AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 21, 1994
REGISTRATION NO. 33-53179
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
FORM S-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
COLLINS & AIKMAN HOLDINGS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 13-3489233
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
8320 University Executive Park, Suite 102, Charlotte, North Carolina 28262 Tel.
(704) 548-2350
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
ELIZABETH R. PHILIPP, ESQ.
Executive Vice President, General Counsel and Secretary
COLLINS & AIKMAN HOLDINGS CORPORATION
210 Madison Avenue, 6th Floor
New York, New York 10016
Tel. (212) 578-1331
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
Copies to:
<TABLE>
<S> <C>
ROBERT ROSENMAN, ESQ. ROBERT A. PROFUSEK, ESQ.
CRAVATH, SWAINE & MOORE JONES, DAY, REAVIS & POGUE
825 Eighth Avenue 599 Lexington Avenue
New York, New York 10019 New York, New York 10022
</TABLE>
------------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the
following box. / /
If the Registrant elects to deliver its latest annual report to security
holders, or a complete
and legible facsimile thereof, pursuant to Item 11(a)(1) of this Form, check the
following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT(2) OFFERING PRICE(2) REGISTRATION FEE
Common Stock, par value
$.01 per share.............. 28,750,000 $17.00 $488,750,000 $176,466.75
</TABLE>
(1) Includes 3,750,000 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTES
The prospectus relating to the Common Stock being registered hereby to be
used in connection with a United States offering (the "U.S. Prospectus") is set
forth following this page. The prospectus to be used in a concurrent
international offering (the "International Prospectus") will consist of
alternate pages set forth following the U.S. Prospectus and the balance of the
pages included in the U.S. Prospectus for which no alternatives are provided.
The contents of the U.S. Prospectus and the International Prospectus are
identical except for the front and back pages, the section captioned
"Underwriting" and the additional section under the caption "Certain United
States Tax Consequences to Non-United States Holders" in the International
Prospectus. Alternate pages for the International Prospectus are separately
designated.
Prior to the consummation of the Offerings, Collins & Aikman Holdings
Corporation will be renamed Collins & Aikman Corporation.
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
CROSS-REFERENCE SHEET SHOWING LOCATION
IN THE PROSPECTUS OF THE RESPONSES
TO ITEMS OF FORM S-2
------------------------
(PURSUANT TO ITEM 501(B) OF REGULATION S-K)
<TABLE>
<CAPTION>
FORM S-2 ITEM LOCATION
NUMBER AND CAPTION IN PROSPECTUS
----------------------------------------------------- -----------------------------------------------------
<S> <C> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus....................... Forepart of the Registration Statement; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover
Pages of Prospectus................................ Inside Front and Outside Back Cover Pages of
Prospectus
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges................. Prospectus Summary; Risk Factors
4. Use of Proceeds...................................... Prospectus Summary; Use of Proceeds and Consolidation
5. Determination of Offering Price...................... Underwriting
6. Dilution............................................. Dilution
7. Selling Security Holders............................. Principal and Selling 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; Dividends; Selected Financial
Data; Management's Discussion and Analysis of
Financial Condition and Results of Operations;
Business
12. Incorporation of Certain Information by
Reference.......................................... Incorporation of Certain Documents by Reference
13. Disclosure of Commission Position on Indemnification
for Securities Act Liabilities..................... *
</TABLE>
- ---------------
* Item not applicable or requires a negative response.
<PAGE>
SUBJECT TO COMPLETION, DATED JUNE 21, 1994
[LOGO] 25,000,000 SHARES
COLLINS & AIKMAN CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
---------------------
Of the 25,000,000 shares of Common Stock offered, 20,000,000 shares are
being offered hereby in the United States and 5,000,000 shares are being offered
in a concurrent international offering outside the United States. The initial
public offering price and the aggregate underwriting discount per share will be
identical for both Offerings. See "Underwriting".
Of the 25,000,000 shares of Common Stock offered, 20,000,000 shares are
being sold by the Company and 5,000,000 shares are being sold by the Selling
Stockholders. The Company will not receive any of the proceeds from the sale of
the shares being sold by the Selling Stockholders. Blackstone Capital Partners
L.P. and Wasserstein Perella Partners, L.P. will together own or have the right
to vote approximately 59.3% of the outstanding Common Stock (53.7% assuming the
over-allotment options are exercised in full) after completion of the Offerings
and will be in a position to control the Company. See "Principal and Selling
Stockholders and Certain Relationships".
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 will be between $14 and $17. For factors to be considered in
determining the initial public offering price, as well as a discussion of the
requirement that the initial public offering price be recommended by a qualified
independent underwriter, see "Underwriting".
SEE "RISK FACTORS" FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN
THE COMMON STOCK.
The Common Stock will be listed on the New York Stock Exchange under the
symbol "CKC".
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY (2) STOCKHOLDERS
-------------- ------------- -------------- -------------------------
<S> <C> <C> <C> <C>
Per Share.......... $ $ $ $
Total(3)........... $ $ $ $
</TABLE>
- ---------------
(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 3,000,000 shares at the initial public
offering price per share, 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 750,000 shares at the initial public offering price per share,
less the underwriting discount, solely to cover over-allotments. If such
options are exercised in full, the total initial public offering price,
underwriting discount and proceeds to the 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 NIKKO SECURITIES CO.
INTERNATIONAL, 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>
[INSIDE FRONT COVER]
Automotive
Products
Collins & Aikman is the largest
supplier of interior trim products to
the North American automotive
industry. At least one of the
Company's five major products
(pictured here) is used on 87% of all North
American produced vehicle line.
[PHOTO]
Seat Fabric
[PHOTO]
Headliner fabric Convertible top stacks
and molded headliners
Molded Hood [OUTLINE OF CAR] Molded package shelves
insulator pads Molded floor carpets
[PHOTO]
Accessory floor mats Foam laminated door fabrics
[PHOTO] and carpet trim
Luggage compartment trim [PHOTO]
<PAGE>
["C&A" LOGO] Collins & Aikman
The table below shows all the North American-produced vehicle lines for which
Collins & Aikman supplies at least one of its five major automotive products.
An asterisk identifies recently awarded placements on new or redesigned vehicle
lines or models.
General Motors
Achieva
Aurora*
Beretta
Blazer*
Bonneville
Brougham
Camaro*
Caprice
Cavalier*
Century
Ciera
C-K Truck/10/30
C-K Truck/15/35
Corvette
DeVille/Concours*
Olds '88
Eldorado
Firebird
Grand Am
Grand Prix
LeSabre
Lumina-Van*
Lumina-Car*
Monte Carlo*
Olds '98
Park Avenue
Regal
Riviera*
S-10*
S-10 Blazer
S-15 Jimmy
Safari
Saturn
Seville
Silhouette
Skylark
Sonoma
Chevy Suburban
GMC Suburban
Sunbird*
Supreme*
TransSport
Yukon
Ford
Aerostar
Bronco
Contour*
Cougar
Explorer*
Mustang*
Mystique*
Probe
Quest
Ranger
Taurus
Tempo
Thunderbird
Topaz
Windstar*
<PAGE>
Chrysler
Acclaim
Caravan
Cirrus*
Concord*
Dakota
Daytona
Eagle Talon
Grand Cherokee
Intrepid
LeBaron/J/JX*/LHS*
Mini Ram Van
Neon*
New Yorker LHS*
Plymouth Neon
Ram Van/Ram
Shadow
Spirit
Stratus*
Sundance
Town & Country
T-300 Pickup
Vision*
Voyager
Wagoneer
Transplants
Fuji/Isuzu Legacy
Fuji/Isuzu Passport
Fuji/Isuzu Rodeo
Geo Metro
Geo Prism
Honda Accord*
Honda Civic*
Honda Mini-Van*
Hyundai Elantra
Isuzu Pickup*
Mazda MX-6
Mazda Pickup
Mazda 626
Mitsubishi Eclipse
Mitsubishi Galant
Nissan Pickup
Nissan Sentra
Suzuki Sidekick
Suzuki Swift
Suzuki Tracker
Toyota Avalon*
Toyota Camry
Toyota Corolla
Toyota Pickup*
Volvo 740/760
<PAGE>
------------------------
IN CONNECTION WITH THESE OFFERINGS, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON
STOCK OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
AVAILABLE INFORMATION
Collins & Aikman Corporation (the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934 (the "Exchange
Act") and, in accordance therewith, files reports and other information with the
Securities and Exchange Commission (the "Commission"). Reports and other
information filed by the Company may be inspected and copied at public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's Regional Offices located at 7
World Trade Center, New York, New York 10048 and 500 West Madison Street,
Chicago, Illinois 60661. Copies of such materials can be obtained upon written
request from the Public Reference Section of the Commission at 450 Fifth Street,
N.W., Washington, D.C. 20549, at prescribed rates. The Company's 15 1/2%
Cumulative Exchangeable Redeemable Preferred Stock, par value $0.01 per share
(the "Merger Preferred Stock"), is listed for trading on the American Stock
Exchange (the "AMEX"). Reports and other information concerning the Company may
also be inspected and copied at the offices of the AMEX, 86 Trinity Place, New
York, New York 10006.
This Prospectus constitutes a part of a registration statement on Form S-2
(herein, together with all exhibits thereto, referred to as the "Registration
Statement") filed by the Company with the Commission under the Securities Act of
1933 (the "Securities Act") with respect to the Common Stock. This Prospectus
does not contain all of the information set forth in the Registration Statement,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. Reference is hereby made to the Registration Statement and
related exhibits for further information with respect to the Company and the
Common Stock offered hereby. Statements contained herein concerning the
provisions of documents are necessarily summaries of such documents, and each
statement is qualified in its entirety by reference to the copy of the
applicable document filed with the Commission.
Prior to the date of this Prospectus, reports and other information were
filed under the Company's former name "Collins & Aikman Holdings Corporation"
and, prior to July 15, 1992, reports and other information were filed under the
name "WCI Holdings Corporation".
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which were previously filed by the Company with
the Commission (File No. 1-10218) pursuant to Section 13 of the Exchange Act,
are incorporated herein by reference: the Company's Annual Report on Form 10-K,
as amended, for the fiscal year ended January 29, 1994 and the Company's
Quarterly Report on Form 10-Q for the thirteen weeks ended April 30, 1994.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified shall not be deemed to constitute a part of this
Prospectus, except as so modified, and any statement so superseded shall not be
deemed to constitute part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any document incorporated herein by reference
(other than exhibits to such documents unless such exhibits are specifically
incorporated by reference into the documents that this Prospectus incorporates).
Requests for such copies should be directed to Corporate Communications, Collins
& Aikman Corporation, 8320 University Executive Park, Suite 102, Charlotte,
North Carolina 28262 (telephone: (704) 548-2350).
3
<PAGE>
PROSPECTUS SUMMARY
The following is a summary of certain information contained elsewhere in
this Prospectus and is qualified in its entirety by the more detailed
information contained elsewhere in this Prospectus or incorporated herein by
reference. The capitalized terms used herein and not otherwise defined have the
meanings ascribed to them elsewhere in this Prospectus. Except where otherwise
indicated, (i) the information in this Prospectus assumes that 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, (iv) references to the Company include
its direct and indirect subsidiaries and predecessors, as appropriate, and (v)
with respect to market or competitive information, references to the Company as
"a leader" or "one of the leading" manufacturers in a particular product
category mean that the Company is one of the principal manufacturers in that
product category and references to the Company as "the leader," "the largest" or
"the leading" manufacturer in a particular product category mean that the
Company has the largest market share based on dollar sales volume in that
product category.
THE COMPANY
The Company is a leader in each of its three business segments: Automotive
Products, the largest supplier of interior trim products to the North American
automotive industry; Interior Furnishings, the largest manufacturer of
residential upholstery fabrics in the U.S.; and Wallcoverings, the largest
producer of residential wallcoverings in the U.S. Within these three segments,
the Company estimates it holds a number one or number two market share position
in each of its eight major product lines, which together comprised approximately
81% of its 1993 net sales of $1,305.5 million. See "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a discussion of the risks inherent in the Company's businesses
and the Company's financial performance over the last three years, including its
history of net losses, competitive factors affecting the Company, the Company's
substantial leverage, contingent liabilities and other risks inherent in an
investment in the Common Stock.
AUTOMOTIVE PRODUCTS
Automotive Products, with 1993 net sales of $677.9 million, is a leading
designer and manufacturer of products for automobile OEMs. The segment's primary
products include four major interior trim products--automotive seat fabric,
molded floor carpet, accessory floor mats and luggage compartment trim--and
convertible top stacks. Management believes that Automotive Products offers a
wider variety of interior trim products and has a broader, more uniform
penetration of the OEMs than any of its competitors. Management estimates that
Automotive Products holds a number one or number two market share position in
each of its five major product categories. At least one of the Company's five
major automotive products is used on approximately 87% of all North
American-produced vehicle lines. Management estimates that Automotive Products'
1993 market share in its five major products was approximately 26% at Ford, 40%
at General Motors, 51% at Chrysler and 36% among the Transplants. Management
believes that Automotive Products' size and broad customer penetration
constitute a competitive advantage.
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.
4
<PAGE>
Decorative Fabrics supplies middle to high-end woven fabrics to furniture
manufacturers and fabric distributors. Management estimates that Decorative
Fabrics' share of the U.S. upholstery fabric market is approximately 15%.
Decorative Fabrics' primary division, Mastercraft, is the number one supplier of
flat-woven upholstery fabrics and is also the industry leader in the
fast-growing Jacquard segment of that market. Mastercraft had 1993 net sales of
$268.9 million. Mastercraft's premier design and manufacturing expertise enables
it to offer a significantly greater variety of patterns than any of its
competitors.
Floorcoverings, with 1993 net sales of $93.6 million, is a leading
manufacturer of high-end specified contract carpeting products for institutional
and commercial customers with high-traffic applications. Differentiated from
competitors by its patented Powerbond RS(R) adhesive system and by its products'
durability characteristics, Floorcoverings occupies a leading position within
this niche sector.
WALLCOVERINGS
Wallcoverings, which operates under the name "Imperial", is a leading
manufacturer and distributor of wallcoverings for the residential and commercial
sectors and had 1993 net sales of $220.4 million. Management estimates that in
1993 Imperial had a 22% market share in the larger residential wallcoverings
sector and held the number one market share position in each of this sector's
two primary distribution channels--chains and dealers.
BUSINESS STRATEGY
FOCUS ON HIGH MARKET SHARE PRODUCTS. Management focuses on developing
products that have high market share potential. Management estimates that each
of the Company's eight major product lines holds a number one or number two
market share position. Together these product lines comprised approximately 81%
of the Company's 1993 net sales. These market positions were achieved primarily
through internal growth and reflect a long-term, Company-wide commitment to
excellence in styling, engineering, product development, value-added
manufacturing and customer service.
<TABLE>
<CAPTION>
1993
NET SALES
(IN 1993 MARKET
PRODUCT LINE MILLIONS) POSITION
- ------------------------------------------------------------------------------ ------------ -------------
<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 wide variety of products and to become the
primary supplier to each of its customers.
5
<PAGE>
MAINTAIN LOW-COST POSITION. Management's strategy is to maintain the
Company's low-cost position and flexible manufacturing capabilities in order to
protect operating margins from competitive pricing pressures and economic
downturns, while maximizing the benefits of operating leverage during cyclical
upturns.
MAXIMIZE BENEFITS FROM HIGH OPERATING LEVERAGE. Management believes that
substantial available production capacity and high operating leverage have
enabled the Company to benefit from the recent cyclical upturn in its served
markets. The Company has substantial manufacturing capacity to support further
growth.
OFFER VALUE-ADDED PRODUCTS. A key element of the Company's strategy is to
increase market share and unit selling prices by developing increasingly higher
value-added products through innovations in materials construction, product
design and styling.
MAINTAIN PRODUCT DESIGN AND STYLING LEADERSHIP. Design and styling are key
differentiating factors in consumer purchasing decisions. Management believes
that the Company's product design and styling capabilities are currently an
important competitive advantage and intends to devote resources to maintain the
Company's position in these areas.
CONTINUE TO DELEVERAGE. The Recapitalization is designed to increase
operating and financial flexibility by reducing the Company's indebtedness and
significantly lowering its cost of borrowing. Management expects this financial
deleveraging to be enhanced through the application of operating cash flow
augmented by the use of the Company's net operating loss carryforwards and other
favorable tax attributes. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" and "--Tax
Matters".
HISTORY OF THE COMPANY
The Company was formed in 1988 by Blackstone Capital Partners L.P. and
Wasserstein Perella Partners, L.P. to acquire Wickes Companies, Inc. for
approximately $2.6 billion, including the assumption of indebtedness (the "1988
Acquisition"). Since the 1988 Acquisition, the Company has divested 27
businesses for approximately $1.6 billion. By the end of 1993, the Company had
streamlined its operations into its three existing business segments in which it
enjoys a competitive advantage.
The Company's principal executive offices are located at 8320 University
Executive Park, Suite 102, Charlotte, North Carolina 28262. Its telephone number
at that location is (704) 548-2350.
6
<PAGE>
THE OFFERINGS
<TABLE>
<S> <C>
Common Stock offered by the Company:
U.S. Offering.................. 16,000,000 shares
International Offering......... 4,000,000 shares
Total........................ 20,000,000 shares
Common Stock offered by the Selling
Stockholders:
U.S. Offering.................. 4,000,000 shares
International Offering......... 1,000,000 shares
Total........................ 5,000,000 shares
Common Stock to be outstanding after
the Offerings..................... 66,710,900 shares(1)
Use of proceeds..................... The net proceeds to the Company from the Offerings (defined below),
together with borrowings under the New Credit Facilities (defined below)
and available cash of the Company, will be used to effect a defeasance and
redemption, or repayment, of an aggregate of $789.4 million principal
amount of debt and an aggregate of $208.1 million liquidation amount of
preferred stock. The Company will not receive any of the proceeds from the
sale of shares by the Selling Stockholders. See "Use of Proceeds and
Consolidation".
Proposed New York Stock Exchange
("NYSE") Symbol................... CKC
</TABLE>
- ---------------
(1) Does not include 6,100,000 shares of Common Stock reserved for issuance
under the Company's stock option plans, including approximately 3,200,000
shares subject to outstanding options. See "Management--The Company's Option
Plans".
The offering of shares of Common Stock initially being offered in the
United States (the "U.S. Offering") and the offering of shares of Common Stock
initially being offered outside the United States (the "International Offering")
are referred to herein collectively as the "Offerings". The closing of the
International Offering is conditioned upon the closing of the U.S. Offering, and
vice versa. See "Underwriting". The Offerings are part of the Recapitalization
(described below).
7
<PAGE>
THE RECAPITALIZATION
The recapitalization (the "Recapitalization") is designed to reduce the
Company's indebtedness, significantly lower interest expense, improve operating
and financial flexibility and provide liquidity for operations and other general
corporate purposes. The Recapitalization involves 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 from the New Credit
Facilities, together with the net proceeds to the Company from the Offerings and
the available cash of the Company, will be used to effect a defeasance and
redemption, or repayment, of virtually all indebtedness and all preferred stock
of the Company and its subsidiaries. See "New Credit Facilities".
The following table sets forth a summary of the estimated sources and
anticipated uses of funds in the Recapitalization (assuming the Recapitalization
occurs on June 22, 1994):
SOURCES OF FUNDS
<TABLE>
<CAPTION>
(IN
MILLIONS)
------------
<S> <C>
Sale of Common Stock in the Offerings(1)....................................... $ 292.9
Proceeds from the New Credit Facilities(2)..................................... 675.1
Available cash................................................................. 87.9
------------
Total..................................................................... $ 1,055.9
------------
------------
USES OF FUNDS
Repayment and redemption of long-term debt (including current maturities)(3)... $ 789.4
Redemption of preferred stock.................................................. 208.1
Accrued interest and dividends as of June 22, 1994............................. 16.3
Redemption premiums............................................................ 13.4
Defeasance costs............................................................... 7.4
Fees and expenses(4)........................................................... 21.3
------------
Total..................................................................... $ 1,055.9
------------
------------
</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
$15.50 per share (the midpoint of the estimated range of the initial public
offering price) less underwriting discounts.
(2) Includes $150 million of proceeds from the sale of an undivided interest in
a pool of receivables under the Receivables Purchase Agreement. See "New
Credit Facilities".
(3) Does not include $193.2 million of PIK Notes being exchanged for Common
Stock in connection with the consummation of the Offerings.
(4) Includes bank commitment, financial advisory, legal and accounting fees and
other expenses in connection with the Recapitalization, excluding
underwriting discounts.
Following the Offerings, the Partners and their affiliates will
beneficially own or have the right to vote, in the aggregate, 59.3% (53.7%
assuming the Underwriters' over-allotment options are exercised in full) of the
outstanding Common Stock. See "Principal and Selling Stockholders and Certain
Relationships".
8
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
(IN THOUSANDS)
The following table presents summary historical financial data derived from
the Company's Consolidated Financial Statements and operating data for the
periods indicated. All information contained in the following table should be
read in conjunction with "Selected Financial Data", "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Consolidated
Financial Statements of the Company and the notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED YEAR ENDED
----------------------- ---------------------------------------------------------------
APRIL 30, JANUARY 29, JANUARY 30, JANUARY 25, JANUARY 26, JANUARY 27,
1994 MAY 1, 1993 1994 1993(1) 1992 1991 1990
---------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales............... $ 390,446 $ 339,043 $ 1,305,517 $ 1,277,500 $ 1,184,316 $ 1,232,403 $ 1,276,442
Gross profit............ $ 100,954 $ 78,948 $ 309,727 $ 299,027 $ 257,499 $ 270,782 $ 262,121
Selling, general and
administrative
expenses................ 55,356 51,872 196,585 218,441 202,690 192,002 209,619
Management equity plan
expense................. 36 -- 26,736 -- -- -- --
Restructuring costs..... -- -- -- 10,000 -- 17,275 --
Goodwill amortization
and write-off......... -- 924 132,630 3,702 3,702 3,798 3,798
---------- ----------- ----------- ----------- ----------- ----------- -----------
Operating income
(loss).................. $ 45,562 $ 26,152 $ (46,224) $ 66,884 $ 51,107 $ 57,707 $ 48,704
Interest expense,
net(2).................. 29,061 27,225 111,291 110,867 107,974 106,099 136,292
Income (loss) from
continuing operations
before income taxes..... 15,372 (2,202) (162,048) (48,497) (61,382) (52,907) (92,102)
Income (loss) from
continuing operations
after income taxes...... 12,754 (5,473) (173,325) (45,341) (73,336) (57,386) (92,109)
Income (loss) before
extraordinary items..... 12,754 (9,069) (277,664) (263,658) (89,701) (86,983) (142,913)
Net Income (loss)....... 12,754 (9,069) (277,664) (263,658) (133,810) (57,908) (15,435)
BALANCE SHEET DATA:
Total assets............ $ 934,048 $ 1,143,689 $ 918,825 $ 1,141,434 $ 1,300,304 $ 1,412,790 $ 1,777,339
Long-term debt,
including current
portion................. 922,243 1,003,975 923,554 982,205 941,838 930,065 1,123,325
Redeemable preferred
stock................... 129,454 104,222 122,368 98,602 79,754 69,240 73,711
Stockholder's equity
(deficit)............... (698,148) (434,859) (702,220) (421,460) (130,921) 18,821 81,075
OTHER DATA (FROM
CONTINUING
OPERATIONS):
EBITDA(3)............... $ 56,689 $ 38,801 $ 155,374 $ 118,748 $ 98,708 $ 106,067 $ 97,072
Capital expenditures.... 15,286 7,267 44,923 38,209 38,928 42,885 44,872
Depreciation............ 11,127 11,725 42,232 45,463 43,899 42,532 44,570
</TABLE>
- ---------------
(1) 1992 was a 53-week year.
(2) Excludes amounts related to discontinued operations of $5,749 in the first
quarter of 1993, $18,871 in 1993, $23,010 in 1992, $25,062 in 1991, $33,040
in 1990 and $112,153 in 1989.
(3) EBITDA is operating income plus depreciation and amortization and the
non-cash portion of non-recurring charges attributable to continuing
operations. EBITDA reflects the Company's ability to satisfy principal and
interest obligations with respect to its indebtedness and to utilize cash
for other purposes. In addition, certain covenants in the New Credit
Facilities are based upon calculations using EBITDA. EBITDA does not
represent and should not be considered as an alternative to net income or
cash flow from operations as determined by generally accepted accounting
principles.
9
<PAGE>
SUMMARY PRO FORMA FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table presents unaudited summary pro forma financial and
other data that are derived from, and should be read in conjunction with, the
pro forma consolidated financial data included elsewhere in this Prospectus. The
following unaudited summary pro forma financial data illustrate the estimated
effects of the Recapitalization. The unaudited summary pro forma operating data
for the thirteen weeks ended April 30, 1994 and May 1, 1993 and for the year
ended January 29, 1994 present the results of operations of the Company as if
the Recapitalization had occurred as of the beginning of each period presented.
The unaudited summary pro forma financial and other data do not purport to
represent what the Company's results of operations would actually have been if
the Recapitalization had occurred as of the beginning of each period presented,
nor do they purport to project the Company's results of operations for any
future period. See "Unaudited Pro Forma Consolidated Financial Data."
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED YEAR ENDED
----------------------------- JANUARY 29,
APRIL 30, 1994 MAY 1, 1993 1994
--------------- ------------ ------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.......................................................... $ 390,446 $ 339,043 $ 1,305,517
Gross profit....................................................... 100,954 78,948 309,727
Selling, general and administrative expenses....................... 54,642 51,122 193,585
Non-recurring charges(1)........................................... -- 924 159,366
--------------- ------------ ------------
Operating income (loss)............................................ 46,312 26,902 (43,224)
Interest expense, net(2)........................................... 7,150 8,075 26,519
Loss on sale of receivables(3)..................................... 3,088 2,781 8,008
--------------- ------------ ------------
Income (loss) from continuing operations before income taxes....... 36,074 16,046 (77,751)
Income taxes(4).................................................... 2,318 2,971 10,077
--------------- ------------ ------------
Income (loss) from continuing operations........................... $ 33,756 $ 13,075 $ (87,828)
--------------- ------------ ------------
--------------- ------------ ------------
OTHER DATA:
Total debt(5)(6)................................................... $ 520,558 (9) (9)
EBITDA(7).......................................................... 57,439 39,551 158,374
Income (loss) from continuing operations per share of common
stock.............................................................. .49 .19 (1.31)
Average common shares outstanding(8)............................... 68,860 67,132 67,132
</TABLE>
- ---------------
(1) Includes, for 1993, the write-off and amortization of goodwill of $132,630
and compensation expense of $26,736 related to the 1993 Plan and, for the
thirteen weeks ended May 1, 1993, goodwill amortization of $924.
(2) Reflects adjustments for the elimination of interest expense related to the
defeasance and redemption, repayment or exchange for Common Stock of certain
of the outstanding indebtedness of the Company in connection with the
Offerings and the Recapitalization. See Note (2) to the Unaudited Pro Forma
Consolidated Statements of Operations.
(3) The loss on sale of receivables arises from the sale, on a revolving basis,
of an undivided interest in trade receivables. See Note (3) to the Unaudited
Pro Forma Consolidated Statements of Operations.
(4) Reflects a reduction of state and foreign income taxes due to an
organizational restructuring and to increased borrowings in Canada in
connection with the Recapitalization.
(5) Includes $498,414 of borrowings under the New Credit Facilities and $22,144
of miscellaneous debt.
(6) Excludes $150,000 of off-balance sheet financing provided by the Company's
sale of a participating interest in trade receivables under the terms of the
Receivables Purchase Agreement (see "New Credit Facilities").
(7) EBITDA is operating income plus depreciation and amortization and the
non-cash portion of non-recurring charges attributable to continuing
operations. EBITDA reflects the Company's ability to satisfy principal and
interest obligations with respect to its indebtedness and to utilize cash
for other purposes. In addition, certain covenants in the New Credit
Facilities are based upon calculations using EBITDA. EBITDA does not
represent and should not be considered as an alternative to net income or
cash flow from operations as determined by generally accepted accounting
principles.
(8) Includes (i) shares currently outstanding, (ii) shares to be issued in the
Offerings, (iii) shares to be issued in exchange for the PIK Notes, and (iv)
the assumed exercise of outstanding stock options, using the treasury
method. Unrecognized compensation on employee stock options is considered as
proceeds in determining the assumed repurchase of shares into treasury.
(9) Pro forma balance sheet data is only required as of April 30, 1994.
10
<PAGE>
RISK FACTORS
In addition to the other information contained in this Prospectus, the
following risk factors should be considered carefully in evaluating an
investment in the Common Stock offered hereby.
CYCLICALITY OF INDUSTRIES
The Company's business segments are highly cyclical. Downturns in North
American automotive production, consumer spending, commercial and residential
construction and renovation could have a material adverse effect on the Company.
DEPENDENCE ON SIGNIFICANT AUTOMOTIVE CUSTOMERS AND CAR MODELS
The Company's sales are dependent on certain significant customers. Sales
to General Motors Corporation ("General Motors"), Chrysler Corporation
("Chrysler") and Ford Motor Company ("Ford") accounted for approximately 16%,
10% and 8%, respectively, of the Company's 1993 net sales. In addition, certain
of the Company's customers are unionized and have in the past experienced labor
disruptions. The loss of one or more significant customers or a prolonged
disruption in their production could have a material adverse effect on the
Company.
The Company principally competes for new business at the design stage of
new models and upon the redesign of existing models. There can be no assurance
that the Company will continue to be able to obtain such new business or to
improve or maintain its gross margins on such new business. In addition, the
Company may not be able to pass on raw material price increases to its customers
due to pricing pressure from its customers. A decrease in demand for the models
that generate the most sales for the Company, the failure of the Company to
obtain purchase orders for new or redesigned models and pricing pressure from
the major automotive companies could have a material adverse effect on the
Company. See "Business--Automotive Products".
VULNERABILITY TO CHANGES IN CONSUMER TASTES
Consumer tastes in automotive seat fabrics, interior furnishings and
wallcoverings change over time. A shift in consumer preferences away from the
products that the Company produces or has the capability to produce could have a
material adverse effect on the Company.
COMPETITION
The industries in which the Company operates are highly competitive. There
can be no assurance that the Company's products will compete successfully with
those of its competitors. Several competitors are larger and have greater
financial and other resources available to them. There can be no assurance that
the Company will be able to maintain its operating margins if the competitive
environment changes. See "Business".
SUBSTANTIAL LEVERAGE
The Recapitalization is designed to reduce indebtedness, significantly
lower interest expense, improve the Company's operating and financial
flexibility and provide liquidity for operations and other general corporate
purposes. However, the substantial indebtedness of the Company and its
subsidiaries following the Recapitalization could have important consequences to
holders of Common Stock, including the following: (i) the ability of the Company
and its subsidiaries to obtain additional financing in the future to refinance
maturing debt or for working capital, capital expenditures, acquisitions,
general corporate or other purposes could be impaired; (ii) a substantial
portion of the cash flow from operations of the Company and its subsidiaries
must be dedicated to the payment of the principal of and interest on existing
indebtedness, which will have the effect of decreasing the amount available for
working capital, capital expenditures, acquisitions, general
11
<PAGE>
corporate or other purposes; (iii) the Company and its subsidiaries could be
more highly leveraged than certain of their competitors, which may place the
Company and its subsidiaries at a competitive disadvantage; (iv) a significant
portion of the borrowings of the Company and its subsidiaries are expected to be
at variable rates of interest, and consequently the Company and its subsidiaries
will be vulnerable to increases in interest rates; and (v) the high degree of
leverage of the Company and its subsidiaries may make the Company more
vulnerable to economic downturns. After giving effect to the Recapitalization,
the Company will have an aggregate of approximately $547.7 million of
indebtedness outstanding (excluding $150.0 million in off-balance sheet
financing under the Receivables Purchase Agreement) and unused borrowing
availability of approximately $95.0 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 AND CERTAIN TRANSACTIONS WITH AFFILIATES
After giving effect to the Offerings, Blackstone Capital Partners L.P.
("Blackstone Partners") and Wasserstein Perella Partners, L.P. ("WP Partners",
and collectively with Blackstone Partners, the "Partners") and their respective
affiliates will beneficially own or have the right to vote 59.3% of the
outstanding Common Stock of the Company (53.7% assuming the over-allotment
options are exercised in full). Although the Partners intend to elect two
directors who are neither officers nor employees of the Partners or their
affiliates, the Company's Board of Directors has been, and is expected to
continue to be, comprised entirely of designees of the Partners. As a result,
the Partners and their affiliates will continue to have the ability to determine
the policies of the
12
<PAGE>
Company, the persons constituting its management, the outcome of corporate
actions requiring stockholder approval by majority action and the future
direction of the Company.
The Partners and the Company will enter into an Amended and Restated
Stockholders Agreement (the "Stockholders Agreement") relating to governance and
management of the Company, and the Partners will enter into a Voting Agreement
(the "Voting Agreement") relating to voting for nominees affiliated with each
other. The Restated Certificate of Incorporation will provide that a
nominating committee of the Board of Directors consisting of the nonemployee
directors will have exclusive power to nominate directors on behalf of the Board
of Directors and will have exclusive power to fill any vacancies on the Board of
Directors. See "Principal and Selling Stockholders and Certain Relationships".
In the past, the Partners and certain of their affiliates (in such
capacity, the "Managers-Advisors") have been paid fees in connection with
management and advisory services performed by the Managers-Advisors for the
Company and its subsidiaries. The Managers-Advisors will continue to be paid
fees in connection with services to be provided in the future. It is anticipated
that each of the Managers-Advisors will receive a $1 million annual monitoring
fee and the reimbursement of expenses from the Company pursuant to the
Stockholders Agreement and that any transaction with affiliates not contemplated
by the Stockholders Agreement will be passed upon by the independent directors.
See "Principal and Selling Stockholders and Certain Relationships".
BENEFIT OF OFFERINGS TO SELLING STOCKHOLDERS
Of the 25,000,000 shares of Common Stock being offered, 5,000,000 shares
are being sold by the Selling Stockholders. In addition, the aggregate of
3,750,000 shares subject to the over-allotment options are being sold by the
Selling Stockholders. The Company will not receive any of the proceeds of sales
of shares of Common Stock by the Selling Stockholders.
The cost per share of the shares of Common Stock owned by the Partners
(after giving effect to the Recapitalization) is $7.00. Thus, the Partners will
realize profits from the sale of the shares offered hereby of $
(based upon estimated net proceeds of $ per share), and $ if the
over-allotment option is exercised in full. The cost of the shares consists of
the Partners' investment in equity of the Company of $117.2 million in 1988 and
their $193.3 million investment in PIK Notes, which includes their 1988
investment in PIK Notes plus additional PIK Notes subsequently issued with
respect to interest on outstanding PIK Notes.
ANTI-TAKEOVER PROVISIONS
The Restated Certificate of Incorporation and the Bylaws of the Company,
which will be effective upon consummation of the Offerings, will contain
provisions which could delay or frustrate the removal of incumbent directors and
could make more difficult a merger, tender offer or proxy contest involving the
Company. The Company will also be subject to provisions of Delaware corporate
law restricting certain business combinations with certain stockholders. See
"Description of the Capital Stock".
COLLECTIVE BARGAINING AGREEMENTS
The Company is a party to collective bargaining agreements with respect to
hourly employees at seven of its 51 U.S. facilities, its five Canadian
facilities and its three Mexican facilities. Of the Company's 12,000 employees,
approximately 2,200 employees, all of whom are employed in Automotive Products
and Wallcoverings, are covered by such agreements. One such agreement covering
approximately 365 Wallcoverings employees has been extended through July 1994
while negotiations are ongoing, and the remainder of such agreements have terms
of two to five years and expire from 1995 to 1997. The Company has not
experienced any significant labor disruptions during the past five years.
Although management believes that its relationship with the employees covered by
collective bargaining agreements is good, there can be no assurance that the
Company will be able to negotiate new agreements on favorable terms. See
"Business--Employees".
ENVIRONMENTAL MATTERS AND OTHER CONTINGENCIES
The Company is subject to increasingly stringent Federal, state and local
laws and regulations concerning the environment. Changes to environmental laws
and regulations may require the Company to make substantial capital expenditures
and to incur substantial expenses with respect to its ongoing and divested
operations and properties. In addition, the Company has received notices that it
is a potentially responsible party ("PRP") in a number of proceedings for
cleanup of hazardous substances at various sites. The Company may be named as a
PRP at other sites in the future. It is difficult to estimate the total cost of
investigation and remediation due to various factors including incomplete
information regarding particular sites and other PRPs, uncertainty regarding
13
<PAGE>
the extent of environmental problems and the Company's share, if any, of
liability for such problems, the selection of alternative compliance approaches,
the complexity of the environmental laws and regulations and changes in cleanup
standards and techniques. When it has been possible to provide reasonable
estimates of the Company's liability with respect to environmental sites,
provisions have been made in accordance with generally accepted accounting
principles. However, there can be no assurance that the Company has identified
or properly assessed all potential environmental liabilities arising from the
activities or properties of the Company, its present and former subsidiaries and
their corporate predecessors. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Environmental Matters".
The Company has significant financial and legal obligations with respect to
certain divested and acquired businesses. In connection with the sale and
acquisition of certain businesses, the Company has indemnified the purchasers
and sellers for certain environmental liabilities, lease obligations and other
matters. In addition, the Company is contingently liable with respect to certain
lease and other obligations assumed by certain purchasers and may be required to
honor such obligations if such purchasers are unable or unwilling to do so. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Environmental Matters" and Notes 6 and 19 to Consolidated Financial
Statements.
PENDING TAX MATTERS
In the course of an examination of the Company's Federal income tax
returns, the Internal Revenue Service ("IRS") has challenged the availability of
$176.6 million of the Company's approximately $434.0 million net operating loss
carryforwards ("NOLs"). The examination is at a preliminary stage and management
believes that the basis for the IRS' position is unclear. Management disputes
the IRS' challenge and believes that substantially all the NOLs should be
available (subject to certain limitations) to offset its income, if any, in the
future. If the IRS were to maintain its position and all or a major portion of
such position were to be upheld in litigation, the amount of NOLs available to
the Company in future years would be materially reduced. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Tax
Matters".
NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offerings, there has been no public market for shares of the
Common Stock. The Common Stock has been approved for listing on the NYSE.
However, there can be no assurance as to the liquidity of any markets that may
develop for the Common Stock or the price at which holders would be able to sell
their Common Stock. The initial public offering price for the Common Stock was
determined by negotiations among the Company, the Selling Stockholders and the
representatives of the Underwriters. There can be no assurance that the market
price of the Common Stock after the Offerings will equal or exceed the initial
public offering price. In addition, broad market fluctuations and general
economic and political conditions may adversely affect the market price of the
Common Stock, regardless of the Company's actual performance. For a description
of the factors which were considered in determining the initial public offering
price, see "Underwriting".
SHARES ELIGIBLE FOR FUTURE SALE
Following the Offerings, there will be 41,710,900 shares of Common Stock
outstanding eligible for future sale in the public market (excluding
approximately 3,200,000 shares issuable upon exercise of outstanding options).
No prediction can be made as to the effect, if any, that market sales of shares
of Common Stock or the availability of shares of Common Stock for sale will have
on the prevailing market price of Common Stock from time to time. Sales of a
significant number of shares of Common Stock in the public market following the
Offerings could adversely affect the prevailing market price of the Common Stock
and could materially impair the Company's future
14
<PAGE>
ability to raise capital through an offering of equity securities. See
"Description of Capital Stock-- Shares Eligible for Future Sale". See
"Underwriting" for a description of agreements by the Company and certain of the
existing stockholders of the Company not to sell shares of Common Stock owned by
them for a period of 180 days after the date of this Prospectus without the
prior written consent of the representatives of the Underwriters.
DILUTION
The negative net tangible book value of the Company as of April 30, 1994,
was approximately $422.3 million or $6.33 per share after giving effect to the
Offerings and the Recapitalization (based upon an assumed initial public
offering price of $15.50 per share). Persons purchasing shares of Common Stock
in the Offerings will incur immediate dilution in net tangible book value of
$21.83 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. See "New Credit Facilities". If the Company
does not have sufficient surplus, under Delaware law the Company could be
prohibited from paying any dividends on Common Stock even after the limitations
under the New Credit Facilities no longer apply.
Under applicable Delaware law, dividends on the Common Stock may only be
paid out of the Company's surplus (defined as the excess of the Company's assets
over the sum of its liabilities and the aggregate par value of its stock) or out
of net profits for the fiscal year in which the dividends are declared and/or
the preceding fiscal year. At April 30, 1994, the Company had a negative surplus
based on its historical financial statements and on a pro forma basis, after
giving effect to the Consolidation and the Recapitalization. However, under
Delaware law, a corporation's board of directors may determine the availability
of surplus based on the actual, current value of its assets and liabilities
rather than their historical book values. The Company's Board of Directors has
in the past relied on this non-book, "revaluation" surplus in the payment of
dividends on the Merger Preferred Stock.
15
<PAGE>
DILUTION
The negative net tangible book value of the Company as of April 30, 1994,
was $20.27 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 $15.50 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 April 30, 1994 would have been
$6.33 per share. This represents an immediate increase of $13.94 per share to
existing stockholders and an immediate dilution of $21.83 per share to new
investors. The following table illustrates the per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $ 15.50
Negative net tangible book value per share as of April 30, 1994,
before the Offerings and the Recapitalization...................... $ (20.27)
Increase in net tangible book value per share attributable to new
investors(1)......................................................... 13.94
----------
Pro forma net tangible book value per share after the Offerings and
the Recapitalization................................................. (6.33)
----------
Dilution per share to new investors(2)............................... $ 21.83
----------
----------
</TABLE>
- ---------------
(1) Determined after deducting the underwriting discounts, estimated offering
expenses and effects of the non-recurring charges resulting from the
Recapitalization. See "Unaudited Pro Forma Consolidated Financial Data".
(2) Dilution is determined by subtracting the pro forma net tangible book value
per share after completion of the Offerings from the initial public offering
price paid by a new investor for a share of Common Stock.
16
<PAGE>
USE OF PROCEEDS AND CONSOLIDATION
The net proceeds from the Offerings (estimated to be approximately $292.9
million) will be used, together with $675.1 million of proceeds from the total
available funds of $775 million under the New Credit Facilities, as described
under "New Credit Facilities", and available cash of the Company, to effect a
defeasance and redemption, or repayment, of the indebtedness and preferred stock
described below. The Company will not receive any proceeds from the sale of
shares of Common Stock by the Selling Stockholders.
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 $1,034.6 million,
including interest or dividends accrued to June 22, 1994 and applicable
redemption premiums and defeasance costs, and excluding estimated fees and
expenses of $21.3 million.
The following table sets forth a summary of the estimated sources and
anticipated uses of funds in the Recapitalization (assuming the Recapitalization
occurs on June 22, 1994):
<TABLE>
<CAPTION>
(IN MILLIONS)
--------------
SOURCES OF FUNDS
<S> <C>
Sale of Common Stock in the Offerings(1)................................... $ 292.9
Proceeds from the New Credit Facilities(2)................................. 675.1
Available cash............................................................. 87.9
--------------
Total................................................................. $ 1,055.9
--------------
--------------
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.............................................. 9.1
Accrued interest and dividends as of June 22, 1994...................... 16.3
Redemption premiums..................................................... 13.4
Defeasance costs........................................................ 7.4
Fees and expenses(3).................................................... 21.3
--------------
Total................................................................. $ 1,055.9
--------------
--------------
</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
$15.50 per share (the midpoint of the estimated range of the initial public
offering price) less underwriting discounts.
(2) Includes $150 million of proceeds from the sale of an undivided interest in
a pool of receivables under the Receivables Purchase Agreement. See "New
Credit Facilities."
(3) 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".
17
<PAGE>
CAPITALIZATION
(IN THOUSANDS)
The following table sets forth the capitalization of the Company and its
subsidiaries (i) at April 30, 1994 and (ii) as adjusted to give effect to the
Recapitalization and the application of the proceeds of the Offerings as if the
Recapitalization had occurred as of April 30, 1994. This table should be read in
conjunction with the Consolidated Financial Statements of the Company included
elsewhere in this Prospectus. See "Use of Proceeds and Consolidation" and
"Unaudited Pro Forma Consolidated Financial Data".
<TABLE>
<CAPTION>
APRIL 30, 1994
-------------------------
ACTUAL AS ADJUSTED
---------- -------------
<S> <C> <C>
Short-Term Debt.................................................................................... $ 3,043 $ 3,043
Current Portion of Long-Term Debt(1)............................................................... 163,715 3,480
---------- -------------
Total............................................................................................ $ 166,758 $ 6,523
---------- -------------
---------- -------------
Long-Term Debt (excluding current portion)(1)(2):
New Credit Facilities............................................................................ $ -- $ 498,414
Senior Indebtedness.............................................................................. 235,512 15,621
Senior Subordinated Indebtedness................................................................. 301,801 --
Subordinated Indebtedness........................................................................ 22,483 --
PIK Notes........................................................................................ 198,732 --
---------- -------------
Total Long-Term Obligations.................................................................... 758,528 514,035
---------- -------------
Preferred Stock and Redeemable Preferred Stock of Subsidiary(3).................................... 313 --
Redeemable Preferred Stock(3)...................................................................... 129,454 --
Stockholder's Deficit:
Common Stock (35,035 actual shares issued and outstanding, 66,711 shares issued and outstanding
on a pro forma basis)(4)....................................................................... 350 667
Other Paid-In Capital(4)......................................................................... 160,285 637,318
Accumulated Deficit(5)........................................................................... (843,669) (1,029,583)
Foreign Currency Translation Adjustments......................................................... (7,367) (7,367)
Pension Equity Adjustment........................................................................ (7,747) (7,747)
---------- -------------
Total Stockholder's Deficit.................................................................... (698,148) (406,712)
---------- -------------
Total Capitalization............................................................................... $ 190,147 $ 107,323
---------- -------------
---------- -------------
</TABLE>
- ---------------
<TABLE>
<S> <C>
(1) Reflects (i) the redemption or repayment of an aggregate book amount of $713,892 of outstanding indebtedness utilizing
the net proceeds of the Offerings, borrowings of $498,414 under the Credit Agreement Facilities and $150,000 of net
proceeds on the sale of a participating interest in receivables and (ii) the exchange of the PIK Notes for Common Stock
as follows:
</TABLE>
<TABLE>
<S> <C> <C>
Debt Extinguished:
Subsidiary Credit Facility..................................................................... $ 127,581
7 1/2%-10% Senior Debentures (face value $138,694 net of discount of $33,063).................. 105,631
11 7/8% Senior Subordinated Debentures (face value $347,414 net of discount of $45,613)........ 301,801
15% Subordinated Notes (face value $137,359 net of discount of $244)........................... 137,115
11 3/8% Subordinated Debentures (face value $24,500 net of discount of $2,017)................. 22,483
PIK Notes ($9,482 redeemed and $189,250 exchanged for Common Stock)............................ 198,732
Miscellaneous Debt............................................................................. 9,799
----------
Debt Extinguished.......................................................................... 903,142
New Credit Facilities............................................................................ (498,414)
----------
Reduction in Outstanding Indebtedness...................................................... $ 404,728
----------
----------
Allocated to:
Current Portion................................................................................ $ 160,235
Long-term Portion.............................................................................. 244,493
----------
$ 404,728
----------
----------
</TABLE>
<TABLE>
<S> <C>
(2) Excludes $150,000 of off-balance sheet financing provided by the Company's sale of receivables under the terms of the
Receivable Purchase Agreement (see "New Credit Facilities").
(3) Reflects the redemption of the 15 1/2% Junior Cumulative Exchangeable Redeemable Preferred Stock (" Intermediate
Preferred Stock") of Group, $2.50 Series A Convertible Preferred Stock ("Series A Preferred Stock") of Group and the
Merger Preferred Stock with an aggregate book value of $129,767 with funds provided by the Offerings and the
Recapitalization.
(4) The as adjusted amounts reflect the issuance of 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) $288,100 for shares of Common Stock to be
sold in the Offerings, net of discounts and commissions and associated expenses and (ii) $189,250 on exchange of PIK
Notes for shares of Common Stock.
(5) Reflects charges for (i) write-off of deferred debt expense and debt discounts of $92,812, (ii) premiums paid in
connection with the redemption of existing indebtedness in the amount of $9,625, (iii) premiums paid in connection with
the redemption of the Intermediate Preferred Stock of Group, the Series A Preferred Stock of Group and the Merger
Preferred Stock of the Company in the amount of $82,077 and (iv) loss of $1,400 on the sale of a $150,000 participating
interest in trade receivables.
</TABLE>
18
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS)
The following table sets forth selected consolidated financial information
for the Company at and for the periods indicated. The selected consolidated
financial information for the years ended January 29, 1994, January 30, 1993,
January 25, 1992, January 26, 1991 and January 27, 1990 have been derived from
the Company's consolidated financial statements which have been audited by
Arthur Andersen & Co. The selected consolidated financial information for the
thirteen weeks ended April 30, 1994 and May 1, 1993 have been derived from
unaudited consolidated financial statements, which in the opinion of management,
reflect all adjustments necessary for a fair presentation of such data. The
statement of operations and balance sheet data have been restated to reflect
discontinued operations (see Note 6 to the Consolidated Financial Statements).
As a result of an acquisition in 1991, and the recognition of a cumulative
adjustment in 1991 to adopt the accrual basis of accounting for postretirement
benefits (see Notes 3 and 13 to the Consolidated Financial Statements), the
financial information set forth below is not comparable for the periods
presented and should not be considered indicative of current or future
operations or income. The following selected financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Consolidated Financial Statements and notes
thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED YEAR ENDED
----------------------- --------------------------------------------------
APRIL 30, JANUARY 29, JANUARY 30, JANUARY 25, JANUARY 26,
1994 MAY 1, 1993 1994 1993(1) 1992 1991
---------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales:
Automotive Products(2)................. $ 222,991 $ 174,695 $ 677,867 $ 643,827 $ 610,325 $ 657,404
Interior Furnishings(2)................ 107,129 102,998 407,201 391,778 336,773 339,528
Wallcoverings(2)....................... 60,326 61,350 220,449 241,895 237,218 235,471
---------- ----------- ----------- ----------- ----------- -----------
Total Net Sales...................... $ 390,446 $ 339,043 $ 1,305,517 $ 1,277,500 $ 1,184,316 $ 1,232,403
---------- ----------- ----------- ----------- ----------- -----------
---------- ----------- ----------- ----------- ----------- -----------
Gross profit............................. $ 100,954 $ 78,948 $ 309,727 $ 299,027 $ 257,499 $ 270,782
Selling, general and administrative
expenses............................... 55,356 51,872 196,585 218,441 202,690 192,002
Management equity plan expense........... 36 -- 26,736 -- -- --
Restructuring costs...................... -- -- -- 10,000 -- 17,275
Goodwill amortization and write-off...... -- 924 132,630 3,702 3,702 3,798
---------- ----------- ----------- ----------- ----------- -----------
Operating income (loss).................. $ 45,562 $ 26,152 $ (46,224) $ 66,884 $ 51,107 $ 57,707
Interest expense, net(3)................. 29,061 27,225 111,291 110,867 107,974 106,099
Income (loss) from continuing operations
before income taxes.................... 15,372 (2,202) (162,048) (48,497) (61,382) (52,907)
Income (loss) from continuing operations
after income taxes..................... 12,754 (5,473) (173,325) (45,341) (73,336) (57,386)
Income (loss) before extraordinary
items.................................. 12,754 (9,069) (277,664) (263,658) (89,701) (86,983)
Net Income (loss)........................ 12,754 (9,069) (277,664) (263,658) (133,810) (57,908)
BALANCE SHEET DATA:
Total assets............................. $ 934,048 $ 1,143,689 $ 918,825 $ 1,141,434 $ 1,300,304 $ 1,412,790
Long-term debt, including current
portion................................ 922,243 1,003,975 923,554 982,205 941,838 930,065
Redeemable preferred stock............... 129,454 104,222 122,368 98,602 79,754 69,240
Stockholder's equity (deficit)........... (698,148) (434,859) (702,220) (421,460) (130,921) 18,821
OTHER DATA (FROM CONTINUING OPERATIONS):
EBITDA(4)................................ $ 56,689 $ 38,801 $ 155,374 $ 118,748 $ 98,708 $ 106,067
Capital expenditures..................... 15,286 7,267 44,923 38,209 38,928 42,885
Depreciation............................. 11,127 11,725 42,232 45,463 43,899 42,532
</TABLE>
JANUARY 27,
1990
-----------
STATEMENT OF OPERATIONS DATA:
Net sales:
Automotive Products(2)................. $ 661,749
Interior Furnishings(2)................ 358,988
Wallcoverings(2)....................... 255,705
-----------
Total Net Sales...................... $ 1,276,442
-----------
-----------
Gross profit............................. $ 262,121
Selling, general and administrative
expenses................................... 209,619
Management equity plan expense........... --
Restructuring costs...................... --
Goodwill amortization and write-off...... 3,798
-----------
Operating income (loss).................. $ 48,704
Interest expense, net(3)................. 136,292
Income (loss) from continuing operations
before income taxes........................ (92,102)
Income (loss) from continuing operations
after income taxes......................... (92,109)
Income (loss) before extraordinary
items...................................... (142,913)
Net Income (loss)........................ (15,435)
BALANCE SHEET DATA:
Total assets............................. $ 1,777,339
Long-term debt, including current
portion.................................... 1,123,325
Redeemable preferred stock............... 73,711
Stockholder's equity (deficit)........... 81,075
OTHER DATA (FROM CONTINUING OPERATIONS):
EBITDA(4)................................ $ 97,072
Capital expenditures..................... 44,872
Depreciation............................. 44,570
- ---------------
(1) 1992 was a 53-week year.
(2) The Company's business segments have been redefined from those presented in
filings with the Commission prior to April 1994. See Note 18 to the
Consolidated Financial Statements.
(3) Excludes amounts related to discontinued operations of $5,749 in the first
quarter of 1993, $18,871 in 1993, $23,010 in 1992, $25,062 in 1991, $33,040
in 1990 and $112,153 in 1989.
(4) EBITDA is operating income plus depreciation and amortization and the
non-cash portion of non-recurring charges attributable to continuing
operations. EBITDA reflects the Company's ability to satisfy principal and
interest obligations with respect to its indebtedness and to utilize cash
for other purposes. In addition, certain covenants in the New Credit
Facilities are based upon calculations using EBITDA. EBITDA does not
represent and should not be considered as an alternative to net income or
cash flow from operations as determined by generally accepted accounting
principles.
19
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following Unaudited Pro Forma Consolidated Statements of Operations for
the year ended January 29, 1994 and for the thirteen week periods ended April
30, 1994 and May 1, 1993, and the Unaudited Pro Forma Consolidated Balance Sheet
as of April 30, 1994 (collectively, the "Pro Forma Statements") were prepared to
illustrate the estimated effects of the Recapitalization. The Unaudited Pro
Forma Consolidated Statements of Operations present the results of operations of
the Company as if the Recapitalization had occurred as of the beginning of each
period presented. The Unaudited Pro Forma Consolidated Balance Sheet as of April
30, 1994 reflects the impact of the Recapitalization as if it had occurred on
that date. The Pro Forma Statements are presented for informational purposes
only and are based on currently available information and upon certain
assumptions that management believes are reasonable under the circumstances. The
Pro Forma Statements and accompanying footnotes should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and related notes thereto
included elsewhere in this Prospectus. The Pro Forma Statements do not purport
to represent what the Company's financial position or results of operations
would actually have been if the Recapitalization had occurred on April 30, 1994
or as of the beginning of each period presented, or to project the Company's
financial position or results of operations at any future date or for any future
period.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JANUARY 29, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS ADJUSTED FOR
ACTUAL THE RECAPITALIZATION PRO FORMA
-------------- -------------------- --------------
<S> <C> <C> <C>
Net sales........................................................ $ 1,305,517 $ -- $ 1,305,517
-------------- --------------
Cost of goods sold............................................... 995,790 -- 995,790
Selling, general and administrative expenses..................... 196,585 (3,000)(1) 193,585
Goodwill amortization and write-off.............................. 132,630 -- 132,630
Management equity plan expense................................... 26,736 -- 26,736
-------------- -------------------- --------------
Total operating expenses....................................... 1,351,741 (3,000) 1,348,741
Operating income (loss).......................................... (46,224) 3,000 (43,224)
Interest expense, net............................................ 111,291 (84,772)(2) 26,519
Loss on sale of receivables...................................... -- 8,008(3) 8,008
Dividends on preferred stock of subsidiary....................... 4,533 (4,533)(4) --
-------------- -------------------- --------------
Income (loss) from continuing operations before income taxes..... (162,048) 84,297 (77,751)
Income taxes..................................................... 11,277 (1,200)(5) 10,077
-------------- -------------------- --------------
Loss from continuing operations.................................. (173,325) 85,497 (87,828)
Preferred stock dividends and accretion.......................... 23,723 (23,723)(4) --
-------------- -------------------- --------------
Income (loss) available for common stock......................... $ (197,048) $ 109,220 $ (87,828)
-------------- -------------------- --------------
-------------- -------------------- --------------
Average common shares outstanding................................ 35,457(6) 67,132(6)
Loss from continuing operations per share of common stock........ $ (5.56) $ (1.31)
</TABLE>
The following are included in the Unaudited Pro Forma Consolidated
Statement of Operations for the period:
<TABLE>
<S> <C>
Depreciation........................................................................... $ 42,232
Amortization of deferred debt expense.................................................. 1,917
Fees and discount on initial sale of receivables....................................... 2,038
</TABLE>
20
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED APRIL 30, 1994
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS ADJUSTED FOR
ACTUAL THE RECAPITALIZATION PRO FORMA
------------- -------------------- -------------
<S> <C> <C> <C>
Net sales.............................................. $ 390,446 $ -- $ 390,446
------------- -------------
Cost of goods sold..................................... 289,492 -- 289,492
Selling, general and administrative expenses........... 55,356 (750)(1) 54,606
Management equity plan expense......................... 36 -- 36
------------- -------------------- -------------
Total operating expenses............................. 344,884 (750) 344,134
Operating income....................................... 45,562 750 46,312
Interest expense, net.................................. 29,061 (21,911)(2) 7,150
Loss on sale of receivables............................ -- 3,088(3) 3,088
Dividends on preferred stock of subsidiary............. 1,129 (1,129)(4) --
------------- -------------------- -------------
Income from continuing operations before income
taxes.................................................. 15,372 20,702 36,074
Income taxes........................................... 2,618 (300)(5) 2,318
------------- -------------------- -------------
Income from continuing operations...................... 12,754 21,002 33,756
Preferred stock dividends and accretion................ 7,086 (7,086)(4) --
------------- -------------------- -------------
Income available for common stock...................... $ 5,668 $ 28,088 $ 33,756
------------- -------------------- -------------
------------- -------------------- -------------
Average common shares outstanding...................... 37,184(6) 68,860(6)
Income from continuing operations per share of common
stock.................................................. $ .15 $ .49
</TABLE>
The following are included in the Unaudited Pro Forma Consolidated
Statement of Operations for the period:
<TABLE>
<S> <C>
Depreciation................................................................ $ 11,127
Amortization of deferred debt expense....................................... 530
Fees and discount on initial sale of receivables............................ 1,400
</TABLE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED MAY 1, 1993
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AS ADJUSTED FOR
ACTUAL THE RECAPITALIZATION PRO FORMA
------------- -------------------- -------------
<S> <C> <C> <C>
Net sales.............................................. $ 339,043 $ -- $ 339,043
------------- -------------
Cost of goods sold..................................... 260,095 -- 260,095
Selling, general and administrative expenses........... 51,872 (750)(1) 51,122
Goodwill amortization.................................. 924 -- 924
------------- -------------------- -------------
Total operating expenses............................. 312,891 (750) 312,141
Operating income....................................... 26,152 750 26,902
Interest expense, net.................................. 27,225 (19,150)(2) 8,075
Loss on sale of receivables............................ -- 2,781(3) 2,781
Dividends on preferred stock of subsidiary............. 1,129 (1,129)(4) --
------------- -------------------- -------------
Income (loss) from continuing operations before income
taxes.................................................. (2,202) 18,248 16,046
Income taxes........................................... 3,271 (300)(5) 2,971
------------- -------------------- -------------
Income (loss) from continuing operations............... (5,473) 18,548 13,075
Preferred stock dividends and accretion................ 5,620 (5,620)(4) --
------------- -------------------- -------------
Income (loss) available for common stock............... $ (11,093) $ 24,168 $ 13,075
------------- -------------------- -------------
------------- -------------------- -------------
Average common shares outstanding...................... 35,457(6) 67,132(6)
Income (loss) from continuing operations per share of
common stock........................................... $ (.31) $ .19
</TABLE>
The following are included in the Unaudited Pro Forma Consolidated
Statement of Operations for the period:
<TABLE>
<S> <C>
Depreciation................................................................ $ 11,725
Amortization of deferred debt expense....................................... 530
Fees and discount on initial sale of receivables............................ 1,298
</TABLE>
21
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEK PERIODS ENDED
APRIL 30, 1994 AND MAY 1, 1993, AND THE YEAR ENDED JANUARY 29, 1994
(IN THOUSANDS)
The following adjustments reflect the effects of the Recapitalization:
<TABLE>
<S> <C>
(1) Management and financial advisory fees payable to the Managers-Advisors will be reduced by $3,000 per
annum, or $750 per quarter, effective as of the first quarter commencing after the consummation of the
Offerings in accordance with the Stockholders Agreement.
(2) Assumes the following related to interest expense:
</TABLE>
<TABLE>
<S> <C>
(i) The pro forma adjustments to interest expense consist of the following:
</TABLE>
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
------------------------------ YEAR ENDED
APRIL 30, 1994 MAY 1, 1993 JANUARY 29, 1994
--------------- ------------- ------------------
<S> <C> <C> <C> <C>
(1) Elimination of interest and
deferred debt expense related to
retirement
of debt and conversion
of PIK Notes (net of
interest income of $2,355,
$1,000 and $4,434,
respectively).................... $ (28,772) $ (26,931) $ (110,112)
(2) Interest on borrowings under
Credit Agreement Facilities (net
of interest income of $399, $177
and $1,236, respectively)........ 6,366 7,286 23,563
(3) Amortization of deferred debt
expense related to Credit
Agreement Facilities............. 495 495 1,777
--------------- ------------- ------------------
Interest expense
adjustment....................... $ (21,911) $ (19,150) $ (84,772)
--------------- ------------- ------------------
--------------- ------------- ------------------
</TABLE>
<TABLE>
<S> <C>
(ii) Base interest rates (average LIBOR in effect during the periods) and weighted average credit
spreads shown below have been used in calculating the pro forma interest on borrowings under the
Credit Agreement Facilities.
</TABLE>
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
------------------------------ YEAR ENDED
APRIL 30, 1994 MAY 1, 1993 JANUARY 29, 1994
--------------- ------------- ------------------
<S> <C> <C> <C>
Base interest rate..................... 3.87% 3.27% 3.35%
Average credit spread.................. 1.75% 1.75% 1.75%
A 0.5% change in the interest rate on the Credit Agreement Facilities would result in
changes to pro forma interest expense of:
Year ended January 29, 1994...................................................$2,706
Thirteen weeks ended April 30, 1994..............................................602
Thirteen weeks ended May 1, 1993.................................................716
As of May 27, 1994, the 90-day LIBOR rate was 4.63%. If this rate had been in effect during
the periods presented, interest expense would have increased by:
Year ended January 29, 1994...................................................$7,946
Thirteen weeks ended April 30, 1994............................................1,434
Thirteen weeks ended May 1, 1993...............................................2,002
</TABLE>
22
<PAGE>
<TABLE>
<S> <C>
(3) The loss on sale of receivables arises from the sale, on a revolving basis, of an undivided
interest in the Company's trade receivables. This loss also includes financing costs computed using
a base interest rate (average LIBOR in effect during the periods) and weighted average credit
spread, as follows:
</TABLE>
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
------------------------------ YEAR ENDED
APRIL 30, 1994 MAY 1, 1993 JANUARY 29, 1994
--------------- ------------- ------------------
<S> <C> <C> <C> <C>
Base interest rate............... 3.87% 3.27% 3.35%
Average credit spread............ .63% .63% .63%
A 0.5% change in the interest rate on the Receivables Facility would result in changes to pro
forma loss on sale of receivables of:
Year ended January 29, 1994......................................................$858
Thirteen weeks ended April 30, 1994...............................................296
Thirteen weeks ended May 1, 1993..................................................296
As of May 27, 1994 the base LIBOR rate was 4.63%. If this had been in effect, the loss on the
sale of receivables would have increased by:
Year ended January 29, 1994....................................................$2,370
Thirteen weeks ended April 30, 1994...............................................510
Thirteen weeks ended May 1, 1993..................................................817
</TABLE>
<TABLE>
<S> <C>
(4) Represents the elimination of dividends related to Series A Preferred Stock and the Intermediate
Preferred Stock of Group and amortization of the discount related to the Intermediate Preferred
Stock. All preferred stock will be redeemed as part of the Recapitalization.
(5) Represents a reduction of state and foreign income taxes due to an organizational restructuring and
to increased borrowings in Canada in connection with the Recapitalization.
(6) Includes (i) shares currently outstanding, (ii) shares to be issued in the Offerings, (iii) shares
to be issued in exchange for the PIK Notes and (iv) the assumed exercise of outstanding stock
options, using the treasury method. Unrecognized compensation on employee stock options is
considered as proceeds in the assumed repurchase of shares into treasury.
</TABLE>
Note: The Unaudited Pro Forma Consolidated Statements of Operations do not
include approximately $185,914 of (i) non-recurring charges consisting of,
(x) premiums paid in connection with redemption of existing debt
securities and (y) the write-off of unamortized deferred financing charges
related to the repayment of a subsidiary credit facility and certain
miscellaneous debt and (ii) a reduction of retained earnings and income
available for common stock representing the difference between the
respective redemption prices of the Series A Preferred Stock of Group,
Intermediate Preferred Stock of Group and Merger Preferred Stock in the
aggregate, and their aggregate carrying value.
23
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF APRIL 30, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
AS ADJUSTED FOR
ACTUAL THE RECAPITALIZATION PRO FORMA
------------ -------------------- --------------
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents............................ $ 139,282 $ (129,282)(1) $ 10,000
Accounts and notes receivable, net................... 212,708 (150,952)(2) 61,756
Inventories.......................................... 189,709 -- 189,709
Other................................................ 44,832 -- 44,832
------------ -------------------- --------------
Total current assets............................ 586,531 (280,234) 306,297
Property, plant and equipment, net..................... 294,684 -- 294,684
Other assets........................................... 52,833 3,424(3) 56,257
------------ -------------------- --------------
$ 934,048 $ (276,810) $ 657,238
------------ -------------------- --------------
------------ -------------------- --------------
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities:
Notes payable........................................ $ 3,043 $ -- $ 3,043
Current maturities of long-term debt................. 163,715 (160,235)(4) 3,480
Accounts payable..................................... 78,188 -- 78,188
Accrued expenses..................................... 159,778 (33,751)(5) 126,027
Other................................................ 4,097 -- 4,097
------------ -------------------- --------------
Total current liabilities....................... 408,821 (193,986) 214,835
Long-term debt......................................... 758,528 (244,493)(4) 514,035
Deferred income taxes.................................. 640 -- 640
Other, including postretirement benefit obligation..... 334,440 -- 334,440
Redeemable preferred stock of subsidiary (aggregate
preference in liquidation $129)........................ 132 (132)(6) --
Preferred stock of subsidiary (aggregate preference in
liquidation $45,145)................................... 181 (181)(6) --
Redeemable preferred stock (aggregate preference in
liquidation $162,861).................................. 129,454 (129,454)(6) --
Common stock (150,000 shares authorized, 35,035 shares
issued and outstanding, 66,711 shares issued and
outstanding
on a pro forma basis)................................ 350 317(7) 667
Other paid-in capital.................................. 160,285 477,033(7) 637,318
Accumulated deficit.................................... (843,669) (185,914)(8) (1,029,583)
Foreign currency translation adjustments............... (7,367) -- (7,367)
Pension equity adjustment.............................. (7,747) -- (7,747)
------------ -------------------- --------------
Total common stockholder's deficit.............. (698,148) 291,436 (406,712)
------------ -------------------- --------------
$ 934,048 $ (276,810) $ 657,238
------------ -------------------- --------------
------------ -------------------- --------------
</TABLE>
24
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF APRIL 30, 1994
(IN THOUSANDS)
The following adjustments reflect the effects of the Recapitalization:
<TABLE>
<S> <C>
(1) Reflects the amount of existing cash to be used in the Recapitalization.
(2) Reflects the sale of a $150,000 participating interest in accounts receivable in connection with the New
Credit Facilities.
(3) Reflects (i) the impact of recording additional deferred debt expense of $15,300 associated with the New
Credit Facilities and (ii) the write-off of $11,876 deferred debt expenses related to the indebtedness
retired.
(4) Reflects (i) the retirement or repayment of an aggregate book amount of $713,892 of outstanding
indebtedness utilizing a portion of the net proceeds of the Offerings and borrowings of $498,414 under
the Credit Agreement Facilities and $150,000 of net proceeds on the sale of a participating interest in
receivables and (ii) the exchange of the PIK Notes for Common Stock as follows:
</TABLE>
<TABLE>
<S> <C>
Debt Extinguished:
Subsidiary credit facility................................................... $ 127,581
7 1/2%-10% Debentures (face value $138,694 net of discount of $33,063)....... 105,631
11 7/8% Debentures (face value $347,414 net of discount of $45,613) 301,801
15% Notes (face value of $137,359 net of discount of $244)................... 137,115
11 3/8% Debentures (face value $24,500 net of discount of $2,017)............ 22,483
14% PIK Notes ($9,482 redeemed and $189,250 exchanged for Common Stock)...... 198,732
Miscellaneous Debt........................................................... 9,799
------------
Debt Extinguished......................................................... 903,142
New Credit Facilities.......................................................... (498,414)
------------
Reduction of Outstanding Indebtedness..................................... $ 404,728
------------
------------
Allocated to:
Current portion.............................................................. $ 160,235
Long-term debt............................................................... 244,493
------------
$ 404,728
------------
------------
</TABLE>
<TABLE>
<S> <C>
(5) Reflects the payment of accrued interest and dividends in the amount of $33,751.
(6) Reflects the redemption of the Intermediate Preferred Stock of Group, Series A Preferred Stock of Group
and the Merger Preferred Stock with an aggregate book value of $129,767 with funds provided by the
Offerings and the Recapitalization.
(7) Reflects the issuance of 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) $288,100 for shares of Common Stock
to be sold in the Offerings,net of discounts and commissions and associated expenses and (ii) $189,250
on exchange of PIK Notes for 12,210 shares of Common Stock, based on an assumed initial public offering
price of $15.50 per share (the midpoint of the estimated range of the initial public offering price).
(8) Reflects charges for (i) write-off of deferred debt expense and debt discounts of $92,812, (ii) premiums
paid in connection with the redemption of existing indebtedness in the amount of $9,625, (iii) premiums
paid in connection with the redemption of the Intermediate Preferred Stock of Group, the Series A
Preferred Stock of Group and the Merger Preferred Stock of the Company in the amount of $82,077 and (iv)
loss of $1,400 on the sale of a $150,000 participating interest in trade receivables.
</TABLE>
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Selected
Financial Data" and the Consolidated Financial Statements of the Company and the
notes thereto, included elsewhere in this Prospectus.
GENERAL
After the 1988 Acquisition, the Company implemented a restructuring plan
designed to focus on certain businesses in which it enjoyed a competitive
advantage and to eliminate unnecessary corporate overhead. The Company
accordingly divested 27 business units which in 1988 contributed 73% of net
sales. The aggregate proceeds from these divestitures were approximately $1.6
billion, and enabled the Company to reduce total indebtedness from approximately
$2.5 billion 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 levels of construction and renovation and by trends in home
remodeling.
During 1993, the Company disposed of several businesses and reclassified
one subsidiary as a continuing business. Accordingly, the Company's 1993
financial statements reflect (i) the sale of the Company's Engineering Group,
(ii) the disposition of the Company's Builders Emporium division, (iii) the sale
of Kayser-Roth 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 the Company's former Specialty Textiles segment have
been reclassified as Automotive Products. The decorative fabrics and
floorcoverings businesses have been reclassified as Interior Furnishings.
Previously, the floorcovering business was part of the Specialty Textiles
segment. Wallcovering products, which were previously part of the Home
Furnishings segment, have been reclassified as Wallcoverings. Industry segment
information has been restated for the years 1992 and 1991. See Note 18 to the
Consolidated Financial Statements.
Given the current state of the capital markets, the Company believes that
it is in its best interests to restructure the Company's debt and capitalization
by increasing its equity capital and decreasing its interest expense. The
Company believes that, in addition to providing the Partners with an opportunity
to realize proceeds from the sale of shares of Common Stock, the
Recapitalization will benefit the Partners by increasing the value of the Common
Stock of the Company.
26
<PAGE>
RESULTS OF OPERATIONS
The Company's operating results were adversely affected by a $129.9 million
goodwill write-off and a $26.7 million management equity plan charge in 1993 and
$10.0 million of restructuring charges in 1992. Operating expenses include these
charges, as well as goodwill amortization expense which will not occur after
1993 because of the write-off.
<TABLE>
<CAPTION>
YEAR ENDED
THIRTEEN WEEKS ENDED ----------------------------------------
------------------------------ JANUARY 29, JANUARY 30, JANUARY 25,
APRIL 30, 1994 MAY 1, 1993 1994 1993 1992
--------------- ------------- ------------ ------------ ------------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Net sales......................... $ 390.4 $ 339.0 $ 1,305.5 $ 1,277.5 $ 1,184.3
Cost of goods sold................ 289.5 260.1 995.8 978.5 926.8
--------------- ------------- ------------ ------------ ------------
Gross profit...................... 100.9 78.9 309.7 299.0 257.5
Selling, general and
administrative expenses........... 55.4 51.9 196.5 218.4 202.7
Non-recurring charges(1).......... -- 0.9 159.4 13.7 3.7
--------------- ------------- ------------ ------------ ------------
Operating income (loss)........... 45.5 26.1 (46.2) 66.9 51.1
Interest expense, net............. (29.0) (27.2) (111.3) (110.9) (108.0)
Dividends on preferred stock
of subsidiary................... (1.1) (1.1) (4.5) (4.5) (4.5)
Income taxes...................... (2.6) (3.3) (11.3) 3.2 (11.9)
--------------- ------------- ------------ ------------ ------------
Income (loss) from continuing
operations...................... $ 12.8 $ (5.5) $ (173.3) $ (45.3) $ (73.3)
--------------- ------------- ------------ ------------ ------------
--------------- ------------- ------------ ------------ ------------
Income (loss) from continuing
operations per share of common
stock............................. $ .15 $ (.31) $ (5.56) $ (1.81) $ (2.52)
--------------- ------------- ------------ ------------ ------------
--------------- ------------- ------------ ------------ ------------
Gross profit percentage........... 25.8% 23.3% 23.7% 23.4% 21.7%
Operating margin percentage....... 11.7% 7.7% (3.5)% 5.2% 4.3%
</TABLE>
- ---------------
(1) Non-recurring charges are:
<TABLE>
<S> <C> <C> <C> <C> <C>
YEAR ENDED
THIRTEEN WEEKS ENDED ----------------------------------------
------------------------------ JANUARY 29, JANUARY 30, JANUARY 25,
APRIL 30, 1994 MAY 1, 1993 1994 1993 1992
--------------- ------------- ------------ ------------ ------------
Management equity plan
expense.................. $ -- $ -- $ 26.7 $ -- $ --
Goodwill write-off and
amortization............. -- 0.9 132.7 3.7 3.7
Restructuring charges...... -- -- -- 10.0 --
--------------- ------------- ------------ ------------ ------------
Total................. $ -- $ 0.9 $ 159.4 $ 13.7 $ 3.7
--------------- ------------- ------------ ------------ ------------
--------------- ------------- ------------ ------------ ------------
</TABLE>
27
<PAGE>
Operating expenses allocated to the Company's three business segments
include the $129.9 million goodwill write-off in 1993 and $10.0 million of
restructuring charges in 1992 as well as goodwill amortization expense which
will not occur after 1993 because of the 1993 goodwill write-off. Management
believes that the segment operating income data presented below are important to
obtaining an understanding of the segments' comparative results in 1993, 1992
and 1991 and in the first quarters of 1994 and 1993.
<TABLE>
<CAPTION>
AUTOMOTIVE PRODUCTS INTERIOR FURNISHINGS WALLCOVERINGS
------------------------------------- ------------------------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
------------------------------------- ------------------------------------- ------------------------
JANUARY 29, JANUARY 30, JANUARY 25, JANUARY 29, JANUARY 30, JANUARY 25, JANUARY 29 JANUARY 30,
1994 1993 1992 1994 1993 1992 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales................ $677.9 $643.8 $610.3 $407.2 $391.8 $336.8 $220.4 $241.9
Cost of goods sold....... 555.4 532.1 505.8 294.7 282.5 248.9 145.7 163.8
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross margin............. 122.5 111.7 104.5 112.5 109.3 87.9 74.7 78.1
Selling, general and
administrative
expenses................. 54.9 57.1 47.0 68.0 70.8 58.7 62.1 66.1
Goodwill amortization,
write-off and other
non-recurring
charges(1)............... 69.9 1.9 1.9 32.3 0.9 0.9 30.5 10.9
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Segment operating income
(loss)(2)................ $(2.3) $52.7 $55.6 $12.2 $37.6 $28.3 $(17.9) $1.1
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Gross margin
percentages.............. 18.1% 17.3% 17.1% 27.6% 27.9% 26.0% 33.9% 32.3%
Operating margin
percentages.............. (0.3)% 8.2% 9.1% 3.0% 9.6% 8.4% (8.1 )% 0.5%
</TABLE>
JANUARY 25,
1992
-----------
Net sales................ $237.2
Cost of goods sold....... 172.2
-----------
Gross margin............. 65.0
Selling, general and
administrative
expenses................. 70.3
Goodwill amortization,
write-off and other
non-recurring
charges(1)............... 0.9
-----------
Segment operating income
(loss)(2)................ $(6.2)
-----------
-----------
Gross margin
percentages.............. 27.4%
Operating margin
percentages.............. (2.6 )%
- ---------------
(1) Goodwill amortization and write-off and other non-recurring charges include:
<TABLE>
<CAPTION>
AUTOMOTIVE PRODUCTS INTERIOR FURNISHINGS WALLCOVERINGS
------------------------------------- ------------------------------------- ------------------------
YEAR ENDED YEAR ENDED YEAR ENDED
------------------------------------- ------------------------------------- ------------------------
JANUARY 29, JANUARY 30, JANUARY 25, JANUARY 29, JANUARY 30, JANUARY 25, JANUARY 29, JANUARY 30,
1994 1993 1992 1994 1993 1992 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Goodwill
amortization and
write-off........ $69.9 $1.9 $1.9 $32.3 $0.9 $0.9 $30.5 $0.9
Restructuring
charges.......... -- -- -- -- -- -- -- 10.0
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
Total............ $69.9 $1.9 $1.9 $32.3 $0.9 $0.9 $30.5 $10.9
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
JANAURY 25,
1992
-----------
Goodwill
amortization and
write-off................ $0.9
Restructuring
charges.................. --
-----------
Total............ $0.9
-----------
-----------
(2) Excludes $38.3 million, $24.5 million and $26.7 million of unallocated
corporate expense in 1993, 1992 and 1991, respectively. See Note 18 to
Consolidated Financial Statements.
<TABLE>
<CAPTION>
AUTOMOTIVE PRODUCTS INTERIOR FURNISHINGS WALLCOVERINGS
---------------------- ---------------------- -----------
THIRTEEN WEEKS ENDED THIRTEEN WEEKS ENDED THIRTEEN
WEEKS ENDED
---------------------- ---------------------- -----------
APRIL 30, MAY 1, APRIL 30, MAY 1, APRIL 30,
1994 1993 1994 1993 1994
----------- --------- ----------- --------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Net sales.......................................................... $223.0 $174.7 $107.1 $103.0 $60.3
Cost of goods sold................................................. 174.8 143.5 75.3 75.4 39.4
----------- --------- ----------- --------- -----------
Gross margin....................................................... 48.2 31.2 31.8 27.6 20.9
Selling, general and administrative expenses....................... 12.8 14.2 18.1 17.6 15.8
Goodwill amortization.............................................. -- 0.5 -- 0.2 --
----------- --------- ----------- --------- -----------
Segment operating income(1)........................................ $35.4 $16.5 $13.7 $9.8 $5.1
----------- --------- ----------- --------- -----------
----------- --------- ----------- --------- -----------
Gross margin percentages........................................... 21.6% 17.9% 29.7% 26.8% 34.7%
Operating margin percentages....................................... 15.9% 9.4% 12.8% 9.5% 8.5%
</TABLE>
MAY 1, 1993
-----------
Net sales.......................................................... $61.3
Cost of goods sold................................................. 41.3
-----------
Gross margin....................................................... 20.0
Selling, general and administrative expenses....................... 15.6
Goodwill amortization.............................................. 0.2
-----------
Segment operating income(1)........................................ $4.2
-----------
-----------
Gross margin percentages........................................... 32.6%
Operating margin percentages....................................... 6.9%
- ---------------
(1) Excludes $8.6 million and $4.5 million of unallocated corporate expenses in
the thirteen weeks ended April 30, 1994 and May 1, 1993, respectively.
28
<PAGE>
FIRST QUARTER OF 1994 COMPARED TO FIRST QUARTER OF 1993
NET SALES. Net sales increased 15.2% to $390.4 million in the first quarter
of 1994 from $339.0 million in the corresponding period of 1993. The overall
increase in net sales reflected improvement in Automotive Products and Interior
Furnishings offset by a decrease in net sales at Wallcoverings.
Automotive Products' net sales increased 27.6% in the first quarter of 1994
to $223.0 million as compared to $174.7 million in the first quarter of 1993.
Approximately 45% of the increase is due to a 12.0% increase in North American
auto build as compared to the first quarter of 1993. The remaining net sales
increase was due primarily to a 175% increase in net sales of the Company's
convertible top stacks.
Interior Furnishings' net sales increased 4.0% in the first quarter of 1994
to $107.1 million as compared to $103.0 million in the first quarter of 1993 as
a result of increases at both the Decorative Fabrics and Floorcoverings groups.
Net sales of the Decorative Fabrics group increased as a result of a 2.7%
increase in average selling price, reflecting a shift to higher priced Jacquard
fabrics. Floorcoverings' net sales increased 9.1% to $22.9 million as a result
of increased installations.
Wallcoverings' net sales decreased 1.7% in the first quarter of 1994 to
$60.3 million as compared to $61.3 million in the first quarter of 1993 due to
sluggish demand by chain stores, which was partially offset by modest growth in
independent retailer ("dealer") business. Management believes that the growth in
dealer business reflects benefits of the initiative begun in late 1993 to
increase product offerings.
GROSS MARGIN AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Automotive
Products' gross margin increased to 21.6% in the first quarter of 1994 from
17.9% in the first quarter of 1993. Of this 3.7% improvement, 1.9% was due to
the absorption of fixed costs over a greater sales volume and 0.5% was due to
improved labor and materials yields. Selling, general and administrative
expenses as a percent of net sales decreased from 8.1% to 5.7% due primarily to
the absorption of fixed costs over a greater sales volume. Approximately 0.6% of
such decrease was due to reduced product development expenses and administrative
overhead.
Interior Furnishings' gross margin increased to 29.7% in the first quarter
of 1994 from 26.8% in the first quarter of 1993. Of this 2.9% improvement, 1.9%
was the result of the increased sales of higher priced Jacquard fabrics and 1.0%
was due to manufacturing cost improvements. Selling, general and administrative
expenses remained flat relative to sales.
Wallcoverings' gross margin increased to 34.7% in the first quarter of 1994
from 32.6% in the first quarter of 1993. Of this 2.1% increase, 1.0% was due to
improved absorption of fixed manufacturing costs resulting from increased
production for new product lines and 0.5% was due to reduced line closeout
costs. Selling, general and administrative expenses remained flat but increased
as a percent of net sales to 26.2% from 25.4%, reflecting the 1.7% reduction of
sales volume.
TOTAL OPERATING EXPENSES. Total operating expenses were $344.9 million and
$312.9 million in the first quarter of 1994 and the first quarter of 1993,
respectively, including $8.6 million and $4.5 million of unallocated corporate
expenses, respectively. Unallocated corporate expenses in the first quarter of
1994 include $3.2 million of expenses incurred for the performance of services
by Blackstone Partners and $2.8 million for the performance of services by WP
Partners in connection with the Company's review of refinancing and other
strategic alternatives as well as certain other advisory services. Operating
expenses allocated to the Company's three business segments totaled $336.3
million or 86.1% of sales in the first quarter of 1994 compared to $308.4
million or 91.0% of sales in the first quarter of 1993. This 4.9 percentage
point improvement is primarily the
29
<PAGE>
result of the allocation of fixed costs over a larger sales volume, improved
manufacturing productivity and continuing cost reduction initiatives at both the
operating and corporate level. Operating expenses in the first quarter of 1993
included $0.9 million of goodwill amortization.
INTEREST EXPENSE. Interest expense allocated to continuing operations, net
of interest income of $2.4 million in the first quarter of 1994 and $1.0 million
in the first quarter of 1993, increased to $29.1 million during the first
quarter of 1994 compared to $27.2 million in the first quarter of 1993. Interest
expense, including amounts allocated to discontinued operations in 1993 and
excluding interest income, decreased to $31.4 million during the first quarter
of 1994 compared to $34.0 million in the first quarter of 1993. The decrease in
interest expense was due primarily to a decrease in the Company's average
borrowings.
INCOME TAXES. In the first quarter of 1994 income taxes of $2.6 million
consisted of foreign and state taxes. This amount compared to a foreign and
state tax provision of $3.3 million in the first quarter of 1993.
DISCONTINUED OPERATIONS. The Company's loss from discontinued operations,
including losses on disposals of $2.2 million, was $3.6 million for the first
quarter of 1993.
NET INCOME. The combined effect of the foregoing resulted in net income of
$12.8 million in the first quarter of 1994 compared to a net loss of $9.1
million in the first quarter of 1993.
1993 COMPARED TO 1992
NET SALES. Net sales increased 2.2% to $1,305.5 million in 1993 (a 52-week
year) from $1,277.5 million in 1992 (a 53-week year). The overall increase in
net sales reflected improvement in Automotive Products and Interior Furnishings,
offset by a decrease in net sales at Wallcoverings.
Automotive Products' net sales increased 5.3% in 1993 to $677.9 million.
Net sales growth increased, primarily during the second half of 1993, due to a
number of factors. First, the net sales growth appears to reflect cyclical
trends. Since late 1993, U.S. light vehicle sales have accelerated, reflecting
what management believes to be a cyclical upturn. See "Business--Automotive
Products--Industry". Second, in recent years, foreign manufacturers have shifted
production from off-shore auto plants to newly built or expanded Transplant
facilities located in North America. As a consequence, North American production
has risen faster than retail sales. The Company has benefitted from this trend.
Third, the Company won placement of its products on a number of new and
redesigned vehicle lines in 1993. For example, the Company was awarded the
automotive fabric order for the Ford Explorer and displaced one of its bodycloth
competitors on the General Motors "W" and "N" body lines. Fourth, the average
sales content per vehicle of the five principal automotive products produced by
the Company increased in 1993 as it has in each of the last five years. (See
"Business--Automotive Products--Automotive Products Segment Growth Strategy").
In 1993, the Company continued to benefit from this trend. For example, in 1993
General Motors' Cadillac division began using the Company's technically advanced
"foam-in-place" carpet system, which provides significant acoustical benefits
and sells at a significantly higher price than traditional molded floor carpet.
These factors were offset by decreased demand for products for certain key
models in the second quarter due to customers' production downtime during model
changeovers.
Interior Furnishings' net sales increased 3.9% in 1993 to $407.2 million.
The increase in net sales was attributable to an increase in U.S. upholstered
furniture shipments in 1993 and increased sales of the Company's patented
Powerbond RS(R) floorcovering products. Net sales increased by 5.6% at both
Mastercraft, which represents 66.0% of Interior Furnishings' sales, and
Floorcoverings, due largely to volume increases. These sales increases were
offset by decreases in net sales of the lower-end woven velvet product line and
the Greeff product line.
30
<PAGE>
Wallcoverings' net sales decreased 8.9% in 1993 to $220.4 million. The
decrease in sales was due primarily to the consolidation of certain product
distribution channels and to a reduction in shelf space and market share due to
Wallcoverings' downsizing program. In the fourth quarter, management responded
to these reduced sales by aggressively rebuilding dealer shelf space. As a
result, sample book placements in the dealer market increased.
GROSS MARGIN AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Automotive
Products' gross margin increased to 18.1% in 1993 from 17.3% in 1992 as a result
of improved product mix mainly due to new fabric placements and as a result of
improved absorption of fixed manufacturing costs over a larger sales volume.
Selling, general and administrative expenses as a percent of net sales decreased
to 8.1% in 1993 from 8.9% in 1992. Of this 0.8% decrease, 0.5% was due to the
absorption of fixed costs over a greater sales volume with the remainder
relating principally to cost reductions from reduced product development
activities.
Interior Furnishings' gross margin decreased to 27.6% in 1993 from 27.9% in
1992 due to price deterioration in the lower-end woven velvet product line of
the Decorative Fabrics group. Selling, general and administrative expenses as a
percent of net sales decreased to 16.7% from 18.1% primarily due to cost
reduction initiatives aimed at streamlining marketing efforts in the Greeff
product line.
Wallcoverings' gross margin increased to 33.9% in 1993 from 32.3% in 1992
as a result of manufacturing cost reduction initiatives aimed at improving
product quality and streamlining production processes. Selling, general and
administrative expenses were reduced by 1.8% of net sales due to the elimination
of outside information systems processing. An 8.9% reduction in net sales
resulted in an increase in selling, general, and administrative expenses as a
percent of net sales to 28.2% from 27.3%.
TOTAL OPERATING EXPENSES. Total operating expenses were $1,351.7 million
and $1,210.6 million in 1993 and 1992, respectively, including $38.3 million
($26.7 million of which was a one-time charge related to the 1993 Plan) and
$24.5 million of unallocated corporate expenses, respectively. Operating
expenses allocated to the Company's three business segments totaled $1,313.5
million and $1,186.1 million in 1993 and 1992, respectively. These operating
expenses in 1993 included certain non-recurring charges relating to the
write-off of goodwill in the amount of $129.9 million in the quarter ended
October 30, 1993 and goodwill amortization of $2.8 million for the nine months
prior to the write-off of goodwill. Operating expenses in 1992 included $10.0
million of charges relating to Wallcoverings' downsizing program and $3.7
million of goodwill amortization. See Notes 4 and 5 to the Consolidated
Financial Statements.
INTEREST EXPENSE. Interest expense allocated to continuing operations, net
of interest income of $4.4 million in 1993 and $4.0 million in 1992, increased
to $111.3 million during 1993 compared to $110.9 million in 1992. Interest
expense, including amounts allocated to discontinued operations and excluding
interest income, decreased to $135.1 million during 1993 compared to $138.3
million in 1992. The decrease in interest expense was due to the additional week
in 1992 and a reduction in the Company's weighted average interest rate.
INCOME TAXES. In 1993 income taxes of $11.3 million consisted of foreign
and state taxes. This amount compares with a 1992 tax benefit of $3.2 million
which was comprised of a foreign and state tax provision of $3.5 million offset
by a Federal tax benefit of approximately $6.7 million.
DISCONTINUED OPERATIONS. The Company's loss from discontinued operations
was $104.3 million for 1993 and $218.3 million for 1992, including losses on
disposals of $99.6 million and $168.0 million, respectively.
The 1993 loss is primarily attributable to the $125.5 million additional
charge arising from the Company's determination as of the end of the second
quarter of 1993 that it would be unable to sell Builders Emporium as an ongoing
entity. This was offset by a $28.1 million gain on the sale of
31
<PAGE>
Kayser-Roth. The 1992 loss reflected primarily the expected losses on the
anticipated disposition of Builders Emporium.
NET INCOME. The combined effect of the foregoing resulted in a net loss of
$277.7 million in 1993 compared to a net loss of $263.7 million in the prior
year.
1992 COMPARED TO 1991
NET SALES. Net sales increased 7.9% to $1,277.5 million in 1992 (a 53-week
year) from $1,184.3 million in 1991 (a 52-week year).
Automotive Products net sales increased 5.5% to $643.8 million in 1992 from
$610.3 million in 1991, reflecting the impact of a modest increase in the North
American vehicle build as well as an improvement in Automotive Products' product
mix. The molded carpet product line experienced the largest net sales increase.
Interior Furnishings net sales increased 16.3% to $391.8 million in 1992
from $336.8 million in 1991 principally due to two factors. First, 1992 net
sales reflected the full year impact of the acquisition of Doblin, a
manufacturer of high-end Jacquard fabric, in the third quarter of 1991, as well
as substantial incremental sales volume from the full utilization of excess
manufacturing capacity acquired with Doblin. Second, Floorcoverings' net sales
increased 17.7%, which was primarily attributable to restyled product offerings
in the six foot roll product line.
Wallcoverings net sales increased 2.0% to $241.9 million in 1992 from
$237.2 million in 1991. The net sales increase reflected a combination of two
offsetting factors. During the first quarter of 1992, the Company benefited from
the increase in industry demand for wallcoverings. However, this increase was
offset by reduced sales due primarily to Wallcoverings' efforts during 1992 to
consolidate certain product distribution channels and its downsizing program.
GROSS MARGIN AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Automotive
Products' gross margin improved slightly due to greater fixed cost absorption
because of the 5.5% increase in sales volume in 1992. Selling, general and
administrative expenses, as a percent of net sales, increased to 8.9% in 1992
from 7.7% in 1991 due to increased product development and marketing activities.
Interior Furnishings' gross margin improved to 27.9% from 26.0% due to
improved Decorative Fabrics product mix related to the Doblin acquisition and
due to improved Floorcoverings product mix related to restyled product offerings
in the six foot roll product line. Selling, general and administrative expenses
as a percent of net sales increased to 18.1% from 17.4% due to product
development activities in Decorative Fabrics.
Wallcoverings' gross margin increased to 32.3% in 1992 from 27.4% in 1991
due to manufacturing material cost reduction. Selling, general and
administrative expenses decreased as a percent of net sales to 27.3% in 1992
from 29.6% in 1991, due to reduced sample book program costs.
TOTAL OPERATING EXPENSES. Total operating expenses were $1,210.6 million
and $1,133.2 million in 1992 and 1991, respectively, including $24.5 million and
$26.7 million of unallocated corporate expense. Operating expenses allocated to
the Company's three business segments totaled $1,186.1 million and $1,106.5
million in 1992 and 1991, respectively. Operating expenses in 1992 included
$10.0 million of restructuring costs.
RESTRUCTURING CHARGES. In 1992, the Company reevaluated the distribution
methods as well as certain manufacturing and product lines in Wallcoverings.
This reevaluation resulted in a restructuring charge of $10.0 million for the
closure of certain manufacturing facilities. Of this amount, $2.7 million
related to asset writedowns and $7.3 million related to the consolidation of
Wallcoverings' operations.
32
<PAGE>
INTEREST EXPENSE. Interest expense for continuing operations, net of
interest income of $4.0 million in 1992 and $7.3 million in 1991, increased to
$110.9 million during 1992 compared to $108.0 million in 1991. Interest expense,
including amounts allocated to discontinued operations and excluding interest
income, decreased to $138.3 million during 1992 compared to $141.5 million in
1991 principally as a result of the reduction in the Company's weighted average
cost of borrowings.
INCOME TAXES. The Company's 1992 tax benefit of $3.2 million includes a
foreign and state tax provision of $3.5 million, offset by a Federal tax benefit
of approximately $6.7 million. In 1991, income taxes of $12.0 million consisted
of foreign and state taxes of $11.7 million and Federal income taxes of $0.3
million.
DISCONTINUED OPERATIONS. As previously discussed, loss from discontinued
operations, net of taxes and including loss on disposals, was $218.3 million in
1992 compared to the loss from discontinued operations of $16.4 million in 1991.
The 1992 loss reflected primarily the expected loss on the anticipated sale of
Builders Emporium. The 1991 loss was attributable to the discontinuation of the
remaining businesses of Wickes Manufacturing.
EXTRAORDINARY ITEM AND CHANGE IN ACCOUNTING. Loss on early retirement of
indebtedness, net of taxes, was $1.8 million in 1991. See Note 11 to the
Consolidated Financial Statements.
The cumulative effect on prior years of the change in accounting for
postretirement benefits other than pensions was $42.3 million in 1991. See Note
13 to the Consolidated Financial Statements.
NET INCOME. The combined effect of the foregoing resulted in a net loss of
$263.7 million in 1992 compared to a net loss of $133.8 million in 1991.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 1994, the Company and its subsidiaries had cash and cash
equivalents totaling $139.3 million compared to $81.4 million and $83.7 million
at January 29, 1994 and January 30, 1993, respectively. Included in cash and
cash equivalents at April 30, 1994 was $135.3 million held by Group. The
increase in the Company's cash balance is principally due to the receipt of the
cash proceeds of $71.2 million from the payment of the Kayser-Roth note referred
to below. The Company's principal sources of funds are cash generated from
continuing operating activities and borrowings under bank credit facilities. Net
cash provided by the operating activities of its continuing operations was $22.9
million in 1993 and $16.6 million for the quarter ended April 30, 1994. C&A Co.
had $59.5 million of borrowing availability under a credit facility at April 30,
1994. Based on financial covenants in that credit facility, approximately $42
million could be paid to Group as a dividend. The Company's Canadian
subsidiaries had $8.1 million of borrowing availability under a bank demand line
of credit at April 30, 1994. Restrictions on the payment of dividends contained
in various debt agreements of Group prevented the payment of dividends by Group
to the Company in 1993 and 1992. See Note 11 to Consolidated Financial
Statements.
During 1993, the Company sold Kayser-Roth for approximately $170 million,
including a $70 million note. The Company's Engineering Group, which was
discontinued in 1992, was sold during 1993 for approximately $51 million.
Additionally, the Company has nearly completed the disposition of the real
estate, inventory and other assets of its Builders Emporium home improvement
retail chain, which the Company discontinued at the end of 1992. During 1993,
the Company used cash from the aforementioned sources and new borrowings of
$76.1 million to repay $179.9 million of outstanding indebtedness. On April 27,
1994, the Kayser-Roth note was paid with accrued interest. The Kayser-Roth sale
is subject to post-closing purchase price adjustments.
At April 30, 1994, outstanding long-term indebtedness (substantially all of
which will be defeased and redeemed, or repaid, in connection with the
Recapitalization) amounted to $922.2 million (including current portion of
$163.7 million) at varying interest rates between 5% and 15% per annum. At
January 29, 1994, $512.3 million of debt was due within the succeeding five year
33
<PAGE>
period. See Note 11 to Consolidated Financial Statements. Cash interest paid
during the thirteen weeks ended April 30, 1994 and May 1,1993 was $8.5 million
and $14.7 million, respectively, and during 1993, 1992 and 1991 was $101.5
million, $105.0 million and $120.6 million, respectively.
The Company's principal uses of funds for the next several years will be to
fund principal and interest payments on its indebtedness, net working capital
increases and capital expenditures. The Company makes capital expenditures on a
recurring basis for replacement and improvements. As of April 30, 1994, the
Company had approximately $43.0 million in outstanding capital commitments.
During 1994, the Company anticipates capital expenditures will aggregate
approximately $80 million as compared to $44.9 million, $38.2 million and $38.9
million during 1993, 1992 and 1991, respectively. This increase is due primarily
to the planned acquisition of additional machinery and equipment at Decorative
Fabrics' Mastercraft division as part of an $85 million five-year capital
investment plan that was initiated this year for the purpose of expanding
production capacity at Mastercraft to accommodate anticipated growth (see
"Business--Decorative Fabrics--Mastercraft Growth Plan"). Secondarily, this
increase is due to the planned completion of an Automotive Products facility in
Mexico for approximately $6.0 million. The Company's capital expenditures in
future years will depend upon demand for the Company's products and changes in
technology. The Company currently estimates that capital expenditures in 1995
will exceed $60 million.
The Company has significant obligations relating to postretirement,
casualty, environmental, lease and other liabilities of discontinued operations.
In connection with the sale and acquisition of certain businesses, the Company
has indemnified the purchasers and sellers for certain environmental
liabilities, lease obligations and other matters. In addition, the Company is
contingently liable with respect to certain lease and other obligations assumed
by certain purchasers and may be required to honor such obligations if such
purchasers are unable or unwilling to do so. Management anticipates that the net
cash requirements of its discontinued operations will be approximately $20.9
million during 1994. However, because the requirements of the Company's
discontinued operations are largely a function of contingencies, it is possible
that the actual net cash requirements of the Company's discontinued operations
could differ materially from management's estimates. Management believes that
the Company's needs relating to discontinued operations can be adequately funded
in 1994 by net cash provided by operating activities from continuing operations
and by additional borrowings under the New Credit Facilities. The Company's NOLs
and unused Federal tax credits may minimize the cash requirement for Federal
income taxes during certain future periods. See "--Tax Matters".
In connection with the Recapitalization, the Company will effect a
defeasance and redemption, or repayment, of all its outstanding indebtedness and
preferred stock, other than (i) $22.6 million of mortgage and other debt which
will remain outstanding and (ii) $202.9 million of PIK Notes, of which
approximately $9.7 million will be redeemed and approximately $193.2 million
will be exchanged for Common Stock of the Company. These amounts are inclusive
of $11.1 million of accrued PIK interest from January 29, 1994 through June 22,
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 (defined below) in an aggregate principal amount of $450 million with a
term of eight years, (ii) the Delayed Draw Term Loan Facility (defined below) in
an aggregate principal amount of $25 million with a term of eight years, (iii)
the Revolving Facility (defined below) in an aggregate principal amount of up to
$150 million with a term of seven years and (iv) the Receivables Facility
(defined below) in an aggregate amount of up to $150 million with a term of
seven years. These facilities will include various restrictive covenants
including maintenance of EBITDA and interest coverage ratios, leverage and
liquidity tests and various other restrictive covenants which are typical for
such facilities. See "New Credit Facilities".
34
<PAGE>
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 $95.0
million available and undrawn under the New Credit Facilities. Management
believes that cash flow from operations and funds available under the New Credit
Facilities will be sufficient to fund the Company's long-and short-term
liquidity requirements, including working capital, capital expenditures and debt
service requirements.
TAX MATTERS
As of January 29, 1994, the Company had NOLs of approximately $434.0
million for Federal income tax purposes, which expire over the period from 1996
to 2008. The Company also has unused Federal tax credits of approximately $18.9
million, $11.9 million of which expire during 1994 to 2003. The Company
anticipates that additional Federal income tax deductions of approximately $37.7
million will be generated during 1994 as a result of write-offs of unamortized
debt discounts and deferred financing costs relating to debt repaid in
connection with the Recapitalization. In addition, the Company estimates that it
will generate tax deductions of approximately $75.4 million in connection with
the ultimate disposition of assets and liabilities of its discontinued
businesses during the period 1994 to 1996, which were previously accrued for
financial reporting purposes prior to January 29, 1994. The Company anticipates
that utilization of these NOLs, tax credits and deductions will result in
minimal Federal income taxes until these NOLs and tax credits are exhausted.
Approximately $134.0 million of the Company's NOLs and $11.9 million of the
Company's unused Federal tax credits may be used only against the income and
apportioned tax liability of the specific corporate entity that generated such
losses or credits or its successors. After giving effect to the Consolidation,
such NOLs and credits may be used against the income and apportioned tax
liability of C&A Co., which the Company believes will have sufficient taxable
income and apportioned tax liability to fully use such NOLs and tax credits. The
Recapitalization will not constitute a "change in control" that would result in
annual limitations on the Company's use of its NOLs and unused tax credits.
However, future sales of Common Stock by the Company or the Partners, or changes
in the composition of the Partners, could constitute such a "change in control".
Management cannot predict whether such a "change in control" will occur. If such
a change of control were to occur, the resulting annual limitations on the use
of NOLs and tax credits will depend on the value of the equity of the Company
and the amount of "built-in gain" or "built-in loss" in the Company's assets at
the time of the "change in control", which cannot be known at this time.
In the course of an examination of the Company's Federal income tax
returns, the IRS has challenged the availability of $176.6 million of the
Company's approximately $434.0 million of NOLs. The examination is at a
preliminary stage and management believes that the basis for the IRS' position
is unclear. Management disputes the IRS' challenge and believes that
substantially all the NOLs should be available (subject to the potential
limitations noted above) to offset its income, if any, in the future. If the IRS
were to maintain its position and all or a major portion of such position were
to be upheld in litigation, the amount of NOLs available to the Company in
future years would be materially reduced.
ENVIRONMENTAL MATTERS
The Company is subject to increasingly stringent Federal, state and local
environmental laws and regulations that (i) affect ongoing operations and may
increase capital costs and operating expenses and (ii) impose liability for the
costs of investigation and remediation and otherwise related to on-site and
off-site soil and groundwater contamination. The Company's management believes
that it has obtained, and is in material compliance with, all material
environmental permits and approvals necessary to conduct its various businesses.
Environmental compliance costs for continuing businesses currently are accounted
for as normal operating expenses or capital
35
<PAGE>
expenditures of such business units. In the opinion of management, based on the
facts presently known to it, such environmental compliance costs will not have a
material adverse effect on the Company's consolidated financial condition or
results of operations.
The Company is legally or contractually responsible or alleged to be
responsible for the investigation and remediation of contamination at various
sites. It also has received notices that it is a PRP in a number of proceedings.
The Company may be named as a PRP at other sites in the future, including with
respect to divested and acquired businesses. It is a normal risk of operating a
manufacturing business that liability may be incurred for investigating and
remediating on-site and off-site contamination. The Company is currently engaged
in investigation or remediation at certain sites. In estimating the total cost
of investigation and remediation, the Company has considered, among other
things, the Company's prior experience in remediating contaminated sites,
remediation efforts by other parties, data released by the EPA, the professional
judgment of the Company's environmental experts, outside environmental
specialists and other experts, and the likelihood that other parties which have
been named as PRPs will have the financial resources to fulfill their
obligations at sites where they and the Company may be jointly and severally
liable. Under the scheme of joint and several liability, the Company could be
liable for the full costs of investigation and remediation even if additional
parties are found to be responsible under the applicable laws. It is difficult
to estimate the total cost of investigation and remediation due to various
factors including incomplete information regarding particular sites and other
PRP's, uncertainty regarding the extent of environmental problems and the
Company's share, if any, of liability for such problems, the selection of
alternative compliance approaches, the complexity of environmental laws and
regulations and changes in cleanup standards and techniques. When it has been
possible to provide reasonable estimates of the Company's liability with respect
to environmental sites, provisions have been made in accordance with generally
accepted accounting principles. Excluding sites at which the Company's
participation is anticipated to be de minimis or otherwise insignificant or
where the Company is being indemnified by a third party for the liability, there
are 15 sites where the Company is participating in the investigation or
remediation of the site, either directly or through financial contribution, and
nine additional sites where the Company is alleged to be responsible for costs
of investigation or remediation. The Company's current estimate of its liability
for these 24 sites is approximately $29.5 million. As of January 29, 1994, the
Company has established reserves of approximately $30.8 million for the
estimated future costs related to all its known environmental sites. In the
opinion of management, based on the facts presently known to it, the
environmental costs and contingencies will not have a material adverse effect on
the Company's consolidated financial condition or results of operations.
However, there can be no assurance that the Company has identified or properly
assessed all potential environmental liability arising from the activities or
properties of the Company, its present and former subsidiaries and their
corporate predecessors. See "Item 3. Legal Proceedings--Environmental
Proceedings" incorporated by reference to the Company's Annual Report on Form
10-K for the fiscal year ended January 29, 1994.
QUARTERLY RESULTS
The following table sets forth certain unaudited quarterly financial
information for 1994, 1993 and 1992. In the opinion of management, this
information has been prepared on the same basis as the information in the
Consolidated Financial Statements and includes normal recurring adjustments
which management considers necessary for a fair presentation of the information
shown when read in conjunction with the Consolidated Financial Statements,
including the notes thereto, appearing
36
<PAGE>
elsewhere in this Prospectus. The operating results for any quarter are not
necessarily indicative of results for the entire year or for any future period.
<TABLE>
<CAPTION>
1994 1993 1992
--------- ------------------------------------------ --------------------------------------------
FIRST FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER(1)
--------- --------- --------- --------- --------- --------- --------- --------- -----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.............. $ 390.4 $ 339.0 $ 289.7 $ 334.6 $ 342.2 $ 319.5 $ 319.7 $ 314.9 $ 323.4
Gross profit........... 101.0 79.0 61.2 84.4 85.1 72.6 74.1 70.8 81.6
Operating income
(loss)(2).............. 45.6(3) 26.2 10.6 (96.4)(4) 13.4(5) 20.2 18.1 19.2 9.4(6)
</TABLE>
- ---------------
<TABLE>
<S> <C>
(1) The fourth quarter of 1992 includes fourteen weeks.
(2) Includes $0.9 million of goodwill amortization through the third quarter of 1993.
(3) Operating income for the first quarter of 1994 includes $6.0 million of operating expenses for services
performed by Blackstone Partners and WP Partners in connection with the Company's review of refinancing and
strategic alternatives, as well as certain other advisory services.
(4) Operating loss for the third quarter of 1993 includes a $129.9 million write-off of goodwill.
(5) Operating income for the fourth quarter of 1993 includes a $26.7 million charge for the 1993 Plan. See Notes
5 and 15 to the Consolidated Financial Statements.
(6) Operating income for the fourth quarter of 1992 reflects a $10.0 million restructuring charge.
</TABLE>
For a discussion of the operating results for the first quarter of 1994,
see "--First Quarter of 1994 Compared to First Quarter of 1993."
The first quarter of 1993 reflects increased net sales from Automotive
Products which followed an increase in automotive industry unit sales (a trend
which began in the fourth quarter of 1992) and increased net sales from the
Mastercraft division of Interior Furnishings. This increase was offset by a
modest net sales decline at Wallcoverings. Gross profit margin increased
slightly reflecting margin improvement across all business segments. Net sales
in the second quarter of 1993 declined 9.4% from the same period in 1992,
reflecting sales declines across all business segments, particularly at
Automotive Products and Wallcoverings. The decline at Automotive Products was
primarily due to decreased demand for product during model changeovers of
certain key models including the Chrysler C/Y body and the Honda Accord.
Wallcoverings' net sales declined partly as a result of its downsizing and the
reduction in sample book placements. Gross margin declined during the second
quarter of 1993 compared to the second quarter of 1992 primarily as a result of
a lower absorption of fixed costs due to lower sales volumes.
Net sales in the third quarter of 1993 increased by 6.3% versus the prior
year due to increased net sales at Automotive Products and Interior Furnishings
offset by a net sales decline at Wallcoverings. Despite a downturn in the
automotive build, Automotive Products net sales increased due to the completion
of changeovers at Honda, strong orders for the segment's Jacquard automotive
seat fabric and the initiation of model year 1994 Ford Mustang production.
Interior Furnishings' net sales increased reflecting general improvements in the
retail furniture market. Company wide gross profit margin increased 2.7
percentage points, reflecting improved margins across all segments, particularly
Wallcoverings due to the fixed cost reductions associated with the previously
discussed downsizing. Net sales in the thirteen-week fourth quarter of 1993
increased 5.8% over the fourteen-week fourth quarter of 1992. Net sales
increased at both Automotive Products and Interior Furnishings, offset by
further net sales declines at Wallcoverings. Automotive Products net sales
outpaced the automotive build, reflecting continued strong demand for bodycloth
and the ramp-up of the 1994 model Ford Mustang, which uses Dura's convertible
top systems.
37
<PAGE>
BUSINESS
The Company is a leader in each of its three business segments: Automotive
Products, the largest supplier of interior trim products to the North American
automotive industry; Interior Furnishings, the largest manufacturer of
residential upholstery fabrics in the U.S.; and Wallcoverings, the largest
producer of residential wallcoverings in the U.S. Within these three segments,
the Company estimates it holds a number one or number two market share position
in each of its eight major product lines which together comprised approximately
81% of 1993 net sales of $1,305.5 million. With respect to market or competitive
information, references to the Company as "a leader" or "one of the leading"
manufacturers in a particular product category mean that the Company is one of
the principal manufacturers in that product category and references to the
Company as "the leader," "the largest" or "the leading" manufacturer in a
particular product category mean that the Company has the largest market share
based on dollar sales volume in that product category. See "Risk Factors" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a discussion of the risks inherent in the Company's businesses
and the Company's financial performance over the last three years, including its
history of net losses, competitive factors affecting the Company, the Company's
substantial leverage, contingent liabilities and other risks inherent in an
investment in Common Stock.
COLLINS & AIKMAN CORPORATION
AND SUBSIDIARIES
<TABLE>
<S> <C> <C> <C>
AUTOMOTIVE INTERIOR
PRODUCTS FURNISHINGS WALLCOVERINGS
. AUTOMOTIVE SEAT FABRIC
. RESIDENTIAL AND COMMERICAL
WALLCOVERINGS
. MOLDED FLOOR CARPETS
. ACCESSORY FLOOR MATS
. LUGGAGE COMPARTMENT TRIM
DECORATIVE
FABRICS FLOORCOVERINGS
. CONVERTIBLE TOP STACKS
. SIX-FOOT CARPET
. MODULAR CARPET TILE
</TABLE>
<TABLE>
<S> <C> <C> <C>
MASTERCRAFT CAVEL GREEFF WARNER
. FLAT-WOVEN . VELVETS . PRINTS . PRINTS
JACQUARDS AND
DOBBIES
</TABLE>
See Note 18 to the Consolidated Financial Statements for financial information
with respect to the three segments for each of the last three fiscal years.
38
<PAGE>
BUSINESS STRATEGY
Management believes the Company is well-positioned to achieve continued
growth in each of its three segments as a result of its pursuit of the following
strategic objectives:
FOCUS ON HIGH MARKET SHARE PRODUCTS. Management focuses on developing
products that have high market share potential. Management estimates that each
of the Company's eight major product lines holds a number one or number two
market share position. Together these product lines comprised approximately 81%
of the Company's 1993 net sales. These market positions were achieved primarily
through internal growth and reflect a long-term, Company-wide commitment to
excellence in styling, engineering, product development, value-added
manufacturing and customer service.
The table below sets forth management's estimates of the Company's 1993
market share positions in its eight major product lines.
<TABLE>
<CAPTION>
1993 1993 MARKET
NET SALES SHARE
Product Line (MILLIONS) POSITION
------------ ----------- -----------
<S> <C> <C>
Automotive Products
Automotive Seat Fabric................................................... $ 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.
MAINTAIN BROAD PRODUCT OFFERINGS TO SUPPORT CUSTOMER BASE. The Company
consistently strives to offer a wide variety of products and to become the
primary supplier to each of its customers. The breadth and variety of fabrics
and styles offered by Decorative Fabrics supports the Company's goal of being
the primary supplier to its customers. Wallcoverings has manufacturing
capabilities in all types of printing technologies, utilizes a vast library of
designs and color concepts and supports the most extensive dealer network in the
industry, selling to approximately 15,000 dealers and most of the leading retail
chains in the country.
Automotive Products offers a wide variety of interior trim products and
thereby maintains a broader, more uniform sales penetration at foreign owned
North American automotive production and assembly facilities ("Transplants") and
U.S. automotive original equipment manufacturers (together with Transplants,
"OEMs") than any of its competitors. Management estimates that for 1993
Automotive Products' overall share in its five major automotive product lines
was 26% at Ford Motor, 40% at General Motors and 51% at Chrysler, and that its
share was 36% among the Transplants.
39
<PAGE>
MAINTAIN LOW-COST POSITION. Management's strategy is to maintain the
Company's low-cost position and flexible manufacturing capabilities in order to
protect operating margins from competitive pricing pressures and economic
downturns, while maximizing the benefit from cyclical upturns. The Company
established its low-cost position through a systematic long-term focus on
improving materials yields and labor productivity and reducing overhead
expenses. These initiatives helped offset the impact of volume declines on
operating margins during the recent economic recession and position the Company
to take full advantage of industry upturns.
MAXIMIZE BENEFITS FROM HIGH OPERATING LEVERAGE. Management believes that
substantial available production capacity and high operating leverage have
enabled the Company to benefit from the recent cyclical upturn in its served
markets. In addition, the Company has substantial available manufacturing
capacity to support further growth.
Over the past several years, the Company has made considerable investments
in product development, MIS upgrades and other areas of capital improvement. The
Company does not currently anticipate the need to make significant capital
expenditures to expand capacity to meet cyclical increases in demand, with the
exception of an $85 million five-year capacity expansion program planned for the
Mastercraft division of Interior Furnishings. Future capital expenditures are
currently targeted primarily toward further cost reduction and modernization.
Recently, sales and production volumes have been increasing rapidly in the
Company's served markets. During the second half of 1993, the seasonally
adjusted annual rate of U.S. light vehicle sales was 14% higher than during the
1991 recession lows, and the seasonally adjusted annual rate of U.S. furniture
sales for the second half of 1993 was 19% higher than in 1991. If the current
upward trends in the Company's businesses continue, management believes that the
Company may continue to achieve higher capacity utilization rates, which
generally result in higher operating margins.
OFFER VALUE-ADDED PRODUCTS. A key element of the Company's strategy is to
increase market share and unit selling prices by developing increasingly higher
value-added products through innovations in materials construction, product
design and styling. The Company produces virtually no inventory or commodity
type products other than in Wallcoverings. The Company recently developed the
"Top-in-a-Box" convertible top assembly, enabling the Company to capture
substantial additional materials and assembly value in its unit selling price by
shipping a fully-assembled module directly to the OEMs. Previously, convertible
top systems were assembled on high-cost OEM assembly lines or in specialty
conversion shops. In recent years, through these and other innovations, the
Company has realized higher unit sales prices.
MAINTAIN PRODUCT DESIGN AND STYLING LEADERSHIP. Design and styling are key
differentiating factors in consumer purchasing decisions. Management believes
that the Company's product styling and design capabilities are currently an
important competitive advantage and intends to devote resources to maintain the
Company's position in these areas. The Decorative Fabrics group introduces more
than twice as many designs each year as its largest competitors and has a design
library built by such well known designers as Wesley Mancini, Carl Miller and
Stanley King. Similarly, Wallcoverings has a leading in-house design staff and
also licenses designs from industry leaders such as Laura Ashley, Mario Buatta
and Clarence House. Automotive Products operates a technical design center with
state-of-the-art, computer-aided design/computer-aided manufacturing ("CAD/CAM")
systems.
CONTINUE TO DELEVERAGE. The Recapitalization is designed to increase
operating and financial flexibility by reducing the Company's indebtedness and
significantly lowering its cost of borrowing, thereby freeing more cash for debt
repayment, continued reinvestment in the Company's businesses and the pursuit of
niche acquisitions. Management expects this financial deleveraging to be
40
<PAGE>
enhanced through the application of operating cash flow augmented by the use of
the Company's NOLs, which management believes will total approximately $434.0
million, and by other favorable tax attributes. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources" and "--Tax Matters".
COMPLETE STRATEGIC RESTRUCTURING OF WALLCOVERINGS. In late 1993, a newly
installed management team instituted a restructuring plan at Wallcoverings
designed to rebuild the segment's product offerings, to increase its sample book
introduction rate through aggressive marketing and design and to improve
utilization of its extensive distribution network and manufacturing
capabilities. Management is also expanding Wallcoverings' quick-ship and
in-stock programs and enhancing its order processing systems. Management
believes that the results of the restructuring are becoming evident in the
segment's financial results, as the operating income margin increased to 8.5% in
the first quarter of 1994 from a 6.9% operating income margin in the first
quarter of 1993.
AUTOMOTIVE PRODUCTS
GENERAL
The Company is a leading designer and manufacturer of automotive products
with 1993 net sales of $677.9 million. Automotive Products supplies four major
interior trim products--automotive seat fabric ("bodycloth"), molded floor
carpets, accessory floor mats and luggage compartment trim--and convertible top
stacks. Management estimates that Automotive Products holds a number one or
number two market share position in each of its five major product categories.
At least one of its five major automotive products is used on approximately 87%
of all North American-produced vehicle lines. Automotive Products has supplied
interior trim products to the automotive industry for over 60 years. Management
estimates that the total market for Automotive Products' five major product
lines in 1993 was approximately $1.4 billion. Accordingly, management believes
that Automotive Products' 1993 sales of $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. Since nearly all of the historic
growth in the stock of light vehicles has been associated with increases in the
driving age population and real per capita income, the Company anticipates that
the fleet of light vehicles will continue to grow at rates consistent with these
factors.
Vehicle replacement demand is significantly influenced by the overall
health of the economy and consumer confidence generally. Management believes
that light vehicle sales may also be influenced by scrappage rates and the
average fleet age. Currently, the average age of the U.S. passenger car fleet is
at a modern high of nearly 8.0 years per vehicle compared to 7.1 years in the
early 1980's and to 6.3 years in 1970. This trend may give rise to replacement
demand for the aging vehicles still in use.
Annual new car and truck sales historically have been cyclical. In the most
recent cycle, U.S. light vehicle sales declined from an average of 15.4 million
units per year in 1986-1988 to a low of 12.3 million units in 1991. Since late
1993, however, U.S. light vehicles sales have accelerated. In the first quarter
of 1994, U.S. light vehicles sold at a 15.6 million annualized rate, a level 27%
higher than during the lowpoint of 1991.
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In 1993, approximately 95% of Automotive Product's sales related to North
American-produced vehicles rather than imported units. In recent years, the
share of retail sales accounted for by North American-produced vehicles has
risen from a low of approximately 72% in 1987 to approximately 78% in 1991 and
to approximately 84% in 1993. This trend reflects the shift of production by
foreign manufacturers from off-shore auto plants to Transplant facilities
located in North America. Based on announced production schedules, management
anticipates that the three largest traditional vehicle importers, Toyota, Honda
and Nissan, will build approximately 60% of their combined North American sales
volume in Transplant facilities during the current calendar year compared to
approximately 49% in 1992 and to approximately 10% in 1986. As a consequence of
the increased share of import "nameplates" produced in Transplant facilities,
North American production has risen faster than retail sales. Between 1991 and
1993, for example, North American production increased by 22% compared to a 13%
increase in U.S. light vehicle sales during the same period. Management believes
this trend provides the Company with additional sales opportunities. In 1993,
the Company sold nearly $100 million of its major auto product lines to
Transplants, with its business spread among virtually all such assembly plants
then in production.
PRODUCTS
Automotive Products manufactures five principal products: automotive seat
fabric, molded floor carpets, accessory floor mats, luggage compartment trim and
convertible top stacks. Automotive Products also produces a variety of other
automotive and nonautomotive products. The following table sets forth Automotive
Products' net sales by product line for the past three years.
<TABLE>
<CAPTION>
1991 1992 1993
---------------------- ----------------------- ----------------------
% OF % OF % OF
NET TOTAL NET TOTAL NET TOTAL
PRODUCT LINE SALES SALES SALES SALES SALES SALES
- ------------------------------------------- ----------- --------- ------------ --------- ----------- ---------
(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>
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.
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ACCESSORY FLOOR MATS. Automotive Products produces carpeted automotive
accessory floor mats for both North American produced vehicles and imported
vehicles. In 1993, management estimates that approximately 63% of all vehicles
produced in North America included accessory mats as original equipment.
Management believes that in 1993 Automotive Products was the market leader in
this product line with net sales of $58.1 million, representing approximately
47% of all mats sold to OEMs. In addition, in 1993 Automotive Products sold
approximately $15.3 million of accessory mats to vehicle importers.
LUGGAGE COMPARTMENT TRIM. Luggage compartment trim includes one-piece
molded trunk systems and assemblies, wheelhouse covers, seatbacks, tireboard
covers, center pan mats and other trunk trim products. Management believes that
in 1993 Automotive Products was tied with another competitor as the second
largest supplier of luggage compartment trim to OEMs with net sales and
estimated market share of $37.4 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, molded package shelves, molded hood insulator
pads, foam laminated door fabrics and carpet trim and roll goods for export and
domestic consumption. Small volumes of certain products, such as residential
floor mats, casket and tie linings and sliver knits, are sold to other
commercial and industrial markets.
AUTOMOTIVE PRODUCTS SEGMENT GROWTH STRATEGY
The Company's business objective is to achieve strong growth in sales and
earnings through a three-pronged approach. First, the Company pursues
innovations in styling, materials construction and product performance, which
add value and revenue yield to its products. Second, the Company seeks to obtain
increased product placements on OEM vehicle lines. Third, the Company intends to
capitalize on an industry-wide increase in interior trim content per vehicle.
First, Automotive Products seeks to increase market share and selling
prices through product innovation. For example, the Company recently developed a
new, distinctive Jacquard velvet fabric which provides OEMs with a diversity of
pattern and color not available in traditional plain velours. Management
believes this new fabric will generate a significantly higher sales content per
vehicle than the traditional velours it will replace. To date, the Company has
been awarded 20 vehicle line placements for its new Jacquard velvet.
Second, the Company has succeeded in capitalizing on its deep OEM
relationship network to win product placements on new vehicle lines in addition
to increasing placements on lines currently supplied by the Company. In the case
of the new Ford Mustang, which was launched in model year 1994, the Company is
supplying all five of its major products, resulting in an average sales content
of approximately $400 per Mustang produced.
The Company's strategy is to focus its substantial styling, engineering and
product development capabilities on the design phase of new vehicle lines and on
each OEM's model changeover cycle. Typically, car and truck model lines are
replaced or substantially redesigned at four to eight year intervals. The
Company's experience has been, with few exceptions, that business awarded on
such new or redesigned model lines has been retained until the next changeover.
Over the last several years, the Company has been successful in placing one
or more of its products on new or redesigned OEM vehicle lines. The Company has
won product placements on
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23 new or redesigned North American vehicle lines, some of which have multiple
models, launched in model year 1994 or scheduled for launch over the next 18
months. The Company supplies three or more products to 10 of the 23 new or
redesigned vehicle lines. Six of the 23 lines use all four major interior trim
products. Two of the 23 use all five of the Company's major automotive products.
Third, the Company intends to capitalize on certain industry trends. In
recent years, OEMs have sought to differentiate their vehicles by strengthening
their consumer appeal through the increased use of interior trim. As a
consequence, the average sales content per vehicle of the five principal
automotive products produced by the Company has increased each year over the
last five years. Management estimates that in 1988 the total North American OEM
market for its five major products was $1.2 billion, resulting in an average
interior trim sales content for the market of $89 per vehicle. By 1993,
according to management estimates, OEM purchases of these products had increased
to $105 per vehicle, representing a 3.3% per year compound growth rate. This
trend has been accelerated by the growing popularity of mini vans and sports
utility vehicles in the light truck category. Because of their size, these
vehicles generally use more interior trim than traditional passenger vehicles.
In addition, automobile manufacturers are upgrading the interiors of these
vehicles by using higher-value fabrics, carpet and other trim materials than
were used previously in such vehicles.
This continuing upgrade of interior trim and convertible applications is
enabling the Company to achieve strong gains in its sales content per North
American vehicle produced. In 1993, its net sales of automotive products to
North American OEMs totalled $568 million, reflecting an average sales content
per North American-produced vehicle of approximately $43.
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The table below shows all the North American-produced vehicle lines for
which Automotive Products supplies at least one of its five major products. An
asterisk identifies recently awarded placements on new or redesigned vehicle
lines or models.
VEHICLE LINES SUPPLIED
COMPANY MODELS
- ------- ------
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 Suburban
Brougham Eldorado Riviera* GMC Suburban
Camaro* Firebird S-10* Sunbird*
Caprice Grand Am S-10 Blazer Supreme*
Cavalier* Grand Prix S-15 Jimmy TransSport
Century LeSabre Safari Yukon
Ciera Lumina-Van* Saturn
Ford
Aerostar Explorer* Quest Thunderbird
Bronco Mustang* Ranger Topaz
Contour* Mystique* Taurus Windstar*
Cougar Probe Tempo
Chrysler
Acclaim Grand Cherokee Plymouth Neon T-300 Pickup
Caravan Intrepid Ram Van/Ram Vision*
Cirrus* LeBaron/J/JX* Shadow Voyager
Concord* LHS* Spirit Wagoneer
Dakota Mini Ram Van Stratus*
Daytona Neon* Sundance
Eagle Talon New Yorker Town & Country
LHS*
Transplants
Fuji/Isuzu Honda Accord* Mitsubishi Suzuki Swift
Legacy Honda Civic* Eclipse Suzuki Tracker
Fuji/Isuzu Honda Mini-Van* Mitsubishi Toyota Avalon*
Passport Hyundai Elantra Galant Toyota Camry
Fuji/Isuzu Isuzu Pickup* Nissan Pickup Toyota Corolla
Rodeo Mazda MX-6 Nissan Sentra Toyota Pickup*
Geo Metro Mazda Pickup Suzuki Sidekick Volvo 740/760
Geo Prism Mazda 626
Broad OEM Penetration
Management believes that the Company is strategically well-positioned
to capitalize on the auto industry's current upturn due to its broad product
offering coupled with its high penetration of every North American OEM. In
recent years, the Company has broadened and balanced its sales base by means
of additional placements with the Transplants. Consequently, in 1993, the
Company's net sales to Transplants amounted to $72 per vehicle at Toyota,
$60 per vehicle at Honda, $75 per vehicle at AAI (Ford/Mazda) and $64 per
vehicle at SIA (Subaru/Isuzu), compared to $41 per vehicle at General Motors,
historically its largest customer.
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Net sales by customer for 1993 are set forth below (in millions):
<TABLE>
<CAPTION>
1993
------------------------
% OF
NET SALES NET SALES
----------- -----------
<S> <C> <C>
General Motors...................................................... $ 210.2 31.0%
Chrysler............................................................ 130.1 19.2
Ford................................................................ 102.4 15.1
Transplants......................................................... 118.0 17.4
Other............................................................... 117.2 17.3
----------- -----------
Net Sales...................................................... $ 677.9 100.0%
----------- -----------
----------- -----------
</TABLE>
VALUE-ADDED MANUFACTURING AND QUALITY
Most OEMs require deliveries on a "just-in-time" ("JIT") basis to meet
precise production schedules. The most stringent requirement demands
color-sequenced JIT delivery of parts within four hours. To meet these
requirements, the Company has instituted a JIT manufacturing process to
complement its customers' manufacturing processes, thereby minimizing
inventories and administrative and materials handling costs and simplifying the
production process for both the Company and the OEMs.
In response to OEM-mandated price reductions, the Company has implemented
value analysis and value engineering programs to reduce costs. Management has
established a standardized format for monitoring cost of nonconformance
throughout the Company.
In addition, OEMs expect suppliers to take on increased design and
engineering responsibilities. The Company's participation with customers in the
early phase of product design and engineering enables it to improve the quality
of its products as well as to meet its customers' cost targets and design
service requirements. The Company has made substantial investments in product
technology and product design capability to support its products and to provide
its customers with value-added engineering and design services. For example, the
Company operates a technical design center with state-of-the-art,
computer-aided-design/computer-aided-manufacturing ("CAD/CAM") systems.
Automotive Products' CAD systems are linked to the design and engineering
systems of its principal customers. These systems enable the Company to simulate
numerous three-dimensional designs for rapid submission to customers, thereby
increasing customer service and lowering development costs.
The Company's goal is to continue to manufacture its products to meet the
exacting standards of its customers. The Company has been recognized as a
quality supplier to the automotive industry as evidenced by numerous awards from
virtually all OEM's, including the Transplants.
ACQUISITIONS/STRATEGIC ALLIANCES
The Company pursues niche acquisitions and strategic alliances that would
further serve to broaden the Company's customer base and products. In 1993, the
Company acquired a Mexican-based molded floor carpet manufacturer and began
construction of a new facility in Mexico to take advantage of opportunities in
the Mexican market.
COMPETITION
The automotive supply business is highly competitive. The primary
competitors in molded floor carpet are Masland Corporation and JPS Automotive
Products Corp. The primary competitor in bodycloth is Milliken & Company. In
accessory floor mats, the Company competes primarily against Pretty Products
Company. Automotive Products' primary competition in luggage compartment trim is
Masland Corporation and Gates Corporation. In convertible top stacks, Automotive
Products competes primarily against American Sunroof Corporation.
FACILITIES
Automotive Products has 28 manufacturing facilities located in the U.S.,
Canada and Mexico. Approximately 90% of the total square footage of these
facilities is owned and the remainder is leased. Many facilities are
strategically located to provide JIT inventory delivery to the Company's
customers. Capacity at any plant depends, among other things, on the product
produced, the processes and equipment used and tooling. This varies
periodically, depending on demand and shifts in production between plants. The
Company currently estimates that its Automotive Products
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plants generally operate at between 50% and 100% of capacity on a six-day basis.
The Company's capacity utilization in this segment is generally in line with its
past experience in similar economic situations, and the Company believes that
its existing facilities are sufficient to meet both this segment's existing
needs and its anticipated growth requirements. The Company does not anticipate
any circumstances that would render its facilities inadequate for its projected
needs.
The following list provides certain information regarding the Automotive
Products' manufacturing facilities:
<TABLE>
<CAPTION>
SQUARE
FOOTAGE OWNED/
LOCATION (000) LEASED FUNCTION
- --------------------------------- ----------- --------- ----------------------------------------------------------
<S> <C> <C> <C>
Farmville, NC.................... 508 Owned Knit Manufacturing
Roxboro, NC(*)................... 545 Owned Auto Upholstery--Dyeing and Finishing
Roxboro, NC(*)................... 330 Owned Auto Upholstery--Weaving
Roxboro, NC(*)................... 137 Owned Auto Upholstery--Knitting
Roxboro, NC(*)................... 67 Owned Auto Upholstery--Warehouse
Albemarle, NC.................... 585 Owned Auto Carpet Tufting/Finishing
Old Fort, NC..................... 375 Owned Auto Carpet Molding
Old Fort, NC..................... 60 Owned Mold Manufacturing
Clinton, OK...................... 158 Owned Auto Carpet Molding
Salisbury, NC.................... 106 Owned Die Cut/Sewing
Troy, NC......................... 98 Owned Non-Woven Carpet
Troy, NC......................... 153 Owned Yarn Spinning Mill
Norwood, NC...................... 275 Owned Yarn Spinning Mill
St. Clair, MI.................... 100 Owned Auto Carpet Molding
Canton, OH....................... 146 Owned Manufacturing--Rubber/Mats
Holmesville, OH.................. 84 Owned Manufacturing--Mats
Ravenna, OH...................... 204 Owned Manufacturing--Rubber
Zanesville, OH................... 599 Owned Manufacturing--Mats
Farnham, Quebec.................. 266 Owned Auto Carpet--Tufting and Finishing/Non-Woven
Lacolle, Quebec.................. 107 Owned Auto Carpet--Molding
Ingersoll, Ontario............... 104 Owned Auto Carpet--Molding
Elmira, Ontario.................. 133 Owned Sliver Knit Carpet Manufacturing
Queretaro, Mexico................ 93 Owned Auto Carpet--Molding
-----------
Total Owned............... 5,233
-----------
Farmville, NC.................... 138 Leased Warehouse
Roxboro, NC(*)................... 88 Leased Warehouse
Roxboro, NC...................... 42 Leased Warehouse
Barberton, OH.................... 41 Leased Manufacturing--Mats
Orange, CA....................... 10 Leased Warehouse
Adrian, MI(East)................. 155 Leased Convertible Tops--Manufacturing
Adrian, MI(West)................. 34 Leased Convertible Tops--Engineering
Plymouth, MI..................... 16 Leased Convertible Tops--Manufacturing
Bloomfield Hills, MI............. 8 Leased Sales Office
Vallejo, Mexico.................. 102 Leased Auto Carpet--Molding
Monterrey, Mexico................ 35 Leased Non-Woven Carpet
-----------
Total Leased.............. 669
-----------
Total..................... 5,902
-----------
-----------
</TABLE>
- ---------------
(*) Also utilized by Decorative Fabrics.
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INTERIOR FURNISHINGS
Interior Furnishings designs and manufactures residential and commercial
upholstery fabrics through its Decorative Fabrics group and high-end specified
contract floorcoverings through its Floorcoverings group. In 1993, Interior
Furnishings had net sales of $407.2 million. Net sales by products are set forth
below (in millions):
<TABLE>
<CAPTION>
1991 1992 1993
------------------------ ------------------------ ------------------------
% OF % OF % OF
PRODUCT LINE NET SALES NET SALES NET SALES NET SALES NET SALES NET SALES
- ---------------------------------------------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Decorative Fabrics
Flat-Woven.................................. $ 214.5 63.7% $ 254.7 65.0% $ 268.9 66.0%
Other....................................... 47.0 14.0 48.5 12.4 44.7 11.0
Floorcoverings................................ 75.3 22.3 88.6 22.6 93.6 23.0
----------- ----------- ----------- ----------- ----------- -----------
Net sales................................... $ 336.8 100.0% $ 391.8 100.0% $ 407.2 100.0%
----------- ----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
DECORATIVE FABRICS
GENERAL. Interior Furnishings' Decorative Fabrics group is the largest
designer and manufacturer of upholstery fabrics in the U.S., with 1993 net sales
of $313.6 million. Management estimates that its share of the U.S. upholstery
fabric market is approximately 15%, based on data published in the May 1994
edition of Furniture Today, a leading trade publication. Decorative Fabrics
strives to be the preferred supplier of middle-to high-end flat-woven upholstery
fabrics to furniture manufacturers and fabric distributors. This group's primary
division, Mastercraft, is the leading manufacturer of flat-woven upholstery
fabrics and had 1993 net sales of $268.9 million. Management believes that
Mastercraft has substantially more Jacquard looms and styling capacity dedicated
to upholstery fabrics, and offers more patterns (approximately 13,000) in a
greater range of price points than any of its competitors. The breadth and size
of Mastercraft's manufacturing and design capabilities provide it with
exceptional flexibility to respond to changing customer demands and to develop
innovative product offerings.
INDUSTRY. The three primary types of upholstery fabric are flat-wovens,
velvets and prints. Based upon published industry estimates, management believes
that flat-woven fabrics were the fastest growing sector in the upholstery
fabrics industry over the last five years and accounted for approximately 53% of
the estimated $1.7 billion upholstery fabric industry in 1993. Flat-woven
fabrics are made in two major styles: Jacquard, which is produced on high-speed
computerized looms capable of weaving and knitting intricate designs into the
fabric, and Dobby, a plain fabric produced on standard looms.
Demand for upholstery fabric generally varies with economic conditions,
particularly sales of new and existing homes, and is directly associated with
sales of upholstered furniture at the retail level. After a period of slow
growth during the 1991 recession, the dollar value of U.S. upholstered furniture
shipments (including both fabric and leather) increased by 7.4% in 1992 and
13.4% in 1993, according to the American Furniture Manufacturers Association. In
the first quarter of 1994, according to that source, U.S. upholstered furniture
shipments increased by 7.8% as compared to the corresponding period for the
prior year. Mastercraft is currently operating at approximately 100% capacity.
In order to accommodate anticipated growth, the Company recently initiated a
plan to invest $85 million in Mastercraft between 1994 and 1998. See
"--Mastercraft Growth Plan".
Management believes there are three significant trends within the U.S.
furniture marketplace that have affected and may continue to affect Decorative
Fabrics. First, fabric design is being increasingly used by residential
furniture manufacturers as a differentiating characteristic for their products.
Jacquard fabric has become increasingly popular due to its incorporation of
intricate designs. A proliferation of Jacquard patterns and styles has been made
possible by recent
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technological developments in the electronic Jacquard loom, which has made the
rapid introduction of new designs significantly less expensive.
Second, the consolidation in both the furniture manufacturing and retailing
industries has resulted in fewer and larger buyers of upholstery fabrics. These
manufacturers and retailers generally are interested in purchasing fabrics from
suppliers that can provide a broad spectrum of their fabric requirements. The
wide range of products offered by Decorative Fabrics enables it to be a primary
supplier to the majority of its customers.
Third, management believes that furniture manufacturers and retailers are
shifting from item-by-item selling to complete room presentations, thus creating
a demand for furniture fabric suppliers that offer a broad array of coordinating
fabrics.
Management believes that Decorative Fabrics is well positioned to benefit
from these trends because it is one of the few industry participants able to
deliver the breadth of styles and quantity of fabrics needed to satisfy the
increasing demands of furniture manufacturers and retailers.
STYLE AND DESIGN. Management believes that the continued development of
superior product designs and styles is the most critical strategic objective of
Decorative Fabrics. The pattern and style of a particular fabric are considered
to be strong influences in the purchasing decision of consumers. Decorative
Fabrics utilizes a combination of in-house design studios, independent signature
designers and consultants to create innovative product designs and styles
utilizing CAD technology. Its product design flexibility also enables Decorative
Fabrics to offer custom fabric designs to its largest customers. Decorative
Fabrics creates approximately 2,000 new designs and styles per year,
substantially more than any of its competitors.
PRODUCTS. Decorative Fabrics' four operating divisions are Mastercraft,
Cavel, Warner and Greeff. Mastercraft and Cavel design and manufacture
Jacquards, velvets and other woven fabrics for the furniture, interior design,
commercial, recreational vehicle and industrial markets. Greeff and Warner
design and distribute high-end designer fabrics to interior designers and
specialty retailers in the U.S. and the U.K., respectively.
MASTERCRAFT DIVISION. Mastercraft is Decorative Fabrics' largest division.
Mastercraft focuses on the medium-to-upper price range, and its products had an
average wholesale price per yard of $6.38 in 1993. Management estimates that
Mastercraft's share of the U.S. flat-woven upholstery fabric market is
approximately 22%, based on data published in the May 1994 edition of Furniture
Today. Over the last ten years, Mastercraft's net sales grew at a compound
annual rate of approximately 14%. Mastercraft serves the diverse furniture
industry through the following four separate product lines which emphasize
different styles and price points:
Mastercraft Fabrics is the largest of the four product lines offered by the
Mastercraft division, currently offering approximately 8,000 designs. Management
believes that this Jacquard product line is the most diverse in style. The
principal product offerings range from a wholesale price of $3.50 to $12.00
per yard.
Home Fabrics is a leading line of traditionally styled Jacquard fabrics.
The design focus is on the middle-to-upper wholesale price ranges of $5.50 to
$14.00 per yard and is under the direction of Wesley Mancini Studios, a
world-renowned designer of classic, formal and traditional styles. The products
are known for their color, quality and innovation. Mancini designs fabrics
exclusively for the Home Fabrics product line and the Greeff division. Mancini's
15-person design staff creates approximately 500 designs per year for Home
Fabrics.
Doblin is a Jacquard product line renowned for its natural fibers and
elegant designs and constructions. It is targeted at the upper-end of the
market. Doblin's studio consists of twelve design professionals (both in-house
and external) who create approximately 300 designs annually.
Mastercraft Contract serves the wall panel, wallcovering and office seating
markets and the product line features approximately 50 Jacquard fabric designs
annually. The eight-member design
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team focuses on Jacquard yarn-dyed and patterned fabrics, which management
believes to be an increasingly favored fabric in the wall panel, wallcovering
and office seating markets.
MASTERCRAFT GROWTH PLAN. Management's strategy is to continually shift its
product mix toward higher price ranges and to increase its manufacturing
capacity in the fast growing Jacquard market. Due to the resulting high sales
volumes, Mastercraft has experienced a "sold-out" order position for nearly
every quarter during the last five years. Its capacity utilization rate has
consistently averaged nearly 100% on a six-day basis. In order to accommodate
anticipated growth, the Company recently initiated a plan to invest $85 million
in Mastercraft between 1994 and 1998. Investment is targeted toward the purchase
of high-speed looms to increase capacity and productivity, new electronic
Jacquard heads to reduce pattern changeover times, and computer monitoring
systems to provide information about the manufacturing processes and to improve
quality, productivity and capacity.
Following the anticipated completion of the Company's current capital
investment plan in 1998, management expects that Mastercraft's production
capacity will have been materially enlarged, and that up to 75% of its weaving
equipment will consist of the latest generation, high-speed Jacquard looms with
electronic heads. Management anticipates that this program will result in higher
labor productivity, reduced materials loss, lower overhead expense and higher
volumes of finished product than presently achieved.
Consistently high capacity utilization rates, as well as demand for
higher-priced products, have also enabled Mastercraft to gradually shift its
product mix toward the higher price ranges, further enhancing operating profit.
The average wholesale price per yard for its fabrics has increased from $5.58 in
1989 to $6.38 in 1993.
OTHER DECORATIVE FABRICS DIVISIONS. With 1993 net sales of $39.6 million,
the Cavel division is a leading manufacturer of velvets. Cavel manufactures both
Dobby and Jacquard velvets. Cavel manufactures fabrics for home furnishings,
recreational vehicles and specialized industrial products such as paint rollers.
Cavel's 13-person design staff produces approximately 250 designs annually for
these markets. The two smaller divisions of Decorative Fabrics, Greeff and
Warner, supply the interior design and specialty retailer markets in the U.S.
and the U.K., respectively.
CUSTOMERS. Decorative Fabrics is a primary supplier to virtually all major
furniture manufacturers in the U.S., including La-Z-Boy, Ethan Allen,
Thomasville, Flexsteel, Bassett, Broyhill, Baker, Henredon, Rowe and Robert
Allen. Due to the breadth of its product offerings, strong design capabilities
and superior customer service, the Company has developed close relationships
with many of Decorative Fabrics' over 1,000 customers.
Nearly all of Decorative Fabrics' products are made to customer order. This
reduces the amount of raw materials and finished goods inventory required and
greatly reduces product returns, thereby improving profit margins.
CUSTOMER SERVICE. Decorative Fabrics invests significant capital resources
in customer service technology. Key service-related objectives include providing
custom-tailored design capabilities to large customers, reducing lead time for
orders and providing consistent, on-time delivery.
To enhance customer satisfaction, Decorative Fabrics began implementation
of a computerized material requirements' inventory system, MRP II, in 1992.
Implementation of the MRP II system has significantly improved inventory control
and enabled the Company to reduce manufacturing lead times. The completion of
the MRP II project in 1993 also provided significant enhancements to Decorative
Fabrics' electronic data interchange ("EDI") systems. The improved use and
availability of EDI allows customers to place orders faster and significantly
reduces order processing time.
MARKETING AND SALES. Fabrics are sold domestically by 31 commissioned sales
representatives who exclusively represent the Mastercraft and Cavel divisions of
Decorative Fabrics. The Mastercraft and Cavel divisions maintain showrooms in
seven key locations throughout the United
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States. Products are presented in collections which suggest a complete room
environment using the Company's diverse mix of fabrics.
Mastercraft's 1993 export sales were $30.5 million, or 11.3% of its net
sales. Export sales have increased at a compound annual growth rate of 30% since
1988. All export fabrics are sold through commissioned sales representatives and
agents in key countries. Major export regions include the United Kingdom,
Scandinavia, Europe, the Middle East, Australia, New Zealand, the Far East,
Canada and South America.
MANUFACTURING. Decorative Fabrics invests significant capital resources to
upgrade manufacturing facilities and continually improve productivity.
Management believes that continued commitment to technological improvements is
essential to remain competitive in the decorative fabrics business. All plants
typically operate on a six-day, three-shift schedule and operate an adjustable
schedule on the seventh day in order to balance production and customer demand.
COMPETITION. The U.S. upholstery fabrics market is highly competitive.
Manufacturers compete on the basis of design, quality, price and customer
service. Decorative Fabrics' primary competitors include Quaker Fabric
Corporation, Culp, Inc., Joan Fabrics Corp. and the Burlington House Upholstery
Division of Burlington Industries, Inc.
FACILITIES. Mastercraft owns and operates four weaving plants and one
finishing plant in North Carolina. Cavel shares manufacturing capacity with
Automotive Products at three plants in Roxboro, North Carolina. Greeff and
Warner are designers and distributors, subcontracting all manufacturing. During
the last three years, the Company's capacity utilization in the Mastercraft
division of the Decorative Fabrics group has consistently averaged nearly 100%
on a six-day basis. The Company believes that its existing facilities are
sufficient to meet the Decorative Fabrics group's existing needs and, after
taking into account Mastercraft's five-year capital investment plan (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources"), anticipated growth requirements.
Assuming the completion of Mastercraft's five-year capital investment plan, the
Company does not anticipate any circumstances that would render its Decorative
Fabrics facilities inadequate for its projected needs.
FLOORCOVERINGS
GENERAL. The Floorcoverings group of the Interior Furnishings segment is a
leading producer of high-end specified contract carpeting products for
institutional and commercial customers. In 1993, net sales were $93.6 million.
Floorcoverings differentiates itself from its competitors in part by its
patented Powerbond RS(R) adhesive system and by its products' durability
characteristics. It is currently the largest manufacturer of six-foot wide rolls
and the third-largest supplier of modular carpet tiles in the U.S.
Floorcoverings produces virtually no product for inventory or for commodity
markets.
Since 1990, Floorcoverings has repositioned its product offerings, shedding
those products in which it lacked either a low-cost position or proprietary
product advantage. By focusing on areas of competitive advantage, Floorcoverings
has prospered, notwithstanding a significant downturn in commercial construction
and renovation, and increased its average selling price per square yard by over
13%.
Management believes that Floorcoverings' niche market position in the high
performance specified sector, differentiated value-added products and
proprietary patented technology provide it with a competitive advantage.
INDUSTRY. Management estimates that 70% of the Company's floorcoverings
business is based on renovation rather than new construction projects.
Historically, renovation activity has been significantly less cyclical than new
construction. Also, approximately 60% of Floorcoverings 1993 net sales were to
institutional customers such as government, healthcare and education
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facilities rather than to commercial market customers. Management believes that
government, healthcare and educational customers are stable, growth sectors, as
illustrated by the fact that new construction spending in these areas has
increased by 7% per year since 1987. As a result of these two factors, sales of
six-foot wide rolls and modular carpet tiles have doubled since 1987 while the
U.S. commercial construction market has been flat.
PRODUCTS. Floorcoverings' key competitive advantage is in its patented
Powerbond RS(R) adhesive technology, which has 14 years of patent protection
remaining. Because the Powerbond RS(R) system uses a peel-and-stick adhesive as
opposed to a wet adhesive, it permits the installation of floorcoverings
directly on floor surfaces, including existing carpeting, with substantially
reduced labor costs and without the fumes of conventional wet adhesives. This
allows for less disruptive and less time-consuming installation and, for this
reason, is particularly attractive to institutions such as schools and
hospitals. By contrast, conventional carpet installation requires a more costly
and disruptive removal of old carpet and a curing period for the wet adhesive
before the facility can be returned to use. In addition to reducing installation
downtime for customers to as little as one day, management believes
Floorcoverings' product exhibits demonstrably superior durability and cleaning
characteristics ideally suited for high-traffic areas such as airline terminals
and customers such as Discovery Zone and Blockbuster.
COMPETITION. The commercial carpet industry is highly competitive, and
several of Floorcoverings' competitors have substantially greater commercial
carpet sales in the commodity segments of the industry, segments in which
Floorcoverings does not compete. Floorcoverings' niche products have demanding
specifications and generally cannot be manufactured using the equipment which
currently supplies most of the industry's commodity products. The Company's
primary competitors are Interface, Milliken & Company, Mohawk Industries and
Shaw Industries.
FACILITIES. Floorcoverings owns and operates four facilities in Dalton,
Georgia. The Company currently estimates that Floorcoverings' plants operate at
between 35% and 80% of capacity on a six-day basis. The Company's capacity
utilization in the Floorcoverings group is generally in line with its past
experience in similar economic situations, and the Company believes that its
existing facilities are sufficient to meet both this group's existing needs and
its anticipated growth requirements. The Company does not anticipate any
circumstances that would render its Floorcoverings facilities inadequate for its
projected needs.
WALLCOVERINGS
GENERAL
Wallcoverings, which operates under the name "Imperial", had 1993 net sales
of $220.4 million. It is a leading manufacturer and distributor of a full range
of wallcoverings for the residential and commercial sectors of the wallcoverings
market. Management estimates that in 1993 Imperial had a 22% market share in the
larger residential wallcoverings sector and held the number one market share
position in each of this sector's two primary distribution channels--chains and
dealers. It is the only producer of wallcoverings in the U.S. that is fully
integrated from paper production through design and distribution. In addition,
management believes that Imperial has a competitive advantage due to its
extensive in-house design expertise and licensing arrangements, its low cost,
vertically-integrated manufacturing capability and its advanced customer
ordering and service network.
INDUSTRY
The wallcoverings industry experienced significant and consistent growth
from the early 1980s through 1987. This growth resulted in part from increases
in new construction starts and existing home sales which peaked in 1986-87. In
addition, a one-time surge in demand created a new industry-wide layer of
inventory as a result of the rapid growth of large in-stock retailers. Between
1983 and 1987, the industry's physical shipment volume increased from 137
million to 200 million
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rolls of wallpaper per year, a 9.9% annual growth rate. Between 1987 and 1990,
the industry underwent a contraction, with volume declining dramatically from
200 million rolls in 1987 to 174 million rolls in 1990, a 4.5% annual decline.
This resulted from a slowdown in the overall economy, particularly in the
housing market, coupled with a reduction in inventory by over-stocked retailers.
From 1991 to 1993, the industry's physical shipment volumes increased at a
compound annual growth rate of 3.0%.
Management estimates that in 1993, total sales for the U.S. wallcovering
market were approximately $1.1 billion on a wholesale basis. The wallcoverings
market can generally be divided into the residential and commercial sectors. The
residential sector is the larger of the two sectors, with estimated total 1993
U.S. sales of $748.0 million. The two primary distribution channels within the
residential sector are dealers and retail chains.
STRATEGIC RESTRUCTURING
The industry contraction of the late 1980s and early 1990s left Imperial
with unutilized manufacturing capacity, an oversized distribution network and
excess product offerings. Between 1989 and 1992, Imperial implemented a
comprehensive downsizing program designed to bring Imperial's high fixed-cost
structure into better alignment with the changed industry environment. Imperial
closed 22 showrooms and 12 warehouses and reduced fixed costs by 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 collections. Through the program
called "On Time Or On Us", free product is offered to dealers for orders
unfilled within 48 hours. The number of collections covered by this program was
increased to 26 in the first quarter of 1994. Imperial also implemented a number
of other MIS and service initiatives designed to enhance customer service and
distribution.
