SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended January 28, 1995.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-10218
Collins & Aikman Corporation
(Exact name of registrant as specified in its charter)
(Formerly Collins & Aikman Holdings Corporation)
Delaware 13-3489233
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
701 McCullough Drive
Charlotte, North Carolina 28262
(Address of principal executive offices)
Registrant's telephone number, including area code: (704) 547-8500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. x Yes No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [x]
The aggregate market value of voting stock held by non affiliates of the
registrant was $127,796,678 as of April 26, 1995.
As of April 26, 1995, the number of outstanding shares of the Registrant's
common stock, $.01 par value, was 70,520,900 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) Annual Report to Stockholders for Fiscal Year Ended January 28, 1995 -
Items 1, 5, 6, 7, 8 and 14*
(2) Proxy Statement for 1995 Annual Meeting of Stockholders to be filed
within 120 days of January 28, 1995 - Items 10, 11, 12 and 13.*
*Only the portions of these documents expressly described in the items
listed are incorporated by reference herein.
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
FORM 10-K Annual Report Index
Item 1. Business, page 1.
Item 2. Properties, page 8.
Item 3. Legal Proceedings, page 8.
Item 4. Submission of Matters to a Vote of Security Holders, page 12.
Executive Officers of the Registrant, page 12.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters,
page 14.
Item 6. Selected Financial Data, page 14.
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations, page 14.
Item 8. Financial Statements and Supplementary Data, page 14.
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure, page 14.
Item 10. Directors and Executive Officers of the Registrant, page 15.
Item 11. Executive Compensation, page 15.
Item 12. Security Ownership of Certain Beneficial Owners and Management,
page 15.
Item 13. Certain Relationships and Related Transactions, page 15.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K,
page 16.
i
<PAGE>
PART I
ITEM 1. 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 wallpaper in
the U.S. For certain financial information regarding the Company's
business segments, see Note 20 to Consolidated Financial Statements
on page 49 of the Company s 1994 Annual Report to Stockholders
and Management's Discussion and Analysis of Financial Condition and
Results of Operations on page 17 of the Company's 1994 Annual Report
to Stockholders, which are incorporated herein by reference. For a
discussion of the organization of the Company, certain developments
in July 1994 resulting in a recapitalization of the Company and
certain related mergers, see Notes 1 and 2 of the Consolidated Financial
Statements on page 32 of the Company's 1994 Annual Report to
Stockholders and the information under the Caption "Initial Public
Offering and Recapitalization" on page 17 of the Company's 1994
Annual Report to Stockholders, which are incorporated herein by
reference. With respect to market or competitive information,
references to the Company as "a leader", "a leading" or "one of the
leading" manufacturers in that 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 product market share based on dollar sales
volume in that product category.
All references to a year with respect to the Company refer to the
fiscal year of the Company which ends on the last Saturday of
January of the following year.
AUTOMOTIVE PRODUCTS
General
The Company is a leading designer and manufacturer of automotive
products with 1994 net sales in this segment of $904.9 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 systems. Automotive Products had
1994 net sales in these product lines of $751.6 million.
Automotive Products has supplied interior trim products to the
automotive industry for over 60 years. While some interior
trim suppliers have sales volumes equivalent to or greater than
that of the Company in a single product line, management
believes that the Company sells a wider variety of interior
trim products, has products on more vehicle lines and has a
broader, more uniform sales penetration at U. S. automotive
equipment manufacturers and foreign owned North American
automotive production and assembly facilities ("Transplants"
and, collectively, "OEMs") than any of its competitors.
The Company's sales are dependent on certain significant
customers. In 1994, direct and indirect sales to each of General
Motors Corporation, Ford Motor Company and Chrysler Corporation
accounted for 10% or more of the Company's net sales. In 1993 and 1992,
direct and indirect sales to each of General Motors Corporation
and Chrysler Corporation accounted for 10% or more of the Company's
net sales.
Automotive industry demand historically has been influenced by both
cyclical factors and long-term growth trends in the driving age population
and real per capita income.
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 increased.
1
<PAGE>
Products
Automotive Products manufactures five principal products:
automotive seat fabric, molded floor carpets, accessory floor mats,
luggage compartment trim and convertible top systems. Automotive
Products also produces a variety of other automotive and
nonautomotive products.
Automotive Seat Fabric. Automotive Products manufactures a
wide variety of bodycloth, including flat-wovens, velvets and knits.
Automotive Products also laminates foam to bodycloth. In 1994, 1993
and 1992, Automotive Products had net sales of bodycloth of $340.3
million, $221.2 million and $191.1 million, respectively.
Molded Floor Carpets. Molded floor carpets include polyethylene,
barrier-backed and molded urethane underlay carpet. In the Company's
automotive molded floor product line, it has developed a
"foam-in-place" process to provide floor carpeting with enhanced
acoustical and fit characteristics, resulting in a substantial gain
in unit selling prices. In 1994, 1993 and 1992 net sales of molded
floor carpets were $213.2 million, $181.1 million, and $173.1 million,
respectively.
Accessory Floor Mats. Automotive Products produces carpeted
automotive accessory floor mats for both North American produced
vehicles and imported vehicles. In 1994, management estimates that
approximately 63% of all vehicles produced in North America included
accessory mats as original equipment.
Luggage Compartment Trim. Luggage compartment trim includes
one-piece molded trunk systems and assemblies, wheelhouse covers,
seatbacks, tireboard covers, center pan mats and other trunk trim
products.
Convertible Top Systems. Automotive Products designs,
manufactures and distributes convertible top systems through its Dura
Convertible Systems subsidiary ("Dura"). In October 1993, Dura
began shipping its "Top-in-a-Box" system, in which it designs and
manufactures all aspects of a convertible top, including the
framework, trim set, backlight and actuating system.
Other. Automotive Products also produces a variety of other auto
products, including die cuts for automotive interior trim
applications, convertible power train units, headliner fabric, and
roll goods for export and domestic consumption. Small volumes of
certain products, such as residential floor mats, casket and tie linings
and sliver knits, are sold to other commercial and industrial markets.
Competition
The automotive supply business is highly competitive. The
primary competitor in bodycloth is Milliken & Company. The primary
competitors in molded floor carpets are Masland Corporation and JPS
Automotive Products Corp. In accessory floor mats, the Company
competes primarily against Pretty Products Company. Automotive
Products' primary competitors in luggage compartment trim are Masland
Corporation and Gates Corporation. In convertible top stacks,
Automotive Products competes primarily against American Sunroof
Corporation and Best Top.
The Company principally competes for new business at the design
stage of new models and upon the redesign of existing models. The
Company is vulnerable to a decrease in demand for the models that
generate the most sales for the Company, a failure to obtain purchase
orders for new or redesigned models and pricing pressure from
the major automotive companies.
2
<PAGE>
Facilities
Automotive Products has 34 manufacturing, warehouse and other
facilities located in the U.S., Canada and Mexico aggregating
approximately 5.9 million square feet. The majority of these
facilities are located in North Carolina, Ohio and Michigan and in
Ontario and Quebec, Canada. Approximately 90% of the total square
footage of these facilities is owned and the remainder is leased.
Many facilities are strategically located to provide just-in-time
("JIT") inventory delivery to the Company's customers. Capacity at
any plant depends, among other things, on the product being 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 plants generally operate at between 50% and 100% of capacity on
a six- day basis. During the second half of 1994 the Company
experienced capacity constraints with respect to certain automotive
seat fabrics. To meet customer expectations, the Company utilized
outside weaving and redeployed certain manufacturing capacity from its
Decorative Fabrics velvet furniture products. Except for the foregoing
constraints, which the Company believes are short term, 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.
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 1994, the Interior Furnishings segment
had net sales of $414.5 million.
Decorative Fabrics
General. Interior Furnishings' Decorative Fabrics group is the
largest designer and manufacturer of upholstery fabrics in the U.S.
The Decorative Fabrics group had 1994 net sales of $306.5 million.
Decorative Fabrics strives to be the preferred supplier of middle to
high-end flat-woven upholstery fabrics to furniture manufacturers and
fabric distributors. This group's primary division, Mastercraft, is
the leading manufacturer of flat-woven upholstery fabrics. Management
believes that Mastercraft has substantially more Jacquard looms and
styling capacity dedicated to upholstery fabrics, and offers more
patterns (approximately 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. In order to accommodate anticipated
growth, the Company is in the initial phase of a four year, $85
million modernization program. Investment is targeted toward the
purchase of high-speed looms to increase capacity and productivity,
new electronic jacquard heads to reduce pattern changeover times,
and computer monitoring systems to provide information about the
manufacturing processes and to improve quality, productivity and
capacity.
The three primary types of upholstery fabric are flat-wovens,
velvets and prints. Flat-woven fabrics are made in two major styles:
Jacquard, which is produced on high- speed computerized looms capable
of weaving intricate designs into the fabric, and Dobby, a plain fabric
produced on standard looms. Demand for upholstery fabric generally
varies with economic conditions, particularly sales of new and
existing homes, and is directly associated with sales of upholstered
furniture at the retail level. Shifts in consumer taste can also
affect demand for upholstery fabric.
3
<PAGE>
Products. Decorative Fabrics' two operating divisions are
Mastercraft and Cavel. Mastercraft and Cavel design and manufacture
jacquards, velvets and other woven fabrics for the furniture,
interior design, commercial, recreational vehicle and industrial
markets. During 1994, the Company sold the Greeff and Warner product
lines through which it had designed and distributed high-end fabrics
to interior designers and specialty retailers in the U.S. and U.K.,
respectively.
Decorative Fabrics had net sales of flat-woven products in 1994,
1993 and 1992 of $262.8 million, $268.9 million and $254.7 million,
respectively.
Customers. Decorative Fabrics is a primary supplier to virtually
all major furniture manufacturers in the U.S., including La-Z-Boy,
Ethan Allen, Thomasville, Flexsteel, Bassett, Broyhill, Baker,
Henredon, Rowe and Robert Allen. Due to the breadth of its product
offerings, strong design capabilities and superior customer service,
the Company has developed close relationships with many of Decorative
Fabrics' over 1,000 customers.
Nearly all of Decorative Fabrics' products are made to customer
order. This reduces the amount of raw material and finished goods
inventory required and greatly reduces product returns, all of which
improve profit margins.
Marketing and Sales. Fabrics are sold domestically by
commissioned sales representatives who exclusively represent the
Mastercraft and Cavel divisions of Decorative Fabrics. The
Mastercraft and Cavel divisions maintain showrooms in seven key
locations throughout the United States.
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 operates four weaving plants and one
finishing plant in North Carolina aggregating 1.0 million square feet,
of which 89% is owned and the remainder leased. Cavel shares
manufacturing capacity with Automotive Products at three plants in
Roxboro, North Carolina. 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 $85 million capital
investment plan (see page 22 of Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidity and
Capital Resources in the Company's 1994 Annual Report to
Stockholders which is incorporated herein by reference),
anticipated growth requirements. Assuming the completion of
Mastercraft's 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
1994 Floorcoverings had net sales of $108.0 million. Its principal
products are six-foot wide rolls and modular carpet tiles.
Floorcoverings produces virtually no product for inventory or for
commodity markets.
Since 1990, Floorcoverings has repositioned its product
offerings, shedding those products in which it lacked either a
low-cost position or proprietary product advantage. By focusing on
areas of competitive advantage, Floorcoverings has prospered,
notwithstanding a significant downturn in commercial construction.
4
<PAGE>
During 1994, Floorcoverings initiated its Source OneSM program to
sell its products directly to end users which provides them turnkey
full service project management.
Approximately 56% of Floorcoverings' 1994 net sales were to
institutional customers such as government, healthcare, and education
facilities. Management believes that government, healthcare and
educational customers are stable growth sectors.
Products. Floorcoverings' key competitive advantage in its
principal products, six- foot wide rolls and modular carpet tiles,
is its patented Powerbond RS(R) adhesive technology, which has 13
years of patent protection remaining. Because the Powerbond RS(R) system
does not use wet adhesives, it permits the installation of
floorcoverings directly on floor surfaces, including existing
carpeting, with substantially reduced labor costs and without the fumes
of conventional wet adhesives. This allows for less disruptive and
less time-consuming installation and, for this reason, is
particularly attractive to institutions such as schools and hospitals.
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 also have substantial
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 that currently
supplies most of the industry's commodity products. The Company's
primary competitors are Interface, Milliken & Company, Mohawk
Industries and Shaw Industries, Inc.
Facilities. Floorcoverings owns and operates four facilities in
Dalton, Georgia aggregating approximately 630,000 square feet. The
Company currently estimates that Floorcoverings' plants operate at
between 35% and 85% 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", is a
leading manufacturer and distributor of a full range of wallpaper for
the residential and commercial sectors with 1994 net sales of $216.6
million. It is the only producer of wallpaper 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.
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 during 1986 and 1987. In addition, a one-time surge in
demand created a new industry-wide layer of inventory as a result of
the rapid growth of large in-stock retailers. Between 1983 and 1987,
the industry's physical shipment volume increased from 137 million to
200 million rolls of wallpaper per year, a 9.9% annual growth rate.
Between 1987 and 1990, the industry underwent a contraction, with
volume declining dramatically from 200 million rolls in 1987 to 174
million rolls in 1990, a 4.5% annual decline. This resulted from a
slowdown in the overall economy, particularly in the housing
5
<PAGE>
market, coupled with a reduction in inventory by overstocked retailers.
From 1991 to 1994, the industry's physical shipment volume increased
at a modest rate.
The wallcoverings market can generally be divided into the
residential and commercial sectors with the residential sector being
the larger of the two sectors. Demand for wallpaper is primarily
influenced by levels of construction, renovation and remodeling. In
addition to these cyclical factors, shifts in consumer taste between
wallpaper and paint can be a factor. The two primary distribution
channels in the residential sector are independent retailers
("dealers") and retail chains.
The industry contraction of the late 1980s and early 1990s
left Imperial with unutilized manufacturing capacity, an oversized
distribution network and excess product offerings. Between 1989 and
1992, Imperial implemented a comprehensive downsizing program designed
to bring Imperial's high fixed-cost structure into better alignment
with the changed industry environment. Imperial closed 22 showrooms and
12 warehouses and reduced fixed costs by nearly 15%. Imperial also
substantially reduced the annual introduction rate of new collections
and virtually eliminated its use of independent distributors in favor
of exclusive captive distribution. This restructuring program
improved manufacturing efficiencies, but it adversely affected sales
and led to a reduction in shelf space and product market share. As a
result, Imperial's sales declined during 1992 and 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 57 and 62
collections being introduced in 1994 and 1993, respectively, compared
to 45 in 1992. Management is also broadening its selection of
in-stock programs and improving its order fulfillment capabilities.
Products
Management believes Imperial has maintained its leading
position in residential wallpaper due to its competitive edge in
color and design. Its in-house studio of approximately 35 artists
represents a major strategic investment by Imperial that 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, Albert Van
Luit and Plexus. In addition to these in-house brands, Imperial
licenses a number of well-known brand names, including Gear, Laura
Ashley, Pfaltzgraff, Croscill, Mario Buatta, David and Dash, Louis
Nichole, Clarence House and Carlton Varney, for which it converts home
furnishing designs into wallpaper designs. Imperial also distributes
the lines of John Wilman, Great Britain's largest wallpaper designer
and manufacturer.
In recent years, there has been increasing demand for wallcoverings
coordinated with decorative accessories such as window treatments,
bedding, upholstery fabric and other textile products. To satisfy
this demand from upscale home furnishings customers, Imperial
provides fabrics, which it generally purchases outside the Company,
that are coordinated with its wallpaper designs. Some of these
fabrics are supplied by the Mastercraft division of the Company.
In 1994, 1993 and 1992, net sales of residential wallpaper were
$191.7 million, $196.0 million and $214.0 million, respectively.
6
<PAGE>
Customers
Dealers and retail chains account for the largest portion of
Imperial's customer base. Management believes that the Company is the
leader in each of these distribution channels. Management believes
that Imperial has the most extensive dealer network in the U.S.,
selling to approximately 15,000 dealers. Imperial also sells to many of
the leading chains in the country, including Home Depot, Lowes, Sears,
Sherwin Williams and Target.
Competition
As a result of the recent economic turndown 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. Management believes that 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 in
wallpaper are Borden, GenCorp, F.S. Schumacher and Seabrook
Wallcoverings.
Facilities
Imperial operates five manufacturing facilities in the United
States and three in Canada, as well as three distribution centers in
the United States aggregating 1.5 million square feet. Of this amount
approximately 82% is owned and the remainder is leased, including the
three U.S. distribution centers. 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.
RAW MATERIALS
Raw materials and other supplies used in the Company's operations
are normally available from a variety of competing suppliers. The loss
of a single or few suppliers would not have a material adverse effect on
the Company. For a discussion of increasing raw material price trends,
see page 24 of Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources in
the Company's 1994 Annual Report to Stockholders which is incorporated
herein by reference.
ENVIRONMENTAL MATTERS
See "ITEM 3. LEGAL PROCEEDINGS - Environmental Proceedings"
and Management's Discussion and Analysis of Financial Condition and
Results of Operations - Environmental Matters on pages 25-26 of the
Company's 1994 Annual Report to Stockholders incorporated
herein by reference.
EMPLOYEES
As of January 28, 1995, the Company's subsidiaries employed
approximately 12,000 persons on a full-time or full-time equivalent
basis. Approximately 2,300 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.
7
<PAGE>
ITEM 2. PROPERTIES
For information concerning the principal physical properties of the
Company and its various operating divisions, see "ITEM 1. BUSINESS".
ITEM 3. LEGAL PROCEEDINGS
Except as described below, the Company and its subsidiaries are
not a party to any material pending legal proceedings, other than
ordinary routine litigation incidental to their businesses.
Preferred Stock Redemption Litigation. On August 2, 1991, a
Fifth Consolidated Amended Complaint was filed in In re Ivan F.
Boesky Securities Litigation (the "Boesky action"), a multi-district
litigation pending for pre-trial purposes in the United States District
Court for the Southern District of New York. In essence, the
complaint is an amalgam of numerous class action and individual
claims against a variety of defendants relating principally to the
activities of, among others, Ivan F. Boesky, Drexel Burnham Lambert
Incorporated and Michael R. Milken. Among other things, the
complaint alleges that these defendants and various named associates,
along with Collins & Aikman Group, Inc. ("Group"), a former wholly
owned subsidiary of the Company, which was merged into Collins &
Aikman Products Co. ("Products"), a wholly owned subsidiary of the
Company, and certain former officers and directors of Group,
conspired to manipulate the price of Group's common stock in April
1986 for the purpose of triggering a redemption of outstanding
preferred stock of Group issued in an April 24, 1985 public offering
(the "Preferred Stock"). The complaint alleges claims for compensatory
and punitive damages in unspecified amounts against Group and the
individual Group-related defendants for fraud and deceit, breach of
fiduciary duty, unjust enrichment and violations of Section 25400 of the
California Corporations Code. It does so on behalf of a certified
class of persons and entities who, during the period of April 23,
1986 through June 2, 1986, redeemed, converted or sold shares of the
Preferred Stock. The complaint also alleges numerous other claims
not involving Group or its former officers and directors. The
factual allegations in the complaint involving Group are substantially
similar to the allegations set forth in Citron v. Wickes Companies,
Inc., et al., and Weinberger v. Wickes Companies, Inc., et al., two
actions previously filed in the Superior Court of the State of
California for the County of Los Angeles which have been stayed in
favor of the Boesky action. On February 27, 1995, plaintiffs made a
motion to "clarify or amend the Fifth Amended Complaint,
essentially seeking either (i) a declaration that the complaint
asserted claims against Group under Section 10(b) of the Securities
Exchange Act and the Racketeer Influenced Corrupt Organizations Act
(RICO); or (ii) the right to amend the complaint to assert those
claims. On April 24, 1995, the court granted plaintiffs motion to the
extent of permitting plaintiffs to amend the complaint to assert
Section 10(b) and RICO claims against Group and the individual
Group-related defendants.
POF Arbitration. On or about May 26, 1992, Advanced
Development & Engineering Centre ("ADEC"), a division of an indirect
subsidiary of Group, filed a request for arbitration with the
International Chamber of Commerce seeking a resolution of ADEC's
dispute with the Pakistan Ordnance Factories Board ("POF") concerning
ADEC's installation of a munitions facility in Pakistan for a purchase
price of $26.5 million. ADEC alleges that POF violated the contract,
among other things, by refusing to permit completion of a production
run, which would have entitled ADEC to receive $2.65 million, the
remaining unpaid portion of the purchase price under the contract. On
August 6, 1992, POF filed a reply and counterclaim alleging that as a
result of ADEC's alleged breach of the contract, POF's entire
investment in the munitions facility was a loss. POF claims
damages in excess of $30 million.
Insurance Coverage Litigation. On November 22, 1994, Products
was served with a complaint filed by National Union Fire Insurance
Company of Pittsburgh, PA ("National Union") in the United States
District Court for the Central District of California (the "California
8
<PAGE>
action"). The complaint seeks declaratory relief and the
return of approximately $10 million paid by National Union in defense
costs and indemnity in respect of a class action, captioned Glass,
Molders, Pottery, Plastics and Allied Workers International Union,
AFL-CIO et al. v. Wickes Companies, Inc. (the "OCF Action"), which was
commenced against Wickes Companies, Inc. (the predecessor by merger to
Products) in or about July 1988 and settled pursuant to an order
entered in or about October 1993. The complaint by National Union
alleges, among other things, that National Union did not have a duty to
defend or indemnify Wickes and that Wickes was unjustly enriched. On
November 21, 1994, Products filed suit against National Union in the
United States District Court for the Southern District of New York (the
"New York action") seeking declaratory relief and damages relating to
the amounts paid by National Union in respect of the OCF Action. Both
the California action and the New York action have been withdrawn. In
accordance with a settlement agreement dated as of January 17, 1995, the
parties exchanged mutual releases of all claims related to either the
California or New York action, and Products agreed to pay National
Union a total of $2,510,000 of which $510,000 is due in 1995;
$1,000,000 is due in 1996; and the remaining $1,000,000 is due in
1997. The settlement is covered by established accruals.
In the opinion of the Company's management based on the facts
presently known to it, the ultimate outcome of any of these legal
proceedings will not have a material effect on the Company's
consolidated financial condition or future results of operations.
Environmental Proceedings
Douglas, Michigan. On January 4, 1991, a complaint was filed in
the Circuit Court for Allegan County, Michigan, captioned Haworth,
Inc. v. Wickes Manufacturing Company (the "Haworth action"), in
which Haworth, Inc. ("Haworth") alleges that predecessors of Wickes
Manufacturing Company ("Wickes Manufacturing"), an indirect wholly owned
subsidiary of the Company, released environmental contaminants on
property, now owned by Haworth, located in the Village of Douglas,
Michigan. Haworth seeks a declaratory judgment that Wickes
Manufacturing is liable for the alleged contamination of the site,
indemnification for any costs incurred or to be incurred in connection
with the alleged contamination, an affirmative injunction requiring
Wickes Manufacturing to implement response actions at the site, damages
in connection with alleged diminution in value of the subject property,
and other damages, interest, and costs, all in unspecified amounts.
Wickes Manufacturing has filed counterclaims against Haworth. On
June 28, 1993, the Court entered an order granting Wickes
Manufacturing's motion for summary disposition dismissing all of
Haworth's claims against Wickes Manufacturing. On July 19, 1993,
Haworth appealed the Court's order. On April 21, 1995, the Court of
Appeals for the State of Michigan affirmed the Trial Court s order
granting Wickes Manufacturing's motion for summary disposition. On
October 22, 1993, Haworth filed a complaint in the United States
District Court for the Western District of Michigan, captioned Haworth,
Inc. v. Wickes Manufacturing Company and Paramount Communications,
Inc. (the "Second Haworth action"). In the Second Haworth action,
Haworth alleges federal and state law claims with respect to Wickes
Manufacturing and Paramount Communications Inc. that are factually
similar to the state law claims alleged in the Haworth action, and
Haworth seeks relief similar to the relief it seeks in the Haworth
action. The Michigan Department of Natural Resources, by letter
dated December 20, 1989, notified Wickes Manufacturing pursuant to
the Michigan Environmental Response Act that Wickes Manufacturing
is potentially responsible for undertaking investigation and
response actions to address contamination at the site involved in the
Haworth action and its possible effect on the water supply of the
Village of Douglas.
North Smithfield, Rhode Island. On May 23, 1988, a complaint
was filed in the United States District Court for the District of
Rhode Island, captioned United States v. Kayser-Roth Corporation and
Hydro-Manufacturing, Inc. (the "Stamina Mills action"), in which the
United States sought to recover response costs under the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") from Group's former Kayser-Roth Corporation subsidiary
("Kayser-Roth") and others in connection with a site formerly
operated
9
<PAGE>
by Stamina Mills, Inc., a former subsidiary of Kayser-Roth,
in North Smithfield, Rhode Island. In January 1990, the District
Court held Kayser-Roth liable under CERCLA for all past and future
response costs. By Amended Administrative Order issued June 4,
1991, the United States Environmental Protection Agency (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 1991 to date, Kayser-Roth has paid approximately $3.6 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.
Miscellaneous Environmental Matters. In addition to the judicial
and administrative proceedings listed above, the Company also is
legally or contractually responsible or alleged to be responsible
for the investigation and remediation of contamination at various
other sites. It also has received notices that it is a potentially
responsible party ("PRP") in a number of proceedings. It is a
normal risk of operating a manufacturing business that liability
may be incurred for investigating and remediating on-site and off-site
contamination. The Company is currently engaged in or alleged to be
responsible for investigation or remediation at certain sites. These
sites include, among others, the following: a site adjacent to a
facility formerly operated by Wickes Manufacturing's former Bohn Heat
Transfer division located at Beardstown, Illinois; a site formerly
owned and operated by Wickes Manufacturing's alleged former
Daybrook Ottawa division located at Bowling Green, Ohio; a site owned
and formerly operated by the Company located at Elmira, California;
the Beaunit Corporation Superfund Site located near Fountain Inn,
South Carolina; the Butterworth Landfill Superfund Site located at
Grand Rapids, Michigan; a site owned and formerly operated by Wickes
Manufacturing's former Mechanical Components division located at
Mancelona, Michigan; the former Albert Van Luit plant site owned by a
Company subsidiary located in North Hollywood, California; the
Hartley & Hartley landfill site located at Kawkawlin, Michigan; and
the Stringfellow Superfund Site located at Riverside County, California.
In addition to the environmental sites and proceedings listed above,
the Company is and has been a party or PRP at other sites and involved
in other proceedings from time to time. In the last three fiscal
years, the Company has paid approximately $6.3 million in the aggregate
(excluding amounts paid in connection with the Stamina Mills action
disclosed above) in connection with its various environmental sites.
The majority of such costs have been incurred in connection with the
Elmira, California and North Hollywood, California sites.
In estimating the total future 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. The Company
records its best estimate when it believes it is probable that an
environmental liability has been incurred and the amount of loss can be
reasonably estimated. The Company also considers estimates of certain
reasonably possible environmental liabilities in determining the
aggregate amount of environmental reserves. As of January 28, 1995,
the Company has established reserves of approximately $31.7 million for
the estimated future
10
<PAGE>
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 seeking insurance coverage for a portion of the
defense costs and liability it has incurred and may incur in
connection with the environmental proceedings described above.
Coverage issues have not been resolved. There can be no assurance that
any coverage will be provided.
11
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
(Pursuant to Instruction G(3) of the General Instructions to Form
10-K, the following information is included herein as an unnumbered
item in lieu of being included in the Company's definitive Proxy
Statement).
The following is a list of the names and ages (as of April 28, 1995) of
all the executive officers of the Company and a description of all
positions and offices with the Company held by each such person and
each such person's principal occupations and employment during the
past five years. All executive officers hold office at the pleasure
of the Company's Board of Directors.
Name Age Position
David A. Stockman 48 Co-Chairman of the Board
Bruce Wasserstein 47 Co-Chairman of the Board
Randall J. Weisenburger 36 Vice Chairman
John P. McNicholas 32 Vice Chairman
Thomas E. Hannah 56 Chief Executive Officer
William J. Brucchieri 52 President of Imperial Wallcoverings
John D. Moose 58 President of Automotive Bodycloth
Division
Harry F. Schoen III 59 President of Mastercraft Division
Elizabeth R. Philipp 38 Executive Vice President, General
Counsel and Secretary
J. Michael Stepp 51 Executive Vice President and Chief
Financial Officer
David A. Stockman has been Co-Chairman of the Board of the Company
since July 1993. Mr. Stockman has been a General Partner of The
Blackstone Group Holdings L.P. (the "Blackstone Group") since 1988.
Mr. Stockman is also a director of Edward J. DeBartolo Corporation.
Bruce Wasserstein has been Co-Chairman of the Board of the Company
since June 1992. Mr. Wasserstein has been Chairman and Chief
Executive Officer of Wasserstein Perella Management Partners, Inc.
("WP Management") since June 1992 and Chief Executive Officer and
Chairman or President, Wasserstein Perella Group, Inc. ("WP Group")
since 1988. Mr. Wasserstein is Chairman of the Board of Maybelline,
Inc.
12
<PAGE>
Randall J. Weisenburger has been a director of the Company since
August 1989 and Vice Chairman of the Company since April 1994. Mr.
Weisenburger was Deputy Chairman of the Company from July 1992 to
April 1994 and Vice President from August 1989 to July 1992. Mr.
Weisenburger has been Managing Director of Wasserstein Perella & Co.,
Inc. ("WP & Co.") since December 1993. Mr. Weisenburger was a Director
of WP & Co. from December 1992 to December 1993 and a Vice President
of WP & Co. from December 1989 to December 1992. Mr. Weisenburger is
also Vice Chairman of the Board of Maybelline, Inc. and Chairman of
the Yardley Lentheric Group.
John P. McNicholas has been Vice Chairman of the Company since
April 1994. Mr. McNicholas was Deputy Chairman of the Company from
July 1992 to April 1994. Mr. McNicholas has been Vice President of the
Blackstone Group since January 1992 and was an Associate of the
Blackstone Group from November 1990 to December 1991 and an Associate,
Merchant Banking Group - Merrill Lynch Capital Markets from August 1989 to
November 1990.
Thomas E. Hannah, has been a director of the Company and Chief
Executive Officer of the Company since July 1994. Mr. Hannah was
President and Chief Executive Officer of Collins & Aikman Textile and
Wallcoverings Group, a division of a wholly owned subsidiary of the
Company, from November 1991 until July 1994 and was named an executive
officer of the Company for purposes hereof in April 1993. Mr.
Hannah was President and Chief Executive Officer of the Collins &
Aikman Textile Group from February 1989 to November 1991 and President
of Milliken & Company's Finished Apparel Division prior to that.
William J. Brucchieri has been President of Imperial
Wallcoverings since February 1993 and was named an executive officer of
the Company for purposes hereof in April 1994. Mr. Brucchieri was
Executive Vice President of Imperial from March 1992 to January 1993
and Executive Vice President of the Mastercraft division from January
1990 to February 1992. Mr. Brucchieri was 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 has been President of the Automotive Bodycloth
division since October 1994 and was President of the North American Auto
Group from June 1989 until October 1994. Mr. Moose was named an
executive officer of the Company for purposes hereof in April 1994. Mr.
Moose joined a wholly owned subsidiary of the Company in 1960.
Harry F. Schoen III has been President of the Mastercraft division
since January 1993 and was named an executive officer of the Company for
purposes hereof in April 1994. Mr. Schoen was Executive Vice
President and Chief Operating Officer of the Mastercraft division
from April 1992 to December 1992. Mr. Schoen was General Manager of
Milliken & Company's Greige Fine Goods Group prior to that.
Elizabeth R. Philipp has been Executive Vice President, General
Counsel and Secretary of the Company since April 1994. Ms. Philipp
was Vice President, General Counsel and Secretary of the Company
from April 1993 to April 1994 and Vice President and General Counsel
from September 1990 to April 1993. Prior to that, Ms. Philipp was
associated with the law firm of Cravath, Swaine and Moore.
J. Michael Stepp has been Executive Vice President and Chief
Financial Officer since April 1995. Mr. Stepp was Executive Vice
President, Chief Financial Officer of Purolator Products Company from
December 1992 to March 1995. Prior to that, Mr. Stepp was President of
American Corporate Finance Group, Inc.
13
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock has been traded on the New York Stock
Exchange under the symbol "CKC" since July 13, 1994. At April 26, 1995,
there were approximately 125 holders of record. The following table
lists the high and low sales prices for the common stock for the full
quarterly periods since trading commenced.
Fiscal 1994
High Low
Third Quarter 10-7/8 8-5/8
Fourth Quarter 9-1/4 7-7/8
No dividend or other distribution with respect to the Common Stock
has been paid by the Company since its incorporation in 1988. Any
payment of future dividends and the amounts thereof will be dependent
upon the Company's earnings, financial requirements and other factors
deemed relevant by the Company's Board of Directors. The Company
currently does not intend to pay any cash dividends in the foreseeable
future; rather, the Company intends to retain earnings to provide for
the operation and expansion of its business. Certain restrictive
covenants contained in the agreement governing the Company's credit
facilities limit the Company's ability to make dividend and other
payments. See Management's Discussion and Analysis of Financial
Condition and Results of Operations - Liquidity and Capital Resources
on pages 22-23 of the Company's 1994 Annual Report to Stockholders
incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The information required by this Item is incorporated by reference
to page 16 of the Company's 1994 Annual Report to Stockholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The information required by this Item is incorporated by
reference to pages 17 through 26 of the Company's 1994 Annual Report
to Stockholders.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is incorporated by
reference to pages 27 through 54 of the Company's 1994 Annual Report
to Stockholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
14
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 401 of Regulation S-K regarding
executive officers is set forth in Part I hereof under the caption
"Executive Officers of the Registrant" and the information required by
Item 401 of Regulation S-K regarding directors is incorporated herein by
reference to that portion of the Registrant's definitive Proxy
Statement to be used in connection with its 1995 Annual Meeting of
Stockholders, which will be filed in final form with the Commission
not later than 120 days after January 28, 1995 (the "Proxy Statement"),
captioned "Election of Directors--Information as to Nominees and
Other Directors". Disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained,
to the best of the Company's knowledge, in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by
reference to that portion of the Proxy Statement captioned "Executive
Compensation".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by
reference to those portions of the Proxy Statement captioned "Voting
Securities and Principal Stockholders" and "Election of
Directors--Information as to Nominees and Other Directors".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by
reference to that portion of the Proxy Statement captioned
"Compensation Committee Interlocks and Insider Participation".
15
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) Financial Statements:
The following Consolidated Financial Statements of Collins & Aikman
Corporation and Report of Independent Public Accountants are
incorporated by reference to pages 27 through 54 of the Registrant's
1994 Annual Report to Stockholders:
Report of Independent Public Accountants
Consolidated Statements of Operations for the fiscal years ended
January 28, 1995, January 29, 1994 and January 30, 1993
Consolidated Balance Sheets at January 28, 1995 and January 29, 1994
Consolidated Statements of Cash Flows for the fiscal years ended
January 28, 1995, January 29, 1994 and January 30, 1993
Consolidated Statements of Common Stockholders' Deficit for the fiscal
years ended January 28, 1995, January 29, 1994 and January 30, 1993
Notes to Consolidated Financial Statements
(a) (2) Financial Schedules:
The following financial statement schedules of Collins & Aikman
Corporation for the fiscal years ended January 28, 1995, January 29,
1994 and January 30, 1993 are filed as part of this Report and should
be read in conjunction with the Consolidated Financial Statements of
Collins & Aikman Corporation.
Page
Number
Report of Independent Public Accountants on Schedules . . . . . . . . S-1
Schedule I-Condensed Financial Information of the Registrant . . . . S-2
Schedule II-Valuation and Qualifying Accounts . . . . . . . . . . . S-5
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are
omitted because they are not required, are inapplicable, or the
information is included in the Consolidated Financial Statements or
Notes thereto.
(a) (3) Exhibits:
Please note that in the following description of exhibits, the
title of any document entered into, or filing made, prior to July 7,
1994 reflects the name of the entity a party thereto or filing, as
the case may be, at such time. Accordingly, documents and filings
described below may refer to Collins & Aikman Holdings Corporation,
Collins & Aikman Group, Inc. or Wickes Companies, Inc., if such
documents and filings were made prior to July 7, 1994.
16
<PAGE>
Exhibit
Number Description
3.1- Restated Certificate of Incorporation of Collins & Aikman
Corporation is hereby incorporated by reference to Exhibit
4.1 of Collins & Aikman Corporation's Report on Form 10-Q
for the fiscal quarter ended July 30, 1994.
3.2- By-Laws of Collins & Aikman Corporation, as amended,
are hereby incorporated by reference to Exhibit 4.2 of Collins
& Aikman Corporation's Report on Form 10-Q for the fiscal
quarter ended July 30, 1994.
4.1- Specimen Stock Certificate for the Common Stock is hereby
incorporated by reference to Exhibit 4.3 of Amendment No. 3
to Collins & Aikman Holdings Corporation's Registration
Statement on Form S-2 (Registration No. 33- 53179) filed
June 21, 1994.
4.2- Indenture dated as of May 1, 1985, pursuant to which 11
3/8% Usable Subordinated Debentures due 1997 of Collins &
Aikman Products Co. (the successor by merger to Collins &
Aikman Group, Inc. and Wickes Companies, Inc.) were issued is
hereby incorporated by reference to Exhibit 4(f) of Wickes
Companies, Inc.'s Current Report on Form 8-K dated May 21,
1985 (SEC File No. 1-6761).
4.3- Credit Agreement dated as of June 22, 1994 between
Collins & Aikman Products Co. (formerly Collins & Aikman
Corporation) as Borrower, WCA Canada Inc., as Canadian
Borrower, the Company, as Guarantor, the lenders named
therein, Continental Bank, N.A., and NationsBank, N.A. as
Managing Agents, and Chemical Bank as Administrative Agent is
hereby incorporated by reference to Exhibit 4.5 of Collins &
Aikman Corporation's Report on Form 10-Q for the fiscal
quarter ended July 30, 1994.
4.4- First Amendment dated as of January 30, 1995 to the Credit
Agreement dated as of June 22, 1994 among Collins & Aikman
Products Co., WCA Canada Inc., Collins & Aikman Corporation,
the financial institutions party thereto and Chemical Bank, as
administrative agent.
Collins & Aikman Corporation agrees to furnish to the
Commission upon request in accordance with Item
601(b)(4)(iii)(A) of Regulation S-K copies of instruments
defining the rights of holders of long-term debt of Collins &
Aikman Corporation or any of its subsidiaries, which debt
does not exceed 10% of the total assets of Collins & Aikman
Corporation and its subsidiaries on a consolidated basis.
10.1- Amended and Restated Stockholders Agreement dated as of
June 29, 1994 among the Company, Collins & Aikman Group,
Inc., Blackstone Capital Partners L.P. and Wasserstein
Perella Partners, L.P.
10.2- Employment Agreement dated as of July 18, 1990 between Wickes
Companies, Inc. and an executive officer is hereby
incorporated by reference to Exhibit 10.3 of Wickes
Companies, Inc.'s Report on Form 10-K for the fiscal year
ended January 26, 1991.*
* Management contract or compensatory plan or arrangement required to
be filed as an exhibit to this form pursuant to Item 14 (c) of this
report.
17
<PAGE>
Exhibit
Number Description
10.3 - Letter Agreement dated as of May 16, 1991 and
Employment Agreement dated as of July 22, 1992 between
Collins & Aikman Corporation and an executive officer is
hereby incorporated by reference to Exhibit 10.7 of
Collins & Aikman Holdings Corporation's Report on Form
10-K for the fiscal year ended January 30, 1993.*
10.4 - First Amendment to Employment Agreement dated as of
February 24, 1994 between Collins & Aikman Corporation
and an executive officer is hereby incorporated by
reference to Exhibit 10.7 of Collins & Aikman Holdings
Corporation's Registration Statement on Form S-2
(Registration No. 33- 53179) filed April 19, 1994.*
10.5 - Letter Agreement dated as of May 16, 1991 between
Collins & Aikman Corporation and an executive officer
is hereby incorporated by reference to Exhibit 10.14 of
Collins & Aikman Holdings Corporation's Registration
Statement on Form S-2 (Registration No. 33-53179) filed
April 19, 1994.*
10.6 - Employment Agreement dated as of March 23, 1992 between
Collins & Aikman Group, Inc. and a former executive
officer is hereby incorporated by reference to
Exhibit 10.6 of Collins & Aikman Holdings
Corporation's Report on Form 10-K for the fiscal year
ended January 30, 1993.*
10.7 - First Amendment dated as of April 4, 1994 to Agreement
dated as of March 23, 1992 between Collins & Aikman
Group, Inc. and a former executive officer is hereby
incorporated by reference to Exhibit 10.14 of Collins &
Aikman Holdings Corporation's Report on Form 10-K for
the fiscal year ended January 29, 1994.*
10.8 - Lease, executed as of the 1st day of June 1987, between
Dura Corporation and Dura Acquisition Corp. is hereby
incorporated by reference to Exhibit 10.24 of
Amendment No.5 to Collins & Aikman Holdings
Corporation's Registration Statement on Form S-2
(Registration No. 33-53179) filed July 6, 1994.
10.9 - Agreement dated as of October 17, 1994 among Collins &
Aikman Products Co. and a former executive officer is
hereby incorporated by reference to Exhibit 10.29 of
Collins & Aikman Corporation's Report on Form 10-Q for
the fiscal quarter ended October 29, 1994.*
10.10 - The Wickes Equity Share Plan is hereby incorporated
by reference to Exhibit 10.11 of Collins & Aikman
Holdings Corporation's Report on Form 10-K for the
fiscal year ended January 30, 1993.*
10.11 - Collins & Aikman Corporation 1994 Executive Incentive
Compensation Plan is hereby incorporated by reference to
Exhibit 10.22 of Amendment No. 4 to Collins & Aikman
Holdings Corporation's Registration Statement on Form S-2
(Registration No. 33-53179) filed June 27, 1994.*
10.12 - Collins & Aikman Corporation Supplemental Retirement
Income Plan is hereby incorporated by reference to
Exhibit 10.23 of Amendment No. 5 to Collins & Aikman
Holdings Corporation's Registration Statement on
Form S-2 (Registration No. 33-53179) filed July 6,
1994.*
* Management contract or compensatory plan or arrangement required
to be filed as an exhibit to this form pursuant to Item 14 (c) of
this report.
18
<PAGE>
Exhibit
Number Description
10.13 - 1993 Employee Stock Option Plan is hereby incorporated
by reference to Exhibit 10.12 of the Registration
Statement on Form S-2 of Collins & Aikman Holdings
Corporation (File No. 33-53179) filed April 19, 1994.*
10.14 - 1994 Employee Stock Option Plan is hereby incorporated
by reference to Exhibit 10.13 of the Registration
Statement on Form S-2 of Collins & Aikman Holdings
Corporation (File No. 33-53179) filed April 19, 1994.*
10.15 - 1994 Directors Stock Option Plan.*
10.16 - 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.
10.17 - Warrant Agreement dated as of January 28, 1994 by and
between Collins & Aikman Group, Inc. and Legwear
Acquisition Corporation is hereby incorporated by
reference to Exhibit 10.20 of Collins & Aikman Holdings
Corporation's Report on Form 10-K for the fiscal year
ended January 29, 1994.
10.18 - Amended and Restated Receivables Sale Agreement dated as
of March 30, 1995 among Collins & Aikman Products Co.,
Ack-Ti-Lining, Inc., WCA Canada Inc., Imperial
Wallcoverings, Inc., The Akro Corporation, Dura
Convertible Systems Inc., each of the other subsidiaries
of Collins & Aikman Products Co. from time to time
parties thereto and Carcorp, Inc.
10.19 - Servicing Agreement, dated as of March 30, 1995,
among Carcorp, Inc., Collins & Aikman Products Co.,
as Master Servicer, each of the subsidiaries of
Collins & Aikman Products Co. from time to time
parties thereto and Chemical Bank, as Trustee.
10.20 - Pooling Agreement, dated as of March 30, 1995, among
Carcorp, Inc., Collins & Aikman Products Co., as
Master Servicer and Chemical Bank, as Trustee.
10.21 - Series 1995-1 Supplement, dated as of March 30, 1995,
among Carcorp, Inc., Collins & Aikman Products Co., as
Master Servicer and Chemical Bank, as Trustee.
10.22 - Series 1995-2 Supplement, dated as of March 30, 1995,
among Carcorp, Inc., Collins & Aikman Products Co., as
Master Servicer, the Initial Purchasers parties
thereto, Societe Generale, as Agent for the
Purchasers and Chemical Bank, as Trustee.
10.23 - Master Equipment Lease Agreement dated as of September
30, 1994, between NationsBanc Leasing Corporation of
North Carolina and Collins & Aikman Products Co. Is
hereby incorporated by reference to Exhibit 10.27 of
Collins & Aikman Corporation's Report on Form 10-Q for
the fiscal quarter ended October 29, 1994.
* Management contract or compensatory plan or arrangement required
to be filed as an exhibit to this form pursuant to Item 14 (c) of
this report.
19
<PAGE>
Exhibit
Number Description
10.24 - Employment Agreement dated as of April 6, 1995 between
Collins & Aikman Products Co. and an executive officer.*
10.25 - Excess Benefit Plan of Collins & Aikman Corporation.*
11 - Computation of Earnings Per Share.
13 - Pages 16-54 of Collins and Aikman Corporation s 1994
Annual Report to Stockholders.
21 - List of subsidiaries of Collins & Aikman Corporation.
23 - Consent of Arthur Andersen LLP.
27 - Financial Data Schedule.
99 - Voting Agreement between Blackstone Capital Partners
L.P. and Wasserstein Perella Partners, L.P. is hereby
incorporated by reference to Exhibit 99 of Amendment
No.4 to Collins & Aikman Holdings Corporation's
Registration Statement on Form S-2 (Registration No.
33-53179) filed June 27, 1994.
* Management contract or compensatory plan or arrangement required
to be filed as an exhibit to this form pursuant to Item 14 (c) of
this report.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the last quarter of the
fiscal year for which this report on Form 10-K was filed.
20
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized, on the 28th day of April, 1995.
COLLINS & AIKMAN CORPORATION
By: /s/ David A. Stockman By: /s/ Bruce Wasserstein
David A. Stockman Bruce Wasserstein
Co-Chairman of the Board of Directors Co-Chairman of the Board of Directors
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
Signature Title Date
/s/ David A. Stockman Co-Chairman of the April 28, 1995
David A. Stockman Board of Directors
/s/ Bruce Wasserstein Co-Chairman of the April 28, 1995
Bruce Wasserstein Board of Directors
/s/ Thomas E. Hannah Director and Chief Executive April 28, 1995
Thomas E. Hannah Officer (Principal Executive
Officer)
/s/ Randall J. Weisenburger Vice Chairman and Director April 28, 1995
Randall J. Weisenburger
/s/ J. Michael Stepp Executive Vice President and April 28, 1995
J. Michael Stepp Chief Financial Officer
(Principal Financial Officer)
/s/ Anthony Hardwick Vice President and Controller April 28, 1995
Anthony Hardwick (Principal Accounting Officer)
/s/ Robert C. Clark Director April 28, 1995
Robert C. Clark
/s/ James J. Mossman Director April 28, 1995
James J. Mossman
/s/ Stephen A. Schwarzman Director April 28, 1995
Stephen A. Schwarzman
/s/ W. Townsend Ziebold, Jr. Director April 28, 1995
W. Townsend Ziebold, Jr.
21
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To Collins & Aikman Corporation:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements included in Collins &
Aikman Corporation's annual report to stockholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated
March 23, 1995, except with respect to the refinancing of the
receivables facility discussed in Note 23 to the consolidated
financial statements, as to which the date is March 31, 1995. Our
audits were made for the purpose of forming an opinion on those
statements taken as a whole. The schedules listed in Item 14 of this
Form 10-K are the responsibility of the Company's management and are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial
statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements and,
in our opinion, fairly state in all material respects the financial
data required to be set forth therein in relation to the basic
financial statements taken as a whole.
ANDERSEN ARTHUR LLP
Charlotte, North Carolina,
March 23, 1995.
S-1
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Condensed Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
January 28, January 29,
ASSETS 1995 1994
<S> <C> <C>
Current Assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . $ 875 $ 3,010
Total current assets . . . . . . . . . . . . . . . . 875 3,010
Other assets . . . . . . . . . . . . . . . . . . . . . 18 1,300
$ 893 $ 4,310
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities:
Accounts payable and accrued expenses . . . . . . . $ - $ 130
Other current liabilities . . . . . . . . . . . . . - 5,000
Total current liabilities . . . . . . . . . . . . . - 5,130
Long-term debt . . . . . . . . . . . . . . . . . . . . - 191,861
Share of accumulated losses in excess ofinvestments in
subsidiaries. . . . . . . . . . . . . . . . . . . . . 410,933 380,772
Other noncurrent liabilities . . . . . . . . . . . . . 2,582 6,399
Commitments and contingencies (Note 1) . . . . . . . .
Redeemable preferred stock . . . . . . . . . . . . . . - 122,368
Common stock . . . . . . . . . . . . . . . . . . . . . 705 350
Other stockholder's equity . . . . . . . . . . . . . . (413,327) (702,570)
Total stockholder's equity . . . . . . . . . . . . . (412,622) (702,220)
$ 893 $ 4,310
</TABLE>
S-2
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Condensed Statements of Operations
(in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
January 28, January 29, January 30,
1995 1994 1993
<S> <C> <C> <C>
Other expenses . . . . . . . . . . . . . . . . $ (349) $ (71) $ (651)
Interest expense . . . . . . . . . . . . . . . (12,549) (25,079) (22,203)
Loss from operations before income taxes and
equity in loss of subsidiaries . . . . . . . (12,898) (25,150) (22,854)
Income tax benefit . . . . . . . . . . . . . . - 468 1,432
Equity in loss of subsidiaries . . . . . . . . (17,884) (252,982) (242,236)
Net loss . . . . . . . . . . . . . . . . . . . $ (30,782) $ (277,664) $(263,658)
</TABLE>
S-3
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
Condensed Statements of Cash Flows
(in thousands)
<TABLE>
<CAPTION>
Fiscal Year Ended
January 28, January 29, January 30,
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net cash provided by (used in) operating
activities . . . . . . . . . . . . . . . . . $ (405) $ (537) $ 1,535
INVESTING ACTIVITIES
Investment in subsidiary . . . . . . . . . . . (52,351) - -
Other, net . . . . . . . . . . . . . . . . . . 1,309 - (55)
Net cash used in investing activities . . . . . (51,042) - (55)
FINANCING ACTIVITIES
Issuance of common stock . . . . . . . . . . . 232,436 - -
Redemption of preferred stock . . . . . . . . . (173,367) - -
Repayment of long-term debt . . . . . . . . . . (9,757) - -
Net cash provided by in financing activities . 49,312 - -
Net increase (decrease) in cash . . . . . . . . (2,135) (537) 1,480
Cash and cash equivalents at beginning of year 3,010 3,547 2,067
Cash and cash equivalents at end of year . . . $875 $ 3,010 $ 3,547
</TABLE>
Notes to Condensed Financial Statements
1. Presentation:
These condensed financial statements have been prepared pursuant
to the rules and regulations of the Securities and Exchange
Commission. Certain information and notedisclosures normally
included in annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted
pursuant to those rules and regulations, although the Company
believes that the disclosures made are adequate to make the
information presented not misleading. For disclosures regarding
redeemable preferred stock and commitments and contingencies, see
Notes 15 and 21, respectively, to Consolidated Financial Statements
incorporated by reference to pages 27 through 54 of the Registrant's
1994 Annual Report to Stockholders.
2. Long-Term Debt:
Long-term debt as of January 29, 1994 consisted of Subordinated PIK
Bridge Notes. For additional disclosures regarding long-term debt,
see Note 9 to Consolidated Financial Statements incorporated by
reference to pages 27 through 54 of the Registrant's 1994 Annual
Report to Stockholders
3. See Notes to Consolidated Financial Statements for additional
disclosures.
S-4
<PAGE>
<TABLE>
<CAPTION>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS (a)
For the Fiscal Years Ended January 28, 1995, January 29, 1994, and January 30, 1993
(in thousands)
Charge
Balance at to Costs Charged Balance at
Beginning and to Other End of
Description of Year Expenses Accounts Deductions Year
<S> <C> <C> <C> <C> <C>
Fiscal Year Ended
January 28, 1995
Allowance for doubtful
accounts . . . . . . . $ 7,071 $ 1,132 $115(b) $ (1,918) (c) $ 6,400
Fiscal Year Ended
January 29, 1994
Allowance for doubtful
accounts . . . . . . . $ 6,748 $ 2,521 $720(b) $ (2,918) (c) $ 7,071
Fiscal Year Ended
January 30, 1993
Allowance for doubtful
accounts . . . . . . . $ 6,401 $ 3,700 $765(b) $ (4,118) (c) $ 6,748
</TABLE>
(a) The fiscal year ended January 30, 1993 has been restated to
exclude amounts related to discontinued operations.
(b) Reclassification and collection of accounts previously written off.
(c) Reclassifications and uncollectible amounts written off.
S-5
FIRST AMENDMENT dated as of January 30,
1995 (this "Amendment") to the CREDIT
AGREEMENT dated as of June 22, 1994 (the
"Credit Agreement") 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 party thereto (the "Lenders"),
and CHEMICAL BANK, as administrative agent
(the "Administrative Agent").
A. The Borrower, the Canadian Borrower, Holdings,
the Lenders and the Administrative Agent desire to amend the
Credit Agreement in certain respects as hereinafter set
forth.
B. Capitalized terms used but not defined herein
shall have the meanings assigned to them in the Credit
Agreement.
Accordingly, the Borrower, the Canadian Borrower,
Holdings, the Lenders and the Administrative Agent hereby
agree as follows:
SECTION 1. Amendment of Credit Agreement. The
Credit Agreement is hereby amended, effective as of the
Effective Date (as hereinafter defined), as follows:
(a) Paragraph (d) of Section 6.01 is amended to
read in its entirety as follows:
"(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, (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 and
(iv) any Restricted Subsidiaries other than Domestic
Restricted Subsidiaries to the Borrower or to any other
Restricted Subsidiaries in an aggregate principal
<PAGE>
amount not at any time in excess of $10,000,000 and
evidenced by one or more Intercompany Notes pledged to
the Collateral Agent under the Pledge Agreement if the
outstanding amount of such Indebtedness exceeds
$5,000,000 in the aggregate; provided that no
Indebtedness may be incurred under this paragraph (d)
by any Domestic Restricted Subsidiary of the Borrower
that is not a Guarantor."
(b) Paragraph (e) of Section 6.01 is amended by
inserting the words "(or any other Restricted Subsidiary in
the case of Purchase Money Indebtedness incurred not in
excess of $10,000,000 in the aggregate at any time
outstanding)" immediately following the words "incurred by
the Borrower" occurring in such paragraph.
(c) Paragraph (q) of Section 6.01 is amended by
inserting the words "or any other Restricted Subsidiary"
immediately following the words "Indebtedness of the
Borrower" occurring in such paragraph.
SECTION 2. Effectiveness. This Amendment will
become effective on the date (the "Effective Date") on which
the following conditions have been satisfied: (a) the
Administrative Agent shall have received counterparts of
this Amendment which, when taken together, bear the
signatures of the Borrower, the Canadian Borrower, Holdings,
the Administrative Agent and the Required Lenders, (b) on
and as of the Effective Date and after giving effect to this
Amendment, no Default or Event of Default shall have
occurred and be continuing, (c) the representations and
warranties made by the Company in the Credit Agreement shall
be true and correct in all material respects on and as of
the Effective Date as if made on such date, except where
such representations and warranties expressly relate to an
earlier date in which case such representations and
warranties shall be true and correct in all material
respects as of such earlier date, (d) the Administrative
Agent shall have received a certificate of a Responsible
Officer of the Borrower, dated the Effective Date,
certifying the matters referred to in clauses (b) and (c)
above, and (e) 65% of the outstanding and capital stock of
Collins & Aikman Products GmbH shall have been pledged to
Collateral Agent as collateral security for the Obligations
and all steps necessary to perfect the lien of such pledge
shall have been taken.
<PAGE>
SECTION 3. Applicable Law. This Amendment shall
be governed by and construed in accordance with the laws of
the State of New York.
SECTION 4. Counterparts. This Amendment 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 instrument.
SECTION 5. Agreement. Except as expressly
amended hereby, the Agreement shall continue in full force
and effect in accordance with the provisions thereof on the
date hereof.
SECTION 6. Expenses. The Borrower shall pay all
reasonable out-of-pocket expenses incurred by the
Administrative Agent in connection with the preparation of
this Amendment, including, but not limited to, the
reasonable fees and disbursements of counsel for the
Administrative Agent.
SECTION 7. Headings. The headings of this
Amendment are for the purposes of reference only and shall
not limit or otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the Borrower, the Canadian
Borrower, Holdings, the Lenders signatory hereto and the
Administrative Agent have caused this Amendment to be duly
executed by their duly authorized officers, all as of the
dates first above written.
COLLINS & AIKMAN PRODUCTS CO.,
by
Anthony Hardwick
Name: Anthony Hardwick
Title:Vice President and Controller
COLLINS & AIKMAN CORPORATION,
by
Anthony Hardwick
Name: Anthony Hardwick
Title:Vice President and Controller
<PAGE>
WCA CANADA INC.,
by
Ronald T. Lindsay
Name:Ronald T. Lindsay
Title:Vice President
CHEMICAL BANK, as a Lender and as
Administrative Agent,
by
Suzanne Kjorlien
Name: Suzanne Kjorlien
Title:Vice President
BANK OF AMERICA ILLINOIS,
by
Name:
Title:
NATIONSBANK, N.A.,
by
J. Timothy Martin
Name: J. Timothy Martin
Title: Senior Vice President
BANK OF AMERICA NATIONAL TRUST
& SAVINGS ASSOCIATION,
by
Name:
Title:
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH,
by
Frederick S. Haddad
Name: Frederick S. Haddad
Title: Authorized Signature
<PAGE>
THE INDUSTRIAL BANK OF JAPAN,
LTD.,
by
Junri Oda
Name: Junri Oda
Title: Senior Vice President
and Senior Manager
THE LONG-TERM CREDIT BANK OF
JAPAN, LTD.,
by
Mitsuo Matsunaga
Name: Mitsuo Matsunaga
Title: Vice President
THE TORONTO-DOMINION BANK,
by
Neva Nesbitt
Name: Neva Nesbitt
Title: Manager Credit
Administration
THE FIRST NATIONAL BANK OF
BOSTON,
by
William C. Purington
Name: William C. Purington
Title: Vice President
BANK OF SCOTLAND,
by
Catherine M. Oniffrey
Name: Catherine M. Oniffrey
Title: Vice President
<PAGE>
THE BANK OF TOKYO TRUST
COMPANY,
by
Name:
Title:
BANQUE PARIBAS,
by
Name:
Title:
BRANCH BANKING AND TRUST
COMPANY,
by
Thatcher L. Townsend
Name: Thatcher L. Townsend
Title: Vice President
CANADIAN IMPERIAL BANK OF
COMMERCE,
by
Charles J. Klenk
Name: Charles J. Klenk
Title: Agent
COMPAGNIE FINANCIERE DE CIC ET
DE L'UNION EUROPEENNE,
by
Sean Mounier Marcus Edward
Name: Sean Mounier Marcus Edward
Title: Vice President
<PAGE>
THE NIPPON CREDIT BANK, LTD.,
by
Clifford Abramsky
Name: Clifford Abramsky
Title: Vice President and
Manager
SOCIETE GENERALE,
by
Ralph Saheb
Name: Ralph Saheb
Title: Vice President
SOCIETY NATIONAL BANK,
by
Lawrence A. Mack
Name: Lawrence A. Mack
Title: Vice President
THE TRAVELERS INSURANCE COMPANY,
by
Craig H. Farnsworth
Name: Craig H. Farnsworth
Title: Investment Officer
THE TRAVELERS INDEMNITY COMPANY,
by
Craig H. Farnsworth
Name: Craig H. Farnsworth
Title: Investment Officer
<PAGE>
WACHOVIA BANK OF NORTH
CAROLINA, N.A.,
by
Joanne M. Starnes
Name: Joanne M. Starnes
Title: Senior Vice President
WELLS FARGO BANK,
by
Name:
Title:
VAN KAMPEN MERRITT PRIME RATE
INCOME TRUST,
by
Jeffrey W. Maillet
Name: Jeffrey W. Maillet
Title: Vice President and
Portfolio Manager
ARAB BANKING CORPORATION,
by
Louise Bilbro
Name: Louise Bilbro
Title: Vice President
BANK OF IRELAND,
by
Roger M. Burns
Name: Roger M. Burns
Title: Vice President
THE BANK OF NEW YORK,
by
Gregory L. Batson
Name: Gregory L. Batson
Title: Assistant Vice President
<PAGE>
CREDITANSTALT CORPORATE
FINANCE, INC.,
by
Robert M. Biringer
Name: Robert M. Biringer
Title: Senior Vice President
by
Daniel D. Lensgraf
Name: Daniel D. Lensgraf
Title: Senior Associate
CRESTAR BANK,
by
T. Patrick Collins
Name: T. Patrick Collins
Title: Vice President
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA,
by
Bert M. Corum
Name: Bert M. Corum
Title: Vice President
FUJI BANK,
by
Name:
Title:
GIROCREDIT BANK,
by
John P. Redding/Dhuan G. Stephens
Name: John P. Redding/Dhuan G. Stephens
Title: Vice President/Vice President
<PAGE>
MIDLAND BANK,
by
Gina Sidorsky
Name: Gina Sidorsky
Title: Director
THE MITSUBISHI TRUST AND
BANKING CORPORATION,
by
Patricia Loret de Mola
Name: Patricia Loret de Mola
Title: Senior Vice President
NATIONAL CITY BANK,
by
Name:
Title:
NBD BANK, N.A.,
by
James D. Heinz
Name: James D. Heinz
Title: Vice President
THE SUMITOMO TRUST & BANKING
CO., LTD., NEW YORK BRANCH
by
Hidehiko Asai
Name: Hidehiko Asai
Title: Deputy General Manager
<PAGE>
UNITED STATES NATIONAL BANK OF
OREGON,
by
Jeffrey W. Jones
Name: Jeffrey W. Jones
Title: Senior Vice President
THE YASUDA TRUST & BANKING
CO., LTD.,
by
Neil T. Chau
Name: Neil T. Chau
Title: First Vice President
CRESCENT/MACH 1 PARTNERS, L.P.,
By its General Partner
CRESCENT MACH 1 G.P. CORPORATION,
By its attorney-in-fact
CRESCENT CAPITAL CORPORATION,
by
Name:
Title:
ALEXANDER HAMILTON LIFE INSURANCE CO.,
by
Name:
Title:
<PAGE>
KEYPORT LIFE INSURANCE CO.,
by
Name:
Title:
SAKURA BANK,
by
Hiroyasu Imamishi
Name: Hiroyasu Imamishi
Title:
RESTRICTED OBLIGATIONS BACKED
BY SENIOR ASSETS,
by
Name:
Title:
<PAGE>
Exhibit 10.1
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
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).
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
having the right to vote for directors under ordinary
circumstances, any person controlling, controlled by or under
common 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
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 or Affiliates of BCP or WPP
immediately following the Recapitalization, (b) any shares
of Common Stock acquired by 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)
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
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
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
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
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
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)
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
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,
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
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-
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 Securities
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
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
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
obligations 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
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
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
necessary 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
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
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.
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
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 nontraditional
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
Company and Group. Nothing contained herein shall preclude
the Boards of Directors of the Company or Group from
increasing director's fees or authorizing directors 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
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.
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
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 David A. Stockman
Name: David A. Stockman
Title: General Partner
WASSERSTEIN PERELLA PARTNERS, L.P.,
by WASSERSTEIN PERELLA MANAGEMENT
PARTNERS, INC., its general
partner,
by W. Townsend Ziebold, Jr.
Name: W. Townsend Ziebold, Jr.
Title: Vice President
COLLINS & AIKMAN CORPORATION,
by Elizabeth Philipp
Name: Elizabeth Philipp
Title: Executive Vice President
COLLINS & AIKMAN GROUP, INC.,
by Elizabeth Philipp
Name: Elizabeth Philipp
Title: Executive Vice President
____________________________________________________________________________
COLLINS & AIKMAN CORPORATION
1994 DIRECTORS STOCK OPTION PLAN
______________________________________________________________________________
As of November 1, 1994
<PAGE>
Table of Contents
Page
I. Purposes of the Plan . . . . . . . . . . . . . . . . . . . . . . . 1
II. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
III. Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . 2
IV. Administration . . . . . . . . . . . . . . . . . . . . . . . . . . 2
A. Duties of the Committee . . . . . . . . . . . . . . . . . . . 2
B. Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . 3
C. Indemnification . . . . . . . . . . . . . . . . . . . . . . . 3
D. Meetings of the Committee . . . . . . . . . . . . . . . . . . 3
E. Determinations . . . . . . . . . . . . . . . . . . . . . . . 3
F. Disinterested Directors . . . . . . . . . . . . . . . . . . . 3
V. Shares; Adjustment Upon Certain Events . . . . . . . . . . . . . . 3
A. Shares to be Delivered; Fractional Shares . . . . . . . . . . 3
B. Number of Shares . . . . . . . . . . . . . . . . . . . . . . 4
C. Adjustments; Recapitalization, etc. . . . . . . . . . . . . . 4
VI. Awards and Terms of Options . . . . . . . . . . . . . . . . . . . . 5
A. Grant . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
B. Date of Grant . . . . . . . . . . . . . . . . . . . . . . . . 5
C. Option Agreement . . . . . . . . . . . . . . . . . . . . . . 5
D. Option Terms . . . . . . . . . . . . . . . . . . . . . . . . 6
E. Expiration. . . . . . . . . . . . . . . . . . . . . . . . . . 6
F. Acceleration of Exercisability . . . . . . . . . . . . . . . 6
VII. Effect of Termination of Directorship . . . . . . . . . . . . . . . 7
A. Death, Disability or Otherwise Ceasing to be a Director . . . 7
B. Cancellation of Options . . . . . . . . . . . . . . . . . . . 7
VIII. Nontransferability of Options . . . . . . . . . . . . . . . . . . . 7
IX. Rights as a Stockholder . . . . . . . . . . . . . . . . . . . . . . 7
X. Termination, Amendment and Modification . . . . . . . . . . . . . . 8
XI. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . 8
XII. General Provisions . . . . . . . . . . . . . . . . . . . . . . . . 9
A. Right to Terminate Directorship . . . . . . . . . . . . . . . 9
B. Trusts, etc. . . . . . . . . . . . . . . . . . . . . . . . . 9
C. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
D. Severability of Provisions . . . . . . . . . . . . . . . . . . 9
i
<PAGE>
Page
E. Payment to Minors, Etc. . . . . . . . . . . . . . . . . . . . . 9
F. Headings and Captions . . . . . . . . . . . . . . . . . . . . 10
G. Controlling Law . . . . . . . . . . . . . . . . . . . . . . . 10
H. Section 16(b) of the Act . . . . . . . . . . . . . . . . . . 10
XIII. Issuance of Stock Certificates;
Legends; Payment of Expenses . . . . . . . . . . . . . . . . . . . 10
A. Stock Certificates . . . . . . . . . . . . . . . . . . . . . 10
B. Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
C. Payment of Expenses . . . . . . . . . . . . . . . . . . . . . 10
XIV. Listing of Shares and Related Matters . . . . . . . . . . . . . . . . 10
XV. Withholding Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 11
Form of Option Agreement Exhibit A
ii
<PAGE>
Collins & Aikman Corporation
1994 Directors Stock Option Plan
I. Purposes of the Plan
The purposes of this 1994 Directors Stock Option Plan (the "Plan") are
to enable Collins & Aikman Corporation (the "Company") to attract,
retain and motivate the directors who are important to the success and
growth of the business of the Company and to create a long-term
mutuality of interest between the directors and the stockholders of
the Company by granting the directors options to purchase Common Stock
(as defined herein). This document shall supersede all other material
describing this Plan, including, but not limited to, prior drafts
hereof and any documents incorporating the terms and provisions of any
such prior drafts.
II. Definitions
In addition to the terms defined elsewhere herein, for purposes of this
Plan, the following terms will have the following meanings when
used herein with initial capital letters:
A. "Act" means the Securities Exchange Act of 1934, as amended,
and all rules and regulations promulgated thereunder.
B. "Board" means the Board of Directors of the Company.
C. "Code" means the Internal Revenue Code of 1986, as amended
(or any successor statute).
D. "Committee" means the Board or a duly appointed committee of
the Board to which the Board has delegated its power and functions hereunder.
E. "Common Stock" means the common stock of the Company, par value
$.01 per share, any Common Stock into which the Common Stock may be
converted and any Common Stock resulting from any reclassification
of the Common Stock.
F. "Company" means Collins & Aikman Corporation, a Delaware
corporation.
G. "Eligible Director" means a director of the Company who is not
an active employee of the Company or any subsidiary and who is not
an officer, director or employee of (i) any entity which, directly or
indirectly, beneficially owns or controls 5% or more of the combined
voting power of the then outstanding voting securities of the Company
(or any subsidiary) entitled to vote generally in the election of
directors or (ii) any entity controlling, controlled by or under
common control (within the meaning of Rule 405 of the Securities
Act) with any such entity.
H. "Fair Market Value" shall mean, for purposes of this Plan,
unless otherwise required by any applicable provision of the Code
or any regulations issued thereunder, as of any date,
<PAGE>
the last sales prices reported for the Common Stock on the applicable
date, (i) as reported by the principal national securities exchange in
the United States on which it is then traded, or (ii) if not traded on
any such national securities exchange, as quoted on an automated quotation
system sponsored by the National Association of Securities Dealers, or
if the sale of the Common Stock shall not have been reported or quoted
on such date, on the first day prior thereto on which the Common Stock
was reported or quoted.
I. "Option" means the right to purchase one Share at a
prescribed purchase price on the terms specified in the Plan.
J. "Participant" means an Eligible Director who is granted
Options under the Plan which Options have not expired.
K. "Person" means any individual or entity, and the heirs,
executors, administrators, legal representatives, successors and
assigns of such Person as the context may require.
L. "Related Person" means (a) any corporation that is defined as a
subsidiary corporation in Section 424(f) of the Code or (b) any
corporation that is defined as a parent corporation in Section 424(e)
of the Code. An entity shall be deemed a Related Person only for such
periods as the requisite ownership relationship is maintained.
M. "Securities Act" means the Securities Act of 1933, as
amended, and all rules and regulations promulgated thereunder.
N. "Share" means a share of Common Stock.
O. "Termination of Directorship" with respect to an individual
means that individual is no longer acting as a director of the Company.
III. Effective Date
The Plan shall become effective as of November 1, 1994 (the
"Effective Date"), subject to its approval by the majority of the Common
Stock (at the time of approval) within one year after the Plan is
adopted by the Board. Grants of Options under the Plan will be made
after the Effective Date of the Plan pursuant to Article VI(B) of this
Plan, provided that, if the Plan is not approved by the majority of the
Common Stock (at the time of approval), all Options which have been
granted pursuant to the terms of the Plan shall be null and void. No
Options may be exercised prior to the approval of the Plan by the
majority of the Common Stock (at the time of approval).
IV. Administration
A. Duties of the Committee. The Plan shall be administered by the
Committee. The Committee shall have full authority to interpret the
Plan and to decide any questions and settle all controversies and
disputes that may arise in connection with the Plan; to establish,
amend and rescind rules for carrying out the Plan; to administer the
Plan, subject to its provisions; to prescribe the form or forms of
instruments evidencing Options and any other instruments required
under the Plan and to change such forms from time to time; and to
make all other determinations and to take all such steps in
connection with the Plan and the Options as the Committee, in its
sole discretion, deems necessary or desirable. The Committee shall not
be bound to any standards of uniformity or similarity of action,
interpretation or conduct in the discharge of its duties
hereunder, regardless of the apparent similarity of
2
<PAGE>
the matters coming before it. Any determination, action or conclusion
of the Committee shall be final, conclusive and binding on all parties.
B. Advisors. The Committee may employ such legal counsel,
consultants and agents as it may deem desirable for the administration
of the Plan, and may rely upon any advice or opinion received from any
such counsel or consultant and any computation received from any such
consultant or agent. Expenses incurred by the Committee in the
engagement of such counsel, consultant or agent shall be paid by the
Company.
C. Indemnification. To the maximum extent permitted by
applicable law, no officer of the Company or member or former member
of the Committee or of the Board shall be liable for any action or
determination made in good faith with respect to the Plan or any Option
granted under it. To the maximum extent permitted by applicable law
and the Restated Certificate of Incorporation or By-Laws of the
Company, each officer and member or former member of the Committee or
of the Board shall be indemnified and held harmless by the Company
against any cost or expense (including reasonable fees of counsel
reasonably acceptable to the Company) or liability (including any sum
paid in settlement of a claim with the approval of the Company), and
advanced amounts necessary to pay the foregoing at the earliest time and
to the fullest extent permitted, arising out of any act or omission to
act in connection with the Plan, except to the extent arising out of
such officer's, member's or former member's own fraud or bad faith.
Such indemnification shall be in addition to any rights of
indemnification the officers, members or former members may have as
directors or officers under applicable law or under the Restated
Certificate of Incorporation or By-Laws of the Company.
D. Meetings of the Committee. The Committee shall adopt such rules
and regulations as it shall deem appropriate concerning the holding of
its meetings and the transaction of its business. All determinations
by the Committee shall be made by the affirmative vote of a majority of
its members. Any such determination may be made at a meeting duly
called and held at which a majority of the members of the Committee
are in attendance in person or through telephonic communication. Any
determination set forth in writing and signed by all the members of the
Committee shall be as fully effective as if it had been made by a
majority vote of the members at a meeting duly called and held.
E. Determinations. Each determination, interpretation or other
action made or taken pursuant to the provisions of this Plan by the
Committee shall be final, conclusive and binding for all purposes and
upon all persons, including, without limitation, the Participants,
the Company, directors, officers and other employees of the
Company, and the respective heirs, executors, administrators,
personal representatives and other successors in interest of each of
the foregoing.
F. Disinterested Directors. Notwithstanding the foregoing, the
Committee may not take any action which would cause any Eligible
Director to cease to be a "disinterested person" for purposes of Rule
16b-3 promulgated under the Act, as then in effect or any successor
provisions ("Rule 16b-3"), with regard to any stock option or other
equity plan of the Company.
V. Shares; Adjustment Upon Certain Events
A. Shares to be Delivered; Fractional Shares. Shares to be
issued under the Plan shall be made available, at the sole discretion
of the Board, either from authorized but unissued Shares or from
issued Shares reacquired by Company and held in treasury. No
fractional Shares will be issued or transferred upon the exercise
of any Option nor will any compensation be paid with regard to
fractional shares.
3
<PAGE>
B. Number of Shares. Subject to adjustment as provided in this
Article V, the maximum aggregate number of Shares that may be issued
under the Plan shall be 600,000. Where Options are for any reason
cancelled, or expire or terminate unexercised, the Shares covered by
such Options shall again be available for the grant of Options,
within the limits provided by the preceding sentence.
C. Adjustments; Recapitalization, etc. The existence of this Plan
and the Options granted hereunder shall not affect in any way the
right or power of the Board or the stockholders of the Company to make
or authorize any adjustment, recapitalization, reorganization or
other change in the Company's capital structure or its business,
any merger or consolidation of the Company, any issue of bonds,
debentures, preferred or prior preference stocks ahead of or
affecting Common Stock, the dissolution or liquidation of the Company
or any sale or transfer of all or part of its assets or business, or
any other corporate act or proceeding, in which case the provisions of
this Article V(C) shall govern outstanding Options:
1. The Shares with respect to which Options may be granted are
Shares of Common Stock as presently constituted, but, if and
whenever the Company shall effect a subdivision, recapitalization
or consolidation of Shares or the payment of a stock dividend on
Shares without receipt of consideration, the aggregate number and
kind of shares of capital stock issuable under this Plan shall be
proportionately adjusted, and each holder of a then outstanding Option
shall have the right to purchase under such Option, in lieu of the
number of Shares as to which the Option was then exercisable
but on the same terms and conditions of exercise set forth in such
Option, the number and kind of shares of capital stock which he or she
would have owned after such sub-division, recapitalization,
consolidation or dividend if immediately prior thereto he had been
the holder of record of the number of Shares as to which such Option
was then exercisable.
2. If the Company merges or consolidates with one or more
corporations and the Company shall be the surviving corporation,
thereafter upon exercise of an Option theretofore granted, the
Participant shall be entitled to purchase under such Option in lieu of
the number of Shares as to which such Option shall then be
exercisable, but on the same terms and conditions of exercise set
forth in such Option, the number and kind of shares of capital stock or
other property to which the Participant would have been entitled
pursuant to the terms of the agreement of merger or consolidation if,
immediately prior to such merger or consolidation, the Participant
had been the holder of record of the number of Shares as to which such
Option was then exercisable.
3. If the Company shall not be the surviving corporation in any
merger or consolidation, or if the Company is to be dissolved or
liquidated, then, unless the surviving corporation assumes the Options
or substitutes new Options which are determined by the Board in
its sole discretion to be substantially similar in nature and
equivalent in terms and value for Options then outstanding, upon the
effective date of such merger, consolidation, liquidation or
dissolution, any unexercised Options shall expire without additional
compensation to the holder thereof; provided, that, the Committee
shall deliver notice to each Participant at least 20 days prior to the
date of consummation of such merger, consolidation, dissolution or
liquidation which would result in the expiration of the Options and
during the period from the date on which such notice of termination is
delivered to the consummation of the merger, consolidation, dissolution
or liquidation, each Participant shall have the right to exercise in
full effective as of such consummation all the Options that are then
outstanding (without regard to limitations on exercise otherwise
contained in the Options other than the requirements of Article III) but
contingent on occurrence of the merger, consolidation, dissolution
or liquidation, and, provided that, if the contemplated transaction does
not take place within a ninety (90) day period after giving such notice
for
4
<PAGE>
any reason whatsoever, the notice, accelerated vesting and exercise
shall be null and void and if and when appropriate new notice shall
be given as aforesaid. Notwithstanding the foregoing, the Options held
by persons subject to Section 16(b) of the Act that would not have vested
under the Plan except pursuant to Article VI(F) prior to the effective
date of such merger, consolidation, liquidation or dissolution shall
not expire on such date but shall expire thirty (30) days after they
would have otherwise vested under the Plan and shall after the effective
date of such merger, consolidation, liquidation or dissolution represent
only the right to receive the number and kind of shares of capital stock
or other property to which the Participant would have been entitled if
immediately prior to the effective date of such merger,
consolidation, liquidation or dissolution the Participant had been the
holder of record of the number of Shares as to which such
Option was then exercisable.
4. If as a result of any adjustment made pursuant to the
preceding paragraphs of this Article V(C), any Participant shall
become entitled upon exercise of an Option to receive any shares of
capital stock other than Common Stock, then the number and kind of
shares of capital stock so receivable thereafter shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Common
Stock set forth in this Article V(C).
5. Except as hereinbefore expressly provided, the issuance by the
Company of shares of stock of any class or securities convertible
into shares of stock of any class, for cash, property, labor or
services, upon direct sale, upon the exercise of rights or warrants to
subscribe therefor, or upon conversion of shares or other securities,
and in any case whether or not for fair value, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number
of Shares subject to Options theretofore granted or the purchase price
per Share.
VI. Awards and Terms of Options
A. Grant. Without further action by the Board or the
stockholders of the Company, each Eligible Director on each Annual
Date of Grant (as hereinafter defined) shall be automatically
granted options to purchase 10,000 shares, subject to the terms of
the Plan, provided that no such Option shall be granted if on the
date of grant the Company has liquidated, dissolved or merged or
consolidated with another entity in such a manner that it is not the
surviving entity (unless the Plan has been assumed by such surviving
entity with regard to future grants).
B. Date of Grant. Annual Grants shall be made initially on the date
on which this Plan is approved by the Board (the "Initial Grant
Date") and on each anniversary of the Effective Date thereafter (the
Initial Grant Date and each anniversary of the Effective Date
thereafter being referred to as an "Annual Date of Grant"); provided
that if such date in any year is a date on which the New York Stock
Exchange is not open for trading, the grant shall be made on the first
day thereafter on which the New York Stock Exchange is open for
trading. Notwithstanding the foregoing, in the event no Fair Market
Value can be determined pursuant to the provisions hereof, no Annual
Grant shall be made for such fiscal year.
C. Option Agreement. Options shall be evidenced by Option
agreements in substantially the form annexed hereto as Exhibit A as
modified from time to time.
5
<PAGE>
D. Option Terms:
1. Exercise Price. The purchase price per share ("Purchase
Price") deliverable upon the exercise of an Option shall be 100%
of the Fair Market Value of such Share as of the date of the
grant of the Option, or the par value of the Share, whichever is
the greater.
2. Period of Exercisability. Except as otherwise provided
herein, each Option granted under this Plan shall be exercisable
on or after the later of (a) six (6) months and one day after
the date of grant or (b) approval of this Plan by the
stockholders in accordance with Article III hereof.
3. Procedure for Exercise. A Participant electing to exercise one
or more Options shall give written notice to the Secretary of
the Company of such election and of the number of Options he
or she has elected to exercise. Shares purchased pursuant to
the exercise of Options shall be paid for at the time of exercise
in cash or by delivery of unencumbered Shares owned by the
Participant for at least six months (or such longer period as
required by applicable accounting standards to avoid a charge to
earnings) or a combination thereof.
E. Expiration. Except as otherwise provided herein, if not
previously exercised each Option shall expire upon the tenth
anniversary of the date of the grant thereof.
F. Acceleration of Exercisability.
All Options granted and not previously exercisable shall become fully
exercisable immediately upon the later of a Change of Control (as
defined herein) or approval of the Plan by the stockholders in
accordance with Article III. Article (V)(C) shall also apply to the
extent, if any, it is applicable. For this purpose, a "Change of
Control" shall be deemed to have occurred upon:
(a) an acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or (14)(d)(1) of the
Act) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Act) of more than 80% of the combined
voting power of the then outstanding voting securities of
Company entitled to vote generally in the election of directors,
including, but not limited to, by merger, consolidation or
similar corporate transaction or by purchase; excluding,
however, the following: (x) any acquisition by the Company, a
Related Person, Wasserstein Perella Partners, L.P., Blackstone
Capital Partners L.P. or an affiliate of any of the
foregoing, or (y) any acquisition by an employee benefit plan
(or related trust) sponsored or maintained by the Company or a
Related Person; or
(b) the approval of the stockholders of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) the
sale or other disposition of more than 80% of the gross assets
of the Company and Related Persons on a consolidated basis
(determined under generally accepted accounting principles
in accordance with prior practice); excluding, however, such a
sale or other disposition to a corporation with respect to which,
following such sale or other disposition, (x) more than 20% of
the combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors will be then beneficially owned,
directly or indirectly, by the individuals and entities who
were the beneficial owners of the outstanding Shares
immediately prior to such sale or other disposition, (y) no
Person (other than the Company, Related Persons, and any
employee benefit plan (or related trust) of the Company or
Related Persons or such corporation and any Person
6
<PAGE>
beneficially owning, immediately prior to such sale or
other disposition, directly or indirectly, 20% or more of the
outstanding Shares) will beneficially own, directly or
indirectly, 20% or more of the combined voting power of the then
outstanding voting securities of such corporation entitled to
vote generally in the election of directors and (z) individuals
who were members of the incumbent board immediately prior to the
sale or other disposition will constitute at least a majority
of the members of the board of directors of such corporation.
VII. Effect of Termination of Directorship
A. Death, Disability or Otherwise Ceasing to be a Director.
Except as otherwise provided herein, upon Termination of
Directorship, on account of disability, death, resignation, failure to
stand for reelection or failure to be reelected or otherwise, all
outstanding Options then exercisable and not exercised by the
Participant prior to such Termination of Directorship shall remain
exercisable by the Participant or, in the case of death, by the
Participant's estate or by the person given authority to exercise such
Options by his or her will or by operation of law, until the expiration
of the Option in accordance with the terms of the Plan and grant.
B. Cancellation of Options. No Options that were not
exercisable during the period such person serves as a director
shall thereafter become exercisable upon a Termination of
Directorship for any reason or no reason whatsoever, and such
options shall terminate and become null and void upon a Termination of
Directorship.
VIII. Nontransferability of Options
Except as provided in the following sentence, no Option shall be
transferable by the Participant otherwise than by will or under
applicable laws of descent and distribution and during the lifetime of
the Participant may be exercised only by the Participant or his or
her guardian or legal representative. An Option shall also be
transferable under a domestic relations order that is a "qualified
domestic relations order", as defined in section 414(p) of the Code,
but may thereafter not be further transferred except as provided in
the prior sentence (with the alternate payee under such order being
substituted for "Participant"). In addition, except as provided
above, no Option shall be assigned, negotiated, pledged or hypothecated
in any way (whether by operation of law or otherwise), and no Option
shall be subject to execution, attachment or similar process. Upon any
attempt to transfer, assign, negotiate, pledge or hypothecate any
Option, or in the event of any levy upon any Option by reason of any
execution, attachment or similar process contrary to the provisions
hereof, such Option shall immediately terminate and become null and
void.
IX. Rights as a Stockholder
A Participant (or a permitted transferee of an Option) shall have no
rights as a stockholder with respect to any Shares covered by
such Participant's Option until such Participant (or permitted
transferee) shall have become the holder of record of such Shares, and
no adjustments shall be made for dividends in cash or other property or
distributions or other rights in respect to any such Shares, except as
otherwise specifically provided in this Plan.
7
<PAGE>
X. Termination, Amendment and Modification
The Plan shall terminate at the close of business on the seventh
anniversary of the Effective Date (the "Termination Date"), unless
terminated sooner as hereinafter provided, and no Option shall be
granted under the Plan on or after that date. The termination of the
Plan shall not terminate any outstanding Options that by their terms
continue beyond the Termination Date. The Committee at any time or from
time to time may amend this Plan to effect (i) amendments necessary or
desirable in order that this Plan and the Options shall conform to all
applicable laws and regulations, and (ii) any other amendments
deemed appropriate, provided that no such amendment may be made if
either the authority to make such amendment or the amendment would
cause the Eligible Directors to cease to be "disinterested persons"
with regard to this Plan or any other stock option or other equity
plan of the Company for purposes of Rule 16b-3 and further provided
that the provisions of the Plan relating to the amount, price and
timing of, and eligibility for, awards shall not be amended more than
once every six (6) months except to comport with changes in the Code
and the Employee Retirement Income Security Act of 1974, as amended,
or the rules thereunder. Notwithstanding the foregoing, the
Committee may not effect any amendment that would require the approval
of the stockholders of the Company under Rule 16b-3 unless such approval
is obtained. In no event, unless no longer required as a condition of
compliance with the requirements of Rule 16b-3, shall the Committee
without the approval of stockholders normally entitled to vote for
the election of directors of the Company:
1. increase the number of Shares available for grants under this Plan;
2. reduce the minimum exercise price at which any option may be
exercised;
3. change the requirements as to eligibility for participation under
this Plan;
4. change the number of Options to be granted or the date on which
such Options are to be granted; or
5. materially increase the benefits accruing to Participants
hereunder.
This Plan may be amended or terminated at any time by the
stockholders of the Company.
This Plan and any Options granted hereunder shall terminate and be void
if this Plan does not receive the approval of the stockholders of
the Company that may be required under Rule 16b-3, no later than the
next annual meeting of stockholders of the Company. Except as otherwise
required by law, no termination, amendment or modification of this
Plan may, without the consent of the Participant or the permitted
transferee of his Option, alter or impair the rights and obligations
arising under any then outstanding Option.
XI. Use of Proceeds
The proceeds of the sale of Shares subject to Options under the Plan
are to be added to the general funds of the Company and used for
its general corporate purposes as the Board shall determine.
8
<PAGE>
XII. General Provisions
A. Right to Terminate Directorship. This Plan shall not impose any
obligations on the Company to retain any Participant as a director
nor shall it impose any obligation on the part of any Participant to
remain as a director of the Company.
B. Trusts, etc. Nothing contained in the Plan and no action taken
pursuant to the Plan (including, without limitation, the grant of any
Option thereunder) shall create or be construed to create a trust of any
kind, or a fiduciary relationship, between the Company and any
Participant or the executor, administrator or other personal
representative or designated beneficiary of such Participant, or any
other persons. Any reserves that may be established by the Company in
connection with the Plan shall continue to be part of the general funds
of the Company, and no individual or entity other than the Company
shall have any interest in such funds until paid to a
Participant. If and to the extent that any Participant or such
Participant's executor, administrator or other personal representative,
as the case may be, acquires a right to receive any payment from the
Company pursuant to the Plan, such right shall be no greater than the
right of an unsecured general creditor of the Company.
C. Notices. Any notice to the Company required by or in
respect of this Plan will be addressed to the Company at 701 McCullough
Drive, Charlotte, North Carolina 28262, Attention: Vice President, Human
Resources, or such other place of business as shall become the
Company's principal executive offices from time to time, or sent to
the Company by facsimile to (704) 548-2081, Attention: Vice President,
Human Resources or to such other facsimile number as the Company
shall notify each Participant. Each Participant shall be
responsible for furnishing the Committee with the current and proper
address for the mailing to such Participant of notices and the
delivery to such Participant of agreements, Shares and payments.
Any such notice to the Participant will, if the Company has received
notice that the Participant is then deceased, be given to the
Participant's personal representative if such representative has
previously informed the Company of his or her status and address (and
has provided such reasonable substantiating information as the Company
may request) by written notice under this Section. Any notice required
by or in respect of this Plan will be deemed to have been duly given
when delivered in person or when dispatched by telegram or, in the case
of notice to the Company, by facsimile as described above, or one
business day after having been dispatched by a nationally recognized
overnight courier service or three business days after having been
mailed by United States registered or certified mail, return
receipt requested, postage prepaid. The Company assumes no
responsibility or obligation to deliver any item mailed to such address
that is returned as undeliverable to the addressee and any further
mailings will be suspended until the Participant furnishes the proper
address.
D. Severability of Provisions. If any provisions of the Plan shall
be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions of the Plan, and the Plan
shall be construed and enforced as if such provisions had not been
included.
E. Payment to Minors, Etc. Any benefit payable to or for the
benefit of a minor, an incompetent person or other person incapable of
receipt thereof shall be deemed paid when paid to such person's
guardian or to the party providing or reasonably appearing to
provide for the care of such person, and such payment shall fully
discharge the Committee, the Company and their employees, agents and
representatives with respect thereto.
9
<PAGE>
F. Headings and Captions. The headings and captions herein are
provided for reference and convenience only. They shall not be
considered part of the Plan and shall not be employed in the
construction of the Plan.
G. Controlling Law. The Plan shall be construed and enforced
according to the laws of the State of Delaware.
H. Section 16(b) of the Act. All elections and transactions under
the Plan by persons subject to Section 16 of the Act involving shares of
Common Stock are intended to comply with all exemptive conditions
under Rule 16b-3. To the extent any provision of the Plan or action
by the Committee fails to so comply, it shall be deemed null and
void. The Committee may establish and adopt written administrative
guidelines, designed to facilitate compliance with Section 16(b) of the
Act, as it may deem necessary or proper for the administration and
operation of the Plan and the transaction of business thereunder.
XIII. Issuance of Stock Certificates;
Legends; Payment of Expenses
A. Stock Certificates. Upon any exercise of an Option and
payment of the exercise price as provided in such Option, a
certificate or certificates for the Shares as to which such Option has
been exercised shall be issued by the Company in the name of the person
or persons exercising such Option and shall be delivered to or upon
the order of such person or persons, subject, however, in the case of
Options exercised pursuant to Section V(C)3 hereof, to the merger,
consolidation, dissolution or liquidation triggering the rights under
that Section.
B. Legends. Certificates for Shares issued upon exercise of an
Option shall bear such legend or legends as the Committee, in its
sole discretion, determines to be necessary or appropriate to prevent
a violation of, or to perfect an exemption from, the registration
requirements of the Securities Act or to implement the provisions of
any agreements between the Company and the Participant with respect to
such Shares.
C. Payment of Expenses. The Company shall pay all issue or
transfer taxes with respect to the issuance or transfer of Shares, as
well as all fees and expenses necessarily incurred by the Company in
connection with such issuance or transfer and with the administration of
the Plan.
XIV. Listing of Shares and Related Matters
If at any time the Board or the Committee shall determine in its sole
discretion that the listing, registration or qualification of the Shares
covered by the Plan upon any national securities exchange or under any
state or federal law, or the consent or approval of any governmental
regulatory body, is necessary or desirable as a condition of, or in
connection with, the grant of Options or the award or sale of Shares
under the Plan, no Option grant shall be effective and no Shares will
be delivered, as the case may be, unless and until such listing,
registration, qualification, consent or approval shall have been
effected or obtained, or otherwise provided for, free of any conditions
not acceptable to the Board.
10
<PAGE>
XV. Withholding Taxes
The Company shall have the right to require, prior to the issuance or
delivery of any shares of Common Stock, payment by the Participant of
any Federal, state or local taxes required by law to be withheld.
11
<PAGE>
Exhibit A
COLLINS & AIKMAN CORPORATION
OPTION AGREEMENT
PURSUANT TO THE
1994 DIRECTORS STOCK OPTION PLAN
[Eligible Director]
Dear:
Preliminary Statement
As a director of Collins & Aikman Corporation (the "Company") on the
Annual Date of Grant and pursuant to the terms of the Collins &
Aikman Corporation 1994 Directors Stock Option Plan, annexed hereto as
Exhibit 1 (the "Plan"), you, as an Eligible Director (as defined in
the Plan), have been automatically granted a nonqualified stock
option (the "Option") to purchase the number of shares of the
Company's common stock, par value $.01 per share (the "Common Stock"),
set forth below.
The terms of the grant are as follows:
1. Tax Matters. No part of the Option granted hereby is
intended to qualify as an "incentive stock option" under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").
2. Grant of Option. Subject in all respects to the Plan and the
terms and conditions set forth herein and therein including,
without limitation, the provisions requiring shareholder approval,
you are hereby granted an Option to purchase from the Company up to
10,000 Shares (as defined in the Plan), at a price per Share of
$_________ (the "Option Price").
3. Vesting. The Option may be exercised by you, in whole or in part,
at any time or from time to time on or after the later of (a) six (6)
months and one (1) day after the date of grant or (b) approval of the
Plan by the stockholders of the Company and prior to the expiration
of the Option as provided herein and in the Plan. Upon the occurrence
of a Change of Control (as defined in the Plan), the Option shall
immediately become exercisable with respect to all Shares subject
thereto, regardless of whether the Option has vested with respect to
such Shares upon the later of such Change of Control and approval of
the Plan by the stockholders of the Company.
4. Termination. Unless terminated as provided below or
otherwise pursuant to the Plan, the Option shall expire on the
tenth anniversary of this grant.
5. Restriction on Transfer of Option. Except as provided in the
Plan with regard to a "qualified domestic relations order", as defined
in Section 414(p) of the Internal Revenue Code, the Option granted
hereby is not transferable otherwise than by will or under the
applicable laws of descent and distribution and during your lifetime
may be exercised only by you or your guardian or legal representative.
