<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 27, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-10218
------------------------------
COLLINS & AIKMAN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3489233
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
701 MCCULLOUGH DRIVE
CHARLOTTE, NORTH CAROLINA 28262
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (704) 547-8500
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ------------------- -----------------------------------------
Common Stock New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
Registrant was $98,171,752 as of March 25, 1998.
As of March 25, 1998, the number of outstanding shares of the Registrant's
common stock, $.01 par value, was 65,611,864 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) Proxy Statement for 1998 Annual Meeting of Stockholders to be filed
within 120 days of December 27, 1997 - Items 10, 11, 12 and 13.*
* Only the portions of this document expressly described in the items
listed are incorporated by reference herein.
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
FORM 10-K ANNUAL REPORT INDEX
Item 1. Business, page 1.
Item 2. Properties, page 4.
Item 3. Legal Proceedings, page 4.
Item 4. Submission of Matters to a Vote of Security Holders, page 5.
Executive Officers of the Registrant, page 5.
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters, page 6.
Item 6. Selected Financial Data, page 7.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations, page 8.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk,
page 21.
Item 8. Financial Statements and Supplementary Data, page 21.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure, page 21.
Item 10. Directors and Executive Officers of the Registrant, page 22.
Item 11. Executive Compensation, page 22.
Item 12. Security Ownership of Certain Beneficial Owners and Management,
page 22.
Item 13. Certain Relationships and Related Transactions, page 22.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K,
page 23.
i
<PAGE>
PART I
ITEM 1. BUSINESS
DEVELOPMENT
Collins & Aikman Corporation (the "Company") is a global supplier of
automotive interior systems, including textile and plastic trim, acoustics and
convertible top systems. The Company (formerly Collins & Aikman Holdings
Corporation) is a Delaware corporation which was formed on September 21, 1988.
As of December 27, 1997, Blackstone Capital Partners, L.P. ("Blackstone
Partners") and Wasserstein Perella Partners, L.P. ("WP Partners") and their
respective affiliates collectively own approximately 82% of the Common Stock of
the Company. The Company conducts all of its operating activities through its
wholly-owned Collins & Aikman Products Co. ("C&A Products") subsidiary.
Predecessors of C&A Products have been in operation for more than a century.
During 1997, the Company continued to execute its automotive growth
strategy. This strategy focuses the Company's resources on expanding its core
automotive business in North America and globally as well as adding
complementary product offerings. To that end, in 1997 and early 1998 the Company
completed several strategic corporate development projects and divested the
remainder of its significant non-automotive operations, all as discussed below.
On December 16, 1997, the Company acquired from Perstorp A.B.
("Perstorp") the remaining interest in the Collins & Aikman/Perstorp automotive
acoustics joint venture with operations in Sweden, Belgium and France. The
Company received the interest in settlement of certain disputed claims by the
Company against Perstorp arising from the Company's December 1996, and August
1997 purchases from Perstorp of certain of its automotive supply operations in
North America, the United Kingdom, Spain and Germany.
On December 4, 1997, the Company entered into a joint venture with
Courtaulds Textiles (Holdings) Limited ("Courtaulds"), a publicly-owned,
international textiles and clothing manufacturer located in the United Kingdom,
to manufacture automotive interior fabrics for European customers. The Company
and Courtaulds each have a 50% ownership interest in the joint venture. The
joint venture allows the Company to expand its automotive fabrics operations in
Europe and to further serve the European automotive market. Customers served by
the joint venture include the Rover Group, Toyota and the Opel division of
General Motors.
On November 5, 1997, the Company announced that it entered into an
agreement to sell its Imperial Wallcoverings, Inc. subsidiary ("Wallcoverings")
to a company sponsored by an affiliate of Blackstone Partners. In connection
with the sale, the Company recorded a loss of approximately $21.1 million, net
of income taxes in the third quarter of 1997. The sale closed on March 13, 1998
for a purchase price of $71.2 million in cash, subject to adjustment, and an
option to acquire 6.7% of the common stock of the purchaser outstanding as of
closing. The purchaser includes both Wallcoverings and the wallcovering and
vinyl units of Borden Inc., which the purchaser also acquired.
On October 29, 1997, the Company entered into a joint venture with
Kigass Automotive Group ("Kigass") to manufacture plastic trim products in the
United Kingdom. The Company and Kigass each owned 50% of the joint venture. On
February 2, 1998, the Company acquired Kigass for approximately $24.2 million,
subject to post-closing adjustment.
On August 31, 1997, the Company purchased certain automotive acoustics
assets and assumed certain liabilities in Germany from Perstorp for
approximately $13.6 million.
On July 24, 1997, JPS Automotive L. P. ("JPS Automotive"), a subsidiary
of the Company acquired in December 1996, completed the sale of its Air
Restraint and Technical Products Division, an airbag and industrial fabric
business ("Airbag"), to Safety Components International, Inc. for a purchase
price of approximately $56 million. No gain or loss was recorded on the sale
since the sales price approximated the acquisition fair value of Airbag.
Pursuant to the indenture governing the JPS Automotive 11-1/8% Senior Notes due
2001 (the "JPS Automotive Senior Notes"), in connection with the sale of Airbag,
the Company caused JPS Automotive to make an offer to purchase (up to the amount
of the net proceeds from the sale) the JPS Automotive Senior Notes at 100% of
their principal amount. Pursuant to such offer, which expired September 16,
1997, JPS Automotive repurchased and retired $23 thousand principal amount of
JPS Automotive Senior Notes. During October 1997, the Company caused JPS
Automotive to use a portion of the proceeds remaining from the sale of Airbag to
make a distribution of $35.0 million to C&A Products, as permitted under the
restricted payments provisions of the JPS Automotive Senior Notes Indenture.
1
<PAGE>
On July 16, 1997, the Company completed its sale of the Mastercraft
Group, a manufacturer of flat woven upholstery fabric, to Joan Fabrics
Corporation, for a purchase price of approximately $310 million, subject to
adjustment. A portion of the net proceeds was used to reduce the Company's
long-term debt.
On February 6, 1997, the Company completed the sale of its
Floorcoverings subsidiary ("Floorcoverings") for net proceeds of approximately
$195.6 million. The proceeds were used to pay down debt incurred to finance the
Company's automotive acquisition strategy.
The Company has accounted for the financial results and net assets of
Floorcoverings, the Mastercraft Group (which were formerly reported in the
Interior Furnishings segment), Airbag, and Wallcoverings as discontinued
operations. Accordingly, previously reported financial results for all periods
have been restated to reflect those four businesses as discontinued operations.
GENERAL
The Company is a global supplier of automotive interior systems,
including textile and plastic trim, acoustics and convertible top systems with
1997 net sales of approximately $1.6 billion. The Company competes in five
principal automotive product groups--carpet and acoustics, automotive fabrics,
accessory floor mats, convertible top systems, and plastic-based interior
systems. The Company's acquisitions in 1996 of Collins & Aikman Plastics, Inc.
("C&A Plastics"), a subsidiary of the Company formerly known as Manchester
Plastics, JPS Automotive and Perstorp's automotive supply operations (primarily
acoustical products) in North America, the United Kingdom and Spain ("Perstorp
Components"), as well as the acquisitions and joint ventures in 1997 which are
discussed above, significantly increased the Company's content per build through
growth in existing product lines and the addition of complementary product
offerings.
The Company's sales are dependent on certain significant customers. In
1997, 1996, and 1995, direct and indirect sales to each of General Motors
Corporation, Ford Motor Company and Chrysler Corporation accounted for 10% or
more of the Company's net sales.
Automotive industry demand historically has been influenced by both
cyclical factors and long-term growth trends in the driving age population and
real per capita income.
Annual new car and light truck sales historically have been cyclical.
In the most recent cycle, North American light vehicle sales declined from an
average of 15.4 million units per year in 1986-1988 to a low of 12.3 million
units in 1991. For the last five years, North American light vehicle sales have
averaged 14.9 million units.
PRODUCTS
The Company operates in five principal automotive product groups:
carpet and acoustics, automotive fabrics, accessory floor mats, convertible top
systems and plastic-based interior systems. The Company also produces certain
other automotive and non-automotive products.
CARPET AND ACOUSTICS. The Company's Carpet and Acoustics group has three
primary product lines: molded floor carpets, luggage compartment trim and
acoustical products. Molded floor carpets include polyethylene, barrier-backed
and molded urethane underlay carpet. In 1997, 1996 and 1995, net sales of molded
floor carpets were $350.2 million, $234.1 million and $231.8 million,
respectively. Luggage compartment trim includes one-piece molded trunk systems
and assemblies, wheelhouse covers and center pan mats, seatbacks, tireboard
covers and other trunk trim products. In 1997, 1996 and 1995, net sales of
luggage compartment trim were $94.6 million, $51.4 million and $52.4 million,
respectively.
The Company entered the acoustical product market with its December 1996
acquisition of Perstorp's North American, United Kingdom and Spanish automotive
supply operations and a joint venture interest in Perstorp's operations in
Sweden, Belgium and France. The Company acquired certain of Perstorp's German
automotive supply operations in August 1997 and acquired full ownership of the
operations in Sweden, Belgium and France in December 1997. These operations
supply acoustical products to both domestic and international automotive
manufacturers. Products manufactured include interior dash insulators, damping
materials and engine compartment NVH (noise, vibration and harshness) systems.
These products can be combined with molded floor carpets to provide complete
interior floor systems to the automotive industry. In 1997, the Company's net
sales of acoustical products were $188.8 million.
2
<PAGE>
AUTOMOTIVE FABRICS. The Company manufactures a wide variety of
bodycloth, including flat-wovens, velvets and knits. The Company also laminates
foam to bodycloth. In 1997, 1996 and 1995, the Company had net sales of
bodycloth of $283.7 million, $243.9 million and $327.5 million, respectively.
The Company's automotive fabrics group also manufactures small volumes of
certain other products, such as headliner fabrics, velvet furniture fabrics,
casket liners and woven fabrics for various commercial and industrial markets.
ACCESSORY FLOOR MATS. The Company produces carpeted automotive accessory
floor mats for North American produced and imported vehicles and for export
to Europe. In 1997, 1996 and 1995, net sales of accessory floor mats were $134.6
million, $83.7 million, and $80.3 million, respectively. This group also
produces residential floor mats.
CONVERTIBLE TOP SYSTEMS. The Company designs and manufactures
convertible top systems through its Dura Convertible Systems subsidiary
("Dura"). In October 1993, Dura began shipping its "Top-in-a-Box" system, in
which it designs and manufactures all aspects of a convertible top, including
the framework, trim set, backlight and power actuating system. Net sales of
convertible top systems in 1997, 1996, and 1995 were $86.6 million, $100.2
million and $58.2 million, respectively.
PLASTIC-BASED INTERIOR SYSTEMS. In January 1996, the Company acquired
C&A Plastics, a manufacturer of automotive door panels, headrests, floor console
systems and instrument panel components. The acquisition of C&A Plastics added a
broad range of molded plastic components to the Company's textile-based
automotive interior trim products. Net sales of plastic interior trim components
in 1997 and 1996 were $294.3 million and $176.4 million, respectively.
COMPETITION
The automotive supply business is highly competitive. The Company has
competitors in respect of each of its automotive products, some of which may
have substantially greater financial and other resources than the Company. The
Company's competitors in molded plastic components include subsidiaries of
certain U.S. automotive and light vehicle manufacturers.
The Company principally competes for new business at the design
stage of new models and upon the redesign of existing models. The Company is
vulnerable to a decrease in demand for the models that generate the most sales
for the Company, a failure to obtain purchase orders for new or redesigned
models and pricing pressure from the major automotive companies.
FACILITIES
At December 27, 1997, the Company had 58 manufacturing, warehouse and
other facilities located in the U.S., Canada, Mexico, the United Kingdom, Spain,
Austria, Germany, Sweden, Belgium, France and Japan aggregating approximately
10.0 million square feet. The majority of these facilities are located in North
Carolina, South Carolina, Ohio and Michigan and in Ontario and Quebec, Canada.
Approximately 90% of the total square footage of these facilities is owned and
the remainder is leased. Many facilities are strategically located to provide
just-in-time ("JIT") inventory delivery to the Company's customers. Capacity at
any plant depends, among other things, on the product being produced, the
processes and equipment used and tooling. This varies periodically, depending on
demand and shifts in production between plants. The Company currently estimates
that its plants generally operate at between 50% and 100% of capacity. The
increasing demand for accessory floormats posed capacity issues during 1997.
However, the addition of capacity in Tennessee in early 1998 is beginning to
alleviate the situation. Except for the foregoing constraints, which the Company
believes are short-term, the Company's capacity utilization is generally in line
with its past experience in similar economic situations, and the Company
believes that its facilities are sufficient to meet existing needs.
FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
The Company's revenues, operating profit and identifiable assets for
the last three fiscal years attributable to the Company's geographic areas and
export sales from the United States to foreign countries are disclosed in Note
21 to the Consolidated Financial Statements.
3
<PAGE>
RAW MATERIALS
Raw materials and other supplies used in the Company's continuing
operations are normally available from a variety of competing suppliers. With
respect to most materials, the loss of a single or even a few suppliers would
not have a material adverse effect on the Company. For a discussion of raw
material price trends, see "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Liquidity and Capital
Resources".
ENVIRONMENTAL MATTERS
See "ITEM 3. LEGAL PROCEEDINGS - Environmental Matters" and "ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - Environmental Matters".
EMPLOYEES
As of December 27, 1997, the Company's continuing operations employed
approximately 15,100 persons on a full-time or full-time equivalent basis.
Approximately 4,600 of such employees are represented by labor unions.
Management believes that the Company's relations with its employees and with the
unions that represent certain of them are generally good.
YEAR 2000 ISSUES
For a discussion of the impact of Year 2000 compliance issues, see
"ITEM 7. MANAGEMENT'S DISCUSSION AND ANLYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - Impact of Year 2000 Compliance."
ITEM 2. PROPERTIES
For information concerning the principal physical properties of the
Company and its various operating divisions, see "ITEM 1. BUSINESS".
ITEM 3. LEGAL PROCEEDINGS
Except as described below, the Company and its subsidiaries are not a
party to any material pending legal proceedings, other than ordinary routine
litigation incidental to their businesses.
ENVIRONMENTAL MATTERS
The Company is legally or contractually responsible or alleged to be
responsible for the investigation and remediation of contamination, or has
received notices that it is a potentially responsible party (a "PRP"), at
various other sites. These sites include, among others, the following: a site
formerly operated by Stamina Mills, Inc., a former subsidiary of a former
indirect subsidiary of the Company, in North Smithfield, Rhode Island; a site
adjacent to a facility formerly operated by Wickes Manufacturing's former Bohn
Heat Transfer division located at Beardstown, Illinois; a site formerly owned
and operated by Wickes Manufacturing's alleged former Daybrook, Ottawa division
located at Bowling Green, Ohio; a site owned and formerly operated by a Company
subsidiary located at Elmira, California; the Reliable Equipment Superfund Site
located at Grand Rapids, Michigan; the Butterworth Landfill Superfund Site
located at Grand Rapids, Michigan; a site owned and formerly operated by Wickes
Manufacturing's former Mechanical Components division located at Mancelona,
Michigan; the former Albert Van Luit plant site owned by a Company subsidiary
located at North Hollywood, California; the Stringfellow Superfund Site located
at Riverside County, California; and certain sites associated with the former
Wickes Engineering business. In addition to the environmental sites and
proceedings listed above, the Company is and has been a party or PRP at other
sites and involved in other proceedings from time to time. The majority of
environmental site costs have been incurred in connection with the North
Smithfield, Rhode Island; Elmira, California; and North Hollywood, California
sites.
In estimating the total future cost of investigation and remediation,
the Company has considered, among other things, the Company's prior experience
in remediating contaminated sites, remediation efforts by other parties, data
released by the 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
4
<PAGE>
for the full costs of investigation and remediation even if additional
parties are found to be responsible under the applicable laws. It is difficult
to estimate the total cost of investigation and remediation due to various
factors including incomplete information regarding particular sites and other
PRPs, uncertainty regarding the extent of environmental problems and the
Company's share, if any, of liability for such problems, the selection of
alternative compliance approaches, the complexity of environmental laws and
regulations and changes in cleanup standards and techniques. When it has been
possible to provide reasonable estimates of the Company's liability with respect
to environmental sites, provisions have been made in accordance with generally
accepted accounting principles. The Company records its best estimate when it
believes it is probable that an environmental liability has been incurred and
the amount of loss can be reasonably estimated. The Company also considers
estimates of certain reasonably possible environmental liabilities in
determining the aggregate amount of environmental reserves. As of December 27,
1997, the Company has established reserves of approximately $46.5 million for
the estimated future costs related to all its known environmental sites. In the
opinion of management, based on the facts presently known to it, the
environmental costs and contingencies will not have a material adverse effect on
the Company's consolidated financial condition or 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.
The Company is seeking insurance coverage for a portion of the defense
costs and liability it has incurred and may incur in connection with the
environmental proceedings described above. Coverage issues have not been
resolved. While the Company has received some payments from certain insurance
carriers, there can be no assurance that additional payments will be received.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
(Pursuant to Instruction G(3) of the General Instructions to Form 10-K, the
following information is included herein as an unnumbered item in lieu of being
included in the Company's definitive Proxy Statement).
The following is a list of the names and ages (as of March 25, 1998) of all the
executive officers of the Company and a description of all positions and offices
with the Company held by each such person and each such person's principal
occupations and employment during the past five years. All executive officers
hold office at the pleasure of the Company's Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Thomas E. Hannah 59 Chief Executive Officer
Dennis E. Hiller 43 President of Automotive Carpet and Acoustics Group
John D. Moose 61 President of Automotive Fabrics Division
Elizabeth R. Philipp 41 Executive Vice President, General Counsel and Secretary
J. Michael Stepp 53 Executive Vice President and Chief Financial Officer
</TABLE>
THOMAS E. HANNAH has been a director of the Company and Chief Executive
Officer of the Company since July 1994. Mr. Hannah was President and Chief
Executive Officer of Collins & Aikman Textile and Wallcoverings Group, a
division of a wholly owned subsidiary of the Company, from November 1991 until
July 1994 and prior to that date was President and Chief Executive Officer of
the Collins & Aikman Textile Group. Mr. Hannah was named an executive officer of
the Company for purposes hereof in April 1993.
DENNIS E. HILLER has been President of the Automotive Carpet and
Acoustics Group since December 1996 and was President of the Automotive Carpet
division from November 1994 to December 1996. Mr. Hiller was President of The
Akro Corporation, an indirect subsidiary of the Company, from 1992 until
November 1994 and Manager, Fabricated Products for the Company prior to that.
Mr. Hiller was named an executive officer of the Company for purposes hereof in
April 1996.
JOHN D. MOOSE has been President of the Automotive Fabrics division
since October 1994 and was President of the North American Auto Group from June
1989 until October 1994. Mr. Moose was named an executive officer of the Company
for purposes hereof in April 1994. Mr. Moose joined a wholly owned subsidiary of
the Company in 1960.
5
<PAGE>
ELIZABETH R. PHILIPP has been Executive Vice President, General Counsel
and Secretary of the Company since April 1994. Ms. Philipp was Vice President,
General Counsel and Secretary of the Company from April 1993 to April 1994 and
Vice President and General Counsel from September 1990 to April 1993.
J. MICHAEL STEPP has been Executive Vice President and Chief Financial
Officer since April 1995. Mr. Stepp was Executive Vice President, Chief
Financial Officer and a Director of Purolator Products Company from December
1992 to January 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock has been traded on the New York Stock
Exchange under the symbol "CKC" since July 7, 1994. At March 23, 1998, there
were 145 holders of record. The following table lists the high and low sales
prices for the Common Stock for the full quarterly periods during the two most
recent fiscal years.
<TABLE>
<CAPTION>
FISCAL 1997 FISCAL 1996
-------------------- ------------------
HIGH LOW HIGH LOW
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter 10-1/2 6 8-1/4 6-1/8
Second Quarter 12-1/8 8-5/8 7-1/8 5-1/2
Third Quarter 11-11/16 10 7 5-7/8
Fourth Quarter 11-3/16 7-15/16 6-5/8 5-3/4
</TABLE>
No dividend or similar distribution with respect to the Common Stock has
been paid by the Company since its incorporation in 1988. Any payment of future
dividends and the amounts thereof will be dependent upon the Company's earnings,
financial requirements and other factors deemed relevant by the Company's Board
of Directors. Certain restrictive covenants contained in the agreements
governing the Company's credit facilities and subordinated notes limit the
Company's ability to make dividend and other payments. See "ITEM 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -
Liquidity and Capital Resources" and Note 11 to the Consolidated Financial
Statements.
6
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------------------------------
DECEMBER 27, DECEMBER 28, JANUARY 27, JANUARY 28, JANUARY 29,
1997 1996 (1) 1996 1995 1994
---- -------- ---- ---- ----
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................. $ 1,629,332 $ 1,053,821 $ 902,017 $ 906,997 $ 689,286
Gross margin.............................. 232,211 188,475 161,925 172,487 120,250
Selling, general and administrative
expenses............................... 118,432 82,699 65,996 68,304 71,397
Management equity plan expense............ - - - - 26,736
Goodwill amortization..................... 6,669 3,872 270 - 1,657
Impairment of long-lived assets(2)........ 22,600 - - - 77,559
Operating income (loss)................... 84,510 101,904 95,659 104,183 (57,099)
Interest expense, net(3).................. 77,581 39,850 22,150 44,440 70,449
Loss on sale of receivables(4)............ 4,700 4,533 6,246 6,124 -
Income (loss) from continuing
operations before income taxes......... 2,907 57,408 67,263 51,361 (132,081)
Income tax expense (benefit).............. 12,998 24,442 (139,959) 10,031 9,580
Income (loss) from continuing
operations............................. (10,091) 32,966 207,222 41,330 (141,661)
Income (loss) from discontinued
operations, including disposals, net of
income taxes........................... 166,047 14,468 (781) 34,416 (136,003)
Income (loss) before extraordinary
items.................................. 155,956 47,434 206,441 75,746 (277,664)
Net income (loss)......................... 155,235 40,824 206,441 (30,782) (277,664)
Income (loss) from continuing operations:(5)
Per basic share........................ (0.15) 0.48 2.96 (1.06) (5.87)
Per diluted share...................... (0.15) 0.47 2.91 (1.06) (5.87)
BALANCE SHEET DATA (AT PERIOD END):
Total assets.............................. $ 1,302,392 $ 1,530,289 $ 991,361 $ 578,900 $ 819,819
Long-term debt, including current
portion................................ 782,677 1,175,594 759,966 557,039 914,938
Redeemable preferred stock................ - - - - 122,368
Common stockholders' deficit.............. (66,850) (194,578) (227,852) (412,622) (702,220)
OTHER DATA (FROM CONTINUING
OPERATIONS):
Capital expenditures...................... $ 56,521 $ 35,000 $ 53,156 $ 56,193 $ 29,266
Depreciation and leasehold
amortization........................... 42,712 24,457 24,146 24,648 23,259
EBITDA (6)................................ 165,950 134,299 124,086 128,831 72,559
</TABLE>
(1) 1996 was a 48-week year.
(2) In 1997, C&A Plastics wrote down fixed assets by $5.1 million and reduced
goodwill by $17.5 million to reflect impairments in the carrying values
of certain assets and goodwill associated with two of its manufacturing
facilities. See Notes to Consolidated Financial Statements.
7
<PAGE>
(3) Excludes amounts related to discontinued operations as follows:
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28, JANUARY 27, JANUARY 28, JANUARY 29,
1997 1996 1996 1995 1994
--------- --------- --------- --------- ----------
<S> <C> <C> <C> <C> <C>
The Mastercraft Group, Floorcoverings,
Airbag and Wallcoverings................ $ 12,539 $ 26,734 $ 26,454 $ 31,243 $ 40,842
Operations discontinued prior to fiscal
1995.................................... - - - - 18,871
--------- --------- --------- --------- ----------
$ 12,539 $ 26,734 $ 26,454 $ 31,243 $ 59,713
========= ========= ========= ========= ==========
</TABLE>
(4) Excludes amounts allocated to discontinued operations totaling $0.6
million, $2.2 million, $2.4 million and $1.5 million in 1997, 1996, 1995
and 1994, respectively.
(5) The earnings per share amounts have been restated to comply with
Statement of Financial Accounting Standards No. 128, "Earnings Per
Share" (SFAS No. 128). For further discussion of earnings per share and
the impact of SFAS 128, see the Notes to Consolidated Financial
Statements.
(6) EBITDA represents earnings before deductions for net interest expense,
loss on sale of receivables, income taxes, depreciation, amortization,
other income and expense, 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.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RECENT DEVELOPMENTS
ACQUISITIONS AND JOINT VENTURES
On August 31, 1997, the Company purchased certain automotive acoustic
assets and assumed certain liabilities in Germany from Perstorp for
approximately $13.6 million.
On October 29, 1997, the Company entered into a joint venture
agreement with Kigass to manufacture plastic trim products in the United
Kingdom. The Company and Kigass each owned 50% of the joint venture. On
February 2, 1998, the Company acquired Kigass for approximately $24.2 million,
subject to post-closing adjustment.
On December 4, 1997, the Company entered into a joint venture with
Courtaulds, a publicly-owned, international textiles and clothing manufacturer
located in the United Kingdom, to manufacture automotive interior fabrics for
European customers. The Company and Courtaulds each have a 50% ownership in the
joint venture.
On December 16, 1997, the Company acquired Perstorp's remaining
interest in the Collins & Aikman/Perstorp automotive acoustics joint venture
with operations in Sweden, Belgium and France. The Company received the
ownership interest in settlement of certain disputed claims by the Company
against Perstorp arising from the Company's December 1996 and August 1997
purchases from Perstorp. The resulting goodwill is being amortized on a straight
line basis over 40 years.
DISCONTINUED OPERATIONS
On November 5, 1997, the Company announced that it entered into an
agreement to sell Wallcoverings to a company sponsored by Blackstone Capital
Partners III Merchant Banking Fund LP, an affiliate of Blackstone Partners. The
purchaser entered into a separate agreement to purchase the wallcovering and
vinyl units of Borden Inc. (the "Borden Business") and stated that it intended
to combine Wallcoverings with the Borden Business. The sale closed on March 13,
1998. The purchase price for Wallcoverings included $71.2 million in cash,
subject to adjustment, and an option to acquire 6.7% of the common stock of the
purchaser (which includes Wallcoverings and the Borden Business) outstanding on
the date of closing. In connection with the transaction, the Company recorded a
loss of approximately $21.1 million, net of income taxes, in the third quarter
of 1997 to adjust the recorded value to the expected proceeds. Accordingly, no
gain or loss was recognized at the sale date. Wallcoverings has been a
discontinued operation since April, 1996.
8
<PAGE>
On July 24, 1997, JPS Automotive completed the sale of Airbag, its
airbag and industrial fabric business, to Safety Components International, Inc.
for a purchase price of approximately $56 million. No gain or loss was recorded
on the sale since the sales price approximated the acquisition fair value of
Airbag. Pursuant to the indenture governing the JPS Automotive Senior Notes, in
connection with such sale, the Company caused JPS Automotive to make an offer to
purchase (up to the amount of the net proceeds from the sale) the JPS Automotive
Senior Notes. During October 1997, the Company caused JPS Automotive to use a
portion of the proceeds remaining from the sale of Airbag to make a distribution
of $35 million to C&A Products, as permitted under the restricted payment
provisions of the JPS Automotive Senior Notes indenture. See "- Liquidity and
Capital Resources". The Company used the proceeds of this distribution to reduce
its long-term debt.
On July 16, 1997, the Company completed its sale of the Mastercraft
Group, a manufacturer of flat woven upholstery fabric, to Joan Fabrics
Corporation, for a purchase price of approximately $310 million, subject to
adjustment. A portion of the net proceeds was used to reduce the Company's
long-term debt. The sale resulted in a net after-tax gain of $97.5 million.
On February 6, 1997, the Company completed the sale of its
Floorcoverings subsidiary for net proceeds of $195.6 million. The net proceeds
were used to pay down debt incurred to finance the Company's automotive
strategy. The sale resulted in a net after-tax gain of $85.3 million.
The Company has accounted for the financial results and net assets of
Wallcoverings, Floorcoverings, the Mastercraft Group and Airbag as discontinued
operations. Accordingly, previously reported financial results for all periods
have been restated to reflect these businesses as discontinued operations. See
Note 15 to the Consolidated Financial Statements for information regarding
discontinued operations.
$400 MILLION SUBORDINATED NOTE OFFERING
On June 10, 1996, the Company's wholly-owned subsidiary, C&A Products,
issued $400 million principal amount of 11-1/2% Senior Subordinated Notes due
2006 (the "Subordinated Notes"), which are guaranteed by the Company. The
Subordinated Notes were sold at a price equal to 100% of their principal amount.
The Company used approximately $356.8 million of the total net proceeds of
$387.0 million to repay $348.2 million principal amount of the outstanding bank
borrowings plus accrued interest on such borrowings and related fees and
expenses, and used the remainder for general corporate purposes.
GENERAL
The Company is a global supplier of automotive interior systems,
including textile and plastic trim, acoustics and convertible top systems. The
Company's net sales in fiscal 1997 were $1,629.3 million compared to $1,053.8
million in fiscal 1996. During 1996, the Company changed it fiscal year end to
the last Saturday in December. Fiscal 1996 was a 48-week period which ended on
December 28, 1996. All prior years refer to the fiscal year of the Company which
ended on the last Saturday of January of the following year. Fiscal 1997 and
1995 were 52-week periods. Capitalized terms that are used in this discussion
and not defined herein have the meanings assigned to such terms in the Notes to
Consolidated Financial Statements.
The automotive supply industry in which the Company competes is
cyclical and is influenced by the level of North American vehicle production.
Management believes the long term trends in the design and manufacture of
automotive products include the increased use of plastic components, the
increased sourcing of interior systems and U.S. automotive manufacturers'
movement to fewer suppliers and to suppliers with engineering and design
capabilities. The Company anticipates the reduction in the supply chain will
result in integration whereby the complete interior of an automobile will be
co-designed and developed with fewer suppliers who will manufacture and deliver
required components. The Company anticipates these capabilities will be
essential to its long term stategic positioning as a key supplier within the
automotive industry and with its customers.
9
<PAGE>
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------------
DECEMBER 27, DECEMBER 28, JANUARY 27,
1997 1996 1996
--------------- --------------- ---------------
(52 WEEKS) (48 WEEKS) (52 WEEKS)
(IN MILLIONS)
<S> <C> <C> <C>
Net sales.......................................................... $ 1,629.3 $ 1,053.8 $ 902.0
Cost of goods sold................................................. 1,397.1 865.3 740.1
Gross margin....................................................... 232.2 188.5 161.9
Selling, general and administrative expenses....................... 118.4 82.7 66.0
Goodwill amortization.............................................. 6.7 3.9 0.3
Impairment of long-lived assets.................................... 22.6 - -
Operating income................................................... 84.5 101.9 95.7
Gross margin percentages........................................... 14.3% 17.9% 18.0%
Operating margin percentages....................................... 5.2% 9.7% 10.6%
EBITDA (1)......................................................... $ 166.0 $ 134.3 $ 124.1
</TABLE>
(1) EBITDA represents earnings before deductions for net interest expense,
loss on sale of receivables, income taxes, depreciation, amortization,
other income and expense 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.
1997 COMPARED TO 1996
As a result of the Company's decision to change its year-end, fiscal
1996 was a 48-week period as compared to fiscal 1997, which was a 52-week
period. Therefore, sales in all product lines and the associated costs and
expenses were impacted by reporting a longer period in 1997. Additional
significant increases in sales and associated costs and expenses resulted from
the Company's 1996 acquisitions. A discussion of the results of operations for
the Company follows:
NET SALES: The Company's net sales increased 54.6% to $1,629.3 million
in 1997, up $575.5 million from 1996. The majority of this increase resulted
from the December 1996 acquisitions of JPS Automotive and Perstorp Components,
which together generated revenues of $422.5 million in fiscal 1997. Sales to
General Motors and Chrysler during 1997 were negatively impacted by United Auto
Workers' strikes in the second quarter. The decrease in net sales attributable
to these strikes is estimated at $17.4 million. Sales to General Motors during
1996 were negatively impacted by the United Auto Workers' strike in March 1996
and the Canadian Auto Workers' strike in October 1996. The decrease in net sales
attributed to these strikes is estimated at $33.5 million. Sales in the
Company's five principal product groups are discussed below.
