<PAGE>
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 March 29, 1997
[ ] 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 May 12, 1997, the number of outstanding shares of the Registrant's common
stock, $.01 par value, was 66,083,848 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
--------------------------------
MARCH 29, 1997 MARCH 23, 1996
-------------- ---------------
<S> <C> <C>
Net sales........................................ $ 432,252 $ 257,677
-------------- ---------------
Cost of goods sold............................... 359,921 211,090
Selling, general and administrative
expenses...................................... 31,096 23,965
-------------- ---------------
391,017 235,055
-------------- ---------------
Operating income................................. 41,235 22,622
Interest expense, net............................ 19,966 8,059
Loss on sale of receivables...................... 1,201 1,366
Other expense (income)........................... 471 (1,059)
-------------- ---------------
Income from continuing operations
before income taxes........................... 19,597 14,256
Income tax expense (benefit) .................... 8,290 (144,150)
-------------- ---------------
Income from continuing operations................ 11,307 158,406
Income (loss) from discontinued operations,
net of income taxes of $751 and $724.......... 879 (22,042)
Gain on sale of discontinued operations,
net of income taxes of $53,358................ 85,292 -
-------------- ---------------
Net income....................................... $ 97,478 $ 136,364
============== ===============
Net income per primary and fully diluted common
share:
Continuing operations......................... $ .17 $ 2.26
Discontinued operations....................... .01 (.31)
Gain on sale of discontinued operations....... 1.25 -
-------------- ---------------
Net income.................................... $ 1.43 $ 1.95
============== ===============
Average common shares outstanding:
Primary....................................... 68,121 70,093
============== ===============
Fully diluted................................. 68,395 70,093
============== ===============
</TABLE>
I-1
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
(UNAUDITED)
MARCH 29, DECEMBER 28,
ASSETS 1997 1996
------------ -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents ........................... $ 26,198 $ 14,316
Accounts and other receivables, net ................. 199,422 210,263
Inventories ......................................... 131,891 129,860
Net assets of discontinued operations ............... 177,935 212,039
Other ............................................... 126,828 129,065
------------ -------------
Total current assets .............................. 662,274 695,543
Property, plant and equipment, net ..................... 374,632 375,974
Deferred tax assets .................................... 45,465 92,011
Goodwill, net .......................................... 295,998 298,239
Other assets ........................................... 74,622 74,713
------------ -------------
$ 1,452,991 $ 1,536,480
============ =============
LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
Current Liabilities:
Notes payable ....................................... $ 1,904 $ 1,920
Current maturities of long-term debt ................ 46,475 38,190
Accounts payable .................................... 132,671 126,927
Accrued expenses .................................... 192,337 177,462
------------ -------------
Total current liabilities ......................... 373,387 344,499
Long-term debt ......................................... 945,795 1,138,029
Other, including postretirement benefit obligation ..... 245,075 248,530
Commitments and contingencies...........................
Common stock (150,000 shares authorized,
70,521 shares issued and 66,375 shares outstanding at
March 29, 1997 and 70,521 shares issued and 67,723
shares outstanding at December 28, 1996) ............ 705 705
Other paid-in capital .................................. 585,211 585,207
Accumulated deficit .................................... (631,837) (729,315)
Foreign currency translation adjustments ............... (23,754) (20,798)
Pension equity adjustment .............................. (10,165) (10,165)
Treasury stock, at cost (4,146 shares at March 29, 1997
and 2,798 shares at December 28, 1996) .............. (31,426) (20,212)
------------ -------------
Total common stockholders' deficit ................ (111,266) (194,578)
------------ -------------
$ 1,452,991 $ 1,536,480
============ =============
</TABLE>
I-2
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------
MARCH 29, MARCH 23,
1997 1996
------------ -----------
<S> <C> <C>
OPERATING ACTIVITIES
Income from continuing operations............................................... $ 11,307 $ 158,406
Adjustments to derive cash flow from continuing operating activities:
Deferred income tax expense (benefit)...................................... 3,544 (145,322)
Depreciation and leasehold amortization.................................... 11,445 6,022
Amortization of goodwill................................................... 1,938 904
Amortization of other assets............................................... 1,881 1,522
Decrease(increase)in accounts and notes receivable......................... 15,411 (10,806)
Decrease(increase )in inventories.......................................... (2,031) 2,715
Increase in accounts payable............................................... 1,123 9,316
Increase in interest payable............................................... 13,583 3,485
Other, net................................................................. 324 (6,922)
------------- -------------
Net cash provided by continuing operating activities..................... 58,525 19,320
------------- -------------
Cash provided by (used in) Wallcoverings, Floorcoverings and the Mastercraft
Group discontinued operations.............................................. (5,196) 6,361
Cash provided by (used in) other discontinued operations........................ (3,701) 7,438
------------- ------------
Net cash provided by (used in) discontinued operations.................... (8,897) 13,799
------------- ------------
INVESTING ACTIVITIES
Additions to property, plant and equipment...................................... (16,751) (23,497)
Sales of property, plant and equipment.......................................... 329 1,214
Proceeds from disposition of discontinued operations............................ 195,600 -
Acquisition of businesses, net of cash acquired................................. - (183,099)
Proceeds from sale-leaseback arrangement........................................ - 7,404
Other, net ..................................................................... (3,550) (1,577)
------------- ------------
Net cash provided by (used in) investing activities...................... 175,628 (199,555)
------------- ------------
FINANCING ACTIVITIES
Issuance of long-term debt...................................................... 4,495 197,546
Repayment of long-term debt..................................................... (9,283) (7,965)
Reduction of participating interests in accounts receivable..................... (18,000) (6,000)
Net repayments on revolving credit facilities................................... (179,000) (12,000)
Net borrowings on notes payable................................................. 51 89
Purchase of treasury stock...................................................... (11,811) (1,949)
Proceeds from exercise of stock options......................................... 139 266
Other, net ..................................................................... 35 (66)
------------ ------------
Net cash provided by (used in) financing activities...................... (213,374) 169,921
------------ ------------
Net increase in cash and cash equivalents....................................... 11,882 3,485
Cash and cash equivalents at beginning of period................................ 14,316 961
------------ ------------
Cash and cash equivalents at end of period...................................... $ 26,198 $ 4,446
============ ============
</TABLE>
I-3
<PAGE>
COLLINS AND 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 March 29,
1997, Blackstone Partners and WP Partners and their respective affiliates
collectively own approximately 81% 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 first quarter of 1996 to conform to the fiscal 1997
presentation and are primarily related to the Mastercraft Group and the
Floorcoverings subsidiary ("Floorcoverings") being reclassified as discontinued
operations (see Note K) and to the change in fiscal year (see Note C).
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 December 28, 1996.
C. CHANGE IN FISCAL YEAR:
During fiscal 1996, the Company changed its fiscal year-end to the
last Saturday in December. For comparative purposes, quarterly data presented
for fiscal 1996 has been restated to reflect this change.
D. ACQUISITIONS:
On December 11, 1996, the Company completed the acquisition of JPS
Automotive L.P. ("JPS Automotive") for a purchase price of $220 million, subject
to post closing adjustment, consisting of approximately $195 million of
indebtedness of JPS Automotive and approximately $25 million in cash. In
connection with the acquisition of JPS Automotive, the Company acquired the
minority interest in a JPS Automotive subsidiary for $10 million. On December
11, 1996, the Company also acquired Perstorp AB's automotive supply operations
(primarily acoustical products) in North America, the United Kingdom and Spain
(collectively referred to as "Perstorp Components") for approximately $108
million, subject to adjustment. In addition, the Company and Perstorp AB
("Perstorp") entered into a joint venture agreement relating to Perstorp AB's
automotive supply operations (primarily acoustical and plastic components) in
I-4
<PAGE>
COLLINS AND AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (CONTINUED)
(UNAUDITED)
Sweden, Belgium and France. On May 1, 1996, the Company acquired the business of
BTR Fatati Limited ("Fatati"), a manufacturer and supplier of molded floor
carpets and luggage component trim for the European automotive market. On
January 3, 1996, the Company completed the acquisition of Manchester Plastics
for a purchase price of approximately $184.0 million, including $40.4 million of
debt extinguished in connection with the acquisition.
E. INTEREST RATE AND FOREIGN CURRENCY 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
cap and collar agreements. 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%. In addition, during April
1997, the Company entered into a two year interest rate swap agreement in which
the Company effectively exchanged $27 million of 11-1/2% fixed rate debt for
floating rate debt at six month LIBOR plus a 4.72% margin. In connection with
this swap agreement, the Company also limited its interest rate exposure by
entering into an 8.50% cap on LIBOR on $27 million of notional principal amount.
Payments to be received, if any, as a result of these agreements are accrued as
a reduction of interest expense.
Amortization of certain interest rate protection agreements that
expired during October 1996 amounted to $.3 million during the quarter ended
March 23, 1996.
During April 1997, the Company entered into an agreement to limit its
foreign currency exposure related to $45 million of US dollar denominated
borrowings of a Canadian subsidiary. The agreement swaps LIBOR based interest
rates for the Canadian equivalent as well as fixes the exchange rate for the
principal balance when the amount comes due in 2002.
F. 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 first quarter of 1997 was $1.9 million.
Accumulated amortization at March 29, 1997 was $6.1 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
March 29, 1997, the Company believes its goodwill of $296.0 million was fully
recoverable.
G. 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 automotive industry, the rate of collection on those
I-5
<PAGE>
COLLINS AND AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (CONTINUED)
(UNAUDITED)
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 March 29, 1997, approximately $33.8 million was available under
the variable funding certificates, all 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 March 29, 1997, the Trust's receivables pool was $160.2 million,
net of allowances for doubtful accounts. As of March 29, 1997, the holders of
term certificates and variable funding certificates collectively possessed a
$117.0 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.
In connection with the proposed spin-off by the Company of its Imperial
Wallcoverings Inc. subsidiary ("Wallcoverings"), as discussed in Note K,
Wallcoverings was terminated as a Seller of receivables under the Receivables
Facility on September 21, 1996. Also, in connection with the sale of
Floorcoverings, as discussed in Note K, Floorcoverings was terminated as a
Seller of receivables under the Receivables Facility on February 6, 1997. On
March 25, 1997, the Trust redeemed $30.0 million face value of term certificates
primarily as a result of the Trust collecting Wallcoverings and Floorcoverings
receivables which were not replaced with eligible receivables.
See Note K for loss on sale amounts allocated to discontinued
operations associated with the Receivables Facility.
H. INVENTORIES:
Inventory balances are summarized as follows (in thousands):
MARCH 29, DECEMBER 28,
1997 1996
--------- -----------
Raw materials ................... $ 69,308 $ 62,413
Work in process ................. 31,159 29,069
Finished goods .................. 31,424 38,378
-------- --------
$131,891 $129,860
======== ========
I. INTEREST EXPENSE, NET:
Interest expense allocated to continuing operations for the quarters
ended March 29, 1997 and March 23, 1996 is net of interest income of $.3 million
and $.5 million, respectively. See Note K for interest expense allocated to
discontinued operations.
J. FACILITY CLOSING COSTS:
In the first quarter of fiscal 1996, the Company in its continuing
operations provided for the cost to rationalize one manufacturing facility
affecting approximately 90 employees. Additionally, the Company provided for the
cost to exit one manufacturing and three distribution centers in its
discontinued
I-6
<PAGE>
COLLINS AND AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (CONTINUED)
(UNAUDITED)
Wallcoverings segment. During the first quarter ended March 29,
1997, 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 quarter
ended March 29, 1997 were approximately $.3 million for severance benefits and
$.5 million for closing and disposal of idled facilities.
In connection with the acquisition of JPS Automotive, the Company has
developed preliminary plans for JPS Automotive to rationalize certain
manufacturing locations as well as marketing and administrative functions. These
plans have not been finalized. During the fourth quarter of fiscal 1996, costs
accrued for the shutdown of facilities and severance and other personnel costs
were $2.2 million and $7.0 million, respectively. The Company expended
approximately $.6 million during the first quarter of 1997 for severance and
other personnel costs related to the JPS Automotive facilities and personnel.
K. DISCONTINUED OPERATIONS:
On December 10, 1996, the Company announced that it entered into an
agreement to sell its Floorcoverings subsidiary. This sale occurred during
February 1997 for $195.6 million and the net proceeds were used to pay down debt
incurred to finance the Company's automotive strategy.
On December 4, 1996, the Company announced that it was considering the
sale of the Mastercraft Group, a leading manufacturer of upholstery fabric. On
April 25, 1997, the Company announced that it had entered into a definitive
agreement to sell the Mastercraft Group for $310 million, subject to adjustment,
plus the assumption of specified liabilities. The transaction, which is subject
to financing and other conditions, is expected to close in the early summer. See
Note R.
On April 9, 1996, the Company announced a plan to spin off
Wallcoverings to the Company's stockholders in the form of a stock dividend. The
proposed spin-off requires, among other things, the declaration of the dividend
by the Company's Board of Directors. As a result of management changes at
Wallcoverings and other factors, the Company currently expects the spin-off to
occur in the second half of 1997.
The Company has accounted for the financial results and net assets of
Floorcoverings, the Mastercraft Group and Wallcoverings as discontinued
operations. Accordingly, previously reported financial results for all periods
have been restated to reflect these businesses as discontinued operations.
The Mastercraft Group reported income of $.4 million for each of the
quarters ended March 29, 1997 and March 23, 1996. Floorcoverings reported income
of $.5 million through the date of its sale in February 1997 and $.7 million for
the quarter ended March 23, 1996. Wallcoverings reported a loss of $23.2 million
during the first quarter of 1996. Wallcoverings incurred operating losses
subsequent to April 29, 1996 which were charged to the Company's
existing discontinued operations reserves. The Wallcoverings' operating losses
were in excess of management's forecasted expectations as of the date of
discontinuance but within previously established accruals. Included in
Wallcoverings' first quarter 1996 loss were $9.9 million in charges related to
the consolidation of distribution activities and the closure of the segment's
Hammond, Indiana facility. See Note J for further discussion on facility
closings. Additionally, $3.0 million in charges related to the impairment of
assets and $10.8 million related to a write-down of inventory were incurred in
the first quarter of 1996.
Net interest expense of discontinued operations including amounts
attributable to discontinued operations was $6.1 million for the quarter ended
March 29, 1997, and $6.7 million for the quarter ended March 23, 1996. Interest
expense of $6.1 million for the quarter ended March 29, 1997, and $6.5 million
for the
I -7
<PAGE>
COLLINS AND AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (CONTINUED)
(UNAUDITED)
quarter ended March 23, 1996, 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 Floorcoverings and the Mastercraft Group to
(y) the total of the Trust's receivables pool. For the quarter ended March 29,
1997, $355,000 of loss on sale of receivables was allocated to discontinued
operations. For the quarter ended March 23, 1996, the allocated amount was
$558,000.
L. 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. During the
first quarter of 1997, the Company incurred fees and expenses for services
performed by Blackstone Partners and WP Partners, or their respective
affiliates, in connection with the sale of Floorcoverings, totaling
approximately $2.7 million. During the first quarter of 1996, the Company
incurred fees and expenses for services performed by Blackstone Partners and WP
Partners, or their respective affiliates, in connection with the acquisition of
Manchester Plastics totaling $2.5 million.
M. INFORMATION ABOUT THE COMPANY'S OPERATIONS:
The geographic dispersion of the operations of the Company and its
subsidiaries did not change significantly from December 28, 1996 to March 29,
1997.
N. 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.
I-8
<PAGE>
COLLINS AND AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (CONTINUED)
(UNAUDITED)
O. 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 DECEMBER 28, 1996... $ 705 $585,207 $(729,315) $(20,798) $(10,165) $(20,212) $(194,578)
Compensation expense
adjustment.................. - 462 - - - - 462
Net income..................... - - 97,478 - - - 97,478
Purchases of treasury stock
(1,427 shares) ............. - - - - - (11,811) (11,811)
Exercise of stock options,
(79 shares)................. (458) 597 139
Foreign currency
translation adjustments..... - - (2,956) - - (2,956)
------ -------- ----------- --------- ---------- --------- ----------
BALANCE AT MARCH 29, 1997...... $ 705 $585,211 $ (631,837) $ (23,754) $ (10,165) $(31,426) $(111,266)
====== ======== =========== ========== ========== ========= ==========
</TABLE>
P. 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.
Q. 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 ENDED
---------------------
MARCH 29, MARCH 23,
1997 1996
---------- ----------
Net sales .............................. $432,252 $257,677
Gross margin ........................... 72,331 46,587
Income from continuing operations ...... 11,269 158,354
Net income ............................. 97,440 136,312
MARCH 29, DECEMBER 28,
1997 1996
--------- ------------
Current assets ......................... $ 661,582 $ 694,796
Noncurrent assets ...................... 790,717 840,575
Current liabilities .................... 371,678 344,487
Noncurrent liabilities.................. 1,188,288 1,383,977
I-9
<PAGE>
COLLINS AND AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL REPORT (CONCLUDED)
(UNAUDITED)
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.
R. SUBSEQUENT EVENT
On April 25, 1997, the Company announced that it entered into a
definitive agreement to sell the Mastercraft Group, a leading manufacturer of
upholstery fabric, to Joan Fabrics Corporation, for a purchase price of $310
million, subject to adjustment, plus the assumption of specified liabilities.
The Company expects the transaction, which is subject to financing and other
conditions, to close in the early summer.
I-10
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RECENT DEVELOPMENTS
On April 25, 1997, the Company announced that it entered into a
definitive agreement to sell the Mastercraft Group, a leading manufacturer of
upholstery fabric, to Joan Fabrics Corporation, for a purchase price of $310
million, subject to adjustment, plus the assumption of specified liabilities.
The Company expects the transaction, which is subject to financing and other
conditions, to close in the early summer.
GENERAL
The Company is a global supplier of automotive interior systems,
including textile and plastic trim, acoustics and convertible tops.
During 1996, the Company took major steps in implementing its
automotive growth strategy, which is to expand the Company's core automotive
businesses in North America and globally as well as to add complementary product
offerings.
The automotive supply industry in which the Company competes is
cyclical and is influenced by the level of North American vehicle production.
RESULTS OF OPERATIONS
The results for the first quarter of 1996 have been restated to reflect the
Company's change in fiscal year end for comparative purposes.
QUARTER ENDED
MARCH 29, 1997 MARCH 23, 1996
AMOUNT PERCENT AMOUNT PERCENT
(DOLLAR AMOUNTS IN THOUSANDS)
Net sales ....................... $432,252 100.0% $257,677 100.0%
Cost of goods sold .............. 359,921 83.3 211,090 81.9
-------- ----- -------- -----
Gross margin .................... 72,331 16.7 46,587 18.1
Selling, general & administrative
expenses ...................... 31,096 7.2 23,965 9.3
-------- ----- -------- -----
Operating income ................ $ 41,235 9.5% $ 22,622 8.8%
======== ===== ======== =====
EBITDA (1) ...................... $ 55,822 12.9% $ 30,144 11.7%
(1) EBITDA represents earnings before deductions for net interest
expense, loss on sale of receivables, income tax, depreciation, amortization and
the non-cash portion of non-recurring charges. EBITDA does not represent and
should not be considered as an alternative to net income or cash flow from
operations as determined by generally accepted accounting principles.
NET SALES: The Company's net sales increased 67.8% to approximately
$432.3 million in the first quarter of 1997, up $174.6 million over the
comparable 1996 quarter. The overall increase was due primarily to the
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<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
acquisitions of JPS Automotive and Perstorp Components in December 1996, which
together generated approximately $119.2 million in net sales during the first
quarter of 1997. In addition, sales increased in plastic trim components, molded
carpet and accessory mats. These increases were partially offset by decreased
sales of convertible top systems. During the first quarter of 1996, the
Company's sales were negatively impacted by the General Motors' strike in
March 1996. During the first quarter of 1997, there was a
7.3% 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.
Automotive bodycloth sales increased 12.1% in the quarter ended March 29, 1997
over the prior year period. The increased sales resulted primarily from the
acquisition of JPS Automotive offset by reduced sales to the Chrysler
Caravan/Voyager and Ford Contour.
Molded carpet sales increased 59.4% in the quarter ended March 29, 1997 over the
prior year period primarily resulting from the JPS Automotive acquisition and
increased sales to the European automotive market. Increased sales to the Buick
Park Avenue, Toyota Camry and certain Cadillac vehicles were partially offset
by reduced sales to the Buick Century and Oldsmobile Cutlass Ciera.
Convertible top system sales decreased 15.7% in the quarter ended March 29, 1997
over the prior year period principally due to decreased shipments of the
Chrysler Sebring and reduced sales of the Ford Mustang.
Accessory mat sales increased 24.9% in the quarter ended March 29, 1997 over the
prior year period. The overall increase is attributable to increased sales to
General Motors' minivans, the Buick Regal, Pontiac Grand Prix, Toyota Camry
and new export programs.
Luggage compartment trim sales increased 84.7% in the quarter ended March 29,
1997 over the prior year period, primarily due to the acquisition of JPS
Automotive. Increased sales to the Pontiac Grand Prix and Buick Park Avenue were
partially offset by reduced sales to the Mazda 626.
Manchester Plastics contributed $71.6 million and $33.8 million in sales of
plastic interior trim components in the quarters ended March 29, 1997 and March
23, 1996, respectively, an increase of 111.9%. The increase in sales relates
primarily to the launch during the latter part of 1996 of new programs for which
Manchester Plastics is the supplier as well as the negative impact of a General
Motors strike on Manchester Plastics' sales for the first quarter of 1996.
Perstorp Components, which was acquired in December 1996, contributed $44.5
million in net sales of acoustical products to the North American and European
automotive markets during the first quarter of 1997.
Of the Company's sales, approximately one third were attributable to products
utilized in vehicles built outside of North America.
The above factors resulted in the Company's average sales content per vehicle
built in North America of approximately $91 for the first quarter of 1997
compared to an average of approximately $68 for the fiscal 1996 year.
GROSS MARGIN: For the first quarter of 1997, gross margin was 16.7%, down from
18.1% in the comparable period in 1996. The decrease in gross margin is
attributable primarily to the lower margins in products sold by JPS Automotive
and Perstorp Components and the decrease in sales of higher margin convertible
top systems .
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<PAGE>
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: Selling, general and
administrative expenses increased 29.8% to $31.1 million in the first quarter of
1997, up $7.1 million over the comparable 1996 period. The increase is primarily
due to the acquisitions of JPS Automotive and Perstorp Components. Selling,
general and administrative expenses as a percent of net sales decreased to 7.2%
for the first quarter of 1997 from 9.3% in the first quarter of 1996. The
decrease relates to the increased sales at Manchester Plastics as well as
lower costs as a percent of net sales at Perstorp Components as compared to
the Company's historical operations.
INTEREST EXPENSE: Interest expense allocated to continuing operations, net of
interest income of $.3 million in the first quarter of 1997 and $.5 million in
the first quarter of 1996, increased $11.9 million to $20.0 million in the first
quarter of 1997 from $8.1 million in the first quarter of 1996. Total interest
expense, including amounts allocated to discontinued operations, increased to
$26.4 million in the first quarter of 1997 from $15.1 million in the first
quarter of 1996. The overall increase in interest expense was due to a higher
amount of overall outstanding indebtedness, primarily related to the JPS
Automotive and Perstorp Components acquisitions, as well as the higher interest
rates associated with the $400 million principal amount of 11-1/2% Senior
Subordinated Notes due 2006 (the "Subordinated Notes") issued by C&A Products in
June 1996. The Subordinated Notes are guaranteed by the Company.
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 $1.2 million, net of amounts
allocated to discontinued operations, was allocated to continuing operations in
the first quarter of 1997 compared to a loss of $1.4 million, net of amounts
allocated to discontinued operations, in the prior year quarter. Total loss on
sale of receivables, including amounts allocated to discontinued operations,
decreased to $1.6 million in the first quarter of 1997 from $1.9 million in the
first quarter of 1996. This decrease is primarily due to fewer receivables being
sold to Carcorp during the first quarter of 1997 as a result of Floorcoverings
and Wallcoverings being terminated as Sellers under the Receivables Facility.
See Note G to Condensed Consolidated Financial Report.
OTHER EXPENSE (INCOME): The Company recognized a foreign currency transaction
loss of $.8 million and a gain of $1.1 million in the quarters ended March 29,
1997 and March 23, 1996, respectively, related to obligations to be settled in
currencies other than the functional currency of its foreign operations. Also,
in the first quarter of 1997, the Company recognized income of $.3 million
related to its investment in the Perstorp joint venture.
INCOME TAXES: In the quarter ended March 29, 1997, the provision for income
taxes was $8.3 million compared with a benefit of $144.2 million in the prior
year quarter. The increase in the Company's tax expense and reported tax rate
results from the Company's recognition of certain deferred tax assets in January
1996. In the first quarter of 1997, income tax expense consisted of foreign,
state, franchise and federal taxes. In the first quarter of 1996, the benefit
principally resulted from a reduction of valuation allowances against the
Company's federal net operating loss carryforwards and other deferred tax assets
offset by current foreign, state, franchise and federal taxes.
DISCONTINUED OPERATIONS: The Company's income from discontinued operations was
$.9 million in the first quarter of 1997 compared to a loss of $22.0 million in
the comparable 1996 period. The increase relates primarily to Wallcoverings'
results subsequent to April 29, 1996 being charged to the Company's existing
discontinued operations reserves. Wallcoverings has continued to experience
sales declines since its proposed spin-off was first announced by the Company in
April 1996. In January 1996, Wallcoverings
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<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
reported a $23.3 million loss which resulted from certain charges for
the write-down of inventory, the consolidation of operations and the closing of
facilities. Excluding the impact of Wallcoverings, income from discontinued
operations declined due to the sale of Floorcoverings in February 1997.
The sale of Floorcoverings for approximately $195.6 million was
completed in February 1997, resulting in a gain on the sale of discontinued
operations of $85.3 million, net of taxes of $53.4 million.
NET INCOME: The combined effect of the foregoing resulted in net income of $97.5
million in the first quarter of 1997 compared to net income of $136.4 million
for the comparable period of 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company and its subsidiaries had cash and cash equivalents totaling
$26.2 million and $14.3 million at March 29, 1997 and December 28, 1996,
respectively. The Company had a total of $246.5 million of borrowing
availability under its credit arrangements as of March 29, 1997. The total was
comprised of $199.9 million under the Revolving Facility, $38.9 million under
the Delayed Draw Term Loan and approximately $7.7 million under bank demand
lines of credit in Canada and Austria. In addition, $108.1 million was available
at that date under the Delayed Draw Term Loan for specified purposes as
discussed below. During February 1997, the Company sold its Floorcoverings
subsidiary for $195.6 million. The net proceeds were used to pay down the
outstanding portion of the Revolving Facility and a portion of the Receivables
Facility.
As discussed previously, the Company announced that it had entered into a
definitive agreement to sell the Mastercraft Group for a purchase price of $310
million, subject to adjustment, plus the assumption of specified liabilities.
The Company expects the transaction, which is subject to financing and other
conditions, to close in the early summer. The Company anticipates utilizing the
net proceeds from the sale to further deleverage the Company. In addition, on
the closing date, receivables generated by members of the Mastercraft Group
will no longer be sold in connection with the Receivables Facility. See below
for further discussion.
As part of the Recapitalization, 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) the 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 a $197 million credit facility (the "Term Loan B
Facility") to finance the January 1996 purchase of Manchester Plastics.
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 described
below and the use of proceeds from such sale to repay various outstanding loans
under the Credit Agreement Facilities. As a result of the Amendment and the
repayment of a portion of the Credit Agreement Facilities with a portion of the
proceeds from the Subordinated Notes, 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 terminating on July 13, 2001. The
Bank Credit Facilities, which are guaranteed by the Company and its U.S.
subsidiaries (subject to
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<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
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 to the
extent necessary to allow the Company to (w) pay taxes and ordinary expenses,
(x) make permitted repurchases of shares or options, (y) make permitted
investments in finance, foreign or acquired subsidiaries and (z) effect the
proposed spin-off of Wallcoverings or the distribution of certain net proceeds
of a sale of Wallcoverings if the proposed spin-off is not affected. In
addition, the Company is 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 (which amount has been increased to $24 million for fiscal 1997) and
(ii) if certain financial ratios are satisfied, 25% of the Company's
consolidated net income for the previous fiscal year, and is permitted to pay
additional dividends to effect the proposed spin-off of Wallcoverings or in
amounts representing certain net proceeds from any sale of Wallcoverings in the
event the proposed spin-off is not effected. The Company's obligations under the
Bank Credit Facilities are secured by a pledge of the stock of C&A Products and
its significant subsidiaries.
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 2.0 to 1.0) 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).
These prohibitions are subject to a number of significant exceptions, including
dividends to stockholders of the Company or stock repurchases 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.
In connection with the closing of the acquisition of JPS Automotive
(the "JPS Automotive Acquisition"), in early December 1996 the Company amended
the Bank Credit Facilities primarily to allow for the existence of the JPS
Automotive 11-1/8% Senior Notes due 2001 (the "JPS Automotive Senior Notes") and
to allow the Company to retain the proceeds from the sale of Floorcoverings. As
part of the JPS Automotive Acquisition, the Company paid off approximately $15
million of outstanding bank indebtedness of JPS Automotive. The cash portion of
the purchase price of the JPS Automotive Acquisition, the purchase price for the
acquisition of a minority interest in a JPS Automotive subsidiary and the bank
indebtedness at JPS Automotive that was repaid at the time of closing were
funded through the Company's Revolving Facility. In addition, as a result of the
JPS Automotive Acquisition, holders of the JPS Automotive Senior Notes had the
right to put their notes to JPS Automotive at a price of 101% of their principal
amount plus accrued interest. Approximately $3.9 million principal amount of JPS
Automotive Senior Notes were so put to JPS Automotive and then repurchased
I-15
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
by JPS Automotive in the first quarter of 1997. After giving effect to
the above, JPS Automotive had as of March 29, 1997 approximately $113 million of
indebtedness outstanding (including a $5 million premium) related to the JPS
Automotive Senior Notes. The Company will operate JPS Automotive as a restricted
subsidiary under the Bank Credit Facilities and the indenture governing the
Subordinated Notes.