In 1994, Imperial is implementing a plan to improve sales momentum in the
chain store channel, including a tripling of its product development budget for
the national chains, consolidating order entry and customer service activities
under dedicated national account teams, developing innovative product/packaging
approaches for warehouse clubs, and broadening its product offerings with newly
licensed products such as borders featuring National Hockey League and National
Collegiate Athletic Association logos and insignias.
PRODUCT
Management believes Imperial has maintained its market position due to its
competitive edge in color and design. Its in-house studio of approximately 35
artists represents a major strategic investment by Imperial which is
supplemented by an active licensing program under which Imperial licenses proven
designs from well-known designers. Imperial is continuously introducing new
designs and color concepts that supplement its already vast library.
Imperial offers a large number of well-known brand names, including
Imperial, United, Sterling Prints, Katzenbach & Warren, Greeff, Albert Van Luit
and Plexus. In addition to these in-house brands, Imperial licenses a number of
well-known brand names, including Gear, Laura Ashley,
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Pfaltzgraff, Croscill, Mario Buatta, David and Dash, Louis Nichole, Clarence
House and Carlton Varney, for which it converts home furnishing designs into
wallcovering designs. Imperial also distributes the lines of John Wilman, Great
Britain's largest wallcoverings designer and manufacturer. Imperial's products
sell at the retail level from $5 per single roll to more than $100 per single
roll, with most products selling in the $8 to $14 range.
In recent years, there has been increasing demand for wallcoverings
coordinated with decorative accessories such as window treatments, bedding,
upholstery fabric and other textile products. To satisfy this demand from
upscale home furnishings customers, Imperial provides fabrics, which it
generally purchases outside the Company, that are coordinated with its
wallcovering designs. Some of these fabrics are supplied by the Mastercraft and
Greeff divisions of the Company.
CUSTOMERS
Dealers and chains account for the largest portion of Imperial's customer
base. Management believes that the Company has the leading share in each of
these channels. Management believes that Imperial has the most extensive dealer
network in the U.S., selling to approximately 15,000 dealers. Imperial also
sells to many of the leading chains in the country, including Home Depot, Lowes,
Sears, Sherwin Williams and Target.
MANUFACTURING
Imperial is the only manufacturer of wallcoverings that is vertically
integrated from paper production to the design and distribution of finished
wallcoverings. Management estimates that Imperial accounts for approximately 30%
of wallpaper manufacturing capacity in North America. Imperial's objective is to
be the lowest cost manufacturer in the industry. In pursuit of this objective,
Imperial has completed several manufacturing efficiency programs over the past
several years, including significantly reducing the set up times in gravure
printing through implementation of single-minute-exchange-of-die techniques.
COMPETITION
As a result of the recent economic downturn in the wallcoverings industry,
many weaker competitors withdrew from the U.S. wallcoverings market. In
addition, further contraction is expected to occur as sales of wallcoverings
shift to chain stores, which along with other retailers prefer working with
fewer, larger suppliers. Imperial is well positioned to benefit from these
developments.
Competition in the wallcoverings industry is based on design, price and
customer service. Imperial's principal competitors are Borden, GenCorp, F.S.
Schumacher and Seabrook Wallcoverings.
FACILITIES
Imperial owns and operates five manufacturing facilities in the United
States and three in Canada, as well as three distribution centers in the United
States. The Company currently estimates that its Wallcoverings facilities that
produce surface print paper generally operate at approximately 35% of capacity
on a five-day basis and its facilities that produce gravure paper generally
operate between approximately 80% and 100% of capacity on a five-day basis. The
Company's capacity utilization in this segment is generally in line with its
past experience in similar economic situations, and the Company believes that
its existing facilities are sufficient to meet both this segment's existing
needs and its anticipated growth requirements. The Company does not anticipate
any circumstances that would render its Wallcoverings facilities inadequate for
its projected needs.
EMPLOYEES
As of January 29, 1994, the Company's subsidiaries employed approximately
12,000 persons on a full-time or full-time equivalent basis. Approximately 2,200
of such employees are represented by labor unions. Management believes that the
Company's relations with its employees and with the unions that represent
certain of them are good. See "Risk Factors--Collective Bargaining Agreements".
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
As of the consummation of the Offerings and giving effect to the
Recapitalization, the executive officers and directors of the Company, and their
ages as of April 10, 1994, will be as follows:
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ------------------------------------ ----------- ---------------------------------------------------------------------
<S> <C> <C>
Thomas E. Hannah.................... 55 Chief Executive Officer and Director
William J. Brucchieri............... 51 President of Imperial Wallcoverings
John D. Moose....................... 57 President of North American Auto Group
Harry F. Schoen III................. 58 President of Mastercraft Division
Elizabeth R. Philipp................ 37 Executive Vice President, General Counsel and Secretary
Mark O. Remissong................... 41 Senior Vice President and Chief Financial Officer
Paul W. Meeks....................... 41 Vice President and Treasurer
David A. Stockman................... 47 Co-Chairman of the Board of Directors
Bruce Wasserstein................... 46 Co-Chairman of the Board of Directors
James R. Birle...................... 58 Director
John P. McNicholas.................. 31 Vice Chairman
Stephen A. Schwarzman............... 47 Director
Randall J. Weisenburger............. 35 Vice Chairman and Director
W. Townsend Ziebold, Jr............. 32 Director
</TABLE>
Set forth below is certain information about each of the Company's
executive officers and directors. Unless otherwise indicated, positions listed
are with the Company. Following the Offerings, the Company expects to elect two
additional directors who are not affiliated with the Company or the Partners.
Pursuant to the Restated Certificate of Incorporation, The Board of Directors
will be classified into three classes consisting of three directors each. Each
class of directors of the Company will be elected at an annual meeting of
stockholders on staggered three-year terms, such that only one class of
directors will be elected each year. See "Description of the Capital
Stock--Anti-takeover Provisions".
THOMAS E. HANNAH. Chief Executive Officer of the Company as of the
consummation of the Offerings. President and Chief Executive Officer of the
Collins & Aikman Textile and Wallcoverings Group from November 1991 to
consummation of the Offerings, and named an executive officer of the Company in
April 1993. President and Chief Executive Officer of the Collins & Aikman
Textile Group from February 1989 to November 1991. President of Milliken &
Company's Finished Apparel Division prior to that.
WILLIAM J. BRUCCHIERI. President of Imperial Wallcoverings since February
1993 and named an executive officer of the Company in April 1994. Executive Vice
President of Imperial from March 1992 to January 1993. Executive Vice President
of the Mastercraft division from January 1990 to February 1992. Vice President,
Operations of the Mastercraft division from August 1989 to January 1990. Mr.
Brucchieri joined a wholly-owned subsidiary of the Company in 1988.
JOHN D. MOOSE. President of the North American Auto Group since June 1989,
and named an executive officer of the Company in April 1994. Mr. Moose joined a
wholly-owned subsidiary of the Company in 1960.
HARRY F. SCHOEN III. President of the Mastercraft division since January
1993 and named an executive officer of the Company in April 1994. Executive Vice
President and Chief Operating Officer of the Mastercraft division from April
1992 to December 1992. General Manager of Milliken & Company's Greige Fine Goods
Group prior to that.
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ELIZABETH R. PHILIPP. Executive Vice President, General Counsel and
Secretary of the Company since April 1994. Vice President, General Counsel and
Secretary of the Company from April 1993 to April 1994. Vice President and
General Counsel from September 1990 to April 1993. Prior to that, associated
with the law firm of Cravath, Swaine & Moore.
MARK O. REMISSONG. Senior Vice President and Chief Financial Officer of the
Company as of the consummation of the Offerings. Since December 1993, Senior
Vice President and Chief Financial Officer of a wholly-owned subsidiary of the
Company and an executive officer of the Company. Vice President of Finance for
Burlington Industries from 1989 until December 1993.
PAUL W. MEEKS. Vice President and Treasurer of the Company since September
1992. Assistant Treasurer of the Company from April 1988 to September 1992. Mr.
Meeks joined a wholly-owned subsidiary of the Company in 1982.
DAVID A. STOCKMAN. Co-Chairman of the Board of Directors of the Company
since July 1993 and a Director of the Company since October 1988. General
Partner of Blackstone Group Holdings L.P. (the "Blackstone Group") since 1988.
Mr. Stockman is also a director of Edward J. DeBartolo Corporation.
BRUCE WASSERSTEIN. Co-Chairman of the Board of Directors of the Company
since June 1992. Chief Executive Officer and Chairman or President of
Wasserstein Perella Group, Inc. ("WP Group") since 1988 and Chairman and Chief
Executive Officer of Wasserstein Perella Management Partners, Inc. ("WP
Management") since June 1992. Mr. Wasserstein is also Chairman of the Board of
Maybelline, Inc.
JAMES R. BIRLE. A Director of the Company since 1988 and Co-Chairman of the
Board of Directors of the Company from October 1988 until July 1993. General
Partner of the Blackstone Group since 1988. Mr. Birle is also a director of
Connecticut Mutual Life Insurance Co., Great Lakes Dredge & Dock Corporation,
and Transtar, Inc.
JOHN P. MCNICHOLAS. Vice Chairman of the Company since April 1994. Deputy
Chairman of the Company from July 1992 to April 1994. Vice President of the
Blackstone Group since January 1992; Associate of the Blackstone Group from
November 1990 to December 1991; Associate, Merchant Banking Group--Merrill Lynch
Capital Markets from August 1989 to November 1990.
STEPHEN A. SCHWARZMAN. A Director of the Company since October 1988 and
President of the Company from its inception to consummation of the Offerings.
Co-Founding Partner of the Blackstone Group and President and Chief Executive
Officer of The Blackstone Group L.P. ("Blackstone") since 1985. Mr. Schwarzman
is also a director of Great Lakes Dredge & Dock Corporation and Transtar, Inc.
RANDALL J. WEISENBURGER. Vice Chairman of the Company since April 1994 and
a Director of the Company since 1989. Deputy Chairman of the Company from July
1992 until April 1994. Managing Director of Wasserstein Perella & Co., Inc.
("WP&Co.") since December 1993; Director of WP&Co. from December 1992 to
December 1993; Vice President of WP&Co. from December 1989 to December 1992;
Associate of WP&Co. from 1988 to December 1989. Mr. Weisenburger is also Vice
Chairman of the Board of Maybelline, Inc. and Chairman of the Yardley Lentheric
Group.
W. TOWNSEND ZIEBOLD, JR. Director of the Company since December 1992.
Director of WP&Co. since December 1993; Vice President of WP&Co. from December
1991 to December 1993; Associate of WP&Co. from 1988 to December 1991. Mr.
Ziebold is also a director of Maybelline, Inc.
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<PAGE>
COMPENSATION OF DIRECTORS
Effective upon consummation of the Offerings, each director (or the Partner
who designates such director to the Board of Directors) will receive an annual
fee of $40,000, payable quarterly.
In July 1992, C&A Co. entered into an employment agreement with Mr. Hannah,
which was amended as of February 1994. The agreement, as amended, provides for
an initial base salary of $525,000 and participation in any executive bonus plan
of C&A Co., with a target bonus of 75% of base salary then in effect up to a
maximum of 150% of base salary. Under the executive bonus plan currently in
effect, Mr. Hannah is to receive the target bonus with respect to any fiscal
year in which the Company achieves all the goals set by the Company's Board of
Directors or an appropriate committee thereof for such year. Financial goals for
the current fiscal year relate to earnings before interest and taxes. The
executive bonus plan may change at any time. The agreement expires January 31,
1997, with automatic one-year renewals thereafter unless C&A Co. notifies Mr.
Hannah prior to that time of its intention to terminate the agreement. In the
event of involuntary termination for reasons other than cause and other than a
change of control, the agreement provides for severance benefits equal to Mr.
Hannah's base salary then in effect for a period of one year from the
termination date plus any unpaid cash bonus for the prior year and a pro rata
portion of any bonus he would have received had he been employed for the entire
year. C&A Co. also entered into a letter agreement with Mr. Hannah in May 1991
pursuant to which Mr. Hannah is entitled to receive an amount equal to two times
his base salary then in effect in the event his employment is terminated within
three months prior to or one year following a change of control (as defined) of
C&A Co.. In 1993, Mr. Hannah received a base salary of $415,000, a cash bonus of
$783,960, and payouts under the Equity Share Plan referred to below and other
compensation aggregating $2,339,388.
THE COMPANY'S OPTION PLANS
In 1988, Group implemented the Wickes Equity Share Plan (the "Equity Share
Plan") for the purposes of attracting, retaining and motivating key employees of
Group and its subsidiaries. In October 1993, the Equity Share Plan was
terminated in accordance with its terms. Concurrently, Group announced its
intention to implement a new stock option plan. Accordingly, the Company created
a special purpose 1993 Employee Stock Option Plan (the "1993 Plan") to provide
for the one-time award of options to purchase shares of Common Stock to active
key employees in recognition of their prior service. In addition, the 1994
Employee Stock Option Plan (the "1994 Plan") was created as a successor to the
1993 Plan to facilitate future awards of Options to key employees and to
consultants. The term "Option" as used herein refers to either a NQSO or an ISO
(each as defined below), as the case may be.
Each of the Company's stock option plans is administered, and options
thereunder are granted, by a duly authorized committee (the "Committee") of the
Board of Directors (the members of which shall be disinterested (as defined in
Rule 16b-3 under the Exchange Act), unless otherwise determined by the Board),
or by the Board if there is no such committee.
Based on the 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 June 1, 1994 was $15.50.
1993 EMPLOYEE STOCK OPTION PLAN
The Company adopted the 1993 Plan effective January 28, 1994 (the
"Effective Date of the 1993 Plan").
SHARES SUBJECT TO OPTIONS. The 1993 Plan authorizes the issuance of up to
3,119,466 shares of Common Stock (with no more than 1,000,000 shares to any
employee in any calender year) upon the exercise of non-qualified stock options
("NQSOs") granted to certain key employees of the
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<PAGE>
Company. Key employees are those active executive officers and other valuable
employees of the Company that are selected by the Committee to participate in
the 1993 Plan. Under the 1993 Plan no Options may be granted after December 31,
1995.
OPTIONS. Options issued pursuant to the 1993 Plan will be exercisable at
such price, not less than the par value of the Common Stock purchasable
thereunder, as may be fixed by the Committee. Shares of Common Stock purchased
pursuant to the exercise of Options shall be paid for at the time of exercise as
follows: (i) in cash or by check, bank draft or money order; (ii) if the Common
Stock is traded on a national securities exchange, through the delivery of
instructions to a broker to deliver the purchase price; or (iii) on other terms
acceptable to the Committee (which may include payment by transfer of shares
owned by the participant for at least six months or the surrender of Options).
Options granted under the 1993 Plan are subject to restrictions on transfer
and exercise. No Option granted under the 1993 Plan may be exercised prior to
the earlier of the closing of a Public Offering (as defined in the 1993 Plan) or
the expiration of two years from the Effective Date of the 1993 Plan, subject to
acceleration in the event of a Change in Control of the Company (as defined in
the 1993 Plan) and subject to the authority of the Committee to permit earlier
exercise in its sole discretion. The Committee may set a schedule of
exerciseability with regard to each Option grant, subject to acceleration in the
event of a Change in Control of the Company. Also, no Option may be exercisable
after the expiration of ten years from the date of its grant. Moreover, no
Option may be transferred, assigned, pledged or hypothecated in any way except
by will or under applicable laws of descent and distribution. Shares of Common
Stock purchased upon exercise of an Option ("Shares") may not be transferred for
a period of two years following the initial Public Offering of the Company, or
such shorter time as the Committee may in its sole discretion determine.
In consideration of the grant of Options, an employee shall be required to
agree not to engage, without the written consent of the Committee, in any
Competitive Activity (as defined in the 1993 Plan) during the participant's
employment by the Company and, in the event any Options shall vest, for a period
of one year following termination of employment. Options that were exercisable
upon a participant's termination of employment by the Company other than for
cause remain exercisable following such termination for a period of: (a) one
year, in the case of death or disability, (b) 90 days, in the case of retirement
or termination by the Company other than for cause and (c) in all other
instances, 30 days following such termination, in each case subject to extension
by the Committee. Except as otherwise determined by the Committee, Options that
were not exercisable at the time of a participant's termination of employment by
the Company shall automatically be canceled upon such termination. The Committee
has the discretion under the 1993 Plan to impose in a participant's Option
Agreement such other conditions, limitations and restrictions as it determines
are appropriate in its sole discretion, including any waivers of rights which a
participant may have.
The 1993 Plan provides for the Committee to have the right to make
appropriate adjustments in the number and kind of securities receivable upon the
exercise of Options or the exercise price in the event of a stock split, stock
dividend, merger, consolidation, reorganization, spinoff, partial or complete
liquidation or other similar changes in the capital structure or other corporate
transactions. The 1993 Plan also gives the Committee the option to terminate all
outstanding Options effective upon the consummation of a merger or consolidation
in which the Company is not the surviving entity or of any other transaction
that results in the acquisition of substantially all of the Company's
outstanding Common Stock by a single person or entity or by a group of persons
and/or entities acting in concert, or upon the consummation of the sale or
transfer of all of the Company's assets (any such event an "Acquisition Event"),
subject to the right of participants to exercise all outstanding Options prior
to the effective date of the Acquisition Event.
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<PAGE>
As of the date hereof, Options for approximately 3,000,000 Shares granted
to approximately 60 employees are outstanding. At the date the 1993 Plan was
adopted, approximately 65 employees were eligible to participate in the 1993
Plan.
1994 EMPLOYEE STOCK OPTION PLAN
The Company adopted the 1994 Plan effective April 15, 1994 (the "Effective
Date of the 1994 Plan").
SHARES SUBJECT TO OPTIONS. The 1994 Plan authorizes the issuance of up to
2,980,534 shares of Common Stock (with no more than 1,000,000 shares to any
employee or consultant in any calender year, with any unused portion thereof
carried forward) upon the exercise of Incentive Stock Options ("ISOs") and NQSOs
granted to certain key employees and NQSOs granted to executive consultants of
the Company. Key employees are those active executive officers or other valuable
employees of the Company that are selected by the Committee to participate in
the 1994 Plan. Executive consultants are those executive-level consultants of
the Company that are selected by the Committee to participate in the 1994 Plan.
No Options may be granted after ten years from the Effective Date of the 1994
Plan.
OPTIONS. In the case of ISOs, the exercise price of an Option may not be
less than 100% of the Fair Market Value (as defined in the 1994 Plan) of a share
of Common Stock at the time of grant (or 110% of such Fair Market Value if the
grantee owns more than 10% of the shares of Common Stock outstanding at the time
of grant (a "Ten Percent Shareholder")). NQSOs issued pursuant to the 1994 Plan
will be exercisable at such price, not less than the Fair Market Value of a
share of Common Stock at the time of grant, as may be fixed by the Committee,
provided, that, prior to the initial Public Offering of the Company, Options may
be issued with an exercise price below the Fair Market Value of a share of
Common Stock at the time of the grant. Shares purchased pursuant to the exercise
of Options shall be paid for at the time of exercise as follows: (i) in cash or
by check, bank draft or money order; (ii) if the Shares are traded on a national
securities exchange, through the delivery of instructions to a broker to deliver
the purchase price; or (iii) on other terms acceptable to the Committee (which
may include payment by transfer of shares owned by the participant for at least
six months or the surrender of Options).
Options granted under the 1994 Plan are subject to restrictions on transfer
and exercise. No Option granted under the 1994 Plan may be exercised prior to
the earlier of the closing of a Public Offering (as defined in the 1994 Plan) or
the expiration of five years from the Effective Date of the 1994 Plan, subject
to acceleration in the event of a Change in Control of the Company (as defined
in the 1994 Plan) and subject to the authority of the Committee to permit
earlier exercise in its sole discretion. In addition, the Committee may set a
schedule of exerciseability with regard to each Option grant, subject to
acceleration in the event of a Change in Control of the Company. Also, no Option
may be exercisable after the expiration of ten years from the date of its grant
(or five years, in the case of ISOs granted to a Ten Percent Shareholder).
Moreover, no Option may be transferred, assigned, pledged or hypothecated in any
way except by will or under applicable laws of descent and distribution. Shares
of Common Stock purchased upon exercise of an Option may not be transferred for
a period of two years following the initial Public Offering of the Company, or
such shorter time as the Committee may in its sole discretion determine.
In consideration of the grant of Options, each employee will be required to
agree not to engage, without the written consent of the Committee, in any
Competitive Activity (as defined in the 1994 Plan) during the participant's
employment by the Company, and in the event any Options shall vest, for a period
of one year following termination of employment. Options that were exercisable
upon a participant's termination of employment or consultancy by the Company
other than for cause remain exercisable following such termination for a period
of: (a) one year, in the case of death or disability, (b) 90 days, in the case
of retirement or termination other than for cause and (c) in all
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<PAGE>
other instances, 30 days following such termination, in each case subject to
extension by the Committee. Except as otherwise determined by the Committee,
Options that were not exercisable at the time of a participant's termination of
employment or consultancy by the Company shall automatically be canceled upon
such termination. The Committee has the discretion under the 1994 Plan to impose
in a participant's Option Agreement such other conditions, limitations and
restrictions as it determines are appropriate in its sole discretion, including
any waivers of rights which a participant may have.
The 1994 Plan provides for the Committee to have the right to make
appropriate adjustments in the number and kind of securities receivable upon the
exercise of Options or the exercise price in the event of a stock split, stock
dividend, merger, consolidation, reorganization, spinoff, partial or complete
liquidation or other similar changes in the capital structure or other corporate
transactions. The 1994 Plan also gives the Committee the option to terminate all
outstanding Options effective upon the consummation of a merger or consolidation
in which the Company is not the surviving entity or of any other transaction
that results in the acquisition of substantially all of the Company's
outstanding Common Stock by a single person or entity or by a group of persons
and/or entities acting in concert, or upon the consummation of the sale or
transfer of all of the Company's assets (any such event an "Acquisition Event"),
subject to the right of participants to exercise all outstanding Options prior
to the effective date of the Acquisition Event.
As of the date hereof, Options for approximately 200,000 Shares granted to
seven employees are outstanding, leaving Options for approximately 2,800,000
Shares available for grant to employees and consultants in the future. At the
date the 1994 Plan was adopted, approximately 500 employees were eligible to
participate in the 1994 Plan.
FEDERAL INCOME TAX CONSEQUENCES
Under Federal income tax law as currently in effect, neither ISOs nor NQSOs
require an optionee to recognize income at the time of grant. However, upon the
exercise of a NQSO, the optionee will recognize ordinary income in an amount
equal to the excess of the fair market value of the Common Stock over the
aggregate exercise price. With respect to an ISO, no income is recognized by the
optionee in connection with the exercise, although the excess of the fair market
value of the Common Stock at exercise over the aggregate exercise price results
in alternative minimum taxable income which is used in determining for the
optionee alternative minimum tax liability. The optionee will be subject to
taxation at the time Shares acquired upon the exercise of an ISO are sold. If
the sale occurs at least two years after the date the ISO was granted and at
least one year after the date it was exercised, the optionee generally will
recognize capital gain in an amount equal to the excess of the proceeds of the
sale over the aggregate exercise price of the Shares sold. If the optionee
disposes of such Shares within two years of the date an Option was granted or
within one year of receipt of the Shares pursuant to the exercise of an ISO, the
optionee will recognize ordinary income, in an amount equal to the excess of the
fair market value of the Shares on the date of the exercise over the exercise
price. The excess, if any, of the amount realized upon disposition of such
Shares over the fair market value of the Shares on the date of exercise will be
long or short term capital gain, depending upon the holding period of the
Shares, providing the optionee holds the shares as a capital asset at the time
of disposition. If such disposition of the Shares by the optionee within two
years of the date of grant of the Option is a sale or exchange with respect to
which a loss (if sustained) would be recognized by the optionee, then the amount
which is includable in the gross income of the optionee shall not exceed the
excess (if any) of the amount realized on the sale or exchange over the adjusted
basis of such Shares.
The Company's tax consequences will also depend upon whether an option is
an ISO or a NQSO. In the case of a NQSO, the Company will be entitled, subject
to the possible application of Sections 162(m) and 280G of the Code as discussed
below, to a deduction in connection with the
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<PAGE>
optionee's exercise in an amount equal to the income recognized by the optionee,
provided that the Company complies with applicable withholding tax requirements,
if any. If the Option is an ISO, however, the Company will not be entitled to a
deduction if the optionee satisfies holding period requirements and recognizes
capital gain. If those requirements are not satisfied, the Company will be
entitled to a deduction corresponding to the ordinary income recognized by the
optionee, subject to the possible application of Section 162(m) of the Code as
discussed below. Section 162(m) of the Code denies a deduction to any
corporation, whose common shares are publicly held, for compensation paid to
certain covered employees in a taxable year to the extent that such compensation
exceeds $1 million. Covered employees are a company's chief executive officer on
the last day of the taxable year and any other individual whose compensation is
required to be reported to shareholders under the Exchange Act by reason of
being among the four highest compensated officers in office at the end of the
taxable year. The amount of ordinary income recognized by an optionee in the
year of exercise (or in the case of an ISO, disqualifying sale) is considered in
determining whether a covered employee's compensation exceeds $1 million.
Compensation paid under certain qualified performance based compensation
arrangements, which provide for compensation based on preestablished performance
goals established by a compensation committee that is comprised solely of two or
more outside directors and which is disclosed to, and approved by, the majority
of the company's shareholders, is not considered in determining whether a
covered employee's compensation exceeds $1 million. The legislative history to
Section 162(m) and the proposed regulations recently issued under Section 162(m)
provide that compensation attributable to options which provide for an exercise
price less than the fair market value of the underlying shares on the date of
grant ("discount options") will not be treated as paid pursuant to a qualified
performance based compensation arrangement. The proposed regulations generally
provide, although the matter is not entirely clear, that option plans (and any
options issued thereunder) that were adopted prior to the time a company
publicly offers its common equity securities will not be subject to the Section
162(m) limitation, provided such plan is adequately disclosed by the company in
a prospectus issued in connection with a public offering of common equity
securities. Since the 1993 Plan and the 1994 Plan were adopted prior to the
effective date of the Registration Statement of which this Prospectus is a part,
the 1993 Plan and the 1994 Plan (and any options issued thereunder) may be
exempt from the application of Section 162(m). The Company intends to review
this issue (including any additional guidance which may hereafter be issued by
the Internal Revenue Service or the courts) at the time any employee exercises
options, the compensation element of which, when combined with other
compensation received by such employee during the taxable year, exceeds $1
million, and consider whether and to what extent the 1993 Plan and the 1994 Plan
and the options at issue are subject to the Section 162(m) limitation.
If there is an acceleration of the exercisability of Options upon a change
of ownership or control of the Company or a change in the ownership of a
substantial portion of the assets of the Company (within the meaning of Section
280G of the Code), all or a portion of the income realized by the optionee (from
the exercise of Options and from any other payments made to the optionee by the
Company) may constitute "excess parachute payments" under Section 280G. The
optionee receiving excess parachute payments incurs an excise tax of 20% of the
amount of the payments in excess of the employee's average annual compensation
for the five calendar years preceding the year of the event causing the
acceleration and the Company is not entitled to a deduction for such excess
amounts.
NEW PLAN BENEFITS
The table below shows Options that have been granted or will be granted
prior to the consummation of the Offerings under the 1993 Plan and the 1994 Plan
to (i) any Named Executive Officer (as defined below), (ii) any executive
officer who is a member of the continuing management group and who is not a
Named Executive Officer, (iii) all current executive officers as a group and
(iv) all employees, including all current officers who are not executive
officers, as a group. The term
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"Named Executive Officer" is defined for these purposes to include (i) Mr.
Stockman and Mr. Wasserstein, the Company's Co-Chairmen of the Board, Mr.
Schwarzman, the Company's President prior to the consummation of the Offerings,
Mr. Birle, the Company's former Co-Chairman of the Board, and two former
executive officers who would have been among the Company's four most highly
compensated executive officers but for the fact that they were not serving as
executive officers at the end of the fiscal year ended January 29, 1994, none of
whom has been granted any Options, and (ii) the Company's four most highly
compensated executive officers who were serving as executive officers at the end
of the fiscal year ended January 29, 1994 and whose total annual salary and
bonus exceeded $100,000.
EMPLOYEE STOCK OPTION GRANTS
<TABLE>
<CAPTION>
NUMBER OF
PER SHARE SHARES
EXERCISE UNDERLYING EXPIRATION
NAME AND POSITION AFTER THE OFFERINGS PRICE OPTIONS DATE PLAN
- ------------------------------------------------------------- ----------- ------------ --------------- ----------
<S> <C> <C> <C> <C>
Thomas E. Hannah............................................. $ 3.99 841,230 (1) 1993
Chief Executive Officer 8.26 140,205 (1) 1993
William J. Brucchieri........................................ 3.99 77,184 (1) 1993
President of Imperial Wallcoverings 8.26 61,757 (1) 1993
John D. Moose................................................ 3.99 146,555 (1) 1993
President of North American Auto Group 8.26 50,074 (1) 1993
Harry F. Schoen III.......................................... 3.99 97,998 (1) 1993
President of Mastercraft Division 8.26 66,007 (1) 1993
Elizabeth R. Philipp......................................... 3.99 83,508 (1) 1993
Executive Vice President, General Counsel and Secretary 8.26 8,345 (1) 1993
Mark O. Remissong............................................ 4.43 44,735 (2) 1994
Senior Vice President and Chief Financial Officer 8.26 33,267 (2) 1994
Paul W. Meeks................................................ 3.99 11,403 (1) 1993
Vice President and Treasurer
Executive Group--1993 Plan................................... 3.99 1,257,878 (1) 1993
8.26 326,388 (1) 1993
Executive Group--1994 Plan................................... 4.43 44,735 (2) 1994
8.26 33,267 (2) 1994
Non-Executive Employee Group--1993 Plan...................... 3.99 1,292,465 (1) 1993
4.43 67,261 (1) 1993
8.26 92,220 (1) 1993
Non-Executive Employee Group--1994 Plan...................... 4.43 76,507 (2) 1994
8.26 15,125 (2) 1994
</TABLE>
- ---------------
(1) January 28, 2004
(2) April 15, 2004
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<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
AND CERTAIN RELATIONSHIPS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock by the existing holders of
Common Stock in excess of 5% after giving effect to the Recapitalization
(including the exchange by Blackstone Partners and WP Partners of $94.3 million
and $98.9 million, respectively, of the PIK Notes of the Company held by them
for shares of Common Stock), (i) before the Offerings, (ii) as adjusted to give
effect to the Offerings and (iii) assuming the over-allotment options are
exercised in full. 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 AFTER
THE
OFFERINGS,
AND AFTER
THE
SHARES BENEFICIALLY OWNED EXERCISE OF
SHARES BENEFICIALLY OWNED OVERALLOTMENT
BEFORE THE OFFERINGS AFTER THE OFFERINGS OPTIONS
-------------------------- --------------------------- -----------
OVERALLOTMENT
OPTION SHARES
NAME AND ADDRESS SHARES TO TO BE
OF SELLING STOCKHOLDER NUMBER PERCENTAGE BE SOLD NUMBER PERCENTAGE OFFERED(1) NUMBER
- ------------------------ ----------- ------------- --------- ------------ ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Blackstone Capital 21,494,417 46.0% 2,500,000 18,994,417 28.5% 1,875,000 17,119,417
Partners L.P.(2)(3)
118 North Bedford Road
Suite 300
Mount Kisco, NY 10549
Wasserstein Perella 23,075,953 49.4% 2,500,000 20,575,953 30.8% 1,875,000 18,700,953
Partners, L.P.(4)
31 West 52nd Street
New York, NY 10019
</TABLE>
NAME AND ADDRESS
OF SELLING STOCKHOLDER PERCENTAGE
- ------------------------ -------------
Blackstone Capital 25.7%
Partners L.P.(2)(3)
118 North Bedford Road
Suite 300
Mount Kisco, NY 10549
Wasserstein Perella 28.0%
Partners, L.P.(4)
31 West 52nd Street
New York, NY 10019
- ---------------
(1) The Partners have granted the U.S. Underwriters an overallotment option to
purchase up to 3,000,000 shares of Common Stock and the International
Underwriters an overallotment option to purchase up to 750,000 shares of
Common Stock.
(2) Includes 1,290,741 shares of Common Stock owned of record by Blackstone
Family Investment Partnership II L.P. and 113,447 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 is a Delaware limited partnership formed for the purpose
of, among other things, (i) committing capital to facilitate corporate
restructurings, leveraged buyouts, bridge financings and other investments
and (ii) capitalizing affiliates which will engage in investment and
merchant banking activities. The sole general partner of Blackstone Partners
is Blackstone Management Associates L.P. ("Blackstone Associates"), a
Delaware limited partnership whose general partners include Messrs. Birle,
Schwarzman and Stockman. At present, the business of Blackstone Associates
consists of performing the function of, and serving as, the general partner
of certain limited partnerships, including Blackstone Partners. Messrs.
Birle, Schwarzman and Stockman are also general partners of Blackstone
Management.
(4) WP Partners is a Delaware limited partnership, the general partner of which
is WP Management. Mr. Wasserstein is Chairman and Chief Executive Officer of
WP Management and WP Group. WP Partners was formed by WP Group for the
purpose of participating in merchant banking activities, including
committing capital to the organization and consummation of leveraged buyout
transactions. WP Management and WP Group are both Delaware corporations. WP
Management is engaged in managing WP Partners. WP Group is an international
private advisory and merchant banking firm. The principal subsidiary of WP
Group is WP & Co., an international investment banking firm.
Prior to the consummation of the Recapitalization, each of Blackstone
Partners and WP Partners beneficially owns, through Holdings II, 50% of the
outstanding voting Common Stock of the Company. 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
28.5% and 30.8%, respectively, of the outstanding Common Stock and will be in a
position to control the Company. It
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<PAGE>
is also expected that the Partners and their respective affiliates may in the
future act in various capacities in connection with transactions to which the
Company is a party.
In each of 1993 and 1994, Group paid each of the Managers-Advisors an
annual operating management fee of $1 million. Group also has paid each of the
Managers-Advisors an annual management and financial advisory services fee of
$1.5 million, paid quarterly in advance. Group also has reimbursed the
Managers-Advisors for out-of-pocket expenses in connection with their management
services. Following the consummation of the Recapitalization, the annual
operating management fee and the annual management and financial advisory
services fee will no longer be payable, and the Managers-Advisors will not be
required to refund any portion of such fees already paid at the time of the
Recapitalization.
Since the beginning of 1993, in connection with the divestiture of the
Engineering Group, Group has paid divestiture fees (i) to Blackstone Management
Partners L.P., an affiliate of Blackstone ("Blackstone Management") in the
amount of approximately $512,500 and (ii) to WP&Co. and WP Partners in an
aggregate amount of $512,500. Since the beginning of 1993, in connection with
the consummation of two credit agreements by Kayser-Roth, Group has paid fees
(i) to Blackstone Management in the amount of $375,000 and (ii) to WP&Co. and WP
Partners in an aggregate amount of $375,000. Since the beginning of 1993, Group
has paid $1,394,000 to each of the Managers-Advisors in connection with the
divestiture of Kayser-Roth.
In September 1993, Blackstone entered into an agreement with Group to
provide advisory services and assistance in connection with the sale or
disposition by Group of its Builders Emporium division. The agreement provides
for reimbursement of out-of-pocket expenses plus payment of fees to be paid by
Group to Blackstone of (i) $100,000 per month, commencing with the month ending
September 25, 1993 and ending with the month ending January 29, 1994 and (ii)
$100,000 for the quarter commencing January 30, 1994 and ending April 30, 1994.
Since the beginning of 1993, Group has paid $600,000 under this agreement. In
addition, Blackstone negotiated with Arkaid Incorporated, a real estate
consultant ("Arkaid"), to receive 20% of the incentive fees payable to Arkaid by
Group in connection with the resolution of lease liabilities of Builders
Emporium. Since the beginning of fiscal 1993, no such incentive fees have been
accrued or paid to Arkaid.
The Board of Directors of Group has authorized the investment by Group from
time to time of amounts not to exceed $5 million in a short-term investment fund
to which Blackrock Financial Management L.P. serves as investment advisor.
Blackrock Financial Management L.P., an affiliate of Blackstone, charges annual
management fees equal to 0.3% of the amount invested, plus nominal out-of-pocket
expenses. Since the beginning of 1993, Group has paid to Blackrock Financial
Management L.P. fees of approximately $13,000.
During the first quarter of 1994, the Company incurred expenses of $2.5
million for services performed by Blackstone Partners and WP Partners in
connection with a comprehensive review of the Company's liabilities associated
with discontinued operations, including surplus real estate, postretirement and
workers compensation liabilities. During the first quarter of 1994, the Company
incurred expenses of $3.25 million for services performed by Blackstone Partners
and $2.75 million for services performed by WP Partners in connection with the
Company's review of refinancing and strategic alternatives as well as certain
other advisory services.
It is anticipated that each of the Managers-Advisors will receive a $1
million annual monitoring fee and the reimbursement of expenses from the Company
pursuant to the Stockholders Agreement, which will be effective as of the
consummation of the Recapitalization, and that any transaction with affiliates
not contemplated by the Stockholders Agreement will be passed upon by the
independent directors.
Pursuant to the Stockholders Agreement, each Partner and the Company has a
right of first refusal with regard to sales of Common Stock by each Partner
(with certain exceptions). Each Partner also has the right to sell along with
the other (with certain exceptions). The Prudential
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<PAGE>
Insurance Company of America and certain of its affiliates, which upon
consummation of the Offerings will own approximately 1,712,424 Shares of Common
Stock, have certain rights to participate in any sale by Blackstone Partners.
The Stockholders Agreement provides that each Partner has the right to
require the Company to effect up to five (but no more than two in any
twelve-month period) registration statements covering sales of Common Stock by
such Partner. All expenses of such demand registration shall be paid by the
Company, except for underwriting commissions and certain other expenses which
shall be paid by the selling Partner. Each Partner also has unlimited rights to
"piggyback" on any Company registration or a demand registration of the other
Partner. No demand registration may be requested prior to January 1, 1995,
unless waived by the Company.
The Restated Certificate of Incorporation will provide that a nominating
committee of the Board of Directors consisting of the nonemployee directors will
have exclusive power to nominate directors on behalf of the Board of Directors
and will have exclusive power to fill any vacancies on the Board of Directors.
Under certain circumstances, such as resignation of a director, the Board of
Directors is required to replace the director with an individual affiliated with
the same Partner as the former director.
Pursuant to the Voting Agreement, each Partner will be obligated to vote
for nominees to the Board of Directors that are affiliated with the other
Partners (and in certain circumstances its transferee).
NEW CREDIT FACILITIES
The Company has entered into a new credit agreement (the "New Credit
Agreement") with Chemical Bank ("Chemical") and the lenders named therein, and a
receivables transfer and servicing agreement (the "Receivables Transfer
Agreement") with Chemical, providing for the New Credit Facilities in an
aggregate amount of $775 million.
The New Credit Facilities will consist of (i) an eight-year senior secured
term loan facility (the "Closing Date Term Loan Facility") in an aggregate
principal amount of $450 million, which will be drawn in full on the Closing
Date, (ii) an eight-year senior secured term loan facility (the "Delayed Draw
Term Loan Facility") in an aggregate principal amount of $25 million, which may
be drawn in full or in part on or prior to the first anniversary of the Closing
Date, (iii) a seven-year senior secured revolving credit facility (the
"Revolving Facility", together with the Closing Date Term Loan Facility and the
Delayed Draw Term Loan Facility, the "Credit Agreement Facilities") in an
aggregate principal amount of up to $150 million and (iv) a seven-year
receivables facility (the "Receivables Facility") in an aggregate amount of up
to $150 million.
The proceeds of loans under the Closing Date Term Loan Facility will be
used by the Company, together with the net proceeds of the Offerings, borrowings
under the Revolving Facility, proceeds of the Receivables Facility and the
Company's existing cash, to refinance existing indebtedness and preferred stock
of the Company and certain of its subsidiaries. See "Use of Proceeds and
Consolidation". Borrowings may be effected under the Delayed Draw Term Loan
Facility during the one-year period following the date of the inital funding
under the Credit Agreement Facilities (the "Closing Date"); provided, however,
that borrowings under the Delayed Draw Term Loan Facility will not be available
unless the Company receives at least $275 million in gross cash proceeds in
connection with the Offerings. 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 finance acquisitions permitted by the terms of the New
Credit Agreement. The proceeds of loans under the Revolving Facility (other than
as set forth in the first sentence of this paragraph) will be used by the
Company for general corporate purposes, including working capital and
acquisitions.
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<PAGE>
CREDIT AGREEMENT FACILITIES
The Company's wholly-owned subsidiary, Group, is the borrower (the
"Borrower") under the Credit Agreement Facilities, although a portion of the
Closing Date Term Loan Facility will be available for loans to a Canadian
subsidiary of the Borrower. Loans outstanding under the Credit Agreement
Facilities will bear interest, which will be due quarterly, at a rate equal to
the Borrower's choice of (i) Chemical's Alternate Base Rate (which is the
highest of Chemical's announced prime rate, the Federal Funds Rate plus 1/2% and
Chemical's base certificate of deposit rate plus 1%) ("ABR") plus the ABR Margin
per annum or (ii) the offered rates for Eurodollar deposits for one, two, three,
six, nine, or twelve months (as selected by the Borrower) appearing on page 3750
(or any successor page) of the Dow Jones Telerate Screen as of 11:00 am, London
time, on the day that is two business days prior to the first day of the
applicable interest period ("LIBOR") plus the LIBOR Margin per annum. Pursuant
to the terms of the New Credit Agreement, the "ABR Margin" initially will be
3/4% and the "LIBOR Margin" initially will be 1 3/4%. Such margins will be
subject to step-downs in certain circumstances and will increase by 1/4% over
the margins then in effect on the fifth anniversary of the Closing Date.
Loans under the Closing Date Term Loan Facility will amortize on an equal
quarterly basis in annual amounts equal to (i) $25 million in the second year
following the Closing Date, (ii) $45 million in the third year following the
Closing Date, (iii) $65 million in the fourth year following the Closing Date,
(iv) $75 million in the fifth year following the Closing Date and (v) $80
million in the sixth, seventh and eighth years following the Closing Date. Loans
under the Delayed Draw Term Loan Facility will amortize on an equal quarterly
basis in annual amounts, which are ratably based on the annual payments of the
Closing Date Term Loan Facility. The Revolving Facility will mature on the
seventh anniversary of the Closing Date. In addition, the New Credit Agreement
provides for mandatory prepayments of the Credit Agreement Facilities with
certain excess cash flow of the Company, net cash proceeds of certain asset
sales or other dispositions by the Company and its subsidiaries, net cash
proceeds of sale/leaseback transactions, net cash proceeds of certain issuances
of debt obligations and net cash proceeds received by the Company in connection
with loans to the ESOP. Mandatory prepayments will be applied pro rata across
remaining scheduled maturities. Loans under the Credit Agreement Facilities will
be voluntarily prepayable by the Borrower at any time without penalty. Voluntary
prepayments will be applied against the most current scheduled maturities.
The Credit Agreement Facilities are guaranteed by the Company and each
existing and subsequently acquired or organized United States subsidiary of the
Company (other than certain unrestricted subsidiaries and, except for loans to
the Canadian subsidiary, the Borrower) subject to certain exceptions. The Credit
Agreement Facilities and the Guarantees are secured by a first priority pledge
of all the capital stock of the Borrower and each subsidiary (other than certain
unrestricted subsidiaries) of the Borrower (or, in the case of any foreign
subsidiary, 65% of the capital stock of such subsidiary) and certain
intercompany indebtedness.
The New Credit Agreement contains certain conditions precedent to the
Credit Agreement Facilities, including without limitation the following
conditions: (i) consummation of the Recapitalization simultaneously with the
Closing, (ii) receipt by the Company of at least $250,000,000 in gross cash
proceeds 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 $23,000,000,
(iv) satisfaction of the conditions precedent under the Receivables Facility,
(v) receipt by the Lenders of certain audited and pro forma consolidated
financial statements for the Company and its subsidiaries for the fiscal years
ended January 29, 1994 and January 30, 1993, (vi) the Lenders' satisfaction (a)
that the Company will have sufficient sources of funds to effect the
Recapitalization and pay related fees and expenses, (b) with the Company's tax
position, (c) with the amount and nature of the Company's and its subsidiaries'
environmental and employee health and safety exposures, (d) with the sufficiency
of the amount available under the
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<PAGE>
Revolving Facility to meet the ongoing working capital requirements of the
Company and the Borrower following the Recapitalization and (e) with all
material legal, tax and accounting matters relating to the Recapitalization,
(vii) the Administrative Agent's reasonable satisfaction with the Company's cash
management procedures, (viii) receipt of all requisite governmental and third
party approvals and (ix) absence of outstanding material litigation.
The New Credit Agreement contains various restrictive covenants typical for
facilities and transactions of this type (with customary qualifications and
exceptions), including limitations on indebtedness of the Company and its
subsidiaries, limitations on dividends and on redemptions and repurchases of
capital stock; limitations on prepayments, redemptions and repurchases of debt;
limitations on liens and sale/leaseback transactions; limitations on loans and
investments; limitations on capital expenditures; a prohibition on the Company's
direct ownership of any subsidiary other than Group or certain unrestricted
subsidiaries; limitations on mergers, acquisitions and asset sales; limitations
on transactions with affiliates and stockholders; limitations on fundamental
changes in business conducted; limitations on the amendment of debt and other
material agreements and licenses. In addition to the foregoing, the New Credit
Agreement contains covenants requiring the Company and its subsidiaries to
maintain a minimum EBITDA level, a minimum ratio of EBITDA to cash interest
expense, a maximum ratio of indebtedness to EBITDA and a minimum ratio of
current assets to current liabilities, in each case tested at the end of each
fiscal quarter of the Company. Based upon pro forma results for the quarter
ended April 30, 1994 and the pro forma balance sheet as of April 30, 1994, the
Company is currently in compliance with all covenants in the New Credit
Agreement, and the Company has no reason to expect that it will not continue to
remain in compliance for the term of the New Credit Agreement. The Company does
not anticipate that such covenants will materially impact the Company's ability
to operate its business in the manner in which it is presently conducted.
The New Credit Agreement also contains various events of default typical
for facilities and transactions of this type (with customary qualifications and
exceptions), including nonpayment of principal or interest; violation of
covenants; material breaches of representations and warranties; cross default
and cross acceleration; bankruptcy; material undischarged judgments; certain
ERISA events; invalidity of security documents; invalidity of subordination
provisions; and Change in Control. "Change In Control" is defined in the New
Credit Agreement to require (a) a majority of the board of directors of the
Company to be comprised of Continuing Directors (defined as any director of the
Company who either (x) was a member of the board of directors on the Closing
Date or (y) after the Closing Date became a member of the board of directors and
whose election was approved by a vote of a majority of the Continuing Directors
then on the board of directors of the Company), (b) that no person or group
(other than WP Partners, Blackstone Partners and additional designated persons)
beneficially own, directly or indirectly, shares representing more than 25% of
the aggregate ordinary voting power represented by the outstanding capital stock
of the Company at any time that WP Partners, Blackstone Partners and additional
designated persons do not beneficially own, free and clear of liens and claims,
shares representing at least 50% of the aggregate ordinary voting power
represented by the outstanding capital stock of the Company, and (c) that the
Company maintain direct ownership of the Borrower, free of liens and claims.
In addition to the foregoing, the New Credit Agreement contains other
miscellaneous provisions, including provisions concerning (i) assignments by
lenders, (ii) indemnification by the Borrower of each lender from and against
any losses, claims or other expenses and (iii) payment by the Borrower of
certain fees and expenses of the lenders and their respective advisors and
consultants.
RECEIVABLES FACILITY
In connection with establishing the Receivables Facility, Group has formed
and capitalized a wholly owned, bankruptcy-remote subsidiary (the "Receivables
Company"). The Receivables Company will purchase, on a revolving basis, all
trade receivables generated by certain subsidiaries of the Company (such
subsidiaries, the "Sellers"). The Receivables Company will purchase
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such receivables from the Sellers pursuant to a receivables sale agreement (the
"Receivables Sale Agreement"), at purchase prices equal to the face amount of
such receivables less a discount factor to reflect collection risks, finance
costs and similar matters. The Receivables Company will finance its initial
purchase of receivables in part with the initial capital contribution received
from Group and in part through the Receivables Transfer Agreement entered into
with Chemical and, if Chemical elects at any time, a syndicate of financial
institutions (together with Chemical, the "Buyers"). Ongoing purchases of
receivables by the Receivables Company will be financed in part from collections
in respect of receivables, in part with new purchases made by the Buyers, in
part through the issuance of subordinated promissory notes to the Sellers or
Group, in part with additional capital contributions from Group and in part
through offsets against certain repurchase obligations of the Sellers to the
Receivables Company.
The purchases by the Buyers of interests in the receivables under the
Receivables Facility will be made with limited recourse and at an initial
interest cost to the Receivables Company equal to, at the Receivables Company's
election, LIBOR plus 5/8% per annum or ABR. The Buyers' interest in receivables
of up to $150 million will be an undivided senior interest in all receivables
owned by the Receivables Company. The Receivables Company will retain a
subordinated interest in the receivables that will vary from time to time. If at
any point in time the Sellers generate insufficient receivables, or the
character of the receivables purchased by the Receivables Company do not satisfy
customary eligibility criteria (such as no bankruptcy, no delinquency and no
excessive concentration levels), the investment of the Buyers may be less than
$150 million.
The proceeds received by the Receivables Company from purchases by the
Buyers pursuant to the Receivables Transfer Agreement will be dividended or
distributed from time to time to Group to be used on the Closing Date in
connection with financing the Recapitalization and thereafter for working
capital purposes.
The Receivables Sale Agreement contains certain restrictions on the Sellers
customary for facilities of this type, including but not limited to limitations
on liens on the Sellers' receivables; limitations on modifications of the terms
of the Sellers' receivables; limitations on changes from historical credit and
collection practices; and limitations on changes in payment instructions. The
Sellers will continue to service the receivables (including all billing and
collection activities) and will receive a customary servicing fee from the
Receivables Company for providing such services. Group will act as a master
servicer, overseeing the servicing activities of the Sellers.
The Receivables Transfer Agreement contains certain restrictions customary
for facilities of this type, but will restrict the Receivables Company only. In
addition, the Board of Directors of the Receivables Company will include at all
times at least one independent director not affiliated with the Company.
The Receivables Transfer Agreement also contains certain conditions
precedent customary for facilities of this type, including the satisfaction or
waiver of all conditions precedent to the Credit Agreement Facilities;
Chemical's satisfaction with the arrangements for the collection of receivables;
Chemical's satisfaction with the original purchase of receivables by the
Receivables Company and Chemical's receipt of an agreed-upon procedures letter
of the Receivables Company's independent accountants.
The commitments under the Receivables Facility will terminate on the
earlier of (i) seven years following the date of the initial purchases by the
Buyers thereunder and (ii) upon the occurrence of certain termination events,
including but not limited to nonpayment of amounts when due; violation of
covenants; bankruptcy; change in control of the Receivables Company; material
judgments; and invalidity of the Receivables Transfer Agreement.
The Company anticipates that the Receivables Facility will be replaced by a
similar facility under which the Receivables Company will issue asset-backed
commercial paper, medium-term notes or other securities. If the Receivables
Facility has not then been replaced, the interest rate on the Receivables
Facility will increase to a rate equal to the then-applicable rate on the Credit
Agreement Facilities 270 days after the date of the initial purchases by the
Buyers thereunder.
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<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. Reference is made to the Restated Certificate
of Incorporation and Bylaws which are included as exhibits to the Registration
Statement of which this Prospectus forms a part (the "Restated Certificate of
Incorporation" and "Bylaws", respectively) for a more complete description of
the capital stock of the Company. See "Principal and Selling Stockholders and
Certain Relationships--Stockholders Agreement" for a description of certain
rights and restrictions relating to the capital stock of the Company.
COMMON STOCK
Subject to the rights of holders of Preferred Stock then outstanding,
holders of Common Stock are entitled to receive such dividends as may from time
to time be declared by the Board. See "Dividends". Holders of Common Stock are
entitled to one vote per share on all matters on which the holders of Common
Stock are entitled to vote. Because holders of Common Stock do not have
cumulative voting rights, the holders of the majority of the shares of Common
Stock represented at a meeting can select all the directors. In the event of
liquidation, dissolution or winding up of the Company, holders of Common Stock
would be entitled to share ratably in all assets of the Company available for
distribution to the holders of the Common Stock.
Upon full payment of the purchase price therefor, shares of Common Stock
will not be liable to further calls or assessments by the Company. There are no
preemptive rights for the Common Stock in the Restated Certificate of
Incorporation.
The Transfer Agent and Registrar for the Common Stock is First Union
National Bank of North Carolina.
PREFERRED STOCK
At April 30, 1994, the Company had outstanding approximately 6,514,000
shares of Merger Preferred Stock. All of the shares of Merger Preferred Stock
will be redeemed in connection with the consummation of the Recapitalization.
Pursuant to the Restated Certificate of Incorporation of the Company, the
Board is authorized, subject to any limitations prescribed by law, to provide
for the issuance of the shares of Preferred Stock in series and to establish
from time to time the number of shares to be included in each such series and to
fix the designation, powers, preferences and rights of the shares of each such
series and any qualifications, limitations or restrictions thereof. Because the
Board has the power to establish the preferences and rights of each series, it
may afford the holders of any Preferred Stock preferences, powers and rights
(including voting rights) senior to the rights of the holders of Common Stock.
No shares of Preferred Stock will be outstanding following the consummation of
the Recapitalization, and the Company has no present intention to issue such
shares. The issuance of shares of Preferred Stock, or the issuance of rights to
purchase such shares, could be used to discourage an unsolicited acquisition
proposal.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Offerings, the Company will have outstanding
66,710,900 shares of Common Stock. Of these shares, the 25,000,000 shares sold
in the Offerings (28,750,000 shares if the Underwriters' over-allotment options
are exercised in full) will be freely tradeable without
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<PAGE>
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, 41,710,900 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 exemption from such
registration, including exemptions provided by Rule 144 under the Securities
Act. Of the 41,710,900 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. With respect to
registration rights of certain investors, see "Principal and Selling
Stockholders and Certain Relationships."
In general, Rule 144 provides that, subject to its provisions and other
applicable Federal and state securities law requirements, any person (or persons
whose shares are aggregated), including any person who may be deemed an
"affiliate" of the Company, who has beneficially owned "restricted securities"
for at least two years is entitled to sell, within any three-month period, a
number of shares that does not exceed the greater of 1% of the total number of
outstanding shares of the same class or the average weekly trading volume of the
same class during the four calendar weeks preceding the sale. A person who is
not deemed to have been an "affiliate" of the Company at any time during the 90
days preceding the sale and who has beneficially owned "restricted securities"
for at least three years is entitled to sell such shares under Rule 144 without
regard to any of the limitations described above.
The holders of 41,710,900 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 without the prior written consent of the
representatives of the Underwriters. If such consent is given, the Company will
make a public announcement thereof. See "Underwriting."
ANTI-TAKEOVER PROVISIONS
The Restated Certificate of Incorporation and the Bylaws of the Company
contain certain provisions that may delay, defer or prevent a change in control
of the Company and make removal of management more difficult. These provisions
are intended to enhance the likelihood of continuity and stability in the
composition of the Board and in the policies formulated by the Board and to
discourage certain types of transactions which may involve an actual or
threatened change of control of the Company. The provisions are designed to
reduce the vulnerability of the Company to an unsolicited proposal for a
takeover of the Company that does not contemplate the acquisition of all its
outstanding shares or an unsolicited proposal for the restructuring or sale of
all or part of the Company. The provisions also are intended to discourage
certain tactics that may be used in proxy fights.
Set forth below is a description of such provisions in the Restated
Certificate of Incorporation and the Bylaws.
The Restated Certificate of Incorporation may be amended only by the
affirmative vote of the holders of 66 2/3% or more of the combined voting power
of the then outstanding shares of voting stock, voting together as a single
class. In addition, such a vote is required for the Company to effect (i) any
merger or consolidation of the Company, (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition of all or substantially all the
assets of the Company, or (iii) the adoption of any plan or proposal for the
liquidation, dissolution, spinoff, splitup, splitoff, or winding up of the
affairs of the Company.
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Pursuant to the Restated Certificate of Incorporation, the Board will be
divided into three classes serving staggered three-year terms. Directors can be
removed from office only for cause and only by the affirmative vote of the
holders of a majority of the combined voting power of the then outstanding
shares of voting stock, voting together as a single class. The Nominating
Committee, consisting of the nonemployee directors, will have exclusive power to
nominate directors on behalf of the Board of Directors and will have exclusive
power to fill any newly created directorships or any other vacancies on the
Board of Directors. Under certain circumstances, such as resignation of a
director, the Board of Directors is required to replace the director with an
individual affiliated with the same Partner as the former director. The Restated
Certificate of Incorporation provides that the number of directors, which shall
not exceed nine, will be fixed by, or in the manner provided in, the Bylaws. The
Bylaws provide that the whole Board will consist of such number of members,
which shall not exceed nine, as fixed from time to time by the Board.
Accordingly a stockholder could be delayed from obtaining majority
representation on the Board.
The Bylaws establish an advance notice procedure with regard to the
nomination, other than by or at the direction of the Nominating Committee, of
candidates for election as directors and with regard to certain matters to be
brought before an annual meeting of stockholders of the Company. In general,
notice as to any such stockholder nomination or other proposal must be received
by the Company with respect to annual meetings not less than 90 nor more than
120 days prior to the anniversary of the immediately preceding annual meeting
and must contain certain specified information concerning the person to be
nominated or the matters to be brought before the meeting and concerning the
stockholder submitting the proposal.
Subject to the terms of any Preferred Stock, any action required or
permitted to be taken by the stockholders of the Company may be taken only at a
duly called annual or special meeting of stockholders and may not be taken by
written consent without a meeting. Special meetings of the stockholders may be
called only by the Chairman or one of the Co-Chairmen of the Board or a majority
of the entire Board, and the business transacted at any special meeting will be
confined to the matters specified in the notice of meeting.
The foregoing provisions, together with the ability of the Board to issue
Preferred Stock without further stockholder action, could delay or frustrate the
removal of incumbent directors or the assumption of control by the holder of a
large block of the Company's Common Stock even if such removal or assumption
would be beneficial, in the short term, to stockholders of the Company. The
provisions could also discourage or make more difficult a merger, tender offer
or proxy contest even if such event would be favorable to the interests of
stockholders.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Section 203 of Delaware General Corporate Law ("DGCL") prevents an
"interested stockholder" (defined in Section 203, generally, as a person owning
15% or more of a corporation's outstanding voting stock), from engaging in a
"business combination" (as defined in Section 203) with a publicly held Delaware
corporation for three years following the date such person became an interested
stockholder unless (i) before such person became an interested stockholder, the
board of directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or approved the business
combination; (ii) upon consummation of the transaction that resulted in the
interested stockholder becoming an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding stock held by
directors who are also officers of the corporation and by employee stock plans
that do not provide employees with the rights to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer); or (iii) following the transaction in which such person became an
interested
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stockholder, the business combination is approved by the board of directors of
the corporation and authorized at a meeting of stockholders by the affirmative
vote of the holders of two-thirds of the outstanding voting stock of the
corporation not owned by the interested stockholder. The provisions of Section
203 will apply to the Company upon the consummation of the Offerings and may
have the effect of delaying, deferring or preventing a change of control of the
Company. Blackstone Partners and WP Partners will be interested stockholders
following consummation of the Offerings; however, Section 203 will not apply to
them because Holdings II has held in excess of 15% of the Company's outstanding
voting stock for more than three years and because the Board of Directors of the
Company has approved the acquisition by Blackstone Partners and WP Partners of a
direct ownership interest in the Company in connection with the
Recapitalization.
DIRECTORS' LIABILITY AND INDEMNIFICATION
The Restated Certificate of Incorporation contains a provision which
eliminates the personal liability of the Company's directors for monetary
damages resulting from breaches of their fiduciary duty to the fullest extent
permitted by the DGCL. Under the DGCL, the Company may not eliminate directors'
liability for breaches of the duty of loyalty, acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
violations under Section 174 of the DGCL or any transaction from which the
director derived an improper personal benefit. This provision also has no effect
on the ability of stockholders to seek equitable relief, such as an injunction,
that may be available to redress a breach of fiduciary duty, even though such
stockholders could not seek monetary damages from the directors for such breach.
The Bylaws contain provisions requiring, subject to certain procedures, the
indemnification of the Company's directors and officers to the fullest extent
permitted by Section 145 of the DGCL, including circumstances in which
indemnification is otherwise discretionary, and provide for the mandatory
advancement of litigation expenses incurred in defense of a claim upon the
receipt by the Company of any undertaking required by law. The Board of
Directors of the Company is further authorized, in its discretion, to provide
such rights to employees and agents of the Company. In addition, the Company may
enter into indemnification agreements with its directors and executive officers
that generally provide for similar rights to indemnification and advancement of
expenses. Management believes that these provisions are necessary to attract and
retain qualified persons as directors and officers.
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UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the U.S. Underwriters named below, and
each of such U.S. Underwriters, for whom Goldman, Sachs & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Wasserstein Perella Securities, Inc. and
The Nikko Securities Co. International, Inc., are acting as representatives, has
severally agreed to purchase from the Company, the respective number of shares
of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON
UNDERWRITER STOCK
- ----------------------------------------------------------------------------- --------------
<S> <C>
Goldman, Sachs & Co..........................................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................................
Wasserstein Perella Securities, Inc..........................................
The Nikko Securities Co.
International, Inc.........................................................
--------------
Total........................................................... 20,000,000
--------------
--------------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the U.S.
Underwriters are committed to take and pay for all of the shares offered hereby,
if any are taken.
The U.S. Underwriters propose to offer the shares of Common Stock in part
directly to the public at the initial public offering price set forth on the
cover page of this Prospectus, and in part to certain securities dealers at such
price less a concession of $ per share. The U.S. Underwriters may allow,
and such dealers may reallow, a concession not in excess of $ per share to
certain brokers and dealers. After the shares of Common Stock are released for
sale to the public, the offering price and other selling terms may from time to
time be varied by the representatives.
The Company 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 5,000,000 shares of Common Stock in an
international offering outside the United States. The initial public offering
price and aggregate underwriting discounts and commissions per share for the two
offerings are identical. The closing of the offering made hereby is a condition
to the closing of the International Offering, and vice versa. The
representatives of the International Underwriters are Goldman Sachs
International, Merrill Lynch International Limited, Wasserstein Perella
Securities, Inc. and Nikko Europe Plc.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
U.S. Underwriters named herein
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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: (i)
any individual who is a resident of the United States or (ii) any corporation,
partnership or other entity organized in or under the laws of the United States
or any political subdivision thereof and whose office most directly involved
with the purchase is located in the United States. Each of the International
Underwriters has agreed pursuant to the Agreement Between that, as a part of the
distribution of the shares offered as a part of the International Offering, and
subject to certain exceptions, it will (i) not, directly or indirectly, offer,
sell or deliver shares of Common Stock (a) in the United States or to any U.S.
persons or (b) to any person who it believes intends to reoffer, resell or
deliver the shares in the United States or to any U.S. persons, and (ii) cause
any dealer to whom it may sell such shares at any concession to agree to observe
a similar restriction.
Pursuant to the Agreement Between, sales may be made between the U.S.
Underwriters and the International Underwriters of such number of shares of
Common Stock as may be mutually agreed. The price of any share so sold shall be
the initial public offering price, less an amount not greater than the selling
concession.
The 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 3,000,000 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 20,000,000 shares of Common Stock offered. The Selling
Stockholders have granted the International Underwriters a similar option to
purchase up to an aggregate of 750,000 additional shares of Common Stock.
The Company and the Selling Stockholders have agreed, during the period
beginning from the date of this Prospectus and continuing to and including the
date 180 calendar days after the date of the Prospectus, not to offer, sell,
contract to sell or otherwise dispose of any securities of the Company (other
than pursuant to employee stock option plans existing, or on the conversion or
exchange of convertible or exchangeable securities outstanding, on the date of
this Prospectus) which are substantially similar to the shares of the Common
Stock or which are convertible or exchangeable into securities which are
substantially similar to the shares of the Common Stock, without the prior
written consent of the representatives, except for the shares of Common Stock
offered in common with the concurrent U.S. and International Offerings. The
Company has informed the representatives of the Underwriters that, if such
consent is given, the Company will make a public announcement thereof.
At the Company's request, the Underwriters have reserved up to 250,000
shares of Common Stock for sale at the initial public offering price to
officers, directors, employees and certain other persons associated with the
Company. The number of shares of Common Stock available for sale to the general
public will be reduced to the extent that these persons purchase such reserved
shares. Any reserved shares not purchased will be offered by the Underwriters to
the general public on the same basis as the other shares offered hereby.
The provisions of Schedule E to the By-Laws of the National Association of
Securities Dealers, Inc. apply to the offering because Wasserstein Perella
Securities, Inc. may be deemed to be an affiliate of the Company for purposes of
Schedule E. In addition, The Nikko Securities Co. International, Inc. ("Nikko"),
may be deemed to be an affiliate of the Company for purposes of
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Schedule E because affiliates of Nikko have limited partnership interests in an
affiliate of Blackstone Partners, which presently owns or has the power to vote
45.0% of the Common Stock. See "Principal and Selling Stockholders and Certain
Relationships". Accordingly, the initial public offering price can be no higher
than that recommended by a "qualified independent underwriter" meeting certain
standards. In accordance with this requirement, Goldman, Sachs & Co. has served
in such role and has recommended a price in compliance with the requirements of
Schedule E. Goldman, Sachs & Co. in its role as qualified independent
underwriter has performed due diligence investigations and reviewed and
participated in the preparation of this Prospectus and the Registration
Statement of which this Prospectus forms a part. The representatives of the U.S.
Underwriters have informed the Company that the U.S. Underwriters do not intend
to confirm sales to any account over which they exercise discretionary
authority, except in accordance with the provisions of Schedule E.
Prior to the Offerings, there has been no public market for the Common
Stock. The initial public offering price was negotiated among the Company, 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.
The Common Stock has been approved for listing on the New York Stock
Exchange. In order to meet one of the requirements for listing the Common Stock
on the New York Stock Exchange, the U.S. Underwriters have undertaken to sell
lots of 100 or more shares to a minimum of 2,000 beneficial holders.
The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities under
the Securities Act.
Affiliates of Wasserstein Perella Securities, Inc. will serve on the Board
of Directors and on the Nominating Committee, which is empowered to nominate
persons for election to the Board of Directors and exclusively empowered to fill
any newly created directorships or any other vacancies on the Board of
Directors. See "Principal and Selling Stockholders and Certain Relationships."
Messrs. Wasserstein, Weisenburger and Ziebold are currently serving as directors
of the Company. See "Management".
From time to time, Goldman, Sachs & Co. has provided financial advisory
services to Blackstone Partners with respect to matters unrelated to the
Company, for which Goldman, Sachs & Co. has received customary fees in the
ordinary course of business. From time to time, each of Merrill Lynch & Co. and
Wasserstein Perella Securities, Inc. has provided financial advisory services to
certain affiliates of the Partners, with respect to matters unrelated to the
Company, for which each has received customary fees in the ordinary course of
business.
In addition, in 1992 Merrill Lynch & Co. and Wasserstein Perella & Co.,
Inc., an affiliate of Wasserstein Perella Securities, Inc., each provided
financial advisory services relating to the solicitation by Group of consents
from the holders of Group's 11 7/8% Senior Subordinated Debentures due 2001, for
which each received fees of approximately $300,000. In 1991, Wasserstein Perella
Securities, Inc. received fees of approximately $400,000 in connection with
repurchases by the Company on the open market of certain securities of the
Company. For further information with respect to financial advisory and other
services provided and the fees received by and the ownership interests of
certain affiliates of Wasserstein Perella Securities, Inc., see "Principal and
Selling Stockholders and Certain Relationships".
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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.
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES (TO BE RENAMED COLLINS &
AIKMAN CORPORATION):
As of April 30, 1994 (unaudited), January 29, 1994, and January 30, 1993,
and for the thirteen weeks ended April 30, 1994 (unaudited) and May 1, 1993
(unaudited) and for the fiscal years ended January 29, 1994, January 30, 1993,
and January 25, 1992:
<TABLE>
<S> <C>
Report of Independent Public Accountants......................................................... F-2
Consolidated Statements of Operations............................................................ F-3
Consolidated Balance Sheets...................................................................... F-4
Consolidated Statements of Other Paid-in Capital................................................. F-5
Consolidated Statements of Accumulated Deficit................................................... F-5
Consolidated Statements of Cash Flows............................................................ F-6
Notes to Consolidated Financial Statements....................................................... F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Collins & Aikman Holdings Corporation:
We have audited the accompanying consolidated balance sheets of
Collins & Aikman Holdings Corporation (a Delaware corporation) and
subsidiaries as of January 29, 1994 and January 30, 1993, and the
related consolidated statements of operations, other paid-in capital,
accumulated deficit and cash flows for each of the three fiscal years
in the period ended January 29, 1994. These financial statements are
the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Collins & Aikman Holdings Corporation and subsidiaries as of January
29, 1994 and January 30, 1993, and the results of their operations and
their cash flows for each of the three fiscal years in the period ended
January 29, 1994, in conformity with generally accepted accounting
principles.
As discussed in Notes 3 and 13 to the Consolidated Financial
Statements, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" in the fiscal year ended January 25, 1992.
ARTHUR ANDERSEN & CO.
Charlotte, North Carolina
April 27, 1994
F-2
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT FOR PER SHARE DATA)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED FISCAL YEAR ENDED
------------------------ -------------------------------------------
APRIL 30, MAY 1, JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1994 1993 1992
----------- ----------- ------------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net sales.................................. $ 390,446 $ 339,043 $ 1,305,517 $ 1,277,500 $ 1,184,316
----------- ----------- ------------- ------------- -------------
Cost of goods sold......................... 289,492 260,095 995,790 978,473 926,817
Selling, general and administrative
expenses................................. 55,356 51,872 196,585 218,441 202,690
Management equity plan expense............. 36 -- 26,736 -- --
Restructuring costs........................ -- -- -- 10,000 --
Goodwill amortization and write-off........ -- 924 132,630 3,702 3,702
----------- ----------- ------------- ------------- -------------
344,884 312,891 1,351,741 1,210,616 1,133,209
----------- ----------- ------------- ------------- -------------
Operating income (loss).................... 45,562 26,152 (46,224) 66,884 51,107
Interest expense, net of interest income of
$2,355, $1,000, $4,434, $4,012 and
$7,299................................... 29,061 27,225 111,291 110,867 107,974
Dividends on preferred stock of
subsidiary................................. 1,129 1,129 4,533 4,514 4,515
----------- ----------- ------------- ------------- -------------
Income (loss) from continuing operations
before income taxes...................... 15,372 (2,202) (162,048) (48,497) (61,382)
Income taxes (benefit)..................... 2,618 3,271 11,277 (3,156) 11,954
----------- ----------- ------------- ------------- -------------
Income (loss) from continuing operations... 12,754 (5,473) (173,325) (45,341) (73,336)
Discontinued operations:
Income (loss) from operations, net of
income taxes of $0, $570, $584, $5,700
and $2,951............................... -- (1,359) (4,775) (50,317) 3,635
Loss on disposals, net of income tax
benefit of $0, $0, $344, $0 and $0.... -- (2,237) (99,564) (168,000) (20,000)
----------- ----------- ------------- ------------- -------------
Income (loss) before extraordinary items... 12,754 (9,069) (277,664) (263,658) (89,701)
Extraordinary loss on early retirement of
debt, net of income taxes of $0.......... -- -- -- -- (1,793)
Cumulative effect on prior years (to
January 26, 1991) of change in accounting
principle, net of income taxes of $0..... -- -- -- -- (42,316)
----------- ----------- ------------- ------------- -------------
Net income (loss).......................... $ 12,754 $ (9,069) $ (277,664) $ (263,658) $ (133,810)
----------- ----------- ------------- ------------- -------------
----------- ----------- ------------- ------------- -------------
Income (loss) available to common
shareholders............................. $ 5,668 $ (14,689) $ (301,387) $ (282,506) $ (149,617)
Per common share:
Continuing operations.................... $ .15 $ (.31) $ (5.56) $ (1.81) $ (2.52)
Discontinued operations.................. -- (.10) (2.94) (6.16) (.46)
Extraordinary item....................... -- -- -- -- (.05)
Cumulative effect of accounting change... -- -- -- -- (1.19)
----------- ----------- ------------- ------------- -------------
Net income (loss)........................ $ .15 $ (.41) $ (8.50) $ (7.97) $ (4.22)
----------- ----------- ------------- ------------- -------------
----------- ----------- ------------- ------------- -------------
Average shares outstanding................. 37,184 35,457 35,457 35,457 35,457
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-3
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 30, JANUARY 29, JANUARY 30,
1994 1994 1993
------------ ------------ --------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents......................................... $ 139,282 $ 81,373 $ 83,688
Accounts and notes receivable, net................................ 212,708 200,368 164,655
Inventories....................................................... 189,709 176,062 165,864
Receivable from sale of business.................................. -- 70,000 --
Net assets of discontinued operations............................. -- -- 190,177
Other............................................................. 44,832 48,397 23,131
------------ ------------ --------------
Total current assets......................................... 586,531 576,200 627,515
Property, plant and equipment, net.................................. 294,684 292,600 292,434
Goodwill............................................................ -- -- 132,630
Other assets........................................................ 52,833 50,025 88,855
------------ ------------ --------------
$ 934,048 $ 918,825 $ 1,141,434
------------ ------------ --------------
------------ ------------ --------------
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities:
Notes payable..................................................... $ 3,043 $ 3,789 $ 9,067
Current maturities of long-term debt.............................. 163,715 25,895 61,287
Accounts payable.................................................. 78,188 85,591 75,996
Accrued expenses.................................................. 159,778 142,351 169,002
Other............................................................. 4,097 2,671 343
------------ ------------ --------------
Total current liabilities.................................... 408,821 260,297 315,695
Long-term debt...................................................... 758,528 897,659 920,918
Deferred income taxes............................................... 640 640 4,823
Other, including postretirement benefit obligation.................. 334,440 339,768 222,510
Commitments and contingencies (Note 19).............................
Redeemable preferred stock of subsidiary (aggregate preference in
liquidation $129)................................................. 132 132 165
Preferred stock of subsidiary (aggregate preference in liquidation
$45,145).......................................................... 181 181 181
Redeemable preferred stock (aggregate preference in liquidation
$162,861)......................................................... 129,454 122,368 98,602
Common stock (150,000 shares authorized, 35,035 shares issued and
outstanding)...................................................... 350 350 350
Other paid-in capital............................................... 160,285 160,249 133,513
Accumulated deficit................................................. (843,669) (849,337) (547,950)
Foreign currency translation adjustments............................ (7,367) (5,735) (4,870)
Pension equity adjustment........................................... (7,747) (7,747) (2,503)
------------ ------------ --------------
Total common stockholder's deficit........................... (698,148) (702,220) (421,460)
------------ ------------ --------------
$ 934,048 $ 918,825 $ 1,141,434
------------ ------------ --------------
------------ ------------ --------------
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-4
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
CONSOLIDATED STATEMENTS OF OTHER PAID-IN CAPITAL
(IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTEEN FISCAL YEAR ENDED
WEEKS ENDED ----------------------------------------
APRIL 30, JANUARY 29, JANUARY 30, JANUARY 25,
1994 1994 1993 1992
------------ ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Balance at beginning of period.......................... $ 160,249 $ 133,513 $ 133,733 $ 133,108
Management equity plan.................................. 36 26,736 -- --
Other................................................... -- -- (220) 625
------------ ------------ ------------ ------------
Balance at end of period................................ $ 160,285 $ 160,249 $ 133,513 $ 133,733
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
CONSOLIDATED STATEMENTS OF ACCUMULATED DEFICIT
(IN THOUSANDS)
THIRTEEN FISCAL YEAR ENDED
WEEKS ENDED ----------------------------------------
APRIL 30, JANUARY 29, JANUARY 30, JANUARY 25,
1994 1994 1993 1992
------------ ------------ ------------ ------------
(UNAUDITED)
Balance at beginning of period......................... $ (849,337) $ (547,950) $ (265,444) $ (115,827)
Net income (loss)...................................... 12,754 (277,664) (263,658) (133,810)
Redeemable preferred stock dividends................... (6,072) (22,107) (18,988) (17,167)
Accretion of difference between redemption value and
fair value at date of issuance of redeemable
preferred stock...................................... (1,014) (1,616) 140 1,360
------------ ------------ ------------ ------------
Balance at end of period............................... $ (843,669) $ (849,337) $ (547,950) $ (265,444)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-5
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED FISCAL YEAR ENDED
---------------------- ----------------------------------------
APRIL 30, MAY 1, JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1994 1993 1992
---------- ---------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Income (loss) from continuing operations........... $ 12,754 $ (5,473) $ (173,325) $ (45,341) $ (73,336)
Adjustments to derive cash flow from continuing
operating activities:
Goodwill write-off............................... -- -- 129,854 -- --
Management equity plan expense................... 36 -- 26,736 -- --
Restructuring costs.............................. -- -- -- 10,000 --
Depreciation and amortization.................... 13,461 15,807 58,037 62,273 61,222
Increase in accounts and notes receivable........ (12,340) (24,747) (32,982) (149) (7,166)
Decrease (increase) in inventories............... (13,647) 689 (6,952) 4,308 23,936
Increase (decrease) in accounts payable.......... (7,403) 626 14,145 130 (2,874)
Other, net....................................... 23,758 12,438 7,398 (6,456) (16,737)
---------- ---------- ------------ ------------ ------------
Net cash provided by (used in) continuing
operating activities...................... 16,619 (660) 22,911 24,765 (14,955)
---------- ---------- ------------ ------------ ------------
Loss from discontinued operations.................. -- (3,596) (104,339) (218,317) (16,365)
Adjustments to derive cash flow from discontinued
operating activities:
Loss on disposals................................ -- 2,237 99,564 168,000 20,000
Depreciation and amortization.................... -- 5,249 17,337 22,559 22,919
Net change in receivables, inventory and
accounts payable............................... -- (14,854) 70,162 24,163 5,634
Other, net....................................... (8,540) (26,806) (150,141) (9,863) (18,653)
---------- ---------- ------------ ------------ ------------
Net cash provided by (used in) discontinued
operating activities...................... (8,540) (37,770) (67,417) (13,458) 13,535
---------- ---------- ------------ ------------ ------------
INVESTING ACTIVITIES
Additions to property, plant and equipment......... (15,286) (7,267) (56,278) (54,181) (61,899)
Sales of property, plant and equipment............. 4,519 815 22,710 10,347 7,522
Proceeds from businesses sold...................... 67,212 49,243 148,743 -- 5,598
Other, net......................................... 3,769 (2,659) 43,983 9,223 27,444
---------- ---------- ------------ ------------ ------------
Net cash provided by (used in) investing
activities................................ 60,214 40,132 159,158 (34,611) (21,335)
---------- ---------- ------------ ------------ ------------
FINANCING ACTIVITIES
Issuance of long-term debt......................... 1,037 36,689 76,135 60,128 157,587
Reduction of long-term debt........................ (10,335) (23,800) (179,861) (54,376) (180,841)
Short-term borrowings (repayments), net............ (821) (6,300) (5,899) 3,554 (1,057)
Other, net......................................... (265) (6,990) (7,342) (2,918) (7,046)
---------- ---------- ------------ ------------ ------------
Net cash provided by (used in) financing
activities................................ (10,384) (401) (116,967) 6,388 (31,357)
---------- ---------- ------------ ------------ ------------
Increase (decrease) in cash and cash equivalents... 57,909 1,301 (2,315) (16,916) (54,112)
Cash and cash equivalents at beginning of period... 81,373 83,688 83,688 100,604 154,716
---------- ---------- ------------ ------------ ------------
Cash and cash equivalents at end of period......... $ 139,282 $ 84,989 $ 81,373 $ 83,688 $ 100,604
---------- ---------- ------------ ------------ ------------
---------- ---------- ------------ ------------ ------------
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-6
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND ACQUISITION:
Collins & Aikman Holdings Corporation (the "Company") (formerly WCI
Holdings Corporation) is a Delaware corporation and a wholly-owned subsidiary of
Collins & Aikman Holdings II Corporation ("Holdings II") (formerly WCI Holdings
II Corporation), a corporation jointly owned by Blackstone Capital Partners L.P.
("Blackstone Partners") and Wasserstein Perella Partners, L.P. ("WP Partners")
(both of which are Delaware limited partnerships), and their respective
affiliates. The Company was formed on September 21, 1988 to acquire all the
outstanding common stock of Collins & Aikman Group, Inc. ("Group") (formerly
Wickes Companies, Inc.). On April 13, 1989, Group became a wholly-owned
subsidiary of the Company. The acquisition of Group has been accounted for as a
purchase and the results of operations have been included from the effective
date of the acquisition.
2. INITIAL PUBLIC OFFERING AND RECAPITALIZATION:
The Company plans to proceed with initial public offerings ("Offerings") of
20.0 million shares of common stock at an initial public offering price of
between $14.00 and $17.00 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 Offerings (assumed to be
June 22, 1994 at an initial public offering price of $15.50 per share) all but
approximately $9.7 million of the Company's Subordinated PIK Notes will be
exchanged for shares of Common Stock. After the Offerings and Recapitalization,
it is expected that approximately 66.7 million shares of Common Stock will be
outstanding (before the exercise of any outstanding stock options). In
connection with the Offerings and Recapitalization, Holdings II, currently the
sole stockholder of the Company, will be merged into the Company. Concurrently,
Group will be merged into its wholly-owned subsidiary, Collins & Aikman
Corporation ("C&A Co."). The Company intends to change its name from Collins &
Aikman Holdings Corporation to Collins & Aikman Corporation and C&A Co. will
change its name to Collins & Aikman Products Co.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
FISCAL YEAR--The fiscal year of the Company ends on the last Saturday of
January. Fiscal 1993 and fiscal 1991 were the 52-week years which ended on
January 29, 1994 and January 25, 1992, respectively. Fiscal 1992 was the 53-week
year which ended on January 30, 1993.
INTERIM FINANCIAL PRESENTATION--The financial statements as of April 30,
1994 and for the thirteen weeks ended April 30, 1994 and May 1, 1993 are
unaudited. In the opinion of management, the unaudited financial statements as
of April 30, 1994 and for the thirteen weeks ended April 30, 1994 and May 1,
1993 reflect all adjustments (consisting of only normal recurring adjustments)
necessary for a fair presentation of financial position and results of
operations. Results of operations for interim periods are not necessarily
indicative of results for the full year.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE--Effective as of the
beginning of fiscal 1991, the Company adopted Statement of Financial Accounting
Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" ("SFAS 106"). SFAS 106 requires accrual, during the period in which
eligible employees render service, of the expected cost of 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.
F-7
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
CONSOLIDATION--The consolidated financial statements include the accounts
of the Company and its subsidiaries. All significant intercompany items have
been eliminated in consolidation.
INCOME TAXES--During fiscal 1992, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 supersedes Statement of Financial Accounting
Standards No. 96, of the same title, which the Company previously followed to
account for income taxes. The adoption of SFAS 109 did not impact the Company's
financial position or results of operations. (See also Note 16.)
FOREIGN CURRENCY TRANSLATION--Foreign currency accounts are translated in
accordance with Statement of Financial Accounting Standards No. 52, "Foreign
Currency Translation" ("SFAS 52"). SFAS 52 generally provides that the assets
and liabilities of foreign operations be translated at the current exchange
rates as of the end of the accounting period and that revenues and expenses be
translated using average exchange rates. The resulting translation adjustment
arising from foreign currency translation is accumulated as a separate component
of stockholder's equity. Translation adjustments during fiscal 1993, 1992 and
1991 were ($865,000), ($5.8 million) and ($1.9 million), respectively.
CASH AND CASH EQUIVALENTS--Cash and cash equivalents include all cash
balances and highly liquid investments with an original maturity of three months
or less. Included in cash and cash equivalents at January 29, 1994 is $69.8
million held by Group and $8.6 million held by C&A Co.
INVENTORIES--Inventories are valued at the lower of cost or market, but not
in excess of net realizable value. Cost is determined on the first-in, first-out
basis.
INSURANCE DEPOSITS--Other current assets at January 29, 1994 include $22.8
million which is on deposit with an Insurer to cover the self-insured portion of
the Company's workers compensation, automotive and general liabilities. The
Company's reserves for these claims are determined based upon actuarial analyses
and aggregated $36.5 million at January 29, 1994, $10.6 million of which is
classified in current liabilities.
PROPERTY, PLANT AND EQUIPMENT--Property, plant and equipment are stated at
cost. Provisions for depreciation are primarily computed on a straight-line
basis over the estimated useful lives of the assets, presently ranging from 3 to
40 years. Leasehold improvements are amortized over the lesser of the lease term
or the estimated useful lives of the improvements.
Management's policy is to continually review whether there have been any
significant and permanent downturns in the industries in which the Company
operates, loss of a majority of customers, introduction of substitute products
and the current and expected future results of operations in assessing the
recoverability of property, plant and equipment and other long-lived assets.
When the foregoing considerations suggest that a long-term deterioration in the
Company's operations has occurred, management evaluates its long-lived assets
for impairment using its forecasted business unit results to determine whether
the cost of such assets can be recovered through future operations. Further, net
asset costs are also reduced, if required, to net realizable value at the time a
disposition is planned.
GOODWILL--Until the write-off of goodwill as of October 30, 1993, goodwill
was being amortized by the straight-line method over 40 years. Amortization
applicable to continuing operations 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.)
F-8
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:--(CONTINUED)
ENVIRONMENT--Accruals for environmental matters are recorded when it is
probable that a liability has been incurred and the amount of the liability can
be reasonably estimated. Accruals for environmental liabilities are generally
included in the balance sheet as other noncurrent liabilities at undiscounted
amounts and exclude claims for recoveries from insurance or other third parties.
Accruals for insurance or other third party recoveries for environmental
liabilities are recorded when it is probable that the recovery will be realized.
INCOME (LOSS) PER COMMON SHARE--Income (loss) per common share is based on
the weighted average number of shares outstanding during each period and the
assumed exercise of all employee stock options less the number of treasury
shares assumed to be purchased from the proceeds, including applicable
compensation expense, using the assumed initial public offering price of $15.50
per share. Income (loss) per common share data is also adjusted for dividends
and accretion requirements on redeemable preferred stock.
RECLASSIFICATIONS--Certain reclassifications have been made to the fiscal
1992 and 1991 statements of operations and statements of cash flows and to the
January 30, 1993 balance sheet to conform to the fiscal 1993 presentation.
NEWLY ISSUED ACCOUNTING PRONOUNCEMENTS--The Financial Accounting Standards
Board has issued Statement of Financial Accounting Standards No. 112 "Employers'
Accounting for Postemployment Benefits" and certain other accounting
pronouncements which are not yet effective. The adoption of these pronouncements
will not have a material effect on the Company's consolidated financial
condition or results of operations.
4. GOODWILL:
At October 30, 1993, before giving effect to the write-off described below,
the Company had $129.9 million of goodwill which arose as a result of the
acquisition of Group in December 1988. The substantial losses of Builders
Emporium and the inability to sell the Builders Emporium chain as an ongoing
entity left the Company with materially higher leverage and interest costs than
previously anticipated. The inability of the Company to sell its Dura
Convertible Systems division ("Dura") at an acceptable price along with the sale
of Kayser-Roth Corporation ("Kayser-Roth") at a price and on terms that were
worse than management's prior expectations of value were additional adverse
factors. Prior to the end of the third quarter, management explored debt
recapitalization alternatives and the possibility of raising new equity capital.
The indications from the financial community at that time were that a debt
recapitalization was not likely to significantly reduce the Company's interest
burden and that raising new equity capital to deleverage the Company was not
feasible at that time. Although management of the Company, based on the facts
known to it at October 30, 1993, was expecting both cyclical and long-term
improvement in the results of operations, an analysis suggested that, given the
Company's capital structure, a deterioration of the financial condition of the
Company had occurred. As a result, the Company forecasted its operating results
forward 35 years, which approximated the remaining amortization period of the
Company's goodwill at October 30, 1993, to determine whether cumulative net
income would be sufficient to recover the goodwill. At October 30, 1993,
management believed that the projected future results were the most likely
scenario given the Company's capital structure at that 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.
F-9
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. GOODWILL:--(CONTINUED)
In early 1994, the Company is again exploring the feasibility of a debt
recapitalization and an initial public equity offering. (See Note 2.) The
holders of $182.7 million of PIK Notes as of January 29, 1994 have now agreed,
at the option of the Company exercisable prior to September 15, 1994, to
exchange those Notes for shares of Common Stock (which will be restricted stock
within the meaning of rule 144 of the Securities Act), subject to certain
conditions including an initial public equity offering by the Company. Due to
this agreement, to improvements in the Company's performance based largely on
accelerating North American auto build rates and to increasing receptivity to
cyclical industries in the equity markets, the Company's financial advisers have
indicated that a debt recapitalization and initial public equity offering may be
feasible in fiscal 1994. If a refinancing or initial public equity offering is
not accomplished during fiscal 1994, the Company expects that it will have
adequate liquidity to meet cash requirements through the end of fiscal 1994 and
into fiscal 1995. Beyond that, the Company expects that it will require
alternative financings or asset sales to meet its cash requirements.
5. RESTRUCTURING COSTS:
During fiscal 1992, the Company incurred certain identifiable costs in
connection with the restructuring of Wallcoverings. The restructuring costs,
aggregating $10 million, principally related to the closure of certain
manufacturing and distribution facilities.
6. DISCONTINUED OPERATIONS:
During fiscal 1991, Group reclassified the remaining businesses of Wickes
Manufacturing Company consisting of its Dura, Bumper and H. Koch & Sons ("H.
Koch") divisions as discontinued operations. In July 1992, Group sold its Bumper
and H. Koch divisions. As of the end of fiscal 1992, Group reclassified Builders
Emporium and the Engineering Group as discontinued operations. Group recorded a
loss on disposal of discontinued operations of $168 million in the fourth
quarter of fiscal 1992 principally to provide for the expected loss on the sale
of Builders Emporium. In March 1993, the Engineering Group was sold for
approximately $51 million.
As of the end of the second quarter of fiscal 1993, the Company determined
that it would be unable to sell Builders Emporium as an ongoing entity. The
Company recorded an additional loss on disposal of discontinued operations of
$125.5 million principally to (i) provide additional reserves for the
significant reduction in estimated proceeds from disposition and other costs in
connection with the sale or disposition of Builders Emporium's inventory, real
estate and other assets, (ii) provide for employee severance and other costs and
(iii) realize a previously unrecognized loss as a result of the decision to
retain Dura. Builders Emporium's inventory was sold during the third and fourth
quarters of fiscal 1993 and substantially all accounts receivable and accounts
payable balances were settled as of January 29, 1994. Remaining assets and
liabilities of Builders Emporium relate primarily to real estate and insurance
liabilities which continue to be liquidated.
Kayser-Roth was reclassified as a discontinued operation at the end of the
third fiscal quarter ended October 30, 1993 and was sold on January 28, 1994 for
a total price of $170 million (subject to post-closing purchase price
adjustment). A portion of the proceeds was used to repay $66 million of
borrowings under a Kayser-Roth credit facility. In connection with the sale,
Group received a 90-day $70 million senior unsecured bridge note from the
purchaser which was paid with accrued interest on April 27, 1994. The gain on
disposal of $28.1 million in the fourth quarter relates to the sale of
Kayser-Roth.
The results of Builders Emporium, Kayser-Roth, the Engineering Group,
Bumper and H. Koch are classified as discontinued operations for all periods
presented. At the end of the second fiscal
F-10
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. DISCONTINUED OPERATIONS:--(CONTINUED)
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>
The above summarized results include Builders Emporium and the Engineering
Group through January 30, 1993 and Kayser-Roth through the third quarter ended
October 30, 1993 (the respective dates at which these businesses were
reclassified as discontinued operations). The summarized statement of operations
for fiscal 1991 also includes Bumper and H. Koch through their date of sale.
Sales of Builders Emporium in fiscal 1993 aggregated approximately $410 million
and sales of Kayser-Roth for the fourth quarter of fiscal 1993 aggregated
approximately $95 million. Interest expense of $13.1 million (including $5.5
million of interest expense which was reserved for Builders Emporium and
Kayser-Roth), $19.7 million and $22.1 million during fiscal 1993, 1992 and 1991,
respectively, has been allocated to discontinued operations based upon the ratio
of net book value of discontinued operations (including reserves for loss on
disposal) to Group's consolidated invested capital. Interest expense incurred by
Builders Emporium and Kayser-Roth subsequent to their reclassification as
discontinued operations aggregated $2.2 million. Such amounts were charged to
discontinued operations reserves. Interest allocated to discontinued operations
was $5.0 million for the quarter ended May 1, 1993. No interest was allocated to
discontinued operations in the quarter ended April 30, 1994.
In October 1993, Group received $35.1 million from Wickes Lumber Company in
exchange for a Wickes Lumber Company promissory note and warrant that Group had
received in partial consideration for the sale of Wickes Lumber Company in 1988.
The Company incurred fees to Blackstone Partners and WP Partners for
services related to divestitures aggregating $4.3 million and $500,000 during
fiscal 1993 and 1992, respectively. Amounts in fiscal 1993 related principally
to divestiture fees on the sales of Kayser-Roth and the Engineering Group, and
advisory services in connection with the sale of Builders Emporium's inventory,
real estate and other assets. Fees incurred during the first quarter of 1994
included $100,000 to Blackstone Partners for advisory services in connection
with the sale of Builders Emporium's inventory, real estate and other assets. In
addition, during the first quarter of 1994 the Company incurred expenses of $2.5
million for services performed by Blackstone Partners and WP Partners in
connection with a comprehensive review of the Company's liabilities associated
with discontinued operations, including surplus real estate, postretirement and
workers compensation liabilities.
The majority of Builders Emporium's leased properties have been assigned to
third parties. In addition, Group has assigned leases in connection with the
divestiture of Kayser-Roth, the Engineering Group, Wickes Manufacturing Company
and other divested businesses. Although
F-11
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
6. DISCONTINUED OPERATIONS:--(CONTINUED)
Group has obtained releases from the lessors of certain properties, Group
remains contingently liable under most of the leases. Group's future liability
for these leases, in management's opinion, based on the facts presently known to
it, will not have a material effect on the Company's consolidated financial
condition or future results of operations.
7. ACCOUNTS AND NOTES RECEIVABLE, NET:
Accounts and notes receivable, net, are summarized below (in thousands):
<TABLE>
<CAPTION>
APRIL 30, JANUARY 29, JANUARY 30,
1994 1994 1993
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Accounts and notes receivable.................... $ 219,811 $ 207,439 $ 171,403
Less allowance for doubtful accounts............. (7,103) (7,071) (6,748)
------------ ------------ ------------
$ 212,708 $ 200,368 $ 164,655
------------ ------------ ------------
------------ ------------ ------------
8. INVENTORIES:
Inventory balances are summarized below (in thousands):
APRIL 30, JANUARY 29, JANUARY 30,
1994 1994 1993
------------ ------------ ------------
(UNAUDITED)
Raw materials.................................... $ 73,592 $ 70,762 $ 62,663
Work in process.................................. 27,038 24,739 26,121
Finished goods................................... 89,079 80,561 77,080
------------ ------------ ------------
$ 189,709 $ 176,062 $ 165,864
------------ ------------ ------------
------------ ------------ ------------
9. PROPERTY, PLANT AND EQUIPMENT, NET:
Property, plant and equipment, net, are summarized below (in thousands):
APRIL 30, JANUARY 29, JANUARY 30,
1994 1994 1993
------------ ------------ ------------
(UNAUDITED)
Land and improvements............................ $ 28,320 $ 28,347 $ 20,747
Buildings........................................ 108,891 109,275 115,406
Machinery and equipment.......................... 371,652 372,208 332,946
Leasehold improvements........................... 1,897 1,421 1,431
Construction in progress......................... 35,127 21,863 20,733
------------ ------------ ------------
545,887 533,114 491,263
Less accumulated depreciation and amortization... (251,203) (240,514) (198,829)
------------ ------------ ------------
$ 294,684 $ 292,600 $ 292,434
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
Depreciation and amortization expense of property, plant and equipment
applicable to continuing operations was $11.1 million and $11.7 million for the
thirteen weeks ended April 30, 1994 and May 1, 1993, respectively, and $42.2
million, $45.5 million and $43.9 million for fiscal 1993, 1992 and 1991,
respectively.
F-12
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
10. ACCRUED EXPENSES:
Accrued expenses are summarized below (in thousands):
<TABLE>
<CAPTION>
APRIL 30, JANUARY 29, JANUARY 30,
1994 1994 1993
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Payroll and employee benefits.................... $ 34,273 $ 42,063 $ 39,633
Interest......................................... 33,029 19,242 24,107
Insurance........................................ 17,100 15,152 25,122
Other............................................ 75,376 65,894 80,140
------------ ------------ ------------
$ 159,778 $ 142,351 $ 169,002
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
11. LONG-TERM DEBT:
Long-term debt is summarized below (in thousands):
<TABLE>
<CAPTION>
APRIL 30 JANUARY 29, JANUARY 30,
1994 1994 1993
------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C>
Senior indebtedness of Group and its subsidiaries:
Mortgage notes...................................................... $ 1,324 $ 1,464 $ 1,841
Notes payable to banks.............................................. 7,344 7,595 7,891
Notes payable to others............................................. 8,674 8,266 4,744
C&A Co. credit facility, average interest rate of 5.6%, 5.5% and
5.3%.............................................................. 127,581 137,129 191,155
Debentures due 2005, interest rate 7 1/2% through January 31, 1994,
and 10% thereafter................................................ 138,694 138,694 138,694
Sinking fund debentures due 1994, interest rate 12%................. -- -- 40,982
Industrial revenue bonds due through 2006, interest rates from 5% to
7 5/8%............................................................ 11,558 11,648 12,754
Unamortized debt discount........................................... (33,063) (33,397) (38,833)
------------ ------------ ------------
262,112 271,399 359,228
------------ ------------ ------------
Senior subordinated indebtedness of Group:
Senior subordinated debentures due 2001, interest rate 11 7/8%...... 347,414 347,414 347,414
Unamortized debt discount........................................... (45,613) (46,532) (49,840)
------------ ------------ ------------
301,801 300,882 297,574
------------ ------------ ------------
Subordinated indebtedness of Group:
Subordinated notes due 1995, interest rate 15%...................... 137,359 137,359 137,359
Subordinated debentures due 1997, interest rate 11 3/8%............. 24,500 24,500 24,500
Unamortized debt discount........................................... (2,261) (2,446) (3,131)
------------ ------------ ------------
159,598 159,413 158,728
------------ ------------ ------------
Indebtedness of the Company:
Subordinated PIK Notes due December 2, 1996, replacement notes
issuable at option of Company through maturity date of December
1998, interest rate 14%.......................................... 198,732 191,860 166,675
------------ ------------ ------------
Total debt............................................................ 922,243 923,554 982,205
Less current maturities............................................... (163,715) (25,895) (61,287)
------------ ------------ ------------
$ 758,528 $ 897,659 $ 920,918
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-13
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. LONG-TERM DEBT:--(CONTINUED)
Group's C&A Co. subsidiary consummated a $225 million credit agreement with
a syndicate of banks on May 22, 1991 that expires on May 15, 1998 (the "C&A Co.
Credit Agreement"). During fiscal 1991, C&A Co. borrowed $152 million under the
C&A Co. Credit Agreement. Out of these borrowings, $120 million was paid to
Group as a dividend to be used for general corporate purposes. During fiscal
1992, C&A Co. paid Group dividends aggregating $110 million, borrowed an
additional $56.0 million and made principal repayments under the C&A Co. Credit
Agreement of $10.3 million. During fiscal 1993, C&A Co. paid Group dividends
aggregating $30 million, borrowed an additional $17.0 million and made principal
repayments under the C&A Co. Credit Agreement of $71.0 million. Availability
under the C&A Co. Credit Agreement is determined monthly based upon C&A Co.'s
receivables balance. The C&A Co. Credit Agreement permits C&A Co. to pay
additional dividends to Group only if C&A Co. satisfies a minimum liquidity
requirement of $25 million and then limits the amount of total dividends to $175
million plus 90% (or 100% if certain specified ratios are met) of C&A Co.'s net
income (excluding the impact of SFAS 106) subsequent to April 27, 1991. As of
January 29, 1994, an additional $54.8 million was available to C&A Co. under the
C&A Co. Credit Agreement. Although as of that date approximately $56 million of
additional dividends could be paid to Group under the dividend restrictions in
the C&A Co. Credit Agreement, other financial covenants in the C&A Co. Credit
Agreement would limit the amount of dividends to approximately $47 million. As
of April 30, 1994 dividends under the C&A Co. Credit Agreement were limited to
approximately $42 million. C&A Co. and its subsidiaries are separate corporate
entities and the assets of C&A Co. and its subsidiaries are available first and
foremost to satisfy the claims of the creditors of C&A Co. and such
subsidiaries. At January 29, 1994, receivables and fixed assets pledged as
collateral under the C&A Co. Credit Agreement aggregated approximately $168
million and $104 million, respectively.
On March 12, 1993, Kayser-Roth and a bank consummated a $40 million credit
agreement. Kayser-Roth initially borrowed $35 million under the credit agreement
of which $26 million was paid to Group as a dividend. On May 27, 1993,
Kayser-Roth completed a $75 million credit facility (the "Kayser-Roth Credit
Agreement") with a group of banks to replace the $40 million credit agreement
and, on July 6, 1993, Kayser-Roth paid an additional dividend of $26 million to
Group. Group used approximately $41 million of the proceeds from the original
and the replacement Kayser-Roth credit facilities to redeem all of its
outstanding 12% Sinking Fund Debentures due January 31, 1994 on July 7, 1993.
Group repaid the outstanding borrowings under the Kayser-Roth Credit Agreement
of $66 million with a portion of the cash proceeds from the sale of Kayser-Roth.
There are limitations on the payment of dividends contained in various debt
agreements of Group. Currently, the most restrictive of such limitations is
contained in the indenture, as amended, (the "11 7/8% Indenture") governing the
11 7/8% Senior Subordinated Debentures due 2001 (the "11 7/8% Securities").
Since January 26, 1991, no additional dividends could be paid to the Company
under such indenture. Under these provisions as of January 29, 1994, Group would
have needed to earn an additional $866 million of consolidated net income (as
defined in the 11 7/8% Indenture) in order to eliminate the deficit in its
dividend capacity (assuming no change in the other factors used to determine
Group's dividend capacity).
Under the terms of the 11 7/8% Indenture, Group is required to redeem $138
million aggregate principal amount of 11 7/8% Securities on each June 1 from
1993 through 2000 ("Mandatory Redemptions") and to repay the remaining
outstanding 11 7/8% Securities at maturity on June 1, 2001. Under the terms of
the 11 7/8% Indenture, if Adjusted Net Worth (as such term is defined in the
F-14
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. LONG-TERM DEBT:--(CONTINUED)
11 7/8% Indenture) is equal to or less than $700 million on the last day of any
fiscal quarter (the "Minimum Equity Test"), Group would be required to begin on
the last day of the second fiscal quarter thereafter (unless the Minimum Equity
Test is satisfied at the end of the intervening fiscal quarter) semi-annual
redemptions ("Accelerated Redemptions") of $138 million aggregate principal
amount of 11 7/8% Securities until all the 11 7/8% Securities are redeemed or
until the Minimum Equity Test is again satisfied. Group can reduce its
obligation to make any cash Mandatory Redemption or Accelerated Redemption
payment through the application of previously redeemed or purchased and canceled
11 7/8% Securities as permitted by the 11 7/8% Indenture. Group has previously
delivered for cancellation $1,033 million in aggregate principal amount of 11
7/8% Securities, which are available for such purpose. Group satisfied the
Minimum Equity Test at the end of fiscal 1993. On that date, Adjusted Net Worth
was $753.7 million. If Group had not satisfied the Minimum Equity Test at that
date and did not subsequently satisfy such test, the first cash redemption
payment (after giving effect to credits for previously acquired 11 7/8%
Securities) would be required at the end of the fiscal quarter ending January
1997. By comparison, if Group continues to satisfy the Minimum Equity Test at
all times or cures any failure of such test prior to any accelerated cash
redemption payment becoming due, no cash redemption payment will be required
until June 1, 2000.
All the consolidated long-term debt of the Company other than the
Subordinated PIK Notes is debt of Group and its subsidiaries. At January 29,
1994, Blackstone Partners and WP Partners were holders of approximately $89.2
million and $93.5 million, respectively, of the Company's Subordinated PIK
Notes, including accrued interest. The remainder of the Subordinated PIK Notes
outstanding aggregated approximately $9.2 million at January 29, 1994. At April
30, 1994, Blackstone Partners and WP Partners were holders of approximately
$92.4 million and $96.9 million, respectively, of the Subordinated PIK Bridge
Notes. The Subordinated PIK Notes mature December 2, 1996, unless extended by
the holders. The Company anticipates that, at least if certain debt of Group
continues to be outstanding or is refinanced with similarly restrictive debt,
the Company will not have sufficient cash to pay the Subordinated PIK Notes in
cash at maturity in 1996 and, unless such maturity is extended by the holders,
the Company will issue replacement notes as permitted by the terms of the
Subordinated PIK Notes. If issued, each replacement note will mature December 8,
1998, with sinking fund payments equal to one-third of the outstanding principal
amount due December 1996 and 1997. The Company's ability to satisfy the sinking
fund payments and the final payment at maturity of the replacement notes, if
issued, will depend on the availability of cash at the Company. The Company
anticipates that, at least if certain debt of Group continues to be outstanding
or is refinanced with similarly restrictive debt, the Company will not have
sufficient cash to satisfy the sinking fund payments or the final payment at
maturity of the replacement notes, if issued, unless the sinking fund and final
maturity dates are extended by the holders. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" elsewhere herein. The
Company is not permitted to pay cash dividends on the common stock of the
Company until payment in full of the Subordinated PIK Notes, unless waived by
the holders. The Company may purchase or redeem shares of its common stock so
long as the aggregate equity investment in the common stock of the Company is at
least $75 million.
In April 1994, WP Partners and Blackstone Partners agreed, at the option of
the Company exercisable prior to September 15, 1994, to exchange the
Subordinated PIK Notes held by them for
F-15
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. LONG-TERM DEBT:--(CONTINUED)
shares of Common Stock, subject to certain conditions including an initial
public equity offering by the Company.
During the first quarter of 1994, the Company incurred expenses of $2.75
million for services performed by WP Partners and $3.25 million for services
performed by Blackstone Partners in connection with the Company's review of
refinancing and strategic alternatives as well as certain other advisory
services. These fees are included in "selling, general and administrative
expenses".
The 11 3/8% subordinated debentures of Group become callable on May 1,
1995. The remaining indebtedness of Group is callable at various premiums at
Group's option.
Debt discount applicable to securities issued by Group is based on the
present values of amounts to be paid determined at market interest rates in
effect at the time the Company acquired Group.
Maturities of long-term debt during each of the five fiscal years
subsequent to January 29, 1994 are $25.9 million, $170.9 million, $127.2
million, $103.8 million and $84.5 million, respectively. Total interest paid by
the Company on all indebtedness was $101.5 million, $105.0 million and $120.6
million for fiscal 1993, 1992 and 1991, respectively.
12. LONG-TERM LEASES AND LEASE COMMITMENTS:
Group is lessee under various long-term operating leases for land and
buildings for periods up to forty years. The majority of these leases contain
renewal provisions. In addition, Group leases transportation, operating and
administrative equipment for periods ranging from one to ten years.
At January 29, 1994, future minimum lease payments under operating leases
are as follows (in thousands):
FISCAL YEAR ENDING
- ----------------------------------
January 1995...................... $ 16,568
January 1996...................... 12,520
January 1997...................... 9,165
January 1998...................... 4,128
January 1999...................... 1,143
Later years....................... 2,171
----------
$ 45,695
----------
----------
Rental expense of continuing operations under operating leases was $19.2
million, $19.0 million and $15.4 million for fiscal 1993, 1992 and 1991,
respectively. Obligations under capital leases are not significant.
13. EMPLOYEE BENEFIT PLANS:
Subsidiaries of the Company have in effect defined benefit pension plans
covering substantially all employees who meet eligibility requirements. Plan
benefits are generally based on years of service and employee's compensation
during their years of employment. Funding of retirement costs for these plans
complies with the minimum funding requirements specified by the Employee
F-16
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. EMPLOYEE BENEFIT PLANS:--(CONTINUED)
Retirement Income Security Act. Assets of the pension plans are held in a Master
Trust which invests primarily in equity and fixed income securities.
Net periodic pension cost of continuing operations for fiscal 1993, 1992
and 1991 include the following components (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Service cost.......................................................... $ 5,232 $ 5,313 $ 5,240
Interest cost on projected benefit obligation and
service cost........................................................ 6,843 6,220 5,947
Actual return on assets............................................... (6,334) 746 (13,771)
Net amortization and deferral......................................... (1,836) (9,298) 5,869
------------ ------------ ------------
$ 3,905 $ 2,981 $ 3,285
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
The following table sets forth the plans' funded status and amounts
recognized in the Company's consolidated balance sheets at January 29, 1994 and
January 30, 1993 (in thousands):
<TABLE>
<CAPTION>
JANUARY 29, 1994 JANUARY 30, 1993
---------------------------- ----------------------------
PLANS FOR WHICH PLANS FOR WHICH
---------------------------- ----------------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation.............................. $ (21,352) $ (82,248) $ (15,096) $ (76,493)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Accumulated benefit obligation......................... $ (22,214) $ (86,450) $ (15,580) $ (80,023)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Projected benefit obligation........................... $ (24,317) $ (89,433) $ (17,314) $ (82,658)
Plan assets at fair value............................ 24,761 66,794 20,089 72,929
------------- ------------- ------------- -------------
Projected benefit obligation less than (in excess of)
plan assets............................................ 444 (22,639) 2,775 (9,729)
Unrecognized net loss.................................... 1,855 20,431 147 19,489
Prior service cost not yet recognized in net periodic
pension cost........................................... 416 (9,208) 441 (14,336)
Adjustment required to recognize minimum liability....... -- (7,841) -- (2,639)
------------- ------------- ------------- -------------
Pension asset (pension liability) recognized in the
consolidated balance sheets............................ $ 2,715 $ (19,257) $ 3,363 $ (7,215)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 7% and 8% at January 29, 1994 and January 30,
1993, respectively. The expected rate of increase in future compensation levels
is 4% and 5.5% and the expected long-term rate of return on plan assets is 9%
and 10% in fiscal 1993 and 1992, respectively.
The provisions of Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions" ("SFAS 87") require companies with any
plans that have an unfunded accumulated benefit obligation to recognize an
additional minimum pension liability, an offsetting intangible pension asset
and, in certain situations, a contra-equity balance. In accordance with the
provisions
F-17
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. EMPLOYEE BENEFIT PLANS:--(CONTINUED)
of SFAS 87, the consolidated balance sheets at January 29, 1994 and January 30,
1993 include an intangible pension asset of $94,000 and $136,000; an additional
minimum pension liability of $7.8 million and $2.6 million; and a contra-equity
balance of $7.7 million and $2.5 million, respectively.
Subsidiaries of the Company sponsor defined contribution plans covering
employees who meet eligibility requirements. Subsidiary contributions are based
on a formula as specified in the plan agreements. Contributions related to
continuing operations were $4.7 million, $4.0 million and $3.4 million for
fiscal 1993, 1992 and 1991, respectively.
Subsidiaries of the Company have provided postretirement life, health and
medical coverage for certain retirees under plans currently in effect. Many of
the subsidiaries' domestic employees may be eligible for benefits if they reach
retirement age while still employed by the Company.
Effective as of the beginning of fiscal 1991, the Company adopted Statement
of Financial Accounting Standards No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions". The Statement requires that costs
of such benefits be accrued as a form of deferred compensation earned during the
period that employees render service, rather than the previously permitted
practice of accounting for such costs as incurred. The Company has elected to
recognize the cumulative effect of this change in accounting principle as of the
beginning of fiscal 1991.
The following table sets forth the amount included in the Company's
consolidated balance sheets (in thousands):
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
------------ ------------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees........................................................................... $ 48,559 $ 56,497
Fully eligible active plan participants............................................ 12,425 13,145
Other active plan participants..................................................... 13,845 26,366
Unrecognized prior service gain from plan amendments............................... 23,764 --
Unrecognized net gain.............................................................. 7,408 8,869
------------ ------------
Total postretirement benefit obligation......................................... $ 106,001 $ 104,877
------------ ------------
------------ ------------
</TABLE>
Net periodic postretirement benefit cost of continuing operations,
determined on the accrual basis, included the following components (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Service cost--benefits attributed to service during the year.......... $ 2,131 $ 2,168 $ 2,066
Interest cost on accumulated postretirement benefit obligation........ 4,385 6,865 6,574
Amortization of unrecognized net gain................................. (200) -- --
------------ ------------ ------------
Net periodic postretirement benefit cost.............................. $ 6,316 $ 9,033 $ 8,640
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-18
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
13. EMPLOYEE BENEFIT PLANS:--(CONTINUED)
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7% at January 29, 1994 and 8% at January
30, 1993. The plans are unfunded.
For measurement purposes, a 14% annual rate of increase in the per capita
cost of covered health care benefits was assumed for fiscal 1993; the rate was
assumed to decrease 1% per year to 6% for fiscal 2001 and remain at that level
thereafter. The health care cost trend rate assumption has an impact on the
amounts reported. To illustrate, increasing the assumed health care cost trend
rates by 1 percentage point in each year would increase the accumulated
postretirement benefit obligation as of January 29, 1994 by $878,000 and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by $103,000.
Effective April 1, 1994, the Company amended the postretirement benefit
plan which covers substantially all of the eligible current and retired
employees of the Company's continuing operations. Pursuant to the amendment, the
Company's obligation for future inflation of health care costs will be limited
to 6% per year through March 31, 1998. Subsequent to March 1998, the Company
will not provide coverage for inflation in healthcare costs.
14. COMMON STOCK AND PREFERRED STOCK:
At January 29, 1994 and January 30, 1993, 1,000 shares of $1.00 par value
common stock were authorized, issued and outstanding. The Company's Certificate
of Incorporation was amended on April 27, 1994 to authorize 150 million shares
of common stock, to reduce the par value of the common stock from $1.00 to $.01
per share and to authorize a 35,035 for 1 stock split of all outstanding shares
of common stock. The stock split was effective April 27, 1994. In connection
therewith, the common stock and other paid-in capital accounts were adjusted for
all periods to reflect the effect of the stock split.
In connection with the 1989 merger of a wholly owned subsidiary of the
Company into Group, approximately 4,250,000 shares of 15 1/2% Cumulative
Exchangeable Redeemable Preferred Stock ("Merger Preferred Stock"), par value
$.01 (authorized 16,000,000 shares), were issued. In addition, approximately
6,500 shares of Merger Preferred Stock may be issued upon exchange of
outstanding shares of Group's 15 1/2% Junior Cumulative Exchangeable Redeemable
Preferred Stock ("Intermediate Preferred Stock"), at the holder's option. Each
share of preferred stock has a liquidation preference of $25. To the extent the
Company shall have funds legally available therefor, the preferred stock is
required to be fully redeemed on April 13, 1999 at its liquidation preference
per share together with all accrued and unpaid dividends, whether or not
declared. Each share is exchangeable, at the Company's option, for 15 1/2%
subordinated debentures with a principal amount equal to the liquidation
preference of the shares being exchanged (plus accrued and unpaid dividends).
Dividends on the Merger Preferred Stock are payable quarterly and dividends
accruing on or prior to February 1, 1995 may be paid, at the option of the
Company, in cash (at the rate of $3.875 per year) or in additional shares of
Merger Preferred Stock (at the rate of .04 shares for each $1 of dividends not
paid in cash). Dividends accruing after February 1, 1995 may be paid only in
cash. To date, all dividends have been paid in additional shares of Merger
Preferred Stock and at April 30, 1994, January 29, 1994 and January 30, 1993
approximately 6,514,000, 6,268,000 and 5,183,000 shares, respectively, were
outstanding. Since January 25,
F-19
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
14. COMMON STOCK AND PREFERRED STOCK:--(CONTINUED)
1992, and as of January 29, 1994, and April 30, 1994, total liabilities of the
Company exceeded total assets based on its balance sheet and therefore, under
Delaware law, the payment of dividends on the Merger Preferred Stock required a
determination by the Board of Directors, based on a current valuation of the
Company's assets and liabilities, that adequate surplus exists under Delaware
law for the purpose of paying dividends. The Board of Directors made that
determination with respect to the dividend paid May 2, 1994, but it is not
possible to predict whether or not such a determination will be able to be made
with respect to future dividends. In addition, the Company's ability to pay cash
dividends on the Merger Preferred Stock will depend on the availability of cash
at the Company. As discussed in Note 11, since January 26, 1991, no additional
cash dividends to the Company have been permitted under the most restrictive
provisions in the existing debt agreements of Group, and the Company does not
expect Group to be permitted to pay dividends during fiscal 1994 or in the
foreseeable future beyond fiscal 1994, at least so long as the 11 7/8%
Securities are outstanding. Even if the 11 7/8% Securities are refinanced, there
can be no assurance that any new debt would not contain similarly restrictive
covenants. Dividends accrued during the thirteen weeks ended April 30, 1994 and
during fiscal 1993, 1992 and 1991, including accretion for difference between
redemption value and fair value at date of issuance, aggregated approximately
$7.1 million, $23.7 million, $18.8 million and $15.8 million, respectively.
At April 30, 1994, January 29, 1994 and January 30, 1993, 30,000,000 shares
of $.10 par value preferred stock of Group were authorized and approximately
1,806,000 shares of convertible preferred stock, Series A were outstanding. Each
share of Series A preferred stock of Group, which has an annual dividend of
$2.50 per share, is convertible into 0.50 shares of Merger Preferred Stock of
the Company, subject to subsequent adjustment pursuant to its terms.
15. STOCK OPTION PLANS:
Effective on January 28, 1994, the Company adopted the 1993 Employee Stock
Option Plan ("1993 Plan") for certain key employees. The 1993 Plan was created
for the special purpose of rewarding key employees for the appreciation earned
through prior service under the Company's previous equity share plan that was
terminated on October 29, 1993. Effective on January 28, 1994, the Company
granted options to acquire approximately 3.1 million shares of the Common Stock
at an average exercise price of $4.57 per share. The majority of these options
vest 40% in June 1995 with the remaining shares vesting in June 1996. In
connection with the adoption of this plan, the Company recorded a charge of
$26.7 million for management equity plan expense.
In addition, effective in April 1994 the 1994 Employee Stock Option Plan
("1994 Plan") was adopted as a successor to the 1993 Plan to facilitate awards
to key employees and to consultants. The 1994 Plan authorizes the issuance of up
to 2,980,534 shares of Common Stock and provides that no options may be granted
after 10 years from the effective date of this plan. Options for approximately
170,000 shares of Common Stock at an average exercise price of $5.52 per share
were granted in April 1994. Management equity plan expense of $1.6 million will
be recognized as the options ratably vest over the next three years, $36,000 of
which was recognized in the first quarter of 1994.
As of April 30, 1994, employee stock options for a total of approximately
3.2 million shares were outstanding and subject to future vesting.
Upon a change of control, as defined, all of the above options become fully
vested and exercisable.
F-20
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. INCOME TAXES:
During the first quarter of fiscal 1992, the Company adopted the provisions
of Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"). SFAS 109 supersedes Statement of Financial Accounting
Standards No. 96, of the same title, which the Company previously followed to
account for income taxes. The adoption of SFAS 109 did not impact the Company's
financial position or results of operations.
Deferred income taxes are provided for the temporary differences between
the financial reporting and tax basis of the Company's assets and liabilities.
The components of the net deferred tax liability as of January 29, 1994 and
January 30, 1993 were as follows (in thousands):
<TABLE>
<CAPTION>
JANUARY 29, JANUARY 30,
1994 1993
------------ ------------
<S> <C> <C>
Deferred tax assets:
Employee benefits including postretirement benefits................................ $ 69,358 $ 68,825
Net operating loss carryforwards................................................... 151,913 91,817
Investment tax credit carryforwards................................................ 11,900 14,567
Alternative minimum tax credits.................................................... 7,000 9,523
Other liabilities and reserves..................................................... 130,056 133,586
Valuation allowance................................................................ (296,624) (248,224)
------------ ------------
Total deferred tax asset...................................................... 73,603 70,094
------------ ------------
Deferred tax liabilities:
Property, plant and equipment...................................................... 51,258 50,213
Unamortized debt discount.......................................................... 22,985 24,704
------------ ------------
Total deferred tax liability.................................................. 74,243 74,917
------------ ------------
Net deferred tax liability........................................................... $ 640 $ 4,823
------------ ------------
------------ ------------
</TABLE>
The valuation allowances of $296.6 million at January 29, 1994 and $248.2
million at January 30, 1993 were established because, in the Company's
assessment, it was uncertain whether the net deferred tax assets would be
realized.
The provisions for income taxes applicable to continuing operations for
fiscal 1993, 1992 and 1991 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Current
Federal............................................................. $ -- $ (6,677) $ 315
State and local..................................................... 6,462 4,896 5,470
Foreign............................................................. 7,697 5,739 2,193
------------ ------------ ------------
14,159 3,958 7,978
------------ ------------ ------------
Deferred
State and local..................................................... (16) (5,936) 3,339
Foreign............................................................. (2,866) (1,178) 637
------------ ------------ ------------
(2,882) (7,114) 3,976
------------ ------------ ------------
Income taxes (benefit)........................................... $ 11,277 $ (3,156) $ 11,954
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
F-21
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. INCOME TAXES:--(CONTINUED)
Domestic and foreign components of income (loss) from continuing operations
before income taxes are summarized as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Domestic.............................................................. $ (172,183) $ (60,966) $ (69,454)
Foreign............................................................... 10,135 12,469 8,072
------------ ------------ ------------
$ (162,048) $ (48,497) $ (61,382)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
A reconciliation between income taxes computed at the statutory Federal
rate (35% for fiscal 1993 and 34% for fiscal 1992 and 1991) and the provisions
for income taxes applicable to continuing operations is as follows (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Amount at statutory Federal rate....................................... $ (56,717) $ (16,489) $ (20,870)
State and local income taxes, net of Federal income tax benefit........ 6,229 (2,893) 5,814
Foreign tax more than Federal tax at statutory rate.................... 1,284 321 86
Amortization and write-off of goodwill................................. 46,421 1,258 1,368
Valuation allowance.................................................... 16,095 15,103 --
Net operating loss generated........................................... -- -- 26,146
Other.................................................................. (2,035) (456) (590)
------------ ------------ ------------
Income taxes (benefit)............................................... $ 11,277 $ (3,156) $ 11,954
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
In addition, the valuation allowance was increased by $38.4 million in
fiscal 1993 and $79.0 million in fiscal 1992 to offset deferred tax assets
arising from the losses of discontinued operations.
At January 29, 1994, the Company had the following tax attribute
carryforwards available for Federal income tax purposes (in thousands):
<TABLE>
<CAPTION>
EXPIRATION
AMOUNT DATES
------------ -------------
<S> <C> <C>
Net operating losses--regular tax
Preacquisition, subject to limitations............................................. $ 134,000 1996-2003
Postacquisition, unrestricted...................................................... 300,000 2006-2008
------------
$ 434,000
------------
------------
Net operating losses--alternative minimum tax
Preacquisition, subject to limitations............................................. $ 118,000 1996-2002
Postacquisition, unrestricted...................................................... 236,000 2006-2008
------------
$ 354,000
------------
------------
Investment tax and other credits
Preacquisition, subject to limitations............................................. $ 11,900 1994-2003
------------
------------
Alternative minimum tax credits...................................................... $ 7,000 No limit
------------
------------
</TABLE>
F-22
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
16. INCOME TAXES:--(CONTINUED)
The regular tax net operating loss carryforwards include amounts related to
Kayser-Roth and subsidiaries for preacquisition regular tax purposes, subject to
limitations, of $35 million and postacquisition regular tax purposes,
unrestricted, of $62 million. Alternative minimum tax net operating loss
carryovers include amounts related to Kayser-Roth and subsidiaries of $33
million for preacquisition alternative minimum tax purposes, subject to
limitations, and $51 million for postacquisition alternative minimum tax
purposes, unrestricted. Although the sale agreement provides that an election
will be made (under Section 338(h)(10) of the Internal Revenue Code) to treat
the sale as an asset sale for Federal income tax purposes, there are provisions
whereby the purchaser of Kayser-Roth and the Company can reevaluate this
decision. If the purchaser and the Company mutually agree to treat the
transaction as a stock sale rather than an asset sale, the net operating losses
related to Kayser-Roth and subsidiaries will be transferred from the Company to
the purchaser.
The Internal Revenue Service has examined the returns of C&A Co. and its
subsidiaries for the last three fiscal years prior to its acquisition by Group
in December 1986. Certain adjustments were agreed to and the effect of those
adjustments, principally reductions to the net operating loss carryforwards and
investment tax credit carryforwards, are reflected in the amounts discussed
above. In the course of an examination of the Company's Federal income tax
returns for fiscal 1988 and 1989, the IRS has challenged the availability of
$176.6 million of the Company's approximately $434.0 million of current NOLs.
The examination is at a preliminary stage and management believes that the basis
for the IRS' position is unclear. Management disputes the IRS' challenge and
believes that substantially all of the NOLs should be available (subject to
certain limitations) to offset its income, if any, in the future. If the IRS
were to maintain its position and all or a major portion of such position were
to be upheld in litigation, the amount of the NOLs available to the Company in
future years would be materially reduced.
The Company has entered into a tax sharing agreement with Group and its
subsidiaries. The tax sharing agreement provides for payments to (from) the
Company for utilization of the Company's tax losses by Group and its
subsidiaries. The agreement provides for tax sharing payments calculated in
accordance with Federal tax regulations. Tax sharing payments received from
Group during fiscal 1993, 1992 and 1991 were $0, $4.5 million and $7.2 million,
respectively. The Company's tax sharing payable to Group of $8.8 million at
January 29, 1994 and the related fiscal 1992 tax sharing benefit result from the
utilization of tax loss carrybacks. This payable to Group is currently expected
to be settled through offset against future years tax sharing receivable
amounts.
Income taxes paid, net of refunds, were $3.3 million, $16.8 million and
$19.0 million for fiscal 1993, 1992 and 1991, respectively.
F-23
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
17. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
CASH AND CASH EQUIVALENTS, ACCOUNTS AND NOTES RECEIVABLE, AND ACCOUNTS
PAYABLE-- The carrying amount approximates fair value because of the short
maturity of these instruments.
RECEIVABLE FROM SALE OF BUSINESS AND LONG-TERM INVESTMENTS--Fair value
approximates carrying value.
LONG-TERM DEBT--The fair value of Group's publicly-traded long-term debt is
based upon the quoted market price of the issues. The fair value of the
remaining long-term debt of the Company approximates the carrying value.
PREFERRED STOCK--The fair value of the Company's redeemable preferred stock
and the Series A Preferred Stock of Group is based upon the quoted market price.
The fair value of the redeemable preferred stock of Group approximates the
carrying value.
The estimated fair values of the Company's financial instruments are
summarized as follows (in thousands):
<TABLE>
<CAPTION>
JANUARY 29, 1994 JANUARY 30, 1993
---------------------------- --------------------------
CARRYING ESTIMATED FAIR CARRYING ESTIMATED
AMOUNT VALUE AMOUNT FAIR VALUE
------------ -------------- ------------ ------------
<S> <C> <C> <C> <C>
Receivable from sale of business........................ $ 70,000 $ 70,000 $ -- $ --
Long-term investments................................... 1,046 1,046 29,344 29,344
Long-term debt.......................................... 923,554 1,017,927 982,205 997,450
Preferred stock......................................... 122,681 161,200 98,948 75,650
</TABLE>
18. INFORMATION ABOUT SEGMENTS OF THE COMPANY'S OPERATIONS:
The Company reclassified its industry segments during 1993 to realign its
products based on primary customer groups. Businesses related to the automotive
industry which were part of Specialty Textiles have been renamed Automotive
Products. The decorative fabrics and floorcoverings businesses have been
reclassified as Interior Furnishings. Previously, the floorcovering business was
part of the Specialty Textiles segment. Wallcovering products which were
previously part of the Home Furnishings segment have been renamed Wallcoverings.
Industry segment information has been restated for fiscal 1992 and 1991.
For fiscal 1993, 1992 and 1991, sales to General Motors Corporation
approximated 16.1%, 15.3% and 17.2%, respectively, and sales to Chrysler
Corporation approximated 10.0%, 10.2% and 8.3%, respectively, of total
consolidated sales. These sales were part of the Automotive Products segment.
F-24
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
18. INFORMATION ABOUT SEGMENTS OF THE COMPANY'S OPERATIONS:--(CONTINUED)
Information about the Company's segments for fiscal 1993, 1992 and 1991
follows (in thousands):
<TABLE>
<CAPTION>
OPERATING DEPRECIATION
FISCAL YEAR ENDED NET INCOME AND CAPITAL
JANUARY 29, 1994 SALES (LOSS)(B) AMORTIZATION(E) ASSETS(B) EXPENDITURES
- ------------------------------------- -------------- ----------- ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Automotive Products.................. $ 677,867 $ (2,261) $ 25,873 $ 379,637 $ 29,208
Interior Furnishings................. 407,201 12,175 12,521 226,417 11,768
Wallcoverings........................ 220,449 (17,856) 6,229 125,387 3,751
-------------- ----------- -------------- -------------- --------------
1,305,517 (7,942 (c) 44,623 731,441 44,727
Corporate items...................... -- (38,282 (d) 384 187,384 196
-------------- ----------- -------------- -------------- --------------
1,305,517 (46,224) 45,007 918,825 44,923
Discontinued operations.............. -- -- 16,340 -- 11,355
-------------- ----------- -------------- -------------- --------------
$ 1,305,517 $ (46,224) $ 61,347 $ 918,825 $ 56,278
-------------- ----------- -------------- -------------- --------------
-------------- ----------- -------------- -------------- --------------
OPERATING DEPRECIATION
FISCAL YEAR ENDED NET INCOME AND CAPITAL
JANUARY 30, 1993(A) SALES (LOSS)(B) AMORTIZATION(E) ASSETS(B) EXPENDITURES
- ------------------------------------- -------------- ----------- -------------- -------------- --------------
Automotive Products.................. $ 643,827 $ 52,684 $ 29,419 $ 403,148 $ 20,563
Interior Furnishings................. 391,778 37,520 13,003 240,292 14,295
Wallcoverings........................ 241,895 1,141 6,545 170,516 3,045
-------------- ----------- -------------- -------------- --------------
1,277,500 91,345(c) 48,967 813,956 37,903
Corporate items...................... -- (24,461)(d) 198 137,301 306
-------------- ----------- -------------- -------------- --------------
1,277,500 66,884 49,165 951,257 38,209
Discontinued operations.............. -- -- 22,541 190,177 15,972
-------------- ----------- -------------- -------------- --------------
$ 1,277,500 $ 66,884 $ 71,706 $ 1,141,434 $ 54,181
-------------- ----------- -------------- -------------- --------------
-------------- ----------- -------------- -------------- --------------
OPERATING DEPRECIATION
FISCAL YEAR ENDED NET INCOME AND CAPITAL
JANUARY 25, 1992 SALES (LOSS)(B) AMORTIZATION(E) ASSETS(B) EXPENDITURES
- ----------------------------------- -------------- ----------- -------------- -------------- --------------
Automotive Products................ $ 610,325 $ 55,598 $ 26,843 $ 421,958 $ 24,220
Interior Furnishings............... 336,773 28,278 13,915 241,980 9,519
Wallcoverings...................... 237,218 (6,088) 6,628 196,238 5,093
-------------- ----------- -------------- -------------- --------------
1,184,316 77,788 47,386 860,176 38,832
Corporate items.................... -- (26,681)(d) 215 131,467 96
-------------- ----------- -------------- -------------- --------------
1,184,316 51,107 47,601 991,643 38,928
Discontinued operations............ -- -- 22,915 308,661 22,971
-------------- ----------- -------------- -------------- --------------
$ 1,184,316 $ 51,107 $ 70,516 $ 1,300,304 $ 61,899
-------------- ----------- -------------- -------------- --------------
-------------- ----------- -------------- -------------- --------------
- ---------------
</TABLE>
<TABLE>
<S> <C>
(a) The fiscal year ended January 30, 1993 included fifty-three weeks.
(b) Operating income is determined by deducting all operating expenses, including restructuring costs, goodwill
write-off and other costs, from revenues. Operating expenses do not include interest expense. Assets of the
business segments at January 30, 1993 and January 25, 1992 include goodwill. Operating income reflects
related amortization.
(Footnotes continued on following page)
</TABLE>
F-25
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
18. INFORMATION ABOUT SEGMENTS OF THE COMPANY'S OPERATIONS:--(CONTINUED)
(Footnotes continued from preceding page)
<TABLE>
<S> <C>
(c) The segment operating loss of $7.9 million in 1993 includes the write-off of goodwill of $129.9 million;
$68.4 million of which is included in the $2.3 million operating loss of the Automotive Products segment;
$31.6 million of which is included in the $12.2 million operating income of the Interior Furnishings segment,
and $29.9 million of which is included in the $17.9 million operating loss of the Wallcovering segment.
Segment operating income in 1992 includes restructuring costs of $10.0 million which relate to the
wallcoverings business.
(d) Corporate items in fiscal 1993 include $26.7 million of management equity plan expense. Corporate items in
fiscal 1993, 1992 and 1991 each include operating management and advisory fees to affiliates of the Company
of $5.0 million.
(e) Depreciation and amortization excludes the amortization of deferred financing costs and debt discount which
do not impact operating income.
</TABLE>
19. COMMITMENTS AND CONTINGENCIES:
During 1991, a Fifth Consolidated Amended Complaint was filed in In re Ivan
F. Boesky Securities Litigation, involving numerous class actions and individual
claims against a variety of defendants including Group. Among other things, this
complaint asserts claims on behalf of certain of Group's former preferred
stockholders alleging a conspiracy to manipulate the price of stock in 1986 for
the purpose of triggering a redemption of certain outstanding preferred stock of
Group. In 1992, Advanced Development & Engineering Centre ("ADEC"), a division
of an indirect subsidiary of the Company, filed arbitration demands against the
Pakistan Ordnance Factories Board ("POF") concerning ADEC's installation of a
munitions facility for POF. POF filed arbitration counterclaims alleging that
ADEC's alleged breach of contract caused POF to lose its entire investment in
the munitions facility.
The ultimate outcome of the legal proceedings to which the Company is a
party will not, in the opinion of the Company's management based on the facts
presently known to it, have a material effect on the Company's consolidated
financial condition or future results of operations.
In 1988, the Federal government filed suit in the U.S. District Court for
the District of Rhode Island against the Company's former Kayser-Roth subsidiary
and others in connection with a Superfund site in Rhode Island. The District
Court held Kayser-Roth liable under CERCLA for all past and future response
costs. By Amended Administrative Order issued June 4, 1991, the EPA directed
Kayser-Roth to implement the remedies set forth in its Record of Decision issued
September 18, 1990. Since the beginning of fiscal 1990 to date, Kayser-Roth has
paid approximately $2.9 million for past response costs, prejudgment interest
and remediation. Kayser-Roth is in the process of complying with the remainder
of the order. The Company has agreed to indemnify Kayser-Roth with respect to
this matter.
The Company is legally or contractually responsible or alleged to be
responsible for the investigation and remediation of contamination at various
sites. It also has received notices that it is a potentially responsible party
("PRP") in a number of proceedings. The Company may be named as a PRP at other
sites in the future, including with respect to divested and acquired businesses.
It is a normal risk of operating a manufacturing business that liability may be
incurred for investigating and remediating on-site and off-site contamination.
The Company is currently engaged in investigation or remediation at certain
sites. In estimating the total cost of investigation and remediation, the
Company has considered, among other things, the Company's prior experience in
remediating contaminated sites, remediation efforts by other parties, data
released by the
F-26
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
19. COMMITMENTS AND CONTINGENCIES:--(CONTINUED)
EPA, the professional judgment of the Company's environmental experts, outside
environmental specialists and other experts, and the likelihood that other
parties which have been named as PRPs will have the financial resources to
fulfill their obligations at sites where they and the Company may be jointly and
severally liable. Under the scheme of joint and several liability, the Company
could be liable for the full costs of investigation and remediation even if
additional parties are found to be responsible under the applicable laws. It is
difficult to estimate the total cost of investigation and remediation due to
various factors including incomplete information regarding particular sites and
other PRP's, uncertainty regarding the extent of environmental problems and the
Company's share, if any, of liability for such problems, the selection of
alternative compliance approaches, the complexity of environmental laws and
regulations and changes in cleanup standards and techniques. When it has been
possible to provide reasonable estimates of the Company's liability with respect
to environmental sites, provisions have been made in accordance with generally
accepted accounting principles. Where it is probable that an environmental
liability has been incurred and the amount of loss can be reasonably estimated
within a range, the Company selects as the best estimate of the liability an
estimate at the high end of the range based upon all information available to
the Company, including the professional judgment of the Company's environmental
experts, outside environmental specialists and other experts. Excluding sites at
which the Company's participation is anticipated to be de minimis or otherwise
insignificant or where the Company is being indemnified by a third party for the
liability, there are 15 sites where the Company is participating in the
investigation or remediation of the site either directly or through financial
contribution, and nine additional sites where the Company is alleged to be
responsible for costs of investigation or remediation. The Company's current
estimate of its liability for these 24 sites is $29.5 million. As of January 29,
1994, the Company has established reserves of approximately $30.8 million for
the estimated future costs related to all its known environmental sites. In the
opinion of management, based on the facts presently known to it, the
environmental costs and contingencies will not have a material adverse effect on
the Company's consolidated financial condition or results of operations.
However, there can be no assurance that the Company has identified or properly
assessed all potential environmental liability arising from the activities or
properties of the Company, its present and former subsidiaries and their
corporate predecessors.
The Company is subject to increasingly stringent Federal, state and local
environmental laws and regulations that (i) affect ongoing operations and may
increase capital costs and operating expenses and (ii) impose liability for the
costs of investigation and remediation and certain other damages related to
on-site and off-site soil and groundwater contamination. The Company's
management believes that it has obtained, and is in material compliance with,
all material environmental permits and approvals necessary to conduct its
various businesses. Environmental compliance costs for continuing businesses
currently are accounted for as normal operating expenses or capital expenditures
of such business units. In the opinion of management, based on the facts
presently known to it, such environmental compliance costs will not have a
material adverse effect on the Company's consolidated financial condition or
results of operations.
F-27
<PAGE>
COLLINS & AIKMAN HOLDINGS CORPORATION AND SUBSIDIARIES
(TO BE RENAMED COLLINS & AIKMAN CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
20. QUARTERLY FINANCIAL DATA (UNAUDITED):
Summarized quarterly financial data for fiscal 1994, 1993 and 1992 follows
(in thousands):
<TABLE>
<CAPTION>
INCOME FROM
CONTINUING OPERATIONS
--------------------------
BEFORE AFTER INCOME
FISCAL YEAR ENDING JANUARY 28, 1995 NET SALES GROSS PROFIT INCOME TAXES TAXES NET INCOME
- --------------------------------------- -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
First Quarter.......................... $ 390,446 $ 100,954 $ 15,372 $ 12,754 $ 12,754
-------------- ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------
LOSS FROM
CONTINUING OPERATIONS
--------------------------
BEFORE AFTER INCOME NET INCOME
FISCAL YEAR ENDED JANUARY 29, 1994 NET SALES GROSS PROFIT INCOME TAXES TAXES (LOSS)
- --------------------------------------- -------------- ------------ ------------ ------------ ------------
First Quarter.......................... $ 339,043 $ 78,948 $ (2,202) $ (5,473) $ (9,069)
Second Quarter......................... 289,694 61,230 (18,343) (20,628) (149,430)
Third Quarter.......................... 334,629 84,445 (125,725) (129,821) (129,871)
Fourth Quarter......................... 342,151 85,104 (15,778) (17,403) 10,706
-------------- ------------ ------------ ------------ ------------
$ 1,305,517 $ 309,727 $ (162,048) $ (173,325) $ (277,664)
-------------- ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------
LOSS FROM
CONTINUING OPERATIONS
--------------------------
BEFORE AFTER INCOME
FISCAL YEAR ENDED JANUARY 30, 1993 NET SALES GROSS PROFIT INCOME TAXES TAXES NET LOSS
- --------------------------------------- -------------- ------------ ------------ ------------ ------------
First Quarter.......................... $ 319,488 $ 72,564 $ (8,507) $ (11,385) $ (17,655)
Second Quarter......................... 319,713 74,081 (9,846) (12,524) (17,059)
Third Quarter.......................... 314,873 70,819 (9,380) (7,452) (16,723)
Fourth Quarter (a)..................... 323,426 81,563 (20,764) (13,980) (212,221)
-------------- ------------ ------------ ------------ ------------
$ 1,277,500 $ 299,027 $ (48,497) $ (45,341) $ (263,658)
-------------- ------------ ------------ ------------ ------------
-------------- ------------ ------------ ------------ ------------
</TABLE>
- ---------------
(a) The fourth quarter of fiscal 1992 included fourteen weeks.
The quarterly financial data above has been restated to reflect Kayser-Roth
as a discontinued operation and Dura as a continuing operation.
The third quarter of 1993 has been restated to exclude a restructuring
charge of $24.0 million that was previously recorded in error and the fourth
quarter of 1993 has been restated to exclude the previously reported reversal
of this charge. The Company previously reported income (loss) from continuing
operations before income taxes, income (loss) from continuing operations after
income taxes and net income (loss) for the thirteen weeks ended October 30, 1993
of ($149.7) million, ($153.8) million and ($153.9) million, respectively, and
$8.2 million, $6.6 million and $34.7 million for the thirteen weeks ended
January 29, 1994, respectively.
Loss from continuing operations before income taxes in the third quarter of
fiscal 1993 includes the write-off of goodwill of $129.9 million. The fourth
quarter of fiscal 1993 includes management equity plan expense of $26.7 million.
Net loss in fiscal 1993 includes provisions for loss (gain) on disposal of
discontinued operations of $2.2 million, $125.4 million and ($28.1) million in
the first, second and fourth quarters, respectively. Loss from continuing
operations before income taxes in fiscal 1992 includes restructuring costs of
$10.0 million in the fourth quarter. Net loss in fiscal 1992 includes provision
for loss on disposal of discontinued operations of $168.0 million in the fourth
quarter.
The Company's operations are not subject to significant seasonal
influences.
F-28
<PAGE>
[INSIDE BACK COVER]
[PHOTO]
Interior Furnishings
Decorative Fabrics: Collins & Aikman manufactures a broad collection of
upholstery for the furniture industry, offering the largest selection of
styles and constructions. The Mastercraft Division is the number one
supplier of flat-woven upholstery fabrics and is also the industry leader in
the fast-growing Jacquard segment of the market. [PHOTO]
Floorcoverings: The Company's
patented Powerbound RS(REGISTERED SYMBOL) carpet
products feature an
exclusive peel and stick
adhesive system. These products
are designed for heavy traffic
applications such as schools,
hospitals, airline terminals
and public buildings.
Wallcoverings [PHOTO]
Built on the Imperial name,
Collins & Aikman is the largest
residential wallcovering
manufacturer in the U.S.,
with a wide selection of designs
and constructions. Collections
feature the efforts of
imperial's in-house studio
and those of well-known
designers.
<PAGE>
- -------------------------------- --------------------------------
- -------------------------------- --------------------------------
NO PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED
IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER 25,000,000 SHARES
TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES
TO WHICH IT RELATES OR AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR COLLINS & AIKMAN
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CORPORATION
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE. Common Stock
(par value $.01 share)
------------------------
TABLE OF CONTENTS
PAGE
----
Available Information............. 3
Incorporation of Certain Documents
by Reference.................... 3
Prospectus Summary................ 4
Risk Factors...................... 11
Dividends......................... 15
Dilution.......................... 16 ---------------------
Use of Proceeds and Consolidation. 17
Capitalization.................... 18
Selected Financial Data........... 19 LOGO
Unaudited Pro Forma Consolidated
Financial Data.................. 20
Management's Discussion and ---------------------
Analysis of Financial Condition
and Results of Operations....... 26
Business.......................... 38
Management........................ 55
Principal and Selling Stockholders
and Certain Relationships....... 63
New Credit Facilities............. 65 GOLDMAN, SACHS & CO.
Description of the Capital Stock.. 69
Underwriting...................... 73 MERRILL LYNCH & CO.
Legal Opinions.................... 76
Experts........................... 76 WASSERSTEIN PERELLA
Index to Financial Statements..... F-1 SECURITIES, INC.
THE NIKKO SECURITIES CO.
INTERNATIONAL, 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, REPRESENTATIVES OF THE
MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS UNDERWRITERS
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 JUNE 21, 1994
[LOGO] 25,000,000 SHARES
COLLINS & AIKMAN CORPORATION
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
---------------------
Of the 25,000,000 shares of Common Stock offered, 5,000,000 shares are
being offered hereby in an international offering outside the United States and
20,000,000 shares are being offered in a concurrent United States offering. The
initial public offering price and the aggregate underwriting discount per share
will be identical for both Offerings. See "Underwriting".
Of the 25,000,000 shares of Common Stock offered, 20,000,000 shares are
being sold by the Company and 5,000,000 shares are being sold by the Selling
Stockholders. The Company will not receive any of the proceeds from the sale of
the shares being sold by the Selling Stockholders. Blackstone Capital Partners
L.P. and Wasserstein Perella Partners, L.P. will together own or have the right
to vote approximately 59.3% of the outstanding Common Stock (53.7% assuming the
over-allotment options are exercised in full) after completion of the Offerings
and will be in a position to control the Company. See "Principal and Selling
Stockholders and Certain Relationships".
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 $14 and $17. For factors to be
considered in determining the initial public offering price, as well as a
discussion of the requirement that the initial public offering price be
recommended by a qualified independent underwriter, see "Underwriting".
SEE "RISK FACTORS" FOR CERTAIN CONSIDERATIONS RELEVANT TO AN INVESTMENT IN
THE COMMON STOCK.
The Common Stock will be listed on the New York Stock Exchange under the
symbol "CKC".
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
<TABLE>
<CAPTION>
INITIAL PUBLIC UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
OFFERING PRICE DISCOUNT(1) COMPANY(2) STOCKHOLDERS
-------------- ------------- -------------- -----------------------
<S> <C> <C> <C> <C>
Per Share................... $ $ $ $
Total(3).................... $ $ $ $
</TABLE>
- ---------------
(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 International Underwriters an
option for 30 days to purchase up to an additional 750,000 shares at the
initial public offering price per share, 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 3,000,000 shares at the initial public offering price per share,
less the underwriting discount, solely to cover over-allotments. If such
options are exercised in full, the total initial public offering price,
underwriting discount and proceeds to the 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.
NIKKO EUROPE PLC
---------------------
The date of this Prospectus is , 1994.
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY 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.
72
<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.
73
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Company has agreed to sell to each of the International Underwriters named
below, and each of such International Underwriters, for whom Goldman Sachs
International, Merrill Lynch International Limited, Wasserstein Perella
Securities, Inc. and The Nikko Europe, Co. Plc are acting as representatives,
has severally agreed to purchase from the Company, the respective number of
shares of Common Stock set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
COMMON
UNDERWRITER STOCK
----------- ----------
<S> <C>
Goldman Sachs International....................................................
Merrill Lynch International Limited............................................
Wasserstein Perella Securities, Inc............................................
Nikko Europe Plc...............................................................
------------
Total........................................................... 5,000,000
------------
------------
</TABLE>
Under the terms and conditions of the Underwriting Agreement, the
International Underwriters are committed to take and pay for all of the shares
offered hereby, if any are taken.
The International Underwriters propose to offer the shares of Common Stock
in part directly to the public at the initial public offering price set forth on
the cover page of this Prospectus, and in part to certain securities dealers at
such price less a concession of $ per share. The International
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to certain brokers and dealers. After the shares of
Common Stock are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the representatives.
The Company 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 20,000,000 shares of Common Stock in a U.S. offering in the United States.
The initial public offering price and aggregate underwriting discounts and
commissions per share for the two offerings are identical. The closing of the
International Offering made hereby is a condition to the closing of the U.S.
Offering, and vice versa. The representatives of the U.S. Underwriters are
Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated,
Wasserstein Perella Securities, Inc. and The Nikko Securities Co. International,
Inc.
Pursuant to an Agreement between the U.S. and International Underwriting
Syndicates (the "Agreement Between") relating to the two offerings, each of the
International Underwriters has agreed that, as a part of the distribution of the
shares offered hereby and subject to certain exceptions, it will (i) not,
directly or indirectly, offer, sell or deliver shares of Common Stock (a) in the
United States of America (including the States and the District of Columbia),
its territories, its possessions and other areas subject to its jurisdiction
(the "United States") or to any U.S. persons or (b) to any person who it
believes intends to reoffer, resell or deliver the shares in the United States
or to any U.S. persons, and (ii) cause any dealer to whom it may sell such
shares at any concession to agree to observe a similar restriction. The term
U.S. person shall mean, for purposes of this paragraph: (a) any individual who
is a resident of the United States or (b) any corporation,
74
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
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 750,000 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 5,000,000 shares of Common Stock offered. The
Selling Stockholders have granted the U.S. Underwriters a similar option to
purchase up to an aggregate of 3,000,000 additional shares of Common Stock.
The Company and the Selling Stockholders have agreed, during the period
beginning from the date of this Prospectus and continuing to and including the
date 180 calendar days after the date of the Prospectus, not to offer, sell,
contract to sell or otherwise dispose of any securities of the Company (other
than pursuant to employee stock option plans existing, or on the conversion or
exchange of convertible or exchangeable securities outstanding, on the date of
this Prospectus) which are substantially similar to the shares of Common Stock
or which are convertible or exchangeable into securities which are substantially
similar to the shares of the Common Stock without the prior written consent of
the representatives, except for the shares of Common Stock offered in connection
with the concurrent U.S. and International Offerings. The Company has informed
the representatives of the Underwriters that, if such consent is given, the
Company will make a public announcement thereof.
Each International Underwriter has also agreed that (a) it has not offered
or sold, and will not offer or sell, in the United Kingdom, by means of any
document, any shares of Common Stock other than to persons whose ordinary
business it is to buy or sell shares or debentures, whether as principal or
agent, or in circumstances which do not constitute an offer to the public within
the meaning of the Companies Act 1985 of Great Britain, (b) it has complied, and
will comply with, all applicable provisions of the Financial Services Act of
1986 of Great Britain with respect to anything done by it in relation to the
shares of Common Stock in, from or otherwise involving the United Kingdom, and
(c) it has only issued or passed on and will only issue or pass on in the United
Kingdom any document received by it in connection with the issuance of the
shares of Common Stock to a person who is of a kind described in Article 9(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1988 (as amended) of Great Britain or is a person to whom the document may
otherwise lawfully be issued or passed on.
Buyers of shares of Common Stock offered hereby may be required to pay
stamp taxes and other charges in accordance with the laws and practice of the
country of purchase in addition to the initial public offering price.
At the Company's request, the Underwriters have reserved up to 250,000
shares of Common Stock for sale at the initial public offering price to
officers, directors, employees and certain other persons associated with the
Company. The number of shares of Common Stock available for sale to the general
public will be reduced to the extent that these persons purchase such reserved
shares. Any reserved shares not purchased will be offered by the Underwriters to
the general public on the same basis as the other shares offered hereby.
75
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
The provisions of Schedule E to the By-Laws of the National Association of
Securities Dealers, Inc. apply to the offering because Wasserstein Perella
Securities, Inc. may be deemed to be an affiliate of the Company for purposes of
Schedule E. In addition, Nikko Europe Plc ("Nikko") could be deemed to be an
affiliate of the Company for purposes of Schedule E because affiliates of Nikko
have limited partnership interests in an affiliate of Blackstone Partners, which
presently owns or has the power to vote 45.0% of the Common Stock. See
"Principal and Selling Stockholders and Certain Relationships". Accordingly, the
initial public offering price can be no higher than that recommended by a
"qualified independent underwriter" meeting certain standards. In accordance
with this requirement, Goldman, Sachs & Co. has served in such role and has
recommended a price in compliance with the requirements of Schedule E. Goldman,
Sachs & Co. in its role as qualified independent underwriter has performed due
diligence investigations and reviewed and participated in the preparation of
this Prospectus and the Registration Statement of which this Prospectus forms a
part. The representatives of the U.S. Underwriters have informed the Company
that the U.S. Underwriters do not intend to confirm sales to any account over
which they exercise discretionary authority, except in accordance with the
provisions of Schedule E.
Prior to the Offerings, there has been no public market for the Common
Stock. The initial public offering price was negotiated among the Company, 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.
Affiliates of Wasserstein Perella Securities, Inc. will serve on the Board
of Directors and on the Nominating Committee, which is empowered to nominate
persons for election to the Board of Directors and exclusively empowered to fill
any newly created directorships or any other vacancies on the Board of
Directors. See "Principal and Selling Stockholders and Certain Relationships".
Messrs. Wasserstein, Weisenburger and Ziebold are currently serving as directors
of the Company. See "Management".
From time to time, Goldman, Sachs & Co. has provided financial advisory
services to Blackstone Partners with respect to matters unrelated to the
Company, for which Goldman, Sachs & Co. has received customary fees in the
ordinary course of business. From time to time, each of Merrill Lynch & Co. and
Wasserstein Perella Securities, Inc. has provided financial advisory services to
certain affiliates of the Partners, with respect to matters unrelated to the
Company, for which each has received customary fees in the ordinary course of
business.
In addition, in 1992 Merrill Lynch & Co. and WP & Co. each provided
financial advisory services relating to the solicitation by Group of consents
from the holders of Group's 11 7/8% Senior Subordinated Debentures due 2001, for
which each received fees of $300,000. In 1991, Wasserstein Perella Securities,
Inc. received fees of approximately $400,000 in connection with repurchases by
the Company on the open market of certain securities of the Company. For further
information with respect to financial advisory and other services provided and
the fees received by and the ownership interests of certain affiliates of
Wasserstein Perella Securities, Inc., see "Principal and Selling Stockholders
and Certain Relationships".