CARPET AND ACOUSTICS: Molded carpet sales increased 49.6% to $350.2
million in 1997, up $116.1 million from 1996 sales, primarily as a result of the
JPS Automotive acquisition and increased sales to the European automotive
market. Overall, average sales prices declined due to the acquisition of JPS
Automotive and the impact of currency rates on sales in Canada. Sales were also
positively impacted by increased sales to the Dodge Dakota and Durango and
Toyota T100. These increases were partially offset by decreased sales to the
Buick Century/Oldsmobile Ciera, Chrysler Minivan and Ford Mustang.
Luggage compartment trim sales increased 84.0% to $94.6 million, up
$43.2 million from 1996 primarily due to the acquisition of JPS Automotive.
Overall, average sales prices increased due to the acquisition of JPS
Automotive. Sales increases also resulted from higher Toyota Camry volumes and
the full year impact of the Buick Park Avenue and Subaru Legacy Wagon both of
which started production in mid-1996. Sales also increased to the Dodge Dakota
and Durango.
Acoustical products, which was acquired in December 1996 and August
1997, contributed $188.8 million in net sales to the North American and European
automotive markets during 1997.
AUTOMOTIVE FABRICS: Automotive bodycloth sales increased 16.3% to
$283.7 million in 1997, up $39.8 million from 1996. Average sales prices were
relatively unchanged from 1996. An increase in sales resulting from the
acquisition of JPS Automotive was offset by reduced sales for the Chrysler LH,
Minivans and the Ford Contour/Mercury Mystique and Ford Explorer.
10
<PAGE>
ACCESSORY FLOOR MATS: Accessory floor mat sales increased 60.8% to
$134.6 million, up $50.9 million over 1996. The overall increase is attributable
to increased sales to General Motors' minivans, the Oldsmobile Cutlass, Buick
Regal, Pontiac Grand Prix, Toyota Camry, Nissan Maxima and Sentra and new export
programs, offset by decreased sales to the Honda Accord and Civic and Mitsubishi
Galant.
CONVERTIBLE TOP SYSTEMS: Convertible top systems sales decreased 13.5%
to $86.6 million, down $13.6 million from 1996, principally due to decreased
production of the Chrysler Sebring and the Ford Mustang convertibles.
PLASTIC-BASED INTERIOR TRIM SYSTEMS: Plastic interior trim component
sales increased 66.9% to $294.3 million, up $117.9 million from 1996. This
increase in sales relates primarily to the launch during the latter part of 1996
of new programs for which C&A Plastics is the supplier as well as the negative
impact of a General Motors strike on C&A Plastics' sales for the first quarter
of 1996. New programs increasing 1997 sales included the Cadillac
Concours/Deville, Buick Century and Regal, Chevrolet Malibu and the Ford
Econoline. These increases were partially offset by decreases to the Chevrolet
Corsica/Beretta.
OTHER: In addition, the Company had $196.5 million and $158.6 million in
sales of non-automotive products in fiscal 1997 and 1996, respectively, which
are spread among four of the Company's five principal product groups discussed
above.
Approximately 35% of the Company's sales were attributable to products
utilized in vehicles built outside of North America.
The above factors resulted in an increase in the Company's average
revenue per North American-produced vehicle to approximately $89 for 1997 up
from approximately $68 for 1996. The Company's content per build in Europe was
approximately $17 in 1997 including the operations in Sweden, Belgium and France
which were jointly owned in 1997.
GROSS MARGIN: For 1997, gross margin was 14.3%, down from 17.9% in
1996. During the third quarter of 1997, the Company incurred charges of
approximately $57.9 million principally related to C&A Plastics. These charges,
which primarily related to manufacturing inefficiencies experienced by C&A
Plastics related to product launches and record volume for its products,
included asset impairments, reductions in goodwill, provisions for certain
programs operating at a loss, inventory adjustments, certain previously deferred
costs and other provisions. Of the $57.9 million of charges, $34.0 million is
included in cost of goods sold, $22.6 million is discussed below as impairment
of long lived assets and $1.3 million relates to selling costs. Adjusted for
certain of the charges taken by C&A Plastics, gross margin was 15.2%. The
decrease in gross margin is attributable primarily to lower margins in products
sold by JPS Automotive and Perstorp Components, the decrease in sales of higher
margin convertible top systems and manufacturing inefficiencies and product
launch costs at C&A Plastics and Akro.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses increased 44.5% to $125.1 million, up $38.5 million from
1996. This increase is primarily due to the acquisitions of JPS Automotive and
Perstorp Components in December 1996. As a percentage of sales, selling, general
and administrative expenses decreased to 7.7% in 1997 from 8.2% in 1996.
IMPAIRMENT OF LONG LIVED ASSETS: During the third quarter of 1997, C&A
Plastics wrote down fixed assets by $5.1 million to realizable value and reduced
its goodwill by $17.5 million, as a result of an evaluation of the
recoverability of the long lived assets of C&A Plastics that was conducted in
connection with the determination of the charges discussed above.
INTEREST EXPENSE: Interest expense allocated to continuing operations,
net of interest income of $5.7 million in 1997 and $4.0 million in 1996,
increased $37.7 million to $77.6 million in 1997 from $39.9 million in 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 higher interest rates associated with the
$400 million principal amount of the Subordinated Notes issued by C&A Products
in June 1996. The Subordinated Notes are guaranteed by the Company. Total net
interest expense, including amounts allocated to discontinued operations, was
$90.1 million in 1997 and $66.6 million in 1996.
LOSS ON SALE OF RECEIVABLES: The Company sells on a continuous basis,
though its Carcorp subsidiary, interests in a pool of accounts receivable. In
connection with the receivable sales, a loss of $4.7 million, net of amounts
allocated to discontinued operations, was incurred in 1997 compared to a loss of
$4.5 million, net of amounts allocated to discontinued operations, in 1996.
Total loss on sale of receivables, including amounts allocated to discontinued
operations, was $5.3 million in 1997 and $6.7 million in 1996.
11
<PAGE>
OTHER (INCOME) EXPENSE: In 1997, the Company recognized a gain of $1.7
million related to the sale of the Borg Textiles Division of its principal
Canadian subsidiary, and income of $0.9 million related to its investment in the
Collins & Aikman/Perstorp joint venture. These gains were offset by a $1.9
million loss on foreign currency transactions. The Company recognized a $0.1
million loss on foreign currency transactions in 1996. The loss in 1997 is
primarily due to fluctuations in the Canadian dollar.
INCOME TAXES: In 1997, the Company recognized a $13.0 million tax
provision compared to a $24.4 million provision in 1996. The Company's effective
tax rate in 1997 was 447%, compared to 42% in 1996. The higher tax rate in 1997
is primarily due to the inclusion in the income tax calculation of nondeductible
goodwill including the $17.5 million of goodwill written off by C&A Plastics.
DISCONTINUED OPERATIONS: The Company's income from discontinued
operations was $4.3 million in 1997 compared to $14.5 million in 1996. The
decrease results primarily from the sale of Floorcoverings in February 1997 and
the sale of the Mastercraft Group in July 1997.
The sale of Floorcoverings for approximately $195.6 million was
completed in February 1997 and resulted in a gain of $85.3 million net of income
taxes of $53.4 million. The sale of the Mastercraft Group was completed in July
1997 for approximately $310.0 million, resulting in a gain on the sale of
discontinued operations of $97.5 million, net of taxes of $65.0 million. In
connection with the agreement to sell Wallcoverings, the Company recorded a loss
of $21.2 million, net of an income tax benefit of $33.0 million, during the
third quarter of 1997 to adjust the recorded value to the expected proceeds.
EXTRAORDINARY LOSS: In 1997, the Company recognized a loss of $0.7
million, net of income taxes of $0.4 million, in connection with the purchase by
JPS Automotive of $19.4 million principal amount of JPS Automotive Senior Notes
on the open market at prices in excess of carrying values. In 1996, the Company
recognized a non-cash extraordinary charge of $6.6 million, net of income taxes
of $4.7 million, related to the refinancing of its bank facilities. The
refinancing was done in conjunction with the Company's offering of the
Subordinated Notes.
NET INCOME: The combined effect of the foregoing resulted in net income
of $155.2 million in 1997 compared to net income of $40.8 million in 1996.
1996 COMPARED TO 1995
As a result of the Company's decision to change its year-end, fiscal
1996 was a 48-week period as compared to fiscal 1995 which was a 52-week period.
Therefore, sales in all product lines and the associated costs and expenses were
impacted by reporting a shorter period. A discussion of the results of
operations for the Company follows:
NET SALES: The Company's net sales increased 16.8% to $1,053.8 million
in 1996, up $151.8 million over 1995. The majority of this increase resulted
from the January 1996 acquisition of C&A Plastics, which had sales for 1996 of
$176.3 million compared with $10.8 million in fiscal 1995. Increased sales in
three of the Company's products (molded carpet, convertible top systems and
accessory mats) were offset by a decrease in sales of automotive bodycloth. In
addition, sales also increased as a result of the JPS Automotive and Perstorp
Components acquisitions, which generated combined sales of $11.9 million from
December 11, 1996 through year end. Sales in 1996 were also negatively impacted
by the March 1996 and October 1996 strikes at General Motors discussed above.
CARPET AND ACOUSTICS: Molded carpet sales increased 1.0% to $234.1
million, up $2.3 million over 1995. The increase in sales was due to a 1.5%
increase in average selling price as well as increased sales in Europe as a
result of the Company's expansion into that market. The increase in average
selling price is partially attributable to a shift in automotive original
equipment manufacturer ("OEM") production to higher content vehicles, such as
the Chrysler Voyager. For the year, the overall increase in molded carpet sales
was principally related to increased sales to the Chrysler Voyager and T300
Truck and the Chevrolet C/K Truck line. These increases were partially offset by
decreased sales to the Ford Explorer, the Chevrolet Camaro and Lumina and the
Pontiac Grand Prix.
Luggage compartment trim sales decreased 1.9% to $51.4 million, from
$52.4 million in 1995. This decrease in sales was primarily due to the shorter
fiscal year partially offset by a 9.3% increase in average selling price. The
increase in average selling price reflects the OEMs' continued move to one-piece
luggage compartments. During the year, luggage compartment trim sales increased
to the Honda Civic, Pontiac Grand Prix and Toyota Camry. These increases were
offset by decreased sales to the Honda Accord and Ford Explorer.
The acoustics operations acquired on December 11, 1996 contributed $5.6
million in sales.
12
<PAGE>
AUTOMOTIVE FABRICS: Automotive bodycloth sales decreased 25.5% to
$243.9 million in 1996, down $83.6 million from 1995. The decline in sales was
due to a decrease in unit shipments on a comparable basis, which was partially
mitigated by a 3.8% increase in average selling price due primarily to a shift
in product mix. Automotive bodycloth sales were negatively impacted by an
estimated $12.6 million as a result of the General Motors strikes. The overall
decrease in automotive bodycloth for the year was principally related to
decreased sales to the Ford Thunderbird, Mustang, Escort, and F-Series Truck and
the Chevrolet Cavalier. These decreases were partially offset by increased sales
to the Mercury Sable and the Chrysler Grand Cherokee and Breeze.
ACCESSORY FLOOR MATS: Accessory floor mat sales increased 4.3% to $83.7
million, up $3.4 million over 1995. The increase in sales was primarily due to
increased unit volume. For the year the overall increase in accessory mat sales
was principally related to increased sales to the Subaru Legacy, the Chrysler
Caravan/Voyager, the Toyota Camry and the Honda Civic and Accord. These
increases were partially offset by decreased sales to the Chrysler Cirrus and
Chevrolet Camaro.
CONVERTIBLE TOP SYSTEMS: Convertible top systems sales increased 72.2%
to $100.2 million, up $42.0 million from 1995. The increase in net sales
resulted from the increased shipments of the Chrysler Sebring partially offset
by reduced OEM production of the Ford Mustang convertible and the scheduled
discontinuance of the Chrysler LeBaron convertible.
PLASTIC-BASED INTERIOR TRIM SYSTEMS: C&A Plastics, which was acquired
in January 1996, contributed $176.3 million in sales of plastic interior trim
components during fiscal 1996 compared to $10.8 million in fiscal 1995. C&A
Plastics' sales in 1996 were negatively impacted by the General Motors strikes
in the amount of $9.4 million and delays in the launch of certain new programs.
OTHER: In addition, the Company had $158.6 million and $141.0 million
in sales of non-automotive products in fiscal 1996 and 1995, respectively, which
are spread among four of the Company's five principal product groups discussed
above.
These factors resulted in an increase in the Company's average revenue
per North American-produced vehicle to approximately $68 for 1996 from
approximately $54 for 1995.
GROSS MARGIN: For 1996, gross margin was 17.9% of sales, down from
18.0% in 1995. The decrease in gross margin was attributable primarily to the
lower sales to General Motors and lower margins in plastic components partially
offset by the increase in the higher margin convertible top systems sales. In
addition, C&A Plastics reduced its gross profit by $3 million for a one-time
special charge in December 1996 related to a disagreement with a customer over
goods supplied. During 1995, the Company recorded a $2.4 million charge related
to a plant closing and the write-off of certain assets in its molded carpet
operations.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses of $82.7 million in 1996 were $16.8 million higher than
in 1995. The increase resulted primarily from the acquisitions of C&A Plastics
in January 1996 and Amco Convertible Fabrics in October 1995 and increased
general and administrative costs due to expansion in Mexico and Europe. Selling,
general and administrative expenses as a percentage of sales increased to 7.8%
in 1996 from 7.3% in 1995.
INTEREST EXPENSE: Interest expense, allocated to continuing operations,
net of interest income of $4.0 million in 1996 and $1.6 million in 1995,
increased to $39.9 million in 1996 from $22.2 million in 1995. In 1996, net
interest expense, including amounts allocated to discontinued operations
increased to $66.6 million from $48.5 million in 1995. The overall increase in
interest expense was due to the higher amount of overall outstanding
indebtedness primarily related to the $197 million credit facility that was
entered into in connection with the acquisition of C&A Plastics in January 1996
(the "Term Loan B Facility") as well as the higher interest rates associated
with the Subordinated Notes issued in June 1996.
LOSS ON SALE OF RECEIVABLES: Beginning with the recapitalization in
July 1994, the Company has sold on a continuous basis, through its Carcorp
subsidiary, interests in a pool of accounts receivable. In connection with the
receivables sales, a loss of $4.5 million, net of amounts allocated to
discontinued operations, was incurred in 1996 compared to a loss of $6.2
million, net of amounts allocated to discontinued operations, in 1995. Total
loss on sale of receivables, including amounts allocated to discontinued
operations, decreased to $6.7 million in 1996 from $8.7 million in 1995. This
decrease resulted from the shorter fiscal year in 1996 as well as an overall
decrease in the outstanding interest sold under the variable portion of the
accounts receivable facility during 1996. The decrease in the outstanding
interest sold resulted primarily from the use of proceeds from the Subordinated
Notes offering to satisfy a portion of the Company's liquidity needs.
OTHER EXPENSE: In 1996, the Company recognized $.1 million in net
foreign currency transaction losses related to obligations to be settled in
currencies other than the functional currency of its foreign operations.
13
<PAGE>
INCOME TAXES: In 1996, the Company recognized a $24.4 million tax
provision compared with a $140.0 million benefit in 1995. The increase in the
Company's tax expense and reported rate results from the Company's recognition
of certain deferred tax assets in 1995. In 1995, 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 $9.9
million in current foreign, state, franchise and Federal alternative minimum
taxes.
DISCONTINUED OPERATIONS: The Company's income from discontinued
operations was $14.3 million in 1996 compared to a loss of $0.8 million in 1995.
The increase relates primarily to Wallcoverings' results subsequent to April 29,
1996 being charged to the Company's existing discontinued operations reserves.
Additionally, in 1995, Wallcoverings 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 increase
in reported tax rates which was partially offset by improved operating results
for both the Mastercraft Group and Floorcoverings.
EXTRAORDINARY LOSS: During 1996, the Company recognized a non-cash
charge of $6.6 million, net of income taxes of $4.7 million, related to the
refinancing of its bank credit facilities. The refinancing was done in
conjunction with C&A Products' issuance of the Subordinated Notes.
NET INCOME: The combined effect of the foregoing resulted in net income
of $40.8 million in 1996 compared to net income of $206.4 million in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company and its subsidiaries had cash and cash equivalents totaling
$24.0 million and $14.3 million at December 27, 1997 and December 28, 1996,
respectively. The Company had a total of $232.0 million of borrowing
availability under its credit arrangements as of December 27, 1997. The total
was comprised of $217.8 million under the Revolving Facility, approximately
$11.2 million under bank demand lines of credit in Canada and Austria, and $3.0
million available under the Receivables Facility.
As part of a recapitalization in 1994, the Company entered into credit
facilities consisting of (i) a Term Loan Facility, (ii) a Revolving Facility
(together with the Term Loan Facility, the "Credit Agreement Facilities") and
(iii) a bridge receivables facility, which was terminated and replaced with the
Receivables Facility described below. On December 22, 1995, the Company and C&A
Products entered into a $197 million credit facility (the "Term Loan B
Facility") to finance the January 1996 purchase of C&A 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 consisted 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.
On February 6, 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. The Company
completed the sale of the Mastercraft Group in July 1997 for a purchase price of
approximately $310 million, subject to adjustment. The Company utilized a
portion of the net proceeds from the sale to further reduce long-term debt. In
addition, effective July 16, 1997, receivables generated by members of the
Mastercraft Group ceased to be sold in connection with the Receivables Facility,
as discussed below. Also, the Company completed the sale of Airbag in July 1997
for a purchase price of approximately $56 million. Pursuant to the indenture
governing the JPS Automotive Senior Notes, in connection with such sale, the
Company caused JPS Automotive to make an offer to purchase (up to the amount of
the net proceeds from the sale) the JPS Automotive Senior Notes at 100% of their
principal amount. Pursuant to such offer (which expired September 16, 1997), JPS
Automotive repurchased and retired $23 thousand principal amount of JPS
Automotive Senior Notes. In December 1997, the Company repaid $88.5 million
under the Term Loan Facility (including $27 million under the Canadian facility)
and $13.5 million under the Term Loan B Facility. At December 27, 1997, the
Company had $10.0 million outstanding on the Revolving Credit Facility, $17.6
million on the Term Loan Facility and $167.4 million on the Term Loan B
Facility.
14
<PAGE>
The Bank Credit Facilities, which are guaranteed by the Company and its
U.S. subsidiaries (subject to certain exceptions), contain restrictive covenants
including maintenance of EBITDA (i.e. earnings before interest, taxes,
depreciation, amortization and other non-cash charges) and interest coverage
ratios, leverage and liquidity tests and various other restrictive covenants
which are customary for such facilities. Certain of these tests and covenants
were waived for the second, third and fourth quarters of 1997 and the first
quarter of 1998 in connection with the charges incurred at C&A Plastics and the
sales of the Mastercraft Group and Floorcoverings. The Company requires a
modification of these tests and covenants for the remainder of 1998 and beyond
due to these sales and its increasing international presence and expects to
renegotiate them in connection with a broader modification of its existing
credit facilities to conform to the Company's current corporate and financing
structure. The Company expects this modification to occur in the first half of
1998. 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) pay permitted dividends. 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 was 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 in amounts representing certain net proceeds from the sale of
Wallcoverings. 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 and increasing to 2.25 to 1.0 after June 30, 1998) 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, dividends to
stockholders of the Company of the net available proceeds from the sale or other
disposition of Wallcoverings 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 Senior Notes and to allow the Company to use the proceeds from the
sale of Floorcoverings to pay down the Revolving Facility and a portion of the
Receivables Facility. 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 purchased by JPS Automotive in the first
quarter of 1997. During the second quarter of 1997, an additional $19.4 million
principal amount of JPS Automotive Notes were purchased by JPS Automotive on the
open market and retired. No open market purchases were made during the third and
fourth quarters of 1997, although $23 thousand principal amount of JPS
Automotive Senior Notes were repurchased and retired pursuant to an offer to
purchase due to the sale of Airbag. After giving effect to the above, JPS
Automotive had as of December 27, 1997 approximately $91.8 million of
indebtedness outstanding (including a premium of $3.2 million) related to the
JPS Automotive Senior Notes. The Company is operating 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;
15
<PAGE>
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 December 27, 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 Company was entitled to draw upon the Delayed Draw Term Loan until
December 11, 1997. Prior to the JPS Automotive Acquisition, the Company had
purchased in the open market $68.0 million principal amount of JPS Automotive
Senior Notes, which were subsequently retired by JPS Automotive. As of December
27, 1997, $23.8 million had been drawn under the Delayed Draw Term Loan and
there was no further availability. The Delayed Draw Term Loan's security and
restrictive covenants are identical to those in the Bank Credit Facilities.
Certain of these tests and covenants were waived for the second, third and
fourth quarters of 1997 and the first quarter of 1998 in connection with the
charges incurred at C&A Plastics and the sales of the Mastercraft Group and
Floorcoverings. The Company requires a modification of these tests and covenants
for the remainder of 1998 and beyond due to these sales and its increasing
international presence and expects to renegotiate them in connection with a
broader modification of its existing credit facilities to conform to the
Company's current corporate and financing structure. The Company expects this
modification to occur in the first half of 1998.
On March 31, 1995, C&A Products entered, through the Trust formed by
Carcorp, into the Receivables Facility, comprised of (i) term certificates,
which were issued on March 31, 1995, in an aggregate face amount of $110 million
and have a term of five years and (ii) variable funding certificates, which
represent revolving commitments of up to an aggregate of $75 million and have a
term of five years. Carcorp purchases on a revolving basis and transfers to the
Trust virtually all trade receivables generated by C&A Products and certain of
its subsidiaries (the "Sellers"). The certificates represent the right to
receive payments generated by the receivables held by the Trust.
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 December
27, 1997 approximately $3.0 million was available under the variable funding
certificates, none of which was utilized.
In connection with the proposed disposition 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 sale of the
Mastercraft Group, effective July 16, 1997 receivables generated by the
Mastercraft Group ceased to be sold to Carcorp and transferred to the Trust, and
the Company terminated Ack-Ti-Lining, Inc., a member of the Mastercraft Group,
as a Seller of receivables under the Receivables Facility. The collections of
these Mastercraft Group receivables resulted in the redemption of $30 million
face value of term certificates on November 25, 1997. The reduction in the term
certificates was offset by increases in the variable funding certificates
through the addition of C&A Plastics and its subsidiaries as Sellers under the
facility.
16
<PAGE>
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 also has outstanding indebtedness totaling approximately
$49.8 million at its subsidiaries operating in Sweden, Belgium and France
constituting the former operations of the Collins & Aikman/Perstorp Joint
Venture. This debt consists of: (i) a 120 million Swedish krona loan ($15.5
million at December 27, 1997), which bears interest at the Stockholm interbank
offered rate for Krona denominated deposits ("STIBOR") plus 0.75% and is secured
by a pledge of the operating assets of the Swedish operating subsidiary; (ii) a
108 million Swedish krona loan ($13.9 million at December 27, 1997), which bears
interest at STIBOR plus 0.75% and is due in June 1998; (iii) a 100 million
Swedish krona loan ($12.9 million at December 27, 1997), which bears interest at
STIBOR plus 1.0% and was repaid in February 1998; and (iv) a 200 million Belgium
franc loan ($5.5 million at December 27, 1997), which bears interest at the
Brussels interbank offered rate for deposits denominated in Belgian francs
("BIBOR") plus 1% and is secured by a pledge of the operating assets of the
Belgian operating subsidiary. In addition, Perstorp has provided a loan in the
amount of 75 million Belgian francs ($2.0 million at December 27, 1997), to the
Belgian subsidiary, which bears interest at BIBOR plus 1% and is due on August
1, 1998.
The Company has a master equipment lease agreement for a maximum of $50
million of machinery and equipment. At December 27, 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 year ended December 27, 1997, the Company made lease payments relating to
continuing operations of approximately $5.6 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 $5.8 million during
fiscal 1998.
The Company's principal sources of funds are cash generated from
continuing operating activities, borrowings under the Bank Credit Facilities and
the sale of receivables under the Receivables Facility. Net cash provided by the
operating activities of the Company's continuing operations was $98.9 million
for 1997.
The Company's principal uses of funds from operating activities and
borrowings for the next several years are expected to be to fund interest and
principal payments on its indebtedness, net working capital increases and
capital expenditures. At December 27, 1997, the Company had total outstanding
indebtedness of $782.7 million (excluding approximately $22.1 million of
outstanding letters of credit and $.4 million of indebtedness of the
discontinued operations) at an average interest rate of 9.9% per annum. Of the
total outstanding indebtedness, $618.8 million relates to the Bank Credit
Facilities and the Subordinated Notes.
The Company's Board of Directors authorized the expenditure of up to
$10 million in 1998 to repurchase shares of the Company's Common Stock at
management's discretion. The Company believes it has sufficient liquidity under
its existing credit arrangements to effect the repurchase program. The Company
spent $19.7 million to repurchase shares during fiscal 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 December
27, 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 December 27, 1997 was 8.0%. The weighted average interest rate on the
sold interests under the Receivables Facility at December 27, 1997 was 6.75%.
Under the Receivables Facility, the term certificates bear interest at an
average rate equal to one month LIBOR plus .34% per
17
<PAGE>
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 $93.0 million
and $60.0 million for the fiscal years ended December 27, 1997 and December 28,
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
$27.0 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 $27.0 million of notional principal amount. Based upon amounts outstanding at
December 27, 1997, a .5% increase in LIBOR (6.0% at December 27, 1997) would
impact interest costs by approximately $1.1 million annually on the Bank Credit
Facilities and the Delayed Draw Term Loan and $1.0 million annually on the
Receivables Facility. During April 1997, the Company entered into an agreement
to limit its foreign currency exposure related to $45.0 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. At December 27,
1997, the remaining $18.0 million of U.S. dollar denominated borrowings of the
Canadian subsidiary were hedged under this agreement.
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
for 1998, 1999, 2000, 2001 and 2002 are $30.3 million, $28.2 million, $59.9
million, $128.9 million and $80.9 million, respectively. The JPS Automotive
Senior Notes 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 or Wallcoverings, 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 will require quarterly installments of approximately $2.2 million
beginning in July 1999 and ending January 2002. 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. As discussed
above, the Company caused JPS Automotive to make such an offer to purchase JPS
Automotive Senior Notes in connection with the sale of Airbag.
The Company makes capital expenditures on a recurring basis for
replacements and improvements. As of December 27, 1997, the Company's continuing
operations had approximately $28.6 million in outstanding capital expenditure
commitments. The Company currently anticipates that its capital expenditures for
continuing operations including its outstanding commitments in fiscal 1998 will
aggregate approximately $85 million, a portion of which may be financed through
leasing. The Company's capital expenditures in future years will depend upon
demand for the Company's products and changes in technology.
The Company is sensitive to price movements in its raw material supply
base. During fiscal 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.
18
<PAGE>
Since Wallcoverings was classified as a discontinued operation in April
1996, Wallcoverings has continued to experience sales declines. From April 1996
through October 1997, the Company has expended approximately $67.1 million to
fund operations, working capital and capital expenditures and to replace
receivables previously sold to Carcorp. Of these amounts, $21.0 million
represents repayments of intercompany amounts owed to Wallcoverings. From
November 1, 1997 through its disposition, the Company expended approximately
$19.2 million prior to the disposition of Wallcoverings principally to fund
Wallcoverings' operations, working capital and capital expenditure requirements.
Of this amount, $13.2 million was the responsibility of the purchaser of
Wallcoverings under the sales agreement and an estimate, which is subject to
adjustment, was included in the purchase price paid at closing.
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, will be approximately $19 million in fiscal 1998. However,
because the requirements of the Company's discontinued operations are largely a
function of contingencies, it is possible that the actual net cash requirements
of the Company's discontinued operations could differ materially from
management's estimates. Management believes that the Company's cash needs
relating to discontinued operations can be provided by operating activities from
continuing operations and by borrowings under the Bank Credit Facilities.
TAX MATTERS
At December 27, 1997, the Company had outstanding net operating loss
carryforwards ("NOLs") of approximately $119.4 million for Federal income tax
purposes. Substantially all of these NOLs expire over the period from 2008 to
2011. The Company also has unused Federal tax credits of approximately $14.9
million, $2.2 million of which expire during the period 1998 to 2006.
Approximately $17.1 million of the Company's NOLs and $2.2 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. 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 of the equity of the Company and the
amount of "built-in gain" or "built-in loss" in the Company's assets at the time
of the "change in control", which cannot be known at this time.
In fiscal 1995, the Company's continuing business segments generated
substantial operating income, consistent with historical trends, that, when
combined with the post-recapitalization capital structure, resulted in income
for both tax and financial reporting purposes. The proposed disposition of
Wallcoverings that was announced in April 1996 further clarified management's
assessment of the Company's likely future performance. Management considered
these factors as well as the future outlook for its continuing businesses in
concluding that it was more likely than not that previously unrecognized net
deferred tax assets totaling approximately $150 million would be realized.
Similarly, management concluded that it was more likely than not that net
deferred tax assets of $74.6 million and $148.4 million at December 27, 1997 and
December 28, 1996, respectively, will be realized. While continued operating
performance at current levels is sufficient to realize these assets, the
Company's ability to generate future taxable income is dependent on numerous
factors, including general economic conditions, the state of the automotive
industry and other factors beyond management's control. Therefore, there can be
no assurance that the Company will meet its expectation of future taxable
income.
The valuation allowance at December 27, 1997 provides for certain
deferred tax assets that in management's assessment may not be realized due to
tax limitations on the use of such amounts or that relate to tax attributes that
are subject to uncertainty due to the long-term nature of their realization.
In fiscal 1995, the California Franchise Tax Board issued a notice of
tax assessment for approximately $11.8 million related to the treatment of the
sale of certain foreign subsidiaries during 1987. The Company disputes the
assessment and has filed a protest with the Franchise Tax Board. If the
Franchise Tax Board were to maintain its position and such position were to be
upheld in litigation, the Company would also become liable for the payment of
interest which is currently estimated to be $19.6 million. In the opinion of
management, the final determination of any additional tax and interest liability
related to this matter will not have a material adverse effect on the Company's
19
<PAGE>
consolidated financial condition or future results of operations.
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 December 27, 1997, including sites
relating to the acquisition of C&A Plastics, JPS Automotive and Perstorp
Components and excluding sites at which the Company's participation is
anticipated to be de minimis or otherwise insignificant or where the Company is
being indemnified by a third party for the liability, there are 25 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 December 27, 1997, the Company's estimate of its liability
for these 34 sites, which exclude sites related to Wallcoverings, is
approximately $33.8 million. As of December 27, 1997, the Company has
established reserves of approximately $46.5 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.
IMPACT OF YEAR 2000 COMPLIANCE
In order to improve operating performance, the Company has undertaken,
or will undertake in the near future, a number of significant information
systems initiatives. One goal of such systems initiatives is to make the
Company's systems Year 2000 compliant. Based upon a recent assessment, the
Company expects at this time that the cost of the overall information systems
initiatives (which includes the cost of ensuring that its remaining computer
systems are Year 2000 compliant) should not have a material adverse effect on
the Company. The Company has completed a preliminary assessment of each of its
operations and their Year 2000 readiness and believes that appropriate actions
are being taken. The Company currently expects to complete its overall Year 2000
remediation prior to any anticipated impact on its operations. The Company
believes that, with modifications to existing software and conversions to new
systems, the Year 2000 issue should not pose significant operational problems
for its computer systems. However, if such modifications and conversions are not
made, or are not completed timely, the Year 2000 issue could have a material
adverse impact on the operations of the Company. Whether such modifications and
conversions are timely completed may to some extent depend on the availability
of outside consultants as well as establishing reliable telecommunication links
with the Company's operations in Europe and Mexico. Further, while the Company
has initiated communications with a number of its significant suppliers to
determine the extent to which the Company's interface systems are
20
<PAGE>
vulnerable to those third parties' failure to remediate their own Year 2000
issues, and plans to initiate similar communications with the balance of its
major suppliers and major customers in 1998, there is no guarantee that the
systems of other companies on which the Company's systems rely will be timely
converted and would not have an adverse effect on the Company's systems.
