SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarter ended July 27, 1996
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
A Delaware Corporation (IRS Employer Identification
No. 13-3489233)
701 McCullough Drive
Charlotte, North Carolina 28262
Telephone (704) 547-8500
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
As of September 9, 1996, the number of outstanding shares of the Registrant's
common stock, $.01 par value, was 68,999,463 shares.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except for per share data)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
July 27, July 29, July 27, July 29,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales............................ $ 347,609 $ 265,160 $ 694,353 $ 576,371
Cost of goods sold................... 277,870 215,949 556,693 463,758
Selling, general and administrative
expenses ........................... 31,970 25,758 62,701 50,309
309,840 241,707 619,394 514,067
Operating income..................... 37,769 23,453 74,959 62,304
Interest expense, net................ 14,455 10,296 27,676 20,128
Loss on sale of receivables 1,284 1,744 3,142 4,249
Other expense........................ 1,538 - 231 -
Income from continuing operations
before income taxes ................ 20,492 11,413 43,910 37,927
Income taxes......................... 8,688 2,015 17,771 5,165
Income from continuing operations 11,804 9,398 26,139 32,762
Income from discontinued operations,.
net of income taxes of $1,779,
$520, $2,617 and $1,023 ............ 3,717 6,047 4,524 11,584
Income before extraordinary loss..... 15,521 15,445 30,663 44,346
Extraordinary loss, net of income
taxes of $4,709 .................... (6,610) - (6,610) -
Net income........................... $ 8,911 $ 15,445 $ 24,053 $ 44,346
Net income per primary and fully
diluted commonshare:
Continuing operations .............. $ .17 $ .13 $ .37 $ .46
Discontinued operations ............ .05 .09 .06 .16
Extraordinary item ................. (.09) - (.09) -
Net income ......................... $ .13 $ .22 $ .34 $ .62
Average common shares outstanding:
Primary ............................ 69,990 71,529 70,013 71,639
Fully diluted ...................... 70,015 71,686 70,067 71,717
</TABLE>
I-1
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
(Unaudited)
July 27, January 27,
1996 1996
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents ........ $ 14,542 $ 977
Accounts and notes receivable, net 165,004 127,583
Inventories ...................... 132,720 134,309
Net assets of discontinued
operations....................... 116,412 93,003
Other ............................ 55,034 73,127
Total current assets ............ 483,712 428,999
Property, plant and equipment, net. 282,081 271,902
Deferred tax assets................ 128,020 127,176
Goodwill, net...................... 160,409 159,347
Other assets....................... 57,599 49,313
$1,111,821 $1,036,737
LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
Current Liabilities:
Notes payable .................... $ 1,542 2,101
Current maturities of long-term
debt............................. 28,649 51,508
Accounts payable ................. 100,513 110,236
Accrued expenses ................. 123,920 93,820
Total current liabilities ....... 254,624 257,665
Long-term debt..................... 782,613 713,514
Other, including postretirement
benefit obligation............... 277,433 293,410
Commitments and contingencies......
Common stock (150,000 shares
authorized, 70,521 shares issued
and 69,051 shares outstanding
at July 27, 1996 and 70,521 shares
issued and 69,074 outstanding at
January 27, 1996)................. 705 705
Other paid-in capital.............. 585,422 585,469
Accumulated deficit................ (746,086) (770,139)
Foreign currency translation
adjustments....................... (22,573) (23,719)
Pension equity adjustment.......... (9,090) (9,090)
Treasury stock, at cost (1,470
shares at July 27, 1996 and 1,447
shares at January 27, 1996)....... (11,227) (11,078)
Total common stockholders'
deficit........................ (202,849) (227,852)
$ 1,111,821 $1,036,737
</TABLE>
I-2
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
July 27, July 29, July 27, July 29,
1996 1995 1996 1995
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Income from continuing operations ... $ 11,804 $ 9,398 $ 26,139 $ 32,762
Adjustments to derive cash flow from
continuing operating activities:
Depreciation and leasehold 9,475 9,761 18,699 19,476
amortization......................
Amortization of goodwill .......... 1,030 - 2,060 -
Amortization of other assets ...... 1,732 1,124 3,727 1,858
Decrease(increase)in accounts and
notes receivable.................. 6,961 28,601 (19,421) 55,072
Decrease(increase )in inventories . (4,066) (88) 1,589 3,745
Decrease in accounts payable ...... (8,398) (795) (9,723) (22,064)
Increase in interest payable ...... 3,025 3 3,471 733
Other, net ........................ 6,312 (7,320) 29,794 (10,158)
Net cash provided by continuing
operating activities............ 27,875 40,684 56,335 81,424
Cash provided by (used in)
Wallcoverings and Floorcoverings
discontinued operations.............. 928 3,245 (255) (6,039)
Cash provided by (used in) other
discontinued operations.............. (1,897) (12,015) 488 (18,846)
Net cash provided by (used in)
discontinued operations....... (969) (8,770) 233 (24,885)
INVESTING ACTIVITIES
Additions to property, plant and
equipment............................ (22,782) (20,704) (42,722) (42,166)
Sales of property, plant and equipment 701 42 3,064 316
Acquisition of businesses, net of cash
acquired............................. (8,007) - (8,007) -
Proceeds from sale-leaseback
arrangement.......................... - 17,645 - 17,645
Other, net............................ (4,263) (2,187) (5,515) (4,437)
Net cash used in investing
activities........................ (34,351) (5,204) (53,180) (28,642)
FINANCING ACTIVITIES
Issuance of long-term debt............ 400,045 3,639 400,229 4,356
Repayment of long-term debt........... (264,461) (968) (278,977) (2,831)
Net reduction of participating
interests in accounts receivable..... (19,000) (23,000) (18,000) (28,000)
Net borrowings (repayments) on
revolving credit facilities.......... (83,000) - (75,000) 15,000
Net borrowings (repayments) on notes
payable.............................. 299 (1,012) (559) (785)
Purchase of treasury stock............ (149) (3,776) (149) (3,776)
Other, net............................ (17,240) 38 (17,367) 172
Net cash provided by (used in)
financing activities.............. 16,494 (25,079) 10,177 (15,864)
Net increase in cash and cash
equivalents.......................... 9,049 1,631 13,565 12,033
Cash and cash equivalents at beginning
of period............................ 5,493 13,719 977 3,317
Cash and cash equivalents at end of
period.............................. $ 14,542 $ 15,350 $ 14,542 $ 15,350
</TABLE>
I-3
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT
(Unaudited)
A. 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 ("Common Stock") and a recapitalization (the "Recapitalization"),
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 of July 27, 1996,
Blackstone Partners and WP Partners and their respective affiliates collectively
own approximately 78% of the Common Stock.
The Company conducts all of its operating activities through its wholly-
owned C&A Products subsidiary.
B. Basis of Presentation:
The condensed consolidated financial statements include the accounts of the
Company and its subsidiaries. In the opinion of management, the accompanying
condensed consolidated financial statements reflect all adjustments (consisting
of only normal recurring adjustments) necessary for a fair presentation of
financial position and results of operations. Results of operations for interim
periods are not necessarily indicative of results for the full year. Certain
reclassifications have been made to these condensed consolidated financial
statements for the quarter and six months ended July 29, 1995 to conform to the
fiscal 1996 presentation and are primarily related to the Wallcoverings segment
and Floorcoverings subsidiary being reclassified as discontinued operations.
See Note J.
For further information, refer to the consolidated financial statements and
footnotes thereto included in the Collins & Aikman Corporation Annual Report on
Form 10-K for the fiscal year ended January 27, 1996.
C. Interest Rate Protection Programs:
The Company maintains a program designed to reduce its exposure to changes
in the cost of its variable rate borrowings by the use of interest rate
corridor and collar agreements. At July 27, 1996, the Company has a corridor
agreement to limit its exposure through October 1996 on a notional principal
amount of $250 million at an average LIBOR strike price of 7.50%. The strike
price of corridor and collar 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 arrangements are included in other assets. The
Company has limited its exposure through April 2, 1998 on $80 million of
notional principal amount utilizing zero cost collars with 4.75% floors and a
weighted average cap of 7.86%.
Amortization of the interest rate protection agreements amounted to $.3
million and $.1 million during the quarter ended July 27, 1996 and July 29,
1995, respectively. Amortization of these agreements amounted to $.5 million
and $.3 million during the six months ended July 27, 1996 and July 29, 1995,
respectively.
I-4
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (Continued)
(Unaudited)
D. Goodwill:
Goodwill, representing the excess of purchase price over the fair value of
net assets of the acquired entities, is being amortized on a straight-line basis
over the period of forty years. Amortization of goodwill applicable to
continuing operations for the second quarter of 1996 and six months ended July
27, 1996 was $1.0 million and $2.1 million, respectively. Accumulated
amortization at July 27, 1996 was $2.3 million. The carrying value of goodwill
will be reviewed periodically based on the nondiscounted cash flows and pretax
income of the entities acquired over the remaining amortization periods. Should
this review indicate that the goodwill balance will not be recoverable, the
Company's carrying value of the goodwill will be reduced. At July 27, 1996, the
Company believes its goodwill of $160.4 million was not impaired.
E. Receivables Facility:
On March 31, 1995, C&A Products repaid and terminated the receivables
financing arrangement it entered into in connection with the Recapitalization
(the "Bridge Receivables Facility") and entered, through a trust (the "Trust")
formed by Carcorp, Inc., a wholly-owned, bankruptcy remote subsidiary of C&A
Products ("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 have a term of five years
and (ii) variable funding certificates, which represent revolving commitments of
up to an aggregate of $75 million and have 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 the
bankruptcy or downgrading below investment grade of the obligor, delinquency and
excessive concentration). Based on these criteria, at July 27, 1996
approximately $18.2 million was available under the variable funding
certificates, none of which 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.
As of July 27 1996 the Trust's receivables pool was $199.0 million net of
allowances for doubtful accounts. As of July 27, 1996 the holders of term
certificates and variable funding certificates collectively possessed a $110.0
million undivided senior interest (net of settlements in transit) in the Trust's
receivables pool and, accordingly, such receivables were not reflected in the
Company's accounts receivable balance as of that date.
See Note J for amounts allocated to discontinued operations associated with
the Receivables Facility.
I-5
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (Continued)
(Unaudited)
F. Inventories:
Inventory balances are summarized as follows (in thousands):
July 27, January 27,
1996 1996
Raw materials...................... $ 76,597 $ 75,529
Work in process.................... 23,001 21,636
Finished goods..................... 33,122 37,144
$132,720 $ 134,309
G. Subordinated Notes:
On June 10, 1996, the Company's wholly-owned subsidiary, C&A Products,
issued at face value $400 million principal amount of 11-1/2% Senior
Subordinated Notes due 2006 (the "Subordinated Notes"), which are guaranteed by
the Company. The Company used approximately $356.8 million of the total net
proceeds of $387.0 million to repay $348.2 million principal amount of
outstanding bank borrowings plus accrued interest on such borrowings and related
fees and expenses and intends to use the remainder for general corporate
purposes, including working capital, capital expenditures and acquisitions.
H. Interest Expense, Net:
Interest expense allocated to continuing operations for the quarters ended
July 27, 1996 and July 29, 1995 is net of interest income of $1.2 million and
$.8 million, respectively. Interest expense allocated to continuing operations
for the six months ended July 27, 1996 and July 29, 1995 is net of interest
income of $1.5 million and $1.6 million, respectively. See Note J for interest
expense allocated to discontinued operations.
I. Facility Closing Costs:
In the fourth quarter of fiscal 1995, the Company in its Automotive
Products segment provided for the cost to exit one manufacturing facility.
Additionally, the Company provided for the cost to exit one manufacturing and
three distribution centers in its discontinued Wallcoverings segment. During
the second quarter of 1996 and the six months ended July 27, 1996, the Company
expended approximately $.1 million related to closure and disposal of idled
facilities for continuing operations. Cash outlays for facility closing costs
related to discontinued operations during the six months ended July 27, 1996
were approximately $.4 million for severance benefits and $.1 million for
closing and disposal of idled facilities. There were no cash outlays for
facility closing costs related to discontinued operations during the second
quarter of 1996.
J. Discontinued Operations:
On April 9, 1996, the Company announced a plan to spin off its Imperial
Wallcoverings, Inc. subsidiary ("Wallcoverings") to the stockholders of the
Company in the form of a stock dividend. The spin-off requires, among other
things, the final approval of the Company's Board of Directors. The Company
expects the spin-off to occur during the fourth quarter of 1996. The Company
has accounted for the financial results and net assets of Wallcoverings as a
discontinued operation. Accordingly, previously reported financial results for
all periods presented have been restated to reflect Wallcoverings as a
discontinued operation. For the six months ended July 27, 1996, Wallcoverings
had income, net of income taxes, of $.4 million which relates to the quarter
ended April 27, 1996. Wallcoverings' results subsequent to the quarter ended
April 27, 1996 have been charged to the Company's existing discontinued
operations reserves. For the quarter ended and six
I-6
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (Continued)
(Unaudited)
months ended July 29, 1995, Wallcoverings had a loss, net of income taxes,
of $.1 million and income, net of income taxes, of $4.0 million, respectively.
During the second quarter, the Company announced its intention to sell the
Company's Floorcoverings subsidiary ("Floorcoverings") in order to more
aggressively pursue the Company's automotive growth strategy. As a result of
this plan, the Company has accounted for the financial results and net assets of
Floorcoverings as a discontinued operation. Accordingly, previously reported
financial results for all periods presented have been restated to reflect
Floorcoverings as a discontinued operation. The following is selected financial
data related to Floorcoverings for the periods presented (in thousands):
<TABLE>
<CAPTION>
For The Quarter Ended For The Six Months Ended
July 27, July 29, July 27, July 29,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Net sales................. $ 41,858 $ 36,702 $ 68,723 $ 60,381
Cost of sales............. 25,641 20,939 42,474 34,437
Selling, general and
administrative expense... 7,655 7,271 14,272 14,027
Other expense............. 427 0 427 0
</TABLE>
Net interest expense of discontinued operations including amounts
attributable to discontinued operations was $2.5 million and $4.5 million for
the quarter and six months ended July 27, 1996, respectively, and $1.9 million
and $3.6 million for the quarter and six months ended July 29, 1995,
respectively. Interest expense of $2.5 million and $4.4 million for the quarter
and six months ended July 27, 1996, respectively, and $1.8 million and $3.4
million for the quarter and six months ended July 29, 1995, respectively, was
allocated to discontinued operations based upon the ratio of net book value of
discontinued operations to consolidated invested capital.
A portion of the loss on sale of receivables has been allocated to
discontinued operations based on the ratio of (x) receivables included in the
Trust's receivable pool related to discontinued operations to (y) the total
Trust's receivables pool. For the quarter and six months ended July 27, 1996,
$185,000 and $390,000, respectively, of loss on sale of receivables was
allocated to discontinued operations. For the quarter and six months ended July
29, 1995, these allocated amounts were $200,000 and $390,000, respectively.
K. Related Party Transactions:
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. Wasserstein Perella
Securities, Inc., an affiliate of WP Partners, participated as a lead
underwriter in C&A Products' offering of Subordinated Notes in June 1996 and was
paid fees of approximately $5.4 million by C&A Products in connection therewith.
I-7
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (Continued)
(Unaudited)
L. Information About Industry Segments of the Company's Continuing Operations:
Information about the Company's continuing industry segments for the second
quarter and first six months of fiscal 1996 and of fiscal 1995 follows (in
thousands):
<TABLE>
<CAPTION>
Depreciation
Quarter Ended Net Gross Operating and Capital
July 27, 1996 Sales Margin Income Amortization (a) Expenditures
<S> <C> <C> <C> <C> <C>
Automotive Products $ 275,683 $ 52,255 $ 29,953 $ 8,852 $ 9,724
Decorative Fabrics 71,926 17,484 7,816 2,420 2,718
Corporate items (b) - - - 965 10,340
$ 347,609 $ 69,739 $ 37,769 $ 12,237 $ 22,782
Depreciation
Quarter Ended Net Gross Operating and Capital
July 29, 1995 Sales Margin Income Amortization (a) Expenditures
Automotive Products $ 204,794 $ 35,062 $ 19,166 $ 6,460 $ 13,991
Decorative Fabrics 60,366 14,149 4,287 3,050 3,889
Corporate items (b) - - - 1,375 2,824
$ 265,160 $ 49,211 $ 23,453 $ 10,885 $ 20,704
Depreciation
Six Months Ended Net Gross Operating and Capital
July 27, 1996 Sales Margin Income Amortization (a) Expenditures
Automotive Products $ 558,383 $104,126 $ 60,097 $ 17,628 $ 18,492
Decorative Fabrics 135,970 33,534 14,862 4,824 7,972
Corporate items (b) - - - 2,034 16,258
$ 694,353 $137,660 $ 74,959 $ 24,486 $ 42,722
Depreciation
Six Months Ended Net Gross Operating and Capital
July 29, 1995 Sales Margin Income Amortization (a) Expenditures
Automotive Products $ 448,488 $ 80,790 $ 50,246 $ 12,967 $ 29,302
Decorative Fabrics 127,883 31,823 12,058 5,957 8,059
Corporate items (b) - - - 2,410 4,805
$ 576,371 $112,613 $ 62,304 $ 21,334 $ 42,166
</TABLE>
I-8
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (Continued)
(Unaudited)
(a) Includes the amortization of goodwill and other assets and liabilities and
excludes depreciation and amortization for discontinued operations.
(b) Includes capital expenditures for discontinued operations for the second
quarter of 1996 and 1995 of $10.2 million and $2.5 million, respectively.
Capital expenditures for discontinued operations for the six months ended
July 27, 1996 and July 29, 1995 were $15.6 million and $4.2 million,
respectively.
The geographic dispersion of the operations of the Company and its
subsidiaries did not change significantly from January 27, 1996 to July 27,
1996.
M. Commitments and Contingencies:
See "PART II - OTHER INFORMATION, Item 1. Legal Proceedings." The ultimate
outcome of the legal proceedings to which the Company is a party will not, in
the opinion of the Company's management based on the facts presently known to
it, have a material effect on the Company's consolidated financial condition or
results of operations.
See also "PART I - FINANCIAL INFORMATION, Item 2. Management's Discussion
and Analysis of Financial Condition and Results of Operations."
C&A Products (or its predecessor, Group) has assigned leases related to
divested businesses. Although C&A Products has obtained releases from the
lessors of certain of these properties, C&A Products remains contingently liable
under most of the leases. C&A Products' future liability for these leases, in
management's opinion, based on the facts presently known to it, will not have a
material effect on the Company's consolidated financial condition or results of
operations.
N. Common Stockholders' Deficit:
Activity in common stockholders' deficit is as follows (in thousands):
<TABLE>
<CAPTION> Foreign
Other Currency Pension
Common Paid-in Accumulated Translation Equity Treasury
Stock Capital Deficit Adjustments Adjustment Stock Total
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 27, 1996 $ 705 $ 585,469 $ (770,139) $ (23,719) $ (9,090) $ (11,078) $ (227,852)
Compensation expense
adjustment ..... - (47) - - - - (47)
Net income....... - - 24,053 - - - 24,053
Purchases of treasury stock
(23 shares) ... - - - - - (149) (149)
Foreign currency
translation adjustments...... - - - 1,146 - - 1,146
Balance at July 27, 1996...... $ 705 $ 585,422 $ (746,086) $ (22,573) $ (9,090) $ (11,227) $ (202,849)
</TABLE>
I-9
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (Concluded)
(Unaudited)
O. Earnings Per Share:
Earnings per common share are 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 deferred compensation expense.
P. Significant Subsidiary:
The Company conducts all of its operating activities through its wholly-
owned subsidiary C&A Products. The following represents summarized consolidated
financial information of C&A Products and its subsidiaries for the following
periods (in thousands):
For the Quarter For the Six Months
Ended Ended
July 27, July 29, July 27, July 29,
1996 1995 1996 1995
Net sales...........................$347,609 $265,160 $694,353 $576,371
Gross margin........................ 69,739 49,211 137,660 112,613
Income from continuing operations... 11,792 9,511 25,952 32,990
Net income ......................... 8,899 15,558 23,866 44,574
July 27, January 27,
1996 1996
Current assets...................... $ 483,134 $ 427,756
Noncurrent assets................... 628,003 607,738
Current liabilities................. 253,409 256,452
Noncurrent liabilities.............. 1,057,464 1,004,342
Separate financial statements of C&A Products are not presented because
they would not be material to the holders of any debt securities of C&A Products
that have been or may be issued, there being no material differences between the
financial statements of C&A Products and the Company. The absence of separate
financial statements of C&A Products is also based upon the fact that any debt
of C&A Products issued, and the assumption that any debt to be issued, under the
Registration Statement on Form S-3 filed by the Company and C&A Products
(Registration No. 33-62665) is or will be fully and unconditionally guaranteed
by the Company.
Q. Subsequent Event:
On August 28, 1996, the Company announced its signing of a definitive
agreement to acquire JPS Automotive L.P. ("JPS Automotive") from Foamex
International, Inc. ("Foamex"). The purchase price, subject to final
adjustments, is a total of $220 million and includes approximately $198 million
of indebtedness of JPS Automotive and approximately $22 million in cash. The
purchase is expected to close by the end of November and is subject to a number
of conditions including the execution of certain agreements with Foamex, the
purchase of a minority interest in a JPS Automotive subsidiary for $10 million,
the arrangement of standby financing, the consent of the Company's lenders and
of Foamex's lenders and bondholders and other conditions. There can be no
assurance that these conditions will be satisfied.
I-10
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RECENT DEVELOPMENTS
On August 28, 1996, the Company announced its signing of a definitive
agreement to acquire JPS Automotive from Foamex. The purchase price, subject to
final adjustments, is a total of $220 million and includes approximately $198
million of indebtedness of JPS Automotive and approximately $22 million in cash.
The purchase is expected to close by the end of November and is subject to a
number of conditions including the execution of certain agreements with Foamex,
the purchase of a minority interest in a JPS Automotive subsidiary for $10
million, the arrangement of standby financing, the consent of the Company's
lenders and of Foamex's lenders and bondholders and other conditions. There can
be no assurance that these conditions will be satisfied.
On June 10, 1996, the Company's wholly-owned subsidiary, C&A Products,
issued $400 million principal amount of the Subordinated Notes, which are
guaranteed by the Company. The Subordinated Notes were sold at a price equal to
100% of their principal amount. The Company used approximately $356.8 million
of the total net proceeds of $387.0 million to repay $348.2 million principal
amount of the outstanding bank borrowings plus accrued interest on such
borrowings and related fees and expenses and intends to use the remainder for
general corporate purposes, including working capital, capital expenditures and
acquisitions.
On May 1, 1996, the Company acquired the business of BTR Fatati Limited
("Fatati"), a manufacturer and supplier of molded floor carpets and luggage
compartment trim for the European automotive market. The acquisition increases
the Company's carpet molding capacity and gives it a European base from which to
supply its new carpet molding plant in Austria. Fatati's customers include
General Motors, Saab and Toyota.
GENERAL
The Company's continuing business segments consist of Automotive Products,
which supplies textile and plastic interior trim products and convertible top
systems to the North American and, increasingly, the European automotive
industry; and Decorative Fabrics, which manufactures residential upholstery in
the United States. The Decorative Fabrics segment was formerly reported as the
Interior Furnishings segment. However, as a result of the Company's decision to
classify the Company's Floorcoverings subsidiary as a discontinued operation,
this segment was renamed Decorative Fabrics. The Wallcoverings segment, which
produces residential and commercial wallpaper in North America, has also been
classified as a discontinued operation. Accordingly, all prior year segment
information has been restated.
The Company's net sales in the second quarter of fiscal 1996 were $347.6
million, with approximately $275.7 million (79.3%) in Automotive Products and
$71.9 million (20.7%) in Decorative Fabrics. All references to a year with
respect to the Company refer to the fiscal year of the Company which ends on the
last Saturday of January of the following year.
The industries in which the Company competes are cyclical. Automotive
Products is primarily influenced by the level of North American vehicle
production. Decorative Fabrics is directly influenced by the level of retail
furniture sales, which in turn is primarily influenced by the level of
residential construction and renovation and by consumer confidence.
I-11
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued).
RESULTS OF OPERATIONS
Discussion of results of each of the Company's operating segments follows:
Automotive Products
Quarter Ended
July 27, 1996 July 29, 1995
Amount Percent Amount Percent
(dollar amounts in thousands)
Net sales................... $ 275,683 100.0% $ 204,794 100.0%
Cost of goods sold.......... 223,428 81.0 169,732 82.9
Gross margin................ 52,255 19.0 35,062 17.1
Selling, general &
administrative expenses... 22,302 8.1 15,896 7.7
Operating income............ $ 29,953 10.9% $ 19,166 9.4%
Six Months Ended
July 27, 1996 July 29, 1995
Amount Percent Amount Percent
(dollar amounts in thousands)
Net sales................... $ 558,383 100.0% $ 448,488 100.0%
Cost of goods sold.......... 454,257 81.4 367,698 82.0
Gross margin................ 104,126 18.6 80,790 18.0
Selling, general &
administrative expenses... 44,029 7.9 30,544 6.8
Operating income............ $ 60,097 10.7% $ 50,246 11.2%
Net Sales: Automotive Products' net sales increased 34.6% to approximately
$275.7 million in the second quarter of 1996, up $70.9 million over the
comparable 1995 quarter. The overall increase was due to the acquisition of
Manchester Plastics in January 1996, as well as increased sales in convertible
top systems, molded carpet, accessory mats and luggage compartment trim,
partially offset by decreased sales of automotive bodycloth. The overall
increase in the segment's sales compares with an 8.8% increase in the North
American vehicle build over the comparable quarter of the prior year. For the
remainder of the year, the Company currently does not expect any increase in the
North American vehicle build versus last year.
For the first six months of 1996, Automotive Products' net sales of $558.4
million were $109.9 million higher than the comparable period in 1995. This
overall increase was due primarily to the acquisition of Manchester Plastics in
January 1996 and the Fatati business in May 1996 as well as the items discussed
above. These increases were partially offset by a reduction in first quarter
sales to General Motors resulting from the United Auto Workers' strike against
General Motors in March 1996.
I-12
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued).
Convertible top system sales increased 94.8% and 87.1% in the quarter and six
months ended July 27, 1996, respectively, over the prior year periods
principally due to increased shipments of the Chrysler Sebring and Ford Mustang.
These increases were partially offset by the planned discontinuance of the
Chrysler LeBaron convertible.
Molded carpet sales increased 13.4% and 8.7% in the quarter and six months
ended July 27, 1996, respectively, over the prior year periods. Increased sales
to the Chrysler Caravan/Voyager, T300 pickup, Sebring and Breeze were partially
offset by reduced sales to the Ford Explorer, Chevrolet Camaro and Pontiac Grand
Prix during both periods of the current year.
Manchester Plastics, which was acquired in January 1996, contributed $40.4
million and $78.7 million in sales of plastic interior trim components in the
quarter and six months ended July 27, 1996, respectively. Manchester's sales
for the six months ended July 27, 1996 were negatively impacted by the General
Motors strike in the first quarter and delays in the launch of certain new
programs which were partially offset by increased sales to the Honda Civic.
Accessory mat sales increased 21.9% and 16.2% in the quarter and six months
ended July 27, 1996, respectively, over the prior year periods. The overall
increase is attributable to increased sales to the Chrysler Caravan/Voyayer and
T-300, and the Honda Civic and Accord. These increases were partially offset by
lower Nissan build requirements.
Luggage compartment trim sales increased 5.7% and 4.0% in the quarter and six
months ended July 27, 1996, respectively, over the prior year periods.
Increased sales to the Honda Civic and the Chrysler Sebring and Breeze were
partially offset by reduced sales to the Ford Explorer and the Mazda 626 and
decreased sales to General Motors in the first quarter.
Automotive bodycloth sales declined 7.5% and 15.9% in the quarter and six months
ended July 27, 1996, respectively, over the prior year periods. The decreased
sales resulted primarily from reduced sales to the Chevrolet Cavalier, Ford
Mustang, Thunderbird, and F-Series truck and the Honda Civic and decreased sales
to General Motors in the first quarter. These decreases were partially offset
by increased sales to the Mercury Sable, the Chrysler Grand Cherokee and Breeze
and the Pontiac Grand Am.
Of the segment's sales, approximately 15.2% and 14.1% in the quarter and six
months ended July 27, 1996, respectively, were attributable to products utilized
in vehicles not built in North America.
The above factors resulted in the Company's average sales content per vehicle
built in North America of approximately $64 for the second quarter and first six
months of 1996 compared to an average of approximately $54 for the fiscal 1995
year.
Gross Margin: For the second quarter of 1996, gross margin was 19.0%, up from
17.1% in the comparable period in 1995. The increase in gross margin is
attributable primarily to the increase in higher margin convertible top system
sales offset partially by the previously anticipated lower margins in plastic
components. The Company currently anticipates margins in its plastic interior
trim business will increase during the remainder of the year unless new programs
fail to launch. For the six months ended July 27, 1996, gross margin was 18.6%,
up from 18.0% in the comparable period in 1995. The increase was due to the
same factors mentioned above, as well as decreased sales of automotive bodycloth
and decreased sales to General Motors in the first quarter.
I-13
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued).
