company.
In July 1992, C&A Co. entered into an employment agreement with Mr. Hannah,
which was amended as of February 1994. The agreement, as amended, provides for
an initial base salary of $525,000 and participation in any executive bonus
plan, with a target bonus of 75% of base salary then in effect up to a maximum
of 150% of base salary. The agreement expires January 31, 1997, with automatic
one-year renewals thereafter unless C&A Co. notifies Mr. Hannah prior to that
time of its intention to terminate the agreement. In the event of involuntary
termination for reasons other than cause and other than a change of control, the
agreement provides for severance benefits equal to Mr. Hannah's base salary then
in effect for a period of one year from the termination date plus any unpaid
cash bonus for the prior year and a pro rata portion of any bonus he would have
received had he been employed for the entire year. C&A Co. also entered into a
letter agreement with Mr. Hannah in May 1991 pursuant to which Mr. Hannah is
entitled to receive an amount equal to two times his base salary then in effect
in the event his employment is terminated within three months prior to or one
year following a change of control (as defined) of C&A Co.. In 1993, Mr. Hannah
received a base salary of $415,000, a cash bonus of $783,960, and payouts under
the Equity Share Plan referred to below and other compensation aggregating
$2,339,338.
THE COMPANY'S OPTION PLANS
In 1988, Group implemented the Wickes Equity Share Plan (the "Equity Share
Plan") for the purposes of attracting, retaining and motivating key employees of
Group and its subsidiaries. In October 1993, the Equity Share Plan was
terminated in accordance with its terms. Concurrently, Group announced its
intention to implement a new stock option plan. Accordingly, the Company created
a special purpose 1993 Employee Stock Option Plan (the "1993 Plan") to provide
for the one-time award of options to purchase shares of Common Stock to active
key employees in recognition of their prior service. In addition, the 1994
Employee Stock Option Plan (the "1994 Plan") was created as a successor to the
1993 Plan to facilitate future awards of Options to key employees and to
consultants. The term "Option" as used herein refers to either a NQSO or an ISO
(each as defined below), as the case may be.
Each of the Company's stock option plans is administered, and options
thereunder are granted, by a duly authorized committee (the "Committee") of the
Board of Directors (the members of which shall be disinterested (as defined in
Rule 16b-3 under the Exchange Act), unless otherwise determined by the Board),
or by the Board if there is no such committee.
Based on the midpoint of the estimated initial public offering price range,
the estimated fair market value of a share of Common Stock underlying an Option
as of April 18, 1994 was $16.50.
1993 EMPLOYEE STOCK OPTION PLAN
The Company adopted the 1993 Plan effective January 28, 1994 (the
"Effective Date of the 1993 Plan").
SHARES SUBJECT TO OPTIONS. The 1993 Plan authorizes the issuance of up to
3,119,466 shares of Common Stock (with no more than 1,000,000 shares to any
employee in any calender year) upon the exercise of non-qualified stock options
("NQSOs") granted to certain key employees of the Company. Key employees are
those active executive officers and other valuable employees of the Company that
are selected by the Committee to participate in the 1993 Plan. Under the 1993
Plan no Options may be granted after December 31, 1995.
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OPTIONS. Options issued pursuant to the 1993 Plan will be exercisable at
such price, not less than the par value of the Common Stock purchasable
thereunder, as may be fixed by the Committee. Shares of Common Stock purchased
pursuant to the exercise of Options shall be paid for at the time of exercise as
follows: (i) in cash or by check, bank draft or money order; (ii) if the Common
Stock is traded on a national securities exchange, through the delivery of
instructions to a broker to deliver the purchase price; or (iii) on other terms
acceptable to the Committee (which may include payment by transfer of shares
owned by the participant for at least six months or the surrender of Options).
Options granted under the 1993 Plan are subject to restrictions on transfer
and exercise. No Option granted under the 1993 Plan may be exercised prior to
the earlier of the closing of a Public Offering (as defined in the 1993 Plan) or
the expiration of two years from the Effective Date of the 1993 Plan, subject to
acceleration in the event of a Change in Control of the Company (as defined in
the 1993 Plan) and subject to the authority of the Committee to permit earlier
exercise in its sole discretion. The Committee may set a schedule of
exerciseability with regard to each Option grant, subject to acceleration in the
event of a Change in Control of the Company. Also, no Option may be exercisable
after the expiration of ten years from the date of its grant. Moreover, no
Option may be transferred, assigned, pledged or hypothecated in any way except
by will or under applicable laws of descent and distribution. Shares of Common
Stock purchased upon exercise of an Option ("Shares") may not be transferred for
a period of two years following the initial Public Offering of the Company, or
such shorter time as the Committee may in its sole discretion determine.
In consideration of the grant of Options, an employee shall be required to
agree not to engage, without the written consent of the Committee, in any
Competitive Activity (as defined in the 1993 Plan) during the participant's
employment by the Company and, in the event any Options shall vest, for a period
of one year following termination of employment. Options that were exercisable
upon a participant's termination of employment by the Company other than for
cause remain exercisable following such termination for a period of: (a) one
year, in the case of death or disability, (b) 90 days, in the case of retirement
or termination by the Company other than for cause and (c) in all other
instances, 30 days following such termination, in each case subject to extension
by the Committee. Except as otherwise determined by the Committee, Options that
were not exercisable at the time of a participant's termination of employment by
the Company shall automatically be canceled upon such termination. The Committee
has the discretion under the 1993 Plan to impose in a participant's Option
Agreement such other conditions, limitations and restrictions as it determines
are appropriate in its sole discretion, including any waivers of rights which a
participant may have.
The 1993 Plan provides for the Committee to have the right to make
appropriate adjustments in the number and kind of securities receivable upon the
exercise of Options or the exercise price in the event of a stock split, stock
dividend, merger, consolidation, reorganization, spinoff, partial or complete
liquidation or other similar changes in the capital structure or other corporate
transactions. The 1993 Plan also gives the Committee the option to terminate all
outstanding Options effective upon the consummation of a merger or consolidation
in which the Company is not the surviving entity or of any other transaction
that results in the acquisition of substantially all of the Company's
outstanding Common Stock by a single person or entity or by a group of persons
and/or entities acting in concert, or upon the consummation of the sale or
transfer of all of the Company's assets (any such event an "Acquisition Event"),
subject to the right of participants to exercise all outstanding Options prior
to the effective date of the Acquisition Event.
To date, Options for 3,119,466 Shares have been granted to 65 employees,
leaving no Options available for grant in the future. At the date the 1993 Plan
was adopted, approximately 65 employees were eligible to participate in the 1993
Plan.
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1994 EMPLOYEE STOCK OPTION PLAN
The Company adopted the 1994 Plan effective April 15, 1994 (the "Effective
Date of the 1994 Plan").
SHARES SUBJECT TO OPTIONS. The 1994 Plan authorizes the issuance of up to
2,980,534 shares of Common Stock (with no more than 1,000,000 shares to any
employee or consultant in any calender year, with any unused portion thereof
carried forward) upon the exercise of Incentive Stock Options ("ISOs") and NQSOs
granted to certain key employees and NQSOs granted to executive consultants of
the Company. Key employees are those active executive officers or other valuable
employees of the Company that are selected by the Committee to participate in
the 1994 Plan. Executive consultants are those executive-level consultants of
the Company that are selected by the Committee to participate in the 1994 Plan.
No Options may be granted after ten years from the Effective Date of the 1994
Plan.
OPTIONS. In the case of ISOs, the exercise price of an Option may not be
less than 100% of the Fair Market Value (as defined in the 1994 Plan) of a share
of Common Stock at the time of grant (or 110% of such Fair Market Value if the
grantee owns more than 10% of the shares of Common Stock outstanding at the time
of grant (a "Ten Percent Shareholder")). NQSOs issued pursuant to the 1994 Plan
will be exercisable at such price, not less than the Fair Market Value of a
share of Common Stock at the time of grant, as may be fixed by the Committee,
provided, that, prior to the initial Public Offering of the Company, Options may
be issued with an exercise price below the Fair Market Value of a share of
Common Stock at the time of the grant. Shares purchased pursuant to the exercise
of Options shall be paid for at the time of exercise as follows: (i) in cash or
by check, bank draft or money order; (ii) if the Shares are traded on a national
securities exchange, through the delivery of instructions to a broker to deliver
the purchase price; or (iii) on other terms acceptable to the Committee (which
may include payment by transfer of shares owned by the participant for at least
six months or the surrender of Options).
Options granted under the 1994 Plan are subject to restrictions on transfer
and exercise. No Option granted under the 1994 Plan may be exercised prior to
the earlier of the closing of a Public Offering (as defined in the 1994 Plan) or
the expiration of five years from the Effective Date of the 1994 Plan, subject
to acceleration in the event of a Change in Control of the Company (as defined
in the 1994 Plan) and subject to the authority of the Committee to permit
earlier exercise in its sole discretion. In addition, the Committee may set a
schedule of exerciseability with regard to each Option grant, subject to
acceleration in the event of a Change in Control of the Company. Also, no Option
may be exercisable after the expiration of ten years from the date of its grant
(or five years, in the case of ISOs granted to a Ten Percent Shareholder).
Moreover, no Option may be transferred, assigned, pledged or hypothecated in any
way except by will or under applicable laws of descent and distribution. Shares
of Common Stock purchased upon exercise of an Option may not be transferred for
a period of two years following the initial Public Offering of the Company, or
such shorter time as the Committee may in its sole discretion determine.
In consideration of the grant of Options, each employee will be required to
agree not to engage, without the written consent of the Committee, in any
Competitive Activity (as defined in the 1994 Plan) during the participant's
employment by the Company, and in the event any Options shall vest, for a period
of one year following termination of employment. Options that were exercisable
upon a participant's termination of employment or consultancy by the Company
other than for cause remain exercisable following such termination for a period
of: (a) one year, in the case of death or disability, (b) 90 days, in the case
of retirement or termination other than for cause and (c) in all other
instances, 30 days following such termination, in each case subject to extension
by the Committee. Except as otherwise determined by the Committee, Options that
were not exercisable at the time of a participant's termination of employment or
consultancy by the Company shall automatically be canceled upon such
termination. The Committee has the discretion under the 1994
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Plan to impose in a participant's Option Agreement such other conditions,
limitations and restrictions as it determines are appropriate in its sole
discretion, including any waivers of rights which a participant may have.
The 1994 Plan provides for the Committee to have the right to make
appropriate adjustments in the number and kind of securities receivable upon the
exercise of Options or the exercise price in the event of a stock split, stock
dividend, merger, consolidation, reorganization, spinoff, partial or complete
liquidation or other similar changes in the capital structure or other corporate
transactions. The 1994 Plan also gives the Committee the option to terminate all
outstanding Options effective upon the consummation of a merger or consolidation
in which the Company is not the surviving entity or of any other transaction
that results in the acquisition of substantially all of the Company's
outstanding Common Stock by a single person or entity or by a group of persons
and/or entities acting in concert, or upon the consummation of the sale or
transfer of all of the Company's assets (any such event an "Acquisition Event"),
subject to the right of participants to exercise all outstanding Options prior
to the effective date of the Acquisition Event.
To date, Options for 169,634 Shares have been granted to seven employees
and no consultants, leaving Options for 2,810,900 Shares available for grant in
the future. At the date the 1994 Plan was adopted, approximately 500 employees
were eligible to participate in the 1994 Plan.
FEDERAL INCOME TAX CONSEQUENCES
Under Federal income tax law as currently in effect, neither ISOs nor NQSOs
require an optionee to recognize income at the time of grant. However, upon the
exercise of a NQSO, the optionee will recognize ordinary income in an amount
equal to the excess of the fair market value of the Common Stock over the
aggregate exercise price. With respect to an ISO, no income is recognized by the
optionee in connection with the exercise, although the excess of the fair market
value of the Common Stock at exercise over the aggregate exercise price results
in alternative minimum taxable income which is used in determining for the
optionee alternative minimum tax liability. The optionee will be subject to
taxation at the time Shares acquired upon the exercise of an ISO are sold. If
the sale occurs at least two years after the date the ISO was granted and at
least one year after the date it was exercised, the optionee generally will
recognize capital gain in an amount equal to the excess of the proceeds of the
sale over the aggregate exercise price of the Shares sold. If the optionee
disposes of such Shares within two years of the date an Option was granted or
within one year of receipt of the Shares pursuant to the exercise of an ISO, the
optionee will recognize ordinary income, in an amount equal to the excess of the
fair market value of the Shares on the date of the exercise over the exercise
price. The excess, if any, of the amount realized upon disposition of such
Shares over the fair market value of the Shares on the date of exercise will be
long or short term capital gain, depending upon the holding period of the
Shares, providing the optionee holds the shares as a capital asset at the time
of disposition. If such disposition of the Shares by the optionee within two
years of the date of grant of the Option is a sale or exchange with respect to
which a loss (if sustained) would be recognized by the optionee, then the amount
which is includable in the gross income of the optionee shall not exceed the
excess (if any) of the amount realized on the sale or exchange over the adjusted
basis of such Shares.
The Company's tax consequences will also depend upon whether an option is
an ISO or a NQSO. In the case of a NQSO, the Company will be entitled, subject
to the possible application of Section 162(m) of the Code as discussed below, to
a deduction in connection with the optionee's exercise in an amount equal to the
income recognized by the optionee, provided that the Company complies with
applicable withholding tax requirements, if any. If the Option is an ISO,
however, the Company will not be entitled to a deduction if the optionee
satisfies holding period requirements and recognizes capital gain. If those
requirements are not satisfied, the Company will be entitled to a deduction
corresponding to the ordinary income recognized by the optionee, subject to the
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possible application of Section 162(m) of the Code as discussed below. Section
162(m) of the Code denies a deduction to any corporation, whose common shares
are publicly held, for compensation paid to certain covered employees in a
taxable year to the extent that such compensation exceeds $1 million. Covered
employees are a company's chief executive officer on the last day of the taxable
year and any other individual whose compensation is required to be reported to
shareholders under the Exchange Act by reason of being among the four highest
compensated officers in office at the end of the taxable year. The amount of
ordinary income recognized by an optionee in the year of exercise (or in the
case of an ISO, disqualifying sale) is considered in determining whether a
covered employee's compensation exceeds $1 million. Compensation paid under
certain qualified performance based compensation arrangements, which provide for
compensation based on preestablished performance goals established by a
compensation committee that is comprised solely of two or more outside directors
and which is disclosed to, and approved by, the majority of the company's
shareholders, is not considered in determining whether a covered employee's
compensation exceeds $1 million. The legislative history to Section 162(m) and
the proposed regulations recently issued under Section 162(m) provide that
compensation attributable to options which provide for an exercise price less
than the fair market value of the underlying shares on the date of grant
("discount options") will not be treated as paid pursuant to a qualified
performance based compensation arrangement. The proposed regulations generally
provide, although the matter is not entirely clear, that option plans (and any
options issued thereunder) that were adopted prior to the time a company
publicly offers its common equity securities will not be subject to the Section
162(m) limitation, provided such plan is adequately disclosed by the company in
a prospectus issued in connection with a public offering of common equity
securities. Since the 1993 Plan and the 1994 Plan were adopted prior to the
effective date of the Registration Statement of which this Prospectus is a part,
the 1993 Plan and the 1994 Plan (and any options issued thereunder) may be
exempt from the application of Section 162(m). The Company intends to review
this issue (including any additional guidance which may hereafter be issued by
the Internal Revenue Service or the courts) at the time any employee exercises
options, the compensation element of which, when combined with other
compensation received by such employee during the taxable year, exceeds $1
million, and consider whether and to what extent the 1993 Plan and the 1994 Plan
and the options at issue are subject to the Section 162(m) limitation.
NEW PLAN BENEFITS The table below shows Options that have been granted or
will be granted prior to the consummation of the Offerings under the 1993 Plan
and the 1994 Plan to (i) any Named Executive Officer (as defined below), (ii)
any executive officer who is a member of the continuing management group and who
is not a Named Executive Officer, (iii) all current executive officers as a
group and (iv) all employees, including all current officers who are not
executive officers, as a group.
The term "Named Executive Officer" is defined for these purposes to include
(i) Mr. Stockman and Mr. Wasserstein, the Company's Co-Chairmen of the Board,
(ii) Mr. Schwarzman, the Company's President prior to the consummation of the
Offering, (iii) Mr. Birle, the Company's former Co-Chairman of the Board (who
resigned from such position on July 20, 1993), (iv) the Company's four most
highly compensated executive officers who were serving as executive officers at
the end of the fiscal year ended January 29, 1994 and whose total annual salary
and bonus exceeded $100,000 and (v) two former executive officers who would have
been among the Company's four most highly compensated executive officers but for
the fact that they were not serving as executive officers at the end of the
fiscal year ended January 29, 1994.
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NEW PLAN BENEFITS
EMPLOYEE STOCK OPTION GRANTS
<TABLE><CAPTION>
NUMBER OF
PER SHARE SHARES
EXERCISE UNDERLYING EXPIRATION
NAME AND POSITION AFTER THE OFFERINGS PRICE OPTIONS DATE PLAN
- - ------------------------------------------------------------- ----------- ------------ --------------- ----------
<S> <C> <C> <C> <C>
Thomas E. Hannah............................................. $ 3.99 841,230 (1) 1993
Chief Executive Officer 8.26 140,205 (1) 1993
William J. Brucchieri........................................ 3.99 77,184 (1) 1993
President of Imperial Wallcoverings 8.26 61,757 (1) 1993
Andrew Major................................................. 3.99 83,254 (1) 1993
President of Decorative Fabrics Group
John D. Moose................................................ 3.99 146,555 (1) 1993
President of North American Auto Group 8.26 50,074 (1) 1993
Harry F. Schoen III.......................................... 3.99 97,998 (1) 1993
President of Mastercraft Division 8.26 66,007 (1) 1993
Elizabeth R. Philipp......................................... 3.99 83,508 (1) 1993
Executive Vice President, General Counsel and Secretary 8.26 8,345 (1) 1993
Mark O. Remissong............................................ 4.43 44,735 (2) 1994
Senior Vice President and Chief Financial Officer 8.26 33,267 (2) 1994
Paul W. Meeks................................................ 3.99 11,403 (1) 1993
Vice President and Treasurer
Executive Group--1993 Plan................................... 3.99 1,341,132 (1) 1993
8.26 326,388 (1) 1993
Executive Group--1994 Plan................................... 4.43 44,735 (2) 1994
8.26 33,267 (2) 1994
Non-Executive Employee Group--1993 Plan...................... 3.99 1,292,463 (1) 1993
4.43 67,261 (1) 1993
8.26 92,220 (1) 1993
Non-Executive Employee Group--1994 Plan...................... 4.43 76,507 (2) 1994
8.26 15,123 (2) 1994
</TABLE>
- - ---------------
(1) January 28, 2004
(2) April 15, 2004
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<PAGE>
PRINCIPAL STOCKHOLDERS
AND CERTAIN RELATIONSHIPS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock, before the Offerings and as
adjusted to give effect to the Offerings and the Recapitalization, by the
existing holders of Common Stock in excess of 5% and by the stockholders that
have granted the overallotment option to the Underwriters (the "Selling
Stockholders"). The information provided under the column "Shares Beneficially
Owned After the Offerings and the Recapitalization" reflects the effect of the
sale of shares by the Selling Stockholders pursuant to the overallotment option,
assuming such option is exercised in full, and the effect of the exchange by
Blackstone Partners and WP Partners of $94.0 million and $98.6 million,
respectively, of the PIK Notes of the Company held by them for shares of Common
Stock. All information with respect to beneficial ownership has been furnished
by the respective stockholder. Unless otherwise indicated below, after the
Offerings the persons named below have sole voting and investment power with
respect to the number of shares set forth opposite their names.
<TABLE><CAPTION>
SHARES BENEFICIALLY OWNED
SHARES BENEFICIALLY OWNED AFTER THE OFFERINGS AND THE
BEFORE THE OFFERINGS RECAPITALIZATION
----------------------------- -----------------------------
OVERALLOTMENT
OPTION SHARES
NAME AND ADDRESS TO BE
OF SELLING STOCKHOLDER NUMBER PERCENTAGE OFFERED(1) NUMBER PERCENTAGE
- - -------------------------------------- -------------- ------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Blackstone Capital 15,765,919 45.0% 1,386,827 20,079,225 30.1%
Partners L.P.(2)
118 North Bedford Road
Suite 300
Mount Kisco, NY 10549
Wasserstein Perella 17,079,733 48.8% 1,500,000 21,555,157 32.3%
Partners, L.P.
31 West 52nd Street
New York, NY 10019
The Prudential Insurance 1,751,753 5.0% 113,173 1,638,580 2.5%
Company of America(3)
and Pruco Insurance Company
Four Gateway Center
100 Mulberry Street
Newark, NJ 07102
</TABLE>
- - ---------------
(1) Each of the Partners and the Prudential entities have granted the U.S.
Underwriters an overallotment option to purchase up to 2,400,000 shares of
Common Stock and the International Underwriters an overallotment option to
purchase up to 600,000 shares of Common Stock.
(2) Includes 1,320,402 shares of Common Stock owned of record by Blackstone
Family Investment Partnership II L.P. and 116,036 shares of Common Stock
owned of record by Blackstone Advisory Directors Partnership L.P., each an
affiliate of Blackstone Partners. Blackstone Partners possesses an
irrevocable proxy to vote these shares.
(3) Blackstone Partners possesses an irrevocable proxy to vote these shares.
Each of Blackstone Partners and WP Partners beneficially owns, through
Holdings II, 50% of the outstanding voting Common Stock of the Company. After
consummation of the Recapitalization and the issuance of shares of Common Stock
in the Offerings (assuming that the Underwriters' over-allotment options are not
exercised), each of Blackstone Partners and its affiliates and WP Partners will
beneficially own 34.8% and 34.6%, respectively, of the outstanding Common Stock
and will be in a position to control the Company. It is also expected that the
Partners and their respective affiliates may in the future act in various
capacities in connection with transactions to which the Company is a party.
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<PAGE>
In 1993, Group paid each of Blackstone Management Partners L.P., an
affiliate of Blackstone ("Blackstone Management"), and WP&Co. or their
affiliates (collectively, the "Managers-Advisors") an annual operating
management fee of $1 million. Group also paid each of the Managers-Advisors an
annual management and financial advisory services fee of $1.5 million, paid
quarterly in advance. Group also has reimbursed the Managers-Advisors for
out-of-pocket expenses in connection with their management.
Since the beginning of 1993, in connection with the divestiture of the
Engineering Group, Group has paid divestiture fees (i) to Blackstone Management
in the amount of approximately $512,500 and (ii) to WP&Co. and WP Partners in an
aggregate amount of $512,500. Since the beginning of 1993, in connection with
the consummation of two credit agreements by Kayser-Roth, Group has paid fees
(i) to Blackstone Management in the amount of $375,000 and (ii) to WP&Co. and WP
Partners in an aggregate amount of $375,000. Since the beginning of 1993, Group
has paid $1,394,000 to each of the Managers-Advisors in connection with the
divestiture of Kayser-Roth.
In September 1993, Blackstone entered into an agreement with Group to
provide advisory services and assistance in connection with the sale or
disposition by Group of its Builders Emporium division. The agreement provides
for reimbursement of out-of-pocket expenses plus payment of fees to be paid by
Group to Blackstone of (i) $100,000 per month, commencing with the month ending
September 25, 1993 and ending with the month ending January 29, 1994 and (ii)
$100,000 for the quarter commencing January 30, 1994 and ending April 30, 1994.
Since the beginning of 1993, Group has paid $500,000 under this agreement. In
addition, Blackstone negotiated with Arkaid Incorporated, a real estate
consultant ("Arkaid"), to receive 20% of the incentive fees payable to Arkaid by
Group in connection with the resolution of lease liabilities of Builders
Emporium. Since the beginning of fiscal 1993, no such incentive fees have been
accrued or paid to Arkaid.
The Board of Directors of Group has authorized the investment by Group from
time to time of amounts not to exceed $5 million in a short-term investment fund
to which Blackrock Financial Management L.P. serves as investment advisor.
Blackrock Financial Management L.P., an affiliate of Blackstone, charges annual
management fees equal to 0.3% of the amount invested, plus nominal out-of-pocket
expenses. Since the beginning of 1993, Group has paid to Blackrock Financial
Management L.P. fees of approximately $7,000.
In the first quarter of fiscal 1994, each of the Managers-Advisors received
$ .
It is anticipated that each of the Managers-Advisors will continue to
receive a $1 million annual monitoring fee from the Company in accordance with
the Stockholders Agreement and that the Company may pay fees to the
Managers-Advisors in connection with future transactions or financings.
NEW CREDIT FACILITIES
The Company has entered into a commitment letter (the "Commitment Letter")
with Chemical Bank ("Chemical") pursuant to which Chemical has committed to
provide to Group the New Credit Facilities in an aggregate amount of $775
million, subject to the execution of definitive documentation (including a new
credit agreement (the "New Credit Agreement")) and to other terms and conditions
set forth in the Commitment Letter. Chemical, through one of its affiliates,
intends to form a syndicate of banks and other financial institutions (together
with Chemical, the "Lenders") to participate in the New Credit Facilities.
The New Credit Facilities will consist of (i) an eight-year senior secured
term loan facility (the "Closing Date Term Loan Facility") in an aggregate
principal amount of $475 million, which will be drawn in full on the Closing
Date, (ii) an eight-year senior secured term loan facility (the "Delayed Draw
Term Loan Facility") in an aggregate principal amount of $25 million, which may
be drawn in
59
<PAGE>
full or in part on or prior to the first anniversary of the Closing Date and
(iii) a seven-year senior secured revolving credit facility (the "Revolving
Facility") in an aggregate principal amount of up to $275 million. The Company's
wholly-owned subsidiary, Group, will be the borrower (the "Borrower") under the
New Credit Facilities, although a portion of the Closing Date Term Loan Facility
and the Revolving Facility will be available for loans in Canadian dollars to
subsidiaries of the Borrower (the "Canadian Sub-facility").
The proceeds of loans under the Closing Date Term Loan Facility will be
used by the Company, together with the net proceeds of the Offerings, borrowings
under the Revolving Facility and the Company's existing cash, to refinance
existing indebtedness and preferred stock of the Company and certain of its
subsidiaries. See "Use of Proceeds and Consolidation". Borrowings may be
effected under the Delayed Draw Term Loan Facility during the one-year period
following the date of the inital funding under the New Credit Facilities (the
"Closing Date"). The proceeds of loans under the Delayed Draw Term Loan Facility
will be used by the Company (i) if the Company establishes an ESOP following the
completion of the Offerings, to finance purchases of Shares by such ESOP or (ii)
to make permitted acquisitions. The proceeds of loans under the Revolving
Facility (other than as set forth in the first sentence of this paragraph) will
be used by the Company for general corporate purposes, including permitted
acquisitions.
Loans outstanding under the New Credit Facilities will bear interest, which
will be due quarterly, at a rate equal to the Borrower's choice of (i)
Chemical's Alternative Base Rate (which is the highest of Chemical's announced
prime rate, the Federal Funds Rate plus 1/2% and Chemical's base certificate of
deposit rate plus 1%) plus the ABR Margin (defined below) per annum or (ii) the
rate at which Eurodollar deposits for one, two, three, six, nine, or twelve
months (as selected by the Borrower) are offered by Chemical in the interbank
Eurodollar market in the approximate amount of Chemical's share of the relevant
loan plus the LIBOR Margin (defined below) per annum. Loans outstanding under
the Canadian Sub-facility will bear interest, which will be due quarterly, at a
rate equal to the Borrower's choice of (i) the Canadian prime rate plus the ABR
Margin per annum or (ii) the Canadian BA rate (which is the average rate for
Canadian dollar bankers' acceptances in respect of an applicable interest
period) plus the LIBOR Margin per annum.
Pursuant to the terms of the New Credit Agreement, the "ABR Margin"
initially will be 3/4% and the "LIBOR Margin" initially will be 1 3/4%; provided
that (i) such margins will be subject to step-downs based on certain financial
performance tests to be set forth in the New Credit Agreement and (ii) such
margins will increase by 1/4% over the margins then in effect on the fifth
anniversary of the Closing Date.
Loans under the Closing Date Term Loan Facility will amortize on an equal
quarterly basis in annual amounts equal to (i) $25 million in the second year
following the Closing Date, (ii) $45 million in the third year following the
Closing Date, (iii) $70 million in the fourth year following the Closing Date,
(iv) $80 million in the fifth year following the Closing Date and (v) $85
million in the sixth, seventh and eighth years following the Closing Date. Loans
under the Delayed Draw Term Loan Facility will amortize on an equal quarterly
basis in annual amounts, which are ratably based on the annual payments of the
Closing Date Term Loan Facility. The Revolving Facility will mature on the
seventh anniversary of the Closing Date. In addition, the New Credit Agreement
will provide for mandatory prepayments of the New Credit Facilities with certain
excess cash flow of the Company, net cash proceeds of certain asset sales or
other dispositions by the Company and its subsidiaries, net cash proceeds of
sale/leaseback transactions, net cash proceeds of certain issuances of debt
obligations and net cash proceeds received by the Company in connection with
loans to the ESOP. Mandatory prepayments will be applied pro rata across
remaining scheduled maturities. Loans under the New Credit Facilities will be
voluntarily prepayable by the Borrower at any time without penalty. Voluntary
prepayments will be applied against the most current scheduled maturities.
60
<PAGE>
The New Credit Facilities will be guaranteed by the Company and each
existing and subsequently acquired or organized United States subsidiary of the
Company (other than, except for loans under the Canadian Facilities, the
Borrower) and by each foreign subsidiary of the Borrower, subject to certain
exceptions. The New Credit Facilities and the Guarantees will be secured by a
first priority pledge of all the capital stock of the Borrower and each
subsidiary of the Borrower (or, in the case of any foreign subsidiary, 65% the
capital stock of such subsidiary), the receivables and inventory of the Company
and its subsidiaries and certain intercompany indebtedness.
The Commitment Letter contains, and the New Credit Agreement will contain,
certain conditions precedent, including without limitation the following
conditions: (i) consummation of the Recapitalization simultaneously with the
Closing, (ii) receipt by the Company of at least $250,000,000 in gross cash
proceeds in connection with the Offerings, (iii) after giving effect to the
Recapitalization, the Company and its subsidiaries having no obligations for
borrowed money other than loans under the New Credit Agreement and industrial
revenue bonds and other debt in an aggregate amount not to exceed $15,000,000,
(iv) receipt by the Lenders of certain audited and pro forma consolidated
financial statements for the Company and its subsidiaries for the fiscal years
ended January 29, 1994 and January 30, 1993, (iv) the Lenders' satisfaction (a)
that the Company will have sufficient sources of funds to effect the
Recapitalization and pay related fees and expenses, (b) with the Company's tax
position, (c) with the amount and nature of the Company's and its subsidiaries'
environmental and employee health and safety exposures, (d) with the sufficiency
of the amount available under the Revolving Facility to meet the ongoing working
capital requirements of the Company and the Borrower following the
Recapitalization and (e) with all material legal, tax and accounting matters
relating to the Recapitalization, (v) the Administrative Agent's reasonable
satisfaction with the Company's cash management procedures, (vi) receipt of all
requisite governmental and third party approvals and (vii) absence of
outstanding material litigation.
The New Credit Agreement will contain various restrictive covenants typical
for facilities and transactions of this type (with customary qualifications and
exceptions) including but not limited to limitations on indebtedness of the
Company and its subsidiaries, limitations (applicable to the Company and the
Borrower) on dividends and on redemptions and repurchases of capital stock;
limitations on prepayments, redemptions and repurchases of debt; limitations on
liens and sale/leaseback transactions; limitations on loans and investments;
limitations on capital expenditures; a prohibition on the Company's direct
ownership of any subsidiary other than Group; limitations on mergers
acquisitions and asset sales; limitations on transactions with affiliates;
limitations on fundamental changes in business conducted; and limitations on the
amendment of debt and other material agreements and licenses. In addition to the
foregoing, the New Credit Agreement will contain financial covenants, including,
among other things, a covenant requiring the Company and its subsidiaries to
maintain a minimum EBITDA level, an interest coverage test, a leverage test and
a liquidity test.
The New Credit Agreement will contain various events of default typical for
facilities and transactions of this type (with customary qualifications and
exceptions), including but not limited to nonpayment of principal or interest;
violation of covenants; material breaches of representations and warranties;
cross default and cross acceleration; bankruptcy; material undischarged
judgments; certain ERISA events; invalidity of security documents; invalidity of
subordination provisions; and Change in Control. "Change In Control" will be
defined in the New Credit Agreement to require (a) a majority of the board of
directors of the Company to be comprised of Continuing Directors (defined as any
director of the Company who either (x) was a member of the board of directors on
the Closing Date or (y) after the Closing Date became a member of the board of
directors and whose election was approved by a vote of the Continuing Directors
then on the board of directors of the Company), (b) that no person or group
(other than WP Partners, Blackstone Partners and their designated affiliates)
beneficially own, directly or indirectly, shares representing more than
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<PAGE>
25% of the aggregate ordinary voting power represented by the outstanding
capital stock of the Company at any time that WP Partners, Blackstone Partners
and their designated affiliates do not beneficially own, free and clear of liens
and claims, shares representing at least 50% of the aggregate ordinary voting
power represented by the outstanding capital stock of the Company, and (c) that
the Company maintain direct ownership of the Borrower, free of liens and claims.
In addition to the foregoing, the New Credit Agreement will contain other
miscellaneous provisions, including provisions concerning (i) assignments by
lenders, (ii) indemnification by the Borrower of each lender from and against
any losses, claims or other expenses and (iii) payment by the Borrower of
certain fees and expenses of the lenders and their respective advisors and
consultants.
The Company intends during 1994 to implement a structured receivables
financing facility for its subsidiaries and is evaluating proposals of several
financial institutions to provide such a facility. The Company currently
anticipates that such a receivables facility would replace and be utilized to
repay approximately $150 million of the commitments and outstanding indebtedness
under the New Credit Facilities. Based upon its discussions with potential
providers of a receivables facility, the Company believes that its interest cost
with respect to amounts financed pursuant to the facility would be more
favorable than that applicable under the New Credit Facilities. The Company has
not obtained any commitment from lenders to provide a receivables facility and
any such facility would in any event be subject to various conditions;
accordingly, there can be no assurance as to whether or on what terms the
Company will be able to establish a receivables facility.
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<PAGE>
DESCRIPTION OF THE CAPITAL STOCK
The authorized capital stock of the Company consists of 150 million shares
of Common Stock, par value $.01 per share, and 16 million shares of Preferred
Stock, par value $.01 per share. The following summary description relating to
the capital stock of the Company does not purport to be complete. Reference is
made to the Restated Certificate of Incorporation and Bylaws which are included
as exhibits to the Registration Statement of which this Prospectus forms a part
(the "Restated Certificate of Incorporation" and "Bylaws", respectively).
COMMON STOCK
Subject to the rights of holders of Preferred Stock then outstanding,
holders of Common Stock are entitled to receive such dividends as may from time
to time be declared by the Board. See "Dividends". Holders of Common Stock are
entitled to one vote per share on all matters on which the holders of Common
Stock are entitled to vote. Because holders of Common Stock do not have
cumulative voting rights, the holders of the majority of the shares of Common
Stock represented at a meeting can select all the directors. In the event of
liquidation, dissolution or winding up of the Company, holders of Common Stock
would be entitled to share ratably in all assets of the Company available for
distribution to the holders of the Common Stock.
Upon full payment of the purchase price therefor, shares of Common Stock
will not be liable to further calls or assessments by the Company. There are no
preemptive rights for the Common Stock in the Restated Certificate of
Incorporation.
The Transfer Agent and Registrar for the Common Stock is
[ ].
PREFERRED STOCK
Pursuant to the Restated Certificate of Incorporation of the Company, the
Board is authorized, subject to any limitations prescribed by law, to provide
for the issuance of the shares of Preferred Stock in series and to establish
from time to time the number of shares to be included in each such series and to
fix the designation, powers, preferences and rights of the shares of each such
series and any qualifications, limitations or restrictions thereof. Because the
Board has the power to establish the preferences and rights of each series, it
may afford the holders of any Preferred Stock preferences, powers and rights
(including voting rights) senior to the rights of the holders of Common Stock.
No shares of Preferred Stock are currently outstanding, and the Company has no
present intention to issue such shares. The issuance of shares of Preferred
Stock, or the issuance of rights to purchase such shares, could be used to
discourage an unsolicited acquisition proposal.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings, the Company will have outstanding
66,710,900 shares of Common Stock. Of these shares, the 20,000,000 shares sold
in the Offerings (23,000,000 shares if the Underwriters' over-allotment options
are exercised in full) will be freely tradeable without restriction or further
registration under the Securities Act except for shares purchased by
"affiliates" of the Company, as such term is defined in Rule 144 under the
Securities Act (which may generally be sold only in compliance with Rule 144 or
Rule 701 under the Securities Act or pursuant to a subsequent registration).
Upon completion of the Offerings, 46,710,900 shares of Common Stock outstanding
upon completion of the Offerings (assuming no exercise of the Underwriters'
over-allotment options) will be deemed "restricted securities" as defined in
Rule 144 under the Securities Act and may not be resold without registration
under the Securities Act or pursuant to an
63
<PAGE>
exemption from such registration, including exemptions provided by Rule 144
under the Securities Act.