The indenture governing the JPS Automotive Senior Notes generally
prohibits JPS Automotive from making certain restricted payments and investments
(generally, dividends and distributions on its equity interests; purchases or
redemptions of its equity interests; purchases of any indebtedness subordinated
to the JPS Automotive Senior Notes; and investments other than as permitted)
("JPS Automotive Restricted Payments") unless (i) there is no default under the
JPS Automotive Senior Notes indenture; (ii) after giving pro forma effect to the
JPS Automotive Restricted Payment, JPS Automotive would be permitted to 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 2.5 to 1.0)
of cashflow to interest expense, and (iii) the aggregate of all JPS Automotive
Restricted Payments from the issue date is less than a specified threshold
(based, generally, on 50% of JPS Automotive's cumulative consolidated net income
since the issue date plus 100% of the aggregate net cash proceeds of the
issuance by JPS Automotive of certain equity and convertible debt securities and
cash contributions to JPS Automotive) (the "JPS Automotive Restricted Payments
Tests"). These conditions were satisfied immediately following the closing of
the JPS Automotive Acquisition and as of March 29, 1997. The JPS Automotive
Restricted Payments Tests are subject to a number of significant exceptions. The
indenture governing the JPS Automotive Senior Notes also contains other
restrictive covenants (including, among others, limitations on the incurrence of
indebtedness and issuance of preferred stock, asset dispositions and
transactions with affiliates including the Company and C&A Products) which are
customary for such securities. These covenants are also subject to a number of
significant exceptions.
Additionally, in December 1996, in connection with the JPS Automotive
Acquisition, the Company entered into a $200 million delayed draw term loan (the
"Delayed Draw Term Loan"). The Delayed Draw Term Loan is a 5.25 year term loan
which was entered into to finance or refinance the purchase of any JPS
Automotive Senior Notes put by the holders to JPS Automotive as a result of the
change in control resulting from the JPS Automotive Acquisition or otherwise
acquired. The Delayed Draw Term Loan is available until December 11, 1997. Up to
$20 million of the Delayed Draw Term Loan can be utilized for general corporate
purposes, including premium and accrued interest on the JPS Automotive Senior
Notes. Prior to the JPS Automotive Acquisition, the Company had purchased in the
open market $68 million principal amount of JPS Automotive Senior Notes, which
were subsequently retired by JPS Automotive. As of March 29, 1997, $53 million
had been drawn under the Delayed Draw Term Loan and $147 million was available,
consisting of $18.9 million available to refinance previously acquired JPS
Automotive Senior Notes, $20 million available for general corporate purposes
and $108.1 million available for future purchases of JPS Automotive Senior
Notes. The Board of Directors of the general partner of JPS Automotive has
authorized JPS Automotive to expend for the repurchase of JPS Automotive Senior
Notes up to the amount of funds that may be drawn for such purpose under the
Delayed Draw Term Loan. The Delayed Draw Term Loan's security and restrictive
covenants are identical to those in the Bank Credit Facilities.
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
I-16
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
the receivables held by the Trust.
Availability under the variable funding certificates at any time
depends primarily on the amount of receivables generated by the Sellers from
sales to the automotive 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 March 29,
1997 approximately $33.8 million was available under the variable funding
certificates, all of which was utilized.
In connection with the proposed spin-off of Wallcoverings,
Wallcoverings was terminated as a Seller of receivables under the Receivables
Facility on September 21, 1996. The Company also terminated Floorcoverings as of
February 6, 1997 as a Seller of receivables under the Receivables Facility in
connection with the Company's sale of Floorcoverings. On March 25, 1997, the
Trust redeemed $30 million face value of term certificates primarily as a result
of the Trust collecting Wallcoverings and Floorcoverings receivables which were
not replaced by eligible receivables. In connection with the pending sale of the
Mastercraft Group, receivables generated by the Mastercraft Group, will no
longer be sold to Carcorp and transferred to the Trust, and the Company expects
to terminate Ack-Ti Lining, Inc., a member of the Mastercraft Group, as a Seller
of receivables under the Receivables Facility on the closing date of the sale.
The Company believes that approximately $30 million face value of term
certificates will be redeemed related to the sale of the Mastercraft Group.
The Company anticipates largely offsetting the impact of this redemption on the
Company's liquidity by utilizing receivables generated by the addition of new
Sellers within the Company to increase the amount available to the Company under
the variable funding certificates.
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 are subject to termination 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 March 29, 1997, 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. In
the first quarter of 1997, the Company made lease payments relating to
continuing operations of approximately $2.8 million for machinery and equipment
sold and leased back under this master lease. The Company expects lease payments
for continuing operations under this master lease to be $2.8 million during the
remainder of 1997.
The Company's principal sources of funds are cash generated from
continuing operating activities, borrowings under the Bank Credit Facilities,
the sale of receivables under the Receivables Facility and the proceeds from the
expected sale of the Mastercraft Group. Net cash provided by the operating
activities of the Company's continuing operations was $58.5 million for the
first quarter of 1997.
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<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
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, to a lesser extent, acquisitions.
At March 29, 1997, the Company had total outstanding indebtedness of $992.3
million (excluding approximately $25.1 million of outstanding letters of
credit and $2.9 million of indebtedness of the discontinued operations) at an
average interest rate of 9.4% per annum. Of the total outstanding indebtedness,
$858.0 million relates to the Bank Credit Facilities and the Subordinated
Notes.
The Company's Board of Directors authorized the expenditure of up to
$24 million in 1997 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
$11.8 million to repurchase shares during the first quarter of 1997 and $9.6
million to repurchase shares during fiscal 1996.
Indebtedness under the Term Loan Facility, the Revolving Facility and
the Delayed Draw Term Loan bears interest at a per annum rate equal to the
Company's choice of (i) Chase Manhattan Bank's ("Chase'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
(the "ABR 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 1.75% in the
case of the "LIBOR Margin" and .75% in the case of the ABR Margin on March 29,
1997. 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'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 and the Delayed Draw Term Loan at
March 29, 1997 was 7.70%. The weighted average interest rate on the sold
interests under the Receivables Facility at March 29, 1997 was 6.55%. 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. The Subordinated Notes bear interest at a rate of 11.5% per annum.
The JPS Automotive Senior Notes bear interest at a rate of 11.125% per annum.
Cash interest paid was $12.2 million and $11.3 million in the quarters ended
March 29, 1997 and March 23, 1996, respectively.
Due to the variable interest rates under the Bank Credit Facilities,
the Delayed Draw Term Loan and the Receivables Facility, the Company is
sensitive to increases in interest rates. Accordingly, during 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%. In addition, during April 1997, the Company entered into a
two year interest rate swap agreement in which the Company effectively exchanged
$27 million of 11-1/2% fixed rate debt for floating rate debt at six month LIBOR
plus a 4.72% margin. In connection with this swap agreement, the Company also
limited its interest rate exposure by entering into an 8.50% cap on LIBOR on $27
million of notional principal amount. Based upon amounts outstanding at March
29, 1997, a .5% increase in LIBOR (5.7% at March 29, 1997) would impact interest
costs by approximately $2.3 million annually on the Bank Credit Facilities and
the Delayed Draw Term Loan and $.6 million annually on the Receivables Facility.
During April 1997, the Company entered into an agreement to limit its foreign
currency exposure related to $45 million of US dollar denominated borrowings of
a Canadian subsidiary. The agreement swaps LIBOR based interest rates for the
Canadian equivalent as well as fixes the exchange rate for the principal balance
when the amount comes due in 2002.
I-18
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
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.
The maturities of long-term debt of the Company's continuing operations
during the remainder of 1997 and for 1998, 1999, 2000 and 2001 are $38.0
million, $53.1 million, $62.0 million $67.5 million and $183.7 million,
respectively. The JPS Automotive Senior Notes, to the extent not previously put
to JPS Automotive or otherwise acquired by the Company or JPS Automotive, will
mature in 2001. In addition, the Bank Credit Facilities and the Delayed Draw
Term Loan provide for mandatory prepayments of the Term Loan and Term Loan B
Facilities and the Delayed Draw Term Loan with certain excess cash flow of the
Company, net cash proceeds of certain asset sales or other dispositions by the
Company other than proceeds generated from the sale of Floorcoverings, 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
the Delayed Draw Term Loan) 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. In
addition, the Delayed Draw Term Loan, if fully drawn, will require a payment of
$27 million on December 11, 1997 (the anniversary date of the initial draw) and
equal quarterly payments in annual amounts equal to $38 million in 1998, $41
million in 1999, $42 million in 2000, $41 million in 2001 and $11 million at
termination. In addition, the indenture governing the JPS Automotive Senior
Notes requires JPS Automotive to apply the net proceeds from the sale of assets
of JPS Automotive to offer to purchase JPS Automotive Senior Notes, to the
extent not applied within 270 days of such asset sale to an investment in
capital expenditures or other long term tangible assets of JPS Automotive, to
permanently reduce senior indebtedness of JPS Automotive or to purchase JPS
Automotive Senior Notes in the open market.
The Company makes capital expenditures on a recurring basis for
replacements and improvements. As of March 29, 1997, the Company's continuing
operations had approximately $25.1 million in outstanding capital expenditure
commitments. The Company currently anticipates that its capital expenditures for
continuing operations in fiscal 1997 will aggregate approximately $90 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. As of March 29, 1997, Wallcoverings and the
Mastercraft Group had approximately $5.8 million and $3.6 million, respectively,
in outstanding capital expenditure commitments.
The Company is sensitive to price movements in its raw material supply
base. During the first quarter of 1997, prices for most of the Company's primary
raw materials remained constant with price levels at December 28, 1996. 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.
Since the Company announced in April 1996 its plan to spin off
Wallcoverings, the Company has repaid $21 million of intercompany amounts owed
to Wallcoverings and expended approximately $34 million to fund operations,
working capital and capital expenditures and to replace receivables previously
sold to
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<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
Carcorp. During the remainder of 1997, the Company currently expects to
expend (subject to the discretion of the Company's Board of Directors)
approximately $25 million prior to the anticipated spin-off of Wallcoverings
principally to fund Wallcoverings' future operations, working capital and
capital expenditure requirements. Amounts actually required for these purposes
could differ materially from expected amounts due to, among other things,
changes in Wallcoverings' operating results and the availability of outside
financing for Wallcoverings. Wallcoverings has continued to experience sales
declines since the proposed spin-off was first announced in April 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, Floorcoverings and the Mastercraft Group, will be approximately
$18 million in fiscal 1997. 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, including
Wallcoverings and the Mastercraft Group, 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 the first quarter
of 1996 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 proposed spin-off of the Company's Wallcoverings subsidiary
to its shareholders.
At December 28, 1996, the Company had outstanding net operating losses
("NOLs") of approximately $284.2 million for Federal income tax purposes, which
excludes $10.4 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 $12.7
million, $4.2 million of which expire during the period 1997 to 2007. 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 $85.9 million of the Company's NOLs and $4.2 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 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
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<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
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 future 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 March 29, 1997, 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 22 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 March 29, 1997, the
Company's estimate of its liability for these 31 sites, which exclude sites
related to Wallcoverings, is approximately $33.5 million. As of March 29, 1997,
the Company has established reserves of approximately $45.8 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
future 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.
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<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONCLUDED)
SAFE HARBOR STATEMENT
This Report on Form 10-Q contains statements which, to the extent they
are not historical fact, constitute forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934 (the "Safe Harbor Acts"). All forward-looking
statements involve risks and uncertainties. The forward-looking statements in
this Report on Form 10-Q are intended to be subject to the safe harbor
protection provided by the Safe Harbor Acts.
Risks and uncertainties that could cause actual results to vary
materially from those anticipated in the forward-looking statements included in
this Report on Form 10-Q include industry-based factors such as possible
declines in the North American automobile and light truck build, labor strikes
at the Company's major customers, changes in consumer tastes, dependence on
significant automotive customers and the level of competition in the automotive
supply industry as well as factors more specific to the Company, such as the
substantial leverage of the Company and its subsidiaries, limitations imposed by
the Company's debt facilities and changes made in connection with operations
acquired by the Company. The Company's divisions may also be affected by changes
in the popularity of particular car models or the loss of programs on particular
car models. For a discussion of certain of these and other important factors
which may affect the Company's operations, products and markets, see the
Company's Securities and Exchange filings, including without limitation "ITEM 1.
BUSINESS" and "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" of the Company's Transition Report on Form
10-K for the transition period from January 28, 1996 to December 28, 1996.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Disclosures not required at this time.
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<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
There have been no material developments in legal proceedings involving
the Company or its subsidiaries since those reported in the Company's Transition
Report on Form 10-K for the transition period from January 28, 1996 to December
28, 1996.
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.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
2.1 - Mastercraft Group Acquisition Agreement dated as of April 25, 1997 among Collins & Aikman Products Co., Joan
Fabrics Corporation and MC Group Acquisition Company L.L.C.
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 &
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<PAGE>
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
3, 1996.
4.5 - Amendment, dated as of December 5, 1996, to the 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 parties thereto, and The Chase Manhattan Bank, as Administrative
Agent, is hereby incorporated by reference to Exhibit 4.5 of Collins & Aikman Corporation's Report on Form 10-Q
for the fiscal quarter ended October 26, 1996.
4.6 - Credit Agreement, dated as of December 5, 1996, among Collins & Aikman Products Co., as Borrower, Collins &
Aikman Corporation, as Guarantor, the Lenders named therein and The Chase Manhattan Bank, as Administrative
Agent, is hereby incorporated by reference to Exhibit 4.6 of Collins & Aikman Corporation's Report on Form 10-Q
for the fiscal quarter ended October 26, 1996.
4.7 - Indenture dated as of June 28, 1994, between JPS Automotive Products Corp., as Issuer, JPS Automotive L.P., as
Guarantor and Shawmut Bank Connecticut, N.A., as Trustee, is hereby incorporated by reference to Exhibit 4.2 of
JPS Automotive Corp.'s Registration Statement on Form S-1, Registration No. 33-75510.
4.8 - First Supplemental Indenture, dated as of October 5, 1994, between JPS Automotive Products Corp. and JPS
Automotive L.P., as Co-Obligors and Shawmut Bank Connecticut, N.A., as Trustee is hereby incorporated by
reference to Exhibit 4.48A of JPS Automotive L.P.'s and JPS Automotive Products Corp.'s Report on Form 10-Q for
the fiscal quarter ended October 2, 1994.
Collins & Aikman Corporation agrees to furnish to the
Commission upon request in accordance with Item 601 (b)(4)
(iii) (A) of Regulation S-K copies of instruments defining the
rights of holders of long-term debt of Collins & Aikman
Corporation or any of its subsidiaries, which debt does not
exceed 10% of the total assets of Collins & Aikman Corporation
and its subsidiaries on a consolidated basis.
10.1 - Amended and Restated Stockholders Agreement dated as of June 29, 1994 among the Company, Collins & Aikman Group,
Inc., Blackstone Capital Partners L.P. and Wasserstein Perella Partners, L.P. is hereby incorporated by reference
to Exhibit 10.1 of Collins & Aikman Corporation's Report on Form 10-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.
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.
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<PAGE>
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 is hereby incorporated by reference to
Exhibit 10.9 of Collins & Aikman Corporation's Report on Form
10-Q for the fiscal quarter ended July 27, 1996.
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 and restated, 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, as amended through February 7, 1997.
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.
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
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<PAGE>
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, Inc. is hereby incorporated by
reference to Exhibit 1.1 of Collins & Aikman Corporation's Current Report on Form 8-K dated June 3, 1996.
10.26 - Second Amendment, dated as of October 3, 1996, to the Employment Agreement, dated as of July 22, 1992, as
amended, between Collins & Aikman Products Co. and an executive officer is hereby incorporated by reference to
Exhibit 10.26 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended October 26,
1996.
10.27 - Equity Purchase Agreement by and among JPSGP, Inc., Foamex - JPS Automotive L.P. and Collins & Aikman Products
Co. dated August 28, 1996 is hereby incorporated by reference to
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<PAGE>
Exhibit 2.1 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended July 27, 1996.
10.28 - Amendment No. 1 to Equity Purchase Agreement by and among JPSGP, Inc., Foamex - JPS Automotive L.P., Foamex
International Inc. and Collins & Aikman Products Co. dated as of December 11, 1996 is hereby incorporated by
reference to Exhibit 2.2 of Collins & Aikman Corporation's Current Report on Form 8-K dated December 10, 1996.
10.29 - Equity Purchase Agreement by and among Seiren U.S.A. Corporation, Seiren Automotive Textile Corporation, Seiren
Co., Ltd. and Collins & Aikman Products Co. dated December 11, 1996, is hereby incorporated by reference to
Exhibit 2.3 of Collins & Aikman Corporation's Current Report on Form 8-K dated December 10, 1996.
10.30 - Acquisition Agreement between Perstorp A.B. and Collins & Aikman Products Co. dated December 11, 1996 is hereby
incorporated by reference to Exhibit 2.4 of Collins & Aikman Corporation's Current Report on Form 8-K dated
December 10, 1996.
10.31 - Agreement among Perstorp A. B., Perstorp GmbH, Perstorp Biotec A.B. and Collins & Aikman Products Co. dated
December 11, 1996 is hereby incorporated by reference to Exhibit 2.5 of Collins & Aikman Corporation's Current
Report on Form 8-K dated December 10, 1996.
10.32 - Shareholders Agreement among Collins & Aikman Products Co., Collins & Aikman Europe, Inc., Perstorp GmbH,
Perstorp A.B., Perstorp Biotec A.B., Perstorp Components N.V. and Perstorp Components A.B., dated December 11,
1996 is hereby incorporated by reference to Exhibit 2.6 of Collins & Aikman Corporation's Current Report on Form
8-K dated December 10, 1996.
10.33 - Acquisition Agreement dated as of December 9, 1996 among Collins & Aikman Products Co., Collins & Aikman Floor
Coverings Group, Inc., Collins & Aikman Floor Coverings, Inc., CAF Holdings, Inc. and CAF Acquisition Corp. is
hereby incorporated by reference to Exhibit 2.7 of Collins & Aikman Corporation's Current Report on Form 8-K
dated December 10, 1996.
11 - Computation of Earnings Per Share.
27 - Financial Data Schedules.
99 - Voting Agreement between Blackstone Capital Partners L.P. and Wasserstein Perella Partners, L.P. is hereby
incorporated by reference to Exhibit 99 of Amendment No. 4 to Collins & Aikman Holdings Corporation's
Registration Statement on Form S-2 (Registration No. 33-53179) filed June 27, 1994.
</TABLE>
(B) REPORTS ON FORM 8-K.
During the quarter for which this Report on Form 10-Q is filed, the
Company filed a Report on Form 8-K dated February 6, 1997 (the "Floorcoverings
8-K") reporting under Item 2 thereof the disposition of the Company's
floorcoverings business through a sale of all the outstanding stock of its
indirect wholly owned subsidiary, Collins & Aikman Floor Coverings, Inc.
("Floorcoverings"), to CAF Acquisition Corporation. The following pro forma
financial information reflecting the disposition of Floorcoverings on the
Company's financial statements was filed with the Floorcoverings 8-K under Item
7 of Form 8-K:
Pro forma Consolidated Statements of Operations for the Eleven Months
Ended December 28, 1996
Pro forma Consolidated Statements of Operations for the fiscal year
Ended January 27, 1996
Pro forma Consolidated Balance Sheet at December 28, 1996
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<PAGE>
During the quarter for which this Report on Form 10-Q is filed, the
Company also filed on February 24, 1997 an amendment to a Report on Form 8-K
dated December 10, 1996 relating to the acquisition of JPS Automotive L.P. (the
"Amendment"). In the Amendment, the Company filed the following financial
statements under Item 7 of Form 8-K:
Independent Auditors' Report dated February 9, 1996.
Consolidated Balance Sheets of JPS Automotive L.P. and Subsidiaries as
of December 31, 1995 and January 1, 1995 (Audited)
Consolidated Statements of Operations of JPS Automotive L.P. and
Subsidiaries for the year ended December 31, 1995, and
the period from June 29, 1994 to January 1, 1995 (Audited)
Consolidated Statements of Owners' Equity of JPS Automotive L.P. and
Subsidiaries (Audited).
Consolidated Statements of Cash Flows of JPS Automotive L.P. and
Subsidiaries for the year ended December 31, 1995, and the
period from June 29, 1994 to January 1, 1995 (Audited).
Notes to Consolidated Financial Statements.
Consolidated Balance Sheets of JPS Automotive L.P. and Subsidiaries as
of September 29, 1996 (Unaudited).
Consolidated Statements of Operations of JPS Automotive L.P. and
Subsidiaries for the Nine Months Ended September 29, 1996
(Unaudited).
Consolidated Statements of Cash Flows of JPS Automotive L.P. and
Subsidiaries for the Nine Months Ended September 29, 1996
(Unaudited).
Notes to Consolidated Condensed Financial Statements of JPS
Automotive L.P. and Subsidiaries.
Pro Forma Consolidated Statement of Operations of Collins &
Aikman Corporation and Subsidiaries for the fiscal year ended
January 27, 1996 (Unaudited).
Pro Forma Consolidated Statement of Operations of Collins &
Aikman Corporation and Subsidiaries for the Nine Months ended
October 26, 1996 (Unaudited).
Pro Forma Consolidated Balance Sheet of Collins & Aikman
Corporation and Subsidiaries at October 26, 1996 (Unaudited).
During the quarter for which this Report on Form 10-Q is filed, the
Company also filed a Report on Form 8-K on February 20, 1997, reporting under
Item 5 thereof the fact that the Company reported operating results for the
fiscal year ended December 28, 1996.
II-6
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: May 12, 1997
COLLINS & AIKMAN CORPORATION
(Registrant)
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)
<PAGE>
MASTERCRAFT GROUP
ACQUISITION AGREEMENT,
DATED AS OF APRIL 24, 1997,
AMONG
COLLINS & AIKMAN PRODUCTS CO.,
JOAN FABRICS CORPORATION
AND
MC GROUP ACQUISITION COMPANY, LLC
<PAGE>
TABLE OF CONTENTS
(Not a part of this Agreement)
<TABLE>
<CAPTION>
<S> <C>
I. PURCHASE AND SALE OF ACQUIRED ASSETS.......................................... 1
1.1. Purchase and Sale................................................... 1
1.2. Acquired Assets and Excluded Assets................................. 1
1.3. Assumption of Liabilities........................................... 4
1.4. Purchase Price...................................................... 7
1.5. Purchase Price Adjustment........................................... 8
1.6. Transactions to be Effected at the Closing...........................10
II. REPRESENTATIONS AND WARRANTIES.................................................11
2.1. Representations and Warranties of Seller.............................11
2.1.1. Authorization and Effect of Agreement.......................11
2.1.2. No Restrictions.............................................11
2.1.3. Financial Statements........................................12
2.1.4. Conduct of the Business Since the Balance Sheet Date........13
2.1.5. Compliance with Laws........................................13
2.1.6. Tangible Personal Property; Title to
Assets................................................ 13
2.1.7. Real Property.............................................. 14
2.1.8. Insurance.................................................. 15
2.1.9. Intellectual Property...................................... 15
2.1.10. Litigation; Decrees........................................ 15
2.1.11. Contract Rights............................................ 16
2.1.12. Employee Plans, Etc........................................ 18
2.1.13. Taxes...................................................... 19
2.1.14. Environmental Matters...................................... 19
2.1.15. Certain Additional Representations......................... 21
2.2. Representations and Warranties of Purchaser......................... 21
2.2.1. Authorization and Effect of Agreement...................... 21
2.2.2. No Restrictions............................................ 22
2.2.3. Financial Capacity......................................... 22
2.3. Certain Limitations on Representations and
Warranties.......................................................... 22
III. COVENANTS..................................................................... 23
3.1. Investigation by Purchaser.............................................. 23
3.2. Press Releases.......................................................... 24
3.3. Regulatory Filings...................................................... 24
3.4. Injunctions............................................................. 25
3.5. Operation of the Business............................................... 25
3.6. Supplemental Schedules.................................................. 27
3.7. Satisfaction of Conditions.............................................. 27
3.8. Bulk Transfer Laws...................................................... 27
3.9. Real Property Licenses.................................................. 27
3.10. Discharge of Mortgages.................................................. 27
3.11. Designer Contracts...................................................... 28
3.12. UCC-3s/Release of Ack-Ti and Ackerman................................... 28
<PAGE>
IV. THE CLOSING....................................................................28
4.1. Conditions Precedent to Obligations of Purchaser,
Parent and Seller....................................................... 28
4.2. Additional Conditions Precedent to Obligations of
Purchaser and Parent.................................................... 29
4.2.1. No Material Misrepresentation or Breach......................... 29
4.2.2. Bills of Sale; Special Warranty Deeds........................... 29
4.2.3. Assignment Agreements........................................... 29
4.2.4. Clearance Certificates.......................................... 30
4.2.5. FIRPTA.......................................................... 30
4.2.6. Opinion of Counsel.............................................. 30
4.2.7. Certain Leases.................................................. 30
4.2.8. Payment of Certain Indebtedness................................. 30
4.3. Additional Conditions Precedent to Obligations of
Seller.............................................................. ....30
4.3.1. No Material Misrepresentation or Breach......................... 30
4.3.2. Assumption Agreement............................................ 31
4.3.3. Opinion of Counsel.............................................. 31
4.3.4. Estimated Purchase Price........................................ 31
4.4. The Closing............................................................. 31
4.5. Termination............................................................. 31
V. SURVIVAL AND INDEMNIFICATION.................................................. 32
5.1. Survival of Representations, Warranties and
Covenants............................................................... 32
5.2. Limitations on Liability................................................ 33
5.3. Indemnification......................................................... 34
5.4. Defense of Claims....................................................... 36
VI. OTHER POST-CLOSING COVENANTS.................................................. 38
6.1. Personnel Matters....................................................... 38
6.1.1. Employees and Employee Benefit Plans............................ 38
6.1.2. Assumption of Obligations....................................... 38
6.1.3. Retirement Plans................................................ 39
6.1.4. Employment and Plan Amendments or
Terminations.................................................... 39
6.1.5. Transitional Matters............................................ 40
6.1.6. Employee Information............................................ 40
6.1.7. W-2 Matters................................................... ..40
6.2. General Post-Closing Matters............................................ 40
6.2.1. Post-Closing Notifications...................................... 40
6.2.2. Names, Trademarks, Etc.......................................... 41
6.2.3. Access.......................................................... 41
6.2.4. Certain Tax Matters............................................. 42
6.2.5. Insurance....................................................... 44
6.2.6. Receivables..................................................... 46
6.2.8. Certain Contracts............................................... 47
6.2.9. Non-Solicitation................................................ 48
6.2.10. Software Licenses............................................... 48
VII. MISCELLANEOUS PROVISIONS...................................................... 49
7.1. Notices................................................................. 49
7.2. Expenses................................................................ 49
7.3. Successors and Assigns...................................................50
<PAGE>
<PAGE>
7.4. Waiver.................................................................. 50
7.5. Entire Agreement........................................................ 50
7.6. Amendments, Supplements, Etc............................................ 51
7.7. Rights of the Parties................................................... 51
7.8. Further Assurances...................................................... 51
7.9. Applicable Law; Jurisdiction............................................ 51
7.10. Titles and Headings..................................................... 52
7.11. Certain Interpretive Matters and Definitions............................ 52
</TABLE>
<PAGE>
TABLE OF DEFINED TERMS
(Not a part of this Agreement)
Section
Accountants.......................................................1.5(c)
Accounting Policies ..............................................1.5(a)
Ack-Ti..........................................................Recitals
Ackerman........................................................Recitals
Acquired Assets...................................................1.2(a)
Actual Net Worth Amount...........................................1.5(a)
Affiliate........................................................7.11(a)
Agreement...................................................Introduction
Assumed Liabilities...............................................1.3(a)
Assumed Contracts..............................................1.2(a)(v)
Balance Sheet...................................................2.1.3(a)
Balance Sheet Date..............................................2.1.3(a)
Business........................................................Recitals
Closing...........................................................4.4(a)
Closing Date......................................................4.4(a)
Closing Price.....................................................1.4(a)
Closing Date Balance Sheet........................................1.5(a)
Closing Date Employees........................................1.3(a)(ii)
Code...........................................................2.1.12(b)
Commitment Letter.................................................4.5(d)
Confidentiality Agreement............................................7.5
Consent Costs......................................................4.2.7
Consent-Required Leased Real Property..............................4.2.7
Contracts......................................................1.2(a)(v)
Direct Claim......................................................5.4(c)
Employee.......................................................2.1.12(a)
Employee Plan..................................................2.1.12(a)
Environment....................................................2.1.14(d)
Environmental Law..............................................2.1.14(d)
Environmental Condition........................................2.1.14(d)
ERISA..........................................................2.1.12(a)
Estimated Purchase Price..........................................1.4(b)
Estimated Net Worth Amount........................................1.4(b)
Excluded Liabilities..............................................1.3(b)
Excluded Assets...................................................1.2(b)
Excluded Contracts...........................................1.3(b)(vii)
Financial Statements............................................2.1.3(a)
Former Employee................................................2.1.12(a)
GAAP............................................................2.1.3(a)
Governmental Entity................................................2.1.2
HSR Act............................................................2.1.2
Income Tax .....................................................6.2.4(g)
Indemnifiable Losses..............................................5.2(a)
Indemnifying Party................................................5.2(a)
Indemnitee........................................................5.2(a)
Indemnity Payment.................................................5.2(a)
Intellectual Property .............................................2.1.9
IRS............................................................2.1.12(b)
Knowledge of Seller..............................................7.11(a)
Last Offer........................................................1.5(c)
<PAGE>
Law.................................................................2.1.2
Leased Real Property................................................2.1.7
Legal Proceedings..................................................2.1.10
Liens...............................................................2.1.6
Master Contracts.................................................6.2.7(a)
Mastercraft Group................................................Recitals
Material Adverse Effect..............................................7.11
Negative Cash Amount............................................1.3(b)(i)
Net Worth Amount...................................................1.4(a)
Non-Prevailing Party...............................................1.5(c)
Orders.............................................................2.1.10
Owned Real Property.................................................2.1.7
Parent.......................................................Introduction
Permit..............................................................2.1.2
Permitted Liens..................................................2.1.6(a)
Person...............................................................7.11
Prevailing Party...................................................1.5(c)
Products.........................................................Recitals
Purchase Price.....................................................1.4(a)
Purchaser Companies................................................5.2(e)
Purchaser....................................................Introduction
Purchaser's Insurance............................................6.2.5(b)
Real Property...................................................1.2(a)(i)
Records..........................................................6.2.3(a)
Receivables Facility ........................................... 2.1.3(c)
Restricted Period...............................................6.2.9(a)
Retirement Plans....................................................6.1.3
Sales Representatives............................................6.2.9(a)
Seller Trade Name.................................................. 6.2.2
Seller.......................................................Introduction
Seller's Accountant................................................1.5(b)
Seller's Insurance...............................................6.2.5(a)
Shares.............................................................1.2(a)
subsidiary...........................................................7.11
Supply Agreement......................................................4.1
Tax/Taxes .......................................................6.2.4(g)
Tax Returns......................................................6.2.4(g)
Third Party Claim..................................................5.2(a)
Transfer.........................................................Recitals
Transfer Taxes ..................................................6.2.4(g)
UCC-3's ..............................................................3.7
West Spindale Property..........................................2.1.14(e)
<PAGE>
LIST OF SCHEDULES
(Not a part of this Agreement)
Schedule 1.2(b)(viii) Other Excluded Assets
Schedule 1.3(b)(vii) Excluded Contracts
Schedule 1.5(a) Accounting Principles
Schedule 2.1.2 Seller Consents and Approvals/Conflicts
Schedule 2.1.3 Financial Statements
Schedule 2.1.4(a) Conduct of Business
Schedule 2.1.5 Compliance with Laws
Schedule 2.1.6(a) Tangible Property; Title to Assets
Schedule 2.1.6(b) Shares
Schedule 2.1.7 Real Property
Schedule 2.1.9 Intellectual Property
Schedule 2.1.10(a) Litigation
Schedule 2.1.11 Contract Rights
Schedule 2.1.12 Current Employee Benefits
Schedule 2.1.13 Tax Matters
Schedule 2.1.14 Environmental Matters
Schedule 2.2.2 Purchaser/Parent Consents and
Approvals/Conflicts
Schedule 3.5(f) Compensation Contracts
Schedule 7.11 Definition of Knowledge
LIST OF EXHIBITS
(Not a part of this Agreement)
Exhibit 4.1 Supply Agreement
Exhibit 4.2.5 FIRPTA Affidavit
Exhibit 4.2.6 Opinion of Seller's Counsel
Exhibit 4.3.3 Opinion of Purchaser's Counsel
<PAGE>
This Mastercraft Group Acquisition Agreement (this "Agreement")
is made and entered into as of April 24, 1997, among Collins & Aikman Products
Co., a Delaware corporation ("Seller"), Joan Fabrics Corporation, a Delaware
corporation ("Parent"), and MC Group Acquisition Company, LLC, a Delaware
limited liability company ("Purchaser").