Selling, General and Administrative Expenses: Automotive Products' selling,
general and administrative expenses increased 40.3% to $22.3 million in the
second quarter of 1996, up $6.4 million over the comparable 1995 period.
Selling, general and administrative expenses increased to $44.0 million for the
six months ended July 27, 1996, up $13.5 million over the comparable 1995
period. The increase is primarily due to the acquisition of Manchester Plastics
and Amco Convertible Fabrics and the expansion of the Company's carpet business
in Europe and convertible top system business in Mexico.
Decorative Fabrics
Quarter Ended
July 27, 1996 July 29, 1995
Amount Percent Amount Percent
(dollar amounts in thousands)
Net sales................... $ 71,926 100.0% $60,366 100.0%
Cost of goods sold.......... 54,442 75.7 46,217 76.6
Gross margin................ 17,484 24.3 14,149 23.4
Selling, general &
administrative expenses... 9,668 13.4 9,862 16.3
Operating income............ $ 7,816 10.9% $ 4,287 7.1%
Six Months Ended
July 27, 1996 July 29, 1995
Amount Percent Amount Percent
(dollar amounts in thousands)
Net sales................... $135,970 100.0% $127,883 100.0%
Cost of goods sold.......... 102,436 75.3 96,060 75.1
Gross margin................ 33,534 24.7 31,823 24.9
Selling, general &
administrative expenses... 18,672 13.7 19,765 15.5
Operating income............ $ 14,862 11.0% $ 12,058 9.4%
Net Sales: Decorative Fabrics' net sales increased 19.1% to $71.9 million in the
second quarter of 1996, up $11.6 million compared to the second quarter of
1995. Net sales for the six months ended July 27, 1996 were $136.0 million, up
6.3% over the comparable period in 1995.
Decorative Fabrics' sales increase was principally in the segment's Mastercraft
division, which makes flatwoven upholstery fabrics. Mastercraft's sales
increased approximately 20% in the second quarter of 1996 as compared to the
prior year period even though the average selling prices decreased due to
changes in sales mix towards the Company's lower priced product lines. All
Mastercraft product lines experienced sales increases in the second quarter of
1996 over the prior year period. The segment also benefited from increased
demand for Mastercraft's Advantage product, which was introduced in August of
1994. Velvet furniture fabric sales increased 10.4% for the second quarter of
1996 as compared to the same period in 1995. However, velvet furniture fabric
sales for the six months ended July 27, 1996 remained flat as compared to the
prior year period.
I-14
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued).
Gross Margin: Decorative Fabrics' gross margin for the second quarter of 1996
increased to 24.3% of sales from 23.4% in the comparable prior year period. The
increase reflects the higher sales and production levels which improved
absorption of overhead costs. In addition, the segment continues to benefit
from the improved efficiencies as a result of the Mastercraft loom modernization
program.
Decorative Fabrics' gross margin for the six months ended July 27, 1996 was
24.7% of sales, down from 24.9% for the comparable period in 1995. This decline
resulted from lower sales volume in the first quarter of 1996 and increased raw
material prices of approximately $1.2 million.
Selling, General and Administrative Expenses: Decorative Fabrics' selling,
general and administrative expenses decreased 2.0% to $9.7 million in the second
quarter of 1996, down $.2 million from the second quarter of 1995. Selling,
general and administrative expenses decreased $1.1 million to $18.7 million for
the six months ended July 27, 1996 as compared to the same period in 1995.
These decreases are primarily due to lower administrative costs.
Company As A Whole
Net Sales: Net sales increased 31.1% to $347.6 million in the second quarter of
1996, up $82.4 million over the second quarter of 1995. Net sales for the six
months ended July 27, 1996 increased 20.5% to $694.4 million, up $118.0 million
over the comparable period in 1995. The overall net sales increase reflects
continued sales increases in the Company's Automotive Products segment and the
second quarter sales increases in the Decorative Fabrics segment as discussed
above.
Gross Margin: Gross margin increased to $69.7 million or 20.1% of sales in the
second quarter of 1996, up from $49.2 million or 18.6% of sales in the second
quarter of 1995. The second quarter 1996 increase in gross margin as a
percentage of sales results primarily from increased convertible top system
sales in the Automotive Products segment and improved margins within Decorative
Fabrics, partially offset by lower margins in plastic interior trim components.
Gross margin increased to $137.7 million or 19.8% of sales for the six months
ended July 27, 1996, up from $112.6 million or 19.5% of sales for the same
period in 1995. This increase resulted primarily from increased Automotive
Products margins partially offset by a decrease in the gross margin percentage
of the Decorative Fabrics segment in the six months ended July 27, 1996 as
discussed above. The Company expects that raw material price increases
announced in 1995 will affect operating results in the remainder of fiscal
1996, although the Company believes that the impact can be somewhat reduced by
price increases to customers, the continued results of the Company's value
engineering/value analysis and cost improvement programs and by continued
reductions in the cost of non-conformance.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses of $32.0 million in the second quarter of 1996 were $6.2
million higher than the comparable period in 1995. Selling, general and
administrative expenses increased to $62.7 million for the six months ended July
27, 1996, up from $50.3 million in the same period in 1995. The increase is
primarily attributable to the acquisitions of Manchester Plastics in January
1996 , the Fatati business in May 1996 and Amco Convertible Fabrics in October
1995.
Interest Expense: Interest expense allocated to continuing operations, net of
interest income of $1.2 million in the second quarter of 1996 and $.8 million in
the second quarter of 1995, increased $4.2 million to $14.5 million in the
second quarter of 1996 from $10.3 million in the second quarter of 1995.
Interest expense allocated to continuing operations, net of interest income of
$1.5 million for the six months ended July 27, 1996 and $1.6 million for the six
months ended July 29, 1995, increased to $27.7 million for the six months ended
July 27, 1996
I-15
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued).
as compared to $20.1 million for the same period in 1995. The
overall increase in interest expense was due to a higher amount of overall
outstanding indebtedness, primarily related to the $197 million credit facility
that was entered into in connection with the acquisition of Manchester Plastics
in January 1996 (the "Term Loan B Facility") as well as the higher interest
rates associated with the Subordinated Notes issued in June 1996.
Loss on the Sale of Receivables: The Company sells on a continuous basis,
through its Carcorp subsidiary, interests in a pool of accounts receivable. In
connection with the receivables sales, a loss of $1.3 million was allocated to
continuing operations in the second quarter of 1996 compared to a loss of $1.7
million in the prior year quarter. Losses of $3.1 million and $4.2 million
were allocated to continuing operations for the six months ended July 27, 1996
and July 29, 1995, respectively. See Note E to Condensed Consolidated Financial
Report.
Other Expense: The Company in the second quarter of 1996 and six months ended
July 27, 1996 recognized $1.5 million and $.2 million, respectively, in foreign
currency transaction losses related to obligations to be settled in currencies
other than the functional currency of its foreign operations.
Income Taxes: In the quarter ended July 27, 1996, the provision for income taxes
was $8.7 million compared with $2.0 million for the comparable 1995 period. For
the six months ended July 27, 1996 and July 29, 1995, the provisions for income
taxes were $17.8 million and $5.2 million, respectively. The increase in the
Company's tax expense and reported rate results from the Company's 1995
recognition of net deferred tax assets of $150 million. In the second quarter
and first six months of 1996 and 1995, income tax expense consisted of foreign,
state, franchise and federal taxes.
Discontinued Operations: The Company's discontinued Floorcoverings subsidiary
had income of $3.7 million in the second quarter of 1996 as compared to income
of $6.0 million for the discontinued Wallcoverings segment and Floorcoverings
subsidiary for the same period in 1995. Income from discontinued operations
for the six months ended July 27, 1996 and July 29, 1995 was $4.5 million and
$11.6 million, respectively. Results of operations for the Wallcoverings
subsidiary subsequent to April 27, 1996 have been charged to the Company's
existing discontinued operations reserves. In addition, the decline in income
from discontinued operations relates primarily to increased income taxes and
allocated interest expense as well as decreased earnings related to
Wallcoverings sales declines.
Extraordinary Loss: For the quarter and six months ended July 27, 1996, the
Company recognized a non-cash extraordinary charge of $6.6 million, net of
income taxes of $4.7 million, related to the refinancing of its bank facilities.
The refinancing was done in conjunction with the Company's offering of the
Subordinated Notes.
Net Income: The combined effect of the foregoing resulted in net income of $8.9
million in the second quarter of 1996 compared to net income of $15.4 million
for the comparable period of 1995. Net income for the six months ended July 27,
1996 and July 29, 1995 was $24.1 million and $44.3 million, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company and its subsidiaries had cash and cash equivalents totaling
$14.5 million and $1.0 million at July 27, 1996 and January 27, 1996,
respectively. The Company had a total of $253.0 million of borrowing
availability under its credit arrangements as of July 27, 1996. The total was
comprised of $224.9 million under
I-16
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued).
the Bank Credit Facilities (as defined below), $18.2 million under the
Receivables Facility and approximately $9.9 million under demand
lines of credit in Canada.
As part of the Recapitalization, in July 1994 the Company entered into
credit facilities consisting of (i) a Term Loan Facility, (ii) a Revolving
Facility (together with the Term Loan Facility, the "Credit Agreement
Facilities") and (iii) a bridge receivables facility, which was terminated and
replaced with the Receivables Facility described below. On December 22, 1995,
the Company and C&A Products entered into the Term Loan B Facility to finance
the January 1996 purchase of Manchester Plastics. The restrictive covenants
contained in the Term Loan B Facility were identical to those in the Credit
Agreement Facilities.
As discussed above, on June 10, 1996 C&A Products issued $400 million
principal amount of Subordinated Notes, which mature in 2006. The Subordinated
Notes are guaranteed by the Company. The indenture governing the Subordinated
Notes generally prohibits the Company, C&A Products and any Restricted
Subsidiary (as defined) from making certain payments and investments (generally,
dividends and distributions on their capital stock; repurchases or redemptions
of their capital stock; repayment prior to maturity of debt subordinated to the
Subordinated Notes; and investments (other than permitted investments))
("Restricted Payments") if (i) there is a default under the Subordinated Notes
or (ii) after giving pro forma effect to the Restricted Payment, C&A Products
could not incur at least $1.00 of additional indebtedness under the indenture's
general test for the incurrence of indebtedness, which is a specified ratio
(currently 2 to 1) of cash flow to interest expense or (iii) the aggregate of
all such Restricted Payments from the issue date exceeds a specified threshold
(based, generally, on 50% of cumulative consolidated net income since the
quarter in which the issue date occurred plus 100% of the net proceeds of
capital contributions to C&A Products from stock issuances by the Company). The
prohibition is subject to a number of significant exceptions, including
dividends to stockholders of the Company not exceeding $10 million in any fiscal
year or $20 million in the aggregate until the maturity of the Subordinated
Notes and dividends to the Company to permit it to pay its operating and
administrative expenses. The Subordinated Notes indenture also contains other
restrictive covenants (including, among others, limitations on the incurrence of
indebtedness, asset dispositions and transactions with affiliates) which are
customary for such securities. These covenants are also subject to a number of
significant exceptions.
On June 3, 1996, the Company and C&A Products entered into an amendment and
restatement (the "Amendment") of the Credit Agreement Facilities and the Term
Loan B Facility (collectively, the "Bank Credit Facilities"). The Amendment was
effected in connection with the sale of the Subordinated Notes and the use of
proceeds from such sale to repay various outstanding loans under the Credit
Agreement Facilities. As a result of the Amendment, the Bank Credit Facilities
consist of (i) the Term Loan Facility, in an aggregate principal amount of $195
million (including a $45 million facility in Canada), payable in installments
until final maturity on July 13, 2002, (ii) the Term Loan B Facility, in the
principal amount of $195.8 million, payable in installments until final maturity
on December 31, 2002, and (iii) the Revolving Facility, having an aggregate
principal amount of up to $250 million and maturing on July 13, 2001. The Bank
Credit Facilities, which are guaranteed by the Company and its U.S. subsidiaries
(subject to certain exceptions), contain restrictive covenants including
maintenance of EBITDA (i.e. earnings before interest, taxes, depreciation,
amortization and other non-cash charges) and interest coverage ratios, leverage
and liquidity tests and various other restrictive covenants which are customary
for such facilities. In addition, C&A Products is generally prohibited from
paying dividends or making other distributions to the Company except (x) to the
extent necessary to allow the Company to pay taxes and ordinary expenses, (y)
for permitted repurchases of shares or options from employees and directors and
(z) to make permitted investments in finance, foreign or acquired subsidiaries.
In addition, the Company and C&A Products are permitted to pay dividends and
repurchase shares of the Company in any fiscal year in an aggregate amount equal
to the greater of (i) $12 million and
I-17
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued).
(ii) if certain financial ratios are satisfied, 25% of the Company's
consolidated net income for the previous fiscal year, and are
permitted to pay additional dividends in amounts representing
certain net proceeds from any sale of Wallcoverings in the event the
spin-off is not effected.
On March 31, 1995, C&A Products entered, through the Trust formed by
Carcorp, into the Receivables Facility, comprised of (i) term certificates,
which were issued on March 31, 1995, in an aggregate face amount of $110 million
and have a term of five years and (ii) variable funding certificates, which
represent revolving commitments of up to an aggregate of $75 million and have 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.
In connection with the proposed spin-off of Wallcoverings, Wallcoverings
will be terminated as a seller of receivables under the Receivables Facility.
Receivables sold by Wallcoverings prior to such termination will remain in the
Trust. The Company anticipates that the Trust will be required to redeem term
certificates having a face value of approximately $20 million as the Trust
collects the Wallcoverings receivables. The Company also anticipates
terminating Floorcoverings as a seller of receivables under the Receivables
Facility in connection with the Company's announced intention to sell
Floorcoverings. This would result in the redemption of approximately $20
million face value of term certificates.
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 the
bankruptcy or downgrading below investment grade of the obligor, delinquency and
excessive concentration). Based on these criteria, at July 27, 1996
approximately $18.2 million was available under the variable funding
certificates, none of which 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, modifications of the terms of receivables, and 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.
The Company has a master equipment lease agreement for a maximum of $50
million of machinery and equipment. At July 27, 1996, the Company had $20.0
million of potential availability under this master lease for future machinery
and equipment requirements of the Company subject to the lessor's approval. The
Company has made lease payments of approximately $2.1 million and $3.9 million
in the quarter and six months ended July 27, 1996, respectively, for machinery
and equipment sold and leased back under this master lease. The Company expects
lease payments under this master lease to be $4.2 million during the remainder
of fiscal 1996.
I-18
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued).
As discussed above, the Company has signed a definitive agreement, subject
to certain conditions, to acquire JPS Automotive. The Company anticipates
funding the estimated $22 million cash portion of the acquisition through
borrowings under the Bank Credit Facilities. JPS Automotive has approximately
$198 million of indebtedness outstanding. This amount includes approximately
$180 million of indebtedness related to the 11-1/8% senior notes due 2001 (the
"JPS Automotive Senior Notes"), which will remain outstanding in the
acquisition. Holders of the JPS Automotive Senior Notes have the right to put
their notes to JPS Automotive at a price of 101% of their principal amount plus
accrued interest as a result of the acquisition. The Company is in preliminary
discussions concerning a standby facility to finance the purchase of any JPS
Automotive Senior Notes that are put to JPS Automotive, and is considering
alternatives for the JPS Automotive Senior Notes. Such alternatives could impact
the Company's decision to operate JPS Automotive as a restricted subsidiary or
unrestricted subsidiary under the Bank Credit Facilities and the indenture
governing the Subordinated Notes. Management believes that JPS Automotive will
generate sufficient cashflow from its operations and borrowings under a new
revolving credit facility expected to be put in place at the time of the closing
of the acquisition, to fund its other cash requirements for the remainder of
1996.
The Company's principal sources of funds are cash generated from continuing
operating activities, borrowings under the Bank Credit Facilities and the sale
of receivables under the Receivables Facility. Net cash provided by the
operating activities of the Company's continuing operations was $27.9 million
and $56.3 million for the quarter and six months ended July 27, 1996.
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, capital expenditures, and acquisitions. At July 27, 1996, the
Company had total outstanding indebtedness of $811.3 million (excluding
approximately $25.1 million of outstanding letters of credit and $.6 million of
indebtedness of the discontinued Wallcoverings segment) at an average interest
rate of 9.5% per annum. Of the total outstanding indebtedness, $787.2 million
relates to the Bank Credit Facilities and the Subordinated Notes.
The Company's Board of Directors authorized the expenditure of up to $12
million in 1996 to repurchase shares of the Company's common stock. The Company
believes it has sufficient liquidity under its existing credit arrangements to
effect the repurchase program. The Company spent an aggregate of $149,000 to
repurchase shares during the quarter and six months ended July 27, 1996.
Indebtedness under the Term Loan Facility and the Revolving Facility bears
interest at a per annum rate equal to the Company's choice of (i) Chase Bank's
Alternate Base Rate (which is the highest of Chase's announced prime rate, the
Federal Funds Rate plus .5% and Chase's base certificate of deposit rate plus
1%) plus a margin ranging from 0% to .75% or (ii) the offered rates for
Eurodollar deposits ("LIBOR") of one, two, three, six, nine or twelve months, as
selected by the Company, plus a margin ranging from 1% to 1.75%. Margins, which
are subject to adjustment based on changes in the Company's ratios of senior
funded debt to EBITDA and cash interest expense to EBITDA, were 1.5% in the case
of the "LIBOR Margin" and .5% in the case of the "ABR Margin" on July 27, 1996.
Such margins will increase by .25% over the margins then in effect on July 13,
1999. Indebtedness under the Term Loan B Facility bears interest at a per annum
rate equal to the Company's choice of (i) Chase Bank's Alternate Base Rate (as
described above) plus a margin of 1.25% or (ii) LIBOR of one, two, three or six
months, as selected by the Company, plus a margin of 2.25%. The weighted
average rate of interest on the Bank Credit Facilities at July 27, 1996 was
7.54%. The weighted average interest rate on the sold interests under the
Receivables Facility at July 27, 1996 was 5.78%. 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 the second quarter of fiscal 1996 and 1995 was $14.7
I-19
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued).
million and $12.3 million, respectively. Cash interest paid during the six
months ended July 27, 1996 and July 29, 1995 was $28.7 million and $23.2
million, respectively. The Subordinated Notes bear interest at a rate of 11.5%
per annum.
Due to the variable interest rates under the Bank 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
corridor and collar agreements. Under a corridor agreement, the Company limited
its exposure on $250 million of notional principal amount from October 17, 1995
through October 17, 1996 at an average LIBOR strike price of 7.50%. In April
1996, the Company limited its exposure through April 2, 1998 on $80 million of
notional principal amount utilizing zero cost collars with 4.75% floors and a
weighted average cap of 7.86%. Based upon amounts outstanding at July 27, 1996,
a .5% increase in LIBOR (5.6% at July 27, 1996) would impact interest costs by
approximately $1.9 million annually on the Bank Credit Facilities and $.6
million annually on the Receivables Facility.
The current maturities of long-term debt primarily consist of the current
portion of the Bank Credit Facilities, vendor financing, industrial revenue
bonds and other miscellaneous debt. Repayments of indebtedness under the Bank
Credit Facilities commenced in the third fiscal quarter of 1995.
The maturities of long-term debt of the Company's continuing operations
during the remainder of 1996 and for 1997, 1998, 1999 and 2000 are $11.0
million, $36.1 million, $46.9 million $53.6 million and $57.7 million,
respectively. In addition, the Bank Credit Facilities provide for mandatory
prepayments of the Term Loan and Term Loan B Facilities 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 indenture governing the Subordinated Notes provides that in the event of
certain asset dispositions, C&A Products must apply net proceeds (to the extent
not reinvested in the business) first to repay Senior Indebtedness (as defined,
which includes the Bank Credit Facilities) and then, to the extent of remaining
net proceeds, to make an offer to purchase outstanding Subordinated Notes at
100% of their principal amount plus accrued interest. C&A Products must also
make an offer to purchase outstanding Subordinated Notes at 101% of their
principal amount plus accrued interest if a Change in Control (as defined) of
the Company occurs.
The Company makes capital expenditures on a recurring basis for
replacements and improvements. As of July 27, 1996, the Company's continuing
operations had approximately $32.6 million in outstanding capital expenditure
commitments. The Company currently anticipates that its capital expenditures
for continuing operations in fiscal 1996 will aggregate approximately $60-70
million, a portion of which may be financed through leasing. The Company's
capital expenditures in future years will depend upon demand for the Company's
products and changes in technology.
The Company is sensitive to price movements in its raw material supply
base. During the first six months of 1996, price trends for most of the
Company's primary raw materials remained constant with the previous six months.
The Company currently does not anticipate significant price increases in 1996 in
its primary raw materials. The Company anticipates that announced 1995 price
increases could increase the cost of purchased raw materials in 1996 by
approximately $20 million to $25 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 value engineering/value analysis and cost
improvement programs and by continued reductions in the cost of nonconformance.
I-20
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued).
The Company currently expects to expend approximately $40 million through
the date of the spin-off of Wallcoverings to fund Wallcoverings' future working
capital and capital expenditure requirements and to replace Wallcoverings'
receivables previously sold to Carcorp. Amounts actually required for these
purposes could differ from expected amounts due to, among other things, changes
in Wallcoverings' operating results and the availability of outside financing
for Wallcoverings. As of July 27, 1996, Wallcoverings and Floorcoverings had
approximately $19.0 million and $800,000, respectively, in outstanding capital
expenditure commitments. The Company does not expect to expend cash to fund
Floorcoverings' operations during the remainder of 1996.
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 currently anticipates
that the net cash requirements of its discontinued operations, excluding
Wallcoverings and Floorcoverings, will be approximately $24.0 million in fiscal
1996. However, because the requirements of the Company's discontinued
operations are largely a function of contingencies, it is possible that the
actual net cash requirements of the Company's discontinued operations could
differ materially from management's estimates. Management believes that the
Company's cash needs relating to discontinued operations can be provided by
operating activities from continuing operations and by borrowings under the Bank
Credit Facilities.
Tax Matters
The Company recognized a $150 million tax benefit in fiscal 1995 by
reducing the valuation allowance related to its deferred tax assets to reflect
the amount the Company expects to be realized in the future. The valuation
allowance was reduced as a result of management's reassessment of the Company's
improved financial performance since its recapitalization and initial public
offering in July 1994, management's outlook for the Company's continuing
businesses, and the planned spin-off of the Company's Wallcoverings subsidiary
to its shareholders. While the Company's reported tax rate in financial
statements subsequent to fiscal 1995 is expected to approximate the statutory
tax rate, the actual amount of taxes to be paid will be significantly less than
the Company's tax expense until the Company utilizes its remaining net operating
loss carryforwards ("NOLs") and tax credits.
At January 27, 1996, the Company had outstanding NOLs of approximately
$286.5 million for Federal income tax purposes, which excludes $9 million
related to the Company's discontinued Wallcoverings subsidiary. Substantially
all of these NOLs expire over the period from 2000 to 2008. The Company also
has unused Federal tax credits of approximately $15.6 million, $6.9 million of
which expire during the period 1996 to 2003. The Company estimates that it will
generate tax deductions of approximately $45.0 million in connection with the
ultimate disposition of assets and liabilities of its discontinued businesses
during the period 1996 to 1998, which were previously accrued for financial
reporting purposes. The Company anticipates that utilization of these NOLs, tax
credits and deductions will result in the payment of minimal Federal income
taxes until these NOLs and tax credits are exhausted.
Approximately $79.8 million of the Company's NOLs and $6.9 million of the
Company's unused Federal tax credits may be used only against the income and
apportioned tax liability of the specific corporate entity that generated
such losses or credits or its successors. The Company believes
that a substantial portion of these tax benefits will be realized in the
future. Future sales of common stock by the Company or its principal
I-21
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Continued).
shareholders, or changes in the composition of its principal shareholders,
could constitute a "change in control" that would result in annual
limitations on the Company's use of its NOLs and unused tax credits.
Management cannot predict whether such a "change in control"
will occur. If such a "change in 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 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 United States 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 theory 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. As of July 27, 1996, including sites relating
to the acquisition of Manchester Plastics and 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 16 sites where the Company is participating in
the investigation or remediation of the site, either directly or through
financial contribution, and 9 additional sites where the Company is alleged
to be responsible for costs of investigation or remediation. As of July
27, 1996, the Company's estimate of its liability for these 25
I-22
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (Concluded).
sites which exclude sites related to Wallcoverings, is approximately $29.6
million. As of July 27, 1996, the Company has established reserves of
approximately $41.2 million for the estimated future costs related to all its
known environmental sites, excluding sites related to Wallcoverings. 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.
I-23
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
There have been no material developments in legal proceedings involving the
Company or its subsidiaries since those reported in the Company's Annual Report
on Form 10-K for the fiscal year ended January 27, 1996, except as described
below.
POF Arbitration. On September 6, 1996, the Pakistan Ordnance Factories
Board ("POF") and Advanced Development and Engineering Centre ("ADEC"), a
division of an indirect subsidiary of C&A Products, agreed to a settlement
whereby the arbitration proceeding would be dismissed and each party would
release all of its claims against the other in exchange for payment by ADEC to
POF of $3.3 million. The settlement is within previously established accruals.
Item 2. Changes in Securities.
(b)On June 10, 1996 C&A Products issued $400 million principal amount of
Subordinated Notes, which mature in 2006. The Subordinated Notes are guaranteed
by the Company. The indenture governing the Subordinated Notes contains certain
limitations upon the payment of dividends by the Company on its capital stock
under certain circumstances and other restrictions on certain payments by the
Company in some events. For a description of these limitations on dividends and
restricted payments, see "Part I - Financial Information, Item 2. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources", which is incorporated herein by reference.
Item 4. Submission of Matters to a Vote of Security Holders.
(a), (c) On June 27, 1996, the Company held its Annual Meeting of
Stockholders. At such meeting, stockholders voted upon the election of three
directors to hold office until the 1999 Annual Meeting of Stockholders. The
results of the voting were as follows:
Broker
Nominee For Withheld Nonvotes
James J. Mossman 64,520,618 116,680 0
Warren B. Rudman 64,520,618 116,680 0
W. Townsend Ziebold, Jr. 64,520,568 116,730 0
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Please note that in the following description of exhibits, the title of any
document entered into, or filing made, prior to July 7, 1994 reflects the name
of the entity a party thereto or filing, as the case may be, at such time.
Accordingly, documents and filings described below may refer to Collins & Aikman
Holdings Corporation, Collins & Aikman Group, Inc. or Wickes Companies, Inc., if
such documents and filings were made prior to July 7, 1994.
II-1
Exhibit
Number Description
2. - Equity Purchase Agreement by and among JPSGP, Inc., Foamex - JPS
Automotive L.P. and Collins & Aikman Products Co. dated August 28,
1996.
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 3.2 of Collins & Aikman
Corporation's Report on Form 10-K for the fiscal year ended January
27, 1996.
3.3 - Certificate of Elimination of Cumulative Exchangeable Redeemable
Preferred Stock of Collins & Aikman Corporation is hereby incorporated
by reference to Exhibit 3.3 of Collins & Aikman Corporation's Report
on Form 10-Q for the fiscal quarter ended October 28, 1995.
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 June 1, 1996, between Collins & Aikman Products
Co., Collins & Aikman Corporation and First Union National Bank of
North Carolina, as Trustee, is hereby incorporated by reference to
Exhibit 4.2 of Collins & Aikman Corporation's Report on Form 10-Q for
the fiscal quarter ended April 27, 1996.
4.3 - First Supplemental Indenture dated as of June 1, 1996, between Collins
& Aikman Products Co., Collins & Aikman Corporation and First Union
National Bank of North Carolina, as Trustee, is hereby incorporated by
reference to Exhibit 4.3 of Collins & Aikman Corporation's Report on
Form 10-Q for the fiscal quarter ended April 27, 1996.
4.4 - Amended and Restated Credit Agreement, dated as of June 3, 1996, among
Collins & Aikman Products Co., as Borrower, Collins & Aikman Canada
Inc., as Canadian Borrower, Collins & Aikman Corporation, as
Guarantor, the lenders named therein, Bank of America N.T.S.A. and
NationsBank, N.A., as Managing Agents, and Chemical Bank, as
Administrative Agent, is hereby incorporated by Reference to Exhibit
4.1 of Collins & Aikman Corporation's Current Report on Form 8-K
dated June 7, 1996.
Collins & Aikman Corporation agrees to furnish to the Commission upon
request in accordance with Item 601 (b)(4) (iii) (A) of Regulation S-K
copies of instruments defining the rights of holders of long-term debt
of Collins & Aikman Corporation or any of its subsidiaries, which debt
does not exceed 10% of the total assets of Collins & Aikman
Corporation and its subsidiaries on a consolidated basis.
10.1 - Amended and Restated Stockholders Agreement dated as of June 29, 1994
among the Company, Collins & Aikman Group, Inc., Blackstone Capital
Partners L.P. and Wasserstein Perella Partners, L.P. is hereby
incorporated by reference to Exhibit 10.1 of Collins & Aikman
Corporation's Report on Form 10-K for the fiscal year ended January
28, 1995.
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.
II-2
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 April 6, 1995 between Collins &
Aikman Products Co. and an executive officer is hereby incorporated by
reference to Exhibit 10.24 of Collins & Aikman Corporation's Report on
Form 10-K for the fiscal year ended January 28, 1995.