In general, Rule 144 provides that, subject to its provisions and other
applicable Federal and state securities law requirements, any person (or persons
whose shares are aggregated), including any person who may be deemed an
"affiliate" of the Company, who has beneficially owned "restricted securities"
for at least two years is entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of 1% of the total number of
outstanding shares of the same class or the average weekly trading volume of the
same class during the four calendar weeks preceding the sale. A person who is
not deemed to have been an "affiliate" of the Company at any time during the 90
days preceding the sale and who has beneficially owned "restricted securities"
for at least three years is entitled to sell such shares under Rule 144 without
regard to any of the limitations described above.
Of the 46,710,900 shares of "restricted" Common Stock referred to above,
2,189,691 shares are held by investors who may sell such shares after the
completion of the Offerings without limitation under Rule 144.
The holders of 46,710,900 shares of Common Stock have agreed that they will
not offer, sell or otherwise dispose of any shares for a period of 180 days from
the date of this Prospectus. See "Underwriting."
ANTI-TAKEOVER PROVISIONS
The Restated Certificate of Incorporation and the Bylaws of the Company
contain certain provisions that may delay, defer or prevent a change in control
of the Company and make removal of management more difficult. These provisions
are intended to enhance the likelihood of continuity and stability in the
composition of the Board and in the policies formulated by the Board and to
discourage certain types of transactions which may involve an actual or
threatened change of control of the Company. The provisions are designed to
reduce the vulnerability of the Company to an unsolicited proposal for a
takeover of the Company that does not contemplate the acquisition of all its
outstanding shares or an unsolicited proposal for the restructuring or sale of
all or part of the Company. The provisions also are intended to discourage
certain tactics that may be used in proxy fights.
Set forth below is a description of such provisions in the Restated
Certificate of Incorporation and the Bylaws.
Pursuant to the Restated Certificate of Incorporation, the Board will be
divided into three classes serving staggered three-year terms. This provision
may only by amended or repealed by vote of 80% or more of the outstanding voting
stock. Directors can be removed from office only for cause and only by the
affirmative vote of the holders of a majority of the combined voting power of
the then outstanding shares of voting stock, voting together as a single class.
Vacancies on the Board and newly created directorships may be filled only by the
remaining directors and not by the stockholders.
The Restated Certificate of Incorporation provides that the number of
directors will be fixed by, or in the manner provided in, the Bylaws. The Bylaws
provide that the whole Board will consist of such number of members as fixed
from time to time by the Board. Accordingly, the Board, and not the
stockholders, has the authority to determine the number of directors and (to the
extent such action is consistent with its fiduciary duties) could delay any
stockholder from obtaining majority representation on the Board by enlarging the
Board and filling the new vacancies with its own nominees until the next
stockholder election.
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The Bylaws establish an advance notice procedure with regard to the
nomination, other than by or at the direction of the Board or a committee
thereof, of candidates for election as directors and with regard to certain
matters to be brought before an annual meeting of stockholders of the Company.
In general, notice as to any such stockholder nomination or other proposal must
be received by the Company with respect to annual meetings not less than 90 nor
more than 120 days prior to the anniversary of the immediately preceding annual
meeting and must contain certain specified information concerning the person to
be nominated or the matters to be brought before the meeting and concerning the
stockholder submitting the proposal.
Subject to the terms of any Preferred Stock, any action required or
permitted to be taken by the stockholders of the Company may be taken only at a
duly called annual or special meeting of stockholders and may not be taken by
written consent without a meeting. Special meetings of the stockholders may be
called only by the Chairman or one of the Co-Chairmen of the Board or a majority
of the entire Board, and the business transacted at any special meeting will be
confined to the matters specified in the notice of meeting.
The foregoing provisions, together with the ability of the Board to issue
Preferred Stock without further stockholder action, could delay or frustrate the
removal of incumbent directors or the assumption of control by the holder of a
large block of the Company's Common Stock even if such removal or assumption
would be beneficial, in the short term, to stockholders of the Company. The
provisions could also discourage or make more difficult a merger, tender offer
or proxy contest even if such event would be favorable to the interests of
stockholders.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 of Delaware General Corporate Law ("DGCL") prevents an
"interested stockholder" (defined in Section 203, generally, as a person owning
15% or more of a corporation's outstanding voting stock), from engaging in a
"business combination" (as defined in Section 203) with a publicly held Delaware
corporation for three years following the date such person became an interested
stockholder unless (i) before such person became an interested stockholder, the
board of directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the business
combination; (ii) upon consummation of the transaction that resulted in the
interested stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers of the corporation and by employee stock plans
that do not provide employees with the rights to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer); or (iii) following the transaction in which such person became an
interested stockholder, the business combination is approved by the board of
directors of the corporation and authorized at a meeting of stockholders by the
affirmative vote of the holders of two-thirds of the outstanding voting stock of
the corporation not owned by the interested stockholder. The provisions of
Section 203 will apply to the Company upon the consummation of the Offerings and
may have the effect of delaying, deferring or preventing a change of control of
the Company. Blackstone Partners and WP Partners will be interested stockholders
following consummation of the Offerings; however, Section 203 will not apply to
them because Holdings II has held in excess of 15% of the Company's outstanding
voting stock for more than three years and because the Board of Directors of the
Company has approved the acquisition by Blackstone Partners and WP Partners of a
direct ownership interest in the Company in connection with the
Recapitalization.
65
<PAGE>
DIRECTORS' LIABILITY AND INDEMNIFICATION
The Restated Certificate of Incorporation contains a provision which
eliminates the personal liability of the Company's directors for monetary
damages resulting from breaches of their fiduciary duty to the fullest extent
permitted by the DGCL. Under the DGCL, the Company may not eliminate directors'
liability for breaches of the duty of loyalty, acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
violations under Section 174 of the DGCL or any transaction from which the
director derived an improper personal benefit. This provision also has no effect
on the ability of stockholders to seek equitable relief, such as an injunction,
that may be available to redress a breach of fiduciary duty, even though such
stockholders could not seek monetary damages from the directors for such breach.
The Bylaws contain provisions requiring, subject to certain procedures, the
indemnification of the Company's directors and officers to the fullest extent
permitted by Section 145 of the DGCL, including circumstances in which
indemnification is otherwise discretionary, and provide for the mandatory
advancement of litigation expenses incurred in defense of a claim upon the
receipt by the Company of any undertaking required by law. The Board of
Directors of the Company is further authorized, in its discretion, to provide
such rights to employees and agents of the Company. In addition, the Company may
enter into indemnification agreements with its directors and executive officers
that generally provide for similar rights to indemnification and advancement of
expenses. Management believes that these provisions are necessary to attract and
retain qualified persons as directors and officers.
66
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the U.S. Underwriters named below, and
each of such U.S. Underwriters, for whom Goldman, Sachs & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated and Wasserstein Perella Securities, Inc.,
are acting as representatives, has severally agreed to purchase from the
Company, the respective number of shares of Common Stock set forth opposite its
name below:
NUMBER OF
SHARES OF
COMMON
UNDERWRITER STOCK
------------- ----------
Goldman, Sachs & Co............................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................
Wasserstein Perella Securities, Inc............................
----------
Total............................................. 16,000,000
-----------
-----------
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus, and in part to certain securities dealers at such
price less a concession of $ per share. The U.S. Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the representatives.
The Company and the Selling Stockholders have entered into an underwriting
agreement (the "International Underwriting Agreement") with the underwriters of
the International Offering (the "International Underwriters") providing for the
concurrent offer and sale of 4,000,000 shares of Common Stock in an
international offering outside the United States. The initial public offering
price and aggregate underwriting discounts and commissions per share for the two
offerings are identical. The closing of the offering made hereby is a condition
to the closing of the International Offering, and vice versa. The
representatives of the International Underwriters are Goldman Sachs
International, Merrill Lynch International Limited and Wasserstein Perella
Securities, Inc.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters named herein has agreed that, as a part of the distribution of
the shares offered hereby and subject to certain exceptions, it will offer, sell
or deliver the shares of Common Stock, directly or indirectly, only in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") and to U.S. persons, which term shall mean, for purposes
of this paragraph: (a) any individual who is a resident of the United States or
(b) any corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States. Each of the
International Underwriters has agreed pursuant to the Agreement Between that, as
a part of the distribution of the shares offered as a part of the International
Offering, and subject to certain exceptions, it will (i) not, directly or
indirectly, offer, sell or deliver shares of Common Stock (a) in the United
States or to any U.S. persons or
67
<PAGE>
(b) to any person who it believes intends to reoffer, resell or deliver the
shares in the United States or to any U.S. persons, and (ii) cause any dealer to
whom it may sell such shares at any concession to agree to observe a similar
restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any share so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
The Selling Stockholders have granted the U.S. Underwriters an option
exercisable for 30 days after the date of this Prospectus to purchase up to an
aggregate of 2,400,000 additional shares of Common Stock solely to cover
over-allotments, if any. If the U.S. Underwriters exercise their overallotment
option, the U.S. Underwriters have severally agreed, subject to certain
conditions, to purchase approximately the same percentage thereof that the
number of shares to be purchased by each of them, as shown in the foregoing
table, bears to the 16,000,000 shares of Common Stock offered. The Selling
Stockholders have granted the International Underwriters a similar option to
purchase up to an aggregate of 600,000 additional shares of Common Stock.
The Company and the Selling Stockholders have agreed that during the period
beginning from the date of this Prospectus and continuing to and including the
date 180 calendar days after the date of the Prospectus, not to offer, sell,
contract to sell or otherwise dispose of any securities of the Company (other
than pursuant to employee stock option plans existing, or on the conversion or
exchange of convertible or exchangeable securities outstanding, on the date of
this Prospectus) which are substantially similar to the shares of the Common
Stock or which are convertible or exchangeable into securities which are
substantially similar to the shares of the Common Stock without the prior
written consent of the representatives, except for the shares of Common Stock
offered in common with the concurrent U.S. and International Offerings.
The provisions of Schedule E to the By-Laws of the National Association of
Securities Dealers, Inc. apply to the offering because Wasserstein Perella
Securities, Inc. is deemed to be an affiliate of the Company for purposes of
Schedule E. See "Principal Stockholders and Certain Relationships". Accordingly,
the initial public offering price can be no higher than that recommended by a
"qualified independent underwriter" meeting certain standards. In accordance
with this requirement, Goldman, Sachs & Co. has served in such role and has
recommended a price in compliance with the requirements of Schedule E. Goldman,
Sachs & Co. in its role as qualified independent underwriter has performed due
diligence investigations and reviewed and participated in the preparation of
this Prospectus and the Registration Statement of which this Prospectus forms a
part. The representatives of the U.S. Underwriters have informed the Company
that the U.S. Underwriters do not intend to confirm sales to any account over
which they exercise discretionary authority.
Prior to the Offerings, there has been no public market for the Common
Stock. The initial public offering price was negotiated among the Company, the
Partners and the representatives of the U.S. Underwriters and the International
Underwriters. Among the factors considered in determining the initial public
offering price of the Common Stock, in addition to prevailing market conditions,
was the Company's historical performance, estimates of the business potential
and earnings prospects of the Company, an assessment of the Company's management
and the consideration of the above factors in relation to market valuation of
companies in related businesses.
Application has been made to list the Common Stock on the New York Stock
Exchange. In order to meet one of the requirements for listing the Common Stock
on the New York Stock Exchange, the U.S. Underwriters have undertaken to sell
lots of 100 or more shares to a minimum of 2,000 beneficial holders.
68
<PAGE>
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act.
From time to time, Goldman, Sachs & Co. has provided financial advisory
services to Blackstone Partners for which it has received customary fees in the
ordinary course of business. From time to time, each of Merrill Lynch & Co. and
Wasserstein Perella Securities, Inc. have provided financial advisory services
to the Company and certain affiliates of the Partners, for which each has
received customary fees in the ordinary course of business.
LEGAL OPINIONS
The validity of the Common Stock will be passed upon for the Company by
Cravath, Swaine & Moore, New York, New York, and for the Underwriters by Jones,
Day, Reavis & Pogue, New York, New York. From time to time, Jones, Day, Reavis &
Pogue provides legal services to the Company and other entities in which the
Partners have an interest.
EXPERTS
The consolidated financial statements included in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen &
Co., independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the reports of said firm and
upon the authority of said firm as experts in accounting and auditing.
69
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES:
As of January 29, 1994, and January 30, 1993, and for the fiscal years
ended January 29, 1994, January 30, 1993, and January 25, 1992:
Report of Independent Public Accountants............................. F-2
Consolidated Statements of Operations................................ F-3
Consolidated Balance Sheets.......................................... F-4
Consolidated Statements of Other Paid-in Capital..................... F-5
Consolidated Statements of Accumulated Deficit....................... F-5
Consolidated Statements of Cash Flows................................ F-6
Notes to Consolidated Financial Statements........................... F-7
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
After the reorganization transaction discussed in Notes 2 and 15 to the
Company's consolidated financial statements is effected, we expect to be in a
position to render the following audit report.
ARTHUR ANDERSEN & CO.
Charlotte, North Carolina,
April 18, 1994.
"REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS"
To Collins & Aikman Corporation:
We have audited the accompanying consolidated balance sheets of
Collins & Aikman Corporation (a Delaware corporation) and subsidiaries as
of January 29, 1994 and January 30, 1993, and the related consolidated
statements of operations, other paid-in capital, accumulated deficit and
cash flows for each of the three fiscal years in the period ended January
29, 1994. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Collins & Aikman Corporation and subsidiaries as of January 29, 1994 and
January 30, 1993, and the results of their operations and their cash flows
for each of the three fiscal years in the period ended January 29, 1994, in
conformity with generally accepted accounting principles.
As discussed in Notes 3 and 13 to the Consolidated Financial
Statements, the Company adopted Statement of Financial Accounting Standards
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" in the fiscal year ended January 25, 1992.
F-2
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE><CAPTION>
FISCAL YEAR ENDED
----------------------------------------------
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
-------------- -------------- --------------
<S> <C> <C> <C>
Net sales......................................................... $ 1,305,517 $ 1,277,500 $ 1,184,316
-------------- -------------- --------------
Cost of goods sold................................................ 995,790 978,473 926,817
Selling, general and administrative expenses...................... 199,361 222,143 206,392
Management equity plan expense.................................... 26,736 -- --
Restructuring costs............................................... -- 10,000 --
Goodwill write-off................................................ 129,854 -- --
-------------- -------------- --------------
1,351,741 1,210,616 1,133,209
-------------- -------------- --------------
Operating income (loss)........................................... (46,224) 66,884 51,107
Interest expense, net of interest income of $4,434, $4,012 and
$7,299.......................................................... 111,291 110,867 107,974
Dividends on preferred stock of subsidiary........................ 4,533 4,514 4,515
-------------- -------------- --------------
Loss from continuing operations before income taxes............... (162,048) (48,497) (61,382)
Income taxes (benefit)............................................ 11,277 (3,156) 11,954
-------------- -------------- --------------
Loss from continuing operations................................... (173,325) (45,341) (73,336)
Discontinued operations:
Income (loss) from operations, net of income taxes of $584,
$5,700 and $2,951............................................. (4,775) (50,317) 3,635
Loss on disposals, net of income tax benefit of $344, $0 and
$0............................................................ (99,564) (168,000) (20,000)
-------------- -------------- --------------
Loss before extraordinary items................................... (277,664) (263,658) (89,701)
Extraordinary loss on early retirement of debt, net of income
taxes of $0..................................................... -- -- (1,793)
Cumulative effect on prior years (to January 26, 1991) of change
in accounting principle, net of income taxes of $0.............. -- -- (42,316)
-------------- -------------- --------------
Net loss.......................................................... $ (277,664) $ (263,658) $ (133,810)
-------------- -------------- --------------
-------------- -------------- --------------
Per common share:
Continuing operations........................................... $ (5.62) $ (1.83) $ (2.54)
Discontinued operations......................................... (2.98) (6.23) (.47)
Extraordinary item.............................................. -- -- (.05)
Cumulative effect of accounting change.......................... -- -- (1.21)
-------------- -------------- --------------
Net loss........................................................ $ (8.60) $ (8.06) $ (4.27)
-------------- -------------- --------------
-------------- -------------- --------------
Average shares outstanding........................................ 35,035 35,035 35,035
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-3
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE><CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
------------ --------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................................................ $ 81,373 $ 83,688
Accounts and notes receivable, net............................................... 200,368 164,655
Inventories...................................................................... 176,062 165,864
Net assets of discontinued operations............................................ -- 190,177
Other............................................................................ 48,397 23,131
------------ --------------
Total current assets........................................................ 506,200 627,515
Property, plant and equipment, net................................................. 292,600 292,434
Goodwill........................................................................... -- 132,630
Other assets....................................................................... 120,025 88,855
------------ --------------
$ 918,825 $ 1,141,434
------------ --------------
------------ --------------
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities:
Notes payable.................................................................... $ 3,789 $ 9,067
Current maturities of long-term debt............................................. 25,895 61,287
Accounts payable................................................................. 85,591 75,996
Accrued expenses................................................................. 142,351 169,002
Other............................................................................ 2,671 343
------------ --------------
Total current liabilities................................................... 260,297 315,695
Long-term debt..................................................................... 897,659 920,918
Deferred income taxes.............................................................. 640 4,823
Other, including postretirement benefit obligation................................. 339,768 222,510
Commitments and contingencies (Note 19)............................................
Redeemable preferred stock of subsidiary (aggregate preference in liquidation
$129)............................................................................ 132 165
Preferred stock of subsidiary (aggregate preference in liquidation $45,145)........ 181 181
Redeemable preferred stock (aggregate preference in liquidation $156,785).......... 122,368 98,602
Common stock (150,000 shares authorized, 35,035 shares issued and outstanding)..... 350 350
Other paid-in capital.............................................................. 160,249 133,513
Accumulated deficit................................................................ (849,337) (547,950)
Foreign currency translation adjustments........................................... (5,735) (4,870)
Pension equity adjustment.......................................................... (7,747) (2,503)
------------ --------------
Total common stockholder's deficit.......................................... (702,220) (421,460)
------------ --------------
$ 918,825 $ 1,141,434
------------ --------------
------------ --------------
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-4
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OTHER PAID-IN CAPITAL
(IN THOUSANDS)
<TABLE><CAPTION>
FISCAL YEAR ENDED
----------------------------------------
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of year.......................................... $ 133,513 $ 133,733 $ 133,108
Management equity plan................................................ 26,736 -- --
Other................................................................. -- (220) 625
------------ ------------ ------------
Balance at end of year................................................ $ 160,249 $ 133,513 $ 133,733
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
CONSOLIDATED STATEMENTS OF ACCUMULATED DEFICIT
(IN THOUSANDS)
<TABLE><CAPTION>
FISCAL YEAR ENDED
----------------------------------------
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of year.......................................... $ (547,950) $ (265,444) $ (115,827)
Net loss.............................................................. (277,664) (263,658) (133,810)
Redeemable preferred stock dividends.................................. (22,107) (18,988) (17,167)
Accretion of difference between redemption value and fair value at
date of issuance of redeemable preferred stock...................... (1,616) 140 1,360
------------ ------------ ------------
Balance at end of year................................................ $ (849,337) $ (547,950) $ (265,444)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-5
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE><CAPTION>
FISCAL YEAR ENDED
----------------------------------------
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Loss from continuing operations....................................... $ (173,325) $ (45,341) $ (73,336)
Adjustments to derive cash flow from continuing
operating activities:
Goodwill write-off.................................................. 129,854 -- --
Restructuring costs................................................. -- 10,000 --
Management equity plan expense...................................... 26,736 -- --
Depreciation and amortization....................................... 58,037 62,273 61,222
Increase in accounts and notes receivable........................... (32,982) (149) (7,166)
Decrease (increase) in inventories.................................. (6,952) 4,308 23,936
Increase (decrease) in accounts payable............................. 14,145 130 (2,874)
Other, net.......................................................... 7,398 (6,456) (16,737)
------------ ------------ ------------
Net cash provided by (used in) continuing operating
activities................................................... 22,911 24,765 (14,955)
------------ ------------ ------------
Loss from discontinued operations..................................... (104,339) (218,317) (16,365)
Adjustments to derive cash flow from discontinued operating
activities:
Loss on disposals................................................... 99,564 168,000 20,000
Depreciation and amortization....................................... 17,337 22,559 22,919
Net change in receivables, inventory and
accounts payable................................................. 70,162 24,163 5,634
Other, net.......................................................... (150,141) (9,863) (18,653)
------------ ------------ ------------
Net cash provided by (used in) discontinued operating
activities................................................... (67,417) (13,458) 13,535
------------ ------------ ------------
INVESTING ACTIVITIES
Additions to property, plant and equipment............................ (56,278) (54,181) (61,899)
Sales of property, plant and equipment................................ 22,710 10,347 7,522
Proceeds from businesses sold......................................... 148,743 -- 5,598
Other, net............................................................ 43,983 9,223 27,444
------------ ------------ ------------
Net cash provided by (used in) investing activities............ 159,158 (34,611) (21,335)
------------ ------------ ------------
FINANCING ACTIVITIES
Issuance of long-term debt............................................ 76,135 60,128 157,587
Reduction of long-term debt and capital lease obligations............. (179,940) (54,376) (182,760)
Short-term borrowings (repayments), net............................... (5,899) 3,554 (1,057)
Other, net............................................................ (7,263) (2,918) (5,127)
------------ ------------ ------------
Net cash provided by (used in) financing activities............ (116,967) 6,388 (31,357)
------------ ------------ ------------
Decrease in cash and cash equivalents................................. (2,315) (16,916) (54,112)
Cash and cash equivalents at beginning of year........................ 83,688 100,604 154,716
------------ ------------ ------------
Cash and cash equivalents at end of year.............................. $ 81,373 $ 83,688 $ 100,604
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-6
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND ACQUISITION:
Collins & Aikman Corporation (the " Company") (formerly Collins & Aikman
Holdings Corporation and prior to that WCI Holdings Corporation) is a Delaware
corporation and a wholly-owned subsidiary of Collins & Aikman Holdings II
Corporation ("Holdings II") (formerly WCI Holdings II Corporation), a
corporation jointly owned by Blackstone Capital Partners L.P. ("Blackstone
Partners") and Wasserstein Perella Partners, L.P. ("WP Partners") (both of which
are Delaware limited partnerships), and their respective affiliates. The Company
was formed on September 21, 1988 to acquire all the outstanding common stock of
Collins & Aikman Group, Inc. ("Group") (formerly Wickes Companies, Inc.). On
October 25, 1988, the Company successfully completed the acquisition.
2. INITIAL PUBLIC OFFERING AND RECAPITALIZATION:
The Company plans to proceed with initial public offerings of 20.0 million
shares of common stock at an initial public offering price of between $15.00 and
$18.00 per share. The net proceeds to the Company together with borrowings under
certain new credit facilities aggregating $775 million and available cash will
be used to effect a defeasance and redemption or repayment of certain
indebtedness and preferred stock of the Company and certain of its subsidiaries.
In addition, at the expected time of the offering (assumed to be June 15, 1994)
all but approximately $9.7 million of the Company's Subordinated PIK Notes will
be exchanged for approximately 11.7 million shares of Common Stock, assuming an
initial public offering price of $16.50 per share. In connection with the
recapitalization, Holdings II, currently the sole stockholder of the Company,
will be merged into the Company and the Company will change its name to Collins
& Aikman Corporation. Concurrently, Group will be merged into its wholly-owned
subsidiary, Collins & Aikman Corporation, which will change its name to C&A
Products Co. ("C&A").
The Company's Certificate of Incorporation was amended on 1994 to
authorize 150 million shares of common stock and to reduce the par value of the
common stock from $1.00 to $.01 per share and authorized a 35,035 for 1 stock
split of all outstanding shares of common stock, prior to the effective date of
the prospectus. In connection therewith, the common stock and other paid in
capital accounts were adjusted for all periods to reflect the effect of this
stock split.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
FISCAL YEAR--The fiscal year of the Company ends on the last Saturday of
January. Fiscal 1993 and fiscal 1991 were the 52-week years which ended on
January 29, 1994 and January 25, 1992, respectively. Fiscal 1992 was the 53-week
year which ended on January 30, 1993.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE--Effective as of the
beginning of fiscal 1991, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" ("SFAS 106"). SFAS 106 requires accrual, during the period in which
eligible employees render service, of the expected cost of providing these
benefits to an employee and the employee's beneficiaries and covered dependents.
The Company has recorded the cumulative effect at January 26, 1991, net of tax
of $0, of $42.3 million as of the beginning of fiscal 1991.
CONSOLIDATION--The consolidated financial statements include the accounts
of the Company and its subsidiaries. All significant intercompany items have
been eliminated in consolidation.
F-7
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
INCOME TAXES--During fiscal 1992, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 supersedes Statement of Financial Accounting
Standards No. 96, of the same title, which the Company previously followed to
account for income taxes. The adoption of SFAS 109 did not impact the Company's
financial position or results of operations. (See also Note 16.)
FOREIGN CURRENCY TRANSLATION--Foreign currency accounts are translated in
accordance with Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation" ("SFAS 52"). SFAS 52 generally provides that the assets
and liabilities of foreign operations be translated at the current exchange
rates as of the end of the accounting period and that revenues and expenses be
translated using average exchange rates. The resulting translation adjustment
arising from foreign currency translation is accumulated as a separate component
of stockholder's equity. Translation adjustments during fiscal 1993, 1992 and
1991 were ($865,000), ($5.8) million and ($1.9) million, respectively.
CASH AND CASH EQUIVALENTS--Cash and cash equivalents include all cash
balances and highly liquid investments with an original maturity of three months
or less. Included in cash and cash equivalents at January 29, 1994 is $69.8
million held by Group and $8.6 million held by C&A.
INVENTORIES--Inventories are valued at the lower of cost or market, but not
in excess of net realizable value. Cost is determined on the first-in, first-out
basis.
OTHER CURRENT ASSETS--Other current assets at January 29, 1994 include
$22.8 million which is on deposit with an insurer to cover future deferred
payments.
PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment are stated at
cost. Provisions for depreciation are primarily computed on a straight-line
basis over the estimated useful lives of the assets, presently ranging from 3 to
40 years. Leasehold improvements are amortized over the lesser of the lease term
or the estimated useful life of the improvements.
GOODWILL--Until the write-off of goodwill as of October 30, 1993, goodwill
was being amortized by the straight-line method over 40 years. Amortization
applicable to continuing operations was $2.8 million, $3.7 million and $3.7
million for fiscal 1993, 1992 and 1991, respectively. Accumulated amortization
was $16.3 million at January 30, 1993. (See also Note 4.)
LOSS PER COMMON SHARE--Loss per common share data is computed based on the
average shares of common stock outstanding during each period. Loss per common
share data is also adjusted for dividends and accretion requirements on
redeemable preferred stock. Options issuable under the Company's stock option
plans are excluded because the effect would be immaterial.
RECLASSIFICATIONS--Certain reclassifications have been made to the fiscal
1992 and 1991 statements of operations and statements of cash flows and to the
January 30, 1993 balance sheet to conform to the fiscal 1993 presentation.
4. GOODWILL:
At October 30, 1993, before giving effect to the write-off described below,
the Company had $129.9 million of goodwill which arose as a result of the
acquisition of Group in December 1988. The substantial losses of Builders
Emporium and the inability to sell the Builders Emporium chain as an ongoing
entity left the Company with materially higher leverage and interest costs than
previously anticipated. The inability of the Company to sell its Dura division
at an acceptable price along with the sale of Kayser-Roth Corporation
("Kayser-Roth") at a price and on terms that were
F-8
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. GOODWILL:--(CONTINUED)
worse than management's prior expectations of value were additional adverse
factors. Prior to the end of the third quarter, management explored debt
recapitalization alternatives and the possibility of raising new equity capital.
The indications from the financial community at that time were that a debt
recapitalization was not likely to significantly reduce the Company's interest
burden and that raising new equity capital to deleverage the Company was not
feasible at that time. Although management of the Company, based on the facts
known to it at October 30, 1993, was expecting both cyclical and long-term
improvement in the results of operations, an analysis suggested that, given the
Company's capital structure, a deterioration of the financial condition of the
Company had occurred. As a result, the Company forecasted its operating results
forward 35 years, which approximated the remaining amortization period of the
Company's goodwill at October 30, 1993, to determine whether cumulative net
income would be sufficient to recover the goodwill. At October 30, 1993,
management believed that the projected future results were the most likely
scenario given the Company's capital structure at that time. In spite of the
fact that the results reflected in the forecasts showed improvement over the
historical results achieved during the past few years, the result was a
cumulative net loss. Accordingly, the Company wrote off its remaining goodwill
balance of $129.9 million during the third quarter ended October 30, 1993.
In early 1994, the Company is again exploring the feasibility of a debt
recapitalization and an initial public equity offering. The holders of $182.7
million of PIK Notes have now agreed, at the option of the Company, to exchange
those Notes for Shares of Common Stock (which will be restricted stock within
the meaning of rule 144 of the Securities Act), subject to certain conditions
including an initial public equity offering by the Company. Due largely to this
agreement, and also to improvements in the Company's performance based largely
on accelerating North American auto build rates and to increasing receptivity to
cyclical industries in the equity markets, the Company's financial advisers have
indicated that a debt recapitalization and initial public equity offering may be
feasible in fiscal 1994. If a refinancing or initial public equity offering is
not accomplished during fiscal 1994, the Company expects that it will have
adequate liquidity to meet cash requirements through the end of fiscal 1994 and
into fiscal 1995. Beyond that, the Company expects that it will require
alternative financings or asset sales to meet its cash requirements.
5. RESTRUCTURING COSTS:
At the end of the third quarter of fiscal 1993, the Company recorded a
restructuring charge of $24.0 million, principally related to the write-down of
certain surplus or under-utilized assets of the Company's Automotive Products
and Wallcoverings segments and to provide for the obsolescence of certain
manufacturing processes as a result of shifts in customer demand. During the
fourth quarter of fiscal 1993, management reevaluated its plan to restructure
these manufacturing facilities and, based on changes in product mix and
underlying improvement in certain of the Company's businesses, management has
concluded that the assets and facilities identified previously can be utilized
at a level of production that would not result in the impairment of the asset
values. Accordingly, in the fourth quarter of fiscal 1993, management has
revised its estimate and reversed these charges.
During fiscal 1992, the Company incurred certain identifiable costs in
connection with the restructuring of Wallcoverings. The restructuring costs,
aggregating $10 million, principally related to the closure of certain
manufacturing and distribution facilities.
F-9
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. DISCONTINUED OPERATIONS:
During fiscal 1991, Group reclassified the remaining businesses of Wickes
Manufacturing Company consisting of its Dura, Bumper and H. Koch & Sons ("H.
Koch") divisions as discontinued operations. In July 1992, Wickes Manufacturing
Company sold its Bumper and H. Koch divisions. As of the end of fiscal 1992,
Group reclassified Builders Emporium and the Engineering Group as discontinued
operations. Group recorded a loss on disposal of discontinued operations of $168
million in the fourth quarter of fiscal 1992 principally to provide for the
expected loss on the sale of Builders Emporium and to write-down the Engineering
Group to net realizable value. In March 1993, the Engineering Group was sold for
approximately $51 million.
As of the end of the second quarter of fiscal 1993, the Company determined
that it would be unable to sell Builders Emporium as an ongoing entity. The
Company recorded an additional loss on disposal of discontinued operations of
$125.5 million (i) to provide additional reserves for the significant reduction
in estimated proceeds from disposition and other costs in connection with the
sale or disposition of Builders Emporium inventory, real estate and other assets
and (ii) to provide for employee severance and other costs and to realize a
previously unrecognized loss as a result of the decision to retain Dura.
Builders Emporium's inventory was sold during the third and fourth quarters of
fiscal 1993 and substantially all accounts receivable and accounts payable
balances were settled as of January 29, 1994. Remaining assets and liabilities
of Builders Emporium relate primarily to real estate and insurance liabilities
which continue to be liquidated.
Kayser-Roth was reclassified as a discontinued operation at the end of the
third fiscal quarter ended October 30, 1993 and was sold on January 28, 1994 for
a total price of $170 million. In connection with the sale, Group received a
90-day senior unsecured bridge note from the purchaser which matures on April
28, 1994. The senior unsecured $70 million bridge note is exchangeable, at the
purchaser's option, for a three year senior note to be secured by a first lien
on substantially all of Kayser-Roth's assets. The principal amount of the note
is included in other noncurrent assets at January 29, 1994. The gain on disposal
of $28.1 million in the fourth quarter relates to the sale of Kayser-Roth.
The results of Builders Emporium, Kayser-Roth, the Engineering Group,
Bumper and H. Koch are classified as discontinued operations for all periods
presented. At the end of the second fiscal quarter ended July 31, 1993, Group
decided to retain the Dura business. The results of Dura are now classified in
the Automotive Products segment and prior reporting periods have been restated
to reflect Dura as a continuing operation.
Summarized statements of operations for periods prior to units being
classified as discontinued operations follow (in thousands):
<TABLE><CAPTION>
FISCAL YEAR ENDED
------------------------------------------
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
------------ ------------ --------------
<S> <C> <C> <C>
Sales............................................................... $ 274,297 $ 977,098 $ 1,042,377
Costs and expenses, other than interest............................. 268,083 998,705 1,010,729
Interest expense.................................................... 10,405 23,010 25,062
------------ ------------ --------------
Income (loss) before income taxes................................... (4,191) (44,617) 6,586
Income taxes........................................................ 584 5,700 2,951
------------ ------------ --------------
Income (loss) from discontinued operations.......................... $ (4,775) $ (50,317) $ 3,635
------------ ------------ --------------
------------ ------------ --------------
</TABLE>
F-10
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. DISCONTINUED OPERATIONS:--(CONTINUED)
The above summarized results include Builders Emporium and the Engineering
Group through January 30, 1993 and Kayser-Roth through the third quarter ended
October 30, 1993 (the respective dates at which these businesses were
reclassified as discontinued operations). The summarized statement of operations
for fiscal 1991 also includes Bumper and H. Koch through their date of sale.
Sales of Builders Emporium in fiscal 1993 aggregated approximately $410 million
and sales of Kayser-Roth for the fourth quarter of fiscal 1993 aggregated
approximately $95 million. Interest expense of $13.1 million (including $5.5
million of interest expense which was reserved for Builders Emporium and
Kayser-Roth), $19.7 million and $22.1 million during fiscal 1993, 1992 and 1991,
respectively, has been allocated to discontinued operations based upon the ratio
of net book value of discontinued operations (including reserves for loss on
disposal) to consolidated invested capital. Interest expense incurred by
Builders Emporium and Kayser-Roth subsequent to their reclassification as
discontinued operations aggregated $2.2 million. Such amounts were charged to
discontinued operations reserves.
In October 1993, Group received $35.1 million from Wickes Lumber Company in
exchange for a Wickes Lumber Company promissory note and warrant that Group had
received in partial consideration for the sale of Wickes Lumber Company in 1988.
Fees paid or accrued to Blackstone Partners and WP Partners for services
related to divestitures aggregated $4.2 million and $500,000 during fiscal 1993
and 1992, respectively. Divestiture fees in fiscal 1993 include $400,000 paid
and $100,000 accrued to Blackstone Partners for advisory services in connection
with the sale of Builders Emporium's inventory, real estate and other assets.
The majority of Builders Emporium's leased properties have been assigned to
third parties. In addition, Group has assigned leases in connection with the
divestiture of Kayser-Roth, the Engineering Group, Wickes Manufacturing Company
and other divestitures. Although Group has obtained releases from the lessors of
certain properties, Group remains contingently liable under most of the leases.
Group's future liability for these leases, in management's opinion, based on the
facts presently known to it, will not have a material effect on the Company's
consolidated financial condition or future results of operations.
F-11
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
7. ACCOUNTS AND NOTES RECEIVABLE, NET:
Accounts and notes receivable, net, are summarized below (in thousands):
<TABLE><CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
------------ ------------
<S> <C> <C>
Accounts and notes receivable................................... $ 207,439 $ 171,403
Less allowance for doubtful accounts............................ (7,071) (6,748)
------------ ------------
$ 200,368 $ 164,655
------------ ------------
------------ ------------
</TABLE>
8. INVENTORIES:
Inventory balances are summarized below (in thousands):
<TABLE><CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
------------ ------------
<S> <C> <C>
Raw materials................................................... $ 70,762 $ 62,663
Work in process................................................. 24,739 26,121
Finished goods.................................................. 80,561 77,080
------------ ------------
$ 176,062 $ 165,864
------------ ------------
------------ ------------
</TABLE>
9. PROPERTY, PLANT AND EQUIPMENT, NET:
Property, plant and equipment, net, are summarized below (in thousands):
<TABLE><CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
------------ ------------
<S> <C> <C>
Land and improvements........................................... $ 28,347 $ 20,747
Buildings....................................................... 109,275 115,406
Machinery and equipment......................................... 372,208 332,946
Leasehold improvements.......................................... 1,421 1,431
Construction in progress........................................ 21,863 20,733
------------ ------------
533,114 491,263
Less accumulated depreciation and amortization.................. (240,514) (198,829)
------------ ------------
$ 292,600 $ 292,434
------------ ------------
------------ ------------
</TABLE>
Depreciation and amortization expense of property, plant and equipment
applicable to continuing operations was $42.2 million, $45.5 million and $43.9
million for fiscal 1993, 1992 and 1991, respectively.