In addition, the Option shall not be assigned, negotiated, pledged
or hypothecated in any way (whether by operation of law or otherwise),
and the Option shall not be subject to execution, attachment or
similar process. Upon any attempt to transfer, assign, negotiate,
pledge or hypothecate
<PAGE>
the Option, or in the event of any levy upon the Option by reason of any
execution, attachment or similar process contrary to the provisions hereof,
the Option shall immediately become null and void.
6. Rights as a Shareholder. You shall have no rights as a
shareholder with respect to any Shares covered by the Option until you
shall have become the holder of record of the Shares, and no
adjustments shall be made for dividends in cash or other property,
distributions or other rights in respect of any such Shares, except as
otherwise specifically provided for in the Plan.
7. Provisions of Plan Control. This grant is subject to all the
terms, conditions and provisions of the Plan and to such
rules, regulations and interpretations relating to the Plan as may be
adopted by the Committee and as may be in effect from time to time.
Any capitalized term used but not defined herein shall have the
meaning ascribed to such term in the Plan. The annexed copy of the
Plan is incorporated herein by reference. If and to the extent that
this grant conflicts or is inconsistent with the terms, conditions and
provisions of the Plan, the Plan shall control, and this grant shall be
deemed to be modified accordingly.
8. Notices. Any notice or communication given hereunder shall be in
writing and shall be deemed to have been duly given when delivered in
person or, in the case of notice to the Company, by facsimile to the
facsimile number set forth below, or when dispatched by Telegram, or
one business day after having been dispatched by a nationally
recognized courier service or three business days after having been
mailed by United States registered or certified mail, return receipt
requested, postage prepaid, to the appropriate party at the address
(or, in the case of notice to the Company, facsimile number) set
forth below (or such other address as the party shall from time to time
specify in accordance with Article XII(D) of the Plan.):
If to the Company, to:
Collins & Aikman Corporation
701 McCullough Drive
Charlotte, North Carolina 28262
Attention: Vice President, Human Resources
Facsimile number: (704) 548-2081
If to you, to:
the address indicated on the signature page at the end of
this grant.
Sincerely,
COLLINS & AIKMAN CORPORATION
By:__________________________
Authorized Officer
Accepted:
[PARTICIPANT]
Address:
2
<PAGE>
<PAGE>
EXECUTION COPY
CARCORP, INC.,
as Company,
COLLINS & AIKMAN PRODUCTS CO.,
as Master Servicer
and
COLLINS & AIKMAN PRODUCTS CO. AND
ITS WHOLLY OWNED SUBSIDIARIES NAMED HEREIN,
as Sellers
AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT
Dated as of March 30, 1995
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS . . . . . . . . . . 2
1.1 Defined Terms . . . . . . . . . . . . . . . . . . 2
1.2 Other Definitional Provisions . . . . . . . . . . 5
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES . . . . . 5
2.1 Purchase and Sale of Receivables . . . . . . . . 5
2.2 Purchase Price . . . . . . . . . . . . . . . . . 8
2.3 Payment of Purchase Price . . . . . . . . . . . . 8
2.4 No Repurchase . . . . . . . . . . . . . . . . . . 10
2.5 Rebates, Adjustments, Returns and Reductions;
Modifications . . . . . . . . . . . . . . . . . 11
2.6 Limited Repurchase Obligation . . . . . . . . . . 11
2.7 Obligations Unaffected . . . . . . . . . . . . . 12
2.8 Certain Charges . . . . . . . . . . . . . . . . . 12
2.9 Certain Allocations . . . . . . . . . . . . . . . 12
ARTICLE III
CONDITIONS TO PURCHASE AND SALE . . . . . 13
3.1 Conditions Precedent to the Company's Initial
Purchase of Receivables . . . . . . . . . . . . 13
3.2 Conditions Precedent to All the Company's
Purchases of Receivables . . . . . . . . . . . 15
3.3 Conditions Precedent to Sellers' Obligations . . 16
3.4 Conditions Precedent to the Addition of a
Seller . . . . . . . . . . . . . . . . . . . . 16
ARTICLE IV
REPRESENTATIONS AND WARRANTIES . . . . . . 18
4.1 Representations and Warranties of the
Sellers Relating to the Sellers . . . . . . . . 18
4.2 Representations and Warranties of the
Sellers Relating to the Agreement and the
Receivables . . . . . . . . . . . . . . . . . . 24
ARTICLE V
AFFIRMATIVE COVENANTS . . . . . . . . 25
5.1 Certificates; Other Information . . . . . . . . . 25
5.2 Compliance with Laws, etc. . . . . . . . . . . . 25
5.3 Preservation of Corporate Existence . . . . . . . 26
5.4 Visitation Rights . . . . . . . . . . . . . . . . 26
- i -
<PAGE>
Page
5.5 Keeping of Records and Books of Account . . . . . 27
5.6 Location of Records . . . . . . . . . . . . . . . 27
5.7 Computer Files . . . . . . . . . . . . . . . . . 27
5.8 Policies . . . . . . . . . . . . . . . . . . . . 27
5.9 Obligations . . . . . . . . . . . . . . . . . . . 28
5.10 Collections . . . . . . . . . . . . . . . . . . 28
5.11 Furnishing Copies, etc . . . . . . . . . . . . . 28
5.12 Obligations with Respect to Obligors and
Receivables . . . . . . . . . . . . . . . . . 29
5.13 Responsibilities of the Sellers . . . . . . . . 29
5.14 Further Action . . . . . . . . . . . . . . . . . 29
5.15 Certain Procedures . . . . . . . . . . . . . . . 32
ARTICLE VI
NEGATIVE COVENANTS . . . . . . . . . 32
6.1 Liens . . . . . . . . . . . . . . . . . . . . . . 32
6.2 Extension or Amendment of Receivables . . . . . . 32
6.3 Change in Payment Instructions to Obligors . . . 33
6.4 Change in Name . . . . . . . . . . . . . . . . . 33
6.5 Policies . . . . . . . . . . . . . . . . . . . . 33
6.6 Modification of Ledger . . . . . . . . . . . . . 33
6.7 Business of the Sellers . . . . . . . . . . . . . 33
6.8 Accounting of Purchases . . . . . . . . . . . . . 34
6.9 Instruments . . . . . . . . . . . . . . . . . . . 34
6.10 Ineligible Receivables . . . . . . . . . . . . . 34
ARTICLE VII
PURCHASE TERMINATION EVENTS . . . . . . 34
ARTICLE VIII
THE SUBORDINATED NOTES; PARENT NOTE . . . . 36
8.1 Subordinated Notes . . . . . . . . . . . . . . . 36
8.2 Restrictions on Transfer of Subordinated
Notes . . . . . . . . . . . . . . . . . . . . . 37
8.3 Parent Note . . . . . . . . . . . . . . . . . . . 37
8.4 Restrictions on Transfer of Parent Note . . . . . 38
ARTICLE IX
MISCELLANEOUS . . . . . . . . . . 38
9.1 Further Assurances . . . . . . . . . . . . . . . 38
9.2 Payments . . . . . . . . . . . . . . . . . . . . 39
9.3 Costs and Expenses . . . . . . . . . . . . . . . 39
- ii -
<PAGE>
Page
9.4 Successors and Assigns . . . . . . . . . . . . . 40
9.5 Governing Law . . . . . . . . . . . . . . . . . . 40
9.6 No Waiver; Cumulative Remedies . . . . . . . . . 41
9.7 Amendments and Waivers . . . . . . . . . . . . . 41
9.8 Severability . . . . . . . . . . . . . . . . . . 41
9.9 Notices . . . . . . . . . . . . . . . . . . . . . 41
9.10 Counterparts . . . . . . . . . . . . . . . . . . 42
9.11 Construction of Agreement as Security
Agreement . . . . . . . . . . . . . . . . . . 42
9.12 Waivers of Jury Trial . . . . . . . . . . . . . 43
9.13 Jurisdiction; Consent to Service of Process . . 43
9.14 Addition of Sellers . . . . . . . . . . . . . . 44
9.15 Optional Termination of a Seller . . . . . . . . 44
9.16 No Bankruptcy Petition . . . . . . . . . . . . . 46
9.17 Termination . . . . . . . . . . . . . . . . . . 46
9.18 Confidentiality . . . . . . . . . . . . . . . . 47
9.19 Conversion of Currencies . . . . . . . . . . . . 48
9.20 Taxes and Deductions . . . . . . . . . . . . . . 48
9.21 Payments by Company . . . . . . . . . . . . . . 49
SCHEDULES
Schedule 1 Locations of Chief Executive Offices;
Locations of Books and Records
Schedule 2 Lockboxes
Schedule 3 Discounted Percentage
Schedule 4 Tax Matters
EXHIBITS
Exhibit A Form of U.S. Dollar Subordinated Note
Exhibit B Form of Canadian Dollar Subordinated Note
Exhibit C Form of Parent Note
Exhibit D Form of Additional Seller Supplement
Exhibit E List of Corporate and Trade Names
- iii -
<PAGE>
AMENDED AND RESTATED RECEIVABLES SALE AGREEMENT,
dated as of March 30, 1995, among Collins & Aikman Products
Co., a Delaware corporation ("C&A Products"), each of the
subsidiaries of C&A Products from time to time parties
hereto (together with C&A Products, the "Sellers"), C&A
Products, as master servicer (in such capacity, the "Master
Servicer"), and Carcorp, Inc., a Delaware corporation (the
"Company").
W I T N E S S E T H :
WHEREAS, the Company, the Master Servicer, and
certain subsidiaries of the Master Servicer that are parties
thereto, in their capacities as sellers of receivables, have
entered into a Receivables Sale Agreement, dated as of July
13, 1994 (as the same has been amended from time to time,
the "Existing RSA");
WHEREAS, in the ordinary course of business, each
Seller generates accounts receivable;
WHEREAS, pursuant to the Existing RSA, each Seller
party thereto sells to the Company, and the Company
purchases from such Seller, all of such Seller's right,
title and interest in, to and under the Receivables (as
defined therein) now existing or hereafter created and in
the rights of such Seller in, to and under all Related
Property (as defined therein);
WHEREAS, the Master Servicer, the Company and
Chemical Bank, as Trustee, have entered into a Pooling
Agreement, dated as of the date hereof (the "Pooling
Agreement") in order to create a master trust into which the
Company will transfer all of its right, title and interest
in, to and under the Receivables (as defined in the Pooling
Agreement) and certain other assets now or hereafter owned
by the Company;
WHEREAS, the parties hereto wish to amend and
restate in its entirety the Existing RSA;
NOW, THEREFORE, in consideration of the premises
and of the mutual covenants herein contained, the parties
hereto agree that the Existing RSA shall be and hereby is
amended and restated in its entirety as follows:
<PAGE>
ARTICLE I
DEFINITIONS
1.1 Defined Terms. Capitalized terms defined in
the Pooling Agreement shall be used herein as therein
defined (unless otherwise defined herein) and the following
terms shall have the following meanings:
"Additional Seller Supplement" shall mean an
instrument substantially in the form of Exhibit D by which
an additional Subsidiary of C&A Products becomes a Seller
party hereto.
"Canadian Dollar Subordinated Note" shall have the
meaning specified in Section 8.1.
"Capital Stock" shall mean 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.
"Dilution Adjustment" shall have the meaning
specified in Section 2.5.
"Discounted Percentage" shall have the meaning
specified in Schedule 3.
"Documents" shall have the meaning specified in
subsection 5.14(d)(iii).
"Early Termination" shall have the meaning
specified in Article VII.
"Effective Date" shall mean (i) with respect to
each party hereto that was an original party to the Existing
RSA, July 13, 1994, (ii) with respect to each Seller added
as a Seller under the Existing RSA, the Seller Addition Date
with respect to such Seller and (iii) with respect to each
additional Subsidiary of C&A Products added as a Seller
pursuant to Section 9.14 of this Agreement, the Seller
Addition Date with respect to each such Subsidiary.
"ERISA Affiliate" shall mean 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 Internal Revenue Code.
-2-
<PAGE>
"Existing RSA" shall have the meaning specified in
the recitals hereto.
"Multiemployer Plan" shall mean 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 Internal Revenue 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.
"One-Month LIBOR" shall have the meaning specified
in Section 1.1 of the Series 1 Supplement.
"Parent Note" shall have the meaning specified in
Section 8.3.
"Payment Date" shall have the meaning specified in
subsection 2.3(a).
"PBGC" shall mean the Pension Benefit Guaranty
Corporation established pursuant to Subtitle A of Title IV
of ERISA, or any successor thereto.
"Plan" shall mean, 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
Internal Revenue Code which is maintained for employees of
such Person or any ERISA Affiliate of such Person.
"Pooling Agreement" shall have the meaning
specified in the recitals hereto.
"Potential Purchase Termination Event" shall mean
any condition or act specified in Article VII that, with the
giving of notice or the lapse of time or both, would become
a Purchase Termination Event.
"Purchase Price" shall have the meaning specified
in Section 2.2.
"Purchase Termination Event" shall have the
meaning specified in Article VII.
"Purchased Receivable" shall mean any Receivable
sold to the Company by any Seller pursuant to, and in
accordance with the terms of, this Agreement and not resold
to such Seller pursuant to subsection 2.1(b) or 2.6.
-3-
<PAGE>
"Recalculated Deficiency" shall have the meaning
specified in subsection 9.15(a).
"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 Internal Revenue Code).
"Repurchase Amount" shall have the meaning
specified in Section 2.6.
"Repurchase Event" shall have the meaning
specified in Section 2.6.
"Sale Documents" shall mean this Agreement, the
Subordinated Notes and the Parent Note.
"Sale Transactions" shall have the meaning
specified in subsection 4.1(b).
"Separate VFC Amortization Event" shall have the
meaning specified in Section 1.1 of the Series 2 Supplement.
"Seller Addition Date" shall have the meaning
specified in Section 3.4.
"Seller Adjustment Payment" shall have the meaning
specified in Section 2.5.
"Seller Repurchase Payment" shall have the meaning
specified in Section 2.6.
"Seller Termination Condition" shall have the
meaning specified in subsection 9.15(a).
"Series 1 Supplement" shall mean the Series 1995-1
Supplement, dated as of March 30, 1995, among the Company,
the Master Servicer and Chemical Bank, as Trustee, as
amended, supplemented or otherwise modified from time to
time.
"Series 2 Supplement" shall mean the Series 1995-2
Supplement, dated as of March 30, 1995, among the Company,
the Master Servicer, Societe Generale, as Agent, and
Chemical Bank, as Trustee, as amended, supplemented or
otherwise modified from time to time.
"Subordinated Notes" shall have the meaning
specified in Section 8.1.
-4-
<PAGE>
"U.S. Dollar Subordinated Note" shall have the
meaning specified in Section 8.1.
"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.
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 GAAP.
(c) The meanings given to terms defined
herein shall be equally applicable to both the singular and
plural forms of such terms.
ARTICLE II
PURCHASE AND SALE OF RECEIVABLES
2.1 Purchase and Sale of Receivables.
(a) Subject to the terms and conditions of
this Agreement, each of the Sellers, on such Seller's
Effective Date, thereby sold, transferred, assigned, set
over and otherwise conveyed, or does or continues to hereby
sell, transfer, assign, set over and otherwise convey,
without recourse (except as expressly provided herein), to
the Company, all its respective right, title and interest,
in, to and under (i) all Receivables then or now existing,
as the case may be, and thereafter or hereafter arising, as
the case may be, from time to time, as provided in
paragraph (b) below, (ii) all payment and enforcement rights
(but none of the obligations) with respect to Receivables,
(iii) all Related Property in respect of such Receivables,
(iv) all Collections with respect to (i), (ii) and (iii) and
(v) for more certainty, the universality of all present and
future assets listed in (i), (ii), (iii) and (iv) including
all proceeds and payments in respect of any and all of the
-5-
<PAGE>
foregoing clauses (including proceeds that constitute
property of the types described in said clauses and
including Collections).
(b) On the related Effective Date and on the
date of creation of each newly created Receivable and until
the close of business on the date immediately prior to the
Trust Termination Date, all of the applicable Seller's
right, title and interest in and to (i) in the case of such
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 considered to be part of the assets
that have been sold, transferred, assigned, set over and
otherwise 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, transferred, assigned and reconveyed
by the Company to such Seller without any further action by
the Company or any other Person.
(c) All sales of Receivables and Related
Property by any Seller hereunder shall be without recourse
to, or representation or warranty of any kind (express or
implied) by, any Seller, except as otherwise specifically
provided herein. The foregoing sale, assignment, transfer
and conveyance does not constitute and is not intended to
result in a creation or assumption by the Company of any
obligation of any Seller or any other Person in connection
with the Receivables, the Related Property or any agreement
or instrument relating thereto, including any obligation to
any Obligor.
(d) 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), and any other similar
instruments, with respect to the Receivables and Related
Property now existing and hereafter acquired by the Company
from the Sellers meeting the requirements of applicable 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
-6-
<PAGE>
related Effective Date. It is the express intent of the
parties hereto that the transfer of such Receivables and
Related Property by the Sellers to the Company, as
contemplated by this Agreement be, and be treated as, sales
of the Receivables and the Related Property by the Sellers
to the Company and not as a grant of a security interest
therein to secure a debt or other obligation of the
applicable Seller. 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, to and under (i) all Receivables then or now
existing, as the case may be, and thereafter or hereafter
arising, as the case may be, from time to time, (ii) all
payment and enforcement rights (but none of the obligations)
with respect to such Receivables, (iii) all Related Property
in respect of such Receivables, (iv) all Collections with
respect to (i), (ii) and (iii) and (v) for more certainty,
the universality of all present and future assets listed in
(i), (ii), (iii) and (iv) including all proceeds and
payments in respect of any and all of the foregoing clauses
(including proceeds that constitute property of the types
described in said clauses and including Collections), to
secure all such Seller's obligations hereunder and agrees to
take such reasonable steps as are necessary to perfect such
security interest.
(e) 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 listings relating
to the Receivables that all Receivables and Related Property
have been sold to the Company in accordance with this
Agreement 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 related Effective Date.
(f) Notwithstanding anything contained
herein to the contrary, from and after the time a
Responsible Officer of the Company receives notice or
becomes aware that a lien has been imposed under Section
412(n) of the Internal Revenue Code or Section 302(f) of
ERISA for a failure to make a required installment or other
payment to a plan to which Section 412(n) of the Internal
Revenue Code or Section 302(f) of ERISA applies, the Company
shall not purchase any Receivables until such time as the
Company furnishes the Trustee evidence (which may be in the
form of a payment receipt or wire transfer confirmation)
that the Person who is required to make such payment pays to
-7-
<PAGE>
such plan the amount of such lien determined under Section
412(n)(3) of the Internal Revenue Code or Section 302(f)(3)
of ERISA, as the case may be, or such lien expires pursuant
to Section 412(n)(4)(B) of the Internal Revenue Code or
Section 302(f)(4)(B) of ERISA.
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.
2.3 Payment of Purchase Price.
(a) Upon fulfillment of the conditions set
forth in Article III, the Purchase Price for Receivables and
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 and Related Property 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 shall be paid by
the Company on each Payment Date as follows:
(i) by netting the amount of any Seller
Adjustment Payments or Seller Repurchase Payments
pursuant to Section 2.5 or 2.6 against such Purchase
Price;
(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 a transfer of such
Purchased Receivables by the Company to other Persons
pursuant to the Pooling Agreement;
(iv) at the option of the Company, by means of an
addition to the principal amount of the Canadian Dollar
Subordinated Note, the U.S. Dollar Subordinated Note or
-8-
<PAGE>
the Parent Note, as appropriate in accordance with this
subsection, in an aggregate amount equal to the
remaining portion of the Purchase Price not paid
pursuant to (i), (ii) and (iii) above; provided,
however, that (A) with respect to any Seller, the
outstanding principal amount of such Seller's interest
in the Subordinated Notes and the Parent Note shall not
at any time exceed 40% of the aggregate Purchase Price
received by such Seller from the Company with respect
to the outstanding balance of the Purchased Receivables
and (B) the aggregate outstanding principal amount of
the Subordinated Notes (with the Canadian Dollar
Subordinated Note being converted into U.S. Dollars
based upon the Canadian Exchange Percentage) and the
Parent Note shall not at any time exceed the Principal
Amount of the Purchased Receivables less the sum of the
Aggregate Adjusted Invested Amount and the aggregate
reserves required to be maintained by the Company under
the relevant Supplement for all Outstanding Series at
such time; and provided further that the Company may
pay by means of additions to the principal amount of
either Subordinated Note or the Parent 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 Dilution Adjust-
ments with respect to the Purchased Receivables, is
greater than the amount of its liabilities including
its liabilities on the Subordinated Notes, the Parent
Note and all interest and other fees payable under the
Pooling Agreement and the other Transaction Documents
by at least $25,000,000. Any such addition to the
principal amount of the Subordinated Notes shall be
allocated among the Sellers by the Master Servicer in
accordance with the provisions of this subsec-
tion 2.3(b)(iv); 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 U.S. 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
for the account of 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
-9-
<PAGE>
(v) in cash from the proceeds of capital
contributed by C&A Products to the Company, if any, in
respect of its equity interest in the Company.
(c) The Master Servicer shall be
responsible, in its sole discretion but in accordance with
the preceding subsection, for allocating among the Sellers
the payment of the Purchase Price for Receivables and any
amounts netted therefrom pursuant to subsection 2.3(b)(i)
which allocation shall be, subject to the first proviso
contained in subsection 2.3(b)(iv), either in the form of
the cash received from the Company or as an addition to the
principal amount of the Seller's interest in the applicable
Subordinated Note. The Company shall be entitled to pay all
amounts in respect of the Purchase Price of Receivables and
Related Property to an account of the Master Servicer
without regard to whether or how such payments are allocated
by the Master Servicer to the Sellers. The Sellers
acknowledge and agree that such payments constitute
consideration for the Purchase Price of Receivables. All
payments under 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.
(d) 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 Alternate Base
Rate 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 effect any purchase of any Purchased
Receivables or Related Property after the Payment Date
relating thereto.
-10-
<PAGE>
2.5 Rebates, Adjustments, Returns and Reductions;
Modifications. From time to time a Seller may make Dilution
Adjustments to Receivables in accordance with this Section
2.5 and Section 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 Dilution Adjustment
(regardless of which Seller shall have granted such Dilution
Adjustment), the amount of any such Dilution 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(b)(i) but only
to the extent of the Purchase Price payable on such Payment
Date; provided further, that, upon the occurrence and
continuation of a Separate VFC Amortization Event, all
Seller Adjustment Payments with respect to PAR Pool I shall
be made solely in cash. A "Dilution Adjustment" shall mean
any rebate, discount, allowance, 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 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 a "Dilution Adjustment" does not
include any Charge-Off. The amount of any Dilution
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 (i) any of the representations or warranties contained
in Section 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 (ii) 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 Sections 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 described in clauses (i) and (ii) above, a
"Repurchase Event"), such Receivable shall cease to be an
Eligible 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 or prior to the 30th day
after the day such Repurchase Event becomes known to any
-11-
<PAGE>
Seller (except that if such day is not a Business Day, such
payment shall be made on the Business Day immediately
succeeding such day) unless such Repurchase Event shall have
been cured on or before such 30th day; provided that in the
event the Company shall be required to repurchase such
Receivable pursuant to Section 2.5 of the Pooling Agreement
and the Company has insufficient funds to make such a
repurchase, such Seller shall make such payment immediately;
provided further, 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(b)(i) but only
to the extent of the Purchase Price payable on such Payment
Date; provided further, that, upon the occurrence and
continuation of a Separate VFC Amortization Event, all
Seller Repurchase Payments with respect to PAR Pool I shall
be made solely in cash. Any payment by any Seller pursuant
to this Section 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 Receiv-
ables shall be the property of the Company notwithstanding
the occurrence 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
-12-
<PAGE>
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 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 related Effective Date from any Seller is subject to
the conditions precedent, which may be waived by the
Company, provided that the Rating Agency Condition shall
have been satisfied with respect to any waiver of clauses
(b)(i), (iii) and (v) below, 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 such 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 such 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 trans-
actions 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 such 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 or
will file on such Effective Date, at its own expense,
UCC-1 financing statements (and registered assignments,
verification statements or other similar statements or
-13-
<PAGE>
instruments) 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 UCC
of all such jurisdictions (or any other similar law of
any relevant jurisdictions (including the Provinces of
Quebec and Ontario)) and delivered evidence of such
filings to the Company on or prior to such Effective
Date except with respect to the Canadian Seller which
shall make all such necessary filings, assignments,
registrations and verification statements and deliver
evidence of such filings not later than ten Business
Days after the date hereof with respect thereto; and
all other action necessary or desirable, in the
reasonable judgment of the Company, to perfect the
Company's ownership of the Receivables and Related
Property 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 such Effective Date, the Obligors whose
Receivables are to be transferred to the Company on
such 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 (including
reports showing the results of searches conducted
against the Canadian Seller and any other Seller
located in Canada in each of the relevant jurisdictions
under those statutes of such jurisdictions (including,
as the case may be, the Civil Code or the Personal
Property Security Act of such jurisdiction) pursuant to
which absolute assignments of, or mortgages, charges,
hypothec or other security interests in or to, assets
similar in nature to the Receivables or Related
Property would ordinarily or customarily be the subject
of a recording, filing or regulation in order to
create, validate, preserve and perfect such assignment
or security interests) 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 such Purchased Receivables
and except for Liens as to which the Company has
received UCC termination statements (or other similar
instruments) to be filed on or prior to such Effective
Date.
-14-
<PAGE>
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
related Effective Date) shall be subject to the further
conditions precedent, which may be waived by the Company,
provided that the Rating Agency Condition shall have been
satisfied with respect to any waiver of clauses (a)(i)-(iii)
below, 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 Sections 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 (in which
case they shall be true and correct in all material
respects as of such date);
(ii) no Purchase Termination Event or Potential
Purchase Termination Event with respect to such Seller
shall have occurred and be continuing; and
(iii) no Early Amortization Event (other than a
Separate VFC Amortization Event) with respect to any
Series shall have occurred and be continuing;
(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 Sections 2.5, 2.6 and 9.2;
(d) the Company shall have received such
other approvals, opinions or documents as the Company may
reasonably request; and
-15-
<PAGE>
(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;
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
related Effective Date shall be subject to the conditions
precedent that such Seller shall have received on or before
such Effective Date the following, each dated such 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 docu-
ments 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 Early Amortization Event set forth in paragraph (a)
of Section 7.1 of the Pooling Agreement with respect to the
Company 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 Section 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 duly executed and delivered by such
Seller;
-16-
<PAGE>
(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;
(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 (or other
similar instruments) 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 therein under the UCC
(or any other similar law) and delivered evidence of
such filings to the Company on or prior to the date
thereof; and all other actions 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;
(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 or transfer by the Company of
such Purchased Receivables and except for Liens as to
which the Company has received UCC termination state-
-17-
<PAGE>
ments (or other similar instruments) to be filed on or
prior to the related Seller Addition Date;
(viii) the Company shall have received (A) legal
opinions on behalf of such Seller as to general
corporate matters of such Seller (including, without
limitation, an opinion as to the perfection of the
Company's interest in the Purchased Receivables) and
(B) confirmation (1) as to the "true sale" of the
Purchased Receivables sold hereunder and (2) as to the
likelihood of the substantive consolidation of such
Seller on the one hand and the Company on the other
hand, all in form and substance reasonably satisfactory
to the Company; and
(ix) the Company shall have received evidence that
the Rating Agency Condition shall have been satisfied
with respect to the addition of such Seller;
provided, however, such additional Seller shall not be
required to satisfy the condition set forth in clause (vii)
above if such Seller is a newly formed (within the preceding
ten Business Days), wholly owned Subsidiary of any existing
Seller formed for the purpose of continuing the business or
businesses, or a portion of the business or businesses,
conducted by one or more of the existing Sellers such that
no Obligors that were not Obligors of an existing Seller
hereunder prior to the Seller Addition Date with respect to
the additional Seller will become Obligors as a result of
the addition of such Seller.
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 related 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, approvals and other governmental authorizations
necessary 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 the jurisdiction in
which its chief executive office is located and every other
-18-
<PAGE>
jurisdiction where such qualification is necessary, except
where the failure so to qualify would not reasonably be
likely to 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.
(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 any
Requirement of Law or Contractual Obligation of such Seller
except for violations that would not, individually or in the
aggregate, reasonably be likely to have a Material Adverse
Effect or (y) 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 the Receivables as
contemplated by the Pooling Agreement. No consent or
authorization of, filing with, notice to or other act by or
in respect of, any Governmental Authority or any other
Person is required in connection with the sales hereunder or
with the execution, delivery, performance, validity or
enforceability of the this Agreement and the other Sale
Documents to which it is a party by or against such Seller
other than (i) those which have duly been obtained or made
and are in full force and effect on such Effective Date,
(ii) any filings of UCC-1 financing statements (or similar
instruments as may be necessary or advisable in the
Provinces of Quebec and Ontario and such other Provinces of
Canada where Obligors of Receivables sold by such Seller
hereunder are located) necessary to perfect the Company's
ownership interest in the Receivables and the Related
Property, (iii) those that may be required under state
securities and "blue sky" laws in connection with the
offering or sale of Certificates and (iv) any such consent,
authorization, filing, notice or other act the absence of
which would not reasonably be likely to have a Material
Adverse Effect.
(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,
-19-
<PAGE>
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. Except with respect to C&A
Products, all of its Capital Stock is owned directly or
indirectly by C&A Products.
(e) Material Litigation; Compliance with Laws.
(i) Except as described in the Annual Report on Form 10-K of
Collins & Aikman Corporation, any Quarterly Report on Form
10-Q of Collins & Aikman Corporation or any Current Report
on Form 8-K of Collins & Aikman Corporation there are not
any actions, suits or proceedings at law or in equity or by
or before any court or Governmental Authority or labor
controversies now pending or, to the knowledge of such
Seller, threatened against it or any of its properties or
rights as to which there is a reasonable possibility of an
adverse determination or effect and which (A) if adversely
determined, could individually or in the aggregate result in
a Material Adverse Effect, or (B) involve this Agreement,
any of the other Sale Documents, any other Transaction
Document to which such Seller is a party or any of the
transactions contemplated hereby or thereby.
(ii) It is not in default under or with respect
to any law, order, judgment, writ, injunction, decree, rule
or regulation of any Governmental Authority where such
default could reasonably be likely to 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 Potential Purchase Termination Event with respect to such
Seller has occurred and is continuing.
(f) Agreements. (i) 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) a material adverse effect on the
business, operations, property or condition (financial or
otherwise) of C&A Products and its Subsidiaries taken as a
whole, (B) a material impairment of the ability of such
Seller to perform its obligations under the Transaction
Documents, (C) a material impairment of the validity or
enforceability of any of the Transaction Documents against
any of the Sellers or any Servicing Party, or (D) a material
-20-
<PAGE>
impairment of the interests, rights or remedies of the
Trustee or the Investor Certificateholders.
(ii) It is not in default in any manner under any
of its Contractual Obligations in any respect which could be
reasonably likely to have a Material Adverse Effect.
(g) Tax Returns. It has filed or caused to be
filed all Federal, and all 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 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 28, 1995, which
taxes, if not paid or adequately provided for, would be
reasonably likely to have a Material Adverse Effect. The
tax returns of such Seller 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 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 any nature (including interest, penalties and additions
thereto) that is imposed by any Governmental Authority.
(h) Employee Benefit Plans. If such Seller is
incorporated in the United States, 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
with respect to each Plan of such Seller or any of its ERISA
Affiliates except for such noncompliance which could not
reasonably be expected to result in a Material Adverse
-21-
<PAGE>
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
reasonably be expected to result in a Material Adverse
Effect and, as of the Effective Date, 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 report applicable thereto,
exceed by more than $10,000,000 the value of the assets of
such Plan. Neither such Seller nor any of its ERISA
Affiliates has incurred or could reasonably be expected to
incur any Withdrawal Liability that could reasonably be
expected to result in a Material Adverse Effect. Neither
such Seller nor 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.
(i) Fraudulent Transfer. Such Seller is not
entering into this Agreement with the actual intent to
hinder, delay, or defraud its present or future creditors
and is receiving reasonably equivalent and fair value for
the Receivables being transferred hereunder.
(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.
(k) Absence of Certain Restrictions. No
Contractual Obligation of such Seller or any of its
Subsidiaries will prohibit or materially restrain, or have
the effect of prohibiting or materially restraining, or
imposing materially adverse conditions upon, the sale of
Receivables and Related Property or the granting of Liens as
contemplated by the Transaction Documents.
(l) Indebtedness to Company. Immediately prior
to consummation of the transactions contemplated hereby on
-22-
<PAGE>
such Effective Date, it had no outstanding Indebtedness to
the Company other than amounts permitted by the Sale
Documents.
(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 each Seller party
thereto, enforceable against such Seller 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 proceeding at law or in
equity).
(n) Filings. On or prior to such 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 UCC or any other similar law of each
relevant jurisdiction) shall 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 5.14(d)(v), 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.
(p) 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 UCC
of the State of New York, or, if applicable, for purposes of
the relevant provincial laws of Canada, and the offices of
such Seller where such Seller keeps its records concerning
the Receivables are also listed in said Schedule opposite
its name (or at such other locations, notified to the
Company in accordance with Section 5.6, in jurisdictions
where all actions required by subsection 5.14(a) have been
taken and completed) and there have been no other such
locations during the four months preceding the date of this
Agreement.
-23-
<PAGE>
(q) Bulk Sales Act. No transaction contemplated
hereby with respect to such Seller requires compliance with,
or will be subject to avoidance under any bulk sales act or
similar law.
(r) Names. Such Seller does not use any trade
name other than its actual corporate name and the trade
names set forth in Exhibit E hereto. Except as set forth in
Exhibit E hereto, from and after the date that fell five
years before the date hereof, such Seller has not been known
by any legal name other than its corporate name as of the
date hereof, nor has it been the subject of any merger or
other corporate reorganization.
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 related
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 the date indicated 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.
(b) Eligible Receivable. Each Receivable
sold by it hereunder and designated on a Daily Report to be
an Eligible Receivable will be, at its respective Payment
Date, an Eligible Receivable. The aggregate outstanding
Principal Amount of Eligible 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.
(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
pursuant to the Pooling Agreement), and no effective
financing statement or other instrument similar in effect
covering all or any part of such Purchased Receivable,
-24-
<PAGE>
Related Property or Collections with respect thereto will at
such time be on file against such Seller in any filing,
recording office or similar office, except such as have been
filed in favor of the Company in accordance with this
Agreement.
(d) Treatment as Sales. Such Seller intends
to treat the transfer of the Receivables to the Company as a
sale of the Receivables for all tax, accounting and
regulatory purposes.
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 and each Rating Agency:
(a) not later than 120 days after the end of
each fiscal year and not later than 90 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, (i) such Responsible Officer has
supervised the review and (ii) to the best of such
Responsible Officer's knowledge (after due inquiry), such
Seller during such period has observed or performed all of
its covenants and other agreements in all material respects,
and satisfied every condition, contained in the Sale
Documents to which it is a party to be observed, performed
or satisfied by it in all material respects, and that such
Responsible Officer has obtained no knowledge of any
Purchase Termination Event or Potential 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 all Requirements of Law and
Contractual Obligations affecting the collectibility of the
Purchased Receivables and the performance by such Seller, in
all material respects, of its obligations under this
Agreement and the other Transaction Documents to which it is
-25-
<PAGE>
a party, except to the extent such compliance would result
in a violation of a Requirement of Law or Contractual
Obligation, as the case may be.
5.3 Preservation of Corporate Existence. Do or
cause to be done all things necessary to (i) preserve, renew
and keep in full force and effect its legal existence and
maintain such legal existence separate from that of the
Company and (ii) preserve and maintain its rights,
franchises and privileges in the jurisdiction of its
incorporation or amalgamation, and qualify and remain in
good standing as a foreign corporation in the jurisdiction
where its chief executive office is located and in each
other jurisdiction where the failure to preserve and
maintain such rights, franchises, privileges and
qualification would be reasonably likely to have a Material
Adverse Effect; provided that any Seller may be merged or
consolidated with or into any other Seller or C&A Products.
Nothing contained herein shall restrict in any manner the
ability of any Seller to change the jurisdiction of its
incorporation or the location of its chief executive office;
provided, however, that no Seller shall change the location
of its chief executive office to a state which is within the
Tenth Circuit unless it delivers an opinion of counsel
reasonably acceptable to the Rating Agencies to the effect
that Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d 948 (10th
Cir. 1993) is no longer controlling precedent in the Tenth
Circuit.
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 and Related Property 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).
-26-
<PAGE>
5.5 Keeping of Records and Books of Account.
Maintain and implement, or cause to be maintained or imple-
mented, 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), and, in the
case of the Canadian Seller, its legal head office, 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 5.14(a) shall have been taken and completed and
be in full force and effect, provided that the Rating
Agencies shall be notified of any such changes in location
and such location is not in a state which is within the
Tenth Circuit unless such Seller delivers an opinion of
counsel reasonably acceptable to the Rating Agencies to the
effect that Octagon Gas Systems, Inc. v. Rimmer, 995 F.2d
948 (10th Cir. 1993) is no longer controlling precedent in
the Tenth Circuit.
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 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 and that the
Company has sold an interest therein and, subsidiarily, has
granted a security interest therein in the Company's
retained interest therein.
5.8 Policies. Perform its obligations in
accordance with and comply in all material respects with the
Policies, as amended from time to time in accordance with
the Transaction Documents, in regard to the Purchased
Receivables and the Related Property except to the extent
that failure to so comply would not be reasonably likely to
have a Material Adverse Effect with respect to such Seller.
-27-
<PAGE>
5.9 Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become
delinquent, as the case may be, all its obligations of
whatever nature, except where (a) the amount or validity
thereof is currently being contested in good faith by
appropriate proceedings and reserves in conformity with GAAP
with respect thereto have been provided on its books, or
(b) the failure to so pay, discharge or satisfy all such
obligations would not, in the aggregate, be reasonably
likely to have a Material Adverse Effect and would not
subject any of its properties to any Lien prohibited by
Section 6.1.
5.10 Collections. Instruct each Obligor to make
payments in respect of its Receivables to a Lockbox or a
Lockbox Account in accordance with the standard Lockbox
procedure of the Lockbox Processor or its agent or by wire
transfer to the applicable Collection Account.
5.11 Furnishing Copies, etc. (a) Furnish to the
Company:
(i) within five Business Days of the
Company's request, but no more than once each month, a
certificate of the chief financial officer of such Seller or
of the Master Servicer on behalf 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;
(ii) promptly upon a Responsible Officer of
such Seller obtaining knowledge of the occurrence of any
Purchase Termination Event or Potential Purchase Termination
Event, written notice thereof;
(iii) 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 time to time
reasonably request;
(iv) promptly upon a Responsible Officer of
such Seller or the Master Servicer obtaining knowledge of
the occurrence thereof, written notice of any event of
default or default under any other Sale Document;
-28-
<PAGE>
(v) promptly upon a Responsible Officer of
such Seller or the Master Servicer obtaining knowledge of
the occurrence thereof, written notice of any development
that has resulted in a Material Adverse Effect; and
(vi) promptly upon determining that any
Purchased Receivable designated as an Eligible Receivable on
the applicable Daily Report or Monthly Settlement Statement
was not an Eligible Receivable as of the date provided
therefor, written notice of such determination.
(b) Furnish to the Rating Agencies copies of
(i) all filings by Collins & Aikman Corporation with the
Securities and Exchange Commission, (ii) all quarterly press
releases issued by Collins & Aikman Corporation and (iii)
all notices delivered pursuant to clauses (a)(ii), (iv) and
(v) above.
5.12 Obligations with Respect to Obligors and
Receivables. Take all actions on its part reasonably neces-
sary to maintain in full force and effect its material
rights under all contracts relating to the Purchased Receiv-
ables.
5.13 Responsibilities of the Sellers. Notwith-
standing 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.
5.14 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 more fully effect the purposes of this
Agreement and the transfer of the Receivables hereunder, 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
-29-
<PAGE>
thereof. Without limiting the generality of the foregoing,
each Seller will upon the request of the Company and as
otherwise necessary to fully effect the purposes of this
Agreement (i) execute and file such financing, financing
change or continuation statements, or amendments thereto,
and such other instruments or notices, as may be necessary
or, in the opinion of the Company, advisable, (ii) 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 pursuant to the Pooling Agreement and,
subsidiarily, 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 (iii) obtain
the agreement of any Person having a Lien on any Receivables
owned by any Seller (other than any Lien created or imposed
hereunder or under the Pooling Agreement or any Permitted
Lien) and take any steps necessary 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 other similar instruments), 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 Section 9.3.
(d) Each Seller agrees that, upon the
occurrence and during the continuation of a Purchase
Termination Event or a Servicer Default:
(i) 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 Related Property 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 (and the Company shall notify each
Rating Agency of such action);
(ii) the Company (and its assignees) shall have
the right to (A) sue for collection on any Purchased
Receivables or (B) sell any Purchased Receivables to
any Person for a price that is acceptable to the
-30-
<PAGE>
Company pursuant to the Pooling Agreement. If required
by the terms of Section 9-504 or 9-505 of the UCC (or
analogous provisions of any other similar law
applicable to the Receivables), 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 (other than
pursuant to the Pooling Agreement) shall cease to be a
Receivable for all purposes under this Agreement as of
the effective date of such sale;
(iii) each Seller shall, upon the Company's written
request and at such Seller's expense, (A) 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 (B) 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 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 the
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;
(iv) each Seller hereby grants to the Company an
irrevocable power of attorney (coupled with an
interest) 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, without limitation,
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
(v) upon written request of the Company, each
Seller will (A) deliver to the Company all licenses,
-31-
<PAGE>
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 (excluding software licenses which by their
terms are not permitted to be so delivered, provided
that such Seller shall use its reasonable efforts to
obtain the consent of the relevant licensor to such
delivery) and (B) make such arrangements with respect
to the collection of the Purchased Receivables as may
be reasonably required by the Company.
5.15 Certain Procedures. Each Seller shall take,
or refrain from taking, as the case may be, all actions that
are necessary to be taken or not taken in order to (a)
ensure that the assumptions and factual recitations set
forth in the Specified Bankruptcy Opinion Provisions remain
true and correct in all material respects with respect to
such Seller and (b) comply with those procedures described
in such provisions which are applicable to such Seller.
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 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
Pooling Agreement.
6.2 Extension or Amendment of Receivables.
Extend, make any Dilution 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 (a) in accordance with the terms of the
Policies, (b) as required by any Requirement of Law or
(c) in the case of Dilution Adjustments, upon making a
Seller Adjustment Payment pursuant to Section 2.5, provided
that the applicable Servicer may cause Receivables to become
Charge-Offs.
-32-
<PAGE>
6.3 Change in Payment Instructions to Obligors.
Except as otherwise provided in Section 5.14, instruct any
Obligor of any Purchased Receivables to make any payments
with respect to any Receivables other than, in accordance
with Section 5.10, to a Lockbox, a Lockbox Account or by
wire transfer to the applicable Collection Account; provided
further, that, in accordance with Section 2.3 of the
Servicing Agreement, (i) it may terminate any Lockbox
Agreements or Lockbox Accounts and (ii) it may execute
additional Lockbox Agreements or Lockbox Accounts and
instruct Obligors to make payments in respect of any
Receivables to such additional accounts.
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 (or other
similar instrument) relating to this Agreement seriously
misleading within the meaning of Section 9-402(7) of the
UCC, or impair the perfection of the Company's interest in
any Receivable under any other similar law, without 30 days'
prior written notice to the Company.
6.5 Policies. Make any change or modification
(or permit any change or modification to be made) in any
material respect to the Policies, except (i) if such changes
or modifications are necessary under any Requirement of Law,
(ii) if such changes or modifications would not reasonably
be expected to have a material adverse effect on the
interests of the Company or the collectibility of the
Receivables or (iii) if the Rating Agency Condition is
satisfied with respect thereto; provided, however, that if
any change or modification, other than a change or
modification permitted pursuant to clause (i) or (ii) above,
would reasonably be expected to have a material adverse
effect on the interests of the Investor Certificateholders
of a Series which is not rated by a Rating Agency, the
consent of the applicable Agent shall be required to effect
such change or modification. The applicable Seller shall
provide notice to each Rating Agency of any modification to
the Policies.
6.6 Modification of Ledger. Delete or otherwise
modify the marking on the ledger referred to in Section 5.7.
6.7 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 or related 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.
-33-
<PAGE>
6.8 Accounting of Purchases. Prepare any finan-
cial statements which shall account for the transactions
contemplated hereby (other than capital contributions, the
Subordinated Notes and the Parent Note contemplated hereby)
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, the
Subordinated Notes and the Parent Note contemplated hereby)
in any manner other than as sales of the Purchased
Receivables by such Seller to the Company.
6.9 Instruments. Take any action to cause any
Receivable to be evidenced by any instrument (as defined in
the UCC as in effect in the State of New York or other
similar statute or legislation) or any title in bearer form
except in connection with the enforcement or collection of a
Receivable.
6.10 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.
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 Section 2.6 in accordance with the
provisions thereof and such failure shall continue
unremedied for a period of five Business Days from the
earlier of (A) the date any Responsible Officer of such
Seller obtains knowledge of such failure and (B) the date
such Seller receives notice of such failure from the
Company, the Master Servicer or the Trustee 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 in any material respect any covenant or agreement
applicable to it contained herein (other than as specified
in paragraph (a) of this Article VII), provided that no such
failure shall constitute a Purchase Termination Event under
-34-
<PAGE>
this paragraph (b) unless such failure shall continue
unremedied for a period of 30 consecutive days from the date
such Seller receives notice of such failure from the
Company, the Master Servicer or the Trustee; or
(c) 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 (c) based
upon a breach of any representation or warranty set forth in
Section 4.2 if the Sellers shall have complied with the
provisions of Section 2.6 in respect thereof; or
(d) (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
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 (d)(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
-35-
<PAGE>
(e) (i) there shall have occurred an Early
Amortization Event (other than a Separate VFC Amortization
Event) under the Pooling Agreement or any Supplement
thereunder or the commencement of the Amortization Period
under any Supplement (other than as a result of a Separate
VFC Amortization Event) or (ii) any Seller has been
terminated as a Servicer following a Servicer Default with
respect to such Seller under the Servicing Agreement;
then, (x) in the case of any Purchase Termination Event
described in paragraph (d) 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, (y) in the case of a Purchase Termination Event
described in paragraph (e)(i), automatically the obligations
of the Company to purchase Receivables from any and all
Sellers shall terminate without notice of any kind which is
waived by the Sellers; provided that the Company and the
Master Servicer, upon written notice to the Sellers, may
waive such Purchase Termination Event and (z) 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), (y) or (z) of this
Article VII which affects a Seller is herein called an
"Early Termination" with respect to such Seller); provided,
however, in the event of an involuntary proceeding or
petition as described in clause (d)(i) above, the Company
shall not purchase Receivables from such Seller until such
time, if any, as such involuntary petition or proceeding has
been dismissed, provided that such dismissal shall have
occurred within 60 days of the filing of such petition or
the commencement of such proceeding.
ARTICLE VIII
THE SUBORDINATED NOTES; PARENT NOTE
8.1 Subordinated Notes. On the initial 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 issuance thereof
-36-
<PAGE>
and each addition to the principal amount of each
Subordinated Note with respect to each Seller pursuant to
the terms of Section 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 at One-Month LIBOR
plus 1.75% from and including the initial Effective Date and
shall be paid on each Distribution Date with respect to
amounts accrued and not paid as of the last day of the
preceding Settlement Period and 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, a
Servicer Default under any Servicing Agreement or an Early
Amortization Event (other than a Separate VFC Amortization
Event) under the Pooling Agreement or any Supplement
thereto. The maturity date for the Subordinated Notes shall
be no earlier than one year and one day after the later of
(i) the last day of the Series 1 Amortization Period and
(ii) the last day of the VFC Amortization Period.
8.2 Restrictions on Transfer of Subordinated
Notes. Neither any Subordinated Note, nor any right of any
Seller to receive payments thereunder, shall be assigned,
transferred, exchanged, pledged, hypothecated, participated
or otherwise conveyed.
8.3 Parent Note. On the date hereof, the Company
shall issue to C&A Products a subordinated note
substantially in the form of Exhibit C (the "Parent Note").
The aggregate principal amount of the Parent Note at any
time shall be equal to the difference between (a) the
aggregate principal amount of each loan by C&A Products to
the Company pursuant to the terms of Section 2.3 minus
(b) the aggregate amount of all payments made to C&A
Products in respect of the principal of such Parent Note.
Interest on the principal amount of the Parent Note shall
accrue at One-Month LIBOR plus 1.75% from and including the
initial Effective Date and shall be paid on each
Distribution Date with respect to amounts accrued and not
paid as of the last day of the preceding Settlement Period
-37-
<PAGE>
and the maturity date thereof; provided, however, that
accrued interest on the Parent Note which is not so paid may
be added to the principal amount of the Parent 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 the Parent Note shall not constitute a
default or event of default or a Purchase Termination Event
under this Agreement, a Servicer Default under a Servicing
Agreement or an Early Amortization Event (other than a
Separate VFC Amortization Event) under the Pooling Agreement
or any Supplement thereto. The maturity date for the Parent
Note shall be no earlier than one year and one day after the
later of (i) the last day of the Series 1 Amortization
Period and (ii) the last day of the VFC Amortization Period.
8.4 Restrictions on Transfer of Parent Note.
Neither the Parent Note, nor any right of any Seller to
receive payments thereunder, shall be assigned, transferred,
exchanged, pledged, hypothecated, participated or otherwise
conveyed.
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 (and
other similar instruments) relating to the Receivables for
filing under the provisions of the UCC (or any other 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 Section 2.6, provided that
the Company shall have been paid all amounts due thereunder;
and the Company and 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.
-38-
<PAGE>
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 (i) 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 U.S. 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 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 Transaction
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 caused by the
Seller 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, (d)
to pay, indemnify, and hold the Company harmless from, any
and all Canadian withholding taxes which may be imposed in
respect of the Receivables or in connection with the Sale
Transactions and (e) 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
-39-
<PAGE>
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 Indemnified
Liabilities are determined by a court of competent
jurisdiction to have resulted from the gross negligence or
willful misconduct of the Company, and provided, further,
that the Sellers shall have no obligation under this Section
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 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 Trustee or the Company at the
direction of the Trustee in collecting from an Obligor. The
agreements in this Section 9.3 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. Subject to
satisfaction of the Rating Agency Condition, 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 Trustee. Each Seller consents to such
assignment and agrees that the Trustee, to the extent
provided in the Pooling Agreement, 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 Potential Purchase 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 Trustee until all amounts due to the Investor
Certificateholders are paid in full. The Trustee, on behalf
of the Investor Certificateholders, shall have the rights of
a third-party beneficiary under this Agreement.
9.5 Governing Law. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF
LAW, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES
HERETO SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
-40-
<PAGE>
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. Subject to
satisfaction of the Rating Agency Condition, 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; provided that there shall be no need to
satisfy the Rating Agency Condition with respect to any
amendment to cure any ambiguity, to correct or supplement
any provisions herein which may be inconsistent with any
other provisions herein or to add any other provisions to or
change in any manner or eliminate any of the provisions with
respect to matters or questions raised under this Agreement
which shall not be inconsistent with this Agreement. Notice
of any such amendment shall be provided to each Rating
Agency.
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 of 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:
-41-
<PAGE>
The Company: Carcorp, Inc.
P.O. Box 50102
Henderson, Nevada 89106
Attention: President
Telecopier: (702) 598-3651
C&A Products: Collins & Aikman Products Co.
701 McCullough Drive
Charlotte, North Carolina 28262
Attention: Assistant Treasurer
Telecopier: (704) 548-2314
with a copy to
Trustee: Chemical Bank, as Trustee
450 West 33rd Street
15th Floor
New York, New York 10001
Attention: Structured Finance
Services - ABS
Telecopier: (212) 946-3916
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, to and under (i) all Receivables then or now
existing, as the case may be, and thereafter or hereafter
arising, as the case may be, from time to time, (ii) all
payment and enforcement rights (but none of the obligations)
with respect to such Receivables, (iii) all Related Property
in respect of such Receivables, (iv) all Collections with
respect to (i), (ii) and (iii) and (v) for more certainty,
the universality of all present and future assets listed in
(i), (ii), (iii) and (iv) including all proceeds and
-42-
<PAGE>
payments in respect of any and all of the foregoing clauses
(including proceeds that constitute property of the types
described in said clauses and including Collections), to
secure all such Seller's obligations hereunder and agrees to
take such reasonable steps as are necessary to perfect such
security interest.
(b) This Agreement shall constitute a
security agreement under applicable law.
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 AGREE-
MENT AND THE OTHER SALE DOCUMENTS, AS APPLICABLE, BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 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 CITY, 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
-43-
<PAGE>
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
SECTION 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 Section 3.4
hereof and the terms and conditions of this Section 9.14,
from time to time one or more additional Subsidiaries
(whether now owned or hereafter acquired) 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 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 Section 3.4.
9.15 Optional Termination of a 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 if the aggregate outstanding 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 Principal Amount of Purchased
Receivables sold by all Sellers which have been terminated
pursuant to this Section 9.15 within the preceding 90 days)
(x) exceeds 10% of the aggregate outstanding Principal
Amount of all Purchased Receivables, the Rating Agency
Condition shall have been satisfied and (y) is equal to or
less than 10% of the aggregate outstanding Principal Amount
of all Purchased Receivables either (A) the Rating Agency
Condition shall have been satisfied or (B) the Seller
Termination Condition shall have been satisfied and (ii)
that no Purchase Termination Event or Potential Purchase
Termination Event has occurred and is continuing, or would
occur 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
-44-
<PAGE>
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
have directed Obligors to remit and deposit Collections into
the appropriate Lockboxes.
To satisfy the "Seller Termination Condition," in
connection with the optional termination of a Seller
hereunder, the Master Servicer shall recalculate each of the
Monthly Settlement Statements prepared for the preceding 12
Settlement Periods (or such lesser number of Settlement
Periods as have elapsed since the Initial Closing Date),
without giving effect to the Receivables generated by such
terminated Seller and, if any one or more recalculated
Monthly Settlement Statements indicate that the Series 1
Target Receivables Amount would have exceeded the Series 1
Allocated Receivables Amount (such excess, the "Recalculated
Deficiency") for the applicable Settlement Period, the
Master Servicer shall advise the Trustee of the highest
resulting Recalculated Deficiency; thereafter, the Company
shall be required to effect a Reduction in an amount at
least equal to such highest Recalculated Deficiency in the
manner provided for in Section 2.7 of the Series 1
Supplement. Further, all future Monthly Settlement
Statements, shall be prepared without giving effect to the
Receivables generated by such terminated Seller.
(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 Potential Purchase
Termination Event has occurred and is continuing, or would
occur as a result thereof; and provided further, that the
Rating Agency Condition shall have been satisfied. Any such
request shall specify the minimum aggregate 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, shall, within
45 days of receipt of such request, select the Sellers to be
so terminated, provided that the aggregate Principal Amount
of outstanding Purchased Receivables previously sold by such
Sellers shall be substantially equal to the Principal Amount
-45-
<PAGE>
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 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
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.
(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 or Parent Note, by its
acceptance thereof, covenants and agrees that, prior to the
date which is one year and one day after the later of (i)
the last day of the Series 1 Amortization Period and (ii)
the last day of the VFC Amortization Period, 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
-46-
<PAGE>
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 to keep
strictly confidential all non-public information provided to
it by each Seller pursuant to this Agreement, and shall not,
without the prior written consent of the relevant Seller,
disclose in any manner whatsoever, in whole or in part, and
shall not use in any way other than for the purposes of this
Agreement any such non-public information provided to it;
provided that nothing herein shall prevent the Company from
disclosing any such information (i) to the Trustee, (ii) if
such information consists of any Monthly Settlement
Statement, any financial statements of the Company, C&A
Products or Collins & Aikman Corporation, any public filings
of Collins & Aikman Corporation, any Annual Master
Servicer's Certificate, any independent accountant's letter
or any other information required to be delivered pursuant
to Rule 144A under the Securities Act, to any Investor
Certificateholder or any prospective Investor
Certificateholder, (iii) to its employees, directors,
agents, attorneys, accountants and other professional
advisors in connection with the foregoing, (iv) upon the
request or demand of any Governmental Authority having
jurisdiction over the Company or any Investor
Certificateholder (provided that notice of such request or
demand shall be furnished to the affected Seller a
reasonable time prior to the time for compliance therewith
unless such notice is legally prohibited or such
Governmental Authority requests that such notice not be
furnished to the Seller), (v) in response to any order of
any court or other Governmental Authority or as may
otherwise be required of the Company or any Investor
Certificateholder pursuant to any Requirement of Law
(provided that notice of such order or requirement shall be
furnished to the affected Seller a reasonable time prior to
the time for compliance therewith unless such notice is
legally prohibited or such court or Governmental Authority
requests that such notice or requirement not be furnished to
the Seller), (vi) which has been publicly disclosed other
than in breach of this Agreement or (vii) in connection with
the collection of any Purchased Receivable or the exercise
of any remedy hereunder or under the Pooling Agreement.
-47-
<PAGE>
9.19 Conversion of Currencies. If, for the
purposes of obtaining judgment in any court or tribunal with
respect to any party hereto, it is necessary to convert any
amount due under this Agreement in U.S. Dollars into
Canadian Dollars, then the conversion shall be made at the
Canadian Exchange Percentage on the day on which the
judgment is given. In the event that the Canadian Exchange
Percentage prevailing on the date of payment is different
from the first-mentioned Canadian Exchange Percentage, such
party shall pay such additional amount (if any) as may be
necessary to ensure that the amount paid on such date of
payment is the amount in such other currency which when
converted at the Canadian Exchange Percentage prevailing on
the date of payment is the amount then due under this
Agreement in the currency in which it is due, together with
all costs, charges and expenses of conversion. Any amount
due from such party under this Section 9.19 shall be due as
a separate obligation and shall not be affected by judgment
being obtained for any other sum due under or in respect of
this Agreement.
9.20 Taxes and Deductions. (a) Any and all
payments to be made by a Seller or a Servicing Party under
this Agreement shall be made in full, without set-off or
counterclaim, and free of and without deduction or
withholding for or on account of any present or future
Canadian taxes of any nature whatsoever imposed or levied
upon or in respect of any such payments, provided that if
the Seller, a Servicing Party or the Company shall be
required by law to deduct or withhold any Canadian taxes
from or in respect of any such payment, then:
(i) the payment or sum payable shall be increased
as may be necessary so that after making all required
deductions or withholdings (including deductions or
withholdings applicable to additional amounts paid
under this subsection 9.20(a)) the recipient of such
payment shall receive an amount equal to the amount it
would have received if no deduction or withholding had
been made; and
(ii) such Seller, Servicing Party or the Company
as the case may be, shall pay the full amount deducted
or withheld to the relevant taxation or other authority
in accordance with applicable law.
(b) The parties hereto hereby agree that, in
conformity with the Excise Tax Act (Canada) and any
provincial sales tax legislation, the Canadian Seller is the
only person obliged in respect of the Receivables to remit
any Canadian goods and services tax and Canadian provincial
-48-
<PAGE>
sales taxes and to file any returns in respect of such taxes
with Canadian tax authorities. The parties hereto further
agree that the Company does not assume in any manner
whatsoever any obligation of the Canadian Seller to collect
such taxes, make such remittances and file such returns, and
that it is not contemplated by the parties that any such
obligation is hereby assumed by the Company. The Canadian
Seller hereby indemnifies the Company and holds it harmless
from and against any assessments, claims or other demands
for payment of such taxes by Canadian tax authorities, as
well as interest and penalties. It is understood that all
of the Canadian Seller's invoices in respect of its
Receivables will bear the Canadian Seller's GST registration
number.
9.21 Payments by Company. Whenever any provision
in the Transaction Documents permits or obligates the
Company to make a payment in cash, failure to make such
payment shall not constitute a breach by the Company giving
rise to any actionable claim against the Company to the
extent that the Company has insufficient funds to make such
payments from amounts properly distributed to the Company
pursuant to the Pooling Agreement and any Supplement. The
foregoing sentence shall not in any manner limit the ability
of the Company to increase the principal amounts outstanding
under the Subordinated Notes and the Parent Note in
accordance with the terms of this Agreement.
-49-
<PAGE>
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: Anthony Hardwick
Name: Anthony Hardwick
Title: Vice President, Controller,
Acting Chief Financial Officer
and Assistant Treasurer
CARCORP, INC.
By: Anthony Hardwick
Name: Anthony Hardwick
Title: Vice President, Secretary
and Treasurer
The Sellers:
COLLINS & AIKMAN PRODUCTS CO.
By: Anthony Hardwick
Name: Anthony Hardwick
Title: Vice President, Controller,
Acting Chief Financial Officer
and Assistant Treasurer
COLLINS & AIKMAN FLOOR COVERINGS, INC.
By: Anthony Hardwick
Name: Anthony Hardwick
Title: Vice President, Controller
and Assistant Treasurer
ACK-TI-LINING, INC.
By: Anthony Hardwick
Name: Anthony Hardwick
Title: Vice President, Controller
and Assistant Treasurer
WCA CANADA INC.
By: Anthony Hardwick
Name: Anthony Hardwick
Title: Agent
-50-
<PAGE>
IMPERIAL WALLCOVERINGS, INC.
By: Anthony Hardwick
Name: Anthony Hardwick
Title: Acting Chief Financial Officer
THE AKRO CORPORATION
By: Anthony Hardwick
Name: Anthony Hardwick
Title: Acting Chief Financial Officer
DURA CONVERTIBLE SYSTEMS, INC.
By: Anthony Hardwick
Name: Anthony Hardwick
Title: Vice President
-51-
<PAGE>
<TABLE>
<CAPTION>
Jurisdiction of
Seller Incorporation Location of Chief Executive Office Office Where Records are Kept
<S> <C> <C> <C>
Ack-Ti-Lining, Inc. New York 210 Madison Avenue, 6th Floor, New 701 McCullough Drive, Charlotte, NC
York, NY 10016 28262
The Akro Corporation Delaware 1212 7th Street SW, P.O. Box 8650, 701 McCullough Drive, Charlotte, NC
Canton, OH 44711 28262
Collins & Aikman Products Delaware 701 McCullough Drive, Charlotte, NC 701 McCullough Drive, Charlotte, NC
Co. 28262 28262
Collins & Aikman Floor Delaware 1735 Cleveland Road, Dalton, GA 30721 701 McCullough Drive, Charlotte, NC
Coverings, Inc. 28262
Dura Convertible Systems, Delaware 1365 East Beecher Street, Adrian, MI 701 McCullough Drive, Charlotte, NC
Inc. 49221 28262
Imperial Wallcoverings, Delaware 23645 Mercantile Road, Beachwood, OH 23645 Mercantile Road, Beachwood, OH
Inc. 44122 44122
WCA Canada Inc. Ontario 150 Collins Street, Farnham, Quebec, 150 Collins Street, Farnham, Quebec,
Canada J2N 2R6 Canada J2N 2R6
</TABLE>
The legal head office of WCA Canada Inc. is c/o Stikeman, Elliott,
Commerce Court West, 53rd Floor, P.O. Box 85, Toronto, Ontario, Canada
M5L 1B9.
<PAGE>
SCHEDULE 2
LOCKBOXES
<PAGE>
SCHEDULE 3
DISCOUNTED PERCENTAGE
The "Discounted Percentage" applicable to the Receivables
purchased on any date shall equal 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 Distribution Date most recently
preceding such Payment Date by (b) four times the aggregate
amount of Collections during the three-fiscal-month period
most recently preceding the Distribution 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, which as of such Payment Date
will equal 0.25%; and
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 Investor Certificateholders with respect
to the Aggregate Adjusted Invested Amount and (ii) the rate of
interest payable to the Sellers with respect to the outstanding
principal amount of the Subordinated Notes, to the Parent in
respect of the Parent Note in each case as such rates are in
<PAGE>
effect as at the end of the fiscal month immediately preceding
the Distribution Date most recent to such Payment Date and (b)
the amount obtained by dividing (i) the aggregate amount of fees
(other than the Monthly Servicing Fee) accrued pursuant to the
Transaction Documents during the fiscal month immediately
preceding the Distribution Date most recent to such Payment Date
by (ii) the average outstanding Principal Amount of the
Receivables during such fiscal month.
With respect to each calculation set forth above with respect to
a Distribution Date, such calculation as calculated on each
Settlement Report Date and included in the applicable Monthly
Settlement Statement shall remain in effect from and including
the related Distribution Date to but excluding the following
Distribution Date.
<PAGE>
SCHEDULE 4
TAX MATTERS
EXECUTION COPY
CARCORP, INC.,
COLLINS & AIKMAN PRODUCTS CO.,
as Master Servicer,
ITS WHOLLY OWNED SUBSIDIARIES NAMED HEREIN,
as Servicers
and
CHEMICAL BANK,
as Trustee
SERVICING AGREEMENT
Dated as of March 30, 1995
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS . . . . . . . . . . . 1
1.1. Definitions . . . . . . . . . . . . . . . . . . 1
1.2. Other Definitional Provisions . . . . . . . . . 1
ARTICLE II
ADMINISTRATION AND SERVICING
OF RECEIVABLES . . . . . . . . . . 2
2.1. Appointment of Master Servicer and
Servicers . . . . . . . . . . . . . . . . . 2
2.2. Servicing Procedures . . . . . . . . . . . . . 2
2.3. Collections . . . . . . . . . . . . . . . . . . 5
2.4. Reconciliation of Deposits . . . . . . . . . . 6
2.5. Servicing Compensation . . . . . . . . . . . . 7
2.6. Addition of Servicers . . . . . . . . . . . . . 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE MASTER SERVICER AND THE SERVICERS . . . . 9
3.1. Corporate Existence; Compliance with Law . . . 9
3.2. Corporate Power; Authorization . . . . . . . . 9
3.3. Enforceability . . . . . . . . . . . . . . . . 9
3.4. No Legal Bar . . . . . . . . . . . . . . . . . 10
3.5. No Material Litigation . . . . . . . . . . . . 10
3.6. No Default . . . . . . . . . . . . . . . . . . 10
3.7. Tax Returns . . . . . . . . . . . . . . . . . . 10
3.8. Servicing Ability . . . . . . . . . . . . . . . 11
3.9. Location of Records . . . . . . . . . . . . . . 11
ARTICLE IV
COVENANTS OF THE MASTER SERVICER
AND THE SERVICERS . . . . . . . . . . 11
4.1. Servicer Repurchase Payment . . . . . . . . . . 11
4.2. Delivery of Daily Reports . . . . . . . . . . . 12
4.3. Delivery of Monthly Settlement Statement . . . 13
4.4. Delivery of Annual Servicer's Certificate . . . 13
4.5. Delivery of Independent Public Accountants'
Servicing Reports . . . . . . . . . . . . . 14
4.6. Extension, Amendment and Adjustment of
Receivables; Amendment of and Compliance
with Policies . . . . . . . . . . . . . . . 14
4.7. Protection of Certificateholders' Rights . . . 15
4.8. Security Interest . . . . . . . . . . . . . . . 15
- i -
<PAGE>
Page
4.9. Location of Records . . . . . . . . . . . . . . 16
4.10. Visitation Rights . . . . . . . . . . . . . . 16
4.11. Lockbox Agreement; Lockbox Accounts . . . . . 16
4.12. Instruments . . . . . . . . . . . . . . . . . 17
4.13. Delivery of Financial Statements . . . . . . . 17
4.14. Notices . . . . . . . . . . . . . . . . . . . 18
ARTICLE V
OTHER MATTERS RELATING TO THE
MASTER SERVICER AND THE SERVICERS . . . . . . 18
5.1. Merger, Consolidation, etc. . . . . . . . . . . 18
5.2. Indemnification of the Trust and the
Trustee . . . . . . . . . . . . . . . . . . 18
5.3. Master Servicer Not to Resign . . . . . . . . . 19
5.4. Access to Certain Documentation and
Information Regarding the Receivables . . . 19
ARTICLE VI
SERVICER DEFAULTS . . . . . . . . . . 20
6.1. Servicer Defaults . . . . . . . . . . . . . . . 20
6.2. Trustee to Act; Appointment of Successor . . . 23
6.3. Waiver of Past Defaults . . . . . . . . . . . . 25
ARTICLE VII
MISCELLANEOUS PROVISIONS . . . . . . . . 26
7.1. Amendment . . . . . . . . . . . . . . . . . . . 26
7.2. Termination . . . . . . . . . . . . . . . . . . 26
7.3. Governing Law . . . . . . . . . . . . . . . . . 26
7.4. Notices . . . . . . . . . . . . . . . . . . . . 26
7.5. Counterparts . . . . . . . . . . . . . . . . . 26
7.6. Third-Party Beneficiaries . . . . . . . . . . . 26
7.7. Merger and Integration . . . . . . . . . . . . 26
7.8. Headings . . . . . . . . . . . . . . . . . . . 27
7.9. No Set-Off . . . . . . . . . . . . . . . . . . 27
7.10. No Bankruptcy Petition . . . . . . . . . . . . 27
7.11. Liability of Trustee . . . . . . . . . . . . . 27
- ii -
<PAGE>
SERVICING AGREEMENT, dated as of March 30, 1995, among
Carcorp, Inc., a Delaware corporation (the "Company"), Collins &
Aikman Products Co., a Delaware corporation ("C&A Products"), as
master servicer (in such capacity, the "Master Servicer"), each
of the subsidiaries of C&A Products (whether now owned or
hereafter acquired) from time to time parties hereto (each, in
such capacity, a "Servicer" (which term shall also include C&A
Products in its capacity as a Servicer of Receivables)) and
Chemical Bank, a New York banking corporation, not in its
individual capacity, but solely as trustee (in such capacity, the
"Trustee").
W I T N E S S E T H :
WHEREAS, the Company, the Master Servicer and the
Servicers (as Sellers thereunder) have entered into an Amended
and Restated Receivables Sale Agreement, dated as of the date
hereof (the "Receivables Sale Agreement");
WHEREAS, pursuant to the Receivables Sale Agreement,
each Seller party thereto sells to the Company, and the Company
purchases from such Seller, all of such Seller's right, title and
interest in, to and under the Receivables (as defined in the
Pooling Agreement dated as of the date hereof among the Company,
the Master Servicer and the Trustee (the "Pooling Agreement"))
now existing or hereafter created and in the rights of such
Seller in, to and under all Related Property related thereto;
WHEREAS, the parties hereto wish to enter into this
Agreement;
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. Definitions. Unless otherwise defined herein,
capitalized terms which are used herein shall have the meanings
assigned to such terms in Section 1.1 of the Pooling Agreement or
the Series 1 Supplement dated as of the date hereof among the
Company, the Master Servicer and the Trustee (the "Series 1
Supplement").
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
<PAGE>
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 any Servicing Party, 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.
ARTICLE II
ADMINISTRATION AND SERVICING
OF RECEIVABLES
2.1. Appointment of Master Servicer and Servicers.
C&A Products agrees to act as the Master Servicer under the
Pooling and Servicing Agreements and the Investor
Certificateholders by their acceptance of the Certificates
consent to C&A Products acting as Master Servicer. The Master
Servicer will have responsibility for the management of the
servicing and receipt of collections in respect of the
Receivables and will have the authority to make any management
decisions relating to the Receivables to the extent such
authority is granted to the Master Servicer under any Pooling and
Servicing Agreement. The Trustee and the Investor
Certificateholders shall treat C&A Products as the Master
Servicer and may conclusively rely on the instructions, notices
and reports of C&A Products as Master Servicer for so long as C&A
Products is the Master Servicer. In addition, each Servicer
agrees to act as a Servicer under each Pooling and Servicing
Agreement and the Investor Certificateholders by their acceptance
of the Certificates consent to such Servicer acting as Servicer.
Each Servicer will be responsible, as directed by the Master
Servicer, for the servicing and administration of the Receivables
originated by it.
2.2. Servicing Procedures. (a) The Master Servicer
shall manage the servicing and administration of the Receivables,
the collection of payments due under the Receivables and charging
off any Receivables as uncollectible, all in accordance with the
Policies and all the terms of this Agreement. The Master
Servicer shall have full power and authority, acting alone or
through any party properly designated by it hereunder, to do any
and all things in connection with such servicing and
administration which it may deem necessary or desirable, but
subject to the terms of this Agreement and the other Transaction
Documents. Without limiting the generality of the foregoing and
subject to Section 6.1, the Master Servicer or its designee is
-2-
<PAGE>
hereby authorized and empowered (i) to instruct the Trustee to
make withdrawals from, and payments to, the Collection Accounts
in accordance with the Daily Report as set forth in the Pooling
and Servicing Agreements, (ii) to execute and deliver, on behalf
of the Trust for the benefit of the Certificateholders, any and
all instruments of satisfaction or cancellation, or of partial or
full release or discharge, and all other comparable instruments,
with respect to the Receivables and, after the delinquency of any
Receivable and to the extent permitted under and in compliance
with applicable Requirements of Law, to commence enforcement
proceedings with respect to such Receivables and (iii) to make
any filings, reports, notices, applications, registrations with,
and to seek any consents or authorizations from the Securities
and Exchange Commission and any state securities authority on
behalf of the Trust as may be necessary or advisable to comply
with any federal or state securities or reporting requirements or
laws. The Master Servicer shall notify any Rating Agency of the
appointment of a designee as provided for herein.
(b) Each Servicer, including the Master Servicer,
will, at its cost and expense and as agent for the Company, the
Trustee and the Investor Certificateholders, 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. Neither the Master Servicer nor any Servicer
will make any material changes that deviate from the Policies in
its administrative, servicing and collection systems except as
expressly permitted by the terms of any Pooling and Servicing
Agreement. In the event of default under any Receivable, the
responsible Servicer shall have the power and authority, on
behalf of the Trustee for the benefit of the Investor
Certificateholders, to take such action in respect of such
Receivable as such Servicer may deem advisable. In the
enforcement or collection of any Receivable, each Servicer shall
be entitled to sue thereon in (i) its own name or (ii) if, but
only if, the Company consents in writing (which consent will not
be unreasonably withheld), as agent for the Company. In no event
shall any Servicing Party be entitled to take any action which
would make the Company, the Trustee or the Investor
Certificateholders a party to any litigation without the express
prior written consent of such Person.
(c) Without limiting the generality of the foregoing
and subject to Section 6.1, each Servicing Party is hereby
authorized and empowered to delegate any or all of its servicing,
collection, enforcement and administrative duties hereunder with
respect to the Receivables serviced by it to a Person who agrees
to conduct such duties in accordance with the Policies; provided,
however, that, in the event that such delegation would reasonably
be expected to adversely affect the ability of such Servicing
Party to perform its obligations in the manner contemplated by
any Pooling and Servicing Agreement, or otherwise to have an
-3-
<PAGE>
adverse effect upon the Receivables taken as a whole, such
Servicing Party shall give prior written notice to the Trustee,
each Agent and the Rating Agencies of any such delegation and
prior to such delegation being effective shall have received
notice that the Rating Agency Condition shall be satisfied after
giving effect to such delegation and the consent of each Agent to
any such delegation shall have been obtained. No delegation of
duties by a Servicing Party permitted hereunder will relieve such
Servicing Party of its liability and responsibility with respect
to such duties.
(d) Neither any Servicing Party nor any Successor
Servicer shall be obligated to use separate servicing procedures,
offices, employees or accounts for servicing the Receivables
transferred to the Trust from the procedures, offices, employees
and accounts used by such Servicing Party or such Successor
Servicer, as the case may be, in connection with servicing other
receivables.
(e) Each Servicing Party shall maintain, at its own
expense, a blanket fidelity bond and an errors and omissions
insurance policy, with broad coverage with responsible companies
on all officers, employees or other persons acting on behalf of
the Servicing Party in any capacity with regard to the
Receivables to handle funds, money, documents and papers relating
to the Receivables. Any such fidelity bond and errors and
omissions insurance shall protect and insure the Servicing Party
against losses, including forgery, theft, embezzlement, fraud,
errors and omissions and negligent acts of such persons and shall
be maintained in a form and amount that would meet the
requirements of prudent institutional receivable servicers. No
provision of this subsection 2.2(e) requiring such fidelity bond
and errors and omissions insurance shall diminish or relieve the
Servicing Party from its duties and obligations as set forth in
this Agreement. The Servicing Party shall be deemed to have
complied with this provision if one of its respective Affiliates
has such fidelity bond and errors and omissions policy coverage
and, by the terms of such fidelity bonds and errors and omission
policy, the coverage afforded thereunder extends to the Servicing
Party. Copies of all such fidelity bonds and insurance policies
shall be provided to the Rating Agencies. Upon request of
Investor Certificateholders evidencing more than 50% of an
Outstanding Series, the Servicing Party shall cause to be
delivered to the Trustee a certification evidencing coverage
under such fidelity bond and insurance policy. Any such fidelity
bond or insurance policy shall not be cancelled or modified in a
materially adverse manner without ten days prior written notice
to the Rating Agencies unless such fidelity bond or insurance
policy is replaced by another fidelity bond or insurance policy
that satisfies the requirements of this subsection 2.2(e).
-4-
<PAGE>
(f) Each Servicing Party shall comply with and perform
its servicing obligations with respect to the Receivables in
accordance with the contracts, if any, relating to the
Receivables and the Policies, except insofar as any failure to so
comply or perform would not materially and adversely affect the
rights of the Trust, the Trustee or the Investor
Certificateholders hereunder or under the Certificates in any
Receivable.
(g) No Servicing Party shall take any action to cause
any Receivable to be evidenced by any instrument (as defined in
the UCC as in effect in the State of New York or as defined in
any similar Canadian legislation) or any title in bearer form
except in connection with its enforcement or collection of a
Receivable, in which event such Servicing Party shall deliver
such instrument to the Trustee as soon as reasonably practicable
but in no event more than 30 days after execution thereof.
2.3. Collections. (a) The Servicers, or the Master
Servicer on their behalf, shall have instructed all Obligors to
make all payments in respect of the Receivables to a Lockbox, a
Lockbox Account or to a Collection Account. All Collections
received in a Lockbox shall, within one Business Day of receipt
thereof, be deposited in a Lockbox Account. In the event that
any payments in respect of the Receivables are made directly to a
Servicing Party (including, without limitation, any employees
thereof or independent contractors employed thereby), such
Servicing Party shall, within two Business Days of receipt
thereof, forward such amounts to a Lockbox, a Lockbox Account or
a Collection Account and, prior to forwarding such amounts, such
Servicing Party shall hold such payments in trust as custodian
for the Trustee. Each of the Company and each Servicing Party
represents, warrants and agrees that all Collections shall be
collected, processed and deposited by it pursuant to, and in
accordance with the terms of the Pooling and Servicing
Agreements.
(b) Each Lockbox Agreement shall provide that the
Lockbox Processor thereunder is irrevocably directed, and such
Lockbox Processor irrevocably agrees, to (i) deposit funds
received in the Lockbox directly into the Lockbox Account and
(ii) transfer funds on deposit in the Lockbox Account within one
Business Day of receipt thereof to the Trustee for deposit in the
applicable Collection Account. Each Lockbox Agreement shall be
substantially in the form of Exhibit B to the Pooling Agreement
or in such form as the Lockbox Processor party thereto employs in
the ordinary course of its business for transactions of a type
similar to the one contemplated by this Agreement. A new Lockbox
Account may be designated by the Company and the Master Servicer;
provided that the Lockbox Processor chosen to maintain such new
Lockbox Account shall have entered into a Lockbox Agreement with
the Company, the Master Servicer and the Trustee. The Company or
-5-
<PAGE>
the Master Servicer shall notify each Rating Agency of the
designation of a new Lockbox Account. Prior to any resignation
of the Lockbox Processor or termination of the Lockbox Processor
by the Company or the Trustee, the Master Servicer hereby agrees
to obtain a replacement Lockbox Processor, the unsecured and
uncollateralized obligations of which (or its holding company
parent) are rated in one of the three highest long-term or short-
term rating categories by each Rating Agency rating such
replacement Lockbox Processor, to serve under a Lockbox Agreement
which is reasonably acceptable to the Trustee.
(c) The Trustee shall administer amounts on deposit in
the Collection Accounts and the Lockbox Accounts in accordance
with the terms of the Pooling and Servicing Agreements. Each of
the Company and each Servicing Party acknowledges and agrees that
(i) it shall not have any right to withdraw any funds on deposit
in any Collection Account or any Lockbox Account and (ii) all
amounts deposited in any Collection Account or Lockbox Account
shall be under the sole dominion and control of the Trustee.
(d) As soon as practicable but in any event not later
than the Business Day following the date that any Servicing Party
determines and identifies that any of the collected funds
received in any of the Lockboxes, the Lockbox Accounts or the
Collection Accounts do not constitute Collections on account of
the Receivables, such monies which do not constitute such
Collections shall be remitted to the relevant Seller to the
extent such determination and identification is reasonably
satisfactory to the Trustee (or such other Person as may be
entitled thereto).
(e) All collections received or deposited in the
Collection Accounts as "Collections" shall be deemed, for
purposes of the Transaction Documents, to have been received or
deposited 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 deposited in
the Collection Accounts by 1:00 p.m., New York City time, such
day of deposit and (ii) if funds are deposited in the Collection
Accounts after 1:00 p.m., New York City time, the Business Day
next following such day of deposit.
(f) Unless otherwise required by law or unless an
Obligor designates that a payment be applied to a specific
Receivable, all Collections received from an Obligor shall be
applied to the Receivables of such Obligor to which such
Collections relate.
2.4. Reconciliation of Deposits. If in respect of a
Collection of a Receivable any Servicing Party deposits into any
Collection Account (a) a check received in respect of such
Collection which check is not honored for any reason or (b) an
-6-
<PAGE>
amount that is less than or more than the actual amount of such
Collection, such Servicing Party shall, in lieu of making a
reconciling withdrawal or deposit, as the case may be, adjust the
amount subsequently deposited into such Collection Account to
reflect such dishonored check or mistake. Any Receivable in
respect of which a dishonored check is received shall be deemed
not to have been paid; provided that no adjustments made pursuant
to this Section 2.4 will change any amount previously reported
pursuant to Section 4.3.
2.5. Servicing Compensation. (a) As full
compensation for their servicing activities hereunder and
reimbursement for their expenses as set forth in subsection
2.5(b), the Servicing Parties shall be entitled to receive on
each Distribution Date for the related Accrual Period prior to
the termination of the Trust pursuant to Section 9.1 of the
Pooling Agreement a servicing fee (the "Servicing Fee"), which
shall be payable to the Master Servicer for the account of the
Servicing Parties. The Servicing Fee shall be an amount equal to
(i) the product of (A) the Servicing Fee Percentage and (B) the
average aggregate Principal Amount of the Receivables in the
Trust for such Accrual Period and (C) the number of days in such
Accrual Period, divided by (ii) 360. Except as otherwise set
forth in the related Supplement, the share of the Servicing Fee
allocable to each Outstanding Series for any Accrual Period shall
be an amount equal to the product of (i) the Servicing Fee and
(ii) a fraction (expressed as a percentage) (A) the numerator of
which is the daily average Invested Amount for such Accrual
Period with respect to such Series (or, in the case of the Series
2 Certificates, the daily average Aggregate Commitment Amount)
and (B) the denominator of which is the sum of (1) the daily
average Invested Amounts for all Outstanding Series (other than
Series 2) for such Accrual Period and (2) the daily average of
the Aggregate Commitment Amount with respect to the Series 2
Certificates for such Accrual Period (with respect to any such
Series, the "Monthly Servicing Fee"); provided, however, that if
on any day C&A Products or any Affiliate thereof is acting as
Master Servicer and an Early Amortization Event has occurred and
is continuing with respect to any Outstanding Series, (i) the
Monthly Servicing Fee with respect to such Series shall be
deposited into the Expense Account up to the amount of the
Expense Account Limit for application in accordance with Section
7.3 of the Pooling Agreement and (ii) thereafter, the Monthly
Servicing Fee with respect to such Series shall be deferred until
all amounts due under the Investor Certificates of such Series
have been paid in full. The Servicing Fee shall be payable to
the Master Servicer solely pursuant to the terms of, and to the
extent amounts are available for payment under, Article III of
the Pooling Agreement. The Master Servicer shall issue invoices
to the Canadian Seller once a month which invoice shall contain
the following legend:
-7-
<PAGE>
"Pursuant to the Servicing Agreement dated as of
March 30, 1995 among Carcorp, Inc., Collins &
Aikman Products Co., as Master Servicer, its
wholly owned subsidiaries named therein, as
Servicers, and Chemical Bank, as Trustee, the
above noted servicing fee includes all sales and
other value added taxes including Canadian goods
and services tax and Canadian provincial sales
tax, if applicable."
(b) The expenses of the Servicing Parties shall
include the amounts due to the Trustee pursuant to Section 8.5 of
the Pooling Agreement and the reasonable fees and disbursements
of independent accountants, and including all other fees and
expenses of the Trust (including counsel fees, if any) not
expressly stated herein to be for the account of the Certificate-
holders; provided, however, that in no event shall any Servicing
Party be liable for any federal, state or local income or
franchise tax, or any interest or penalties with respect thereto,
assessed on the Trust, the Trustee or the Certificateholders
except as expressly provided herein. Notwithstanding anything to
the contrary herein or in any other Pooling and Servicing
Agreement, in the event that the Master Servicer fails to pay any
amount due to the Trustee pursuant to Section 8.5 of the Pooling
Agreement, or during an Early Amortization Event, the Trustee
shall be entitled, in addition to any other rights it may have
under law and under the Pooling Agreement, to receive directly
such amounts owing to it hereunder from, and in the same order of
priority as, the Servicing Fee before payment to the Master
Servicer of any portion thereof; provided, that in the event the
Master Servicer, on its own behalf and on behalf of the
Servicers, shall have elected to waive its rights to payment of
the Servicing Fee or the Servicing Fee is deferred pursuant to
subsection 2.5(a), the Trustee shall nonetheless be entitled to
receive such amounts from payments which would ordinarily be
applied to the payment of the Servicing Fee, in the same order of
priority as though such Servicing Fee were payable. Each
Servicing Party shall be required to pay expenses for its own
account, and shall not be entitled to any payment therefor other
than the Servicing Fee. Nothing contained herein shall be
construed to limit the obligation of C&A Products to pay any
amounts due the Trustee pursuant to Section 8.5 of the Pooling
Agreement.
2.6. Addition of Servicers. Subject to the terms and
conditions hereof, from time to time one or more Subsidiaries of
C&A Products may be added as additional Servicers hereunder upon
(a) execution by each such Subsidiary of an Additional Servicer
Supplement and (b) the prior satisfaction with respect to such
Subsidiary of each of the conditions precedent set forth in
Section 3.4 of the Receivables Sale Agreement.
-8-
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE MASTER SERVICER AND THE SERVICERS
Each Servicing Party hereby makes the following
representations and warranties to each of the other parties
hereto:
3.1. Corporate Existence; Compliance with Law. Such
Person (i) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its
organization, (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 (iii) is duly
qualified to do business as 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 Receivables as required by
this Agreement requires such qualification, except where the
failure to so qualify or obtain licenses or approvals would not
be reasonably likely to have a Material Adverse Effect.
3.2. Corporate Power; Authorization. Such Person has
the corporate power and authority to execute, deliver and perform
this Agreement and the other Transaction Documents to which it is
a party and has taken all necessary corporate action to authorize
the execution, delivery and performance of this Agreement and the
other Transaction Documents to which it is a party. No consent
or authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is
required in connection with the execution, delivery, performance,
validity or enforceability of this Agreement and the other
Transaction Documents to which it is a party by or against such
Person other than (i) those which have duly been obtained or made
and are in full force and effect on the Initial Closing Date,
(ii) any filings of UCC-1 financing statements (or similar
instruments as may be necessary or advisable in the Provinces of
Quebec and Ontario) necessary to perfect the Company's or the
Trust's interest in the Receivables and the Related Property,
(iii) those that may be required under state securities or "blue
sky" laws in conection with the offering or sale of Certificates
and (iv) any such consent, authorization, filing, notice or other
act, the absence of which would not reasonably be likely to have
a Material Adverse Effect. This Agreement and each other
Transaction Document to which it is a party have been duly
executed and delivered on behalf of such Person.
3.3. Enforceability. This Agreement and each other
Transaction Document to which it is a party constitute the legal,
valid and binding obligation of such Person enforceable against
-9-
<PAGE>
it in accordance with its terms, except as such enforceability
may be limited by applicable 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 proceeding
at law or in equity).
3.4. No Legal Bar. The execution, delivery and
performance of this Agreement and each other Transaction Document
to which it is a party will not violate any Requirement of Law or
Contractual Obligation of such Person except for violations that
would not be reasonably likely to have a Material Adverse Effect,
and will not result in, or require, the creation or imposition of
any Lien (other than Liens contemplated hereby) on any of its
properties or revenues pursuant to any such Requirement of Law or
Contractual Obligation.
3.5. No Material Litigation. Except as described in
(i) the Annual Report on Form 10-K of Collins & Aikman
Corporation, (ii) any Quarterly Report on Form 10-Q of Collins &
Aikman Corporation or (iii) any Current Report on Form 8-K of
Collins & Aikman Corporation, 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 it or any of its properties or rights
as to which there is a reasonable possibility of an adverse
determination and which (A) if adversely determined, could
individually or in the aggregate result in a Material Adverse
Effect, or (B) involve this Agreement or any of the other
Transaction Documents or any of the transactions contemplated
hereby or thereby.
3.6. No Default. Such Person is not in default under
or with respect to any of its Contractual Obligations in any
respect which would be reasonably likely to have a Material
Adverse Effect. No Early Amortization Event or Potential Early
Amortization Event with respect to such Person has occurred and
is continuing.
3.7. Tax Returns. It has filed or caused to be filed
all Federal, and all 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 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
-10-
<PAGE>
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 28, 1995, which taxes, if not paid or
adequately provided for, would be reasonably likely to have a
Material Adverse Effect. The tax returns of such Person 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 4 to the Receivables Sale Agreement, as of the
Initial Closing Date, with respect to such Person, (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 any
nature (including interest, penalties and additions thereto) that
is imposed by any Governmental Authority.
3.8. Servicing Ability. As of the related Issuance
Date, there has not been since the date of this Agreement any
material adverse change in the ability of such Person to perform
its obligations, as Servicer or Master Servicer, as the case may
be, under any Transaction Document.
3.9. Location of Records. The offices at which such
Person keeps its records concerning the Receivables serviced by
it either (i) are located at the addresses set forth for such
Person on Schedule 1 to the Receivables Sale Agreement or (ii)
have been notified to the Trustee in accordance with the
provisions of Section 4.9. The chief executive office of such
Person is located at one of such locations and is the place where
such Person is "located" for the purposes of Section 9-103(3)(d)
of the UCC as in effect in the State of New York or, if
applicable, for purposes of the relevant provincial laws of
Canada.
ARTICLE IV
COVENANTS OF THE MASTER SERVICER
AND THE SERVICERS
4.1. Servicer Repurchase Payment. (a) If any
Servicing Party shall breach any covenant contained in subsection
2.2(e), 2.2(f), 4.6, 4.7 or 4.8 which materially and adversely
affects the interest of the Investor Certificateholders in any
Receivable, then upon receipt by any Servicing Party of written
-11-
<PAGE>
notice of such event given by the Trustee or upon a Responsible
Officer of such Servicing Party obtaining knowledge of such event
(whether such breach relates to such Person or to another Person
bound by such representations, warranties and covenants), the
Servicing Parties, jointly and severally, shall purchase such
Receivable from the Trust in accordance with subsection 4.1(b).
(b) The Servicing Parties, jointly and severally,
shall purchase such Receivable by depositing into the applicable
Collection Account in immediately available funds on the Business
Day following the date on which the obligation to make such
purchase arises pursuant to this Section 4.1, an amount equal to
the outstanding Principal Amount of such Receivable (the
"Servicer Repurchase Amount"). Upon each such purchase by a
Servicing Party, the Trust shall automatically and without
further action be deemed to sell, transfer, assign, and set over,
and otherwise convey to such Servicing Party, without recourse,
representation or warranty, all right, title and interest of the
Trust in and to such Receivable, all monies due or to become due
with respect thereto and all proceeds thereof; and such
Receivable shall be treated by the Trust as collected in full as
of the date on which it was transferred. The Trustee shall
execute such documents and instruments of transfer or assignment
and take such other actions as shall be reasonably requested by
such Servicing Party to effect the conveyance of any Receivable
pursuant to this Section. The obligation of the Servicing
Parties to purchase any such Receivables shall constitute the
sole remedy respecting any breach of the representations,
warranties and covenants set forth in subsection 2.2(e), 2.2(f),
4.6, 4.7 or 4.8 with respect to such Receivables available to
Certificateholders or the Trustee on behalf of Certificate-
holders.
4.2. Delivery of Daily Reports. (a) Unless otherwise
specified in the Supplement with respect to any Series, for each
Business Day (the "Reported Day") and with respect to each
Outstanding Series, the Master Servicer shall submit to the
Trustee and each Agent no later than 3:00 p.m., New York City
time, on the second Business Day following each Reported Day, a
report substantially in the form attached to the related
Supplement of each such Series (the "Daily Report") setting forth
for the Reported Day total Collections, the amount of Receivables
and Eligible Receivables created, and such other information as
the Trustee may reasonably request. The Daily Report shall be in
an electronic format mutually agreed upon by the Master Servicer
and the Trustee, or pending such agreement, by facsimile. By
delivery of a Daily Report, the Master Servicer shall be deemed
to have made a representation and warranty that all information
set forth therein is true and correct.
(b) On each Business Day, each Servicer shall provide
the Master Servicer with a written report (a "Seller Daily
-12-
<PAGE>
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.
4.3. Delivery of Monthly Settlement Statement. Unless
otherwise specified in the Supplement with respect to any
Outstanding Series, the Master Servicer hereby covenants and
agrees that it shall deliver to the Trustee, each Agent and each
Rating Agency by 11:00 a.m., New York City time, on each
Settlement Report Date, a certificate of a Responsible Officer of
the Master Servicer substantially in the form attached to the
related Supplement of each such Series (a "Monthly Settlement
Statement") setting forth, as of the last day of the Settlement
Period most recently ended and for such Settlement Period, (a)
the information described in such Monthly Settlement Statement
(with such changes as may be agreed to by the Master Servicer,
the Trustee and the Rating Agencies) and (b) such other
information as the Trustee may reasonably request. Such
certificate shall include a certification by a Responsible
Officer of the Master Servicer that, to the best of such
Responsible Officer's knowledge, the information contained
therein is true and correct and each Servicing Party has
performed in all material respects all of its obligations under
each Transaction Document throughout such preceding Settlement
Period (or, if there has been a material default in the
performance of any such obligation, specifying each such default
known to such officer and the nature and status thereof). Each
Servicer hereby agrees to provide sufficient information to the
Master Servicer on a timely basis in order to permit the Master
Servicer to prepare each Monthly Settlement Statement. A copy of
each Monthly Settlement Statement may be obtained by any
Certificateholder by a request in writing to the Trustee
addressed to the Corporate Trust Office.
4.4. Delivery of Annual Servicer's Certificate. The
Master Servicer agrees that it shall deliver to the Trustee, each
Agent and each Rating Agency, a certificate of a Responsible
Officer of the Master Servicer, substantially in the form of
Exhibit D to the Pooling Agreement, stating that:
(a) a review of the activities of each Servicing
Party during the preceding fiscal year (or in the case of
the first such certificate issued after the Initial
Closing Date, during the period from the Initial Closing
Date) and of its performance under each Transaction
Document was made under the supervision of such
Responsible Officer; and
(b) to the best of such Responsible Officer's
knowledge, based on such review, (i) each Servicing Party
-13-
<PAGE>
has performed in all material respects its obligations
under each Transaction Document throughout the period
covered by such certificate (or, if there has been a
material default in the performance of any such
obligation, specifying each such default known to such
Responsible Officer and the nature and status thereof)
and (ii) each Daily Report and Monthly Settlement
Statement was accurate and correct in all material
respects, except as specified in such certificate.