10.7 - Letter Agreement dated as of June 30, 1995 between Collins & Aikman
Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.6 of Collins & Aikman Corporation's Report on
Form 10-K for the fiscal year ended January 27, 1996.
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 - Collins & Aikman Corporation 1996 Executive Incentive Compensation
Plan.
10.10 - Collins & Aikman Corporation Supplemental Retirement Income Plan is
hereby incorporated by reference to Exhibit 10.23 of Amendment No. 5
to Collins & Aikman Holdings Corporation's Registration Statement on
Form S-2 (Registration No. 33-53179) filed July 6, 1994.
10.11 - 1993 Employee Stock Option Plan, as amended, is hereby incorporated by
reference to Exhibit 10.13 of Collins & Aikman Corporation's Report on
Form 10-Q for the fiscal quarter ended April 29, 1995.
10.12 - 1994 Employee Stock Option Plan is hereby incorporated by reference to
Exhibit 10.14 of Collins & Aikman Corporation's Report on Form 10-Q
for the fiscal quarter ended April 29, 1995.
10.13 - 1994 Directors Stock Option Plan is hereby incorporated by reference
to Exhibit 10.15 of Collins & Aikman Corporation's Report on Form 10-K
for the fiscal year ended January 28, 1995.
10.14 - Excess Benefit Plan of Collins & Aikman Corporation is hereby
incorporated by reference to Exhibit 10.25 of Collins & Aikman
Corporation's Report on Form 10-K for the fiscal year ended January
28, 1995.
10.15 - 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. is hereby incorporated by reference to Exhibit 10.18 of Collins &
Aikman Corporation's Report on Form 10-K to the fiscal year ended
January 28, 1995.
II-3
10.16 - 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 is hereby incorporated
by reference to Exhibit 10.19 of Collins & Aikman Corporation's Report
on Form 10-K to the fiscal year ended January 28, 1995.
10.17 - Pooling Agreement, dated as of March 30, 1995, among Carcorp, Inc.,
Collins & Aikman Products Co., as Master Servicer and Chemical Bank,
as Trustee, is hereby incorporated by reference to Exhibit 10.20 of
Collins & Aikman Corporation's Report on Form 10-K to the fiscal year
ended January 28, 1995.
10.18 - 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, is hereby incorporated by reference to Exhibit 10.21
of Collins & Aikman Corporation's Report on Form 10-K to the fiscal
year ended January 28, 1995.
10.19 - 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 is hereby incorporated by
reference to Exhibit 10.22 of Collins & Aikman Corporation's Report on
Form 10-K to the fiscal year ended January 28, 1995.
10.20 - Amendment No.1, dated September 5, 1995, among Carcorp, Inc., as
Company, Collins & Aikman Products Co., as Master Servicer, and
Chemical Bank, as Trustee, to the Pooling Agreement, dated as of March
30, 1995, among the Company, the Master Servicer and Trustee is hereby
incorporated by reference to Exhibit 10.2 of Collins & Aikman
Corporation's Report on Form 10-Q for the fiscal quarter ended July
29, 1995.
10.21 - Amendment No.2, dated October 25, 1995, among Carcorp, Inc., as
Company, Collins & Aikman Products Co., as Master Servicer, and
Chemical Bank, as Trustee, to the Pooling Agreement, dated as of March
30, 1995, among the Company, the Master Servicer and the Trustee is
hereby incorporated by reference to Exhibit 10.2 of Collins & Aikman
Corporation's Report on Form 10-Q for the fiscal quarter ended October
28, 1995.
10.22 - Amendment No.1, dated February 29, 1996, to the 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, is hereby incorporated by reference to Exhibit 10.20 of
Collins & Aikman Corporation's Report on Form 10-K for the fiscal year
ended January 27, 1996.
10.23 - Amendment No.1, dated February 29, 1996, to the Series 1995-2
Supplement, dated as of March 30, 1995, among Carcorp, Inc., Collins &
Aikman Products Co., as Master Servicer, Societe Generale, as agent,
and Chemical Bank, as Trustee, is hereby incorporated by reference to
Exhibit 10.21 of Collins & Aikman Corporation's Report on Form 10-K
for the fiscal year ended January 27, 1996.
10.24 - 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.
10.25 - Underwriting Agreement dated June 5, 1996 between Collins & Aikman
Products Co., Collins & Aikman Corporation, Wasserstein Perella
Securities, Inc., Chase Securities Inc. and BA Securities,
II-4
Inc. is hereby incorporated by reference to Exhibit 1.1 of Collins
& Aikman Corporation's Current Report on Form 8-K dated June 7,
1996.
11 - Computation of Earnings Per Share.
27 - Financial Data Schedule.
(b) Reports on Form 8-K.
During the quarter for which this report on Form 10-Q is filed the Company
filed (i) a Report on Form 8-K dated May 17, 1996, reporting in Item 5 thereof
first quarter operating results and the proposed offering of the Subordinated
Notes, (ii) a Report on Form 8-K dated June 4, 1996, reporting in Item 5 thereof
the appointment of a trustee for the proposed offering of the Subordinated Notes
and (iii) a Report on Form 8-K dated June 7, 1996, reporting in Item 5 thereof
the execution of the indenture for the Subordinated Notes and the amendment and
restatement of the Bank Credit Facilities. No financial statements were filed
with such reports on Form 8-K.
II-5
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COLLINS & AIKMAN CORPORATION
(Registrant)
<TABLE>
<S> <C>
Dated: September 10, 1996 By: /s/ J. Michael Stepp
J. Michael Stepp
Chief Financial Officer and
Executive Vice President
(On behalf of the Registrant and as
Principal Financial and Accounting Officer)
</TABLE>
JPS AUTOMOTIVE L.P.
EQUITY PURCHASE AGREEMENT
BY AND AMONG
JPSGP INC.,
FOAMEX-JPS AUTOMOTIVE L.P.
AND
COLLINS & AIKMAN PRODUCTS CO.
Dated as of August 28, 1996
TABLE OF CONTENTS
Page No.
ARTICLE I. DEFINITIONS..........................................1
Section 1.1. Definitions .....................................1
Section 1.2. Accounting Terms and Determinations ............11
ARTICLE II. SALE AND PURCHASE..................................11
Section 2.1. Agreement to Sell and to Purchase ..............11
Section 2.2. Purchase and Sale of Equity ....................11
Section 2.3. Purchase Price Adjustment ......................12
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SELLERS.........15
Section 3.1. Authority of Sellers ...........................15
Section 3.2. Organization of the Company ....................16
Section 3.3. Capitalization of the Company; Title to the
Equity .......................................16
Section 3.4. No Conflict or Violation; Consents .............16
Section 3.5. Subsidiaries and Investments ...................17
Section 3.6. Financial Statements; Closing Date Liability
to Sellers. ..................................18
Section 3.7. Undisclosed Liabilities ........................19
Section 3.8. Accounts Receivable ............................19
Section 3.9. Inventory ......................................20
Section 3.10. Material Adverse Effect .......................20
Section 3.11. Real Property .................................20
Section 3.12. Condition and Compliance of Property ..........21
Section 3.13. Compliance with Laws ..........................22
Section 3.14. Affiliate Agreements and Liabilities ..........22
Section 3.15. Contracts .....................................23
Section 3.16. Intellectual Property .........................24
Section 3.17. Labor Relations ...............................24
Section 3.18. Employee Benefits .............................25
Section 3.19. Insurance .....................................27
Section 3.20. Litigation ....................................27
Section 3.21. Environmental Matters .........................27
Section 3.22. Tax Matters ...................................29
Section 3.23. Interim Operations ............................30
Section 3.24. Brokers .......................................31
Section 3.25. Product Liability .............................32
Section 3.26. SEC Reports ...................................32
Section 3.27. Books and Records of the Company ..............32
Section 3.28. 1994 Acquisition Agreement ....................33
Section 3.29. No Material Misstatements .....................33
Section 3.30. Certain Matters Regarding the Senior Notes ....33
Section 3.31. No Seiren Right of First Refusal ..............33
Section 3.32. Disclaimer of Additional Representations
and Warranties; Schedules .....................34
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF PURCHASER........34
Section 4.1. Authority of Purchaser .........................34
- i -
Section 4.2. No Conflict or Violation .......................35
Section 4.3. Litigation .....................................35
Section 4.4. Brokers ........................................35
Section 4.5. Investment Intent; Status ......................35
Section 4.6. Disclaimer of Additional Representations
and Warranties ................................36
ARTICLE V. CERTAIN COVENANTS OF SELLERS........................36
Section 5.1. Conduct of Business ............................36
Section 5.2. Information and Access .........................38
Section 5.3. Confidentiality Agreements .....................38
Section 5.4. Certain Environmental Covenants ................38
ARTICLE VI. CERTAIN COVENANTS AND AGREEMENTS...................39
Section 6.1. Hart-Scott-Rodino and Other Filings ............39
Section 6.2. Transfer Taxes .................................39
Section 6.3. Obligation to File Tax Returns .................40
Section 6.4. Certain Provisions Relating to Consents ........40
Section 6.5. Nondisclosure; Noncompetition ..................41
Section 6.6. Efforts ........................................42
Section 6.7. Ongoing Tax Cooperation ........................42
Section 6.8. Certain Agreements .............................43
Section 6.9. Clearance Certificates .........................43
Section 6.10. Control of Tax Audits .........................44
Section 6.11. Tax Sharing Agreements and Arrangements .......44
Section 6.12. Sale of Assets for Tax Purposes. ..............44
Section 6.13. Certain Matters Relating to Enhanced
Severance. ....................................46
Section 6.14. Ongoing Insurance Cooperation .................47
Section 6.15. Cramerton Tax Distribution ....................48
ARTICLE VII. CONDITIONS TO SELLERS' OBLIGATIONS................49
Section 7.1. Representations and Warranties .................49
Section 7.2. Compliance with Agreement ......................49
Section 7.3. No Adverse Proceeding ..........................49
Section 7.4. Hart-Scott-Rodino ..............................49
Section 7.5. Consents .......................................49
Section 7.6. Corporate Documents ............................49
Section 7.7. Certain Agreements .............................50
Section 7.8. Discount Debentures Change of Control Put ......50
Section 7.9. Opinion of Counsel .............................50
ARTICLE VIII. CONDITIONS TO PURCHASER'S OBLIGATIONS............50
Section 8.1. Representations and Warranties .................50
Section 8.2. Compliance with Agreement ......................50
Section 8.3. No Adverse Proceeding ..........................51
Section 8.4. Hart-Scott-Rodino ..............................51
Section 8.5. Consents .......................................51
Section 8.6. Corporate Documents ............................51
Section 8.7. FIRPTA .........................................51
Section 8.8. Cramerton ......................................51
Section 8.9. Purchaser Bank Consent .........................52
- ii -
Section 8.10. Financing of Senior Note Change of Control
Put ...........................................52
Section 8.11. Certain Agreements ............................52
Section 8.12. Material Adverse Effect .......................52
Section 8.13. Opinion of Counsel ............................52
ARTICLE IX. THE CLOSING; TERMINATION...........................52
Section 9.1. The Closing ....................................52
Section 9.2. Deliveries by Sellers at the Closing ...........52
Section 9.3. Deliveries by Purchaser at the Closing .........53
Section 9.4. Termination ....................................53
ARTICLE X. INDEMNIFICATION.....................................54
Section 10.1. Survival ......................................54
Section 10.2. Indemnification Provisions for Benefit of
Purchaser .....................................54
Section 10.3. Indemnification Provisions for Benefit of
Sellers .......................................57
Section 10.4. Tax Indemnity .................................57
Section 10.5. Matters Involving Third Parties ...............58
Section 10.6. Certain Limitations on Environmental
Indemnification ...............................59
Section 10.7. Certain Additional Provisions Relating to
Indemnification ...............................61
Section 10.8. Certain Litigation Matters ....................62
ARTICLE XI. EMPLOYEE BENEFITS..................................63
Section 11.1. Employees .....................................63
ARTICLE XII. MISCELLANEOUS PROVISIONS..........................63
Section 12.1. Notices .......................................63
Section 12.2. Amendments ....................................64
Section 12.3. Assignment and Parties in Interest ............64
Section 12.4. Announcements .................................65
Section 12.5. Expenses ......................................65
Section 12.6. Entire Agreement ..............................66
Section 12.7. Descriptive Headings ..........................66
Section 12.8. Counterparts ..................................66
Section 12.9. Governing Law; Jurisdiction ...................66
Section 12.10. Construction .................................67
Section 12.11. Severability .................................67
Section 12.12. Specific Performance .........................67
ARTICLE XIII. FOAMEX INTERNATIONAL INC. GUARANTY...............67
Section 13.1. Guaranty ......................................67
Section 13.2. Nature of Guaranty ............................67
Section 13.3. Limitation on Guaranty ........................68
Section 13.4. Authority of Guarantor ........................68
- iii -
SCHEDULE
NUMBER SCHEDULE NAME
1.1 Certain Officers
1.2 Permitted Liens
2.3 Base Line Adjusted Net Assets
3.2 Certificate and Partnership Agreement
3.3 Capitalization
3.4 Conflicts or Violations
3.5 Subsidiaries
3.6(a) Financial Statements
3.6(b) Interim Financial Statements
3.6(e) Warranty Reserve
3.7 Undisclosed Liabilities
3.10 Material Adverse Effect
3.11(a) Owned Real Property
3.11(b) Lease Obligations
3.12(a) Personal Property; Liens
3.12(b) Leased Personal Property
3.13(a) Compliance with Laws
3.13(b) Permits
3.14 Affiliate Agreements
3.15 Contracts
3.16 Intellectual Property
3.17 Collective Bargaining Agreements
3.18 Employee Benefit Plans
3.19 Insurance
3.20 Litigation
3.21 Environmental Matters
3.22 Tax Matters
3.23 Interim Operations
3.25 Products Liability
5.1 Interim Operations
6.8 Certain Agreements
6.13 Certain Employees
8.5 Required Consents
8.8 Terms of Cramerton Contract
EXHIBIT EXHIBIT NAME
A Terms of SMT License Agreement
B Terms of Cramerton Supply Agreement
C Form of Jones, Day, Reavis & Pogue Opinion
D Form of Willkie Farr & Gallagher Opinion
E Intentionally Omitted
F Form of Amendments to Partnership Agreement
G Form of FIRPTA Certificate
- iv -
EXH2-1.DOC
EQUITY PURCHASE AGREEMENT
THIS EQUITY PURCHASE AGREEMENT (the "Agreement") is made and entered
into as of August 28, 1996, by and among JPSGP INC., a Delaware corporation
("JPSGP"), FOAMEX-JPS AUTOMOTIVE L.P., a Delaware limited partnership ("FJPS"
and, together with JPSGP, "Sellers"), and COLLINS & AIKMAN PRODUCTS CO., a
Delaware corporation ("Purchaser").
PRELIMINARY STATEMENT
WHEREAS, JPSGP owns a 1% general partnership interest (the "GP
Interest") in JPS Automotive L.P. (the "Company");
WHEREAS, FJPS owns a 99% limited partnership interest in the Company
(the "LP Interest" and, together with the GP Interest, the "Equity"); and
WHEREAS, Purchaser desires to purchase the Equity from Sellers, and
Sellers desire to sell the Equity to Purchaser, in each case upon the terms and
subject to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1. Definitions. In addition to the
terms defined elsewhere herein, the terms defined in the introductory
paragraph and the Recitals to this Agreement shall have the respective
meanings specified therein, and the following terms shall have the
meanings specified below when used herein with initial capital letters:
"Adjusted Net Assets" means as of any date the excess of the total
assets of the Company and its Subsidiaries (excluding cash and cash
equivalents) over the total liabilities of the Company and its Subsidiaries
(excluding Indebtedness) and minority interests as reflected in a balance
sheet prepared in accordance with this Agreement. In calculating Closing
Date Adjusted Net Assets, there shall be no reduction in "Minority
Interest" for any distributions made to the minority partner in Cramerton
since the Interim Balance Sheet Date with respect to the amount of taxes
paid or to be paid by such partner on account of the income of Cramerton.
"Adjustment Report" has the meaning set forth in Section 2.3(a).
<PAGE>
"Affiliate" means "affiliate" as defined in Rule 405 promulgated under
the Securities Act of 1933, as amended.
"Agreement" has the meaning set forth in the preamble, and shall
include all Schedules and Exhibits hereto.
"Arbiter" has the meaning set forth in Section 2.3(d).
"Balance Sheet" has the meaning set forth in Section 3.6(a).
"Base Line Adjusted Net Assets" has the meaning set forth in Section
2.3(a).
"Business Day" means a day, other than a Saturday or a Sunday, on
which commercial banks are not required or authorized to close in the City
of New York.
"Cap" has the meaning set forth in Section 10.2(a).
"Cash Purchase Price" has the meaning set forth in Section 2.2, as
adjusted pursuant to Section 2.3.
"Closing" has the meaning set forth in Section 9.1.
"Closing Date" has the meaning set forth in Section 9.1.
"Closing Date Adjusted Net Assets" has the meaning set forth in
Section 2.3(a).
"Closing Date Balance Sheet" has the meaning set forth in Section
2.3(a) as finally adjusted pursuant to Section 2.3(d).
"Closing Date Net Indebtedness" has the meaning set forth in Section
2.3(a).
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" has the meaning set forth in the preamble hereto and, in
Sections 3.4 through 3.32, includes the Company and the Company's
Subsidiaries.
"Contracts" as of any date means, collectively, all contracts,
agreements, commitments, instruments and guaranties to hich the Company or
any Subsidiary of the Company is a party as of such date, including those
listed or required to be listed on Schedule 3.15, all unfilled orders
outstanding as of such date for the purchase of raw materials, goods or
services by the Company or any Subsidiary of the Company, and all unfilled
orders outstanding as of such date for the sale of goods or
- 2 -
services by the Company or any Subsidiary of the Company; Contracts,
however, shall not include Leases or Permitted Liens.
"Costs of Remediation" means all losses, amounts paid in settlement,
remediation, monitoring and reporting costs and expenses, Taxes, claims,
damages, Liabilities, obligations, judgments, settlements and out-of-pocket
costs (including, without limitation, costs of investigation or
enforcement), expenses and attorneys' fees including, without limitation,
fees for services of attorneys, consultants, contractors, experts,
engineers and laboratories, and all other out-of-pocket costs, incurred in
connection with investigation, characterization, remediation, monitoring,
reporting or mitigation, arising out of or related to the presence or
Release of any Hazardous Materials existing as of or prior to the Closing
Date at, on, or emanating from any of the Owned Real Property, Leased
Property or any real property at or to which the Company, any Subsidiary or
predecessor of any of the foregoing disposed, Released, transported,
stored, treated, or arranged to dispose of Hazardous Materials prior to the
Closing Date including, without limitation, off-site liability under any
Environmental Law arising from or in connection with transportation,
treatment, storage, disposal, Release, or arranging for disposal of
Hazardous Materials.
"Cramerton" means Cramerton Automotive Products, L.P., a Delaware
limited partnership.
"Cramerton Supply Agreement" means a Supply Agreement, having the
terms and conditions set forth in Exhibit B hereto, to be entered into
between Foamex L.P. and Cramerton as of the Closing Date.
"Damages" means any losses, amounts paid in settlement, claims,
damages, Liabilities, obligations, judgments, settlements and reasonable
out-of-pocket costs (including, without limitation, costs of investigation
or enforcement), expenses and attorneys' fees, including, without
limitation, (i) any consequential damages or (ii) any special or punitive
damages which are assessed against an Indemnified Party as a result of a
third party action.
"Employee Benefit Plan" means an Employee Pension Benefit Plan or an
Employee Welfare Benefit Plan, where no distinction is required by the
context in which the term is used.
"Employee Pension Benefit Plan" has the meaning set forth in Section
3(2) of ERISA.
- 3 -
"Employee Welfare Benefit Plan" has the meaning set forth in Section
3(1) of ERISA.
"Employees" means each individual who, on the applicable date,
performs services as an employee primarily for the Company or any of its
Subsidiaries (including such persons who are on an approved leave of
absence, vacation, short-term disability or otherwise treated as an active
employee of the Company or its Subsidiaries).
"Enjema" means Industrias Enjema S.A. de C.V.
"Environmental Laws" means any existing and applicable federal, state
or local statute, regulation or ordinance or any rules, orders, writs,
decrees, or injunctions of any Governmental Agency with respect to the
protection of the environment, including, without limitation, with respect
to any Hazardous Materials, drinking water, groundwater, wetlands,
landfills, open dumps, storage tanks, solid waste, or waste water, water,
soil, air, pollution, the protection, preservation or restoration of
natural resources, plant and animal life or human health or the
environment, or waste management, regulation or control. Without limiting
the generality of the foregoing, the term will encompass each of the
following statutes, and the regulations promulgated thereunder, in each
case as in effect as of Closing: (a) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (codified in scattered
sections of 26 U.S.C., 33 U.S.C., 42 U.S.C. and 42 U.S.C. Section 9601 et
seq., "CERCLA"); (b) the Resource Conservation and Recovery Act of 1976 (42
U.S.C. Section 6901 et seq., "RCRA"); (c) the Hazardous Materials
Transportation Act (49 U.S.C. Section 1801 et seq., "HMTA"); (d) the Toxic
Substances Control Act (15 U.S.C. Section 2061 et seq., "TSCA"); (e) the
Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq.); (f)
the Clean Air Act and Amendments (42 U.S.C. Section 7401 et seq.); (g) the
Safe Drinking Water Act (21 U.S.C. Section 349; 42 U.S.C. Section 201 and
Section 300 et seq.); and (h) the Superfund Amendment and Reauthorization
Act of 1986 (codified in scattered sections of 10 U.S.C., 29 U.S.C., 33
U.S.C. and 42 U.S.C., "SARA").
"Equity" has the meaning set forth in the preamble hereto.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any trade or business (whether or not
incorporated) which has been under common control or treated as a single
employer with the Company under Section 414(b), (c) or (m) of the Code.
"Final Adjusted Net Assets" means: (i) if Purchaser does not timely
deliver an Objection Notice, the Adjusted
- 4 -
Net Assets as of the Closing Date as set forth in the Adjustment Report,
or (ii) if Purchaser timely delivers an Objection Notice, the Adjusted
Net Assets as of the Closing Date determined pursuant to Section 2.3(d).
"Final Base Line Adjusted Net Assets" means: (i) Base Line Adjusted
Net Assets as set forth in Schedule 2.3, or (ii) if Sellers deliver a
notice of Sellers' Adjustments, Base Line Adjusted Net Assets as determined
pursuant to Section 2.3(d).
"Final Net Indebtedness" means: (i) if Purchaser does not timely
deliver an Objection Notice, the Closing Date Net Indebtedness as set forth
in the Adjustment Report, or (ii) if Purchaser timely delivers an Objection
Notice objecting to the calculation of Closing Date Net Indebtedness, the
Net Indebtedness as of the Closing Date determined pursuant to Section
2.3(d).
"Former Employee" means each individual other than an Employee on the
Closing Date who at any time prior to the Closing Date performed services
as an employee primarily for the Company or any Subsidiary of the Company.
"GAAP Objections" has the meaning set forth in Section 2.3(c).
"Governmental Agency" means (a) any international, foreign, federal,
state, county, local or municipal government or administrative agency or
political subdivision thereof, (b) any governmental agency, authority,
board, bureau, commission, department or instrumentality, (c) any court or
administrative tribunal, (d) any non-governmental agency, tribunal or
entity that is vested by a governmental agency with applicable
jurisdiction, or (e) any arbitration tribunal or other non-governmental
authority with applicable jurisdiction.
"GP Interest" has the meaning set forth in the preamble hereto, as the
same may be altered as described on Exhibit F.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"Hazardous Materials" means each and every element, compound, chemical
mixture, pollutant, contaminant material, waste or other substance which is
defined, designated, determined, classified or identified as of the Closing
Date as hazardous, radioactive or toxic under any Environmental Law, or the
Release of which is prohibited or regulated under any Environmental Law, or
which to the knowledge of Seller could reasonably be expected to cause,
whether now or with the passage of time, damage to Persons, property,
- 5 -
flora, fauna or the environment. Without limiting the generality of the
foregoing, the term will include any "toxic substance," "hazardous
substance," "hazardous waste," or "hazardous material" as defined in any
Environmental Law as amended to date, and any explosive or radioactive
material, friable asbestos, friable asbestos-containing material, waste
water, sludge, untreated dye, other effluent, coal ash, polychlorinated
biphenyls, special waste, petroleum or any derivative or byproduct thereof,
and toxic waste.
"Indebtedness" means (without duplication), with respect to any
Person, whether recourse is to all or a portion of the assets of such
Person, (i) the principal of and premium, if any, in respect of any
indebtedness of such Person for money borrowed, (ii) the principal,
premium, if any, and interest of such Person with respect to obligations
evidenced by bonds, debentures, notes or, except for accrued liabilities
arising in the ordinary course of business, other similar instruments,
including obligations incurred in connection with the acquisition of
property, assets or businesses (other than trade payables), (iii) all
obligations of such Person in respect of letters of credit or other similar
instruments (including reimbursement obligations with respect thereto) but
only to the extent of drawings thereunder (other than obligations with
respect to letters of credit securing obligations (other than obligations
described in (i), (ii), and (v)) entered into in the ordinary course of
business of such Person to the extent such drawing is reimbursed no later
than the third Business Day following receipt by such Person of a demand
for reimbursement following payment on the letter of credit), (iv) every
obligation of such Person issued or assumed as the deferred purchase price
of property or services (excluding trade accounts payable or accrued
liabilities arising in the ordinary course of business), (v) every capital
lease obligation (determined in accordance with GAAP) of such Person, (vi)
all Indebtedness of other Persons secured by a Lien on any asset of such
Person, whether or not such Indebtedness is assumed by such Person;
provided, however, that the amount of such Indebtedness shall be the lesser
of (A) the fair market value of such asset at such date of determination
and (B) the amount of such Indebtedness of such other Persons, (vii) the
present value (discounted using an interest rate of 11 1/2% per annum) as
of the date of determination of every obligation to pay rent or other
payment amounts of such Person with respect to any sale-leaseback
transaction to which such Person is a party, payable through the
stated maturity of such sale-leaseback transaction, and (viii) every
obligation of the type referred to in clauses (i) through (vii) of
another Person the payment of which, in any case, such Person has
guaranteed or is responsible or liable, directly or indirectly, as
obligor, guarantor or otherwise.
- 6 -
"Indemnified Party" has the meaning set forth in Section 10.5(a) and
in the case of Purchaser shall also include the Company and its
Subsidiaries.
"Indemnifying Party" has the meaning set forth in Section 10.5(a).
"Intellectual Property" means any inventions, improvements,
trademarks, service marks, brand names, logos, trade names, trade dress,
label designs and copyrightable works and all patents, registrations and
applications therefor; customer lists and rights in computer software and
all know-how; and all rights granted or retained in licenses under any of
the foregoing.
"Interim Balance Sheet" has the meaning set forth in Section 3.6(b).
"Interim Balance Sheet Date" means June 30, 1996.
"Interim Financial Statements" has the meaning set forth in Section
3.6(b).
"IRS" means the Internal Revenue Service of the Department of the
Treasury.
"Knowledge" as applied to Sellers, means the actual knowledge, after
reasonable inquiry, of any person listed on Schedule 1.1 hereto.
"Leased Property" has the meaning set forth in Section 3.11(b).
"Leases" has the meaning set forth in Section 3.11(b).
"Liability" means any liability or obligation (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent,
whether accrued or unaccrued, whether liquidated or unliquidated and
whether due or to become due), including, without limitation, any liability
for Taxes.
"Lien" means any lien, mortgage, pledge, or other security interest.
"LP Interest" has the meaning set forth in the preamble hereto, as the
same may be altered as described on Exhibit F.
"Material Adverse Effect" means a material adverse change in or
effect with respect to the business, results of operations, properties, or
financial condition of either (i) the Company and its Subsidiaries taken as
a whole, or (ii) the Company's carpet division.
- 7 -
"MSBT" means the Michigan Single Business Tax.
"MSBT Recapture" means the amount of liability incurred by Sellers or
the Company for MSBT solely by reason of the sale by Sellers of the Equity
pursuant to this Agreement.
"Multiemployer Plan" has the meaning set forth in Section 3(37) of
ERISA.
"Net Indebtedness" as of any date means: (a) the net principal amount
of Indebtedness of the Company and its Subsidiaries (on a consolidated
basis), less (b) the cash and cash equivalents of the Company and its
Subsidiaries (on a consolidated basis).
"Net Indebtedness Statement" means a statement delivered by Sellers to
Purchaser not less than five nor more than ten Business Days prior to the
Closing Date setting forth Sellers' reasonable, good faith estimate of the
Net Indebtedness as of the Closing Date after giving effect to the
repayment of any Net Indebtedness to be made on or prior to the Closing
Date.
"New JPS Automotive" has the meaning set forth in Section 6.12.
"1994 Acquisition Agreement" means that certain Asset Purchase
Agreement, dated as of May 25, 1994, by and among JPS Textile Group, Inc.,
JPS Auto, Inc., JPS Converter and Industrial Corp., JPS Automotive Products
Corp. and Foamex International Inc.
"Objection Notice" has the meaning set forth in Section 2.3(b).