CURRENCY RATE EXPOSURE
The primary purpose of the Company's foreign currency hedging
activities is to protect against the volatility associated with foreign currency
purchase transactions. Corporate policy prescribes the range of allowable
hedging activity. The Company primarily utilizes forward exchange contracts and
purchased options with durations of generally less than 12 months.
Gains and losses related to qualifying hedges of foreign currency firm
commitments or anticipated transactions are included in the basis of the
underlying transactions. To the extent that a qualifying hedge is terminated or
ceases to be effective as a hedge, any deferred gains and losses up to that
point continue to be deferred and are included in the basis of the underlying
transaction. All other foreign exchange contracts are marked-to-market on a
current basis and are generally charged to other income (expense). To the extent
that the anticipated transactions are no longer likely to occur, the related
hedges are closed with gains or losses charged to earnings on a current basis.
Based on the Company's overall currency rate exposure at December 27,
1997, including derivative and other foreign currency sensitive instruments, a
near-term change in currency rates in amounts indicated by historical currency
rate movements would not materially affect the consolidated financial position,
results of operations, or cash flows of the Company.
SAFE HARBOR STATEMENT
This Form 10-K 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 Form
10-K 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 Form 10-K 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 preferences, dependence on significant
automotive customers, the level of competition in the automotive supply industry
and Year 2000 compliance issues, 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 the integration of 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 "ITEM 1. BUSINESS" and the above
discussion in this "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" and also see the Company's other filings
with the Securities and Exchange Commission.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Disclosures are not required at this time.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the Consolidated Financial Statements of Collins & Aikman
Corporation and subsidiaries included herein and listed on the Index to
Financial Statements set forth in Item 14 (a) of this Form 10-K report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
21
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 401 of Regulation S-K regarding
executive officers is set forth in Part I hereof under the caption "Executive
Officers of the Registrant" and the information required by Item 401 of
Regulation S-K regarding directors is incorporated herein by reference to that
portion of the Registrant's definitive Proxy Statement to be used in connection
with its 1998 Annual Meeting of Stockholders, which will be filed in final form
with the Commission not later than 120 days after December 27, 1997 (the "Proxy
Statement"), captioned "Election of Directors--Information as to Nominees and
Other Directors". Disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Company's knowledge, in the Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated herein by
reference to that portion of the Proxy Statement captioned "Executive
Compensation".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated herein by
reference to those portions of the Proxy Statement captioned "Voting Securities
and Principal Stockholders", "Security Ownership of Management" and "Election of
Directors--Information as to Nominees and Other Directors".
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated herein by
reference to that portion of the Proxy Statement captioned "Compensation
Committee Interlocks and Insider Participation".
22
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
Report of Independent Public Accountants F-1
Consolidated Statements of Operations for the fiscal years ended December 27, 1997,
December 28, 1996, and January 27, 1996 F-2
Consolidated Balance Sheets at December 27, 1997 and December 28, 1996 F-3
Consolidated Statements of Cash Flows for the fiscal years ended December 27, 1997,
December 28, 1996, and January 27, 1996 F-4
Consolidated Statements of Common Stockholders' Deficit for the fiscal years ended
December 27, 1997, December 28, 1996, and January 27, 1996 F-5
Notes to Consolidated Financial Statements F-6
</TABLE>
(a) (2) FINANCIAL SCHEDULES:
The following financial statement schedules of Collins & Aikman
Corporation for the fiscal years ended December 27, 1997, December 28, 1996, and
January 27, 1996 are filed as part of this Report and should be read in
conjunction with the Consolidated Financial Statements of Collins & Aikman
Corporation.
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
Report of Independent Public Accountants on Schedules....................................................... S-1
Schedule I-Condensed Financial Information of the Registrant................................................ S-2
Schedule II-Valuation and Qualifying Accounts............................................................... S-5
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are omitted
because they are not required, are inapplicable, or the information is included
in the Consolidated Financial Statements or Notes thereto.
(a) (3) EXHIBITS:
Please note that in the following description of exhibits, the title of
any document entered into, or filing made, prior to July 7, 1994 reflects the
name of the entity a party thereto or filing, as the case may be, at such time.
Accordingly, documents and filings described below may refer to Collins & Aikman
Holdings Corporation, Collins & Aikman Group, Inc. or Wickes Companies, Inc., if
such documents and filings were made prior to July 7, 1994.
23
<PAGE>
<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., is hereby incorporated by reference to Exhibit 2.1
of Collins & Aikman Corporation's Report on Form 10-Q for this fiscal quarter ended March 29, 1997.
2.2 - Asset Purchase Agreement dated as of June 30, 1997 by and between JPS Automotive L.P. and Safety Components
International, Inc. is hereby incorporated by reference to Exhibit 2.1 of JPS Automotive L.P.'s and JPS
Automotive Products Corp.'s Current Report on Form 8-K dated July 24, 1997.
2.3 - Closing Agreement dated July 24, 1997 between JPS Automotive L.P., Safety Components International, Inc. and
Safety Components Fabric Technologies, Inc. is hereby incorporated by reference to Exhibit 2.2 of JPS Automotive
L.P.'s and JPS Automotive Products Corp.'s Current Report on Form 8-K dated July 24, 1997.
2.4 - Amended and Restated Acquisition Agreement dated as of November 4, 1997 and amended and restated as of March 9,
1998, among Collins & Aikman Products Co., Imperial Wallcoverings Inc. and BDPI Holdings Corporation.
3.1 - Restated Certificate of Incorporation of Collins & Aikman Corporation is hereby incorporated by reference to
Exhibit 4.1 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended July 30, 1994.
3.2 - By-laws of Collins & Aikman Corporation, as amended, are hereby incorporated by reference to Exhibit 3.2 of
Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended January 27, 1996.
3.3 - Certificate of Elimination of Cumulative Exchangeable Redeemable Preferred Stock of Collins & Aikman Corporation
is hereby incorporated by reference to Exhibit 3.3 of Collins & Aikman Corporation's Report on Form 10-Q for the
fiscal quarter ended October 28, 1995.
4.1 - Specimen Stock Certificate for the Common Stock is hereby incorporated by reference to Exhibit 4.3 of Amendment
No. 3 to Collins & Aikman Holdings Corporation's Registration Statement on Form S-2 (Registration No. 33-53179)
filed June 21, 1994.
4.2 - Indenture, dated as of June 1, 1996, between Collins & Aikman Products Co., Collins & Aikman Corporation and
First Union National Bank of North Carolina, as Trustee, is hereby incorporated by reference to Exhibit 4.2 of
Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended April 27, 1996.
4.3 - First Supplemental Indenture dated as of June 1, 1996, between Collins & Aikman Products Co., Collins & Aikman
Corporation and First Union National Bank of North Carolina, as Trustee, is hereby incorporated by reference to
Exhibit 4.3 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended April 27, 1996.
4.4 - Amended and Restated Credit Agreement, dated as of June 3, 1996, among Collins & Aikman Products Co., as
Borrower, Collins & Aikman Canada Inc., as Canadian Borrower, Collins & Aikman Corporation, as Guarantor, the
lenders named therein, Bank of America N.T.S.A. and NationsBank, N.A., as Managing Agents, and Chemical Bank, as
Administrative Agent, is hereby incorporated by reference to Exhibit 4.1 of Collins & Aikman Corporation's
Current Report on Form 8-K dated June 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.
24
<PAGE>
Exhibit
Number Description
- ------ -----------
4.6 - Waiver, dated as of June 28, 1997, to the Amended and Restated Credit Agreement, dated as of June 3, 1996 among
Collins & Aikman Products Co., Collins & Aikman Canada, Inc., Collins & Aikman Corporation, the Lenders parties
thereto 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 June 28, 1997.
4.7 - Waiver, dated as of October 27, 1997, to the Amended and Restated Credit Agreement, dated as of June 3, 1996
among Collins & Aikman Products Co., Collins & Aikman Canada Inc., Collins & Aikman Corporation, the Lenders
parties thereto, and The Chase Manhattan Bank, as Administrative Agent is hereby incorporated by reference to
Exhibit 4.7 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended September 27, 1997.
4.8 - Waiver, dated as of January 12, 1998, to the Amended and Restated Credit Agreement, dated as of June 3, 1996
among Collins & Aikman Products Co., Collins & Aikman Canada Inc., Collins & Aikman Corporation the Lenders
parties thereto, and The Chase Manhattan Bank, as Administrative Agent.
4.9 - 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.
4.10 - Waiver, dated as of June 28, 1997, to the Credit Agreement, dated as of December 5, 1996, among Collins & Aikman
Products Co., Collins & Aikman Corporation, the Lenders parties thereto and The Chase Manhattan Bank, as
Administrative Agent is hereby incorporated by reference to Exhibit 4.8 of Collins & Aikman Corporation's Report
on Form 10-Q for the fiscal quarter ended June 28, 1997.
4.11 - Waiver, dated as of October 27, 1997, to the Credit Agreement, dated as of December 5, 1996, among Collins &
Aikman Products Co., Collins & Aikman Corporation, the Lenders parties thereto, and The Chase Manhattan Bank, as
Administrative Agent is hereby incorporated by reference to Exhibit 4.10 of Collins & Aikman Corporation's Report
on Form 10-Q for the fiscal quarter ended September 27, 1997.
4.12 Waiver, dated as of January 12, 1998, to the Credit Agreement, dated as of December 5, 1996, among Collins &
Aikman Products Co., Collins & Aikman Corporation, the Lenders parties thereto and The Chase Manhattan Bank, as
Administrative Agent.
4.13 Waiver, dated as of March 27, 1998 to the Amended and Restated Credit Agreement dated as of June 3, 1996 among
Collins & Aikman Products Co., Collins & Aikman Canada Inc., Collins & Aikman Corporation, the Lenders parties
thereto, and The Chase Manhattan Bank, as Administrative Agent.
4.14 Waiver, dated as of March 27, 1998 to the Credit Agreement, dated as of December 5, 1996, among Collins &
Aikman Products Co., Collins & Aikman Corporation, the Lenders parties thereto, and The Chase Manhattan Bank, as
Administrative Agent.
25
<PAGE>
Exhibit
Number Description
- ------ -----------
4.15 Amendment, dated as of March 27, 1997 to the Amended and Restated Credit Agreement, dated as of June 3, 1996,
among Collins & Aikman Products Co., Collins & Aikman Canada Inc., Collins & Aikman Corporation, the Lenders
parties thereto, and The Chase Manhattan Bank, as Administrative Agent.
4.16 Amendment, dated as of March 27, 1997, to the Credit Agreement, dated as of December 5, 1996, among Collins &
Aikman Products Co., Collins & Aikman Corporation, the Lenders parties thereto, and The Chase Manhattan Bank, as
Administrative Agent.
4.17 - 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.
4.18 - 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.*
10.5 - 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.*
10.6 - Third Amendment dated as of August 1, 1997, to the Employment Agreement dated as of July 22, 1992, as amended,
between the Corporation and an executive officer is hereby incorporated by reference to Exhibit 10.35 of Collins
& Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended September 27, 1997.*
10.7 - 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.*
10.8 - 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.*
10.9 - 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.*
10.10 - Letter Agreement dated October 9, 1992 between Collins & Aikman Corporation and an executive officer.*
10.11 - Collins & Aikman Corporation 1997 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 September 27,
1997.*
* Management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to Item 14 (c)
of this report.
26
<PAGE>
Exhibit
Number Description
- ------ -----------
10.12 - Collins & Aikman Corporation Supplemental Retirement Income Plan is hereby incorporated by reference to Exhibit
10.23 of Amendment No. 5 to Collins & Aikman Holdings Corporation's Registration Statement on Form S-2
(Registration No. 33-53179) filed July 6, 1994.*
10.13 - 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.*
10.14 - 1994 Employee Stock Option Plan, as amended through February 7, 1997, is hereby incorporated by reference to
Exhibit 10.12 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended March 29,
1997.*
10.15 - 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.*
10.16 - 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.*
10.17 - Change in control agreement dated March 17, 1998 between Collins & Aikman Corporation and an executive officer.*
10.18 - Change in control agreement dated March 17, 1998 between Collins & Aikman Corporation and an executive officer.*
10.19 - Change in control agreement dated March 17, 1998 between Collins & Aikman Corporation and an executive officer.*
10.20 - Change in control agreement dated March 17, 1998 between Collins & Aikman Corporation and an executive officer.*
10.21 - 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.
10.22 - 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.
10.23 - 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.
10.24 - Pooling Agreement, dated as of March 30, 1995, among Carcorp, Inc., Collins & Aikman Products Co., as Master
Servicer and Chemical Bank, as Trustee, is hereby incorporated by reference to Exhibit 10.20 of Collins & Aikman
Corporation's Report on Form 10-K to the fiscal year ended January 28, 1995.
10.25 - 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.
* Management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to Item 14 (c)
of this report.
27
<PAGE>
Exhibit
Number Description
- ------ -----------
10.26 - 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.
10.27 - 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.
10.28 - 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.
10.29 - 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.
10.30 - 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.
10.31 - 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.
10.32 - 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 Exhibit 2.1 of Collins & Aikman Corporation's
Report on Form 10-Q for the fiscal quarter ended July 27, 1996.
10.33 - 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.
10.34 - 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.
10.35 - 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.
10.36 - 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.
28
<PAGE>
Exhibit
Number Description
- ------ -----------
10.37 - 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.
10.38 - 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.
21 - Subsidiaries of the Registrant.
23 - Consent of Arthur Andersen LLP
27 - Financial Data Schedule.
99 - Voting Agreement between Blackstone Capital Partners L.P. and Wasserstein Perella Partners, L.P. is hereby
incorporated by reference to Exhibit 99 of Amendment No. 4 to Collins & Aikman Holdings Corporation's
Registration Statement on Form S-2 (Registration No. 33-53179) filed June 27, 1994.
(B) REPORTS ON FORM 8-K
During the last quarter of the fiscal year for which this report on Form 10-K
was filed, the Company filed no reports on Form 8-K.
</TABLE>
29
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 27th day of
March, 1998.
COLLINS & AIKMAN CORPORATION
By: /s/ David A. Stockman By: /s/ Randall J. Weisenburger
------------------------------- --------------------------------
DAVID A. STOCKMAN RANDALL J. WEISENBURGER
CO-CHAIRMAN OF THE BOARD OF DIRECTORS CO-CHAIRMAN OF THE BOARD OF DIRECTORS
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------- --------------------------------------- ------------------------------
<S> <C> <C>
/s/ David A. Stockman Co-Chairman of the March 27, 1998
- ----------------------------------
DAVID A. STOCKMAN Board of Directors
/s/ Randall J. Weisenburger Co-Chairman of the March 27, 1998
- ----------------------------------
RANDALL J. WEISENBURGER Board of Directors
/s/ Thomas E. Hannah Director and Chief Executive Officer March 27, 1998
- ----------------------------------- (Principal Executive Officer)
THOMAS E. HANNAH
/s/ J. Michael Stepp Executive Vice President and Chief March 27, 1998
- ----------------------------------- Financial Officer (Principal Financial and
J. MICHAEL STEPP Accounting Officer)
/s/ Robert C. Clark Director March 27, 1998
- ------------------------------------
ROBERT C. CLARK
/s/ George L. Majoros, Jr. Director March 27, 1998
- --------------------------------
GEORGE L. MAJOROS, JR.
/s/ James J. Mossman Director March 27, 1998
- --------------------------------
JAMES J. MOSSMAN
/s/ Warren B. Rudman Director March 27, 1998
- ------------------------------
WARREN B. RUDMAN
/s/ Stephen A. Schwarzman Director March 27, 1998
- ---------------------------
STEPHEN A. SCHWARZMAN
/s/ W. Townsend Ziebold, Jr. Director March 27, 1998
- ------------------------------
W. TOWNSEND ZIEBOLD, JR.
</TABLE>
30
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of Collins & Aikman Corporation:
We have audited the accompanying consolidated balance sheets of Collins
& Aikman Corporation (a Delaware Corporation) and subsidiaries as of December
27, 1997 and December 28, 1996 and the related consolidated statements of
operations, cash flows, and common stockholders' deficit for each of the three
fiscal years in the period ended December 27, 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Collins &
Aikman Corporation and subsidiaries as of December 27, 1997 and December 28,
1996 and the results of their operations and their cash flows for each of the
three fiscal years in the period ended December 27, 1997, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Charlotte, North Carolina
February 9, 1998 (except with
respect to the matters discussed in
Note 26, as to which the date
is March 13, 1998).
F-1
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------
DECEMBER 27, DECEMBER 28, JANUARY 27,
1997 1996 1996
------------- ------------ ------------
(52 WEEKS) (48 WEEKS) (52 WEEKS)
<S> <C> <C> <C>
Net sales .................................................... $ 1,629,332 $ 1,053,821 $ 902,017
------------- ------------ ------------
Cost of goods sold ........................................... 1,397,121 865,346 740,092
Selling, general and administrative expenses ................. 125,101 86,571 66,266
Impairment of long lived assets .............................. 22,600 -- --
1,544,822 951,917 806,358
------------- ------------ ------------
Operating income ............................................. 84,510 101,904 95,659
Interest expense, net of interest income of $5,685, $3,987,
and $1,556 ................................................. 77,581 39,850 22,150
Loss on sale of receivables .................................. 4,700 4,533 6,246
Other (income) expense ....................................... (678) 113 --
------------- ------------ ------------
Income from continuing operations before income taxes ........ 2,907 57,408 67,263
Income tax expense (benefit) ................................. 12,998 24,442 (139,959)
------------- ------------ ------------
Income from continuing operations ............................ (10,091) 32,966 207,222
Income (loss) from discontinued operations, net of income
taxes of $2,835, $9,317 and $844 .......................... 4,306 14,468 (781)
Gain on sale of discontinued operations, net of income
taxes of $85,358 .......................................... 161,741 -- --
------------- ------------ ------------
Income before extraordinary loss ............................. 155,956 47,434 206,441
Extraordinary loss, net of income taxes of $443, $4,709 and $0 (721) (6,610) --
------------- ------------ ------------
Net income ................................................... $ 155,235 $ 40,824 $ 206,441
============= ============ ============
Net income (loss) per basic common share:
Continuing operations .................................... $ (0.15) $ 0.48 $ 2.96
Discontinued operations .................................. 0.06 0.21 (0.01)
Gain on sale of discontinued operations .................. 2.44 -- --
Extraordinary item ....................................... (0.01) (0.10) --
------------- ------------ ------------
Net income ............................................... $ 2.34 $ 0.59 $ 2.95
============= ============ ============
Net income (loss) per diluted common share:
Continuing operations .................................... $ (0.15) $ 0.47 $ 2.91
Discontinued operations .................................. 0.06 0.21 (0.01)
Gain on sale of discontinued operations .................. 2.44 -- --
Extraordinary item ....................................... (0.01) (0.10) --
------------- ------------ ------------
Net income ............................................... $ 2.34 $ 0.58 $ 2.90
============= ============ ============
Average common shares outstanding:
Basic .................................................... 66,337 68,997 70,015
============= ============ ============
Diluted .................................................. 66,337 69,887 71,181
============= ============ ============
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-2
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------------ ------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.................................................... $ 24,004 $ 14,314
Accounts and other receivables, net of allowances of $9,275 and
$10,380.................................................................. 198,125 200,763
Inventories.................................................................. 142,042 121,971
Net assets of discontinued operations........................................ 53,004 263,523
Other........................................................................ 92,116 128,762
------------------ ------------------
Total current assets..................................................... 509,291 729,333
Property, plant and equipment, net.............................................. 388,087 351,282
Deferred tax assets............................................................. 59,293 91,690
Goodwill, net................................................................... 263,007 283,271
Other assets.................................................................... 82,714 74,713
------------------ ------------------
$ 1,302,392 $ 1,530,289
================== ==================
LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
Current Liabilities:
Notes payable................................................................ $ 1,314 $ 1,920
Current maturities of long-term debt......................................... 30,301 37,565
Accounts payable............................................................. 135,468 123,899
Accrued expenses............................................................. 148,201 176,147
------------------ ------------------
Total current liabilities................................................ 315,284 339,531
Long-term debt.................................................................. 752,376 1,138,029
Other, including postretirement benefit obligation.............................. 301,582 247,307
Commitments and contingencies...................................................
Common Stockholders' Deficit:
Common stock (150,000 shares authorized, 70,521 shares issued
and 65,851 shares outstanding at December 27, 1997, 70,521 705 705
shares issued and 67,723 shares outstanding at December 28, 1996)
Other paid-in capital........................................................ 585,890 585,207
Accumulated deficit.......................................................... (576,851) (729,315)
Foreign currency translation adjustments..................................... (29,123) (20,798)
Pension equity adjustment.................................................... (10,700) (10,165)
Treasury stock, at cost (4,670 shares at December 27, 1997 and 2,798
shares at December 28, 1996).............................................. (36,771) (20,212)
------------------ ------------------
Total common stockholders' deficit....................................... (66,850) (194,578)
------------------ ------------------
$ 1,302,392 $ 1,530,289
================== ==================
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-3
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------
DECEMBER 27, DECEMBER 28, JANUARY 27,
1997 1996 1996
---------------- --------------- ----------------
(52 WEEKS) (48 WEEKS) (52 WEEKS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Income (loss) from continuing operations............................... $ (10,091) $ 32,966 $ 207,222
Adjustments to derive cash flow from continuing operating activities:
Impairment of long lived assets..................................... 22,600 - -
Deferred income tax expense (benefit)............................... 4,251 12,228 (149,822)
Depreciation and leasehold amortization............................. 42,712 24,457 24,146
Goodwill amortization............................................... 6,669 3,872 270
Amortization of other assets and liabilities........................ 7,592 7,545 5,995
(Increase) decrease in accounts and other receivables............... 35,819 (22,333) 2,762
(Increase) decrease in inventories.................................. (8,078) (1,006) 5,593
Increase (decrease) in interest and dividends payable............... (520) 7,784 1,353
Increase (decrease) in accounts payable............................. (4,126) (8,734) 2,136
Other, net.......................................................... 2,053 332 (21,548)
---------------- --------------- ----------------
Net cash provided by continuing operating activities.............. 98,881 57,111 78,107
---------------- --------------- ----------------
Cash provided by (used in) Wallcoverings, Floorcoverings, Airbag and
the Mastercraft Group discontinued operations (4,719) (2,631) 24,861
Cash used in other discontinued operations............................. (12,252) (6,160) (22,886)
---------------- --------------- ----------------
Net cash provided by (used in) discontinued operations............ (16,971) (8,791) 1,975
---------------- --------------- ----------------
INVESTING ACTIVITIES
Additions to property, plant and equipment............................. (71,775) (78,454) (93,698)
Sales of property, plant and equipment................................. 5,879 4,119 2,733
Proceeds from sale-leaseback arrangements.............................. - - 32,818
Acquisitions of businesses, net of cash acquired....................... 3,447 (225,256) (190,338)
Net proceeds from disposition of discontinued operations............... 562,100 - -
Other, net ............................................................ (92,534) (10,198) (5,507)
---------------- --------------- ----------------
Net cash provided by (used in) investing activities............... 407,117 (309,789) (253,992)
---------------- --------------- ----------------
FINANCING ACTIVITIES
Issuance of long-term debt............................................. 12,235 453,475 213,658
Proceeds from (reduction of) participating interests in
accounts receivable, net of redemptions............................. (13,000) 7,000 (17,000)
Repayment and defeasance of long-term debt............................. (261,416) (286,406) (18,979)
Net borrowings (repayments) on revolving credit facilities............. (194,000) 127,804 5,000
Purchases of treasury stock............................................ (19,715) (9,594) (11,736)
Other, net ............................................................ (3,441) (17,473) 627
---------------- --------------- ----------------
Net cash provided by (used in) financing activities............... (479,337) 274,806 171,570
---------------- --------------- ----------------
Increase (decrease) in cash and cash equivalents....................... 9,690 13,337 (2,340)
Cash and cash equivalents at beginning of year......................... 14,314 977 3,317
---------------- --------------- ----------------
Cash and cash equivalents at end of year............................... $ 24,004 $ 14,314 $ 977
================ =============== ================
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-4
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' DEFICIT
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOREIGN
OTHER CURRENCY PENSION
COMMON PAID-IN ACCUMULATED TRANSLATION EQUITY TREASURY
STOCK CAPITAL DEFICIT ADJUSTMENTS ADJUSTMENT STOCK TOTAL
--------- ----------- -------------- ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 28, 1995 $ 705 $ 586,281 $ (976,549) $ (13,655) $ (9,404) $ - $ (412,622)
Compensation expense adjustment..... - (567) - - - - (567)
Net income.......................... - - 206,441 - - - 206,441
Purchase of treasury stock (1,542
shares).......................... - - - - - (11,736) (11,736)
Exercise of stock options (95 shares) - (245) (31) - - 658 382
Foreign currency translation
adjustments...................... - - - (10,064) - - (10,064)
Pension equity adjustment........... - - - - 314 - 314
--------- ----------- -------------- ------------ ------------ ------------ -----------
BALANCE AT JANUARY 27, 1996 705 585,469 (770,139) (23,719) (9,090) (11,078) (227,852)
Compensation expense adjustment..... - 60 - - - - 60
Net income.......................... - - 40,824 - - - 40,824
Purchase of treasury stock (1,420
shares).......................... - - - - - (9,594) (9,594)
Exercise of stock options (69 shares) - (322) - - - 460 138
Foreign currency translation
adjustments...................... - - - 2,921 - - 2,921
Pension equity adjustment........... - - - - (1,075) - (1,075)
--------- ----------- -------------- ------------ ------------ ------------ -----------
BALANCE AT DECEMBER 28, 1996 705 585,207 (729,315) (20,798) (10,165) (20,212) (194,578)
Compensation expense adjustment..... - 683 - - - - 683
Net income.......................... - - 155,235 - - - 155,235
Purchase of treasury stock (2,245
shares).......................... - - - - - (19,715) (19,715)
Exercise of stock options (373 shares) - - (2,771) - - 3,156 385
Foreign currency translation
adjustments...................... - - - (8,325) - - (8,325)
Pension equity adjustment........... - - - - (535) - (535)
--------- ----------- -------------- ------------ ------------ ------------ -----------
BALANCE AT DECEMBER 27, 1997 $ 705 $ 585,890 $ (576,851) $ (29,123) $ (10,700) $ (36,771) $ (66,850)
========= =========== ============== ============ ============ ============ ===========
</TABLE>
The Notes to Consolidated Financial Statements are
an integral part of these consolidated financial statements.
F-5
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION:
Collins & Aikman Corporation (the "Company") (formerly Collins & Aikman
Holdings Corporation) is a Delaware corporation. As of December 27, 1997,
Blackstone Capital Partners L.P. ("Blackstone Partners") and Wasserstein Perella
Partners L.P. ("WP Partners") and their respective affiliates collectively own
approximately 82% of the common stock of the Company.
The Company conducts all of its operating activities through its
wholly-owned Collins & Aikman Products Co. ("C&A Products") subsidiary.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION - The consolidated financial statements include
the accounts of the Company and its subsidiaries. All significant intercompany
items have been eliminated in consolidation. Certain prior year items have been
reclassified to conform with the fiscal 1997 presentation and are primarily
related to the reclassification of JPS Automotive L.P.'s ("JPS Automotive")
discontinued airbag and industrial fabric operation ("Airbag"). See Note 15.
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
FISCAL YEAR - Fiscal 1997 was a 52-week year which ended on December
27, 1997. During fiscal 1996, the Company changed its fiscal year to end on the
last Saturday of December. Fiscal 1996 was a 48-week year which ended on
December 28, 1996. Fiscal 1995 was a 52-week year which ended on January 27,
1996. See Note 5.
EARNINGS (LOSS) PER SHARE - Basic earnings per share is based on income
available to common shareholders divided by the weighted average number of
common shares outstanding. Diluted earnings per share is based on income
available to common shareholders divided by the sum of the weighted average
number of common shares outstanding and all diluted potential common shares.
Diluted potential common shares include shares issued upon the assumed exercise
of employee stock options less the number of treasury shares assumed to be
purchased from the proceeds, including applicable compensation expense. See Note
25.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents include all cash
balances and highly liquid investments with an original maturity of three months
or less.
ACCOUNTS AND OTHER RECEIVABLES - Accounts and other receivables consist
primarily of the Company's trade receivables and the retained interest in the
Receivables Facility. See Note 12. The Company has provided an allowance against
uncollectible accounts. In June 1996, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards No. 125, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities" ("SFAS No. 125") which was amended by Statement of Financial
Accounting Standards No. 127, "Amendment to SFAS No. 125". SFAS No. 125, as
amended, establishes standards of accounting for transfers of assets in which
the transferor has some continuing involvement with the assets transferred or
with the transferee. It also clarifies the accounting for arrangements whereby
assets are set aside for the extinguishment of a liability. The Company adopted
the provisions of SFAS No. 125 on December 29, 1996. The Company's Receivables
Facility complies with the provisions of SFAS No. 125, and, accordingly,
adoption of this statement did not have a material impact on the Company's
consolidated financial position or results of operations.
INVENTORIES - Inventories are valued at the lower of cost or market,
but not in excess of net realizable value. Cost is determined on the first-in,
first-out basis.
INSURANCE DEPOSITS - Other current assets as of December 27, 1997 and
December 28, 1996 included $1.2 million and $0.5 million, respectively, which
were on deposit with an insurer to cover a portion of the self-insured portion
of the Company's workers' compensation, automotive and general liability
insurance. The Company's reserves for these claims were determined based upon
actuarial analyses and aggregated $21.3 million and $18.0 million at December
27, 1997 and December 28, 1996, respectively. Of these reserves, $4.7 million
were classified in current liabilities at December 27, 1997 and December 28,
1996.
F-6
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are
stated at cost. Provisions for depreciation are primarily computed on a
straight-line basis over the estimated useful lives of the assets, presently
ranging from 3 to 40 years. Leasehold improvements are amortized over the lesser
of the lease term or the estimated useful lives of the improvements.
LONG LIVED ASSETS - In the fourth quarter of fiscal 1995, the Company
adopted Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of"
("SFAS No. 121"). SFAS No. 121 establishes accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets to be held and used and for long-lived assets and
certain identifiable intangibles to be disposed of. SFAS No. 121 requires that
long-lived assets and certain identifiable intangibles to be held and used by an
entity be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable, and that
certain long-lived assets and identifiable intangibles to be disposed of be
reported at the lower of carrying amount or fair value less cost to sell. The
adoption of SFAS No. 121 did not have a material impact on the Company's
consolidated results of operations. During the third quarter of fiscal 1997,
Collins & Aikman Plastics, Inc. ("C&A Plastics"), a wholly-owned subsidiary of
the Company, incurred charges of $31.3 million for provisions for certain
programs operating at a loss, inventory adjustments, certain previously deferred
costs and other provisions. These charges primarily related to manufacturing
inefficiencies experienced by C&A Plastics related to product launches and
record volume for its products. In addition, the recoverability of C&A Plastics'
assets and goodwill was evaluated and the Company determined that the carrying
values of certain assets and the goodwill allocated to two of its manufacturing
facilities were impaired. Accordingly, the Company wrote down fixed assets by
$5.1 million and the carrying value of goodwill was reduced by $17.5 million.
The adjustments were determined based on management's estimate of the future
cash flows generated by the assets and their values.
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 a period of forty years. Amortization of goodwill
applicable to continuing operations for fiscal years 1997 and 1996 was $6.7
million and $3.9 million, respectively. Accumulated amortization at December 27,
1997 and December 28, 1996 was $10.9 million, and $4.2 million, respectively.
The carrying value of goodwill at an enterprise level is reviewed periodically
based on the non-discounted cash flows and pretax income of the entities
acquired over the remaining amortization periods. At December 27, 1997, the
Company believes the recorded value of goodwill in the amount of $263.0 million
is fully recoverable. See Note 3.
DERIVATIVE FINANCIAL INSTRUMENTS - The Company utilizes derivative
financial instruments to manage risks associated with foreign exchange rate and
interest rate market volatility. Gains and losses on hedges of existing assets
or liabilities are included in the carrying amounts of those assets or
liabilities and are ultimately recognized in income as part of those carrying
amounts. Gains and losses related to qualifying hedges of firm commitments or
anticipated transactions are deferred and are recognized in income or as
adjustments of carrying amounts when the hedged transaction occurs. Gains and
losses on derivative contracts that do not qualify as hedges are recognized
currently in other income (expense). The Company does not hold or issue
derivative financial instruments for trading purposes. See Note 6.