RECITALS:
A. Seller is engaged in the business (the "Business") of
designing, manufacturing and marketing fabrics for furniture
upholstery, home textiles, recreational vehicles and neckwear
interlining and of manufacturing and selling yarn (such fabrics
and yarn, the "Products");
B. Seller operates the Business through its Mastercraft Division,
its Yarn Division and its Ack-Ti Division, including Seller's wholly owned
subsidiaries, Ack-Ti-Lining, Inc., a New York corporation ("Ack-Ti"), and
Ackerman Associates, Inc., a New York corporation ("Ackerman") (the Mastercraft
Division, the Yarn Division and the Ack-Ti Division (including Ack-Ti and
Ackerman) being collectively referred to as the "Mastercraft Group");
C. Seller desires to sell, assign and deliver
("Transfer") to Purchaser, and Purchaser desires to purchase and
accept from Seller, the Acquired Assets on the terms and subject
to the conditions of this Agreement;
D. Seller desires to delegate to Purchaser, and
Purchaser is willing to assume, the Assumed Liabilities on the
terms and subject to the conditions of this Agreement; and
E. Seller and Parent desire that the foregoing
transactions be completed on such terms and subject to such
conditions.
NOW, THEREFORE, the parties hereto agree as follows:
I. PURCHASE AND SALE OF ACQUIRED ASSETS
1.1. Purchase and Sale. On the terms and subject to the
conditions of this Agreement, at the Closing, Seller will
Transfer to Purchaser, and Purchaser will purchase and accept
from Seller, the Acquired Assets.
1.2. Acquired Assets and Excluded Assets. (a) For
purposes of this Agreement, the term "Acquired Assets" means the
following properties, assets and rights of whatever kind and
nature, real or personal, tangible or intangible, other than the
1
<PAGE>
Excluded Assets, owned by Seller as of the Closing and used or held for use
primarily in the Business:
(i) the real property, leaseholds and other interests
in real property of Seller that are listed in Schedule 2.1.7,
together with the right, title and interest of Seller in all
buildings, improvements, fixtures and other appurtenances thereto
(the "Real Property");
(ii) the inventory of Seller that as of the Closing is
located on the Real Property and all other inventory of Seller on
the Closing Date that is used or held for use primarily in the
Business;
(iii) the machinery and equipment of Seller and other
fixed assets of the Business located at the Real Property
as of the Closing;
(iv) the prepaid expenses of Seller as of the Closing
to the extent relating to the Acquired Assets;
(v) the right, title and interest of Seller as of the
Closing in, to and under all contracts, leases, licenses and all
other legally binding commitments ("Contracts") (other than
Excluded Contracts) ("Assumed Contracts") that are listed on
Schedules 2.1.7 or 2.1.11, or which would be so listed but for
any dollar, time or other exclusion or exception in Section 2.1.7
or Section 2.1.11, as the case may be, and any Contract primarily
relating to the Business entered into in accordance with this
Agreement, including without limitation Section 3.5;
(vi) the right, title and interest of Seller as of the
Closing in, to and under the intellectual property listed or
required to be listed on Schedule 2.1.9;
(vii) the trade secrets, know how and goodwill owned
by Seller as of the Closing relating primarily to the
Business;
(viii) the books of account, general, financial,
accounting and personnel records, files, invoices, customers' and
suppliers' lists and other written information owned by Seller as
of the Closing and relating primarily to the Business;
(ix) the permits, licenses, franchises and other
federal, state, local and foreign governmental approvals and
authorizations of Seller as of the Closing relating primarily to
the Business;
(x) the assets reflected as such in the Closing Date
Balance Sheet, including without limitation amounts due
2
<PAGE>
from Seller or any of its Affiliates as of the Closing Date
arising out of or relating to the supply of yarn or the provision
of commission weaving services to the Seller or any of its
Affiliates by the Mastercraft Group prior to the Closing Date;
and
(xi) the entire right, title and interest of Seller in
all of the issued and outstanding capital stock of Ack-Ti and
Ackerman (the "Shares").
(b) For purposes of this Agreement, the term "Excluded
Assets" means:
(i) cash and cash-equivalent assets;
(ii) the insurance policies or other insuring agreements
of Seller, whether or not pertaining to the Acquired Assets or
the Business, and all rights of every nature and description
under or arising out of such policies or agreements, except as
expressly provided in Section 6.2.5;
(iii) the rights of Seller under this Agreement and the
agreements, instruments and certificates delivered in connection
with this Agreement;
(iv) the Records referred to in Section 6.2.3(a)(i),
(ii) or (iii);
(v) the rights and other assets (including Tax and
other refunds and claims thereto) to the extent related
to any of the Excluded Liabilities;
(vi) the rights, title and interest in the trade names
"Collins & Aikman" and "C&A" and the "CA" logo, or any variations
or derivations of such names or logo;
(vii) the accounts of a type that would be reflected (on
a net basis or otherwise) on a combined balance sheet of the
Mastercraft Group prepared on a basis consistent with the Balance
Sheet as "Investments and Advances from Collins & Aikman Products
Co." and any other accounts due from Seller or any of its
subsidiaries without reduction or increase, as the case may be,
of such accounts for (A) amounts due from Seller or any of its
Affiliates as of the Closing Date arising out of or relating to
the supply of yarn or the provision of commission weaving
services to the Seller or any of its Affiliates by the
Mastercraft Group prior to the Closing Date and (B) amounts due
to Seller or any of its Affiliates as of the Closing Date arising
out of or relating to the provision of finishing services to the
Ack-Ti Division and transportation services to the Mastercraft
Group prior to the Closing Date; and
3
<PAGE>
(viii) the assets identified on Schedule 1.2(b)(viii).
(c) As used in this Agreement, the phrases "used" or "held for
use in," "relate to," "related primarily to" or "relating primarily to" the
Business, or the conduct thereof, and similar phrases are intended to exclude
assets of Seller owned or held (i) in any business other than the Business, (ii)
for use in the businesses or activities of Seller generally, or (iii) for use by
both the Mastercraft Group and any other business of Seller so long as such
assets or rights do not exclusively or predominantly relate to the Business.
Nothing in this Section 1.2 will constitute a representation or warranty with
respect to the extent of Seller's right, title and interest in or to any of the
Acquired Assets.
1.3. Assumption of Liabilities. (a) On the terms and subject to
the conditions of this Agreement, effective as of the Closing, Purchaser assumes
and agrees to pay, perform and discharge when due, and to indemnify Seller and
its Affiliates against and hold them harmless from, the obligations and
liabilities of Seller of whatever kind and nature, primary or secondary, direct
or indirect, absolute or contingent, known or unknown, whenever arising, whether
or not accrued, that are described below (collectively, the "Assumed
Liabilities"):
(i) the obligations and liabilities, or reserves
therefor, to the extent reflected in the Closing Date Balance
Sheet, including without limitation amounts due to Seller or any
of its subsidiaries as of the Closing Date arising out of or
relating to the provision of finishing services to the Ack-Ti
Division and transportation services to the Mastercraft Group
prior to the Closing Date;
(ii) all amounts due from Seller or any of its
Affiliates (A) to Employees who are employed by Seller as of the
Closing Date (or on temporary leave or disability) ("Closing Date
Employees") under any of the Employee Plans or arrangements
listed on Schedule 2.1.12 (excluding those Employee Plans marked
with an asterisk thereon), the parties hereby acknowledging,
however, that (1) except and only to the extent provided in
Sections 6.1.1-6.1.7, nothing in this Section 1.3(a)(ii) will
require Purchaser to continue any Employee Plan or arrangement
listed on Schedule 2.1.12 that is not an Assumed Contract after
the Closing and (2) accordingly, Purchaser's obligations under
this Section 1.3(a)(ii)(A) will apply only to events or periods
occurring or, in the case of a continuing event (such as, for
example, a hospitalization) commencing, prior to or on the
Closing Date, (B) for severance or termination pay or benefits to
any sales representative referred to on Schedule 2.1.12 or to any
Closing Date Employee pursuant to the severance letters referred
to in Exhibit A to Schedule 2.1.12, the
4
<PAGE>
severance policy referred to in Exhibit B of Schedule 2.1.12, any
Assumed Contract or applicable Law arising out of (1) the
termination (actual, constructive or, under certain of such
severance letters, for "Good Reason" or without "cause") of any
such sales representative or Closing Date Employee on or after
the Closing or (2) the consummation of the transactions
contemplated hereby, (C) for post-retirement health benefits to
Closing Date Employees, and (D) for claims under worker's
compensation Laws made by Closing Date Employees on or after the
Closing Date;
(iii) the obligations and liabilities relating to,
resulting from or arising out of any matter listed or described
on any of Schedules 2.1.7, 2.1.9 and 2.1.10(a) or not so listed
or described by reason of any dollar, time or other exclusion or
exception in any representation or warranty in the corresponding
Section in Article II;
(iv) the obligations and liabilities of Seller under
the executory portion of Assumed Contracts;
(v) the obligations and liabilities of Seller, if any,
(A) for personal injury in respect of any and all Products
manufactured by Purchaser or any of its Affiliates after the
Closing and (B) for Product return, warranty or similar
liabilities or obligations in respect of any and all Products
manufactured or sold by Seller, Purchaser or any of their
respective Affiliates prior to, on or after the Closing Date
(including without limitation obligations and liabilities for
refunds, adjustments, allowances, damages, repairs, exchanges and
returns;
(vi) the obligations and liabilities arising out of
Purchaser's conduct of the Business after the Closing
Date;
(vii) the obligations and liabilities assumed by
Purchaser or Parent under Sections 6.1.1, 6.1.2 and
6.2.4; and
(viii) the obligations and liabilities for any legal,
accounting, travel, printing or other expenses incurred on behalf
of Purchaser or any of its Affiliates in connection with the
transactions contemplated by this Agreement or the financing
thereof.
The provisions of Sections 1.3(a)(i)-(viii) are independent, with the result
that any limitation in any such provision thereof will not apply to any other
provision thereof. All Persons having any right in respect of any Assumed
Liabilities are intended third-party beneficiaries of Purchaser's obligations
under this Section
5
<PAGE>
1.3(a). Notwithstanding any other provision hereof or of applicable Law to the
contrary, the parties' respective obligations under any covenant in this
Agreement, including without limitation Purchaser's obligations under this
Section 1.3(a), will not be subject to offset or reduction or otherwise affected
by reason of any actual or alleged breach of any representation, warranty or
covenant contained in this Agreement or any document contemplated by or
delivered in connection herewith or any right or alleged right to
indemnification hereunder or thereunder or any other matter whatsoever.
(b) Notwithstanding anything to the contrary contained herein,
but subject to Section 1.3(c), Purchaser will not assume or otherwise become
liable for, and as between Purchaser and Seller, Seller will retain and remain
responsible for and pay in accordance with their respective terms, the
obligations and liabilities of Seller of whatever kind and nature, primary or
secondary, direct or indirect, absolute or contingent, known or unknown,
whenever arising, whether or not accrued, that are described below
(collectively, the "Excluded Liabilities"):
(i) the obligations or liabilities of Seller to the
extent attributable to any of the Excluded Assets, including
without limitation the total amounts of checks issued by Seller,
Ack-Ti, Ackerman or any Affiliate thereof that have not been
presented for payment to Seller's bank disbursement account prior
to the Closing Date (the amount thereof, the "Negative Cash
Amount");
(ii) the obligations or liabilities of Seller (A) under
any Employee Plans marked with an asterisk on Schedule 2.1.12
except to the extent assumed by Purchaser pursuant to Section
1.3(a)(ii)(B) or (C), (B) referred to in the second paragraph of
Note 2(c) to the Financial Statements to provide post-retirement
health benefits to individuals formerly employed in the Business
and not so employed as of immediately prior to the Closing
(unless on temporary leave or disability), and (C) referred to in
Note 2(d) to the Financial Statements under worker's compensation
Laws in respect of claims made prior to the Closing Date;
(iii) the obligations or liabilities of Seller that are
not Assumed Liabilities, including without limitation arising out
of any Environmental Condition to the extent existing prior to
the Closing Date;
(iv) the obligations or liabilities of Seller of a type
that would be reflected (on a net basis or otherwise) on a
combined balance sheet of the Mastercraft Group prepared on a
basis consistent with the Balance Sheet as "Investments and
Advances from Collins & Aikman Products Co.", and any other
accounts due to Seller or any of its subsidiaries without
reduction or increase, as
6
<PAGE>
the case may be, of such accounts for (A) amounts due to Seller
or any of its Affiliates as of the Closing Date arising out of or
relating to the provision of finishing services to the Ack-Ti
Division and transportation services to the Mastercraft Group
prior to the Closing Date or (B) amounts due from Seller or any
of its Affiliates as of the Closing Date arising out of or
relating to the supply of yarn or the provision of commission
weaving services to Seller or any of its Affiliates by the
Mastercraft Group prior to the Closing Date;
(v) the obligations or liabilities retained by
Seller under Section 6.1.3 or 6.2.4;
(vi) the obligations or liabilities for any legal,
accounting, investment banking, brokerage or similar fees or
expenses incurred by Seller or any of its Affiliates in
connection with the transactions contemplated by this Agreement;
and
(vii) the obligations or liabilities of Seller or Ack- Ti
under the Contracts listed on Schedule 1.3(b)(vii) (the "Excluded
Contracts").
(c) Notwithstanding any other provision hereof, effective as
of the seventh anniversary of the Closing Date, all Excluded Liabilities
involving claims for personal injury or damage to property relating to,
resulting from or arising out of the conduct of the Business at any time, other
than (i) any of such Excluded Liabilities as to which Purchaser has theretofore
made a claim for indemnification in accordance with this Agreement and (ii) any
of such Excluded Liabilities relating to any Environmental Condition existing on
or prior to the Closing Date, will, without further action, become Assumed
Liabilities.
1.4. Purchase Price. (a) In addition to assuming the Assumed
Liabilities, at the Closing, Purchaser will pay to Seller U.S. $310.0 million
(the "Closing Price"), subject to adjustment as provided in Sections 1.4(b) and
1.5 in respect of changes in the Net Worth Amount (as adjusted, the "Purchase
Price"). "Net Worth Amount" means the amount shown as "Investments and Advances
from Collins & Aikman Products Co." as it would appear on a balance sheet of the
Mastercraft Group prepared in accordance with the second sentence of Section
1.5(a).
(b) Not less than two business days prior to the Closing Date,
Seller will deliver to Purchaser a combined balance sheet which will set forth
Seller's estimate of the Net Worth Amount as of the Closing Date (the "Estimated
Net Worth Amount"), determined in accordance with the second sentence of Section
1.5(a) as if it were the Actual Net Worth Amount, but based upon Seller's review
of monthly financial information then available to Seller and its inquiries of
personnel responsible for the
7
<PAGE>
preparation of financial information relating to the Business in the ordinary
course thereof. The Closing Price will be reduced or increased
dollar-for-dollar, as the case may be (as so adjusted, the "Estimated Purchase
Price"), by the amount by which the Estimated Net Worth Amount calculated on the
basis set forth in the second sentence of Section 1.5(a) is less or more, as the
case may be, than $143,714,000.
(c) On the Closing Date, Purchaser will pay by wire transfer
of immediately available funds to such account as Seller has theretofore
designated an amount equal to the Estimated Purchase Price.
1.5. Purchase Price Adjustment. (a) In order to determine the
Purchase Price, the Estimated Purchase Price will be reduced or increased
dollar-for-dollar, as the case may be, to the extent that the Actual Net Worth
Amount is less or greater, as the case may be, than the Estimated Net Worth
Amount determined in accordance with Section 1.4(b). For purposes of this
Agreement, the "Actual Net Worth Amount" means the Net Worth Amount (without
giving effect to any extraordinary transactions taken upon or after the Closing)
on a combined balance sheet for the Mastercraft Group prepared in accordance
with this Section 1.5 as of the close of business on the Closing Date (the
"Closing Date Balance Sheet") on a basis consistent with, and using the same
accounting principles, policies, practices and procedures used in preparing, the
Balance Sheet (the "Accounting Policies"), except that (i) the principles set
forth in Schedule 1.5(a) will be applied in preparing the Closing Date Balance
Sheet, (ii) the Closing Date Balance Sheet will in all events exclude any
Excluded Liabilities (including without limitation the Executive Incentive
Compensation Plan referred to on Schedule 2.1.12) and Excluded Assets and any
accruals or reserves related thereto, (iii) the Closing Date Balance Sheet will
reflect liabilities for amounts accrued as of the close of business on the
Closing Date for the obligations and liabilities of Seller to Closing Date
Employees for group health, long term disability, medical, dental, vision and
hospitalization benefits referred to in Note 2(c) to the Financial Statements in
accordance with the Accounting Policies, and (iv) the Negative Cash Amount, if
any, and any accounts payable to which the Negative Cash Amount relates will be
excluded from the Closing Date Balance Sheet.
(b) Within 60 calendar days after the Closing Date, Seller and
Arthur Andersen L.L.P. ("Seller's Accountants") will prepare, or cause to be
prepared, and deliver to Purchaser the Closing Date Balance Sheet setting forth
the Actual Net Worth Amount. The Closing Date Balance Sheet will be accompanied
by a report of Seller's Accountants substantially to the effect, that in the
opinion of such firm, the Closing Date Balance Sheet has been prepared in all
material respects in accordance with the requirements of the second sentence of
Section 1.5(a). Seller and its authorized representatives will be entitled to
review, during normal business hours, the books, records and workpapers
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of the Mastercraft Group to prepare the Closing Date Balance Sheet. Without
limiting the generality or effect of any other provision hereof, (i) Purchaser
will (A) provide Seller and its representatives access, during normal business
hours, to the facilities, personnel and accounting and other records of the
Mastercraft Group to the extent reasonably determined by Seller to be necessary
to permit Seller to prepare or have prepared the Closing Date Balance Sheet as
herein provided; provided, however, that Seller will conduct any such review in
a manner that does not unreasonably interfere with the conduct of the Business
by the Mastercraft Group after the Closing, or result in substantial
out-of-pocket costs to Purchaser, and (B) take such actions as may be reasonably
requested by Seller to close, or to assist Seller in closing, as of the close of
business on the Closing Date, the books and accounting records of the
Mastercraft Group and otherwise reasonably to cooperate with Seller and its
representatives in the preparation of the Closing Date Balance Sheet, and (ii)
Purchaser's independent accountants will be entitled to participate as an
observer in any physical inventory count or similar procedure conducted by
Seller in connection with the preparation of the Closing Date Balance Sheet.
Purchaser and Seller will each pay one-half of the Seller's Accountants' fees
and expenses incurred in performing the audit of the Closing Date Balance Sheet.
Concurrently with the delivery of the Closing Date Balance Sheet, Seller will
use its reasonable efforts to cause Seller's Accountants to provide Purchaser
access to any of such firm's workpapers, trial balances and similar materials
prepared in connection with such firm's audit or review of the Closing Date
Balance Sheet.
(c) If, within 60 calendar days after the date of Seller's
delivery of its computation of the Actual Net Worth Amount, Purchaser determines
in good faith that such computation is inaccurate, Purchaser will give written
notice to Seller within such 60 calendar day period (i) setting forth
Purchaser's computation of Actual Net Worth Amount as of the close of business
on the Closing Date and (ii) specifying in reasonable detail Purchaser's basis
for its disagreement with Seller's computation. The failure by Purchaser so to
express its disagreement or provide such specification within such 60 calendar
day period will constitute Purchaser's acceptance of Seller's computation of the
Actual Net Worth Amount. If Purchaser and Seller are unable to resolve any
disagreement between them within ten calendar days after the giving of notice of
such disagreement, the items in dispute will be referred for determination to
the dispute resolution group of Deloitte & Touche (the "Accountants") as
promptly as practicable. Purchaser and Seller will use reasonable efforts to
cause the Accountants to render their decision as soon as practicable, including
without limitation by promptly complying with all reasonable requests by the
Accountants for information, books, records and similar items. The Accountants
will make a determination as to each of the items in dispute, which
determination will be (A) in writing, (B) furnished to each of the parties
hereto as promptly
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as practicable after the items in dispute have been referred to the Accountants,
(C) made in accordance with this Agreement, and (D) conclusive and binding upon
each of the parties hereto. In connection with their determination of the
disputed items, the Accountants will be entitled, but not obligated, to rely on
the workpapers, trial balances and similar materials prepared by Seller's
Accountants in connection with such firm's examination of the financial
statements of Seller and its subsidiaries, the Accountants will not consider or
make any adjustment in respect of any matter which is not in dispute, other than
an adjustment resulting from any other adjustment in respect of a matter which
is in dispute, and the fees and expenses of the Accountants will be shared
equally by Purchaser and Seller (except as provided below). If the determination
of the Accountants represents an outcome more favorable to either Purchaser or
Seller than the midpoint of such parties' last written settlement offers related
to all items in dispute, in the aggregate, submitted to the Accountants upon the
referral of the matter to the Accountants (each, a "Last Offer"), then the party
obtaining such favorable result will be deemed the "Prevailing Party" and the
other party will be deemed the "Non-Prevailing Party". For purposes hereof, all
of the fees and expenses of the Accountants, and the reasonable out-of-pocket
expenses of the Prevailing Party, will be borne by the Non-Prevailing Party. No
party will disclose to the Accountants, and the Accountants will not consider
for any purpose, any settlement discussions or settlement offer (other than the
Last Offer) made by any party.
(d) To the extent that the Actual Net Worth Amount determined
as provided in this Section 1.5 is more or less than the Estimated Net Worth
Amount, Purchaser or Seller, as applicable, will, within ten calendar days after
the final determination of the Actual Net Worth Amount pursuant to this Section
1.5, make payment by wire transfer of immediately available funds of the amount
of such difference, together with interest thereon from the Closing Date to the
date of payment (at a rate equal to Chase Manhattan Bank's prime rate, as
publicly announced and in effect from time to time during such period, plus
2.0%, calculated on the basis of the actual number of days elapsed over 360), to
such account as has been designated by Purchaser or Seller, as applicable.
1.6. Transactions to be Effected at the Closing. At the
Closing:
(a) Seller will deliver or cause to be delivered to
Purchaser the documents described in Section 4.2; and
(b) Purchaser will deliver to Seller payment of the Estimated
Purchase Price as provided in Section 1.4(b) and the documents described in
Section 4.3.
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II. REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of Seller. Subject
to Section 2.3, Seller represents and warrants to Purchaser as of
the date of this Agreement as follows:
2.1.1. Authorization and Effect of Agreement. (a) Seller has
the requisite corporate power to execute and deliver this Agreement and to
perform the transactions contemplated hereby to be performed by it. All
necessary corporate action required to be taken under the Delaware General
Corporation Law and the New York Business Corporation Law for the due
authorization of the execution and delivery by Seller of this Agreement and the
performance by Seller of the transactions contemplated hereby to be performed by
Seller has been duly taken by Seller. This Agreement has been duly executed and
delivered by Seller and, assuming the due execution and delivery of this
Agreement by Parent and Purchaser, constitutes a valid and binding obligation of
Seller.
(b) Each of Ack-Ti and Ackerman is a duly organized, validly
existing corporation, in good standing under New York Law and is duly qualified
or licensed to do business and is in good standing as a foreign corporation in
each jurisdiction in which the character of its respective properties owned or
held under lease or the nature of its business makes such qualification
necessary, except for such of the foregoing in which the failure to be so
qualified or in good standing would not have a Material Adverse Effect.
2.1.2. No Restrictions. The execution and delivery of this
Agreement by Seller does not, and the performance by Seller of the transactions
contemplated hereby to be performed by it will not, in any material respect,
conflict with, or result in any material violation of, or constitute a material
default (with or without notice or lapse of time or both) under, or give rise to
a right of termination, cancellation or acceleration of any obligation or the
loss of a material benefit or the incurrence of a material liability under, any
provision of the Certificate of Incorporation or By-laws of Seller, Ack-Ti or
Ackerman or any Contract listed or described or required to be listed or
described on Schedule 2.1.7 or Schedule 2.1.11, or any permit or approval
pertaining to the Mastercraft Group ("Permit") issued under any domestic,
foreign or other statute, law, ordinance, rule, regulation, judgment, order,
injunction, decree or ruling or common law obligation ("Law") of any domestic,
foreign or other court, government, governmental agency, authority, entity or
instrumentality ("Governmental Entity"), other than any such conflicts,
violations or defaults as are listed or described on Schedule 2.1.2 or which
would not reasonably be expected to have a Material Adverse Effect. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any Governmental Entity is required to be obtained or made by or with
respect to Seller under any applicable Law in connection
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with the execution and delivery of this Agreement by Seller or the performance
by Seller of the transactions contemplated hereby to be performed by it, except
(i) for the filing of a premerger notification report by an Affiliate of Seller
under the Hart- Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), (ii) for such of the foregoing as are listed or described on
Schedule 2.1.2, and (iii) for such consents, approvals, orders, authorizations
of, or registrations, declarations or filings with, any Governmental Entity,
which if not obtained or made, would not reasonably be expected to have a
Material Adverse Effect.
2.1.3. Financial Statements. (a) Attached as Schedule 2.1.3
are the audited combined balance sheet of the Mastercraft Group as of January
27, 1996, the related audited combined statements of operations and cash flows
for the 12 months ended January 27, 1996, the audited combined balance sheet of
the Mastercraft Group as of December 28, 1996 (the "Balance Sheet") and the
related audited combined statements of operations and cash flows for the fiscal
year then ended (collectively, with the related notes, the "Financial
Statements"). The Financial Statements present fairly, in all material respects,
the combined financial position of the Mastercraft Group as of the dates thereof
and the results of its operations and cash flows for the periods specified in
conformity with United States generally accepted accounting principles,
consistently applied ("GAAP"), except as set forth in the notes to the Financial
Statements. For purposes of this Agreement, "Balance Sheet Date" means December
28, 1996.
(b) The inventory that will be shown on the Closing Date
Balance Sheet will consist of items usable or salable in the ordinary course of
business of the Business and will be shown thereon at the lower of historical
cost or net realizable value based on sales in the ordinary course of business,
in either case, valued in accordance with GAAP.
(c) The accounts receivable that are shown on the Balance
Sheet and that will be shown on the Closing Date Balance Sheet arose or will
arise out of transactions in the ordinary course of business of the Business
(without giving effect to the Receivables Facility) and constitute identifiable
indebtedness of the applicable account debtor, and the related reserves will be
adequate under GAAP. Any collections of accounts receivable to which Purchaser
is entitled pursuant to Section 6.2.6 will be remitted without reduction for any
discount or loss on sale attributable to the accounts receivables financing
facility operated by a finance subsidiary of Seller for Seller and its
Affiliates described in the Notes to the Financial Statements and embodied in
certain agreements referred to in Schedule 1.3(b)(vii) (the "Receivables
Facility").
(d) Except for liabilities of a type specifically
referred to in the notes to the Balance Sheet, as of the Closing
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Date there will be no Assumed Liabilities that are not reflected in the Closing
Date Balance Sheet, but are required to be so reflected in accordance with GAAP
(subject to Schedule 1.5(a)).