"Owned Real Property" has the meaning set forth in Section 3.11(a).
"Parent Entities" means Sellers and their Affiliates, other than the
Company and its Subsidiaries and their respective officers and directors.
"Partnership Agreement" means the Company's First Amended and Restated
Agreement of Limited Partnership, dated as of July 27, 1994, as the same
may be amended in accordance with the terms of this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Permit" means any permit, approval, consent, authorization, license,
variance, or permission required by a Governmental Agency under any
applicable laws.
- 8 -
"Permitted Liens" means, with respect to any asset, (i) any covenants,
conditions, restrictions, easements, encroachments, encumbrances or other
imperfections of title (other than a Lien securing any Indebtedness) with
respect to such asset which, individually or in the aggregate, does not
materially detract from the value of, or materially interfere with the
present occupancy or use of, such asset and the continuation of the present
occupancy or use of such asset; (ii) the matters set forth on Schedule 1.2
hereto; (iii) mechanic's, materialmen's and similar liens with respect to
amounts not yet due and payable or which are being contested in good faith
through appropriate proceedings and, for those existing on the Interim
Balance Sheet Date or the Closing Date, for which adequate reserves in
accordance with GAAP are reflected on the Interim Balance Sheet or the
Closing Date Balance Sheet, as the case may be; (iv) liens for Taxes not
yet delinquent or which are being contested in good faith through
appropriate proceedings and, for those existing on the Interim Balance
Sheet Date or the Closing Date, for which adequate reserves in accordance
with GAAP are reflected on the Interim Balance Sheet or the Closing Date
Balance Sheet, as the case may be; and (v) liens securing rental payments
under capital lease arrangements, which capital lease arrangements existing
as of the Closing Date are in accordance with GAAP reflected as
Indebtedness on the Closing Date Balance Sheet and the Closing Date Net
Indebtedness Statement.
"Perpetual Representations" has the meaning set forth in Section 10.1.
"Person" means any individual, partnership, corporation, trust,
association, limited liability company, Governmental Agency or any other
entity.
"Plan" has the meaning set forth in Section 3.18(a).
"Product" has the meaning set forth in Section 3.25.
"Product Claim" has the meaning set forth in Section 3.25.
"Purchase Price" has the meaning set forth in Section 2.2.
"Purchaser" has the meaning set forth in the preamble hereto.
"Recall" has the meaning set forth in Section 3.25.
"Release" means any spilling, leaking, pumping, releasing, depositing,
pouring, emitting, emptying, migrating, discharging, injecting, storing,
escaping,
- 9 -
leaching, dumping, burying, abandoning, disposing or moving into
the environment.
"Schedules" or "Disclosure Schedules" means, collectively, the various
Schedules referred to in this Agreement delivered separately to Purchaser
on or before the date of this Agreement.
"SEC Reports" means (a) the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995, as filed with the Securities and
Exchange Commission (the "SEC"), and (b) the Company's Quarterly Reports on
Form 10-Q for the fiscal quarters ended March 31, 1996 and June 30, 1996,
as filed with the SEC.
"Seller Entity" means any of the Company, JAPC, Cramerton, CMC and
JMC.
"Sellers" has the meaning set forth in the preamble hereto.
"Sellers' Adjustment" has the meaning set forth in Section 2.3(c).
"Senior Note Indenture" has the meaning set forth in Section 3.30.
"Significant Employee" has the meaning set forth in Section 3.23.
"Single-Employer Plan" means an Employee Pension Benefit Plan which is
described in Section 4001(a)(15) of ERISA and which is subject to Title IV
of ERISA.
"SMT License Agreement" means a Technology License Agreement, having
the terms and conditions set forth in Exhibit A hereto, to be entered into
between Foamex L.P. and Purchaser as of the Closing Date.
"Straddle Period" has the meaning set forth in Section 3.22.
"Subsidiary" means "subsidiary" as defined in Rule 405 promulgated
under the Securities Act of 1933, as amended.
"Tax Return" means any report, return, information return, forms,
declarations, claims for refund, statements or other information (including
any amendments thereto and including any schedule or statement thereto)
required to be supplied to a Governmental Agency in connection with Taxes.
"Taxes" means all federal, state, local, foreign and other taxes,
assessments and water and sewer charges and rents, including without
limitation, income, gross receipts,
- 10 -
excise, employment, sales, use, transfer, license, payroll, franchise,
severance, stamp, withholding, Social Security, unemployment, real
property, personal property, registration, capital stock, value added,
single business, occupation, workers' compensation, alternative or add-on
minimum, estimated, or other tax, including without limitation any
interest, penalties or additions thereto.
Section 1.2. Accounting Terms and Determinations. All references
in this Agreement to "generally accepted accounting principles" or "GAAP" shall
mean generally accepted accounting principles in effect in the United States of
America at the time of application thereof, applied on a consistent basis.
Unless otherwise specified herein, all accounting terms used herein shall be
interpreted, all determinations with respect to accounting matters hereunder
shall be made, and all financial statements and certificates and reports as to
financial matters required to be furnished hereunder shall be prepared, in
accordance with generally accepted accounting principles, applied on a
consistent basis.
ARTICLE II.
SALE AND PURCHASE
Section 2.1. Agreement to Sell and to Purchase. On the terms and
subject to the conditions set forth in this Agreement, at the Closing,
Purchaser shall purchase from Sellers, and Sellers shall sell,
transfer, assign, convey and deliver to Purchaser, the Equity.
Section 2.2. Purchase and Sale of Equity. On the terms
and subject to the conditions set forth in this Agreement, at the Closing
(in addition to the transactions referred to in Article IX):
(a) JPSGP shall deliver to a corporate Affiliate of Purchaser
designated by Purchaser in accordance with Section 12.3(a) hereof on or
prior to the Closing Date certificates representing the GP Interest, duly
endorsed in blank for transfer or accompanied by appropriate powers duly
executed in blank, and FJPS shall deliver to Purchaser or its designees
certificates representing the LP Interest, duly endorsed in blank for
transfer or accompanied by appropriate powers duly executed in blank.
(b) Purchaser shall deliver to Sellers by wire transfer of
immediately available funds an amount equal to $220,000,000 (the "Purchase
Price") less the amount of Net Indebtedness set forth on the Net
Indebtedness Statement (the "Cash Purchase Price"), of which 99% shall be
paid by Purchaser to FJPS and 1% shall be paid by the Affiliate described
in Section 2.2(a) hereof to JPSGP.
- 11 -
Section 2.3. Purchase Price Adjustment.
(a) Attached as Schedule 2.3 hereto is the computation of Adjusted
Net Assets, assuming that the Closing had occurred on the Interim Balance
Sheet Date (the "Base Line Adjusted Net Assets"). As soon as reasonably
practical after the Closing, but in no event more than 120 days after the
Closing Date, Sellers and Purchaser shall jointly prepare (i) a
consolidated balance sheet of the Company as of the close of business on
the Closing Date (the "Closing Date Balance Sheet"), together with (ii) a
schedule ("the Adjustment Report") showing the computation, without giving
effect to any extraordinary transactions taken after the Closing on the
Closing Date, of (A) Adjusted Net Assets as of the Closing Date (the
"Closing Date Adjusted Net Assets"), (B) the Net Indebtedness as of the
Closing Date ("Closing Date Net Indebtedness"), and (C) the purchase price
adjustment to be made in accordance with this Section 2.3. The Closing
Date Balance Sheet shall be prepared in accordance with GAAP applied on a
basis consistent with that used in, and in accordance with the same
accounting principles, policies and practices applied in, the preparation
of the Interim Balance Sheet and shall present fairly the financial
position of the Company as of the Closing Date. In the event of a
disagreement between Purchaser and Sellers of any amounts to be recorded on
the Closing Date Balance Sheet or the Adjustment Report, the views of
Sellers shall be utilized to commence the review process set forth in this
Section 2.3 (which process will not be required if the parties agree in
writing to a Closing Date Balance Sheet and Adjustment Report). In
connection with the preparation of the Closing Date Balance Sheet and the
Adjustment Report, Purchaser and Sellers shall grant Sellers' counsel and
other representatives reasonable access to all of the books and records of
the Company.
(b) Within ten Business Days after receipt of the Closing Date
Balance Sheet and the Adjustment Report, Purchaser may, by written notice
to Sellers, object to the Closing Date Balance Sheet, or the Closing Date
Adjusted Net Assets or the Closing Date Net Indebtedness as set forth in
the Adjustment Report. If Purchaser objects in good faith to the Closing
Date Balance Sheet, or the Closing Date Adjusted Net Assets or the Closing
Date Net Indebtedness as set forth in the Adjustment Report, it shall
within such ten Business Day period deliver written notice of its objection
(the "Objection Notice") to Sellers: (i) objecting in good faith to the
Closing Date Balance Sheet, the Closing Date Adjusted Net Assets and/or the
Closing Date Net Indebtedness, (ii) setting forth the items being disputed
and the reasons therefor, and (iii) specifying Purchaser's calculation of
the Closing Date Adjusted Net Assets and Closing Date Net Indebtedness and
the adjustment to be made in accordance with Section 2.3.
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(c) Sellers may, within 20 Business Days after receipt of such
Objection Notice, deliver in writing to Purchaser the adjustments
("Sellers' Adjustments") to the Interim Balance Sheet and the calculation
of Base Line Adjusted Net Assets, which (i) reflect Purchaser's objections
as set forth in the Objection Notice to the effect that the Closing Date
Balance Sheet and the calculation of Closing Date Adjusted Net Assets were
not prepared in accordance with GAAP (the "GAAP Objections"), and (ii)
adjust the Interim Balance Sheet and the calculation of Base Line Adjusted
Net Assets set forth therein in accordance with the same principles
utilized by Purchaser in respect of such matters in the Objection Notice
(the "Base Line Adjustments"). Purchaser and Sellers agree that to the
extent Purchaser's GAAP Objections are correct, adjustments will be made in
the Interim Balance Sheet and the calculation of Base Line Adjusted Net
Assets, subject to paragraph (d) below, so that such items are so provided
for or reflected therein in a manner consistent with the principles used by
Purchaser in providing for or reflecting the same in the Closing Date
Balance Sheet. Sellers' Adjustments shall not constitute an admission by
Sellers that Purchaser's GAAP Objections are correct or that any of
Seller's representations or warranties, including without limitation those
set forth in Section 3.6, are not true in all respects.
(d) For 30 Business Days after delivery of the Objection Notice,
Purchaser and Sellers shall attempt to resolve all disputes between them
regarding the Closing Date Adjusted Net Assets, the Base Line Adjustments
and/or the Closing Date Net Indebtedness. If Purchaser and Sellers cannot
resolve all such disputes within such 30 Business Day period, the matters
in dispute shall be determined by KPMG Peat Marwick or another nationally
recognized independent public accounting firm mutually satisfactory to
Purchaser and Sellers (the "Arbiter"). Promptly, but not later than 30
Business Days after the acceptance of its appointment, the Arbiter shall
determine (based solely on presentations by Sellers and Purchaser to the
Arbiter and not by independent review) only those items in dispute and
shall render a report as to its resolution of such items and the resulting
calculation of the Closing Date Adjusted Net Assets, the Base Line Adjusted
Net Assets, the Base Line Adjustments and the Closing Date Net
Indebtedness. For purposes of the Arbiter's calculation of the Final
Adjusted Net Assets, the Final Base Line Adjusted Net Assets, the Base Line
Adjustments and the Final Net Indebtedness, the amounts to be included
shall be the appropriate amounts from Schedule 2.3, the Closing Date
Balance Sheet or the Adjustment Report, as the case may be, as to items
that are not in dispute, and the amounts determined by the Arbiter, as to
items that are submitted for resolution by the Arbiter. In resolving any
disputed item, the Arbiter may not assign a value to such item greater than
the greatest
- 13 -
value for such item claimed by either party or less than the
lowest value for such item claimed by either party. Purchaser and Sellers
shall cooperate with the Arbiter in making its determination and such
determination shall be conclusive and binding upon Purchaser and Sellers.
(e) Purchaser and Sellers shall each bear one-half of the fees and
expenses of the Arbiter.
(f) Notwithstanding anything to the contrary contained in this
Agreement, for purposes of preparing the Closing Date Balance Sheet and
calculating Final Adjusted Net Assets, (i) the "Warranty Reserve" shall be
recorded as $4,089,634, subject to adjustment (x) downward to reflect cash
expenditures and (y) upward, in each case, only for events or occurrences
subsequent to the Interim Balance Sheet Date, and, except for such
adjustments, shall not be subject to dispute (whether pursuant to Section
2.3(c) or otherwise) or any other adjustment and (ii) there will be no
increase in the carrying value of the Company's equity investment in
Enjema.
(g) Within five Business Days after determination of the Final
Adjusted Net Assets and, if applicable, Final Base Line Adjusted Net Assets
and Final Net Indebtedness:
(i) Either (x) Sellers shall pay Purchaser by wire transfer of
immediately available funds the amount, if any, by which Final Base
Line Adjusted Net Assets exceeds the Final Adjusted Net Assets; or (y)
Purchaser shall pay Sellers by wire transfer of immediately available
funds the amount, if any, by which the Final Adjusted Net Assets
exceeds Final Base Line Adjusted Net Assets.
(ii) Either (x) Sellers shall pay Purchaser by wire transfer of
immediately available funds the amount, if any, by which Final Net
Indebtedness exceeds the Net Indebtedness set forth on the Net
Indebtedness Statement; or (y) Purchaser shall pay Sellers by wire
transfer of immediately available funds the amount, if any, by which
the Net Indebtedness set forth on the Net Indebtedness Statement
exceeds Final Net Indebtedness.
(iii) Amounts payable pursuant to clauses (i) and (ii) above may
be offset, one against the other. Any net payment to Sellers shall be
made 99% to FJPS and 1% to JPSGP. Any payment by Sellers or Purchaser
required by this paragraph (g) shall bear interest at the rate equal
to 8.0% per annum from the Closing Date until the date of payment.
Any payment pursuant to this Section (excluding payments attributable
to interest) shall be treated by the parties as an increase or
decrease in the Purchase Price.
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(h) Except as set forth in Section 10.2(d), nothing in this Section
2.3 or in the statements, reports or documents contemplated hereby shall
affect the parties' rights and obligations in respect of a breach or
alleged breach of any representation or warranty herein.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SELLERS
Subject to Section 3.32, each of the Sellers, jointly and severally,
represents and warrants to Purchaser as set forth in this Article III; provided,
however, to the extent any representation or warranty relates to Enjema, such
representation or warranty (other than Section 3.5(e)) shall be deemed to be
made to Sellers' Knowledge:
Section 3.1. Authority of Sellers.
(a) JPSGP is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. JPSGP has full
corporate power and authority to execute and deliver this Agreement, and
the execution and delivery by JPSGP of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of JPSGP, and this
Agreement constitutes the legal, valid and binding obligation of JPSGP
enforceable against JPSGP in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency,
moratorium, or similar laws from time to time in effect which affect
creditors' rights generally and by legal and equitable limitations on the
enforceability of specific remedies.
(b) FJPS is a limited partnership duly organized, validly existing,
and in good standing under the laws of the State of Delaware, including
after giving effect to the transactions set out on Exhibit F hereto. FJPS
has full partnership power and authority to execute and deliver this
Agreement, and the execution and delivery by FJPS of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by all necessary partnership action on the part of FJPS,
and this Agreement constitutes the legal, valid and binding obligation of
FJPS enforceable against FJPS in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency,
moratorium, or similar laws from time to time in effect which affect
creditors' rights generally and by legal and equitable limitations on the
enforceability of specific remedies.
Section 3.2. Organization of the Company. The Company is a limited
partnership duly organized, validly existing, and in good standing under the
laws of the State of Delaware. The
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Company is duly qualified to do business and is in good standing in the states
listed in Schedule 3.2, such states being each jurisdiction in which the
ownership of its properties or the conduct of its business requires
such qualification, except where the failure to so qualify, individually
or in the aggregate, could not reasonably be expected to have a Material
Adverse Effect. The Company has the requisite partnership power and
authority to own its properties and to conduct its business as presently
conducted. Schedule 3.2 includes true and correct copies of the Certificate of
Limited Partnership and the Partnership Agreement as in effect on the date of
this Agreement.
Section 3.3. Capitalization of the Company; Title to the Equity.
The partnership equity of the Company is as follows: (i) the LP Interest,
which, except as set forth on Schedule 3.3, is owned solely by FJPS, and (ii)
the GP Interest, which is owned solely by JPSGP. The Company has no other
partners other than FJPS and JPSGP. FJPS will have at the Closing valid and
marketable title to the LP Interest, free and clear of any Liens, except those
arising under this Agreement and the Partnership Agreement. JPSGP will have at
the Closing valid and marketable title to the GP Interest, free and clear of any
Liens, except those arising under this Agreement and the Partnership Agreement.
Section 3.4. No Conflict or Violation; Consents. Except as set forth
on Schedule 3.4, neither the execution and delivery of this Agreement
by Sellers, nor the consummation of the transactions contemplated
hereby, nor the fulfillment of the terms and compliance with the provisions
hereof, will (a) conflict with or result in a breach of or a default
(or in an occurrence which with the lapse of time or action by a third party,
or both, could result in a default) with respect to any of the terms,
conditions or provisions of, (b) result in the termination of,
accelerate the performance required by, (c) result in the creation of any
Lien upon the assets of the Company in connection with, (d) impair Sellers'
ability to consummate the transactions contemplated hereby, (e) require any
filing with or approval of any Person, including without limitation
any Governmental Agency arising out of, or (f) give rise to any right of
termination or renegotiation, or purchase or offer right, under: (x) any
statute, rule, regulation, code, order, writ or decree of any Governmental
Agency applicable to Sellers or the Company, (y) the certificate of limited
partnership or partnership agreement of FJPS or JPS Automotive L.P. or the
certificate of incorporation or by-laws of JPSGP, or (z) any Contract, Lease,
Permit or other instrument to which the Company or any Seller is a party or
subject or by which any of Sellers' or the Company's properties or assets are
bound, except in the cases of clauses (x) and (z) for those conflicts, breaches,
defaults, terminations, or accelerations, which individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect or
materially impair the ability of Sellers to consummate the transactions
contemplated by this Agreement; provided, however, that no
- 16 -
representation or warranty is made hereby by Sellers with respect to the
effect of antitrust laws or regulations. No consent, approval, or
authorization of, or registration or filing with, any Governmental Agency is
required to be obtained or made by or with respect to Sellers in connection
with the execution and delivery of this Agreement by Sellers or the performance
by Sellers of the transactions contemplated hereby to be performed by
them, except for such of the foregoing (i) as are listed or described on
Schedule 3.4 or (ii) which, if not so obtained or made, individually or
in the aggregate could not reasonably be expected to have a Material Adverse
Effect.
Section 3.5. Subsidiaries and Investments.
(a) Except as set forth on Schedule 3.5, the Company does not own any
stock of, or any equity participation in, any Person (other than those held
by Employee Benefit Plans or acquired in connection with the settlement of
outstanding accounts receivable subsequent to the date hereof).
(b) Each of Cramerton Management Corporation ("CMC"), JPS Automotive
Products Corp. ("JAPC") and JPS Mexico Corp. ("JMC"), is a corporation duly
organized, validly existing, and in good standing under the laws of the
State of Delaware and has the requisite corporate power to carry on its
business as it is now being conducted. Cramerton is a limited partnership
duly organized, validly existing and in good standing under the laws of the
State of Delaware and has the requisite partnership power to carry on its
business as it is now being conducted. Each of CMC, JAPC, JMC, and
Cramerton is duly qualified as a foreign corporation or limited
partnership, as the case may be, to do business and is in good standing in
each jurisdiction where the character of its properties or the conduct of
its business requires such qualification, except where the failure to be so
qualified, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
(c) All of the outstanding shares of capital stock or limited
partnership interests, as the case may be, of CMC, JAPC, JMC, and Cramerton
are duly authorized, validly issued, fully paid, and non-assessable, and
those shares of capital stock and limited partnership interests owned by
the Company and set forth on Schedule 3.5 are owned free and clear of any
Lien other than as set forth on Schedule 3.5.
(d) Except as set forth on Schedule 3.5, there are no outstanding or
authorized options, warrants, calls, subscriptions, rights, commitments or
any other agreements of any character (i) evidencing the right to purchase
or subscribe for any shares of capital stock or limited partnership
interests, as the case may be, of CMC, JAPC, JMC, and Cramerton owned by
the Company and set forth on Schedule 3.5 or (ii) obligating any of CMC,
JAPC, JMC, or
- 17 -
Cramerton to issue any additional shares of its respective
capital stock or limited partnership interests, as the case may be.
(e) Enjema is a limited liability variable stock corporation
(sociedad anonima de capital variable) incorporated and existing pursuant
to the laws of Mexico. Fifty percent of the outstanding shares of capital
stock of Enjema is owned by JMC free and clear of any Lien. There are no
outstanding or authorized options, warrants, calls, subscriptions, rights,
commitments or any other agreements of any character evidencing the right
to purchase or subscribe for any shares of capital stock of Enjema owned by
JMC. No Seller Entity nor any Subsidiary of any Seller Entity (other than
Enjema itself or JMC) has any liability or obligation, whether arising by
law, by Contract or otherwise, for any liability or obligation of Enjema or
JMC. JMC has no assets other than its interest in Enjema.
Section 3.6. Financial Statements; Closing Date Liability to
Sellers.
(a) The audited balance sheet of the Company at December 31, 1995
(the "Balance Sheet"), and related statement of income, retained earnings
and cash flow for the periods then ended and the notes thereto, (i) are
included as Schedule 3.6(a), (ii) were prepared in accordance with GAAP,
consistently applied, and (iii) present fairly the financial condition and
the results of operations of the Company as of the dates and for the
periods indicated thereon.
(b) The unaudited balance sheet as of the Interim Balance Sheet Date
(the "Interim Balance Sheet"), and the related income statement for the
period then ended (collectively, the "Interim Financial Statements"),
included as Schedule 3.6(b) were prepared in accordance with GAAP,
consistently applied, and present fairly the financial condition and the
results of operations of the Company as of the dates and for the periods
indicated thereon, subject to normal year-end adjustments. To the
Knowledge of Sellers, the Interim Financial Statements included all
adjustments, consisting solely of normal recurring accruals, necessary for
a fair presentation of the Company's consolidated financial position and
results of operations.
(c) As of the Closing, the Company will have no Liabilities to any
Parent Entity, other than (i) as set forth on Schedule 3.14 which are
either reflected in full on the Closing Date Balance Sheet or are not
required under GAAP to be so reflected, (ii) the SMT License Agreement and
the Cramerton Supply Agreement, and (iii) as reflected in full in the
Closing Date Balance Sheet.
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(d) The $8.4 million account payable to FII reflected in Note 3 to
the Interim Balance Sheet arose out of purchases of goods by FII on behalf
of the Company in the ordinary course of business of the Company
("Intracompany Trade Payables") and the matters comprising such item
consist of accounts payable by the Company to FII which are identical to
corresponding accounts payable by FII to unrelated third parties, except as
otherwise expressly permitted under the Supply Agreement, dated as of June
28, 1994, between FII and the Company.
(e) The warranty reserve reflected on the Interim Balance Sheet is
comprised of the matters set forth in Schedule 3.6(e).
Section 3.7. Undisclosed Liabilities. As of the Interim Balance
Sheet Date and the Closing Date, the Company has and will have no material
Liabilities, except for Liabilities: (a) reflected or reserved for on
the Interim Balance Sheet or the Closing Date Balance Sheet, as the case
may be, (b) relating to performance obligations, under Leases, Contracts
and Permitted Liens in accordance with the terms and conditions thereof which
are not required by GAAP to be reflected on the Interim Balance Sheet
or the Closing Date Balance Sheet, as the case may be, (c) constituting Costs
of Remediation, (d) arising out of or in connection with any claim
by the ultimate retail purchaser of any of the Company's Products resulting
from an alleged defect in the design or manufacture of any Product, or
any alleged failure to warn with respect to any Product, (e) as specifically
disclosed in the SEC Reports, (f) constituting Taxes, or (g) as set forth on
Schedule 3.7.
Section 3.8. Accounts Receivable. All accounts receivable reflected
on the Interim Balance Sheet, and all accounts receivable arising subsequent to
the Interim Balance Sheet Date, have or will have arisen in the ordinary
course of business of the Company. All items that are required by GAAP to be
reflected as accounts receivable on the Interim Balance Sheet
and on the Closing Date Balance Sheet are or will be so reflected and any
reserve accounts relating thereto are adequate under GAAP and have been or will
have been established in accordance with GAAP, consistently applied.
Section 3.9. Inventory. The materials, supplies and work-in-process
included in the inventory of the Company as set forth on the Interim
Balance Sheet were, and the inventory of the Company at the Closing and
reflected on the Closing Date Balance Sheet will be, as the case may be,
(a) substantially equivalent in quality and quantity, subject to seasonality,
to the materials, supplies and work-in-process, and additions thereto,
generally included in such inventory in the past; (b) suitable for the
manufacture and distribution of the Company's products in a manner
substantially equivalent in quality to that achieved generally by the
Company in the past and (c) valued in accordance
- 19 -
with GAAP, consistently applied, subject, in each case, to all reserves
reflected in the Interim Balance Sheet with respect to such inventory existing
on the Interim Balance Sheet Date or in the Closing Date Balance Sheet with
respect to inventory existing on the Closing Date. Such reserves on the
Interim Balance Sheet are, and on the Closing Date Balance Sheet will be,
adequate under GAAP and are, in the case ofthe Interim Balance Sheet, or
will have been, in the case of the Closing Date Balance Sheet,
established in accordance with GAAP, consistently applied.
Section 3.10. Material Adverse Effect. Other than changes resulting
from (a) general economic conditions, (b) conditions affecting the automotive
carpet and textile industry generally, (c) changes in any applicable law,
rule, regulation, statute, or interpretation thereof, or (d) as set forth in
Schedule 3.10, since the Interim Balance Sheet Date, there has not been any
Material Adverse Effect, nor have any events occurred nor do any circumstances
exist which, individually or in the aggregate, could reasonably be expected to
result in a Material Adverse Effect. Since the Interim Balance Sheet Date,
except as set forth on Schedule 3.10, there has not occurred any deterioration
in the Company's relationships with its Employees, unions, suppliers or
customers, and the Company has not lost or been threatened with the loss of
any model or program in each case which, individually or in the aggregate,
has had or could reasonably be expected to have a Material Adverse Effect.
Section 3.11. Real Property.
(a) Schedule 3.11(a) lists all real property owned by the Company
(the "Owned Real Property"). The Company has good and marketable title in
fee simple to the Owned Real Property free and clear of any Liens other
than Permitted Liens.
(b) Schedule 3.11(b) contains a list of all leases and subleases,
together with any amendments thereto (the "Leases"), with respect to all
real property leased by the Company (the "Leased Property"). Each Lease is
in full force and effect, the Company has performed all material
obligations required to be performed by it to date under each of the Leases
and neither the Company nor, to Sellers' Knowledge, any other party thereto
is in material default under any of the Leases. Sellers have delivered to
Purchaser a copy of each Lease, and all amendments thereto, listed in
Schedule 3.11(b), except to the extent otherwise noted therein.
(c) Neither of the Sellers is a "foreign person" within the meaning
of Section 1445 of the Code.
(d) The covenants, easements or rights-of-way affecting the Owned
Real Property or Leased Property do not with respect to each Owned Real
Property or Leased Property
- 20 -
materially impair the Company's ability to use any such Owned Real
Property or Leased Property in the operation of the Company's business
as presently conducted. There are no pending, or to Sellers'
Knowledge, threatened condemnation or similar proceedings
affecting the Owned Real Property. To Sellers' Knowledge there are no
pending or threatened condemnation or similar proceedings affecting the
Leased Property. The Company has access to public roads, streets or the
like or valid easements over private streets, roads or other private
property for such ingress to and egress from the Owned Real Property (and
to Sellers' Knowledge, the Leased Property), except as would not materially
impair the Company's ability to use any such Owned Real Property or Leased
Property in the operation of the Company's business as presently conducted.
Section 3.12. Condition and Compliance of Property.
(a) Schedule 3.12(a) contains a list of owned personal property of
the Company (excluding Enjema) with an original cost of $25,000 or more as
of June 30, 1996. As of such date, the Company owned outright and had good
and marketable title to all such personal property subject to no Lien
except Permitted Liens and except as set forth on Schedule 3.12(a).
(b) Schedule 3.12(b) sets forth the name, parties and date of all
personal property leases: (i) under which the Company is the lessee, (ii)
under which the annual rent is $25,000 or more, and (iii) which leases are
not cancelable (without liability) within 90 days. Except as set forth in
Schedule 3.12(b), the Company holds good leaseholds in all of the personal
property shown or required to be shown on Schedule 3.12(b) as leased by the
Company, in each case under valid and enforceable leases. The Company is
not, and to Sellers' Knowledge no other party to any such personal property
lease is, in material breach of or default under any lease of any item of
personal property listed on Schedule 3.12(b) (and no event has occurred
which, with due notice or lapse of time or both, would constitute such a
lapse or default).
(c) The assets of the Company: (i) in the aggregate are adequate to
conduct the operations of the Company in substantially the manner currently
conducted, (ii) are suitable for the purposes for which they are currently
used, (iii) have been maintained in accordance with the Company's
historical practices since December 31, 1995, and (iv) are in good
condition, ordinary wear and tear excepted.