To the extent that a qualifying hedge is terminated or ceases to be
effective as a hedge, any deferred gains and losses up to that point continue to
be deferred and are included in the basis of the underlying transaction. To the
extent that the anticipated transactions are no longer likely to occur, the
related hedges are closed with gains or losses charged to earnings on a current
basis.
FOREIGN CURRENCY - Foreign currency activity is reported in accordance
with Statement of Financial Accounting Standards No. 52, "Foreign Currency
Translation" ("SFAS No. 52"). SFAS No. 52 generally provides that the assets and
liabilities of foreign operations be translated at the current exchange rates as
of the end of the accounting period and that revenues and expenses be translated
using average exchange rates. The resulting translation adjustments arising from
foreign currency translations are accumulated as a separate component of common
stockholders' deficit.
Gains and losses resulting from foreign currency transactions are
recognized in other income (expense). Recorded balances that are denominated in
a currency other than the functional currency are adjusted to reflect the
exchange rate at the balance sheet date.
ENVIRONMENTAL - The Company records its best estimate when it believes
it is probable that an environmental liability has been incurred and the amount
of loss can be reasonably estimated. The Company also considers estimates of
certain reasonably possible environmental liabilities in determining the
aggregate amount of environmental reserves. Accruals for environmental
liabilities are generally included in the consolidated balance sheet as other
non-current
F-7
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
liabilities at undiscounted amounts and exclude claims for recoveries from
insurance or other third parties. Accruals for insurance or other third party
recoveries for environmental liabilities are recorded when it is probable that
the claim will be realized.
In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position 96-1, "Environmental Remediation Liabilities" ("SOP
96-1"). SOP 96-1 provides authoritative guidance on specific accounting issues
related to the recognition, measurement, display and disclosure of environmental
remediation liabilities. SOP 96-1 addresses only those actions undertaken in
response to a threat of litigation or assertion of a claim. It does not address
accounting for pollution control costs with respect to current operations or for
costs of future site restoration or closure required upon cessation of
operations. The Company adopted the provisions of SOP 96-1 on December 29, 1996.
Adoption of this standard did not have a material impact on the Company's
consolidated financial position or results of operations.
NEWLY ISSUED ACCOUNTING STANDARDS - In June 1997, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No.
130 establishes standards for reporting and display of comprehensive income and
its components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. SFAS No. 130 requires that an enterprise
classify items of other comprehensive income by their nature in a financial
statement and display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position. This statement is effective for
fiscal years beginning after December 15, 1997.
In June 1997, the FASB also issued Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS No. 131"). SFAS No. 131 requires that a public business
enterprise report financial and descriptive information about its reportable
operating segments. Generally, financial information is required to be reported
on the basis that is used internally for evaluating segment performance. This
statement also requires that a public business enterprise report descriptive
information about the way that the operating segments were determined and the
products and services provided by the operating segments. SFAS No. 131 is
effective for financial statements for periods beginning after December 15,
1997. The Company has not determined the impact of this statement on its
disclosure requirements.
3. ACQUISITIONS AND JOINT VENTURES:
On December 4, 1997, the Company entered into a joint venture with
Courtaulds Textiles (Holdings) Limited ("Courtaulds") to manufacture automotive
interior fabrics in the United Kingdom. The Company and Courtaulds each own 50%
of the joint venture. The Company's investment in the joint venture of $5.9
million has been included in other assets in the accompanying December 27, 1997
consolidated balance sheet.
On October 29, 1997, the Company entered into a joint venture with
Kigass Automotive Group ("Kigass") to manufacture automotive interior plastic
trim products in the United Kingdom. The Company and Kigass each own 50% of the
joint venture. The Company's investment in the joint venture of $0.7 million has
been included in other assets in the accompanying December 27, 1997 consolidated
balance sheet. On February 2, 1998, the Company acquired Kigass for
approximately $24.2 million, subject to post closing adjustment. See Note 26.
On August 31, 1997, the Company purchased certain automotive acoustics
assets in Germany and assumed certain liabilities from Perstorp AB ("Perstorp")
for approximately $13.6 million.
On December 11, 1996, the Company acquired Perstorp's automotive supply
operations (primarily acoustical products) in North America, the United Kingdom
and Spain (collectively referred to as "Perstorp Components") for $108 million.
In addition, in December 1996, the Company and Perstorp entered into a joint
venture agreement (the "Collins & Aikman/Perstorp Joint Venture") relating to
Perstorp's automotive supply operations (primarily acoustical and plastic
components) in Sweden, Belgium and France. During 1997, the Company finalized
the purchase price for the Perstorp Components acquisition with the seller. In
settlement of disputed claims by the Company against Perstorp arising from the
December 1996 and August 1997 acquisitions, Perstorp transferred its 50%
interest in the Collins & Aikman/Perstorp Joint Venture to the Company on
December 16, 1997. The Company is in the process of finalizing the allocation of
the purchase price for the newly-acquired interest. Goodwill resulting from
these 1996 and 1997 acquisitions is approximately $25.0 million.
F-8
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On December 11, 1996, the Company also acquired JPS Automotive for $220
million, consisting of approximately $195 million of indebtedness of JPS
Automotive and approximately $25 million of cash. The Company also acquired the
minority interest in a JPS Automotive subsidiary for $10 million. The purchase
price allocation related to the JPS Automotive acquisition established certain
reserves related to management's plans to rationalize certain acquired
manufacturing facilities. See Note 16. During 1997, the Company finalized the
purchase price and received approximately $11.2 million from the seller as a
reduction of the purchase price.
On May 1, 1996, the Company acquired the business of BTR Fatati Limited
("Fatati"), a manufacturer and supplier of molded floor carpets and luggage
compartment trim for the European automotive market.
On January 3, 1996, the Company completed the acquisition of C&A
Plastics (formerly known as Manchester Plastics) for a purchase price of
approximately $184.0 million, including $40.4 million of debt extinguished in
connection with the acquisition.
In November 1995, the Company acquired certain assets of Amco
Manufacturing Corporation and its Mexican affiliate, Omca, Inc. (collectively
"Amco"), for approximately $7 million.
The results of operations of the acquired companies are included in the
Company's consolidated statements of operations for the periods in which they
were owned by the Company.
The acquisitions were accounted for under the purchase method of
accounting. The excess of the purchase price for each acquisition over the
estimated fair value of the tangible and identifiable intangible net assets
acquired is being amortized over a period of forty years on a straight line
basis. In determining the amortization period of goodwill assigned to these
automotive industry acquisitions, management assessed the impact of these
acquisitions on the Company's ability to strategically position itself with the
long term trends in the design and manufacture of automotive products. The
trends that management has identified are the increased use of plastic
components, the increased sourcing of interior systems and U.S. automotive
manufacturers' movement to fewer suppliers and to suppliers with engineering and
design capabilities. The Company anticipates the reduction in the supply chain
will result in integration whereby the complete interior of an automobile will
be co-designed and developed with fewer suppliers who will manufacture and
deliver required components. The Company anticipates these capabilities will be
essential to its long term strategic positioning as a key supplier within the
automotive industry and with its customers.
4. PRO FORMA INFORMATION:
Set forth below are unaudited pro forma consolidated results from
continuing operations assuming (i) the fiscal 1997 acquisition of Perstorp's
interest in the Collins & Aikman/Perstorp Joint Venture (see Note 3) had
occurred as of the beginning of fiscal 1997 and 1996, (ii) the 1996 acquisitions
of JPS Automotive and Perstorp Components had occurred as of the beginning of
fiscal 1996, and (iii) the issuance of the Subordinated Notes, the application
of the net proceeds to pay down indebtedness and the amendments to the Bank
Credit Facilities (as defined in Note 11) had occurred as of the beginning of
fiscal 1996 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------
DECEMBER 27, 1997 DECEMBER 28, 1996
-------------------------- ------------------------
(52 WEEKS) (48 WEEKS)
<S> <C> <C>
Net sales.......................................................... $ 1,768,944 $ 1,539,741
Operating income................................................... 89,478 126,870
Interest expense, net.............................................. 80,624 72,406
Loss on the sale of receivables.................................... 4,700 4,533
Income (loss) from continuing operations........................... (8,201) 29,952
Income (loss) from continuing operations per common share:
Per basic common share.......................................... $ (0.12) $ 0.43
Per diluted common share........................................ (0.12) 0.43
Average shares outstanding:
Basic........................................................... 66,337 68,997
Diluted......................................................... 66,337 69,887
</TABLE>
F-9
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
After giving effect to the adjustments above, net income (loss) for
fiscal 1997 and 1996 on a pro forma basis would have been $157.1 million and
$42.4 million, respectively.
Set forth below are unaudited pro forma consolidated results from
continuing operations assuming (i) the fiscal 1996 acquisitions of JPS
Automotive and Perstorp Components (see Note 3) had occurred as of the beginning
of fiscal 1996 and 1995, (ii) the issuance of the Subordinated Notes, the
application of the net proceeds to pay down indebtedness and the amendment to
the Bank Credit Facilities (as defined in Note 11) had occurred as of the
beginning of fiscal 1996 and 1995 and (iii) the fiscal 1995 acquisitions of C&A
Plastics and Amco (see Note 3) had occurred as of the beginning of fiscal 1995
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------
DECEMBER 28, 1996 JANUARY 27, 1996
---------------------------- --------------------------
(48 WEEKS) (52 WEEKS)
<S> <C> <C>
Net sales..................................................... $ 1,414,828 $ 1,554,114
Operating income.............................................. 123,635 136,547
Interest expense, net......................................... 69,088 73,786
Loss on the sale of receivables............................... 4,533 6,246
Income from continuing operations............................. 29,819 196,457
Income from continuing operations:
Per basic common share..................................... $ 0.43 $ 2.81
Per diluted common share................................... 0.43 2.76
Average common shares outstanding:
Basic...................................................... 68,997 70,015
Diluted.................................................... 69,887 71,181
</TABLE>
After giving effect to the adjustments above, net income for fiscal
1996 and 1995 on a pro forma basis would have been $42.1 million and $189.3
million, respectively. The extraordinary loss in fiscal 1996 would have been
eliminated because the pro forma adjustments assume that the transaction that
created the extraordinary loss would have occurred at the beginning of the year.
Set forth below are unaudited pro forma consolidated results from
continuing operations assuming (i) the fiscal 1995 acquisitions of C&A Plastics
and Amco (see Note 3) had occurred as of the beginning of fiscal 1995 and 1994
(ii) the July 1994 common stock offering and recapitalization had occurred as of
the beginning of fiscal 1994 (in thousands, except per share amounts):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------
JANUARY 27, 1996 JANUARY 28, 1995
------------------------ --------------------------
(52 WEEKS) (52 WEEKS)
<S> <C> <C>
Net sales.............................................. $ 1,084,080 $ 1,084,094
Operating income....................................... 99,947 127,365
Interest expense, net.................................. 37,050 39,713
Loss on the sale of receivables........................ 6,246 7,799
Income from continuing operations...................... 196,362 65,729
Income from continuing operations:
Per basic common share............................. $ 2.80 $ 1.26
Per diluted common share........................... 2.76 1.26
Average common shares outstanding:
Basic.............................................. 70,015 52,186
Diluted............................................ 71,181 52,186
</TABLE>
After giving effect to the adjustments above, net income for fiscal 1995
and 1994 would have been $195.6 million and $118.5 million, respectively. The
pro forma adjustments identified above for fiscal 1995 would not impact the
results from discontinued operations as presented. The income from discontinued
operations for fiscal 1994 after giving effect to the pro forma adjustments
would have increased as a result of reduced allocated interest expense. The
extraordinary loss in fiscal 1994 would have been eliminated as a result of the
recapitalization occurring at the beginning of fiscal 1994.
F-10
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
5. CHANGE IN FISCAL YEAR:
During fiscal 1996, the Company changed its fiscal year-end to the last
Saturday in December. As a result of this change, fiscal 1996 was a 48-week
period. The following information presents comparative data for the 52 and
53-week periods ended December 27, 1997 and December 28, 1996 (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
PERIOD ENDED
--------------------------------------------
DECEMBER 28, 1996
DECEMBER 27, 1997 (UNAUDITED)
(52 WEEKS) (53 WEEKS)
----------------- ------------------
<S> <C> <C>
Net sales.......................................................... $ 1,629,332 $ 1,140,027
Operating income................................................... 84,510 108,796
Income (loss) from continuing operations........................... (10,091) 185,008
Income (loss) from discontinued operations......................... 4,306 (6,752)
Gain on sale of discontinued operations............................ 161,741 -
Extraordinary loss................................................. (721) (6,610)
Net income......................................................... 155,235 171,646
Net income (loss) per basic share:
Continuing operations............................................ $ (0.15) $ 2.68
Discontinued operations.......................................... 0.06 (0.10)
Gain on sale of discontinued operations.......................... 2.44 -
Extraordinary loss............................................... (0.01) (0.10)
----------------- ------------------
Net income....................................................... $ 2.34 $ 2.48
================= ==================
Net income (loss) per diluted share:
Continuing operations............................................ $ (0.15) $ 2.65
Discontinued operations.......................................... 0.06 (0.10)
Gain on sale of discontinued operations.......................... 2.44 -
Extraordinary loss............................................... (0.01) (0.10)
----------------- ------------------
Net income....................................................... $ 2.34 $ 2.45
================= ==================
</TABLE>
The following information presents comparative data for the 48 and
47-week periods ended December 28, 1996 and December 23, 1995 (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
PERIOD ENDED
--------------------------------------------
DECEMBER 23, 1995
DECEMBER 28, 1996 (UNAUDITED)
(48 WEEKS) (47 WEEKS)
----------------- ------------------
<S> <C> <C>
Net sales.......................................................... $ 1,053,821 $ 815,811
Operating income................................................... 101,904 88,767
Income from continuing operations.................................. 32,966 55,180
Income from discontinued operations................................ 14,468 20,440
Extraordinary loss................................................. (6,610) -
Net income......................................................... 40,824 75,620
Net income (loss) per basic share:
Continuing operations............................................ $ 0.48 $ 0.79
Discontinued operations.......................................... 0.21 0.29
Extraordinary loss............................................... (0.10) -
----------------- ------------------
Net income....................................................... $ 0.59 $ 1.08
================= ==================
Net income (loss) per diluted share:
Continuing operations............................................ $ 0.47 $ 0.77
Discontinued operations.......................................... 0.21 0.29
Extraordinary loss............................................... (0.10) -
----------------- ------------------
Net income....................................................... $ 0.58 $ 1.06
================= ==================
</TABLE>
F-11
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. INTEREST RATE AND FOREIGN CURRENCY PROTECTION PROGRAMS:
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
an adjustment to interest expense.
The effect of the above interest rate protection agreements on the
operating results of the Company was to decrease interest expense by $0.1
million in fiscal 1997 and increase interest expense by $0.7 million and $0.7
million in fiscal 1996 and 1995, respectively.
The primary purpose of the Company's foreign currency hedging
activities is to protect against the volatility associated with foreign currency
purchase transactions. Corporate policy prescribes the range of allowable
hedging activity. The Company primarily utilizes forward exchange contracts and
purchased options with durations of generally less than 12 months. The Company
has in place forward exchange contracts denominated in multiple currencies which
will mature during fiscal 1998. These contracts, which aggregated a U.S. dollar
equivalent of $13.0 million at December 27, 1997, are to manage the currency
volatility associated with purchase transactions. The fair value of these
contracts approximated the contract value at December 27, 1997.
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 remaining amount comes due in 2002. During fiscal
1997, this agreement resulted in reductions of interest expense and other
expenses of approximately $1.7 million. At December 27, 1997, the remaining $18
million of U.S. dollar denominated borrowings of the Canadian subsidiary were
hedged under this agreement. See Note 11.
7. INVENTORIES:
Inventory balances are summarized below (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------------ ------------------
<S> <C> <C>
Raw materials................................................. $ 72,862 $ 60,438
Work in process............................................... 31,066 26,192
Finished goods................................................ 38,114 35,341
------------------ ------------------
$ 142,042 $ 121,971
================== ==================
</TABLE>
8. OTHER CURRENT ASSETS:
Other current asset balances are summarized below (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------------ ------------------
<S> <C> <C>
Deferred tax assets........................................... $ 33,345 $ 63,911
Prepaid tooling and molds..................................... 32,460 24,319
Other......................................................... 26,311 40,532
------------------ ------------------
$ 92,116 $ 128,762
================== ==================
</TABLE>
F-12
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. PROPERTY, PLANT AND EQUIPMENT, NET:
Property, plant and equipment, net, are summarized below (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------------ ------------------
<S> <C> <C>
Land and improvements......................................... $ 24,177 $ 26,511
Buildings..................................................... 129,507 118,137
Machinery and equipment....................................... 414,136 375,294
Leasehold improvements........................................ 1,830 1,840
Construction in progress...................................... 30,589 19,149
------------------ ------------------
600,239 540,931
Less accumulated depreciation and amortization................ (212,152) (189,649)
------------------ ------------------
$ 388,087 $ 351,282
================== ==================
</TABLE>
Depreciation and leasehold amortization of property, plant and
equipment applicable to continuing operations was $42.7 million, $24.5
million, and $24.1 million for fiscal 1997, 1996 and 1995,
respectively.
10. ACCRUED EXPENSES:
Accrued expenses are summarized below (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------------ ------------------
<S> <C> <C>
Payroll and employee benefits................................. $ 40,181 $ 51,777
Interest...................................................... 15,495 15,023
Other......................................................... 92,525 109,347
------------------ ------------------
$ 148,201 $ 176,147
================== ==================
</TABLE>
11. LONG-TERM DEBT:
Long-term debt is summarized below (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
------------------ ------------------
<S> <C> <C>
Bank Credit Facilities:
Revolving Credit Facility.................................. $ 10,000 $ 204,000
Term Loan Facility......................................... 17,566 190,333
Term Loan B Facility....................................... 167,380 193,250
Delayed Draw Term Loan..................................... 23,845 53,000
Public Indebtedness:
11-1/2% Senior Subordinated Notes.......................... 400,000 400,000
JPS Automotive 11-1/8% Senior Notes........................ 91,843 117,221
Other......................................................... 72,043 17,790
------------------ ------------------
Total debt.................................................... 782,677 1,175,594
Less current maturities....................................... (30,301) (37,565)
------------------ ------------------
$ 752,376 $ 1,138,029
================== ==================
</TABLE>
F-13
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
BANK CREDIT FACILITIES
The Bank Credit Facilities of C&A Products consist of a (i) $250
million Revolving Credit Facility due July 2001, (ii) $195 million Term Loan
Facility due in quarterly installments through July 2002, (iii) Term Loan B
Facility in the original principal amount of $195.8 million due in quarterly
installments through December 2002 and (iv) Delayed Draw Term Loan Facility,
which was entered into in December 1996 and is payable in quarterly installments
through March 2002.
In June 1996, the Company amended and restated the Revolving Credit,
Term Loan, and Term Loan B Facilities in connection with the sale of $400
million in Senior Subordinated Notes (discussed below). The amendment resulted
in the use of proceeds from such sale to repay various outstanding amounts under
the Revolving and Term Loan Facilities. In connection with such amendment and
repayment, the Company recognized a non-cash extraordinary charge of $6.6
million, net of income taxes of $4.7 million.
In December 1996, in connection with the acquisition of JPS Automotive,
the Company amended the Revolving Credit, Term Loan and Term Loan B Facilities
to allow for the existence of the JPS Automotive 11-1/8% Senior Notes ("JPS
Automotive Senior Notes") and to allow the Company to retain proceeds from the
sale of the Company's Floorcoverings subsidiary ("Floorcoverings").
Additionally, in December 1996, the Company entered into a $200 million Delayed
Draw Term Loan Facility to finance or refinance the purchase of JPS Automotive
Senior Notes. As of December 11, 1997, the Company was no longer entitled to
draw additional funds against the Delayed Draw Term Loan Facility. At December
27, 1997, the Delayed Draw Term Loan Facility outstanding balance was $23.8
million, and is due in quarterly installments of approximately $2.2 million
beginning in July 1999 and ending January 2002. The $23.8 million was drawn to
refinance and repurchase a portion of the $68 million of JPS Automotive Senior
notes purchased by the Company prior to its acquisition of JPS Automotive and
subsequently retired by JPS Automotive.
The Company used the majority of the proceeds received from the 1997
dispositions of the discontinued operations (described in Note 15 below) to
repay indebtedness. In conjunction with the February 1997 disposition of
Floorcoverings, the Company applied approximately $100.0 million of the net
proceeds to the Revolving Credit Facility and $30.0 million of such proceeds
against the Receivables Facility (see Note 12). Under the terms of the credit
agreement, the Company was required to apply approximately $78.4 million of the
proceeds received in the Mastercraft Group disposition as repayment of the Term
Loan Facility and the Term Loan B Facility (together the "Term Loan
Facilities"). In December 1997, the Company repaid $88.5 million under the Term
Loan Facility (including $27.0 million on the Canadian facility), $13.5 million
on the Term Loan B Facility and $13.0 million on the Delayed Draw Term Loan
Facility. As a result of these repayments, the Company is not required to make
quarterly installments on the Term Loan Facilities until 1999.
The Bank Credit Facilities, which are guaranteed by the Company and its
U.S. subsidiaries (subject to certain exceptions), contain restrictive covenants
including maintenance of EBITDA (i.e. earnings before interest, taxes,
depreciation, amortization and other non-cash charges) and interest coverage
ratios, leverage and liquidity tests and various other restrictive covenants
which are customary for such facilities. In addition, C&A Products is generally
prohibited from paying dividends or making other distributions to the Company
except for the Company's expenses and for permitted dividends or stock
repurchases and in certain other circumstances. Dividends paid are limited to a
maximum of $12 million per fiscal year unless certain conditions are satisfied
(in which case the Bank Credit Facilities limit dividends paid in any year to a
maximum of 25% of net income for the prior year and amounts representing net
proceeds from the sale of Imperial Wallcoverings Inc. subsidiary
("Wallcoverings"). In addition, the Bank Credit Facilities provide for mandatory
prepayments with certain excess cash flows of the Company and certain other
transactions. After giving effect to waivers obtained for fiscal 1997, the
Company was in compliance with all restrictive covenants at December 27, 1997.
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.
Indebtedness under the Term Loan Facility, Revolving Credit 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
plus a margin (the "ABR Margin") ranging from 0% to .75% or (ii) the offered
rates for Eurodollar deposits ("LIBOR") plus a margin (the "LIBOR Margin")
ranging from 1% to 1.75%. Pursuant to the terms of the Term Loan Facility, the
F-14
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Revolving Credit Facility and the Delayed Draw Term Loan Facility, at December
27, 1997, the ABR Margin is .75% and the LIBOR Margin is 1.75%. 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 plus a margin of 1.25% or
(ii) the offered rates for LIBOR plus a margin of 2.25%. The weighted average
rate of interest on the balances outstanding under the Bank Credit Facilities at
December 27, 1997 was 8.0%.
The Company had a total of $229.0 million of borrowing availability
under the Bank Credit Facilities and other credit lines as of December 27, 1997.
The total is comprised of approximately $217.8 million under the Revolving
Facility, approximately $10.9 million under demand lines of credit in Canada and
Austria and approximately $0.3 million under a C&A Plastics demand line of
credit. At December 27, 1997, the Company had approximately $22.1 million
outstanding in letters of credit.
PUBLIC INDEBTEDNESS:
In June 1996, the Company's wholly-owned subsidiary, C&A Products,
issued at face value $400 million principal amount of 11-1/2% Senior
Subordinated Notes due 2006 (the "Subordinated Notes"), which are guaranteed by
the Company. The Company used approximately $356.8 million of the total net
proceeds of $387.0 million to repay $348.2 million principal amount of
outstanding bank borrowings plus accrued interest on such borrowings and related
fees and expenses and used the remainder for general corporate purposes. 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 unless a certain financial test is satisfied and the aggregate
amount of such payments and investments since the issue date is less than a
specified amount. The prohibition is 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, dividends to stockholders of the Company or stock repurchases in the
amount of the net proceeds from the sale of Wallcoverings and dividends to the
Company to permit it to pay its operating and administrative expenses. The
Subordinated Notes indenture also contains other restrictive covenants
(including, among others, limitations on the incurrence of indebtedness, asset
dispositions and transactions with affiliates) which are customary for such
securities. These covenants are also subject to a number of significant
exceptions.
On the JPS Automotive acquisition date, $180 million principal amount
of JPS Automotive 11-1/8% Senior Notes due 2001 (the "JPS Automotive Senior
Notes") were outstanding. Of this amount, $68 million had been purchased by the
Company in the open market and were subsequently contributed to or repurchased
by JPS Automotive. The remaining $112 million face value of JPS Automotive
Senior Notes were recorded at a market value of $117.2 million on the date of
the 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 as a result of the JPS Automotive acquisition. Approximately
$3.9 million principal amount of JPS Automotive Senior Notes were so put to JPS
Automotive and then repurchased by JPS Automotive on March 10, 1997. In
addition, JPS Automotive repurchased $23 thousand of JPS Automotive Senior notes
in conjunction with an offer to purchase as a result of the 1997 sale of the
Airbag subsidiary. See Note 15. In addition, during 1997, JPS Automotive
purchased $19.4 million of JPS Automotive Senior Notes in the open market. These
notes were subsequently retired. The indenture governing the JPS Automotive
Senior Notes generally prohibits JPS Automotive from making certain 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) unless a certain financial test is satisfied and the aggregate amount
of such payments and investments since the issue date is less than a specified
amount (the "JPS Automotive Restricted Payments Tests"). These conditions were
satisfied immediately following the closing of the JPS Automotive Acquisition.
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 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.
OTHER INDEBTEDNESS:
The Company has outstanding indebtedness totaling approximately $49.8
million at its subsidiaries operating in Sweden, Belgium and France constituting
the former operations of the Collins & Aikman/Perstorp Joint Venture. This debt
consists of: (i) a 120 million Swedish krona loan ($15.5 million at December 27,
1997), which bears interest at the Stockholm interbank offered rate for Krona -
denominated deposits ("STIBOR") plus 0.75% and is secured by a pledge of the
operating assets of the Swedish operating subsidiary; (ii) a 108 million Swedish
krona loan ($13.9 million at December 27, 1997), which bears interest at STIBOR
plus 0.75% and is due in June 1998; (iii) a 100 million Swedish krona loan
($12.9 million at December 27, 1997), which bears interest at
F-15
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
STIBOR plus 1% and was repaid in February 1998; and (iv) a 200 million Belgium
franc loan ($5.5 million at December 27, 1997), which bears interest at the
Brussels interbank offered rate for deposits denominated in Belgian francs
("BIBOR") plus 1% and is secured by a pledge of the operating assets of the
Belgian operating subsidiary. In addition, Perstorp has provided a loan in the
amount of 75 million Belgian francs ($2.0 million at December 27, 1997), to the
Belgian subsidiary, which bears interest at BIBOR plus 1% and is due on August
1, 1998.
At December 27, 1997, the scheduled annual maturities of long-term debt
are as follows (in thousands):
FISCAL YEAR ENDING
December 1998........................................ $ 30,301
December 1999........................................ 28,205
December 2000........................................ 59,877
December 2001........................................ 128,859
December 2002........................................ 80,903
Later Years.......................................... 454,532
---------
$ 782,677
=========
Total interest paid by the Company on all indebtedness was $93.0
million, $60.0 million, and $45.8 million for fiscal 1997, 1996 and 1995,
respectively.
12. RECEIVABLES FACILITY:
During fiscal 1994, C&A Products and certain of its subsidiaries (the
"Sellers") sold approximately $190.0 million of customer trade receivables to
Carcorp, Inc. ("Carcorp"), a wholly-owned, bankruptcy remote subsidiary of C&A
Products which, in turn, sold an undivided senior interest in the receivables
pool for $136.8 million to Chase pursuant to a Receivables Transfer and
Servicing Agreement with Chase, as administrative agent (the "Bridge Receivables
Facility").
On March 31, 1995, C&A Products repaid the Bridge Receivables Facility
and entered, through a 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 the "Sellers. The certificates represent the right to receive
payments generated by the receivables held by the trust.
In connection with the proposed disposition by the Company of
Wallcoverings, as discussed in Note 15, 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 15,
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. In connection with the sale of the Mastercraft Group,
as discussed in Note 15, effective July 16, 1997, receivables generated by
members of the Mastercraft Group ceased to be sold and Ack-Ti-Lining, Inc., a
member of the Mastercraft Group, was terminated as a Seller of receivables under
the Receivables Facility. On November 25, 1997, the Trust redeemed $30.0 million
face value of term certificate as a result of the Trust collecting Mastercraft
receivables which were not replaced with eligible receivables. Effective June 2,
1997, C&A Plastics and its subsidiaries and the domestic operations of Amco were
added as Sellers of receivables under the Receivables Facility.
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 that affect their eligibility
(such as bankruptcy or downgrading below investment grade of the obligor,
delinquency and excessive concentration). Based on these criteria, at December
27, 1997 approximately $75.0 million was available under the variable funding
certificates, of which $72.0 million was utilized. As of December 27, 1997,
$50.0 million of the term certificates remained outstanding.
In connection with the receivables sales, losses of $4.7 million, $4.5
million, and $6.2 million were incurred for continuing operations in fiscal
1997, 1996, and 1995 respectively.
F-16
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As of December 27, 1997 and December 28, 1996, Carcorp's total
receivables pool was $193.4 million and $178.0 million, respectively. As of
December 27, 1997 and December 28, 1996, the holders of term certificates and
variable funding certificates collectively had invested $122.0 million and
$135.0 million, respectively, to purchase an 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 and other receivables
balances as of those dates.
13. LEASE COMMITMENTS:
The Company is lessee under various long-term operating leases for land
and buildings for periods up to forty years. The majority of these leases
contain renewal provisions. In addition, the Company leases transportation,
operating and administrative equipment for periods ranging from one to ten
years.
On September 30, 1994, the Company entered into a master equipment
lease agreement. Pursuant to that agreement, during fiscal 1995 the Company sold
and leased back equipment utilized in its manufacturing operations. During
fiscal 1995, equipment of its continuing operations having aggregate net book
values totaling $18.8 million was removed from the balance sheet and gains
realized on the sale totaling approximately $.1 million, were deferred and are
being recognized as an adjustment to rent expense over the lease terms. Payments
under the lease began in 1995 and the Company made lease payments related to
continuing operations of approximately $5.6 million, $4.0 million and $4.6
million for fiscal 1997, 1996, and 1995, respectively. The Company has a
purchase option on the equipment at the end of the lease term based on the fair
market value of the equipment and has additional options to cause the sale of
some or all of the equipment or to purchase some or all of the equipment at
prices determined under the agreement. The Company has classified the leases as
operating. The Company may sell and lease back additional equipment in the
future under the same master lease agreement, subject to the lessor's approval.
At December 27, 1997, future minimum lease payments under operating
leases for continuing operations are as follows (in thousands):
FISCAL YEAR ENDING
December 1998........................................ $ 18,606
December 1999........................................ 17,427
December 2000........................................ 15,409
December 2001........................................ 13,862
December 2002........................................ 12,374
Later years........................................... 11,892
------------
$ 89,570
============
Rental expense of continuing operations under operating leases was
$15.4 million, $15.2 million, and $13.2 million for fiscal 1997, 1996 and 1995,
respectively. Obligations under capital leases are not significant.
14. EMPLOYEE BENEFIT PLANS:
DEFINED BENEFIT PLANS
Subsidiaries of the Company have defined benefit pension plans covering
substantially all employees who meet eligibility requirements. Plan benefits are
generally based on years of service and employees' compensation during their
years of employment. Funding of retirement costs for these plans complies with
the minimum funding requirements specified by the Employee Retirement Income
Security Act. Assets of the pension plans are invested primarily in equity and
fixed income securities.