Such certificate shall be delivered by the Master Servicer within
45 days after the end of each fiscal year of C&A Products
commencing with the fiscal year ending January 27, 1996. A copy
of such certificate may be obtained by any Certificateholder by a
request in writing to the Trustee addressed to the Corporate
Trust Office.
4.5. Delivery of Independent Public Accountants'
Servicing Reports. The Master Servicer will cause Arthur
Andersen LLP or other independent certified public accountants of
nationally recognized standing which constitute one of the
accounting firms commonly referred to as the "big six" accounting
firms (or any successors thereto), or otherwise acceptable to the
Trustee (who may also render other services to the Master
Servicer, any Servicer and the Company) to furnish to the
Company, the Trustee, each Agent and each Rating Agency within
six months after the Initial Closing Date and thereafter within
120 days following the last day of each fiscal year of C&A
Products a letter to the effect that such firm has performed
certain agreed upon procedures relating to each Servicing Party
with respect to the Receivables and its performance hereunder
during the preceding fiscal year (or, in the case of the first
such letter issued after the Initial Closing Date, during the
period from the Initial Closing Date) and describing its findings
with respect to such procedures. A copy of such report may be
obtained by any Certificateholder by a request in writing to the
Trustee addressed to the Corporate Trust Office.
4.6. Extension, Amendment and Adjustment of
Receivables; Amendment of and Compliance with Policies. (a)
Each Servicing Party hereby covenants and agrees that it shall
not extend, rescind, cancel, amend or otherwise modify, or
attempt or purport to extend, rescind, cancel, amend or otherwise
modify, the terms of, or grant any Dilution Adjustment to, any
Receivable purported to be sold by such Person, or otherwise take
any action which is intended to cause or permit an Eligible
Receivable to cease to be an Eligible Receivable, except in any
such case (i) in accordance with the terms of the Policies, (ii)
as required by any Requirement of Law, (iii) in the case of any
Dilution Adjustments, upon the payment by or on behalf of the
related Seller of a Seller Adjustment Payment pursuant to Section
2.5 of the Receivables Sale Agreement or (iv) to the extent that
-14-
<PAGE>
such modification could not reasonably be expected to have a
materially adverse effect on the Company's or the Trust's
interest in the Receivables. Any Dilution Adjustment authorized
to be made pursuant to the preceding sentence shall result in the
reduction, on the Business Day on which such Dilution Adjustment
arises or is identified, in the aggregate Principal Amount of
Receivables and if as a result of such a reduction, the Aggregate
Receivables Amount is less than the Aggregate Target Receivables
Amount, the related Seller shall be required to pay into the
Series Principal Collection Sub-subaccount with respect to each
Outstanding Series in immediately available funds within one
Business Day of such determination such Series' pro rata share of
the amount by which the Aggregate Target Receivables Amount
exceeds the Aggregate Receivables Amount.
(b) No Servicing Party shall make any change or
modification to the Policies in any material respect, except (i)
if such changes or modifications are necessary under any
Requirement of Law, (ii) if such changes or modifications would
not reasonably be expected to have a material adverse effect on
the Company's or the Trust's interests in the Receivables or
(iii) if the Rating Agency Condition is satisfied with respect
thereto; provided, however, that if any change or modification,
other than a change or modification permitted pursuant to clause
(i) or (ii) above, would reasonably be expected to have a
material adverse effect on the interests of the Investor
Certificateholders of a Series which is not rated by a Rating
Agency, the consent of the applicable Agent shall be required to
effect such change or modification. The applicable Servicing
Party shall provide notice to each Rating Agency of any
modification to the Policies.
(c) Each Servicing Party shall perform its obligations
in accordance with and comply in all material respects with the
Policies.
4.7. Protection of Certificateholders' Rights. Each
Servicing Party hereby agrees that it shall take no action, nor
intentionally omit to take any action, which could reasonably be
expected to substantially impair the rights or interests of the
Certificateholders in the Receivables nor shall it reschedule,
revise or defer payments due on any Receivable except in
accordance with the Policies.
4.8. Security Interest. Each Servicing Party hereby
covenants and agrees that it shall not sell, pledge, assign or
transfer to any other Person, or grant, create, incur, assume or
suffer to exist any Lien on, any Receivable sold and assigned to
the Trust, whether now existing or hereafter created, or any
interest therein, and such Servicing Party shall defend the
right, title and interest of the Trust in, to and under any
Receivable sold and assigned to the Trust, whether now existing
-15-
<PAGE>
or hereafter created, against all claims of third parties
claiming through or under such Servicing Party or the Company;
provided, however, that nothing in this Section 4.8 shall prevent
or be deemed to prohibit such Servicing Party from suffering to
exist upon any of the Receivables any Permitted Liens described
in clause (i) of the definition thereof.
4.9. Location of Records. Each Servicing Party hereby
covenants and agrees that it (a) shall not move its chief
executive office or any of the offices where it keeps its records
with respect to the Receivables or, in the case of the Canadian
Seller, its legal head office, outside of the location specified
in respect thereof on Schedule 1 to the Receivables Sale
Agreement, in any such case, without giving 30 days' prior
written notice to the Trustee and (b) shall promptly take all
actions reasonably required (including but not limited to all
filings and other acts necessary or reasonably requested by the
Trustee as being advisable under the UCC or other similar statute
or legislation) in order to continue the valid and enforceable
interest of the Trust in all Receivables now owned or hereafter
created.
4.10. Visitation Rights. Each Servicing Party shall,
at any reasonable time during normal business hours on any
Business Day and from time to time, upon reasonable prior notice,
according to such Servicing Party's normal security and
confidentiality requirements, permit (a) the Trustee, any Agent
or any of their respective agents or representatives, (i) to
examine and make copies of and abstracts from the records, books
of account and documents (including computer tapes and disks) of
such Person relating to the Receivables and (ii) following the
termination of the appointment of such Person as Master Servicer
or as Servicer, as the case may be, to be present at the offices
and properties of such Person to administer and control the
Collection of the Receivables and (b) the Trustee, any Agent or
any of their respective agents or representatives, to visit the
properties of such Person to discuss the affairs, finances and
accounts of such Person relating to the Receivables or such
Person's performance hereunder or under any of the other
Transaction Documents to which it is a party with any of its
officers or directors and with its independent certified public
accountants; provided that the Trustee or the Agent, as the case
may be, shall notify such Person prior to any contact with such
accountants and shall give such Person the opportunity to
participate in such discussions.
4.11. Lockbox Agreement; Lockbox Accounts. Each
Servicing Party shall (a) maintain, and keep in full force and
effect, each Lockbox Agreement to which such Person is a party,
except to the extent otherwise permitted under the terms of the
Transaction Documents, and (b) ensure that each related Lockbox
Account shall be free and clear of, and defend each such Lockbox
-16-
<PAGE>
Account against, any writ, order, stay, judgment, warrant of
attachment or execution or similar process.
4.12. Instruments. Each Servicing Party shall not
take any action to cause any Receivable to be evidenced by any
instrument (as defined in the UCC as in effect in the State of
New York or other similar statute or legislation) or any title in
bearer form except in connection with the enforcement or
collection of a Receivable.
4.13. Delivery of Financial Statements. The Master
Servicer shall furnish to the Trustee:
(a) 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 sheets 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 (beginning with
the consolidated financial statements delivered for the
1996 fiscal year) and certified without a "going concern"
or like qualification or exception, or scope limitation,
by Arthur Andersen LLP or other independent certified
public accountants of nationally recognized standing
which constitute one of the accounting firms commonly
referred to as the "big six" accounting firms (or any
successors thereto), or otherwise acceptable to the
Trustee; 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 Master
Servicer, commencing with the fiscal quarter ending April
29, 1995, the unaudited consolidated balance sheets 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);
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
-17-
<PAGE>
approved by such accountants or officer, as the case may be, and
disclosed therein).
4.14. Notices. Each Servicing Party shall furnish to
the Trustee and each Rating Agency, promptly upon obtaining
knowledge of the occurrence of any Purchase Termination Event,
Potential Purchase Termination Event, Early Amortization Event,
Potential Early Amortization Event or Servicer Default, written
notice thereof.
ARTICLE V
OTHER MATTERS RELATING TO THE
MASTER SERVICER AND THE SERVICERS
5.1. Merger, Consolidation, etc. The Master Servicer
shall not consolidate with or merge into any other corporation or
convey or transfer its properties and assets substantially as an
entirety to any Person, unless:
(a) the corporation formed by such consolidation or
into which the Master Servicer is merged or the Person
which acquires by conveyance or transfer the properties
and assets of the Master Servicer substantially as an
entirety shall be a corporation organized and existing
under the laws of the United States of America or any
State or the District of Columbia, and, if the Master
Servicer is not the surviving entity, such corporation
shall assume, without the execution or filing of any
paper or any further act on the part of any of the
parties hereto, the performance of every covenant and
obligation of the Master Servicer hereunder;
(b) the Master Servicer has delivered to the Trustee
an officer's certificate executed by a Vice President or
more senior officer and an Opinion of Counsel each
stating that such consolidation, merger, conveyance or
transfer comply with this Section 5.1 and that all
conditions precedent herein provided for relating to such
transaction have been complied with; and
(c) in the case of a merger into or conveyance or
transfer by the Master Servicer of its properties and
assets substantially as an entirety to any Person other
than Collins & Aikman Corporation or any Seller, the
Rating Agency Condition shall have been satisfied in
respect thereof.
5.2. Indemnification of the Trust and the Trustee.
Each Servicing Party hereby agrees, jointly and severally, to
indemnify and hold harmless the Trustee for the benefit of the
-18-
<PAGE>
Certificateholders and the Trustee and their respective
directors, officers, agents and employees (an "indemnified
person") from and against any loss, liability, expense, damage or
injury suffered or sustained by reason of any acts, omissions or
alleged acts or omissions arising out of, or relating to,
activities of such Servicing Party pursuant to any Pooling and
Servicing Agreement to which it is a party, including but not
limited to any judgment, award, settlement, reasonable attorneys'
fees and other reasonable costs or expenses incurred in
connection with the defense of any actual or threatened action,
proceeding or claim; provided that the Servicing Parties shall
not indemnify any indemnified person for any liability, cost or
expense of such indemnified person (a) arising solely from the
failure of an Obligor to make payment in respect of a Receivable
as a result of defaults or other losses relating to such
Receivable for which no specific indemnification obligation is
required hereunder or (b) to the extent that such liability, cost
or expense arises from the negligence, bad faith or willful
misconduct of such indemnified person (or any of their respective
directors, officers, agents or employees). The provisions of
this indemnity shall run directly to, and be enforceable by, an
injured party and shall survive the termination of this Agreement
or the resignation of the Master Servicer or any Servicer.
5.3. Master Servicer Not to Resign. The Master
Servicer shall not resign from the obligations and duties hereby
imposed on it except upon determination that (a) the performance
of its duties hereunder is no longer permissible under applicable
law and (b) there is no reasonable action which the Master
Servicer could take to make the performance of its duties
hereunder permissible under applicable law. Any such
determination permitting the resignation of the Master Servicer
shall be evidenced as to clause (a) above by an Opinion of
Counsel to such effect delivered to the Trustee. No such
resignation shall become effective until a Successor Servicer or
another Servicing Party shall have assumed the responsibilities
and obligations of the Master Servicer in accordance with
Section 6.2. Each Rating Agency shall be notified of such
resignation.
5.4. Access to Certain Documentation and Information
Regarding the Receivables. Each Servicing Party will hold in
trust for the Trustee at the office of such Servicing Party set
forth in Schedule 1 to the Receivable Sale Agreement such
computer programs, books of account and other records as are
reasonably necessary to enable the Trustee 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).
-19-
<PAGE>
ARTICLE VI
SERVICER DEFAULTS
6.1. Servicer Defaults. If, with respect to any
Servicing Party, any one of the following events (a "Servicer
Default") shall occur and be continuing:
(a) failure by the Master Servicer to deliver, within
two Business Days of the due date thereof, any Daily
Report or, within three Business Days of the due date
thereof, any Monthly Settlement Statement conforming in
all material respects to the requirement of Section 4.2
or 4.3, as the case may be, in each case, after the
earlier to occur of (i) the date upon which a Responsible
Officer of the Master Servicer obtains knowledge of such
failure or (ii) the date on which written notice of such
failure, requiring the same to be remedied, shall have
been given to the Master Servicer by the Trustee, or to
the Master Servicer and the Trustee from holders of the
Term Certificates evidencing 25% or more of the Term
Certificates Invested Amount or by any Agent;
(b) failure by such Servicing Party to pay any amount
on or before the date occurring five Business Days after
the earlier to occur of (i) the date upon which a
Responsible Officer of the Master Servicer obtains
knowledge of such failure or (ii) the date on which
written notice of such failure, requiring the same to be
remedied, shall have been given to such Servicing Party
by the Trustee, or to such Servicing Party and the
Trustee from holders of the Term Certificates evidencing
25% or more of the Term Certificates Invested Amount;
(c) failure on the part of such Servicing Party duly
to observe or perform in any material respect any other
covenants or agreements of such Servicing Party set forth
in any Pooling and Servicing Agreement which has a
material adverse effect on the holders of any outstanding
Series, which continues unremedied until 30 days after
the date on which written notice of such failure,
requiring the same to be remedied, shall have been given
to such Servicing Party by the Trustee, or to such
Servicing Party and the Trustee by holders of the Term
Certificates evidencing 25% or more of the Term
Certificates Invested Amount or by any Agent; provided
that no Servicer Default shall be deemed to occur under
this subsection if the related Servicing Party shall have
complied with the provisions of Section 4.1 with respect
thereto;
-20-
<PAGE>
(d) any representation, warranty or certification made
by such Servicing Party in any Pooling and Servicing
Agreement or in any certificate delivered pursuant
thereto shall prove to have been incorrect when made or
deemed made, which incorrectness has a material adverse
effect on the holders of any outstanding Series which
material adverse effect continues unremedied until 30
days after the date on which written notice thereof,
requiring the same to be remedied, shall have been given
to such Servicing Party by the Trustee, or to such
Servicing Party and the Trustee by holders of the Term
Certificates evidencing 25% or more of the Term
Certificates Invested Amount or by any Agent; provided
that no Servicer Default shall be deemed to occur under
this subsection if the related Servicing Party shall have
complied with the provisions of Section 4.1 with respect
thereto;
(e) (i) such Servicing Party shall commence any case,
proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign,
relating to bankruptcy, insolvency, reorganization or
relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to
it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets,
or any Servicing Party shall make a general assignment
for the benefit of its creditors; or (ii) there shall be
commenced against any Servicing Party any case,
proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an
order for relief or any such adjudication or appointment
or (B) remains undismissed, undischarged or unbonded for
a period of 60 days; or (iii) there shall be commenced
against any Servicing Party or any of its Subsidiaries
any case, proceeding or other action seeking issuance of
a warrant of attachment, execution, distraint or similar
process against all or any substantial part of its assets
which results in the entry of an order for any such
relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 such days from
the entry thereof; or (iv) any Servicing Party or any of
its respective Subsidiaries shall take any action in
furtherance of, or indicating its consent to, approval
of, or acquiescence in, any of the acts set forth in
clause (i), (ii), or (iii) above; or (v) any Servicing
Party shall generally not, or shall be unable to, or
-21-
<PAGE>
shall admit in writing its inability to, pay its debts as
they become due; or
(f) there shall have occurred and be continuing a
Purchase Termination Event with respect to such Servicing
Party under the Receivables Sale Agreement;
then, in the event of any Servicer Default, so long as the
Servicer Default shall not have been remedied, the Trustee may,
and at the written direction of (i) the holders of Term
Certificates evidencing 50% or more of the Invested Amount (as
such term is defined in the Series 1 Supplement) voting as a
single class or (ii) the Majority Purchasers (as defined in the
Series 2 Supplement) shall, by notice then given in writing to
the Master Servicer and each Rating Agency (a "Termination
Notice"), terminate all or any part of the rights and obligations
of such Servicing Party as Master Servicer or Servicer, as the
case may be, under the Pooling and Servicing Agreements.
Notwithstanding anything to the contrary in this Section 6.1, a
delay in or failure of performance referred to under clause (b)
above for a period of 10 Business Days after the applicable grace
period or a delay in or failure of performance referred to under
clauses (a), (c) or (d) above for a period of 30 Business Days
after the applicable grace period shall not constitute a Servicer
Default, if such delay or failure could not have been prevented
by the exercise of reasonable diligence by the Servicing Party
and such delay or failure was caused by an act of God or other
similar occurrences. After receipt by a Servicing Party of a
Termination Notice, and on the date that a Successor Servicer
shall have been appointed by the Trustee pursuant to Section 6.2,
all authority and power of such Servicing Party under any Pooling
and Servicing Agreement to the extent specified in such
Termination Notice shall pass to and be vested in a Successor
Servicer (a "Service Transfer"); and, without limitation, the
Trustee is hereby authorized and empowered (upon the failure of a
Servicing Party to cooperate) to execute and deliver, on behalf
of such Servicing Party, as attorney-in-fact or otherwise, all
documents and other instruments upon the failure of such
Servicing Party to execute or deliver such documents or
instruments, and to do and accomplish all other acts or things
necessary or appropriate to effect the purposes of such Service
Transfer. Each Servicing Party agrees to cooperate with the
Trustee and such Successor Servicer in effecting the termination
of the responsibilities and rights of a Servicing Party to
conduct servicing hereunder, including, without limitation, the
transfer to such Successor Servicer of all authority of a
Servicing Party to service the Receivables provided for under the
Pooling and Servicing Agreements, including, without limitation,
all authority over all Collections which shall on the date of
transfer be held by a Servicing Party for deposit, or which have
been deposited by a Servicing Party, in the Collection Accounts,
or which shall thereafter be received with respect to the
-22-
<PAGE>
Receivables, and in assisting the Successor Servicer. The
relevant Servicing Party shall promptly (x) assemble all such
Servicing Party's documents, instruments and other records
(including credit files, licenses, rights, copies of all relevant
computer programs and any necessary licenses for the use thereof,
related material, computer tapes, disks, cassettes and data) that
(i) evidence or will evidence or record Receivables sold and
assigned to the Trust and (ii) are otherwise necessary or
desirable to enable a Successor Servicer to effect the immediate
Collection of such Receivables, with or without the participation
of any Seller or such Servicing Party and (y) deliver or license
the use of all of the foregoing documents, instruments and other
records to the Successor Servicer at a place designated thereby.
In recognition of such Servicing Party's need to have access to
any such documents, instruments and other records which may be
transferred to such Successor Servicer hereunder, whether as a
result of its continuing responsibility as a servicer of accounts
receivable which are not sold and assigned to the Trust or
otherwise, the Trustee agrees to cause such Successor Servicer to
provide to such Servicing Party reasonable access to such
documents, instruments and other records transferred by such
Servicing Party to it in connection with any activity arising in
the ordinary course of such Servicing Party's business; provided
that such Servicing Party shall not disrupt or otherwise
interfere with the Successor Servicer's use of and access to such
documents, instruments and other records. To the extent that
compliance with this Section 6.1 shall require a Servicing Party
to disclose to the Successor Servicer information of any kind
which such Servicing Party reasonably deems to be confidential,
the Successor Servicer shall be required to enter into such
customary licensing and confidentiality agreements as such
Servicing Party shall deem necessary to protect its interest.
All costs and expenses incurred by the defaulting Servicing
Party, the Successor Servicer and the Trustee in connection with
any transfer resulting from a Servicer Default shall be for the
account of such defaulting Servicing Party.
6.2. Trustee to Act; Appointment of Successor. (a)
On and after the receipt by a Servicing Party of a Termination
Notice pursuant to Section 6.1, such Servicing Party shall
continue to perform all servicing functions under the Pooling and
Servicing Agreements until the date specified in the Termination
Notice or otherwise specified by the Trustee or the Company in
writing or, if no such date is specified in such Termination
Notice or otherwise specified by the Trustee, until a date
mutually agreed upon by such Servicing Party and the Trustee. The
Trustee shall, as promptly as possible after the giving of a
Termination Notice, appoint an Eligible Successor Servicer as
successor master servicer or successor servicer, as the case may
be (the "Successor Servicer"). The Successor Servicer shall
accept its appointment by a written assumption in a form
acceptable to the Trustee and the Company. In the event that a
-23-
<PAGE>
Successor Servicer has not been appointed or has not accepted its
appointment at the time when the relevant Servicing Party ceases
to act as Master Servicer or Servicer, as the case may be, the
Trustee without further action shall automatically be appointed
the Successor Servicer. The Trustee may delegate any of its
servicing obligations to an affiliate or agent in accordance with
subsection 2.2(c). All amounts in the Expense Account shall be
available for the Successor Servicer (but only if such Successor
Servicer is not C&A Products or any Affiliate thereof) for
payment of all costs, losses, liabilities, expenses, damages or
injuries (including, but not limited to, reasonable attorney's
fees and other reasonable costs and expenses incurred in
connection with any actual or threatened action, proceeding or
claim) in connection with the performance of the Successor
Servicer's duties under any Pooling and Servicing Agreement
except any such cost, loss, liability, expense, damage or injury
as may arise from its negligence, bad faith or willful
misconduct. Notwithstanding the above, the Trustee shall, if it
is legally unable so to act, petition a court of competent
jurisdiction to appoint any Person qualifying as an Eligible
Successor Servicer as the Successor Servicer hereunder. The
Master Servicer shall immediately give notice to each Rating
Agency of the receipt of any Termination Notice and the
appointment of a Successor Servicer.
(b) Upon its appointment, the Successor Servicer shall
be the successor in all respects to the Servicing Party to which
it is successor with respect to servicing functions under the
Pooling and Servicing Agreements (with such changes as are agreed
to between such Successor Servicer and the Trustee) and shall be
subject to all the responsibilities, duties and liabilities
relating thereto placed on such Servicing Party by the terms and
provisions hereof, and all references in any Pooling and
Servicing Agreement to the Master Servicer or Servicer, as the
case may be, shall be deemed to refer to the Successor Servicer.
The Successor Servicer shall manage the servicing and
administration of the Receivables, the collection of payments due
under the Receivables and charging off any Receivables as
uncollectible, with reasonable care, using that degree of skill
and attention that is the customary and usual standard of
practice of prudent receivable servicers with respect to all
comparable receivables serviced for itself and others. The
Successor Servicer shall not be liable for, and relevant
Servicing Party to which it is the successor shall indemnify the
Successor Servicer against costs incurred by the Successor
Servicer as a result of, any acts or omissions of such Servicing
Party or any events or occurrences occurring prior to the
Successor Servicer's acceptance of its appointment as Successor
Servicer.
(c) The Trustee will review any bids obtained from
Eligible Successor Servicers and the Trustee shall be permitted
-24-
<PAGE>
to appoint any Eligible Successor Servicer submitting such a bid
as a Successor Servicer for servicing compensation not in excess
of the Servicing Fee; provided, however, that the Company shall
be responsible for payment of the Company's portion of the
Servicing Fee as determined pursuant to Section 2.5.
(d) All authority and power granted to the Successor
Servicer under any Pooling and Servicing Agreement shall
automatically cease and terminate on the Trust Termination Date,
and shall pass to and be vested in the Company and, without
limitation, the Company is hereby authorized and empowered to
execute and deliver, on behalf of the Successor Servicer, as
attorney-in-fact or otherwise, all documents and other
instruments, and to do and accomplish all other acts or things
necessary or appropriate to effect the purposes of such transfer
of servicing rights from and after the Trust Termination Date.
The Successor Servicer agrees to cooperate with the Company in
effecting the termination of the responsibilities and rights of
the Successor Servicer to conduct servicing on the Receivables.
The Successor Servicer shall transfer all of its records relating
to the Receivables to the Company in such form as the Company may
reasonably request and shall transfer all other records,
correspondence and documents to the Company in the manner and at
such times as the Company shall reasonably request. To the
extent that compliance with this Section 6.2 shall require the
Successor Servicer to disclose to the Company information of any
kind which the Successor Servicer deems to be confidential, the
Company shall be required to enter into such customary licensing
and confidentiality agreements as the Successor Servicer shall
reasonably deem necessary to protect its interests.
6.3. Waiver of Past Defaults. Holders of Term
Certificates evidencing more than 50% or more of the Term
Certificates Invested Amount and the Majority Purchasers may
waive any default by such Servicing Party or the Company in the
performance of their obligations hereunder and its consequences,
except a default in the failure to make any required deposits or
payments in respect of any Series of Certificates. Upon any such
waiver of a past default, such default shall cease to exist, and
any default arising therefrom shall be deemed to have been
remedied for every purpose of the Pooling and Servicing
Agreements. No such waiver shall extend to any subsequent or
other default or impair any right consequent thereon except to
the extent expressly so waived. Either the Company or the
applicable Servicing Party shall provide notice to each Rating
Agency of any such waiver.
-25-
<PAGE>
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1. Amendment. (a) This Agreement may only be
amended, supplemented or otherwise modified from time to time if
such amendment, supplement or modification is effected in
accordance with the provisions of Section 10.1 of the Pooling
Agreement.
7.2. Termination. The respective obligations and
responsibilities of the parties hereto shall terminate on the
Trust Termination Date (unless such obligations or
responsibilities are expressly stated to survive the termination
of this Agreement).
7.3. Governing Law. THIS AGREEMENT SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
7.4. 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 (i) in the case of the Servicers, as set
forth under their signatures in the Receivables Sale Agreement
and (ii) in the case of the Master Servicer, the Company and the
Trustee, as set forth in Section 10.5 of the Pooling Agreement,
or to such other address as may be hereafter notified by the
respective parties hereto.
7.5. Counterparts. This Agreement may be executed in
two or more counterparts (and by different parties on separate
counterparts), each of which shall be an original, but all of
which together shall constitute one and the same instrument.
7.6. Third-Party Beneficiaries. This Agreement will
inure to the benefit of and be binding upon the parties hereto
and the Certificateholders and their respective successors and
permitted assigns. Except as otherwise provided in this Article
VII, no other person will have any right or obligation hereunder.
7.7. Merger and Integration. Except as specifically
stated otherwise herein, this Agreement sets forth the entire
understanding of the parties relating to the subject matter
hereof, and all prior understandings, written or oral, are
superseded by this Agreement. This Agreement may not be
-26-
<PAGE>
modified, amended, waived, or supplemented except as provided
herein.
7.8. Headings. The headings herein are for purposes
of reference only and shall not otherwise affect the meaning or
interpretation of any provision hereof.
7.9. No Set-Off. Except as expressly provided in this
Agreement, each Servicing Party agrees that it shall have no
right of set-off or banker's lien against, and no right to
otherwise deduct from, any funds held in the Collection Accounts
for any amount owed to it by the Company, the Trust, the Trustee
or any Certificateholder.
7.10. No Bankruptcy Petition. Each of the Trustee and
each Servicing Party hereby covenants and agrees that, prior to
the date which is one year and one day after the later of (i) the
date on which the principal of and all other amounts in respect
of the Term Certificates have been repaid in full or (ii) the
date on which the principal of and all other amounts in respect
of the VFC Certificates have been repaid in full, 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.
7.11. Liability of Trustee. Notwithstanding anything
in this Agreement to the contrary, in no event shall the Trustee
be liable to any Person for special, indirect or consequential
loss or damage of any kind whatsoever (including, but not limited
to, lost profits that are not direct damages), even if the
Trustee has been advised of the likelihood of such loss or
damage; provided, however, that this Section 7.11 shall be of no
force and effect in the event that such loss or damage is a
result of the Trustee's bad faith, negligence or willful
misconduct.
-27-
<PAGE>
IN WITNESS WHEREOF, the Company, the Servicing Parties
and the Trustee have caused this Agreement to be duly executed by
their respective officers as of the day and year first above
written.
CARCORP, INC.
By: Anthony Hardwick
Name: Anthony Hardwick
Title: Vice President, Secretary
and Treasurer
CHEMICAL BANK, not in its
individual capacity but solely as
Trustee
By: Charles E. Dooley
Name: Charles E. Dooley
Title: Vice President
COLLINS & AIKMAN PRODUCTS CO., as
Master Servicer
By: Anthony Hardwick
Name: Anthony Hardwick
Title: Vice President, Controller,
Acting Chief Financial Officer
and Assistant Treasurer
COLLINS & AIKMAN PRODUCTS CO., as
Servicer for itself and for Ack-Ti-
Lining, Inc., The Akro Corporation,
Collins & Aikman Floor Coverings,
Inc. and Dura Convertible Systems,
Inc.
By: Anthony Hardwick
Name: Anthony Hardwick
Title: Vice President, Controller,
Acting Chief Financial Officer
and Assistant Treasurer
WCA CANADA INC., as Servicer
By: Anthony Hardwick
Name: Anthony Hardwick
Title: Agent
-28-
<PAGE>
IMPERIAL WALLCOVERINGS, INC., as
Servicer
By:Anthony Hardwick
Name: Anthony Hardwick
Title: Acting Chief Financial
Officer
-29-
<PAGE>
<PAGE>
EXECUTION COPY
CARCORP, INC.,
as Company,
COLLINS & AIKMAN PRODUCTS CO.,
as Master Servicer,
and
CHEMICAL BANK,
as Trustee
on behalf of the Certificateholders
C&A MASTER TRUST
POOLING AGREEMENT
Dated as of March 30, 1995
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS . . . . . . . . . . . 2
1.1. Definitions . . . . . . . . . . . . . . . . . . . 2
1.2. Other Definitional Provisions . . . . . . . . . . 27
ARTICLE II
CONVEYANCE OF RECEIVABLES;
ISSUANCE OF CERTIFICATES . . . . . . . . 28
2.1. Conveyance of Receivables . . . . . . . . . . . . 28
2.2. Acceptance by Trustee . . . . . . . . . . . . . . 31
2.3. Representations and Warranties of the
Company Relating to the Company . . . . . . . . . 32
2.4. Representations and Warranties of the Company
Relating to the Receivables . . . . . . . . . . . 35
2.5. Repurchase of Ineligible Receivables . . . . . . . 36
2.6. Purchase of Investor Certificateholders'
Interest in Trust Portfolio . . . . . . . . . . . 37
2.7. Affirmative Covenants of the Company . . . . . . . 38
2.8. Negative Covenants of the Company . . . . . . . . 42
ARTICLE III
RIGHTS OF CERTIFICATEHOLDERS AND ALLOCATION
AND APPLICATION OF COLLECTIONS . . . . . . 46
3.1. Establishment of Collection Accounts; Certain
Allocations . . . . . . . . . . . . . . . . . . . 46
ARTICLE IV
ARTICLE IV IS RESERVED AND MAY BE SPECIFIED IN
ANY SUPPLEMENT WITH RESPECT TO THE SERIES
RELATING THERETO . . . . . . . . . . 53
ARTICLE V
THE CERTIFICATES . . . . . . . . . . 53
5.1. The Certificates . . . . . . . . . . . . . . . . . 53
5.2. Authentication of Certificates . . . . . . . . . . 54
5.3. Registration of Transfer and Exchange of
Certificates . . . . . . . . . . . . . . . . . . . 54
5.4. Mutilated, Destroyed, Lost or Stolen
Certificates . . . . . . . . . . . . . . . . . . . 56
-i-
<PAGE>
Page
5.5. Persons Deemed Owners . . . . . . . . . . . . . . 57
5.6. Appointment of Paying Agent . . . . . . . . . . . 57
5.7. Access to List of Certificateholders' Names and
Addresses . . . . . . . . . . . . . . . . . . . . 58
5.8. Authenticating Agent . . . . . . . . . . . . . . . 59
5.9. Tax Treatment . . . . . . . . . . . . . . . . . . 61
5.10. Tender of Exchangeable Company Certificate . . . 61
5.11. Book-Entry Certificates . . . . . . . . . . . . . 63
5.12. Notices to Clearing Agency . . . . . . . . . . . 64
5.13. Definitive Certificates . . . . . . . . . . . . . 64
ARTICLE VI
OTHER MATTERS RELATING TO THE COMPANY . . . . . 65
6.1. Liability of the Company . . . . . . . . . . . . . 65
6.2. Limitation on Liability of the Company . . . . . . 65
6.3. Liabilities . . . . . . . . . . . . . . . . . . . 66
ARTICLE VII
EARLY AMORTIZATION EVENTS . . . . . . . . 66
7.1. Early Amortization Events . . . . . . . . . . . . 66
7.2. Additional Rights Upon the Occurrence of Certain
Events . . . . . . . . . . . . . . . . . . . . . . 67
7.3. Expense Account . . . . . . . . . . . . . . . . . 68
ARTICLE VIII
THE TRUSTEE . . . . . . . . . . . 69
8.1. Duties of Trustee . . . . . . . . . . . . . . . . 69
8.2. Rights of the Trustee . . . . . . . . . . . . . . 71
8.3. Trustee Not Liable for Recitals in Certificates . 73
8.4. Trustee May Own Certificates . . . . . . . . . . . 73
8.5. Trustee's Fees and Expenses . . . . . . . . . . . 73
8.6. Eligibility Requirements for Trustee . . . . . . . 74
8.7. Resignation or Removal of Trustee . . . . . . . . 75
8.8. Successor Trustee . . . . . . . . . . . . . . . . 76
8.9. Merger or Consolidation of Trustee . . . . . . . . 76
8.10. Appointment of Co-Trustee or Separate Trustee . . 76
8.11. Tax Returns . . . . . . . . . . . . . . . . . . . 78
8.12. Trustee May Enforce Claims Without Possession of
Certificates . . . . . . . . . . . . . . . . . . . 78
8.13. Suits for Enforcement . . . . . . . . . . . . . . 79
8.14. [Reserved] . . . . . . . . . . . . . . . . . . . . 79
8.15. Representations and Warranties of Trustee . . . . 79
8.16. Maintenance of Office or Agency . . . . . . . . . 80
8.17. Limitation of Liability . . . . . . . . . . . . . 80
-ii-
<PAGE>
Page
ARTICLE IX
TERMINATION . . . . . . . . . . . 80
9.1. Termination of Trust; Optional Repurchase . . . . 80
9.2. Optional Purchase and Final Termination Date of
Investor Certificates of any Series . . . . . . . 81
9.3. Final Payment with Respect to Any Series . . . . . 82
9.4. Company's Termination Rights . . . . . . . . . . . 83
ARTICLE X
MISCELLANEOUS PROVISIONS . . . . . . . . 84
10.1. Amendment . . . . . . . . . . . . . . . . . . . 84
10.2. Protection of Right, Title and Interest
to Trust . . . . . . . . . . . . . . . . . . . . 85
10.3. Limitation on Rights of Certificateholders . . . 86
10.4. Governing Law . . . . . . . . . . . . . . . . . 87
10.5. Notices . . . . . . . . . . . . . . . . . . . . 87
10.6. Severability of Provisions . . . . . . . . . . . 88
10.7. Assignment . . . . . . . . . . . . . . . . . . . 88
10.8. Certificates Nonassessable and Fully Paid . . . 89
10.9. Further Assurances . . . . . . . . . . . . . . . 89
10.10. No Waiver; Cumulative Remedies . . . . . . . . . 89
10.11. Counterparts . . . . . . . . . . . . . . . . . . 89
10.12. Third-Party Beneficiaries . . . . . . . . . . . 89
10.13. Actions by Certificateholders . . . . . . . . . 89
10.14. Merger and Integration . . . . . . . . . . . . . 90
10.15. Headings . . . . . . . . . . . . . . . . . . . . 90
10.16. Construction of Agreement . . . . . . . . . . . 90
10.17. No Set-Off . . . . . . . . . . . . . . . . . . . 90
10.18. No Bankruptcy Petition . . . . . . . . . . . . . 90
10.19. Limitation of Liability . . . . . . . . . . . . 91
10.20. Canadian Taxes . . . . . . . . . . . . . . . . . 91
10.21. Payments by Company . . . . . . . . . . . . . . 92
10.22. Certain Information . . . . . . . . . . . . . . 92
-iii-
<PAGE>
EXHIBITS
Exhibit A Form of Exchangeable Company Certificate
Exhibit B Form of Lockbox Agreement
Exhibit C [Reserved]
Exhibit D Form of Annual Master Servicer's Certificate
Exhibit E [Reserved]
Exhibit F Form of Annual Opinion of Counsel
Exhibit G Form of Additional Servicer Supplement
Exhibit H Internal Operating Procedures Memorandum
SCHEDULES
Schedule 1 Receivables
Schedule 2 Identification of the Trust Accounts
Schedule 3 Special Obligors
Schedule 4 Location of Chief Executive Office
Schedule 5 Contractual Obligations
APPENDICES
Appendix A Description of Servicer Site Review Procedures
Appendix B Description of Standby Liquidation System
-iv-
<PAGE>
POOLING AGREEMENT, dated as of March 30, 1995, among
Carcorp, Inc., a Delaware corporation (the "Company"); Collins &
Aikman Products Co. ("C&A Products"), a Delaware corporation (in
its capacity as master servicer, the "Master Servicer"); and
Chemical Bank, a New York banking corporation, not in its
individual capacity, but solely as trustee (in such capacity, the
"Trustee").
W I T N E S S E T H :
WHEREAS, the Company, the Master Servicer, the
subsidiaries of the Master Servicer which are parties thereto
(the "Sellers"), the several financial institutions which are
parties thereto (the "Original Banks") and Chemical Bank, in its
capacity as administrative agent for the Original Banks (the
"Original Agent"), have entered into a Receivables Transfer and
Servicing Agreement, dated as of July 13, 1994 (as the same has
been amended from time to time, the "Original Transfer
Agreement");
WHEREAS, pursuant to the Original Transfer Agreement,
the Company has transferred to the Original Banks all of its
right, title and interest in, to and under the receivables and
other related property owned by the Company upon the terms and
conditions therein stated;
WHEREAS, as of the date hereof, (i) the Company, the
Master Servicer and the Sellers are entering into an Amended and
Restated Receivables Sale Agreement (as amended, supplemented or
otherwise modified from time to time, the "Receivables Sale
Agreement"), (ii) the Company, the Master Servicer, each of the
subsidiaries of the Master Servicer which are from time to time
parties thereto, in their capacities as servicers of the
Receivables (in such capacities, the "Servicers"), and the
Trustee have entered into a Servicing Agreement (as amended,
supplemented or otherwise modified from time to time, the
"Servicing Agreement") and (iii) the Company, the Master Servicer
and the Trustee have entered into two Supplements to this
Agreement pursuant to which the Company, upon the issuance and
sale of the Investor Certificates thereunder, will receive funds
to reacquire from the Original Banks the receivables and other
property transferred under the Original Transfer Agreement and
the interest of the Original Banks in such receivables and other
property will be terminated; and
WHEREAS, the parties hereto wish to enter into this
Agreement in order to create a master trust to which the Company
will transfer all of its right, title and interest in, to and
under the Receivables and other Trust Assets now or hereafter
owned by the Company and such master trust shall, from time to
<PAGE>
time at the direction of the Company, issue one or more Series of
Investor Certificates which shall represent interests in the
Receivables and such other Trust Assets as specified in the
Supplement related to such Series;
NOW, THEREFORE, in consideration of the premises and of
the mutual covenants herein contained, the parties hereto agree
as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Whenever used in this
Agreement, the following words and phrases shall have the
following meanings:
"Accounts" shall have the meaning specified in
subsection 2.1(a)(vi) of this Agreement.
"Accrual Period" shall mean, for any Series, the period
from and including a Distribution Date, or, in the case of
the initial Accrual Period for such Series, the Issuance
Date for such Series, to but excluding the succeeding
Distribution Date.
"Additional Receivables" shall mean those Receivables,
if any, originated by a Seller added to Schedule 1 to the
Receivables Sale Agreement after the Initial Closing Date,
which Seller's Receivables, as evidenced by an amendment to
the related Supplement, shall be designated as Additional
Receivables.
"Additional Servicer Supplement" shall mean an
instrument substantially in the form of Exhibit G by which a
Subsidiary of the Master Servicer becomes a Servicer party
to the Servicing Agreement.
"Adjusted Invested Amount" shall mean, with respect to
any Outstanding Series, the definition assigned to such term
in the related Supplement.
"Affiliate" shall mean, with respect to any specified
Person, any other Person which, directly or indirectly, is
in control of, is controlled by, or is under common control
with, such Person; provided that a Person shall not be
deemed an Affiliate of another Person solely by reason of an
individual serving as an officer or director of such other
Person. For purposes of this definition "control" of a
Person means the power, directly or indirectly, either to
(i) vote 10% or more of the securities having ordinary
-2-
<PAGE>
voting power for the election of directors of such Person or
(ii) direct or cause the direction of the management and
policies of such Person, whether by contract or otherwise;
and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent" shall mean, with respect to any Series, the
Person, if any, so designated in the related Supplement.
"Aggregate Adjusted Invested Amount" shall mean, with
respect to any date of determination, the sum of the
Adjusted Invested Amount with respect to each Outstanding
Series.
"Aggregate Allocated Receivables Amount" shall mean,
with respect to any date of determination, the sum of the
Allocated Receivables Amount with respect to each
Outstanding Series.
"Aggregate Daily Collections" shall mean, with respect
to any Business Day, the aggregate amount of all Collections
deposited into the Collection Accounts on such day.
"Aggregate Invested Amount" shall mean, at any time,
the sum of the Invested Amounts with respect to all
Outstanding Series.
"Aggregate Primary Auto Receivables Amount" shall mean,
with respect to any date of determination, the aggregate
Principal Amount of all Primary Auto Receivables.
"Aggregate Receivables Amount" shall mean, with respect
to any date of determination, the sum of the "Aggregate
Receivables Amount" with respect to each Outstanding Series
as set forth in the related Supplement for each such
Outstanding Series.
"Aggregate Target Receivables Amount" shall mean, with
respect to any date of determination, the sum of the Target
Receivables Amount with respect to each Outstanding Series.
"Agreement" shall mean this Pooling Agreement and all
amendments hereof and supplements hereto, and including,
unless expressly stated otherwise, each Supplement.
"Allocated Receivables Amount" shall mean, with respect
to any Outstanding Series, the amount specified in the
related Supplement.
"Amortization Period" shall mean, with respect to any
Series, the period following the Revolving Period with
-3-
<PAGE>
respect to such Series, as defined in any related
Supplement.
"Applicants" shall have the meaning specified in
Section 5.7.
"Authorized Foreign Exchange Dealer" shall mean any
foreign exchange dealer authorized by applicable law to deal
and engage in foreign exchange transactions relating to
Canadian Dollars selected by the Master Servicer and
reasonably acceptable to the Trustee.
"Book-Entry Certificates" shall mean certificates
evidencing a beneficial interest in the Certificates,
ownership and transfers of which shall be made through book
entries by a Clearing Agency as described in Section 5.11;
provided, however, that after the occurrence of a condition
whereupon book-entry registration and transfer are no longer
permitted and Definitive Certificates are issued to the
Certificate Book-Entry Holders, such Certificates shall no
longer be "Book-Entry Certificates".
"Business Day" shall mean any day other than (i) a
Saturday or a Sunday or (ii) another day on which commercial
banking institutions or trust companies in the State of
New York or in the city where the Corporate Trust Office is
located, are authorized or obligated by law, executive order
or governmental decree to be closed.
"Business Day Received" shall have the meaning
specified in subsection 2.3(e) of the Servicing Agreement.
"C&A Products" shall mean Collins & Aikman Products
Co., a Delaware corporation.
"Canada/Canadian Dollar Collection Account" shall have
the meaning specified in subsection 3.1(a).
"Canada/U.S. Dollar Collection Account" shall have the
meaning specified in subsection 3.1(a).
"Canadian Dollars" shall mean dollars in lawful
currency of Canada.
"Canadian Exchange Percentage" shall mean, at any date
of determination, the rate at which Canadian Dollars may be
exchanged into U.S. Dollars (expressed as the percentage of
Canadian Dollars per U.S. Dollars), as reported in The Wall
Street Journal on the immediately preceding Business Day.
In the event that such rate does not appear in The Wall
Street Journal on such immediately preceding Business Day,
the Canadian Exchange Percentage shall be determined by
-4-
<PAGE>
reference to the relevant Bloomberg currency page (or, if
such rate does not appear on any Bloomberg currency page, on
the relevant page of the Reuters Monitor Money Rates
Service) as of the close of business of the immediately
preceding Business Day. In the event that such rate does
not appear on any Bloomberg page or the relevant page of the
Reuters Monitor Money Rates Service, the Canadian Exchange
Percentage 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
Trustee.
"Canadian Seller" shall mean WCA Canada Inc., a wholly-
owned Subsidiary of C&A Products.
"Certificate" shall mean one of any Series of Investor
Certificates, the Exchangeable Company Certificate or, if
applicable, any Subordinated Company Certificate.
"Certificate Book-Entry Holder" shall mean, with
respect to a Book-Entry Certificate, the Person who is
listed on the books of the Clearing Agency, or on the books
of a Person maintaining an account with such Clearing
Agency, as the beneficial owner of such Book-Entry
Certificate (directly or as an indirect participant, in
accordance with the rules of such Clearing Agency).
"Certificate Rate" shall mean with respect to any
Series and Class of Certificates, the percentage interest
rate (or formula on the basis of which such interest rate
shall be determined) stated in the applicable Supplement.
"Certificate Register" shall mean the register
maintained pursuant to Section 5.3, providing for the
registration of the Certificates and transfers and exchanges
thereof.
"Certificateholder" shall mean the Person in whose name
a Certificate is registered in the Certificate Register.
"Certificateholders' Interest" shall have the meaning
specified in subsection 3.1(b).
"Charge-Offs" shall mean, during any period, with
respect to the Receivables originated by any Seller and sold
to the Company, the aggregate amount of such Receivables, as
reflected in the most recent aged trial balance report of
such Seller, that were written off, or should have been
written off, during such period as uncollectible in
accordance with the Policies of the Company.
-5-
<PAGE>
"Class" shall mean, with respect to any Series, any one
of the classes of Certificates of that Series as specified
in the related Supplement.
"Clearing Agency" shall mean each organization
registered as a "clearing agency" pursuant to Section 17A of
the Securities Exchange Act of 1934, as amended.
"Clearing Agency Participant" shall mean a broker,
dealer, bank, other financial institution or other Person
for whom from time to time a Clearing Agency effects book-
entry transfers and pledges of securities deposited with
such Clearing Agency.
"Collection Accounts" shall mean the collective
reference to the U.S. Dollar Collection Account, the
Canada/U.S. Dollar Collection Account and the
Canada/Canadian Dollar Collection Account.
"Collections" shall mean all collections and all
amounts received in respect of the Receivables transferred
to the Trust, including Recoveries, Repurchase Payments and
payments in respect of Dilutive Credits, together with all
collections received in respect of the Related Property
(including Recoveries) in the form of cash, checks, wire
transfers or any other form of cash payment, and all
proceeds thereof (including, without limitation, whatever is
received upon the sale, exchange, collection or other
disposition of, or any indemnity, warranty or guaranty
payable in respect of, the foregoing and all "proceeds" as
defined in Section 9-306 of the UCC as in effect in the
State of New York or, if applicable, as defined under
similar provincial laws of Canada).
"Company" shall mean Carcorp, Inc., a Delaware
corporation.
"Company Collection Subaccount" shall have the meaning
specified in subsection 3.1(a).
"Company Exchange" shall have the meaning specified in
subsection 5.10(b).
"Company Interest" shall have the meaning specified in
subsection 3.1(b).
"Contractual Obligation" shall mean, 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.
-6-
<PAGE>
"Corporate Trust Office" shall mean the principal
office of the Trustee at which at any particular time its
corporate trust business shall be administered, which office
at the date of the execution of this Agreement is located at
450 West 33rd Street, 15th Floor, New York, New York 10001
(Attention: Structured Finance Services - ABS).
"Credit Agreement" shall mean the Credit Agreement
dated as of June 22, 1994 among C&A Products, as Borrower,
WCA Canada Inc., as Canadian 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.
"Cut-Off Date" shall mean the close of business on
March 29, 1995.
"Daily Report" shall have the meaning specified in
subsection 4.2(a) of the Servicing Agreement.
"Defaulted Receivable" shall mean, with respect to each
Seller, any Receivable (a) the Obligor of which is in
bankruptcy, (b) which is unpaid in whole or in part for more
than 90 days after its original due date or (c) which, in
accordance with such Seller's Policies, is or should have
been determined to be uncollectible by such Seller, in each
case as calculated based on the most recent aged trial
balance report with respect to such Seller.
"Deficiency Amount" shall have, with respect to any
Series, the meaning specified in the applicable Supplement.
"Definitive Certificates" shall have the meaning
specified in Section 5.11.
"Delinquent Receivable" shall mean, with respect to
each Seller, any Receivable, other than Defaulted
Receivables, which Receivable, as calculated based on the
most recent aged trial balance report with respect to such
Seller, is unpaid in whole or in part for more than 60 days
after its original due date.
"Deposit Date" shall have the meaning specified in
subsection 3.1(e).
"Depository" shall mean, with respect to any Series,
the Clearing Agency designated as the "Depository" in the
related Supplement.
-7-
<PAGE>
"Depository Agreement" shall mean, with respect to any
Series, an agreement among the Company, the Trustee and a
Clearing Agency, in a form reasonably satisfactory to the
Trustee and the Company.
"Determination Date" shall mean, with respect to any
Distribution Date, the Business Day immediately preceding
such Distribution Date.
"Dilution Adjustments" shall have the meaning specified
in Section 2.5 of the Receivables Sale Agreement.
"Dilutive Credits" shall mean, for any period, the
aggregate amount of discount expense, rebates, refunds,
billing error expense, credits against Receivables, offsets
and other adjustments or allowances in respect of
Receivables permitted or incurred by the Seller thereof or
the Company with respect thereto during such period.
"Distribution Date" shall mean, except as otherwise set
forth in the applicable Supplement, the 25th day of the
month, beginning in the month immediately following the
month of the Initial Issuance, or if such 25th day is not a
Business Day, the next succeeding Business Day.
"Dollars," "U.S. Dollars" and "$" shall mean dollars in
lawful currency of the United States of America.
"Early Amortization Event" shall have, with respect to
any Series, the meaning specified in Section 7.1 of this
Agreement and in any Supplement for such Series.
"Eligible Institution" shall mean (a) with respect to
accounts in the United States, a depositary institution or
trust company (which may include the Trustee) organized
under the laws of the United States of America or any one of
the states thereof or the District of Columbia; provided,
however, that at all times (i) such depositary institution
or trust company is a member of the Federal Deposit
Insurance Corporation, the unsecured and uncollateralized
debt obligations of which are rated in the highest long-term
or short-term rating category by each Rating Agency and (ii)
such depositary institution or trust company has a combined
capital and surplus of at least $50,000,000, and (b) with
respect to accounts in Canada, a bank within the meaning of
the Bank Act (Canada) or a trust company licensed under the
laws of Canada or any province thereof; provided, however,
that at all times the short-term deposits of any such bank
or trust company shall have a credit rating from S&P so long
as it is a Rating Agency, and any other Rating Agency rating
such bank or trust company in the highest long-term
investment category granted thereby or, if such institution
-8-
<PAGE>
does not have a long-term rating from S&P and/or such other
Rating Agency, the highest short-term investment category
granted by S&P, as the case may be.
"Eligible Investments" shall mean any 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) federal funds, demand deposits, time deposits or
certificates of deposit of any depository institution or
trust company 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, however, 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 rating such
investment in the highest investment category granted
thereby;
(c) commercial paper rated, at the time of the
investment or contractual commitment to invest therein, in
the highest rating category by each Rating Agency rating
such commercial paper;
(d) investments in money market funds rated the
highest rating category by each Rating Agency rating such
money market fund (provided, that if such Rating Agency is
Standard & Poor's Ratings Group, a division of McGraw-Hill,
Inc., such rating shall be AAAm-g);
(e) bankers' acceptances issued by any depository
institution or trust company referred to in clause (b)
above;
(f) 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 a depository
institution or trust company (acting as principal) described
in clause (b) above; or
-9-
<PAGE>
(g) any other investment approved in writing by each
Rating Agency.
"Eligible Letter of Credit" shall mean any irrevocable
direct pay or standby letter of credit (a) issued in favor
of a Seller by any commercial bank that (i) has combined
capital and surplus of not less than $50,000,000 and (ii)
has (or the holding company parent of which has) a long-term
or short-term senior unsecured debt rating in the highest
rating category by each Rating Agency and (b) which permits
such Seller to draw, upon notice to the issuing bank, an
amount equal to the entire Principal Amount of any
Receivable supported thereby, in U.S. 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" shall mean, as of any date of
determination, each Obligor in respect of a Receivable that
satisfies the following eligibility criteria:
(a) it is organized or located (within the meaning of
Section 9-103(3)(d) of the UCC as in effect in the State of
New York) in the United States; provided, however, that (i)
Obligors organized or located in Canada or Japanese Obligors
or (ii) Obligors not otherwise described in clause (i) above
which are located (within the meaning of Section 9-103(3)(d)
of the UCC as in effect in the State of New York) outside
the United States, shall be deemed Eligible Obligors if (x)
in the case of clauses (i) and (ii) above, the Receivables
of such Obligor would otherwise be Eligible Receivables, (y)
in the case of clause (i) above, the aggregate Principal
Amount of all such Receivables does not exceed 20.0% of the
Principal Amount of the Eligible Receivables then held by
the Trust and (z) in the case of clause (ii) above, (1) the
Receivables of such Obligor are supported by an Eligible
Letter of Credit and (2) the aggregate Principal Amount of
all such Receivables does not exceed 3.0% of the Principal
Amount of the Eligible Receivables then held by the Trust;
provided, further, that if an Obligor is located in the
Provinces of Prince Edward Island, New Brunswick, Nova
Scotia or Newfoundland, it shall not be deemed to be an
Eligible Obligor until, as evidenced by an Opinion of
Counsel, all actions are taken that are required to perfect
the Company's and the Trust's ownership/security interest in
the Receivables of any such Obligor;
(b) it is not a direct or indirect Subsidiary of C&A
Products;
(c) it is not a domestic or foreign government or any
agency, department, or instrumentality thereof; provided,
-10-
<PAGE>
however, that up to 2.5% of the aggregate Principal Amount
of the Eligible Receivables may be owing by the United
States government, any state or local government within the
United States or subdivision, or any agency, department or
instrumentality thereof; and
(d) it is not the subject of any reorganization,
bankruptcy, receivership, custodianship or insolvency,
unless the Receivables of such Obligor arise subsequent to a
decree or order for relief under the Bankruptcy Reform Act
of 1978, as amended, with respect to such Obligor;
provided, however, that, if 25% or more of the Principal
Amount of Receivables of an Obligor that is one of the ten
largest Obligors (measured by Principal Amount of
Receivables in the Trust) are reported as being 60 days or
more past due as at the end of the fiscal month immediately
preceding the most recent Settlement Report Date (commencing
with the May 1995 Settlement Report Date), such Obligor
shall not be deemed an Eligible Obligor until such time as
the Master Servicer furnishes the Rating Agencies with a
report (which may be part of a Daily Report or a Monthly
Settlement Statement) indicating that less than 25% of the
Principal Amount of Receivables of such Obligor then in the
Trust are 60 days or more past due.
"Eligible Receivable" shall mean, as of any date of
determination, each Receivable owing by an Eligible Obligor
in existence as of such date that satisfies the following
eligibility criteria:
(a) it constitutes an account (and not an "instrument"
or "chattel paper" or a title in bearer form) within the
meaning of Section 9-106 of the UCC of the State the law of
which governs the perfection of the interest granted in it
or, if applicable, under the provisions of similar
legislation of any province of Canada;
(b) it represents an enforceable obligation of such
Eligible Obligor to pay the full Principal Amount thereof
and it is not subject to any dispute in whole or in part or
to any offset, counterclaim or defense; provided that a
Receivable that is subject only in part to any of the
foregoing shall be an Eligible Receivable to the extent not
subject to dispute, offset, counterclaim or defense;
(c) it is not a Defaulted Receivable or a Delinquent
Receivable;
(d) it is denominated and payable in U.S. Dollars or
Canadian Dollars in the United States or Canada;
-11-
<PAGE>
(e) it arose in the ordinary course of business from
the sale of products or services of a Seller and in
accordance with the Policies of such Seller and, at such
date of determination, such Seller continues to be a Seller
under the Receivables Sale Agreement;
(f) it does not contravene any applicable law, rule or
regulation and the applicable Seller is not in violation of
any law, rule or regulation in connection with it which in
any way renders it unenforceable or would otherwise impair
in any material respect the collectibility of such
Receivable;
(g) if the Company and the Trust are not excluded from
the definition of "investment company" pursuant to Rule 3a-7
under the Investment Company Act of 1940, as amended, it is
an account receivable representing all or part of the sales
price of merchandise, insurance or services within the
meaning of Section 3(c)(5) of the Investment Company Act of
1940, as amended;
(h) it is not a Receivable for which the applicable
Seller has established an offsetting specific reserve;
(i) it is not a Receivable in respect of which the
applicable Seller has (i) entered into an arrangement with
the Obligor pursuant to which payment of any portion of the
purchase price has been extended or deferred, whether by
means of a promissory note or by any other means, to a date
more than 60 days from the billing date, (ii) altered the
basis of the aging from the initial due date for payment
such that the final due date extends to a date more than 60
days from the billing date or (iii) otherwise made any
modification except in the ordinary course of business and
consistent with the Policies of such Seller;
(j) the related goods shall have been delivered to the
related Obligor or the related services shall have been
performed and the Receivable shall have been billed to the
related Obligor;
(k) the Company or the Trust will have good and
marketable title thereto free and clear from Liens (except
those in favor of the Company and/or the Trust) and such
Receivable has been the subject of either a valid transfer
from the Company to the Trust or, subsidiarily, the grant of
a first priority perfected security interest therein to the
Trust;
(l) except for Receivables sold on any Effective Date
(as defined under the Receivables Sale Agreement) for any
Seller, it was sold to the Company pursuant to the
-12-
<PAGE>
Receivables Sale Agreement within three Business Days after
the original invoice date with respect thereto;
(m) all required consents, approvals and
authorizations (including, without limitation, any consent
of the Obligor thereof required for the assignment and sale
thereof to the Company and by the Company to the Trust) have
been obtained with respect to the Receivable;
(n) it is fully assignable; and
(o) at the time such Receivable was sold by the
respective Seller to the Company under the Receivables Sale
Agreement, no event described in subsection 7(d)(i) of the
Receivables Sale Agreement (without giving effect to any
requirement as to the passage of time) had occurred with
respect to such Seller.
"Eligible Primary Auto Receivables" shall mean, as of
any date of determination, each Primary Auto Receivable that
also is an Eligible Receivable.
"Eligible Successor Servicer" shall mean a Person
which, at the time of its appointment as a Servicing Party
(i) is legally qualified and has the corporate power and
authority to service the Receivables transferred to the
Trust, (ii) has demonstrated the ability to service a
portfolio of similar receivables in accordance with high
standards of skill and care in the sole determination of the
Master Servicer and (iii) has a combined capital and surplus
of at least $5,000,000.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
"Exchange" shall mean either of the procedures
described under Section 5.10.
"Exchange Date" shall have the meaning, with respect to
any Series issued pursuant to an Exchange, specified in
Section 5.10.
"Exchange Notice" shall have the meaning, with respect
to any Series issued pursuant to an Exchange, specified in
Section 5.10.
"Exchangeable Company Certificate" shall mean the
certificate executed by the Company and authenticated by the
Trustee, substantially in the form of Exhibit A and
exchangeable as provided in Section 5.10.
-13-
<PAGE>
"Excess Primary Auto Receivables" shall mean, on any
date of determination, the aggregate Principal Amount of
Eligible Primary Auto Receivables in excess of the Obligor
Limits for the Primary Auto Obligors.
"Expense Account" shall have the meaning specified in
subsection 7.3(a).
"Expense Account Limit" shall mean $500,000.
"Force Majeure Delay" shall mean, with respect to any
Servicing Party, any cause or event which is beyond the
control and not due to the negligence of such Servicing
Party which delays, prevents or prohibits such Servicing
Party's delivery of Daily Reports and/or Monthly Settlement
Statements, including, without limitation, acts of God or
the elements and fire, but shall not include strikes;
provided that no such cause or event shall be deemed to be a
Force Majeure Delay unless the affected Servicing Party or
the Master Servicer on behalf of such Servicing Party shall
have given the Company and the Trustee written notice
thereof as soon as possible after the beginning of such
delay.
"Fractional Undivided Interest" shall mean the
fractional undivided interest in the Certificateholders'
Interest evidenced by an Investor Certificate.
"GAAP" shall mean generally accepted accounting
principles in the United States of America as in effect from
time to time.
"General Opinion" shall mean, with respect to any
action, an Opinion of Counsel to the effect that (i) such
action has been duly authorized by all necessary corporate
action on the part of the Master Servicer or the Company, as
the case may be, (ii) any agreement executed in connection
with such action constitutes a legal, valid and binding
obligation of the Master Servicer or the Company, as the
case may be, enforceable in accordance with the terms
thereof, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereinafter in
effect, affecting the enforcement of creditors' rights and
except as such enforceability may be limited by general
principles of equity (whether considered in a proceeding at
law or in equity) and (iii) any condition precedent to any
such action has been complied with.
"Governmental Authority" shall mean any nation or
government, any state or other political subdivision thereof
and any entity exercising executive, legislative, judicial,
-14-
<PAGE>
regulatory or administrative functions of or pertaining to
government.
"Indebtedness" shall mean, with respect to 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), (b) any other
indebtedness of such Person which is evidenced by a note,
bond, debenture or similar instrument, (c) all obligations
of such Person under capital leases, (d) all obligations of
such Person in respect of acceptances issued or created for
the account of such Person which would be reflected on a
balance sheet of such Person prepared in accordance with
GAAP and (e) all liabilities secured by any Lien on any
property owned by such Person even though such Person has
not assumed or otherwise become liable for the payment
thereof. For purposes of any calculation hereunder, the
amount of any Indebtedness outstanding at any time, except
Indebtedness under clause (e) of this definition, shall be
deemed to be equal to the then outstanding principal amount
of such Indebtedness (including, with respect to capital
leases, the implied principal amount thereof calculated in
accordance with GAAP) and the amount of any Indebtedness
outstanding at any time under clause (e) of this definition
shall be equal to the lesser of (i) the then outstanding
principal amount of, and all accrued and unpaid interest on,
the liability secured by the applicable property and (ii)
the then fair market value of such property.
"Ineligible Receivable" shall have the meaning
specified in Section 2.5.
"Initial Closing Date" shall mean March 31, 1995.
"Initial Invested Amount" shall mean, with respect to
any Series, the amount stated as such in the applicable
Supplement.
"Insolvency Event" shall mean the occurrence of any one
or more of the events specified in paragraph (a) of Section
7.1.
"Internal Operating Procedures Memorandum" shall mean
the internal operating procedures memorandum prepared by the
Trustee as set forth in Exhibit H hereto.
"Internal Revenue Code" shall mean the Internal Revenue
Code of 1986, as amended from time to time.
"Invested Amount" shall have, with respect to any
Series, the meaning specified in the applicable Supplement.
-15-
<PAGE>
"Invested Percentage" shall have, with respect to any
Series, the meaning specified in the applicable Supplement.
"Investment Earnings" shall have the meaning specified
in subsection 3.1(c).
"Investor Certificateholder" shall mean the holder of
record of, or the bearer of, an Investor Certificate.
"Investor Certificates" shall mean the Certificates
executed by the Company and authenticated by or on behalf of
the Trustee, substantially in the form attached to the
applicable Supplement, but shall not include the
Exchangeable Company Certificate, any Subordinated Company
Certificate or any other Certificate held by the Company.
"Issuance Date" shall mean, with respect to any Series,
the date of issuance of such Series, or the date of any
increase to the Invested Amount of such Series, as specified
in the related Supplement.
"Japanese Obligor" shall mean any of Fuji Heavy
Industries, Inc., Toyota Motor Company, Honda Motor Co.,
Ltd., Toyota Tsusho Corp., or Kotobakiya Fronte Co., Inc.
"Lien" shall mean, with respect to any asset, (a) any
mortgage, hypothec, 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 other similar right
of a third party with respect to such securities; provided,
however, that if a lien is imposed under Section 412(n) of
the Internal Revenue Code or Section 302(f) of ERISA for a
failure to make a required installment or other payment to a
plan to which Section 412(n) of the Internal Revenue Code or
Section 302(f) of ERISA applies, then such lien shall not be
treated as a "Lien" from and after the time any Person who
is obligated to make such payment pays to such plan the
amount of such lien determined under Section 412(n)(3) of
the Internal Revenue Code or Section 302(f)(3) of ERISA, as
the case may be, and provides to the Trustee and each Agent
a written statement of the amount of such lien together with
written evidence of payment of such amount, or such lien
expires pursuant to Section 412(n)(4)(B) of the Internal
Revenue Code or Section 302(f)(4)(B) of ERISA.
"Lockbox" shall mean the post office boxes listed on
Schedule 2 to the Receivables Sale Agreement to which the
Obligors are instructed to remit payments on the Receivables
-16-
<PAGE>
and/or such other post office boxes as may be established
pursuant to Section 2.3 of the Servicing Agreement.
"Lockbox Account" shall mean the intervening account
used by a Lockbox Processor for deposit of funds received in
a Lockbox prior to their transfer to the Collection
Accounts.
"Lockbox Agreement" shall mean a lockbox agreement in
the form set forth as Exhibit B.
"Lockbox Processor" shall mean the depositary
institution or processing company (which may be the Trustee)
which processes payments on the Receivables sent by the
Obligors thereon forwarded to a Lockbox.
"Master Servicer" shall initially mean C&A Products in
its capacity as Master Servicer under the Transaction
Documents and, after any Service Transfer, the Successor
Servicer.
"Material Adverse Effect" shall mean (i) with respect
to any Seller or any Servicing Party, (a) a materially
adverse effect on the business, operations, property or
condition (financial or otherwise) of C&A Products and its
Subsidiaries taken as a whole, (b) a material impairment of
the ability of such Seller or Servicing Party, as the case
may be, to perform its obligations under the Transaction
Documents, (c) a material impairment of the validity or
enforceability of any of the Transaction Documents against
any of the Sellers or any Servicing Party, (d) a material
impairment of the interests, rights or remedies of the
Trustee or the Investor Certificateholders or (e) a material
impairment of the collectibility of the Receivables of such
Seller or Servicing Party, as the case may be, or (ii) with
respect to the Company, (a) a materially adverse effect on
the business, operations, property or condition (financial
or otherwise) of the Company, (b) a material impairment of
the ability of the Company to perform its obligations under
any Transaction Document to which it is a party, (c) a
material impairment of the validity or enforceability of any
of the Transaction Documents against the Company, (d) a
material impairment of the interests, rights or remedies of
the Trustee or the Investor Certificateholders or (e) a
material impairment of the collectibility of the
Receivables.
"Monthly Servicing Fee" shall have the meaning
specified in subsection 2.5(a) of the Servicing Agreement.
"Monthly Settlement Statement" shall have the meaning
specified in Section 4.3 of the Servicing Agreement.
-17-
<PAGE>
"Obligor" shall mean, with respect to any Receivable,
the party obligated to make payments with respect to such
Receivable, including any guarantor thereof.
"Obligor Limit" shall mean, at any date, (i) with
respect to any Eligible Obligor other than a Special
Obligor, 2.5% of the Principal Amount of all Eligible
Receivables in the Trust at such date, and (ii) with respect
to any Special Obligor, the Special Obligor Limit designated
in respect thereof. For purposes of applying the Obligor
Limit, (i) all Eligible Obligors that are Affiliates of each
other shall be deemed to be a single Eligible Obligor and
(ii) all Eligible Obligors that are state or local
governmental entities located within the United States or
any agencies thereof shall be deemed to be a single Eligible
Obligor.
"Officer's Certificate" shall mean, unless otherwise
specified in this Agreement, a certificate signed by the
Chairman of the Board, Vice Chairman of the Board,
President, Chief Financial Officer, any Vice President or
Treasurer of the Master Servicer or the Company, as the case
may be, or, in the case of a Successor Servicer, a
certificate signed by a Vice President and the financial
controller (or an officer holding an office with equivalent
or more senior responsibilities) of such Successor Servicer.
"Opinion of Counsel" shall mean a written opinion of
counsel, who may be internal counsel to the Company or the
Master Servicer, designated by the Company or the Master
Servicer, as the case may be, which is reasonably acceptable
to the Trustee.
"Optional Repurchase Percentage" shall mean, with
respect to any Series, the percentage stated as such in the
applicable Supplement.
"Outstanding Series" shall mean, at any time, a Series
issued pursuant to an effective Supplement for which the
Series Termination Date for such Series has not occurred.
"Overconcentration Amount" shall mean, with respect to
any date of determination, the sum of (i) for all Eligible
Obligors, the excess, if any, of the aggregate Principal
Amount of Eligible Receivables of each such Eligible Obligor
over the Obligor Limit of each such Eligible Obligor and
(ii) the excess, if any, of (A) the aggregate Principal
Amount of all Receivables payable in Canadian Dollars over
(B) 7.5% of the aggregate Principal Amount of all Eligible
Receivables in the Trust at the end of the Business Day
immediately preceding such date. For purposes of clause (i)
above, the Overconcentration Amount for each Eligible
-18-
<PAGE>
Obligor that owes Receivables payable in Canadian Dollars
and U.S. Dollars shall be allocated first to its Eligible
Receivables payable in Canadian Dollars and then to its
Eligible Receivables payable in U.S. Dollars.
"Parent Note" shall have the meaning specified in
Section 8.3 of the Receivables Sale Agreement.
"Paying Agent" shall mean any paying agent and
co-paying agent appointed pursuant to Section 5.6 and,
unless otherwise specified in the related Supplement of any
Series and with respect to such Series, shall initially be
Chemical Bank.
"Permitted Liens" shall mean, at any time, for any
Person:
(i) Liens created pursuant to this Agreement or
the Receivables Sale Agreement;
(ii) Liens for taxes, assessments or other
governmental charges or levies not yet due, or which
are for less than $100,000 in the aggregate, or which
are being contested in good faith by appropriate
proceedings provided that the relevant Person shall
have set aside on its books reserves in accordance with
GAAP;
(iii) deposits to secure the performance of
leases, which are for less than $100,000 in the
aggregate, and appeal bonds; and
(iv) Liens (not otherwise permitted hereunder)
securing obligations not exceeding $100,000 in
aggregate amount at any time outstanding.
"Person" shall mean any individual, partnership,
corporation, business trust, joint stock company, trust,
unincorporated association, joint venture, Governmental
Authority or other entity of whatever nature.
"Policies" shall mean, (i) with respect to any Seller
or Servicing Party, as the case may be, 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 or Servicing Party, as the case may be, in the
ordinary course of its business prior to the Initial Closing
Date, (ii) with respect to any Seller or Servicing Party, as
the case may be, 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 or
Servicing Party, as the case may be, in the ordinary course
-19-
<PAGE>
of business prior to the Initial Closing Date, and (iii)
with respect to the Company, its written charge-off policies
as they have been applied by the Company in the ordinary
course of its business prior to the Initial Closing Date, in
each case as the same may be amended, supplemented or
otherwise modified from time to time in accordance with the
Transaction Documents.
"Pooling and Servicing Agreements" shall have the
meaning specified in subsection 10.1(a).
"Potential Early Amortization Event" shall mean an
event which, with the giving of notice and/or the lapse of
time, would constitute an Early Amortization Event hereunder
or under any Supplement.
"Potential Servicer Default" shall mean an event which,
with the giving of notice and/or the lapse of time, would
constitute a Servicer Default hereunder or under any
Supplement.
"Prepayment Request" shall have the meaning, with
respect to any Outstanding Series, specified in the related
Supplement.
"Primary Auto Obligors" shall mean General Motors
Corporation, Chrysler Corporation, Ford Motor Company, Honda
Motor Co., Ltd., American Honda Motor Co. Inc., Toyota Motor
Company and Toyota Tsusho Corp. and their respective
Subsidiaries.
"Primary Auto Receivable" shall mean any Receivable the
Obligor of which is a Primary Auto Obligor.
"Principal Amount" shall mean, with respect to any
Receivable, the amount due thereunder, net of any prompt
payment discount, volume discount or other promotional
discount or rebate known to be deductible at the date of
determination and, in the case of any Receivable payable in
Canadian Dollars, multiplied by 85.0% of the applicable
Canadian Exchange Percentage.
"Principal Terms" shall have the meaning, with respect
to any Series issued pursuant to an Exchange, specified in
Section 5.10.
"Rating Agency" shall mean, with respect to each
Outstanding Series, any rating agency or agencies designated
as such in the related Supplement.
"Rating Agency Condition" shall mean, with respect to
any action, that each Rating Agency shall have notified the
-20-
<PAGE>
Company, the Master Servicer, any Agent and the Trustee
orally (to be confirmed promptly in writing) or in writing
that such action will not result in a reduction or
withdrawal of the rating of any Outstanding Series or any
Class of any such Outstanding Series with respect to which
it is a Rating Agency; provided, however, that to the extent
specified in the related Supplement, certain actions
requiring satisfaction of the Rating Agency Condition shall
require written notice from each such Rating Agency.
"Receivable" shall mean the indebtedness and payment
obligations of any Person to a Seller arising from a sale of
merchandise or services by such Seller in the ordinary
course of its business, including, without limitation, any
right to payment for goods sold or for services rendered,
and including the right of payment of any interest, finance
charges, returned check or late charges and other
obligations of such Person with respect thereto.
Notwithstanding the foregoing, "Receivables" shall not
include, and the holders of the Investor Certificates shall
have no interest in, the receivables generated by the Borg
Textile division of the Canadian Seller.
"Receivables Purchase Date" shall mean, with respect to
any Receivable, the Business Day on which the Company
purchases such Receivable from a Seller and transfers such
Receivable to the Trust.
"Receivables Sale Agreement" shall mean the Amended and
Restated Receivables Sale Agreement, dated as of the date
hereof, among the Sellers, the Master Servicer and the
Company, as buyer, as amended, supplemented or otherwise
modified from time to time.
"Record Date" shall mean, with respect to any Series,
the date specified as such in the applicable Supplement.
"Recoveries" shall mean all amounts collected (net of
out-of-pocket costs of collection) in respect of Charge-
Offs.
"Related Property" shall mean, with respect to each
Receivable:
(a) all of the applicable Seller's interest in
the merchandise (including returned merchandise), if
any, relating to the sale which gave rise to such
Receivable;
(b) all other security interests or Liens and
property subject thereto from time to time purporting
to secure payment of such Receivable, whether pursuant
-21-
<PAGE>
to the contract related to such Receivable or
otherwise, together with all financing statements
signed by an Obligor describing any collateral securing
such Receivable; and
(c) all guarantees, insurance, letters of credit
and other agreements or arrangements of whatever
character from time to time supporting or securing
payment of such Receivable whether pursuant to the
contract related to such Receivable or otherwise.
"Reported Day" shall have the meaning specified in
subsection 4.2(a) of the Servicing Agreement.
"Repurchase Payments" shall mean the collective
reference to payments of Transfer Deposit Amounts and
Servicer Repurchase Amounts.
"Repurchase Terms" shall mean, with respect to any
Series, the terms and conditions under which the Company may
repurchase such Series pursuant to Section 9.2, as modified
by the related Supplement.
"Requirements of Law" for any Person shall mean the
certificate of incorporation and by-laws or other
organizational or governing documents of such Person, and
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" shall mean (i) when used with
respect to the Trustee, any officer within the Corporate
Trust Office of the Trustee including any Vice President,
any Assistant Vice President, Trust Officer or Assistant
Trust Officer or any other officer of the Trustee
customarily performing functions similar to those performed
by any of the above designated officers and (ii) when used
with respect to any other Person, the chief executive
officer and the president or the treasurer or the chief
financial officer or any vice-president in the finance
department of such Person.
"Revolving Period" shall have, with respect to any
Outstanding Series, the definition assigned to such term in
the related Supplement.
"Revolving Termination Date" shall mean, with respect
to all Series, the date on which the Revolving Period for
any Series terminates.
-22-
<PAGE>
"Scheduled Amortization Period" shall have, if
applicable with respect to any Outstanding Series, the
definition assigned to such term in the related Supplement.
"Securities Act" shall mean the United States
Securities Act of 1933, as amended.
"Seller Daily Report" shall have the meaning specified
in subsection 4.2(b) of the Servicing Agreement.
"Sellers" shall mean C&A Products and the Subsidiaries
of C&A Products listed on Schedule 1 to the Receivables Sale
Agreement (excluding any such Subsidiaries which have been
terminated as Sellers in accordance with the provisions of
the Receivables Sale Agreement) together with any
Subsidiaries of C&A Products (whether now owned or hereafter
acquired) which have been added as Sellers in accordance
with the provisions of the Receivables Sale Agreement, in
their capacities as sellers under the Receivables Sale
Agreement.
"Series" shall mean any series of Investor
Certificates, the terms of which are set forth in a
Supplement.
"Series Account" shall mean any deposit, trust, escrow,
reserve or similar account maintained for the benefit of the
Investor Certificateholders of any Series or Class, as
specified in any Supplement.
"Series Canada/Canadian Dollar Collection Subaccount"
shall have the meaning specified in subsection 3.1(a).
"Series Canada/U.S. Dollar Collection Subaccount" shall
have the meaning specified in subsection 3.1(a).
"Series Collection Subaccount" shall have the meaning
specified in subsection 3.1(a).
"Series Collection Sub-subaccount" shall have the
meaning specified in subsection 3.1(a).
"Series Non-Principal Collection Sub-subaccount" shall
have the meaning specified in subsection 3.1(a).
"Series Percentage" shall have, with respect to any
Outstanding Series, the definition assigned to such term in
the related Supplement.
"Series Principal Collection Sub-subaccount" shall have
the meaning specified in subsection 3.1(a).
-23-
<PAGE>
"Series Termination Date" shall mean, with respect to
any Series, the date specified as such in the Supplement
relating to such Series.
"Service Transfer" shall have the meaning specified in
Section 6.1 of the Servicing Agreement.
"Servicer" shall have the meaning assigned in the
recitals hereto.
"Servicer Default" shall have, with respect to any
Series, the meaning specified in Section 6.1 of the
Servicing Agreement, as supplemented by the related
Supplement for such Series.
"Servicer Repurchase Amount" shall have the meaning
specified in subsection 4.1(b) of the Servicing Agreement.
"Servicer Site Review" shall mean a review performed by
the Trustee of the servicing operations of each Servicer at
such Servicer's offices, as described in Appendix A.
"Servicing Agreement" shall have the meaning specified
in the recitals hereto.
"Servicing Fee" shall have the meaning specified in
subsection 2.5(a) of the Servicing Agreement.
"Servicing Fee Percentage" shall mean 1.0% per annum.
"Servicing Party" shall mean the collective reference
to each of the Master Servicer and each Servicer.
"Settlement Period" shall mean, initially, the period
commencing March 31, 1995 and ending April 29, 1995.
Thereafter, Settlement Period shall mean each fiscal month
of the Master Servicer.
"Settlement Report Date" shall mean, except as
otherwise set forth in the applicable Supplement, the 20th
day of each calendar month or, if such 20th day is not a
Business Day, the next succeeding Business Day.
"Special Obligor" shall mean each Eligible Obligor
whose name is set forth on Schedule 3 which Schedule may be
amended from time to time (including any amendment to any
Special Obligor Limit set forth thereon) upon satisfaction
of the Rating Agency Condition.
"Special Obligor Limit" shall mean, with respect to any
Special Obligor, the percentage set forth opposite the name
of such Special Obligor on Schedule 3.
-24-
<PAGE>
"Specified Bankruptcy Opinion Provisions" shall mean
the provisions contained under the heading "Statement of
Facts and Assumptions" in the legal opinion of Stroock &
Stroock & Lavan relating to certain bankruptcy matters
delivered on the Initial Closing Date.
"S&P" shall mean Standard & Poor's Ratings Group, a
division of McGraw-Hill, Inc., and its successors in
interest.
"Standby Liquidation System" shall mean a system by
which the Trustee will receive and store electronic
information regarding Receivables from each Servicing Party
which may be utilized in the event of a liquidation of the
Receivables to be carried out by the Trustee, as described
in Appendix B.
"Subordinated Certificate Amount" shall have, with
respect to any Series, the meaning specified in the
applicable Supplement.
"Subordinated Company Certificate" shall mean any
Certificate issued to the Company pursuant to the Supplement
for any Series which represents an interest in the Trust
Assets which is subordinated to the Investor Certificates of
such Series.
"Subordinated Notes" shall have the meaning specified
in Section 8.1 of the Receivables Sale Agreement.
"Subsidiary" shall mean, as to any Person, a
corporation, partnership or other entity of which shares of
stock or other ownership interests having ordinary voting
power (other than stock or such other ownership interests
having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors
or other managers of such corporation, partnership or other
entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or
more intermediaries, or both, by such Person.
"Successor Servicer" shall have the meaning specified
in Section 6.2 of the Servicing Agreement.
"Supplement" shall mean, with respect to any Series, a
supplement to this Agreement complying with the terms of
Section 5.10, executed in conjunction with the issuance of
any Series.
"Target Receivables Amount" shall mean, with respect to
any Outstanding Series, the amount specified as the "Target
Receivables Amount" in the related Supplement.
-25-
<PAGE>
"Tax Opinion" shall mean, with respect to any action,
an opinion of counsel (a) to the effect that, for federal
income tax purposes, (i) such action will not adversely
affect the characterization as debt or as an interest in a
partnership (other than a partnership taxable as a
corporation), as the case may be, of any Investor
Certificates of any Outstanding Series or Class not retained
by the Company, (ii) such action will not cause or
constitute a sale, exchange or other disposition by the
Company or the Trust of the Trust Assets, or by the Investor
Certificateholders of such Certificateholders' Certificates
of any Outstanding Series or Class and (iii) in the case of
Section 5.9, the Investor Certificates of the new Series
which are not retained by the Company will be characterized
as debt or as an interest in a partnership (other than a
partnership taxable as a corporation) and (b) with respect
to New York and North Carolina state taxation issues, in
substantially the form delivered at the Initial Closing
Date.
"Termination Notice" shall have the meaning specified
in Section 6.1 of the Servicing Agreement.
"Transaction Documents" shall mean the collective
reference to this Agreement, the Servicing Agreement, each
Supplement with respect to any Outstanding Series, the
Receivables Sale Agreement, the Lockbox Agreements, the
Certificates and any other documents delivered pursuant to
or in connection therewith.
"Transfer Agent and Registrar" shall have the meaning
specified in Section 5.3 and shall initially be Chemical
Bank.
"Transfer Deposit Amount" shall have the meaning
specified in subsection 2.5(b).
"Transferred Agreements" shall have the meaning
assigned in subsection 2.1(a)(v).
"Trust" shall mean the C&A Master Trust created by this
Agreement.
"Trust Assets" shall have the meaning specified in
Section 2.1.
"Trust Termination Date" shall have the meaning
specified in subsection 9.1(a).
"Trustee" shall mean the institution executing this
Agreement as trustee, or its successor in interest, or any
successor trustee appointed as herein provided.
-26-
<PAGE>
"UCC" shall mean the Uniform Commercial Code, as
amended from time to time, as in effect in any specified
jurisdiction.
"U.S. Dollar Collection Account" shall have the meaning
specified in subsection 3.1(a).
"U.S. Dollar Primary Auto Collection Subaccount" shall
have the meaning specified in subsection 3.1(a).
Section 1.2. Other Definitional Provisions. (a) All
terms defined in this Agreement, the Servicing Agreement or in
any Supplement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto
unless otherwise defined therein.
(b) As used herein and in any certificate or other
document made or delivered pursuant hereto or thereto, accounting
terms not defined in Section 1.1, and accounting terms partly
defined in Section 1.1 to the extent not defined, shall have the
respective meanings given to them under GAAP. To the extent that
the definitions of accounting terms herein are inconsistent with
the meanings of such terms under GAAP, the definitions contained
herein shall control.
(c) 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 Section, subsection, Schedule and Exhibit
references contained in this Agreement are references to
Sections, subsections, Schedules and Exhibits in or to this
Agreement unless otherwise specified.
(d) The definitions contained in Section 1.1 are
applicable to the singular as well as the plural forms of such
terms and to the masculine as well as to the feminine and neuter
genders of such terms.
(e) Where a definition contained in Section 1.1
specifies that such term shall have the meaning set forth in the
related Supplement, the definition of such term set forth in the
related Supplement may be preceded by a prefix indicating the
specific Series or Class to which such definition shall apply.
(f) Where reference is made in this Agreement or any
related Supplement to the principal amount of Receivables, such
reference shall, unless explicitly stated otherwise, be deemed a
reference to the Principal Amount (as such term is defined in
Section 1.1) of such Receivables. The intent of this provision
is to require that, unless explicitly stated otherwise, in
determining the amount of Receivables payable in Canadian
-27-
<PAGE>
Dollars, the applicable Canadian Exchange Percentage be taken
into consideration.
(g) Any reference herein or in any other Transaction
Document to a provision of the Internal Revenue Code or ERISA
shall be deemed a reference to any successor provision thereto.
ARTICLE II
CONVEYANCE OF RECEIVABLES;
ISSUANCE OF CERTIFICATES
Section 2.1. Conveyance of Receivables.
(a) By execution and delivery of this Agreement, the
Company does hereby transfer, assign, set over and otherwise
convey to the Trust for the benefit of the Certificateholders,
without recourse (except as specifically provided herein), all of
its present and future right, title and interest in, to and
under:
(i) all Receivables owned by the Company, including
those owned by the Company at the close of business on the
Initial Closing Date and all Receivables thereafter acquired
by the Company from time to time until but not including the
Trust Termination Date;
(ii) the Related Property;
(iii) all Collections;
(iv) all rights (including rescission, replevin or
reclamation) relating to any Receivable or arising
therefrom;
(v) each of the Receivables Sale Agreement and the
Servicing Agreement, including in respect of each agreement,
(A) all rights of the Company to receive monies due and to
become due under or pursuant to such agreement, whether
payable as fees, expenses, costs or otherwise, (B) all
rights of the Company to receive proceeds of any insurance,
indemnity, warranty or guaranty with respect to such
agreement, (C) claims of the Company for damages arising out
of or for breach of or default under such agreement, (D) 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 (E) 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
-28-
<PAGE>
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 (all of the foregoing set forth in
subclauses (v)(A)-(E), inclusive, the "Transferred
Agreements");
(vi) each Collection Account, each Lockbox and each
Lockbox Account (collectively, the "Accounts"), 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;
(vii) all investments of such funds held in such
Accounts and all certificates and instruments from time to
time representing or evidencing such investments;
(viii) all notes, certificates of deposit and other
instruments from time to time hereafter delivered to, or
otherwise possessed by, the Trustee for and on behalf of the
Company in substitution for any of the then existing
Accounts;
(ix) 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;
(x) all proceeds of or payments in respect of any
and all of the foregoing clauses (i) through (ix) (including
proceeds that constitute property of the types described in
clauses (vi)-(ix) above and including Collections); and
(xi) for more certainty, the universality of all of
the Company's present and future rights, title and interest
in, to and under the items listed in clauses (i)-(x) above.
Such property described in the foregoing clauses (i) through
(xi), together with all investments and all monies on deposit in
any other bank account or accounts maintained for the benefit of
any Certificateholders for payment to Certificateholders shall
constitute the assets of the Trust (the "Trust Assets").
Although it is the intent of the parties to this
Agreement that the conveyance of the Company's right, title and
interest in, to and under the Receivables and the other Trust
Assets pursuant to this Agreement shall constitute a purchase and
sale and not a loan, in the event that such conveyance is deemed
to be a loan, it is the intent of the parties to this Agreement
that the Company shall be deemed to have granted to the Trustee a
first priority security interest in all of the Company's present
-29-
<PAGE>
and future right, title and interest in, to and under the
Receivables and the other Trust Assets, and that this Agreement
shall constitute a security agreement under applicable law.
Notwithstanding anything contained herein to the
contrary, from and after the time a Responsible Officer of the
Company receives notice or becomes aware that a lien has been
imposed against Collins & Aikman Corporation, the Company, the
Trust or any of the Sellers, under Section 412(n) of the Internal
Revenue Code or Section 302(f) of ERISA for a failure to make a
required installment or other payment to a plan to which Section
412(n) of the Internal Revenue Code or Section 302(f) of ERISA
applies, the Company shall not transfer, assign, set over or
otherwise convey to the Trust any Receivables until such time as
the Company furnishes the Trustee evidence (which may be in the
form of a payment receipt or wire transfer confirmation) that the
Person who is required to make such payment pays to such plan the
amount of such lien determined under Section 412(n)(3) of the
Internal Revenue Code or Section 302(f)(3) of ERISA, as the case
may be, or such lien expires pursuant to Section 412(n)(4)(B) of
the Internal Revenue Code or Section 302(f)(4)(B) of ERISA.
(b) The transfer, assignment, setover and conveyance
to the Trust pursuant to Section 2.1(a) shall be made to the
Trustee, on behalf of the Trust, and each reference in this
Agreement to such transfer, assignment, setover and conveyance
shall be construed accordingly. In connection with the foregoing
transfer, the Company and each Servicing Party agree to deliver
to the Trustee each Trust Asset (including any original documents
or instruments included in the Trust Assets as are necessary to
effect such transfer) in which the transfer of an interest is
perfected under the UCC or otherwise solely by possession and not
by filing a financing statement or similar document.
Notwithstanding the assignment of the Transferred
Agreements set forth in Section 2.1(a), the Company does not
hereby assign or delegate any of its duties or obligations under
the Receivables Sale Agreement to the Trust and the Trust does
not accept such duties or obligations, and the Company shall
continue to have the right and the obligation to purchase
Receivables from the Sellers thereunder from time to time. The
foregoing transfer, assignment, set-over and conveyance does not
constitute and is not intended to result in a creation or an
assumption by the Trust, the Trustee, any Investor
Certificateholder or the Company, in its capacity as a
Certificateholder, of any obligation of the Master Servicer, the
Company, any Seller or any other Person in connection with the
Receivables or under any agreement or instrument relating
thereto, including, without limitation, any obligation to any
Obligors.
-30-
<PAGE>
In connection with such transfer, the Company agrees to
record and file, at its own expense, any financing statements
(and continuation statements with respect to such financing
statements when applicable) or, where applicable, registrations
in the appropriate records, with respect to the Receivables now
existing and hereafter created (and with respect to any other
Trust Assets a security interest for which may be perfected under
the relevant UCC, legislation or similar statute by such filing
or registration, as the case may be) meeting the requirements of
applicable law in such manner and in such jurisdictions as are
necessary to perfect the transfer and assignment of the
Receivables and such other Trust Assets (excluding returned
merchandise) to the Trust, and to deliver a file-stamped copy or
certified statement of such financing statement or registration
or other evidence of such filing or registration to the Trustee
on or prior to the date of issuance of any Certificates. The
Trustee shall be under no obligation whatsoever to file such
financing statement, or a continuation statement to such
financing statement, or to make any other filing or other
registration under the UCC, other relevant legislation or similar
statute in connection with such transfer. The Trustee shall be
entitled to conclusively rely on the filings or registrations
made by or on behalf of the Company without any independent
investigation. In this regard, inasmuch as the within creation
of security interests is concerned, the parties hereto agree to
execute a movable hypothec and to attend to its due registration
in every jurisdiction where such movable hypothec and
registration may be necessary or useful.
In connection with such transfer, the Company further
agrees, at its own expense, (a) on or prior to the Initial
Closing Date, to indicate, or to cause to be indicated, in its
computer files containing its master database of Receivables and
to cause each of the Sellers to indicate in its records
containing its master database of Receivables that Receivables
have been conveyed to the Company or the Trust, as the case may
be, pursuant to the Receivables Sale Agreement or this Agreement,
respectively, for the benefit of the Certificateholders and
(b) within two Business Days of the Initial Closing Date, to
deliver or cause to be delivered to the Trustee computer tapes or
disks containing a true and complete list of all Receivables
transferred to the Trust specifying for each such Receivable, as
of the Cut-Off Date, (i) the identification or reference number
assigned to such Receivables by the Company and (ii) the
Principal Amount of such Receivables. Such tapes or disks shall
be marked as Schedule 1 to this Agreement and is hereby
incorporated into and made a part of this Agreement.
Section 2.2. Acceptance by Trustee. (a) The Trustee
hereby acknowledges its acceptance on behalf of the Trust of all
right, title and interest to the property, now existing and
hereafter created, transferred to the Trust pursuant to Section
-31-
<PAGE>
2.1 and declares that it shall maintain such right, title and
interest, upon the trust herein set forth, for the benefit of all
Certificateholders. The Trustee further acknowledges that, prior
to or simultaneously with the execution and delivery of this
Agreement, the Company delivered or caused to be delivered to the
Trustee the computer tapes or disks described in the last
paragraph of Section 2.1.
(b) The Trustee shall have no power to create, assume
or incur indebtedness or other liabilities in the name of the
Trust other than as contemplated in this Agreement.
Section 2.3. Representations and Warranties of the
Company Relating to the Company. The Company hereby represents
and warrants to the Trustee and the Trust, for the benefit of the
holders of Certificates of each Outstanding Series, as of the
Issuance Date of such Series, that:
(a) Corporate Existence; Compliance with Law. The
Company (i) is a corporation duly incorporated, validly
existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has all requisite
corporate power and authority, and all material licenses,
permits, franchises, consents and approvals, to own and
lease its property and assets and to carry on its business
as now conducted and (iii) is qualified and in good standing
as a foreign corporation to do business in the jurisdiction
in which its chief executive office is located and in every
other jurisdiction where such qualification is necessary,
except where the failure to so qualify would not reasonably
be expected to have a Material Adverse Effect. The Company
does not engage in activities prohibited by the Transaction
Documents or its certificate of incorporation.
(b) Corporate Power; Authorization. The Company has
the corporate power and authority, and the legal right, to
execute, deliver and perform this Agreement and the other
Transaction Documents to which it is a party and has taken
all necessary corporate action to authorize the execution,
delivery and performance of this Agreement and the other
Transaction Documents to which it is a party. No consent or
authorization of, filing with, notice to or other act by or
in respect of, any Governmental Authority or any other
Person is required in connection with the execution,
delivery, performance, validity or enforceability of this
Agreement and the other Transaction Documents to which it is
a party by or against the Company other than (i) those which
have duly been obtained or made and are in full force and
effect on the Initial Closing Date, (ii) any filings of UCC-
1 financing statements or similar documents necessary to
perfect the Company's or the Trust's interest in the Trust
Assets, (iii) those that may be required under the state
-32-
<PAGE>
securities or "blue sky" laws in connection with the
offering or sale of Certificates and (iv) any such consent,
authorization, filing, notice or other act, the absence of
which would not reasonably be likely to have a Material
Adverse Effect. This Agreement and each other Transaction
Document to which the Company is a party have been duly
executed and delivered on behalf of the Company.
(c) Enforceability. This Agreement and each of the
other Transaction Documents to which it is a party
constitute the legal, valid and binding obligation of the
Company enforceable against it in accordance with their
terms, except as such enforceability may be limited by
applicable 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 proceeding at
law or in equity).