Section 3.13. Compliance with Laws.
(a) Except as set forth on Schedule 3.13(a), the Company has complied
with, has not received any notice of
- 21 -
violation of, and has no Knowledge of any facts which with or without
notice could reasonably be expected to constitute a violation of,
any laws, ordinances, rules, regulations, orders, judgments,
injunctions, awards or decrees of Governmental Agencies applicable
to the Company and its property, including but not limited to
Environmental Laws, except for any violation or failure so to comply which,
individually or in the aggregate, could not reasonably be expected to have
a Material Adverse Effect.
(b) Schedule 3.13(b) sets forth a list of each Permit that is
necessary for the operations of the Company as currently or currently
proposed to be conducted, the lack of which individually or in the
aggregate could reasonably be expected to have a Material Adverse Effect.
All Permits included on Schedule 3.13(b), except as noted therein, are in
full force and effect and no proceeding is pending or, to the Knowledge of
Sellers, threatened, to revoke or limit any such Permit.
Section 3.14. Affiliate Agreements and Liabilities. Except as set
forth on Schedule 3.14, there are no written or oral Contracts between the
Company and any of the Parent Entities, including, without limitation, any such
Contracts relating to the provision of any services by the Company to any such
Parent Entity, or by any such Parent Entity to the Company. Other than (w) in
the ordinary course of business consistent with past practice (which in the
case of transactions with Affiliates will be on an arms' length basis), (x)
as expressly permitted by Section 5.1(a), (y) as set forth on Schedule 3.14
or (z) the SMT License Agreement and the Cramerton Supply Agreement, (a) since
the Interim Balance Sheet Date, there have been, (b) from the date hereof to
the Closing Date there will be, and (c) after the Closing Date there will be, no
transactions, agreements or arrangements between the Company and (i) any
Parent Entity, (ii) any director or officer of any Parent Entity or (iii) any
member of the immediate family of any individual described in clause (i) or
(ii) of this sentence.
Section 3.15. Contracts. Schedule 3.15 hereto lists all of the
Contracts, commitments, arrangements and understandings (other than
the Leases or Permitted Liens), which are material to the properties,
conduct, operations or financial condition of the Company or are otherwise
material. Except as set forth on Schedule 3.15 (and for Leases and Permitted
Liens), the Company is not a party to or bound by any: (i) mortgage, indenture,
note, or installment obligation, or other instrument for or relating to
Indebtedness; (ii) guaranty of any obligation for borrowings
or performance, or guaranty or warranty of products or services, excluding
endorsements or guaranties of instruments made in the ordinary course of
business in connection with the deposit of items for collection, and express
product and statutory warranties; (iii) agreement or arrangement for the sale or
lease of any of its assets other than in the usual, regular
- 22 -
and ordinary course of business; (iv) agreement or other arrangement
for the purchase of any real estate, machinery, equipment, or other
capital assets in excess of $25,000; (v) Contract pursuant to which it is
or may be obligated to make payments, contingent or otherwise, on
account of or arising out of prior acquisitions or sales of
businesses, assets, or stock of other companies; (vi) distribution,
dealership, representative, broker, sales agency, advertising or consulting
Contract excepting any such contract that is terminable at will, or by giving
notice of 30 days or less, without Liability; (vii) lease or other agreement for
the use of personal property with rent in excess of $25,000 per year;
(viii) agreement imposing non-competition or exclusive dealing obligations on
it; (ix) Contract for the future purchase of materials, supplies, services,
merchandise, or equipment parts in excess of $100,000; (x) Contract or agreement
for the employment of any stockholder, director, officer, consultant or key
employee not terminable without penalty or liability arising from such
termination or any severance or change-in-control contract or arrangement; (xi)
Contract relating to cleanup, abatement or other actions in connection with
environmental liabilities; or (xii) Contract which terminates, accelerates or
creates any liability or obligation as a result of this Agreement or any of the
transactions contemplated hereby, except in the ordinary course of business; or
(xiii) Contract which (A) involves future payment by or to the Company in excess
of $250,000 or (B) is otherwise material to the extent relating to the conduct
of the business of the Company. Each Contract listed or required to be listed
on Schedule 3.15 is valid, binding and enforceable against the Company, and to
Sellers' Knowledge the other parties thereto in accordance with its terms, and
is in full force and effect. The Company has performed all material obligations
required to be performed by it to date under each of the Contracts. Except as
set forth in Schedule 3.15, neither the Company nor, to Sellers' Knowledge, any
other party thereto is in material breach of or default under any Contract to
which the Company is a party or by which it is bound or to which its assets are
subject (and no event has occurred which, with due notice or lapse of time or
both, would constitute such a lapse or default). Sellers have delivered to
Purchaser a copy of each Contract or other written evidence of the obligations,
and all amendments thereto, listed or required to be listed in Schedule 3.15,
except to the extent otherwise noted thereon.
Section 3.16. Intellectual Property. Schedule 3.16 contains a list
of all applications and registrations for material Intellectual Property
(other than know-how, non-customized computer software, and customer lists)
which the Company owns or has used in connection with, or which
relates to, its business. Except as set forth in Schedule 3.16, the
Company either owns or has the right to use by license, sublicense, agreement,
or permission all of the Intellectual Property set forth on Schedule 3.16,
and in the case of patents and license agreements for the term set forth on
Schedule 3.16. Except for
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Purchaser pursuant to this Agreement or as otherwise set forth in Schedule
3.16, the Company has not granted a license, nor reached an understanding
with any third party, nor entered into a written agreement, relating in whole
or in part, to any of the Intellectual Property, and to Sellers' Knowledge
since June 28, 1994, there has been no assertion thereof by any Person that
has not been fully withdrawn. Except as noted in Schedule 3.16, the Company
has not been charged with nor to the Knowledge of Sellers is it threatened to
be charged with, the infringement or other violation of the intellectual
property rights of any other Person.
Section 3.17. Labor Relations. Except as set forth on
Schedule 3.17, the Company is not a party to any collective bargaining
agreement covering Employees, there are no controversies or unfair
labor practice proceedings pending or, to Sellers' Knowledge,
threatened between the Company and any of its current or former
Employees or any labor or other collective bargaining unit representing any
current or former Employee of the Company that could reasonably be expected to
result in a labor strike, dispute, slow-down or work stoppage or otherwise have
a Material Adverse Effect. To Sellers' Knowledge, except as set forth on
Schedule 3.17, no organizational effort is presently being made or to the
Knowledge of Sellers, threatened by or on behalf of any labor union.
Section 3.18. Employee Benefits.
(a) Schedule 3.18(a) sets forth all Employee Benefit Plans and all
other employee benefit arrangements or payroll practices, including,
without limitation, any such arrangements or payroll practices providing
severance pay, sick leave, vacation pay, salary continuation for
disability, retirement benefits, deferred compensation, bonus pay,
incentive pay, stock options, hospitalization insurance, medical insurance,
life insurance, scholarships or tuition reimbursements, maintained by the
Company or to which the Company is obligated to contribute for Employees or
Former Employees. Each of the employee benefit plans, practices and
arrangements set forth on Schedule 3.18(a) shall hereafter be referred to
as a "Plan" (or "Plans" as the context may require).
(b) Except with respect to any Multiemployer Plan, copies of the
following documents, with respect to each of the Plans as applicable, have
been delivered or made available to Purchaser by Sellers: (i) all plan and
related trust documents, and amendments thereto; (ii) the most recent IRS
Form 5500; (iii) the last IRS determination letter; (iv) summary plan
descriptions; and (v) the most recent actuarial report.
(c) Except as set forth on Schedule 3.18(c), none of the Plans is a
Multiemployer Plan. Neither the Company nor
- 24 -
any ERISA Affiliate has incurred any liability resulting from a complete
or partial withdrawal from any Multiemployer Plan, and none of them has
incurred, or is reasonably likely to incur, any liability due to
the termination or reorganization of a Multiemployer Plan which has not
been satisfied in full, and to the Knowledge of Sellers, no event has
occurred that would subject the Company or any ERISA Affiliate to any such
liability.
(d) Neither the Company nor any ERISA Affiliate has incurred, or is
reasonably likely to incur, any liability under Section 4062, 4063 or 4064
of ERISA to the PBGC or to a trustee appointed under Section 4042 of ERISA
with respect to any Single-Employer Plan, and to the Knowledge of Sellers,
no event has occurred that would subject the Company or any ERISA Affiliate
to any such liability. All premiums due the PBGC with respect to all
Single-Employer Plans maintained by the Company and its ERISA Affiliates
have been timely paid. Neither the Company nor any ERISA Affiliate has
engaged in any transaction described in Section 4069 of ERISA. Except as
set forth on Schedule 3.18(d), there has been no "reportable event", within
the meaning of Section 4043 of ERISA, with respect to any Single-Employer
Plan maintained by the Company or its ERISA Affiliates which would require
the giving of notice to the PBGC. No Single-Employer Plan maintained by
the Company or its ERISA Affiliates has incurred an accumulated funding
deficiency within the meaning of Section 412 of the Code.
(e) Except with respect to any Multiemployer Plan, each Plan complies
with, and has been established, operated and administered in accordance
with its terms and the requirements of, ERISA, the Code and other
applicable laws, except for any failures to comply that could not,
individually or in the aggregate, be reasonably expected to have a Material
Adverse Effect.
(f) Except with respect to any Multiemployer Plan, there are no
material pending or, to Sellers' Knowledge, threatened claims by or on
behalf of any Plan (other than routine claims for benefits).
(g) Neither the Company nor any ERISA Affiliate has incurred any
liability for any tax or penalty imposed by Section 4975 of the Code or
Section 502(i) of ERISA with respect to any Plan.
(h) With respect to each Plan that is a Single Employer Plan, the
most recent actuarial report prepared by the Plan's actuary, using the
actuarial methods and assumptions contained in such report, fairly presents
the fair market value of the assets of each such Plan and the present value
of the liabilities in respect of the benefits accrued under each such Plan,
and since the date of such
- 25 -
actuarial report there has been no material adverse change in the
funded status of any such Plan after taking into account the additional
accrual of benefits by participants since the date of such actuarial
report through the Closing Date.
(i) Each Plan which is intended to qualify under Section 401(a) of
the Code has received an IRS determination letter concluding that such Plan
so qualifies in form, and no amendment has been adopted or action been
taken that, to the Sellers' Knowledge, would cause such Plan to lose its
qualified status.
(j) Except as set forth on Schedule 3.18(j) or as may be required
under Section 4980B of the Code, Section 601 of ERISA or other applicable
foreign, state or local law, the Company does not have any Liability for
post-retirement medical or life insurance benefits or coverage for any
Employee or Former Employee or any dependent of any such employee. The
reserve reflected in the Closing Date Balance Sheet will be adequate in
accordance with GAAP for the payment or provision of all such benefits.
(k) Except as set forth on Schedule 3.18(k), the consummation of the
transactions contemplated by this Agreement will not result in any increase
in the amount of compensation or benefits or accelerate the vesting or
timing of payment of any compensation or benefits payable by the Company to
or in respect of any Employee or Former Employee or the beneficiary or
dependent of any such employee under any Plan.
Section 3.19. Insurance. Schedule 3.19 sets forth a list of
all material current and past insurance policies providing coverage for
the properties or operations or Liabilities of the Company since June 28,
1994, the type and amount of coverage, and the expiration dates of the
policies. Such policies are valid and enforceable in accordance with their
terms, are in full force and effect and insure against risk and liabilities
to the extent and in the manner deemed appropriate and sufficient by the
Company. As of the date of this Agreement, no insurance policy aggregates,
limits or maximums have been reached or exceeded, and no insurance carrier
has been declared insolvent, for policies providing coverage for the
properties, operations or Liabilities of the Company since June 28,
1994. The Company has not received notice from any insurance carrier: (i)
threatening a suspension, revocation, modification or cancellation of any
current insurance policy or a material increase in any premium in connection
therewith, or (ii) informing the Company that any current coverage listed or
required to be listed on Schedule 3.19 will or may not be available in the
future on substantially the same terms as now in effect.
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Section 3.20. Litigation. Except as set forth in Schedule 3.20,
there are no actions, causes of action, claims, suits, or proceedings
pending or, to the Knowledge of Sellers, threatened against the
Company at law, in equity, in admiralty, or otherwise before or by any
Governmental Agency or any other Person, which (i) seeks to restrain or
enjoin the consummation of the transactions contemplated hereby or
(ii) individually or in the aggregate could reasonably be expected to have a
Material Adverse Effect. Except as set forth in Schedule 3.20, the Company is
not subject to, or in default with respect to, any order, writ, injunction, or
decree of any Governmental Agency, which individually or in the aggregate has
had, or could reasonably be expected to have, a Material Adverse Effect.
Section 3.21. Environmental Matters. Except as set forth on
Schedule 3.21: (i) the Company is, and since June 28, 1994 has been, and
to Sellers' Knowledge, prior to June 28, 1994 was, in compliance with all
Environmental Laws except for any noncompliance resulting in Damages of
less than $20,000 individually or in the aggregate; (ii) the Company has
no Liability, whether contingent or otherwise, under any Environmental
Law except for any Liability resulting in Damages of less than $20,000
individually or in the aggregate; (iii) no request for information,
notice, Governmental Agency inquiry, demand letter, notice of violation or
alleged violation of, non-compliance or alleged non-compliance with
or any Liability under, any Environmental Law by or relating to operations or
properties of the Company has been received by or threatened in writing against
the Company since June 28, 1994, or, to Sellers' Knowledge, before June 28,
1994; (iv) the Company has not entered into or been subject to, and is not
currently a party or respondent to, any administrative, civil or criminal writs,
injunctions, decrees, orders, or judgments outstanding, or any administrative,
civil or criminal actions, suits, proceedings or investigations pending or, to
Sellers' Knowledge, threatened, relating to any Environmental Law affecting the
Company; (v) the Company has obtained and has in full force and effect, or as
set forth on Schedule 3.13(b), has applied for and reasonably expects to obtain,
all Permits required under any Environmental Law for the activities and
operations of the Company on the Owned Real Property or Leased Property and for
any alterations or improvements existing at such property at any time since June
28, 1994; (vi) as of the date of this Agreement, no changes in Environmental Law
proposed, contemplated or under consideration by a Governmental Agency will to
Seller's knowledge subject the Company to Liability in excess of $20,000
individually or in the aggregate or cause a Material Adverse Effect, (vii)
except as set forth in the 1994 Acquisition Agreement, the Company has neither
expressly nor by operation of law, assumed or undertaken any liability,
including without limitation any obligation for Costs of Remediation of any
other Person, (viii) the Company has not, and Sellers have no Knowledge of any
other Person who has, caused any Release or threatened Release of any Hazardous
Material on, in, under, or from the Owned Real Property or Leased Property nor
- 27 -
does Seller have knowledge of any such Release, except for any Release resulting
in Damages of less than $20,000 individually or in the aggregate, (ix) the
Company has not received any written or, to Sellers' Knowledge, other
communication indicating or claiming potential liability for response costs,
Damages, or remediation with respect to a Release or threatened Release of any
Hazardous Material; (x) the Company is not subject to any cleanup, remediation,
monitoring or corrective action liability or requirement under any Environmental
Law; (xi) the Company has not arranged for the disposal of any Hazardous
Material at, or transported any Hazardous Material to, any site from which, to
the Sellers' Knowledge, there exists a Release or threat of Release of any
Hazardous Material; (xii) no Lien has been or with the passage of time and or
the giving of notice could reasonably be expected to be imposed on the property
of the Company by any Governmental Agency under any Environmental Law or in
connection with any Hazardous Material; (xiii) to Sellers' Knowledge none of the
Owned Real Property or Leased Property (and any buildings, structures, fixtures
or materials on such real property) (1) contains or includes any friable
asbestos, polychlorinated biphenyls, or any underground storage tanks, piping,
or sumps (or other underground structures which contain Hazardous Material), (2)
is included or proposed for inclusion on the National Priorities List or any
similar list maintained under any Environmental Law, (3) constitutes a habitat
for any species designated as threatened or endangered pursuant to the
Endangered Species Act, or (4) contains any wetlands subject to regulation under
the Federal Water Pollution Control Act or any other Environmental Law; and
(xiv) to Sellers' Knowledge the Company is not required to give notice of or
record or deliver to any Governmental Agency an environmental disclosure
document or statement by virtue of the transactions set forth herein and
contemplated hereby.
Section 3.22. Tax Matters.
(a) Except as set forth on Schedule 3.22 hereto, (i) the Seller
Entities have filed (or joined in the filing of), or will file (or join in
the filing of), all Tax Returns required to be filed under applicable law
prior to the Closing Date that relate to any material Taxes of the Seller
Entities; (ii) as of the time of such filing, the Seller Entities have paid
all Taxes shown to be due and payable on such Tax Returns and, as to any
such Tax Returns not filed as of the date hereof, will pay all Taxes shown
to be due and payable thereon; (iii) the Seller Entities have made or will
make adequate provision for all material Taxes payable for any periods that
end on or before the Closing Date for which no Tax Returns have yet been
filed and for any periods that begin before the Closing Date and end after
the Closing Date (a "Straddle Period") to the extent such Taxes are
attributable to the portion of any such period ending at the Closing Date;
(iv) none of the Seller Entities has given or requested any waivers of
statutes of limitation in respect
- 28 -
of any Tax Returns nor has any Seller Entity agreed to any extension
of time with respect to any Tax assessment or deficiency; (v) no material
claim for assessment or collection of Taxes has been asserted against
any Seller Entity and no Seller Entity is a party to (or has been
informed that it may become a party to) any pending action, proceeding
or investigation by any Governmental Agency for the assessment
or collection of any such Taxes; (vi) none of the Seller Entities has
granted or received any extension of the limitation period applicable to
any Tax; (vii) except as otherwise permitted pursuant to Section 6.12, each
of the Company and Cramerton is and has been since June 28, 1994 a
"partnership" within the meaning of Section 7701(a)(2) of the Code; (viii)
the Seller Entities (other than Cramerton or any Seller Entity that is a
corporation for Federal income tax purposes) has not made an election under
Section 754 of the Code; (ix) except for the 1994 Acquisition Agreement,
none of the Seller Entities is a party to any agreement, whether written or
unwritten, providing for the payment of Tax liabilities, payment for Tax
losses, entitlements to refunds or similar tax matters; (x) no security
interests have been imposed upon or asserted against any assets of any
Seller Entity as a result of or in connection with any failure or alleged
failure, to pay any Tax; (xi) no ruling with respect to Taxes (other than a
request for determination of the status of a qualified pension plan) has
been requested by or on behalf of any Seller Entity; (xii) since June 28,
1994, no claim has been made by a Governmental Agency in a jurisdiction
where any Seller Entity does not currently file Tax Returns that it is or
may be subject to taxation by that jurisdiction, nor is any Seller Entity
aware that any such assertion of jurisdiction is threatened; (xiii) no
Seller Entity has filed a consent under Section 341(f) of the Code; (xiv)
no Seller Entity has requested any extension of time within which to file
any Tax Return which Tax Return has not been filed; and (xv) no Seller
Entity has been a United States real property holding corporation within
the meaning of Section 897(c)(2) of the Code during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code.
(b) Sellers have delivered to Purchaser copies of all federal income
Tax Returns (redacted as appropriate to exclude any information not related
to any of the Seller Entities), examination reports, closing agreements and
statements of deficiencies assessed against or agreed to by any Seller
Entity since June 28, 1994. Schedule 3.22 lists all federal, state, local
and foreign income Tax Returns filed with respect to each Seller Entity for
taxable periods ended on or after June 28, 1994, indicates those Tax
Returns that have been audited and indicates those Tax Returns that
currently are the subject of audit.
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(c) No Seller Entity is a party to any agreement that is or may be
characterized as a lease under the safe-harbor leasing provisions of
Section 168(f)(8) of the Internal Revenue Code of 1954 that would result in
any asset being treated as owned by another person. None of the assets of
the Seller Entities is tax exempt use property within the meaning of
Section 168(h) of the Code or tax-exempt bond financed property within the
meaning of Section 168(g)(5) of the Code.
(d) All Seller Entities have withheld and paid all material Taxes
required to be withheld in connection with any amounts paid or owing to any
employee, creditor, independent contractor or other third party.
Section 3.23. Interim Operations. Since the Interim Balance Sheet
Date, the Company has operated in the ordinary course, except as set
forth on Schedule 5.1, consistent with past practices, and except as set
forth in Schedule 3.23 the Company has not: (i) incurred or become subject
to, or agreed to incur or become subject to, any material obligation or
Liability, except in the ordinary course of business, consistent with
past practice or as contemplated by this Agreement; (ii) mortgaged or
pledged any of its assets, tangible or intangible, except for Permitted
Liens; (iii) sold or transferred or agreed to sell or transfer any
of its assets, or canceled or agreed to cancel any debts or claims
except in the ordinary course of business, consistent with past practice;
(iv) suffered any extraordinary losses or, except in the ordinary course of
business consistent with past practice, waived any material rights;
(v) increased the rate of compensation payable by it to any of its
executive officers or to any employee, whose current total annual
compensation or estimated annual compensation from the Company is $100,000
or more ("Significant Employee"), over the rate being paid or accrued
to them as of the Interim Balance Sheet Date except in accordance with
its prior practices or employment agreements; (vi) terminated any contract,
agreement, license, or other instrument to which it is a party except in
the ordinary course of business, consistent with past practice;
(vii) made or agreed to make any accrual or arrangement for or payment of
bonuses or special compensation of any kind to any of its executive officers
or Significant Employees; or general increase in the salary or bonus payable
or to become payable by the Company to any other salaried employees or to
hourly employees (other than (x) pursuant to existing collective bargaining
agreements, and (y) increases granted to individual employees for merit, length
of service, change in position or responsibility or other reasons
applicable to specific employees and not generally to a class
or group thereof); (viii) entered into any agreement, written or oral,
providing for the employment of any senior executive of the Company or any
severance or termination benefits payable or to become payable by the
Company to any senior executive of the Company; (ix) taken any action which
would have constituted a breach of any negative covenant of Sellers set
- 30 -
forth in Article V or VI if such negative covenant had applied since
the Interim Balance Sheet Date; or (x) suffered any shortages of materials or
supplies or any casualty that individually or in the aggregate has had or could
reasonably be expected to have a Material Adverse Effect.
Section 3.24. Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried on by Sellers
without the intervention of any other Person (other than Donaldson, Lufkin &
Jenrette Securities Corporation and Lazard Freres & Co. LLC the fees and
expenses of which will not be reflected on the Closing Date Balance Sheet)
acting on its behalf in such manner as to give rise to any valid claim
by any such Person against the Company or Purchaser for a finder's fee,
brokerage commission or other similar payment based on an arrangement
with Sellers. Sellers covenant that they shall pay the fees and
expenses of Donaldson, Lufkin & Jenrette Securities Corporation and Lazard
Freres & Co. LLC, if any, arising out of the transactions contemplated by this
Agreement.
Section 3.25. Product Liability. Except as disclosed in Schedule
3.25, (i) there is no notice, demand, claim, action, suit, inquiry, hearing,
proceeding, notice of violation or investigation of a civil, criminal
or administrative nature by or before any Governmental Agency
against or involving any product, substance or material (collectively, a
"Product"), or class of claims or lawsuits involving a Product manufactured,
produced, distributed or sold by or on behalf of the Company which is pending
or, to Sellers' Knowledge, threatened, on behalf of the ultimate retail
purchaser of any Product, resulting from an alleged defect in design,
manufacture, materials or workmanship of any Product manufactured, produced,
distributed or sold by or on behalf of the Company, or any alleged failure to
warn, or from any breach of express or implied specifications or warranties or
representations (a "Product Claim"), and (ii) there has not been, nor is
there under consideration or investigation by the Company, any Product
recall, rework, retrofit or post-sale warning (collectively, recalls, reworks,
retrofits and post-sale warnings are referred to in this Agreement as "Recalls")
conducted by or on behalf of the Company concerning any Products manufactured,
produced, distributed or sold by or on behalf of the Company or, to the
Knowledge of Sellers, any Recall conducted by or on behalf of any entity as a
result of any alleged defect in any Product supplied by the Company. Except as
disclosed in Schedule 3.25, there is no Product Claim pending or, to Sellers'
Knowledge threatened, on behalf of a customer of the Company or any Governmental
Agency which individually or in the aggregate has had or could reasonably be
expected to have a Material Adverse Effect.
Section 3.26. SEC Reports. Sellers have furnished Purchaser
true and correct copies (with exhibits) of each of the SEC Reports.
As of their respective dates, the SEC Reports did not contain any
untrue statement of a material fact or omit to
- 31 -
state any material fact necessary to make the statements therein, in light
of the circumstances in which they were made, not misleading,
except any statement or omission therein which has been corrected
or otherwise disclosed or updated in a subsequent filing with the SEC prior
to the date hereof. Since June 1, 1994, the Company has filed with the SEC all
reports and registration statements and all other filings required to be filed
by the Company with the SEC under the rules and regulations of the SEC.
Section 3.27. Books and Records of the Company. The Company has
made available to Purchaser and its directors, officers, attorneys, accountants
and representatives true and correct copies of all agreements, documents and
other items listed on the Schedules to this Agreement and all books and records
of the Company. The books and records of the Company accurately reflect
in reasonable detail the transactions to which the Company is a party or by
which its properties are bound in accordance with GAAP.
Section 3.28. 1994 Acquisition Agreement. Sellers have previously
furnished to Purchaser copies of all notices, claims and other correspondence
under the 1994 Acquisition Agreement (collectively, the "Prior Notices").
As of the date of this Agreement, there are no pending or,
to Sellers' Knowledge, threatened claims arising under or with respect to
the 1994 Acquisition Agreement not included in the Prior Notices.
Section 3.29. No Material Misstatements. None of the
representations or warranties of Sellers contained herein and none of
the information contained in the Schedules hereto furnished by Sellers
is false or misleading in any material respect or omits to state a material
fact necessary to make the statements herein or therein not misleading in
any material respect.
Section 3.30. Certain Matters Regarding the Senior Notes.
(a) The Company's 11-1/8% Senior Notes, due 2001, constitute
"Existing Indebtedness", as such term is defined in the Indenture, dated as
of June 28, 1994, by and among JPS Automotive Products Corp., as Issuer,
JPS Automotive L.P., as Issuer, and Fleet National Bank of Connecticut
(formerly known as Shawmut Bank Connecticut, National Association), as
amended (the "Senior Note Indenture").
(b) There is no Default (as such term is defined in the Senior Note
Indenture) existing under the Senior Note Indenture (other than any Default
arising out of the requirement or failure of the Company to take any action
after the Closing) or any litigation alleging such a Default.
- 32 -
Section 3.31. No Seiren Right of First Refusal. In connection
with the consummation of the purchase and sale of the Equity contemplated by
this Agreement:
(a) Seiren U.S.A. Corporation does not have a right of first refusal
pursuant to Section 3.2 of that certain Partner Interest Purchase Agreement
dated as of December 2, 1991, by and among JPS Automotive Products Corp.,
Cramerton Management Corp., Seiren U.S.A. Corporation and Seiren Automotive
Textile Corporation, as amended and supplemented; and
(b) Seiren Co. Ltd. does not have a right of first refusal pursuant
to Section 1.2 of that certain Stockholders Agreement dated as of December
2, 1991, by and among JPS Textile Group, Inc., Cramerton Management Corp.,
and Seiren Co. Ltd., as amended and supplemented.
Section 3.32. Disclaimer of Additional Representations and
Warranties; Schedules.
(a) Except as expressly set forth in this Agreement, the Schedules
and Exhibits hereto, and any other certificate or instrument delivered
pursuant to the terms hereof or thereof, Sellers make no representation or
warranty, including, with respect to the Company, or its operations,
assets, Liabilities, or conditions, including, any representation or
warranty of merchantability, suitability or fitness for a particular
purpose, or quality as to the assets of the Company, or any part thereof,
or as to the condition or workmanship thereof, or the absence of any
defects therein, whether latent or patent.
(b) Notwithstanding anything to the contrary contained in this
Agreement, any item disclosed on any one Schedule shall be deemed to be
disclosed on each Schedule, where relevant, provided that a specific cross-
reference is made in the relevant Schedule. Any information included in
the SEC Reports shall be deemed to be included in the Schedules to the
extent a specific cross-reference is made in the applicable Schedule.
Disclosure of an item in any Schedule shall not be deemed to be an
admission that such item is material.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Sellers as follows:
Section 4.1. Authority of Purchaser. Purchaser is a corporation
duly organized, validly existing, and in good standing under the laws
of the State of Delaware. Purchaser has full corporate power and authority
to execute and deliver this
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Agreement, the execution and delivery by Purchaser of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Purchaser, and this
Agreement constitutes the legal, valid and binding obligation of Purchaser
enforceable against Purchaser in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, moratorium or
similar laws from time to time in effect which affect creditors' rights
generally, and by legal and equitable limitations on the enforceability of
specific remedies. Purchaser has the requisite corporate power and authority to
own its properties and to carry on the business presently being conducted by it.