F-17
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The net periodic pension cost of continuing operations for fiscal 1997,
1996 and 1995 includes the following components (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28, JANUARY 27,
1997 1996 1996
----------------- ------------------ -----------------
(52 WEEKS) (48 WEEKS) (52 WEEKS)
<S> <C> <C> <C>
Service cost................................................. $ 7,294 $ $4,043 $ 3,341
Interest cost on projected benefit obligation and
service cost.............................................. 9,640 6,905 6,218
Actual gain on assets........................................ (13,027) (11,066) (9,446)
Net amortization and deferral................................ 3,475 4,773 4,922
----------------- ------------------ -----------------
Net periodic pension cost.................................... $ 7,382 $ 4,655 $ 5,035
================= ================== =================
</TABLE>
The following table sets forth the plans' funded status and amounts
recognized in the Company's consolidated balance sheets, excluding
Wallcoverings, Floorcoverings, Airbag, and the Mastercraft Group at December 27,
1997 and December 28, 1996 (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, 1997 DECEMBER 28, 1996
------------------------------------- -------------------------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
----------------- ------------------ ----------------- ------------------
<S> <C> <C> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation..................... $ (31,255) $ (94,945) $ (24,633) $ (81,046)
================= ================== ================= ==================
Accumulated benefit obligation................ $ (32,356) $ (102,789) $ (25,417) $ (89,982)
================= ================== ================= ==================
Projected benefit obligation.................. (34,151) (107,644) (28,068) (95,995)
Plan assets at fair value......................... 39,791 82,259 35,923 73,382
----------------- ------------------ ----------------- ------------------
Projected benefit obligation less than (in
excess of) plan assets....................... 5,640 (25,385) 7,855 (22,613)
Unrecognized net loss (gain)...................... (113) 17,995 (1,401) 13,700
Prior service amounts not yet recognized in
net periodic pension cost....................... 1,649 (2,107) 907 (2,664)
Adjustment required to recognize minimum
liability....................................... - (12,175) - (7,359)
----------------- ------------------ ----------------- ------------------
Pension asset (liability) recognized in the
consolidated balance sheets ................... $ 7,176 $ (21,672) $ 7,361 $ (18,936)
================= ================== ================= ==================
</TABLE>
The weighted average discount rate used in determining the above
actuarial present value of the projected benefit obligation of each of the
Company's plans was 7.0% and 7.6% at December 27, 1997 and December 28, 1996,
respectively. The weighted average expected rate of increase in future
compensation levels is 4.5% and 5.4%, respectively, and the expected long-term
rate of return on plan assets was 9% in fiscal 1997 and 1996.
The provisions of Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions" ("SFAS No. 87") require companies with any
plans that have an unfunded accumulated benefit obligation to recognize an
additional minimum pension liability, an offsetting intangible pension asset
and, in certain situations, a contra-equity balance. In accordance with the
provisions of SFAS No. 87, the consolidated balance sheets at December 27, 1997
and December 28, 1996 include an intangible pension asset of $0.2 million; an
additional minimum pension liability of $10.9 million and $10.4 million,
respectively; and a contra-equity balance of $10.7 million and $10.2 million,
respectively. These amounts relate to all operations of the Company and are
reflected in the Company's consolidated balance sheets.
F-18
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DEFINED CONTRIBUTION PLANS
Subsidiaries of the Company sponsor defined contribution plans covering
employees who meet eligibility requirements. Subsidiary contributions are based
on formulas or are at the Company's discretion as specified in the plan
documents. Contributions related to continuing operations were $3.5 million,
$2.8 million and $2.7 million for fiscal 1997, 1996 and 1995, respectively.
POSTRETIREMENT BENEFIT PLANS
Subsidiaries of the Company have provided postretirement life and
health coverage for certain retirees under plans currently in effect. Many of
the subsidiaries' domestic employees may be eligible for coverage if they reach
retirement age while still employed by the Company.
The net periodic postretirement benefit cost of continuing operations,
determined on the accrual basis, includes the following components (in
thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 27, DECEMBER 28, JANUARY 27,
1997 1996 1996
------------------- ------------------- ---------------
(52 WEEKS) (48 WEEKS) (52 WEEKS)
<S> <C> <C> <C>
Service cost................................................. $ 1,204 $ 769 $ 670
Interest cost on accumulated postretirement
benefit obligation........................................ 4,362 1,756 1,884
Net amortization............................................. (2,345) (934) (1,206)
------------------- ------------------- ---------------
Net periodic postretirement benefit cost..................... $ 3,221 $ 1,591 $ 1,348
=================== =================== ===============
</TABLE>
The following table sets forth the amount of net postretirement benefit
obligation included in the Company's consolidated balance sheets, excluding
Wallcoverings, Floorcoverings, Airbag, and the Mastercraft Group (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
--------------- ----------------
<S> <C> <C>
Retirees....................................................................... $ 41,077 $ 35,217
Fully eligible active plan participants........................................ 11,637 8,814
Other active plan participants................................................. 14,373 10,176
--------------- ----------------
Accumulated postretirement benefit obligation.................................. 67,087 54,207
Unrecognized prior service gain from plan amendments........................... 12,455 13,942
Unrecognized net gain.......................................................... 8,325 11,781
--------------- ----------------
Net postretirement benefit obligation.......................................... $ 87,867 $ 79,930
=============== ================
</TABLE>
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 7% at December 27, 1997 and 7.5% at
December 28, 1996. The Company does not fund its postretirement benefit plans.
For purposes of the December 27, 1997 and December 28, 1996 valuations,
a 9% and a 10%, respectively, annual rate of increase in the per capita cost of
covered health care benefits was assumed; the rate was assumed to decrease 1
percentage point per year to 6% and remain at that level thereafter. The health
care cost trend rate assumption has an impact on the amounts reported; however,
the Company's obligation is limited by certain amended provisions of the various
plans, as further described below. To illustrate, increasing the assumed health
care cost trend rates by 1 percentage point in each year would increase the
accumulated postretirement benefit obligation as of December 27, 1997 by $1.1
million and the aggregate of the service and interest cost components of net
periodic postretirement benefit cost for the year then ended by $0.1 million.
F-19
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Effective April 1, 1994, the Company amended the postretirement benefit
plan which covers substantially all of the eligible current and retired
employees of the Company's continuing operations in the United States. Pursuant
to the amendment, the Company's obligation for future inflation of health care
costs will be limited to 6% per year through March 31, 1998. Subsequent to March
1998, the Company's portion of coverage costs will not be adjusted for inflation
in health care costs.
15. DISCONTINUED OPERATIONS:
On July 24, 1997, JPS Automotive completed the sale of Airbag to Safety
Components International, Inc. for a purchase price of $56.3 million, subject to
adjustment. No gain or loss was recorded on the sale since the sales price
approximated the acquisition fair value of Airbag. Pursuant to the indenture
governing the JPS Automotive Senior Notes, in connection with the sale of
Airbag, the Company caused JPS Automotive to make an offer to purchase (up to
the amount of the net proceeds from the sale) the JPS Automotive Senior Notes at
100% of their principal amount. Pursuant to such offer (which expired September
16, 1997), JPS Automotive repurchased and retired $23 thousand principal amount
of JPS Automotive Senior Notes. During October 1997, the Company caused JPS
Automotive to use a portion of the proceeds remaining from the sale of Airbag to
make a distribution of $35.0 million to C&A Products, as permitted under the
restricted payments provisions of the JPS Automotive Senior Notes indenture.
See Note 11.
On July 16, 1997, the Company completed its sale of the Mastercraft
Group for a purchase price of approximately $310 million, subject to adjustment.
A portion of the net proceeds from the sale was used to reduce the Company's
long-term debt. The sale resulted in a net after-tax gain of $97.5 million.
On February 6, 1997, the Company completed the sale of its
Floorcoverings subsidiary for $195.6 million and the net proceeds were used to
pay down debt incurred to finance the Company's automotive strategy. The sale
resulted in a net after-tax gain of $85.3 million.
On April 9, 1996, the Company announced a proposed plan to spin off
Wallcoverings to the Company's stockholders in the form of a stock dividend. On
October 28, 1997, the Company announced that it received a proposal for the
acquisition of Wallcoverings and was reviewing all its options with respect to
Wallcoverings. On November 5, 1997, the Company announced that it entered into
an agreement to sell Wallcoverings to a company sponsored by an affiliate of
Blackstone Partners. The transaction closed on March 13, 1998. See Note 26.
The Company has accounted for the financial results and net assets of
Airbag, the Mastercraft Group, Floorcoverings and Wallcoverings as discontinued
operations. Accordingly, previously reported financial results for all periods
have been restated to reflect these businesses as discontinued operations.
Net sales of discontinued operations in fiscal 1997, 1996 and 1995 were
$200.4 million, $443.3 million and $594.7 million, respectively. The following
information relates to income (loss) from discontinued operations, net of income
taxes (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-----------------------------------------------------------------
DECEMBER 27, DECEMBER 28, JANUARY 27,
1997 1996 1996
------------------ ------------------- -------------------
(52 WEEKS) (48 WEEKS) (52 WEEKS)
<S> <C> <C> <C>
Mastercraft Group $ 3,401 $ 6,376 $ 8,406
Floorcoverings 518 7,598 14,094
Airbag 387 145 -
Wallcoverings - 349 (23,281)
------------------ ------------------- -------------------
$ 4,306 $ 14,468 $ (781)
================== =================== ===================
</TABLE>
Wallcoverings incurred operating losses subsequent to April 29, 1996
which were charged to the Company's existing discontinued operations reserves.
Wallcoverings' operating losses were in excess of management's forecasted
expectations as of the date of discontinuance but within previously established
accruals. Included in the loss on sale of Wallcoverings discussed above were
expected operating losses to be incurred through the date of disposition.
Included in Wallcoverings' first quarter 1995 loss were $9.9 million in charges
related to the consolidation of distribution activities
F-20
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
and the closure of the segment's Hammond, Indiana facility. See Note 16 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 1995.
Net interest expense of discontinued operations (including amounts
attributable to discontinued operations) was $12.5 million, $26.7 million and
$26.5 million in fiscal 1997, 1996 and 1995, respectively. Interest expense of
$12.6 million, $26.5 million and $25.4 million during fiscal 1997, 1996, and
1995, respectively, was allocated to discontinued operations based upon the
ratio of net book value of discontinued operations (including reserves for loss
on disposal) to consolidated invested capital. In addition, a portion of 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 trust's receivables
pool. For fiscal 1997, 1996 and 1995, amounts allocated to discontinued
operations for the loss on sale of receivables totaled $.6 million, $2.2 million
and $2.4 million, respectively.
In connection with the retained lease liabilities of certain
discontinued operations, the Company has future minimum lease payments and
future sublease rental receipts at December 27, 1997 as follows (in thousands):
<TABLE>
<CAPTION>
Minimum Lease Sublease Rental
Fiscal Years Ending Payments Receipts
- ----------------------------------------------------------- -------------- ---------------
<S> <C> <C>
December 1998............................................... $ 6,551 $ 2,750
December 1999............................................... 5,040 3,078
December 2000............................................... 3,168 3,060
December 2001............................................... 2,500 2,542
December 2002............................................... 2,106 2,321
Later years................................................. 10,512 11,746
-------------- --------------
$ 29,877 $ 25,497
============== ==============
</TABLE>
16. FACILITY CLOSING COSTS:
In January 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 Wallcoverings
segment. The Wallcoverings closings affected approximately 200 employees. The
closure of the three distribution centers was delayed until 1997 due to
construction delays at the new Knoxville distribution center which became
operational in 1997.
In connection with the acquisition of JPS Automotive, the Company
eliminated certain redundant sales and administrative functions, closed one
manufacturing facility in 1997 and finalized plans to exit two additional
manufacturing facilities in 1998. In addition, the Company is in the process of
relocating certain manufacturing processes from a facility acquired from JPS
Automotive to an existing facility. These actions affect approximately 640
employees. Original estimates of the total costs accrued for the shutdown of
facilities and severance and other personnel costs were $2.2 million and $7.0
million, respectively. During 1997, the Company revised these estimates upon
finalization of the plans and increased the accruals for the shutdown of
facilities and severance and other personnel costs to $2.7 million and $7.7
million, respectively.
The components of the reserves for these facilities are as follows (in
thousands):
<TABLE>
<CAPTION>
REMAINING RESERVE
ORIGINAL RESERVE CHANGES IN RESERVE DECEMBER 27,1997
---------------------------- --------------------------- ---------------------------
CONTINUING DISCONTINUED CONTINUING DISCONTINUED CONTINUING DISCONTINUED
OPERATIONS OPERATIONS OPERATIONS OPERATIONS OPERATIONS OPERATIONS
<S> <C> <C> <C> <C> <C>
Anticipated losses associated with the
disposal of property, plant and
equipment............................. $ 385 $ 5,721 $ (385) $ (5,721) $ - -
Anticipated expenditures to close and
dispose of idled facilities.......... 3,259 2,766 (430) (1,902) 2,829 864
Anticipated severance benefits.......... 8,061 1,410 (3,214) (1,285) 4,847 125
--------- ------------- ----------- ------------- ----------- ------------
$ 11,705 $ 9,897 $ (4,029) $ (8,908) $ 7,676 $ 989
========= ============= =========== ============= =========== ============
</TABLE>
F-21
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. STOCK OPTION PLANS:
The 1994 Employee Stock Option Plan ("1994 Plan") was adopted as a
successor to the 1993 Employee Stock Option Plan to facilitate awards to certain
key employees and to consultants. The 1994 Plan authorizes the issuance of up to
2,980,534 shares of common stock and provides that no options may be granted
after 10 years from the effective date of this plan. Options vest, in each case,
as specified by the Company's compensation committee, generally over three years
after issuance. At December 27, 1997, options representing 1,897,379 shares of
common stock were available for grants.
Effective February 23, 1995, the Company adopted the 1994 Directors
Stock Option Plan which provides for the issuance of options to acquire a
maximum of 600,000 shares of common stock to directors who are not part of
management and are not affiliated with a major stockholder. As of December 27,
1997, 70,000 options had been granted.
Stock option activity under the plans is as follows:
<TABLE>
<CAPTION>
DECEMBER 27, 1997 DECEMBER 28, 1996 JANUARY 27, 1996
-------------------------- -------------------------- --------------------------
WEIGHTED WEIGHTED WEIGHTED
NUMBER AVERAGE NUMBER OF AVERAGE NUMBER AVERAGE
OF EXERCISE SHARES EXERCISE OF EXERCISE
SHARES PRICE PRICE SHARES PRICE
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding beginning of year............ 3,287,106 $ 5.25 3,298,036 $ 5.12 3,096,802 $ 4.64
Awarded.................................. 584,000 8.33 145,000 6.71 431,500 8.21
Cancelled................................ (83,127) 6.46 (19,492) 4.10 (135,003) 4.79
Exercised................................ (370,210) 4.70 (69,022) 3.99 (95,263) 3.99
Surrendered.............................. (685,574) 5.57 (67,416) 3.99 -
------------ ------------ ------------
Outstanding at end of year............... 2,732,195 $ 5.86 3,287,106 $ 5.25 3,298,036 $ 5.12
============ ============ =============
</TABLE>
At December 27, 1997, December 28, 1996 and January 27, 1996,
1,858,685, 2,709,094 and 1,251,887, respectively, of the outstanding options
were exercisable at a weighted average price of $4.78, $4.74 and $4.66,
respectively.
Of the total options outstanding at December 27, 1997, 1,508,324 have
an exercise price in the range of $3.99 and $4.43 with a weighted average
exercise price of $4.00 and a weighted average contractual life of 6 years.
These options are currently exercisable at a weighted average exercise price of
$4.00. The remaining 1,223,871 of total options outstanding at December 27, 1997
have an exercise price in the range of $6.00 and $11.75 with a weighted average
exercise price of $8.16 and a weighted average contractual life of 8 years;
350,361 of these options are currently exercisable at a weighted average
exercise price of $8.15. Upon a change of control, as defined, all of the above
options become fully vested and exercisable.
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS No. 123") was issued. SFAS No.
123 encourages companies to adopt the fair value method for compensation expense
recognition related to employee stock options. Existing accounting requirements
of Accounting Principles Board Opinion No. 25 ("APB No. 25") use the intrinsic
value method in determining compensation expense which represents the excess of
the market price of the stock over the exercise price on the measurement date.
The Company elected to continue to utilize the accounting provisions of APB No.
25 rules for stock options, and is required to provide pro forma disclosures of
what net income and earnings per share would have been had the Company adopted
the new fair value method for recognition purposes. The following information is
presented as if the Company had adopted SFAS No. 123 and restated its results
(in thousands, except per share amounts):
F-22
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------------
DECEMBER 27, DECEMBER 28, JANUARY 27,
1997 1996 1996
--------------- --------------- --------------
(52 WEEKS) (48 WEEKS) (52 WEEKS)
<S> <C> <C> <C>
Net income:
As reported.................................... $ 155,235 $ 40,824 $ 206,441
Pro forma...................................... 154,525 40,261 206,148
Basic EPS:
As reported.................................... $ 2.34 $ 0.59 $ 2.95
Pro forma...................................... 2.33 0.58 2.94
Diluted EPS:
As reported.................................... $ 2.34 $ 0.58 $ 2.90
Pro forma...................................... 2.33 0.58 2.90
</TABLE>
For the above information, the fair value of each option grant was
estimated on the date of grant using the Black-Scholes option pricing model with
the following assumptions used for grants in fiscal 1997, 1996 and 1995:
expected volatility of 40%, expected lives of 10 years which equals the lives of
the grants, the risk free interest rate ranged from 5.94% to 7.82% and a zero
expected dividend rate. The weighted average grant-date fair value of an option
granted during fiscal 1997, 1996 and 1995 was $5.41, $4.32 and $5.27,
respectively.
Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 28, 1995, the above pro forma amounts may not
be representative of the compensation costs to be expected in future years.
18. INCOME TAXES:
The provisions for income taxes applicable to continuing operations for
fiscal 1997, 1996 and 1995 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------
DECEMBER 27, DECEMBER 28, JANUARY 27,
1997 1996 1996
------------------- ------------------ ----------------
(52 WEEKS) (48 WEEKS) (52 WEEKS)
<S> <C> <C> <C>
Current
Federal.......................................... $ - $ 250 $ 1,330
State............................................ 2,600 2,006 2,293
Foreign.......................................... 6,147 9,958 6,240
------------------- ------------------ ----------------
8,747 12,214 9,863
Deferred
Federal.......................................... 4,833 9,871 (140,705)
State............................................ 882 1,811 (9,050)
Foreign.......................................... (1,464) 546 (67)
------------------- ------------------ ----------------
4,251 12,228 (149,822)
------------------- ------------------ ----------------
Income tax expense (benefit)........................ $ 12,998 $ 24,442 $ (139,959)
=================== ================== ================
</TABLE>
Domestic and foreign components of income from continuing operations
before income taxes are summarized as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------
DECEMBER 27, DECEMBER 28, JANUARY 27,
1997 1996 1996
------------------- ------------------ ----------------
(52 WEEKS) (48 WEEKS) (52 WEEKS)
<S> <C> <C> <C>
Domestic......................................... $ (4,545) $ 25,905 $ 53,545
Foreign.......................................... 7,452 31,503 13,718
------------------- ------------------ ----------------
$ 2,907 $ 57,408 $ 67,263
=================== ================== ================
</TABLE>
F-23
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation between income taxes computed at the statutory Federal
rate of 35% and the provisions for income taxes applicable to continuing
operations is as follows (in thousands):
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------------------
DECEMBER 27, DECEMBER 28, JANUARY 27,
1997 1996 1996
------------------ ------------------ -----------------
(52 WEEKS) (48 WEEKS) (52 WEEKS)
<S> <C> <C> <C>
Amount at statutory Federal rate...................... $ 1,017 $ 20,093 $ 23,542
State taxes, net of Federal income tax................ 2,263 2,481 1,490
Tax differential on foreign earnings.................. 123 (698) 925
Foreign losses with no tax benefit.................... 1,436 176 447
Foreign dividend income............................... - 410 800
Amortization and write-down of goodwill............... 7,770 1,243 95
Other................................................. 389 737 1,250
Change in valuation allowance......................... - - (168,508)
------------------ ------------------ -----------------
Income tax expense (benefit).......................... $ 12,998 $ 24,442 $ (139,959)
================== ================== =================
</TABLE>
Deferred income taxes are provided for the temporary differences
between the financial reporting and tax basis of the Company's assets and
liabilities. The components of the net deferred tax assets as of December 27,
1997 and December 28, 1996 were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
--------------- ---------------
<S> <C> <C>
Deferred tax assets:
Employee benefits, including postretirement benefits..................... $ 35,041 $ 54,512
Net operating loss carryforwards......................................... 41,796 101,099
Investment tax credit carryforwards...................................... 2,200 4,200
Alternative minimum tax credits.......................................... 12,650 8,500
Other liabilities and reserves........................................... 81,018 71,125
Valuation allowance...................................................... (40,586) (44,277)
--------------- ----------------
Total deferred tax assets........................................... 132,119 195,159
Deferred tax liabilities:
Property, plant and equipment............................................ (50,245) (39,146)
Undistributed earnings of foreign subsidiaries........................... (7,226) (7,600)
--------------- ---------------
Total deferred tax liabilities...................................... (57,471) (46,746)
--------------- ---------------
Net deferred tax asset .................................................... $ 74,648 $ 148,413
=============== ================
</TABLE>
The valuation allowance at December 27, 1997 and December 28, 1996
provides for certain deferred tax assets that in management's assessment may not
be realized due to tax limitations on the use of such amounts or that relate to
tax attributes that are subject to uncertainty due to the long-term nature of
their realization.
During fiscal 1997 the valuation allowance decreased $3.7 million from
fiscal 1996. This decrease resulted primarily from the expiration of tax credits
and restricted net operating loss carryforwards. During fiscal 1996, the
valuation allowance decreased $7.3 million from fiscal 1995.
The above amounts have been classified in the consolidated balance
sheets as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
1997 1996
--------------- --------------------
<S> <C> <C>
Deferred tax assets (liabilities):
Current, included in other current assets......................... $ 33,345 $ 63,911
Current foreign, included in accrued expenses..................... (395) -
Noncurrent........................................................ 59,293 91,690
Noncurrent foreign, included in other noncurrent
liabilities..................................................... (17,595) (7,188)
---------------- --------------------
$ 74,648 $ 148,413
================ ====================
</TABLE>
F-24
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In fiscal 1995, the Company's continuing business segments generated
substantial operating income, consistent with historical trends, that, when
combined with the post-recapitalization capital structure, resulted in income
for both tax and financial reporting purposes. The then proposed spin-off of
Wallcoverings that was announced in April 1996 further clarified management's
assessment of the Company's likely future performance. Management considered
these factors as well as the future outlook for its continuing businesses in
concluding that it is more likely than not that previously unrecognized net
deferred tax assets totaling approximately $150 million would be realized.
Similarly, management concluded that it was more likely than not that net
deferred tax assets of $74.6 million and $148.4 million at December 27, 1997 and
December 28, 1996, respectively, will be realized. While continued operating
performance at current levels is sufficient to realize these assets, the
Company's ability to generate future taxable income is dependent on numerous
factors, including general economic conditions, the state of the automotive
industry and other factors beyond management's control. Therefore, there can be
no assurance that the Company will meet its expectation of future taxable
income.
Deferred income taxes and withholding taxes have been provided on
earnings of the Company's foreign subsidiaries to the extent it is anticipated
that the earnings will be remitted in the future as dividends. Deferred income
taxes and withholding taxes have not been provided on the remaining
undistributed earnings of foreign subsidiaries as such amounts are deemed to be
permanently reinvested. The cumulative undistributed earnings on which the
Company has not provided deferred income taxes and withholding taxes are not
significant.
At December 27, 1997, the Company had the following tax attributes
carryforwards available for Federal income tax purposes (in thousands):
<TABLE>
<CAPTION>
EXPIRATION
AMOUNT DATES
-------------- --------------
<S> <C> <C>
Net operating losses - regular tax
Preacquisition, subject to limitations................................. $ 17,124 2000-2009
Postacquisition, unrestricted.......................................... 102,294 2008-2011
--------------
$ 119,418
==============
Net operating losses - alternative minimum tax
Preacquisition, subject to limitations................................. $ 14,948 2000-2009
Postacquisition, unrestricted.......................................... 35,836 2008-2011
--------------
$ 50,784
==============
Investment tax and other credits
Preacquisition, subject to limitations................................. $ 2,200 1998-2006
==============
Alternative minimum tax credits........................................ $ 12,650
==============
</TABLE>
The above amounts include the tax attributes of Wallcoverings. In
addition, the Company's net deferred tax assets at December 27, 1997 include
amounts related to Wallcoverings. At December 28, 1996, the amounts attributable
to Wallcoverings were excluded since they would not have been available to the
Company under the proposed spin-off plan contemplated at that time.
Approximately $17.1 million of the Company's NOLs and $2.2 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. Future sales of common stock by the Company
or its principal stockholders, or changes in the composition of its principal
stockholders, could constitute a "change in control" that would result in annual
limitations on the Company's use of its NOLs and unused tax credits. Management
cannot predict whether such a "change in control" will occur. If such a "change
in control" were to occur, the resulting annual limitations on the use of NOLs
and tax credits would depend on the value of the equity of the Company and the
amount of "built-in gain" or "built-in loss" in the Company's assets at the time
of the "change in control", which cannot be known at this time.
In fiscal 1995, the California Franchise Tax Board issued a notice of
tax assessment for approximately $11.8 million related to the treatment of the
sale of certain foreign subsidiaries during 1987. The Company disputes the
assessment and has filed a protest with the Franchise Tax Board. If the
Franchise Tax Board were to maintain its position and such position were to be
upheld in litigation, the Company would also become liable for the payment of
interest which is currently estimated to be $19.6 million. In the opinion of
management, the final determination of any
F-25
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
additional tax and interest liability related to this matter will not have a
material adverse effect on the Company's consolidated financial condition or
results of future operations.
Income taxes paid, net of refunds, were $40.4 million, $10.4 million,
and $13.5 million for fiscal 1997, 1996 and 1995, respectively.
19. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair values of the Company's continuing operations'
financial instruments are summarized as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, 1997 DECEMBER 28, 1996
-------------------------------- -------------------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
Long-term investments........................ $ 3,125 $ 3,125 $ 3,255 $ 3,255
Interest rate protection agreements.......... - 296 - -
Long-term debt............................... 782,675 838,975 1,176,219 1,214,919
</TABLE>
The following methods and assumptions were used to estimate these fair
values:
LONG-TERM INVESTMENTS - Fair value approximates carrying value.
INTEREST RATE PROTECTION AGREEMENTS - The fair value of interest rate
cap and corridor agreements is based on quoted market prices as if the
agreements were entered into on the measurement date.
LONG-TERM DEBT - The fair value of the Subordinated Notes and JPS
Automotive Senior Notes is based upon quoted market price. The fair value of the
other long-term debt of the Company approximates the carrying value.
Carrying amounts reported in the consolidated balance sheets for cash
and cash equivalents, accounts and other receivables, accounts payable and
accrued expenses approximate fair value due to the short-term nature of these
instruments.
Fair value estimates are made at a specific point in time, based on
relevant market information about the financial instruments. These estimates are
subjective in nature and involve uncertainties and matters of significant
judgement and therefore, cannot be determined with precision changes in
assumptions could significantly affect these estimates.
20. RELATED PARTY TRANSACTIONS:
During fiscal 1997, the Company incurred fees and expenses for services
performed by Blackstone Partners and WP Partners, or their respective
affiliates, in connection with the dispositions of Floorcoverings, Mastercraft
Group and Wallcoverings of approximately $2.6 million, $4.0 million, and $0.8
million, respectively. During fiscal 1996, the Company incurred fees and
expenses for services performed by Blackstone Partners and WP Partners, or their
respective affiliates, in connection with the 1996 acquisitions of JPS
Automotive and Perstorp Components and the joint venture entered into with
Perstorp of approximately $2.7 million, $1.2 million and $0.8 million,
respectively. During 1995, the Company incurred fees and expenses for services
performed by Blackstone Partners and WP Partners, or their respective
affiliates, in connection with the 1995 acquisition of C&A Plastics totaling
$2.5 million. In addition, Wasserstein Perella Securities, Inc., ("WP
Securities") an affiliate of WP Partners, acted as the lead underwriter in the
Subordinated Notes offering and was paid fees of approximately $5.4 million by
C&A Products in connection therewith.
On November 5, 1997, the Company announced that it entered into an
agreement to sell Wallcoverings to a company sponsored by an affiliate of
Blackstone Partners. The transaction was approved by a special committee of the
Company's Board of Directors composed of independent directors. The sale closed
on March 13, 1998. See Notes 15 and 26.
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 in quarterly
installments.
F-26
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
21. INFORMATION ABOUT THE COMPANY'S OPERATIONS:
The Company's continuing operations primarily supply automotive
interior systems - textile and plastic trim, acoustics and convertible tops - to
the global automotive industry.
The Company performs periodic credit evaluations of its customers'
financial condition and, although the Company does not generally require
collateral, it does require cash payments in advance when the assessment of
credit risk associated with a customer is substantially higher than normal.
Receivables generally are due within 45 days, and credit losses have
consistently been within management's expectations and are provided for in the
consolidated financial statements.
Direct and indirect sales to significant customers in excess of ten
percent of consolidated net sales from continuing operations are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
General Motors Corporation....................... 37.1% 34.0% 33.3%
Ford Motor Company............................... 14.2% 15.4% 16.6%
Chrysler Corporation............................. 16.2% 21.1% 18.2%
</TABLE>
Information about the Company's continuing operations in different
geographic areas for fiscal 1997, 1996 and 1995 is presented below (in
thousands). These amounts have been restated to reflect Floorcoverings,
Wallcoverings, Airbag and the Mastercraft Group as discontinued operations (see
Note 15):
<TABLE>
<CAPTION>
UNITED OTHER DISCONTINUED
STATES CANADA MEXICO COUNTRIES OPERATIONS CONSOLIDATED
----------- ----------- ----------- ------------ -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
FISCAL 1997
Net sales.............................. $ 1,089,114 $ 348,056 $ 71,706 $ 120,456 $ - $ 1,629,332
Operating income (a)................... 35,875 23,166 20,980 4,489 - 84,510
Depreciation and amortization (b)...... 37,928 10,332 2,722 5,991 - 56,973
Identifiable assets ................... 787,118 217,649 36,164 208,457 53,004 1,302,392
Capital expenditures .................. 38,576 13,797 660 3,488 15,254 71,775
UNITED OTHER DISCONTINUED
STATES CANADA MEXICO COUNTRIES OPERATIONS CONSOLIDATED
----------- ----------- ----------- ------------ -------------- ---------------
FISCAL 1996
Net sales.............................. $ 716,710 $ 233,334 $ 74,287 $ 29,490 $ - $ 1,053,821
Operating income (a)................... 43,542 38,599 18,686 1,077 - 101,904
Depreciation and amortization (b)...... 28,862 3,734 2,133 1,145 - 35,874
Identifiable assets ................... 907,275 235,064 38,771 85,656 263,523 1,530,289
Capital expenditures .................. 24,570 6,141 1,763 2,526 43,454 78,454
UNITED OTHER DISCONTINUED
STATES CANADA MEXICO COUNTRIES OPERATIONS CONSOLIDATED
----------- ----------- ----------- ------------ -------------- ---------------
FISCAL 1995
Net sales.............................. $ 762,293 $ 123,958 $ 14,466 $ 1,300 $ - $ 902,017
Operating income (loss) (a)............ 75,083 20,426 (5) 155 - 95,659
Depreciation and amortization (b)...... 26,276 2,795 1,190 150 - 30,411
Identifiable assets ................... 549,782 245,943 24,579 10,032 161,025 991,361
Capital expenditures................... 39,269 5,055 1,739 7,093 40,542 93,698
</TABLE>
(a) Operating income (loss) is determined by deducting all operating
expenses, including goodwill write-off and other costs, from revenues.
Operating expenses do not include interest expense. Corporate services
provided by the Company have been allocated to the business units based
on a combination of estimated use and the relative sales of the business
units to the total consolidated operations of the Company.
(b) Depreciation and amortization includes the amortization of goodwill and
other assets and liabilities.
Intersegment sales between geographic areas are not material. For
fiscal years 1997, 1996 and 1995, export sales from the United States to foreign
countries were $136.7 million, $69.9 million and $77.8 million, respectively.
As of December 27, 1997, the Company's continuing operations employed
approximately 15,100 persons on a full-time or full-time equivalent basis.
Approximately 4,600 of such employees are represented by labor unions.
Approximately 3,000 employees are represented by collective bargaining
agreements that expire during fiscal 1998.
F-27
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
22. COMMITMENTS AND CONTINGENCIES:
ENVIRONMENTAL
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 EPA, the professional judgment of the Company's environmental
experts, outside environmental specialists and other experts, and the likelihood
that other parties which have been named as PRPs will have the financial
resources to fulfill their obligations at sites where they and the Company may
be jointly and severally liable. Under the 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. The Company
records its best estimate when it believes it is probable that an environmental
liability has been incurred and the amount of loss can be reasonably estimated.