2.1.4. Conduct of the Business Since the Balance Sheet Date.
(a) Except as listed or described on Schedule 2.1.4(a), and except as a result
of matters permitted or required by this Agreement, since the Balance Sheet
Date, Seller has conducted the Business in the ordinary course consistent with
past practice, Seller has not taken any action which would have constituted a
violation of Section 3.5 if Section 3.5 had applied since the Balance Sheet Date
and there has not been any Material Adverse Effect except as a result of general
economic conditions and competitive circumstances in the businesses in which the
Business is conducted.
(b) Seller has not sold any capital equipment or machinery
having an original cost basis of more than $1,000 since the Balance Sheet Date.
2.1.5. Compliance with Laws. To the Knowledge of Seller,
except as listed or described on Schedule 2.1.5, Seller is not in violation of
any applicable Law in the conduct of the Business and has all Permits required
thereunder, other than such violations or failures to have such Permits which
would not reasonably be expected to have a Material Adverse Effect.
2.1.6. Tangible Personal Property; Title to Assets. (a) Except
(i) with respect to the Owned Real Property and the Leased Real Property which
are the subject of Section 2.1.7, (ii) as listed or referred to on Schedule
2.1.6(a), and (iii) for assets sold in the ordinary course of business to any
Person who is not an Affiliate of Seller in transactions believed by Seller to
be for fair value since the Balance Sheet Date, Seller, Ack-Ti and Ackerman own
all tangible assets reflected on the Balance Sheet as owned by Seller, or Ack-Ti
or Ackerman for the Mastercraft Group, or thereafter purchased or acquired by
Seller, Ack-Ti or Ackerman for the Mastercraft Group, free and clear of all
mortgages, liens, security interests or other encumbrances ("Liens") except for
(A) Liens that are listed or described on Schedule 2.1.7, (B) mechanics',
carriers', workers', warehouseman's, materialman's, repairmen's or other Liens
arising or incurred in the ordinary course of business of the Business, (C)
Liens for Taxes, assessments and other similar governmental charges which are
not due and payable or which may thereafter be paid without penalty or which are
listed or described in Schedule 2.1.6(a) and, if required by GAAP, as will be
reflected in the Closing Date Balance Sheet, (D) other imperfections of title or
encumbrances, if any, which do not materially affect the marketability of the
property subject thereto and do not materially impair the use of the property
subject thereto in the Business as presently conducted, and (E) other Liens
arising as a matter of Law. (The items referred to in clauses (A) through (E) of
the immediately preceding sentence are hereafter referred to
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as "Permitted Liens"). Other than Excluded Assets, the tangible assets owned by
Seller on the Closing Date and Transferred to Purchaser will constitute all
tangible assets owned by Seller and primarily used in the conduct of the
Business. All such tangible assets and all of the tangible assets listed on
Seller's most recent asset register prepared by Seller in the ordinary course of
business and furnished to Purchaser prior to the date hereof (except for such of
those as have been sold in the ordinary course of business or otherwise in
accordance with the covenants of Seller herein contained) are located at the
Real Property or are owned by Seller and held by a bailee.
(b) Except as set forth on Schedule 2.1.6(b), Seller owns the
number of Shares listed on Schedule 2.1.6(b) free and clear of any Liens and
such Shares represent all of the issued and outstanding shares of capital stock
of Ack-Ti and Ackerman. The Shares are duly authorized, validly issued and
outstanding, fully paid and nonassessable and the Shares have not been issued in
violation of, and are not subject to, any preemptive rights, and there are no
outstanding convertible or exchangeable securities, calls, options or similar
Contracts relating to the Shares or that may require Ack-Ti or Ackerman to issue
to any Person any shares of any of its capital stock. Except as listed or
described on Schedule 2.1.6(b), there are no voting trust or other Contracts
restricting the voting, dividend rights or disposition of the Shares.
2.1.7. Real Property. The Real Property listed on Schedule
2.1.7 constitutes all real property primarily used in the Business and owned in
fee by Seller or any of its Affiliates (the "Owned Real Property") or leased by
Seller (the "Leased Real Property"). Seller has title to the Owned Real Property
and title to the leasehold interests in the Leased Real Property (subject to the
terms of the applicable leases, licenses, subleases and related instruments
governing the Seller's interests therein, as listed on Schedule 2.1.7), to the
Knowledge of Seller, free and clear of all Liens other than (a) Liens listed or
described on Schedule 2.1.7, (b) Liens referred to in the title policies listed
on Schedule 2.1.7, (c) other Permitted Liens, (d) Liens that arise under zoning,
land use and other similar laws, and (e) easements, covenants, rights-of-way and
other encumbrances or restrictions, whether recorded or referred to in an
applicable lease or unrecorded, which, in the case of any of the preceding
clauses (a) through (e), do not materially impair the continued use of the
property subject thereto in the Business as presently conducted. The leases,
licenses and subleases related to the Leased Real Property are valid and
subsisting leases, licenses or subleases which are in full force and effect and
neither Seller nor, to the Knowledge of Seller, any other party thereto, is in
material default thereunder. The Real Property, and Seller's use of it in the
Business, comply with all applicable Laws, except where the failure to so
comply, individually or together with all other such failures to so comply,
would not have a Material Adverse Effect; and no
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condemnation proceedings are pending, or to the Knowledge of the Seller,
threatened, with respect to any of the Real Property, nor has any such property
been condemned. Seller has, and the Purchaser immediately after the Closing will
have, access to public roads or valid easements over private streets or private
property for such ingress to and egress from each of the Real Property as is
necessary for the conduct of the Business as conducted as of the date hereof.
2.1.8. Insurance. Seller has made available to
Purchaser schedules of all material policies of fire, liability
and other forms of insurance covering occurrences as of, or
claims made on, the date hereof and maintained by Seller or any
of its Affiliates to the extent applicable to the Business.
2.1.9. Intellectual Property. Schedule 2.1.9 lists or
describes all material patents, trademarks, trade names, service marks,
registered copyrights and registrations and applications therefor used primarily
in the conduct of the Business as of the date hereof (the "Intellectual
Property"). Except as set forth on Schedule 2.1.9, neither Seller nor any of its
Affiliates has received any written notice (that has not been subsequently
satisfied or withdrawn) of any conflict with the asserted rights of others in
connection with the use by Seller of any of the Intellectual Property in the
conduct of the Business and, to the Knowledge of Seller, the use of the
Intellectual Property as currently used by Seller does not conflict with or
infringe upon any intellectual property rights of others.
2.1.10. Litigation; Decrees. (a) Except (i) as listed or
described on Schedules 2.1.5 or 2.1.10(a), (ii) for claims under workers'
compensation Laws, (iii) for routine claims for employee benefits, and (iv) for
claims for money damages alone of less than $50,000 in respect of any single
claim or series of related claims arising out of a single event or condition
(which claims do not exceed $100,000 in the aggregate), to the Knowledge of
Seller, there are no lawsuits, claims or administrative or other proceedings
("Legal Proceedings") pending or threatened in writing against Seller or any of
its Affiliates with respect to the Business or the Real Property, except for
Legal Proceedings which, if determined adversely, would not reasonably be
expected to have a Material Adverse Effect. To the Knowledge of Seller, neither
Seller nor any of its Affiliates is in default under the terms of any judgment,
order or decree of any Governmental Entity (collectively, "Orders") with respect
to the Business or the Real Property, except for such defaults which would not
reasonably be expected to have a Material Adverse Effect.
(b) Neither Seller nor any of its Affiliates has any obligation
or liability in respect of breach of warranty on any Product manufactured by
Seller or any of its Affiliates prior to the Closing that results from a
systemic manufacturing process or construction defect (excluding for this
purpose obligations and
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liabilities for refunds, adjustments, allowances, damages (including as a result
of product liability claims), repairs, exchanges and returns in the ordinary
course of business and for personal injury).
2.1.11. Contract Rights. Except as listed or described on
Schedule 2.1.7 or Schedule 2.1.11, and except for Excluded Contracts, as of the
date hereof, neither Seller nor any of its Affiliates is a party to or bound by
any Contract relating primarily to the Business that is of a type described
below:
(a) Any employment, severance or consulting Contract with an
Employee or Former Employee that is not terminable at will by Seller (other than
any Contract for the employment of any such Employee or Former Employee implied
in Law but as to which no specific claim has, to the Knowledge of Seller, been
asserted) and which will require the payment of amounts to such employee after
the date hereof in excess of $100,000 in any year;
(b) Any collective bargaining Contract with any labor
union;
(c) Any Contract or series of related Contracts for capital
expenditures or the acquisition or construction of fixed assets which requires
aggregate future payments in excess of $250,000;
(d) Any Contract or series of related Contracts requiring
aggregate future payments or expenditures in excess of $100,000 and relating to
cleanup, abatement or other actions in connection with environmental
liabilities;
(e) Any license or other Contract or series of related
Contracts with respect to Intellectual Property (other than licenses for terms
of less than one year granted or received in the ordinary course of business of
the Business), which pursuant to the terms thereof requires future payments in
excess of $50,000 in any year;
(f) Any indenture, mortgage, loan or credit Contract under
which Seller, Ack-Ti or Ackerman has borrowed any money or issued any note,
bond, indenture or other evidence of indebtedness for borrowed money, or
guaranteed indebtedness for money borrowed by others, which is not reflected in
the Balance Sheet (without reference to any associated notes);
(g) Any Contract with any manufacturer's representative or
other sales agent having a remaining term in excess of one year and which is not
terminable without penalty on 90 calendar days' or less notice;
(h) Any Contract which requires payments in any year in excess
of $100,000 under which Seller, Ack-Ti or Ackerman is (i) a lessee of, or holds
or uses, any machinery, equipment,
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vehicle or other tangible personal property owned by a third Person or (ii) a
lessor of or one who otherwise makes available for third party use any tangible
personal property owned by Seller, Ack-Ti or Ackerman;
(i) Any Contract or series of related Contracts which involves
aggregate future payments by or to the Seller in excess of $100,000, other than
a purchase or sales order or other Contract entered into in the ordinary course
of the conduct of the Business or not required to be listed on Schedule 2.1.7 or
Schedule 2.1.11 by reason of any dollar amount, time or other exclusion or
exception in any other paragraph of this Section 2.1.11;
(j) Any Contract granting to any Person a first- refusal,
first-offer or other similar right to purchase or acquire any of the Acquired
Assets; any Contract with respect to a joint venture or partnership arrangement;
any Contract granting a power of attorney other than in connection with the
asserted rights of landlords in the event of a default under any real property
lease; any Contract with respect to indemnities, guarantees, letters of credit,
surety or other bonds or pursuant to which any assets or properties of the
Business is, or is to be, subjected to a Lien; any Contract limiting or
restricting the ability of the Purchaser or any of its Affiliates to enter into
or engage in any market or line of business in or related to the Business after
the Closing Date; or any Contract relating to any borrowing or any full or
partial guarantee or other similar liability in respect of any similar liability
for indebtedness of any Person other than Seller;
(k) Any Contract for the provision of design services
to the Business which is, or would reasonably be expected to be,
material to the Business; or
(l) Any other Contract a breach of or default under which
would have a Material Adverse Effect if recovery for such breach or default were
based on general compensatory damages.
Except as set forth on Schedule 2.1.11 or 2.1.7, each Assumed Contract is a
valid and binding obligation of Seller, Ack-Ti or Ackerman, as the case may be,
and, to the Knowledge of Seller, the other parties thereto. Except as set forth
on Schedule 2.1.11 or 2.1.7, to the Knowledge of Seller, Seller or one of its
Affiliates, as the case may be, has performed in all material respects the
obligations required to be performed by it through the date hereof under each of
the Assumed Contracts and neither Seller nor any of its Affiliates, as
applicable, is (with or without the lapse of time or the giving of notice, or
both) in breach or default in any respect thereunder and neither Seller nor any
of its Affiliates has received any notice of default or termination of any
Contract required to be listed on Schedule 2.1.7 or Schedule 2.1.11 from any
party thereto, except in any
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such case for any breach, default or termination which would not have a Material
Adverse Effect.
2.1.12. Employee Plans, Etc. (a) For purposes of this
Agreement, (i) the term "Employee Plan" means each employee benefit plan as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and each other material plan, program, agreement or
arrangement, whether or not subject to ERISA, that (A) provides benefits for
Employees or Former Employees and (B) is maintained by Seller or any of its
Affiliates or to which Seller or any of its Affiliates contributes or is
obligated to contribute, or under which Seller or any of its Affiliates is
liable in respect of Employees or Former Employees, provided, however, that the
term "Employee Plan" does not include any of the foregoing that relates
exclusively to an Excluded Contract, (ii) the term "Employee" means each Person
listed or described as such on Schedule 2.1.12 and each Person who is presently
employed by Seller, Ack-Ti or Ackerman primarily in the conduct of the Business,
and (iii) the term "Former Employee" means any Person formerly so employed by
Seller, Ack-Ti or Ackerman. (The terms "Employee" and "Former Employee" will
include, where an Employee Plan provides benefits for beneficiaries or
dependents, the beneficiaries and dependents of an Employee or Former Employee.)
Schedule 2.1.12 lists or describes all Employee Plans currently in effect other
than Employee Plans (x) listed or described on Schedule 2.1.11 or (y) mandated
or implied by Law and usual and customary for a business such as the Business.
None of the Employee Plans is a multiemployer plan within the meaning of Section
3(37) of ERISA.
(b) With respect to each Employee Plan listed or described on
Schedule 2.1.12, Seller has delivered or made available to Purchaser, to the
extent applicable, a copy of (i) the plan document for each Employee Plan as
currently in effect (or a description of any Employee Plan for which there is no
plan document), including any agreements entered into in connection with such
Employee Plan, (ii) the most recent annual report (Form 5500 Series) filed with
the Internal Revenue Service, (iii) the most recent actuarial report, and (iv)
the most recent summary plan description, together with each summary of material
modifications that has been distributed to Employees. Except as set forth on
Schedule 2.1.12, each Employee Plan which is intended to be qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and the trust (if any) forming a part thereof, has received a favorable
determination from the Internal Revenue Service (the "IRS") as to the
qualification under the Code of each such Employee Plan. Seller has delivered to
Purchaser a copy of the most recent determination letter with respect to each
such Employee Plan, and to the Knowledge of Seller nothing has occurred since
the date of such determination letter that would adversely affect such
qualification which cannot be corrected within the remedial amendment period
provided under Section 401(b) of the Code.
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(c) Neither Seller nor any of its Affiliates has engaged in a
transaction with respect to any Employee Plan which would reasonably be expected
to subject any Employee Plan or Purchaser to a material civil penalty under
ERISA or a material tax under the Code. Each of the Employee Plans has been
operated and administered in all material respects in accordance with applicable
Laws, including without limitation, to the extent applicable, ERISA. Neither
Seller nor any of its Affiliates has incurred any liability under Title IV of
ERISA that would reasonably be expected to result in material liability to
Purchaser. Each Employee Plan that is a group health plan within the meaning of
Section 5000(b)(1) of the Code is in compliance in all material respects with
the provisions of Section 4980B(f) of the Code. There is not any pending or, to
the Knowledge of Seller, threatened in writing, material claim by or on behalf
of any Employee Plan, by any Employee or Former Employee covered under any
Employee Plan or otherwise involving any Employee Plan (other than routine
claims for benefits).
(d) As of the date hereof, none of Seller, Ack-Ti or Ackerman
is a party to any Contract with any union representing Employees and, to the
Knowledge of Seller, no union organizational effort relating to Employees is
pending.
2.1.13. Taxes. Seller, Ack-Ti and Ackerman have filed or
caused to be filed with the appropriate United States, state, local and foreign
Governmental Entities all Tax Returns required to be filed by them on or prior
to the Closing Date (taking into account all extensions of due dates) and
Seller, Ack-Ti and Ackerman have paid or adequately reserved or provided for all
Taxes shown thereon as owing, except where the failure to file such Tax Returns
or pay any such Taxes would not reasonably be expected to have a Material
Adverse Effect. Except as set forth on Schedule 2.1.13, to the Knowledge of
Seller, no Governmental Entity has proposed any adjustment to any such Tax
Return which adjustment relates to the Business or the Mastercraft Group, unless
such adjustment has been adequately provided for or satisfied or would not
reasonably be expected to have a Material Adverse Effect. Seller has withheld
and paid all Taxes required to be withheld in connection with any amounts paid
or owing to any Employee or Former Employee, creditor, independent contractor or
other third party, including without limitation payroll and back-up withholding
taxes.
2.1.14. Environmental Matters. (a) Except as listed or
described on Schedule 2.1.14 or in the environmental assessments referred to
therein, (i) neither Seller nor any of its Affiliates has any liability under
any Environmental Law (including without limitation any obligation to remediate
any Environmental Condition) applicable to the Owned Real Property or the Leased
Real Property, (ii) neither Seller nor any of its Affiliates is in violation of
or has any liability with respect to any Environmental Law with respect to the
Business, and (iii) there exists no Environmental Condition with respect to the
Owned
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Real Property or the Leased Real Property or the Business, which liability,
violation or Environmental Condition specified in (i), (ii) or (iii) would
reasonably be expected to have a Material Adverse Effect.
(b) Furthermore, to the Knowledge of Seller, except as listed
or described on Schedule 2.1.14 or in the environmental assessments referred to
therein, (i) neither Seller nor any predecessor of Seller, has generated,
manufactured, refined, transported, treated, stored, handled, disposed,
released, spilled, transferred, produced or processed any oil or hazardous
material or any solid waste at the Real Property, except in compliance with all
applicable Environmental Laws, (ii) neither Seller nor any predecessor of Seller
has any Knowledge of the release or threat of release of any oil or hazardous
material at or in the vicinity of the Real Property, (iii) neither Seller nor
any predecessor of Seller has received notice under the citizen suit provision
of any Environmental Law in connection with any of the Real Property or any
facilities or operations thereon, (iv) neither Seller nor any predecessor of
Seller has received any request for information, notice, demand letter or notice
of a legal proceeding, or is subject to a pending or ongoing investigation, with
respect to any Environmental Condition relating to any of the Real Property or
any facilities or operations thereon, (v) Seller is not in violation of any
health standards or applicable Laws relating to asbestos, oil or hazardous
material, (vi) no asbestos or polychlorinated biphenyls are used or stored at
any of the Real Property, (vii) no oil or hazardous material has migrated from
other properties upon, about or beneath the Real Property, and (viii) the Real
Property is not listed on the National Priorities List under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, or
on any similar state list of sites, as a property requiring investigation or
remediation and Seller has not received written notice that the Real Property is
proposed to be so listed.
(c) Without limiting the generality or effect of the
foregoing, to the Knowledge of Seller, Schedule 2.1.14 or the environmental
assessments referred to therein list all underground storage tanks, and the
capacity and contents of such tanks, located on any of the Real Property.
(d) For purposes of this Agreement, (i) the term "Environment"
means soil, surface waters, groundwaters, land, surface or subsurface strata,
ambient air or any other environmental medium, (ii) the term "Environmental
Condition" means a condition with respect to the Environment which is reasonably
likely to result in an Indemnifiable Loss with respect to the Business, and
(iii) the term "Environmental Law" means any Law for the protection of the
Environment. Seller has made available to Purchaser all documents and records in
possession or control of Seller or any of its Affiliates concerning
Environmental Conditions at any of the Real Property or any
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facilities or operations thereon, whether generated by Seller or others,
including without limitation environmental audits, environmental risk
assessments or site assessments of any of the Real Property and/or any adjacent
property or any property in the vicinity of any of the Real Property owned or
operated by Seller or others, documentation regarding off-site disposal of
hazardous materials, spill control plans and environmental agency reports and
correspondence.
(e) To the Knowledge of Seller, the Real Property located at
650 West Street, Spindale North Carolina (the "West Spindale Property") does not
and has not contained any underground or aboveground storage tanks, underground
injection wells, equipment containing polychlorinated biphenyls or drums or
containers buried in the ground and there are no existing or closed sanitary
landfills, solid waste disposal sites or hazardous waste treatment, storage or
disposal facilities on or affecting, or reasonably likely to affect, the West
Spindale Property.
2.1.15. Certain Additional Representations. (a) Neither
Seller, Ack-Ti, Ackerman nor any director, officer, agent, employee or other
Person acting on behalf of Seller, Ack- Ti or Ackerman, has used any corporate
or other funds for unlawful contributions, payments, gifts or entertainment, or
made any unlawful expenditures relating to political activity to governmental
officials or others or established or maintained any unlawful or unrecorded
funds in violation of Laws. Neither Seller, Ack-Ti, Ackerman nor any current
director, officer, agent, employee or other Person acting on behalf of Seller,
Ack- Ti or Ackerman, has accepted or received any unlawful contributions,
payments, gifts or expenditures.
(b) The Acquired Assets, Purchaser's right to collections of
receivables pursuant to Section 6.2.6 and the Excluded Assets constitute, and
will as of the Closing constitute, all assets (real or personal) and rights of
Seller or any of its Affiliates used primarily in the Business or necessary for
the conduct of the Business as conducted on the date hereof.
2.2. Representations and Warranties of Purchaser.
Subject to Section 2.3, each of Purchaser and Parent jointly and
severally represents and warrants to Seller as follows:
2.2.1. Authorization and Effect of Agreement. Each of Parent
and Purchaser has the requisite corporate power to execute and deliver this
Agreement and to perform the transactions contemplated hereby to be performed by
it. All necessary corporate action required to be taken for the due
authorization of the execution and delivery by Parent and Purchaser of this
Agreement and the performance by Parent and Purchaser of the transactions
contemplated hereby to be performed by them has been duly taken by Parent and
Purchaser. This Agreement has been duly executed and delivered by each of Parent
and Purchaser and,
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assuming the due execution and delivery of this Agreement by Seller, constitutes
a valid and binding obligation of each of Parent and Purchaser.
2.2.2. No Restrictions. The execution and delivery of this
Agreement by each of Parent and Purchaser does not, and the performance by
Parent and Purchaser of the transactions contemplated hereby to be performed by
each of them will not conflict with, or result in any material violation of, or
constitute a material default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or the loss of a material benefit or incurrence of a material
liability under, any provision of the charter or bylaws or comparable governing
documents of Parent and Purchaser, or any indenture, mortgage, deed of trust or
other agreement or Permit applicable to Parent or Purchaser. No material
consent, approval, order or authorization of, or registration, declaration or
filing with, any Governmental Entity is required to be obtained or made by or
with respect to Parent or Purchaser under an applicable Law in connection with
the execution and delivery of this Agreement by Parent or Purchaser or the
performance by Parent or Purchaser of the transactions contemplated hereby to be
performed by either of them, except for the filing of a premerger notification
report by Parent under the HSR Act and as listed or described on Schedule 2.2.2.
2.2.3. Financial Capacity. Parent has or has
committed to it, and will cause Purchaser to have, cash on hand
sufficient to satisfy all of its obligations under this
Agreement.
2.3. Certain Limitations on Representations and Warranties. (a)
Each of the parties is a sophisticated legal entity that was advised by
experienced counsel and, to the extent it deemed necessary, other advisors in
connection with this Agreement. Accordingly, each of the parties hereby
acknowledges that (i) no party has relied or will rely upon any document or
written or oral information previously furnished or made available to or
discovered by it or its representatives, other than this Agreement (including
the Schedules hereto) or such of the foregoing as are delivered at the Closing,
(ii) there are no representations or warranties by or on behalf of any party
hereto or any of its respective Affiliates or representatives other than those
expressly set forth in this Agreement, and (iii) the parties' respective rights,
obligations and remedies with respect to this Agreement and the events giving
rise thereto will be solely and exclusively as set forth in this Agreement and
the Confidentiality Agreement. EACH OF PARENT AND PURCHASER ACKNOWLEDGES THAT,
SHOULD THE CLOSING OCCUR, PURCHASER WILL ACQUIRE THE ACQUIRED ASSETS WITHOUT ANY
REPRESENTATION OR WARRANTY AS TO MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE, IN AN "AS IS" CONDITION AND ON A "WHERE IS" BASIS, EXCEPT AS OTHERWISE
EXPRESSLY REPRESENTED AND WARRANTED HEREIN.
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(b) The representations and warranties made in this Agreement
by Seller will be deemed for all purposes to be qualified by the disclosures
made in any Schedule not specifically referred to only if the item disclosed in
the Schedule not referred to specifically cross references the representation
and warranty to be qualified by such item or the relevance of any item in any
Schedule to such representation and warranty is apparent on its face.
III. COVENANTS
3.1. Investigation by Purchaser. (a) Prior to the Closing, upon
reasonable notice from Parent (on behalf of itself and Purchaser) to Seller
given in accordance with this Agreement, Seller will afford to the officers,
attorneys, accountants or other authorized representatives of Purchaser and
Parent reasonable access during normal business hours to the facilities, assets
and the books and records of the Mastercraft Group so as to afford Purchaser and
Parent a reasonable opportunity to make, at their sole cost and expense, such
review, examination and investigation of the Business as Purchaser and Parent
may reasonably desire to make, including without limitation asset appraisals
relating to inventory, receivables, fixed assets and other assets and a
so-called "Phase I" (I.E., documentary review and walk-through site inspection)
preliminary environmental evaluations; provided, however, that no borings or
other so-called "Phase II" environmental examinations will be performed without
Seller's prior written consent, which consent may be given or withheld in
Seller's sole discretion. Purchaser and Parent will be permitted to make
extracts from or to make copies of such books and records as may be reasonably
necessary. Neither Parent nor Purchaser will contact any employee of Seller
without the prior written approval of an authorized representative of Seller.
Prior to the Closing, Seller will furnish to Parent or Purchaser, or cause to be
furnished to Parent or Purchaser, such financial and operating data and other
information pertaining to the Business as Parent or Purchaser may reasonably
request; provided, however, that nothing in this Agreement will obligate Seller
to take actions that would unreasonably disrupt the normal course of business of
itself or any of its Affiliates, violate the terms of any applicable Law or any
Contract or agreement to which any of them is a party or to which any of them or
any of their assets are subject, or grant access to any of their proprietary or
confidential information.
(b) Subject to Section 3.2, whether or not the Closing occurs,
Parent and Purchaser will, and will cause each of their Affiliates to, treat in
confidence all documents, materials and other information (including without
limitation information relating to supply and sales agreements and relationships
with third Persons) disclosed by or on behalf of Seller or any of its
Affiliates, whether before, during or after the course of the negotiations
leading to the execution of this Agreement or thereafter, including without
limitation in its investigation of
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the other parties and in the preparation of agreements, schedules and other
documents relating to the consummation of the transactions contemplated hereby.
Prior to the Closing, and in the event that this Agreement is terminated,
neither Purchaser, Parent nor any of their Affiliates will use in their
businesses or otherwise any confidential or proprietary information furnished by
Seller or any of its Affiliates not known to Purchaser or Parent on a
non-confidential basis prior to its disclosure to Purchaser or Parent by Seller
or any of its Affiliates. If this Agreement is terminated, Purchaser, Parent and
each of their Affiliates will return to Seller all originals and copies of all
non-public documents and materials of the type provided for in this Section 3.1
which have been furnished or made available in connection with this Agreement,
and Purchaser and Parent will destroy all notes, analyses, compilations, studies
or other documents which contain or otherwise reflect such information.
3.2. Press Releases. Prior to the Closing, no party will issue or
cause the publication of any press release or other public announcement with
respect to this Agreement or the transactions contemplated hereby without the
prior consent of Parent (in the case of Seller) or Seller (in the case of
Purchaser or Parent), which consent will not be unreasonably withheld; provided,
however, that nothing herein will prohibit any party from issuing or causing
publication of any such press release or public announcement to the extent that
such party determines such action to be required by Law or the rules of any
national stock exchange applicable to it or its Affiliates, in which event the
party making such determination will, if practicable in the circumstances, use
reasonable efforts to allow the other parties reasonable time to comment on such
release or announcement in advance of its issuance.
3.3. Regulatory Filings. (a) Within ten calendar days after the
date hereof, Parent will, and Seller will cause the ultimate parent entity of
Seller to, make such filings as may be required by the HSR Act with respect to
the consummation of the transactions contemplated by this Agreement. Thereafter,
Parent will, and Seller will cause the ultimate parent entity of Seller to, file
or cause to be filed as promptly as practicable with the United States Federal
Trade Commission and the United States Department of Justice any supplemental
information which may be requested pursuant to the HSR Act. If applicable to the
consummation of the transactions contemplated by this Agreement, Purchaser and
Parent will each make such filings and use their respective reasonable efforts
to obtain all permits required by Law. Seller will make such filings and use its
reasonable efforts to obtain the governmental approvals referred to in Section
2.1.2, and Purchaser and Parent will each make such filings and use their
respective reasonable efforts to obtain the governmental approvals referred to
in Section 2.2.2. All filings referred to in this Section 3.3(a) will comply in
all material
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respects with the requirements of the respective Laws pursuant to
which they are made.
(b) Without limiting the generality or effect of Section
3.3(a), each of the parties will (i) use their respective reasonable efforts to
comply as expeditiously as possible with all lawful requests of Governmental
Entities for additional information and documents pursuant to the HSR Act, (ii)
not (A) extend any waiting period under the HSR Act or (B) enter into any
agreement with any Governmental Entity not to consummate the transactions
contemplated by this Agreement, except with the prior consent of Seller, in the
case of Parent and Purchaser, or Parent, in the case of Seller, and (iii)
cooperate with each other and use reasonable efforts to cause the lifting or
removal of any temporary restraining order, preliminary injunction or other
judicial or administrative order which may be entered into in connection with
the transactions contemplated by this Agreement, including without limitation
the execution, delivery and performance by the appropriate entity of such
divestiture agreements or other actions, as the case may be, as may be necessary
to secure the expiration or termination of the applicable waiting periods under
the HSR Act or the removal, dissolution, stay or dismissal of any temporary
restraining order, preliminary injunction or other judicial or administrative
order which prevents the consummation of the transactions contemplated hereby or
requires as a condition thereto that all or any part of the Business be held
separate and, prior to or after the Closing, pursue the underlying litigation or
administrative proceeding diligently and in good faith.