Section 4.2. No Conflict or Violation. Except as referenced
in Section 8.9, neither the execution and delivery of this Agreement
by Purchaser, nor the consummation of the transactions contemplated hereby, nor
the fulfillment of the terms and compliance with the provisions hereof will
conflict with or result in a material breach of or a material default (or in an
occurrence which with the lapse of time or action by a third party, or both,
could result in a material default) with respect to any of the terms,
conditions or provisions of any applicable order, writ or decree of any court
or of any Governmental Agency, applicable to Purchaser, or of the Certificate
of Incorporation or By-Laws of Purchaser, or of any indenture, contract,
agreement, lease, or other instrument to which Purchaser is a party or subject
or by which Purchaser or any of its properties or assets are bound,
or of any applicable statute, rule, or regulation to which
Purchaser or its businesses is subject, except for those conflicts, breaches,
defaults, terminations, or accelerations, which individually or in the
aggregate could not reasonably be expected to have a material
adverse effect on Purchaser or materially impair the ability of Purchaser
to consummate the transactions contemplated by this Agreement; provided,
however, that no representation or warranty is made hereby by Purchaser with
respect to the effect of antitrust laws or regulations.
Section 4.3. Litigation. There are no actions, causes
of action, claims, suits, proceedings, orders, writs, injunctions or decrees
pending or, to the actual knowledge, after reasonable inquiry, of the
executive officers of Purchaser, threatened against Purchaser at law,
in equity, in admiralty or otherwise, or before or by any Governmental
Agency, which seeks to restrain or enjoin the consummation of the transactions
contemplated hereby.
Section 4.4. Brokers. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried on by Purchaser
without the intervention of any other Person acting on its behalf in such
manner as to give rise to any valid claim by any such Person against
Sellers or their Affiliates (other than, after the Closing, the Company) for a
- 34 -
finder's fee, brokerage commission or other similar payment based on an
arrangement with Purchaser.
Section 4.5. Investment Intent; Status. The Equity will be
acquired hereunder solely for the account of Purchaser for investment,
and not with a view to the resale or distribution thereof in violation of
the Securities Act of 1933, as amended, subject to the right of the Purchaser
and any such designees to sell, assign, transfer or distribute any or all of
the Equity to any corporation which is an Affiliate of the Purchaser.
Purchaser is an "accredited investor" within the mean of Regulation 501
promulgated under the Securities Act of 1933, as amended.
Section 4.6. Disclaimer of Additional Representations and
Warranties. Except as expressly set forth in this Agreement and
the Exhibits hereto, and any other certificate or instrument delivered pursuant
to the terms hereof or thereof, Purchaser makes no representation or warranty.
ARTICLE V.
CERTAIN COVENANTS OF SELLERS
Each of Sellers covenants with Purchaser that from and after the date
hereof through the Closing Date (except as provided in Section 6.12 hereof, as
expressly set forth in Schedule 5.1, or as consented to or approved by Purchaser
in writing):
Section 5.1. Conduct of Business. Sellers shall (x) cause
the Company and each Subsidiary which the Company controls, and (y) not
affirmatively consent to any action which would cause or permit Enjema not:
(a) to operate in the ordinary course, in accordance with past
practices, except for payment of intercompany items, the existence of which
would otherwise violate Section 3.6 or 3.14;
(b) to use commercially reasonable efforts to keep available
generally the services of its present officers and employees, and preserve
generally the present relationships with Persons having business dealings
with it;
(c) to not make any sale, assignment, transfer, abandonment, or other
conveyance of any of its assets or any part thereof in each case having a
book value of $25,000 or more or a fair market value in excess of $100,000,
except (i) transactions pursuant to existing Contracts set forth in
Schedule 3.15 and (ii) dispositions of inventory or of worn-out or obsolete
equipment for fair or reasonable value in the ordinary course of business
consistent with past practices;
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(d) to keep in full force and effect insurance comparable in amount
and scope to coverage maintained by it (or on behalf of it) on the date
hereof; after the Closing, policies held by the Parent Entities will not be
available to cover occurrences (in the case of occurrence-based policies)
occurring, or claims made (in the case of claims-made-based policies),
after the Closing Date;
(e) to not settle, release or forgive any material claim or
litigation or waive any material right;
(f) to not make, change or revoke, or permit to be made, changed or
revoked, without the consent of Purchaser any material election or method
of accounting with respect to Taxes affecting or relating to any of the
Seller Entities;
(g) to not enter into, or permit to be entered into, without the
consent of Purchaser any closing or other agreement or settlement with
respect to Taxes affecting or relating to any of the Seller Entities;
(h) to not grant any increase in the salary or other compensation of
any Significant Employee;
(i) to not enter into any employment Contract with any director,
executive officer or Significant Employee of the Company or any of its
Subsidiaries or make any loan to, or enter into any material transaction of
any other nature with, any director, executive officer or Significant
Employee of the Company or any of its Subsidiaries;
(j) to not acquire, lease or dispose or agree to acquire, lease or
dispose of any capital assets having a book value in excess of $25,000 or a
fair market value in excess of $100,000 other than in the ordinary course
of business;
(k) to inform the Purchaser of (i) any loss or threat of loss of any
automotive program, (ii) any material development in any organizational
effort on behalf of any labor union set forth on Schedule 3.17, (iii)
changes in Environmental Law proposed, contemplated or under consideration
by a Governmental Agency which will to Sellers' knowledge subject the
Company to Liability in excess of $20,000 individually or aggregate or
cause a Material Adverse Effect, or (iv) any material discussion or
development of the amendment, termination or renewal of the lease
identified as Item 3 on Schedule 3.12(b); provided, however, that
notwithstanding anything to the contrary contained in this Agreement, any
breach of this Section 5.1(k) shall be deemed to be a breach of
representation and warranty and not a breach of covenant; and
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(l) to use commercially reasonable efforts to inform Purchaser of (i)
all material insurance policies providing coverage for the properties or
operations or Liabilities of the Company prior to June 28, 1994 of which
Seller has Knowledge, (ii) the type and amount of coverage, and the
expiration dates of such policies, and (iii) whether, with respect to such
policies, the insurance policy aggregates, limits or maximums have been
reached or exceeded, and whether the insurance carrier has been declared
insolvent; provided, however, that notwithstanding anything to the contrary
contained in this Agreement, any breach of this Section 5.1(l) shall be
deemed to be a breach of representation and warranty and not a breach of
covenant.
Section 5.2. Information and Access.
(a) Sellers shall permit and cause the Company and its Subsidiaries
to permit representatives of Purchaser to have reasonable access during
normal business hours, and in a manner so as not to interfere with the
normal operations of the Company and its Subsidiaries, to all premises,
properties, personnel, accountants, books, records, contracts and documents
of the Company and its Subsidiaries. Purchaser and each of its
representatives shall treat and hold as confidential such information in
accordance with the terms and provisions of that certain Confidentiality
Agreement, entered into as of January 17, 1996, between Purchaser and
Sellers, which Confidentiality Agreement shall remain in full force and
effect until the Closing Date, whereupon such Confidentiality Agreement
will terminate without further action.
(b) Purchaser shall indemnify, defend and hold harmless Sellers, the
lessors under the Leases and their respective Affiliates from and against
any and all claims, demands, causes of action, losses, damages,
Liabilities, cost and expenses (including, without limitation, attorneys'
fees and disbursements), suffered or incurred by such Persons in connection
with (i) Purchaser's and/or Purchaser's representatives' entry upon the
Owned Real Property or Leased Property, or (ii) any and all other
activities undertaken by Purchaser or Purchaser's representatives with
respect to the Owned Real Property or Leased Property pursuant to this
Section 5.2.
Section 5.3. Confidentiality Agreements. At the Closing,
Sellers will take all such commercially reasonable actions as may be
required to assign to the Company the benefits of all confidentiality
agreements relating to the possible sale of the Company or any division
or Subsidiary thereof.
Section 5.4. Certain Environmental Covenants. Upon
reasonable request, Sellers shall promptly respond to Purchaser's
requests for information, and make available to Purchaser copies
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of all documents, records and correspondence in their possession or control
(or available to Sellers, if unavailable to Purchaser) relating to the
compliance by the Company with Environmental Laws or to the release
or threat of release of Hazardous Materials in connection with
the ownership or operation of the Company, any of its Subsidiaries, or any
predecessor of either, whether generated by Sellers or others, including,
without limitation, environmental audits, environmental risk assessments, or
site assessments of the Owned Real Property or Leased Property, documentation
regarding off-site or on-site disposal of Hazardous Materials, spill control
plans, and environmental agency reports and correspondence. Prior to the
Closing Date, Purchaser shall have the right to inspect and investigate the
Leased Property and Owned Real Property. The scope of the investigation shall
not include any sampling, monitoring, testing, soil borings, well or wellpoint
installation, or any other physical testing of the indoor or outdoor environment
unless agreed to in writing by Seller at Seller's sole discretion; provided,
however, Purchaser shall be permitted to sample existing groundwater wells at
the Leased Property and the Owned Real Property.
ARTICLE VI.
CERTAIN COVENANTS AND AGREEMENTS
Section 6.1. Hart-Scott-Rodino and Other Filings.
(a) As promptly as practicable, and in any event within ten Business
Days following the execution and delivery of this Agreement by the parties,
Sellers and Purchaser shall each prepare and file, or shall cause its
"ultimate parent" (as defined in the HSR Act) to prepare and file, any
required notification and report form under the HSR Act, in connection with
the transactions contemplated hereby, the filing fees for which shall be
borne by Purchaser. Sellers and Purchaser shall, or shall cause their
ultimate parents to, request early termination of the waiting period
thereunder.
(b) Sellers and Purchaser shall, or shall cause their ultimate
parents to, respond with reasonable diligence to any request for additional
information made in response to such filings.
(c) As promptly as practicable, Sellers and Purchaser shall prepare
and file any other application, report, or other filing required to be
submitted to any other Governmental Agency in connection with the
transactions contemplated hereby.
Section 6.2. Transfer Taxes. Any sales, recording,
transfer, stamp, conveyance, value added, use, or other similar Taxes, duties,
excise, governmental charges or fees imposed as a result of the sale of the
Equity to Purchaser pursuant to this Agreement shall be borne by Sellers,
and any MSBT Recapture shall
- 38 -
be borne by Sellers. Purchaser shall promptly remit any refunds of such
items to Sellers. Sellers and Purchaser, to the extent required by law,
shall prepare and file all Tax Returns on a timely basis with respect to
any such Taxes or fees.
Section 6.3. Obligation to File Tax Returns. Sellers
shall prepare and file (or cause to be prepared and filed) (i) all
Tax Returns of or relating to the operations of the Seller Entities
that are due, taking into account applicable extensions not entered into
in violation of this Agreement, before the Closing Date, and (ii) all
income Tax Returns of or relating to the Seller Entities for taxable periods
ending on or before the Closing Date. Purchaser shall prepare (or cause to
be prepared or filed) all other Tax Returns of or relating to the operations
of the Seller Entities. The party preparing and filing Tax Returns
hereunder shall pay or cause to be paid all Taxes shown as due thereon (subject
to any rights to indemnification hereunder). The party preparing or causing the
preparation of any Tax Return under this Section 6.3 shall allow the other
parties to review, comment upon and reasonably approve any Tax Returns relating
to a Straddle Period at any time during the 45 day period immediately preceding
the filing of such return. Purchaser and Sellers agree to file or cause the
filing of all Tax Returns relating to the Seller Entities for any Straddle
Period on the basis that the relevant taxable period ended as of the Closing
Date or of the date of the sale described in Section 6.12, as appropriate,
unless the relevant taxing authority will not accept a Tax Return filed on that
basis.
Section 6.4. Certain Provisions Relating to Consents. Sellers
shall use commercially reasonable efforts prior to and after the
Closing Date to obtain all consents that are required in connection with the
transactions contemplated by this Agreement. Sellers shall not obtain any
consent that will affect Purchaser or the Company to either of their economic
detriment, including any modification of any Contract, Lease or Permit.
Purchaser shall cooperate as reasonably necessary or desirable to secure
the third party consents, including, without limitation, providing to such
third party information, including financial information, provided, however,
that neither Purchaser nor the Company will be required to incur any liability
or obligation in connection therewith, other than for the underlying matter
for which such consent was obtained as in effect immediately prior to such
consent.
Section 6.5. Nondisclosure; Noncompetition.
(a) From and after the Closing Date, Sellers shall not use, divulge,
furnish or make accessible to anyone any proprietary, material non-public,
confidential or secret information to the extent relating to the Company or
any Subsidiary (including, without limitation, customer lists, supplier
lists and pricing and marketing arrangements with customers or suppliers),
and Sellers shall cooperate
- 39 -
reasonably with Purchaser in preserving such proprietary, confidential or
secret aspects of the Company.
(b) For a period of four years after the Closing Date, Sellers will
not, and will cause each of their Affiliates not to, directly or
indirectly, manufacture or sell any products manufactured or sold by the
Company or any Subsidiary thereof as of the Closing, or own stock or
otherwise have an equity interest in or be affiliated with any person or
entity engaged in such business (except as a stockholder holding less than
5% of the stock of a publicly held corporation); provided, however that the
foregoing shall not apply to (i) products sold pursuant to the SMT License
Agreement, (ii) any products in which foam is combined with textiles,
whether pursuant to flame lamination, adhesive lamination, or otherwise,
and (iii) needle-punch floormats and trunk liners sold in the after-market
(i.e. not to original equipment manufacturers); provided that in no event
will any of the foregoing exceptions apply to permit any Parent Entity to
bid on any Toyota program as to which the Company or any Subsidiary thereof
is a supplier as of the Closing Date. None of the Sellers will, for a
period of two years from the Closing Date, solicit for hire any Employees
without the prior written consent of Purchaser. Sellers agree that a
violation of this Section 6.5 will cause irreparable injury to Purchaser,
and Purchaser will be entitled, in addition to any other rights and
remedies it may have at law or in equity, to an injunction enjoining and
restraining Sellers from doing or continuing to do any such violation and
any other violations or threatened violations of Section 6.5. This Section
6.5(b) shall not apply to any Person or any Affiliates of such Person which
acquires all or substantially all of the assets or the capital stock of
Foamex International Inc. unless such Person or Affiliate is presently an
Affiliate of Sellers.
(c) Sellers acknowledge and agree that the covenants set forth in
this Section 6.5 are reasonable and valid in scope and in all other
respects. If any of such covenants is found to be invalid or unenforceable
by a final determination of a court of competent jurisdiction (i) the
remaining terms and provisions hereof shall be unimpaired and (ii) the
invalid or unenforceable term or provision shall be deemed replaced by a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision.
In the event that, notwithstanding the first sentence of this Section
6.5(c), any of the provisions of this Section 6.5 relating to scope of the
covenants contained therein or the nature of the business restricted
thereby shall be declared by a court of competent jurisdiction to exceed
the maximum restrictiveness such court deems enforceable, such provision
shall be deemed to
- 40 -
be replaced herein by the maximum restriction deemed enforceable by such
court.
Section 6.6. Efforts. Upon the terms and subject to the conditions
of this Agreement, each of the parties hereto shall use commercially reasonable
efforts to take, or cause to be taken, all action, and to do, or cause to
be done, all things necessary, proper or advisable consistent with applicable
law to consummate and make effective in the most expeditious manner practicable
the transactions contemplated hereby; provided, however, that nothing in this
covenant or any other provision of this Agreement will require Purchaser
to agree to any divestiture, hold-separate or other similar agreement or
requirement.
Section 6.7. Ongoing Tax Cooperation. If the Closing occurs,
Sellers and Purchaser shall cooperate fully with each other and
make available or cause to be made available to each other in a
timely fashion such Tax data, prior Tax Returns and filings and other
information as may be reasonably required for the preparation by Purchaser or
Sellers of any tax returns, elections, consents or certificates required to be
prepared and filed by Purchaser or Sellers and any audit or other examination
by any taxing authority, or judicial or administrative proceeding relating
to liability for Taxes. Without limiting the generality of the foregoing,
each of Purchaser and Sellers shall retain copies of all Tax Returns,
supporting work schedules and other records relating to tax periods or portions
thereof ending prior to or including the Closing Date until the later of
(i) the expiration of the statute of limitations for the taxable periods
to which such Tax Returns and other documents relate, without regard to
extensions except for extensions executed by that party or its Affiliates
or extensions or which suchparty has received written notice from another
party, or (ii) six years following the due date (without extensions)
for such Tax Returns; provided, however, that no party will dispose of its
copies without first notifying the other parties and providing such other
parties with a reasonable period of time to assume possession of such copies.
In addition, without limiting the generality of the foregoing, each party shall
make its personnel and those of its Affiliates reasonably available for
deposition and testimony in any tax controversy or proceeding. Purchaser shall
provide Sellers with any necessary payroll records attributable to the period
prior to the Closing Date. Purchaser shall cooperate with Sellers to the
extent reasonably necessary for Sellers' preparation of their financial
statements and Tax Returns and in the sharing of financial and accounting
information with respect thereto or with respect to any audit, examination,
or other proceeding with respect thereto. Any information or documentation
provided pursuant to the Section 6.7 shall not be disclosed by the recipient
thereof to any Person except its accountants and relevant tax authorities
or as required by applicable law (in which case the disclosing party
shall consult in good faith with the other party prior to making any such
disclosure).
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Section 6.8. Certain Agreements.
(a) Purchaser and Sellers shall use their commercially reasonable
efforts to cause the parties to the agreements listed on Schedule 6.8 Part
A to release Sellers and Foamex International Inc. ("FII") from all
obligations arising under such agreements. Notwithstanding the foregoing,
it is understood and agreed that Purchaser shall not, and shall not cause
the Company to, provide any guarantee or security, or expend any money, or
incur any Liability, or agree to any change in any of the terms of any such
agreement to obtain such release. To the extent such release is not
obtained, Purchaser shall cause the Company and its Subsidiaries to
indemnify Sellers and FII for all Damages arising under such agreements
after the Closing Date that are obligations of Purchaser, the Company or
any of its Subsidiaries, without regard to any right of set-off.
(b) On the Closing Date, Sellers shall assign, and shall cause FII to
assign, all of their respective right, title interest and obligations
(other than any right to receive payment which is reflected as a liability
in the Closing Date Balance Sheet in accordance herewith and the right to
indemnification for periods prior to the Closing Date) under the agreements
listed on Schedule 6.8 Part B to Purchaser or its designee, and Purchaser
shall cause the Company to release and discharge Sellers and FII from all
further obligations under such agreements.
(c) From and after the Closing Date, Purchaser shall cause the
Company to pay all amounts due to the Parent Entities pursuant to the terms
of the Supply Agreement or any item that would constitute an Intracompany
Trade Payables had it existed prior to the Interim Balance Sheet Date in
the ordinary course, consistent with past practice.
Section 6.9. Clearance Certificates. To the extent required
by law to relieve Purchaser of any secondary liability for unpaid sales or
similar Taxes of any of the Seller Entities attributable to periods
prior to the Closing Date, Sellers shall, following execution of this Agreement,
use reasonable efforts to obtain clearance certificates or similar documents
from any state Tax authority.
Section 6.10. Control of Tax Audits. Each party shall promptly
notify the other party in writing upon receipt by such first party, or its
Affiliates of notice of any pending or threatened Tax audits or assessments
relating to the Company or its Subsidiaries for any taxable period which
may affect any Tax for which such other party may be liable or have otherwise
agreed to indemnify such first party under this Agreement. Such notice shall
contain factual information (to the extent known) describing the asserted Tax
Liability in reasonable detail and shall be accompanied by copies of any
notice or other document
- 42 -
received from any tax authority in respect of such matter. Sellers shall
control any audits and disputes related to any Tax for which Sellers are
liable or for which Sellers have otherwise agreed to indemnify the Company
or Purchaser under this Agreement at Sellers' sole expense. Sellers and
Purchaser shall jointly control, in good faith with each other, any Tax
audit or dispute involving a Straddle Period. A party shall not compromise,
and shall prevent its Affiliates from compromising, any audit issue or other
controversy the resolution of which is reasonably likely to result in a Tax
for which another party may be liable or has agreed to indemnify the first
such party under this Agreement without first advising such other party in
writing of the proposed compromise and obtaining the written consent of such
other party, which consent shall not be unreasonably withheld or
delayed.
Section 6.11. Tax Sharing Agreements and Arrangements. Sellers will
cause any tax sharing agreement or similar arrangement with respect to Taxes
involving the Seller Entities (other than as provided in Section 6.8 or
Contracts solely among such Seller Entities) to be terminated, amended or
assigned effective as of the Closing Date, to the extent that any such agreement
or arrangement relates to the Company or any Subsidiary of the Company, on the
one hand, and any Parent Entity, on the other hand, and after the Closing Date
none of the parties shall have any obligation to a Parent Entity under any such
agreement or arrangement for any past, present or future period.
Section 6.12. Sale of Assets for Tax Purposes.
(a) Purchaser acknowledges and agrees that, notwithstanding any other
provision of this Agreement, following the execution of this Agreement and
prior to the Closing Date, Sellers shall take the actions specified on
Exhibit F hereto (including causing the amendments to the Partnership
Agreement specified therein) to convert JPS Automotive, L.P. into an
"association" taxable as a corporation ("New JPS Automotive") within the
meaning of Treasury Regulation Section 301.7701-2(a). Sellers, the Company
and Purchaser agree to treat such conversion for all federal, state and
local income tax purposes as a taxable transfer of all of the assets of JPS
Automotive, L.P. to New JPS Automotive in exchange for the entire equity
interest in New JPS Automotive, which transfer fails to meet the "control"
requirement under Sections 351(a) and 368(c) of the Code, and therefore
constitutes a taxable sale of all such assets. Purchaser further covenants
and agrees to treat New JPS Automotive as a corporation for all such
purposes from and after the Closing Date, including (i) treating New JPS
Automotive as an "includible corporation" within the meaning of Section
1504(b) of the Code in any consolidated federal income tax return filed by
or on behalf of Purchaser after the Closing Date; and (ii) taking no action
the effect of which would terminate the status of New
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JPS Automotive as a corporation for all such purposes at any time
prior to the end of the taxable year of Purchaser that includes the
Closing Date.
(b) Following the Closing Date, the Company shall prepare an
allocation (in accordance with the methodology required by Section 1060 of
the Code and regulations thereunder) of the fair market value of the assets
of the Company (which shall be deemed to equal the Purchase Price) among
the assets of the Company in connection with the sale of such assets from
the Company to New JPS Automotive described in Section 6.12(a). This
allocation shall be subject to the approval of Sellers, which approval
shall not be unreasonably withheld or delayed. All income tax filings by
the parties and their affiliates shall be fully consistent with such
allocation and Section 6.12(a), including without limitation (i) those
statements or forms (including Form 8594) required by Section 1060 of the
Code and the regulations thereunder, or similar state or local tax law,
with respect to such sale; (ii) the Form 1065 partnership tax return of the
Company for the period ending with such sale; and (iii) any consolidated
federal income tax return in which any Affiliate of Foamex International
Inc. and New JPS Automotive are included.
(c) Purchaser and Sellers further acknowledge and agree that as a
result of the sale described in Section 6.12(a), the Company will be
treated for federal income tax purposes as having sold its interest in
Cramerton to New JPS Automotive, resulting in an adjustment to the basis of
Cramerton in its assets pursuant to Section 743(b) of the Code and a
termination of Cramerton within the meaning of Section 708 of the Code.
After the Closing, the Company shall prepare a schedule of the fair market
value and tax basis of each of its assets (such fair market value in the
aggregate to be consistent with the allocation described in Section
6.12(b)) and a calculation of the basis of Cramerton's assets following
such basis adjustment and such termination. All income tax filings by the
parties and their affiliates shall be fully consistent with such schedule
and calculations.
(d) In addition to complying with Section 6.3, within 45 days after
the preparation and approval of the allocation described in Section 6.12(b)
hereof, Sellers shall prepare or cause to be prepared drafts of the U.S.
Form 1065 partnership federal income tax returns, and any similar state or
local income tax returns for the Company and for Cramerton for the period
ending with the sale described in Section 6.12(a), together with pro forma
corporate income tax returns for New JPS Automotive for the period
beginning with such sale and ending with the Closing Date, all prepared in
accordance with this Section 6.12. Such returns shall be subject to the
approval of Purchaser, and shall not
- 44 -
be filed by Sellers or their affiliates without such approval. Any
consolidated or combined income tax return including the income of
New JPS Automotive shall be filed in accordance with (or amended to
comply with) such pro forma corporate income tax returns as approved
by Purchaser. Sellers and Purchaser shall, and shall cause their
respective Affiliates to, cooperate in the execution and filing of
such returns as approved by Purchaser.
Section 6.13. Certain Matters Relating to Enhanced Severance.
(a) In the event that in the nine months following the Closing Date,
the employment of any of the persons listed on Schedule 6.13 Part A
terminates under circumstances in which he or she is entitled to benefits,
then Sellers shall reimburse the Company or such Subsidiary for all amounts
which the Company or such Subsidiary is obligated to pay and actually pays
to or for the benefit of such person (whether in the form of a severance
payment or continued benefits, if any) pursuant to the JPS Automotive
and/or Successor Company Obligations Severance Plan, dated April 11, 1996,
as in effect as of the date hereof (the "Enhanced Severance Plan"), as such
Enhanced Severance Plan is interpreted pursuant to the Memorandum set forth
on Schedule 3.18, beyond the payment or benefit (if any) otherwise payable
whether pursuant to an employment agreement or otherwise. In addition,
Sellers shall reimburse the Company or any such Subsidiary for any payroll
or FICA tax which the Company or such Subsidiary is obligated to pay in
connection with any payment for which Sellers are required to provide
reimbursement pursuant to this paragraph (a).
(b) In the event that in the nine months following the Closing Date,
the employment of any person listed on Schedule 6.13 Part B terminates
under circumstances in which he or she is entitled to benefits, then
Sellers shall reimburse the Company or such Subsidiary for one-half of all
amounts which the Company or such Subsidiary is obligated to pay and
actually pays to or for the benefit of such person pursuant to the Enhanced
Severance Plan beyond the payment or benefit (if any) otherwise payable
whether pursuant to an employment agreement or otherwise; provided,
however, in no event shall Sellers be obligated to provide reimbursement
pursuant to this sentence in excess of $652,500. In addition, Sellers
shall reimburse the Company or any such Subsidiary for any payroll or FICA
tax which the Company or such Subsidiary is obligated to pay in connection
with any payment for which Sellers are required to provide reimbursement
pursuant to this paragraph (b).
(c) Sellers shall not be obligated to reimburse Purchaser, the
Company or any Subsidiary pursuant to this Section 6.13 with respect to any
person whose employment is
- 45 -
terminated if such person is employed (or retained as an independent
contractor or consultant) by the Company or any of its Affiliates
in the period of fifteen months from the Closing Date. To the extent
Sellers have previously reimbursed Purchaser, the Company or any
Subsidiary, such entity shall, subject to Purchaser's rights to make
additional claims under Section 6.13(b), promptly repay such excess
reimbursement to Sellers.
(d) The parties will reasonably cooperate with each other to avoid
the application of the special tax rules applicable to "excess parachute
payments" within the meaning of Section 280G of the Code to any payments to
or for the benefit of Employees referred to in this Section 6.13 or any
other Contract or Plan listed or required to be listed on any Schedule
hereto.
Section 6.14. Ongoing Insurance Cooperation.
(a) If the Closing occurs, Sellers and Purchaser shall cooperate
fully with each other and make available or cause to be made available to
each other in a timely fashion such information and documentation as may be
reasonably required for the processing of insurance claims and the
determining of or obtaining of insurance coverage. Sellers and Purchaser
will use reasonable efforts to cooperate (i) to transfer to Purchaser any
insurance and administrative services contracts that Purchaser wishes to
continue and (ii) to cause any insurance carrier or third party
administrator administering workers' compensation or other insurance
programs or liabilities assumed by Purchaser to deal directly with
Purchaser.
(b) With respect to any loss, liability or damage relating to,
resulting from or arising out of the ownership or conduct of the business
of the Company on or prior to the Closing Date for which any Parent Entity
would be entitled to assert, or cause any other person or entity to assert,
a claim for recovery under any policy of insurance maintained by or for the
benefit of a Parent Entity in respect of the Company or any Subsidiary
("Insurance"), at the request of Purchaser, Sellers will and will cause any
such Parent Entity to use their reasonable efforts to assert, or to assist
Purchaser to assert, one or more claims under such Insurance covering such
loss, liability or damage if Purchaser, the Company or any Subsidiary of
the Company is not itself entitled to assert such claim but such Parent
Entity is so entitled and Sellers will cause such Parent Entity to promptly
pay to Purchaser any amounts recovered in respect of any such claim,
provided that all of such Parent Entity's out-of-pocket costs and expenses
incurred in connection with the foregoing, including without limitation any
cost in asserting or assisting in asserting any claim, or any deductible,
self-insurance retention, retrospective
- 46 -
premium or other like arrangement by which such Parent Entity retains any
liability under any such policy of Insurance, are promptly reimbursed
by Purchaser. Sellers will be deemed, solely for the purpose of asserting
claims for insurance pursuant to the immediately preceding sentence, to
have retained liability for such loss, liability or damage to the extent
of the policy limits of the applicable Insurance. Nothing in this
Section 6.14 will change or alter the provisions of Article X.