(d) No Legal Bar. The execution, delivery and
performance of this Agreement and the other Transaction
Documents to which the Company is a party will not violate
any Requirement of Law or Contractual Obligation of the
Company except for violations that would not be reasonably
likely to have a Material Adverse Effect, and will not
result in, or require, the creation or imposition of any
Lien (other than Liens contemplated hereby) on any of its
properties or revenues pursuant to any such Requirement of
Law or Contractual Obligation.
(e) No Material Litigation. (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 which (a) involve this Agreement or any of the other
Transaction Documents or any of the transactions
contemplated hereby or thereby or (b) would reasonably be
likely to have a materially adverse effect on the
performance of the Company under the Transaction Documents
or have a Material Adverse Effect with respect to the
Company.
(ii) The Company is not in default under or with
respect to any law, order, judgment, writ, injunction,
decree, rule or regulation of any Governmental Authority
where such default could reasonably be likely to have a
Material Adverse Effect. The transactions contemplated
hereunder and the use of the proceeds therefrom do not
violate any applicable law or regulation, any judgment,
writ, injunction, decree or order of any court or
-33-
<PAGE>
Governmental Authority or subject the Company to any civil
or criminal penalty or fine.
(f) No Default. The Company is not in default under
or with respect to any of its Contractual Obligations except
for defaults with respect to leases of office space,
equipment or other facilities for use by the Company in its
ordinary course of business, employment agreements and
servicing agreements which defaults would not reasonably be
likely to have a Material Adverse Effect. No Early
Amortization Event has occurred and is continuing.
(g) Tax Returns. 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 in excess of $100,000 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. 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.
(h) Location of Records; Chief Executive Office. The
offices at which the Company keeps its records concerning
the Receivables either (x) are located at the addresses set
forth for the Sellers on Schedule 1 of the Receivables Sale
Agreement or (y) have been notified to the Trustee in
accordance with the provisions of subsection 2.8(l) of this
Agreement. The chief executive office of the Company is
located at the address set forth on Schedule 4 and is the
place where the Company is "located" for the purposes of
Section 9-103(3)(d) of the UCC as in effect in the State of
New York, or, if applicable, for purposes of the relevant
provincial laws of Canada. The state and county where the
chief executive office of the Company is "located" for the
purposes of Section 9-103(3)(d) of the UCC as in effect in
the State of New York has not changed in the past four
months.
(i) 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 Issuance Date under the Transaction Documents
to which the Company is a party, the fair salable value of
the assets of the Company exceeds the amount that will be
-34-
<PAGE>
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 Issuance Date
under the Transaction Documents to which the Company is
party, the assets of the Company do not constitute
unreasonably small capital to carry out its business as
conducted or as proposed to be conducted.
(iii) The Company 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 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.
(j) Investment Company. Neither the Company nor the
Trust is an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
(k) Ownership; Subsidiaries. All of the issued and
outstanding capital stock of the Company is owned, legally
and beneficially, by C&A Products. The Company has no
Subsidiaries.
(l) Names. The legal name of the Company is as set
forth in this Agreement. The Company has no trade names,
fictitious names, assumed names or "doing business as"
names.
(m) Use of Proceeds. No proceeds of the issuance of
any Investor Certificates will be used by the Company to
purchase or carry any margin security.
The representations and warranties as of the date made
set forth in this Section 2.3 shall survive the transfer and
assignment of the Trust Assets to the Trust. Upon discovery by a
Responsible Officer of the Company or the Master Servicer or by a
Responsible Officer of the Trustee of a breach of any of the
foregoing representations and warranties as of the date made, the
party discovering such breach shall give prompt written notice to
the other parties and to each Agent with respect to all
Outstanding Series.
Section 2.4. Representations and Warranties of the
Company Relating to the Receivables. The Company hereby
represents and warrants to the Trustee and the Trust, for the
benefit of the holders of Certificates of each Outstanding
Series, (x) as of the Issuance Date of such Series, and (y) with
-35-
<PAGE>
respect to each Receivable transferred to the Trust after such
Issuance Date, as of the related Receivables Purchase Date,
unless, in either case, otherwise stated in the applicable
Supplement or unless such representation or warranty expressly
relates only to a prior date, that:
(a) As of the Cut-Off Date, Schedule 1 to this
Agreement sets forth an accurate and complete listing in all
material respects of all Receivables transferred to the
Trust as of the Cut-Off Date and the information contained
therein with respect to the identity and Principal Amount of
each such Receivable is true and correct in all material
respects as of the Cut-Off Date. As of the Cut-Off Date,
the aggregate amount of Receivables owned by the Company is
accurately set forth in Schedule 1 hereto.
(b) Each Receivable existing on the Initial Closing
Date or, in the case of Receivables transferred to the Trust
after the Initial Closing Date, on the date that each such
Receivable shall have been transferred to the Trust, has
been conveyed to the Trust free and clear of any Lien,
except for Liens created pursuant to this Agreement or the
Receivables Sale Agreement.
(c) On the Initial Closing Date, each Receivable
transferred to the Trust that is included in the calculation
of the initial Aggregate Receivables Amount is an Eligible
Receivable and, in the case of Receivables transferred to
the Trust after the Initial Closing Date, on the date such
Receivable shall have been transferred to the Trust, each
such Receivable that is included in the calculation of the
Aggregate Receivables Amount on such date is an Eligible
Receivable.
The representations and warranties as of the date made
set forth in this Section 2.4 shall survive the transfer and
assignment of the Trust Assets to the Trust. Upon discovery by a
Responsible Officer of the Company or the Master Servicer or a
Responsible Officer of the Trustee of a breach of any of the
representations and warranties set forth in this Section 2.4 as
of the date made, the party discovering such breach shall give
prompt written notice to the other parties and to each Agent, if
any, with respect to all Outstanding Series.
Section 2.5. Repurchase of Ineligible Receivables.
(a) Repurchase Obligation. If (i) any representation or
warranty under subsections 2.4(a), (b) or (c) is not true and
correct in any material respect as of the date specified therein
with respect to any Receivable transferred to the Trust, (ii)
there is a breach of any covenant under subsection 2.8(c) with
respect to any Receivable and such breach has a material adverse
effect on the Certificateholders' Interest in such Receivable or
-36-
<PAGE>
(iii) the Trust's interest in any Receivable is not a first
priority perfected ownership or security interest at any time
(any Receivable as to which the conditions specified in any of
clause (i), (ii) or (iii) of this subsection 2.5(a) exists is
referred to herein as an "Ineligible Receivable") then, after the
earlier to occur of the discovery by the Company of any such
event which continues unremedied, or receipt by the Company of
written notice given by the Trustee or any Servicing Party of any
such event which continues unremedied, the Company shall purchase
or cause to be repurchased such Ineligible Receivable on the
terms and conditions set forth in subsection 2.5(b).
(b) Repurchase of Receivables. Subject to the last
sentence of this subsection 2.5(b), the Company shall repurchase,
or cause to be repurchased, each Ineligible Receivable required
to be repurchased pursuant to subsection 2.5(a) by depositing in
the U.S. Dollar Collection Account in immediately available funds
on the Business Day following the date on which such repurchase
obligation arises an amount equal to the lesser of (x) the amount
by which the Aggregate Target Receivables Amount exceeds the
Aggregate Allocated Receivables Amount (after giving effect to
the reduction thereof by the Principal Amount of such Ineligible
Receivable) and (y) the aggregate outstanding Principal Amount of
each such Ineligible Receivable (the "Transfer Deposit Amount").
Upon transfer or deposit of the Transfer Deposit Amount, the
Trust shall automatically and without further action be deemed to
sell, transfer, assign, set over and otherwise convey to the
Company, without recourse, representation or warranty, all the
right, title and interest of the Trust in and to such Ineligible
Receivable, all monies due or to become due with respect thereto
and all proceeds thereof; and such repurchased Ineligible
Receivable shall be treated by the Trust as collected in full as
of the date on which it was transferred. The Trustee 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. Except as otherwise specified in any
Supplement, the obligation of the Company to repurchase any
Ineligible Receivable shall constitute the sole remedy respecting
the event giving rise to such obligation available to Investor
Certificateholders (or the Trustee on behalf of Investor
Certificateholders).
Section 2.6. Purchase of Investor Certificateholders'
Interest in Trust Portfolio. In the event of any breach of any
of the representations and warranties set forth in Section 2.3 as
of the date made, which breach has a material adverse effect on
the interests of the holders of an Outstanding Series, then the
Trustee, at the written direction of holders evidencing more than
50% of the Invested Amount of such Outstanding Series, may direct
the Company to purchase such Outstanding Series and the Company
shall be obligated to make such purchase on the next Distribution
-37-
<PAGE>
Date occurring at least five Business Days after receipt of such
notice on the terms and conditions set forth below; provided,
however, that no such purchase shall be required to be made if,
by such Distribution Date, the representations and warranties
contained in Section 2.3 shall be satisfied in all material
respects, or any material adverse effect on the holders of such
Outstanding Series caused thereby shall have been cured.
The Company shall deposit into the U.S. Dollar
Collection Account for credit to the applicable subaccount of the
U.S. Dollar Collection Account on the Business Day preceding such
Distribution Date an amount equal to the purchase price (as
described in the next succeeding sentence) for the Certificate-
holders' Interest for such Outstanding Series on such day. The
purchase price for any such purchase will be equal to (i) the
Adjusted Invested Amount of such Outstanding Series on the date
on which the purchase is made plus (ii) an amount equal to all
interest accrued but unpaid on such Series up to the Distribution
Date on which the distribution of such deposit is scheduled to be
made pursuant to Section 9.2 plus (iii) any other amount required
to be paid in connection therewith pursuant to any Supplement.
Payment of such purchase price into the U.S. Dollar Collection
Account in immediately available funds shall be considered a
payment of the entire amount, if any, to be distributed to
Certificateholders. Notwithstanding anything to the contrary in
this Agreement, the entire amount of the purchase price deposited
in the U.S. Dollar Collection Account shall be distributed to the
related Investor Certificateholders on such Distribution Date
pursuant to Section 9.2. If the Trustee gives notice directing
the Company to purchase the Certificates of an Outstanding Series
as provided above, the obligation of the Company to purchase such
Certificates pursuant to this Section 2.6 shall constitute the
sole remedy respecting an event of the type specified in the
first sentence of this Section 2.6 available to the applicable
Investor Certificateholders (or the Trustee on behalf of such
Investor Certificateholders).
Section 2.7. Affirmative Covenants of the Company.
The Company hereby covenants that, until the Trust Termination
Date occurs, the Company shall:
(a) Financial Statements. Furnish to the Trustee and
each Agent, 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 1996 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 LLP or
-38-
<PAGE>
other independent certified public accountants of nationally
recognized standing which constitute one of the accounting
firms commonly referred to as the "big six" accounting firms
(or any successors thereto), or otherwise acceptable to the
Trustee. 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
and disclosed therein).
(b) Payment of Obligations; Compliance with
Obligations. Pay, discharge or otherwise satisfy at or
before maturity or before they become delinquent, as the
case may be, all its obligations of whatever nature, except
where (i) the amount or validity thereof is currently being
contested in good faith by appropriate proceedings and
reserves in conformity with GAAP with respect thereto have
been provided on the books of the Company or (ii) such
obligations are owing to no more than two Persons and are in
an amount not to exceed $10,000 in the aggregate at any one
time. The Company shall defend the right, title and
interest of the Certificateholders in, to and under the
Receivables and the other Trust Assets, whether now existing
or hereafter created, against all claims of third parties
claiming through or under the Company, the Sellers or any
Servicing Party. The Company will duly fulfill all material
obligations on its part to be fulfilled under or in
connection with each Receivable and will do nothing to
impair the rights of the Certificateholders in such
Receivable.
(c) Inspection of Property; Books and Records;
Discussions. Keep proper books of records and account in
which full, true and correct entries in conformity with GAAP
and all Requirements of Law shall be made of all dealings
and transactions in relation to its business and activities;
and permit representatives of the Trustee upon reasonable
advance notice to visit and inspect any of its properties
and examine and make abstracts from any of its books and
records during normal business hours on any Business Day and
as often as may reasonably be desired according to the
Company's normal security and confidentiality requirements
and to discuss the business, operations, properties and
financial and other condition of the Company with officers
and employees of the Company and with its independent
certified public accountants; provided, that the Trustee
shall notify the Company prior to any contact with such
accountants and shall give the Company the opportunity to
participate in such discussions.
-39-
<PAGE>
(d) Compliance with Law and Policies. (i) Comply in
all material respects with all Requirements of Law
applicable to the Company except to the extent that failure
to so comply would not be reasonably likely to have a
Material Adverse Effect.
(ii) Perform its obligations, and cause each
Seller to perform its obligations, in accordance with
and comply in all material respects with the Policies,
as amended from time to time in accordance with the
Transaction Documents, in regard to the Receivables and
the Related Property except to the extent that failure
to so comply would not be reasonably likely to have a
Material Adverse Effect with respect to the Company or
such Seller.
(e) Purchase of Receivables. Purchase Receivables
solely pursuant to the Receivables Sale Agreement or this
Agreement.
(f) Delivery of Collections. In the event that the
Company receives Collections directly from Obligors, deposit
such Collections into a Collection Account within two
Business Days after receipt thereof by the Company.
(g) Notices. Promptly (and, in any event, within two
Business Days after a Responsible Officer of the Company
becomes aware of such event) give notice to the Trustee,
each Rating Agency and each Agent for any Outstanding Series
of:
(i) the occurrence of any Early Amortization
Event or Potential Early Amortization Event; and
(ii) any Lien not permitted by subsection 2.8(c)
on any Receivable or any other Trust Assets other than
the conveyances and Liens hereunder and under the
Receivables Sale Agreement.
(h) Lockboxes. (i) Maintain, and keep in full force
and effect, each Lockbox Agreement to which the Company is a
party, except to the extent otherwise permitted under the
terms of this Agreement and the other Transaction Documents
and (ii) ensure that each related Lockbox Account shall be
free and clear of, and defend each such Lockbox Account
against, any writ, order, stay, judgment, warrant of
attachment or execution or similar process.
(i) Separate Corporate Existence.
(i) Maintain its own deposit account or accounts,
separate from those of any Affiliate, with commercial
-40-
<PAGE>
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
Subsidiary or 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 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, whether currently existing or
hereafter entered into, 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 annually and prepared in
accordance with subsection 2.7(a);
(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,
-41-
<PAGE>
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; and
(vii) Take, or refrain from taking, as the case
may be, all other actions that are necessary to be
taken or not to be taken in order to (x) ensure that
the assumptions and factual recitations set forth in
the Specified Bankruptcy Opinion Provisions remain true
and correct in all material respects with respect to
the Company and (y) comply with those procedures
described in such provisions which are applicable to
the Company.
(j) Maintain a net worth of not less than $25,000,000
at all times which net worth shall not include any amounts
outstanding under the Parent Note or the Subordinated Notes.
Section 2.8. Negative Covenants of the Company. The
Company hereby covenants that, until the Trust Termination Date
occurs, it shall not directly or indirectly:
(a) Accounting of Transfers. Prepare any financial
statements which shall account for the transactions
contemplated hereby in any manner other than as transfers of
Receivables and the other Trust Assets by the Company to the
Trust or in any other respect account for or treat the
transactions under this Agreement (including for financial
accounting purposes, except as required by law) in any
manner other than as transfers of Receivables and the other
Trust Assets by the Company to the Trust; provided, however,
that this subsection shall not apply for any tax or tax
accounting purposes.
(b) Limitation on Indebtedness. Create, incur, assume
or suffer to exist any Indebtedness, except: (i)
Indebtedness evidenced by the Subordinated Notes or the
Parent Note; (ii) Indebtedness representing fees, expenses
and indemnities payable pursuant to and in accordance with
the Transaction Documents; and (iii) Indebtedness for
services supplied or furnished to the Company in an amount
not to exceed $100,000 at any time outstanding; provided
that any Indebtedness permitted hereunder and described in
clauses (i) and (iii) shall be payable by the Company solely
from funds available to the Company which are not otherwise
needed to be applied to the payment of any amounts by the
Company pursuant to this Agreement or any Supplement.
-42-
<PAGE>
(c) 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 Permitted Liens, it being understood that no Permitted
Lien under clauses (ii), (iii) and (iv) of the definition
thereof shall cover any of the Trust Assets.
(d) Limitation on Guarantee Obligations. Become or
remain liable, directly or contingently, in connection with
any Indebtedness or other liability of any other Person,
whether by guarantee, endorsement (other than endorsements
of negotiable instruments for deposit or collection in the
ordinary course of business), agreement to purchase or
repurchase, agreement to supply or advance funds, or
otherwise.
(e) 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 make any material change in its present
method of conducting business, or convey, sell, lease,
assign, transfer or otherwise dispose of, all or
substantially all of its property, business or assets other
than (i) the assignments and transfers contemplated hereby
and (ii) sales or other dispositions of property (other than
Trust Assets) with an aggregate book value not exceeding
$25,000 in any period of twelve consecutive fiscal months.
(f) Limitation on Dividends and Other Payments.
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 (any of the
foregoing, a "restricted payment"), unless (i) if, at the
date such restricted payment is made, the Company shall have
made all payments in respect of any of its repurchase
obligations pursuant to this Agreement at such date and (ii)
such restricted payment is made no more frequently than on a
monthly basis and such restricted payment is effected in
accordance with all corporate and legal formalities
applicable to the Company; provided, however, that no
restricted payment shall be made upon the occurrence and
during the continuation of an Early Amortization Event.
(g) 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
-43-
<PAGE>
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.
(h) 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 (i) the Receivables and the other Trust
Assets and (ii) an advance or loan made to C&A Products,
provided that there are no amounts then outstanding under
the Subordinated Notes or Parent Note and, both before and
after giving effect to such investment, no Early
Amortization Event or Potential Early Amortization Event has
occurred and is continuing.
(i) Agreements. (i) Become a party to, or permit any
of its properties to be bound by, any indenture, mortgage,
instrument, contract, agreement, lease or other undertaking,
except the Contractual Obligations set forth on Schedule 5
hereto and any renewals thereof (and any amendments,
supplements, modifications or waivers to such Contractual
Obligations or renewals so long as such amendments,
supplements, modifications or waivers would not reasonably
be likely to have a Material Adverse Effect on the Company),
this Agreement and the other Transaction Documents and
agreements necessary to perform its obligations under the
Transaction Documents or (ii) issue any power of attorney
(except to the Trustee or any Servicing Party or except 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), or (iii) amend, supplement, modify
or waive any of the provisions of the Receivables Sale
Agreement or any Lockbox Agreement or request, consent or
agree to or suffer to exist or permit any such amendment,
supplement, modification or waiver or exercise any consent
rights granted to it thereunder except such amendments,
supplements, modifications or waivers or such exercise of
consent rights as would not be reasonably expected to have a
Material Adverse Effect with respect to the Company;
provided, however, that the Rating Agency Condition shall
have been satisfied with respect to any such amendments,
supplements, modifications or waivers pursuant to this
clause (iii).
(j) Policies. Make any change or modification (or
permit any change or modification to be made) in any
-44-
<PAGE>
material respect to the Policies, except (i) if such changes
or modifications are necessary under any Requirement of Law,
(ii) if such changes or modifications would not reasonably
be expected to have a material adverse effect on the
interests of the Investor Certificateholders or the
collectibility of the Receivables or (iii) if the Rating
Agency Condition is satisfied with respect thereto;
provided, however, that if any change or modification, other
than a change or modification permitted pursuant to clause
(i) or (ii) above, would reasonably be expected to have a
material adverse effect on the interests of the Investor
Certificateholders of a Series which is not rated by a
Rating Agency, the consent of the applicable Agent shall be
required to effect such change or modification.
(k) Receivables Not To Be Evidenced by Promissory
Notes. Subject to the delivery requirement set forth in
subsection 2.1(b), take any action to cause any Receivable
to be evidenced by any "instrument" (as defined in the UCC
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 or, as defined under
the relevant provincial laws of Canada) or any title in
bearer form except in connection with its enforcement or
collection.
(l) Offices. 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, or its legal head office,
without (i) 30 days' prior written notice to the Trustee and
each Rating Agency, (ii) taking all actions reasonably
requested by the Trustee (including but not limited to all
filings and other acts necessary or advisable under the UCC
or similar statute of each relevant jurisdiction) in order
to continue the Trust's first priority perfected ownership
or security interest in all Receivables now owned or
hereafter created and (iii) giving the Trustee 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; provided, however, that the Company shall not
change the location of its chief executive office to a state
which is within the Tenth Circuit unless it delivers an
opinion of counsel reasonably acceptable to the Rating
Agencies to the effect that Octagon Gas Systems, Inc. v.
Rimmer, 995 F.2d 948 (10th Cir. 1993) is no longer
controlling precedent in the Tenth Circuit.
(m) Addition of Sellers. Agree to the addition of any
Subsidiary of C&A Products as an additional Seller pursuant
to Section 9.14 of the Receivables Sale Agreement without
-45-
<PAGE>
such Subsidiary being simultaneously added as a Servicer (or
without the Master Servicer or another Subsidiary of C&A
Products simultaneously agreeing to act as a Servicer in
respect of such additional Seller) under the Transaction
Documents pursuant to Section 2.6 of the Servicing
Agreement.
(n) Charter. Amend or make any change or modification
to its certificate of incorporation without first satisfying
the Rating Agency Condition (other than an amendment, change
or modification made pursuant to changes in law of the state
of its incorporation or amendments to change the Company's
name, registered agent or address of registered office).
ARTICLE III
RIGHTS OF CERTIFICATEHOLDERS AND
ALLOCATION AND APPLICATION OF COLLECTIONS
THE FOLLOWING PORTION OF THIS ARTICLE III
IS APPLICABLE TO ALL SERIES.
Section 3.1. Establishment of Collection Accounts;
Certain Allocations. (a) The Trustee, for the benefit of the
Certificateholders, shall cause to be established and maintained
in the name of the Trustee on behalf of the Trust with an
Eligible Institution or with the trust department of the Trustee,
the following three segregated trust accounts (collectively, the
"Collection Accounts"), each bearing a designation clearly
indicating that the funds deposited therein are held for the
benefit of the Certificateholders: (i) an account in the United
States to hold all Collections received in the United States (the
"U.S. Dollar Collection Account"); (ii) an account in Canada to
hold all Collections received in Canada that are paid in U.S.
Dollars (the "Canada/U.S. Dollar Collection Account"); and (iii)
an account in Canada to hold all Collections received in Canada
that are paid in Canadian Dollars (the "Canada/Canadian Dollar
Collection Account"). The U.S. Dollar Collection Account shall
be divided into (i) a subaccount for deposit of Collections
received in the United States in respect of Primary Auto
Receivables (the "U.S. Dollar Primary Auto Collection
Subaccount"), (ii) individual subaccounts for each Outstanding
Series (each, respectively, a "Series Collection Subaccount" and,
collectively, the "Series Collection Subaccounts") and (iii) a
subaccount for the Company (the "Company Collection Subaccount").
For administrative purposes only, the Trustee shall establish or
cause to be established for each Series, so long as such Series
is an Outstanding Series, sub-subaccounts of the Series
Collection Subaccounts with respect to such Series (respectively,
the "Series Principal Collection Sub-subaccount" and "Series
Non-Principal Collection Sub-subaccount" and, collectively, the
-46-
<PAGE>
"Series Collection Sub-subaccounts"). For administrative
purposes only, the Trustee shall also establish or cause to be
established for each Series, so long as such Series is an
Outstanding Series, subaccounts of the Canada/U.S. Dollar
Collection Account and subaccounts of the Canada/Canadian Dollar
Collection Account (each, respectively, a "Series Canada/U.S.
Dollar Collection Subaccount" and a "Series Canada/Canadian
Dollar Subaccount").
(b) Authority of the Trustee in Respect of the
Collection Accounts and Certificateholders' Interests Therein.
The Trustee shall possess all right, title and interest in all
funds on deposit from time to time in the Collection Accounts and
in all proceeds thereof. The Collection Accounts shall be under
the sole dominion and control of the Trustee for the benefit of
the Investor Certificateholders and, to the extent set forth in
any Supplement, any holder of any Subordinated Company
Certificate. If, at any time, the Master Servicer has actual
notice or knowledge that any institution holding any of the
Collection Accounts is other than the trust department of the
Trustee or has ceased to be an Eligible Institution, the Master
Servicer shall direct the Trustee to establish within 15 days a
substitute account therefor with an Eligible Institution,
transfer any cash and/or any Eligible Investments to such new
account and from the date any such substitute accounts are
established, such account shall be the applicable Collection
Account. Neither the Company nor the Master Servicer, nor any
person or entity claiming by, through or under the Company or
Master Servicer, shall have any right, title or interest in
except to the extent expressly provided under the Transaction
Documents, or any right to withdraw any amount from, the
Collection Accounts. Pursuant to the authority granted to the
Master Servicer in subsection 2.2(a) of the Servicing Agreement,
the Master Servicer shall have the power, revocable by the
Trustee as provided therein, to instruct the Trustee to make
withdrawals from and payments to the Collection Accounts for the
purposes of carrying out the Master Servicer's or Trustee's
duties hereunder.
Each Series of Investor Certificates shall represent
Fractional Undivided Interests in the Trust as indicated in the
Supplement relating to such Series and the right to receive
Collections and other amounts at the times and in the amounts
specified in this Article III (as supplemented by the Supplement
related to such Series) to be deposited in the Collection
Accounts and any other accounts maintained for the benefit of the
Investor Certificateholders or paid to the Investor Certificate-
holders (with respect to each outstanding Series, the
"Certificateholders' Interest"). The Exchangeable Company
Certificate shall represent the interest in the Trust not
represented by any Series of Investor Certificates or
Subordinated Company Certificates then outstanding, including the
-47-
<PAGE>
right to receive Collections and other amounts at the times and
in the amounts specified in this Article III to be paid to the
Company (the "Company Interest"), and each Subordinated Company
Certificate, if any, shall represent the interests granted to
such Certificate pursuant to the related Supplement; provided,
however, that no such Certificate shall represent any interest in
any Trust Account and any other accounts maintained for the
benefit of the Investor Certificateholders, except as
specifically provided in this Article III.
(c) Administration of the Collection Accounts. At the
written direction of the Company, funds on deposit in the
Collection Accounts available for investment, shall be invested
by the Trustee in Eligible Investments selected by the Company.
All such Eligible Investments shall be held by the Trustee for
the benefit of the Investor Certificateholders. Amounts on
deposit in each Series Non-Principal Collection Sub-subaccount
shall, if applicable, be invested in Eligible Investments that
will mature, or that are payable or redeemable upon demand of the
holder thereof, so that such funds will be available on or before
the immediately following Determination Date. None of such
Eligible Investments shall be disposed of prior to the maturity
date with respect thereto. All interest and investment earnings
(net of losses and investment expenses) on funds deposited in a
Series Non-Principal Collection Sub-subaccount shall be deposited
in such sub-subaccount. Amounts on deposit in the Series
Principal Collection Sub-subaccounts shall be invested in
Eligible Investments that mature, or that are payable or
redeemable upon demand of the holder thereof, so that such funds
will be available not later than the date which is specified in
any Supplement. The Trustee, or its nominee or custodian, shall
maintain possession of the negotiable instruments or securities,
if any, evidencing any Eligible Investments from the time of
purchase thereof until the time of sale or maturity. Any
earnings (net of losses and investment expenses) (the "Investment
Earnings") on such invested funds in a Series Principal
Collection Sub-subaccount will be deposited in the related Series
Non-Principal Collection Sub-subaccount.
(d) Identification of Accounts. Schedule 2, which is
hereby incorporated into and made a part of this Agreement,
identifies the Collection Accounts by setting forth the account
number of each such account, the account designation of each such
account and the name of the institution with which each such
account has been established.
(e) Daily Collections. (i) As promptly as possible
following its receipt of Collections, but in no event later than
the Business Day following such receipt (such later Business Day,
the "Deposit Date"), the Master Servicer shall cause to be
transferred all Collections on deposit in the form of available
funds in the Lockbox Accounts directly to the respective
-48-
<PAGE>
Collection Accounts as follows: (A) all funds which are deposited
in the United States, to the U.S. Dollar Collection Account;
(B) all funds which are deposited in Canada in U.S. Dollars, to
the Canada/U.S. Dollar Collection Account; and (C) all funds
which are deposited in Canada in Canadian Dollars, to the
Canada/Canadian Dollar Collection Account. All such transfers to
the U.S. Dollar Collection Account and the Canada/U.S. Dollar
Collection Account shall be made in U.S. Dollars. All such
transfers to the Canada/Canadian Dollar Collection Account shall
be made in Canadian Dollars.
(ii) No later than the Business Day following each
Deposit Date, the Master Servicer shall direct the Trustee to
transfer from Aggregate Daily Collections deposited into the U.S.
Dollar Collection Account pursuant to paragraph (e)(i) above
below the following:
(A) With respect to Aggregate Daily Collections
deposited into the U.S. Dollar Collection Account other than
Aggregate Daily Collections in respect of Primary Auto
Receivables, (1) to the respective Series Collection
Subaccount, an amount equal to the product of (x) the
applicable Invested Percentage, if any, for such Outstanding
Series and (y) such Aggregate Daily Collections and (2) to
the Company Collection Subaccount, any remaining amounts;
and
(B) With respect to Aggregate Daily Collections
deposited into the U.S. Dollar Collection Account in respect
of Primary Auto Receivables, to the U.S. Dollar Primary Auto
Collection Subaccount.
(iii) No later than the Business Day following each
Deposit Date, the Master Servicer shall direct the Trustee to
transfer from Aggregate Daily Collections deposited into the U.S.
Dollar Primary Auto Collection Subaccount pursuant to paragraph
(e)(ii)(B) above, (1) to the respective Series Collection
Subaccount, an amount equal to the product of (x) the Series
Percentage for such Outstanding Series, (y) the applicable
Invested Percentage, if any, for such Outstanding Series and (z)
the amounts so deposited and (2) to the Company Collection
Subaccount, any remaining amounts.
(iv) No later than the Business Day following each
Deposit Date, the Master Servicer shall direct the Trustee to
allocate funds transferred to the Series Collection Subaccount
for each Outstanding Series pursuant to subsections 3.1(e)(ii)
and (iii), to the Series Non-Principal Collection Sub-subaccount
and the Series Principal Collection Sub-subaccount of each such
Series in accordance with the related Supplement for such Series.
-49-
<PAGE>
(v) No later than the Business Day following each
Deposit Date, except as otherwise provided in a Supplement, the
Master Servicer shall direct the Trustee to transfer to the
Company Collection Subaccount the remaining funds, if any, on
deposit in the U.S. Dollar Collection Account on such date after
giving effect to transfers to be made pursuant to subsections
3.1(e)(ii) and (iii).
(vi) No later than the Business Day following each
Deposit Date, the Master Servicer shall direct the Trustee to
transfer (A) with respect to Aggregate Daily Collections
deposited into the Canada/U.S. Dollar Collection Account and the
Canada/Canadian Dollar Collection Account, other than Aggregate
Daily Collections in respect of Primary Auto Receivables, to the
respective Series Canada/U.S. Dollar Collection Subaccount and
the respective Series Canada/Canadian Dollar Collection
Subaccount, as the case may be, an amount equal to the product of
(x) the applicable Invested Percentage, if any, for such
Outstanding Series and (y) such Aggregate Daily Collections and
(B) with respect to Aggregate Daily Collections deposited into
the Canada/U.S. Dollar Collection Account and the Canada/Canadian
Dollar Collection Account in respect of Primary Auto Receivables,
to the respective Series Canada/U.S. Dollar Collection Subaccount
and the respective Series Canada/Canadian Dollar Collection
Subaccount, as the case may be, an amount equal to the product of
(x) the Series Percentage for such Outstanding Series, (y) the
applicable Invested Percentage, if any, for such Outstanding
Series and (z) such Aggregate Daily Collections.
(vii) No later than the Business Day following each
Deposit Date, except as otherwise provided in a Supplement, if
(A) the amounts deposited in a Series Collection Subaccount or
Sub-subaccount, as the case may be, of an Outstanding Series in
accordance with this Section 3.1 and the related Supplement are
less than the amounts required to be on deposit therein or (B) if
a Supplement requires funds on deposit in the respective Series
Canada/U.S. Dollar Collection Subaccount or the respective Series
Canada/Canadian Dollar Collection Subaccount to be transferred to
another Collection Subaccount or Sub-subaccount of such Series,
as the case may be, the Master Servicer shall direct the Trustee
to transfer to the applicable Series Collection Subaccount or
Sub-subaccounts, as the case may be, first, from amounts on
deposit in the Series Canada/U.S. Dollar Collection Subaccount
for such Series and second, from amounts on deposit in the Series
Canada/Canadian Dollar Collection Subaccount for such Series, an
amount up to the amount of any such shortfall.
(f) Allocations for the Exchangeable Company
Certificate. Until the occurrence and continuation of an Early
Amortization Event or the commencement of an Amortization Period,
on each Business Day and, after the occurrence and continuation
of an Early Amortization Event or the commencement of an
-50-
<PAGE>
Amortization Period and until the Trust Termination Date, on each
Distribution Date, after making all allocations required pursuant
to subsection 3.1(e) the Master Servicer, at the direction of the
Company, shall direct the Trustee to pay to the holder of the
Exchangeable Company Certificate the amounts on deposit in the
Company Collection Subaccount as well as all amounts on deposit
in the Canada/U.S. Dollar Collection Account and the
Canada/Canadian Dollar Collection Account (and any subaccounts
thereof) not otherwise required to be retained therein or
otherwise distributed pursuant to the terms of a Supplement.
(g) Set-Off. (i) If the Company shall fail to make a
payment as provided in this Agreement or any Supplement, the
Trustee may set off and apply any amounts otherwise payable to
the Company on account of such obligation. The Company hereby
waives demand, notice or declaration of such set-off and
application; provided that notice will promptly be given to the
Company of such set-off; provided further that failure to give
such notice shall not affect the validity of such set-off.
(ii) In the event the Master Servicer shall fail to
make a payment as provided in this Agreement or any Supplement,
the Trustee may set off and apply any amounts otherwise payable
to the Master Servicer on account of such obligation. The Master
Servicer hereby waives demand, notice or declaration of such
set-off and application; provided that notice will promptly be
given to the Master Servicer of such set-off; provided further
that failure to give such notice shall not affect the validity of
such set-off.
(h) Allocation and Application of Funds. The Master
Servicer will apply all Collections with respect to the
Receivables for each Accrual Period as described in this Article
III and in the Supplement with respect to each Outstanding
Series. The Master Servicer shall direct the Trustee to pay
Collections to the holder of the Exchangeable Company Certificate
to the extent such Collections are allocated to the Exchangeable
Company Certificate under subsection 3.1(f) and as otherwise
provided in Article III. Notwithstanding anything in this
Agreement, any Supplement or any other Transaction Document to
the contrary, to the extent that the Trustee receives any Daily
Report prior to 2:00 p.m., New York City time, on any Business
Day, the Trustee shall make any applications of funds required
thereby on the same Business Day and otherwise on the next
succeeding Business Day.
(i) Allocation of Collections on Additional
Receivables. Notwithstanding anything to the contrary contained
in this Article III to the contrary, if any Additional
Receivables are added to the Trust Assets, the Supplement
creating the Series of Certificates having an interest in such
-51-
<PAGE>
Additional Receivables shall set forth provisions allocating the
Collections received on such Additional Receivables.
(j) Exchange of Canadian Dollars into U.S. Dollars.
All amounts transferred from a Series Canada/Canadian Dollar
Collection Subaccount to the U.S. Dollar Collection Account (or
any subaccount or sub-subaccount thereof) shall be exchanged by
the Trustee into U.S. Dollars at the direction of the Master
Servicer. The Trustee shall solicit offer quotations from at
least two Authorized Foreign Exchange Dealers for effecting such
exchange and shall effect such exchange with at least one such
Authorized Foreign Exchange Dealer as soon thereafter as is
reasonably practicable.
The Trustee shall notify the Master Servicer of
the offer quotations or combination of offer quotations submitted
that require the least amount of Canadian Dollars to be paid to
the Authorized Foreign Exchange Dealers to purchase U.S. Dollars
and the names and payment instructions of the Authorized Foreign
Exchange Dealers that submitted such offer or offers and shall
enter into an agreement or agreements on behalf of and solely as
agent of the Trust with such Authorized Foreign Exchange Dealers
with respect to such offer or offers (which agreement or
agreements will provide for delivery of the U.S. Dollars in
immediately available funds directly to or upon the order of the
Trustee). The Trustee shall withdraw the portion of the Canadian
Dollars from the appropriate Series Canada/Canadian Dollar
Collection Subaccount required to be paid pursuant to such
agreement or agreements and make the payments described in the
payment instructions provided pursuant to the preceding sentence.
The Trustee shall maintain written records of any
quotations received in response to any solicitations made
pursuant to this Section 3.1(j) and shall make the same available
to the Master Servicer promptly upon request.
If, as a result of changes in customary market
practice in, or other changes relating to, the currency exchange
markets in Canada, the Trustee is unable to comply with the terms
hereof in respect of the purchase of U.S. Dollars with Canadian
Dollars, then the parties hereto will use all reasonable efforts
to agree on the terms of an amendment hereto and to amend the
terms hereof in order to permit such compliance with the terms
hereof or to reflect such customary market practice.
THE REMAINDER OF ARTICLE III SHALL BE SPECIFIED
IN THE SUPPLEMENT WITH RESPECT TO EACH SERIES.
SUCH REMAINDER SHALL BE APPLICABLE ONLY TO THE
SERIES RELATING TO THE SUPPLEMENT IN WHICH
SUCH REMAINDER APPEARS.
-52-
<PAGE>
ARTICLE IV
ARTICLE IV IS RESERVED
AND MAY BE SPECIFIED IN ANY SUPPLEMENT
WITH RESPECT TO THE SERIES RELATING THERETO
ARTICLE V
THE CERTIFICATES
Section 5.1. The Certificates. The Investor
Certificates of each Series, any Class thereof and any
Subordinated Company Certificates related thereto shall be in
fully registered form (collectively, the "Certificates") and
shall be substantially in the form of the exhibits with respect
thereto attached to the applicable Supplement. The Exchangeable
Company Certificate shall be substantially in the form of Exhibit
A. The Certificates and the Exchangeable Company Certificates
shall, upon issue, be executed and delivered by the Company to
the Trustee for authentication and redelivery as provided in
Section 5.2. Except as otherwise set forth in the related
Supplement, the Investor Certificates shall be issued in minimum
denominations of $5,000,000 and in integral multiples of $100,000
in excess thereof unless otherwise specified in any Supplement
for any Series and Class. Unless otherwise specified in any
Supplement for any Series, the Investor Certificates shall be
issued upon initial issuance as a single certificate in an
original principal amount equal to the Initial Invested Amount
with respect to such Series. Each Subordinated Company
Certificate, if any, issued under any Supplement shall be a
single certificate and shall represent a subordinated interest in
the Trust Assets allocated to such Series, as designated in the
related Supplement. The Exchangeable Company Certificate shall
also be a single certificate and shall represent the entire
Company Interest. The Company is hereby authorized to execute
and deliver each Certificate on behalf of the Trust. Each
Certificate shall be executed by manual or facsimile signature on
behalf of the Company by a Responsible Officer. Certificates
bearing the manual or facsimile signature of the individual who
was, at the time when such signature was affixed, authorized to
sign on behalf of the Company or the Trustee shall not be
rendered invalid, notwithstanding that such individual has ceased
to be so authorized prior to or on the date of the authentication
and delivery of such Certificates or does not hold such office at
the date of such Certificates. No Certificate shall be entitled
to any benefit under this Agreement, or be valid for any purpose,
unless there appears on such Certificate a certificate of
authentication substantially in the form provided for herein
executed by or on behalf of the Trustee by the manual signature
of a duly authorized signatory, and such certificate upon any
Certificate shall be conclusive evidence, and the only evidence,
-53-
<PAGE>
that such Certificate has been duly authenticated and delivered
hereunder. All Certificates shall be dated the date of their
authentication but failure to do so shall not render them
invalid.
Section 5.2. Authentication of Certificates.
Contemporaneously with the initial sale, assignment and transfer
of the Receivables, whether now existing or hereafter created,
and the other Trust Assets to the Trust, the Trustee shall
authenticate and deliver the initial Series of the Investor
Certificates that is issued upon original issuance, upon the
written order of the Company in a form reasonably satisfactory to
the Trustee, to the holders of the initial Series of Investor
Certificates, against payment to the Company of the Initial
Invested Amount. The Trustee shall authenticate and deliver the
Exchangeable Company Certificate to the Company simultaneously
with its delivery of the initial Series of Investor Certificates.
The Certificates shall be duly authenticated by or on behalf of
the Trustee, in the case of the Investor Certificates in
authorized denominations equal to (in the aggregate) the Initial
Invested Amount, in the case of any Subordinated Company
Certificate, in a denomination equal to the subordinated interest
in the Trust Assets allocated to such Certificate in accordance
with the terms of the related Supplement and, in the case of the
Exchangeable Company Certificate, in a denomination equal to the
remaining Company Interest from time to time, and together
evidencing the entire ownership of the Trust. Upon an Exchange
as provided in Section 5.10 and the satisfaction of certain other
conditions specified therein, the Trustee shall authenticate and
deliver the Certificates of additional Series (with the
designation provided in the applicable Supplement) (or, if
provided in any Supplement, the additional Investor Certificates
of an existing Series), upon the written order of the Company, to
the Persons designated in such Supplement. Upon the order of the
Company, the Investor Certificates of any Series shall be duly
authenticated by or on behalf of the Trustee, in authorized
denominations equal to (in the aggregate) the Initial Invested
Amount of such Series of Investor Certificates.
Section 5.3. Registration of Transfer and Exchange of
Certificates. (a) The Trustee shall cause to be kept at the
office or agency to be maintained by a transfer agent and
registrar (which may be the Trustee) (the "Transfer Agent and
Registrar") in accordance with the provisions of Section 8.16 a
register (the "Certificate Register") in which, subject to such
reasonable regulations as the Trustee may prescribe, the Transfer
Agent and Registrar shall provide for the registration of the
Investor Certificates and of transfers and exchanges of the
Investor Certificates as herein provided. The Company hereby
appoints Chemical Bank as Transfer Agent and Registrar for the
purpose of registering the Investor Certificates and transfers
and exchanges of the Investor Certificates as herein provided.
-54-
<PAGE>
Chemical Bank shall be permitted to resign as Transfer Agent and
Registrar upon 30 days' written notice to the Company, the
Trustee and the Master Servicer; provided, however, that such
resignation shall not be effective and Chemical Bank shall
continue to perform its duties as Transfer Agent and Registrar
until the Trustee has appointed a successor Transfer Agent and
Registrar reasonably acceptable to the Company.
The Company hereby agrees to provide the Trustee from
time to time sufficient funds, on a timely basis and in
accordance with and subject to Section 8.5, for the payment of
any reasonable compensation payable to the Transfer Agent and
Registrar for their services under this Section 5.3. The Trustee
hereby agrees that, upon the receipt of such funds from the
Company, it shall pay the Transfer Agent and Registrar such
amounts.
Upon surrender for registration of transfer of any
Investor Certificate at any office or agency of the Transfer
Agent and Registrar maintained for such purpose, the Company
shall execute, and the Trustee shall authenticate and deliver, in
the name of the designated transferee or transferees, one or more
new Investor Certificates in authorized denominations of the same
Series representing like aggregate Fractional Undivided Interests
and which bear numbers that are not contemporaneously
outstanding.
At the option of an Investor Certificateholder,
Investor Certificates may be exchanged for other Investor
Certificates of the same Series in authorized denominations of
like aggregate Fractional Undivided Interests, bearing numbers
that are not contemporaneously outstanding, upon surrender of the
Investor Certificates to be exchanged at any such office or
agency of the Transfer Agent and Registrar maintained for such
purpose.
Whenever any Investor Certificates of any Series are so
surrendered for exchange, the Company shall execute, and the
Trustee shall authenticate and (unless the Transfer Agent and
Registrar is different from the Trustee, in which case the
Transfer Agent and Registrar shall) deliver, the Investor
Certificates of such Series which the Certificateholder making
the exchange is entitled to receive. Every Investor Certificate
presented or surrendered for registration of transfer or exchange
shall be accompanied by a written instrument of transfer in a
form satisfactory to the Trustee and the Transfer Agent and
Registrar duly executed by the Certificateholder thereof or his
attorney-in-fact duly authorized in writing delivered to the
Trustee (unless the Transfer Agent and Registrar is different
from the Trustee, in which case to the Transfer Agent and
Registrar) and complying with any requirements set forth in the
applicable Supplement.
-55-
<PAGE>
No service charge shall be made for any registration of
transfer or exchange of Investor Certificates, but the Transfer
Agent and Registrar may require any Certificateholder that is
transferring or exchanging one or more Certificates to pay a sum
sufficient to cover any tax or governmental charge that may be
imposed in connection with any transfer or exchange of Investor
Certificates.
All Investor Certificates surrendered for registration
of transfer and exchange shall be cancelled and disposed of in a
manner satisfactory to the Trustee and the Company. The Trustee
shall cancel and destroy each Certificate in global form upon its
exchange in full for Definitive Certificates and shall deliver a
certificate of destruction to the Company.
The Company shall execute and deliver Certificates to
the Trustee or the Transfer Agent and Registrar in such amounts
and at such times as are necessary to enable the Trustee and the
Transfer Agent and Registrar to fulfill their respective
responsibilities under this Agreement and the Certificates.
(b) The Transfer Agent and Registrar will maintain at
its expense in the Borough of Manhattan, The City of New York
and, subject to subsection 5.3(a), if specified in the related
Supplement for any Series, any other city designated in such
Supplement, an office or offices or agency or agencies where
Investor Certificates may be surrendered for registration or
transfer or exchange.
(c) Unless otherwise stated in any related
Supplements, registration of transfer of Certificates containing
a legend relating to restrictions on transfer of such
Certificates (which legend shall be set forth in the Supplement
relating to such Investor Certificates) shall be effected only if
the conditions set forth in the related Supplement are complied
with.
Certificates issued upon registration of transfer of,
or in exchange for, Certificates bearing the legend referred to
above shall also bear such legend unless the Company, the Master
Servicer, the Trustee and the Transfer Agent and Registrar
receive an Opinion of Counsel satisfactory to each of them, to
the effect that such legend may be removed.
Section 5.4. Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificate is surrendered to
the Transfer Agent and Registrar, or the Transfer Agent and
Registrar receives evidence to its satisfaction of the
destruction, loss or theft of any Certificate and (b) there is
delivered to the Transfer Agent and Registrar and the Trustee
such security or indemnity as may be required by them to save the
Trust and each of them harmless, then, in the absence of notice
-56-
<PAGE>
to the Trustee or Transfer Agent and Registrar that such
Certificate has been acquired by a bona fide purchaser, the
Company shall execute and, upon the request of the Company, the
Trustee shall authenticate and deliver (in compliance with
applicable law), in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Certificate, a new
Certificate of like tenor and aggregate Fractional Undivided
Interest and bearing a number that is not contemporaneously
outstanding. In connection with the issuance of any new
Certificate under this Section 5.4, the Trustee or the Transfer
Agent and Registrar may require the payment by the Certificate-
holder of a sum sufficient to cover any tax or other governmental
expenses (including the fees and expenses of the Trustee and
Transfer Agent and Registrar) connected therewith. Any duplicate
Certificate issued pursuant to this Section 5.4 shall constitute
complete and indefeasible evidence of ownership in the Trust, as
if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
Section 5.5. Persons Deemed Owners. Prior to due
presentation of a Certificate for registration of transfer, the
Trustee, the Paying Agent, the Transfer Agent and Registrar and
any agent of any of them may treat the Person in whose name any
Certificate is registered as the owner of such Certificate for
the purpose of receiving distributions pursuant to Article IV and
for all other purposes whatsoever, and neither the Trustee, the
Paying Agent, the Transfer Agent and Registrar nor any agent of
any of them shall be affected by any notice to the contrary.
Notwithstanding the foregoing provisions of this Section 5.5, in
determining whether the holders of the requisite Fractional
Undivided Interests have given any request, demand,
authorization, direction, notice, consent or waiver hereunder,
Certificates owned by the Company, the Master Servicer or any
affiliate thereof (as defined in Rule 405 under the Securities
Act), shall be disregarded and deemed not to be outstanding,
except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only
Certificates which a Responsible Officer of the Trustee actually
knows to be so owned shall be so disregarded. Certificates so
owned by the Company, the Master Servicer or any Affiliate
thereof which have been pledged in good faith shall not be
disregarded and may be regarded as outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's
right so to act with respect to such Certificates and that the
pledgee is not the Company, the Master Servicer or an Affiliate
thereof.
Section 5.6. Appointment of Paying Agent. The Paying
Agent shall make distributions to Investor Certificateholders
from the Collection Accounts (and/or any other account or
accounts maintained for the benefit of Certificateholders as
-57-
<PAGE>
specified in the related Supplement for any Series) pursuant to
Articles III and IV. The Trustee may revoke such power and
remove the Paying Agent if the Trustee determines in its sole
discretion that the Paying Agent shall have failed to perform its
obligations under this Agreement in any material respect. Unless
otherwise specified in the related Supplement for any Series and
with respect to such Series, the Paying Agent shall initially be
Chemical Bank and any co-paying agent chosen by Chemical Bank.
Each Paying Agent shall have a combined capital and surplus of at
least $50,000,000. The Paying Agent shall be permitted to resign
upon 30 days' written notice to the Trustee. In the event that
the Paying Agent shall so resign, the Trustee shall appoint a
successor to act as Paying Agent (which shall be a depositary
institution or trust company) reasonably acceptable to the
Company which appointment shall be effective on the date which
the Person so appointed gives the Trustee written notice that it
accepts the appointment. Any resignation or removal of the
Paying Agent and appointment of successor Paying Agent pursuant
to this Section 5.6 shall not become effective until acceptance
of appointment by the successor Paying Agent as provided in this
Section 5.6. The Trustee shall cause such successor Paying Agent
or any additional Paying Agent appointed by the Trustee to
execute and deliver to the Trustee an instrument in which such
successor Paying Agent or additional Paying Agent shall agree
with the Trustee that as Paying Agent, such successor Paying
Agent or additional Paying Agent will hold all sums, if any, held
by it for payment to the Investor Certificateholders in trust for
the benefit of the Investor Certificateholders entitled thereto
until such sums shall be paid to such Certificateholders. The
Paying Agent shall return all unclaimed funds to the Trustee and
upon removal of a Paying Agent such Paying Agent shall also
return all funds in its possession to the Trustee. The
provisions of Sections 8.1, 8.2, 8.3 and 8.5 shall apply to the
Trustee also in its role as Paying Agent, for so long as the
Trustee shall act as Paying Agent. Any reference in this
Agreement to the Paying Agent shall include any co-paying agent
unless the context requires otherwise.
The Company hereby agrees to provide the Trustee from
time to time sufficient funds, on a timely basis and in
accordance with and subject to Section 8.5, for the payment of
any reasonable compensation payable to the Paying Agent for its
services under this Section 5.6. The Trustee hereby agrees that,
upon the receipt of such funds from the Company, it shall pay the
Paying Agent such amounts.
Section 5.7. Access to List of Certificateholders'
Names and Addresses. The Trustee will furnish or cause to be
furnished by the Transfer Agent and Registrar to the Master
Servicer or the Paying Agent, within three Business Days after
receipt by the Trustee of a request therefor from the Company,
the Master Servicer or the Paying Agent, respectively, in
-58-
<PAGE>
writing, a list of the names and addresses of the Investor
Certificateholders as then recorded by or on behalf of the
Trustee. If three or more Investor Certificateholders of record
or any Investor Certificateholder of any Series or a group of
Investor Certificateholders of record representing Fractional
Undivided Interests aggregating not less than 25% of the Invested
Amount of the related Outstanding Series (the "Applicants") apply
in writing to the Trustee, and such application states that the
Applicants desire to communicate with other Investor Certificate-
holders of any Series with respect to their rights under this
Agreement or under the Investor Certificates and is accompanied
by a copy of the communication which such Applicants propose to
transmit, then the Trustee, after having been adequately
indemnified by such Applicants for its costs and expenses, shall
transmit or shall cause the Transfer Agent and Registrar to
transmit, such communication to the Certificateholders reasonably
promptly after the receipt of such application.
Every Certificateholder, by receiving and holding a
Certificate, agrees with the Trustee that neither the Trustee,
the Transfer Agent and Registrar, nor any of their respective
agents shall be held accountable by reason of the disclosure or
mailing of any such information as to the names and addresses of
the Certificateholders hereunder, regardless of the sources from
which such information was derived.
As soon as practicable following each Record Date the
Trustee shall provide to the Paying Agent or its designee, a list
of Certificateholders in such form as the Paying Agent may
reasonably request.
Section 5.8. Authenticating Agent. (a) The Trustee
may appoint one or more authenticating agents with respect to the
Certificates which shall be authorized to act on behalf of the
Trustee in authenticating the Certificates in connection with the
issuance, delivery, registration of transfer, exchange or
repayment of the Certificates. Whenever reference is made in
this Agreement to the authentication of Certificates by the
Trustee or the Trustee's certificate of authentication, such
reference shall be deemed to include authentication on behalf of
the Trustee by an authenticating agent and a certificate of
authentication executed on behalf of the Trustee by an
authenticating agent. Each authenticating agent must be
acceptable to the Company.
(b) Any institution succeeding to the corporate trust
business of an authenticating agent shall continue to be an
authenticating agent without the execution or filing of any paper
or any further act on the part of the Trustee or such
authenticating agent.
-59-
<PAGE>
(c) An authenticating agent may at any time resign by
giving written notice of resignation to the Trustee. Upon the
receipt by the Trustee of any such notice of resignation and upon
the giving of any such notice of termination by the Trustee, the
Trustee shall immediately give notice of such resignation or
termination to the Company. Any resignation of an authenticating
agent and appointment of successor authenticating agent shall not
become effective until acceptance of appointment by the successor
authenticating agent as provided in this Section 5.8. The
Trustee may at any time terminate the agency of an authenticating
agent by giving notice of termination to such authenticating
agent. Upon receiving such a notice of resignation or upon such
a termination, or in case at any time an authenticating agent
shall cease to be acceptable to the Trustee, the Trustee promptly
may appoint a successor authenticating agent. Any successor
authenticating agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its
predecessor hereunder, with like effect as if originally named as
an authenticating agent. No successor authenticating agent shall
be appointed unless acceptable to the Trustee and the Company.
(d) The Company hereby agrees to provide the Trustee
from time to time sufficient funds, on a timely basis and in
accordance with and subject to Section 8.5, for the payment of
any reasonable compensation payable to each authenticating agent
for its services under this Section 5.8. The Trustee hereby
agrees that, upon the receipt of such funds from the Company it
shall pay each authenticating agent such amounts.
(e) The provisions of Sections 8.1, 8.2, 8.3 and 8.5
shall be applicable to any authenticating agent.
(f) Pursuant to an appointment made under this
Section 5.8, the Certificates may have endorsed thereon, in lieu
of the Trustee's certificate of authentication, an alternate
certificate of authentication in substantially the following
form:
"This is one of the Certificates described in the
Pooling Agreement dated as of March 30, 1995, among Carcorp,
Inc., Collins & Aikman Products Co., as Master Servicer and
Chemical Bank, as Trustee.
as Authenticating Agent
for the Trustee
By
Authorized Officer"
-60-
<PAGE>
Section 5.9. Tax Treatment. It is the intent of the
Master Servicer, the Company, the Investor Certificateholders and
the Trustee that, for federal, state and local income and
franchise tax purposes, the Investor Certificates be treated as
evidence of indebtedness secured by the Trust Assets and the
Trust not be characterized as an association taxable as a
corporation. The Company, by entering into this Agreement, and
each Investor Certificateholder, by its acceptance of its
Investor Certificate, agree to treat the Investor Certificates
for federal, state and local income and franchise tax purposes as
indebtedness. The provisions of this Agreement and all related
Transaction Documents shall be construed to further these
intentions of the parties. This Section 5.9 shall survive the
termination of this Agreement and shall be binding on all
transferees of any of the foregoing persons.
Section 5.10. Tender of Exchangeable Company
Certificate. The terms relating to any tender of the Exchangeable
Company Certificate shall be specified in the Supplement with
respect to each Series. Such terms shall be applicable only to
the Series relating to the Supplement in which such terms appear.
(a) Upon any Company Exchange, the Trustee shall issue
to the Company under Section 5.1 for execution and redelivery to
the Trustee for authentication under Section 5.2 (i) one or more
Certificates representing an increase in the Invested Amount of
an Outstanding Series, and an increase in the related
Subordinated Company Certificate, or (ii) one or more new Series
of Investor Certificates representing an interest in the Excess
Primary Auto Receivables or any Additional Receivables, and the
related Series of Subordinated Company Certificate. Any such
Certificates shall be substantially in the form specified in the
applicable Supplement and each shall bear, upon its face, the
designation for such Series to which each such certificate
belongs so selected by the Company. Except as specified in any
Supplement for a related Series, all Investor Certificates of any
Series shall be equally and ratably entitled as provided herein
to the benefits hereof without preference, priority or
distinction on account of the actual time or times of
authentication and delivery, all in accordance with the terms and
provisions of this Agreement and the applicable Supplement.
(b) The Company may tender the Exchangeable Company
Certificate to the Trustee in exchange for (i) (A) an increase in
the Invested Amount of a Class of Investor Certificates of an
Outstanding Series, and an increase in the related Subordinated
Company Certificate or (B) one or more newly issued Series of
Investor Certificates representing an interest in the Excess
Primary Auto Receivables or any Additional Receivables, and the
related newly issued Subordinated Company Certificate, and (ii) a
reissued Exchangeable Company Certificate (any such tender a
"Company Exchange"). In addition, to the extent permitted for
-61-
<PAGE>
any Series of Investor Certificates as specified in the related
Supplement, the Investor Certificateholders of such Series may
tender their Certificates and the Company may tender the
Exchangeable Company Certificate and any Investor or Subordinated
Company Certificate to the Trustee pursuant to the terms and
conditions set forth in such Supplement in exchange for (i) one
or more newly issued Series of Investor Certificates, (ii) if
applicable, one or more Series of Subordinated Company
Certificate, and (iii) a reissued Exchangeable Company
Certificate (an "Investor Exchange"). The Company Exchange and
Investor Exchange are referred to collectively herein as an
"Exchange". The Company may perform an Exchange by notifying the
Trustee, in writing at least three days in advance (an "Exchange
Notice") of the date upon which the Exchange is to occur (an
"Exchange Date"). Any Exchange Notice shall state the
designation of any Series to be issued on the Exchange Date and,
with respect to each such Series: (a) its additional or Initial
Invested Amount, as the case may be, (or the method for
calculating such additional or Initial Invested Amount), if any,
which, in the aggregate, at any time, may not be greater than the
current principal amount of the Exchangeable Company Certificate,
if any, at such time (or in the case of an Investor Exchange, the
sum of the Invested Amount of the Series of Investor Certificates
to be exchanged plus the current principal amount of the
Subordinated Company Certificates, if any, to be exchanged plus
the current principal amount of the Exchangeable Company
Certificate) and (b) its Certificate Rate (or the method for
allocating interest payments or other cash flow to such Series),
if any. On the Exchange Date, the Trustee shall only
authenticate and deliver any such Series upon delivery to it of
the following: (a) a Supplement executed by the Company and
specifying the Principal Terms of such Series, (b) a Tax Opinion,
(c) a General Opinion, (d) written confirmation from each Rating
Agency that the Exchange will not result in the Rating Agency's
reducing or withdrawing its rating on any then Outstanding Series
rated by it and (e) the existing Exchangeable Company Certificate
or applicable Investor Certificates and Subordinated Company
Certificates, as the case may be. Upon the delivery of the items
listed in clauses (a) through (e) above, the Trustee shall cancel
the existing Exchangeable Company Certificate, the applicable
Investor Certificates and Subordinated Company Certificates, as
the case may be, and issue, as provided above, such Series of
Investor Certificates, such Series of Subordinated Company
Certificate, if applicable, and a new Exchangeable Company
Certificate, dated the Exchange Date. There is no limit to the
number of Exchanges that the Company may perform under this
Agreement. If the Company shall, on any Exchange Date, retain
any Investor Certificates issued on such Exchange Date, it shall,
prior to transferring any such Certificates to another Person,
obtain a Tax Opinion with respect to such Certificates.
-62-
<PAGE>
(c) In conjunction with an Exchange, the parties
hereto shall execute a Supplement, which shall define, with
respect to any additional Investor Certificates or newly issued
Series, as the case may be: (i) its name or designation,
(ii) its additional or initial principal amount, as the case may
be, (or method for calculating such amount), (iii) its coupon
rate (or formula for the determination thereof), (iv) the
interest payment date or dates and the date or dates from which
interest shall accrue, (v) the method for allocating Collections
to Certificateholders, (vi) the names of any accounts to be used
by such Series and the terms governing the operation of any such
accounts, (vii) the terms on which the certificates of such
Series may be repurchased by the Company or may be remarketed to
other investors, (viii) the Series Termination Date, (ix) any
deposit account maintained for the benefit of Certificateholders,
(x) the number of classes of such Series, and if more than one
class, the rights and priorities of each such class, (xi) the
rights of the holder of the Exchangeable Company Certificate that
have been transferred to the holders of such Series, (xii) the
designation of any Series Accounts and the terms governing the
operation of any such Series Accounts, (xiii) provisions
acceptable to the Trustee concerning the payment of the Trustee's
fees and expenses and (xiv) other relevant terms (all such terms,
the "Principal Terms" of such Series). The Supplement executed
in connection with the Exchange shall contain administrative
provisions which are reasonably acceptable to the Trustee.
(d) Without prior satisfaction of the Rating Agency
Condition, the Company shall not transfer, assign, exchange or
otherwise dispose of any Subordinated Company Certificate or any
interest represented thereby without the consent of Investor
Certificateholders holding at least 50% of the Invested Amount of
the related Outstanding Series and the Trustee, and any attempt
to do so shall be void and of no effect.
(e) Except as specified in any Supplement for a
related Series, all Investor Certificates of any Series shall be
equally and ratably entitled as provided herein to the benefits
hereof without preference, priority or distinction on account of
the actual time or times of authentication and delivery, all in
accordance with the terms and provisions of this Agreement and
the applicable Supplement.
Section 5.11. Book-Entry Certificates. If specified
in any related Supplement, the Investor Certificates, or any
portion thereof, upon original issuance, shall be issued in the
form of one or more typewritten Certificates representing the
Book-Entry Certificates, to be delivered to the depository
specified in such Supplement (the "Depository") which shall be
the Clearing Agency, specified by, or on behalf of, the Company
for such Series. The Investor Certificates shall initially be
registered on the Certificate Register in the name of the nominee
-63-
<PAGE>
of such Clearing Agency, and no Certificate Book-Entry Holder
will receive a definitive certificate representing such
Certificate Book-Entry Holder's interest in the Investor
Certificates, except as provided in Section 5.13. Unless and
until definitive, fully registered Investor Certificates
("Definitive Certificates") have been issued to
Certificateholders pursuant to Section 5.13:
(a) the provisions of this Section 5.11 shall be in
full force and effect;
(b) the Company, the Master Servicer and the Trustee
may deal with each Clearing Agency for all purposes
(including the making of distributions on the Investor
Certificates) as the Certificateholder without respect to
whether there has been any actual authorization of such
actions by the Certificate Book-Entry Holders with respect
to such actions;
(c) to the extent that the provisions of this
Section 5.11 conflict with any other provisions of this
Agreement, the provisions of this Section 5.11 shall
control; and
(d) the rights of Certificate Book-Entry Holders shall
be exercised only through the Clearing Agency and the
related Clearing Agency Participants and shall be limited to
those established by law and agreements between such related
Certificate Book-Entry Holders and the Clearing Agency
and/or the Clearing Agency Participants. Pursuant to the
Depository Agreement, the initial Clearing Agency will make
book-entry transfers among the Clearing Agency Participants
and receive and transmit distributions of principal and
interest on the Investor Certificates to such Clearing
Agency Participants.
Section 5.12. Notices to Clearing Agency. Whenever
notice or other communication to the Certificateholders is
required under this Agreement, unless and until Definitive
Certificates shall have been issued to Certificate Book-Entry
Holders pursuant to Section 5.13, the Trustee shall give all such
notices and communications specified herein to be given to the
Investor Certificateholders to the Clearing Agencies.
Section 5.13. Definitive Certificates. If (a)(i) the
Company advises the Trustee in writing that any Clearing Agency
is no longer willing or able to properly discharge its
responsibilities under the applicable Depository Agreement, and
(ii) the Trustee or the Company is unable to locate a qualified
successor, (b) the Company, at its option, advises the Trustee in
writing that it elects to terminate the book-entry system through
the Clearing Agency or (c) after the occurrence of a Servicer
-64-
<PAGE>
Default, Certificate Book-Entry Holders representing Fractional
Undivided Interests aggregating more than 50% of the Invested
Amount held by such Certificate Book-Entry Holders of each
affected Series then issued and outstanding advise the Clearing
Agency through the Clearing Agency Participants in writing, and
the Clearing Agency shall so notify the Trustee, that the
continuation of a book-entry system through the Clearing Agency
is no longer in the best interests of the Certificate Book-Entry
Holders, the Trustee shall notify the Clearing Agency, which
shall be responsible to notify the Certificate Book-Entry
Holders, of the occurrence of any such event and of the
availability of Definitive Certificates to Certificate Book-Entry
Holders requesting the same. Upon surrender to the Trustee of
the Investor Certificates by the Clearing Agency, accompanied by
registration instructions from the Clearing Agency for
registration, the Trustee shall issue the Definitive
Certificates. Neither the Company nor the Trustee shall be
liable for any delay in delivery of such instructions and may
conclusively rely on, and shall be protected in relying on, such
instructions.
ARTICLE VI
OTHER MATTERS RELATING
TO THE COMPANY
Section 6.1. Liability of the Company. The Company
shall be liable for all obligations, covenants, representations
and warranties of the Company arising under or related to this
Agreement or any Supplement. Except as provided in the preceding
sentence, the Company shall be liable only to the extent of the
obligations specifically undertaken by it in its capacity as
Company hereunder.
Section 6.2. Limitation on Liability of the Company.
Subject to Sections 6.1 and 6.3, neither the Company nor any of
its directors or officers or employees or agents shall be under
any liability to the Trust, the Trustee, the Certificateholders
or any other Person for any action taken or for refraining from
the taking of any action pursuant to this Agreement whether or
not such action or inaction arises from express or implied duties
under any Transaction Document; provided, however, that this
provision shall not protect the Company or any such Person
against any liability which would otherwise be imposed by reason
of willful misfeasance, bad faith or negligence in the
performance of duties or by reason of reckless disregard of
obligations and duties hereunder. The Company and any director
or officer or employee or agent of the Company may rely in good
faith on any document of any kind prima facie properly executed
and submitted by any Person respecting any matters arising
hereunder.
-65-
<PAGE>
Section 6.3. Liabilities. Notwithstanding
Section 6.2, by entering into this Agreement, the Company agrees
to be liable, directly to the injured party, for the entire
amount of any losses, claims, damages or liabilities, arising out
of or based on the arrangement created by this Agreement, the
Servicing Agreement or any Supplement and the actions of the
Master Servicer taken pursuant hereto or thereto as though the
Pooling and Servicing Agreements created a partnership under the
New York Uniform Partnership Act with the Company as a general
partner thereof (except (i) those losses, claims, damages or
liabilities incurred by an Investor Certificateholder in the
capacity of an investor in the Investor Certificates as a result
of the performance of the Receivables, market fluctuations or
other similar market or investment risks or (ii) to the extent
that such losses, claims, damages or liabilities arise from any
action or omission to act by any Investor Certificateholder). In
the event of a Service Transfer, the Successor Servicer (except
for the Trustee in its capacity as Successor Servicer) will
indemnify and hold harmless the Company for any losses, claims,
damages and liabilities of the Company arising under this
Section 6.3 from the actions or omissions of such Successor
Servicer.
ARTICLE VII
EARLY AMORTIZATION EVENTS
Section 7.1. Early Amortization Events. Unless
modified with respect to any Series of Investor Certificates by
any related Supplement, if any one of the following events shall
occur:
(a) (i) the Company or the Master Servicer, as the
case may be, shall commence any case, proceeding or other
action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or
seeking to adjudicate it a bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment, winding-up,
liquidation, dissolution, composition or other relief with
respect to it or its debts, or (B) seeking appointment of a
receiver, trustee, custodian or other similar official for
it or for all or any substantial part of its assets, or the
Company or the Master Servicer, as the case may be, shall
make a general assignment for the benefit of its creditors;
or (ii) there shall be commenced against the Company or the
Master Servicer, as the case may be, any case, proceeding or
other action of a nature referred to in clause (i) above
which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed,
-66-
<PAGE>
undischarged or unbonded for a period of 60 days; or (iii)
there shall be commenced against the Company or the Master
Servicer, as the case may be, any case, proceeding or other
action seeking issuance of a warrant of attachment,
execution, distraint or similar process against all or any
substantial part of its assets which results in the entry of
an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal
within 60 such days from the entry thereof; or (iv) the
Company or the Master Servicer, as the case may be, shall
take any action in furtherance of, or indicating its consent
to, approval of, or acquiescence in, any of the acts set
forth in clause (i), (ii), or (iii) above; or (v) the
Company or the Master Servicer, as the case may be, shall
generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due;
(b) the Trust shall become an "investment company"
within the meaning of the Investment Company Act of 1940, as
amended; or
(c) the Trust is characterized for Federal income tax
purposes as an association taxable as a corporation;
then, an "Early Amortization Event" shall occur and an
Amortization Period shall commence without any notice or other
action on the part of the Trustee or any Investor Certificate-
holder immediately upon the occurrence of such event. The Master
Servicer shall notify each Rating Agency and the Trustee of the
occurrence of any Early Amortization Event. Further, upon the
commencement against the Company of a case, proceeding or other
action described in clause (a)(ii) or (iii) above, the Company
shall not purchase Receivables from any Seller, or transfer
Receivables to the Trust, until such time, if any, as such case,
proceeding or other action is vacated, discharged, or stayed or
bonded pending appeal, provided, that such case, proceeding or
other action is vacated, discharged, or stayed or bonded pending
appeal within 60 days after the occurrence thereof.
Section 7.2. Additional Rights Upon the Occurrence of
Certain Events. (a) If an Insolvency Event with respect to the
Company occurs, the Company shall immediately cease to transfer
Receivables to the Trust and shall promptly give notice to the
Trustee of such occurrence. Notwithstanding any cessation of the
transfer to the Trust of additional Receivables, Receivables
transferred to the Trust prior to the occurrence of such
Insolvency Event and Collections in respect of such Receivables
and interest, whenever created, accrued in respect of such
Receivables, shall continue to be a part of the Trust. If 60
days after the occurrence of such Insolvency Event, the Aggregate
Invested Amount and all accrued and unpaid interest thereon have
not been paid to the Investor Certificateholders, the Trustee at
-67-
<PAGE>
the direction of the Master Servicer shall proceed to sell,
dispose of, or otherwise liquidate the Receivables in a
commercially reasonable manner and on commercially reasonable
terms, which shall include the solicitation of competitive bids
if reasonably available; provided, however, that if the allocable
sale price, less all reasonable fees, expenses and other amounts
due hereunder to the Trustee, its agents and counsel to the
Trustee, to be realized from such sale, disposition or
liquidation would be less than the Aggregate Invested Amount plus
accrued and unpaid interest thereon through the Distribution Date
next succeeding the date of such sale, the Trustee must receive
the prior unanimous consent of all the Investor
Certificateholders. The provisions of Sections 7.1 and 7.2 shall
not be deemed to be mutually exclusive. The reasonable costs and
expenses incurred by the Trustee in such sale shall be
reimbursable to the Trustee as provided in Section 8.5.
(b) The proceeds from the sale, disposition or
liquidation of the Receivables pursuant to subsection (a) above
shall be treated as Collections on the Receivables and such
proceeds will be distributed to holders of each Series after
immediately being deposited in the applicable Collection Account,
in accordance with the provisions of Section 3.1(e) and the
related Supplement for such Series. After giving effect to all
such deposits, the remainder, if any, shall be allocated to the
Company Interest and shall be released to the holder of the
Exchangeable Company Certificate upon surrender thereof.
Section 7.3. Expense Account. (a) Upon the occurrence
of an Early Amortization Event, the Trustee, for the benefit of
the Successor Servicer under the Servicing Agreement shall
establish and maintain in the name of the Trustee with an
Eligible Institution or with the trust department of the Trustee,
a segregated trust account accessible only by and under the sole
control and dominion of, the Trustee (such account, the "Expense
Account").
(b) Upon the occurrence of an Early Amortization Event
with respect to any Outstanding Series as specified in the
related Supplement and as specified herein, the Trustee shall
deposit the portion of the Servicing Fee allocable to such Series
into the Expense Account.
(c) Amounts in the Expense Account shall be withdrawn
by the Successor Servicer in the manner specified in Section 6.2
of the Servicing Agreement.
(d) The Trustee shall invest amounts on deposit in the
Expense Account in Eligible Investments and the income therefrom
shall be deposited therein. Any losses resulting from such
investment shall be charged to amounts on deposit in the Expense
Account.
-68-
<PAGE>
(e) Upon the earlier to occur of (i) the 30th day
following the termination of the Trust pursuant to Section 9.1,
and (ii) 30 days after the termination of the duties of the
Successor Servicer under the Servicing Agreement, the Trustee
shall distribute all remaining funds in the Expense Account to or
at the direction of C&A Products.
ARTICLE VIII
THE TRUSTEE
Section 8.1. Duties of Trustee. (a) The Trustee,
prior to the occurrence of a Servicer Default of which a
Responsible Officer of the Trustee has actual knowledge and after
the curing of all Servicer Defaults which may have occurred,
undertakes to perform such duties and only such duties as are
specifically set forth in the Pooling and Servicing Agreements or
any Supplement and no implied covenants or obligations shall be
read into such Agreements against the Trustee. If a Servicer
Default to the actual knowledge of a Responsible Officer of the
Trustee has occurred (which has not been cured or waived), the
Trustee shall exercise the rights and powers vested in it by this
Agreement or any Supplement.
(b) The Trustee may conclusively rely as to the truth
of the statements and the correctness of the opinions expressed
therein upon resolutions, certificates, statements, opinions,
reports, documents, orders or other instruments furnished to the
Trustee; but in the case of any of the above which are
specifically required to be furnished to the Trustee pursuant to
any provision of the Pooling and Servicing Agreements, the
Trustee shall, subject to Section 8.2, examine them to determine
whether they substantially conform to the requirements of this
Agreement or any Supplement.
(c) Subject to subsection 8.1(a), no provision of this
Agreement or any Supplement shall be construed to relieve the
Trustee from liability for its own negligent action, its own
negligent failure to act or its own willful misconduct; provided,
however, that:
(i) The Trustee shall not be liable for an error of
judgment unless it shall be proved that the Trustee was
negligent, or acted in bad faith, in ascertaining the
pertinent facts;
(ii) The Trustee shall not be liable with respect to
any action taken, suffered or omitted to be taken by it in
good faith and, to the extent not so provided herein, with
respect to any act requiring the Trustee to exercise its own
discretion, relating to the time, method and place of
-69-
<PAGE>
conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the
Trustee, under any Pooling and Servicing Agreement;
(iii) The Trustee shall not be charged with knowledge of
any failure by any Servicing Party to comply with any of its
obligations, unless a Responsible Officer of the Trustee
obtains actual knowledge of such failure or the Trustee
receives written notice of such failure from the Master
Servicer, any Agent or any holders of Investor Certificates
evidencing Fractional Undivided Interests aggregating not
less than 10% of the Invested Amount of any Series;
(iv) The Trustee shall not be charged with knowledge of
an Early Amortization Event unless a Responsible Officer
obtains actual knowledge of such event or the Trustee
receives written notice of such event from the Master
Servicer, any Agent or any holder of Investor Certificates;
(v) The Trustee shall not be liable for any investment
losses resulting from any investments of funds on deposit in
the Accounts or any subaccounts thereof (provided that such
investments are Eligible Investments);
(vi) The Trustee shall have no duty to monitor the
performance of the Master Servicer, nor shall it have any
liability in connection with malfeasance or nonfeasance by
the Master Servicer. The Trustee shall have no liability in
connection with compliance of the Master Servicer or the
Company with statutory or regulatory requirements related to
the Receivables; and
(vii) The Trustee shall take such actions as are set
forth in the Internal Operating Procedures Memorandum.
(d) The Trustee shall not be required to expend or
risk its own funds or otherwise incur any financial liability in
the performance of any of its duties under any Pooling and
Servicing Agreement or in the exercise of any of its rights or
powers, if there is reasonable ground for believing that the
repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it, and none of the
provisions contained in any Pooling and Servicing Agreement shall
in any event require the Trustee to perform, or be responsible
for the manner of performance of, any obligations of the Master
Servicer under such Agreement except during such time, if any, as
the Trustee shall be the successor to, and be vested with the
rights, duties, powers and privileges of, the Master Servicer in
accordance with the terms of such Agreement.
(e) Except for actions expressly authorized by any
Pooling and Servicing Agreement, the Trustee shall take no action
-70-
<PAGE>
reasonably likely to impair the interests of the Trust in any
Receivable now existing or hereafter created or to impair the
value of any Receivable now existing or hereafter created.
(f) Except as expressly provided in any Pooling and
Servicing Agreement, the Trustee shall have no power to vary the
corpus of the Trust.
(g) Provided that the Master Servicer, each other
Servicing Party and the Company shall have provided to the
Trustee immediately upon request all books, records and other
information reasonably requested by the Trustee and shall have
provided the Trustee with all necessary access to the properties,
books and records of the Master Servicer, each other Servicing
Party and the Company which the Trustee may reasonably require,
then within 60 days following the Initial Closing Date, the
Trustee shall have (i) completed the Servicer Site Review and
(ii) established the Standby Liquidation System, and shall have
notified the Master Servicer and each Rating Agency of such
events.
Section 8.2. Rights of the Trustee. Except as
otherwise provided in Section 8.1:
(a) The Trustee may rely on and shall be protected in
acting on, or in refraining from acting in accord with, any
resolution, Officers' Certificate, certificate of auditors
or any other certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order,
appraisal, bond, note or other paper or document believed by
it to be genuine and to have been signed or presented to it
pursuant to any Pooling and Servicing Agreement by the
proper party or parties;
(b) The Trustee may consult with counsel and any
Opinion of Counsel or any advice of such Counsel shall be
full and complete authorization and protection in respect of
any action taken or suffered or omitted by it hereunder in
good faith and in accordance with such Opinion of Counsel;
(c) The Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by any
Pooling and Servicing Agreement, or to institute, conduct or
defend any litigation hereunder or in relation hereto, at
the request, order or direction of any of the Certificate-
holders, pursuant to the provisions of any Pooling and
Servicing Agreement, unless such Certificateholders shall
have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which may be
incurred therein or thereby; provided, however, that nothing
contained herein shall relieve the Trustee of the
obligations, upon the occurrence of a Servicer Default
-71-
<PAGE>
(which has not been cured), to exercise such of the rights
and powers vested in it by any Pooling and Servicing
Agreement, and to use the same degree of care and skill in
their exercise as a prudent person would exercise or use
under the circumstances in the conduct of such person's own
affairs. The right of the Trustee to perform any
discretionary act enumerated in this Agreement shall not be
construed as a duty, and the Trustee shall not be answerable
for other than its negligence or wilful misconduct in the
performance of any such act;
(d) The Trustee shall not be personally liable for any
action taken, suffered or omitted by it in good faith and
believed by it to be authorized or within the discretion or
rights or powers conferred upon it by any Pooling and
Servicing Agreement; provided that the Trustee shall be
liable for its negligence or willful misconduct;
(e) The Trustee shall not be bound to make any
investigation into the facts of matters stated in any
resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, direction, order,
approval, bond, note or other paper or document, unless
requested in writing so to do by the holders of Investor
Certificates evidencing Fractional Undivided Interests
aggregating more than 50% of the Invested Amount of any
Series which could be adversely affected if the Trustee does
not perform such acts; provided, however, that such holders
of Investor Certificates shall reimburse the Trustee for any
expense resulting from any such investigation requested by
them; provided, further, that the Trustee shall be entitled
to make such further inquiry or investigation into such
facts or matters as it may reasonably see fit, and if the
Trustee shall determine to make such further inquiry or
investigation, it shall be entitled to examine the books and
records of the Company, personally or by agent or attorney,
at the sole cost and expense of the Company;
(f) The Trustee may execute any of the trusts or
powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys or a custodian
or nominee, and the Trustee shall not be responsible for any
misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or
nominee appointed with due care by it hereunder;
(g) The Trustee shall not be required to make any
initial or periodic examination of any documents or records
related to the Receivables or the Accounts for the purpose
of establishing the presence or absence of defects, the
compliance by the Company with its representations and
warranties or for any other purpose; and
-72-
<PAGE>
(h) In the event that the Trustee is also acting as
Paying Agent or Transfer Agent and Registrar hereunder, the
rights and protections afforded to the Trustee pursuant to
this Article VIII shall also be afforded to such Paying
Agent or Transfer Agent and Registrar.
Section 8.3. Trustee Not Liable for Recitals in
Certificates. The Trustee assumes no responsibility for the
correctness of the recitals contained herein and in the
Certificates (other than the certificate of authentication on the
Certificates). Except as set forth in Section 8.15, the Trustee
makes no representations as to the validity or sufficiency of any
Pooling and Servicing Agreement or of the Certificates (other
than the certificate of authentication on the Certificates) or of
any Receivable or related document. The Trustee shall not be
accountable for the use or application by the Company of any of
the Certificates or of the proceeds of such Certificates, or for
the use or application of any funds paid to the Company in
respect of the Receivables or deposited in or withdrawn from the
Collection Accounts or other accounts hereafter established to
effectuate the transactions contemplated herein and in accordance
with the terms hereof.
The Trustee shall not be accountable for the use or
application by the Master Servicer of any of the Certificates or
of the proceeds of such Certificates, or for the use or
application of any funds paid to the Master Servicer or any
Servicer in respect of the Receivable or deposited in or
withdrawn from the Accounts by or at the direction of the Master
Servicer or any Servicer or Lockbox Processor. The Trustee shall
at no time have any responsibility or liability for or with
respect to the legality, validity and enforceability of any
Receivable.
Section 8.4. Trustee May Own Certificates. The
Trustee in its individual or any other capacity (a) may become
the owner or pledgee of Investor Certificates with the same
rights as it would have if it were not the Trustee and (b) may
transact any banking and trust business with the Company, any
Servicing Party or any Seller.
Section 8.5. Trustee's Fees and Expenses. The Master
Servicer covenants and agrees to pay, but only from funds
available to it as the Servicing Fee paid under the Servicing
Agreement, to the Trustee annually in advance on the Initial
Closing Date and on each one year anniversary thereof, and the
Trustee shall be entitled to receive, such reasonable
compensation as is agreed upon in writing between the Trustee and
the Master Servicer (which shall not be limited by any provision
of law in regard to the compensation of a trustee of an express
trust) for all services rendered by it in the execution of the
trust hereby created and in the exercise and performance of any
-73-
<PAGE>
of the powers and duties hereunder of the Trustee. The Trustee
shall be entitled to reimbursement upon its request for all
reasonable expenses (including, without limitation, expenses
incurred in connection with notices, requests for documentation
or other communications to Certificateholders), disbursements,
losses, liabilities, damages and advances incurred or made by the
Trustee in accordance with any of the provisions of any Pooling
and Servicing Agreement (including the reasonable fees and
expenses of its agents, any co-trustee and counsel) except any
such expense, disbursement, loss, liability, damage or advance as
may arise from its negligence or bad faith and except as
otherwise provided in this Section 8.5. To the extent not paid
from Aggregate Daily Collections on a current basis on each
Distribution Date, the Company will pay or reimburse the Trustee
upon its request and if the Company shall fail to do so, C&A
Products will so pay or reimburse the Trustee (with a right of
reimbursement from the Company) for such items. Notwithstanding
anything contained in this Agreement to the contrary, the Trustee
shall not be entitled to reimbursement for any costs or expenses
incurred in connection with the review, negotiation, preparation,
execution and delivery of any of the Transaction Documents or in
connection with the issuance of any Certificates on the Initial
Closing Date except for such costs and expenses as have been
agreed upon in writing between the Trustee and the Master
Servicer. The expenses, disbursement, losses, liabilities,
damages and advances made or incurred by the Trustee shall be
considered "Trustee's expenses" for purposes of computing the
Program Costs under each Supplement. If the Trustee is appointed
Successor Servicer in accordance with the Servicing Agreement,
this Section 8.5 shall not apply to expenses, disbursements,
losses, liabilities, damages and advances made or incurred by the
Trustee in its capacity as Successor Servicer which items shall
be paid, first, out of the Servicing Fee, second, to the extent
not paid therefrom, by making an appropriate withdrawal from the
Expense Account and third, from amounts distributable to the
Company pursuant to Section 9.4. The covenants to pay the
expenses, disbursements, losses, liabilities, damages and
advances provided for in the preceding sentence shall survive the
termination of this Agreement. The provision of this Section 8.5
shall apply to the reasonable expenses, disbursements and
advances made or incurred by the Trustee, or any other Person, in
its capacity as liquidating agent, which may exceed the Servicing
Fee.
Section 8.6. Eligibility Requirements for Trustee.
The Trustee hereunder shall at all times be a corporation
organized and doing business under the laws of the United States
of America or any state thereof authorized under such laws to
exercise corporate trust powers, having (or having a holding
company parent with) a combined capital and surplus of at least
$50,000,000, having unsecured and uncollateralized debt
obligations which are rated in one of the two highest long-term
-74-
<PAGE>
or short-term rating categories by each Rating Agency and subject
to supervision or examination by Federal or State authority. If
such corporation publishes reports of condition at least
annually, pursuant to law or to the requirements of the aforesaid
supervising or examining authority, then, for the purpose of this
Section 8.6, the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set
forth in its most recent report of condition so published. In
case at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section 8.6, the Trustee
shall resign immediately in the manner and with the effect
specified in Section 8.7.
Section 8.7. Resignation or Removal of Trustee. (a)
Subject to paragraph (c) below, the Trustee may at any time
resign and be discharged from the trust hereby created by giving
written notice thereof to the Company and the Master Servicer.
Upon receiving such notice of resignation, the Company shall
promptly appoint a successor trustee by written instrument, in
duplicate, one copy of which instrument shall be delivered to the
resigning Trustee and one copy to the successor trustee. If no
successor trustee shall have been so appointed and have accepted
appointment within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of
competent jurisdiction for the appointment of a successor
trustee.
(b) If at any time the Trustee shall cease to be
eligible in accordance with the provisions of Section 8.6 hereof
and shall fail to resign after written request therefor by the
Master Servicer, or if at any time the Trustee shall be legally
unable to act, or shall be adjudged a bankrupt or insolvent, or
if a receiver of the Trustee or of its property shall be
appointed, or any public officer shall take charge or control of
the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation, then the Company may
remove the Trustee and promptly appoint a successor trustee by
written instrument, in duplicate, one copy of which instrument
shall be delivered to the Trustee so removed and one copy to the
successor trustee.
(c) Any resignation or removal of the Trustee and
appointment of successor trustee pursuant to any of the
provisions of this Section 8.7 shall not become effective until
acceptance of appointment by the successor trustee as provided in
Section 8.8.
(d) The obligations of the Company described in
Sections 6.3 and 8.5 hereof and the obligations of the Master
Servicer described in Section 8.5 hereof and Section 5.1 of the
Servicing Agreement shall survive the removal or resignation of
the Trustee as provided in this Agreement.
-75-
<PAGE>
(e) No Trustee under this Agreement shall be
personally liable for any action or omission of any successor
trustee.
Section 8.8. Successor Trustee. (a) Any successor
trustee appointed as provided in Section 8.7 shall execute,
acknowledge and deliver to the Company and to its predecessor
Trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor Trustee
shall become effective and such successor trustee, without any
further act, deed or conveyance, shall become fully vested with
all the rights, powers, duties and obligations of its predecessor
hereunder, with like effect as if originally named as Trustee
herein. The predecessor Trustee shall deliver to the successor
trustee all documents or copies thereof, at the expense of the
Master Servicer, and statements held by it hereunder; and the
Company and the predecessor Trustee shall execute and deliver
such instruments and do such other things as may reasonably be
required for fully and certainly vesting and confirming in the
successor trustee all such rights, power, duties and obligations.
The Master Servicer shall immediately give notice to each Rating
Agency upon the appointment of a successor trustee.
(b) No successor trustee shall accept appointment as
provided in this Section 8.8 unless at the time of such
acceptance such successor trustee shall be eligible under the
provisions of Section 8.6.
(c) Upon acceptance of appointment by a successor
trustee as provided in this Section 8.8, such successor trustee
shall mail notice of such succession hereunder to all
Certificateholders at their addresses as shown in the Certificate
Register.
Section 8.9. Merger or Consolidation of Trustee. Any
Person into which the Trustee may be merged or converted or with
which it may be consolidated, or any Person resulting from any
merger, conversion or consolidation to which the Trustee shall be
a party, or any Person succeeding to the corporate trust business
of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be eligible under the provisions
of Section 8.6, without the execution or filing of any paper or
any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding. The Trustee
shall promptly give notice, but in no event less than ten days
prior to any such merger or consolidation, to the Rating Agencies
upon any such merger or consolidation of the Trustee.
Section 8.10. Appointment of Co-Trustee or Separate
Trustee. (a) Notwithstanding any other provisions of any
Pooling and Servicing Agreement, at any time, for the purpose of
meeting any legal requirements of any jurisdiction in which any
-76-
<PAGE>
part of the Trust may at the time be located, the Trustee shall
have the power and may execute and deliver all instruments to
appoint one or more persons to act as a co-trustee or co-
trustees, or separate trustee or separate trustees, of all or any
part of the Trust, and to vest in such Person or Persons, in such
capacity and for the benefit of the Certificateholders, such
title to the Trust, or any part thereof, and, subject to the
other provisions of this Section 8.10, such powers, duties,
obligations, rights and trusts as the Trustee may consider
necessary or desirable. No co-trustee or separate trustee
hereunder shall be required to meet the terms of eligibility as a
successor trustee under Section 8.6 and no notice to Certificate-
holders of the appointment of any co-trustee or separate trustee
shall be required under Section 8.8. The Trustee shall promptly
notify each Rating Agency of the appointment of any co-trustee.
(b) Every separate trustee and co-trustee shall, to
the extent permitted by law, be appointed and act subject to the
following provisions and conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Trustee shall be conferred or
imposed upon and exercised or performed by the Trustee and
such separate trustee or co-trustee jointly (it being
understood that such separate trustee or co-trustee is not
authorized to act separately without the Trustee joining in
such act), except to the extent that under any statute of
any jurisdiction in which any particular act or acts are to
be performed (whether as Trustee hereunder or as successor
to the Master Servicer hereunder), the Trustee shall be
incompetent or unqualified to perform such act or acts, in
which event such rights, powers, duties and obligations
(including the holding of title to the Trust or any portion
thereof in any such jurisdiction) shall be exercised and
performed singly by such separate trustee or co-trustee, but
solely at the direction of the Trustee;
(ii) no trustee hereunder shall be personally liable by
reason of any act or omission of any other trustee
hereunder; and
(iii) the Trustee may at any time accept the resignation
of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the
Trustee shall be deemed to have been given to each of the then
separate trustees and co-trustees, as effectively as if given to
each of them. Every instrument appointing any separate trustee
or co-trustee shall refer to this Agreement and the conditions of
this Article VIII. Each separate trustee and co-trustee, upon
its acceptance of the trusts conferred, shall be vested with the
estates or property specified in its instrument of appointment,
-77-
<PAGE>
either jointly with the Trustee or separately, as may be provided
therein, subject to all the provisions of any Pooling and
Servicing Agreement, specifically including every provision of
any Pooling and Servicing Agreement relating to the conduct of,
affecting the liability of, or affording protection to, the
Trustee. Every such instrument shall be filed with the Trustee
and a copy thereof given to the Master Servicer and the Company.
(d) Any separate trustee or co-trustee may at any time
constitute the Trustee, its agent or attorney-in-fact with full
power and authority, to the extent not prohibited by law, to do
any lawful act under or in respect to any Pooling and Servicing
Agreement on its behalf and in its name. If any separate trustee
or co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and
trusts shall vest in and be exercised by the Trustee, to the
extent permitted by law, without the appointment of a new or
successor trustee.
Section 8.11. Tax Returns. In the event the Trust
shall be required to file tax returns, the Company shall prepare
and file or shall cause to be prepared and filed any tax returns
required to be filed by the Trust and shall remit such returns to
the Trustee for signature at least five Business Days before such
returns are due to be filed. The Company shall also prepare or
shall cause to be prepared all tax information required by law to
be distributed to Certificateholders and shall deliver such
information to the Trustee at least five Business Days prior to
the date it is required by law to be distributed to the
Certificateholders. The Trustee, upon request, will furnish the
Company with all such information known to the Trustee as may be
reasonably required in connection with the preparation of all tax
returns of the Trust, and shall, upon request, execute such
returns. In no event shall the Trustee in its individual
capacity be liable for any liabilities, costs or expenses of the
Trust, the Certificateholders, the Company or the Master Servicer
arising under any tax law or regulation, including, without
limitation, federal, state or local income or excise taxes or any
other tax imposed on or measured by income (or any interest or
penalty with respect thereto or arising from any failure to
comply therewith).
Section 8.12. Trustee May Enforce Claims Without
Possession of Certificates. All rights of action and claims
under any Pooling and Servicing Agreement or the Certificates may
be prosecuted and enforced by the Trustee without the possession
of any of the Certificates or the production thereof in any
proceeding relating thereto, and any such proceeding instituted
by the Trustee shall be brought in its own name as trustee. Any
recovery of judgment shall, after provision for the payment of
the reasonable compensation, expenses, disbursements and advances
of the Trustee, its agents and counsel, be for the ratable
-78-
<PAGE>
benefit of the Certificateholders in respect of which such
judgment has been obtained.
Section 8.13. Suits for Enforcement. If a Servicer
Default shall occur and be continuing, the Trustee, in its
discretion may, subject to the provisions of Section 6.1 of the
Servicing Agreement, proceed to protect and enforce its rights
and the rights of the Certificateholders under this Agreement or
any other Transaction Document by suit, action or proceeding in
equity or at law or otherwise, whether for the specific
performance of any covenant or agreement contained in this
Agreement or any other Transaction Document or in aid of the
execution of any power granted in this Agreement or any other
Transaction Document or for the enforcement of any other legal,
equitable or other remedy as the Trustee, being advised by
counsel, shall deem most effectual to protect and enforce any of
the rights of the Trustee or the Certificateholders. Nothing
herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any
Certificateholder any plan of reorganization, arrangement,
adjustment or composition affecting the Certificates or the
rights of any holder thereof, or authorize the Trustee to vote in
respect of the claim of any Certificateholder in any such
proceeding.
Section 8.14. [Reserved]
Section 8.15. Representations and Warranties of
Trustee. The Trustee represents and warrants that:
(a) the Trustee is a banking corporation organized,
existing and in good standing under the laws of the State of
New York and meets the requirements of Section 8.6;
(b) the Trustee has full power, authority and right to
execute, deliver and perform this Agreement and any
Supplement, and has taken all necessary action to authorize
the execution, delivery and performance by it of this
Agreement and any Supplement; and
(c) each Pooling and Servicing Agreement and each of
the Transaction Documents executed by it have been duly
executed and delivered by the Trustee and, in the case of
all such Transaction Documents, are legal, valid and binding
obligations of the Trustee, enforceable in accordance with
their respective terms, except as such enforceability may be
limited by applicable 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).