The Company also considers estimates of certain reasonably possible
environmental liabilities in determining the aggregate amount of environmental
reserves. In its assessment the Company makes its best estimate of the liability
based upon information available to the Company at that time, including the
professional judgment of the Company's environmental experts, outside
environmental specialists and other experts. As of December 27, 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 25 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 December 27,
1997, the Company's estimate of its liability for these 34 sites, which exclude
sites related to Wallcoverings, is approximately $33.8 million. As of December
27, 1997, the Company has established reserves of approximately $46.5 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.
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 certain other damages related to on-site and
off-site 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.
LITIGATION
The Company and its subsidiaries have lawsuits and claims pending
against them and have certain guarantees outstanding which were made in the
ordinary course of business.
The ultimate outcome of the legal proceedings to which the Company is a
party will not, in the opinion of the Company's management based on the facts
presently known to it, have a material adverse effect on the Company's
consolidated financial condition or future results of operations.
F-28
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OTHER COMMITMENTS
The majority of the leased properties of the Company's previously
divested businesses have been assigned to third parties. Although releases have
been obtained from the lessors of certain 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 adverse effect on the Company's consolidated financial
condition or future results of operations.
F-29
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
23. QUARTERLY FINANCIAL DATA (UNAUDITED):
(in thousands, except for per share data)
The quarterly data below is based on the Company's previous fiscal
periods and has been restated to reflect Wallcoverings, Floorcoverings, Airbag
and the Mastercraft Group as discontinued operations.
<TABLE>
<CAPTION>
FISCAL 1997
-------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------------- -------------- -------------- --------------
(3 MONTHS) (3 MONTHS) (3 MONTHS) (3 MONTHS)
<S> <C> <C> <C> <C>
Net sales as previously reported..................... $ 432,252 $ 416,018 $ 368,008 $ 429,746
Less discontinued operations......................... 16,692 - - -
-------------- -------------- -------------- --------------
Net sales as restated................................ $ 415,560 $ 416,018 $ 368,008 $ 429,746
============== ============== ============== ==============
Gross margin as previously reported.................. $ 72,331 $ 72,189 $ 16,953 $ 72,824
Less discontinued operations......................... 2,086 - - -
-------------- -------------- -------------- --------------
Gross margin as restated............................. $ 70,245 $ 72,189 $ 16,953 (a) $ 72,824
============== ============== ============== ==============
Income (loss) from continuing operations as
previously reported ............................ $ 11,307 $ 11,600 $ (57,919) $ 9,046
Less discontinued operations......................... 42 - - -
-------------- -------------- -------------- --------------
Income (loss) from continuing operations as
restated........................................... $ 11,265 $ 11,600 $ (57,919) (a) $ 9,046
============== ============== ============== ==============
Income before extraordinary loss..................... $ 97,478 $ 15,481 $ 33,951 $ 9,046
============== ============== ============== ==============
Net income .......................................... $ 97,478 $ 14,760 $ 33,951 $ 9,046
============== ============== ============== ==============
Basic earnings per share............................. $ 1.45 $ 0.22 $ 0.51 $ 0.14
============== ============== ============== ==============
Diluted earnings per share........................... $ 1.43 $ 0.22 $ 0.50 $ 0.14
============== ============== ============== ==============
Common stock prices
High............................................... $ 10-1/2 $ 12-1/8 $ 11-11/16 $ 11-3/16
============== ============== ============== ==============
Low................................................ $ 6 $ 8-5/8 $ 10 $ 7-15/16
============== ============== ============== ==============
FISCAL 1996
-------------------------------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
---------------- -------------- -------------- --------------
(3 MONTHS) (3 MONTHS) (3 MONTHS) (2 MONTHS)
Net sales as previously reported..................... $ 373,611 $ 347,609 $ 371,027 $ 204,098
Less discontinued operations......................... 90,678 71,911 77,825 2,110
-------------- -------------- -------------- --------------
Net sales as restated................................ $ 282,933 $ 275,698 $ 293,202 $ 201,988
============== ============== ============== ==============
Gross margin as previously reported.................. $ 77,956 $ 69,739 $ 71,868 $ 30,817
Less discontinued operations......................... 25,460 16,900 19,346 199
-------------- -------------- -------------- --------------
Gross margin as restated............................. $ 52,496 $ 52,839 $ 52,522 $ 30,618
============== ============== ============== ==============
Income (loss) from continuing operations as
previously reported ............................ $ 14,786 $ 11,804 $ 13,697 $ (2,110)
Less discontinued operations......................... 1,610 1,346 2,110 145
-------------- -------------- -------------- --------------
Income (loss) from continuing operations as
restated........................................... $ 13,176 $ 10,458 $ 11,587 $ (2,255)
============== ============== ============== ==============
Income before extraordinary loss..................... $ 15,142 $ 15,521 $ 15,922 $ 849
============== ============== ============== ==============
Net income .......................................... $ 15,142 $ 8,911 $ 15,922 $ 849
============== ============== ============== ==============
Basic and diluted earnings per share................. $ 0.22 $ 0.13 $ 0.23 $ 0.01
============== ============== ============== ==============
Common stock prices
High............................................... $ 8-1/4 $ 7-1/8 $ 7 $ 6-5/8
============== ============== ============== ==============
Low................................................ $ 6-1/8 $ 5-1/2 $ 5-7/8 $ 5-3/4
============== ============== ============== ==============
</TABLE>
(a) In the third quarter of 1997, the Company incurred charges of $57.9 million
primarily related to C&A Plastics for asset impairments, reductions in
goodwill, provisions for certain programs operating at a loss, inventory
adjustments and other provisions. Of the $57.9 million in charges, $34.0
million is included in cost of goods sold, $22.6 million as impairment of
long-lived assets and $1.3 million relates to selling costs.
The Company's operations are not subject to significant seasonal
influences.
F-30
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
24. 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
fiscal years ending, (in thousands):
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28, JANUARY 27,
1997 1996 1996
--------------- ------------- ---------------
<S> <C> <C> <C>
Current assets.............................................. $ 508,864 $ 728,586 $ 455,729
Noncurrent assets........................................... 792,199 800,594 534,389
Current liabilities......................................... 315,268 339,519 231,898
Noncurrent liabilities...................................... 1,051,376 1,382,754 984,698
Net sales................................................... 1,629,332 1,053,821 902,017
Gross margin................................................ 232,211 188,475 161,925
Income from continuing operations........................... (10,338) 32,768 207,900
Income before extraordinary item............................ 155,709 47,236 207,119
Net income ................................................. 154,988 40,626 207,119
</TABLE>
The consolidated financial information for fiscal 1997 and 1996 has
been restated to reflect Airbag as a discontinued operation. 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 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.
25. EARNINGS PER SHARE
The Company adopted SFAS No. 128, "Earnings Per Share," (SFAS No. 128)
in December 1997. Basic earnings per common share were computed by dividing net
income by the weighted average number of shares of common stock outstanding
during the year. Diluted earnings per common share were determined assuming the
exercise of the stock options issued under the Company's stock option plans (see
Note 17). The following table reconciles the number of common shares used in the
basic and diluted earnings per share from continuing operations.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED
DECEMBER 27, 1997 DECEMBER 28, 1996 JANUARY 27, 1996
---------------------------------- --------------------------------- ---------------------------------
(52 WEEKS) (48 WEEKS) (52 WEEKS)
PER-SHARE PER-SHARE PER-SHARE
INCOME SHARES AMOUNT INCOME SHARES AMOUNT INCOME SHARES AMOUNT
----------- -------- ---------- ---------- -------- --------- ---------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BASIC EARNINGS PER SHARE $ (10,091) 66,337 $ (0.15) $ 32,966 68,997 $ 0.48 $ 207,222 70,015 $ 2.96
Effect of stock option
plans - - - - 890 (0.01) - 1,166 (0.05)
----------- -------- ---------- ---------- -------- --------- ---------- -------- ---------
DILUTED EARNINGS PER
SHARE $ (10,091) 66,337 $ (0.15) $ 32,966 69,887 $ 0.47 $ 207,222 71,181 $ 2.91
=========== ======== ========== ========== ======== ========= ========== ======== =========
</TABLE>
F-31
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company has restated earnings per share for fiscal years 1996 and
1995 to conform to SFAS No. 128. The effect of this accounting change on
previously reported earnings per share data for income from continuing
operations is as follows:
FISCAL YEAR ENDED
----------------------------------
DECEMBER 26, JANUARY 27,
1996 1996
---------------- -------------
PER SHARE AMOUNTS:
Primary earnings per share as
previously reported $ 0.47 $ 2.91
Effect of SFAS No. 128 0.01 0.05
---------------- -------------
Basic earnings per share $ 0.48 $ 2.96
================ =============
26. SUBSEQUENT EVENTS
As discussed in Note 3, the Company acquired Kigass on February 2,
1998. The total purchase price for the acquisition was approximately $24.2
million, subject to adjustment. Kigass is a privately-held, automotive interior
plastic products manufacturer headquartered in the United Kingdom. Under the
terms of the agreement, the Company assumed effective control of Kigass on
January 1, 1998. The Company had previously entered into a joint venture
agreement with Kigass in October 1997.
On March 13, 1998, the Company completed its sale of Wallcoverings to
an affiliate of Blackstone Partners for a purchase price of $71.2 million,
subject to adjustment, and an option for 6.7% of the common stock of the
purchaser (which includes Wallcoverings and the wallcovering and vinyl units of
Borden, Inc.) outstanding as of the closing date. In connection with the sale,
the Company recorded a loss of approximately $21.1 million, net of an estimated
tax benefit of $33.0 million, in the third quarter of 1997 to adjust the
recorded value to the expected proceeds. Accordingly, no gain or loss was
recognized at the sale date.
F-32
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To Collins & Aikman Corporation:
We have audited, in accordance with generally accepted auditing
standards, the consolidated financial statements of Collins & Aikman Corporation
and subsidiaries included in this Form 10-K, and have issued our report thereon
dated February 9, 1998 (except with respect to the matters discussed in Note 26
to those financial statements, as to which the date is March 13, 1998). Our
audits were made for the purpose of forming an opinion on those statements taken
as a whole. The schedules listed in Item 14 of this Form 10-K are the
responsibility of the Company's management and are presented for purposes of
complying with the Securities and Exchange Commission's rules and are not part
of the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
February 9, 1998.
S-1
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28,
ASSETS 1997 1996
----------------- ------------------
<S> <C> <C>
Current Assets:
Cash .............................................................. $ 415 $ 747
Other .............................................................. 12 -
----------------- ------------------
Total current assets.............................................. 427 747
Other assets........................................................... 902 362
----------------- ------------------
$ 1,329 $ 1,109
================= ==================
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities.................................................... $ 16 $ 12
Share of accumulated losses in excess of investments in
subsidiaries ...................................................... 65,581 193,093
Other noncurrent liabilities........................................... 2,582 2,582
Commitments and contingencies (Note 1).................................
Common stock........................................................... 705 705
Other stockholders' deficit............................................ (67,555) (195,283)
----------------- ------------------
Total stockholders' deficit....................................... (66,850) (194,578)
----------------- ------------------
$ 1,329 $ 1,109
================= ==================
</TABLE>
The Notes to the Condensed Financial Statements
are an integral part of these condensed financial statements.
S-2
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------------
DECEMBER 27, DECEMBER 28, JANUARY 27,
1997 1996 1996
----------------- ---------------- -----------------
<S> <C> <C> <C>
Other expenses....................................................... $ (589) $ (592) $ (1,023)
Interest income...................................................... 836 790 345
----------------- ---------------- -----------------
Income (loss) from operations before equity in income of subsidiary 247 198 (678)
Equity in income of subsidiary....................................... 154,988 40,626 207,119
----------------- ---------------- -----------------
Net income........................................................... $ 155,235 $ 40,824 $ 206,441
================= ================ =================
</TABLE>
The Notes to the Condensed Financial Statements
are an integral part of these condensed financial statements.
S-3
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 27, DECEMBER 28, JANUARY 27,
1997 1996 1996
---------------- --------------- ----------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net cash provided by (used in) operating activities................ $ (332) $ 122 $ (544)
FINANCING ACTIVITIES
Purchases of treasury stock........................................ (19,715) (9,594) (11,736)
Proceeds from exercise of stock options............................ 385 138 382
Intercompany transfers (to) from subsidiary........................ (2,094) 6,104 -
Dividends received from subsidiary................................. 21,424 3,000 12,000
------ ------ ------
Net cash provided by (used in) financing activities................ - (352) 646
------ ------ ------
Net increase (decrease) in cash.................................... (332) (230) 102
Cash at beginning of year.......................................... 747 977 875
------ ------ ------
Cash at end of year................................................ $ 415 $ 747 $ 977
====== ====== =======
</TABLE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. PRESENTATION:
These condensed financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to those rules and regulations, although
the Company believes that the disclosures made are adequate to make the
information presented not misleading. For disclosures regarding commitments and
contingencies, see Notes 17 and 23, respectively, to Consolidated Financial
Statements.
2. SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR ADDITIONAL DISCLOSURES.
S-4
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND
JANUARY 27, 1996 (IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE ADDITIONS CHARGE
AT RESULTING TO COSTS CHARGED BALANCE AT
BEGINNING FROM AND TO OTHER END OF
DESCRIPTION OF YEAR ACQUISITIONS EXPENSES ACCOUNTS DEDUCTIONS YEAR
- -------------------------- ----------- ------------ --------- ---------------- -------------------- ----------
<S> <C> <C> <C> <C> <C> <C>
FISCAL YEAR ENDED
DECEMBER 27, 1997
Allowance for doubtful
accounts............... $ 10,380 $ - $ 604 $ 96 (b) $ (1,805) (c) $ 9,275
FISCAL YEAR ENDED
DECEMBER 28, 1996
Allowance for doubtful
accounts............... $ 3,381 $ 6,461 $ 899 $ 37 (b) $ (398) (c) $ 10,380
FISCAL YEAR ENDED
JANUARY 27, 1996 (a)
Allowance for doubtful
accounts............... $ 5,102 $ 166 $ 432 $ 58 (b) $ (2,377) (c) $ 3,381
</TABLE>
(a) The amounts for fiscal year ended January 27, 1996 have been restated to
exclude amounts related to discontinued operations.
(b) Reclassifications and collection of accounts previously written off.
(c) Reclassifications to discontinued operations and other accounts and
uncollectible amounts written off.
S-5
Exhibit 2.4
AMENDED AND RESTATED ACQUISITION AGREEMENT
This Amended and Restated Acquisition Agreement (the "Agreement") is
dated as of the 4th day of November, 1997, and amended and restated as of the
9th day of March, 1998, among Collins & Aikman Products Co., a Delaware
corporation ("Seller"), Imperial Wallcoverings, Inc., a Delaware corporation
("Imperial"), and BDPI Holdings Corporation, a Delaware corporation
("Purchaser").
RECITALS:
A. Imperial, together with its wholly owned subsidiaries Imperial
Wallcoverings Limited, a company incorporated in England ("Imperial UK") and
Marketing Service, Inc., a Delaware corporation ("MSI") and Imperial
Wallcoverings (Canada) Inc. ("Imperial Canada"), Canadian corporation owned by
Imperial and Collins & Aikman Canada Inc., an Ontario corporation and indirect
wholly owned subsidiary of Seller ("C&A Canada") (Imperial UK and MSI being
referred to herein collectively as the "Subsidiaries" and, together with
Imperial and Imperial Canada, the "Company" and Imperial UK, MSI and Imperial
being referred to herein as the "Purchased Imperial Companies"), is presently
engaged in the business (the "Business") of the development, production,
manufacture, marketing, distribution and sale of paper and vinyl decorative
surface products and related products for residential, commercial and industrial
applications ("Products") and performing certain related services;
B. Seller is the record and beneficial owner of all of the issued and
outstanding shares of Common Stock, par value $0.01 per share, of Imperial (the
"Imperial Shares") and C&A Canada is the record and beneficial owner of
3,100,000 issued and outstanding shares of common stock, without par value, of
Imperial Canada, which shares, together with the 1,000,000 shares of common
stock of Imperial Canada owned of record and beneficially by Imperial, represent
all of the issued and outstanding shares of capital stock of Imperial Canada;
C. Seller intends to cause C&A Canada to own all of the issued and
outstanding shares of common stock of Imperial Canada and to cause Imperial
Canada to be liquidated (the "Imperial Canada Liquidation") prior to the
Closing, with the result that C&A Canada will have all right, title and interest
in and to the assets, and be subject to all of the obligations and liabilities,
of Imperial Canada;
D. Purchaser intends to effect the recapitalization (the "Borden
Recap") of Borden Decorative Products Holdings, Inc. ("BDPH") pursuant to, among
other transactions, the merger of
1
<PAGE>
Purchaser into BDPH (the "Merger"), whereupon all rights and obligations of
Purchaser hereunder will be, by virtue of the Merger, vested in BDPH (which will
be renamed "The Imperial Home Decor Group Inc." following the Merger);
E Seller desires to sell, assign and deliver ("Transfer") to Purchaser,
and Purchaser desires to purchase and accept from Seller, the Imperial Shares on
the terms and subject to the conditions set forth in this Agreement;
F. Seller desires to cause C&A Canada to Transfer to Purchaser or its
assignee (and, where applicable the term "Purchaser" will also refer to such
assignee), and Purchaser desires to purchase and accept from C&A Canada, the C&A
Imperial Canada Assets and to assume the C&A Imperial Canada Assumed Liabilities
(together, the "Imperial Canada Business Acquisition").
NOW, THEREFORE, the parties hereto agree as follows:
I. PURCHASE AND SALE OF SHARES
1.1. Purchase and Sale of Shares. On the terms and subject to the
conditions hereof, at the Closing, Seller will Transfer, or cause to be
Transferred, to Purchaser, and Purchaser will purchase and accept from Seller
and C&A Canada, the Imperial Shares and the C&A Imperial Canada Assets, free and
clear of all Liens, for the amount determined pursuant to Section 1.3 and in
consideration of the grant of the Option to be delivered at Closing pursuant to
Section 4.3.3 and the assumption of the C&A Imperial Canada Assumed Liabilities
(such amount, together with the Option and the C&A Imperial Canada Assumed
Liabilities, the "Purchase Price"). Notwithstanding any other provision hereof,
in no event will the total amount of the accounts payable and accrued
liabilities included in the C&A Imperial Canada Assumed Liabilities (other than
any liabilities under the Canadian Pension Plan) exceed $5.0 million. For
purposes of this Agreement, (a) the "C&A Imperial Canada Assets" means all
assets, properties and rights, of whatever kind and nature, real or personal,
tangible or intangible, contractual or legal, wherever located, as of the
Closing that would have been owned or held by Imperial Canada but for the
Imperial Canada Liquidation except for any right, title or interest in, to or
under that certain Credit Agreement dated as of July 12, 1994, between
Canadian Imperial Bank of Commerce, WCA Canada Inc. and Imperial Canada (the
"Imperial Canada Credit Agreement") and (b) "C&A Imperial Canada Assumed
Liabilities" means all obligations and liabilities, fixed or contingent,
primary or secondary, direct or indirect, absolute or contingent, known or
unknown, whether or not accrued, as of the Closing that would have been
obligations or liabilities of Imperial Canada but for the Imperial Canada
Liquidation,
2
<PAGE>
except for (i) any Indebtedness of C&A Canada and (ii) such of the foregoing as
are retained by Seller or any of its Post-Closing Affiliates hereunder or as to
which Seller has agreed to indemnify the Purchaser or the Purchased Imperial
Companies under any provision of Article VI and (iii) any obligation or
liability under the Imperial Canada Credit Agreement.
1.2. Closing Payment. (a) The cash portion of the Purchase Price will
be (i) $58 million, plus the amount of cash of Imperial UK as of immediately
prior to the Closing, less $500,000 (the "Base Amount"), (ii) plus the
Adjustment Amount, and (iii) minus the amount of any Indebtedness of any
Purchased Imperial Companies outstanding immediately prior to the Closing
(calculated after giving effect to any payments of any such Indebtedness prior
to the Closing and in accordance with this Agreement (provided, however, that
nothing in this Section 1.2 will be deemed to constitute an authorization of the
incurrence or maintenance of any such Indebtedness by the Company)). For
purposes of this Agreement (A) "Adjustment Amount" means, if Net Cash Flow is
negative, a positive amount equal to such negative Net Cash Flow and, if Net
Cash Flow is positive, a negative amount equal to such positive Net Cash Flow;
(B) "Indebtedness" means any liability or obligation (whether primary or
secondary as a guarantor or other surety other than arising out of the
endorsement of checks for collection in the ordinary course of business), for
borrowed money, for deferred purchase price of any asset (other than obligations
to pay for inventory purchased in the ordinary course of business), under a
capitalized lease and any other liability or obligation which should be shown as
indebtedness on a consolidated balance sheet for the Company prepared in
accordance with GAAP, whether or not evidenced by a note, bond or similar
instrument, and any prepayment penalties, accrued interest or other amounts due
on or in respect of any of the foregoing; and (C) the term "Net Cash Flow" means
an amount, for the period from and including November 2, 1997 through the
opening of business on the Closing Date, calculated in accordance with Schedule
1.2, giving effect to an additional deemed positive cash flow amount (regardless
of the actual amount thereof) of $6.0 million.
(b) Not less than two business days prior to the Closing Date, Seller
and Purchaser will jointly prepare estimates of the Adjustment Amount and
Indebtedness (such estimated Adjustment Amount minus such estimated Indebtedness
being the "Estimated Purchase Price Adjustment Amount"), determined in
accordance with Section 1.2(a) and based upon their respective review of monthly
financial information then available to Seller and Purchaser and their
respective inquiries of personnel responsible for the preparation of financial
information relating to the Company in the ordinary course thereof. If the
parties are unable so to
3
<PAGE>
agree on the Estimated Purchase Price Adjustment Amount, then the amount thereof
as estimated by Deloitte & Touche LLP, Purchaser's independent accountants
("D&T"), in good faith will be the Estimated Purchase Price Adjustment Amount
for all purposes of this Agreement and the amount to be paid by Purchaser at the
Closing will be the Base Amount, plus or minus, as the case may be, the
Estimated Purchase Price Adjustment Amount (such amount, the "Closing Payment").
(c) On the Closing Date, Purchaser will cause to be paid by wire
transfer of immediately available funds to such account as Seller has
theretofore designated an amount equal to the Closing Payment.
1.3. Purchase Price Adjustment. (a) In order finally to determine the
Purchase Price, the Closing Payment will be increased or decreased, as the case
may be, by the amount, if any, by which the Adjustment Amount and Indebtedness,
each as finally determined in accordance with this Section 1.3, differ (on a
combined basis) from the amounts thereof reflected in the Estimated Purchase
Price Adjustment Amount. For purposes of this Agreement, (x) the adjustment
referred to in the immediately preceding sentence will be finally calculated on
a net basis and (y) all determinations of the actual amounts thereof (the
"Actual Purchase Price Adjustment Amount") will be determined by reference to
the amounts thereof required to be shown, with respect to Indebtedness, on a
consolidated balance sheet as of the opening of business on the Closing Date
and, with respect to Net Cash Flow, on a consolidated statement of cash flows
for the period from and including November 2, 1997 through the opening of
business on the Closing Date (collectively, the "Closing Statement"), each on a
basis consistent with, and using the same accounting principles, policies,
practices and procedures used in preparing, the Financial Statements and in
accordance with Schedule 1.2 and Section 1.2(a).
(b) Within 60 calendar days after the Closing Date, Purchaser will in
good faith prepare and deliver, or cause to be prepared and delivered, to Seller
a Closing Statement setting forth Purchaser's determination of the Actual
Purchase Price Adjustment Amount. The parties and their respective authorized
representatives will be entitled to review, during normal business hours, the
books, records and work papers of the Company to prepare or review, as the case
may be, the Closing Statement and to determine the Actual Purchase Price
Adjustment Amount. Without limiting the generality or effect of any other
provision hereof, (i) the parties will provide the other parties and their
authorized representatives access, during normal business hours, to the
facilities, personnel and accounting and other records of the Company and the
parties, as the case may be, to the extent reasonably determined by such other
parties to be necessary to
4
<PAGE>
permit Purchaser to prepare or have prepared the Closing Statement and to
compute the Actual Purchase Price Adjustment Amounts as herein provided and to
permit Seller to review such Closing Statement and computation (including, if
requested by Seller, such access as may be necessary or appropriate to permit
Arthur Andersen L.L.P. ("AA") to perform an audit of Net Cash Flow); provided,
however, that the parties will conduct any such review in a manner that does not
unreasonably interfere with the conduct of any other party's business, and (ii)
Seller will take such actions as may be reasonably requested by Purchaser to
close, or to assist Purchaser in closing, as of the opening of business on the
Closing Date, or as of the Closing, as the case may be, the books and accounting
records of the Company and otherwise reasonably to cooperate with Purchaser and
its representatives in the preparation of the Closing Statement. Concurrently
with the delivery of the Closing Statement, Seller will use its reasonable
efforts to cause AA to provide Purchaser access to any of such firm's
workpapers, trial balances and similar materials prepared in connection with
such firm's audits or reviews of any of the Financial Statements (the
"Workpapers").
(c) If, within 45 calendar days after the date of Purchaser's delivery
of its computation of the Actual Purchase Price Adjustment Amount, Seller
determines in good faith that such computations are inaccurate, Seller will give
written notice to Purchaser within such 45 calendar day period (i) setting forth
Seller's computation of Actual Purchase Price Adjustment Amount and (ii)
specifying in reasonable detail Seller's basis for its disagreement with
Purchaser's computations. The failure by Seller so to express its disagreement
or provide such specification within such 45 calendar day period will constitute
Seller's acceptance of Purchaser's computation of the Actual Purchase Price
Adjustment Amounts. 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
KPMG Peat Marwick LLP (the "Accountants") as promptly as practicable. 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 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 to rely on
the Workpapers and the Company's books and records, and the fees and expenses of
the Accountants will be shared equally by Purchaser and Seller (except as
provided below). 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
5
<PAGE>
the Accountants for information, books, records and similar items. 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 other
party at least two calendar days before 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, 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 offer (other than the Last Offer) made by any party.
(d) To the extent that the Actual Purchase Price Adjustment Amount,
determined as provided in this Section 1.3 is more or less than the Estimated
Purchase Price Adjustment Amount, Seller or Purchaser, as applicable, will,
within ten calendar days after the final determination of the Actual Purchase
Price Adjustment Amount, calculated on a net basis, pursuant to this Section
1.3, make or, in the case of Purchaser, cause to be made 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 The 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 365), to such account as has
been designated by Purchaser or Seller, as applicable.
1.4. Intercompany Obligations. Notwithstanding any other provision
hereof, except for the receivables and payables described in Schedule 1.4
("Post-Closing AR/AP"), any amount owed by Seller or any of its Affiliates other
than the Purchased Imperial Companies (collectively, "Post-Closing Affiliates"),
or owed by any of the Purchased Imperial Companies to Seller or any Post-Closing
Affiliate, in respect of liabilities, obligations or assets of the Purchased
Imperial Companies of a type that would be shown on a consolidated balance sheet
of any of the Purchased Imperial Companies as "Investments and Advances From
(To) Collins & Aikman Products Co." will be settled at or prior to the Closing
and will not be reflected in the Closing Statement. Effective immediately after
the Closing, all intercompany liabilities and obligations owing from Seller or
any Post-Closing Affiliate to any of the Purchased Imperial Companies or owing
from any of the Purchased Imperial Companies to Seller or any Post-Closing
Affiliate (except for any Post-Closing AR/AP) that is not settled as
contemplated by the immediately preceding sentence will be netted against each
other and the net balance thereof will be discharged and deemed forgiven without
further action or payment,
6
<PAGE>
will be deemed contributed to or deducted from capital of the appropriate
Purchased Imperial Company and all such amounts will be excluded from the
determination of Net Cash Flow or Indebtedness under Sections 1.2 and 1.3. As a
result, immediately following the Closing, there will be no further liability or
obligation in respect of any such matters between Seller or any Post-Closing
Affiliate, on the one hand, and the Purchased Imperial Companies, on the other
hand, except as expressly provided herein. Any holder of a note or other
evidence of indebtedness deemed settled pursuant to this Section 1.4 will
surrender such note or other evidence of indebtedness to the obligor thereon. In
addition, and without limiting the generality or effect of the foregoing,
effective as of immediately prior to the Closing, all contracts and other
obligations, other than the Transaction Documents and other than as set forth on
Schedule 1.4, between or among the Purchased Imperial Companies or any of the
Subsidiaries, on the one hand, and Seller or any Post-Closing Affiliate, on the
other hand, will be terminated without further action to the extent that they
would otherwise apply to any period or act occurring after the Closing.
Notwithstanding anything to the contrary in this Agreement, Purchaser will not
assume any liability or obligation (other than those listed on Schedule 1.4)
owed by Imperial Canada to Seller or any Post-Closing Affiliate of a type that
would be shown on a balance sheet of Imperial Canada and any such liability or
obligation will not be included in the C&A Imperial Canada Assumed Liabilities.
II. REPRESENTATIONS AND WARRANTIES
2.1. Representations and Warranties of Seller. Subject to Section 2.3,
Seller represents and warrants to Purchaser as follows:
2.1.1. The Imperial Shares. (a) Except as set forth on
Schedule 2.1.1, (i) Seller owns free and clear of any mortgages, liens, security
interests or other encumbrances (collectively, "Liens") the number of Imperial
Shares listed in Schedule 2.1.1, which Shares represent all of the issued and
outstanding shares of capital stock of Imperial, and (ii) C&A Canada owns the
shares of common stock of Imperial Canada listed in Schedule 2.1.1 as owned by
C&A Canada (the "C&A Canada-Owned Imperial Canada Shares"), which shares,
together with the shares of common stock of Imperial Canada listed in Schedule
2.1.1 as owned by Imperial (the "Imperial-Owned Imperial Canada Shares"),
represent all of the issued and outstanding shares of capital stock of Imperial
Canada.
(b) The Imperial Shares are duly authorized, validly issued and
outstanding, fully paid and nonassessable. The Imperial
7
<PAGE>
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 Imperial Shares
or that may require the Company to issue to any person or entity any shares of
any of its capital stock. Except as listed or described on Schedule 2.1.1, there
are no voting trust or other Contracts restricting the voting, dividend rights
or disposition of the Imperial Shares.
(c) Except as set forth in Schedule 2.1.1, Seller owns the Imperial
Shares beneficially and of record free and clear of all Liens and at the Closing
will Transfer its entire right, title and interest in and to the Imperial Shares
to Purchaser.
(d) The Company does not own, beneficially or of record, any stock or
other ownership interests in, or control, any other entity other than the
Subsidiaries, all of the issued and outstanding share capital of which is owned
by Imperial free and clear of all Liens (except for the C&A Canada-Owned
Imperial Canada Shares and as set forth on Schedule 2.1.1); and, except as set
forth on Schedule 2.1.1, there are no outstanding convertible or exchangeable
securities or agreements giving any person or entity any right to acquire shares
of capital stock of either of the Subsidiaries and no voting trusts or other
Contracts restricting the voting, dividend rights or disposition of shares of
either of the Subsidiaries.
2.1.2. Authorization and Effect of Agreement. Seller has the
requisite corporate power to execute and deliver this Agreement and the other
agreements or instruments referred to herein other than the Recapitalization
Agreement, dated as of the date hereof, between Borden, Inc., BDPH and Purchaser
(the "Borden Agreement") (collectively, the "Transaction Documents") to which
Seller is a party 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 for the due authorization of the execution and
delivery by Seller of the Transaction Documents to which Seller is a party and
the performance by Seller of the transactions contemplated thereby to be
performed by it has been duly taken by Seller. Each Transaction Document to
which Seller is a party has been, or will be, as the case may be, duly executed
and delivered by Seller, and, assuming the due execution and delivery of such
Transaction Document by Purchaser, constitutes, or will constitute, as the case
may be, valid and binding obligations of Seller enforceable in accordance with
its terms. Imperial and each of the Subsidiaries is a corporation duly
organized, validly existing and in good standing under the Laws of its
jurisdiction of incorporation.