(c) Until the Closing Date, if any current insurance policy is
cancelled or expires, Sellers will use their reasonable efforts to have
such current insurance policy renewed or extended or to replace such policy
with one or more policies providing substantially the same type and amount
of coverage prior to such cancellation or expiration, provided that any
such renewal, extension or replacement is on reasonable terms. After the
Closing Date, Sellers will not, and will cause each Parent Entity not to,
terminate or otherwise discontinue any current insurance policy solely for
the purpose of obtaining a refund thereunder; provided, however, that
nothing in this Agreement will prevent or interfere with Sellers' or any
other Parent Entity's right to terminate or otherwise discontinue any
insurance policy, including without limitation any current insurance
policy, for any other reason, including without limitation in connection
with the settlement or discharge of any claim.
Section 6.15. Cramerton Tax Distribution. Prior to the
Closing, Sellers shall cause Cramerton to distribute to its partners,
an amount equal to (a) all distributions declared but not paid to
the date hereof, (b) all distributions declared from the date hereof to the
Closing Date, and (c) to the extent not reflected in (a) or (b), Cramerton's
reasonable good faith estimate of the amount of taxes paid or to be paid by
such partners on account of the income of Cramerton through the Closing
Date, net of any prior overpayment of such amounts.
ARTICLE VII.
CONDITIONS TO SELLERS' OBLIGATIONS
The obligation of Sellers to consummate the transactions contemplated
by this Agreement is subject to the satisfaction (unless waived in writing by
Sellers) of each of the following conditions on or prior to the Closing Date:
Section 7.1. Representations and Warranties. The representations and
warranties of Purchaser contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date, as though such
representations and warranties were made anew on and as of the Closing Date.
Purchaser shall have delivered to Sellers a certificate of its President or a
Vice President, dated the Closing Date, to the foregoing effect.
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Section 7.2. Compliance with Agreement. Purchaser shall
have performed and complied in all material respects with the covenants
set forth in Sections 6.1(b) and (c), 6.4 and 6.6, and in all respects
with all other covenants to be performed or complied with by it on or prior to
the Closing Date. Purchaser shall have delivered to Sellers a certificate of
its President or a Vice President, dated the Closing Date, to the
foregoing effect.
Section 7.3. No Adverse Proceeding. As of the Closing Date,
there shall not have been instituted or be pending any suit,
action or other proceeding by any Governmental Agency in which it is sought
to restrain or prohibit or question the validity or legality of the transactions
contemplated by this Agreement, nor shall any such suit, action or proceeding
under any applicable antitrust law, rule or regulation be threatened by
any Governmental Agency.
Section 7.4. Hart-Scott-Rodino. All applicable waiting
periods (and any extensions thereof) under the HSR Act shall have expired or
otherwise been terminated.
Section 7.5. Consents. All consents, Permits, authorizations,
approvals, waivers and amendments which are listed on Schedule 8.5 hereto
shall have been obtained.
Section 7.6. Corporate Documents. Sellers shall have
received from Purchaser certified
copies of the resolutions duly adopted by the board of directors of Purchaser
approving the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby, and such resolutions shall be in full
force and effect as of the Closing Date.
Section 7.7. Certain Agreements. Purchaser shall have executed and
delivered the SMT License Agreement and Cramerton shall have executed and
delivered the Cramerton Supply Agreement on terms and conditions satisfactory
to Sellers in their sole discretion.
Section 7.8. Discount Debentures Change of Control Put. Sellers
shall have either (i) received the consent of the holders of FJPS's Senior
Secured Discount Debentures due 2004 ("Discount Debentures") to a waiver
of the offers to repurchase upon a Change of Control (as such term
is defined in the Indenture, dated as of June 28, 1994, by and among
FJPS and Foamex-JPS Capital Corporation, as joint and several obligors,
and Foamex International Inc., as guarantor, and Fleet National Bank of
Connecticut (formerly known as Shawmut Bank Connecticut, National
Association)) for the Discount Debentures or (ii) obtained a commitment letter
for financing to satisfy the offers to purchase
upon a Change of Control for the Discount Debentures in each case, on terms and
conditions satisfactory to Sellers in their sole discretion.
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Section 7.9. Opinion of Counsel. Sellers shall have
received an opinion of Jones, Day, Reavis & Pogue, counsel to Purchaser,
in the form of Exhibit C hereto ("Purchaser's Opinion of Counsel").
ARTICLE VIII.
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligation of Purchaser to consummate the transactions
contemplated by this Agreement is subject to the satisfaction (unless waived in
writing by Purchaser) of each of the following conditions on or prior to the
Closing Date:
Section 8.1. Representations and Warranties. The representations and
warranties of Sellers contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date, as though such
representations and warranties were made anew on and as of the Closing Date.
Sellers shall have delivered to Purchaser a certificate of the President or a
Vice President of JPSGP and the general partner of FJPS, dated the Closing Date,
to the foregoing effect.
Section 8.2. Compliance with Agreement. Sellers shall
have performed and complied in all material respects with the covenants
set forth in Sections 5.1(a), (b), (d), and (g), 5.2, 5.3, 5.4, 6.1(b)
and (c), 6.4, 6.6 and 6.15, and in all respects with all other covenants to
be performed or complied with by them on or prior to the Closing Date.
Sellers shall have delivered to Purchaser a certificate of the President or a
Vice President of JPSGP and the general partner of FJPS, dated the Closing Date,
to the foregoing effect.
Section 8.3. No Adverse Proceeding. As of the Closing Date,
there shall not have been instituted or be pending any suit, action or
other proceeding by any Governmental Agency in which it is sought
to restrain, prohibit or question the validity or legality of the transactions
contemplated by this Agreement, nor shall any such suit, action or proceeding
under any applicable antitrust law, rule or regulation be threatened by
any Governmental Agency.
Section 8.4. Hart-Scott-Rodino. All applicable waiting
periods (and any extensions thereof)
under the HSR Act shall have expired or otherwise been terminated.
Section 8.5. Consents.All consents, Permits, authorizations,
approvals, waivers and amendments which are listed on Schedule 8.5
hereto shall have been obtained.
Section 8.6. Corporate Documents. Purchaser shall have
received from Sellers certified copies of the resolutions duly adopted by the
board of directors of JPSGP and the general partner of FJPS approving the
execution and delivery of this Agreement by JPSGP and FJPS, respectively, and
the consummation
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of the transactions contemplated hereby, and such resolutions shall be in
full force and effect as of the Closing Date.
Section 8.7. FIRPTA. Sellers shall have delivered an affidavit,
dated the Closing Date, pursuant to Section 1445 of the Code (Foreign Investment
in Real Property Tax Act of 1980 affidavit) in substantially the form of
Exhibit G.
Section 8.8. Cramerton. Purchaser or one or more of its
Affiliates and Seiren Co. Ltd. or one or more of its Affiliates, shall have
entered into definitive agreements relating to the purchase by Purchaser or
its Affiliates of all of the direct and/or indirect interest in Cramerton
not beneficially owned by the Company, on terms and conditions set forth in
Schedule 8.8 and on such other terms as are reasonably satisfactory to
Purchaser.
Section 8.9. Purchaser Bank Consent. Purchaser shall have obtained,
on terms and conditions satisfactory to Purchaser in its sole discretion, the
consent of the requisite lenders under its existing bank credit facility
to the extent necessary to consummate the transactions contemplated
by this Agreement.
Section 8.10. Financing of Senior Note Change of Control Put.
Purchaser shall have obtained a commitment letter for a standby facility in an
amount of at least $120 million, to satisfy the offers to repurchase upon a
Change of Control (as such term is defined in the Senior Note Indenture) for the
JPS Automotive L.P. Senior Notes on terms and conditions satisfactory to
Purchaser in its sole discretion.
Section 8.11. Certain Agreements. Foamex L.P. shall have executed
and delivered the SMT License Agreement and the Cramerton Supply Agreement
on terms and conditions satisfactory to Purchaser in its sole discretion.
Section 8.12. Material Adverse Effect. Since the date hereof,
there shall not have occurred (i) a Material Adverse Effect or (ii) any
event which could reasonably be expected to have a Material Adverse Effect.
Section 8.13. Opinion of Counsel. Purchaser shall have received
an opinion of Willkie Farr & Gallagher, counsel to Sellers, in the form of
Exhibit D ("Sellers' Opinion of Counsel").
ARTICLE IX.
THE CLOSING; TERMINATION
Section 9.1. The Closing. The Closing of the transactions
contemplated hereby (the "Closing") shall beheld two Business Days after each
of the conditions precedent set forth in Articles VII and VIII have been
satisfied or waived by the party entitled to the benefit thereof
(the "Closing Date").
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The Closing shall be held at the offices of Jones, Day, Reavis & Pogue,
599 Lexington Avenue, New York, New York 10022 or at such other place as the
parties may mutually agree. At the Closing, all of the transactions provided
for in Article II hereof shall be consummated on a substantially
concurrent basis.
Section 9.2. Deliveries by Sellers at the Closing. At the Closing,
Sellers shall deliver, or cause to be delivered, to Purchaser, the following
items:
(a) The duly executed officer's certificates and certified
resolutions referred to in Sections 8.1, 8.2, and 8.6;
(b) The consents listed on Schedule 8.5;
(c) Sellers' Opinion of Counsel; and
(d) All other previously undelivered documents that Sellers are
required to deliver to Purchaser pursuant to this Agreement.
Section 9.3. Deliveries by Purchaser at the Closing. At the Closing,
Purchaser shall deliver, or cause to be delivered, to Sellers, the following
items:
(a) The duly executed officer's certificates referred to in Sections
7.1, 7.2, and 7.6;
(b) Duly executed and acknowledged transfer tax and other required
tax forms reasonably required by Sellers to consummate the transactions
contemplated hereby, all in the form required by applicable law;
(c) Purchaser's Opinion of Counsel;
(d) All other previously undelivered documents that Purchaser is
required to deliver to Sellers pursuant to this Agreement; and
(e) The Purchase Price.
Section 9.4. Termination. Anything in this Agreement to the
contrary notwithstanding, this Agreement and the transactions contemplated
hereby may be terminated in any of the following ways at any time before
the Closing and in no other manner:
(a) By mutual written consent of Purchaser and Sellers; or
(b) After October 31, 1996 by Purchaser or Sellers (if such
terminating party is not then in default of any
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obligation hereunder), if the Closing has not occurred on or before
such date.
In the event this Agreement is terminated pursuant to this Section
9.4, all further obligations of the parties hereunder shall terminate, except
for the obligations set forth in Sections 5.2, 12.4, 12.5, and 12.9, and except
that nothing in this Section 9.4 shall relieve any party hereto of any
liability for breach of any of the covenants or willful or intentional breach
of any of the representations or warranties contained in this Agreement.
ARTICLE X.
INDEMNIFICATION
Section 10.1. Survival. All of the representations and warranties
of Sellers contained in Article III of this Agreement or in any certificate
delivered by Sellers pursuant to this Agreement shall survive the Closing
and continue in full force and effect: (a) in the case of the
representations and warranties of Sellers contained in Section 3.22,
until six months after the expiration of the statute of limitations with
respect to the matter to which the claim relates, (b) in the case of the
representations and warranties of Sellers contained in Section 3.21,
until September 15, 2000, (c) in the case of the representations and warranties
of Sellers contained in Section 3.30(b), until June 15, 2001, (d) in the case of
the representations and warranties of Sellers contained in Section 3.11(a),
until the tenth anniversary of the Closing Date, and (e) in the case of any
other representation or warranty of Sellers contained in this Agreement (other
than the representations and warranties of Sellers contained in Sections 3.1,
3.2, 3.3, 3.5, and 3.24 (collectively the "Perpetual Representations")) or any
certificate delivered by Sellers, until April 30, 1998. Notwithstanding the
foregoing, any notice given in accordance with Section 12.1 of this Agreement
claiming an alleged breach of any representation or warranty hereunder will
without further action extend the survival period for the representation or
warranty alleged to have been breached as applied to the circumstances set forth
in such notice until immediately after the final resolution of the matter. The
Perpetual Representations, all of the representations and warranties of
Purchaser, and all of the covenants of Sellers and Purchaser contained in this
Agreement shall survive the Closing and continue in full force and effect
forever thereafter.
Section 10.2. Indemnification Provisions for Benefit of Purchaser.
Except in the case of any claim related to Taxes, for which the
Purchaser's right to indemnification shall be limited to the rights provided
under Section 10.4 hereof,
(a) In the event Sellers breach any of their representations,
warranties or covenants contained in this Agreement or in any certificate
delivered by Sellers
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pursuant to this Agreement and provided that, as to any claim for
breach of representations or warranties, Purchaser makes a written claim
for indemnification against Sellers within the applicable survival
period, if applicable, then Sellers agree jointly and severally to
indemnify Purchaser and its Affiliates from and against all Damages
Purchaser suffers resulting from or arising out of such event; provided,
however, Sellers shall not have any obligation to indemnify Purchaser from
and against any Damages resulting from the breach of any representation or
warranty of Sellers (as opposed to any covenant of Sellers) contained in
Article III of this Agreement (other than Perpetual Representations): (i)
until Purchaser has suffered aggregate Damages, by reason of all such
breaches (excluding breaches or series of related breaches resulting in
Damages of less than $5,000), in excess of $1 million (the "Deductible")
(after which point Sellers will be obligated only to indemnify the
Purchaser from and against further Damages in excess of the Deductible),
(ii) in the case of a breach, or alleged breach, of the representations and
warranties contained in Section 3.21, to the extent that Purchaser has not
complied with the provisions of Section 10.6, or (iii) notwithstanding
anything to the contrary contained in this Agreement, to the extent the
aggregate amount that Sellers have actually indemnified Purchaser for prior
breaches of representations and warranties of Sellers contained in Article
III of this Agreement exceeds $220 million (the "Cap"). Notwithstanding
anything to the contrary contained in this Agreement, to the extent any
Damages for which Purchaser may claim indemnity (or satisfaction of the
Deductible) pursuant to this Section 10.2 relate to a breach of any of the
representations or warranties contained in Article III (other than Section
3.5) and are due to Damages suffered by Cramerton (which are not directly
suffered by Purchaser or the Company or any other Subsidiary of the Company
other than Cramerton), Sellers shall only be obligated to indemnify
Purchaser and its Affiliates for (or reduce the remaining portion of the
Deductible by) 80% of the total Damages suffered by Cramerton.
Notwithstanding anything to the contrary contained in this Agreement,
Sellers shall not be obligated to indemnify Purchaser for (or apply against
the Deductible) any Damages which relate to a breach of any of the
representations or warranties contained in Article III (other than Section
3.5) and are due to Damages suffered by Enjema (which are not directly
suffered by the Company or any other Subsidiary of the Company (other than
JMC)) to the extent that such Damages exceed $1,000,000.
(b) Without limiting the generality or effect of the foregoing,
Sellers shall indemnify, defend and hold harmless the Company, Purchaser
and any of their respective Affiliates from and against any and all Damages
resulting from or arising out of any of the following:
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(i) Subject to Section 10.6, any business or property formerly
owned or operated by the Company, any of its Subsidiaries or any of
their respective predecessors but not owned or operated by the Company
or its Subsidiaries immediately after the Closing;
(ii) (A) Any breach of the 1994 Acquisition Agreement by
Sellers, the Company or any of their respective Affiliates to the
extent occurring or commencing, in whole or in part, prior to the
Closing Date and (B) all Taxes of another Person assumed by the
Company pursuant to the 1994 Acquisition Agreement which the Company
is obligated to pay after the Closing Date;
(iii) Any claim of any creditor of Sellers or any of their
Affiliates (other than the Company and its Subsidiaries), whether
arising prior to, on or after the Closing Date; or
(iv) Except as set forth on the Closing Date Balance Sheet or
Schedules 3.15 Items J.2-5, or 3.18: (x) any liability to any Former
Employee of the Company, any of its Subsidiaries or any of their
respective predecessors as of the Closing Date arising under any
employee welfare benefit plan, including, without limitation, post-
retirement health benefits, to the extent not fully funded immediately
prior to the Closing, and (y) any severance or other benefit payable
to any Employee or Former Employee by reason of this Agreement or the
transactions contemplated hereby, including, without limitation, any
stay bonus, golden parachute or other change-in-control payment or
benefit. This provision does not affect the obligations of the
parties under Section 6.13 hereof.
(c) The Indemnification provided for in Section 10.2(a) and 10.2(b)
shall survive any investigation at any time made by or on behalf of
Purchaser or any knowledge or information that Purchaser may have.
(d) Notwithstanding anything to the contrary contained in this
Agreement, including this Section 10.2, Purchaser shall not be entitled to
indemnity hereunder if and to the extent that there has been an increase in
a liability or contra-asset with respect to the matter for which
indemnification is sought in the period from the Interim Balance Sheet Date
to the Closing Date as reflected on the Closing Date Balance Sheet as
finally adjusted in connection with the computation of Final Adjusted Net
Assets.
(e) Notwithstanding anything to the contrary contained in this
Agreement, including this Section 10.2, Purchaser shall not be entitled to
indemnity hereunder for any breach
- 54 -
of Section 3.11(a), until Purchaser has first made, or has caused the
Company or the applicable Subsidiary to first make, a demand against
the insurer under any available title insurance and Purchaser has
concluded in its sole discretion that such insurer is unable or
unwilling to comply with such demand.
Section 10.3. Indemnification Provisions for Benefit of Sellers.
In the event Purchaser breaches any of its representations, warranties or
covenants contained in this Agreement or in any certificate delivered by
Purchaser pursuant to this Agreement and provided that Sellers make a written
claim for indemnification against Purchaser, then Purchaser agrees to indemnify
Sellers from and against the entirety of any Damages Sellers suffer resulting
from, arising out of, relating to or caused by such breach.
Section 10.4. Tax Indemnity. Provided that Purchaser makes a
written claim for indemnification hereunder, Sellers shall indemnify
and hold harmless Purchaser and its Affiliates against any Damages
resulting from (i) any Taxes of (or assertions of Tax against) the Seller
Entities or Enjema for any taxable period ending on or before the Closing Date
(and any Taxes of the Seller Entities or Enjema for any Straddle Period,
to the extent allocable to the portion of such period ending with the
Closing Date) including any Taxes under Section 6.2, except to the
extent provided for on the Closing Date Balance Sheet; (ii) Taxes relating to
any pre-Closing Affiliate of any of the Seller Entities which are imposed on
Purchaser, any Affiliate of Purchaser or any of the Seller Entities under
Treasury Regulations Section 1.1502-6 (or any similar provision of state, local
or foreign law), as a transferee or successor, by contract or otherwise; (iii) a
breach of any representation, warranty or covenant under Sections 3.22(a)(ix),
3.22(c), 3.22(d) or 6.11; and (iv) compliance with Section 6.12(a) hereof. For
purposes of this Section 10.4, the portion of Taxes for any Straddle Period
deemed to be allocable to the portion of such period ending with the Closing
Date shall be (i) in the case of Taxes that are either (x) based upon or related
to income or receipts, or (y) imposed in connection with any sale or other
transfer or assignment of property, the amount which would have been payable if
such period had ended on such date (except that, solely for purposes of
determining the marginal tax rate applicable in a jurisdiction in which such
rate depends upon the level of income or receipts, annualized income or receipts
may be taken into account if appropriate for an equitable sharing of such
Taxes); and (ii) in the case of Taxes described in subparagraph (i) that are
imposed on a periodic basis and measured by the level of any item, the amount of
such Taxes for the entire Straddle Period multiplied by a fraction, the
numerator of which is the number of calendar days in the portion of the period
ending on the Closing Date and the denominator of which is the number of
calendar days in the entire Straddle Period. In the case of Damages
attributable to Taxes of Cramerton or Enjema described in Section
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10.4(i) above, Seller shall only be obligated to indemnify
Purchaser to the extent of 80% or 50%, respectively, of such Damages.
Section 10.5. Matters Involving Third Parties.
(a) If any third party notifies any party hereto (the "Indemnified
Party") with respect to any matter which may give rise to a claim for
indemnification against the other party hereto (the "Indemnifying Party")
under this Article X, then the Indemnified Party shall use reasonable
efforts to notify the Indemnifying Party thereof promptly and in any event
within ten days after receiving any written notice from a third party;
provided, however, that no delay on the part of the Indemnified Party in
notifying the Indemnifying Party shall relieve the Indemnifying Party from
any obligation hereunder unless, and then solely to the extent that, the
Indemnifying Party is actually prejudiced thereby.
(b) Once the Indemnified Party has given notice of the matter to the
Indemnifying Party, the Indemnified Party may, subject to the Indemnifying
Party's rights to assume the defense of such matter pursuant to paragraph
(c) below, defend against the matter in any manner it deems appropriate.
(c) The Indemnifying Party may at any point in time choose to assume
the defense of all of such matter, in which event:
(i) the Indemnifying Party shall defend the Indemnified Party
against the matter with counsel of its choice reasonably satisfactory
to the Indemnified Party,
(ii) the Indemnified Party may retain separate counsel at its
sole cost and expense (except that the Indemnifying Party shall be
responsible for the fees and expenses of one separate co-counsel for
all Indemnified Parties to the extent the Indemnified Party is
advised, in writing by its counsel, that either (x) the counsel the
Indemnifying Party has selected has a conflict of interest, or (y)
there are legal defenses available to the Indemnified Party that are
different from or additional to those available to the Indemnifying
Party (but only to the extent of such additional defenses)), and
(iii) the Indemnifying Party shall reimburse the Indemnified
Party for the reasonable costs of defense or investigation for the
period prior to the assumption of the defense.
- 56 -
(d) Assumption of the defense of any matter by the Indemnifying Party
shall without further action constitute an irrevocable waiver by the
Indemnifying Party of its right to claim at a later date that such third
party action for which the defense was assumed is not a proper matter for
indemnification pursuant to this Article X.
(e) The Indemnified Party shall not consent to the entry of a
judgment or enter into any settlement with respect to any matter which may
give rise to a claim for indemnification without the written consent of the
Indemnifying Party, which consent may not be unreasonably withheld or
delayed. The Indemnifying Party shall not consent to the entry of a
judgment with respect to any matter which may give rise to a claim for
indemnification or enter into any settlement which does not include a
provision whereby the plaintiff or claimant in the matter releases the
Indemnified Party from all liability with respect thereto, without the
written consent of the Indemnified Party (not to be unreasonably withheld
or delayed).
Section 10.6. Certain Limitations on Environmental Indemnification.
(a) Purchaser and Sellers agree that except as provided in this
Agreement, Purchaser forever waives, and shall cause the Company and its
Subsidiaries to forever waive, any right it has or may in the future have
against the Parent Entities under any Environmental Law (collectively,
"Environmental Losses").
(b) Notwithstanding any other provision of this Agreement to the
contrary, Sellers shall have no obligation to indemnify Purchaser pursuant
to Section 10.2 for Environmental Losses unless, and only to the extent
that, after the Closing Date, Purchaser, the Company, or any of their
respective Affiliates, incurs, undertakes to incur, or becomes liable to
incur Costs of Remediation as a result of a breach of this Agreement;
provided, however, that nothing herein will require that Costs of
Remediation be incurred, undertaken to be incurred or liable to be incurred
prior to the expiration of the survival period set forth in Section 10.1 so
long as notice of a breach or alleged breach or claim for Costs of
Remediation is given during the survival period. Such "Costs of
Remediation" shall be the sole basis for calculating Damages arising out of
Environmental Losses pursuant to Section 10.2, and shall be limited to
those costs that are necessary:
(i) in accordance with Environmental Laws in effect at the time
such costs are incurred, to respond to a Release of any Hazardous
Materials that first occurred in whole or in part at, on, under, in or
from the Owned Real Property, Leased Property or formerly
- 57 -
owned, leased or operated properties or third party properties prior
to the Closing Date;
(ii) to bring the Company from any non-compliance with
Environmental Laws first occurring in whole or in part prior to the
Closing Date into compliance with all Environmental Laws in effect as
of the time the Costs of Remediation are incurred; or
(iii) in accordance with Environmental Laws in effect at the
time such costs are incurred, to respond to any legal proceedings,
notices, requests for information, investigations or claims under
Environmental Laws brought by third parties;
provided, however, Sellers shall not be required to indemnify Purchaser for
Costs of Remediation to the extent arising solely out of the knowing acts or
knowing omissions of Purchaser occurring after the Closing Date.
(c) Sellers waive any right they may have under Environmental Law
against Purchaser, the Company and its Subsidiaries for any matter to the
extent arising out of a breach by Sellers of Section 3.21.
(d) If a dispute arises with respect to whether a claim for Costs of
Remediation meets the requirements of Section 10.6(b)(i), (ii) and (iii)
(without respect to whether there has been a breach of the representations
and warranties of Section 3.21), and such dispute cannot be resolved within
20 days of written notice of the dispute, the parties shall select within
14 days thereafter a mutually satisfactory qualified environmental
consultant who is a professional engineer (the "Environmental Arbitrator").
The Environmental Arbitrator shall review the information relevant to the
dispute provided by the parties and within 30 days render a decision as to
whether or not the Costs of Remediation meet the requirements of Section
10.6(b)(i), (ii) and (iii) (without respect to whether there has been a
breach of the representations and warranties of Section 3.21) by applying
the standards set forth in this Section 10.6. Any fees charged by the
Environmental Arbitrator shall be allocated as determined by the
Environmental Arbitrator between Purchaser and Sellers. If an
Environmental Arbitrator cannot be agreed upon within the aforesaid period,
the parties shall direct the American Arbitration Association ("AAA") to
immediately provide a list of six potential arbitrators who are qualified
environmental consultants each of whom is a professional engineer. From
the list provided, each party shall have the opportunity to strike one
name, and the AAA shall appoint the Environmental Arbitrator from the
remaining names. The final determination of the Environmental Arbitrator
shall be final and binding on the parties and there shall be no
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appeal from or reexamination of such final determination,
except for fraud, perjury, or misconduct by the Environmental Arbitrator
prejudicing the rights of any party, and to correct manifest clerical
errors. Purchaser and Sellers may enforce any final determination of the
Environmental Arbitrator in any court of competent jurisdiction.
Section 10.7. Certain Additional Provisions Relating to
Indemnification.
(a) Notwithstanding Section 12.12, after the Closing Date, the
indemnification provisions set forth in this Article X shall constitute the
sole and exclusive recourse and remedy available to the parties hereto with
respect to the breach of any representation or warranty contained in this
Agreement or in any certificate delivered pursuant to this Agreement except
for actual fraud.
(b) The Indemnifying Party shall have no obligation to indemnify or
hold harmless the Indemnified Party pursuant to Article X for any Damages
to the extent that the Indemnified Party or its Affiliates have actually
recovered such Damages (net of expenses or other costs (including without
limitation attorneys' fees and expenses) of recovery and any retroactive or
retrospective premium increases resulting from such recovery, including
without limitation obligations engendered thereby) from any Person other
than the Indemnifying Party or any Affiliate thereof.
(c) The Indemnified Party hereby assigns to the Indemnifying Party
any right the Indemnified Party may have against any Person (other than the
Indemnifying Party, the Indemnified Party and any Affiliate of any of the
foregoing), including, without limitation, any insurance company, to
recover any Damages or other amounts that the Indemnifying Party has paid
to the Indemnified Party pursuant to Article X. The Indemnified Party
agrees to cooperate reasonably with the Indemnifying Party, at the
Indemnifying Party's sole cost and expense, in connection with the
Indemnifying Party's efforts to pursue such rights, including, without
limitation, providing reasonable access to the Indemnified Party's
personnel, books and records, making its personnel and those of its
Affiliates reasonably available for deposition and testimony and executing
such additional instruments of assignment to evidence the assignment of
such rights. In the event such rights by their terms may not be assigned
(including, without limitation, the rights of the Company under the 1994
Acquisition Agreement), the Indemnified Party agrees to pursue its rights
against such other Person, at the sole cost and expense and direction of
the Indemnifying Party, and to remit to the Indemnifying Party any
recovery.
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(d) To the extent permitted by applicable law, any payments by an
Indemnifying Party under Article X shall be treated as an adjustment to the
Purchase Price for all foreign, federal, state and local income tax
purposes.
Section 10.8. Certain Litigation Matters.
(a) Sellers shall indemnify, defend and hold harmless the Company,
Purchaser and any of their respective Affiliates from and against any and
all Damages resulting from or arising out of or caused by the matters set
forth on Item 2 of Schedule 3.20 (the "Indemnified Litigation").
(b) Purchaser shall cause the Company and its Subsidiaries to assign
to Sellers, subject to Purchaser's rights under paragraph (c) below, any
right that they may have against any Person (other than Purchaser, the
Company or any Affiliate of any of the foregoing), that is a party or an
Affiliate of a party to the Indemnified Litigation, including, without
limitation, any counterclaim, right of offset, or claim arising out of the
transactions giving rise to the Indemnified Litigation.
(c) Sellers shall control the Indemnified Litigation pursuant to the
provisions of Section 10.5; provided, however, that Purchaser shall have
the right to control any aspect of the Indemnified Litigation relating to
any provisional or other remedy, other than one imposing solely monetary
relief. Purchaser shall also have the right to approve any settlement,
provided that such approval is not unreasonably withheld; except that this
proviso shall be inapplicable in respect of any settlement involving
anything other than the exchange of releases or the payment of money.