3.4. Injunctions. Without limiting the generality or effect of
any provision of Section 3.3 or Article IV, if any Governmental Entity having
jurisdiction over any party issues or otherwise promulgates any injunction,
decree or similar order prior to the Closing which prohibits the consummation of
the transactions contemplated hereby, the parties will use their respective
reasonable efforts to have such injunction dissolved or otherwise eliminated as
promptly as possible and, prior to or after the Closing, to pursue the
underlying litigation diligently and in good faith.
3.5. Operation of the Business. Except (i) in connection with or
as a result of any matter listed or described on any Schedule and specifically
identified therein as affecting the operating covenants below or as to which the
relevance to the operating covenants below is apparent on its face, (ii) as
expressly contemplated by this Agreement, or (iii) as otherwise consented to by
Parent (on behalf of itself and Purchaser) in writing, prior to the Closing,
Seller will:
(a) Use reasonable efforts to keep the Business intact and not
take or permit to be taken or do or suffer to be done anything other than in the
ordinary course of business of the Business as presently conducted, and use
reasonable good faith
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efforts to keep intact, to preserve and maintain the goodwill associated with
the Business and Seller's relationships with the customers, suppliers,
distributors, licensors and others with whom Seller has a material relationship;
provided, however, that nothing in this Agreement or otherwise will prohibit or
restrict Seller from paying or prepaying any indebtedness for borrowed money or
any intercompany obligation reflected on the Balance Sheet;
(b) Continue existing practices relating to maintenance of the
Acquired Assets so that they remain in substantially the same (or better)
condition as on the date of this Agreement, normal wear and tear excepted;
(c) Not purchase, sell, lease or dispose of, or enter into any
lease, agreement or other Contract for the purchase, sale, lease or disposition
of, or subject to a Lien (other than a Permitted Lien), any asset that would be,
but for such transaction, an Acquired Asset other than in the ordinary course of
business of the Business or pursuant to the Receivables Facility and, with
respect to the sale or disposition of a capital asset, only in respect of assets
having an individual cost basis of less than $1,000;
(d) Not make any material amendment to any Employee Plan or
materially increase the general rates of compensation of Employees, except (i)
as required by Law or (ii) in the ordinary course of business of the Business;
(e) Not incur any indebtedness or guarantee any debt or other
liability of any other Person that would constitute an Assumed Liability;
(f) Not increase the compensation payable or to become payable
by the Seller to any Employee whose annual base compensation exceeds $100,000
except for normal periodic increase of regular salary (not bonuses or other
compensation) in the ordinary course of business of the Business that are made
in accordance with established compensation policies of the Seller or as
required under a Contract listed on Schedule 3.5(f);
(g) Not enter into any employment Contract which would be an
Assumed Contract which is not terminable at will without Purchaser incurring any
liability;
(h) Not adopt or enter into any employee retirement or welfare
benefit plan, whether or not subject to ERISA, providing for benefits to
Employees; or
(i) Except for transactions which do not breach any covenant
of Seller hereunder, not voluntarily take any action that would result in a
material breach of the covenants, representations or warranties of the Seller
hereunder or that
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would, individually or together with any other such action, have a Material
Adverse Effect.
3.6. Supplemental Schedules. Seller may (but will not be required
to), from time to time but not less than five days prior to the Closing, by
notice in accordance with this Agreement, supplement or amend any Schedule,
including without limitation one or more supplements or amendments to correct
any matter which would otherwise constitute a breach of any representation,
warranty or covenant herein contained; provided, however, that subject to the
following sentence, no such supplement or amendment will affect the rights or
obligations of any party to this Agreement, including without limitation under
Section 4.2.1., which such party would have had in the absence of such
supplement or amendment. Notwithstanding any other provision hereof, if the
Closing occurs, any such previously noticed supplement or amendment of any
Schedule will be effective to cure and correct for all purposes any breach of
any representation, warranty or covenant which would have existed by reason of
Seller not having made such supplement or amendment.
3.7. Satisfaction of Conditions. Without limiting the generality
or effect of any provision of Article IV, prior to the Closing, each of the
parties hereto will use its respective reasonable efforts with due diligence and
in good faith to satisfy promptly all conditions required hereby to be satisfied
by such party in order to expedite the consummation of the transactions
contemplated hereby.
3.8. Bulk Transfer Laws. Purchaser hereby waives
compliance by Seller with the provisions of any so-called "bulk
transfer" Law of any jurisdiction in connection with the sale of
the Acquired Assets to Purchaser.
3.9. Real Property Licenses. On the Closing Date each of
Purchaser and Seller will execute and deliver to the other (a) the licenses for
Seller's use of the Mastercraft Group showrooms in Tupelo, MS, Cerritos, CA,
Chicago, IL, Hickory, NC and High Point, NC referred to in item 2 under the
heading "Licenses" on Schedule 2.1.7 in the form attached, on the terms and
conditions, described on Exhibit A to Schedule 2.1.7, and (b) the license for
Seller's use of certain office and showroom space located at 210 Madison Avenue
in the form of Exhibit B to Schedule 2.1.7.
3.10. Discharge of Mortgages. On or before the Closing Date,
Seller will (a) pay or discharge (i) any and all mortgages of record with
respect to the Owned Real Property and (ii) the encumbrances on the Owned Real
Property located in Troy, North Carolina in favor of the Montgomery County
Industrial Facilities and Pollution Control Authority (including under the
related Bond Purchase Agreement) and (b) provide Purchaser with evidence of such
payment or discharge suitable for recording in the appropriate registry of
deeds.
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3.11. Designer Contracts. On the Closing Date, Seller will
execute and deliver to Purchaser (a) a separate assignment to Purchaser of the
Assumed Contracts with respect to the provision of Product design services with
a specific consent of Seller to the provision of design services to Purchaser
under such Assumed Contracts and (b) a separate assignment to Purchaser of the
Assumed Contracts with respect to sales representatives containing a specific
consent of Seller to the provision by such sales representatives of services to
Purchaser under such Assumed Contracts.
3.12. UCC-3s/Release of Ack-Ti and Ackerman. Prior to the Closing
Seller will use reasonable best efforts to obtain and deliver to Purchaser at
the Closing, and in any event will deliver to Purchaser within 30 days after the
Closing, (a) releases of all of Ack-Ti's and Ackerman's obligations and
liabilities under the vendor financing agreements and credit agreements
described on Schedule 1.3(b)(vii), to the extent permitted thereby, with respect
to the Receivables Facility and other similar agreements relating to similar
facilities, and (b) appropriate termination or partial release statements on
Form UCC-3 ("UCC-3s") releasing all security interests with respect to Acquired
Assets granted in connection with the vendor financing agreements and credit
agreements described on Schedule 1.3(b)(vii). To the extent the agreements with
respect to the Receivables Facility do not permit the release of Ack-Ti from all
obligations and liabilities thereunder, subject to Purchaser's obligations under
Section 6.2.6, Seller will indemnify, defend and hold harmless Purchaser from
and against any and all Indemnifiable Losses arising out of the assertion
against Ack-Ti or Purchaser of any claim under such agreements.
IV. THE CLOSING
4.1. Conditions Precedent to Obligations of Purchaser, Parent and
Seller. The obligations of each of Purchaser, Parent and Seller under this
Agreement to consummate the transactions contemplated hereby will be subject to
the satisfaction, at or prior to the Closing, of the conditions that (a) subject
to the last sentence of this Section 4.1, each of the governmental and other
approvals, consents or waivers identified in Item 1 on Schedule 2.1.2 shall have
been obtained, (b) there shall not have been entered a preliminary or permanent
injunction, temporary restraining order or other judicial or administrative
order or decree in any jurisdiction, the effect of which prohibits the Closing,
(c) the waiting period under the HSR Act shall have expired or been terminated,
and (d) Seller and Purchaser shall have executed and delivered to each other the
letter agreement substantially in the form of Exhibit 4.1 (the "Supply
Agreement") (which each party covenants to do at the Closing, provided that the
other conditions to the Closing are duly satisfied or waived). Any of the
foregoing conditions may be waived (i) insofar as it is a condition to the
obligations of Purchaser
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or Parent, by Parent (without the joinder of Purchaser) at its option and (ii)
insofar as it is a condition to the obligations of Seller, by Seller at its
option.
4.2. Additional Conditions Precedent to Obligations of Purchaser
and Parent. The obligations of Purchaser and Parent under this Agreement to
consummate the transactions contemplated hereby will be subject to the
satisfaction, at or prior to the Closing, of all of the following conditions,
any one or more of which may be waived at the option of Parent (without the
joinder of Purchaser):
4.2.1. No Material Misrepresentation or Breach. There
shall have been no material breach by Seller in the performance
of any of the covenants herein to be performed by it in whole or
in part prior to the Closing, and the representations and
warranties of Seller contained in this Agreement shall be true
and correct in all material respects on the date hereof and as of
the Closing Date as if made anew on the Closing Date, except for
representations or warranties made as of a specified date, which
shall be true and correct in all material respects as of the
specified date, and Seller shall have delivered to Purchaser a
certificate certifying each of the foregoing, dated the Closing
Date and signed by one of its executive officers to the foregoing
effect (it being understood that for purposes of the condition in
Section 4.2.1 the representations and warranties contained in
Sections 2.1.5, 2.1.9, 2.1.10, 2.1.13 and 2.1.14 will be read
without regard to the actual state of the Knowledge of Seller but
that such representations and warranties will be subject to the
additional condition that this Section 4.2.1 will be deemed to
have been satisfied unless any breach of such representation or
warranty as of the Closing Date would reasonably be expected to
have a Material Adverse Effect);
4.2.2. Bills of Sale; Special Warranty Deeds. Seller shall
have delivered to Purchaser bills of sale for the Transfer of the personal
property included in the Acquired Assets effective to vest in Purchaser all of
Seller's right, title and interest in such Acquired Assets and deeds for the
Transfer of the Owned Real Property included in the Acquired Assets effective to
vest in Purchaser all of Seller's right, title and interest in such Acquired
Assets in form and substance reasonably satisfactory to Purchaser and Seller;
4.2.3. Assignment Agreements. Seller shall have delivered to
Purchaser any assignment documents relating to the assignment by Seller to
Purchaser of the Real Property leases, the equipment leases included in the
Acquired Assets, the Intellectual Property included in the Acquired Assets and
any other Acquired Assets reasonably requested by Purchaser for recording or
other evidentiary purposes and, except as contemplated by Section 6.2.8,
effective to vest in Purchaser all of Seller's right, title and interest in such
Acquired Assets;
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4.2.4. Clearance Certificates. Seller shall have
delivered to Purchaser any clearance certificates or similar
documents that may be required by any state Tax authority in
order to relieve Purchaser of any obligation to withhold any
portion of the Purchase Price;
4.2.5. FIRPTA. Seller shall have delivered to
Purchaser an affidavit, dated the Closing Date, pursuant to
Section 1445 of the Code in substantially the form of Exhibit
4.2.5;
4.2.6. Opinion of Counsel. Seller shall have
delivered to Purchaser an opinion of Seller's counsel
substantially to the effect set forth in Exhibit 4.2.6;
4.2.7. Certain Leases. Seller shall have (a) obtained all
required consents to the Transfer of the Leased Real Property designated with an
asterisk on Schedule 2.1.7 (the "Consent- Required Leased Real Property") or (b)
notified Parent and Purchaser in writing specifically referring to this Section
4.2.7 that Seller has elected to indemnify, defend and hold harmless Purchaser
for its actual, reasonable and documented out-of-pocket moving costs incurred
within 12 months of the Closing Date in relocating the operations conducted as
of the Closing at the Consent-Required Property for which the consent
contemplated by clause (a) was not obtained ("Consent Costs"), whereupon, if the
Closing occurs, such notice will constitute an undertaking to indemnify, defend
and hold harmless Purchaser for its Consent Costs in accordance with the
provisions of Section 5.4 applicable to Direct Claims; and
4.2.8. Payment of Certain Indebtedness. Seller shall have
repaid all amounts necessary to release the Acquired Assets from any pledge or
security interest arising under the credit agreement and vendor financing
agreements referred to on Schedule 1.3(b)(vii).
4.3. Additional Conditions Precedent to Obligations of Seller.
The obligations of Seller under this Agreement to consummate the transactions
contemplated hereby will be subject to the satisfaction, at or prior to the
Closing, of all the following conditions, any one or more of which may be waived
at the option of Seller:
4.3.1. No Material Misrepresentation or Breach. There
shall have been no material breach by either Purchaser or Parent
in the performance of any of the covenants herein to be performed
by either of them in whole or in part prior to the Closing, and
the representations and warranties of Parent and Purchaser
contained in this Agreement shall be true and correct in all
material respects on the date hereof and as of the Closing Date
as if made anew on the Closing Date, except for representations
or warranties made as of a specified date, which shall be true
and correct in all material respects as of the specified date,
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and each of Purchaser and Parent shall have delivered to Seller a certificate
certifying each of the foregoing, dated the Closing Date and signed by one of
its executive officers to the foregoing effect;
4.3.2. Assumption Agreement. If requested by Seller,
Purchaser shall have delivered to Seller an assumption agreement
evidencing Purchaser's assumption of the Assumed Liabilities on
the terms set forth herein and otherwise in form reasonably
satisfactory to Purchaser and Seller;
4.3.3. Opinion of Counsel. Purchaser shall have
delivered to Seller an opinion of Purchaser's counsel
substantially to the effect set forth in Exhibit 4.3.3; and
4.3.4. Estimated Purchase Price. Purchaser shall have
delivered to Seller in the manner specified in Section 1.4 an
amount equal to the Estimated Purchase Price.
4.4. The Closing. (a) Subject to the fulfillment or waiver of the
conditions precedent specified in Sections 4.1, 4.2 and 4.3, the consummation of
the purchase of the Acquired Assets and assumption of the Assumed Liabilities
contemplated hereby (the "Closing") will take place on the 60th calendar day
after the date hereof or such other date as provided in Section 4.4(b) (the
"Closing Date"). The Closing will take place at 10:00 A.M., Eastern Time, at the
offices of Jones, Day, Reavis & Pogue at 599 Lexington Avenue, New York, New
York 10022.
(b) Subject to Section 4.5(b), if the Closing has not occurred
by the date specified in Section 4.4(a), then the Closing Date will be extended
to the earlier of (a) the business day after the conditions set forth in Section
4.1 have been satisfied and (b) such other date, on or prior to the 90th
calendar day after the date hereof, to which Parent (on behalf of itself and
Purchaser) and Seller mutually agree.
4.5. Termination. Notwithstanding anything contained in
this Agreement to the contrary, this Agreement may be terminated
at any time prior to the Closing:
(a) By the mutual written consent of Parent (without
the joinder of Purchaser) and Seller;
(b) By either Parent (without the joinder of Purchaser) or
Seller if the Closing shall not have occurred on or before the 90th calendar day
after the date hereof;
(c) By either Parent (without the joinder of Purchaser) or
Seller if there shall have been entered a final, nonappealable order or
injunction of any Governmental Entity restraining or prohibiting the
consummation of the transactions contemplated hereby or any material part
thereof;
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(d) By Purchaser after June 30, 1997 if (i) on or prior to May
7, 1997 Fleet Financial Corp. shall have terminated its financing commitment
under its letter to Parent given in connection with this Agreement (a copy of
which has previously been delivered by Parent to Seller) (the "Commitment
Letter"), (ii) on or prior to May 7, 1997 Purchaser shall have so notified
Seller, (iii) Parent and Purchaser use their respective reasonable best efforts
to obtain alternative financing on terms that, in the aggregate, are not
materially less favorable to Parent than the terms set forth in the Commitment
Letter, and (iv) financing shall not be available to Parent on or prior to June
30, 1997 from Chase Manhattan Bank or another bank on terms that, in the
aggregate, are not materially less favorable to Parent than the terms set forth
in the Commitment Letter; or
(e) By Seller on or prior to June 30, 1997 if it shall have
received the notice referred to in (d)(ii) above.
In the event of the termination of this Agreement under this Section 4.5, each
party hereto will pay all of its own fees and expenses. There will be no further
liability hereunder on the part of any party hereto if this Agreement is so
terminated, except under Section 3.1(b) or by reason of a breach of any covenant
contained in this Agreement, including without limitation the covenants
contained in Sections 3.2, 3.3, 3.4 and 3.7.
V. SURVIVAL AND INDEMNIFICATION
5.1. Survival of Representations, Warranties and Covenants. (a)
Each of the representations and warranties contained in Article II will survive
the Closing and remain in full force and effect until March 31, 1999, except
that the representations and warranties set forth in Sections 2.1.1, 2.1.9,
2.1.10(b) and 2.2.1 will survive the Closing and remain in full force and effect
until March 31, 2000 and the representations and warranties set forth in Section
2.1.13 will survive for 30 calendar days after the expiration of applicable
statutes of limitation. Any claim for indemnification with respect to any of
such matters which is not asserted by a notice given as herein provided
specifically identifying the particular breach underlying such claim and the
facts and Indemnifiable Loss relating thereto within such specified periods of
survival may not be pursued and is hereby irrevocably waived.
(b) The covenants contained in Sections 3.1(b), 3.3(b), 3.4,
3.8, 3.12 and 4.2.7 in this Article V and in Articles I, VI and VII, will
survive the Closing and remain in effect indefinitely unless a specified period
is otherwise set forth in this Agreement (in which event such specified period
will control). All other covenants contained in this Agreement will terminate,
without further action, upon the occurrence of the Closing, with the result that
any claim for an alleged breach
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of any such covenant may not be pursued and is hereby irrevocably
waived.
5.2. Limitations on Liability. (a) For purposes of this
Agreement, (i) "Indemnity Payment" means any amount of Indemnifiable Losses
required to be paid pursuant to this Agreement, (ii) "Indemnitee" means any
Person entitled to indemnification under this Agreement, (iii) "Indemnifying
Party" means any Person required to provide indemnification under this
Agreement, (iv) "Indemnifiable Losses" means any and all claims, demands,
actions, suits or proceedings (by any Person, including without limitation any
Governmental Entity), settlements and compromises relating thereto and
reasonable attorneys' fees and expenses in connection therewith, losses,
liabilities, costs and expenses, reduced by the amount of insurance proceeds
recoverable by the Indemnitee or an Affiliate of the Indemnitee from any Person
that is not the Indemnitee or an Affiliate of the Indemnitee, and (v) "Third
Party Claim" means any claim, demand, action, suit or proceeding made or brought
by any Person who or which is not a party to this Agreement or an Affiliate of a
party to this Agreement.
(b) Notwithstanding anything to the contrary contained in this
Agreement, if the Closing occurs, (i) no claim for indemnification may be
asserted under Section 5.3(a)(i) with respect to any matter discovered by or
known to Purchaser or Parent on or before the Closing Date and (ii) no claim for
indemnification may be asserted under Section 5.3(b)(i) with respect to any
matter discovered by or known to Seller on or before the Closing Date.
(c) Notwithstanding any other provision in this
Agreement or of any applicable Law:
(i) No Indemnitee will be entitled to make a claim
against an Indemnifying Party under Section 5.3(a)(i) or Section
5.3(b)(i) in respect of any individual event or occurrence giving
rise to an Indemnifiable Loss unless and until the aggregate
amount of Indemnifiable Losses incurred by the Indemnitee in
respect of any such individual event or occurrence giving rise to
such Indemnifiable Losses exceeds $5,000, in which event (subject
to the following provisions of this Section 5.2) such Indemnitee
may assert its right to indemnification hereunder to the full
extent of its Indemnifiable Losses in respect thereof; and
(ii) No Indemnitee will be entitled to make a claim
against an Indemnifying Party under Section 5.3(a)(i) or Section
5.3(b)(i) unless and until the aggregate amount of claims which
may be asserted for Indemnifiable Losses under Section 5.3(a)(i)
and Section 5.3(b)(i) (but subject to Section 5.2(c)(i) in all
events), exceeds $500,000, and then only to the extent of the
excess.
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(d) Notwithstanding any other provision of this Agreement, the
indemnification obligations of Seller under Section 5.3(a)(i) will not exceed
the Purchase Price.
(e) As between Seller and any of its Affiliates, on the one
hand, and Purchaser, Parent or any of its Affiliates (collectively, the
"Purchaser Companies"), on the other hand, the rights and obligations set forth
in this Article V will be the sole and exclusive rights, obligations and
remedies with respect to this Agreement, the events giving rise to this
Agreement and the transactions provided for herein or contemplated hereby.
Without limiting the generality or effect of the foregoing, as a material
inducement to the other parties hereto entering into this Agreement, and in
light of, among other factors, the acknowledgements contained in Section 2.3,
each of the parties to this Agreement hereby (i) waives any claim or cause of
action which it otherwise might assert, including without limitation under the
common law or federal or state securities, trade regulation, environmental or
other Laws, by reason of this Agreement, the events giving rise to this
Agreement and the transactions provided for herein or contemplated hereby (other
than in respect of the Confidentiality Agreement (as hereafter defined)) except
for claims or causes of action brought under and subject to the terms and
conditions of this Article V and (ii) agrees that, regardless of the foregoing
provisions, no party will have any liability or obligation in respect of any
claim or cause of action that is or may be brought (other than in respect of the
Confidentiality Agreement) except in respect of an Indemnifiable Loss, and then
only to the extent expressly provided in this Article V.
(f) Notwithstanding anything to the contrary contained in this
Agreement, including this Article V, Purchaser and Parent will not be entitled
to indemnity hereunder if and to the extent that the amount on the Closing Date
Balance Sheet (as finally adjusted pursuant to Section 1.5) of a liability or
contra-asset with respect to the matter for which indemnification is sought is
greater than the corresponding amount on the Balance Sheet.
5.3. Indemnification. (a) Subject to Sections 5.1, 5.2 and 5.4,
Seller will indemnify, defend and hold harmless Purchaser and its directors,
officers, partners, members, managers, employees, agents and representatives
(including without limitation any successor to any of the foregoing) from and
against any and all Indemnifiable Losses relating to, resulting from or arising
out of:
(i) Any breach by Seller of any of the representations
or warranties of Seller contained in this Agreement;
(ii) Any breach by Seller of any covenant of Seller
contained in this Agreement which requires performance by
Seller after the Closing; and
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(iii) the assertion against Purchaser or any of its
Affiliates of (A) any claim arising from an Excluded Liability or
(B) any other obligation or liability of Seller of whatever kind
and nature, primary or secondary, direct or indirect, absolute or
contingent, known or unknown, whether or not accrued, arising
with respect to periods before the Closing (other than to the
extent any of the foregoing is an Assumed Liability).
(b) Subject to Sections 5.1, 5.2 and 5.4, each of Purchaser
and Parent will jointly and severally indemnify, defend and hold harmless Seller
and its Affiliates and their respective directors, officers, partners, members,
managers, employees, agents and representatives (including without limitation
any predecessor or successor to any of the foregoing) from and against any and
all Indemnifiable Losses relating to, resulting from or arising out of:
(i) Any breach by Purchaser or Parent of any of the
representations or warranties of Purchaser or Parent
contained in this Agreement;
(ii) Any breach by Purchaser or Parent of any
covenant of Purchaser or Parent contained in this Agreement which
covenant requires performance by Purchaser or Parent after the
Closing; and
(iii) the assertion against Seller or any of its
Affiliates of (A) any claim arising from an Assumed Liability or
(B) any other obligation or liability of the Business of whatever
kind and nature, primary or secondary, direct or indirect,
absolute or contingent, known or unknown, whether or not accrued,
arising with respect to periods on or after the Closing (other
than to the extent any of the foregoing is an Excluded
Liability).
(c) Subject to Sections 5.1, 5.2 and 5.4, each of Purchaser
and Parent will jointly and severally indemnify, defend and hold harmless Seller
and each of its Affiliates and their respective directors, officers, partners,
members, managers, employees, agents and representatives (including without
limitation any predecessor or successor to any of the foregoing) from and
against any and all Indemnifiable Losses relating to, resulting from or arising
out of any breach by Purchaser or Parent of any covenant of Purchaser or Parent
contained in Sections 3.1(b), 3.2, 3.3, 3.7, 3.9, 7.2, 7.7(b) or 7.8.
(d) Subject to Sections 5.1, 5.2 and 5.4, Seller will
indemnify, defend and hold harmless Purchaser and Parent and each of their
respective Affiliates and their respective directors, officers, partners,
members, managers, employees, agents and representatives (including without
limitation any predecessor or successor to any of the foregoing) from and
against any and all
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Indemnifiable Losses relating to, resulting from or arising out of any breach by
Seller of any covenant of Seller contained in Sections 3.1(a), 3.2, 3.3, 3.7,
3.9, 3.10, 3.11, 3.12, 7.2 or 7.8.
(e) The rights of the parties under the various clauses of
Sections 5.3(a), 5.3(b), 5.3(c) and 5.3(d) are cumulative and not exclusive.
5.4. Defense of Claims. (a) If any Indemnitee receives notice of
the assertion or commencement of any Third Party Claim against such Indemnitee
with respect to which an Indemnifying Party is obligated to provide
indemnification under this Agreement, the Indemnitee will give such Indemnifying
Party reasonably prompt written notice thereof, but in any event not later than
20 calendar days after receipt of such notice of such Third Party Claim. Such
notice by the Indemnitee will describe the Third Party Claim in reasonable
detail, will include copies of all material written evidence thereof and will
indicate the estimated amount, if reasonably practicable, of the Indemnifiable
Loss that has been or may be sustained by the Indemnitee. The Indemnifying Party
will have the right to participate in or, by giving written notice to the
Indemnitee, to assume, the defense of any Third Party Claim at such Indemnifying
Party's own expense and by such Indemnifying Party's own counsel (reasonably
satisfactory to the Indemnitee), and the Indemnitee will cooperate in good faith
in such defense.
(b) If, within ten calendar days after giving notice of a
Third Party Claim to an Indemnifying Party pursuant to Section 5.4(a), an
Indemnitee receives written notice from the Indemnifying Party that the
Indemnifying Party has elected to assume the defense of such Third Party Claim
as provided in the last sentence of Section 5.4(a), the Indemnifying Party will
not be liable for any legal expenses subsequently incurred by the Indemnitee in
connection with the defense thereof; provided, however, that if the Indemnifying
Party fails to take reasonable steps necessary to defend diligently such Third
Party Claim within ten calendar days after receiving written notice from the
Indemnitee that the Indemnitee believes the Indemnifying Party has failed to
take such steps, the Indemnitee may assume its own defense, and the Indemnifying
Party will be liable for all reasonable costs or expenses paid or incurred in
connection therewith. Without the prior written consent of the Indemnitee, the
Indemnifying Party will not enter into any settlement of any Third Party Claim
which would lead to liability or create any financial or other obligation on the
part of the Indemnitee for which the Indemnitee is not entitled to
indemnification hereunder. If a firm offer is made to settle a Third Party Claim
without leading to liability or the creation of a financial or other obligation
on the part of the Indemnitee for which the Indemnitee is not entitled to
indemnification hereunder and the Indemnifying Party desires to accept and agree
to such offer, the Indemnifying Party will give written notice to the Indemnitee
to
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that effect. If the Indemnitee fails to consent to such firm offer within ten
calendar days after its receipt of such notice, the Indemnitee may continue to
contest or defend such Third Party Claim and, in such event, the maximum
liability of the Indemnifying Party as to such Third Party Claim will not exceed
the amount of such settlement offer.
(c) Any claim by an Indemnitee on account of an Indemnifiable
Loss which does not result from a Third Party Claim (a "Direct Claim") will be
asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, but in any event not later than 30 calendar days after the Indemnitee
becomes aware of such Direct Claim. Such notice by the Indemnitee will describe
the Direct Claim in reasonable detail, will include copies of all material
written evidence thereof and will indicate the estimated amount, if reasonably
practicable, of the Indemnifiable Loss that has been or may be sustained by the
Indemnitee. The Indemnifying Party will have a period of 30 calendar days within
which to respond in writing to such Direct Claim. If the Indemnifying Party does
not so respond within such 30 calendar day period, the Indemnifying Party will
be deemed to have rejected such claim, in which event the Indemnitee will be
free to pursue such remedies as may be available to the Indemnitee on the terms
and subject to the provisions of this Agreement.
(d) A failure to give timely notice or to include any
specified information in any notice as provided in Sections 5.4(a), 5.4(b) or
5.4(c) will not affect the rights or obligations of any party hereunder except
and only to the extent that, as a result of such failure, any party which was
entitled to receive such notice was deprived of its right to recover any payment
under its applicable insurance coverage or was otherwise prejudiced as a result
of such failure.
(e) If the amount of any Indemnifiable Loss, at any time
subsequent to the making of an Indemnity Payment, is reduced by recovery,
settlement or otherwise under or pursuant to any insurance coverage, or pursuant
to any claim, recovery, settlement, rebate or other payment by or against any
other Person, the amount of such reduction, less any costs, expenses, premiums
or taxes incurred in connection therewith, together with interest thereon from
the date of payment thereof at the rate of interest described in Section 1.5(d),
will promptly be repaid by the Indemnitee to the Indemnifying Party. Upon making
any Indemnity Payment the Indemnifying Party will, to the extent of such
Indemnity Payment, be subrogated to all rights of the Indemnitee against any
third Person that is not an Affiliate of the Indemnitee or an insurer of the
Indemnitee in respect of the Indemnifiable Loss to which the Indemnity Payment
relates; provided, however, that (i) the Indemnifying Party shall then be in
compliance with its obligations under this Agreement in respect of such
Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of its
Indemnifiable Loss, any and all
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claims of the Indemnifying Party against any such third Person on account of
said Indemnity Payment will be subrogated and subordinated in right of payment
to the Indemnitee's rights against such third Person. Without limiting the
generality or effect of any other provision hereof, each such Indemnitee and
Indemnifying Party will duly execute upon request all instruments reasonably
necessary to evidence and perfect the above-described subrogation and
subordination rights.
VI. OTHER POST-CLOSING COVENANTS
6.1. Personnel Matters.
6.1.1. Employees and Employee Benefit Plans. (a) Subject to
Section 6.1.4, effective as of the Closing, Purchaser will, or will cause one of
its Affiliates to, offer employment to each Closing Date Employee commencing as
of the Closing with compensation that is substantially equivalent to the
compensation of such Closing Date Employee immediately prior to the Closing.