-79-
<PAGE>
Section 8.16. Maintenance of Office or Agency. The
Trustee will maintain at its expense in the Borough of Manhattan,
The City of New York, an office or offices or agency or agencies
where notices and demands to or upon the Trustee in respect of
the Certificates and the Pooling and Servicing Agreements may be
served. The Trustee will give prompt written notice to the
Company, the Master Servicer and the Certificateholders of any
change in the location of the Certificate Register or any such
office or agency.
Section 8.17. Limitation of Liability. The
Certificates are executed by the Trustee, not in its individual
capacity but solely as Trustee of the Trust, in the exercise of
the powers and authority conferred and vested in it by the Trust
Agreement. Each of the undertaking and agreements made on the
part of the Trustee in the Certificates is made and intended not
as a personal undertaking or agreement by the Trustee but is made
and intended for the purpose of binding only the Trust.
ARTICLE IX
TERMINATION
Section 9.1. Termination of Trust; Optional
Repurchase. (a) The Trust and the respective obligations and
responsibilities of the Company, the Master Servicer, the
Servicers and the Trustee created hereby (other than the
obligation of the Trustee to make payments to Certificateholders
as hereafter set forth) shall terminate, except with respect to
any such obligations or responsibilities expressly stated to
survive such termination, on the earliest of (i) the last day of
the March 2010 Settlement Period (ii) at the option of the
Company at any time where the Aggregate Invested Amount is zero
(unless an Early Amortization Event as specified in Section 7.1
of this Agreement shall have occurred and be continuing in which
case the Company shall be deemed to elect to terminate the Trust
pursuant to this clause (ii)) and (iii) upon completion of
distribution of the amounts referred to in subsection 7.2(b) (the
"Trust Termination Date").
(b) If on the Distribution Date in the month
immediately preceding the month in which the Trust Termination
Date occurs (after giving effect to all transfers, withdrawals,
deposits and drawings to occur on such date and the payment of
principal on any Series of Certificates to be made on the related
Distribution Date pursuant to Article III) the Invested Amount of
any Series would be greater than zero, the Trustee, at the
direction of the Master Servicer, shall sell within 30 days of
such Distribution Date all of the Receivables. The proceeds of
such sale shall be treated as Collections on the Receivables and
shall be allocated in accordance with Article III. During such
-80-
<PAGE>
30-day period, the Master Servicer shall continue to collect
Collections on the Receivables and allocate Collections in
accordance with the provisions of Article III. The reasonable
costs and expenses incurred by the Trustee in such sale shall be
reimbursable to the Trustee as provided in Section 8.5.
Section 9.2. Optional Purchase and Final Termination
Date of Investor Certificates of any Series. (a) On the
Distribution Date during the Amortization Period with respect to
any Series on which the Invested Amount (or such other amount as
may be set forth in the related Supplement) of such Series is
reduced to an amount equal to or less than the Optional
Repurchase Percentage of the Initial Invested Amount (or such
other amount as may be set forth in the related Supplement) for
such Series as of the day preceding the beginning of such
Amortization Period, the Company shall have the option to
repurchase the entire Certificateholders' Interest of such
Series, at a purchase price equal (i) to the outstanding Invested
Amount of the Investor Certificates of such Series plus (ii)
accrued and unpaid interest through the date of such purchase
(after giving effect to any payment of principal and monthly
interest on such date of purchase) plus (iii) all other amounts
payable to all Investor Certificateholders of such Series under
the related Supplement. The amount of the purchase price will be
deposited into the U.S. Dollar Collection Account for credit to
the Series Collection Subaccount for such Series on the
Distribution Date in immediately available funds and will be
passed through in full to the applicable Investor
Certificateholders. Following any such repurchase, such
Certificateholders' Interest in the Receivables shall terminate
and such interest therein will be allocated to the Company
Interest and such Certificateholders will have no further rights
with respect thereto. In the event that the Company fails for
any reason to deposit the purchase price for such Receivables,
the Trust will continue to hold such interest in the Receivables
and monthly payments will continue to be made to the
Certificateholders.
(b) The amount deposited pursuant to subsection 9.1(b)
shall be paid to the Investor Certificateholders of the related
Series pursuant to Article III on the Distribution Date following
the date of such deposit. All Certificates of a Series which are
purchased by the Company pursuant to subsection 9.1(b) shall be
delivered by the Company upon such purchase to, and be canceled
by, the Transfer Agent and Registrar and be disposed of in a
manner satisfactory to the Trustee and the Company.
(c) All principal or interest with respect to any
Series of Investor Certificates shall be due and payable no later
than the Series Termination Date with respect to such Series.
Unless otherwise provided in a Supplement, in the event that the
Invested Amount of any Series of Certificates is greater than
-81-
<PAGE>
zero on its Series Termination Date (after giving effect to all
transfers, withdrawals, deposits and drawings to occur on such
date and the payment of principal to be made on such Series on
such date), the Trustee will sell or cause to be sold, in
accordance with the directions of the Master Servicer and pay the
proceeds to all Certificateholders of such Series pro rata
(except that unless expressly provided to the contrary in the
related Supplement, no payment shall be made to
Certificateholders of any Class of any Series that is by its
terms subordinated to any other Class until such senior Class of
Certificates have been paid in full) in final payment of all
principal of and accrued interest on such Series of Certificates,
an amount of Receivables or interests in Receivables up to the
Invested Amount of such Series at the close of business on such
date. The reasonable costs and expenses incurred by the Trustee
in such sale shall be reimbursable to the Trustee as provided in
Section 8.5. Any proceeds of such sale in excess of such
principal and interest paid shall be paid to the holder of the
Exchangeable Company Certificate, unless and to the extent
otherwise specified in any applicable Supplement. Upon such
Series Termination Date with respect to the applicable Series of
Certificates, final payment of all amounts allocable to any
Investor Certificates of such Series shall be made in the manner
provided in this Section 9.2.
Section 9.3. Final Payment with Respect to Any Series.
(a) Written notice of any termination, specifying the
Distribution Date upon which the Investor Certificateholders of
any Series may surrender their Investor Certificates for payment
of the final distribution with respect to such Series and
cancellation, shall be given (subject to at least 30 days' prior
written notice from the Master Servicer to the Trustee containing
all information required for the Trustee's notice) by the Trustee
to Investor Certificateholders of such Series mailed not later
than the fifth day of the month of such final distribution
specifying (i) the Distribution Date upon which final payment of
the Investor Certificates will be made upon presentation and
surrender of Investor Certificates at the office or offices
therein designated, (ii) the amount of any such final payment and
(iii) that the Record Date otherwise applicable to such
Distribution Date is not applicable, payments being made only
upon presentation and surrender of the Investor Certificates at
the office or offices therein specified. The Master Servicer's
notice to the Trustee in accordance with the preceding sentence
shall be accompanied by an Officers' Certificate setting forth
the information specified in Section 4.4 of the Servicing
Agreement covering the period during the then current calendar
year through the date of such notice. The Trustee shall give
such notice to the Transfer Agent and Registrar and the Paying
Agent at the time such notice is given to such Investor
Certificateholders.
-82-
<PAGE>
(b) Notwithstanding the termination of the Trust
pursuant to subsection 9.1(a) or the occurrence of the Series
Termination Date with respect to any Series pursuant to
Section 9.2, all funds then on deposit in the Collection Accounts
(but only to the extent necessary to pay all outstanding and
unpaid amounts to Certificateholders) shall continue to be held
in trust for the benefit of the Certificateholders and the Paying
Agent or the Trustee shall pay such funds to the
Certificateholders upon surrender of their Certificates. Any
Certificate not surrendered on the date specified in subsection
9.3(a)(i) shall cease to accrue any interest provided for such
Certificate from and after such date. In the event that all of
the Investor Certificateholders shall not surrender their
Certificates for cancellation within six months after the date
specified in the above-mentioned written notice, the Trustee
shall give a second written notice to the remaining Investor
Certificateholders of such Series to surrender their Certificates
for cancellation and receive the final distribution with respect
thereto. If within one year after the second notice all the
Investor Certificates of such Series shall not have been
surrendered for cancellation, the Trustee may take appropriate
steps, or may appoint an agent to take appropriate steps, to
contact the remaining Investor Certificateholders of such Series
concerning surrender of their Certificates, and the cost thereof
shall be paid out of the funds in the Collection Accounts held
for the benefit of such Investor Certificateholders. The Trustee
and the Paying Agent shall pay to the Company upon request any
monies held by them for the payment of principal or interest that
remains unclaimed for two years. After payment to the Company,
Certificateholders entitled to the money must look to the Company
for payment as general creditors unless an applicable abandoned
property law designates another Person.
(c) All Certificates surrendered for payment of the
final distribution with respect to such Certificates and
cancellation shall be canceled by the Transfer Agent and
Registrar and be disposed of in a manner satisfactory to the
Trustee and the Company.
Section 9.4. Company's Termination Rights. Upon the
termination of the Trust pursuant to Section 9.1 and the
surrender of the Exchangeable Company Certificate and payment to
the Trustee (in its capacity as such and in its capacity as
Successor Servicer) of all amounts owed to it under any Pooling
and Servicing Agreement, the Trustee shall sell, assign and
convey to the Company (without recourse, representation or
warranty) all right, title and interest of the Trust in the
Receivables, whether then existing or thereafter created, and all
proceeds thereof except for amounts held by the Trustee pursuant
to subsection 9.3(b). The Trustee shall execute and deliver such
instruments of transfer and assignment, in each case without
recourse, representation or warranty, as shall be reasonably
-83-
<PAGE>
requested by the Company to vest in the Company all right, title
and interest which the Trust had in the Receivables.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1. Amendment. (a) This Agreement, the
Servicing Agreement and each Supplement in respect of an
Outstanding Series (collectively, the "Pooling and Servicing
Agreements") may be amended in writing from time to time by the
Master Servicer, the Company and the Trustee, without the consent
of any holder of any outstanding Certificate, to cure any
ambiguity, to correct or supplement any provisions herein or
therein which may be inconsistent with any other provisions
herein or therein or to add any other provisions hereof to change
in any manner or eliminate any of the provisions with respect to
matters or questions raised under any Pooling and Servicing
Agreement which shall not be inconsistent with the provisions of
any Pooling and Servicing Agreement; provided, however, that such
action shall not, as evidenced by an Opinion of Counsel delivered
to the Trustee, adversely affect in any material respect the
interests of the Investor Certificateholders. The Trustee may,
but shall not be obligated to, enter into any such amendment
pursuant to this paragraph or paragraph (b) below which affects
the Trustee's rights, duties or immunities under any Pooling and
Servicing Agreement or otherwise.
(b) Any Pooling and Servicing Agreement and, to the
extent provided in any Pooling and Servicing Agreement, any other
agreement relating to the Receivables may also be amended in
writing from time to time by the Master Servicer, the Company and
the Trustee with the consent of Investor Certificateholders
evidencing more than 50% of the Invested Amount of any Series
adversely affected by the amendment (and, if such amendment has
not been consented to by Investor Certificateholders evidencing
66-2/3% or more of the Invested Amount of any Series adversely
affected by the amendment (or, if any such Series shall have more
than one Class of Investor Certificates adversely affected by the
amendment, 66-2/3% or more of the Invested Amount of each Class
adversely affected by the amendment), upon satisfaction of the
Rating Agency Condition with respect to such amendment) for the
purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of such Pooling and Servicing
Agreement or such other agreement or of modifying in any manner
the rights of holders of any Series then issued and outstanding;
provided, however, that no such amendment shall (i) reduce in any
manner the amount of, or delay the timing of, distributions which
are required to be made on any Investor Certificate of such
Series without the consent of such Investor Certificateholder of
such Series; (ii) change the definition of or the manner of
-84-
<PAGE>
calculating the interest of any Investor Certificateholder of
such Series without the consent of such Investor
Certificateholder; or (iii) reduce the aforesaid percentage of
fractional undivided interests the holders of which are required
to consent to any such amendment, in each case without the
consent of all Certificateholders of all Series adversely
affected.
(c) Notwithstanding anything in this Section 10.1 to
the contrary, the Supplement with respect to any Series may only
be amended on the terms and with the procedures provided in such
Supplement.
(d) The Company or the Master Servicer shall deliver
any proposed amendment to each Agent at least five days prior to
the execution and delivery thereof.
(e) Promptly after the execution of any such amendment
or consent the Trustee shall furnish written notification of the
substance of such amendment to each Certificateholder of each
Outstanding Series (or with respect to an amendment of a
Supplement, to the applicable Series), and the Master Servicer
shall furnish written notification of the substance of such
amendment to each Rating Agency.
(f) It shall not be necessary for the consent of
Investor Certificateholders under this Section 10.1 to approve
the particular form of any proposed amendment, but it shall be
sufficient if such consent shall approve the substance thereof.
The manner of obtaining such consents and of evidencing the
authorization of the execution thereof by Investor Certificate-
holders shall be subject to such reasonable requirements as the
Trustee may prescribe.
(g) In executing or accepting any amendment pursuant
to this Section 10.1, the Trustee shall, upon request, be
entitled to receive and rely upon (i) an Opinion of Counsel
stating that (A) such amendment is authorized pursuant to a
specific provision of a Pooling and Servicing Agreement and
complies with such provision, and (B) all conditions precedent to
the execution, delivery and performance of such amendment shall
have been satisfied in full and (ii) a Tax Opinion.
Section 10.2. Protection of Right, Title and Interest
to Trust. (a) The Company shall cause each Pooling and
Servicing Agreement, all amendments thereto and/or all financing
statements and continuation statements and any other necessary
documents covering the Certificateholders' and the Trustee's
right, title and interest to the Trust to be promptly recorded,
registered and filed, and at all times to be kept recorded,
registered and filed, all in such manner and in such places as
may be required by law fully to preserve and protect the right,
-85-
<PAGE>
title and interest of the Trustee hereunder to all property
comprising the Trust. The Company shall deliver to the Trustee
file-stamped copies of, or filing receipts for, any document
recorded, registered or filed as provided above, as soon as
available following such recording, registration or filing. In
the event that the Company fails to file such financing or
continuation statements then the Trustee shall have the right to
file the same on behalf of the Company.
(b) The Company will deliver an Opinion of Counsel,
not more than once annually, substantially in the form of Exhibit
F, to the Trustee promptly following a request therefor (and, in
any event, within 20 Business Days following such request).
Section 10.3. Limitation on Rights of
Certificateholders. (a) The death or incapacity of any
Certificateholder shall not operate to terminate this Agreement
or the Trust, nor shall such death or incapacity entitle such
Certificateholders' legal representatives or heirs to claim an
accounting or to take any action or commence any proceeding in
any court for a partition or winding up of the Trust, nor
otherwise affect the rights, obligations and liabilities of the
parties hereto or any of them.
(b) No Certificateholder shall have any right to vote
(except with respect to the Investor Certificateholders as
provided in Section 10.1 hereof) or in any manner otherwise
control the operation and management of the Trust, or the
obligations of the parties hereto, nor shall anything herein set
forth, or contained in the terms of the Certificates, be
construed so as to constitute the Certificateholders from time to
time as partners or members of an association; nor shall any
Certificateholder be under any liability to any third person by
reason of any action taken by the parties to this Agreement
pursuant to any provision hereof.
(c) No Certificateholder shall have any right by
virtue of any provisions of this Agreement to institute any suit,
action or proceeding in equity or at law upon or under or with
respect to this Agreement, unless such Certificateholder
previously shall have given to the Trustee, written request to
institute such action, suit or proceeding in its own name as
Trustee hereunder and shall have offered to the Trustee such
reasonable indemnity as it may require against the costs,
expenses and liabilities to be incurred therein or thereby, and
the Trustee, for 60 days after its receipt of such notice,
request and offer of indemnity, shall have neglected or refused
to institute any such action, suit or proceeding; it being
understood and intended, and being expressly covenanted by each
Certificateholder with every other Certificateholder and the
Trustee, that no one or more Certificateholders shall have any
right in any manner whatever by virtue or by availing itself or
-86-
<PAGE>
themselves of any provisions of the Pooling and Servicing
Agreements to affect, disturb or prejudice the rights of any
other of the Investor Certificates, or to obtain or seek to
obtain priority over or preference to any other such Investor
Certificateholder, or to enforce any right under this Agreement,
except in the manner herein provided and for the equal, ratable
and common benefit of all Investor Certificateholders. For the
protection and enforcement of the provisions of this Section
10.3, each and every Certificateholder and the Trustee shall be
entitled to such relief as can be given either at law or in
equity.
(d) By their acceptance of Certificates pursuant to
this Agreement and the applicable Supplement, the
Certificateholders agree to the provisions of this Section 10.3.
Section 10.4. Governing Law. THIS AGREEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 10.5. 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 (i) in the
case of the Company, the Master Servicer and the Trustee, and
(ii) in the case of the Servicers, as set forth on Schedule 1 to
the Receivables Sale Agreement, or to such other address as may
be hereafter notified by the respective parties hereto:
The Company: Carcorp, Inc.
P.O. Box 50102
Henderson, Nevada 89106
Attention: President
Telecopy: (702) 598-3651
with a copy to the Master Servicer and a copy to:
210 Madison Avenue
New York, New York 10016
Attention: Elizabeth R. Philipp
Telecopy: (212) 578-1269
-87-
<PAGE>
The Master
Servicer: Collins & Aikman Products Co.
701 McCullough Drive
Charlotte, North Carolina 28262
Attention: Assistant Treasurer
Telecopy: (704) 548-2314
with a copy to:
210 Madison Avenue
New York, New York 10016
Attention: Elizabeth R. Philipp
Telecopy: (212) 578-1269
The Trustee: Chemical Bank
450 West 33rd Street
15th Floor
New York, New York 10001
Attention: Structured Finance
Services - ABS
Telecopy: (212) 946-3916
Telephone: (212) 946-8600
Any notice required or permitted to be mailed to a
Certificateholder shall be given by first-class mail, postage
prepaid, at the address of such Certificateholder as shown in the
Certificate Register. Any notice so mailed within the time
prescribed in any Pooling and Servicing Agreement shall be
conclusively presumed to have been duly given, whether or not the
Certificateholder receives such notice.
Section 10.6. Severability of Provisions. If any one
or more of the covenants, agreements, provisions or terms of any
Pooling and Servicing Agreement shall for any reason whatsoever
be held invalid, then such covenants, agreements, provisions or
terms shall be deemed severable from the remaining covenants,
agreements, provisions or terms of such Pooling and Servicing
Agreement and shall in no way affect the validity or
enforceability of the other provisions of any Pooling and
Servicing Agreement or of the Certificates or rights of the
Certificateholders.
Section 10.7. Assignment. Notwithstanding anything to
the contrary contained herein, except as provided in Section 5.1
of the Servicing Agreement, no Pooling and Servicing Agreement
may be assigned by the Master Servicer without the prior written
consent of the Trustee acting on behalf of the holders of 66-2/3%
of the Invested Amount of each Outstanding Series and without the
Rating Agency Condition having been satisfied with respect to any
such assignment.
-88-
<PAGE>
Section 10.8. Certificates Nonassessable and Fully
Paid. It is the intention of the parties to each Pooling and
Servicing Agreement that the Investor Certificateholders shall
not be personally liable for obligations of the Trust, that the
interests in the Trust represented by the Investor Certificates
shall be nonassessable for any losses or expenses of the Trust or
for any reason whatsoever and that Investor Certificates upon
authentication thereof by the Trustee pursuant to Section 5.2 are
and shall be deemed fully paid.
Section 10.9. Further Assurances. The Company and the
Master Servicer agree to do and perform, from time to time, any
and all acts and to execute any and all further instruments
required or reasonably requested by the Trustee more fully to
effect the purposes of each Pooling and Servicing Agreement,
including, without limitation, the execution of any financing
statements or continuation statements relating to the Receivables
for filing under the provisions of the UCC of any applicable
jurisdiction, or under the provisions of similar provincial laws
of Canada.
Section 10.10. No Waiver; Cumulative Remedies. No
failure to exercise and no delay in exercising, on the part of
the Trustee or the Investor Certificateholders, 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.
Section 10.11. Counterparts. This Agreement may be
executed in two or more counterparts (and by different parties on
separate counterparts), each of which shall be an original, but
all of which together shall constitute one and the same
instrument.
Section 10.12. Third-Party Beneficiaries. This
Agreement will inure to the benefit of and be binding upon the
parties hereto, the Certificateholders and their respective
successors and permitted assigns. Except as otherwise provided
in this Article X, no other Person will have any right or
obligation hereunder.
Section 10.13. Actions by Certificateholders.
(a) Wherever in any Pooling and Servicing Agreement a provision
is made that an action may be taken or a notice, demand or
instruction given by Investor Certificateholders, such action,
notice or instruction may be taken or given by any Investor
Certificateholders of any Series, unless such provision requires
-89-
<PAGE>
a specific percentage of Investor Certificateholders of a certain
Series or all Series.
(b) Any request, demand, authorization, direction,
notice, consent, waiver or other act by a Certificateholder shall
bind such Certificateholder and every subsequent holder of such
Certificate issued upon the registration of transfer thereof or
in exchange therefor or in lieu thereof in respect of anything
done or omitted to be done by the Trustee, the Company or the
Master Servicer in reliance thereon, whether or not notation of
such action is made upon such Certificate.
Section 10.14. Merger and Integration. Except as
specifically stated otherwise herein, this Agreement sets forth
the entire understanding of the parties relating to the subject
matter hereof, and all prior understandings, written or oral, are
superseded by this Agreement. This Agreement may not be
modified, amended, waived, or supplemented except as provided
herein.
Section 10.15. Headings. The headings herein are for
purposes of reference only and shall not otherwise affect the
meaning or interpretation of any provision hereof.
Section 10.16. Construction of Agreement. (a) The
Company hereby grants to the Trustee a security interest in all
of the Company's right, title and interest in, to and under the
Receivables and the other Trust Assets now existing and hereafter
created, all monies due or to become due and all amounts received
with respect thereto and all "proceeds" thereof (including
Recoveries), to secure all of the Company's and the Master
Servicer's obligations hereunder, including, without limitation,
the Company's obligation to sell or transfer Receivables
hereafter created to the Trust.
(b) This Agreement shall constitute a security
agreement under applicable law.
Section 10.17. No Set-Off. Except as expressly
provided in this Agreement, the Trustee agrees that it shall have
no right of set-off or banker's lien against, and no right to
otherwise deduct from, any funds held in the Collection Accounts
for any amount owed to it by the Company, the Master Servicer or
any Certificateholder.
Section 10.18. No Bankruptcy Petition. Each of the
Trustee and the Master Servicer hereby covenant and agree that,
prior to the date which is one year and one day after the date of
the end of the Amortization Period with respect to all
Outstanding Series, it will not institute against, or join any
other Person in instituting against, the Company any bankruptcy,
reorganization, arrangement, insolvency or liquidation
-90-
<PAGE>
proceedings, or other proceedings under any federal or state
bankruptcy or similar law.
Section 10.19. Limitation of Liability. It is
expressly understood and agreed by the parties hereto that
(a) each Pooling and Servicing Agreement is executed and
delivered by Chemical Bank, not individually or personally but
solely as Trustee of the Trust, in the exercise of the powers and
authority conferred and vested in it, (b) except with respect to
Section 8.15 hereof the representations, undertakings and
agreements herein made on the part of the Trust are made and
intended not as personal representations, undertakings and
agreements by Chemical Bank, but are made and intended for the
purpose of binding only the Trust, (c) nothing herein contained
shall be construed as creating any liability on Chemical Bank,
individually or personally, to perform any covenant either
expressed or implied contained herein, all such liability, if
any, being expressly waived by the parties who are signatories to
this Agreement and by any Person claiming by, through or under
such parties; provided, however, Chemical Bank shall be liable in
its individual capacity for its own willful misconduct or
negligence and for any tax assessed against Chemical Bank based
on or measured by any fees, commission or compensation received
by it for acting as Trustee and (d) under no circumstances shall
Chemical Bank be personally liable for the payment of any
indebtedness or expenses of the Trust or be liable for the breach
or failure of any obligation, representation, warranty or
covenant made or undertaken by the Trust under any Pooling and
Servicing Agreement.
The Company hereby agrees to indemnify and hold
harmless the Trustee for the benefit of the Certificateholders
(each, an "indemnified person") from and against any loss,
liability, expense, damage or injury suffered or sustained by
reason of any acts, omissions or alleged acts or omissions
arising out of, or relating to, activities of the Company
pursuant to any Pooling and Servicing Agreement to which it is a
party, including but not limited to any judgment, award,
settlement, reasonable attorneys' fees and other reasonable costs
or expenses incurred in connection with the defense of any actual
or threatened action, proceeding or claim, except to the extent
such loss, liability, expense, damage or injury resulted from the
negligence, bad faith or willful misconduct of an indemnified
person.
Section 10.20. Canadian Taxes. The Company represents
and warrants to the Trustee for the benefit of the
Certificateholders that it has not assumed in any manner
whatsoever any obligation of the Canadian Seller to make
collections and remittances in respect of any Canadian goods and
services tax and Canadian provincial sales taxes and to file any
returns in respect of such taxes with Canadian tax authorities
-91-
<PAGE>
and that it was not contemplated by the Canadian Seller and the
Company that such obligation was to be assumed by the Company.
The parties hereto agree that the Trust does not assume in any
manner whatsoever any obligation of the Canadian Seller to
collect such taxes, make such remittances and file such returns,
and that it is not contemplated by the parties hereto that any
such obligation is hereby assumed by the Trust or the Trustee.
The Company hereby indemnifies the Trustee for the benefit of the
Certificateholders and holds it harmless from and against any
assessments, claims or other demands for payment of such taxes by
Canadian tax authorities, as well as interest and penalties. It
is understood that all of the Canadian Seller's invoices in
respect of its Receivables will bear the Canadian Seller's GST
registration number.
Section 10.21. Payments by Company. Whenever any
provision in the Transaction Documents permits or obligates the
Company to make a payment in cash, failure to make such payment
shall not constitute a breach by the Company giving rise to any
actionable claim against the Company to the extent that the
Company has insufficient funds to make such payments from amounts
properly distributed to the Company pursuant to this Agreement
and any Supplement. The foregoing sentence shall not in any
manner limit the ability of the Company to increase the principal
amounts outstanding under the Subordinated Notes and the Parent
Note in accordance with the terms of the Receivables Sale
Agreement.
Section 10.22. Certain Information. The Master
Servicer and the Company shall promptly provide to the Trustee
such information in computer tape, hard copy or other form
regarding the Receivables as the Trustee may reasonably request
to perform its obligations hereunder.
-92-
<PAGE>
IN WITNESS WHEREOF, the Company, the Master Servicer
and the Trustee have caused this Agreement to be duly executed by
their respective officers as of the day and year first above
written.
CARCORP, INC., as Company
By: Anthony Hardwick
Name: Anthony Hardwick
Title: Vice President,
Secretary
and Treasurer
COLLINS & AIKMAN PRODUCTS CO., as
Master Servicer
By: Anthony Hardwick
Name: Anthony Hardwick
Title: Vice President,
Controller,
Acting Chief Financial
Officer and Assistant
Treasurer
CHEMICAL BANK,
not in its individual capacity
but solely as Trustee
By: Charles E. Dooley
Title: Vice President
-93-
<PAGE>
Schedule 1
Receivables
<PAGE>
Schedule 2
Identification of Trust Accounts
The U.S. Dollar Collection Account has been established by and at
Chemical Bank, account number 323-334466.
The U.S. Dollar Collection Account is for the account of Chemical
Bank, as trustee for the C&A Master Trust.
The Canada/U.S. Dollar Collection Account has been established by
and at Canadian Imperial Bank of Commerce, account number 04-
46718.
The Canada/U.S. Dollar Collection Account is for the account of
Chemical Bank, as trustee for the C&A Master Trust.
The Canada/Canadian Dollar Collection Account has been
established by and at Canadian Imperial Bank of Commerce, account
number 22-43318.
The Canada/Canadian Dollar Collection Account is for the account
of Chemical Bank, as trustee for the C&A Master Trust.
<PAGE>
Schedule 3
Special Obligors
Special Obligor Special Obligor Limit
General Motors Corporation 7.0%
and its Subsidiaries
Ford Motor Company and 10.0%
its Subsidiaries
Chrysler Corporation 7.0%
and its Subsidiaries
Honda Motor Co., Ltd., 7.0%
American Honda Motor Co.
and their respective
Subsidiaries
Toyota Motor Company, 14.0%
Toyota Tsusho Corp.
and their respective
Subsidiaries
Notwithstanding the foregoing, if after March 30, 1995 the rating assigned
to a Special Obligor is changed by either Standard & Poor's Rating Group
or Duff & Phelps Credit Rating Co., the following Special Obligor Limit
shall apply to such Special Obligor (in case of a split rating, the Special
Obligor Limit shall be the lower of the two):
Minimum Rating
Standard & Poor's Duff & Phelps Special Obligor Limit
A-1 AAA- 14.0%
A-2 AA- 10.0%
A-3 A- 7.0%
- -- BBB- 5.0%
Non-Investment Less than 2.5%
Grade/Unrated BBB- and unrated
<PAGE>
Schedule 4
Locations of Chief Executive Office of the Company
Bank of America Plaza
Suite 1100
300 South Fourth Street
Las Vegas, Nevada 89101
<PAGE>
Schedule 5
Contractual Obligations
1. Service Agreement, dated as of December 16, 1994,
between Nevada Holding Services, Inc. ("NHS") and the
Company, as amended.
2. Sublease, dated as of December 16, 1994, between NHS,
as Sublessor, and the Company, as Sublessee.
3. Agreement, dated as of December 16, 1994, between the
Company and Monte L. Miller.
4. Payroll Services Agreement, dated December 22, 1994,
between the Company and Computing Resources, Inc.
EXECUTION COPY
CARCORP, INC.,
COLLINS & AIKMAN PRODUCTS CO.,
as Master Servicer
and
CHEMICAL BANK,
as Trustee
SERIES 1995-1 SUPPLEMENT
Dated as of March 30, 1995
to
POOLING AGREEMENT
Dated as of March 30, 1995
C&A MASTER TRUST
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS . . . . . . . . . . 1
SECTION 1.1. Definitions . . . . . . . . . . . . . . 1
ARTICLE II
DESIGNATION OF CERTIFICATES; PURCHASE AND SALE
OF THE TERM CERTIFICATES . . . . . . . 24
SECTION 2.1. Designation . . . . . . . . . . . . . . 24
SECTION 2.2. The Series 1 Certificates . . . . . . . 25
SECTION 2.3. Delivery . . . . . . . . . . . . . . . . 25
SECTION 2.4. Tender of Exchangeable Company
Certificate . . . . . . . . . . . . . 26
SECTION 2.5. Restrictions on Transfer. . . . . . . . 27
SECTION 2.6. Application of Proceeds. . . . . . . . . 28
SECTION 2.7. Procedure for Decreasing the Invested
Amount . . . . . . . . . . . . . . . . 29
ARTICLE III
ARTICLE III OF THE AGREEMENT . . . . . . 30
SECTION 3A.2. Establishment of Trust Accounts. . . . 30
SECTION 3A.3. Daily Allocations. . . . . . . . . . . 32
SECTION 3A.4. Determination of Interest . . . . . . . 34
SECTION 3A.5. Determination of Series 1 Monthly
Principal Payment . . . . . . . . . . 35
SECTION 3A.6. Applications . . . . . . . . . . . . . 35
ARTICLE IV
DISTRIBUTIONS AND REPORTS . . . . . . . 37
SECTION 4A.1. Distributions . . . . . . . . . . . . . 37
SECTION 4A.2. Statements and Notices . . . . . . . . 38
Section 4A.3. Notices . . . . . . . . . . . . . . . . 39
ARTICLE V
ADDITIONAL EARLY AMORTIZATION EVENTS . . . . 39
SECTION 5.1. Additional Early Amortization Events . . 39
-i-
<PAGE>
Page
ARTICLE VI
SERVICING FEE . . . . . . . . . . 41
SECTION 6.1. Servicing Compensation . . . . . . . . . 41
ARTICLE VII
COVENANTS, REPRESENTATIONS AND WARRANTIES . . . 42
SECTION 7.1. Representations and Warranties
of the Company and the Master
Servicer . . . . . . . . . . . . . . . 42
SECTION 7.2. Covenants of the Company . . . . . . . . 42
SECTION 7.3. Covenants of the Master Servicer . . . . 42
ARTICLE VIII
MISCELLANEOUS . . . . . . . . . . 42
SECTION 8.1. Ratification of Agreement . . . . . . . 42
SECTION 8.2. Governing Law . . . . . . . . . . . . . 43
SECTION 8.3. Further Assurances . . . . . . . . . . . 43
SECTION 8.4. No Waiver; Cumulative Remedies . . . . . 43
SECTION 8.5. Amendments . . . . . . . . . . . . . . . 43
SECTION 8.6. Notices . . . . . . . . . . . . . . . . 43
SECTION 8.7. Counterparts . . . . . . . . . . . . . . 44
ARTICLE IX
FINAL DISTRIBUTIONS . . . . . . . . 44
SECTION 9.1. Certain Distributions . . . . . . . . . 44
-ii-
<PAGE>
EXHIBITS
Exhibit A Form of Class A Certificate, Series 1995-1
Exhibit B Form of Class B Certificate, Series 1995-1
Exhibit C Form of Subordinated Company Certificate,
Series 1995-1
Exhibit D [Reserved]
Exhibit E Form of Daily Report
Exhibit F Form of Monthly Settlement Statement
SCHEDULES
Schedule 1 Trust Accounts
-iii-
<PAGE>
SERIES 1995-1 SUPPLEMENT, dated as of March 30, 1995
(this "Supplement"), among Carcorp, Inc., a Delaware corporation
(the "Company"), Collins & Aikman Products Co. ("C&A Products"),
a Delaware corporation, as master servicer (the "Master
Servicer"), and Chemical Bank, a New York banking corporation,
in its capacity as Trustee (the "Trustee") under the Agreement
(as hereinafter defined).
W I T N E S S E T H :
WHEREAS, the parties hereto entered into a Pooling
Agreement, dated as of March 30, 1995 (the "Agreement");
WHEREAS, the Agreement provides, among other things,
that the Company, the Master Servicer and the Trustee may at any
time and from time to time enter into supplements to the
Agreement for the purpose of authorizing the issuance on behalf
of the Trust by the Company for execution and redelivery to the
Trustee for authentication of one or more Series of Investor
Certificates; and
WHEREAS, the Company, the Master Servicer and the
Trustee wish to supplement the Agreement as hereinafter set
forth;
NOW, THEREFORE, in consideration of the premises and of
the mutual covenants herein contained, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby expressly acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. (a) The following words
and phrases shall have the following meanings with respect to
Series 1 and the definitions of such terms are applicable to the
singular as well as the plural form of such terms and to the
masculine as well as the feminine and neuter genders of such
terms:
"Accrued Expense Amount" shall mean, for each Business
Day during an Accrual Period, the sum of (i) the Series 1
Daily Interest Expense for such Business Day, (ii) one-tenth
of the Series 1 Certificates pro rata portion of the
Servicing Fee (up to the Series 1 Certificates pro rata
portion of the amount thereof due and payable on the
succeeding Distribution Date and zero on each Business Day
<PAGE>
thereafter until the succeeding Distribution Date) and
(iii) all Program Costs which have accrued since such
preceding Business Day; provided, however, that if by the
tenth Business Day of an Accrual Period, the entire amount
of (A) the Series 1 Monthly Interest, (B) the Series 1
Certificates pro rata portion of the Servicing Fee and (C)
all Program Costs, in each case for such Accrual Period,
shall not have been transferred to the applicable Account,
the Accrued Expense Amount for such tenth Business Day (and
each Business Day thereafter until paid) shall also include
the amount of such shortfall. For purposes of clause (ii),
the Servicing Fee shall be allocated among each Outstanding
Series pro rata based upon the proportion that the Invested
Amount for such Series (or, in the case of the Series 2
Certificates, the Aggregate Commitment Amount) bears to the
sum of (i) the Invested Amounts for all Outstanding Series
(other than Series 2) and (ii) the Aggregate Commitment
Amount.
"Additional Series Primary Auto Receivables Percentage"
shall mean, as of any date of determination, the percentage,
if any, set forth in, or calculated pursuant to the
provisions of, the Supplement relating to a Series of
Certificates issued after the Issuance Date and having an
interest in PAR Pool II; provided, however, that such
percentage shall not exceed, on any date of determination,
the fraction (expressed as a percentage) the numerator of
which equals the Principal Amount of PAR Pool II allocated
to such Series and the denominator of which equals the
Principal Amount of PAR Pool II.
"Additional Series 2 Receivables" shall mean those
Receivables, if any, originated by a Seller added to
Schedule 1 to the Receivables Sale Agreement after the
Issuance Date, which Seller's Receivables shall be
designated as Additional Series 2 Receivables.
"Aged Receivables Ratio" shall mean, as of the last day
of each Settlement Period, the percentage equivalent of a
fraction, the numerator of which shall be the sum of (a) the
aggregate unpaid balance of Receivables originated by the
Sellers that were 61-90 days past due and (b) the aggregate
amount of Receivables of such Seller which were charged off
as uncollectible prior to the day which is 91 days after its
original due date during the Settlement Period, and the
denominator of which shall be the aggregate Principal Amount
of Receivables originated by the Sellers during the fourth
prior Settlement Period (including the current Settlement
Period).
"Aggregate Commitment Amount" shall have the meaning
set forth in Section 1.1 of the Series 2 Supplement.
-2-
<PAGE>
"Aggregate Non-Series 1 Primary Auto Receivables
Amount" shall mean, on any day, the sum of (A) the Principal
Amount of the Excess Primary Auto Receivables and (B) the
lesser of (i) the excess, if any, of the Aggregate Series 1
Receivables Amount over the Series 1 Target Receivables
Amount and (ii) the aggregate Principal Amount of Eligible
Primary Auto Receivables (other than Excess Primary Auto
Receivables).
"Aggregate Series 1 Receivables Amount" shall mean, as
of any day, the aggregate Principal Amount of Eligible
Receivables minus (i) the Principal Amount of Excess Primary
Auto Receivables, (ii) the Overconcentration Amounts with
respect to the Receivables of other Eligible Obligors and
(iii) the Principal Amount of any Additional Series 2
Receivables.
"Aggregate Series 2 Receivables Amount" shall mean, on
any day, the sum of the Aggregate Non-Series 1 Primary Auto
Receivables Amount and the aggregate Principal Amount of any
Additional Series 2 Receivables; provided, however, that the
Aggregate Series 2 Receivables Amount shall not include (i)
the excess, if any, of (a) the aggregate Principal Amount of
all Primary Auto Receivables payable in Canadian Dollars
over (b) 25% of the aggregate Principal Amount of all
Eligible Primary Auto Receivables in the Trust at the end of
the Business Day immediately preceding such date and (ii) if
the senior unsecured credit rating of a Primary Auto Obligor
(or, if such Primary Auto Obligor is a Subsidiary, its
parent) shall be reduced below BBB- by S&P, or Baa3 by
Moody's Investors Service, Inc., the Principal Amount of
Receivables of such Primary Auto Obligor.
"Aggregate Series 2 Receivables Amount Deficiency"
shall be deemed to occur on any Business Day when, if after
giving effect to all allocations and distributions to be
made on such day (based upon the VFC Percentage as
calculated for such day) the VFC Target Receivables Amount
would exceed the Aggregate Series 2 Receivables Amount.
"Agreement" shall mean the Pooling Agreement, dated as
of March 30, 1995, among the Company, the Master Servicer
and the Trustee, as amended, supplemented or otherwise
modified from time to time.
"Carrying Cost Reserve Ratio" shall mean, as of any
Settlement Report Date and continuing until the next
Settlement Report Date, an amount (expressed as a
percentage) equal to (a) the product of (i) 2.0 times Days
Sales Outstanding as of such day and (ii) 1.50 times the
Discount Rate as of such day divided by (b) 360.
-3-
<PAGE>
"Class A Additional Interest" shall have the meaning
assigned in subsection 3A.4(b)(i).
"Class A Adjusted Invested Amount" shall mean, on any
date of determination, the Class A Invested Amount minus the
amount on deposit in the Series 1 Principal Collection Sub-
subaccount.
"Class A Certificate" shall mean a Class A Certificate,
Series 1995-1, executed by the Company and authenticated by
or on behalf of the Trustee, substantially in the form of
Exhibit A.
"Class A Certificateholder" shall mean each holder of a
Class A Certificate.
"Class A Certificate Rate" shall mean, with respect to
(i) the initial Accrual Period, 6.455% per annum, and (ii)
any Accrual Period thereafter, One-Month LIBOR for such
Accrual Period plus 0.33% per annum.
"Class A Dilution Reserve Ratio I" shall mean, as of
any Settlement Report Date and continuing until the next
Settlement Report Date, an amount (expressed as a
percentage) which is calculated as follows:
DRR = [(c * d) + [(e-d) * (e/d)]] * f
Where:
DRR = Class A Dilution Reserve Ratio I;
c = the Class A Ratings Multiple;
d = the average of the Dilution Ratio during the
period of twelve consecutive Settlement Periods
ending prior to such earlier Settlement Report
Date;
e = the highest Dilution Ratio for any Settlement
Period during the period of twelve consecutive
Settlement Periods ending prior to such earlier
Settlement Report Date; and
f = the quotient of (i) the product of (A) the
aggregate Principal Amount of Receivables which
were originated by the Sellers during the
immediately preceding Settlement Period and (B)
the Dilution Horizon Factor and (ii) the
difference between (A) the aggregate outstanding
Principal Amount of all Receivables and (B) the
aggregate outstanding Principal Amount of all
-4-
<PAGE>
Delinquent Receivables and Defaulted Receivables,
in each case, as of the last day of the Settlement
Period preceding such earlier Settlement Report
Date.
"Class A Dilution Reserve Ratio II" shall mean, as of
any Settlement Report Date and continuing until the next
Settlement Report Date, an amount (expressed as a
percentage) which is calculated as follows:
DRR = [(c * d) + e] * f
Where:
DRR = Class A Dilution Reserve Ratio II;
c = the Class A Ratings Multiple;
d = the average of the Dilution Ratio during the
period of twelve consecutive Settlement Periods
ending prior to such earlier Settlement Report
Date;
e = the product of (i) the twelve-month sample
standard deviation of the Dilution Ratio as of the
end of each of the twelve consecutive Settlement
Periods immediately preceding such earlier
Settlement Report Date and (ii) the Class A Z
Value; and
f = the quotient of (i) the product of (A) the
aggregate Principal Amount of Receivables which
were originated by the Sellers during the
immediately preceding Settlement Period and (B)
the Dilution Horizon Factor and (ii) the
difference between (A) the aggregate outstanding
Principal Amount of all Receivables and (B) the
aggregate outstanding Principal Amount of all
Delinquent Receivables and Defaulted Receivables,
in each case, as of the last day of the Settlement
Period preceding such earlier Settlement Report
Date.
"Class A Initial Invested Amount" shall mean
$100,000,000.00.
"Class A Interest Shortfall" shall have the meaning
assigned in subsection 3A.4(b)(i).
"Class A Invested Amount" shall mean, with respect to
any date of determination, an amount equal to the Class A
Initial Invested Amount (plus the Initial Invested Amount of
-5-
<PAGE>
any Class A Certificate issued subsequent to the Issuance
Date) minus the aggregate amount of distributions to the
Class A Certificateholders (including the holders of any
such subsequently issued Class A Certificates) made in
respect of principal on or prior to such date.
"Class A Loss Reserve Ratio I" shall mean, as of any
Settlement Report Date and continuing until the next
Settlement Report Date, an amount (expressed as a
percentage) which is calculated as follows:
LRR = [(a * b)/c] * d * e
Where:
LRR = Class A Loss Reserve Ratio I;
a = the sum of the aggregate Principal Amount of
Receivables originated by the Sellers during the
three and one-half Settlement Periods immediately
preceding such earlier Settlement Report Date;
b = the highest three-month rolling average of the
Aged Receivables Ratio that occurred during the
period of twelve consecutive Settlement Periods
preceding such earlier Settlement Report Date;
c = the difference between (i) the aggregate
outstanding Principal Amount of all Receivables
and (ii) the aggregate outstanding Principal
Amount of all Delinquent Receivables and Defaulted
Receivables, in each case, originated by the
Sellers as of the last day of the Settlement
Period preceding such earlier Settlement Report
Date;
d = the Class A Ratings Multiple; and
e = the Payment Terms Factor.
"Class A Loss Reserve Ratio II" shall mean, as of any
Settlement Report Date and continuing until the next
Settlement Report Date, an amount (expressed as a
percentage) which is calculated as follows:
LRR = [(a * b)/c] * d * e + f
Where:
LRR = Class A Loss Reserve Ratio II;
-6-
<PAGE>
a = the aggregate Principal Amount of Receivables
originated by the Sellers during the three and
one-half Settlement Periods immediately preceding
such earlier Settlement Report Date;
b = the highest two-month rolling average of the Aged
Receivables Ratio that occurred during the period
of twelve consecutive Settlement Periods preceding
such earlier Settlement Report Date;
c = the difference between (i) the aggregate
outstanding Principal Amount of all Receivables
and (ii) the aggregate outstanding Principal
Amount of all Delinquent Receivables and Defaulted
Receivables, in each case, originated by the
Sellers as of the last day of the Settlement
Period preceding such earlier Settlement Report
Date;
d = the Class A Ratings Multiple;
e = the Payment Terms Factor; and
f = the product of (i) the twelve-month sample
standard deviation of the Aged Receivables Ratio
as of the end of each of the twelve consecutive
Settlement Periods preceding such earlier
Settlement Report Date and (ii) the Class A Z
Value.
"Class A Monthly Interest" shall have the meaning
assigned in subsection 3A.4(a)(i).
"Class A Ratings Multiple" shall mean 2.5.
"Class A Ratios" shall mean, on any date of
determination, the greater of (i) the sum of the Class A
Loss Reserve Ratio I and the Class A Dilution Reserve Ratio
I, (ii) the sum of the Class A Loss Reserve Ratio II and the
Class A Dilution Reserve Ratio II and (iii) the Minimum
Class A Ratio.
"Class A Z Value" shall mean 2.58.
"Class B Additional Interest" shall have the meaning
assigned in subsection 3A.4(b)(ii).
"Class B Adjusted Invested Amount" shall mean, on any
date of determination, the Class B Invested Amount minus the
excess, if any, of the amount on deposit on such date in the
Series 1 Principal Collection Sub-subaccount over the Class
A Invested Amount.
-7-
<PAGE>
"Class B Certificate" shall mean a Class B Certificate,
Series 1995-1, executed by the Company and authenticated by
or on behalf of the Trustee, substantially in the form of
Exhibit B.
"Class B Certificateholder" shall mean each holder of a
Class B Certificate.
"Class B Certificate Rate" shall mean, with respect to
(i) the initial Accrual Period, 6.625% per annum, and (ii)
any Accrual Period thereafter, One-Month LIBOR for such
Accrual Period plus 0.50% per annum.
"Class B Dilution Reserve Ratio I" shall mean, as of
any Settlement Report Date and continuing until the next
Settlement Report Date, an amount (expressed as a
percentage) which is calculated as follows:
DRR = [(c * d) + [(e-d) * (e/d)]] * f
Where:
DRR = Class B Dilution Reserve Ratio I;
c = the Class B Ratings Multiple;
d = the average of the Dilution Ratio during the
period of twelve consecutive Settlement Periods
ending prior to such earlier Settlement Report
Date;
e = the highest Dilution Ratio for any Settlement
Period during the period of twelve consecutive
Settlement Periods ending prior to such earlier
Settlement Report Date; and
f = the quotient of (i) the product of (A) the
aggregate Principal Amount of Receivables which
were originated by the Sellers during the
immediately preceding Settlement Period and (B)
the Dilution Horizon Factor and (ii) the
difference between (A) the aggregate outstanding
Principal Amount of all Receivables and (B) the
aggregate outstanding Principal Amount of all
Delinquent Receivables and Defaulted Receivables,
in each case, as of the last day of the Settlement
Period preceding such earlier Settlement Report
Date.
"Class B Dilution Reserve Ratio II" shall mean, as of
any Settlement Report Date and continuing until the next
-8-
<PAGE>
Settlement Report Date, an amount (expressed as a
percentage) which is calculated as follows:
DRR = [(c * d) + e] * f
Where:
DRR = Class B Dilution Reserve Ratio II;
c = the Class B Ratings Multiple;
d = the average of the Dilution Ratio during the
period of twelve consecutive Settlement Periods
ending prior to such earlier Settlement Report
Date;
e = the product of (i) the twelve-month sample
standard deviation of the Dilution Ratio as of the
end of each of the twelve consecutive Settlement
Periods immediately preceding such earlier
Settlement Report Date and (ii) the Class B Z
Value; and
f = the quotient of (i) the product of (A) the
aggregate Principal Amount of Receivables which
were originated by the Sellers during the
immediately preceding Settlement Period and (B)
the Dilution Horizon Factor and (ii) the
difference between (A) the aggregate outstanding
Principal Amount of all Receivables and (B) the
aggregate outstanding Principal Amount of all
Delinquent Receivables and Defaulted Receivables,
in each case, as of the last day of the Settlement
Period preceding such earlier Settlement Report
Date.
"Class B Initial Invested Amount" shall mean
$10,000,000.00.
"Class B Interest Shortfall" shall have the meaning
assigned in subsection 3A.4(b)(ii).
"Class B Invested Amount" shall mean, with respect to
any date of determination, an amount equal to the Class B
Initial Invested Amount (plus the Initial Invested Amount of
any Class B Certificates issued subsequent to the Issuance
Date) minus the aggregate amount of distributions to the
Class B Certificateholders (including the holders of any
such subsequently issued Class B Certificates) made in
respect of principal on or prior to such date.
-9-
<PAGE>
"Class B Loss Reserve Ratio I" shall mean, as of any
Settlement Report Date and continuing until the next
Settlement Report Date, an amount (expressed as a
percentage) which is calculated as follows:
LRR = [(a * b)/c] * d * e
Where:
LRR = Class B Loss Reserve Ratio I;
a = the aggregate Principal Amount of Receivables
originated by the Sellers during the three and
one-half Settlement Periods immediately preceding
such earlier Settlement Report Date;
b = the highest three-month rolling average of the
Aged Receivables Ratio that occurred during the
period of twelve consecutive Settlement Periods
preceding such earlier Settlement Report Date;
c = the difference between (i) the aggregate
outstanding Principal Amount of all Receivables
and (ii) the aggregate outstanding Principal
Amount of all Delinquent Receivables and Defaulted
Receivables, in each case, originated by the
Sellers as of the last day of the Settlement
Period preceding such earlier Settlement Report
Date;
d = the Class B Ratings Multiple; and
e = the Payment Terms Factor.
"Class B Loss Reserve Ratio II" shall mean, as of any
Settlement Report Date and continuing until the next
Settlement Report Date, an amount (expressed as a
percentage) which is calculated as follows:
LRR = [(a * b)/c] * d * e + f
Where:
LRR = Class B Loss Reserve Ratio II;
a = the aggregate Principal Amount of Receivables
originated by the Sellers during the three and
one-half Settlement Periods immediately preceding
such earlier Settlement Report Date;
b = the highest two-month rolling average of the Aged
Receivables Ratio that occurred during the period
-10-
<PAGE>
of twelve consecutive Settlement Periods preceding
such earlier Settlement Report Date;
c = the difference between (i) the aggregate
outstanding Principal Amount of all Receivables
and (ii) the aggregate outstanding Principal
Amount of all Delinquent Receivables and Defaulted
Receivables, in each case, originated by the
Sellers as of the last day of the Settlement
Period preceding such earlier Settlement Report
Date;
d = the Class B Ratings Multiple;
e = the Payment Terms Factor; and
f = the product of (i) the twelve-month sample
standard deviation of the Aged Receivables Ratio
as of the end of each of the twelve consecutive
Settlement Periods preceding such earlier
Settlement Report Date and (ii) the Class B Z
Value.
"Class B Monthly Interest" shall have the meaning
assigned in subsection 3A.4(a)(ii).
"Class B Ratings Multiple" shall mean 2.0.
"Class B Ratios" shall mean, on any date of
determination, the greater of (i) the sum of the Class B
Loss Reserve Ratio I and the Class B Dilution Reserve Ratio
I, (ii) the sum of the Class B Loss Reserve Ratio II and the
Class B Dilution Reserve Ratio II and (iii) the Minimum
Class B Ratio.
"Class B Z Value" shall mean 1.96.
"Company Exchange" shall have the meaning specified in
subsection 2.4(b).
"Daily Report" shall mean a report prepared by the
Master Servicer on each Business Day for the period
specified therein, in substantially the form of Exhibit E.
"Days Sales Outstanding" shall mean, as of any
Settlement Report Date and continuing until the next
Settlement Report Date, the number of days equal to the
product of (a) 91 and (b) the amount obtained by dividing
(i) the difference between (A) the aggregate Principal
Amount of Receivables and (B) the aggregate bad debt reserve
of the Sellers, in each case as at the last day of the
Settlement Period immediately preceding such earlier
-11-
<PAGE>
Settlement Report Date, by (ii) aggregate Principal Amount
of Receivables generated by the Sellers for the three
Settlement Periods immediately preceding such earlier
Settlement Report Date.
"Depository" shall mean The Depository Trust Company,
the nominee of which is Cede & Co., or any successor
thereto.
"Depository Agreement" shall have the meaning specified
in subsection 2.1(b).
"Depository Participant" shall mean a broker, dealer,
bank, other financial institution or other Person for whom
from time to time the Depository effects book-entry
transfers and pledges of securities deposited with the
Depository.
"Dilution Horizon" shall mean the number of days from
the invoice date with respect to a Receivable until a
Dilutive Credit with respect to such Receivable is issued by
the related Servicing Party in accordance with its Policies.
"Dilution Horizon Factor" shall mean a fraction, the
numerator of which is the weighted average (based upon the
Principal Amount of the Receivables) Dilution Horizon of the
Sellers on the last Business Day of the most recent first
and third fiscal quarters and the denominator of which is
30; provided, however, that the numerator shall not be less
than 55 unless the calculation of the numerator is based
upon the average of the weighted average (based upon the
Principal Amount of the Receivables) Dilution Horizon
calculated for the immediately preceding first and third
fiscal quarters.
"Dilution Ratio" shall mean, as of the last day of each
Settlement Period, an amount (expressed as a percentage)
equal to the aggregate amount of Dilution Adjustments made
during such Settlement Period divided by the aggregate
Principal Amount of Receivables which were originated by the
Sellers during the immediately preceding Settlement Period.
"Discount Rate" shall mean, as of any date of
determination, the sum of (a) the weighted average interest
rate in effect with respect to the outstanding Class A and
Class B Certificates as of the end of the Settlement Period
immediately preceding the most recent Settlement Report Date
and (b) an amount equal to (i) the aggregate amount of fees
(other than the Servicing Fee) accrued with respect to the
outstanding Term Certificates during the Settlement Period
immediately preceding the most recent Settlement Report Date
-12-
<PAGE>
divided by (ii) the average daily Term Certificates Invested
Amount during such Settlement Period.
"D&P" shall mean Duff & Phelps Credit Rating Co. and
its successors in interest.
"Early Amortization Event" shall have the meanings
assigned in Section 5.1 of this Supplement and Section 7.1
of the Agreement.
"ERISA Entity" shall mean (i) an employee benefit plan,
retirement arrangement, individual retirement account or
Keogh plan subject to either Title I of ERISA or Section
4975 of the Internal Revenue Code, or (ii) an entity whose
source of funds to be used for the purchase of a Certificate
includes the assets of any such plan, arrangement or
account.
"Exchange Date" shall have the meaning, with respect to
any Class A and Class B Certificates issued pursuant to a
Company Exchange, specified in Section 2.4(b).
"Exchange Notice" shall have the meaning, with respect
to any Class A and Class B Certificates issued pursuant to a
Company Exchange, specified in Section 2.4(b).
"Initial Purchasers" shall mean the institutional
"accredited investors" (as defined in Rule 501(a)(1)-(3)
promulgated under the Securities Act) who are purchasing the
Term Certificates on the Issuance Date pursuant to a
Purchase Agreement.
"Initial Sale" shall mean the sale on the Issuance Date
of the Term Certificates to the Initial Purchasers pursuant
to a Purchase Agreement.
"Invested Percentage" shall mean, with respect to any
Business Day (i) during the Series 1 Revolving Period, the
percentage equivalent of a fraction, the numerator of which
is the Series 1 Allocated Receivables Amount as of the end
of the immediately preceding Business Day and the
denominator of which is the Aggregate Series 1 Receivables
Amount as of the end of the immediately preceding Business
Day and (ii) during the Series 1 Amortization Period, the
percentage equivalent (but not greater than 100%) of a
fraction, the numerator of which is the Series 1 Allocated
Receivables Amount as of the end of the last Business Day of
the Series 1 Revolving Period and the denominator of which
is the Aggregate Series 1 Receivables Amount as of the end
of the immediately preceding Business Day.
"Issuance Date" shall mean March 31, 1995.
-13-
<PAGE>
"LIBOR Business Day" shall mean a day that is both a
Business Day and a day on which banking institutions in the
City of London, England are not required or authorized by
law to be closed.
"LIBOR Determination Date" shall mean for each given
Accrual Period after the initial Accrual Period, the second
LIBOR Business Day prior to the commencement of each
applicable Accrual Period.
"Majority Term Certificateholders" shall mean, on any
day, Term Certificateholders having, in the aggregate, more
than 50% of the Invested Amount.
"Minimum Class A Ratio" shall mean, as of any
Settlement Report Date and continuing until the next
Settlement Report Date, an amount (expressed as a
percentage) which is calculated as follows:
MR = a + (b * c)
Where:
MR = Minimum Class A Ratio;
a = 21%;
b = the average of the Dilution Ratio during the
period of the twelve consecutive Settlement
Periods ending prior to such earlier Settlement
Report Date; and
c = the quotient of (i) the product of (A) the
aggregate Principal Amount of Receivables which
were originated by the Sellers during the
immediately preceding Settlement Period and (B)
the Dilution Horizon Factor and (ii) the
difference between (A) the aggregate outstanding
Principal Amount of all Receivables originated by
the Sellers and (B) the aggregate outstanding
Principal Amount of all Delinquent Receivables and
Defaulted Receivables, in each case, as of the
last day of the Settlement Period preceding such
earlier Settlement Report Date.
"Minimum Class B Ratio" shall mean, as of any
Settlement Report Date and continuing until the next
Settlement Report Date, an amount (expressed as a
percentage) which is calculated as follows:
MR = a + (b * c)
-14-
<PAGE>
Where:
MR = Minimum Class B Ratio;
a = 15%;
b = the average of the Dilution Ratio during the
period of the twelve consecutive Settlement
Periods ending prior to such earlier Settlement
Report Date; and
c = the quotient of (i) the product of (A) the
aggregate Principal Amount of Receivables which
were originated by the Sellers during the
immediately preceding Settlement Period and (B)
the Dilution Horizon Factor and (ii) the
difference between (A) the aggregate outstanding
Principal Amount of all Receivables originated by
the Sellers and (B) the aggregate outstanding
Principal Amount of all Delinquent Receivables and
Defaulted Receivables, in each case, as of the
last day of the Settlement Period preceding such
earlier Settlement Report Date.
"One-Month LIBOR" shall mean for any Accrual Period
after the initial Accrual Period, the offered rate for U.S.
Dollar deposits for one month commencing on the related
LIBOR Determination Date which appears on Telerate Page 3750
as of 11:00 a.m., London time, on such LIBOR Determination
Date. If on any LIBOR Determination Date the offered rate
does not appear on Telerate Page 3750, the Trustee will
request each of the Reference Banks to provide the Trustee
with its offered quotation for U.S. Dollar deposits for one
month to prime banks in the London interbank market as of
11:00 a.m., London time, on such date. If at least two
Reference Banks provide the Trustee with such offered
quotations, One-Month LIBOR on such date shall be the
arithmetic mean (rounded upwards, if necessary, to the
nearest one-sixteenth of one percent) of all such
quotations. If on such date fewer than two of the Reference
Banks provide the Trustee with such offered quotations, One-
Month LIBOR on such date shall be the Reserve Interest Rate.
The "Reserve Interest Rate" shall be the arithmetic mean
(rounded upwards, if necessary, to the nearest one-sixteenth
of one percent) of the offered per annum rates that one or
more leading banks in New York City selected by the Trustee
are quoting as of 11:00 a.m., New York City time, on such
date to leading European banks for U.S. Dollar deposits for
one month; provided, however, that if the banks selected as
aforesaid are not quoting as mentioned in this sentence,
One-Month LIBOR in effect for the applicable Accrual Period
will be One-Month LIBOR in effect for the previous Accrual
-15-
<PAGE>
Period. If on the April 21, 1995 LIBOR Determination Date,
the Trustee is required but unable to determine One-Month
LIBOR in the manner provided in the preceding sentence, One-
Month LIBOR shall be 6.125%. Until the Term Certificates
Invested Amount has been repaid in full, the Trustee will at
all times retain at least four Reference Banks for the
purpose of determining One-Month LIBOR with respect to each
LIBOR Determination Date. Each Reference Bank shall (i) be
a leading bank engaged in transactions in Eurodollar
deposits in the international Eurocurrency market, (ii) have
an established place of business in London and (iii) whose
quotes appear on the Reuters Screen LIBO Page. The
Reference Banks initially are Barclays Bank PLC, Bank of
Tokyo, Bankers Trust Company and National Westminster Bank,
PLC. If any Reference Bank designated by the Trustee should
be removed from the Reuters Screen LIBO Page or in any other
way fails to meet the qualifications of a Reference Bank,
the Trustee will use its best efforts to designate an
alternative Reference Bank. The Trustee shall not have any
liability or responsibility to any Person for (i) the
selection of any Reference Bank for purposes of determining
One-Month LIBOR or (ii) any inability to retain at least
four Reference Banks which is caused by circumstances beyond
its reasonable control. In determining One-Month LIBOR, the
Class A Certificate Rate and the Class B Certificate Rate,
the Trustee may conclusively rely and shall be protected in
relying upon the offered quotations (whether written, oral
or on the Reuters Screen LIBO Page) from the Reference Banks
or the New York City banks as to One-Month LIBOR or the
Reserve Interest Rate, respectively, in effect from time to
time. The Trustee shall not have any liability or
responsibility to any Person for the Trustee's inability,
following a good-faith reasonable effort, to obtain such
quotations from the Reference Banks or the New York City
banks as provided for in this definition. The establishment
of One-Month LIBOR on each LIBOR Determination Date by the
Trustee and the Trustee's calculation of the rates of
interest applicable to the Term Certificates for the related
Accrual Period shall (in the absence of manifest error) be
final and binding.
"Optional Repurchase Percentage" shall mean 10% of the
Term Certificates Initial Invested Amount.
"Optional Termination Date" shall have the meaning
assigned in subsection 2.7(b).
"Optional Termination Notice" shall have the meaning
assigned in subsection 2.7(b).
"PAR Pool I" shall mean the pool of Primary Auto
Receivables constituting part of the Trust Assets on the
-16-
<PAGE>
Business Day preceding the commencement of a Separate VFC
Amortization Event.
"PAR Pool II" shall mean the pool of Primary Auto
Receivables conveyed to the Trust after the commencement of
a Separate VFC Amortization Event.
"Payment Terms Factor" shall mean a fraction the
numerator of which is the weighted average (based upon the
Principal Amount of the Receivables) payment terms of the
Sellers on the last business day of the immediately
preceding fiscal quarter and the denominator of which is 45;
provided, however, that the numerator shall not be less than
45 unless the calculation of the numerator is based upon the
average of the weighted average (based upon the Principal
Amount of the Receivables) payment terms for the immediately
preceding four fiscal quarters.
"Principal Terms" shall have the meaning, with respect
to any newly issued Class A and Class B Certificates issued
pursuant to a Company Exchange, specified in Section 2.4.
"Program Costs" shall mean, for any Business Day, the
sum of (a) product of (i) the sum of (A) all unpaid fees and
expenses due and payable to counsel to, and independent
auditors of, the Company (other than fees and expenses
payable on or in connection with the closing of the issuance
of the Term Certificates) and any corporate income or
franchise taxes due and payable by the Company, in each case
on such Business Day and (B) all unpaid Trustee's expenses,
and (ii) a fraction, the numerator of which is the Series 1
Invested Amount on such Business Day and the denominator of
which is, except as otherwise set forth in a Supplement, the
sum of (A) the Invested Amounts on such Business Day for
each Outstanding Series (other than Series 2) and (B) the
Aggregate Commitment Amount for Series 2 on such Business
Day and (b) all unpaid fees and expenses due and payable to
Rating Agencies rating the Term Certificates; provided,
however, that Program Costs shall not exceed $50,000 in the
aggregate in any fiscal year of the Master Servicer.
"Purchase Agreement" shall mean each agreement to be
entered into on the Issuance Date between the Company and
the Initial Purchaser named therein pursuant to which the
Company agrees to sell, and such Initial Purchaser agrees to
purchase, the principal amount and Class of Term
Certificates set forth therein.
"Qualified Institutional Buyer" has the meaning
ascribed to such term in Rule 144A under the Securities Act.
-17-
<PAGE>
"Rating Agency" shall mean, with respect to Series 1,
the collective reference to D&P and S&P.
"Record Date" shall mean, with respect to any
Distribution Date, the last Business Day of the immediately
preceding Settlement Period.
"Reduction" shall have the meaning assigned in
subsection 2.7(a).
"Reduction Amount" shall have the meaning assigned in
subsection 2.7(a).
"Reduction Threshold" shall mean, at any date of
determination, $10,000,000.
"Reference Bank" shall mean, at any time, each of the
banks acting as a Reference Bank pursuant to the definition
of One-Month LIBOR.
"Required Reserves" shall mean, as of any date of
determination, an amount equal to the sum of (a) the greater
of (i) (A) the product of (1) the Class A Adjusted Invested
Amount on such day and (2) the Class A Ratios minus (B) the
Class B Adjusted Invested Amount and (ii) the product of (A)
the Class A Adjusted Invested Amount and (B) the Class B
Ratios, (b) the product of (i) the Class B Adjusted Invested
Amount and (ii) the Class B Ratios, (c) the product of (i)
the Term Certificates Invested Amount and (ii) the Carrying
Cost Reserve Ratio, (d) the product of (i) the Principal
Amount of Receivables in the Trust on such day, (ii) the
Term Certificates Adjusted Invested Amount divided by the
Aggregate Adjusted Invested Amount and (iii) the Servicing
Reserve Ratio, and (e) the amount of any Accrued Expense
Amount in respect of which sufficient Aggregate Daily
Collections have not been transferred to the Series 1 Non-
Principal Collection Sub-subaccount.
"Reuters Screen LIBO Page" shall mean the display
designated as page "LIBO" on the Reuters Monitor Money Rates
Service (or such other page as may replace the LIBO page on
that service for the purpose of displaying London interbank
offered quotations of major banks).
"Scheduled Termination Date" shall mean the last day of
the December 1999 Settlement Period.
"Separate VFC Amortization Event" shall mean the
occurrence and continuation of an Early Amortization Event
with respect to the VFC Certificates prior to the Series 1
Amortization Period.
-18-
<PAGE>
"Series 1" shall mean Series 1995-1, the Principal
Terms of which are set forth in this Supplement.
"Series 1 Accrued Interest Sub-subaccount" shall have
the meaning assigned in subsection 3A.2(a).
"Series 1 Allocated Receivables Amount" shall mean, on
any date of determination, the lower of (i) the Series 1
Target Receivables Amount on such day and (ii) the Aggregate
Series 1 Receivables Amount on such day.
"Series 1 Amortization Period" shall mean the period
following the Series 1 Revolving Period and ending on the
earlier of (i) the date when the Term Certificates Invested
Amount shall have been reduced to zero and all accrued
interest on the Term Certificates shall have been paid and
(ii) the Series 1 Termination Date.
"Series 1 Canada/Canadian Dollar Collection Subaccount"
shall have the meaning assigned in subsection 3A.2(a).
"Series 1 Canada/U.S. Dollar Collection Subaccount"
shall have the meaning assigned in subsection 3A.2(a).
"Series 1 Certificates" shall mean, collectively, those
Certificates designated as the Class A Certificates, the
Class B Certificates and the Series 1 Subordinated
Certificate.
"Series 1 Certificateholders' Interest" shall have the
meaning assigned in subsection 2.2(a).
"Series 1 Collection Subaccount" shall have the meaning
assigned in subsection 3A.2(a).
"Series 1 Daily Interest Expense" shall mean, with
respect to any Business Day during an Accrual Period, the
sum of (a) one-tenth of the Series 1 Monthly Interest to be
distributed on the next succeeding Distribution Date (up to
but not exceeding the full amount thereof) for each day
since the preceding Business Day, (b) the aggregate amount
of all previously accrued and unpaid Series 1 Daily Interest
Expense and (c) the aggregate amount of all accrued and
unpaid Class A Additional Interest and Class B Additional
Interest for each day since the preceding Business Day.
"Series 1 Invested Amount" shall mean, with respect to
any date of determination, the Term Certificates Invested
Amount.
-19-
<PAGE>
"Series 1 Monthly Interest" shall mean, collectively,
the Class A Monthly Interest and the Class B Monthly
Interest.
"Series 1 Monthly Principal Payment" shall have the
meaning assigned in Section 3A.5.
"Series 1 Monthly Servicing Fee" shall have the meaning
assigned in subsection 6.1.
"Series 1 Non-Principal Collection Sub-subaccount"
shall have the meaning assigned in subsection 3A.2(a).
"Series 1 Percentage" shall mean, on any Business Day
(i) prior to the occurrence of a Separate VFC Amortization
Event, one minus the VFC Percentage, and (ii) after the
occurrence of a Separate VFC Amortization Event, (A) with
respect to PAR Pool I, one minus the VFC Percentage and
(B) with respect to PAR Pool II, one minus the Additional
Series Primary Auto Receivables Percentage, if any.
"Series 1 Principal Collection Sub-subaccount" shall
have the meaning assigned in subsection 3A.2(a).
"Series 1 Required Reserves Ratio" shall mean, as of
any date of determination, the quotient of (i) Required
Reserves on such day and (ii) the Term Certificates Adjusted
Invested Amount on such day.
"Series 1 Required Subordinated Amount" shall mean, on
any date of determination, the product of (i) the Term
Certificates Adjusted Invested Amount and (ii) the
percentage equivalent of (A) the excess of a fraction the
numerator of which is one and the denominator of which is
one minus the Series 1 Required Reserves Ratio minus (B)
one.
"Series 1 Revolving Period" shall mean the period
commencing on the Issuance Date and terminating on the
earliest to occur of the close of business on (i) the date
on which an Early Amortization Event is declared or
automatically occurs, (ii) the Optional Termination Date and
(iii) the Scheduled Termination Date.
"Series 1 Subordinated Certificate" shall mean the
Subordinated Company Certificate, Series 1995-1, executed by
the Company and authenticated by or on behalf of the
Trustee, substantially in the form of Exhibit C.
"Series 1 Subordinated Certificate Amount" shall mean,
for any date of determination, an amount equal to the Series
-20-
<PAGE>
1 Allocated Receivables Amount on such date minus the Term
Certificates Adjusted Invested Amount on such date.
"Series 1 Target Receivables Amount" shall mean, on any
date of determination, the sum of (i) the Term Certificates
Adjusted Invested Amount on such day and (ii) the Series 1
Required Subordinated Amount on such day.
"Series 1 Termination Date" shall mean the Distribution
Date that occurs in December 2000.
"Series 2" shall mean Series 1995-2, the Principal
Terms of which are set forth in the Series 2 Supplement.
"Series 2 Allocated Receivables Account" shall mean, on
any date of determination, the lower of (i) the VFC Target
Receivables Amount on such day and (ii) the Aggregate
Series 2 Receivables Amount on such day.
"Series 2 Certificates" shall mean, collectively, those
Certificates issued pursuant to the Series 2 Supplement and
designated as the VFC Certificates and the VFC Subordinated
Certificate.
"Series 2 Principal Collection Sub-subaccount" shall
mean the Series Principal Collection Sub-subaccount
established by the Trustee for the benefit of the holders of
the Series 2 Certificates pursuant to the Series 2
Supplement.
"Series 2 Supplement" shall mean the Series 1995-2
Supplement, dated as of March 30, 1995, among the Company,
the Master Servicer, Societe Generale, as Agent, and the
Trustee, as amended, supplemented or otherwise modified from
time to time.
"Servicer Default" shall have the meaning specified in
Section 6.1 of the Servicing Agreement.
"Servicing Reserve Ratio" shall mean, as of any
Settlement Report Date and continuing until the next
Settlement Report Date, an amount (expressed as a
percentage) equal to (i) the product of (A) 1.0% and (B) 2.0
times Days Sales Outstanding as of such earlier Settlement
Report Date divided by (ii) 360.
"Special Distribution Date" shall have the meaning
assigned in subsection 2.7(a).
"Subordinated Interest" shall have the meaning
specified in subsection 2.2(b).
-21-
<PAGE>
"Telerate Page 3750" shall mean the display page so
designated on the Dow Jones Telerate Service (or such other
page as may replace that page on that service, or such other
service as may be nominated as the information vender, for
the purpose of displaying comparable rates or prices).
"Term Certificateholders" shall mean, collectively, the
Class A Certificateholders and Class B Certificateholders.
"Term Certificates" shall mean, collectively, those
Certificates designated as the Class A Certificates and
Class B Certificates.
"Term Certificates Adjusted Invested Amount" shall
mean, as of any date of determination, (i) the Term
Certificates Invested Amount on such date, minus (ii) the
amount on deposit in the Series 1 Principal Collection Sub-
subaccount on such date.
"Term Certificates Initial Invested Amount" shall mean,
collectively, the Class A Initial Invested Amount and the
Class B Initial Invested Amount.
"Term Certificates Invested Amount" shall mean,
collectively, the Class A Invested Amount and the Class B
Invested Amount.
"Trust Accounts" shall have the meaning assigned in
subsection 3A.2(a).
"VFC Adjusted Invested Amount" shall mean, as of any
date of determination, (i) the Aggregate VFC Invested Amount
(as defined in Section 1.1 of the Series 2 Supplement) minus
(ii) the amount on deposit in the Series 2 Principal
Collection Sub-subaccount.
"VFC Certificate" shall mean a VFC Certificate, Series
1995-2, executed by the Company and authenticated by or on
behalf of the Trustee, substantially in the form of Exhibit
A to the Series 2 Supplement.
"VFC Percentage" shall mean (i) on any Business Day
during the Revolving Period for the VFC Certificates, the
percentage equivalent of a fraction, the numerator of which
is equal to (A) the Series 2 Allocated Receivables Amount as
of the end of such Business Day and the denominator of which
is equal to (B) the Aggregate Primary Auto Receivables
Amount as of the end of such Business Day; provided that if
on any Business Day, if after giving effect to all
allocations and distributions to be made on such day (based
upon the VFC Percentage as calculated for such day), an
Aggregate Series 2 Receivables Amount Deficiency would
-22-
<PAGE>
exist, the VFC Percentage will not change (and shall be
equal to the VFC Percentage as calculated at the close of
business on the Business Day immediately preceding the
occurrence of such Aggregate VFC Receivables Amount
Deficiency) until such Aggregate Series 2 Receivables Amount
Deficiency would no longer exist, and (ii) on any Business
Day during the Amortization Period for the VFC Certificates,
the VFC Percentage on the last day of the Revolving Period
for the VFC Certificates; provided that such percentage
shall only be applied with respect to PAR Pool I. Further,
the VFC Percentage with respect to any Receivables other
than Primary Auto Receivables (and Additional Series 2
Receivables, if any) shall be 0.
"VFC Required Subordinated Amount" shall have the
meaning set forth in Section 1.1 of the Series 2 Supplement.
"VFC Subordinated Certificate" shall mean the
Subordinated Company Certificate, Series 1995-2, executed by
the Company and authenticated by or on behalf of the
Trustee, substantially in the form of Exhibit B to the
Series 2 Supplement.
"VFC Target Receivables Amount" shall mean, on any date
of determination, the sum of (i) the VFC Adjusted Invested
Amount on such date and (ii) the VFC Required Subordinated
Amount for such day.
(b) If any term or provision contained herein
conflicts with or is inconsistent with any term or provision
contained in the Agreement, the terms and provisions of this
Supplement shall govern. All capitalized terms not otherwise
defined herein are defined in the Agreement. All Article,
Section or subsection references herein shall mean Article,
Section or subsections of this Supplement, except as otherwise
provided herein. Unless otherwise stated herein, as the context
otherwise requires or if such term is otherwise defined in the
Agreement, each capitalized term used or defined herein shall
relate only to the Series 1 Certificates and no other Series of
Investor Certificates issued by the Trust.
(c) Unless the contest requires otherwise, any
reference contained herein to Series 2 or VFC shall include any
other Outstanding Series of Investor Certificates which have an
interest in Collections on the Receivables not otherwise
allocated to the Series 1 Certificates.
-23-
<PAGE>
ARTICLE II
DESIGNATION OF CERTIFICATES; PURCHASE AND SALE
OF THE TERM CERTIFICATES
SECTION 2.1. Designation. (a) The Certificates created
and authorized pursuant to the Agreement and this Supplement
shall be divided into three classes, which shall be designated
respectively as (i) the "Class A Certificates, Series 1995-1,"
(ii) the "Class B Certificates, Series 1995-1" and (iii) the
"Subordinated Company Certificate, Series 1995-1".
(b) The Depository, the Company and the Trustee have
entered into a Depository Agreement dated as of March 30, 1995
(the "Depository Agreement"). Each Class of the Term
Certificates shall be issued in the form of one typewritten
Certificate, representing the Book-Entry Certificate, to be
delivered to the Depository. Except as provided in Section 5.13
of the Agreement, the Term Certificates shall at all times remain
registered in the name of the Depository or its nominee and at
all times: (i) registration of the Term Certificates may not be
transferred by the Trustee except to a successor to the
Depository; (ii) ownership and transfers of registration of the
Term Certificates on the books of the Depository shall be
governed by applicable rules established by the Depository; (iii)
the Depository may collect its usual and customary fees, charges
and expenses from its Depository Participants; (iv) the Trustee
shall deal with the Depository, Depository Participants and
indirect participating firms as representatives of such
Certificate Book-Entry Holders of the respective Class of Term
Certificates for purposes of exercising the rights of the Term
Certificateholders under the Agreement and this Supplement, and
requests and directions for and votes of such representatives
shall not be deemed to be inconsistent if they are made with
respect to different Certificate Book-Entry Holders; and (v) the
Trustee may rely and shall be fully protected in relying upon
information furnished by the Depository with respect to its
Depository Participants and furnished by the Depository
Participants with respect to indirect participating firms and
Persons shown on the books of such indirect participating firms
as direct or indirect Certificate Book-Entry Holders. The
Depository Agreement provides that the Depository shall maintain
book-entry records with respect to the Certificate Book-Entry
Holders and with respect to ownership and transfers of each such
Class of Term Certificates.
All transfers by Certificate Book-Entry Holders of such
respective Classes of Term Certificates shall be made in
accordance with the procedures established by the Depository
Participant or brokerage firm representing such Book-Entry
Certificate Holders. Each Depository Participant shall only
transfer Term Certificates of Certificate Book-Entry Holders it
-24-
<PAGE>
represents or of brokerage firms for which it acts as agent in
accordance with the Depository's normal procedures.
SECTION 2.2. The Series 1 Certificates. (a) The Term
Certificates shall represent fractional undivided interests in
the Trust, consisting of the right to receive (1) the Invested
Percentage (expressed as a decimal) of (i) Collections received
with respect to the Receivables (other than the Primary Auto
Receivables) and (ii) all other funds on deposit in the
Collection Accounts and in any subaccounts thereof (other than
those relating to Primary Auto Receivables) and (2) the product
of the Series 1 Percentage and the Invested Percentage (expressed
as a decimal) of (i) Collections received with respect to the
Primary Auto Receivables and (ii) all other funds relating to the
Primary Auto Receivables on deposit in the Collection Accounts
and in any subaccounts thereof (collectively, the "Series 1
Certificateholders' Interest").
(b) The Series 1 Subordinated Certificate shall
represent a fractional undivided interest in the Trust,
consisting of the right to receive Collections with respect to
the Receivables allocated to the Series 1 Certificateholders'
Interest and not required to be distributed to or for the benefit
of the Term Certificateholders (the "Subordinated Interest").
The Exchangeable Company Certificate and any other Series of
Investor Certificates outstanding shall represent the ownership
interest in the remainder of the Trust not allocated pursuant
hereto to the Series 1 Certificateholders' Interest or the
Subordinated Interest.
(c) The Class A Certificates, the Class B Certificates
and the Series 1 Subordinated Certificate shall be issued in
registered form in substantially the forms of Exhibits A, B and
C, respectively, and shall, upon issue, be executed and delivered
by the Company to the Trustee for authentication and redelivery
as provided in Section 2.3 hereof and Section 5.2 of the
Agreement.
SECTION 2.3. Delivery. On the Issuance Date, the
Company shall sign on behalf of the Trust and shall direct in
writing pursuant to Section 5.2 of the Agreement the Trustee to
duly authenticate, and the Trustee, upon receiving such
direction, shall so authenticate (a) the Class A Certificates in
authorized denominations equal to the Initial Class A Invested
Amount, (b) the Class B Certificates in authorized denominations
equal to the Initial Class B Invested Amount and (c) a Series 1
Subordinated Certificate in a denomination equal to the Series 1
Subordinated Certificate Amount from time to time. The Term
Certificates shall be issued in minimum denominations of $500,000
and integral multiples of $100,000 in excess thereof.
-25-
<PAGE>
SECTION 2.4. Tender of Exchangeable Company
Certificate. (a) Upon any Company Exchange, the Trustee shall
issue to the Company under Section 5.1 of the Agreement for
execution and redelivery to the Trustee for authentication under
Section 5.2 of the Agreement one or more newly issued Class A and
Class B Certificates.
(b) The Company may tender the Exchangeable Company
Certificate to the Trustee in exchange for (i) one or more newly
issued Class A and Class B Certificates and (ii) a reissued
Exchangeable Company Certificate (any such tender a "Company
Exchange"). The Company may perform a Company Exchange by
notifying the Trustee, in writing at least three days in advance
(an "Exchange Notice") of the date upon which the Company
Exchange is to occur (an "Exchange Date"). Any Exchange Notice
shall state: (a) the Initial Invested Amount (or the method for
calculating such Initial Invested Amount) of each newly issued
Class A and Class B Certificate, which, in the aggregate,
together with any increase in the Series 1 Subordinated
Certificate Amount, at any time, may not be greater than the
current principal amount of the Exchangeable Company Certificate,
if any, at such time and (b) its Certificate Rate (or formula for
the determination thereof). On the Exchange Date, the Trustee
shall only authenticate and deliver any such Certificates upon
delivery to it of the following: (a) a Supplement executed by
the Company and specifying the Principal Terms of such Class A
Certificates and Class B Certificates, (b) a Tax Opinion, (c) a
General Opinion, (d) written confirmation from each Rating Agency
that the Company Exchange will not result in the Rating Agency's
reducing or withdrawing its rating on any then outstanding Class
A and Class B Certificates rated by it and (e) the existing
Exchangeable Company Certificate. Such Supplement shall contain
provisions reasonably acceptable to the Trustee concerning the
payment of the Trustee's reasonable fees and expenses and shall
contain administrative provisions which are reasonably acceptable
to the Trustee. Upon the delivery of the items listed in clauses
(a) through (e) above, the Trustee shall cancel the existing
Exchangeable Company Certificate, and issue, as provided above,
such Class A Certificates and Class B Certificates and a new
Exchangeable Company Certificate, dated the Exchange Date and
increase the Series 1 Subordinated Certificate Amount. There is
no limit to the number of Company Exchanges that the Company may
perform under this Supplement. If the Company shall, on any
Exchange Date, retain any Class A Certificates or Class B
Certificates issued on such Exchange Date, it shall, prior to
transferring any such Certificates to another Person, obtain a
Tax Opinion with respect to such Certificates.
(c) In conjunction with a Company Exchange, the
parties hereto shall execute a Supplement, which shall define,
with respect to any newly issued Class A and Class B
Certificates: (i) their Initial Invested Amounts and (ii) their
-26-
<PAGE>
Certificate Rates (or formula for the determination thereof) (all
such terms, the "Principal Terms" of such Certificates). All
other terms of such newly issued Class A and Class B Certificates
shall be identical in all other respects to the terms of the then
outstanding Class A and Class B Certificates. The Initial
Invested Amounts of any newly issued Class A and Class B
Certificates shall be in the same proportions as the Initial
Class A Invested Amount and the Initial Class B Invested Amount.
(d) In addition, during the Series 1 Amortization
Period, the Company may tender the Exchangeable Company
Certificate to the Trustee in exchange for (i) one or more
additional Series of Investor Certificates, (ii) one or more
Subordinated Company Certificates and (iii) a reissued
Exchangeable Company Certificate. An exchange pursuant to this
subsection 2.4(d) shall only be made upon (i) receipt of written
notice by the Trustee that the Rating Agency Condition has been
satisfied in connection with such exchange and (ii) compliance
with the other conditions set forth in Section 5.10 of the
Agreement.
SECTION 2.5. Restrictions on Transfer. On the
Issuance Date, the Company shall sell the Term Certificates to
the Initial Purchasers pursuant to the Purchase Agreements.
Thereafter, the Term Certificates may not be transferred except
(a) to Qualified Institutional Buyers in reliance on the
exemption from the registration requirements of the Securities
Act provided by Rule 144A thereunder or (b) pursuant to a
transaction exempt from registration under the Securities Act.
The Trustee shall have no obligations or duties with respect to
determining whether any transfers of Term Certificates in book-
entry form are made in accordance with the Securities Act. With
respect to Definitive Certificates, the Trustee shall enforce
such transfer restrictions in accordance with the terms set forth
on the related Certificate.
Each purchaser of the Term Certificates (other than the
Initial Purchasers) will be deemed to have represented and agreed
as follows:
(i) It is (a) a Qualified Institutional Buyer as
defined in Rule 144A promulgated under the Securities Act and is
acquiring the Term Certificates for its own institutional account
or for the account of a Qualified Institutional Buyer or (b)
buying the Term Certificates pursuant to a transaction exempt
from registration under the Securities Act.
(ii) It is not an ERISA Entity.
(iii) It understands that the Term Certificates are
being transferred to it in a transaction not involving any public
offering within the meaning of the Securities Act, and that, if
-27-
<PAGE>
in the future it decides to resell, pledge or otherwise transfer
any Term Certificates, such Term Certificates may be resold,
pledged or transferred only (a) to a person who the seller
reasonably believes is a Qualified Institutional Buyer that
purchases for its own account or for the account of a Qualified
Institutional Buyer to whom notice is given that the resale,
pledge or transfer is being made in reliance on Rule 144A or
(b) pursuant to a transaction otherwise exempt from registration
under the Securities Act.
(iv) It understands that each Term Certificate will
bear a legend substantially to the following effect:
"UNLESS THIS TERM CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUER (AS DEFINED BELOW) OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS TERM CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THE HOLDER
HEREOF, BY PURCHASING THIS TERM CERTIFICATE, AGREES THAT THIS
TERM CERTIFICATE MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED
ONLY IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS AND
(1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, OR (2) IN A TRANSACTION OTHERWISE EXEMPT
FROM REGISTRATION UNDER THE ACT.
THIS TERM CERTIFICATE MAY NOT BE TRANSFERRED DIRECTLY OR
INDIRECTLY TO (1) EMPLOYEE BENEFIT PLANS, RETIREMENT
ARRANGEMENTS, INDIVIDUAL RETIREMENT ACCOUNTS OR KEOGH PLANS
SUBJECT TO EITHER TITLE I OF THE EMPLOYEE RETIREMENT INCOME
SECURITY ACT OF 1974, AS AMENDED, OR SECTION 4975 OF THE INTERNAL
REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"), OR (2)
ENTITIES WHOSE SOURCE OF FUNDS TO BE USED FOR THE PURCHASE OF A
CERTIFICATE CONSISTS OF ASSETS OF ANY SUCH PLAN OR ACCOUNT.
THIS TERM CERTIFICATE IS NOT GUARANTEED OR INSURED BY ANY
GOVERNMENTAL AGENCY OR INSTRUMENTALITY OR BY ANY OTHER PERSON."
SECTION 2.6. Application of Proceeds. On the Issuance
Date, the Trustee shall remit to the Company the cash proceeds
received by it upon the issuance of the Term Certificates.
-28-
<PAGE>
SECTION 2.7. Procedure for Decreasing the Invested
Amount. (a) If (i) as of the last day of any period of three
consecutive Settlement Periods the daily average excess during
such period of the Term Certificates Invested Amount over the
Term Certificates Adjusted Invested Amount equals or exceeds the
Reduction Threshold, or (ii) following the termination of any
Seller pursuant to Section 9.15 of the Receivables Sale
Agreement, as of the last day of any Settlement Period, the
Company shall, in the case of clause (i) above, or the Company
may, in the case of clause (ii) above, reduce the Class A
Invested Amount and the Class B Invested Amount (a "Reduction"),
by distributing to the Term Certificateholders an amount (the
"Reduction Amount") at least equal to such Reduction Threshold,
provided that in no event shall a Reduction cause the Term
Certificates Invested Amount be reduced below $50,000,000. The
distribution of the Reduction Amount shall be made to the Term
Certificateholders pro rata based on the Initial Invested Amount
of each Class, from the funds on deposit in the Series 1
Principal Collection Sub-subaccount on the immediately succeeding
Distribution Date (a "Special Distribution Date"); provided that
no Early Amortization Event or Potential Early Amortization Event
(other than pursuant to clauses (c), (d) and (f) of Section 5.1
hereof) has occurred and is continuing and the Company shall have
given the Trustee and the Master Servicer written notice (or, if
such Reduction is mandatory, the Master Servicer shall have given
such notice on behalf of the Company) of such Reduction and the
related Reduction Amount (which amount shall not exceed the
available funds on deposit in the Series 1 Principal Collection
Account (including amounts to be transferred thereto from the
Series 1 Canada/U.S. Dollar Collection Subaccount and the
Series 1 Canada/Canadian Dollar Collection Subaccount pursuant to
Section 3.1(e)(vii) of the Agreement) as of the date of such
notice) at least five days prior to the related Special
Distribution Date setting forth the amount of such Reduction and,
in the case of such notice to the Trustee, instructions to not
distribute to the Company any amounts pursuant to subsection
3A.3(c)(i) until the condition set forth in the second proviso in
such subsection is satisfied. If the Company elects to cause a
Reduction pursuant to clause (ii) above as a result of a sale or
other disposition of a Seller and, after giving effect to such
sale or disposition, the amount by which the Term Certificates
Invested Amount exceeds the Term Certificates Adjusted Invested
Amount is less than the Reduction Threshold, the Company may
direct the Trustee to retain Collections on deposit in the
Series 1 Principal Collection Sub-subaccount (including amounts
to be transferred from the Series 1 Canada/U.S. Collection
Subaccount or the Series 1 Canada/Canadian Dollar Collection
Subaccount pursuant to Section 3.1(e)(vii) of the Agreement)
until such date as the amount on deposit therein at least equals
$10,000,000 and, on the Distribution Date next succeeding such
date, a Reduction shall be effected. The Trustee shall give
-29-
<PAGE>
prompt written notice of any proposed Reduction to the Term
Certificateholders and each Rating Agency.
(b) (i) On any Business Day to occur following the
second anniversary of the Issuance Date and prior to the
occurrence of the Scheduled Termination Date or an Early
Amortization Event, the Company shall have the right to deliver
an irrevocable notice (an "Optional Termination Notice") to the
Trustee and the Master Servicer in which the Company declares
that the Series 1 Revolving Period shall terminate on the date
(the "Optional Termination Date") set forth in such notice (which
date, in any event, shall not be less than 10 days from the date
on which such notice is delivered).
(ii) From and after the Optional Termination Date, the
Series 1 Amortization Period shall commence for all purposes
under this Agreement and the other Transaction Documents. The
Trustee shall give prompt written notice of its receipt of an
Optional Termination Notice to the Term Certificateholders and
each Rating Agency.
ARTICLE III
ARTICLE III OF THE AGREEMENT
Section 3.1 of the Agreement shall be read in its
entirety as provided in the Agreement. Article III of the
Agreement (except for Section 3.1 thereof and any portion thereof
relating to another Series) shall read in its entirety as follows
and shall be exclusively applicable to the Series 1 Certificates:
SECTION 3A.2. Establishment of Trust Accounts.
(a) The Trustee shall cause to be established and maintained in
the name of the Trustee, on behalf of the Trust, (i) (A) for the
benefit of the Class A Certificateholders, (B) for the benefit,
subject to the prior interest of the Class A Certificateholders,
of the Class B Certificateholders and (C) for the benefit,
subject to the prior interest of the Term Certificateholders, of
the holder of the Series 1 Subordinated Certificate, a subaccount
of the U.S. Dollar Collection Account (the "Series 1 Collection
Subaccount"), which subaccount is the Series Collection
Subaccount with respect to Series 1, bearing a designation
clearly indicating that the funds deposited therein are held (A)
for the benefit of the Class A Certificateholders, (B) for the
benefit, subject to the prior interest of the Class A
Certificate-holders, of the Class B Certificateholders and (C)
for the benefit, subject to the prior interest of the Term
Certificateholders, of the holder of the Series 1 Subordinated
Certificate; (ii) (A) for the benefit of the Class A
Certificateholders, (B) for the benefit, subject to the prior
interest of the Class A Certificateholders, of the Class B
-30-
<PAGE>
Certificateholders and (C) for the benefit, subject to the prior
interest of the Term Certificateholders, of the holder of the
Series 1 Subordinated Certificate, two subaccounts of the Series
1 Collection Subaccount: the Series 1 Principal Collection Sub-
subaccount and the Series 1 Non-Principal Collection
Sub-subaccount (respectively, the "Series 1 Principal Collection
Sub-subaccount" and the "Series 1 Non-Principal Collection Sub-
subaccount"), each bearing a designation clearly indicating that
the funds deposited therein are held (A) for the benefit of the
Class A Certificateholders, (B) for the benefit, subject to the
prior interest of the Class A Certificateholders, of the Class B
Certificateholders and (C) for the benefit, subject to the prior
interest of the Term Certificateholders, of the holder of the
Series 1 Subordinated Certificate; (iii) for the benefit of the
Class A Certificateholders and for the benefit, subject to the
prior interest of the Class A Certificateholders, of the Class B
Certificateholders, a subaccount of the Series 1 Non-Principal
Collection Sub-subaccount (the "Series 1 Accrued Interest Sub-
subaccount"; and (iv)(A) for the benefit of the Class A
Certificateholders, (B) for the benefit, subject to the prior
interest of the Class A Certificateholders, of the Class B
Certificateholders and (C) for the benefit, subject to the prior
interest of the Term Certificateholders, of the holder of the
Series 1 Subordinated Certificate, one subaccount of the
Canada/U.S. Dollar Collection Account (the "Series 1 Canada/U.S.