10. ACCRUED EXPENSES:
Accrued expenses are summarized below (in thousands):
<TABLE><CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
------------ ------------
<S> <C> <C>
Payroll and employee benefits................................... $ 42,063 $ 39,633
Interest........................................................ 19,242 24,107
Insurance....................................................... 15,152 25,122
Other........................................................... 65,894 80,140
------------ ------------
$ 142,351 $ 169,002
------------ ------------
------------ ------------
</TABLE>
F-12
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. LONG-TERM DEBT:
Long-term debt is summarized below (in thousands):
<TABLE><capiton>
JANUARY 29, JANUARY 30,
1994 1993
------------ ------------
<S> <C> <C>
Senior indebtedness of Group and its subsidiaries:
Mortgage notes..................................................................... $ 1,464 $ 1,841
Notes payable to banks............................................................. 7,595 7,891
Notes payable to others............................................................ 8,266 4,744
C&A credit facility, average interest rate of 5.5% and 5.3%........................ 137,129 191,155
Debentures due 2005, interest rate 7 1/2% until January 31, 1994, and 10%
thereafter....................................................................... 138,694 138,694
Sinking fund debentures due 1994, interest rate 12%................................ -- 40,982
Industrial revenue bonds due through 2006, interest rates from 5% to 7 5/8%........ 11,648 12,754
Unamortized debt discount.......................................................... (33,397) (38,833)
------------ ------------
271,399 359,228
------------ ------------
Senior subordinated indebtedness of Group:
Senior subordinated debentures due 2001, interest rate 11 7/8%..................... 347,414 347,414
Unamortized debt discount.......................................................... (46,532) (49,840)
------------ ------------
300,882 297,574
------------ ------------
Subordinated indebtedness of Group:
Subordinated notes due 1995, interest rate 15%..................................... 137,359 137,359
Subordinated debentures due 1997, interest rate 11 3/8%............................ 24,500 24,500
Unamortized debt discount.......................................................... (2,446) (3,131)
------------ ------------
159,413 158,728
------------ ------------
Indebtedness of the Company:
Subordinated PIK Notes due December 2, 1996, replacement notes issuable at option
of Company through maturity date of December 1998, interest rate 14%............ 191,860 166,675
------------ ------------
Total debt........................................................................... 923,554 982,205
Less current maturities.............................................................. (25,895) (61,287)
------------ ------------
$ 897,659 $ 920,918
------------ ------------
------------ ------------
</TABLE>
Group's C&A subsidiary consummated a $225 million credit agreement with a
syndicate of banks on May 22, 1991 that expires on May 15, 1998 (the "C&A Credit
Agreement"). During fiscal 1991, C&A borrowed $152 million under the C&A Credit
Agreement. Out of these borrowings, $120 million was paid to Group as a dividend
to be used for general corporate purposes. During fiscal 1992, C&A paid Group
dividends aggregating $110 million, borrowed an additional $56.0 million and
made principal repayments under the C&A Credit Agreement of $10.3 million.
During fiscal 1993, C&A paid Group dividends aggregating $30 million, borrowed
an additional $17.0 million and made principal repayments under the C&A Credit
Agreement of $71.0 million. Availability under the C&A Credit Agreement is
determined monthly based upon C&A's receivables balance. The C&A Credit
Agreement permits C&A to pay additional dividends to Group only if C&A satisfies
a minimum liquidity requirement of $25 million and then limits the amount of
total dividends to $175 million plus 90% (or 100% if certain specified ratios
are met) of C&A's net income (excluding the impact of
F-13
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. LONG-TERM DEBT:--(CONTINUED)
SFAS 106) subsequent to April 27, 1991. As of January 29, 1994, an additional
$54.8 million was available to C&A under the C&A Credit Agreement. Although as
of that date approximately $83 million of additional dividends could be paid to
Group under the dividend restrictions in the C&A Credit Agreement, other
financial covenants in the C&A Credit Agreement would limit the amount of
dividends to approximately $47 million. C&A and its subsidiaries are separate
corporate entities and the assets of C&A and its subsidiaries are available
first and foremost to satisfy the claims of the creditors of C&A and such
subsidiaries. At January 29, 1994, receivables and fixed assets pledged as
collateral under the C&A Credit Agreement aggregated approximately $168 million
and $104 million, respectively.
On March 12, 1993, Kayser-Roth and a bank consummated a $40 million credit
agreement. Kayser-Roth initially borrowed $35 million under the credit agreement
of which $26 million was paid to Group as a dividend. On May 27, 1993,
Kayser-Roth completed a $75 million credit facility (the "Kayser-Roth Credit
Agreement") with a group of banks to replace the $40 million credit agreement
and, on July 6, 1993, Kayser-Roth paid an additional dividend of $26 million to
Group. Group used approximately $41 million of the proceeds from the original
and the replacement Kayser-Roth credit facilities to redeem all of its
outstanding 12% Sinking Fund Debentures due January 31, 1994 on July 7, 1993.
Group repaid the outstanding borrowings under the Kayser-Roth Credit Agreement
of $66 million with a portion of the cash proceeds from the sale of Kayser-Roth.
There are limitations on the payment of dividends contained in various debt
agreements of Group. Currently, the most restrictive of such limitations is
contained in the indenture, as amended, (the "11 7/8% Indenture") governing the
11 7/8% Senior Subordinated Debentures due 2001 (the "11 7/8% Securities").
Since January 26, 1991, no additional dividends could be paid to the Company
under such indenture. Under these provisions as of January 29, 1994, Group would
have needed to earn an additional $868 million of consolidated net income (as
defined in the 11 7/8% Indenture) in order to eliminate the deficit in its
dividend capacity (assuming no change in the other factors used to determine
Group's dividend capacity).
Under the terms of the 11 7/8% Indenture, Group is required to redeem $138
million aggregate principal amount of 11 7/8% Securities on each June 1 from
1993 through 2000 ("Mandatory Redemptions") and to repay the remaining
outstanding 11 7/8% Securities at maturity on June 1, 2001. Under the terms of
the 11 7/8% Indenture, if Adjusted Net Worth (as such term is defined in the 11
7/8% Indenture) is equal to or less than $700 million on the last day of any
fiscal quarter (the "Minimum Equity Test"), Group would be required to begin on
the last day of the second fiscal quarter thereafter (unless the Minimum Equity
Test is satisfied at the end of the intervening fiscal quarter) semi-annual
redemptions ("Accelerated Redemptions") of $138 million aggregate principal
amount of 11 7/8% Securities until all the 11 7/8% Securities are redeemed or
until the Minimum Equity Test is again satisfied. Group can reduce its
obligation to make any cash Mandatory Redemption or Accelerated Redemption
payment through the application of previously redeemed or purchased and canceled
11 7/8% Securities as permitted by the 11 7/8% Indenture. Group has previously
delivered for cancellation $1,033 million in aggregate principal amount of 11
7/8% Securities, which are available for such purpose. Group satisfied the
Minimum Equity Test at the end of fiscal 1993. On that date, Adjusted Net Worth
was $753.5 million. If Group had not satisfied the Minimum Equity Test at that
date and did not subsequently satisfy such test, the first cash redemption
payment (after giving effect to credits for previously acquired 11 7/8%
Securities) would be required at the end of the fiscal quarter ending January
1997. By comparison, if Group continues to satisfy the Minimum Equity Test at
all times or cures any failure of such test prior to any
F-14
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. LONG-TERM DEBT:--(CONTINUED)
accelerated cash redemption payment becoming due, no cash redemption payment
will be required until June 1, 2000.
All the consolidated long-term debt of the Company other than the
Subordinated PIK Notes is debt of Group and its subsidiaries. At January 29,
1994, Blackstone Partners and WP Partners were holders of the Company's
Subordinated PIK Notes with aggregate balances of approximately $89.2 million
and $93.5 million, respectively. The remainder of the Subordinated PIK Notes
outstanding aggregated approximately $9.2 million at January 29, 1994. The
Subordinated PIK Notes mature December 2, 1996, unless extended by the holders.
The Company anticipates that, at least if certain debt of Group continues to be
outstanding or is refinanced with similarly restrictive debt, the Company will
not have sufficient cash to pay the Subordinated PIK Notes in cash at maturity
in 1996 and, unless such maturity is extended by the holders, the Company will
issue replacement notes as permitted by the terms of the Subordinated PIK Notes.
If issued, each replacement note will mature December 8, 1998, with sinking fund
payments equal to one-third of the outstanding principal amount due December
1996 and 1997. The Company's ability to satisfy the sinking fund payments and
the final payment at maturity of the replacement notes, if issued, will depend
on the availability of cash at the Company. The Company anticipates that, at
least if certain debt of Group continues to be outstanding or is refinanced with
similarly restrictive debt, the Company will not have sufficient cash to satisfy
the sinking fund payments or the final payment at maturity of the replacement
notes, if issued, unless the sinking fund and final maturity dates are extended
by the holders. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" elsewhere herein. The Company is not permitted to pay
cash dividends on the common stock of the Company until payment in full of the
Subordinated PIK Notes, unless waived by the holders. The Company may purchase
or redeem shares of its common stock so long as the aggregate equity investment
in the common stock of the Company is at least $75 million.
The 11 3/8% subordinated debentures of Group become callable on May 1,
1995. The remaining indebtedness of Group is callable at various premiums at
Group's option.
Debt discount applicable to securities issued by Group is based on the
present values of amounts to be paid determined at market interest rates in
effect at the time the Company acquired Group.
Maturities of long-term debt during each of the five fiscal years
subsequent to January 29, 1994 are $25.9 million, $170.9 million, $127.2
million, $103.8 million and $84.5 million, respectively. Total interest paid by
the Company on all indebtedness was $101.5 million, $105.0 million and $120.6
million for fiscal 1993, 1992 and 1991, respectively.
12. LONG-TERM LEASES AND LEASE COMMITMENTS:
Group is lessee under various long-term operating leases for land and
buildings for periods up to forty years. The majority of these leases contain
renewal provisions. In addition, Group leases transportation, operating and
administrative equipment for periods ranging from one to ten years.
F-15
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
12. LONG-TERM LEASES AND LEASE COMMITMENTS:--(CONTINUED)
At January 29, 1994, future minimum lease payments under operating leases
are as follows (in thousands):
FISCAL YEAR ENDING
----------------------------------
January 1995...................... $ 16,568
January 1996...................... 12,520
January 1997...................... 9,165
January 1998...................... 4,128
January 1999...................... 1,143
Later years....................... 2,171
----------
$ 45,695
----------
----------
Rental expense of continuing operations under operating leases was $19.2
million, $19.0 million and $15.4 million for fiscal 1993, 1992 and 1991,
respectively. Obligations under capital leases are not significant.
13. EMPLOYEE BENEFIT PLANS:
Subsidiaries of the Company have in effect defined benefit pension plans
covering substantially all employees who meet eligibility requirements. Plan
benefits are generally based on years of service and employee's compensation
during their years of employment. Funding of retirement costs for these plans
complies with the minimum funding requirements specified by the Employee
Retirement Income Security Act. Assets of the pension plans are held in a Master
Trust which invests primarily in equity and fixed income securities.
Net periodic pension cost of continuing operations for fiscal 1993, 1992
and 1991 include the following components (in thousands):
<TABLE><CAPTION>
FISCAL YEAR ENDED
----------------------------------------
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Service cost.......................................................... $ 5,232 $ 5,313 $ 5,240
Interest cost on projected benefit obligation and
service cost........................................................ 6,843 6,220 5,947
Actual return on assets............................................... (6,334) 746 (13,771)
Net amortization and deferral......................................... (1,836) (9,298) 5,869
------------ ------------ ------------
$ 3,905 $ 2,981 $ 3,285
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-16
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. EMPLOYEE BENEFIT PLANS:--(CONTINUED)
The following table sets forth the plans' funded status and amounts
recognized in the Company's consolidated balance sheets at January 29, 1994 and
January 30, 1993 (in thousands):
<TABLE><CAPTION>
JANUARY 29, 1994 JANUARY 30, 1993
---------------------------- ----------------------------
PLANS FOR WHICH PLANS FOR WHICH
---------------------------- ----------------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation.............................. $ (21,352) $ (82,248) $ (15,096) $ (76,493)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Accumulated benefit obligation......................... $ (22,214) $ (86,450) $ (15,580) $ (80,023)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Projected benefit obligation........................... $ (24,317) $ (89,433) $ (17,314) $ (82,658)
Plan assets at fair value................................ 24,761 66,794 20,089 72,929
------------- ------------- ------------- -------------
Projected benefit obligation less than (in excess of)
plan assets............................................ 444 (22,639) 2,775 (9,729)
Unrecognized net loss.................................... 1,855 20,431 147 19,489
Prior service cost not yet recognized in net periodic
pension cost........................................... 416 (9,208) 441 (14,336)
Adjustment required to recognize minimum liability....... -- (7,841) -- (2,639)
------------- ------------- ------------- -------------
Pension asset (pension liability) recognized in the
consolidated balance sheets............................ $ 2,715 $ (19,257) $ 3,363 $ (7,215)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7% and 8% at January 29, 1994 and January 30,
1993, respectively. The expected rate of increase in future compensation levels
is 4% and 5.5% and the expected long-term rate of return on plan assets is 9%
and 10% in fiscal 1993 and 1992, respectively.
The provisions of Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions" ("SFAS 87") require companies with any
plans that have an unfunded accumulated benefit obligation to recognize an
additional minimum pension liability, an offsetting intangible pension asset
and, in certain situations, a contra-equity balance. In accordance with the
provisions of SFAS 87, the consolidated balance sheets at January 29, 1994 and
January 30, 1993 include an intangible pension asset of $94,000 and $136,000; an
additional minimum pension liability of $7.8 million and $2.6 million; and a
contra-equity balance of $7.7 million and $2.5 million, respectively.
Subsidiaries of the Company sponsor defined contribution plans covering
employees who meet eligibility requirements. Subsidiary contributions are based
on a formula as specified in the plan agreements. Contributions related to
continuing operations were $4.7 million, $4.0 million and $3.4 million for
fiscal 1993, 1992 and 1991, respectively.
Subsidiaries of the Company have provided postretirement life, health and
medical coverage for certain retirees under plans currently in effect. Many of
the subsidiaries' domestic employees may be eligible for benefits if they reach
retirement age while employed by the Company.
Effective as of the beginning of fiscal 1991, the Company adopted Statement
of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions". The Statement requires that costs
of such benefits be accrued as a form of deferred
F-17
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. EMPLOYEE BENEFIT PLANS:--(CONTINUED)
compensation earned during the period that employees render service, rather than
the previously permitted practice of accounting for such costs as incurred. The
Company has elected to recognize the cumulative effect of this change in
accounting principle as of the beginning of fiscal 1991.
The following table sets forth the amount included in the Company's
consolidated balance sheets (in thousands):
<TABLE><CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
------------ ------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees........................................................................... $ 48,559 $ 56,497
Fully eligible active plan participants............................................ 12,425 13,145
Other active plan participants..................................................... 13,845 26,366
Unrecognized prior service gain from plan amendments............................... 23,764 --
Unrecognized net gain.............................................................. 7,408 8,869
------------ ------------
Total postretirement benefit obligation......................................... $ 106,001 $ 104,877
------------ ------------
------------ ------------
</TABLE>
Net periodic postretirement benefit cost of continuing operations,
determined on the accrual basis, included the following components (in
thousands):
<TABLE><CAPTION>
FISCAL YEAR ENDED
----------------------------------------
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Service cost--benefits attributed to service during the year.......... $ 2,131 $ 2,168 $ 2,066
Interest cost on accumulated postretirement benefit obligation........ 4,385 6,865 6,574
Amortization of unrecognized net gain................................. (200) -- --
------------ ------------ ------------
Net periodic postretirement benefit cost.............................. $ 6,316 $ 9,033 $ 8,640
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7% at January 29, 1994 and 8% at January
30, 1993. The plans are unfunded.
For measurement purposes, a 14% annual rate of increase in the per capita
cost of covered health care benefits was assumed for fiscal 1993; the rate was
assumed to decrease 1% per year to 6% for fiscal 2001 and remain at that level
thereafter. The health care cost trend rate assumption has an impact on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rates by 1 percentage point in each year would increase the accumulated
postretirement benefit obligation as of January 29, 1994 by $878,000 and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by $103,000.
Effective April 1, 1994, the Company amended the postretirement benefit
plan which covers substantially all of the eligible current and retired
employees of the Company's continuing operations. Pursuant to the amendment, the
Company's obligation for future inflation of health care costs
F-18
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. EMPLOYEE BENEFIT PLANS:--(CONTINUED)
will be limited to 6% per year through March 31, 1998. Subsequent to March 1998,
the Company will not provide coverage for inflation in healthcare costs.
14. COMMON STOCK AND PREFERRED STOCK:
At January 29, 1994 and January 30, 1993, 1,000 shares of $1.00 par value
common stock were authorized, issued and outstanding. See also Note 2.
In connection with the 1989 merger of a wholly owned subsidiary of the
Company into Group, approximately 4,250,000 shares of 15 1/2% Cumulative
Exchangeable Redeemable Preferred Stock ("Merger Preferred Stock"), par value
$.01 (authorized 16,000,000 shares), were issued. In addition, approximately
6,500 shares of Merger Preferred Stock may be issued upon exchange of
outstanding shares of Group's 15 1/2% Junior Cumulative Exchangeable Redeemable
Preferred Stock ("Intermediate Preferred Stock"), at the holder's option. Each
share of preferred stock has a liquidation preference of $25. To the extent the
Company shall have funds legally available therefor, the preferred stock is
required to be fully redeemed on April 13, 1999 at its liquidation preference
per share together with all accrued and unpaid dividends, whether or not
declared. Each share is exchangeable, at the Company's option, for 15 1/2%
subordinated debentures with a principal amount equal to the liquidation
preference of the shares being exchanged (plus accrued and unpaid dividends).
Dividends on the Merger Preferred Stock are payable quarterly and dividends
accruing on or prior to February 1, 1995 may be paid, at the option of the
Company, in cash (at the rate of $3.875 per year) or in additional shares of
preferred stock (at the rate of .04 shares for each $1 of dividends not paid in
cash). Dividends accruing after February 1, 1995 may be paid only in cash. To
date, all dividends have been paid in additional shares of preferred stock and
at January 29, 1994 and January 30, 1993 approximately 6,268,000 and 5,183,000
shares, respectively, were outstanding. Since January 25, 1992, and as of
January 29, 1994, total liabilities of the Company exceeded total assets based
on its balance sheet and therefore, under Delaware law, the payment of dividends
on the Merger Preferred Stock required a determination by the Board of
Directors, based on a current valuation of the Company's assets and liabilities,
that adequate surplus exists under Delaware law for the purpose of paying
dividends. The Board of Directors made that determination with respect to the
dividend payable May 2, 1994, but it is not possible to predict whether or not
such a determination will be able to be made with respect to future dividends.
In addition, the Company's ability to pay cash dividends on the Merger Preferred
Stock will depend on the availability of cash at the Company. As discussed in
Note 11, since January 26, 1991, no additional cash dividends to the Company
have been permitted under the most restrictive provisions in the existing debt
agreements of Group, and the Company does not expect Group to be permitted to
pay dividends during fiscal 1994 or in the foreseeable future beyond fiscal
1994, at least so long as the 11 7/8% Securities are outstanding. Even if the 11
7/8% Securities are refinanced, there can be no assurance that any new debt
would not contain similarly restrictive covenants. Dividends accrued during
fiscal 1993, 1992 and 1991, including accretion for difference between
redemption value and fair value at date of issuance, aggregated approximately
$23.7 million, $18.8 million and $15.8 million, respectively.
At January 29, 1994 and January 30, 1993, 30,000,000 shares of $.10 par
value preferred stock of Group were authorized and approximately 1,806,000
shares of convertible preferred stock, Series A were outstanding. Each share of
Series A preferred stock of Group, which has an annual dividend of $2.50 per
share, is convertible into 0.50 shares of Merger Preferred Stock of the Company,
subject to subsequent adjustment pursuant to its terms.
F-19
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
15. STOCK OPTION PLANS:
Effective in January 1994, the Company adopted the 1993 Employee Stock
Option Plan ("1993 Plan") for certain key employees. The 1993 Plan was created
for the special purpose of rewarding key employees for the appreciation earned
through prior service under the Company's previous equity share plan that was
terminated on October 29, 1993. The Company granted options to acquire 3,119,466
shares of the Common Stock at an average exercise price of $4.57 per share. The
majority of these options vest 40% in June 1995 with the remaining shares
vesting in June 1996. In connection with the adoption of this plan, the Company
recorded a charge of $26.7 million for management equity plan expense.
In addition, effective in April 1994 the 1994 Employee Stock Option Plan
("1994 Plan") was adopted as a successor to the 1993 Plan to facilitate awards
to key employees and to consultants. The 1994 Plan authorizes the issuance of up
to 2,980,534 shares of Common Stock and provides that no options may be granted
after 10 years from the effective date of this plan. Options for 169,634 shares
of Common Stock at an average exercise price of $5.52 per share were granted in
April 1994. Management equity plan expense of $1.3 million will be recognized as
the options ratably vest over the next three years.
Upon a change of control, as defined, all of the above options become fully
vested and exercisable.
16. INCOME TAXES:
During the first quarter of fiscal of 1992, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes" ("SFAS 109"). SFAS 109 supersedes Statement of Financial
Accounting Standards No. 96, of the same title, which the Company previously
followed to account for income taxes. The adoption of SFAS 109 did not impact
the Company's financial position or results of operations.
Deferred income taxes are provided for the temporary differences between
the financial reporting and tax basis of the Company's assets and liabilities.
The components of the net deferred tax liability as of January 29, 1994 and
January 30, 1993 were as follows (in thousands):
<TABLE><CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
------------ ------------
<S> <C> <C>
Deferred tax assets:
Employee benefits including postretirement benefits................................ $ 69,358 $ 68,825
Net operating loss carryforwards................................................... 151,913 91,817
Investment tax credit carryforwards................................................ 11,900 14,567
Alternative minimum tax credits.................................................... 7,000 9,523
Other liabilities and reserves..................................................... 130,056 133,586
Valuation allowance................................................................ (296,624) (248,224)
------------ ------------
Total deferred tax asset...................................................... 73,603 70,094
------------ ------------
Deferred tax liabilities:
Property, plant and equipment...................................................... 51,258 50,213
Unamortized debt discount.......................................................... 22,985 24,704
------------ ------------
Total deferred tax liability.................................................. 74,243 74,917
------------ ------------
Net deferred tax liability........................................................... $ 640 $ 4,823
------------ ------------
------------ ------------
</TABLE>
F-20
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. INCOME TAXES:--(CONTINUED)
The valuation allowances of $296.6 million at January 29, 1994 and $248.2
million at January 30, 1993 were established because, in the Company's
assessment, it was uncertain whether the net deferred tax assets would be
realized.
The provisions for income taxes applicable to continuing operations for
fiscal 1993, 1992 and 1991 are summarized as follows (in thousands):
<TABLE><CAPTION>
FISCAL YEAR ENDED
----------------------------------------
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Current
Federal............................................................. $ -- $ (6,677) $ 315
State and local..................................................... 6,462 4,896 5,470
Foreign............................................................. 7,697 5,739 2,193
------------ ------------ ------------
14,159 3,958 7,978
------------ ------------ ------------
Deferred
State and local..................................................... (16) (5,936) 3,339
Foreign............................................................. (2,866) (1,178) 637
------------ ------------ ------------
(2,882) (7,114) 3,976
------------ ------------ ------------
Income taxes (benefit)........................................... $ 11,277 $ (3,156) $ 11,954
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
Domestic and foreign components of income (loss) from continuing operations
before income taxes are summarized as follows (in thousands):
<TABLE><CAPTION>
FISCAL YEAR ENDED
----------------------------------------
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Domestic.............................................................. $ (172,183) $ (60,966) $ (69,454)
Foreign............................................................... 10,135 12,469 8,072
------------ ------------ ------------
$ (162,048) $ (48,497) $ (61,382)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
A reconciliation between income taxes computed at the statutory Federal
rate (35% for fiscal 1993 and 34% for fiscal 1992 and 1991) and the provisions
for income taxes applicable to continuing operations is as follows (in
thousands):
<TABLE><CAPTION>
FISCAL YEAR ENDED
----------------------------------------
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Amount at statutory Federal rate....................................... $ (56,717) $ (16,489) $ (20,870)
State and local income taxes, net of Federal income tax benefit........ 6,229 (2,893) 5,814
Foreign tax more than Federal tax at statutory rate.................... 1,284 321 86
Amortization and write-off of goodwill................................. 46,421 1,258 1,368
Valuation allowance.................................................... 16,095 15,103 --
Net operating loss generated........................................... -- -- 26,146
Other.................................................................. (2,035) (456) (590)
------------ ------------ ------------
Income taxes (benefit)............................................... $ 11,277 $ (3,156) $ 11,954
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-21
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. INCOME TAXES:--(CONTINUED)
In addition, the valuation allowance was increased by $38.4 million in
fiscal 1993 and $79.0 million in fiscal 1992 to offset deferred tax assets
arising from the losses of discontinued operations.
At January 29, 1994, the Company had the following tax attribute
carryforwards available for Federal income tax purposes (in thousands):
<TABLE><CAPTION>
EXPIRATION
AMOUNT DATES
------------ -------------
<S> <C> <C>
Net operating losses--regular tax
Preacquisition, subject to limitations............................................. $ 134,000 1996-2003
Postacquisition, unrestricted...................................................... 300,000 2006-2008
------------
$ 434,000
------------
------------
Net operating losses--alternative minimum tax
Preacquisition, subject to limitations............................................. $ 118,000 1996-2002
Postacquisition, unrestricted...................................................... 236,000 2006-2008
------------
$ 354,000
------------
------------
Investment tax and other credits
Preacquisition, subject to limitations............................................. $ 11,900 1994-2003
------------
------------
Alternative minimum tax credits...................................................... $ 7,000 No limit
------------
------------
</TABLE>
The regular tax net operating loss carryforwards include amounts related to
Kayser-Roth and subsidiaries for preacquisition regular tax purposes, subject to
limitations, of $35 million and postacquisition regular tax purposes,
unrestricted, of $62 million. Alternative minimum tax net operating loss
carryovers include amounts related to Kayser-Roth and subsidiaries of $33
million for preacquisition alternative minimum tax purposes, subject to
limitations, and $51 million for postacquisition alternative minimum tax
purposes, unrestricted. Although the sale agreement provides that an election
will be made (under Section 338(h)(10) of the Internal Revenue Code) to treat
the sale as an asset sale for Federal income tax purposes, there are provisions
whereby the purchaser of Kayser-Roth and the Company can reevaluate this
decision. If the purchaser and the Company mutually agree to treat the
transaction as a stock sale rather than an asset sale, the net operating losses
related to Kayser-Roth and subsidiaries will be transferred from the Company to
the purchaser.
The Internal Revenue Service has examined the returns of Collins & Aikman
Corporation and subsidiaries for the last three fiscal years prior to its
acquisition by Group in December 1986. Certain adjustments were agreed to and
the effect of those adjustments, principally reductions to the net operating
loss carryforwards and investment tax credit carryforwards, are reflected in the
amounts discussed above. In the course of an examination of the Company's
Federal income tax returns, the IRS has challenged the availability of $176.6
million of the Company's approximately $434.0 million of current NOLs. The
examination is at a preliminary stage and management believes that the basis for
the IRS' position is unclear. Management disputes the IRS' challenge and
believes that substantially all of the NOLs should be available (subject to
certain limitations) to offset its income, if any, in the future. If the IRS
were to maintain its position and all or a majority of such position were to be
upheld in litigation, the amount of the NOLs available to the Company in future
years would be materially reduced.
F-22
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. INCOME TAXES:--(CONTINUED)
The Company has entered into a tax sharing agreement with Group and its
subsidiaries. The tax sharing agreement provides for payments to (from) the
Company for utilization of the Company's tax losses by Group and its
subsidiaries. The agreement provides for tax sharing payments calculated in
accordance with Federal tax regulations. Tax sharing payments received from
Group during fiscal 1993, 1992 and 1991 were $0, $4.5 million and $7.2 million,
respectively. The Company's tax sharing payable to Group of $8.8 million at
January 29, 1994 and the related fiscal 1992 tax sharing benefit result from the
utilization of tax loss carrybacks. This payable to Group is currently expected
to be settled through offset against future years tax sharing receivable
amounts.
Income taxes paid, net of refunds, were $3.3 million, $16.8 million and
$19.0 million for fiscal 1993, 1992 and 1991, respectively.
17. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
CASH AND CASH EQUIVALENTS, ACCOUNTS AND NOTES RECEIVABLE, AND ACCOUNTS
PAYABLE-- The carrying amount approximates fair value because of the short
maturity of these instruments.
LONG-TERM RECEIVABLES AND INVESTMENTS--Fair value approximates carrying
value.
LONG-TERM DEBT--The fair value of Group's publicly-traded long-term debt is
based upon the quoted market price of the issues. The fair value of the
remaining long-term debt of the Company approximates the carrying value.
PREFERRED STOCK--The fair value of the Company's redeemable preferred stock
and the Series A Preferred Stock of Group is based upon the quoted market price.
The fair value of the redeemable preferred stock of Group approximates the
carrying value.
The estimated fair values of the Company's financial instruments are
summarized as follows (in thousands):
<TABLE><CAPTION>
JANUARY 29, 1994 JANUARY 30, 1993
---------------------------- --------------------------
CARRYING ESTIMATED FAIR CARRYING ESTIMATED
AMOUNT VALUE AMOUNT FAIR VALUE
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
Long-term receivables and investments................... $ 71,046 $ 71,046 $ 29,344 $ 29,344
Long-term debt.......................................... 923,554 1,017,927 982,205 997,450
Preferred stock......................................... 122,681 161,200 98,948 75,650
</TABLE>
18. INFORMATION ABOUT SEGMENTS OF THE COMPANY'S OPERATIONS:
The Company reclassified its industry segments during 1993 to realign its
products based on primary customer groups. Businesses related to the automotive
industry which were part of Specialty Textiles have been renamed Automotive
Products. The decorative fabrics and floorcoverings businesses have been
reclassified Interior Furnishings. Previously, the floorcovering business was
part of the Specialty Textiles segment. Wallcovering products which were
previously part of the Home Furnishings segment have been renamed Wallcoverings.
Industry segment information has been restated for fiscal 1992 and 1991.
F-23
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
18. INFORMATION ABOUT SEGMENTS OF THE COMPANY'S OPERATIONS:--(CONTINUED)
For fiscal 1993, 1992 and 1991, sales to General Motors Corporation
approximated 16.1%, 15.3% and 17.2%, respectively, and sales to Chrysler
Corporation approximated 10.0%, 10.2% and 8.3%, respectively, of total
consolidated sales. These sales were part of the Automotive Products segment.
Information about the Company's segments for fiscal 1993, 1992 and 1991
follows (in thousands):
<TABLE><CAPTION>
OPERATING DEPRECIATION
FISCAL YEAR ENDED NET INCOME AND CAPITAL
JANUARY 29, 1994 SALES (LOSS)(B) AMORTIZATION ASSETS(B) EXPENDITURES
- - --------------------------------------- -------------- ----------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Automotive Products.................... $ 677,867 $ (2,261) $ 25,873 $ 379,637 $ 29,208
Interior Furnishings................... 407,201 12,175 12,521 226,417 11,768
Wallcoverings.......................... 220,449 (17,856) 6,229 125,387 3,751
-------------- ----------- ------------- -------------- --------------
1,305,517 (7,942)(c) 44,623 731,441 44,727
Corporate items........................ -- (38,282)(d) 384 187,384 196
-------------- ----------- ------------- -------------- --------------
1,305,517 (46,224) 45,007 918,825 44,923
Discontinued operations................ -- -- 16,340 -- 11,355
-------------- ----------- ------------- -------------- --------------
$ 1,305,517 $ (46,224) $ 61,347 $ 918,825 $ 56,278
-------------- ----------- ------------- -------------- --------------
-------------- ----------- ------------- -------------- --------------
</TABLE>
<TABLE><CAPTION>
OPERATING DEPRECIATION
FISCAL YEAR ENDED NET INCOME AND CAPITAL
JANUARY 30, 1993(A) SALES (LOSS)(B) AMORTIZATION ASSETS(B) EXPENDITURES
- - --------------------------------------- -------------- ----------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Automotive Products.................... $ 643,827 $ 52,684 $ 29,419 $ 403,148 $ 20,563
Interior Furnishings................... 391,778 37,520 13,003 240,292 14,295
Wallcoverings.......................... 241,895 1,141 6,545 170,516 3,045
-------------- ----------- ------------- -------------- --------------
1,277,500 91,345 (c) 48,967 813,956 37,903
Corporate items........................ -- (24,461)(d) 198 137,301 306
-------------- ----------- ------------- -------------- --------------
1,277,500 66,884 49,165 951,257 38,209
Discontinued operations................ -- -- 22,541 190,177 15,972
-------------- ----------- ------------- -------------- --------------
$ 1,277,500 $ 66,884 $ 71,706 $ 1,141,434 $ 54,181
-------------- ----------- ------------- -------------- --------------
-------------- ----------- ------------- -------------- --------------
</TABLE>
<TABLE><CAPTION>
OPERATING DEPRECIATION
FISCAL YEAR ENDED NET INCOME AND CAPITAL
JANUARY 25, 1992 SALES (LOSS)(B) AMORTIZATION ASSETS(B) EXPENDITURES
- - -------------------------------------- -------------- ----------- ------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Automotive Products................... $ 610,325 $ 55,598 $ 26,843 $ 421,958 $ 24,220
Interior Furnishings.................. 336,773 28,278 13,915 241,980 9,519
Wallcoverings......................... 237,218 (6,088) 6,628 196,238 5,093
-------------- ----------- ----------- -------------- ------------
1,184,316 77,788 47,386 860,176 38,832
Corporate items....................... -- (26,681)(d) 215 131,467 96
-------------- ----------- ----------- -------------- ------------
1,184,316 51,107 47,601 991,643 38,928
Discontinued operations............... -- -- 22,915 308,661 22,971
-------------- ----------- ----------- -------------- ------------
$ 1,184,316 $ 51,107 $ 70,516 $ 1,300,304 $ 61,899
-------------- ----------- ----------- -------------- ------------
-------------- ----------- ----------- -------------- ------------
</TABLE>
- - ---------------
(a) The fiscal year ended January 30, 1993 included fifty-three weeks.
(Footnotes continued on following page)
F-24
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
18. INFORMATION ABOUT SEGMENTS OF THE COMPANY'S OPERATIONS:--(CONTINUED)
(Footnotes continued from preceding page)
(b) Operating income is determined by deducting all operating expenses,
including restructuring costs, goodwill write-off and other costs,
from revenues. Operating expenses do not include interest expense.
Assets of the business segments at January 30, 1993 and January 25,
1992 include goodwill. Operating income reflects related amortization.
<TABLE><CAPTION>
FISCAL YEAR ENDED
--------------------------
JANUARY 29, JANUARY 30,
1994 1993
------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C>
(c) Segment operating income before goodwill write-off and restructuring
costs:....................................................................... $ 121,912 $ 101,345
Goodwill write-off:
Automotive Products........................................................ (68,379) --
Interior Furnishings....................................................... (31,604) --
Wallcoverings.............................................................. (29,871) --
Restructuring costs.......................................................... -- (10,000)
------------ ------------
Segment operating income (loss).............................................. $ (7,942) $ 91,345
------------ ------------
------------ ------------
</TABLE>
(d) Corporate items in fiscal 1993 include $26.7 million of management
equity plan expense. Corporate items in fiscal 1993, 1992 and 1991
each include operating management and advisory fees to affiliates
of the Company of $5.0 million.
19. COMMITMENTS AND CONTINGENCIES:
During 1991, a Fifth Consolidated Amended Complaint was filed in In re Ivan
F. Boesky Securities Litigation, involving numerous class actions and individual
claims against a variety of defendants including the Company. Among other
things, this complaint asserts claims on behalf of certain of the Company's
former preferred stockholders alleging a conspiracy to manipulate the price of
stock in 1986 for the purpose of triggering a redemption of certain outstanding
preferred stock of the Company. In 1992, Advanced Development & Engineering
Centre ("ADEC"), a division of an indirect subsidiary of the Company, filed
arbitration demands against the Pakistan Ordnance Factories Board ("POF")
concerning ADEC's installation of a munitions facility for POF. POF filed
arbitration counterclaims alleging that ADEC's alleged breach of contract caused
POF to lose its entire investment in the munitions facility.
The ultimate outcome of the legal proceedings to which the Company is a
party will not, in the opinion of the Company's management based on the facts
presently known to it, have a material effect on the Company's consolidated
financial condition or future results of operations.
In 1988, the Federal government filed suit in the U.S. District Court for
the District of Rhode Island against the Company's former Kayser-Roth subsidiary
and others in connection with a Superfund site in Rhode Island. The District
Court held Kayser-Roth liable under CERCLA for all past and future response
costs. By Amended Administrative Order issued June 4, 1991, the EPA directed
Kayser-Roth to implement the remedies set forth in its Record of Decision issued
September 18, 1990. Since the beginning of fiscal 1990 to date, Kayser-Roth has
paid approximately $2.9 million for past response costs, prejudgment interest
and remediation. Kayser-Roth is in the process of complying with the remainder
of the order. The Company has agreed to indemnify Kayser-Roth with respect to
this matter.