(b) Purchaser agrees that, under any employee benefit plan
made available or established after the Closing, Closing Date Employees will
receive credit for their years of service with Seller or any of its Affiliates
prior to the Closing in determining eligibility and vesting thereunder, and in
determining the amount of benefits under any applicable sick leave, vacation or
severance plan. Purchaser will, or will cause one of its Affiliates to, cover
Closing Date Employees as of the Closing under a group health plan and waive any
preexisting condition limitations applicable to Closing Date Employees under any
group health plan made available to Closing Date Employees to the extent that a
Closing Date Employee's condition would not have operated as a preexisting
condition limitation under any applicable group health plan of or sponsored by
Seller or any of its Affiliates prior to Closing, and Purchaser will, or will
cause one of its Affiliates to, take all action necessary to ensure that Closing
Date Employees are given full credit for all co-payments and deductibles
incurred under any group health plan for the plan year that includes the Closing
Date.
6.1.2. Assumption of Obligations. (a) Effective as of the
Closing, Purchaser will, or will cause one of its Affiliates to, assume and be
solely responsible for all liabilities and obligations of any of Seller and each
of its Affiliates arising at any time and relating to employment or termination
(actual or constructive) of employment by Purchaser or any of its Affiliates of
any Closing Date Employee after the Closing Date.
(b) Without limiting Purchaser's obligations in respect of
Assumed Liabilities, effective as of the Closing, Purchaser will, or will cause
one of its Affiliates to, assume
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and be solely responsible for all liabilities and obligations of Seller with
respect to Closing Date Employees for (i) accrued wages, vacation or sick pay,
whether or not accrued for or reserved against on the Closing Date Balance Sheet
and including any claims for such benefits incurred but not reported, and (ii)
any liability or obligation to provide such Closing Date Employees and their
qualified beneficiaries with continuation coverage (within the meaning of
Section 4980B(f)(2) of the Code) under each Employee Plan that is a group health
plan, and any liability or obligation relating to such coverage, including
without limitation any liability or obligation to provide such Closing Date
Employees with the notice required under Section 4980B(f)(6) of the Code with
respect to qualifying events that occur as a result of the Transfer of the
Assets.
6.1.3. Retirement Plans. As of the Closing, Seller will cause
Closing Date Employees to be fully vested in their accrued benefits under the
Collins & Aikman Profit Sharing Account Plan, the Collins & Aikman Savings
Account Plan and the Collins & Aikman Employees' Pension Account Plan (the
"Retirement Plans"). Neither Purchaser nor any of its Affiliates will assume any
liabilities or obligations with respect to the Retirement Plans, which will be
retained by Seller, or with respect to any claims made with respect to benefits
allegedly payable thereunder. As soon as practicable after the Closing, but
subject to the terms of the Retirement Plans and applicable Law, Seller will
permit distributions or transfers of Closing Date Employees' vested benefits
under the Retirement Plans. As soon as practicable after the Closing, Purchaser
will, or will cause one of its Affiliates to, take all action necessary to cause
one or more qualified retirement plans maintained by Purchaser or any one of its
Affiliates to accept an eligible rollover distribution (within the meaning of
Section 402(f)(2) of the Code) of the amounts distributed from the Retirement
Plans to each Closing Date Employee who shall become an employee of Purchaser's
affiliated group and a rollover contribution (within the meaning of Section
408(d)(3) of the Code) with respect to such amounts. To the extent distributions
are not permitted under Law, the Purchaser and Seller will take mutually agreed
upon action with respect to Closing Date Employees' plan benefits, whether that
be a spin-off, trustee-to-trustee transfer to a plan maintained by Purchaser or
any of its Affiliates, or retention in the Retirement Plans for eventual
distribution pursuant to the terms of such Retirement Plans.
6.1.4. Employment and Plan Amendments or Terminations. Subject
to Purchaser's obligations under Assumed Contracts, no provision of this Section
6.1 or Section 1.3(a)(ii) will limit Purchaser's or any of its Affiliates' right
and authority to discontinue, suspend or modify the employment of any Closing
Date Employee or benefits provided to any or all Closing Date Employees after
the Closing; provided, however, that in the event of any such discontinuance,
suspension or modification Purchaser will, or will cause one of its Affiliates
to, remain liable for
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all Employee Plan and other employee benefit liabilities or obligations assumed
pursuant to this Agreement and will indemnify, defend and hold harmless Seller,
each of its Affiliates and their respective directors, officers, partners,
employees, agents and representatives (including without limitation any
predecessor or successor to any of the foregoing) from and against any and all
Indemnifiable Losses they may suffer or incur as a result thereof. Neither
Seller nor any of its Affiliates will be liable for any liability or obligation
that may arise from the amendment or termination by Purchaser or any of its
Affiliates of any employee benefit plan assumed, established or continued by
Purchaser or any of its Affiliates.
6.1.5. Transitional Matters. Each of Seller and Purchaser will
use its respective reasonable efforts to cooperate to (a) transfer to Purchaser
or any of its Affiliates any insurance and administrative services contracts
that Purchaser wishes to continue with respect to any employee benefit plan or
arrangement established by Purchaser or included in the Assumed Contracts and
(b) cause any insurance carrier administering employee benefit liabilities or
obligations assumed by Purchaser or any of its Affiliates to deal directly with
Purchaser or such Affiliate.
6.1.6. Employee Information. Each of Seller and Purchaser will
provide the other, in a timely manner, any information with respect to any
Closing Date Employee's, Employee's or Former Employee's employment with and
compensation from Seller, any of its Affiliates or Purchaser or any of its
Affiliates, as the case may be, or rights or benefits under any employee benefit
plan or arrangement which the other party hereto may reasonably request.
6.1.7. W-2 Matters. Pursuant to the alternate procedure
described by Revenue Procedure 96-60, Purchaser will assume Seller's entire
obligation to furnish Forms W-2 for the year ending December 31, 1997 to Closing
Date Employees. Seller will provide Purchaser the information not available to
Purchaser and relating to periods ending on the Closing Date necessary for
Purchaser to prepare and distribute Forms W-2 to Closing Date Employees for the
year ending December 31, 1997, which Forms W-2 will include all remuneration
earned by Closing Date Employees from Seller and Purchaser during the year
ending December 31, 1997, and Purchaser will prepare and distribute such Forms.
Seller will indemnify, defend and hold harmless Purchaser against any fines or
penalties to the extent resulting from Seller's provision of incorrect
information pursuant to this Section 6.1.7.
6.2. General Post-Closing Matters.
6.2.1. Post-Closing Notifications. Purchaser and
Seller will, and each will cause its respective Affiliates to,
comply with any post-Closing notification or other requirements,
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to the extent then applicable to such party, of any antitrust, trade
competition, investment, control or other Law of any Governmental Entity having
jurisdiction over the Business or the transactions contemplated hereby.
6.2.2. Names, Trademarks, Etc. Purchaser will revise
trademarks and Product literature, change signage and stationery and otherwise
discontinue use of the names "Collins & Aikman" and "C&A" and the "CA" logo or
any variations or derivations of such names or logo (collectively, the "Seller
Trade Name") as promptly as practicable after the Closing; provided, however,
that for a period of one month from the Closing Date, Purchaser may consume
stationery and similar supplies on hand as of the Closing which contain the
Seller Trade Name thereon, provided that such items are overstamped or otherwise
appropriately indicate that the Mastercraft Group is then owned by Purchaser.
Without limiting the generality or effect of the foregoing, Purchaser will, and
will cause each of its Affiliates to, discontinue (a) no later than the close of
business on the Closing Date, affixing in any manner whatsoever the Seller Trade
Name to any Product and (b) no later than the close of business on the 30th
calendar day after the Closing Date, selling, shipping and delivering any
Product having the Seller Trade Name affixed thereto in any manner whatsoever.
6.2.3. Access. (a) On the Closing Date, or as soon thereafter
as practicable, and in no event later than 90 calendar days after the Closing
Date, Seller will deliver or cause to be delivered to Purchaser all original
agreements, documents, books, records and files primarily relating to the
Business (collectively, "Records") in the possession of Seller or any Affiliate
of Seller to the extent not in the possession of Purchaser, subject to the
following exceptions:
(i) Purchaser recognizes that certain Records may
contain only incidental information relating to the Business or
may primarily relate to the Seller or any of its Affiliates, or
the businesses of the Seller or any of its Affiliates other than
the Business, and Seller and its Affiliates may retain such
Records and Seller may deliver appropriately excised, but
otherwise true and correct copies of such Records so long as the
effect of such excising is not to omit information from the
Records necessary for the conduct of the Business;
(ii) Seller and each of its Affiliates may retain any
Tax Returns so long as true and complete copies of the portions
thereof relating to the Business are delivered to Purchaser at or
before the Closing or made available to the Purchaser following
the Closing; and
(iii) Seller and each post-Closing Affiliate may
retain Records that contain information that is privileged or
similarly protected from disclosure and
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Records relating to the Excluded Liabilities or Excluded
Assets.
After the Closing, Purchaser will retain all Records (except those Records
referred to in Section 6.2.3(a)(i), (ii) and (iii)) required to be retained
pursuant to obligations imposed by any applicable Law. Except as provided in the
immediately preceding sentence, Purchaser will retain all Records for a period
of seven years after the Closing Date. After the end of such seven-year period,
before disposing of any such Records, Purchaser will give notice to such effect
to Seller and give Seller at its cost and expense an opportunity to remove and
retain all or any part of such Records as Seller may elect.
(b) After the Closing, upon reasonable notice, each party
hereto will give, or cause to be given, to the representatives, employees,
counsel and accountants of the other parties hereto access, during normal
business hours, to Records relating to periods prior to or including the Closing
Date (except those Records referred to in Section 6.2.3(a)(i), (ii) or (iii)),
and will permit such Persons to examine and copy such Records to the extent
reasonably requested by the other party in connection with tax and financial
reporting matters, audits, legal proceedings, governmental investigations and
other business purposes; provided, however, that nothing herein will obligate
any party to take actions that would unreasonably disrupt the normal course of
its business, violate the terms of any Contract to which it is a party or to
which it or any of its assets is subject or grant access to any of its
proprietary, confidential or classified information or information that is
privileged or similarly protected from disclosure. Purchaser will provide or
make available to Seller and each of its Affiliates access to, and assistance
from, employees of Purchaser for the purposes of, and with the limitations
described in, the preceding sentence. The parties hereto will, and will cause
their respective Affiliates to, cooperate with each other in the conduct of any
tax audit, claim for refund of taxes or similar proceedings involving or
otherwise relating to the Business (or the income therefrom or assets thereof)
with respect to any Tax as may be necessary to carry out the intent of this
Section 6.2.3(b). Purchaser and Seller will each be responsible to the other for
ensuring that such information can be provided to the other in the event that
the party obligated to provide the information disposes of any portion of the
Business.
6.2.4. Certain Tax Matters. (a) Each of Purchaser and Seller
will bear and pay one-half of all sales, use, transfer, stamp, conveyance, value
added or other similar Taxes, duties, excise or governmental charges imposed by
any United States federal, state, local or foreign Governmental Entity, and all
recording or filing fees, notarial fees and other similar costs of Closing with
respect to the Transfer of the Acquired Assets or otherwise on account of this
Agreement or the
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transactions contemplated hereby (collectively, the "Transfer
Taxes").
(b) Purchaser will prepare and file or cause to be prepared
and filed all Tax Returns with respect to the Acquired Assets and the Business
required to be filed with the appropriate United States, state, local and
foreign agencies for all taxable periods for which Tax Returns are due after the
Closing Date (other than for Taxes with respect to periods for which the
consolidated, unitary and combined Tax Returns of Seller will include the
operations of the Business). Purchaser will make all payments required with
respect to any such Tax Returns.
(c) Seller or an Affiliate of Seller will prepare and file or
cause to be prepared and filed all Tax Returns for the Seller that are required
to be filed with respect to the Acquired Assets and the Business, other than Tax
Returns that Purchaser is obligated to prepare and file pursuant to Section
6.2.4(b), with the appropriate United States, state, local and foreign agencies.
Seller will pay or cause to be paid all Taxes required to be paid with respect
to such Tax Returns. The amount of any Income Taxes attributable to a portion of
a taxable period that includes but does not end on the Closing Date shall be
determined pursuant to the interim closing of books method.
(d) From the date hereof through the Closing Date, Seller and
Parent will consult with one another with a view to determining a mutually
acceptable allocation of the Purchase Price among the Acquired Assets. If such a
mutually acceptable allocation is agreed upon, Purchaser and Parent will jointly
prepare Form 8594 pursuant to Section 1060 of the Code and Purchaser, Parent and
Seller will file all of their respective Tax Returns consistent with such
allocation and each of Purchaser and Seller will notify the other if the IRS
disputes the allocation. If such a mutually acceptable allocation is not agreed
upon, each of Seller and Purchaser will be free independently to determine an
appropriate allocation of the aggregate purchase price among the Acquired Assets
for purposes of preparing and filing its own Tax Returns.
(e) Purchaser will prepare and deliver, or will cause to be
prepared and delivered, within 60 calendar days of receipt of Seller's request
therefor, to Seller, such information as Seller may reasonably request in order
for the operations of the Business to be properly reported in Seller's Tax
Returns.
(f) Purchaser will pay or reimburse Seller any fees and
expenses that are required to be paid in accordance with that certain Consultant
Services Agreement made as of February 1, 1995 between Ennes & Associates, Inc.,
an Illinois corporation, and Seller and certain Affiliates of Seller, and
extended by letter agreement dated March 27, 1997, as the same may be further
extended from time to time, to the extent that such fees and expenses are
ratably allocable to any reduction in the assessed
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value of Owned Real Property resulting in a reduction in real property taxes for
which Purchaser is responsible.
(g) For purposes of this Agreement, (i) "Tax" or "Taxes"
includes all federal, state, local, foreign and other taxes, assessments, or
governmental charges of any kind whatsoever including, without limitation,
income, franchise, capital stock, excise, property, sales, use, service, service
use, leasing, leasing use, gross receipts, value added, single business,
alternative or add-on minimum, occupation, real and personal property, stamp,
workers' compensation, severance, environmental, payroll, withholding,
employment, unemployment and social security taxes, or other taxes of the same
or similar nature, together with any interest, penalties or additions thereon
and estimated payments thereof, whether disputed or not, (ii) "Tax Return" or
"Tax Returns" includes all returns, reports, information returns, forms,
declarations, claims for refund, statements and other documents (including any
amendments thereto and including any schedule or attachment thereto) in
connection with Taxes that are required to be filed with a Governmental Entity
or other tax authority, or sent or provided to another party under applicable
Law, (iii) "Income Tax" or "Income Taxes" means all Taxes imposed on, measured
by, or that require reference to, net or taxable income (including any income,
franchise, estimated, alternative, minimum, add-on minimum or other tax imposed
on, measured by, or which requires reference to, net or taxable income),
together with interest and penalties thereon and estimated payments thereof, and
(iv) "Code" means the Internal Revenue Code of 1986, as amended (all citations
to the Code or to the Treasury Regulations promulgated thereunder will include
any amendments or successor provisions thereto).
6.2.5. Insurance. (a) With respect to any loss, liability or
damage suffered after the Closing Date relating to, resulting from or arising
out of the conduct of the Business on or prior to the Closing Date and included
in the Assumed Liabilities for which Seller or any of its Affiliates would be
entitled to assert, or cause any other Person to assert, a claim for recovery
under any policy of insurance maintained by or for the benefit of Seller, in
respect of the Business ("Seller's Insurance"), at the request of Purchaser,
Seller will assert one or more claims under Seller's Insurance covering such
loss, liability or damage if Purchaser is not itself entitled to assert such
claim, but Seller or any of its Affiliates is so entitled, provided that all of
Seller's and any of its Affiliates' out-of-pocket costs and expenses incurred in
connection with the foregoing, including without limitation any liability,
obligation or expense referred to in the last sentence of this Section 6.2.5(a),
are, at the option of the entity incurring such costs and expenses, paid in
advance or promptly reimbursed by Purchaser; provided, however, that, effective
as of the Closing Date, Seller may in its sole discretion terminate or otherwise
discontinue any policy of Seller's Insurance but no such termination or
discontinuance will affect Seller's liability
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under Section 5.3. To the extent required under the terms of Seller's Insurance
to give effect to the foregoing, Seller will be deemed, solely for the purpose
of asserting claims for Seller's Insurance pursuant to the immediately preceding
sentence, to have assumed or retained liability for such loss, liability or
damage to the extent of the policy limits of the applicable policy of Seller's
Insurance; provided, however, that (i) Purchaser's and Parent's obligations
under Section 5.3(b) will not be affected by the provisions of this Section
6.2.5(a) and (ii) with respect to any claim made by Seller or any of its
Affiliates under any Seller's Insurance pursuant to this Section 6.2.5(a), each
of Purchaser and Parent will jointly and severally indemnify, defend and hold
harmless Seller and each of its Affiliates and their respective directors,
officers, partners, employees, agents and representatives (including without
limitation any predecessor or successor of any of the foregoing) from and
against any Indemnifiable Loss relating to, resulting from or arising out of any
deductible, policy limit, obligation, indemnity, reinsurance due to the
liquidation or insolvency of the reinsurer, self-insurance retention, or
retroactive or retrospective premium resulting from claims made under this
Section 6.2.5(a) or other like arrangement by which any such entity, including
without limitation any captive insurance company, retains any liability or
obligation under any such policy of Seller's Insurance or otherwise.
(b) With respect to any loss, liability or damage suffered
after the Closing Date relating to, resulting from or arising out of the conduct
of the Business on or prior to the Closing Date and not included in the Assumed
Liabilities for which Purchaser or any of its Affiliates would be entitled to
assert, or cause any other Person to assert, a claim for recovery under any
policy of insurance maintained by or for the benefit of Purchaser or any of its
Affiliates, in respect of the Business ("Purchaser's Insurance"), at the request
of Seller, Purchaser will assert one or more claims under Purchaser's Insurance
covering such loss, liability or damage if Seller is not itself entitled to
assert such claim, but Purchaser or any of its Affiliates is so entitled,
provided that all of Purchaser's and any of its Affiliates' out-of-pocket costs
and expenses incurred in connection with the foregoing, including without
limitation any liability, obligation or expense referred to in the last sentence
of this Section 6.2.5(b), are, at the option of the entity incurring such costs
and expenses, paid in advance or promptly reimbursed by Seller; provided,
however, nothing herein shall obligate Purchaser to maintain any policy of
Purchaser's Insurance. To the extent required under the terms of Purchaser's
Insurance to give effect to the foregoing, Purchaser will be deemed, solely for
the purpose of asserting claims for Purchaser's Insurance pursuant to the
immediately preceding sentence, to have assumed or retained liability for such
loss, liability or damage to the extent of the policy limits of the applicable
policy of Purchaser's Insurance; provided, however, that (i) Seller's
obligations under Section 5.3(a) will not be
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affected by the provisions of this Section 6.2.5(b) and (ii) with respect to any
claim made by Purchaser or any of its Affiliates under any Purchaser's Insurance
pursuant to this Section 6.2.5(b), Seller will indemnify, defend and hold
harmless Purchaser and each of its Affiliates and their respective directors,
officers, members, managers, partners, employees, agents and representatives
(including without limitation any predecessor or successor of any of the
foregoing) from and against any Indemnifiable Loss relating to, resulting from
or arising out of any deductible, policy limit, obligation, indemnity,
reinsurance due to the liquidation or insolvency of the reinsurer,
self-insurance retention, or retroactive or retrospective premium resulting from
claims made under this Section 6.2.5(b) or other like arrangement by which any
such entity, including without limitation any captive insurance company, retains
any liability or obligation under any such policy of Purchaser's Insurance or
otherwise.
6.2.6. Receivables. As of the Closing, Seller will terminate
the participation of the Mastercraft Group in the Receivables Facility.
Following the Closing, Purchaser and Parent will, and will cause Ack-Ti to, (a)
direct the customers of the Business to remit and deposit collections in respect
of receivables reflected on the Closing Date Balance Sheet to the appropriate
Receivables Facility lock-box account or accounts, (b) in the event that Ack-Ti,
Purchaser or any of Purchaser's Affiliates receives monies in respect of the
accounts receivable on the Closing Date Balance Sheet directly from any
customer, remit such monies together with identifying information to the
appropriate Receivables Facility lock-box account or accounts, and (c) perform
the servicing, collection and other obligations under the Receivables Facility
with respect to such receivables (other than any obligation to sell receivables
or pay any commission or loss on sale). Seller or its Affiliates will promptly
upon receipt thereof remit to Purchaser the full amount of any monies collected
after the Closing Date by Seller or any of its Affiliates with respect to
receivables reflected in the Closing Date Balance Sheet (without reduction for
any discount or loss on sale attributable to the Receivables Facility).
6.2.7. Master Contracts Etc. From and after the Closing,
Parent and Purchaser will use reasonable efforts (and Seller will cooperate
therewith) to obtain and have issued replacements for any Assumed Contract under
which Seller remains liable, or guarantees or secures Purchaser's payment or
performance thereunder notwithstanding the assignment thereof to Purchaser on
the Closing Date (collectively, "Master Contracts"), and to obtain any
amendments, novations, releases, waivers, consents or approvals necessary to
release Seller and each Seller Affiliate party to such Master Contract from all
liability or obligation thereunder relating to the Business, in each case as
promptly as practicable. In no event shall "reasonable efforts" be deemed to
require payments to obtain the same (other than payments of costs and expenses
incidental thereto). In the event
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and for the period that Purchaser fails to obtain any such replacement,
amendment, novation, release, waiver, consent or approval, without limiting the
generality of Section 5.3(b), Parent and Purchaser will jointly and severally
indemnify, defend and hold harmless each of Seller and each of its Affiliates
and their respective Affiliates, directors, officers, partners, employees,
agents and representatives (including without limitation the predecessors or
successors of any of the foregoing) from and against any Indemnifiable Loss
relating to, resulting from or arising out of Purchaser's failure to perform or
pay the obligations or liabilities under the Master Contracts assumed pursuant
to this Agreement.
6.2.8. Certain Contracts. (a) Notwithstanding anything to the
contrary in this Agreement, to the extent that (i) any Assumed Contract is not
capable of being assigned to Purchaser in connection with the Closing without
the consent or waiver of a third Person (including without limitation a
Governmental Entity) which has not been obtained on or before the Closing Date,
or (ii) any of the transactions contemplated by this Agreement constituted or
would constitute a breach of any Assumed Contract, or a violation of any Law or
Order or other governmental edict, Seller will be deemed not to have
Transferred, and will not be obligated to Transfer, to Purchaser any direct or
indirect right, title or interest in or to any such Contract without first
having obtained all necessary consents and waivers. Seller will use reasonable
efforts to obtain such consents and waivers as may be necessary to cure such
potential breach or violation; provided, however, but without affecting Seller's
obligations under Section 5.3, Seller will not be obligated to pay any
consideration therefor to the party from whom the consent or waiver is
requested. Purchaser and Parent agree that neither Seller nor any of its
Affiliates will have any liability whatsoever arising out of or relating to the
failure to obtain any consents or waivers that may have been or may be required
in connection with the transactions contemplated by this Agreement or because of
a breach of, default under or termination of any Assumed Contract as a result
thereof, except in connection with a breach of the representation in the last
sentence of Section 2.1.11.
(b) To the extent that the consents and waivers referred to in
the immediately preceding paragraph are not obtained, or until the breaches or
violations referred to in the immediately preceding paragraph are resolved,
Seller will use reasonable efforts, with reasonable costs of Seller and its
Affiliates related thereto to be promptly reimbursed by Purchaser, to (i)
provide to Purchaser, at its request, the benefits of any such Contract, (ii)
cooperate in any reasonable and lawful arrangement designed to provide such
benefits to Purchaser, without incurring any financial obligation to Seller or
any of its Affiliates, and (iii) enforce, at the request and for the account of
Purchaser, any rights of Seller arising from any such Contract against the other
party or parties to such
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Contract (including the right to elect to terminate in accordance with the terms
thereof upon the advice of Purchaser). Notwithstanding any provision to the
contrary contained herein, Purchaser will perform or pay for the benefit of the
other party or parties thereto the obligations of Seller under or in connection
with any such Contract and will indemnify and hold Seller and its Affiliates
harmless from any Indemnifiable Losses relating to, resulting from or arising
out of any failure by Purchaser so to perform or pay. Purchaser will comply with
all reasonable requests of Seller for cooperation in connection with the
performance of Seller's obligations under this Section 6.2.8.
6.2.9. Non-Solicitation. (a) During the period from
the Closing Date until the second anniversary thereof (the
"Restricted Period"), neither Seller nor any of its subsidiaries
will (i) solicit for hire any Closing Date Employee other than
pursuant to or resulting from a general advertisement not
specifically targeted at Closing Date Employees or (ii) engage,
hire or enter into any Contract to obtain the services of any
sales representative or Product designer or design consultant
engaged by or for the Business as of the Closing, provided,
however, that (A) the restriction in clause (ii) of this Section
6.2.9(a) will not apply during the initial year of the Restricted
Period to any sales representative with which Seller has a
business relationship as of the Closing in respect of any of
Seller's products other than the Products ("Sales
Representatives") if such relationship is not expanded beyond
such products and (B) in no event will any provisions hereof
apply to any Person who is or may be an Affiliate of Seller
(other than a subsidiary of Seller), including without limitation
The Blackstone Group, Wasserstein Perella & Co., Inc. and their
respective Affiliates.
(b) During the period from the Closing Date until the first
anniversary thereof, neither Purchaser nor any of its Affiliates will, engage,
hire or enter into any Contract to obtain the services of any Sales
Representative in respect of any products of Purchaser or any of its Affiliates
other than the Products. Purchaser expressly acknowledges that the Sales
Representatives currently under Contract to sell Seller's or any of its
Affiliate's products other than Products may continue to sell such products for
the one-year period following the Closing Date.
6.2.10. Software Licenses. For a period of 30 days following
the Closing, Seller will, upon Purchaser's request and to the extent permitted
by the terms of the applicable license or by Law, make available for Purchaser's
use the software licensed by Seller pursuant to software licenses that are
Excluded Contracts.
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VII. MISCELLANEOUS PROVISIONS
7.1. Notices. All notices and other communications required or
permitted hereunder will be in writing and, unless otherwise provided in this
Agreement, will be deemed to have been duly given when delivered in person or
when dispatched by telegram or electronic facsimile transfer (confirmed in
writing by mail simultaneously dispatched) or one business day after having been
dispatched by a nationally recognized overnight courier service to the
appropriate party at the address specified below:
(a) If to Parent or Purchaser, to:
Elkin McCallum
100 Vesper Executive Park
Tyngsboro, MA 01879
Facsimile No.: (508) 649-3541
with a copy to:
Goulston & Storrs
400 Atlantic Avenue
Boston, MA
Facsimile No.: (617) 574-4112
Attention: Donald L. Shulman, Esq.
(b) If to Seller, to:
Collins & Aikman Products Co.
210 Madison Avenue, 6th Floor
New York, New York 10016
Facsimile No.: (212) 578-1269
Attention: Elizabeth R. Philipp, Esq.
Executive Vice President - Law
with a copy to:
Jones, Day, Reavis & Pogue
599 Lexington Avenue
New York, New York 10022
Facsimile No.: (212) 755-7306
Attention: Robert A. Profusek, Esq.
or to such other address or addresses as any such party may from time to time
designate as to itself by like notice.
7.2. Expenses. Except as otherwise expressly provided herein, (a)
Seller will pay or cause to be paid all expenses incurred by Seller incident to
this Agreement and in preparing to consummate and consummating the transactions
provided for herein and (b) each of Parent and Purchaser will pay any expenses
incurred by it incident to this Agreement and in preparing to consummate and
consummating the transactions provided for herein.
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7.3. Successors and Assigns. (a) Subject to Sections 7.3(b) and
(c), this Agreement will be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but will not be
assignable or delegatable by any party without the prior written consent of the
other parties hereto.
(b) Nothing in this Agreement is intended to limit Purchaser's
ability to sell or to Transfer the Acquired Assets and the Assumed Liabilities
following the Closing Date; provided, however, that any such sale or Transfer
will not result in a termination of any of Parent's or Purchaser's covenants,
duties, responsibilities, obligations or liabilities hereunder, including
without limitation under Sections 3.1(b) and Articles V and VI, and provided
further that the Person acquiring the Acquired Assets and Assumed Liabilities
pursuant to such sale or Transfer will assume all of such covenants, duties,
responsibilities, obligations and liabilities in a written instrument
satisfactory to Seller.
(c) Notwithstanding anything contained in this Agreement to
the contrary, upon notice to Purchaser, Seller may assign or delegate any or all
of its rights under this Agreement to any Affiliate of Seller, or to any Person,
that acquires all or substantially all of the assets or voting stock of Seller.
7.4. Waiver. Either Parent (on behalf of itself and Purchaser) or
Seller by written notice to the other may (a) extend the time for performance of
any of the obligations or other actions of the other under this Agreement, (b)
waive any inaccuracies in the representations or warranties of the other
contained in this Agreement, (c) waive compliance with any of the conditions or
covenants of the other contained in this Agreement, or (d) waive or modify
performance of any of the obligations of the other under this Agreement. Except
as provided in the immediately preceding sentence, no action taken pursuant to
this Agreement will be deemed to constitute a waiver of compliance with any
representations, warranties or covenants contained in this Agreement. Any waiver
of any term or condition will not be construed as a subsequent waiver of the
same term or condition, or a waiver of any other term or condition of this
Agreement. No failure or delay of any party in asserting any of its rights
hereunder will constitute a waiver of any such rights.