76
<PAGE>
[ALTERNATE PAGES FOR INTERNATIONAL PROSPECTUS]
LEGAL OPINIONS
The validity of the Common Stock will be passed upon for the Company by
Cravath, Swaine & Moore, New York, New York, and for the Underwriters by Jones,
Day, Reavis & Pogue, New York, New York. From time to time, Jones, Day, Reavis &
Pogue provides legal services to the Company and other entities in which the
Partners have an interest.
EXPERTS
The consolidated financial statements included in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen &
Co., independent public accountants, as indicated in their report with respect
thereto, and are included herein in reliance upon the reports of said firm and
upon the authority of said firm as experts in accounting and auditing.
77
<PAGE>
[ALTERNATE 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 25,000,000 SHARES
TO SELL OR THE SOLICITATION OF AN OFFER TO
BUY ANY SECURITIES OTHER THAN THE SECURITIES
TO WHICH IT RELATES OR AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH
SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR COLLINS & AIKMAN
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CORPORATION
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF
THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE. Common Stock
(par value $.01 share)
------------------------
TABLE OF CONTENTS
PAGE
----
Available Information............. 3
Incorporation of Certain Documents
by Reference.................... 3
Prospectus Summary................ 4
Risk Factors...................... 11
Dividends......................... 15
Dilution.......................... 16 ---------------------
Use of Proceeds and Consolidation. 17
Capitalization.................... 18
Selected Financial Data........... 19 LOGO
Unaudited Pro Forma Consolidated
Financial Data.................. 20
Management's Discussion and ---------------------
Analysis of Financial Condition
and Results of Operations....... 26
Business.......................... 38
Management........................ 55
Principal and Selling Stockholders
and Certain Relationships....... 63
New Credit Facilities............. 65 GOLDMAN SACHS INTERNATIONAL
Description of the Capital Stock.. 69
Certain United States Tax
Consequences to Non-United
States Holders.................. 73
Underwriting...................... 75 MERRILL LYNCH INTERNATIONAL
Legal Opinions.................... 78 LIMITED
Experts........................... 78
Index to Financial Statements..... F-1 WASSERSTEIN PERELLA
SECURITIES, INC.
------------------------
NIKKO EUROPE PLC
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, REPRESENTATIVES OF THE
MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS UNDERWRITERS
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:
<TABLE>
<S> <C>
SEC Registration Fee...................................................... $ 176,466.75
NASD Filing Fee........................................................... 30,500.00
NYSE Listing Fee.......................................................... 319,100.00
Legal Fees and Expenses................................................... 350,000.00
Transfer Agent and Registrar Fee.......................................... 2,000.00
Blue Sky Fees and Expenses................................................ 10,000.00
Accounting Fees and Expenses.............................................. 250,000.00
Printing and Engraving Expenses........................................... 250,000.00
Miscellaneous............................................................. 5,000.00
-----------------
Total................................................................... $ 1,393,066.75
-----------------
-----------------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware (the "DGCL")
authorizes the Company to indemnify each director and officer of the Company
against expenses (including attorney's fees, judgments, fines and amounts paid
in settlement) actually and reasonably incurred in connection with the defense
or settlement of any threatened, pending or completed legal proceedings in which
he is involved by reason of the fact that he is or was a director or officer of
the Company or is or was serving as a director, officer, employee or agent of
another corporation or organization at the request of the Company, provided that
he acted in good faith and in a manner that he reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, provided he had no reasonable cause to believed
that his conduct was unlawful. The determination whether a director or officer
has met the applicable standard of conduct may be made by (1) the Board of
Directors by vote of a quorum consisting of directors who were not parties to
such action, suit or proceedings, or (2) if such a quorum is not obtainable, or
even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel, in a written opinion, or (3) by the stockholders.
Indemnification is mandatory in any instance in which the director or officer is
successful on the merits or otherwise in the defense of any proceeding or any
claim, issue or matter thereof. If the legal proceeding, however, is by or in
the right of the Company, Section 145 provides that the director or officer may
not be indemnified in respect to any claim, issue or matter as to which he shall
have been adjudged to be liable to the Company unless a court determines
otherwise. Section 145 also authorizes the payment of expenses incurred in
defense of any proceeding in advance of its final disposition upon the receipt
by the Company of an undertaking of the director or officer to repay the amounts
so advanced if it is ultimately determined that he is not entitled to indemnity.
It further provides that the power to indemnify includes the power to indemnify
persons who served as directors and officers of Holdings II prior to its merger
into the Company, as well as persons who cease to be directors or officers of
the Company.
Article Eighth of the Restated Certificate, provides that, to the fullest
extent permitted by the DGCL, as now or hereafter in effect, no director of the
Company shall be personally liable to the Company or its stockholders for
monetary damages for any breach of his fiduciary duty as a director. However,
under Section 102(b)(7) of the DGCL, a director cannot be absolved from
liability (1) for any breach of his duty of loyalty to the Company or its
stockholders, (2) for acts or omissions that are not in good faith or involve
intentional misconduct or a knowing violation of the
II-1
<PAGE>
law, (3) under Section 174 of the DGCL, or (4) for any transaction from which
the director derived an improper personal benefit.
Article VIII of the Company's By-Laws, a copy of which is filed as Exhibit
4.2, provides that any person made a party to, threatened to be made a party to,
or otherwise involved in, any action, suit or proceeding by reason of the fact
that he is or was a director or officer of the Company or is or was a director,
officer, employee or agent of any corporation for which he served as such at the
request of the Company (including service with respect to employee benefit
plans), shall be indemnified by the Company to the fullest extent authorized by
the DGCL against all expenses, including attorneys' fees, reasonably incurred by
him in connection therewith except for expenses incurred in connection with
certain proceedings (or parts thereof) initiated by the indemnitee. Such right
of indemnification includes the right to be paid, in advance, all expenses
incurred in connection with the defense of a proceeding (upon receipt of any
required undertaking) and grants to an indemnitee the right to bring suit to
enforce the rights to indemnification and to the advancement of expenses
provided in Article VIII. The rights to indemnification and to the advancement
of expenses provided therein shall not be deemed exclusive of any other rights
to which such director or officer may be entitled apart from the indemnification
provisions of said Article VIII of the Company's By-Laws. Additionally, the
Company intends to maintain directors and officers liability insurance that
insures the directors and officers of the Company against any expense, liability
or loss to the extent such insurance is available at prices the Company
determines are reasonable.
ITEM 16. EXHIBITS.
(a) Exhibits. See Exhibit Index on page E-1.
(b) Financial Statement Schedules. See Index to Financial Statement
Schedules on page S-1.
ITEM 17. UNDERTAKINGS.
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(b) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of Prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-2 and has duly caused this Amendment to
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in The City of New York, State of New York, on the 21st day of
June 1994.
COLLINS & AIKMAN
HOLDINGS CORPORATION
By: /s/ DAVID A. STOCKMAN
................................
David A. Stockman
Co-Chairman of the
Board of Directors
By: /s/ BRUCE WASSERSTEIN
................................
Bruce Wasserstein
Co-Chairman of the Board
of Directors
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
---- ----- ----
<S> <C> <C>
* Co-Chairman of the Board of Directors June 21, 1994
..............................................
David A. Stockman
* Co-Chairman of the Board of Directors June 21, 1994
..............................................
Bruce Wasserstein
* President and Director June 21, 1994
.............................................. (Principal Executive Officer)
Stephen A. Schwarzman
* Principal Financial and Accounting Officer June 21, 1994
..............................................
David J. McKittrick
/s/ RANDALL J. WEISENBURGER Vice Chairman and Director June 21, 1994
..............................................
Randall J. Weisenburger
* Director June 21, 1994
..............................................
James R. Birle
* Director June 21, 1994
..............................................
W. Townsend Ziebold, Jr.
*By: /s/ RANDALL J. WEISENBURGER
..............................................
Randall J. Weisenburger
Attorney-in-Fact
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
Please note that in the following description of exhibits, the title of any
document entered into, or filing made, prior to July 15, 1992 reflects the name
of the entity a party thereto or filing, as the case may be, at such time.
Accordingly, documents and filings described below may refer to WCI Holdings II
Corporation, WCI Holdings Corporation or Wickes Companies, Inc., if such
documents and filings were made prior to July 15, 1992.
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION NUMBER
- -------- ----------- ---------------
<S> <C> <C>
+1.1 Form of Underwriting Agreement (U.S. Version).
1.2 Form of Underwriting Agreement (International Version).
4.1 Certificate of Incorporation of the Company, as amended, is hereby incorporated by
reference to Exhibit 4.1 to the Company's Registration Statement on Form S-8
(Registration No. 33-53321) filed April 28, 1994.
4.2 By-laws of the Company is hereby incorporated by reference to Exhibit 3.1 to the Company's
Report on Form 10-Q for the fiscal quarter ended April 30, 1994.
+4.3 Specimen Stock Certificate for the Common Stock.
4.4 Indenture dated as of May 1, 1985, pursuant to which 11 3/8% Usable Subordinated
Debentures due 1997 of Collins & Aikman Group, Inc. (formerly named Wickes Companies,
Inc.) were issued is hereby incorporated by reference to Exhibit 4(f) of Wickes
Companies, Inc.'s Current Report on Form 8-K dated May 21, 1985 (SEC File No. 1-6761).
+4.5 Form of New Credit Agreement to be entered into by Collins & Aikman Group, Inc. and a
syndicate of banks and other financial institutions for whom Chemical Bank will act as
agent.
+4.6 Form of Restated Certificate of Incorporation of the Company
+4.7 Form of Restated By-laws of the Company
+4.8 Form of Stockholders Agreement among the Company, Collins & Aikman Group, Inc., Blackstone
Capital Partners L.P., and Wasserstein Perella Partners, L.P.
+5. Opinion of Cravath, Swaine & Moore as to the legality of the shares being issued.
10.1 Employment Agreements dated as of June 16, 1989 between Wickes Companies, Inc. and certain
executive officers are hereby incorporated by reference to Exhibit 10.1 of Wickes
Companies, Inc. Form 10-K for the fiscal year ended January 27, 1990.
10.2 First Amendment to Employment Agreements dated as of March 20, 1990 between Wickes
Companies, Inc. and certain executive officers is hereby incorporated by reference to
Exhibit 10.2 of Wickes Companies, Inc.'s Form 10-K for the fiscal year ended January 27,
1990.
10.3 Employment Agreement dated as of July 18, 1990 between Wickes Companies, Inc. and an
executive officer is hereby incorporated by reference to Exhibit 10.3 of Wickes
Companies, Inc. Form 10-K for the fiscal year ended January 26, 1991.
10.4 Agreement dated as of March 23, 1992 between Collins & Aikman Group, Inc. and an executive
officer is hereby incorporated by reference to Exhibit 10.6 of Collins & Aikman Holdings
Corporation's Report on Form 10-K for the fiscal year ended January 30, 1993.
</TABLE>
E-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION NUMBER
- -------- ----------- ---------------
<S> <C> <C>
10.5 First Amendment to Agreement, dated as of April 4, 1994 between Collins & Aikman Group,
Inc. and an executive officer is hereby incorporated by reference to Exhibit 10.14 of
Collins & Aikman Holdings Corporation's Report on Form 10-K for the fiscal year ended
January 29, 1994.
10.6 Letter Agreement dated as of May 16, 1991 and Employment Agreement dated as of July 22,
1992 between Collins & Aikman Corporation and an executive officer are hereby
incorporated by reference to Exhibit 10.7 of Collins & Aikman Holdings Corporation's
report on Form 10-K for the fiscal year ended January 30, 1993.
10.7 First Amendment to Employment Agreement dated as of February 24, 1994 between Collins &
Aikman Corporation and an executive officer.
10.8 Employment Agreement dated as of May 1, 1991 between Kayser-Roth Corporation and an
executive officer is hereby incorporated by reference to Exhibit 10.8 of Collins &
Aikman Holdings Corporation's Report on Form 10-K for the fiscal year ended January 30,
1993.
10.9 First Amendment to Employment Agreement dated as of May 1, 1991 between Kayser-Roth
Corporation and an executive officer is hereby incorporated by reference to Exhibit 10.9
of Collins & Aikman Holdings Corporation's Quarterly Report on Form 10-Q for the quarter
ended July 31, 1993.
10.10 Letter Agreement dated as of August 12, 1992 between Collins & Aikman Group, Inc. and an
executive officer is hereby incorporated by reference to Exhibit 10.9 of Collins &
Aikman Holdings Corporation's Report on Form 10-K for the fiscal year ended January 30,
1993.
10.11 Agreement dated as of February 25, 1993 and First Amendment dated as of March 29, 1993
between Collins & Aikman Group, Inc. and a former executive officer are hereby
incorporated by reference to Exhibit 10.10 of Collins & Aikman Holdings Corporation's
Report on Form 10-K for the fiscal year ended January 30, 1993.
10.12 1993 Employee Stock Option Plan.
10.13 1994 Employee Stock Option Plan.
10.14 Letter Agreements dated as of May 16, 1991 between Collins & Aikman Corporation and
certain executive officers.
10.15 Employment Agreement dated as of April 27, 1992 between Collins & Aikman Corporation and
an executive officer.
10.16 Employment Agreement dated as of March 1, 1993 between Imperial Wallcoverings, Inc. and an
executive officer.
10.17 Employment Agreement dated as of October 1, 1993 between Collins & Aikman Corporation and
an executive officer.
10.18 Warrant Agreement dated as of January 8, 1994 by and between Collins & Aikman Group, Inc.
and Legwear Acquisition corporation is hereby incorporated by reference to Exhibit 10.20
of Collins & Aikman Holdings Corporation's Report on Form 10-K for the fiscal year ended
January 29, 1994.
10.19 Acquisition Agreement dated as of November 22, 1993 as amended and restated as of January
28, 1994, among Collins & Aikman Group, Inc., Kayser-Roth Corporation and Legwear
Acquisition Corporation is hereby incorporated by reference to Exhibit 2.1 of Collins &
Aikman Holdings Corporation's Current Report on Form 8-K dated February 10, 1994.
+10.20 Form of Receivables Sale Agreement among C&A Receivables Company, Collins & Aikman Group,
Inc., the serveral financial institutions from time to time parties thereto and Chemical
Bank
</TABLE>
E-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL PAGE
NUMBER DESCRIPTION NUMBER
- -------- ----------- ---------------
<S> <C> <C>
+10.21 Form of Receivables Transfer and Servicing Agreement among the Company, Collins & Aikman
Group, Inc., Collins & Aikman Automotive International, Inc., Collins & Aikman Holdings
Canada, Inc., WCA Canada, Inc., Imperial Wallcoverings (Canada), Inc., Imperial
Wallcoverings, Inc., The Akro Corporation, Dura Acquisition Corp. and each of the other
subsidiaries of C&A Group from time to time parties thereto, C&A Group and C&A
Receivables Company.
+10.22 Collins & Aikman Corporation 1994 Executive Incentive Compensation Plan
+11. Computation of Earnings Per Share.
21. Subsidiaries.
+23.1 Consent of Cravath, Swaine & Moore is contained in Exhibit 5.
+23.2 Consent of Arthur Andersen & Co.
24. Power of attorney (contained in the signature section of this Registration Statement).
</TABLE>
- ---------------
+ Filed herewith.
E-3
EXHIBIT 1.1
Collins & Aikman Corporation
Common Stock
(par value $0.01 per share)
Underwriting Agreement
(U.S. Version)
June , 1994
--
Goldman, Sachs & Co.,
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Wasserstein Perella Securities, Inc.
The Nikko Securities Co. International, Inc.
As representatives of the several Underwriters
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004
Dear Sirs:
Collins & Aikman Corporation, a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated
herein, to issue and sell to the Underwriters named in Schedule I
hereto (the "Underwriters") an aggregate of 16,000,000 shares of
Common Stock, par value $0.01 per share ("Stock"), of the
Company, and the entities named in Schedule II hereto (the
"Selling Stockholders") propose, subject to the terms and
conditions stated herein, to sell to the Underwriters 4,000,000
shares of Stock and, at the election of the Underwriters, up to
3,000,000 additional shares of Stock. The aggregate of
16,000,000 shares to be sold by the Company and 4,000,000 shares
of Stock to be sold by the Selling Stockholders are herein
collectively called the "Firm Shares" and the aggregate of
3,000,000 additional shares to be sold by the Selling
Stockholders is herein called the "Optional Shares". The Firm
Shares and the Optional Shares which the Underwriters elect to
purchase pursuant to Section 2 hereof are herein collectively
called the "Shares".
It is understood and agreed to by all parties that the
Company and the Selling Stockholders are concurrently entering
<PAGE>
into an agreement (the "International Underwriting Agreement")
providing for the sale by the Company and the Selling
Stockholders of up to a total of 5,750,000 shares of Stock (the
"International Shares"), including the overallotment option
thereunder, through arrangements with certain underwriters
outside the United States (the "International Underwriters"), for
whom Goldman Sachs International, Merrill Lynch International
Limited, Wasserstein Perella Securities, Inc. and Nikko Europe
Plc and are acting as lead managers. Anything herein or therein
to the contrary notwithstanding, the respective closings under
this Agreement and the International Underwriting Agreement are
hereby expressly made conditional on one another. The
Underwriters hereunder and the International Underwriters are
simultaneously entering into an Agreement between U.S. and
International Underwriting Syndicates (the "Agreement between
Syndicates") which provides, among other things, for the transfer
of shares of Stock between the two syndicates. Two forms of
prospectus are to be used in connection with the offering and
sale of shares of Stock contemplated by the foregoing, one
relating to the Shares hereunder and the other relating to the
International Shares. The latter form of prospectus will be
identical to the former except for certain substitute pages as
included in the registration statement and amendments thereto as
mentioned below. Except as used in Sections 2, 3, 4, 9 and 11
herein, and except as the context may otherwise require,
references hereinafter to the Shares shall include all the shares
of Stock which may be sold pursuant to either this Agreement or
the International Underwriting Agreement, and references herein
to any prospectus whether in preliminary or final form, and
whether as amended or supplemented, shall include both the
U.S. and the international versions thereof.
1. (a) The Company represents and warrants to, and agrees
with, each of the Underwriters that:
(i) A registration statement in respect of the Firm
Shares and the Optional Shares has been filed with the
Securities and Exchange Commission (the "Commission"); such
registration statement and any post-effective amendment
thereto, each in the form heretofore delivered to you, and,
excluding exhibits thereto but including all documents
incorporated by reference in the prospectus contained
therein, to you for each of the other Underwriters, have
been declared effective by the Commission in such form; no
other document with respect to such registration statement
or document incorporated by reference therein has heretofore
been filed with the Commission; and no stop order suspending
the effectiveness of such registration statement has been
issued and no proceeding for that purpose has been initiated
or threatened by the Commission (any preliminary prospectus
included in such registration statement or filed with the
Commission pursuant to Rule 424(a) of the rules and
regulations of the Commission under the Securities Act of
-2-
<PAGE>
1933, as amended (the "Act"), is hereinafter called a
"Preliminary Prospectus"; the various parts of such
registration statement, including all exhibits thereto and
including (i) the information contained in the form of final
prospectus filed with the Commission pursuant to Rule 424(b)
under the Act in accordance with Section 5(a) hereof and
deemed by virtue of Rule 430A under the Act to be part of
the registration statement at the time it was declared
effective and (ii) the documents incorporated by reference
in the prospectus contained in the registration statement at
the time such part of the registration statement became
effective, each as amended at the time such part of the
registration statement became effective, are hereinafter
collectively called the "Registration Statement"; such final
prospectus, in the form first filed pursuant to Rule 424(b)
under the Act, is hereinafter called the "Prospectus"; and
any reference herein to any Preliminary Prospectus or the
Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item
12 of Form S-2 under the Act, as of the date of such
Preliminary Prospectus or Prospectus, as the case may be);
(ii) No order preventing or suspending the use of any
Preliminary Prospectus has been issued by the Commission,
and each Preliminary Prospectus, at the time of filing
thereof, conformed in all material respects to the
requirements of the Act and the rules and regulations of the
Commission thereunder, and did not contain an untrue
statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under
which they were made, not misleading; provided, however,
that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in
conformity with information furnished in writing to the
Company by an Underwriter through you expressly for use
therein;
(iii) The documents incorporated by reference in the
Prospectus, when they were filed with the Commission,
conformed in all material respects to the requirements of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations of the
Commission thereunder, and none of such documents contained
an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading;
(iv) The Registration Statement conforms, and the
Prospectus and any further amendments or supplements to the
Registration Statement or the Prospectus will conform, in
all material respects to the requirements of the Act and the
rules and regulations of the Commission thereunder and do
-3-
<PAGE>
not and will not, as of the applicable effective date as to
the Registration Statement and any amendment thereto and as
of the applicable filing date as to the Prospectus and any
amendment or supplement thereto, contain an untrue statement
of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this
representation and warranty shall not apply to any
statements or omissions made in reliance upon and in
conformity with information furnished in writing to the
Company by an Underwriter through you expressly for use
therein;
(v) Neither the Company nor any of its subsidiaries
has sustained since the date of the latest audited financial
statements included or incorporated by reference in the
Prospectus any material loss or interference with its
business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree,
otherwise than as set forth or contemplated in the
Prospectus; and, since the respective dates as of which
information is given in the Registration Statement and the
Prospectus, there has not been any change in the capital
stock or long-term debt of the Company or any
of its subsidiaries or any material adverse change, or any
development involving a prospective material adverse change,
in or affecting the general affairs, management, financial
position, stockholders' equity, results of operations of the
Company and its subsidiaries, otherwise than as set forth or
contemplated in the Prospectus;
(vi) The Company and its subsidiaries have good and
marketable title in fee simple to all real property and good
and marketable title to all personal property owned by them,
in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or
such as do not materially affect the value of such property
and do not interfere with the use made and proposed to be
made of such property by the Company and its subsidiaries;
and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the
Company and its subsidiaries;
(vii) The Company has been duly incorporated and is
validly existing as a corporation in good standing under the
laws of the State of Delaware, with power and authority
(corporate and other) to own its properties and conduct its
business as described in the Prospectus, and has been duly
qualified as a foreign corporation for the transaction of
-4-
<PAGE>
business and is in good standing under the laws of each
other jurisdiction in which it owns or leases properties, or
conducts any business, so as to require such qualification,
or is subject to no material liability or disability by
reason of the failure to be so qualified in any such
jurisdiction; and each subsidiary of the Company has been
duly incorporated and is validly existing as a corporation
in good standing under the laws of its jurisdiction of
incorporation;
(viii) The Company has an authorized capitalization as
set forth in the Prospectus, and all of the issued shares of
capital stock of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable;
and all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly
authorized and issued and are fully paid and non-assessable.
Except for certain preferred shares which will be redeemed
prior to the sale of Stock contemplated hereby, all such
shares of capital stock of each subsidiary of the Company
are owned beneficially and of record by the Company or one
of its subsidiaries, free and clear of all liens,
encumbrances, equities or claims (other than such of the
foregoing as arise under the Credit Agreements);
(ix) The unissued Shares to be issued and sold by the
Company to the Underwriters hereunder and under the
International Underwriting Agreement have been duly and
validly authorized and, when issued and delivered against
payment therefor as provided herein and therein, will be
duly and validly issued and fully paid and non-assessable
and will conform to the description of the Stock contained
in the Prospectus;
(x) The issue and sale of the Shares to be sold by the
Company hereunder and under the International Underwriting
Agreement and the compliance by the Company with all of the
provisions of this Agreement and the International
Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not
conflict with or result in a breach or violation of any of
the terms or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument to which the Company or any of
its subsidiaries is a party or by which the Company or any
of its subsidiaries is bound or to which any of the property
or assets of the Company or any of its subsidiaries is
subject, except for such conflicts, breaches or violations
which, individually or in the aggregate, would not have a
material adverse effect on the general affairs, management,
financial position, business prospects, stockholders' equity
or results of operations of the Company and its subsidiaries
(a "Material Adverse Effect"), nor will such action result
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in any violation of the provisions of the Certificate of
Incorporation or By-Laws of the Company or any statute or
any order, rule or regulation of any court or governmental
agency or body having jurisdiction over the Company or any
of its subsidiaries or any of their properties; and no
consent, approval, authorization, order, registration or
qualification of or with any such court or governmental
agency or body is required for the issue and sale of the
Shares or the consummation by the Company of the
transactions contemplated by this Agreement and the
International Underwriting Agreement, except the
registration under the Act of the Shares and such consents,
approvals, authorizations, registrations or qualifications
as may be required under state securities or Blue Sky laws
in connection with the purchase and distribution of the
Shares by the Underwriters and the International
Underwriters;
(xi) Neither the Company nor any of its subsidiaries
is in violation of its charter or in default in the
performance or observance of any material obligation,
agreement, covenant or condition contained in any indenture,
mortgage, loan agreement or note or any material contract,
lease or other instrument to which it is a party or by which
it or any of them or their properties may be bound;
(xii) The statements made in the Prospectus under the
caption "Description of Capital Stock" insofar as they
purport to constitute a summary of the terms of the Stock,
under the caption "Certain United States Tax Consequences to
Non-United States Holders," and under the captions "The New
Credit Facilities" and "Underwriting", insofar as they
describe the provisions of the matters therein described,
are accurate and fair summaries;
(xiii) Other than as set forth in the Prospectus,
there are no legal or governmental proceedings pending to
which the Company or any of its subsidiaries is a party or
of which any property of the Company or any of its
subsidiaries is the subject which, if determined adversely
to the Company or any of its subsidiaries, would
individually or in the aggregate have a Material Adverse
Effect; and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated by governmental
authorities or threatened by others;
(xiv) The Credit Agreement, dated as of the date of
this Agreement, among the Company and the banks party
thereto (the "Credit Agreement"), has been duly authorized,
executed and delivered by the Company and constitutes a
valid and binding obligation of the Company, enforceable in
accordance with its terms, subject, as to enforcement, to
applicable bankruptcy, insolvency, reorganization and other
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<PAGE>
laws of general applicability relating to or affecting
creditors' rights and to general equitable principles; and
immediately prior to or simultaneously with the First Time
of Delivery the Company will consummate the borrowing of not
less than $ million of borrowings pursuant to the Credit
---
Agreement (the "Term Borrowings") and effect the other
transactions described under the caption "Use of Proceeds
and Consolidation" in the Prospectus;
(xv) The transactions described under the caption "Use
of Proceeds and Consolidation" in the Prospectus (the
"Transactions"), including, without limitation, the merger
of Collins & Aikman Holdings II Corporation ("Holdings II")
with and into the Company (the "Holdings II Merger") and the
merger of Collins & Aikman Group, Inc. ("Group") with and
into Collins & Aikman Corporation (the "Group Merger", and
collectively with the Holdings II Merger, the
"Consolidation"), have been duly authorized, will be
consummated simultaneously with the First Time of Delivery
and, assuming the consummation of the sale of the Firm
Shares pursuant to this Agreement and the International
Underwriting Agreement, the consummation of the Term
Borrowings and the application of the net proceeds of the
foregoing as described under the caption "Use of Proceeds
and Consolidation" in the Prospectus, the consummation of
the Transactions will not conflict with or result in a
breach or violation of any of the terms or provisions of, or
constitute a default under, any indenture, mortgage, deed of
trust, loan agreement or other agreement or instrument to
which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries is bound or
to which any of the property or assets of the Company or any
of its subsidiaries is subject, except for such conflicts,
breaches or violations which, individually or in the
aggregate, would not have a Material Adverse Effect, nor
will such action result in any violation of the provisions
of the respective Certificate of Incorporation or By-laws of
the Company, or any statute or any order, rule or regulation
of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries or
any of their properties; and no consent, approval,
authorization, order, registration or qualification of or
with any such court or governmental agency or body is
required for the consummation of the Transactions, except
for the filing of certificates of merger in accordance with
Delaware law;
(xvi) The Company and its subsidiaries have filed all
federal or state income or franchise tax returns required to
be filed and have paid all taxes shown thereon as due
(except taxes being contested in good faith as to which
adequate provisions have been made to the extent required by
generally accepted accounting principles ("GAAP")), and
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there is no material tax deficiency which has been or might
reasonably be expected to be asserted against the Company or
any of its subsidiaries (except such of the foregoing as
have been adequately provided for on the books of the
Company and its subsidiaries);
(xvii) Neither the Company, any of its subsidiaries,
any predecessor of any of the foregoing nor, to the
knowledge of the Company, any entity as to which any of the
foregoing has any indemnity or similar obligation has
authorized or conducted or has knowledge of the generation,
transportation, storage, use, treatment, disposal or release
of any hazardous substance, hazardous waste, hazardous
material, hazardous constituent, toxic substance, pollutant,
contaminant, petroleum product (including crude oil or any
fraction thereof), natural gas, liquefied gas or synthetic
gas defined or regulated under any environmental law
(collectively, "Hazardous Materials") on, in or under any
real property leased, owned, used, operated or by any means
controlled by the Company or any subsidiary (the "Real
Property") which, in the case of any of the foregoing, is
required to be disclosed (directly or by incorporation by
reference) in the Prospectus, or in any of the Company's
filings required under the Exchange Act, and which is not so
disclosed in accordance with such requirements; the Real
Property and the Company's, each subsidiary's and, to the
knowledge of the Company, each such other entity's, as the
case may be, operations are in compliance in all material
respects with all federal, state and local laws, ordinances,
rules and regulations relating to health, safety and the
environment (collectively, "Environmental Laws"), and the
Company, each subsidiary and, to the knowledge of the
Company, each such other entity has all licenses, permits
and authorizations required to be had under any
Environmental Law, and is and has operated in compliance
therewith, except for such of the foregoing as, individually
or in the aggregate, would not have a Material Adverse
Effect; except as described in the Prospectus, neither the
Company, any of its subsidiaries nor, to the knowledge of
the Company, any such other entity has received any written
or oral notice from any governmental entity or third party,
and there is no pending or, to the best knowledge of the
Company or any subsidiary, threatened, and, to the knowledge
of the Company or any subsidiary there are no circumstances
with respect to the Real Property or the operations of the
Company or its subsidiaries that could reasonably be
anticipated to form the basis of, any claim, litigation or
any administrative agency proceeding that: (1) alleges a
violation of any Environmental Laws by the Company or any
subsidiary, (2) alleges the Company, any subsidiary or any
predecessor of any of the foregoing nor any entity as to
which any of the foregoing has any indemnity or similar
obligation is a liable party under the Comprehensive
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<PAGE>
Environmental Response, Compensation, and Liability Act, 42
U.S.C. Sec.Sec. 9601, et seq. or any state superfund law, (3)
alleges possible contamination of the environment by the
Company or any subsidiary, or (4) alleges possible
contamination of the Real Property, except for such of the
foregoing as, individually or in the aggregate, would not
have a Material Adverse Effect;
(xviii) No labor dispute with the employees of, or
representatives of employees of, the Company or any of its
subsidiaries exists or, to the knowledge of the Company or
any of its subsidiaries, is imminent, and the Company is not
aware of any existing or reasonably foreseeable labor
disturbance by the employees of any of its principal
suppliers, manufacturers or contractors which, in any such
case, might be expected to result in any Material Adverse
Effect;
(xix) The Company and its subsidiaries each owns or
possesses, or can acquire on reasonable terms, the patents,
patent rights, licenses, inventions, copyrights, know how
(including trade secrets and other unpatented and
unpatentable proprietary or confidential information,
systems or procedures), trade marks, service marks and trade
names presently employed by it in connection with the
business now operated by them, and neither the Company nor
any subsidiary has received any notice of infringement of or
conflict with asserted rights of others with respect to any
of the foregoing which, individually or in the aggregate, if
the subject of an unfavorable decision, ruling or finding,
would result in any Material Adverse Effect;
(xx) There are no transactions with affiliates, as
defined in Rule 405 under the Act, which are required to be
disclosed in a Prospectus that are not fairly disclosed
therein;
(xxi) The Company is not and, after giving effect to
the offering and sale of the Shares, will not be an open-end
investment company, unit investment trust or face-amount
certificate company that is or is required to be registered
under the Investment Company Act of 1940, as amended (the
"Investment Company Act"); and neither the Company nor any
affiliated entity is directly or indirectly controlled by or
acting on behalf of any person that is such a company or
trust;
(xxii) The Shares have been approved for listing on
the New York Stock Exchange (the "Exchange"), subject only
to official notice of issuance, under the symbol "CKC";
(xxiii) Neither the Company nor any of its affiliates
does business with the government of Cuba or with any person
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<PAGE>
or affiliate located in Cuba within the meaning of Section
517.075 of Florida Statutes (Chapter 92-198, Laws of
Florida); and
(xxiv) Arthur Andersen & Co., who have certified
certain financial statements of the Company and its
subsidiaries, are independent public accountants as required
by the Act and the rules and regulations of the Commission
thereunder.
(b) Holdings II represents and warrants to, and agrees
with, each of the Underwriters that:
(i) Holdings II has, and immediately prior to the
effective time of the Holdings II Merger will have, good and
valid title to all of the presently issued and outstanding
shares of stock of Holdings, free and clear of all liens,
encumbrances, equities or claims; and, upon the effective
time of the Holdings II Merger, good and valid title to such
shares of Stock, free and clear of all liens, encumbrances,
equities or claims, will be held by the Selling Stockholders
and other former security holders of Holdings II; and
(ii) The Holdings II Merger has been duly authorized,
and the consummation thereof will not conflict with or
result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement
or instrument to which Holdings II or any of its
subsidiaries is a party or by which Holdings II or any of
its subsidiaries is bound or to which any of the property or
assets of Holdings II or any of its subsidiaries is subject,
nor will such action result in any violation of the
provisions of the respective Certificates of Incorporation
or By-laws of Holdings II or any statute or any order, rule
or regulation of any court or governmental agency or body
having jurisdiction over Holdings II or any of its
subsidiaries or any of their properties; and no consent,
approval, authorization, order, registration or
qualification of or with any such court or governmental
agency or body is required for the consummation of the
Holdings II Merger, except for the filing of certificates of
merger in accordance with Delaware law.
(c) Each of the Selling Stockholders severally represents
and warrants to, and agrees with, each of the Underwriters and
the Company that:
(i) All consents, approvals, authorizations and orders
necessary for the execution and delivery by such Selling
Stockholder of this Agreement and the International
Underwriting Agreement, and for the sale and delivery of the
Shares to be sold by such Selling Stockholder hereunder and
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<PAGE>
under the International Underwriting Agreement, have been
obtained; and such Selling Stockholder has full right, power
and authority to enter into this Agreement and the
International Underwriting Agreement and to sell, assign,
transfer and deliver the Shares to be sold by such Selling
Stockholder hereunder and under the International
Underwriting Agreement;
(ii) The sale of the Shares to be sold by such Selling
Stockholder hereunder and the compliance by such Selling
Stockholder with all of the provisions of this Agreement and
the International Underwriting Agreement and the
consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or
constitute a default under, any statute, any indenture,
mortgage, deed of trust, loan agreement or other agreement
or instrument to which such Selling Stockholder is a party
or by which such Selling Stockholder is bound, or to which
any of the property or assets of such Selling Stockholder is
subject, nor will such action result in any violation of the
provisions of the Certificate of Incorporation or By-Laws of
such Selling Stockholder if such Selling Stockholder is a
corporation, or the Articles of Partnership of such Selling
Stockholder, if such Selling Stockholder is a partnership or
any statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over such
Selling Stockholder or the property of such Selling
Stockholder;
(iii) Immediately following the effective time of the
Holdings II Merger, such Selling Stockholder will have, and
immediately prior to each Time of Delivery (as defined in
Section 4 hereof) such Selling Stockholder will have, good
and valid title to the Shares to be sold by such Selling
Stockholder hereunder or under the International
Underwriting Agreement, free and clear of all liens,
encumbrances, equities or claims; and, upon delivery of such
Shares and payment therefor pursuant hereto and thereto,
good and valid title to such Shares, free and clear of all
liens, encumbrances, equities or claims, will pass to the
several Underwriters or the International Underwriters, as
the case may be;
(iv) During the period beginning from the date hereof
and continuing to and including the date 180 calendar days
after the date of the Prospectus, such Selling Stockholder
will not offer, sell, contract to sell or otherwise dispose
of, except as provided hereunder or under the International
Underwriting Agreement, any securities of the Company that
are substantially similar to the Shares, including but not
limited to any securities that are convertible into or
exchangeable for or that represent the right to receive the
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<PAGE>
Shares or any such substantially similar securities (other
than pursuant to employee stock option plans existing on, or
upon the conversion or exchange of convertible or
exchangeable securities outstanding as of, the date of this
Agreement) without your prior written consent;
(v) Such Selling Stockholder has not taken and will
not take, directly or indirectly, any action which is
designed to or which has constituted or which might
reasonably be expected to cause or result in stabilization
or manipulation of the price of any security of the Company
to facilitate the sale or resale of the Shares; and
(vi) To the extent that any statements or omissions
made in the Registration Statement, any Preliminary
Prospectus, the Prospectus or any amendment or supplement
thereto are made in reliance upon and in conformity with
written information furnished to the Company by such Selling
Stockholder expressly for use therein, such Preliminary
Prospectus and the Registration Statement did, and the
Prospectus and any further amendments or supplements to the
Registration Statement and the Prospectus will, when they
become effective or are filed with the Commission, as the
case may be, not contain any untrue statement of a material
fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein
not misleading.
In order to document the Underwriters' compliance with the
reporting and withholding provisions of the Tax Equity and Fiscal
Responsibility Act of 1982 with respect to the transactions
herein contemplated, each of the Selling Stockholders agrees to
deliver to you prior to or at the First Time of Delivery (as
hereinafter defined) a properly completed and executed United
States Treasury Department Form W-9 (or other applicable form or
statement specified by Treasury Department regulations in lieu
thereof).
2. Subject to the terms and conditions herein set forth,
(a) the Company and each of the Selling Stockholders agrees,
severally and not jointly, to sell to each of the Underwriters,
and each of the Underwriters agrees, severally and not jointly,
to purchase from the Company and each of the Selling
Stockholders, at a purchase price per share of $............, the
number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto and (b) in the event and to the
extent that the Underwriters shall exercise the election to
purchase Optional Shares as provided below, each of the Selling
Stockholders agrees, severally and not jointly, to sell to each
of the Underwriters, and each of the Underwriters agrees,
severally and not jointly, to purchase from each of the Selling
Stockholders, at the purchase price per share set forth in clause
(a) of this Section 2, that portion of the number of Optional
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<PAGE>
Shares as to which such election shall have been exercised (to be
adjusted by you so as to eliminate fractional shares) determined
by multiplying such number of Optional Shares by a fraction the
numerator of which is the maximum number of Optional Shares which
such Underwriter is entitled to purchase as set forth opposite
the name of such Underwriter in Schedule I hereto and the
denominator of which is the maximum number of the Optional Shares
which all of the Underwriters are entitled to purchase hereunder.
The Selling Stockholders, as and to the extent indicated in
Schedule II hereto, hereby grant, severally and not jointly, to
the Underwriters the right to purchase at their election up to
3,000,000 Optional Shares, at the purchase price per share set
forth in the immediately preceding paragraph, for the sole
purpose of covering overallotments in the sale of the Firm
Shares. Any such election to purchase Optional Shares shall be
made in proportion to the maximum number of Optional Shares to be
sold by each Selling Stockholder as set forth in Schedule II
hereto. Any such election to purchase Optional Shares may be
exercised by written notice from you to the Attorneys-in-Fact,
given within a period of 30 calendar days after the date of this
Agreement and setting forth the aggregate number of Optional
Shares to be purchased and the date on which such Optional Shares
are to be delivered, as determined by you but in no event earlier
than the First Time of Delivery (as defined in Section 4 hereof)
or, unless you and the Attorneys-in-Fact otherwise agree in
writing, earlier than two or later than ten business days after
the date of such notice.
3. Upon the authorization by you of the release of the Firm
Shares, the several Underwriters propose to offer the Firm Shares
for sale upon the terms and conditions set forth in the
Prospectus.
4. Certificates in definitive form for the Shares to be
purchased by each Underwriter hereunder, and in such denomina-
tions and registered in such names as Goldman, Sachs & Co. may
request upon at least forty-eight hours' prior notice to the
Company and the Selling Stockholders, shall be delivered by or on
behalf of the Company and the Selling Stockholders to you for the
account of such Underwriter, against payment by such Underwriter
or on its behalf of the purchase price therefor by certified or
official bank check or checks, payable to the order of the
Company and the Custodian as their interests may appear, in New
York Clearing House funds, all at the offices of Jones, Day,
Reavis & Pogue, 599 Lexington Avenue, New York, New York 10022,
or at such other place as shall be agreed upon by the Company,
and you. The time and date of such delivery and payment shall
be, with respect to the Firm Shares, 9:30 a.m., New York City
time, on June .., 1994 or such other time and date as you and the
Company may agree upon in writing, and, with respect to the
Optional Shares, 9:30 a.m., New York City time, on the date
specified by you in the written notice given by you of the
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<PAGE>
Underwriters' election to purchase such Optional Shares, or such
other time and date as you, the Company and the Selling
Stockholders may agree upon in writing. Such time and date for
delivery of the Firm Shares is herein called the "First Time of
Delivery". Such time and date for delivery of the Optional
Shares, if not the First Time of Delivery, is herein called the
"Second Time of Delivery", and each such time and date for
delivery is herein called a "Time of Delivery". Such
certificates will be made available for checking and packaging at
least twenty-four hours prior to each Time of Delivery at the
office of Goldman, Sachs & Co., 85 Broad Street, New York, New
York 10004.
5. The Company agrees with each of the Underwriters:
(a) To prepare the Prospectus in a form approved by you and
to file such Prospectus pursuant to Rule 424(b) under the Act not
later than the Commission's close of business on the second
business day following the execution and delivery of this
Agreement, or, if applicable, such earlier time as may be
required by Rule 430A(a)(3) under the Act; to make no further
amendment or any supplement to the Registration Statement or
Prospectus which shall be disapproved by you promptly after
reasonable notice thereof; to advise you, promptly after it
receives notice thereof, of the time when the Registration
Statement, or any amendment thereto, has been filed or becomes
effective or any supplement to the Prospectus or any amended
Prospectus has been filed and to furnish you copies thereof; to
advise you, promptly after it receives notice thereof, of the
issuance by the Commission of any stop order or of any order
preventing or suspending the use of any Preliminary Prospectus or
prospectus, of the suspension of the qualification of the Shares
for offering or sale in any jurisdiction, of the initiation or
threatening of any proceeding for any such purpose, or of any
request by the Commission for the amending or supplementing of
the Registration Statement or Prospectus or for additional
information; and, in the event of the issuance of any stop order
or of any order preventing or suspending the use of any
Preliminary Prospectus or prospectus or suspending any such
qualification, promptly to use its best efforts to obtain its
withdrawal;
(b) Promptly from time to time to take such action as you
may reasonably request to qualify the Shares for offering and
sale under the securities laws of such jurisdictions as you may
request and to comply with such laws so as to permit the
continuance of sales and dealings therein in such jurisdictions
for as long as may be necessary to complete the distribution of
the Shares, provided that in connection therewith the Company
shall not be required to qualify as a foreign corporation or to
file a general consent to service of process in any jurisdiction;
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<PAGE>
(c) To furnish the Underwriters with copies of the
Prospectus in such quantities as you may from time to time
reasonably request, and, if the delivery of a prospectus is
required at any time prior to the expiration of nine months after
the time of issue of the Prospectus in connection with the
offering or sale of the Shares and if at such time any events
shall have occurred as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in
order to make the statements therein, in the light of the
circumstances under which they were made when such Prospectus is
delivered, not misleading, or, if for any other reason it shall
be necessary during such same period to amend or supplement the
Prospectus in order to comply with the Act, to notify you and
upon your request to prepare and furnish without charge to each
Underwriter and to any dealer in securities as many copies as you
may from time to time reasonably request of an amended Prospectus
or a supplement to the Prospectus which will correct such
statement or omission or effect such compliance, and in case any
Underwriter is required to deliver a prospectus in connection
with sales of any of the Shares at any time nine months or more
after the time of issue of the Prospectus, upon your request but
at the expense of such Underwriter, to prepare and deliver to
such Underwriter as many copies as you may request of an amended
or supplemented Prospectus complying with Section 10(a)(3) of the
Act;
(d) To make generally available to its security holders as
soon as practicable, but in any event not later than eighteen
months after the effective date of the Registration Statement (as
defined in Rule 158(c) under the Act), an earnings statement of
the Company and its subsidiaries (which need not be audited)
complying with Section 11(a) of the Act and the rules and
regulations of the Commission thereunder (including at the option
of the Company Rule 158 under the Act);
(e) During the period beginning from the date hereof and
continuing to and including the date 180 calendar days after the
date of the Prospectus, not to offer, sell, contract to sell or
otherwise dispose of, except as provided hereunder or under the
International Underwriting Agreement, any securities of the
Company that are substantially similar to the Shares, including
but not limited to any securities that are convertible into or
exchangeable for or that represent the right to receive the
Shares or any such substantially similar securities (other than
pursuant to employee stock option plans existing on, or upon the
conversion or exchange of convertible or exchangeable securities
outstanding as of, the date of this Agreement) without your prior
written consent;
(f) To furnish to its stockholders as soon as practicable
after the end of each fiscal year an annual report (including a
balance sheet and statements of income, stockholders' equity and
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cash flows of the Company and its consolidated subsidiaries
certified by independent public accountants) and, as soon as
practicable after the end of each of the first three quarters of
each fiscal year (beginning with the fiscal quarter ending after
the effective date of the Registration Statement), consolidated
summary financial information of the Company and its subsidiaries
for such quarter in reasonable detail;
(g) During a period of five years from the effective date
of the Registration Statement, to furnish to you copies of all
reports or other communications (financial or other) furnished to
stockholders, and deliver to you (i) as soon as they are
available, copies of any reports and financial statements
furnished to or filed with the Commission or any national
securities exchange on which any class of securities of the
Company is listed and (ii) such additional information concerning
the business and financial condition of the Company as you may
from time to time reasonably request (such financial statements
to be on a consolidated basis to the extent the accounts of the
Company and its subsidiaries are consolidated in reports
furnished to its stockholders generally or to the Commission);
(h) To use the net proceeds received by it from the sale of
the Shares pursuant to this Agreement and the International
Underwriting Agreement in the manner specified in the Prospectus
under the caption "Use of Proceeds and the Consolidation"; and
(i) To use its best efforts to list, subject to notice of
issuance, the Shares on the Exchange.
6. The Company and each of the Selling Stockholders,
jointly and severally, covenant and agree with one another and
with the several Underwriters that (a) the Company will pay or
cause to be paid the following: (i) the fees, disbursements and
expenses of the Company's counsel and accountants in connection
with the registration of the Shares under the Act and all other
expenses in connection with the preparation, printing and filing
of the Registration Statement, any Preliminary Prospectus and the
Prospectus and amendments and supplements thereto and the mailing
and delivering of copies thereof to the Underwriters and dealers;
(ii) the cost of printing or producing any Agreement among
Underwriters, this Agreement, the International Underwriting
Agreement, the Agreement between Syndicates, the Selling
Agreements, the Blue Sky Memorandum and any other documents in
connection with the offering, purchase, sale and delivery of the
Shares; (iii) all expenses in connection with the qualification
of the Shares for offering and sale under state securities laws
as provided in Section 5(b) hereof, including the fees and
disbursements of counsel for the Underwriters in connection with
such qualification and in connection with the Blue Sky survey;
(iv) the filing fees incident to securing any required review by
the National Association of Securities Dealers, Inc. of the terms
of the sale of the Shares; (v) the cost of preparing stock
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certificates; (vi) the cost and charges of any transfer agent or
registrar; and (vii) all other costs and expenses incident to the
performance of its obligations hereunder which are not otherwise
specifically provided for in this Section and (b) such Selling
Stockholder will pay or cause to be paid all costs and expenses
incident to the performance of such Selling Stockholder's
obligations hereunder which are not otherwise specifically
provided for in this Section, including (i) any fees and expenses
of counsel for such Selling Stockholder and (ii) all expenses and
taxes incident to the sale and delivery of the Shares to be sold
by such Selling Stockholder to the Underwriters hereunder. In
connection with clause (b)(ii) of the preceding sentence,
Goldman, Sachs & Co. agrees to pay New York State stock transfer
tax, and each Selling Stockholder agrees to reimburse Goldman,
Sachs & Co. for associated carrying costs if such tax payment is
not rebated on the day of payment and for any portion of such tax
payment not rebated. It is understood, however, that the Company
shall bear, and the Selling Stockholders shall not be required to
pay or to reimburse the Company for, the cost of any other
matters not directly relating to the sale and purchase of the
Shares pursuant to this Agreement, and that, except as provided
in this Section, Section 8 and Section 11 hereof, the
Underwriters will pay all of their own costs and expenses,
including the fees of their counsel, stock transfer taxes on
resale of any of the Shares by them and any advertising expenses
connected with any offers they may make.
7. The obligations of the Underwriters hereunder, as to the
Shares to be delivered at each Time of Delivery, shall be
subject, in their discretion, to the condition that all
representations and warranties and other statements of the
Company and of the Selling Stockholders herein are, at and as of
such Time of Delivery, true and correct, the condition that the
Company and the Selling Stockholders shall have performed all of
its and their obligations hereunder theretofore to be performed,
and the following additional conditions:
(a) The Prospectus shall have been filed with the
Commission pursuant to Rule 424(b) within the applicable time
period prescribed for such filing by the rules and regulations
under the Act and in accordance with Section 5(a) hereof; no stop
order suspending the effectiveness of the Registration Statement
or any part thereof shall have been issued and no proceeding for
that purpose shall have been initiated or threatened by the
Commission; and all requests for additional information on the
part of the Commission shall have been complied with to your
reasonable satisfaction;
(b) Jones, Day, Reavis & Pogue, counsel for the
Underwriters, shall have furnished to you such opinion or
opinions, dated such Time of Delivery, with respect to the
matters covered in paragraphs (i), (ii), (iii), (v) and (vi) of
subsection (c) below, as well as such other matters relating to
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the transactions, contemplated hereby as you may request, and
such counsel shall have received such papers and information as
they may reasonably request to enable them to pass upon such
matters;
(c) Cravath, Swaine & Moore, counsel for the Company,
shall have furnished to you their written opinion, dated such
Time of Delivery, in form and substance satisfactory to you, to
the effect that:
(i) The Company is duly incorporated and validly
existing as a corporation in good standing under the
laws of the State of Delaware, with corporate power and
authority to own its properties and conduct its
business as described in the Prospectus;
(ii) The Company has an authorized capitalization
as set forth in the Prospectus, and all of the issued
shares of capital stock of the Company (including the
Shares being delivered at such Time of Delivery) have
been duly and validly authorized and issued and are
fully paid and non-assessable;
(iii) This Agreement and the International
Underwriting Agreement have been duly authorized,
executed and delivered by the Company;
(iv) No consent, approval, authorization, order,
registration or qualification of or with any such court
or governmental agency or body is required for the
issue and sale of the Shares or the consummation by the
Company of the transactions contemplated by this
Agreement and the International Underwriting Agreement,
except the registration under the Act of the Shares,
and such consents, approvals, authorizations,
registrations or qualifications as may be required
under state securities or Blue Sky laws in connection
with the purchase and distribution of the Shares by the
Underwriters and the International Underwriters;
(v) The statements made in the Prospectus under
the caption "Description of Capital Stock", insofar as
they purport to constitute summaries of the terms of
the Stock, under the caption "Certain United States Tax
Consequences to Non-United States Holders", insofar as
they purport to describe the material tax consequences
of an investment in Common Stock, and under the caption
"The New Credit Facilities", insofar as they describe
the provisions of the documents therein described,
fairly summarize the matters therein described;
(vi) Although they do not assume any
responsibility for the accuracy, completeness or
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fairness of the statements contained in the
Registration Statement or the Prospectus, except for
those covered by their opinion in subsection (v) of
this Section 7(c), they have no reason to believe that
the Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the
Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as
to which such counsel need express no opinion) do not
comply as to form in all material respects with the
requirements of the Act and the rules and regulations
thereunder (including, without limitation, requirements
thereunder relating to the filing of any amendment to
the Registration Statement); and they have no reason to
believe that, as of its effective date, the
Registration Statement or any further amendment thereto
made by the Company prior to such Time of Delivery
(other than the financial statements and related
schedules therein, as to which such counsel need
express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading or that, as of its
date, the Prospectus or any further amendment or
supplement thereto made by the Company prior to such
Time of Delivery (other than the financial statements
and related schedules therein, as to which such counsel
need express no opinion) contained an untrue statement
of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of
the circumstances in which they were made, not
misleading or that, as of such Time of Delivery, either
the Registration Statement or the Prospectus or any
further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as
to which such counsel need express no opinion) contains
an untrue statement of a material fact or omits to
state a material fact necessary to make the statements
therein, in light of the circumstances in which they
were made, not misleading;
(vii) The Consolidation has been duly and validly
effected in accordance with the General Corporation Law
of the State of Delaware; and
(viii) The Credit Agreement has been duly
authorized, executed and delivered by the Company and
constitutes a valid and binding obligation of the
Company, enforceable in accordance with its terms,
except to the extent that the enforceability thereof
may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to
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or affecting the enforceability of creditors rights
generally and to general equitable principles.
In rendering such opinion, such counsel may state that they
express no opinion as to the laws of any jurisdiction outside the
United States;
(d) Elizabeth R. Philipp, General Counsel of the
Company, shall have furnished to you her written opinion, dated
such Time of Delivery, in form and substance satisfactory to you,
to the effect that:
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing
under the laws of the State of Delaware, with corporate
power and authority to own its properties and conduct
its business as described in the Prospectus;
(ii) The Company has an authorized capitalization
as set forth in the Prospectus, and all of the issued
shares of capital stock of the Company (including the
Shares being delivered at such Time of Delivery) have
been duly and validly authorized and issued and are
fully paid and non-assessable; and the Shares conform
to the description of the Stock contained in the
Prospectus;
(iii) The Company has been duly qualified as a
foreign corporation for the transaction of business and
is in good standing under the laws of each other
jurisdiction in which it owns or leases properties, or
conducts any business, so as to require such
qualification, or is subject to no material liability
or disability by reason of failure to be so qualified
in any such jurisdiction (such counsel being entitled
to rely in respect of the opinion in this clause upon
opinions of local counsel; provided that such counsel
shall state that she believes that such local counsel
is qualified to render an opinion of the nature of the
opinions on which she has relied);
(iv) Each significant subsidiary of the Company
has been duly incorporated and is validly existing as a
corporation in good standing under the laws of its
jurisdiction of incorporation; and all of the issued
shares of capital stock of each such subsidiary have
been duly and validly authorized and issued, are fully
paid and non-assessable and are owned beneficially and
of record by the Company or one of its subsidiaries,
free and clear of all liens, encumbrances, equities or
claims other than those arising under the Credit
Agreements (such counsel being entitled to rely in
respect of the opinion in this clause upon opinions of
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local counsel; provided that such counsel shall state
that she believes that such local counsel is qualified
to render an opinion of the nature of the opinions on
which she has relied);
(v) To such counsel's knowledge and other than as
set forth in the Prospectus, there are no legal or
governmental proceedings pending to which the Company
or any of its subsidiaries is a party or of which any
property of the Company or any of its subsidiaries is
the subject which such counsel has reasonable cause to
believe would individually or in the aggregate have a
material adverse effect on the consolidated financial
position, stockholder's equity or results of operations
of the Company and its subsidiaries; and, to such
counsel's knowledge, no such proceedings are threatened
or contemplated by governmental authorities or
threatened by others;
(vi) This Agreement and the International
Underwriting Agreement have been duly authorized,
executed and delivered by the Company;
(vii) The issue and sale of the Shares being
delivered at such Time of Delivery to be sold by the
Company and the compliance by the Company with all of
the provisions of this Agreement and the International
Underwriting Agreement and the consummation of the
transactions herein and therein contemplated will not
conflict with or result in a breach or violation of any
of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument known to
such counsel to which the Company or any of its
subsidiaries is a party or by which the Company or any
of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its
subsidiaries is subject, which would have a Material
Adverse Effect; nor will such action result in any
violation of the provisions of the Certificate of
Incorporation or By-Laws of the Company or any statute
or any order, rule or regulation known to such counsel
of any court or governmental agency or body having
jurisdiction over the Company or any of its
subsidiaries or any of their properties;
(viii) Neither the Company nor any of its
significant subsidiaries is in violation of its charter
or in default in the performance or observance of any
material obligation, agreement, covenant or condition
contained in any indenture, mortgage, loan agreement or
note or material contract, lease or other instrument
known to such counsel to which it is a party or by
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which it or any of them or their properties may be
bound;
(ix) The documents incorporated by reference in
the Prospectus (other than the financial statements and
related schedules therein, as to which such counsel
need express no opinion), when they were filed with the
Commission, complied as to form in all material
respects with the requirements of the Exchange Act and
the rules and regulations of the Commission thereunder;
and she has no reason to believe that any of such
documents, when such documents were so filed, contained
an untrue statement of a material fact or omitted to
state a material fact necessary in order to make the
statements therein, in the light of the circumstances
under which they were made when such documents were so
filed, not misleading; and
(x) Although she does not assume any
responsibility for the accuracy, completeness or
fairness of the statements contained in the
Registration Statement or the Prospectus, except for
those covered by her opinion in subsection (xi) of this
Section 7(d), she has no reason to believe that the
Registration Statement and the Prospectus and any
further amendments and supplements thereto made by the
Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as
to which such counsel need express no opinion) does not
comply as to form in all material respects with the
requirements of the Act and the rules and regulations
thereunder (including, without limitation, requirements
thereunder relating to the filing of any amendment to
the Registration Statement); and she has no reason to
believe that, as of its effective date, the
Registration Statement or any further amendment thereto
made by the Company prior to such Time of Delivery
(other than the financial statements and related
schedules therein, as to which such counsel need
express no opinion) contained an untrue statement of a
material fact or omitted to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading or that, as of its
date, the Prospectus or any further amendment or
supplement thereto made by the Company prior to such
Time of Delivery (other than the financial statements
and related schedules therein, as to which such counsel
need express no opinion) contained an untrue statement
of a material fact or omitted to state a material fact
necessary to make the statements therein, in light of
the circumstances in which they were made, not
misleading or that, as of such Time of Delivery, either
the Registration Statement or the Prospectus or any
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further amendment or supplement thereto made by the
Company prior to such Time of Delivery (other than the
financial statements and related schedules therein, as
to which such counsel need express no opinion) contains
an untrue statement of a material fact or omits to
state a material fact necessary to make the statements
therein, in light of the circumstances in which they
were made, not misleading, and she does not know of any
contracts or other documents of a character required to
be filed as an exhibit to the Registration Statement or
required to be incorporated by reference into the
Prospectus or required to be described in the
Registration Statement or the Prospectus which are not
filed or incorporated by reference or described as
required.
In rendering such opinion, such counsel may state that she
expresses no opinion as to the laws of any jurisdiction outside
the United States, and, in respect of certain matters of fact,
she may rely upon certificates of officers of the Company or its
subsidiaries;
(e) Counsel for the respective Selling Stockholders, who
shall be reasonably satisfactory to you shall have furnished to
you a written opinion, in each case dated such Time of Delivery,
in form and substance satisfactory to you, to the effect that:
(i) This Agreement and the International
Underwriting Agreement have been duly executed and
delivered by or on behalf of such Selling Stockholder;
and the sale of the Shares to be sold by such Selling
Stockholder hereunder and thereunder and the compliance
by such Selling Stockholder with all of the provisions
of this Agreement and the International Underwriting
Agreement and the consummation of the transactions
herein and therein contemplated will not conflict with
or result in a breach or violation of any terms or
provisions of, or constitute a default under, any
indenture, mortgage, deed of trust, loan agreement or
other agreement or instrument known to such counsel to
which such Selling Stockholder is a party or by which
such Selling Stockholder is bound, or to which any of
the property or assets of such Selling Stockholder is
subject, nor will such action result in any violation
of the provisions of the Certificate of Incorporation
or By-Laws of such Selling Stockholder if such Selling
Stockholder is a corporation or the Articles of
Partnership of such Selling Stockholder if such Selling
Stockholder is a partnership or any order, statute,
rule or regulation known to such counsel of any court
or governmental agency or body having jurisdiction over
such Selling Stockholder or the property of such
Selling Stockholder;
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(ii) No consent, approval, authorization or order
of any court or governmental agency or body is required
for the consummation of the transactions contemplated
by this Agreement and the International Underwriting
Agreement in connection with the Shares to be sold by
such Selling Stockholder hereunder or thereunder,
except such as have been obtained under the Act and
such as may be required under state securities or Blue
Sky laws in connection with the purchase and
distribution of such Shares by the Underwriters or the
International Underwriters;
(iii) Immediately prior to such Time of Delivery
such Selling Stockholder had good and valid title to
the Shares to be sold at such Time of Delivery by such
Selling Stockholder under this Agreement and the
International Underwriting Agreement, free and clear of
all liens, encumbrances, equities or claims, and full
right, power and authority to sell, assign, transfer
and deliver the Shares to be sold by such Selling
Stockholder hereunder and thereunder; and
(iv) Good and valid title to such Shares, free
and clear of all liens, encumbrances, equities or
claims, has been transferred to each of the several
Underwriters or International Underwriters, as the case
may be, who have purchased such Shares in good faith
and without notice of any such lien, encumbrance,
equity or claim or any other adverse claim within the
meaning of the Uniform Commercial Code.
In rendering such opinion, such counsel may state that they
express no opinion as to the laws of any jurisdiction outside the
United States and in rendering the opinion in subparagraph (iv)
such counsel may rely upon a certificate of such Selling
Stockholder in respect of matters of fact as to ownership of and
liens, encumbrances, equities or claims on the Shares sold by
such Selling Stockholder, provided that such counsel shall state
that they believe that both you and they are justified in relying
upon such certificate;
(f) At 10:00 a.m., New York City time, on the effective
date of the Registration Statement and the effective date of the
most recently filed post-effective amendment to the Registration
Statement and also at each Time of Delivery, Arthur Andersen &
Co. shall have furnished to you a letter or letters, dated the
respective date of delivery thereof, in form and substance
satisfactory to you, to the effect set forth in Annex I hereto;
(g) (i) Neither the Company nor any of its subsidiaries
shall have sustained since the date of the latest audited
financial statements included or incorporated by reference in the
Prospectus any loss or interference with its business from fire,
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explosion, flood or other calamity, whether or not covered by
insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or
contemplated in the Prospectus, and (ii) since the respective
dates as of which information is given in the Prospectus there
shall not have been any change in the capital stock or long-term
debt of the Company or any of its subsidiaries or any change, or
any development involving a prospective change, in or affecting
the general affairs, management, financial position,
stockholders' equity or results of operations of the Company and
its subsidiaries, otherwise than as set forth or contemplated in
the Prospectus, the effect of which, in any such case described
in Clause (i) or (ii), is in your judgment so material and
adverse as to make it impracticable or inadvisable to proceed
with the public offering or the delivery of the Shares being
delivered at such Time of Delivery on the terms and in the manner
contemplated in the Prospectus;
(h) On or after the date hereof (i) no downgrading shall
have occurred in the rating accorded the Company's existing or
proposed debt securities or preferred stock by any "nationally
recognized statistical rating organization," as that term is
defined by the Commission for purposes of Rule 436(g)(2) under
the Act and (ii) no such organization shall have publicly
announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Company's debt
securities or preferred stock;
(i) On or after the date hereof there shall not have
occurred any of the following: (i) a suspension or material
limitation in trading in securities generally on the Exchange;
(ii) a suspension or material limitation in trading in the
securities of the Company or any of its subsidiaries on the
American Stock Exchange; (iii) a general moratorium on commercial
banking activities in New York declared by either Federal or New
York State authorities; or (iv) the outbreak or escalation of
hostilities involving the United States or the declaration by the
United States of a national emergency or war if the effect of any
such event specified in this Clause (iv) in your judgment makes
it impracticable or inadvisable to proceed with the public
offering or the delivery of the Shares being delivered at such
Time of Delivery on the terms and in the manner contemplated in
the Prospectus;
(j) The Shares to be sold by the Company and the Selling
Stockholders at such Time of Delivery shall have been duly
listed, subject to notice of issuance, on the Exchange;
(k) The Company has obtained and delivered to the
Underwriters executed copies of an agreement from each
stockholder of the Company, other than the Selling Stockholders,
to the effect set forth in Subsection 1(c)(iv) hereof in a form
satisfactory to you;
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(l) The Consolidation shall have been effected as
described in the Prospectus;
(m) There shall not have occurred or be continuing any
default or breach under the Credit Agreement and immediately
prior to the First Time of Delivery (A) there shall be no non-
compliance or failure to satisfy any condition to borrowing under
the Credit Agreement other than the sale of the Shares hereunder
and (B) the Company shall have consummated the Term Borrowings
and effected the other transactions referenced under the caption
"Use of Proceeds and Consolidation" in the Prospectus; and
(n) The Company and the Selling Stockholders shall have
furnished or caused to be furnished to you at such Time of
Delivery certificates of officers of the Company and of the
Selling Stockholders, respectively, satisfactory to you as to the
accuracy of the representations and warranties of the Company and
the Selling Stockholders, respectively, herein at and as of such
Time of Delivery, as to the performance by the Company and the
Selling Stockholders of all of their respective obligations
hereunder to be performed at or prior to such Time of Delivery,
and as to such other matters as you may reasonably request, and
the Company shall have furnished or caused to be furnished
certificates as to the matters set forth in subsections (a) and
(f) of this Section, and as to such other matters as you may
reasonably request.
8. (a) The Company and each of the Selling Stockholders,
jointly and severally, will indemnify and hold harmless each
Underwriter against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter may become subject,
under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Preliminary
Prospectus, the Registration Statement or the Prospectus, or any
amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each
Underwriter for any legal or other expenses reasonably incurred
by such Underwriter in connection with investigating or defending
any such action or claim as such expenses are incurred; provided,
however, that the Company and any Selling Stockholder shall not
be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or
alleged omission made in any Preliminary Prospectus, the
Registration Statement or the Prospectus or any such amendment or
supplement in reliance upon and in conformity with written
information furnished to the Company by any Underwriter through
you expressly for use therein; and provided, further, that the
liability of any Selling Stockholder pursuant to this subsection
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(a) shall not exceed the product of the number of Shares
(including any Optional Shares) sold by such Selling Stockholder
and the initial public offering price of the Shares as set forth
in the Prospectus.
(b) Each Underwriter will indemnify and hold harmless the
Company and each Selling Stockholder against any losses, claims,
damages or liabilities to which the Company or such Selling
Stockholder may become subject, under the Act or otherwise,
insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact
contained in any Preliminary Prospectus, the Registration
Statement or the Prospectus, or any amendment or supplement
thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, in each case to the extent, but only to the extent,
that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any
such amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by such
Underwriter through you expressly for use therein; and will
reimburse the Company and each Selling Stockholder for any legal
or other expenses reasonably incurred by the Company or such
Selling Stockholder in connection with investigating or defending
any such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any
action, such indemnified party shall, if a claim in respect
thereof is to be made against an indemnifying party under such
subsection, notify the indemnifying party in writing of the
commencement thereof; but the omission so to notify the
indemnifying party shall not relieve it from any liability which
it may have to any indemnified party otherwise than under such
subsection. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of
the commencement thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it shall
wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party (which shall not, except
with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying
party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to
such indemnified party under such subsection for any legal
expenses of other counsel or any other expenses, in each case
subsequently incurred by such indemnified party, in connection
with the defense thereof other than reasonable costs of
investigation.
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(d) If the indemnification provided for in this Section 8
is unavailable to or insufficient to hold harmless an indemnified
party under subsection (a), (b) or (c) above in respect of any
losses, claims, damages or liabilities (or actions in respect
thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified
party as a result of such losses, claims, damages or liabilities
(or actions in respect thereof) in such proportion as is
appropriate to reflect the relative benefits received by the
Company and the Selling Stockholders on the one hand and the
Underwriters on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding
sentence is not permitted by applicable law or if the indemnified
party failed to give the notice required under subsection (c)
above, then each indemnifying party shall contribute to such
amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative
benefits but also the relative fault of the Company and the
Selling Stockholders on the one hand and the Underwriters on the
other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the
Company and the Selling Stockholders on the one hand and the
Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering of the
Shares purchased under this Agreement (before deducting expenses)
received by the Company and the Selling Stockholders bear to the
total underwriting discounts and commissions received by the
Underwriters with respect to the Shares purchased under this
Agreement, in each case as set forth in the table on the cover
page of the Prospectus. The relative fault shall be determined
by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information
supplied by the Company or the Selling Stockholders on the one
hand or the Underwriters on the other and the parties' relative
intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, each
of the Selling Stockholders and the Underwriters agree that it
would not be just and equitable if contributions pursuant to this
subsection (d) were determined by pro rata allocation (even if
the Underwriters were treated as one entity for such purpose) or
by any other method of allocation which does not take account of
the equitable considerations referred to above in this subsection
(d). The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions
in respect thereof) referred to above in this subsection (d)
shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in connection with investigat-
ing or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Underwriter shall be
required to contribute any amount in excess of the amount by
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which the total price at which the Shares underwritten by it and
distributed to the public were offered to the public exceeds the
amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11
(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this subsection (d) to contribute
are several in proportion to their respective underwriting
obligations and not joint.
(e) The obligations of the Company and the Selling
Stockholders under this Section 8 shall be in addition to any
liability which the Company and the respective Selling
Stockholders may otherwise have and shall extend, upon the same
terms and conditions, to each person, if any, who controls any
Underwriter within the meaning of the Act; and the obligations of
the Underwriters under this Section 8 shall be in addition to any
liability which the respective Underwriters may otherwise have
and shall extend, upon the same terms and conditions, to each
officer and director of the Company (including any person who,
with his consent, is named in the Registration Statement as about
to become a director of the Company) and to each person, if any,
who controls the Company or any Selling Stockholder within the
meaning of the Act.
9. (a) If any Underwriter shall default in its obligation
to purchase the Shares which it has agreed to purchase hereunder
at a Time of Delivery, you may in your discretion arrange for you
or another party or other parties to purchase such Shares on the
terms contained herein. If within thirty-six hours after such
default by any Underwriter you do not arrange for the purchase of
such Shares, then the Company and the Selling Stockholders shall
be entitled (but shall not have an obligation) to a further
period of thirty-six hours within which to procure another party
or other parties satisfactory to you to purchase such Shares on
such terms. In the event that, within the respective prescribed
periods, you notify the Company and the Selling Stockholders that
you have so arranged for the purchase of such Shares, or the
Company and the Selling Stockholders notify you that they have so
arranged for the purchase of such Shares, you or the Company and
the Selling Stockholders shall have the right to postpone such
Time of Delivery for a period of not more than seven days, in
order to effect whatever changes may thereby be made necessary in
the Registration Statement or the Prospectus, or in any other
documents or arrangements, and the Company agrees to file
promptly any amendments to the Registration Statement or the
Prospectus which in your opinion may thereby be made necessary.
The term "Underwriter" as used in this Agreement shall include
any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with
respect to such Shares.
-29-
<PAGE>
(b) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or
Underwriters by you and the Company and the Selling Stockholders
as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased does not exceed one-eleventh of
the aggregate number of all the Shares to be purchased at such
Time of Delivery, then the Company and the Selling Stockholders
shall have the right to require each non-defaulting Underwriter
to purchase the number of Shares which such Underwriter agreed to
purchase hereunder at such Time of Delivery and, in addition, to
require each non-defaulting Underwriter to purchase its pro rata
share (based on the number of Shares which such Underwriter
agreed to purchase hereunder) of the Shares of such defaulting
Underwriter or Underwriters for which such arrangements have not
been made; but nothing herein shall relieve a defaulting
Underwriter from liability for its default.
(c) If, after giving effect to any arrangements for the
purchase of the Shares of a defaulting Underwriter or
Underwriters by you and the Company and the Selling Stockholders
as provided in subsection (a) above, the aggregate number of such
Shares which remains unpurchased exceeds one-eleventh of the
aggregate number of all the Shares to be purchased at such Time
of Delivery, or if the Company and the Selling Stockholders shall
not exercise the right described in subsection (b) above to
require non-defaulting Underwriters to purchase Shares of a
defaulting Underwriter or Underwriters, then this Agreement (or,
with respect to the Second Time of Delivery, the obligations of
the Underwriters to purchase and of the Selling Stockholders to
sell the Optional Shares) shall thereupon terminate, without
liability on the part of any non-defaulting Underwriter or the
Company or the Selling Stockholders, except for the expenses to
be borne by the Company and the Selling Stockholders and the
Underwriters as provided in Section 6 hereof and the indemnity
and contribution agreements in Section 8 hereof; but nothing
herein shall relieve a defaulting Underwriter from liability for
its default.
10. The respective indemnities, agreements,
representations, warranties and other statements of the Company,
the Selling Stockholders and the several Underwriters, as set
forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full
force and effect, regardless of any investigation (or any
statement as to the results thereof) made by or on behalf of any
Underwriter or any controlling person of any Underwriter, or the
Company, or any of the Selling Stockholders, or any officer or
director or controlling person of the Company, or any controlling
person of any Selling Stockholder, and shall survive delivery of
and payment for the Shares.
11. If this Agreement shall be terminated pursuant to
Section 9 hereof, neither the Company nor the Selling
-30-
<PAGE>
Stockholders shall then be under any liability to any Underwriter
except as provided in Section 6 and Section 8 hereof; but, if for
any other reason any Shares are not delivered by or on behalf of
the Company and the Selling Stockholders as provided herein, the
Company and each of the Selling Stockholders pro rata (based on
the number of Shares to be sold by the Company and such Selling
Stockholder hereunder) will reimburse the Underwriters through
you for all out-of-pocket expenses approved in writing by you,
including fees and disbursements of counsel, reasonably incurred
by the Underwriters in making preparations for the purchase, sale
and delivery of the Shares not so delivered, but the Company and
the Selling Stockholders shall then be under no further liability
to any Underwriter in respect of the Shares not so delivered
except as provided in Section 6 and Section 8 hereof.
12. In all dealings hereunder, you shall act on behalf of
each of the Underwriters, and the parties hereto shall be
entitled to act and rely upon any statement, request, notice or
agreement on behalf of any Underwriter made or given by you
jointly or by Goldman, Sachs & Co. on behalf of you as the
representatives; and in all dealings with any Selling Stockholder
hereunder, you and the Company shall be entitled to act and rely
upon any statement, request, notice or agreement on behalf of
such Selling Stockholder made or given by any or all of the
Attorneys-in-Fact for such Selling Stockholder.
All statements, requests, notices and agreements hereunder
shall be in writing, and if to the Underwriters shall be
delivered or sent by mail, telex or facsimile transmission to you
as the representatives in care of Goldman, Sachs & Co., at 85
Broad Street, New York, N.Y. 10004, Attention: Registration
Department; if to any Selling Stockholder shall be delivered or
sent by mail, telex or facsimile transmission to the Company or
the address of the Company set forth in the Registration
Statement, Attention: Secretary; provided, however, that any
notice to an Underwriter pursuant to Section 8(c) hereof shall be
delivered or sent by mail, telex or facsimile transmission to
such Underwriter at its address set forth in its Underwriters'
Questionnaire or telex constituting such Questionnaire, which
address will be supplied to the Company or the Selling
Stockholders by you upon request. Any such statements, requests,
notices or agreements shall take effect upon receipt thereof.
13. This Agreement shall be binding upon, and inure solely
to the benefit of, the Underwriters, the Company and the Selling
Stockholders and, to the extent provided in Sections 8 and 10
hereof, the officers and directors of the Company and each person
who controls the Company, any Selling Stockholder or any
Underwriter, and their respective heirs, executors,
administrators, successors and assigns, and no other person shall
acquire or have any right under or by virtue of this Agreement.
No purchaser of any of the Shares from any Underwriter shall be
deemed a successor or assign by reason merely of such purchase.
-31-
<PAGE>
14. Time shall be of the essence of this Agreement. As
used herein, the term "business day" shall mean any day when the
Commission's office in Washington, D.C. is open for business.
15. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
16. This Agreement may be executed by any one or more of
the parties hereto in any number of counterparts, each of which
shall be deemed to be an original, but all such counterparts
shall together constitute one and the same instrument.
-32-
<PAGE>
If the foregoing is in accordance with your understanding,
please sign and return to us eight counterparts hereof, and upon
the acceptance hereof by you, on behalf of each of the
Underwriters, this letter and such acceptance hereof shall
constitute a binding agreement among each of the Underwriters,
the Company and each of the Selling Stockholders. It is under-
stood that your acceptance of this letter on behalf of each of
the Underwriters is pursuant to the authority set forth in a form
of Agreement among Underwriters (U.S. Version), the form of which
shall be submitted to the Company and the Selling Stockholders
for examination upon request, but without warranty on your part
as to the authority of the signers thereof.
Any person executing and delivering this Agreement as
Attorney-in-Fact for a Selling Stockholder represents by so doing
that he has been duly appointed as Attorney-in-Fact by such
Selling Stockholder pursuant to a validly existing and binding
Power of Attorney which authorizes such Attorney-in-Fact to take
such action.
Very truly yours,
Collins & Aikman Corporation
By: ..............................
..............................
.....................
Name:
Title:
Collins & Aikman Holdings II
Corporation
By: ..............................
..............................
.....................
Name:
Title:
Blackstone Capital Partners L.P.
By: ..............................
..............................
.....................
Name:
-33-
<PAGE>
Title:
-34-
<PAGE>
Wasserstein Perella Partners, L.P.
By: ..............................
..............................
.....................
Name:
Title:
Accepted as of the date hereof
at New York, New York:
Goldman, Sachs & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Wasserstein Perella Securities, Inc.
The Nikko Securities Co. International, Inc.
By:
................................................................
(Goldman, Sachs & Co.)
On behalf of each of the Underwriters
-35-
<PAGE>
SCHEDULE I
Number of
Total Number Optional
Total Number of of Firm Shares Shares to be
Firm Shares to to be Purchased if
be Purchased Purchased from Maximum
from the the Selling Option
Underwriter Company Stockholders Exercised
----------- ------- ------------ ---------
Goldman, Sachs & Co. . .
Merrill Lynch, Pierce,
Fenner & Smith
Incorporated . . . . . .
Wasserstein Perella
Securities, Inc. . . . .
The Nikko Securities Co.
International, Inc. .
Total . . . . . . . 16,000,000 4,000,000 3,000,000
========== ========= =========
<PAGE>
SCHEDULE II
Number of
Optional
Shares to be
Total Number Purchased if
of Firm Maximum
Shares Option
Underwriter to be Sold Exercised
----------- ---------- ---------
The Company . . . . . . . . .
The Selling Stockholders:
Blackstone Capital
Partners, L.P.
Wasserstein Perella
Partners, L.P.
Total . . . . . . . 20,000,000 3,000,000
========== =========
<PAGE>
ANNEX I
Pursuant to Section 7(f) of the Underwriting Agreement, the
accountants shall furnish letters to the Underwriters to the
effect that:
(i) They are independent certified public accountants
with respect to the Company and its subsidiaries within the
meaning of the Act and the applicable published rules and
regulations thereunder;
(ii) In their opinion, the financial statements, any
supplementary financial information and schedules and pro
forma financial information examined by them and included or
incorporated by reference in the Registration Statement or
the Prospectus comply as to form in all material respects
with the applicable accounting requirements of the Act or
the Exchange Act, as applicable, and the related rules and
regulations thereunder; and they have made a review in
accordance with standards established by the American
Institute of Certified Public Accountants of the
consolidated interim financial statements, selected
financial data, pro forma financial information and
condensed financial statements derived from audited
financial statements of the Company for the periods
specified in such letter, as indicated in their reports
thereon, copies of which have been furnished to the
representatives of the Underwriters (the "Representatives");
(iii) The unaudited selected financial information
with respect to the consolidated results of operations and
financial position of the Company for the five most recent
fiscal years included in the Prospectus and included or
incorporated by reference in Item 6 of the Company's Annual
Report on Form 10-K for the most recent fiscal year agrees
with the corresponding amounts in the audited consolidated
financial statements for such five fiscal years which were
included or incorporated by reference in the Company's
Annual Reports on Form 10-K for such fiscal years;
(iv) On the basis of limited procedures, not
constituting an examination in accordance with generally
accepted auditing standards, consisting of a reading of the
unaudited financial statements and other information
referred to below, a reading of the latest available interim
financial statements of the Company and its subsidiaries,
inspection of the minute books of the Company and its
subsidiaries since the date of the latest audited financial
statements included or incorporated by reference in the
Prospectus, inquiries of officials of the Company and its
subsidiaries responsible for financial and accounting
matters and such other inquiries and procedures as are
customarily made or carried out by such firm in connection
<PAGE>
with public offerings and sales of equity securities (such
inquiries and procedures to be specified in such letter),
nothing came to their attention that caused them to believe
that:
(A) the unaudited condensed consolidated
statements of income, consolidated balance sheets and
consolidated statements of cash flows included or
incorporated by reference in the Company's Quarterly
Reports on Form 10-Q incorporated by reference in the
Prospectus do not comply as to form in all material
respects with the applicable accounting requirements of
the Exchange Act as it applies to Form 10-Q and the
related published rules and regulations thereunder or
are not in conformity with generally accepted
accounting principles applied on a basis substantially
consistent with the basis for the audited consolidated
statements of income, consolidated balance sheets and
consolidated statements of cash flows included or
incorporated by reference in the Company's Annual
Report on Form 10-K for the most recent fiscal year;
(B) any other unaudited income statement data and
balance sheet items included in the Prospectus do not
agree with the corresponding items in the unaudited
consolidated financial statements from which such data
and items were derived, and any such unaudited data and
items were not determined on a basis substantially
consistent with the basis for the corresponding amounts
in the audited consolidated financial statements
included or incorporated by reference in the Company's
Annual Report on Form 10-K for the most recent fiscal
year;
(C) the unaudited financial statements which were
not included in the Prospectus but from which were
derived the unaudited condensed financial statements
referred to in Clause (A) and any unaudited income
statement data and balance sheet items included in the
Prospectus and referred to in Clause (B) were not
determined on a basis substantially consistent with the
basis for the audited financial statements included or
incorporated by reference in the Company's Annual
Report on Form 10-K for the most recent fiscal year;
(D) any unaudited pro forma consolidated
condensed financial statements included or incorporated
by reference in the Prospectus do not comply as to form
in all material respects with the applicable accounting
requirements of the Act and the published rules and
regulations thereunder or the pro forma adjustments
have not been properly applied to the historical
amounts in the compilation of those statements;
<PAGE>
(E) as of a specified date not more than five
days prior to the date of such letter, there have been
any changes in the consolidated capital stock (other
than issuances of capital stock upon exercise of
options and stock appreciation rights which were
outstanding on the date of the latest balance sheet
included or incorporated by reference in the
Prospectus) or any increase in the consolidated
long-term debt of the Company and its subsidiaries, or
any decreases in consolidated net current assets or net
assets or other items specified by the Representatives,
or any increases in any items specified by the
Representatives, in each case as compared with amounts
shown in the latest balance sheet included or
incorporated by reference in the Prospectus, except in
each case for changes, increases or decreases which the
Prospectus discloses have occurred or may occur or
which are described in such letter; and
(F) for the period from the date of the latest
financial statements included or incorporated by
reference in the Prospectus to the specified date
referred to in Clause (E), there were any decreases in
consolidated net revenues or operating profit or the
total or per share amounts of consolidated net income
or other items specified by the Representatives, or any
increases in any items specified by the
Representatives, in each case as compared with the
comparable period of the preceding year and with any
other period of corresponding length specified by the
Representatives, except in each case for increases or
decreases which the Prospectus discloses have occurred
or may occur or which are described in such letter; and
(v) In addition to the examination referred to in
their reports included or incorporated by reference in the
Prospectus and the limited procedure, inspection of minute
books, inquiries and other procedures referred to in
paragraphs (iii) and (iv) above, they have carried out
certain specified procedures, not constituting an
examination in accordance with generally accepted auditing
standards, with respect to certain amounts, percentages and
financial information specified by the Representatives which
are derived from the general accounting records of the
Company and its subsidiaries which appear in the Prospectus
and have compared certain of such amounts, percentages and
financial information with the accounting records of the
Company and its subsidiaries and have found them to be in
agreement.
EXHIBIT 4.3
Number SHARES
CA [ ] [ ]
CUSIP
[ ]
Incorporated Under The Laws of Delaware
COLLINS & AIKMAN CORPORATION
This Certifies that __________________________ is
the owner of ________________________________ FULLY-PAID AND
NON-ASSESSABLE SHARES OF THE COMMON STOCK PAR VALUE $0.01
PER SHARE OF COLLINS & AIKMAN CORPORATION transferable on
the books of the Corporation in person or by duly authorized
attorney upon surrender of this Certificate properly
endorsed.
This Certificate and the shares of stock
represented hereby are issued and shall be held subject for
all of the provisions of the Certificate of Incorporation of
the Corporation and all amendments thereto so all of which
the holder by acceptance hereof assents. This Certificate is
not valid until countersigned by the Transfer Agent and
registered by the Registrar.
Witness the signatures of the duly authorized
officers of the Corporation.
Dated
/s/Elizabeth R. Philipp /s/Bruce Wasserstein /s/David A. Stockman
SECRETARY CO-CHAIRMAN OF CO-CHAIRMAN OF
THE BOARD THE BOARD
COUNTERSIGNED AND REGISTERED
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA (CHARLOTTE,
NORTH CAROLINA)
______________________________
TRANSFER AGENT AND REGISTRAR
AUTHORIZED SIGNATORY
<PAGE>
2
The Corporation will furnish without charge to
each stockholder who so requests the powers, designations,
references and relative, participating, optional, or other
special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such
preferences and/or rights, upon application to the transfer
agent or to the Secretary of the Corporation.
The following abbreviations, when used in the
inscription on the face of this certificate, shall be
construed as though they were written out in full according
to applicable laws or regulations:
TEN COM - as tenants in UNIF GIFT MIN
common ACT.......Custodian.......
(cust) (Minor)
TEN ENT - as tenants by the under Uniform Gifts to
entireties Minors Act............
(State)
JT TEN - as joint tenants
with right of survivorship
and not as tenants in
common
Additional abbreviations may also be used though not in the
above list.
For value received __________ hereby sell, assign and
transfer unto
Please insert social security
or other identifying number of
Assignee
| |
| |
| |
____________________________________________________________
(Please print or typewrite name and address, including zip
code, of assignee)
____________________________________________________________
____________________________________________________________
__________________________________________________ shares of
the capital stock represented by the written Certificates
and do hereby irrevocably constitute and appoint
____________________________________________Attorney to
transfer the said stock on the books of the within named
Corporation with full power of substitution in the premises.
Dated__________________
<PAGE>
3
NOTICE: ________________________________________________
The signature to this Assignment must correspond
with the name as written upon the face of the
certificate in every particular without
alteration or enlargement or any change
whatever.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST,
STOLEN, MUTILATED OR DESTROYED, THE CORPORATION WILL REQUIRE
A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF A
REPLACEMENT CERTIFICATE.
STB DRAFT
Execution Copy
--------------
===========================================================================
CREDIT AGREEMENT
Dated as of June 22, 1994
Among
COLLINS & AIKMAN PRODUCTS CO.,
as Borrower,
WCA CANADA INC.,
as Canadian Borrower,
COLLINS & AIKMAN CORPORATION,
as Guarantor,
THE LENDERS NAMED HEREIN,
CONTINENTAL BANK, N.A.,
NATIONSBANK, N.A.,
as Managing Agents,
And
CHEMICAL BANK,
as Administrative Agent
===========================================================================
<PAGE>
TABLE OF CONTENTS
Article Section Page
I.
DEFINITIONS
SECTION 1.01. Defined Terms. . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Terms Generally . . . . . . . . . . . . . . . . . . . . 20
II.
THE CREDITS
SECTION 2.01. Commitments. . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.02. Loans . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.03. Notice of Borrowings . . . . . . . . . . . . . . . . . 24
SECTION 2.04. Notes; Repayment of Loans . . . . . . . . . . . . . . . 24
SECTION 2.05. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 2.06. Interest on Loans . . . . . . . . . . . . . . . . . . . 25
SECTION 2.07. Default Interest . . . . . . . . . . . . . . . . . . . 26
SECTION 2.08. Alternate Rate of Interest . . . . . . . . . . . . . . 26
SECTION 2.09. Termination and Reduction of Commitments . . . . . . . 26
SECTION 2.10. Conversion and Continuation of Delayed Draw Term, Term
and Canadian Term Borrowings . . . . . . . . . . . . . . . . . . 27
SECTION 2.11. Repayment of Term and Delayed Draw Term Borrowings . . 28
SECTION 2.12. Prepayment . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 2.13. Reserve Requirements; Change in Circumstances . . . . . 30
SECTION 2.14. Change in Legality . . . . . . . . . . . . . . . . . . 32
SECTION 2.15. Indemnity . . . . . . . . . . . . . . . . . . . . . . . 32
SECTION 2.16. Pro Rata Treatment . . . . . . . . . . . . . . . . . . 33
SECTION 2.17. Payments . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.18. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 2.19. Issuance of Letters of Credit . . . . . . . . . . . . . 35
SECTION 2.20. Participations; Unconditional Obligations . . . . . . . 36
SECTION 2.21. Letter of Credit Fee . . . . . . . . . . . . . . . . . 36
SECTION 2.22. Agreement To Repay Letter of Credit Disbursements . . . 37
SECTION 2.23. Letter of Credit Operations . . . . . . . . . . . . . . 38
SECTION 2.24. Cash Collateralization . . . . . . . . . . . . . . . . 38
SECTION 2.25. Termination and Reduction of Letter of Credit
Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
III. REPRESENTATIONS AND WARRANTIES
SECTION 3.01. Organization, Corporate Powers . . . . . . . . . . . . 39
SECTION 3.02. Authorization . . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.03. Enforceability . . . . . . . . . . . . . . . . . . . . 39
SECTION 3.04. Recapitalization . . . . . . . . . . . . . . . . . . . 39
SECTION 3.05. Use of Proceeds . . . . . . . . . . . . . . . . . . . . 40
SECTION 3.06. Federal Reserve Regulations . . . . . . . . . . . . . . 40
SECTION 3.07. Capitalization of the Borrower and Holdings . . . . . . 40
SECTION 3.08. Pledge Agreement . . . . . . . . . . . . . . . . . . . 41
SECTION 3.09. Financial Statements . . . . . . . . . . . . . . . . . 41
SECTION 3.10. No Material Adverse Change . . . . . . . . . . . . . . 41
i
<PAGE>
Article Section Page
SECTION 3.11. Title to Properties; Possession Under Leases . . . . . 41
SECTION 3.12. Subsidiaries . . . . . . . . . . . . . . . . . . . . . 42
SECTION 3.13. Litigation; Compliance with Laws . . . . . . . . . . . 42
SECTION 3.14. Agreements . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 3.15. Investment Company Act . . . . . . . . . . . . . . . . 42
SECTION 3.16. Public Utility Holding Company Act . . . . . . . . . . 42
SECTION 3.17. Tax Returns . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 3.18. No Material Misstatements . . . . . . . . . . . . . . . 43
SECTION 3.19. Employee Benefit Plans . . . . . . . . . . . . . . . . 43
SECTION 3.20. Labor Matters . . . . . . . . . . . . . . . . . . . . . 43
SECTION 3.21. Environmental Matters . . . . . . . . . . . . . . . . . 44
SECTION 3.22. Solvency . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 3.23. Absence of Certain Restrictions . . . . . . . . . . . . 45
SECTION 3.24. No Foreign Assets Control Regulation Violation . . . . 46
SECTION 3.25. Insurance . . . . . . . . . . . . . . . . . . . . . . . 46
SECTION 3.26. Certain Other Representations . . . . . . . . . . . . . 46
IV. CONDITIONS
SECTION 4.01. All Credit Events . . . . . . . . . . . . . . . . . . . 46
SECTION 4.02. First Borrowing . . . . . . . . . . . . . . . . . . . . 47
V. AFFIRMATIVE COVENANTS
SECTION 5.01. Existence; Businesses and Properties . . . . . . . . . 50
SECTION 5.02. Insurance . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.03. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 51
SECTION 5.04. Financial Statements, Reports, Amendments, etc. . . . . 51
SECTION 5.05. Litigation and Other Notices . . . . . . . . . . . . . 53
SECTION 5.06. ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 5.07. Maintaining Records; Access to Properties and
Inspections . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 5.08. Use of Proceeds . . . . . . . . . . . . . . . . . . . . 54
SECTION 5.09. Further Assurances . . . . . . . . . . . . . . . . . . 54
SECTION 5.10. Change in Ownership . . . . . . . . . . . . . . . . . . 54
SECTION 5.11. Fiscal Year; Accounting . . . . . . . . . . . . . . . . 55
SECTION 5.12. Dividends . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 5.13. Rate Protection Agreements . . . . . . . . . . . . . . 55
SECTION 5.14. Corporate Separateness . . . . . . . . . . . . . . . . 55
SECTION 5.15. Business of Restricted Subsidiaries. . . . . . . . . . 55
VI. NEGATIVE COVENANTS
SECTION 6.01. Indebtedness . . . . . . . . . . . . . . . . . . . . . 55
SECTION 6.02. Dividends and Distributions . . . . . . . . . . . . . . 57
SECTION 6.03. Capital Expenditures . . . . . . . . . . . . . . . . . 58
SECTION 6.04. Liens . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 6.05. Priority of Loan Payments . . . . . . . . . . . . . . . 60
SECTION 6.06. Sale and Lease-Back Transactions . . . . . . . . . . . 61
SECTION 6.07. Investments, Loans and Advances . . . . . . . . . . . . 61
SECTION 6.08. Mergers, Consolidations, Sales of Assets and
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . 62
ii
<PAGE>
Article Section Page
SECTION 6.09. Transactions with Affiliates and Stockholders . . . . . 64
SECTION 6.10. Subordinated Indebtedness . . . . . . . . . . . . . . . 64
SECTION 6.11. Amendment of Constitutive Documents; Change in
Corporate Structure . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 6.12. Business of Holdings and Restricted Subsidiaries . . . 64
SECTION 6.13. Restrictive Agreements . . . . . . . . . . . . . . . . 64
SECTION 6.14. Interest Coverage Ratio . . . . . . . . . . . . . . . . 64
SECTION 6.15. EBITDA . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.16. Leverage Ratio . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.17. Current Ratio . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.18. Tax Sharing . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 6.19. Significant Subsidiaries . . . . . . . . . . . . . . . 65
VII. EVENTS OF DEFAULT
VIII. THE ADMINISTRATIVE AGENT
IX. MISCELLANEOUS
SECTION 9.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 9.02. Survival of Agreement . . . . . . . . . . . . . . . . . 71
SECTION 9.03. Binding Effect . . . . . . . . . . . . . . . . . . . . 71
SECTION 9.04. Successors and Assigns . . . . . . . . . . . . . . . . 72
SECTION 9.05. Expenses; Indemnity . . . . . . . . . . . . . . . . . . 74
SECTION 9.06. Right of Setoff; Sharing . . . . . . . . . . . . . . . 75
SECTION 9.07. Applicable Law . . . . . . . . . . . . . . . . . . . . 76
SECTION 9.08. Waivers; Amendment . . . . . . . . . . . . . . . . . . 76
SECTION 9.09. Interest Rate Limitation . . . . . . . . . . . . . . . 77
SECTION 9.10. Entire Agreement . . . . . . . . . . . . . . . . . . . 77
SECTION 9.11. Waiver of Jury Trial . . . . . . . . . . . . . . . . . 77
SECTION 9.12. Severability . . . . . . . . . . . . . . . . . . . . . 77
SECTION 9.13. Counterparts . . . . . . . . . . . . . . . . . . . . . 77
SECTION 9.14. Headings . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 9.15. Jurisdiction; Consent to Service of Process . . . . . . 77
SECTION 9.16. Conversion of Currencies . . . . . . . . . . . . . . . 78
SECTION 9.17. Confidentiality . . . . . . . . . . . . . . . . . . . . 78
iii
<PAGE>
Exhibits
Exhibit A-1 Revolving Credit Note
Exhibit A-2 Delayed Draw Term Note
Exhibit A-3 Term Note
Exhibit A-4 Swingline Note
Exhibit A-5 Canadian Term Note
Exhibit A-6 Intercompany Note
Exhibit B Assignment and Acceptance
Exhibit C Administrative Questionnaire
Exhibit D Form of Guarantee Agreement
Exhibit E Form of Pledge Agreement
Exhibit F Form of Opinion of Cravath, Swaine & Moore,
Elizabeth R. Philipp, Esq. and Stikeman, Elliott
Exhibit G Form of Compliance Certificate
Exhibit H Form of Intercreditor Agreement
Schedules
1.01(A) Applicable Margin
1.01(B) Applicable Prepayment Percentage
1.01(C) Additional Designated Persons
1.01(D) Subordination Terms
2.01 Commitments
2.11(a) Term Loan Amortization Schedule; Canadian Term Loan
Amortization Schedule
3.07(b)(1) Holdings Common Stock By Designated Persons
3.07(b)(2) Options and Rights Regarding Holdings
Capital Stock
3.12(a) Subsidiaries of Holdings
3.12(b) Outstanding Commitments Relating to Capital Stock
3.17 Tax Matters
4.02(o) Indebtedness to be repaid on Closing Date
6.01 Existing Indebtedness
6.04 Existing Liens
6.07 Existing Investments
iv
<PAGE>
CREDIT AGREEMENT dated as of June 22, 1994, among COLLINS & AIKMAN
PRODUCTS CO., a Delaware corporation (the "Borrower"), WCA CANADA INC.,
a Canadian corporation (the "Canadian Borrower"), COLLINS & AIKMAN
CORPORATION, a Delaware corporation ("Holdings"), the financial
institutions listed in Schedule 2.01 hereto (the "Lenders"), and
CHEMICAL BANK, a New York banking corporation ("Chemical"), as
administrative agent for the Lenders and the Issuing Banks (in such
capacity, the "Administrative Agent").
The Borrower has requested the Lenders to extend credit in order to enable
(a) the Borrower, subject to the terms and conditions of this Agreement, to
borrow (i) on a term basis, on the Closing Date (as defined herein), an
aggregate principal amount not in excess of $405,000,000, (ii) on a term basis,
at any time during the Delayed Draw Availability Period (as defined herein), an
aggregate principal amount not in excess of $25,000,000 and (iii) on a
revolving basis, at any time and from time to time prior to the Revolving
Credit Maturity Date (as defined herein), an aggregate principal amount at any
time outstanding not in excess of $150,000,000 and (b) the Canadian Borrower,
subject to the terms and conditions of this Agreement, to borrow on a term
basis, on the Closing Date, an aggregate principal amount not in excess of
$45,000,000. The Borrower also has requested the Issuing Banks to issue
letters of credit for the account of the Borrower (with the exposure on such
letters of credit being limited to $50,000,000 and resulting in a reduction to
the availability of borrowings on a revolving basis). The proceeds of such
borrowings and such letters of credit are to be used as described herein. The
Lenders are willing to extend such credit to the Borrower and the Canadian
Borrower on the terms and subject to the conditions set forth herein.
Accordingly, the Borrower, the Canadian Borrower, Holdings, the Lenders,
the Issuing Banks and the Administrative Agent agree as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.01. Defined Terms. In addition to the terms defined above, as
used in this Agreement the following terms shall have the meanings specified
below:
"ABR Borrowing" shall mean a Borrowing comprised of ABR Loans.
"ABR Canadian Term Loan" shall mean any Canadian Term Loan bearing
interest at a rate determined by reference to the Alternate Base Rate in
accordance with the provisions of Article II.
"ABR Delayed Draw Term Loan" shall mean any Delayed Draw Term Loan
bearing interest at a rate determined by reference to the Alternate Base
Rate in accordance with the provisions of Article II.
"ABR Loan" shall mean any ABR Term Loan, ABR Delayed Draw Term Loan,
ABR Revolving Loan, ABR Canadian Term Loan or Swingline Loan.
"ABR Revolving Loan" shall mean any Revolving Loan bearing interest at
a rate determined by reference to the Alternate Base Rate in accordance
with the provisions of Article II.
"ABR Term Loan" shall mean any Term Loan bearing interest at a rate
determined by reference to the Alternate Base Rate in accordance with the
provisions of Article II.
"Adjusted LIBO Rate" shall mean, with respect to any Eurodollar
Borrowing for any Interest Period, an interest rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the product of (a)
the LIBO Rate in effect for such Interest Period and (b) Statutory
Reserves. For purposes hereof, (a) if at least two offered rates for
deposits in dollars for a period comparable to the applicable Interest
Period appear on page 3750 (or any successor page) of the Dow Jones
Telerate Screen as of 11:00 a.m., London time, on the day that is two
Business Days prior to the first day of such Interest Period, the term
"LIBO Rate" shall mean the arithmetic mean of all such offered rates and
<PAGE>
2
(b) if fewer than two such offered rates so appear on page 3750 (or any
successor page) of the Dow Jones Telerate Screen, the term "LIBO Rate"
shall mean the rate (rounded upwards, if necessary, to the next 1/16 of
1%) at which dollar deposits approximately equal in principal amount to
Chemical's portion (or, if Chemical shall not have any portion, the
portion of the Lender having the largest applicable Type of Loan) of the
applicable Eurodollar Borrowing and for a period comparable to the
applicable Interest Period are offered to Chemical's office in which its
eurodollar operations in respect of eurodollar loans are being conducted
in immediately available funds in the eurodollar market at approximately
11:00 a.m., New York time, on the day that is two Business Days prior to
the first day of such Interest Period.
"Administrative Questionnaire" shall mean an Administrative
Questionnaire substantially in the form of Exhibit C.
"Affiliate" shall mean, when used with respect to a specified person,
another person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control
with the person specified.
"Agency Fees" shall have the meaning assigned to such term in Section
2.05(c).
"Agents" shall mean the collective reference to the Administrative
Agent and the Managing Agents.
"Alternate Base Rate" shall mean, for any day, a rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to the
greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate
in effect on such day plus 1% and (c) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. For purposes hereof, "Prime Rate"
shall mean the rate of interest per annum publicly announced from time to
time by Chemical as its prime rate in effect at its principal office in
New York City; each change in the Prime Rate shall be effective on the
date such change is publicly announced as being effective. "Base CD Rate"
shall mean the sum of (a) the product of (i) the Three-Month Secondary CD
Rate and (ii) Statutory Reserves and (b) the Assessment Rate.
"Three-Month Secondary CD Rate" shall mean, for any day, the secondary
market rate for three-month certificates of deposit reported as being in
effect on such day (or, if such day shall not be a Business Day, the next
preceding Business Day) by the Board through the public information
telephone line of the Federal Reserve Bank of New York (which rate will,
under the current practices of the Board, be published in Federal Reserve
Statistical Release H.15(519) during the week following such day), or, if
such rate shall not be so reported on such day or such next preceding
Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New
York City received at approximately 10:00 a.m., New York City time, on
such day (or, if such day shall not be a Business Day, on the next
preceding Business Day) by the Administrative Agent from three New York
City negotiable certificate of deposit dealers of recognized standing
selected by it. "Federal Funds Effective Rate" shall mean, for any day,
the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published on the next succeeding Business Day by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations for the day of such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it. If for any reason the
Administrative Agent shall have determined (which determination shall be
conclusive absent manifest error) that it is unable to ascertain the Base
CD Rate or the Federal Funds Effective Rate or both for any reason,
including the inability or failure of the Administrative Agent to obtain
sufficient quotations in accordance with the terms thereof, the Alternate
Base Rate shall be determined without regard to clause (b) or (c), or
both, of the first sentence of this definition, as appropriate, until the
circumstances giving rise to such inability no longer exist. Any change
in the Alternate Base Rate due to a change in the Prime Rate, the Base CD
Rate or the Federal Funds Effective Rate shall be effective on the
effective date of such change in the Prime Rate, the Base CD Rate or the
Federal Funds Effective Rate, respectively.
"Applicable Level" shall mean at any time the highest of Level I, Level
II, Level III and Level IV in effect determined in accordance with
Schedule 1.01(A).
<PAGE>
3
"Applicable Margin" means (i) for any date on or after the Closing Date
to but excluding the first day of the second full fiscal quarter
commencing after the Closing Date, with respect to Eurodollar Loans, 1-
3/4%, and with respect to ABR Loans, 3/4% of 1%, and (ii) for any date on
or after the first day of the second full fiscal quarter commencing after
the Closing Date, with respect to any Eurodollar Loans or ABR Loans, as
the case may be, the applicable margin set forth on Schedule 1.01(A)
opposite the Applicable Level, in each case as of the last day of the
Borrower's fiscal quarter most recently ended as of such date.
Notwithstanding anything herein to the contrary, from and after the fifth
anniversary of the Closing Date the Applicable Margin shall be 1/4 of 1%
higher than the rate otherwise determined pursuant to this definition.
"Applicable Percentage" shall mean, with respect to any Revolving
Lender, the percentage of the aggregate Revolving Credit Commitments
represented by such Revolving Lender's Revolving Credit Commitment.
"Applicable Prepayment Percentage" shall mean at any time 75% or, if
the Applicable Level is higher than Level I, the percentage set forth in
Part I of Schedule 1.01(B) opposite the Applicable Level in effect at such
time. Notwithstanding the foregoing, if the Term Loans and Canadian Term
Loans have been repaid in the amounts set forth in Part II of Schedule
1.01(B), the Applicable Prepayment Percentage shall be the percentage set
forth in Part I of Schedule 1.01(B) opposite the Applicable Level
determined by increasing the current Applicable Level by the number of
additional Levels set forth opposite such amount of Term Loans and
Canadian Term Loans so repaid in Part II of Schedule 1.01(B).
"Assessment Rate" shall mean for any date the annual rate (rounded
upwards, if necessary, to the next 1/100 of 1%) most recently estimated by
the Administrative Agent as the then current net annual assessment rate
that will be employed in determining amounts payable by Chemical to the
Federal Deposit Insurance Corporation (or any successor) for insurance by
such Corporation (or such successor) of time deposits made in dollars at
Chemical's domestic offices.
"Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and an assignee, and accepted by the
Administrative Agent, substantially in the form of Exhibit B or such other
form as shall be approved by the Administrative Agent.
"Blackstone" shall mean Blackstone Capital Partners L.P., a Delaware
limited partnership.
"Blackstone Entities" shall mean Blackstone, Blackstone Group,
Blackstone Management Partners, L.P., Blackstone Management Associates,
L.P. or any of their Affiliates.
"Blackstone Group" shall mean The Blackstone Group L.P., a Delaware
limited partnership.
"Board" shall mean the Board of Governors of the Federal Reserve System
of the United States (or any successor).
"Borrower Common Stock" shall have the meaning assigned to that term in
Section 3.07(a).
"Borrowing" shall mean a group of Loans of a single Type made to the
Borrower or the Canadian Borrower on a single date and as to which a
single Interest Period is in effect.
"Business Day" shall mean any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of New York) on which banks
are open for business in New York City; provided, however, that, when used
in connection with a Eurodollar Loan, the term "Business Day" shall also
exclude any day on which banks are not open for dealings in dollar
deposits in the London interbank market.
"Canadian Term Borrowing" shall mean a Borrowing comprised of Canadian
Term Loans.
<PAGE>
4
"Canadian Term Loan Commitment" shall mean, with respect to each
Lender, the commitment, if any, of such Lender to make Canadian Term Loans
hereunder as set forth in Schedule 2.01, as the same may be reduced from
time to time pursuant to Section 2.09.
"Canadian Term Loan Maturity Date" shall mean the eighth anniversary of
the Closing Date.
"Canadian Term Loan Repayment Date" shall have the meaning assigned to
such term in Section 2.11.
"Canadian Term Loans" shall mean the term loans made to the Canadian
Borrower pursuant to Section 2.01(e). Each Canadian Term Loan shall be a
Eurodollar Canadian Term Loan or an ABR Canadian Term Loan.
"Canadian Term Note" shall mean a promissory note of the Canadian
Borrower, substantially in the form of Exhibit A-5, evidencing Canadian
Term Loans.
"Capital Expenditures" shall mean, for any person in any period, the
aggregate amount of all capital expenditures of such person during such
period (but not including Permitted Business Acquisitions). For the
purposes hereof, the amount of any Capital Expenditure shall not include
(i) an amount equal to that portion of the proceeds received upon any
sale, transfer or other disposition of assets or properties pursuant to
Section 6.08(a), (g) or (i) which is applied to the purchase of
replacement assets or properties used for the same purpose as the assets
or properties disposed of within 12 months of the receipt thereof, (ii)
expenditures that are accounted for as capital expenditures of such person
and that actually are paid for by a third party (excluding Holdings or any
subsidiary thereof) and for which neither Holdings nor any subsidiary
thereof has provided or is required to provide, directly or indirectly,
any consideration to such third party or any other person (whether before,
during or after such period), (iii) the book value of any asset owned by
such person prior to or during such period to the extent that such book
value is included as a capital expenditure during such period as a result
of such person reusing or beginning to reuse such asset during such period
without a corresponding expenditure actually having been made in such
period, provided that any expenditure necessary in order to permit such
asset to be reused shall be included as a Capital Expenditure during the
period that such expenditure actually is made or (iv) expenditures of
insurance proceeds or condemnation awards received in connection with the
loss, damage, destruction or condemnation of property of Holdings or its
subsidiaries.
"Capital Lease Obligations" of any person shall mean the obligations of
such person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such person under
GAAP and, for the purposes hereof, the amount of such obligations at any
time shall be the capitalized amount thereof at such time determined in
accordance with GAAP.
"Cash Interest Expense" shall mean Interest Expense paid or required to
be paid in cash (but excluding any amortization of debt discounts and fees
included in the calculation of Interest Expense).
A "Change in Control" shall be deemed to have occurred if (a) Holdings
shall cease to directly own, beneficially and of record, free and clear of
any and all Liens (other than Liens in favor of the Collateral Agent
pursuant to the Pledge Agreement), 100% of the issued and outstanding
capital stock of the Borrower; (b) any person or group (within the meaning
of Rule 13d-5 of the Securities and Exchange Commission as in effect on
the date hereof) (other than (i) any Designated Person or (ii) any
combination of Designated Persons) shall own beneficially, directly or
indirectly, shares representing more than 25% of the aggregate ordinary
voting power represented by the issued and outstanding capital stock of
Holdings at a time when Designated Persons or any combination of
Designated Persons do not own, beneficially, free and clear of Liens,
shares representing at least 50% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of Holdings; or
(c) the Continuing Directors shall cease to occupy a majority of the seats
<PAGE>
5
(excluding vacant seats) on the Board of Directors of Holdings. For
purposes of clause (b) of this definition, the term "Designated Person"
shall be deemed to include any other holder or holders of shares of
Holdings having ordinary voting power if any Blackstone Entity or WP
Entity shall hold the irrevocable general proxy of each such holder in
respect of the shares held by such holder.
"Charges" shall have the meaning assigned to that term in Section 9.09.
"Closing Date" shall mean the date on which the first Loan is made
pursuant to this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral Agent" shall mean Chemical, as Collateral Agent under the
Pledge Agreement and the Guarantee Agreement.
"Commitment" shall mean, with respect to any Lender, such Lender's Term
Loan Commitment, Delayed Draw Term Loan Commitment, Swingline Loan
Commitment, Canadian Term Loan Commitment and Revolving Credit Commitment.
"Commitment Fee" shall have the meaning assigned to such term in
Section 2.05(a).
"Compliance Certificate" shall have the meaning assigned to such term
in Section 5.04(c).
"Contaminants" means those substances which are regulated by or form
the basis of liability under any Environmental Law, including asbestos,
polychlorinated biphenyls, Hazardous Materials, pollutants or solid
wastes.
"Continuing Directors" shall mean the collective reference to (i) all
members of the Board of Directors of Holdings who have held office
continuously since the Closing Date and (ii) all members of the Board of
Directors of Holdings who assumed office after the Closing Date and whose
election and nomination for election by Holdings' shareholders was
approved by a vote of a majority of the then Continuing Directors.
"Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise, and "Controlling" and "Controlled" shall have meanings
correlative thereto.
"Credit Agreement Creditors" shall mean the Administrative Agent, the
Issuing Banks and the Lenders.
"Current Assets" shall mean, with respect to any person at any date,
the consolidated aggregate amount of all assets of such person which would
be classified as current assets at such date, other than cash and cash
equivalents.
"Current Liabilities" shall mean, with respect to any person at any
date, the consolidated aggregate amount of all liabilities of such person
(including tax and other proper accruals) which would be classified as
current liabilities at such date, other than (without duplication) (i) the
current portion of long-term debt, (ii) accruals of Interest Expense
(excluding Interest Expense which is due and unpaid) and losses or
expenses on the sale of receivables to the Finance Subsidiary, (iii)
Revolving Loans classified as current, (iv) accruals of transaction costs
resulting from the Recapitalization Transactions and (v) accruals of any
costs or expenses related to severance or termination of employees accrued
prior to the date hereof.
"Current Ratio" shall mean, with respect to Holdings on any date, the
ratio of (a) Current Assets plus (without duplication) the accounts
receivable owned by any Finance Subsidiary to (b) Current Liabilities.
<PAGE>
6
"Default" shall mean any event or condition which upon notice, lapse of
time or both would constitute an Event of Default.
"Delayed Draw Availability Period" shall mean the period from and
including the Closing Date to and including the first anniversary of the
Closing Date.
"Delayed Draw Borrowing" shall mean a Borrowing comprised of Delayed
Draw Term Loans.
"Delayed Draw Term Loan Commitment" shall mean, with respect to each
Lender, the commitment, if any, of such Lender to make Delayed Draw Term
Loans hereunder as set forth in Schedule 2.01, as the same may be reduced
from time to time pursuant to Section 2.09.
"Delayed Draw Term Loan Maturity Date" shall mean the eighth
anniversary of the Closing Date.
"Delayed Draw Term Loan Repayment Date" shall have the meaning assigned
to such term in Section 2.11.
"Delayed Draw Term Loans" shall mean the delayed draw term loans made
to the Borrower pursuant to Section 2.01(b). Each Delayed Draw Term Loan
shall be a Eurodollar Delayed Draw Term Loan or an ABR Delayed Draw Term
Loan.
"Delayed Draw Term Note" shall mean a promissory note of the Borrower,
substantially in the form of Exhibit A-2, evidencing Delayed Draw Term
Loans.
"Designated Persons" shall mean any one or more of the Blackstone
Entities, the WP Entities and the persons listed on Schedule 1.01(C).
"Dividend Condition" shall mean that the Applicable Level is at least
Level II and the outstanding principal amount of the Term Loans and
Canadian Term Loans is less than $350,000,000.
"dollars" or "$" shall mean lawful money of the United States of
America. All Loans and Letters of Credit shall be denominated in dollars
and all payment obligations of the Borrower and the Canadian Borrower
under the Loan Documents shall be in dollars.
"Domestic Restricted Subsidiary" means any Restricted Subsidiary
incorporated or organized under the laws of the United States of America
or any state thereof at least 90% of the capital stock of which is owned
directly or indirectly by the Borrower.
"EBITDA" shall mean, without duplication, for any fiscal period, the
sum of the amounts for such fiscal period of (i) Net Income, (ii)
provision for taxes based on income, (iii) depreciation expense, (iv)
total interest expense (whether shown as interest expense or as loss and
expenses on sales of receivables), (v) amortization expense and (vi) other
non-cash items reducing Net Income, all as determined on a consolidated
basis for Holdings and its Restricted Subsidiaries in conformity with
GAAP.
"Environmental Claim" means any written accusation, allegation, notice
of violation, claim, demand, order, directive, cost recovery action or
proceeding by any Governmental Authority or, if any Responsible Officer of
Holdings has knowledge of it, by any person for damages, injunctive or
equitable relief, personal injury (including sickness, disease or death),
remedial action costs, tangible or intangible property damage, damage to
the environment or natural resources, nuisance, pollution, contamination
or other adverse effects on the environment, or for fines, penalties or
restrictions, resulting from or based upon (i) the existence, or the
continuation of the existence, of a Release (including sudden or
non-sudden, accidental or non-accidental Releases) of, or exposure to, any
Contaminant or odor, (ii) the presence, use, handling, transportation,
storage, treatment or the disposal of Contaminants in connection with the
operation of the facilities to which such Release relates or (iii) the
violation or alleged violation of any Environmental Law.
<PAGE>
7
"Environmental Law" means any and all applicable treaties, laws,
regulations, enforceable requirements, binding determinations, orders,
decrees, judgments, injunctions, permits, approvals, authorizations,
licenses, variances, permissions, notices or binding agreements issued,
promulgated or entered by any Governmental Authority, relating to the
environment, preservation or reclamation of natural resources or to the
management, Release or threatened Release of Contaminants or noxious odor,
including the Hazardous Materials Transportation Act, 49 U.S.C. Secs. 1801
et seq., Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended by the Superfund Amendments and Reauthorization Act
of 1986, 42 U.S.C. Secs. 9601 et seq., Solid Waste Disposal Act, as amended
by the Resource Conservation and Recovery Act of 1976 and Hazardous and
Solid Waste Amendments of 1984, 42 U.S.C. Secs. 6901, et seq., Federal
Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33
U.S.C. Secs. 1251 et seq., Clean Air Act of 1970, as amended 42. U.S.C.
Secs. 7401 et seq., Toxic Substances Control Act of 1976, 15 U.S.C. Secs.
2601 et seq., Emergency Planning and Community Right-to-Know Act of 1986,
42 U.S.C. Secs. 11001 et seq., National Environmental Policy Act of 1975,
42 U.S.C. Secs. 4321 et seq., Safe Drinking Water Act of 1974, as amended,
42 U.S.C. Secs. 300(f) et seq., and any similar or implementing state or
foreign law, and all amendments or regulations promulgated thereunder.
"Environmental Permit" means any permit, approval, authorization,
license, variance, or permission required from any Governmental Authority
pursuant to any applicable Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as the same may be amended from time to time.
"ERISA Affiliate" with respect to any person shall mean any trade or
business (whether or not incorporated) that is a member of a group of
which such person is a member and which is treated as a single employer
under Section 414 of the Code.
"ESOP" shall mean any employee stock ownership plan to be established
by the Borrower or a subsidiary Guarantor thereof to make the ESOP
Investment.
"ESOP Investment" shall mean the issuance and sale of shares of
Holdings Common Stock to, or the purchase of shares of Holdings Common
Stock in open market or privately negotiated transactions by, the ESOP
from time to time.
"ESOP Loans" shall mean a loan or loans to be made from time to time by
the Borrower to the ESOP in an aggregate amount not to exceed $25,000,000,
solely to enable the ESOP to effect the ESOP Investment.
"Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar
Loans.
"Eurodollar Canadian Term Loan" shall mean any Canadian Term Loan
bearing interest at a rate determined by reference to the Adjusted LIBO
Rate in accordance with the provisions of Article II.
"Eurodollar Delayed Draw Term Loan" shall mean any Delayed Draw Term
Loan bearing interest at a rate determined by reference to the Adjusted
LIBO Rate in accordance with the provisions of Article II.
"Eurodollar Loan" shall mean any Eurodollar Term Loan, Eurodollar
Delayed Draw Term Loan, Eurodollar Canadian Term Loan or Eurodollar
Revolving Loan.
"Eurodollar Revolving Loan" shall mean any Revolving Loan bearing
interest at a rate determined by reference to the Adjusted LIBO Rate in
accordance with the provisions of Article II.
"Eurodollar Term Loan" shall mean any Term Loan bearing interest at a
rate determined by reference to the Adjusted LIBO Rate in accordance with
the provisions of Article II.
<PAGE>
8
"Event of Default" shall have the meaning assigned to such term in
Article VII.
"Excess Cash Flow" shall mean for any period (i) the Net Income for
such period plus (minus) (ii) the amount of depreciation, depletion,
amortization of intangibles, deferred taxes, accreted and zero coupon bond
interest and other noncash expenses (revenues) which, pursuant to GAAP,
were deducted (added) in determining such Net Income minus (plus) (iii)
additions (reductions, other than reductions attributable solely to
Specified Asset Sales) to working capital for such period (i.e., the
increase or decrease in Current Assets of Holdings and the Restricted
Subsidiaries minus Current Liabilities of Holdings and the Restricted
Subsidiaries from the beginning to the end of such period, as adjusted to
exclude reductions attributable solely to Specified Asset Sales) minus
(iv) the amount of Capital Expenditures for such period paid by Holdings
and the Restricted Subsidiaries in cash from funds other than from the
proceeds of Borrowings minus (v) the sum of (a) scheduled Term Loan,
Canadian Term Loan and Delayed Draw Term Loan repayments made during such
period pursuant to Section 2.11, (b) optional prepayments of the Term
Loans, the Canadian Term Loans and the Delayed Draw Term Loans made during
such period pursuant to Section 2.12(a) and (c) Revolving Loan repayments
made during such period that were required to be made as a result of
voluntary reductions of the Revolving Commitment pursuant to Section
2.09(b) minus (vi) scheduled mandatory payments of principal of
Indebtedness of Holdings and the Restricted Subsidiaries other than the
Loans made during such period minus (vii) fees and expenses paid in cash
in connection with the Recapitalization Transactions to the extent not
deducted in determining Net Income and provided that such amounts are paid
from reserves established therefor by the Borrower on the Closing Date
minus (viii) amounts paid in cash for liabilities relating to discontinued
operations which were discontinued prior to the Closing Date to the extent
not deducted in determining Net Income, provided that such amounts are
paid from reserves established by the Borrower for such liabilities prior
to the Closing Date.
"Executive Officer" of any corporation shall mean the president, any
senior vice president or any vice president of such person.
"Existing Credit Agreement" shall mean the Credit Agreement dated as of
May 15, 1991, as amended, among the Borrower and certain of its
subsidiaries and the financial institutions named therein.
"Fees" shall mean the Agency Fees, the Participation Fees, the Fronting
Fees, the Commitment Fees and the Letter of Credit Fees.
"Finance Subsidiary" shall mean any wholly-owned subsidiary of the
Borrower that is formed for the sole purpose of engaging in Permitted
Receivables Financings.
"Financial Officer" of any corporation shall mean the chief financial
officer, Senior Vice President-Finance and Accounting, Vice
President-Finance, Controller, or Treasurer of such corporation.
"Fronting Fees" shall have the meaning assigned to such term in Section
2.05(d).
"Funded Debt" shall mean, as applied to any person, all Indebtedness
for borrowed money (including, without limitation, Capital Lease
Obligations and unreimbursed drawings under letters of credit) or
evidenced by a note, bond, debenture or similar instrument of that person
(it being understood that all Loans shall at all times constitute "Funded
Debt" for all purposes hereunder).
"GAAP" shall mean United States generally accepted accounting
principles.
"Governmental Authority" shall mean any international, Federal, state,
regional, local or foreign court or governmental agency, authority,
instrumentality or regulatory body.
"Guarantors" shall mean Holdings and each Restricted Subsidiary (other
than Inactive Subsidiaries) incorporated or organized under the laws of
the United States or any State thereof.
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9
"Guarantee" of or by any person shall mean (i) any obligation,
contingent or otherwise, of such person guaranteeing or having the
economic effect of guaranteeing any Indebtedness of any other person (the
"primary obligor") in any manner, whether directly or indirectly, and
including any obligation of such person, direct or indirect, (a) to
purchase or pay (or advance or supply funds for the purchase or payment
of) such Indebtedness (whether arising by virtue of partnership
arrangements, by agreement to keep well, to purchase assets, goods,
securities or services, to take-or-pay or otherwise) or to purchase (or to
advance or supply funds for the purchase of) any security for the payment
of such Indebtedness, (b) to purchase property, securities or services for
the purpose of assuring the owner of such Indebtedness of the payment of
such Indebtedness, (c) to maintain working capital, equity capital or
other financial statement conditions or liquidity of the primary obligor
so as to enable the primary obligor to pay such Indebtedness or (d)
entered into for the purpose of assuring in any other manner the holders
of such Indebtedness of the payment thereof or to protect such holders
against loss in respect thereof (in whole or in part), or (ii) any Lien on
any assets of such person securing any Indebtedness of any other person,
whether or not such Indebtedness is assumed by such person; provided,
however, that the term Guarantee shall not include endorsements for
collection or deposit, in either case in the ordinary course of business.
"Guarantee Agreement" shall mean the Guarantee Agreement substantially
in the form attached as Exhibit D, as amended and in effect from time to
time.
"Hazardous Materials" means all explosive or regulated radioactive
materials or substances, hazardous or toxic wastes or substances,
petroleum (including crude oil or any fraction thereof) or petroleum
distillates, asbestos or material containing asbestos and all materials
regulated pursuant to any Environmental Law, including materials listed in
49 C.F.R. Section 172.101 and materials defined as hazardous pursuant to
Section 101(14) of the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended.
"Holdings Common Stock" shall mean the Common Stock, par value $.01 per
Share, of Holdings.
"Holdings Underwriting Agreement" shall mean the Underwriting Agreement
to be entered into among Holdings and Goldman, Sachs & Co., Merrill Lynch
& Co., Wasserstein Perella Securities, Inc. and The Nikko Securities Co.,
as Representatives of the several underwriters listed therein, relating to
the Public Offering, in substantially the form filed with the Securities
and Exchange Commission prior to the date of this Agreement or in such
other form as shall be satisfactory to the Agents.
"Inactive Subsidiary" shall mean the Restricted Subsidiaries listed as
Inactive Subsidiaries on Schedule 3.12(a) and which Restricted
Subsidiaries; (i) individually and in the aggregate have no material net
assets and (ii) do not engage in any operating activity (other than
payroll or the Leasing of immaterial property).
"Indebtedness" of any person shall mean, without duplication, (a) all
indebtedness of such person for borrowed money or for the deferred
purchase price of property or services (other than current trade
liabilities incurred in the ordinary course of business), (b) any other
indebtedness of such person which is evidenced by a note, bond, debenture
or similar instrument, (c) all Capital Lease Obligations of such person,
(d) all obligations of such person in respect of bankers' acceptances
issued or created for the account of such person, (e) all Indebtedness of
others secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien on any
property owned or acquired by such person even though such person has not
assumed or otherwise become liable for the payment thereof, (f) all
obligations of such person in respect of Interest Rate Agreements which,
in accordance with the definition of Interest Rate Agreement, constitute
(or would upon early termination constitute) Indebtedness and (g) all
Guarantees by such person of Indebtedness of others. The Indebtedness of
any person shall include the Indebtedness of any partnership in which such
person is a general partner; provided that, if the sole asset of such
person is its general partnership interest in such partnership, the amount
of such Indebtedness shall be deemed equal to the value of such general
partnership interest and the amount of any Indebtedness in respect of any
Guarantee of such partnership Indebtedness shall be limited to the same
extent as such Guarantee may be limited.
<PAGE>
10
"Indemnitee" shall have the meaning assigned to that term in Section
9.05(b).
"Intercompany Loan" shall mean a loan made by any subsidiary of the
Borrower to the Borrower or any Domestic Restricted Subsidiary or by any
Restricted Subsidiary to any Domestic Restricted Subsidiary, evidenced by
an Intercompany Note pledged pursuant to the Pledge Agreement in the case
of such loans from any such person to another such person aggregating more
than $10,000,000.
"Intercreditor Agreement" shall mean the Master Collateral and
Intercreditor Agreement substantially in the form attached as Exhibit H,
as amended in effect from time to time.
"Intercompany Note" shall mean an intercompany note evidencing
Indebtedness owed by the Borrower or any of its wholly-owned subsidiaries
to the Borrower or any of its wholly-owned subsidiaries and pledged
pursuant to the Pledge Agreement in accordance with Section 6.01(d), in
substantially the form of Exhibit A-6 annexed hereto.
"Interest Coverage Ratio" shall mean, for any period of four (or, if
less, the number of full fiscal quarters ending after the Closing Date)
consecutive fiscal quarters, the ratio of (a) EBITDA on a consolidated
basis for such period to (b) the sum of Cash Interest Expense of Holdings
and the Restricted Subsidiaries on a consolidated basis for such period
and losses or expenses on the sale of receivables to and Finance
Subsidiary.
"Interest Expense" shall mean, with respect to any person for any
period, the gross interest expense of such person for such period
determined on a consolidated basis in accordance with GAAP consistently
applied, including (a) the amortization of debt discounts, (b) the
amortization of all fees (including fees with respect to interest rate
protection agreements) payable in connection with the incurrence of
Indebtedness to the extent included in interest expense (c) the portion of
any payments or accruals with respect to Capital Lease Obligations
allocable to interest expense, net of all interest income for such period
(except for purposes of the definition of Cash Interest Expense, in which
case only interest income paid or required to be paid in cash shall be
netted against cash interest expense). For purposes of the foregoing,
gross interest expense shall be determined after giving effect to any net
payments made or received by such person with respect to interest rate
protection agreements entered into as a hedge against interest rate
exposure.
"Interest Payment Date" shall mean, (a)(i) with respect to any
Eurodollar Loan, the last day of the Interest Period applicable to the
Borrowing of which such Loan is a part and, in the case of a Eurodollar
Borrowing with an Interest Period of more than three months' duration,
each day that would have been an Interest Payment Date had successive
Interest Periods of three months' duration been applicable to such
Borrowing, and, in addition, the date of any prepayment, refinancing or
conversion of such Borrowing with or to a Borrowing of a different Type
and (ii) with respect to any ABR Loan or Swingline Loan, the last day of
each March, June, September and December, commencing September 30, 1994
and (b) the Revolving Credit Maturity Date, the Delayed Draw Term Loan
Maturity Date, the Canadian Term Loan Maturity Date or the Term Loan
Maturity Date, as applicable.
"Interest Period" shall mean (a) as to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing or on the last day of the
immediately preceding Interest Period applicable to such Borrowing, as the
case may be, and ending on the numerically corresponding day (or, if there
is no numerically corresponding day, on the last day) in the calendar
month that is 1, 2, 3 or 6 (or, subject to availability (as determined by
all applicable Lenders), 9 or 12) months thereafter, as the Borrower or
the Canadian Borrower, as the case may be, may elect and (b) as to any ABR
Borrowing or Swingline Loan, the period commencing on the date of such
Borrowing or Loan or on the last day of the immediately preceding Interest
Period applicable to such Borrowing or Loan, as the case may be, and
ending on the earliest of (i) the next succeeding March 31, June 30,
September 30 or December 31, (ii) the Revolving Credit Maturity Date, the
Delayed Draw Term Loan Maturity Date, the Canadian Term Loan Maturity Date
or the Term Loan Maturity Date, as applicable, and (iii) the date such
Borrowing is converted to a Borrowing of a different Type in accordance
with Section 2.10 or repaid or prepaid in accordance with Section 2.01(d),
<PAGE>
11
2.11 or 2.12; provided, however, that if any Interest Period would end on
a day other than a Business Day, such Interest Period shall be extended to
the next succeeding Business Day unless, in the case of a Eurodollar
Borrowing only, such next succeeding Business Day would fall in the next
calendar month, in which case such Interest Period shall end on the next
preceding Business Day. Interest shall accrue from and including the
first day of an Interest Period to but excluding the last day of such
Interest Period.
"Interest Rate Agreement" shall mean any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement, currency
hedge agreement or other similar agreement or arrangement designed to
protect the Borrower or any of its Restricted Subsidiaries against
fluctuations in interest rates or currency exchange rates; provided that
the calculation of payments for early termination shall be made on a
reasonable basis in accordance with customary industry practices; provided
further that all obligations to make such payments for early termination
(guaranteed or unguaranteed) shall, to the extent matured, constitute
Indebtedness.
"Issuing Bank" shall mean, with respect to any Letter of Credit, the
Revolving Lender which has agreed to issue such Letter of Credit.
"Letter of Credit" shall mean any letter of credit issued by an Issuing
Bank pursuant to Section 2.19(a).
"Letter of Credit Commitment" shall mean $50,000,000, as the same may
be reduced from time to time pursuant to Section 2.25.
"Letter of Credit Disbursement" shall mean a payment or disbursement
made by an Issuing Bank pursuant to a Letter of Credit.
"Letter of Credit Exposure" shall mean at any time the sum of (a) the
aggregate undrawn amount of all outstanding Letters of Credit and (b) the
aggregate amount of all Letter of Credit Disbursements not yet reimbursed
by the Borrower as provided in Section 2.22.
"Letter of Credit Fee" shall have the meaning assigned to such term in
Section 2.21.
"Leverage Ratio" shall mean, with respect to Holdings and the
Restricted Subsidiaries on any date, the ratio of (a) Funded Debt of
Holdings and the Restricted Subsidiaries as of such date to (b) the
product of (i) EBITDA for the period of twelve (or, if less, the number of
full consecutive fiscal months ending after the Closing Date) consecutive
fiscal months then ended and (ii) twelve divided by the number of months
in such period.
"Lien" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on
such asset, (b) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement relating to
such asset and (c) in the case of securities, any purchase option, call or
similar right of a third party with respect to such securities.
"Loans" shall mean the Revolving Loans, the Delayed Draw Term Loans,
the Swingline Loans, the Canadian Term Loans and the Term Loans.
"Loan Documents" shall mean this Agreement and the Notes, the Letters
of Credit (and any instrument or document executed by the Borrower
relating to any Letter of Credit), the Pledge Agreement, the Guarantee
Agreement and, if and when executed and delivered, the Intercreditor
Agreement.
"Managing Agents" shall mean NationsBank, N.A. and Continental Bank,
N.A.
"Margin Stock" shall have the meaning assigned to such term under
Regulation U.
<PAGE>
12
"Material Adverse Effect" shall mean (a) a materially adverse effect on
the business, assets, properties, operations or financial condition of
Holdings and the Restricted Subsidiaries, taken as a whole, (b) a material
impairment of the ability of Holdings or any Subsidiary of Holdings to
perform any of its material obligations under any Loan Document to which
it is or will be a party or to consummate the Recapitalization
Transactions or (c) an impairment of the validity or enforceability of, or
material impairment of the rights, remedies or benefits available to the
Credit Agreement Creditors under, any Loan Document.
"Maximum Rate" shall have the meaning assigned to such term in Section
9.09.
"Multiemployer Plan" with respect to any person shall mean a
multiemployer plan as defined in Section 4001(a)(3) of ERISA to which such
person or any ERISA Affiliate of such person (other than one considered an
ERISA Affiliate only pursuant to subsection (m) or (o) of Section 414 of
the Code) is making or accruing an obligation to make contributions, or
has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"Net Income" shall mean, for any fiscal period, the net income (or
loss) of Holdings and its Restricted Subsidiaries and the Finance
Subsidiary on a consolidated basis for such fiscal period taken as a
single accounting period determined in conformity with GAAP; provided that
there shall be excluded (i) the income (or loss) of any Unrestricted
Subsidiary (other than the Finance Subsidiary) or any person (other than a
Restricted Subsidiary) in which any other person (other than Holdings or
any of the Restricted Subsidiaries) has a joint interest, but shall
include the amount of dividends or other distributions (including return
of capital or any other cash receipt in respect of ownership or beneficial
interest) actually paid to Holdings or any of the Restricted Subsidiaries
by such Unrestricted Subsidiary or such person during such period, (ii)
the income (or loss) of any person accrued prior to the date it becomes a
Restricted Subsidiary of Holdings or is merged into or consolidated with
Holdings or any of the Restricted Subsidiaries or that person's assets are
acquired by Holdings or any of the Restricted Subsidiaries and (iii) the
income of any Restricted Subsidiary of Holdings to the extent that the
declaration or payment of dividends or similar distributions by that
Restricted Subsidiary of that income is not at the time permitted by
operation of the terms of its charter or any agreement, instrument,
judgment, decree, order, statute, rule or governmental regulation after
tax gains or losses attributable to Specified Asset Sales; provided
further, that, solely for the purposes of determining EBITDA, there shall
be excluded any charges, losses, fees or expenses to Net Income incurred
in connection with the consummation of the Recapitalization Transactions.
"Net Proceeds" shall mean with respect to any sale, transfer or other
disposition (including by casualty, loss or condemnation) of any assets or
properties or any other Prepayment Event (a "Proceeds Transaction") (i)
the gross amount of any cash paid to or received by Holdings or any of the
Restricted Subsidiaries in respect of such Proceeds Transaction (including
insurance proceeds, condemnation awards and payments from time to time in
respect of installment obligations, if applicable), less (ii) the amount,
if any, of (a) Holdings' good faith best estimate of all taxes
attributable to such Proceeds Transaction which it in good faith expects
to be paid in the taxable year in which such Proceeds Transaction shall
occur or in the next taxable year, (b) reasonable and customary fees,
discounts, commissions, costs and other expenses (other than those payable
to Holdings or any Affiliate of Holdings, except that Blackstone and WP
and their respective Affiliates may receive customary fees on terms no
less favorable to Holdings or any of the Restricted Subsidiaries than
would be obtained in a comparable arm's-length transaction for acting as
financial advisor in connection with such Proceeds Transaction) which are
incurred in connection with such Proceeds Transaction and are payable by
Holdings or any of the Restricted Subsidiaries and (c) in the case of a
Proceeds Transaction that is a sale, transfer or other disposition of
assets or properties, proceeds required to discharge Liens in respect of
such assets or properties permitted by Section 6.04; provided, however,
that Net Proceeds shall not include (1) any amount that otherwise would
constitute Net Proceeds to the extent such amount is excluded from the
definition of the term "Capital Expenditures" pursuant to clause (i) or
(iv) of the second sentence thereof; or (2) any amount being reserved for
application as contemplated in clause (i) or (iv) of such second sentence,
except that in the event any amount so reserved is not in fact so applied
<PAGE>
13
or contractually committed to be applied within the permitted 12-month
period, such amount shall be deemed for all purposes (including the
definition of Excess Cash Flow and Section 2.12(f)) to be Net Proceeds of
a Proceeds Transaction received upon such Proceeds Transaction.
"Notes" shall mean the Term Notes, the Delayed Draw Term Notes, the
Canadian Term Notes, the Swingline Note and the Revolving Credit Notes.
"Obligations" shall mean all obligations defined as "Guaranteed
Obligations" in the Guarantee Agreement and "Secured Obligations" in the
Pledge Agreement in each case owing by the Borrower or the Canadian
Borrower to any Credit Agreement Creditor.
"Operating Lease" shall mean a lease which is not required to be
accounted for or classified as a capital lease under GAAP. The "amount"
of any Operating Lease shall be the amount that, if such Operating Lease
were accounted for as a Capital Lease Obligation, would be recorded as a
liability in accordance with GAAP.
"Other Taxes" shall have the meaning assigned to such term in Section
2.18.
"Overallotment Option" shall mean the option granted to the
underwriters in connection with the Public Offering pursuant to which the
underwriters may elect to purchase pursuant to the Holdings Underwriting
Agreement up to 3,750,000 additional shares of Holdings Common Stock to
cover overallotments.
"Participation Fees" shall have the meaning assigned to such term in
Section 2.05(b).
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to
and defined in ERISA (or any such successor).
"Permitted Acquisition Indebtedness" shall mean Indebtedness of the
Borrower permitted by Section 6.01(l).
"Permitted Business Acquisitions" shall mean acquisitions of all or
substantially all of the assets of, or shares or other equity interests
in, a person or division or line of business of a person engaged in the
same business as Holdings and the Restricted Subsidiaries or in a related
business if immediately after giving effect thereto: (i) no Default or
Event of Default shall have occurred and be continuing, (ii) all
transactions related thereto shall be consummated in accordance with
applicable laws, (iii) at least 90% of the outstanding capital stock or
other ownership interests of any acquired or newly formed corporation or
other entity must be owned directly by the Borrower or a Domestic
Restricted Subsidiary and such corporation or entity shall become a
Restricted Subsidiary and a Guarantor and execute a counterpart to the
Guarantee Agreement, and all capital stock or other equity interest
created or acquired in connection with such acquisition shall be duly and
validly pledged to the Collateral Agent for the ratable benefit of the
Lenders, and (iv) (A) Holdings shall be in compliance, on a pro forma
basis, with the covenants contained in Sections 6.14, 6.16 and 6.17
recomputed as at the last day of the most recently ended fiscal quarter of
Holdings, and the Borrower shall have delivered to the Administrative
Agent an officers' certificate to such effect, together with all relevant
financial information for such acquired corporation, entity or assets, and
(B) the acquired corporation or entity shall not be liable for any
Indebtedness (except for Indebtedness permitted by Section 6.01 and the
Guarantee Agreement). For purposes of Section 6, any Restricted
Subsidiary satisfying the requirements of clause (iii) above shall be
deemed to be a "wholly owned subsidiary".
"Permitted Debt Redemption Price" shall have the meaning ascribed
thereto in Section 5.08(a).
<PAGE>
14
"Permitted Investments" shall mean:
(a) direct obligations of, or obligations the principal of and
interest on which are unconditionally guaranteed by, the United States of
America (or by any agency thereof to the extent such obligations are
backed by the full faith and credit of the United States of America), in
each case maturing within one year from the date of acquisition thereof;
(b) marketable general obligations issued by any state of the United
States of America or any political subdivision of any such state or any
public instrumentality thereof maturing within six months from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings generally obtainable from either Standard & Poor's Ratings
Group or Moody's Investors Service, Inc.;
(c) investments in commercial paper maturing no more than six months
from the date of acquisition thereof and having, at such date of
acquisition, a credit rating of A-1 or higher from Standard & Poor's
Ratings Group or P-1 or higher from Moody's Investors Service, Inc.;
(d) investments in domestic and Eurodollar certificates of deposit,
banker's acceptances and time deposits maturing within six months from the
date of acquisition thereof issued or guaranteed by or placed with, and
money market deposit accounts issued or offered by (w) any domestic office
of any commercial bank organized or licensed under the laws of the United
States of America or any State thereof which has a combined capital and
surplus and undivided profits of not less than $500,000,000, (x) any
Lender, (y) any branch of any Lender or any commercial bank organized
under the laws of the United Kingdom, Canada, France or Japan having
combined capital, surplus and undivided profits (less any undivided
losses) of not less than $500,000,000 or (z) other than in the case of
banker's acceptances, any domestic commercial bank whose deposits are
guaranteed by the Federal Deposit Insurance Corporation (or any successor)
and with whom deposits maintained by Holdings or any of its subsidiaries
do not exceed the amount so guaranteed; and
(e) investments in money market funds or other mutual funds that
invest in the types of Permitted Investments described in clauses (a)
through (d) above.
"Permitted Preferred Stock Redemption Price" shall have the meaning
ascribed thereto in Section 5.08(a).
"Permitted Receivables Financing" shall mean any sale by the Borrower
or a Restricted Subsidiary of accounts receivable to a Finance Subsidiary
in a true sale transaction with customary limited recourse based upon the
collectibility of the receivables sold and the corresponding sale or
pledge of such accounts receivable (or an interest therein) by the Finance
Subsidiary, in each case without any Guarantee by Holdings or any other
subsidiary thereof; provided, however, that the terms, conditions and
structure (including the legal and organizational structure of the Finance
Subsidiary and the restrictions imposed on its activities) of and the
documentation incident to such transactions must be reasonably acceptable
to the Administrative Agent.
"Permitted Subordinated Indebtedness" shall mean unsecured subordinated
indebtedness of the Borrower or Holdings having no amortization of
principal and a scheduled final maturity no earlier than June 30, 2003 and
having subordination terms at least as favorable to the Lenders as set
forth on Schedule 1.01(D) and other terms and conditions (including,
covenants, events of default, interest rate) as shall be reasonably
satisfactory to the Required Lenders in the exercise of their sole
discretion.
"Permitted Tax Payment" means for any taxable year of the Borrower in
which it joins in filing a consolidated federal income tax return with
Holdings, a payment by the Borrower to Holdings in an amount not in excess
of the amount required to be paid by the Borrower under the Tax Sharing
Agreement, dated as of November 1, 1989, between Holdings and the
Borrower, as in effect on the date hereof, as amended solely to reflect
the mergers described in clauses (iii) of the definition of
<PAGE>
15
Recapitalization Transactions; provided that within 20 days of receipt of
such payment Holdings applies the amount thereof to satisfy such tax
liability or its obligations under the Tax Sharing Agreement.
"person" shall mean any natural person, corporation, business trust,
joint venture, association, company, partnership or government, or any
agency or political subdivision thereof.
"Plan" with respect to any person shall mean any pension plan (other
than a Multiemployer Plan) subject to the provisions of Title IV of ERISA
or Section 412 of the Code which is maintained for employees of such
person or any ERISA Affiliate of such person.
"Pledge Agreement" shall mean the Pledge Agreement substantially in the
form of Exhibit E, as amended and in effect from time to time.
"Pledged Securities" shall have the meaning assigned to such term in
the Pledge Agreement.
"Preliminary Prospectus" shall mean the preliminary prospectus of
Holdings dated June 2, 1994, filed with the Securities and Exchange
Commission in connection with the Public Offering, as amended or
supplemented from time to time.
"Prepayment Event" shall mean (i) any Specified Asset Sale, (ii) any
Sale and Lease-Back Transaction deemed to be a Prepayment Event pursuant
to Section 6.06, and (iii) the incurrence by Holdings or any Restricted
Subsidiary of any Indebtedness (other than Indebtedness permitted by
Section 6.01), provided, however, that for purposes of Section 2.12(e) (a)
a Prepayment Event shall not be deemed to occur until the aggregate Net
Proceeds from Prepayment Events not yet applied pursuant to Section
2.12(e) by reason of this proviso equals or exceeds $5,000,000, at which
time a Prepayment Event shall, except as set forth in clause (b) below, be
deemed to occur having Net Proceeds equal to the aggregate Net Proceeds
from Prepayment Events not yet so applied and (b) with respect to
Specified Asset Sales, a Prepayment Event shall be deemed to occur only
with respect to that portion of the Net Proceeds thereof required to be
repaid pursuant to Section 6.08(i).
"Public Offering" shall mean the underwritten public offering of shares
of Holdings Common Stock contemplated by the Preliminary Prospectus.
"Purchase Money Indebtedness" shall mean Indebtedness incurred for
capital expenditures, which may be secured in compliance with Section
6.04(i).
"Recapitalization Transactions" shall mean:
(i) the execution, delivery and performance of each Loan Document;
(ii) the borrowings under this Agreement and the issuance of Letters
of Credit pursuant to this Agreement;
(iii) the merger of Collins & Aikman Holdings II Corporation into
Holdings with Holdings as the surviving corporation and the merger of
Collins & Aikman Group, Inc. into Collins & Aikman Corporation with the
Borrower as the surviving corporation;
(iv) the grant of security interests and other Liens pursuant to the
Pledge Agreement;
(v) the conversion of approximately $191,500,000 of the 14%
Subordinated Pay-in-Kind Bridge Notes of Holdings (the "Holdings
Subordinated PIK Notes") held by WP and Blackstone to Holdings Common
Stock and the conversion to Holdings Common Stock or redemption of the
remaining approximately $9,400,000 of Holdings Subordinated PIK Notes;
<PAGE>
16
(vi) the issuance and sale of Holdings Common Stock pursuant to the
Holdings Underwriting Agreement;
(vii) the consummation of the Public Offering and the sale, if any,
of Holdings Common Stock pursuant to the Overallotment Option, all as
contemplated by the Preliminary Prospectus and the consummation of the
other transactions contemplated by the Preliminary Prospectus;
(viii) the entering into a Permitted Receivables Financing providing
commitments of at least $150,000,000 and the initial funding
thereunder;
(ix) the repayment in full of all amounts owed under and in respect
of the Existing Credit Agreement, the release of all Liens in respect
thereof and the termination of the Existing Credit Agreement;
(x) irrevocable notice of the redemption of all outstanding shares
of preferred stock of Holdings and the Borrower shall have been given
to each holder of preferred stock of Holdings and the Borrower at an
aggregate redemption price not greater than the Permitted Preferred
Stock Redemption Price;
(xi) the redemption or defeasance of all public senior and
subordinated debt of Holdings, the Borrower and their subsidiaries set
forth on Schedule 4.02(o) at a redemption price not greater than the
Permitted Debt Redemption Price; and
(xii) the consummation of the other transactions contemplated by the
Loan Documents, the Preliminary Prospectus and the Holdings
Underwriting Agreement.
"Register" shall have the meaning given such term in Section 9.04(d).
Regulation D" shall mean Regulation D of the Board as from time to time
in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation G" shall mean Regulation G of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation T" shall mean Regulation T of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation U" shall mean Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Regulation X" shall mean Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.
"Release" means any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching, emanation or
migration in, into, onto or through the environment (including ambient
air, surface water, ground water, land surface, subsurface strata or
workplace), including the movement of any Contaminant through or in the
air, soil, surface water or ground water.
"Remedial Action" means (i) "remedial action" as such term is defined
in 42 U.S.C. Section 9601(24) and (ii) all other actions required or
voluntarily undertaken to (x) clean up, remove, treat, abate or in any
other way address any Contaminant in the environment or workplace, (y)
prevent the Release or threat of Release, or minimize the further Release
of any Contaminant so it does not migrate or endanger or threaten to
endanger public health or welfare of the environment or workplace, or (z)
perform studies and investigations in connection with (x) or (y) above.
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17
"Reportable Event" shall mean any reportable event as defined in
Section 4043(b) of ERISA or the regulations issued thereunder with respect
to a Plan (other than a Plan maintained by an ERISA Affiliate which is
considered an ERISA Affiliate only pursuant to subsection (m) or (o) of
Section 414 of the Code).
"Required Lenders" shall mean, at any time, Lenders with Loans (other
than Swingline Loans), Letter of Credit Exposure and unused Commitments
representing at least a majority of the sum of the aggregate principal
amount of the Loans (other than Swingline Loans) outstanding, the
aggregate amount of the Letter of Credit Exposure and unused Commitments
at such time.
"Responsible Officer" of any corporation shall mean any Executive
Officer or Financial Officer of such corporation and any other officer or
similar official thereof responsible for the administration of the obliga-
tions of such corporation in respect of this Agreement. Unless the
context otherwise requires, Responsible Officer shall mean a Responsible
Officer of Holdings.
"Restricted Subsidiary" shall mean each Subsidiary in existence as of
the Closing Date and any direct or indirect Subsidiary formed or acquired
after the Closing Date, in each case, other than Unrestricted
Subsidiaries.
"Revolving Credit Borrowing" shall mean a Borrowing comprised of
Revolving Loans.
"Revolving Credit Commitment" shall mean, with respect to each Lender,
the commitment, if any, of such Lender to make Revolving Loans hereunder
as set forth in Schedule 2.01, as the same may be reduced from time to
time pursuant to Section 2.09.
"Revolving Credit Maturity Date" shall mean the seventh anniversary of
the Closing Date.
"Revolving Credit Note" shall mean a promissory note of the Borrower,
substantially in the form of Exhibit A-1, evidencing Revolving Loans.
"Revolving Lender" shall mean any Lender with a Revolving Credit
Commitment.
"Revolving Loans" shall mean the revolving loans made to the Borrower
pursuant to Section 2.01(c). Each Revolving Loan shall be a Eurodollar
Revolving Loan or an ABR Revolving Loan.
"Sale and Lease-Back Transaction" shall have the meaning assigned to
that term in Section 6.06.
"Secured Parties" shall mean the Credit Agreement Creditors and any
holders, if any, of any Permitted Acquisition Indebtedness which have
executed and delivered to the Collateral Agent an Acknowledgement to the
Intercreditor Agreement in the form of Exhibit A thereto.
"Significant Subsidiary" shall mean the Borrower, the Canadian Borrower
and any subsidiary of Holdings that at the date of any determination (i)
accounts for 5% or more of the consolidated assets of Holdings, (ii) has
accounted for 5% or more of the consolidated EBITDA of Holdings for each
of the two consecutive periods of four fiscal quarters immediately
preceding the date of determination or (iii) has been designated by the
Borrower in writing to the Administrative Agent as a Significant
Subsidiary.
"Specified Asset Sale" shall mean any sale, lease, transfer, assignment
or other disposition of assets, business units or property of Holdings or
any of its subsidiaries for Net Proceeds in excess of $100,000 in any
transaction or series of related transactions described in paragraph (i)
of Section 6.08.
"Statutory Reserves" shall mean a fraction (expressed as a decimal),
the numerator of which is the number one and the denominator of which is
the number one minus the aggregate of the maximum reserve percentages
(including any marginal, special, emergency or supplemental reserves)
expressed as a decimal established by the Board and any other banking
authority to which the Administrative Agent is subject (a) with respect to
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18
the Base CD Rate (as such term is used in the definition of "Alternate
Base Rate"), for new negotiable nonpersonal time deposits in dollars of
over $100,000 with maturities approximately equal to three months, and (b)
with respect to the Adjusted LIBO Rate, for Eurocurrency Liabilities (as
defined in Regulation D of the Board). Such reserve percentages shall
include those imposed pursuant to such Regulation D. Eurodollar Loans
shall be deemed to constitute Eurocurrency Liabilities and to be subject
to such reserve requirements without benefit of or credit for proration,
exemptions or offsets which may be available from time to time to any
Lender under such Regulation D. Statutory Reserves shall be adjusted
automatically on and as of the effective date of any change in any reserve
percentage.
"subsidiary" shall mean, with respect to any person (herein referred to
as the "parent"), any corporation, partnership, association or other
business entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary
voting power or more than 50% of the general partnership interests are, at
the time any determination is being made, owned, controlled or held, or
(b) which is, at the time any determination is made, otherwise Controlled,
by the parent or one or more subsidiaries of the parent or by the parent
and one or more subsidiaries of the parent.
"Subsidiary" shall mean any subsidiary of Holdings.
"Swingline Lender" shall mean Chemical, in its capacity as Swingline
Lender hereunder and under the other Loan Documents.
"Swingline Loan Commitment" shall mean the commitment of the Swingline
Lender to make Swingline Loans as set forth in Section 2.01(d).
"Swingline Loans" shall mean the swingline loans made by the Swingline
Lender to the Borrower pursuant to Section 2.01(d).
"Swingline Note" shall mean a promissory note of the Borrower,
substantially in the form of Exhibit A-4, evidencing the Swingline Loans.
"Taxes" shall have the meaning assigned to such term in Section 2.18.
"Term Borrowing" shall mean a Borrowing comprised of Term Loans.
"Term Loan Commitment" shall mean, with respect to each Lender, the
commitment, if any, of such Lender to make Term Loans hereunder as set
forth in Schedule 2.01, as the same may be reduced from time to time
pursuant to Section 2.09.
"Term Loan Maturity Date" shall mean the 30th quarterly anniversary of
the Closing Date.
"Term Loan Repayment Date" shall have the meaning assigned to such term
in Section 2.11.
"Term Loans" shall mean the term loans made to the Borrower pursuant to
Section 2.01(a). Each Term Loan shall be a Eurodollar Term Loan or an ABR
Term Loan.