F-25
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
19. COMMITMENTS AND CONTINGENCIES:--(CONTINUED)
The Company is subject to increasingly stringent Federal, state and local
environmental laws and regulations that (i) affect ongoing and divested
operations and properties and may increase capital costs and operating expenses
and (ii) impose or increase the liability for the costs of investigation and
remediation and certain other damages related to on-site and off-site soil and
groundwater contamination. The Company's management believes that it has
obtained, and is in material compliance with, all material environmental permits
and approvals necessary to conduct its various businesses.
The Company is legally or contractually responsible or alleged to be
responsible for the investigation and remediation of contamination at various
sites. It also has received notices that it is a PRP in a number of proceedings.
The Company may be named as a PRP at other sites in the future, including with
respect to divested and acquired businesses. It is a normal risk of operating a
manufacturing business that liability may be incurred for investigating and
remediating on-site and off-site contamination. The Company is currently engaged
in investigation or remediation at certain sites. It is difficult to estimate
the total cost of investigation and remediation due to various factors including
incomplete information regarding particular sites and other PRP's, uncertainty
regarding the extent of environmental problems and the Company's share, if any,
of liability for such problems, the selection of alternative compliance
approaches, the complexity of environmental laws and regulations and changes in
cleanup standards and techniques. When it has been possible to provide
reasonable estimates of the Company's liability with respect to environmental
sites, provisions have been made in accordance with generally accepted
accounting principles. However, there can be no assurance that the Company has
identified or properly assessed all potential environmental liability arising
from the activities or properties of the Company, its present and former
subsidiaries and their corporate predecessors. As of January 29, 1994, the
Company has established reserves of approximately $30.8 million for the
estimated future costs related to all its 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.
20. QUARTERLY FINANCIAL DATA (UNAUDITED):
Summarized quarterly financial data for fiscal 1993 and 1992 follows (in
thousands):
<TABLE><CAPTION>
INCOME (LOSS) FROM
CONTINUING OPERATIONS
--------------------------
BEFORE AFTER INCOME NET INCOME
FISCAL YEAR ENDED JANUARY 29, 1994 NET SALES GROSS PROFIT INCOME TAXES TAXES (LOSS)
- - --------------------------------------- -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
First Quarter.......................... $ 339,043 $ 78,948 $ (2,202) $ (5,473) $ (9,069)
Second Quarter......................... 289,694 61,230 (18,343) (20,628) (149,430)
Third Quarter.......................... 334,629 84,445 (149,725) (153,821) (153,871)
Fourth Quarter......................... 342,151 85,104 8,222 6,597 34,706
-------------- ------------ ------------ ------------ ------------
$ 1,305,517 $ 309,727 $ (162,048) $ (173,325) $ (277,664)
-------------- ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------
</TABLE>
F-26
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
20. QUARTERLY FINANCIAL DATA (UNAUDITED):--(CONTINUED)
<TABLE><CAPTION>
LOSS FROM
CONTINUING OPERATIONS
--------------------------
BEFORE AFTER INCOME
FISCAL YEAR ENDED JANUARY 30, 1993 NET SALES GROSS PROFIT INCOME TAXES TAXES NET LOSS
- - --------------------------------------- -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
First Quarter.......................... $ 319,488 $ 72,564 $ (8,507) $ (11,385) $ (17,655)
Second Quarter......................... 319,713 74,081 (9,846) (12,524) (17,059)
Third Quarter.......................... 314,873 70,819 (9,380) (7,452) (16,723)
Fourth Quarter (a)..................... 323,426 81,563 (20,764) (13,980) (212,221)
-------------- ------------ ------------ ------------ ------------
$ 1,277,500 $ 299,027 $ (48,497) $ (45,341) $ (263,658)
-------------- ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------
</TABLE>
- - ---------------
(a) The fourth quarter of fiscal 1992 included fourteen weeks.
The quarterly financial data above has been restated to reflect Kayser-Roth
as a discontinued operation and Dura as a continuing operation.
Loss from continuing operations before income taxes in the third quarter of
fiscal 1993 includes the write-off of goodwill of $129.9 million and
restructuring costs of $24.0 million. The fourth quarter of fiscal 1993 includes
management equity plan expense of $26.7 million offset by the reversal of the
third quarter restructuring costs. (See Note 5). Net loss in fiscal 1993
includes provisions for loss (gain) on disposal of discontinued operations of
$2.2 million, $125.4 million and ($28.1) million in the first, second and fourth
quarters, respectively. Loss from continuing operations before income taxes in
fiscal 1992 includes restructuring costs of $10.0 million in the fourth quarter.
Net loss in fiscal 1992 includes provision for loss on disposal of discontinued
operations of $168.0 million in the fourth quarter.
The Company's operations are not subject to significant seasonal
influences.
F-27
<PAGE>
- - ------------------------------------------ -----------------------------------
- - ------------------------------------------ -----------------------------------
NO PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES OTHER 20,000,000 SHARES
THAN THE SECURITIES TO WHICH IT
RELATES OR AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF
COLLINS & AIKMAN THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER COLLINS & AIKMAN
ANY CIRCUMSTANCES, CREATE ANY CORPORATION CORPORATION
IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
COMMON STOCK
------------------ (PAR VALUE $.01 PER SHARE)
PAGE
----
Available Information................ 2
Incorporation of Certain Documents
by Reference....................... 2
Prospectus Summary................... 3
Certain Considerations............... 10
Dividends............................ 13 -----------------
Dilution............................. 14
Use of Proceeds and Consolidation.... 15
Capitalization....................... 16 PROSPECTUS
Selected Financial Data.............. 17
Unaudited Pro Forma Consolidated
Financial Data..................... 18 -----------------
Management's Discussion and
Analysis of Financial Condition
and Results of Operations.......... 23
Business............................. 32
Management........................... 50
Principal Stockholders and Certain
Relationships...................... 58
New Credit Facilities................ 59
Description of the Capital Stock..... 63
Underwriting......................... 67
Legal Opinions....................... 69 GOLDMAN, SACHS & CO.
Experts.............................. 69
Index to Financial Statements........ F-1 MERRILL LYNCH & CO.
------------------ WASSERSTEIN PERELLA
SECURITIES, INC.
UNTIL , 1994 (25 DAYS AFTER
THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REPRESENTATIVES OF THE REPRESENTATIVES OF THE
UNDERWRITERS REQUIRED TO DELIVER A PROSPECTUS. UNDERWRITERS
THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- - ------------------------------------------- ----------------------------------
- - ------------------------------------------- ----------------------------------
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
SUBJECT TO COMPLETION, DATED APRIL 19, 1994
20,000,000 SHARES
COLLINS & AIKMAN CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
---------------------
Of the 20,000,000 shares of Common Stock offered, 4,000,000 shares are
being offered hereby in an international offering outside the United States and
16,000,000 shares are being offered in a concurrent United States offering.
Assuming no exercise of the Underwriters' over-allotment options, all of the
shares of Common Stock offered are being sold by the Company. The initial public
offering price and the aggregate underwriting discount per share will be
identical for both Offerings. See "Underwriting".
Prior to the Offerings, there has been no public market for the Common
Stock of the Company. It is currently estimated that the initial public offering
price per share of Common Stock will be between $15 and $18. For factors to be
considered in determining the initial public offering price, see "Underwriting".
SEE "CERTAIN CONSIDERATIONS" FOR CERTAIN CONSIDERATIONS RELEVANT TO AN
INVESTMENT IN THE COMMON STOCK.
Application has been made to list the Common Stock on the New York Stock
Exchange under the symbol "CKC".
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
INITIAL PUBLIC UNDERWRITING PROCEEDS TO
OFFERING PRICE DISCOUNT(1) COMPANY (2)
-------------- ------------- -------------
Per Share.............. $ $ $
Total(3)............... $ $ $
- - ---------------
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933.
(2) Before deducting estimated expenses of $ payable by the Company.
(3) The Selling Stockholders have granted the International Underwriters an
option for 30 days to purchase up to an additional 600,000 shares at the
initial public offering price, less the underwriting discount, solely to
cover over-allotments. Additionally, the Selling Stockholders have granted
the U.S. Underwriters an option for 30 days to purchase up to an additional
2,400,000 shares at the initial public offering price, less the underwriting
discount, solely to cover over-allotments. If such options are exercised in
full, the total initial public offering price, underwriting discount and
proceeds to the Selling Stockholders will be $ , $
and $ , respectively. See "Underwriting".
---------------------
The shares offered hereby are offered severally by the International
Underwriters, as specified herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. It is expected
that certificates for the shares will be ready for delivery in New York, New
York, on or about , 1994.
GOLDMAN SACHS INTERNATIONAL
MERRILL LYNCH INTERNATIONAL LIMITED
WASSERSTEIN PERELLA SECURITIES, INC.
---------------------
The date of this Prospectus is , 1994.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
CERTAIN UNITED STATES TAX CONSEQUENCES
TO NON-UNITED STATES HOLDERS
This is a general discussion of certain U.S. Federal income and estate tax
consequences of the ownership and disposition of Common Stock by a non-U.S.
holder. A "non-U.S. holder" is a person or entity that, for U.S. Federal income
tax purposes, is a non-resident alien individual or a foreign corporation
partnership, estate or trust. An individual may be deemed to be a resident of
the United States in several circumstances, including being present in the
United States on at least 31 days in the calendar year and for an aggregate of
183 days taken into account during the three-year period ending with the current
calendar year. For purposes of this determination, all of the days present in
the United States during the current year, one-third of the days present during
the immediately preceding year, and one-sixth of the days present during the
second preceding year are taken into account. Resident aliens are subject to
U.S. Federal tax as if they were U.S. citizens and residents.
This discussion is based on the U.S. Internal Revenue Code of 1986 and
administrative and judicial interpretations as of the date hereof, all of which
may be changed. This discussion does not address all the aspects of U.S. Federal
income and estate taxation that may be relevant to non-U.S. holders in light of
their particular circumstances. Nor does it address tax consequences under the
laws of any U.S. state, municipality or other taxing jurisdiction or under the
laws of any country other than the United States.
Prospective holders should consult their own tax advisors about the
particular tax consequences to them of holding and disposing of Common Stock.
DIVIDENDS
Generally, dividends paid to a non-U.S. holder of Common Stock that are not
effectively connected with the holder's conduct of a trade or business within
the United States (or attributable to a U.S. permanent establishment of the
holder, if an income tax treaty applies) will be subject to Federal withholding
tax at a 30% rate or such lower rate as may be specified by an applicable income
tax treaty. Under current U.S. Treasury regulations, such dividends paid to an
address outside the United States in a foreign country may be presumed to be
paid to a resident of such country for purposes of the withholding tax. Under
current interpretation of U.S. Treasury regulations, unless the payor has
knowledge to the contrary the same presumption applies to determine the
applicability of a reduced rate of withholding under a U.S. tax treaty. Thus,
non-U.S. holders receiving dividends at addresses outside the United States are
not currently required to file forms with the United States Internal Revenue
Service (the "IRS") in order to obtain the benefit of an applicable treaty rate.
If there is excess withholding on a person eligible for a treaty benefit, the
person can file for a refund with the IRS.
Under U.S. Treasury regulations which were proposed in 1984 but are not
currently in effect, to claim the benefits of a tax treaty a non-U.S. holder of
Common Stock would have to file certain forms accompanied by statements from a
competent authority of the country of his residence attesting to the holder's
eligibility to claim treaty benefits.
Generally, upon the filing of a Form 4224 by a non-U.S. holder with the
Company, no withholding is required on dividends that are effectively connected
with the non-U.S. holders's conduct of a trade or business within the United
States. Instead, the effectively connected dividends are subject to tax at rates
applicable to U.S. citizens and U.S. corporations. Effectively connected
dividends received by a non-U.S. corporation may be subject to an additional
"branch profits tax" at a 30% rate (or a lower rate under an applicable income
tax treaty) when such dividends are deemed repatriated from the United States.
67
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
GAIN ON DISPOSITION OF COMMON STOCK
Generally, a non-U.S. holder will not be subject to U.S. Federal income tax
on gain realized from a sale or other disposition of Common Stock unless (i) the
gain is effectively connected with the holder's conduct of a U.S. trade or
business and is attributable to such holder's office or other fixed place of
business within the United States, (ii) the Company is (or has been within the
preceding five years) a "U.S. real property holding corporation," or (iii) in
the case of a non-U.S. holder who is a non-resident alien individual and holds
Common Stock as a capital asset, such holder is present in the United States for
183 or more days during the taxable year of sale and either (a) such holder's
"tax home" for U.S. federal income tax purposes is within the United States or
(b) the gain is attributable to such holder's office or other fixed place of
business within the United States and no treaty exemption applies. The Company
is not, has at no time been, and does not anticipate becoming, a "U.S. real
property holding corporation." Any gain subject to U.S. Federal income tax will
be taxed under the regime applicable to U.S. citizens and U.S. corporations.
Non-U.S. corporations might be subject to the "branch profits tax" regime as
well.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
Generally, the Company must report to the IRS the amount of dividends paid,
the name and address of the recipient and the amount, if any, of tax withheld. A
similar report is sent to the holder. Pursuant to tax treaties or other
agreements, the IRS may make such reports available to tax authorities in the
recipient's country of residence. No further information reporting and no backup
withholding is required with respect to dividends paid on Common Stock to a
non-U.S. holder at an address outside the United States.
If the proceeds of a disposition of Common Stock are paid over by or
through a U.S. office of a broker, the payment is subject to information
reporting and possible backup withholding at a flat 31% rate unless the
disposing holder certifies as to his name, address and non-U.S. status or
otherwise establishes an exemption. Generally, United States information
reporting and backup withholding will not apply to a payment of disposition
proceeds if the payment is made outside the United States through a non-U.S.
office of a non-U.S. broker. However, U.S. information reporting requirements
(but not backup withholding) will apply to a payment of disposition proceeds
outside the United States if (A) the payment is made through an office outside
the United States of a broker that either (i) is a U.S. person, (ii) derives 50%
or more of its gross income for certain periods from the conduct of a trade or
business in the United States or (iii) is a "controlled foreign corporation" for
United States Federal income tax purposes, (B) the broker fails to maintain
documentary evidence that the holder is a non-U.S. holder and that certain
conditions are met, and (C) the holder fails to establish that it otherwise is
entitled to an exemption.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained.
FEDERAL ESTATE TAXES
Common Stock held at death by an individual who is neither a citizen nor a
resident of the United States for U.S. Federal estate tax purposes will be
subject to U.S. Federal estate tax, unless an applicable estate tax treaty
provides otherwise. Estates of nonresident aliens are generally allowed a
statutory credit which is the equivalent of an exclusion of $60,000 of assets
from the U.S. estate tax. Tax treaties may permit a larger credit.
68
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the International Underwriters named
below, and each of such International Underwriters, for whom Goldman Sachs
International, Merrill Lynch International Limited and Wasserstein Perella
Securities, Inc. are acting as representatives, has severally agreed to purchase
from the Company, the respective number of shares of Common Stock set forth
opposite its name below:
NUMBER OF
SHARES OF
COMMON
UNDERWRITER STOCK
----------- ----------
Goldman Sachs International...............................
Merrill Lynch International Limited.......................
Wasserstein Perella Securities, Inc.......................
----------
Total...................................... 4,000,000
----------
----------
Under the terms and conditions of the Underwriting Agreement, the
International Underwriters are committed to take and pay for all of the shares
offered hereby, if any are taken.
The International Underwriters propose to offer the shares of Common Stock
in part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus, and in part to certain securities dealers at
such price less a concession of $ per share. The International
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to certain brokers and dealers. After the shares of
Common Stock are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the representatives.
The Company and the Selling Stockholders have entered into an underwriting
agreement (the "U.S. Underwriting Agreement") with the underwriters of the U.S.
offering (the "U.S. Underwriters") providing for the concurrent offer and sale
of 16,000,000 shares of Common Stock in a U.S. offering in the United States.
The initial public offering price and aggregate underwriting discounts and
commissions per share for the two offerings are identical. The closing of the
International Offering made hereby is a condition to the closing of the U.S.
Offering, and vice versa. The representatives of the U.S. Underwriters are
Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and
Wasserstein Perella Securities, Inc.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
International Underwriters has agreed that, as a part of the distribution of the
shares offered hereby and subject to certain exceptions, it will (i) not,
directly or indirectly, offer, sell or deliver shares of Common Stock (a) in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") or to any U.S. persons or (b) to any person who it
believes intends to reoffer, resell or deliver the shares in the United States
or to any U.S. persons, and (ii) cause any dealer to whom it may sell such
shares at any concession to agree to observe a similar restriction. The term
U.S. person shall mean, for purposes
69
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
of this paragraph: (a) any individual who is a resident of the United States or
(b) any corporation, partnership or other entity organized in or under the laws
of the United States or any political subdivision thereof and whose office most
directly involved with the purchase is located in the United States. Each of the
U.S. Underwriters named herein has agreed pursuant to the Agreement Between
that, as a part of the distribution of the shares offered as a part of the U.S.
Offering, and subject to certain exceptions, it will only offer, sell or deliver
shares of Common Stock, directly or indirectly, in the United States and to U.S.
persons.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any shares so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
The Selling Stockholders have granted the International Underwriters an
option exercisable for 30 days after the date of this Prospectus to purchase up
to an aggregate of 600,000 additional shares of Common Stock solely to cover
over-allotments, if any. If the International Underwriters exercise their
over-allotment option, the International Underwriters have severally agreed,
subject to certain conditions, to purchase approximately the same percentage
thereof that the number of shares to be purchased by each of them, as shown in
the foregoing table, bears to the 4,000,000 shares of Common Stock offered. The
Company has granted the U.S. Underwriters a similar option to purchase up to an
aggregate of 2,400,000 additional shares of Common Stock.
The Company and the Partners have agreed that during the period beginning
from the date of this Prospectus and continuing to and including the date 180
calendar days after the date of the Prospectus, not to offer, sell, contract to
sell or otherwise dispose of any securities of the Company (other than pursuant
to employee stock option plans existing, or on the conversion or exchange of
convertible or exchangeable securities outstanding, on the date of this
Prospectus) which are substantially similar to the shares of Common Stock or
which are convertible or exchangeable into securities which are substantially
similar to the shares of the Common Stock without the prior written consent of
the representatives, except for the shares of Common Stock offered in connection
with the concurrent U.S. and International Offerings.
Each International Underwriter has also agreed that (a) it has not offered
or sold, and will not offer or sell, in the United Kingdom, by means of any
document, any shares of Common Stock other than to persons whose ordinary
business it is to buy or sell shares or debentures, whether as principal or
agent, or in circumstances which do not constitute an offer to the public within
the meaning of the Companies Act 1985 of Great Britain, (b) it has complied, and
will comply with, all applicable provisions of the Financial Services Act of
1986 of Great Britain with respect to anything done by it in relation to the
shares of Common Stock in, from or otherwise involving the United Kingdom, and
(c) it has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issuance of the
shares of Common Stock to a person who is of a kind described in Article 9(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1988 (as amended) of Great Britain or is a person to whom the document may
otherwise lawfully be issued or passed on.
Buyers of shares of Common Stock offered hereby may be required to pay
stamp taxes and other charges in accordance with the laws and practice of the
country of purchase in addition to the initial public offering price.
The provisions of Schedule E to the By-Laws of the National Association of
Securities Dealers, Inc. apply to the offering because Wasserstein Perella
Securities, Inc. is deemed to be an affiliate of the Company for purposes of
Schedule E. See "Principal Stockholders and Certain Relationships". Accordingly,
the initial public offering price can be no higher than that recommended by a
"qualified
70
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
independent underwriter" meeting certain standards. In accordance with this
requirement, Goldman, Sachs & Co. has served in such role and has recommended a
price in compliance with the requirements of Schedule E. Goldman, Sachs & Co. in
its role as qualified independent underwriter has performed due diligence
investigations and reviewed and participated in the preparation of this
Prospectus and the Registration Statement of which this Prospectus forms a part.
The representatives of the U.S. Underwriters have informed the Company that the
U.S. Underwriters do not intend to confirm sales to any account over which they
exercise discretionary authority.
Prior to the Offerings, there has been no public market for the Common
Stock. The initial public offering price was negotiated among the Company, the
Partners and the representatives of the U.S. Underwriters and the International
Underwriters. Among the factors considered in determining the initial public
offering price of the Common Stock, in addition to prevailing market conditions,
was the Company's historical performance, estimates of the business potential
and earnings prospects of the Company, an assessment of the Company's management
and the consideration of the above factors in relation to market valuation of
companies in related businesses.
Application has been made to list the Common Stock on the New York Stock
Exchange. In order to meet one of the requirements for listing the Common Stock
on the New York Stock Exchange, the U.S. Underwriters have undertaken to sell
lots of 100 or more shares to a minimum of 2,000 beneficial holders.
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act.
From time to time, Goldman, Sachs & Co. has provided financial advisory
services to Blackstone Partners, for which it has received customary fees in the
ordinary course of business. From time to time, each of Merrill Lynch & Co. and
Wasserstein Perella Securities, Inc. have provided financial advisory services
to the Company and certain affiliates of the Partners, for which each has
received customary fees in the ordinary course of business.
71
<PAGE>
[ALTERNATIVE WRAP FOR INTERNATIONAL PROSPECTUS]
- - ------------------------------------------ -----------------------------------
- - ------------------------------------------ -----------------------------------
NO PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED. THIS
PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES OTHER 20,000,000 SHARES
THAN THE SECURITIES TO WHICH IT
RELATES OR AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN
WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF
COLLINS & AIKMAN THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER COLLINS & AIKMAN
ANY CIRCUMSTANCES, CREATE ANY CORPORATION CORPORATION
IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE.
COMMON STOCK
------------------ (PAR VALUE $.01 PER SHARE)
PAGE
----
Available Information................ 2
Incorporation of Certain Documents
by Reference....................... 2
Prospectus Summary................... 3
Certain Considerations............... 10
Dividends............................ 13 -----------------
Dilution............................. 14
Use of Proceeds and Consolidation.... 15
Capitalization....................... 16 PROSPECTUS
Selected Financial Data.............. 17
Unaudited Pro Forma Consolidated
Financial Data..................... 18 -----------------
Management's Discussion and
Analysis of Financial Condition
and Results of Operations.......... 23
Business............................. 32
Management........................... 50
Principal Stockholders and Certain
Relationships...................... 58
New Credit Facilities................ 59
Description of the Capital Stock..... 63
Certain United States Tax Consequences
to Non-United States Holders....... 67
Underwriting......................... 69
Legal Opinions....................... 71 GOLDMAN SACHS INTERNATIONAL
Experts.............................. 71
Index to Financial Statements........ F-1 MERRILL LYNCH INTERNATIONAL
LIMITED
------------------ WASSERSTEIN PERELLA
SECURITIES, INC.
UNTIL , 1994 (25 DAYS AFTER
THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE COMMON STOCK,
WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REPRESENTATIVES OF THE REPRESENTATIVES OF THE
UNDERWRITERS REQUIRED TO DELIVER A PROSPECTUS. UNDERWRITERS
THIS IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING
AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- - ------------------------------------------- ----------------------------------
- - ------------------------------------------- ----------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated expenses of the Company in
connection with the issuance and distribution of the securities being
registered, other than underwriting compensation and subject to further
contingencies:
SEC Registration Fee............................... $ 142,759
NASD Filing Fee.................................... 30,500
NYSE Listing Fee................................... *
Legal Fees and Expenses............................ *
Transfer Agent and Registrar Fee................... *
Blue Sky Fees and Expenses......................... *
Accounting Fees and Expenses....................... *
Printing and Engraving Expenses.................... *
Miscellaneous...................................... *
------------
Total............................................ $ *
------------
------------
- - ---------------
* To be supplied by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware (the "DGCL")
authorizes the Company to indemnify each director and officer of the Company
against expenses (including attorney's fees, judgments, fines and amounts paid
in settlement) actually and reasonably incurred in connection with the defense
or settlement of any threatened, pending or completed legal proceedings in which
he is involved by reason of the fact that he is or was a director or officer of
the Company or is or was serving as a director, officer, employee or agent of
another corporation or organization at the request of the Company, provided that
he acted in good faith and in a manner that he reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, provided he had no reasonable cause to believed
that his conduct was unlawful. The determination whether a director or officer
has met the applicable standard of conduct may be made by (1) the Board of
Directors by vote of a quorum consisting of directors who were not parties to
such action, suit or proceedings, or (2) if such a quorum is not obtainable, or
even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel, in a written opinion, or (3) by the stockholders.
Indemnification is mandatory in any instance in which the director or officer is
successful on the merits or otherwise in the defense of any proceeding or any
claim, issue or matter thereof. If the legal proceeding, however, is by or in
the right of the Company, Section 145 provides that the director or officer may
not be indemnified in respect to any claim, issue or matter as to which he shall
have been adjudged to be liable to the Company unless a court determines
otherwise. Section 145 also authorizes the payment of expenses incurred in
defense of any proceeding in advance of its final disposition upon the receipt
by the Company of an undertaking of the director or officer to repay the amounts
so advanced if it is ultimately determined that he is not entitled to indemnity.
It further provides that the power to indemnify includes the power to indemnify
persons who served as directors and officers of Holdings II prior to its merger
into the Company, as well as persons who cease to be directors or officers of
the Company.
Article Seventh of the Restated Certificate, provides that, to the fullest
extent permitted by the DGCL, as now or hereafter in effect, no director of the
Company shall be personally liable to the Company or its stockholders for
monetary damages for any breach of his fiduciary duty as a
II-1
<PAGE>
director. However, under Section 102(b)(7) of the DGCL, a director cannot be
absolved from liability (1) for any breach of his duty of loyalty to the Company
or its stockholders, (2) for acts or omissions that are not in good faith or
involve intentional misconduct or a knowing violation of the law, (3) under
Section 174 of the DGCL, or (4) for any transaction from which the director
derived an improper personal benefit.
Article XI of the Company's By-Laws, a copy of which is filed as part of
Exhibit 3.02, provides that any person made a party to any action, suit or
proceeding by reason of the fact that he is or was a director or officer of the
Company or is or was a director, officer, employee or agent of any corporation
for which he served as such at the request of the Company (including service
with respect to employee benefit plans), shall be indemnified by the Company to
the fullest extent authorized by the DGCL against all expenses, including
attorneys' fees, reasonably incurred by him in connection therewith. Such right
of indemnification includes the right to be paid, in advance, all expenses
incurred in connection with the defense of a proceeding (upon receipt of any
required undertaking) and shall not be deemed exclusive of any other rights to
which such director or officer may be entitled apart from the indemnification
provisions of said Article XI of the Company's By-Laws. Additionally, the
Company intends to maintain directors and officers liability insurance that
insures the directors and officers of the Company against any expense, liability
or loss to the extent such insurance is available at prices the Company
determines are reasonable.
ITEM 16. EXHIBITS.
(a) Exhibits. See Exhibit Index on page E-1.
(b) Financial Statement Schedules. See Index to Financial Statement
Schedules on page S-1.
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of Prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in The City of New York, State of New York, on the 19th day of April
1994.
COLLINS & AIKMAN
HOLDINGS CORPORATION
By: /s/ DAVID A. STOCKMAN
................................
David A. Stockman
Co-Chairman of the
Board of Directors
By: /s/ BRUCE WASSERSTEIN
................................
Bruce Wasserstein
Co-Chairman of the Board
of Directors
POWER OF ATTORNEY
Each person whose signature appears below on this Registration Statement
hereby constitutes and appoints David A. Stockman and Randall J. Weisenburger,
and each of them, with full power to act without the other, his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities (until
revoked in writing) to sign any and all amendments (including post-effective
amendments and amendments thereto) to this Registration Statement on Form S-2 of
Collins & Aikman Holdings Corporation, and to file the same, with all exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary fully to all intents and purposes as he might or could
do in person thereby ratifying and confirming all that said attorneys-in-fact
and agents or either of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
II-3
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE><CAPTION>
NAME TITLE DATE
------ ------- ------
<S> <C> <C>
/s/ DAVID A. STOCKMAN Co-Chairman of the Board of Directors April 19, 1994
..............................................
David A. Stockman
/s/ BRUCE WASSERSTEIN Co-Chairman of the Board of Directors April 19, 1994
..............................................
Bruce Wasserstein
/s/ STEPHEN A. SCHWARZMAN President and Director April 19, 1994
.............................................. (Principal Executive Officer)
Stephen A. Schwarzman
/s/ DAVID J. MCKITTRICK Principal Financial and Accounting Officer April 19, 1994
..............................................
David J. McKittrick
/s/ RANDALL J. WEISENBURGER Deputy Chairman and Director April 19, 1994
..............................................
Randall J. Weisenburger
/s/ JAMES R. BIRLE Director April 19, 1994
..............................................
James R. Birle
/s/ W. TOWNSEND ZIEBOLD, JR. Director April 19, 1994
..............................................
W. Townsend Ziebold, Jr.
II-4
<PAGE>
EXHIBIT INDEX
Please note that in the following description of exhibits, the title of any
document entered into, or filing made, prior to July 15, 1992 reflects the name
of the entity a party thereto or filing, as the case may be, at such time.
Accordingly, documents and filings described below may refer to WCI Holdings II
Corporation, WCI Holdings Corporation or Wickes Companies, Inc., if such
documents and filings were made prior to July 15, 1992.
</TABLE>
<TABLE><CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION NUMBER
- - --------- ------------------------------------------------------------------------------------------ ---------------
<S> <C> <C>
*1.1 Form of Underwriting Agreement (U.S. Version).
*1.2 Form of Underwriting Agreement (International Version).
4.1 Certificate of Incorporation of the Company, as amended, is hereby incorporated by
reference to Collins & Aikman Holdings Corporation's Report on Form 10-K for the fiscal
year ended January 30, 1993.
*4.2 Certificate of Amendment of Certificate of Incorporation of Collins & Aikman Holdings
Corporation dated April , 1994.
4.3 By-laws of the Company is hereby incorporated by reference to Collins & Aikman Holdings
Corporation's Report on Form 10-K for the fiscal year ended January 30, 1993.
*4.4 Specimen Stock Certificate for the Common Stock.
4.5 Indenture dated as of May 1, 1985, pursuant to which 11 3/8% Usable Subordinated
Debentures due 1997 of Collins & Aikman Group, Inc. (formerly named Wickes Companies,
Inc.) were issued is hereby incorporated by reference to Exhibit 4(f) of Wickes
Companies, Inc.'s Current Report on Form 8-K dated May 21, 1985 (SEC File No. 1-6761).
*4.6 Form of New Credit Agreement to be entered into by Collins & Aikman Group, Inc. and a
syndicate of banks and other financial institutions for whom Chemical Bank will act as
agent.
*5. Opinion of Cravath, Swaine & Moore as to the legality of the shares being issued.
10.1 Employment Agreements dated as of June 16, 1989 between Wickes Companies, Inc. and certain
executive officers are hereby incorporated by reference to Exhibit 10.1 of Wickes
Companies, Inc. Form 10-K for the fiscal year ended January 27, 1990.
10.2 First Amendment to Employment Agreements dated as of March 20, 1990 between Wickes
Companies, Inc. and certain executive officers is hereby incorporated by reference to
Exhibit 10.2 of Wickes Companies, Inc.'s Form 10-K for the fiscal year ended January 27,
1990.
10.3 Employment Agreement dated as of July 18, 1990 between Wickes Companies, Inc. and an
executive officer is hereby incorporated by reference to Exhibit 10.3 of Wickes
Companies, Inc. Form 10-K for the fiscal year ended January 26, 1991.
10.4 Agreement dated as of March 23, 1991 between Collins & Aikman Group, Inc. and an executive
officer is hereby incorporated by reference to Exhibit 10.6 of Collins & Aikman Holdings
Corporation's Report on Form 10-K for the fiscal year ended January 30, 1993.
10.5 First Amendment to Agreement, dated as of April 4, 1994 between Collins & Aikman Group,
Inc. and an executive officer is hereby incorporated by reference to Exhibit 10.14 of
Collins & Aikman Holdings Corporation's Report on Form 10-K for the fiscal year ended
January 29, 1994.
10.6 Letter Agreement dated as of May 16, 1991 and Employment Agreement dated as of July 22,
1992 between Collins & Aikman Corporation and an executive officer are hereby
incorporated by reference to Exhibit 10.7 of Collins & Aikman Holdings Corporation's
report on Form 10-K for the fiscal year ended January 30, 1993.
</TABLE>
E-1
<PAGE>
<TABLE><CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION NUMBER
- - --------- ------------- ---------------
<S> <C> <C>
10.7 First Amendment to Employment Agreement dated as of February 24, 1994 between Collins &
Aikman Corporation and an executive officer.
10.8 Employment Agreement dated as of May 1, 1991 between Kayser-Roth Corporation and an
executive officer is hereby incorporated by reference to Exhibit 10.8 of Collins &
Aikman Holdings Corporation's Report on Form 10-K for the fiscal year ended January 30,
1993.
10.9 First Amendment to Employment Agreement dated as of May 1, 1991 between Kayser-Roth
Corporation and an executive officer is hereby incorporated by reference to Exhibit 10.9
of Collins & Aikman Holdings Corporation's Quarterly Report on Form 10-Q for the quarter
ended July 31, 1993.
10.10 Letter Agreement dated as of August 12, 1992 between Collins & Aikman Group, Inc. and an
executive officer is hereby incorporated by reference to Exhibit 10.9 of Collins &
Aikman Holdings Corporation's Report on Form 10-K for the fiscal year ended January 30,
1993.
10.11 Agreement dated as of February 25, 1993 and First Amendment dated as of March 29, 1993
between Collins & Aikman Group, Inc. and a former executive officer are hereby
incorporated by reference to Exhibit 10.10 of Collins & Aikman Holdings Corporation's
Report on Form 10-K for the fiscal year ended January 30, 1993.
10.12 1993 Employee Stock Option Plan.
10.13 1994 Employee Stock Option Plan.
10.14 Letter Agreements dated as of May 16, 1991 between Collins & Aikman Corporation and
certain executive officers.
10.15 Employment Agreement dated as of February 1, 1992 between Collins & Aikman Corporation and
an executive officer.
10.16 Employment Agreement dated as of April 27, 1992 between Collins & Aikman Corporation and
an executive officer.
10.17 Employment Agreement dated as of March 1, 1993 between Imperial Wallcoverings, Inc. and an
executive officer.
10.18 Employment Agreement dated as of October 1, 1993 between Collins & Aikman Corporation and
an executive officer.
10.19 Warrant Agreement dated as of January 8, 1994 by and between Collins & Aikman Group, Inc.
and Legwear Acquisition corporation is hereby incorporated by reference to Exhibit 10.20
of Collins & Aikman Holdings Corporation's Report on Form 10-K for the fiscal year ended
January 29, 1994.
10.20 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. Stockholders Agreement
21. Subsidiaries.
*23.1 Consent of Cravath, Swaine & Moore is contained in Exhibit 5.
23.2 Consent of Arthur Andersen & Co.
24. Power of attorney (contained in the signature section of this Registration Statement).
</TABLE>
- - ---------------
* To be filed by amendment.
E-2
EXHIBIT 10.7
------------
FIRST AMENDMENT, dated as of February 24, 1994 to
Agreement (the "Agreement") dated as of July 22, 1992,
between COLLINS & AIKMAN CORPORATION (the "Company")
and THOMAS E. HANNAH ("Employee").
WHEREAS, the Company and Employee desire to amend the
Agreement as hereinafter provided;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable
consideration, the parties hereto hereby agree as follows:
1. Section 1 of the Agreement is hereby amended by changing
"April 1, 1995" to "January 31, 1997", by changing "April 1,
1996" to "January 31, 1998" and by changing "April 1" to January 31".
2. Section 3.1 of the Agreement is hereby amended by
changing "$410,000" to "$525,000".
3. Section 3.2 of the Agreement is hereby amended by
deleting paragraph (h) and by restating paragraphs (a), (b), (c) and (d)
in their entirety as follows:
(a) Employee shall be eligible to participate in any
bonus plan of the Company established generally for the Company's
executive officers by the Company's Board of Directors or an
appropriate committee thereof, which in the absence of a
designation shall be comprised of the Co-Chairmen (the
Company's Board of Directors or such committee being referred
to herein as the "Compensation Board").
(b) Employee's target bonus with respect to any fiscal
year of the Company under all bonus plans in effect for such
year and applicable to Employee pursuant to Section 3.2(a)
shall be in the aggregate 75% of his annual base pay (the
"Target Bonus") and his maximum bonus with respect to any
fiscal year of the Company shall be in the aggregate 150% of
his annual base pay. Subject to the provisions of such plans
and to this Section 3.2, Employee shall receive the Target
Bonus with respect to any fiscal year in which the Company
achieves all the goals set by the Compensation Board for such
year.
<PAGE>
(c) In determining whether Employee shall receive a
bonus hereunder, goals and performance shall be measured for the
Company as a whole (including Dura) notwithstanding any
provisions in any bonus plan of the Company which refer to
units or divisions of the Company. Any determination of
performance or goals by the Compensation Board shall be final
and binding upon Employee.
(d) The bonus plan of the Company may change at any time
and from time-to-time.
4. Section 3.3 of the Agreement is hereby deleted.
5. Section 6.2 of the Agreement is hereby amended by
inserting in paragraph (b) immediately after "May 16, 1991" the
words "or any replacement letter".
6. Section 11 of the Agreement is hereby amended by
changing "James R. Birle" to "David A. Stockman", by changing "Robert B.
McKeon" to "Randall J. Weisenburger" and by changing "Wickes
Companies, Inc." to "Collins & Aikman Group, Inc."
7. The validity, interpretation and performance of this
Amendment shall be governed by the laws of the State of New York,
regardless of the laws that might be applied under applicable
principles of conflicts of laws. Each of the parties hereby
waives any right such party may have to a trial by jury.