Dollar Collection Subaccount") and one subaccount of the
Canada/Canadian Dollar Collection Account (the "Series 1
Canada/Canadian Dollar Collection Subaccount"); all accounts
established pursuant to this subsection 3A.2(a) and listed on
Schedule 1, collectively, the "Trust Accounts"). The Trustee
shall possess all right, title and interest in all funds from
time to time on deposit in, and all Eligible Investments credited
to, the Trust Accounts and in all proceeds thereof. The Trust
Accounts shall be under the sole dominion and control of the
Trustee for the exclusive benefit of (i) the Class A
Certificateholders, (ii) subject to the prior interest of the
Class A Certificateholders, the Class B Certificateholders, and
(iii) to the extent applicable, subject to the prior interest of
the Term Certificateholders, the holder of the Series 1
Subordinated Certificate.
(b) All Eligible Investments in the Trust Accounts
shall be held by the Trustee for the exclusive benefit of (i) the
Class A Certificateholders, (ii) subject to the prior interest of
the Class A Certificateholders, the Class B Certificateholders,
and (iii) subject to the prior interest of the Term Certificate-
holders, the holder of the Series 1 Subordinated Certificate;
provided, however, that funds on deposit in a Trust Account which
is a Sub-subaccount of the a Collection Account may, at the
direction of the Master Servicer, be invested together with funds
held in other Sub-subaccounts of a Collection Account. After
giving effect to any distribution to the Company pursuant to
-31-
<PAGE>
subsection 3A.3(d), amounts on deposit and available for
investment in the Series 1 Principal Collection Sub-subaccount
shall be invested by the Trustee at the written direction of the
Company in Eligible Investments that mature, or that are payable
or redeemable upon demand of the holder thereof, (i) in the case
of any such investment made during the Revolving Period, on or
prior to the next Business Day and (ii) in the case of any such
investment made during the Amortization Period, on or prior to
the Business Day immediately preceding the next Distribution
Date. Amounts on deposit and available for investment in the
Series 1 Non-Principal Collection Sub-subaccount and the Series 1
Accrued Interest Sub-subaccount shall be invested by the Trustee
at the written direction of the Company in Eligible Investments
that mature, or that are payable or redeemable upon demand of the
holder thereof, on or prior to the subsequent Determination Date.
As of the Determination Date, all interest and other investment
earnings (net of losses and investment expenses) on funds
deposited in the Series 1 Accrued Interest Sub-subaccount shall
be deposited in the Series 1 Non-Principal Collection Sub-
subaccount. All interest and investment earnings (net of losses
and investment expenses) on funds deposited in the Series 1
Principal Collection Sub-subaccount shall be deposited in the
Series 1 Non-Principal Collection Sub-subaccount.
SECTION 3A.3. Daily Allocations. (a) The portion of
Aggregate Daily Collections allocated to the Series 1
Certificates pursuant to Article III of the Agreement shall be
allocated and distributed as set forth in this Article III by the
Trustee based on the information provided to it by the Master
Servicer in the Daily Report.
(b)(i) On each Business Day, an amount equal to the
Accrued Expense Amount for such day (or such greater amount as
the Company may request) shall be transferred from the Series 1
Collection Subaccount (or, if necessary, from the Series 1
Canada/U.S. Dollar Collection Subaccount and the Series 1
Canada/Canadian Dollar Collection Subaccount pursuant to
Section 3.1(e)(vii) of the Agreement) to the Series 1 Non-
Principal Collection Sub-subaccount.
(ii) Following the transfers pursuant to
clause (i) above, any remaining funds on deposit in the Series 1
Collection Subaccount shall be transferred to the Series 1
Principal Collection Sub-subaccount.
(c)(i) On each Business Day during the Series 1
Revolving Period (including Distribution Dates), after giving
effect to all allocations of Aggregate Daily Collections on such
Business Day, amounts on deposit in the Series 1 Principal
Collection Sub-subaccount and amounts, if any, remaining on
deposit in the Series 1 Canada/U.S. Dollar Collection Subaccount
and the Series 1 Canada/Canadian Dollar Collection Subaccount
-32-
<PAGE>
shall (but only to the extent that the Trustee has received a
Daily Report which reflects the receipt of the Collections on
deposit therein), at the election of the Company, either (A) be
distributed by the Trustee to the Company or (B) transferred to
the Series 2 Principal Collection Sub-subaccount, all as
indicated on the Daily Report; provided that such distributions
or transfers, as the case may be, shall be made only if no Early
Amortization Event or Potential Early Amortization Event (other
than pursuant to clauses (c), (d) and (f) of Section 5.1 hereof)
shall be continuing and only to the extent that, if after giving
effect to such distributions or transfers, the Series 1 Target
Receivables Amount would not exceed the Series 1 Allocated
Receivables Amount and no Aggregate Series 2 Receivables Amount
Deficiency exists; provided further that if the Company (or the
Master Servicer, on behalf of the Company) shall have given a
notice of a Reduction to the Trustee and the Master Servicer
pursuant to subsection 2.7(a), the Trustee shall retain, until
the related Special Distribution Date, aggregate amounts on
deposit in the Series 1 Principal Collection Sub-subaccount
(including any amounts transferred thereto from the Series 1
Canada/U.S. Dollar Collection Subaccount and the Series 1
Canada/Canadian Dollar Collection Subaccount pursuant to Section
3.1(e)(vii) of the Agreement) equal to the sum of the Reduction
Amount in respect thereof; and provided further that such
distribution shall not, in any event, be made if an Early
Amortization Event or Potential Early Amortization Event (other
than pursuant to clauses (c), (d) and (f) of Section 5.1 hereof)
has occurred. Amounts distributed to the Company hereunder shall
be deemed to be paid first from Collections received directly by
any Servicing Party and second from Collections received in the
Lockboxes.
(ii) On each Business Day during the Series 1
Amortization Period, amounts on deposit in the Series 1
Canada/U.S. Dollar Collection Subaccount and, subject to
subsection 3.1(j) of the Agreement, the Series 1 Canada/Canadian
Dollar Collection Subaccount shall be transferred to the Series 1
Collection Subaccount and allocated as set forth in Article III
of the Agreement and this Section 3A.3.
(iii) On each Business Day during the Series 1
Amortization Period (including Distribution Dates), funds
deposited in the Series 1 Principal Collection Sub-subaccount
(including, without limitation, funds transferred pursuant to
clause (b)(ii) above) shall be invested in Eligible Investments
that mature on or prior to the next Determination Date and shall
be distributed on such Distribution Date in accordance with
subsection 3A.6(c). No amounts on deposit in the Series 1
Principal Collection Sub-subaccount shall be distributed by the
Trustee to the Company during the Series 1 Amortization Period.
-33-
<PAGE>
(d) On each Business Day an amount equal to the Series
1 Daily Interest Expense for such day shall be transferred from
the Series 1 Non-Principal Collection Sub-subaccount to the
Series 1 Accrued Interest Sub-subaccount.
(e) The allocations to be made pursuant to this
Section 3A.3 are subject to the provisions of Sections 2.6, 7.2
and 9.1 of the Agreement.
SECTION 3A.4. Determination of Interest. (a) The
amount of interest distributable with respect to the Term
Certificates on each Distribution Date shall be as determined by
the Master Servicer as follows:
(i) for the Class A Certificates, an amount (the
"Class A Monthly Interest") equal to the product of (A) the
Class A Certificate Rate for such Accrual Period; (B) the
Class A Invested Amount on the first day of such Accrual
Period (after giving effect to any distributions of
principal on such date); and (C) the actual number of days
in such Accrual Period divided by 360; and
(ii) for the Class B Certificates, an amount (the
"Class B Monthly Interest") equal to the product of (A) the
Class B Certificate Rate for such Accrual Period; (B) the
Class B Invested Amount on the first day of such Accrual
Period (after giving effect to any distributions of
principal on such date); and (C) the actual number of days
in such Accrual Period divided by 360.
(b) (i) On each Distribution Date, the Master Servicer
shall determine the excess, if any (the "Class A Interest
Shortfall"), of (A) the Class A Monthly Interest for the
Accrual Period ending on such Distribution Date over (B) the
amount which will be available to be distributed to the
Class A Certificateholders on such Distribution Date in
respect thereof pursuant to this Supplement. If the Class A
Interest Shortfall with respect to any Distribution Date is
greater than zero, an additional amount ("Class A Additional
Interest") equal to the product, for such Accrual Period
until such Class A Interest Shortfall is repaid, of (A) the
Class A Certificate Rate for such Accrual Period (B) such
Class A Interest Shortfall (or the portion thereof which has
not been paid to the Class A Certificateholders) and (C) the
actual number of days in such Accrual Period divided by 360,
shall be payable as provided herein with respect to the
Class A Certificates on each Distribution Date following
such Distribution Date to and including, the Distribution
Date on which such Class A Interest Shortfall is paid in
full to the Class A Certificateholders.
-34-
<PAGE>
(ii) On each Distribution Date, the Master Servicer
shall determine the excess, if any (the "Class B Interest
Shortfall"), of (A) the Class B Monthly Interest for the
Accrual Period ending on such Distribution Date over (B) the
amount which will be available to be distributed to the
Class B Certificateholders on such Distribution Date in
respect thereof pursuant to this Supplement. If the Class B
Interest Shortfall with respect to any Distribution Date is
greater than zero, an additional amount ("Class B Additional
Interest") equal to the product, for such Accrual Period (or
portion thereof) until such Class B Interest Shortfall is
repaid, of (A) the Class B Certificate Rate for such Accrual
Period (B) such Class B Interest Shortfall (or the portion
thereof which has not been paid to the Class B
Certificateholders) and (C) the actual number of days in
such Accrual Period divided by 360, shall be payable as
provided herein with respect to the Class B Certificates on
each Distribution Date following such Distribution Date to
and including, the Distribution Date on which such Class B
Interest Shortfall is paid in full to the Class B
Certificateholders.
SECTION 3A.5. Determination of Series 1 Monthly
Principal Payment. The amount (the "Series 1 Monthly Principal
Payment") distributable from the Series 1 Principal Collection
Sub-subaccount on each Distribution Date during the Series 1
Amortization Period shall be equal to the amount on deposit in
such account on such Distribution Date as determined by the
Master Servicer; provided, that the Series 1 Monthly Principal
Payment on any Distribution Date shall not exceed the Term
Certificates Invested Amount on such Distribution Date.
SECTION 3A.6. Applications. (a) The Master Servicer
shall direct the Trustee to distribute, on each Distribution
Date, from amounts on deposit in the Series 1 Accrued Interest
Sub-subaccount in the following order of priority to the extent
funds are available:
(i) an amount equal to the Class A Monthly Interest
payable on such Distribution Date, plus the amount of any
Class A Monthly Interest previously due but not distributed
to the Class A Certificateholders on a prior Distribution
Date, plus the amount of any Class A Additional Interest for
such Distribution Date and any Class A Additional Interest
previously due but not distributed to the Class A
Certificateholders on a prior Distribution Date, to the
Class A Certificateholders; provided, however, that during
the Series 1 Amortization Period, no Class A Additional
Interest will be paid until repayment in full of the Term
Certificates Invested Amount and all Class A and Class B
Monthly Interest has been paid;
-35-
<PAGE>
(ii) an amount equal to the Class B Monthly Interest
payable on such Distribution Date, plus the amount of any
Class B Monthly Interest previously due but not distributed
to the Class B Certificateholders on a prior Distribution
Date, plus the amount of any Class B Additional Interest for
such Distribution Date and any Class B Additional Interest
previously due but not distributed to the Class B
Certificateholders on a prior Distribution Date, to the
Class B Certificateholders; provided, however, that during
the Series 1 Amortization Period, no Class B Additional
Interest will be paid until repayment in full of the Term
Certificates Invested Amount and all Class A and Class B
Monthly Interest has been paid.
(b) On each Distribution Date, the Master Servicer
shall direct the Trustee to apply funds on deposit in the Series
1 Non-Principal Collection Sub-subaccount (after taking into
consideration the distribution to the Term Certificateholders
from the Series 1 Non-Principal Collection Sub-subaccount
pursuant to subsection 3A.6(a)) in the following order of
priority to the extent funds are available:
(i) an amount equal to the Series 1 Monthly Servicing
Fee for the Accrual Period ending on such Distribution Date
shall be withdrawn from the Series 1 Non-Principal
Collection Sub-subaccount by the Trustee and paid to the
Master Servicer, provided that if an Early Amortization
Event shall have occurred and C&A Products or any Affiliate
thereof is the Master Servicer, the Trustee shall deposit
the Series 1 Monthly Servicing Fee into the Expense Account
up to the amount of the Expense Account Limit, or if C&A
Products or any Affiliate thereof is not the Master
Servicer, the Series 1 Monthly Servicing Fee shall be paid
to such Person acting as Successor Servicer; and
(ii) an amount equal to any Program Costs due and
payable shall be withdrawn from the Series 1 Non-Principal
Collection Sub-subaccount by the Trustee and paid to the
Persons owed such amounts.
Any remaining amount on deposit in the Series 1 Non-Principal
Collection Sub-subaccount not allocated pursuant to clauses (i)
and (ii) above shall be paid to the holder of the Series 1
Subordinated Certificate; provided, however, that during the
Series 1 Amortization Period, such remaining amounts shall be
deposited in the Series 1 Principal Collection Sub-subaccount for
distribution in accordance with subsection 3A.6(c).
(c) During the Series 1 Amortization Period, the
Master Servicer shall direct the Trustee to apply, on each
Distribution Date, amounts on deposit in the Series 1 Principal
Collection Sub-subaccount in the following order of priority:
-36-
<PAGE>
(i) an amount equal to the Series 1 Monthly Principal
Payment for such Distribution Date (rounded down to the
nearest $1,000,000 unless such payment is less than
$1,000,000) shall be distributed from the Series 1 Principal
Collection Sub-subaccount:
(A) first, pro rata to the Class A
Certificateholders until the repayment in full of the
Class A Invested Amount on such date; and
(B) second, pro rata to the Class B
Certificateholders until the repayment in full of the
Class B Invested Amount on such date;
(ii) if, following the repayment in full of the
Invested Amount, any amounts are owed to the Trustee or any
other Person, on account of its expenses incurred in respect
of the performance of its responsibilities hereunder or as
Successor Servicer, such amounts shall be transferred from
the Series 1 Principal Collection Sub-subaccount and paid to
the Trustee or such other Person; and
(iii) if, following the repayment of all of the amounts
set forth in clauses (i) and (ii) above, the remaining
amount on deposit in the Series 1 Principal Collection Sub-
subaccount on such Distribution Date, if any, shall be
distributed to the holder of the Series 1 Subordinated
Certificate.
(d) On each Special Distribution Date occurring in
respect of a Reduction hereunder, the Master Servicer shall cause
the Trustee to distribute to the Term Certificateholders on such
Special Distribution Date from amounts on deposit in the Series 1
Principal Collection Sub-subaccount (including amounts
transferred from the Series 1 Canada/U.S. Dollar Collection
Subaccount and the Series 1 Canada/Canadian Dollar Collection
Subaccount) amounts equal to the Reduction Amount to be made on
such Special Distribution Date, pro rata based on the Initial
Invested Amount of each Class, to the Term Certificateholders.
ARTICLE IV
DISTRIBUTIONS AND REPORTS
Article IV of the Agreement (except for any portion
thereof relating to another Series) shall read in its entirety as
follows and the following shall be exclusively applicable to the
Term Certificates:
SECTION 4A.1. Distributions. (a) The final
distribution of principal in respect of the Term Certificates
-37-
<PAGE>
will be made after due notice by the Trustee of the pendency of
such distribution (subject to at least five Business Days prior
written notice from the Master Servicer to the Trustee containing
all information required for the Trustee's notice) and only upon
presentation and surrender of such Term Certificates at the
office of the Paying Agent or at the Corporate Trust Office of
the Trustee, by check drawn on, or by transfer to an account
maintained by the holder with, a bank in New York City. Any
other distribution of principal in respect of the Term
Certificates or on account of interest or fees on the Term
Certificates on each Distribution Date will be made or caused to
be made by the Paying Agent or the Trustee to the persons in
whose name the Term Certificates are registered at the close of
business on the related Record Date. Such payment will be made
by a check mailed to the Term Certificateholders at such Term
Certificateholders' registered addresses or, upon application by
any Term Certificateholder of at least $3,000,000 in original
principal amount thereof to the Trustee not later than five
Business Days prior to the related Distribution Date, by transfer
to an account maintained by the Term Certificateholder with a
bank in New York City.
(b) All allocations and distributions hereunder shall
be in accordance with the Monthly Settlement Statement and
subject to Section 3.1(h) of the Agreement.
SECTION 4A.2. Statements and Notices. (a) Monthly
Settlement Statements. On each Settlement Report Date the Master
Servicer shall deliver to the Trustee and each Rating Agency a
Monthly Settlement Statement setting forth, among other things,
the Class A Loss Reserve Ratio I, the Class A Loss Reserve Ratio
II, the Class B Loss Reserve Ratio I, the Class B Loss Reserve
Ratio II, the Class A Dilution Reserve Ratio I, the Class A
Dilution Reserve Ratio II, the Class B Dilution Reserve Ratio I,
the Class B Dilution Reserve Ratio II, the Minimum Class A Ratio,
the Minimum Class B Ratio, the Carrying Cost Reserve Ratio and
the Servicing Reserve Ratio, each as recalculated for the next
succeeding Settlement Period. The Trustee shall forward a copy
of each Monthly Settlement Statement to any Term
Certificateholder upon request by such Term Certificateholder.
(b) Annual Certificateholders' Tax Statement. On or
before April 1 of each calendar year (or such earlier date as
required by applicable law), beginning with calendar year 1996,
the Company on behalf of the Trustee shall furnish, or cause to
be furnished, to each Person who at any time during the preceding
calendar year was a Term Certificateholder, a statement prepared
by the Company containing the aggregate amount distributed to
such Person for such calendar year or the applicable portion
thereof during which such Person was a Term Certificateholder,
together with such other information as is required to be
provided by an issuer of indebtedness under the Internal Revenue
-38-
<PAGE>
Code and such other customary information as the Company deems
necessary or desirable to enable the Term Certificateholders to
prepare their tax returns. Such obligation of the Company shall
be deemed to have been satisfied to the extent that substantially
comparable information shall have been provided by the Trustee
pursuant to any requirements of the Internal Revenue Code as from
time to time in effect.
(c) Early Amortization Event Notices. Promptly after
its receipt of notice of the occurrence of an Early Amortization
Event with respect to Series 1, the Trustee shall give notice of
such occurrence to (i) each Rating Agency (which notice shall in
any event be given (by telephone or otherwise) not later than the
second Business Day after such receipt) and (ii) each Term
Certificateholder.
Section 4A.3. Notices. Notices required to be given
to the Term Certificateholders hereunder will be given by first
class mail to the address of such holders as they appear in the
Certificate Register.
ARTICLE V
ADDITIONAL EARLY AMORTIZATION EVENTS
SECTION 5.1. Additional Early Amortization Events. If
any one of the events specified in Section 7.1 of the Agreement
(after any grace periods or consents applicable thereto) or any
one of the following events shall occur during the Revolving
Period with respect to the Series 1 Certificates:
(a) failure on the part of the Company to make any
payment (i) in respect of interest owing on any Term
Certificates within two Business Days of the date such
interest is due or (ii) in respect of any other amounts
owing by the Company under any Pooling and Servicing
Agreement to or for the benefit of the Term
Certificateholders within five Business Days of the date
such other amount is due;
(b) the Trustee shall be appointed, pursuant to
Section 6.2 of the Servicing Agreement, as Master Servicer
to liquidate the Receivables and the Related Property;
(c) failure on the part of the Company duly to observe
or perform in any material respect any covenants or
agreements of the Company set forth in any Pooling and
Servicing Agreement which has a material adverse effect on
the Term Certificateholders which continues unremedied until
30 days after the date on which written notice of such
failure, requiring the same to be remedied, shall have been
-39-
<PAGE>
given to the Company by the Trustee, or the Company and the
Trustee by holders of the Term Certificates evidencing 25%
or more of the Term Certificates Invested Amount;
(d) any representation or warranty made by the Company
in any Pooling and Servicing Agreement to or for the benefit
of the Term Certificateholders shall prove to have been
incorrect in any material respect when made or when deemed
made which continues to be incorrect until 30 days after the
date on which notice of such failure, requiring the same to
be remedied, shall have been given by the Trustee to the
Company or the Company and the Trustee by holders of the
Term Certificates evidencing 25% or more of the Term
Certificates Invested Amount and as a result of such
incorrectness, the interests of the Term Certificateholders
have been materially and adversely affected; provided,
however, that no event under Section 5.1 herein or
Section 7.1 of the Agreement with respect to the Series 1
Certificates shall not be deemed to have occurred under this
paragraph if the incorrectness of such representation or
warranty gives rise to an obligation to repurchase the
related Receivables and the Company has repurchased the
related Receivable or all such Receivables, if applicable,
in accordance with the provisions of the Pooling and
Servicing Agreement within ten Business Days of when the
Company was obligated to do so;
(e) the Series 1 Allocated Receivables Amount shall be
less than the Series 1 Target Receivables Amount for a
period of five consecutive Business Days;
(f) a Servicer Default with respect to the Master
Servicer shall have occurred and be continuing;
(g) any of the Agreement, the Servicing Agreement,
this Supplement or the Receivables Sale Agreement shall
cease, for any reason, to be in full force and effect, or
the Company shall so assert in writing; or
(h) the Internal Revenue Service shall file a notice
of lien with regard to the assets of Collins & Aikman
Corporation or any of the Sellers and 40 days shall have
elapsed without such notice having been effectively
withdrawn or such lien having been released or discharged;
then, in the case of any event described above, after the
applicable grace period (if any) set forth in such subsections,
the Trustee may, and at the written direction of Term
Certificateholders evidencing 51% or more of the Term
Certificates Invested Amount voting as a single class shall, by
written notice then given to the Company and the Master Servicer,
declare that an early amortization event (an "Early Amortization
-40-
<PAGE>
Event") has occurred and the Series 1 Amortization Period has
commenced as of the date of such notice with respect to Series 1;
provided, however, that in the case of the event described in
clause (e) above, if an Early Amortization Event has not been
declared within ten Business Days from the occurrence of such
event, then an Early Amortization Event shall occur automatically
unless, (i) prior to the end of such ten Business Day period, the
Series 1 Allocated Receivables Amount shall no longer be less
than the Series 1 Target Receivables Amount and (ii) so long as
the Series 1 Allocated Receivables Amount is equal to or greater
than the Series 1 Target Receivables Amount, within fifteen
Business Days from the end of such ten Business Day period, Term
Certificateholders evidencing 51% or more of the Term
Certificates Invested Amount voting as a single class shall have
waived the occurrence of such event.
Notwithstanding the foregoing, a delay in or failure in
performance referred to in clause (a) above for a period of
five Business Days after the applicable grace period, or in
clause (c) above for a period of 30 Business Days after the
applicable grace period, will not constitute an Early
Amortization Event if such delay or failure could not have been
prevented by the exercise of reasonable diligence by the Company
and such delay or failure was caused by an act of God or the
public enemy, riots, acts of war, acts of terrorism, epidemics,
flood, embargoes, weather, landslides, fire, earthquakes or
similar causes. The Company will nevertheless be required to use
its best efforts to perform its obligations in a timely manner in
accordance with the terms of the Transaction Documents, and the
Company shall promptly give the Trustee an Officer's Certificate
notifying it of such failure or delay by it.
ARTICLE VI
SERVICING FEE
SECTION 6.1. Servicing Compensation. A monthly
servicing fee (the "Series 1 Monthly Servicing Fee") shall be
payable to the Master Servicer, on behalf of the Servicing
Parties, on each Distribution Date for the Accrual Period then
ending, in an amount equal to the product of (a) the Servicing
Fee and (b) a fraction the numerator of which is the daily
average Term Certificates Invested Amount for such Accrual Period
and the denominator of which is the sum of (i) the daily average
of the Invested Amounts for each Outstanding Series (other than
Series 2) for such Accrual Period and (ii) the daily average of
the Aggregate Commitment Amount with respect to the Series 2
Certificates for such Accrual Period; provided, however, that if
an Early Amortization Event has occurred and C&A Products or any
Affiliate thereof is acting as Master Servicer, (i) the Series 1
Monthly Servicing Fee shall be deposited into the Expense Account
-41-
<PAGE>
up to the amount of the Expense Account Limit for application in
accordance with Section 7.3 of the Agreement and (ii) thereafter,
the Series 1 Monthly Servicing Fee shall be deferred until the
Term Certificates Invested Amount has been paid in full.
ARTICLE VII
COVENANTS, REPRESENTATIONS AND WARRANTIES
SECTION 7.1. Representations and Warranties of the
Company and the Master Servicer. The Company and the Master
Servicer hereby represent and warrant to the Trustee and each of
the Term Certificateholders that each and all of their respective
representations and warranties contained in each Pooling and
Servicing Agreement is true and correct in all material respects
as of the Issuance Date.
SECTION 7.2. Covenants of the Company. The Company
hereby agrees that:
(a) it shall observe each and all of its respective
covenants (both affirmative and negative) contained in each
Pooling and Servicing Agreement in all material respects;
(b) it shall not terminate the Agreement unless in
strict compliance with the terms of the Agreement; and
(c) within 60 days of the date hereof, it will (i)
deliver to the Trustee executed copies of software licenses
or sublicenses, in a form reasonably acceptable to the
Trustee, which grant to the Trustee the right to utilize any
of the software owned or licensed by the Servicers that is
necessary to perform the collection and administrative
functions to be performed by the Trustee under the
Transaction Documents, and (ii) have taken all necessary
actions in connection with, and to ensure completion of,
each of the Servicer Site Review and the Standby Liquidation
System.
SECTION 7.3. Covenants of the Master Servicer. The
Master Servicer hereby agrees that it shall observe each and all
of its covenants (both affirmative and negative) contained in
each Pooling and Servicing Agreement in all material respects.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Ratification of Agreement. As
supplemented by this Supplement, the Agreement is in all respects
-42-
<PAGE>
ratified and confirmed and the Agreement as so supplemented by
this Supplement shall be read, taken and construed as one and the
same instrument.
SECTION 8.2. Governing Law. THIS SUPPLEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 8.3. Further Assurances. Each of the Company
and the Trustee agrees, from time to time, to do and perform any
and all acts and to execute any and all further instruments
required or reasonably requested by the other more fully to
effect the purposes of this Supplement and the sale of the Term
Certificates hereunder, including, without limitation, in the
case of the Company, the execution of any financing or
registration statements or continuation statements relating to
the Receivables and the other Trust Assets for filing under the
provisions of the UCC or similar legislation of any applicable
jurisdiction.
SECTION 8.4. No Waiver; Cumulative Remedies. No
failure to exercise and no delay in exercising, on the part of
the Trustee or any Term Certificateholder, 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.
SECTION 8.5. Amendments. This Supplement may only be
amended, supplemented or otherwise modified from time to time if
such amendment, supplement or modification is effected in
accordance with the provisions of Section 10.1 of the Pooling
Agreement.
SECTION 8.6. Notices. All notices, requests and
demands to or upon any party hereto to be effective shall be
given in the manner set forth, in the case of the Company, the
Master Servicer and the Trustee, in Section 10.5 of the Pooling
Agreement, and in the case of any other party, in writing
(including a confirmed transmission 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 Rating Agencies or to such other address as may be
hereafter notified by the respective parties hereto:
-43-
<PAGE>
D&P: Duff & Phelps Credit Rating Co.
55 East Monroe Street
Chicago, Illinois 60603
Attention: Asset-Backed Research
and Monitoring Group
Telecopier: (312) 263-2852
S&P: Standard & Poor's Ratings Group
25 Broadway
New York, New York 10004
Attention: Asset-Backed
Surveillance Group
Telecopier: (212) 412-0225
Any notice required or permitted to be mailed to a Term
Certificateholder shall be given as provided in Section 4A.3.
SECTION 8.7. Counterparts. This Supplement may be
executed in any number of counterparts and by the different
parties hereto in separate counterparts, each of which when so
executed shall be deemed to be an original, and all of which
taken together shall constitute one and the same agreement.
ARTICLE IX
FINAL DISTRIBUTIONS
SECTION 9.1. Certain Distributions. (a) Not later
than 2:00 p.m., New York City time, on the Distribution Date
following the date on which the proceeds from the disposition of
the Receivables are deposited into the Series 1 Non-Principal
Collection Sub-subaccount and the Series 1 Principal Collection
Sub-subaccount pursuant to subsection 7.2(b) of the Agreement,
the Trustee shall distribute such amounts pursuant to Article III
of this Supplement.
(b) Notwithstanding anything to the contrary in this
Supplement or the Agreement, any distribution made pursuant to
this Section shall be deemed to be a final distribution pursuant
to Section 9.3 of the Agreement with respect to the Term
Certificates.
-44-
<PAGE>
IN WITNESS WHEREOF, the Company, the Master Servicer
and the Trustee have caused this Series 1 Supplement to be duly
executed by their respective officers as of the day and year
first above written.
CARCORP, INC.
By: Anthony Hardwick
Name: Anthony Hardwick
Title: Vice President, Secretary
and Treasurer
COLLINS & AIKMAN PRODUCTS CO.,
as Master Servicer
By: Anthony Hardwick
Name: Anthony Hardwick
Title: Vice President, Controller,
Acting Chief Financial Officer
and Assistant Treasurer
CHEMICAL BANK, not in its
individual capacity but solely as
Trustee
By: Charles E. Dooley
Title: Vice President
-45-
<PAGE>
Schedule 1
Trust Accounts
The U.S. Dollar Collection Account has been established
by and at Chemical Bank, account number 323-334466.
The U.S. Dollar Collection Account is for the account
of Chemical Bank, as trustee for the C&A Master Trust.
The Canada/U.S. Dollar Collection Account has been
established by and at Canadian Imperial Bank of Commerce, account
number 04-46718.
The Canada/U.S. Dollar Collection Account is for the
account of Chemical Bank, as trustee for the C&A Master Trust.
The Canada/Canadian Dollar Collection Account has been
established by and at Canadian Imperial Bank of Commerce, account
number 22-43318
The Canada/Canadian Dollar Collection Account is for
the account of Chemical Bank, as trustee for the C&A Master
Trust.
<PAGE>
EXECUTION COPY
CARCORP, INC.,
COLLINS & AIKMAN PRODUCTS CO.,
as Master Servicer,
SOCIETE GENERALE,
as Agent
and
CHEMICAL BANK,
as Trustee
SERIES 1995-2 SUPPLEMENT
Dated as of March 30, 1995
to
POOLING AGREEMENT
Dated as of March 30, 1995
C&A MASTER TRUST
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS . . . . . . . . . . . 1
SECTION 1.1. Definitions . . . . . . . . . . . . . . . 1
ARTICLE II
DESIGNATION OF CERTIFICATES; PURCHASE AND SALE
OF THE VFC CERTIFICATES . . . . . . . . 17
SECTION 2.1. Designation . . . . . . . . . . . . . . . 17
SECTION 2.2. The Series 2 Certificates . . . . . . . . 17
SECTION 2.3. Purchases of Interests in the VFC
Certificates . . . . . . . . . . . . . . 18
SECTION 2.4. Delivery . . . . . . . . . . . . . . . . . 18
SECTION 2.5. Procedure for Initial Issuance and for
Increasing the VFC Invested Amount . . . 19
SECTION 2.6. Procedure for Decreasing the VFC
Invested Amount . . . . . . . . . . . . 20
SECTION 2.7. Reductions of the Commitments . . . . . . 21
SECTION 2.8. Interest; Commitment Fee . . . . . . . . . 22
SECTION 2.9. Purchase of VFC Certificateholders'
Interest in the VFC Certificates . . . . 22
SECTION 2.10. Indemnification by Company and the
Master Servicer . . . . . . . . . . . 23
ARTICLE III
ARTICLE III OF THE AGREEMENT . . . . . . . 25
SECTION 3A.2. Establishment of Trust Accounts . . . . . 25
SECTION 3A.3. Daily Allocations. . . . . . . . . . . . 27
SECTION 3A.4. Determination of Interest . . . . . . . . 29
SECTION 3A.5. Determination of Series 2 Monthly
Principal Payment During a
VFC Amortization Period . . . . . . . 31
SECTION 3A.6. Applications . . . . . . . . . . . . . . 31
ARTICLE IV
DISTRIBUTIONS AND REPORTS . . . . . . . . 33
SECTION 4A.1. Distributions . . . . . . . . . . . . . . 33
SECTION 4A.2. Daily Reports . . . . . . . . . . . . . . 33
SECTION 4A.3. Statements and Notices . . . . . . . . . 33
-i-
<PAGE>
Page
ARTICLE V
ADDITIONAL EARLY AMORTIZATION EVENTS . . . . . 34
SECTION 5.1. Additional Early Amortization Events . . . 34
ARTICLE VI
SERVICING FEE . . . . . . . . . . . 37
SECTION 6.1. Servicing Compensation . . . . . . . . . . 37
ARTICLE VII
CHANGE IN CIRCUMSTANCES . . . . . . . . 38
SECTION 7.1. Illegality . . . . . . . . . . . . . . . . 38
SECTION 7.2. Requirements of Law . . . . . . . . . . . 38
SECTION 7.3. Taxes . . . . . . . . . . . . . . . . . . 40
SECTION 7.4. Indemnity . . . . . . . . . . . . . . . . 42
SECTION 7.5. Limitation . . . . . . . . . . . . . . . . 43
ARTICLE VIII
COVENANTS, REPRESENTATIONS AND WARRANTIES . . . . 43
SECTION 8.1. Representations and Warranties of the
Company and the Master Servicer . . . . 43
SECTION 8.2. Covenants of the Company . . . . . . . . . 43
SECTION 8.3. Covenants of the Master Servicer . . . . . 44
SECTION 8.4. Obligations Unaffected . . . . . . . . . . 45
SECTION 8.5. Representations and Warranties of the
Initial Purchasers . . . . . . . . . . . 45
ARTICLE IX
CONDITIONS PRECEDENT . . . . . . . . . 46
SECTION 9.1. Conditions Precedent to Effectiveness
of Supplement . . . . . . . . . . . . . 46
ARTICLE X
THE AGENT . . . . . . . . . . . . 49
SECTION 10.1. Appointment, Rights and Duties of
the Agent . . . . . . . . . . . . . . 49
SECTION 10.2. Consultation with Experts . . . . . . . . 50
SECTION 10.3. Liability of the Agent . . . . . . . . . 50
SECTION 10.4. Indemnification . . . . . . . . . . . . . 50
SECTION 10.5. Credit Decision . . . . . . . . . . . . . 50
-ii-
<PAGE>
Page
SECTION 10.6. Reliance by the Agent . . . . . . . . . . 51
SECTION 10.7. Notice of Servicer Default or Early
Amortization Event . . . . . . . . . . 51
SECTION 10.8. The Agent in its Individual
Capacity . . . . . . . . . . . . . . . 52
SECTION 10.9. Successor Agent . . . . . . . . . . . . . 52
ARTICLE XI
MISCELLANEOUS . . . . . . . . . . . 53
SECTION 11.1. Ratification of Agreement . . . . . . . 53
SECTION 11.2. Governing Law . . . . . . . . . . . . . 53
SECTION 11.3. Further Assurances . . . . . . . . . . . 53
SECTION 11.4. Payments . . . . . . . . . . . . . . . . 53
SECTION 11.5. Costs and Expenses . . . . . . . . . . . 53
SECTION 11.6. No Waiver; Cumulative Remedies . . . . . 54
SECTION 11.7. Amendments . . . . . . . . . . . . . . . 54
SECTION 11.8. Severability . . . . . . . . . . . . . . 55
SECTION 11.9. Notices . . . . . . . . . . . . . . . . 55
SECTION 11.10. Successors and Assigns . . . . . . . . . 55
SECTION 11.11. Counterparts; Effectiveness . . . . . . 58
SECTION 11.12. Adjustments; Set-off . . . . . . . . . . 58
SECTION 11.13. Repurchase by Master Servicer . . . . . 59
SECTION 11.14. Repurchase by Company . . . . . . . . . 59
SECTION 11.15. Limitation of Liability . . . . . . . . 59
SECTION 11.16. Limitation of Payments By Company . . . 60
SECTION 11.17. Certain Payments . . . . . . . . . . . . 60
SECTION 11.18. No Bankruptcy Petition . . . . . . . . . 61
ARTICLE XII
FINAL DISTRIBUTIONS . . . . . . . . . 61
SECTION 12.1. Certain Distributions . . . . . . . . . . 61
-iii-
<PAGE>
EXHIBITS
Exhibit A Form of VFC Certificate, Series 1995-2
Exhibit B Form of Subordinated Company Certificate,
Series 1995-2
Exhibit C [Reserved]
Exhibit D Form of Commitment Transfer Supplement
Exhibit E Form of Daily Report
Exhibit F Form of Monthly Settlement Statement
Exhibit G Form of Notice of Increase
SCHEDULES
Schedule 1 Commitments
Schedule 2 Trust Accounts
-iv-
<PAGE>
SERIES 1995-2 SUPPLEMENT, dated as of March 30, 1995
(this "Supplement"), among Carcorp, Inc., a Delaware corporation
(the "Company"), Collins & Aikman Products Co., a Delaware
corporation ("C&A Products"), as master servicer (the "Master
Servicer"), the several banks parties to this Supplement as of
the Issuance Date (collectively, the "Initial Purchasers" and,
individually, an "Initial Purchaser"), the other financial
institutions from time to time parties hereto as purchasers
pursuant to Section 11.10, Societe Generale, a banking
corporation organized under the laws of France acting through its
Southwest Agency, as agent (the "Agent") for the Purchasers (as
hereinafter defined) and as an Initial Purchaser, and Chemical
Bank, a New York banking corporation, in its capacity as Trustee
(the "Trustee") under the Agreement (as hereinafter defined).
W I T N E S S E T H :
WHEREAS, the Company, the Master Servicer and the
Trustee entered into a Pooling Agreement, dated as of March 30,
1995 (the "Agreement");
WHEREAS, the Agreement provides, among other things,
that the Company, the Master Servicer and the Trustee may at any
time and from time to time enter into supplements to the
Agreement for the purpose of authorizing the issuance on behalf
of the Trust by the Company for execution and redelivery to the
Trustee for authentication of one or more Series of Investor
Certificates; and
WHEREAS, the Company, the Master Servicer, the Trustee
and the Initial Purchasers wish to supplement the Agreement as
hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and of
the mutual covenants herein contained, and other good and
valuable consideration, the receipt and sufficiency of which are
hereby expressly acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. (a) The following words and
phrases shall have the following meanings with respect to
Series 2 and the definitions of such terms are applicable to the
singular as well as the plural form of such terms and to the
masculine as well as the feminine and neuter genders of such
terms:
<PAGE>
"Accrued Expense Amount" shall mean, for each Business
Day during an Accrual Period, the sum, without duplication,
of (i) the Daily Interest Deposit for such Business Day,
(ii) one-tenth of the Commitment Fee (up to the amount
thereof due and payable on the succeeding Distribution Date
and zero on each Business Day thereafter until the
succeeding Distribution Date) payable to the VFC
Certificateholders on the next succeeding Distribution Date,
(iii) one-tenth of the Series 2 Certificates pro rata
portion of the Servicing Fee (up to the Series 2
Certificates' pro rata portion of the amount thereof due and
payable on such succeeding Distribution Date and zero on
each Business Day thereafter until the succeeding
Distribution Date) and (iv) all Program Costs which have
accrued since such preceding Business Day. For purposes of
clause (iii) above, the Servicing Fee shall be allocated
among each Outstanding Series pro rata based upon the
proportion that the Invested Amount for each such Series
(or, with respect to Series 2, the Aggregate Commitment
Amount) bears to the sum of (i) the Invested Amounts for all
Outstanding Series (other than Series 2) and (ii) the
Aggregate Commitment Amount.
"Acquiring Purchaser" shall have the meaning assigned
in subsection 11.10(c).
"Additional Interest" shall have the meaning assigned
in subsection 3A.4(b).
"Additional Series 2 Receivables" shall mean those
Receivables, if any, originated by a Seller added to
Schedule 1 to the Receivables Sale Agreement after the
Issuance Date, which Seller's Receivables, as evidenced by
an amendment to this Supplement and consented to by each
Purchaser (in its sole and absolute discretion), shall be
designated as Additional Series 2 Receivables.
"Agent" shall have the meaning specified in the
recitals hereto.
"Aggregate Commitment Amount" shall mean, with respect
to any Business Day, the aggregate amount of the Commitments
of all Purchasers on such date, as reduced from time to time
pursuant to Section 2.6.
"Aggregate Series 1 Receivables Amount" shall mean, of
any day, the aggregate Principal Amount of Eligible
Receivables minus (i) the Principal Amount of Excess Primary
Auto Receivables, (ii) the Overconcentration Amounts with
respect to Receivables of other Eligible Obligors and
(iii) the Principal Amount of any Additional Series 2
Receivables.
-2-
<PAGE>
"Aggregate Series 2 Primary Auto Receivables Amount"
shall mean, on any day, the sum of (A) the Principal Amount
of the Excess Primary Auto Receivables and (B) the lesser of
(i) the excess, if any, of the Aggregate Series 1
Receivables Amount over the Series 1 Target Receivables
Amount and (ii) the aggregate Principal Amount of Eligible
Primary Auto Receivables (other than Excess Primary Auto
Receivables).
"Aggregate Series 2 Receivables Amount" shall mean, on
any day, the sum of the Aggregate Series 2 Primary Auto
Receivables Amount and the aggregate Principal Amount of any
Additional Series 2 Receivables; provided, however, that the
Aggregate Series 2 Receivables Amount shall not include (i)
the excess, if any, of (a) the aggregate Principal Amount of
all Primary Auto Receivables payable in Canadian Dollars
over (b) 25% of the aggregate Principal Amount of all
Eligible Primary Auto Receivables in the Trust at the end of
the Business Day immediately preceding such date and (ii) if
the senior unsecured credit rating of a Primary Auto Obligor
(or, if such Primary Auto Obligor is a Subsidiary, its
parent) shall be reduced below BBB- by S&P, or Baa3 by
Moody's Investors Service, Inc., the Principal Amount of
Receivables of such Primary Auto Obligor.
"Aggregate Series 2 Receivables Amount Deficiency"
shall be deemed to occur on any Business Day when, if after
giving effect to all allocations and distributions to be
made on such day (based upon the VFC Percentage as
calculated for such day) the VFC Target Receivables Amount
would exceed the Aggregate Series 2 Receivables Amount.
"Aggregate VFC Invested Amount" shall mean, as of any
date of determination, the sum of the VFC Invested Amounts
of all Purchasers on such date.
"Agreement" shall mean the Pooling Agreement, dated as
of March 30, 1995, among the Company, the Master Servicer
and the Trustee, as amended, supplemented or otherwise
modified from time to time.
"Alternate Base Rate" shall mean, for any day, a rate
per annum (rounded upwards, if necessary, to the next 1/16th
of 1%) equal to the greater of (a) the Prime Rate in effect
on such day and (b) the Federal Funds Effective Rate in
effect on such day plus 1/2 of 1%. If the Agent shall have
determined (which determination shall be conclusive absent
manifest error) that it is unable to ascertain the Federal
Funds Effective Rate for any reason, including the inability
or failure of the Agent to obtain sufficient quotations in
accordance with the terms thereof, the Alternate Base Rate
shall be determined without regard to clause (b) of the
-3-
<PAGE>
preceding sentence 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 or the Federal
Funds Effective Rate shall be effective on the effective day
of such change in the Prime Rate or the Federal Funds
Effective Rate, respectively.
"Applicable Margin" shall mean, at any date of
determination, for each Eurodollar Tranche 0.40%, and for
the Floating Tranche 0.0%; provided, however, if the senior
unsecured credit rating of a Primary Auto Obligor (or, if
such Primary Auto Obligor is a Subsidiary, its parent) shall
be reduced below BBB by S&P, or Baa2 by Moody's Investors
Service, Inc., the Applicable Margin for each Eurodollar
Tranche and each Floating Tranche shall increase by 0.10%
per annum commencing with the date the Master Servicer
receives notice that such rating has been reduced and
continuing until the date the Master Servicer receives
notice that such rating has been upgraded to at least BBB or
Baa2, as the case may be, or such other date as the Trust no
longer owns Receivables of such Primary Auto Obligor.
"Article VII Costs" shall mean any amounts due pursuant
to Article VII.
"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 Agent as the then current
net annual assessment rate that will be employed in
determining amounts payable by the Agent to the Federal
Deposit Insurance Corporation (or any successor) for
insurance by such Corporation (or such successor) of time
deposits made in U.S. Dollars at the Agent's domestic
offices.
"Available Commitment" shall mean, with respect to any
Business Day, the (i) Aggregate Commitment Amount on such
Business Day minus (ii) the Aggregate VFC Invested Amount.
"Available Pricing Amount" shall mean, on any Business
Day, the sum of (i) the Unallocated Balance plus (ii) the
Increase, if any, on such date.
"Benefitted Purchaser" shall have the meaning assigned
in Section 11.12.
"Board" shall mean the Board of Governors of the
Federal Reserve System or any successor thereto.
"Certificate Rate" shall mean on any date of
determination, the average, weighted based on the respective
amounts of the Floating Tranche and each Eurodollar Tranche,
-4-
<PAGE>
of the Alternate Base Rate in effect on such day and the
Eurodollar Rates in effect on such day plus, in each case,
the Applicable Margin; provided, however, during the
continuation of an Early Amortization Event, the
"Certificate Rate" shall be equal to the greater of (i) such
average or (ii) the Alternate Base Rate plus 2.0%.
"Commitment" shall mean, as to any Purchaser, its
obligation to maintain and, subject to certain conditions,
increase, its VFC Invested Amount, in an aggregate amount
not to exceed at any one time outstanding the amount set
forth opposite such Purchaser's name on Schedule 1 under the
caption "Commitment", as such amount may be reduced from
time to time as provided herein; collectively, as to all
Purchasers, the "Commitments".
"Commitment Fee" shall have the meaning assigned in
subsection 2.8(b).
"Commitment Percentage" shall mean, as to any Purchaser
and as of any date, the percentage equivalent of a fraction,
the numerator of which is such Purchaser's Commitment as set
forth on Schedule 1 and the denominator of which is the
Aggregate Commitment Amount as of such date.
"Commitment Period" shall mean the period commencing on
the Issuance Date and terminating on the date which is the
earlier of (i) the Commitment Termination Date and (ii) the
date on which an VFC Amortization Period commences.
"Commitment Reduction" shall have the meaning assigned
in subsection 2.7(a).
"Commitment Termination Date" shall mean the last day
of the December 1999 Settlement Period.
"Commitment Transfer Supplement" shall have the meaning
assigned in subsection 11.10(c).
"Daily Interest Deposit" shall mean, for any Business
Day, an amount equal to (i) the amount of accrued and unpaid
Daily Interest Expense in respect of such day plus (ii) the
aggregate amount of all previously accrued and unpaid Daily
Interest Expense plus (iii) the aggregate amount of all
accrued and unpaid Additional Interest.
"Daily Interest Expense" for any day in any Accrual
Period, shall mean the sum of (A) the product of (i) the
Aggregate VFC Invested Amount allocable to the Floating
Tranche on such day divided by 365 and (ii) the Alternate
Base Rate plus the Applicable Margin in effect on such day,
and (B) the product of (i) the Aggregate VFC Invested Amount
-5-
<PAGE>
allocable to Eurodollar Tranches on such day divided by 360
and (ii) the weighted average Eurodollar Rate plus the
Applicable Margin in effect with respect thereto; provided,
however, that for any such day during the continuation of an
Early Amortization Event, the "Daily Interest Expense" for
such day shall be equal to the greater of (i) the sum of the
amounts calculated pursuant to clauses (A) and (B) above and
(ii) the product of (x) the Aggregate VFC Invested Amount on
such day divided by 365 and (y) the Alternate Base Rate in
effect on such day plus 2.0%.
"Daily Report" shall mean a report prepared by the
Master Servicer on each Business Day for the period
specified therein, in substantially the form of Exhibit E or
in such other form as may be approved by the Agent and the
Master Servicer.
"Days Sales Outstanding" shall mean, as of any
Settlement Report Date and continuing until the next
Settlement Report Date, the number of days equal to the
product of (a) 91 and (b) the amount obtained by dividing
(i) the difference between (A) the aggregate Principal
Amount of the Primary Auto Receivables and Additional
Series 2 Receivables and (B) the aggregate bad debt reserve
of the Sellers, in each case as at the last day of the
Settlement Period immediately preceding such earlier
Settlement Report Date, by (ii) aggregate Principal Amount
of Primary Auto Receivables and Additional Series 2
Receivables generated by the Sellers for the three
Settlement Periods immediately preceding such earlier
Settlement Report Date.
"Decrease" shall have the meaning assigned in
Section 2.6.
"Dilution Ratio" shall mean, as of the last day of each
Settlement Period, the ratio (expressed as a percentage)
equal to the aggregate amount of Dilution Adjustments made
with respect to the Primary Auto Receivables and Additional
Series 2 Receivables during such Settlement Period divided
by the aggregate Principal Amount of the Primary Auto
Receivables and Additional Series 2 Receivables which were
originated by the Sellers during such Settlement Period.
"Dilution Reserve Multiple" shall mean 1.50.
"Dilution Reserve Ratio" shall mean, as of any
Settlement Report Date and continuing until the next
Settlement Report Date, an amount (expressed as a
percentage) which is calculated as follows:
-6-
<PAGE>
DRR = c*d*e
Where:
DRR = Dilution Reserve Ratio;
c = the Dilution Reserve Multiple;
d = the greater of (i) the average of the
Dilution Ratio during the period of twelve
consecutive Settlement Periods ending prior
to such Settlement Report Date and (ii) the
average of the Dilution Ratio during the
period of three consecutive Settlement
Periods ending prior to such Settlement
Report Date; and
e = the quotient of (i) the aggregate Principal
Amount of Primary Auto Receivables and
Additional Series 2 Receivables which were
originated by the Sellers during the two
Settlement Periods immediately preceding such
earlier Settlement Report Date and (ii) the
difference between (A) the aggregate
outstanding Principal Amount of the
outstanding Primary Auto Receivables and
Additional Series 2 Receivables and (B) the
aggregate outstanding Principal Amount of all
Primary Auto Receivables and Additional
Series 2 Receivables which are Delinquent
Receivables and Defaulted Receivables, in
each case, as of the last day of the
Settlement Period immediately preceding such
earlier Settlement Report Date.
"Discount Rate" shall mean, as of any date of
determination, the sum of (a) the weighted average interest
rate in effect with respect to the VFC Certificates as of
the end of the Settlement Period immediately preceding the
most recent Settlement Report Date and (b) an amount equal
to (i) the aggregate amount of fees (other than the
Servicing Fee) accrued with respect to the VFC Certificates
during the Settlement Period immediately preceding the most
recent Settlement Report Date divided by (ii) the average
daily VFC Invested Amount during such Settlement Period.
"Early Amortization Event" shall have the meaning
assigned in Section 5.1 of this Supplement and Section 7.1
of the Agreement.
"Effective Date" shall have the meaning assigned in
Section 9.1.
-7-
<PAGE>
"Eurodollar Base Rate" shall mean, with respect to each
day during each Eurodollar Period pertaining to a Eurodollar
Tranche:
(a) if at least two offered rates for deposits in
U.S. Dollars for a period comparable to the applicable
Eurodollar Period appears on Telerate Page 3750 as of
11:00 a.m., London time, on the day that is two
Eurodollar Business Days prior to the first day of such
Eurodollar Period, the arithmetic mean of all such
offered rates; and
(b) if fewer than two such offered rates so
appear on Telerate Page 3750, the rate (rounded
upwards, if necessary, to the nearest 1/16th of 1%) at
which U.S. Dollar deposits approximately equal to the
amount of such Eurodollar Tranche and for a period
comparable to the applicable Eurodollar Period are
offered to the Agent's office in which the relevant
eurodollar operations are being conducted in
immediately available funds in the eurodollar market at
approximately 11:00 a.m., New York City time, on the
day that is two Eurodollar Business Days prior to the
first day of such Eurodollar Period.
"Eurodollar Business Day" shall mean a day that is both
a Business Day and a day on which banking institutions in
the City of London, England are not required or authorized
by law to be closed.
"Eurodollar Period" shall mean, with respect to any
Eurodollar Tranche:
(a) initially, the period commencing on the
Issuance Date or conversion date, as the case may be,
with respect to such Eurodollar Tranche and ending one,
two or three months thereafter, as selected by the
Company in its notice of Issuance 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 Eurodollar Period
applicable to such Eurodollar Tranche and ending one,
two or three months thereafter, as selected by the
Company by irrevocable notice to the Agent not less
than three Eurodollar Business Days prior to the last
day of the then current Eurodollar Period with respect
thereto;
provided that, all of the foregoing provisions relating to
Eurodollar Periods are subject to the following:
-8-
<PAGE>
(1) if any Eurodollar Period would otherwise end
on a day that is not a Eurodollar Business Day, such
Eurodollar Period shall be extended to the next
succeeding Eurodollar Business Day unless the result of
such extension would be to carry such Eurodollar Period
into another calendar month in which event such
Eurodollar Period shall end on the immediately
preceding Eurodollar Business Day;
(2) any Eurodollar Period that would otherwise
extend beyond the Scheduled Termination Date shall end
on the Scheduled Termination Date; and
(3) any Eurodollar Period that begins on the last
Eurodollar 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 Eurodollar
Period) shall end on the last Eurodollar Business Day
of a calendar month.
"Eurodollar Rate" shall mean, with respect to each day
during each Eurodollar Period pertaining to a portion of the
VFC Invested Amount allocated to a Eurodollar Tranche, a
rate per annum (rounded upwards, if necessary, to the
nearest 1/16th of 1%) equal to the product of (a) the
Eurodollar Base Rate in effect for such Eurodollar Period
and (b) Statutory Reserves.
"Eurodollar Tranche" shall mean a portion of the
Aggregate VFC Invested Amount for which the Series 2 Monthly
Interest is calculated by reference to a Eurodollar Rate
determined by reference to a particular Eurodollar Period.
"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 Agent from three
federal funds brokers of recognized standing selected by it.
"Floating Tranche" shall mean that portion of the
Aggregate VFC Invested Amount not allocated to a Eurodollar
Tranche for which the Series 2 Monthly Interest is
calculated by reference to the Alternative Base Rate.
"Increase" shall have the meaning assigned in
subsection 2.5(a).
-9-
<PAGE>
"Increase Amount" shall have the meaning assigned in
subsection 2.5(a).
"Increase Date" shall have the meaning assigned in
subsection 2.5(a).
"Indemnified Amounts" shall have the meaning assigned
in subsection 2.10(a).
"Indemnitee" shall have the meaning assigned in
subsection 2.10(a).
"Initial Purchasers" shall have the meaning specified
in the recitals hereto.
"Initial VFC Invested Amount" shall mean $12,000,000.
"Initial VFC Subordinated Certificate Amount" shall
mean the VFC Subordinated Certificate Increase Amount in
respect of the Issuance Date.
"Interest Shortfall" shall have the meaning assigned in
subsection 3A.4(b).
"Invested Percentage" shall not be applicable to
Series 2.
"Issuance Date" shall mean March 31, 1995.
"Majority Purchasers" shall mean, on any day,
Purchasers having, in the aggregate, more than 50% of the
Aggregate Commitment Amount.
"Maximum Commitment Amount" shall mean $75,000,000.
"Monthly Interest Payment" shall have the meaning
assigned in subsection 3A.6(a).
"Monthly Settlement Statement" shall mean a report
prepared by the Master Servicer with respect to each
Distribution Date for the immediately preceding Settlement
Period, in substantially the form of Exhibit F or in such
other form as may be approved by the Agent and the Master
Servicer.
"Non-Excluded Taxes" shall have the meaning assigned in
subsection 7.3(a).
"Optional Repurchase Percentage" shall mean 10% of the
Aggregate VFC Invested Amount on the close of business of
the last day of the VFC Revolving Period.
-10-
<PAGE>
"Participants" shall have the meaning assigned in
subsection 11.10(b).
"PAR Pool I" shall mean the pool of Primary Auto
Receivables constituting part of the Trust Assets on the
Business Day preceding the occurrence of a Separate VFC
Amortization Event.
"PAR Pool II" shall mean the pool of Primary Auto
Receivables conveyed to the Trust after the occurrence of a
Separate VFC Amortization Event.
"Prime Rate" shall mean the rate of interest per annum
publicly announced (or, if not announced publicly, quoted
internally) from time to time by the Agent as its prime rate
in effect at its principal office in New York City for
short-term commercial loans in U.S. Dollars to domestic
corporate borrowers (each change in the Prime Rate to be
effective on the date such change is publicly announced (or
quoted internally) as being effective), which rate, it is
hereby acknowledged, is not necessarily the Agent's lowest
rate.
"Program Costs" shall mean, for any Business Day,
(i) all expenses, indemnities and other amounts due and
payable to the Purchasers and the Agent under the Agreement
or this Supplement (including, without limitation, any
Article VII Costs), plus (ii) the product of (a) the sum (x)
of all unpaid fees and expenses due and payable to counsel
to, and independent auditors of, the Company (other than
fees and expenses payable on or in connection with the
closing of the issuance of the Series 2 Certificates) and
any corporate income or franchise taxes due and payable by
the Company, in each case on such Business Day and (y) all
unpaid Trustee's expenses, and (b) a fraction, the numerator
of which is the Aggregate Commitment Amount on such Business
Day and the denominator of which is the sum of (i) the
Invested Amounts on such Business Day of each Outstanding
Series (other than Series 2) and (ii) the Aggregate
Commitment Amount on such Business Day.
"Purchaser" shall mean each purchaser of a VFC
Certificate, including each Initial Purchaser and each
Acquiring Purchaser.
"Rating Agency" shall not be applicable to Series 2.
"Record Date" shall mean, for any Distribution Date or
other date on which a distribution is to be made on a Series
2 Certificate, the Business Day immediately preceding such
date.
-11-
<PAGE>
"Register" shall mean a register maintained by the
Agent for recording transfers of the VFC Certificates.
"Required Purchasers" shall mean, on any day,
Purchasers having, in the aggregate, more than 50% of the
Aggregate Commitment Amount.
"Scheduled Termination Date" shall mean the earlier of
(a) the Commitment Termination Date and (b) the date on
which the Commitments are terminated in whole pursuant to
Section 2.7.
"Separate VFC Amortization Event" shall have the
meaning assigned in Section 5.1.
"Series 1 Required Subordinated Amount" shall have the
meaning set forth in Section 1.1 of the Series 1 Supplement.
"Series 1 Supplement" shall mean the Series 1995-1
Supplement, dated as of March 30, 1995, among the Company,
the Master Servicer and the Trustee, as amended,
supplemented or otherwise modified from time to time.
"Series 1 Target Receivables Amount" shall mean, on any
date of determination, the sum of (i) the Term Certificate
Adjusted Invested Amount on such day and (ii) the Series 1
Required Subordinated Amount on such day.
"Series 2" shall mean Series 1995-2, the Principal
Terms of which are set forth in this Supplement.
"Series 2 Accrued Interest Sub-subaccount" shall have
the meaning assigned in subsection 3A.2(a).
"Series 2 Allocated Receivables Amount" shall mean, on
any date of determination, the lower of (i) the VFC Target
Receivables Amount on such day and (ii) the Aggregate Series
2 Receivables Amount on such day.
"Series 2 Canada/Canadian Dollar Collection Subaccount"
shall have the meaning assigned in subsection 3A.2(a).
"Series 2 Canada/U.S. Dollar Collection Subaccount"
shall have the meaning assigned in subsection 3A.2(a).
"Series 2 Certificates" shall mean, collectively, those
Certificates designated as the VFC Certificates and the VFC
Subordinated Certificate.
"Series 2 Collection Subaccount" shall have the meaning
assigned in subsection 3A.2(a).
-12-
<PAGE>
"Series 2 Invested Amount" shall mean, with respect to
any date of determination, the Aggregate VFC Invested
Amount.
"Series 2 Monthly Interest" shall have the meaning
assigned in subsection 3A.4(a).
"Series 2 Monthly Principal Payment" shall have the
meaning assigned in Section 3A.5.
"Series 2 Monthly Servicing Fee" shall have the meaning
assigned in Section 6.1.
"Series 2 Non-Principal Collection Sub-subaccount"
shall have the meaning assigned in subsection 3A.2(a).
"Series 2 Percentage" shall mean the VFC Percentage.
"Series 2 Principal Collection Sub-subaccount" shall
have the meaning assigned in subsection 3A.2(a).
"Series 2 Termination Date" shall mean the date which
is nine (9) months after the last day of the VFC Revolving
Period.
"Servicing Reserve Ratio" shall mean, as of any
Settlement Report Date and continuing until the next
Settlement Report Date, an amount (expressed as a
percentage) equal to (a) the product of (i) 1.0% and (ii)
2.0 times (b) Days Sales Outstanding as of such day divided
by (c) 365.
"Statutory Reserves" shall mean a fraction (expressed
as a decimal), the numerator of which is one and the
denominator of which is one minus the aggregate of the
maximum reserve percentages (including, without limitation,
basic, supplemental, marginal, special, emergency or
supplemental reserves) expressed as a decimal established by
the Board and any other banking authority to which the Agent
is subject 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. Eurodollar Tranches
shall be deemed to constitute Eurocurrency Liabilities and
to be subject to such reserve requirements without the
benefit of or credit for proration, exemptions or offsets
which may be available from time to time to any Purchaser
under such Regulation D. Statutory Reserves shall be
adjusted automatically on and as of the effective date of
any change in any reserve percentage.
-13-
<PAGE>
"Telerate Page 3750" shall mean the display page so
designated on the Dow Jones Telerate Service (or such other
page as may replace that page on that service, or such other
service as may be nominated as the information vender, for
the purpose of displaying comparable rates or prices).
"Term Certificates Adjusted Invested Amount" shall have
the meaning set forth in Section 1.1 of the Series 1
Supplement.
"Transfer Issuance Date" shall mean the date on which a
Commitment Transfer Supplement becomes effective pursuant to
the terms of such Commitment Transfer Supplement.
"Transferee" shall have the meaning assigned in
subsection 11.10(f).
"Trust Accounts" shall have the meaning assigned in
subsection 3A.2(a).
"Unallocated Balance" shall mean, as of any Business
Day, the sum of (i) the portion of the Aggregate VFC
Invested Amount for which interest is then being calculated
by reference to the Alternate Base Rate, and (ii) the
portion of the Aggregate VFC Invested Amount allocated to
any Eurodollar Tranche that expires on such Business Day.
"VFC Adjusted Invested Amount" shall mean, as of any
date of determination, (i) the Aggregate VFC Invested Amount
on such date, minus (ii) the amount on deposit in the Series
2 Principal Collection Sub-subaccount on such date.
"VFC Amortization Period" shall mean the period
following the VFC Revolving Period and ending on the date
when (i) the Aggregate VFC Invested Amount shall have been
reduced to zero and all accrued interest and other amounts
owing on the VFC Certificates and to the Agent and the
Purchasers hereunder shall have been paid, or (ii) all
Primary Auto Receivables and all Additional Series 2
Receivables, if any, or, in the case of a the VFC
Amortization Period commencing as a result of a Separate VFC
Amortization Event, all PAR Pool I Receivables, have been
collected or written off as uncollectible in accordance with
the Policies and, in the case of write-offs, 90 days has
past since the last write-off.
"VFC Certificate" shall mean a VFC Certificate,
Series 1995-2, executed by the Company and authenticated by
or on behalf of the Trustee, substantially in the form of
Exhibit A.
"VFC Certificateholders" shall mean the Purchasers.
-14-
<PAGE>
"VFC Certificateholders' Interest" shall have the
meaning assigned in subsection 2.1(a).
"VFC Invested Amount" shall mean, with respect to any
Purchaser on the Issuance Date, an amount equal to the
product of such Purchaser's Commitment Percentage on such
date and the Initial VFC Invested Amount, and with respect
to such Purchaser on any date of determination thereafter,
an amount equal to (a) such Purchaser's VFC Invested Amount
on the immediately preceding Business Day (or, with respect
to the day as of which such Purchaser becomes a party to
this Supplement, whether by executing a counterpart hereof,
a Commitment Transfer Supplement or otherwise, (i) the
product of such Purchaser's Commitment Percentage and the
Initial VFC Invested Amount or (ii) the portion of the
transferor's VFC Invested Amount being purchased, in the
case of an Acquiring Purchaser), plus (b) the amount of any
increases in such Purchaser's VFC Invested Amount pursuant
to Section 2.5 made on such day, minus (c) the amount of any
distributions to such Purchaser pursuant to Section 2.6 on
such day.
"VFC Percentage" shall mean (i) on any Business Day
during the VFC Revolving Period, the percentage equivalent
of a fraction, the numerator of which is equal to (A) the
Series 2 Allocated Receivables Amount as of the end such
Business Day and the denominator of which is equal to (B)
the Aggregate Primary Auto Receivables Amount as of the end
of such Business Day; provided that if on any Business Day,
if after giving effect to all allocations and distributions
to be made on such day (based upon the VFC Percentage as
calculated for such day), an Aggregate Series 2 Receivables
Amount Deficiency would exist, the VFC Percentage will not
change (and shall be equal to the VFC Percentage as
calculated at the close of business on the Business Day
immediately preceding the occurrence of such Aggregate VFC
Receivables Deficiency) until such Aggregate Series 2
Receivables Amount Deficiency would no longer exist, and
(ii) on any Business Day during the VFC Amortization Period,
the VFC Percentage on the last day of the VFC Revolving
Period; provided that such percentage shall only be applied
with respect to PAR Pool I. Further, the VFC Percentage
with respect to any Receivables other than Primary Auto
Receivables (and Additional Series 2 Receivables, if any)
shall be 0.
"VFC Required Reserves Ratio" shall mean, as of any
date of determination, the sum of (a) the Dilution Reserve
Ratio on such date and (b) the Yield Reserve Ratio on such
date.
-15-
<PAGE>
"VFC Required Subordinated Amount" shall mean, on any
date of determination, the greater of (1) the product of (x)
4% and (y) the VFC Adjusted Invested Amount on such date and
(2) the sum of (x) the product of (i) the VFC Adjusted
Invested Amount on such date and (ii) the VFC Required
Subordinated Percentage on such date, (y) the product of (i)
the Servicing Reserve Ratio on such date and (ii) the VFC
Invested Amount on such date, and (z) the aggregate amount
of Daily Interest Expense for all Accrual Periods not set
aside and transferred as of such day to the Series 2 Non-
Principal Collection Account.
"VFC Required Subordinated Percentage" shall mean, as
of any date of determination, the VFC Required Reserves
Ratio (expressed as a percentage) for such date.
"VFC Revolving Period" shall mean the period commencing
on the Issuance Date and terminating on the earlier to occur
of (i) the close of business on the date on which an Early
Amortization Event occurs and (ii) the Scheduled Termination
Date.
"VFC Subordinated Certificate" shall mean the
Subordinated Company Certificate, Series 1995-2, executed by
the Company and authenticated by or on behalf of the
Trustee, substantially in the form of Exhibit B.
"VFC Subordinated Certificate Amount" shall mean, for
any date of determination, an amount equal to (i) the Series
2 Allocated Receivables Amount minus (ii) the VFC Adjusted
Invested Amount.
"VFC Subordinated Certificate Increase Amount" shall
have the meaning assigned in subsection 2.5(a).
"VFC Subordinated Certificate Reduction Amount" shall
have the meaning assigned in subsection 2.6(b).
"VFC Target Receivables Amount" shall mean, on any date
of determination, the sum of (i) the VFC Adjusted Invested
Amount on such day and (ii) the VFC Required Subordinated
Amount for such day.
"Yield Reserve Ratio" shall mean, as of any date of any
Settlement Period Date and continuing until the next
Settlement Report Date, a ratio (expressed as a percentage)
equal to (a) the product of(i) 2.0 times Days Sales
Outstanding as of such day and (ii) 1.50 times the Discount
Rate as of such day divided by (b) 360.
(b) If any term or provision contained herein
conflicts with or is inconsistent with any term or provision
-16-
<PAGE>
contained in the Agreement, the terms and provisions of this
Supplement shall govern. All capitalized terms not otherwise
defined herein are defined in the Agreement. All Article,
Section or subsection references herein shall mean Article,
Section or subsections of this Supplement, except as otherwise
provided herein. Unless otherwise stated herein, as the context
otherwise requires or if such term is otherwise defined in the
Agreement, each capitalized term used or defined herein shall
relate only to the Series 2 Certificates and no other Series of
Investor Certificates issued by the Trust.
ARTICLE II
DESIGNATION OF CERTIFICATES; PURCHASE AND SALE
OF THE VFC CERTIFICATES
SECTION 2.1. Designation. The Certificates created
and authorized pursuant to the Agreement and this Supplement
shall be divided into two Classes, which shall be designated
respectively as (i) the "VFC Certificates, Series 1995-2" and
(ii) the "Subordinated Company Certificate, Series 1995-2."
SECTION 2.2. The Series 2 Certificates. (a) The VFC
Certificates shall represent fractional undivided interests in
the Trust, consisting of the right to receive (i) the VFC
Percentage (expressed as a decimal) of (A) Collections received
with respect to the Primary Auto Receivables (other than PAR Pool
II) and (B) all other funds relating to Primary Auto Receivables
(other than PAR Pool II) on deposit in the Collection Accounts
and in any subaccounts thereof and (ii)(A) Collections received
with respect to Additional Series 2 Receivables, if any, and (B)
all other funds relating to Additional Series 2 Receivables, if
any, on deposit in the Collection Accounts and in any subaccounts
thereof (collectively, the "VFC Certificateholders' Interest").
(b) The VFC Subordinated Certificate shall represent a
fractional undivided interest in the Trust, consisting of the
right to receive (A) Collections received with respect to the
Primary Auto Receivables (other than PAR Pool II) and (B) all
other funds relating to Primary Auto Receivables (other than PAR
Pool II) on deposit in the Collection Accounts and in any
subaccounts thereof and (ii)(A) Collections received with respect
to Additional Series 2 Receivables, if any, and (B) all other
funds relating to Additional Series 2 Receivables, if any, on
deposit in the Collection Accounts and in any subaccounts thereof
allocated to the VFC Certificateholders' Interest and not
required to be distributed to or for the benefit of the
Purchasers (the "VFC Subordinated Interest"). The Exchangeable
Company Certificate and any other Series of Investor Certificates
outstanding shall represent the ownership interest in the
-17-
<PAGE>
remainder of the Trust not allocated pursuant hereto to the VFC
Certificateholders' Interest or the VFC Subordinated Interest.
(c) The VFC Certificates and the VFC Subordinated
Certificate shall be substantially in the forms of Exhibits A and
B, respectively, and shall, upon issue, be executed and delivered
by the Company to the Trustee for authentication and redelivery
as provided in Section 2.4 hereof and Section 5.2 of the
Agreement.
(d) Except as otherwise provided herein or in the
Pooling Agreement, the Series 2 Certificates shall have no right
to receive payments with respect to Receivables other than (i)
the VFC Percentage of the Primary Auto Receivables and (ii) the
Additional Series 2 Receivables, if any.
SECTION 2.3. Purchases of Interests in the VFC
Certificates. (a) Initial Purchase. Subject to the terms and
conditions of this Supplement, including delivery of notice in
accordance with Section 2.4,(i) each Initial Purchaser hereby
severally agrees (A) to purchase from the Trust on the Issuance
Date a VFC Certificate in an amount equal to such Initial
Purchaser's Commitment Percentage of the Initial VFC Invested
Amount and (B) to maintain its VFC Certificate, subject to
increase or decrease during the VFC Revolving Period, in
accordance with the provisions of this Supplement and (ii) the
Company hereby agrees (A) to purchase from the Trust on the
Issuance Date the VFC Subordinated Certificate in an amount equal
to the Initial VFC Subordinated Certificate Amount and (B) to
maintain such interest in the VFC Subordinated Certificate,
subject to increase or decrease during the VFC Revolving Period,
in accordance with the provisions of this Supplement. Payments
by the Initial Purchasers in respect of the VFC Certificates
shall be made in immediately available funds on the Issuance Date
to the Agent for payment to the Company.
(b) Subsequent Purchases. Subject to the terms and
conditions of this Supplement, each Acquiring Purchaser hereby
severally agrees to maintain its VFC Certificate, subject to
increase or decrease during the VFC Revolving Period, in
accordance with the provisions of this Supplement.
(c) Maximum VFC Invested Amount. Notwithstanding
anything to the contrary contained in this Supplement, at no time
shall the VFC Invested Amount of any Purchaser exceed such
Purchaser's Commitment at such time.
SECTION 2.4. Delivery. On the Issuance Date, the
Company shall sign on behalf of the Trust and shall direct in
writing pursuant to Section 5.2 of the Agreement the Trustee to
duly authenticate, and the Trustee, upon receiving such
direction, shall so authenticate (i) the VFC Certificates in
-18-
<PAGE>
denominations equal in the aggregate to the Maximum Commitment
Amount, and (ii) a VFC Subordinated Certificate in a denomination
equal to the Initial VFC Subordinated Certificate Amount. The
VFC Certificates shall be issued in minimum denominations of
$1,000,000 and in integral multiples of $100,000 in excess
thereof. The Trustee shall mark on its books the actual VFC
Invested Amount and VFC Subordinated Certificate Amount
outstanding on any date of determination, which, absent manifest
error, shall constitute prima facie evidence of the outstanding
VFC Invested Amount and VFC Subordinated Certificate Amount from
time to time.
SECTION 2.5. Procedure for Initial Issuance and for
Increasing the VFC Invested Amount. (a) Subject to
subsection 2.5(b), on any Business Day during the Commitment
Period, each Purchaser agrees that the Aggregate VFC Invested
Amount may be increased by increasing each Purchaser's VFC
Invested Amount (an "Increase"), up to an amount not exceeding
each Purchaser's Commitment, upon the request of the Master
Servicer or the Company on behalf of the Trust (each date on
which an increase in the Aggregate VFC Invested Amount occurs
hereunder being herein referred to as the "Increase Date"
applicable to such Increase); provided, however, that the Master
Servicer or the Company, as the case may be, shall have given the
Agent irrevocable oral notice, followed promptly, but in no event
later than the next Business Day, by a written notice,
substantially in the form of Exhibit G hereto, of such request no
later than (i) if the Initial VFC Invested Amount or Increase
Amount is to be priced solely with reference to the Alternate
Base Rate, on or prior to 11:00 a.m., New York City time, one day
prior to the Issuance Date or on such Increase Date, as the case
may be, or (ii) if all or a portion of the Initial VFC Invested
Amount or Increase Amount is to be allocated to a Eurodollar
Tranche, 11:00 a.m., New York City time, three Eurodollar
Business Days prior to the Issuance Date or such Increase Date,
as the case may be; provided, further, that the provisions of
this subsection shall not restrict the allocations of Collections
pursuant to Article III. Such notice shall state (x) the
Issuance Date or the Increase Date, as the case may be; (y) the
Initial VFC Invested Amount or the proposed amount of such
Increase (the "Increase Amount"), as the case may be; (y) what
portions thereof will be allocated to a Eurodollar Tranche and
the Floating Tranche; and (z) if any portions thereof are to be
allocated to a Eurodollar Tranche, the length of the Eurodollar
Period with respect thereto. No Purchaser shall be obligated to
fund any such Increase, unless concurrently with any such
Increase in the Aggregate VFC Invested Amount, the VFC
Subordinated Certificate Amount shall be increased by an amount
such that after giving effect to such increase, the VFC Adjusted
Invested Amount plus the VFC Subordinated Certificate Amount
equals the VFC Target Receivables Amount (the "VFC Subordinated
Certificate Increase Amount").
-19-
<PAGE>
Notwithstanding the foregoing, neither the Agent nor any
Purchaser shall be required to fund the Initial VFC Invested
Amount if the VFC Target Receivables Amount would exceed the
Series 2 Allocated Receivables Amount on the Issuance Date after
giving effect to such funding.
(b) The Purchasers shall not be required to increase
their respective VFC Invested Amounts on any Increase Date
hereunder unless:
(i) the related aggregate Increase Amount is equal to
(A) in the case of a Floating Tranche, $1,000,000 or an
integral multiple of $1,000,000 in excess thereof and (B) in
the case of a Eurodollar Tranche, $5,000,000 or an integral
multiple of $1,000,000 in excess thereof;
(ii) after giving effect to the Increase, (A) the
Aggregate VFC Invested Amount would not exceed the Maximum
Commitment Amount on such Increase Date or (B) the Series 2
Allocated Receivables Amount would equal or exceed the VFC
Target Receivables Amount on such Increase Date; or
(iii) no Early Amortization Event with respect to any
Outstanding Series or an event which, with the passage of
time or the giving of notice, would constitute an Early
Amortization Event with respect to any such Series shall
have occurred and be continuing.
(c) After receipt by the Agent of the notice required
by subsection 2.4(a) from the Master Servicer or the Company on
behalf of the Trust, the Agent shall, so long as the conditions
set forth in subsections 2.5(a) and (b) are satisfied, promptly
provide telephonic notice to each Purchaser of the Increase Date
and of the portion of the Increase Amount allocable to such
Purchaser (which shall equal such Purchaser's Commitment
Percentage of the Increase Amount). The Master Servicer shall
promptly notify the Company of the Increase Date and the amount
of the VFC Subordinated Certificate Increase Amount. Each
Purchaser agrees to pay in immediately available funds such
Purchaser's Commitment Percentage of each Increase on the related
Increase Date to the Agent for payment to the Trust.
SECTION 2.6. Procedure for Decreasing the VFC Invested
Amount. (a) On any Business Day during the VFC Revolving Period
or the VFC Amortization Period (except for Distribution Dates
during the VFC Amortization Period (which shall be governed by
subsection 3A.6(c))), upon request of the Master Servicer on
behalf of the Trust, the Aggregate VFC Invested Amount may be
reduced (a "Decrease") by the distribution to the Agent for the
pro rata benefit of the Purchasers in accordance with their
Commitment Percentages of some or all of the funds on deposit in
the Series 2 Principal Collection Sub-subaccount on such day;
-20-
<PAGE>
provided that the Master Servicer shall have given the Agent oral
notice, followed promptly in writing, prior to 12:00 noon, New
York City time, on the date prior to such Decrease and which
notice shall state the amount of such Decrease; provided,
further, that such Decrease shall be in an amount equal to
$1,000,000 and integral multiples of $1,000,000 in excess
thereof. Each such Decrease shall be subject to the payment of
any amounts required by Section 7.4 resulting from a payment of a
Eurodollar Tranche prior to the termination of the Eurodollar
Period for such Eurodollar Tranche.
(b) Simultaneously with any such Decrease during the
VFC Revolving Period, the VFC Subordinated Certificate Amount
shall be reduced by an amount (the "VFC Subordinated Certificate
Reduction Amount") such that the VFC Subordinated Certificate
Amount shall equal the VFC Required Subordinated Amount after
giving effect to such Decrease. During the VFC Revolving Period,
after the distribution described in subsection (a) above has been
made, and the VFC Subordinated Certificate Amount shall have been
reduced by the VFC Subordinated Certificate Reduction Amount, a
distribution shall be made to the holder of the VFC Subordinated
Certificate out of remaining funds on deposit in the Series 2
Principal Collection Sub-subaccount (including amounts
transferred from any Series Canada/U.S. Dollar Collection
Subaccount and any Series Canada/Canadian Dollar Collection
Subaccount) in an amount equal to the lesser of (x) the VFC
Subordinated Certificate Reduction Amount and (y) the amount of
such remaining funds on deposit in the Series 2 Principal
Collection Sub-subaccount (including amounts transferred from any
Series Canada/U.S. Dollar Collection Subaccount and any Series
Canada/Canadian Dollar Collection Subaccount).
SECTION 2.7. Reductions of the Commitments. (a) On
any Business Day during the VFC Revolving Period, the Company, on
behalf of the Trust, may, upon three Eurodollar Business Days'
prior written notice (effective upon receipt) reduce or terminate
the Commitments (a "Commitment Reduction") in an aggregate amount
equal to $5,000,000 or a whole multiple of $5,000,000 in excess
thereof; provided that no such termination or reduction shall be
permitted if, after giving effect thereto and to any reduction in
the Aggregate VFC Invested Amount on such date, the Aggregate VFC
Invested Amount would exceed the Aggregate Commitment Amount then
in effect. Each Purchaser's Commitment shall be reduced by such
Purchaser's Commitment Percentage of the amount of such
Commitment Reduction.
(b) Once reduced, the Commitments may not be
subsequently reinstated. Upon effectiveness of any such
reduction, the Agent shall prepare a revised Schedule 1 to
reflect the reduced Commitment of each Purchaser and Schedule 1
of this Supplement shall be deemed to be automatically superseded
by such revised Schedule 1. The Agent shall distribute such
-21-
<PAGE>
revised Schedule 1 to the Company, the Master Servicer, the
Trustee and each Purchaser.
SECTION 2.8. Interest; Commitment Fee. (a) Interest
shall be payable on the VFC Certificates on each Distribution
Date pursuant to subsection 3A.6(a).
(b) The Company shall direct the Trustee in writing to
pay to the Agent, for the pro rata account of the Purchasers in
accordance with their Commitment Percentages, on each
Distribution Date, a commitment fee with respect to each Accrual
Period or portion thereof ending on such date (the "Commitment
Fee") during the VFC Revolving Period at a rate equal to 0.25%
per annum of the average daily excess of the Aggregate Commitment
Amount over the average Aggregate VFC Invested Amount during such
Accrual Period. The Commitment Fee shall be payable (a) monthly
in arrears on each Distribution Date, (b) immediately upon any
termination of any Commitment and (c) on the Scheduled
Termination Date. To the extent that funds on deposit in the
Series 2 Accrued Interest Sub-subaccount and the Series 2 Non-
Principal Collection Sub-subaccount at any such date are
insufficient to pay the Commitment Fee due on such date, the
Trustee shall so notify the Master Servicer and the Master
Servicer shall immediately pay the Agent the amount of any such
deficiency.
(c) Calculations of per annum rates and fees under
this Supplement shall be made on the basis of a 365-day year with
respect to Commitment Fees, other fees, and, except with respect
to Eurodollar Tranches, interest rates. Each determination of
the Eurodollar Rate by the Agent shall be conclusive and binding
upon each of the parties hereto in the absence of manifest error.
SECTION 2.9. Purchase of VFC Certificateholders'
Interest in the VFC Certificates. In the event of any breach of
any of the representations and warranties set forth in Section
2.3 of the Agreement, which breach has a material adverse effect
on the interests of the Purchasers, then the Majority Purchasers,
by notice then given in writing to the Company, the Trustee and
the Master Servicer, may direct the Company to purchase the VFC
Certificates and the Company shall be obligated to make such
purchase on the next Distribution Date occurring at least five
Business Days after receipt of such notice on the terms and
conditions set forth below; provided, however, that no such
purchase shall be required to be made if, by such Distribution
Date, the representations and warranties contained in Section 2.3
of the Agreement shall be satisfied in all material respects, or
any material adverse effect on the Purchasers caused thereby
shall have been cured to the satisfaction of the Majority
Purchasers.
-22-
<PAGE>
The Company shall deposit in the U.S. Dollar Collection
Account for credit to the Series 2 Principal Collection Sub-
subaccount, on the Business Day preceding such Distribution Date,
amounts equal to the purchase price (as described in the next
succeeding sentence) for each of the VFC Certificateholders'
Interests on such day. The purchase price for each such purchase
will be equal to the Aggregate VFC Invested Amount on the
Distribution Date on which the purchase is scheduled to be made,
plus (i) with respect to the VFC Certificateholders' Interest, an
amount equal to all interest accrued but unpaid on such
Distribution Date and all prior Distribution Dates, plus (ii) all
Article VII Costs plus (iii) all other amounts payable to the
Agent and the Purchasers hereunder. Payment of such purchase
price into the Series 2 Principal Collection Sub-subaccount in
immediately available funds shall be considered a distribution of
the entire amount required to be distributed to the VFC
Certificateholders. Notwithstanding anything to the contrary in
this Supplement or the Agreement, the entire amount of the
purchase price deposited in each such account shall be
distributed to the VFC Certificateholders on such Distribution
Date. If the Majority Purchasers give notice directing the
Company to purchase the Receivables as provided above, the
obligation of the Company to purchase the VFC Certificateholders'
Interest pursuant to this Section 2.9 shall constitute the sole
remedy respecting an event of the type specified in the first
sentence of this Section 2.9 available to the Purchasers.
SECTION 2.10. Indemnification by Company and the
Master Servicer. (a) The Company, subject to Section 11.16, and
the Master Servicer hereby agree, jointly and severally, to pay,
and to indemnify and hold harmless, the Agent, each Purchaser and
each of their respective officers, directors, agents and
employees (each such person being called an "Indemnitee") from
and against all claims, liabilities, damages, penalties and
losses, including without limitation (but subject to
Section 2.10(b)), reasonable attorneys' fees and expenses and
disbursements of counsel (all of the foregoing being referred to
collectively as "Indemnified Amounts") arising out of or
resulting from the Transaction Documents or the transactions
contemplated thereby, including Indemnified Amounts related to or
resulting from (i) the use by the Company of the proceeds from
the sale of any Certificates, (ii) a breach of any representation
or warranty made or deemed made by the Company or the Master
Servicer (or any of their respective officers) under or in
connection with any Transaction Document, (iii) the failure by
the Company or the Master Servicer to comply with any applicable
law, rule or regulation, (iv) any dispute, claim, offset or
defense (other than discharge in bankruptcy of the Obligor or as
a result of a Charge-Off of a Receivable) of the Obligor to the
payment of any Receivable (including, without limitation, a
defense based on such Receivable or the related contract not
being a legal, valid and binding obligation of such Obligor
-23-
<PAGE>
enforceable against it in accordance with its terms, or any other
claim resulting from the sale of the merchandise or services
related to such Receivable or the furnishing or failure to
furnish such merchandise or services or relating to collection
activities with respect to such Receivable), (v) any failure of
the Company or the Master Servicer to perform its covenants,
agreements, duties or obligations required to be performed or
observed by it, in accordance with the provisions of the Pooling
Agreement, the Servicing Agreement or the other Transaction
Documents, (vi) any products liability or other claim arising out
of or in connection with merchandise or service which are the
subject of any Receivable, (vii) the commingling of Collections
of Receivables at any time with other funds, or (viii) the
failure to maintain vested in the Trustee a first priority
ownership or security interest in the Trust Assets; provided,
however, that such indemnity shall not, as to any Indemnitee, be
available to the extent that such Indemnified Amounts are
determined by a court of competent jurisdiction to have resulted
from the gross negligence or willful misconduct of such
Indemnitee (treating, for this purpose only, any Person and its
respective directors, officers, employees and agents as a single
Indemnitee).
(b) If any action, suit, proceeding or investigation
is commenced as to which an Indemnitee proposes to demand
indemnification, it shall promptly so notify the Company and the
Master Servicer. The Indemnitee shall have the right to retain
counsel of its own choice to represent it (which choice of
counsel shall be reasonably satisfactory to the Company and the
Master Servicer (it being understood that it would not be
reasonable for the Company or the Master Servicer to object to
the Indemnitee's choice of law firm solely on the basis of the
location of such firm's principal office or the size of such
firm)), and the Company and the Master Servicer shall pay the
reasonable fees, expenses and disbursements of such counsel; and
such counsel shall, to the extent consistent with its
professional responsibilities, cooperate with the Company, the
Master Servicer and any counsel designated by the Company or the
Master Servicer. In no event shall the Company or the Master
Servicer be liable for the fees, expenses and disbursements of
more than one counsel representing all Indemnitees that are
parties to the same action, suit, proceeding or investigation.
The Company and the Master Servicer shall be liable for any
settlement of any action, suit, proceeding or investigation
against an Indemnitee made with the Company's and the Master
Servicer's written consent, which consent shall not be
unreasonably withheld. The Company and the Master Servicer may,
without the consent of an Indemnitee, settle or compromise any
action, suit, proceeding or investigation, or permit a default or
consent to the entry of any judgment in respect thereof, if such
settlement, compromise or consent includes the giving by the
claimant to such Indemnitee a release from all liability in
-24-
<PAGE>
respect of such action, suit, proceeding or investigation. In
the event of any dispute between any Indemnitee, on the one hand,
and the Company or the Master Servicer, on the other hand, as to
whether the Company or the Master Servicer is acting reasonably
in objecting to any proposed settlement, compromise, default or
consent, such dispute shall be resolved through arbitration in
New York City in accordance with the commercial arbitration rules
of the American Arbitration Association. There shall be a single
arbitrator to be selected by mutual agreement of the Indemnitee,
the Company and the Master Servicer (or, if such parties cannot
agree on an arbitrator, by an arbitrator selected by a federal or
state court located in the City of New York). Any such
arbitration must be commenced not later than 30 days after the
date such dispute arose. In any such arbitration, each party
shall be responsible for and pay its costs and expenses
(including attorneys' fees), and the parties shall share equally
in the cost of the arbitration.
(c) Notwithstanding anything to the contrary in this
Section 2.10, this Section 2.10 shall not apply to taxes, it
being understood that the Company's and the Master Servicer's
only obligations with respect to taxes shall arise under Section
7.3.
ARTICLE III
ARTICLE III OF THE AGREEMENT
Section 3.1 of the Agreement shall be read in its
entirety as provided in the Agreement. Article III of the
Agreement (except for Section 3.1 thereof and any portion thereof
relating to another Series) shall read in its entirety as follows
and shall be exclusively applicable to the Series 2 Certificates:
SECTION 3A.2. Establishment of Trust Accounts.
(a) The Trustee shall cause to be established and maintained in
the name of the Trustee, on behalf of the Trust, (i) for the
benefit of the Purchasers and for the benefit, subject to the
prior interest of the Purchasers, of the holder of the VFC
Subordinated Certificate, a subaccount of the U.S. Dollar
Collection Account (the "Series 2 Collection Subaccount"), which
subaccount is the Series Collection Subaccount with respect to
Series 2, bearing a designation clearly indicating that the funds
deposited therein are held for the benefit of the Purchasers and
for the benefit, subject to the prior interest of the Purchasers,
of the holder of the VFC Subordinated Certificate; (ii) for the
benefit of the Purchasers and for the benefit, subject to the
prior interest of the Purchasers, of the holder of the VFC
Subordinated Certificate, two subaccounts of the Series 2
Collection Subaccount: the Series 2 Principal Collection Sub-
subaccount and the Series 2 Non-Principal Collection
-25-
<PAGE>
Sub-subaccount (respectively, the "Series 2 Principal Collection
Sub-subaccount" and the "Series 2 Non-Principal Collection Sub-
subaccount"), each bearing a designation clearly indicating that
the funds deposited therein are held for the benefit of the
Purchasers and for the benefit, subject to the prior interest of
the Purchasers, of the holder of the VFC Subordinated
Certificate; (iii) for the benefit of the Purchasers, a
subaccount of the Series 2 Non-Principal Collection
Sub-subaccount (the "Series 2 Accrued Interest Sub-subaccount";
and (iv) for the benefit of the Purchasers, one subaccount of the
Canada/U.S. Dollar Collection Account (the "Series 2 Canada/U.S.
Dollar Collection Subaccount") and one subaccount of the
Canada/Canadian Dollar Collection Account (the "Series 2
Canada/Canadian Dollar Collection Subaccount"); all accounts
established pursuant to this subsection 3A.2(a) and listed on
Schedule 2, collectively, the "Trust Accounts"). The Trustee
shall possess all right, title and interest in all funds from
time to time on deposit in, and all Eligible Investments credited
to, the Trust Accounts and in all proceeds thereof. The Trust
Accounts shall be under the sole dominion and control of the
Trustee for the exclusive benefit of the Purchasers and to the
extent applicable, subject to the prior interest of the
Purchasers, to the holder of the VFC Subordinated Certificate.
(b) All Eligible Investments in the Trust Accounts
shall be held by the Trustee for the exclusive benefit of the
Purchasers and, subject to the prior interest of the Purchasers,
of the holder of the VFC Subordinated Certificate; provided,
however, that funds on deposit in a Trust Account which is a Sub-
subaccount of a Collection Account may, at the direction of the
Master Servicer, be invested together with funds held in other
Sub-subaccounts of a Collection Account. After giving effect to
any distribution to the Company pursuant to subsection 3A.3(c),
amounts on deposit and available for investment in the Series 2
Principal Collection Sub-subaccount shall be invested by the
Trustee at the written direction of the Company in Eligible
Investments that mature, or that are payable or redeemable upon
demand of the holder thereof, on or prior to the next Business
Day. Amounts on deposit and available for investment in the
Series 2 Accrued Interest Sub-subaccount shall be invested by the
Trustee at the written direction of the Company in Eligible
Investments that mature, or that are payable or redeemable upon
demand of the holder thereof, on or prior to the subsequent
Distribution Date. All interest and other investment earnings
(net of losses and investment expenses) on funds deposited in the
Series 2 Accrued Interest Sub-subaccount shall be deposited in
the Series 2 Non-Principal Collection Sub-subaccount. All
interest and investment earnings (net of losses and investment
expenses) on funds deposited in the Series 2 Principal Collection
Sub-subaccount shall be deposited in the Series 2 Non-Principal
Collection Sub-subaccount.
-26-
<PAGE>
SECTION 3A.3. Daily Allocations. (a) The portion of
the Aggregate Daily Collections allocated to the Series 2
Certificates pursuant to Article III of the Agreement shall be
allocated and distributed as set forth in this Article III. In
accordance with subsection 3.1(e) of the Agreement, the Master
Servicer shall direct the Trustee to transfer the following
amounts:
(i) on each Business Day, an amount equal to the
Accrued Expense Amount for such day (or such greater amount
as the Company may request) shall be transferred from the
Series 2 Collection Subaccount (or, if necessary, from the
Series 2 Canada/U.S. Dollar Collection Subaccount and the
Series 2 Canada/Canadian Dollar Collection Subaccount
pursuant to Section 3.1(e)(vii) of the Agreement) to the
Series 2 Non-Principal Collection Sub-subaccount; provided,
however, if on any Business Day, after giving effect to any
transfers to be made on such Business Day, the VFC Invested
Amount would be less than $10,000,000, the Master Servicer
shall direct the Trustee to transfer from the Series 2
Collection Subaccount (or, if necessary, from the Series 2
Canada/U.S. Dollar Collection Subaccount and the Series 2
Canada/Canadian Dollar Collection Subaccount pursuant to
Section 3.1(e)(vii) of the Agreement) to the Series 2 Non-
Principal Collection Sub-subaccount an amount equal to the
excess, if any, of (A) the sum of (1) the Commitment Fee
(assuming the daily average available Commitment would be
equal to the Maximum Commitment) payable to the Purchasers
on the next succeeding Distribution Date and (2) the Series
2 Certificates pro rata portion of the Servicing Fee due and
payable on the next succeeding Distribution Date over (B)
the amount transferred to and on deposit in the Series 2
Non-Principal Sub-subaccount prior to such Business Day
pursuant to clauses (ii) and (iii) of the definition of
Accrued Expense Amount; and
(ii) following the transfers pursuant to
clause (i) above, any remaining funds on deposit in the
Series 2 Collection Subaccount shall be transferred to the
Series 2 Principal Collection Sub-subaccount.
(b) (i) On each Business Day during the VFC Revolving
Period (including Distribution Dates), after giving effect to all
allocations of Aggregate Daily Collections on such Business Day,
amounts on deposit in the Series 2 Principal Collection Sub-
subaccount (together with any amounts transferred thereto
pursuant to subsection 3A.3(c) of the Series 1 Supplement), and
amounts, if any, remaining on deposit in the Series 2 Canada/U.S.