"Term Note" shall mean a promissory note of the Borrower, substantially
in the form of Exhibit A-3, evidencing Term Loans.
"Total Indebtedness" shall mean, without duplication, all outstanding
Indebtedness of Holdings and its subsidiaries, on a consolidated basis.
"Transactions" shall have the meanings assigned to such term in Section
3.02.
<PAGE>
19
"Type", when used in respect of any Loan or Borrowing, shall refer to
the Rate by reference to which interest on such Loan or on the Loans
comprising such Borrowing is determined. For purposes hereof, "Rate"
shall include the Adjusted LIBO Rate and the Alternate Base Rate.
"UCC" shall mean the Uniform Commercial Code of New York.
"Unrestricted Subsidiary" shall mean (i) each Finance Subsidiary,
Collins & Aikman de Mexico, S.A. de C.V. and Warner Fabrics plc, (ii) any
Subsidiary of Holdings none of the Capital Stock or other ownership
interest of which is owned by the Borrower or any of its Subsidiaries,
provided that Holdings has notified the Administrative Agent of its
acquisition or creation of such Subsidiary and its ownership interest
therein concurrently with such acquisition or creation and the intended
purposes of such Subsidiary and (iii) any Subsidiary of an Unrestricted
Subsidiary. Each Unrestricted Subsidiary, other than a non-U.S.
Unrestricted Subsidiary, shall have entered into the existing Tax Sharing
Agreement with Holdings and the Borrower (or another tax sharing agreement
containing terms which, in the reasonable judgment of the Administrative
Agent, are customary in similar circumstances to provide an appropriate
allocation of tax liabilities and benefits).
The Unrestricted Subsidiaries shall be capitalized solely from the
following sources: (a) any Investment in such Unrestricted Subsidiary by
any Person other than Holdings and the Restricted Subsidiaries; (b)
Indebtedness issued by such Unrestricted Subsidiary, or proceeds thereof;
(c) capital stock of any Unrestricted Subsidiary, or proceeds thereof; (d)
capital stock of Holdings issued by Holdings after the Closing Date, or
proceeds thereof; and (e) Investments permitted to be made in Unrestricted
Subsidiaries pursuant to Section 6.07(l).
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as
a result of a complete or partial withdrawal from such Multiemployer Plan,
as such terms are defined in Part I of Subtitle E of Title IV of ERISA.
"WP" shall mean Wasserstein Perella Partners, L.P.
"WP Entities" shall mean WP, WPMP or any of their Affiliates.
"WPMP" shall mean Wasserstein Perella Management Partners, Inc.
SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. For all purposes of
this Agreement (other than preparation of the financial statements to be
delivered pursuant to Section 5.04), all terms of an accounting or financial
nature shall be construed in accordance with GAAP, as in effect on the date of
this Agreement applied on a basis consistent with the application used in
preparing Holdings' audited financial statements for its fiscal year ended
January 29, 1994 referred to in Section 3.09.
<PAGE>
20
ARTICLE II.
THE CREDITS
SECTION 2.01. Commitments. (a) Subject to the terms and conditions and
relying upon the representations and warranties set forth herein, each Lender
with a Term Loan Commitment agrees, severally and not jointly, to make a Term
Loan to the Borrower on the Closing Date in a principal amount not to exceed
its Term Loan Commitment set forth opposite its name in Schedule 2.01, as the
same may be reduced from time to time pursuant to Section 2.09. Amounts paid
or prepaid in respect of Term Loans may not be reborrowed.
(b) Subject to the terms and conditions and relying upon the
representations and warranties set forth herein, each Lender with a Delayed
Draw Term Loan Commitment agrees, severally and not jointly, to make Delayed
Draw Term Loans to the Borrower at any time and from time to time during the
Delayed Draw Availability Period or until the earlier termination of its
Delayed Draw Term Loan Commitment in accordance with the terms hereof, in an
aggregate principal amount not to exceed its Delayed Draw Term Loan Commitment
set forth opposite its name in Schedule 2.01, as the same may be reduced from
time to time pursuant to Section 2.09. Amounts paid or prepaid in respect of
Delayed Draw Term Loans may not be reborrowed.
(c) Subject to the terms and conditions and relying upon the
representations and warranties set forth herein, each Revolving Lender agrees,
severally and not jointly, to make Revolving Loans to the Borrower, at any time
and from time to time on or after the Closing Date and until the earlier of the
Revolving Credit Maturity Date and the termination of the Revolving Credit
Commitment of such Lender in accordance with the terms hereof, in an aggregate
principal amount at any time outstanding not to exceed the excess of (i) its
Revolving Credit Commitment set forth opposite its name in Schedule 2.01, as
the same may be reduced from time to time pursuant to Section 2.09, minus (ii)
its Applicable Percentage of the Letter of Credit Exposure and Swingline Loans
at such time. Within the foregoing limits, the Borrower may borrow, pay or
prepay and reborrow Revolving Loans on or after the Closing Date and prior to
the Revolving Credit Maturity Date, subject to the terms, conditions and
limitations set forth herein. As provided in Section 2.19, up to $50,000,000
of the Revolving Credit Commitment may be utilized for the issuance of Letters
of Credit.
(d) (i) The Swingline Lender hereby agrees, subject to the limitations
set forth below with respect to the maximum amount of Swingline Loans permitted
to be outstanding from time to time, to make a portion of the Revolving Credit
Commitments available to the Borrower from time to time during the period from
the Closing Date through and excluding the earlier of Revolving Credit Maturity
Date and the termination of the Revolving Credit Commitments in an aggregate
principal amount not to exceed the Swingline Loan Commitment, by making
Swingline Loans to the Borrower. Swingline Loans may be made notwithstanding
the fact that such Swingline Loans, when aggregated with the Swingline Lender's
outstanding Revolving Loans and outstanding Swingline Loans, may exceed the
Swingline Lender's Revolving Credit Commitment. The Swingline Lender's
commitment to make Swingline Loans to the Borrower pursuant to this Section
2.01(d) is herein called its "Swingline Loan Commitment." The original amount
of the Swingline Lender's Swingline Loan Commitment is $10,000,000. The
Swingline Lender's Swingline Loan Commitment shall expire on the date the
Revolving Credit Commitments are terminated and all Swingline Loans and all
other amounts owed hereunder with respect to Swingline Loans shall be paid in
full no later than that date. Amounts borrowed under this Section 2.01(d) may
be repaid and reborrowed to but excluding the date of termination of the
Revolving Credit Commitments.
(ii) In no event shall (a) the aggregate principal amount of Swingline
Loans outstanding at any time exceed the aggregate Swingline Loan Commitment in
effect at such time, (b) the aggregate principal amount of Revolving Loans and
Swingline Loans outstanding at any time exceed the Revolving Credit Commitments
as reduced by the aggregate Letter of Credit Exposure at such time or (c) the
aggregate Swingline Loan Commitment exceed at any time the aggregate Revolving
Loan Commitments in effect at such time. Swingline Loans may only be made as
ABR Loans.
(iii) With respect to any Swingline Loans which have not been
voluntarily prepaid by the Borrower, the Swingline Lender (by request to the
Administrative Agent) or Administrative Agent at any time may, on one Business
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21
Day's notice, require each Lender, including the Swingline Lender, and each
Lender hereby agrees, subject to the provisions of this Section 2.01(d), to
make a Revolving Loan (which shall be funded as an ABR Loan) in an amount equal
to such Lender's Applicable Percentage of the amount of the Swingline Loans
("Refunded Swingline Loans") outstanding on the date notice is given which
Swingline Lender requests the Lenders to prepay; provided that so long as no
Default or Event of Default shall have occurred and be continuing, Lenders
shall not be required to make such Revolving Loans if the aggregate principal
amount of Swingline Loans outstanding as of any Tuesday of each week (or the
first Business Day occurring after any such Tuesday if such Tuesday is not a
Business Day) is less than $1,000,000.
(iv) In the case of Revolving Loans made by Lenders other than the
Swingline Lender under the immediately preceding paragraph (iii), each such
Lender shall make the amount of its Revolving Loan available to the
Administrative Agent, in same day funds, at the office of the Administrative
Agent located at 270 Park Avenue, New York, New York, not later than 1:00 P.M.
(New York time) on the Business Day next succeeding the date such notice is
given. The proceeds of such Revolving Loans shall be immediately delivered to
the Swingline Lender (and not to the Borrower) and applied to repay the
Refunded Swingline Loans. On the day such Revolving Loans are made, the
Swingline Lender's Applicable Percentage of the Refunded Swingline Loans shall
be deemed to be paid with the proceeds of a Revolving Loan made by the
Swingline Lender and such portion of Swingline Loans deemed to be so paid shall
no longer be outstanding as Swingline Loans and shall be outstanding as
Revolving Loans of Lenders. The Borrower authorizes the Administrative Agent
and the Swingline Lender to charge the Borrower's account with Administrative
Agent (up to the amount available in such account) in order to pay immediately
to the Swingline Lender the amount of such Refunded Swingline Loans to the
extent amounts received from Lenders, including amounts deemed to be received
from the Swingline Lender, are not sufficient to repay in full such Refunded
Swingline Loans. If any portion of any such amount paid (or deemed to be paid)
to the Swingline Lender should be recovered by or on behalf of the Borrower
from the Swingline Lender in bankruptcy, by assignment for the benefit of
creditors or otherwise, the loss of the amount so recovered shall be ratably
shared among all Lenders in the manner contemplated by Section 9.06(b).
Subject to the proviso contained in the first sentence of the preceding
paragraph and to the compliance by the Swingline Lender with the provisions of
Section 2.01(d)(vii), each Lender's obligation to make the Revolving Loans
referred to in this paragraph shall be absolute and unconditional and shall not
be affected by any circumstance, including, without limitation, (i) any setoff,
counterclaim, recoupment, defense or other right which such Lender may have
against the Swingline Lender, the Borrower or any other Person for any reason
whatsoever; (ii) the occurrence or continuance of an Event of Default or a
Default; (iii) any adverse change in the condition (financial or otherwise) of
Holdings or any of its subsidiaries; (iv) any breach of this Agreement by
Holdings, the Borrower or any other Lender; or (v) any other circumstance,
happening or event whatsoever, whether or not similar to any of the foregoing.
Nothing in this Section 2.01(d) shall be deemed to relieve any Lender from its
obligation to fulfill its Commitments hereunder or to prejudice any rights that
the Borrower may have against any Lender as a result of any default by such
Lender hereunder.
(v) A copy of each notice given by the Swingline Lender or the
Administrative Agent pursuant to this Section 2.01(d) shall be promptly
delivered by the Swingline Lender to the Administrative Agent and the Borrower.
Upon the making of a Revolving Loan by a Lender pursuant to this Section
2.01(d), the amount so funded shall no longer be owed in respect of Swingline
Loans.
(vi) If as a result of any bankruptcy or similar proceeding, Revolving
Loans are not made pursuant to this Section 2.01(d) sufficient to repay any
amounts owed to the Swingline Lender as a result of a nonpayment of outstanding
Swingline Loans, each Lender agrees to purchase, and shall be deemed to have
purchased, a participation in such outstanding Swingline Loans in an amount
equal to its Applicable Percentage of the unpaid amount together with accrued
interest thereon. Upon one Business Day's notice from the Swingline Lender,
each Lender shall deliver to the Swingline Lender an amount equal to its
respective participation in same day funds at the office of the Swingline
Lender in New York, New York. In order to evidence such participation each
Lender agrees to enter into a participation agreement at the request of the
Swingline Lender in form and substance reasonably satisfactory to all parties.
In the event any Lender fails to make available to the Swingline Lender the
amount of such Lender's participation as provided in this Section 2.01(d), the
Swingline Lender shall be entitled to recover such amount on demand from such
Lender together with interest at the customary rate set by the Swingline Lender
<PAGE>
22
for correction of errors among banks in New York City for one Business Day and
thereafter at the Alternate Base Rate plus the Applicable Margin then in
effect.
(vii) Notwithstanding anything herein to the contrary, the Swingline
Lender shall not make any Swingline Loans after the occurrence and during the
continuation of a Default or Event of Default of which it is aware unless the
Required Lenders have consented thereto.
(e) Subject to the terms and conditions and relying upon the
representations and warranties set forth herein, each Lender with a Canadian
Term Loan Commitment agrees, severally and not jointly, to make a Canadian Term
Loan to the Canadian Borrower on the Closing Date in a principal amount not to
exceed its Canadian Term Loan Commitment set forth opposite its name in
Schedule 2.01, as the same may be reduced from time to time pursuant to Section
2.09. Amounts paid or prepaid in respect of Canadian Term Loans may not be
reborrowed.
SECTION 2.02. Loans. (a) Each Loan shall be made as part of a Borrowing
consisting of Loans made by the Lenders ratably in accordance with their
respective Term Loan Commitments, Delayed Draw Term Loan Commitments, Revolving
Credit Commitments, Canadian Term Loan Commitments or Swingline Commitment, as
the case may be; provided, however, that the failure of any Lender to make any
Loan shall not in itself relieve any other Lender of its obligation to lend
hereunder (it being understood, however, that no Lender shall be responsible
for the failure of any other Lender to make any Loan required to be made by
such other Lender). The Loans comprising each ABR Borrowing shall be in an
aggregate principal amount which is an integral multiple of $1,000,000 (or, in
the case of Swingline Loans, $500,000) and not less than $5,000,000 (or, in the
case of Swingline Loans, $500,000) (or an aggregate principal amount equal to
the remaining balance of the Term Loan Commitments, Canadian Term Loan
Commitments, Delayed Draw Term Loan Commitments or Revolving Credit
Commitments, as the case may be); provided that the aggregate amount of any
Loans comprising a Eurodollar Borrowing shall be subject to a minimum principal
amount of $5,000,000 and shall be an integral multiple of $1,000,000.
(b) Each Borrowing shall be comprised of ABR Loans, or (except in the
case of Swingline Loans) Eurodollar Loans, as the Borrower or the Canadian
Borrower, as the case may be, may request pursuant to Section 2.03. Each
Lender may at its option fulfill its Commitment with respect to any Eurodollar
Loan by causing any domestic or foreign branch or Affiliate of such Lender to
make such Loan; provided that any exercise of such option shall not affect the
obligation of the Borrower or the Canadian Borrower, as the case may be, to
repay such Loan in accordance with the terms of this Agreement and the
applicable Note. Borrowings of more than one Type may be outstanding at the
same time; provided, however, that (except in the case of Swingline Loans) the
Borrower or the Canadian Borrower, as the case may be, shall not be entitled to
request any Borrowing which, if made, would result in an aggregate of more than
15 separate Loans of any Lender being outstanding hereunder at any one time.
For purposes of the foregoing, Loans having different Interest Periods,
regardless of whether they commence on the same date, shall be considered
separate Loans.
(c) Subject to paragraph (e) below, each Lender shall make a Loan in the
amount of its pro rata portion, as determined under Section 2.16, of each
Borrowing hereunder on the proposed date thereof by wire transfer of
immediately available funds to the Administrative Agent in New York, New York,
not later than 11:00 a.m., New York City time, and the Administrative Agent
shall credit the amounts so received to the general deposit account of the
Borrower or the Canadian Borrower, as the case may be, with the Administrative
Agent or, if a Borrowing shall not occur on such date because any condition
precedent herein specified shall not have been met, return the amounts so
received to the respective Lenders. Unless the Administrative Agent shall have
received notice from a Lender prior to the date of any Borrowing that such
Lender will not make available to the Administrative Agent such Lender's
portion of such Borrowing, the Administrative Agent may assume that such Lender
has made such portion available to the Administrative Agent on the date of such
Borrowing in accordance with this paragraph (c) and the Administrative Agent
may, in reliance upon such assumption, make available to the Borrower or the
Canadian Borrower, as the case may be, on such date a corresponding amount. If
and to the extent that such Lender shall not have made such portion available
<PAGE>
23
to the Administrative Agent, such Lender and the Borrower or the Canadian
Borrower, as the case may be, severally agree to repay to the Administrative
Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date such amount is made available to the
Borrower or the Canadian Borrower, as the case may be, until the date such
amount is repaid by either the Borrower or the Canadian Borrower, as the case
may be, or such Lender to the Administrative Agent at (i) in the case of the
Borrower or the Canadian Borrower, the interest rate applicable at the time to
the Loans comprising such Borrowing and (ii) in the case of such Lender, the
Federal Funds Effective Rate. If such Lender shall repay to the Administrative
Agent such corresponding amount together with the applicable interest thereon,
such amount shall constitute such Lender's Loan as part of such Borrowing for
purposes of this Agreement and the Borrower's or the Canadian Borrower's
obligations under the preceding sentence shall terminate. If the Borrower or
the Canadian Borrower, as the case may be, shall repay to the Administrative
Agent such corresponding amount together with the applicable interest thereon,
then such amount shall not constitute a Loan hereunder and the Borrower or the
Canadian Borrower shall have no further obligations hereunder in respect
thereof.
(d) Notwithstanding any other provision of this Agreement, the Borrower
shall not be entitled to request any Revolving Credit Borrowing if the Interest
Period requested with respect thereto would end after the Revolving Credit
Maturity Date.
(e) The Borrower may refinance all or any part of any Revolving Credit
Borrowing with a Revolving Credit Borrowing of the same or a different Type,
subject to the conditions and limitations set forth in this Agreement. Any
Revolving Credit Borrowing or part thereof so refinanced shall be deemed to be
repaid or prepaid in accordance with Section 2.04 or 2.12, as applicable, with
the proceeds of a new Revolving Credit Borrowing, and the proceeds of the new
Revolving Credit Borrowing, to the extent they do not exceed the principal
amount of the Revolving Credit Borrowing being refinanced, shall not be paid by
the Lenders to the Administrative Agent or by the Administrative Agent to the
Borrower pursuant to paragraph (c) above.
(f) If the Administrative Agent has not received from the Borrower the
payment required by Section 2.22(a) by 12:00 noon, New York City time, on the
date on which an Issuing Bank has notified the Borrower and the Administrative
Agent that payment of a draft presented under any Letter of Credit will be made
(or such later time permitted by Section 2.22(a)), as provided in Section 2.22,
the Administrative Agent will promptly notify such Issuing Bank and each
Revolving Lender of the Letter of Credit Disbursement and, in the case of each
such Lender, its Applicable Percentage of such Letter of Credit Disbursement.
Each Revolving Lender (other than the applicable Issuing Bank) will pay to the
Administrative Agent not later than 2:00 p.m., New York City time, on such date
(or, if payment by the Borrower is not required until after 11:00 a.m., New
York City time, on such date, by 10:00 a.m. on the immediately following
Business Day) such Lender's Applicable Percentage of such Letter of Credit
Disbursement, which the Administrative Agent will promptly pay to such Issuing
Bank. The Administrative Agent will promptly remit to each Revolving Lender
its Applicable Percentage of any amounts subsequently received by the
Administrative Agent from the Borrower in respect of such Letter of Credit
Disbursement.
SECTION 2.03. Notice of Borrowings. The Borrower or the Canadian
Borrower, as the case may be, shall give the Administrative Agent written
notice (or telephone notice promptly confirmed in writing) (a) in the case of a
Eurodollar Borrowing, not later than 12:00 noon, New York City time, three
Business Days before a proposed borrowing and (b) in the case of an ABR
Borrowing, not later than 12:00 noon, New York City time, one Business Day
before a proposed borrowing. Such notice shall be irrevocable and shall in
each case refer to this Agreement and specify (i) whether the Borrowing then
being requested is to be a Term Borrowing, a Delayed Draw Borrowing, a Canadian
Term Borrowing or a Revolving Credit Borrowing, and whether such Borrowing is
to be a Eurodollar Borrowing or an ABR Borrowing; (ii) the date of such
Borrowing (which shall be a Business Day) and the amount thereof; and (iii) if
such Borrowing is to be a Eurodollar Borrowing, the Interest Period with
respect thereto. If no election as to the Type of Borrowing is specified in
any such notice, then the requested Borrowing shall be an ABR Borrowing. If no
Interest Period with respect to any Eurodollar Borrowing is specified in any
such notice, then the Borrower or the Canadian Borrower, as the case may be,
shall be deemed to have selected an Interest Period of one month's duration.
If the Borrower shall not have given notice in accordance with this Section
2.03 of its election to refinance a Revolving Credit Borrowing prior to the end
of the Interest Period in effect for such Borrowing, then the Borrower shall
(unless such Borrowing is repaid at the end of such Interest Period) be deemed
to have given notice of an election to refinance such Borrowing with an ABR
Borrowing. The Administrative Agent shall promptly advise the Lenders of any
notice given pursuant to this Section 2.03 and of each Lender's portion of the
requested Borrowing.
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SECTION 2.04. Notes; Repayment of Loans. (a) The Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Lender (i) the then unpaid principal amount of each Revolving Loan and
Swingline Loan of such Lender on the Revolving Credit Maturity Date (or such
earlier date on which the Revolving Loans and Swing Line Loans become due and
payable pursuant to Article VII), and (ii) the principal amount of the Term
Loan and Delayed Draw Term Loan of such Lender, in 26 and 28 consecutive
quarterly installments, respectively, payable on each quarterly anniversary of
the Closing Date, commencing on the fifth quarterly anniversary of the Closing
Date in accordance with Section 2.11 (or the then unpaid principal amount of
such Term Loan and Delayed Draw Term Loan, on the date that the Term Loans and
the Delayed Draw Term Loans become due and payable pursuant to Article II).
The Canadian Borrower hereby unconditionally promises to pay to the
Administrative Agent for the account of each Lender the principal amount of the
Canadian Term Loan of such Lender, in 3 consecutive quarterly installments,
payable on each quarterly anniversary of the Closing Date, commencing on the
30th quarterly anniversary of the Closing Date (or the then unpaid principal
amount of such Canadian Term Loan on the date that the Canadian Term Loans
become due and payable pursuant to Article VII). Each of the Borrower and the
Canadian Borrower hereby further agrees to pay interest on the unpaid principal
amount of the Loans made to it from time to time outstanding from the date
hereof until payment in full thereof at the rates per annum, and on the dates,
set forth in Section 2.06.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing indebtedness of the Borrower and the Canadian
Borrower to such Lender resulting from each Loan of such Lender from time to
time, including the amounts of principal and interest payable and paid to such
Lender from time to time under this Agreement.
(c) The Administrative Agent shall maintain the Register pursuant to
Section 9.04(d), and a subaccount therein for each Lender, in which shall be
recorded (i) the amount of each Revolving Credit Loan, Swingline Loan, Delayed
Draw Term Loan, Canadian Term Loan and Term Loan made hereunder, the Type
thereof and each Interest Period applicable thereto, (ii) the amount of any
principal or interest due and payable or to become due and payable from the
Borrower or the Canadian Borrower to each Lender hereunder and (iii) both the
amount of any sum received by the Administrative Agent hereunder from the
Borrower or the Canadian Borrower and each Lender's share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to Section 2.04(b) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrower and the Canadian Borrower therein recorded;
provided, however, that the failure of any Lender or the Administrative Agent
to maintain the Register or any such account, or any error therein, shall not
in any manner affect the obligation of the Borrower or the Canadian Borrower to
repay (with applicable interest) the Loans made to the Borrower or the Canadian
Borrower by such Lender in accordance with the terms of this Agreement.
(e) The Borrower agrees that, upon the request to the Administrative
Agent by any Lender, the Borrower will execute and deliver to such Lender (i) a
Revolving Credit Note with appropriate insertions as to date and principal
amount, and/or (ii) a Delayed Draw Term Note with appropriate insertions as to
date and principal amount, and/or (iii) a Term Note with appropriate insertions
as to date and principal amount, and/or (iv) in the case of the Swingline
Lender, a Swingline Note with appropriate insertions as to date and principal
amount. The Canadian Borrower agrees that, upon the request to the
Administrative Agent by any Lender, the Canadian Borrower will execute and
deliver to such Lender a Canadian Term Note with appropriate insertions as to
date and principal amount.
SECTION 2.05. Fees. (a) The Borrower agrees to pay to each Lender,
through the Administrative Agent, on the Closing Date, thereafter on the last
day of March, June, September and December in each year, and on the date on
which the Commitment of such Lender shall be terminated as provided herein, a
commitment fee (a "Commitment Fee") of 1/2 of 1% per annum on the average daily
unused amount of the Term Loan Commitment, the Canadian Term Loan Commitment
and the Revolving Commitment of such Lender, and 5/8 (or, prior to the Closing
Date, 1/2) of 1% per annum on the average daily unused amount of the Delayed
Draw Term Loan Commitment of such Lender, in each case during the preceding
quarter (or shorter period ending with the Closing Date, the Revolving Credit
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25
Maturity Date or the date on which the Commitment of such Lender shall be
terminated). All Commitment Fees shall be computed on the basis of the actual
number of days elapsed in a year of 365 or 366 days. For purposes of
calculating any Lender's Commitment Fee, the outstanding Swingline Loans during
the period for which such Lender's Commitment Fee is calculated shall be deemed
to be zero. The Commitment Fee due to each Lender commenced on an allocation
date agreed to among such Lender, the Borrower and Chemical, or, if later, the
date such entity becomes a Lender pursuant to Section 9.04, and shall cease to
accrue on the date on which the Commitment of such Lender shall be terminated
as provided herein.
(b) The Borrower agrees to pay to the Lenders, through the
Administrative Agent, on the Closing Date, the participation fees (the
"Participation Fees") in the amounts previously agreed to be payable to the
Lenders.
(c) The Borrower agrees to pay to the Administrative Agent, for its own
account, on the Closing Date and thereafter at the times previously agreed, the
fees (the "Agency Fees") in the amounts previously agreed to be payable to the
Administrative Agent for its own account in accordance with the fee letter
between Chemical and Holdings.
(d) The Borrower agrees to pay to each Issuing Bank, for its own
account, a fronting fee for each Letter of Credit issued by such Issuing Bank,
in the amount agreed upon between the Borrower and such Issuing Bank, payable
as agreed to by the Borrower and such Issuing Bank for such Letter of Credit,
and negotiation, amendment, issuing, payment and other customary fees
(collectively, the "Fronting Fees") in the amounts separately agreed to by such
Issuing Bank and the Borrower.
(e) All Fees shall be paid on the dates due, in immediately available
funds, to the Administrative Agent for distribution, if and as appropriate,
among the Lenders or to the applicable Issuing Banks, as the case may be. Once
paid, none of the Fees shall be refundable under any circumstances.
SECTION 2.06. Interest on Loans. (a) Subject to the provisions of
Section 2.07, the Loans comprising each ABR Borrowing and Swingline Loans shall
bear interest (computed on the basis of the actual number of days elapsed over
a year of 365 or 366 days, as the case may be, when determined by reference to
the Prime Rate and over a year of 360 days at all other times) at a rate per
annum equal to the Alternate Base Rate plus the Applicable Margin.
(b) Subject to the provisions of Section 2.07, the Loans comprising each
Eurodollar Borrowing shall bear interest (computed on the basis of the actual
number of days elapsed over a year of 360 days) at a rate per annum equal to
the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing
plus the Applicable Margin.
(c) Interest on each Loan shall be payable on the Interest Payment Dates
applicable to such Loan and as otherwise provided in this Agreement. The
applicable Alternate Base Rate and Adjusted LIBO Rate for each Interest Period
or day within an Interest Period, as the case may be, shall be determined by
the Administrative Agent, and such determination shall be conclusive absent
manifest error.
(d) For purposes of the Interest Act (Canada) (i) whenever any interest
or fee under this Agreement with respect to the Canadian Term Loan Commitments,
or credit extended thereunder, is calculated using a rate based on a year of
360 days, such rate determined pursuant to such calculation, when expressed as
an annual rate, is equivalent to (x) the applicable rate based on a year of 360
days multiplied by (y) the actual number of days in the calendar year in which
the period for which such interest or fee is payable (or compounded) ends, and
(z) divided by 360 and (ii) the principle of deemed reinvestment of interest
does not apply to any such interest calculation under this Agreement, and (iii)
the rates of interest stipulated in this Agreement are intended to be nominal
rates and not effective rates or yields.
SECTION 2.07. Default Interest. If the Borrower or the Canadian
Borrower, as the case may be, shall default in the payment of the principal of
or interest on any Loan or any other amount becoming due hereunder, by
acceleration or otherwise, the Borrower or the Canadian Borrower, as the case
may be, shall on demand from time to time pay interest, to the extent permitted
by law, on such defaulted amount up to (but not including) the date of actual
<PAGE>
26
payment (after as well as before judgment) at a rate per annum (computed on the
basis of the actual number of days elapsed over a year of 365 or 366 days, as
the case may be, when determined by reference to the Prime Rate and over a year
of 360 days at all other times) equal to the Alternate Base Rate plus the
Applicable Margin plus 2% per annum.
SECTION 2.08. Alternate Rate of Interest. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Borrowing the Administrative Agent shall have
determined that dollar deposits in the principal amounts of the Loans
comprising such Borrowing are not generally available in the interbank
eurodollar market, or that the rates at which such dollar deposits are being
offered will not adequately and fairly reflect the cost to any Lender of making
or maintaining its Eurodollar Loan during such Interest Period, or that
reasonable means do not exist for ascertaining the Adjusted LIBO Rate, the
Administrative Agent shall, as soon as practicable thereafter, give written or
telex or telecopy notice of such determination to the Borrower, the Canadian
Borrower and the Lenders. In the event of any such determination, any request
by the Borrower or the Canadian Borrower, as the case may be, for a Eurodollar
Borrowing pursuant to Section 2.03 or 2.10 shall, until the Administrative
Agent shall have advised the Borrower, the Canadian Borrower and the Lenders
that the circumstances giving rise to such notice no longer exist, be deemed to
be a request for an ABR Borrowing. Each determination by the Administrative
Agent hereunder shall be conclusive absent manifest error.
SECTION 2.09. Termination and Reduction of Commitments. (a) All
Commitments shall automatically terminate at 5:00 p.m., New York City time, on
September 15, 1994, unless the Closing Date occurs on or prior to such date.
The Term Loan Commitments and the Canadian Term Loan Commitments shall be
automatically terminated at 5:00 p.m., New York City time, on the Closing Date.
The Delayed Draw Term Loan Commitments shall be automatically terminated at
5:00 p.m., New York City time, on the last day of the Delayed Draw Availability
Period. The Revolving Credit Commitments shall be automatically terminated on
the Revolving Credit Maturity Date. The Letter of Credit Commitment shall be
automatically terminated at 5:00 p.m., New York City time, on the date that is
five Business Days prior to the Revolving Credit Maturity Date.
(b) Upon at least three Business Days' prior irrevocable written notice
to the Administrative Agent, the Borrower or the Canadian Borrower, as the case
may be, may at any time in whole permanently terminate, or from time to time in
part permanently reduce, any of the Term Loan Commitments, the Delayed Draw
Term Loan Commitments, the Canadian Term Loan Commitments or the Revolving
Credit Commitments; provided, however, that (i) each partial reduction of any
such Commitments shall be in an integral multiple of $1,000,000 and in a
minimum principal amount of $5,000,000 and (ii) the Revolving Credit
Commitments shall not be reduced to an amount which is less than the Letter of
Credit Exposure and the outstanding Revolving Credit Loans and Swingline Loans
at such time.
(c) Each reduction in the Commitments hereunder shall be made ratably
among the applicable Lenders in accordance with their respective applicable
Commitments. The Borrower shall pay to the Administrative Agent for the
account of the applicable Lenders, on the date of each termination or
reduction, the Commitment Fees on the amount of the Commitments so terminated
or reduced accrued through the date of such termination or reduction.
SECTION 2.10. Conversion and Continuation of Delayed Draw Term, Term and
Canadian Term Borrowings. The Borrower or the Canadian Borrower, as the case
may be, shall have the right at any time upon prior irrevocable notice to the
Administrative Agent (i) not later than 12:00 (noon), New York City time, one
Business Day prior to conversion, to convert any Eurodollar Term Borrowing into
an ABR Term Borrowing, or to convert any Eurodollar Delayed Draw Term Borrowing
into an ABR Delayed Draw Term Borrowing, or to convert any Eurodollar Canadian
Term Borrowing into an ABR Canadian Term Borrowing, (ii) not later than 10:00
a.m., New York City time, three Business Days prior to conversion or
continuation, to convert any ABR Term Borrowing into a Eurodollar Term
Borrowing, or convert any ABR Delayed Draw Term Borrowing into a Eurodollar
Delayed Draw Term Borrowing, or convert any ABR Canadian Term Borrowing to a
Eurodollar Canadian Term Borrowing or to continue any Eurodollar Term Borrowing
or Eurodollar Delayed Draw Term Borrowing or Eurodollar Canadian Term Borrowing
as a Eurodollar Term Borrowing or Eurodollar Delayed Draw Term Borrowing or
Eurodollar Canadian Term Borrowing, as applicable, for an additional Interest
<PAGE>
27
Period and (iii) not later than 10:00 a.m., New York City time, three Business
Days prior to conversion, to convert the Interest Period with respect to any
Eurodollar Term Borrowing or Eurodollar Delayed Draw Term Borrowing or
Eurodollar Canadian Term Borrowing to another permissible Interest Period,
subject to the following conditions:
(a) each conversion or continuation shall be made pro rata among the
applicable Lenders in accordance with the respective principal amounts of
the Loans comprising the converted or continued Borrowing;
(b) if less than all the outstanding principal amount of any
Borrowing shall be converted or continued, the aggregate principal amount
of such Borrowing converted or continued shall be an integral multiple of
$1,000,000 and not less than $5,000,000; provided that the aggregate
principal amount of each Eurodollar Borrowing resulting from any such
conversion or continuation shall not be less than $5,000,000 and shall be
an integral multiple of $1,000,000;
(c) each conversion shall be effected by each applicable Lender by
such Lender converting its applicable Loan (or portion thereof), and
accrued interest on a Loan (or portion thereof) being converted shall be
paid by the Borrower or the Canadian Borrower, as the case may be, at the
time of conversion;
(d) if any Eurodollar Borrowing is converted at a time other than the
end of the Interest Period applicable thereto, the Borrower shall pay,
upon demand, any amounts due to the applicable Lenders pursuant to Section
2.15;
(e) any portion of a Borrowing maturing or required to be repaid in
less than one month may not be converted into or continued as a Eurodollar
Borrowing;
(f) any portion of a Eurodollar Borrowing which cannot be converted
into or continued as a Eurodollar Borrowing by reason of clause (e) above
shall be automatically converted at the end of the Interest Period in
effect for such Borrowing into an ABR Borrowing;
(g) no Interest Period may be selected for any Eurodollar Borrowing
that would end later than a Term Loan Repayment Date, Canadian Term Loan
Repayment Date or Delayed Draw Term Loan Repayment Date, as applicable,
occurring on or after the first day of such Interest Period if, after
giving effect to such selection, the aggregate outstanding amount of (i)
the Eurodollar Term Borrowings, the Eurodollar Canadian Term Borrowings or
the Eurodollar Delayed Draw Term Borrowings, as the case may be, with
Interest Periods ending on or prior to such Term Loan Repayment Date,
Canadian Term Loan Repayment Date or Delayed Draw Term Loan Repayment Date
and (ii) the ABR Term Borrowings, ABR Canadian Term Borrowings or ABR
Delayed Draw Term Borrowings, as the case may be, would not be at least
equal to the principal amount of Term Borrowings, Canadian Term Borrowings
or Delayed Draw Borrowings to be paid on such Term Loan Repayment Date,
Canadian Term Loan Repayment Date or Delayed Draw Term Loan Repayment
Date; and
(h) a Borrowing may not be converted into or continued as a
Eurodollar Borrowing if a Default or an Event of Default has occurred and
is continuing and the Required Lenders have determined such conversion or
continuation is not appropriate.
Each notice pursuant to this Section 2.10 shall be irrevocable and shall
refer to this Agreement and specify (i) the identity and amount of the
Borrowing that the Borrower or the Canadian Borrower, as the case may be,
requests be converted or continued, (ii) whether such Borrowing is to be
converted to or continued as a Eurodollar Borrowing or an ABR Borrowing, (iii)
if such notice requests a conversion, the date of such conversion (which shall
be a Business Day) and (iv) if such Borrowing is to be converted to or
continued as a Eurodollar Borrowing, the Interest Period with respect thereto.
If no Interest Period is specified in any such notice with respect to any
conversion to or continuation as a Eurodollar Borrowing, the Borrower shall be
deemed to have selected an Interest Period of one month's duration. The
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Administrative Agent shall promptly advise the other Lenders of any notice
given pursuant to this Section 2.10 and of each Lender's portion of any
converted or continued Borrowing. If the Borrower or the Canadian Borrower, as
the case may be, shall not have given notice in accordance with this Section
2.10 to continue any Borrowing into a subsequent Interest Period (and shall not
otherwise have given notice in accordance with this Section 2.10 to convert
such Borrowing), such Borrowing shall, at the end of the Interest Period
applicable thereto (unless repaid pursuant to the terms hereof), automatically
be continued into a new Interest Period as an ABR Borrowing.
SECTION 2.11. Repayment of Term and Delayed Draw Term Borrowings. (a)
The Term Borrowings shall be payable as to principal in such number of
consecutive installments, payable on such dates (each a "Term Loan Repayment
Date") and in such amounts as set forth on Schedule 2.11(a), based upon the
aggregate principal amount of Term Loans advanced on the Closing Date.
(b) The Delayed Draw Term Borrowings shall be payable as to principal on
each Term Loan Repayment Date and Canadian Term Loan Repayment Date (each a
"Delayed Draw Term Loan Repayment Date") and in such amounts (expressed as a
percentage of the aggregate principal amount of Delayed Draw Term Borrowings
outstanding on the last day of the Delayed Draw Availability Period) equal to
the same percentage as the percentage of the original aggregate Term Loans and
Canadian Term Loans required to be repaid on such Delayed Draw Term Loan
Repayment Date.
(c) The Canadian Term Borrowings shall be payable as to principal in
such number of consecutive installments, payable on such dates (each a
"Canadian Term Loan Repayment Date") and in such amounts as set forth on
Schedule 2.11(a), based upon the aggregate principal amount of Canadian Term
Loans advanced on the Closing Date.
(d) To the extent not previously paid, all Term Borrowings shall be due
and payable on the Term Loan Maturity Date, all Canadian Term Borrowings shall
be due and payable on the Canadian Term Loan Maturity Date and all Delayed Draw
Term Borrowings shall be due and payable on the Delayed Draw Term Loan Maturity
Date. Each payment of Eurodollar Term Borrowings, Canadian Eurodollar Term
Borrowings or Delayed Draw Eurodollar Term Borrowings repaid pursuant to this
Section 2.11 shall be accompanied by accrued interest on the principal amount
paid to but excluding the date of payment.
SECTION 2.12. Prepayment. (a) The Borrower or the Canadian Borrower, as
the case may be, shall have the right at any time and from time to time to
prepay any Borrowing, in whole or in part, upon, in the case of Eurodollar
Borrowings, at least three Business Days', and in the case of ABR Borrowings,
at least one Business Day's, prior written notice (or telephone notice promptly
confirmed by written notice) to the Administrative Agent; provided, however,
that (i) each partial prepayment (other than of a Swingline Loan) of ABR Loans
shall be in a minimum principal amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof and of Eurodollar Loans shall be in a minimum
principal amount of $5,000,000 or an integral multiple of $1,000,000 in excess
thereof and (ii) any prepayment by the Borrower (other than of a Revolving
Credit Borrowing or Swingline Loan) shall be applied to the Term Loans and the
Delayed Draw Term Loans ratably according to the respective outstanding
principal amounts thereof.
(b) On the date of any termination or reduction of the Revolving Credit
Commitments pursuant to Section 2.09, the Borrower shall pay or prepay so much
of, first, the Swingline Loans and, second, the Revolving Credit Borrowings as
shall be necessary in order that the aggregate principal amount of the
Revolving Loans and Swingline Loans outstanding will not exceed the excess, if
any, of (i) the aggregate Revolving Credit Commitments after giving effect to
such termination or reduction, minus (ii) the Letter of Credit Exposure at the
time.
(c) The Borrower and the Canadian Borrower shall prepay the Borrowings
at the times and in the amounts required pursuant to Section 2.12(e) and
2.12(f). Each prepayment of the Borrowings required to be made pursuant to
Section 2.12(e) and 2.12(f) shall be applied, first, to prepay in full
outstanding Term Borrowings and Delayed Draw Borrowings pro rata in accordance
with the respective outstanding principal amounts of such Borrowings and,
second, to prepay in full outstanding Canadian Term Borrowings.
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(d) The Borrower's and the Canadian Borrower's prepayment obligations
under any paragraph of this Section 2.12 shall be in addition to, and shall not
be discharged by the performance of, its obligations under any other such
paragraph. Each notice of prepayment shall specify the prepayment date and the
principal amount of each Borrowing (or portion thereof) to be prepaid, shall be
irrevocable and shall commit the Borrower or the Canadian Borrower, as the case
may be, to prepay such Borrowing by the amount stated therein on the date
stated therein. All prepayments under this Section 2.12 shall be subject to
Section 2.15 but otherwise without premium or penalty. All prepayments under
this Section 2.12 shall be accompanied by accrued interest on the principal
amount being prepaid to the date of payment.
(e) In the event and on each occasion that a Prepayment Event occurs,
the Borrower or the Canadian Borrower, as the case may be, shall apply an
amount equal to the Applicable Prepayment Percentage of the Net Proceeds
therefrom to prepay the Loans in accordance with this Section 2.12(e) and
Section 2.12(g) below. Substantially simultaneously with (and in any event not
later than the Business Day next following) the occurrence of a Prepayment
Event, the Borrower or the Canadian Borrower, as the case may be, shall pay to
the Administrative Agent (for application to the prepayment of Loans in
accordance with Section 2.12(g)) an amount equal to the Applicable Prepayment
Percentage of the Net Proceeds from such Prepayment Event.
(f) Not later than 90 days after the end of each fiscal year, the
Borrower or the Canadian Borrower, as the case may be, shall pay to the
Administrative Agent (for application to the prepayment of Loans in accordance
with Section 2.12(g)) an amount equal to the Applicable Prepayment Percentage
(as of the last day for the fiscal year for which Excess Cash Flow is
calculated) of the amount of the Excess Cash Flow for such fiscal year.
(g) Each prepayment of principal of the Term Borrowings or the Delayed
Draw Term Borrowings pursuant to this Section 2.12 shall be applied to reduce
scheduled payments of principal of the applicable Borrowings due under
paragraph (a) or (b), as applicable, of Section 2.11 after the date of such
prepayment pro rata in accordance with the remaining scheduled amount of each
such payment; provided, however, that in the case of any prepayment of the Term
Borrowings and the Delayed Draw Term Borrowings pursuant to Section 2.12(c)
that is required pursuant to Section 2.12(f) or pursuant to Section 2.12(a),
the principal amount of such prepayment shall be applied to reduce scheduled
payments of principal due under Section 2.11 after the date of such prepayment
in the chronological order of maturity. Each prepayment of principal of the
Canadian Term Borrowings pursuant to this Section 2.12 shall be applied to
reduce scheduled payments of principal of the Canadian Term Borrowings due
under paragraph (c) of Section 2.11 after the date of such prepayment pro rata
in accordance with the remaining scheduled amount of each such payment;
provided, however, that in the case of any prepayment of the Canadian Term
Borrowings pursuant to Section 2.12(c) that is required pursuant to Section
2.12(f) or pursuant to Section 2.12(a), the principal amount of such prepayment
shall be applied to reduce scheduled payments of principal due under Section
2.11 after the date of such prepayment in the chronological order of maturity.
(h) Notwithstanding anything herein to the contrary, the Canadian
Borrower shall not have any mandatory obligation under this Section 2.12 (i) to
prepay any Canadian Term Loans until such time as the Delayed Draw Term Loans
and Term Loans have been repaid in full or (ii) to prepay more than 25% of the
original principal amount of the Canadian Term Loans prior to the fifth
anniversary of the Closing Date. Any mandatory prepayment of the Canadian Term
Loans which would be made but for the provisions of clause (ii) of the
preceding sentence shall be due and payable on the first Business Day following
the fifth anniversary of the Closing Date.
(i) In the event the amount of any prepayment required to be made above
shall exceed the aggregate principal amount of the applicable outstanding ABR
Loans (the amount of any such excess being called the "Excess Amount"), the
Borrower or the Canadian Borrower, as the case may be, shall have the right, in
lieu of making such prepayment in full, to prepay all the outstanding
applicable ABR Loans and to deposit an amount equal to the Excess Amount with
the Collateral Agent in a cash collateral account maintained (pursuant to
documentation satisfactory to the Administrative Agent) by and in the sole
dominion and control of the Collateral Agent. Any amounts so deposited shall
be held by the Collateral Agent as collateral for the Obligations and applied
to the prepayment of the applicable Eurodollar Loans at the end of the current
Interest Periods applicable thereto. On any Business Day on which (x)
collected amounts remain on deposit in or to the credit of such cash collateral
account after giving effect to the payments made on such day pursuant to this
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Section 2.12(i) and (y) the Borrower or the Canadian Borrower, as the case may
be, shall have delivered to the Collateral Agent a written request or a
telephonic request (which shall be promptly confirmed in writing) that such
remaining collected amounts be invested in the Permitted Investments specified
in such request, the Collateral Agent shall use its reasonable efforts to
invest such remaining collected amounts in such Permitted Investments;
provided, however, that the Collateral Agent shall have continuous dominion and
full control over any such investments (and over any interest that accrues
thereon) to the same extent that it has dominion and control over such cash
collateral account and no Permitted Investment shall mature after the end of
the Interest Period for which it is to be applied. Neither the Borrower nor
the Canadian Borrower shall have the right to withdraw any amount from such
cash collateral account until the applicable Eurodollar Loans and accrued
interest thereon are paid in full or if a Default or Event of Default then
exists or would result.
SECTION 2.13. Reserve Requirements; Change in Circumstances. (a)
Notwithstanding any other provision herein, if after the date of this Agreement
any change in applicable law or regulation or in the interpretation or
administration thereof by any governmental authority charged with the
interpretation or administration thereof (whether or not having the force of
law) shall change the basis of taxation of payments to any Lender or any
Issuing Bank in respect of any Letter of Credit or of the principal of or
interest on any Eurodollar Loan made by such Lender or any Fees or other
amounts payable hereunder (other than changes in respect of (i) taxes imposed
on the overall net income of such Lender or such Issuing Bank by the
jurisdiction in which such Lender or such Issuing Bank has its principal office
or by any political subdivision or taxing authority therein and (ii) any Taxes
described in Section 2.18), or shall impose, modify or deem applicable any
reserve, special deposit or similar requirement against assets or deposits with
or for the account of or credit extended by or, in the case of the Letters of
Credit, participated in by such Lender (except any such reserve requirement
which is reflected in the Adjusted LIBO Rate) or such Issuing Bank or shall
impose on such Lender or such Issuing Bank or the interbank eurodollar market
any other condition affecting this Agreement, any Letter of Credit (or any
participation with respect thereto), the Letter of Credit Exposure, the Letter
of Credit Commitment or Eurodollar Loans made by such Lender, and the result of
any of the foregoing shall be to increase the cost to such Lender or such
Issuing Bank of making or maintaining the Letter of Credit Exposure, the Letter
of Credit Commitment or any Eurodollar Loan (or, in the case of such Issuing
Bank, of making any payment or maintaining the Letter of Credit Commitment) or
to reduce the amount of any sum received or receivable by such Lender or such
Issuing Bank hereunder or under the Notes (whether of principal, interest or
otherwise) by an amount deemed by such Lender or such Issuing Bank to be
material, then the Borrower will pay to such Lender or such Issuing Bank upon
demand such additional amount or amounts as will compensate such Lender or such
Issuing Bank for such additional costs incurred or reduction suffered.
(b) If any Lender or Issuing Bank shall have determined that the
adoption after the date hereof of any law, rule, regulation or guideline
regarding capital adequacy, or any change after the date hereof in any of the
foregoing or in the interpretation or administration of any of the foregoing by
any Governmental Authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or any
lending office of such Lender) or Issuing Bank or any Lender's or Issuing
Bank's holding company with any request or directive regarding capital adequacy
(whether or not having the force of law) made or issued after the date hereof
by any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Lender's or Issuing Bank's
capital or on the capital of such Lender's or Issuing Bank's holding company,
if any, as a consequence of this Agreement or its obligations pursuant hereto
to a level below that which such Lender or Issuing Bank or such Lender's or
Issuing Bank's holding company would have achieved but for such adoption,
change or compliance (taking into consideration such Lender's or Issuing Bank's
policies and the policies of such Lender's or Issuing Bank's holding company
with respect to capital adequacy) by an amount deemed by such Lender or Issuing
Bank to be material, then from time to time the Borrower shall pay to such
Lender or Issuing Bank such additional amount or amounts as will compensate
such Lender or Issuing Bank or such Lender's or Issuing Bank's holding company
for any such reduction suffered.
(c) A certificate of each Lender or Issuing Bank setting forth such
amount or amounts as shall be necessary to compensate such Lender or Issuing
Bank or its holding company as specified in paragraph (a) or (b) above, as the
case may be, shall be delivered to the Borrower through the Administrative
Agent and shall be conclusive absent manifest error. The Borrower shall pay
each Lender or Issuing Bank the amount shown as due on any such certificate
delivered by it within 10 days after its receipt of the same.
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(d) In the event any Lender or Issuing Bank delivers a notice pursuant
to paragraph (e) below, the Borrower may require, at the Borrower's expense and
subject to Section 2.15, such Lender or Issuing Bank to assign, at par plus
accrued interest and fees, without recourse (in accordance with Section 9.04)
all its interests, rights and obligations hereunder (including, in the case of
a Lender, all of its Commitment and the Loans at the time owing to it and its
Notes and participations in Letters of Credit held by it and its obligations to
acquire such participations) to a financial institution specified by the
Borrower provided that (i) such assignment shall not conflict with or violate
any law, rule or regulation or order of any court or other Governmental
Authority, (ii) the Borrower shall have received the written consent of the
Administrative Agent, which consent shall not unreasonably be withheld, to such
assignment, (iii) the Borrower shall have paid to the assigning Lender or
Issuing Bank all monies accrued and owing hereunder to it (including pursuant
to this Section) and (iv) in the case of a required assignment by an Issuing
Bank, all outstanding Letters of Credit issued by such Issuing Bank shall be
canceled and returned to such Issuing Bank.
(e) Promptly after any Lender or Issuing Bank has determined, in its
sole judgment, that it will make a request for increased compensation pursuant
to this Section, such Lender or Issuing Bank will notify the Borrower thereof.
Failure on the part of any Lender or Issuing Bank so to notify the Borrower or
to demand compensation for any increased costs or reduction in amounts received
or receivable or reduction in return on capital with respect to any period
shall not constitute a waiver of such Lender's or Issuing Bank's right to
demand compensation with respect to such period or any other period; provided
that the Borrower shall not be under any obligation to compensate any Lender or
Issuing Bank under Section 2.13(b) with respect to increased costs or
reductions with respect to any period prior to the date that is six months
prior to such request if such Lender or the Issuing Bank knew or could
reasonably have been expected to be aware of the circumstances giving rise to
such increased costs or reductions and of the fact that such circumstances
would in fact result in such increased costs or reduction; provided, further,
that, the foregoing limitation shall not apply to any increased costs or
reductions arising out of the retroactive application of any law, regulation,
rule, guideline or directive as aforesaid within such six month period. The
protection of this Section shall be available to each Lender and Issuing Bank
regardless of any possible contention of the invalidity or inapplicability of
the law, rule, regulation, guideline or other change or condition which shall
have occurred or been imposed.
SECTION 2.14. Change in Legality. (a) Notwithstanding any other
provision herein, if the adoption of or any change in any law or regulation or
in the interpretation thereof by any Governmental Authority charged with the
administration or interpretation thereof shall make it unlawful for any Lender
to make or maintain any Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to any Eurodollar Loan, then, by written
notice to the Borrower and to the Administrative Agent, such Lender may:
(i) declare that Eurodollar Loans will not thereafter be made by such
Lender hereunder, whereupon any request by the Borrower for a Eurodollar
Borrowing shall, as to such Lender only, be deemed a request for an ABR
Loan unless such declaration shall be subsequently withdrawn; and
(ii) require that all outstanding Eurodollar Loans made by it be
converted to ABR Loans, in which event all such Eurodollar Loans shall be
automatically converted to ABR Loans as of the effective date of such
notice as provided in paragraph (b) below.
In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal which would otherwise have been applied
to repay the Eurodollar Loans that would have been made by such Lender or the
converted Eurodollar Loans of such Lender shall instead be applied to repay the
ABR Loans made by such Lender in lieu of, or resulting from the conversion of,
such Eurodollar Loans.
(b) For purposes of this Section 2.14, a notice to the Borrower by any
Lender shall be effective as to each Eurodollar Loan, if lawful, on the last
day of the Interest Period currently applicable to such Eurodollar Loan; in all
other cases such notice shall be effective on the date of receipt by the
Borrower.
SECTION 2.15. Indemnity. The Borrower shall indemnify each Lender
against any loss or expense (other than taxes) which such Lender may sustain or
incur as a consequence of (a) any failure by the Borrower or the Canadian
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Borrower to fulfill on the date of any Borrowing or proposed Borrowing
hereunder the applicable conditions set forth in Article IV, (b) any failure by
the Borrower or the Canadian Borrower to borrow or to refinance, convert or
continue any Loan hereunder after irrevocable notice of such Borrowing,
refinancing, conversion or continuation has been given pursuant to Section 2.03
or 2.10, (c) any payment, prepayment or conversion of a Eurodollar Loan
required by any other provision of this Agreement or otherwise made or deemed
made on a date other than the last day of the Interest Period applicable
thereto, (d) any default in payment or prepayment of the principal amount of
any Loan or any part thereof or interest accrued thereon, as and when due and
payable (at the due date thereof, whether by scheduled maturity, acceleration,
irrevocable notice of prepayment or otherwise) or (e) the occurrence of any
Event of Default, including, in each such case, any loss or reasonable expense
sustained or incurred or to be sustained or incurred in liquidating or
employing deposits from third parties acquired to effect or maintain such Loan
or any part thereof as a Eurodollar Loan. Such loss or reasonable expense
shall exclude loss of margin hereunder but shall include an amount equal to the
excess, if any, as reasonably determined by such Lender, of (i) its cost of
obtaining the funds for the Loan being paid, prepaid, converted or not
borrowed, converted or continued (assumed to be the Adjusted LIBO Rate
applicable thereto) for the period from the date of such payment, prepayment,
conversion or failure to borrow, convert or continue to the last day of the
Interest Period for such Loan (or, in the case of a failure to borrow, convert
or continue, the Interest Period for such Loan which would have commenced on
the date of such failure) over (ii) the amount of interest (as reasonably
determined by such Lender) that would be realized by such Lender in reemploying
the funds so paid, prepaid, converted or not borrowed, converted or continued
for such period or Interest Period, as the case may be. A certificate of any
Lender setting forth any amount or amounts which such Lender is entitled to
receive pursuant to this Section (and the reasons therefor) shall be delivered
to the Borrower through the Administrative Agent and shall be conclusive absent
manifest error.
SECTION 2.16. Pro Rata Treatment. Except as required under Section 2.14,
each Borrowing, each payment or prepayment of principal of any Borrowing, each
payment of interest on the Loans, each payment of the Commitment Fees or Letter
of Credit Fees, each reduction of the Term Loan Commitments, the Delayed Draw
Term Loan Commitments, the Canadian Term Loan Commitments or the Revolving
Credit Commitments and each refinancing of any Borrowing with, conversion of
any Borrowing to or continuation of any Borrowing as a Borrowing of any Type
shall be allocated (except in the case of Swingline Loans) pro rata among the
Lenders in accordance with their respective applicable Commitments (or, if such
Commitments shall have expired or been terminated, in accordance with the
respective principal amounts of their applicable outstanding Loans). Each
Lender agrees that in computing such Lender's portion of any Borrowing to be
made hereunder, the Administrative Agent may, in its discretion, round each
Lender's percentage of such Borrowing, computed in accordance with Section
2.01, to the next higher or lower whole dollar amount.
SECTION 2.17. Payments. (a) Each of the Borrower and the Canadian
Borrower shall make each payment without set-off or counterclaim (including
principal of or interest on any Borrowing or any Fees or other amounts)
required to be made by it hereunder and under any other Loan Document not later
than 12:00 noon, New York City time, on the date when due in dollars to the
Administrative Agent at its offices at 270 Park Avenue, New York, New York,
Attention of Wholesale Loan Services, in immediately available funds, for
credit to account number ___________.
(b) Whenever any payment (including principal of or interest on any
Borrowing or any Fees or other amounts) hereunder or under any other Loan
Document shall become due, or otherwise would occur, on a day that is not a
Business Day, such payment may be made on the next succeeding Business Day
(except in the case of payment of principal of a Eurodollar Borrowing if the
effect of such extension would be to extend such payment into the next
succeeding month, in which event such payment shall be due on the immediately
preceding Business Day), and such extension of time shall in such case be
included in the computation of interest or Fees, if applicable.
SECTION 2.18. Taxes. (a) Any and all payments by the Borrower and the
Canadian Borrower to the Administrative Agent, the Issuing Banks or the Lenders
hereunder or under the other Loan Documents shall be made, in accordance with
Section 2.17 free and clear of and without deduction for any and all present or
future taxes, levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding (i) in the case of each Lender,
each Issuing Bank and the Administrative Agent, taxes that would not be imposed
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but for a connection between such Lender, such Issuing Bank or the
Administrative Agent (as the case may be) and the jurisdiction imposing such
tax, other than a connection arising solely by virtue of the activities of such
Lender, such Issuing Bank or the Administrative Agent (as the case may be)
pursuant to or in respect of this Agreement or under any other Loan Document,
including, without limitation, entering into, lending money or extending credit
pursuant to, receiving payments under, or enforcing, this Agreement or any
other Loan Document, and (ii) in the case of each Lender, each Issuing Bank and
the Administrative Agent, any United States withholding taxes payable with
respect to payments hereunder or under the other Loan Documents under laws
(including, without limitation, any statute, treaty, ruling, determination or
regulation) in effect on the Initial Date (as hereinafter defined) for such
Lender, such Issuing Bank or the Administrative Agent, as the case may be, but
not excluding any United States withholding taxes payable solely as a result of
any change in such laws occurring after the Initial Date (all such non-excluded
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). For purposes of this Section 2.18, the
term "Initial Date" shall mean (i) in the case of the Administrative Agent, any
Issuing Bank or any Lender, the date on which such person became a party to
this Agreement and (ii) in the case of any assignment including any assignment
by a Lender or an Issuing Bank to a new lending office, the date of such
assignment. If any Taxes shall be required by law to be deducted from or in
respect of any sum payable hereunder or under any other Loan Document to any
Lender, any Issuing Bank or the Administrative Agent (i) the sum payable by the
Borrower or the Canadian Borrower, as the case may be, shall be increased as
may be necessary so that after making all required deductions (including
deductions applicable to additional sums payable under this Section 2.18) such
Lender, such Issuing Bank or the Administrative Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower or the Canadian Borrower, as the case
may be, shall make such deductions and (iii) the Borrower or the Canadian
Borrower, as the case may be, shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law. The Borrower and the Canadian Borrower shall not, however, be required to
pay any amounts pursuant to clause (i) of the preceding sentence to any Lender,
any Issuing Bank or the Administrative Agent (in the case of payments to be
made by the Borrower) not organized under the laws of the United States of
America or a state thereof (or, in the case of payments to be made by the
Canadian Borrower, not organized under the laws of Canada) if such Lender, such
Issuing Bank or the Administrative Agent fails to comply with the requirements
of paragraphs (f) or (g), as the case may be, and paragraph (h) of this Section
2.18.
(b) In addition, the Borrower agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies which arise from the execution, delivery or registration of, or
otherwise with respect to, this Agreement or any other Loan Document
(hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Lender, each Issuing Bank and the
Administrative Agent for the full amount of Taxes and Other Taxes (including
any Taxes or Other Taxes imposed by any jurisdiction on amounts payable under
this Section 2.18) paid by such Lender, such Issuing Bank or the Administrative
Agent, as the case may be, and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto whether or not such Taxes
or Other Taxes were correctly or legally asserted. Such indemnification shall
be made within 10 days after the date any Lender, any Issuing Bank or the
Administrative Agent, as the case may be, makes written demand therefor. If a
Lender, an Issuing Bank or the Administrative Agent shall become aware that it
is entitled to receive a refund or is reasonably requested by the Borrower to
pursue a claim for a refund in respect of Taxes or Other Taxes, it shall
promptly notify the Borrower of the availability of such refund (unless
instructed to pursue a claim by the Borrower) and shall, within 30 days after
receipt of a request by the Borrower, pursue or timely claim such refund at the
Borrower's expense. If any Lender, any Issuing Bank or the Administrative
Agent receives a refund in respect of any Taxes or Other Taxes for which such
Lender, such Issuing Bank or the Administrative Agent has received payment from
the Borrower hereunder, it shall promptly notify the Borrower of such refund
and shall, within 30 days after receipt of a request by the Borrower (or
promptly upon receipt, if the Borrower has requested application for such
refund pursuant hereto), repay such refund (plus any interest received) to the
Borrower, provided that the Borrower, upon the request of such Lender, such
Issuing Bank or the Administrative Agent, agrees to return such refund (plus
any penalties, interest or other charges required to be paid) to such Lender,
such Issuing Bank or the Administrative Agent in the event such Lender, such
Issuing Bank or the Administrative Agent is required to repay such refund.
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(d) Within 30 days after the date of any payment of Taxes or Other Taxes
withheld by the Borrower or the Canadian Borrower, as the case may be, in
respect of any payment to any Lender, any Issuing Bank or the Administrative
Agent, the Borrower or the Canadian Borrower, as the case may be, will furnish
to the Administrative Agent, at its address referred to in Schedule 2.01, the
original or a certified copy of a receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other agreement contained
herein, the agreements and obligations contained in this Section 2.18 shall
survive the payment in full of principal and interest hereunder and the
termination of the Commitments.
(f) In the case of any Borrowing by the Borrower, this paragraph (f)
shall apply. Each Lender, each Issuing Bank and the Administrative Agent that
is not organized under the laws of the United States of America or a state
thereof agrees that at least 10 days prior to the first Interest Payment Date
following the Initial Date in respect of such Issuing Bank or such Lender, it
will deliver to the Borrower and the Administrative Agent (if appropriate) two
duly completed copies of either (i) United States Internal Revenue Service Form
1001 or 4224 or successor applicable form, as the case may be, certifying in
each case that the Issuing Bank or such Lender or the Administrative Agent, as
the case may be, is entitled to receive payments under this Agreement and the
Notes payable to it without deduction or withholding of any United States
federal income taxes and backup withholding taxes or is entitled to receive
such payments at a reduced rate pursuant to a treaty provision or (ii) in the
case of a Lender that is not a "bank" within the meaning of Section 881(c)(3)
of the Code, United States Internal Revenue Service Form W-8 or successor
applicable form and a statement from such Lender certifying to the fact that
interest payable to it hereunder (A) will not be described in Section
871(h)(3)(A) or Section 881(c)(3)(A), (B) or (C) of the Code and (B) will not
be effectively connected with a trade or business carried on in the United
States by such Lender. Each Lender, each Issuing Bank and the Administrative
Agent required to deliver to the Borrower and the Administrative Agent a Form
1001, 4224 or W-8 pursuant to the preceding sentence further undertakes to
deliver to the Borrower and the Administrative Agent (if appropriate) two
further copies of Form 1001, 4224 or W-8, or successor forms, or other similar
manner of certification and such extensions or renewals thereof as may
reasonably be requested by the Borrower and, in the case where a Form W-8 has
been delivered, a further statement certifying to the fact set forth in clause
(B) of the preceding sentence (i) at the times reasonably requested by the
Borrower, (ii) after the occurrence of an event requiring a change in the most
recent form or statement previously delivered by it to the Borrower or (iii) in
the case of Form 1001, 4224 or W-8, on or before the date that any such form
expires or becomes obsolete, and, in the case of Form 1001 or 4224, certifying
that such Issuing Bank or such Lender is entitled to receive payments under
this Agreement without deduction or withholding of any United States federal
income taxes and backup withholding taxes or is entitled to receive such
payments at a reduced rate pursuant to a treaty provision, unless such Issuing
Bank or such Lender advises the Borrower that it is unable lawfully to provide
such forms and other certifications and notifies the Borrower to such effect.
Unless the Borrower and the Administrative Agent have received forms,
certificates and other documents satisfactory to them indicating that payments
hereunder or under or in respect of the Notes or the Letters of Credit to or
for any Issuing Bank or Lender not incorporated under the laws of the United
States or a state thereof are not subject to United States withholding tax or
are subject to such tax at a rate reduced by an applicable tax treaty, the
Borrower or the Administrative Agent shall withhold such taxes from such
payments at the applicable statutory rate.
(g) In the event the Canadian Borrower is required to pay additional
amounts pursuant to this Section 2.18, this paragraph (g) shall apply. Each
Lender, each Issuing Bank and the Administrative Agent that is not incorporated
within or under the laws of Canada and that is claiming such additional amounts
agrees that within a reasonable period of time following the request of the
Canadian Borrower, it will, to the extent it is legally entitled to a reduction
in the rate of or exemption from Canadian withholding taxes, deliver to the
Canadian Borrower and the Administrative Agent (if appropriate) any form or
document required under the laws, regulations, official interpretations or
treaties enacted by, made or entered into with Canada properly completed and
duly executed by such Issuing Bank, such Lender or Administrative Agent
establishing that any payments hereunder are exempt from Canadian withholding
tax or subject to a reduced rate of Canadian withholding tax, as the case may
be; provided that, in the sole determination of such Lender, such Issuing Bank
or the Administrative Agent, such form or document shall not be otherwise
disadvantageous to such Lender, such Issuing Bank or the Administrative Agent.
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(h) Any Issuing Bank and any Lender claiming any additional amounts
payable pursuant to this Section 2.18 shall use reasonable efforts (consistent
with legal and regulatory restrictions) to file any certificate or document
requested by the Borrower or the Canadian Borrower to change the jurisdiction
of its applicable lending office if the making of such a filing or change would
avoid the need for or reduce the amount of any such additional amounts which
may thereafter accrue and would not, in the sole determination of such Issuing
Bank or such Lender, be otherwise disadvantageous to such Issuing Bank or such
Lender.
SECTION 2.19. Issuance of Letters of Credit.
(a) Each Issuing Bank agrees, upon the terms and subject to the
conditions herein set forth, to issue Letters of Credit, in a form reasonably
acceptable to the Administrative Agent and such Issuing Bank, appropriately
completed, for the account of the Borrower, at any time and from time to time
on and after the Closing Date until the earlier of the date five Business Days
prior to the Revolving Credit Maturity Date and the termination of the Letter
of Credit Commitment in accordance with the terms hereof; provided, however,
that any Letter of Credit shall be issued by an Issuing Bank only if, and each
request by the Borrower for the issuance of any Letter of Credit shall be
deemed a representation and warranty of the Borrower that, immediately
following the issuance of any such Letter of Credit, (i) the Letter of Credit
Exposure shall not exceed the Letter of Credit Commitment in effect at the time
and (ii) the sum of the Letter of Credit Exposure and the aggregate principal
amount of outstanding Revolving Loans and Swingline Loans shall not exceed the
aggregate Revolving Credit Commitments in effect at the time. In determining
whether the issuance of a Letter of Credit will comply with clauses (i) and
(ii) of the preceding sentence, each Issuing Bank may rely conclusively on
information obtained from the Administrative Agent regarding the aggregate
principal amount of outstanding Revolving Loans and the aggregate Revolving
Credit Commitments, Letter of Credit Exposure and Swingline Loans.
(b) Each Letter of Credit shall expire no later than the fifth Business
Day preceding the Revolving Credit Maturity Date, unless such Letter of Credit
expires by its terms on an earlier date. Each Letter of Credit shall provide
for payments of drawings in dollars. Each Letter of Credit shall reduce
availability under the Revolving Credit Commitments.
(c) Each issuance of any Letter of Credit shall be made on at least
three Business Days' prior written notice from the Borrower to the applicable
Issuing Bank and the Administrative Agent (which shall give prompt notice
thereof to each Revolving Lender) specifying the date of issuance, the date on
which such Letter of Credit is to expire (which shall not be later than the
earlier of (i) the fifth Business Day preceding the Revolving Credit Maturity
Date and (ii) subject to extension, two years after the date of any such Letter
of Credit), the amount of such Letter of Credit, the name and address of the
beneficiary of such Letter of Credit and such other information as may be
necessary or desirable to complete such Letter of Credit. Such Issuing Bank
will give the Administrative Agent and the Administrative Agent shall give each
Revolving Lender prompt notice of the issuance and amount of each Letter of
Credit and the expiration of each Letter of Credit.
(d) No Issuing bank shall be required to issue a Letter of Credit unless
it has agreed with the Borrower upon the Fronting Fees to be paid by the
Borrower in connection with such Letter of Credit and the form of such Letter
of Credit is reasonably acceptable to such Issuing Bank.
SECTION 2.20. Participations; Unconditional Obligations. (a) By the
issuance of a Letter of Credit and without any further action on the part of
the applicable Issuing Bank or the Revolving Lenders in respect thereof, each
Issuing Bank hereby grants to each Revolving Lender, and each Revolving Lender
hereby agrees to acquire from such Issuing Bank, a participation in such Letter
of Credit equal to such Revolving Lender's Applicable Percentage of the face
amount of such Letter of Credit, effective upon the issuance of such Letter of
Credit. In consideration and in furtherance of the foregoing, each Revolving
Lender hereby absolutely and unconditionally agrees to pay to the
Administrative Agent, for the account of such Issuing Bank, in accordance with
Section 2.02(f), such Revolving Lender's Applicable Percentage of each Letter
of Credit Disbursement made by such Issuing Bank; provided, however, that the
Revolving Lenders shall not be obligated to make any such payment to an Issuing
Bank with respect to any wrongful payment or disbursement made as a result of
the gross negligence or willful misconduct of such Issuing Bank in determining
whether documents presented in connection with such Letter of Credit
Disbursement conform to the requirements of the applicable Letter of Credit.
(b) Each Revolving Lender acknowledges and agrees that its obligation to
acquire participations pursuant to paragraph (a) in respect of Letters of
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Credit is absolute and unconditional and shall not be affected by any
circumstance whatsoever, including the occurrence and continuance of an Event
of Default or Default hereunder, and that each such payment shall be made
without any offset, abatement, withholding or reduction whatsoever other than
in the case of any wrongful payment made as a result of the gross negligence or
willful misconduct of the Issuing Bank in determining whether documents
presented in connection with such Letter of Credit conform to the requirements
of the applicable Letter of Credit.
SECTION 2.21. Letter of Credit Fee. The Borrower agrees to pay to the
Administrative Agent for the account of the Revolving Lenders for each calendar
quarter (or shorter period commencing with the Closing Date or ending with the
first date on which the Letter of Credit Commitment shall have expired or been
terminated and there shall be no outstanding Letters of Credit) a fee (the
"Letter of Credit Fee") on the average daily amount of the outstanding Letters
of Credit at a per annum rate equal to the Applicable Margin at such time for
Eurodollar Borrowings; provided that with respect to any Letter of Credit as to
which the Borrower has failed to make a payment required by Section 2.22,
interest calculated at the rate set forth in Section 2.07 from the date such
payment was due through the date such payment is made shall be paid by the
Borrower in lieu of the Letter of Credit Fee on the date such payment is made.
The Letter of Credit Fee shall be computed on the basis of the actual number of
days elapsed over a year of 360 days. The Administrative Agent agrees to
disburse to each Revolving Lender its pro rata portion of such Letter of Credit
Fee promptly upon receipt. The Letter of Credit Fee shall be paid in arrears
on the last day of March, June, September and December of each year and on the
Revolving Credit Maturity Date (or the first date on which the Letter of Credit
Commitment shall have expired or been terminated and there shall be no
outstanding Letters of Credit, if earlier), commencing on the first such date
following the Closing Date. Once paid the Letter of Credit Fee paid or payable
shall not be refundable in any circumstances whatsoever, absent manifest error.
SECTION 2.22. Agreement To Repay Letter of Credit Disbursements. (a) If
an Issuing Bank shall pay any draft presented under a Letter of Credit, the
Borrower shall pay to the Administrative Agent, on behalf of such Issuing Bank,
an amount equal to the amount of such draft before 11:00 a.m., New York City
time, on the Business Day on which such Issuing Bank shall have notified the
Borrower that payment of such draft will be made (or such later time as is not
later than one hour after the Borrower shall have received such notice or, if
the Borrower shall have received such notice later than 4:00 p.m., New York
City time, on any Business Day, not later than 10:00 a.m., New York City time,
on the immediately following Business Day). The Administrative Agent will
promptly pay any such amounts received by it to such Issuing Bank.
(b) The Borrower's obligation to repay each Issuing Bank for payments
and disbursements made by such Issuing Bank under the outstanding Letters of
Credit shall be absolute, unconditional and irrevocable under any and all
circumstances and irrespective of:
(i) any lack of validity or enforceability of any Letter of Credit;
(ii) the existence of any claim, setoff, defense or other right which
the Borrower or any other person may at any time have against the
beneficiary under any Letter of Credit, any Issuing Bank, the
Administrative Agent or any Lender (other than the defense of payment in
accordance with the terms of this Agreement or a defense based on the
gross negligence or wilful misconduct of any Issuing Bank) or any other
person in connection with this Agreement or any other agreement or
transaction;
(iii) any draft or other document presented under a Letter of Credit
proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect;
provided that payment by an Issuing Bank under such Letter of Credit
against presentation of such draft or document shall not have constituted
gross negligence or wilful misconduct of such Issuing Bank;
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37
(iv) payment by an Issuing Bank under a Letter of Credit against
presentation of a draft or other document which does not comply with the
terms of such Letter of Credit; provided that such payment shall not have
constituted gross negligence or wilful misconduct of such Issuing Bank;
and
(v) any other circumstance or event whatsoever, whether or not similar
to any of the foregoing; provided that such other circumstance or event
shall not have been the result of gross negligence or wilful misconduct of
the applicable Issuing Bank.
It is understood that in making any payment under a Letter of Credit (x)
each Issuing Bank's exclusive reliance on the documents presented to it under
such Letter of Credit as to any and all matters set forth therein, including
reliance on the amount of any draft presented under such Letter of Credit,
whether or not the amount due to the beneficiary equals the amount of such
draft and whether or not any document presented pursuant to such Letter of
Credit proves to be insufficient in any respect, if such document on its face
appears to be in order, and whether or not any other statement or any other
document presented pursuant to such Letter of Credit proves to be forged or
invalid or any statement therein proves to be inaccurate or untrue in any
respect whatsoever and (y) any noncompliance in any immaterial respect of the
documents presented under a Letter of Credit with the terms thereof shall, in
each case, not be deemed willful misconduct or gross negligence of such Issuing
Bank.
SECTION 2.23. Letter of Credit Operations. Each Issuing Bank shall,
promptly following its receipt thereof, examine all documents purporting to
represent a demand for payment under an outstanding Letter of Credit to
ascertain that the same appear on their face to be in substantial conformity
with the terms and conditions of such outstanding Letter of Credit. Such
Issuing Bank shall (i) as promptly as possible after such demand for payment
give oral notification, confirmed by telecopy, to the Administrative Agent and
the Borrower of such demand for payment and (ii) as promptly as possible after
such Issuing Bank determines whether such demand for payment was in accordance
with the terms and conditions of such outstanding Letter of Credit, give notice
in the same manner to the Administrative Agent and the Borrower as to such
determination and as to whether such Issuing Bank has made or will make a
Letter of Credit Disbursement thereunder, provided that the failure to give
such notices shall not relieve the Borrower of its obligation to reimburse such
Issuing Bank with respect to any such Letter of Credit Disbursement, and the
Administrative Agent shall promptly give each Revolving Lender notice thereof.
SECTION 2.24. Cash Collateralization. If any Event of Default shall
occur and be continuing, the Borrower shall, on the Business Day it receives
notice from the Administrative Agent or the Required Lenders therefor, deposit
in an account with the Collateral Agent, for the benefit of the Lenders, an
amount in cash equal to its Letter of Credit Exposure as of such date. Such
deposit shall be held by the Collateral Agent as collateral for the payment and
performance of the Obligations. So long as such Event of Default is
continuing, the Collateral Agent shall have exclusive dominion and control,
including the exclusive right of withdrawal, over such account. Other than any
interest earned on the investment of such deposits in Permitted Investments,
which investments shall be made at the option and sole discretion of the
Collateral Agent, such deposits shall not bear interest. Interest or profits,
if any, on such investments shall accumulate in such account. Moneys in such
account shall automatically be applied by the Collateral Agent to reimburse the
applicable Issuing Bank and the Revolving Lenders for Letter of Credit
Disbursements and, if the maturity of the Loans has been accelerated, to
satisfy the Obligations. All remaining amounts on deposit shall be returned to
the Borrower within three Business Days after all Events of Default have been
cured or waived.
SECTION 2.25. Termination and Reduction of Letter of Credit Commitment.
(a) Notwithstanding any other provision hereof, in the event that any
restrictions or limitations are imposed upon or determined or held to be
applicable to any Issuing Bank, any Revolving Lender or the Borrower by, under
or pursuant to any law or regulation (Federal, state or local) now or hereafter
in effect or by reason of any interpretation thereof by any court or
Governmental Authority (including any interpretation by the Comptroller of the
Currency as to the applicability of 12 U.S.C. Sec. 84 or any substitute statute,
as now or hereafter in effect, to the transactions contemplated hereby), which
would prevent such Revolving Lender from legally incurring liability under or
in connection with a Letter of Credit issued or to be issued pursuant hereto,
then such Revolving Lender shall give prompt written notice thereof to the
Administrative Agent (which shall notify the Borrower, each Issuing Bank and
each other Revolving Lender thereof as soon as reasonably practicable),
whereupon the obligation of each Issuing Bank to issue additional Letters of
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38
Credit pursuant hereto shall be reduced by the Applicable Percentage of such
Revolving Lender (and, as to any Letter of Credit thereafter issued, the
Applicable Percentages of the other Revolving Lenders shall be determined as
though such Revolving Lender does not have a Revolving Credit Commitment) until
the Administrative Agent shall be advised that such event is no longer
continuing or until such Revolving Lender shall have assigned its Commitment
pursuant to the provisions of this Agreement.
(b) The Borrower may permanently terminate, or from time to time in part
permanently reduce, the Letter of Credit Commitment, in each case upon at least
three Business Days' prior written or telex notice to the Administrative Agent;
provided that the Letter of Credit Commitment shall not be reduced to an amount
that is less than the Letter of Credit Exposure at the time.
(c) In the event that the Revolving Credit Commitments are at any time
reduced pursuant to Section 2.09 to an amount that is less than the Letter of
Credit Commitment, the Letter of Credit Commitment shall be permanently reduced
to an amount equal to the Revolving Credit Commitments.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
Each of Holdings, the Canadian Borrower and the Borrower represents and
warrants to each of the Lenders and each Issuing Bank that:
SECTION 3.01. Organization, Corporate Powers. Each of Holdings and each
Restricted Subsidiary (i) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is
incorporated, (ii) has all requisite corporate power and authority, and all
material licenses, permits, franchises, consents and approvals, to own or lease
its property and assets and to carry on its business as now conducted and as
proposed to be conducted, (iii) is qualified and in good standing as a foreign
corporation to do business in every jurisdiction where such qualification is
necessary, except where the failure so to qualify would not have a Material
Adverse Effect and (iv) has the corporate power and authority to execute,
deliver and perform each of the Loan Documents and each agreement or instrument
contemplated hereby or thereby to which it is or will be a party. None of
Holdings or any Restricted Subsidiary of Holdings has any assets or business,
or is a party to any material contract within the meaning of Item 6.01(b)(10)
of Regulation S-K of the Securities and Exchange Commission, other than as
disclosed or referred to in the registration statement of which the Preliminary
Prospectus is a part or as contemplated hereby and thereby.
SECTION 3.02. Authorization. The execution, delivery and performance of
each of the Loan Documents, the borrowings hereunder and the consummation of
the Recapitalization Transactions and the other transactions contemplated by
any of the foregoing (collectively, the "Transactions") (i) have been duly
authorized by all requisite corporate and, if required, stockholder action and
(ii) will not (x) violate (A) any provision of law, statute, rule or regulation
(including, without limitation, Regulations G, T, U and X) or the certificate
of incorporation or by-laws (or similar governing documents) of any of Holdings
and the Restricted Subsidiaries, (B) any applicable order of any court or any
rule, regulation or order of any Governmental Authority or (C) any indenture,
certificate of designation for preferred stock, agreement or other instrument
to which any of Holdings or any Restricted Subsidiary is a party or by which
any of them or any of their property is bound, (y) be in conflict with, result
in a breach of or constitute (with notice or lapse of time or both) a default
under any such indenture, agreement or other instrument where any such
conflict, violation, breach or default referred to in clause (ii)(x) or (ii)(y)
of this Section, individually or in the aggregate, would have a Material
Adverse Effect or (z) result in the creation or imposition of any Lien upon any
property or assets of Holdings or any subsidiary of Holdings, except for Liens
created by the Pledge Agreement.
SECTION 3.03. Enforceability. This Agreement has been duly executed and
delivered by each of Holdings, the Canadian Borrower and the Borrower and
constitutes, and each other Loan Document when executed and delivered by any of
Holdings, the Borrower, the Canadian Borrower or the Subsidiary Guarantors that
is or is to be a party thereto will constitute, a legal, valid and binding
<PAGE>
39
obligation of such party enforceable against such party in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting creditors' rights
generally and except as enforceability may be limited by general principles of
equity (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
SECTION 3.04. Recapitalization. (a) All consents and approvals of,
filings and registrations with, and other actions in respect of, all
Governmental Authorities required in order to make or consummate the
Recapitalization Transactions have been obtained, given, filed or taken and are
in full force and effect, other than (i) filings and other actions required
pursuant to the Securities Act of 1933, the Securities Exchange Act of 1934 and
the respective rules and regulations thereunder, and filings and other actions
required pursuant to state securities or blue sky laws, in each case to the
extent that such filings and other actions are not required to have been made
or taken prior to the date hereof, and (ii) any such consents, approvals,
filings or other actions, the failure to obtain or make which could not
reasonably be expected to result in a Material Adverse Effect.
(b) The Preliminary Prospectus at the time of its dissemination to the
public did not and on the Closing Date will not contain any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they are
made, not misleading. Copies of the Preliminary Prospectus have been delivered
to the Lenders.
(c) The final prospectus filed with the Securities and Exchange
Commission in connection with the Public Offering and any amendments or
supplements thereto will not at the time of its dissemination to the public or
on the Closing Date contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements therein, in
the light of the circumstances under which they are made, not misleading.
Copies of such final prospectus and any amendments or supplements thereto will
be delivered to the Lenders promptly following the time they are made available
to the public or filed with the Securities and Exchange Commission.
SECTION 3.05. Use of Proceeds. The Borrower and the Canadian Borrower
will use the proceeds of the Loans only for the purposes set forth in Section
5.08.
SECTION 3.06. Federal Reserve Regulations. (a) None of Holdings or any
subsidiary of Holdings is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing
or carrying Margin Stock.
(b) The making of the Loans hereunder and the use of the proceeds
thereof as contemplated hereby and the other Transactions will not violate or
be inconsistent with the provisions of the Regulations of the Board, including
Regulations G, T, U and X.
SECTION 3.07. Capitalization of the Borrower and Holdings. (a) The
authorized capital stock of the Borrower consists of 2,000 shares of common
stock, par value $1.00 per share ("Borrower Common Stock"), of which 1,000
shares will be issued and outstanding as of the Closing Date (after giving
effect to the Recapitalization Transactions). All such outstanding shares of
Borrower Common Stock are fully paid and nonassessable and, on and after the
Closing Date (after giving effect to the Recapitalization Transactions), will
be owned beneficially and of record by Holdings and, on and after the Closing
Date, shall be free and clear of all Liens and encumbrances whatsoever (other
than the Lien of the Pledge Agreement). Except for the Pledge Agreement, there
are no outstanding subscriptions, options, warrants, calls, rights (including
preemptive rights) or other agreements or commitments of any nature relating to
any capital stock of the Borrower.
(b) The authorized capital stock of Holdings consists of (i) 150,000,000
shares of Holdings Common Stock, of which approximately 66,710,900 shares will
be issued and outstanding as of the Closing Date (assuming no exercise of the
Overallotment Option) and (ii) 16,000,000 shares of preferred stock, par value
$0.01 per share, of which no shares will be outstanding as of the Closing Date
(after giving effect to the Recapitalization Transactions). On the Closing
Date, all such outstanding shares of Holdings Common Stock will be fully paid
and nonassessable. On the Closing Date, after giving effect to the
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40
Recapitalization Transactions (but assuming no exercise of the Overallotment
Option), each Designated Person (or group of Designated Persons) will be the
owner, beneficially and of record, of the number of shares of Holdings Common
Stock specified on Schedule 3.07(b)(1). Except as provided in Schedule
3.07(b)(2) hereto, neither Holdings nor any Subsidiary is a party to any
outstanding subscriptions, options, warrants, calls, rights (including
preemptive rights) or other agreements or commitments (other than stock options
granted to employees, consultants or directors and directors' qualifying
shares) of any nature relating to any capital stock of Holdings.
(c) The authorized capital stock of the Canadian Borrower consists of
an unlimited number of common shares without par value ("Canadian Borrower
Common Stock"), of which 3,694 shares will be issued and outstanding as of the
Closing Date and an unlimited number of 5% non-commulative, redeemable
preferred shares, without par value, no shares of which will be issued and
outstanding as of the Closing Date. All such outstanding shares of Canadian
Borrower Common Stock are fully paid and nonassessable and, on and after the
Closing Date, will be owned directly or indirectly, beneficially and of record
by the Borrower and, on and after the Closing Date, shall be free and clear of
all Liens and encumbrances whatsoever.
SECTION 3.08. Pledge Agreement. The security interests created in favor
of the Collateral Agent, for the benefit of the Lenders, under the Pledge
Agreement will at all times constitute first-priority, perfected security
interests in the Pledged Securities, and such Pledged Securities will be
subject to no Liens or security interests of any other person. No filings or
recordings are or will be required in order to perfect the security interests
in the Pledged Securities created under the Pledge Agreement.
SECTION 3.09. Financial Statements. (a) (i) Holdings has heretofore
furnished to each of the Lenders consolidated balance sheets and consolidated
statements of income and cash flow of Holdings and its consolidated
subsidiaries as of and for the fiscal years ended January 29, 1994 and January
30, 1993, certified by Arthur Andersen & Co., independent public accountants
for Holdings and (ii) Holdings has heretofore furnished to each of the Lenders
consolidated balance sheets and consolidated statements of income and cash flow
of Holdings and its consolidated subsidiaries as of and for the thirteen weeks
ended April 30, 1994. Such balance sheets and statements of income and cash
flows present fairly the financial condition and results of operations of
Holdings and its consolidated subsidiaries on a consolidated basis as of the
dates and for the periods indicated. Except as disclosed in the Preliminary
Prospectus, neither Holdings nor any of its Subsidiaries had, at the date of
the most recent balance sheet referred to above, any material Guarantee,
contingent liability or liability for taxes, or any long-term lease or unusual
forward or long-term commitment, including, without limitation, any interest
rate or foreign currency swap or exchange transaction, which is not reflected
in the foregoing statements or in the notes thereto. The financial statements
referred to in this Section 3.09(a) have been prepared in accordance with GAAP
applied on a consistent basis.
(b) The pro forma consolidated balance sheet of Holdings as of April 30,
1994 included in the Preliminary Prospectus is the unaudited consolidated
balance sheet of Holdings as of such date, adjusted to give effect (as if such
events had occurred on such date) to all the Recapitalization Transactions and
other identified pro forma adjustments set forth in the Preliminary Prospectus,
including the payment of all fees and expenses expected to be incurred in
connection therewith (as estimated at the time of the preparation of such
balance sheet), based upon the assumptions specified therein. Such pro forma
consolidated balance sheet presents fairly, on a pro forma basis, the
consolidated financial position of Holdings as of such date assuming that the
events specified in the preceding sentence had actually occurred or are true,
as the case may be, on such date and has been prepared based upon reasonable
assumptions and in accordance with GAAP applied on a consistent basis.
SECTION 3.10. No Material Adverse Change. There has been no material
adverse change in the business, properties, assets, operations or financial
condition of Holdings and its Restricted Subsidiaries, taken as a whole, since
January 29, 1994.
SECTION 3.11. Title to Properties; Possession Under Leases. (a) Each of
Holdings, the Borrower and the Significant Subsidiaries has good and marketable
title to, or valid leasehold interests in, or easements on or other limited
property interests in, all their respective material properties and assets,
except for minor defects in title and limitations on property interests that do
not interfere with their respective ability to conduct their respective
business as currently conducted or to utilize such properties and assets for
their intended purposes. All such material properties and assets are free and
clear of Liens, other than Liens expressly permitted by Section 6.04.
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41
(b) Each of Holdings, the Borrower and the Significant Subsidiaries has
complied with all obligations under all material leases to which it is a party,
except where the failure to comply would not have a Material Adverse Effect,
and all such leases are in full force and effect, except leases in respect of
which the failure to be in full force and effect would not have a Material
Adverse Effect. Each of Holdings, the Borrower and the Significant Subsidi-
aries enjoys peaceful and undisturbed possession under all such material
leases.
(c) Each of Holdings, the Borrower and the Significant Subsidiaries owns
or possesses, or could obtain ownership or possession of, on terms not
materially adverse to it, all patents, trademarks, service marks, trade names,
copyrights, licenses and rights with respect thereto necessary for the present
conduct of its business, without any known conflict with the rights of others,
and free from any burdensome restrictions, except where such conflicts and
restrictions would not, individually or in the aggregate, have a Material
Adverse Effect.
SECTION 3.12. Subsidiaries. (a) Schedule 3.12(a) sets forth as of the
Closing Date a list of all Subsidiaries of Holdings and the percentage
ownership interest of Holdings therein and whether such Subsidiaries are
Significant Subsidiaries.
(b) There are no outstanding subscriptions, options, warrants, calls,
rights or other agreements or commitments (other than stock options granted to
employees, consultants or directors and directors' qualifying shares) of any
nature relating to any capital stock of any subsidiary of Holdings, except for
the Pledge Agreement or as provided in Schedule 3.12(b).
SECTION 3.13. Litigation; Compliance with Laws. (a) Except as described
in the registration statement of which the Preliminary Prospectus is a part,
there are not any actions, suits or proceedings at law or in equity or by or
before any court or Governmental Authority now pending or, to the knowledge of
Holdings, the Borrower or the Canadian Borrower, threatened against or
affecting Holdings or any of its subsidiaries or any property or rights of
Holdings or any of its subsidiaries as to which there is a reasonable
possibility of an adverse determination and which (i) if adversely determined,
could individually or in the aggregate result in a Material Adverse Effect or
(ii) involve the Loan Documents or (iii) if adversely determined could
materially adversely affect the Recapitalization Transactions.
(b) None of Holdings or any of its Subsidiaries is in default with
respect to any law, order, judgment, writ, injunction, decree, rule or
regulation of any Governmental Authority where such default could have a
Material Adverse Effect. The Borrowings hereunder, the use of the proceeds
thereof as described in Section 5.08 and the other Recapitalization
Transactions will not violate any applicable law or regulation or violate or be
prohibited by any judgment, writ, injunction, decree or order of any court or
Governmental Authority or subject Holdings or any of its subsidiaries to any
civil or criminal penalty or fine.
SECTION 3.14. Agreements. (a) None of Holdings or any of its
Subsidiaries is a party to any agreement or instrument or subject to any
corporate restriction that has resulted or could reasonably be expected to
result in a Material Adverse Effect.
(b) None of Holdings or any of its Subsidiaries is in default in any
manner under any provision of any indenture or other agreement or instrument
evidencing Indebtedness or any other material agreement or instrument to which
it is a party or by which it or any of its properties or assets are or may be
bound, in either case where such default could result in a Material Adverse
Effect. After giving effect to the Recapitalization Transactions, no Default
or Event of Default shall have occurred and be continuing.
SECTION 3.15. Investment Company Act. None of Holdings or any of its
Subsidiaries is an "investment company" or a company "controlled" by an
"investment company" within the meaning of the Investment Company Act of 1940,
as amended.
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42
SECTION 3.16. Public Utility Holding Company Act. None of Holdings or
any of its Subsidiaries is a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
SECTION 3.17. Tax Returns. Each of Holdings and its Subsidiaries has
filed or caused to be filed all Federal, and all material state and local tax
returns required to have been filed by it and has paid or caused to be paid all
taxes shown thereon to be due and payable, and any assessments in excess of
$2,000,000 in the aggregate received by it, except taxes that are being
contested in accordance with Section 5.03 and taxes, assessments, charges,
levies or claims in respect of property taxes for property that Holdings or one
of its Subsidiaries has determined to abandon where the sole recourse for such
tax, assessment, charge, levy or claim is to such property. Each of Holdings
and its Subsidiaries has paid in full or made adequate provision (in accordance
with GAAP) for the payment of all taxes due with respect to the periods ending
on or before January 29, 1994, which taxes, if not paid or adequately provided
for, would have a Material Adverse Effect. The tax returns of Holdings and its
Subsidiaries have been examined by relevant Federal tax authorities for all
periods through January 26, 1985, and all deficiencies asserted as a result of
such examinations have been paid. Except as set forth on Schedule 3.17 or in
the Preliminary Prospectus, as of the Closing Date, with respect to each of
Holdings and its Subsidiaries, (i) no material claims are being asserted in
writing with respect to any taxes, (ii) no presently effective waivers or
extensions of statutes of limitation with respect to taxes have been given or
requested, (iii) no tax returns are being examined by, and no written notifica-
tion of intention to examine has been received from, the Internal Revenue
Service or any other taxing authority and (iv) no currently pending issues have
been raised in writing by the Internal Revenue Service or any other taxing
authority. For purposes hereof, "taxes" shall mean any present or future tax,
levy, impost, duty, charge, assessment or fee of any nature (including
interest, penalties and additions thereto) that is imposed by any Governmental
Authority.
SECTION 3.18. No Material Misstatements. (a) The information, reports,
financial statements, exhibits and schedules furnished by or on behalf of
Holdings or any of its Subsidiaries or Affiliates to the Administrative Agent
or any Lender in connection with the negotiation of any Loan Document or
included therein or delivered pursuant thereto (including the Preliminary
Prospectus), when taken as a whole, did not contain, and as they may be
amended, supplemented or modified from time to time, will not contain, as of
the Closing Date any material misstatement of fact and did not omit, and as
they may be amended, supplemented or modified from time to time, will not omit,
to state as of the Closing Date any material fact necessary to make the
statements therein, in the light of the circumstances under which they were,
are or will be made, not materially misleading in their presentation of the
Recapitalization Transactions or of Holdings and its Subsidiaries taken as a
whole.
(b) All financial projections concerning Holdings and its Subsidiaries
that are or have been made available to the Administrative Agent or any Lender
by Holdings or any of its Subsidiaries or Affiliates, unless otherwise
disclosed, have been or will be prepared in good faith based upon assumptions
believed by Holdings and the Borrower to be reasonable.
SECTION 3.19. Employee Benefit Plans. Each of Holdings and the
Restricted Subsidiaries and each of their ERISA Affiliates is in compliance in
all material respects with the applicable provisions of ERISA and the
regulations and published interpretations thereunder except for such
noncompliance which would not be expected to result in a Material Adverse
Effect. No Reportable Event has occurred as to which Holdings or any of the
Restricted Subsidiaries or any of their ERISA Affiliates was required to file a
report with the PBGC, other than reports for which the 30 day notice
requirement is waived, reports that have been filed and reports the failure of
which to file would not result in a Material Adverse Effect and the present
value of all benefit liabilities under each Plan of Holdings and the Restricted
Subsidiaries or any of their ERISA Affiliates (on a termination basis and based
on those assumptions used to fund such Plan) did not, as of the last annual
valuation date applicable thereto, exceed by more than $7,500,000 the value of
the assets of such Plan. None of Holdings or any of the Restricted
Subsidiaries or any of their ERISA Affiliates has incurred or could reasonably
be expected to incur any Withdrawal Liability that could result in a Material
Adverse Effect. None of Holdings or any of the Restricted Subsidiaries or any
of their ERISA Affiliates has received any notification that any Multiemployer
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43
Plan is in reorganization or has been terminated within the meaning of Title IV
of ERISA, and no Multiemployer Plan is reasonably expected to be in reorgan-
ization or to be terminated where such reorganization or termination has
resulted or could reasonably be expected to result, through increases in the
contributions required to be made to such Plan or otherwise, in a Material
Adverse Effect.
SECTION 3.20. Labor Matters. There are no strikes against Holdings or
any of its Subsidiaries pending, other than any strikes which, individually or
in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect. The hours worked and payment made to employees of Holdings and
each of its Subsidiaries have not been in violation in any material respect of
the Fair Labor Standards Act or any other applicable law dealing with such
matters. All material payments due from Holdings or any of its Subsidiaries,
or for which any claim may be made against Holdings or any of its Subsidiaries,
on account of wages and employee health and welfare insurance and other
benefits have been paid or accrued as a liability on the books of Holdings or
such subsidiary to the extent required by GAAP. The consummation of the
Recapitalization Transactions will not give rise to a right of termination or
right of renegotiation on the part of any union under any collective bargaining
agreement to which Holdings or any of its Subsidiaries (or any predecessor) is
a party or by which Holdings or any of its subsidiaries (or any predecessor) is
bound, other than collective bargaining agreements which, individually or in
the aggregate, are not material to Holdings and its Subsidiaries taken as a
whole.
SECTION 3.21. Environmental Matters. (a) Except as disclosed in writing
to the Administrative Agent, each Lender and the Issuing Bank prior to the date
of this Agreement, which disclosed matters individually and in the aggregate
are not reasonably expected by Holdings or the Borrower to have a Material
Adverse Effect, (i) Holdings and each of its Subsidiaries has complied in all
respects with all applicable Federal, state, local and other statutes,
ordinances, orders, judgments, rulings and regulations relating to
environmental pollution or to environmental regulation or control, except to
the extent of any failure so to comply which alone and together with other such
failures is not reasonably expected to result in a Material Adverse Effect;
(ii) none of Holdings or any Subsidiary of Holdings has received notice of any
failure so to comply which alone or together with other such failures is
reasonably expected to result in a Material Adverse Effect; and (iii) none of
Holdings or any of its Subsidiaries manages, transports or stores any hazardous
wastes, hazardous substances, hazardous materials, toxic substances or toxic
pollutants, as those terms are used in the Resource Conservation and Recovery
Act, the Comprehensive Environmental Response Compensation and Liability Act,
the Hazardous Materials Transportation Act, the Toxic Substance Control Act,
the Clean Air Act or the Clean Water Act, in violation of any applicable
regulations promulgated pursuant thereto or of any other applicable law where
such violation is reasonably likely to result, individually or together with
other violations, in a Material Adverse Effect.
(b) Except with respect to matters that, individually and in the
aggregate, Holdings and the Borrower reasonably believe would not have a
Material Adverse Effect, as of the Closing Date: (i) the operations of Holdings
and each of its Subsidiaries comply in all respects with all Environmental Laws
and, to the knowledge of Holdings, the Canadian Borrower or the Borrower after
inquiry, no conditions exist (including at properties leased or subleased to
third persons) which would subject Holdings or its Subsidiaries to damages,
liabilities, penalties, injunctive relief or clean-up costs under any
Environmental Law or which require or are reasonably likely to require any
Remedial Action under any Environmental Law; (ii) each of Holdings and its
Subsidiaries has obtained all Environmental Permits necessary for its operation
or required by any Environmental Law, and all such Environmental Permits are in
good standing, and none of Holdings or its Subsidiaries has been cited by a
Governmental Authority for violating any terms or conditions of such
Environmental Permits within the five-year period prior to the Closing Date;
(iii) none of Holdings or its Subsidiaries is subject or a party to any
Environmental Claim; (iv) with respect to present facilities and operations,
none of Holdings or its Subsidiaries, or, to the knowledge of Holdings, the
Canadian Borrower or the Borrower, any predecessor of such persons, is subject
to any outstanding written order or agreement with any Governmental Authority
or private party respecting (A) any Environmental Law, (B) any Remedial Action
under any Environmental Law, or (C) any Environmental Claim; (v) to the
knowledge of Holdings, the Canadian Borrower or the Borrower, none of the
operations of any of Holdings or its Subsidiaries is the subject of any
investigation by a Governmental Authority evaluating whether any Remedial
Action under any Environmental Law is needed; (vi) none of Holdings or its
Subsidiaries or, to the knowledge of Holdings, the Canadian Borrower or the
Borrower, any predecessor of such persons has filed any notice under any
Environmental Law indicating past or present treatment, storage or disposal of
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44
a hazardous waste as defined under 40 C.F.R. Parts 260 through 270 (in effect
as of the Closing Date) or any state equivalent, or reporting a Release of a
Contaminant; (vii) to the knowledge of Holdings, the Canadian Borrower or the
Borrower except as permitted under any Environmental Law, none of Holdings or
its Subsidiaries has experienced a Release of any Contaminant, and there has
been no voluntary disposal, use, storage, recycling or treatment on, under or
at any property of such person (or in tanks or other facilities thereon) of any
Contaminant which, if known to be present on such property, or present in soils
or groundwater, would require Remedial Action under any Environmental Law; and
(viii) no Lien in favor of any Governmental Authority for (A) any liability
under any Environmental Law or (B) damages arising from or costs incurred by
such Governmental Authority in response to a Release of a Contaminant into the
environment has been recorded with respect to any property of Holdings or any
of its Subsidiaries. For purposes of this Section 3.21(b), "knowledge" means
the actual knowledge of any Responsible Officer of Holdings or any Restricted
Subsidiary, any officer of Holdings or any Restricted Subsidiary with
responsibility for environmental compliance, or any plant or facilities manager
with responsibility for overall management of such plant or facility of
Holdings or any of its Subsidiaries.
(c) Each of Holdings and its Subsidiaries reasonably believes that
Holdings and its Subsidiaries on a consolidated basis have made adequate
provision (in accordance with GAAP) for all damages, liabilities, penalties or
costs that they reasonably expect to incur in connection with any Environmental
Claim or any Remedial Action existing or, to the knowledge of Holdings or the
Borrower, reasonably anticipated as of the date of this Agreement.
SECTION 3.22. Solvency. (a) The fair salable value of the assets of
each of the Borrower and, as of the Closing Date, the Canadian Borrower exceeds
the amount that will be required to be paid on or in respect of the existing
debts and other liabilities (including contingent liabilities) of the Borrower
and, as of the Closing Date, the Canadian Borrower, respectively, as they
mature. The assets of each of the Borrower and, as of the Closing Date, the
Canadian Borrower do not constitute unreasonably small capital to carry out its
business as conducted or as proposed to be conducted. Neither the Borrower
nor, as of the Closing Date, the Canadian Borrower intends to, or believes that
it will, incur debts beyond its ability to pay such debts as they mature
(taking into account the Recapitalization Transactions but assuming that the
Overallotment Option is not exercised).
(b) Upon consummation of the Recapitalization Transactions
(irrespective of whether the Overallotment Option is exercised), the fair
salable value of the assets of each of the Borrower and its subsidiaries taken
as a whole and, as of the Closing Date, of the Canadian Borrower and its
subsidiaries taken as a whole will exceed the amount that will be required to
be paid on or in respect of the existing debts and other liabilities (including
contingent liabilities) of the Borrower and its subsidiaries and, as of the
Closing Date, of the Canadian Borrower and its subsidiaries, respectively.
(c) The assets of each of the Borrower and its subsidiaries taken as a
whole and, as of the Closing Date, the Canadian Borrower and its subsidiaries
taken as a whole do not, and upon consummation of the Recapitalization
Transactions (but assuming that the Overallotment Option is not exercised) will
not, constitute unreasonably small capital for the Borrower and its
subsidiaries and, as of the Closing Date, the Canadian Borrower and its
subsidiaries, respectively, to carry out their respective businesses as now
conducted and as proposed to be conducted including the capital needs of the
Borrower and its subsidiaries and, as of the Closing Date, the Canadian
Borrower and its subsidiaries taking into account the particular capital
requirements of the business conducted by the Borrower and each of its
subsidiaries, and projected capital requirements and capital availability
thereof.
(d) Neither the Borrower nor, as of the Closing Date, the Canadian
Borrower intends to, or intends to permit any of its subsidiaries to, incur
debts beyond their respective ability to pay such debts as they mature, taking
into account the timing and amounts of cash to be received by the Borrower and
each of such subsidiaries, and of amounts to be payable on or in respect of
debt of the Borrower and each of such subsidiaries.
SECTION 3.23. Absence of Certain Restrictions. No indenture, certificate
of designation for preferred stock, agreement or other instrument to which
Holdings or any Restricted Subsidiary is a party will prohibit or materially
restrain, or have the effect of prohibiting or materially restraining, or
imposing materially adverse conditions upon, the incurrence of Indebtedness,
the granting of Liens, the provision of Guarantees or the payment of dividends
by subsidiaries of Holdings except for restrictions (a) on the granting of
Liens on assets that are encumbered by Liens permitted under clause (a), (b),
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45
(i), (k), (l) or (r) of Section 6.04, to the extent that such restrictions
apply only to the assets so encumbered and are imposed by the agreements under
which such Liens were granted or (b) contained in agreements relating to
Indebtedness not in excess of $10,000,000 in the aggregate.
SECTION 3.24. No Foreign Assets Control Regulation Violation. None of
the Recapitalization Transactions will result in a violation of any of the
foreign assets control regulations of the United States Treasury Department, 31
C.F.R., Subtitle B, Chapter V, as amended (including the Foreign Assets Control
Regulations, the Transaction Control Regulations, the Cuban Assets Control
Regulations, the Foreign Funds Control Regulations, the Iranian Assets Control
Regulations, the Nicaraguan Trade Control Regulations, the South African
Transactions Regulations, the Libyan Sanctions Regulations, the Soviet Gold
Coin Regulations, the Panamanian Transactions Regulations, the Kuwaiti Assets
Control Regulations and the Iraqi Sanctions Regulations contained in said
Chapter V), or any ruling issued thereunder or any enabling legislation or
Presidential Executive Order granting authority therefor, nor will the proceeds
of the Loans be used by the Borrower in a manner that would violate any
thereof.
SECTION 3.25. Insurance. Each of Holdings and the Restricted
Subsidiaries carries and maintains with respect to its insurable properties
insurance (including self insurance) with financially sound and reputable
insurers of the types, to such extent and against such risks as is customary
with companies in the same or similar businesses, including fire and other
risks insured against by extended coverage and public liability insurance
against claims for personal injury or death or property damages occurring upon,
in, about or in connection with the use of any properties owned, occupied or
controlled by it.
SECTION 3.26. Certain Other Representations. All representations and
warranties contained in any other Loan Document and made by any of Holdings or
any of its Subsidiaries are true and correct as of the date made or deemed to
have been made.
ARTICLE IV.
CONDITIONS
The obligations of the Lenders to make Loans hereunder and the obligation
of the Issuing Bank to issue Letters of Credit hereunder are subject to the
satisfaction of the following conditions:
SECTION 4.01. All Credit Events. On the date of each Borrowing, other
than a Borrowing in which Revolving Credit Loans are refinanced with new
Revolving Credit Loans (without any increase in the aggregate principal amount
of Revolving Credit Loans outstanding) as contemplated by Section 2.02(e), and
on the date of each issuance or renewal of a Letter of Credit:
(a) The Administrative Agent shall have received a notice of such
Borrowing as required by Section 2.03, or the Administrative Agent and the
applicable Issuing Bank shall have received a notice regarding the
issuance or renewal of such Letter of Credit as required by Section
2.19(c), as applicable.
(b) The representations and warranties set forth in each Loan
Document shall be true and correct in all material respects on and as of
the date of such Borrowing, issuance or renewal with the same effect as
though made on and as of such date, except to the extent such repre-
sentations and warranties expressly relate to an earlier date.
(c) At the time of and immediately after such Borrowing, issuance or
renewal no Event of Default or Default shall have occurred and be
continuing.
(d) If such Borrowing is of Delayed Draw Term Loans (i) the gross
proceeds received by Holdings from the Public Offering (after giving
effect to the arrangements described in Section 4.02(s)) shall have been
at least $275,000,000 and (ii) if the proceeds of such Borrowing will be
used to fund an ESOP Loan, the Agents shall be reasonably satisfied with
the loan documentation executed in connection therewith (which loan
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46
documentation shall provide that the ESOP shall, to the extent permitted
by law, repay the ESOP Loan upon receipt by the ESOP of cash distributions
in respect of the ESOP Investment).
Each Borrowing and each issuance or renewal of a Letter of Credit shall be
deemed to constitute a representation and warranty by the Borrower on the date
of such Borrowing as to the matters specified in paragraphs (b) and (c) of this
Section 4.01.
SECTION 4.02. First Borrowing. On the Closing Date:
(a) Each Lender, if it so requests in accordance with subsection
2.04(e), shall have received a duly executed Revolving Credit Note,
Delayed Draw Term Note and Term Note and the Swingline Lender, if it so
requests in accordance with subsection 2.04(e), shall have received a
Swingline Note, in each case, complying with the provisions of Section
2.04. Each Lender, if it so requests in accordance with subsection
2.04(a), shall have received a duly executed Canadian Term Note, complying
with the provisions of Section 2.04.
(b) The Administrative Agent shall have received all Fees and other
amounts due and payable on or prior to the Closing Date, including
reimbursement of any out-of-pocket expenses referred to in Section 9.05
(to the extent that notice thereof is given to the Borrower prior to the
Closing Date).
(c) The issuance by Holdings of its Common Stock in the Public
Offering for aggregate gross proceeds of not less than $250,000,000 shall
have occurred or shall occur simultaneously with the initial Borrowing
hereunder. The Lenders shall have received copies of the Holdings
Underwriting Agreement and the Agents shall be satisfied with the terms
and conditions thereof.
(d) The Administrative Agent shall have received the favorable
written opinions of (i) Cravath, Swaine & Moore, special counsel for
Holdings and its subsidiaries, (ii) Elizabeth R. Philipp, Esq., general
counsel for Holdings and its subsidiaries, and (iii) Stikeman, Elliott
special Canadian Counsel for the Canadian Borrower, each dated the Closing
Date and addressed to the Lenders, and in form and substance satisfactory
to the Administrative Agent and covering the matters set forth in Exhibit
F. In addition, the Administrative Agent shall have received the
favorable written opinions of such local counsel (including Canadian
counsel) with respect to legal matters relating hereto as the
Administrative Agent may reasonably have requested, in such form and to
such effect as shall be satisfactory to the Lenders and to Simpson Thacher
& Bartlett, special counsel for the Administrative Agent.
(e) The Administrative Agent shall have received (i) a copy of the
certificate or articles of incorporation, including all amendments
thereto, of each of the Borrower, the Canadian Borrower and each
Guarantor, certified as of a recent date by the Secretary of State of the
state of its organization (or, in the case of the Canadian Borrower, the
Ministry of Consumer and Commercial Relations of the Province of Ontario),
and a certificate as to the good standing of each of the Borrower, the
Canadian Borrower and each Guarantor as of a recent date, from such
Secretary of State (or, in the case of the Canadian Borrower, the Ministry
of Consumer and Commercial Relations of the Province of Ontario); (ii) a
certificate of the Secretary or Assistant Secretary of each of the
Borrower, the Canadian Borrower and each Guarantor dated the Closing Date
and certifying (A) that attached thereto is a true and complete copy of
the by-laws of such entity as in effect on the Closing Date and at all
times since a date prior to the date of the resolutions described in
clause (B) below, (B) that attached thereto is a true and complete copy of
resolutions duly adopted by the Board of Directors of such entity
authorizing the execution, delivery and performance of the Loan Documents
to which it is a party, the granting of the Liens thereunder and, in the
case of the Borrower and the Canadian Borrower, the borrowings hereunder,
and that such resolutions have not been modified, rescinded or amended and
are in full force and effect, (C) that the certificate or articles of
incorporation of such entity have not been amended since the date of the
last amendment thereto shown on the certificate of good standing furnished
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47
pursuant to clause (i) above, and (D) as to the incumbency and specimen
signature of each officer executing any Loan Document or any other
document delivered in connection herewith on behalf of such entity; (iii)
a certificate of another officer as to the incumbency and specimen
signature of the Secretary or Assistant Secretary executing the
certificate pursuant to (ii) above; (iv) a certificate or equivalent
documentation from the Secretary of State of each state (or, in the case
of the Canadian Borrower, the Ministry of Consumer and Commercial
Relations of the Province of Ontario and the Inspector General of
Financial Institutions of the Province of Quebec) in which any of the
Borrower , the Canadian Borrower or the Guarantors conducts material
business or owns material assets as to the qualification of such entity to
do business and its good standing in such state; and (v) such other
documents as the Lenders or their counsel or Simpson Thacher & Bartlett,
special counsel for the Administrative Agent, may reasonably request.
(f) The Administrative Agent shall have received a certificate, dated
the Closing Date and signed by a Financial Officer of Holdings and the
Borrower, confirming compliance with the conditions precedent set forth in
paragraphs (b) and (c) of Section 4.01 and those set forth in paragraphs
(c), (h), (k), (l), (m), (n), and (o) of this Section 4.02 (disregarding,
for this purpose, the provisions of any such paragraph that refer to the
satisfaction of the Administrative Agent, its counsel or the Lenders with
any matter).
(g) The Pledge Agreement shall have been duly executed by Holdings
and each Restricted Subsidiary listed therein and delivered to the
Collateral Agent and shall be in full force and effect, all outstanding
shares of capital stock of the Borrower and each domestic subsidiary
thereof, 65% of the outstanding shares of capital stock of each foreign
subsidiary owned directly by the Borrower or a domestic subsidiary of the
Borrower and all inter-company obligations in excess of $10,000,000 held
by Holdings, the Borrower or any subsidiary of the Borrower and evidenced
by notes, bonds or other instruments shall have been duly and validly
pledged to the Collateral Agent for the benefit of the Secured Parties and
certificates representing all such shares and the instruments representing
all such obligations shall be in the actual possession of the Collateral
Agent.
(h) A Permitted Receivables Financing providing commitments of at
least $150,000,000 shall have become effective and the initial funding
thereunder shall have been consummated.
(i) The Collateral Agent shall have received each document (including
Uniform Commercial Code financing statements) required by law or rea-
sonably requested by the Collateral Agent to be filed, registered or
recorded in order to create in favor of the Collateral Agent for the
benefit of the Secured Parties a valid, legal and perfected first priority
security interest in or lien on the Collateral that is the subject of the
Pledge Agreement.
(j) The Guarantee Agreement shall have been duly executed by Holdings
and each other Guarantor and delivered to the Collateral Agent and shall
be in full force and effect on such date.
(k) Except as contemplated by the Recapitalization Transactions, there
shall not have occurred any material change in the capitalization (whether
in debt or equity), corporate structure or assets of Holdings or any of
its subsidiaries, or any changes in the certificate of incorporation or
by-laws of Holdings or any of its Subsidiaries.
(l) The Recapitalization Transactions, including the extensions of
credit (including in particular the incurrence of the Loans), Guarantees,
Liens and ability to make dividend payments contemplated hereby (including
the unsubordinated ranking of all obligations under the Loan Documents and
the Liens created by the Pledge Agreement), and the consummation of the
Public Offering and repayment, redemption or defeasance of the
Indebtedness and preferred stock contemplated by the Recapitalization
Transactions and the Preliminary Prospectus, shall have been approved or
exempted by all requisite Governmental Authorities, and all such approvals
or exemptions, including any conditions imposed thereby, shall be in form
and substance acceptable to the Required Lenders in their sole discretion.
No action shall have been taken by any Governmental Authority which
restrains or prevents or seeks to restrain or prevent, or imposes or seeks
to impose materially adverse conditions upon, any of the Recapitalization
Transactions. Without limiting the generality of the foregoing, the
Required Lenders shall be satisfied, in their sole discretion, that all
governmental approvals have been obtained which, if not obtained, could
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48
render the obligations to the Lenders under the Loan Documents either void
or voidable or subordinate them to other claims or obligations or could
impair or subject to subordination the security interests of, or the
exercise of remedies by, the Lenders.
(m) No action, suit, litigation or similar proceeding at law or in
equity or by or before any court or Governmental Authority shall exist or,
in the case of litigation by a Governmental Authority, be threatened, with
respect to any of the Recapitalization Transactions which would in the
reasonable opinion of the Required Lenders be likely to have a Material
Adverse Effect.
(n) The exchange of at least $191,400,000 principal amount (including
all amounts owned by the WP Entities and the Blackstone Entities) of
Holdings' 14% Subordinated Pay-in-Kind Bridge Notes for shares of Holdings
Common Stock shall have occurred or shall occur simultaneously with the
initial Borrowing hereunder.
(o) Holdings and the Borrower shall, on a basis that is reasonably
satisfactory to the Administrative Agent and is substantially
contemporaneous with the first Borrowing hereunder on the Closing Date
(i)(A) have repaid in full the principal of and accrued interest on all
loans and other amounts outstanding under the Existing Credit Agreement,
(B) have terminated the Existing Credit Agreement and all commitments
thereunder and (C) have obtained the release and termination (or
assignment to the Collateral Agent) of all liens securing obligations
thereunder (including the execution, delivery and filing of all necessary
releases and termination or assignment statements, in form and substance
satisfactory to the Administrative Agent), (ii)(A) have called all
outstanding shares of Holdings preferred stock for redemption at an
aggregate redemption price not to exceed the Permitted Preferred Stock
Redemption Price at the earliest practical date following the Closing
Date, (B) have deposited with the Collateral Agent on the Closing Date,
pursuant to arrangements satisfactory to the Administrative Agent, an
amount equal to such redemption price in order to provide for payment of
such redemption price and (C) have made arrangements satisfactory to the
Administrative Agent for the cancellation of all such shares when so
redeemed and (iii)(A) have called all outstanding Indebtedness of Holdings
and its subsidiaries listed on Schedule 4.02(o) for redemption at an
aggregate redemption price not to exceed the Permitted Debt Redemption
Price at the earliest practical date following the Closing Date, (B) have
deposited with the trustees for such Indebtedness or the Collateral Agent,
acting as trustee, and on competitive terms on the Closing Date, pursuant
to arrangements satisfactory to the Administrative Agent, an amount equal
to the redemption price in order to provide for payment of such redemption
price and (C) have made arrangements satisfactory to the Administrative
Agent for the cancellation of all such Indebtedness when so redeemed.
(p) The Closing Date shall occur prior to September 15, 1994.
(q) The Agents shall be satisfied that the Revolving Credit Commit-
ments will be sufficient to fund the ongoing working capital requirements
of the Borrower and the other Restricted Subsidiaries.
(r) Each Lender and the Administrative Agent shall have received the
pro forma consolidated balance sheet of Holdings described in Section
3.09(b) and the same shall be satisfactory to the Required Lenders.
(s) The Administrative Agent shall have received copies of
arrangements in form and substance satisfactory to it and Simpson Thacher
& Bartlett, special counsel for the Administrative Agent, between Holdings
and the Selling Stockholders (as defined in the Preliminary Prospectus)
providing that, if Holdings raises less than $300,000,000 in gross
proceeds from the issuance of common stock in the Public Offering and the
Overallotment Option is exercised, the Selling Stockholders will assign
(without cost to Holdings) to Holdings their obligation to deliver to the
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49
underwriters pursuant to the Holdings Underwriting Agreement, and the
related right to receive payment therefor, shares of Holdings Common
Stock, so that after giving effect thereto Holdings will have received the
lesser of (A) the amount of net proceeds attributable to gross Public
Offering proceeds of $300,000,000 and (B) the aggregate net proceeds from
the Public Offering (including the Overallotment Option but excluding the
proceeds of up to 5,000,000 shares of Holdings Common Stock which may be
sold by the Selling Stockholders (other than pursuant to the Overallotment
Option)), and such arrangements shall be in full force and effect.
(t) The Administrative Agent shall be reasonably satisfied with the
existing cash management procedures for Holdings and its subsidiaries and
the proposed cash management procedures for Holdings and its subsidiaries
following the Closing Date.
(u) All aspects of the structure and documentation of the
Recapitalization Transactions and all corporate and other proceedings
taken or to be taken in connection therewith and all documents incidental
thereto shall be reasonably satisfactory in form and substance to the
Administrative Agent and to Simpson Thacher & Bartlett, special counsel
for the Administrative Agent, and each Lender shall have received copies
of all such documents as such Lender, acting through the Administrative
Agent, may reasonably request. All legal matters incident to this
Agreement and the borrowings hereunder shall be reasonably satisfactory to
the Agents and to Simpson Thacher & Bartlett, special counsel for the
Administrative Agent.
Each of Holdings, the Borrower and the Canadian Borrower hereby directs
its counsel referred to in clause (d) above to deliver the opinions to be
delivered by such counsel pursuant to such paragraph, it being understood that
the Lenders will and may rely thereon.
ARTICLE V.
AFFIRMATIVE COVENANTS
Each of Holdings, the Canadian Borrower and the Borrower covenants and
agrees that from and after the Closing Date, so long as this Agreement or any
Letter of Credit shall remain in effect or the principal of or interest on any
Loan, any Fees or any other expenses or amounts payable under or in respect of
any Loan Document or Letter of Credit shall be unpaid, unless the Required
Lenders shall otherwise consent in writing, Holdings, the Canadian Borrower
and the Borrower will, and will cause each of the Restricted Subsidiaries to:
SECTION 5.01. Existence; Businesses and Properties. (a) Do or cause to
be done all things necessary to preserve, renew and keep in full force and
effect its legal existence, except as otherwise expressly permitted under
Section 6.08 and except for the liquidation or dissolution of Restricted
Subsidiaries (other than Significant Subsidiaries) if the assets of such
corporations to the extent they exceed estimated liabilities are acquired by a
wholly owned Restricted Subsidiary in such liquidation or dissolution; provided
that Subsidiaries which are Guarantors may not be liquidated into Subsidiaries
that are not Guarantors and domestic Subsidiaries may not be liquidated into
foreign Subsidiaries.
(b) Do or cause to be done all things necessary to obtain, preserve,
renew, extend and keep in full force and effect the rights, licenses, permits,
franchises, authorizations, patents, copyrights, trademarks and trade names
material to the conduct of its business; comply in all material respects with
all applicable laws, rules, regulations and orders of any Governmental
Authority, whether now in effect or hereafter enacted; and at all times
maintain and preserve all property material to the conduct of such business and
keep such property in good repair, working order and condition and from time to
time make, or cause to be made, all needful and proper repairs, renewals, addi-
tions, improvements and replacements thereto necessary in order that the
business carried on in connection therewith, if any, may be properly conducted
at all times.
(c) Without limiting the generality of the provisions of Section
5.01(b), each of Holdings, the Canadian Borrower and the Borrower shall (i)(A)
undertake reasonable efforts to comply, and to cause each Subsidiary to comply,
in all material respects with all Environmental Laws and any order, decree or
similar requirements of any Governmental Authority concerning (1) a material
violation of any Environmental Law, (2) a financial contribution by Holdings or
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50
any of its Subsidiaries under any Environmental Law or (3) a Remedial Action by
or on the part of Holdings or any of its Subsidiaries under any Environmental
Law and (B) undertake reasonable efforts to remedy and to cause each of its
Subsidiaries to remedy, as soon as reasonably practicable, any material
violation of Environmental Laws, except in any case that compliance or remedy
shall not be required insofar as any failure to undertake such efforts cannot
reasonably be expected by Holdings, the Canadian Borrower or the Borrower to
have a Material Adverse Effect, or so long as (x) the validity of the same
shall be contested diligently and in good faith, (y) the subject property does
not contain a material plant or other facility or shall then be in no danger of
being sold, forfeited or lost pursuant to such contest and (z) reserves have
been established in accordance with GAAP by Holdings or such subsidiary in
connection therewith; and (ii) undertake reasonable efforts to require and to
cause each of its subsidiaries to require, to the extent practicable and
appropriate, that a lease for any renewing or new tenant contain terms
substantially equivalent to those of clause (i) above.
SECTION 5.02. Insurance. Keep its insurable properties insured
(including through self-insurance) at all times by financially sound and
reputable insurers in such amounts as shall be customary for similar businesses
and maintain such other insurance, of such types, to such extent and against
such risks, as is customary with companies in the same or similar businesses,
including insurance against fire and other risks insured against by extended
coverage and public liability insurance against claims for personal injury or
death or property damage occurring upon, in, about or in connection with the
use of any properties owned, occupied or controlled by it; and maintain such
other insurance as may be required by law.
SECTION 5.03. Taxes. Pay and discharge promptly all taxes, assessments
and governmental charges or levies imposed upon it or upon its income or
profits or in respect of its property, before the same shall become delinquent
or in default, as well as all lawful claims for labor, materials and supplies
or otherwise which, if unpaid, might give rise to a Lien upon such properties
or any part thereof; provided, however, that such payment and discharge shall
not be required with respect to any such tax, assessment, charge, levy or claim
so long as (a) the validity or amount thereof shall be contested in good faith
by appropriate proceedings and Holdings or any Restricted Subsidiary, as
applicable, shall set aside on its books adequate reserves as required by GAAP
with respect thereto, (b) such tax, assessment, charge, levy or claim is in
respect of property taxes for property that Holdings or one of the Restricted
Subsidiaries has determined to abandon and the sole recourse for such tax,
assessment, charge, levy or claim is to such property or (c) the amount of such
taxes assessments, charges, levies and claims and interest and penalties
thereon does not exceed $1,000,000 in the aggregate.
SECTION 5.04. Financial Statements, Reports, Amendments, etc. In the
case of Holdings, furnish to each Credit Agreement Creditor:
(a) within 90 (or, in the case of clause (ii) below, 105) days after
the end of each fiscal year (x) consolidated balance sheets and related
statements of income and cash flows, showing the consolidated financial
condition of each of (i) Holdings and its Subsidiaries and (ii) Holdings
and the Restricted Subsidiaries, in each case as of the close of such
fiscal year and the results of their operations during such year, audited
in the case of clause (i) above by Arthur Andersen & Co. or other
independent public accountants of recognized national standing (who shall
be reasonably acceptable to the Administrative Agent) and accompanied by
(1) in the case of clause (i), an opinion of such accountants (which shall
not be qualified in any material respect) to the effect that such
consolidated financial statements fairly present the financial condition
and results of operations of Holdings and its consolidated subsidiaries
and Holdings and the Restricted Subsidiaries, respectively, in accordance
with GAAP and (2) a certificate of a Financial Officer certifying that
such consolidated financial statements fairly present the financial
condition and results of operations of Holdings and its consolidated
subsidiaries and Holdings and the Restricted Subsidiaries, respectively,
in accordance with GAAP consistently applied (except as disclosed in such
certificate, in reasonable detail, which detail shall be reasonably
acceptable to the Administrative Agent) and (y) a statement of
stockholders' equity of Holdings, presented on a basis consistent with the
financial statements furnished pursuant to clause (x) above, and certified
by one of Holdings' Financial Officers as fairly presenting the
stockholders' equity of Holdings in accordance with GAAP consistently
applied (except as disclosed in such certificate in reasonable detail,
which detail shall be reasonably acceptable to the Administrative Agent);
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51
(b) within 45 (or, in the case of clause (ii) below, 60) days after
the end of each of the first three fiscal quarters of each fiscal year,
the consolidated balance sheets and related statements of income and cash
flows, showing the consolidated financial condition of each of (i)
Holdings and its Subsidiaries and (ii) Holdings and the Restricted
Subsidiaries, in each case as of the close of such fiscal quarter and the
results of their operations during such fiscal quarter and the then
elapsed portion of the fiscal year, together with the balance sheets and
related statements of income and cash flows as of the corresponding dates
and for the corresponding periods in the prior year, all certified by one
of its Financial Officers as fairly presenting the consolidated financial
condition and results of operations of Holdings and its consolidated
subsidiaries and Holdings and the Restricted Subsidiaries, respectively,
in accordance with GAAP (other than the absence of footnotes in accordance
with GAAP) consistently applied (except as disclosed in such certificate
in reasonable detail, which detail shall be reasonably acceptable to the
Administrative Agent), subject to normal year-end audit adjustments;
(c) concurrently with any delivery of financial statements under (a)
or (b) above, a certificate (a "Compliance Certificate") of the accounting
firm or Financial Officer (which certificate shall be in the form of
Exhibit G if delivered by a Financial Officer) opining on or certifying
such statements (which certificate, when furnished by an accounting firm,
may be limited to accounting matters and disclaim responsibility for legal
interpretations) (i) certifying that no Default or Event of Default has
occurred or, if such Default or Event of Default has occurred, specifying
the nature and extent thereof and any corrective action taken or proposed
to be taken with respect thereto and (ii) setting forth computations in
reasonable detail (which detail shall be reasonably satisfactory to the
Administrative Agent) demonstrating compliance with the covenants
contained in Sections 6.14, 6.15, 6.16 and 6.17 and showing the Applicable
Level;
(d) if, as a result of any change in accounting principles and
policies from those as in effect on the date of this Agreement, the
consolidated financial statements of Holdings and the Subsidiaries or
Holdings and the Restricted Subsidiaries, as the case may be, delivered
pursuant to clauses (a) and (b) above will differ in any material respect
from the consolidated financial statements that would have been delivered
pursuant to such clauses had no such change in accounting principles and
policies been made, then, together with the first delivery of financial
statements pursuant to clauses (a) and (b) above following such change, a
schedule prepared by a Financial Officer reconciling such changes to what
the financial statements would have been without such changes;
(e) promptly after the same become publicly available, copies of all
periodic reports and proxy statements and, to the extent requested by the
Administrative Agent, any other materials filed by Holdings or any of its
Subsidiaries with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, or any Governmental Authority succeeding
to any of or all the functions of said Commission, or with any national
securities exchange, or distributed to its shareholders generally, as the
case may be;
(f) within 90 days after the beginning of each fiscal year, a copy of
the annual income and capital expenditure budget for such fiscal year;
(g) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of Holdings or any of
its Restricted Subsidiaries, or compliance with the terms of any Loan
Document, as any Credit Agreement Creditor, acting through the
Administrative Agent, may reasonably request;
(h) promptly, a copy of any amendment or waiver of any provisions of
any agreement which amendment or waiver is described in Section 6.10 or
6.11;
(i) promptly following the creation or acquisition of any Subsidiary,
a certificate from a Responsible Officer, identifying such new Subsidiary
and the ownership interest of Holdings and its Subsidiaries therein; and
promptly following any Investment in an Unrestricted Subsidiary, a
description of such Investment and the amount thereof;
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52
(j) if requested by the Administrative Agent, within 105 days
following the end of any fiscal year of any Unrestricted Subsidiary, a
balance sheet and related statements of income and cash flow for such
Unrestricted Subsidiary at the end of and for such fiscal year; and
(k) promptly, a copy of all reports submitted in connection with any
interim or special audit made by independent accountants of the books of
Holdings or any of its Subsidiaries.
SECTION 5.05. Litigation and Other Notices. Furnish to each Credit
Agreement Creditor prompt written notice of the following:
(a) any Default or Event of Default, specifying the nature and extent
thereof and the corrective action (if any) proposed to be taken with
respect thereto;
(b) the filing or commencement of any action, suit or proceeding,
whether at law or in equity or by or before any Governmental Authority,
against Holdings or any Subsidiary in respect of which there is a
reasonable possibility of an adverse determination and which, if adversely
determined, could reasonably be expected to result in a Material Adverse
Effect; and
(c) any development specific to Holdings and its Subsidiaries and not
otherwise publicly disclosed known to a Responsible Officer that has
resulted in, or could reasonably be anticipated to result in, a Material
Adverse Effect.
SECTION 5.06. ERISA. (a) Comply in all material respects with the
applicable provisions of ERISA and (b) furnish to each Credit Agreement
Creditor (i) as soon as possible, and in any event within 30 days after any
Responsible Officer of the Borrower, any Guarantor or any ERISA Affiliate of
any of them knows or has reason to know that any Reportable Event has occurred
that alone or together with any other Reportable Event could reasonably be
expected to result in liability of the Borrower, any Guarantor or any of their
ERISA Affiliates to the PBGC in an aggregate amount exceeding $10,000,000, a
statement of a Financial Officer setting forth details as to such Reportable
Event and the action proposed to be taken with respect thereto, together with a
copy of the notice, if any, of such Reportable Event given to the PBGC, (ii)
promptly after any Responsible Officer learns of receipt thereof, a copy of any
notice the Borrower or any Guarantor or any of their ERISA Affiliates may
receive from the PBGC relating to the intention of the PBGC to terminate any
Plan or Plans (other than a Plan maintained by any of their ERISA Affiliates
which is considered an ERISA Affiliate only pursuant to subsection (m) or (o)
of Section 414 of the Code) or to appoint a trustee to administer any Plan or
Plans, (iii) within 20 days after the due date for filing with the PBGC
pursuant to Section 412(n) of the Code a notice of failure to make a required
installment or other payment with respect to a Plan, a statement of a Financial
Officer setting forth details as to such failure and the action proposed to be
taken with respect thereto, together with a copy of such notice given to the
PBGC and (iv) promptly after any Responsible Officer learns thereof and in any
event within 30 days after receipt thereof by the Borrower, any Guarantor or
any ERISA Affiliate from the sponsor of a Multiemployer Plan, a copy of each
notice received by the Borrower, any Guarantor or such ERISA Affiliate
concerning (A) the imposition of Withdrawal Liability or (B) a determination
that a Multiemployer Plan is, or is expected to be, terminated or in
reorganization, in each case within the meaning of Title IV of ERISA.
SECTION 5.07. Maintaining Records; Access to Properties and Inspections.
Maintain all financial records in accordance with GAAP and permit any persons
designated by the Administrative Agent to visit and inspect the financial
records and the properties of Holdings or any Restricted Subsidiary at
reasonable times, upon reasonable notice and as often as reasonably requested
and to make extracts from and copies of such financial records, and permit any
persons designated by the Administrative Agent (or, during the continuance of
an Event of Default, any Lender) to discuss the affairs, finances and condition
of Holdings or any Restricted Subsidiary with the officers thereof and
independent accountants therefor (subject to reasonable requirements of
confidentiality, including requirements imposed by law or by contract).
SECTION 5.08. Use of Proceeds. (a) Use the proceeds of the Term Loans,
the Canadian Term Loans and the Public Offering solely (i) to repay the
principal of and accrued interest on all loans and all other amounts
<PAGE>
53
outstanding under the Existing Credit Agreement, (ii) to redeem Holdings, Group
and Borrower outstanding preferred stock at an aggregate redemption price not
greater than its face value plus any premium payable upon redemption plus
accrued and unpaid dividends to the date of redemption (the "Permitted
Preferred Stock Redemption Price"), which is approximately $220,000,000 as of
June 30, 1994, (iii) to redeem or defease outstanding Indebtedness of Holdings
and its Subsidiaries listed on Schedule 4.02(o) at an aggregate redemption
price not greater than the principal amount thereof plus accrued and unpaid
interest to the date of redemption plus any required redemption premium (the
"Permitted Debt Redemption Price"), which is approximately $821,000,000 as of
June 30, 1994 (excluding the Holdings Subordinated PIK Notes to be converted to
Holdings Common Stock) and (iv) to fund transaction costs related to the
Recapitalization Transactions.
(b) Prior to the first anniversary of the Closing Date, use the proceeds
of Delayed Draw Term Loans solely (i) to make ESOP Loans and (ii) to the extent
not used to make ESOP Loans, to finance Permitted Business Acquisitions.
(c) Use the proceeds of Revolving Loans made on the Closing Date solely
for the purposes set forth in Section 5.08(a) and thereafter for general
corporate purposes (including to make Permitted Business Acquisitions).
(d) Use Letters of Credit solely for general corporate purposes in the
ordinary course of business of the Borrower and its subsidiaries.
(e) Use the proceeds of the Canadian Term Loans only to pay a dividend
to the Borrower, which proceeds will be used for the purposes described in
clause (a) above.
SECTION 5.09. Further Assurances. Execute any and all further documents,
financing statements, agreements and instruments, and take all further action
(including filing UCC financing statements, mortgages and deeds of trust),
which may be required under applicable law, or which the Collateral Agent may
reasonably request, in order to effectuate the transactions contemplated by the
Loan Documents, in order to release the security interests securing obligations
in respect of the Existing Credit Agreement and in order to grant, preserve,
protect and perfect the validity and first priority (subject to Liens permitted
by Section 6.04) of the security interests created or intended to be created
pursuant to the Pledge Agreement. In addition, from time to time, Holdings and
the Restricted Subsidiaries will, at their cost and expense, subject to the
obtaining of any required regulatory authorizations (which Holdings and
Borrower agree to use their best efforts to obtain) promptly secure the
Obligations by causing the following to occur: (i) promptly upon creating or
acquiring any additional subsidiary, the stock of such subsidiary will (unless
such subsidiary is a subsidiary of an Unrestricted Subsidiary) be pledged
pursuant to the Pledge Agreement, provided that no more than 65% of the capital
stock of any foreign subsidiary shall be required to be pledged pursuant to
this Section 5.09, and (ii) such subsidiary will (unless such subsidiary is an
Unrestricted Subsidiary or a foreign subsidiary) become a party to the
Guarantee Agreement. All such security interests and Liens will be created
under the Pledge Agreement and other security agreements and other instruments
and documents in form and substance reasonably satisfactory to the Collateral
Agent, and Holdings and the Restricted Subsidiaries shall deliver or cause to
be delivered to the Administrative Agent all such instruments and documents
(including legal opinions and lien searches) as the Required Lenders shall
reasonably request to evidence compliance with this Section 5.09. Holdings and
the Restricted Subsidiaries agree to provide such evidence as the
Administrative Agent shall reasonably request as to the perfection and priority
status of each such security interest and Lien.
SECTION 5.10. Change in Ownership. In the case of Holdings, own directly
at all times, legally and beneficially, 100% of the capital stock of the
Borrower, free of Liens except Liens in favor of the Collateral Agent; and, in
the case of Borrower, own (a) directly at all times, legally and beneficially,
100% of the capital stock of the Finance Subsidiary free of Liens except Liens
in favor of the Collateral Agent and (b) directly or indirectly at all times,
legally and beneficially, 100% of the capital stock of the Canadian Borrower
free of Liens except Liens, if any, in favor of the Collateral Agent.
SECTION 5.11. Fiscal Year; Accounting. In the case of each of Holdings
and its subsidiaries, cause its respective fiscal year to end on the last
Saturday in January.
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54
SECTION 5.12. Dividends. In the case of the Borrower, permit its
subsidiaries to pay dividends and cause such dividends to be paid to the extent
required to pay the monetary Obligations.
SECTION 5.13. Rate Protection Agreements. As promptly as practicable and
in any event within 90 days after the Closing Date, enter into, and thereafter
maintain in effect, one or more interest rate protection agreements (including
interest rate swaps, caps, collars and other interest rate hedging
transactions) with any of the Lenders or other financial institutions
reasonably satisfactory to the Administrative Agent, the effect of which shall
be to limit for at least two years the interest payable by the Borrower in
connection with Indebtedness under this Agreement having an aggregate
outstanding principal amount not less than an amount equal to 40% of the
aggregate principal amount of the Loans projected to be outstanding during such
period on terms and conditions reasonably acceptable, taking into account
current market conditions, to the Administrative Agent and deliver evidence of
the execution and delivery thereof to the Administrative Agent.
SECTION 5.14. Corporate Separateness. Cause the management, business and
affairs of each of Holdings and the Subsidiaries to be conducted in such a
manner so that each of Holdings and the Unrestricted Subsidiaries will be
perceived as a legal entity separate and distinct from each other and the
Restricted Subsidiaries.
SECTION 5.15. Business of Restricted Subsidiaries. Cause all of the
business and activities of the Restricted Subsidiaries to be performed and
conducted by the Borrower and Restricted Subsidiaries which are subsidiaries of
the Borrower.
ARTICLE VI.
NEGATIVE COVENANTS
Each of Holdings, the Canadian Borrower and the Borrower covenants and
agrees that from and after the Closing Date, so long as this Agreement or any
Letter of Credit shall remain in effect or any monetary Obligation shall be
unpaid, unless the Required Lenders shall otherwise consent in writing,
Holdings, the Canadian Borrower and the Borrower will not, and will not cause
or permit any Restricted Subsidiary to:
SECTION 6.01. Indebtedness. Incur, create, assume or permit to exist any
Indebtedness, except:
(a) Indebtedness of the Borrower and the Restricted Subsidiaries for
borrowed money in an amount not to exceed $23,000,000 under agreements
existing on the date of this Agreement and set forth in Schedule 6.01 and
other Indebtedness existing on the Closing Date, but not any extensions,
renewals or refinancings of such Indebtedness except (i) renewals and
extensions expressly provided for in the agreements evidencing any such
Indebtedness as the same are in effect on the date of this Agreement and
(ii) refinancings and extensions of any such Indebtedness if the interest
rate with respect thereto and other terms thereof are no less favorable
than the Indebtedness being refinanced or extended and the average life to
maturity thereof is greater than or equal to the Indebtedness being
refinanced or extended (provided that such Indebtedness permitted under
clause (i) or clause (ii) above shall not be (A) Indebtedness of an
obligor that was not an obligor with respect to the Indebtedness being
extended, renewed or refinanced, (B) in a principal amount which exceeds
the Indebtedness being renewed, extended or refinanced or (C) incurred,
created or assumed if any Default or Event of Default has occurred and is
continuing or would result therefrom);
(b) Indebtedness of the Borrower consisting of contingent liabilities
arising from indemnities and other contractual obligations of the Borrower
existing on the date hereof from the sale of properties prior to the date
hereof by Holdings and the Borrower and their predecessors;
(c) So long as immediately after giving effect to the incurrence
thereof: (i) no Default or Event of Default shall have occurred and be
continuing and (ii) the outstanding principal amount of the Term Loans and
Canadian Term Loans is less than $350,000,000, Permitted Subordinated
Indebtedness;
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(d) Indebtedness of (i) the Borrower to any subsidiary of the
Borrower evidenced, if the amount of such Indebtedness exceeds
$10,000,000, by an Intercompany Note pledged to the Collateral Agent under
the Pledge Agreement, (ii) any Domestic Restricted Subsidiary to the
Borrower evidenced, if the amount of such Indebtedness exceeds
$10,000,000, by an Intercompany Note pledged to the Collateral Agent under
the Pledge Agreement and (iii) any Domestic Restricted Subsidiary to any
other Restricted Subsidiary evidenced, if the amount of such Indebtedness
exceeds $10,000,000, by an Intercompany Note pledged to the Collateral
Agent under the Pledge Agreement; provided that no Indebtedness may be
incurred under this paragraph (d) by any subsidiary of the Borrower that
is not a Guarantor;
(e) Capital Lease Obligations and Purchase Money Indebtedness
incurred by the Borrower prior to or within 270 days after a Capital
Expenditure permitted under Section 6.03 in order to finance such Capital
Expenditure, and extensions, renewals and refinancings thereof if the
interest rate with respect thereto and other terms thereof are no less
favorable than the Indebtedness being refinanced and the average life to
maturity thereof is greater than or equal to the Indebtedness being
refinanced (provided that such Indebtedness shall not be (A) Indebtedness
of an obligor that was not an obligor with respect to the Indebtedness
being extended, renewed or refinanced, (B) in a principal amount which
exceeds the Indebtedness being renewed, extended or refinanced or (C)
incurred, created or assumed if any Default or Event of Default has
occurred and is continuing or would result therefrom);
(f) Capital Lease Obligations incurred by the Borrower or any
Restricted Subsidiary in respect of any Sale and Leaseback Transaction
that is permitted under Section 6.06;
(g) Indebtedness of the Borrower and its subsidiaries in the nature
of Interest Rate Agreements and other interest rate and foreign currency
hedging transactions entered into in order to fix the effective rate of
interest, or to hedge against currency fluctuations, on the Loans and
other Indebtedness (it being understood that such transactions shall be
entered into for business purposes and not for the purpose of
speculation);
(h) Indebtedness of a Domestic Restricted Subsidiary which represents
the assumption by such Domestic Restricted Subsidiary of Indebtedness of a
Restricted Subsidiary in connection with the merger of such Restricted
Subsidiary with or into the assuming Domestic Restricted Subsidiary or the
purchase of all or substantially all the assets of such other Restricted
Subsidiary;
(i) Indebtedness of the Restricted Subsidiaries in respect of
performance bonds, bid bonds, appeal bonds, bankers acceptances, letters
of credit and surety bonds provided in the ordinary course of business,
and any extension, renewal or refinancing thereof to the extent not
provided to secure the repayment of other Indebtedness and to the extent
that the amount of refinancing Indebtedness is not greater than the amount
of Indebtedness being refinanced;
(j) Indebtedness arising from the honoring by a bank or other
financial institutions of a check, draft or similar instrument drawn
against insufficient funds in the ordinary course of business; provided
that such Indebtedness is extinguished within two Business Days of its
incurrence;
(k) Indebtedness of a Restricted Subsidiary acquired after the date
hereof and Indebtedness of a corporation merged or consolidated with or
into a Restricted Subsidiary after the date hereof, which Indebtedness
exists at the time of such acquisition, merger or consolidation and is not
created in contemplation of such event and such acquisition, merger or
consolidation is permitted by this Agreement, provided that the aggregate
principal amount of Indebtedness under this clause (k) shall not exceed
$50,000,000;
(l) Indebtedness of the Borrower incurred after the date hereof,
which Indebtedness is created or incurred at the time of any Permitted
Business Acquisition to finance such acquisition; provided that the
aggregate principal amount of Indebtedness which may be created or
incurred under this paragraph (l) together with Indebtedness permitted by
paragraph (k) above shall not exceed $150,000,000;
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56
(m) Indebtedness owed to (including obligations in respect of letters
of credit for the benefit of) any person providing worker's compensation,
health, disability or other employee benefits, property, casualty,
liability or other insurance to Holdings or any Subsidiary, pursuant to
reimbursement or indemnification obligations to such person;
(n) (i) Indebtedness represented by the Loans, the Letters of Credit
and the Guarantees thereof by the Guarantors pursuant to the Guarantee
Agreement and (ii) Indebtedness represented by the Guarantees of
Indebtedness permitted under clause (l) above by the Guarantors pursuant
to the Guarantee Agreement;
(o) other Capital Lease Obligations of the Restricted Subsidiaries in
an aggregate principal amount at any time outstanding not in excess of
$10,000,000;
(p) other unsecured Indebtedness of the Borrower and the Canadian
Borrower in an aggregate principal amount at any time outstanding not in
excess of $40,000,000 and unsecured Guarantees by the Borrower of any
Indebtedness of the Canadian Borrower incurred in accordance with this
clause (p);
(q) other Indebtedness of the Borrower together with Indebtedness
listed on Schedule 6.01 (as such Indebtedness may be refinanced as
permitted by Section 6.01(a)) in an aggregate principal amount outstanding
at any time not to exceed $35,000,000; and
(r) all premium (if any), interest (including post-petition
interest), fees, expenses, indemnities, charges and additional or
contingent interest on obligations described in clauses (a) through (q)
above.
SECTION 6.02. Dividends and Distributions. Declare or pay, directly or
indirectly, any dividend or make any other distribution (by reduction of
capital or otherwise), whether in cash, property, securities or a combination
thereof, with respect to any shares of its capital stock (other than dividends
and distributions on Holdings Common Stock payable solely by the issuance of
additional shares of Holdings Common Stock) or directly or indirectly redeem,
purchase, retire or otherwise acquire for value (or permit any Restricted
Subsidiary to purchase or acquire) any shares of any class of its capital stock
or any option, warrant or other right to acquire shares of such stock or set
aside any amount for any such purpose; provided, however, that:
(a) the foregoing shall not prohibit the Recapitalization
Transactions;
(b) any Subsidiary may declare and pay dividends or make other
distributions to the Borrower or to wholly owned Restricted Subsidiaries;
(c) if at the time thereof and after giving effect thereto no Default
or Event of Default shall have occurred and be continuing, Holdings may,
commencing with the fifth full fiscal quarter following the Closing Date,
pay dividends in cash on its common stock or any preferred stock in any
fiscal quarter in an amount not to exceed $3,000,000;
(d) if at the time thereof and after giving effect thereto no Default
or Event of Default shall have occurred and be continuing and the Dividend
Condition shall have been met, Holdings may pay dividends in cash on its
common stock or any preferred stock in any fiscal year in an amount not to
exceed in the aggregate 25% of Net Income for the prior fiscal year less
the amount of dividends paid in such current fiscal year pursuant to
clause (c) above;
(e) if at the time thereof and after giving effect thereto no Default
or Event of Default shall have occurred and be continuing, Holdings may
repurchase director's qualifying shares of Holdings and capital stock of
Holdings and options therefor of employees and directors of Holdings and
the Restricted Subsidiaries provided that (i) no such repurchase may be
made unless Holdings is obligated to do so at the time of repurchase
pursuant to contractual agreements between Holdings and the applicable
officer or director and (ii) the aggregate amount paid by Holdings in
connection with such repurchases at any time shall not exceed $3,000,000
<PAGE>
57
plus the aggregate amount (but only to the extent such amount is
simultaneously contributed by Holdings to the Borrower) received by
Holdings from the sale or issuance of its capital stock or options
therefor to officers and directors of Holdings and the Restricted
Subsidiaries after the Closing Date;
(f) the Borrower may pay dividends or make other distributions to
Holdings in amounts sufficient to allow Holdings to pay (i) expenses
incurred in connection with the Recapitalization Transactions, Permitted
Tax Payments and state and local taxes and other governmental charges, and
administrative and routine expenses required to be paid by Holdings in the
ordinary course of its business, (ii) the dividends and other amounts
contemplated by clauses (c) and (d) above; provided that such dividends
pursuant to clause (ii) are used by Holdings for such purposes within 20
days of the receipt of such dividends by Holdings, (iii) the repurchase
price for the capital stock and options therefor of Holdings contemplated
by clause (e) above provided that such dividends pursuant to clause (iii)
are used by Holdings for such purpose within 20 days of the receipt of
such dividends by Holdings and (iv) the amount of any Investment in an
Unrestricted Subsidiary if the Borrower and the Restricted Subsidiaries
could have made such Investment in Unrestricted Subsidiaries pursuant to
Section 6.07 (l) (but on the assumption that the Borrower could otherwise
invest in such Unrestricted Subsidiary); provided that such dividends
pursuant to clause (iv) are used by Holdings for such purpose within 20
days of receipt of such dividends by Holdings; provided further that no
dividend may be paid to Holdings pursuant to clause (ii) or (iii) or (iv)
if at the time of such dividend or after giving effect thereto a Default
or Event of Default shall have occurred and be continuing; and
(g) the foregoing shall not prohibit the ESOP Investment.
SECTION 6.03. Capital Expenditures. Permit Capital Expenditures of the
Restricted Subsidiaries on a consolidated basis during any calendar year to be
greater than the amount set forth below for such year:
Calendar Year Amount
1994 $85,000,000
1995 85,000,000
1996 80,000,000
1997 80,000,000
1998 80,000,000
1999 80,000,000
2000 80,000,000
2001 80,000,000
2002 80,000,000
provided, however, that (i) to the extent Capital Expenditures made in any year
are less than the amount set forth above opposite such year, Restricted
Subsidiaries shall be permitted to carry forward the unused amount to the
succeeding calendar years so long as such aggregate Capital Expenditures in any
fiscal year do not exceed $130,000,000; and (ii) Capital Expenditures may not
be made by Holdings.
SECTION 6.04. Liens. Create, incur, assume or permit to exist any Lien
on any property or assets (including stock or other securities) now owned or
hereafter acquired by it or on any income or rights in respect of any thereof,
except:
(a) Liens on property or assets of the Restricted Subsidiaries
existing on the date of this Agreement and, in the case of Liens securing
Indebtedness for borrowed money, set forth in Schedule 6.04; provided that
such Liens shall secure only those obligations which they secure on such
date (and extensions, renewals and refinancings of such obligations
permitted by Section 6.01(a)) and do not subsequently apply to any other
property or assets of Holdings or any Restricted Subsidiary;
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(b) any Lien on any property or asset used by a Restricted Subsidiary
in the ordinary course of business, which Lien existed prior to the
acquisition thereof by such subsidiary; provided that (i) such Lien is not
created in contemplation of or in connection with such acquisition and
(ii) such Lien does not apply to any other property or assets of any other
Restricted Subsidiary;
(c) any Lien on any property or asset of a Restricted Subsidiary
securing Indebtedness permitted by Section 6.01(k), provided that such
Lien does not apply to any other property or assets of Holdings or any
Restricted Subsidiary not securing such Indebtedness at the date of
acquisition of such property or asset;
(d) Liens for taxes, assessments or other governmental charges or
levies not yet due, or which are for less than $1,000,000 in the
aggregate, or which are being contested in compliance with Section 5.03 or
for property taxes for property that the Borrower or one of its Restricted
Subsidiaries has determined to abandon if the sole recourse for such tax,
assessment, charge, levy or claim is to such property;
(e) carriers', warehousemen's, mechanics', materialmen's, repairmen's
or other like Liens arising in the ordinary course of business and
securing obligations which are not due or which are being contested in
good faith by appropriate proceedings and in respect of which, if
applicable, Holdings or the relevant Restricted Subsidiary shall have set
aside on its books reserves in accordance with GAAP;
(f) pledges and deposits made in the ordinary course of business in
compliance with the Federal Employers Liability Act or any other
workmen's compensation, unemployment insurance and other social security
laws or regulations and deposits securing liability to insurance carriers
under insurance or self-insurance arrangements;
(g) deposits to secure the performance of bids, trade contracts
(other than for Indebtedness), leases (other than Capital Lease
Obligations), statutory obligations, surety and appeal bonds, performance
bonds and other obligations of a like nature incurred in the ordinary
course of business;
(h) zoning restrictions, easements, trackage rights, leases (other
than Capital Lease Obligations), licenses, special assessments,
rights-of-way, restrictions on use of real property and other similar
encumbrances incurred in the ordinary course of business which, in the
aggregate, are not substantial in amount and do not materially detract
from the value of the property subject thereto or interfere in any
material respect with the ordinary conduct of the business of any
Restricted Subsidiary;
(i) purchase money security interests in real property, improvements
thereto or equipment hereafter acquired (or, in the case of improvements,
constructed) by any Restricted Subsidiary (including without limitation,
the interests of vendors and lessors under conditional sale and title
retention agreements); provided that (i) such security interests secure
Indebtedness permitted by Section 6.01, (ii) such security interests are
incurred, and the Indebtedness secured thereby is created, within 270 days
after such acquisition (or construction), (iii) the Indebtedness secured
thereby does not exceed 100% of the cost of such real property,
improvements or equipment at the time of such acquisition (or
construction), (iv) such expenditures are Capital Expenditures permitted
under Section 6.03 and (v) such security interests do not apply to any
other property or assets of any Restricted Subsidiary (other than to
accessions to such real property, improvements or equipment and provided
that individual financings of equipment provided by a single lender may be
cross-collateralized to other financings of equipment provided solely by
such lender);
(j) Liens created in favor of the Collateral Agent for the benefit of
the Secured Parties;
(k) Liens securing reimbursement obligations in respect of commercial
letters of credit permitted under Section 6.01 and covering the goods (or
the documents of title in respect of such goods) financed by such letters
of credit;
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(l) Liens arising out of capitalized or operating lease transactions
permitted under Section 6.06, so long as such Liens (i) attach only to the
property sold in such transaction and any accessions thereto and (ii) do
not interfere with the business of Holdings and the Restricted
Subsidiaries in any material respect;
(m) any Lien on assets of a person securing Indebtedness of such
person permitted by Section 6.01(q);
(n) any Lien arising by operation of law pursuant to Section 107(1)
of the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Sec. 9607(l), or pursuant to analogous state law, for costs
or damages which are not yet due (by virtue of a written demand for payment
by a Governmental Authority) or which are being contested in compliance
with Section 5.03, or on property that a Restricted Subsidiary has
determined to abandon if the sole recourse for such costs or damages is to
such property, provided that the liability of Holdings and the Restricted
Subsidiaries with respect to the matter giving rise to such Lien shall
not, in the reasonable estimate of the Borrower (in light of all attendant
circumstances, including the likelihood of contribution by third parties),
exceed $7,500,000;
(o) any leases or subleases to other persons of properties or assets
owned or leased by a Restricted Subsidiary;
(p) Liens consisting of interests of lessors under capital leases
permitted by Section 6.01;
(q) Liens securing judgements for the payment of money in an aggregate
amount not in excess of $7,500,000 (to the extent not covered by
insurance) which judgements shall not be undischarged or stayed for a
period of more than 30 consecutive days;
(r) the replacement, extension or renewal of any Lien permitted by
clause (b), (c) or (i) above, provided that such replacement, extension or
renewal Lien shall not cover any property other than the property that was
subject to such Lien prior to such replacement, extension or renewal and
provided further that the Indebtedness and other obligations secured by
such replacement, extension or renewal Lien are permitted by this
Agreement; and
(s) other Liens with respect to property or assets not constituting
collateral for the Obligations with an aggregate fair market value of not
more than $25,000,000 at any time.