8. All references in the Agreement to this "Agreement"
shall mean the Agreement, as amended hereby. Except as expressly
amended hereby, the Agreement shall continue in full force and effect in
accordance with the provisions thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the day and year first above written.
/s/ Thomas E. Hannah [L.S.]
COLLINS & AIKMAN CORPORATION
By /s/ Randall J. Weisenburger
Title: Co-Chairman
By /s/ David A. Stockman
Title: Co-Chairman
EXHIBIT 10.12
_________________________________________________________________
COLLINS & AIKMAN HOLDINGS CORPORATION
1993 EMPLOYEE STOCK OPTION PLAN
_________________________________________________________________
January 28, 1994
<PAGE>
Table of Contents
-----------------
Page
----
I. Purposes of the Plan . . . . . . . . . . . . . . . . . . 1
II. Definitions . . . . . . . . . . . . . . . . . . . . . . 1
III. Effective Date . . . . . . . . . . . . . . . . . . . . . 3
IV. Administration . . . . . . . . . . . . . . . . . . . . . 4
A. Duties of the Committee . . . . . . . . . . . . . . 4
B. Advisors . . . . . . . . . . . . . . . . . . . . . 4
C. Indemnification . . . . . . . . . . . . . . . . . . 4
D. Meetings of the Committee . . . . . . . . . . . . . 4
E. Determinations . . . . . . . . . . . . . . . . . . 5
V. Shares; Adjustment Upon Certain Events . . . . . . . . . 5
A. Shares to be Delivered; Fractional Shares . . . . . 5
B. Number of Shares . . . . . . . . . . . . . . . . . 5
C. Adjustments; Recapitalization, etc. . . . . . . . . 5
VI. Awards and Terms of Options . . . . . . . . . . . . . . 6
A. Grant . . . . . . . . . . . . . . . . . . . . . . . 6
B. Exercise Price . . . . . . . . . . . . . . . . . . 6
C. Number of Shares . . . . . . . . . . . . . . . . . 6
D. Exercisability . . . . . . . . . . . . . . . . . . 6
E. Acceleration of Exercisability . . . . . . . . . . 6
F. Exercise of Options . . . . . . . . . . . . . . . . 7
G. Black-Out Periods . . . . . . . . . . . . . . . . . 8
H. Non-Competition and Other Provisions . . . . . . . 8
I. Restrictions on Exercise. . . . . . . . . . . . . . 8
VII. Effect of Termination of Employment . . . . . . . . . . 8
A. Death, Disability, Retirement, etc. . . . . . . . . 8
B. Cause . . . . . . . . . . . . . . . . . . . . . . . 9
C. Other Termination . . . . . . . . . . . . . . . . . 9
D. Cancellation of Options . . . . . . . . . . . . . . 9
VIII. Nontransferability of Options . . . . . . . . . . . 9
IX. Rights as a Stockholder . . . . . . . . . . . . . . . . 9
X. Termination, Amendment and Modification . . . . . . . . 10
A. General Amendments . . . . . . . . . . . . . . . . 10
B. Other Termination . . . . . . . . . . . . . . . . . 10
XI. Use of Proceeds . . . . . . . . . . . . . . . . . . . . 10
i
<PAGE>
Page
----
XII. General Provisions . . . . . . . . . . . . . . . . . . . 10
A. Right to Terminate Employment . . . . . . . . . . . 10
B. Purchase for Investment . . . . . . . . . . . . . . 11
C. Trusts, etc. . . . . . . . . . . . . . . . . . . . 11
D. Notices . . . . . . . . . . . . . . . . . . . . . . 11
E. Severability of Provisions . . . . . . . . . . . . 11
F. Payment to Minors, Etc. . . . . . . . . . . . . . . 11
G. Headings and Captions . . . . . . . . . . . . . . . 12
H. Controlling Law . . . . . . . . . . . . . . . . . . 12
I. Section 162(m) Deduction Limitation . . . . . . . . 12
J. Section 16(b) of the Act . . . . . . . . . . . . . 12
XIII. Issuance of Stock Certificates;
Legends; Payment of Expenses . . . . . . . . . . . . . . 12
A. Stock Certificates . . . . . . . . . . . . . . . . 12
B. Legends . . . . . . . . . . . . . . . . . . . . . . 12
C. Payment of Expenses . . . . . . . . . . . . . . . . 12
XIV. Listing of Shares and Related Matters . . . . . . . . . 13
XV. Withholding Taxes . . . . . . . . . . . . . . . . . . . 13
ii
<PAGE>
Collins & Aikman Holdings Corporation
1993 Employee Stock Option Plan
I. Purposes of the Plan
--------------------
In 1988, Collins & Aikman Group, Inc. ("Group")
implemented the Wickes Equity Share Plan (the "1988 Plan") for
the purposes of attracting, retaining and motivating key
employees of Group and its subsidiaries. In October 1993, the
1988 Plan was terminated in accordance with its terms.
Concurrently, Group announced its intention to implement a new
stock option plan. Accordingly, Collins & Aikman Holdings
Corporation (the "Company") has created a special purpose 1993
Employee Stock Option Plan (the "Plan") to provide for the one-
time award of options to purchase Common Stock, principally to
active key employees who were participants in the 1988 Plan in
recognition of their prior service and to certain other key
employees with substantial prior service. This document shall
supersede all other material describing this Plan, including, but
not limited to, prior drafts hereof and any documents
incorporating the terms and provisions of any such prior drafts.
II. Definitions
-----------
In addition to the terms defined elsewhere herein, for
purposes of this Plan, the following terms will have the
following meanings when used herein with initial capital letters:
A. "Act" means the Securities Exchange Act of 1934,
as amended, and all rules and regulations promulgated thereunder.
B. "Board" means the Board of Directors of the
Company.
C. "Cause" means that the Committee shall have
determined that any of the following events has occurred: (1) an
act of fraud, embezzlement, misappropriation of business or theft
committed by a Participant in the course of his or her
employment, or any intentional or gross negligent misconduct of a
Participant which injures the business or reputation of the
Company or Related Persons; (2) intentional or gross negligent
damage committed by a Participant to the property of the Company
or Related Persons; (3) a Participant's willful failure or
refusal to perform the customary duties and responsibilities of
his or her position with the Company or Related Persons; (4) a
Participant's breach of fiduciary duty, or the making of a false
representation, to the Company or Related Persons; (5) a
Participant's material breach of any covenant, condition or
1
<PAGE>
obligation required to be performed by him or her pursuant to
this Plan, the Option Agreement or any other agreement between
him or her and the Company or Related Persons or a Participant's
intentional or gross negligent violation of any material written
policy of the Company or Related Persons; (6) a Key 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 (7) commission by a Participant of a felony or a
crime involving moral turpitude. Cause shall be deemed to exist
as of the date any of the above events occur even if the
Committee's determination is later and whether or not such
determination is made before or after Termination of Employment.
D. "Code" means the Internal Revenue Code of 1986, as
amended (or any successor statute).
E. "Committee" means such committee, if any,
appointed by the Board to administer the Plan, consisting of two
or more directors as may be appointed from time to time by the
Board each of whom, unless otherwise determined by the Board,
shall be disinterested persons as defined in Rule 16b-3
promulgated under Section 16(b) of the Act. If the Board does
not appoint a committee for this purpose, "Committee" means the
Board.
F. "Common Stock" means the common stock of the
Company, par value $.01 per share, any Common Stock into which
the Common Stock may be converted and any Common Stock resulting
from any reclassification of the Common Stock.
G. "Company" means Collins & Aikman Holdings
Corporation, a Delaware corporation.
H. "Competitive Activity" means (a) being employed
by, consulting to or being a director of any business, or
engaging directly or indirectly in any business activity, that is
competitive with any material business of any of the Company, a
Related Person or of the division that the Participant is or was
employed by or (b) soliciting for employment or consulting,
employing or retaining, or assisting another Person to employ or
retain, directly or indirectly, any employees of the Company or
Related Persons or any Person who was an employee of the Company
or Related Persons in the prior six months, provided, however,
that employing or retaining, or assisting another Person to
employ or retain, any Person whose employment or consultancy with
the Company or a Related Person has been terminated without Cause
or any Person that is non-exempt under the Federal Fair Labor
Standards Act, 29 USC Sec. 213(a)(1), shall not be considered
Competitive Activity.
I. "Disability" means a permanent and total
disability, as determined by the Committee in its sole
2
<PAGE>
discretion. A Disability shall only be deemed to occur at the
time of the determination by the Committee of the Disability.
J. "Fair Market Value" shall mean, for purposes of
this Plan, unless otherwise required by any applicable provision
of the Code or any regulations issued thereunder, as of any date,
the last sales prices reported for the Common Stock on the
applicable date, (i) as reported by the principal national
securities exchange in the United States on which it is then
traded, or (ii) if not traded on any such national securities
exchange, as quoted on an automated quotation system sponsored by
the National Association of Securities Dealers, or if the sale of
the Common Stock shall not have been reported or quoted on such
date, on the first day prior thereto on which the Common Stock
was reported or quoted. If the Common Stock is not readily
tradeable on a national securities exchange or any system
sponsored by the National Association of Securities Dealers, its
Fair Market Value shall be set by the Committee based upon its
assessment of the cash price that would be paid between a fully
informed buyer and seller under no compulsion to buy or sell
(without giving effect to any discount for a minority interest or
any restrictions on transferability or any lack of liquidity of
the stock).
K. "Key Employee" means any person who is an
executive officer or other valuable employee of the Company or a
Related Person, as determined by the Committee, provided,
however, that no managing director, general partner, limited
partner, director, officer or employee of Wasserstein Perella &
Co., Inc. or The Blackstone Group L.P. that is a director of the
Company will be eligible to participate in the Plan. A Key
Employee may, but need not, be an officer or director of the
Company or a Related Person.
L. "Option" means the right to purchase one Share at
a prescribed purchase price on the terms specified in the Plan.
M. "Outside Director" means any director of the
Company or a Related Person that is not an employee of the
Company or a Related Person.
N. "Participant" means a Key Employee, who is granted
Options under the Plan which Options have not expired.
O. "Person" means any individual or entity, and the
heirs, executors, administrators, legal representatives,
successors and assigns of such Person as the context may require.
P. "Public Offering" means the closing of an offering
under a registration statement registering the common equity
shares of the registering entity under the Securities Act (other
3
<PAGE>
than a registration on a Form S-8, S-4 or any successor or
similar special purpose form).
Q. "Related Person or Related Persons" means (a) any
corporation that is defined as a subsidiary corporation in
Section 424(f) of the Code or (b) any corporation that is defined
as a parent corporation in Section 424(e) of the Code. An entity
shall be deemed a Related Person only for such periods as the
requisite ownership relationship is maintained.
R. "Securities Act" means the Securities Act of 1933,
as amended, and all rules and regulations promulgated thereunder.
S. "Share" means a share of Common Stock.
T. "Termination of Employment" with respect to an
individual means that individual is no longer actively employed
by the Company or a Related Person on a full-time basis,
irrespective of whether or not such employee is receiving salary
continuance pay, is continuing to participate in other employee
benefit programs or is otherwise receiving severance type
payments. In the event an entity shall cease to be a Related
Person, there shall be deemed a Termination of Employment of any
individual who is not otherwise an employee of the Company or
another Related Person at the time the entity ceases to be a
Related Person. A Termination of Employment shall not include a
leave of absence approved for purposes of the Plan by the
Committee.
III. Effective Date
--------------
The Plan shall become effective on January 28, 1994
(the "Effective Date"), subject to its approval by the majority
of the Common Stock (at the time of approval) within one year
after the Plan is adopted by the Board of Directors of the
Company. Grants of Options by the Committee under the Plan may
be made on or after the Effective Date of the Plan, including
retroactively, provided that, if the Plan is not approved by the
majority of the Common Stock (at the time of approval), all
Options which have been granted by the Committee shall be null
and void. No Options may be exercised prior to the approval of
the Plan by the majority of the Common Stock (at the time of
approval).
IV. Administration
--------------
A. Duties of the Committee. The Plan shall be
-------------------------
administered by the Committee. The Committee shall have full
authority to interpret the Plan and to decide any questions and
settle all controversies and disputes that may arise in
4
<PAGE>
connection with the Plan; to establish, amend and rescind rules
for carrying out the Plan; to administer the Plan, subject to its
provisions; to select Participants in, and grant Options under,
the Plan; to determine the terms, exercise price and form of
exercise payment for each Option granted under the Plan; to
determine the consideration to be received by the Company in
exchange for the grant of the Options; to prescribe the form or
forms of instruments evidencing Options and any other instruments
required under the Plan (which need not be uniform) and to change
such forms from time to time; and to make all other
determinations and to take all such steps in connection with the
Plan and the Options as the Committee, in its sole discretion,
deems necessary or desirable. The Committee shall not be bound
to any standards of uniformity or similarity of action,
interpretation or conduct in the discharge of its duties
hereunder, regardless of the apparent similarity of the matters
coming before it. Any determination, action or conclusion of the
Committee shall be final, conclusive and binding on all parties.
B. Advisors. The Committee may employ such legal
--------
counsel, consultants and agents as it may deem desirable for the
administration of the Plan, and may rely upon any advice or
opinion received from any such counsel or consultant and any
computation received from any such consultant or agent. Expenses
incurred by the Committee in the engagement of such counsel,
consultant or agent shall be paid by the Company.
C. Indemnification. To the maximum extent permitted
---------------
by applicable law, no officer of the Company or member or former
member of the Committee or of the Board shall be liable for any
action or determination made in good faith with respect to the
Plan or any Option granted under it. To the maximum extent
permitted by applicable law or the Certificate of Incorporation
or By-Laws of the Company, each officer and member or former
member of the Committee or of the Board shall be indemnified and
held harmless by the Company against any cost or expense
(including reasonable fees of counsel reasonably acceptable to
the Company) or liability (including any sum paid in settlement
of a claim with the approval of the Company), and advanced
amounts necessary to pay the foregoing at the earliest time and
to the fullest extent permitted, arising out of any act or
omission to act in connection with the Plan, except to the extent
arising out of such officer's, member's or former member's own
fraud or bad faith. Such indemnification shall be in addition to
any rights of indemnification the officers, members or former
members may have as directors under applicable law or under the
Certificate of Incorporation or By-Laws of the Company or Related
Person.
D. Meetings of the Committee. The Committee shall
--------------------------
adopt such rules and regulations as it shall deem appropriate
5
<PAGE>
concerning the holding of its meetings and the transaction of its
business. Any member of the Committee may be removed from the
Committee at any time either with or without cause by resolution
adopted by the Board, and any vacancy on the Committee may at any
time be filled by resolution adopted by the Board. All
determinations by the Committee shall be made by the affirmative
vote of a majority of its members. Any such determination may be
made at a meeting duly called and held at which a majority of the
members of the Committee are in attendance in person or through
telephonic communication. Any determination set forth in writing
and signed by all the members of the Committee shall be as fully
effective as if it had been made by a majority vote of the
members at a meeting duly called and held.
E. Determinations. Each determination,
--------------
interpretation or other action made or taken pursuant to the
provisions of this Plan by the Committee shall be final,
conclusive and binding for all purposes and upon all persons,
including, without limitation, the Participants, the Company and
Related Persons, directors, officers and other employees of the
Company and Related Persons, and the respective heirs, executors,
administrators, personal representatives and other successors in
interest of each of the foregoing.
V. Shares; Adjustment Upon Certain Events
--------------------------------------
A. Shares to be Delivered; Fractional Shares. Shares
-----------------------------------------
to be issued under the Plan shall be made available, at the sole
discretion of the Board, either from authorized but unissued
Shares or from issued Shares reacquired by Company and held in
treasury. No fractional Shares will be issued or transferred
upon the exercise of any Option. In lieu thereof, the Company
shall pay a cash adjustment equal to the same fraction of the
Fair Market Value of one Share on the date of exercise.
B. Number of Shares. Subject to adjustment as
------------------
provided in this Article V, the maximum aggregate number of
Shares that may be issued under the Plan shall be 3,119,466. Any
Shares covered by Options that are for any reason canceled, or
expire or terminate unexercised, shall not again be available for
the grant of Options.
C. Adjustments; Recapitalization, etc. The existence
-----------------------------------
of the Plan and the Options granted hereunder shall not affect in
any way the right or power of the Board or the stockholders of
the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of
the Company, any issue of bonds, debentures, preferred or prior
preference stocks ahead of or affecting Common Stock, the
dissolution or liquidation of the Company or Related Persons, any
6
<PAGE>
sale or transfer of all or part of its assets or business or any
other corporate act or proceeding. The Committee may make or
provide for such adjustments in the maximum number of Shares
specified in Article V(B), in the number of Shares covered by
outstanding Options granted hereunder, and/or in the Purchase
Price (as hereinafter defined) applicable to such Options or such
other adjustments in the number and kind of securities received
upon the exercise of Options, as the Committee in its sole
discretion may determine is equitably required to prevent
dilution or enlargement of the rights of Participants or to
otherwise recognize the effect that otherwise would result from
any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the
Company, merger, consolidation, spin-off, reorganization, partial
or complete liquidation, issuance of rights or warrants to
purchase securities or any other corporate transaction or event
having an effect similar to any of the foregoing. In the event
of a merger or consolidation in which Company is not the
surviving entity or in the event of any transaction that results
in the acquisition of substantially all of Company's outstanding
Common Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the
sale or transfer of all of the Company's assets (the foregoing
being referred to as "Acquisition Events"), then the Committee
may in its sole discretion terminate all outstanding Options
effective as of the consummation of the Acquisition Event by
delivering notice of termination to each Participant at least 20
days prior to the date of consummation of the Acquisition Event;
provided that, during the period from the date on which such
notice of termination is delivered to the consummation of the
Acquisition Event, each Participant shall have the right to
exercise in full all the Options that are then outstanding
(without regard to limitations on exercise otherwise contained in
the Options) but contingent on occurrence of the Acquisition
Event, and, provided that, if the Acquisition Event does not take
place within a specified period after giving such notice for any
reason whatsoever, the notice and exercise shall be null and
void. Except as hereinbefore expressly provided, the issuance by
the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash,
property, labor or services, upon direct sale, upon the exercise
of rights or warrants to subscribe therefor or upon conversion of
shares or other securities, and in any case whether or not for
fair value, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number and class of shares
and/or other securities or property subject to Options
theretofore granted or the Purchase Price (as hereinafter
defined).
7
<PAGE>
VI. Awards and Terms of Options
---------------------------
A. Grant. The Committee may grant Options to Key
-----
Employees provided, that the maximum number of Shares with
respect to which Options may be granted to any Key Employee
during any calendar year may not exceed 1,000,000. Each Option
shall be evidenced by an Option agreement (the "Option
Agreement") in such form as the Committee shall approve from time
to time.
B. Exercise Price. The purchase price per Share (the
--------------
"Purchase Price") deliverable upon the exercise of an Option
shall be determined by the Committee and set forth in a
Participant's Option Agreement, provided that the Purchase Price
shall not be less than the par value of a Share.
C. Number of Shares. The Option Agreement shall
-----------------
specify the number of Options granted to the Participant, as
determined by the Committee in its sole discretion.
D. Exercisability. At the time of grant, the
--------------
Committee shall specify when and on what terms the Options
granted shall be exercisable. In the case of Options not
immediately exercisable in full, the Committee may at any time
accelerate the time at which all or any part of the Options may
be exercised and may waive any other conditions to exercise. No
Option shall be exercisable after the expiration of ten years
from the date of grant. Each Option shall be subject to earlier
termination as provided in Article VII below.
E. Acceleration of Exercisability.
------------------------------
All Options granted and not previously exercisable
shall become fully exercisable immediately upon a Change of
Control (as defined herein). For this purpose, a "Change of
Control" shall be deemed to have occurred upon:
(a) an acquisition by any individual, entity
or group (within the meaning of Section 13d-3 or 14d-1
of the Act) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Act) of more than
80% of the combined voting power of the then
outstanding voting securities of Company entitled to
vote generally in the election of directors including,
but not limited to, by merger, consolidation or similar
corporate transaction or by purchase; excluding,
however, the following: (x) any acquisition by the
Company, Related Persons, Wasserstein Perella Partners,
L.P., Blackstone Capital Partners L.P. or an affiliate
of any of the foregoing, or (y) any acquisition by an
employee benefit plan (or related trust) sponsored or
maintained by the Company or Related Persons; or
8
<PAGE>
(b) the approval of the stockholders of the
Company of (i) a complete liquidation or dissolution of
the Company or (ii) the sale or other disposition of
more than 80% of the gross assets of the Company and
Related Persons on a consolidated basis (determined
under generally accepted accounting principles as
determined in good faith by the Committee); excluding,
however, such a sale or other disposition to a
corporation with respect to which, following such sale
or other disposition, (x) more than 20% of the combined
voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the
election of directors will be then beneficially owned,
directly or indirectly, by the individuals and entities
who were the beneficial owners of the outstanding
Shares immediately prior to such sale or other
disposition, (y) no Person (other than the Company,
Related Persons, and any employee benefit plan (or
related trust) of the Company or Related Persons or
such corporation and any Person beneficially owning,
immediately prior to such sale or other disposition,
directly or indirectly, 20% or more of the outstanding
Shares) will beneficially own, directly or indirectly,
20% or more of the combined voting power of the then
outstanding voting securities of such corporation
entitled to vote generally in the election of directors
and (z) individuals who were members of the Incumbent
Board will constitute at least a majority of the
members of the board of directors of such corporation.
F. Exercise of Options.
-------------------
1. A Participant may elect to exercise one or
more Options by giving written notice to the Committee of
such election and of the number of Options such Participant
has elected to exercise, accompanied by payment in full of
the aggregate Purchase Price for the number of Shares for
which the Options are being exercised.
2. Shares purchased pursuant to the exercise of
Options shall be paid for at the time of exercise as
follows:
(a) in cash or by check, bank draft or money
order payable to the order of Company;
(b) if the Shares are traded on a national
securities exchange, through the delivery of
irrevocable instructions to a broker to deliver
promptly to the Company an amount equal to the
aggregate Purchase Price; or
9
<PAGE>
(c) on such other terms and conditions as
may be acceptable to the Committee (which may include
payment in full or in part by the transfer of Shares
which have been owned by the Participant for at least 6
months or the surrender of Options owned by the
Participant) and in accordance with applicable law.
3. Upon receipt of payment, the Company shall
deliver to the Participant as soon as practicable a
certificate or certificates for the Shares then purchased.
G. Black-Out Periods. The direct or indirect sale,
-----------------
transfer or other disposition of Common Stock received by a
Participant upon the exercise of Options shall be prohibited for
two years following the initial Public Offering of the Company,
unless a shorter period of time is specified by the Committee in
its sole discretion at any time.
H. Non-Competition and Other Provisions. In
-----------------------------------------
consideration of the grant of Options, by accepting the grant of
Options the Participant agrees during employment and, in the
event any Options vest, for a period ending one year following
the date of the Participant's Termination of Employment, not to
engage in any Competitive Activity, except to the extent
consented to by the Committee in writing. Each Participant by
accepting a grant of Options hereunder acknowledges that the
Company or a Related Person will suffer irreparable harm in the
event such Participant engages in any Competitive Activity during
this period, and agrees that in addition to its remedies at law,
the Company and a Related Person shall be entitled to injunctive
relief as a consequence of a violation or threatened violation of
this covenant. Notwithstanding the foregoing, nothing in this
Plan shall prohibit or penalize ownership by a Participant of the
shares of a business that is registered under Section 12 of the
Act and constitutes, together with all such shares owned by any
immediate family member or affiliate of, or person acting in
concert with, such Participant, less than 2% of the outstanding
registered shares of such business. The Committee will have the
discretion to impose in a Participant's Option Agreement such
other conditions, limitations and restrictions as it determines
are appropriate in its sole discretion, including any waivers of
rights which a Participant may have.
I. Restrictions on Exercise. Notwithstanding
----------------------------
anything else contained herein to the contrary other than Article
VI(E), no Options may be exercised prior to the earlier of the
closing of a Public Offering of Shares or the expiration of two
years from the Effective Date of the Plan, except to the extent
consented to by the Committee in its sole and absolute
discretion.
10
<PAGE>
VII. Effect of Termination of Employment
-----------------------------------
A. Death, Disability, Retirement, etc. Except as
-------------------------------------
otherwise provided in the Participant's Option Agreement, upon
Termination of Employment, all outstanding Options then
exercisable and not exercised by the Participant prior to such
Termination of Employment (and any Options not previously
exercisable but made exercisable by the Committee at or after the
Termination of Employment) shall remain exercisable by the
Participant to the extent not exercised for the following time
periods, or, if earlier, the prior expiration of the Option in
accordance with the terms of the Plan and grant:
1. In the event of the Participant's death or
Disability, such Options shall remain exercisable by the
Participant (or by the Participant's estate or by the person
given authority to exercise such Options by the
Participant's will or by operation of law) for a period of
one year from the date of the Participant's death or
Disability, provided that the Committee, in its sole
discretion, may at any time extend such time period.
2. In the event the Participant retires from
employment at or after age 65 (or, with the consent of the
Committee or under an early retirement policy of the Company
or a Related Person, before age 65), or if the Participant's
employment is terminated by the Company or a Related Person
without Cause, such Options shall remain exercisable for 90
days from the date of the Participant's Termination of
Employment, provided that the Committee, in its sole
discretion, may at any time extend such time period.
B. Cause. Upon the Termination of Employment of a
-----
Participant for Cause, or if the Company or a Related Person
obtains or discovers information after Termination of Employment
that such Participant had engaged in conduct that would have
justified a Termination of Employment for Cause during
employment, all outstanding Options of such Participant shall
immediately be canceled.
C. Other Termination. In the event of Termination of
-----------------
Employment for any reason other than as provided in Article
VII(A) or VII(B), all outstanding Options not exercised by the
Participant prior to such Termination of Employment shall remain
exercisable (to the extent exercisable by such Participant
immediately before such termination) for a period of 30 days
after such termination, provided that the Committee, in its sole
discretion, may at any time extend such time period.
D. Cancellation of Options. Except as otherwise
------------------------
provided in Article VI(E), no Options that were not exercisable
11
<PAGE>
during the period of employment, shall thereafter become
exercisable upon a Termination of Employment for any reason or no
reason whatsoever, and such options shall terminate and become
null and void upon a Termination of Employment unless the
Committee determines in its sole discretion that such Options
shall be exercisable.
VIII. Nontransferability of Options
-----------------------------
No Option shall be transferable by the Participant
otherwise than by will or under applicable laws of descent and
distribution, and during the lifetime of the Participant may be
exercised only by the Participant or his or her guardian or legal
representative. In addition, no Option shall be assigned,
negotiated, pledged or hypothecated in any way (whether by
operation of law or otherwise), and no Option shall be subject to
execution, attachment or similar process. Upon any attempt to
transfer, assign, negotiate, pledge or hypothecate any Option, or
in the event of any levy upon any Option by reason of any
execution, attachment or similar process contrary to the
provisions hereof, such Option shall immediately terminate and
become null and void.
IX. Rights as a Stockholder
-----------------------
A Participant (or a permitted transferee of an Option)
shall have no rights as a stockholder with respect to any Shares
covered by such Participant's Option until such Participant (or
permitted transferee) shall have become the holder of record of
such Shares, and no adjustments shall be made for dividends in
cash or other property or distributions or other rights in
respect to any such Shares, except as otherwise specifically
provided in this Plan.
X. Termination, Amendment and Modification
---------------------------------------
A. General Amendments. The Plan shall terminate at
------------------
the close of business on December 31, 1995 (the "Termination
Date"), unless terminated sooner as hereinafter provided, and no
Option shall be granted under the Plan on or after that date.
The termination of the Plan shall not terminate any outstanding
Options that by their terms continue beyond the Termination Date.
At any time prior to the Termination Date, the Committee may
amend or terminate the Plan or suspend the Plan in whole or in
part.
The Committee may at any time, and from time to time,
amend, in whole or in part, any or all of the provisions of the
Plan (including any amendment deemed necessary to ensure that the
12
<PAGE>
Company may comply with any regulatory requirement referred to in
Article XII), or suspend or terminate it entirely, retroactively
or otherwise; provided, however, that, unless otherwise required
-------- -------
by law or specifically provided herein, the rights of a
Participant with respect to Options granted prior to such
amendment, suspension or termination, may not, other than as
provided in Article X(B), be materially impaired without the
consent of such Participant and, provided further, without the
approval of the stockholders of the Company entitled to vote, no
amendment may be made which would (i) materially increase the
aggregate number of shares of Common Stock that may be issued
under this Plan (except by operation of Article V); (ii) decrease
the minimum Purchase Price of any Option or (iii) extend the
maximum option period.
The Committee may amend the terms of any Option
granted, prospectively or retroactively, but, subject to Article
VI above or as otherwise provided herein, no such amendment or
other action by the Committee shall materially impair the rights
of any Participant without the Participant's consent.
Notwithstanding the foregoing, however, no such amendment may,
without the approval of the stockholders of the Company, effect
any change that would require stockholder approval under
applicable law.
B. Other Termination. Notwithstanding any other
------------------
provision of the Plan, in the event that a Public Offering does
not occur with respect to the Company by January 28, 1995, the
Committee shall have the absolute right and discretion to amend
or terminate the Plan and a Participant's rights with respect to
any Options granted prior to such amendment or termination.
XI. Use of Proceeds
---------------
The proceeds of the sale of Shares subject to Options
under the Plan are to be added to the general funds of Company
and used for its general corporate purposes as the Board shall
determine.
XII. General Provisions
------------------
A. Right to Terminate Employment. Neither the
---------------------------------
adoption of the Plan nor the grant of Options shall impose any
obligation on the Company or Related Persons to continue the
employment of any Participant, nor shall it impose any obligation
on the part of any Participant to remain in the employ of the
Company or Related Persons.
B. Purchase for Investment. If the Board or the
------------------------
Committee determines that the law so requires, the holder of an
Option granted hereunder shall, upon any exercise or conversion
13
<PAGE>
thereof, execute and deliver to the Company a written statement,
in form satisfactory to the Company, representing and warranting
that such Participant is purchasing or accepting the Shares then
acquired for such Participant's own account and not with a view
to the resale or distribution thereof, that any subsequent offer
for sale or sale of any such Shares shall be made either pursuant
to (i) a Registration Statement on an appropriate form under the
Securities Act, which Registration Statement shall have become
effective and shall be current with respect to the Shares being
offered and sold, or (ii) a specific exemption from the
registration requirements of the Securities Act, and that in
claiming such exemption the holder will, prior to any offer for
sale or sale of such Shares, obtain a favorable written opinion,
satisfactory in form and substance to the Company, from counsel
acceptable to the Company as to the availability of such
exception.
C. Trusts, etc. Nothing contained in the Plan and no
------------
action taken pursuant to the Plan (including, without limitation,
the grant of any Option thereunder) shall create or be construed
to create a trust of any kind, or a fiduciary relationship,
between Company and any Participant or the executor,
administrator or other personal representative or designated
beneficiary of such Participant, or any other persons. Any
reserves that may be established by Company in connection with
the Plan shall continue to be part of the general funds of
Company, and no individual or entity other than Company shall
have any interest in such funds until paid to a Participant. If
and to the extent that any Participant or such Participant's
executor, administrator or other personal representative, as the
case may be, acquires a right to receive any payment from Company
pursuant to the Plan, such right shall be no greater than the
right of an unsecured general creditor of Company.
D. Notices. Any notice to the Company required by or
-------
in respect of this Plan will be addressed to the Company at 8320
University Executive Park, Suite 102, Charlotte, North Carolina
28262, Attention: Legal Department, or such other place of
business as shall become the Company's principal executive
offices from time to time. Each Participant shall be responsible
for furnishing the Committee with the current and proper address
for the mailing to such Participant of notices and the delivery
to such Participant of agreements, Shares and payments. Any such
notice to the Participant will, if the Company has received
notice that the Participant is then deceased, be given to the
Participant's personal representative if such representative has
previously informed the Company of his status and address (and
has provided such reasonable substantiating information as the
Company may request) by written notice under this Section. Any
notice required by or in respect of this Plan will be deemed to
have been duly given when delivered in person or when dispatched
by telegram or one business day after having been dispatched by a
14
<PAGE>
nationally recognized overnight courier service or three business
days after having been mailed by United States registered or
certified mail, return receipt requested, postage prepaid. The
Company assumes no responsibility or obligation to deliver any
item mailed to such address that is returned as undeliverable to
the addressee and any further mailings will be suspended until
the Participant furnishes the proper address.
E. Severability of Provisions. If any provisions of
--------------------------
the Plan shall be held invalid or unenforceable, such invalidity
or unenforceability shall not affect any other provisions of the
Plan, and the Plan shall be construed and enforced as if such
provisions had not been included.
F. Payment to Minors, Etc. Any benefit payable to or
-----------------------
for the benefit of a minor, an incompetent person or other person
incapable of receipt thereof shall be deemed paid when paid to
such person's guardian or to the party providing or reasonably
appearing to provide for the care of such person, and such
payment shall fully discharge the Committee, the Company and
their employees, agents and representatives with respect thereto.
G. Headings and Captions. The headings and captions
---------------------
herein are provided for reference and convenience only. They
shall not be considered part of the Plan and shall not be
employed in the construction of the Plan.
H. Controlling Law. The Plan shall be construed and
----------------
enforced according to the laws of the State of Delaware.
I. Section 162(m) Deduction Limitation. The
----------------------------------------
Committee at any time may in its sole discretion limit the number
of Options that can be exercised in any taxable year of the
Company, to the extent necessary to prevent the application of
Section 162(m) of the Code (or any similar or successor
provision), provided that the Committee may not postpone the
earliest date on which Options can be exercised beyond the last
day of the stated term of such Options.
J. Section 16(b) of the Act. All elections and
----------------------------
transactions under the Plan by persons subject to Section 16 of
the Exchange Act involving shares of Common Stock are intended to
comply with all exemptive conditions under Rule 16b-3. The
Committee may establish and adopt written administrative
guidelines, designed to facilitate compliance with Section 16(b)
of the Act, as it may deem necessary or proper for the
administration and operation of the Plan and the transaction of
business thereunder.
15
<PAGE>
XIII. Issuance of Stock Certificates;
Legends; Payment of Expenses
----------------------------
A. Stock Certificates. Upon any exercise of an
-------------------
Option and payment of the exercise price as provided in such
Option, a certificate or certificates for the Shares as to which
such Option has been exercised shall be issued by Company in the
name of the person or persons exercising such Option and shall be
delivered to or upon the order of such person or persons.
B. Legends. Certificates for Shares issued upon
-------
exercise of an Option shall bear such legend or legends as the
Committee, in its sole discretion, determines to be necessary or
appropriate to prevent a violation of, or to perfect an exemption
from, the registration requirements of the Securities Act or to
implement the provisions of any agreements between Company and
the Participant with respect to such Shares.
C. Payment of Expenses. The Company shall pay all
--------------------
issue or transfer taxes with respect to the issuance or transfer
of Shares, as well as all fees and expenses necessarily incurred
by the Company in connection with such issuance or transfer and
with the administration of the Plan.
XIV. Listing of Shares and Related Matters
-------------------------------------
If at any time the Board or the Committee shall
determine in its sole discretion that the listing, registration
or qualification of the Shares covered by the Plan upon any
national securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body,
is necessary or desirable as a condition of, or in connection
with, the grant of Options or the award or sale of Shares under
the Plan, no Option grants shall be effective and no Shares will
be delivered, as the case may be, unless and until such listing,
registration, qualification, consent or approval shall have been
effected or obtained, or otherwise provided for, free of any
conditions not acceptable to the Board.
XV. Withholding Taxes
-----------------
The Company shall have the right to require prior to
the issuance or delivery of any shares of Common Stock payment by
the Participant of any Federal, state or local taxes required by
law to be withheld.
The Committee may permit any such withholding
obligation to be satisfied by reducing the number of shares of
Common Stock otherwise deliverable. A person required to file
reports under Section 16(a) of the Exchange Act with respect to
16
<PAGE>
securities of the Company may elect to have a sufficient number
of shares of Common Stock withheld to fulfill such tax
obligations (hereinafter a "Withholding Election") only if the
election complies with such conditions as are necessary to
prevent the withholding of such shares from being subject to
Section 16(b) of the Exchange Act. To the extent necessary under
then current law, such conditions shall include the following:
(x) the Withholding Election shall be subject to the approval of
the Committee and (y) the Withholding Election is made (i) during
the period beginning on the third business day following the date
of release for publication of the quarterly or annual summary
statements of sales and earnings of the Company and ending on the
twelfth business day following such date or is made in advance
but takes effect during such period, (ii) six (6) months before
the stock award becomes taxable, or (iii) during any other period
in which a Withholding Election may be made under the provisions
of Rule 16b-3 promulgated pursuant to the Act. Any fraction of a
share of Common Stock required to satisfy such tax obligations
shall be disregarded and the amount due shall be paid instead in
cash by the Participant.
17
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION
OPTION AGREEMENT
PURSUANT TO THE
1993 EMPLOYEE STOCK OPTION PLAN
-------------------------------------
AGREEMENT, dated ____________, 1994 by and between
Collins & Aikman Holdings Corporation (the "Company") and
___________________ (the "Participant").
Preliminary Statement
---------------------
The Committee of the Board of Directors of the Company
(the "Committee"), pursuant to the Company's 1993 Employee Stock
Option Plan, annexed hereto as Exhibit A (the "Plan"), has
authorized the granting to the Participant, as a Key Employee (as
defined in the Plan), of a nonqualified stock option (the
"Option") to purchase the number of shares of the Company's
common stock, par value $.01 per share (the "Common Stock"), set
forth below. The parties hereto desire to enter into this
Agreement in order to set forth the terms of the Option.