7.5. Entire Agreement. This Agreement (including the Schedules
and Exhibits hereto) supersedes any other agreement, whether written or oral,
that may have been made or entered into by any party or any of their respective
Affiliates (or by any director, officer or representative thereof) prior to the
date hereof relating to the matters contemplated hereby, other than the existing
letter agreement (the "Confidentiality Agreement"), between Seller or one of its
Affiliates and Parent or one of its Affiliates, which will survive the
execution, delivery or termination of this Agreement and to which Purchaser
agrees to be
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bound as if it was an original party thereto. This Agreement (together with the
Schedules and Exhibits hereto) and the Confidentiality Agreement constitute the
entire agreement by and among the parties hereto and there are no agreements or
commitments by or among such parties or their Affiliates except as expressly set
forth herein and therein.
7.6. Amendments, Supplements, Etc. This Agreement may be amended
or supplemented at any time by additional written agreements as may mutually be
determined by Parent (without the joinder of Purchaser) and Seller to be
necessary, desirable or expedient to further the purposes of this Agreement, or
to clarify the intention of the parties hereto.
7.7. Rights of the Parties. (a) Except as provided in Article V
or in Sections 1.3(a), 6.2.4(f) and 7.3, nothing expressed or implied in this
Agreement is intended or will be construed to confer upon or give any Person
other than the parties hereto and their respective Affiliates any rights or
remedies under or by reason of this Agreement or any transaction contemplated
hereby.
(b) Parent will cause Purchaser to perform in accordance with
the terms hereof all covenants to be performed by Purchaser pursuant to this
Agreement. Without limiting the generality of the foregoing, Parent will cause
Purchaser to have cash on hand and other capital resources sufficient to
discharge, on a timely basis, all of Purchaser's obligations hereunder. The
obligations of Purchaser and Parent hereunder are not subject to financing.
7.8. Further Assurances. From time to time, as and when requested
by either Parent (on behalf of itself and Purchaser) or Seller, the other will
execute and deliver, or cause to be executed and delivered, all such documents
and instruments as may be reasonably necessary to consummate the transactions
contemplated by this Agreement.
7.9. Applicable Law; Jurisdiction. (a) This Agreement
and the legal relations among the parties hereto will be governed
by and construed in accordance with the substantive Laws of the
State of New York, without giving effect to the principles of
conflict of laws thereof.
(b) Each party irrevocably submits to the exclusive
jurisdiction of either the United States District Court for the Southern
District of New York or the Supreme Court of the State of New York, New York
County, for purposes of any action, suit or other proceeding arising out of this
Agreement or any transaction contemplated hereby. Each of Parent and Purchaser
hereby irrevocably designates, appoints and empowers Parent, and Seller hereby
irrevocably designates, appoints and empowers any officer of Seller, located in
its New York offices, in each case as its true and lawful agent and
attorney-in-fact in its name, place and
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stead to receive and accept on its behalf service of process in any action, suit
or proceeding in New York with respect to any matters as to which it has
submitted to jurisdiction as set forth in the immediately preceding sentence.
7.10. Titles and Headings. Titles and headings to
Sections herein are inserted for convenience of reference only,
and are not intended to be a part of or to affect the meaning or
interpretation of this Agreement.
7.11. Certain Interpretive Matters and Definitions. (a)
Unless the context otherwise requires, (i) all references to
Sections or Schedules are to Sections or Schedules of or to this
Agreement, (ii) each term defined in this Agreement has the
meaning assigned to it, (iii) each accounting term not otherwise
defined in this Agreement has the meaning assigned to it in
accordance with GAAP, (iv) "or" is disjunctive but not
necessarily exclusive, (v) words in the singular include the
plural and VICE VERSA, (vi) the terms "subsidiary" and
"Affiliate" have the meanings given to those terms in Rule 12b-2
of Regulation 12B under the Securities Exchange Act of 1934, as
amended, (vii) all references to "$" or dollar amounts will be to
lawful currency of the United States of America, (viii)
"Knowledge of Seller" means solely to the actual knowledge of the
persons listed on Schedule 7.11 (Purchaser and Parent hereby
expressly acknowledging that such persons are under no obligation
to conduct any particular inquiry for purposes of this
Agreement), (ix) "Person" means an individual, corporation,
partnership, limited liability company, joint venture,
association, trust, unincorporated organization or other entity
and (x) "Material Adverse Effect" means a material adverse effect
on the Business or the combined financial condition or results of
operations of the Mastercraft Group, taken as a whole.
(b) No provision of this Agreement will be interpreted in
favor of, or against, any of the parties hereto by reason of the extent to which
any such party or its counsel participated in the drafting thereof or by reason
of the extent to which any such provision is inconsistent with any prior draft
hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the day and year first above written.
COLLINS & AIKMAN PRODUCTS CO.
By: /s/ Thomas E. Hannah
Name: Thomas E. Hannah
Title: President and CEO
MC GROUP ACQUISITION COMPANY, LLC
By: /s/ Elkin McCallum
Name: Elkin McCallum
Title: President
JOAN FABRICS CORPORATION
By: /s/ Elkin McCallum
Name: Elkin McCallum
Title: President
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COLLINS & AIKMAN CORPORATION
1994 EMPLOYEE STOCK OPTION PLAN
As Amended through February 7, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
I. PURPOSES OF THE PLAN..................................................................................... 1
II. DEFINITIONS.............................................................................................. 1
III. EFFECTIVE DATE............................................................................................ 4
IV. ADMINISTRATION............................................................................................ 4
A. Duties of the Committee............................................................................. 4
B. Advisors........................................................................................... 5
C. Indemnification..................................................................................... 5
D. Meetings of the Committee........................................................................... 5
E. Determinations...................................................................................... 5
V. SHARES; ADJUSTMENT UPON CERTAIN EVENTS.................................................................... 5
A. Shares to be Delivered; Fractional Shares........................................................... 5
B. Number of Shares.................................................................................... 6
C. Adjustments; Recapitalization, etc................................................................. 6
VI. AWARDS AND TERMS OF OPTIONS............................................................................... 6
A. Grant............................................................................................... 6
B. Exercise Price...................................................................................... 7
C. Number of Shares.................................................................................... 7
D. Exercisability...................................................................................... 7
E. Acceleration of Exercisability...................................................................... 7
F. Exercise of Options............................................................................... 8
G. Black-Out Periods.................................................................................. 9
H. Non-Competition and Other Provisions............................................................... 9
I. Restrictions on Exercise........................................................................... 9
J. Incentive Stock Option Limitations................................................................. 9
VII. EFFECT OF TERMINATION OF RELATIONSHIP.................................................................... 10
A. Death, Disability, Retirement, etc................................................................ 10
B. Cause.............................................................................................. 10
C. Other Termination.................................................................................. 10
D. Cancellation of Options............................................................................ 11
VIII. NONTRANSFERABILITY OF OPTIONS........................................................................... 11
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IX. RIGHTS AS A STOCKHOLDER................................................................................... 11
X. TERMINATION, AMENDMENT AND MODIFICATION................................................................... 11
A. General Amendments................................................................................. 11
B. Other Termination.................................................................................. 12
XI. USE OF PROCEEDS........................................................................................... 12
XII. GENERAL PROVISIONS....................................................................................... 12
A. Right to Terminate Employment ......................................................................12
B. Purchase for Investment............................................................................ 12
C. Trusts, etc........................................................................................ 12
D. Notices............................................................................................ 13
E. Severability of Provisions......................................................................... 13
F. Payment to Minors, Etc............................................................................. 13
G. Headings and Captions.............................................................................. 13
H. Controlling Law.................................................................................... 13
I. Section 162(m) Deduction Limitation................................................................ 13
J. Section 16(b) of the Act........................................................................... 14
XIII. ISSUANCE OF STOCK CERTIFICATES; LEGENDS; PAYMENT
OF EXPENSES ......................................................................................... 14
A. Stock Certificates................................................................................. 14
B. Legends............................................................................................ 14
C. Payment of Expenses................................................................................ 14
XIV. LISTING OF SHARES AND RELATED MATTERS.................................................................... 14
XV. WITHHOLDING TAXES........................................................................................ 14
Schedule I. 1997 U.K. EXECUTIVE STOCK OPTION SCHEME ..........................................................16
</TABLE>
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Collins & Aikman Corporation
1994 Employee Stock Option Plan
(As Amended)
I. PURPOSES OF THE PLAN
The purposes of this 1994 Employee Stock Option Plan (the
"Plan") are to enable Collins & Aikman Corporation (formerly Collins & Aikman
Holdings Corporation), (the "Company") and Related Persons (as defined herein)
to attract, retain and motivate the employees and consultants who are important
to the success and growth of the business of the Company and Related Persons and
to create a long-term mutuality of interest between the Key Employees and
Executive Consultants (as defined herein) and the stockholders of the Company by
granting the Key Employees and Executive Consultants options to purchase Common
Stock (as defined herein). This document shall supersede all other material
describing this Plan, including, but not limited to, prior drafts hereof and any
documents incorporating the terms and provisions of any such prior drafts.
II. DEFINITIONS
In addition to the terms defined elsewhere herein, for
purposes of this Plan, the following terms will have the following meanings when
used herein with initial capital letters:
A. "Act" means the Securities Exchange Act of 1934, as
amended, and all rules and regulations promulgated thereunder.
B. "Board" means the Board of Directors of the Company.
C. "Cause" means that the Committee shall have determined that
any of the following events has occurred: (1) an act of fraud, embezzlement,
misappropriation of business or theft committed by a Participant in the course
of his or her employment or consultancy or any intentional or gross negligent
misconduct of a Participant which injures the business or reputation of the
Company or Related Persons; (2) intentional or gross negligent damage committed
by a Participant to the property of the Company or Related Persons; (3) a
Participant's willful failure or refusal to perform the customary duties and
responsibilities of his or her position or consultancy with the Company or
Related Persons; (4) a Participant's breach of fiduciary duty, or the making of
a false representation, to the Company or Related Persons; (5) a Participant's
material breach of any covenant, condition or obligation required to be
performed by him or her pursuant to this Plan, the Option Agreement or any other
agreement between him or her and the Company or Related Persons or a
Participant's intentional or gross negligent violation of any material written
policy of the Company or Related Persons; (6) a Key Employee's willful failure
or refusal to act in accordance with any specific lawful instructions of a
majority of the Board of Directors of the Company; or (7) commission by a
Participant of a felony or a crime involving moral turpitude. Cause shall be
deemed to exist as of the date any of the above events occur even if the
Committee's determination is later and whether or not such determination is made
before or after Termination of Employment or Termination of Consultancy.
<PAGE>
D. "Code" means the Internal Revenue Code of 1986, as amended
(or any successor statute).
E. "Committee" means such committee, if any, appointed by the
Board to administer the Plan, consisting of two or more directors as may be
appointed from time to time by the Board each of whom, unless otherwise
determined by the Board, shall be disinterested persons as defined in Rule 16b-3
promulgated under Section 16(b) of the Act. If the Board does not appoint a
committee for this purpose, "Committee" means the Board.
F. "Common Stock" means the common stock of the Company, par
value $.01 per share, any Common Stock into which the Common Stock may be
converted and any Common Stock resulting from any reclassification of the Common
Stock.
G. "Company" means Collins & Aikman Corporation, a Delaware
corporation.
H. "Competitive Activity" means (a) being employed by,
consulting to or being a director of any business, or engaging directly or
indirectly in any business activity, that is competitive with any material
business of any of the Company, a Related Person or of the division that the
Participant is or was employed by or (b) soliciting for employment or
consulting, employing or retaining, or assisting another Person to employ or
retain, directly or indirectly, any employees of the Company or Related Persons
or any Person who was an employee of the Company or Related Persons in the prior
six months, provided, however, that employing or retaining, or assisting another
Person to employ or retain, any Person whose employment or consultancy with the
Company or a Related Person has been terminated without Cause or any Person that
is non-exempt under the Federal Fair Labor Standards Act, 29 USC ss. 213(a)(1),
shall not be considered Competitive Activity.
I. "Disability" means a permanent and total disability, as
determined by the Committee in its sole discretion. A Disability shall only be
deemed to occur at the time of the determination by the Committee of the
Disability.
J. "Executive Consultants" shall mean executive-level
consultants of the Company or Related Persons, as determined by the Committee,
provided, however, that no managing director, general partner, limited partner,
director, officer or employee of Wasserstein Perella & Co., Inc. or The
Blackstone Group L.P. that is a director of the Company will be eligible to
participate in the Plan.
K. "Fair Market Value" shall mean, for purposes of this Plan,
unless otherwise required by any applicable provision of the Code or any
regulations issued thereunder, as of any date, the last sales prices reported
for the Common Stock on the applicable date, (i) as reported by the principal
national securities exchange in the United States on which it is then traded, or
(ii) if not traded on any such national securities exchange, as quoted on an
automated quotation system sponsored by the National Association of Securities
Dealers, or if the sale of the Common Stock shall not have been reported or
quoted on such date, on the first day prior thereto on which the Common Stock
was reported or quoted. If the Common Stock is not readily tradeable on a
national securities exchange or any system sponsored by the National Association
of Securities Dealers, its Fair Market Value shall be set by the Committee based
upon its assessment of the cash price that would be paid between a fully
informed buyer and seller under no compulsion to buy or sell (without giving
effect to any discount for a minority interest or any restrictions on
transferability or any lack of liquidity of the stock).
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<PAGE>
L. "Incentive Stock Option" shall mean any Option awarded
under this Plan intended to be and designated as an "Incentive Stock Option"
within the meaning of Section 422 of the Code.
M. "Key Employee" means any person who is an executive officer
or other valuable employee of the Company or a Related Person, as determined by
the Committee, provided, however, that no managing director, general partner,
limited partner, director, officer or employee of Wasserstein Perella & Co.,
Inc. or The Blackstone Group L.P. that is a director of the Company will be
eligible to participate in the Plan. A Key Employee may, but need not, be an
officer or director of the Company or a Related Person.
N. "Non-Qualified Stock Option" shall mean any Option awarded
under this Plan that is not an Incentive Stock Option.
O. "Option" means the right to purchase one Share at a
prescribed purchase price on the terms specified in the Plan.
P. "Participant" means a Key Employee or Executive Consultant
who is granted Options under the Plan which Options have not expired; provided,
however, that any Executive Consultant shall be a Participant for purposes of
the Plan solely with respect to grants of Non-Qualified Stock Options and shall
be ineligible for Incentive Stock Options.
Q. "Person" means any individual or entity, and the heirs,
executors, administrators, legal representatives, successors and assigns of such
Person as the context may require.
R. "Public Offering" means the closing of an offering under a
registration statement registering the common equity shares of the registering
entity under the Securities Act (other than a registration on a Form S-8, S-4 or
any successor or similar special purpose form).
S. "Related Person or Related Persons" means (a) any
corporation that is defined as a subsidiary corporation in Section 424(f) of the
Code or (b) any corporation that is defined as a parent corporation in Section
424(e) of the Code. An entity shall be deemed a Related Person only for such
periods as the requisite ownership relationship is maintained.
T. "Securities Act" means the Securities Act of 1933, as
amended, and all rules and regulations promulgated thereunder.
U. "Share" means a share of Common Stock.
V. "Ten Percent Shareholder" shall mean a person owning Common
Stock of the Company possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company as defined in
Section 422 of the Code.
W. "Termination of Consultancy" with respect to an individual
means that individual is no longer acting as an Executive Consultant to the
Company or a Related Person. In the event an entity shall cease to be a Related
Person, there shall be deemed a Termination of Consultancy of any individual who
is not otherwise an Executive Consultant of the Company or another Related
Person at the time the entity ceases to be a Related Person.
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<PAGE>
X. "Termination of Employment" with respect to an individual
means that individual is no longer actively employed by the Company or a Related
Person on a full-time basis, irrespective of whether or not such employee is
receiving salary continuance pay, is continuing to participate in other employee
benefit programs or is otherwise receiving severance type payments. In the event
an entity shall cease to be a Related Person, there shall be deemed a
Termination of Employment of any individual who is not otherwise an employee of
the Company or another Related Person at the time the entity ceases to be a
Related Person. A Termination of Employment shall not include a leave of absence
approved for purposes of the Plan by the Committee.
Y. "Termination of Relationship" means a Termination of
Consultancy or a Termination of Employment where the individual is no longer a
consultant to, or employee of, the Company.
III. EFFECTIVE DATE
The Plan shall become effective on April 15, 1994 (the
"Effective Date"), subject to its approval by the majority of the Common Stock
(at the time of approval) within one year after the Plan is adopted by the Board
of Directors of the Company. Grants of Options by the Committee under the Plan
may be made on or after the Effective Date of the Plan, including retroactively,
provided that, if the Plan is not approved by the majority of the Common Stock
(at the time of approval), all Options which have been granted by the Committee
shall be null and void. No Options may be exercised prior to the approval of the
Plan by the majority of the Common Stock (at the time of approval).
IV. ADMINISTRATION
A. Duties of the Committee. The Plan shall be administered by
the Committee. The Committee shall have full authority to interpret the Plan and
to decide any questions and settle all controversies and disputes that may arise
in connection with the Plan; to establish, amend and rescind rules for carrying
out the Plan; to administer the Plan, subject to its provisions; to select
Participants in, and grant Options under, the Plan; to determine the terms,
exercise price and form of exercise payment for each Option granted under the
Plan; to determine the consideration to be received by the Company in exchange
for the grant of the Options; to determine whether and to what extent Incentive
Stock Options and Non-Qualified Stock Options, or any combination thereof, are
to be granted hereunder to one or more Key Employees and to determine whether
and to what extent Non-Qualified Stock Options are to be granted hereunder to
one or more Executive Consultants; to prescribe the form or forms of instruments
evidencing Options and any other instruments required under the Plan (which need
not be uniform) and to change such forms from time to time; and to make all
other determinations and to take all such steps in connection with the Plan and
the Options as the Committee, in its sole discretion, deems necessary or
desirable. The Committee shall not be bound to any standards of uniformity or
similarity of action, interpretation or conduct in the discharge of its duties
hereunder, regardless of the apparent similarity of the matters coming before
it. Any determination, action or conclusion of the Committee shall be final,
conclusive and binding on all parties. Anything in the Plan to the contrary
notwithstanding, no term of this Plan relating to Incentive Stock Options shall
be interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be so exercised, so as to disqualify the Plan under
Section 422 of the Code, or, without the consent of the Participants affected,
to disqualify any Incentive Stock Option under such Section 422.
4
<PAGE>
B. Advisors. The Committee may employ such legal counsel,
consultants and agents as it may deem desirable for the administration of the
Plan, and may rely upon any advice or opinion received from any such counsel or
consultant and any computation received from any such consultant or agent.
Expenses incurred by the Committee in the engagement of such counsel, consultant
or agent shall be paid by the Company.
C. Indemnification. To the maximum extent permitted by
applicable law, no officer of the Company or member or former member of the
Committee or of the Board shall be liable for any action or determination made
in good faith with respect to the Plan or any Option granted under it. To the
maximum extent permitted by applicable law or the Certificate of Incorporation
or By-Laws of the Company, each officer and member or former member of the
Committee or of the Board shall be indemnified and held harmless by the Company
against any cost or expense (including reasonable fees of counsel reasonably
acceptable to the Company) or liability (including any sum paid in settlement of
a claim with the approval of the Company), and advanced amounts necessary to pay
the foregoing at the earliest time and to the fullest extent permitted, arising
out of any act or omission to act in connection with the Plan, except to the
extent arising out of such officer's, member's or former member's own fraud or
bad faith. Such indemnification shall be in addition to any rights of
indemnification the officers, members or former members may have as directors
under applicable law or under the Certificate of Incorporation or By-Laws of the
Company or Related Person.
D. Meetings of the Committee. The Committee shall adopt such
rules and regulations as it shall deem appropriate concerning the holding of its
meetings and the transaction of its business. Any member of the Committee may be
removed from the Committee at any time either with or without cause by
resolution adopted by the Board, and any vacancy on the Committee may at any
time be filled by resolution adopted by the Board. All determinations by the
Committee shall be made by the affirmative vote of a majority of its members.
Any such determination may be made at a meeting duly called and held at which a
majority of the members of the Committee are in attendance in person or through
telephonic communication. Any determination set forth in writing and signed by
all the members of the Committee shall be as fully effective as if it had been
made by a majority vote of the members at a meeting duly called and held.
E. Determinations. Each determination, interpretation or other
action made or taken pursuant to the provisions of this Plan by the Committee
shall be final, conclusive and binding for all purposes and upon all persons,
including, without limitation, the Participants, the Company and Related
Persons, directors, officers and other employees of the Company and Related
Persons, and the respective heirs, executors, administrators, personal
representatives and other successors in interest of each of the foregoing.
V. SHARES; ADJUSTMENT UPON CERTAIN EVENTS
A. Shares to be Delivered; Fractional Shares. Shares to be
issued under the Plan shall be made available, at the sole discretion of the
Board, either from authorized but unissued Shares or from issued Shares
reacquired by Company and held in treasury. No fractional Shares will be issued
or transferred upon the exercise of any Option. In lieu thereof, the Company
shall pay a cash adjustment equal to the same fraction of the Fair Market Value
of one Share on the date of exercise.
5
<PAGE>
B. Number of Shares. Subject to adjustment as provided in this
Article V, the maximum aggregate number of Shares that may be issued under the
Plan shall be 2,980,534. If Options are for any reason canceled, or expire or
terminate unexercised, the Shares covered by such Options shall again be
available for the grant of Options, subject to the foregoing limit.
C. Adjustments; Recapitalization, etc. The existence of the
Plan and the Options granted hereunder shall not affect in any way the right or
power of the Board or the stockholders of the Company to make or authorize any
adjustment, recapitalization, reorganization or other change in the Company's
capital structure or its business, any merger or consolidation of the Company,
any issue of bonds, debentures, preferred or prior preference stocks ahead of or
affecting Common Stock, the dissolution or liquidation of the Company or Related
Persons, any sale or transfer of all or part of its assets or business or any
other corporate act or proceeding. The Committee may make or provide for such
adjustments in the maximum number of Shares specified in Article V(B), in the
number of Shares covered by outstanding Options granted hereunder, and/or in the
Purchase Price (as hereinafter defined) applicable to such Options or such other
adjustments in the number and kind of securities received upon the exercise of
Options, as the Committee in its sole discretion may determine is equitably
required to prevent dilution or enlargement of the rights of Participants or to
otherwise recognize the effect that otherwise would result from any stock
dividend, stock split, combination of shares, recapitalization or other change
in the capital structure of the Company, merger, consolidation, spin-off,
reorganization, partial or complete liquidation, issuance of rights or warrants
to purchase securities or any other corporate transaction or event having an
effect similar to any of the foregoing. In the event of a merger or
consolidation in which Company is not the surviving entity or in the event of
any transaction that results in the acquisition of substantially all of
Company's outstanding Common Stock by a single person or entity or by a group of
persons and/or entities acting in concert, or in the event of the sale or
transfer of all of the Company's assets (the foregoing being referred to as
"Acquisition Events"), then the Committee may in its sole discretion terminate
all outstanding Options effective as of the consummation of the Acquisition
Event by delivering notice of termination to each Participant at least 20 days
prior to the date of consummation of the Acquisition Event; provided that,
during the period from the date on which such notice of termination is delivered
to the consummation of the Acquisition Event, each Participant shall have the
right to exercise in full all the Options that are then outstanding (without
regard to limitations on exercise otherwise contained in the Options) but
contingent on occurrence of the Acquisition Event, and, provided that, if the
Acquisition Event does not take place within a specified period after giving
such notice for any reason whatsoever, the notice and exercise shall be null and
void. Except as hereinbefore expressly provided, the issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, for cash, property, labor or services, upon direct sale, upon the
exercise of rights or warrants to subscribe therefor or upon conversion of
shares or other securities, and in any case whether or not for fair value, shall
not affect, and no adjustment by reason thereof shall be made with respect to,
the number and class of shares and/or other securities or property subject to
Options theretofore granted or the Purchase Price (as hereinafter defined).
VI. AWARDS AND TERMS OF OPTIONS
A. Grant. The Committee may grant Non-Qualified Stock Options
or Incentive Stock Options, or any combination thereof to Key Employees and may
grant Non-Qualified Stock Options to Executive Consultants, provided, that the
maximum number of Shares with respect to which Options may be granted to any Key
Employee or Executive Consultant during any calendar year may not exceed
1,000,000, except that in the year of the first grant of Options to a Key
Employee or Executive Consultant,
6
<PAGE>
the maximum number of Shares with respect to which Options may be granted may
not exceed 1,000,000. To the extent that the maximum number of authorized Shares
with respect to which Options may be granted are not granted in a particular
calendar year to a Participant (beginning with the year in which the Participant
receives his or her first grant of Options hereunder), such ungranted Options
for any year shall increase the maximum number of Shares with respect to which
Options may be granted to such Participant in subsequent calendar years during
the term of the Plan until used. To the extent that any Option does not qualify
as an Incentive Stock Option (whether because of its provisions or the time or
manner of its exercise or otherwise), such Option or the portion thereof which
does not qualify, shall constitute a separate Non-Qualified Stock Option. Each
Option shall be evidenced by an Option agreement (the "Option Agreement") in
such form as the Committee shall approve from time to time.
B. Exercise Price. The purchase price per Share (the "Purchase
Price") deliverable upon the exercise of a Non-Qualified Stock Option granted on
or prior to the initial Public Offering of the Company shall be determined by
the Committee and set forth in a Participant's Option Agreement, provided that
the Purchase Price shall not be less than the par value of a Share, and,
provided, further, that the Purchase Price deliverable upon the exercise of a
Non-Qualified Stock Option granted after the initial Public Offering of the
Company shall be determined by the Committee and set forth in a Participant's
Option Agreement but shall not be less than 100% of the Fair Market Value of a
Share at the time of grant. The Purchase Price deliverable upon the exercise of
an Incentive Stock Option shall be determined by the Committee and set forth in
a Participant's Option Agreement but shall be not less than 100% of the Fair
Market Value of a Share at the time of grant; provided, however, if an Incentive
Stock Option is granted to a Ten Percent Shareholder, the Purchase Price shall
be no less than 110% of the Fair Market Value of a Share.
C. Number of Shares. The Option Agreement shall specify the
number of Options granted to the Participant, as determined by the Committee in
its sole discretion.
D. Exercisability. At the time of grant, the Committee shall
specify when and on what terms the Options granted shall be exercisable. In the
case of Options not immediately exercisable in full, the Committee may at any
time accelerate the time at which all or any part of the Options may be
exercised and may waive any other conditions to exercise. No Option shall be
exercisable after the expiration of ten years from the date of grant; provided,
however, the term of an Incentive Stock Option granted to a Ten Percent
Shareholder may not exceed five years. Each Option shall be subject to earlier
termination as provided in Article VII below.
E. Acceleration of Exercisability.
All Options granted and not previously exercisable
shall become fully exercisable immediately upon a Change of Control (as
defined herein). For this purpose, a "Change of Control" shall be
deemed to have occurred upon:
(a) an acquisition by any individual, entity
or group (within the meaning of Section 13d-3 or 14d-1 of the
Act) of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Act) of more than 80% of the combined
voting power of the then outstanding voting securities of
Company entitled to vote generally in the election of
directors, including, but not limited to, by merger,
consolidation or similar corporate transaction or by purchase;
excluding, however, the following: (x) any
7
<PAGE>
acquisition by the Company, Related Persons, Wasserstein
Perella Partners, L.P., Blackstone Capital Partners L.P. or an
affiliate of any of the foregoing, or (y) any acquisition by
an employee benefit plan (or related trust) sponsored or
maintained by the Company or Related Persons; or
(b) the approval of the stockholders of the
Company of (i) a complete liquidation or dissolution of the
Company or (ii) the sale or other disposition of more than 80%
of the gross assets of the Company and Related Persons on a
consolidated basis (determined under generally accepted
accounting principles as determined in good faith by the
Committee); excluding, however, such a sale or other
disposition to a corporation with respect to which, following
such sale or other disposition, (x) more than 20% of the
combined voting power of the then outstanding voting
securities of such corporation entitled to vote generally in
the election of directors will be then beneficially owned,
directly or indirectly, by the individuals and entities who
were the beneficial owners of the outstanding Shares
immediately prior to such sale or other disposition, (y) no
Person (other than the Company, Related Persons, and any
employee benefit plan (or related trust) of the Company or
Related Persons or such corporation and any Person
beneficially owning, immediately prior to such sale or other
disposition, directly or indirectly, 20% or more of the
outstanding Shares) will beneficially own, directly or
indirectly, 20% or more of the combined voting power of the
then outstanding voting securities of such corporation
entitled to vote generally in the election of directors and
(z) individuals who were members of the Incumbent Board will
constitute at least a majority of the members of the board of
directors of such corporation.
F. Exercise of Options.
1. A Participant may elect to exercise one or more
Options by giving written notice to the Committee of such election and
of the number of Options such Participant has elected to exercise,
accompanied by payment in full of the aggregate Purchase Price for the
number of Shares for which the Options are being exercised; provided,
however, that, in the case of a notice of exercise delivered to the
Committee by facsimile, such payment may be made by delivery of payment
to the Committee on the business day next following the date on which
such notice of exercise is delivered (such delivery being deemed to
have been duly made if the Participant giving such facsimile notice
shall have dispatched such payment by a nationally recognized overnight
courier service guaranteeing delivery on such next business day,
provided such payment is actually received by the Company).
2. Shares purchased pursuant to the exercise of
Options shall be paid for as follows:
(a) in cash or by check, bank draft or
money order payable to the order of Company;
(b) if the Shares are traded on a national
securities exchange, through the delivery of irrevocable
instructions to a broker to deliver promptly to the Company an
amount equal to the aggregate Purchase Price; or
8
<PAGE>
(c) on such other terms and conditions as may be
acceptable to the Committee (which may include payment in
full or in part by the transfer of Shares which have been
owned by the Participant for at least 6 months or the
surrender of Options owned by the Participant) and in
accordance with applicable law.
3. Upon receipt of payment, the Company shall
deliver to the Participant as soon as practicable a certificate or
certificates for the Shares then purchased.
G. Black-Out Periods. The direct or indirect sale, transfer
or other disposition of Common Stock received by a Participant upon the exercise
of Options shall be prohibited for two years following the initial Public
Offering of the Company, unless a shorter period of time is specified by the
Committee in its sole discretion at any time.