Dollar Collection Subaccount and the Series 2 Canada/Canadian
Dollar Collection Subaccount shall be distributed by the Trustee
to the Company (but only to the extent that the Trustee has
received a Daily Report which reflects the receipt of the
-27-
<PAGE>
Collections on deposit therein); provided that such distribution
shall be made only if no Early Amortization Event shall be
continuing and only to the extent that, if after giving effect to
such distribution, the VFC Target Receivables Amount would not
exceed the Aggregate Series 2 Receivables Amount; provided
further that if the Company or the Master Servicer shall have
given the Agent irrevocable notice (effective upon receipt) at
least one Eurodollar Business Day prior to such day (or, in the
case of the Floating Tranche, notice may be given on such day),
the Company or the Master Servicer may instruct the Trustee to
withdraw all or a portion of such amounts on deposit in the
Series 2 Principal Collection Sub-subaccount (together with any
amounts transferred thereto pursuant to subsection 3A.3(c) of the
Series 1 Supplement and any amounts to be transferred thereto
from the Series 2 Canada/U.S. Dollar Collection Sub-subaccount
and the Series 2 Canada/Canadian Dollar Collection Sub-
subaccount) and apply such withdrawn amounts toward the reduction
of the Aggregate VFC Invested Amount and the VFC Subordinated
Certificate Amount in accordance with Section 2.6; provided
further, that, if on any Business Day during the VFC Revolving
Period, after giving effect to all allocations of Aggregate Daily
Collections on such Business Day, the VFC Target Receivables
Amount would exceed the Aggregate Series 2 Receivables Amount,
the Master Servicer shall direct the Trustee to transfer to the
Series 2 Principal Collection Sub-subaccount, first, from amounts
on deposit in the Series 2 Canada/U.S. Dollar Collection
Subaccount and second, from amounts on deposit in the Series 2
Canada/Canadian Dollar Subaccount (after exchanging such amounts
into U.S. Dollars in accordance with subsection 3.1(j) of the
Agreement), an amount equal to such shortfall. Amounts
distributed to the Company hereunder shall be deemed to be paid
first from Collections received directly by any Servicing Party
and second from Collections received in the Lockboxes.
(ii) On each Business Day during the VFC Amortization
Period, amounts on deposit in the Series 2 Canada/U.S. Dollar
Collection Subaccount and, subject to subsection 3.1(j) of the
Agreement, the Series 2 Canada/Canadian Dollar Collection
Subaccount shall be transferred to the Series 2 Collection
Subaccount and allocated as set forth in Article III of the
Agreement and this Section 3A.3.
(iii) On each Business Day during the VFC Amortization
Period (including Distribution Dates), funds deposited in the
Series 2 Principal Collection Sub-subaccount (including, without
limitation, funds transferred pursuant to clause (b)(ii) above)
shall be invested in Eligible Investments that mature on or prior
to the next Determination Date and shall be distributed on such
Distribution Date in accordance with subsection 3A.6(c). No
amounts on deposit in the Series 2 Principal Collection
Sub-subaccount shall be distributed by the Trustee to the Company
-28-
<PAGE>
or the holder of the VFC Subordinated Certificate during a VFC
Amortization Period.
(c) On each Business Day, an amount equal to the Daily
Interest Deposit for such day shall be transferred from the
Series 2 Non-Principal Sub-subaccount to the Series 2 Accrued
Interest Sub-subaccount.
(d) The allocations to be made pursuant to this
Section 3A.3 are subject to the provisions of Sections 2.6, 7.2
and 9.1 of the Agreement.
SECTION 3A.4. Determination of Interest. (a) (i) The
amount of interest distributable with respect to the VFC
Certificates ("Series 2 Monthly Interest") on each Distribution
Date shall be determined by the Master Servicer and shall be (A)
with respect to that portion of the Aggregate VFC Invested Amount
allocated to each Eurodollar Tranche on such day, an amount equal
to the product of (1) the number of days in the preceding Accrual
Period divided by 360, (2) the weighted average portion of the
Aggregate VFC Invested Amount allocable to such Eurodollar
Tranche since the close of business on the preceding Distribution
Date and (3) the Eurodollar Rate applicable to such Eurodollar
Tranche for the Accrual Period ending on such Distribution Date
plus the Applicable Margin, and (B) with respect to that portion
of the Aggregate VFC Invested Amount allocated to the Floating
Tranche on such day, an amount equal to the sum of the portion of
the Daily Interest Expense accrued pursuant to clause (A) of the
definition thereof determined for each day of the Accrual Period
ended on such Distribution Date; provided, however, that during
the continuance of an Early Amortization Event, the "Series 2
Monthly Interest" on such Distribution Date shall be equal to the
greater of (x) the sum of the amounts calculated pursuant to
clauses (A) and (B) above and (y) the sum of the Daily Interest
Expense accrued pursuant to clause (ii) of the proviso to the
definition thereof determined for each day of the Accrual Period
relating to such Distribution Date.
(ii) Following any change in the amount of any
Eurodollar Tranche or Floating Tranche during an Accrual Period,
the Series 2 Monthly Interest shall be calculated with respect to
such changed amount for the number of days in the Accrual Period
during which such changed amount is outstanding.
(iii) If the Certificate Rate changes during any
Accrual Period, the Master Servicer and the Agent shall cooperate
in amending the Monthly Settlement Statement to reflect the
adjustment in the Series 2 Monthly Interest for such Accrual
Period caused by such change and any consequent adjustments,
including, without limitation, adjustment to the Series 2
Deficiency Amount, if any, and the Master Servicer shall also
provide notification to the Trustee of any such change in the
-29-
<PAGE>
Certificate Rate. Any amendment to the Monthly Settlement
Statement pursuant to this subsection 3A.4(a)(ii), including,
without limitation, any adjustment to the Series 2 Deficiency
Amount, shall be completed by 10:00 a.m. on the day preceding the
next Settlement Report Date.
(b) On each Distribution Date, the Master Servicer
shall determine the excess, if any (the "Interest Shortfall"), of
(i) the aggregate Series 2 Monthly Interest for the Accrual
Period ending on such Distribution Date over (ii) the amount
which will be available to be distributed to the Purchasers on
such Distribution Date in respect thereof pursuant to this
Supplement. If the Interest Shortfall with respect to any
Distribution Date is greater than zero, an additional amount
("Additional Interest") equal to the product of (A) the number of
days until such Interest Shortfall shall be repaid divided by
365, (B) the Alternate Base Rate plus 2.0% and (C) such Interest
Shortfall (or the portion thereof which has not been paid to the
Purchasers) shall be payable as provided herein with respect to
the VFC Certificates on each Distribution Date following such
Distribution Date to and including, the Distribution Date on
which such Interest Shortfall is paid to the VFC
Certificateholders.
(c) On any Eurodollar Business Day, the Company may,
subject to subsection 3A.4(e), elect to allocate all or any
portion of the Available Pricing Amount to one or more Eurodollar
Tranches with Eurodollar Periods commencing on such Eurodollar
Business Day by giving the Agent irrevocable written or
telephonic (confirmed in writing) notice thereof, which notice
must be received by the Agent prior to 12:00 noon, New York City
time, three Eurodollar Business Days prior to such Eurodollar
Business Day. Such notice shall specify (i) the applicable
Eurodollar Business Day, (ii) the Eurodollar Period for each
Eurodollar Tranche to which a portion of the Available Pricing
Amount is to be allocated and (iii) the portion of the Available
Pricing Amount being allocated to each such Eurodollar Tranche.
Promptly upon receipt of each such notice the Agent shall notify
each Purchaser of the contents thereof. If the Agent shall not
have received timely notice as aforesaid with respect to all or
any portion of the Available Pricing Amount, the Monthly Interest
Payment on such amount shall be calculated by reference to the
Alternate Base Rate.
(d) Any reduction in the VFC Invested Amount on any
Business Day shall be allocated in the following order of
priority:
First, to reduce the Available Pricing Amount, as
appropriate; and
-30-
<PAGE>
Second, to reduce the portion of the Aggregate VFC
Invested Amount allocated to Eurodollar Tranches in
such order as the Company may select in order to
minimize costs payable pursuant to Section 7.4.
(e) Notwithstanding anything to the contrary contained
in this Section 3A.4, (i) the portion of the Aggregate VFC
Invested Amount allocable to each Eurodollar Tranche must be in
an amount equal to $5,000,000 or an integral multiple of
$1,000,000 in excess thereof; (ii) no more than five Eurodollar
Tranches shall be outstanding at any one time; (iii) after the
occurrence and during the continuance of any Early Amortization
Event, the Company may not elect to allocate any portion of the
Available Pricing Amount to a Eurodollar Tranche; and (iv) after
the end of the VFC Revolving Period, the Company may not select
any Eurodollar Period that exceeds one month or that does not end
on or prior to the next succeeding Distribution Date.
SECTION 3A.5. Determination of Series 2 Monthly
Principal Payment During a VFC Amortization Period. The amount
(the "Series 2 Monthly Principal Payment") distributable from the
Series 2 Principal Collection Sub-subaccount on each Distribution
Date during the VFC Amortization Period shall be equal to the
amount on deposit in such account on the immediately preceding
Determination Date; provided, however, that Series 2 Monthly
Principal Payment on any Distribution Date shall not exceed the
Aggregate VFC Invested Amount on such Distribution Date.
Further, on any other Business Day during the VFC Amortization
Period, funds may be distributed from the Series 2 Principal
Collection Sub-subaccount to the Purchasers in accordance with
Section 2.6 of this Supplement.
SECTION 3A.6. Applications. (a) The Master Servicer
shall direct the Trustee to distribute, on each Distribution
Date, from amounts on deposit in the Series 2 Accrued Interest
Sub-subaccount, an amount equal to the Series 2 Monthly Interest
payable on such Distribution Date (such amount, the "Monthly
Interest Payment"), plus the amount of any Monthly Interest
Payment previously due but not distributed to the Purchasers on a
prior Distribution Date, plus the amount of any Additional
Interest for such Distribution Date and any Additional Interest
previously due but not distributed to the Purchasers on a prior
Distribution Date, to the Purchasers.
(b) On each Distribution Date, the Master Servicer
shall direct the Trustee to apply funds on deposit in the Series
2 Non-Principal Collection Sub-subaccount (after taking into
consideration the distribution to the Purchasers from the Series
2 Non-Principal Collection Sub-subaccount pursuant to subsection
3A.6(a)) in the following order of priority to the extent funds
are available:
-31-
<PAGE>
(i) an amount equal to the Series 2 Monthly Servicing
Fee for the Accrual Period ending on such Distribution Date
shall be withdrawn from the Series 2 Non-Principal
Collection Sub-subaccount by the Trustee and paid to the
Master Servicer, provided that if an Early Amortization
Event shall have occurred and C&A Products or any Affiliate
thereof is the Master Servicer, the Trustee shall deposit
the Series 2 Monthly Servicing Fee into the Expense Account
up to the amount of the Expense Account Limit, or if C&A
Products or any Affiliate thereof is not the Master
Servicer, the Series 2 Monthly Servicing Fee shall be paid
to such Person acting as Successor Servicer; and
(ii) an amount equal to any Program Costs due and
payable shall be withdrawn from the Series 2 Non-Principal
Collection Sub-subaccount by the Trustee and paid to the
Persons owed such amounts.
Any remaining amounts on deposit in the Series 2 Non-Principal
Collection Sub-subaccount (in excess of the Accrued Expense
Amount as of such day) not allocated pursuant to clauses (i) and
(ii) above shall be paid to the holder of the VFC Subordinated
Certificate; provided, however, that during the VFC Amortization
Period, such remaining amounts shall be deposited in the Series 2
Principal Collection Sub-subaccount for distribution in
accordance with subsection 3A.6(c).
(c) During a VFC Amortization Period, the Master
Servicer shall direct the Trustee to apply, on each Distribution
Date, amounts on deposit in the Series 2 Principal Collection
Sub-subaccount in the following order of priority:
(i) an amount equal to the Series 2 Monthly Principal
Payment for such Distribution Date shall be distributed from
the Series 2 Principal Collection Sub-subaccount to the
Purchasers; and
(ii) if, following the repayment in full of the VFC
Invested Amount, any amounts are owed to the Trustee or any
other Person, on account of its expenses incurred in respect
of the performance of its responsibilities hereunder or as
Successor Servicer, such amounts shall be transferred from
the Series 2 Principal Collection Sub-subaccount and paid to
the Trustee or such other Person; and
(iii) if, following the repayment of all of the amounts
set forth in clauses (i) and (ii) above, the remaining
amount on deposit in the Series 2 Principal Collection Sub-
subaccount on such Distribution Date, if any, shall be
distributed to the holder of the VFC Subordinated
Certificate.
-32-
<PAGE>
ARTICLE IV
DISTRIBUTIONS AND REPORTS
Article IV of the Agreement (except for any portion
thereof relating to another Series) shall read in its entirety as
follows and the following shall be exclusively applicable to the
VFC Certificates:
SECTION 4A.1. Distributions. (a) On each
Distribution Date, the Trustee shall distribute to each Purchaser
an amount equal to the product of (i) the amount to be
distributed to the Purchasers pursuant to Article III and (ii)
such Purchaser's Commitment Percentage.
(b) All allocations and distributions hereunder shall
be in accordance with the Monthly Settlement Statement and shall
be made in accordance with the provisions of Section 11.4 hereof
and subject to Section 3.1(h) of the Agreement.
SECTION 4A.2. Daily Reports. The Master Servicer
shall provide the Agent and the Trustee with a Daily Report in
accordance with subsection 4.2(a) of the Servicing Agreement.
The Agent shall make copies of the Daily Report available to the
Purchasers at their reasonable request at the Agent's office in
The City of New York.
SECTION 4A.3. Statements and Notices. (a) Monthly
Settlement Statements. On each Settlement Report Date, the
Master Servicer shall deliver to the Trustee and the Agent a
Monthly Settlement Statement. The Agent shall forward a copy of
each Monthly Settlement Statement to any Purchaser upon request
by such Purchaser.
(b) Annual Certificateholders' Tax Statement. On or
before April 1 of each calendar year (or such earlier date as
required by applicable law), beginning with calendar year 1996,
the Company on behalf of the Trustee shall furnish, or cause to
be furnished, to each Person who at any time during the preceding
calendar year was a Purchaser, a statement prepared by the
Company containing the aggregate amount distributed to such
Person for such calendar year or the applicable portion thereof
during which such Person was a Purchaser, together with such
other information as is required to be provided by an issuer of
indebtedness under the Internal Revenue Code and such other
customary information as the Company deems necessary or desirable
to enable the Purchasers to prepare their tax returns. Such
obligation of the Company shall be deemed to have been satisfied
to the extent that substantially comparable information shall
have been provided by the Trustee or the Agent pursuant to any
requirements of the Internal Revenue Code as from time to time in
effect.
-33-
<PAGE>
(c) Early Amortization Event Notices. Upon the
occurrence of an Early Amortization Event with respect to Series
2, the Company or the Master Servicer, as the case may be, shall
give prompt written notice thereof to the Trustee and the Agent.
The Agent shall give notice to each Purchaser. In addition, on
the Business Day preceding each day on which a distribution of
principal is to be made during the VFC Amortization Period, the
Master Servicer shall direct the Agent to send notice to each
Purchaser, which notice shall set forth the amount of principal
to be distributed on the related date to the Purchasers with
respect to the outstanding VFC Certificates.
ARTICLE V
ADDITIONAL EARLY AMORTIZATION EVENTS
SECTION 5.1. Additional Early Amortization Events. If
an "Early Amortization Event" shall occur with respect to the
Series 1 Certificates under the Series 1 Supplement during the
VFC Revolving Period, an "Early Amortization Event" also shall be
deemed to have occurred hereunder with respect to the Series 2
Certificates. In addition, if any one of the events specified in
Section 7.1 of the Agreement (after any grace periods or consents
applicable thereto) or any one of the following events shall
occur during the VFC Revolving Period:
(a) failure on the part of the Company to make any
payment (i) in respect of interest owing on any VFC
Certificates or the Commitment Fee within two Business Days
of the date such interest or Commitment Fee is due or (ii)
in respect of any other amounts owing by the Company under
any Pooling and Servicing Agreement to or for the benefit of
the Purchasers within five Business Days of the date such
other amount is due;
(b) failure on the part of the Company duly to observe
or perform in any material respect any covenants or
agreements of the Company set forth in any Pooling and
Servicing Agreement or the other Transaction Documents which
continues unremedied until 30 days after the earlier of (i)
the date any Responsible Officer of the Company obtains
actual knowledge of such failure and (ii) the date on which
written notice of such failure, requiring the same to be
remedied, shall have been given to the Company by the
Trustee, or the Company and the Trustee by the Agent or
Purchasers evidencing 25% or more of the VFC Invested
Amount;
(c) any representation or warranty made by the Company
in any Pooling and Servicing Agreement shall prove to have
been incorrect in any material respect when made or when
-34-
<PAGE>
deemed made which continues to be incorrect until 30 days
after the date on which notice of such failure, requiring
the same to be remedied, shall have been given by the
Trustee to the Company or the Company and the Trustee by
Purchasers evidencing 25% or more of the VFC Invested Amount
and as a result of such incorrectness, the interests, rights
or remedies of the Purchasers have been materially and
adversely affected; provided, however, that no event under
Section 5.1 herein or Section 7.1 of the Agreement with
respect to the Series 2 Certificates shall not be deemed to
have occurred under this paragraph if the incorrectness of
such representation or warranty gives rise to an obligation
to repurchase the related Receivables and the Company has
repurchased the related Receivable or all such Receivables,
if applicable, in accordance with the provisions of the
Pooling and Servicing Agreements within ten Business Days of
when the Company was obligated to do so;
(d) as of the end of any Settlement Period, the three
month rolling average of the Dilution Ratio shall exceed
5.0%;
(e) as of the end of any Settlement Period, the three
month rolling average of the ratio, expressed as a
percentage, for each such Settlement Period of (i) the
Principal Amount of the Primary Auto Receivables and
Additional Series 2 Receivables that are between 61-90 days
past due as of the last day of such Settlement Period to
(ii) the aggregate Principal Amount of the outstanding
Primary Auto Receivables and Additional Series 2 Receivables
on such day, shall exceed 3.0%;
(f) as of the end of any Settlement Period, the three
month rolling average of the ratio, expressed as a
percentage, for each such Settlement Period of (i) the
Principal Amount of the Primary Auto Receivables and
Additional Series 2 Receivables that have become 91-120 days
past due as of the last day of such Settlement Period to
(ii) the aggregate Principal Amount of the outstanding
Primary Auto Receivables and Additional Series 2 Receivables
on such day, shall exceed 2.25%;
(g) an Event of Default (as defined in the Credit
Agreement) shall have occurred pursuant to Article VII of
the Credit Agreement and the effect of which Event of
Default is to cause the Loans (as defined in the Credit
Agreement) then outstanding to be due and payable prior to
their stated maturity;
(h) an Event of Default (as defined in the Credit
Agreement) shall have occurred (i) pursuant to clause (b) or
(c) of Article VII of the Credit Agreement or (ii) as a
-35-
<PAGE>
result of the failure by Holdings, any Restricted Subsidiary
or any Significant Subsidiary (each as defined in the Credit
Agreement as in effect on the date hereof) to pay any
principal or interest due in respect of (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 or (C) all obligations of such person in respect
of bankers' acceptances issued or created for the account of
such person, having (in the case of (A), (B) or (C)) an
aggregate principal or notional amount of $15,000,000 or
more, when and as the same shall become due and payable,
after giving effect to any applicable grace period;
(i) the Trustee shall be appointed, pursuant to
Section 6.2 of the Servicing Agreement, as Master Servicer
to liquidate the Receivables and the Related Property;
(j) the Series 2 Allocated Receivables Amount shall be
less than the VFC Target Receivables Amount for a period of
five consecutive Business Days;
(k) a Servicer Default with respect to the Master
Servicer shall have occurred and be continuing;
(l) any of the Agreement, the Servicing Agreement,
this Supplement, the Series 1 Supplement or the Receivables
Sale Agreement shall cease, for any reason, to be in full
force and effect, or the Company, a Seller or the Master
Servicer shall so assert in writing; or
(m) failure on the part of the Company to make any
payment in respect of interest owing on any Series 1
Certificate or in respect of any other amounts owing by the
Company under any Pooling and Servicing Agreement to or for
the benefit of the holders of the Series 1 Certificates,
which failure continues unremedied for a period of 60 days,
and an "Early Amortization Event" with respect to Series 1
has not been declared by the Trustee; or
(n) the Internal Revenue Service or the Pension
Benefit Guaranty Corporation shall file a notice of lien
with regard to the assets of Collins & Aikman Corporation,
the Company, the Trust or any of the Sellers and 30 days
shall have elapsed without such notice having been
effectively withdrawn or such lien having been released or
discharged;
then, in the case of any event described above, after the
applicable grace periods (if any) set forth in such subsections,
-36-
<PAGE>
the Trustee may, and at the written direction of the Majority
Purchasers shall, by written notice then given to the Company and
the Master Servicer, declare that a "Separate VFC Amortization
Event" has occurred with respect to the Series 2 Certificates as
of the date of such notice and that the VFC Amortization Period
has commenced. A Separate VFC Amortization Event also shall
constitute an Early Amortization Event with respect to Series 2.
Notwithstanding the foregoing, a delay in or failure in
performance referred to in clause (a) above for a period of
five Business Days after the applicable grace period, or in
clause (b) above for a period of 30 Business Days after the
applicable grace period, will not constitute an Early
Amortization Event if such delay or failure could not have been
prevented by the exercise of reasonable diligence by the Company
and such delay or failure was caused by an act of God or the
public enemy, riots, acts of war, acts of terrorism, epidemics,
flood, embargoes, weather, landslides, fire, earthquakes or
similar causes. The Company will nevertheless be required to use
its best efforts to perform its obligations in a timely manner in
accordance with the terms of the Transaction Documents, and the
Company shall promptly give the Trustee an Officer's Certificate
notifying it of such failure or delay by it.
ARTICLE VI
SERVICING FEE
SECTION 6.1. Servicing Compensation. A monthly
servicing fee (the "Series 2 Monthly Servicing Fee") shall be
payable to the Master Servicer, on behalf of the Servicing
Parties, on each Distribution Date for the Accrual Period then
ending, in an amount equal to the product of (a) the Servicing
Fee and (b) a fraction the numerator of which is the daily
average Aggregate Commitment Amount for such Accrual Period and
the denominator of which is the sum of (i) the daily average of
the Invested Amounts for each Outstanding Series (other than
Series 2) such Accrual Period and (ii) the daily average of the
Aggregate Commitment Amount for such Accrual Period; provided,
however, that if an Early Amortization Event has occurred and is
continuing and C&A Products or any Affiliate thereof is acting as
Master Servicer, (i) the Series 2 Monthly Servicing Fee shall be
deposited into the Expense Account up to the amount of the
Expense Account Limit for application in accordance with Section
7.3 of the Agreement and (ii) thereafter, the Series 2 Monthly
Servicing Fee shall be deferred until the VFC Invested Amount has
been paid in full.
-37-
<PAGE>
ARTICLE VII
CHANGE IN CIRCUMSTANCES
SECTION 7.1. Illegality. (a) Notwithstanding any
other provision herein, if, after the Issuance Date, the adoption
of or any change in any Requirement of Law or in the
interpretation or administration thereof by any Governmental
Authority charged with the interpretation or administration
thereof shall make it unlawful for any Purchaser to make or
maintain its portion of the VFC Certificateholders' Interest in
any Eurodollar Tranche and such Purchaser shall notify the Agent,
the Trustee and the Company, then the portion of each Eurodollar
Tranche applicable to such Purchaser shall thereafter be
calculated by reference to the Alternate Base Rate. If any such
change in the method of calculating interest occurs on a day
which is not the last day of the Eurodollar Period with respect
to any Eurodollar Tranche, the Company shall pay to the Agent for
the account of such Purchaser the amounts, if any, as may be
required pursuant to Section 7.4.
(b) For purposes of this Section 7.1, a notice to the
Company by any Purchaser shall be effective as to each Eurodollar
Tranche, if lawful, on the last day of the Eurodollar Period
currently applicable to such Eurodollar Tranche; in all other
cases such notice shall be effective on the date of receipt by
the Company.
SECTION 7.2. Requirements of Law. (a)
Notwithstanding any other provision herein, if after the Issuance
Date any change in any Requirement of Law or in the
interpretation or administration thereof by any Governmental
Authority charged with the administration thereof (whether or not
having the force of law) shall change the basis of taxation of
payments to any Purchaser in respect of such Purchaser's portion
of the VFC Certificateholders' Interest (other than (i) any Non-
Excluded Taxes described in Section 7.3 and (ii) changes in
respect of taxes imposed on the overall net income of such
Purchaser by the jurisdiction in which such Purchaser has its
principal office or by any political subdivision or taxing
authority therein), 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 Purchaser (except any such reserve requirement which is
reflected in the Eurodollar Base Rate), or shall impose on any
Purchaser any other condition affecting this Supplement or such
Purchaser's Commitment hereunder, and the result of any of the
foregoing is to increase the cost to such Purchaser of purchasing
or maintaining its portion of the VFC Certificateholders'
Interest by an amount which such Purchaser deems to be material,
then the Company will pay to such Purchaser upon demand such
-38-
<PAGE>
additional amount or amounts as will compensate such Purchaser
for such additional costs incurred or reduction suffered.
(b) If any Purchaser shall have determined that the
adoption of or any change in any Requirement of Law regarding
capital adequacy or in the interpretation or administration
thereof by any Governmental Authority, central bank or comparable
agency charged with the interpretation or administration thereof,
or compliance by such Purchaser (or any purchasing office of such
Purchaser) or any Purchaser's holding company with any request or
directive regarding capital adequacy (whether or not having the
force of law) made or issued after the Issuance Date by any such
Governmental Authority, central bank or comparable agency, has or
would have the effect of reducing the rate of return on such
Purchaser's capital or on the capital of such Purchaser's holding
company, if any, as a consequence of its obligations hereunder to
a level below that which such Purchaser or such Purchaser's
holding company would have achieved but for such adoption, change
or compliance (taking into consideration such Purchaser's
policies and the policies of such Purchaser's holding company
with respect to capital adequacy) by an amount deemed by such
Purchaser to be material, then from time to time, the Company
shall promptly pay to such Purchaser such additional amount or
amounts as will compensate such Purchaser for any such reduction
suffered.
(c) A certificate of each Purchaser setting forth such
amount or amounts as shall be necessary to compensate such
Purchaser or its holding company as specified in subsections
7.2(a) and (b) above, as the case may be, shall be delivered to
the Company and the Master Servicer through the Agent and shall
be conclusive absent manifest error. The Company shall pay each
Purchaser the amount shown as due on any such certificate
delivered by it on the Distribution Date subsequent to such
notification.
(d) In the event any Purchaser delivers a notice
pursuant to subsection 7.2(e) below, the Company may require, at
the Company's expense and subject to Section 7.4, such Purchaser
to assign, upon payment of such Purchaser's VFC Invested Amount
plus accrued interest and fees payable hereunder, without
recourse (in accordance with Section 11.10), all of its
interests, rights and obligations hereunder (including all of its
Commitment and the VFC Certificateholders' Interest 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 Requirement of Law of any court or other Governmental
Authority, (ii) the Company shall have received the written
consent of the Agent, which consent shall not unreasonably be
withheld, to such assignment and (iii) the Company shall have
paid to the assigning Purchaser all monies accrued and owing
hereunder to it (including pursuant to this Section 7.2).
-39-
<PAGE>
(e) Promptly after any Purchaser has determined, in
its sole judgment, that it will make a request for increased
compensation pursuant to this Section 7.2, such Purchaser will
notify the Company thereof. Failure on the part of any Purchaser
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 Purchaser's right to demand
compensation with respect to such period or any other period;
provided that the Company shall not be under any obligation under
subsections 7.2(a) or (b) with respect to any increased costs or
reductions with respect to any period prior to the date that is
six months prior to such request if such Purchaser knew or could
reasonably have been expected to be aware of 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 7.2 shall be available to each
Purchaser 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 7.3. Taxes. (a) All payments made by the
Company under this Supplement shall be made free and clear of,
and without deduction or withholding for or on account of, any
present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding (i) net income taxes and
franchise taxes (imposed in lieu of net income taxes) imposed on
the Agent or any Purchaser as a result of a present or former
connection between the Agent or such Purchaser and the
jurisdiction of the Governmental Authority imposing such tax or
any political subdivision or taxing authority thereof or therein
(other than any such connection arising solely from the Agent or
such Purchaser having executed, delivered or performed its
obligations or received a payment under, or enforced, this
Supplement) and (ii) any United States withholding taxes payable
with respect to payments under this Supplement under laws
(including, without limitation, any statute, treaty, ruling,
determination or regulation) in effect on the date such Purchaser
or a Participant became a party to this Supplement. If any such
non-excluded taxes, levies, imposts, duties, charges, fees
deductions or withholdings ("Non-Excluded Taxes") are required to
be withheld from any amounts payable to the Agent or any
Purchaser hereunder, the amounts so payable to the Agent or such
Purchaser shall be increased to the extent necessary to yield to
the Agent or such Purchaser (after payment of all Non-Excluded
-40-
<PAGE>
Taxes) interest or any such other amounts payable hereunder at
the rates or in the amounts specified in this Supplement;
provided, however, that the Company shall not be required to
increase any such amounts payable to any Purchaser that is not
organized under the laws of the United States of America or a
state thereof if such Purchaser fails to comply with the
requirements of subsection 7.3(b). Whenever any Non-Excluded
Taxes are payable by the Company, as promptly as possible
thereafter the Company shall send to the Agent for its own
account or for the account of such Purchaser, as the case may be,
a certified copy of an original official receipt received by the
Company showing payment thereof. If the Company fails to pay any
Non-Excluded Taxes when due to the appropriate taxing authority
or fails to remit to the Agent the required receipts or other
required documentary evidence, the Company shall indemnify the
Agent and the Purchasers for any incremental taxes, interest or
penalties that may become payable by the Agent or any Purchaser
as a result of any such failure.
(b) Each Purchaser that is not incorporated under the
laws of the United States of America or a state thereof agrees
that prior to the Issuance Date (or if such Purchaser is not an
Initial Purchaser, prior to or at the time such Purchaser becomes
a "Purchaser" hereunder) it shall:
(i) deliver to the Company and the Agent (A) two
duly completed copies of United States Internal Revenue
Service Form 1001 or 4224, or successor applicable form, as
the case may be, and (B) an Internal Revenue Service Form
W-8 or W-9, or successor applicable form, as the case may
be;
(ii) deliver to the Company and the Agent two
further copies of any such form or certification on or
before the date that any such form or certification expires
or becomes obsolete and after the occurrence of any event
requiring a change in the most recent form previously
delivered by it to the Company; and
(iii) obtain such extensions of time for filing and
complete such forms or certifications as may reasonably be
requested by the Company or the Agent;
unless in any such case an event (including, without limitation,
any change in treaty, law or regulation) has occurred prior to
the date on which any such delivery would otherwise be required
which renders all such forms inapplicable or which would prevent
such Purchaser from duly completing and delivering any such form
with respect to it and such Purchaser so advises the Company and
the Agent. Such Purchaser shall certify (to the extent permitted
by law) (i) in the case of a Form 1001 or 4224, that it is
entitled to receive payments under this Supplement without
-41-
<PAGE>
deduction or withholding of any United States federal income
taxes and (ii) in the case of a Form W-8 or W-9, that it is
entitled to an exemption from United States backup withholding
tax. Each Person that shall become a Purchaser or a Participant
pursuant to Section 11.10 shall, upon the effectiveness of the
related transfer, be required to provide all of the forms and
statements required pursuant to this subsection, provided that in
the case of a Participant such Participant shall furnish all such
required forms and statements to the Purchaser from which the
related participation shall have been purchased.
(c) No increased amount on account of Non-Excluded
Taxes shall be payable pursuant to this Section 7.3 to any
Purchaser to the extent such Non-Excluded Taxes would not have
been payable if such Purchaser had furnished a form (properly and
accurately completed in all material respects) which it was
otherwise required to furnish in accordance with subsection
7.3(b).
(d) Each Purchaser shall furnish the Agent, and the
Agent shall furnish the Company (to the extent received from the
Purchasers), with information necessary to enable the Company to
comply with United States federal income tax information
reporting requirements regarding payments of interest received by
Purchasers under this Supplement.
(e) Upon the occurrence of any event requiring Non-
Excluded Taxes to be withheld from any amounts payable to any
Purchaser hereunder, each Purchaser whose Commitment hereunder is
affected by such event shall transfer its Commitment to another
branch office (or, if such Purchaser so elects, to an Affiliate)
of such Purchaser; provided that such transfer shall be made only
if such Purchaser shall have determined in good faith (which
determination shall, absent manifest error, be final, conclusive
and binding upon all parties) that, on the basis of existing
circumstances, such transfer will avoid or reduce the amount of
Non-Excluded Taxes withheld resulting from such event and will
not result in any additional costs, liabilities or expenses to
such Purchaser (unless the Company agrees to pay such additional
costs, liabilities or expenses of such Purchaser).
SECTION 7.4. Indemnity. The Company and the Master
Servicer jointly and severally agree to indemnify each Purchaser
and to hold each Purchaser harmless from any loss or expense
which such Purchaser may sustain or incur as a consequence of (a)
default by the Company in making a borrowing of, conversion into
or continuation of a Eurodollar Tranche after the Company has
given irrevocable notice requesting the same in accordance with
the provisions of this Supplement, (b) default by the Company in
making any prepayment after the Company has given irrevocable
notice thereof in accordance with the provisions of this
Supplement or (c) the making of a prepayment of a Eurodollar
-42-
<PAGE>
Tranche prior to the termination of the Eurodollar Period for
such Eurodollar Tranche. Such indemnification may include an
amount equal to the excess, if any, of (i) the amount of interest
which would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of
such prepayment or of such failure to borrow, convert or continue
to the last day of such Eurodollar Period (or, in the case of a
failure to borrow, convert or continue, the Eurodollar Period
that would have commenced on the date of such failure) in each
case at the applicable rate of interest for such Eurodollar
Tranche provided for herein (excluding, however, the Applicable
Margin included therein, if any) over (ii) the amount of interest
(as reasonably determined by such Purchaser) which would have
accrued to such Purchaser on such amount by placing such amount
on deposit for a comparable period with leading banks in the
interbank eurodollar market. A certificate as to any additional
amounts payable pursuant to the foregoing sentence submitted by
any Purchaser to the Company and the Master Servicer shall be
conclusive absent manifest error.
SECTION 7.5. Limitation. The obligations of the
Company under this Article VII shall be limited by Section 11.16.
ARTICLE VIII
COVENANTS, REPRESENTATIONS AND WARRANTIES
SECTION 8.1. Representations and Warranties of the
Company and the Master Servicer. The Company and the Master
Servicer each hereby represents and warrants to the Trustee, the
Agent and each of the Purchasers that each and every of their
respective representations and warranties contained in the
Agreement is true and correct in all material respects as of the
Issuance Date and as of the date of each Increase.
SECTION 8.2. Covenants of the Company. The Company
hereby agrees that:
(a) it shall observe in all material respects each and
every of its respective covenants (both affirmative and
negative) contained in the Agreement, the Servicing
Agreement, this Supplement and all other Transaction
Documents to which it is a party;
(b) it shall not terminate the Agreement unless in
strict compliance with the terms of the Agreement; and
(c) it shall afford the Agent or any representative of
the Agent access to all records relating to the Receivables
at any reasonable time during regular business hours, upon
reasonable prior notice, for purposes of inspection and
-43-
<PAGE>
shall permit the Agent or any representative of the Agent to
visit any of its offices or properties during regular
business hours and as often as may reasonably be desired
according to the Company's normal security and
confidentiality requirements and to discuss the business,
operations, properties, financial and other conditions of
the Company with its officers and employees and with its
independent certified public accountants; provided that the
Agent shall notify the Company prior to any contact with
such accountants and shall give the Company the opportunity
to participate in such discussions.
SECTION 8.3. Covenants of the Master Servicer. The
Master Servicer hereby agrees that:
(a) it shall observe in all material respects
each and every of its respective covenants (both
affirmative and negative) contained in the Agreement,
the Servicing Agreement, this Supplement and all other
Transaction Documents to which it is a party;
(b) subject to any applicable limitation under the
related Supplement of any other Outstanding Series, it shall
not (i) amend, supplement or otherwise modify any Receivable
which will result in a material adverse effect on the
interest of the Purchasers in the Receivables transferred to
the Trust and in the Collections in respect thereof without
the consent of the Majority Purchasers or (ii) terminate the
Agreement unless in strict compliance with the terms of the
Agreement;
(c) it shall provide to the Agent, simultaneously with
delivery to the Trustee or the Rating Agencies, all reports,
notices, certificates, statements and other documents
required to be delivered to the Trustee or the Rating
Agencies pursuant to the Agreement, the Servicing Agreement
and the other Transaction Documents and furnish to the Agent
promptly after receipt thereof a copy of each material
notice, material demand or other material communication
(excluding routine communications) received by or on behalf
of the Company or the Master Servicer with respect to the
Transaction Documents;
(d) it shall afford the Agent or any representative of
the Agent access to all records relating to the Receivables
at any reasonable time during regular business hours, upon
reasonable prior notice, for purposes of inspection and
shall permit the Agent or any representative of the Agent to
visit any of its offices or properties during regular
business hours and as often as may reasonably be desired
according to the Master Servicer's normal security and
confidentiality requirements and to discuss the business,
-44-
<PAGE>
operations, properties, financial and other conditions of
the Master Servicer with its officers and employees and with
its independent certified public accountants; provided that
the Agent shall notify the Master Servicer prior to any
contact with such accountants and shall give the Master
Servicer (if C&A Products) the opportunity to participate in
such discussions; and
(e) it shall provide notice to the Agent of the
appointment of a Successor Servicer pursuant to Section 6.2
of the Servicing Agreement.
SECTION 8.4. Obligations Unaffected. The obligations
of the Company and the Master Servicer to the Agent and the
Purchasers under this Supplement shall not be affected by reason
of any invalidity, illegality or irregularity of any of the
Receivables or any sale of any of the Receivables.
SECTION 8.5. Representations and Warranties of the
Initial Purchasers. Each Initial Purchaser represents, warrants
and covenants to the Company, as of the Issuance Date, that:
(a) Such Initial Purchaser acknowledges that the VFC
Certificates have not been and will not be registered under the
Securities Act in reliance upon the exemption provided in Section
4(2) of the Securities Act, and have not and will not be
registered or qualified under the securities or "blue sky" laws
of any jurisdiction, and may not be resold or otherwise
transferred unless so registered or qualified or unless any
exemption from such requirements is available.
(b) Such Initial Purchaser is purchasing the VFC
Certificates in the ordinary course of its business and for
investment only solely for its own account or accounts for which
it exercises sole investment discretion and not as nominee or
agent for any other Person and not with a view to, or for offer
or sale in connection with, any distribution thereof (within the
meaning of the Securities Act) that would be in violation of the
securities laws of the United States of America or any state
thereof.
(c) Such Initial Purchaser is an institutional
investor that is an "Accredited Investor" (as defined under Rule
501(a) of the Securities Act) or, if the VFC Certificates are to
be purchased for one or more institutional accounts ("investor
accounts) for which it is acting as a fiduciary or agent, each
such investor account is an institutional investor that is an
Accredited Investor.
(d) Such Initial Purchaser invests in or has such
knowledge and experience in business and financial matters and
with respect to investments in securities so as to enable it to
-45-
<PAGE>
understand and evaluate the risks of such investments and form an
investment decision with respect thereto and is able to bear the
risk of such investment for an indefinite period and to afford a
complete loss thereof.
(e) Such Initial Purchaser has been afforded access to
information (including the financial condition) about the
Company, C&A Products and the Sellers to enable such Initial
Purchaser to evaluate its investment in the VFC Certificates and
acknowledges that it has been afforded the opportunity (i) to ask
such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company, C&A Products or
Persons acting on its behalf concerning the terms and conditions
of the offering of the VFC Certificates and the merits and risks
of investing in the VFC Certificates, (ii) to obtain such
additional information which the Company possesses or can acquire
without unreasonable effort or expense that is necessary to
verify the accuracy and completeness of the Information and (iii)
to review the filings of Collins & Aikman Corporation with the
Securities and Exchange Commission and all of the public
disclosure of Collins & Aikman Corporation.
(f) Such Initial Purchaser acknowledges that it is the
expressed intent of the Company that the VFC Certificates are
being issued only in transactions not involving any public
offering within the meaning of the Securities Act and that the
Certificates will bear a legend substantially as set forth in the
form of the VFC Certificates included in this Supplement and will
be subject to certain limitations on transfer and exchange
specified in the Pooling Agreement, this Supplement and the other
Transaction Documents.
ARTICLE IX
CONDITIONS PRECEDENT
SECTION 9.1. Conditions Precedent to Effectiveness of
Supplement. This Supplement will become effective on the date
(the "Effective Date") on which the following conditions
precedent have been satisfied:
(a) Documents. The Agent shall have received an
original executed copy for each Purchaser, each executed and
delivered in form and substance satisfactory to the Agent,
of (i) the Agreement executed by a duly authorized officer
of each of the Company, the Master Servicer and the Trustee,
(ii) this Supplement executed by a duly authorized officer
of each of the Company, the Master Servicer, the Trustee,
the Agent and the Initial Purchasers and (iii) the other
Transaction Documents duly executed by the parties thereto.
-46-
<PAGE>
(b) Corporate Documents; Corporate Proceedings of the
Company and Master Servicer. The Agent shall have received,
with a copy for each Purchaser, from the Company, each
Seller and the Master Servicer
(i) a copy of the certificate or articles of
incorporation or the articles of amalgamation, as the
case may be, including all amendments thereto, and all
other constituting documents (if any), of such Person,
certified as of a recent date by the Secretary of State
or other appropriate authority of the state of
incorporation or jurisdiction of amalgamation thereof,
as the case may be, and a certificate of compliance, of
status or of good standing, as and to the extent
applicable, of each such Person as of a recent date,
from the Secretary of State or other appropriate
authority of such jurisdiction;
(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 by-laws 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 the resolutions in form and
substance reasonably satisfactory to the Agent, of the
Board of Directors of such Person authorizing the
execution, delivery and performance of the Transaction
Documents to which it is a party and the transactions
contemplated thereby, and that such resolutions have
not been amended, modified, revoked or rescinded and
are in full force and effect, (C) that the certificate
or articles of incorporation or the articles of
amalgamation, as the case may be, of such Person has
not been amended since the date of the last amendment
thereto shown on the certificate of good standing (or
its equivalent) furnished pursuant to clause (i) above
and (D) as to the incumbency and specimen signature of
each officer executing any Transaction Documents or any
other document delivered in connection herewith or
therewith on behalf of such Person; and
(iii) a certificate of another officer as the
incumbency and specimen signature of the Secretary or
Assistant Secretary executing the certificate pursuant
to clause (ii) above.
(c) Good Standing Certificates. The Agent shall have
received copies of certificates of compliance, of status or
of good standing, dated as of a recent date from the
Secretary of State or other appropriate authority of such
-47-
<PAGE>
jurisdiction, with respect to the Company, the Master
Servicer and each Seller, in each State and Province where
the ownership, lease or operation of property or the conduct
of business requires it to qualify as a foreign corporation,
except where the failure to so qualify would not have a
material adverse effect on the business, operations,
properties or condition (financial or otherwise) of the
Company, the Master Servicer or a Seller, as the case may
be, and with respect to each Seller the Obligors of which
are located in Canada, of each Province in which an Obligor
is situated if such Seller's registration as an extra-
provincial corporation in such Province is required as a
condition precedent to the effectiveness or enforceability
of the Company's ownership interest in the Receivables or
Related Property sold pursuant to the Receivables Sale
Agreement.
(d) Consents, Licenses, Approvals, Etc. The Agent
shall have received, with a counterpart for each Purchaser,
certificates dated the date hereof of the President, Vice
Chairman, Chief Financial Officer or any Vice President of
the Company, the Master Servicer and each Seller either
(i) attaching copies of all material consents, licenses and
approvals required in connection with the execution,
delivery and performance by the Company, the Master Servicer
or any Seller, as the case may be, of this Supplement or the
Receivables Sale Agreement, as the case may be, and the
validity and enforceability of this Supplement and the
Agreement against the Company and the Master Servicer and
the Receivables Sale Agreement against such Seller, and such
consents, licenses and approvals shall be in full force and
effect or (ii) stating that no such consents, licenses or
approvals are so required, except those that may be required
under state securities or "blue sky" laws.
(e) Filings, Registrations and Recordings. Any
documents (including, without limitation, financing
statements) required to be filed in order (i) to perfect the
sale of the Receivables by any Seller to the Company
pursuant to the Receivables Sale Agreement and (ii) to
create, in favor of the Trustee, a perfected
ownership/security interest in the Trust Assets under the
Agreement with respect to which an ownership/security
interest may be perfected by a filing under the UCC or other
comparable statute shall, in each case, have been properly
prepared and executed for immediate filing in each office in
each jurisdiction listed in the Agreement or the Receivables
Sale Agreement, as the case may be, and such filings are the
only filings required in order to perfect the sale of the
Receivables to the Company under the Receivables Sale
Agreement or to the Trust, under the Agreement, as the case
may be, in the jurisdictions listed therein, except with
-48-
<PAGE>
respect to the Canadian Seller which shall make all such
necessary filings not later than ten Business Days after the
date hereof. The Agent shall have received evidence
reasonably satisfactory to it of each such filing,
registration or recordation and satisfactory evidence of the
payment of any necessary fee, tax or expense relating
thereto.
(f) Lien Searches. The Agent shall have received the
results of a recent search by a Person satisfactory to the
Agent, of UCC and other filings with respect to the Company
and such other parties as it deems necessary.
(g) Legal Opinions. The Agent shall have received,
(i) with a counterpart for each Purchaser and the Trustee,
legal opinions of Stroock & Stroock & Lavan, special counsel
to the Company and the Master Servicer, and Stikeman,
Elliott, special Canadian counsel to the Company and the
Master Servicer, dated the Issuance Date, as to corporate,
tax, bankruptcy, perfection and other matters in form and
substance acceptable to the Agent and its counsel and (ii)
with a counterpart for each Purchaser and the Company, a
legal opinion of counsel acceptable to the Agent and its
counsel in each jurisdiction where the chief executive
office of any Seller is located, dated the Issuance Date, in
form and substance satisfactory to the Agent.
(h) Interest Rate Certificate. The Trustee shall have
received from the Agent a certificate stating the Alternate
Base Rate in effect on the Issuance Date.
ARTICLE X
THE AGENT
SECTION 10.1. Appointment, Rights and Duties of the
Agent. Each Purchaser hereby irrevocably designates and appoints
the Agent as the agent of such Purchaser under this Supplement
and each such Purchaser hereby irrevocably authorizes the Agent,
as the agent for such Purchaser, to take such action on its
behalf under the provisions of this Supplement and to exercise
such powers and perform such duties as are expressly delegated to
such Agent by the terms of this Supplement, together with such
other powers as are reasonably incidental thereto including, but
not limited to, the signing by the Agent as agent for the
Purchasers of any financing statements related to the
Receivables. Notwithstanding any provision to the contrary in
this Supplement, the Agent shall not have any duties or
responsibilities, except those expressly set forth in this
Supplement, nor any fiduciary relationship with any Purchaser
(except as Agent), the Company or the Master Servicer, and no
-49-
<PAGE>
implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Supplement or
otherwise be deemed to exist against the Agent.
SECTION 10.2. Consultation with Experts. The Agent
may consult with legal counsel (who may be counsel for the
Company or the Master Servicer), independent public accountants
and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or
experts.
SECTION 10.3. Liability of the Agent. Neither the
Agent nor any of its directors, officers, agents or employees
shall be liable for any action taken or not taken by it in
connection herewith (a) with the consent or at the request of the
Required Purchasers or (b) in the absence of its own negligence
or willful misconduct. Neither the Agent nor any of its
directors, officers, agents or employees shall be responsible for
or have any duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in connection with the
Agreement or this Supplement; (ii) the performance or observance
of any of the covenants or agreements of the Company or the
Master Servicer; (iii) the satisfaction of any condition
specified in Article IX, except receipt of items required to be
delivered to the Agent; or (iv) the validity, effectiveness or
genuineness of this Supplement, the Agreement or any other
instrument or writing furnished in connection herewith. The
Agent shall not incur any liability by acting in reliance upon
any notice, consent, certificate, statement, or other writing
(which may be a bank wire, telex or similar writing) believed by
it to be genuine or to be signed by the proper party or parties.
SECTION 10.4. Indemnification. Each Purchaser shall,
ratably in accordance with its VFC Invested Amount, indemnify the
Agent (to the extent not reimbursed by the Company or the Master
Servicer, but without limiting the obligations of the Company and
the Master Servicer under Section 2.10 hereof) against any cost,
expense (including counsel fees and disbursements), claim,
demand, action, loss or liability (except such as result from the
Agent's gross negligence or willful misconduct) that the Agent
may suffer or incur in connection with this Supplement or any
action taken or omitted by the Agent hereunder.
SECTION 10.5. Credit Decision. Each Purchaser
acknowledges that it has, independently and without reliance upon
the Agent and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to
enter into this Supplement. Each Purchaser also acknowledges
that it will, independently and without reliance upon the Agent,
and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit
-50-
<PAGE>
decisions in taking or not taking any action under this
Supplement.
SECTION 10.6. Reliance by the Agent. The Agent shall
be entitled to rely, and shall be fully protected in relying,
upon any writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or 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 Purchasers and counsel to the
Company or the Master Servicer), independent accountants and
other experts selected by such Agent, as the case may be. The
obligations of the Agent are only those expressly set forth
herein. The Agent shall be fully justified in failing or
refusing to take any action under this Supplement unless it shall
first receive such advice or concurrence of the Required
Purchasers as it deems appropriate or it shall first be
indemnified to its satisfaction by the Purchasers against any and
all liability and expense (other than such liability or expense
arising from such Agent's own gross negligence or willful
misconduct) which may be incurred by it by reason of taking or
continuing to take any such action. The 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 Required
Purchasers, and such request and any action taken or failure to
act pursuant thereto shall be binding upon all the Purchasers and
all successors and assigns of the Purchasers.
SECTION 10.7. Notice of Servicer Default or Early
Amortization Event. The Agent shall not be deemed to have
knowledge or notice of the occurrence of any Servicer Default
with respect to the Master Servicer or any Early Amortization
Event hereunder unless the Agent has received notice from a
Purchaser, the Company or the Master Servicer referring to the
Agreement or this Supplement, describing such Servicer Default or
Early Amortization Event and stating that such notice is a
"notice of a Servicer Default with respect to the Master
Servicer" or a "notice of an Early Amortization Event", as the
case may be. In the event that the Agent receives such a notice,
the Agent shall give notice thereof to the Purchasers, the
Trustee, the Company and the Master Servicer. The Agent shall
take such action with respect to such Servicer Default or Early
Amortization Event as shall be reasonably directed by the
Required Purchasers, provided that unless and until the Agent
shall have received such directions, the Agent may (but shall not
be obligated to) take such action, or refrain from taking such
action, with respect to such Servicer Default or Early
Amortization Event as it shall deem advisable in the best
interests of the Purchasers.
-51-
<PAGE>
SECTION 10.8. The Agent in its Individual Capacity.
The Agent and its Affiliates may make loans to, accept deposits
from and generally engage in any kind of business with the
Company, the Master Servicer or any of their Affiliates as though
such Agent were not an Agent. With respect to any VFC
Certificate, the Agent may from time to time hold the same and
the Agent shall have the same rights and powers under this
Supplement as any Purchaser and may exercise the same as if it
were not the Agent, and the term "Purchaser" and "Purchasers"
shall include the Agent in its individual capacity.
SECTION 10.9. Successor Agent. (a) Societe Generale
may assign all or a portion of its rights and obligations as
Agent at any time to an Affiliate of Societe Generale or an
Eligible Institution acceptable to the Company and the Master
Servicer. Any such assignee shall be entitled to all the
benefits and protection afforded the Agent pursuant to this
Article X. Any such assignment shall become effective upon
Societe Generale's giving notice of such assignment to the
Company, the Master Servicer and the Purchasers.
(b) The Agent may resign as Agent upon 10 days' notice
to the Purchasers and the Trustee and pursuant to the following
sentence. The Agent's resignation shall not become effective
until a successor is approved pursuant hereto. If the Agent
shall give notice to the Purchasers, Trustee and the Company of
its intention to resign as Agent under this Agreement, then the
Required Purchasers shall appoint a successor agent for the
Purchasers which successor agent shall be approved by the Company
and the Master Servicer, which approval shall not be unreasonably
withheld; provided that if the Required Purchasers shall not have
appointed, or the Required Purchasers shall have appointed but
the Company and the Master Servicer shall not have approved, any
such successor agent within 60 days of the original notice given
by the Agent of its intention to resign, then the Agent may
appoint a successor agent for the Purchasers, subject to the
approval of the Required Purchasers and, provided that no Early
Amortization Event has occurred and is continuing, the Company
and the Master Servicer, which approval shall not be unreasonably
withheld. Notwithstanding the foregoing, if the Required
Purchasers, the Company and the Master Servicer determine in good
faith that the Agent has carried out its duties in a manner
characterized by gross negligence or willful misconduct, then the
Required Purchasers, the Company and the Master Servicer may
appoint a successor agent. Upon any appointment pursuant to the
two preceding sentences, such successor agent shall succeed to
the rights, powers and duties of the Agent, and the term "Agent"
shall mean such successor agent effective upon its appointment,
and the former Agent's rights, powers and duties as Agent shall
be terminated, without any other or further act or deed on the
part of such former Agent or any of the parties to this
-52-
<PAGE> Supplement or any of their successors and assigns. After any
retiring Agent's resignation or dismissal hereunder as Agent, the
provisions of this Section 10.9 shall inure to its benefit as to
any actions taken or omitted to be taken by it while it was Agent
under this Supplement.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Ratification of Agreement. As
supplemented by this Supplement, the Agreement is in all respects
ratified and confirmed and the Agreement as so supplemented by
this Supplement shall be read, taken and construed as one and the
same instrument.
SECTION 11.2. Governing Law. THIS SUPPLEMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW, AND THE
OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL
BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
SECTION 11.3. Further Assurances. Each of the
Company, the Master Servicer and the Trustee agrees, from time to
time, to do and perform any and all acts and to execute any and
all further instruments required or reasonably requested by the
Agent or Required Purchasers more fully to effect the purposes of
this Supplement and the sale of the VFC Certificates hereunder,
including, without limitation, in the case of the Company and the
Master Servicer, the execution of any financing or registration
statements or similar documents or notices or continuation
statements relating to the Receivables and the other Trust Assets
for filing or registration under the provisions of the UCC or
other comparable statute of any applicable jurisdiction or under
the laws of any province of Canada.
SECTION 11.4. Payments. Each payment to be made
hereunder shall be made on the required payment date in lawful
money of the United States and in immediately available funds, if
to the Purchasers, at the office of the Agent set forth below its
signature hereto. On each Distribution Date, the Agent shall
remit in like funds to each Purchaser its applicable pro rata
share (based on each such Purchaser's VFC Invested Amount) of
each such payment received by the Agent for the account of the
Purchasers.
SECTION 11.5. Costs and Expenses. The Company and the
Master Servicer jointly and severally agree to pay all reasonable
out-of-pocket costs and expenses of the Agent (including, without
limitation, reasonable fees and disbursements of one counsel to
the Agent) in connection with (i) the preparation, execution and
-53-
<PAGE> delivery of this Supplement, the Agreement and the other
Transaction Documents and amendments or waivers of any such
documents and (ii) the enforcement by the Agent of the
obligations and liabilities of the Company and the Master
Servicer under the Agreement, this Supplement or any related
document.
SECTION 11.6. No Waiver; Cumulative Remedies. No
failure to exercise and no delay in exercising, on the part of
the Trustee, the Agent or any Purchaser, 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.
SECTION 11.7. Amendments. (a) Subject to subsection
(c) of this Section 11.7, this Supplement may be amended in
writing from time to time by the Master Servicer, the Company and
the Trustee, with the consent of the Agent but without the
consent of any holder of any outstanding VFC Certificate, to cure
any ambiguity, to correct or supplement any provisions herein or
therein which may be inconsistent with any other provisions
herein or therein or to add any other provisions to or changing
in any manner or eliminating any of the provisions with respect
to matters or questions raised under this Supplement which shall
not be inconsistent with the provisions of any Pooling and
Servicing Agreement; provided, however, that such action shall
not, as evidenced by an Opinion of Counsel delivered to the
Trustee, adversely affect in any material respect the interests
of any VFC Certificateholder. The Trustee may, but shall not be
obligated to, enter into any such amendment pursuant to this
paragraph or paragraph (b) below which affects the Trustee's
rights, duties or immunities under any Pooling and Servicing
Agreement or otherwise.
(b) Subject to subsection (c) of this Section 11.7,
this Supplement may also be amended in writing from time to time
by the Master Servicer, the Company and the Trustee with the
written consent of the Required Purchasers for the purpose of
adding any provisions to or changing in any manner or eliminating
any of the provisions of this Supplement or of modifying in any
manner the rights of the VFC Certificateholders; provided,
however, that no such amendment shall, unless signed or consented
to in writing by all Purchasers, (i) extend the time for payment,
or reduce the amount, of any amount of money payable to or for
the account of any Purchaser under any provision of this
Supplement (including, without limitation, Articles II, III and
VII), (ii) subject any Purchaser to any additional obligation
(including, without limitation, any change in the determination
-54-
<PAGE> of any amount payable by any Purchaser) or (iii) change the
Aggregate Commitment Amount or the number of Purchasers which
shall be required for any action under this subsection or any
other provision of this Supplement.
(c) Any amendment hereof can be effected without the
Agent being a party thereto; provided, however, that no such
amendment, modification or waiver of this Supplement that affects
rights or duties of the Agent shall be effective unless the Agent
shall have given its prior written consent thereto.
(d) Notwithstanding the foregoing, no amendment to
subsection 2.2(d) or Sections 11.16 or 11.18 or the definition of
VFC Percentage of this Supplement may be effected without
satisfying the Rating Agency Condition.
SECTION 11.8. Severability. If any provision hereof
is void or unenforceable in any jurisdiction, such voidness or
unenforceability shall not affect the validity or enforceability
of (i) such provision in any other jurisdiction or (ii) any other
provision hereof in such or any other jurisdiction.
SECTION 11.9. Notices. All notices, requests and
demands to or upon any party hereto to be effective shall be
given in the manner set forth, in the case of the Company, the
Master Servicer and the Trustee, in Section 10.5 of the Pooling
Agreement, and in the case of any other party, in writing
delivered by hand or by facsimile and shall be deemed to have
been duly given, in the case of notice by facsimile, when
telecopied to the number set forth below its signature hereto,
or, in the case of notice by hand, if personally delivered at its
address set forth below its signature hereto or to such other
telecopier number or address as may be hereafter notified by it
to the other parties hereto.
SECTION 11.10. Successors and Assigns. (a) This
Supplement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns,
except that the Company may not assign or transfer any of its
rights under this Supplement without the prior written consent of
the Purchasers.
(b) Any Purchaser may, upon the satisfaction of all
applicable requirements under Section 5.3 of the Agreement, in
the ordinary course of its business and in accordance with
applicable law, at any time sell to one or more financial
institutions or other entities ("Participants") participations in
its VFC Certificate and its rights hereunder pursuant to
documentation in form and substance satisfactory to such
Purchaser and the Participant. In the event of any such sale by
a Purchaser to a Participant, such Purchaser's obligations under
this Supplement shall remain unchanged and such Purchaser shall
-55-
<PAGE> remain solely responsible for the performance thereof. The
Company agrees that each Purchaser is entitled, in its own name,
to enforce for the benefit of, or as agent for, any Participant
any and all rights, claims and interest of such Participant in
respect of the Trust and the Company's obligations under this
Supplement. A Participant shall have the right to receive
Article VII Costs but only to the extent that the related selling
Purchaser would have had such right absent the sale of the
related participation.
(c) Any Purchaser may, in the ordinary course of its
business and in accordance with applicable law, at any time sell
or assign all or any part of its rights and obligations under
this Supplement and the VFC Certificate to (i) its Affiliates and
to any other Purchaser and, (ii) upon prior written notice to the
Agent, one or more banks or other entities (an "Acquiring
Purchaser"), in each case pursuant to a commitment transfer
supplement, substantially in the form of Exhibit D, (the
"Commitment Transfer Supplement"), executed by such Acquiring
Purchaser, such assigning Purchaser and the Agent (and, in the
case of an Acquiring Purchaser that is not then an existing
Purchaser or an Affiliate thereof, by the Company and the Master
Servicer), and delivered to the Agent for its acceptance and
recording in the Register. Notwithstanding the foregoing, no
Purchaser shall so sell its rights hereunder without the prior
written consent of the Company, which consent will not be
unreasonably withheld. Upon such execution, delivery, acceptance
and recording, from and after the Transfer Issuance Date
determined pursuant to such Commitment Transfer Supplement, (x)
the Acquiring Purchaser thereunder shall be a party hereto and,
to the extent provided in such Commitment Transfer Supplement,
have the rights and obligations of a Purchaser hereunder with a
Commitment as set forth therein and (y) the transferor Purchaser
thereunder shall, to the extent provided in such Commitment
Transfer Supplement, be released from its obligations under this
Supplement. Such Commitment Transfer Supplement shall be deemed
to amend this Supplement (including the Schedules attached
hereto) to the extent, and only to the extent, necessary to
reflect the addition of such Acquiring Purchaser as a "Purchaser"
and the resulting adjustment of Commitment percentages arising
from the purchase by such Acquiring Purchaser of all or a portion
of the rights and obligations of such transferor Purchaser under
this Supplement and the VFC Certificates.
(d) The Agent shall maintain at its address referred
to in Section 11.9 a copy of each Commitment Transfer Supplement
delivered to it.
(e) Upon its receipt of a Commitment Transfer
Supplement executed by a transferor Purchaser and an Acquiring
Purchaser (and, in the case of a Transferee that is not then an
existing Purchaser or an affiliate thereof, by the Company and
-56-
<PAGE>
the Master Servicer), the Agent shall (i) promptly accept such
Commitment Transfer Supplement and (ii) on the Transfer Issuance
Date determined pursuant thereto record the information contained
therein in the Register and give notice of such acceptance and
recordation to the Purchasers, the Master Servicer and the
Company.
(f) The Company and the Master Servicer each
authorizes each Purchaser to disclose to any Participant or
Acquiring Purchaser (each, a "Transferee") and any prospective
Transferee any and all financial information in such Purchaser's
possession concerning the Company, the Master Servicer or the
Receivables which has been delivered to such Purchaser by the
Company or the Master Servicer pursuant to this Supplement or
which has been delivered to such Purchaser by or on behalf of the
Company in connection with such Purchaser's credit evaluation of
the Company, the Master Servicer, the Trust and the Trust Assets
prior to becoming a party to this Supplement; provided, however,
if any such information is subject to a confidentiality agreement
between such Purchaser and the Company or the Master Servicer,
the Transferee or prospective Transferee shall have agreed to be
bound by the terms and conditions of such confidentiality
agreement.
(g) If, pursuant to this subsection, any interest in
this Supplement or the VFC Certificates is transferred to any
Transferee which is organized under the laws of any jurisdiction
other than the United States or any State thereof, the transferor
Purchaser shall cause such Transferee, concurrently with the
effectiveness of such transfer, (i) to represent to the
transferor Purchaser (for the benefit of the transferor
Purchaser, the Agent, the Company and the Master Servicer) that
under applicable law and treaties no taxes will be required to be
withheld by the Agent, the Company, the Master Servicer or the
transferor Purchaser with respect to any payments to be made to
such Transferee in respect of the VFC Certificates, (ii) to
furnish to the transferor Purchaser (and, in the case of any
Acquiring Purchaser not registered in the Register, the Agent and
the Company) either U.S. Internal Revenue Service Form 4224 or
U.S. Internal Revenue Service Form 1001 (wherein such Transferee
claims entitlement to complete exemption from U.S. federal
withholding tax on all interest payments hereunder) and (iii) to
agree (for the benefit of the transferor Purchaser, the Agent,
the Company and the Master Servicer) to provide the transferor
Purchaser (and, in the case of any Acquiring Purchaser not
registered in the Register, the Agent, the Company and the Master
Servicer) a new Form 4224 or Form 1001 upon the expiration or
obsolescence of any previously delivered form and comparable
statements in accordance with applicable U.S. laws and
regulations and amendments duly executed and completed by such
Transferee, and to comply from time to time with all applicable
-57-
<PAGE>
U.S. laws and regulations with regard to such withholding tax
exemption.
(h) Notwithstanding any other provisions herein, no
transfer or assignment of any interests or obligations of any
Purchaser hereunder or any grant of participations therein shall
be permitted if such transfer, assignment or grant would result
in a prohibited transaction under Section 4975 of the Internal
Revenue Code or Section 406 of ERISA or cause the Trust Assets to
be regarded as plan assets pursuant to 29 C.F.R. (section mark)
2510.3-101, or require the Company or any Seller to file a
registration statement with the Securities and Exchange Commission
or to qualify the VFC Certificates under the "blue sky" laws of any
state.
SECTION 11.11. Counterparts; Effectiveness. This
Supplement may be executed in any number of counterparts and by
the different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original, and all
of which taken together shall constitute one and the same
agreement.
SECTION 11.12. Adjustments; Set-off. (a) If any
Purchaser (a "Benefitted Purchaser") shall at any time receive in
respect of its VFC Invested Amount any distribution of principal,
interest, Commitment Fees or other fees, or any interest thereon,
or receive any collateral in respect thereof (whether voluntarily
or involuntarily, by set-off, or otherwise) in a greater
proportion than any such distribution received by any other
Purchaser, if any, in respect of such other Purchaser's VFC
Invested Amount, or interest thereon, such Benefitted Purchaser
shall purchase for cash from the other Purchasers such portion of
each such other Purchaser's interest in the VFC Certificates, or
shall provide such other Purchasers with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to
cause such Benefitted Purchaser to share the excess payment or
benefits of such collateral or proceeds ratably with each of the
Purchasers; provided, however, that if all or any portion of such
excess payment or benefits is thereafter recovered from such
Benefitted Purchaser, such purchase shall be rescinded, and the
purchase price and benefits returned, to the extent of such
recovery, but without interest. The Company agrees that each
Purchaser so purchasing a portion of the VFC Certificateholders'
Interest may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as
fully as if such Purchaser were the direct holder of such
portion.
(b) In addition to any rights and remedies of the
Purchasers provided by law, each Purchaser shall have the right,
without prior notice to the Company, any such notice being
expressly waived by the Company to the extent permitted by
-58-
<PAGE> applicable law, upon any amount becoming due and payable by the
Company hereunder or under the VFC Certificates to set-off and
appropriate and apply against 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 Purchaser
to or for the credit or the account of the Company. Each
Purchaser agrees promptly to notify the Company and the Agent
after any such set-off and application made by such Purchaser;
provided that the failure to give such notice shall not affect
the validity of such set-off and application.
SECTION 11.13. Repurchase by Master Servicer. Upon
any repurchase of the VFC Certificates by the Master Servicer
pursuant to Section 9.1 of the Agreement, the Master Servicer
shall pay, in addition to the amounts set forth in Section 9.1 of
the Agreement, any accrued and unpaid Article VII Costs and any
accrued and unpaid Commitment Fees.
SECTION 11.14. Repurchase by Company. Upon any
repurchase of the VFC Certificates by the Company pursuant to
Section 2.6 or subsection 9.2(a), as the case may be, of the
Agreement, the Company shall pay, in addition to the amounts set
forth in Section 2.6 or subsection 9.2(a), as the case may be, of
the Agreement, any accrued and unpaid Article VII Costs and any
accrued and unpaid Commitment Fees.
SECTION 11.15. Limitation of Liability. It is
expressly understood and agreed by the parties hereto that
(a) this Supplement is executed and delivered by the trust
department of Chemical Bank, in its capacity as Trustee, not
individually or personally but solely as Trustee of the Trust, in
the exercise of the powers and authority conferred and vested in
it, (b) the representations, undertakings and agreements herein
made on the part of the Trust are made and intended not as
personal representations, undertakings and agreements by Chemical
Bank, but are made and intended for the purpose of binding only
the Trust, (c) nothing herein contained shall be construed as
creating any liability of Chemical Bank, as Trustee, individually
or personally, to perform any covenant either expressed or
implied contained herein, all such liability, if any, being
expressly waived by the parties who are signatories to this
Supplement and by any Person claiming by, through or under such
parties; provided, however, that Chemical Bank, as Trustee, shall
be liable in its individual capacity for its own willful
misconduct or negligence and for any tax assessed against
Chemical Bank, based on or measured by any fees, commission or
compensation received by it for acting as Trustee and (d) under
no circumstances shall Chemical Bank be personally liable for the
payment of any indebtedness or expenses of the Trust or be liable
for the breach or failure of any obligation, representation,
-59-
<PAGE>
warranty or covenant made or undertaken by the Trust under this
Supplement.
SECTION 11.16. Limitation of Payments By Company.
Whenever any provision in the Transaction Documents permits or
obligates the Company to make a payment in cash, failure to make
such payment shall not constitute a breach by the Company giving
rise to any actionable claim against the Company to the extent
that the Company has insufficient funds to make such payments
from amounts properly distributed to the Company pursuant to the
Pooling Agreement and any Supplement. The foregoing sentence
shall not in any manner limit the ability of the Company to
increase the principal amounts outstanding under the Subordinated
Notes and the Parent Note in accordance with the terms of the
Receivables Sale Agreement. If the Company is required to make a
payment under this Supplement but does not have sufficient
amounts to make such a payment, C&A Products hereby agrees that
it shall make all such payments.
SECTION 11.17. Certain Payments. To the extent that
the Trustee, the Master Servicer or the Company makes a payment
to the Agent or the Purchasers, or the Agent or the Purchasers
receive any payment or proceeds with respect to any amount
payable in connection with this Supplement, which payment or
proceeds or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside or required
to be repaid to a trustee, receiver or any other party under any
bankruptcy law, state or federal law, common law or equitable
cause, then, to the extent such payment or proceeds are set
aside, the amount payable in connection with this Agreement or
part or parts thereof intended to be satisfied shall be revived
and continue in full force and effect, as if such payment or
proceeds had not been received by the Agent or the Purchasers.
-60-
<PAGE>
SECTION 11.18. No Bankruptcy Petition. Each Purchaser
hereby covenants and agrees that, prior to the date which is one
year and one day after the later of (i) the last day of the VFC
Amortization Period and (ii) the last day of the Series 1
Amortization Period, 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 similar proceedings under any federal or
state bankruptcy or similar law.
ARTICLE XII
FINAL DISTRIBUTIONS
SECTION 12.1. Certain Distributions. (a) Not later
than 2:00 p.m., New York City time, on the Distribution Date
following the date on which the proceeds from the disposition of
the Receivables are deposited into the Series 2 Non-Principal
Collection Sub-subaccount and the Series 2 Principal Collection
Sub-subaccount pursuant to subsection 7.2(b) of the Agreement,
the Trustee shall distribute such amounts pursuant to Article III
of this Supplement.
(b) Notwithstanding anything to the contrary in this
Supplement or the Agreement, any distribution made pursuant to
this Section shall be deemed to be a final distribution pursuant
to Section 9.3 of the Agreement with respect to the VFC
Certificates.
-61-
<PAGE>
IN WITNESS WHEREOF, the Company, the Master Servicer,
the Trustee, the Agent and the Initial Purchasers have caused
this Series 2 Supplement to be duly executed by their respective
officers as of the day and year first above written.
CARCORP, INC.
By: Anthony Hardwick
________________________________
Name: Anthony Hardwick
Title: Vice President, Secretary
and Treasurer
COLLINS & AIKMAN PRODUCTS CO.,
as Master Servicer
By: Anthony Hardwick
__________________________________
Name: Anthony Hardwick
Title: Vice President, Controller,
Acting Chief Financial
Officer and Assistant
Treasurer
SOCIETE GENERALE, as Agent
By: Martin J. Finan
_______________________________
Title: Vice President
Address: 303 Peachtree Street NE
Atlanta, Georgia 30308
Telecopier: (404) 865-7419
CHEMICAL BANK, not in its
individual capacity but solely as
Trustee
By: Charles E. Dooley
________________________________
Title: Vice President
SOCIETE GENERALE, as Initial Purchaser
By: Martin J. Finan
_______________________________
Title: Vice President
Address: 303 Peachtree Street NE
Atlanta, Georgia 30308
Telecopier: (404) 865-7419
-62-
<PAGE>
Schedule 1
Commitments
Purchaser Commitment
Societe Generale $75,000,000
<PAGE>
Schedule 2
Trust Accounts
The U.S. Dollar Collection Account has been established
by and at Chemical Bank, account number 323-334466.
The U.S. Dollar Collection Account is for the account
of Chemical Bank, as trustee for the C&A Master Trust.
The Canada/U.S. Dollar Collection Account has been
established by and at Canadian Imperial Bank of Commerce, account
number 04-46718.
The Canada/U.S. Dollar Collection Account is for the
account of Chemical Bank, as trustee for the C&A Master Trust.
The Canada/Canadian Dollar Collection Account has been
established by and at Canadian Imperial Bank of Commerce, account
number 22-43318.
The Canada/Canadian Dollar Collection Account is for
the account of Chemical Bank, as trustee for the C&A Master
Trust.
<PAGE>
<PAGE>
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of April 6, 1995 between COLLINS &
AIKMAN PRODUCTS CO. (the "Company") and J. MICHAEL STEPP
("Employee").
WHEREAS, the Company desires to employ Employee and to enter
into an agreement embodying the terms of such employment; and
WHEREAS, Employee desires to a accept such employment and to
enter into such agreement;
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable
consideration, the parties hereto hereby agree as follows:
1. Term of Employment. The Company hereby agrees to
employ Employee and Employee hereby accepts employment for a
period of three (3) years, commencing April 6, 1995 and ending
April 5, 1998 subject to the terms and conditions of this
Agreement.
2. Position of Employment. During the term of this
Agreement, Employee shall be employed in the position of not less
than Executive Vice President and Chief Financial Officer of the
Company and shall perform such services for the Company and its
subsidiaries as may be assigned to him from time to time by the
Board of Directors of the Company. Employee shall devote his
full time and attention to the affairs of the Company and his
duties in such positions.
3. Salary, Bonus Plan and Stock Options
3.1 Salary. The Company shall pay Employee a base salary
at an annual rate of not less than $240,000 during the term of
his employment hereunder. Such amount shall be reviewed with the
salaries of the other members of the Company Operating Committee,
from time to time, by the Board of Directors of the Company or an
appropriate committee thereof (the Company's Board of Directors
or such committee being referred to herein as the "Compensation
Board") and may be increased in the sole discretion of the
Compensation Board.
3.2 Bonus Plan. Employee shall be eligible to participate
in the Company's annual Executive Incentive Compensation Plan
(the "EIC Plan") in accordance with the applicable provisions of
the Plan; however, in no event for the first year of Employee's
participation in the EIC Plan shall Employee receive a cash bonus
of less than $92,000.
3.3 Stock Options. Employee shall be eligible to
participate in the Collins & Aikman Holdings Corporation 1994
Employee Stock Option Plan (the "Option Plan") and shall be
granted the option to purchase up to 100,000 shares, in
accordance with the applicable terms and conditions of the Option
Plan and the Option Agreement
1
<PAGE>
between Collins & Aikman Holdings Corporation and Employee.
4. Benefits. Employee shall be entitled to such fringe
benefits and perquisites, and to participate in such pension,
profit sharing and benefit plans as are generally made available
to executives of the Company and such other fringe benefits as
may be determined by the Company during the term hereof,
including major medical, extended medical and disability
insurance, group term life insurance and appropriate annual
holidays, sick days and annual vacation time.
5. Reimbursement of Expenses. The Company shall reimburse
Employee for all reasonable travel, entertainment and other
reasonable business expenses reasonably incurred by Employee in
connection with the performance of his duties hereunder, provided
that Employee furnishes to the Company adequate records or other
evidence respecting such expenditures.
6. Perquisites. Employee shall be entitled to use of a
Company car (Buick Park Avenue or comparable vehicle) and
reimbursement of reasonable expenses related thereto incurred by
Employee. Such Company car use shall be subject to applicable
terms and policies of the Company. Employee also shall be
entitled to reimbursement of the initiation fee (not to exceed
$15,000), monthly dues and reasonable business related expenses
incurred by Employee at a local country club of Employee's
choice.
7. Termination of Employment
7.1 Voluntary Termination. Employees may terminate his
employment with the Company at any time. In the event Employee
terminates such employment voluntarily, upon such termination the
Company shall pay Employee his unpaid base salary under Section
3.1 accrued to the date on which his employment terminates (the
"Termination Date").
7.2 Involuntary Termination.
(a) Employee's employment with the Company shall
automatically terminate upon Employee's death or, unless the
Board of Directors of the Company in its sole discretion shall
otherwise elect, Employee's physical or mental disability for any
consecutive six-month period (measured from the first date on
which Employee is absent from work due to such disability to the
same date in the sixth succeeding calendar month, or, if there is
no such date or such date is not a business day, the next
succeeding business day). In the event Employee's employment
with the Company is terminated due to Employee's death or
physical or mental disability, the Company shall pay to Employee
or, if applicable, his estate or legal representative his unpaid
base salary under Section 3.1 accrued to the Termination Date,
but in no event less than an amount equal to one year's base
salary. The amount due to Employee
2
<PAGE>
pursuant to this paragraph (a) shall be paid, at the sole election
of Employee or, if applicable, his estate or legal representative,
at the time of termination, either in a lump sum or in a number of
equal annual installments to be specified by Employee or, if applicable,
Employee's estate or legal representative at the Termination
Date.
(b) In the event Employee's employment with the Company is
involuntarily terminated for any other reason, other than
termination for Cause (as hereinafter defined), prior to the
expiration of the term of employment then in effect under Section
1, upon such termination the Company shall be obligated to pay
Employee an amount equal to his base salary under Section 3.1 for
the entire remaining portion of such term of employment then in
effect under Section 1; or if longer, for a one year period
following the Termination Date. The amount due to Employee
pursuant to this paragraph (b) shall be paid, at the sole
discretion of the Compensation Board at the Termination Date,
either in a lump sum or on a periodic basis in accordance with
normal pay practice. Employee shall receive the same letter
agreement as all other members of the Company Operating Committee
regarding termination relating to a change of control.
(c) The Company may at any time without notice terminate
Employee's employment with the Company for Cause. In the event
Employee's employment with the Company is terminated for Cause,
Employee shall receive the same amount that would be payable
under Section 7.1 if such termination were voluntary.
(d) As used herein, the term "Cause" means (i) fraud or
misappropriation with respect to the business of the Company or
intentional material damage to the property or business of the
Company, (ii) willful failure by Employee to perform his duties
and responsibilities and to carry out his authority, (iii)
willful malfeasance or misfeasance or breach of fiduciary duty or
representation to the Company or its stockholder, (iv) willful
failure to act in accordance with any specific lawful
instructions of a majority of the Board of Directors of the
Company, or (v) conviction of Employee of a felony.
8. Representations and Covenants of Employee.
8.1 No Violation. Employee represents and warrants that he
has not disclosed and will not disclose any confidential
information or trade secrets concerning his former employer to
the Company or its subsidiaries or any directors or officers
thereof, and that he can perform his duties for the Company
without disclosing or using any such confidential information or
trade secrets. Employee covenants and agrees that he will not
use any confidential information or trade secrets concerning any
former employer or its subsidiaries in violation of any
obligations to such former employer during the term of his
employment by the
3
<PAGE>
Company.
8.2 No Conflicts. Employee represents and warrants that
the terms of this Agreement do not conflict with any other
agreement, written or oral, to which Employee is a party or by
which Employee is bound, including, without limitation, any
noncompetition agreement for the benefit of any former employer.
8.3 Conduct. Employee will at all times refrain from
taking any action or making any statements, written or oral,
which are intended to and do disparage the goodwill or reputation
of the Company or any of its subsidiaries or affiliates or any
directors or officers thereof or which could adversely affect the
morale of employees of the Company and its subsidiaries.
8.4 Performance of Duties. In consideration of the
payments to be made hereunder, Employee agrees that during the
term of his employment under this Agreement, he shall devote
substantially his entire business time and attention to the
performance of his duties hereunder, serve the Company diligently
and to the best of his abilities and shall not compete with the
Company in any way whatsoever. Without limiting the generality
of the foregoing, Employee shall not, during such term, directly
or indirectly (whether for compensation or otherwise), alone or
as an agent, principal, partner, officer, employee, trustee,
director, shareholder or in any other capacity, own, manage,
operate, join, control or participate in the ownership,
management, operation or control of, or furnish any capital to,
or be connected in any manner with or provide any services as a
consultant for any business which competes with the business of
the Company, its parent company or their subsidiaries or
affiliates as it may be conducted from time to time, provided,
however, that notwithstanding the foregoing, nothing contained in
the Employment Agreement shall be deemed to preclude Employee
from owning not more than 5% of the publicly traded securities of
any entity which is in competition with the business of the
Company, its parent company or their subsidiaries or affiliates.
8.5 Company Information. Employee agrees that so long as
he is employed by the Company and following any termination of
this employment Employee will keep confidential all confidential
information and trade secrets of the Company or any of its
subsidiaries or affiliates and will not disclose such information
to any person without the prior approval of the Board of
Directors of the Company or use such information for any purpose
other than in the course of fulfilling his duties of employment
with the Company pursuant to this Agreement. It is understood
that for purposes of this Agreement the term "confidential
information" is to be construed broadly to include all material
nonpublic or proprietary information.
9. Release. In consideration of the compensation
4
<PAGE>
continuance available in certain events pursuant to this
Agreement, Employee unconditionally releases and covenants not to
sue the Company and its subsidiaries and affiliates and
directors, officers, employees and stockholders thereof, from any
and all claims, liabilities and obligations of any nature
pertaining to termination of employment other than those
explicitly provided for by this Agreement including, without
limitation, any claims arising out of alleged legal restrictions
on the Company's rights to terminate its employees, such as any
implied contract of employment or termination contrary to public
policy.
10. Governing law. The validity, interpretation and
performance of this Agreement shall be governed by the laws of
North Carolina, regardless of the laws that might be applied
under applicable principles of conflicts of laws.
11. Entire Agreement and Survivorship. This Agreement
constitutes the entire agreement and understanding between the
parties hereto with respect to the matters referred to herein and
supersedes all prior agreements and understandings between the
parties hereto with respect to the matters referred to herein.
The representations, warranties and covenants of Employee
contained in all parts of Section 8, except 8.4, and the release
contained in Section 9 shall survive expiration, or termination
of this Agreement by either party.
12. Notice. Any written notice required to be given by one
party to the other party hereunder shall be deemed effective if
mailed by certified or registered mail:
To the Company: Collins & Aikman Products Co.
701 McCullough Drive
Charlotte, North Carolina 28262
Attention: Harold R. Sunday
To Employee:
Attention: J. Michael Stepp
or such other address as may be stated in notice given under this
Section 12.
13. Severability. The invalidity, illegality or
enforceability of any provision of this Agreement in any
jurisdiction shall not affect the validity, legality or
enforceability of the remainder of this Agreement in such
jurisdiction or the validity, legality or enforceability of this
Agreement or such provision in any other jurisdiction, it being
the intent of the parties hereto that all rights and obligations
of the parties hereto under this Agreement shall be enforceable
to the fullest extent permitted by law.
5
<PAGE>
14. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and
their personal representatives, and, in the case of the Company,
its successors and assigns, and Section 9 shall also inure to the
benefit of the other persons and entities identified therein;
provided, however, that Employee shall not, without the prior
written consent of the Company, transfer, assign, convey, pledge
or encumber this Agreement or any interest under this Agreement.
Employees understands that the assignment of this Agreement or
any benefits hereof or obligations hereunder by the Company to
any subsidiary, or to any purchaser of all or a substantial
portion of the assets of the Company, and the employment of
Employee by such subsidiary or by any such purchaser or by any
successor of the Company in a merger or consolidation, shall not
be deemed a termination of Employee's employment for purposes of
Section 7.2 or otherwise.
15. Amendment. This Agreement may be amended or canceled
only by an instrument in writing duly executed and delivered by
each party to this Agreement.
16. Headings. Headings contained in this Agreement are for
convenience only and shall not limit this Agreement or affect the
interpretation thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
J. Michael Stepp
_______________________________
J. Michael Stepp
COLLINS & AIKMAN PRODUCTS CO.
Thomas E. Hannah
By: ___________________________
Thomas E. Hannah, President
6
EXCESS BENEFIT PLAN
OF
COLLINS & AIKMAN CORPORATION
(Amended And Restated as of November 7, 1986)
ARTICLE I
Background and Purpose
Effective as of February 29, 1976, the Collins & Aikman
Corporation (the "Company") established the Excess Benefit Plan
of Collins & Aikman Corporation (the "Plan"). The Plan is hereby
amended and restated effective as of November 7, 1986. The Plan
is intended to provide benefits which would have accrued to any
Company employee under the terms of the Company's Profit-Sharing
Plan or Retirement Plan but for certain restrictions imposed by
certain provisions of the Internal Revenue Code, including
without limitation, Code sections 415 and 401(a)(17), upon the
contributions for, or benefits of, Company employees
participating in the Profit-Sharing Plan and the Retirement Plan.
ARTICLE II
Definitions
The following terms whenever used in the Plan, including the
Preamble, shall have the meanings set forth in this Article II.
2.1 "Beneficiary" means the Participant's beneficiary under
the Profit-Sharing Plan or Retirement Plan, as the case may be,
or such other beneficiary as is designated in writing to the
Committee by the Participant.
2.2 "Board of Directors" means the Board of Directors of
the Company as constituted from time to time.
2.3 "Code" means the Internal Revenue Code of 1954, as
amended, or, effective January 1, 1987, the Internal Revenue Code
of 1986, as amended.
2.4 "Committee" means the Pension Plan and Profit-Sharing
Plan Committee appointed by the Board of Directors which shall be
<PAGE>
responsible for the administration of the Plan in accordance with
Article VI.
2.5 "Company" means Collins & Aikman Corporation or any
successor thereto.
2.6 "Excess Profit-Sharing Account" means the bookkeeping
account established to reflect a Participant's total excess
profit-sharing benefit under the Plan as determined in accordance
with Ssection 4.1.
2.7 "Excess Retirement Benefit" means a Participant's
retirement benefit under the Plan determined in accordance with
Section 4.2.
2.8 "Fund" or "Funds" means the fund or funds in which
contributions to the Profit-Sharing Plan may be invested.
2.9 "Participant" means a Participant in this Plan as
defined in Article III.
2.10 "Plan" means the Excess Benefit Plan of Collins &
Aikman Corporation, as amended and restated as of November 7,
1986.
2.11 "Plan Year" means the 52 or 53 week period ending in
each year on the Saturday nearest to or coinciding with the last
day of February (or such other period as may be specified by the
Committee).
2.12 "Profit-Sharing Account" means the separate account or
combination of accounts established and maintained for each
Participant under the Profit-Sharing Plan.
2.13 "Profit-Sharing Plan" means the Employees Profit-
Sharing Plan of Collins & Aikman Corporation, as amended through
March 2, 1986, and as may be amended from time to time
thereafter.
2.14 "Retirement Plan" means the Collins & Aikman
Corporation Salaried Employees' Retirement Plan, as amended and
restated effective March 3, 1985, and as may be amended from time
to time thereafter.
2.15 "Retirement Plan Benefit" means the annual retirement
benefit payable to or on account of a Participant pursuant to the
Retirement Plan.
2
<PAGE>
2.16 "Valuation Date" means the last business day of each
Plan Year, and such other dates as the Committee under the
Profit-Sharing Plan may from time to time designate as "valuation
dates".
ARTICLE III
Participants
Any salaried employee who is a participant in the Profit-
Sharing Plan and/or in the Retirement Plan shall be a Participant
in this Plan if the benefit payable to such Participant under the
Profit-Sharing Plan or the Retirement Plan is limited as a result
of restrictions imposed by Code provisions, including, without
limitation, the limitations on contributions and benefits imposed
by Section 415 of the Code, and the limitation on includible
compensation under Section 401(a)(17) of the Code.
ARTICLE IV
Benefits
4.1 Excess Profit-Sharing Account.
A Participant's Excess Profit-Sharing Account shall be equal
to the total amounts credited to such account as follows:
(a) As of the last day of each Plan Year (commencing
with the Plan Year ended February 29, 1976), each
Participant's Excess Profit-Sharing Account shall be
credited with an amount equal to the difference between (i)
and (ii) (the "Excess Contributions") where (i) equals the
contribution which would have been made to the Participant's
Profit-Sharing Account for such Plan Year had the limitation
imposed by Section 415 of the Code not been in effect, and
had the amount of compensation used in calculating the
contribution to the Participant's Profit-Sharing Account
under the terms of the Profit-Sharing Plan not been
curtailed by Section 401(a)(17) of the Code, and (ii) equals
the actual contribution made to
3
<PAGE>
the Participant's Profit-Sharing Account as of the end of
such Plan Year; and
(b) As of each Valuation Date, each Participant's
Excess Profit-Sharing Account shall be credited or debited,
as the case may be, with an amount equal to the income,
dividend, expense, gain, loss or other appreciation or
depreciation in value (the "Investment Credit") which would
have been earned on the Participant's Excess Profit-Sharing
Account as of such Valuation Date had such account been
invested in such Funds and in such proportions in each Fund
as elected by the Participant in accordance with
subparagraph (c) hereof.
(c) Each Participant may file a written election with
the Committee prior to the last day of each Plan Year, in
accordance with procedures established by the Committee, to
have the Investment Credit allocable to his Excess
Contributions for such Plan Year determined as if such
Excess Contributions were invested in such Funds, and in
such proportions in each Fund, as designated by the
Participant. A Participant's investment designation shall
be applied to future Excess Contributions unless, prior to
the end of any Plan Year for which Excess Contributions are
credited to such Participant's Excess Profit-Sharing
Account, the Participant files a new investment designation
with respect to Excess Contributions for such Plan Year. A
Participant may change the investment designation as to
existing amounts credited to his or her Excess Profit-
Sharing Account on such dates and in accordance with such
conditions as may be specified by the Committee.
If a Participant fails to file an investment
designation with the Committee in accordance with this
subparagraph (c), the election as to Fund investment filed
by the Participant under the Profit-Sharing Plan shall be
applied to his Excess Profit-Sharing Account, and any
investment direction or transfer between Funds pursuant to a
request which has been approved in accordance with the
Profit-Sharing Plan shall be
4
<PAGE>
similarly applied to the Participant's Excess Profit-Sharing
Account.
4.2 Excess Retirement Benefit
A Participant's Excess Retirement Benefit shall be equal to
the difference between (a) and (b) where
(a) equals the benefit the Participant would have
received under the Retirement Plan on a single life annuity
basis (i) had the limitation imposed by Section 415 of the
Code not been in effect, (ii) had the amount of compensation
used in calculating the Participant's Retirement Plan
Benefit under the terms of the Retirement Plan not been
curtailed by Section 401(a)(17) of the Code, and (iii) in
the case of Donald F. McCullough, had such Participant's
Retirement Plan Benefit been computed without regard to any
actuarial reduction by reason of his retirement prior to
attaining age 65; and
(b) equals the actual Retirement Plan Benefit on a
single life annuity basis payable to the Participant.
4.3 Vesting of Benefits
A Participant shall become vested in his or her Excess
Profit-Sharing Account and Excess Retirement Benefit in
accordance with the same schedule and rules as are applicable in
determining when he or she becomes vested in his or her Profit-
Sharing Account or Retirement Plan Benefit, respectively.
ARTICLE V
Payment of Benefits
5.1 Excess Profit Sharing Account
A Participant's Excess Profit-Sharing Account shall be paid
in the form of a lump-sum, at such time as the Participant would
be entitled to receive a lump-sum payment under the Profit
Sharing Plan. Upon the death of a Participant, the balance in
his Excess Profit Sharing Account shall be paid to his
Beneficiary in a lump-
5
<PAGE>
sum as soon as practicable, and in any event no later than one
year, after a Participant's death.
5.2 Payment of Excess Retirement Benefit
A Participant's Excess Retirement Benefit shall be paid
under the same circumstances, in the same form and at the same
time as such Participant's benefits under the Retirement Plan,
and shall cease when benefits under the Retirement Plan cease,
unless a Participant elects otherwise in accordance with this
Article V. For purposes of determining such circumstances, form
and time, all relevant provisions of the Retirement Plan shall be
applied hereunder, including, without limitation, the provisions
that relate to payments to the Participant's Beneficiary under
such plan. A Participant may elect in writing prior to
commencement of benefits under the Plan to receive payment of his
or her Excess Retirement Benefit in an alternative form of
benefit payment provided under the Retirement Plan, regardless of
the form in which benefits under such plan are paid.
ARTICLE VI
Administration of the Plan
6.1 Committee
The Committee shall be responsible for the management,
operation and administration of the Plan and shall have such
implied powers and duties as may be necessary to carry out the
provisions of the Plan, including the power to delegate any of
its administrative responsibilities hereunder as well as any
powers and duties granted to the administrative committees under
the Profit-Sharing Plan and the Retirement Plan.
6.2 Benefit Determination
The Committee shall rely on the records of the Company in
determining the form in which and time at which benefits are
being paid under the Profit-Sharing Plan and the Retirement Plan
and, pursuant to Article V of this Plan, shall pay benefits under
this Plan accordingly.
6
<PAGE>
6.3 Indemnification
To the extent permitted by law, the Company shall indemnify
the members of the Committee from all claims for liability, loss
or damage (including payment of expenses in connection with
defense against such claim) arising from any act or failure to
act which constitutes a breach of such individual's fiduciary
responsibilities under any applicable law.
ARTICLE VII
Miscellaneous
7.1 Benefits Payable by Company
All benefits payable under this Plan shall constitute an
unfunded obligation of the Company. Payments shall be made, as
due, from the general funds of the Company. The Company may, in
its sole and absolute discretion, establish one or more accounts
or funds to reflect its obligations under the Plan and may make
such investments as it may deem desirable to assist it in meeting
such obligations. Any such accounts or funds shall be assets of
the Company subject to claims of its general creditors. No
person eligible for a benefit under this Plan shall have any
right, title or interest in any such investments.
7.2 Inalienability of Benefits
The right of any person to any benefit or payment under the
Plan shall not be subject to voluntary or involuntary transfer,
alienation or assignment, and, to the fullest extent permitted by
law, shall not be subject to attachment, execution, garnishment,
sequestration or other legal or equitable process. In the event
a person who is receiving or is entitled to receive benefits
under the Plan attempts to assign, transfer or dispose of such
right, or if an attempt is made to subject said right to such
process, such assignment, transfer or disposition shall be null
and void.
7.3 Status of Employment
Nothing herein contained shall be deemed (a) to give any
Participant the right to be retained in the employ of the Company
7
<PAGE>
or any affiliate, (b) to affect the right of the Company to
discipline, including (but not limited to), the right to
discharge, any Participant at any time, (c) to give the Company
or any affiliate the right to require any Participant to remain
in its employ, or (d) to affect any Participant's right to
terminate his or her employment at any time.