8
<PAGE>
2.1.3. No Restrictions. The execution and delivery of the
Transaction Documents by Seller, C&A Canada and Imperial to which they are
parties does not, and the performance by Seller, C&A Canada and Imperial of the
transactions contemplated thereby to be performed by them will not, conflict
with, or result in any violation of, or constitute a 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 benefit under,
(i) any provision of the Certificate of Incorporation or By-laws or comparable
governing documents of Seller, C&A Canada, Imperial or any of the Subsidiaries,
(ii) any material lease, agreement, or other contract or legally binding
contractual right or obligation (a "Contract") of the Company, (iii) any permit
or approval ("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"), or (iv) any Law (other than a Law requiring a Permit),
other than, as to clauses (ii), (iii) and (iv), any such conflicts, violations
or defaults as are listed or described on Schedule 2.1.3 or which, individually
or in the aggregate, could not reasonably be expected to result in a material
undisclosed liability of the Company. 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 or the
Company in connection with the execution and delivery by Seller and C&A Canada
of the Transaction Documents to which they are a party or the performance by
Seller and C&A Canada of the transactions contemplated thereby to be performed
by them, 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"), if applicable in the circumstances, (ii) for
such of the foregoing as are listed or described on Schedule 2.1.3, and (iii)
for such consents, approvals, orders, authorizations of, or registrations,
declarations or filings with, any Governmental Entity, which, individually or in
the aggregate, if not obtained or made, could not reasonably be expected to
result in a material undisclosed liability of the Company.
2.1.4. Financial Statements. (a) Attached as Schedule
2.1.4(a) are the audited consolidated balance sheets of the Company as of
January 27, 1996 and December 28, 1996, the related audited consolidated
statements of stockholders' equity, operations and cash flows for the fiscal
years then ended, accompanied by the accountant's reports thereon, the unaudited
combined balance sheet of the Company as of September 26, 1997 (the "Balance
Sheet") and the unaudited combined statements of operations for the combined
first two fiscal quarters of 1996 and
9
<PAGE>
1997 (collectively, with the related notes, the "Financial Statements"). The
audited Financial Statements present fairly, in all material respects, the
consolidated financial position of the Company as of the dates thereof and the
consolidated 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 Schedule 2.1.4(a).
(b) Seller will deliver audited consolidated balance sheets of
the Company as of September 26, 1997 and the related audited consolidated
statements of stockholders' equity, operations and cash flows for the nine month
periods ended September 26, 1997 (collectively, with the related notes, the
"Offering Financial Statements") as promptly as practicable and in any event by
November 30, 1997. The Offering Financial Statements will present fairly, in all
material respects, the consolidated financial position of the Company as of the
dates thereof and the results of its operations and cash flows for the periods
specified in conformity with GAAP.
(c) The Company does not have, and as of immediately prior to
the Closing will not have, any liabilities or obligations, whether known or
unknown, absolute, accrued, contingent or otherwise, whether due or to
become due, including any uninsured liabilities, and whether arising by virtue
of a breach of or under any Law, any lawsuit or claim or otherwise, that would
be required by GAAP to be shown as a liability on a consolidated balance sheet
of the Company except (i) as and to the extent set forth in the Balance Sheet or
specifically disclosed in the notes thereto, (ii) liabilities incurred in the
ordinary course of business consistent with past practice and not prohibited by
this Agreement, which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect, (iii) as set forth in Schedule
2.1.4(c), and (iv) other liabilities for which Seller is responsible pursuant to
this Agreement.
(d) Except as listed or described on Schedule 2.1.4(d), (i)
from September 26, 1997 to November 4, 1997, the Company has conducted the
Business only in the ordinary course, consistent with past practice, (ii) since
September 26, 1997 through November 4, 1997, the Company has not taken any
action which would have constituted a violation of Section 3.5 if Section 3.5
had applied since September 26, 1997, and (iii) during the period from September
26, 1997 to the Closing Date, there has not been any Material Adverse Effect,
including any damage, destruction, loss or abandonment (whether or not covered
by insurance) which, individually or in the aggregate, has or, to the Knowledge
of Seller, could reasonably be expected to have, a Material Adverse Effect,
other than, as applied to the accuracy
10
<PAGE>
of this representation in respect of the period between the date hereof and the
Closing Date, changes or effects after the date hereof that result from
general economic conditions or competitive circumstances in the markets in
which the Business is conducted.
(e) For purposes of this Agreement, the term "Material Adverse
Effect" means an event, circumstance or occurrence that has a material adverse
effect on the Business or the consolidated financial condition or results of
operations of the Company relative, in the case of financial condition or
results of operations, to the management projections for the Business set forth
in Schedule 2.1.4(e).
2.1.5. Brokers. No broker, investment banker, financial
advisor or other person (other than BancBoston Securities, Inc. and Wasserstein
Perella & Co., Inc., the fees and expenses of which will be paid by Seller) is
entitled to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with the transactions contemplated by this Agreement.
2.2. Representations and Warranties of Purchaser. Subject to Section
2.3, Purchaser represents and warrants to Seller as follows:
2.2.1. Authorization and Effect of Agreement. 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 under the Delaware General
Corporation Law for the due authorization of the execution and delivery by
Purchaser of this Agreement and the performance by Purchaser of the transactions
contemplated hereby to be performed has been duly taken by Purchaser. This
Agreement has been duly executed and delivered by Purchaser and, assuming the
due execution and delivery of this Agreement by Seller constitutes a valid and
binding obligation of Purchaser, enforceable in accordance with its terms.
2.2.2. No Restrictions. The execution and delivery of this
Agreement by Purchaser does not, and the performance by Purchaser of the
transactions contemplated hereby to be performed by it 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 under, any provision of the charter or bylaws or comparable
governing documents of Purchaser, or any material Contract or Permit applicable
to Purchaser other than any such conflicts, violations or defaults which,
11
<PAGE>
individually or in the aggregate, could not reasonably be expected to result in
a material undisclosed liability of 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
Purchaser in connection with the execution and delivery of this Agreement by
Purchaser or the performance by Purchaser of the transactions contemplated
hereby to be performed by either of them, except (i) for such of the foregoing
as are listed or described on Schedule 2.2.2 and (ii) for such consents,
approvals, orders, authorizations of, or registrations, declarations or filings
with, any Governmental Entity, which, individually or in the aggregate if not
obtained or made, could not reasonably be expected to result in a material
undisclosed liability of Purchaser.
2.2.3. Financial Capacity. Purchaser has in hand a commitment
letter (the "Commitment Letter"), which is currently in effect and a true and
correct copy of which has been previously provided to Seller, from the
financial institutions indicated therein, as well as the equity commitment
letter of Blackstone Capital Partners III Merchant Banking Fund, L.P.
("Blackstone"), to provide the secured debt and equity financing contemplated by
Purchaser for the transactions described in this Agreement and has obtained a
highly confident letter, a true and correct copy of which has been previously
provided to Seller, with respect to the subordinated debt financing so
contemplated. Blackstone has undertaken to provide the equity capital
contemplated by the Commitment Letter, and a true and correct copy of such
undertaking has been previously provided to Seller.
2.2.4. Disclosure. As of the date hereof, to the Knowledge of
Purchaser, (a) Seller is not in breach of any of its representations and
warranties set forth in Section 2.1.4 and (b) Purchaser has furnished to
Seller's financial advisors all material information pertaining to the Company
and the Borden Recap that such financial advisors have requested prior to the
date hereof.
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) 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 (ii) 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 the Transaction
Documents.
12
<PAGE>
(b) Any representation and warranty made in this Agreement by
Seller will be deemed for all purposes to be qualified by the disclosures made
in any Schedule specifically referred to in such representation or warranty and
by the information disclosed in any other Schedule if the relevance of such
information to such representation and warranty is reasonably apparent on its
face. References in this Article to matters "primarily" relating to the Business
are to matters which predominantly relate to the Business rather than
predominantly to one of either Seller's or any Post-Closing Affiliate's other
businesses or to the businesses or operations of Seller or any Post-Closing
Affiliate generally.
III. COVENANTS
3.1. Investigation by Purchaser. (a) Prior to the Closing, upon
reasonable notice from Purchaser to Seller given in accordance with this
Agreement, Seller will, and will cause the Company to, afford to the officers,
attorneys, accountants or other authorized representatives of Purchaser
reasonable access during normal business hours to the facilities and the books
and records of the Company so as to afford Purchaser a reasonable opportunity to
make, at its sole cost and expense, such review, examination and investigation
of the Company as Purchaser may reasonably desire to make, including without
limitation a so-called "Phase I" (i.e., documentary review and walk-through site
inspection) preliminary environmental evaluation; 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 will be permitted to make
extracts from or to make copies of such books and records as may be reasonably
necessary. Prior to the Closing, Seller will furnish to Purchaser, or cause to
be furnished to Purchaser, such financial and operating data and other
information pertaining to the Company as 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,
any Post-Closing Affiliate or the Company, violate the terms of any applicable
Law or rules of any national stock exchange applicable to it or its Affiliates
or any Contract to which any of them is a party or to which any of them or any
of their assets are subject (to the extent described in reasonable detail in
response to any request for information specified above) or grant access to any
of their proprietary or confidential information not related to the Business.
(b) Subject to Section 3.2, whether or not the Closing occurs,
Purchaser will, and will cause its Affiliates other than Seller to, treat in
confidence all documents, materials and other information (including without
limitation information relating to
13
<PAGE>
supply and sales agreements and relationships with third persons or entities)
disclosed by any other party that is not its Affiliate, 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
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 nor any of its Affiliates will, and if the Closing occurs,
Seller will not and will cause its Affiliates not to, disclose to any third
party any confidential information, except as required by Law or rules of any
national stock exchange or any Governmental Authority applicable to it or its
Affiliates or Purchaser determines is required to be disclosed in connection
with the financing described in Section 2.2.3, subject to Seller's right to
review and reasonably object to such disclosure. If this Agreement is
terminated, Purchaser and each of its 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 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 the other parties, which consent will not be unreasonably
withheld or delayed; 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 or prohibit Purchaser from making any disclosure it determines may be
reasonably necessary in furtherance of obtaining the financing contemplated by
Section 2.2.3, 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) Not later than two business days after
the date hereof, Purchaser will, and Seller will cause the ultimate parent
entity of Seller to, make such filings, if any, as may be required by the HSR
Act with respect to the consummation of the transactions contemplated by this
Agreement. Thereafter, Purchaser 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
14
<PAGE>
(the "FTC") and the United States Department of Justice (the "DOJ") supplemental
information, if any, which may be required or requested by the FTC or the DOJ
pursuant to the HSR Act. To the extent required by Law, Seller will make, or
cause any of its Affiliates to make, such filings and use its reasonable efforts
to obtain the governmental approvals and the other third party consents (if any)
referred to in Section 2.1.3, and Purchaser will each make such filings and use
its reasonable efforts to obtain the governmental approvals and the other third
party consents (if any) referred to in Section 2.2.2. All filings referred to in
this Section 3.3(a) will comply in all material 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, if applicable,
(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 each of the
other parties hereto, and (iii) cooperate with each other and use reasonable
efforts to prevent the entry of, and 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, Section 3.6 or Section 3.9 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.
15
<PAGE>
3.5. Operation of the Business. Except in connection with or as a
result of any matter listed or described on Schedule 3.5, as expressly
contemplated herein or as otherwise consented to by Purchaser or requested by
Purchaser or any of its Affiliates, from the date hereof to the Closing Date,
Seller will cause the Company to:
(a) Use reasonable efforts to keep the Business intact
(including without limitation relationships with customers, employees,
suppliers and others) 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 efforts to maintain the goodwill associated with the
Business; without limiting the generality or effect of the foregoing,
(i) in all events Seller will take all actions so that, as of
immediately prior to the Closing, the total accounts payable and
accrued liabilities (other than any liabilities under the Canadian
Pension Plan) included in the C&A Imperial Canada Assumed Liabilities
total not more than $5.0 million and (ii) not effect any transaction
between Imperial Canada or C&A Canada, on the one hand, and any of the
Purchased Imperial Companies, on the other hand, except in the ordinary
course of business;
(b) Continue existing practices relating to maintenance of the
assets owned, leased or otherwise held by the Company for use in the
Business ("Assets") in good repair, ordinary wear and tear excepted,
and continue to make capital expenditures substantially in accordance
with budgets previously delivered to Purchaser (and Imperial hereby
agrees to continue to make capital expenditures only substantially in
accordance with budgets previously delivered to Purchaser unless each
other party otherwise consents);
(c) Not purchase, sell, lease or dispose of, or enter into any
Contract for the purchase, sale, lease or disposition of, or subject to
Lien, any of the Assets other than (i) Products or (ii) in the ordinary
course of business of the Business;
(d) Not adopt or make any amendment to any Employee Plan or
increase the general rates of compensation of Employees, except (i) as
required by Law or (ii) pursuant to any Contract in effect on the date
of this Agreement (Seller representing that, to the Knowledge of
Seller, no Contract providing for such adoption, amendment or increase
is in effect other than collective bargaining agreements the terms of
which have been previously disclosed to Purchaser);
16
<PAGE>
(e) Not enter into, amend, modify or cancel any material
Contract except in the ordinary course of business consistent with past
practice;
(f) Not incur indebtedness for borrowed money, or assume,
guarantee, endorse or otherwise become responsible for the obligations
of any other person or entity, or make loans or advances to any person
or entity (other than advances to Employees in the ordinary course of
business consistent with past practice reflected on the Company's books
and records);
(g) Not enter into any joint venture, partnership or similar
arrangement;
(h) Not amend its Certificate of Incorporation or By-Laws;
(i) Not dispose of, permit to lapse or otherwise fail to
preserve any of its Intellectual Property or other similar rights,
dispose of or permit to lapse any material Permit, or dispose of or
disclose to any person or entity other than an authorized
representative of Purchaser, any trade secret (except for such of the
foregoing as may occur by operation of Law or the terms of any of the
foregoing);
(j) Not make any change in the accounting methods, principles
or practices of the Business, except as required by GAAP;
(k) Not sell or factor any account receivable of the Business
or otherwise participate in any accounts receivable facility other than
to accept payments made by account debtors to the Company at an
existing lock-box of the Company (which lock-box arrangement will be
terminated as promptly as practicable);
(l) With respect to the Pension Plan for Salaried Employees of
Imperial Wallcoverings (Canada), Inc.(the "Canadian Pension Plan"), (1)
not withdraw any assets from the Canadian Pension Plan other than to
pay benefits in accordance with its existing terms, (2) not make any
amendment to the Canadian Pension Plan and (3) other than as may be
required by Law, make any change to the actuarial assumptions used in
determining the actuarial present value of the liabilities of the
Canadian Pension Plan;
(m) Not fail to pay when due any amount owed to a third party,
including without limitation, any Taxes, in accordance with the
applicable payment terms;
17
<PAGE>
(n) Not prepay any obligation of the Company other than (i) in
the ordinary course of business consistent with past practice or (ii)
Indebtedness; and
(o) Not enter into a Contract to do any of the foregoing
(other than as may be required by Section 3.5(a) or 3.5(b).
For purposes of this Agreement, "Intellectual Property" means all patents and
trademarks and all material trade names, service marks and registered
copyrights, and registrations and applications therefor, used or held for use in
the conduct of the Business.
3.6. Satisfaction of Conditions. Without limiting the generality or
effect of any provision of Section 3.3, 3.4 or 3.9 or 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.
3.7. Negotiations With Others. From the date hereof until the
termination of this Agreement in accordance with its terms or the Closing,
Seller and its Affiliates will not, and will cause its and their respective
officers, directors, investment bankers, attorneys, accountants and other agents
not to: (i) initiate, solicit (including by way of furnishing information) or
accept, any offer or proposal which constitutes, an Alternative Proposal or (ii)
in the event of an unsolicited Alternative Proposal, engage in substantive
discussions or negotiations, or enter into any Contract, with, or furnish
information to, any Person relating to any Alternative Proposal. All such
negotiations prior to the date hereof have been terminated. For purposes of this
Agreement, "Alternative Proposal" means any proposal or offer from any Person
relating to any acquisition or purchase of all or substantially all of the
assets or common stock of the Company or any merger, consolidation, business
combination or similar transaction involving the Company, other than the
transactions contemplated by this Agreement.
3.8. Certain Additional Covenants. Seller will use its reasonable
best efforts to cause the independent accountants that issued the reports
relating to the Offering Financial Statements to consent to Purchaser's use of
the Offering Financial Statements as may be required by applicable Law in the
disclosure documents relating to the financing contemplated by this Agreement or
any subsequent financing involving a public offering.
18
<PAGE>
3.9. Efforts to Consummate. Subject to the terms and conditions
herein provided, Seller and Purchaser will use their reasonable efforts to take
or cause to be taken, all actions and to do, or cause to be done, all things
necessary to consummate and make effective the transactions contemplated by this
Agreement and to cooperate with the other in connection with the foregoing.
Seller will, at its sole expense, cause to be included in the assets and
properties of the Company prior to the Closing all assets, properties, permits,
authorizations, rights and related obligations which are being used or held for
use primarily or exclusively by the Company (whether or not such assets,
properties, permits, authorizations, rights and related obligations are
presently owned or held by the Company), all on terms and conditions, and
pursuant to documentation, reasonably acceptable to Purchaser.
3.10. Resignations. Prior to the Closing, upon Purchaser's specific
request, Seller will cause to resign or to be removed from office such officers
and directors of Imperial and each of the Subsidiaries whose full-time
employment is not in the Business.
3.11. Certain Conditions. Notwithstanding any other provision hereof,
in the event that the condition to the Closing set forth in Section 4.2.4 is not
satisfied, Purchaser will have no liability or obligation to Seller or any other
Person under any provision of, or actual or alleged breach of, this Article III
(other than Section 3.1(b) or 3.2), the parties hereby expressly acknowledging
and agreeing that Purchaser will have no liability or obligation hereunder if
the Borden Recap shall not have been consummated.
3.12. Certain Pre-Closing Transactions. Prior to the Closing, Seller
will cause Imperial to Transfer to C&A Canada the Imperial-Owned Imperial Canada
Shares for $1.00 and will cause the Imperial Canada Liquidation to be effected
with the result described in the recitals to this Agreement; such Transfer and
Imperial Canada Liquidation will be deemed not to constitute a breach of any
representation, warranty or covenant herein.
IV. THE CLOSING
4.1. Conditions Precedent to Obligations of Purchaser and Seller. The
obligations of Purchaser 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 there shall be no injunction,
restraining order or decree of any nature of any court or governmental agency or
body of competent jurisdiction that is in effect that prohibits the Closing and
the waiting period (and any extension thereof) applicable to the Imperial Canada
Business Acquisition
19
<PAGE>
and the purchase and sale of the Imperial Shares contemplated hereby under the
HSR Act shall have lapsed or been terminated. The foregoing conditions may be
waived (i) insofar as it is a condition to the obligations of Purchaser, by
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. The
obligations of Purchaser 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 Purchaser:
4.2.1. No Material 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.
4.2.2. Transfer Documents, Etc. Seller shall have delivered or caused
to be delivered to Purchaser the certificates representing the Imperial Shares,
and certificates representing all shares of capital stock of the Subsidiaries,
which certificates shall have been duly endorsed for transfer or accompanied by
duly executed stock powers, with (if applicable) any required tax stamps affixed
thereto and a Bill of Sale and other transfer documents for the C&A Imperial
Canada Assets, including without limitation, a deed of sale for the owned real
property included in the C&A Imperial Canada Assets, in a form reasonably
acceptable to Purchaser.
4.2.3. Other Documents. Seller shall have duly executed and delivered
to Purchaser a Management Services Agreement in substantially the form of
Schedule 4.2.3(a) (the "MSA") and a Noncompetition Agreement in substantially
the form of Schedule 4.2.3(b) (the "NCA"), and Seller shall have delivered to
Purchaser an opinion of Cravath, Swaine & Moore, counsel to Seller,
substantially to the effect set forth in Schedule 4.2.3(c).
4.2.4. Borden Closing. The conditions to the obligations of Purchaser
to consummate the Borden Recap shall have been satisfied or duly waived in
accordance with the requirements thereof.
4.2.5. Material Adverse Change. Since September 26, 1997, there shall
not have occurred (a) a Material Adverse Effect or (b) any event which could
reasonably be expected to have a Material Adverse Effect.
20
<PAGE>
4.2.6. No Litigation. There shall not be pending or threatened any
litigation seeking to enjoin this Agreement or the transactions contemplated
hereby or the Borden Recap or seeking substantial damages as a result thereof.
4.2.7. Certain Approvals. All filings and approvals specified in
Schedule 2.1.3 shall have been made or obtained and shall be in full force and
effect.
4.2.8. Release of Liens. Seller shall have delivered to Purchaser
evidence reasonably satisfactory to Purchaser of the release and termination of
all Liens in respect of Indebtedness and any guarantees of indebtedness of
Seller or any Post-Closing Affiliate.
4.2.9. Evidence of Imperial Canada Liquidation. Seller shall have
furnished to Purchaser evidence reasonably satisfactory to Purchaser that the
Imperial Canada Liquidation has been effected and that, as a result of the
Imperial Canada Liquidation, C&A Canada has all right, title and interest in and
to the assets of Imperial Canada.
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 Breach. There shall have been no material breach by
Purchaser in the performance of any of the covenants herein to be performed by
it in whole or in part prior to the Closing.
4.3.2. Closing Payment. Purchaser shall have delivered the Closing
Payment to Seller in the manner specified in Section 1.2.
4.3.3. Option. Purchaser shall have executed and delivered to Seller
an Option Agreement in substantially the form of Exhibit A (the "Option
Agreement") under which Seller will have the right (the "Option") to purchase
6.7% of the common stock of BDPH issuable in the Merger calculated as specified
in Footnote 1 of Exhibit A at an initial option exercise price (the "Initial
Exercise Price") calculated in accordance with Note 2 of Exhibit A and otherwise
on the terms set forth in Exhibit A. The Initial Exercise Price will be
proportionately increased to the extent that stockholders of Purchaser make any
additional contributions to the capital of BDPH to fund any adjustments required
by Section 1.3 and the comparable provisions of the Borden Agreement.
21
<PAGE>
4.3.4. Other Documents. Purchaser shall have caused the Company to
have duly executed and delivered to Seller the MSA and the NCA, and Purchaser
shall have delivered to Seller an opinion of Jones, Day, Reavis & Pogue, counsel
to Purchaser, substantially to the effect set forth in Schedule 4.3.4.
4.4. The Closing. 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 and sale of the Shares contemplated hereby (the "Closing") will
take place on December 31, 1997 (or as soon as practicable thereafter as all of
the conditions to the Closing set forth in Section 4.3 are satisfied or waived)
(the actual date of the Closing, the "Closing Date"). The Closing will take
place at 10:00 A.M., Eastern Time, at the offices of Jones, Day, Reavis & Pogue,
599 Lexington Avenue, New York, New York 10022 or at such other time or place or
on such date as shall be agreed upon the parties. At the Closing, the parties
will execute and deliver such transfer and assumption documentation as may be
customary to evidence the Transfer of the C&A Imperial Canada Assets and the
assumption of the C&A Imperial Canada Assumed Liabilities, as contemplated
herein.
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 Purchaser and Seller;
(b) By Purchaser or Seller if the Closing shall not have
occurred on or before May 31, 1998 (the "Drop Dead Date");
(c) By either 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;
(d) By Purchaser, in its sole discretion, on December 5, 1997
or, if later, the fifth day following Seller's delivery of the Offering
Financial Statements, but neither before nor after such date, if the
Offering Financial Statements reflect an adverse difference from the
financial information for the first three quarters of fiscal year 1997
previously provided to Purchaser by Imperial in any material respect as
determined by Purchaser, which determination will be conclusive for all
purposes; or
22
<PAGE>
(e) By Purchaser, in its sole discretion, by notice given to
Seller prior to 5:00 p.m., New York time, on November 5, 1997.
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 Sections 3.1(b), 3.2 and 7.2 or by reason of a breach
of any covenant or representation or warranty contained in this Agreement,
including without limitation the covenants contained in Sections 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 and in the last
sentence of Section 6.1.3(a) will survive the Closing and remain in full force
and effect until the later of (i) the expiration of the applicable statute of
limitations and (ii) the fifth anniversary of the Closing Date, except that the
representations and warranties contained in clauses (ii) and (iii) of the first
sentence of Section 2.1.3 and Sections 2.1.4, 2.2.2 and 2.2.4 will not survive
the Closing. Any claim for indemnification with respect to such matters which is
not asserted by a notice given as herein provided specifically identifying the
particular breach underlying such claim (whether or not the Indemnifiable Loss
has been actually incurred as of the date of such notice) and the facts and
Indemnifiable Loss relating thereto (to the extent reasonably determinable as of
the date of such notice), 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,
3.5(a)(i)-(ii), 3.5(l), 3.5(m), 3.5(n), 3.8 and 3.9 (second sentence only), in
this Article V and in Articles I, VI and VII (the "Post-Closing Covenants") 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 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 or entity
entitled to indemnification under this Agreement, (iii) "Indemnifying
23
<PAGE>
Party" means any person or entity required to provide indemnification under this
Agreement, (iv) "Indemnifiable Losses" means any and all claims, demands,
actions, suits or proceedings (by any person or entity, including without
limitation any Governmental Entity), settlements and compromises relating
thereto and reasonable attorneys' fees and expenses in connection therewith or
in enforcing the Indemnifying Party's obligations hereunder, losses,
liabilities, costs and expenses, reduced by the amount of insurance proceeds
actually received from any person or entity that is not an Affiliate of the
Indemnitee, and (v) "Third Party Claim" means any claim, demand, action, suit or
proceeding made or brought by any person or entity who or which is not a party
to this Agreement or an Affiliate of a party to this Agreement.
(b) After the Closing, as between Seller and any Post-Closing
Affiliate, on the one hand, and Purchaser, the Purchased Imperial Companies and
any Affiliate of either of them, on the other hand, the rights and obligations
set forth in this Article V will be the sole and exclusive remedies for breach
of this Agreement.
5.3. Indemnification. (a) Subject to Sections 5.1, 5.2 and 5.4, Seller
will indemnify, defend and hold harmless Purchaser and its Affiliates and their
respective directors, officers, partners, shareholders, employees, agents and
representatives (including, without limitation, any predecessor or successor to
any of the foregoing) (such persons and entities, "Purchaser Indemnitees") 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 Post-Closing Covenant of
Seller contained in this Agreement;
(iii) Any controlled group liability under (A) Title IV of
ERISA, (B) Section 302 of ERISA, (C) Sections 412 and 4971 of the
Internal Revenue Code of 1986, as amended (the "Code"), (D)
continuation coverage requirements of Sections 601, et seq. of ERISA
and Section 4980B of the Code, and (E) corresponding or similar
provisions of foreign Laws, other than such liabilities that arise
solely out of, or relate solely to, Employees or Former Employees;
(iv) All Indemnifiable Losses incurred by any Purchaser
Indemnitee by reason of any liability or obligation of Seller or any of
its Post-Closing Affiliates that does not solely arise out of the
Business or the Company; and
24
<PAGE>
(v) The assertion against Purchaser or any of its Affiliates
of any liability or obligation of Imperial Canada or C&A Canada that is
not a C&A Imperial Canada Assumed Liability.
(b) Subject to Sections 5.1, 5.2 and 5.4, Purchaser will, and, if the
Closing occurs, Imperial, jointly and severally with Purchaser will, indemnify,
defend and hold harmless Seller and each Post-Closing Affiliate and their
respective directors, officers, partners, shareholders, employees, agents and
representatives (including, without limitation, any predecessor or successor to
any of the foregoing) (such persons and entities, "Seller Indemnitees") from and
against any and all Indemnifiable Losses relating to, resulting from or arising
out of:
(i) Any breach by Purchaser of any of the representations or
warranties of Purchaser contained in this Agreement;
(ii) Any breach by Purchaser of any Post-Closing Covenant of
Purchaser contained in this Agreement;
(iii) The Assumed Push-Down Liabilities;
(iv) All Indemnifiable Losses incurred by any Seller
Indemnitee by reason of any liability or obligation of the Company that
solely arises out of the Business or the operations of the Company,
provided, however, that this Section 5.3(b)(iv) will not apply to any
matter for which Purchaser is entitled to indemnification under Section
5.3(a); and
(v) The assertion against Seller or any of its Post-Closing
Affiliates of any C&A Imperial Canada Assumed Liability.
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 30
calendar days after receipt of such written 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
25
<PAGE>
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 or
if the Indemnifying Party has not undertaken fully to indemnify the Indemnitee
in respect of all Indemnifiable Losses relating to the matter, 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, or which
provides for injunctive or other non-monetary relief applicable to the
Indemnitee or does not include an unconditional release of all Indemnified
Parties. 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 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
26
<PAGE>
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 to the Indemnitee, 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 or entity, the amount of such reduction, less any costs, expenses,
premiums or taxes incurred in connection therewith, 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 or entity that is not
an Affiliate 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 claims of the Indemnifying Party against
any such third person or entity on account of said Indemnity Payment will be
subrogated and subordinated in right of payment to the Indemnitee's rights
against such third person or entity. 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) Purchaser and
Imperial, jointly and severally, will indemnify Seller and
27
<PAGE>
each of its Affiliates for any Indemnifiable Loss relating to, resulting from
or arising out of any change by Purchaser or any of its affiliates, including
the Company, in employee plan benefits or levels of compensation following the
Closing Date from those existing on the Closing Date or any liability or
obligation to any Employee in the event that Purchaser or any of its affiliates,
including the Company, terminates the employment of any person who is an
Employee as of the Closing Date. Subject to Section 6.1.4, effective as of the
Closing Date, Purchaser will, or will cause one of its Affiliates to, offer
employment to each person employed as of the Closing Date by C&A Canada that
would have been employed by Imperial Canada but for the Imperial Canada
Liquidation ("Imperial Canada Employees").
(b) Purchaser agrees that, under any employee benefit plan made
available or established after the Closing, Employees will receive credit for
their years of service with Seller, any Post-Closing Affiliate or the Company
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
Employees and Former Employees as of the Closing under a group health plan and
waive any preexisting condition limitations applicable to Employees under any
group health plan made available to Employees to the extent that an Employee's
condition would not have operated as a preexisting condition limitation under
any applicable group health plan prior to the Closing, and Purchaser will, or
will cause one of its Affiliates to, take all action necessary to ensure that
Employees and Former 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.
(c) For purposes of this Agreement, 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
(i) provides benefits for Employees or Former Employees and (ii) is maintained
by Seller, any Post-Closing Affiliate or the Company or to which Seller, any
Post-Closing Affiliate or the Company contributes or is obligated to contribute,
or under which Seller, any Post-Closing Affiliate or the Company is liable in
respect of Employees or Former Employees. As used in this Agreement, (A) the
term "Employee" means each person (if any) listed or described as such on
Schedule 6.1.1 and each person who is an Imperial Canada Employee or is employed
by the Company as of the Closing(Seller hereby covenanting that no such person
will be so employed who also works for Seller or any Post-Closing Affiliate) and
(B) the term "Former Employee" means any person formerly so employed by the
Company in the conduct of the
28
<PAGE>
Business but does not include person who became an employee of Seller (or any
entity that is or was an Affiliate of Seller) following the termination of their
employment with the Company. 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.
6.1.2. Assumption of Obligations. (a) Effective as of the Closing,
Purchaser will cause the Company to assume and be solely responsible for all
liabilities and obligations of any of Seller and each Post-Closing Affiliate
arising at any time and relating to the employment or termination of employment
of any Employee or Former Employee, except to the extent that any of such
liabilities or obligations are expressly retained by any Seller or any
Post-Closing Affiliate pursuant to this Section 6.1. Notwithstanding the
foregoing but subject to the provisions of Section 6.1.1, Seller will retain and
be solely responsible for all liabilities and obligations relating to or arising
out of the deemed termination of any Imperial Canada Employee arising solely by
virtue of the fact that the Imperial Canada Business Transaction is in the form
of a sale to Purchaser of assets rather than the capital stock of Imperial
Canada.