SECTION 6.05. Priority of Loan Payments. (a) Until the Commitments have
been terminated and the Obligations have been indefeasibly paid in full,
directly or indirectly, make any payment, retirement, repurchase or redemption
on account of the principal of any Permitted Subordinated Indebtedness or
directly or indirectly prepay any Permitted Subordinated Indebtedness prior to
the stated maturity date of such Permitted Subordinated Indebtedness, make any
payment or prepayment of any Permitted Subordinated Indebtedness which would
violate the terms of this Agreement or of such Permitted Subordinated
Indebtedness, any agreement or document evidencing, related to or securing the
payment or performance of the Permitted Subordinated Indebtedness or any
subordination agreement applicable to such Permitted Subordinated Indebtedness.
(b) Until the Commitments have been terminated and the Obligations have
been indefeasibly paid in full, repay any Funded Debt of Holdings and the
Restricted Subsidiaries except:
(i) the Obligations;
(ii) payments of Funded Debt made in conformity with the regularly
scheduled maturity thereof or mandatory prepayment provisions thereof;
(iii) if no Default or Event of Default has occurred and is continuing
or would result therefrom, refinancings permitted by Section 6.01;
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60
(iv) if no Default or Event of Default has occurred and is continuing
or would result therefrom, prepayments by a Restricted Subsidiary of its
Funded Debt acquired in connection with a Permitted Business Acquisition;
and
(v) if no Default or Event of Default has occurred and is continuing
or would result therefrom, prepayments of up to $10,000,000 in the
aggregate of other Funded Debt of the Restricted Subsidiaries.
SECTION 6.06. Sale and Lease-Back Transactions. Enter into any
arrangement, directly or indirectly, with any person whereby Holdings or any
Restricted Subsidiary shall sell or transfer any property, real or personal,
used or useful in its business, whether now owned or hereafter acquired, and
thereafter rent or lease such property or other property which it intends to
use for substantially the same purpose or purposes as the property being sold
or transferred (a "Sale and Lease-Back Transaction"), other than any Sale and
Lease-Back Transaction which involves a sale by the Borrower or a Restricted
Subsidiary solely for cash consideration on terms not less favorable than would
prevail in an arms'-length transaction and which (a) results in a Capital Lease
Obligation or an Operating Lease, in either case entered into to finance a
Capital Expenditure permitted by Section 6.03 consisting of the initial
acquisition by such subsidiary of the property sold or transferred in such Sale
and Lease-Back Transaction, provided that such Sale and Lease-Back Transaction
occurs within 270 days after such acquisition or (b) results in a Capital Lease
Obligation or an Operating Lease entered into for any other purpose (provided
that any such Sale and Lease-Back Transaction in reliance upon this clause (b)
shall be deemed to be a Prepayment Event).
SECTION 6.07. Investments, Loans and Advances. Purchase, hold or acquire
any capital stock, evidences of indebtedness or other securities of, make or
permit to exist any loans or advances to, or make or permit to exist any
investment or any other interest in (collectively, an "Investment"), any other
person, except:
(a) Permitted Investments and Investments that were Permitted
Investments when made;
(b) Investments by Holdings in the Borrower and Investments by a
Restricted Subsidiary in another Domestic Restricted Subsidiary;
(c) Investments arising out of the receipt by the Borrower of noncash
consideration for the sale of assets permitted under Section 6.08 provided
that such consideration (if the stated amount or value thereof is in
excess of $1,000,000) is pledged upon receipt pursuant to the Pledge
Agreement;
(d) Intercompany Loans permitted to be incurred as Indebtedness under
Section 6.01(d);
(e) Investments by a wholly-owned Restricted Subsidiary constituting
Permitted Business Acquisitions;
(f) (i) loans and advances to employees of any Restricted Subsidiary
not to exceed $300,000 at any time outstanding to any one employee and not
to exceed $2,000,000 in the aggregate at any time outstanding and (ii)
advances of payroll payments and expenses to employees in the ordinary
course of business;
(g) accounts receivable arising and trade credit granted in the
ordinary course of business and any securities received in satisfaction or
partial satisfaction thereof from financially troubled account debtors to
the extent reasonably necessary in order to prevent or limit loss;
(h) an Investment by the Borrower or any of the Restricted
Subsidiaries in any Finance Subsidiary that the Borrower is incorporating,
but only to the extent necessary to incorporate such Finance Subsidiary
and acquire its capital stock and subordinated indebtedness in connection
with sales of receivables, all with the minimum capitalization necessary;
(i) investments, other than investments listed in clauses (a) through
(h) of this Section, existing on the Closing Date and set forth on
Schedule 6.07;
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(j) the ESOP Loans;
(k) Investments the sole consideration for which by Holdings and the
Restricted Subsidiaries is capital stock of Holdings provided that, after
giving effect thereto, no Default or Event of Default under paragraph (m)
of Article VII shall have occurred;
(l) if no Default or Event of Default exists immediately before or
after giving effect to such Investment, other Investments, including joint
ventures, currency hedges and Investments in Unrestricted Subsidiaries,
provided that (i) the consideration for Investments other than Investments
in Unrestricted Subsidiaries (whether cash or property, as valued at the
time of such Investment) does not exceed (net of any return representing
return of capital of (but not return on) any such Investment) at any time
$75,000,000 in the aggregate less one half of the amount of all
Investments pursuant to clause (ii) below in Unrestricted Subsidiaries and
(ii) the consideration for Investments in Unrestricted Subsidiaries
(whether cash or property, as valued at the time of such Investment) does
not exceed (net of any return representing return of capital of (but not
return on) any such Investment) at any time $50,000,000 in the aggregate;
and
(m) Investments resulting from pledges and deposits referred to in
Section 6.04(f).
None of Holdings and the Restricted Subsidiaries may make any Investment in
Unrestricted Subsidiaries except as described in the definition of
"Unrestricted Subsidiaries" set forth in Section 1.01.
SECTION 6.08. Mergers, Consolidations, Sales of Assets and Acquisitions.
Merge into or consolidate with any other person, or permit any other person to
merge into or consolidate with it, or sell, transfer, lease or otherwise
dispose of (in one transaction or in a series of transactions) all or any part
of its assets (whether now owned or hereafter acquired) or any capital stock of
any subsidiary, or purchase, lease or otherwise acquire (in one transaction or
a series of transactions) all or any substantial part of the assets of any
other person, except that this Section 6.08 shall not prohibit:
(a) the purchase and sale of property and assets in the ordinary
course of business by any Restricted Subsidiary;
(b) Sale and Lease-Back Transactions permitted by Section 6.06;
(c) Permitted Business Acquisitions;
(d) sales, leases or transfers from one Restricted Subsidiary of the
Borrower to the Borrower or to a Domestic Restricted Subsidiary;
(e) sales, leases or other dispositions of (i) inventory of the
Restricted Subsidiaries determined by the Board of Directors of the
Borrower to be no longer useful or necessary in the operation of the
businesses of the Restricted Subsidiaries and (ii) assets of operations
that were discontinued prior to the Closing Date;
(f) any Permitted Receivables Financing;
(g) sales, leases or other dispositions of equipment or real property
of the Restricted Subsidiaries determined by the Board of Directors of the
Borrower to be no longer useful or necessary in the operation of the
business of the Restricted Subsidiaries, provided that the Net Proceeds
thereof in excess of $1,000,000 shall be used to prepay the Term Loans,
Delayed Draw Term Loans and the Canadian Term Loans in accordance with
Section 2.12(e) or used to purchase replacement assets or properties used
for the same purpose as the equipment or real property disposed of within
12 months of the receipt thereof;
(h) any Restricted Subsidiary may merge with any other Restricted
Subsidiary, provided that (i) at the time of and immediately after giving
effect to any such merger no Default or Event of Default shall have
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occurred, (ii) the Borrower shall be the surviving corporation of any
merger involving the Borrower, and the Canadian Borrower shall be the
surviving corporation of any merger involving the Canadian Borrower and
(iii) no Restricted Subsidiary organized under the laws of a jurisdiction
outside the United States may merge with a Domestic Restricted Subsidiary
unless the Domestic Restricted Subsidiary is the surviving corporation;
and
(i) the Restricted Subsidiaries may sell or otherwise dispose of
assets having a fair market value, for all such transactions, not in
excess of 25% of the fair market value as determined by the Board of
Directors of the Borrower of the assets of the Restricted Subsidiaries at
the Closing Date, provided that (i) each such sale shall be for a
consideration determined in good faith by the Board of Directors of the
Borrower to be at least equal to the fair market value (if any) of the
asset sold, (ii) the aggregate amount of all noncash consideration
included in such sale proceeds may not exceed 15% of the fair market value
of the aggregate amount of all such sale proceeds; provided, however, that
obligations of the type referred to in clauses (a) and (b) of the
definition of "Permitted Investments" (without regard to the maturity or
the credit rating thereof) shall not be deemed non-cash proceeds if such
obligations are promptly sold for cash and the proceeds of such sale are
included in the calculation of Net Proceeds from such sale, (iii) the
aggregate Net Proceeds of all such sales and dispositions under this
clause (i) in excess of $50,000,000 are applied to repay the Term Loans,
the Canadian Term Loans and the Delayed Draw Term Loans in accordance with
Section 2.12(e) and the first $50,000,000 of such aggregate Net Proceeds
are either applied to the purchase of assets or properties used in the
business of the Borrower and its Restricted Subsidiaries as permitted by
Section 6.12 within 12 months of the receipt thereof or are applied to
repay the Term Loans, the Canadian Term Loans and the Delayed Draw Term
Loans in accordance with Section 2.12(e) and (iv) no Default or Event of
Default shall have occurred and be continuing immediately prior to or
after such sale. Upon receipt by Holdings or any Restricted Subsidiary of
Net Proceeds of any Specified Asset Sale occurring after the Closing Date,
Borrower shall promptly deliver a certificate of a Responsible Officer to
the Administrative Agent setting forth the amount of the Net Proceeds
which Borrower expects to reinvest in replacement assets or property
during the subsequent 12-month period which are not required to be applied
to the repayment of the Term Loans, the Canadian Term Loans and the
Delayed Draw Term Loans. On the first anniversary of the receipt of such
Net Proceeds, Borrower shall (i) deliver a certificate of a Responsible
Officer to the Administrative Agent certifying as to the amount and use of
such Net Proceeds actually reinvested in replacement assets or property
during the preceding 12-month period and (ii) deliver to the
Administrative Agent, for application in accordance with Section 2.12(e),
an amount equal to the remaining uninvested Net Proceeds; and
(j) Investments permitted by Section 6.07.
SECTION 6.09. Transactions with Affiliates and Stockholders. Sell or
transfer any property or assets to, or purchase or acquire any property or
assets of, or otherwise engage in any other transactions with, any of its
Affiliates (including Unrestricted Subsidiaries but excluding Domestic
Restricted Subsidiaries) or any known holder of 10% or more of any class of
capital stock of Holdings or any Unrestricted Subsidiary, except that Holdings
or any of the Restricted Subsidiaries may engage in any of the foregoing
transactions at prices and on terms and conditions not less favorable to each
than would prevail on an arm's-length basis from unrelated third parties;
provided that Holdings and the Restricted Subsidiaries may not pay any fees to
an Affiliate (including an Unrestricted Subsidiary) for the provision of
financial or advisory services if after giving effect thereto a Default or
Event of Default shall have occurred and is continuing.
SECTION 6.10. Subordinated Indebtedness. Amend or modify any
instruments, agreements or documents evidencing or related to any Permitted
Subordinated Indebtedness, unless, in the judgement of the Required Lenders,
any such amendment or modification does not substantially affect either the
rights or security interests granted to the Credit Agreement Creditors or the
Collateral Agent or the first and superior position of the Obligations owed to
the Credit Agreement Creditors relative to the second and inferior position of
the holders of the notes or other instruments evidencing the Permitted
Subordinated Indebtedness (without limiting the generality of the foregoing, it
is understood that any increase in interest, fees or other amounts payable in
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63
connection therewith, or any amendment that imposes additional covenants or
events of default or makes more restrictive the covenants or events of default
contained therein, shall require the consent of the Required Lenders).
SECTION 6.11. Amendment of Constitutive Documents; Change in Corporate
Structure. (i) Permit any amendment or modification to be made to the
certificate of incorporation or By-laws of Holdings or of any Restricted
Subsidiary if such amendment or modification is materially adverse to the
interests of the Lenders or (ii) permit any Restricted Subsidiary to issue any
capital stock or other equity interest to any person other than the Borrower or
its wholly owned subsidiaries.
SECTION 6.12. Business of Holdings and Restricted Subsidiaries. (a)
Engage at any time in any business or business activity other than the business
currently conducted by it and business activities reasonably incidental or
related thereto or (b) fail to maintain and operate such business in
substantially the manner in which it is presently conducted and operated (other
than as contemplated herein) if such failure would materially adversely affect
the Credit Agreement Creditors; provided, however, that the activities of
Holdings shall be limited to (i) the ownership of the stock of the Borrower
together with activities directly related thereto, (ii) the ownership of the
stock of Unrestricted Subsidiaries described in clause (ii) of the definition
of such term set forth in Section 1.01 together with activities directly
related thereto, (iii) performance of its obligations under the Loans Documents
and (iv) actions required by law to maintain its status as a public company.
SECTION 6.13. Restrictive Agreements. Enter into any indenture,
agreement, instrument or other arrangement which, directly or indirectly,
prohibits or restrains, or has the effect of prohibiting or restraining, or
imposes materially adverse conditions upon, the granting of Liens, the provi-
sion of Guarantees or the payment of dividends or the making of loans or
advances or transfers of property or assets by Holdings or any of the
Restricted Subsidiaries other than restrictions (i) on the granting of Liens on
assets that are encumbered by Liens permitted under clauses (b), (i), (k), (l)
or (r) of Section 6.04 or (ii) contained in agreements relating to Indebtedness
not in excess of $10,000,000 in the aggregate.
SECTION 6.14. Interest Coverage Ratio. In the case of Holdings, permit
the Interest Coverage Ratio for any period of four (or, if less, the number of
full fiscal quarters ending after the Closing Date) consecutive fiscal quarters
to be less than the ratio set forth below opposite the period which includes
the last day of such period of consecutive fiscal quarters:
Period: Amount:
August 1, 1994 - April 30, 1995 3.00 to 1.00
May 1, 1995 - January 31, 1996 3.25 to 1.00
February 1, 1996 - January 31, 1997 3.75 to 1.00
February 1, 1997 - January 31, 1998 4.25 to 1.00
Thereafter 4.75 to 1.00
SECTION 6.15. EBITDA. In the case of Holdings, until such time as
$175,000,000 of the Term Loans and Canadian Term Loans have permanently and
irrevocably been repaid, permit its EBITDA for any fiscal year to be less than
$175,000,000.
SECTION 6.16. Leverage Ratio. In the case of Holdings, permit the
Leverage Ratio as of the last day of any fiscal quarter occurring during any
period set forth below to be greater than the ratio set forth below for such
period:
Quarter Ending: Ratio:
October 31, 1994 3.75 to 1.00
January 31, 1995 3.50 to 1.00
April 30, 1995 3.50 to 1.00
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64
July 31, 1995 3.50 to 1.00
October 31, 1995 3.25 to 1.00
January 31, 1996 3.25 to 1.00
February 1, 1996 - January 31, 1997 3.00 to 1.00
February 1, 1997 - January 31, 1998 2.75 to 1.00
February 1, 1998 - January 31, 1999 2.50 to 1.00
Thereafter 2.25 to 1.00
SECTION 6.17. Current Ratio. In the case of Holdings, permit the Current
Ratio to be less than 1.25:1.00 on the last day of any fiscal quarter.
SECTION 6.18. Tax Sharing. File or consent to the filing of any
consolidated income tax return with any person (other than Holdings, the
Restricted Subsidiaries and Unrestricted Subsidiaries that have entered into
the existing Tax Sharing Agreements).
SECTION 6.19. Significant Subsidiaries. Permit the Significant
Subsidiaries to account for less than 85% of the consolidated assets of
Holdings at any time or 90% of the consolidated EBITDA of Holdings for any two
consecutive periods of four fiscal quarters.
SECTION 6.20. Inactive Subsidiaries. Permit any Inactive Subsidiary, at
any time, to fail to satisfy any of the criteria set forth in the definition of
Inactive Subsidiary in Section 1.01.
ARTICLE VII.
EVENTS OF DEFAULT
In case of the happening of any of the following events ("Events of
Default"):
(a) any representation or warranty made or deemed made in any Loan
Document, or any representation, warranty, statement or information
contained in any report, certificate, financial statement or other
instrument furnished in connection with or pursuant to any Loan Document,
shall prove to have been false or misleading in any material respect when
so made, deemed made or furnished;
(b) default shall be made in the payment of any principal of any Loan
when and as the same shall become due and payable, whether at the due date
thereof or at a date fixed for prepayment thereof or by acceleration
thereof or otherwise;
(c) default shall be made in the payment of any interest on any Loan
or reimbursement of any Letter of Credit Disbursement or any Fee or any
other amount (other than an amount referred to in (b) above) due under any
Loan Document, when and as the same shall become due and payable, and such
default shall continue unremedied for a period of five Business Days;
(d) default shall be made in the due observance or performance by the
Borrower, the Canadian Borrower or Holdings or any subsidiary thereof of
any covenant, condition or agreement contained in Section 2.12(e),
5.01(a), 5.05(a), 5.08 or 5.10 or in Article VI;
(e) default shall be made in the due observance or performance by the
Borrower, the Canadian Borrower or Holdings or subsidiary thereof of any
covenant, condition or agreement contained in any Loan Document (other
than those specified in (b), (c) or (d) above) and such default shall
continue unremedied for a period of 30 days in the case of Sections
5.01(b), 5.02, 5.09 and 5.13 and 15 days in the case of all others, in
each case after notice thereof from the Administrative Agent or any Lender
to Holdings, the Canadian Borrower or the Borrower;
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(f) Holdings, any Restricted Subsidiary or any Significant Subsidiary
shall (i) fail to pay any principal or interest, regardless of amount, due
in respect of Indebtedness having an aggregate principal or notional
amount in excess of $7,500,000, when and as the same shall become due and
payable, or (ii) fail to observe or perform any other term, covenant,
condition or agreement contained in any agreements or instruments
evidencing or governing any Indebtedness having an aggregate principal
amount in excess of $7,500,000 if the effect of any failure referred to in
this clause (ii) is to cause, or to permit the holder or holders of such
Indebtedness or a trustee on its or their behalf to cause, such
Indebtedness to become due prior to its stated maturity; or a termination
event or comparable event shall occur under the documents governing the
Permitted Receivables Financing entitling the persons financing the
receivables owned by the Finance Subsidiary to stop funding the purchase
of receivables of all sellers of receivables to the Finance Subsidiary;
(g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i)
relief in respect of the Borrower or Holdings or any Significant
Subsidiary, or of a substantial part of the property or assets of the
Borrower or Holdings or any Significant Subsidiary, under Title 11 of the
United States Code, as now constituted or hereafter amended, or any other
Federal or state bankruptcy, insolvency, receivership or similar law or
comparable foreign law, (ii) the appointment of a receiver, trustee,
custodian, sequestrator, conservator or similar official for the Borrower
or Holdings or any Significant Subsidiary or for a substantial part of the
property or assets of the Borrower or Holdings or any Significant
Subsidiary or (iii) the winding-up or liquidation of the Borrower or
Holdings or any Significant Subsidiary; and such proceeding or petition
shall continue undismissed for 60 days or an order or decree approving or
ordering any of the foregoing shall be entered;
(h) the Borrower or Holdings or any Significant Subsidiary shall (i)
voluntarily commence any proceeding or file any petition seeking relief
under Title 11 of the United States Code, as now constituted or hereafter
amended, or any other Federal or state bankruptcy, insolvency,
receivership or similar law or comparable foreign law, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner, any
proceeding or the filing of any petition described in (g) above, (iii)
apply for or consent to the appointment of a receiver, trustee, custodian,
sequestrator, conservator or similar official for the Borrower or Holdings
or any Significant Subsidiary or for a substantial part of the property or
assets of the Borrower or Holdings or any Significant Subsidiary, (iv)
file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (v) make a general assignment for the
benefit of creditors, (vi) become unable, admit in writing its inability
or fail generally to pay its debts as they become due or (vii) take any
action for the purpose of effecting any of the foregoing;
(i) one or more judgments for the payment of money in an aggregate
amount in excess of $7,500,000 (to the extent not covered by insurance)
shall be rendered against Holdings, any Restricted Subsidiary or any
Significant Subsidiary or any combination thereof and the same shall
remain undischarged or stayed for a period of 30 consecutive days during
which execution shall not be effectively stayed, or any action shall be
legally taken by a judgment creditor to levy upon assets or properties of
Holdings or any Restricted Subsidiary to enforce any such judgment;
(j) a Reportable Event or Reportable Events, or a failure to make a
required installment or other payment (within the meaning of Section
412(n)(1) of the Code), shall have occurred with respect to any Plan or
Plans that reasonably could be expected to result in liability of the
Borrower, any Guarantor or any of their ERISA Affiliates to the PBGC or to
a Plan in an aggregate amount exceeding $5,000,000 and, within 30 days
after the reporting of any such Reportable Event to the Administrative
Agent or after the receipt by the Administrative Agent of the statement
required pursuant to Section 5.06(b)(iii), the Administrative Agent shall
have notified the Borrower in writing that (i) the Required Lenders have
made a determination that, on the basis of such Reportable Event or
Reportable Events or the failure to make a required payment, there are
reasonable grounds (A) for the termination of such Plan or Plans by the
PBGC, (B) for the appointment by the appropriate United States District
Court of a trustee to administer such Plan or Plans or (C) for the
imposition of a lien in favor of a Plan and (ii) as a result thereof an
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Event of Default exists hereunder; or a trustee shall be appointed by a
United States District Court to administer any such Plan or Plans; or the
PBGC shall institute proceedings to terminate any Plan or Plans;
(k) (i) the Borrower, any Guarantor or any of their ERISA Affiliates
shall have been notified by the sponsor of a Multiemployer Plan that it
has incurred Withdrawal Liability to such Multiemployer Plan, (ii) the
Borrower, any Guarantor or such ERISA Affiliate does not have reasonable
grounds for contesting such Withdrawal Liability or is not in fact
contesting such Withdrawal Liability in a timely and appropriate manner
and (iii) the amount of the Withdrawal Liability specified in such notice,
when aggregated with all other amounts required to be paid to
Multiemployer Plans in connection with Withdrawal Liabilities (determined
as of the date or dates of such notification), exceeds $7,500,000 or
requires payments exceeding $7,500,000 in any year;
(l) the Borrower, any Guarantor or any of their ERISA Affiliates
shall have been notified by the sponsor of a Multiemployer Plan that such
Multiemployer Plan is in reorganization or is being terminated, within the
meaning of Title IV of ERISA, if solely as a result of such reorganization
or termination the aggregate annual contributions of the Borrower, the
Guarantors and their ERISA Affiliates to all Multiemployer Plans that are
then in reorganization or have been or are being terminated have been or
will be increased over the amounts required to be contributed to such
Multiemployer Plans for their most recently completed plan years by an
amount exceeding $7,500,000;
(m) there shall have occurred a Change in Control;
(n) (i) any Loan Document shall for any reason be asserted by
Holdings or any of its subsidiaries not to be a legal, valid and binding
obligation of the respective parties thereto, (ii) any security interest
or Lien purported to be created by the Pledge Agreement and to extend to
assets which are not immaterial to Holdings and its subsidiaries on a
consolidated basis shall for any reason (except to the extent resulting
from the negligent or wilful failure of the Collateral Agent to retain
possession of the applicable collateral) cease to be, or any security
interest or Lien purported to be created by the Pledge Agreement and to
extend to any assets of Holdings or its subsidiaries shall for any reason
be asserted by Holdings or any of its subsidiaries not to be, a valid,
first priority perfected security interest (subject to no Liens other than
Liens not prohibited by any applicable provision of the Loan Documents) in
such collateral (other than cash proceeds which are not identifiable
proceeds) or (iii) the Obligations and the guarantees thereof pursuant to
the Guarantee Agreement shall cease to constitute senior indebtedness
under the subordination provisions of any document or instrument
evidencing any Permitted Subordinated Indebtedness or such subordination
provisions shall be invalidated or otherwise cease to be a legal, valid
and binding obligation of the parties thereto, enforceable in accordance
with its terms;
(o) any Selling Stockholder shall fail to comply with any provision
of the arrangements described in Section 4.02(s); or
(p) the Finance Subsidiary shall engage in any business or activity
other than the purchase of receivables from the Restricted Subsidiaries
and the sale of such receivables and activities incidental thereto;
then, and in every such event (other than an event with respect to the Borrower
or the Canadian Borrower described in paragraph (g) or (h) above), and at any
time thereafter during the continuance of such event, the Administrative Agent
may, and at the request of the Required Lenders, shall, by notice to the
Borrower and the Canadian Borrower, take either or both of the following
actions, at the same or different times: (i) terminate forthwith the
Commitments and (ii) declare the Loans then outstanding to be forthwith due and
payable in whole or in part, whereupon the principal of the Loans so declared
to be due and payable, together with accrued interest thereon and any unpaid
accrued Fees and all other liabilities of the Borrower and the Canadian
Borrower accrued hereunder and under any other Loan Document, shall become
forthwith due and payable, without presentment, demand, protest or any other
notice of any kind, all of which are hereby expressly waived by the Borrower
and the Canadian Borrower, anything contained herein or in any other Loan
Document to the contrary notwithstanding; and in any event with respect to the
Borrower or the Canadian Borrower described in paragraph (g) or (h) above, the
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Commitments shall automatically terminate and the principal of the Loans then
outstanding, together with accrued interest thereon and any unpaid accrued Fees
and all other liabilities of the Borrower and the Canadian Borrower accrued
hereunder and under any other Loan Document, shall automatically become due and
payable, without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived by the Borrower and the Canadian
Borrower, anything contained herein or in any other Loan Document to the
contrary notwithstanding.
ARTICLE VIII.
THE ADMINISTRATIVE AGENT
In order to expedite the transactions contemplated by this Agreement,
Chemical Bank is hereby appointed to act as Administrative Agent and Collateral
Agent on behalf of the Lenders and the Issuing Banks. Each of the Lenders, and
each subsequent holder of any Note by its acceptance thereof, and each Issuing
Bank hereby irrevocably authorizes the Administrative Agent to take such
actions on behalf of such Lender or holder or the Issuing Bank, as applicable,
and to exercise such powers as are specifically delegated to the Administrative
Agent by the terms and provisions hereof and of the other Loan Documents
(including the power to execute and deliver the Intercreditor Agreement if and
when requested to do so by any holders of any Permitted Acquisition
Indebtedness), together with such actions and powers as are reasonably
incidental thereto. The Administrative Agent is hereby expressly authorized by
the Lenders and the Issuing Banks, without hereby limiting any implied
authority, (a) to receive on behalf of the Lenders all payments of principal of
and interest on the Loans and all other amounts due to the Lenders hereunder,
and promptly to distribute to each Lender its proper share of each payment so
received; (b) to give notice on behalf of each of the Lenders to the Borrower
or the Canadian Borrower of any Event of Default specified in this Agreement of
which the Administrative Agent has actual knowledge acquired in connection with
its agency hereunder; and (c) to distribute to each Lender and Issuing Bank
copies of all notices, financial statements and other materials delivered by
the Borrower or the Canadian Borrower pursuant to this Agreement as received by
the Administrative Agent. In acting as Collateral Agent Chemical Bank shall be
entitled to the rights and benefits, and subject to the obligations, set forth
for the Administrative Agent under this Article VII, mutatis mutandis, which
Article is hereby incorporated by reference, mutatis mutandis, in each of the
Guarantee Agreement and the Pledge Agreement.
Neither the Administrative Agent nor any Issuing Bank nor any of their
respective affiliates, directors, officers, employees or agents shall be liable
as such for any action taken or omitted by any of them except for its or his
own gross negligence or wilful misconduct, or be responsible for any statement,
warranty or representation herein or the contents of any document delivered in
connection herewith, or be required to ascertain or to make any inquiry
concerning the performance or observance by the Borrower or the Canadian
Borrower or any Guarantor of any of the terms, conditions, covenants or
agreements contained in any Loan Documents. The Administrative Agent shall not
be responsible to the Lenders or the holders of the Notes or the Issuing Bank
for the due execution (other than by the Administrative Agent), genuineness,
validity, enforceability (other than against the Administrative Agent) or
effectiveness of this Agreement, the Notes or any other Loan Documents or other
instruments or agreements. The Administrative Agent may deem and treat the
payee of any Note as the owner thereof for all purposes hereof until it shall
have received from the payee of such Note notice, given as provided herein, of
the transfer thereof in compliance with Section 9.04. The Administrative Agent
shall in all cases be fully protected in acting, or refraining from acting, in
accordance with written instructions signed by the Required Lenders (and the
Issuing Banks, with respect to Letters of Credit) and, except as otherwise
specifically provided herein, such instructions and any action or inaction
pursuant thereto shall be binding on all the Lenders and each subsequent holder
of any Note and the Issuing Banks. The Administrative Agent shall, in the
absence of knowledge to the contrary, be entitled to rely on any instrument or
document believed by it in good faith to be genuine and correct and to have
been signed or sent by the proper person or persons. Neither the
Administrative Agent nor the Issuing Banks nor any of their respective
directors, officers, employees or agents shall have any responsibility to the
Borrower or the Canadian Borrower on account of the failure of or delay in
performance or breach by any Lender (or, in the case of the Administrative
Agent, by any Issuing Bank) of any of its obligations hereunder or to any
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Lender (or, in the case of the Administrative Agent, to any Issuing Bank) on
account of the failure of or delay in performance or breach by any other Lender
or the Borrower, the Canadian Borrower or any Guarantor of any of their
respective obligations hereunder or under any other Loan Document or in
connection herewith or therewith. Each of the Administrative Agent and each
Issuing Bank may execute any and all duties hereunder by or through agents or
affiliates and shall be entitled to rely upon the advice of legal counsel
selected by it with respect to all matters arising hereunder and shall not be
liable for any action taken or suffered in good faith by it in accordance with
the advice of such counsel.
The Lenders hereby acknowledge that neither the Administrative Agent nor
any Issuing Bank shall be under any duty to take any discretionary action
permitted to be taken by it pursuant to the provisions of this Agreement unless
it shall be requested in writing to do so by the Required Lenders.
Subject to the appointment and acceptance of a successor Administrative
Agent as provided below, the Administrative Agent may resign at any time by
notifying the Lenders, the Issuing Bank, the Canadian Borrower and the
Borrower. Upon any such resignation, the Required Lenders shall have the right
to appoint a successor, with the consent of the Borrower (not to be
unreasonably withheld). If no successor shall have been so appointed by the
Required Lenders and shall have accepted such appointment within 30 days after
the retiring Administrative Agent gives notice of its resignation, then the
retiring Administrative Agent may, on behalf of the Lenders, appoint a
successor Administrative Agent, with the consent of the Borrower (not to be
unreasonably withheld), which shall be a bank with an office in New York, New
York, having a combined capital and surplus of at least $500,000,000 or an
Affiliate of any such bank which is also a bank. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor bank, such
successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent and the retiring
Administrative Agent shall be discharged from its duties and obligations
hereunder. After the Administrative Agent's resignation hereunder, the
provisions of this Article and Section 9.05 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Administrative Agent.
With respect to the Loans made by it hereunder and the Notes issued to it
and the Letter of Credit
participations acquired by it, each of the Administrative Agent and each
Issuing Bank in its individual capacity and not as Administrative Agent or
Issuing Bank, as the case may be, shall have the same rights and powers as any
other Lender and may exercise the same as though it were not the Administrative
Agent or an Issuing Bank, as the case may be, and the Administrative Agent and
its Affiliates and each Issuing Bank and its Affiliates may accept deposits
from, lend money to and generally engage in any kind of business with the
Borrower, the Canadian Borrower or any subsidiary or other Affiliate thereof as
if it were not the Administrative Agent or an Issuing Bank, as the case may be.
Each Lender recognizes that applicable laws, rules, regulations or
guidelines of Governmental Authorities may require the Administrative Agent to
determine whether the transactions contemplated hereby should be classified as
"highly leveraged" or assigned any similar or successor classification, and
that such determination may be binding upon the other Lenders. Each Lender
understands that any such determination shall be made solely by the
Administrative Agent based upon such factors (which may include, without
limitation, the Administrative Agent's internal policies and prevailing market
practices) as the Administrative Agent shall deem relevant and agrees that the
Administrative Agent shall have no liability for the consequences of any such
determination.
Each Lender agrees (i) to reimburse each of the Administrative Agent and,
if such Lender is a Revolving Lender, each Issuing Bank, on demand, in the
amount of its pro rata share (based on its Commitments hereunder or its
Revolving Credit Commitment, if any, in the case of reimbursement of any
Issuing Bank) of any reasonable expenses incurred for the benefit of the
Lenders by the Administrative Agent or, if applicable, such Issuing Bank,
including counsel fees and compensation of agents and employees paid for
services rendered on behalf of the Lenders, which shall not have been
reimbursed by the Borrower and (ii) to indemnify and hold harmless each of the
Administrative Agent and, if such Lender is a Revolving Lender, each Issuing
Bank and any of their respective directors, officers, employees or agents, on
demand, in the amount of such pro rata share, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against it in its capacity as the
Administrative Agent or an Issuing Bank, as the case may be, or any of them in
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69
any way relating to or arising out of this Agreement or any other Loan Document
or any action taken or omitted by it or any of them under this Agreement or any
other Loan Document, to the extent the same shall not have been reimbursed by
the Borrower or the Canadian Borrower; provided that no Lender shall be liable
to the Administrative Agent or any Issuing Bank for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the gross negligence or
wilful misconduct of the Administrative Agent or such Issuing Bank, as the case
may be, or any of their directors, officers, employees or agents.
Each Lender acknowledges that it has, independently and without reliance
upon the Administrative Agent, any Issuing Bank or any other Lender and based
on such documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the
Administrative Agent, any Issuing Bank or any other Lender and based on such
documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or
based upon this Agreement or any other Loan Document, any related agreement or
any document furnished hereunder or thereunder.
The Managing Agents shall have no rights or duties except as expressly set
forth in this Agreement. The Lead Managers shall have no rights or duties
under the Loan Documents.
ARTICLE IX.
MISCELLANEOUS
SECTION 9.01. Notices. Notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed or sent by telex or telecopy, as follows:
(a) if to Holdings or to the Borrower, to it at 701 McCullough Drive,
Charlotte, North Carolina 28262, Attention of Chief Financial Officer
(Telecopy No. 704-548-2330) with copies to 210 Madison Avenue, 6th Floor,
New York, New York 10016, Attention of General Counsel (Telecopy No.
212-578-1269);
(b) if to the Canadian Borrower, to it at 150 Collins Street, Farnham,
Quebec, J2N 2R6, Canada, Attention Controller (Telecopy and Elizabeth R.
Phillip (Telecopy No. 212-578-1269) No. 514 293 6657) with copies to the
Borrower, Attention of Chief Financial Officer (Telecopy No. 704-548-
2330);
(c) if to the Administrative Agent, to it at 270 Park Avenue (10th
Floor), New York, New York 10017, Attention of Susan Kjorlien (Telecopy
No. 212-270-3277);
(d) if to a Lender, to it at its address (or telecopy number) set
forth in Schedule 2.01 or in the Assignment and Acceptance pursuant to
which such Lender shall have become a party hereto.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by hand or overnight courier service or sent by
telex or telecopy, or on the date five Business Days after dispatch by
certified or registered mail if mailed, in each case delivered, sent or mailed
(properly addressed) to such party as provided in this Section 9.01 or in
accordance with the latest unrevoked direction from such party given in
accordance with this Section 9.01.
SECTION 9.02. Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrower, the Canadian Borrower and
the Guarantors herein and in the certificates or other instruments prepared or
delivered in connection with or pursuant to this Agreement or any other Loan
Document shall be considered to have been relied upon by the Lenders and shall
survive the making by the Lenders of the Loans, and the execution and delivery
to the Lenders of the Notes evidencing such Loans, and the issuance of the
Letters of Credit, regardless of any investigation made by the Lenders or on
their behalf, and shall continue in full force and effect as long as the
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principal of or any accrued interest on any Loan or any Fee or any other amount
payable under this Agreement or any other Loan Document is outstanding and
unpaid and so long as the Commitments have not been terminated. Without
prejudice to the survival of any other agreements contained herein,
indemnification and reimbursement obligations contained herein (including
pursuant to Sections 2.13, 2.15 and 9.05) shall survive the payment in full of
the principal and interest hereunder and the termination of the Commitments or
this Agreement.
SECTION 9.03. Binding Effect. This Agreement shall become effective when
it shall have been executed by the Borrower, the Canadian Borrower, Holdings
and the Administrative Agent and when the Administrative Agent shall have
received copies hereof which, when taken together, bear the signatures of each
Lender, and thereafter shall be binding upon and inure to the benefit of the
Borrower, Holdings, each Issuing Bank, the Administrative Agent and each Lender
and their respective successors and assigns, except that none of the Borrower,
the Canadian Borrower or Holdings shall have the right to assign its rights
hereunder or any interest herein without the prior consent of all the Lenders.
SECTION 9.04. Successors and Assigns. (a) Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and assigns of such party; and all covenants, promises
and agreements by or on behalf of the Borrower, the Canadian Borrower,
Holdings, the Administrative Agent, the Issuing Banks or the Lenders that are
contained in this Agreement shall bind and inure to the benefit of their
respective successors and assigns.
(b) Each Lender may assign to one or more assignees all or a portion of
its interests, rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans at the time owing to it and the Notes
and participations in Letters of Credit held by it, it being understood that
Lenders shall not be required to assign pro rata amounts of their Revolving
Credit Commitments, Delayed Draw Term Commitments, Canadian Term Commitments
and Term Commitments); provided, however, that (i) except in the case of an
assignment to a Lender or an Affiliate of such Lender, the Borrower and the
Administrative Agent must give their prior written consent to such assignment
(which consents shall not be unreasonably withheld or delayed), (ii) after
giving effect to such assignment, the aggregate amount of the Loans owing to,
and the Letter of Credit Exposure and unused Commitments of, the assignee and
its Affiliates and of the assignor (unless the assignor ceases to be a Lender)
and its Affiliates shall not be less than 10/625ths of the sum of the aggregate
amount of outstanding Loans, the Letter of Credit Exposure and the unused
Commitments at such time, (iii) the parties to each such assignment shall
execute and deliver to the Administrative Agent an Assignment and Acceptance,
together with the Note or Notes subject to such assignment and a processing and
recordation fee of $3,500 and (iv) the assignee, if it shall not be a Lender,
shall deliver to the Administrative Agent an Administrative Questionnaire.
Upon acceptance and recording pursuant to paragraph (e) of this Section 9.04,
from and after the effective date specified in each Assignment and Acceptance,
which effective date shall be at least five Business Days after the execution
thereof unless agreed otherwise by the Administrative Agent, (A) the assignee
thereunder shall be a party hereto and, to the extent of the interest assigned
by such Assignment and Acceptance, have the rights and obligations of a Lender
under this Agreement and (B) the assigning Lender thereunder shall, to the
extent of the interest assigned by such Assignment and Acceptance, be released
from its obligations under this Agreement (and, in the case of an Assignment
and Acceptance covering all or the remaining portion of an assigning Lender's
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of Sections
2.13, 2.15, 2.18 and 9.05, as well as to any Fees accrued for its account and
not yet paid).
(c) By executing and delivering an Assignment and Acceptance, the
assigning Lender thereunder and the assignee thereunder shall be deemed to
confirm to and agree with each other and the other parties hereto as follows:
(i) such assigning Lender warrants that it is the legal and beneficial owner of
the interest being assigned thereby free and clear of any adverse claim and
that its Term Loan Commitment, Delayed Draw Term Loan Commitment, Canadian Term
Commitment and Revolving Credit Commitment, and the outstanding balances of its
Term Loans, Delayed Draw Term Loans, Canadian Term Loans and Revolving Loans,
in each case without giving effect to assignments thereof which have not become
effective, are as set forth in such Assignment and Acceptance, (ii) except as
set forth in (i) above, such assigning Lender makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement, or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of this Agreement, any other Loan Document or any other instrument or
document furnished pursuant hereto, or the financial condition of the Borrower,
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the Canadian Borrower or any Guarantor or the performance or observance by the
Borrower, the Canadian Borrower or any Guarantor of any of its obligations
under this Agreement, any other Loan Document or any other instrument or
document furnished pursuant hereto; (iii) such assignee represents and warrants
that it is legally authorized to enter into such Assignment and Acceptance;
(iv) such assignee confirms that it has received copies of this Agreement,
together with copies of the most recent financial statements delivered pursuant
to this Agreement and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance; (v) such assignee will independently and without
reliance upon the Administrative Agent, any Issuing Bank, such assigning Lender
or any other Lender and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit decisions in
taking or not taking action under this Agreement; (vi) such assignee appoints
and authorizes the Administrative Agent to take such action as agent on its
behalf and to exercise such powers under this Agreement as are delegated to the
Administrative Agent by the terms hereof, together with such powers as are
reasonably incidental thereto; and (vii) such assignee agrees that it will
perform in accordance with their terms all the obligations which by the terms
of this Agreement are required to be performed by it as a Lender.
(d) The Administrative Agent shall maintain at its address referred to
in subsection 9.01 a copy of each Assignment and Acceptance delivered to it and
a register (the "Register") for the recordation of the names and addresses of
the Lenders and the Commitments of, and principal amount of the Loans owing to,
each Lender from time to time. The Administrative Agent shall separately
record the names and addresses of each Lender that holds Notes in the Register.
The Administrative Agent shall also record the amount of the Commitments of,
and the aggregate principal amount of Loans owing to, and the Letter of Credit
Exposure of, such Lender in the Register. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Borrower, the Canadian
Borrower, the Administrative Agent and the Lenders shall treat each person
whose name is recorded in the Register as the owner of the Notes, the
Commitments and the Loans and Letter of Credit Exposures recorded therein for
all purposes of this Agreement. The Register shall be available for inspection
by the Borrower, the Canadian Borrower the Issuing Bank and any Lender, at any
reasonable time and from time to time upon reasonable prior notice.
(e) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee together with the Note or Notes
subject to such assignment, an Administrative Questionnaire completed in
respect of the assignee (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b)
above and, if required, the written consent of the Borrower and the
Administrative Agent to such assignment, the Administrative Agent shall (i)
accept such Assignment and Acceptance, (ii) record the information contained
therein in the Register and (iii) give prompt notice thereof to the Lenders.
Within five Business Days after receipt of notice, the Borrower or the Canadian
Borrower, as the case may be, at its own expense, shall execute and deliver to
the Administrative Agent, in exchange for the surrendered Note or Notes, a new
Note or Notes to the order of such assignee in a principal amount equal to the
applicable Commitment assumed by it pursuant to such Assignment and Acceptance
and, if the assigning Lender has retained a Commitment, a new Note to the order
of such assigning Lender in a principal amount equal to the applicable
Commitment retained by it. Such new Note or Notes shall be in an aggregate
principal amount equal to the aggregate principal amount of such surrendered
Note; such new Notes shall be dated the date of the surrendered Notes which
they replace and shall otherwise be in substantially the form of Exhibit A-1,
A-2, A-3, A-4 or A-5 hereto, as appropriate. Canceled Notes shall be returned
to the Borrower or the Canadian Borrower, as the case may be. Notwithstanding
anything to the contrary contained herein, no assignment under Section 9.04(b)
of any rights or obligations under or in respect of the Notes or Loans
evidenced by the Notes shall be effective unless and until the Administrative
Agent shall have recorded such assignment in the Register. The Administrative
Agent shall record the name of the transferor, the name of the transferee, and
the amount of the transfer in the Register after receipt of all documents
required pursuant to this Section 9.04, including, without limitation, the
Notes being assigned in connection with such transfer, and such other documents
as the Administrative Agent may reasonably request.
(f) Each Lender may without the consent of the Borrower, the Canadian
Borrower, any Issuing Bank or the Administrative Agent sell participations to
one or more banks or other entities in all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans owing to it and the Notes and participations in Letters of Credit
held by it); provided, however, that (i) such Lender's obligations under this
Agreement shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such
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obligations, (iii) the participating banks or other entities shall be entitled
to the benefit of the cost protection provisions contained in Sections 2.13,
2.15, 2.18 and 9.06(a) to the same extent as if they were Lenders, provided,
that no such participating bank or entity shall be entitled to receive any
greater amount pursuant to such Sections than a Lender would have been entitled
to receive in respect of the amount of the participation sold by such Lender to
such participating bank or entity had no sale occurred, and (iv) the Borrower,
the Canadian Borrower, the Administrative Agent, the Issuing Banks and the
other Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement, and
such Lender shall retain the sole right to enforce the obligations of the
Borrower or the Canadian Borrower, as the case may be, relating to the Loans
and participations in Letters of Credit and to approve any amendment,
modification or waiver of any provision of this Agreement or any other Loan
Document (other than amendments, modifications or waivers decreasing any fees
payable hereunder or the amount of principal of or the rate at which interest
is payable on the Loans, extending any final maturity date, in each case in
respect of an Obligation in which the relevant participating bank or entity is
participating, or releasing all or substantially all of the Pledged Securities
or any Guarantor from the Guarantee Agreement unless all or substantially all
of the capital stock of such subsidiary is sold in a transaction permitted by
this Agreement). Each Lender will disclose the identity of its participants to
the Borrower and Administrative Agent if requested by the Borrower or the
Administrative Agent.
(g) Any Lender or participant may, in connection with any assignment or
participation or proposed assignment or participation pursuant to this Section
9.04, disclose to the assignee or participant or proposed assignee or partici-
pant any information relating to the Borrower or the Canadian Borrower
furnished to such Lender by or on behalf of the Borrower or the Canadian
Borrower; provided that, prior to any such disclosure, each such assignee or
participant or proposed assignee or participant shall execute an agreement
whereby such assignee or participant shall agree to be bound by Section 9.17.
(h) Any Lender may at any time assign all or any portion of its rights
under this Agreement and the Notes issued to it to a Federal Reserve Bank;
provided that no such assignment shall release a Lender from any of its
obligations hereunder.
(i) None of the Borrower, Holdings or the Canadian Borrower shall assign
or delegate any of its rights or duties hereunder.
SECTION 9.05. Expenses; Indemnity. (a) The Borrower agrees to pay all
reasonable out-of-pocket expenses incurred by the Administrative Agent in
connection with the preparation of this Agreement and the other Loan Documents,
or by the Administrative Agent in connection with the syndication of the
Commitments or the administration of this Agreement, or in connection with any
amendments, modifications or waivers of the provisions hereof or thereof
(whether or not the transactions hereby contemplated shall be consummated) or
incurred by the Administrative Agent or any Lender in connection with the
enforcement or protection of their rights in connection with this Agreement and
the other Loan Documents or in connection with the Loans made or the Notes
issued hereunder, including the reasonable fees, charges and disbursements of
Simpson Thacher & Bartlett, counsel for the Administrative Agent, and, in
connection with any such enforcement or protection, the reasonable fees,
charges and disbursements of any other counsel (including the reasonable
allocated costs of internal counsel if a Lender elects to use internal counsel
in lieu of outside counsel) for the Administrative Agent, any Issuing Bank or
any Lender (but no more than one such counsel for any Lender).
(b) The Borrower agrees to indemnify the Administrative Agent, each
Issuing Bank, each Lender and each of their respective directors, officers,
employees and agents (each such person being called an "Indemnitee") against,
and to hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses, including reasonable counsel fees, charges
and disbursements, incurred by or asserted against any Indemnitee arising out
of, in any way connected with, or as a result of (i) the execution or delivery
of this Agreement or any other Loan Document or any agreement or instrument
contemplated thereby, the performance by the parties thereto of their
respective obligations thereunder or the consummation of the Recapitalization
Transactions and the other transactions contemplated thereby, (ii) the use of
the proceeds of the Loans or the use of any Letter of Credit or (iii) any
claim, litigation, investigation or proceeding relating to any of the fore-
going, whether or not any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses are determined by a
court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or wilful misconduct of such Indemnitee
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(treating, for this purpose only, any Lender and its directors, officers,
employees and agents as a single Indemnitee). Subject to and without limiting
the generality of the foregoing sentence, the Borrower agrees to indemnify each
Indemnitee against, and hold each Indemnitee harmless from, any Environmental
Claim, and any and all losses, claims, damages, liabilities and related
expenses, including reasonable counsel or consultant fees, charges and
disbursements, incurred by or asserted against any Indemnitee (and arising out
of, or in any way connected with or as a result of, any of the events described
in clause (i), (ii) or (iii) of the preceding sentence) arising out of, in any
way connected with, or as a result of (i) any Environmental Claim, (ii) any
violation of any Environmental Law, or (iii) any act, omission, event or
circumstance (including the actual, proposed or threatened, release, removal,
disposition, discharge or transportation, storage, holding, existence,
generation, processing, abatement, handling or presence on, into, from or under
any present, past or future property of Holdings or any of its subsidiaries of
any Contaminant), regardless of whether the act, omission, event or
circumstance constituted a violation of Environmental Law at the time of its
existence or occurrence; provided that such indemnity shall not, as to any
Indemnitee, be available to the extent that such Environmental Claim is, or
such, losses, claims, damages, liabilities or related expenses are, determined
by a court of competent jurisdiction by final and nonappealable judgment to
have resulted from the gross negligence or wilful misconduct of such Indemnitee
or any of its employers, officers, directors, employees or agents.
(c) The Borrower shall be entitled to assume the defense of any action
for which indemnification is sought hereunder with counsel of its choice at its
expense (in which case the Borrower shall not thereafter be responsible for the
fees and expenses of any separate counsel retained by an Indemnitee except as
set forth below); provided, however, that such counsel shall be reasonably
satisfactory to each such Indemnitee. Notwithstanding the Borrower's election
to assume the defense of such action, each Indemnitee shall have the right to
employ separate counsel and to participate in the defense of such action, and
the Borrower shall bear the reasonable fees, costs, and expenses of such
separate counsel, if (i) the use of counsel chosen by the Borrower to represent
such Indemnitee would present such counsel with a conflict of interest; (ii)
the actual or potential defendants in, or targets of, any such action include
both the Borrower and such Indemnitee and such Indemnitee shall have reasonably
concluded that there may be legal defenses available to it that are different
from or additional to those available to the Borrower (in which case the
Borrower shall not have the right to assume the defense or such action on
behalf of such Indemnitee); (iii) the Borrower shall not have employed counsel
reasonably satisfactory to such Indemnitee to represent it within a reasonable
time after notice of the institution of such action; or (iv) the Borrower shall
authorize such Indemnitee to employ separate counsel at the Borrower's expense.
The Borrower will not be liable under this Agreement for any amount paid by an
Indemnitee to settle any claims or actions if the settlement is entered into
without the Borrower's consent, which consent may not be withheld unless such
settlement is unreasonable in light of such claims or actions against, and
defenses available to, such Indemnitee.
(d) Holdings, the Canadian Borrower and the Borrower shall not, and
shall not permit any of their subsidiaries to, bring any demand, claim, cost
recovery or other action they may now or hereafter have against any Indemnitee
resulting from any Environmental Claim; provided that this paragraph (d) shall
not, as to any Indemnitee, apply to the extent that such Environmental Claim
has been determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the gross negligence or wilful
misconduct of such Indemnitee or any of its employers, directors, officers,
employees or agents.
(e) Notwithstanding anything to the contrary in this Section 9.05, this
Section 9.05 shall not apply to taxes, it being understood that the Borrower's
only obligations with respect to taxes shall arise under Sections 2.13 and 2.18
and Section 19 of the Guarantee Agreement.
(f) The provisions of this Section 9.05 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Obligations, the invalidity or unenforceability of any
term or provision of this Agreement or any other Loan Document, or any
investigation made by or on behalf of the Administrative Agent, any Issuing
Bank or any Lender. All amounts due under this Section 9.05 shall be payable
on written demand therefor.
<PAGE>
74
SECTION 9.06. Right of Setoff; Sharing. (a) If an Event of Default
shall have occurred and be continuing, each Lender (including each Issuing
Bank) is hereby authorized at any time and from time to time, to the fullest
extent permitted by law, to set off and apply any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by such Lender to or for the credit or the
account of the Borrower or the Canadian Borrower against any of and all the
obligations of the Borrower or the Canadian Borrower now or hereafter existing
under this Agreement and other Loan Documents held by such Lender, irrespective
of whether or not such Lender shall have made any demand under this Agreement
or such other Loan Document and although such obligations may be unmatured.
The rights of each Lender under this Section are in addition to other rights
and remedies (including other rights of setoff) which such Lender may have.
(b) If any Lender (a "benefitted Lender") shall at any time receive
any payment of all or part of its Loans or interest in Letters of Credit, or
interest thereon, then due, or receive any collateral in respect thereof
(whether voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in paragraph (g) or (h) of Article VII,
or otherwise), in a greater proportion than any such payment to or collateral
received by any other Lender, if any, in respect of such other Lender's Loans
and interests in Letters of Credit, or interest thereon, then due, such
benefitted Lender shall purchase for cash from the other Lenders a
participating interest in such portion of each such other Lender's Loans and
interests in Letters of Credit, or shall provide such other Lenders with the
benefits of any such collateral, or the proceeds thereof, as shall be necessary
to cause such benefitted Lender to share the excess payment or benefits of such
collateral or proceeds ratably with each of the Lenders; provided, however,
that if all or any portion of such excess payment or benefits is thereafter
recovered from such benefitted Lender, such purchase shall be rescinded, and
the purchase price and benefits returned, to the extent of such recovery, but
without interest.
SECTION 9.07. Applicable Law. THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK.
SECTION 9.08. Waivers; Amendment. (a) No failure or delay of the
Administrative Agent, the Issuing Bank or any Lender in exercising any power or
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any other or
further exercise thereof or the exercise of any other right or power. The
rights and remedies of the Administrative Agent, the Issuing Banks and the
Lenders hereunder and under the other Loan Documents are cumulative and are not
exclusive of any rights or remedies which they would otherwise have. No waiver
of any provision of this Agreement or any other Loan Document or consent to any
departure by the Borrower, the Canadian Borrower or Holdings therefrom shall in
any event be effective unless the same shall be permitted by paragraph (b)
below, and then such waiver or consent shall be effective only in the specific
instance and for the purpose for which given. No notice or demand on the
Borrower, the Canadian Borrower or Holdings in any case shall entitle the
Borrower to any other or further notice or demand in similar or other
circumstances.
(b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrower, the Canadian Borrower and the Required Lenders;
provided, however, that no such agreement shall (i) decrease the principal
amount of, or extend the final maturity of, or waive or excuse any such payment
or any part thereof, or decrease the rate of interest on any Loan or any Letter
of Credit Disbursement, without the prior written consent of each Lender
affected thereby, (ii) extend any Term Loan Repayment Date or Delayed Draw Term
Loan Repayment Date or Canadian Term Loan Repayment Date (other than, in each
case, final maturity) or any other date on which principal of the Loans is due,
or extend any date on which payment of interest on any Loan or reimbursement of
any Letter of Credit Disbursement is due, without the prior written consent of
(A) in the case of Term Loans, Canadian Term Loans or Delayed Draw Terms Loans,
Lenders with Term Loans, Canadian Term Loans or Delayed Draw Term Loans, as the
case may be, representing at least 80% of the aggregate principal amount of the
Term Loans, Canadian Term Loans and Delayed Draw Term Loans then outstanding or
(B) in the case of Loans under the Revolving Credit Commitments and Letter of
Credit Disbursements, Lenders with Revolving Credit Commitments representing at
least 80% of the aggregate Revolving Credit Commitments then in effect, (iii)
increase or extend the Commitment or decrease the Commitment Fees or Letter of
Credit Fees or other fees of any Lender without the prior written consent of
such Lender, or (iv) amend or modify the provisions of Section 2.09(c) or 2.16,
the provisions of this Section or the definition of "Required Lenders", or
<PAGE>
75
release substantially all the Pledged Securities from the Lien of the Pledge
Agreement or release any Guarantor from the Guarantee Agreement unless all or
substantially all of the capital stock of such subsidiary is sold in a
transaction permitted by this Agreement, without the prior written consent of
each Lender; provided further that no such agreement shall amend, modify or
otherwise affect the rights or duties of the Administrative Agent or the
Issuing Banks hereunder without the prior written consent of the Administrative
Agent or the Issuing Banks acting as such at the effective date of such
agreement, as the case may be. Each Lender and each holder of a Note shall be
bound by any waiver, amendment or modification authorized by this Section
regardless of whether its Note shall have been marked to make reference
thereto, and any consent by any Lender or holder of a Note pursuant to this
Section shall bind any person subsequently acquiring a Note from it, whether or
not such Note shall have been so marked.
SECTION 9.09. Interest Rate Limitation. Notwithstanding anything herein
or in the Notes to the contrary, if at any time the applicable interest rate,
together with all fees and charges which are treated as interest under appli-
cable law (collectively the "Charges"), as provided for herein or in any other
document executed in connection herewith, or otherwise contracted for, charged,
received, taken or reserved by any Lender, shall exceed the maximum lawful rate
(the "Maximum Rate") which may be contracted for, charged, taken, received or
reserved by such Lender in accordance with applicable law, the rate of interest
payable under the Note held by such Lender, together with all Charges payable
to such Lender, shall be limited to the Maximum Rate, provided that such excess
amount shall be paid to such Lender on the subsequent payment dates to the
extent not exceeding the legal limitation.
SECTION 9.10. Entire Agreement. This Agreement, the other Loan Documents
and the agreements regarding certain Fees referred to herein constitute the
entire contract between the parties relative to the subject matter hereof. Any
previous agreement among or representations from the parties with respect to
the subject matter hereof is superseded by this Agreement and the other Loan
Documents. Nothing in this Agreement or in the other Loan Documents, expressed
or implied, is intended to confer upon any party other than the parties hereto
and thereto any rights, remedies, obligations or liabilities under or by reason
of this Agreement or the other Loan Documents.
SECTION 9.11. Waiver of Jury Trial. Each party hereto hereby waives, to
the fullest extent permitted by applicable law, any right it may have to a
trial by jury in respect of any litigation directly or indirectly arising out
of, under or in connection with this Agreement or any of the other Loan
Documents. Each party hereto (a) certifies that no representative, agent or
attorney of any other party has represented, expressly or otherwise, that such
other party would not, in the event of litigation, seek to enforce the
foregoing waiver and (b) acknowledges that it and the other parties hereto have
been induced to enter into this Agreement and the other Loan Documents, as
applicable, by, among other things, the mutual waivers and certifications in
this Section 9.11.
SECTION 9.12. Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Document should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby. The parties shall
endeavor in good-faith negotiations to replace the invalid, illegal or
unenforceable provisions with valid provisions the economic effect of which
comes as close as possible to that of the invalid, illegal or unenforceable
provisions.
SECTION 9.13. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract, and shall become effec-
tive as provided in Section 9.03.
SECTION 9.14. Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of
this Agreement and are not to affect the construction of, or to be taken into
consideration in interpreting, this Agreement.
<PAGE>
76
SECTION 9.15. Jurisdiction; Consent to Service of Process. (a) Each of
the Borrower, the Canadian Borrower and Holdings hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any New York State court or Federal court of the United States
of America sitting in New York City, and any appellate court from any thereof,
in any action or proceeding arising out of or relating to this Agreement or the
other Loan Documents, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in such New York State or, to the extent permitted by law, in such
Federal court. Each of the parties hereto agrees that a final judgment in any
such action or proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
Nothing in this Agreement shall affect any right that any Lender may otherwise
have to bring any action or proceeding relating to this Agreement or the other
Loan Documents against the Borrower or Holdings or their properties in the
courts of any jurisdiction.
(b) Each of the Borrower, the Canadian Borrower and Holdings hereby
irrevocably and unconditionally waives, to the fullest extent they may legally
and effectively do so, any objection which it may now or hereafter have to the
laying of venue of any suit, action or proceeding arising out of or relating to
this Agreement or the other Loan Documents in any New York State or Federal
court. Each of the parties hereto hereby irrevocably waives, to the fullest
extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.01. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
SECTION 9.16. Conversion of Currencies. (a) If, for the purpose of
obtaining judgment in any court, it is necessary to convert a sum due hereunder
or under any other Loan Document in dollars into another currency, the parties
hereto agree, to the fullest extent that they may legally and effectively do
so, that the rate of exchange used shall be that at which in accordance with
normal banking procedures the Administrative Agent could purchase dollars with
such other currency in New York, New York, on the Business Day immediately
preceding the day on which final judgment is given.
(b) The obligation of each of the Borrower and the Canadian Borrower in
respect of any sum due to the Administrative Agent, any Lender or any Issuing
Bank hereunder or under any other Loan Document in US dollars shall, to the
extent permitted by applicable law, notwithstanding any judgment in a currency
other than US dollars, be discharged only to the extent that on the Business
Day following receipt of any sum adjudged to be so due in the judgment currency
the Administrative Agent, such Lender or such Issuing Bank may in accordance
with normal banking procedures purchase US dollars in the amount originally due
to the Administrative Agent, such Lender or such Issuing Bank with the judgment
currency. If the amount of US dollars so purchased is less than the sum
originally due to the Administrative Agent, such Lender or such Issuing Bank,
the Borrower agrees, as a separate obligation and notwithstanding any such
judgment, to indemnify the Administrative Agent, such Lender or such Issuing
Bank against the resulting loss.
SECTION 9.17. Confidentiality. Each of the Lenders, the Issuing Banks
and the Administrative Agent agrees that it shall maintain in confidence any
information relating to the Borrower and the Canadian Borrower furnished to it
by or on behalf of the Borrower or the Canadian Borrower (other than
information that (x) has become generally available to the public other than as
a result of a disclosure by such party, (y) has been independently developed by
such party without violating this Section or (z) was available to such party
from a third party having, to such party's knowledge, no obligation of
confidentiality to the Borrower or the Canadian Borrower) and shall not reveal
the same other than (i) to its directors, officers, employees and advisors with
a need to know and (ii) as contemplated by Section 9.04(g), except: (a) to the
extent necessary to comply with law or any legal process or the requirements of
<PAGE>
77
any Governmental Authority or of any securities exchange on which securities of
the disclosing party or any Affiliate of the disclosing party are listed or
traded, (b) as part of normal reporting or review procedures to Governmental
Authorities or its parent companies, Affiliates or auditors and (c) in order to
enforce its rights under any Loan Document in a legal proceeding.
IN WITNESS WHEREOF, the Borrower, the Canadian Borrower Holdings, the
Administrative Agent, and the Lenders have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
COLLINS & AIKMAN PRODUCTS CO.
by
--------------------------
Name:
Title:
COLLINS & AIKMAN CORPORATION
by
--------------------------
Name:
Title:
WCA CANADA INC.
by
---------------------------
Name:
Title:
CHEMICAL BANK, as
Administrative Agent
and Collateral Agent and as
a Lender
by
--------------------------
Name:
Title:
CONTINENTAL BANK, N.A., as
Managing Agent
and as a Lender
by
--------------------------
Name:
Title:
<PAGE>
78
NATIONSBANK, N.A., as Managing
Agent
and as a Lender
by
--------------------------
Name:
Title:
BANK OF AMERICA NATIONAL TRUST
& SAVINGS
ASSOCIATION, as Lead Manager
and as a Lender
by
--------------------------
Name:
Title:
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH, as Lead Manager and
as a Lender
by
--------------------------
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN,
LTD.,
as Lead Manager and as a
Lender
by
--------------------------
Name:
Title:
THE LONG-TERM CREDIT BANK OF
JAPAN,
LTD., as Lead Manager and as
a Lender
by
--------------------------
Name:
Title:
THE TORONTO-DOMINION BANK,
as Lead Manager and as a
Lender
by
--------------------------
Name:
Title:
<PAGE>
79
THE FIRST NATIONAL BANK OF
BOSTON,
as a Lender
by
--------------------------
Name:
Title:
BANK OF SCOTLAND, as a Lender
by
--------------------------
Name:
Title:
THE BANK OF TOKYO TRUST
COMPANY,
as a Lender
by
--------------------------
Name:
Title:
BANQUE PARIBAS, as a Lender
by
--------------------------
Name:
Title:
BARCLAYS BANK PLC, as a Lender
by
--------------------------
Name:
Title:
BRANCH BANKING AND TRUST
COMPANY,
as a Lender
by
--------------------------
Name:
Title:
<PAGE>
80
CANADIAN IMPERIAL BANK OF
COMMERCE, as a Lender
by
--------------------------
Name:
Title:
COMPAGNIE FINANCIERE DE CIC ET
DE
L'UNION EUROPEENE, as a
Lender
by
--------------------------
Name:
Title:
THE NIPPON CREDIT BANK, LTD.,
as a Lender
by
--------------------------
Name:
Title:
SOCIETE GENERALE, as a Lender
by
--------------------------
Name:
Title:
SOCIETY NATIONAL BANK, as a
Lender
by
--------------------------
Name:
Title:
THE TRAVELERS INSURANCE
COMPANY,
as a Lender
by
--------------------------
Name:
Title:
<PAGE>
81
THE TRAVELERS INDEMNITY
COMPANY
by
--------------------------
Name:
Title:
WACHOVIA BANK OF NORTH
CAROLINA,
N.A., as a Lender
by
--------------------------
Name:
Title:
WELLS FARGO BANK, as a Lender
by
--------------------------
Name:
Title:
VAN KAMPEN MERRIT PRIME RATE
INCOME
TRUST, as a Lender
by
--------------------------
Name:
Title:
ARAB BANKING CORPORATION, as a
Lender
by
--------------------------
Name:
Title:
BANK OF IRELAND, as a Lender
by
--------------------------
Name:
Title:
<PAGE>
82
THE BANK OF NEW YORK, as a
Lender
by
--------------------------
Name:
Title:
CREDITANSTALT CORPORATE
FINANCE, INC.,
as a Lender
by
--------------------------
Name:
Title:
by
--------------------------
Name:
Title:
CRESTAR BANK, as a Lender
by
--------------------------
Name:
Title:
FIRST UNION NATIONAL BANK OF
NORTH
CAROLINA, as a Lender
by
--------------------------
Name:
Title:
FUJI BANK, as a Lender
by
--------------------------
Name:
Title:
GIROCREDIT BANK, as a Lender
by
--------------------------
Name:
Title:
<PAGE>
83
MIDLAND BANK, as a Lender
by
--------------------------
Name:
Title:
THE MITSUBISHI TRUST AND
BANKING
CORPORATION, as a Lender
by
--------------------------
Name:
Title:
NATIONAL CITY BANK, as a
Lender
by
--------------------------
Name:
Title:
NBD BANK, N.A., as a Lender
by
--------------------------
Name:
Title:
THE SUMITOMO TRUST & BANKING
CO., LTD.
New York Branch, as a Lender
by
--------------------------
Name:
Title:
UNITED STATES NATIONAL BANK OF
OREGON, as a
Lender
by
--------------------------
Name:
Title:
<PAGE>
84
THE YASUDA TRUST & BANKING
CO., LTD.,
as a Lender
by
--------------------------
Name:
Title:
CRESCENT/MACH 1 PARNTERS, L.P.
By its General Partner
CRESCENT MACH 1 G.P.
CORPORATION
By its attorney-in-fact
CRESCENT CAPITAL CORPORATION
by
--------------------------
Name:
Title:
<PAGE>
SCHEDULE 1.01(A) TO
CREDIT AGREEMENT
Applicable Margin
Eurodollar
Ratios Loan Margin ABR Loan Margin
------ --------------- ---------------
Leverage Ratio 1-3/4% 3/4% of 1%
greater than 2.75:1
or
Interest Coverage
Ratio less than 4.00
("Level I")
Leverage Ratio less 1-1/2% 1/2 of 1%
than or equal to
2.75:1
and
Interest Coverage
Ratio greater than
or equal to 4.00
("Level II")
Leverage Ratio less 1-1/4% 1/4 of 1%
than or equal to
2.25:1
and
Interest Coverage
Ratio greater than
5.75:1 ("Level III")
Leverage Ratio less 1% 0%
than or equal to
2.00:1
and
Interest Coverage
Ratio greater than
or equal to 6.75:1
("Level IV")
For purposes of the foregoing, the Applicable Margin for any date shall be
determined by reference to the Leverage Ratio and Interest Coverage Ratio
as of the last day of the Borrower's fiscal quarter most recently ended as
of such date and any change in the Applicable Margin shall become effective
upon the delivery to the Administrative Agent of a certificate of a
Responsible Officer of the Borrower (which certificate may be delivered
prior to delivery of the relevant financial statements) with respect to the
financial statements to be delivered, pursuant to Section 5.04 for the most
recently ended fiscal quarter (a) setting forth in reasonable detail the
calculation of the Interest Coverage Ratio and Leverage Ratio for and at
the end of such fiscal quarter and (b) stating that the signer has reviewed
the terms of this Agreement and other Loan Documents and has made, or
caused to be made under his or her supervision, a review in reasonable
detail of the transactions and condition of Holdings and its Subsidiaries
during the accounting period, and that the signer does not have knowledge
of the existence as at the date of such officers' certificate of any Event
of Default or Default and shall apply (i) to ABR Loans outstanding on such
delivery date or made on and after such delivery date and (ii) to
Eurodollar Loans made on and after such delivery date; provided, however,
that if the proceeds of such Loans are used to finance a Permitted Business
Acquisition, and either the Leverage Ratio or Interest Coverage Ratio,
after giving effect to such Permitted Business Acquisition on a pro forma
basis, would result in a change in the Applicable Margin, such change shall
become effective for all purposes simultaneously with the making of such
Loans and shall apply (i) to ABR Loans outstanding on such date or made on
or after such date and (ii) to Eurodollar Loans made on or after such date.
It is understood that the foregoing certificate of a Responsible Officer
<PAGE>
2
shall be permitted to be delivered prior to, but in no event later than,
the time of the actual delivery of the financial statements required to be
delivered pursuant to Section 5.04. Notwithstanding the foregoing, at any
time during which the Borrower has failed to deliver the Compliance
Certificate with respect to a fiscal quarter following the date the
delivery thereof is due, the Leverage Ratio and Interest Coverage Ratio
shall be deemed, solely for the purposes of this definition, to be greater
than 2.75:1 and less than 4.00:1, respectively, until such time as Borrower
shall deliver such Compliance Certificate.
<PAGE>
SCHEDULE 1.01(B) TO
CREDIT AGREEMENT
Applicable Prepayment Percentage
Part I
Applicable Prepayment
Applicable Level Percentage
---------------- ------------------------
Level I 75%
Level II 50%
Level III 25%
Level IV 10%
Part II
Notwithstanding the foregoing, if the principal of the Term Loans and Canadian
Term Loans is permanently repaid in the amounts set forth below, the Applicable
Prepayment Percentage shall be based on the current Applicable Level increased
by the number of additional Levels set forth below (but not above Applicable
Level IV):
Aggregate Term Loans
and Canadian Term Number of Additional
Loans Repaid Levels
-------------------- --------------------
$150,000,000 1
225,000,000 2
325,000,000 3
<PAGE>
SCHEDULE 2.11(a) TO
CREDIT AGREEMENT
Term Loan Amortization Schedule
Term Loan Repayment Date Aggregate Repayment
-------------------
Quarterly Anniversary of Closing Date
-------------------------------------
5 $ 6,250,000
6 6,250,000
7 6,250,000
8 6,250,000
9 11,250,000
10 11,250,000
11 11,250,000
12 11,250,000
13 16,250,000
14 16,250,000
15 16,250,000
16 16,250,000
17 18,750,000
18 18,750,000
19 18,750,000
20 18,750,000
21 20,000,000
22 20,000,000
23 20,000,000
24 20,000,000
25 20,000,000
26 20,000,000
27 20,000,000
28 20,000,000
29 20,000,000
30 15,000,000
Canadian Term Loan Amortization Schedule
Canadian Term Loan Repayment Date Aggregate
Quarterly Anniversary of Closing Date Repayment
------------------------------------- ---------
30 5,000,000
31 20,000,000
32 20,000,000
EXHIBIT 4.6
RESTATED CERTIFICATE OF INCORPORATION
of
COLLINS & AIKMAN CORPORATION
Under Section 245 of the General Corporation Law
------------------------------------------------
of the State of Delaware
------------------------
This Restated Certificate of Incorporation of
Collins & Aikman Corporation (originally incorporated under
the name WCI Holdings Corporation) amends and restates such
corporation's Certificate of Incorporation, as amended,
which was originally filed with the Secretary of State of
the State of Delaware on September 21, 1988, and was duly
adopted in the manner and by the vote prescribed by
Section 242, in accordance with the provisions of
Section 245 and Section 228 of the General Corporation Law
of the State of Delaware.
FIRST: The name of the Corporation is Collins &
Aikman Corporation (the "Corporation").
SECOND: The address of the registered office of
the Corporation in the State of Delaware is 32 Loockerman
Square, Suite L-100, in the City of Dover, County of Kent.
The name of the registered agent at such registered office
is The Prentice-Hall Corporation System, Inc.
THIRD: The purpose of the Corporation is to
engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of the
State of Delaware.
FOURTH: The total number of shares of stock
which the Corporation shall have authority to issue is
166,000,000, consisting of:
(a) 150,000,000 shares of Common Stock, par value
$0.01 per share, which shall be designated "Common Stock".
Each share of Common Stock shall be entitled to one vote per
share; and
(b) 16,000,000 shares of Preferred Stock, par
value $0.01 per share ("Preferred Stock"). The Board of
Directors of the Corporation is hereby expressly authorized
to provide for the issuance of shares of Preferred Stock in
one or more series, by resolution or resolutions and by
<PAGE>
2
filing a certificate pursuant to the applicable laws of the
State of Delaware (any such certificate a "Preferred Stock
Designation"), 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 series and the qualifications, limitations or
restrictions thereof. Before any shares of any such series
are issued, the Board of Directors shall fix, and hereby is
expressly empowered to fix, the provisions of the shares
thereof including, but not limited to, the following:
(1) the distinctive designation of such series,
the number of shares to constitute such series and the
stated value thereof if different from the par value
thereof;
(2) whether the shares of such series shall have
voting rights, in addition to any voting rights
provided by law, and, if so, the terms of such voting
rights, which may be general or limited;
(3) the dividends, if any, payable on such
series, whether any such dividends shall be cumulative,
and, if so, from what dates, the conditions and dates
upon which such dividends shall be payable, the
preference or relation which such dividends shall bear
to the dividends payable on any shares of stock of any
other class or any other series of this class;
(4) whether the shares of such series shall be
subject to redemption by the Corporation and, if so,
the times, prices and other conditions of such
redemption;
(5) the amount or amounts payable upon shares of
such series upon, and the rights of the holders of such
series in, the voluntary or involuntary liquidation,
dissolution or winding-up, or upon any distribution of
the assets, of the Corporation;
(6) whether the shares of such series shall be
subject to the operation of a retirement or sinking
fund and, if so, the extent to and manner in which any
such retirement or sinking fund shall be applied to the
purchase or redemption of the shares of such series for
retirement or other corporate purposes and the terms
and provisions relative to the operation thereof;
<PAGE>
3
(7) whether the shares of such series shall be
convertible into, or exchangeable for, shares of stock
of any other class or any other series of this class or
any other securities and, if so, the price or prices or
the rate or rates of conversion or exchange and the
method, if any, of adjusting the same, and any other
terms and conditions of conversion or exchange;
(8) the limitations and restrictions, if any, to
be effective while any shares of such series are
outstanding upon the payment of dividends or the making
of other distributions on, and upon the purchase,
redemption or other acquisition by the Corporation of,
the Common Stock or shares of stock of any other class
or any other series of this class;
(9) the conditions or restrictions, if any, upon
the creation of indebtedness of the Corporation or upon
the issue of any additional stock, including additional
shares of such series or of any other series of this
class or of any other class; and
(10) any other powers, preferences and relative,
participating, optional and other special rights, and
any qualifications, limitations and restrictions
thereof.
The powers, preferences and relative, partici-
pating, optional and other special rights of each series of
Preferred Stock, and the qualifications, limitations or
restrictions thereof, if any, may differ from those of any
and all other series at any time outstanding. All shares of
any one series of Preferred Stock shall be identical in all
respects with all other shares of such series, except that
shares of any one series issued at different times may
differ as to the dates from which dividends thereon shall be
cumulative.
* * * *
Rights, Preferences, Privileges and Restrictions
------------------------------------------------
of 15-1/2% Cumulative Exchangeable Redeemable
---------------------------------------------
Preferred Stock
---------------
RESOLVED that, pursuant to authority conferred
upon the Board of Directors by the Certificate of
Incorporation of the Company, as amended (hereinafter
called the "Certificate of Incorporation"), the Board
<PAGE>
4
of Directors hereby provides for the issuance of a
series of Preferred Stock (as such term is defined in
the Certificate of Incorporation) of the Company to
consist of 16,000,000 shares, and fixes the powers,
designation, preferences and relative, participating,
optional or other rights, and the qualifications,
limitations or restrictions of the shares of such
series of Preferred Stock, in addition to those set
forth in the Certificate of Incorporation, as follows:
1. Designation. There is hereby designated
------------
a series of Preferred Stock known as the 15 1/2%
Cumulative Exchangeable Redeemable Preferred
Stock, par value $0.01 per share (the "Merger
Preferred Stock"), consisting of 16,000,000
shares, issuable by the Company pursuant to
authority granted to the Board of Directors in
Article FOURTH of the Certificate of Incorpora-
tion, which authorizes the issuance of Preferred
Stock having such rights and other terms as may be
determined by the Board of Directors.
2. Rank. The Merger Preferred Stock shall,
-----
with respect to dividend rights and rights on
liquidation, winding-up and dissolution of the
Company, rank senior to the Company's Common
Stock, and to all other classes and series of
stock of the Company now or hereafter authorized,
issued or outstanding, other than any stock of the
Company ranking senior to or pari passu with the
---- -----
Merger Preferred Stock as to dividend rights or
rights upon liquidation, winding-up or dissolution
of the Company either authorized after the date
hereof in compliance with paragraph 10(c)(i) or
issued after the date hereof in compliance with
paragraph (10)(c)(i) (the Common Stock and such
other classes and series of stock collectively
referred to herein as the "Junior Securities").
The Merger Preferred Stock shall be subject to the
creation of such senior stock, such pari passu
---- -----
stock and Junior Securities to the extent not
expressly prohibited by this Certificate.
3. Dividends. (a) The holders of shares of
----------
the Merger Preferred Stock shall be entitled to
receive, when, as and if declared by the Board of
Directors of the Company and out of the assets of
the Company available for the payment of dividends
<PAGE>
5
under the provisions of the General Corporation
Law of the State of Delaware, dividends payable at
the rate of $3.875 per share per annum (subject to
increase as provided below). Such dividends shall
be payable quarterly on the first day of February,
May, August, and November in each year (each of
such dates a "Dividend Payment Date") commencing
with the later of (i) August 1, 1989 and (ii) the
first such date after the time the merger of WCI
Acquisition Corporation, a Delaware corporation,
into Wickes Companies, Inc., a Delaware
corporation ("Wickes"), shall become effective
(the "Merger Effective Time"); except that if such
first day is not a business day then such
dividends shall be payable on the next succeeding
business day. (As used herein, the term "business
day" shall mean any day except a Saturday, a
Sunday or a day on which banking institutions are
authorized or required by law to close in the City
of New York.) Dividends on each share of Merger
Preferred Stock shall begin to accrue and be
cumulative on outstanding shares of the Merger
Preferred Stock (whether or not in any quarterly
period there shall be assets of the Company
legally available for the payment of such
dividends) from and including the date of initial
issuance of such share. The amount of any
dividends "accrued" on any share of Merger
Preferred Stock at any Dividend Payment Date shall
be deemed to be the amount of any unpaid dividends
accumulated thereon to and excluding such Dividend
Payment Date, whether or not earned or declared,
and the amount of dividends "accrued" on any share
of Merger Preferred Stock at any date other than a
Dividend Payment Date shall be calculated as the
amount of any unpaid dividends accumulated to and
excluding the last preceding Dividend Payment
Date, whether or not earned or declared, plus an
amount calculated on the basis of the annual
dividend rate for the period from and including
such last preceding Dividend Payment Date to and
excluding the date as of which the calculation is
made.
All dividends on the Merger Preferred Stock
shall be computed on the basis of the number of
days elapsed in a 360-day year consisting of
12 months of 30 days each. Such dividends shall
<PAGE>
6
be paid to the holders of record of shares of the
Merger Preferred Stock as they appear on the stock
register of the Company on such date as shall be
fixed by the Board of Directors of the Company;
provided, however, that such date shall not be
-------- -------
less than 10 days nor more than 60 days prior to
the date of payment.
Dividend arrearage for any past dividend
periods may be declared and paid at any time to
holders of record on such date as may be fixed by
the Board of Directors of the Company; provided,
--------
however, that such date shall not be less than
-------
10 days nor more than 60 days prior to the date of
payment.
(b) All dividends on the Merger Preferred
Stock shall be payable in cash, except that
dividend payments with respect to quarterly
dividends accruing on or prior to February 1, 1995
(whenever such dividends are actually paid), may
be paid in whole or in part in additional shares
of the Merger Preferred Stock if the Board of
Directors of the Company so directs. All such
dividends paid in additional shares of Merger
Preferred Stock shall be paid at a rate of
0.04 shares of Merger Preferred Stock for each $1
of such dividends not paid in cash. The issuance
of Merger Preferred Stock at the prescribed rate
shall constitute full payment of the portion of
such dividends payable in kind. Except as
described below with respect to fractional shares
of Merger Preferred Stock, all dividends paid with
respect to shares of the Merger Preferred Stock,
whether and to the extent in cash or in kind,
shall be paid pro rata to the holders entitled
thereto. No interest or sum of money in lieu of
interest or additional shares of Merger Preferred
Stock shall be payable in respect of any
accumulated unpaid dividends on the Merger
Preferred Stock (whether such unpaid dividends are
subsequently paid in kind or in cash).
(c) Only whole shares of Merger Preferred
Stock will be issued upon the payment of dividends
in kind on the Merger Preferred Stock. In lieu of
the fractional portion of the aggregate number of
shares of Merger Preferred Stock otherwise payable
<PAGE>
7
to a record holder of Merger Preferred Stock at
any time as dividends in kind ("Fractional
Shares"), such record holder will receive a
payment in cash equal to such record holder's
proportionate interest in the net proceeds from
the sale or sales in the open market of the
aggregate of all Fractional Shares otherwise
payable as a dividend. Such sale or sales shall
be effected promptly after the record date fixed
for determining the holders entitled to payment of
the dividend.
(d) (i) Holders of shares of the Merger
Preferred Stock shall be entitled to receive the
dividends provided for in paragraph 3(a) in
preference to and in priority over any dividends
upon any of the Junior Securities.
(ii) The Company shall not (x) declare,
pay or set apart funds for payment of any
cash dividends on shares of Common Stock or
any other shares of Junior Securities,
(y) purchase, redeem or otherwise retire any
Junior Securities or warrants, rights or
options exercisable for shares of Junior
Securities (and shall not set apart funds for
such payment with respect thereto), or
(z) make any distributions with respect to
Junior Securities or any warrants, rights or
options exercisable for any Junior Securities
(except dividends or distributions on shares
of Junior Securities in shares of any Junior
Securities), unless (I) full cumulative
dividends on the Merger Preferred Stock shall
have been paid prior to, or shall be paid
concurrently with, the time of such
declaration, payment, setting apart,
purchase, redemption, retirement or
distribution for each Dividend Payment Date
on or prior to such time and (II) any
redemption required to have been made on or
prior to such time pursuant to paragraph 4(b)
and, if such time is on or after the
10th anniversary of the Merger Effective
Time, the redemption of Merger Preferred
Stock set forth in paragraph 4(a) shall have
been made prior to, or shall be made
concurrently with, such time (it being
<PAGE>
8
understood that the failure of the Company to
effect such a redemption as a result of the
absence of assets legally available therefor
shall not constitute compliance with this
clause (II)).
(iii) Notwithstanding anything contained
in this Certificate to the contrary, no
dividends on shares of the Merger Preferred
Stock shall be declared by the Board of
Directors of the Company or paid or set apart
for payment by the Company at such time as
the terms and provisions of any contract or
other agreement of the Company or any of its
subsidiaries entered into or assumed at or
prior to the Merger Effective Time, or any
refinancings (including multiple
refinancings) of such contracts or
agreements, prohibit such declaration,
payment or setting apart for payment or
provide that such declaration, payment or
setting apart for payment would constitute a
breach thereof or a default thereunder;
provided, however, that nothing contained in
-------- -------
this Certificate shall in any way or under
any circumstances be construed or deemed to
require the Board of Directors of the Company
to declare or the Company to set apart for
payment any dividends on shares of the Merger
Preferred Stock, whether or not permitted by
any of such agreements. The failure of the
Board of Directors of the Company to declare
a dividend in reliance upon the immediately
preceding sentence shall not be construed or
deemed to prevent the accrual of such
undeclared dividend.
(e) Subject to the foregoing provisions of
this paragraph 3 and to the provisions of para-
graph 9, the Board of Directors may declare, and
the Company may pay, make or set apart for
payment, dividends and other distributions on, and
the Company may purchase, redeem or otherwise
retire, any Junior Securities or any warrants,
rights or options exercisable for shares of Junior
Securities, and the holders of shares of Merger
Preferred Stock shall not be entitled to share
therein.
<PAGE>
9
(f) If, at any time on or after the second
anniversary of the Merger Effective Time, the
Affiliated Common Equity Interest shall be less
than $75,000,000, from and after such time the
dividend rate for all outstanding Merger Preferred
Stock shall be increased to $3.9375 per share per
annum. "Affiliated Common Equity Interest" means
from time to time the amount of the aggregate of
all equity contributions to WCI Holdings II
Corporation, a Delaware corporation ("Parent"), on
or before such time by Blackstone Capital Partners
L.P., a Delaware limited partnership, or any
successor thereto ("Blackstone Partners"),
Wasserstein, Perella Partners, L.P., a Delaware
limited partnership, or any successor thereto ("WP
Partners"), and all owners of a limited
partnership interest in, or employees of
Blackstone Partners or WP Partners who had co-
investment rights or a similar opportunity to
invest in investments made by Blackstone Partners
or WP Partners at the time of their equity
contribution to Parent (Blackstone Partners, WP
Partners and all such persons who on or before
such time shall have made such equity
contributions, or any successor thereto,
collectively, the "Affiliated Investors") minus
any amounts received by Affiliated Investors as
dividends on, redemptions of or sales of equity
interests in Parent (other than sales by an
Affiliated Investor to another Affiliated
Investor), it being understood that payments to an
Affiliated Investor of amounts characterized for
this purpose by Parent (in its sole discretion and
notwithstanding the characterization of such
payments for any other purpose) as fees or
expenses shall not constitute dividends. As used
in this Certificate, a "Person" shall include any
individual, corporation, partnership, joint
venture, association, joint-stock company, trust,
unincorporated organization or government or
political subdivision thereof. The Company will
by first-class mail send to each record holder a
written notice of any such change in the dividend
rate on the Merger Preferred Stock within 15 days
of such change.
4. Scheduled Redemption. (a) Subject to
---------------------
the Company having funds legally available
<PAGE>
10
therefor, the Company shall be obligated to redeem
all outstanding shares of Merger Preferred Stock
on the 10th anniversary of the Merger Effective
Time. Such redemption of shares of Merger
Preferred Stock pursuant to this paragraph 4(a)
shall be at a redemption price equal to the
Liquidation Preference (as defined below) per
share together with accrued but unpaid dividends
(whether or not declared) through the date fixed
for redemption.
(b) To the extent the Company shall have
funds legally available therefor, if at any time
prior to the second anniversary of the Merger
Effective Time, the Affiliate Common Equity
Interest is less than $75,000,000, the Company
will be obligated within 45 days (or the next
following business day if the 45th following day
is not a business day) to set apart out of funds
legally available therefor, funds sufficient to
redeem all shares of Merger Preferred Stock then
outstanding. Such a redemption shall be at the
Optional Redemption Price (as defined below) plus
all accrued and unpaid dividends (whether or not
declared) to the date fixed for redemption.
(c) If the funds of the Company legally
available for any redemption pursuant to this
paragraph 4 at the redemption date are
insufficient to redeem such Merger Preferred
Stock, funds to the extent legally available for
the purpose will be used to redeem the number of
shares of Merger Preferred Stock that legally may
be redeemed. If the Company at any time shall
fail to discharge any obligation to redeem shares
of Merger Preferred Stock pursuant to this
paragraph 4, such obligation shall be discharged
as soon as the Company is able to do so.
5. Optional Redemption. All or any part of
--------------------
the Merger Preferred Stock may be redeemed by the
Company at its election at any time and from time
to time in whole or in part, by resolution of the
Board of Directors, at a cash price per share
equal to the sum of (i) the Optional Redemption
Price plus (ii) any accrued and unpaid dividends
thereon, whether or not declared, to the date
fixed for the redemption; provided, however, that,
-------- -------
<PAGE>
11
if and when any quarterly dividend shall have
accrued on the Merger Preferred Stock and shall
not have been paid or declared and a sufficient
sum set apart for payment for any Dividend Payment
Date on or prior to the date fixed for redemption,
the Company may not redeem any shares of the
Merger Preferred Stock unless all shares of the
Merger Preferred Stock then outstanding are
redeemed. The Optional Redemption Price shall
equal for redemptions with a date fixed for
redemption (a) that is on or prior to the first
anniversary of the Merger Effective Time, 101% of
the Liquidation Preference per share, (b) after
the first anniversary of the Merger Effective Time
to and including the second anniversary of the
Merger Effective Time, 101.5% of the Liquidation
Preference per share, and (c) thereafter, 102% of
the Liquidation Preference per share.
6. Selection of the Merger Preferred Stock
---------------------------------------
To Be Redeemed. If fewer than all the outstanding
---------------
shares of the Merger Preferred Stock not
previously called for redemption or exchange are
to be redeemed pursuant to paragraph 5, the Board
of Directors of the Company shall select the
shares of the Merger Preferred Stock to be
redeemed from outstanding shares not previously
called for redemption by lot or pro rata as
determined by the Board of Directors of the
Company, in its sole discretion; provided,
--------
however, that the Board of Directors of the
-------
Company may in selecting shares for redemption
choose to redeem all shares of Merger Preferred
Stock held by holders of a number of such shares
not to exceed 99 as may be specified by the Board
of Directors (with all other shares to be
redeemed, if any, so selected by lot or pro rata).
7. Notice of Redemption. At least 30 days
---------------------
but not more than 60 days prior to the date fixed
for any redemption of shares of the Merger
Preferred Stock, written notice of such redemption
shall be mailed to each holder of record of shares
of Merger Preferred Stock to be redeemed at the
address shown on the stock transfer books of the
Company or, if no such address appears or is
given, at the place where the principal executive
office of the Company is located; provided,
--------
<PAGE>
12
however, that no failure to give such notice or
-------
any defect therein or in the mailing thereof shall
affect the validity of the proceedings for such
redemption. Each such notice shall specify
(i) the number of shares to be redeemed from such
holder, (ii) the numbers of the certificates of
the shares being redeemed, (iii) the date fixed
for redemption, (iv) the redemption price, (v) the
place or places at which payment may be obtained,
(vi) the provision of this Certificate pursuant to
which the shares are to be redeemed and (vii) that
dividends on the shares to be redeemed shall cease
to accrue on the date fixed for such redemption.
8. Status of Shares of Merger Preferred
------------------------------------
Stock upon Redemption. (a) Upon due surrender of
----------------------
the certificates for any shares of Merger
Preferred Stock to be redeemed, such shares of
Merger Preferred Stock shall be redeemed by the
Company at the applicable redemption price. In
case fewer than all the shares of Merger Preferred
Stock represented by any such certificate are
redeemed, a new certificate or certificates shall
be issued representing the unredeemed shares of
Merger Preferred Stock without cost to the holder
thereof. Unless there shall have been a default
in payment of the redemption price, from and after
any date fixed for redemption, dividends on the
shares of Merger Preferred Stock so called for
redemption shall cease to accrue, such shares of
Merger Preferred Stock shall no longer be deemed
to be outstanding and shall not have the status of
shares of Merger Preferred Stock and all rights of
the holders thereof as stockholders of the Company
(except the right to receive from the Company the
redemption price without interest) shall cease
with respect to such shares. From and after any
date fixed for redemption, shares of the Merger
Preferred Stock redeemed by the Company shall be
restored to the status of authorized but unissued
shares of Preferred Stock, without designation as
to series until such shares are once more
designated as part of a particular series by the
Board of Directors of the Company.
(b) If at any time the Company shall have
irrevocably deposited in trust with a trustee for
the benefit of the holders of all shares of Merger
<PAGE>
13
Preferred Stock money or direct noncallable
obligations of the United States maturing as to
principal and interest in such amounts and at such
times as are sufficient to pay all future
dividends on all shares of Merger Preferred Stock
at the scheduled Dividend Payment Dates through
the 10th anniversary of the Merger Effective Time
(or any earlier date duly fixed for an optional
redemption thereof), and the redemption price
thereof, then, from and after the date on which
such provision has been made, such Merger
Preferred Stock shall no longer be deemed to be
outstanding except for purposes of accruals of
quarterly dividends and shall not have the status
of shares of Merger Preferred Stock, and all
rights of the holders thereof as stockholders of
the Company (except the right to receive from the
Company quarterly dividends and the applicable
redemption price without interest) shall cease
with respect to such shares. Without limiting the
foregoing, any shares deemed not to be outstanding
pursuant to this paragraph 8(b) shall not be
subject to the provisions of paragraphs 3(f) and
4(b).
(c) All moneys so deposited with or held by
such trustee which remain unclaimed by the holders
of shares of Merger Preferred Stock 730 days after
the date such moneys are payable to holders of
shares of such Merger Preferred Stock shall be
paid by such trustee to the Company, and
thereafter the holders of such shares of Merger
Preferred Stock shall look only to the Company for
payment.
9. Liquidation, Dissolution or Winding-
------------------------------------
Up. In the event of any voluntary or involuntary
---
liquidation, dissolution or winding-up of the
Company, holders of the Merger Preferred Stock
shall be entitled to be paid out of the assets of
the Company available for distribution to its
stockholders, whether from capital, surplus or
earnings, an amount in cash equal to $25.00 per
share (the "Liquidation Preference") plus any
accrued and unpaid dividends to the date fixed for
liquidation, dissolution or winding-up, whether or
not declared, before any distribution is made on
any Junior Securities, including the Common Stock.
<PAGE>
14
If upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Company, the
assets of the Company available for distribution
to holders of the Merger Preferred Stock shall be
insufficient to pay the holders of outstanding
Merger Preferred Stock the full amounts to which
they shall be entitled under this paragraph 9, the
holders of the Merger Preferred Stock shall share
equally and ratably in any distribution of assets
of the Company in proportion to the full amount to
which they would otherwise be respectively
entitled. After payment of the full amount of
Liquidation Preference to which they are entitled
plus all accrued and unpaid dividends, whether or
not declared, the holders of the Merger Preferred
Stock shall not be entitled to any further
participation in any distribution of assets of the
Company. However, neither the voluntary sale,
conveyance, exchange or transfer (for cash, shares
of stock, securities or other consideration) of
all or any part of the property or assets of the
Company, nor the consolidation or merger or other
business combination of the Company with or into
any other corporation or corporations, shall be
deemed to be a voluntary or involuntary
liquidation, dissolution or winding-up of the
Company, unless such voluntary sale, conveyance,
exchange or transfer shall be in connection with a
plan of liquidation, dissolution or winding-up of
the Company.
10. Voting Rights. (a) The holders of
--------------
shares of Merger Preferred Stock shall not be
entitled to any voting rights except as expressly
provided in this paragraph 10 or as otherwise
provided by law.
(b) (i) If at any time or times dividends
payable on the then outstanding Merger Preferred
Stock shall be in arrears and unpaid in an
aggregate amount equal to the amount of five
consecutive quarterly dividends on the then
outstanding Merger Preferred Stock, the then
number of directors constituting the Board of
Directors of the Company, without further action,
shall be increased by two and the holders of
Merger Preferred Stock shall have the exclusive
right, voting separately as a class, to elect the
<PAGE>
15
directors of the Company to fill such newly
created directorships, the remaining directors to
be elected by the other class or classes of stock
entitled to vote therefor, at each meeting of
stockholders held for the purpose of electing
directors.
(ii) Whenever such voting right shall
have vested, such right may be initially
exercised at a special meeting of the holders
of Merger Preferred Stock called as
hereinafter provided, at any annual meeting
of stockholders held for the purpose of
electing directors or by the written consent
of the holders of Merger Preferred Stock
pursuant to Section 228 of the General
Corporation Law of the State of Delaware.
Such voting right shall continue until such
time as all cumulative dividends on Merger
Preferred Stock accrued through the latest
Dividend Payment Date on or before such time
shall have been paid in full, at which time
such voting right of the holders of Merger
Preferred Stock shall terminate, but such
voting right shall again vest in the event of
each and every subsequent arrearage in
dividends in the requisite amount as
described above.
(iii) At any time when such voting right
shall have vested in the holders of Merger
Preferred Stock and if such right shall not
already have been initially exercised, a
proper officer of the Company shall, upon the
written request of any holder of record of
Merger Preferred Stock then outstanding, call
a special meeting of holders of Merger
Preferred Stock; provided, however, no such
-------- -------
special meeting shall be called during a
period within 90 days immediately preceding
the date fixed for the next annual meeting of
stockholders. Such meeting shall be held at
the earliest practicable date upon the notice
required for annual meetings of stockholders.
Any holder of Merger Preferred Stock which
would be entitled to vote at such meeting
shall have access to the stock books of the
Company for the purpose of causing a meeting
<PAGE>
16
of stockholders to be called pursuant to the
provisions of this paragraph 10(b)(iii).
(iv) At any meeting at which the holders
of Merger Preferred Stock shall have the
right to elect directors as provided in this
paragraph 10(b), the presence in person or by
proxy of the holders of at least a majority
of the then outstanding shares of Merger
Preferred Stock shall be required and be
sufficient to constitute a quorum. At any
such meeting or adjournment thereof, the
absence of a quorum of the holders of Merger
Preferred Stock shall not prevent the
election of directors other than those to be
elected by the holders of Merger Preferred
Stock and the absence of a quorum or quorums
of the holders of capital stock entitled to
elect such other directors shall not prevent
the election of directors to be elected by
the holders of Merger Preferred Stock.
(v) For so long as the aforesaid voting
rights are vested in the holders of Merger
Preferred Stock, the term of office of all
directors elected by the holders of Merger
Preferred Stock shall terminate upon the
election of their successors by the holders
of Merger Preferred Stock; provided, however,
-------- -------
that any director who shall have been elected
by holders of the Merger Preferred Stock may
be removed at any time, either with or
without cause, only by the affirmative vote
of the holders of record of a majority of the
outstanding shares of the Merger Preferred
Stock at a duly called stockholders meeting.
Upon any termination of such voting rights in
accordance with paragraph 10(b)(ii), the term
of office of all directors elected by the
holders of Merger Preferred Stock shall
thereupon terminate and upon such termination
the number of directors constituting the
Board of Directors shall, without further
action, be reduced by two.
(vi) In case of any vacancy occurring
among the directors so elected by holders of
Merger Preferred Stock, the remaining
<PAGE>
17
director who shall have been so elected may
appoint a successor to hold office for the
unexpired term of the director whose place
shall be vacant. If both directors so
elected by the holders of Merger Preferred
Stock shall cease to serve as directors
before their terms shall expire, the holders
of Merger Preferred Stock then outstanding
may, in the manner provided in
paragraph 10(b)(ii), elect successors to hold
office for the unexpired terms of the
directors whose places shall be vacant.
(c) (i) Subject to paragraph 10(c)(ii), so
long as any shares of Merger Preferred Stock are
outstanding, the Company will not, without the
affirmative vote, or the written consent pursuant
to Section 228 of the General Corporation Law of
the State of Delaware, of the holders of at least
the Required Majority of the outstanding shares of
Merger Preferred Stock (or such greater number as
may be required by law), voting separately as a
class:
(I) increase the authorized number
of shares of Merger Preferred Stock or
create, authorize or issue any class or
series of stock of the Company (other
than the shares of the Merger Preferred
Stock) ranking pari passu with the
---- -----
Merger Preferred Stock as to dividend
rights or rights upon liquidation,
winding-up or dissolution of the
Company;
(II) make any amendment, alteration
or repeal of any of the provisions of
the Certificate of Incorporation or of
any certificate amendatory thereof or
supplemental thereto so as to change the
terms of the Merger Preferred Stock to
affect adversely the rights, powers,
preferences or privileges of the Merger
Preferred Stock; or
(III) create, authorize or issue any
class or series of stock of the Company
ranking senior to the Merger Preferred
<PAGE>
18
Stock as to dividend rights or rights
upon liquidation, winding-up or
dissolution of the Company.
The "Required Majority" for any action
referred to in clause (II) and (III) shall be
two-thirds, and for any other action referred
to in this paragraph 10(c)(i) shall be a
simple majority.
(ii) Notwithstanding paragraph 10(a) or
paragraph 10(c)(i), holders of the Merger
Preferred Stock will have no voting rights in
connection with a merger or consolidation of
the Company with or into Wickes, as the
surviving corporation in the merger referred
to above, in which the Merger Preferred Stock
is converted into stock of Wickes with
substantially the same terms as those set
forth in this Certificate (as determined in
good faith by the Board of Directors of the
Company).
(d) In connection with any matter on which
holders of the Merger Preferred Stock are entitled
to vote including, without limitation, the
election of directors as set forth in this
paragraph 10 or any matter on which the holders of
the Merger Preferred Stock are entitled to vote as
a class or otherwise pursuant to the General
Corporation Law of the State of Delaware or the
provisions of the Certificate of Incorporation of
the Company, each holder of the Merger Preferred
Stock shall be entitled to one vote for each share
of Merger Preferred Stock held by such holder.
11. Exchange Provisions. (a) On any
--------------------
Dividend Payment Date, the Company, at its sole
option, may require the exchange of all or any
part of the shares of the Merger Preferred Stock
then outstanding for the Company's 15 1/2% Junior
Subordinated Exchange Debentures (the "Exchange
Debentures") on the notice set forth below.
Holders of record of outstanding shares of the
Merger Preferred Stock as they appear on the stock
register of the Company at the close of business
on the record date for such exchange shall be
entitled to receive Exchange Debentures having a
<PAGE>
19
principal amount equal to the sum of the
Liquidation Preference plus any accrued and unpaid
dividends, whether or not declared, on the Merger
Preferred Stock to the date of such exchange in
exchange for each share of Merger Preferred Stock
held by them. At the time of such exchange (an
"Exchange Date"), the rights of the holders of the
Merger Preferred Stock then outstanding as
stockholders of the Company shall cease (except
for the right to receive the Exchange Debentures)
and the persons entitled to receive the Exchange
Debentures issuable upon exchange shall be treated
for all purposes as the holders of record of such
Exchange Debentures. In the event such exchange
would result in the issuance of any Exchange
Debenture in a principal amount which is less than
$1,000 or which is not an integral multiple of
$1,000 (such principal amount less than $1,000 or
the difference between such principal amount and
the highest integral multiple of $1,000 that is
less than such principal amount, as the case may
be, being hereinafter referred to as a "Fractional
Principal Amount"), each holder of Merger
Preferred Stock otherwise entitled to a Fractional
Principal Amount shall be entitled to receive a
cash payment in lieu thereof equal to such
holder's proportionate interest in the net
proceeds by the Company or any agent appointed for
the purpose from the sale or sales on the open
market of the aggregate amount of such Exchange
Debentures. The person or persons entitled to
receive the Exchange Debentures issuable upon
exchange shall be treated for all purposes as the
registered holder or holders of such Exchange
Debentures as of the related Exchange Date. The
Exchange Debentures will be issued under an
Indenture (the "Indenture") between the Company
and United States Trust Company of New York, as
trustee, substantially in the form filed as an
Exhibit to the Company's and Wickes' Registration
Statement on Form S-4 as filed with the Securities
and Exchange Commission (File No. 33-27143), as
amended pursuant to the terms of the Indenture.
When no Exchange Debentures are outstanding, the
Indenture may be changed as may be required by
law, stock exchange rules or usage, or as may
otherwise be agreed to by the Company and holders
of a majority of the then outstanding shares of
<PAGE>
20
Merger Preferred Stock. The Exchange Debentures
shall have the terms and benefits provided in the
Indenture.
(b) If fewer than all the outstanding shares
of the Merger Preferred Stock are to be exchanged,
the Board of Directors of the Company shall select
the shares of the Merger Preferred Stock to be
exchanged from the outstanding shares by lot or
pro rata as determined by the Board of Directors
of the Company, in their sole discretion;
provided, however, that the Board of Directors of
-------- -------
the Company may in selecting shares to be
exchanged choose to exchange all shares of the
Merger Preferred Stock held by holders of a number
of such shares not to exceed 100 as may be
specified by the Board of Directors.
(c) At least 30 days but not more than
60 days prior to the Exchange Date, written notice
of such exchange shall be mailed to each holder of
record of shares of the Merger Preferred Stock to
be exchanged at the address shown on the stock
transfer books of the Company or, if no such
address appears or is given, at the place where
the principal executive office of the Company is
located; provided, however, that no failure to
-------- -------
give such notice or any defect therein or in the
mailing thereof shall affect the validity of the
proceedings for such exchange. Each such notice
shall specify (i) the number of shares of Merger
Preferred Stock to be received in the exchange
from such holder, (ii) the numbers of the
certificates of the shares of Merger Preferred
Stock being exchanged, (iii) the principal amount
of Exchange Debentures to be issued in exchange
for such shares, (iv) the Exchange Date, (v) the
place or places at which the shares of the Merger
Preferred Stock shall be exchanged for Exchange
Debentures and (vi) that dividends on the shares
to be exchanged shall cease to accrue on the
Exchange Date.
(d) Upon surrender of the certificates for
any of the Merger Preferred Stock so exchanged,
such shares of Merger Preferred Stock shall be
exchanged by the Company at the required exchange
rate. In case fewer than all the shares of Merger
<PAGE>
21
Preferred Stock represented by any such
certificate are exchanged, a new certificate or
certificates shall be issued representing the
unexchanged shares of Merger Preferred Stock
without cost to the holder thereof. From and
after the Exchange Date, dividends on the shares
of the Merger Preferred Stock so called for
exchange shall cease to accrue, such shares of
Merger Preferred Stock shall no longer be deemed
to be outstanding and shall not have the status of
shares of Merger Preferred Stock, and all rights
of the holders thereof as stockholders of the
Company (except the right to receive from the
Company the Exchange Debentures upon exchange and
the right to receive cash payments in lieu of
Fractional Principal Amounts) shall cease with
respect to such shares. From and after the
related Exchange Date, shares of Merger Preferred
Stock exchanged for the Exchange Debentures shall
be restored to the status of authorized but
unissued shares of Preferred Stock, without
designation as to series until such shares are
once more designated as part of a particular
series by the Board of Directors of the Company.
FIFTH: (a) The business of the Corporation shall
be managed by and under the direction of the Board of
Directors, except as may be otherwise provided by statute or
by this Certificate of Incorporation. The number of
directors of the Corporation shall be fixed by, or in the
manner provided in, the By-laws of the Corporation;
provided, however, that such number of directors shall not
-------- -------
exceed nine. The directors of the Corporation, other than
those who may be elected pursuant to any Preferred Stock
Designation, shall be divided into three classes (Class I,
Class II and Class III), with the term of office of one
class expiring each year. Each class shall consist, as
nearly as may be possible, of one-third of the total number
of directors constituting the entire Board of Directors.
The membership of each class initially shall be as set forth
in a resolution adopted by the Board of Directors of the
Corporation on or prior to June 30, 1994 (the "Effective
Date"). The initial term of Class I directors shall expire
at the first annual meeting of stockholders following the
Effective Date; the initial term of Class II directors shall
expire at the second annual meeting of stockholders
following the Effective Date; and the initial term of Class
III directors shall expire at the third annual meeting of
<PAGE>
22
stockholders following the Effective Date. At each annual
meeting of stockholders, each class of directors whose term
shall then expire shall be elected to hold office for a
three year term. If the number of directors is changed, any
increase or decrease shall be apportioned among the classes
so as to maintain the number of directors in each class as
nearly equal as possible, but in no case shall a decrease in
the number of directors shorten the term of any incumbent
director. A director shall hold office until the annual
meeting for the year in which such director's term expires
and until such director's successor shall be elected and
shall qualify, subject, however, to prior death,
resignation, retirement, disqualification or removal from
office.
(b) There shall be a nominating committee of the
Board of Directors (the "Nominating Committee") consisting
of all directors serving on the Board of Directors,
excluding directors that are salaried employees of the
Corporation. The Nominating Committee shall be authorized
to nominate, by a majority vote thereof and subject only to
the restrictions set forth in this paragraph (b) of this
Article FIFTH, persons for election to the Board of
Directors at any annual meeting of stockholders or at any
special meeting of stockholders called for the purpose of
electing directors; provided, however, that if the
-------- -------
Nominating Committee does not nominate a person by majority
vote with respect to any directorship to be voted upon at
such meeting and the incumbent director holding such
directorship is affiliated with Blackstone Capital Partners L.P.
("Blackstone Partners"), Wasserstein Perella Partners, L.P.
("WP Partners") or a Transferee (as defined in Section 3.01 of
that certain Voting Agreement dated as of June 29, 1994 between
Blackstone Partners and WP Partners, as the same may be amended
from time to time) of either the Nominating Committee shall
nominate the incumbent director for election to the Board of
Directors at such meeting or a similarly affiliated person.
For purposes of the preceding sentence and paragraph (d) of
this Article FIFTH, a person shall be affiliated with Blackstone
Partners, WP Partners or a Transferee if such person is a
general partner, limited partner, director or officer of such
entity or any affiliate of such entity or is otherwise an
"affiliate" of such entity as defined in the rules and
regulations under the Securities Act of 1933. The Board of
Directors, or any other committee thereof, shall not be
authorized to nominate persons for election to the Board of
Directors.
<PAGE>
23
(c) Unless and except to the extent that the By-
laws of the Corporation shall so require, the election of
directors of the Corporation need not be by written ballot.
(d) Newly created directorships resulting from
any increase in the authorized number of directors or any
vacancies in the Board of Directors resulting from death,
resignation, removal from office or any other cause, shall
be filled solely by the Nominating Committee, by a majority
vote thereof, and not by the stockholders; provided,
--------
however, that if a vacancy in the Board of Directors results
-------
from the death, resignation or removal from office for any
other cause of a director affiliated with (as defined in
paragraph (b) of this Article FIFTH) Blackstone Partners, WP
Partners or a Transferee, the Nominating Committee shall
fill such vacancy with a similarly affiliated person. Any
director elected to fill a newly created directorship or any
vacancy on the Board of Directors resulting from death,
resignation, removal or any other cause, shall hold office
for the remainder of the full term of the class of directors
in which the new directorship was created or the vacancy
occurred and until such director's successor shall have been
elected and qualified. Directors shall continue in office
until others are chosen and qualified in their stead.
(e) Notwithstanding the foregoing, whenever the
holders of any one or more classes or series of Preferred
Stock issued by the Corporation, if any, shall have the
right, voting separately by class or series, to elect
directors at an annual or special meeting of stockholders,
the election, term of office, filling of vacancies and other
features of such directorships shall be governed by the
terms of the applicable resolution or resolutions of the
Board of Directors adopted pursuant to Article FOURTH.
(f) Any director or the entire Board of Directors
of the Corporation may be removed from office only for cause
and only by the affirmative vote of the holders of a
majority of the shares of capital stock of the Corporation
then entitled to vote in the election of such director or
directors. For purposes of this paragraph and to the extent
permitted by law, "cause" shall be limited to (i) action by
a director involving wilful malfeasance, which conduct has a
material adverse effect on the Corporation, (ii) conviction
of a director of a felony or (iii) the wilful and continuous
failure of a director substantially to perform such director's
duties to the Corporation (including any such failure resulting
from incapacity due to physical or mental illness).
<PAGE>
24
(g) In furtherance and not in limitation of the
powers conferred upon it by law, the Board of Directors is
expressly authorized to adopt, alter, amend or repeal any
provision of the By-laws of the Corporation (including,
without limitation, By-laws governing the conduct of, and
the matters which may properly be brought before, meetings
of the stockholders and By-laws specifying the manner and
extent to which prior notice shall be given of the
submission of proposals to be submitted at any meeting of
stockholders or of nominations of elections of directors to
be held at any such meeting) by the vote of a majority of
the entire Board of Directors.
(h) In addition to the powers and authorities
herein or by statute expressly conferred upon it, the Board
of Directors may exercise all such powers and do all such
acts and things as may be exercised or done by the
Corporation, subject, nevertheless, to the provisions of the
laws of the State of Delaware, this Restated Certificate of
Incorporation and the By-laws of the Corporation; provided,
--------
however, that no By-laws hereafter adopted by the
-------
stockholders shall invalidate any prior act of the directors
which would have been valid if such By-laws had not been
adopted.
SIXTH: Any action required or permitted to be
taken by the stockholders of the Corporation may be effected
only at a duly called annual or special meeting of such
stockholders and may not be effected by consent in writing
by such stockholders. Except as otherwise provided by any
Preferred Stock Designation, special meetings of
stockholders for any purpose or purposes may be called only
by the Chairman or a Co-Chairman of the Board, if there be
one, or by resolution of the Board of Directors, acting by
not less than a majority of the entire Board, and the power
of stockholders to call a special meeting is specifically
denied. No business shall be transacted and no corporate
action shall be taken at a special meeting of stockholders
other than that stated in the notice of such meeting.
SEVENTH: (a) In addition to any requirements of
law and any other provision of this Restated Certificate of
Incorporation or any resolution or resolutions of the Board
of Directors adopted pursuant to Article FOURTH of this
Restated Certificate of Incorporation (and notwithstanding
the fact that a lesser percentage may be specified by law,
this Restated Certificate of Incorporation or any such
resolution or resolutions), a Business Combination (as
<PAGE>
25
hereinafter defined) shall require the affirmative vote of
the holders of 66-2/3% or more of the combined voting power
of the then outstanding shares of Voting Stock, voting
together as a single class.
(b) For the purposes of this Article SEVENTH,
"Business Combination" shall mean:
(1) any merger or consolidation of the
Corporation (whether or not the Corporation is the
surviving corporation);
(2) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a
series of related transactions) of all or substantially
all the assets of the Corporation;
(3) the adoption of any plan or proposal for the
liquidation, dissolution, spinoff, splitup, splitoff,
or winding up of the affairs of the Corporation
(whether voluntary or involuntary); or
(4) any agreement, contract or other arrangement
providing for any of the transactions described in this
definition of Business Combination.
EIGHTH: To the fullest extent that the General
Corporation Law of the State of Delaware as it exists on the
date hereof or as it may hereafter be amended permits the
limitation or elimination of the liability of directors, no
director of the Corporation shall be liable to the Corpora-
tion or its stockholders for monetary damages for breach of
fiduciary duty as a director. No amendment to or repeal of
this Article EIGHTH shall apply to or have any effect on the
liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of
such director occurring prior to such amendment or repeal.
NINTH: The Corporation reserves the right at any
time and from time to time to amend, alter or repeal any
provision contained in this Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by
law. In addition to any requirements of law and any other
provision of this Restated Certificate of Incorporation or
any resolution or resolutions of the Board of Directors
adopted pursuant to Article FOURTH of this Restated Certifi-
cate of Incorporation (and notwithstanding the fact that a
lesser percentage may be specified by law, this Restated
Certificate of Incorporation or any such resolution or
resolutions), the affirmative vote of the holders of 66-2/3%
<PAGE>
26
or more of the combined voting power of the then outstanding
shares of Voting Stock, voting together as a single class,
shall be required to adopt, amend, alter or repeal any
provision of this Restated Certificate of Incorporation.
IN WITNESS WHEREOF, the Corporation has caused
this Restated Certificate of Incorporation to be signed in
the name and on behalf of the Corporation, and attested to,
by the duly elected officers of the Corporation as indicated
below this [ ] day of [ ], 1994.
COLLINS & AIKMAN CORPORATION
by
________________________
Name:
Title:
Attest:
____________________________
Name:
Title:
EXHIBIT 4.7
BY-LAWS
(as amended through June __, 1994)
OF
COLLINS & AIKMAN CORPORATION
ARTICLE I
Offices
-------
SECTION 1. Registered Office. The registered
------------------
office of Collins and Aikman Corporation (the "Corporation")
shall be in the City of Dover, County of Kent, State of
Delaware and the registered agent shall be The Prentice-Hall
Corporation System, Inc., or such other office or agent as
the Board of Directors shall from time to time select.
SECTION 2. Other Offices. The Corporation may
--------------
also have offices at such other places both within and
without the State of Delaware as the Board of Directors may
from time to time determine.
ARTICLE II
Meetings of Stockholders
------------------------
SECTION 1. Place of Meeting. Meetings of the
-----------------
stockholders shall be held at such time and place, either
within or without the State of Delaware, as shall be
designated from time to time by the Board of Directors.
SECTION 2. Annual Meetings. The annual meeting
----------------
of stockholders shall be held on such date and at such time
as shall be designated from time to time by the Board of
Directors, at which meetings the stockholders shall elect,
in accordance with Section 1 and Section 2 of Article III of
these By-laws, by a plurality vote those Directors belonging
to the class or classes of directors to be elected at such
meeting, and transact such other business as may properly be
brought before the meeting.
SECTION 3. Special Meetings. Unless otherwise
-----------------
prescribed by law or by the Restated Certificate of
Incorporation (the "Certificate of Incorporation"), special
meetings of stockholders may be called only by the Chairman
<PAGE>
2
or a Co-Chairman of the Board, if there be one, or pursuant
to a resolution adopted by a majority of the entire Board of
Directors. Business transacted at all special meetings
shall be confined to the matters specified in the notice of
the meeting.
SECTION 4. Notice of Meetings. Except as
-------------------
otherwise provided by law, written notice of each meeting of
the stockholders, whether annual or special, shall be given,
either by personal delivery or by mail, not less than 10 nor
more than 60 days before the date of the meeting to each
stockholder of record entitled to notice of the meeting. If
mailed, such notice shall be deemed given when deposited in
the United States mail, postage prepaid, directed to the
stockholder at such stockholder's address as it appears on
the records of the Corporation. Each such notice shall
state the place, date and hour of the meeting, and the
purpose or purposes for which the meeting is called. Notice
of any meeting of stockholders shall not be required to be
given to any stockholder who shall attend such meeting in
person or by proxy without protesting, prior to or at the
commencement of the meeting, the lack of proper notice to
such stockholder, or who shall in writing waive notice
thereof. Notice of adjournment of a meeting of stockholders
need not be given if the time and place to which it is
adjourned are announced at such meeting, unless the
adjournment is for more than 30 days or, after adjournment,
a new record date is fixed for the adjourned meeting.
SECTION 5. Quorum. Except as otherwise provided
-------
by law or by the Certificate of Incorporation, the holders
of a majority of the capital stock issued and outstanding
and entitled to vote thereat, present in person or
represented by proxy, shall constitute a quorum at all
meetings of the stockholders for the transaction of
business. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be
presented or represented. At such adjourned meeting at
which a quorum shall be presented or represented, any
business may be transacted which might have been transacted
at the meeting as originally noticed. If the adjournment is
for more than 30 days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of
<PAGE>
3
the adjourned meeting shall be given to each stockholder
entitled to vote at the meeting.
SECTION 6. Voting. Unless otherwise provided by
-------
law or by the Certificate of Incorporation, each stockholder
of record of Common Stock shall be entitled at each meeting
of stockholders to one vote for each share of such stock, in
each case, registered in such stockholder's name on the
books of the Corporation (1) on the date fixed pursuant to
Section 5 of Article V of these By-laws as the record date
for the determination of stockholders entitled to notice of
and to vote at such meeting; or (2) if no such record date
shall have been so fixed, then at the close of business on
the day next preceding the day on which notice of such
meeting is given, or, if notice is waived, at the close of
business on the day next preceding the day on which the
meeting is held. At each meeting of the stockholders, all
corporate actions to be taken by vote of the stockholders
(except as otherwise required by law and except as otherwise
provided in the Certificate of Incorporation or these
By-laws) shall be authorized by a majority of the votes cast
affirmatively or negatively by the stockholders entitled to
vote thereon who are present in person or represented by
proxy, and where a separate vote by class is required, a
majority of the votes cast affirmatively or negatively by
the stockholders of such class who are present in person or
represented by proxy shall be the act of such class. Unless
required by law or determined by the Chairman of the meeting
to be advisable, the vote on any matter, including the
election of directors, need not be by written ballot. In
the case of a vote by written ballot, each ballot shall be
signed by the stockholder voting, or by such stockholder's
proxy, and shall state the number of shares voted.
SECTION 7. List of Stockholders Entitled to Vote.
--------------------------------------
The officer of the Corporation who has charge of the stock
ledger of the Corporation shall prepare and make, at least
ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting,
arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the
name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of
at least 10 days prior to the meeting, either at a place
within the city where the meeting is to be held, which place
shall be specified in the notice of the meeting, or, if not
so specified, at the place where the meeting is to be held.
<PAGE>
4
The list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may
be inspected by any stockholder of the Corporation who is
present.
SECTION 8. Stock Ledger. The stock ledger of the
-------------
Corporation shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list
required by Section 7 of this Article II or the books of the
Corporation, or to vote in person or by proxy at any meeting
of stockholders.
SECTION 9. Notice of Business. No business may
-------------------
be transacted at an annual meeting of stockholders, other
than business that is either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the
direction of the Board of Directors (or any duly authorized
committee thereof), (b) otherwise properly brought before
the annual meeting by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or
(c) otherwise properly brought before the annual meeting by
any stockholder of the Corporation (i) who is a stockholder
of record on the date of the giving of the notice provided
for in this Section 9 of this Article II and on the record
date for the determination of stockholders entitled to vote
at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section 9.
In addition to any other applicable requirements,
for business to be properly brought before an annual meeting
by a stockholder, such stockholder must have given timely
notice thereof in proper written form to the Secretary of
the Corporation.
To be timely, a stockholder's notice to the
Secretary must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than
90 days nor more than 120 days prior to the anniversary date
of the immediately preceding annual meeting of stockholders;
provided, however, that in the event that the annual meeting
-------- -------
is called for a date that is not within 30 days before or
after such anniversary date, notice by the stockholder in
order to be timely must be so received not later than the
close of the business on the tenth day following the day on
which such notice of the date of the annual meeting was
mailed or public disclosure of the date of the annual
meeting was made, whichever first occurs.
<PAGE>
5
To be in proper written form, a stockholder's
notice to the Secretary must set forth as to each matter
such stockholder proposes to bring before the annual meeting
(i) a brief description of the business proposed to be
brought before the annual meeting and the reasons for
conducting such business at the annual meeting, (ii) the
name and record address of such stockholder, (iii) the class
or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by
such stockholder, (iv) a description of all arrangements or
understandings between such stockholder and any other person
or persons (including their names) in connection with the
proposal of such business by such stockholder and any
material interest of such stockholder in such business and
(v) a representation that such stockholder intends to appear
in person or by proxy at the annual meeting to bring such
business before the meeting.
No business shall be conducted at the annual
meeting of stockholders except business brought before the
annual meeting in accordance with the procedures set forth
in this Section 9 of this Article II; provided, however,
-------- -------
that, once business has been properly brought before the
annual meeting in accordance with such procedures, nothing
in this Section 9 of this Article II shall be deemed to
preclude discussion by any stockholder of any such business.
If the Chairman of an annual meeting determines that
business was not properly brought before the annual meeting
in accordance with the foregoing procedures, the Chairman
shall declare to the meeting that the business was not
properly brought before the meeting and such business shall
not be transacted or discussed.
ARTICLE III
Directors
---------
SECTION 1. Number of Directors. The business and
--------------------
affairs of the Corporation shall be managed by or under the
direction of a Board of Directors consisting of a number of
directors, divided into such classes and subject to such
other provisions as are set forth in the Certificate of
Incorporation. Except as otherwise provided in the
Certificate of Incorporation, the exact number of directors
shall be fixed from time to time by the Board of Directors.
<PAGE>
6
SECTION 2. Nomination of Directors. Only persons
------------------------
who are nominated in accordance with the following
procedures shall be eligible for election as directors of
the Corporation, except as may be otherwise provided in the
Certificate of Incorporation of the Corporation.
Nominations of persons for election to the Board of
Directors may be made at any annual meeting of stockholders
or at any special meeting of stockholders called for the
purpose of electing directors, (a) by or at the direction of
the Nominating Committee of the Board of Directors or (b) by
any stockholder of the Corporation (i) who is a stockholder
of record on the date of the giving of the notice provided
for in this Section 2 of this Article III and on the record
date for the determination of stockholders entitled to vote
at such meeting and (ii) who complies with the notice
procedures set forth in this Section 2 of this Article III.
In addition to any other applicable requirements,
for a nomination to be made by a stockholder, such
stockholder must have given timely notice thereof in proper
written form to the Secretary of the Corporation.
To be timely, a stockholder's notice to the
Secretary must be delivered to or mailed and received at the
principal executive offices of the Corporation (a) in the
case of an annual meeting, not less than 90 days nor more
than 120 days prior to the anniversary date of the
immediately preceding annual meeting of stockholders;
provided, however, that in the event that the annual meeting
-------- -------
is called for a date that is not within 30 days before or
after such anniversary date, notice by the stockholder in
order to be timely must be so received not later than the
close of business on the tenth day following the day on
which such notice of the date of the annual meeting was
mailed or public disclosure of the date of the annual
meeting was made, whichever first occurs; and (b) in the
case of a special meeting of stockholders called for the
purpose of electing directors, not later than the close of
business on the tenth day following the day on which public
disclosure of the date of the special meeting was made.
To be in proper written form, a stockholder's
notice to the Secretary must set forth (a) as to each person
whom the stockholder proposes to nominate for election as a
director (i) the name, age, business address and residence
address of the person, (ii) the principal occupation or
employment of the person, (iii) the class or series and
number of shares of capital stock of the Corporation which
<PAGE>
7
are owned beneficially or of record by the person and
(iv) any other information relating to the person that would
be required to be disclosed in a proxy statement or other
filings required to be made in connection with solicitations
of proxies for election of directors pursuant to Section 14
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and the rules and regulations promulgated
thereunder; and (b) as to the stockholder giving the notice
(i) the name and record address of such stockholder,
(ii) the class or series and number of shares of capital
stock of the Corporation which are owned beneficially or of
record by such stockholder, (iii) a description of all
arrangements or understandings between such stockholder and
each proposed nominee and any other person or persons
(including their names) pursuant to which the nomination(s)
are to be made by such stockholder, (iv) a representation
that such stockholder intends to appear in person or by
proxy at the meeting to nominate the persons named in its
notice and (v) any other information relating to such
stockholder that would be required to be disclosed in a
proxy statement or other filings required to be made in
connection with solicitations of proxies for election of
directors pursuant to Section 14 of the Exchange Act and the
rules and regulations promulgated thereunder. Such notice
must be accompanied by a written consent of each proposed
nominee to being named as a nominee and to serve as a
director if elected.
Subject to Section 4 of this Article III, no
person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the
procedures set forth in this Section 2 of this Article III.
If the Chairman of the meeting determines that a nomination
was not made in accordance with the foregoing procedures,
the Chairman shall declare to the meeting that the
nomination was defective and such defective nomination shall
be disregarded.
SECTION 3. Removal of Directors. Directors of
---------------------
the Corporation may be removed only as provided in
Paragraph (e) of Article FIFTH of the Certificate of
Incorporation.
SECTION 4. Vacancies and Newly Created
---------------------------
Directorships. Any newly created directorship resulting
-------------
from an increase in the number of directors or any other
vacancy occurring in the Board of Directors may be filled by
a majority vote of the Nominating Committee, except as may
<PAGE>
8
be otherwise provided in the Certificate of Incorporation of
the Corporation. Any director of any class elected to fill
a vacancy resulting from an increase in the number of
directors in such class shall hold office for a term that
shall coincide with the remaining term of that class. Any
director elected to fill a vacancy not resulting from an
increase in the number of directors shall have the same
remaining term as that of the director's predecessor.
SECTION 5. Duties and Powers. The business of
------------------
the Corporation shall be managed by or under the direction
of the Board of Directors, except as may be otherwise
provided by statute or by the Certificate of Incorporation.
SECTION 6. Meetings. The Board of Directors of
---------
the Corporation may hold meetings, both regular and special,
either within or without the State of Delaware. Regular
meetings of the Board of Directors may be held without
notice at such time and at such place as may from time to
time be determined by the Board of Directors. Special
meetings of the Board of Directors may be called by the
Chairman or any Co-Chairman, if there be one, the Chief
Executive Officer, the President or any two directors.
Notice thereof stating the place, date and hour of the
meeting shall be given to each director either by mail not
less than 48 hours before the date of the meeting, by
telephone, electronic facsimile or telegram on 24 hours'
notice, or on such shorter notice as the person or persons
calling such meeting may deem necessary or appropriate in
the circumstances, provided that notice need not be given to
any director who shall, either before or after the meeting,
submit a signed waiver of such notice or who shall attend
such meeting without protesting, prior to or at its
commencement, the lack of notice to such director.
SECTION 7. Quorum. Except as may be otherwise
------
specifically provided by law, the Certificate of
Incorporation or these By-laws, at all meetings of the Board
of Directors, one-half of the entire Board of Directors
shall constitute a quorum for the transaction of business,
and the act of a majority of the directors present at any
meeting at which there is a quorum shall be the act of the
Board of Directors. If a quorum shall not be present at
any meeting of the Board of Directors, the directors present
thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a
quorum shall be present.
<PAGE>
9
SECTION 8. Actions of Board. Unless otherwise
-----------------
provided by the Certificate of Incorporation or these By-
laws, any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee
thereof may be taken without a meeting if all the members of
the Board of Directors or committee, as the case may be,
consent thereto in writing and the writing or writings are
filed with the minutes of proceedings of the Board of
Directors or committee.
SECTION 9. Meetings by Means of Conference
-------------------------------
Telephone. Unless otherwise provided by the Certificate of
----------
Incorporation or these By-laws, members of the Board of
Directors of the Corporation, or any committee designated by
the Board of Directors, may participate in a meeting of the
Board of Directors or such committee by means of a
conference telephone or similar communications equipment by
means of which all persons participating in the meeting can
hear each other, and participation in a meeting pursuant to
this Section 9 shall constitute presence in person at such
meeting.
SECTION 10. Committees. The Board of Directors
-----------
may, by resolution passed by a majority of the entire Board
of Directors, designate one or more committees, each
committee to consist of one or more of the directors of the
Corporation. The Board of Directors may designate one or
more directors as alternate members of any committee, who
may replace any absent or disqualified member at any meeting
of any such committee. In the absence or disqualification
of a member of a committee, and in the absence of a
designation by the Board of Directors of an alternate member
to replace the absent or disqualified member, the member or
members thereof present at any meeting and not disqualified
from voting, whether or nor such member or members
constitute a quorum, may unanimously appoint another member
of the Board of Directors to act at the meeting in the place
of any absent or disqualified member. Any committee, to the
extent allowed by law and provided in the resolution
establishing such committee, shall have and may exercise all
the powers and authority of the Board of Directors in the
management of the business and affairs of the Corporation.
Each committee shall keep regular minutes and report to the
Board of Directors when required.
SECTION 11. Compensation. The directors may be
-------------
paid their expenses, if any, of attendance at each meeting
of the Board of Directors and may be paid a fixed sum for
<PAGE>
10
attendance at each meeting of the Board of Directors or a
stated salary as director. No such payment shall preclude
any director from serving the Corporation in any other
capacity and receiving compensation therefor. Members of
special or standing committees may be allowed like
compensation for attending committee meetings.
SECTION 12. Interested Directors. No contract or
---------------------
transaction between the Corporation and one or more of its
directors or officers, or between the Corporation and any
other corporation, partnership, association, or other
organization in which one or more of its directors or
officers are directors or officers, or have a financial
interest, shall be void or voidable solely for this reason,
or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or
committee thereof which authorized the contract or
transaction, or solely because the vote or votes of such
person or persons are counted for such purpose if (i) the
material facts as to the relationship or interest of such
person or persons and as to the contract or transaction are
disclosed or are known to the Board of Directors or the
committee, and the Board of Directors or committee in good
faith authorizes the contract or transaction by the
affirmative votes of a majority of the disinterested
directors, even though the disinterested directors be less
than a quorum; or (ii) the material facts as to the
relationship or interest of such persons or persons and as
to the contract or transaction are disclosed or are known to
the stockholders entitled to vote thereon, and the contract
or transaction is specifically approved in good faith by
vote of the stockholders; or (iii) the contract or
transaction is fair as to the Corporation as of the time it
is authorized, approved or ratified, by the Board of
Directors, a committee thereof or the stockholders. Common
or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors
or of a committee which authorizes the contract or
transaction.
SECTION 13. Meaning of "entire Board of
---------------------------
Directors". As used in this Article III and in these By-
-----------
laws generally, the term "entire Board of Directors" means
the total number of directors which the Corporation would
have if there were no vacancies.
SECTION 14. Chairman and Co-Chairman of the Board
-------------------------------------
of Directors. The Board of Directors may appoint one of its
-------------
<PAGE>
11
members as Chairman and one or more of its members as Co-
Chairmen of the Board of Directors. The Chairman or a Co-
Chairman of the Board of Directors, if there be one, shall
preside at all meetings of the stockholders and of the Board
of Directors and shall have such other powers and perform
such other duties as may be prescribed by the Board of
Directors or as provided in these By-laws or as otherwise
may normally be incident to such office.
SECTION 15. Vice Chairman. The Board of
--------------
Directors may also appoint one or more of its members as
Vice Chairman of the Board of Directors, who shall preside
at all meetings of the stockholders and of the Board of
Directors in the absence of the Chairman or Co-Chairman, and
shall have such other powers and perform such other duties
as may be prescribed by the Board of Directors or as
provided in these By-laws or as otherwise may normally be
incident to such office (including, without limitation, the
power and authority to exercise the authority of the
Chairman or the Co-Chairmen in the absence or disability of
such person or persons).
ARTICLE IV
Officers
--------
SECTION 1. General. The officers of the
--------
Corporation shall be a Chief Executive Officer, a Secretary
and a Treasurer. The officers of the Corporation may also
include, at the discretion of the Board of Directors, a
Chief Financial Officer and one or more business unit
Presidents, Vice Presidents (including, without limitation,
Assistant, Executive and Senior), Vice Chairmen, Assistant
Secretaries, Assistant Treasurers and other officers. The
officers of the Corporation shall be chosen by the Board of
Directors, except that the Board may from time to time
authorize any officer to appoint and remove any other
officer or agent and to prescribe such person's authority
and duties. Any number of offices may be held by the same
person, unless otherwise prohibited by law, the Certificate
of Incorporation or these By-laws. The officers of the
Corporation need not be stockholders of the Corporation nor
need such officers be directors of the Corporation.
SECTION 2. Election. Each Officer shall hold
---------
office for the term for which elected or appointed by the
Board of Directors and shall exercise such powers and
<PAGE>
12
perform such duties as are provided in these By-laws or as
shall be determined from time to time by the Board of
Directors; and all officers of the Corporation shall hold
office until their successors are chosen and qualified, or
until their earlier death, resignation or removal. Any
officer may be removed, either with or without cause, by the
Board of Directors, at any regular or special meeting
thereof, or by any officer upon whom such power of removal
may be conferred by the Board of Directors, except that an
officer chosen by the Board of Directors may be removed only
by the Board of Directors. A vacancy occurring in any
office of the Corporation shall be filled in the manner
prescribed in these By-laws for regular appointments to such
office. The salaries and other compensation of all officers
of the Corporation shall be fixed by the Board of Directors.
SECTION 3. Voting Securities Owned by the
------------------------------
Corporation. Powers of attorney, proxies, waivers of notice
------------
of meeting, consents and other instruments relating to
securities owned by the Corporation may be executed in the
name of and on behalf of the Corporation by the Chief
Executive Officer, the President or any Vice President and
any such officer may, in the name of and on behalf of the
Corporation, take all such action as any such officer may
deem advisable to vote in person or by proxy at any meeting
of security holders of any corporation in which the
Corporation may own securities and at any such meeting shall
possess and may exercise any and all rights and powers
incident to the ownership of such securities and which, as
the owner thereof, the Corporation might have exercised and
possessed if present. The Board of Directors may, by
resolution, from time to time confer like powers upon any
other person or persons.
SECTION 4. Chief Executive Officer. The chief
------------------------
executive officer shall be the Chief Executive Officer of
the Corporation and shall have the powers and perform the
duties incident to that position. Subject to the Board of
Directors, the Chief Executive Officer shall be in general
and active charge of the entire business and affairs of the
Corporation, and shall be its chief policy-making officer.
The Chief Executive Officer shall see to it that all orders
and resolutions of the Board of Directors are carried into
effect. The Chief Executive Officer shall execute all
bonds, mortgages, contracts and other instruments of the
Corporation requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be
otherwise signed and executed and except that the other
<PAGE>
13
officers of the Corporation may sign and execute documents
when so authorized by these By-laws, the Board of Directors
or the Chief Executive Officer. In the absence or
disability of the Chairman of the Board of Directors or any
Co-Chairman or Vice Chairman, or if there be none, the Chief
Executive Officer shall preside at all meetings of the
stockholders and the Board of Directors. The Chief
Executive Officer shall also perform such other duties and
may exercise such other powers as from time to time may be
assigned to the Chief Executive Officer by these By-laws or
by the Board of Directors.
SECTION 5. President. The President shall
----------
perform such duties and exercise such powers as are incident
to that position, and shall perform such other duties and
exercise such other powers as may from time to time be
prescribed by the Board of Directors.
SECTION 6. Vice Presidents. At the request of
----------------
the Chief Executive Officer or in the absence of the Chief
Executive Officer or in the event of the inability or
refusal to act of the Chief Executive Officer (and if there
be no Chairman or Co-Chairman or any Vice Chairman of the
Board of Directors), the Vice President or the Vice
Presidents, if there is more than one (in the order
designated by the Board of Directors) shall perform the
duties of the Chief Executive Officer, and when so acting,
shall have all the powers of and be subject to all the
restrictions upon the Chief Executive Officer. Each Vice
President shall perform such other duties and have such
other powers as the Board of Directors from time to time may
prescribe. If there be no Chairman or Co-Chairman or any
Vice Chairman of the Board of Directors and no Vice
President, the Board of Directors shall designate the
officer of the Corporation who, in the absence of the Chief
Executive Officer or in the event of the inability or
refusal of the Chief Executive Officer to act, shall perform
the duties of the Chief Executive Officer, and when so
acting, shall have all the powers of and be subject to all
the restrictions upon the Chief Executive Officer.
SECTION 7. Secretary. The Secretary shall attend
----------
all meetings of the Board of Directors and all meetings of
stockholders and record all the proceedings thereat in a
book or books to be kept for that purpose; the Secretary
shall also perform like duties for the standing committees
when required. The Secretary shall give, or cause to be
given, notice of all meetings of the stockholders and
<PAGE>
14
special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board
of Directors or Chief Executive Officer, under whose
supervision the Secretary shall be. If the Secretary shall
be unable or shall refuse to cause to be given notice of all
meetings of the stockholders and special meetings of the
Board of Directors, and if there be no Assistant Secretary,
then either the Board of Directors or the Chief Executive
Officer may choose another officer to cause such notice to
be given. The Secretary shall have custody of the seal of
the Corporation and the Secretary or any Assistant
Secretary, if there be one, shall have authority to affix
the same to any instrument requiring it and when so affixed,
it may be attested by the signature of the Secretary or by
the signature of any such Assistant Secretary. The Board of
Directors may give general authority to any other officer to
affix the seal of the Corporation and to attest the affixing
by his or her signature. The Secretary shall see that all
books, reports, statements, certificates and other documents
and records required by law to be kept or filed are properly
kept or filed, as the case may be.
SECTION 8. Chief Financial Officer. The Chief
------------------------
Financial Officer shall be the principal officer of the
Corporation having responsibility for financial matters and
shall perform such duties as may be assigned to him by the
Board of Directors or the Chairman or any Co-Chairman.
SECTION 9. Treasurer. The Treasurer shall have
----------
the custody of the corporate funds and securities and shall
keep full and accurate accounts of receipts and
disbursements in books belonging to the Corporation and
shall deposit all moneys and other valuable effects in the
name and to the credit of the Corporation in such
depositories as may be designated by the Board of Directors.
The Treasurer shall disburse the funds of the Corporation as
may be ordered by the Board of Directors, taking proper
vouchers for such disbursements, and shall render to the
Chief Executive Officer and the Board of Directors, at its
regular meetings, or when the Board of Directors so
requires, an account of all the Treasurer's transactions as
Treasurer and of the financial condition of the Corporation.
SECTION 10. Assistant Secretaries. Except as may
----------------------
be otherwise provided in these By-laws, Assistant
Secretaries, if there be any, shall perform such duties and
have such powers as from time to time may be assigned to
them by the Board of Directors, the Chief Executive Officer,
<PAGE>
15
the President, any Vice Chairman, if there be one, or the
Secretary, and in the absence of the Secretary or in the
event of the disability of the Secretary or refusal of the
Secretary to act, shall perform the duties of the Secretary,
and when so acting, shall have all the powers of and be
subject to all the restrictions upon the Secretary.
SECTION 11. Assistant Treasurers. Assistant
---------------------
Treasurers, if there be any, shall perform such duties and
have such powers as from time to time may be assigned to
them by the Board of Directors, the Chief Executive Officer,
any Vice President, if there be one, or the Treasurer, and
in the absence of the Treasurer or in the event of the
disability of the Treasurer or refusal of the Treasurer to
act, shall perform the duties of the Treasurer, and when so
acting, shall have all the powers of and be subject to all
the restrictions upon the Treasurer. If required by the
Board of Directors, an Assistant Treasurer shall give the
Corporation a bond in such sum and with such surety or
sureties as shall be satisfactory to the Board of Directors
for the faithful performance of the duties of such office
and for the restoration to the Corporation, in case of such
Assistant Treasurer's death, resignation, retirement or
removal from office, of all books, papers, vouchers, money
and other property of whatever kind in the possession or
under the control of such Assistant Treasurer belonging to
the Corporation.
SECTION 12. Other Officers. Such other officers
---------------
as the Board of Directors may choose shall perform such
duties and have such powers as from time to time may be
assigned to them by the Board of Directors. The Board of
Directors may delegate to any other officer of the
Corporation the power to choose such other officers and to
prescribe their respective duties and powers.
ARTICLE V
Stock
-----
SECTION 1. Form of Certificates. Every holder of
---------------------
stock in the Corporation shall be entitled to have a
certificate signed, in the name of the Corporation (i) by
the Chairman of the Board of Directors, the Co-Chairman of
the Board of Directors, the Chief Executive Officer or a
Vice President and (ii) by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the
<PAGE>
16
Corporation, certifying the number of shares in the
Corporation owned by such holder.
SECTION 2. Signatures. Any or all the signatures
-----------
on the certificate may be a facsimile. In case any officer,
transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the
Corporation with the same effect as if such person were such
officer, transfer agent or registrar at the date of issue.
SECTION 3. Lost Certificates. The Board of
------------------
Directors may direct a new certificate to be issued in place
of any certificate theretofore issued by the Corporation
alleged to have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the person claiming
the certificate of stock to be lost, stolen or destroyed.
When authorizing such issue of a new certificate, the Board
of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificate, or the legal
representative of such person, to advertise the same in such
manner as the Board of Directors shall require and/or to
give the Corporation a bond in such sum as it may direct as
indemnity against any claim that may be made against the
Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
SECTION 4. Transfers. Stock of the Corporation
----------
shall be transferable in the manner prescribed by law and in
these By-laws. Transfers of stock shall be made on the
books of the Corporation only by the person named in the
certificate or by the person's attorney lawfully constituted
in writing and upon the surrender of the certificate
therefor, which shall be canceled before a new certificate
shall be issued.
SECTION 5. Record Date. In order that the
------------
Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any
adjournment thereof, or entitled to receive payment of any
dividend or other distribution or allotment of any rights,
or entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any
other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than 60 days
nor less than 10 days before the date of such meeting, nor
<PAGE>
17
more than 60 days prior to any other action. A
determination of stockholders of record entitled to notice
of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the
-------- -------
Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 6. Beneficial Owners. The Corporation
------------------
shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to
receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on its
books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in
such share or shares on the part of any other person,
whether or not it shall have express or other notice
thereof, except as otherwise required by law.
ARTICLE VI
Notices
-------
SECTION 1. Notices. Whenever written notice is
--------
required by law, the Certificate of Incorporation or these
By-laws, to be given to any director, member of a committee
or stockholder, such notice may be given by mail, addressed
to such director, member of a committee or stockholder, at
the address of such person as it appears on the records of
the corporation, with postage thereon prepaid, and such
notice shall be deemed to be given at the time when the same
shall be deposited in the United States mail. Written
notice may also be given personally or by electronic
facsimile, telegram, telex, cable or overnight courier.
SECTION 2. Waivers of Notice. Whenever any
------------------
notice is required by law, the Certificate of Incorporation
or these By-laws, to be given to any director, member of a
committee or stockholder, a waiver thereof in writing,
signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be
deemed equivalent thereto.
<PAGE>
18
ARTICLE VII
General Provisions
------------------
SECTION 1. Dividends. Dividends upon the capital
----------
stock of the Corporation, subject to the provisions of the
Certificate of Incorporation, if any, may be declared by the
Board of Directors at any regular or special meeting, and
may be paid in cash, in property, or in shares of the
capital stock. Before payment of any dividend, there may be
set aside out of any funds of the Corporation available for
dividends such sum or sums as the Board of Directors from
time to time, in its absolute discretion, deems proper as a
reserve or reserves to meet contingencies, or for equalizing
dividends, or for repairing or maintaining any property of
the Corporation, or for any proper purpose, and the Board of
Directors may modify or abolish any such reserve.
SECTION 2. Disbursements. All checks or demands
--------------
for money and notes of the Corporation shall be signed by
such officer or officers or such other person or persons as
the Board of Directors may from time to time designate.
SECTION 3. Fiscal Year. The fiscal year of the
------------
Corporation shall be fixed by resolution of the Board of
Directors.
SECTION 4. Corporate Seal. The corporate seal
---------------
shall have inscribed thereon the name of the Corporation,
the year of its organization and the words "Corporate Seal
Delaware". The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or reproduced
or otherwise.
ARTICLE VIII
Indemnification of Directors and Officers
-----------------------------------------
SECTION 1. Right to Indemnification. Each person
------------------------
who was or is made a party or is threatened to be made a
party to or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the
fact that he or she is or was a director or an officer of
the Corporation or is or was serving at the request of the
Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture,
<PAGE>
19
trust or other enterprise, including service with respect to
an employee benefit plan (hereinafter an "indemnitee"),
whether the basis of such proceeding is alleged action in an
official capacity as a director, officer, employee or agent
or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized
by the Delaware General Corporation Law, as the same exists
or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights
than such law permitted the Corporation to provide prior to
such amendment), against all expense, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid in settlement)
reasonably incurred or suffered by such indemnitee in
connection therewith; provided, however, that, except as
-------- -------
provided in Section 3 of this ARTICLE VIII with respect to
proceedings to enforce rights to indemnification, the
Corporation shall indemnify any such indemnitee in
connection with a proceeding (or part thereof) initiated by
such indemnitee only if such proceedings (or part thereof)
was authorized by the Board of Directors of the Corporation.
SECTION 2. Right to Advancement of Expenses. The
--------------------------------
right to indemnification conferred in Section 1 of this
ARTICLE VIII shall include the right to be paid by the
Corporation the expenses (including attorneys' fees)
incurred in defending any such proceeding in advance of its
final disposition (hereinafter an "advancement of
expenses"); provided, however, that, if the Delaware General
-------- -------
Corporation Law requires, an advancement of expenses
incurred by an indemnitee in his or her capacity as a
director or officer (and not in any other capacity in which
service was or is rendered by such indemnitee, including,
without limitation, service to an employee benefit plan)
shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf
of such indemnitee, to repay all amounts so advanced if it
shall ultimately be determined by final judicial decision
from which there is no further right to appeal (hereinafter
a "final adjudication") that such indemnitee is not entitled
to be indemnified for such expenses under this Section 2 or
otherwise. The rights to indemnification and to the
advancement of expenses conferred in Sections 1 and 2 of
this ARTICLE VIII shall be contract rights and such rights
shall continue as to an indemnitee who has ceased to be a
director, officer, employee or agent and shall inure to the
<PAGE>
20
benefit of the indemnitee's heirs, executors and
administrators.
SECTION 3. Right of Indemnitee to Bring Suit. If
----------------------------------
a claim under Section 1 or 2 of this ARTICLE VIII is not
paid in full by the Corporation within sixty (60) days after
a written claim has been received by the Corporation, except
in the case of a claim for an advancement of expenses, in
which case the applicable period shall be twenty (20) days,
the indemnitee may at any time thereafter bring suit against
the Corporation to recover the unpaid amount of the claim.
If successful in whole or in part in any such suit, or in a
suit brought by the Corporation to recover an advancement of
expenses pursuant to the terms of an undertaking, the
indemnitee shall be entitled to be paid also the expense of
prosecuting or defending such suit. In (i) any suit brought
by the indemnitee to enforce a right to indemnification
hereunder (but not in a suit brought by the indemnitee to
enforce a right to an advancement of expenses) it shall be a
defense that, and (ii) in any suit brought by the
Corporation to recover an advancement of expenses pursuant
to the terms of an undertaking, the Corporation shall be
entitled to recover such expenses upon a final adjudication
that, the indemnitee has not met any applicable standard for
indemnification set forth in the Delaware General
Corporation Law. Neither the failure of the Corporation
(including its Board of Directors, independent legal counsel
or its stockholders) to have made a determination prior to
the commencement of such suit that indemnification of the
indemnitee is proper in the circumstances because the
indemnitee has met the applicable standard of conduct set
forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders)
that the indemnitee has not met such applicable standard of
conduct, shall create a presumption that the indemnitee has
not met the applicable standard of conduct or, in the case
of such a suit brought by the indemnitee, be a defense to
such suit. In any suit brought by the indemnitee to enforce
a right to indemnification or to an advancement of expenses
hereunder, or brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the indemnitee is
not entitled to be indemnified, or to such advancement of
expenses, under this ARTICLE VIII or otherwise shall be on
the Corporation.
<PAGE>
21
SECTION 4. Non-Exclusivity of Rights. The rights
--------------------------
to indemnification and to the advancement of expenses
conferred in this ARTICLE VIII shall not be exclusive of any
other right which any person may have or hereafter acquire
under any statute, the Corporation's Certificate of
Incorporation, By-laws, agreement, vote of stockholders or
disinterested directors or otherwise.
SECTION 5. Insurance. The Corporation may
----------
maintain insurance, at its expense, to protect itself and
any director, officer, employee or agent of the Corporation
or another corporation, partnership, joint venture, trust or
other enterprise against any expense, liability or loss,
whether or not the Corporation would have the power to
indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
SECTION 6. Indemnification of Employees and
--------------------------------
Agents of the Corporation. The Corporation may, to the
--------------------------
extent authorized from time to time by the Board of
Directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the
Corporation to the fullest extent of the provisions of this
Article with respect to the indemnification and advancement
of expenses of directors and officers of the Corporation.
ARTICLE IX
Amendments
----------
Except as otherwise provided in the Certificate of
Incorporation, these By-laws may be altered, amended or
repealed, in whole or in part, or new By-laws may be adopted
(i) upon a vote of a majority of the entire Board of
Directors or (ii) by the affirmative vote of the holders of
a majority of the combined voting power of the then
outstanding shares of stock of all classes and series of
stock the holders of which are entitled to vote generally in
the election of directors, voting together as a single
class.