7.4 Payments to Minors and Incompetents
If a Participant or Beneficiary entitled to receive any
benefits hereunder is a minor or is deemed by the Committee or is
adjudged to be legally incapable of giving valid receipt and
discharge for such benefits, they will be paid to the duly
appointed guardian of such minor or incompetent or to such other
legally appointed person as the Committee may designate. Such
payment shall, to the extent made, be deemed a complete discharge
of any liability for such payment under the Plan.
7.5 Amendment or Termination
(a) The Company reserves the right to amend, modify,
restate or terminate the Plan; provided, however, that no such
action by the Company shall reduce a Participant's Excess Profit-
Sharing Account or Excess Retirement Benefit accrued as of the
time thereof.
(b) If the Plan is terminated, a determination shall be
made of each Participant's Excess Profit-Sharing Account and
Excess Retirement Benefit as of the Plan termination date. The
amount of such account or benefits shall be payable to the
Participant or Beneficiary at the time it would have been payable
under Article V if the Plan had not been terminated. Until fully
paid, the accrued and undistributed balance of a Participant's
Excess Profit-Sharing Account shall be credited or debited, as
the case may be, as of the last day of each Plan Year, with an
amount equal to the income, dividend, expense, gain, loss or
other appreciation or depreciation in value on such balance as if
it had been invested in such Funds and in such proportions in
each Fund as the Participant's Profit-Sharing Account for such
Plan Year. No interest shall be credited on an Excess Retirement
Benefit.
8
<PAGE>
7.6 Governing Law
Except to the extent Pre-empted by federal law, the
provisions of the Plan will be construed according to the laws of
the State of New York.
IN WITNESS WHEREOF, Collins & Aikman Corporation has caused
this amended and restated Plan to be executed effective as of
November 7, 1986.
COLLINS & AIKMAN CORPORATION
By:/s/ Alfred S. Crimmins
President
ATTEST:
/s/ Charles H. Scherer
Secretary
9
<PAGE>
Exhibit 11
Collins & Aikman Corporation
Computation of Earnings Per Share
In thousands, except per share data
(Unaudited)
<TABLE>
<CAPTION>
Fiscal Year Ended
January 28, January 29, January 30,
1995 1994 1993
<S> <C> <C> <C>
Average shares outstanding during the period 51,338 28,164 28,164
Incremental shares under stock options
computed under the treasury stock method
using the average market price of issuer's
stock during the periods . . . . . . . . . 1,567 (904) (904)
Total shares for EPS . . . . . . . . . . 52,905 27,260 27,260
Loss applicable to common shareholders:
Continuing operations (1) . . . . . . . . $ (20,684) $ (197,048) $ (64,189)
Discontinued operations . . . . . . . . . - (104,339) (218,317)
Extraordinary item . . . . . . . . . . . . (106,528) - -
Net loss . . . . . . . . . . . . . . . . $ (127,212) $ (301,387) $ (282,506)
Loss per common share:
Continuing operations . . . . . . . . . . $ (.39) $ (7.23) $ (2.35)
Discontinued operations . . . . . . . . . - (3.83) (8.01)
Extraordinary item . . . . . . . . . . . . (2.01) - -
Net loss . . . . . . . . . . . . . . . . $ (2.40) $ (11.06) $ (10.36)
</TABLE>
Notes:
(1) Loss from continuing operations has been adjusted for dividends and
accretion requirements on redeemable preferred stock of $14,408, $23,723
and $18,848 for the fiscal years ended January 28, 1995, January 29, 1994
and January 30, 1993, respectively. In addition, loss from continuing
operations for the fiscal year ended January 28, 1995 has been adjusted
for the loss on redemption of preferred stock of $82,022.
<PAGE>
SELECTED FINANCIAL DATA
(in thousands, except per share data)
[CAPTION]
<TABLE>
<CAPTION>
Fiscal Year Ended
<S> <C> <C> <C> <C> <C>
JANUARY 28, January 29, January 30, January 25, January 26,
1995 1994 1993(1) 1992 1991
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $ 1,536,002 $ 1,305,517 $ 1,277,500 $ 1,184,316 $ 1,232,403
Gross margin 371,133 309,727 299,027 257,499 270,782
Selling, general and administrative expenses 198,293 196,585 218,441 202,690 192,002
Management equity plan expense -- 26,736 -- -- --
Restructuring costs -- -- 10,000 -- 17,275
Goodwill amortization and write-off -- 132,630 3,702 3,702 3,798
<CAPTION>
<S> <C> <C> <C> <C> <C>
Operating income (loss) $ 172,840 $ (46,224) $ 66,884 $ 51,107 $ 57,707
Interest expense, net (2) 75,683 111,291 110,867 107,974 106,099
Income (loss) from continuing operations before income
taxes 87,283 (162,048) (48,497) (61,382) (52,907)
Income (loss) from continuing operations 75,746 (173,325) (45,341) (73,336) (57,386)
Income (loss) before extraordinary items 75,746 (277,664) (263,658) (89,701) (86,983)
Net loss (30,782) (277,664) (263,658) (133,810) (57,908)
Loss from continuing operations per common share (.39) (7.23) (2.35) (3.27) (2.63)
<CAPTION>
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets $ 681,071 $ 918,825 $ 1,141,434 $ 1,300,304 $ 1,412,790
Long-term debt, including current portion 566,077 923,554 982,205 941,838 930,065
Redeemable preferred stock -- 122,368 98,602 79,754 69,240
Common stockholders' equity (deficit) (412,622) (702,220) (421,460) (130,921) 18,821
<CAPTION>
<S> <C> <C> <C> <C> <C>
OTHER DATA (FROM CONTINUING OPERATIONS):
Capital expenditures $ 84,423 $ 44,923 $ 38,209 $ 38,928 $ 42,885
Depreciation 43,882 42,232 45,463 43,899 42,532
<CAPTION>
</TABLE>
(1) 1992 was a 53-week year.
(2) Excludes amounts related to discontinued operations of $18,871 in 1993,
$23,010 in 1992, $25,062 in 1991 and $33,040 in 1990.
16
<PAGE>
MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
INITIAL PUBLIC OFFERING AND RECAPITALIZATION
On July 13, 1994, the Company completed an initial public offering (the
"Offering") of 15.0 million shares of Common Stock at an initial public offering
price of $10.50 per share. The net proceeds to the Company from the Offering and
from the sale by the Company of an aggregate of 8.81 million shares of Common
Stock to affiliates of the Company's principal shareholders together with
proceeds under new credit facilities and available cash were used to effect a
defeasance and redemption or repayment of virtually all outstanding indebtedness
and all outstanding preferred stock of the Company and its subsidiaries (the
"Recapitalization"). In addition, certain of the Company's indebtedness was
exchanged for approximately 18.5 million shares of Common Stock. After the
Offering and Recapitalization, approximately 70.5 million shares of Common Stock
were outstanding.
The Recapitalization was designed to reduce the Company's indebtedness,
significantly lower interest expense, improve operating and financial
flexibility and provide liquidity for operations and other general corporate
purposes. In connection with the Recapitalization, Collins & Aikman Holdings II
Corporation, formerly the sole common stockholder of the Company, was merged
into the Company and the Company changed its name to Collins & Aikman
Corporation. Concurrently, Collins & Aikman Group, Inc. was merged into its
wholly-owned subsidiary which changed its name to Collins & Aikman Products Co.
For pro forma operating results see Note 2 to the consolidated financial
statements.
GENERAL
The Company's continuing business segments consist of Automotive Products, which
supplies interior trim products to the North American automotive industry;
Interior Furnishings, which manufactures residential upholstery and commercial
floorcoverings in the United States; and Wallcoverings, which produces
residential and commercial wallpaper in North America. The Company's net sales
in fiscal 1994 were $1,536 million, with approximately $905 million (59%) in
Automotive Products, $414 million (27%) in Interior Furnishings, and $217
million (14%) in Wallcoverings. All references to a year with respect to the
Company refer to the fiscal year of the Company which ends on the last Saturday
of January of the following year. Capitalized terms that are used in this
discussion and not defined herein have the meanings assigned to such terms in
the Notes to Consolidated Financial Statements.
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.
17
<PAGE>
RESULTS OF OPERATIONS
[CAPTION]
<TABLE>
<CAPTION>
Automotive Products Interior Furnishings Wallcoverings
<S> <C> <C> <C> <C> <C> <C> <C>
Fiscal Year
Fiscal Year Ended Fiscal Year Ended Ended
JANUARY 28, January 29, January 30, JANUARY 28, January 29, January 30, JANUARY 28,
1995 1994 1993 1995 1994 1993 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 904.9 $ 677.9 $ 643.8 $ 414.5 $ 407.2 $ 391.8 $ 216.6
Cost of goods sold 730.1 555.4 532.1 287.1 294.7 282.5 147.7
Gross margin 174.8 122.5 111.7 127.4 112.5 109.3 68.9
Selling, general and adminis-
trative expenses 51.5 54.9 57.1 70.0 68.0 70.8 61.9
Goodwill amortization, write
off and other non-recurring
charges (1) -- 69.9 1.9 -- 32.3 0.9 --
Segment operating income
(loss) (2) $ 123.3 $ (2.3) $ 52.7 $ 57.4 $ 12.2 $ 37.6 $ 7.0
Gross margin percentages 19.3% 18.1% 17.3% 30.7% 27.6% 27.9% 31.8%
Operating margin percentages 13.6% (.3)% 8.2% 13.8% 3.0% 9.6% 3.2%
<CAPTION>
<S> <C> <C>
January 29, January 30,
1994 1993
<S> <C> <C>
Net sales $ 220.4 $ 241.9
Cost of goods sold 145.7 163.8
Gross margin 74.7 78.1
Selling, general and adminis-
trative expenses 62.1 66.1
Goodwill amortization, write
off and other non-recurring
charges (1) 30.5 10.9
Segment operating income
(loss) (2) $ (17.9) $ 1.1
Gross margin percentages 33.9% 32.3%
Operating margin percentages (8.1)% .5%
</TABLE>
(1) Goodwill amortization and write-off and other non-recurring charges consist
of:
[CAPTION]
<TABLE>
<CAPTION>
Automotive Products Interior Furnishings Wallcoverings
<S> <C> <C> <C> <C> <C> <C> <C>
Fiscal Year
Fiscal Year Ended Fiscal Year Ended Ended
JANUARY 28, January 29, January 30, JANUARY 28, January 29, January 30, JANUARY 28,
1995 1994 1993 1995 1994 1993 1995
<S> <C> <C> <C> <C> <C> <C> <C>
Goodwill amortization and
write-off $ -- $69.9 $ 1.9 $ -- $32.3 $ 0.9 $ --
Restructuring charges -- -- -- -- -- -- --
Total $ -- $69.9 $ 1.9 $ -- $32.3 $ 0.9 $ --
<CAPTION>
<S> <C> <C>
January 29, January 30,
1994 1993
<S> <C> <C>
Goodwill amortization and
write-off $30.5 $ 0.9
Restructuring charges -- 10.0
Total $30.5 $10.9
</TABLE>
(2) Excludes $14.9 million, $38.3 million and $24.5 million of unallocated
corporate expense in 1994, 1993 and 1992, respectively.
18
<PAGE>
1994 COMPARED TO 1993
A discussion of the results of operations for each of the Company's operating
segments follows:
AUTOMOTIVE PRODUCTS
NET SALES: Automotive Products' net sales increased 33.5% to approximately
$904.9 million in 1994, up $227.0 million over 1993. The increase is
attributable to increased sales volume, which reflects the impact of a 10.6%
increase in North American automobile and light truck build in 1994 from 1993.
Of the net sales increase, 53% related to automotive bodycloth, 20% related to
convertible top and topstack products and 16% related to molded floor carpet.
The remainder related to other automotive products.
The bodycloth increase was primarily due to the Company's jacquard velvets
product line, currently utilized in such high volume models as the General
Motors C/K Truck Line, and to other new placements including the Chevrolet Monte
Carlo, the Ford Contour/Mystique, Windstar and F-Series Trucks and the Chrysler
Cirrus/Stratus. Existing product placements which experienced significant
overall increases in volume over 1993 were the Pontiac Grand Am and Bonneville
and the Chrysler Minivans.
The molded floor carpet increase was due to a 17% increase in unit shipments
principally related to increased production of high volume models including
Cadillac Deville, Oldsmobile Aurora, General Motors C/K Truck Line, Chrysler
Minivans, Ford Mustang, Toyota Camry, and the Dodge T-300 and Dakota Trucks.
The convertible top and topstack increase resulted from Ford's full production
of the Mustang convertible and increased volume of the Chrysler LeBaron
convertible.
These factors resulted in the Company's average revenue per North
American-produced vehicle of approximately $53 for 1994 compared to
approximately $43 for 1993.
GROSS MARGIN: For 1994, gross margin was 19.3%, up from 18.1% in 1993. During
the third and fourth quarters, the Company incurred premium freight and
commission weaving costs related to capacity constraints for certain automotive
seat fabrics. The premium freight and commission weaving costs offset the
improvements in gross margin which resulted from spreading fixed costs over
higher production volume and from continued benefits of reducing costs of
nonconforming products. During 1995, the Company expects to continue to incur
commission weaving costs at a declining rate into the second quarter on certain
automotive seat fabric lines.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Automotive Products' selling,
general and administrative expenses decreased 6.3% or $3.5 million in 1994 as
compared to 1993. The reduction is attributable to lower styling and product
development costs in the segment's automotive carpet product line and reduced
administrative expenses resulting from reductions in administrative head count
and changes in postretirement plan provisions.
INTERIOR FURNISHINGS
NET SALES: Interior Furnishings' net sales increased 1.8% to $414.5 million in
1994, up $7.3 million over 1993. In Decorative Fabrics, sales declined $7.2
million to $306.5 million. This decline was primarily due to the Company's
redeployment of manufacturing capacity from certain Decorative Fabrics velvet
furniture products to automotive seat fabrics and to softness in the Mastercraft
product line commencing in the third quarter, which was partially offset by
increased sales in the contract fabric lines. Management believes that the sales
decline experienced by Mastercraft in the second half of 1994 primarily reflects
increased competition from lower priced fabrics. In 1994, Floorcoverings net
sales increased $14.4 million over 1993. This increase is largely attributable
to a 16.3% increase in volume, primarily in six foot roll sales to the education
and corporate markets and in sales in the southern United States.
GROSS MARGIN: Interior Furnishings' gross margin rose to 30.7% of sales in 1994
from 27.6% in 1993. The increase reflects improvements in manufacturing
efficiencies in the Decorative Fabrics group resulting from Mastercraft's loom
modernization and cost improvement programs, as well as improved sales volumes
and product mix in Floorcoverings.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Interior Furnishings' selling,
general and administrative expenses increased 2.9% or $2.0 million in 1994 from
1993. The increase is primarily due to increased selling expenses related to
sales volume increases in Floorcoverings as well as the planned expansion of
that group's sales staff.
WALLCOVERINGS
NET SALES: Wallcoverings' net sales decreased 1.7% to $216.6 million in 1994,
down $3.8 million from 1993. The overall decrease in net sales continues to
reflect a modest unit increase in the independent retailer ("dealer") and
converter businesses offset by a decrease in unit shipments to chain businesses
and by a planned reduction in sales to independent distributors. The Company
believes that the decrease in the chain business reflects increased price
competition from imports and delayed product replenishment by the chain stores.
19
<PAGE>
GROSS MARGIN: Wallcoverings' gross margin dropped to 31.8% of sales in 1994 from
33.9% in 1993. The decrease in gross margin reflects manufacturing
inefficiencies in the third and fourth quarters of 1994 related to labor and
materials utilization and the impact of spreading fixed costs over reduced
production volume. The above factors offset improvements recognized in the first
six months related to reductions in product close-out costs and improved
absorption of fixed costs due to increased production of new product lines.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Wallcoverings' selling, general
and administrative expenses decreased .3% to $61.9 million in 1994, down $.2
million over 1993. The decrease was due to lower administrative and selling
expenses offset by planned increases in sample and product development costs.
TOTAL COMPANY
NET SALES: Net sales increased 17.7% to $1,536.0 million in 1994, up $230.5
million over 1993. The overall net sales increase reflects continued increases
in the Company's Automotive Products and Interior Furnishings segments offset by
continued decreases in the Wallcoverings segment as discussed above.
GROSS MARGIN: Gross margin increased to $371.1 million in 1994 or 24.2% of
sales, up from $309.7 million or 23.7% of sales in 1993. The increase in the
gross margin in 1994 relates primarily to increased volume in the Company's
Automotive Products segment, which resulted in lower fixed costs per unit, and
manufacturing efficiencies in the Interior Furnishings segment, offset by
premium freight and commission weaving charges in the Automotive Products
segment and manufacturing inefficiencies in the Wallcoverings segment, as
described above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses of $198.3 million in 1994 were $1.7 million higher than
in 1993. In 1994, unallocated corporate expenses of $14.9 million were $3.4
million higher than 1993 expenses. The overall increase in unallocated corporate
expenses relates to fees for services performed by affiliates of Blackstone
Partners and of WP Partners in connection with the Company's evaluation of
refinancing and strategic alternatives and certain other advisory services.
MANAGEMENT EQUITY PLAN: In 1993, the Company incurred a one-time charge of $26.7
million related to the Company's 1993 Employee Stock Option Plan (the "1993
Plan").
GOODWILL WRITE-OFF AND AMORTIZATION: During the third quarter ended October 30,
1993, the Company wrote off its remaining goodwill of $129.9 million. The write-
off was based on management's assessment of the Company's financial condition
given the Company's capital structure at that time. Although management of the
Company, based on the facts known to it at October 30, 1993, was expecting both
cyclical and long-term improvement in the results of operations, an analysis
suggested that, given the Company's capital structure at that time, a
deterioration of the financial condition of the Company had occurred and
cumulative future net income would not be sufficient to recover the Company's
remaining goodwill balance of $129.9 million at October 30, 1993.
Goodwill amortization was $2.8 million in 1993. No goodwill amortization was
recorded in 1994 as a result of the write-off of goodwill at October 30, 1993.
INTEREST EXPENSE: Interest expense allocated to continuing operations, net of
interest income of $6.4 million in 1994 and $4.4 million in 1993, decreased to
$75.7 million in 1994 from $111.3 million in 1993. In 1994, interest expense,
including amounts allocated to discontinued operations and excluding interest
income, decreased to $82.1 million from $135.1 million in 1993. The overall
decrease in interest expense was due to the Recapitalization, which reduced the
amount of outstanding indebtedness and replaced higher fixed rate indebtedness
with variable rate borrowings. No interest was allocated to discontinued
operations in 1994.
LOSS ON THE SALE OF RECEIVABLES: On July 13, 1994, the Company, as part of the
Recapitalization, sold through its Carcorp subsidiary an undivided senior
interest in a pool of accounts receivable to Chemical Bank. In connection with
the receivables sale, a loss of $7.6 million was incurred in 1994. Of this loss,
$1.3 million related to fees and expenses associated with the sale and $6.3
million related to discounts on the receivables sold.
INCOME TAXES: In 1994, the provision for income taxes was $11.5 million compared
with $11.3 million in 1993. In 1994 and 1993 income tax expense consisted of
foreign, state and franchise taxes.
DISCONTINUED OPERATIONS: The Company's loss from discontinued operations,
including loss on disposals, was $104.3 million in 1993. This loss principally
related to the accrual of additional reserves (i) for the significant reduction
in estimated proceeds from disposition and other costs in connection with the
sale or disposition of Builders Emporium's inventory, real estate and other
assets (ii) to provide for employee severance and other costs and (iii) to
realize a previously unrecognized loss as a result of the decision to retain
Dura. The 1993 loss was partially offset by a $28.1 million gain on the sale of
Kayser-Roth. In 1994, discontinued operations did not result in any charges
against earnings.
20
<PAGE>
EXTRAORDINARY LOSS ON THE EXTINGUISHMENT OF DEBT: On July 13, 1994, the Company,
as part of the Recapitalization, recognized a loss on the extinguishment of debt
of $106.5 million. This second quarter 1994 loss consisted of $9.6 million of
premiums paid to redeem indebtedness and $96.9 million of unamortized discounts,
deferred financing charges and defeasance costs.
NET INCOME: The combined effect of the foregoing resulted in a net loss of $30.8
million in 1994 compared to a net loss of $277.7 million in 1993.
1993 COMPARED TO 1992
A discussion of the results of operations for each of the Company's operating
segments follows:
AUTOMOTIVE PRODUCTS
NET SALES: Automotive Products' net sales increased 5.3% in 1993 to $677.9
million. Net sales growth increased, primarily during the second half of 1993,
due to a number of factors. First, growth in the North American vehicle build
accelerated due in part to increased production by the transplants. Second, the
Company won placement of its products on a number of new and existing vehicle
lines in 1993. Third, the Company continued to benefit from increasing sales
content per vehicle. These factors were offset by decreased demand for product
for certain key models in the second quarter due to OEM production downtime
during model changeovers.
GROSS MARGIN: Automotive Products' gross margin increased to 18.1% in 1993 from
17.3% in 1992 as a result of improved product mix primarily 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: 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
NET SALES: Interior Furnishings' net sales increased 3.9% in 1993 to $407.2
million. The increase in net sales was attributable to an industry-wide
strengthening of furniture sales in 1993 (somewhat offset by an industry-wide
decline in sales volume during the second quarter of 1993) and to increased
sales of the Company's patented Powerbond RS(Register mark) floorcovering
products. Net sales increased by 5.6% at both Mastercraft, which represents
66.0% of Interior Furnishings' sales, and Floorcoverings due largely to volume
increases.
GROSS MARGIN: 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: 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
NET SALES: Wallcoverings' net sales decreased 8.9% in 1993 to $220.4 million.
The decrease in sales was primarily due to the consolidation of certain product
distribution channels and to Wallcoverings' downsizing program. In the fourth
quarter, management responded to these reduced sales by aggressively rebuilding
dealer shelf space. As a result, sample book placements in the dealer market
increased.
GROSS MARGIN: 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: 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 COMPANY
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.
GROSS MARGIN: Gross margin increased to $309.7 million or 23.7% of sales in
1993, up from $299.0 million or 23.4% of sales in 1992. The increase in the
gross margin in 1993 relates primarily to increased volume in the Company's
Automotive Products segment, which resulted in lower fixed costs per unit, and
cost reduction initiatives in the Wallcoverings segment offset partially by
price deterioration in the Interior Furnishings segment, as described above.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses of $196.6 million
21
<PAGE>
were $21.9 million lower than in 1992. In 1993, unallocated corporate expenses
of $11.5 million were $12.9 million lower than 1992. The overall decrease in
unallocated corporate expenses relates to the reduction and relocation of
headquarters staff from California to North Carolina.
MANAGEMENT EQUITY PLAN: In 1993, the Company incurred a one-time charge of $26.7
million related to the 1993 Plan.
GOODWILL WRITE-OFF AND AMORTIZATION: During the third quarter ended October 30,
1993, the Company wrote off its remaining goodwill of $129.9 million. The write-
off was based on management's assessment of the Company's financial condition
given the Company's capital structure at that time. Although management of the
Company, based on the facts known to it at October 30, 1993, was expecting both
cyclical and long-term improvement in the results of operations, an analysis
suggested that, given the Company's capital structure at that time, a
deterioration of the financial condition of the Company had occurred and
cumulative future net income would not be sufficient to recover the Company's
remaining goodwill balance of $129.9 million at October 30, 1993.
Goodwill amortization was $2.8 million in 1993 and $3.7 million in 1992.
RESTRUCTURING CHARGES: In 1992, the Company reevaluated the distribution methods
as well as certain manufacturing and product lines in Wallcoverings. This
reevaluation resulted in a restructuring charge of $10.0 million for the closure
of certain manufacturing facilities. Of this amount, $2.7 million related to
asset write-downs and $7.3 million related to the consolidation of
Wallcoverings' operations.
INTEREST EXPENSE: Interest expense for continuing operations, net of interest
income of $4.4 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 cost of borrowings.
INCOME TAXES: In 1993, income taxes of $11.3 million consisted of foreign and
state taxes. This amount compared with a 1992 tax benefit of $3.2 million which
was comprised of a foreign and state tax provision of $3.5 million offset by a
Federal tax benefit of approximately $6.7 million.
DISCONTINUED OPERATIONS: The Company's loss from discontinued operations was
$104.3 million for 1993 and $218.3 million for 1992, including losses on
disposals of $99.6 million and $168.0 million, respectively.
The 1993 loss is primarily attributable to the $125.5 million additional charge
arising from the Company's determination as of the end of the second quarter of
1993 that it would be unable to sell Builders Emporium as an ongoing entity.
This was offset by a $28.1 million gain on the sale of Kayser-Roth. The 1992
loss reflected primarily the expected loss on the anticipated sale of Builders
Emporium.
NET INCOME: The combined effect of the foregoing resulted in a net loss of
$277.7 million in 1993 compared to a net loss of $263.7 million in the prior
year.
LIQUIDITY AND CAPITAL RESOURCES
The Company and its subsidiaries had cash and cash equivalents totaling $3.3
million and $81.4 million at January 28, 1995 and January 29, 1994,
respectively. The decrease in the Company's cash balance is primarily due to the
Recapitalization which occurred in July 1994.
During the fourth quarter of 1993, the Company sold Kayser-Roth for
approximately $170 million (before the post-closing purchase price adjustment
described below) including a $70 million note. A portion of the proceeds was
used to repay $66 million of borrowings under a Kayser-Roth credit facility. On
April 27, 1994, the Kayser-Roth note was paid with accrued interest resulting in
cash proceeds of $71.2 million to the Company. A post-closing purchase price
adjustment of $5.1 million was paid to the purchaser of Kayser-Roth on September
1, 1994.
As part of the Recapitalization, the Company's C&A Products subsidiary entered
into the New Credit Facilities on July 13, 1994. The New Credit Facilities
consist of (i) the Term Loan Facilities, comprised of term loans in an aggregate
principal amount of $475 million (including a $45 million Canadian loan) and
having a term of eight years, which were drawn in full on the closing date, (ii)
the Revolving Facility, having an aggregate principal amount of up to $150
million and a term of seven years and (iii) the Bridge Receivables Facility
having an aggregate face amount of up to $150 million and a term of seven years.
The New Credit Facilities contain restrictive covenants including maintenance of
EBITDA (earnings before interest, taxes, depreciation and amortization including
the non cash write-off of goodwill) and interest coverage ratios, leverage and
liquidity tests and various other restrictive covenants which are typical for
such facilities. In addition, C&A Products is prohibited from paying dividends
or making other distributions to the Company except
22
<PAGE>
to the extent necessary to allow the Company to pay taxes, ordinary expenses,
permitted dividends on the Common Stock, the repurchase price for shares or
options pursuant to contractual obligations and to make permitted investments in
finance, foreign or acquired subsidiaries. The Company does not believe such
prohibition will have a material adverse impact on the Company because all the
Company's operations are conducted, and all the Company's debt obligations are
issued, by C&A Products and its subsidiaries.
On March 31, 1995, C&A Products repaid and terminated the Bridge Receivables
Facility and entered, through a trust formed by its wholly-owned, bankruptcy
remote subsidiary ("Carcorp"), into a new receivables facility (the "Receivables
Facility") comprised of (i) term certificates, which were issued on March 31,
1995, in an aggregate face amount of $110 million and having a term of five
years and (ii) variable funding certificates, which represent revolving
commitments, of up to an aggregate of $75 million and having a term of five
years. Carcorp purchases on a revolving basis and transfers to the trust
virtually all trade receivables generated by C&A Products and certain of its
subsidiaries (the "Sellers"). The certificates represent the right to receive
payments generated by the receivables held by the trust.
Availability under the variable funding certificates at any time depends
primarily on the amount of receivables generated by the Sellers from sales to
the auto industry, the rate of collection on those receivables and other
characteristics of those receivables which affect their eligibility (such as
bankruptcy or downgrading below investment grade of the obligor, delinquency and
excessive concentration). Based on these criteria, at March 31, 1995
approximately $30 million was available under the variable funding certificates,
of which approximately $12 million was utilized.
The proceeds received by Carcorp from collections on receivables, after the
payment of expenses and amounts due on the certificates, are used to purchase
new receivables from the Sellers. Collections on receivables are required to
remain in the trust if at any time the trust does not contain sufficient
eligible receivables to support the outstanding certificates. The Receivables
Facility contains certain other restrictions on Carcorp (including maintenance
of $25 million net worth) and on the Sellers (including limitations on liens on
receivables, on modifications of the terms of receivables, and on changes in
credit and collection practices) customary for facilities of this type. The
commitments under the Receivables Facility will terminate prior to their term
upon the occurrence of certain events, including payment defaults, breach of
covenants, bankruptcy, insufficient eligible receivables to support the
outstanding certificates, default by C&A Products in servicing the receivables
and, in the case of the variable funding certificates, failure of the
receivables to satisfy certain performance criteria.
On September 30, 1994, the Company entered into a master lease agreement for a
maximum of $50 million of machinery and equipment. Under the master lease, the
Company during 1994 sold and leased back $30.4 million of machinery and
equipment utilized in the Automotive Products and Interior Furnishings segments.
At January 28, 1995, the Company had $19.6 million of potential availability
under this master lease for future machinery and equipment requirements of the
Company, subject to the lessors' approval.
The Company's principal sources of funds are cash generated from continuing
operations, borrowings under the Revolving Facility and the sale of receivables
under the Receivables Facility described above. Net cash provided by the
operating activities of the Company's continuing operations was $50.6 million
for the year ended January 28, 1995. Additionally, the Company generated $30.4
million of cash in the sale/leaseback transactions discussed above. The Company
had a total of $81.2 million of borrowing availability under its credit
arrangements as of January 28, 1995. The total was comprised of $67 million
under the Revolving Facility, $5 million under the Bridge Receivables Facility
and approximately $9.2 million under a bank demand line of credit in Canada.
The Company's principal uses of funds for the next several years will be to fund
interest and principal payments on its indebtedness, net working capital
increases and capital expenditures. At January 28, 1995, the Company had total
outstanding indebtedness of $567.8 million (excluding approximately $13.0
million of outstanding letters of credit) at an average interest rate of 7.7%
per annum. Of the total outstanding indebtedness, $545 million relates to the
Term Loan Facilities and the Revolving Facility.
Indebtedness under the Term Loan Facilities and Revolving Facility bears
interest at a per annum rate equal to the Company's choice of (i) Chemical's
Alternate Base Rate (which is the highest of Chemical's announced prime rate,
the Federal Funds Rate plus .5% and Chemical's base certificate of deposit rate
plus 1%) ("ABR") plus the ABR Margin per annum or (ii) the offered rates for
Eurodollar deposits ("LIBOR") of one, two, three, six, nine or twelve months, as
selected by the Company, plus the LIBOR Margin. Pursuant to the terms of the
Term Loan Facilities and the Revolving Facility, the "ABR Margin" is initially
.75% and the "LIBOR Margin" is initially 1.75%. The weighted average rate of
interest on the Term Loan Facilities and the
23
<PAGE>
Revolving Facility at January 28, 1995 was 7.8%. In March 1995, the "ABR Margin"
was reduced to .50% and the "LIBOR Margin" was reduced to 1.50%. The purchases
by the Buyers of participating interests in the receivables under the Bridge
Receivables Facility were made at an initial interest equal to LIBOR plus .625%
per annum or ABR. The weighted average interest rate on the sold interests under
the Bridge Receivables Facility at January 28, 1995 was 6.6%. Under the
Receivables Facility, the term certificates bear interest at an average rate
equal to one-month LIBOR plus .34% per annum and the variable funding
certificates bear interest, at Carcorp's option, at LIBOR plus .40% per annum or
a prime rate. Cash interest paid during 1994 and 1993 was $77.9 million ($16.0
million of which was paid in connection with the Recapitalization) and $101.5
million, respectively.
Due to the variable interest rates associated with indebtedness under the New
Credit Facilities and the Receivables Facility, the Company is sensitive to
increases in interest rates. Accordingly, during September 1994, the Company
entered into a program to reduce its exposure to increases in interest rates
through the use of interest rate cap and corridor agreements. Under these
agreements, the Company has limited its exposure through October 17, 1995 on
$300 million of notional principal amount at an average LIBOR strike price of
6.92% and on $250 million of notional principal amount from October 17, 1995
through October 17, 1996 at an average LIBOR strike price of 7.50%. Based upon
amounts outstanding at January 28, 1995, a .5% increase in LIBOR (6.3% at
January 28, 1995) would impact interest costs by approximately $2.7 million
annually on the Term Loan Facilities and the Revolving Facility and $.7 million
annually on the Receivables Facility.
The current maturities of long-term debt primarily consist of the current
portion of the Term Loan Facilities, vendor financing, industrial revenue bonds
and other miscellaneous debt. Repayments of indebtedness under the New Credit
Facilities commence in the third fiscal quarter of 1995. The maturities of
long-term debt of the Company during 1995 and for 1996, 1997, 1998 and 1999 are
$18.1 million, $41.2 million, $61.5 million, $77.5 million and $83.6 million,
respectively. In addition, the New Credit Facilities provide for mandatory
prepayments with certain excess cash flow of the Company, net cash proceeds of
certain asset sales or other dispositions by the Company, net cash proceeds of
certain sale/leaseback transactions and net cash proceeds of certain issuances
of debt obligations.
The Company makes capital expenditures on a recurring basis for replacements and
improvements. As of January 28, 1995, the Company had approximately $19.9
million in outstanding capital expenditure commitments. During 1994, capital
expenditures of continuing operations aggregated approximately $84.4 million as
compared to $44.9 million in 1993. The increase is due primarily to the
acquisition of additional machinery and equipment at Decorative Fabrics'
Mastercraft division as part of an $85 million four year capital investment plan
that was initiated this year for the purpose of expanding production capacity to
accommodate anticipated growth. Secondarily, this increase is due to
expenditures of approximately $5.9 million on two new Automotive Products
facilities in Mexico, which are expected to be completed for a total of
approximately $9.5 million. The Company's capital expenditures in future years
will depend upon demand for the Company's products and changes in technology.
Due to the acceleration of certain capital projects the Company currently
expects that capital expenditures in 1995 will approximate $80 million, an
increase over its previous expectations.
The Company is sensitive to price movements in its raw material supply base.
During the last quarter of 1994 price trends for many materials began to
increase. The Company anticipates that announced price increases in its primary
raw materials could increase the cost of purchased materials by approximately
$20 million on an annualized basis. While the Company may not be able to pass on
future raw material price increases to its customers, it believes that a
significant portion of the increased cost can be offset by continued results of
its reengineering efforts and by continued reductions in the cost of
nonconformance.
During 1994, the Company began construction of two facilities in Mexico, to
supply automotive products to Mexican subsidiaries of U.S. based automobile
manufacturers. The Company believes that, based on the nature of its Mexican
operations, fluctuations in the Mexican peso will not have a material impact on
the Company's operations.
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 $25.0 million
in 1995. However, because the requirements of the
24
<PAGE>
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 1995 and into 1996 by net cash provided by operating
activities from continuing operations and by borrowings under existing bank
credit facilities.
TAX MATTERS
At January 28, 1995, the Company had outstanding NOLs (net operating loss
carryforwards) of approximately $391 million for Federal income tax purposes.
These NOLs expire over the period from 1996 to 2009. The Company also has unused
Federal tax credits of approximately $17.8 million, $10.7 million of which
expire during 1995 to 2003. The Company estimates that it will generate tax
deductions of approximately $65.0 million in connection with the ultimate
disposition of assets and liabilities of its discontinued businesses during the
period 1995 to 1997, which were previously accrued for financial reporting
purposes. 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.
The Company's Federal income tax returns for fiscal 1988 through 1991 are
currently under examination by the IRS. The examination is at a preliminary
stage. The IRS has outstanding challenges to the availability or timing of the
utilization of $139 million of the Company's NOL's and other deductions. The
Company disputes the proposed adjustments. If the IRS were to maintain its
position and such position were to be upheld in litigation, the Company would
become liable for the payment of interest and would lose a material amount of
the NOL's and other deductions otherwise available to the Company in future
years.
Approximately $134.0 million of the Company's NOLs and $10.7 million of the
Company's unused Federal tax credits may be used only against the income and
apportioned tax liability of the specific corporate entity that generated such
losses or credits or its successors. Because of the merger of Group and C&A
Products, such NOLs and credits may be used against the income and apportioned
tax liability of C&A Products, which the Company believes will have sufficient
taxable income and apportioned tax liability to fully use such NOLs and to use a
substantial portion of such tax credits. The Recapitalization did not constitute
a "change in control" that would result in annual limitations on the Company's
use of its NOLs and unused tax credits. However, future sales of common stock by
the Company or the principal shareholders, or changes in the composition of the
principal shareholders, could constitute such a "change in control". Management
cannot predict whether such a "change in control" will occur. If such a "change
of control" were to occur, the resulting annual limitations on the use of NOLs
and tax credits would 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.
ENVIRONMENTAL MATTERS
The Company is subject to increasingly stringent Federal, state and local
environmental laws and regulations that (i) affect ongoing operations and may
increase capital costs and operating expenses and (ii) impose liability for the
costs of investigation and remediation and otherwise related to on-site and off-
site soil and groundwater contamination. The Company's management believes that
it has obtained, and is in material compliance with, all material environmental
permits and approvals necessary to conduct its various businesses. Environmental
compliance costs for continuing businesses currently are accounted for as normal
operating expenses or capital expenditures of such business units. In the
opinion of management, based on the facts presently known to it, such
environmental compliance costs will not have a material adverse effect on the
Company's consolidated financial condition or results of operations.
The Company is legally or contractually responsible or alleged to be responsible
for the investigation and remediation of contamination at various sites. It also
has received notices that it is a potentially responsible party ("PRP") in a
number of proceedings. The Company may be named as a PRP at other sites in the
future, including with respect to divested and acquired businesses. The Company
is currently engaged in investigation or remediation at certain sites. In
estimating the total cost of investigation and remediation, the Company has
considered, among other things, the Company's prior experience in remediating
contaminated sites, remediation efforts by other parties, data released by the
Environmental Protection Agency, the professional judgment of the Company's
environmental experts, outside environmental specialists and other experts, and
the likelihood that other parties which have 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
25
<PAGE>
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. As of January 28, 1995, 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 14 sites where the Company is participating in the
investigation or remediation of the site, either directly or through financial
contribution, and 11 additional sites where the Company is alleged to be
responsible for costs of investigation or remediation. As of January 28, 1995,
the Company's estimate of its liability for these 25 sites is approximately
$29.6 million. As of January 28, 1995, the Company has established reserves of
approximately $31.7 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.
26
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Collins & Aikman Corporation:
We have audited the accompanying consolidated balance sheets of Collins & Aikman
Corporation (formerly Collins & Aikman Holdings Corporation) (a Delaware
corporation) and subsidiaries as of January 28, 1995 and January 29, 1994, and
the related consolidated statements of operations, cash flows, and common
stockholders' deficit for each of the three fiscal years in the period ended
January 28, 1995. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Collins & Aikman
Corporation and subsidiaries as of January 28, 1995 and January 29, 1994, and
the results of their operations and their cash flows for each of the three
fiscal years in the period ended January 28, 1995, in conformity with generally
accepted accounting principles.
(Arthur Andersen LLP signature appears here)
Charlotte, North Carolina,
March 23, 1995 (except with respect to the
matter discussed in Note 23, as to which
the date is March 31, 1995).
27
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
[CAPTION]
<TABLE>
<CAPTION>
Fiscal Year Ended
<S> <C> <C> <C>
JANUARY 28, January 29, January 30,
1995 1994 1993
<S> <C> <C> <C>
Net sales $ 1,536,002 $ 1,305,517 $ 1,277,500
Cost of goods sold 1,164,869 995,790 978,473
Selling, general and administrative expenses 198,293 196,585 218,441
Management equity plan expense -- 26,736 --
Goodwill amortization and write-off -- 132,630 3,702
Restructuring costs -- -- 10,000
1,363,162 1,351,741 1,210,616
Operating income (loss) 172,840 (46,224) 66,884
Interest expense, net of interest income of $6,441, $4,434 and $4,012 75,683 111,291 110,867
Loss on sale of receivables 7,616 -- --
Dividends on preferred stock of subsidiary 2,258 4,533 4,514
Income (loss) from continuing operations before income taxes 87,283 (162,048) (48,497)
Income tax expense (benefit) 11,537 11,277 (3,156)
Income (loss) from continuing operations 75,746 (173,325) (45,341)
Discontinued operations:
Loss from operations, net of income tax expense of $0, $584 and $5,700 -- (4,775) (50,317)
Loss on disposals, net of income tax benefit of $0, $344 and $0 -- (99,564) (168,000)
Income (loss) before extraordinary loss 75,746 (277,664) (263,658)
Extraordinary loss, net of income tax expense of $0 (106,528) -- --
Net loss $ (30,782) $ (277,664) $ (263,658)
Dividends and accretion on preferred stock (14,408) (23,723) (18,848)
Excess of redemption cost over book value of preferred stock (82,022) -- --
Loss applicable to common stockholders $ (127,212) $ (301,387) $ (282,506)
Per primary and fully diluted common share:
Continuing operations $ (.39) $ (7.23) $ (2.35)
Discontinued operations -- (3.83) (8.01)
Extraordinary loss (2.01) -- --
Net loss $ (2.40) $ (11.06) $ (10.36)
Average common shares outstanding 52,905 27,260 27,260
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
28
<PAGE>
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
JANUARY 28, January 29,
1995 1994
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,317 $ 81,373
Accounts and notes receivable, net of allowances of $6,400 and $7,071 92,082 200,368
Inventories 196,096 176,062
Receivable from sale of business -- 70,000
Other 38,184 48,397
Total current assets 329,679 576,200
Property, plant and equipment, at cost less accumulated depreciation
and amortization of $269,808 and $240,514 287,559 292,600
Other assets 63,833 50,025
$ 681,071 $ 918,825
LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
Current Liabilities:
Notes payable $ 1,723 $ 3,789
Current maturities of long-term debt 18,114 25,895
Accounts payable 97,726 85,591
Accrued expenses 144,566 145,022
Total current liabilities 262,129 260,297
Long-term debt, net of current maturities 547,963 897,659
Deferred income taxes 1,377 640
Other, including postretirement benefit obligation 282,224 339,768
Commitments and contingencies
Redeemable preferred stock of subsidiary, at carrying value -- 132
Preferred stock of subsidiary, at carrying value -- 181
Redeemable preferred stock, at carrying value -- 122,368
Common Stockholders' Deficit:
Common stock (150,000 authorized; 70,521 and 28,164 shares issued and outstanding) 705 282
Other paid-in capital 586,281 160,317
Accumulated deficit (976,549) (849,337)
Foreign currency translation adjustments (13,655) (5,735)
Pension equity adjustment (9,404) (7,747)
Total common stockholders' deficit (412,622) (702,220)
$ 681,071 $ 918,825
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
29
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
[CAPTION]
<TABLE>
<CAPTION>
Fiscal Year Ended
<S> <C> <C> <C>
JANUARY 28, January 29, January 30,
1995 1994 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES
Income (loss) from continuing operations $ 75,746 $(173,325) $ (45,341)
Adjustments to derive cash flow from continuing operating activities:
Depreciation and leasehold amortization 43,882 42,232 45,463
Goodwill amortization and write-off -- 132,630 3,702
Restructuring costs -- -- 10,000
Management equity plan expense -- 26,736 --
Amortization of other assets and liabilities 5,277 13,029 13,108
Increase in accounts and notes receivable (36,714) (32,982) (149)
Decrease (increase) in inventories (20,034) (6,952) 4,308
Increase (decrease) in interest and dividends payable (14,485) (4,865) 1,027
Increase in accounts payable 12,135 14,145 130
Other, net (15,251) 11,975 (9,919)
Net cash provided by continuing operating activities 50,556 22,623 22,329
Cash used in discontinued operations (30,974) (67,417) (13,458)
INVESTING ACTIVITIES
Additions to property, plant and equipment (84,423) (56,278) (54,181)
Sales of property, plant and equipment 805 22,710 10,347
Proceeds from sale/leaseback arrangement 30,365 -- --
Net proceeds from disposition of discontinued operations 68,861 148,743 --
Other, net 1,915 44,271 11,659
Net cash provided by (used in) investing activities 17,523 159,446 (32,175)
FINANCING ACTIVITIES
Issuance of common stock 232,436 -- --
Issuance of long-term debt 675,234 76,135 60,128
Proceeds from sales of a participating interest in
accounts receivable, net of redemptions 145,000 -- --
Redemption of preferred stock (219,110) -- --
Repayment and defeasance of long-term debt (884,908) (139,940) (104,376)
Net borrowings (repayments) on revolving credit facilities,
excluding the Recapitalization (60,000) (40,000) 50,000
Net borrowings (repayments) on notes payable (2,066) (5,899) 3,554
Other, net (1,747) (7,263) (2,918)
Net cash provided by (used in) financing activities (115,161) (116,967) 6,388
Decrease in cash and cash equivalents (78,056) (2,315) (16,916)
Cash and cash equivalents at beginning of year 81,373 83,688 100,604
Cash and cash equivalents at end of year $ 3,317 $ 81,373 $ 83,688
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
30
<PAGE>
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' DEFICIT
(in thousands)
<TABLE>
<CAPTION>
Foreign
Other Currency Pension
Common Paid-in Accumulated Translation Equity
Stock Capital Deficit Adjustments Adjustment Total
<S> <C> <C> <C> <C> <C> <C>
Balance at January 25, 1992 $ 282 $133,801 $ (265,444) $ 979 $ (539) $(130,921)
Conversion of warrants into intermediate
preferred stock -- (220) -- -- -- (220)
Net loss -- -- (263,658) -- -- (263,658)
Redeemable preferred stock dividends -- -- (18,988) -- -- (18,988)
Accretion of redeemable preferred stock -- -- 140 -- -- 140
Foreign currency translation adjustment -- -- -- (5,849) -- (5,849)
Pension equity adjustment -- -- -- -- (1,964) (1,964)
Balance at January 30, 1993 282 133,581 (547,950) (4,870) (2,503) (421,460)
1993 management equity plan expense -- 26,736 -- -- -- 26,736
Net loss -- -- (277,664) -- -- (277,664)
Redeemable preferred stock dividends -- -- (22,107) -- -- (22,107)
Accretion of redeemable preferred stock -- -- (1,616) -- -- (1,616)
Foreign currency translation adjustment -- -- -- (865) -- (865)
Pension equity adjustment -- -- -- -- (5,244) (5,244)
Balance at January 29, 1994 282 160,317 (849,337) (5,735) (7,747) (702,220)
ISSUANCE OF SHARES THROUGH THE
RECAPITALIZATION 423 426,759 -- -- -- 427,182
COMPENSATION EXPENSE ADJUSTMENT -- (795) -- -- -- (795)
NET LOSS -- -- (30,782) -- -- (30,782)
REDEEMABLE PREFERRED STOCK DIVIDENDS -- -- (12,380) -- -- (12,380)
ACCRETION OF REDEEMABLE PREFERRED STOCK -- -- (2,028) -- -- (2,028)
EXCESS OF REDEMPTION COST OVER BOOK VALUE OF
REDEEMABLE PREFERRED STOCK -- -- (82,022) -- -- (82,022)
FOREIGN CURRENCY TRANSLATION ADJUSTMENT -- -- -- (7,920) -- (7,920)
PENSION EQUITY ADJUSTMENT -- -- -- -- (1,657) (1,657)
BALANCE AT JANUARY 28, 1995 $ 705 $586,281 $ (976,549) $(13,655) $(9,404) $(412,622)
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION:
Collins & Aikman Corporation (the "Company") (formerly Collins & Aikman Holdings
Corporation) is a Delaware corporation. Prior to July 13, 1994, the Company was
a wholly-owned subsidiary of Collins & Aikman Holdings II Corporation ("Holdings
II"). In connection with an initial public offering of common stock and a
recapitalization (the "Recapitalization") (described below), Holdings II was
merged into the Company. Concurrently, Collins & Aikman Group, Inc., a
wholly-owned subsidiary of the Company ("Group"), was merged into its
wholly-owned subsidiary, Collins & Aikman Corporation, which changed its name to
Collins & Aikman Products Co. ("C&A Products"). On July 7, 1994, the Company
changed its name from Collins & Aikman Holdings Corporation to Collins & Aikman
Corporation.
Prior to the Recapitalization the Company was jointly owned by Blackstone
Capital Partners L.P. ("Blackstone Partners") and Wasserstein Perella Partners,
L.P. ("WP Partners") and their respective affiliates. As a result of the
Recapitalization, Blackstone Partners and WP Partners and their respective
affiliates collectively own approximately 76% of the common stock of the
Company.
The Company conducts all of its operating activities through its wholly-owned
C&A Products subsidiary.
2. RECAPITALIZATION:
On July 13, 1994, the Company completed an initial public offering (the
"Offering") of 15,000,000 shares of its common stock. The Offering provided net
proceeds to the Company of $145.4 million. In addition, the Company sold to its
principal shareholders, Blackstone Partners and WP Partners, and their
respective affiliates an additional 8,810,000 shares for $87 million. These
proceeds were combined with $720 million of proceeds from new credit facilities
(the "New Credit Facilities") and existing cash to redeem all outstanding shares
of preferred stock issued by the Company and Group as well as virtually all
their outstanding indebtedness. In a noncash transaction, approximately
18,500,000 shares were issued by the Company in exchange for outstanding
indebtedness in an amount of $194.7 million.
Set forth below are unaudited fiscal 1994 and 1993 pro forma results assuming
the Offering and Recapitalization had occurred as of the beginning of each
fiscal year.
<TABLE>
<CAPTION>
(in thousands, except per share data) 1994 1993
<S> <C> <C>
Operating income (loss) $174,340 $(43,224)
Interest expense, net 37,922 25,582
Loss on the sale of receivables 9,755 7,195
Income (loss) from continuing operations 115,366 (86,798)
Net income (loss) per common share 1.60 (1.25)
Average common shares outstanding 72,166 69,617
</TABLE>
The computation of pro forma net income per share excludes all interest and
other charges related to the preferred stock and indebtedness redeemed.
For additional information regarding the New Credit Facilities see Note 9.
32
<PAGE>
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION -- The consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant intercompany items
have been eliminated in consolidation. Certain prior year items have been
reclassified to conform to the fiscal 1994 presentation.
FISCAL YEAR -- The fiscal year of the Company ends on the last Saturday of
January. Fiscal 1994 and fiscal 1993 were 52-week years which ended on January
28, 1995 and January 29, 1994, respectively. Fiscal 1992 was a 53-week year
which ended on January 30, 1993.
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 Note 17.
LOSS PER SHARE -- Loss per common share is based on the weighted average number
of shares of common stock outstanding during each period and the assumed
exercise of employee stock options less the number of treasury shares assumed to
be purchased from the proceeds, including applicable compensation expense. In
connection with the merger of Holdings II into the Company, the 35,035,000
shares of common stock of the Company outstanding prior to the Recapitalization
were canceled and approximately 28,164,000 shares of common stock were issued in
exchange for the common stock of Holdings II. All historical amounts and
earnings per share computations have been adjusted to reflect the merger. Net
loss has been adjusted by dividends and accretion requirements on preferred
stock and the excess of redemption cost over book value of preferred stock to
compute the loss applicable to common stockholders.
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 stockholders' deficit. Translation adjustments during fiscal 1994, 1993 and
1992 were ($7.9) million, ($.9) million, and ($5.8) 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 28, 1995 is $2.4 million held
by C&A Products.
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 28, 1995 include $14.4
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 $29.4 million at January 28, 1995, $18.4 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.
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 and $3.7 million for fiscal
1993 and 1992, respectively. Accumulated amortization was $16.3 million at
January 30, 1993. See Note 5.
33
<PAGE>
ENVIRONMENTAL -- The Company records its best estimate when it believes it is
probable that an environmental liability has been incurred and the amount of
loss can be reasonably estimated. The Company also considers estimates of
certain reasonably possible environmental liabilities in determining the
aggregate amount of environmental reserves. Accruals for environmental
liabilities are generally included in the consolidated balance sheet as other
noncurrent liabilities at undiscounted amounts and exclude claims for recoveries
from insurance or other third parties. Accruals for insurance or other third
party recoveries for environmental liabilities are recorded when it is probable
that the claim will be realized.
4. INTEREST RATE PROTECTION PROGRAM:
During September 1994, the Company entered into a program designed to reduce its
exposure to changes in the cost of its variable rate borrowings by the use of
interest rate cap and corridor agreements. The strike price of these agreements
exceeded the current market levels at the time they were entered into and their
cost is included in interest expense ratably during the life of the agreements.
Payments to be received, if any, as a result of the agreements are accrued as a
reduction of interest expense. Unamortized costs of these agreements are
included in other assets. Under these agreements, the Company has limited its
exposure on notional principal amounts as follows (in thousands):
<TABLE>
<CAPTION>
Protection Period Notional Principal Amount Average LIBOR Strike Price
<S> <C> <C>
October 1994 thru October 1995 $300,000 6.92%
October 1995 thru October 1996 $250,000 7.50%
</TABLE>
Amortization of these agreements amounted to $.1 million during 1994.
Information regarding the fair value of these agreements is included in Note 18.
5. 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 home improvement chain ("Builders Emporium") and the inability to sell
Builders Emporium 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 of fiscal
1993, 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.
34
<PAGE>
6. INVENTORIES:
Inventory balances are summarized below (in thousands):
<TABLE>
<CAPTION>
JANUARY 28, January 29,
1995 1994
<S> <C> <C>
Raw materials $ 81,669 $ 70,762
Work in process 24,149 24,739
Finished goods 90,278 80,561
$ 196,096 $ 176,062
</TABLE>
7. PROPERTY, PLANT AND EQUIPMENT, NET:
Property, plant and equipment, net, are summarized below (in thousands):
<TABLE>
<CAPTION>
JANUARY 28, January 29,
1995 1994
<S> <C> <C>
Land and improvements $ 21,992 $ 28,347
Buildings 110,786 109,275
Machinery and equipment 392,015 372,208
Leasehold improvements 1,259 1,421
Construction in progress 31,315 21,863
557,367 533,114
Less accumulated depreciation and amortization (269,808) (240,514)
$ 287,559 $ 292,600
</TABLE>
Depreciation and leasehold amortization of property, plant and equipment
applicable to continuing operations was $43.9 million, $42.2 million and $45.5
million for fiscal 1994, 1993 and 1992, respectively.
8. ACCRUED EXPENSES:
Accrued expenses are summarized below (in thousands):
<TABLE>
<CAPTION>
JANUARY 28, January 29,
1995 1994
<S> <C> <C>
Payroll and employee benefits $ 40,857 $ 42,063
Interest 5,886 19,242
Insurance 25,462 15,152
Other 72,361 68,565
$ 144,566 $ 145,022
</TABLE>
35
<PAGE>
9. LONG-TERM DEBT:
Long-term debt is summarized below (in thousands):
<TABLE>
<CAPTION>
JANUARY 28, January 29,
1995 1994
<S> <C> <C>
Senior indebtedness:
Mortgage notes $ 853 $ 1,464
Notes payable to banks -- 7,595
Notes payable to others 12,425 8,266
Credit facility, interest at LIBOR + 1.75% -- 137,129
Revolving Facility, interest at LIBOR + 1.75% 70,000 --
Term Loan Facilities, interest at LIBOR + 1.75% 475,000 --
Industrial revenue bonds due through 2006, interest rates from 5% to 7 5/8% 7,799 11,648
Debentures due 2005, interest rate 7 1/2% until January 31, 1994, and 10% thereafter -- 138,694
Unamortized debt discount -- (33,397)
566,077 271,399
Senior subordinated indebtedness:
Senior subordinated debentures due 2001, interest rate 11 7/8% -- 347,414
Unamortized debt discount -- (46,532)
-- 300,882
Subordinated indebtedness:
Subordinated notes due 1995, interest rate 15% -- 137,359
Subordinated debentures due 1997, interest rate 11 3/8% -- 24,500
Unamortized debt discount -- (2,446)
-- 159,413
Subordinated PIK bridge notes due December 2, 1996, interest rate 14% -- 191,860
Total debt 566,077 923,554
Less current maturities (18,114) (25,895)
$ 547,963 $ 897,659
</TABLE>
As part of the Recapitalization on July 13, 1994, the Company's C&A Products
subsidiary entered into the New Credit Facilities aggregating $775 million,
which together with proceeds from the Offering and available cash, were used to
effect a defeasance and redemption or repayment of all preferred stock and
virtually all outstanding indebtedness of the Company.
The New Credit Facilities consist of (i) term loans in an aggregate principal
amount of $475 million (including a $45 million Canadian loan) with a term of
eight years, which were drawn in full on the closing date (the "Term Loan
Facilities"), (ii) a revolving credit facility in an aggregate principal amount
of up to $150 million with a term of seven years (the "Revolving Facility") and
(iii) a bridge receivables facility (See Note 10) in an aggregate face amount of
up to $150 million with a term of seven years (the "Bridge Receivables
Facility"). The New Credit Facilities contain
36
<PAGE>
restrictive covenants including maintenance of EBITDA (i.e. earnings before
interest, taxes, depreciation and amortization) and interest coverage ratios,
leverage and liquidity tests and various other restrictive covenants which are
typical for such facilities. See Note 15.
The Company's obligations under the Term Loan Facilities and the Revolving
Facility are secured by a pledge of the stock of C&A Products and its
significant subsidiaries.
Indebtedness under the Term Loan Facilities and Revolving Facility bears
interest at a per annum rate equal to the Company's choice of (i) Chemical's
Alternative Base Rate (which is the highest of Chemical's announced prime rate,
the Federal Funds Rate plus .5% and Chemical's base certificate of deposit rate
plus 1%) ("ABR") plus the ABR Margin per annum or (ii) the offered rates for
eurodollar deposits ("LIBOR") of one, two, three, six, nine or twelve months, as
selected by the Company, plus the LIBOR margin. Pursuant to the terms of the
Term Loan Facilities and the Revolving Facility, the "ABR Margin" is initially
.75% and the "LIBOR Margin" is initially 1.75%. The weighted average rate of
interest on the Term Loan Facilities and the Revolving Facility at January 28,
1995 was 7.8%.
The Company had a total of $81.2 million of borrowing availability under its
credit arrangements as of January 28, 1995. The total was comprised of $67
million under the Revolving Facility, $5 million under the Bridge Receivables
Facility and approximately $9.2 million under an unsecured bank demand line of
credit in Canada. At January 28, 1995, the Company had approximately $13 million
outstanding in letters of credit.
The current maturities of long-term debt primarily consist of the current
portion of the Term Loan Facilities, vendor financing, industrial revenue bonds
and other miscellaneous debt. Repayments of indebtedness under the New Credit
Facilities commence in the third fiscal quarter of 1995. In addition, the New
Credit Facilities provide for mandatory prepayments with certain excess cash
flow of the Company and net cash proceeds of certain asset sales or other
dispositions by the Company, certain sale/leaseback transactions and certain
issuances of debt obligations.
At January 28, 1995, the scheduled annual maturities of long-term debt are as
follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ending
<S> <C>
January 1996 $ 18,114
January 1997 41,227
January 1998 61,480
January 1999 77,479
January 2000 83,574
Later Years 284,203
$566,077
</TABLE>
37
<PAGE>
As part of the Recapitalization, the Company defeased or redeemed the following
face value of indebtedness (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Credit facility $122,581
Debentures due 2005 138,694
Senior subordinated debentures due 2001 347,414
Subordinated notes due 1995 137,359
Subordinated debentures due 1997 24,500
Subordinated PIK bridge notes due 1996 9,712
Subordinated PIK bridge notes due 1996 exchanged for common stock 194,745
Other 8,094
$983,099
</TABLE>
The redemption of this indebtedness resulted in a loss of $106.5 million
consisting of premiums paid of $9.6 million, unamortized debt discounts and
deferred debt expenses of $79.7 million and $11.8 million, respectively, and
post-defeasance interest of $5.4 million.
On May 27, 1993, a subsidiary of C&A Products, Kayser-Roth Corporation
("Kayser-Roth") completed a $75 million credit facility (the "Kayser-Roth Credit
Agreement") with a group of banks to replace a $40 million credit agreement and,
on July 6, 1993, Kayser-Roth paid an additional dividend of $26.0 million to C&A
Products. C&A Products used approximately $41 million of the proceeds from the
original and the replacement Kayser-Roth credit facilities to redeem on July 7,
1993 all of its outstanding 12% Sinking Fund Debentures due January 31, 1994.
C&A Products 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.
At January 29, 1994, Blackstone Partners and WP Partners were holders of the
Company's Subordinated PIK bridge notes with aggregate balances of approximately
$89.2 million and $93.5 million, respectively. The remainder of the Subordinated
PIK bridge notes outstanding aggregated approximately $9.2 million at January
29, 1994.
Total interest paid by the Company on all indebtedness was $77.9 million, $101.5
million and $105.0 million for fiscal 1994, 1993 and 1992, repectively.
10. RECEIVABLES FACILITY:
In connection with the Recapitalization, on July 13, 1994, C&A Products and
certain of its subsidiaries (the "Sellers") transferred approximately $190.0
million of customer trade receivables to Carcorp, a wholly-owned, bankruptcy
remote subsidiary of C&A Products which, in turn, on July 13, 1994, sold an
undivided senior interest in the receivables pool for $136.8 million to Chemical
Bank ("Chemical" and, together with a syndicate of financial institutions if
Chemical so elects at any time, the "Buyers") pursuant to a Receivables Transfer
and Servicing Agreement ("RTA") with Chemical, as administrative agent. In
connection with the receivables sales, a loss of $7.6 million was incurred in
1994. Of this loss, $1.3 million related to fees and expenses associated with
the sales and $6.3 million related to discounts on the receivables sold. Carcorp
continues to purchase, on a revolving basis, all trade receivables generated by
the Sellers. The Sellers will continue to service the receivables for Carcorp.
Carcorp may sell to the Buyers undivided senior interests of up to $150 million
in receivables at any time, subject to, among other things, the sufficiency of
the underlying receivables and the qualification of the underlying receivables
as "Eligible Receivables" under the RTA. The Bridge Receivables Facility
terminates July 13, 2001 or earlier if a defined liquidation event occurs.
38
<PAGE>
As of January 28, 1995, Carcorp's total receivables pool was $228.5 million net
of allowances for doubtful accounts. As of January 28, 1995, the Buyers
possessed a $145 million undivided senior interest in Carcorp's receivables pool
and, accordingly, such receivables were not reflected in the Company's accounts
receivable balance as of that date. As of January 28, 1995, Carcorp owned a
subordinated interest in the receivables pool. For information regarding the
Receivables Facility, which replaced the Bridge Receivables Facility, see Note
23.
11. LEASE COMMITMENTS:
The Company is the lessee under various long-term operating leases for land and
buildings for periods up to forty years. The majority of these leases contain
renewal provisions. In addition, the Company leases transportation, operating
and administrative equipment for periods ranging from one to ten years.
On September 30, 1994, the Company entered into a master equipment lease
agreement. Pursuant to that agreement, during 1994, the Company sold and leased
back for a term of 10.5 years equipment utilized in its Automotive Products and
Interior Furnishings segments. The aggregate net book values of the equipment
totaling $29.8 million have been removed from the balance sheet and the gain
realized on the sale totaling $.6 million has been deferred and is being
recognized as an adjustment to rent expense over the lease term. The Company's
rental payments on the leased equipment amount to $4.0 million annually. The
Company has a purchase option on the equipment at the end of the lease term
based on the fair market value of the equipment and has additional options to
cause the sale of some or all of the equipment or to purchase some or all of the
equipment at prices determined under the agreement. The Company has classified
the lease as an operating lease. The Company may sell and leaseback additional
equipment in the future under the same master lease agreement, subject to the
lessors' approval.
At January 28, 1995, future minimum lease payments under operating leases for
continuing operations are as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ending
<S> <C>
January 1996 $18,193
January 1997 15,043
January 1998 12,079
January 1999 10,305
January 2000 8,577
Later years 22,326
$86,523
</TABLE>
Rental expense of continuing operations under operating leases was $20.1
million, $19.2 million and $19.0 million for fiscal 1994, 1993 and 1992,
respectively. Obligations under capital leases are not significant.
12. EMPLOYEE BENEFIT PLANS:
DEFINED 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 employees' compensation
during their years of employment. Funding of retirement costs for these plans
complies with the minimum funding requirements specified by the Employee
Retirement Income Security Act. Assets of the pension plans are held in a master
trust which invests primarily in equity and fixed income securities.
39
<PAGE>
The net periodic pension cost of continuing operations for fiscal 1994, 1993 and
1992 includes the following components (in thousands):
[CAPTION]
<TABLE>
<CAPTION>
Fiscal Year Ended
<S> <C> <C> <C>
JANUARY 28, January 29, January 30,
1995 1994 1993
<S> <C> <C> <C>
Service cost $ 5,590 $ 5,232 $ 5,313
Interest cost on projected benefit obligation and service cost 7,577 6,843 6,220
Actual loss (gain) on assets 1,450 (6,334) 746
Net amortization and deferral (8,412) (1,836) (9,298)
Net periodic pension cost $ 6,205 $ 3,905 $ 2,981
</TABLE>
The following table sets forth the plans' funded status and amounts recognized
in the Company's consolidated balance sheets at January 28, 1995 and January 29,
1994 (in thousands):
<TABLE>
<CAPTION>
JANUARY 28, 1995 January 29, 1994
<S> <C> <C> <C> <C>
PLANS FOR WHICH Plans for Which
<CAPTION>
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 $ (18,990) $ (80,860) $ (21,352) $ (82,248)
Accumulated benefit obligation $ (19,591) $ (86,546) $ (22,214) $ (86,450)
Projected benefit obligation $ (20,897) $ (90,908) $ (24,317) $ (89,433)
Plan assets at fair value 22,927 68,096 24,761 66,794
Projected benefit obligation less than (in excess of) plan assets 2,030 (22,812) 444 (22,639)
Unrecognized net loss 666 19,505 1,855 20,431
Prior service cost not yet recognized in net periodic pension cost 1,042 (7,168) 416 (9,208)
Adjustment required to recognize minimum liability -- (9,541) -- (7,841)
Pension asset (liability) recognized in the consolidated balance
sheets $ 3,738 $ (20,016) $ 2,715 $ (19,257)
</TABLE>
The discount rate used in determining the actuarial present value of the
projected benefit obligation was 8.5% and 7% at January 28, 1995 and January 29,
1994, respectively. The expected rate of increase in future compensation levels
was 5.5% and 4.75% and the expected long-term rate of return on plan assets was
9% in fiscal 1994 and 1993. The provisions of Statement of Financial Accounting
Standards No. 87, "Employers' Accounting for Pensions"("SFAS 87") require
companies with any plans that have an unfunded accumulated benefit obligation to
recognize an additional minimum pension liability, an offsetting intangible
pension asset and, in certain situations, a contra-equity balance. In accordance
with the provisions of SFAS 87, the consolidated balance sheets at January 28,
1995 and
40
<PAGE>
January 29, 1994 include an intangible pension asset of $.1 million and $.1
million; an additional minimum pension liability of $9.5 million and $7.8
million; and a contra-equity balance of $9.4 million and $7.7 million,
respectively.
DEFINED CONTRIBUTION PLANS
Subsidiaries of the Company sponsor defined contribution plans covering
employees who meet eligibility requirements. Subsidiary contributions are based
on a formula or are at the Company's discretion as specified in the plan
documents. Contributions related to continuing operations were $8.9 million,
$4.7 million and $4.0 million for fiscal 1994, 1993 and 1992, respectively.
POSTRETIREMENT BENEFIT PLANS
Subsidiaries of the Company have provided postretirement life and health
coverage for certain retirees under plans currently in effect. Many of the
subsidiaries' domestic employees may be eligible for coverage if they reach
retirement age while still employed by the Company.
The net periodic postretirement benefit cost of continuing operations,
determined on the accrual basis, includes the following components (in
thousands):
[CAPTION]
<TABLE>
<CAPTION>
Fiscal Year Ended
<S> <C> <C> <C>
JANUARY 28, January 29, January 30,
1995 1994 1993
<S> <C> <C> <C>
Service cost $ 1,389 $ 2,131 $ 2,168
Interest cost on accumulated postretirement benefit obligation 3,117 4,385 6,865
Net amortization (1,897) (200) --
Net periodic postretirement benefit cost $ 2,609 $ 6,316 $ 9,033
</TABLE>
The following table sets forth the amount of accumulated postretirement benefit
obligation included in the Company's consolidated balance sheets (in thousands):
<TABLE>
<CAPTION>
JANUARY 28, January 29,
1995 1994
<S> <C> <C>
Retirees $ 38,191 $ 48,559
Fully eligible active plan participants 11,671 12,425
Other active plan participants 13,678 13,845
Unrecognized prior service gain from plan amendments 26,866 23,764
Unrecognized net gain 13,677 7,408
Accumulated postretirement benefit obligation $ 104,083 $ 106,001
</TABLE>
The weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 8.5% and 7% at January 28, 1995 and
January 29, 1994, respectively. The plans are unfunded.
For measurement purposes, a 12% annual rate of increase in the per capita cost
of covered health care benefits was assumed for fiscal 1995; the rate was
assumed to decrease 1% per year to 6% through fiscal 1998 and remain at that
level thereafter. The health care cost trend rate assumption has an impact on
the amounts reported; however, the Company's obligation is limited by certain
amended provisions of the various plans, as further described below. 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 28, 1995 by $1.2 million and the aggregate of the
41
<PAGE>
service and interest cost components of net periodic postretirement benefit cost
for the year then ended by $.1 million.
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's portion of
coverage costs will not be adjusted for inflation in health care costs.
13. RESTRUCTURING COSTS:
During fiscal 1992, the Company incurred certain identifiable costs in
connection with the restructuring of its Wallcoverings segment. The
restructuring costs, aggregating $10.0 million, principally related to the
closure of certain manufacturing and distribution facilities.
14. DISCONTINUED OPERATIONS:
As of the end of fiscal 1992, the Company reclassified its Builders Emporium
home improvement retail chain and its Engineering Group as discontinued
operations. The Company recorded a loss on disposal of discontinued operations
of $168.0 million in the fourth quarter of fiscal 1992 principally to provide
for the expected loss on sale of Builders Emporium. In March 1993, the
Engineering Group was sold for approximately $51 million.
As of the end of the second quarter of fiscal 1993, the Company determined that
it would be unable to sell Builders Emporium as an ongoing entity. The Company
recorded an additional loss on disposal of discontinued operations of $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 all accounts receivable and accounts payable
balances were settled as of January 28, 1995. Remaining assets and liabilities
of Builders Emporium relate primarily to seven owned and three leased real
estate properties and self-insured workers compensation liabilities, which
continue to be liquidated.
Kayser-Roth was reclassified as a discontinued operation at the end of the third
fiscal quarter ended October 30, 1993 and was sold on January 28, 1994 for a
total price of approximately $170 million, subject to a post-closing purchase
price adjustment of $5.1 million which was paid to the purchaser of Kayser-Roth
on September 1, 1994. In connection with the sale, the Company received a 90 day
$70 million senior unsecured bridge note from the purchaser which was collected
with accrued interest on April 27, 1994. The gain on disposal of $28.1 million
in the fourth quarter of fiscal 1993 related to the sale of Kayser-Roth.
Net sales of discontinued operations in fiscal 1993 and fiscal 1992 aggregated
approximately $790.1 million and $977.1 million, respectively. Subsequent to
their respective reclassifications as discontinued operations, sales of Builders
Emporium aggregated approximately $410.0 million and sales of Kayser-Roth
aggregated approximately $95.0 million. Total interest expense of discontinued
operations, including amounts allocated to discontinued operations, was $18.9
million and $23.0 million in fiscal 1993 and fiscal 1992, respectively. Interest
expense of $13.1 million and $19.7 million during fiscal 1993 and 1992,
respectively, has been allocated to discontinued operations based upon the ratio
of net book value of discontinued operations (including reserves for loss on
disposal) to consolidated invested capital. Interest expense incurred by
Builders Emporium and Kayser-Roth subsequent to their reclassification as
discontinued operations aggregated $2.2 million. Such amounts were charged to
discontinued operations reserves.
42
<PAGE>
In connection with certain discontinued operations, the Company has future
minimum lease payments and future sublease rental receipts at January 28, 1995
as follows (in thousands):
<TABLE>
<CAPTION>
Minimum Lease Sublease Rental
Fiscal Year Ending Payments Receipts
<S> <C> <C>
January 1996 $8,832 $6,250
January 1997 7,722 5,104
January 1998 4,755 2,764
January 1999 3,339 1,932
January 2000 2,485 1,628
Later Years 6,823 953
Total $33,956 $18,631
</TABLE>
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. The Company believes it has provided
adequate reserves for anticipated future costs of its discontinued operations.
15. COMMON STOCK AND PREFERRED STOCK:
At January 29, 1994, 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 150,000,000 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 with the merger of
Holdings II into the Company, the 35,035,000 shares of common stock of the
Company outstanding prior to the Recapitalization were canceled and
approximately 28,164,000 shares of common stock were issued in exchange for the
common stock of Holdings II. All historical amounts and earnings per share
computations have been adjusted to reflect the merger and 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. At January 29, 1994, approximately
6,268,000 shares were outstanding. Dividends payable in additional shares
accrued during fiscal 1994, 1993, and 1992, including accretion for difference
between redemption value and fair value at date of issuance, aggregated
approximately $14.4 million, $23.7 million and $18.8 million, respectively. All
of the shares of Merger Preferred Stock were redeemed in connection with the
Recapitalization.
At January 29, 1994, 30,000,000 shares of $.10 par value preferred stock of
Group were authorized and approximately 1,806,000 shares of $2.50 Convertible
Preferred Stock, Series A of Group ("Series A Preferred Stock") were
outstanding. Each share of Series A Preferred Stock of Group had an annual
dividend of $2.50 per share. All of the Series A Preferred Stock of Group was
redeemed in connection with the Recapitalization.
The Company has not declared or paid cash dividends on common stock since its
incorporation. The New Credit Facilities prohibit the payment of dividends until
the fifth full fiscal quarter following the closing date of the Recapitalization
and then limit any dividends paid to a maximum of $3 million per quarter unless
the principal amount of the Term Loan Facilities is reduced to less than $350
million and certain other conditions are satisfied (in which case the New Credit
Facilities limit dividends paid in any year to a maximum of 25% of net income
for the prior fiscal year).
43
<PAGE>
16. 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
primarily for the special purpose of rewarding key employees for the
appreciation earned through prior service under the Company's previous equity
share plan that was terminated on October 29, 1993. The 1993 Plan authorizes the
issuance of 3,119,466 shares of Common Stock. Effective on January 28, 1994, the
Company granted options to acquire 3,119,466 shares of the Common Stock. 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
certain key employees and to consultants. The 1994 Plan authorizes the issuance
of up to 2,980,534 shares of Common Stock and provides that no options may be
granted after 10 years from the effective date of this plan. Options vest, in
each case, as specified by the Company's compensation committee, generally over
three years after issuance.
At January 28, 1995, none of the outstanding options were exercisable.
Upon a change of control, as defined, all of the above options become fully
vested and exercisable.
Stock option activity under the plans is as follows:
[CAPTION]
<TABLE>
<CAPTION>
Fiscal Year Ended
<S> <C> <C> <C> <C>
JANUARY 28, 1995 January 29, 1994
NUMBER PRICE Number Price
OF PER of Per
SHARES SHARE Shares Share
<S> <C> <C> <C> <C>
Outstanding beginning of year 3,119,466 $ 3.99- 8.26 -- $ --
Awarded 186,634 4.43-10.50 3,199,466 3.99-8.26
Cancelled (209,298) 3.99- 8.26 -- --
Outstanding end of year 3,096,802 $ 3.99-10.50 3,199,466 $ 3.99-8.26
</TABLE>
On February 23, 1995, the Company adopted the 1994 Director's Stock Option Plan
("the Director's Plan") which provides for the issuance of a maximum of 600,000
options to non-management directors and directors not affiliated with a major
stockholder. This plan is subject to stockholder approval and, as of January 28,
1995, no options were granted.
44
<PAGE>
17. INCOME TAXES:
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 28, 1995 and January
29, 1994 were as follows (in thousands):
<TABLE>
<CAPTION>
JANUARY 28, January 29,
1995 1994
<S> <C> <C>
Deferred tax assets:
Employee benefits, including postretirement benefits $ 68,862 $ 69,358
Net operating loss carryforwards 136,709 151,913
Investment tax credit carryforwards 10,700 11,900
Alternative minimum tax credits 7,100 7,000
Other liabilities and reserves 99,132 130,056
Valuation allowance (268,908) (296,624)
Total deferred tax assets 53,595 73,603
Deferred tax liabilities:
Property, plant and equipment 54,972 51,258
Unamortized debt discount -- 22,985
Total deferred tax liabilities 54,972 74,243
Net deferred tax liability $ 1,377 $ 640
</TABLE>
The valuation allowances of $268.9 million at January 28, 1995 and $296.6
million at January 29, 1994 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
1994, 1993 and 1992 are summarized as follows (in thousands):
[CAPTION]
<TABLE>
<CAPTION>
Fiscal Year Ended
<S> <C> <C> <C>
JANUARY 28, January 29, January 30,
1995 1994 1993
<S> <C> <C> <C>
Current
Federal 150 $ -- $ (6,677)
State and local 5,158 6,462 4,896
Foreign 6,056 7,697 5,739
11,364 14,159 3,958
Deferred
State and local 162 (16) (5,936)
Foreign 11 (2,866) (1,178)
173 (2,882) (7,114)
Income tax expense (benefit) 11,537 $ 11,277 $ (3,156)
</TABLE>
45
<PAGE>
Domestic and foreign components of income (loss) from continuing operations
before income taxes are summarized as follows (in thousands):
[CAPTION]
<TABLE>
<CAPTION>
Fiscal Year Ended
<S> <C> <C> <C>
JANUARY 28, January 29, January 30,
1995 1994 1993
<S> <C> <C> <C>
Domestic $ 68,720 $ (172,183) $ (60,966)
Foreign 18,563 10,135 12,469
87,283 $ (162,048) $ (48,497)
</TABLE>
A reconciliation between income taxes computed at the statutory Federal rate
(35% for fiscal 1994 and 1993 and 34% for fiscal 1992) and the provisions for
income taxes applicable to continuing operations is as follows (in thousands):
[CAPTION]
<TABLE>
<CAPTION>
Fiscal Year Ended
<S> <C> <C> <C>
JANUARY 28, January 29, January 30,
1995 1994 1993
<S> <C> <C> <C>
Amount at statutory Federal rate $ 30,549 $ (56,717) $ (16,489)
State and local income taxes, net of Federal income tax benefit 3,391 6,229 (2,893)
Foreign tax more (less) than Federal tax at statutory rate (360) 1,284 321
Foreign dividend income 23,509 -- --
Amortization and write-off of goodwill -- 46,421 1,258
Other 1,354 (2,035) (456)
Valuation allowance (46,906) 16,095 15,103
Income tax expense (benefit) $ 11,537 $ 11,277 $ (3,156)
</TABLE>
During 1994, the valuation allowance decreased $27.7 million from 1993. The net
decrease resulted from the utilization of $46.9 million for continuing
operations offset by $19.2 million in additions related primarily to the
deferral of the net benefits arising from the loss on redemption of indebtedness
and other miscellaneous adjustments. During 1993, the valuation allowance
increased $48.4 million which consisted of $16.1 million related to continuing
operations and $32.3 million related primarily to the establishment of reserves
for discontinued operations and other miscellaneous adjustments.
46
<PAGE>
At January 28, 1995, 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 257,000 2006-2009
$391,000
Net operating losses -- alternative minimum tax
Preacquisition, subject to limitations $112,000 1996-2002
Postacquisition, unrestricted 187,000 2006-2008
$299,000
Investment tax and other credits
Preacquisition, subject to limitations $ 10,700 1995-2003
Alternative minimum tax credits $ 7,100 No limit
</TABLE>
The Company's Federal income tax returns for fiscal 1988 through 1991 are
currently under examination by the Internal Revenue Service ("IRS"). The
examination is at a preliminary stage. The IRS has outstanding challenges to the
availability or timing of the utilization of $139 million of the Company's net
operating losses ("NOLs") and other deductions. The Company disputes the
proposed adjustments. If the IRS were to maintain its position and such position
were to be upheld in litigation, the Company would become liable for the payment
of interest and would lose a material amount of the NOLs and other deductions
otherwise available to the Company in future years.
Approximately $134.0 million of the Company's NOLs and $10.7 million of the
Company's unused Federal tax credits may be used only against the income and
apportioned tax liability of the specific corporate entity that generated such
losses or credits or its successors. Because of the merger of Group and C&A
Products, such NOLs and credits may be used against the income and apportioned
tax liability of C&A Products, which the Company believes will have sufficient
taxable income and apportioned tax liability to fully use such NOLs and to use a
substantial portion of such tax credits. The Recapitalization did not constitute
a "change in control" that would result in annual limitations on the Company's
use of its NOLs and unused tax credits. However, future sales of common stock by
the Company or the principal shareholders, or changes in the composition of the
principal shareholders, could constitute such a "change in control". Management
cannot predict whether such a "change in control" will occur. If such a "change
of control" were to occur, the resulting annual limitations on the use of NOLs
and tax credits would 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.
Income taxes paid, net of refunds, were $5.1 million, $3.3 million, and $16.8
million for fiscal 1994, 1993 and 1992, respectively.
18. 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.
47
<PAGE>
RECEIVABLE FROM SALE OF BUSINESS, LONG-TERM INVESTMENTS -- Fair value
approximates carrying value.
INTEREST RATE PROTECTION AGREEMENTS -- The fair value of interest rate cap and
corridor agreements is based on quoted market prices as if the agreements were
entered into on the measurement date.
LONG-TERM DEBT -- The fair value of 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 Series A Preferred Stock approximates the carrying value.
The estimated fair values of the Company's financial instruments are summarized
as follows (in thousands):
[CAPTION]
<TABLE>
<CAPTION>
JANUARY 28, 1995 January 29, 1994
<S> <C> <C> <C> <C>
ESTIMATED
CARRYING 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 4,364 4,364 1,046 1,046
Interest rate protection agreements 1,405 1,567 -- --
Long-term debt 566,077 566,077 923,554 1,017,927
Preferred stock -- -- 122,681 161,200
</TABLE>
19. RELATED PARTY TRANSACTIONS:
Pursuant to the Stockholders' Agreement among the Company, Group, Blackstone
Partners and WP Partners dated December 1988, the Company paid Blackstone
Partners and WP Partners, or their respective affiliates, operating, management
and advisory fees aggregating $5.0 million annually until the agreement's
amendment in July 1994.
Under the Amended and Restated Stockholders' Agreement among the Company, C&A
Products, Blackstone Partners and WP Partners, the Company pays Blackstone
Partners and WP Partners, or their respective affiliates, each an annual
monitoring fee of $1.0 million, which is payable quarterly and which commenced
in the quarter ended October 29, 1994.
During the first quarter of 1994, the Company incurred expenses of $2.5 million
for services performed by affiliates of Blackstone Partners and WP Partners in
connection with a comprehensive review of the Company's liabilities associated
with discontinued operations, including surplus real estate, postretirement and
workers compensation liabilities. The Company also incurred during the first
quarter of 1994 expenses of $2.75 million for services performed by affiliates
of WP Partners and $3.25 million for services performed by affiliates of
Blackstone Partners in connection with the Company's review of refinancing and
strategic alternatives as well as other advisory services; these fees are
included in "selling, general and administrative expenses" for the first quarter
of 1994.
48
<PAGE>
In connection with the Company's discontinued operations, the Company incurred
fees to affiliates of Blackstone Partners and WP Partners for services related
to divestitures aggregating $4.3 million and $.5 million 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
$.1 million to an affiliate of Blackstone Partners for advisory services in
connection with the sale of Builders Emporium's inventory, real estate and other
assets.
In September 1993, an affiliate of Blackstone Partners negotiated with a real
estate consultant to receive 20% of the incentive fees payable to the consultant
by the Company in connection with the resolution of lease liabilities of
Builders Emporium. Such affiliate received approximately $.5 million in fees
during 1994 pursuant to this arrangement.
20. INFORMATION ABOUT SEGMENTS OF THE COMPANY'S OPERATIONS:
The Company's continuing business segments consist of Automotive Products, which
supplies interior trim products to the North American automotive industry;
Interior Furnishings, which manufactures residential upholstery and commercial
floorcoverings in the United States; and Wallcoverings, which produces
residential and commercial wallpaper in North America.
Direct and indirect sales to significant customers in excess of ten percent of
net sales are as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
General Motors Corporation 18.3% 16.1% 15.3%
Ford Motor Company 12.1 N/A N/A
Chrysler Corporation 10.3 10.0 10.2
</TABLE>
49
<PAGE>
Information about the Company's segments for fiscal 1994, 1993 and 1992 follows
(in thousands):
<TABLE>
<CAPTION>
OPERATING
INCOME DEPRECIATION
FISCAL YEAR ENDED NET (LOSS) AND CAPITAL
JANUARY 28, 1995 SALES (B) AMORTIZATION (D) ASSETS (B) EXPENDITURES
<S> <C> <C> <C> <C> <C>
Automotive Products $ 904,855 $123,318 $ 25,279 $ 273,010 $ 55,834
Interior Furnishings 414,524 57,421 12,247 131,851 22,173
Wallcoverings 216,623 7,039 5,292 101,159 5,360
1,536,002 187,778 42,818 506,020 83,367
Corporate items -- (14,938) 1,064 175,051(F) 1,056
$ 1,536,002 $172,840 $ 43,882 $ 681,071 $ 84,423
</TABLE>
<TABLE>
<CAPTION>
Operating
Income Depreciation
Fiscal Year Ended Net (Loss) and Capital
January 29, 1994 Sales (b) Amortization (d) 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)(e) 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
<CAPTION>
Operating
Income Depreciation
Fiscal Year Ended Net (Loss) and Capital
January 30, 1993 (a) Sales (b) Amortization (d) Assets (b) Expenditures
<S> <C> <C> <C> <C> <C>
Automotive Products $ 643,827 $ 52,684 $ 29,419 $ 403,148 $ 20,563
Interior Furnishings 391,778 37,520 13,003 240,292 14,295
Wallcoverings 241,895 1,141 6,545 170,516 3,045
1,277,500 91,345(c) 48,967 813,956 37,903
Corporate items -- (24,461) 198 137,301 306
1,277,500 66,884 49,165 951,257 38,209
Discontinued operations -- -- 22,541 190,177 15,972
$ 1,277,500 $ 66,884 $ 71,706 $1,141,434 $ 54,181
</TABLE>
(a) The fiscal year ended January 30, 1993 included fifty-three weeks.
(b) Operating income (loss) 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 include goodwill. Operating income
(loss) reflects related amortization.
(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 Wallcoverings' segment. The Wallcoverings'
segment operating income in 1992 includes restructuring costs of $10.0
million.
(d) Depreciation and amortization excludes the amortization of deferred
financing costs and debt discount which do not impact operating income
(loss).
(e) Corporate items in 1993 include $26.7 million of management equity plan
expense.
(f) Includes Carcorp's $83.5 million subordinated interest in the total
receivables pool of $228.5 million, net of allowances for doubtful accounts.
50
<PAGE>
21. COMMITMENTS AND CONTINGENCIES:
LEGAL
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 Company and its subsidiaries also have other lawsuits and claims pending
against them and have certain guarantees outstanding which were made in the
ordinary course of business.
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 results of operations.
ENVIRONMENTAL
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 1991 to date, Kayser-Roth has paid
approximately $3.6 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
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 PRPs, uncertainty regarding the extent of environmental problems and the
Company's share, if any, of liability for such problems, the selection of
alternative compliance approaches, the complexity of 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. The Company records its best estimate when it
believes it is probable that an environmental liability has been incurred and
the amount of loss can be reasonably estimated. The Company also considers
estimates of certain reasonably possible environmental liabilities in
determining the aggregate amount of environmental reserves. In its assessment
51
<PAGE>
the Company makes its best estimate of the liability based upon information
available to the Company at that time, including the professional judgment of
the Company's environmental experts, outside environmental specialists and other
experts. As of January 28, 1995, 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 14 sites where the Company is participating in the investigation or
remediation of the site either directly or through financial contribution, and
11 additional sites where the Company is alleged to be responsible for costs of
investigation or remediation. As of January 28, 1995, the Company's estimate of
its liability for these 25 sites is $29.6 million. As of January 28, 1995, the
Company has established reserves of approximately $31.7 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.
OTHER COMMITMENTS
The majority of Builders Emporium's leased properties have been assigned to
third parties. In addition, Group has assigned leases in connection with the
divestiture of Kayser-Roth, the Engineering Group, Wickes Manufacturing Company
and other divested businesses. Although Group has obtained releases from the
lessors of certain properties, C&A Products, as successor by merger to Group,
remains contingently liable under most of the leases. C&A Products' future
liability for these leases, in management's opinion, based on the facts
presently known to it, will not have a material effect on the Company's
consolidated financial condition or results of operations.
52
<PAGE>
22. QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
(in thousands, except for per share data)
<S> <C> <C> <C> <C>
FIRST SECOND THIRD FOURTH
FISCAL 1994 QUARTER QUARTER QUARTER QUARTER
Net sales $390,446 $359,749 $403,722 $382,085
Gross margin 100,954 87,357 92,976 89,846
Income from continuing operations before income taxes 15,372 10,293 33,941 27,677
Income from continuing operations 12,754 7,323 30,966 24,703
Net income (loss) 12,754 (99,205) 30,966 24,703
Primary and fully diluted earnings (loss) per share before extraordinary loss .19 (2.17) .43 .34
Primary and fully diluted earnings (loss) per share .19 (4.99) .43 .34
Common stock prices
High -- 10 9/16 10 7/8 9 1/4
Low -- 10 8 5/8 7 7/8
<CAPTION>
First Second Third Fourth
Fiscal 1993 Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Net sales $339,043 $ 289,694 $ 334,629 $342,151
Gross margin 78,948 61,230 84,445 85,104
Loss from continuing operations before income taxes (2,202) (18,343) (125,725) (15,778)
Loss from continuing operations (5,473) (20,628) (129,821) (17,403)
Net income (loss) (9,069) (149,430) (129,871) 10,706
Primary and fully diluted earnings (loss) per share (.54) (5.70) (4.99) .16
</TABLE>
Net loss in the second quarter of fiscal 1994 includes an extraordinary loss of
$106.5 million related to the Recapitalization.
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.
The Company's operations are not subject to significant seasonal influences.
53
<PAGE>
23. SUBSEQUENT EVENT:
On March 31, 1995, C&A Products repaid and terminated the Bridge Receivables
Facility and entered, through a trust formed by its wholly-owned, bankruptcy
remote subsidiary Carcorp, into a new receivables facility (the "Receivables
Facility") comprised of (i) term certificates, which were issued on March 31,
1995, in an aggregate face amount of $110 million and having a term of five
years and (ii) variable funding certificates, which represent revolving
commitments, of up to an aggregate of $75 million and having a term of five
years. Carcorp purchases on a revolving basis and transfers to the trust
virtually all trade receivables generated by C&A Products and certain of its
subsidiaries (the "Sellers").
Availability under the variable funding certificates at any time depends
primarily on the amount of receivables generated by the Sellers from sales to
the auto industry, the rate of collection on those receivables and other
characteristics of those receivables which affect their eligibility (such as
bankruptcy or downgrading below investment grade of the obligor, delinquency and
excessive concentration). Based on these criteria, at March 31, 1995
approximately $30 million was available under the variable funding certificates,
of which approximately $12 million was utilized.
The term certificates bear interest at an average rate equal to one-month LIBOR
plus .34% per annum. The variable funding certificates bear interest, at
Carcorp's option, at LIBOR plus .40% per annum or a prime rate.
54
<PAGE>
Exhibit 21
<TABLE>
<CAPTION>
Subsidiaries of Collins & Aikman Corporation1
Company Jurisdiction
<S> <C>
Collins & Aikman Products Co.2 Delaware
Ackerman Associates, Inc. New York
Ack-Ti-Lining, Inc. New York
The Akro Corporation Delaware
Builders Emporium Payroll Services, Inc. Delaware
Cepco Incorporated Delaware
Collins & Aikman Automotive International, Inc. Delaware
Collins & Aikman Floor Coverings, Inc. Delaware
Collins & Aikman Holdings Canada, Inc. Canada
WCA Canada Inc. Canada
Imperial Wallcoverings (Canada), Inc.3 Canada
Collins & Aikman Products GmbH Austria
Carcorp, Inc. Delaware
Collins & Aikman United Kingdom, Ltd.4 United Kingdom
Imperial Wallcoverings Limited United Kingdom
Dura Convertible Systems, Inc.5 Delaware
Dura Convertible Systems de Mexico, S.A. de C.V.6 Mexico
Imperial Wallcoverings, Inc. Delaware
Marketing Service, Inc. Delaware
Collins & Aikman de Mexico, S.A. de C.V.7 Mexico
Gamble Development Company Minnesota
Greeff Fabrics, Inc. New York
Hopkins Realty Company Minnesota
Ole's, Inc. California
Ole's Nevada, Inc. Nevada
Simmons Universal Corporation Delaware
Wickes Asset Management, Inc. Delaware
Wickes Guaranteed Parts, Ltd. Canada
Wickes International Corporation Delaware
Wickes Manufacturing Company Delaware
Wickes Products, Inc. Delaware
Wickes ELCO Corporation Delaware
Wickes Manufacturing Services Company, Inc. Delaware
Wickes Realty, Inc. Delaware
Wickes Venture Capital, Inc. Delaware
Sequoia Pacific Development Company Delaware
1 Formerly Collins & Aikman Holdings Corporation.
2 Formerly Collins & Aikman Corporation.
3 Formerly Berkley Wallcoverings, Inc.; 24% owned by Imperial
Wallcoverings, Inc.
4 One share owned by Collins & Aikman Products Co. and Ronald T.
Lindsay, as joint owners.
5 Formerly Dura Acquisition Corp.
6 One share owned by The Collins & Aikman Products Co.
7 One share owned by The Akro Corporation
</TABLE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included and incorporated by reference in this Form 10-K, into
the Company's previously filed Registration Statements File No. 33-53321 and
No. 33-53323.
ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
April 28, 1995.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
company's consolidated balance sheet and consolidated statement of
operations for the twelve months ended January 28, 1995 and such is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-28-1995
<PERIOD-END> JAN-28-1995
<CASH> 3,317
<SECURITIES> 0
<RECEIVABLES> 98,482
<ALLOWANCES> 6,400
<INVENTORY> 196,096
<CURRENT-ASSETS> 329,679
<PP&E> 557,367
<DEPRECIATION> 269,808
<TOTAL-ASSETS> 681,071
<CURRENT-LIABILITIES> 262,129
<BONDS> 547,963
<COMMON> 705
0
0
<OTHER-SE> (413,327)
<TOTAL-LIABILITY-AND-EQUITY> 681,071
<SALES> 1,536,002
<TOTAL-REVENUES> 1,536,002
<CGS> 1,164,869
<TOTAL-COSTS> 1,164,869
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,132
<INTEREST-EXPENSE> 75,683
<INCOME-PRETAX> 87,283
<INCOME-TAX> 11,537
<INCOME-CONTINUING> 75,746
<DISCONTINUED> 0
<EXTRAORDINARY> (106,528)
<CHANGES> 0
<NET-INCOME> (30,782)
<EPS-PRIMARY> (2.40)
<EPS-DILUTED> (2.40)
</TABLE>