Accordingly, the parties hereto agree as follows:
1. Tax Matters. No part of the Option granted hereby
-----------
is intended to qualify as an "incentive stock option" under
Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
2. Grant of Option. Subject in all respects to the
----------------
Plan and the terms and conditions set forth herein and therein,
the Participant is hereby granted the Option to purchase from the
Company up to _______ Shares (as defined in the Plan), at a price
per Share of $_________ (the "Option Price").
3. Vesting. The Option is exercisable in
-------
installments as provided below, which shall be cumulative. To
the extent that the Option has become exercisable with respect to
a number of shares as provided below, the Option may thereafter
be exercised by the Participant, in whole or in part, at any time
or from time to time prior to the expiration of the Option as
provided herein. The following table indicates each date (the
"Vesting Date") upon which the Participant shall be entitled to
exercise the Option with respect to the number of Shares
indicated beside that date:
<PAGE>
Vesting Date Number of Shares
------------ ----------------
June 1, 1995 [40%] [33%]
June 1, 1996 [100%] [66%]
June 1, 1997 [100%]
Upon the occurrence of a Change of Control (as defined
in the Plan), the Option shall immediately become exercisable
with respect to all Shares subject thereto, regardless of whether
the Option has vested with respect to such Shares.
4. Termination. Unless terminated as provided below
-----------
or otherwise pursuant to the Plan, the Option shall expire on the
tenth anniversary of this Agreement, or earlier as provided in
the Plan upon a Termination of Employment of the Participant.
5. Non-Competition. In consideration of the grant
---------------
of this Option under the Plan and under this Agreement, the
Participant agrees during employment and, in the event any
Options vest, for a period ending one year following the date of
the Participant's Termination of Employment, not to engage in any
Competitive Activity, except to the extent consented to by the
Committee. Each Participant acknowledges that the Company or a
Related Person will suffer irreparable harm in the event such
Participant engages in any Competitive Activity during this
period, and agrees that in addition to its remedies at law, the
Company and a Related Person shall be entitled to injunctive
relief as a consequence of a violation or threatened violation of
this covenant. The Participant acknowledges that he or she is a
key employee of the Company or a Related Person and by virtue of
his or her employment acquired and continues to acquire
confidential information as to the business of the Company and/or
a Related Person that has independent economic value, not being
generally known to and not being ascertainable by other persons,
and could obtain economic value from its disclosure or use.
Accordingly, in consideration of the grant of the Option to the
Participant, the Participant agrees to the aforesaid
noncompetition provision.
The Participant and the Company agree it is not the
intention of either party to violate any public policy, statutory
or common law and that if any part of the aforesaid
noncompetition provision is in violation of any applicable state
law, such part shall be void in the jurisdiction where it is
unlawful, and the remainder of the provision shall remain binding
on the parties. In the event that any part of this covenant is
determined by a court of law to be overly broad thereby making
this provision unenforceable, the parties hereto agree, and it is
their desire that such court shall substitute a reasonable,
individual enforceable limitation in place of the offensive part
of the covenant and as so modified the covenant shall be as fully
2
<PAGE>
enforceable as if set forth herein by the parties themselves in
the modified form.
This noncompetition provision shall be governed by the
laws of the State of Delaware, without regard to conflict of law
provisions.
"Competitive Activity" means (a) being employed by,
consulting to or being a director of any business, or engaging
directly or indirectly in any business activity, that is
competitive with any material business of any of the Company, a
Related Person or of the division that the Participant is or was
employed by or (b) soliciting for employment or consulting,
employing or retaining, or assisting another Person to employ or
retain, directly or indirectly, any employees of the Company or
Related Persons or any person who was an employee of the Company
or Related Persons in the prior six months, provided, however,
that employing or retaining, or assisting another Person to
employ or retain, any Person whose employment or consultancy with
the Company or a Related Person has been terminated without Cause
or any Person that is non-exempt under the Federal Fair Labor
Standards Act, 29 USC Sec. 213(a)(1), shall not be considered
Competitive Activity.
Notwithstanding the foregoing, nothing in this Plan or
this Agreement shall prohibit or penalize ownership by a
Participant of the shares of a business that is registered under
Section 12 of the Act and constitutes, together with all such
shares owned by any immediate family member or affiliate of, or
person acting in concert with, such Participant, less than 2% of
the outstanding registered shares of such business.
6. Restriction on Transfer of Option. The Option
-----------------------------------
granted hereby is not transferable otherwise than by will or
under the applicable laws of descent and distribution and during
the lifetime of the Participant may be exercised only by the
Participant or the Participant's guardian or legal
representative. In addition, the Option shall not be assigned,
negotiated, pledged or hypothecated in any way (whether by
operation of law or otherwise), and the Option shall not be
subject to execution, attachment or similar process. Upon any
attempt to transfer, assign, negotiate, pledge or hypothecate the
Option, or in the event of any levy upon the Option by reason of
any execution, attachment or similar process contrary to the
provisions hereof, the Option shall immediately become null and
void.
7. Waiver of Rights under The Wickes Equity Share
--------------------------------------------------
Plan. In consideration of the grant of this Option, the
----
Participant hereby absolutely, unconditionally and irrevocably
releases, waives, relinquishes, renounces and discharges forever
each of the Company, Related Persons, Wasserstein Perrella & Co.,
3
<PAGE>
Inc., The Blackstone Group L.P., and their respective parents,
subsidiaries and affiliated persons, firms and entities, and
their predecessors and successors, if any, and their principals,
partners, shareholders, directors, officers, employees, attorneys
and agents, past and present, and their successors and assigns,
from any and all claims, liabilities or obligations of any kind
or nature, whether known or unknown, suspected or unsuspected,
direct or indirect or nominally or beneficially possessed or
claimed by the Participant under The Wickes Equity Share Plan
(the "Equity Share Plan"), arising out of the termination of the
Equity Share Plan, or under any letter of communication with
regard to the Equity Share Plan, the termination of the Equity
Share Plan or the creation of any new plan.
8. Rights as a Stockholder. The Participant shall
------------------------
have no rights as a stockholder with respect to any Shares
covered by the Option until the Participant shall have become the
holder of record of the Shares, and no adjustments shall be made
for dividends in cash or other property, distributions or other
rights in respect of any such Shares, except as otherwise
specifically provided for in the Plan.
9. Provisions of Plan Control. This Agreement is
----------------------------
subject to all the terms, conditions and provisions of the Plan,
including, without limitation, the amendment provisions thereof,
and to such rules, regulations and interpretations relating to
the Plan as may be adopted by the Committee and as may be in
effect from time to time. Any capitalized term used but not
defined herein shall have the meaning ascribed to such term in
the Plan. The annexed copy of the Plan is incorporated herein by
reference. If and to the extent that this Agreement conflicts or
is inconsistent with the terms, conditions and provisions of the
Plan, the Plan shall control, and this Agreement shall be deemed
to be modified accordingly.
10. Notices. Any notice or communication given
-------
hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, or by United States mail, to
the appropriate party at the address set forth below (or such
other address as the party shall from time to time specify in
accordance with Article XII(D) of the Plan.):
4
<PAGE>
If to the Company, to:
Collins & Aikman Holdings Corporation
8320 University Executive Park, Suite 102
Charlotte, North Carolina 28262
Attention: Legal Department
If to the Participant, to:
the address indicated on the signature page at the
end of this Agreement.
11. No Obligation to Continue Employment. This
-----------------------------------------
Agreement does not guarantee that the Company or any Related
Person will employ the Participant for any specific time period,
nor does it modify in any respect the Company's or any Related
Person's right to terminate or modify the Participant's
employment or compensation.
IN WITNESS WHEREOF, the parties have executed this
Agreement on the date and year first above written.
COLLINS & AIKMAN HOLDINGS CORPORATION
By:__________________________
Authorized Officer
-----------------------------
[PARTICIPANT]
Address:
5
EXHIBIT 10.13
_________________________________________________________________
COLLINS & AIKMAN HOLDINGS CORPORATION
1994 EMPLOYEE STOCK OPTION PLAN
_________________________________________________________________
April 15, 1994
<PAGE>
Table of Contents
-----------------
Page
----
I. Purposes of the Plan . . . . . . . . . . . . . . . . . . 1
II. Definitions . . . . . . . . . . . . . . . . . . . . . . 1
III. Effective Date . . . . . . . . . . . . . . . . . . . . . 4
IV. Administration . . . . . . . . . . . . . . . . . . . . . 4
A. Duties of the Committee . . . . . . . . . . . . . . 4
B. Advisors . . . . . . . . . . . . . . . . . . . . . 5
C. Indemnification . . . . . . . . . . . . . . . . . . 5
D. Meetings of the Committee . . . . . . . . . . . . . 5
E. Determinations . . . . . . . . . . . . . . . . . . 5
V. Shares; Adjustment Upon Certain Events . . . . . . . . . 6
A. Shares to be Delivered; Fractional Shares . . . . . 6
B. Number of Shares . . . . . . . . . . . . . . . . . 6
C. Adjustments; Recapitalization, etc. . . . . . . . . 6
VI. Awards and Terms of Options . . . . . . . . . . . . . . 7
A. Grant . . . . . . . . . . . . . . . . . . . . . . . 7
B. Exercise Price . . . . . . . . . . . . . . . . . . 7
C. Number of Shares . . . . . . . . . . . . . . . . . 7
D. Exercisability . . . . . . . . . . . . . . . . . . 7
E. Acceleration of Exercisability . . . . . . . . . . 8
F. Exercise of Options. . . . . . . . . . . . . . . . 8
G. Black-Out Periods. . . . . . . . . . . . . . . . . 9
H. Non-Competition and Other Provisions. . . . . . . . 9
I. Restrictions on Exercise. . . . . . . . . . . . . . 9
J. Incentive Stock Option Limitations. . . . . . . . . 9
VII. Effect of Termination of Relationship . . . . . . . . . 10
A. Death, Disability, Retirement, etc. . . . . . . . . 10
B. Cause . . . . . . . . . . . . . . . . . . . . . . . 10
C. Other Termination . . . . . . . . . . . . . . . . . 11
D. Cancellation of Options . . . . . . . . . . . . . . 11
VIII. Nontransferability of Options . . . . . . . . . . . 11
IX. Rights as a Stockholder . . . . . . . . . . . . . . . . 11
X. Termination, Amendment and Modification . . . . . . . . 11
A. General Amendments . . . . . . . . . . . . . . . . 11
B. Other Termination . . . . . . . . . . . . . . . . . 12
XI. Use of Proceeds . . . . . . . . . . . . . . . . . . . . 12
i
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Page
----
XII. General Provisions . . . . . . . . . . . . . . . . . . . 12
A. Right to Terminate Employment . . . . . . . . . . . 12
B. Purchase for Investment . . . . . . . . . . . . . . 12
C. Trusts, etc. . . . . . . . . . . . . . . . . . . . 13
D. Notices . . . . . . . . . . . . . . . . . . . . . . 13
E. Severability of Provisions . . . . . . . . . . . . 13
F. Payment to Minors, Etc. . . . . . . . . . . . . . . 13
G. Headings and Captions . . . . . . . . . . . . . . . 13
H. Controlling Law . . . . . . . . . . . . . . . . . . 13
I. Section 162(m) Deduction Limitation . . . . . . . . 14
J. Section 16(b) of the Act . . . . . . . . . . . . . 14
XIII. Issuance of Stock Certificates;
Legends; Payment of Expenses . . . . . . . . . . 14
A. Stock Certificates . . . . . . . . . . . . . . . . 14
B. Legends . . . . . . . . . . . . . . . . . . . . . . 14
C. Payment of Expenses . . . . . . . . . . . . . . . . 14
XIV. Listing of Shares and Related Matters . . . . . . . . . 14
XV. Withholding Taxes . . . . . . . . . . . . . . . . . . . 15
ii
<PAGE>
Collins & Aikman Holdings Corporation
1994 Employee Stock Option Plan
I. Purposes of the Plan
--------------------
The purposes of this 1994 Employee Stock Option Plan
(the "Plan") are to enable Collins & Aikman Holdings Corporation
(the "Company") and Related Persons (as defined herein) to
attract, retain and motivate the employees and consultants who
are important to the success and growth of the business of the
Company and Related Persons and to create a long-term mutuality
of interest between the Key Employees and Executive Consultants
(as defined herein) and the stockholders of the Company by
granting the Key Employees and Executive Consultants options to
purchase Common Stock (as defined herein). This document shall
supersede all other material describing this Plan, including, but
not limited to, prior drafts hereof and any documents
incorporating the terms and provisions of any such prior drafts.
II. Definitions
-----------
In addition to the terms defined elsewhere herein, for
purposes of this Plan, the following terms will have the
following meanings when used herein with initial capital letters:
A. "Act" means the Securities Exchange Act of 1934,
as amended, and all rules and regulations promulgated thereunder.
B. "Board" means the Board of Directors of the
Company.
C. "Cause" means that the Committee shall have
determined that any of the following events has occurred: (1) an
act of fraud, embezzlement, misappropriation of business or theft
committed by a Participant in the course of his or her employment
or consultancy or any intentional or gross negligent misconduct
of a Participant which injures the business or reputation of the
Company or Related Persons; (2) intentional or gross negligent
damage committed by a Participant to the property of the Company
or Related Persons; (3) a Participant's willful failure or
refusal to perform the customary duties and responsibilities of
his or her position or consultancy with the Company or Related
Persons; (4) a Participant's breach of fiduciary duty, or the
making of a false representation, to the Company or Related
Persons; (5) a Participant's material breach of any covenant,
condition or obligation required to be performed by him or her
1
<PAGE>
pursuant to this Plan, the Option Agreement or any other
agreement between him or her and the Company or Related Persons
or a Participant's intentional or gross negligent violation of
any material written policy of the Company or Related Persons;
(6) a Key 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 (7) commission by a
Participant of a felony or a crime involving moral turpitude.
Cause shall be deemed to exist as of the date any of the above
events occur even if the Committee's determination is later and
whether or not such determination is made before or after
Termination of Employment or Termination of Consultancy.
D. "Code" means the Internal Revenue Code of 1986, as
amended (or any successor statute).
E. "Committee" means such committee, if any,
appointed by the Board to administer the Plan, consisting of two
or more directors as may be appointed from time to time by the
Board each of whom, unless otherwise determined by the Board,
shall be disinterested persons as defined in Rule 16b-3
promulgated under Section 16(b) of the Act. If the Board does
not appoint a committee for this purpose, "Committee" means the
Board.
F. "Common Stock" means the common stock of the
Company, par value $.01 per share, any Common Stock into which
the Common Stock may be converted and any Common Stock resulting
from any reclassification of the Common Stock.
G. "Company" means Collins & Aikman Holdings
Corporation, a Delaware corporation.
H. "Competitive Activity" means (a) being employed
by, consulting to or being a director of any business, or
engaging directly or indirectly in any business activity, that is
competitive with any material business of any of the Company, a
Related Person or of the division that the Participant is or was
employed by or (b) soliciting for employment or consulting,
employing or retaining, or assisting another Person to employ or
retain, directly or indirectly, any employees of the Company or
Related Persons or any Person who was an employee of the Company
or Related Persons in the prior six months, provided, however,
that employing or retaining, or assisting another Person to
employ or retain, any Person whose employment or consultancy with
the Company or a Related Person has been terminated without Cause
or any Person that is non-exempt under the Federal Fair Labor
Standards Act, 29 USC Sec. 213(a)(1), shall not be considered
Competitive Activity.
I. "Disability" means a permanent and total
disability, as determined by the Committee in its sole
2
<PAGE>
discretion. A Disability shall only be deemed to occur at the
time of the determination by the Committee of the Disability.
J. "Executive Consultants" shall mean executive-level
consultants of the Company or Related Persons, as determined by
the Committee, provided, however, that no managing director,
general partner, limited partner, director, officer or employee
of Wasserstein Perella & Co., Inc. or The Blackstone Group L.P.
that is a director of the Company will be eligible to participate
in the Plan.
K. "Fair Market Value" shall mean, for purposes of
this Plan, unless otherwise required by any applicable provision
of the Code or any regulations issued thereunder, as of any date,
the last sales prices reported for the Common Stock on the
applicable date, (i) as reported by the principal national
securities exchange in the United States on which it is then
traded, or (ii) if not traded on any such national securities
exchange, as quoted on an automated quotation system sponsored by
the National Association of Securities Dealers, or if the sale of
the Common Stock shall not have been reported or quoted on such
date, on the first day prior thereto on which the Common Stock
was reported or quoted. If the Common Stock is not readily
tradeable on a national securities exchange or any system
sponsored by the National Association of Securities Dealers, its
Fair Market Value shall be set by the Committee based upon its
assessment of the cash price that would be paid between a fully
informed buyer and seller under no compulsion to buy or sell
(without giving effect to any discount for a minority interest or
any restrictions on transferability or any lack of liquidity of
the stock).
L. "Incentive Stock Option" shall mean any Option
awarded under this Plan intended to be and designated as an
"Incentive Stock Option" within the meaning of Section 422 of the
Code.
M. "Key Employee" means any person who is an
executive officer or other valuable employee of the Company or a
Related Person, as determined by the Committee, provided,
however, that no managing director, general partner, limited
partner, director, officer or employee of Wasserstein Perella &
Co., Inc. or The Blackstone Group L.P. that is a director of the
Company will be eligible to participate in the Plan. A Key
Employee may, but need not, be an officer or director of the
Company or a Related Person.
N. "Non-Qualified Stock Option" shall mean any Option
awarded under this Plan that is not an Incentive Stock Option.
O. "Option" means the right to purchase one Share at
a prescribed purchase price on the terms specified in the Plan.
3
<PAGE>
P. "Participant" means a Key Employee or Executive
Consultant who is granted Options under the Plan which Options
have not expired; provided, however, that any Executive
Consultant shall be a Participant for purposes of the Plan solely
with respect to grants of Non-Qualified Stock Options and shall
be ineligible for Incentive Stock Options.
Q. "Person" means any individual or entity, and the
heirs, executors, administrators, legal representatives,
successors and assigns of such Person as the context may require.
R. "Public Offering" means the closing of an offering
under a registration statement registering the common equity
shares of the registering entity under the Securities Act (other
than a registration on a Form S-8, S-4 or any successor or
similar special purpose form).
S. "Related Person or Related Persons" means (a) any
corporation that is defined as a subsidiary corporation in
Section 424(f) of the Code or (b) any corporation that is defined
as a parent corporation in Section 424(e) of the Code. An entity
shall be deemed a Related Person only for such periods as the
requisite ownership relationship is maintained.
T. "Securities Act" means the Securities Act of 1933,
as amended, and all rules and regulations promulgated thereunder.
U. "Share" means a share of Common Stock.
V. "Ten Percent Shareholder" shall mean a person
owning Common Stock of the Company possessing more than ten
percent (10%) of the total combined voting power of all classes
of stock of the Company as defined in Section 422 of the Code.
W. "Termination of Consultancy" with respect to an
individual means that individual is no longer acting as an
Executive Consultant to the Company or a Related Person. In the
event an entity shall cease to be a Related Person, there shall
be deemed a Termination of Consultancy of any individual who is
not otherwise an Executive Consultant of the Company or another
Related Person at the time the entity ceases to be a Related
Person.
X. "Termination of Employment" with respect to an
individual means that individual is no longer actively employed
by the Company or a Related Person on a full-time basis,
irrespective of whether or not such employee is receiving salary
continuance pay, is continuing to participate in other employee
benefit programs or is otherwise receiving severance type
payments. In the event an entity shall cease to be a Related
Person, there shall be deemed a Termination of Employment of any
individual who is not otherwise an employee of the Company or
4
<PAGE>
another Related Person at the time the entity ceases to be a
Related Person. A Termination of Employment shall not include a
leave of absence approved for purposes of the Plan by the
Committee.
Y. "Termination of Relationship" means a Termination
of Consultancy or a Termination of Employment where the
individual is no longer a consultant to, or employee of, the
Company.
III. Effective Date
--------------
The Plan shall become effective on April 15, 1994 (the
"Effective Date"), subject to its approval by the majority of the
Common Stock (at the time of approval) within one year after the
Plan is adopted by the Board of Directors of the Company. Grants
of Options by the Committee under the Plan may be made on or
after the Effective Date of the Plan, including retroactively,
provided that, if the Plan is not approved by the majority of the
Common Stock (at the time of approval), all Options which have
been granted by the Committee shall be null and void. No Options
may be exercised prior to the approval of the Plan by the
majority of the Common Stock (at the time of approval).
IV. Administration
--------------
A. Duties of the Committee. The Plan shall be
-------------------------
administered by the Committee. The Committee shall have full
authority to interpret the Plan and to decide any questions and
settle all controversies and disputes that may arise in
connection with the Plan; to establish, amend and rescind rules
for carrying out the Plan; to administer the Plan, subject to its
provisions; to select Participants in, and grant Options under,
the Plan; to determine the terms, exercise price and form of
exercise payment for each Option granted under the Plan; to
determine the consideration to be received by the Company in
exchange for the grant of the Options; to determine whether and
to what extent Incentive Stock Options and Non-Qualified Stock
Options, or any combination thereof, are to be granted hereunder
to one or more Key Employees and to determine whether and to what
extent Non-Qualified Stock Options are to be granted hereunder to
one or more Executive Consultants; to prescribe the form or forms
of instruments evidencing Options and any other instruments
required under the Plan (which need not be uniform) and to change
such forms from time to time; and to make all other
determinations and to take all such steps in connection with the
Plan and the Options as the Committee, in its sole discretion,
deems necessary or desirable. The Committee shall not be bound
to any standards of uniformity or similarity of action,
interpretation or conduct in the discharge of its duties
5
<PAGE>
hereunder, regardless of the apparent similarity of the matters
coming before it. Any determination, action or conclusion of the
Committee shall be final, conclusive and binding on all parties.
Anything in the Plan to the contrary notwithstanding, no term of
this Plan relating to Incentive Stock Options shall be
interpreted, amended or altered, nor shall any discretion or
authority granted under the Plan be so exercised, so as to
disqualify the Plan under Section 422 of the Code, or, without
the consent of the Participants affected, to disqualify any
Incentive Stock Option under such Section 422.
B. Advisors. The Committee may employ such legal
--------
counsel, consultants and agents as it may deem desirable for the
administration of the Plan, and may rely upon any advice or
opinion received from any such counsel or consultant and any
computation received from any such consultant or agent. Expenses
incurred by the Committee in the engagement of such counsel,
consultant or agent shall be paid by the Company.
C. Indemnification. To the maximum extent permitted
---------------
by applicable law, no officer of the Company or member or former
member of the Committee or of the Board shall be liable for any
action or determination made in good faith with respect to the
Plan or any Option granted under it. To the maximum extent
permitted by applicable law or the Certificate of Incorporation
or By-Laws of the Company, each officer and member or former
member of the Committee or of the Board shall be indemnified and
held harmless by the Company against any cost or expense
(including reasonable fees of counsel reasonably acceptable to
the Company) or liability (including any sum paid in settlement
of a claim with the approval of the Company), and advanced
amounts necessary to pay the foregoing at the earliest time and
to the fullest extent permitted, arising out of any act or
omission to act in connection with the Plan, except to the extent
arising out of such officer's, member's or former member's own
fraud or bad faith. Such indemnification shall be in addition to
any rights of indemnification the officers, members or former
members may have as directors under applicable law or under the
Certificate of Incorporation or By-Laws of the Company or Related
Person.
D. Meetings of the Committee. The Committee shall
--------------------------
adopt such rules and regulations as it shall deem appropriate
concerning the holding of its meetings and the transaction of its
business. Any member of the Committee may be removed from the
Committee at any time either with or without cause by resolution
adopted by the Board, and any vacancy on the Committee may at any
time be filled by resolution adopted by the Board. All
determinations by the Committee shall be made by the affirmative
vote of a majority of its members. Any such determination may be
made at a meeting duly called and held at which a majority of the
members of the Committee are in attendance in person or through
6
<PAGE>
telephonic communication. Any determination set forth in writing
and signed by all the members of the Committee shall be as fully
effective as if it had been made by a majority vote of the
members at a meeting duly called and held.
E. Determinations. Each determination,
--------------
interpretation or other action made or taken pursuant to the
provisions of this Plan by the Committee shall be final,
conclusive and binding for all purposes and upon all persons,
including, without limitation, the Participants, the Company and
Related Persons, directors, officers and other employees of the
Company and Related Persons, and the respective heirs, executors,
administrators, personal representatives and other successors in
interest of each of the foregoing.
V. Shares; Adjustment Upon Certain Events
--------------------------------------
A. Shares to be Delivered; Fractional Shares. Shares
-----------------------------------------
to be issued under the Plan shall be made available, at the sole
discretion of the Board, either from authorized but unissued
Shares or from issued Shares reacquired by Company and held in
treasury. No fractional Shares will be issued or transferred
upon the exercise of any Option. In lieu thereof, the Company
shall pay a cash adjustment equal to the same fraction of the
Fair Market Value of one Share on the date of exercise.
B. Number of Shares. Subject to adjustment as
------------------
provided in this Article V, the maximum aggregate number of
Shares that may be issued under the Plan shall be 2,980,534. If
Options are for any reason canceled, or expire or terminate
unexercised, the Shares covered by such Options shall again be
available for the grant of Options, subject to the foregoing
limit.
C. Adjustments; Recapitalization, etc. The existence
-----------------------------------
of the Plan and the Options granted hereunder shall not affect in
any way the right or power of the Board or the stockholders of
the Company to make or authorize any adjustment,
recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of
the Company, any issue of bonds, debentures, preferred or prior
preference stocks ahead of or affecting Common Stock, the
dissolution or liquidation of the Company or Related Persons, any
sale or transfer of all or part of its assets or business or any
other corporate act or proceeding. The Committee may make or
provide for such adjustments in the maximum number of Shares
specified in Article V(B), in the number of Shares covered by
outstanding Options granted hereunder, and/or in the Purchase
Price (as hereinafter defined) applicable to such Options or such
other adjustments in the number and kind of securities received
upon the exercise of Options, as the Committee in its sole
7
<PAGE>
discretion may determine is equitably required to prevent
dilution or enlargement of the rights of Participants or to
otherwise recognize the effect that otherwise would result from
any stock dividend, stock split, combination of shares,
recapitalization or other change in the capital structure of the
Company, merger, consolidation, spin-off, reorganization, partial
or complete liquidation, issuance of rights or warrants to
purchase securities or any other corporate transaction or event
having an effect similar to any of the foregoing. In the event
of a merger or consolidation in which Company is not the
surviving entity or in the event of any transaction that results
in the acquisition of substantially all of Company's outstanding
Common Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the
sale or transfer of all of the Company's assets (the foregoing
being referred to as "Acquisition Events"), then the Committee
may in its sole discretion terminate all outstanding Options
effective as of the consummation of the Acquisition Event by
delivering notice of termination to each Participant at least 20
days prior to the date of consummation of the Acquisition Event;
provided that, during the period from the date on which such
notice of termination is delivered to the consummation of the
Acquisition Event, each Participant shall have the right to
exercise in full all the Options that are then outstanding
(without regard to limitations on exercise otherwise contained in
the Options) but contingent on occurrence of the Acquisition
Event, and, provided that, if the Acquisition Event does not take
place within a specified period after giving such notice for any
reason whatsoever, the notice and exercise shall be null and
void. Except as hereinbefore expressly provided, the issuance by
the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, for cash,
property, labor or services, upon direct sale, upon the exercise
of rights or warrants to subscribe therefor or upon conversion of
shares or other securities, and in any case whether or not for
fair value, shall not affect, and no adjustment by reason thereof
shall be made with respect to, the number and class of shares
and/or other securities or property subject to Options
theretofore granted or the Purchase Price (as hereinafter
defined).
VI. Awards and Terms of Options
---------------------------
A. Grant. The Committee may grant Non-Qualified
-----
Stock Options or Incentive Stock Options, or any combination
thereof to Key Employees and may grant Non-Qualified Stock
Options to Executive Consultants, provided, that the maximum
number of Shares with respect to which Options may be granted to
any Key Employee or Executive Consultant during any calendar year
may not exceed 1,000,000, except that in the year of the first
grant of Options to a Key Employee or Executive Consultant, the
8
<PAGE>
maximum number of Shares with respect to which Options may be
granted may not exceed 1,000,000. To the extent that the maximum
number of authorized Shares with respect to which Options may be
granted are not granted in a particular calendar year to a
Participant (beginning with the year in which the Participant
receives his or her first grant of Options hereunder), such
ungranted Options for any year shall increase the maximum number
of Shares with respect to which Options may be granted to such
Participant in subsequent calendar years during the term of the
Plan until used. To the extent that any Option does not qualify
as an Incentive Stock Option (whether because of its provisions
or the time or manner of its exercise or otherwise), such Option
or the portion thereof which does not qualify, shall constitute a
separate Non-Qualified Stock Option. Each Option shall be
evidenced by an Option agreement (the "Option Agreement") in such
form as the Committee shall approve from time to time.
B. Exercise Price. The purchase price per Share (the
--------------
"Purchase Price") deliverable upon the exercise of a Non-
Qualified Stock Option granted on or prior to the initial Public
Offering of the Company shall be determined by the Committee and
set forth in a Participant's Option Agreement, provided that the
Purchase Price shall not be less than the par value of a Share,
and, provided, further, that the Purchase Price deliverable upon
the exercise of a Non-Qualified Stock Option granted after the
initial Public Offering of the Company shall be determined by the
Committee and set forth in a Participant's Option Agreement but
shall not be less than 100% of the Fair Market Value of a Share
at the time of grant. The Purchase Price deliverable upon the
exercise of an Incentive Stock Option shall be determined by the
Committee and set forth in a Participant's Option Agreement but
shall be not less than 100% of the Fair Market Value of a Share
at the time of grant; provided, however, if an Incentive Stock
Option is granted to a Ten Percent Shareholder, the Purchase
Price shall be no less than 110% of the Fair Market Value of a
Share.
C. Number of Shares. The Option Agreement shall
-----------------
specify the number of Options granted to the Participant, as
determined by the Committee in its sole discretion.
D. Exercisability. At the time of grant, the
--------------
Committee shall specify when and on what terms the Options
granted shall be exercisable. In the case of Options not
immediately exercisable in full, the Committee may at any time
accelerate the time at which all or any part of the Options may
be exercised and may waive any other conditions to exercise. No
Option shall be exercisable after the expiration of ten years
from the date of grant; provided, however, the term of an
Incentive Stock Option granted to a Ten Percent Shareholder may
not exceed five years. Each Option shall be subject to earlier
termination as provided in Article VII below.
9
<PAGE>
E. Acceleration of Exercisability.
------------------------------
All Options granted and not previously exercisable
shall become fully exercisable immediately upon a Change of
Control (as defined herein). For this purpose, a "Change of
Control" shall be deemed to have occurred upon:
(a) an acquisition by any individual, entity
or group (within the meaning of Section 13d-3 or 14d-1
of the Act) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Act) of more than
80% of the combined voting power of the then
outstanding voting securities of Company entitled to
vote generally in the election of directors, including,
but not limited to, by merger, consolidation or similar
corporate transaction or by purchase; excluding,
however, the following: (x) any acquisition by the
Company, Related Persons, Wasserstein Perella Partners,
L.P., Blackstone Capital Partners L.P. or an affiliate
of any of the foregoing, or (y) any acquisition by an
employee benefit plan (or related trust) sponsored or
maintained by the Company or Related Persons; or
(b) the approval of the stockholders of the
Company of (i) a complete liquidation or dissolution of
the Company or (ii) the sale or other disposition of
more than 80% of the gross assets of the Company and
Related Persons on a consolidated basis (determined
under generally accepted accounting principles as
determined in good faith by the Committee); excluding,
however, such a sale or other disposition to a
corporation with respect to which, following such sale
or other disposition, (x) more than 20% of the combined
voting power of the then outstanding voting securities
of such corporation entitled to vote generally in the
election of directors will be then beneficially owned,
directly or indirectly, by the individuals and entities
who were the beneficial owners of the outstanding
Shares immediately prior to such sale or other
disposition, (y) no Person (other than the Company,
Related Persons, and any employee benefit plan (or
related trust) of the Company or Related Persons or
such corporation and any Person beneficially owning,
immediately prior to such sale or other disposition,
directly or indirectly, 20% or more of the outstanding
Shares) will beneficially own, directly or indirectly,
20% or more of the combined voting power of the then
outstanding voting securities of such corporation
entitled to vote generally in the election of directors
and (z) individuals who were members of the Incumbent
Board will constitute at least a majority of the
members of the board of directors of such corporation.
10
<PAGE>
F. Exercise of Options.
-------------------
1. A Participant may elect to exercise one or
more Options by giving written notice to the Committee of
such election and of the number of Options such Participant
has elected to exercise, accompanied by payment in full of
the aggregate Purchase Price for the number of Shares for
which the Options are being exercised.
2. Shares purchased pursuant to the exercise of
Options shall be paid for at the time of exercise as
follows:
(a) in cash or by check, bank draft or money
order payable to the order of Company;
(b) if the Shares are traded on a national
securities exchange, through the delivery of
irrevocable instructions to a broker to deliver
promptly to the Company an amount equal to the
aggregate Purchase Price; or
(c) on such other terms and conditions as
may be acceptable to the Committee (which may include
payment in full or in part by the transfer of Shares
which have been owned by the Participant for at least 6
months or the surrender of Options owned by the
Participant) and in accordance with applicable law.
3. Upon receipt of payment, the Company shall
deliver to the Participant as soon as practicable a
certificate or certificates for the Shares then purchased.
G. Black-Out Periods. The direct or indirect sale,
-----------------
transfer or other disposition of Common Stock received by a
Participant upon the exercise of Options shall be prohibited for
two years following the initial Public Offering of the Company,
unless a shorter period of time is specified by the Committee in
its sole discretion at any time.
H. Non-Competition and Other Provisions. In
-----------------------------------------
consideration of the grant of Options, by accepting the grant of
Options the Participant agrees during employment and, in the
event any Options vest, for a period ending one year following
the date of the Participant's Termination of Employment, not to
engage in any Competitive Activity, except to the extent
consented to by the Committee in writing. Each Participant by
accepting a grant of Options hereunder acknowledges that the
Company or a Related Person will suffer irreparable harm in the
event such Participant engages in any Competitive Activity during
this period, and agrees that in addition to its remedies at law,
the Company and a Related Person shall be entitled to injunctive
11
<PAGE>
relief as a consequence of a violation or threatened violation of
this covenant. Notwithstanding the foregoing, nothing in this
Plan shall prohibit or penalize ownership by a Participant of the
shares of a business that is registered under Section 12 of the
Act and constitutes, together with all such shares owned by any
immediate family member or affiliate of, or person acting in
concert with, such Participant, less than 2% of the outstanding
registered shares of such business. The Committee will have the
discretion to impose in a Participant's Option Agreement such
other conditions, limitations and restrictions as it determines
are appropriate in its sole discretion, including any waivers of
rights which a Participant may have.
I. Restrictions on Exercise. Notwithstanding
----------------------------
anything else contained herein to the contrary other than Article
VI(E), no Options may be exercised prior to the earlier of the
closing of a Public Offering of Shares or the expiration of five
years from the Effective Date of the Plan, except to the extent
consented to by the Committee in its sole and absolute
discretion.
J. Incentive Stock Option Limitations. To the extent
----------------------------------
that the aggregate Fair Market Value (determined as of the time
of grant) of the Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by the
Participant during any calendar year under the Plan and/or any
other stock option plan of the Company or any subsidiary or
parent corporation (within the meaning of Section 424 of the
Code) exceeds $100,000, such Options shall be treated as Options
which are not Incentive Stock Options.
To the extent permitted under Section 422 of the Code,
or the applicable regulations thereunder or any applicable
Internal Revenue Service pronouncement, if (i) a Participant's
employment with the Company or Related Person is terminated by
reason of death, Disability, retirement or termination without
Cause, and (ii) the portion of any Incentive Stock Option that
would be exercisable during the post-termination period specified
under Article VII but for the $100,000 limitation currently
contained in Section 422(d) of the Code, is greater than the
portion of such Stock Option that is immediately exercisable as
an `incentive stock option' during such post-termination period
under Section 422, such excess shall be treated as a Non-
Qualified Stock Option. If the exercise of an Incentive Stock
Option is accelerated for any reason, any portion of such Option
that is not exercisable as an Incentive Stock Option by reason of
the $100,000 limitation contained in Section 422(d) of the Code
shall be treated as a Non-Qualified Stock Option.
Should any of the foregoing provisions not be necessary
in order for the Stock Options to qualify as Incentive Stock
Options, or should any additional provisions be required, the
12
<PAGE>
Committee may amend the Plan accordingly, without the necessity
of obtaining the approval of the shareholders of the Company,
except as otherwise required by law.