EXHIBIT 4.8
============================================================
AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT
among
BLACKSTONE CAPITAL PARTNERS L.P.,
WASSERSTEIN PERELLA PARTNERS, L.P.,
COLLINS & AIKMAN CORPORATION
and
COLLINS & AIKMAN GROUP, INC.
_________________________________________
Dated as of June 29, 1994
_________________________________________
============================================================
<PAGE>
[Draft--6/20/94]
AMENDED AND RESTATED STOCKHOLDERS
AGREEMENT, dated as of June 29, 1994, among
BLACKSTONE CAPITAL PARTNERS L.P., a Delaware
limited partnership ("BCP"), WASSERSTEIN
PERELLA PARTNERS, L.P., a Delaware limited
partnership ("WPP"), COLLINS & AIKMAN
CORPORATION, a Delaware corporation (the
"Company"), and COLLINS & AIKMAN GROUP, INC.,
a Delaware corporation ("Group").
WHEREAS BCP, WPP, the Company (as the surviving
corporation from a merger between Collins & Aikman Holdings
Corporation, a Delaware corporation, and Collins & Aikman
Holdings II Corporation, a Delaware corporation, pursuant to
the Recapitalization (as such term is defined in the
Registration Statement on Form S-2 initially filed by the
Company on April 19, 1994, as such Registration Statement
may be amended from time to time)) and Group are parties to
a Stockholders Agreement dated as of December 6, 1988, as
amended by Amendment No. 1 dated as of May 1, 1992 (the
"Stockholders Agreement");
WHEREAS BCP and WPP (or their affiliates) are
entitled to certain fees for the provision of services to
the Company and Group (or their subsidiaries) pursuant to
the Stockholders Agreement and pursuant to an agreement
ratified September 5, 1990 (the "Management and Retainer
Agreement");
WHEREAS in connection with the Recapitalization,
BCP and WPP have agreed (subject to, and effective only
upon, the consummation of the Recapitalization) to reduce
the fees required by the Stockholders Agreement and the
Management and Retainer Agreement; and
WHEREAS the parties to the Stockholders Agreement
wish to otherwise amend the Stockholders Agreement and
restate it in its entirety (subject to, and effective only
upon, the consummation of the Recapitalization).
<PAGE>
2
NOW, THEREFORE, in consideration of the premises
and the covenants and agreements contained herein, the
parties hereto agree as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. Certain Definitions. As used in
-------------------
this Agreement, the following terms shall have the meanings
specified below:
"Affiliate" shall mean, when used with respect to
any person, any other person which directly or indirectly
beneficially owns or controls 25% or more of the total
voting power of shares of capital stock of such person hav-
ing the right to vote for directors under ordinary circum-
stances, any person controlling, controlled by or under com-
mon control with any such person (within the meaning of
Rule 405 of the Securities Act), and any director or
executive officer of any such person. "Affiliate" shall in
any event include, when used with respect to WPP,
Wasserstein Perella Co., Inc., Wasserstein Perella Group,
Inc. and Wasserstein Perella Management Partners, Inc. and,
when used with respect to BCP, The Blackstone Group L.P. and
Blackstone Group Holdings L.P.
"Common Stock" shall mean the capital stock of the
Company having the right to vote for directors under
ordinary circumstances.
"Demanding Party" shall mean either BCP or WPP or
both, or any transferee of BCP's or WPP's rights under
Section 3.01 hereof, which party has properly given notice
that it is seeking demand registration pursuant to
Section 3.01 hereof.
"Holder" shall mean BCP and WPP and any person who
becomes a party to this Agreement pursuant to Section 2.03
or 2.04 hereof so long as such person remains the beneficial
owner of Common Stock.
"HSR Act" shall mean the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
"Piggyback Party" shall mean either BCP or WPP or
both, or any transferee of BCP's or WPP's rights under
<PAGE>
3
Section 3.02 hereof, which party has properly given notice
that it is seeking piggyback registration pursuant to
Section 3.02 hereof.
"Registration Right Party" shall mean any
Demanding Party and any Piggyback Party.
"Registration Shares" shall mean (a) the shares of
Common Stock held by BCP or WPP immediately following the
Recapitalization, (b) any shares of Common Stock acquired by
BCP or WPP or Affiliates of BCP or WPP subsequent to the
Recapitalization, and (c) any shares of Common Stock or
other securities issued or issuable with respect to any such
Common Stock (set forth in clauses (a) and (b) above) by way
of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise.
"Securities Act" shall mean the Securities Act of
1933, as from time to time amended.
SECTION 1.02. Additional Definitions. Other
-----------------------
capitalized terms not defined in Section 1.01 hereof are
defined in the following Sections:
Term Section
---- -------
Additional Services 4.02
Affiliate Transfer Agreement 2.04(a)
Affiliate Transferee 2.04(a)
BCP Parties
Company Parties
Company Securities 3.04
Demanding Party 3.01
Demand Registration 3.01
Former Fees 4.01
Group Parties
Holder Offeree 2.05(a)
Company Parties
Company Securities 3.04
Management and Retainer Agreement Recitals
Monitoring Fee 4.01
Offered Shares 2.05(a)
Offering Price 2.06(b)
Offering Terms 2.06(b)
Offeror 2.05(a)
Offer Terms 2.05(a)
Piggyback Registration 3.02(a)
Proposed Purchaser 2.06(b)
<PAGE>
4
Purchase Offer 2.06(b)
Recapitalization Recitals
Refusal Offeree 2.05(a)
Registration Statement 3.10(a)
Selling Holder 2.06(b)
Stockholders Agreement Recitals
Tag-Along Stockholder 2.06(b)
Third Party Offeree 2.05(a)
Transfer 2.03
Transfer Agreement 2.03
WPP Parties
ARTICLE II
Restrictions on Transfer
------------------------
SECTION 2.01. General Restrictions. Each Holder
---------------------
agrees that it shall not, directly or indirectly, offer,
sell, assign, transfer, grant a participation in, pledge, or
create, incur or assume any encumbrance with respect to or
otherwise dispose of, any Common Stock (or solicit any
offers to buy or otherwise acquire, or take a pledge, of any
Common Stock) except (i) in compliance with this Agreement
and with all applicable federal, state and foreign
securities laws, (ii) after having given written notice to
the Company as set forth in this Agreement or, if no notice
is otherwise required by the applicable provisions of this
Agreement, after having given at least three business days
prior written notice to the Company, and (iii) when
requested by the Company, with a written opinion of counsel
(which opinion shall be reasonably satisfactory in form and
substance to the Company) that an exemption from
registration under the Securities Act is available and that
the proposed transaction would not violate applicable
securities laws.
SECTION 2.02. Legends. Each certificate
--------
evidencing outstanding Common Stock that is issued to any
Holder shall bear a legend in substantially the following
form so long as the restrictions set forth in the legend are
applicable to such Common Stock:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT"), OR BY THE SECURITIES REGULATORY AUTHORITY OF
ANY STATE OF THE UNITED STATES OR BY ANY SUCH AUTHORITY
IN CANADA OR ANY PROVINCE OF CANADA OR OF ANY OTHER
<PAGE>
5
JURISDICTION. NO REGISTRATION OF TRANSFER OF SUCH
SECURITIES SHALL BE MADE ON THE BOOKS OF THE ISSUER
UNLESS SUCH TRANSFER IS MADE IN CONNECTION WITH AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND
REGISTRATION OF THE SECURITIES UNDER THE SECURITIES
LAWS OF ANY APPLICABLE JURISDICTIONS OR PURSUANT TO AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT AND THE SECURITIES LAWS OF ANY APPLICABLE
JURISDICTIONS.
THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE ALSO
SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OTHER
RESTRICTIONS AS SET FORTH IN THE AMENDED AND RESTATED
STOCKHOLDERS AGREEMENT, DATED AS OF JUNE 29, 1994, AS
SUCH AGREEMENT MAY BE AMENDED FROM TIME TO TIME, COPIES
OF WHICH ARE ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES
OF THE ISSUER. NO REGISTRATION OF TRANSFER OF SUCH
SECURITIES SHALL BE MADE ON THE BOOKS OF THE ISSUER
UNLESS AND UNTIL SUCH RESTRICTIONS SHALL HAVE BEEN
COMPLIED WITH.
When either paragraph of the preceding legend ceases to
apply to any Common Stock and upon the request of the holder
of such Common Stock, the Company shall issue a new
certificate or certificates to such holder without the
inapplicable portions of such legend in exchange for the
certificate or certificates held by such holder.
SECTION 2.03. Agreements to be Bound. Each
-----------------------
Holder agrees that it shall not (except as required by law),
directly or indirectly, sell, assign, transfer, grant a
participation in or pledge (each, to "Transfer") any Common
Stock to any transferee if following such Transfer such
transferee and its Affiliates, if any, will be the
beneficial owner or owners of in aggregate 10% or more of
the then outstanding shares of Common Stock or a member of a
group, within the meaning of Section 13(d)(3) of the
Securities Exchange Act of 1934, that is such an owner,
provided, however, that the foregoing restriction shall not
-------- -------
apply to any Transfer to a transferee where the transferee
has, prior to such Transfer, executed a Transfer Agreement,
substantially in the form attached hereto as Exhibit A,
which shall cause such transferee to be bound by the
obligations of this Agreement as a Holder (yet not receive
the benefits of this Agreement except as expressly
transferred in such Transfer Agreement pursuant to a
provision of this Agreement allowing such transfer), a copy
of which Transfer Agreement shall be maintained on file with
<PAGE>
6
the Secretary of the Company and shall include the address
of such transferee to which notices hereunder shall be sent.
Each such Transfer Agreement shall become effective upon its
execution by the transferee of the Common Stock (and shall
not require the signature or consent of any other Holder)
and delivery to all the parties hereto.
SECTION 2.04. Transfers to Affiliates, General
--------------------------------
Partners and Limited Partners. (a) Each of BCP and WPP may
-----------------------------
Transfer any Common Stock held by it, in whole or in part,
to any of its Affiliates without incurring any obligations
pursuant to Sections 2.05 or 2.06 hereof, provided that
prior to any such Transfer such Affiliate of BCP or WPP (an
"Affiliate Transferee"), shall execute and deliver to the
parties hereto (i) an Affiliate Transfer Agreement,
substantially in the Form attached hereto as Exhibit B,
which shall cause such Affiliate Transferee to be bound by
the obligations of, and enjoy the benefits of, this
Agreement as a successor to BCP or WPP, respectively, with
such Affiliate Transfer Agreement becoming effective upon
its execution by the Affiliate Transferee and delivery to
all the parties hereto and (ii) an irrevocable proxy
granting to BCP, in the case of an Affiliate Transferee of
BCP, or to WPP, in the case of an Affiliate Transferee of
WPP, all voting rights with respect to the Common Stock so
transferred. Such Affiliate Transferee shall also agree
that it shall not cease to be an Affiliate of BCP or WPP,
as the case may be, unless prior to the time such Affiliate
Transferee ceases to be an Affiliate of BCP or WPP, such
Affiliate Transferee transfers to BCP or WPP, as the case
may be, or to an Affiliate thereof designated by BCP or WPP,
as the case may be, who has become bound by the terms of
this Agreement pursuant to this Section 2.04, all shares of
Common Stock owned by such Affiliate Transferee, and BCP and
WPP hereby agree to cause such Affiliate Transferee prior to
the time it ceases to be an Affiliate of BCP or WPP to so
transfer such Common Stock.
(b) Each of BCP and WPP may Transfer any Common
Stock held by it, in whole or in part, to any of its or its
Affiliates' limited partners that is not an Affiliate of BCP
or WPP (a "Partner Transferee") without incurring any
obligations pursuant to Sections 2.05 or 2.06 hereof,
provided that if, following any Transfer pursuant to this
Section 2.04(b), any Partner Transferee combined with its
Affiliates, if any, will be the beneficial owner or owners
of in aggregate 10% or more of the then outstanding shares
<PAGE>
7
of Common Stock, such Partner Transferee shall enter into a
Transferee Agreement as provided in Section 2.03 hereof.
SECTION 2.05. Right of First Refusal. (a) In the
----------------------
event that any Holder (the "Offeror") shall have made an
offer to, or shall have an offer from, a third party (the
"Third Party Offeree") to sell or otherwise transfer shares
of Common Stock owned by such Holder in one transaction or
from time to time in a series of transactions (except in a
registered public offering or pursuant to Rule 144 under the
Securities Act), the Holder Offeree (as defined below) and
the Company shall have a right of first refusal with respect
to such Common Stock as set forth below. Prior to such sale
or transfer of shares of Common Stock to the Third Party
Offeree, the Offeror shall offer such Common Stock (the
"Offered Shares") for purchase by BCP, in the case of WPP
and Affiliates or transferees of WPP, or by WPP, in the case
of BCP and Affiliates or transferees of BCP (the "Holder
Offeree"), as hereinafter provided by notifying the Holder
Offeree in writing of such offer, setting forth the terms
and conditions of sale and the price at which the Offeror
proposes to sell the Offered Shares (the "Offer Terms") and
the identity of the Third Party Offeree (with a copy of such
notice given to the Company concurrently with such notice to
the Holder Offeree). The giving of such notice shall
constitute an offer by the Offeror, irrevocable during the
20-day period referred to in and subject to the terms of
this Section 2.05, to sell to the Holder Offeree the Offered
Shares on the Offer Terms. The Holder Offeree shall have a
period of 20 days after the receipt of such notice from the
Offeror in which to notify the Offeror in writing that it
(or any of its Affiliates) elects to purchase the Offered
Shares upon the Offer Terms. If the Holder Offeree (or any
of its Affiliates) elects to purchase the Offered Shares, it
shall give irrevocable notice of such election to the
Offeror within such 20-day period. If the Holder Offeree
does not give notice to the Offeror within such 20-day
period or at any time during such 20-day period the Holder
Offeree gives notice that it does not elect to purchase the
Offered Shares, the Offeror shall offer the Offered Shares
for purchase by the Company (together with the Holder
Offeree, the "Refusal Offerees") by notifying the Company in
writing of such offer, setting forth the Offer Terms and the
identity of the Third Party Offeree. The giving of notice
shall constitute an offer by the Offeror, irrevocable during
the 10 days following the Company's receipt of such notice,
to sell to the Company the Offered Shares on the Offer
Terms. During such 10-day period, the Company may
<PAGE>
8
irrevocably notify the Offeror in writing that it (or any of
its Affiliates other than BCP and WPP) elects to purchase
the Offered Shares upon the Offer Terms. If the Company
does not give notice to the Offeror within such 10-day
period or at any time during such 10-day period the Company
gives notice that it does not elect to purchase the Offered
Shares, the Offeror shall be free to sell the Offered Shares
to the Third Party Offeree on the Offer Terms (or, if there
has been a material change in the facts considered by the
Offeror and the Third Party Offeree in arriving at the Offer
Terms, at a price which is at least 90% of the offered price
and upon terms which are at least as favorable to the
Offeror as the Offer Terms) provided that (i) such sale to
the Third Party Offeree shall be consummated within 45 days
after the 10-day period referred to above and (ii) the
Offeror shall furnish to the Refusal Offerees (x) a
certificate of an officer of the Offeror specifying the
price and other material terms of sale to the Third Party
Offeree, (y) a written instrument of the Third Party Offeree
pursuant to which the Third Party Offeree represents and
warrants that it is acquiring the Offered Shares for its own
account and not for purposes of distribution thereof and
(z) a Transfer Agreement of the Third Party Offeree pursuant
to Section 2.03 hereof in which the Third Party Offeree
agrees to be bound by the obligations of this Agreement;
provided, however, that clause (ii)(z) of this Section
-------- -------
2.05(a) shall apply only if, following such sale of Offered
Shares, the Third Party Offeree and its Affiliates will be
the beneficial owner or owners of in the aggregate 10% or
more of the then outstanding shares of Common Stock or a
member of a group, within the meaning of Section 13(d)(3) of
the Securities Exchange Act of 1934, that is such an owner.
(b) In the event that a Refusal Offeree (or any
of its Affiliates) elects to purchase the Offered Shares
pursuant to paragraph (a) of this Section 2.05, the Offeror
(including any Tag-Along Stockholders selling pursuant to
Section 2.06 hereof) shall be obligated to sell to such
Refusal Offeree (or its Affiliates), and such Refusal
Offeree (or its Affiliates) shall be obligated to purchase
from the Offeror (and Tag-Along Stockholders), the Offered
Shares upon the Offer Terms. The written notice of election
given to the Offeror pursuant to paragraph (a) of this
Section 2.05 shall specify the place and date (not later
than the later of 45 days from the date such notice is given
and the expiration of any applicable waiting period under
the HSR Act) for the closing of such purchase. At the
closing of a purchase of Offered Shares hereunder, the
<PAGE>
9
Refusal Offeree (or its Affiliates) shall pay to the Offeror
(and Tag-Along Stockholders) the purchase price for all the
Offered Shares in accordance with paragraph (a) of this
Section 2.05 and the Offeror (and Tag-Along Stockholders)
will deliver or cause to be delivered to the Refusal Offeree
(or its Affiliates) a certificate or certificates
representing the Offered Shares, duly endorsed or
accompanied by appropriate stock powers duly executed in
blank and a certificate containing the representation
described in clause (iii) of the next sentence. The
obligation of the Offeror (and Tag-Along Stockholders) to
deliver the Offered Shares and the Refusal Offeree (or its
Affiliates) to purchase the Offered Shares at such closing
shall be subject only to the conditions that (i) no
preliminary or permanent injunction or other order, decree
or ruling issued by a court of competent jurisdiction or by
a governmental, regulatory or administrative agency or
commission shall be in effect which would prohibit such sale
and delivery, (ii) any applicable waiting period under the
HSR Act shall have expired and any other applicable
governmental approvals and clearances shall have been
obtained and (iii) with respect to the obligation of the
Refusal Offeree (or its Affiliates), the Offeror shall
deliver to the Refusal Offeree (or its Affiliates) a
representation in form and substance reasonably satisfactory
to the Refusal Offeree (or its Affiliates) that the Offeror
(and Tag-Along Stockholders) has good and marketable title
to the Offered Shares, free and clear of all liens, claims,
encumbrances and security interests, and that the Offeror
(and Tag-Along Stockholders) has full right, power and
authority to effect such sale.
(c) A Holder shall be entitled to rights under
this Section 2.05 only so long as such Holder (combined with
its Affiliates) beneficially owns 8% or more of the then
outstanding shares of Common Stock.
SECTION 2.06. Tag-Along Rights. (a) Anything in
-----------------
this Agreement to the contrary notwithstanding, if any
Holder or group of Holders proposes, in a single transaction
or from time to time in a group of related transactions, to
sell or otherwise dispose of an amount of Common Stock equal
to 5% or more of the shares of Common Stock then outstanding
(other than (a) to an Affiliate of such Holder(s), (b) in a
registered public offering or (c) pursuant to Rule 144 of
the Securities Act), such Holder(s) shall refrain from
effecting such transaction(s) unless, prior to the
consummation thereof, BCP and WPP (and their Affiliates)
<PAGE>
10
shall have been afforded the opportunity to join in such
transfer as provided in clause (b) of this Section 2.06.
(b) Prior to the consummation of any transaction
subject to this Section 2.06, the Holder or Holders that
propose(s) to sell shares of Common Stock in a transaction
or series of related transactions (the "Selling Holder")
shall offer (the "Purchase Offer") in writing to BCP and WPP
(collectively with the Affiliates of BCP and WPP, the
"Tag-Along Stockholders") the option, exercisable by written
notice to such Selling Holder within 15 days after receipt
of the Purchase Offer, to require the Selling Holder to
arrange for the proposed purchaser or purchasers (the
"Proposed Purchaser") to purchase at the same time as the
purchase from the Selling Holder, the number of shares
described below at the price per share (the "Offering
Price") at which and on the terms and conditions (the
"Offering Terms") on which the Proposed Purchaser purchases
the shares of Common Stock of the Selling Holder. If any of
the Tag-Along Stockholders shall so elect, the Selling
Holder shall arrange for the Proposed Purchaser to purchase
the total number of shares of Common Stock as originally
agreed upon between the Selling Holder and the Proposed
Purchaser but from both the Selling Holder and the Tag-Along
Stockholder, pro rata in the proportion to each such
seller's total beneficial ownership of Common Stock
immediately prior to the Purchase Offer, provided, however,
-------- -------
that the Tag-Along Stockholder may elect, in its original
written notice to the Selling Holder, to sell an amount of
Common Stock less than such pro rata amount. In the event
that a sale or other transfer subject to this Section 2.06
is to be made, the Selling Holder shall notify the Proposed
Purchaser that the sale or other transfer is subject to this
Section 2.06 and shall ensure that no sale or other transfer
is consummated without first complying with this Section
2.06.
(c) A Holder shall be entitled to rights under
this Section 2.06 only so long as such Holder (combined with
its Affiliates) beneficially owns 4% or more of the then
outstanding shares of Common Stock.
SECTION 2.07. Prohibition on Encumbrance. No
--------------------------
Holder shall pledge, hypothecate or grant a security
interest in any of the shares of Common Stock held by it;
provided, however, that a Holder may pledge, hypothecate or
-------- -------
grant a security interest in such shares to a lender if such
lender agrees in writing to be bound by the terms of this
<PAGE>
11
Agreement (and acknowledges that it shall not receive any of
the rights granted to Holders under this Agreement) and such
lender is not granted any voting rights prior to
foreclosure.
ARTICLE III
Registration Rights
-------------------
SECTION 3.01. Demand Registrations. At any time
---------------------
following the Recapitalization, the Company shall, upon the
written demand of BCP or WPP (the "Demanding Party"), use
its best efforts to effect the registration (a "Demand
Registration") under the Securities Act of such number of
Registration Shares then beneficially owned by the Demanding
Party and its Affiliates as shall be indicated in a written
demand by the Demanding Party sent to the Company and to the
other Holders, if any, with demand rights pursuant to this
Section 3.01; provided, however, that as to each of BCP and
-------- -------
WPP (a) the Company shall be obligated to effect a total of
no more than five Demand Registrations, with no more than
two such Demand Registrations in any twelve month period,
with the first such Demand Registration occurring no earlier
than January 1, 1995 (unless this date restriction is waived
by the Company); (b) the Company shall not be obligated to
effect a Demand Registration unless the total number of
shares of Common Stock proposed to be registered by such
Demanding Party equals (x) at least 5% of the total number
of Registration Shares held by such Demanding Party
immediately following the Recapitalization or (y) all of
such Demanding Party's Common Stock, (c) if a registration
pursuant to this Section 3.01 involves an underwritten
offering and the managing underwriter advises the Company
that, in the opinion of such managing underwriter, the
number of Registration Shares proposed to be included in
such registration would have a material adverse effect on
the success of the offering, then the Company will include
in such registration only the number of Registration Shares
requested to be included in such registration that, in the
opinion of such managing underwriter, can be successfully
sold, (d) a Demand Registration shall not count as such
until it has become effective, except that if, after it has
become effective, the offering of Registration Shares
pursuant to such registration is interfered with by any stop
order, injunction or other order or requirement of the SEC
or any other governmental authority, such registration shall
be deemed not to have been effected unless such stop order,
<PAGE>
12
injunction or other order or requirement shall subsequently
have been vacated or otherwise removed. Upon receipt of the
Demanding Party's written demand and subject to Section 3.04
hereof, the Company shall expeditiously effect the
registration under the Securities Act of the Registration
Shares and use its best efforts to have such registration
become and remain effective as provided in Section 3.10.
The Demanding Party, together with any other party
participating in the Demand Registration pursuant to
Section 3.02 hereof (unless such other party is registering
less than 80% of the amount of Registration Shares being
registered by the Demanding Party), shall have the right to
select the managing underwriter for a Demand Registration.
SECTION 3.02. Piggyback Registrations. (a) If
------------------------
the Company proposes to register, or is caused to register
pursuant to a demand registration, any Common Stock under
the Securities Act for sale for cash (otherwise than in
connection with the registration of Common Stock issuable
pursuant to an employee or director stock option, stock
purchase or similar plan or pursuant to a merger, exchange
offer or a transaction of the type specified in Rule 145(a)
under the Securities Act), the Company shall give BCP and
WPP notice of such proposed registration at least 15 days
prior to the filing of a registration statement. At the
written request of BCP or WPP delivered to the Company
within 10 days after the receipt of the notice from the
Company, which request shall state the number of
Registration Shares that such party wishes to sell or
distribute publicly under the registration statement pro-
posed to be filed by the Company, the Company shall use its
best efforts to register under the Securities Act such
Registration Shares, and to cause such registration (a
"Piggyback Registration") to become and remain effective as
provided in Section 3.10. In a piggyback registration
pursuant to this Section 3.02 (other than a piggyback
registration on a Demand Registration), the managing
underwriter shall be selected by the Company in consultation
with the Piggyback Party or Piggyback Parties, as the case
may be.
(b) If a Piggyback Registration is an under-
written primary registration on behalf of the Company, and
the managing underwriters thereof advise the Company in
writing that in their opinion the number of shares of Common
Stock requested to be included in the registration exceeds
the number which can be sold in the offering, the Company
shall include in the registration (i) first, the Common
<PAGE>
13
Stock the Company proposes to sell and (ii) second, the
Registration Shares that BCP or WPP propose to sell divided
pro rata between BCP and WPP based on the total beneficial
ownership of Common Stock of each of BCP and WPP,
respectively, at the time notice is given to the Company by
such managing underwriters. Any Piggyback Party shall be
given prompt notice by the Company of any such cutback.
(c) If a Piggyback Registration is an under-
written secondary registration on behalf of a Demanding
Party and the managing underwriters thereof advise the
Company in writing that in their opinion the number of
shares of Common Stock requested to be included in the
registration exceeds the number which can be sold in the
offering, the Company shall include in the registration (i)
first, a pro rata amount of each of BCP and WPP's
Registration Shares, based on the total beneficial ownership
of Common Stock of each of BCP and WPP, respectively, at the
time notice is given to the Company by such managing
underwriters, until one such party has had all shares so
demanded included and (ii) second, the Registration Shares
of the other party, if any. Any Piggyback Party shall be
given prompt notice by the Company of any such cutback. In
the event the Company subsequently desires to participate in
such a registration of securities, the Company shall include
in the registration (A) first, the Registration Shares BCP
and WPP propose to sell and (B) second, the Common Stock
that the Company proposes to sell.
SECTION 3.03. Lock-up. Each Holder hereby agrees
--------
that, in connection with any public offering effected
pursuant to this Article III, such Holder will, if so
requested by the managing underwriter of such offering,
enter into a customary lock-up agreement not to transfer any
Common Stock held by it for a period of up to 90 days
following such offering (such lock-up agreement in form and
substance acceptable to such managing underwriter).
SECTION 3.04. The Company's Right to Delay Demand
-----------------------------------
Registration. The Company shall not be obligated to file a
-------------
registration statement relating to any Demand Registration
pursuant to Section 3.01 hereof if counsel to the Company
renders an opinion, in form and substance reasonably
satisfactory to the Demanding Party, to the effect that
registration is not required for the proposed transfer of
Registration Shares or if a post-effective amendment to an
existing registration statement would be sufficient for such
proposed transfer (and the Company files such a post-
<PAGE>
14
effective amendment to effect the proposed transfer). The
Company may delay filing the registration statement relating
to any Demand Registration pursuant to Section 3.01 hereof
for not more than 60 days if (i) in the case of an
underwritten offering, the Company has filed, or has taken
substantial steps toward filing, a registration statement
relating to any of the Company's securities (the "Company
Securities"), and the managing underwriter is of the opinion
that the filing of a registration statement with respect to
the Demand Registration would adversely affect the offering
by the Company of Company Securities, or (ii) the Board of
Directors of the Company determines in good faith, by
resolution, that the filing of a registration statement
would, if not so deferred, materially and adversely affect a
then proposed or pending financial project, acquisition,
merger or corporate reorganization.
SECTION 3.05. Indemnification by the Company. In
-------------------------------
the event of any registration of any Registration Shares
under the Securities Act, the Company shall, and hereby
does, indemnify and hold harmless each Registration Rights
Party, its directors and officers, each other person who
participates as an underwriter in the offering or sale of
such Registration Shares and each other person, if any, who
controls such Registration Rights Party or any such
underwriter within the meaning of Section 15 of the Securi-
ties Act against any losses, claims, damages or liabilities,
joint or several, to which such Registration Rights Party or
any such director or officer or underwriter or controlling
person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under
which the Registration Shares were registered under the
Securities Act, any preliminary prospectus, final prospectus
or summary prospectus contained therein, or any amendment or
supplement thereto, or any omission or alleged omission to
state therein a material fact required to be stated therein
or necessary to make the statements therein in light of the
circumstances in which they were made not misleading, and
the Company shall reimburse each Registration Rights Party,
and each such director, officer, underwriter and controlling
person for any legal or any other expenses reasonably
incurred by them in connection with investigating or
defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that the Company shall not be
-------- -------
<PAGE>
15
liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission made in such registration statement, preliminary
prospectus, final prospectus, summary prospectus, amendment
or supplement in reliance upon and in conformity with
written information about a Registration Rights Party
furnished to the Company through an instrument duly executed
by or on behalf of such Registration Rights Party,
specifically stating that it is for use in the preparation
thereof; and provided further, however, that the Company
----------------- -------
shall not be liable to any person who participates as an
underwriter in the offering or sale of Registration Shares
or any other person, if any, who controls such underwriter
within the meaning of the Securities Act, in any such case
to the extent that any such loss, claim, damage, liability
(or action or proceeding in respect thereof) or expense
arises out of such person's failure to send or give a copy
of the final prospectus, as the same may be then
supplemented or amended, to the person asserting an untrue
statement or alleged untrue statement or omission or alleged
omission at or prior to the written confirmation of the sale
of Registration Shares to such person if such statement or
omission was corrected in such final prospectus. Such
indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of a Registration
Rights Party or any such director, officer or controlling
person and shall survive the transfer of the Registration
Shares by such Registration Rights Party.
SECTION 3.06. Indemnification by the Registration
-----------------------------------
Rights Party. The Company may require, as a condition to
-------------
including any Registration Shares in any registration
statement filed pursuant to Section 3.01 or 3.02, that the
Company shall have received an undertaking reasonably
satisfactory to it from the Registration Rights Party to
indemnify and hold harmless (in the same manner and to the
same extent as set forth in Section 3.05) the Company, each
director of the Company, each officer of the Company signing
such registration statement and each other person, if any,
who controls the Company within the meaning of Section 15 of
the Securities Act with respect to any untrue statement or
alleged untrue statement of any material fact in such
registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein or any
amendment or supplement thereto, or omission to state
therein a material fact required to be stated therein or
<PAGE>
16
necessary to make the statements therein in light of the
circumstances in which they were made not misleading, if
such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and
in conformity with written information about the
Registration Rights Party as a shareholder of the Company
furnished to the Company through an instrument duly executed
by the Registration Rights Party specifically stating that
it is for use in the preparation of such registration
statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement. Such indemnity shall
remain in full force and effect, regardless of any
investigation made by or on behalf of the Company or any
such director, officer or controlling person and shall
survive the transfer by the seller of the securities of the
Company being registered.
SECTION 3.07. Notices of Claims, etc. Promptly
-----------------------
after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim
referred to in Section 3.05 or 3.06, such indemnified party
will, if a claim in respect thereof is to be made against an
indemnifying party, give notice to the latter of the
commencement of such action; provided, however, that the
-------- -------
failure of any indemnified party to give notice as provided
herein shall not relieve the indemnifying party of its obli-
gations under Section 3.05 or 3.06, except to the extent
that the indemnifying party is actually prejudiced by such
failure to give notice. In case any such action is brought
against an indemnified party, unless in such indemnified
party's reasonable judgment a conflict of interest between
such indemnified and indemnifying parties may exist or the
indemnified party may have defenses not available to the
indemnifying party in respect of such claim, the indemnify-
ing party shall be entitled to participate in and to assume
the defense thereof, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnify-
ing party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not
be liable to such indemnified party for any legal or other
expenses subsequently incurred by the latter in connection
with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall be liable for
any settlement of any action or proceeding effected without
its written consent. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the
<PAGE>
17
claimant or plaintiff to such indemnified party of a release
from all liability in respect to such claim or litigation.
SECTION 3.08. Other Indemnification. Indemnifi-
----------------------
cation similar to that specified in Section 3.05 and 3.06
hereof (with appropriate modifications) shall be given by
the Company and the Registration Rights Party with respect
to any required registration or other qualification of
Registration Shares under any Federal or state law or
regulation of any Governmental Authority other than the
Securities Act.
SECTION 3.09. Indemnification Payments. The
-------------------------
indemnification required by this Article III shall be made
by periodic payments of the amount thereof during the course
of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
SECTION 3.10. Registration Covenants of the
-----------------------------
Company. In the event that any Registration Shares of the
--------
Registration Rights Party are to be registered pursuant to
Section 3.01 or 3.02 hereof, the Company covenants and
agrees that it shall use its best efforts to effect the
registration and cooperate in the sale of the Registration
Shares to be registered and shall as expeditiously as
possible:
(a) (i) prepare and file with the SEC a registra-
tion statement with respect to the Registration Shares
(as well as any necessary amendments or supplements
thereto) (a "Registration Statement") and (ii) use its
best efforts to cause the Registration Statement to
become effective;
(b) prior to the filing described above in Section
3.10(a), furnish to the Registration Rights Party
copies of the Registration Statement and any amendments
or supplements thereto and any prospectus forming a
part thereof, which documents shall be subject to the
review of counsel for the Registration Rights Party
(but not approval of such counsel except with respect
to any statement in the Registration Statement which
relates to the Registration Rights Party);
(c) notify the Registration Rights Party, promptly
after the Company shall receive notice thereof, of the
time when the Registration Statement becomes effective
or when any amendment or supplement or any prospectus
<PAGE>
18
forming a part of the Registration Statement has been
filed;
(d) notify the Registration Rights Party promptly
of any request by the SEC for the amending or
supplementing of the Registration Statement or
prospectus or for additional information;
(e) (i) advise the Registration Rights Party after
the Company shall receive notice or otherwise obtain
knowledge of the issuance of any order by the SEC
suspending the effectiveness of the Registration
Statement or any amendment thereto or of the initiation
or threatening of any proceeding for that purpose and
(ii) promptly use its best efforts to prevent the
issuance of any stop order or to obtain its withdrawal
promptly if a stop order should be issued;
(f) (i) prepare and file with the SEC such amend-
ments and supplements to the Registration Statement and
the prospectus forming a part thereof as may be neces-
sary to keep the Registration Statement effective for
the lesser of (A) a period of time necessary to permit
the Registration Rights Party to dispose of all its
Registration Shares and (B) 30 days and (ii) comply
with the provisions of the Securities Act with respect
to the disposition of all Registration Shares covered
by the Registration Statement during such period in
accordance with the intended methods of disposition by
the Registration Rights Party set forth in the
Registration Statement;
(g) furnish to the Registration Rights Party such
number of copies of the Registration Statement, each
amendment and supplement thereto, the prospectus
included in the Registration Statement (including each
preliminary prospectus) and such other documents as the
Registration Rights Party may reasonably request in
order to facilitate the disposition of the Registration
Shares owned by the Registration Rights Party;
(h) use its best efforts to register or qualify
such Registration Shares under such other securities or
blue sky laws of such jurisdictions as determined by
the underwriters after consultation with the Company
and the Registration Rights Party and do any and all
other acts and things which may be reasonably necessary
or advisable to enable the Registration Rights Party to
<PAGE>
19
consummate the disposition in such jurisdictions of the
Registration Shares (provided that the Company shall
--------
not be required to (i) qualify generally to do business
in any jurisdiction in which it would not otherwise be
required to qualify but for this Section 3.10(h), (ii)
subject itself to taxation in any such jurisdiction or
(iii) consent to general service of process in any such
jurisdiction);
(i) notify the Registration Rights Party, at any
time when a prospectus relating thereto is required to
be delivered under the Securities Act, of the happening
of any event as a result of which the Registration
Statement would contain an untrue statement of a
material fact or omit to state any material fact
required to be stated therein or necessary to make the
statements therein not misleading, and, at the request
of the Registration Rights Party, prepare a supplement
or amendment to the Registration Statement so that the
Registration Statement shall not, to the Company's
knowledge, contain an untrue statement of a material
fact or omit to state any material fact required to be
stated therein or necessary to make the statements
therein not misleading;
(j) if the Common Stock is not then listed on a
securities exchange, and if the NASD is reasonably
likely to permit the reporting of the Common Stock on
NASDAQ, use its best efforts, consistent with the then-
current corporate structure of the Company, to
facilitate the reporting of the Common Stock on NASDAQ;
(k) provide a transfer agent and registrar, which
may be a single entity, for all the Registration Shares
not later than the effective date of the Registration
Statement;
(l) enter into such customary agreements (includ-
ing an underwriting agreement in customary form) and
take all such other action, if any, as the Registration
Rights Party or the underwriters shall reasonably
request in order to expedite or facilitate the
disposition of the Registration Shares pursuant to this
Article III;
(m) (i) make available for inspection by the
Registration Rights Party, any underwriter
participating in any disposition pursuant to the
<PAGE>
20
Registration Statement and any attorney, accountant or
other agent retained by the Registration Rights Party
or any such underwriter all relevant financial and
other records, pertinent corporate documents and
properties of the Company and (ii) cause the Company's
officers, directors and employees to supply all
relevant information reasonably requested by the
Registration Rights Party or any such underwriter,
attorney, accountant or agent in connection with the
Registration Statement;
(n) use its best efforts to cause the Registration
Shares covered by the Registration Statement to be
registered with or approved by such other Governmental
Authorities as may be necessary to enable the
Registration Rights Party to consummate the disposition
of such Registration Shares; and
(o) cause the Company's independent public
accountants to provide a comfort letter in customary
form and covering such matters of the type customarily
covered by comfort letters.
SECTION 3.11. Shelf Registrations. If a
--------------------
Demanding Party shall demand a shelf registration pursuant
to paragraph (a) of this Section 3.01 or a Piggyback Party
shall piggyback on a shelf registration pursuant to Section
3.02 hereof, such Demanding Party or Piggyback Party shall
have 30 days from the time such shelf registration is
declared effective by the Securities and Exchange Commission
to distribute all Registration Shares so registered.
SECTION 3.12. Expenses. In connection with any
---------
Demand Registration pursuant to Section 3.01, the Company
shall pay all registration, filing and NASD fees, all fees
and out-of-pocket expenses of complying with securities or
blue sky laws, all word processing, duplicating and printing
expenses, all messenger and delivery expenses, the
reasonable fees and disbursements of the Company's
independent public accountants for services required because
of the Demand Registration (including the expenses of
comfort letters required for the Demand Registration) and
any fees and disbursements of underwriters customarily paid
by issuers or sellers of securities. In any registration,
(i) the Registration Rights Party shall pay for its own
underwriting discounts and commissions and transfer taxes
and (ii) each of the Company and the Registration Rights
Party shall pay for its own counsel.
<PAGE>
21
SECTION 3.13. Assignment of Registration
--------------------------
Rights. BCP and WPP may assign their rights under this
-------
Article III in whole or in part to anyone to whom BCP or
WPP, respectively, sells, transfers or assigns any of the
Registration Shares (other than in sales pursuant to Rule
144 under the Securities Act or a registered public sale);
provided, however, that no assignment shall increase the
-------- -------
Company's obligations to effect registrations or pay
expenses thereof.
SECTION 3.14. Other Registration Rights. The
--------------------------
Company shall not grant any right of registration under the
Securities Act relating to any of its securities to any
person other than BCP, WPP or an assignee of BCP or WPP
unless BCP and WPP shall be entitled to have included in any
piggyback registration pursuant to such grant a number of
Registration Shares requested by BCP and WPP to be so
included representing at least 30% of such offering prior to
the inclusion of any securities requested to be registered
by the persons entitled to any such registration rights.
SECTION 3.15. Rule 144. So long as the Company
---------
is subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, the Company shall take all
actions reasonably necessary to enable BCP and WPP to sell
the Registration Shares without registration under the
Securities Act within the limitation of the exemptions
provided by Rule 144 under the Securities Act, as such Rule
may be amended from time to time, or any similar rule or
regulation hereafter adopted by the SEC, including filing on
a timely basis all reports required to be filed by the
Company by the Exchange Act. Upon the request of BCP or
WPP, the Company shall deliver to BCP or WPP a written
statement as to whether it has complied with such
requirements.
ARTICLE IV
Fees and Other Payments
-----------------------
SECTION 4.01. Monitoring Fee. Following the
---------------
consummation of the Recapitalization, Group (or any of its
subsidiaries or affiliates, on Group's behalf) shall pay an
annual monitoring fee of $1,000,000 per year to each of BCP
and WPP (the "Monitoring Fee"). Following the consummation
of the Recapitalization, the annual operating management fee
<PAGE>
22
set forth in Section 6.4 of the Stockholders Agreement and
the Management and Retainer Services Fee set forth in the
Management and Retainer Agreement (collectively, the "Former
Fees") shall no longer be payable (although BCP and WPP or
their affiliates shall not be required to refund any portion
of the Former Fees already paid at the time of the
Recapitalization). The Monitoring Fee shall be payable in
quarterly installments at the beginning of each quarter
commencing after the consummation of the Recapitalization.
In consideration of the Monitoring Fee, each of BCP and WPP
shall provide personnel to monitor the management of the
Company and its subsidiaries, including Group. Such
personnel shall not receive any separate compensation for
such services except as provided herein, but such personnel
(or BCP or WPP on their behalf) shall be entitled to
reimbursement of their reasonable out-of-pocket expenses in
connection therewith, including travel expenses, and shall
provide documentation of such expenses to the Company upon
request.
SECTION 4.02. Other Fees Not Precluded.
-------------------------
Notwithstanding the foregoing, nothing contained herein
shall preclude BCP and WPP or their Affiliates from
receiving fees in addition to the Monitoring Fee; provided
that any such fees shall be for services ("Additional
Services") in addition to providing personnel to monitor the
management of the Company and its subsidiaries. Additional
Services may include, but are not limited to, services in
connection with transactions such as acquisitions,
divestitures, the negotiation of credit agreements or
amendments thereto, sales and dispositions of assets or
subsidiaries, public or private offerings of debt or equity
securities, work-outs and other traditional or nontradi-
tional investment banking, consultant or management
services.
SECTION 4.03. Compensation of Directors. Each
--------------------------
director of the Company and Group who is not a full-time
employee thereof shall receive reimbursement of out-of-
pocket expenses incurred in connection with attendance at
meetings of, and other activities relating to, serving on
the Boards of Directors and any committees thereof.
Following the Recapitalization, a director's fee of $40,000
per year, payable quarterly, for each such director shall be
paid to each such director unless and to the extent that WPP
or BCP shall notify the Company or Group that it should
receive the director's fees for the directors that it has
the right to designate to the Boards of Directors of the
<PAGE>
23
Company and Group. Nothing contained herein shall preclude
the Boards of Directors of the Company or Group from
increasing director's fees or authorizing director's stock
options or additional director's fees.
SECTION 4.04. Accrual of Payments. To the extent
--------------------
that the payment of any of the fees, expenses or other
compensation provided for in this Agreement is not timely
made, such fees, expenses or other compensation shall be
accrued, together with interest thereon at the rate of
interest announced publicly in New York, New York, from time
to time by Citibank, N.A., as its base rate and shall be
paid as soon as practicable.
ARTICLE V
Miscellaneous
-------------
SECTION 5.01. Amendment and Restatement of the
--------------------------------
Stockholders Agreement; Complete Agreement. Subject to, and
-------------------------------------------
effective only upon, the consummation of the
Recapitalization, this Agreement shall constitute an
amendment and restatement of the Stockholders Agreement.
This Agreement constitutes the entire agreement and
understanding among the parties hereto with respect to the
matters referred to herein and supersedes all prior
agreements and understandings among the parties hereto with
respect to the matters referred to herein, including,
without limitation, the Stockholders Agreement and the
Management and Retainer Agreement.
SECTION 5.02. No Inconsistent Agreements.
---------------------------
Neither the Company nor any of its subsidiaries shall, and
BCP and WPP shall not permit the Company or any of its
subsidiaries to, enter into any agreement inconsistent with
the terms of this Agreement.
SECTION 5.03. Amendment. Except as otherwise
----------
expressly provided herein, this Agreement may not be
amended, modified or supplemented and no waivers of or
consents to departures from the provisions hereof may be
given unless consented to in writing by each of the parties
hereto.
SECTION 5.04. Notices. All notices, statements,
--------
instructions or other documents provided for herein shall be
in writing and shall be either transmitted by facsimile or
<PAGE>
24
delivered either personally or by mailing the same in a
sealed envelope, first-class mail, postage prepaid and
either certified or registered, return receipt requested,
addressed as follows:
For notices and communications to the Company or
Group:
210 Madison Avenue
New York, NY 10016
Attention: Elizabeth R. Philipp, Esq.
and
8320 University Executive Park
Suite 102
Charlotte, NC 28262
Attention: Corporate Counsel
For notices and communications to BCP:
118 North Bedford Road
Suite 300
Mount Kisco, New York 10549
Attention: Mr. David A. Stockman
For notices and communications to WPP:
31 West 52nd Street
New York, New York 10019
Attention: Mr. Randall J. Weisenburger
Each party, by written notice given to the other parties in
accordance with this Section 5.04, may change the address to
which notices, statements, instructions or other documents
are to be sent to such party. All notices, statements,
instructions and other documents hereunder shall be deemed
to have been given on the earlier of the date of actual or
facsimile delivery and three days after the date of mailing,
except that notice of a change of address shall be effective
only upon actual delivery.
<PAGE>
25
SECTION 5.05. Successors; Assigns. The terms and
--------------------
conditions of this Agreement shall be binding on and inure
to the benefit of the respective successors and permitted
assigns of the parties hereto.
SECTION 5.06. Counterparts. This Agreement may
-------------
be executed by the parties hereto in any number of
counterparts, each of which shall be deemed to be an
original, but all of which shall together constitute one and
the same instrument.
SECTION 5.07. Severability. The invalidity,
-------------
illegality or unenforceability of any provision of this
Agreement in any jurisdiction shall not affect the validity,
legality or enforceability of the remainder of this
Agreement in such jurisdiction or the validity, legality or
enforceability of this 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.
SECTION 5.08. Headings. The section headings
---------
herein are for convenience of reference only and in no way
define, limit or extend the scope or intent of this
Agreement or any provisions hereof.
SECTION 5.09. Applicable Law. The laws of the
---------------
State of Delaware shall govern this Agreement, regardless of
the laws that might be applied under applicable principles
of conflicts of laws.
SECTION 5.10. Term of the Agreement. This
----------------------
Agreement shall become effective only upon consummation of
the Recapitalization and shall expire 10 years after the
date hereof unless extended by the parties hereto.
SECTION 5.11. No Third-Party Beneficiaries. This
-----------------------------
Agreement is intended to be solely for the benefit of the
parties hereto and their respective successors and permitted
assigns and is not for the benefit of, nor may any provision
hereof be enforced by, any other person.
SECTION 5.12. Specific Performance. Each party
---------------------
hereto acknowledges that its failure to comply with the
provisions of this Agreement will result in irreparable and
continuing damage to the other parties hereto for which
there will be no adequate remedies at law and that, in the
<PAGE>
26
event of a failure of any party hereto to comply with the
terms of this Agreement, the other parties hereto shall be
entitled to injunctive relief, without the necessity of
proving actual damages and without being required to post a
bond or other security, and to such other and further relief
as may be proper and necessary to ensure compliance with the
provisions of this Agreement.
IN WITNESS WHEREOF, the parties hereto have
executed this Agreement as of the day and year first above
written.
BLACKSTONE CAPITAL PARTNERS, L.P.,
by BLACKSTONE MANAGEMENT
PARTNERS, L.P., its general
partner,
by
----------------------------
Name:
Title:
WASSERSTEIN PERELLA PARTNERS, L.P.,
by WASSERSTEIN PERELLA MANAGEMENT
PARTNERS, INC., its general
partner,
by
---------------------------
-
Name:
Title:
COLLINS & AIKMAN CORPORATION,
by
-------------------------------
Name:
Title:
COLLINS & AIKMAN GROUP, INC.,
by
-------------------------------
Name:
Title:
EXHIBIT 5
[Letterhead of]
CRAVATH, SWAINE & MOORE
June 20, 1994
Collins & Aikman Holdings Corporation
-------------------------------------
Dear Sirs:
We have acted as counsel for Collins & Aikman
Holdings Corporation, a Delaware corporation (hereinafter
called the "Company"), in connection with the proposed
issuance of up to 28,750,000 shares of Common Stock, par
value $0.01 per share (the "Common Stock"), of the Company.
In that connection, we have examined originals,
or copies certified or otherwise identified to our satis-
faction, of such documents, corporate records and other
instruments as we have deemed necessary for the purposes of
this opinion, including the following: (a) the Certificate
of Incorporation of the Company, as amended and restated,
and (b) the By-laws of the Company.
Based upon the foregoing, we are of opinion as
follows:
(1) the Company has been duly incorporated and is
a validly existing corporation under the laws of the
State of Delaware; and
(2) the Common Stock, when issued and delivered,
will be duly authorized, validly issued, fully paid and
nonassessable.
We know that we may be referred to, as counsel who
has passed upon the validity of the issuance of the Common
Stock on behalf of the Company, in the Prospectus forming a
part of the Registration Statement on Form S-2 relating to
the Common Stock filed with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, and we
hereby consent to such use of our name in said Registration
Statement and to the use of this opinion for filing with
said Registration Statement as Exhibit 5 thereto.
Very truly yours,
/s/ CRAVATH, SWAINE & MOORE
Collins & Aikman Holdings Corporation
8320 University Executive Park
Suite 102
Charlotte, North Carolina 28262
VV
o
=============================================================================
[C&A RECEIVABLES COMPANY]
----------------------
RECEIVABLES SALE AGREEMENT
----------------------
Dated as of June __, 1994
=============================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
DEFINITIONS
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . 1
-------------
1.2 Other Definitional Provisions . . . . . . . . . . . . . . . . . 1
-----------------------------
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
2.1 Purchase and Sale of Receivables . . . . . . . . . . . . . . . 2
--------------------------------
2.2 Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . 3
--------------
2.3 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . 3
-------------------------
2.4 No Repurchase . . . . . . . . . . . . . . . . . . . . . . . . . 5
-------------
2.5 Rebates, Adjustments, Returns and Reductions; Modifications . . 5
-----------------------------------------------------------
2.6 Limited Repurchase Obligation . . . . . . . . . . . . . . . . . 5
-----------------------------
2.7 Obligations Unaffected . . . . . . . . . . . . . . . . . . . . 6
----------------------
2.8 Certain Charges . . . . . . . . . . . . . . . . . . . . . . . . 6
---------------
2.9 Certain Allocations . . . . . . . . . . . . . . . . . . . . . . 6
-------------------
ARTICLE III
CONDITIONS TO PURCHASE AND SALE
3.1 Conditions Precedent to the Company's Initial Purchase of
---------------------------------------------------------
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . 6
-----------
3.2 Conditions Precedent to All the Company's Purchases of
------------------------------------------------------
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . 7
-----------
3.3 Conditions Precedent to Sellers' Obligations . . . . . . . . . 8
--------------------------------------------
3.4 Conditions Precedent to the Addition of a Seller . . . . . . . 9
------------------------------------------------
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Sellers Relating to the
-------------------------------------------------------------
Sellers . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
-------
-i-
<PAGE>
Page
----
(a) Organization, Corporate Powers . . . . . . . . . . . . . 10
(b) Authorization . . . . . . . . . . . . . . . . . . . . . 10
(c) Enforceability . . . . . . . . . . . . . . . . . . . . . 11
(d) Capitalization . . . . . . . . . . . . . . . . . . . . . 11
(e) Litigation; Compliance with Laws . . . . . . . . . . . . 11
(f) Agreements . . . . . . . . . . . . . . . . . . . . . . . 11
(g) Tax Returns . . . . . . . . . . . . . . . . . . . . . 12
(h) No Material Misstatements . . . . . . . . . . . . . . . 12
(i) Employee Benefit Plans . . . . . . . . . . . . . . . . . 13
(j) Solvency . . . . . . . . . . . . . . . . . . . . . . . . 13
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(l) Indebtedness to Company. . . . . . . . . . . . . . . . . 13
(m) Lockboxes. . . . . . . . . . . . . . . . . . . . . . . . 13
(n) Filings . . . . . . . . . . . . . . . . . . . . . . . . 14
(o) Receivables Documents . . . . . . . . . . . . . . . . . 14
4.2 Representations and Warranties of the Sellers Relating to the
-------------------------------------------------------------
Agreement and the Receivables . . . . . . . . . . . . . . . . 14
-----------------------------
ARTICLE V
AFFIRMATIVE COVENANTS
5.1 Certificates; Other Information . . . . . . . . . . . . . . . . 16
-------------------------------
5.2 Compliance with Laws, etc. . . . . . . . . . . . . . . . . . . 16
--------------------------
5.3 Preservation of Corporate Existence . . . . . . . . . . . . . . 16
-----------------------------------
5.4 Visitation Rights . . . . . . . . . . . . . . . . . . . . . . . 16
-----------------
5.5 Keeping of Records and Books of Account . . . . . . . . . . . . 17
---------------------------------------
5.6 Location of Records . . . . . . . . . . . . . . . . . . . . . . 17
-------------------
5.7 Computer Files . . . . . . . . . . . . . . . . . . . . . . . . 17
--------------
5.8 Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
--------
5.9 Taxes; ERISA . . . . . . . . . . . . . . . . . . . . . . . . . 17
------------
5.10 Collections . . . . . . . . . . . . . . . . . . . . . . . . . 18
-----------
5.11 Lockbox Agreements; Lockbox Accounts . . . . . . . . . . . . . 18
------------------------------------
5.12 Furnishing Copies, etc . . . . . . . . . . . . . . . . . . . . 19
----------------------
5.13 Obligations with Respect to Obligors and Receivables . . . . . 19
----------------------------------------------------
5.14 Responsibilities of the Sellers . . . . . . . . . . . . . . . 19
-------------------------------
5.15 Further Action . . . . . . . . . . . . . . . . . . . . . . . . 19
--------------
ARTICLE VI
NEGATIVE COVENANTS
-ii-
<PAGE>
Page
----
6.1 Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
-----
6.2 Extension or Amendment of Receivables . . . . . . . . . . . . . 22
-------------------------------------
6.3 Change in Payment Instructions to Obligors . . . . . . . . . . 22
------------------------------------------
6.4 Change in Name . . . . . . . . . . . . . . . . . . . . . . . . 22
--------------
6.5 Modification of Ledger . . . . . . . . . . . . . . . . . . . . 22
----------------------
6.6 Business of the Sellers . . . . . . . . . . . . . . . . . . . . 22
-----------------------
6.7 Accounting of Purchases . . . . . . . . . . . . . . . . . . . . 22
-----------------------
6.8 Chattel Paper . . . . . . . . . . . . . . . . . . . . . . . . . 22
-------------
6.9 Ineligible Receivables . . . . . . . . . . . . . . . . . . . . 23
----------------------
ARTICLE VII
PURCHASE TERMINATION EVENTS . . . . . . . . . . 23
ARTICLE VIII
THE SUBORDINATED NOTES
8.1 Subordinated Notes . . . . . . . . . . . . . . . . . . . . . . 24
------------------
8.2 Restrictions on Transfer of Subordinated Notes . . . . . . . . 25
----------------------------------------------
ARTICLE IX
MISCELLANEOUS
9.1 Further Assurances . . . . . . . . . . . . . . . . . . . . . . 25
------------------
9.2 Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
--------
9.3 Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . 26
------------------
9.4 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 27
----------------------
9.5 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . 27
-------------
9.6 No Waiver; Cumulative Remedies . . . . . . . . . . . . . . . . 27
------------------------------
9.7 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . 27
----------------------
9.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 27
------------
9.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
-------
9.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 28
------------
9.11 Construction of Agreement as Security Agreement . . . . . . . 28
-----------------------------------------------
9.12 Waivers of Jury Trial . . . . . . . . . . . . . . . . . . . . 28
---------------------
9.13 Jurisdiction; Consent to Service of Process . . . . . . . . . 29
-------------------------------------------
9.14 Addition of Sellers . . . . . . . . . . . . . . . . . . . . . 29
-------------------
9.15 Optional Termination of Seller . . . . . . . . . . . . . . . . 29
------------------------------
9.16 No Bankruptcy Petition . . . . . . . . . . . . . . . . . . . . 30
----------------------
9.17 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 31
-----------
9.18 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . 31
---------------
-iii-
<PAGE>
Page
----
ANNEX X Definitions
SCHEDULES
1 Locations of Chief Executive Offices; Locations of
Books and Records
2 Lockboxes
3 Discounted Percentage
4 Tax Matters
EXHIBITS
A Form of U.S. Dollar Subordinated Note
B Form of Canadian Dollar Subordinated Note
C Form of Additional Seller Supplement
-iv-
<PAGE>
RECEIVABLES SALE AGREEMENT, dated as of June __, 1994, among
Collins & Aikman Products Co., a Delaware corporation ("C&A Products"),
Collins and Aikman Corporation, Ack-Ti-Lining, Inc., WCA Canada, Inc.,
Imperial Wallcoverings (Canada), Inc., Imperial Wallcoverings, Inc., The Akro
Corporation, Dura Acquisition Corp. and each of the other subsidiaries of C&A
Products from time to time parties hereto (each of the foregoing, a
"Seller"), C&A Products, as Master Servicer (in such capacity, the "Master
Servicer"), and [C&A Receivables Company], a Delaware corporation (the
"Company").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, in the ordinary course of business, each Seller
generates accounts receivable; and
WHEREAS, each Seller desires to sell to the Company, and the
Company is willing to purchase from such Seller, all of such Seller's right,
title and interest in, to and under the Receivables (as defined herein) now
existing or hereafter created and the rights of such Seller in, to and under
all Related Property (as so defined) related thereto;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. Capitalized terms used in this Agreement
-------------
shall have the respective meanings assigned to such terms in Annex X hereto
unless otherwise defined herein.
1.2 Other Definitional Provisions. (a) The words "hereof",
-----------------------------
"herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement, and article, section, subsection, schedule and
exhibit references are to this Agreement unless otherwise specified.
(b) As used herein and in any certificate or other document made
or delivered pursuant hereto, accounting terms relating to the Sellers and
the Company, unless otherwise defined herein, shall have the respective
meanings given to them under generally accepted accounting principles.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
<PAGE>
2
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
2.1 Purchase and Sale of Receivables. (a) By execution of this
--------------------------------
Agreement, each of the Sellers does hereby sell, transfer, assign, set over
and otherwise convey, without recourse (except as expressly provided herein),
to the Company, on the Effective Date, all Receivables owned by the Sellers
at the close of business on the Effective Date and all Related Property in
respect of such Receivables. Subject to Article VII, as of each assign, set
over and otherwise convey, without recourse of its right, title and interest
in, to and under all Receivables owned by the Sellers at the close of
business on such Payment date and not theretofore conveyed to the Company and
all Related Property in respect of such Receivables. The foregoing sale,
transfer, assignment, assignments, set-overs and conveyances do not
constitute, and are not intended to result in, the creation or an assumption
by the Company or any other person of any obligation of the Sellers in
connection with the Receivables or under any agreement or instrument relating
thereto, including any obligation to any Obligor.
(b) On the Effective Date and on the date of creation of each
newly created Receivable, all of the applicable Seller's right, title and
interest in and to (i) in the case of the Effective Date, all existing
Receivables and Related Property in respect of such Receivables and (ii) in
the case of each such date of creation, all such newly created Receivables
and all Related Property in respect of such Receivables shall be immediately
and automatically sold, assigned, transferred and conveyed to the Company
pursuant to paragraph (a) above without any further action by such Seller or
any other Person. If any Seller shall not have received payment from the
Company of the Purchase Price for any newly created Receivable on the Payment
Date therefor in accordance with the terms of subsection 2.3(c), such newly
created Receivable and the Related Property with respect thereto shall, upon
receipt of notice from the applicable Seller of such failure to receive
payment, immediately and automatically be sold, assigned, transferred and
reconveyed by the Company to such Seller without any further action by the
Company or any other Person.
(c) In connection with the foregoing conveyances, each Seller
agrees to record and file, or cause to be recorded and filed, at its own
expense, financing statements (and continuation statements with respect to
such financing statements when applicable) with respect to the Receivables
and Related Property now existing and hereafter acquired by the Company from
the Sellers meeting the requirements of applicable state law in such manner
and in such jurisdictions as are necessary to perfect the purchases of the
Receivables and Related Property by the Company from the Sellers, and to
deliver evidence of such filings to the Company on or prior to the Effective
Date. The parties hereto intend that the transfer of Receivables effected by
this Agreement be sales.
<PAGE>
3
(d) In connection with the foregoing conveyances, each Seller
agrees at its own expense, as agent of the Company, that it will (i) indicate
or cause to be indicated on the computer files and other physical records
relating to the Receivables that all Receivables and Related Property have
been sold to the Company and that the Company has sold an interest therein
and has granted a security interest in the Company's retained interest
therein and (ii) deliver or cause to be delivered to the Company computer
files, microfiche lists or typed or printed lists containing true and
complete lists of all such Receivables, identified by Obligor and by the
Receivables balance as of a date no later than five Business Days prior to
the Effective Date.
2.2 Purchase Price. The amount payable by the Company to a
--------------
Seller (the "Purchase Price") for newly created Receivables and Related
Property on any Payment Date under this Agreement shall be equal to the
product of (a) the aggregate outstanding Principal Amount of such Receivables
as set forth in the applicable Daily Report and (b) the Discounted Percentage
with respect to such Seller. To the extent the Purchase Price of any
Receivable is denominated in Canadian Dollars, the Dollar equivalent of such
Purchase Price shall be equal to the Canadian Exchange Percentage thereof.
2.3 Payment of Purchase Price. (a) Upon fulfillment of the
-------------------------
conditions set forth in Article III, the Purchase Price for Receivables and
the Related Property shall be paid or provided for in the manner provided
below on each day for which a Daily Report is prepared and delivered to the
Company (each such day, a "Payment Date"). Each Seller hereby appoints the
Master Servicer as its agent to receive payment of the Purchase Price for
Receivables sold by it to the Company and hereby authorizes the Company to
make all payments due to such Seller directly to, or as directed by, the
Master Servicer. The Master Servicer hereby accepts and agrees to such
appointment.
(b) The Purchase Price for Receivables and the Related Property
with respect thereto purchased by the Company on the Effective Date from each
Seller shall be paid by the Company as follows:
(i) in cash from the net proceeds of the sale of an interest in
such Purchased Receivables by the Company to other Persons; and
(ii) in cash from the proceeds of capital contributed by C&A
Products to the Company in respect of its equity interest in the
Company.
(c) The Purchase Price for Receivables and the Related Property
with respect thereto purchased by the Company on any Payment Date after the
Effective Date shall be paid by the Company on such Payment Date as follows:
(i) by netting the amount of any Seller Adjustment Payments or
Seller Repurchase Payments pursuant to subsections 2.5 or 2.6 against
such Purchase Price;
<PAGE>
4
(ii) to the extent available for such purpose, in cash from
Collections; it being understood that Canadian Dollar cash Collections
shall be applied solely to the Purchase Price of Canadian Dollar
denominated Receivables;
(iii) to the extent available for such purpose, in cash from the net
proceeds of the sale of an interest in such Purchased Receivables by the
Company to other Persons;
(iv) at the option of the Company, by means of an addition to the
principal amount of the Canadian Dollar Subordinated Note or U.S. Dollar
Subordinated Note, as appropriate in accordance with this subsection, in
an aggregate amount equal to the remaining portion of the Purchase
Price; provided, however, that with respect to any Seller, the aggregate
-------- -------
outstanding principal amount of such Seller's interest in the
Subordinated Notes shall not exceed 10% of the difference between the
aggregate Purchase Price received by such Seller from the Company and
the aggregate Collections applied by the Company in reduction of such
Purchase Price; and provided further, that the Company may pay by means
-------- -------
of additions to the principal amount of either Subordinated Note only
if, at the time of such payment and after giving effect thereto, the
fair market value of its assets, including any beneficial interests or
indebtedness of a trust and all Receivables and Related Property it
owns, after giving effect for this purpose to any Adjustments with
respect to the Purchased Receivables or any participation interest
therein sold to the Banks under the Receivables Transfer Agreement, is
greater than the amount of its liabilities including its liabilities on
the Subordinated Notes and in respect of the Purchase Discount Amounts
and all fees payable under the Receivables Transfer Agreement. Any such
addition to the principal amount of the Subordinated Notes shall be
allocated among the Sellers by the Master Servicer provided, however,
-------- -------
that additions to the principal amount of the Canadian Dollar
Subordinated Note may only be made to evidence the purchase price of
Receivables denominated in Canadian Dollars and additions to the U.S.
Dollar Subordinated Note may only be made to evidence the purchase price
of Receivables denominated in Dollars. The Master Servicer may evidence
such payments by means of additions to the principal amount of the
appropriate Subordinated Note by recording the date and amount thereof
on the books and records of the Master Servicer or the Sellers or on the
grid attached to such Subordinated Note; provided that the failure to
make any such recordation or any error in such grid shall not adversely
affect any Seller's rights; and
(v) in cash from the proceeds of capital contributed by C&A
Products to the Company in respect of its equity interest in the
Company.
(d) The Master Servicer may allocate among the Sellers the
payment of the Purchase Price for Receivables and any amounts netted
therefrom pursuant to subsection 2.3(c)(i). The Company shall be entitled to
pay all amounts in respect of the Purchase Price of Receivables to an account
of the Master Servicer without regard to whether or how such payments are
allocated by the Master Servicer to the Sellers. All payments under
<PAGE>
5
this Agreement (i) to the extent such payments are made in Canadian Dollars,
shall be made on the date specified therefor in Canadian Dollars in same day
funds or by check, as the Master Servicer shall elect, (ii) in all other
cases, shall be made on the date specified therefor in Dollars in same day
funds or by check, as the Master Servicer shall elect, (iii) in all cases,
shall be made not later than 3:00 p.m (New York City time) and (iv) shall be
made (x) if to any Seller, to the bank account for such Seller designated in
writing by the Master Servicer to the Company and (y) if to the Master
Servicer, to the bank account designated in writing by the Master Servicer to
the Company.
(e) Whenever any payment to be made under this Agreement shall
be stated to be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day. Amounts not paid when due in
accordance with the terms of this Agreement shall bear interest at a rate
equal at all times to the ABR plus the Applicable ABR Margin plus 2%, payable
---- ----
on demand.
2.4 No Repurchase. Except to the extent expressly set forth
-------------
herein, no Seller shall have any right or obligation under this Agreement, by
implication or otherwise, to repurchase from the Company any Purchased
Receivables or Related Property or to rescind or otherwise retroactively
affect any purchase of any Purchased Receivables or Related Property after
the Payment Date relating thereto.
2.5 Rebates, Adjustments, Returns and Reductions; Modifications.
-----------------------------------------------------------
From time to time a Seller may make Adjustments to Receivables in accordance
with this subsection 2.5 and subsection 6.2. The Sellers, jointly and
severally, agree to pay to the Company, on the Payment Date immediately
succeeding the date of the grant of any Adjustment (regardless of which
Seller shall have granted such Adjustment), the amount of any such Adjustment
(a "Seller Adjustment Payment"); provided, that, prior to any Purchase
--------
Termination Event, any such payments to the Company shall be netted against
the Purchase Price of newly created Receivables in accordance with subsection
2.3(c)(i). An "Adjustment" shall mean any rebate, discount, refund or
adjustment (including, without limitation, as a result of the application of
any special or other discounts or any reconciliations) of any Receivable, the
amount owing for any returns (including, without limitation, as a result of
the return of any stale goods) or cancellations and the amount of any other
reduction of any payment under any Receivable in each case granted or made by
the applicable Seller to the related Obligor, provided, that, an "Adjustment"
--------
does not include any Charge-Off. The amount of any Adjustment shall be set
forth on the first Daily Report prepared after the date of the grant thereof.
2.6 Limited Repurchase Obligation. In the event that any of the
-----------------------------
representations or warranties contained in subsection 4.2 in respect of any
Receivable shall be or have been incorrect in any material respect as of the
date made or deemed made, or any Eligible Receivable shall become subject to
any defense, dispute, offset or counterclaim of any kind (other than as
expressly permitted by this Agreement) or any Seller shall breach any
covenant contained in subsection 5.2, 5.8, 6.1, 6.2, 6.3, 6.4, 6.5, 6.8 or
6.9 with respect to any Receivable (each of the foregoing events or
circumstances, a "Repurchase Event"), such Receivable shall cease to be an
Eligible
<PAGE>
6
Receivable on the date on which such Repurchase Event occurs. In addition,
if any Repurchase Event shall occur with respect to any Receivable, then the
Sellers, jointly and severally, agree to pay to the Company an amount (the
"Repurchase Amount") equal to the Purchase Price of such Receivable (whether
the Company paid such Purchase Price in cash or otherwise) less Collections
received by the Company in respect of such Receivable, regardless of which
Seller shall have been responsible for such Repurchase Event, such payment to
occur on the 30th day after the day such Repurchase Event becomes known (or
should have become known with due diligence) to any Seller (except that if
such 30th day is not a Business Day, such payment shall be made on the
Business Day immediately succeeding such 30th day) unless such Repurchase
Event shall have been cured on or before such 30th day; provided, that, prior
--------
to the occurrence of any Purchase Termination Event, any such payments to the
Company shall be netted against the Purchase Price of newly created
Receivables in accordance with subsection 2.3(c)(i). Any payment by any
Seller pursuant to this subsection 2.6 is referred to as a "Seller Repurchase
Payment". If, on or prior to such 30th day (or the Business Day immediately
succeeding such 30th day, as applicable), any Seller shall so reacquire any
such Receivable, then
the Company shall have no further remedy against the Sellers in respect of
the Repurchase Event with respect to such reacquired Receivable. Upon a
Seller Repurchase Payment, the Company shall automatically and without
further action be deemed to sell, transfer, assign, set over and otherwise
convey to the applicable Seller, without recourse, representation or
warranty, all the right, title and interest of the Company in, to and under
such Receivable and the Related Property with respect thereto. The Company
shall execute such documents and instruments of transfer or assignment and
take such other actions as shall reasonably be requested by such Seller to
effect the conveyance of such Receivable pursuant to this section 2.6.
2.7 Obligations Unaffected. The obligations of the Sellers to
----------------------
the Company under this Agreement shall not be affected by reason of any
invalidity, illegality or irregularity of any Receivable or any sale of a
Receivable.
2.8 Certain Charges. Each of the Sellers and the Company agrees
---------------
that late charge revenue, reversals of discounts, other fees and charges and
other similar items, whenever created, accrued in respect of Purchased
Receivables shall be the property of the Company notwithstanding the occur-
rence of an Early Termination, and all Collections with respect thereto shall
continue to be allocated and treated as Collections in respect of Purchased
Receivables.
2.9 Certain Allocations. Each of the Sellers hereby agrees
-------------------
that, following the occurrence of an Early Termination in respect of any
Seller, all Collections and other proceeds received in respect of Receivables
generated by such Seller shall be applied first, to pay the outstanding
-----
Principal Amount of Purchased Receivables (as of the date of such Early
Termination) of the Obligor to whom such Collections are attributable until
such Purchased Receivables are paid in full and, second, to such Seller to
------
pay Receivables of such Obligor not sold to the Company; provided, however,
-------- -------
that notwithstanding the foregoing, if any such Seller can attribute a
Collection
<PAGE>
7
to a specific Obligor and a specific Receivable, then such Collection shall
be applied to pay such Receivable of such Obligor.
ARTICLE III
CONDITIONS TO PURCHASE AND SALE
3.1 Conditions Precedent to the Company's Initial Purchase of
---------------------------------------------------------
Receivables. The obligation of the Company to purchase the Receivables and
-----------
the Related Property hereunder on the Effective Date from any Seller is
subject to the conditions precedent, which may be waived by the Company, that
(a) each of the Sale Documents shall be in full force and effect and (b) the
conditions set forth below shall have been satisfied on or before the
Effective Date:
(i) the Company shall have received copies of duly adopted
resolutions of the Board of Directors of each Seller as in effect on the
Effective Date and in form and substance reasonably satisfactory to the
Company, authorizing this Agreement, the documents to be delivered by
such Seller hereunder and the transactions contemplated hereby,
certified by the Secretary or Assistant Secretary of such Seller;
(ii) the Company shall have received duly executed certificates of
the Secretary or an Assistant Secretary of each Seller, dated the
Effective Date and in form and substance reasonably satisfactory to the
Company, certifying the names and true signatures of the officers
authorized on behalf of such Seller to sign this Agreement and any
instruments or documents in connection with this Agreement;
(iii) each Seller shall have filed and recorded, at its own expense,
UCC-1 financing statements with respect to the Receivables and the
Related Property in such manner and in such jurisdictions as are
necessary or desirable to perfect the Company's ownership interest
thereof under the Uniform Commercial Code and delivered evidence of such
filings to the Company on or prior to the Effective Date; and all other
action necessary or desirable, in the reasonable judgment of the
Company, to perfect the Company's ownership of the Receivables shall
have been duly taken;
(iv) each Seller shall have delivered to the Company a microfiche,
typed or printed list or other tangible evidence reasonably acceptable
to the Company showing as of a date no later than five Business Days
preceding the Effective Date, the Obligors whose Receivables are to be
transferred to the Company on the Effective Date and the balance of the
Receivables with respect to each such Obligor as of such preceding date;
and
(v) the Company shall have received reports of UCC-1 and other
searches of the Sellers with respect to the Receivables and the Related
Property reflecting the absence of Liens thereon, except Liens
<PAGE>
8
created in connection with the sale by the Company of an interest in the
Purchased Receivables and except for Liens as to which the Company has
received Uniform Commercial Code termination statements to be filed on
or prior to the Effective Date.
3.2 Conditions Precedent to All the Company's Purchases of
------------------------------------------------------
Receivables. The obligation of the Company to pay a Seller for any
-----------
Receivable and the Related Property with respect thereto on each Payment Date
(including the Effective Date) shall be subject to the further conditions
precedent, which may be waived by the Company, that on such Payment Date:
(a) the following statements shall be true (and the acceptance
by such Seller of the Purchase Price for any Receivables on any Payment
Date shall constitute a representation and warranty by such Seller that
on such Payment Date such statements are true):
(i) the representations and warranties of such Seller contained
in subsections 4.1 and 4.2 shall be true and correct in all
material respects on and as of such Payment Date as though made
on and as of such date, except insofar as such representations
and warranties are expressly made only as of another date; and
(ii) no Purchase Termination Event or Incipient Purchase
Termination Event shall have occurred and be continuing; and
(iii) there has been no material adverse change since the date of
this Agreement in the collectibility of the Receivables (other
than due to a change in the creditworthiness of the Obligors);
and
(b) the Company shall be satisfied that such Seller's systems,
procedures and record-keeping relating to the Purchased Receivables are
in all material respects sufficient and satisfactory in order to permit
the purchase and administration of the Purchased Receivables in
accordance with the terms and intent of this Agreement (it being
understood and agreed that as of the date hereof, the Sellers' systems,
procedures and record-keeping relating to the Receivables are in all
material respects sufficient and satisfactory);
(c) the Company shall have received payment in full of all
amounts for which payment is due from such Seller pursuant to subsection
2.5, 2.6 or 9.3;
(d) the Company shall have received such other approvals,
opinions or documents as the Company may reasonably request; and
(e) such Seller shall have complied with all of its covenants in
all material respects and satisfied all of its obligations in all
material respects under this Agreement required to be complied with or
satisfied as of such date;
<PAGE>
9
provided, however, that the failure of any Seller to satisfy any of the
-------- -------
foregoing conditions shall not prevent such Seller from subsequently selling
Receivables upon satisfaction of all such conditions or exercising its rights
under subsection 2.1(b).
3.3 Conditions Precedent to Sellers' Obligations. (a) The
--------------------------------------------
obligations of each Seller on the Effective Date shall be subject to the
conditions precedent that such Seller shall have received on or before the
Effective Date the following, each dated the Effective Date and in form and
substance satisfactory to such Seller:
(i) a copy of duly adopted resolutions of the Board of Directors of
the Company authorizing this Agreement, the documents to be delivered by
the Company hereunder and the transactions contemplated hereby,
certified by the Secretary or Assistant Secretary of the Company; and
(ii) a duly executed certificate of the Secretary or Assistant
Secretary of the Company certifying the names and true signatures of the
officers authorized on its behalf to sign this Agreement and the other
documents to be delivered by it hereunder.
(b) The obligations of each Seller on each Payment Date shall be
subject to the condition precedent that no Termination Event set forth in
paragraph (f) of Article IX of the Receivables Transfer Agreement shall have
occurred and be continuing.
3.4 Conditions Precedent to the Addition of a Seller. No
------------------------------------------------
Subsidiary of C&A Products approved by the Company as an additional Seller
pursuant to subsection 9.14 shall be added as a Seller hereunder unless the
conditions set forth below shall have been satisfied on or before the date
designated for the addition of such Seller (the "Seller Addition Date"):
(i) the Company shall have received an Additional Seller Supplement
substantially in the form of Exhibit C hereto, duly executed and
delivered by such Seller;
(ii) the Company shall have received copies of duly adopted
resolutions of the Board of Directors of such Seller as in effect on the
related Seller Addition Date and in form and substance reasonably
satisfactory to the Company, authorizing this Agreement, the documents
to be delivered by such Seller hereunder and the transactions
contemplated hereby, certified by the Secretary or Assistant Secretary
of such Seller;
(iii) the Company shall have received duly executed certificates of
the Secretary or an Assistant Secretary of such Seller dated the related
Seller Addition Date and in form and substance reasonably satisfactory
to the Company, certifying the names and true signatures of the officers
authorized on behalf of such Seller to sign the Additional Seller
Supplement or any instruments or documents in connection with this
Agreement;
<PAGE>
10
(iv) a Lockbox Account with respect to Receivables to be sold by
such Seller shall have been established in the name of the Company;
(v) such Seller shall have filed and recorded, at its own expense,
UCC-1 financing statements with respect to the Receivables and the
Related Property in such manner and in such jurisdictions as are
necessary or desirable to perfect the Company's ownership interest
thereof under the Uniform Commercial Code and delivered evidence of such
filings to the Company on or prior to the date hereof; and all other
action necessary or desirable, in the opinion of the Company, to perfect
the Company's ownership of the Receivables shall have been duly taken;
(vi) such Seller shall have delivered to the Company a microfiche, a
typed or printed list or other tangible evidence reasonably acceptable
to the Company showing as of a date acceptable to the Company prior to
the related Seller Addition Date the Obligors whose Receivables are to
be transferred to the Company and the balance of the Receivables with
respect to each such Obligor as of such date; and
(vii) the Company shall have received reports of UCC-1 and other
searches of such Seller with respect to the Receivables and the Related
Property reflecting the absence of Liens thereon, except Liens created
in connection with the sale by the Company of an interest in the
Purchased Receivables and except for Liens as to which the Company has
received Uniform Commercial Code termination statements to be filed on
or prior to the related Seller Addition Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Sellers Relating to
---------------------------------------------------------
the Sellers. Each Seller hereby represents and warrants to the Company on
-----------
the Effective Date and on each Payment Date that:
(a) Organization, Corporate Powers. It (i) is a corporation
duly organized, validly existing and in good standing under the laws of
the jurisdiction in which it is incorporated, (ii) has all requisite
corporate power and authority, and all material licenses, permits,
franchises, consents and approvals, to own or lease its property and
assets and to carry on its business as now conducted and as proposed to
be conducted, (iii) is qualified and in good standing as a foreign
corporation to do business in every jurisdiction where such
qualification is necessary, except where the failure so to qualify would
not have a Material Adverse Effect and (iv) has the corporate power and
authority to execute, deliver and perform this Agreement and each of the
other Sale Documents to which it is a party and each other agreement or
instrument contemplated hereby or thereby to which it is or will be a
party. It does not have any assets or business, nor is it a party to
any material contract within the meaning of Item 6.01(b)(10) of
Regulation S-K of the Securities
<PAGE>
11
and Exchange Commission, other than as disclosed or referred to in the
registration statement of which the Preliminary Prospectus is a part or
as contemplated hereby and thereby.
(b) Authorization. The execution, delivery and performance by
it of this Agreement and each of the other Sale Documents to which it is
a party, the sale of Receivables by it hereunder and the consummation of
the other transactions contemplated by any of the foregoing
(collectively, the "Sale Transactions") (i) have been duly authorized by
all requisite corporate and, if required, stockholder action and (ii)
will not (x) violate (A) any provision of law, statute, rule or
regulation (including, without limitation, Regulations G, T, U and X) or
the certificate of incorporation or by-laws (or similar governing
documents) of such Seller, (B) any applicable order of any court or any
rule, regulation or order of any Governmental Authority or (C) any
indenture, certificate of designation for preferred stock, agreement or
other instrument to which such Seller is a party or by which it or any
of its property is bound, (y) be in conflict with, result in a breach of
or constitute (with notice or lapse of time or both) a default under any
such indenture, agreement or other instrument where any such conflict,
violation, breach or default referred to in clause (ii)(x) or (ii)(y) of
this subsection, individually or in the aggregate, would have a Material
Adverse Effect or (z) result in the creation or imposition of any Lien
upon any of its property or assets, except for Liens created under this
Agreement and Liens created in connection with the sale by the Company
of an interest in the Receivables.
(c) Enforceability. Each of this Agreement and each of the
other Sale Documents to which it is a party has been duly executed and
delivered by such Seller and constitutes a legal, valid and binding
obligation of such Seller enforceable against it in accordance with its
terms, except as enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization or other similar laws affecting
creditors' rights generally and except as enforceability may be limited
by general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(d) Capitalization. All of its capital stock is owned directly
or indirectly by C&A Products.
(e) Litigation; Compliance with Laws. (1) Except as described
in the registration statement of which the Preliminary Prospectus is a
part, there are not any actions, suits or proceedings at law or in
equity or by or before any court or Governmental Authority now pending
or, to the knowledge of such Seller, threatened against or affecting
such Seller or any of its property or rights as to which there is a
reasonable possibility of an adverse determination and which (i) if
adversely determined, could individually or in the aggregate result in a
Material Adverse Effect or (ii) involve the Transaction Documents or
(iii) if adversely determined, could materially adversely affect the
Sale Transactions.
<PAGE>
12
(2) It is not in default with respect to any law, order,
judgment, writ, injunction, decree, rule or regulation of any Govern-
mental Authority where such default could have a Material Adverse
Effect. The sales hereunder and the use of the proceeds thereof will
not violate any applicable law or regulation or violate or be prohibited
by any judgment, writ, injunction, decree or order of any court or
Governmental Authority or subject such Seller to any civil or criminal
penalty or fine. No Purchase Termination Event or Incipient Purchase
Termination Event has occurred and is continuing.
(f) Agreements. (1) It is not a party to any agreement or
instrument or subject to any corporate restriction that has resulted or
could reasonably be expected to result in a Material Adverse Effect.
(2) It is not in default in any manner under any provision of
any indenture or other agreement or instrument evidencing Indebtedness
or any other material agreement or instrument to which it is a party or
by which it or any of its properties or assets are or may be bound, in
either case where such default could result in a Material Adverse
Effect.
(g) Tax Returns. It has filed or caused to be filed all
Federal, state and local tax returns required to have been filed by it
and has paid or caused to be paid all taxes shown thereon to be due and
payable, and any assessments in excess of $2,000,000 in the aggregate
received by it, except taxes the amount or validity of which are
currently being contested in good faith by appropriate proceedings and
with respect to which reserves in conformity with GAAP have been
provided on its books and taxes, assessments, charges, levies or claims
in respect of property taxes for property that it has determined to
abandon where the sole recourse for such tax, assessment, charge, levy
or claim is to such property. It has paid in full or made adequate
provision (in accordance with GAAP) for the payment of all taxes due
with respect to the periods ending on or before January 29, 1994, which
taxes, if not paid or adequately provided for, would have a Material
Adverse Effect. The tax returns of such Seller have been examined by
relevant Federal tax authorities for all periods through _______ __,
19__, and all deficiencies asserted as a result of such examinations
have been paid. No statute of limitations period for any tax years
ending on or before _______ __, 19__, has been waived or extended by
Holdings or any of its Subsidiaries as to assessment or collection.
Except as set forth on Schedule 4, as of the Effective Date, with
respect to such Seller, (i) no material claims are being asserted in
writing with respect to any taxes, (ii) no presently effective waivers
or extensions of statutes of limitation with respect to taxes have been
given or requested, (iii) no tax returns are being examined by, and no
written notification of intention to examine has been received from, the
Internal Revenue Service or any other taxing authority and (iv) no
currently pending issues have been raised in writing by the Internal
Revenue Service or any other taxing authority. For purposes of this
paragraph, "taxes" shall mean any present or future tax, levy, impost,
duty, charge, assessment or fee of
<PAGE>
13
any nature (including interest, penalties and additions thereto) that is
imposed by any Governmental Authority.
(h) No Material Misstatements. (1) The information, reports,
financial statements, exhibits and schedules furnished by or on behalf
of such Seller to the Company in connection with the negotiation of any
Sale Document or included therein or delivered pursuant thereto did not
contain and will not contain as of the Effective Date any material
misstatement of fact and did not omit and will not omit to state as of
the Effective Date any material fact necessary to make the statements
therein, in the light of the circumstances under which they were, are or
will be made, not materially misleading in their presentation of the
Sale Transactions or such Seller.
(2) As of the Effective Date, there are no facts relating to
such Seller known or which, after reasonable inquiry, would be known by
it that have not been disclosed to the Company in writing which could
have a Material Adverse Effect.
(i) Employee Benefit Plans. Each of such Seller and each of its
ERISA Affiliates is in compliance in all material respects with the
applicable provisions of ERISA and the regulations and published
interpretations thereunder except for such noncompliance which would not
be expected to result in a Material Adverse Effect. No Reportable Event
has occurred as to which such Seller or any of its ERISA Affiliates was
required to file a report with the PBGC, other than reports for which
the 30 day notice requirement is waived, reports that have been filed
and reports the failure of which to file would not result in a Material
Adverse Effect and the present value of all benefit liabilities under
each Plan of such Seller or any of its ERISA Affiliates (on a
termination basis and based on those assumptions used to fund such Plan)
did not, as of the last annual valuation date applicable thereto, exceed
by more than $7,500,000 the value of the assets of such Plan. None of
such Seller or any of its ERISA Affiliates has incurred or could
reasonably be expected to incur any Withdrawal Liability that could
result in a Material Adverse Effect. None of such Seller or any of its
ERISA Affiliates has received any notification that any Multiemployer
Plan is in reorganization or has been terminated within the meaning of
Title IV of ERISA, and no Multiemployer Plan is reasonably expected to
be in reorganization or to be terminated where such reorganization or
termination has resulted or could reasonably be expected to result,
through increases in the contributions required to be made to such Plan
or otherwise, in a Material Adverse Effect.
(j) Solvency. The fair salable value of the assets of such
Seller exceeds the amount that will be required to be paid on or in
respect of the existing debts and other liabilities (including
contingent liabilities) of such Seller. The assets of such Seller do
not constitute unreasonably small capital to carry out its business as
conducted or as proposed to be conducted. Such Seller does not intend
to, or believe that it will, incur debts beyond its ability to pay such
debts as they mature (taking into account the
<PAGE>
14
Recapitalization Transactions but assuming that the Overallotment Option
is not exercised).
(k) Absence of Certain Restrictions. No indenture, certificate
of designation for preferred stock, agreement or other instrument to
which such Seller or any of its Subsidiaries is a party will prohibit or
materially restrain, or have the effect of prohibiting or materially
restraining, or imposing materially adverse conditions upon, the sale of
Receivables or the granting of Liens thereon.
(l) Indebtedness to Company. Immediately prior to consummation
of the transactions contemplated hereby on the Effective Date, it had no
outstanding Indebtedness to the Company.
(m) Lockboxes. Set forth in Schedule 2 is a complete and
accurate description as of the Effective Date of each Lockbox Account
currently maintained by such Seller. Each of the Lockbox Agreements,
once entered into, shall be the legal, valid and binding obligation of
the parties thereto, enforceable against such parties in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect affecting the enforcement of creditors' rights in
general and except as such enforceability may be limited by general
principles of equity (whether considered in a suit at law or in equity).
(n) Filings. On or prior to the Effective Date, all filings and
other acts necessary or advisable (including but not limited to all
filings and other acts necessary or advisable under the Uniform
Commercial Code of each relevant jurisdiction) have been made or
performed in order to grant the Company a first priority perfected
ownership interest in respect of all Receivables.
(o) Receivables Documents. Upon the delivery, if any, by such
Seller to the Company of licenses, rights, computer programs, related
materials, computer tapes, disks, cassettes and data relating to the
administration of the Purchased Receivables pursuant to subsection
5.15(d)(5), the Company shall have been furnished with all materials and
data necessary to permit immediate collection of the Purchased
Receivables without the participation of any Seller in such collection.
4.2 Representations and Warranties of the Sellers Relating to
---------------------------------------------------------
the Agreement and the Receivables. Each Seller hereby represents and
---------------------------------
warrants to the Company on the Effective Date and on each Payment Date that
with respect to the Receivables being paid for as of such date:
(a) Receivables Description. The microfiche, printed or typed list
or computer file delivered pursuant to subsection 3.1(b)(iv) is an
accurate and complete listing in all material respects of all its
Receivables as of _________ __, 1994 and the information contained
therein with respect to the identity of
<PAGE>
15
such Receivables is true and correct in all material respects as of such
date.
(b) Eligible Receivable. Each Receivable sold by it hereunder
and included as an Eligible Receivable in the calculation of Applicable
Eligible Receivables Percentage will be, on and as of the date of such
inclusion, an Eligible Receivable. The aggregate outstanding Principal
Amount of Receivables sold by it on any Payment Date is correctly set
forth on the Seller Daily Report with respect to such Seller and with
respect to such Payment Date. The aggregate outstanding Adjusted
Principal Amount of Receivables denominated in Canadian Dollars and sold
by it on any Payment Date is correctly set forth on the Seller Daily
Report with respect to such Seller and with respect to such Payment
Date.
(c) Title; No Liens. Other than with respect to Receivables
which such Seller states in writing (in the applicable Seller Daily
Report or otherwise) are not Eligible Receivables on such date, such
Seller is the sole legal and beneficial owner of its Receivables, and
upon the sale of each Receivable of such Seller, the Company will become
the sole legal and beneficial owner of such Receivable, free and clear
of any Liens (except for Liens granted by such Seller in favor of the
Company and the interest in such Purchased Receivables sold and the
security interest therein granted by the Company to other Persons and
except for Liens which are released on or prior to the Effective Date),
and no effective financing statement or other instrument similar in
effect covering all or any part of such Purchased Receivable, Related
Property or Collections with respect thereto will at such time be on
file against such Seller in any filing or recording office except such
as have been filed in favor of the Company in accordance with this
Agreement.
(d) Governmental Consents. Other than with respect to Receivables
which such Seller states in writing (in the applicable Seller Daily
Report or otherwise) are not Eligible Receivables on such date, all
consents, licenses, approvals or authorizations of or registrations or
declarations with any Governmental Authority required to be obtained,
effected or given by the Company in connection with the conveyance of
each Receivable pursuant to the Receivables Transfer Agreement have been
duly obtained, effected or given and are in full force and effect.
(e) Compliance With Laws. Other than with respect to Receivables
which such Seller states in writing (in the applicable Seller Daily
Report or otherwise) are not Eligible Receivables on such date, all
laws, statutes, rules and regulations (including, without limitation,
usury laws), applicable at the related Payment Date to any of the
Receivables have been duly complied with by such Seller except to the
extent any failure to so comply could not affect the validity or
collectibility of such Receivable.
<PAGE>
16
(f) No Set-Off. Other than with respect to Receivables which
such Seller states in writing (in the applicable Seller Daily Report or
otherwise) are not Eligible Receivables on such date, the Receivables
are not subject to any defense, dispute, offset or counterclaim, whether
arising out of the transactions represented by the Receivables or
independently thereof and whether arising out of any assertion by any
Obligor that its obligations in respect of any Receivable are, or may
be, payable to a third party, instead of the owner of such Receivable,
or otherwise.
(g) Chief Executive Office. The chief executive office of such
Seller is listed opposite its name on Schedule 1, which office is the
place where such Person is "located" for the purposes of Section 9-
103(3)(d) of the Uniform Commercial Code of the State of New York, and
the offices of such Seller where such Seller keeps its records
concerning the Receivables are also listed in said Schedule opposite its
name.
(h) Absence of Changes. As of the related Payment Date, there
has not been since the date of this Agreement any material adverse
change in the ability of such Seller, acting as the Servicer, to perform
its obligations hereunder or under the Receivables Transfer Agreement.
ARTICLE V
AFFIRMATIVE COVENANTS
Each Seller hereby agrees that, so long as there are any amounts
outstanding with respect to Purchased Receivables previously sold by such
Seller to the Company or until an Early Termination with respect to such
Seller, whichever is later, such Seller or the Master Servicer on behalf of
such Seller shall:
5.1 Certificates; Other Information. Furnish to the Company:
-------------------------------
(a) not later than 90 days after the end of each fiscal year and
not later than 45 days after the end of each of the first three fiscal
quarters of each fiscal year, a certificate of a Responsible Officer of
the Master Servicer stating that, to the best of such Officer's
knowledge, such Seller during such period has observed or performed all
of its covenants and other agreements, and satisfied every condition,
contained in the Sale Documents to which it is a party to be observed,
performed or satisfied by it, and that such Officer has obtained no
knowledge of any Purchase Termination Event or Incipient Purchase
Termination Event except as specified in such certificate; and
(b) promptly, such additional financial and other information as
the Company may from time to time reasonably request.
5.2 Compliance with Laws, etc. Comply in all material respects
--------------------------
with its Certificate of Incorporation and by-laws and all laws, rules,
regulations and orders of any Governmental Authority, whether now
<PAGE>
17
in effect or hereafter enacted, applicable to the Purchased Receivables,
except to the extent that failure to comply therewith could not materially
adversely affect the rights of the Company in the Purchased Receivables or
the collectibility or validity thereof. Each Seller will comply, in all
material respects, with its obligations under contracts with Obligors
relating to the Purchased Receivables except to the extent such compliance
would result in a violation of a laws, rules, regulations and orders of any
Governmental Authority.
5.3 Preservation of Corporate Existence. Do or cause to be done
-----------------------------------
all things necessary to preserve, renew and keep in full force and effect its
legal existence and maintain such legal existence separate from that of the
Company, provided that any Seller may be merged or consolidated with or into
--------
any other Seller or C&A Products.
5.4 Visitation Rights. At any reasonable time during normal
-----------------
business hours and from time to time, in each case upon reasonable notice to
such Seller and the Master Servicer, permit (i) the Company, or any of its
agents or representatives, (A) to examine and make copies of and abstracts
from the records, books of account and documents (including computer tapes
and disks) of each Seller relating to the Purchased Receivables hereunder and
(B) following the termination of the appointment of C&A Products as Master
Servicer or of such Seller as Servicer with respect to the Purchased
Receivables, to be present at the offices and properties of such Seller to
administer and control the collection of amounts owing on the Purchased
Receivables and (ii) the Company, or any of its agents or representatives, to
visit the properties of such Seller for the purpose of examining such
records, books of account and documents, and to discuss the affairs, finances
and accounts of such Seller relating to the Purchased Receivables or such
Seller's performance hereunder with any of its officers or directors and with
its independent certified public accountants (subject to any requirements of
confidentiality imposed by law or contract).
5.5 Keeping of Records and Books of Account. Maintain and
---------------------------------------
implement, or cause to be maintained or implemented, administrative and
operating procedures reasonably necessary or advisable for the collection of
amounts owing on all Purchased Receivables, and, until any delivery to the
Company, keep and maintain, or cause to be kept and maintained, all
documents, books, records and other information reasonably necessary or
advisable for the collection of amounts owing on all such Purchased
Receivables and the Related Property with respect thereto.
5.6 Location of Records. Keep its chief place of business and
-------------------
chief executive office, and the offices where it keeps the records concerning
the Purchased Receivables (and all original documents relating thereto) at
the locations referred to for it on Schedule 1 hereto or, upon 30 days' prior
written notice to the Company, at such other locations in a jurisdiction
where all action required by subsection 5.15(a) shall have been taken and
completed and be in full force and effect.
5.7 Computer Files. At its own cost and expense, retain the
--------------
ledger used by such Seller as a master record of the Obligors and retain
copies of all documents relating to each Obligor as custodian and agent for
the
<PAGE>
18
Company and other Persons with interests in the Purchased Receivables and
mark the computer tape or other physical records of the Purchased Receivables
to the effect that interests in the Purchased Receivables existing with
respect to the Obligors listed thereon have been sold to the Company.
5.8 Policies. Perform its obligations in accordance with and
--------
comply in all material respects with the Policies and neither change nor
modify the Policies in any material respect, except with the prior written
consent of the Company or if such changes are necessary under any law, rule,
regulation or order of any Governmental Authority applicable to it; it being
understood that material changes to the Policies shall include, without
limitation, changes to the timing of Charge-Offs of Receivables and changes
to the creditworthiness criteria used in determining whether to extend credit
to a Person and in determining the amount of such credit to extend.
5.9 Taxes; ERISA. (a) Pay and discharge promptly all
------------
taxes, assessments and governmental charges or levies imposed upon it or upon
its income or profits or in respect of its property, before the same shall
become delinquent or in default, as well as all lawful claims for labor,
materials and supplies or otherwise which, if unpaid, might give rise to a
Lien upon such properties or any part thereof; provided, however, that such
-------- -------
payment and discharge shall not be required with respect to any such tax,
assessment, charge, levy or claim so long as (i) the validity or amount
thereof shall be contested in good faith by appropriate proceedings and
Holdings or such Seller, as applicable, shall set aside on its books adequate
reserves as required by GAAP with respect thereto, (ii) such tax, assessment,
charge, levy or claim is in respect of property taxes for property that such
Seller has determined to abandon and the sole recourse for such tax,
assessment, charge, levy or claim is to such property or (iii) the amount of
such taxes assessments, charges, levies and claims and interest and penalties
thereon does not exceed $1,000,000 in the aggregate for the Master Servicer
and all Sellers taken as a whole.
(b) (i) Comply in all material respects with the applicable
provisions of ERISA and (ii) furnish to the Company (w) as soon as possible,
and in any event within 30 days after any Responsible Officer of such Seller
or any ERISA Affiliate of such Seller knows or has reason to know that any
Reportable Event has occurred that alone or together with any other
Reportable Event could reasonably be expected to result in liability of the
Master Servicer, such Seller or any of their ERISA Affiliates to the PBGC in
an aggregate amount exceeding $10,000,000, a statement of a Financial Officer
setting forth details as to such Reportable Event and the action proposed to
be taken with respect thereto, together with a copy of the notice, if any, of
such Reportable Event given to the PBGC, (x) promptly after any Responsible
Officer learns of receipt thereof, a copy of any notice such Seller or any of
its ERISA Affiliates may receive from the PBGC relating to the intention of
the PBGC to terminate any Plan or Plans (other than a Plan maintained by any
of their ERISA Affiliates which is considered an ERISA Affiliate only
pursuant to subsection (m) or (o) of Section 414 of the Code) or to appoint a
trustee to administer any Plan or Plans, (y) within 20 days after the due
date for filing with the PBGC pursuant to Section
<PAGE>
19
412(n) of the Code a notice of failure to make a required installment or
other payment with respect to a Plan, a statement of a Financial Officer
setting forth details as to such failure and the action proposed to be taken
with respect thereto, together with a copy of such notice given to the PBGC
and (z) promptly after any Responsible Officer learns thereof and in any
event within 30 days after receipt thereof by such Seller or any ERISA
Affiliate from the sponsor of a Multiemployer Plan, a copy of each notice
received by such Seller or such ERISA Affiliate concerning (I) the imposition
of Withdrawal Liability or (II) a determination that a Multiemployer Plan is,
or is expected to be, terminated or in reorganization, in each case within
the meaning of Title IV of ERISA.
5.10 Collections. Use its best efforts to cause any Obligor
-----------
which currently pays its Receivables by checks mailed to such Seller to make
future payments in respect of Receivables to a Lockbox Account or by wire
transfer to the Collection Account, provided, that, prior to an Incipient
--------
Purchase Termination Event or a Purchase Termination Event, no Seller shall
be obliged to make any such request of any such Obligor if such Seller
determines in its reasonable judgment that such request could be detrimental
to its ongoing business relationship with such Obligor.
5.11 Lockbox Agreements; Lockbox Accounts. Within 60 days of
------------------------------------
the Effective Date,
(a) if such Seller has not established a Lockbox Account on the
Effective Date, it shall establish one and enter into a Lockbox
Agreement with respect thereto;
(b) if such Seller shall not have entered into a Lockbox Agreement
with respect to any existing Lockbox Account on the Effective Date, it
shall enter into such a Lockbox Agreement.
5.12 Furnishing Copies, etc. Furnish to the Company:
-----------------------
(a) within two Business Days of the Company's request, but no more
than once each month, a certificate of the chief financial officer of
such Seller certifying, as of the date thereof, to the best knowledge of
such officer, that no Purchase Termination Event has occurred and is
continuing, and setting forth the computations used by the chief
financial officer of such Seller in making such determination or if one
has so occurred specifying the nature and extent thereof and any
corrective action taken or proposed to be taken with respect thereto;
(b) promptly upon obtaining knowledge of the occurrence of any
Purchase Termination Event or Incipient Purchase Termination Event,
written notice thereof;
(c) promptly following request therefor, such other information,
documents, records or reports regarding or with respect to the Purchased
Receivables of the applicable Seller, as the Company may from
<PAGE>
20
time to time reasonably request;
(d) promptly upon obtaining knowledge of the occurrence thereof,
written notice of any event of default or default under any other Sale
Document;
(e) promptly upon obtaining knowledge of the occurrence thereof,
written notice of any development that has resulted in, or could
reasonably be expected to result in, a Material Adverse Effect; and
(f) promptly upon determining that any Purchased Receivable
designated as an Eligible Receivable on the applicable Daily Report was
not an Eligible Receivable as of the date provided therefor, written
notice of such determination.
5.13 Obligations with Respect to Obligors and Receivables. Take
----------------------------------------------------
all actions on its part reasonably necessary to maintain in full force and
effect its material rights under all contracts relating to the Purchased
Receivables.
5.14 Responsibilities of the Sellers. Notwithstanding anything
-------------------------------
herein to the contrary, (i) each Seller shall perform or cause to be
performed all its obligations under the Policies related to the Purchased
Receivables to the same extent as if such Purchased Receivables had not been
transferred to the Company hereunder, (ii) the exercise by the Company of any
of its rights hereunder shall not relieve any Seller of its obligations with
respect to such Purchased Receivables and (iii) except as provided by law,
the Company shall not have any obligation or liability with respect to any
Purchased Receivables, nor shall the Company be obligated to perform any of
the obligations or duties of any Seller thereunder.
5.15 Further Action. In addition to the foregoing:
--------------
(a) Each Seller agrees that from time to time, at its expense, it
will promptly execute and deliver all further instruments and documents,
and take all further action, that may be necessary or desirable in such
Seller's reasonable judgment or that the Company may reasonably request,
in order to protect or more fully evidence the Company's right, title
and interest in the Purchased Receivables, or to enable the Company to
exercise or enforce any of its rights in respect thereof. Without
limiting the generality of the foregoing, each Seller will upon the
request of the Company (A) execute and file such financing or
continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or, in the opinion of the
Company, advisable, (B) indicate on its books and records that the
Purchased Receivables have been purchased by the Company and that the
Company has sold an interest therein and has granted a security interest
therein in the Company's retained interest, and provide to the Company,
upon request, copies of any such records, and (C) obtain the agreement
of any Person having a
<PAGE>
21
Lien on any Receivables owned by any Seller (other than any Lien created
or imposed hereunder or any Lien expressly permitted pursuant to
subsection 6.1) to release such Lien upon the purchase of any such
Receivables by the Company.
(b) Each Seller hereby irrevocably authorizes the Company to file
one or more financing or continuation statements, and amendments
thereto, relative to all or any part of the Purchased Receivables and
the Related Property sold or to be sold by such Seller without the
signature of such Seller to the extent permitted by applicable law.
(c) If any Seller fails to perform any of its agreements or
obligations under this Agreement, the Company may (but shall not be
required to) perform, or cause performance of, such agreements or
obligations, and the expenses of the Company incurred in connection
therewith shall be payable by such Seller as provided in subsection 9.3.
(d) Each Seller agrees that, upon the occurrence and during the
continuation of a Purchase Termination Event, Incipient Purchase
Termination Event or a Servicer Event of Default:
(1) the Company (and its assignees) shall have the right at
any time to notify, or require that any Seller at such Seller's
expense notify, the respective Obligors of the Company's
ownership of the Purchased Receivables and may direct that
payment of all amounts due or to become due under the Purchased
Receivables be made directly to the Company or its designee;
(2) the Company (and its assignees) shall have the right to
(x) sue for collection on any Purchased Receivables or (y) sell
any Purchased Receivables to any Person for a price that is
acceptable to the Company. If required by the terms of Section
9-504 or 9-505 of the Uniform Commercial Code, the Company (and
its assignees) may offer to sell any Purchased Receivable to any
Person, together, at its option, with all other Purchased
Receivables created by the same Obligor. Any Purchased
Receivable sold hereunder shall cease to be a Receivable for all
purposes under this Agreement as of the effective date of such
sale;
(3) each Seller shall, upon the Company's written request and
at such Seller's expense, (x) assemble all such Seller's
documents, instruments and other records (including credit files
and computer tapes or disks) that (1) evidence or will evidence
or record Receivables sold by such Seller and (2) are otherwise
necessary or desirable to effect Collections of such Purchased
Receivables (collectively, the "Documents") and (y) deliver the
Documents to the Company or its designee at a place designated by
the Company. In recognition of each Seller's need to have access
to any Documents which may be transferred to the Company
hereunder, whether as a result of its
<PAGE>
22
continuing business relationship with any Obligor for Receivables
purchased hereunder or as a result of its responsibilities as
Servicer, the Company hereby grants to the applicable Seller an
irrevocable license to access the Documents transferred by such
Seller to Company and to access any such transferred computer
software in connection with any activity arising in the ordinary
course of such Seller's business or in performance of such
Seller's duties as Servicer, provided that such Seller shall not
disrupt or otherwise interfere with the Company's use of and
access to the Documents and its computer software during such
license period;
(4) each Seller hereby irrevocably authorizes the Company or
its designee to take any and all steps in such Seller's name
necessary or desirable, in the reasonable opinion of the Company,
to collect all amounts due under the Purchased Receivables,
including endorsing such Seller's name on checks and other
instruments representing Collections, enforcing the Purchased
Receivables and exercising all rights and remedies in respect
thereof; and
(5) upon written request of the Company, each Seller will (x)
deliver to the Company or a party designated by the Company all
licenses, rights, computer programs, related material, computer
tapes, disks, cassettes and data necessary to the immediate
collection of the Purchased Receivables by the Company, with or
without the participation of any Seller and (y) make such
arrangements with respect to the collection of the Purchased
Receivables as may be reasonably required by the Company.
ARTICLE VI
NEGATIVE COVENANTS
Each Seller hereby agrees that, so long as there are any amounts
outstanding with respect to Purchased Receivables previously sold by such
Seller to the Company or until an Early Termination with respect to such
Seller, whichever is later, such Seller shall not, directly or indirectly:
6.1 Liens. Except as otherwise expressly herein provided, sell,
-----
assign (by operation of law or otherwise) or otherwise dispose of, or create
or suffer to exist any Lien upon or with respect to, any Receivables or
Related Property, or assign any right to receive proceeds in respect thereof
except for Liens created or imposed hereunder or under the Receivables
------
Transfer Agreement.
6.2 Extension or Amendment of Receivables. Extend, make any
-------------------------------------
Adjustment to, rescind, cancel, amend or otherwise modify, or attempt or
purport to extend, amend or otherwise modify, the terms of any Purchased
Receivables, except (i) in accordance with the terms of the Policies, (ii) as
required by any Requirement of Law, (iii) in the case of Adjustments, upon
making an Adjustment Payment pursuant to subsection 2.5, or (iv)
<PAGE>
23
with the consent of the Company, provided that the applicable Servicer may
--------
cause Receivables to become Charge-Offs.
6.3 Change in Payment Instructions to Obligors. Instruct any
------------------------------------------
Obligor of any Purchased Receivables to make any payments with respect to any
Receivables other than in accordance with its current practices with respect
to such Obligor; provided that, in accordance with subsection 5.10, it may
--------
instruct any Obligor to make such payments to a Lockbox Account or by wire
transfer to the Collection Account.
6.4 Change in Name. Change its name, identity or corporate
--------------
structure in any manner which would or might make any financing statement or
continuation statement relating to this Agreement seriously misleading within
the meaning of Section 9-402(7) of the Uniform Commercial Code without 30
days' prior written notice to the Company.
6.5 Modification of Ledger. Delete or otherwise modify the
----------------------
marking on the ledger referred to in subsection 5.7.
6.6 Business of the Sellers. (a) Engage at any time in any
-----------------------
business or business activity other than the business currently conducted by
it and business activities reasonably incidental thereto or (b) fail to
maintain and operate such business in substantially the manner in which it is
presently conducted and operated if such failure would materially adversely
affect the interests of the Company under the Transaction Documents.
6.7 Accounting of Purchases. Prepare any financial statements
-----------------------
which shall account for the transactions contemplated hereby (other than
capital contributions and the Subordinated Notes) in any manner other than as
sales of the Purchased Receivables by such Seller to the Company or in any
other respect account for or treat the transactions contemplated hereby
(including for accounting purposes and, where taxes are not consolidated, for
tax reporting purposes, except as required by law) (other than capital
contributions and the Subordinated Notes) in any manner other than as sales
of the Purchased Receivables by such Seller to the Company.
6.8 Chattel Paper. Not take any action to cause any Receivable
-------------
to be evidenced by any instrument (as defined in the Uniform Commercial Code
as in effect in the State of New York) except in connection with the
enforcement or collection of a Receivable.
6.9 Ineligible Receivables. Without the prior written approval
----------------------
of the Company, take any action to cause, or which would permit, an Eligible
Receivable to cease to be an Eligible Receivable, except as otherwise
expressly provided by this Agreement.
<PAGE>
24
ARTICLE VII
PURCHASE TERMINATION EVENTS
If any of the following events (herein called "Purchase
Termination Events") shall have occurred and be continuing:
(a) any Seller shall fail (i) to pay any amount due pursuant to
subsection 2.6 in accordance with the provisions thereof and such
failure shall continue unremedied for a period of five days from the
earlier of (A) the date any officer of such Seller obtains knowledge of
such default and (B) the date such Seller receives notice of such
default from the Company or (ii) to pay any other amount required to be
paid by such Seller hereunder within two Business Days of the date when
due; or
(b) any Seller shall fail to observe or perform any covenant or
agreement applicable to it contained in subsection 5.6, 5.7, 5.12 or
5.15(a), provided no such failure shall constitute a Purchase
--------
Termination Event under this paragraph (b) unless such default shall
continue unremedied for 10 consecutive days; or
(c) any Seller shall fail to observe or perform any covenant or
agreement applicable to it contained in subsection 5.2, 5.8, 6.1, 6.2,
6.3, 6.4, 6.5, 6.8 or 6.9; provided that a Purchase Termination Event
--------
shall not be deemed to have occurred under this paragraph (c) based upon
a failure to observe a covenant contained in subsection 5.2, 5.8, 6.1,
6.2, 6.3, 6.4, 6.5, 6.8 or 6.9 if the Sellers shall have complied with
the provisions of subsection 2.6 in respect thereof; or
(d) any Seller shall fail to observe or perform any covenant or
agreement applicable to it contained herein (other than as specified in
paragraph (a), (b) or (c) of this Article VII), provided that no such
--------
failure shall constitute a Purchase Termination Event under this
paragraph (d) unless such default shall continue unremedied for a period
of 30 consecutive days from the earlier of (A) the date any Responsible
Officer of such Seller obtains knowledge of such default and (B) the
date such Seller receives notice of such default from the Company; or
(e) any representation, warranty, certification or statement
made or deemed made by any Seller in this Agreement or in any statement,
record, certificate, financial statement or other document delivered
pursuant to this Agreement shall prove to have been false or misleading
in any material respect on or as of the date made or deemed made,
provided, that a Purchase Termination Event shall not be deemed to have
--------
occurred under this paragraph (e) based upon a breach of any
representation or warranty set forth in subsection 4.2 if the Sellers
shall have complied with the provisions of subsection 2.6 in respect
thereof; or
(f) (i) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent jurisdiction
seeking (x) relief in respect of any Seller or of a substantial part of
the
<PAGE>
25
property or assets of any Seller under Title 11 of the United States
Code, as now constituted or hereafter amended, or any other Federal,
state or foreign bankruptcy, insolvency, receivership or similar law,
(y) the appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for any Seller or for a substantial part
of the property or assets of any Seller or (z) the winding-up or
liquidation of any Seller; and such proceeding or petition shall
continue undismissed for 60 days or an order or decree approving or
ordering any of the foregoing shall be entered; or (ii) any Seller shall
(t) voluntarily commence any proceeding or file any petition seeking
relief under Title 11 of the United States Code, as now constituted or
hereafter amended, or any other Federal, state or foreign bankruptcy,
insolvency, receivership or similar law, (u) consent to the institution
of, or fail to contest in a timely and appropriate manner, any
proceeding or the filing of any petition described in clause (f)(i)
above, (v) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for
such Seller or for a substantial part of the property or assets of such
Seller, (w) file an answer admitting the material allegations of a
petition filed against it in any such proceeding, (x) make a general
assignment for the benefit of creditors, (y) become unable, admit in
writing its inability or fail generally to pay its debts as they become
due or (z) take any action for the purpose of effecting any of the
foregoing; or
(g) there shall have occurred a Termination Event under the
Receivables Transfer Agreement or the Commitments shall have terminated
thereunder;
then, (x) in the case of any Purchase Termination Event described in
paragraph (f) above with respect to any Seller, automatically the obligation
of the Company to purchase Receivables from such Seller shall thereupon
terminate without notice of any kind, which is hereby waived by the Sellers
and (y) in the case of any Purchase Termination Event, so long as such
Purchase Termination Event shall be continuing, the Company may terminate its
obligation to purchase Receivables from any or all of the Sellers by written
notice to each such Seller (any termination pursuant to clause (x) or (y) of
this Article VII which affects a Seller is herein called an "Early
Termination" with respect to such Seller).
ARTICLE VIII
THE SUBORDINATED NOTES
8.1 Subordinated Notes. On the Effective Date, the Company
------------------
shall issue to the Sellers (i) a subordinated note substantially in the form
of Exhibit A (the "U.S. Dollar Subordinated Note") and (ii) a subordinated
note substantially in the form of Exhibit B (the "Canadian Dollar
Subordinated Note"; each, a "Subordinated Note" and collectively, the
"Subordinated Notes"). The aggregate principal amount of the Subordinated
Notes at any time shall be equal to the difference between (a) the aggregate
principal amount on the
<PAGE>
26
issuance thereof and each addition to the principal amount of each
Subordinated Note with respect to each Seller pursuant to the terms of
subsection 2.3 minus (b) the aggregate amount of all payments made in respect
-----
of the principal of the Subordinated Notes. All payments made in respect of
the Subordinated Notes shall be allocated among the Sellers by the Master
Servicer. Each Seller's interest in the Subordinated Notes shall equal the
sum of each addition thereto allocated to such Seller pursuant to subsection
2.3(c) less the sum of each repayment thereof allocated to such Seller.
Interest on the principal amount of each Subordinated Note shall accrue on
the last day of each fiscal month of the Sellers at the ABR from and
including the Effective Date and shall be paid on each Settlement Date with
respect to amounts accrued and not paid as of the last day of the preceding
Settlement Period and/or the maturity date thereof provided, however, that
-------- -------
accrued interest on a Subordinated Note which is not so paid may be added to
the principal amount of such Subordinated Note. Principal not prepaid
pursuant to the terms hereof and of the other Sale Documents shall be payable
on the maturity date thereof. Default in the payment of principal or
interest under either Subordinated Note shall not constitute a default or
event of default or a Purchase Termination Event hereunder or a Termination
Event under the Receivables Transfer Agreement.
8.2 Restrictions on Transfer of Subordinated Notes. Neither
----------------------------------------------
Subordinated Note, nor any right of any Seller to receive payments
thereunder, shall be assigned, transferred, exchanged, pledged, hypothecated,
participated or otherwise conveyed; provided, however, that any Seller may
-------- -------
pledge its rights to receive payments under either Subordinated Note to the
lenders under the Credit Agreement subject to the conditions that the
Collateral Agent and any present or future holder or beneficiary of such
right to receive payments under a Subordinated Note agrees, in its capacity
as such, to be bound by all the terms and conditions of this Agreement,
including without limitation, subsection 9.16 hereof.
ARTICLE IX
MISCELLANEOUS
9.1 Further Assurances. (a) Each Seller agrees, from time to
------------------
time, to do and perform any and all acts and to execute any and all further
instruments reasonably required or requested by the Company more fully to
effect the purposes of this Agreement and the sales of the Receivables
hereunder, including, without limitation, the execution of any financing
statements or continuation statements relating to the Receivables for filing
under the provisions of the Uniform Commercial Code, or any similar law, of
any applicable jurisdiction.
(b) From time to time at the request of a Seller, the Company
shall deliver to such Seller such documents, assignments, releases and
instruments of termination as such Seller may reasonably request to evidence
the reconveyance by the Company to such Seller of a Receivable pursuant to
the terms of subsection 2.1(b) or 2.6, provided that the Company shall have
--------
been paid all amounts due thereunder; and the Company and
<PAGE>
27
the Master Servicer shall take such action as such Seller may reasonably
request, at the expense of such Seller, to assure that any such Receivable,
the Related Property with respect thereto and the proceeds thereof do not
remain commingled with Collections hereunder.
9.2 Payments. Each cash payment to be made by any of the
--------
Company or the Sellers hereunder shall be made on the required payment date
and in immediately available funds at the office of the payee set forth below
its signature hereto or to such other office as may be specified by either
party in a notice to the other party hereto and (x) with respect to payments
on account of Receivables denominated in Canadian Dollars, in Canadian
Dollars except to the extent provided otherwise in Article II hereof and (ii)
in all other cases, in Dollars.
9.3 Costs and Expenses. The Sellers, jointly and severally,
------------------
agree (a) to pay or reimburse the Company for all its out-of-pocket costs and
expenses incurred in connection with the preparation and execution of, and
any amendment, supplement or modification to, this Agreement, the other Sale
Documents and any other documents prepared in connection herewith and
therewith, the consummation and administration of the transactions
contemplated hereby and thereby, including, without limitation, all
reasonable and documented fees and disbursements of counsel, (b) to pay or
reimburse the Company for all its costs and expenses incurred in connection
with the enforcement or preservation of any rights under this Agreement and
any of the other Related Documents, including, without limitation, the
reasonable fees and disbursements of counsel to the Company, (c) to pay,
indemnify, and hold the Company harmless from, any and all recording and
filing fees and any and all liabilities with respect to, or resulting from
any delay in paying, stamp, excise and other similar taxes, if any, which may
be payable or determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any
waiver or consent under or in respect of, this Agreement and any such other
documents and (d) to pay, indemnify, and hold the Company harmless from and
against any and all other liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements of any
kind or nature whatsoever (i) which may at any time be imposed on, incurred
by or asserted against the Company in any way relating to or arising out of
this Agreement or the transactions contemplated hereby or in connection
herewith or any action taken or omitted by the Company under or in connection
with any of the foregoing (all such other liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses and
disbursements being herein called "Indemnified Liabilities") or (ii) which
would not have been imposed on, incurred by or asserted against the Company
but for its having purchased the Receivables hereunder, provided, that such
--------
indemnity shall not be available to the extent that such losses, claims,
damages, liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted
from the gross negligence or wilful misconduct of the Company, and provided,
--------
further, that the Sellers shall have no obligation under this subsection 9.3
-------
to the Company with respect to Indemnified Liabilities arising from (i) any
action taken, or omitted to be taken, by a Servicer which is not an Affiliate
of the Sellers, (ii) any Eligible
<PAGE>
28
Receivable which becomes a Charge-Off as a result of non-payment by the
Obligor with respect thereto or (iii) any action taken by the Banks or the
Company at the direction of the Administrative Agent in collecting from an
Obligor. The agreements in this subsection shall survive the collection of
all Receivables, the termination of this Agreement and the payment of all
amounts payable hereunder.
9.4 Successors and Assigns. This Agreement shall be binding
----------------------
upon and inure to the benefit of the Sellers and the Company and their
respective successors (whether by merger, consolidation or otherwise) and
assigns. Except as expressly permitted pursuant to subsections 8.2 and 8.4,
each Seller agrees that it will not assign or transfer all or any portion of
its rights or obligations hereunder without the prior written consent of the
Company. The Sellers acknowledge that the Company shall assign all of its
rights hereunder to the Banks and, after the termination of the Receivables
Transfer Agreement, to another entity or entities (each, a "Subsequent
Financing Party") buying an interest in the Receivables. Each Seller
consents to such assignment and agrees that the Administrative Agent and the
Banks, to the extent provided in the Receivables Transfer Agreement, and each
Subsequent Financing Party to the extent provided in the documents to which
it is a party, shall be entitled to enforce the terms of this Agreement and
the rights (including, without limitation, the right to grant or withhold any
consent or waiver) of the Company directly against such Seller, whether or
not a Purchase Termination Event or a Termination Event has occurred. Each
Seller further agrees that, in respect of its obligations hereunder, it will
act at the direction of and in accordance with all requests and instructions
from the Administrative Agent or such Subsequent Financing Party, as the case
may be, until all amounts due to the Banks or such Subsequent Financing
Party, as the case may be, are paid in full. Each of the Administrative
Agent and each such Subsequent Financing Party shall have the rights of
third-party beneficiaries under this Agreement.
9.5 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
9.6 No Waiver; Cumulative Remedies. No failure to exercise and
------------------------------
no delay in exercising, on the part of the Company, any right, remedy, power
or privilege hereunder, shall operate as a waiver thereof, nor shall any
single or partial exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exhaustive of any rights,
remedies, powers and privileges provided by law.
9.7 Amendments and Waivers. Neither this Agreement nor any
----------------------
terms hereof may be amended, supplemented or modified except in a writing
signed by the Company and any affected Seller.
<PAGE>
29
9.8 Severability. Any provision of this Agreement which is
------------
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent such prohibition or
unenforceability without invalidating the remaining provisions hereof, and
any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any other jurisdiction.
9.9 Notices. All notices, requests and demands to or upon the
-------
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed
to have been duly given or made when delivered by hand, or three days after
being deposited in the mail, postage prepaid, or, in the case of telecopy
notice, when received, addressed as follows in the case of the Company and
C&A Products, and as set forth on Schedule 1 hereof in the case of the
Sellers, or to such other address as may be hereafter notified by the
respective parties hereto:
The Company:
C&A Products:
9.10 Counterparts. This Agreement may be executed by one or
------------
more of the parties to this Agreement on any number of separate counterparts
(including by telecopy), and all of said counterparts taken together shall be
deemed to constitute one and the same instrument. A set of the copies of
this Agreement signed by all the parties shall be lodged with the Company.
9.11 Construction of Agreement as Security Agreement.
-----------------------------------------------
(a) The parties to this Agreement intend that the transactions contemplated
hereby shall be, and shall be treated as, a purchase by the Company and a
sale by the applicable Seller of the Purchased Receivables and Related
Property with respect thereto and not as a lending transaction. If, however,
notwithstanding the intent of the parties, such transactions are deemed to be
loans, each Seller hereby grants to the Company a first priority security
interest in all of such Seller's right, title and interest in and to the
Receivables and the Related Property now existing and hereafter created, all
monies due or to become due and all amounts received with respect thereto,
including, without limitation, Recoveries, and all "proceeds" thereof, to
secure all such Seller's obligations hereunder.
(b) This Agreement shall constitute a security agreement under
applicable law.
<PAGE>
30
9.12 Waivers of Jury Trial. Each party hereto hereby waives, to
---------------------
the fullest extent permitted by applicable law, any right it may have to a
trial by jury in respect of any litigation directly or indirectly arising out
of, under or in connection with this Agreement or any of the other Sale
Documents. Each party hereto (a) certifies that no representative, agent or
attorney of any other party has represented, expressly or otherwise, that
such other party would not, in the event of litigation, seek to enforce the
foregoing waiver and (b) acknowledges that it and the other parties hereto
have been induced to enter into this Agreement and the other Sale Documents,
as applicable, by, among other things, the mutual waivers and certifications
in this subsection 9.12.
9.13 Jurisdiction; Consent to Service of Process. (a) Each
-------------------------------------------
party hereto hereby irrevocably and unconditionally submits, for itself and
its property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York County, and
any appellate court from any thereof, in any action or proceeding arising out
of or relating to this Agreement or the other Sale Documents, or for
recognition or enforcement of any judgment, and each of the parties hereto
hereby irrevocably and unconditionally agrees that all claims in respect of
any such action or proceeding may be heard and determined in such New York
State or, to the extent permitted by law, in such Federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement
shall affect any right that the Company may otherwise have to bring any
action or proceeding relating to this Agreement or the other Sale Documents
against any Seller or its properties in the courts of any jurisdiction.
(b) Each party hereto hereby irrevocably and unconditionally waives,
to the fullest extent they may legally and effectively do so, any objection
which it may now or hereafter have to the laying of venue of any suit, action
or proceeding arising out of or relating to this Agreement or the other Sale
Documents in any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.
(c) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in subsection 9.9. Nothing in
this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.
9.14 Addition of Sellers. Subject to subsection 3.4 hereof,
-------------------
subsection 8.22 of the Receivables Transfer Agreement and the terms and
conditions of this subsection 9.14, from time to time one or more additional
Subsidiaries of C&A Products may become Sellers hereunder and parties hereto.
If any such Subsidiary wishes to become an additional Seller, it shall submit
a request to such effect in writing to the Company. The Company, in its sole
and absolute discretion, may agree to or deny any such request, provided
--------
that, if the Company shall have failed to respond to any such request within
30 days after receipt thereof, such request shall be deemed to have been
denied. If the Company shall have agreed to any such request, such
<PAGE>
31
Subsidiary shall become an additional Seller hereunder and a party hereto on
the related Seller Addition Date upon satisfaction of the conditions set
forth in subsection 3.4.
9.15 Optional Termination of Seller. (a) Any Seller may be
------------------------------
terminated as a Seller hereunder on the date such Seller ceases to be a
wholly owned direct or indirect Subsidiary of C&A Products, provided (i) that
--------
the aggregate outstanding Adjusted Principal Amount of Purchased Receivables
sold by all Sellers which so cease to be wholly owned Subsidiaries at such
time (together with the aggregate outstanding Adjusted Principal Amount of
Purchased Receivables sold by all Sellers which have been terminated pursuant
to this subsection 9.15 within the preceding 90 days) shall not exceed 10% of
the aggregate outstanding Adjusted Principal Amount of all Purchased
Receivables and (ii) that no Purchase Termination Event or Incipient Purchase
Termination Event has occurred and is continuing, or would result as a result
thereof. From and after the date any such Seller ceases to be a wholly owned
Subsidiary of C&A Products, the Company shall cease buying Receivables and
Related Property from such Seller. Each such Seller shall be released as a
Seller party hereto for all purposes and shall cease to be a party hereto on
the date on which there are no amounts outstanding with respect to Purchased
Receivables previously sold by such Seller to the Company, whether such
amounts have been repurchased, collected or written off in accordance with
the Policies. Prior to such date, such Seller shall be obligated to perform
its servicing and other obligations hereunder and under the Transaction
Documents to which it is a party with respect to Purchased Receivables
previously sold by such Seller to the Company, including, without limitation,
its obligation to deposit Collections into the appropriate Lockboxes.
(b) From time to time the Sellers, or the Master Servicer on
behalf of the Sellers, may request in writing that the Company designate one
or more Sellers as Sellers that shall cease to be parties to this Agreement;
provided that no Purchase Termination Event or Incipient Purchase Termination
--------
Event has occurred and is continuing, or would result as a result thereof.
Any such request shall specify the minimum aggregate Adjusted Principal
Amount of outstanding Purchased Receivables to have been sold by the Sellers
to be so designated by the Company. The Company, in its sole and absolute
discretion (subject to subsection 8.23 of the receivables Transfer
Agreement), shall, within 45 days of receipt of such request, select the
Sellers to be so terminated, provided that the aggregate Adjusted Principal
--------
Amount of outstanding Purchased Receivables previously sold by such Sellers
shall be substantially equal to the Adjusted Principal Amount specified in
such request. Promptly after receipt of any such designation by the Company,
the Sellers shall either (i) elect not to terminate such designated Sellers
or (ii) select a date, which date shall not be later than 30 days after the
date of receipt of such designation, as the "Sale Termination Date" for such
designated Sellers. From and after such date, the Company shall cease buying
Receivables and Related Property from such Sellers. Each such Seller shall
be released as a Seller hereunder and a party hereto for all purposes and
shall cease to be a party hereto on the date on which there are no amounts
outstanding with respect to Purchased Receivables previously sold by such
Seller to the Company, whether such amounts have been repurchased in the
manner provided in clause (a) above, collected or written off in accordance
with the Policies. Prior to such date, such
<PAGE>
32
Seller shall be obligated to perform its servicing and other obligations
hereunder and under the Related Documents with respect to Purchased
Receivables previously sold by such Seller to the Company, including, without
limitation, its obligation to deposit Collections into the appropriate
Lockboxes.
(c) A terminated Seller shall have no obligation to repurchase
any Receivables other than Receivables previously sold by it to the Company
which are subject to a Repurchase Event.
9.16 No Bankruptcy Petition. Each Seller and C&A Products by
----------------------
entering into this Agreement, and any present or future holder of a
Subordinated Note, by its acceptance thereof, covenants and agrees that,
prior to the date which is one year and one day after the date of termination
of this Agreement pursuant to subsection 9.17, it will not institute against,
or join any other Person in instituting against, the Company any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceedings, or other
proceedings under any federal or state bankruptcy or similar law.
9.17 Termination. This Agreement will terminate at such time as
-----------
(a) the commitment of the Company to purchase Receivables from all Sellers
hereunder shall have terminated and (b) all Receivables purchased hereunder
have been collected, and the proceeds thereof turned over to the Company and
all other amounts owing to the Company hereunder shall have been paid in full
or, if Receivables sold hereunder have not been collected such Receivables
have become Defaulted Receivables and the Company shall have completed its
collection efforts in respect thereto; provided, however, that the
-------- -------
indemnities of the Sellers to the Company set forth in this Agreement shall
survive such termination and provided, further, that, to the extent any
-------- -------
amounts remain due and owing to the Company hereunder, the Company shall
remain entitled to receive any collections on Receivables sold hereunder
which have become Defaulted Receivables after it shall have completed its
collection efforts in respect thereof.
9.18 Confidentiality. The Company agrees that it shall maintain
---------------
in confidence any information relating to any Seller furnished to it by or on
behalf of such Seller (other than information that (x) has become generally
available to the public other than as a result of a disclosure by such party,
(y) has been independently developed by such party without violating this
subsection 9.18 or (z) was available to such party from a third party having,
to such party's knowledge, no obligation of confidentiality to such Seller)
and shall not reveal the same other than to its directors, officers,
employees and advisors with a need to know except: (a) to the extent
necessary to comply with law or any legal process or the requirements of any
Governmental Authority or of any securities exchange on which securities of
the disclosing party or any Affiliate of the disclosing party are listed or
<PAGE>
33
traded, (b) as part of normal reporting or review procedures to Governmental
Authorities or its parent companies, Affiliates or auditors, (c) in order to
enforce its rights under any Sale Document in a legal proceeding and (d) in
connection with the collection of any Purchased Receivable or the exercise of
any remedy hereunder or under the Receivables Transfer Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective officers thereunto duly authorized, all as
of the day and year first above written.
COLLINS & AIKMAN PRODUCTS CO., as Master
Servicer
By:_________________________
Title:
[C&A RECEIVABLES COMPANY]
By:_________________________
Title:
The Sellers:
-----------
COLLINS & AIKMAN PRODUCTS CO.
By:_________________________
Title:
COLLINS & AIKMAN CORPORATION
By:_________________________
Title:
ACK-TI-LINING, INC.
By:_________________________
Title:
<PAGE>
34
WCA CANADA, INC.
By:_________________________
Title:
IMPERIAL WALLCOVERINGS (CANADA), INC.
By:_________________________
Title:
IMPERIAL WALLCOVERINGS, INC.
By:_________________________
Title:
THE AKRO CORPORATION
By:_________________________
Title:
DURA ACQUISITION CORP.
By:________________________
Title:
<PAGE>
DRAFT 06/16/94
ANNEX X
"ABR": for any day, a rate per annum (rounded upwards, if
------
necessary, to the next 1/16 of 1%) equal to the greatest of (a)
the Prime Rate in effect on such day, (b) the Base CD Rate in
effect on such day plus 1% and (c) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1%. For purposes hereof,
"Prime Rate" shall mean the rate of interest per annum publicly
----------
announced from time to time by Chemical as its prime rate in
effect at its principal office in New York City; each change in
the Prime Rate shall be effective on the date such change is
publicly announced as being effective. "Base CD Rate" shall mean
------------
the sum of (a) the product of (i) the Three-Month Secondary CD
Rate and (ii) Statutory Reserves and (b) the Assessment Rate.
"Three-Month Secondary CD Rate" shall mean, for any day, the
-----------------------------
secondary market rate for three-month certificates of deposit
reported as being in effect on such day (or, if such day shall
not be a Business Day, the next preceding Business Day) by the
Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the
current practices of the Board, be published in Federal Reserve
Statistical Release H.15(519) during the week following such
day), or, if such rate shall not be so reported on such day or
such next preceding Business Day, the average of the secondary
market quotations for three-month certificates of deposit of
major money center banks in New York City received at
approximately 10:00 a.m., New York City time, on such day (or, if
such day shall not be a Business Day, on the next preceding
Business Day) by the Administrative Agent from three New York
City negotiable certificate of deposit dealers of recognized
standing selected by it. "Federal Funds Effective Rate" shall
----------------------------
mean, for any day, the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for the day of such
transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by it. If
for any reason the Administrative Agent shall have determined
(which determination shall be conclusive absent manifest error)
that it is unable to ascertain the Base CD Rate or the Federal
Funds Effective Rate or both for any reason, including the
inability or failure of the Administrative Agent to obtain
sufficient quotations in accordance with the terms thereof, the
ABR shall be determined without regard to clause (b) or (c), or
both, of the first sentence of this definition, as appropriate,
until the circumstances giving rise to such inability no longer
exist. Any change in the ABR due to a change in the Prime Rate,
the Three-Month
<PAGE>
2
Secondary CD Rate or the Federal Funds Effective Rate shall be
effective on the effective date of such change in the Prime Rate,
the Three-Month Secondary CD Rate or the Federal Funds Effective
Rate, respectively.
"ABR Participating Interest": with respect to any Bank,
--------------------------
that portion of its Participating Interest in the Receivables
with respect to which the Purchase Discount Amount is determined
by reference to the ABR.
"Accounts": as defined in subsection 2.1(c)(ii) of the
--------
Receivables Transfer Agreement.
"Acquiring Banks": as defined in subsection 11.4(d) of the
---------------
Receivables Transfer Agreement.
"Additional Seller Supplement": an instrument substantially
----------------------------
in the form of Exhibit C to the Receivables Sale Agreement by
which a Subsidiary of C&A Products becomes a Seller party to the
Receivables Sale Agreement.
"Additional Servicer Supplement": an instrument
------------------------------
substantially in the form of Exhibit F to the Receivables
Transfer Agreement by which a Subsidiary of C&A Products becomes
a Servicer party to the Receivables Transfer Agreement.
"Adjusted Principal Amount": (a) in the case of any
-------------------------
Receivable denominated in U.S. Dollars, the Principal Amount in
respect thereof and (b) in the case of any Receivable denominated
in Canadian Dollars, the Canadian Exchange Percentage of the
Principal Amount in respect thereof.
"Adjustment": as defined in subsection 2.5 of the
----------
Receivables Sale Agreement.
"Adjustment Payment": as defined in subsection 12.4 of the
------------------
Receivables Transfer Agreement.
"Administrative Agent": Chemical, together with its
--------------------
affiliates, as the arranger of the Commitments and as the agent
for the Banks under the Receivables Transfer Agreement.
"Affiliate": as to any Person, any other Person that
---------
directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the
Person specified.
"Aggregate Eligible Receivables": the excess of (a) the
------------------------------
Applicable Eligible Receivables Percentage of the aggregate
outstanding Adjusted Principal Amount of all Receivables over (b)
----
the aggregate Excess Amounts with respect to all Obligors.
<PAGE>
3
"Agreement": the agreement wherein such term is used, as
---------
the same may from time to time be amended, supplemented or
otherwise modified.
"Amortization Period": the period commencing after the end
-------------------
of the Commitment Period and ending with the termination of the
Receivables Transfer Agreement pursuant to subsection 4.1
thereof.
"Applicable ABR Margin": (a) prior to the 270th day after
---------------------
the Effective Date, 0% and (b) on and after such 270th day, the
"Applicable Margin" with respect to "ABR Loans" (as each such
term is defined in the Credit Agreement), determined in
accordance with the provisions of the Credit Agreement as in
effect on the Effective Date.
"Applicable Eligible Receivables Percentage": at any date
------------------------------------------
of determination, a fraction (expressed as a percentage) equal to
(a) the aggregate Adjusted Principal Amount of all Eligible
Receivables determined pursuant to the most recent Settlement
Statement divided by (b) the aggregate Adjusted Principal Amount
----------
of all outstanding Receivables generated by the Sellers
determined pursuant to such Settlement Statement.
"Applicable Eurodollar Margin": (a) prior to the 270th day
----------------------------
after the Effective Date, 0.625% and (b) on and after such 270th
day, the "Applicable Margin" with respect to "Eurodollar Loans"
(as each such term is defined in the Credit Agreement),
determined in accordance with the provisions of the Credit
Agreement as in effect on the Effective Date.
"Applicable Obligor Percentage": with respect to any
-----------------------------
Obligor, (a) [7.5%], in the case of any such Obligor having a
long-term senior unsecured debt rating of at least A- from S&P or
A3 from Moody's or a short-term deposit or commercial paper
rating of at least A-1 from S&P or P-1 from Moody's, provided,
--------
that in the case of General Motors Corporation, Chrysler
Corporation and Honda, the Applicable Obligor Percentage shall
instead be [17.0%] so long as such Obligor maintains a short-term
deposit or commercial paper rating of at least A-2 from S&P or P-
2 from Moody's; (b) [5.0%], in the case of any such Obligor (not
described in clause (a) above) having a long-term senior
unsecured debt rating of at least BBB- from S&P or Baa3 from
Moody's or a short-term deposit or commercial paper rating of at
least A-3 from S&P or P-3 from Moody's; or (c) [2.0%], in the
case of any other such Obligor.
"Assessment Rate": for any date, the annual rate (rounded
---------------
upwards, if necessary, to the next 1/100 of 1%) most recently
estimated by the Administrative Agent as the then current net
annual assessment rate that will be
<PAGE>
4
employed in determining amounts payable by Chemical to the
Federal Deposit Insurance Corporation (or any successor) for
insurance by such Corporation (or such successor) of time
deposits made in dollars at Chemical's domestic offices.
"Average Default Ratio": for any Settlement Period, a
---------------------
percentage equal to (a) the sum of the Default Ratios for such
Settlement Period and each of the [two] preceding Settlement
Periods divided by (b) [3].
----------
"Average Dilution Ratio": with respect to any Settlement
----------------------
Period, a fraction (a) the numerator of which is the aggregate
amount of Dilutive Credits which are incurred with respect to the
Receivables during the twelve-month period ended on the last day
of such Settlement Period and (b) the denominator of which is the
aggregate Adjusted Principal Amount of Receivables generated by
the Sellers during the twelve-month period ended on the last day
of such Settlement Period.
"Bank": each financial institution listed on Schedule 1 to
----
the Receivables Transfer Agreement and each financial institution
to which an assignment has been made pursuant to the terms of the
Receivables Transfer Agreement, and any successor of the
foregoing.
"benefitted Bank": as defined in subsection 11.12 of the
---------------
Receivables Transfer Agreement.
"Board": the Board of Governors of the Federal Reserve
-----
System and any successor thereto.
"Business Day": any day (other than a day which is a
------------
Saturday, Sunday or legal holiday in the State of New York) on
which banks are open for business in New York City; provided,
--------
however, that, when used in connection with any Fixed Tranche or
-------
the determination of any Eurodollar Rate, the term "Business Day"
------------
shall also exclude any day on which banks are not open for
dealings in dollar deposits in the London interbank market.
"Business Day Received": as defined in subsection 12.1(d) of
---------------------
the Receivables Transfer Agreement.
"C&A Products": Collins & Aikman Products Co., a Delaware
------------
corporation.
"Canada/Canadian Dollar Concentration Account": as defined
--------------------------------------------
in subsection 2.7(a) of the Receivables Transfer Agreement.
"Canada/U.S. Dollar Concentration Account": as defined in
----------------------------------------
subsection 2.7(a) of the Receivables Transfer Agreement.
<PAGE>
5
"Canadian Dollars": dollars in lawful currency of Canada.
----------------
"Canadian Dollar Subordinated Note": as defined in
---------------------------------
subsection 8.1 of the Receivables Sale Agreement.
"Canadian Exchange Percentage": at any date, the lesser of
----------------------------
(a) 70% and (b) the Canadian Exchange Rate in effect on such
date.
"Canadian Exchange Rate": at any date, the rate at which
----------------------
Canadian Dollars may be exchanged into Dollars (expressed as the
percentage of Dollars per Canadian Dollar), determined by
reference to the relevant Reuters currency page. In the event
that such rate does not appear on any Reuters currency page, the
"Canadian Exchange Rate" shall be determined by reference to such
----------------------
other publicly available service for displaying exchange rates
with respect to Canadian Dollars as may be selected by the
Administrative Agent. The Canadian Exchange Rate shall be
determined by the Administrative Agent on each Settlement
[Statement] Date and shall remain in effect until the next
succeeding Settlement [Statement] Date. The Administrative Agent
shall notify the Company and the Master Servicer of each such
determination on the date thereof.
"Capital Lease Obligations": with respect to any Person,
-------------------------
the obligations of such Person to pay rent or other amounts under
any lease of (or other arrangement conveying the right to use)
real or personal property, or a combination thereof, which
obligations are required to be classified and accounted for as
capital leases on a balance sheet of such Person under GAAP and,
for the purposes hereof, the amount of such obligations at any
time shall be the capitalized amount thereof at such time
determined in accordance with GAAP.
"Capital Stock": any and all shares, interests,
-------------
participations or other equivalents (however designated) of
capital stock of a corporation, any and all equivalent ownership
interests in a Person (other than a corporation) and any and all
warrants, options or other rights to purchase or acquire any of
the foregoing.
"Cash Equivalents": book-entry securities, negotiable
----------------
instruments or securities represented by instruments in bearer or
registered form which evidence:
(a) direct obligations of, and obligations fully guaranteed
as to timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of
deposit of any depository institution or trust company
<PAGE>
6
incorporated under the laws of the United States of America or
any state thereof (or any domestic branch of a foreign bank) and
subject to supervision and examination by Federal or State
banking or depository institution authorities; provided, that at
--------
the time of the investment or contractual commitment to invest
therein the commercial paper or other short-term unsecured debt
obligations (other than such obligations the rating of which is
based on the credit of a Person other than such depository
institution or trust company) thereof shall have a credit rating
from each of the Rating Agencies in the highest investment
category granted thereby;
(c) commercial paper having, at the time of the investment
or contractual commitment to invest therein, a rating of A-1 from
S&P or of P-1 from Moody's;
(d) investments in money market funds having a rating from
each of the Rating Agencies in the highest investment category
granted thereby;
(e) demand deposits, time deposits and certificates of
deposit which are fully insured by the Federal Deposit Insurance
Corporation;
(f) bankers' acceptances issued by any depository
institution or trust company referred to in clause (b) above;
(g) repurchase obligations with respect to any security
that is a direct obligation of, or fully guaranteed by, the
United States of America or any agency or instrumentality thereof
the obligations of which are backed by the full faith and credit
of the United States of America, in either case entered into with
(i) a depository institution or trust company (acting as
principal) described in clause (b) above or (ii) so long as the
Company takes actual or constructive possession of each security
subject to such repurchase obligations, a depository institution
or trust company the deposits of which are insured by the Federal
Deposit Insurance Corporation; or
(h) any other investment permitted by Moody's and S&P for
short-term investment of funds supporting securities with a
rating of A1/P1 or better.
"Change in Control": (a) any "Change in Control" under
-----------------
the Credit Agreement (as such term is defined therein on the
Effective Date), (b) except upon the exercise by the
Collateral Agent of any of its remedies in accordance with
the terms of the Pledge Agreement (as in effect on the
Effective Date), the Company shall at any time not be a
direct wholly owned Subsidiary of C&A Products or (c) except
as permitted pursuant to
<PAGE>
7
subsection 9.15 of the Receivables Sale Agreement and subsection
12.10 of the Receivables Transfer Agreement, any Seller or
Servicer (other than C&A Products) shall at any time not be
wholly owned, either directly or indirectly, by C&A Products.
"Charge-Offs": with respect to the Receivables originated
-----------
by any Seller, for any period, the aggregate amount of such
Receivables that are written off, or should be written off,
during such period as uncollectible in accordance with the
Policies of such Seller.
"Chemical": Chemical Bank, a New York banking corporation.
--------
"Closing Date": as defined in subsection 2.3(a) of the
------------
Receivables Transfer Agreement.
"Code": the Internal Revenue Code of 1986, as amended from
----
time to time.
"Collateral Agent": as defined in the Credit Agreement.
----------------
"Collections": all cash collections and other cash proceeds
-----------
received in respect of Receivables and Related Property
including, without limitation, Seller Repurchase Payments and
Seller Adjustment Payments and any Investment Earnings.
"Commitment": of each Bank, the amount set forth opposite
----------
the name of such Bank on Schedule 1 to the Receivables Transfer
Agreement, as such amount may be changed pursuant to subsection
2.10 or 11.4 of the Receivables Transfer Agreement.
"Commitment Fee": as defined in subsection 2.4 of the
--------------
Receivables Transfer Agreement.
"Commitment Percentage": as to any Bank, (a) on or prior to
---------------------
the last day of the Commitment Period, the percentage equivalent
of a fraction the numerator of which is the Commitment of such
Bank and the denominator of which is the Maximum Commitment and
(b) thereafter, the percentage equivalent of a fraction the
numerator of which is the Participating Interest of such Bank and
the denominator of which is aggregate amount of the Participating
Interests of all Banks.
"Commitment Period": the period from and including the
-----------------
Effective Date, up to but not including the first to occur of (a)
the Scheduled Termination Date, (b) any termination of the
Commitments pursuant to Article IX of the Receivables Transfer
Agreement and (c) termination (but not reduction)
<PAGE>
8
of the Commitments pursuant to subsection 2.10 of the Receivables
Transfer Agreement.
"Company": [C&A Receivables Company], a _________
-------
corporation.
"Complete Servicing Transfer": as defined in subsection
---------------------------
12.2(d) of the Receivables Transfer Agreement.
"Concentration Accounts": the collective reference to the
----------------------
U.S. Concentration Account, the Canada/U.S. Dollar Concentration
Account and the Canada/Canadian Dollar Concentration Account.
"Contractual Obligation": as to any Person, any provision
----------------------
of any security issued by such Person or of any agreement,
instrument or other undertaking to which such Person is a party
or by which it or any of its property is bound.
"Control": the possession, directly or indirectly, of the
-------
power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting
securities, by contract or otherwise, and "Controlling" and
"Controlled" shall have meanings correlative thereto.
"Credit Agreement": the Credit Agreement dated as of June
----------------
__, 1994 among the Credit Agreement Borrower, Collins & Aikman
Corporation, as Guarantor, the Lenders named therein, Continental
Bank, N.A. and NationsBank, N.A., as Managing Agents, and
Chemical Bank, as Administrative Agent, as amended, supplemented
or otherwise modified from time to time.
"Credit Agreement Borrower": Collins & Aikman Products Co.,
-------------------------
a Delaware corporation.
"Daily Report": as defined in subsection 12.5(a) of the
------------
Receivables Transfer Agreement.
"Days Sales Outstanding": as of any day, the product of (a)
----------------------
91 and (b) the amount obtained by dividing (i) the difference
between (x) the amount of Receivables and (y) the aggregate bad
debt reserve of the Sellers, in each case as at the end of the
fiscal month immediately preceding the most recent Settlement
Date, by (ii) aggregate net sales of the Sellers for the three-
fiscal-month period immediately preceding the most recent
Settlement Date.
"Defaulted Receivable": any Receivable which has been
--------------------
charged off, or should have been charged off, by the related
Servicer as uncollectible in accordance with the Policies of such
Servicer.
<PAGE>
9
"Default Ratio": (a) with respect to any Settlement Period
-------------
ending on or before April 30, 1994, a fraction (i) the numerator
of which is the aggregate Adjusted Principal Amount of
Receivables which first became 60 to 89 days past due as of the
last day of such month and (ii) the denominator of which is the
aggregate Adjusted Principal Amount of Receivables generated by
the Sellers during the fourth preceding Settlement Period and (b)
with respect to any Settlement Period ending on any date
thereafter, a fraction (i) the numerator of which is the
aggregate Adjusted Principal Amount of Receivables which first
became 90 to 119 days past due as of the last day of such month
and (ii) the denominator of which is the aggregate Adjusted
Principal Amount of Receivables generated by the Sellers during
the fifth preceding Settlement Period.
"Designated Affiliate": any Person as to which Holdings has
--------------------
the power (directly or indirectly) to vote 51% or more of the
securities having ordinary voting power for the election of
directors of such Person.
"Dilution Reserve Ratio": as of any day thereafter, the
----------------------
percentage equivalent, determined pursuant to the most recent
Settlement Statement, of the product of (x) the sum of clauses
-------
(i) and (ii) below and (y) clause (iii) below:
(i) (A) [2.0] times (B) the Average Dilution Ratio for the
most recently ended Settlement Period;
(ii) the product of (A)(x) the highest Peak Dilution Ratio
during the period of 12 calendar months ended on the last day of
the most recently ended Settlement Period minus (y) the amount
-----
determined pursuant to clause (i)(B) of this definition and (B)
the amount determined pursuant to clause (A)(x) above divided by
-------
the amount determined pursuant to clause (A)(y) above; and
(iii) (A) the aggregate Adjusted Principal Amount of
Receivables generated by the Sellers during the most recently
ended Settlement Period divided by (B) the aggregate Adjusted
-------
Principal Amount of Eligible Receivables on the last day of such
Settlement Period.
"Dilutive Credits": for any period, the aggregate amount of
----------------
discount expense, rebates, refunds, billing error expense,
credits against Receivables and other adjustments or allowances
in respect of Receivables permitted or incurred by the Seller or
Servicer with respect thereto during such period.
"Discount Rate": as of any day, the sum of (a) the weighted
-------------
average Purchase Discount Amount rate in effect with respect to
the Participating Interest as at the end of the fiscal month
immediately preceding the most recent
<PAGE>
10
Settlement Date and (b) the amount obtained by dividing (i) the
--------
aggregate amount of fees (other than the Monthly Servicing Fee
and the Purchase Discount Amount) accrued with respect to the
Participating Interest during the fiscal month immediately
preceding the most recent Settlement Date by (ii) the average
daily Net Investment during such fiscal month.
"Discounted Percentage": as defined in Schedule 3 to the
---------------------
Receivables Sale Agreement.
"Documents": as defined in subsection 5.15(d)(3) of the
---------
Receivables Sale Agreement.
"Dollars", "U.S. Dollars" and "$": dollars in lawful
----------------------- -
currency of the United States of America.
"Early Termination": as defined in Article VII of the
-----------------
Receivables Sale Agreement.
"Effective Date": as defined in subsection 6.1 of the
--------------
Receivables Transfer Agreement.
"Eligible Letter of Credit": any irrevocable direct pay [or
-------------------------
standby] letter of credit (a) issued in favor of the Company by
(i) any Bank or (ii) any commercial bank that (x) has combined
capital and surplus of not less than $500,000,000 and (y) has (or
the holding company parent of which has) a long-term senior
unsecured debt rating of at least A from S&P or at least A2 from
Moody's and (b) which permits the Company to draw, upon notice to
the issuing bank, an amount equal to the entire face amount of
any Receivable supported thereby, in Dollars payable by the
issuing bank in the United States, no later than 90 days after
the original invoice date with respect to such Receivable.
"Eligible Obligor": each Obligor that satisfies each of the
----------------
following eligibility criteria:
(a) it is not organized or located (within the meaning
of Section 9-103(3)(d) of the New York Uniform Commercial
Code) in a jurisdiction other than the United States;
provided, however, that (i) Receivables which have Obligors
-------- -------
organized or located in Canada or which are Japanese
Obligors or (ii) Receivables which have Obligors not
otherwise described in clause (i) above which are located
(within the meaning of Section 9-103(3)(d) of the New York
Uniform Commercial Code) outside the United States shall be
excluded from this clause (a) if (x) in the case of clauses
(i) and (ii) above, such Receivables would otherwise be
Eligible Receivables and (y) in the case of clause (ii)
above, (1) such Receivables are supported by an Eligible
<PAGE>
11
Letter of Credit and (2) the aggregate Adjusted Principal Amount
of all such Receivables does not exceed 15% of the Adjusted
Principal Amount of the Eligible Receivables;
(b) it is not a direct or indirect Subsidiary of
[Wickes Companies, Inc.];
(c) it is not a domestic or foreign government or any
agency, department, or instrumentality thereof; provided,
--------
however, that up to 2% of the aggregate Adjusted Principal
-------
Amount of the Eligible Receivables may be owing by the
United States government or any agency, department or
instrumentality thereof; and
(d) it is not the subject of any reorganization,
bankruptcy, receivership, custodianship or insolvency,
[unless the payment of Receivables from such Obligor is
secured in a manner satisfactory to the Administrative Agent
or, if such Receivables arise subsequent to a decree or
order for relief under the Bankruptcy Reform Act of 1978, as
amended, with respect to such Obligor, the Administrative
Agent shall have determined that timely payment and
collection of such Receivables will not be impaired].