Sellers shall direct their counsel to communicate with Purchaser and to
consult with Purchaser on all significant matters relating to the
Indemnified Litigation, including by providing Purchaser with any and all
papers served or filed in the Indemnified Litigation or other
correspondence or documents requested by Purchaser, including papers
otherwise subject to a claim under the attorney-client privilege or the
work-product doctrine, provided that Purchaser executes a joint defense
agreement or takes other reasonable steps to preserve such privilege or
doctrine. Purchaser shall also be entitled, in its sole discretion, but
will not be required to participate in the Indemnified Litigation.
Purchaser shall cause the Company and its Subsidiaries and Affiliates to
cooperate reasonably with Sellers in connection with Sellers' efforts to
pursue such rights, including, without limitation, providing access to
their personnel, books and records, and making their personnel reasonably
available for deposition and testimony.
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ARTICLE XI.
EMPLOYEE BENEFITS
Section 11.1. Employees.
(a) Effective as of the Closing Date, the Employees shall continue
employment with the Company and its Subsidiaries in the same positions and
at the same level of wages and/or salary; provided, however, except as may
be specifically required by applicable law or any Contract, the Company and
its Subsidiaries shall not be obligated to continue any employment
relationship with any Employee for any specific period of time.
(b) Subject to Sections 10.2 and 6.13, upon the Closing, the Company
and its Subsidiaries shall be solely responsible for all Liabilities and
shall honor and satisfy all obligations with respect to the Plans.
Notwithstanding the foregoing, the Company shall not be required to
continue any particular Plan after the Closing, and any Plan may be amended
or terminated in accordance with its terms and applicable law; provided
such change is not prohibited by any collective bargaining agreement.
Purchaser shall take all required actions so that the Employees will
receive credit for eligibility and vesting purposes, but not for the
accrual of retirement benefits, for their periods of service with the
Company and its predecessors prior to the Closing under any employee
benefit plans, programs or arrangements established, maintained, continued
or made available by the Purchaser, the Company or any Affiliate after the
Closing in which the Employees are eligible to participate.
ARTICLE XII.
MISCELLANEOUS PROVISIONS
Section 12.1. Notices. All notices, demands or other communications
to be given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given (a) when delivered
personally to the recipient, (b) when sent to the recipient by telecopy
(receipt electronically confirmed by sender's telecopy machine) if during
normal business hours of the recipient, otherwise on the next Business Day,
(c) one Business Day after the date when sent to the recipient by reputable
express courier service (charges prepaid), or (d) seven Business Days after the
date when mailed to the recipient by certified or registered mail, return
receipt requested and postage prepaid. Such notices, demands and other
communications will be sent to Sellers and to Purchaser at the addresses
indicated below:
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If to Purchaser: Collins & Aikman Products Co.
701 McCullough Drive
Charlotte, North Carolina 28232
Attention: Chief Executive Officer
Fax: (704) 548-2208
With a copy to: Collins & Aikman Products Co.
(which shall not 201 Madison Avenue, 6th Floor
constitute notice) New York, New York 10016
Attention: Elizabeth Philipp, Esq.
Fax: (212) 578-1269
and
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Attention: Robert A. Profusek, Esq.
Fax: (212) 755-7306
If to Sellers: Foamex-JPS Automotive L.P.
JPSGP Inc.
c/o Foamex International Inc.
375 Park Avenue, 11th Floor
New York, New York 10152
Attention: Philip N. Smith, Jr.
Facsimile No. (212) 593-1363
With a copy to: Willkie Farr & Gallagher
(which shall not 153 East 53rd Street
constitute notice) New York, New York 10022
Attention: Jack H. Nusbaum
Facsimile No. (212) 821-8111
or to such other address as either party hereto may, from time to time,
designate in writing delivered pursuant to the terms of this Section.
Section 12.2. Amendments. The terms, provisions and
conditions of this Agreement may not be changed, modified or amended in
any manner except by an instrument in writing duly executed by both of
the parties hereto.
Section 12.3. Assignment and Parties in Interest.
(a) Neither this Agreement nor any of the rights, duties, or
obligations of any party hereunder may be assigned or delegated (by
operation of law or otherwise) by either party hereto except with the prior
written consent of the other party hereto, provided, however, that (i)
prior to or after the Closing, Purchaser may assign all of its rights
hereunder to any Affiliate of Purchaser, provided that no such assignment
will relieve Purchaser of its obligations hereunder unless such assignment
is made at Closing to
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Collins & Aikman Corp., and provided further that such assignment shall
not hinder, delay or prevent the Closing, and (ii) Purchaser has a
one-time right to assign all of its rights hereunder to any other
Person which acquires all or substantially all of the assets of, or
equity interest in, the Company.
(b) Notwithstanding any provision of this Agreement to the contrary,
Purchaser hereby acknowledges and agrees that Sellers may collaterally
assign their rights, title and interest to any payments under this
Agreement to any creditor of Sellers. Furthermore, Sellers hereby
acknowledge and agree that upon receipt of written notice from such
creditor that an "Event of Default" has occurred, Purchaser will tender any
payments due under this Agreement to such creditor in accordance with the
instructions set forth in such notice; provided, however, in the event that
Purchaser tenders payment to Sellers, such payment shall be a complete
discharge of Purchaser's obligation to such creditor for such payment and
Purchaser shall thereafter have no further liability to such creditor with
respect to such payment.
(c) Except as provided in Article X, this Agreement (including
without limitation Article XI) shall not confer any rights or remedies upon
any person or entity other than the parties hereto and their respective
permitted successors and assigns.
Section 12.4. Announcements. All press releases, notices to
customers and suppliers and similar public announcements prior to or within five
days after the Closing Date with respect to this Agreement and the transactions
contemplated by this Agreement shall be approved by both Purchaser and Sellers
prior to the issuance thereof; provided that either party may make any public
disclosure it believes in good faith is required by law, regulation or rule of
any stock exchange on which its securities are traded (in which case the
disclosing party shall use reasonable efforts to advise the other party
prior to making such disclosure and to provide the other party
a reasonable opportunity to review the proposed disclosure).
Section 12.5. Expenses. Except as expressly set forth in this
Agreement, each party to this Agreement shall bear all of its legal,
accounting, investment banking, and other expenses incurred by it or on
its behalf in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated.
Section 12.6. Entire Agreement. This Agreement constitutes
the entire agreement among the parties hereto with respect to the subject
matter hereof, supersedes and is in full substitution for any and all
prior agreements and understandings among them relating to such subject
matter, and no party shall be
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liable or bound to the other party hereto in any manner with respect to such
subject matter by any warranties, representations, indemnities, covenants,
or agreements except as specifically set forth herein. The Exhibits and
Schedules to this Agreement are hereby incorporated and made a part hereof
and are an integral part of this Agreement.
Section 12.7. Descriptive Headings. The descriptive headings of
the several sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the
provisions hereof.
Section 12.8. Counterparts. For the convenience of the parties,
any number of counterparts of this Agreement may be executed by any
one or more parties hereto, and each such executed counterpart shall be, and
shall be deemed to be, an original, but all of which shall constitute, and
shall be deemed to constitute, in the aggregate but one and the same
instrument.
Section 12.9. Governing Law; Jurisdiction.
(a) This Agreement and the legal relations between the parties hereto
shall be governed by and construed in accordance with the laws of the State
of New York, applicable to contracts made and performed therein.
(b) Except as set forth in Section 10.6(d), the parties hereto
irrevocably submit to the exclusive in personam jurisdiction of any New
York State or Federal court sitting in the City of New York over any suit,
action or proceeding arising out of or relating to this Agreement. To the
fullest extent it may effectively do so under applicable law, each of the
parties hereto irrevocably waives and agrees not to assert, by way of
motion, as a defense or otherwise, (i) any claim that (A) any proceeding
arising out of or relating to this Agreement may be brought in another
jurisdiction (except a proceeding brought by a third party) or (B) that it
is not subject to the in personam jurisdiction of any court referenced in
the first sentence of this clause (b), (ii) any objection that it may now
or hereafter have to the laying of the venue of any such suit, action or
proceeding brought in any such court and (iii) any claim that any such
suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
Section 12.10. Construction. The language used in this Agreement
will be deemed to be the language chosen by the parties to express their
mutual intent, and no rule of strict construction will be applied against
any party. Any references to any federal, state, local or foreign
statute or law will also refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. Unless the context
otherwise requires: (a) a term has the meaning assigned to it by this
Agreement; (b) an accounting term not otherwise defined has the
- 64 -
meaning assigned to by GAAP; (c) "or" is disjunctive but not exclusive; (d)
words in the singular include the plural, and in the plural include the
singular; (e) provisions apply to successive events and transactions; and (f)
"$" means the currency of the United States of America.
Section 12.11. Severability. In the event that any one or more
of the provisions contained in this Agreement or in any other instrument
referred to herein, shall, for any reason, be held to be invalid, illegal
or unenforceable in any respect, then to the maximum extent permitted by
law, such invalidity, illegality or unenforceability shall not affect any
other provision of this Agreement or any other such instrument. Furthermore,
in lieu of any such invalid or unenforceable term or provision, the parties
hereto intend that there shall be added as a part of this Agreement a
provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
Section 12.12. Specific Performance. Without limiting or waiving
in any respect any rights or remedies of Purchaser under this Agreement now
or hereinafter existing at law or in equity or by statute, each of the
parties hereto shall be entitled to seek specific performance of the
obligations to be performed by the other in accordance with the provisions
of this Agreement.
ARTICLE XIII.
FOAMEX INTERNATIONAL INC. GUARANTY
Section 13.1. Guaranty. Foamex International Inc., a Delaware
corporation ("Guarantor"), hereby irrevocably and unconditionally guarantees
the due and prompt payment and performance of all obligations, covenants
and agreements to be performed by Sellers to Purchaser hereunder (the
"Obligations").
Section 13.2. Nature of Guaranty. The guaranty to be provided
by Guarantor pursuant to Section 13.1 hereof is the exclusive remedy of
Purchaser against Guarantor and is a guaranty of payment and performance,
not merely of collection, and is independent of any other guaranty or
surety of the Obligations. If Sellers shall fail timely to perform or
pay any Obligation, Guarantor shall pay or perform such Obligation as
and when due. Guarantor hereby waives (i) promptness, diligence, notice,
disclosure, demand for, presentment, protest and dishonor, and (ii)
except as set forth below, any right to force Purchaser to proceed first,
concurrently or jointly against Sellers, any other guarantor, surety or
other co-obligor. Purchaser hereby agrees that prior to enforcing its
rights of payment and performance against Guarantor pursuant to Section 13.1
hereof with respect to any Obligation, Purchaser shall have (x) made demand on
Sellers to perform such obligation, covenant or agreement hereunder, (y) given
Sellers a reasonable opportunity to comply with such obligation, covenant or
agreement, and (z) determined in its sole
- 65 -
discretion that Sellers have not or will not comply with such Obligation.
Section 13.3. Limitation on Guaranty. Notwithstanding anything
to the contrary contained in this Agreement, the scope of Guarantor's
liability hereunder shall in no event be greater than the scope of the
liability of Sellers under this Agreement. Purchaser expressly agrees
that the defenses available to Guarantor shall be no less than the
defenses which are, or would have been, available to Sellers.
Section 13.4. Authority of Guarantor. Guarantor is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Guarantor has full corporate power and authority to
execute and deliver this Agreement, and the execution and delivery by
Guarantor of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of Guarantor, and this Agreement constitutes
the legal, valid and binding obligation of Guarantor enforceable against
Guarantor in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, moratorium, or similar laws
from time to time in effect which affect creditors' rights generally and by
legal and equitable limitations on the enforceability of specific remedies.
The execution, delivery and performance of this Agreement does not
conflict with any contractual or other obligation to which Guarantor is
a party, except for such conflicts which individually or in the aggregate could
not reasonably be expected to have a material adverse effect on Guarantor or
materially impair the ability of Guarantor to consummate the transactions
contemplated by this Agreement.
- 66 -
IN WITNESS WHEREOF, Sellers and Purchaser have executed and delivered
this Agreement as of the day and year first written above.
SELLERS: FOAMEX-JPS AUTOMOTIVE L.P.
BY: FJGP, Inc.
Its: General Partner
BY: /s/ Philip N. Smith, Jr.
Name: Philip N. Smith, Jr.
Title: Vice President
JPSGP INC.
BY: /s/ Philip N. Smith, Jr.
Name: Philip N. Smith, Jr.
Title: Vice President
GUARANTOR: FOAMEX INTERNATIONAL INC.
pursuant to Article XIII.
BY: /s/ Philip N. Smith, Jr.
Name: Philip N. Smith, Jr.
Title: Vice President
PURCHASER: COLLINS & AIKMAN PRODUCTS CO.
BY: /s/ David A. Stockman
Name: David A. Stockman
Title: Co-Chairman of the Board
- 67 -
<PAGE>
Collins & Aikman Products Co.
1996 EXECUTIVE INCENTIVE
COMPENSATION PLAN
</PAGE>
<PAGE>
Collins & Aikman Products Co.
1996 EXECUTIVE INCENTIVE COMPENSATION PLAN
ARTICLE 1. Introduction: Plan Summary and Objectives
1.1 Plan Summary. The Collins & Aikman Products Co. (the "Company") 1996
Executive Incentive Compensation Plan (the "Plan") establishes the
annual (fiscal year) bonus program for key employees ("Participants")
who are in a position to have an impact on the attainment of the goals of
the Company, and the Company's operating divisions. The Plan provides
for substantial awards to Participants whose unit meets or exceeds the
specified performance goal.
The bonuses of Participants in the 1996 Plan will be based primarily on
one financial measure: Earnings Before Interest and Taxes ("EBIT") of
the Participant's unit. Threshold, Target and Maximum performance
goals will be established for this financial measure. These goals
shall be associated, respectively, with lowest, expected and maximum
bonus levels for each measure.
Awards are determined by assigning each Participant a "Target Bonus" or
expected bonus level that is equal to a specified percent of base salary.
The bonus actually paid to the Participant will be based on the extent
to which the performance of his or her unit meets or exceeds the
predetermined goals, and on the Participant's performance
relative to other Plan Participants. The maximum bonus payable shall
be equal to 200% of the Target Bonus.
1.2 Plan Objectives. The Plan objectives are:
a. to motivate key employees to achieve and exceed the specified
financial objectives,
b. to maintain management's focus on the importance of earnings,
c. to encourage management to balance the longer term needs of the
business with shorter term requirements, and
d. to attract and retain the quality and quantity of key employees
required to successfully manage the Company's business.
ARTICLE 2. Plan Definitions
2.1 "Base Salary" means the annual base rate of pay, exclusive of bonuses,
long term incentive awards, benefits, car allowances, awards under this
Plan and any other non-salary items, as in effect for a Participant on
the last day of the calendar year ending in the Plan Year for which
an incentive award is made.
</PAGE> 1
<PAGE>
2.2 "Board" means the Board of Directors of the Company.
2.3 "Cause" means
a. fraud, misappropriation or gross misconduct with respect to any
business of the Company or an affiliate of the Company or
intentional material damage to any property or business, or the
reputation, of the Company or an affiliate of the Company,
b. willful failure by a Participant to perform his/her duties and
responsibilities and to carry out his/her authority,
c. willful malfeasance or misfeasance or breach of duty or
representation to the Company or an affiliate of the Company,
d. willful failure to act in accordance with any specific lawful
instructions of a majority of the Board of Directors of the
Company, or breach of any written agreement between Participant
and the Company or an affiliate of the Company, or
e. conviction of a Participant of a felony.
2.4 "Committee" shall mean the Compensation Committee of the Board of
Directors of the Company or any parent company, whose members are
determined and appointed by the Board or by the Board of Directors of
any parent company in their sole discretion.
2.5 "Company" shall mean Collins & Aikman Products Co.
2.6 "Division" means an operating division of the Company for which EBIT
performance goals are established and approved by the Committee and the
President and CEO.
2.7 "Earnings Before Interest and Taxes" ("EBIT") means earnings before
interest and taxes (including imputed interest and taxes) as determined
by the Company in accordance with generally accepted accounting
principles.
2.8 "Effective Date" means January 28, 1996.
2.9 "Maximum Performance Goal" means the highest level of performance
specified for the EBIT financial measure. Performance at (and above)
this level is associated with the maximum level of bonus payouts for
each measure.
2.10 "Participant" means a key executive or staff person designated as being
eligible for an award under the Plan.
2.11 "Plan Year" means the 1996 fiscal year ending December 28, 1996.
</PAGE> 2
<PAGE>
2.12 "Target Bonus" means a specified percentage of a Participant's Base Salary
as determined pursuant to the provisions of the Plan.
2.13 "Target Performance Goal" is the expected level of performance established
for the EBIT financial performance measure based on the Company's and,
where applicable, Division's budget and other considerations. This
level of performance is associated with the Target Bonus level of
bonus payouts.
2.14 "Threshold Performance Goal" is the lowest acceptable level of performance
specified for the EBIT financial performance measure. This level of
performance is associated with the lowest level of bonus payouts.
ARTICLE 3. Eligible Executives
3.1 Eligible Executives. Key executives and staff of the Company and
Divisions are eligible to be named Participants in the Plan for the Plan
Year. Generally, only those executives and staff whose potential
contributions are deemed to be important to the success of the Company or
Division in achieving its objectives will be designated as Participants.
The designation of eligible executives shall be the responsibility of the
Vice President - Human Resources and President and CEO of the Company.
See Article 5 regarding Participant selection.
ARTICLE 4. Setting Performance Goals
4.1 Budgets and Performance Goals
The annual budget of the Company shall form the initial basis for setting
financial performance goals.
Threshold, Target and Maximum EBIT Performance Goals will be established
for the Company and each Division. Threshold and Maximum goals may or
may not be pre-determined based on a fixed percent of the Target goal.
The final determination of goals shall be subject to the approval of the
Committee, in their sole discretion.
4.2 Performance Goal Setting Process
a. Performance Goal Recommendations: Upon finalization of the
Company's budget, the President and CEO shall submit recommended
Threshold, Target and Maximum EBIT Performance Goals and any
interim goals.
</PAGE> 3
<PAGE>
b. Performance Goal Approval: Final approval of the performance
goals shall be the responsibility of the Committee. It is
contemplated that such goals, once set, will not change for any
reason during the fiscal year. The Committee may,
in its sole discretion, alter or amend these goals if deemed
necessary or appropriate.
ARTICLE 5. Selecting Plan Participants; Assigning Target Bonuses
5.1 Participant Selection.
The President and CEO and each Division head (as appropriate) shall
recommend as a Plan Participant any executive or key employee whose
potential contributions to his/her unit's performance are considered
important to the success of their unit. Such recommendations are subject
to the Plan and the final approval of the Vice President - Human
Resources and President and CEO.
a. Eligible Group. The group of eligible employees shall include,
but not be limited to, senior executives and their direct reports
at the Company staff level, Division heads and senior management
of the Divisions and their direct reports. Key employees below
these levels may be included.
b. Approval. No employee shall become a participant in the Plan,
nor shall Plan participation be discussed with an employee,
until approval is received in writing from the Vice President -
Human Resources.
5.2 Assignment of Target Bonuses
a. Target Bonus Guidelines. The Vice President - Human Resources and
the President and CEO have the responsibility to assign and
recommend a Target Bonus for each Participant. The recommended
Target Bonus, will take into account the Participant's: a) position
relative to those of other Participants, b) anticipated
contribution to the organization's performance and c) external
competitive bonus rates for similar positions in similar
industries.
b. Target Bonus Changes. From time to time, due primarily to changes
in position, it may be necessary to modify an assigned Target
Bonus. The Vice President - Human Resources and President and
CEO shall have the authority to make such modifications subject
to the terms of this Plan.
</PAGE> 4
<PAGE>
5.3 Communication of Performance Goals, Participant Eligibility and Target
Bonuses
The Vice President - Human Resources has the responsibility to
communicate to each Participant his or her unit's performance goals,
Participant eligibility and Participant Target Bonus, provided: a)
the necessary approvals have been obtained before any communication
takes place, b) any communication regarding the Target Bonus,
written or otherwise, is fully consistent with this Plan, c) it is
clear that the recommendation for program participation and bonus
eligibility is not a guarantee of payment or amount, and d) a
Participant be provided a copy of this Plan upon request.
ARTICLE 6. Granting Participant Bonuses
6.1 Introduction
Bonuses based on EBIT performance will be paid only if the Participant's
unit (i.e., Division or Company, as appropriate) hits its EBIT Threshold.
It is not necessary for the Company to achieve its EBIT threshold for a
Division to receive a bonus based on EBIT.
All bonuses are subject to the final approval of the Committee.
6.2 EBIT Bonus Calculation. When the EBIT bonus is determined, it is
calculated as a percent of the Target Bonus per the following schedule:
Company/Division EBIT
Performance Level Achieved: Threshold Target Maximum
Payout as a % of Target Bonus 50% 100% 200%
In addition, the Committee may establish interim EBIT performance levels.
Straight line interpolation is used between Threshold and Target; and
between Target and Maximum.
6.3 Bonus Recommendations, Approvals and Distribution
a. Bonus Recommendations. The President & CEO shall, as soon as
possible following the determination of year-end results,
submit to the Committee a list of recommendations for all Plan
Participants for actual bonus awards. In determining bonus
awards, the President and CEO may, in his sole discretion,
use other factors such as cash flow, etc. in determining
the level of achievement of the financial performance measure.
Where a recommended award is different than a calculated award,
the variance should be noted.
</PAGE> 5
<PAGE>
In arriving at the recommended awards, the Vice President - Human
Resources shall work with each Division head in considering the
Participants' Target Bonus levels, the calculated awards based
on actual EBIT performance, and the Participants' relative
contributions to the unit's performance. The Division head
has, therefore, the discretion to modify individual calculated
awards to account for different performance levels. If one
individual's award is modified upward, however, other awards
have to be adjusted downward such that the net change of all
modifications is $0. In other words, the sum of all awards
calculated must stay the same regardless of any changes in
individual awards.
Subject to the other provisions hereof, in no event shall a
Participant who is eligible for a calculated award have his/her
award reduced below 75% of the award as calculated.
Recommendations for Company staff shall normally be based
entirely on the actual performance of the Company as a whole.
b. Final Approval. The Committee shall have final approval of
Company and Division operating results to be used in bonus
calculations and the timing, and amount of all bonus payments.
c. Bonus Distribution. Final approval by the Committee shall
authorize the President and CEO to make bonus grants as approved.
The Vice President - Human Resources shall effect the payment
of the bonus as soon as is administratively practicable once
the bonuses are approved.
ARTICLE 7. Plan Administration
7.1 Administrative Responsibilities
a. Overall Plan administration shall be the responsibility of the
Committee who shall have absolute and final discretion regarding
interpretation of Plan and sole authority to make all decisions
with respect to Plan.
b. The Committee shall have the authority to, at their discretion,
approve all performance goals, actual performance results,
recommended bonuses, Plan interpretations and modifications
and to take any and all other actions at any time they deem
necessary or appropriate for the administration of the Plan.
c. Responsibility for plan implementation and operation has been
delegated by the Committee to the President and CEO and the
Vice President - Human Resources who shall have the
responsibility for:
1. approving Participant rosters and Participant Target Bonuses,
2. ensuring that performance goals are submitted, reviewed and
approved on a timely basis;
</PAGE> 6
<PAGE>
3. ensuring that year-end results and recommended bonuses for
all eligible Participants are submitted, reviewed and
approved on a timely basis; and
4. maintaining appropriate records with respect to performance
goals, eligible Participants, Target Bonuses, actual awards,
all necessary written approvals and other records as
appropriate.
7.2 Award Payments
a. Payment of awards shall be made on or before March 1 of the
year immediately following the year for which the performance
goals have been set.
b. In the event of a change of assignment or transfer that would
result in a change of Target Bonus during the course of the year,
the participant's bonus calculation shall be determined by
mutual agreement with the Division head, the President and CEO
and the Vice President - Human Resources.
c. If a person is not on the payroll at the end of the fiscal year,
a bonus will not be paid regardless of length of service or
reason for termination except as noted herein. Exceptions may
be made by the Vice President - Human Resources and the
President and CEO in their sole discretion for terminations
prior to the end of the fiscal year due to death, total and
permanent disability (as defined by the applicable disability
plan(s)), and Early or Normal Retirement (as defined by the
applicable retirement plan(s)). An exception may also be made
for employees on approved leaves of absence. A pro rata bonus
based on the executive's contributions to his/her objectives
may be payable under these circumstances. In the event of the
death of a Participant, the Participant's beneficiaries shall be
entitled to the awards, if any, to which the Participant would
have otherwise been entitled.
An additional exception may be made in the event of the sale
of a unit. In such cases, the Committee may, in its sole
discretion, award discretionary bonuses based on performance to
date. The sale of a unit does not necessarily entitle a Plan
participant to a bonus under this Plan.
d. A former Plan Participant who is not on the payroll when awards
are distributed (approximately March 1) but who was on the payroll
at the end of the fiscal year, shall generally be entitled to a
bonus, subject to the terms of this Plan.
e. An employee discharged for Cause, as defined above, shall forfeit
any and all rights to a bonus under this Plan, even if the employee
is on the payroll at the end of the fiscal year.
</PAGE> 7
<PAGE>
7.3 General Provisions
a. The Plan is intended to constitute an "unfunded" plan for the
incentive compensation of a select group of key management
employees of the Company and its Divisions.
b. Neither the Plan nor any action taken under the Plan shall be
construed as:
1) giving any employee any right to be retained in the employ
of the Company, or Division.
2) affecting the right of the above-mentioned entities to
terminate the employment of any individual at any time
for any reason; or
3) interfering with the rights created under any separate
written employment or severance agreement.
c. Should the provisions of a Participant's employment contract not
be consistent with the provisions of the Plan, the provisions
of the employment contract shall control.
d. The Committee may alter, amend or terminate the Plan at any time
or from time to time.
e. Neither the Board nor the Committee, nor the Company nor any
Division, nor any officers, directors or employees shall have
any liability to any Participant (or his/her beneficiaries)
under the Plan or otherwise on account of any action taken,
or not taken, in good faith by any of the foregoing persons with
respect to the business or operations of such entities
notwithstanding the fact that any such action or inaction in
any way whatsoever may adversely affect the value of any
awards, rights or benefits of a Participant (or his/her
beneficiaries) under the Plan. Unless the Participant specifies
otherwise in writing to the Committee, beneficiaries, for the
purposes of this Plan, shall mean the beneficiaries identified
by the Participant for his/her qualified pension or retirement
plan(s).
f. The Plan and all actions taken pursuant to the Plan shall be
governed by, and construed in accordance with, the internal laws
of the State of New York.
g. The invalidity or unenforceability of any one or more provisions
of the Plan shall not affect the validity or enforceability of
any other provisions of the Plan, which shall remain in full
force and effect.
h. Correspondence regarding this Plan should be sent to the Vice
President - Human Resources, Collins & Aikman Products Co.,
Post Office Box 32665, Charlotte, NC 28232.
</PAGE> 8
Exhibit 11
Collins & Aikman Corporation
Computation of Earnings Per Share
In thousands, except per share data
(Unaudited)
Quarter Ended Six Months Ended
July 27, July 29, July 27, July 29,
1996 1995 1996 1995
Average shares outstanding during
the period......................... 69,073 70,373 69,074 70,447
Incremental shares under stock
options computed under the treasury
stock method using the average
market price of issuer's stock
during the period 917 1,156 939 1,192
Total shares for primary EPS 69,990 71,529 70,013 71,639
Additional shares under stock
options computed under the treasury
stock method using the ending price
of issuer's stock.................. 25 157 54 78
Total shares for fully diluted EPS 70,015 71,686 70,067 71,717
Income (loss) applicable to common
shareholders:
Continuing operations (1) ....... $ 11,804 $ 9,398 $26,139 $37,762
Discontinued operations ......... 3,717 6,047 4,524 11,584
Income before extraordinary loss 15,521 15,445 30,663 44,346
Extraordinary loss .............. (6,610) - (6,610) -
Net income (loss) ............... $ 8,911 $15,445 $24,053 $44,346
Income (loss) per primary and fully
diluted common share:
Continuing operations ........... $ .17 $ .13 $ .37 $ .46
Discontinued operations ......... .05 .09 .06 .16
Extraordinary loss .............. (.09) - (.09) -
Net income (loss) ............... $ .13 $ .22 $ .34 $ .62
<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 SIX MONTHS ENDED JULY 27, 1996 AND SUCH IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-25-1997
<PERIOD-END> JUL-27-1996
<CASH> 14,542
<SECURITIES> 0
<RECEIVABLES> 168,932
<ALLOWANCES> 3,928
<INVENTORY> 132,720
<CURRENT-ASSETS> 483,712
<PP&E> 486,522
<DEPRECIATION> 204,441
<TOTAL-ASSETS> 1,111,821
<CURRENT-LIABILITIES> 254,624
<BONDS> 782,613
0
0
<COMMON> 705
<OTHER-SE> (203,554)
<TOTAL-LIABILITY-AND-EQUITY> 1,111,821
<SALES> 694,353
<TOTAL-REVENUES> 694,353
<CGS> 556,693
<TOTAL-COSTS> 556,693
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 299
<INTEREST-EXPENSE> 27,676
<INCOME-PRETAX> 43,910
<INCOME-TAX> 17,771
<INCOME-CONTINUING> 26,139
<DISCONTINUED> 4,524
<EXTRAORDINARY> (6,610)
<CHANGES> 0
<NET-INCOME> 24,053
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