VII. Effect of Termination of Relationship
-------------------------------------
A. Death, Disability, Retirement, etc. Except as
-------------------------------------
otherwise provided in the Participant's Option Agreement, upon
Termination of Relationship, all outstanding Options then
exercisable and not exercised by the Participant prior to such
Termination of Relationship (and any Options not previously
exercisable but made exercisable by the Committee at or after the
Termination of Relationship) shall remain exercisable by the
Participant to the extent not exercised for the following time
periods, or, if earlier, the prior expiration of the Option in
accordance with the terms of the Plan and grant:
1. In the event of the Participant's death or
Disability, such Options shall remain exercisable by the
Participant (or by the Participant's estate or by the person
given authority to exercise such Options by the
Participant's will or by operation of law) for a period of
one year from the date of the Participant's death or
Disability, provided that the Committee, in its sole
discretion, may at any time extend such time period.
2. In the event the Participant retires from
employment at or after age 65 (or, with the consent of the
Committee or under an early retirement policy of the Company
or a Related Person, before age 65), or if the Participant's
employment is terminated by the Company or a Related Person
without Cause, such Options shall remain exercisable for 90
days from the date of the Participant's Termination of
Employment, provided that the Committee, in its sole
discretion, may at any time extend such time period.
B. Cause. Upon the Termination of Relationship of a
-----
Participant for Cause, or if the Company or a Related Person
obtains or discovers information after Termination of
Relationship that such Participant had engaged in conduct that
would have justified a Termination of Relationship for Cause
during employment or consultancy, all outstanding Options of such
Participant shall immediately be canceled.
C. Other Termination. In the event of Termination of
-----------------
Relationship for any reason other than as provided in Article
VII(A) or VII(B), all outstanding Options not exercised by the
Participant prior to such Termination of Relationship shall
remain exercisable (to the extent exercisable by such Participant
immediately before such termination) for a period of 30 days
13
<PAGE>
after such termination, provided that the Committee, in its sole
discretion, may at any time extend such time period.
D. Cancellation of Options. Except as otherwise
-------------------------
provided in Article VI(E), no Options that were not exercisable
during the period of employment or consultancy shall thereafter
become exercisable upon a Termination of Relationship for any
reason or no reason whatsoever, and such options shall terminate
and become null and void upon a Termination of Relationship,
unless the Committee determines in its sole discretion that such
Options shall be exercisable.
VIII. Nontransferability of Options
-----------------------------
No Option shall be transferable by the Participant
otherwise than by will or under applicable laws of descent and
distribution, and during the lifetime of the Participant may be
exercised only by the Participant or his or her guardian or legal
representative. In addition, no Option shall be assigned,
negotiated, pledged or hypothecated in any way (whether by
operation of law or otherwise), and no Option shall be subject to
execution, attachment or similar process. Upon any attempt to
transfer, assign, negotiate, pledge or hypothecate any Option, or
in the event of any levy upon any Option by reason of any
execution, attachment or similar process contrary to the
provisions hereof, such Option shall immediately terminate and
become null and void.
IX. Rights as a Stockholder
-----------------------
A Participant (or a permitted transferee of an Option)
shall have no rights as a stockholder with respect to any Shares
covered by such Participant's Option until such Participant (or
permitted transferee) shall have become the holder of record of
such Shares, and no adjustments shall be made for dividends in
cash or other property or distributions or other rights in
respect to any such Shares, except as otherwise specifically
provided in this Plan.
X. Termination, Amendment and Modification
---------------------------------------
A. General Amendments. The Plan shall terminate at
------------------
the close of business on the tenth anniversary of the Effective
Date (the "Termination Date"), unless terminated sooner as
hereinafter provided, and no Option shall be granted under the
Plan on or after that date. The termination of the Plan shall
not terminate any outstanding Options that by their terms
continue beyond the Termination Date. At any time prior to the
14
<PAGE>
Termination Date, the Committee may amend or terminate the Plan
or suspend the Plan in whole or in part.
The Committee may at any time, and from time to time,
amend, in whole or in part, any or all of the provisions of the
Plan (including any amendment deemed necessary to ensure that the
Company may comply with any regulatory requirement referred to in
Article XII), or suspend or terminate it entirely, retroactively
or otherwise; provided, however, that, unless otherwise required
-------- -------
by law or specifically provided herein, the rights of a
Participant with respect to Options granted prior to such
amendment, suspension or termination, may not, other than as
provided in Article X(B), be materially impaired without the
consent of such Participant and, provided further, without the
approval of the stockholders of the Company entitled to vote, no
amendment may be made which would (i) materially increase the
aggregate number of shares of Common Stock that may be issued
under this Plan (except by operation of Article V); (ii) decrease
the minimum Purchase Price of any Option or (iii) extend the
maximum option period.
The Committee may amend the terms of any Option
granted, prospectively or retroactively, but, subject to Article
VI above or as otherwise provided herein, no such amendment or
other action by the Committee shall materially impair the rights
of any Participant without the Participant's consent. No
modification of an Option shall adversely affect the status of an
Incentive Stock Option as an incentive stock option under Section
422 of the Code. Notwithstanding the foregoing, however, no such
amendment may, without the approval of the stockholders of the
Company, effect any change that would require stockholder
approval under applicable law.
B. Other Termination. Notwithstanding any other
------------------
provision of the Plan, in the event that a Public Offering does
not occur with respect to the Company by January 28, 1995, the
Committee shall have the absolute right and discretion to amend
or terminate the Plan and a Participant's rights with respect to
any Options granted prior to such amendment or termination.
XI. Use of Proceeds
---------------
The proceeds of the sale of Shares subject to Options
under the Plan are to be added to the general funds of Company
and used for its general corporate purposes as the Board shall
determine.
15
<PAGE>
XII. General Provisions
------------------
A. Right to Terminate Employment. Neither the
--------------------------------
adoption of the Plan nor the grant of Options shall impose any
obligation on the Company or Related Persons to continue the
employment of any Participant, nor shall it impose any obligation
on the part of any Participant to remain in the employ of the
Company or Related Persons.
B. Purchase for Investment. If the Board or the
------------------------
Committee determines that the law so requires, the holder of an
Option granted hereunder shall, upon any exercise or conversion
thereof, execute and deliver to the Company a written statement,
in form satisfactory to the Company, representing and warranting
that such Participant is purchasing or accepting the Shares then
acquired for such Participant's own account and not with a view
to the resale or distribution thereof, that any subsequent offer
for sale or sale of any such Shares shall be made either pursuant
to (i) a Registration Statement on an appropriate form under the
Securities Act, which Registration Statement shall have become
effective and shall be current with respect to the Shares being
offered and sold, or (ii) a specific exemption from the
registration requirements of the Securities Act, and that in
claiming such exemption the holder will, prior to any offer for
sale or sale of such Shares, obtain a favorable written opinion,
satisfactory in form and substance to the Company, from counsel
acceptable to the Company as to the availability of such
exception.
C. Trusts, etc. Nothing contained in the Plan and no
------------
action taken pursuant to the Plan (including, without limitation,
the grant of any Option thereunder) shall create or be construed
to create a trust of any kind, or a fiduciary relationship,
between Company and any Participant or the executor,
administrator or other personal representative or designated
beneficiary of such Participant, or any other persons. Any
reserves that may be established by Company in connection with
the Plan shall continue to be part of the general funds of
Company, and no individual or entity other than Company shall
have any interest in such funds until paid to a Participant. If
and to the extent that any Participant or such Participant's
executor, administrator or other personal representative, as the
case may be, acquires a right to receive any payment from Company
pursuant to the Plan, such right shall be no greater than the
right of an unsecured general creditor of Company.
D. Notices. Any notice to the Company required by or
-------
in respect of this Plan will be addressed to the Company at 8320
University Executive Park, Suite 102, Charlotte, North Carolina
28262, Attention: Legal Department, or such other place of
business as shall become the Company's principal executive
offices from time to time. Each Participant shall be responsible
16
<PAGE>
for furnishing the Committee with the current and proper address
for the mailing to such Participant of notices and the delivery
to such Participant of agreements, Shares and payments. Any such
notice to the Participant will, if the Company has received
notice that the Participant is then deceased, be given to the
Participant's personal representative if such representative has
previously informed the Company of his status and address (and
has provided such reasonable substantiating information as the
Company may request) by written notice under this Section. Any
notice required by or in respect of this Plan will be deemed to
have been duly given when delivered in person or when dispatched
by telegram or one business day after having been dispatched by a
nationally recognized overnight courier service or three business
days after having been mailed by United States registered or
certified mail, return receipt requested, postage prepaid. The
Company assumes no responsibility or obligation to deliver any
item mailed to such address that is returned as undeliverable to
the addressee and any further mailings will be suspended until
the Participant furnishes the proper address.
E. Severability of Provisions. If any provisions of
--------------------------
the Plan shall be held invalid or unenforceable, such invalidity
or unenforceability shall not affect any other provisions of the
Plan, and the Plan shall be construed and enforced as if such
provisions had not been included.
F. Payment to Minors, Etc. Any benefit payable to or
-----------------------
for the benefit of a minor, an incompetent person or other person
incapable of receipt thereof shall be deemed paid when paid to
such person's guardian or to the party providing or reasonably
appearing to provide for the care of such person, and such
payment shall fully discharge the Committee, the Company and
their employees, agents and representatives with respect thereto.
G. Headings and Captions. The headings and captions
---------------------
herein are provided for reference and convenience only. They
shall not be considered part of the Plan and shall not be
employed in the construction of the Plan.
H. Controlling Law. The Plan shall be construed and
----------------
enforced according to the laws of the State of Delaware.
I. Section 162(m) Deduction Limitation. The
----------------------------------------
Committee at any time may in its sole discretion limit the number
of Options that can be exercised in any taxable year of the
Company, to the extent necessary to prevent the application of
Section 162(m) of the Code (or any similar or successor
provision), provided that the Committee may not postpone the
earliest date on which Options can be exercised beyond the last
day of the stated term of such Options.
17
<PAGE>
J. Section 16(b) of the Act. All elections and
----------------------------
transactions under the Plan by persons subject to Section 16 of
the Exchange Act involving shares of Common Stock are intended to
comply with all exemptive conditions under Rule 16b-3. The
Committee may establish and adopt written administrative
guidelines, designed to facilitate compliance with Section 16(b)
of the Act, as it may deem necessary or proper for the
administration and operation of the Plan and the transaction of
business thereunder.
XIII. Issuance of Stock Certificates;
Legends; Payment of Expenses
----------------------------
A. Stock Certificates. Upon any exercise of an
-------------------
Option and payment of the exercise price as provided in such
Option, a certificate or certificates for the Shares as to which
such Option has been exercised shall be issued by Company in the
name of the person or persons exercising such Option and shall be
delivered to or upon the order of such person or persons.
B. Legends. Certificates for Shares issued upon
-------
exercise of an Option shall bear such legend or legends as the
Committee, in its sole discretion, determines to be necessary or
appropriate to prevent a violation of, or to perfect an exemption
from, the registration requirements of the Securities Act or to
implement the provisions of any agreements between Company and
the Participant with respect to such Shares.
C. Payment of Expenses. The Company shall pay all
--------------------
issue or transfer taxes with respect to the issuance or transfer
of Shares, as well as all fees and expenses necessarily incurred
by the Company in connection with such issuance or transfer and
with the administration of the Plan.
XIV. Listing of Shares and Related Matters
-------------------------------------
If at any time the Board or the Committee shall
determine in its sole discretion that the listing, registration
or qualification of the Shares covered by the Plan upon any
national securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body,
is necessary or desirable as a condition of, or in connection
with, the grant of Options or the award or sale of Shares under
the Plan, no Option grant shall be effective and no Shares will
be delivered, as the case may be, unless and until such listing,
registration, qualification, consent or approval shall have been
effected or obtained, or otherwise provided for, free of any
conditions not acceptable to the Board.
18
<PAGE>
XV. Withholding Taxes
-----------------
The Company shall have the right to require prior to
the issuance or delivery of any shares of Common Stock payment by
the Participant of any Federal, state or local taxes required by
law to be withheld.
The Committee may permit any such withholding
obligation to be satisfied by reducing the number of shares of
Common Stock otherwise deliverable. A person required to file
reports under Section 16(a) of the Exchange Act with respect to
securities of the Company may elect to have a sufficient number
of shares of Common Stock withheld to fulfill such tax
obligations (hereinafter a "Withholding Election") only if the
election complies with such conditions as are necessary to
prevent the withholding of such shares from being subject to
Section 16(b) of the Exchange Act. To the extent necessary under
then current law, such conditions shall include the following:
(x) the Withholding Election shall be subject to the approval of
the Committee and (y) the Withholding Election is made (i) during
the period beginning on the third business day following the date
of release for publication of the quarterly or annual summary
statements of sales and earnings of the Company and ending on the
twelfth business day following such date or is made in advance
but takes effect during such period, (ii) six (6) months before
the stock award becomes taxable, or (iii) during any other period
in which a Withholding Election may be made under the provisions
of Rule 16b-3 promulgated pursuant to the Act. Any fraction of a
share of Common Stock required to satisfy such tax obligations
shall be disregarded and the amount due shall be paid instead in
cash by the Participant.
19
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION
OPTION AGREEMENT
PURSUANT TO THE
1994 EMPLOYEE STOCK OPTION PLAN
-------------------------------------
AGREEMENT, dated ____________, 1994 by and between
Collins & Aikman Holdings Corporation (the "Company") and
___________________ (the "Participant").
Preliminary Statement
---------------------
The Committee of the Board of Directors of the Company
(the "Committee"), pursuant to the Company's 1994 Employee Stock
Option Plan, annexed hereto as Exhibit A (the "Plan"), has
authorized the granting to the Participant, as a Key Employee (as
defined in the Plan), of a nonqualified stock option (the
"Option") to purchase the number of shares of the Company's
common stock, par value $.01 per share (the "Common Stock"), set
forth below. The parties hereto desire to enter into this
Agreement in order to set forth the terms of the Option.
Accordingly, the parties hereto agree as follows:
1. Tax Matters. No part of the Option granted hereby
-----------
is intended to qualify as an "incentive stock option" under
Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
2. Grant of Option. Subject in all respects to the
----------------
Plan and the terms and conditions set forth herein and therein,
the Participant is hereby granted the Option to purchase from the
Company up to _______ Shares (as defined in the Plan), at a price
per Share of $_________ (the "Option Price").
3. Vesting. The Option is exercisable in
-------
installments as provided below, which shall be cumulative. To
the extent that the Option has become exercisable with respect to
a number of shares as provided below, the Option may thereafter
be exercised by the Participant, in whole or in part, at any time
or from time to time prior to the expiration of the Option as
provided herein. The following table indicates each date (the
"Vesting Date") upon which the Participant shall be entitled to
exercise the Option with respect to the number of Shares
indicated beside that date:
<PAGE>
Vesting Date Number of Shares
------------ ----------------
June 1, 1995 [40%] [33%]
June 1, 1996 [100%] [66%]
June 1, 1997 [100%]
Upon the occurrence of a Change of Control (as defined
in the Plan), the Option shall immediately become exercisable
with respect to all Shares subject thereto, regardless of whether
the Option has vested with respect to such Shares.
4. Termination. Unless terminated as provided below
-----------
or otherwise pursuant to the Plan, the Option shall expire on the
tenth anniversary of this Agreement, or earlier as provided in
the Plan upon a Termination of Employment of the Participant.
5. Non-Competition. In consideration of the grant
---------------
of this Option under the Plan and under this Agreement, the
Participant agrees during employment and, in the event any
Options vest, for a period ending one year following the date of
the Participant's Termination of Employment, not to engage in any
Competitive Activity, except to the extent consented to by the
Committee. Each Participant acknowledges that the Company or a
Related Person will suffer irreparable harm in the event such
Participant engages in any Competitive Activity during this
period, and agrees that in addition to its remedies at law, the
Company and a Related Person shall be entitled to injunctive
relief as a consequence of a violation or threatened violation of
this covenant. The Participant acknowledges that he or she is a
key employee of the Company or a Related Person and by virtue of
his or her employment acquired and continues to acquire
confidential information as to the business of the Company and/or
a Related Person that has independent economic value, not being
generally known to and not being ascertainable by other persons,
and could obtain economic value from its disclosure or use.
Accordingly, in consideration of the grant of the Option to the
Participant, the Participant agrees to the aforesaid
noncompetition provision.
The Participant and the Company agree it is not the
intention of either party to violate any public policy, statutory
or common law and that if any part of the aforesaid
noncompetition provision is in violation of any applicable state
law, such part shall be void in the jurisdiction where it is
unlawful, and the remainder of the provision shall remain binding
on the parties. In the event that any part of this covenant is
determined by a court of law to be overly broad thereby making
this provision unenforceable, the parties hereto agree, and it is
their desire that such court shall substitute a reasonable,
individual enforceable limitation in place of the offensive part
of the covenant and as so modified the covenant shall be as fully
2
<PAGE>
enforceable as if set forth herein by the parties themselves in
the modified form.
This noncompetition provision shall be governed by the
laws of the State of Delaware, without regard to conflict of law
provisions.
"Competitive Activity" means (a) being employed by,
consulting to or being a director of any business, or engaging
directly or indirectly in any business activity, that is
competitive with any material business of any of the Company, a
Related Person or of the division that the Participant is or was
employed by or (b) soliciting for employment or consulting,
employing or retaining, or assisting another Person to employ or
retain, directly or indirectly, any employees of the Company or
Related Persons or any person who was an employee of the Company
or Related Persons in the prior six months, provided, however,
that employing or retaining, or assisting another Person to
employ or retain, any Person whose employment or consultancy with
the Company or a Related Person has been terminated without Cause
or any Person that is non-exempt under the Federal Fair Labor
Standards Act, 29 USC Sec. 213(a)(1), shall not be considered
Competitive Activity.
Notwithstanding the foregoing, nothing in this Plan or
this Agreement shall prohibit or penalize ownership by a
Participant of the shares of a business that is registered under
Section 12 of the Act and constitutes, together with all such
shares owned by any immediate family member or affiliate of, or
person acting in concert with, such Participant, less than 2% of
the outstanding registered shares of such business.
6. Restriction on Transfer of Option. The Option
-----------------------------------
granted hereby is not transferable otherwise than by will or
under the applicable laws of descent and distribution and during
the lifetime of the Participant may be exercised only by the
Participant or the Participant's guardian or legal
representative. In addition, the Option shall not be assigned,
negotiated, pledged or hypothecated in any way (whether by
operation of law or otherwise), and the Option shall not be
subject to execution, attachment or similar process. Upon any
attempt to transfer, assign, negotiate, pledge or hypothecate the
Option, or in the event of any levy upon the Option by reason of
any execution, attachment or similar process contrary to the
provisions hereof, the Option shall immediately become null and
void.
7. Rights as a Stockholder. The Participant shall
-------------------------
have no rights as a stockholder with respect to any Shares
covered by the Option until the Participant shall have become the
holder of record of the Shares, and no adjustments shall be made
for dividends in cash or other property, distributions or other
3
<PAGE>
rights in respect of any such Shares, except as otherwise
specifically provided for in the Plan.
8. Provisions of Plan Control. This Agreement is
----------------------------
subject to all the terms, conditions and provisions of the Plan,
including, without limitation, the amendment provisions thereof,
and to such rules, regulations and interpretations relating to
the Plan as may be adopted by the Committee and as may be in
effect from time to time. Any capitalized term used but not
defined herein shall have the meaning ascribed to such term in
the Plan. The annexed copy of the Plan is incorporated herein by
reference. If and to the extent that this Agreement conflicts or
is inconsistent with the terms, conditions and provisions of the
Plan, the Plan shall control, and this Agreement shall be deemed
to be modified accordingly.
9. Notices. Any notice or communication given
-------
hereunder shall be in writing and shall be deemed to have been
duly given when delivered in person, or by United States mail, to
the appropriate party at the address set forth below (or such
other address as the party shall from time to time specify in
accordance with Article XII(D) of the Plan.):
If to the Company, to:
Collins & Aikman Holdings Corporation
8320 University Executive Park, Suite 102
Charlotte, North Carolina 28262
Attention: Legal Department
If to the Participant, to:
the address indicated on the signature page at the
end of this Agreement.
10. No Obligation to Continue Employment. This
----------------------------------------
Agreement does not guarantee that the Company or any Related
Person will employ the Participant for any specific time period,
nor does it modify in any respect the Company's or any Related
Person's right to terminate or modify the Participant's
employment or compensation.
IN WITNESS WHEREOF, the parties have executed this
Agreement on the date and year first above written.
COLLINS & AIKMAN HOLDINGS CORPORATION
By:__________________________
Authorized Officer
-----------------------------
[PARTICIPANT]
Address:
4
EXHIBIT 10.14
-------------
May 16, 1991
Mr. John Moose
Collins & Aikman Corporation
Automotive Division
313 Bethany Road
Albemarle, NC 28001
Dear John:
This is to advise you that in the event your employment with
Collins & Aikman Corporation (the "Company") is terminated by the
Company or any successor company (other than for "Cause") at any
time within three months prior to or one year following a "change
of control" of the Company, then in lieu of any severance that
may be available to you under any severance pay policy or practices
of the Company or any of its subsidiaries or under any employment
agreement, you shall receive an amount equal to two times your
annual base salary as in effect at the time of such termination.
Such amount shall be paid, at the sole discretion of the Company,
either in a lump sum promptly after your termination or on a
periodic basis for the two-year period following your termination
in accordance with the Company's normal pay practice. For
purposes hereof, a "change of control" shall mean the sale or transfer,
whether in one transaction or several, of more than 50% of the
voting common stock of the Company to any person or persons other
than Wickes Companies, Inc. or any subsidiary or affiliate of
Wickes Companies, Inc. For purposes hereof, "Cause" shall mean
(i) fraud or misappropriation with respect to any business of the
Company or an affiliate of the Company or intentional material
damage to any property or business of the Company or an affiliate
of the Company, (ii) willful failure by you to perform your
duties and responsibilities and to carry out your authority, (iii)
willful malfeasance or misfeasance or breach of fiduciary duty or
representation to the Company or an affiliate of the Company,
(iv) willful failure to act in accordance with any specific lawful
instructions of a majority of the Board of Directors of the
Company or an affiliate of the Company or (v) conviction of you of a
felony.
<PAGE>
Mr. John Moose May 16, 1991
page 2
This letter agreement shall not create an employment
agreement and shall not affect the right of the Company to terminate your
employment at any time without notice. The Company may terminate
this letter agreement if, prior to the date that is three months
prior to a change of control of the Company, you cease to hold
your current position or a higher executive position with the Company.
Very truly yours,
/s/ James R. Birle
Chairman
Accepted:
/s/ John Moose
<PAGE>
May 16, 1991
Mr. Thomas E. Hannah
Collins & Aikman Corporation
701 McCullough Drive
Charlotte, North Carolina 28262
Dear Tom:
This is to advise you that in the event your employment with
Collins & Aikman Corporation (the "Company") is terminated by the
Company or any successor company (other than for "Cause") at any
time within three months prior to or one year following a "change
of control" of the Company, then in lieu of any severance that
may be available to you under any severance pay policy or
practices of the Company or any of its subsidiaries or under any
employment agreement, you shall receive an amount equal to two
times your annual base salary as in effect at the time of such
termination. Such amount shall be paid, at the sole discretion
of the Company, either in a lump sum promptly after your
termination or on a periodic basis for the two-year period
following your termination in accordance with the Company's
normal pay practice. For purposes hereof, a "change of control"
shall mean the sale or transfer, whether in one transaction or
several, of more than 50% of the voting common stock of the
Company to any person or persons other than Wickes Companies,
Inc. or any subsidiary or affiliate of Wickes Companies, Inc.
For purposes hereof, "Cause" shall mean (i) fraud or
misappropriation with respect to any business of the Company or
an affiliate of the Company or intentional material damage to any
property or business of the Company or an affiliate of the
Company, (ii) willful failure by you to perform your duties and
responsibilities and to carry out your authority, (iii) willful
malfeasance or misfeasance or breach of fiduciary duty or
representation to the Company or an affiliate of the Company,
(iv) willful failure to act in accordance with any specific
lawful instructions of a majority of the Board of Directors of
the Company or an affiliate of the Company or (v) conviction of
you of a felony.
<PAGE>
Mr. Thomas E. Hannah May 16, 1991
page 2
This letter agreement shall not create an employment
agreement and shall not affect the right of the Company to
terminate your employment at any time without notice. The
Company may terminate this letter agreement if, prior to the date
that is three months prior to a change of control of the Company,
you cease to hold your current position or a higher executive
position with the Company.
Very truly yours,
/s/ James R. Birle
Chairman
Accepted:
/s/ THOMAS E. HANNAH
- - --------------------
<PAGE>
May 16, 1991
Mr. Andrew Major
Collins & Aikman Corporation
Decorative Fabrics Group
210 Park Street
Spindale, NC 28160
Dear Andrew:
This is to advise you that in the event your employment with
Collins & Aikman Corporation (the "Company") is terminated by the
Company or any successor company (other than for "Cause") at any
time within three months prior to or one year following a "change
of control" of the Company, then in lieu of any severance that
may be available to you under any severance pay policy or
practices of the Company or any of its subsidiaries or under any
employment agreement, you shall receive an amount equal to two
times your annual base salary as in effect at the time of such
termination. Such amount shall be paid, at the sole discretion
of the Company, either in a lump sum promptly after your
termination or on a periodic basis for the two-year period
following your termination in accordance with the Company's
normal pay practice. For purposes hereof, a "change of control"
shall mean the sale or transfer, whether in one transaction or
several, of more than 50% of the voting common stock of the
Company to any person or persons other than Wickes Companies,
Inc. or any subsidiary or affiliate of Wickes Companies, Inc.
For purposes hereof, "Cause" shall mean (i) fraud or
misappropriation with respect to any business of the Company or
an affiliate of the Company or intentional material damage to any
property or business of the Company or an affiliate of the
Company, (ii) willful failure by you to perform your duties and
responsibilities and to carry out your authority, (iii) willful
malfeasance or misfeasance or breach of fiduciary duty or
representation to the Company or an affiliate of the Company,
(iv) willful failure to act in accordance with any specific
lawful instructions of a majority of the Board of Directors of
the Company or an affiliate of the Company or (v) conviction of
you of a felony.
<PAGE>
Mr. Andrew Major May 16, 1991
page 2
This letter agreement shall not create an employment
agreement and shall not affect the right of the Company to
terminate your employment at any time without notice. The
Company may terminate this letter agreement if, prior to the date
that is three months prior to a change of control of the Company,
you cease to hold your current position or a higher executive
position with the Company.
Very truly yours,
/s/ James R. Birle
James R. Birle
Chairman
Accepted:
/s/ Andrew Major
- - --------------------
EXHIBIT 10.15
-------------
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of February 1, 1992 between COLLINS &
AIKMAN CORPORATION (the "Company") and ANDREW MAJOR ("Employee").
WHEREAS, the Company desires to employ Employee and to enter
into an agreement embodying the terms of such employment; and
WHEREAS, Employee desires to a accept such employment and to
enter into such agreement;
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. Term of Employment. The Company hereby agrees to employ
------------------
Employee and Employee hereby accepts employment for a period of
three (3) years commencing February 1, 1992 and ending January
31, 1995 subject to the terms and conditions of this Agreement.
2. Position of Employment. During the term of this
------------------------
Agreement, Employee shall be the President of the Decorative
Fabrics Group of the Company and shall perform such services for
the Company and its subsidiaries as may be assigned to him from
time to time by the Company's Chief Executive Officer. Employee
shall devote his full time and attention to the affairs of the
Company and his duties in such positions.
3. Salary, Bonus Plan and Shadow Equity.
------------------------------------
3.1 Salary. The Company shall pay Employee a base salary at
------
an annual rate of not less than $290,650 during the term of his
employment hereunder. Such amount shall be reviewed by August 1,
1992 and thereafter in August of each year during the term of
this Agreement by the Board of Directors of the Company or an
appropriate committee thereof (the Company's Board of Directors
or such committee being referred to herein as the "Compensation
Board") and shall be increased by the Compensation Board in an
amount at each review of not less than five percent (5%) of the
then base salary.
3.2 Bonus Plan. Employee shall be eligible to participate
-----------
in the annual Management Incentive Compensation plan (the "MIC"
plan) of the Mastercraft Division of the Company for the 1992
fiscal year, in accordance with the applicable provisions of the
plan. Employee shall be eligible to participate in a composite
of the MIC plans for the Mastercraft and Cavel Divisions of the
Company and for Warner Fabrics PLC for the fiscal years 1993 and
1994, in accordance with the applicable provisions of these
<PAGE>
plans. Employee's composite participation in these three MIC
plans for 1993 and 1994 shall be calculated based upon the
percentage of the annual sales of each of these three units to
the aggregated sales of these units (e.g., If annual sales of the
Mastercraft Division for fiscal year 1993 are eighty percent
(80%) of the aggregate sales of the three units, Employee's
participation in the Mastercraft MIC plan would be calculated at
eighty percent (80%) of the level had Employee solely
participated in the Mastercraft MIC plan. Further, if Cavel
annual sales are fifteen percent (15%) of the aggregate and
Warner sales are five percent (5%) for 1993, then Employee's
participation in the Cavel and Warner MIC plans would be at
fifteen percent (15%) and five percent (5%) respectively of the
levels had Employee solely participated in each of these two MIC
plans. Therefore, Employee's bonus for the 1993 fiscal year
would be the total of these three calculations.).
3.3 Shadow Equity. Employee shall retain the 5,261 Equity
-------------
Shares already issued to Employee in the shadow equity plan (the
"Equity Plan") adopted for Collins & Aikman Corporation in
accordance with the applicable terms and conditions of the Equity
Plan and shall receive an additional 1,000 Equity Shares in the
Equity Plan, effective July 29, 1989.
4. Benefits. Employee shall be entitled to such fringe
--------
benefits and perquisites, and to participate in such pension and
benefit plans as are generally made available to executives of
the Company and such other fringe benefits as may be determined
by the Company during the term hereof, including major medical,
and disability insurance, group term life insurance and
appropriate annual holidays, sick days and annual vacation time.
5. Reimbursement of Business Expenses. The Company shall
-----------------------------------
reimburse Employee for all travel, entertainment and other
business expenses reasonably incurred by Employee in connection
with the performance of his duties hereunder, provided that
Employee furnishes to the Company adequate records or other
evidence respecting such expenditures.
6. Termination of Employment.
-------------------------
6.1 Voluntary Termination. Employees may terminate his
----------------------
employment with the Company at any time. In the event Employee
terminates such employment voluntarily, upon such termination the
Company shall pay Employee his unpaid base salary under Section
3.1 accrued to the date on which his employment terminates (the
"Termination Date").
6.2 Involuntary Termination.
-----------------------
(a) Employee's employment with the Company shall
2
<PAGE>
automatically terminate upon Employee's death or, unless the
Board of Directors of the Company in its sole discretion shall
otherwise elect, Employee's physical or mental disability for any
consecutive six-month period (measured from the first date on
which Employee is absent from work due to such disability to the
same date in the sixth succeeding calendar month, or, if there is
no such date or such date is not a business day, the next
succeeding business day). In the event Employee's employment
with the Company is terminated due to Employee's death or
physical or mental disability, the Company shall pay to Employee
or, if applicable, his estate or legal representative his base
salary under Section 3.1 accrued to the Termination Date. The
amount due to Employee pursuant to this paragraph (a) shall be
paid, at the sole election of Employee or, if applicable, his
estate or legal representative, at the time of termination,
either in a lump sum or in a number of equal annual installments
to be specified by Employee or, if applicable, Employee's estate
or legal representative at the Termination Date.
(b) In the event Employee's employment with the Company is
involuntarily terminated for any other reason, other than
termination for Cause (as hereinafter defined), prior to the
expiration of the term of employment then in effect under Section
1, upon such termination the Company shall be obligated to pay
Employee an amount equal to his base salary under Section 3.1 for
the entire remaining portion of such term of employment then in
effect under Section 1, or if longer, for a one year period
following the Termination Date. The amount due to Employee
pursuant to this paragraph (b) shall be paid, at the sole
discretion of the Compensation Board at the Termination Date,
either in a lump sum or on a periodic basis in accordance with
normal pay practice.
(c) The Company may at any time without notice terminate
Employee's employment with the Company for Cause. In the event
Employee's employment with the Company is terminated for Cause,
Employee shall receive the same amount that would be payable
under Section 6.1 if such termination were voluntary.
(d) As used herein, the term "Cause" means (i) fraud or
misappropriation with respect to the business of the Company or
intentional material damage to the property or business of the
Company, (ii) willful failure by Employee to perform his duties
and responsibilities and to carry out his authority, (iii)
willful malfeasance or misfeasance or breach of fiduciary duty or
representation to the Company or its stockholder, (iv) willful
failure to act in accordance with any specific lawful
instructions of a majority of the Board of Directors of the
Company, or (v) conviction of Employee of a felony.
3
<PAGE>
7. Representations and Covenants of Employee.
-----------------------------------------
7.1 Conduct. Employee will at all times refrain from taking
-------
any action or making any statements, written or oral, which are
intended to and do disparage the goodwill or reputation of the
Company or any of its subsidiaries or affiliates or any directors
or officers thereof or which could adversely affect the morale of
employees of the Company and its subsidiaries.
7.2 Performance of Duties.
---------------------
(a) In consideration of the payments to be made hereunder,
Employee agrees that during the term of his employment under this
Agreement, he shall devote substantially his entire business time
and attention to the performance of his duties hereunder and
shall, serve the Company diligently and to the best of his
abilities.
(b) In consideration of the payments to be made hereunder,
Employee agrees that while he is employed hereunder and (i) in
the event Employee voluntarily terminates his employment or the
Company terminates his employment under Section 6.2(b) or (c)
prior to the expiration of the term of employment then in effect
under Section 1, for the longer of one year after the Termination
Date or until the expiration of such term of employment then in
effect, (ii) in the event at the expiration of the term of
employment then in effect under Section 1 the Company offers to
extend such term by an additional year and Employee does not
accept such offer, for one year after the Termination Date, and
(iii) in the event at the expiration of the term of employment
then in effect under Section 1 the Company offers to pay Employee
his base salary under Section 3.1 for an additional year (whether
or not Employee accepts such offer), for one year after such
expiration, he shall not engage directly or indirectly in any
business activity that is competitive with any business of the
Company or any of its subsidiaries. Without limiting the
generality of the foregoing, Employee shall not while he is
employed hereunder and during any such period thereafter compete
with the Company in any way whatsoever. Without limiting the
generality of the foregoing, Employee shall not, during such term
or for such one-year period, directly or indirectly (whether for
compensation or otherwise), alone or as an agent, principal,
partner, officer, employee, trustee, director, shareholder or in
any other capacity, own, manage, operate, join, control or
participate in the ownership, management, operation or control
of, or furnish any capital to, or be connection in any manner
with or provide any services as a consultant for any business
which competes with the business of the Company or its
subsidiaries as it may be conducted from time to time, provided,
however, that notwithstanding the foregoing, nothing contained in
the Employment Agreement shall be deemed to preclude Employee
from owning not more than five percent (5%) of the publicly trade
securities of any entity which is in competition with the
business of the Company or its subsidiaries.
4
<PAGE>
(c) Notwithstanding paragraphs (a) and (b) of this Section
7.2, nothing in this Agreement shall prohibit or penalize the
ownership by Employee of the 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 five percent (5%) of the
outstanding registered shares of such business.
7.3 Company Information. Employee agrees that so long as he
-------------------
is employed by the Company and following any termination of this
employment Employee will keep confidential all confidential
information and trade secrets of the Company or any of its
subsidiaries or affiliates and will not disclose such information
to any person without the prior approval of the Board of
Directors of the Company or use such information for any purpose
other than in the course of fulfilling his duties of employment
with the Company pursuant to this Agreement. It is understood
that for purposes of this Agreement the term "confidential
information" is to be construed broadly to include all material
nonpublic or proprietary information.
8. Release. In consideration of the compensation
-------
continuance available in certain events pursuant to this
Agreement, Employee unconditionally releases and covenants not to
sue the Company and its subsidiaries and affiliates and
directors, officers, employees and stockholders thereof, from any
and all claims, liabilities and obligations of any nature
pertaining to termination of employment other than those
explicitly provided for by this Agreement including, without
limitation, any claims arising out of 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 (including, without limitation, the Age Discrimination in
Employment Act).
9. Governing Law. The validity, interpretation and
--------------
performance of this Agreement shall be governed by the laws of
North Carolina, regardless of the laws that might be applied
under applicable principles of conflicts of laws.
10. Entire Agreement and Survivorship. This Agreement
------------------------------------
constitutes the entire agreement and understanding between the
parties hereto with respect to the matters referred to herein and
supersedes all prior agreements and understandings between the
parties hereto with respect to the matters referred to herein.
The representations, warranties and covenants of Employee
contained in all parts of Section 7, except 7.2(a), and the
release contained in Section 8 shall survive expiration, or
termination of this Agreement by either party.
11. Notice. Any written notice required to be given by one
------
party to the other party hereunder shall be deemed effective if
mailed by certified or registered mail:
5
<PAGE>
To the Company: Collins & Aikman Corporation
701 McCullough Drive
Charlotte, North Carolina 28262
Attention: Harold R. Sunday
To Employee: Andrew Major
3414 Broomfield Terrace
Durham, North Carolina 27705
or such other address as may be stated in notice given under this
Section 11.
12. Severability. The invalidity, illegality or
------------
enforceability 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
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.
13. Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties hereto and their
personal representatives, and, in the case of the Company, its
successors and assigns, and Section 8 shall also inure to the
benefit of the other persons and entities 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.