"Eligible Receivable": as of any date, each Receivable in
-------------------
existence as of such date that is not subject to a Repurchase
Event and (i) which the Administrative Agent determines, in its
commercially reasonable judgment, to be an "Eligible Receivable"
or (ii) that satisfies each of the following eligibility
criteria:
(a) the Company has lawful title to such Receivable,
free and clear of all Liens other than the security interest
in favor of the Banks;
(b) the Banks have a Lien on such Receivable, which
Lien is legal, valid, binding, perfected and first priority
under the Uniform Commercial Code or other applicable law;
(c) the Company has the full and unqualified right to
assign and grant a Lien on such Receivable to the Banks;
(d) such Receivable is payable in Dollars in the
United States or Canada and is a legal, valid, binding and
enforceable obligation of the Obligor under such Receivable;
provided, however, that Receivables having an aggregate
-------- -------
Adjusted Principal Amount equal to no more than 5% of the
aggregate Adjusted Principal Amount of all Eligible
Receivables may be payable in Canadian dollars in the United
States or Canada;
<PAGE>
12
(e) such Receivable is not subject to any bona fide
---- ----
dispute, setoff, counterclaim or other claim or defense on
the part of the related Obligor denying liability under such
Receivable in whole or in part; provided, however, that any
-------- -------
such Receivable shall constitute an Eligible Receivable to
the extent it is not subject to any such dispute, setoff,
counterclaim or other claim or defense;
(f) such Receivable is evidenced by an invoice
rendered to the related Obligor and is not evidenced by any
"instrument" or "chattel paper", as such terms are defined
in the Uniform Commercial Code;
(g) such Receivable is a bona fide Receivable which
---- ----
arose in the ordinary course of business, and with respect
to which,
(i) in the case of a Receivable arising from the
sale of goods, such goods have been shipped or
delivered to and accepted by the Obligor, such
Receivable was created as a result of a sale on an
absolute basis and not on a consignment, approval or
sale-and-return basis and all other actions have been
taken necessary to create a binding obligation on the
part of the Obligor for such Receivable, and
(ii) in the case of a Receivable relating to the
sale of services, such services have been performed or
completed and accepted by the Obligor and all other
actions have been taken necessary to create a binding
obligation on the part of the Obligor;
(h) the Obligor with respect to such Receivable is an
Eligible Obligor;
(i) such Receivable is not outstanding more than 90
days past the original invoice date with respect thereto
(which date, for all purposes of eligibility, shall not be
later than the shipment date of the goods giving rise to
such Receivable); provided, however, that Receivables of
-------- -------
Imperial Wallcoverings, Inc. and Imperial Wallcoverings
(Canada), Inc. (not to exceed an aggregate Adjusted
Principal Amount of $12,500,000) may be outstanding for up
to, but not in excess of, 120 days past such original
invoice date;
(j) payment with respect to such Receivable, if by
check, has not been returned for insufficient funds;
(k) such Receivable has not been placed with an
attorney for collection;
<PAGE>
13
(l) such Receivable, to the extent it represents a
consumer credit card receivable, conforms to all federal and
state consumer protection laws;
(m) if such Receivable represents a consumer credit
card receivable, the Obligor with respect to such Receivable
has not missed more than one payment in respect of such
Receivable; and
(o) such Receivable has such other characteristics or
criteria as the Administrative Agent, in its reasonable
discretion, may specify in writing to the Company.
"Equipment": as defined in subsection 2.1(c)(i) of the
---------
Receivables Transfer Agreement.
"ERISA": the Employee Retirement Income Security Act of
-----
1974, as the same may be amended from time to time.
"ERISA Affiliate": with respect to any Person, any trade or
---------------
business (whether or not incorporated) that is a member of a
group of which such Person is a member and which is treated as a
single employer under Section 414 of the Code.
"Eurodollar Participating Interest": with respect to any
---------------------------------
Bank, that portion of its Participating Interest in the
Receivables with respect to which the Purchase Discount Amount is
determined by reference to the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each
---------------
Transfer Period pertaining to a Fixed Tranche, a rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to
the product of (a) the Eurodollar Base Rate in effect for such
Transfer Period and (b) Statutory Reserves. For purposes hereof,
(a) if at least two offered rates for deposits in dollars for a
period comparable to the applicable Transfer Period appear on
page 3750 (or any successor page) of the Dow Jones Telerate
Screen as of 11:00 a.m., London time, on the day that is two
Business Days prior to the first day of such Transfer Period, the
term "Eurodollar Base Rate" shall mean the arithmetic mean of all
--------------------
such offered rates and (b) if fewer than two such offered rates
so appear on page 3750 (or any successor page) of the Dow Jones
Telerate Screen, the term "Eurodollar Base Rate" shall mean the
--------------------
rate (rounded upwards, if necessary, to the next 1/16 of 1%) at
which dollar deposits approximately equal in principal amount to
Chemical's portion of the applicable Fixed Tranche and for a
period comparable to the applicable Transfer Period are offered
to Chemical's office in which its relevant eurodollar operations
are being conducted in immediately available funds in the
eurodollar market at approximately 11:00 a.m., New York time, on
the
<PAGE>
14
day that is two Business Days prior to the first day of such
Transfer Period.
"Excess Amount": at any time, with respect to any Obligor,
-------------
the excess (if any) of (a) the aggregate outstanding Adjusted
Principal Amount of the Eligible Receivables owing by such
Obligor over (b) the Applicable Obligor Percentage of the
----
aggregate outstanding Adjusted Principal Amount of all Eligible
Receivables.
"Excess Application Amount": as defined in subsection
-------------------------
2.12(c) of the Receivables Transfer Agreement.
"Facility Amount": $150,000,000.
---------------
"Financial Officer": of any corporation, the chief
-----------------
financial officer, Senior Vice President-Finance and Accounting,
Vice President-Finance, Controller, or Treasurer of such
corporation.
"Fixed Tranche": a portion of the Net Investment on which
-------------
the rate at which the Purchase Discount Amount accrues is based
upon the Eurodollar Rate.
"Floating Tranche": that portion of the Net Investment not
----------------
allocated to a Fixed Tranche and the Purchase Discount Amount in
respect of which is based upon the ABR.
"Force Majeure Delay": with respect to any Servicer or the
-------------------
Master Servicer, any cause or event which is beyond the control
and not due to the negligence of such Servicer or the Master
Servicer, as the case may be, which delays, prevents or prohibits
such Person's delivery of Seller Daily Reports or Daily Reports
and/or Seller Settlement Statements or Settlement Statements, as
the case may be, including, without limitation, computer,
electrical and mechanical failures, acts of God or the elements
and fire; provided that no such cause or event shall be deemed to
--------
be a Force Majeure Delay unless the affected Servicer or Master
Servicer shall have given the Company and the Administrative
Agent written notice thereof as soon as possible after the
beginning of such delay.
"GAAP": [generally accepted accounting principles in the
----
United States of America as in effect as of the date of, and used
in, the preparation of the audited financial statements delivered
under the Receivables Transfer Agreement except that, with
respect to the presentation of financial statements required to
be furnished after the Effective Date, GAAP shall mean generally
accepted accounting principles in the United States of America as
in effect from time to time.]
<PAGE>
15
"Governmental Authority": any international, Federal,
----------------------
state, regional, local or foreign court or governmental agency,
authority, instrumentality or regulatory body.
"Guarantee": of or by any Person, shall mean (a) any
---------
obligation, contingent or otherwise, of such Person guaranteeing
or having the economic effect of guaranteeing any Indebtedness of
any other Person (the "primary obligor") in any manner, whether
---------------
directly or indirectly, and including any obligation of such
Person, direct or indirect, (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness
(whether arising by virtue of partnership arrangements, by
agreement to keep well, to purchase assets, goods, securities or
services, to take-or-pay or otherwise) or to purchase (or to
advance or supply funds for the purchase of) any security for the
payment of such Indebtedness, (ii) to purchase property,
securities or services for the purpose of assuring the owner of
such Indebtedness of the payment of such Indebtedness, (iii) to
maintain working capital, equity capital or other financial
statement conditions or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness or (iv)
entered into for the purpose of assuring in any other manner the
holders of such Indebtedness of the payment thereof or to protect
such holders against loss in respect thereof (in whole or in
part), or (b) any Lien on any assets of such Person securing any
Indebtedness of any other Person, whether or not such
Indebtedness is assumed by such Person; provided, however, that
-------- -------
the term Guarantee shall not include endorsements for collection
or deposit, in either case in the ordinary course of business.
"Holdings": Collins & Aikman Corporation, a Delaware
--------
corporation.
"Incipient Purchase Termination Event": any condition or
------------------------------------
act specified in Article VII of the Receivables Sale Agreement
that, with the giving of notice or the lapse of time or both,
would become a Purchase Termination Event.
"Increase in Net Investment": for any applicable Closing
--------------------------
Date, the Dollar amount by which the Net Investment of the Banks
is being increased on such Closing Date.
"Indebtedness": of any Person at any date, (a) all
------------
indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (other than
current trade liabilities incurred in the ordinary course of
business and payable in accordance with customary practices), (b)
any other indebtedness of such Person which is evidenced by a
note, bond, debenture or similar instrument, (c) all Capital
Lease Obligations of such Person, (d) all obligations of such
Person in respect of acceptances issued or created for the
account of such
<PAGE>
16
Person, (e) all Indebtedness of others secured by (or for which
the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien on any property owned or
acquired by such Person even though such Person has not assumed
or otherwise become liable for the payment thereof, (f) all
obligations of such Person in respect of interest rate protection
agreements, foreign currency exchange agreements or other
interest or exchange rate hedging arrangements and (g) all
Guarantees by such Person of Indebtedness of others. The
Indebtedness of any Person shall include the Indebtedness of any
partnership in which such Person is a general partner; provided
--------
that, if the sole asset of such Person is its general partnership
interest in such partnership, the amount of such Indebtedness
shall be deemed equal to the value of such general partnership
interest and the amount of any Indebtedness in respect of any
Guarantee of such partnership Indebtedness shall be limited to
the same extent as such Guarantee may be limited.
"Indemnified Liabilities": as defined in subsection 9.3 of
-----------------------
the Receivables Sale Agreement.
"Indemnitee": as defined in subsection 11.3 of the
----------
Receivables Transfer Agreement.
"Invested Percentage": a fraction the numerator of which is
-------------------
Net Investment and the denominator of which is Aggregate Eligible
Receivables.
"Investment Earnings": as defined in subsection 2.7(a)(iii)
-------------------
of the Receivables Transfer Agreement.
"Japanese Obligor": any of Fuji Heavy Industries, Inc.,
----------------
Toyota Motor Co., Honda Motor Co., Ltd., Toyota Tsusho Corp., or
Kotobakiya Fronte Co., Inc.
"Lien": with respect to any asset, (a) any mortgage, deed
----
of trust, lien, pledge, encumbrance, charge or security interest
in or on such asset, (b) the interest of a vendor or a lessor
under any conditional sale agreement, capital lease or title
retention agreement relating to such asset and (c) in the case of
securities, any purchase option, call or similar right of a third
party with respect to such securities.
"Lockbox Account" means each blocked deposit account
---------------
identified by number and name of bank on Schedule 3 to the
Receivables Transfer Agreement, including the box identified by
location and number on such Schedule 3, and any replacements
therefor or additions thereto which are acceptable to the
Administrative Agent.
<PAGE>
17
"Lockbox Agreement" means a lockbox agreement in form and
-----------------
substance satisfactory to the Administrative Agent, as the same
may be amended, supplemented or otherwise modified from time to
time in accordance with subsection 8.14 of the Receivables
Transfer Agreement.
"Lockbox Bank" means each bank listed on Schedule 3, and any
------------
replacements therefor or additions thereto agreed to in writing
by the Administrative Agent.
"Loss Reserve Ratio": as of any day thereafter, the
------------------
percentage equivalent, determined pursuant to the most recent
Settlement Statement, of the product of:
(i) the highest Average Default Ratio during the period of
twelve consecutive calendar months ended on the last day of the
most recently ended Settlement Period; and
(ii) (A) the aggregate Adjusted Principal Amount of
Receivables generated by the Sellers during the [four] preceding
Settlement Periods divided by the outstanding Adjusted Principal
-------
Amount of Eligible Receivables as of the last day of the
preceding Settlement Period; and
(iii) [2.0].
"Loss to Liquidation Ratio": a ratio (expressed as a
-------------------------
percentage), as of the last day of any fiscal month, equal to (a)
the difference, if any, between (i) the aggregate reduction in
the outstanding Adjusted Principal Amount of all Receivables as a
result of Write-Offs during the immediately preceding twelve-
fiscal-month period and (ii) the aggregate amount of Recoveries
during such twelve-fiscal-month period, divided by (b) four times
----------
the aggregate amount of Collections during the immediately
preceding three-fiscal-month period.
"Margin Stock": as defined in Regulation U.
------------
"Master Servicer": C&A Products, in its capacity as Master
---------------
Servicer under the Receivables Transfer Agreement.
"Material Adverse Effect": (a) with respect to the Master
-----------------------
Servicer, any Servicer or any Seller, (i) a materially adverse
effect on the business, assets, properties, operations or
financial condition of C&A Products and its Subsidiaries, taken
as a whole, (ii) a material impairment of the ability of the
Master Servicer, any Servicer or any Seller to perform any of its
material obligations under any Transaction Document to which it
is or will be a party or to consummate the Transactions or the
Sale Transactions or (iii) an impairment of the validity or
enforceability of, or a material impairment of the rights,
remedies or benefits available to the Administrative Agent or the
Banks under,
<PAGE>
18
any Transaction Document or (b) with respect to the Company, (i)
a materially adverse effect on the business, assets, properties,
operations or financial condition of the Company, (ii) a material
impairment of the ability of the Company to perform any of its
material obligations under any Transaction Document to which it
is or will be a party or to consummate the Transactions or the
Sale Transactions or (iii) an impairment of the validity or
enforceability of, or a material impairment of the rights,
remedies or benefits available to the Administrative Agent or the
Banks under, any Transaction Document.
"Maximum Commitment": $150,000,000, as such amount may be
------------------
reduced pursuant to subsection 2.10 of the Receivables Transfer
Agreement.
"Maximum Invested Percentage": at a particular date, 100%
---------------------------
minus the greater of (a) [17]% and (b) the Required Reserve
-----
Percentage.
"Maximum Transfer Amount": at a particular date, the lesser
-----------------------
of (a) the Maximum Commitment at such date and (b) the product of
(i) the Maximum Invested Percentage at such date and (ii)
Aggregate Eligible Receivables (which, for purposes of this
definition, shall not include a Seller from which the Company has
ceased purchasing Receivables pursuant to subsection 9.15 of the
Receivables Sale Agreement and shall not include, from the date
which is 30 days after the date of any such termination, a Seller
with respect to which the Company has terminated its obligation
to acquire Receivables pursuant to Article VII of the Receivables
Sale Agreement) as of the close of business on the Business Day
preceding such date.
"Monthly Servicing Fee": for each Settlement Period, the
---------------------
product of (a) the number of days in such period, (b) 1% and (c)
the average daily principal balance of Purchased Receivables
during such period divided by 365.
"Moody's": Moody's Investors Service, Inc. and its
-------
successors.
"Multiemployer Plan": with respect to any Person, a
------------------
multiemployer plan as defined in Section 4001(a)(3) of ERISA to
which such Person or any ERISA Affiliate of such Person (other
than one considered an ERISA Affiliate only pursuant to
subsection (m) or (o) of Section 414 of the Code) is making or
accruing an obligation to make contributions, or has within any
of the preceding five plan years made or accrued an obligation to
make contributions.
"Net Investment": at any time, the excess, if any, of (a)
--------------
the aggregate of the amount paid by the Banks pursuant to
subsections 2.2 and 2.3 of the Receivables Transfer
<PAGE>
19
Agreement over (b) the aggregate amount of Collections
----
distributed to the Banks in repayment of the Net Investment
pursuant to the Receivables Transfer Agreement.
"Obligor": with respect to any Receivable, the Person or
-------
Persons obligated to make payments with respect to such
Receivable, including any guarantor thereof.
"Overallotment Option": as defined in the Credit Agreement.
--------------------
"Partial Servicing Transfer": as defined in subsection
--------------------------
12.2(d) of the Receivables Transfer Agreement.
"Participants": as defined in subsection 11.4(b) of the
------------
Receivables Transfer Agreement.
"Participating Interest": as defined in subsection 2.2 of
----------------------
the Receivables Transfer Agreement.
"Payment Date": as defined in subsection 2.3(a) of the
------------
Receivables Sale Agreement.
"PBGC": the Pension Benefit Guaranty Corporation referred
----
to and defined in ERISA.
"Peak Dilution Ratio": with respect to any Settlement
-------------------
Period, a fraction (a) the numerator of which is the aggregate
amount of Dilutive Credits which are incurred with respect to the
Receivables during the two-month period ended on the last day of
such Settlement Period and (b) the denominator of which is the
aggregate Adjusted Principal Amount of Receivables generated by
the Sellers during the two-month period ended on the last day of
such Settlement Period.
"Person": any natural person, corporation, business trust,
------
joint venture, association, company, partnership or government,
or any agency or political subdivision thereof.
"Plan": with respect to any Person, any pension plan (other
----
than a Multiemployer Plan) subject to the provisions of Title IV
of ERISA or Section 412 of the Code which is maintained for
employees of such Person or any ERISA Affiliate of such Person.
"Pledge Agreement": the Pledge Agreement referred to in the
----------------
Credit Agreement.
"Policies": with respect to any Seller which has set forth
--------
its credit and collection policies in writing, such written
credit and collection policies as they have been applied by such
Seller in the ordinary course of its business prior to the
Effective Date and, with respect to
<PAGE>
20
any Seller which has not set forth its credit and collection
policies in writing, its credit and collection policies as in
effect and applied by such Seller in the ordinary course of its
business prior to the Effective Date, in each case as the same
may be amended, supplemented or otherwise modified from time to
time in accordance with the Receivables Transfer Agreement.
"Pooled Property": as defined in subsection 2.1(a) of the
---------------
Receivables Transfer Agreement.
"Potential Termination Event": any Termination Event and
---------------------------
any event or condition that upon notice, lapse of time or both
would constitute a Termination Event.
"Preliminary Prospectus": the preliminary prospectus of
----------------------
Holdings dated May __, 1994, filed with the Securities and
Exchange Commission in connection with the underwritten public
offering of shares of common stock, par value $.01 per share, of
Holdings, as amended or supplemented from time to time.
"Principal Amount": with respect to any Receivable, the
----------------
amount due thereunder (expressed in U.S. Dollars or Canadian
Dollars, as the case may be), net of any available prompt payment
discount, volume discount or other promotional discount or
rebate.
"Purchase Discount Amount": a purchase discount which (a)
------------------------
accrues to the Banks in respect of the Participating Interest;
(b) is payable in arrears on each Purchase Discount Amount
Payment Date (both prior to and after the commencement of the
Amortization Period) occurring during the period commencing on
the date of the first transfer and assignment of the
Participating Interest in Receivables and Related Property
pursuant to subsection 2.3(a) of the Receivables Transfer
Agreement and ending on the date on which the Net Investment is
equal to zero and the Commitments of the Banks have terminated;
and (c) is calculated at a rate per annum equal to: (i) in
respect of that portion of the Net Investment allocated to any
Fixed Tranche, the sum of the Eurodollar Rate with respect
thereto plus the Applicable Eurodollar Margin and (ii) in respect
----
of that portion of the Net Investment not allocated to any Fixed
Tranche, the sum of the ABR in effect from time to time during
the period for which payment is made plus the Applicable ABR
----
Margin.
"Purchase Discount Amount Payment Date": (a) as to the
-------------------------------------
Floating Tranche, each Settlement Date, (b) as to any Fixed
Tranche having a Transfer Period of one, two or three months, the
last day of such Transfer Period, (c) as to any Fixed Tranche
having a Transfer Period longer than three months, each day which
is three months, or a whole multiple
<PAGE>
21
thereof, after the first day of such Transfer Period, and the
last day of such Transfer Period and (d) as to any Tranche, any
date on which the principal portion of the Net Investment
represented thereby is paid, prepaid or is otherwise due (by
scheduled installment, mandatory prepayment, acceleration or
otherwise).
"Purchase Price": as defined in subsection 2.2 of the
--------------
Receivables Sale Agreement.
"Purchase Termination Event": as defined in Article VII of
--------------------------
the Receivables Sale Agreement.
"Purchased Receivable": any Receivable sold to the Company
--------------------
by any Seller pursuant to, and in accordance with the terms of,
the Receivables Sale Agreement and not resold to such Seller
pursuant to subsection 2.1(b) or 2.6 thereof.
"Rating Agencies": Moody's and S&P.
---------------
"Recapitalization Transactions": as defined in the Credit
-----------------------------
Agreement.
"Receivables": the indebtedness and payment obligations of
-----------
any Person to a Seller arising from a sale of merchandise or
services by such Seller, including, without limitation, any right
to payment for goods sold or leased or for services rendered, and
including the right of payment of any interest, sales taxes,
finance charges, returned check or late charges and other
obligations of such Person with respect thereto.
"Receivables Sale Agreement": the Receivables Sale
--------------------------
Agreement, dated as of June __, 1994, among the Sellers, and the
Company, as buyer, as amended, supplemented or otherwise modified
from time to time.
"Receivables Transfer Agreement": the Receivables Transfer
------------------------------
and Servicing Agreement, dated as of June __, 1994, among the
Company, as seller, the Master Servicer, the Servicers, the Banks
and the Administrative Agent, as amended, supplemented or
otherwise modified from time to time.
"Recoveries": amounts collected in respect of Defaulted
----------
Receivables.
"Register": as defined in subsection 11.4(e) of the
--------
Receivables Transfer Agreement.
"Regulation G, T, U or X": Regulation G, T, U or X,
-----------------------
respectively, of the Board as from time to time in effect and all
official rulings and interpretations thereunder or thereof.
<PAGE>
22
"Related Property": as defined in subsection 2.1(a)(iv) of
----------------
the Receivables Transfer Agreement.
"Replacement Facility": as defined in subsection 12.6 of
--------------------
the Receivables Transfer Agreement.
"Reportable Event": any reportable event as defined in
----------------
Section 4043(b) of ERISA or the regulations issued thereunder
with respect to a Plan (other than a Plan maintained by an ERISA
Affiliate which is considered an ERISA Affiliate only pursuant to
subsection (m) or (o) of Section 414 of the Code).
"Reporting Day": as defined in subsection 12.5 of the
-------------
Receivables Transfer Agreement.
"Repurchase Amount": as defined in subsection 2.6 of the
-----------------
Receivables Sale Agreement.
"Repurchase Event": as defined in subsection 2.6 of the
----------------
Receivables Sale Agreement.
"Required Banks": Banks having Commitment Percentages the
--------------
sum of which, in the aggregate, is equal to or exceeds 51%.
"Required Reserve Percentage": as of any day, the sum,
---------------------------
expressed as a percentage, of (a) the Loss Reserve Ratio, (b) the
Dilution Reserve Ratio, (c) the Yield Reserve Ratio and (d) the
Servicing Reserve Ratio.
"Requirement of Law": as to any Person, any law, treaty,
------------------
rule or regulation or determination of an arbitrator or a court
or other Governmental Authority, in each case applicable to or
binding upon such Person or any of its property or to which such
Person or any of its property is subject.
"Responsible Officer": with respect to any Person, the
-------------------
chief executive officer, the president, any senior vice president
or any vice president of such Person or, with respect to
financial matters, the chief financial officer, Senior Vice
President-Finance and Accounting, Vice President-Finance,
Controller, or Treasurer of such Person.
"Restricted Payments": as defined in subsection 8.7 of the
-------------------
Receivables Transfer Agreement.
"Retransfer Payment": as defined in subsection 5.3(b) of
------------------
the Receivables Transfer Agreement.
"S&P": Standard & Poor's Ratings Group and its successors.
---
<PAGE>
23
"Sale Documents": the Receivables Sale Agreement, the
--------------
Subordinated Notes and the Subordination Agreement.
"Sale Termination Date": as defined in subsection 9.15(b)
---------------------
of the Receivables Sale Agreement.
"Sale Transactions": as defined in subsection 4.1(b) of the
-----------------
Receivables Sale Agreement.
"Scheduled Termination Date": the seventh anniversary of
--------------------------
the Effective Date.
"Seller Addition Date": as defined in subsection 3.4 of the
--------------------
Receivables Sale Agreement.
"Seller Adjustment Payment": as defined in subsection 2.5
-------------------------
of the Receivables Sale Agreement.
"Seller Daily Report": as defined in subsection 12.5(a) of
-------------------
the Receivables Transfer Agreement.
"Seller Repurchase Payment": as defined in subsection 2.6
-------------------------
of the Receivables Sale Agreement.
"Seller Settlement Statement": as defined in subsection
---------------------------
12.5(b) of the Receivables Transfer Agreement.
"Sellers": as defined in the preamble to the Receivables
-------
Sale Agreement.
"Servicer Default": any Servicer Event of Default and any
----------------
event or condition that upon notice, lapse of time or both would
constitute a Servicer Event of Default.
"Servicer Event of Default": as defined in subsection 12.12
-------------------------
of the Receivables Transfer Agreement.
"Servicer Transfer Payment": as defined in subsection 12.7
-------------------------
of the Receivables Transfer Agreement.
"Servicers": each of the Sellers (excluding any such
---------
Sellers which have been terminated as Servicers in accordance
with the provisions of the Receivables Transfer Agreement)
together with any other Person which has been added as a Servicer
in accordance with the provisions of the Receivables Transfer
Agreement, in their capacities as servicers under the Receivables
Transfer Agreement.
"Servicing Reserve Percentage": as of any day, [0.5]%.
----------------------------
"Settlement Date": with respect to any fiscal month, the
---------------
day that is 22 calendar days following the last day of such
fiscal month (or if such 22nd calendar day is not a Business Day,
the next succeeding Business Day).
<PAGE>
24
"Settlement Period": each calendar month.
-----------------
"Settlement Statement": as defined in subsection 12.5(b) of
--------------------
the Receivables Transfer Agreement.
"Settlement Statement Date": with respect to any fiscal
-------------------------
month for which a Settlement Statement is required to be
prepared, the day that is 16 calendar days following the last day
of such fiscal month (or, if such 16th calendar day is not a
Business Day, the next succeeding Business Day).
"Single Employer Plan": any Plan which is covered by Title
--------------------
IV of ERISA, but which is not a Multiemployer Plan.
"Statutory Reserves": a fraction (expressed as a decimal),
------------------
the numerator of which is the number one and the denominator of
which is the number one minus the aggregate of the maximum
reserve percentages (including any marginal, special, emergency
or supplemental reserves) expressed as a decimal established by
the Board and any other banking authority to which the
Administrative Agent is subject (a) with respect to the Base CD
Rate (as such term is used in the definition of "ABR"), for new
negotiable nonpersonal time deposits in dollars of over $100,000
with maturities approximately equal to three months, and (b) with
respect to the Eurodollar Rate, for Eurocurrency Liabilities (as
defined in Regulation D of the Board). Such reserve percentages
shall include those imposed pursuant to such Regulation D. Fixed
Tranches shall be deemed to constitute Eurocurrency Liabilities
and to be subject to such reserve requirements without benefit of
or credit for proration, exemptions or offsets which may be
available from time to time to any Bank under such Regulation D.
Statutory Reserves shall be adjusted automatically on and as of
the effective date of any change in any reserve percentage.
"Subordinated Notes": as defined in subsection 8.1 of the
------------------
Receivables Sale Agreement.
"Subordination Agreement": the Subordination Agreement,
-----------------------
dated as of June __, 1994 among the Sellers, the Master Servicer,
the Company and the Administrative Agent, as amended,
supplemented or otherwise modified from time to time.
"Subsequent Financing Party": as defined in subsection 9.4
--------------------------
of the Receivables Sale Agreement.
"Subsidiary": with respect to any Person (herein referred
----------
to as the "parent"), any corporation, partnership, association or
other business entity (a) of which securities or other ownership
interests representing more than 50% of the equity or more than
50% of the ordinary voting power or more than 50% of the general
partnership interests are, at
<PAGE>
25
the time any determination is being made, owned, controlled or
held, or (b) which is, at the time any determination is made,
otherwise Controlled, by the parent or one or more subsidiaries
of the parent or by the parent and one or more subsidiaries of
the parent.
"Substitute Servicer": as defined in subsection 12.2(d) of
-------------------
the Receivables Transfer Agreement.
"Termination Event": as defined in Article IX of the
-----------------
Receivables Transfer Agreement.
"Tranches": the collective reference to the Floating
--------
Tranche and the Fixed Tranches.
"Transaction Documents": the Receivables Transfer
---------------------
Agreement, the Receivables Sale Agreement, the Subordination
Agreement and the Lockbox Agreements.
"Transaction Parties": the Company, the Master Servicer,
-------------------
the Sellers and the Servicers.
"Transactions": as defined in subsection 5.1(b) of the
------------
Receivables Transfer Agreement.
"Transfer Notice": as defined in subsection 12.2(d) of the
---------------
Receivables Transfer Agreement.
"Transfer Period": with respect to any portion of the Net
---------------
Investment allocated to a Fixed Tranche:
(a) initially, the period commencing on the Closing
Date or conversion date, as the case may be, with respect to
such Fixed Tranche and ending one, two, three or six months
thereafter, as selected by the Company in its notice of
Closing Date or notice of conversion, as the case may be,
given with respect thereto; and
(b) thereafter, each period commencing on the last day
of the next preceding Transfer Period applicable to such
Fixed Tranche and ending one, two, three or six months
thereafter, as selected by the Company by irrevocable notice
to the Administrative Agent not less than three Business
Days prior to the last day of the then current Transfer
Period with respect thereto;
provided that, all of the foregoing provisions relating to
--------
Transfer Periods are subject to the following:
(1) if any Transfer Period would otherwise end on a
day that is not a Business Day, such Transfer Period shall
be extended to the next succeeding Business Day
<PAGE>
26
unless the result of such extension would be to carry such
Transfer Period into another calendar month in which event
such Transfer Period shall end on the immediately preceding
Business Day;
(2) any Transfer Period that would otherwise extend
beyond the Scheduled Termination Date shall end on the
Scheduled Termination Date; and
(3) any Transfer Period that begins on the last
Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar
month at the end of such Transfer Period) shall end on the
last Business Day of a calendar month.
"Transferee": as defined in subsection 11.4(g) of the
----------
Receivables Transfer Agreement.
"Transferred Agreement": as defined in subsection 2.1(b) of
---------------------
the Receivables Transfer Agreement.
"Transferring Servicer": as defined in subsection 12.2(d)
---------------------
of the Receivables Transfer Agreement.
"U.S. Concentration Account": as defined in subsection
--------------------------
2.7(a) of the Receivables Transfer Agreement.
"U.S. Dollar Subordinated Note": as defined in subsection
-----------------------------
8.1 of the Receivables Sale Agreement.
"Weekly Transfer Date": (a) the second Business Day of each
--------------------
calendar week, except for any calendar week in which a Settlement
Date occurs, and (b) each Settlement Date.
"Withdrawal Liability": liability to a Multiemployer Plan
--------------------
as a result of a complete or partial withdrawal from such
Multiemployer Plan, as such terms are defined in Part I of
Subtitle E of Title IV of ERISA.
"Write-Offs": with respect to any Seller, for any period,
----------
the aggregate amount of Receivables that are written off during
such period as uncollectible in accordance with the Policies of
such Seller.
"Yield Reserve Ratio": as of any day, the amount as of such
-------------------
day obtained by dividing (a) the product of (i) [2], (ii) Days
--------
Sales Outstanding as of the Settlement Date immediately preceding
such day and (iii) the Discount Rate in effect as of the
Settlement Date immediately preceding such day by (b) 360.
<PAGE>
SCHEDULE 1
----------
LOCATIONS OF CHIEF EXECUTIVE OFFICES;
LOCATIONS OF BOOKS AND RECORDS
------------------------------
<PAGE>
SCHEDULE 2
----------
LOCKBOXES
---------
<PAGE>
SCHEDULE 3
----------
DISCOUNTED PERCENTAGE
---------------------
The Discounted Percentage applicable to the Receivables purchased on any date
from any Seller shall equal [(a) until the date which is 90 days after the
Effective Date, __% and (b) thereafter,] the percentage obtained from the
following formula:
100% - (A + B + C + D)
all determined by the Company as of the related Payment Date,
Where
A = Adjusted Loss Reserve Percentage, which as of such Payment Date will
equal the ratio obtained by dividing (a) Charge-Offs (net of recoveries
in respect of Charge-Offs) with respect to such Seller during the
twelve-fiscal-month period immediately preceding the Settlement Date
most recently preceding such Payment Date by (b) four times the
aggregate amount of Collections during the three-fiscal-month period
immediately preceding the Settlement Date most recently preceding such
Payment Date with respect to Receivables originated by such Seller.
B = Adjusted Yield Reserve Percentage, which as of such Payment Date will
equal the amount obtained by dividing (a) the product of (i) 1.5, (ii)
Days Sales Outstanding and (iii) the Adjusted Discount Rate by (b) 360.
C = Servicing Reserve Percentage.
D = Processing Expense Reserve Percentage, which will equal [1/2%] and
reflects the cost of the Company's overhead, including costs of
processing the purchase of Receivables and other normal operating costs
and a reasonable profit margin.
None of the elements of the above-referenced formula, in respect of any
purchase of Receivables, will be adjusted following the related Payment Date.
"Adjusted Discount Rate" means as of such Payment Date the sum of (a) the
weighted average of (i) the weighted average rate of interest payable to the
Banks or any Subsequent Financing Party with respect to the outstanding
Participating Interest and (ii) the rate of interest payable to the Sellers
with respect to the outstanding principal amount of the Subordinated Notes as
such rates are in effect as at the end of the fiscal month immediately
preceding the Settlement Date most recent to such Payment Date and (iii) an
assumed return on the shareholders' equity in the Company at a rate to be
determined from time to time by the Master Servicer and (b) the amount
obtained by dividing (i) the aggregate amount of fees (other than the
Servicing Fee) accrued with respect to the Receivables Transfer Agreement
during the fiscal month immediately preceding the Settlement Date most recent
to such Payment Date by (ii) the average outstanding principal amount of the
Receivables during such fiscal month.
<PAGE>
2
With respect to each calculation set forth above with respect to a Settlement
Date, such calculation as calculated on each Settlement Statement Date and
included in the applicable Settlement Statement shall remain in effect from
and including the related Settlement Date to but excluding the following
Statement Date.
<PAGE>
SCHEDULE 4
----------
TAX MATTERS
-----------
DRAFT 06/16/94
==================================================================
[C&A RECEIVABLES COMPANY]
COLLINS & AIKMAN PRODUCTS CO.,
as Master Servicer
----------------------
RECEIVABLES TRANSFER AND SERVICING AGREEMENT
----------------------
Dated as of June __, 1994
CHEMICAL BANK,
as Administrative Agent
==================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
Definitions . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . 1
-------------
1.2 Other Definitional Provisions . . . . . . . . . . 1
-----------------------------
ARTICLE II
Acquisition and Transfer of Participating Interest . 2
2.1 Acquisition and Transfer of Participating
-----------------------------------------
Interest . . . . . . . . . . . . . . . . . . . . 2
--------
2.2 Payment for Initial Transfer of a Participating
-----------------------------------------------
Interest and any Increase in Net Investment . . . 4
-------------------------------------------
2.3 Acquisition and Transfer Procedure . . . . . . . 4
----------------------------------
2.4 Commitment Fees . . . . . . . . . . . . . . . . . 5
---------------
2.5 Fee and Purchase Discount Amount Calculations . . 5
---------------------------------------------
2.6 Interest on Overdue Payments . . . . . . . . . . 5
----------------------------
2.7 Establishment of Accounts; Allocation of
----------------------------------------
Collections; Reinvestment of Principal
--------------------------------------
Collections . . . . . . . . . . . . . . . . . . . 6
-----------
2.8 Payments; Pro Rata Treatment . . . . . . . . . . 9
----------------------------
2.9 Netting of Payments . . . . . . . . . . . . . . . 9
-------------------
2.10 Termination or Reduction of Commitment . . . . . 9
--------------------------------------
2.11 Optional Retransfer; Reduction of Net
-------------------------------------
Investment . . . . . . . . . . . . . . . . . . . 10
----------
2.12 Mandatory Reductions in Net Investment . . . . . 10
--------------------------------------
ARTICLE III
Increased Costs . . . . . . . . . . 11
3.1 Illegality . . . . . . . . . . . . . . . . . . . 11
----------
3.2 Indemnity . . . . . . . . . . . . . . . . . . . . 12
---------
3.3 Requirements of Law . . . . . . . . . . . . . . . 13
-------------------
3.4 Inability to Determine Eurodollar Rate . . . . . 14
--------------------------------------
3.5 Taxes . . . . . . . . . . . . . . . . . . . . . . . . 15
-----
ARTICLE IV
Termination . . . . . . . . . . . 17
4.1 Termination . . . . . . . . . . . . . . . . . . . . . 17
-----------
-i-
<PAGE>
Page
----
ARTICLE V
Covenants, Representations and Warranties . . . 18
5.1 Representations and Warranties of the Company
---------------------------------------------
Relating to the Company . . . . . . . . . . . . . . . 18
-----------------------
(a) Organization; Corporate Powers . . . . . . . . . 18
------------------------------
(b) Authorization . . . . . . . . . . . . . . . . . . 18
-------------
(c) Enforceability . . . . . . . . . . . . 19
--------------
(d) Consents . . . . . . . . . . . . . . . . . . . . 19
--------
(e) Litigation, etc . . . . . . . . . . . . . . . . . 19
---------------
(f) No Default, etc . . . . . . . . . . . . . . . . . 19
---------------
(g) Ownership of Property; Liens . . . . . . . . . . 20
----------------------------
(h) Investment Company Act; Other Regulations . . . . 20
-----------------------------------------
(i) Taxes . . . . . . . . . . . . . . . . . . . . . . 20
-----
(j) Ownership; Subsidiaries . . . . . . . . . . . . . 20
-----------------------
(k) Accuracy and Completeness of Information . . . . 20
----------------------------------------
(l) Pro Forma Balance Sheet . . . . . . . . . . . . . 21
-----------------------
(m) No Material Adverse Change . . . . . . . . . . . 21
--------------------------
(n) Solvency . . . . . . . . . . . . . . . . . . 21
--------
(o) Employee Benefit Plans . . . . . . . . . . . 21
----------------------
5.2 Representations and Warranties of the Company
---------------------------------------------
Relating to this Agreement and the Receivables . 22
----------------------------------------------
5.3 Retransfer Obligation . . . . . . . . . . . . . . 23
---------------------
5.4 Obligations Unaffected . . . . . . . . . . . . . 24
----------------------
ARTICLE VI
Conditions to Effectiveness/Transfers/Reinvestments . 24
6.1 Effective Date . . . . . . . . . . . . . . . . . 24
--------------
6.2 Condition to each Increase in Net Investment . . 27
--------------------------------------------
ARTICLE VII
Affirmative Covenants . . . . . . . . 28
7.1 Financial Statements . . . . . . . . . . . . . . 28
--------------------
7.2 Certificates; Other Information . . . . . . . . . 28
-------------------------------
7.3 Existence; Businesses and Properties; Insurance;
------------------------------------------------
Receivables . . . . . . . . . . . . . . . . . . . 29
-----------
7.4 Taxes . . . . . . . . . . . . . . . . . . . . . . 29
-----
7.5 Inspection of Property; Books and Records;
------------------------------------------
Discussions . . . . . . . . . . . . . . . . . . . 30
-----------
7.6 Notices . . . . . . . . . . . . . . . . . . . . . 30
-------
7.7 ERISA . . . . . . . . . . . . . . . . . . . . . . 30
-----
7.8 Use of Proceeds . . . . . . . . . . . . . . . . . 31
---------------
7.9 Separate Corporate Existence . . . . . . . . . . 31
----------------------------
7.10 Facility Rating . . . . . . . . . . . . . . . . 32
---------------
7.11 Lockbox Agreements . . . . . . . . . . . . . . . 32
------------------
7.12 Eligible Letters of Credit . . . . . . . . . . . 32
--------------------------
-ii-
<PAGE>
Page
----
ARTICLE VIII
Negative Covenants . . . . . . . . . 33
8.1 Accounting of Transfers . . . . . . . . . . . . . 33
-----------------------
8.2 Limitation on Indebtedness . . . . . . . . . . . 33
--------------------------
8.3 Limitation on Liens . . . . . . . . . . . . . . . 33
-------------------
8.4 Limitation on Guarantees . . . . . . . . . . . . 33
------------------------
8.5 Limitation on Fundamental Changes . . . . . . . . 33
---------------------------------
8.6 Limitation on Sale of Assets . . . . . . . . . . 33
----------------------------
8.7 Limitation on Dividends and Payments on
---------------------------------------
Subordinated Notes . . . . . . . . . . . . . . . 33
------------------
8.8 Business of the Company . . . . . . . . . . . . . 34
-----------------------
8.9 Limitation on Investments, Loans and Advances . . 34
---------------------------------------------
8.10 Limitation on Sales and Leasebacks . . . . . . . 34
----------------------------------
8.11 Transactions with Affiliates . . . . . . . . . . 34
----------------------------
8.12 Capital Stock . . . . . . . . . . . . . . . . . 34
-------------
8.13 Amendments . . . . . . . . . . . . . . . . . . . 34
----------
8.14 Receivables Sale Agreement, etc . . . . . . . . 34
-------------------------------
8.15 Policies . . . . . . . . . . . . . . . . . . . . 35
--------
8.16 No Powers of Attorney . . . . . . . . . . . . . 35
---------------------
8.17 Receivables Not To Be Evidenced by Promissory
---------------------------------------------
Notes . . . . . . . . . . . . . . . . . . . . . . 35
-----
8.18 Ownership of Assets and Property . . . . . . . . 35
--------------------------------
8.19 Rescission or Cancellation . . . . . . . . . . . 35
--------------------------
8.20 Ineligible Receivables . . . . . . . . . . . . . 35
----------------------
8.21 Offices . . . . . . . . . . . . . . . . . . . . 35
-------
8.22 Addition of Sellers . . . . . . . . . . . . . . 36
-------------------
8.23 Optional Termination of Seller . . . . . . . . . 36
------------------------------
8.24 Operating Expenses . . . . . . . . . . . . . . . 36
------------------
ARTICLE IX
Events of Termination . . . . . . . . 36
ARTICLE X
The Administrative Agent . . . . . . . 40
10.1 Appointment . . . . . . . . . . . . . . . . . . 40
-----------
10.2 Delegation of Duties . . . . . . . . . . . . . . 40
--------------------
10.3 Exculpatory Provisions . . . . . . . . . . . . 40
----------------------
10.4 Reliance by the Administrative Agent . . . . . . 41
------------------------------------
10.5 Notice of Default or Termination Event . . . . . 41
--------------------------------------
10.6 Non-Reliance on the Administrative Agent and
--------------------------------------------
Other Banks . . . . . . . . . . . . . . . . . . . 41
-----------
10.7 Indemnification . . . . . . . . . . . . . . . . 42
---------------
10.8 The Administrative Agent in Its Individual
------------------------------------------
Capacity . . . . . . . . . . . . . . . . . . . . 42
--------
10.9 Successor Administrative Agent . . . . . . . . . 43
------------------------------
-iii-
<PAGE>
Page
----
ARTICLE XI
Miscellaneous . . . . . . . . . . 43
11.1 Further Assurances . . . . . . . . . . . . . . . 43
------------------
11.2 Payments . . . . . . . . . . . . . . . . . . . . 43
--------
11.3 Costs and Expenses . . . . . . . . . . . . . . . 43
------------------
11.4 Successors and Assigns; Participations;
---------------------------------------
Acquiring Banks . . . . . . . . . . . . . . . . . 45
---------------
11.5 GOVERNING LAW . . . . . . . . . . . . . . . . . 47
-------------
11.6 No Waiver; Cumulative Remedies . . . . . . . . . 47
------------------------------
11.7 Amendments and Waivers . . . . . . . . . . . . . 47
----------------------
11.8 Severability . . . . . . . . . . . . . . . . . . 48
------------
11.9 Notices . . . . . . . . . . . . . . . . . . . . 48
-------
11.10 Counterparts . . . . . . . . . . . . . . . . . 48
------------
11.11 Construction of Agreement as Security
-------------------------------------
Agreement . . . . . . . . . . . . . . . . . . . . 49
---------
11.12 Adjustments; Set-off . . . . . . . . . . . . . 49
--------------------
11.13 Jurisdiction; Consent to Service of Process . . 50
-------------------------------------------
11.14 Acknowledgements . . . . . . . . . . . . . . . 50
----------------
11.15 Waiver of Jury Trial . . . . . . . . . . . . . 51
--------------------
11.16 Confidentiality . . . . . . . . . . . . . . . . 51
---------------
11.17 No Bankruptcy Petition . . . . . . . . . . . . 51
----------------------
11.18 Tax Treatment . . . . . . . . . . . . . . . . . 51
-------------
11.19 No Action by Banks . . . . . . . . . . . . . . 52
------------------
ARTICLE XII
Servicing
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
12.1 Servicing . . . . . . . . . . . . . . . . . . . 52
---------
12.2 Collections by the Servicers . . . . . . . . . . 55
----------------------------
12.3 Maintenance of Records . . . . . . . . . . . . . 58
----------------------
12.4 Rebates, Adjustments, Returns and Reductions;
---------------------------------------------
Modifications . . . . . . . . . . . . . . . . . . 58
-------------
12.5 Daily Reports; Settlement Statements . . . . . . 59
------------------------------------
12.6 Representations, Warranties and Covenants of
--------------------------------------------
the Servicers . . . . . . . . . . . . . . . . . . 60
-------------
12.7 Acquisition Obligation . . . . . . . . . . . . . 66
----------------------
12.8 Obligations Unaffected . . . . . . . . . . . . . 67
----------------------
12.9 Addition of Servicers . . . . . . . . . . . . . 67
---------------------
12.10 Optional Termination of Servicers . . . . . . . 67
---------------------------------
12.11 Interest on Overdue Payments . . . . . . . . . 67
----------------------------
12.12 Servicer Events of Defaults . . . . . . . . . . 67
---------------------------
12.13 Audit . . . . . . . . . . . . . . . . . . . . . 69
-----
-iv-
<PAGE>
ANNEX X Definitions
SCHEDULES
1 Names, Addresses and Commitments of Banks
2 Location of Chief Executive Offices; Location of
Books and Records
3 Lockboxes
4 Transactions with Affiliates
5 Contractual Obligations
6 Local Counsel
7 Certain Procedures
EXHIBITS
A Form of Assignment and Acceptance
B Form of Lockbox Agreement
C Form of Subordination Agreement
D-1 Form of Opinion of Cravath, Swaine & Moore
(Corporate)
D-2 Form of Opinion of Cravath, Swaine & Moore
(Bankruptcy)
D-3 Form of Opinion of Elizabeth R. Philipp, Esq.,
general counsel of Collins & Aikman Corporation
D-4 Form of Opinion of Stikeman & Elliott, special
Canadian counsel
D-5 Form of Opinion of Local Counsel
E Form of Settlement Statement
F Form of Additional Servicer Supplement
G Form of Responsible Officer's Certificate as to
Solvency, etc.
H Form of Daily Report
I Form of Receivables Sale Agreement
<PAGE>
RECEIVABLES TRANSFER AND SERVICING AGREEMENT, dated as of
June __, 1994, among [C&A RECEIVABLES COMPANY], a Delaware corporation
(the "Company"), COLLINS & AIKMAN PRODUCTS CO., a Delaware corporation
("C&A Products"), as master servicer (in such capacity, the "Master
Servicer"), C&A Products and each of the subsidiaries of C&A Products
from time to time parties hereto, in their capacities as servicers of
receivables (in such capacities, the "Servicers"), the several
financial institutions from time to time parties to this Agreement
(the "Banks") and CHEMICAL BANK, a New York banking corporation, as
administrative agent for the Banks.
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Company desires to assign and transfer to the
Banks, and the Banks desire to acquire a Participating Interest (as
hereinafter defined) in, all the Company's right, title and interest
in, to and under the Receivables (as hereinafter defined) now existing
or hereafter created and in the rights of the Company in, to and under
all other Related Property (as hereinafter defined);
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, the parties hereto agree as
follows:
ARTICLE I
Definitions
1.1 Defined Terms. Capitalized terms used in this
-------------
Agreement shall have the respective meanings assigned to such terms in
Annex X hereto unless otherwise defined herein.
1.2 Other Definitional Provisions. (a) The words
-----------------------------
"hereof", "herein" and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement, and article,
section, subsection, schedule and exhibit references are to this
Agreement unless otherwise specified.
(b) As used herein and in any certificate or other document
made or delivered pursuant hereto, accounting terms relating to C&A
Products and its Subsidiaries, unless otherwise defined herein, shall
have the respective meanings given to them under GAAP.
(c) The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such
terms.
<PAGE>
2
ARTICLE II
Acquisition and Transfer of Participating Interest
2.1 Acquisition and Transfer of Participating Interest.
--------------------------------------------------
(a) By execution of this Agreement and subject to the terms and
conditions contained herein, the Company does hereby sell, transfer,
assign, set over and otherwise convey, without recourse (except as
expressly provided herein), to the Banks on the Effective Date and
from time to time during the Commitment Period, and each Bank hereby
severally agrees to acquire from the Company on the Effective Date and
from time to time during the Commitment Period, a Participating
Interest (up to the maximum amount specified in subsection 2.3) in all
right, title and interest of the Company in, to and under the
following, whether now owned or hereafter acquired (collectively, with
the property described in subsections 2.1(b) and 2.1(c), the "Pooled
Property"):
(i) all Receivables;
(ii) (A) all goods, if any, relating to the sale which
gave rise to any Receivable;
(B) all other security interests or liens and property
subject thereto from time to time purporting to secure
payment of any Receivable, whether pursuant to the contract
related to such Receivable or otherwise, together with all
financing statements signed by an Obligor describing any
collateral securing such Receivable;
(C) all guarantees, insurance and other agreements or
arrangements of whatever character from time to time
supporting or securing payment of any Receivable whether
pursuant to the contract related to such Receivable or
otherwise; and
(D) all rights (including rescission, replevin or
reclamation) relating to any Receivable or arising
therefrom;
(iii) all monies due or to become due with respect to the
foregoing, including, without limitation, all Recoveries; and
(iv) all proceeds of the foregoing, including, without
limitation, whatever is received upon the sale, exchange,
collection or other disposition of the foregoing or proceeds
thereof (the items described in clauses (ii), (iii) and (iv),
collectively, the "Related Property").
(b) The Company hereby assigns to the Administrative Agent,
for the benefit of the Banks, and grants to the Administrative Agent,
for the benefit of the Banks, a security interest in, all its right,
title and interest in, to and under the Receivables Sale Agreement,
including (i) all rights of the Company to receive moneys due and to
become due under or pursuant to such agreement, whether payable as
fees, expenses, costs or otherwise, (ii) all
<PAGE>
3
rights of the Company to receive proceeds of any insurance, indemnity,
warranty or guaranty with respect to such agreement, (iii) claims of
the Company for damages arising out of or for breach of or default
under such agreement, (iv) the right of the Company to amend, waive or
terminate such agreement, to perform thereunder and to compel
performance and otherwise exercise all remedies thereunder and (v) all
other rights, remedies, powers, privileges and claims of the Company
under or in connection with such agreement (whether arising pursuant
to such agreement or otherwise available to the Company at law or in
equity), including the rights of the Company to enforce such agreement
and to give or withhold any and all consents, requests, notices,
directions, approvals, extensions or waivers under or in connection
therewith (the Pooled Property described in this sentence being
referred to herein as the "Transferred Agreement").
(c) In addition, to secure the obligations of the Company
hereunder, the Company hereby grants to the Administrative Agent, for
the benefit of the Banks, a security interest in all right, title and
interest of the Company in, to and under the following, whether now
owned or hereafter acquired:
(i) all equipment in all its forms, wherever located, now
or hereafter existing (including all software, data bases,
materials, books, records, magnetic tapes, disks and cassettes
relating to the Receivables and all other equipment in which
information concerning the Receivables is stored), and all parts
thereof and accessions thereto (any and all such equipment, parts
and accessions being the "Equipment");
(ii) all the following (the "Accounts"):
(A) each Concentration Account and each Lockbox
Account, all funds and other evidences of payment held
therein and all certificates and instruments, if any, from
time to time representing or evidencing any of such Accounts
or any funds and other evidences of payment held therein;
(B) any operating account or other accounts of the
Company, all funds held therein and all certificates and
instruments, if any, from time to time representing or
evidencing any such operating account or any funds held
therein;
(C) all Cash Equivalents and all certificates and
instruments from time to time representing or evidencing the
Cash Equivalents;
(D) all notes, certificates of deposit and other
instruments from time to time hereafter delivered to, or
otherwise possessed by, the Administrative Agent for and on
behalf of the Company in substitution for or in addition to
any of the then existing Accounts; and
(E) all interest, dividends, cash, instruments and
other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any
and all of the then existing Accounts; and
<PAGE>
4
(iii) all proceeds of or payments in respect of any and all
of the foregoing (including proceeds that constitute property of
the types described in clauses (i) and (ii) above and including
Collections) and, to the extent not otherwise included, all
payments under insurance (whether or not the Administrative Agent
is the loss payee in respect thereof), or any indemnity, warranty
or guaranty, payable by reason of loss or damage to or otherwise
with respect to any of the Pooled Property.
2.2 Payment for Initial Transfer of a Participating
-----------------------------------------------
Interest and any Increase in Net Investment. The undivided
- -------------------------------------------
participating interest of the Banks in the Receivables and the Related
Property (the "Participating Interest"; a Bank's Commitment Percentage
of such Participating Interest shall equal such Bank's "Participating
Interest") shall equal, at any date of determination thereof, the Net
Investment at such date. The Company shall notify the Banks of the
amount of the initial transfer and assignment of a Participating
Interest or any request for an Increase in Net Investment pursuant to
subsection 2.3. The amount which the Banks shall pay for such initial
transfer and assignment or Increase in Net Investment shall equal the
amount of such initial transfer and assignment or Increase in Net
Investment, as the case may be. After receipt by the Administrative
Agent of the notice required by subsection 2.3(a) from the Company,
the Administrative Agent shall promptly provide notice (which may be
telephonic but shall be confirmed in writing) to each Bank of the
Closing Date and of the portion of the Participating Interest or the
Increase in Net Investment allocable to such Bank on such Closing
Date. Amounts payable to the Company in respect of the initial
transfer and assignment of a Participating Interest or any Increase in
Net Investment on such Closing Date shall be obtained by the
Administrative Agent from the Banks and paid by the Administrative
Agent to the Company in accordance with the provisions of subsection
2.8(a).
2.3 Acquisition and Transfer Procedure. (a) Subject to
----------------------------------
subsections 2.3(b) and 6.2, the initial transfer and assignment of a
Participating Interest or an Increase in Net Investment of the Banks
shall occur, upon notice from the Company, on the Effective Date and
on each Weekly Transfer Date (each date on which the initial transfer
and assignment of a Participating Interest in the Receivables or an
Increase in Net Investment of the Banks occurs hereunder being herein
referred to as the "Closing Date" applicable to such transfer and
assignment or such increase, as the case may be) which shall occur
during the Commitment Period and shall take place at the office of the
Administrative Agent or such other place as may be mutually agreed
upon, provided that the Company shall have given the Administrative
--------
Agent irrevocable notice (effective upon receipt) of such request no
later than (i) if the initial transfer and assignment of a
Participating Interest or the Increase in Net Investment on such date
is to be priced solely with reference to ABR, 12:00 Noon (New York
City time) one Business Day prior to such Closing Date or (ii) if all
or a portion of the initial transfer and assignment of a Participating
Interest or the Increase in Net Investment is to be allocated to a
Fixed Tranche, 12:00 Noon (New York City time) three Business Days
prior to such Closing Date, provided, further, that the provisions of
-------- -------
this subsection 2.3 shall not restrict the allocations of Collections
pursuant to subsection 2.7. Such notice shall state (i) the Closing
Date, (ii) the amount of the initial transfer and assignment of a
Participating Interest or the Increase in Net Investment, as the case
may be, for the proposed transaction, (iii) what portion thereof will
be allocated to a Fixed Tranche and/or the Floating
<PAGE>
5
Tranche and (iv) if any portion thereof is to be allocated to a Fixed
Tranche, the length of the Transfer Period therefor.
(b) Each Bank shall have no obligation to acquire a
Participating Interest or to increase its pro rata share of the Net
--- ----
Investment on any Closing Date hereunder:
(1) unless, in the case of an Increase in Net Investment,
the Increase in Net Investment on such Closing Date is equal to
at least $500,000 or an integral multiple thereof;
(2) to the extent that, after giving effect to (A) in the
case of the initial transfer and assignment of a Participating
Interest, such transfer, and (B) in the case of an Increase in
Net Investment, such Increase in Net Investment on such date, the
Net Investment would exceed the Maximum Transfer Amount; or
(3) if the Commitments of the Banks have terminated
pursuant to Article IX.
The initial transfer and assignment of the Participating Interest or
an Increase in Net Investment allocable to the Banks as a group shall
be allocated to each Bank according to the Commitment Percentage of
such Bank.
2.4 Commitment Fees. The Company agrees to pay to the
---------------
Administrative Agent, for the account of the Banks, a commitment fee
(the "Commitment Fee") for the Commitment Period, computed at the rate
of 3/8ths of 1% per annum on the average daily excess of the Maximum
Commitment over the Net Investment for each day during the period for
which such Commitment Fee is payable. Commitment Fees shall be
payable in arrears on each Settlement Date for the relevant Settlement
Period.
2.5 Fee and Purchase Discount Amount Calculations. (a)
---------------------------------------------
Calculations of per annum rates and fees under this Agreement shall be
made on the basis of a 360-day year for actual days elapsed, except
that Purchase Discount Amounts on the Floating Tranche determined by
reference to the Prime Rate shall be calculated on the basis of a 365-
(or 366-, as the case may be) day year. Each determination of the
Eurodollar Rate hereunder by the Administrative Agent shall be
conclusive and binding upon each of the parties hereto in the absence
of manifest error. Any change in the Purchase Discount Amount
resulting from a change in ABR or Statutory Reserves shall become
effective as of the opening of business on the day on which such
change is announced.
(b) Anything contained in this Agreement to the contrary
notwithstanding, (i) the portion of the Net Investment allocable to
any Fixed Tranche must be an amount equal to $10,000,000 or an
integral multiple of $1,000,000 in excess thereof, (ii) no more than
ten Fixed Tranches shall be outstanding at any one time, and (iii)
after the occurrence and during the continuance of any Termination
Event, at the end of the related Transfer Period all of the Net
Investment allocated to any Fixed Tranche shall be reallocated to the
Floating Tranche.
<PAGE>
6
2.6 Interest on Overdue Payments. If any amount payable
----------------------------
by the Company to the Banks or the Administrative Agent hereunder,
whether on account of fees or expenses or on account of amounts
collected by the Company or amounts payable by the Company pursuant to
subsection 3.4 or 5.3, or otherwise, is not paid by the Company or
otherwise on the relevant Settlement Date or other relevant date, such
amount shall be payable together with interest, payable on demand, for
each day from such Settlement Date or other relevant date, as the case
may be, until such amount is paid in full at a rate per annum equal to
the ABR plus the Applicable ABR Margin plus 2%.
---- ----
2.7 Establishment of Accounts; Allocation of Collections;
-----------------------------------------------------
Reinvestment of Principal Collections.
- -------------------------------------
(a) (i) The Administrative Agent shall establish and
maintain in the name of the Administrative Agent (x) with Chemical one
account in the United States (the "U.S. Concentration Account"), (y)
with a financial institution acceptable to the Administrative Agent
one account in Canada for the purpose of receiving certain Collections
in U.S. Dollars (the "Canada/U.S. Dollar Concentration Account") and
(z) with a financial institution acceptable to the Administrative
Agent one account in Canada for the purpose of receiving Collections
in Canadian Dollars (the "Canada/Canadian Dollar Concentration
Account"). Collections deposited into each Lockbox Account will be
transferred to the relevant Concentration Account as set forth in
Article XII. Collections paid directly by wire transfer by Obligors
will be deposited in the relevant Concentration Account as set forth
in Article XII. All Collections otherwise received by any Servicer,
the Master Servicer or the Company shall be deposited by it either to
a Lockbox Account or through the Automated Clearing House System into
the relevant Concentration Account as set forth in Article XII. The
Administrative Agent shall have sole and exclusive dominion over and
control of each Concentration Account and the Company, the Servicers
and the Master Servicer shall not have any dominion over or control of
any such account.
(ii) Amounts deposited in any Concentration Account shall
be invested by the Administrative Agent as directed by the Master
Servicer in Cash Equivalents maturing not later than the next Business
Day.
(iii) Any earnings (net of losses and investment expenses) on
such invested funds in any Concentration Account ("Investment
Earnings") will be treated as Collections and retained therein.
(iv) Neither the Company nor the Master Servicer nor any
Servicer nor any Person claiming by, through or under the Company, any
Servicer or the Master Servicer shall have any right, title or
interest in, or any control over the use of, or any right to withdraw
moneys from, any Concentration Account, except the right to give
directions for investments of amounts on deposit therein as expressly
provided for in paragraph (ii) above.
(b) Prior to the commencement of an Amortization Period,
the Collections, Retransfer Payments, Servicer Transfer Payments and
Adjustment Payments deposited in the Concentration Accounts
(collectively, "Receivables Proceeds") shall be applied by the
Administrative Agent on each Business Day, as follows:
<PAGE>
7
(i) first, if such Business Day is a Settlement Date, to
the payment of the Monthly Servicing Fee of any Servicer that is
not an Affiliate of the Company, the Master Servicer or any
Seller;
(ii) second, on each Purchase Discount Amount Payment Date
occurring during the period commencing on the date of the first
transfer and assignment of the Participating Interest in
Receivables and Related Property pursuant to subsection 2.3(a)
and ending on the date on which the Net Investment is equal to
zero and the Commitments of the Banks have terminated, to the
payment in arrears of accrued Purchase Discount Amount on such
Business Day to the Banks in respect of the Participating
Interest;
(iii) third, to the payment of the Commitment Fees and any
other amounts, if any, accrued and payable on such Business Day
to the Administrative Agent and the Banks in respect of the
Participating Interest;
(iv) fourth, to the payments, if any, required by
subsection 2.12 (Mandatory Reductions in Net Investment) on such
Business Day;
(v) fifth, to the payment of the Company's indemnity
obligations hereunder and, then, to the Company's operating
account for the payment of the operating expenses of the Company
incurred or reserved for on such Business Day, provided that the
--------
aggregate amounts paid to the Company's operating account
pursuant to this clause (v) shall not exceed, for any fiscal year
of the Company, $100,000;
(vi) sixth, if such Business Day is a Settlement Date, to
the payment of the Monthly Servicing Fee of any Servicer that is
an Affiliate of the Company, the Master Servicer or any Seller;
(vii) seventh, to the Company to enable the Company to
acquire Receivables from the Sellers pursuant to the Receivables
Sale Agreement in the aggregate amount specified in the
applicable Daily Report, provided that the Company may elect to
--------
(A) retain all or any portion of such amounts in the
Concentration Accounts and (B) on the next Weekly Transfer Date,
if the Company shall have given the Administrative Agent
irrevocable notice in accordance with subsection 2.11(b), have
all or any portion of such amounts remitted to the Banks on such
Weekly Transfer Date and have the Net Investment reduced
accordingly (subject to the payment by the Company of any amounts
required pursuant to subsection 3.2);
(viii) eighth, at the Company's option and subject to the
terms of this Agreement and the Subordinated Notes, to make
payments on account of the Subordinated Notes, in the aggregate
amount specified in the applicable Daily Report;
(ix) ninth, to the extent such expenses are not paid
pursuant to clause (v) above, to the Company's operating account
for the payment of the operating expenses of the Company incurred
or reserved for such Business Day;
<PAGE>
8
(x) tenth, at the Company's option and subject to the terms
of this Agreement, to the Company to enable the Company to make
payments on account of Restricted Payments in the aggregate
amount specified in the applicable Daily Report, so long as the
outstanding principal amount of the Subordinated Notes shall be
zero at the time of such payment and all accrued interest thereon
shall have been paid in full;
provided, that (I) in no event shall any Receivables Proceeds be
- --------
distributed from the Concentration Accounts with respect to clauses
(iv)-(x) above to the extent such distribution would necessitate a
payment under subsection 2.12; (II) in no event shall any Receivables
Proceeds be distributed from the Concentration Accounts with respect
to clauses (vii)-(x) (other than a distribution in accordance with the
proviso in clause (vii)), if a Potential Termination Event of a type
set forth in subsection 9(b)(ii) has occurred and is continuing; (III)
in no event shall any Receivables Proceeds be distributed from the
Concentration Accounts with respect to clauses (viii)-(x) above if a
Termination Event shall have occurred and be continuing or would occur
as a result of such payment; and (IV) Receivables Proceeds shall first
be distributed out of the U.S. Concentration Account and the
Canada/U.S. Dollar Concentration Account before any distributions are
made out of the Canada/Canadian Dollar Concentration Account (except
in the case of distributions to be applied to make payments in
Canadian Dollars, which shall instead be distributed out of the
Canada/Canadian Dollar Concentration Account so long as all
obligations having a prior claim to Receivables Proceeds have been
paid in full).
(c) During any Amortization Period, all Receivables
Proceeds shall be applied by the Administrative Agent as follows: (i)
first, (x) to the payment of Monthly Servicing Fees of any Servicer
that is not an Affiliate of the Company, the Master Servicer or any
Seller and (y) to the payment of the reasonable operating expenses of
the Company and (to the extent approved by the Required Banks) any
Servicer that is an Affiliate of the Company, the Master Servicer or
any Seller, (ii) second, to the payment to each Bank of its Commitment
Percentage of such Receivables Proceeds until such time as the Net
Investment and Purchase Discount Amounts thereon and the payment of
all other amounts that are payable to the Administrative Agent and its
Affiliates and the Banks shall have been paid in full and (iii) after
such time as the Net Investment and Purchase Discount Amounts thereon
and all other amounts that are due and payable to the Administrative
Agent and the Banks shall have been paid in full, the remainder to the
Company.
(d) The Master Servicer shall as soon as possible after
receipt of any Collections and other proceeds determine whether or not
they are with respect to Purchased Receivables and shall as soon as
possible notify the Administrative Agent of such determination. The
Administrative Agent shall as soon as possible thereafter transfer any
Collections that are not with respect to Purchased Receivables from
the relevant Concentration Account to the Master Servicer for payment
to the applicable Person, provided, that with respect to any
--------
Collections for which the Administrative Agent has not been provided
such a determination by the Master Servicer by the end of the Business
Day five Business Days from the date of receipt thereof, such
Collections shall be deemed to be Collections with respect to
Purchased Receivables and no other Person shall have any rights
therein except to the extent provided in applicable state laws
governing the laws of
<PAGE>
9
restitution and mistake. Notwithstanding the foregoing, during any
Amortization Period the Administrative Agent shall apply all cash
collections and other proceeds received in respect of an Obligor with
respect to all Receivables of such Obligor first, to pay the
-----
outstanding principal balance of Purchased Receivables (on the date of
such notification) of such Obligor until Purchased Receivables with
respect to such Obligor are paid in full and second, amounts in excess
------
thereof shall be paid to the Master Servicer for payment to the Person
legally entitled thereto to pay the outstanding principal balance of
all remaining Receivables with respect to such Obligor. The Master
Servicer agrees that in making each such determination with respect to
Collections and other proceeds, the Master Servicer represents and
warrants at such time, to the best of the Master Servicer's knowledge,
that such determination is true and correct.
2.8 Payments; Pro Rata Treatment. (a) Not later than
----------------------------
11:00 a.m. (New York City time) on each date on which the Banks are
notified to remit payments to the Administrative Agent or as the
Administrative Agent shall direct on account of any Increase in Net
Investment, each Bank shall make available to the Administrative Agent
or as the Administrative Agent shall direct an amount in immediately
available funds equal to the amount of such remittance calculated as
provided herein. The Administrative Agent shall credit the proceeds
of such payments in a timely manner in accordance with the
instructions of the Company.
(b) Unless the Administrative Agent shall have been
notified in writing by any Bank prior to a Closing Date that such Bank
will not make the amount which would constitute its portion of the
Participating Interest or Increase in Net Investment on such date
available to the Administrative Agent, the Administrative Agent may
assume that such Bank has made such amount available to the
Administrative Agent on such Closing Date, and the Administrative
Agent may, in reliance upon such assumption, make available to the
Company, a corresponding amount. If such amount is made available to
the Administrative Agent on a date after such Closing Date, such Bank
shall pay to the Administrative Agent on demand an amount equal to the
product of (i) the daily average Federal Funds Effective Rate during
such period, times (ii) the amount of such Bank's portion of the
Participating Interest or Increase in Net Investment, times (iii) a
fraction the numerator of which is the number of days that elapse from
and including such Closing Date to the date on which such Bank's funds
shall have become immediately available to the Administrative Agent
and the denominator of which is 360. A certificate of the
Administrative Agent submitted to any Bank with respect to any amounts
owing under this subsection 2.8(b) shall be conclusive, absent
manifest error. If such Bank's portion of the Participating Interest
or Increase in Net Investment is not in fact made available to the
Administrative Agent by such Bank within three Business Days of such
Closing Date, the Administrative Agent shall be entitled to recover
such amount with interest thereon at a per annum rate equal to the ABR
plus the Applicable ABR Margin, on demand, from the Company. No
provision contained in this subsection 2.8(b) shall prejudice any
rights of the Company against any Bank.
(c) Except where an amount is payable to a particular Bank,
the amount of such collections and amounts paid allocable to the Banks
to be remitted to each Bank shall be such Bank's Commitment Percentage
of the aggregate amount thereof allocable to the Banks.
<PAGE>
10
2.9 Netting of Payments. Anything contained in this
-------------------
Agreement to the contrary notwithstanding, the Administrative Agent
may, in its sole discretion, net any amounts the Administrative Agent
is required to make available to the Company on any day pursuant to
subsection 2.7(b) or any other subsection of this Agreement against
any amounts the Administrative Agent is required to make available to
the Banks on such day pursuant to subsection 2.7(b) or any other
provision of this Agreement.
2.10 Termination or Reduction of Commitment. The Company
--------------------------------------
may on any Settlement Date, upon three Business Days' prior written
notice to the Administrative Agent (effective upon receipt),
(i) terminate the Banks' Commitments hereunder or (ii) reduce the
Maximum Commitment hereunder in an amount equal to $5,000,000 or a
whole multiple of $1,000,000 in excess thereof; provided, that the
--------
Maximum Commitment may not be reduced below the Net Investment. After
receipt by the Administrative Agent of any such notice from the
Company, the Administrative Agent shall promptly provide a copy of
such notice to each Bank. Upon any such reduction, the Commitment of
each Bank shall be reduced pro rata according to the Commitment
--- ----
Percentage of such Bank. Upon any such termination or reduction as
aforesaid, the Maximum Commitment of the Banks shall terminate or be
reduced, as the case may be. Any such termination shall not in any
way affect the Company's obligations under Article III hereof. Once
terminated or reduced, the Commitments of the Banks cannot be
reinstated unless otherwise agreed in writing by all of the Banks.
2.11 Optional Retransfer; Reduction of Net Investment.
------------------------------------------------
(a) On any Settlement Date during the Amortization Period on which
the Net Investment equals 10% or less of the Net Investment as of the
first day of the Amortization Period, the Company shall have the
option, exercisable upon three Business Days' prior notice to the
Administrative Agent (effective upon receipt), to acquire the Banks'
total Participating Interest at a transfer price equal to the Net
Investment plus all accrued and unpaid fees (including without
limitation, Purchase Discount Amounts) to the date of such transfer
plus any amounts payable pursuant to subsections 3.2 and 3.3. After
receipt by the Administrative Agent of any such notice from the
Company, the Administrative Agent shall promptly provide a copy of
such notice to each Bank.
(b) The Company may, in accordance with subsection
2.7(b)(vii), reduce the Net Investment on any Weekly Transfer Date,
without premium or penalty (other than amounts payable pursuant to
subsection 3.2), upon at least three Business Days' irrevocable notice
to the Administrative Agent, in the case of reductions in the Net
Investment that are part of any Fixed Tranche, and one Business Day's
irrevocable notice to the Administrative Agent, in the case of
reductions in the Net Investment that are part of the Floating
Tranche, specifying (a) the Tranches to be reduced, (b) the date and
amount of such reduction and (c) if such reduction is of a combination
of Fixed Tranche amounts and Floating Tranche amounts, the amount of
reduction allocable to each (and, with respect to such Fixed Tranche,
each Tranche thereof). Upon receipt of any such notice, the
Administrative Agent will promptly notify each Bank thereof. If any
such notice is given, amounts on deposit in the Concentration Accounts
shall be applied pursuant to subsection 2.7(b)(vii) on the date
specified therein. Each reduction of the Net Investment pursuant to
this subsection 2.11(b)
<PAGE>
11
shall be in an amount equal to the lesser of (x) a whole multiple of
$1,000,000 and (y) the Net Investment then outstanding.
2.12 Mandatory Reductions in Net Investment. (a) On any
--------------------------------------
Business Day on which the Net Investment exceeds the Maximum Transfer
Amount, all Collections, Adjustment Payments, Servicer Transfer
Payments and Retransfer Payments shall be applied on such Business Day
to reduce the Net Investment (and the Purchase Discount Amounts
accrued on the portion thereof so repaid) in such amount as shall be
necessary so that after giving effect to such payment there shall be
no such excess and, to the extent such Collections or other amounts
are not sufficient to pay such excess (and the Purchase Discount
Amount accrued thereon) on such Business Day, all subsequent
Collections, Adjustment Payments, Servicer Transfer Payments and
Retransfer Payments shall be applied to pay such excess (and the
Purchase Discount Amounts accrued thereon) until so paid.
(b) Notwithstanding anything to the contrary set forth in
this Agreement, any mandatory reduction hereunder shall be applied,
unless the Administrative Agent receives instructions from the Company
otherwise, (i) first, to the Floating Tranche, (ii) second, to any
Fixed Tranche the then applicable Transfer Period with respect to
which ends on the date of the relevant payment and (iii) third, unless
otherwise directed by the Company pursuant to subsection 2.12(c), to
the other Fixed Tranches as selected by the Administrative Agent in
its sole discretion, provided that, in any event, the Company shall
--------
pay such amounts, if any, required by subsection 3.2.
(c) In the event the amount of any mandatory reduction
required to be made on any date pursuant to this subsection 2.12 shall
exceed the aggregate of the amounts described in clauses (i) and (ii)
of paragraph (b) above with respect to such date (the amount of any
such excess being called the "Excess Application Amount"), the Company
-------------------------
shall have the right, in lieu of making such reduction in full, to
first apply such reduction in the manner contemplated by said clauses
(i) and (ii) and to deposit an amount equal to the Excess Application
Amount with the Administrative Agent in a cash collateral account
maintained (pursuant to documentation satisfactory to the
Administrative Agent) by and in the sole dominion and control of the
Administrative Agent. Any amounts so deposited shall be held by the
Administrative Agent as collateral for the obligations of the Company
hereunder and applied to the reduction of the applicable Fixed
Tranches at the end of the current Transfer Periods applicable
thereto. On any Business Day on which (x) collected amounts remain on
deposit in or to the credit of such cash collateral account after
giving effect to the payments made on such day pursuant to this
paragraph (c) and (y) the Company shall have delivered to the
Administrative Agent a written request or a telephonic request (which
shall be promptly confirmed in writing) that such remaining collected
amounts be invested in the Cash Equivalents specified in such request,
the Administrative Agent shall use its reasonable efforts to invest
such remaining collected amounts in such Cash Equivalents; provided,
--------
that the Administrative Agent shall have continuous dominion and full
control over any such investments (and over any interest that accrues
thereon) to the same extent that it has dominion and control over such
cash collateral account and no Cash Equivalent shall mature after the
end of the Transfer Period for which it is to be applied. The Company
shall not have the right to withdraw any amount from such cash
collateral account until the applicable Fixed Tranches have been
reduced to zero and accrued Purchase Discount
<PAGE>
12
Amount thereon has been paid in full or if a Termination Event or
Potential Termination Event then exists or would result.
(d) All payments under this subsection 2.12 shall be
subject to subsection 3.2 but otherwise without premium or penalty.
All payments in reduction of the Net Investment under this subsection
2.12 shall be accompanied by the Purchase Discount Amounts on the
amount being paid accrued to the date of payment.
ARTICLE III
Increased Costs
3.1 Illegality. (a) Notwithstanding any other provision
----------
herein, if any change in any law or regulation or in the
interpretation thereof by any Governmental Authority charged with the
administration or interpretation thereof shall make it unlawful for
any Bank to purchase or maintain a Eurodollar Participating Interest
as contemplated by this Agreement or to give effect to its obligations
as contemplated hereby with respect to any portion of the Net
Investment allocated to any Fixed Tranche, then, by written notice to
the Company and to the Administrative Agent, such Bank may:
(i) declare that a Eurodollar Participating Interest will
not thereafter be purchased or maintained by such Bank hereunder,
whereupon any request by the Company for a Eurodollar
Participating Interest shall, as to such Bank only, be deemed a
request for an ABR Participating Interest unless such declaration
shall be subsequently withdrawn; and
(ii) require that the outstanding Eurodollar Participating
Interest of such Bank be converted to an ABR Participating
Interest, in which event such Eurodollar Participating Interest
shall be automatically converted to an ABR Participating Interest
as of the effective date of such notice as provided in paragraph
(b) below.
In the event any Bank shall exercise its rights under clause (i) or
(ii) above, all payments which would otherwise have been applied to
reduce the Eurodollar Participating Interest that would have been held
by such Bank or the converted Eurodollar Participating Interest of
such Bank shall instead be applied to reduce the ABR Participating
Interest made by such Bank in lieu of, or resulting from the
conversion of, such Eurodollar Participating Interest.
(b) For purposes of this subsection 3.1, a notice to the
Company by any Bank shall be effective as to each Fixed Tranche, if
lawful, on the last day of the Transfer Period currently applicable to
such Fixed Tranche; in all other cases such notice shall be effective
on the date of receipt by the Company.
3.2 Indemnity. The Company shall indemnify each Bank
---------
against any loss or expense (other than taxes) which such Bank may
sustain or incur as a consequence of (a) any failure by the Company to
fulfill on the date of any Increase in Net Investment hereunder the
applicable conditions set forth in Article VI, (b) any failure by the
Company to effectuate
<PAGE>
13
an Increase in Net Investment or to convert or continue any Fixed
Tranche or Floating Tranche hereunder after irrevocable notice of such
increase, conversion or continuation has been given pursuant hereto,
(c) any reduction or conversion of a Fixed Tranche required by any
other provision of this Agreement or otherwise made or deemed made on
a date other than the last day of the Transfer Period applicable
thereto, (d) any default in reduction in respect of the Net Investment
or any part thereof or the payment of Purchase Discount Amount accrued
thereon, as and when such reduction is required or such amount is due
and payable, as the case may be, or (e) the occurrence of any
Termination Event, including, in each such case, any loss or
reasonable expense sustained or incurred or to be sustained or
incurred in liquidating or employing deposits from third parties
acquired to effect or maintain any Participating Interest or any part
thereof as a Eurodollar Participating Interest. Such loss or
reasonable expense shall exclude loss of margin hereunder but shall
include an amount equal to the excess, if any, as reasonably
determined by such Bank, of (i) its cost of obtaining the funds for
the Participating Interest being reduced, converted or not
transferred, converted or continued (assumed to be the Eurodollar Rate
applicable thereto) for the period from the date of such reduction,
conversion or failure to transfer, convert or continue to the last day
of the Transfer Period for such Eurodollar Participating Interest (or,
in the case of a failure to transfer, convert or continue, the
Transfer Period for such Eurodollar Participating Interest which would
have commenced on the date of such failure) over (ii) the amount of
interest (as reasonably determined by such Bank) that would be
realized by such Bank in reemploying the funds in an amount equal to
the amount of such reduction or conversion or the amount not
transferred, converted or continued for such period or Transfer
Period, as the case may be. A certificate of any Bank setting forth
any amount or amounts which such Bank is entitled to receive pursuant
to this subsection 3.2 (and the reasons therefor) shall be delivered
to the Company and shall be conclusive absent manifest error.
<PAGE>
14
3.3 Requirements of Law. (a) Notwithstanding any other
-------------------
provision herein, if after the date of this Agreement any change in
applicable law or regulation or in the interpretation or
administration thereof by any Governmental Authority charged with the
interpretation or administration thereof (whether or not having the
force of law) shall change the basis of taxation of payments to any
Bank in respect of the Eurodollar Participating Interest of such Bank
or any fees or other amounts payable hereunder (other than changes in
respect of (i) taxes imposed on the overall net income of such Bank by
the jurisdiction in which such Bank has its principal office or by any
political subdivision or taxing authority therein and (ii) any Taxes
described in subsection 3.5), or shall impose, modify or deem
applicable any reserve, special deposit or similar requirement against
assets or deposits with or for the account of or credit extended by
such Bank (except any such reserve requirement which is reflected in
the Eurodollar Rate) or shall impose on such Bank or the interbank
eurodollar market any other condition affecting this Agreement or the
Eurodollar Participating Interest of such Bank, and the result of any
of the foregoing shall be to increase the cost to such Bank of
purchasing or maintaining its Eurodollar Participating Interest or to
reduce the amount of any sum received or receivable by such Bank
hereunder (whether in repayment of the Net Investment, payment of any
Purchase Discount Amount or otherwise) by an amount deemed by such
Bank to be material, then the Company will pay to such Bank upon
demand such additional amount or amounts as will compensate such Bank
for such additional costs incurred or reduction suffered.
(b) If any Bank shall have determined that the adoption
after the date hereof of any law, rule, regulation or guideline
regarding capital adequacy, or any change after the date hereof in any
of the foregoing or in the interpretation or administration of any of
the foregoing by any Governmental Authority, central bank or
comparable agency charged with the interpretation or administration
thereof, or compliance by any Bank (or any purchasing office of such
Bank) or any Bank's holding company with any request or directive
regarding capital adequacy (whether or not having the force of law)
made or issued after the date hereof by any such authority, central
bank or comparable agency, has or would have the effect of reducing
the rate of return on such Bank's capital or on the capital of such
Bank's holding company, if any, as a consequence of this Agreement or
its obligations pursuant hereto to a level below that which such Bank
or such Bank's holding company would have achieved but for such
adoption, change or compliance (taking into consideration such Bank's
policies and the policies of such Bank's holding company with respect
to capital adequacy) by an amount deemed by such Bank to be material,
then from time to time the Company shall pay to such Bank such
additional amount or amounts as will compensate such Bank or such
Bank's holding company for any such reduction suffered.
(c) A certificate of each Bank setting forth such amount or
amounts as shall be necessary to compensate such Bank or its holding
company as specified in paragraph (a) or (b) above, as the case may
be, shall be delivered to the Company and shall be conclusive absent
manifest error. The Company shall pay each Bank the amount shown as
due on any such certificate delivered by it within 10 days after its
receipt of the same.
(d) In the event any Bank delivers a notice pursuant to
paragraph (e) below, the Company may require, at the Company's
expense, such Bank to assign, at par plus accrued Purchase Discount
Amount and fees, without recourse (in accordance with
<PAGE>
15
subsection 11.4) all its interests, rights and obligations hereunder
(including all of its Commitment and the Participating Interests at
the time held by it) to a financial institution specified by the
Company provided that (i) such assignment shall not conflict with or
violate any law, rule or regulation or order of any court or other
Governmental Authority, (ii) the Company shall have received the
written consent of the Administrative Agent, which consent shall not
unreasonably be withheld, to such assignment and (iii) the Company
shall have paid to the assigning Bank all monies accrued and owing
hereunder to it (including pursuant to this subsection 3.3).
(e) Promptly after any Bank has determined, in its sole
judgment, that it will make a request for increased compensation
pursuant to this subsection 3.3, such Bank will notify the Company
thereof. Failure on the part of any Bank so to notify the Company or
to demand compensation for any increased costs or reduction in amounts
received or receivable or reduction in return on capital with respect
to any period shall not constitute a waiver of such Bank's right to
demand compensation with respect to such period or any other period;
provided that the Company shall not be under any obligation to
- --------
compensate any Bank under subsection 3.3(b) with respect to increased
costs or reductions with respect to any period prior to the date that
is six months prior to such request if such Bank knew or could
reasonably have been expected to be aware of the circumstances giving
rise to such increased costs or reductions and of the fact that such
circumstances would in fact result in such increased costs or
reduction; provided, further, that, the foregoing limitation shall not
-------- -------
apply to any increased costs or reductions arising out of the
retroactive application of any law, regulation, rule, guideline or
directive as aforesaid within such six month period. The protection
of this subsection 3.3 shall be available to each Bank regardless of
any possible contention of the invalidity or inapplicability of the
law, rule, regulation, guideline or other change or condition which
shall have occurred or been imposed.
3.4 Inability to Determine Eurodollar Rate. In the event,
--------------------------------------
and on each occasion, that on the day two Business Days prior to the
commencement of any Transfer Period for a Fixed Tranche the
Administrative Agent shall have determined that dollar deposits, in
the respective amounts of the portion of each Bank's Eurodollar
Participating Interest comprising such Fixed Tranche, are not
generally available in the interbank eurodollar market, or that the
rates at which such dollar deposits are being offered will not
adequately and fairly reflect the cost to any Bank of purchasing or
maintaining its Eurodollar Participating Interest during such Transfer
Period, or that reasonable means do not exist for ascertaining the
Eurodollar Rate, the Administrative Agent shall, as soon as
practicable thereafter, give written or telex notice of such
determination to the Company and the Banks. If such notice is given,
the Purchase Discount Amount applicable to that portion of the Net
Investment that was to be allocated to a Fixed Tranche shall be
determined by reference to the ABR. Until such notice has been
withdrawn by the Administrative Agent, no further Eurodollar Rate
elections shall be made. Each determination by the Administrative
Agent hereunder shall be conclusive absent manifest error.
3.5 Taxes. (a) Any and all payments by the Company, any
-----
Servicer or the Master Servicer (each, a "Tax Indemnifying Party") to
the Administrative Agent or the Banks hereunder shall be made, in
accordance with subsection 2.8, free and clear of and without
deduction for any and all present or future taxes, levies, imposts,
deductions, charges or
<PAGE>
16
withholdings, and all liabilities with respect thereto, excluding (i)
in the case of each Bank and the Administrative Agent, taxes that
would not be imposed but for a connection between such Bank or the
Administrative Agent (as the case may be) and the jurisdiction
imposing such tax, other than a connection arising solely by virtue of
the activities of such Bank or the Administrative Agent (as the case
may be) pursuant to or in respect of this Agreement, including,
without limitation, entering into, making purchases pursuant to,
receiving payments under, or enforcing, this Agreement, and (ii) in
the case of each Bank and the Administrative Agent, any United States
withholding taxes payable with respect to payments hereunder under
laws (including, without limitation, any statute, treaty, ruling,
determination or regulation) in effect on the Initial Date (as
hereinafter defined) for such Bank or the Administrative Agent, as the
case may be, but not excluding any United States withholding taxes
payable solely as a result of any change in such laws occurring after
the Initial Date (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). For purposes of this subsection 3.5, the
term "Initial Date" shall mean (i) in the case of the Administrative
Agent or any Bank, the date on which such Person became a party to
this Agreement and (ii) in the case of any assignment including any
assignment by a Bank to a new purchasing office, the date of such
assignment. If any Taxes shall be required by law to be deducted from
or in respect of any sum payable hereunder to any Bank or the
Administrative Agent (i) the sum payable by the relevant Tax
Indemnifying Party shall be increased as may be necessary so that
after making all required deductions (including deductions applicable
to additional sums payable under this subsection 3.5) such Bank or the
Administrative Agent (as the case may be) receives an amount equal to
the sum it would have received had no such deductions been made, (ii)
the relevant Tax Indemnifying Party shall make such deductions and
(iii) the relevant Tax Indemnifying Party shall pay the full amount
deducted to the relevant taxation authority or other authority in
accordance with applicable law. No Tax Indemnifying Party shall,
however, be required to pay any amounts pursuant to clause (i) of the
preceding sentence to any Bank or the Administrative Agent not
organized under the laws of the United States of America or a state
thereof if such Bank or the Administrative Agent fails to comply with
the requirements of paragraphs (f) or (g), as the case may be, and
paragraph (h) of this subsection 3.5.
(b) In addition, the Company agrees to pay any present or
future stamp or documentary taxes or any other excise or property
taxes, charges or similar levies which arise from the execution,
delivery or registration of, or otherwise with respect to, this
Agreement (hereinafter referred to as "Other Taxes").
(c) Each Tax Indemnifying Party will indemnify each Bank
and the Administrative Agent for the full amount of Taxes and Other
Taxes (including any Taxes or Other Taxes imposed by any jurisdiction
on amounts payable under this subsection 3.5) paid by such Bank or the
Administrative Agent, as the case may be, and any liability (including
penalties, interest and expenses) arising therefrom or with respect
thereto whether or not such Taxes or Other Taxes were correctly or
legally asserted. Such indemnification shall be made within 10 days
after the date any Bank or the Administrative Agent, as the case may
be, makes written demand therefor. If a Bank or the Administrative
Agent shall become aware that it is entitled to receive a refund or is
reasonably requested by the relevant Tax Indemnifying Party to pursue
a claim for a refund in respect of Taxes or Other Taxes, it shall
<PAGE>
17
promptly notify such Tax Indemnifying Party of the availability of
such refund (unless instructed to pursue a claim by such Tax
Indemnifying Party) and shall, within 30 days after receipt of a
request by such Tax Indemnifying Party, pursue or timely claim such
refund at such Tax Indemnifying Party's expense. If any Bank or the
Administrative Agent receives a refund in respect of any Taxes or
Other Taxes for which such Bank or the Administrative Agent has
received payment from any Tax Indemnifying Party hereunder, it shall
promptly notify such Tax Indemnifying Party of such refund and shall,
within 30 days after receipt of a request by such Tax Indemnifying
Party (or promptly upon receipt, if such Tax Indemnifying Party has
requested application for such refund pursuant hereto), repay such
refund (plus any interest received) to such Tax Indemnifying Party,
provided that such Tax Indemnifying Party, upon the request of such
Bank or the Administrative Agent, agrees to return such refund (plus
any penalties, interest or other charges required to be paid) to such
Bank or the Administrative Agent in the event such Bank or the
Administrative Agent is required to repay such refund.
(d) Within 30 days after the date of any payment of Taxes
or Other Taxes withheld by any Tax Indemnifying Party in respect of
any payment to any Bank or the Administrative Agent, such Tax
Indemnifying Party will furnish to the Administrative Agent, at its
address referred to in subsection 11.2, the original or a certified
copy of a receipt evidencing payment thereof.
(e) Without prejudice to the survival of any other
agreement contained herein, the agreements and obligations contained
in this subsection 3.5 shall survive the termination of this
Agreement.
(f) This paragraph (f) shall apply to cases where the Tax
Indemnifying Party is a U.S. Person (within the meaning of the Code).
Each of each Bank and the Administrative Agent that is not
incorporated under the laws of the United States of America or a state
thereof agrees that at least 10 days prior to the first Purchase
Discount Amount Payment Date following the Initial Date in respect of
such Bank, it will deliver to the Company and the Administrative Agent
(if appropriate) two duly completed copies of either (i) United States
Internal Revenue Service Form 1001 or 4224 or successor applicable
form, as the case may be, certifying in each case that such Bank or
the Administrative Agent, as the case may be, is entitled to receive
payments under this Agreement payable to it without deduction or
withholding of any United States federal income taxes and backup
withholding taxes or is entitled to receive such payments at a reduced
rate pursuant to a treaty provision or (ii) in the case of a Bank that
is not a "bank" within the meaning of Section 881(c)(3) of the Code,
United States Internal Revenue Service Form W-8 or successor
applicable form and a statement from such Bank certifying to the fact
that interest payable to it hereunder (A) will not be described in
Section 871(h)(3)(A) or Section 881(c)(3)(A), (B) or (C) of the Code
and (B) will not be effectively connected with a trade or business
carried on in the United States by such Bank. Each of each Bank and
the Administrative Agent required to deliver to the Company and the
Administrative Agent a Form 1001, 4224 or W-8 pursuant to the
preceding sentence further undertakes to deliver to the Company and
the Administrative Agent (if appropriate) two further copies of Form
1001, 4224 or W-8, or successor forms, or other similar manner of
certification and such extensions or renewals thereof as may
reasonably be requested by the Company and, in the case where a Form
W-8 has been
<PAGE>
18
delivered, a further statement certifying to the fact set forth in
clause (B) of the preceding sentence (i) at the times reasonably
requested by the Company, (ii) after the occurrence of an event
requiring a change in the most recent form or statement previously
delivered by it to the Company or (iii) in the case of Form 1001, 4224
or W-8, on or before the date that any such form expires or becomes
obsolete, and, in the case of Form 1001 or 4224, certifying that such
Bank is entitled to receive payments under this Agreement without
deduction or withholding of any United States federal income taxes and
backup withholding taxes or is entitled to receive such payments at a
reduced rate pursuant to a treaty provision, unless such Bank advises
the Company that it is unable lawfully to provide such forms and other
certifications and notifies the Company to such effect. Unless the
Company and the Administrative Agent have received forms, certificates
and other documents satisfactory to them indicating that payments
hereunder to or for any Bank not incorporated under the laws of the
United States or a state thereof are not subject to United States
withholding tax or are subject to such tax at a rate reduced by an
applicable tax treaty, the relevant Tax Indemnifying Party or the
Administrative Agent, as the case may be, shall withhold such taxes
from such payments at the applicable statutory rate.
(g) This paragraph (g) shall apply to cases where the Tax
Indemnifying Party is incorporated in or under the laws of Canada.
Each Bank and the Administrative Agent that is not incorporated within
or under the laws of Canada and that is claiming such additional
amounts agrees that within a reasonable period of time following the
request of the relevant Tax Indemnifying Party, it will, to the extent
it is legally entitled to a reduction in the rate of or exemption from
Canadian withholding taxes, deliver to the such Tax Indemnifying Party
and the Administrative Agent (if appropriate) any form or document
required under the laws, regulations, official interpretations or
treaties enacted by, made or entered into with Canada properly
completed and duly executed by such Bank or Administrative Agent
establishing that any payments hereunder are exempt from Canadian
withholding tax or subject to a reduced rate of Canadian withholding
tax, as the case may be; provided that, in the sole determination of
such Bank or the Administrative Agent, such form or document shall not
be otherwise disadvantageous to such Bank or the Administrative Agent.
(g) Any Bank claiming any additional amounts payable
pursuant to this subsection 3.5 shall use reasonable efforts
(consistent with legal and regulatory restrictions) to file any
certificate or document requested by the relevant Tax Indemnifying
Party or to change the jurisdiction of its applicable purchasing
office if the making of such a filing or change would avoid the need
for or reduce the amount of any such additional amounts which may
thereafter accrue and would not, in the sole determination of such
Bank, be otherwise disadvantageous to such Bank.
ARTICLE IV
Termination
4.1 Termination. This Agreement will terminate at such
-----------
time after the expiration of the Commitment Period when the Net
Investment has been reduced to zero
<PAGE>
19
and all other amounts owing to the Banks and the Administrative Agent
hereunder shall have been paid in full; provided, however, that the
-------- -------
indemnities of the Company, the Servicers and the Master Servicer to
the Banks and the Administrative Agent set forth in this Agreement
and, to the extent set forth in Article III, the agreements in Article
III shall survive such termination. Upon (i) the expiration of the
Commitment Period and (ii) the reduction of the Net Investment to zero
and the payment in full of all other amounts owing to the Banks and
the Administrative Agent hereunder, the Administrative Agent shall, at
the expense of the Company, execute such Uniform Commercial Code
termination statements and such other documents, and take such other
actions, as the Company may reasonably request to evidence the
termination of the ownership interest of the Banks in the Receivables
and the payment of all amounts owing pursuant to and in connection
with this Agreement.
ARTICLE V
Covenants, Representations and Warranties
5.1 Representations and Warranties of the Company Relating
------------------------------------------------------
to the Company. The Company hereby represents and warrants to the
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Administrative Agent and the Banks, (x) as of the Effective Date, and
(y) with respect to an Increase in Net Investment, as of the related
Closing Date, unless, in either case, such representation or warranty
expressly relates only to a prior date, that:
(a) Organization; Corporate Powers. The Company (i) is a
------------------------------
corporation duly organized, validly existing and in good standing
under the laws of the jurisdiction in which it is incorporated, (ii)
has all requisite corporate power and authority, and all material
licenses, permits, franchises, consents and approvals, to own or lease
its property and assets and to carry on its business as now conducted
and as proposed to be conducted, (iii) is qualified and in good
standing as a foreign corporation to do business in every jurisdiction
where such qualification is necessary, except where the failure so to
qualify would not have a Material Adverse Effect and (iv) has the
corporate power and authority to execute, deliver and perform each of
the Transaction Documents and each agreement or instrument
contemplated hereby or thereby to which it is or will be a party.
(b) Authorization. The execution, delivery and performance
-------------
of each of the Transaction Documents to which the Company is a party,
the assignment and transfer of the Participating Interests hereunder
and the consummation of the other transactions contemplated by any of
the foregoing (collectively, the "Transactions") (i) have been duly
authorized by all requisite corporate and, if required, stockholder
action and (ii) will not (x) violate (A) any provision of law,
statute, rule or regulation (including, without limitation,
Regulations G, T, U and X) or the certificate of incorporation or
by-laws (or similar governing documents) of the Company, (B) any
applicable order of any court or any rule, regulation or order of any
Governmental Authority or (C) any indenture, certificate of
designation for preferred stock, agreement or other instrument to
which the Company is a party or by which the Company or any of its
property is bound, (y) be in conflict with, result
<PAGE>
20
in a breach of or constitute (with notice or lapse of time or both) a
default under any such indenture, agreement or other instrument where
any such conflict, violation, breach or default referred to in clause
(ii)(x) or (ii)(y) of this subsection 5.1(b), individually or in the
aggregate, would have a Material Adverse Effect or (z) result in the
creation or imposition of any Lien upon any property or assets of the
Company, except for Liens created by this Agreement.
(c) Enforceability. This Agreement has been duly executed
--------------
and delivered by the Company and constitutes, and each other
Transaction Document if and when executed and delivered by the Company
will constitute, a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency,
moratorium, reorganization or other similar laws affecting creditors'
rights generally and except as enforceability may be limited by
general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(d) Consents. All consents and approvals of, filings and
--------
registrations with, and other actions in respect of, all Governmental
Authorities required in order to make or consummate the Transactions
have been obtained, given, filed or taken and are in full force and
effect, other than any such consents, approvals, filings or other
actions, the failure to obtain or make which could not reasonably be
expected to result in a Material Adverse Effect.
(e) Litigation, etc. (i) There are not any actions, suits
---------------
or proceedings at law or in equity or by or before any court or
Governmental Authority now pending or, to the knowledge of the
Company, threatened against or affecting the Company or any property
or rights of the Company as to which there is a reasonable possibility
of an adverse determination and which (x) if adversely determined,
could individually or in the aggregate result in a Material Adverse
Effect or (y) involve the Transaction Documents or (z) if adversely
determined could materially adversely affect the Transactions.
(ii) The Company is not in default with respect to any law,
order, judgment, writ, injunction, decree, rule or regulation of any
Governmental Authority where such default could have a Material
Adverse Effect. The assignment and transfer of the Participating
Interests hereunder, the use of the proceeds thereof and the other
Transactions will not violate any applicable law or regulation or
violate or be prohibited by any judgment, writ, injunction, decree or
order of any court or Governmental Authority or subject the Company to
any civil or criminal penalty or fine.
(f) No Default, etc. (i) The Company is not a party to
---------------
any agreement or instrument or subject to any corporate restriction
that has resulted or could reasonably be expected to result in a
Material Adverse Effect.
(ii) No indenture, certificate of designation for preferred
stock, agreement or other instrument to which the Company is a party
will prohibit or materially restrain, or have the effect of
prohibiting or materially restraining, or imposing materially adverse
conditions upon, the consummation of any of the Transactions.
<PAGE>
21
(iii) The Company is not in default in any manner under any
provision of any indenture or other agreement or instrument evidencing
Indebtedness or any other material agreement or instrument to which it
is a party or by which it or any of its properties or assets are or
may be bound, in either case where such default could result in a
Material Adverse Effect. After giving effect to the Transactions, no
Termination Event or Potential Termination Event shall have occurred
and be continuing.
(g) Ownership of Property; Liens. The Company has good and
----------------------------
marketable title to, or valid leasehold interests in, or easements on
or other limited property interests in, all its material properties
and assets, except for minor defects in title and limitations on
property interests that do not interfere with its ability to conduct
its business as currently conducted or to utilize such properties and
assets for their intended purposes. All such material properties and
assets are free and clear of Liens, other than Liens expressly
permitted by subsection 8.3.
(h) Investment Company Act; Other Regulations. (i) The
-----------------------------------------
Company is not an "investment company", or a company "controlled" by
an "investment company", within the meaning of the Investment Company
Act of 1940, as amended.
(ii) The Company is not a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a
"holding company" or of a "subsidiary company" of a "holding company",
within the meaning of the Public Utility Holding Company Act of 1935,
as amended.
(iii) The Company is not engaged principally, or as one of
its important activities, in the business of extending credit for the
purpose of purchasing or carrying Margin Stock.
(iv) The assignment and transfer of the Participating
Interests hereunder and the use of the proceeds thereof and the other
Transactions will not violate or be inconsistent with the provisions
of the Regulations of the Board, including Regulations G, T, U and X.
(i) Taxes. The Company has filed or caused to be filed all
-----
Federal, and all material state and local, tax returns required to
have been filed by it and has paid or caused to be paid all taxes
shown thereon to be due and payable, and any assessments received by
it, except taxes that are being contested in accordance with
subsection 7.4. For purposes of this paragraph, "taxes" shall mean
any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions
thereto) that is imposed by any Governmental Authority.
(j) Ownership; Subsidiaries. All the issued and
-----------------------
outstanding capital stock of the Company is owned, legally and
beneficially, by C&A Products. The Company has no Subsidiaries.
(k) Accuracy and Completeness of Information. The
----------------------------------------
information, reports, financial statements, exhibits and schedules
furnished by or on behalf of the Company to the Administrative Agent
or any Bank in connection with the negotiation of any Transaction
<PAGE>
22
Document or included therein or delivered pursuant thereto, when taken
as a whole, did not contain, and as they may be amended, supplemented
or modified from time to time, will not contain, as of the Effective
Date any material misstatement of fact and did not omit, and as they
may be amended, supplemented or modified from time to time, will not
omit, to state as of the Effective Date any material fact necessary to
make the statements therein, in the light of the circumstances under
which they were, are or will be made, not materially misleading in
their presentation of the Transactions or of the Company.
(l) Pro Forma Balance Sheet. The Company has heretofore
-----------------------
furnished to the Administrative Agent and each of the Banks its pro
forma balance sheet after giving effect to the transactions to take
place on the Effective Date. Such balance sheet (i) was prepared in
good faith on the basis of reasonable assumptions and (ii) discloses
all material liabilities, direct or contingent, of the Company as of
the date thereof.
(m) No Material Adverse Change. There has been no material
--------------------------
adverse change in the business, properties, assets, operations or
financial condition of the Company (after giving effect to the
Transactions contemplated to occur on or prior to the Effective Date
pursuant to the Transaction Documents) since the date of the pro forma
balance sheet referred to in paragraph (l) above.
(n) Solvency. (i) The fair salable value of the assets of
--------
the Company exceeds the amount that will be required to be paid on or
in respect of the existing debts and other liabilities (including
contingent liabilities) of the Company. After giving effect to the
Transactions to occur on the Effective Date or such Closing Date, as
applicable, the fair salable value of the assets of the Company will
exceed the amount that will be required to be paid on or in respect of
the existing debts and other liabilities (including contingent
liabilities) of the Company.
(ii) The assets of the Company do not constitute unreasonably
small capital to carry out its business as conducted or as proposed to
be conducted. After giving effect to the Transactions to occur on the
Effective Date or such Closing Date, as applicable, the assets of the
Company will not constitute unreasonably small capital for the Company
to carry out its business as now conducted and as proposed to be
conducted, including the capital needs of the Company taking into
account the particular capital requirements of the business conducted
by it and projected capital requirements and capital availability
thereof.
(iii) The Company does not intend to incur debts beyond its
ability to pay such debts as they mature, taking into account the
timing and amounts of cash to be received by the Company and of
amounts to be payable on or in respect of debt of the Company.
(o) Employee Benefit Plans. The Company and each of its
----------------------
ERISA Affiliates is in compliance in all material respects with the
applicable provisions of ERISA and the regulations and published
interpretations thereunder except for such noncompliance which would
not be expected to result in a Material Adverse Effect. No Reportable
Event has occurred as to which the Company or any of its ERISA
Affiliates was required to file a report with the PBGC, other than
reports for which the 30 day notice requirement is waived, reports
that have been filed and reports the failure of which to file would
not result in a
<PAGE>
23
Material Adverse Effect and the present value of all benefit
liabilities under each Plan of the Company or any of its ERISA
Affiliates (on a termination basis and based on those assumptions used
to fund such Plan) did not, as of the last annual valuation date
applicable thereto, exceed by more than $7,500,000 the value of the
assets of such Plan. None of the Company or any of its ERISA
Affiliates has incurred or could reasonably be expected to incur any
Withdrawal Liability that could result in a Material Adverse Effect.
None of the Company or any of its ERISA Affiliates has received any
notification that any Multiemployer Plan is in reorganization or has
been terminated within the meaning of Title IV of ERISA, and no
Multiemployer Plan is reasonably expected to be in reorganization or
to be terminated where such reorganization or termination has resulted
or could reasonably be expected to result, through increases in the
contributions required to be made to such Plan or otherwise, in a
Material Adverse Effect.
The representations and warranties set forth in this
subsection 5.1 shall survive the initial transfer of a Participating
Interest and any Increase in the Net Investment. Upon discovery by
the Company, any Bank or the Administrative Agent of a breach of any
of the foregoing representations and warranties, the Person
discovering such breach shall give prompt written notice to such other
Persons.
5.2 Representations and Warranties of the Company Relating
------------------------------------------------------
to this Agreement and the Receivables. The Company hereby represents
- -------------------------------------
and warrants to the Administrative Agent and the Banks, (x) as of the
Effective Date, and (y) with respect to an Increase in Net Investment,
as of the related Closing Date, unless, in either case, such
representation or warranty expressly relates only to a prior date,
that:
(a) The document or computer file delivered pursuant to
subsection 6.1(j) is an accurate and complete listing in all
material respects of all the Receivables as of the date set forth
therein and the information contained therein with respect to the
identity of such Receivables is true and correct in all material
respects as of such date. As of such date, the aggregate amount
of Eligible Receivables is as set forth on such document or file.
(b) The Company has not sold, assigned or transferred, or
granted any existing Lien on, the Receivables or any of the other
Pooled Property, or any interest therein, to any Person, except
the Banks hereunder.
(c) Other than with respect to Receivables which the
Company shall have stated in writing (in the Daily Report or
otherwise) on the Closing Date therefor are not Eligible
Receivables on such date, with respect to each Receivable, all
consents, licenses, approvals or authorizations of or
registrations or declarations with any Governmental Authority
required to be obtained, effected or given by the Company in
connection with the conveyance of such Receivable to the Banks
have been duly obtained, effected or given and are in full force
and effect.
(d) This Agreement effects a valid transfer and assignment
to the Banks of an undivided, participating ownership interest in
all right, title and interest of the Company in the Receivables,
the Related Property and the proceeds thereof,
<PAGE>
24
including Recoveries relating thereto, or, if this Agreement does
not effect a transfer and assignment of such an ownership
interest, it effects a grant of a "security interest" (as defined
in the Uniform Commercial Code as in effect in the State of New
York) in such property to the Banks, which, in the case of
existing Receivables, the Related Property and the proceeds
thereof, is enforceable upon execution and delivery of this
Agreement, and which will be enforceable with respect to such
Receivables hereafter created and the proceeds thereof upon such
creation. On or prior to the initial Closing Date, all filings
and other acts necessary or advisable (including but not limited
to all filings and other acts necessary or advisable under the
Uniform Commercial Code of each relevant jurisdiction) have been
made or performed in order to grant the Banks a first priority
perfected ownership interest in respect of all Receivables and
Related Property. On the Effective Date and, in the case of the
Receivables hereafter created and the proceeds thereof, upon the
creation thereof, the Banks shall have a first priority perfected
ownership or security interest in such property.
(e) This Agreement effects a grant of a "security interest"
(as defined in the Uniform Commercial Code as in effect in the
State of New York) in all of the Equipment, the Transferred
Agreement and the Accounts to the Banks, which, in the case of
such property and the proceeds thereof existing as of the date
hereof, is enforceable upon execution and delivery of this
Agreement, and which will be enforceable with respect to such
property hereafter created and the proceeds thereof upon such
creation. On or prior to the initial Closing Date, all filings
and other acts necessary or advisable (including but not limited
to all filings and other acts necessary or advisable under the
Uniform Commercial Code of each relevant jurisdiction) have been
made or performed in order to grant the Banks a first priority
perfected ownership interest in respect of all such property. On
the Effective Date and, in the case of such property hereafter
created and the proceeds thereof, upon the creation thereof, the
Banks shall have a first priority perfected ownership or security
interest in such property.
(f) The chief executive office of the Company is listed on
Schedule 2, which office is the place where the Company is
"located" for the purposes of Section 9-103(3)(d) of the Uniform
Commercial Code of the State of ______________, and the offices
at which the Company keeps its records concerning the Receivables
are also listed on said Schedule.
(g) No Termination Event or Potential Termination Event has
occurred and is continuing.
(h) Each Receivable that is included by the Company in its
determination of the aggregate Adjusted Principal Amount of all
Eligible Receivables shall be a Receivable with respect to which
all of the criteria contained in the definition of "Eligible
Receivable" hereunder are satisfied.
The representations and warranties set forth in this
subsection 5.2 shall survive the initial transfer of a Participating
Interest and any Increase in Net Investment. Upon
<PAGE>
25
discovery by the Company, any Bank or the Administrative Agent or of a
breach of any of the foregoing representations and warranties, the
Person discovering such breach shall give prompt written notice to
such other Persons.
5.3 Retransfer Obligation. (a) In the event of any breach
---------------------
of any of the representations or warranties of the Company contained
in subsection 5.2(d), (e), (f) or (h), then upon the earlier to occur
of the discovery of such event by the Company, or receipt by the
Company of written notice of such event given by the Administrative
Agent, the outstanding Principal Amount of Receivables shall be
reduced by the Principal Amount of Receivables as to which such
representations and warranties were breached; provided, however, that
-------- -------
(i) prior to the Amortization Period, to the extent that such a
reduction would cause the Invested Percentage to be more than the
Maximum Invested Percentage, the Company agrees to acquire such
Receivables and any Related Property with respect thereto on the terms
and conditions set forth in paragraph (b) below and (ii) during the
Amortization Period, the Company agrees to acquire such Receivables
and any Related Property with respect thereto on the terms and
conditions set forth in paragraph (b) below.
(b) If any breach of a representation or warranty which
necessitates the Company's reacquisition of a Receivable pursuant to
paragraph (a) above remains uncured on the date which is 30 days after
discovery or notice of such breach, the Company shall acquire such
Receivable and any Related Property with respect thereto by depositing
into the relevant Concentration Account in immediately available funds
on such 30th day (or, if such day is not a Business Day, on the next
succeeding Business Day, an amount equal to (i) prior to an
Amortization Period, the lesser of (A) the amount necessary to cause
the Invested Percentage to equal the Maximum Invested Percentage and
(B) the Principal Amount of such Receivable or (ii) during an
Amortization Period, the Principal Amount of such Receivables (in
either case, a "Retransfer Payment"). Upon deposit of the Retransfer
Payment, the Banks shall automatically and without further action be
deemed to transfer, assign, set-over and otherwise convey to the
Company, free and clear of any Lien created by the Banks but otherwise
without recourse, representation or warranty, all the right, title and
interest of the Banks in and to such Receivable, all Related Property
with respect thereto, all monies due or to become due with respect
thereto and all proceeds thereof; and such reacquired Receivable shall
be treated by the Banks as collected in full as of the date on which
it was transferred. The Administrative Agent shall execute such
documents and instruments of transfer or assignment and take such
other actions as shall reasonably be requested by the Company to
effect the conveyance of such Receivables pursuant to this subsection
5.3. The obligation to reacquire any Receivable shall constitute the
sole remedy respecting any breach of the representations, warranties
and covenants set forth in subsection 5.2(d), (e), (f) or (h) with
respect to such Receivables available to Banks or the Administrative
Agent on behalf of the Banks.
5.4 Obligations Unaffected. The obligations of the
----------------------
Company to the Administrative Agent and the Banks under this Agreement
shall not be affected by reason of any invalidity, illegality or
irregularity of any Receivable or any transfer and assignment of a
Receivable.
<PAGE>
26
ARTICLE VI
Conditions to Effectiveness/Transfers/Reinvestments
6.1 Effective Date. This Agreement shall become effective
--------------
on the date (the "Effective Date") on which each of the following
conditions precedent are either (x) satisfied or (y) waived by the
Required Banks:
(a) The Company, each Servicer and the Master Servicer
shall have delivered to the Administrative Agent, with a copy for
each Bank, (i) a copy of the certificate or articles of
incorporation, including all amendments thereto, of such Person,
certified as of a recent date by the Secretary of State of the
state of incorporation thereof, and such certificate or articles
shall be in form and substance satisfactory to the Administrative
Agent, and a certificate as to the good standing of such Person
as of a recent date, from such Secretary of State; (ii) a
certificate of the Secretary or Assistant Secretary of such
Person dated the Effective Date and certifying (A) that attached
thereto is a true and complete copy of the Bylaws of such Person
as in effect on the Effective Date and at all times since a date
prior to the date of the resolutions described in clause (B)
below, (B) that attached thereto is a true and complete copy of
resolutions in form and substance satisfactory to the
Administrative Agent and duly adopted by the Board of Directors
of such Person authorizing the execution, delivery and
performance of the Transaction Documents to which such Person is
a party and the transactions contemplated thereby, and that such
resolutions have not been modified, rescinded or amended and are
in full force and effect, (C) that the certificate or articles of
incorporation of such Person has not been amended since the date
of the last amendment thereto shown on the certificate of good
standing furnished pursuant to clause (i) above and (D) as to the
incumbency and specimen signature of each officer executing any
Transaction Document or any other document delivered in
connection herewith or therewith on behalf of such Person; and
(iii) a certificate of another officer as to the incumbency and
specimen signature of the Secretary or Assistant Secretary
executing the certificate pursuant to clause (ii) above.
(b) There shall have been delivered to the Administrative
Agent, with a copy for each Bank, the written opinions of (i)
Cravath, Swaine & Moore, special counsel for the Company, the
Servicers and the Master Servicer, in substantially the forms of
Exhibits D-1 and D-2, (ii) Elizabeth R. Philipp, Esq., general
counsel of Collins & Aikman Corporation, in substantially the
form of Exhibit D-3, (iii) Stikeman & Elliott, special Canadian
counsel, in substantially the form of Exhibit D-4, and (iv) each
local state counsel listed on Schedule 6, in substantially the
form of Exhibit D-5, in each case addressed to the Administrative
Agent and the Banks, dated the Effective Date, and in form and
substance satisfactory to the Administrative Agent, and such
additional opinions, if any, as may be reasonably requested by
the Administrative Agent.
(c) Appropriate financing statements relating to the
Receivables shall have been executed and delivered and shall be
in proper form for filing in each appropriate
<PAGE>
27
filing office in the jurisdiction in which the Company maintains
its principal executive office.
(d) The Administrative Agent shall have received search
reports satisfactory to the Administrative Agent dated a date
reasonably near to the Effective Date, listing all effective
financing statements which name the Company as debtor and which
are filed in the jurisdictions in which filings were made
pursuant to paragraph (c) above, together with copies of such
other financing statements or notices of assignment (none of
which shall cover any Receivables unless a corresponding
termination statement has been delivered to the Administrative
Agent).
(e) There shall have been delivered to the Administrative
Agent search reports acceptable to the Administrative Agent dated
a date reasonably near the Effective Date confirming the absence
of any tax lien and judgment lien filings made against the
Company or any of its assets in any filing office in any
jurisdiction where filings were made pursuant to paragraph (c)
above.
(f) The Administrative Agent shall have received a
certificate from the Company, dated the Effective Date and signed
by one of its Responsible Officers, in form and substance
satisfactory to the Administrative Agent, confirming compliance
with the conditions precedent set forth in subsection 6.2.
(g) The Administrative Agent shall have received all fees
and other amounts due and payable on or prior to the Effective
Date.
(h) The Administrative Agent shall have received (i) a copy
of the Receivables Sale Agreement, duly executed on behalf of C&A
Products, each of the Sellers and the Company and (ii) the
Subordination Agreement, duly executed on behalf of each of C&A
Products, each of the Sellers and the Company.
(i) The initial funding under the Credit Agreement shall
have occurred or shall occur simultaneously with the initial
purchase under this Agreement.
(j) The Administrative Agent shall have received a
microfiche or other tangible evidence, as certified by a
Responsible Officer of the Company, acceptable to the
Administrative Agent, showing as of a date acceptable to the
Administrative Agent prior to the Effective Date the Obligors
whose Receivables have been transferred to the Company and the
balance of the Receivables with respect to each such Obligor as
of such date.
(k) A Responsible Officer of the Company shall have
certified that all conditions to the obligations of the Company
and each of the Sellers under the Receivables Sale Agreement
shall have been satisfied in all respects (or waived by the
Required Banks).
<PAGE>
28
(l) The Administrative Agent shall have received an agreed-
upon procedures letter relating to historical financial
information with respect to the Receivables from independent
auditors satisfactory to the Administrative Agent.
(m) The Administrative Agent shall have received, as
certified by a Responsible Officer of the Company, a copy of the
written Policies, or, to the extent that the credit and
collection policies of the Sellers are not in written form at the
Effective Date, a written description of the historical credit
and collection practices of the Sellers and proposed practices
for the Company, in each case in form and substance acceptable to
the Administrative Agent.
(n) The Administrative Agent shall have received licenses
or contingent licenses, or the Administrative Agent shall
otherwise be satisfied with its ability, to use any computer
programs, material tapes, disks, cassettes and data necessary or
advisable to permit the collection of the Receivables by a
Servicer without the participation of any Seller or the Company.
(o) The Administrative Agent shall have reviewed the
computer programs, material, data and back-up plans of the
Sellers required for the collection of Receivables and shall be
satisfied that the foregoing, including the procedures of the
Sellers for the preparation, storage and retrieval thereof, are
sufficient to permit (i) the Company or the Administrative Agent
to collect the Receivables with or without the participation of
the Sellers or any servicer and (ii) a third-party servicer to
collect the Receivables with or without the participation of the
Sellers or the Company.
(p) The composition of the Company's Board of Directors
(including the independent director) shall be reasonably
acceptable to the Administrative Agent.
(q) The Administrative Agent shall have received the pro
forma opening balance sheet for the Company referred to in
subsection 5.1(l).
(r) The Administrative Agent shall have received a
certificate dated the Effective Date and signed by a Responsible
Officer of the Company, substantially in the form of Exhibit G,
to the effect that the Company will be solvent after giving
effect to the transactions occurring on the Effective Date.
6.2 Condition to each Increase in Net Investment. The
--------------------------------------------
obligations of the Banks to increase the Net Investment on any Closing
Date is subject to the conditions that:
(a) no Termination Event or Potential Termination Event
shall have occurred and then be continuing, and no such
Termination Event or Potential Termination Event shall occur as a
result of the proposed Increase in Net Investment on such Closing
Date;
(b) the representations and warranties of the Company set
forth in Article V shall be true and correct in all material
respects on and as of such Closing Date;
<PAGE>
29
(c) the representations and warranties of the Servicers and
the Master Servicer set forth in Article XII shall be true and
correct in all material respects on and as of such Closing Date;
and
(d) the Administrative Agent shall have timely received all
notices, statements and certificates relating to such Closing
Date required by subsections 2.3 and 12.5.
Each Increase in Net Investment on any Closing Date shall constitute a
representation and warranty by the Company that the conditions to the
transfer thereof on such Closing Date, as the case may be, have been
satisfied.
ARTICLE VII
Affirmative Covenants
The Company hereby agrees that, unless and until this
Agreement is terminated pursuant to subsection 4.1, the Company shall:
7.1 Financial Statements. Furnish to each Bank:
--------------------
(a) as soon as available, but in any event within 90 days
after the end of each fiscal year of the Company, a copy of the
balance sheet of the Company as at the end of such year and the
related statements of income and retained earnings and cash flows
for such year, setting forth in each case (beginning with the
financial statements delivered for the 1995 fiscal year) in
comparative form the figures for the previous year, reported on
without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, by Arthur
Andersen & Co. or other independent certified public accountants
of nationally recognized standing reasonably acceptable to the
Administrative Agent; and
(b) as soon as available, but in any event not later than
45 days after the end of each of the first three quarterly
periods of each fiscal year of the Company, the unaudited balance
sheet of the Company as at the end of such quarter and the
related unaudited statements of income and retained earnings and
cash flows of the Company for such quarter and the portion of the
fiscal year through the end of such quarter, setting forth in
each case, with respect to any such financial statements covering
any fiscal quarter commencing after the first anniversary of the
Effective Date, in comparative form the figures for the
corresponding quarter and portion of the previous year, certified
by a Responsible Officer of the Company as being fairly stated in
all material respects (subject to normal year-end audit
adjustments);
all such financial statements shall be complete and correct in all
material respects and shall be prepared in reasonable detail and in
accordance with GAAP applied consistently throughout the periods
reflected therein and with prior periods (except as approved by such
accountants or Responsible Officer, as the case may be, and disclosed
therein).
<PAGE>
30
7.2 Certificates; Other Information. Furnish to each Bank:
-------------------------------
(a) concurrently with the delivery of the financial
statements referred to in subsection 7.1(a), a certificate of the
independent certified public accountants reporting on such
financial statements stating that in making the examination
necessary therefor no knowledge was obtained of any Termination
Event or Potential Termination Event, except as specified in such
certificate;
(b) concurrently with the delivery of the financial
statements referred to in subsections 7.1(a) or (b), a
certificate of a Responsible Officer of the Company stating that,
to the best of such Responsible Officer's knowledge, the Company
during such period has observed or performed all of its covenants
and other agreements, and satisfied every condition, contained in
the Transaction Documents to which it is a party to be observed,
performed or satisfied by it, and that such Responsible Officer
has obtained no knowledge of any Termination Event or Potential
Termination Event, except as specified in such certificate; and
(c) promptly, such additional financial and other
information as any Bank may from time to time reasonably request
by written notice to the Company (through the Administrative
Agent).
7.3 Existence; Businesses and Properties; Insurance;
------------------------------------------------
Receivables. (a) Do or cause to be done all things necessary to
- -----------
preserve, renew and keep in full force and effect its legal existence.
(b) Do or cause to be done all things necessary to obtain,
preserve, renew, extend and keep in full force and effect the rights,
licenses, permits, franchises, authorizations, patents, copyrights,
trademarks and trade names material to the conduct of its business;
comply in all material respects with all applicable laws, rules,
regulations and orders of any Governmental Authority, whether now in
effect or hereafter enacted; and at all times maintain and preserve
all property material to the conduct of such business and keep such
property in good repair, working order and condition and from time to
time make, or cause to be made, all needful and proper repairs,
renewals, additions, improvements and replacements thereto necessary
in order that the business carried on in connection therewith, if any,
may be properly conducted at all times.
(c) Keep its insurable properties insured (including
through self-insurance) at all times by financially sound and
reputable insurers in such amounts as shall be customary for similar
businesses and maintain such other insurance, of such types, to such
extent and against such risks, as is customary with companies in the
same or similar businesses; and maintain such other insurance as may
be required by law.
(d) Defend the right, title and interest of the Banks in,
to and under the Receivables and the other Pooled Property, whether
now existing or hereafter created, against all claims of third parties
claiming through or under the Company, the Sellers, the Master
Servicer or the Servicers.
<PAGE>
31
(e) Duly fulfill all material obligations on its part to be
fulfilled under or in connection with each Receivable and do nothing
that could reasonably be expected to impair the rights of the Banks in
any Receivable.
7.4 Taxes. Pay and discharge promptly all taxes,
-----
assessments and governmental charges or levies imposed upon it or upon
its income or profits or in respect of its property, before the same
shall become delinquent or in default, as well as all lawful claims
for labor, materials and supplies or otherwise which, if unpaid, might
give rise to a Lien upon such properties or any part thereof;
provided, however, that such payment and discharge shall not be
- -------- -------
required with respect to any such tax, assessment, charge, levy or
claim so long as (a) the validity or amount thereof shall be contested
in good faith by appropriate proceedings and the Company shall set
aside on its books adequate reserves as required by GAAP with respect
thereto, (b) such tax, assessment, charge, levy or claim is in respect
of property taxes for property that the Company has determined to
abandon and the sole recourse for such tax, assessment, charge, levy
or claim is to such property or (c) the amount of such taxes
assessments, charges, levies and claims and interest and penalties
thereon does not exceed $100,000 in the aggregate.
7.5 Inspection of Property; Books and Records; Discussions.
------------------------------------------------------
Maintain all financial records in accordance with GAAP and permit any
Persons designated by the Administrative Agent to visit and inspect
the financial records and the properties of the Company at reasonable
times, upon reasonable notice and as often as reasonably requested and
to make extracts from and copies of such financial records, and permit
any Persons designated by the Administrative Agent to discuss the
affairs, finances and condition of the Company with the officers
thereof and independent accountants therefor (subject to reasonable
requirements of confidentiality, including requirements imposed by law
or by contract).
7.6 Notices. Promptly give notice to the Administrative
-------
Agent and each Bank of:
(a) the occurrence of any Termination Event, Potential
Termination Event, Servicer Default or Servicer Event of Default,
specifying the nature and extent thereof and the corrective
action (if any) proposed to be taken with respect thereto;
(b) any Lien not permitted by subsection 8.3 on any
Receivable or any other Pooled Property other than the
conveyances and Liens hereunder and under the Receivables Sale
Agreement;
(c) the filing or commencement of any action, suit or
proceeding, whether at law or in equity or by or before any
Governmental Authority, against the Company in respect of which
there is a reasonable possibility of an adverse determination and
which, if adversely determined, could reasonably be expected to
result in a Material Adverse Effect; and
(d) any development known to a Responsible Officer of the
Company that has resulted in, or could reasonably be anticipated
to result in, a Material Adverse Effect.
<PAGE>
32
7.7 ERISA. (a) Comply in all material respects with the
-----
applicable provisions of ERISA and (b) furnish to the Administrative
Agent and each Bank (i) as soon as possible, and in any event within
30 days after any Responsible Officer of the Company or any ERISA
Affiliate of any of them knows or has reason to know that any
Reportable Event has occurred that alone or together with any other
Reportable Event could reasonably be expected to result in liability
of the Company or any of its ERISA Affiliates to the PBGC in an
aggregate amount exceeding $10,000,000, a statement of a Responsible
Officer of the Company setting forth details as to such Reportable
Event and the action proposed to be taken with respect thereto,
together with a copy of the notice, if any, of such Reportable Event
given to the PBGC, (ii) promptly after any Responsible Officer of the
Company learns of receipt thereof, a copy of any notice the Company or
any of its ERISA Affiliates may receive from the PBGC relating to the
intention of the PBGC to terminate any Plan or Plans (other than a
Plan maintained by any of their ERISA Affiliates which is considered
an ERISA Affiliate only pursuant to subsection (m) or (o) of Section
414 of the Code) or to appoint a trustee to administer any Plan or
Plans, (iii) within 20 days after the due date for filing with the
PBGC pursuant to Section 412(n) of the Code a notice of failure to
make a required installment or other payment with respect to a Plan, a
statement of a Responsible Officer of the Company setting forth
details as to such failure and the action proposed to be taken with
respect thereto, together with a copy of such notice given to the PBGC
and (iv) promptly after any Responsible Officer of the Company learns
thereof and in any event within 30 days after receipt thereof by the
Company or any ERISA Affiliate from the sponsor of a Multiemployer
Plan, a copy of each notice received by the Company or such ERISA
Affiliate concerning (A) the imposition of Withdrawal Liability or (B)
a determination that a Multiemployer Plan is, or is expected to be,
terminated or in reorganization, in each case within the meaning of
Title IV of ERISA.
7.8 Use of Proceeds. The Company shall use the proceeds of
---------------
the initial transfer and assignment of the Participating Interest only
to acquire all the Receivables owned by the Sellers on the date of
such transfer and assignment and to pay fees and expenses pursuant to
the Transaction Documents. The Company shall use the proceeds of any
Increases in Net Investment (a) to acquire Receivables from the
Sellers pursuant to the Receivables Sale Agreement in an amount not to
exceed the aggregate amount specified in the applicable Daily Report,
(b) to pay operating expenses of the Company, (c) to make payments on
account of the Subordinated Notes in the aggregate amount specified in
the applicable Daily Report, and (d) to make payments on account of
Restricted Payments in the aggregate amount specified in the
applicable Daily Report.
7.9 Separate Corporate Existence. The Company shall:
----------------------------
(i) Maintain its own deposit account or accounts, separate
from those of any Affiliate, with commercial banking
institutions. The funds of the Company will not be diverted to
any other Person or for other than corporate uses of the Company,
nor will such funds be commingled with the funds of C&A Products
or any other Affiliate of C&A Products.
(ii) To the extent that it shares the same officers or
other employees as any of its stockholders or Affiliates, the
salaries of and the expenses related to providing
<PAGE>
33
benefits to such officers and other employees shall be fairly
allocated among such entities, and each such entity shall bear
its fair share of the salary and benefit costs associated with
all such common officers and employees.
(iii) To the extent that it jointly contracts with any of
its stockholders or Affiliates to do business with vendors or
service providers or to share overhead expenses, the costs
incurred in so doing shall be allocated fairly among such
entities, and each such entity shall bear its fair share of such
costs. To the extent that the Company contracts or does business
with vendors or service providers where the goods and services
provided are partially for the benefit of any other Person, the
costs incurred in so doing shall be fairly allocated to or among
such entities for whose benefit the goods or services are
provided, and each such entity shall bear its fair share of such
costs. All material transactions between the Company and any of
its Affiliates are set forth on Schedule 4 (and copies of any
agreements, documents or other instruments executed and delivered
in connection therewith have been delivered to the Administrative
Agent) and all future material transactions shall be only on an
arm's-length basis.
(iv) Maintain a principal executive and administrative
office through which its business is conducted separate from
those of C&A Products and its Affiliates. To the extent that the
Company and any of its stockholders or Affiliates have offices in
the same location, there shall be a fair and appropriate
allocation of overhead costs among them, and each such entity
shall bear its fair share of such expenses.
(v) Issue separate financial statements prepared not less
frequently than quarterly and prepared according to generally
accepted accounting principles.
(vi) Conduct its affairs strictly in accordance with its
certificate of incorporation and observe all necessary,
appropriate and customary corporate formalities, including, but
not limited to, holding all regular and special stockholders' and
directors' meetings appropriate to authorize all corporate action
(or, in lieu of such meetings, authorize such action by unanimous
written consent), keeping separate and accurate minutes of its
meetings, passing all resolutions or consents necessary to
authorize actions taken or to be taken, and maintaining accurate
and separate books, records and accounts, including, but not
limited to, payroll and intercompany transaction accounts.
(vii) Compensate Affiliates of the Company for operational
services provided by such Affiliates in an amount equal to the
amount which would be charged by unaffiliated third parties
pursuant to an arm's-length transaction.
(viii) Comply with the procedures set forth in Schedule 7
hereto. [to be based on assumptions in CSM opinion]
7.10 Facility Rating. Promptly upon request of the
---------------
Administrative Agent, at the expense of the Company, cause the
receivables purchase facility created by this
<PAGE>
34
Agreement to be rated by S&P or another nationally recognized rating
agency designated by the Administrative Agent.
7.11 Lockbox Agreements. Within 60 days after the
------------------
Effective Date, deliver to the Administrative Agent one or more
confirmations that the Lockbox Accounts, in the name of the Company,
have been established in accordance with the terms of this Agreement
and deliver to the Administrative Agent an executed Lockbox Agreement
from each of the Lockbox Banks.
7.12 Eligible Letters of Credit. (a) Submit to the
--------------------------
relevant issuing bank all documentation necessary to effect a drawing
under any Eligible Letter of Credit immediately upon the occurrence of
any event entitling the Company to receive any payment thereunder and
(b) cause such payment to be deposited directly into the U.S.
Concentration Account.
ARTICLE VIII
Negative Covenants
The Company hereby agrees that, unless and until this
Agreement is terminated pursuant to subsection 4.1, the Company shall
not directly or indirectly:
8.1 Accounting of Transfers. Prepare any financial
-----------------------
statements which shall account for the transactions contemplated
hereby (other than capital contributions contemplated hereby) in any
manner other than as sales of participating interests in the Purchased
Receivables by the Company to the Banks or in any other respect
account for or treat the transactions contemplated hereby (including
for financial accounting purposes, except as required by law) (other
than capital contributions and loans from Affiliates contemplated
hereby) in any manner other than as assignments and transfers of
participating interests in the Purchased Receivables by the Company to
the Banks, provided however that this subsection 8.1 shall not apply
-------- -------
for any tax or tax accounting purposes.
8.2 Limitation on Indebtedness. Create, incur, assume or
--------------------------
suffer to exist any Indebtedness, except: (a) Indebtedness evidenced
by the Subordinated Notes; (b) Indebtedness representing fees,
expenses and indemnities payable pursuant to and in accordance with
the Transaction Documents; and (c) Indebtedness for services supplied
or furnished to the Company in an amount not to exceed $50,000 at any
time outstanding.
8.3 Limitation on Liens. Create, incur, assume or suffer
-------------------
to exist any Lien upon any of its property, assets or revenues,
whether now owned or hereafter acquired, except for (a) Liens created
pursuant to this Agreement and (b) Liens for taxes not yet due or
which are being contested in good faith by appropriate proceedings
provided that adequate reserves with respect thereto are maintained on
- --------
the books of the Company in conformity with GAAP.
8.4 Limitation on Guarantees. Create, incur, assume or
------------------------
suffer to exist any obligation constituting a Guarantee.
<PAGE>
35
8.5 Limitation on Fundamental Changes. Enter into any
---------------------------------
merger, consolidation or amalgamation, or liquidate, wind up or
dissolve itself (or suffer any liquidation or dissolution), or convey,
sell, lease, assign, transfer or otherwise dispose of, all or
substantially all of its property, business or assets, or make any
material change in its present method of conducting business, other
than the assignments and transfers to the Banks contemplated hereby.
8.6 Limitation on Sale of Assets. Convey, sell, lease,
----------------------------
assign, transfer or otherwise dispose of any of its property, business
or assets (including, without limitation, receivables and leasehold
interests), whether now owned or hereafter acquired, other than (a)
the assignments and transfers contemplated hereby and (b) sales or
other dispositions of property with an aggregate book value not
exceeding $10,000 in any period of twelve consecutive fiscal months.
8.7 Limitation on Dividends and Payments on Subordinated
----------------------------------------------------
Notes. Declare or pay any dividend on, or make any payment on account
- -----
of, or set apart assets for a sinking or other analogous fund for, the
purchase, redemption, defeasance, retirement or other acquisition of,
any shares of any class of Capital Stock of the Company, whether now
or hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or
in obligations of the Company (such declarations, payments, setting
apart, purchases, redemptions, defeasances, retirements, acquisitions
and distributions being herein called "Restricted Payments"), or make,
directly or indirectly, payments in any form in respect of the
Subordinated Notes except that, so long as no Termination Event or
Potential Termination Event shall have occurred and be continuing or
would result therefrom, the Company may (a) make payments on the
Subordinated Notes and (b) make Restricted Payments, each pursuant to
subsection 2.7.
8.8 Business of the Company. Engage at any time in any
-----------------------
business or business activity other than the acquisition of
Receivables pursuant to the Receivables Sale Agreement, the
assignments and transfers hereunder and the other transactions
contemplated by the Transaction Documents, and any activity incidental
to the foregoing and necessary or convenient to accomplish the
foregoing, or enter into or be a party to any agreement or instrument
other than in connection with the foregoing, except those agreements
or instruments set forth on Schedule 5.
8.9 Limitation on Investments, Loans and Advances. Make
---------------------------------------------
any advance, loan, extension of credit or capital contribution to, or
purchase any stock, bonds, notes, debentures or other securities of or
any assets constituting a business unit of, or make any other
investment in, any Person, except for the Receivables and the other
Pooled Property.
8.10 Limitation on Sales and Leasebacks. Enter into any
----------------------------------
arrangement with any Person providing for the leasing by the Company
of real or personal property which has been or is to be sold or
transferred by the Company to such Person or to any other Person to
whom funds have been or are to be advanced by such Person on the
security of such property or rental obligations of the Company.
<PAGE>
36
8.11 Transactions with Affiliates. Sell or transfer any
----------------------------
property or assets to, or purchase or acquire any property or assets
from, or otherwise engage in any other transactions with, any of its
Affiliates except (a) as expressly contemplated by the Transaction
Documents; (b) as disclosed on Schedule 4; or (c) with the unanimous
approval or ratification of the Board of Directors of the Company upon
fair and reasonable terms no less favorable to the Company than it
could reasonably expect to obtain in a comparable arm's length
transaction with a Person which is not an Affiliate.
8.12 Capital Stock. Issue any Capital Stock to any Person
-------------
or permit any of its Capital Stock to be transferred to any Person,
except pursuant to the Pledge Agreement.
8.13 Amendments. Amend (or permit to be amended) section
----------
___, ___, ___, ___, ___, ___, ___ or ____ of its Certificate of
Incorporation.
8.14 Receivables Sale Agreement, etc. Amend, supplement or
-------------------------------
otherwise modify (or permit to be amended, supplemented or otherwise
modified) the Receivables Sale Agreement or any of the other
Transaction Documents or give any consent or waiver to any Seller
thereunder, provided that, with respect to any Lockbox Agreement, the
--------
Company shall be permitted to amend, supplement or otherwise modify
any such Lockbox Agreement so long as (a) such amendment, supplement
or modification could not be reasonably expected to have a Material
Adverse Effect and (b) the Administrative Agent shall have received a
substantially final draft of such amendment, supplement or
modification at least five Business Days prior to the effective date
thereof.
8.15 Policies. Amend, supplement or otherwise modify in
--------
any material respect (or permit to be amended, supplemented or
otherwise modified in any material respect) the Policies or vary the
implementation of the Policies other than (a) with the consent of the
Required Banks and (b) changes that are required by applicable law;
provided, that material changes to the Policies shall include, without
- --------
limitation, changes to the timing of Charge-Offs of Receivables and
changes to the creditworthiness criteria used in determining whether
to extend credit to a Person and in determining the amount of such
credit to extend.
8.16 No Powers of Attorney. Grant any powers of attorney
---------------------
to any Person for any purposes except (a) for the purpose of
permitting any Person to perform any ministerial functions on behalf
of the Company that are not prohibited by or inconsistent with the
terms of the Transaction Documents; (b) to the Administrative Agent in
connection herewith; or (c) as expressly permitted by the Transaction
Documents.
8.17 Receivables Not To Be Evidenced by Promissory Notes.
---------------------------------------------------
Take any action to cause any Receivable to be evidenced by any
"instrument" (as defined in the Uniform Commercial Code as in effect
in any state in which the Company's or any Seller's chief executive
offices or books and records relating to such Receivable are located)
other than as expressly contemplated by the Policies.
8.18 Ownership of Assets and Property. Own or lease any
--------------------------------
material tangible assets other than as expressly contemplated pursuant
to the terms of this Agreement and
<PAGE>
37
the other Transaction Documents, or own or lease any facilities or
incur, create, assume or permit to exist any lease obligations other
than arms' length lease obligations to Affiliates or third parties in
respect of office space, equipment and computer time.
8.19 Rescission or Cancellation. Rescind or cancel any
--------------------------
Receivable or modify or extend any term or provision of any thereof
without the prior written consent of the Required Banks, except (a) in
the ordinary course of its business and consistent with the Policies
or (b) as required by any Requirement of Law, provided that the
--------
Company may cause Receivables to become Charge-Offs and may allow
Sellers to make Adjustments in accordance with subsection 2.5 of the
Receivables Sale Agreement.
8.20 Ineligible Receivables. Without the prior written
----------------------
approval of the Required Banks, take any action to cause, or which
would permit, an Eligible Receivable to cease to be an Eligible
Receivable, except as otherwise expressly provided for in this
Agreement.
8.21 Offices. (a) Move outside the state where such
-------
office is now located the location of its chief executive office or of
any of the offices where it keeps its records with respect to the
Receivables without (i) 30 days' prior written notice to the
Administrative Agent and (ii) taking all actions reasonably requested
by the Administrative Agent (including but not limited to all filings
and other acts necessary or advisable under the Uniform Commercial
Code of each relevant jurisdiction) in order to continue the Banks'
first priority perfected ownership interest in all Receivables now
owned or hereafter created or (b) fail to give the Administrative
Agent prompt notice of a change within the state where such office is
now located of the location of its chief executive office or any
office where it keeps its records with respect to the Receivables.
8.22 Addition of Sellers. Agree to the addition of any
-------------------
Subsidiary as an additional Seller pursuant to subsection 9.14 of the
Receivables Sale Agreement unless (a) the Required Banks have approved
such addition in writing and (b) such Subsidiary shall have been
simultaneously added as a Servicer party hereto pursuant to subsection
12.9 hereof.
8.23 Optional Termination of Seller. Designate any Seller
------------------------------
as a Seller to be terminated as a Seller pursuant to subsection
9.15(b) of the Receivables Sale Agreement unless (a) the Required
Banks have approved such designation in writing and (b) if such Seller
is a Servicer hereunder, such Seller shall have been terminated as a
Servicer pursuant to subsection 12.10 hereof.
8.24 Operating Expenses. Incur or otherwise become liable
------------------
for operating expenses other than expenses for office space,
equipment, personnel, office supplies, computer time, services of
third party professionals and other reasonable overhead expenses.
<PAGE>
38
ARTICLE IX
Events of Termination
If any of the following events (herein called "Termination
Events") shall have occurred and be continuing:
(a) the Company shall fail to deliver any Daily Report or
any Settlement Statement conforming in all material respects to
the requirements of subsection 12.5 and such failure shall
continue for two consecutive Business Days after the
Administrative Agent shall have delivered notice thereof to the
Company, provided that if a Force Majeure Delay shall have
--------
occurred with respect to any Servicer or the Master Servicer, as
the case may be, (i) in the case of such an event with respect to
a Servicer, the failure of any Daily Report or Settlement
Statement to contain information with respect to the Receivables
serviced by such Servicer or (ii) in the case of such an event
with respect to the Master Servicer, the failure of the Company
to deliver any Daily Report or Settlement Statement, shall not,
in either case, constitute a Termination Event unless such
failure continues for longer than the lesser of (x) ten
consecutive Business Days and (y) the length of such Force
Majeure Delay (or, if greater, two Business Days) after the
Administrative Agent shall have delivered notice of such failure
to the Company;
(b) the Company shall fail to pay, or the Banks or the
Administrative Agent shall not be paid, any amount (i) required
to be paid hereunder in respect of reduction of the Net
Investment when due or (ii) required to be paid in respect of
Purchase Discount Amounts, any other amounts payable to the Banks
or Administrative Agent or any payment reflected in any Daily
Report or Settlement Statement as being required to be made by
the Company, in any case, with respect to this clause (ii),
within five Business Days after the date when due;
(c) default shall be made in the due observance or
performance by the Company of any covenant, condition or
agreement contained in subsection 7.3(a), 7.6(a) or 7.8 or in
Article VIII;
(d) the Company shall fail to observe or perform any
covenant or agreement applicable to it contained herein (other
than as specified in subsection (a), (b) or (c) of this Article
IX), provided that no such failure shall constitute a Termination
--------
Event under this paragraph (d) unless such failure shall continue
unremedied for a period of 30 consecutive days in the case of
subsection 7.3(b) or 7.3(c) and 15 consecutive days in the case
of all others, in each case after notice thereof from the
Administrative Agent or the Required Banks to the Company;
(e) any representation, warranty, certification or
statement made or deemed made by the Company in this Agreement or
in any Settlement Statement or other certificate, financial
statement or other document delivered pursuant to this Agreement
shall prove to have been false or misleading in any material
respect on or as of the date made or deemed made; provided that a
--------
Termination Event shall not be
<PAGE>
39
deemed to have occurred under this paragraph (e) based upon a
breach of a representation or warranty contained in subsection
5.2(d), (e), (f) or (h) if the Company shall have complied with
the provisions of subsection 5.3(b) in respect thereof;
(f) (i) an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (A) relief in respect of the Company, or of
a substantial part of its property or assets, under Title 11 of
the United States Code, as now constituted or hereafter amended,
or any other Federal or state bankruptcy, insolvency,
receivership or similar law, (B) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official
for the Company or for a substantial part of its property or
assets or (C) the winding-up or liquidation of the Company; and
such proceeding or petition shall continue undismissed for 60
days or an order or decree approving or ordering any of the
foregoing shall be entered; or (ii) the Company shall (A)
voluntarily commence any proceeding or file any petition seeking
relief under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other Federal or state
bankruptcy, insolvency, receivership or similar law, (B) consent
to the institution of, or fail to contest in a timely and
appropriate manner, any proceeding or the filing of any petition
described in clause (i) above, (C) apply for or consent to the
appointment of a receiver, trustee, custodian, sequestrator,
conservator or similar official for the Company or for a
substantial part of its property or assets, (D) file an answer
admitting the material allegations of a petition filed against it
in any such proceeding, (E) make a general assignment for the
benefit of creditors, (F) become unable, admit in writing its
inability or fail generally to pay its debts as they become due
or (G) take any action for the purpose of effecting any of the
foregoing;
(g) Holdings or any Restricted Subsidiary or any
Significant Subsidiary (as each such term is defined in the
Credit Agreement as in effect on the Effective Date) shall (i)
fail to pay any principal or interest, regardless of amount, due
in respect of Indebtedness in an aggregate principal or notional
amount in excess of $7,500,000, when and as the same shall become
due and payable, or (ii) fail to observe or perform any other
term, covenant, condition or agreement contained in any
agreements or instruments evidencing or governing any
Indebtedness in an aggregate principal amount in excess of
$7,500,000 if the effect of any failure referred to in this
clause (ii) is to cause, or to permit the holder or holders of
such Indebtedness or a trustee on its or their behalf to cause,
such Indebtedness to become due prior to its stated maturity;
(h) (i) a Reportable Event or Reportable Events, or a
failure to make a required installment or other payment (within
the meaning of Section 412(n)(1) of the Code), shall have
occurred with respect to any Plan or Plans that reasonably could
be expected to result in liability of the Company or any of its
ERISA Affiliates to the PBGC or to a Plan in an aggregate amount
exceeding $5,000,000 and, within 30 days after the reporting of
any such Reportable Event to the Administrative Agent or after
the receipt by the Administrative Agent of the statement required
pursuant to Section 7.7(b)(iii), the Administrative Agent shall
have notified the Company in writing
<PAGE>
40
that (x) the Required Banks have made a determination that, on
the basis of such Reportable Event or Reportable Events or the
failure to make a required payment, there are reasonable grounds
(A) for the termination of such Plan or Plans by the PBGC, (B)
for the appointment by the appropriate United States District
Court of a trustee to administer such Plan or Plans or (C) for
the imposition of a lien in favor of a Plan and (y) as a result
thereof a Termination Event exists hereunder; or a trustee shall
be appointed by a United States District Court to administer any
such Plan or Plans; or the PBGC shall institute proceedings to
terminate any Plan or Plans; or (ii) (x) the Company or any of
its ERISA Affiliates shall have been notified by the sponsor of a
Multiemployer Plan that it has incurred Withdrawal Liability to
such Multiemployer Plan, (y) the Company or such ERISA Affiliate
does not have reasonable grounds for contesting such Withdrawal
Liability or is not in fact contesting such Withdrawal Liability
in a timely and appropriate manner and (z) the amount of the
Withdrawal Liability specified in such notice, when aggregated
with all other amounts required to be paid to Multiemployer Plans
in connection with Withdrawal Liabilities (determined as of the
date or dates of such notification), exceeds $7,500,000] or
requires payments exceeding $7,500,000 in any year; or (iii) the
Company or any of its ERISA Affiliates shall have been notified
by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or is being terminated, within the
meaning of Title IV of ERISA, if solely as a result of such
reorganization or termination the aggregate annual contributions
of the Company and its ERISA Affiliates to all Multiemployer
Plans that are then in reorganization or have been or are being
terminated have been or will be increased over the amounts
required to be contributed to such Multiemployer Plans for their
most recently completed plan years by an amount exceeding
$7,500,000;
(i) there shall have occurred a Change in Control;
(j) (i) one or more judgments for the payment of money in
an aggregate amount in excess of $250,000 (to the extent not
covered by insurance) shall be rendered against the Company and
the same shall remain undischarged or stayed for a period of 30
consecutive days during which execution shall not be effectively
stayed, or any action shall be legally taken by a judgment
creditor to levy upon assets or properties of the Company to
enforce any such judgment or (ii) one or more judgments for the
payment of money in an aggregate amount in excess of $7,500,000
(to the extent not covered by insurance) shall be rendered
against Holdings or any Restricted Subsidiary (as defined in the
Credit Agreement as in effect on the Effective Date) or any
combination thereof and the same shall remain undischarged or
stayed for a period of 30 consecutive days during which execution
shall not be effectively stayed, or any action shall be legally
taken by a judgment creditor to levy upon assets or properties of
Holdings or any Restricted Subsidiary to enforce any such
judgment;
(k) any material provision of the Transaction Documents
shall not be in full force and effect, enforceable in accordance
with its terms, or the Company, a Seller, a Servicer or the
Master Servicer, or any Affiliate of any of the foregoing, shall
so assert in writing;
<PAGE>
41
(l) the Participating Interest shall for any reason cease
to be a valid and perfected first priority undivided
participating interest in the Receivables;
(m) the Company shall have become an "investment company"
under the Investment Company Act of 1940;
(n) a Purchase Termination Event shall have occurred and be
continuing under the Receivables Sale Agreement;
(o) the Company shall fail to pay the Purchase Price for
any newly created Receivable when due pursuant to subsection 2.3
of the Receivables Sale Agreement (including, without limitation,
by application of any restrictions in such subsection); provided
--------
that no such failure shall constitute a Termination Event under
this paragraph (o) unless such failure shall continue for five
consecutive Business Days;
(p) a Servicer Event of Default shall have occurred and be
continuing;
(q) at the end of any fiscal month, the Loss to Liquidation
Ratio exceeds 5%;
(r) the ratio (expressed as a percentage) of (i) all
Receivables that are more than 60 days past due at the end of any
fiscal month (and are not Defaulted Receivables) to (ii) all
Receivables (which are not Defaulted Receivables) at the end of
such fiscal month exceeds 10%;
(s) at the end of any fiscal month, Days Sales Outstanding
with respect to such fiscal month exceeds 75 days; or
(t) the Net Investment exceeds the Maximum Transfer Amount
on the second Business Day following any Settlement Date, after
giving effect to the calculation of the Required Reserve
Percentage on such Settlement Date, and after application of
Collections and all other payments and amounts to reduce the Net
Investment to and including such second Business Day;
then, (x) if such event is (I) a Termination Event described in
paragraph (f) above or (II) a Termination Event described in paragraph
(n) above resulting from a Purchase Termination Event described in
paragraph (f) of Article VII of the Receivables Sale Agreement,
automatically the Commitment Period shall thereupon terminate without
notice of any kind, which is hereby waived by the Company and (y) if
such event is any other Termination Event, so long as such Termination
Event shall be continuing, with the consent of the Required Banks the
Administrative Agent may, or upon the request of the Required Banks
the Administrative Agent shall, by notice to the Company terminate the
Commitment Period.
<PAGE>
42
ARTICLE X
The Administrative Agent
10.1 Appointment. Each Bank hereby irrevocably designates
-----------
and appoints the Administrative Agent as the agent of such Bank under
this Agreement and each Bank irrevocably authorizes the Administrative
Agent, as the agent for such Bank, to take such action on its behalf
under the provisions of this Agreement and to exercise such powers and
perform such duties as are expressly delegated to the Administrative
Agent by the terms of this Agreement, together with such other powers
as are reasonably incidental thereto, including, but not limited to,
the signing by the Administrative Agent, as agent for the Banks, of
any financing statements related to the Receivables. Notwithstanding
any provision to the contrary elsewhere in this Agreement, the
Administrative Agent shall not have any duties or responsibilities,
except those expressly set forth herein, or any fiduciary relationship
with any Bank, the Company, any Servicer or the Master Servicer, and
no implied covenants, functions, responsibilities, duties, obligations
or liabilities shall be read into this Agreement or otherwise exist
against the Administrative Agent. Each Bank acknowledges and consents
to Chemical Bank's acting as administrative agent for the lenders
under the Credit Agreement and the documents delivered pursuant
thereto.
10.2 Delegation of Duties. The Administrative Agent may
--------------------
execute any of its duties under this Agreement by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct of any
agents or attorneys in-fact selected by it with reasonable care.
10.3 Exculpatory Provisions. Neither the Administrative
----------------------
Agent nor any of its officers, directors, employees, agents,
attorneys-in-fact or affiliates shall be (i) liable for any action
lawfully taken or omitted to be taken by it or such Person under or in
connection with this Agreement or the transactions contemplated hereby
or thereby (except for its or such Person's own gross negligence or
willful misconduct), (ii) responsible in any manner to any party
hereto for any recitals, statements, representations or warranties
made by the Company, any Servicer, the Master Servicer or any of the
Banks or any officer thereof contained in this Agreement, or in any
certificate, report, statement or other document referred to or
provided for in, or received by the Administrative Agent under or in
connection with this Agreement or the transactions contemplated hereby
or thereby or for the value, validity, effectiveness, genuineness,
enforceability or sufficiency of this Agreement or (iii) for any
failure of the Company, any Servicer, the Master Servicer, or any of
the Banks to perform their respective obligations hereunder. The
Administrative Agent shall not be under any obligation to any party
hereto to ascertain or to inquire as to the observance or performance
of any of the agreements contained in, or conditions of, this
Agreement or to inspect the properties, books or records of the
Company, any Servicer, the Master Servicer or any of the Banks.