H. Non-Competition and Other Provisions. In consideration of
the grant of Options, by accepting the grant of Options the Participant agrees
during employment and, in the event any Options vest, for a period ending one
year following the date of the Participant's Termination of Employment, not to
engage in any Competitive Activity, except to the extent consented to by the
Committee in writing. Each Participant by accepting a grant of Options hereunder
acknowledges that the Company or a Related Person will suffer irreparable harm
in the event such Participant engages in any Competitive Activity during this
period, and agrees that in addition to its remedies at law, the Company and a
Related Person shall be entitled to injunctive relief as a consequence of a
violation or threatened violation of this covenant. Notwithstanding the
foregoing, nothing in this Plan shall prohibit or penalize ownership by a
Participant of the shares of a business that is registered under Section 12 of
the Act and constitutes, together with all such shares owned by any immediate
family member or affiliate of, or person acting in concert with, such
Participant, less than 2% of the outstanding registered shares of such business.
The Committee will have the discretion to impose in a Participant's Option
Agreement such other conditions, limitations and restrictions as it determines
are appropriate in its sole discretion, including any waivers of rights which a
Participant may have.
I. Restrictions on Exercise. Notwithstanding anything else
contained herein to the contrary other than Article VI(E), no Options may be
exercised prior to the earlier of the closing of a Public Offering of Shares or
the expiration of five years from the Effective Date of the Plan, except to the
extent consented to by the Committee in its sole and absolute discretion.
J. Incentive Stock Option Limitations. To the extent that the
aggregate Fair Market Value (determined as of the time of grant) of the Common
Stock with respect to which Incentive Stock Options are exercisable for the
first time by the Participant during any calendar year under the Plan and/or any
other stock option plan of the Company or any subsidiary or parent corporation
(within the meaning of Section 424 of the Code) exceeds $100,000, such Options
shall be treated as Options which are not Incentive Stock Options.
To the extent permitted under Section 422 of the Code, or the
applicable regulations thereunder or any applicable Internal Revenue Service
pronouncement, if (i) a Participant's employment with the Company or Related
Person is terminated by reason of death, Disability, retirement or termination
without Cause, and (ii) the portion of any Incentive Stock Option that would be
exercisable during the post- termination period specified under Article VII but
for the $100,000 limitation currently contained in Section 422(d) of the Code,
is greater than the portion of such Stock Option that is immediately exercisable
as an
9
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`incentive stock option' during such post-termination period under Section 422,
such excess shall be treated as a Non-Qualified Stock Option. If the exercise of
an Incentive Stock Option is accelerated for any reason, any portion of such
Option that is not exercisable as an Incentive Stock Option by reason of the
$100,000 limitation contained in Section 422(d) of the Code shall be treated as
a Non-Qualified Stock Option.
Should any of the foregoing provisions not be necessary in
order for the Stock Options to qualify as Incentive Stock Options, or should any
additional provisions be required, the Committee may amend the Plan accordingly,
without the necessity of obtaining the approval of the shareholders of the
Company, except as otherwise required by law.
VII. EFFECT OF TERMINATION OF RELATIONSHIP
A. Death, Disability, Retirement, etc. Except as otherwise
provided in the Participant's Option Agreement, upon Termination of
Relationship, all outstanding Options then exercisable and not exercised by the
Participant prior to such Termination of Relationship (and any Options not
previously exercisable but made exercisable by the Committee at or after the
Termination of Relationship) shall remain exercisable by the Participant to the
extent not exercised for the following time periods, or, if earlier, the prior
expiration of the Option in accordance with the terms of the Plan and grant:
1. In the event of the Participant's death or Disability,
such Options shall remain exercisable by the Participant (or by the
Participant's estate or by the person given authority to exercise such
Options by the Participant's will or by operation of law) for a period
of one year from the date of the Participant's death or Disability,
provided that the Committee, in its sole discretion, may at any time
extend such time period.
2. In the event the Participant retires from employment at
or after age 65 (or, with the consent of the Committee or under an
early retirement policy of the Company or a Related Person, before age
65), or if the Participant's employment is terminated by the Company or
a Related Person without Cause, such Options shall remain exercisable
for 90 days from the date of the Participant's Termination of
Employment, provided that the Committee, in its sole discretion, may at
any time extend such time period.
B. Cause. Upon the Termination of Relationship of a
Participant for Cause, or if the Company or a Related Person obtains or
discovers information after Termination of Relationship that such Participant
had engaged in conduct that would have justified a Termination of Relationship
for Cause during employment or consultancy, all outstanding Options of such
Participant shall immediately be canceled.
C. Other Termination. In the event of Termination of
Relationship for any reason other than as provided in Article VII(A) or VII(B),
all outstanding Options not exercised by the Participant prior to such
Termination of Relationship shall remain exercisable (to the extent exercisable
by such Participant immediately before such termination) for a period of 30 days
after such termination, provided that the Committee, in its sole discretion, may
at any time extend such time period.
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D. Cancellation of Options. Except as otherwise provided in
Article VI(E), no Options that were not exercisable during the period
ofemployment or consultancy shall thereafter become exercisable upon a
Terminationof Relationship for any reason or no reason whatsoever, and such
options shall terminate and become null and void upon a Termination of
Relationship, unless the Committee determines in its sole discretion that such
Options shall be exercisable.
VIII. NONTRANSFERABILITY OF OPTIONS
No Option shall be transferable by the Participant otherwise
than by will or under applicable laws of descent and distribution, and during
the lifetime of the Participant may be exercised only by the Participant or his
or her guardian or legal representative. In addition, no Option shall be
assigned, negotiated, pledged or hypothecated in any way (whether by operation
of law or otherwise), and no Option shall be subject to execution, attachment or
similar process. Upon any attempt to transfer, assign, negotiate, pledge or
hypothecate any Option, or in the event of any levy upon any Option by reason of
any execution, attachment or similar process contrary to the provisions hereof,
such Option shall immediately terminate and become null and void.
IX. RIGHTS AS A STOCKHOLDER
A Participant (or a permitted transferee of an Option) shall
have no rights as a stockholder with respect to any Shares covered by such
Participant's Option until such Participant (or permitted transferee) shall have
become the holder of record of such Shares, and no adjustments shall be made for
dividends in cash or other property or distributions or other rights in respect
to any such Shares, except as otherwise specifically provided in this Plan.
X. TERMINATION, AMENDMENT AND MODIFICATION
A. General Amendments. The Plan shall terminate at the close
of business on the tenth anniversary of the Effective Date (the "Termination
Date"), unless terminated sooner as hereinafter provided, and no Option shall be
granted under the Plan on or after that date. The termination of the Plan shall
not terminate any outstanding Options that by their terms continue beyond the
Termination Date. At any time prior to the Termination Date, the Committee may
amend or terminate the Plan or suspend the Plan in whole or in part.
The Committee may at any time, and from time to time, amend,
in whole or in part, any or all of the provisions of the Plan (including any
amendment deemed necessary to ensure that the Company may comply with any
regulatory requirement referred to in Article XII), or suspend or terminate it
entirely, retroactively or otherwise; provided, however, that, unless otherwise
required by law or specifically provided herein, the rights of a Participant
with respect to Options granted prior to such amendment, suspension or
termination, may not, other than as provided in Article X(B), be materially
impaired without the consent of such Participant and, provided further, without
the approval of the stockholders of the Company entitled to vote, no amendment
may be made which would (i) materially increase the aggregate number of shares
of Common Stock that may be issued under this Plan (except by operation of
Article V); (ii) decrease the minimum Purchase Price of any Option or (iii)
extend the maximum option period.
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The Committee may amend the terms of any Option granted,
prospectively or retroactively, but, subject to Article VI above or as otherwise
provided herein, no such amendment or other action by the Committee shall
materially impair the rights of any Participant without the Participant's
consent. No modification of an Option shall adversely affect the status of an
Incentive Stock Option as an incentive stock option under Section 422 of the
Code. Notwithstanding the foregoing, however, no such amendment may, without the
approval of the stockholders of the Company, effect any change that would
require stockholder approval under applicable law.
B. Other Termination. Notwithstanding any other provision of
the Plan, in the event that a Public Offering does not occur with respect to the
Company by January 28, 1995, the Committee shall have the absolute right and
discretion to amend or terminate the Plan and a Participant's rights with
respect to any Options granted prior to such amendment or termination.
XI. USE OF PROCEEDS
The proceeds of the sale of Shares subject to Options under
the Plan are to be added to the general funds of Company and used for its
general corporate purposes as the Board shall determine.
XII. GENERAL PROVISIONS
A. Right to Terminate Employment. Neither the adoption of the
Plan nor the grant of Options shall impose any obligation on the Company or
Related Persons to continue the employment of any Participant, nor shall it
impose any obligation on the part of any Participant to remain in the employ of
the Company or Related Persons.
B. Purchase for Investment. If the Board or the Committee
determines that the law so requires, the holder of an Option granted hereunder
shall, upon any exercise or conversion thereof, execute and deliver to the
Company a written statement, in form satisfactory to the Company, representing
and warranting that such Participant is purchasing or accepting the Shares then
acquired for such Participant's own account and not with a view to the resale or
distribution thereof, that any subsequent offer for sale or sale of any such
Shares shall be made either pursuant to (i) a Registration Statement on an
appropriate form under the Securities Act, which Registration Statement shall
have become effective and shall be current with respect to the Shares being
offered and sold, or (ii) a specific exemption from the registration
requirements of the Securities Act, and that in claiming such exemption the
holder will, prior to any offer for sale or sale of such Shares, obtain a
favorable written opinion, satisfactory in form and substance to the Company,
from counsel acceptable to the Company as to the availability of such exception.
C. Trusts, etc. Nothing contained in the Plan and no action
taken pursuant to the Plan (including, without limitation, the grant of any
Option thereunder) shall create or be construed to create a trust of any kind,
or a fiduciary relationship, between Company and any Participant or the
executor, administrator or other personal representative or designated
beneficiary of such Participant, or any other persons. Any reserves that may be
established by Company in connection with the Plan shall continue to be part of
the general funds of Company, and no individual or entity other than Company
shall have any interest in such funds until paid to a Participant. If and to the
extent that any Participant or such
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<PAGE>
Participant's executor, administrator or other personal representative, as the
case may be, acquires a right to receive any payment from Company pursuant to
the Plan, such right shall be no greater than the right of an unsecured general
creditor of Company.
D. Notices. Any notice to the Company required by or in
respect of this Plan will be addressed to the Company at 701 McCullough Drive,
Charlotte, North Carolina 28262, Attention: Vice President, Human Resources, or
such other place of business as shall become the Company's principal executive
offices from time to time, or sent to the Company by facsimile to (704)
548-2081, Attention: Vice President, Human Resources, or to such other facsimile
number as the Company shall notify each Participant. Each Participant shall be
responsible for furnishing the Committee with the current and proper address for
the mailing to such Participant of notices and the delivery to such Participant
of agreements, Shares and payments. Any such notice to the Participant will, if
the Company has received notice that the Participant is then deceased, be given
to the Participant's personal representative if such representative has
previously informed the Company of his status and address (and has provided such
reasonable substantiating information as the Company may request) by written
notice under this Section. Any notice required by or in respect of this Plan
will be deemed to have been duly given when delivered in person or when
dispatched by telegram or, in the case of notice to the Company, by facsimile as
described above, or one business day after having been dispatched by a
nationally recognized overnight courier service or three business days after
having been mailed by United States registered or certified mail, return receipt
requested, postage prepaid. The Company assumes no responsibility or obligation
to deliver any item mailed to such address that is returned as undeliverable to
the addressee and any further mailings will be suspended until the Participant
furnishes the proper address.
E. Severability of Provisions. If any provisions of the Plan
shall be held invalid or unenforceable, such invalidity or unenforceability
shall not affect any other provisions of the Plan, and the Plan shall be
construed and enforced as if such provisions had not been included.
F. Payment to Minors, Etc. Any benefit payable to or for the
benefit of a minor, an incompetent person or other person incapable of receipt
thereof shall be deemed paid when paid to such person's guardian or to the party
providing or reasonably appearing to provide for the care of such person, and
such payment shall fully discharge the Committee, the Company and their
employees, agents and representatives with respect thereto.
G. Headings and Captions. The headings and captions herein
are provided for reference and convenience only. They shall not be considered
part of the Plan and shall not be employed in the construction of the Plan.
H. Controlling Law. The Plan shall be construed and enforced
according to the laws of the State of Delaware.
I. Section 162(m) Deduction Limitation. The Committee at any
time may in its sole discretion limit the number of Options that can be
exercised in any taxable year of the Company, to the extent necessary to prevent
the application of Section 162(m) of the Code (or any similar or successor
provision), provided that the Committee may not postpone the earliest date on
which Options can be exercised beyond the last day of the stated term of such
Options.
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J. Section 16(b) of the Act. All elections and transactions
under the Plan by persons subject to Section 16 of the Exchange Act involving
shares of Common Stock are intended to comply with all exemptive conditions
under Rule 16b-3. The Committee may establish and adopt written administrative
guidelines, designed to facilitate compliance with Section 16(b) of the Act, as
it may deem necessary or proper for the administration and operation of the Plan
and the transaction of business thereunder.
XIII. ISSUANCE OF STOCK CERTIFICATES; LEGENDS; PAYMENT OF EXPENSES
A. Stock Certificates. Upon any exercise of an Option and
payment of the exercise price as provided in such Option, a certificate or
certificates for the Shares as to which such Option has been exercised shall be
issued by Company in the name of the person or persons exercising such Option
and shall be delivered to or upon the order of such person or persons.
B. Legends. Certificates for Shares issued upon exercise of
an Option shall bear such legend or legends as the Committee, in its sole
discretion, determines to be necessary or appropriate to prevent a violation of,
or to perfect an exemption from, the registration requirements of the Securities
Act or to implement the provisions of any agreements between Company and the
Participant with respect to such Shares.
C. Payment of Expenses. The Company shall pay all issue or
transfer taxes with respect to the issuance or transfer of Shares, as well as
all fees and expenses necessarily incurred by the Company in connection with
such issuance or transfer and with the administration of the Plan.
XIV. LISTING OF SHARES AND RELATED MATTERS
If at any time the Board or the Committee shall determine in
its sole discretion that the listing, registration or qualification of the
Shares covered by the Plan upon any national securities exchange or under any
state or federal law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in connection with, the
grant of Options or the award or sale of Shares under the Plan, no Option grant
shall be effective and no Shares will be delivered, as the case may be, unless
and until such listing, registration, qualification, consent or approval shall
have been effected or obtained, or otherwise provided for, free of any
conditions not acceptable to the Board.
XV. WITHHOLDING TAXES
The Company shall have the right to require prior to the
issuance or delivery of any shares of Common Stock payment by the Participant of
any Federal, state or local taxes required by law to be withheld.
The Committee may permit any such withholding obligation to be
satisfied by reducing the number of shares of Common Stock otherwise
deliverable. A person required to file reports under Section 16(a) of the
Exchange Act with respect to securities of the Company may elect to have a
sufficient number of shares of Common Stock withheld to fulfill such tax
obligations (hereinafter a "Withholding Election") only if the election complies
with such conditions as are necessary to prevent the withholding of such shares
from being subject to Section 16(b) of the Exchange Act. To the extent necessary
under then current law,
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<PAGE>
such conditions shall include the following: (x) the Withholding Election shall
be subject to the approval of the Committee and (y) the Withholding Election is
made (i) during the period beginning on the third business day following the
date of release for publication of the quarterly or annual summary statements of
sales and earnings of the Company and ending on the twelfth business day
following such date or is made in advance but takes effect during such period,
(ii) six (6) months before the stock award becomes taxable, or (iii) during any
other period in which a Withholding Election may be made under the provisions of
Rule 16b-3 promulgated pursuant to the Act. Any fraction of a share of Common
Stock required to satisfy such tax obligations shall be disregarded and the
amount due shall be paid instead in cash by the Participant.
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SCHEDULE I
COLLINS & AIKMAN CORPORATION 1997 U.K. EXECUTIVE STOCK OPTION
SCHEME - SCHEDULE TO THE COLLINS & AIKMAN CORPORATION 1994 EMPLOYEE
STOCK OPTION PLAN
1. DEFINITIONS AND INTERPRETATION
(a) Unless the context otherwise requires, all expressions defined
in the U.S. Plan shall have the same meaning in the U.K.
Scheme, save that:-
"Fair Market Value" has the meaning set forth in sub-rule 5.(3);
"Option" includes an Approved Stock Option as defined in sub-rule
1.(2);
"Related Person or Related Persons" includes "Subsidiary" as defined
in sub-rule 1.(2).
(b) In addition, the following expressions shall have the
following meanings in the U.K. Scheme unless the context
otherwise requires:
"Approved Stock Option" means an Option granted in accordance with the
U.K. Scheme;
"the Inland Revenue" means the United Kingdom's Commissioners of
Inland Revenue;
"Participating Company" means the Company or a Subsidiary of the
Company;
"the U.K. Scheme" means the Collins & Aikman Corporation 1997 U.K.
Executive Stock Option Scheme as herein set out but subject to any
alterations or additions made under Rule 8 below;
"Schedule 9" means Schedule 9 to the Taxes Act;
"Subsidiary" shall mean a body corporate, whether now or hereafter
existing which is:
(i) a subsidiary of the Company within the meaning of
Section 736 of the United Kingdom Companies Act
1985; and is
(ii) under the control of the Company within the meaning
of Section 840 of the Taxes Act.
"the Taxes Act" means the United Kingdom's Income and Corporation
Taxes Act 1988;
"the U.S. Plan" means the Collins & Aikman Corporation (formerly
Collins & Aikman Holdings Corporation) 1994 Employee Stock Option
Plan.
(a) Expressions not otherwise defined herein have the same
meanings as they have in Schedule 9.
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(b) Any reference herein to any enactment includes a reference to
that enactment as from time to time modified, extended or
re-enacted.
2. APPLICABILITY OF THE U.S. PLAN
Save as hereinafter specified, all the terms and provisions of the U.S.
Plan shall apply MUTATIS MUTANDIS to the grant of Approved Stock
Options under the U.K. Scheme.
3. ELIGIBILITY
(a) Subject to sub-rule (3) below, a person is eligible to be
granted an Approved Stock Option if (and only if) he is a
full-time director or qualifying employee of a Participating
Company.
(b) For the purposes of sub-rule (1) above:-
(i) a person shall be treated as a full-time director of
a Participating Company if he is obliged to devote to
the performance of the duties of his office or
employment with that and any other Participating
Company not less than 25 hours a week (excluding meal
breaks);
(ii) a qualifying employee, in relation to a Participating
Company, is an employee of the Participating Company
(other than one who is a director of a Participating
Company).
(c) A person is not eligible to be granted an Option under the
U.K. Scheme at any time when he is not eligible to
participate in the U.K. Scheme by virtue of paragraph 8 of
Schedule 9.
4. GRANT OF OPTIONS
(a) Subject to sub-rule (3) below, the Committee may grant to any
person who is eligible to be granted an Option under the U.K.
Scheme an Approved Stock Option to acquire Shares which
satisfy the requirements of paragraphs 10 to 14 of Schedule 9,
upon the terms set out in the U.K. Scheme and upon such other
objective terms as the Committee may reasonably specify
(provided that no such other terms may be so specified at a
time when the U.K. Scheme is approved by the Inland Revenue
under Schedule 9 without the prior approval of the Inland
Revenue).
(b) The grant of an Approved Stock Option shall be subject to
obtaining any approval or consent which may be required under
the provisions of any regulation or enactment.
(c) No person shall be granted Approved Stock Options under the
U.K. Scheme which would, at the time they are granted, cause
the aggregate market value of the Shares which he may acquire
in pursuance of options granted to him under the U.K. Scheme
or under any other share option scheme, not being a
savings-related share option scheme, approved under Schedule 9
and established by the Company or by any
17
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associated company of the Corporation (and not exercised) to
exceed or further exceed (pound)30,000. Any Stock Options
granted in excess of this amount shall be granted under the
unapproved Collins & Aikman Corporation 1994 Employee Stock
Option Plan.
(d) For the purposes of sub-rule (3) above:-
(i) in the case of an Option granted under the U.K.
Scheme the aggregate market value of the shares shall
be calculated as on the day by reference to which the
price at which Shares may be acquired by the exercise
thereof is determined as mentioned in Rule 5(2)
below;
(ii) in the case of an Option granted under any other
approved scheme, as at the time when it was granted
or, in a case where an agreement relating to the
shares has been made under paragraph 29 of Schedule
9, such earlier time or times as may be provided in
the agreement; and
(iii) In the case of any other Option, the
aggregate fair market value of shares shall
be calculated as on the day or days by
reference to which the price at which shares
may be acquired by the exercise hereof was
determined.
(e) Unless otherwise agreed with the Inland Revenue, the United
States dollar exchange rate for pounds sterling for the
purposes of calculating the limit in sub-rule (3) above shall
be the noon buying rate in the City of London on the day by
reference to which the price at which Shares may be acquired
on the exercise of the Option is determined as mentioned in
Rule 5(2) below.
(f) Article V (A) of the U.S Plan shall not apply to the grant of
Approved Stock Options under the U.K. Scheme and options under
the U.K. Scheme shall not be granted, or adjustments made to
them which would create an entitlement to a fraction of a
share.
5. EXERCISE PRICE AND CONSIDERATION
(a) Shares shall be issued to the Optionee pursuant to the
exercise of an Option only upon receipt by the Company from
the Optionee of payment in full in cash. The provisions of
Article VI (F) of the U.S. Plan permitting the purchase of
Shares on exercise by means other than the payment of cash
shall not apply to the grant of Approved Stock Options under
the U.K. Scheme.
(b) The price per Share under each Approved Stock Option granted
by the Committee shallbe such price as is determined by the
Committee before the grant thereof, provided that it shall not
be less than 100% of the Fair Market Value per Share on the
Option Grant Date (or such other dealing day as may be agreed
with the Inland Revenue).
(c) The Fair Market Value per Share on any day shall be
determined as follows:-
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(i) if shares of the same class as the Shares are quoted
on the New York Stock Exchange, the Fair Market
Value per Share shall be the average between the
highest and lowest quoted selling price per Share in
the New York Stock Exchange Composite Transactions
Tape on that day (and if there shall be no sale of
Shares reported on such date, the Fair Market Value
shall be deemed equal to the average between the
highest and lowest sale price of a Share on such
Composite Tape for the last preceding date on which
sales of Shares were reported);
(ii) if paragraph (a) above does not apply, the Fair
Market Value shall be equal to the higher of (i)
market value (within the meaning of Part VIII of the
United Kingdom's Capital Gains Tax Act 1992) of
Shares, as agreed in advance for the purposes of the
U.K. Scheme with the Shares Valuation Division of
the Inland Revenue, on that day; and (ii) Fair
Market Value in accordance with the definition set
out in the U.S. Plan.
6. EXERCISE OF OPTION
(a) A person is not eligible to exercise an Approved Stock Option
granted under the U.K. Scheme at any time when he is not
eligible to participate in the U.K. Scheme by virtue of
paragraph 8 of Schedule 9.
(b) The provisions of Article VI (D) of the U.S. Plan which allows
the Committee to accelerate the exercise of options which have
not yet vested shall not apply to the grant of Approved Stock
Options under the U.K. Scheme.
(c) For the avoidance of doubt Article VI (I) of the U.S. Plan is
no longer in effect and therefore does not apply to the grant
of Approved Stock Options under the U.K.
Scheme.
(d) Article VII of the U.S. Plan shall apply in respect of
Approved Stock Options granted under the UK Scheme, save that
Approved Stock Options granted under the U.K. Scheme may not
be exercised more than 12 months following the death of a
Participant.
7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER
(a) Article V(C) of the U.S. Plan shall apply to Approved Stock
Options granted under the U.K. Scheme in respect of a
variation of capital of the Company only, save that no
adjustment under Article V(C) shall be made to an Approved
Stock Option at a time when the UK Scheme is approved by the
Inland Revenue under Schedule 9 without the prior approval of
the Inland Revenue.
(b) If any company ("the acquiring company") obtains control of
the Company as a result of making -
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(i) a general offer to acquire the whole of the Common
Stock of the Company which is made on a condition
such that if it is satisfied the person making the
offer will have control of the Company, or
(ii) a general offer to acquire all the shares in the
Company which are of the same class as the Shares
which may be acquired by the exercise of Options
granted under the U.K. Scheme,
any Optionee may at any time within the appropriate period
(which expression shall be construed in accordance with
paragraph 15(2) of Schedule 9), by agreement with the
acquiring company, release any Option granted under the U.K.
Scheme which has not lapsed ("the old option") in
consideration of the grant to him of an option ("the new
option") which (for the purposes of that paragraph) is
equivalent to the old option but relates to shares in a
different company (whether the acquiring company itself or
some other company falling within paragraph 10(b) or (c) of
Schedule 9).
(c) The new option shall not be regarded for the purposes of
sub-rule (2) above as equivalent to the old option unless the
conditions set out in paragraph 15(3) of Schedule 9 are
satisfied, but so that the provisions of the U.K. Scheme shall
for this purpose be construed as if:-
(i) the new option were an Option granted under the U.K.
Scheme at the same time as the old option;
(ii) except for the purposes of the definitions of
"Participating Company" and "Subsidiary" in Rule 1
above and the references to "the Committee" in Rule
4(1) above, the reference to Collins & Aikman
Corporation in the definition of "Company" in Article
II of the U.S. Plan were a reference to the different
company mentioned in sub-rule (2) above.
8. AMENDMENT AND TERMINATION OF THE U.K. SCHEME
(a) The provisions of Article X of the U.S. Plan shall apply
MUTATIS MUTANDIS to the U.K. Scheme, save that if an amendment
is made to the U.K. Scheme or to the terms of an Approved
Stock Option at a time when the U.K. Scheme is approved by the
Inland Revenue under Schedule 9, the approval will not
thereafter have effect unless the Inland Revenue have approved
the alteration or addition.
(b) As soon as reasonably practicable after making any amendment
to the U.K. Scheme under sub-rule (1) above, the Committee
shall give notice in writing thereof to any Optionee affected
thereby and, if the U.K. Scheme is then approved by the Inland
Revenue under Schedule 9, to the Inland Revenue.
(c) In accordance with the Committees' powers under Article IV of
the US Plan, the Committee shall if it deems necessary
delegate authority to any one or more of the officers of the
Corporation to be responsible for the administration of the
U.K. Scheme.
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9. MISCELLANEOUS
(a) Within thirty days after an Option has been exercised by any
person, the Committee on behalf of the Company shall allot to
him or, as appropriate, procure the transfer to him of the
number of Shares in respect of which the Option has been
exercised.
(b) All Shares allotted under the U.K. Scheme shall rank pari
passu in all respect with the Shares of the same class for the
time being in issue save as regards any rights attaching to
such shares by reference to a record date prior to the date of
the allotment.
(c) For the avoidance of doubt, it is hereby confirmed that
Awards of Incentive Stock Options may not be made under the
U.K. Scheme.
CLIFFORD CHANCE
200 Aldersgate Street
LONDON
EC1A 4JJ
Tel. 071 600 0000
Fax. 071 600 5555
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EXHIBIT 11
COLLINS & AIKMAN CORPORATION
COMPUTATION OF EARNINGS PER SHARE
IN THOUSANDS, EXCEPT PER SHARE DATA
(UNAUDITED)
QUARTER ENDED
MARCH 29, MARCH 23,
1997 1996
Average shares outstanding during the period ... 67,125 69,090
Incremental shares under stock options
computed under the treasury stock
method using the average
market price of issuer's stock
during the period ............................ 996 1,003
------ ------
Total shares for primary EPS .............. 68,121 70,093
Additional shares under stock options
computed under the treasury stock
method using the ending
price of issuer's stock ....................... 274 -
--------- ---------
Total shares for fully diluted EPS ........ 68,395 70,093
========= =========
Income (loss) applicable to common shareholders:
Continuing operations ..................... $ 11,307 $ 158,406
Discontinued operations ................... 879 (22,042)
Gain on sale of discontinued operations ... 85,292 -
--------- ---------
Net income ................................ $ 97,478 $ 136,364
========= =========
Income (loss) per primary and fully
diluted common share:
Continuing operations ..................... $ .17 $ 2.26
Discontinued operations ................... .01 (.31)
Gain on sale of discontinued operations ... 1.25 -
--------- ---------
Net income ................................ $ 1.43 $ 1.95
========= =========
==============================================================================
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATIN EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 29, 1997 AND SUCH IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-29-1997
<CASH> 26,198
<SECURITIES> 0
<RECEIVABLES> 209,655
<ALLOWANCES> 10,233
<INVENTORY> 131,891
<CURRENT-ASSETS> 662,274
<PP&E> 487,789
<DEPRECIATION> 113,157
<TOTAL-ASSETS> 1,452,991
<CURRENT-LIABILITIES> 373,387
<BONDS> 945,795
0
0
<COMMON> 705
<OTHER-SE> (111,971)
<TOTAL-LIABILITY-AND-EQUITY> 1,452,991
<SALES> 432,252
<TOTAL-REVENUES> 432,252
<CGS> 359,921
<TOTAL-COSTS> 359,921
<OTHER-EXPENSES> 471
<LOSS-PROVISION> 94
<INTEREST-EXPENSE> 19,966
<INCOME-PRETAX> 19,597
<INCOME-TAX> 8,290
<INCOME-CONTINUING> 11,307
<DISCONTINUED> 86,171
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 97,478
<EPS-PRIMARY> 1.43
<EPS-DILUTED> 1.43
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 23, 1996 AND SUCH IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENT.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-23-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 257,677
<TOTAL-REVENUES> 257,677
<CGS> 211,090
<TOTAL-COSTS> 211,090
<OTHER-EXPENSES> (1,059)
<LOSS-PROVISION> 140
<INTEREST-EXPENSE> 8,059
<INCOME-PRETAX> 14,256
<INCOME-TAX> (144,150)
<INCOME-CONTINUING> 158,406
<DISCONTINUED> (22,042)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 136,364
<EPS-PRIMARY> 1.95
<EPS-DILUTED> 1.95
</TABLE>