Employees understands that the assignment of this Agreement or
any benefits hereof or obligations hereunder by the Company to
Collins & Aikman Group, Inc. ("Parent"), Collins & Aikman
Holdings Corporation ("Grandparent") or any direct or indirect
subsidiary of Grandparent, or to any purchaser of all or a
substantial portion of the assets of the Company, and the
employment of Employee by Parent, Grandparent, or such subsidiary
or by any such purchaser or by any successor of the Company in a
merger or consolidation, shall not be deemed a termination of
Employee's employment for purposes of Section 6.2 or otherwise.
If any of the Company's obligations under this Agreement are
expressly assumed by Parent, Grandparent or any significant
subsidiary of Parent or by any purchaser of all or a substantial
portion of the assets or stock of the Company, the Company shall
be released from such obligations.
14. Amendment. This Agreement may be amended or canceled
---------
only by an instrument in writing duly executed and delivered by
each party to this Agreement.
15. Headings. Headings contained in this Agreement are for
--------
convenience only and shall not limit this Agreement or affect the
interpretation thereof.
6
<PAGE>
16. Miscellaneous. In executing this Agreement, Employee
-------------
has not relied upon any statement, representation or promise,
whether written or oral, of the Company or any of its
subsidiaries or affiliates, or of any representative or attorney
for the Company or any of its subsidiaries or affiliates, except
for statements expressly set forth in this Agreement. Each of
the parties has read this Agreement and the Equity Plan carefully
and knows and understands the contents hereof and thereof,
including, without limitation, in the case of Employee the
release set forth in Section 8 hereof.
17. Effective Date of Agreement. Employee acknowledges that
---------------------------
he was advised that he had a period of twenty-one (21) calendar
days in which to consider and execute this Agreement. Employee
further acknowledges and understands that he has seven calendar
days from the date on which he executes this Agreement to revoke
it. Accordingly, this Agreement shall not become effective or
enforceable until the revocation period has expired. To the
extent that it has not otherwise done so, the Company hereby
advises Employee to consult with an attorney prior to executing
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
/s/ Andrew Major
-----------------------------------
ANDREW MAJOR
COLLINS & AIKMAN CORPORATION
By: /s/ Thomas E. Hannah
-------------------------------
Thomas E. Hannah,
President and
Chief Executive Officer
7
EXHIBIT 10.16
-------------
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of April 27, 1992 between COLLINS &
AIKMAN CORPORATION (the "Company") and HARRY F. SCHOEN
("Employee").
WHEREAS, the Company desires to employ Employee and to enter
into an agreement embodying the terms of such employment; and
WHEREAS, Employee desires to a accept such employment and to
enter into such agreement;
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. Term of Employment. The Company hereby agrees to employ
------------------
Employee and Employee hereby accepts employment for a period of
three (3) years, commencing April 27, 1992 and ending April 28,
1995 subject to the terms and conditions of this Agreement.
2. Position of Employment. During the term of this
------------------------
Agreement, Employee shall be employed in the position of not less
than the Chief Operating Officer of the Mastercraft Division of
Collins & Aikman Corporation ("Mastercraft") and shall perform
such services for the Company and its subsidiaries as may be
assigned to him from time to time by the Board of Directors of
the Company. Employee shall devote his full time and attention
to the affairs of the Company and his duties in such positions.
3. Salary, Bonus Plans and Shadow Equity.
-------------------------------------
3.1 Salary. The Company shall pay Employee a base salary at
------
an annual rate of not less than $230,000 during the term of his
employment hereunder. Such amount shall be reviewed annually by
the Board of Directors of the Company or an appropriate committee
thereof (the Company's Board of Directors or such committee being
referred to herein as the "Compensation Board") and may be
increased in the sole discretion of the Compensation Board.
3.2 Bonus Plans. Employee shall be eligible to participate
------------
in the Company's annual Management Incentive Compensation Plan
(the "MIC Plan") in accordance with the applicable provisions of
the Plan; however, in no event for the first year of his
participation in the MIC Plan shall he receive a cash bonus of
less than $70,000.
3.3 Shadow Equity. Employee shall be eligible to
---------------
participate in the shadow equity plan (the "Equity Plan") adopted
for the Company in accordance with the applicable terms and
conditions of the Equity Plan and shall receive 3,500 Equity
Shares (as defined in the Equity Plan).
<PAGE>
4. Benefits. Employee shall be entitled to such fringe
--------
benefits and perquisites, and to participate in such pension,
profit sharing and benefit plans as are generally made available
to executives of the Company and such other fringe benefits as
may be determined by the Company during the term hereof,
including major medical, extended medical and disability
insurance, group term life insurance and appropriate annual
holidays, sick days and annual vacation time.
5. Reimbursement of Expenses. The Company shall reimburse
--------------------------
Employee for all reasonable travel, entertainment and other
reasonable business expenses reasonably incurred by Employee in
connection with the performance of his duties hereunder, provided
that Employee furnishes to the Company adequate records or other
evidence respecting such expenditures.
6. Termination of Employment
-------------------------
6.1 Voluntary Termination. Employees may terminate his
----------------------
employment with the Company at any time. In the event Employee
terminates such employment voluntarily, upon such termination the
Company shall pay Employee his unpaid base salary under Section
3.1 accrued to the date on which his employment terminates (the
"Termination Date").
6.2 Involuntary Termination.
-----------------------
(a) Employee's employment with the Company shall
automatically terminate upon Employee's death or, unless the
Board of Directors of the Company in its sole discretion shall
otherwise elect, Employee's physical or mental disability for any
consecutive six-month period (measured from the first date on
which Employee is absent from work due to such disability to the
same date in the sixth succeeding calendar month, or, if there is
no such date or such date is not a business day, the next
succeeding business day). In the event Employee's employment
with the Company is terminated due to Employee's death or
physical or mental disability, the Company shall pay to Employee
or, if applicable, his estate or legal representative his unpaid
base salary under Section 3.1 accrued to the Termination Date,
but in no event less than an amount equal to one year's base
salary. The amount due to Employee pursuant to this paragraph
(a) shall be paid, at the sole election of Employee or, if
applicable, his estate or legal representative, at the time of
termination, either in a lump sum or in a number of equal annual
installments to be specified by Employee or, if applicable,
Employee's estate or legal representative at the Termination
Date.
2
<PAGE>
(b) In the event Employee's employment with the Company is
involuntarily terminated for any reason, other than termination
for Cause (as hereinafter defined), prior to the expiration of
the term of employment then in effect under Section 1, upon such
termination the Company shall be obligated to pay Employee an
amount equal to his base salary under Section 3.1 for the entire
remaining portion of such term of employment then in effect under
Section 1; or if longer, for a one year period following the
Termination Date. However, if such termination is within three
months prior to or one year following a "change of control" of
the Company, the period shall be for two years following the
Termination Date. (For purposes hereof, a "change of control"
shall mean the sale or transfer, whether in one transaction or
several, of more than fifty percent (50%) of the voting common
stock of the Company to any person or persons other than Wickes
Companies, Inc. or any subsidiary or affiliate of Wickes
Companies, Inc.) The amount due to Employee pursuant to this
paragraph (b) shall be paid, at the sole discretion of the
Compensation Board at the Termination Date, either in a lump sum
or on a periodic basis in accordance with normal pay practice.
(c) The Company may at any time without notice terminate
Employee's employment with the Company for Cause. In the event
Employee's employment with the Company is terminated for Cause,
Employee shall receive the same amount that would be payable
under Section 6.1 if such termination were voluntary.
(d) As used herein, the term "Cause" means (i) fraud or
misappropriation with respect to the business of the Company or
intentional material damage to the property or business of the
Company, (ii) willful failure by Employee to perform his duties
and responsibilities and to carry out his authority, (iii)
willful malfeasance or misfeasance or breach of fiduciary duty or
representation to the Company or its stockholder, (iv) willful
failure to act in accordance with any specific lawful
instructions of a majority of the Board of Directors of the
Company, or (v) conviction of Employee of a felony.
7. Representations and Covenants of Employee.
-----------------------------------------
7.1 No Violation. Employee represents and warrants that he
-------------
has not disclosed and will not disclose any confidential
information or trade secrets concerning his former employer to
the Company or its subsidiaries or any directors or officers
thereof, and that he can perform his duties for the Company
without disclosing or using any such confidential information or
trade secrets. Employee covenants and agrees that he will not
use any confidential information or trade secrets concerning any
former employer or its subsidiaries in violation of any
obligations to such former employer during the term of his
employment by the Company.
3
<PAGE>
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, including, without limitation, any
noncompetition agreement for the benefit of any former employer.
7.3 Conduct. Employee will at all times refrain from taking
-------
any action or making any statements, written or oral, which are
intended to and do disparage the goodwill or reputation of the
Company or any of its subsidiaries or affiliates or any directors
or officers thereof or which could adversely affect the morale of
employees of the Company and its subsidiaries.
7.4 Performance of Duties. In consideration of the payments
---------------------
to be made hereunder, Employee agrees that during the term of his
employment under this Agreement, he shall devote substantially
his entire business time and attention to the performance of his
duties hereunder, serve the Company diligently and to the best of
his abilities and shall not compete with the Company in any way
whatsoever. Without limiting the generality of the foregoing,
Employee shall not, during such term, directly or indirectly
(whether for compensation or otherwise), alone or as an agent,
principal, partner, officer, employee, trustee, director,
shareholder or in any other capacity, own, manage, operate, join,
control or participate in the ownership, management, operation or
control of, or furnish any capital to, or be connected in any
manner with or provide any services as a consultant for any
business which competes with the business of the Company, its
parent company or their subsidiaries or affiliates as it may be
conducted from time to time, provided, however, that
notwithstanding the foregoing, nothing contained in the
Employment Agreement shall be deemed to preclude Employee from
owning not more than 5% of the publicly traded securities of any
entity which is in competition with the business of the Company,
its parent company or their subsidiaries or affiliates.
7.5 Company Information. Employee agrees that so long as he
-------------------
is employed by the Company and following any termination of this
employment Employee will keep confidential all confidential
information and trade secrets of the Company or any of its
subsidiaries or affiliates and will not disclose such information
to any person without the prior approval of the Board of
Directors of the Company or use such information for any purpose
other than in the course of fulfilling his duties of employment
with the Company pursuant to this Agreement. It is understood
that for purposes of this Agreement the term "confidential
information" is to be construed broadly to include all material
nonpublic or proprietary information.
8. Release. In consideration of the compensation
-------
continuance available in certain events pursuant to this
Agreement, Employee unconditionally releases and covenants not to
4
<PAGE>
sue the Company and its subsidiaries and affiliates and
directors, officers, employees and stockholders thereof, from any
and all claims, liabilities and obligations of any nature
pertaining to termination of employment other than those
explicitly provided for by this Agreement including, without
limitation, any claims arising out of 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.
9. Governing law. The validity, interpretation and
--------------
performance of this Agreement shall be governed by the laws of
North Carolina, regardless of the laws that might be applied
under applicable principles of conflicts of laws.
10. Entire Agreement and Survivorship. This Agreement
------------------------------------
constitutes the entire agreement and understanding between the
parties hereto with respect to the matters referred to herein and
supersedes all prior agreements and understandings between the
parties hereto with respect to the matters referred to herein.
The representations, warranties and covenants of Employee
contained in all parts of Section 7, except 7.4, and the release
contained in Section 8 shall survive expiration, or termination
of this Agreement by either party.
11. Notice. Any written notice required to be given by one
------
party to the other party hereunder shall be deemed effective if
mailed by certified or registered mail:
To the Company: Collins & Aikman Corporation
701 McCullough Drive
Charlotte, North Carolina 28262
Attention: Harold R. Sunday
To Employee:
Attention: Harry Schoen
or such other address as may be stated in notice given under this
Section 11.
12. Severability. The invalidity, illegality or
------------
enforceability 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
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.
5
<PAGE>
13. Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties hereto and their
personal representatives, and, in the case of the Company, its
successors and assigns, and Section 8 shall also inure to the
benefit of the other persons and entities 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.
Employees understands that the assignment of this Agreement or
any benefits hereof or obligations hereunder by the Company to
Wickes Companies, Inc., or any subsidiary of Wickes Companies,
Inc., or to any purchaser of all or a substantial portion of the
assets of the Company, and the employment of Employee by Wickes
Companies, Inc., or such subsidiary or by any such purchaser or
by any successor of the Company in a merger or consolidation,
shall not be deemed a termination of Employee's employment for
purposes of Section 6.2 or otherwise.
14. Amendment. This Agreement may be amended or canceled
---------
only by an instrument in writing duly executed and delivered by
each party to this Agreement.
15. Headings. Headings contained in this Agreement are for
--------
convenience only and shall not limit this Agreement or affect the
interpretation thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
/s/ Harry Schoen
-----------------------------------
Harry Schoen
COLLINS & AIKMAN CORPORATION
By: /s/ Thomas E. Hannah
-------------------------------
Thomas E. Hannah, President
By: /s/ Andrew Major
------------------------------
Andrew Major, President
Decorative Fabrics Group
6
EXHIBIT 10.17
-------------
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of March 1, 1993 between IMPERIAL
WALLCOVERINGS, INC. (the "Company") and WILLIAM J. BRUCCHIERI
("Employee").
WHEREAS, the Company desires to employ Employee and to enter
into an agreement embodying the terms of such employment; and
WHEREAS, Employee desires to a accept such employment and to
enter into such agreement;
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. Term of Employment. The Company hereby agrees to employ
------------------
Employee and Employee hereby accepts employment for the period
commencing March 1, 1993 and ending February 28, 1995 subject to
the terms and conditions of this Agreement.
2. Position of Employment. During the term of this
------------------------
Agreement, Employee shall be the President of the Company and
shall perform such services for the Company and its subsidiaries
as may be assigned to him from time to time by the Board of
Directors of the Company. Employee shall devote his full time
and attention to the affairs of the Company and his duties in
such positions.
3. Salary, Bonus Plan and Shadow Equity.
------------------------------------
3.1 Salary. The Company shall pay Employee a base salary at
------
an annual rate of not less than $225,000 during the term of his
employment hereunder. Such amount shall be reviewed annually by
the Board of Directors of the Company or an appropriate committee
thereof (the Company's Board of Directors or such committee being
referred to herein as the "Compensation Board") and may be
increased in the sole discretion of the Compensation Board.
3.2 Bonus Plan. Employee shall be eligible to participate
----------
in the Company's annual Management Incentive Compensation Plan
(the "MIC Plan") in accordance with the applicable provisions of
the Plan.
3.3 Shadow Equity. Employee shall retain the 1,649 Equity
-------------
Shares in the shadow equity plan (the "Equity Plan") adopted for
Collins & Aikman Corporation in accordance with the applicable
terms and conditions of the Equity Plan. Any participation by
<PAGE>
Employee in the Equity Plan of the Company shall be determined
solely by the Directors of the Company's Equity Plan in
accordance with the applicable terms and conditions.
4. Benefits. Employee shall be entitled to such fringe
--------
benefits and perquisites, and to participate in such pension and
benefit plans as are generally made available to executives of
the Company and such other fringe benefits as may be determined
by the Company during the term hereof, including major medical,
and disability insurance, group term life insurance and
appropriate annual holidays, sick days and annual vacation time.
The Company shall maintain at least the amount of life insurance
for the Employee which Employee had at the time he resigned his
position with the Mastercraft Division of Collins & Aikman
Corporation.
5. Business Expenses. The Company shall reimburse Employee
-----------------
for all travel, entertainment and other business expenses
reasonably incurred by Employee in connection with the
performance of his duties hereunder, provided that Employee
furnishes to the Company adequate records or other evidence
respecting such expenditures.
6. Termination of Employment.
-------------------------
6.1 Voluntary Termination. Employees may terminate his
----------------------
employment with the Company at any time. In the event Employee
terminates such employment voluntarily, upon such termination the
Company shall pay Employee his unpaid base salary under Section
3.1 accrued to the date on which his employment terminates (the
"Termination Date").
6.2 Involuntary Termination.
-----------------------
(a) Employee's employment with the Company shall
automatically terminate upon Employee's death or, unless the
Board of Directors of the Company in its sole discretion shall
otherwise elect, Employee's physical or mental disability for any
consecutive six-month period (measured from the first date on
which Employee is absent from work due to such disability to the
same date in the sixth succeeding calendar month, or, if there is
no such date or such date is not a business day, the next
succeeding business day). In the event Employee's employment
with the Company is terminated due to Employee's death or
physical or mental disability, the Company shall pay to Employee
or, if applicable, his estate or legal representative his unpaid
base salary under Section 3.1 accrued to the Termination Date;
however, in no event shall this amount be less than one year's
base salary. The amount due to Employee pursuant to this
paragraph (a) shall be paid, at the sole election of Employee or,
2
<PAGE>
if applicable, his estate or legal representative, at the time of
termination, either in a lump sum or in a number of equal annual
installments to be specified by Employee or, if applicable,
Employee's estate or legal representative at the Termination
Date.
(b) In the event Employee's employment with the Company is
involuntarily terminated for any other reason, other than
termination for Cause (as hereinafter defined), prior to the
expiration of the term of employment then in effect under Section
1, upon such termination the Company shall be obligated to pay
Employee an amount equal to his base salary under Section 3.1 for
the entire remaining portion of such term of employment then in
effect under Section 1, or if longer, for a two year period
following the Termination Date. The amount due to Employee
pursuant to this paragraph (b) shall be paid, at the sole
discretion of the Compensation Board at the Termination Date,
either in a lump sum or on a periodic basis in accordance with
normal pay practice.
(c) The Company may at any time without notice terminate
Employee's employment with the Company for Cause. In the event
Employee's employment with the Company is terminated for Cause,
Employee shall receive the same amount that would be payable
under Section 6.1 if such termination were voluntary.
(d) As used herein, the term "Cause" means (i) fraud or
misappropriation with respect to the business of the Company or
intentional material damage to the property or business of the
Company, (ii) willful failure by Employee to perform his duties
and responsibilities and to carry out his authority, (iii)
willful malfeasance or misfeasance or breach of fiduciary duty or
representation to the Company or its stockholder, (iv) willful
failure to act in accordance with any specific lawful
instructions of a majority of the Board of Directors of the
Company, or (v) conviction of Employee of a felony.
7. Representations and Covenants of Employee.
-----------------------------------------
7.1 No Violation. Employee represents and warrants that he
-------------
has not disclosed and will not disclose any confidential
information or trade secrets concerning his former employer to
the Company or its subsidiaries or any directors or officers
thereof, and that he can perform his duties for the Company
without disclosing or using any such confidential information or
trade secrets. Employee covenants and agrees that he will not
use any confidential information or trade secrets concerning any
former employer or its subsidiaries in violation of any
obligations to such former employer during the term of his
employment by the Company.
3
<PAGE>
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, including, without limitation, any
noncompetition agreement for the benefit of any former employer.
7.3 Conduct. Employee will at all times refrain from taking
-------
any action or making any statements, written or oral, which are
intended to and do disparage the goodwill or reputation of the
Company or any of its subsidiaries or affiliates or any directors
or officers thereof or which could adversely affect the morale of
employees of the Company and its subsidiaries.
7.4 Performance of Duties and Covenant Not to Compete. In
---------------------------------------------------
consideration of the payments to be made hereunder, including any
payments to be made pursuant to Section 6.2(b), Employee agrees
that he shall devote his entire business time and attention to
the performance of his duties hereunder, serve the Company
diligently and to the best of his abilities during the term of
his employment under this Agreement; and he agrees and covenants
not compete with the Company in any way whatsoever, during the
term of his employment under this Agreement and during the period
that he is receiving any payments pursuant to Section 6.2(b).
Without limiting the generality of the foregoing, Employee shall
not, during such term, directly or indirectly (whether for
compensation or otherwise), alone or as an agent, principal,
partner, officer, employee, trustee, director, shareholder or in
any other capacity, own, manage, operate, join, control or
participate in the ownership, management, operation or control
of, or furnish any capital to, or be connected in any manner with
or provide any services as a consultant for any business which
competes with the business of the Company, its parent company or
their subsidiaries or affiliates as it may be conducted from time
to time, provided, however, that notwithstanding the foregoing,
nothing contained in the Employment Agreement shall be deemed to
preclude Employee from owning not more than 5% of the publicly
traded securities of any entity which is in competition with the
business of the Company, its parent company or their subsidiaries
or affiliates.
7.5 Company Information. Employee agrees that so long as he
-------------------
is employed by the Company and following any termination of this
employment Employee will keep confidential all confidential
information and trade secrets of the Company or any of its
subsidiaries or affiliates and will not disclose such information
to any person without the prior approval of the Board of
Directors of the Company or use such information for any purpose
other than in the course of fulfilling his duties of employment
with the Company pursuant to this Agreement. It is understood
that for purposes of this Agreement the term "confidential
information" is to be construed broadly to include all material
nonpublic or proprietary information.
4
<PAGE>
8. Release. In consideration of the compensation
-------
continuance available in certain events pursuant to this
Agreement, Employee unconditionally releases and covenants not to
sue the Company and its subsidiaries and affiliates and
directors, officers, employees and stockholders thereof, from any
and all claims, liabilities and obligations of any nature
pertaining to termination of employment other than those
explicitly provided for by this Agreement including, without
limitation, any claims arising out of 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.
9. Governing Law. The validity, interpretation and
--------------
performance of this Agreement shall be governed by the laws of
Ohio, regardless of the laws that might be applied under
applicable principles of conflicts of laws.
10. Entire Agreement and Survivorship. This Agreement
------------------------------------
constitutes the entire agreement and understanding between the
parties hereto with respect to the matters referred to herein and
supersedes all prior agreements and understandings between the
parties hereto with respect to the matters referred to herein.
The representations, warranties and covenants of Employee
contained in all parts of Section 7, except 7.4, and the release
contained in Section 8 shall survive expiration, or termination
of this Agreement by either party.
11. Notice. Any written notice required to be given by one
------
party to the other party hereunder shall be deemed effective if
mailed by certified or registered mail:
To the Company: Collins & Aikman Corporation
701 McCullough Drive
Charlotte, North Carolina 28262
Attention: Harold R. Sunday
To Employee: William J. Brucchieri
6499 Hammontree Drive
Hudson, Ohio 44236
or such other address as may be stated in notice given under this
Section 11.
12. Severability. The invalidity, illegality or
------------
enforceability of any provision of this Agreement in any
jurisdiction shall not affect the validity, legality or
5
<PAGE>
enforceability of the remainder of this Agreement in such
jurisdiction or the validity, legality or enforceability of this
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.
13. Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the parties hereto and their
personal representatives, and, in the case of the Company, its
successors and assigns, and Section 8 shall also inure to the
benefit of the other persons and entities 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.
Employees understands that the assignment of this Agreement or
any benefits hereof or obligations hereunder by the Company to
Collins & Aikman Group, Inc., or any subsidiary of Collins &
Aikman Group, Inc., or to any purchaser of all or a substantial
portion of the assets of the Company, and the employment of
Employee by Collins & Aikman Group, Inc., or such subsidiary or
by any such purchaser or by any successor of the Company in a
merger or consolidation, shall not be deemed a termination of
Employee's employment for purposes of Section 6.2 or otherwise.
14. Amendment. This Agreement may be amended or canceled
---------
only by an instrument in writing duly executed and delivered by
each party to this Agreement.
15. Headings. Headings contained in this Agreement are for
--------
convenience only and shall not limit this Agreement or affect the
interpretation thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
/s/ William J. Brucchieri
-----------------------------------
William J. Brucchieri
COLLINS & AIKMAN TEXTILE GROUP
By: /s/ Thomas E. Hannah
-------------------------------
Thomas E. Hannah
President & CEO
IMPERIAL WALLCOVERINGS, INC.
By: /s/ Anthony Hardwick
-------------------------------
Anthony Hardwick
Vice President
By: /s/ Ronald T. Lindsay
-------------------------------
Ronald T. Lindsay
Vice President and Secretary
6
EXHIBIT 10.18
-------------
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of October 1, 1993 between COLLINS &
AIKMAN CORPORATION (the "Company") and Mark O. Remissong
("Employee").
WHEREAS, the Company desires to employ Employee and to enter
into an agreement embodying the terms of such employment; and
WHEREAS, Employee desires to accept such employment and to
enter into such agreement;
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. Term of Employment. The Company hereby agrees to
employ employee and the employee hereby accepts employment for
the period commencing December 13, 1993 and ending December 31,
1996 subject to the terms and conditions of this agreement.
2. Position of Employment. During the term of this
Agreement, Employee shall be employed in the position of not less
than the Senior Vice President and Chief Financial Officer of
Collins & Aikman Corporation and shall perform such services for
the Company and its subsidiaries as may be assigned to him from
time to time by the Board of Directors of the Company. Employee
shall devote his full time and attention to the affairs of the
Company and his duties in such positions.
3. Salary, Bonus Plans and Shadow Equity.
3.1 Salary. The Company shall pay Employee a base salary
at an annual rate of not less than $230,000 during the term of
his employment hereunder. Employee's base salary shall be
reviewed at such times as the base salaries of other executives
reporting to the President are reviewed, by the Board of
Directors of the Company or an appropriate committee thereof (the
Company's Board of Directors or such committee being referred to
herein as the "Compensation Board") and may be increased in the
sole discretion of the Compensation Board.
3.2 Bonus Plans. Beginning on January 30, 1994, Employee
shall be eligible to participate in the Company's annual
Management Incentive Compensation Plan (the "MIC Plan") in
accordance with the applicable provisions of the Plan; however,
in no event for the first year of his participation in the MIC
Plan shall he receive a cash bonus of less than $100,000.
<PAGE>
3.3 Stock Program(s). Employee shall be eligible to
participate in any stock program(s) generally made available to
Executives of the Company during the term of this Agreement, in
accordance with the applicable provisions of any such stock
program(s) at a level commensurate with other senior level
positions represented on the Collins & Aikman Operating
Committee. If any such stock program(s) is made available to
Executives of the Company then in no event shall Employee's
participation in any such program(s) cumulatively result in a
total payment to Employee of less than $150,000 upon the
termination of his employment with the Company upon any basis.
4. Benefits. Employee shall be entitled to such fringe
benefits and perquisites, and to participate in such pension,
profit sharing and benefit plans as are generally made available
to executives of the Company and such other fringe benefits as
may be determined by the Company during the term hereof,
including major medical, extended medical and disability
insurance, group term life insurance and appropriate annual
holidays, sick days and annual vacation time.
5. Expenses
5.1 Reimbursement of Expenses. The Company shall
reimburse Employee for all reasonable travel, entertainment and
other reasonable business expenses reasonably incurred by
Employee in connection with the performance of his duties
hereunder, provided that Employee furnishes to the Company
adequate records or other evidence respecting such expenditures.
5.2 Relocation Expenses. The Company will pay or
reimburse the Employee for all reasonable moving expenses,
including real estate commissions and loan commitment fees, but
excluding any loss on the sale of any property incurred by him
and his family relating to relocation by him in connection with
his acceptance of employment with the Company. If prior to the
sale of his current principal residence, Employee seeks to obtain
an equity loan, the principal of which approximates the value of
his equity in his current principal residence, in order to
purchase a principal residence in the Charlotte area, Employee
agrees to use his best efforts to obtain such a loan personally.
However, if Employee is unable to obtain such a loan without the
guarantee of the Company, the Company agrees to guarantee such an
equity loan. In such event, Employee agrees to abide by all
terms and conditions of all agreements relating to such loan,
including the securing of such loan with a first or second deed
of trust on his new principal residence and repayment of such
loan in full within three (3) months of the sale of his current
principal residence. If the employment of Employee with the
Company is terminated under any of the provisions of Section 6 of
this Agreement prior to full repayment of such loan, Employee
agrees that the Company may withhold a total amount due him,
under the provisions of this Agreement other than Section 3.1,
sufficient to pay the then balance of such loan and any costs and
fees associated therewith.
<PAGE>
6. Termination of Employment
6.1 Voluntary Termination. Employees may terminate his
employment with the Company at any time. In the event Employee
terminates such employment voluntarily, upon such termination the
Company shall pay Employee his unpaid base salary under Section
3.1 accrued to the date on which his employment terminates (the
"Termination Date").
6.2 Involuntary Termination. (a) Employee's employment
with the Company shall automatically terminate upon Employee's
death or, unless the Board of Directors of the Company in its
sole discretion shall otherwise elect, Employee's physical or
mental disability for any consecutive six-month period (measured
from the first date on which Employee is absent from work due to
such disability to the same date in the sixth succeeding calendar
month, or, if there is not such date or such date is not a
business day, the next succeeding business day). In the event
Employee's employment with the Company is terminated due to
Employee's death or physical or mental disability, the Company
shall pay to Employee or, if applicable, his estate or legal
representative his unpaid base salary under Section 3.1 accrued
to the Termination Date, but in no event less than an amount
equal to one year's base salary. The amount due to Employee
pursuant to this paragraph (a) shall be paid, at the sole
election of Employee or, if applicable, his estate or legal
representative, at the time of termination, either in a lump sum
or in a number of equal annual installments to be specified by
Employee or, if applicable, Employee's estate or legal
representative at the Termination Date.
(b) In the event Employee's employment with the Company
is involuntarily terminated for any other reason, other than
termination for Cause (as hereinafter defined), prior to the
expiration of the term of employment then in effect under Section
1, upon such termination the Company shall be obligated to pay
Employee an amount equal to his base salary under Section 3.1 for
the entire remaining portion of such term of employment then in
effect under Section 1; or if longer, for a two year period
following the Termination Date. The amount due to Employee
pursuant to this paragraph (b) shall be paid at the sole
discretion of the Compensation Board at the Termination Date,
either in a lump sum or on a periodic basis in accordance with
normal pay practice.
(c) The Company may at any time without notice terminate
Employee's employment with the Company for Cause. In the event
Employee's employment with the Company is terminated for Cause,
Employee shall receive the same amount that would be payable
under Section 6.1 if such termination were voluntary.
<PAGE>
(d) As used herein, the term "Cause" means (i) fraud or
misappropriation with respect to the business of the Company or
intentional material damage to the property or business of the
Company, (ii) willful failure by Employee to perform his duties
and responsibilities and to carry out his authority, (III)
willful malfeasance or misfeasance or breach of fiducially duty
or representation to the Company or its stockholder, (iv) willful
failure to act in accordance with any specific lawful
instructions of a majority of the Board of Directors of the
Company, or (v) conviction of Employee of a felony.
7. Representations and Covenants of Employee.
7.1 No Violation. Employee represents and warrants that
he has not disclosed and will not disclose any confidential
information or trade secrets concerning his former employer to
the Company or its subsidiaries or any directors or officers
thereof, and that he can perform his duties for the Company
without disclosing or using any such confidential information or
trade secrets. Employee covenants and agrees that he will not
use any confidential information or trade secrets concerning any
former employer or its subsidiaries 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, including, without limitation, any
noncompetition agreement for the benefit of any former employer.
7.3 Conduct. Employee will at all times refrain from
taking any action or making any statements, written or oral,
which are intended to and do disparage the goodwill or reputation
of the Company or any of its subsidiaries or affiliates or any
directors or officers thereof or which could adversely affect the
morale of employees of the Company and its subsidiaries.
7.4 Performance of Duties. In consideration of the
payments to be made hereunder, Employee agrees that during the
term of his employment under this Agreement, he shall devote
substantially his entire business time and attention to the
performance of his duties hereunder, serve the Company diligently
and to the best of his abilities and shall not compete with the
Company in any way whatsoever. Without limiting the generality
of the foregoing, Employee shall not, during such term, directly
or indirectly (whether for compensation or otherwise), alone or
as an agent, principal, partner, officer, employee, trustee,
director, shareholder or in any other capacity, own, manage,
operate, join, control or participate in the ownership,
management, operation or control of, or furnish any capital to or
be connected in any manner with or provide any services as a
consultant for any business which competes with the business of
the Company, its parent company or their subsidiaries or
<PAGE>
affiliates as it may be conducted from time to time, provided,
however, that notwithstanding the foregoing, nothing contained in
the Employment Agreement shall be deemed to preclude Employee
from owning not more than 5% of the publicly traded securities of
any entity which is in competition with the business of the
Company, its parent company or their subsidiaries or affiliates.
7.5. Company Information. Employee agrees that so long as
he is employed by the Company and following any termination of
this employment, Employee will keep confidential all confidential
information and trade secrets of the Company or any of its
subsidiaries or affiliates and will not disclose such information
to any person without the prior approval of the Board of
Directors of the Company or use such information for any purpose
other than in the course of fulfilling his duties of employment
with the Company pursuant to this Agreement. It is understood
that for purposes of this Agreement the term "confidential
information" is to be construed broadly to include all material
nonpublic or proprietary information.
8. Release. In consideration of the compensation
continuance available in certain events pursuant to this
Agreement, Employee unconditionally releases and covenants not to
sue the Company and its subsidiaries and affiliates and
directors, officers, employees and stockholders thereof, from any
and all claims, liabilities and obligations of any nature
pertaining to termination of employment other than those
explicitly provided for by this Agreement including, without
limitation, any claims, arising out of 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.
9. Governing Law. The validity, interpretation and
performance of this Agreement shall be governed by the laws of
North Carolina, regardless of the laws that might be applied
under applicable principles of conflicts of laws.
10. Entire Agreement and Survivorship. This Agreement
constitutes the entire agreement and understanding between the
parties hereto with respect to the matters referred to herein and
supersedes all prior agreements and understandings between the
parties hereto with respect to the matters referred to herein.
The representations, warranties and covenants of Employee
contained in all parts of Section 7, except 7.4, and the release
contained in Section 8 shall survive expiration, or termination
of this Agreement by either party.
11. Notice. Any written notice required to be given by
one party to the other party hereunder shall be deemed effective
if mailed by certified or registered mail:
<PAGE>
To the Company: Collins & Aikman Corporation
701 McCullough Drive
Charlotte, North Carolina 28262
Attention: Harold R. Sunday
To Employee:
Attention: Mark O. Remissong
or such other address as may be stated in notice given under this
Section 11.
12. Severability. The invalidity, illegality or
enforceability 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
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.
13. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their personal representatives, and, in the case of the Company,
its successors and assigns, and Section 8 shall also inure to the
benefit of the other persons and entities 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.
Employee understands that the assignment of this Agreement or any
benefits hereof or obligations hereunder by the Company to
Collins & Aikman Group, Inc., or any subsidiary of Collins &
Aikman Group, Inc., or to any purchaser of all or a substantial
portion of the assets of the Company, and the employment of
Employee by Collins & Aikman Group, Inc., or such subsidiary or
by any such purchaser or by any successor of the Company in a
merger or consolidation, shall not be deemed a termination of
Employee's employment for purposes of Section 6.2 or otherwise.
14. Amendment. This Agreement may be amended or canceled
only by an instrument in writing duly executed and delivered by
each party to this Agreement.
15. Headings. Headings contained in this Agreement are
for convenience only and shall not limit this Agreement or affect
the interpretation thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
COLLINS & AIKMAN CORPORATION
/s/ Mark O. Remissong /s/ Thomas E. Hannah
- - ------------------------ ------------------------
Mark O. Remissong Thomas E. Hannah, President & CEO
EXHIBIT 21
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Subsidiaries of Collins & Aikman Holdings Corporation
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Company Jurisdiction
------- ------------
Collins & Aikman Group, Inc. Delaware
Builders Emporium Payroll Services, Inc. Delaware
Cepco Incorporated Delaware
Collins & Aikman Corporation Delaware
Ackerman Associates, Inc. New York
Ack-Ti-Lining, Inc. New York
Collins & Aikman Automotive International, Inc. Delaware
Collins & Aikman Holdings Canada Canada
WCA Canada, Inc. Canada
Imperial Wallcoverings (Canada), Inc.(1) Canada
Collins & Aikman Lease Co. Delaware
Collins & Aikman United Kingdom, Ltd. United Kingdom
Imperial Wallcoverings, Inc. Delaware
Marketing Service, Inc. Delaware
The Akro Corporation Delaware
Dura Acquisition Corp. Delaware
Dura Convertible Systems de Mexico, S.A. de C.V.(2) Mexico
(1% owned by Collins & Aikman Corporation)
Warner Fabrics plc United Kingdom
(Owned with Wickes International Corporation)
Harris Fabrics Limited United Kingdom
Warner & Sons, Ltd. United Kingdom
(1 share owned by Warner Fabrics plc; 1 share
owned by Warner Fabrics plc and Nicholas E. Joels,
as joint holders)
Collins & Aikman de Mexico, S.A. de C.V.(3) Mexico
Gamble Development Company Minnesota
Greeff Fabrics, Inc. New York
Hopkins Realty Company Minnesota
Ole's, Inc. California
Ole's Nevada, Inc. Nevada
Simmons Universal Corporation Delaware
Wickes Asset Management, Inc. Delaware
Wickes Guaranteed Parts, Ltd. Canada
Wickes International Corporation Delaware
Design Edition Limited United Kingdom
(50% ownership with Warner Fabrics plc)
Warner Weaving Company Limited United Kingdom
(50% ownership with Warner Fabrics plc)
Wickes Manufacturing Company Delaware
Wickes Products, Inc. Delaware
Wickes ELCO Corporation Delaware
Wickes Manufacturing Services Company, Inc. Delaware
Wickes Realty, Inc. Delaware
Wickes Venture Capital, Inc. Delaware
Sequoia Pacific Development Company Delaware
--------------------
1 Formerly Berkley Wallcoverings, Inc.; 24% owned by
Imperial Wallcoverings, Inc.
2 In formation.
3 1% owned by The Akro Corporation. In formation.
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
report included in or made a part of this prospectus.
ARTHUR ANDERSEN & CO.
Greensboro, North Carolina,
April 19, 1994.