10.4 Reliance by the Administrative Agent. The
------------------------------------
Administrative Agent shall be entitled to rely, and shall be fully
protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telecopy, telex or teletype message,
statement, order or
<PAGE>
43
other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to any of the Banks and counsel to the
Company, any Servicer or the Master Servicer), independent accountants
and other experts selected by the Administrative Agent, as the case
may be. The Administrative Agent shall be fully justified in failing
or refusing to take any action under this Agreement unless it shall
first receive such advice or concurrence of the Banks as it deems
appropriate or it shall first be indemnified to its satisfaction by
the Banks against any and all liability and expense which may be
incurred by it by reason of taking or continuing to take any such
action. The Administrative Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this
Agreement in accordance with a request of the Banks entitled to give
such a request hereunder, and such request and any action taken or
failure to act pursuant thereto shall be binding upon all the Banks.
10.5 Notice of Default or Termination Event. The
--------------------------------------
Administrative Agent shall not be deemed to have knowledge or notice
of the occurrence of any default or Termination Event hereunder unless
the Administrative Agent has received notice from a Bank, the Company,
any Servicer or the Master Servicer referring to this Agreement,
describing such default or Termination Event and stating that such
notice is a "notice of default" or a "notice of Termination Event", as
the case may be. In the event that the Administrative Agent receives
such a notice, the Administrative Agent shall give promptly notice
thereof to the Banks and to the Company. The Administrative Agent
shall take such action with respect to such default or Termination
Event as shall be reasonably directed by the Required Banks, provided
--------
that unless and until the Administrative Agent shall have received
such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action,
with respect to such default or Termination Event as it shall deem
advisable in the best interests of the Banks.
10.6 Non-Reliance on the Administrative Agent and Other
--------------------------------------------------
Banks. Each Bank hereby expressly acknowledges that neither the
- -----
Administrative Agent nor any of its officers, directors, employees,
agents, attorneys-in-fact or affiliates has made any representations
or warranties to it and that no act by the Administrative Agent
hereinafter taken, including any review of the affairs of the Company,
any Servicer or the Master Servicer, shall be deemed to constitute any
representation or warranty by the Administrative Agent to any Bank.
Each Bank hereby represents to the Administrative Agent that it has,
independently and without reliance upon the Administrative Agent or
any other Bank, and based on such documents and information as it has
deemed appropriate, made its own appraisal of and investigation into
the business, operations, property and financial and other condition
and creditworthiness of the Company, the Servicers and the Master
Servicer and made its own decision to acquire a Participating Interest
hereunder and enter into this Agreement. Each Bank hereby also
represents that it will, independently and without reliance upon the
Administrative Agent or any other Bank, and based on such documents
and information as it shall deem appropriate at the time, continue to
make its own appraisals and decisions in taking or not taking action
under this Agreement, and to make such investigation as it deems
necessary to inform itself as to the business, operations, property
and financial and other condition and creditworthiness of the Company,
the Servicers and the Master Servicer. Except for notices, reports
and other documents expressly required to be furnished to the
<PAGE>
44
Banks by the Administrative Agent hereunder, the Administrative Agent
shall not have any duty or responsibility to provide any Bank with any
information concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of the
Company, any Servicer or the Master Servicer which may come into the
possession of the Administrative Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates.
10.7 Indemnification. Each Bank hereby agrees to indemnify
---------------
the Administrative Agent in its capacity as such (to the extent not
reimbursed by the Company and without limiting the obligation of the
Company to do so), ratably according to their respective Commitment
Percentages in effect on the date on which indemnification is sought
under this subsection 10.7 (or, if indemnification is sought after the
date upon which the Commitment Period shall have terminated, ratably
in accordance with their Commitment Percentages immediately prior to
such date), from and against any and all Indemnified Liabilities which
may at any time (including without limitation at any time following
the termination of the commitment of the Banks to increase their
Participating Interest hereunder) be imposed on, incurred by or
asserted against the Administrative Agent in any way relating to or
arising out of this Agreement, or any documents contemplated by or
referred to herein or the transactions contemplated hereby or any
action taken or omitted by the Administrative Agent under or in
connection with any of the foregoing, provided that no Bank shall be
--------
liable for the payment of any portion of such Indemnified Liabilities
resulting from the Administrative Agent's gross negligence or willful
misconduct. The agreements in this subsection 10.7 shall survive the
termination of the commitments of the Banks to acquire a Participating
Interest hereunder, the collection of all Receivables, the termination
of this Agreement and the payment of all amounts payable hereunder.
10.8 The Administrative Agent in Its Individual Capacity.
---------------------------------------------------
The Administrative Agent and its affiliates may make loans to, accept
deposits from and generally engage in any kind of business with the
Company, the Servicers, the Master Servicer or any of their affiliates
as though the Administrative Agent were not the Administrative Agent.
With respect to any Participating Interests purchased or maintained by
it under this Agreement, the Administrative Agent shall have the same
rights and powers hereunder as any Bank and may exercise the same as
though it were not the Administrative Agent, and the term "Bank" shall
include the Administrative Agent in its individual capacity.
10.9 Successor Administrative Agent. Subject to the
------------------------------
appointment and acceptance of a successor Administrative Agent as
provided below, the Administrative Agent may resign at any time by
notifying the Banks and the Company. Upon any such resignation, the
Required Banks shall have the right to appoint a successor, with the
consent of the Company (not to be unreasonably withheld). If no
successor shall have been so appointed by the Required Banks and shall
have accepted such appointment within 30 days after the retiring
Administrative Agent gives notice of its resignation, then the
retiring Administrative Agent may, on behalf of the Banks, appoint a
successor Administrative Agent, with the consent of the Company (not
to be unreasonably withheld), which shall be a bank with an office in
New York, New York, having a combined capital and surplus of at least
$500,000,000 or an Affiliate of any such bank which is also a bank.
Upon the acceptance of any appointment as Administrative Agent
hereunder by a successor bank, such successor
<PAGE>
45
shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Administrative Agent and the
retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After the Administrative Agent's resignation
hereunder, the provisions of this Article X and of subsection 11.3
shall continue in effect for its benefit in respect of any actions
taken or omitted to be taken by it while it was acting as
Administrative Agent.
ARTICLE XI
Miscellaneous
11.1 Further Assurances. Each of the Company, the
------------------
Servicers and the Master Servicer agrees, from time to time, to do and
perform any and all acts and to execute any and all further
instruments reasonably required or requested by the Administrative
Agent at the request of any Bank more fully to effect the purposes of
this Agreement and the assignments and transfers of the Participating
Interest hereunder, including, without limitation, the execution of
any financing statements or continuation statements relating to the
Receivables for filing under the provisions of the Uniform Commercial
Code, or any similar law, of any applicable jurisdiction.
11.2 Payments. Each payment to be made by any of the
--------
Banks, the Company, any of the Servicers or the Master Servicer
hereunder shall be made on the required payment date in Dollars and in
immediately available funds at the office of the Administrative Agent
located at 270 Park Avenue, New York, New York 10017 or to such other
office as may be specified by the Administrative Agent in a notice to
the Company, the Servicers, the Master Servicer and the Banks.
11.3 Costs and Expenses. (a) The Company agrees to pay
------------------
all reasonable out-of-pocket expenses incurred by the Administrative
Agent in connection with the preparation of this Agreement and the
other Transaction Documents, or by the Administrative Agent in
connection with the syndication of the Commitments or the
administration of this Agreement, or in connection with any
amendments, modifications or waivers of the provisions hereof or
thereof (whether or not the transactions hereby contemplated shall be
consummated) or incurred by the Administrative Agent or any Bank in
connection with the enforcement or protection of their rights in
connection with this Agreement and the other Transaction Documents or
in connection with the purchases made hereunder, including the
reasonable fees, charges and disbursements of Simpson Thacher &
Bartlett, counsel for the Administrative Agent, and, in connection
with any such enforcement or protection, the reasonable fees, charges
and disbursements of any other counsel for the Administrative Agent or
any Bank.
(b) The Company agrees to indemnify the Administrative
Agent, each Bank and each of their respective directors, officers,
employees and agents (each such Person being called an "Indemnitee")
against, and to hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses, including
reasonable counsel fees, charges and disbursements, incurred by or
asserted against any Indemnitee arising out of, in any way connected
with, or as a result of (i) the execution or delivery of this
<PAGE>
46
Agreement or any other Transaction Document or any agreement or
instrument contemplated thereby, the performance by the parties
thereto of their respective obligations thereunder or the consummation
of the Transactions and the other transactions contemplated thereby,
(ii) the use of the proceeds of the initial transfer and assignment of
the Participating Interest and of any Increases in Net Investment or
(iii) any claim, litigation, investigation or proceeding relating to
any of the foregoing, whether or not any Indemnitee is a party
thereto; provided that such indemnity shall not, as to any Indemnitee,
be available to the extent that such losses, claims, damages,
liabilities or related expenses (i) are determined by a court of
competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or wilful misconduct of such
Indemnitee (treating, for this purpose only, any Bank and its
directors, officers, employees and agents as a single Indemnitee) or
(ii) arise from (x) any Receivable which becomes a Charge-Off as a
result of non-payment by the Obligor with respect thereto, (y) any
action taken, or omitted to be taken, by any Servicer which is not an
Affiliate of C&A Products, or (z) any action taken by the Banks in
collecting from an Obligor.
(c) The Company shall be entitled to assume the defense of
any action for which indemnification is sought hereunder with counsel
of its choice at its expense (in which case the Company shall not
thereafter be responsible for the fees and expenses of any separate
counsel retained by an Indemnitee except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory
- -------- -------
to each such Indemnitee. Notwithstanding the Company's election to
assume the defense of such action, each Indemnitee shall have the
right to employ separate counsel and to participate in the defense of
such action, and the Company shall bear the reasonable fees, costs,
and expenses of such separate counsel, if (i) the use of counsel
chosen by the Company to represent such Indemnitee would present such
counsel with a conflict of interest; (ii) the actual or potential
defendants in, or targets of, any such action include both the Company
and such Indemnitee and such Indemnitee shall have reasonably
concluded that there may be legal defenses available to it that are
different from or additional to those available to the Company (in
which case the Company shall not have the right to assume the defense
or such action on behalf of such Indemnitee); (iii) the Company shall
not have employed counsel reasonably satisfactory to such Indemnitee
to represent it within a reasonable time after notice of the
institution of such action; or (iv) the Company shall authorize such
Indemnitee to employ separate counsel at the Company's expense. The
Company will not be liable under this Agreement for any amount paid by
an Indemnitee to settle any claims or actions if the settlement is
entered into without the Company's consent, which consent may not be
withheld unless such settlement is unreasonable in light of such
claims or actions against, and defenses available to, such Indemnitee.
(d) Notwithstanding anything to the contrary in this
subsection 11.3, this subsection 11.3 shall not apply to taxes, it
being understood that the Company's only obligations with respect to
taxes shall arise under subsections 3.3 and 3.5.
(e) The provisions of this subsection 11.3 shall remain
operative and in full force and effect regardless of the expiration of
the term of this Agreement, the consummation of the transactions
contemplated hereby, the repayment of all or any portion of the Net
Investment, the invalidity or unenforceability of any term or
provision of this
<PAGE>
47
Agreement or any other Transaction Document, or any investigation made
by or on behalf of the Administrative Agent or any Bank. All amounts
due under this subsection 11.3 shall be payable on written demand
therefor.
11.4 Successors and Assigns; Participations; Acquiring
-------------------------------------------------
Banks. (a) The provisions of this Agreement shall be binding upon
- -----
and inure to the benefit of the Company, the Banks, the Master
Servicer, the Servicers, the Administrative Agent and their respective
successors and assigns, except that the Company, the Servicers and the
Master Servicer may not assign or transfer any of its or their rights
or obligations under this Agreement without the prior written consent
of each Bank.
(b) Any Bank may, in the ordinary course of its business
and in accordance with applicable law, at any time sell to one or more
banks or other entities ("Participants") a participation in the
Participating Interest of such Bank, any Commitment of such Bank or
any other interests of such Bank hereunder. In the event of any such
sale by a Bank of a participation to a Participant, such Bank's
obligations under this Agreement to the other parties to this
Agreement shall remain unchanged, such Bank shall remain solely
responsible for the performance thereof, and the Company, the Master
Servicer, the Servicers and the Administrative Agent shall continue to
deal solely and directly with such Bank in connection with such Bank's
rights and obligations under this Agreement. The Company, the
Servicers, and the Master Servicer agree that if amounts outstanding
under this Agreement are due or unpaid, each Participant shall be
deemed to have the right of setoff in respect of its participation in
amounts owing under this Agreement to the same extent and subject to
the same terms and conditions as if the amount of its participation
were owing directly to it as a Bank under this Agreement, provided
--------
that such right of setoff shall be subject to the obligation of such
Participant to share with the Banks, and the Banks agree to share with
such Participant, as provided in subsection 11.12. The Company also
agrees that each Participant shall be entitled to the benefits of
subsections 3.2, 3.3 and 3.5 with respect to its Participating
Interest; provided that, in the case of subsection 3.5, such
--------
Participant shall have complied with the requirements of said
subsection and provided further that no Participant shall be entitled
-------- -------
to receive any greater amount pursuant to such subsections than the
transferor Bank would have been entitled to receive in respect of the
amount of the participation transferred by such transferor Bank to
such Participant had no such transfer occurred. Each Bank will
disclose the identity of its participants to the Company and
Administrative Agent if requested by the Company or the Administrative
Agent.
(c) Each Bank agrees that any agreement between such Bank
and any Participant in respect of any participation shall not restrict
such Bank's right to agree to any amendment, supplement or
modification to this Agreement or any of the Transaction Documents
except (i) to extend the Scheduled Termination Date, or increase the
amount of such Bank's Commitment, or change the definition of "Maximum
Invested Percentage" so as to permit the Maximum Invested Percentage
to exceed [83]%, or reduce the rate or extend the time of payment of
any Purchase Discount Amount or Commitment Fee, in each case to the
extent such Participant is directly affected thereby and (ii) to
release any substantial portion of the Pooled Property (other than
pursuant to subsection 5.3 or 12.7).
<PAGE>
48
(d) Any Bank may, in the ordinary course of its business
and in accordance with applicable law, at any time sell (x) to any
Bank or any Bank (as defined in the Credit Agreement) or any affiliate
thereof, and (y) with the consent of the Company and the
Administrative Agent (which in each case shall not be unreasonably
withheld or delayed), to one or more additional financial institutions
("Acquiring Banks") all or any part of its rights and obligations
under this Agreement pursuant to an Assignment and Acceptance,
substantially in the form of Exhibit A, executed by such Acquiring
Bank, such transferor Bank and the Administrative Agent (and, in the
case of a Acquiring Bank that is not then a Bank or an affiliate
thereof, by the Administrative Agent and the Company) and delivered to
the Administrative Agent for its acceptance and recording in the
register, provided that the Commitment transferred pursuant to any
--------
such sale to a Acquiring Bank shall be in an amount not less than the
lesser of $5,000,000 and the amount of such transferor Bank's
Commitment, unless (i) otherwise agreed by the Company or (ii) the
assignment is to any Bank or any Lender (as defined in the Credit
Agreement) or any affiliate thereof. Upon such execution, delivery,
acceptance and recording, from and after the effective date determined
pursuant to such Assignment and Acceptance, (x) the Acquiring Bank
thereunder shall be a party hereto, shall be subject to the
requirements of subsection 3.5(f) and, to the extent provided in such
Assignment and Acceptance, shall have the rights and obligations of a
Bank hereunder with a Commitment Percentage as set forth therein, and
(y) the assigning Bank thereunder shall, to the extent provided in
such Assignment and Acceptance, be released from its obligations under
this Agreement (and, in the case of an Assignment and Acceptance
covering all or the remaining portion of an assigning Bank's rights
and obligations under this Agreement, such assigning Bank shall cease
to be a party hereto).
(e) The Administrative Agent shall maintain at its address
referred to in subsection 11.2 a copy of each Assignment and
Acceptance delivered to it and a register (the "Register") for the
recordation of the names and addresses of the Banks and the Commitment
of, and principal amount of the Participating Interests owing to, each
Bank from time to time. The entries in the Register shall be
conclusive, in the absence of manifest error, and the Company, the
Servicers, the Master Servicer, the Administrative Agent and the Banks
may treat each Person whose name is recorded in the Register as the
owner of the Participating Interests recorded therein for all purposes
of this Agreement. The Register shall be available for inspection by
the Company, the Servicers, the Master Servicer or any Bank at any
reasonable time and from time to time upon reasonable prior notice.
(f) Upon its receipt of an Assignment and Acceptance
executed by an assigning Bank and a Acquiring Bank (and, in the case
of a Acquiring Bank that is not then a Bank or an affiliate thereof,
by the Administrative Agent and the Company) together with payment to
the Administrative Agent of a registration and processing fee of
$3,500, the Administrative Agent shall (i) promptly accept such
Assignment and Acceptance and (ii) on the effective date determined
pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation to the
Banks and the Company.
(g) Subject to subsection 11.16, the Master Servicer, each
Servicer and the Company authorize each Bank to disclose to any
Participant or Acquiring Bank (each, a "Transferee") and any
prospective Transferee any and all financial information in such
Bank's possession concerning such Servicer, the Master Servicer, the
Company or any of its or their Affiliates which has been delivered to
such Bank by or on behalf of such Servicer, the Master Servicer, the
Company or such Affiliate in connection with such Bank's credit
evaluation of such Servicer, the Master Servicer or the Company.
11.5 GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND
-------------
OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE
OF NEW YORK.
<PAGE>
49
11.6 No Waiver; Cumulative Remedies. No failure to
------------------------------
exercise and no delay in exercising, on the part of the Administrative
Agent or the Banks, any right, remedy, power or privilege hereunder,
shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other
right, remedy, power or privilege. The rights, remedies, powers and
privileges herein provided are cumulative and not exhaustive of any
rights, remedies, powers and privileges provided by law.
11.7 Amendments and Waivers. Neither this Agreement nor
----------------------
any terms hereof may be amended, supplemented or modified except in
accordance with the provisions of this subsection 11.7. The Required
Banks may, or, with the written consent of the Required Banks, the
Administrative Agent may, from time to time, (a) enter into with the
Company, the Master Servicer and the Servicers written amendments,
supplements or modifications hereto for the purpose of adding any
provisions to this Agreement or changing in any manner the rights of
the Banks, the Company, the Servicers or the Master Servicer hereunder
or (b) waive, on such terms and conditions as the Required Banks or
the Administrative Agent, as the case may be, may specify in such
instrument, any of the requirements of this Agreement or any default
or Termination Event and its consequences; provided, however, that no
-------- -------
such waiver and no such amendment, supplement or modification shall
(i) extend the Scheduled Termination Date; or reduce the rate or
extend the time of payment of any Purchase Discount Amount or
Commitment Fee; or extend the time of payment of any mandatory
reduction of the Net Investment; or modify subsection 2.12 so that the
fact that the Net Investment exceeds the Maximum Transfer Amount does
not necessitate a mandatory reduction in the Net Investment; or change
the definition of "Maximum Invested Percentage" so as to permit the
Maximum Invested Percentage to exceed [83]%; or increase the amount of
any Bank's Commitment; or amend, modify or waive any provision of this
subsection 11.7; or reduce the percentage specified in the definition
of Required Banks; or consent to the assignment or transfer by the
Company, any Servicer or the Master Servicer of any of their
respective rights and obligations under this Agreement (except in
accordance with Article XII); or release any substantial portion of
the Pooled Property (other than pursuant to subsection 5.3 or 12.7);
in each case without the written consent of each Bank directly
affected thereby or (ii) amend, modify or waive any provision of
Article X without the written consent of the Administrative Agent.
Any such waiver and any such amendment, supplement or modification
shall apply equally to each of the Banks and shall be binding upon the
Company, the Servicers, the Master Servicer, the Banks, the
Administrative Agent and all future holders of a Participating
Interest. In the case of any waiver, the Company, the Servicers, the
Master Servicer, the Banks and the
<PAGE>
50
Administrative Agent shall be restored to their former position and
rights hereunder, any default or Termination Event waived shall be
deemed to be cured and not continuing; but no such waiver shall extend
to any subsequent or other default or Termination Event, or impair any
right consequent thereon.
11.8 Severability. Any provision of this Agreement which
------------
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent such prohibition or
unenforceability without invalidating the remaining provisions hereof,
and any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other
jurisdiction.
11.9 Notices. All notices, requests and demands to or upon
-------
the respective parties hereto to be effective shall be in writing
(including by telecopy), and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when delivered
by hand, or three days after being deposited in the mail, postage
prepaid, or, in the case of telecopy notice, when received, addressed
as follows in the case of the Company and the Administrative Agent, as
set forth under their signatures on the signature pages hereof (in the
case of the Master Servicer and the Servicers) and as set forth on
Schedule 1 hereto (in the case of the Banks), or to such other address
as may be hereafter notified by the respective parties hereto:
The Company: [C&A Receivables Company]
________________________________
________________________________
Attention:
Telecopy No.:
The Administrative Agent: Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: Susan Kjorlien
Telecopy: 212-270-3277
provided that any notice, request or demand to or upon the
--------
Administrative Agent or the Banks pursuant to subsections 2.3,
2.7, 2.8, 2.10 and 2.11 shall not be effective until received.
11.10 Counterparts. This Agreement may be executed by
------------
one or more of the parties to this Agreement on any number of
separate counterparts (including by telecopy), and all of said
counterparts taken together shall be deemed to constitute one and
the same instrument. A set of the copies of this Agreement
signed by all the parties shall be lodged with the Company and
the Administrative Agent.
11.11 Construction of Agreement as Security Agreement.
-----------------------------------------------
(a) It is the intent of the parties that the transactions
contemplated herein constitute assignments and transfers of the
Receivables and the Related Property with respect thereto to the
<PAGE>
51
Banks. If, however, such transactions are deemed to be loans,
the Company hereby grants to the Administrative Agent, for the
benefit of the Banks, a first priority security interest in all
of the Company's right, title and interest in and to (i) the
Receivables and the Related Property now existing and hereafter
created, all monies due or to become due and all amounts received
with respect thereto, (ii) the Receivables Sale Agreement and
(iii) all "proceeds" of any of the foregoing, including, without
limitation, whatever is received upon the sale, exchange,
collection or other disposition of the foregoing or any proceeds
thereof, to secure all the Company's obligations hereunder.
(b) Each Servicer hereby grants to the Administrative
Agent on behalf of the Banks a first priority security interest
in all of the Servicer's right, title and interest in, to and
under its records relating to the Receivables and Related
Property serviced by it to secure all of the Company's
obligations hereunder.
(c) This Agreement shall constitute a security
agreement under applicable law.
11.12 Adjustments; Set-off. (a) If any Bank (a
--------------------
"benefitted Bank") shall at any time receive any payment of all
or part of its Participating Interest of the Net Investment, or
any Purchase Discount Amount in respect thereof, or receive any
collateral in respect thereof (whether voluntarily or
involuntarily, by set-off, pursuant to events or proceedings of
the nature referred to in paragraph (f) of Article IX, or
otherwise) in a greater proportion than any such payment to and
collateral received by any other Bank, if any, in respect of such
other Bank's Participating Interest of the Net Investment, or any
Purchase Discount Amount in respect thereof, such benefitted Bank
shall acquire for cash from the other Banks such portion of each
such other Bank's Participating Interest of the Net Investment,
or shall provide such other Banks with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to
cause such benefitted Bank to share the excess payment or
benefits of such collateral or proceeds ratably with each of the
Banks; provided, however, that if all or any portion of such
-------- -------
excess payment or benefits is thereafter recovered from such
benefitted Bank, such acquisition shall be rescinded, and the
transfer price and benefits returned, to the extent of such
recovery, but without interest.
(b) In addition to any rights and remedies of the
Banks provided by law, each Bank shall have the right, without
prior notice to the Company, any such notice being expressly
waived by the Company to the extent permitted by applicable law,
upon any amount, other than amounts in respect of the principal
amount of the Net Investment and the Purchase Discount Amounts
with respect thereto, becoming due and payable by the Company
hereunder (whether at the stated maturity, by acceleration or
otherwise) to set off and appropriate and apply against such
amount any and all deposits (general or special, time or demand,
provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether
direct or indirect, absolute or contingent, matured or unmatured,
at any time held or owing by such Bank or any branch or agency
thereof to or for the credit or the account of the Company. Each
Bank agrees promptly to notify the Company and the Administrative
Agent after any
<PAGE>
52
such set-off and application made by such Bank, provided that the
--------
failure to give such notice shall not affect the validity of such
set-off and application.
11.13 Jurisdiction; Consent to Service of Process.
-------------------------------------------
(a) Each of the Company, the Master Servicer and each Servicer
hereby irrevocably and unconditionally submits, for itself and
its property, to the nonexclusive jurisdiction of any New York
State court or Federal court of the United States of America
sitting in New York City, and any appellate court from any
thereof, in any action or proceeding arising out of or relating
to this Agreement or the other Transaction Documents, or for
recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be
heard and determined in such New York State or, to the extent
permitted by law, in such Federal court. Each of the parties
hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Agreement shall affect any
right that the Administrative Agent or any Bank may otherwise
have to bring any action or proceeding relating to this Agreement
or the other Transaction Documents against the Company, the
Master Servicer or any Servicer or their properties in the courts
of any jurisdiction.
(b) Each of the Company, the Master Servicer and each
Servicer hereby irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or
relating to this Agreement or the other Transaction Documents in
any New York State or Federal court. Each of the parties hereto
hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.
(c) Each party to this Agreement irrevocably consents
to service of process in the manner provided for notices in
subsection 11.9. Nothing in this Agreement will affect the right
of any party to this Agreement to serve process in any other
manner permitted by law.
11.14 Acknowledgements. Each of the Company, the
----------------
Master Servicer and each Servicer hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the other
Transaction Documents to which it is a party;
(b) neither the Administrative Agent nor any Bank has
any fiduciary relationship with or duty to the Company, the
Master Servicer or any Servicer arising out of or in
connection with this Agreement or any of the other
Transaction Documents, and the relationship between the
Administrative Agent and the Banks, on one hand, and the
Company, on the other hand, in connection herewith or
therewith is solely that of purchaser/creditor and
seller/debtor; and
<PAGE>
53
(c) no joint venture is created hereby or by the other
Transaction Documents or otherwise exists by virtue of the
transactions contemplated hereby among the Banks or among
the Company, the Master Servicer or any Servicer and the
Banks.
11.15 Waiver of Jury Trial. Each party hereto hereby
--------------------
waives, to the fullest extent permitted by applicable law, any
right it may have to a trial by jury in respect of any litigation
directly or indirectly arising out of, under or in connection
with this Agreement or any of the other Transaction Documents.
Each party hereto (a) certifies that no representative, agent or
attorney of any other party has represented, expressly or
otherwise, that such other party would not, in the event of
litigation, seek to enforce the foregoing waiver and (b)
acknowledges that it and the other parties hereto have been
induced to enter into this Agreement and the other Transaction
Documents, as applicable, by, among other things, the mutual
waivers and certifications in this subsection 11.15.
11.16 Confidentiality. Each of the Banks and the
---------------
Administrative Agent agrees that it shall maintain in confidence
any information relating to the Company, the Master Servicer or
any Servicer furnished to it by or on behalf of the Company, the
Master Servicer or any Servicer (other than information that (x)
has become generally available to the public other than as a
result of a disclosure by such party, (y) has been independently
developed by such party without violating this subsection 11.16
or (z) was available to such party from a third party having, to
such party's knowledge, no obligation of confidentiality to the
Company, the Master Servicer or such Servicer, as the case may
be) and shall not reveal the same other than (i) to its
directors, officers, employees and advisors with a need to know
and (ii) as contemplated by subsection 11.4(g), except: (a) to
the extent necessary to comply with law or any legal process or
the requirements of any Governmental Authority or of any
securities exchange on which securities of the disclosing party
or any Affiliate of the disclosing party are listed or traded,
(b) as part of normal reporting or review procedures to
Governmental Authorities or its parent companies, Affiliates or
auditors and (c) in order to enforce its rights under any
Transaction Document in a legal proceeding.
11.17 No Bankruptcy Petition. Each Servicer, the
----------------------
Master Servicer, each Bank and the Administrative Agent covenants
and agrees that, prior to the date which is one year and one day
after the date of termination of this Agreement pursuant to
subsection 4.1, it will not institute against, or join any other
Person in instituting against, the Company any bankruptcy,
reorganization, arrangement, insolvency or liquidation
proceedings, or other proceedings under any federal or state
bankruptcy or similar law.
11.18 Tax Treatment. (a) The execution and delivery
-------------
of this Agreement shall constitute an acknowledgement by the
Banks, the Administrative Agent, the Company, the Master Servicer
and each Servicer that they do not intend to establish (for
Federal tax purposes) an association taxable as a corporation.
The powers granted and obligations undertaken in this Agreement
shall be construed so as to further such intent.
<PAGE>
54
(b) It is the intent of the Company and the Banks
that, for federal, state and local income and franchise tax
purposes, the Participating Interest will be indebtedness of the
Company secured by the Pooled Property. The Company and the
Banks agree to treat the Company as the owner of the Pooled
Property and the Participating Interest as indebtedness of the
Company secured by the Pooled Property and the Purchase Discount
Amount as interest for federal, state and local income and
franchise tax purposes (including for reporting purposes), except
as otherwise required by law or any tax authorities. This
subsection 11.18 shall survive the termination of this Agreement
and shall be binding on all Transferees.
11.19 No Action by Banks. Each of the Banks and the
------------------
Administrative Agent hereby agrees that, until the occurrence of
a Purchase Termination Event, an Incipient Purchase Termination
Event or a Servicer Event of Default, the Banks will not
exercise, or otherwise direct the Administrative Agent to
exercise on their behalf, the rights of the Company pursuant to
subsection 5.15(d) of the Receivables Sale Agreement.
ARTICLE XII
Servicing
12.1 Servicing. (a) Appointment of Servicers. The
--------- ------------------------
Banks and the Company hereby appoint (i) the Servicers as their
agents to service and administer the Receivables originated by
such Persons in their capacities as Sellers and (ii) C&A Products
as their agent to coordinate the servicing of the Receivables by
the Servicers. Each of the Servicers and the Master Servicer
hereby consents to such appointment and agrees to service and
administer the Receivables in accordance with the terms and
conditions contained herein. The Company hereby appoints the
Master Servicer, and the Master Servicer hereby consents to such
appointment, to take any actions on behalf of the Company which
by the terms hereof have been delegated to the Master Servicer
and any further actions incidental thereto. The Company and the
Master Servicer may agree, in accordance with subsection 8.11,
that the Master Servicer may perform on behalf of the Company
certain of the Company's obligations under the Transaction
Documents. Prior to the occurrence of a Complete Servicing
Transfer, on each Settlement Date, the Servicers and the Master
Servicer shall receive the Monthly Servicing Fee for performing
their functions as Servicers and Master Servicer hereunder as
provided in subsection 2.7.
(b) Collection Procedures. (i) Each Collection shall
---------------------
be deposited into a Lockbox Account and shall be transferred from
such Lockbox Account to the relevant Concentration Account at
least as often as once each day that is a business day for the
applicable Lockbox Bank and for Chemical, such transfer to be
commenced in any event by 1:00 p.m. (New York City time) on the
business day following such day of deposit; provided that
--------
Collections may, at the option of the applicable Obligor, be
deposited directly into the relevant Concentration Account by
wire transfer from an account of such Obligor to the
Concentration Account or by means of transfer through the
Automated Clearing House System. Each of the Company, the Master
Servicer and each Servicer acknowledges and agrees that it shall
not have any right to withdraw any funds or any
<PAGE>
55
remittance advisements or payment invoices on deposit in any
Concentration Account or any Lockbox Account except as otherwise
expressly provided in this Agreement or in the Lockbox
Agreements; provided however that until the date which is 60 days
-------- -------
after the Effective Date (at which time a Lockbox Account in the
name of the Company shall have been established, as required
hereunder), the Servicers set forth on Schedule 3 which do not
have, as of the Effective Date, a Lockbox Account in place, shall
be allowed to continue to receive and deposit Collections in the
same manner in which such Servicer receives and deposits
Collections as of the Effective Date.
(ii) All Collections otherwise received by any
Servicer, the Master Servicer or the Company shall be deposited
by it either to a Lockbox Account or through the Automated
Clearing House System into the relevant Concentration Account as
soon as possible after receipt thereof, such transfer to commence
in no event later than the Business Day after such receipt.
(iii) Each of the Company, the Master Servicer and
each Servicer represents, warrants, covenants and agrees that all
Collections shall be collected, processed and deposited pursuant
to, and in accordance with, the terms of this Agreement.
(iv) The Company represents, warrants, covenants and
agrees that it shall not make or maintain any deposits in any
bank account, deposit account or trust account with any financial
institution other than the Lockbox Accounts and the Concentration
Accounts as provided for by this Agreement and other than one
operating account funded solely with amounts disbursed as
operating expenses pursuant to subsection 2.7. The Company shall
provide the Administrative Agent with the account number and
location of such account, and any other information as the
Administrative Agent may reasonably request with respect thereto.
The Company represents, warrants, covenants and agrees that it
shall have no bank accounts, deposit accounts or trust accounts
other than the Lockbox Accounts and the Concentration Accounts
and such operating account. The Company represents, warrants,
covenants and agrees that no new bank accounts or deposit
accounts will be established unless and until the Company has
received the prior written consent of the Administrative Agent.
<PAGE>
56
(v) Each of the Company, the Master Servicer and each
Servicer represents, warrants, covenants and agrees that no
location other than the Lockbox Accounts, and, with respect to
wire transfers, the Concentration Accounts, has been established
for the deposit of Collections; provided however that until the
-------- -------
date which is 60 days after the Effective Date (at which time a
Lockbox Account in the name of the Company shall have been
established, as required hereunder), the Servicers set forth on
Schedule 3 which do not have, as of the Effective Date, a Lockbox
Account in place, shall be allowed to continue to receive and
deposit Collections in the same manner in which such Servicer
receives and deposits Collections as of the Effective Date. Each
of the Company, the Master Servicer and each Servicer represents,
warrants, covenants and agrees that no new location for the
deposit of Collections will be established unless and until the
Company has received the prior written consent of the
Administrative Agent.
(vi) The Company agrees to pay all fees for the
services of the Lockbox Banks.
(vii) Notwithstanding anything to the contrary in this
Agreement, all Collections in respect of the Receivables and all
Retransfer Payments and Servicer Retransfer Payments shall be
deposited (directly or through a Lockbox Account in the case of
Collections) into the U.S. Concentration Account; except that
Collections, Retransfer Payments and Servicer Retransfer Payments
in respect of the following Receivables may instead be deposited
(directly or through a Lockbox Account in the case of
Collections) into the Canada/Canadian Dollar Concentration
Account (in the case of Receivables denominated in Canadian
Dollars) or the Canada/U.S. Dollar Concentration Account (in the
case of Receivables denominated in U.S. Dollars): (x)
Receivables as to which General Motors Corporation is the Obligor
and (y) Receivables which have Obligors organized or located in
Canada.
(c) Lockbox Accounts. Within 60 days after the
----------------
Effective Date, the Company shall deliver to the Administrative
Agent fully executed letter agreements in substantially the form
of Exhibit B (the "Lockbox Agreements") from each Lockbox Bank,
(x) with such changes as to which the Administrative Agent
reasonably consents or (y) in such form as the Lockbox Bank party
thereto requires in the ordinary course of its business for
transactions of a type similar to those contemplated by this
Agreement.
(i) The Company shall instruct, or cause the Servicers
to instruct, each Lockbox Bank to transfer at least as often as
once each day that is a business day for such Lockbox Bank and
for Chemical and in any event by 1:00 p.m. (New York City time)
on the business day following each such day of deposit, via the
Automated Clearing House System, all available funds on deposit
in any Lockbox Account on such day to the relevant Concentration
Account along with (unless otherwise provided in the related
Lockbox Agreement) any remittance advisements or payment invoices
on deposit therein.
(ii) In the event the Company (with the consent of the
Administrative Agent) or any Servicer or any Lockbox Bank shall,
after the date hereof, terminate the Lockbox Agreement with
respect to the maintenance of any Lockbox Account with any
Lockbox Bank for any reason, or, in the event (A) a Termination
Event or Potential Termination Event shall occur and be
continuing or (B) there has been a failure by any Lockbox Bank to
perform any of its material obligations under the applicable
Lockbox Agreement and such failure could have a Material Adverse
Effect on the Banks' interest in any Receivables or the
Administrative Agent's or the Banks' rights, or ability to
exercise any remedies, under this Agreement, if the
Administrative Agent shall demand such termination, the Company
agrees to notify, or cause the responsible Servicer to notify
(and, if the Company or such Servicer fails to so notify, the
<PAGE>
57
Company irrevocably grants the Administrative Agent the authority
to notify) all Obligors that were depositing Collections into
such terminated Lockbox Account or Lockbox Bank to make all
future deposits to another Lockbox Bank with which the Company
has a Lockbox Agreement that has not been terminated by the
Company, by such Lockbox Bank or by demand from the
Administrative Agent; provided, however, that, if the
-------- -------
Administrative Agent shall demand
<PAGE>
58
termination of any Lockbox Accounts of the Company with all
Lockbox Banks, the Company agrees to notify, or cause the
responsible Servicer to notify (and, if the Company or such
Servicer fails to so notify, the Company irrevocably grants the
Administrative Agent the authority to notify) all Obligors to
make all future payments directly to the relevant Concentration
Account or any other account designated by the Administrative
Agent.
(iii) The Company represents, warrants, covenants and
agrees that (x) upon execution of a Lockbox Agreement with
respect thereto the Administrative Agent will be authorized to
receive mail delivered to any Lockbox Bank with respect to any
Lockbox Account and (y) within 60 days after the Effective Date,
a form of standing delivery order shall have been filed by the
Company with the United States Postal Service authorizing the
Administrative Agent to receive mail delivered to Lockbox Banks
with respect to any Lockbox Account.
(iv) The Administrative Agent shall have sole and
exclusive dominion over and control of each Lockbox Account and
the Company and the Servicer shall not have any dominion over or
control of any Lockbox Account, other than the right to authorize
transfers to the Concentration Accounts as set forth herein and
pursuant to the terms hereof.
(v) Each of the Company, the Master Servicer and each
Servicer agrees that the Administrative Agent shall have the
unconditional right at any time, whether or not a Termination
Event or Potential Termination Event has occurred, (i) to
instruct any Lockbox Bank to transfer, via the Automated Clearing
House System, all available funds on deposit in any Lockbox
Account to the relevant Concentration Account or (ii) to instruct
any Lockbox Bank to thereafter transfer automatically at least as
often as once each day that is a business day for such Lockbox
Bank and for Chemical and in any event at the opening of business
on the business day following each such day of deposit, via the
Automated Clearing House System, all available funds on deposit
in any Lockbox Account to the relevant Concentration Account
along with any remittance advisements or payment invoices on
deposit therein. Any such instructions may be revoked only upon
the written direction of the Administrative Agent.
(d) The Administrative Agent shall treat all
collections received by it or deposited in any Concentration
Account as "Collections" for purposes of this Agreement as of the
Business Day Received (as defined in the immediately succeeding
sentence). As used herein, the term "Business Day Received"
shall mean (i) if funds are otherwise deposited in the
Concentration Account by 1:00 p.m. (New York City time), such day
of deposit and (ii) if funds are deposited in the Concentration
Account after 1:00 p.m. (New York City time), the Business Day
next following such day of deposit.
12.2 Collections by the Servicers. (a) Each
----------------------------
Servicer will, at its cost and expense and as agent for the Banks
and the Company, use its best efforts to collect, consistent with
its past practices, as and when the same becomes due, the amount
owing on each Receivable for which it is the Servicer. No
Servicer will make any material changes that deviate from the
Policies in its administrative, servicing and collection
<PAGE>
59
systems without the prior written approval of the Required Banks.
In the event of default under any Receivable, the responsible
Servicer shall have the power and authority, on behalf of the
Banks and the Company, to take such action in respect of such
Receivable as such Servicer may reasonably deem advisable. In
the enforcement or collection of any Receivable, each Servicer
shall be entitled to sue thereon in (i) its own name, (ii) if,
but only if, the Administrative Agent consents in writing, as
agent of the Banks, or (iii) if, but only if, the Company
consents in writing, as agent for the Company. In no event shall
any Servicer or the Master Servicer be entitled to take any
action which would make the Administrative Agent or any of the
Banks or the Company a party to any litigation without the
express prior written consent of the Administrative Agent or each
such Bank or the Company, as the case may be.
(b) The Master Servicer and the Servicers which are
Affiliates of the Company, jointly and severally, agree to defend
and indemnify the Banks and the Administrative Agent against all
reasonable costs, expenses, claims and liabilities in respect of
any action taken by the Master Servicer or any Servicer which is
an Affiliate of the Company arising out of its collection or
servicing efforts and relative to any Receivable or relative to
any failure of compliance of any Receivable with the provisions
of any law or regulation, whether Federal, state, local or
foreign, applicable thereto (including, without limitation, any
usury law). Each Master Servicer or Servicer which is not an
Affiliate of the Company agrees to defend and indemnify the Banks
and the Administrative Agent and the Company and the Sellers
against all reasonable costs, expenses, claims and liabilities in
respect of any action taken by such Servicer or such Master
Servicer, as the case may be, relative to any Receivable, or
arising out of any failure of compliance of any Receivable with
the provisions of any law or regulation, whether Federal, state,
local or foreign, applicable thereto (including, without
limitation, any usury law). The Administrative Agent and the
Banks shall have no obligation to, and unless and until the
occurrence of an event described in clause (i) or (ii) of the
third sentence of subsection 12.2(d) neither the Administrative
Agent nor the Banks shall, take any action or commence any legal
proceedings to realize upon any Receivable (including, without
limitation, any Defaulted Receivable) or to enforce any of their
rights or remedies with respect thereto. Notwithstanding
anything to the contrary contained in this subsection 12.2(b),
neither the Master Servicer nor any Servicer shall be obligated
to indemnify or otherwise hold any Person harmless with respect
to any losses arising from the nonpayment of any Receivable by or
on behalf of the related Obligor.
(c) The Servicers, the Master Servicer and the Company
each hereby irrevocably grant to the Administrative Agent an
irrevocable power of attorney, with full power of substitution,
coupled with an interest, to take in the name of the Master
Servicer, such Servicer or the Company or in its own name at any
time after the occurrence of a Complete Servicing Transfer all
steps necessary or advisable to endorse, negotiate or otherwise
realize on any writing or other right of any kind held or owned
by the Master Servicer, such Servicer or the Company or
transmitted to or received by the Administrative Agent as payment
on account or otherwise in respect of any Receivable.
(d) Upon the occurrence and during the continuance of
any Servicer Event of Default, the Administrative Agent shall, at
the request of the Required Banks, by giving
<PAGE>
60
two Business Days' notice in writing to the Master Servicer (a
"Transfer Notice"), terminate any or all Servicer or Master
Servicer administrative, servicing and collection functions
provided for herein as to any or all of the Servicers and the
Master Servicer (the termination of all such functions with
respect to all Servicers and the Master Servicer being referred
to as a "Complete Servicing Transfer" and any other such
termination being referred to as a "Partial Servicing Transfer").
Upon the occurrence of either a Partial Servicing Transfer or a
Complete Servicing Transfer, without limitation, (i) a designee
of the Required Banks (for purposes of paragraphs (d) through (e)
of this subsection 12.2, the term "Substitute Servicer" means
such designee, as appropriate) shall administer the
administrative, servicing and collection functions of each
affected Servicer (each, a "Transferring Servicer") (in the case
of a Partial Servicing Transfer) or all Servicers and the Master
Servicer (in the case of a Complete Servicing Transfer) in any
manner it deems fit (which may include notifying any Obligor of
the assignment to the Banks of the interest in the affected
Receivables and/or directing any Obligor to make all payments in
respect of the affected Receivables in the name of the Substitute
Servicer), provided that the Substitute Servicer shall furnish or
--------
cause to be furnished to the Company such information as such
Company needs to perform its obligations under this Agreement,
and the Company may, without independent investigation, rely on
such information for all purposes of this Agreement and (ii) the
Company, each Transferring Servicer (in the case of a Partial
Servicing Transfer) or each Servicer and the Master Servicer (in
the case of a Complete Servicing Transfer) shall, at its own
expense, (x) if so requested by the Substitute Servicer, endorse
each instrument, if any, evidencing any Receivable to the
Substitute Servicer in such manner as the Substitute Servicer
shall reasonably direct and (y) perform, or cause to be performed
by any Person involved in administrative, servicing or collection
functions on behalf of or under the direction of each
Transferring Servicer (in the case of a Partial Servicing
Transfer) or each Servicer and the Master Servicer (in the case
of a complete Servicing Transfer) or the Company, any and all
acts, any and all documents as, in each case, may be reasonably
requested by the Substitute Servicer in order to effect the
purposes of this Agreement and the transfer and assignment of the
Participating Interest and to perfect and protect the ownership
interest of the Banks in the Receivables and the Related
Property. Each Servicer agrees to serve as a Substitute Servicer
if so designated by the Required Banks at any time and from time
to time. Upon the occurrence of a Partial Servicing Transfer or
a Complete Servicing Transfer, each Transferring Servicer (in the
case of a Partial Servicing Transfer) or each Servicer and the
Master Servicer (in the case of a Complete Servicing Transfer)
shall promptly transfer its electronic records relating to its
Receivables to the Substitute Servicer in such electronic form as
the Substitute Servicer may reasonably request and shall promptly
transfer to the Substitute Servicer all other records,
correspondence and documents necessary for the continued
servicing of such Receivables in the manner and at such times as
the Substitute Servicer shall reasonably request; provided that
--------
to the extent that such Transferring Servicer or such Servicer
and the Master Servicer, as the case may be, is required to have,
as a result of a continuing relationship with the related
Obligors, access to any such records in respect of its
Receivables, the Substitute Servicer shall allow such
Transferring Servicer or such Servicer and the Master Servicer,
as the case may be, to have reasonable access to such records
upon reasonable advance notice and so long as such access shall
not disrupt or
<PAGE>
61
otherwise interfere with the Substitute Servicer's use of such
records in performing its duties hereunder.
(e) Each Transferring Servicer (in the case of a
Partial Servicing Transfer) or each Servicer and the Master
Servicer (in the case of a Complete Servicing Transfer) and the
Company shall each execute and deliver such additional documents
and shall take such further action as the Substitute Servicer may
reasonably request to effect or evidence the transfer of
servicing and shall execute and deliver to the Substitute
Servicer such powers-of-attorney (in addition to the power of
attorney provided for in subsection 12.2(c)) as may be necessary
or appropriate to enable the Substitute Servicer, on behalf of
the Banks, to endorse for payment any check, draft or other
instrument delivered in payment of any amount under or in respect
of an affected Receivable. If, at any time when the provisions
of subsection 12.1(c) shall have become operative, any Servicer,
the Master Servicer or the Company receives any cash or checks,
drafts or other instruments for the payment of money on account
or otherwise in respect of the Purchased Receivables, such
Servicer, the Master Servicer or the Company shall segregate such
cash and other items, hold such cash and other items in trust for
the benefit of the Banks and cause such cash and other items
(properly endorsed, where required, so that such items may be
collected by the Substitute Servicer) to be transmitted or
delivered to the Substitute Servicer for deposit in the relevant
Concentration Account within one Business Day after the date any
such cash or other item shall have been identified and segregated
by such Servicer, the Master Servicer or the Company as being on
account of a Purchased Receivable.
12.3 Maintenance of Records. Each Servicer and the
----------------------
Master Servicer will hold in trust for the Banks at the office of
such Servicer or Master Servicer set forth in Schedule 2 such
books of account and other records as it currently maintains for
its own purposes in the ordinary course of its business, provided
--------
that, as of the date which is three months following the
Effective Date, such books of account and other records shall be
in a form reasonably satisfactory to the Administrative Agent to
determine at any time the status of the Receivables and all
collections and payments in respect thereof (including, without
limitation, an ability to recreate records evidencing Receivables
in the event of the destruction of the originals thereof). The
Administrative Agent may at any time and from time to time upon
reasonable prior notice during the regular business hours of any
Servicer or the Master Servicer inspect, audit, check and make
abstracts from the books, accounts, records, or other papers of
such Servicer or the Master Servicer pertaining to the
Receivables. From time to time upon the written request of the
Administrative Agent, which request shall be promptly made upon a
request therefor to the Administrative Agent by any Bank, each
Servicer or the Master Servicer, at its own expense, will as
promptly as is practicable deliver to the Administrative Agent a
schedule of the Receivables indicating as to each Receivables
information as to the Obligor thereon, the unpaid balance
thereof, the amount and delinquency of any Receivable that is
past due and such other information as the Administrative Agent
may reasonably request. Upon the written request of the
Administrative Agent, which request may only be made at any time
after a Partial Servicing Transfer or a Complete Servicing
Transfer, each affected Servicer and the Master Servicer, at its
own expense, will deliver to the Administrative Agent, or to any
agent selected by the Administrative Agent, any records
<PAGE>
62
pertaining thereto and evidence thereof as the Administrative
Agent may deem necessary to enable it to enforce the Banks'
rights thereunder; provided that to the extent that such affected
--------
Servicer or the Master Servicer is required to have, as a result
of a continuing relationship with the related Obligors, access to
any such records in respect of its Receivables, the
Administrative Agent (or the agent selected by it) shall allow
such affected Servicer or the Master Servicer to have reasonable
access to such records upon reasonable advance notice and so long
as such access shall not disrupt or otherwise interfere with the
Administrative Agent's (or its agent's) use of such records in
performing its duties hereunder. Upon the expiration of the
Commitment Period, the reduction of the Net Investment to zero
and the payment in full of all amounts owing to the Banks and the
Administrative Agent hereunder, the Administrative Agent will
promptly return to the Servicers and the Master Servicer any such
records delivered to the Administrative Agent or its agent.
12.4 Rebates, Adjustments, Returns and Reductions;
---------------------------------------------
Modifications. From time to time a Servicer may make Adjustments
-------------
to Receivables in accordance with subsection 12.6(p). If the
Master Servicer or any Servicer makes any Adjustment, then, in
any such case, the amount of Receivables will be automatically
reduced by the principal amount of such Adjustment. Any
Adjustment shall be made on the Business Day on which such
adjustment obligation arises or is identified. In addition, if,
after giving effect to any such Adjustment, the Invested
Percentage would exceed the Maximum Invested Percentage, the
Company shall pay to the Administrative Agent, for the account of
the Banks, an amount equal to the lesser of (i) the dollar amount
of such Adjustment and (ii) the amount necessary to cause the
Invested Percentage to equal the Maximum Invested Percentage (the
amount of each such payment is referred to herein as an
"Adjustment Payment"). Such Adjustment Payment shall be treated
as a Collection and shall be distributed in accordance with the
applicable provisions of subsection 2.7.
12.5 Daily Reports; Settlement Statements. (a) (i)
------------------------------------
On each Business Day the Master Servicer will prepare a written
report (the "Daily Report") in the form of Exhibit H, with such
changes as may be agreed upon by the Administrative Agent and the
Master Servicer, setting forth for the second preceding Business
Day (the "Reporting Day") total Collections, the estimated amount
of Receivables and Eligible Receivables created, and such other
information as the Administrative Agent may request. The Master
Servicer shall complete such Daily Report and deliver it to the
Administrative Agent prior to 12:00 Noon (New York City time) on
the second Business Day following the Reporting Day. Each Daily
Report shall be transmitted by telecopy to the Administrative
Agent at the telecopy number specified in subsection 11.9.
(ii) On each Business Day, each Servicer shall provide
the Master Servicer with a written report (a "Seller Daily
Report") with respect to the Receivables serviced by such
Servicer, in a form to be agreed upon by such Servicer and the
Master Servicer, which report shall contain such information as
the Master Servicer shall need or otherwise request in order to
complete the Daily Report.
(b) (i) Not later than two Business Days prior to
each Settlement Date until the Participating Interest of the
Banks in the Receivables has been reduced to zero and the
Commitments of the Banks hereunder have been terminated, the
Master Servicer shall submit to the Administrative Agent a
statement (hereinafter, a "Settlement Statement"), substantially
in the form attached hereto as Exhibit E or such other form as
may be acceptable to the Administrative Agent. Promptly upon
receipt thereof, the Administrative Agent shall forward a copy of
each Settlement Statement to each Bank.
(ii) Not later than three Business Days prior to each
Settlement Date, each Servicer shall provide the Master Servicer
with a written report (a "Seller Settlement Statement") with
<PAGE>
63
respect to the Receivables serviced by such Servicer, in a form
to be agreed upon by such Servicer and the Master Servicer, which
report shall contain such information as the Master Servicer
shall need or otherwise request in order to complete the
Settlement Statement.
(c) (i) Within 45 days after the end of each fiscal
quarter of C&A Products, the Master Servicer will deliver to the
Administrative Agent and each Bank a certificate of a Responsible
Officer of the Master Servicer stating that (a) a review of the
activities of the Master Servicer and each Servicer and its
performance hereunder during such fiscal quarter was made under
the supervision of such Responsible Officer, (b) to the best
knowledge of such Responsible Officer, based on such review, the
Master Servicer and each Servicer has accurately and correctly
performed its obligations hereunder in all material respects
throughout such quarter, or, if there has been a material default
in the performance of any such obligation, specifying the nature
and status of each such default and (c) to the best knowledge of
such Responsible Officer, based on such review, each Daily Report
and Settlement Statement was accurate and correct in all material
respects, except as specified in such certificate.
(ii) In connection with the annual audit of the Master
Servicer referred to in subsection 12.6(s)(i) and at the
Administrative Agent's prior request therefor, within 90 days
after the end of each fiscal year of C&A Products, the Master
Servicer shall cause a firm of independent certified public
accountants (who may also render other services to the Master
Servicer, the Servicers and the Company) to deliver to the
Administrative Agent and each Bank a report of examination to the
effect that such firm has examined the activities of the Master
Servicer and each Servicer with respect to the Receivables and
its performance hereunder during such fiscal year and that such
examination included tests relating to Receivables serviced and
such other auditing procedures as such firm considered necessary
under the circumstances and, except as described in such report,
disclosed no material exceptions or errors in the records
relating to the Receivables serviced and its material performance
hereunder that, in such firm's opinion, are required to be
reported by such firm.
12.6 Representations, Warranties and Covenants of the
------------------------------------------------
Servicers. Each Servicer and the Master Servicer hereby makes
---------
the following representations, warranties and covenants to the
Banks and the Administrative Agent:
(a) Organization; Corporate Powers. Such Person (i)
------------------------------
is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it
is incorporated, (ii) has all requisite corporate power and
authority, and all
<PAGE>
64
material licenses, permits, franchises, consents and
approvals, to own or lease its property and assets and to
carry on its business as now conducted and as proposed to be
conducted, (iii) is duly qualified to do business and is in
good standing as a foreign corporation (or is exempt from
such requirements) and has obtained all necessary licenses
and approvals in each jurisdiction in which the servicing of
the Receivables as required by this Agreement requires such
qualification except where the failure to so qualify or
obtain licenses or approvals would not have a Material
Adverse Effect and (iv) has the corporate power and
authority to execute, deliver and perform this Agreement.
(b) Authorization. The execution, delivery and
-------------
performance by such Person of this Agreement and the
consummation of the other Transactions (i) have been duly
authorized by all requisite corporate and, if required,
stockholder action and (ii) will not (x) violate (A) any
provision of law, statute, rule or regulation (including,
without limitation, Regulations G, T, U and X) or the
certificate of incorporation or by-laws (or similar
governing documents) of such Person, (B) any applicable
order of any court or any rule, regulation or order of any
Governmental Authority or (C) any indenture, certificate of
designation for preferred stock, agreement or other
instrument to which such Person is a party or by which such
Person or any of its property is bound, (y) be in conflict
with, result in a breach of or constitute (with notice or
lapse of time or both) a default under any such indenture,
agreement or other instrument where any such conflict,
violation, breach or default referred to in clause (ii)(x)
or (ii)(y) of this subsection 12.6(b), individually or in
the aggregate, would have a Material Adverse Effect or (z)
result in the creation or imposition of any Lien upon any
property or assets of the such Person.
(c) Enforceability. This Agreement has been duly
--------------
executed and delivered by such Person and constitutes a
legal, valid and binding obligation of such Person
enforceable against such party in accordance with its terms,
except as enforceability may be limited by bankruptcy,
insolvency, moratorium, reorganization or other similar laws
affecting creditors' rights generally and except as
enforceability may be limited by general principles of
equity (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
(d) Litigation, etc. (i) There are not any actions,
---------------
suits or proceedings at law or in equity or by or before any
court or Governmental Authority now pending or, to the
knowledge of such Person, threatened against or affecting
such Person or any property or rights of such Person as to
which there is a reasonable possibility of an adverse
determination and which (x) if adversely determined, could
individually or in the aggregate result in a Material
Adverse Effect or (y) involve the Transaction Documents or
(z) if adversely determined could materially adversely
affect the Transactions.
(ii) Such Person is not in default with respect to any
law, order, judgment, writ, injunction, decree, rule or
regulation of any Governmental Authority where such default
could have a Material Adverse Effect. The Transactions will
not violate any applicable law or regulation or violate or
be prohibited by any
<PAGE>
65
judgment, writ, injunction, decree or order of any court or
Governmental Authority or subject such Person to any civil
or criminal penalty or fine.
(e) Taxes. Such Person and each of its Subsidiaries
-----
has filed or caused to be filed all Federal, and material
state, local and foreign, tax returns required to have been
filed by it and has paid or caused to be paid all taxes
shown thereon to be due and payable, and any assessments
received by it, except taxes that are being contested in
good faith by appropriate proceedings and such Person or
such Subsidiary, as the case may be, shall set aside on its
books adequate reserves as required by GAAP with respect
thereto. For purposes of this paragraph, "taxes" shall mean
any present or future tax, levy, impost, duty, charge,
assessment or fee of any nature (including interest,
penalties and additions thereto) that is imposed by any
Governmental Authority.
(f) Consents. All consents and approvals of, filings
--------
and registrations with, and other actions in respect of, all
Governmental Authorities required in order to make or
consummate the Transactions have been obtained, given, filed
or taken and are in full force and effect, other than any
such consents, approvals, filings or other actions, the
failure to obtain or make which could not reasonably be
expected to result in a Material Adverse Effect.
(g) Compliance with Requirements of Law. Such Person
-----------------------------------
(i) shall duly satisfy all obligations on its part to be
fulfilled under or in connection with the servicing and
collection of the Receivables, (ii) will maintain in effect
all qualifications required under Requirements of Law in
order to properly service the Receivables and (iii) will
comply in all respects with all Requirements of Law in
connection with servicing the Receivables, except, in each
case, where such conduct could not have a Material Adverse
Effect.
(h) Agreement to Cooperate. The Master Servicer shall
----------------------
from time to time and at any time provide, and shall cause
its Subsidiaries to provide, information with respect to the
business, operations, properties and financial matters of
the Master Servicer and such Subsidiaries to the Company,
its officers, employees, agents and professional advisers in
connection with the replacement or refinancing, in whole or
in part, of this Agreement and the other Transaction
Documents with a new receivables financing facility in which
ownership interests in, or notes, commercial paper,
certificates or other debt instruments secured by, the
Receivables shall be sold in one or more public offerings,
private placements or otherwise (such facility, the
"Replacement Facility"), and the Master Servicer shall
otherwise cooperate with, and cause its Subsidiaries to
cooperate with, the Company and such officers, employees,
agents and professional advisers in the negotiation,
development, preparation and execution of, such Replacement
Facility.
(i) Protection of Banks' Rights. Such Person shall
---------------------------
take no action, nor omit to take any action, which act or
omission would substantially impair the rights of Banks in
the Receivables, nor shall it reschedule, revise or defer
payments due on
<PAGE>
66
any Receivable except in accordance with the Policies or
except as otherwise expressly permitted by this Agreement;
provided, that such Person shall have no obligation to the
--------
Banks or the Administrative Agent under this paragraph (i)
in respect of Receivables which become Charge-Offs as a
result of non-payment by the Obligor with respect thereto.
(j) Security Interest. Except for the conveyance
-----------------
hereunder and under the Receivables Sale Agreement, such
Person will not sell, pledge, assign or transfer to any
other Person, or grant, create, incur, assume or suffer to
exist any Lien on any Receivable or other Pooled Property
transferred and assigned to the Banks, whether now existing
or hereafter created, or any interest therein, and such
Person shall defend the right, title and interest of the
Banks in, to and under any Receivable or other Pooled
Property transferred and assigned to the Banks, whether now
existing or hereafter created, against all claims of third
parties claiming through or under such Person, the Master
Servicer or any Seller.
(k) Location of Offices. The chief executive office
-------------------
of each Servicer and the Master Servicer is listed on
Schedule 2, which office is the place where such Person is
"located" for the purposes of Section 9-103(3)(d) of the
Uniform Commercial Code of the State of New York, and the
offices of each Servicer and the Master Servicer where such
Servicer and the Master Servicer keeps its records
concerning the Receivables are also listed in said Schedule.
Such Person (i) will not move outside the State listed on
Schedule 2 under the heading "Chief Executive Office" the
location of its chief executive office or outside of the
State listed on Schedule 2 under the heading "Offices Where
Records Kept" the location of any of the offices where it
keeps its records with respect to the Receivables without 30
days' prior written notice to the Administrative Agent and
(ii) will promptly take all actions reasonably required
(including but not limited to all filings and other acts
necessary or advisable under the Uniform Commercial Code of
each relevant jurisdiction) in order to continue the first
priority perfected ownership interest of the Banks in all
Receivables and other Pooled Property now owned or hereafter
created. Such Person will give the Administrative Agent
prompt notice of a change within the State listed on
Schedule 2 of the location of its chief executive office or
of a change within the State listed on Schedule 2 of the
location of any office where it keeps its records with
respect to the Receivables and the other Pooled Property.
(l) No Adverse Change. There has not been since the
-----------------
date of this Agreement any material adverse change in the
ability of such Person to perform its obligations under
Article XII of this Agreement.
(m) Lockboxes and other Payment Methods. Listed on
-----------------------------------
Schedule 3 is each Lockbox Account to which, as of the
initial Closing Date, the Obligors have been directed to
remit payments on account of the Receivables, except to the
extent that any of the Servicers, in the normal course of
their business and consistent with past practices, have
directed such Obligors to remit payments by (i) delivering
cash, a check or other instrument to or in care of the
Person delivering goods to
<PAGE>
67
such Obligor, (ii) a wire transfer of such funds directly to
the relevant Concentration Account or (iii) delivering a
check to the business offices, agents or officers of such
Servicer. Neither the Master Servicer nor any Servicer
shall (i) add or terminate any bank as a bank at which a
Lockbox Account is maintained, (ii) add or terminate any
such Lockbox Account at any such bank or (iii) make any
change in its instructions to any Obligor regarding payments
to be made to any such bank or Lockbox Account; provided,
--------
that a Servicer may at any time change its instructions to
Obligors so as to require such Obligors to make payments to
a different Lockbox Account, so long as such Servicer has
previously delivered to the Administrative Agent an executed
Lockbox Agreement in form and substance reasonably
satisfactory to the Administrative Agent regarding such
Lockbox Account.
(n) Reports. The information with respect to the
-------
Receivables serviced by such Person contained in each
Settlement Statement will be true and correct in all
material respects as of the date of such Settlement
Statement.
(o) Instruments. Such Person will not take any action
-----------
to cause any Receivable to be evidenced by any instrument
(other than an instrument which constitutes chattel paper)
(as each such term is defined in the Uniform Commercial Code
as in effect in the State of New York) except in connection
with the enforcement or collection of a Receivable.
(p) Extension of Receivables; Amendment of Policies.
-----------------------------------------------
Extend, make any Adjustment to, rescind, cancel, amend or
otherwise modify, or attempt or purport to extend, amend or
otherwise modify, the terms of any Purchased Receivables,
except (i) in accordance with the terms of the Policies,
(ii) as required by any Requirement of Law, (iii) in the
case of Adjustments, upon making an Adjustment Payment
pursuant to subsection 12.4 or (iv) with the consent of the
Required Banks, provided the Servicers may cause Receivables
to become Charge-Offs. Neither the Servicers nor the Master
Servicer shall amend or otherwise modify or waive any term
or condition of the Policies except in accordance with
subsection 5.8 of the Receivables Sale Agreement.
(q) Ineligible Receivables. Without the prior written
----------------------
approval of the Required Banks, such Person shall not take
any action to cause, or which would permit, an Eligible
Receivable to cease to be an Eligible Receivable, except as
expressly permitted in this Agreement.
(r) Notices. Such Person will give written notice to
-------
the Administrative Agent and each Bank promptly upon
obtaining knowledge of (i) the occurrence of any Termination
Event, Potential Termination Event, Servicer Default or
Servicer Event of Default (which notice shall specify what,
if any, action will be taken with respect thereto) and (ii)
a breach of any of the representations and warranties of the
Company set forth in Article V.
(s) Financial Statements. The Master Servicer shall
--------------------
furnish to each Bank:
(i) as soon as available, but in any event within
90 days after the end of each fiscal year of the Master
Servicer, a copy of the consolidated balance sheet of
the Master Servicer and its consolidated Subsidiaries
as at the end of such year and the related consolidated
statements of income, shareholders' equity and retained
earnings and cash flows for such year, setting forth
the comparative amounts for the previous year and
certified without a "going concern" or like
qualification or exception, or scope limitation, by
Arthur Andersen & Co. or other independent certified
<PAGE>
68
public accountants of nationally recognized standing
reasonably acceptable to the Administrative Agent;
(ii) as soon as available, but in any event not
later than 45 days after the end of each of the first
three quarterly periods of each fiscal year of the
Master Servicer, the unaudited consolidated balance
sheet of the Master Servicer and its consolidated
Subsidiaries as at the end of such quarter and the
related unaudited consolidated statements of income,
shareholders' equity and retained earnings and cash
flows of the Master Servicer and its consolidated
Subsidiaries for such quarter and the portion of the
fiscal year through the end of such quarter, setting
forth the comparative amounts for the corresponding
quarter and portion of the previous year, certified by
a Responsible Officer of the Master Servicer as being
fairly stated in all material respects (subject to
normal year-end audit adjustments); and
(iii) as soon as available, but in any event not
later than 45 days after the end of each month in each
fiscal year of the Master Servicer, the unaudited
consolidated balance sheet of the Master Servicer and
its consolidated Subsidiaries as at the end of such
month and the related unaudited consolidated statements
of income, shareholders' equity and retained earnings
and cash flows of the Master Servicer and its
consolidated Subsidiaries for such month and the
portion of the fiscal year through the end of such
month, setting forth the comparative amounts for the
corresponding month of the previous year, certified by
a Responsible Officer of the Master Servicer as being
fairly stated in all material respects (subject to
normal year-end audit adjustments);
all such financial statements shall be complete and correct
in all material respects and shall be prepared in reasonable
detail and in accordance with GAAP applied consistently
throughout the periods reflected therein and with prior
periods (except as approved by such accountants or
Responsible Officer, as the case may be, and disclosed
therein) except that the monthly financial statements
provided pursuant to clause (iii) shall only be consistent
with GAAP in all material respects and that the monthly
financial statements provided pursuant to clause (iii) shall
not be required to include footnotes.
(t) Certificates; Other Information. The Master
-------------------------------
Servicer shall furnish to each Bank:
<PAGE>
69
(i) concurrently with the delivery of the
financial statements referred to in clause (s)(i), a
certificate of the independent certified public
accountants reporting on such financial statements
stating that in making the examination necessary
therefor no knowledge was obtained of any Servicer
Default or Servicer Event of Default, except as
specified in such certificate;
(ii) concurrently with the delivery of the
financial statements referred to in clause (s)(i) and
(ii), a certificate of a Responsible Officer of the
Master Servicer stating that, to the best of such
Responsible Officer's knowledge, each Transaction Party
during such period has observed or performed all of its
covenants and other agreements, and satisfied every
condition, contained in the Transaction Documents to
which it is a party to be observed, performed or
satisfied by it, and that such Responsible Officer has
obtained no knowledge of any Servicer Default or
Servicer Event of Default except as specified in such
certificate.
(u) Separate Corporate Existence of the Company. The
-------------------------------------------
Master Servicer shall cause the Company to comply with the
provisions of subsection 7.9. Neither the Master Servicer
nor any Servicer shall take any action, or omit to take any
action, which is inconsistent with the provisions thereof.
The Master Servicer shall not assign, pledge, transfer or
otherwise dispose of the Capital Stock of the Company other
than pursuant to the terms of the Pledge Agreement.
Each of the Master Servicer and each Servicer agrees and
acknowledges that each of the representations and warranties
contained in this subsection 12.6 shall be deemed to have been
made by the Master Servicer or such Servicer, as the case may be,
(x) as of the Effective Date, and (y) with respect to an Increase
in Net Investment, as of the related Closing Date, unless, in
either case, such representation or warranty expressly relates
only to a prior date.
12.7 Acquisition Obligation. (a) In the event of any
----------------------
breach of any of the representations, warranties or covenants of
the Master Servicer or any Servicer which is an Affiliate of the
Company contained in subsection 12.6(g), (i), (j), (k), (p) or
(q), then upon the earlier to occur of the discovery of such
event by such Person, or receipt by such Person of written notice
of such event given by the Administrative Agent, the outstanding
Principal Amount of Receivables shall be reduced by the Principal
Amount of such Receivables in respect of which such
representation or warranty was incorrect or such covenant was
breached; provided, however, that (i) prior to the Amortization
-------- -------
Period, to the extent that such a reduction would cause the
Invested Percentage to be more than the Maximum Invested
Percentage, the Master Servicer and the Servicers which are
Affiliates of the Company, jointly and severally, agree to
acquire such Receivable and any Related Property with respect
thereto on the terms and conditions set
<PAGE>
70
forth in paragraph (b) below and (ii) during the Amortization
Period, the Master Servicer and the Servicers which are
Affiliates of the Company, jointly and severally, agree
(regardless of which such Servicer or Master Servicer shall have
been responsible for such breach) to acquire such Receivable and
any Related Property with respect thereto on the terms and
conditions set forth in paragraph (b) below. In the event of any
breach of any of the representations, warranties or covenants of
the Master Servicer or any Servicer which is not an Affiliate of
the Company contained in subsection 12.6(g), (i), (j), (k), (p)
or (q), then upon the earlier to occur of the discovery of such
event by such Person, or receipt by such Person of written notice
of such event given by the Administrative Agent, the outstanding
Principal Amount of Receivables shall be reduced by the Principal
Amount of such Receivables in respect of which such
representation or warranty was incorrect or such covenant was
breached upon the deposit by the Master Servicer or such Servicer
(which deposit the Master Servicer or such Servicer hereby agrees
to make) into the relevant Concentration Account in immediately
available funds an amount equal to the Principal Amount of such
Receivable (together with payments pursuant to paragraph (b),
"Servicer Transfer Payments").
(b) If any breach of a representation, warranty or
covenant by a Servicer or the Master Servicer which is an
Affiliate of the Company which necessitates the acquisition of a
Receivable by the Master Servicer and the Servicers pursuant to
paragraph (a) remains uncured on the day which is 30 days after
discovery or notice of such breach, the Master Servicer and such
Servicers shall acquire such Receivable and any Related Property
with respect thereto by depositing into the relevant
Concentration Account in immediately available funds on such 30th
day (or, if such day is not a Business Day, the immediately
succeeding Business Day, an amount equal to (i) prior to an
Amortization Period, the lesser of (A) the amount necessary to
cause the Invested Percentage to equal the Maximum Invested
Percentage and (B) the Principal Amount of such Receivable or
(ii) during an Amortization Period, the Principal Amount of such
Receivable (also, a "Servicer Transfer Payment"). Upon deposit
of the Servicer Transfer Payment, the Banks shall automatically
and without further action be deemed to sell, transfer, assign,
set-over and otherwise convey to such Person, free and clear of
any Lien created by the Banks but otherwise without recourse,
representation or warranty, all the right, title and interest of
the Banks in and to such Receivable, and all Related Property
with respect thereto; and such retransferred Receivable shall be
treated by the Banks as collected in full as of the date on which
it was transferred. The Administrative Agent shall execute such
documents and instruments of transfer or assignment and take such
other actions as shall reasonably be requested by the Master
Servicer to effect the conveyance of such Receivables pursuant to
this subsection 12.7. The obligation to acquire any Receivable
shall constitute the sole remedy respecting any breach of the
representations, warranties and covenants set forth in subsection
12.6(g), (i), (j), (k), (p) or (q) with respect to such
Receivables available to Banks or the Administrative Agent on
behalf of the Banks.
12.8 Obligations Unaffected. The obligations of the
----------------------
Master Servicer, each Servicer and the Company to the
Administrative Agent and the Banks under this Agreement shall not
be affected by reason of any invalidity, illegality or
irregularity of any Receivable or any transfer and assignment of
a Receivable.
<PAGE>
71
12.9 Addition of Servicers. Subject to the terms and
---------------------
conditions hereof, from time to time one or more Subsidiaries of
C&A Products which the Required Banks have approved as additional
Sellers pursuant to subsection 8.22 shall become additional
Servicers parties hereto upon (a) execution by each such
Subsidiary of an Additional Servicer Supplement and (b)
satisfaction of all conditions precedent set forth in subsection
3.4 of the Receivables Sale Agreement to such Subsidiary becoming
an additional Seller.
12.10 Optional Termination of Servicers. Any Servicer
---------------------------------
which is terminated as a Seller pursuant to subsection 9.15 of
the Receivables Sale Agreement shall be released as a Servicer
party hereto and shall cease to be a party hereto on the date it
ceases to be a party to the Receivables Sale Agreement.
12.11 Interest on Overdue Payments. If any amount
----------------------------
payable by the Servicers or the Master Servicer to the Banks or
the Administrative Agent hereunder, whether on account of fees or
expenses or on account of amounts collected by the Servicers or
the Master Servicer or amounts payable pursuant to subsection
12.4 or 12.7, or otherwise, is not paid by such Servicer or the
Master Servicer, as the case may be, on the relevant Settlement
Date or other relevant date, such amount shall be payable
together with interest for each day from such Settlement Date or
other relevant date, as the case may be, until such amount is
paid in full at a rate per annum equal to ABR plus the Applicable
----
ABR Margin plus 2%.
----
12.12 Servicer Events of Defaults. If any of the
---------------------------
following events (herein called "Servicer Events Of Default")
shall have occurred and be continuing:
(a) any Servicer or the Master Servicer, as the case
may be, (1) shall fail to deliver any Daily Report or any
Settlement Statement conforming in all material respects to
the requirements of subsection 12.5 and such failure shall
continue unremedied for two consecutive Business Days after
the Administrative Agent shall have delivered notice thereof
to such Servicer or the Master Servicer, as the case may be,
provided that if a Force Majeure Delay shall have occurred
--------
with respect to any Servicer or the Master Servicer, as the
case may be, (i) in the case of such an event with respect
to a Servicer, the failure of any Daily Report or Settlement
Statement to contain information with respect to the
Receivables serviced by such Servicer or (ii) in the case of
such an event with respect to the Master Servicer, the
failure of the Master Servicer to deliver any Daily Report
or Settlement Statement, shall not constitute, in either
case, a Servicer Event of Default unless such failure
continues for longer than the lesser of (x) ten consecutive
Business Days and (y) the length of such Force Majeure Delay
(or, if greater, two Business Days) after the Administrative
Agent shall have delivered notice of such failure to the
Company, or (2) shall fail to make any payment reflected in
such Daily Report or Settlement Statement as being required
to be made by it thereunder on the date such report or
statement is delivered;
(b) any Servicer or the Master Servicer, as the case
may be, shall fail to pay any amount required to be paid by
it hereunder (other than those specified in
<PAGE>
72
paragraph (a) of this subsection 12.12) within five Business
Days after the date when due;
(c) any Servicer or the Master Servicer, as the case
may be, shall fail to observe or perform any covenant or
agreement applicable to it contained herein (other than as
specified in subsections (a) and (b) of this subsection
12.12), provided that, except in the case of any failure to
--------
observe or perform any covenant contained in subsection
12.6(r)(i), no such failure shall constitute a Servicer
Event of Default under this paragraph (c) unless such
failure shall continue unremedied for a period of 30
consecutive days after notice thereof from the
Administrative Agent, the Required Banks or the Company;
provided that a Servicer Event of Default shall not be
--------
deemed to have occurred under this paragraph (c) based upon
a breach of a representation, warranty or covenant contained
in subsection 12.6(g), (i), (j), (k), (p) or (q) if the
Servicers and Master Servicer shall have complied with the
provisions of subsection 12.7 with respect thereto;
(d) any representation, warranty, certification or
statement made or deemed made by any Servicer or the Master
Servicer, as the case may be, in this Agreement or in any
Settlement Statement or other certificate, financial
statement or other document delivered pursuant to this
Agreement shall prove to have been false or misleading in
any material respect on or as of the date made or deemed
made; provided that a Servicer Event of Default shall not be
--------
deemed to have occurred under this paragraph (d) based upon
a breach of a representation, warranty or covenant contained
in subsection 12.6(g), (i), (j), (k), (p) or (q) if the
Servicers and Master Servicer shall have complied with the
provisions of subsection 12.7 with respect thereto;
(e) (i) an involuntary proceeding shall be commenced
or an involuntary petition shall be filed in a court of
competent jurisdiction seeking (A) relief in respect of any
Servicer or the Master Servicer, as the case may be, or of a
substantial part of its property or assets, under Title 11
of the United States Code, as now constituted or hereafter
amended, or any other Federal, state or foreign bankruptcy,
insolvency, receivership or similar law, (B) the appointment
of a receiver, trustee, custodian, sequestrator, conservator
or similar official for the any Servicer or the Master
Servicer, as the case may be, or for a substantial part of
its property or assets or (C) the winding-up or liquidation
of the any Servicer or the Master Servicer, as the case may
be; and such proceeding or petition shall continue
undismissed for 60 days or an order or decree approving or
ordering any of the foregoing shall be entered; or (ii) any
Servicer or the Master Servicer, as the case may be, shall
(A) voluntarily commence any proceeding or file any petition
seeking relief under Title 11 of the United States Code, as
now constituted or hereafter amended, or any other Federal,
state or foreign bankruptcy, insolvency, receivership or
similar law, (B) consent to the institution of, or fail to
contest in a timely and appropriate manner, any proceeding
or the filing of any petition described in clause (i) above,
(C) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar
official for such Servicer or the Master Servicer, as the
case may be, or for a substantial part of its
<PAGE>
73
property or assets, (D) file an answer admitting the
material allegations of a petition filed against it in any
such proceeding, (E) make a general assignment for the
benefit of creditors, (F) become unable, admit in writing
its inability or fail generally to pay its debts as they
become due or (G) take any action for the purpose of
effecting any of the foregoing; or
(f) a Purchase Termination Event shall have occurred
and be continuing under the Receivables Sale Agreement;
then, in any such event, so long as such Servicer Event of
Default shall be continuing, with the consent of the Required
Banks the Administrative Agent or the Company may, or upon the
request of the Required Banks the Administrative Agent or the
Company shall, terminate the rights of any or all of the
Servicers and the Master Servicer in accordance with subsection
12.2(d) by notice to each such Servicer and/or the Master
Servicer, as the case may be.
12.13 Audit. Upon the earlier of (a) the date which
-----
is 270 days after the Effective Date and (b) the date on which
C&A Products shall have determined not to pursue the replacement
or refinancing, in whole, of this Agreement and the other
Transaction Documents with a Replacement Facility, the
Administrative Agent, at the expense of C&A Products, may select
and engage a third party to audit the Receivables and all
computer programs, material and data of the Sellers required for
the collection of Receivables by the Company. C&A Products
hereby agrees to give the Administrative Agent prompt written
notice of any determination referred to in clause (b) of the
preceding sentence.
<PAGE>
74
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto
duly authorized, all as of the day and year first above written.
[C&A RECEIVABLES COMPANY]
By:_________________________
Title:
COLLINS & AIKMAN PRODUCTS CO.,
as Master Servicer
By:_________________________
Title:
Address for Notices:
________________________________
________________________________
CHEMICAL BANK, as Administrative Agent
and as a Bank
By:_________________________
Title:
The Servicers:
--------------
COLLINS & AIKMAN CORPORATION
By:_________________________
Title:
Address for Notices:
________________________________
________________________________
COLLINS & AIKMAN PRODUCTS CO., as
Servicer for itself and for Ack-Ti-
Lining, Inc. and The Akro Corporation
By:_________________________
Title:
Address for Notices:
________________________________
________________________________
<PAGE>
75
DURA ACQUISITION CORP.
By:_________________________
Title:
Address for Notices:
________________________________
________________________________
IMPERIAL WALLCOVERINGS, INC.
By:_________________________
Title:
Address for Notices:
________________________________
________________________________
IMPERIAL WALLCOVERINGS (CANADA), INC.
By:_________________________
Title:
Address for Notices:
________________________________
________________________________
WCA CANADA, INC.
By:_________________________
Title:
Address for Notices:
________________________________
________________________________
<PAGE>
DRAFT 06/16/94
ANNEX X
"ABR": for any day, a rate per annum (rounded upwards, if
------
necessary, to the next 1/16 of 1%) equal to the greatest of (a)
the Prime Rate in effect on such day, (b) the Base CD Rate in
effect on such day plus 1% and (c) the Federal Funds Effective
Rate in effect on such day plus 1/2 of 1%. For purposes hereof,
"Prime Rate" shall mean the rate of interest per annum publicly
----------
announced from time to time by Chemical as its prime rate in
effect at its principal office in New York City; each change in
the Prime Rate shall be effective on the date such change is
publicly announced as being effective. "Base CD Rate" shall mean
------------
the sum of (a) the product of (i) the Three-Month Secondary CD
Rate and (ii) Statutory Reserves and (b) the Assessment Rate.
"Three-Month Secondary CD Rate" shall mean, for any day, the
-----------------------------
secondary market rate for three-month certificates of deposit
reported as being in effect on such day (or, if such day shall
not be a Business Day, the next preceding Business Day) by the
Board through the public information telephone line of the
Federal Reserve Bank of New York (which rate will, under the
current practices of the Board, be published in Federal Reserve
Statistical Release H.15(519) during the week following such
day), or, if such rate shall not be so reported on such day or
such next preceding Business Day, the average of the secondary
market quotations for three-month certificates of deposit of
major money center banks in New York City received at
approximately 10:00 a.m., New York City time, on such day (or, if
such day shall not be a Business Day, on the next preceding
Business Day) by the Administrative Agent from three New York
City negotiable certificate of deposit dealers of recognized
standing selected by it. "Federal Funds Effective Rate" shall
----------------------------
mean, for any day, the weighted average of the rates on overnight
Federal funds transactions with members of the Federal Reserve
System arranged by Federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published for any day which is a
Business Day, the average of the quotations for the day of such
transactions received by the Administrative Agent from three
Federal funds brokers of recognized standing selected by it. If
for any reason the Administrative Agent shall have determined
(which determination shall be conclusive absent manifest error)
that it is unable to ascertain the Base CD Rate or the Federal
Funds Effective Rate or both for any reason, including the
inability or failure of the Administrative Agent to obtain
sufficient quotations in accordance with the terms thereof, the
ABR shall be determined without regard to clause (b) or (c), or
both, of the first sentence of this definition, as appropriate,
until the circumstances giving rise to such inability no longer
exist. Any change in the ABR due to a change in the Prime Rate,
the Three-Month
<PAGE>
2
Secondary CD Rate or the Federal Funds Effective Rate shall be
effective on the effective date of such change in the Prime Rate,
the Three-Month Secondary CD Rate or the Federal Funds Effective
Rate, respectively.
"ABR Participating Interest": with respect to any Bank,
--------------------------
that portion of its Participating Interest in the Receivables
with respect to which the Purchase Discount Amount is determined
by reference to the ABR.
"Accounts": as defined in subsection 2.1(c)(ii) of the
--------
Receivables Transfer Agreement.
"Acquiring Banks": as defined in subsection 11.4(d) of the
---------------
Receivables Transfer Agreement.
"Additional Seller Supplement": an instrument substantially
----------------------------
in the form of Exhibit C to the Receivables Sale Agreement by
which a Subsidiary of C&A Products becomes a Seller party to the
Receivables Sale Agreement.
"Additional Servicer Supplement": an instrument
------------------------------
substantially in the form of Exhibit F to the Receivables
Transfer Agreement by which a Subsidiary of C&A Products becomes
a Servicer party to the Receivables Transfer Agreement.
"Adjusted Principal Amount": (a) in the case of any
-------------------------
Receivable denominated in U.S. Dollars, the Principal Amount in
respect thereof and (b) in the case of any Receivable denominated
in Canadian Dollars, the Canadian Exchange Percentage of the
Principal Amount in respect thereof.
"Adjustment": as defined in subsection 2.5 of the
----------
Receivables Sale Agreement.
"Adjustment Payment": as defined in subsection 12.4 of the
------------------
Receivables Transfer Agreement.
"Administrative Agent": Chemical, together with its
--------------------
affiliates, as the arranger of the Commitments and as the agent
for the Banks under the Receivables Transfer Agreement.
"Affiliate": as to any Person, any other Person that
---------
directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the
Person specified.
"Aggregate Eligible Receivables": the excess of (a) the
------------------------------
Applicable Eligible Receivables Percentage of the aggregate
outstanding Adjusted Principal Amount of all Receivables over (b)
----
the aggregate Excess Amounts with respect to all Obligors.
<PAGE>
3
"Agreement": the agreement wherein such term is used, as
---------
the same may from time to time be amended, supplemented or
otherwise modified.
"Amortization Period": the period commencing after the end
-------------------
of the Commitment Period and ending with the termination of the
Receivables Transfer Agreement pursuant to subsection 4.1
thereof.
"Applicable ABR Margin": (a) prior to the 270th day after
---------------------
the Effective Date, 0% and (b) on and after such 270th day, the
"Applicable Margin" with respect to "ABR Loans" (as each such
term is defined in the Credit Agreement), determined in
accordance with the provisions of the Credit Agreement as in
effect on the Effective Date.
"Applicable Eligible Receivables Percentage": at any date
------------------------------------------
of determination, a fraction (expressed as a percentage) equal to
(a) the aggregate Adjusted Principal Amount of all Eligible
Receivables determined pursuant to the most recent Settlement
Statement divided by (b) the aggregate Adjusted Principal Amount
----------
of all outstanding Receivables generated by the Sellers
determined pursuant to such Settlement Statement.
"Applicable Eurodollar Margin": (a) prior to the 270th day
----------------------------
after the Effective Date, 0.625% and (b) on and after such 270th
day, the "Applicable Margin" with respect to "Eurodollar Loans"
(as each such term is defined in the Credit Agreement),
determined in accordance with the provisions of the Credit
Agreement as in effect on the Effective Date.
"Applicable Obligor Percentage": with respect to any
-----------------------------
Obligor, (a) [7.5%], in the case of any such Obligor having a
long-term senior unsecured debt rating of at least A- from S&P or
A3 from Moody's or a short-term deposit or commercial paper
rating of at least A-1 from S&P or P-1 from Moody's, provided,
--------
that in the case of General Motors Corporation, Chrysler
Corporation and Honda, the Applicable Obligor Percentage shall
instead be [17.0%] so long as such Obligor maintains a short-term
deposit or commercial paper rating of at least A-2 from S&P or P-
2 from Moody's; (b) [5.0%], in the case of any such Obligor (not
described in clause (a) above) having a long-term senior
unsecured debt rating of at least BBB- from S&P or Baa3 from
Moody's or a short-term deposit or commercial paper rating of at
least A-3 from S&P or P-3 from Moody's; or (c) [2.0%], in the
case of any other such Obligor.
"Assessment Rate": for any date, the annual rate (rounded
---------------
upwards, if necessary, to the next 1/100 of 1%) most recently
estimated by the Administrative Agent as the then current net
annual assessment rate that will be
<PAGE>
4
employed in determining amounts payable by Chemical to the
Federal Deposit Insurance Corporation (or any successor) for
insurance by such Corporation (or such successor) of time
deposits made in dollars at Chemical's domestic offices.
"Average Default Ratio": for any Settlement Period, a
---------------------
percentage equal to (a) the sum of the Default Ratios for such
Settlement Period and each of the [two] preceding Settlement
Periods divided by (b) [3].
----------
"Average Dilution Ratio": with respect to any Settlement
----------------------
Period, a fraction (a) the numerator of which is the aggregate
amount of Dilutive Credits which are incurred with respect to the
Receivables during the twelve-month period ended on the last day
of such Settlement Period and (b) the denominator of which is the
aggregate Adjusted Principal Amount of Receivables generated by
the Sellers during the twelve-month period ended on the last day
of such Settlement Period.
"Bank": each financial institution listed on Schedule 1 to
----
the Receivables Transfer Agreement and each financial institution
to which an assignment has been made pursuant to the terms of the
Receivables Transfer Agreement, and any successor of the
foregoing.
"benefitted Bank": as defined in subsection 11.12 of the
---------------
Receivables Transfer Agreement.
"Board": the Board of Governors of the Federal Reserve
-----
System and any successor thereto.
"Business Day": any day (other than a day which is a
------------
Saturday, Sunday or legal holiday in the State of New York) on
which banks are open for business in New York City; provided,
--------
however, that, when used in connection with any Fixed Tranche or
-------
the determination of any Eurodollar Rate, the term "Business Day"
------------
shall also exclude any day on which banks are not open for
dealings in dollar deposits in the London interbank market.
"Business Day Received": as defined in subsection 12.1(d) of
---------------------
the Receivables Transfer Agreement.
"C&A Products": Collins & Aikman Products Co., a Delaware
------------
corporation.
"Canada/Canadian Dollar Concentration Account": as defined
--------------------------------------------
in subsection 2.7(a) of the Receivables Transfer Agreement.
"Canada/U.S. Dollar Concentration Account": as defined in
----------------------------------------
subsection 2.7(a) of the Receivables Transfer Agreement.
<PAGE>
5
"Canadian Dollars": dollars in lawful currency of Canada.
----------------
"Canadian Dollar Subordinated Note": as defined in
---------------------------------
subsection 8.1 of the Receivables Sale Agreement.
"Canadian Exchange Percentage": at any date, the lesser of
----------------------------
(a) 70% and (b) the Canadian Exchange Rate in effect on such
date.
"Canadian Exchange Rate": at any date, the rate at which
----------------------
Canadian Dollars may be exchanged into Dollars (expressed as the
percentage of Dollars per Canadian Dollar), determined by
reference to the relevant Reuters currency page. In the event
that such rate does not appear on any Reuters currency page, the
"Canadian Exchange Rate" shall be determined by reference to such
----------------------
other publicly available service for displaying exchange rates
with respect to Canadian Dollars as may be selected by the
Administrative Agent. The Canadian Exchange Rate shall be
determined by the Administrative Agent on each Settlement
[Statement] Date and shall remain in effect until the next
succeeding Settlement [Statement] Date. The Administrative Agent
shall notify the Company and the Master Servicer of each such
determination on the date thereof.
"Capital Lease Obligations": with respect to any Person,
-------------------------
the obligations of such Person to pay rent or other amounts under
any lease of (or other arrangement conveying the right to use)
real or personal property, or a combination thereof, which
obligations are required to be classified and accounted for as
capital leases on a balance sheet of such Person under GAAP and,
for the purposes hereof, the amount of such obligations at any
time shall be the capitalized amount thereof at such time
determined in accordance with GAAP.
"Capital Stock": any and all shares, interests,
-------------
participations or other equivalents (however designated) of
capital stock of a corporation, any and all equivalent ownership
interests in a Person (other than a corporation) and any and all
warrants, options or other rights to purchase or acquire any of
the foregoing.
"Cash Equivalents": book-entry securities, negotiable
----------------
instruments or securities represented by instruments in bearer or
registered form which evidence:
(a) direct obligations of, and obligations fully guaranteed
as to timely payment by, the United States of America;
(b) demand deposits, time deposits or certificates of
deposit of any depository institution or trust company
<PAGE>
6
incorporated under the laws of the United States of America or
any state thereof (or any domestic branch of a foreign bank) and
subject to supervision and examination by Federal or State
banking or depository institution authorities; provided, that at
--------
the time of the investment or contractual commitment to invest
therein the commercial paper or other short-term unsecured debt
obligations (other than such obligations the rating of which is
based on the credit of a Person other than such depository
institution or trust company) thereof shall have a credit rating
from each of the Rating Agencies in the highest investment
category granted thereby;
(c) commercial paper having, at the time of the investment
or contractual commitment to invest therein, a rating of A-1 from
S&P or of P-1 from Moody's;
(d) investments in money market funds having a rating from
each of the Rating Agencies in the highest investment category
granted thereby;
(e) demand deposits, time deposits and certificates of
deposit which are fully insured by the Federal Deposit Insurance
Corporation;
(f) bankers' acceptances issued by any depository
institution or trust company referred to in clause (b) above;
(g) repurchase obligations with respect to any security
that is a direct obligation of, or fully guaranteed by, the
United States of America or any agency or instrumentality thereof
the obligations of which are backed by the full faith and credit
of the United States of America, in either case entered into with
(i) a depository institution or trust company (acting as
principal) described in clause (b) above or (ii) so long as the
Company takes actual or constructive possession of each security
subject to such repurchase obligations, a depository institution
or trust company the deposits of which are insured by the Federal
Deposit Insurance Corporation; or
(h) any other investment permitted by Moody's and S&P for
short-term investment of funds supporting securities with a
rating of A1/P1 or better.
"Change in Control": (a) any "Change in Control" under
-----------------
the Credit Agreement (as such term is defined therein on the
Effective Date), (b) except upon the exercise by the
Collateral Agent of any of its remedies in accordance with
the terms of the Pledge Agreement (as in effect on the
Effective Date), the Company shall at any time not be a
direct wholly owned Subsidiary of C&A Products or (c) except
as permitted pursuant to
<PAGE>
7
subsection 9.15 of the Receivables Sale Agreement and subsection
12.10 of the Receivables Transfer Agreement, any Seller or
Servicer (other than C&A Products) shall at any time not be
wholly owned, either directly or indirectly, by C&A Products.
"Charge-Offs": with respect to the Receivables originated
-----------
by any Seller, for any period, the aggregate amount of such
Receivables that are written off, or should be written off,
during such period as uncollectible in accordance with the
Policies of such Seller.
"Chemical": Chemical Bank, a New York banking corporation.
--------
"Closing Date": as defined in subsection 2.3(a) of the
------------
Receivables Transfer Agreement.
"Code": the Internal Revenue Code of 1986, as amended from
----
time to time.
"Collateral Agent": as defined in the Credit Agreement.
----------------
"Collections": all cash collections and other cash proceeds
-----------
received in respect of Receivables and Related Property
including, without limitation, Seller Repurchase Payments and
Seller Adjustment Payments and any Investment Earnings.
"Commitment": of each Bank, the amount set forth opposite
----------
the name of such Bank on Schedule 1 to the Receivables Transfer
Agreement, as such amount may be changed pursuant to subsection
2.10 or 11.4 of the Receivables Transfer Agreement.
"Commitment Fee": as defined in subsection 2.4 of the
--------------
Receivables Transfer Agreement.
"Commitment Percentage": as to any Bank, (a) on or prior to
---------------------
the last day of the Commitment Period, the percentage equivalent
of a fraction the numerator of which is the Commitment of such
Bank and the denominator of which is the Maximum Commitment and
(b) thereafter, the percentage equivalent of a fraction the
numerator of which is the Participating Interest of such Bank and
the denominator of which is aggregate amount of the Participating
Interests of all Banks.
"Commitment Period": the period from and including the
-----------------
Effective Date, up to but not including the first to occur of (a)
the Scheduled Termination Date, (b) any termination of the
Commitments pursuant to Article IX of the Receivables Transfer
Agreement and (c) termination (but not reduction)
<PAGE>
8
of the Commitments pursuant to subsection 2.10 of the Receivables
Transfer Agreement.
"Company": [C&A Receivables Company], a _________
-------
corporation.
"Complete Servicing Transfer": as defined in subsection
---------------------------
12.2(d) of the Receivables Transfer Agreement.
"Concentration Accounts": the collective reference to the
----------------------
U.S. Concentration Account, the Canada/U.S. Dollar Concentration
Account and the Canada/Canadian Dollar Concentration Account.
"Contractual Obligation": as to any Person, any provision
----------------------
of any security issued by such Person or of any agreement,
instrument or other undertaking to which such Person is a party
or by which it or any of its property is bound.
"Control": the possession, directly or indirectly, of the
-------
power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting
securities, by contract or otherwise, and "Controlling" and
"Controlled" shall have meanings correlative thereto.
"Credit Agreement": the Credit Agreement dated as of June
----------------
__, 1994 among the Credit Agreement Borrower, Collins & Aikman
Corporation, as Guarantor, the Lenders named therein, Continental
Bank, N.A. and NationsBank, N.A., as Managing Agents, and
Chemical Bank, as Administrative Agent, as amended, supplemented
or otherwise modified from time to time.
"Credit Agreement Borrower": Collins & Aikman Products Co.,
-------------------------
a Delaware corporation.
"Daily Report": as defined in subsection 12.5(a) of the
------------
Receivables Transfer Agreement.
"Days Sales Outstanding": as of any day, the product of (a)
----------------------
91 and (b) the amount obtained by dividing (i) the difference
between (x) the amount of Receivables and (y) the aggregate bad
debt reserve of the Sellers, in each case as at the end of the
fiscal month immediately preceding the most recent Settlement
Date, by (ii) aggregate net sales of the Sellers for the three-
fiscal-month period immediately preceding the most recent
Settlement Date.
"Defaulted Receivable": any Receivable which has been
--------------------
charged off, or should have been charged off, by the related
Servicer as uncollectible in accordance with the Policies of such
Servicer.
<PAGE>
9
"Default Ratio": (a) with respect to any Settlement Period
-------------
ending on or before April 30, 1994, a fraction (i) the numerator
of which is the aggregate Adjusted Principal Amount of
Receivables which first became 60 to 89 days past due as of the
last day of such month and (ii) the denominator of which is the
aggregate Adjusted Principal Amount of Receivables generated by
the Sellers during the fourth preceding Settlement Period and (b)
with respect to any Settlement Period ending on any date
thereafter, a fraction (i) the numerator of which is the
aggregate Adjusted Principal Amount of Receivables which first
became 90 to 119 days past due as of the last day of such month
and (ii) the denominator of which is the aggregate Adjusted
Principal Amount of Receivables generated by the Sellers during
the fifth preceding Settlement Period.
"Designated Affiliate": any Person as to which Holdings has
--------------------
the power (directly or indirectly) to vote 51% or more of the
securities having ordinary voting power for the election of
directors of such Person.
"Dilution Reserve Ratio": as of any day thereafter, the
----------------------
percentage equivalent, determined pursuant to the most recent
Settlement Statement, of the product of (x) the sum of clauses
-------
(i) and (ii) below and (y) clause (iii) below:
(i) (A) [2.0] times (B) the Average Dilution Ratio for the
most recently ended Settlement Period;
(ii) the product of (A)(x) the highest Peak Dilution Ratio
during the period of 12 calendar months ended on the last day of
the most recently ended Settlement Period minus (y) the amount
-----
determined pursuant to clause (i)(B) of this definition and (B)
the amount determined pursuant to clause (A)(x) above divided by
-------
the amount determined pursuant to clause (A)(y) above; and
(iii) (A) the aggregate Adjusted Principal Amount of
Receivables generated by the Sellers during the most recently
ended Settlement Period divided by (B) the aggregate Adjusted
-------
Principal Amount of Eligible Receivables on the last day of such
Settlement Period.
"Dilutive Credits": for any period, the aggregate amount of
----------------
discount expense, rebates, refunds, billing error expense,
credits against Receivables and other adjustments or allowances
in respect of Receivables permitted or incurred by the Seller or
Servicer with respect thereto during such period.
"Discount Rate": as of any day, the sum of (a) the weighted
-------------
average Purchase Discount Amount rate in effect with respect to
the Participating Interest as at the end of the fiscal month
immediately preceding the most recent
<PAGE>
10
Settlement Date and (b) the amount obtained by dividing (i) the
--------
aggregate amount of fees (other than the Monthly Servicing Fee
and the Purchase Discount Amount) accrued with respect to the
Participating Interest during the fiscal month immediately
preceding the most recent Settlement Date by (ii) the average
daily Net Investment during such fiscal month.
"Discounted Percentage": as defined in Schedule 3 to the
---------------------
Receivables Sale Agreement.
"Documents": as defined in subsection 5.15(d)(3) of the
---------
Receivables Sale Agreement.
"Dollars", "U.S. Dollars" and "$": dollars in lawful
----------------------- -
currency of the United States of America.
"Early Termination": as defined in Article VII of the
-----------------
Receivables Sale Agreement.
"Effective Date": as defined in subsection 6.1 of the
--------------
Receivables Transfer Agreement.
"Eligible Letter of Credit": any irrevocable direct pay [or
-------------------------
standby] letter of credit (a) issued in favor of the Company by
(i) any Bank or (ii) any commercial bank that (x) has combined
capital and surplus of not less than $500,000,000 and (y) has (or
the holding company parent of which has) a long-term senior
unsecured debt rating of at least A from S&P or at least A2 from
Moody's and (b) which permits the Company to draw, upon notice to
the issuing bank, an amount equal to the entire face amount of
any Receivable supported thereby, in Dollars payable by the
issuing bank in the United States, no later than 90 days after
the original invoice date with respect to such Receivable.
"Eligible Obligor": each Obligor that satisfies each of the
----------------
following eligibility criteria:
(a) it is not organized or located (within the meaning
of Section 9-103(3)(d) of the New York Uniform Commercial
Code) in a jurisdiction other than the United States;
provided, however, that (i) Receivables which have Obligors
-------- -------
organized or located in Canada or which are Japanese
Obligors or (ii) Receivables which have Obligors not
otherwise described in clause (i) above which are located
(within the meaning of Section 9-103(3)(d) of the New York
Uniform Commercial Code) outside the United States shall be
excluded from this clause (a) if (x) in the case of clauses
(i) and (ii) above, such Receivables would otherwise be
Eligible Receivables and (y) in the case of clause (ii)
above, (1) such Receivables are supported by an Eligible
<PAGE>
11
Letter of Credit and (2) the aggregate Adjusted Principal Amount
of all such Receivables does not exceed 15% of the Adjusted
Principal Amount of the Eligible Receivables;
(b) it is not a direct or indirect Subsidiary of
[Wickes Companies, Inc.];
(c) it is not a domestic or foreign government or any
agency, department, or instrumentality thereof; provided,
--------
however, that up to 2% of the aggregate Adjusted Principal
-------
Amount of the Eligible Receivables may be owing by the
United States government or any agency, department or
instrumentality thereof; and
(d) it is not the subject of any reorganization,
bankruptcy, receivership, custodianship or insolvency,
[unless the payment of Receivables from such Obligor is
secured in a manner satisfactory to the Administrative Agent
or, if such Receivables arise subsequent to a decree or
order for relief under the Bankruptcy Reform Act of 1978, as
amended, with respect to such Obligor, the Administrative
Agent shall have determined that timely payment and
collection of such Receivables will not be impaired].
"Eligible Receivable": as of any date, each Receivable in
-------------------
existence as of such date that is not subject to a Repurchase
Event and (i) which the Administrative Agent determines, in its
commercially reasonable judgment, to be an "Eligible Receivable"
or (ii) that satisfies each of the following eligibility
criteria:
(a) the Company has lawful title to such Receivable,
free and clear of all Liens other than the security interest
in favor of the Banks;
(b) the Banks have a Lien on such Receivable, which
Lien is legal, valid, binding, perfected and first priority
under the Uniform Commercial Code or other applicable law;
(c) the Company has the full and unqualified right to
assign and grant a Lien on such Receivable to the Banks;
(d) such Receivable is payable in Dollars in the
United States or Canada and is a legal, valid, binding and
enforceable obligation of the Obligor under such Receivable;
provided, however, that Receivables having an aggregate
-------- -------
Adjusted Principal Amount equal to no more than 5% of the
aggregate Adjusted Principal Amount of all Eligible
Receivables may be payable in Canadian dollars in the United
States or Canada;
<PAGE>
12
(e) such Receivable is not subject to any bona fide
---- ----
dispute, setoff, counterclaim or other claim or defense on
the part of the related Obligor denying liability under such
Receivable in whole or in part; provided, however, that any
-------- -------
such Receivable shall constitute an Eligible Receivable to
the extent it is not subject to any such dispute, setoff,
counterclaim or other claim or defense;
(f) such Receivable is evidenced by an invoice
rendered to the related Obligor and is not evidenced by any
"instrument" or "chattel paper", as such terms are defined
in the Uniform Commercial Code;
(g) such Receivable is a bona fide Receivable which
---- ----
arose in the ordinary course of business, and with respect
to which,
(i) in the case of a Receivable arising from the
sale of goods, such goods have been shipped or
delivered to and accepted by the Obligor, such
Receivable was created as a result of a sale on an
absolute basis and not on a consignment, approval or
sale-and-return basis and all other actions have been
taken necessary to create a binding obligation on the
part of the Obligor for such Receivable, and
(ii) in the case of a Receivable relating to the
sale of services, such services have been performed or
completed and accepted by the Obligor and all other
actions have been taken necessary to create a binding
obligation on the part of the Obligor;
(h) the Obligor with respect to such Receivable is an
Eligible Obligor;
(i) such Receivable is not outstanding more than 90
days past the original invoice date with respect thereto
(which date, for all purposes of eligibility, shall not be
later than the shipment date of the goods giving rise to
such Receivable); provided, however, that Receivables of
-------- -------
Imperial Wallcoverings, Inc. and Imperial Wallcoverings
(Canada), Inc. (not to exceed an aggregate Adjusted
Principal Amount of $12,500,000) may be outstanding for up
to, but not in excess of, 120 days past such original
invoice date;
(j) payment with respect to such Receivable, if by
check, has not been returned for insufficient funds;
(k) such Receivable has not been placed with an
attorney for collection;
<PAGE>
13
(l) such Receivable, to the extent it represents a
consumer credit card receivable, conforms to all federal and
state consumer protection laws;
(m) if such Receivable represents a consumer credit
card receivable, the Obligor with respect to such Receivable
has not missed more than one payment in respect of such
Receivable; and
(o) such Receivable has such other characteristics or
criteria as the Administrative Agent, in its reasonable
discretion, may specify in writing to the Company.
"Equipment": as defined in subsection 2.1(c)(i) of the
---------
Receivables Transfer Agreement.
"ERISA": the Employee Retirement Income Security Act of
-----
1974, as the same may be amended from time to time.
"ERISA Affiliate": with respect to any Person, any trade or
---------------
business (whether or not incorporated) that is a member of a
group of which such Person is a member and which is treated as a
single employer under Section 414 of the Code.
"Eurodollar Participating Interest": with respect to any
---------------------------------
Bank, that portion of its Participating Interest in the
Receivables with respect to which the Purchase Discount Amount is
determined by reference to the Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each
---------------
Transfer Period pertaining to a Fixed Tranche, a rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to
the product of (a) the Eurodollar Base Rate in effect for such
Transfer Period and (b) Statutory Reserves. For purposes hereof,
(a) if at least two offered rates for deposits in dollars for a
period comparable to the applicable Transfer Period appear on
page 3750 (or any successor page) of the Dow Jones Telerate
Screen as of 11:00 a.m., London time, on the day that is two
Business Days prior to the first day of such Transfer Period, the
term "Eurodollar Base Rate" shall mean the arithmetic mean of all
--------------------
such offered rates and (b) if fewer than two such offered rates
so appear on page 3750 (or any successor page) of the Dow Jones
Telerate Screen, the term "Eurodollar Base Rate" shall mean the
--------------------
rate (rounded upwards, if necessary, to the next 1/16 of 1%) at
which dollar deposits approximately equal in principal amount to
Chemical's portion of the applicable Fixed Tranche and for a
period comparable to the applicable Transfer Period are offered
to Chemical's office in which its relevant eurodollar operations
are being conducted in immediately available funds in the
eurodollar market at approximately 11:00 a.m., New York time, on
the
<PAGE>
14
day that is two Business Days prior to the first day of such
Transfer Period.
"Excess Amount": at any time, with respect to any Obligor,
-------------
the excess (if any) of (a) the aggregate outstanding Adjusted
Principal Amount of the Eligible Receivables owing by such
Obligor over (b) the Applicable Obligor Percentage of the
----
aggregate outstanding Adjusted Principal Amount of all Eligible
Receivables.
"Excess Application Amount": as defined in subsection
-------------------------
2.12(c) of the Receivables Transfer Agreement.
"Facility Amount": $150,000,000.
---------------
"Financial Officer": of any corporation, the chief
-----------------
financial officer, Senior Vice President-Finance and Accounting,
Vice President-Finance, Controller, or Treasurer of such
corporation.
"Fixed Tranche": a portion of the Net Investment on which
-------------
the rate at which the Purchase Discount Amount accrues is based
upon the Eurodollar Rate.
"Floating Tranche": that portion of the Net Investment not
----------------
allocated to a Fixed Tranche and the Purchase Discount Amount in
respect of which is based upon the ABR.
"Force Majeure Delay": with respect to any Servicer or the
-------------------
Master Servicer, any cause or event which is beyond the control
and not due to the negligence of such Servicer or the Master
Servicer, as the case may be, which delays, prevents or prohibits
such Person's delivery of Seller Daily Reports or Daily Reports
and/or Seller Settlement Statements or Settlement Statements, as
the case may be, including, without limitation, computer,
electrical and mechanical failures, acts of God or the elements
and fire; provided that no such cause or event shall be deemed to
--------
be a Force Majeure Delay unless the affected Servicer or Master
Servicer shall have given the Company and the Administrative
Agent written notice thereof as soon as possible after the
beginning of such delay.
"GAAP": [generally accepted accounting principles in the
----
United States of America as in effect as of the date of, and used
in, the preparation of the audited financial statements delivered
under the Receivables Transfer Agreement except that, with
respect to the presentation of financial statements required to
be furnished after the Effective Date, GAAP shall mean generally
accepted accounting principles in the United States of America as
in effect from time to time.]
<PAGE>
15
"Governmental Authority": any international, Federal,
----------------------
state, regional, local or foreign court or governmental agency,
authority, instrumentality or regulatory body.
"Guarantee": of or by any Person, shall mean (a) any
---------
obligation, contingent or otherwise, of such Person guaranteeing
or having the economic effect of guaranteeing any Indebtedness of
any other Person (the "primary obligor") in any manner, whether
---------------
directly or indirectly, and including any obligation of such
Person, direct or indirect, (i) to purchase or pay (or advance or
supply funds for the purchase or payment of) such Indebtedness
(whether arising by virtue of partnership arrangements, by
agreement to keep well, to purchase assets, goods, securities or
services, to take-or-pay or otherwise) or to purchase (or to
advance or supply funds for the purchase of) any security for the
payment of such Indebtedness, (ii) to purchase property,
securities or services for the purpose of assuring the owner of
such Indebtedness of the payment of such Indebtedness, (iii) to
maintain working capital, equity capital or other financial
statement conditions or liquidity of the primary obligor so as to
enable the primary obligor to pay such Indebtedness or (iv)
entered into for the purpose of assuring in any other manner the
holders of such Indebtedness of the payment thereof or to protect
such holders against loss in respect thereof (in whole or in
part), or (b) any Lien on any assets of such Person securing any
Indebtedness of any other Person, whether or not such
Indebtedness is assumed by such Person; provided, however, that
-------- -------
the term Guarantee shall not include endorsements for collection
or deposit, in either case in the ordinary course of business.
"Holdings": Collins & Aikman Corporation, a Delaware
--------
corporation.
"Incipient Purchase Termination Event": any condition or
------------------------------------
act specified in Article VII of the Receivables Sale Agreement
that, with the giving of notice or the lapse of time or both,
would become a Purchase Termination Event.
"Increase in Net Investment": for any applicable Closing
--------------------------
Date, the Dollar amount by which the Net Investment of the Banks
is being increased on such Closing Date.
"Indebtedness": of any Person at any date, (a) all
------------
indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (other than
current trade liabilities incurred in the ordinary course of
business and payable in accordance with customary practices), (b)
any other indebtedness of such Person which is evidenced by a
note, bond, debenture or similar instrument, (c) all Capital
Lease Obligations of such Person, (d) all obligations of such
Person in respect of acceptances issued or created for the
account of such
<PAGE>
16
Person, (e) all Indebtedness of others secured by (or for which
the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by) any Lien on any property owned or
acquired by such Person even though such Person has not assumed
or otherwise become liable for the payment thereof, (f) all
obligations of such Person in respect of interest rate protection
agreements, foreign currency exchange agreements or other
interest or exchange rate hedging arrangements and (g) all
Guarantees by such Person of Indebtedness of others. The
Indebtedness of any Person shall include the Indebtedness of any
partnership in which such Person is a general partner; provided
--------
that, if the sole asset of such Person is its general partnership
interest in such partnership, the amount of such Indebtedness
shall be deemed equal to the value of such general partnership
interest and the amount of any Indebtedness in respect of any
Guarantee of such partnership Indebtedness shall be limited to
the same extent as such Guarantee may be limited.
"Indemnified Liabilities": as defined in subsection 9.3 of
-----------------------
the Receivables Sale Agreement.
"Indemnitee": as defined in subsection 11.3 of the
----------
Receivables Transfer Agreement.
"Invested Percentage": a fraction the numerator of which is
-------------------
Net Investment and the denominator of which is Aggregate Eligible
Receivables.
"Investment Earnings": as defined in subsection 2.7(a)(iii)
-------------------
of the Receivables Transfer Agreement.
"Japanese Obligor": any of Fuji Heavy Industries, Inc.,
----------------
Toyota Motor Co., Honda Motor Co., Ltd., Toyota Tsusho Corp., or
Kotobakiya Fronte Co., Inc.
"Lien": with respect to any asset, (a) any mortgage, deed
----
of trust, lien, pledge, encumbrance, charge or security interest
in or on such asset, (b) the interest of a vendor or a lessor
under any conditional sale agreement, capital lease or title
retention agreement relating to such asset and (c) in the case of
securities, any purchase option, call or similar right of a third
party with respect to such securities.
"Lockbox Account" means each blocked deposit account
---------------
identified by number and name of bank on Schedule 3 to the
Receivables Transfer Agreement, including the box identified by
location and number on such Schedule 3, and any replacements
therefor or additions thereto which are acceptable to the
Administrative Agent.
<PAGE>
17
"Lockbox Agreement" means a lockbox agreement in form and
-----------------
substance satisfactory to the Administrative Agent, as the same
may be amended, supplemented or otherwise modified from time to
time in accordance with subsection 8.14 of the Receivables
Transfer Agreement.
"Lockbox Bank" means each bank listed on Schedule 3, and any
------------
replacements therefor or additions thereto agreed to in writing
by the Administrative Agent.
"Loss Reserve Ratio": as of any day thereafter, the
------------------
percentage equivalent, determined pursuant to the most recent
Settlement Statement, of the product of:
(i) the highest Average Default Ratio during the period of
twelve consecutive calendar months ended on the last day of the
most recently ended Settlement Period; and
(ii) (A) the aggregate Adjusted Principal Amount of
Receivables generated by the Sellers during the [four] preceding
Settlement Periods divided by the outstanding Adjusted Principal
-------
Amount of Eligible Receivables as of the last day of the
preceding Settlement Period; and
(iii) [2.0].
"Loss to Liquidation Ratio": a ratio (expressed as a
-------------------------
percentage), as of the last day of any fiscal month, equal to (a)
the difference, if any, between (i) the aggregate reduction in
the outstanding Adjusted Principal Amount of all Receivables as a
result of Write-Offs during the immediately preceding twelve-
fiscal-month period and (ii) the aggregate amount of Recoveries
during such twelve-fiscal-month period, divided by (b) four times
----------
the aggregate amount of Collections during the immediately
preceding three-fiscal-month period.
"Margin Stock": as defined in Regulation U.
------------
"Master Servicer": C&A Products, in its capacity as Master
---------------
Servicer under the Receivables Transfer Agreement.
"Material Adverse Effect": (a) with respect to the Master
-----------------------
Servicer, any Servicer or any Seller, (i) a materially adverse
effect on the business, assets, properties, operations or
financial condition of C&A Products and its Subsidiaries, taken
as a whole, (ii) a material impairment of the ability of the
Master Servicer, any Servicer or any Seller to perform any of its
material obligations under any Transaction Document to which it
is or will be a party or to consummate the Transactions or the
Sale Transactions or (iii) an impairment of the validity or
enforceability of, or a material impairment of the rights,
remedies or benefits available to the Administrative Agent or the
Banks under,
<PAGE>
18
any Transaction Document or (b) with respect to the Company, (i)
a materially adverse effect on the business, assets, properties,
operations or financial condition of the Company, (ii) a material
impairment of the ability of the Company to perform any of its
material obligations under any Transaction Document to which it
is or will be a party or to consummate the Transactions or the
Sale Transactions or (iii) an impairment of the validity or
enforceability of, or a material impairment of the rights,
remedies or benefits available to the Administrative Agent or the
Banks under, any Transaction Document.
"Maximum Commitment": $150,000,000, as such amount may be
------------------
reduced pursuant to subsection 2.10 of the Receivables Transfer
Agreement.
"Maximum Invested Percentage": at a particular date, 100%
---------------------------
minus the greater of (a) [17]% and (b) the Required Reserve
-----
Percentage.
"Maximum Transfer Amount": at a particular date, the lesser
-----------------------
of (a) the Maximum Commitment at such date and (b) the product of
(i) the Maximum Invested Percentage at such date and (ii)
Aggregate Eligible Receivables (which, for purposes of this
definition, shall not include a Seller from which the Company has
ceased purchasing Receivables pursuant to subsection 9.15 of the
Receivables Sale Agreement and shall not include, from the date
which is 30 days after the date of any such termination, a Seller
with respect to which the Company has terminated its obligation
to acquire Receivables pursuant to Article VII of the Receivables
Sale Agreement) as of the close of business on the Business Day
preceding such date.
"Monthly Servicing Fee": for each Settlement Period, the
---------------------
product of (a) the number of days in such period, (b) 1% and (c)
the average daily principal balance of Purchased Receivables
during such period divided by 365.
"Moody's": Moody's Investors Service, Inc. and its
-------
successors.
"Multiemployer Plan": with respect to any Person, a
------------------
multiemployer plan as defined in Section 4001(a)(3) of ERISA to
which such Person or any ERISA Affiliate of such Person (other
than one considered an ERISA Affiliate only pursuant to
subsection (m) or (o) of Section 414 of the Code) is making or
accruing an obligation to make contributions, or has within any
of the preceding five plan years made or accrued an obligation to
make contributions.
"Net Investment": at any time, the excess, if any, of (a)
--------------
the aggregate of the amount paid by the Banks pursuant to
subsections 2.2 and 2.3 of the Receivables Transfer
<PAGE>
19
Agreement over (b) the aggregate amount of Collections
----
distributed to the Banks in repayment of the Net Investment
pursuant to the Receivables Transfer Agreement.
"Obligor": with respect to any Receivable, the Person or
-------
Persons obligated to make payments with respect to such
Receivable, including any guarantor thereof.
"Overallotment Option": as defined in the Credit Agreement.
--------------------
"Partial Servicing Transfer": as defined in subsection
--------------------------
12.2(d) of the Receivables Transfer Agreement.
"Participants": as defined in subsection 11.4(b) of the
------------
Receivables Transfer Agreement.
"Participating Interest": as defined in subsection 2.2 of
----------------------
the Receivables Transfer Agreement.
"Payment Date": as defined in subsection 2.3(a) of the
------------
Receivables Sale Agreement.
"PBGC": the Pension Benefit Guaranty Corporation referred
----
to and defined in ERISA.
"Peak Dilution Ratio": with respect to any Settlement
-------------------
Period, a fraction (a) the numerator of which is the aggregate
amount of Dilutive Credits which are incurred with respect to the
Receivables during the two-month period ended on the last day of
such Settlement Period and (b) the denominator of which is the
aggregate Adjusted Principal Amount of Receivables generated by
the Sellers during the two-month period ended on the last day of
such Settlement Period.
"Person": any natural person, corporation, business trust,
------
joint venture, association, company, partnership or government,
or any agency or political subdivision thereof.
"Plan": with respect to any Person, any pension plan (other
----
than a Multiemployer Plan) subject to the provisions of Title IV
of ERISA or Section 412 of the Code which is maintained for
employees of such Person or any ERISA Affiliate of such Person.
"Pledge Agreement": the Pledge Agreement referred to in the
----------------
Credit Agreement.
"Policies": with respect to any Seller which has set forth
--------
its credit and collection policies in writing, such written
credit and collection policies as they have been applied by such
Seller in the ordinary course of its business prior to the
Effective Date and, with respect to
<PAGE>
20
any Seller which has not set forth its credit and collection
policies in writing, its credit and collection policies as in
effect and applied by such Seller in the ordinary course of its
business prior to the Effective Date, in each case as the same
may be amended, supplemented or otherwise modified from time to
time in accordance with the Receivables Transfer Agreement.
"Pooled Property": as defined in subsection 2.1(a) of the
---------------
Receivables Transfer Agreement.
"Potential Termination Event": any Termination Event and
---------------------------
any event or condition that upon notice, lapse of time or both
would constitute a Termination Event.
"Preliminary Prospectus": the preliminary prospectus of
----------------------
Holdings dated May __, 1994, filed with the Securities and
Exchange Commission in connection with the underwritten public
offering of shares of common stock, par value $.01 per share, of
Holdings, as amended or supplemented from time to time.
"Principal Amount": with respect to any Receivable, the
----------------
amount due thereunder (expressed in U.S. Dollars or Canadian
Dollars, as the case may be), net of any available prompt payment
discount, volume discount or other promotional discount or
rebate.
"Purchase Discount Amount": a purchase discount which (a)
------------------------
accrues to the Banks in respect of the Participating Interest;
(b) is payable in arrears on each Purchase Discount Amount
Payment Date (both prior to and after the commencement of the
Amortization Period) occurring during the period commencing on
the date of the first transfer and assignment of the
Participating Interest in Receivables and Related Property
pursuant to subsection 2.3(a) of the Receivables Transfer
Agreement and ending on the date on which the Net Investment is
equal to zero and the Commitments of the Banks have terminated;
and (c) is calculated at a rate per annum equal to: (i) in
respect of that portion of the Net Investment allocated to any
Fixed Tranche, the sum of the Eurodollar Rate with respect
thereto plus the Applicable Eurodollar Margin and (ii) in respect
----
of that portion of the Net Investment not allocated to any Fixed
Tranche, the sum of the ABR in effect from time to time during
the period for which payment is made plus the Applicable ABR
----
Margin.
"Purchase Discount Amount Payment Date": (a) as to the
-------------------------------------
Floating Tranche, each Settlement Date, (b) as to any Fixed
Tranche having a Transfer Period of one, two or three months, the
last day of such Transfer Period, (c) as to any Fixed Tranche
having a Transfer Period longer than three months, each day which
is three months, or a whole multiple
<PAGE>
21
thereof, after the first day of such Transfer Period, and the
last day of such Transfer Period and (d) as to any Tranche, any
date on which the principal portion of the Net Investment
represented thereby is paid, prepaid or is otherwise due (by
scheduled installment, mandatory prepayment, acceleration or
otherwise).
"Purchase Price": as defined in subsection 2.2 of the
--------------
Receivables Sale Agreement.
"Purchase Termination Event": as defined in Article VII of
--------------------------
the Receivables Sale Agreement.
"Purchased Receivable": any Receivable sold to the Company
--------------------
by any Seller pursuant to, and in accordance with the terms of,
the Receivables Sale Agreement and not resold to such Seller
pursuant to subsection 2.1(b) or 2.6 thereof.
"Rating Agencies": Moody's and S&P.
---------------
"Recapitalization Transactions": as defined in the Credit
-----------------------------
Agreement.
"Receivables": the indebtedness and payment obligations of
-----------
any Person to a Seller arising from a sale of merchandise or
services by such Seller, including, without limitation, any right
to payment for goods sold or leased or for services rendered, and
including the right of payment of any interest, sales taxes,
finance charges, returned check or late charges and other
obligations of such Person with respect thereto.
"Receivables Sale Agreement": the Receivables Sale
--------------------------
Agreement, dated as of June __, 1994, among the Sellers, and the
Company, as buyer, as amended, supplemented or otherwise modified
from time to time.
"Receivables Transfer Agreement": the Receivables Transfer
------------------------------
and Servicing Agreement, dated as of June __, 1994, among the
Company, as seller, the Master Servicer, the Servicers, the Banks
and the Administrative Agent, as amended, supplemented or
otherwise modified from time to time.
"Recoveries": amounts collected in respect of Defaulted
----------
Receivables.
"Register": as defined in subsection 11.4(e) of the
--------
Receivables Transfer Agreement.
"Regulation G, T, U or X": Regulation G, T, U or X,
-----------------------
respectively, of the Board as from time to time in effect and all
official rulings and interpretations thereunder or thereof.
<PAGE>
22
"Related Property": as defined in subsection 2.1(a)(iv) of
----------------
the Receivables Transfer Agreement.
"Replacement Facility": as defined in subsection 12.6 of
--------------------
the Receivables Transfer Agreement.
"Reportable Event": any reportable event as defined in
----------------
Section 4043(b) of ERISA or the regulations issued thereunder
with respect to a Plan (other than a Plan maintained by an ERISA
Affiliate which is considered an ERISA Affiliate only pursuant to
subsection (m) or (o) of Section 414 of the Code).
"Reporting Day": as defined in subsection 12.5 of the
-------------
Receivables Transfer Agreement.
"Repurchase Amount": as defined in subsection 2.6 of the
-----------------
Receivables Sale Agreement.
"Repurchase Event": as defined in subsection 2.6 of the
----------------
Receivables Sale Agreement.
"Required Banks": Banks having Commitment Percentages the
--------------
sum of which, in the aggregate, is equal to or exceeds 51%.
"Required Reserve Percentage": as of any day, the sum,
---------------------------
expressed as a percentage, of (a) the Loss Reserve Ratio, (b) the
Dilution Reserve Ratio, (c) the Yield Reserve Ratio and (d) the
Servicing Reserve Ratio.
"Requirement of Law": as to any Person, any law, treaty,
------------------
rule or regulation or determination of an arbitrator or a court
or other Governmental Authority, in each case applicable to or
binding upon such Person or any of its property or to which such
Person or any of its property is subject.
"Responsible Officer": with respect to any Person, the
-------------------
chief executive officer, the president, any senior vice president
or any vice president of such Person or, with respect to
financial matters, the chief financial officer, Senior Vice
President-Finance and Accounting, Vice President-Finance,
Controller, or Treasurer of such Person.
"Restricted Payments": as defined in subsection 8.7 of the
-------------------
Receivables Transfer Agreement.
"Retransfer Payment": as defined in subsection 5.3(b) of
------------------
the Receivables Transfer Agreement.
"S&P": Standard & Poor's Ratings Group and its successors.
---
<PAGE>
23
"Sale Documents": the Receivables Sale Agreement, the
--------------
Subordinated Notes and the Subordination Agreement.
"Sale Termination Date": as defined in subsection 9.15(b)
---------------------
of the Receivables Sale Agreement.
"Sale Transactions": as defined in subsection 4.1(b) of the
-----------------
Receivables Sale Agreement.
"Scheduled Termination Date": the seventh anniversary of
--------------------------
the Effective Date.
"Seller Addition Date": as defined in subsection 3.4 of the
--------------------
Receivables Sale Agreement.
"Seller Adjustment Payment": as defined in subsection 2.5
-------------------------
of the Receivables Sale Agreement.
"Seller Daily Report": as defined in subsection 12.5(a) of
-------------------
the Receivables Transfer Agreement.
"Seller Repurchase Payment": as defined in subsection 2.6
-------------------------
of the Receivables Sale Agreement.
"Seller Settlement Statement": as defined in subsection
---------------------------
12.5(b) of the Receivables Transfer Agreement.
"Sellers": as defined in the preamble to the Receivables
-------
Sale Agreement.
"Servicer Default": any Servicer Event of Default and any
----------------
event or condition that upon notice, lapse of time or both would
constitute a Servicer Event of Default.
"Servicer Event of Default": as defined in subsection 12.12
-------------------------
of the Receivables Transfer Agreement.
"Servicer Transfer Payment": as defined in subsection 12.7
-------------------------
of the Receivables Transfer Agreement.
"Servicers": each of the Sellers (excluding any such
---------
Sellers which have been terminated as Servicers in accordance
with the provisions of the Receivables Transfer Agreement)
together with any other Person which has been added as a Servicer
in accordance with the provisions of the Receivables Transfer
Agreement, in their capacities as servicers under the Receivables
Transfer Agreement.
"Servicing Reserve Percentage": as of any day, [0.5]%.
----------------------------
"Settlement Date": with respect to any fiscal month, the
---------------
day that is 22 calendar days following the last day of such
fiscal month (or if such 22nd calendar day is not a Business Day,
the next succeeding Business Day).
<PAGE>
24
"Settlement Period": each calendar month.
-----------------
"Settlement Statement": as defined in subsection 12.5(b) of
--------------------
the Receivables Transfer Agreement.
"Settlement Statement Date": with respect to any fiscal
-------------------------
month for which a Settlement Statement is required to be
prepared, the day that is 16 calendar days following the last day
of such fiscal month (or, if such 16th calendar day is not a
Business Day, the next succeeding Business Day).
"Single Employer Plan": any Plan which is covered by Title
--------------------
IV of ERISA, but which is not a Multiemployer Plan.
"Statutory Reserves": a fraction (expressed as a decimal),
------------------
the numerator of which is the number one and the denominator of
which is the number one minus the aggregate of the maximum
reserve percentages (including any marginal, special, emergency
or supplemental reserves) expressed as a decimal established by
the Board and any other banking authority to which the
Administrative Agent is subject (a) with respect to the Base CD
Rate (as such term is used in the definition of "ABR"), for new
negotiable nonpersonal time deposits in dollars of over $100,000
with maturities approximately equal to three months, and (b) with
respect to the Eurodollar Rate, for Eurocurrency Liabilities (as
defined in Regulation D of the Board). Such reserve percentages
shall include those imposed pursuant to such Regulation D. Fixed
Tranches shall be deemed to constitute Eurocurrency Liabilities
and to be subject to such reserve requirements without benefit of
or credit for proration, exemptions or offsets which may be
available from time to time to any Bank under such Regulation D.
Statutory Reserves shall be adjusted automatically on and as of
the effective date of any change in any reserve percentage.
"Subordinated Notes": as defined in subsection 8.1 of the
------------------
Receivables Sale Agreement.
"Subordination Agreement": the Subordination Agreement,
-----------------------
dated as of June __, 1994 among the Sellers, the Master Servicer,
the Company and the Administrative Agent, as amended,
supplemented or otherwise modified from time to time.
"Subsequent Financing Party": as defined in subsection 9.4
--------------------------
of the Receivables Sale Agreement.
"Subsidiary": with respect to any Person (herein referred
----------
to as the "parent"), any corporation, partnership, association or
other business entity (a) of which securities or other ownership
interests representing more than 50% of the equity or more than
50% of the ordinary voting power or more than 50% of the general
partnership interests are, at
<PAGE>
25
the time any determination is being made, owned, controlled or
held, or (b) which is, at the time any determination is made,
otherwise Controlled, by the parent or one or more subsidiaries
of the parent or by the parent and one or more subsidiaries of
the parent.
"Substitute Servicer": as defined in subsection 12.2(d) of
-------------------
the Receivables Transfer Agreement.
"Termination Event": as defined in Article IX of the
-----------------
Receivables Transfer Agreement.
"Tranches": the collective reference to the Floating
--------
Tranche and the Fixed Tranches.
"Transaction Documents": the Receivables Transfer
---------------------
Agreement, the Receivables Sale Agreement, the Subordination
Agreement and the Lockbox Agreements.
"Transaction Parties": the Company, the Master Servicer,
-------------------
the Sellers and the Servicers.
"Transactions": as defined in subsection 5.1(b) of the
------------
Receivables Transfer Agreement.
"Transfer Notice": as defined in subsection 12.2(d) of the
---------------
Receivables Transfer Agreement.
"Transfer Period": with respect to any portion of the Net
---------------
Investment allocated to a Fixed Tranche:
(a) initially, the period commencing on the Closing
Date or conversion date, as the case may be, with respect to
such Fixed Tranche and ending one, two, three or six months
thereafter, as selected by the Company in its notice of
Closing Date or notice of conversion, as the case may be,
given with respect thereto; and
(b) thereafter, each period commencing on the last day
of the next preceding Transfer Period applicable to such
Fixed Tranche and ending one, two, three or six months
thereafter, as selected by the Company by irrevocable notice
to the Administrative Agent not less than three Business
Days prior to the last day of the then current Transfer
Period with respect thereto;
provided that, all of the foregoing provisions relating to
--------
Transfer Periods are subject to the following:
(1) if any Transfer Period would otherwise end on a
day that is not a Business Day, such Transfer Period shall
be extended to the next succeeding Business Day
<PAGE>
26
unless the result of such extension would be to carry such
Transfer Period into another calendar month in which event
such Transfer Period shall end on the immediately preceding
Business Day;
(2) any Transfer Period that would otherwise extend
beyond the Scheduled Termination Date shall end on the
Scheduled Termination Date; and
(3) any Transfer Period that begins on the last
Business Day of a calendar month (or on a day for which
there is no numerically corresponding day in the calendar
month at the end of such Transfer Period) shall end on the
last Business Day of a calendar month.
"Transferee": as defined in subsection 11.4(g) of the
----------
Receivables Transfer Agreement.
"Transferred Agreement": as defined in subsection 2.1(b) of
---------------------
the Receivables Transfer Agreement.
"Transferring Servicer": as defined in subsection 12.2(d)
---------------------
of the Receivables Transfer Agreement.
"U.S. Concentration Account": as defined in subsection
--------------------------
2.7(a) of the Receivables Transfer Agreement.
"U.S. Dollar Subordinated Note": as defined in subsection
-----------------------------
8.1 of the Receivables Sale Agreement.
"Weekly Transfer Date": (a) the second Business Day of each
--------------------
calendar week, except for any calendar week in which a Settlement
Date occurs, and (b) each Settlement Date.
"Withdrawal Liability": liability to a Multiemployer Plan
--------------------
as a result of a complete or partial withdrawal from such
Multiemployer Plan, as such terms are defined in Part I of
Subtitle E of Title IV of ERISA.
"Write-Offs": with respect to any Seller, for any period,
----------
the aggregate amount of Receivables that are written off during
such period as uncollectible in accordance with the Policies of
such Seller.
"Yield Reserve Ratio": as of any day, the amount as of such
-------------------
day obtained by dividing (a) the product of (i) [2], (ii) Days
--------
Sales Outstanding as of the Settlement Date immediately preceding
such day and (iii) the Discount Rate in effect as of the
Settlement Date immediately preceding such day by (b) 360.
<PAGE>
SCHEDULE 1
----------
NAMES, ADDRESSES AND COMMITMENTS OF BANKS
-----------------------------------------
Commitment
----------
CHEMICAL BANK . . . . . . . . . . . . . . . . . . . $150,000,000
270 Park Avenue
New York, New York 10017
Attention:
Telecopy No.:
<PAGE>
SCHEDULE 2
----------
LOCATIONS OF CHIEF EXECUTIVE OFFICES;
LOCATIONS OF BOOKS AND RECORDS
------------------------------
Location of Offices
Seller State of Chief Executive Where
Incorporation Office Records are
Kept
Ack-Ti-Lining,
Inc.
The Akro
Corporation
Collins & Aikman
Corporation
Collins & Aikman
Products Co.
Dura Acquisition
Corp.
Imperial
Wallcoverings,
Inc.
Imperial
Wallcoverings
(Canada), Inc.
WCA Canada, Inc.
<PAGE>
SCHEDULE 3
----------
LOCKBOXES
---------
Account No.
(including
Seller Bank Lockbox No.)
------ ---- ---------------
Ack-Ti-Lining, Inc.
The Akro Corporation
Collins & Aikman
Corporation
Collins & Aikman
Products Co.
Dura Acquisition
Corp.
Imperial
Wallcoverings, Inc.
Imperial
Wallcoverings
(Canada), Inc.
WCA Canada, Inc.
<PAGE>
SCHEDULE 4
----------
TRANSACTIONS WITH AFFILIATES
----------------------------
<PAGE>
SCHEDULE 5
----------
CONTRACTUAL OBLIGATIONS
-----------------------
<PAGE>
SCHEDULE 6
----------
LOCAL COUNSEL
-------------
State Counsel
----- -------
LOGO
Collins & Aikman Corporation
1994 EXECUTIVE INCENTIVE
COMPENSATION PLAN
June 17, 1994
<PAGE>
Collins & Aikman Corporation
1994 EXECUTIVE INCENTIVE COMPENSATION PLAN
ARTICLE 1. Introduction: Plan Summary and Objectives
------------------------------------------------------
1.1 Plan Summary. The Collins & Aikman Corporation (the
"Company") 1994 Executive Incentive Compensation Plan (the
"Plan") establishes the annual (fiscal year) bonus program
for key employees ("Participants") who are in a position to
have an impact on the attainment of the goals of the
Company, and the Company's operating divisions. The Plan
provides for substantial awards to Participants whose unit
meets or exceeds the specified performance goal.
The bonuses of Participants in the 1994 Plan will be based
primarily on one financial measure: Earnings Before Income and
Taxes ("EBIT") of the Participant's unit. Threshold, Target and
Maximum performance goals will be established for this financial
measure. These goals shall be associated, respectively, with
lowest, expected and maximum bonus levels for each measure.
Awards are determined by assigning each Participant a "Target
Bonus" or expected bonus level that is equal to a specified
percent of base salary. The bonus actually paid to the
Participant will be based on the extent to which the performance
of his or her unit meets or exceeds the predetermined goals, and
on the Participant's performance relative to other Plan
Participants. The maximum bonus payable shall be equal to 225%
of the Target Bonus.
1.2 Plan Objectives. The Plan objectives are:
a. to motivate key employees to achieve and exceed the
specified financial objectives,
b. to maintain management's focus on the importance of
earnings,
c. to encourage management to balance the longer term needs of
the business with shorter term requirements, and
d. to attract and retain the quality and quantity of key
employees required to successfully manage the Company's
business.
ARTICLE 2. Plan Definitions
----------------------------
2.1 "Base Salary" means the annual base rate of pay, exclusive
-----------
of bonuses, long term incentive awards, benefits, car
allowances, awards under this Plan and any other non-salary
items, as in effect for a Participant on the last day of the
calendar year ending in the Plan Year for which an incentive
award is made.
1
<PAGE>
2.2 "Board" means the Board of Directors of the Company.
-----
2.3 "Cause" means
-----
a. fraud, misappropriation or gross misconduct with respect to
any business of the Company or an affiliate of the Company
or intentional material damage to any property or business,
or the reputation, of the Company or an affiliate of the
Company,
b. willful failure by a Participant to perform his/her duties
and responsibilities and to carry out his/her authority,
c. willful malfeasance or misfeasance or breach of duty or
representation to the Company or an affiliate of the
Company,
d. willful failure to act in accordance with any specific
lawful instructions of a majority of the Board of Directors
of the Company, or breach of any written agreement between
Participant and the Company or an affiliate of the Company,
or
e. conviction of a Participant of a felony.
2.4 "Committee" shall mean the Compensation Committee of the
---------
Board of Directors of the Company or any parent company,
whose members are determined and appointed by the Board or
by the Board of Directors of any parent company in their
sole discretion.
2.5 "Company" shall mean Collins & Aikman Corporation.
-------
2.6 "Division" means an operating division of the Company for
--------
which EBIT performance goals are established and approved by
the Committee and the President and CEO.
2.7 "Earnings Before Interest and Taxes" ("EBIT") means earnings
----------------------------------
before interest and taxes (including imputed interest and
taxes) as determined by the Company in accordance with
generally accepted accounting principles.
2.8 "Effective Date" means January 30, 1994.
--------------
2.9 "Maximum Performance Goal" means the highest level of
------------------------
performance specified for the EBIT financial measure.
Performance at (and above) this level is associated with the
maximum level of bonus payouts for each measure.
2.10 "Participant" means a key executive or staff person
-----------
designated as being eligible for an award under the Plan.
2
<PAGE>
2.11 "Plan Year" means the 1994 fiscal year ending January 28,
---------
1995.
2.12 "Target Bonus" means a specified percentage of a
------------
Participant's Base Salary as determined pursuant to the
provisions of the Plan.
2.13 "Target Performance Goal" is the expected level of
-----------------------
performance established for the EBIT financial performance
measure based on the Company's and, where applicable,
Division's budget and other considerations. This level of
performance is associated with the Target Bonus level of
bonus payouts.
2.14 "Threshold Performance Goal" is the lowest acceptable level
--------------------------
of performance specified for the EBIT financial performance
measure. This level of performance is associated with the
lowest level of bonus payouts.
ARTICLE 3. Eligible Executives
------------------------------
3.1 Eligible Executives. Key executives and staff of the
Company and Divisions are eligible to be named Participants
in the Plan for the Plan Year. Generally, only those
executives and staff whose potential contributions are
deemed to be important to the success of the Company or
Division in achieving its objectives will be designated as
Participants. The designation of eligible executives shall
be the responsibility of the Vice President - Human
Resources and President and CEO of the Company. See Article
5 regarding Participant selection.
ARTICLE 4. Setting Performance Goals
--------------------------------------
4.1 Budgets and Performance Goals
The annual budget of the Company shall form the initial basis for
setting financial performance goals.
Threshold, Target and Maximum EBIT Performance Goals will be
established for the Company and each Division. Threshold and
Maximum goals may or may not be pre-determined based on a fixed
percent of the Target goal.
The final determination of goals shall be subject to the approval
of the Committee, in their sole discretion.
4.2 Performance Goal Setting Process
a. Performance Goal Recommendations: Upon finalization of
---------------------------------
the Company's budget, the President and CEO shall
submit recommended Threshold, Target and Maximum EBIT
Performance Goals and any interim goals.
3
<PAGE>
b. Performance Goal Approval: Final approval of the
--------------------------
performance goals shall be the responsibility of the
Committee. It is contemplated that such goals, once
set, will not change for any reason during the fiscal
year. The Committee may, in its sole discretion, alter
or amend these goals if deemed necessary or
appropriate.
ARTICLE 5. Selecting Plan Participants; Assigning Target Bonuses
----------------------------------------------------------------
5.1 Participant Selection.
The President and CEO and each Division head (as
appropriate) shall recommend as a Plan Participant any
executive or key employee whose potential contributions to
his/her unit's performance are considered important to the
success of their unit. Such recommendations are subject to
the Plan and the final approval of the Vice President -
Human Resources and President and CEO.
a. Eligible Group. The group of eligible employees
---------------
shall include, but not be limited to, senior
executives and their direct reports at the Company
staff level, Division heads and senior management of
the Divisions and their direct reports. Key
employees below these levels may be included.
b. Approval. No employee shall become a participant in
---------
the Plan, nor shall Plan participation be discussed
with an employee, until approval is received in writing
from the Vice President - Human Resources.
5.2 Assignment of Target Bonuses
a. Target Bonus Guidelines The Vice President - Human
-----------------------
Resources and the President and CEO have the
responsibility to assign and recommend a Target Bonus
for each Participant. The recommended Target Bonus,
will take into account the Participant's: a) position
relative to those of other Participants, b) anticipated
contribution to the organization's performance and c)
external competitive bonus rates for similar positions
in similar industries.
b. Target Bonus Changes. From time to time, due primarily
--------------------
to changes in position, it may be necessary to modify
an assigned Target Bonus. The Vice President - Human
Resources and President and CEO shall have the
authority to make such modifications subject to the
terms of this Plan.
4
<PAGE>
5.3 Communication of Performance Goals, Participant Eligibility and
Target Bonuses
The Vice President - Human Resources has the responsibility
to communicate to each Participant his or her unit's
performance goals, Participant eligibility and Participant
Target Bonus, provided: a) the necessary approvals have been
obtained before any communication takes place, b) any
communication regarding the Target Bonus, written or
otherwise, is fully consistent with this Plan, c) it is
clear that the recommendation for program participation and
bonus eligibility is not a guarantee of payment or amount,
and d) a Participant be provided a copy of this Plan upon
request.
ARTICLE 6. Granting Participant Bonuses
----------------------------------------
6.1 Introduction
Bonuses based on EBIT performance will be paid only if the
Participant's unit (i.e., Division or Company, as appropriate)
hits its EBIT Threshold. It is not necessary for the Company to
achieve its EBIT threshold for a Division to receive a bonus
based on EBIT.
All bonuses are subject to the final approval of the Committee.
6.2 EBIT Bonus Calculation. When the EBIT bonus is determined,
it is calculated as a percent of the Target Bonus per the
following schedule:
Company/Division EBIT
Performance Level Achieved: Threshold Target Maximum
--------- ------ -------
Payout as a % of Target Bonus 50% 100% 225%
In addition, the Committee may establish interim EBIT performance
levels. Straight line interpolation is used between Threshold
and Target, between Target and Maximum, and between any interim
EBIT performance levels (if established) to determine the
calculated payout.
6.3 Bonus Recommendations, Approvals and Distribution
a. Bonus Recommendations. The President & CEO shall, as soon as
---------------------
possible following the determination of year-end results,
submit to the Committee a list of recommendations for all
Plan Participants for actual bonus awards. In determining
bonus awards, the President and CEO may, in his sole
discretion, use other factors -- such as cash flow, etc. -- in
determining the level of achievement of the financial
performance measure. Where a recommended award is different
than a calculated award, the variance should be noted.
5
<PAGE>
In arriving at the recommended awards, the Vice President -
Human Resources shall work with each Division head in
considering the Participants' Target Bonus levels, the
calculated awards based on actual EBIT performance, and the
Participants' relative contributions to the unit's
performance. The Division head has, therefore, the
discretion to modify individual calculated awards to account
for different performance levels. If one individual's award
is modified upward, however, other awards have to be
adjusted downward such that the net change of all
modifications is $0. In other words, the sum of all awards
---
calculated must stay the same regardless of any changes in
individual awards.
----------
Subject to the other provisions hereof, in no event shall a
Participant who is eligible for a calculated award have
his/her award reduced below 75% of the award as calculated.
Recommendations for Company staff shall normally be based
entirely on the actual performance of the Company as a
whole.
b. Final Approval. The Committee shall have final approval of
---------------
Company and Division operating results to be used in bonus
calculations and the timing, and amount of all bonus
payments.
c. Bonus Distribution. Final approval by the Committee shall
------------------
authorize the President and CEO to make bonus grants as
approved. The Vice President - Human Resources shall effect
the payment of the bonus as soon as is administratively
practicable once the bonuses are approved.
ARTICLE 7. Plan Administration
--------------------------------
7.1 Administrative Responsibilities
a. Overall Plan administration shall be the responsibility of
the Committee who shall have absolute and final discretion
regarding interpretation of Plan and sole authority to make
all decisions with respect to Plan.
b. The Committee shall have the authority to, at their
discretion, approve all performance goals, actual
performance results, recommended bonuses, Plan
interpretations and modifications and to take any and all
other actions at any time they deem necessary or appropriate
for the administration of the Plan.
c. Responsibility for plan implementation and operation has
been delegated by the Committee to the President and CEO and
the Vice President - Human Resources who shall have the
responsibility for:
1. approving Participant rosters and Participant Target
Bonuses,
2. ensuring that performance goals are submitted, reviewed
and approved on a timely basis;
6
<PAGE>
3. ensuring that year-end results and recommended bonuses
for all eligible Participants are submitted, reviewed
and approved on a timely basis; and
4. maintaining appropriate records with respect to
performance goals, eligible Participants, Target
Bonuses, actual awards, all necessary written approvals
and other records as appropriate.
7.2 Award Payments
a. Payment of awards shall be made on or before April 1 of
the year immediately following the year for which the
performance goals have been set.
b. In the event of a change of assignment or transfer that
would result in a change of Target Bonus during the course
of the year, the participant's bonus calculation shall be
determined by mutual agreement with the Division head, the
President and CEO and the Vice President - Human Resources.
c. If a person is not on the payroll at the end of the fiscal
year, a bonus will not be paid regardless of length of
service or reason for termination except as noted herein.
Exceptions may be made by the Vice President - Human
Resources and the President and CEO in their sole discretion
for terminations prior to the end of the fiscal year due to
death, total and permanent disability (as defined by the
applicable disability plan(s)), and Early or Normal
Retirement (as defined by the applicable retirement
plan(s)). An exception may also be made for employees on
approved leaves of absence. A pro rata bonus based on the
executive's contributions to his/her objectives may be
payable under these circumstances. In the event of the
death of a Participant, the Participant's beneficiaries
shall be entitled to the awards, if any, to which the
Participant would have otherwise been entitled.
An additional exception may be made in the event of the sale
of a unit. In such cases, the Committee may, in its sole
discretion, award discretionary bonuses based on performance
to date. The sale of a unit does not necessarily entitle a
Plan participant to a bonus under this Plan.
d. A former Plan Participant who is not on the payroll when
awards are distributed (approximately April 1) but who was
on the payroll at the end of the fiscal year, shall
generally be entitled to a bonus, subject to the terms of
this Plan.
e. An employee discharged for Cause, as defined above, shall
forfeit any and all rights to a bonus under this Plan, even
if the employee is on the payroll at the end of the fiscal
year.
7
<PAGE>
7.3 General Provisions
a. The Plan is intended to constitute an "unfunded" plan for
the incentive compensation of a select group of key
management employees of the Company and its Divisions.
b. Neither the Plan nor any action taken under the Plan shall
be construed as:
1) giving any employee any right to be retained in the
employ of the Company, or Division.
2) affecting the right of the above-mentioned entities to
terminate the employment of any individual at any
time for any reason; or
3) interfering with the rights created under any separate
written employment or severance agreement.
c. Should the provisions of a Participant's employment contract
not be consistent with the provisions of the Plan, the
provisions of the employment contract shall control.
d. The Committee may alter, amend or terminate the Plan at any
time or from time to time.
e. Neither the Board nor the Committee, nor the Company nor any
Division, nor any officers, directors or employees shall
have any liability to any Participant (or his/her
beneficiaries) under the Plan or otherwise on account of any
action taken, or not taken, in good faith by any of the
foregoing persons with respect to the business or operations
of such entities notwithstanding the fact that any such
action or inaction in any way whatsoever may adversely
affect the value of any awards, rights or benefits of a
Participant (or his/her beneficiaries) under the Plan.
Unless the Participant specifies otherwise in writing to the
Committee, beneficiaries, for the purposes of this Plan,
shall mean the beneficiaries identified by the Participant
for his/her qualified pension or retirement plan(s).
f. The Plan and all actions taken pursuant to the Plan shall be
governed by, and construed in accordance with, the internal
laws of the State of New York.
g. The invalidity or unenforceability of any one or more
provisions of the Plan shall not affect the validity or
enforceability of any other provisions of the Plan, which
shall remain in full force and effect.
h. Correspondence regarding this Plan should be sent to the
Vice President - Human Resources, Collins & Aikman
Corporation, Post Office Box 32665, Charlotte, NC 28232.
8
EXHIBIT 11
COLLINS & AIKMAN HOLDINGS CORPORATION
COMPUTATION OF EARNINGS PER SHARE
<TABLE><CAPTION>
FISCAL YEAR ENDED
----------------------------------------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
JANUARY 29, JANUARY 30, JANUARY 25,
1994 1993 1992
------------ ------------ ------------
<S> <C> <C> <C>
Shares outstanding.................................................... 35,035 35,035 35,035
------------ ------------ ------------
------------ ------------ ------------
Shares issued upon exercise of options
1993 Plan........................................................... 3,036 3,036 3,036
1994 Plan........................................................... 170 170 170
------------ ------------ ------------
3,206 3,206 3,206
------------ ------------ ------------
------------ ------------ ------------
Proceeds from exercise of options
1993 Plan........................................................... $ 13,875 $ 13,875 $ 13,875
1994 Plan........................................................... 937 937 937
------------ ------------ ------------
14,812 14,812 14,812
------------ ------------ ------------
Applicable compensation expense:
1993 Plan........................................................... 26,736 26,736 26,736
1994 Plan........................................................... 1,608 1,608 1,608
------------ ------------ ------------
28,344 28,344 28,344
------------ ------------ ------------
Amount available to buy back shares................................... $ 43,156 $ 43,156 $ 43,156
------------ ------------ ------------
------------ ------------ ------------
Average per share price............................................. $ 15.50 $ 15.50 $ 15.50
------------ ------------ ------------
------------ ------------ ------------
Shares repurchased under Treasury Stock Method...................... (2,784) (2,784) (2,784)
------------ ------------ ------------
Increase in total shares.............................................. 422 422 422
------------ ------------ ------------
Total shares for EPS............................................. 35,457 35,457 35,457
------------ ------------ ------------
------------ ------------ ------------
Loss Applicable to Common Shareholders
Continuing operations(1)............................................ $ (197,048) $ (64,189) $ (89,143)
Discontinued operations............................................. (104,339) (218,317) (16,365)
Extraordinary items................................................. -- -- (1,793)
Cumulative effect of accounting change.............................. -- -- (42,316)
------------ ------------ ------------
Net Loss......................................................... $ (301,387) $ (282,506) $ (149,617)
------------ ------------ ------------
------------ ------------ ------------
Loss Per Common Share
Continuing operations............................................... $ (5.56) $ (1.81) $ (2.52)
Discontinued operations............................................. (2.94) (6.16) (.46)
Extraordinary item.................................................. -- -- (.05)
Cumulative effect of accounting change.............................. -- -- (1.19)
------------ ------------ ------------
Net Loss......................................................... $ (8.50) $ (7.97) $ (4.22)
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
- ---------------
Notes:
(1) Loss from continuing operations has been adjusted for dividends and
accretion requirements on redeemable preferred stock of $23,723, $18,848 and
$15,807 for fiscal years 1993, 1992 and 1991 respectively.
(2) Primary and fully diluted earnings per share are the same in each year since
the same average share price ($15.50) is applicable to both calculations in
each year.
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN & CO.
Charlotte, North Carolina,
June 20, 1994.
<PAGE>
APPENDIX A
GRAPHIC AND IMAGE MATERIALS
Photographic material, see inside front and
back covers for narrative description.