(b) Except as provided in Section 6.1.3, effective as of the Closing,
Purchaser will cause the Company to, assume and be solely responsible for all
liabilities and obligations of Seller or any Post-Closing Affiliate with respect
to Employees and Former Employees under any Employee Plan and Seller and each
Post-Closing Affiliate will be relieved of all liabilities and obligations with
respect to such Employee Plans. The liabilities and obligations assumed by
Purchaser and all of its Affiliates pursuant to this Section 6.1.2(b) include
without limitation (i) any liability or obligation relating to (x) short-term
and long-term disability benefits, (y) group medical benefits, and (z) retiree
health and life insurance benefits; including in each case any claims for
disability, medical, health and life insurance benefits incurred prior to the
Closing; and (ii) any liability or obligation to provide such Employees and
Former 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 Employees and Former 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. Notwithstanding the foregoing, neither Purchaser
nor any of its Affiliates will assume any liabilities or obligations with
respect to Seller's cafeteria plan arrangement arising out of any
29
<PAGE>
failure of Seller to set forth the terms of such plan in a written plan
document.
(c) Purchaser and Seller will, and Seller will cause C&A Canada to,
take all steps (i) as are necessary (including obtaining all required
governmental or third party consents) to effect the assumption by Purchaser or
one of Purchaser's Affiliates of the Employee Benefit Plans (other than the
plans referred to in Section 6.1.3) maintained or sponsored by Imperial Canada
prior to the Imperial Canada Liquidation and the collective bargaining
agreements covering Employees employed by Imperial Canada prior to the Imperial
Canada Liquidation and (ii) as are reasonably calculated to ensure that
Purchaser or its Affiliate assuming such plans and collective bargaining
agreements do not incur any obligations or liabilities with respect to such
plans and agreements that are greater than, or in addition to, C&A Canada's
obligations or liabilities as successor to Imperial Canada's obligations or
liabilities under the terms of such plans and agreements as of the Closing Date.
6.1.3. Retirement Plans. (a) As of the Closing, Seller will cause
Employees to fully vest in their accrued benefits under the Collins & Aikman
Corporation Employees' Profit Sharing and Personal Savings Plan (the "Savings
Plan") and the Collins & Aikman Corporation Employees' Pension Account Plan (the
"Pension Plan" and, together with the Savings Plan, the "Retirement Plans").
Except as provided in Section 6.1.3(b), 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. As soon as practicable after
the Closing, to the extent permitted by Law and the terms of the Pension Plan,
Seller will permit distributions to Employees of their accrued benefits under
the Pension Plan. 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 Pension Plan to each 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 from the Pension Plan are not permitted under Law,
Purchaser and Seller will take such mutually agreed upon action with respect
to Employees' 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
Pension Plan for eventual distribution pursuant to the terms of such plan. All
distributions under the Pension Plan will satisfy all requirements for
funding as are required by Law giving effect to the transactions contemplated
by this Agreement. Seller represents and warrants that distributions to
Employees as
30
<PAGE>
contemplated by this Section 6.1.3 are permitted by the terms of the Pension
Plan.
(b) As soon as reasonably practicable following the Closing, Seller
will cause the trustee of the Savings Plan to transfer the account balances of
Employees and Former Employees to the trustee of a qualified defined
contribution plan maintained by Purchaser or any one of its Affiliates
("Purchaser's Plan"). Such transferred account balances will be made in cash
except to the extent any portion of an account balance represents a participant
loan, in which case the participant's loan obligation will be transferred to the
trustee of Purchaser's Plan. The assets transferred from the Savings Plan to
Purchaser's Plan will be equal to the account balances of the transferring
Employees and Former Employees as of the valuation date immediately preceding
the date of transfer. No transfer of assets to Purchaser's Plan will occur until
Purchaser and Seller have received such assurances as are reasonable that the
applicable provisions of the Code have been satisfied. Purchaser will take such
action as may be necessary to cause Purchaser's Plan to provide each such
Employee and Former Employee after the transfer with an initial account balance
that is at least equal to the account balance transferred with respect to such
Employee and Former Employee from the Savings Plan, and to provide all benefits
protected by law, including optional forms of benefit.
(c) Purchaser and Seller will, and Seller will cause Imperial Canada
to, take all steps as are necessary or reasonably requested by Purchaser, to
transfer the sponsorship of the Canadian Pension Plan to Purchaser, or one of
Purchaser's Affiliates (including obtaining all required governmental and third
party consents). To the extent such a transfer is not permitted by the terms of
the Canadian Pension Plan or applicable Law, Seller and Purchaser will permit
distributions or make other arrangements in the same manner as contemplated with
respect to Pension Plan by the third and fourth sentences of Section 6.1.3(a),
subject to applicable law.
6.1.4. Employment and Plan Amendments or Terminations. Except as
provided in Section 6.1.1, no provision of this Section 6.1 will limit
Purchaser's or any of its Affiliates' right and authority to discontinue,
suspend or modify the employment of any Employee or benefits provided to any or
all Employees or Former 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 all Employee Plan and
other employee benefit liabilities or obligations assumed pursuant to this
Agreement and will indemnify, defend and hold harmless Seller, each Post-Closing
Affiliate and their respective directors, officers, partners,
31
<PAGE>
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 Post-Closing Affiliate 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 under this Section 6.1.
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 Plan that Purchaser or
any of its Affiliates is assuming or continuing pursuant to this Agreement and
(b) cause any insurance carrier administering workers' compensation and other
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 Employee's or
Former Employee's employment with and compensation from Seller, any Post-Closing
Affiliate or Purchaser or any of its Affiliates, as the case may be, or rights
or benefits under any employee benefit plan which the other party hereto may
reasonably request.
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, 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.
6.2.2. Access. (a) On the Closing Date, or as soon thereafter as
practicable, and in no event later than 30 calendar days after the Closing Date,
Seller will deliver or cause to be delivered to Purchaser all original
agreements, documents, books, records, including without limitation Employee
records and records relating to obligations of the Company to Employees under
Employee Plans retained or assumed by Purchaser or the Company hereunder, and
files primarily relating to the Business or the Company (collectively,
"Records") in the possession of Seller or any Post-Closing Affiliate to the
extent not in the possession of the Company or Purchaser, subject to the
following exceptions:
32
<PAGE>
(i) Purchaser recognizes that certain Records may contain only
incidental information relating to the Company or may primarily relate
to Seller or any Post-Closing Affiliate, or the businesses of Seller or
any Post-Closing Affiliate other than the Business, and Seller and its
Post-Closing Affiliates may retain such Records and Seller may deliver
appropriately excised copies of such Records; and
(ii) Seller and each Post-Closing Affiliate 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 Purchaser following the Closing.
After the Closing, each party will, and will cause its Affiliates to, retain all
Records (except those Records referred to in Section 6.2.2(a)(i) and (ii))
required to be retained pursuant to obligations imposed by any applicable Law.
Except as provided in the immediately preceding sentence, each party will, and
will cause its Affiliates to, retain all Records for a period of seven years
after the Closing Date. After the end of such seven-year period, before
disposing, or permitting its Affiliates to dispose, of any such Records, each
party will, and will cause its Affiliates to, give notice to such effect to the
other party and give the other party at its cost and expense an opportunity to
remove and retain all or any part of such Records as the other party 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, 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
(including, without limitation, any Tax Return relating to state or local real
property transfer or gains taxes), audits, legal proceedings, governmental
investigations and other business purposes and to make inquiries relating
thereto of the relevant personnel; 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 (except to the extent
required for purposes of defending or prosecuting any third party lawsuits or
administrative or other adjudicative proceedings ("Legal Proceedings")). Each
party will, and will cause its respective Affiliates controlled by it to,
provide or make available to the other and the other's respective Affiliates
access to employees of Purchaser and the Company for the purposes
33
<PAGE>
of, and with the limitations described in, the preceding sentence (including
without limitation for the purpose of providing, and preparing to provide,
testimony in connection with third party Legal Proceedings).
6.2.3. Certain Tax Matters. (a) Seller will prepare and file or cause
to be prepared and filed all Income Tax Returns for the Purchased Imperial
Companies required to be filed with the appropriate foreign, United States,
state and local taxing authorities for any taxable period that ends on or before
the Closing Date (each a "Pre-Closing Tax Period"). Seller will prepare and, if
required to do so by applicable Law, deliver to Purchaser for signing and filing
any Income Tax Returns of the Purchased Imperial Companies with respect to any
Pre-Closing Tax Period (including any short period) that have not been filed
prior to the Closing Date. Seller will pay all Taxes required to be paid with
respect to such Tax Returns. Seller will prepare and file or cause to be
prepared and filed all Income Tax Returns for Imperial Canada and will pay all
Income Taxes required to be paid with respect to such Tax Returns.
(b) Except as otherwise provided in Section 6.2.3(a) or Section
6.2.3(c), Purchaser will prepare and file or cause to be prepared and filed all
Tax Returns for the Purchased Imperial Companies that are required to be filed
with the appropriate United States, state, local and foreign taxing authorities
for all periods as to which such Tax Returns are due after the Closing Date
(taking into account all extensions of due dates). Subject to Section 6.2.3(r)
and Section 6.2.3(v), Purchaser will pay or cause to be paid all Taxes required
to be paid with respect to such Tax Returns.
(c) With respect to any taxable period that would otherwise include but
not end on the Closing Date, to the extent permissible pursuant to applicable
Law, Seller will, and Purchaser will cause the Purchased Imperial Companies and
Imperial Canada to, insofar as possible, (i) take all steps as are or may be
reasonably necessary, including without limitation the filing of elections or
returns with applicable taxing authorities, to cause such period to end on the
Closing Date or (ii) if clause (i) is inapplicable, report (insofar as possible)
the operations of the Purchased Imperial Companies only for the portion of such
period ending on the Closing Date in a combined, consolidated or unitary Tax
Return filed by Seller or a Post-Closing Affiliate, and report the operations of
Imperial Canada only for the portion of such period ending at the close of
business on the Closing Date, notwithstanding that such taxable period does not
end on the Closing Date. If clause (ii) applies to a taxable period of the
Purchased Imperial Companies, the portion of such taxable period included in
such return filed by Seller will be treated as a Pre-Closing Tax Period
described in
34
<PAGE>
Section 6.2.3(a) and Purchaser will not be responsible for filing such return
for such portion of such year pursuant to Section 6.2.3(b), provided that the
foregoing will not relieve Purchaser of its obligation under Section 6.2.3(b) to
file a Tax Return reporting the operations of the Purchased Imperial Companies
for the portion of such taxable period beginning after the Closing Date. If it
is not possible for a Tax Return to be filed for Non-Income Taxes that reports
the operations of Imperial Canada only for the period ending at the close of
business on the Closing Date, the parties shall cooperate in preparing a return
for the whole taxable period.
(d) 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, Seller's standard international, federal and state Income Tax Return
data gathering packages relating to the Purchased Imperial Companies, and
Seller's standard Tax Return data gathering packages relating to the Non-Income
Taxes of Imperial Canada (if appropriate pursuant to Section 6.2.3(c)). Such
packages will be prepared on a basis consistent with the prior year's Income Tax
or Non-Income Tax (if appropriate) Returns. In addition to providing such
packages to Seller, Purchaser will promptly provide or cause to be provided to
Seller such other information as Seller may reasonably request in order for the
operations of the Company to be properly reported in such Income Tax or
Non-Income Tax(if appropriate) Returns.
(e) Seller will indemnify, defend and hold harmless Purchaser and each
of its Affiliates from and against any and all liability for any taxable period
as a result of Treasury Regulation Section 1.1502-6 (or any comparable provision
of state, local or foreign law) for Income Taxes of any corporation, other than
the Purchased Imperial Companies which is or has been affiliated with Seller or
Collins & Aikman Corporation, a Delaware corporation ("C&A Corp.").
(f) Purchaser is eligible to and will make a timely and effective
election under Section 338(g) of the Code (and any comparable provision of state
or local law) with respect to the purchase of the Imperial Shares hereunder.
Both Seller and Purchaser are eligible to, and Purchaser will make and Seller
will cause C&A Corp. to make, a timely and effective election under Section
338(h)(10) of the Code (and any comparable provision of state or local law) with
respect to such purchase (the "Section 338(h)(10) Election").
(g) At the Closing, Purchaser will deliver to Seller a completed
Internal Revenue Service Form 8023A, and the required schedules thereto ("Form
8023A"), providing for the Section 338(h)(10) Election. Provided that the
information on such Form
35
<PAGE>
8023A is, in the reasonable determination of Seller, correct and complete in all
material respects, Seller will, at the Closing, execute and deliver such Form
8023A to Purchaser. If any changes or supplements are required to the Form 8023A
as a result of any information that is first available after the Closing, Seller
and Purchaser will promptly agree upon and make such changes. Purchaser and
Seller (or C&A Corp.) will timely file the Form 8023A, and any required
supplements thereto, and will provide written evidence to the other that it has
done so.
(h) Purchaser and Seller agree that neither of them will take, or
permit their Affiliates to take, any action to modify or revoke the elections
contained in or the content of any Form 8023A without the express written
consent of the other party.
(i) Seller will pay and indemnify and hold Purchaser and Imperial
harmless from (i) any and all Taxes arising from the Section 338(h)(10) Election
and (ii) any Tax liability, cost or expense arising out of the failure to pay
such Tax. Seller will also pay any state or local Tax (and indemnify and hold
Purchaser and the Purchased Imperial Companies harmless against any Tax
liability, cost or expense arising out of any failure to pay such Tax)
attributable to any election under state or local law comparable to the election
available under Section 338(g) of the Code (or which results from the making of
an election under Section 338(g) of the Code) with respect to Purchaser's
acquisition of the Purchased Imperial Companies.
(j) Purchaser and Seller agree to report transactions under this
Agreement consistent with the Section 338(h)(10) Election and will take no
position contrary thereto unless required to do so pursuant to a final
determination by any Taxing authority or judicial proceeding.
(k) Seller will cause any tax sharing agreements between the Company
and Seller or any other Post-Closing Affiliate to be terminated, effective as of
the Closing Date, to the extent that any such agreement relates to the Company.
(l) Purchaser and Seller agree that for purposes of all Tax Returns and
other appropriate documents, (i) $10 million of the Purchase Price will be
allocated to the Imperial Canada Business Acquisition, (ii) the balance of the
Purchase Price and the liabilities of the Purchased Imperial Companies (plus
other relevant items) will be allocated to the assets of the Purchased Imperial
Companies (with the Option deemed for this purpose to be valued at $6 million)
in a manner consistent with the purchase price allocation to be determined by
the parties in accordance with Treasury Regulation Section 1.338(h)(10)-1, and
(iii) the sum of $10 million and the C&A Imperial Assumed Liabilities will be
allocated among the C&A Imperial Canada Assets as follows:
36
<PAGE>
(A) Purchaser will propose such an allocation and (B) if Seller disagrees in
good faith, after consultation with its Canadian tax advisors, with Purchaser's
proposed allocation, Purchaser, Seller and their respective Canadian tax
advisors will negotiate to determine such an allocation based on the principle
that Purchaser's proposed allocation will be used to the maximum extent
permitted by Canadian tax law. Such allocation as finally determined will be
evidenced by a writing signed by Seller and Purchaser. The parties agree that,
if requested by Seller, the parties will make any election under Canadian tax
law necessary to permit C&A Canada or Imperial Canada to treat any loss on
accounts receivable as an ordinary loss unless Purchaser determines in its sole
discretion that such election could have a negative impact on Purchaser or any
of its Affiliates.
(m) On or before the Closing Date, Seller agrees to provide Purchaser
and the Company with all required clearance certificates or similar documents
that may be required by any state, local or other Taxing authority in order, to
the extent allowed, to relieve Purchaser of any obligation to withhold any
portion of the Purchase Price. If necessary to avoid sales or use Taxes, Seller
will, to the extent allowed, provide Purchaser with all appropriate state and
local resale certificates.
(n) Seller will furnish to Purchaser on or before the Closing Date a
certification of Seller's non-foreign status as set forth in Treasury Regulation
Section 1.1445-2(b).
(o) Seller, Purchaser and the Company will reasonably cooperate with
each other in connection with the preparation and filing of all Tax Returns or
any audit examinations for any period, including without limitation the timely
furnishing or making available of records, books of account and any other
information necessary for the preparation of the Tax Returns.
(p) (i) With respect to any Income Tax Return of the Purchased Imperial
Companies for a Pre-Closing Tax Period and any Income Tax Return of Imperial
Canada for any tax period, Seller and its duly appointed representatives will
have the sole right, at its or their expense, to supervise or otherwise
coordinate any examination process and to negotiate, resolve, settle or contest
any asserted Tax deficiencies or assert and prosecute any claims for refund;
notwithstanding the foregoing, without the express written consent of Purchaser
or Imperial, which consent will not be unreasonably withheld or delayed, Seller
will not file any amended Tax Return, settle any Tax claim or assessment, or
surrender any right to claim a refund of Tax, if such action could have the
effect of increasing the Tax liabilities of the Purchased Imperial Companies or
Purchaser.
37
<PAGE>
(ii) With respect to any other Tax Return of C&A Imperial
Canada or the Purchased Imperial Companies, Purchaser, the Purchased Imperial
Companies and their duly appointed representatives will have the sole right, at
the expense of Purchaser or the Purchased Imperial Companies, to supervise or
otherwise coordinate any examination process and to negotiate, resolve, settle
or contest any asserted Tax deficiencies or assert and prosecute any claims for
refund; notwithstanding the foregoing, without the express written consent of
Seller, which consent will not be unreasonably withheld or delayed, neither
Purchaser nor the Purchased Imperial Companies will file any amended Tax Return,
settle any Tax claim or assessment, or surrender any right to claim a refund of
Tax, if such action could have the effect of increasing the Tax liabilities of
Seller or any Post-Closing Affiliate.
(iii) Each party hereto will notify the other within 30
calendar days (unless action is required sooner, then as soon as practicable) of
the assertion of any claim or the commencement of any suit, action, proceeding,
investigation or audit with respect to the operations of the Company that is the
subject of this Section 6.2.3(p), and will provide the other copies (subject to
deletion of nonrelevant information) of all correspondence relating to such
contest.
(q) (i) "Income Tax" or "Income Taxes" means all Taxes imposed on,
measured by or which 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 require reference to, net or taxable income),
together with interest and penalties thereon and estimated payments thereof,
(ii) "Taxes" means all federal, state, local, foreign and other taxes (including
without limitation income, profits, premium, estimated, excise, sales, use,
occupancy, gross receipts, franchise, ad valorem, severance, capital levy,
production, transfer, withholding, social security, employment, unemployment
compensation, payroll-related and property taxes, alternative minimum, estimated
stamp, value added, windfall profits, import duties and other governmental
charges and assessments), whether or not measured in whole or in part by net
income, and including deficiencies, interest, additions to tax or additional
amounts, interest and penalties with respect thereto (such term shall also
include any "Taxes" as to which the Company is liable as a successor or
transferee or pursuant to a contractual obligation), (iii) "Non-Income Taxes"
means all Taxes that are not Income Taxes, and (iv) "Tax Returns" means all
returns, reports or information returns or statements relating to Taxes as are
required to be filed with any United States, state, local and foreign taxing
authorities.
38
<PAGE>
(r) Seller will defend, indemnify and hold harmless Purchaser and the
Purchased Imperial Companies and their respective directors, officers,
employees, agents and representatives (including, without limitation, any
predecessor or successor to any of the foregoing) from and against any breach of
a covenant contained in this Section 6.2.3 and against the following Taxes and,
except as otherwise provided in Section 6.2.3(s), against any loss, damage,
liability, or expense, including reasonable fees for attorneys and consultants,
incurred in contesting or otherwise in connection with any such Taxes and in
enforcing their rights under this Section 6.2.3: (i) all Income Taxes imposed on
the Purchased Imperial Companies with respect to taxable periods ending before
or on the Closing Date, (ii) all Income Taxes of Imperial Canada with respect to
any Tax period, (iii) with respect to taxable periods beginning before the
Closing Date and ending after the Closing Date, Income Taxes imposed on the
Purchased Imperial Companies that are allocable, pursuant to Section 6.2.3(s),
to the portion of such period ending on the Closing Date, (iv) all Non-Income
Taxes of Imperial Canada that arise or accrue after the close of business on the
Closing Date, and (v) all Canadian Non-Income Taxes arising out of or related to
the pre-Closing transfer pricing practices of Seller and its Affiliates.
(s) Purchaser will, and, if the Closing occurs, Imperial jointly and
severally with Purchaser will, indemnify, defend and hold harmless Seller, each
Post-Closing Affiliate and their respective directors, officers, partners,
employees, agents and representatives (including, without limitation, any
predecessor to any of the foregoing) from and against (i) all Income Taxes
imposed on the Purchased Imperial Companies with respect to taxable periods
beginning after the Closing Date and, with respect to taxable periods beginning
before the Closing Date and ending after the Closing Date, Income Taxes imposed
on the Purchased Imperial Companies that are allocable, pursuant to Section
6.2.3(t), to the portion of such period beginning after the Closing Date, (ii)
all Income Taxes relating to or arising out of the operation by Purchaser or any
of its Affiliates of the business of Imperial Canada after the Closing Date,
(iii) all Non-Income Taxes of the Purchased Imperial Companies with respect to
any Tax period and Non-Income Taxes of Imperial Canada that arise or accrue
through the close of business on the Closing Date, in each case other than sales
and transfer Taxes which are Seller's responsibility pursuant to Section
6.2.3(v) and Taxes which are Seller's responsibility pursuant to Section
6.2.3(r)(v), and (iv) any loss, damage, liability, or expense, including
reasonable fees for attorneys and consultants, incurred in contesting or
otherwise in connection with any such Taxes and in enforcing their rights under
this Section 6.2.3.
39
<PAGE>
(t) In the case of Income Taxes of the Purchased Imperial Companies and
Non-Income Taxes of Imperial Canada that are payable with respect to a taxable
period that begins before the Closing Date and ends after the Closing Date, the
portion of any such Tax that is allocable to the portion of the period ending on
the Closing Date or, in the case of Non-Income Taxes of Imperial Canada, at the
close of business on the Closing Date, will be deemed equal to the amount that
would be payable if the taxable year ended immediately prior to the Closing
Date (including the taxable years of organizations in which the Company owns a
partnership interest or equity interest) (except that, solely for purposes of
determining the marginal tax rate applicable to income or receipts during such
period in a jurisdiction in which such tax rate depends upon the level of income
or receipts, annualized income or receipts may be taken into account if
appropriate for an equitable sharing of such Taxes). The portion of Tax
allocable to the portion of the period ending on the Closing Date shall be
computed on a per diem basis in the case of Taxes that are neither (x) Income
Taxes nor (y) imposed in connection with any sale or other transfer or
assignment of property, real or personal, tangible or intangible.
(u) Any Tax refund (or comparable benefit resulting from a reduction in
Tax liability) for a period ending on or before the Closing Date arising out of
the carryback of a loss or credit incurred by the Purchased Imperial Companies
in a taxable period (or allocable portion thereof) ending after the Closing Date
will be the property of Purchaser and, if received by Seller or any Post-Closing
Affiliate will be paid over promptly to Purchaser (including any interest
received from or credited thereon by the applicable taxing authority). Any other
Income Tax refund for a period ending on or before the Closing Date or for the
allocable portion of a period including the Closing Date will be the property of
Seller. Purchaser will pay or cause the Company to pay to Seller all refunds or
credits of Taxes (including any interest received from or credited thereon by
the applicable taxing authority) received by Purchaser or any of its Affiliates
after the Closing Date and attributable to Income Taxes paid by the Purchased
Imperial Companies or any other Post-Closing Affiliate with respect to a
Pre-Closing Tax Period or by Seller. Such payment will be made to Seller
promptly after receipt of any such refund from, or allowance of such credit by,
the relevant taxing authority. In all other events, any Tax refund will be the
property of the Purchased Imperial Companies and paid to the Purchased Imperial
Companies.
(v) Seller and Purchaser will each pay one-half of all sales and
transfer Taxes, if any, which may be payable with respect to the consummation of
the transactions contemplated by this Agreement, including any and all sales,
transfer, recording and other Taxes arising from the Imperial Canada Business
40
<PAGE>
Acquisition being effected in the form of a purchase and sale of assets rather
than a stock acquisition, and to the extent any exemptions from such Taxes are
available Seller and Purchaser will cooperate to prepare any certificates or
other documents necessary to claim such exemptions.
6.2.4. Insurance. With respect to any loss, liability or damage
suffered by Purchased Imperial Companies after the Closing Date relating to,
resulting from or arising out of the conduct of the Business prior to the
Closing Date or included in the C&A Imperial Canada Assumed Liabilities, for
which Seller or any Post-Closing Affiliate would be entitled to assert, or cause
any other Person to assert, a claim for recovery under any policy of insurance
maintained by Seller or a Post-Closing Affiliate or for the benefit of Seller or
the Company, in respect of the Business, products, employees or the Company
("Insurance"), at the request of Purchaser, Seller will use its reasonable
efforts to assert, or to assist Purchaser or the Purchased Imperial Companies to
assert, one or more claims under such Insurance covering such loss, liability or
damage if Purchaser or any of the Purchased Imperial Companies is not itself
entitled to assert such claim, provided that all of Seller's and any
Post-Closing Affiliate's 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 6.2.4, are promptly
reimbursed by Purchaser. Seller will be deemed, solely for the purpose of
asserting claims for 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 Insurance; provided,
however, that (a) Purchaser's obligations under Section 5.3(b) will not be
affected by the provisions of this Section 6.2.4 and (b) with respect to any
claim made at the request of Purchaser or the Purchased Imperial Companies by
Seller or any Seller Affiliate under any Insurance pursuant to this Section
6.2.4, Purchaser will indemnify, defend and hold harmless Seller and each
Post-Closing Affiliate 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, premium adjustments
resulting from claims made at the request of Purchaser or the Purchased Imperial
Companies under this Section 6.2.4 or other like arrangement by which any such
entity retains any liability or obligation under any such policy of Insurance or
otherwise.
6.2.5. Receivables. As of the Closing, Seller will terminate any
agreements to which Imperial or any of the
41
<PAGE>
Subsidiaries is a party that is related to the accounts receivables facility
operated by a finance subsidiary of Seller for its affiliates and Seller will
indemnify, defend and hold harmless the Company or Purchaser for any
Indemnifiable Loss arising out of the Company's prior participation in this
facility or performance under such agreements, provided, however, that the
foregoing indemnity obligation will not apply to any loss on the sale of
receivables prior to the Closing Date or the collection (or failure to collect)
the receivables. Seller hereby agrees that all monies (regardless of any prior
discount or loss on sale) collected after the Closing by Seller or any
Post-Closing Affiliate with respect to receivables attributable to the Company
will be paid to the Company within three business days of Seller's or
Post-Closing Affiliate's receipt thereof.
6.2.6. Surety Obligations. (a) From and after the Closing, Purchaser
will, and will cause the Company to, use reasonable efforts to obtain and have
issued replacements for any guarantee, performance bond, letter of credit or
other agreement guaranteeing or securing liabilities and obligations (including
without limitation in respect of operating or other leases and the surety bonds
listed on Schedule 6.2.6) (collectively, "Surety Obligations") relating to the
Business or the Company under which Seller or any Post-Closing Affiliate has any
liability to a third party and to obtain any amendments, novations, releases,
waivers, consents or approvals necessary to release Seller and each Post-Closing
Affiliate to such Surety Obligations from all liability thereunder relating to
the Business or the Company, in each case as promptly as practicable. In the
event and for the period that Purchaser and the Company fail to obtain any such
replacement, amendment, novation, release, waiver, consent or approval, without
limiting the generality of Section 5.3(b), Purchaser will indemnify, defend, and
hold harmless Seller and each Post-Closing Affiliate and their respective
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
any such failure by Purchaser or the Company.
(b) From and after the Closing, Seller will use reasonable
efforts to obtain and have issued replacements for any Surety Obligations
relating to any business other than the Business or any Post-Closing Affiliate
or under which the Company has any liability to a third party and to obtain any
amendments, novations, releases, waivers, consents or approvals necessary to
release the Company from all liability thereunder relating to any business other
than the Business or any Post-Closing Affiliate, in each case as promptly as
practicable. In the event and for the period that Seller fails to obtain any
such replacement, amendment, novation, release, waiver, consent or approval,
42
<PAGE>
without limiting the generality of Section 5.3(a), Seller will indemnify,
defend, and hold harmless the Company and its 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 any
such failure by Seller.
6.2.7. Assumed Push-Down Liabilities. Without further action,
effective as of the Closing, the Company will assume the liabilities of Seller
listed on Schedule 6.2.7 (the "Assumed Push-Down Liabilities") but only to the
extent related exclusively to the Business.
6.2.8. 1994 Financial Statements. Seller will deliver as promptly as
practicable after Purchaser's written request, audited consolidated balance
sheets of the Company as of January 28, 1995 and the related audited
consolidated statements of stockholders' equity, operations and cash flows for
the fiscal year then ended, accompanied by the accountant's report thereon.
6.2.9. Certain Contracts. (a) Notwithstanding anything to the contrary
in this Agreement, to the extent that (i) any Contract that is a C&A Imperial
Canada Asset (an "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 agrees 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.
(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
43
<PAGE>
immediately preceding paragraph are resolved, Seller will use reasonable
efforts, (i) with reasonable costs of Purchaser and its Affiliates related
thereto to be promptly reimbursed by Seller, to provide to Purchaser, at its
request, the benefits of any such Contract and 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 (ii)
with reasonable costs of Seller and its Affiliates related thereto to be
promptly reimbursed by Purchaser, to 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 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 6.2.9.
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 by
a nationally recognized overnight courier service or when dispatched during
normal business hours by electronic facsimile transfer (confirmed in writing by
mail simultaneously dispatched) to the appropriate party at the address
specified below:
(a) If to Purchaser, to:
BDPI Holdings Corporation
c/o The Blackstone Group
345 Park Avenue
New York, New York 10154
Facsimile No.: (212) 754-8720
Attention: Mr. David A. Stockman
Senior Managing Director
44
<PAGE>
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.
(b) If to Seller, to:
Collins & Aikman Products Co.
701 McCullough Drive
Charlotte, North Carolina 28262
Facsimile No.: (704) 548-2010
Attention: Corporate Counsel
with a copy to:
Collins & Aikman Products Co.
1556 Third Avenue
Suite 603
New York, New York 10128
Facsimile No.: (212) 410-9314
Attention: Elizabeth R. Philipp, Esq.
Executive Vice President - Law
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) Purchaser will pay any expenses incurred by it
incident to this Agreement and in preparing to consummate and consummating the
transactions provided for herein, including without limitation the fees and
expenses of any broker, finder, financial advisor or similar person engaged by
such party.
7.3. Successors and Assigns. (a) Subject to Section 7.3(b), 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. Notwithstanding the foregoing sentence, Purchaser may
assign any of its rights or obligations under this Agreement to any lender to
Purchaser or any subsidiary of Purchaser as security for obligations to such
lender in respect of the financing arrangements entered into in connection with
the
45
<PAGE>
transactions contemplated hereby and any refinancings, extensions, refundings or
renewals thereof, or to any subsidiary of Purchaser or BDPH or any entity of
which Purchaser is a subsidiary, provided however, that no assignment hereunder
shall in any way affect Purchaser's or the Company's obligations or liabilities
under this Agreement.
(b) Nothing in this Agreement is intended to limit Purchaser's ability
to sell or to Transfer the Shares following the Closing Date provided that such
sale or Transfer will not result in a termination of any of Purchaser's
covenants, duties, responsibilities, obligations or liabilities hereunder,
including without limitation under Sections 3.1(b) and Articles V and VI, unless
the person or entity acquiring the Shares pursuant to such sale or Transfer
assumes all of such covenants, duties, responsibilities, obligations and
liabilities in a written instrument reasonably satisfactory to Seller.
7.4. Waiver. Either 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; provided, however, that neither Purchaser nor
Seller may, without the prior written consent of the other, make or grant such
extension of time, waiver of inaccuracies or compliance or waiver or
modification of performance with respect to its (or any of its Affiliates')
representations, warranties, conditions or covenants hereunder. 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 and will
not operate or be construed as a waiver of any subsequent breach, whether of a
similar or dissimilar nature.
7.5. Entire Agreement. This Agreement (including the Schedules
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. This Agreement (together with the
Schedules hereto) constitutes 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.
7.6. Amendments, Supplements, Etc. This Agreement may be amended or
supplemented at any time by additional written
46
<PAGE>
agreements as may mutually be determined by 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. Except as provided in Article V or in
Sections 6.2.3 and 7.3, nothing expressed or implied in this Agreement is
intended or will be construed to confer upon or give any person or entity 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.
7.8. Further Assurances. From time to time, whether at or after the
Closing as and when requested by either 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 or otherwise reasonably requested
by Purchaser or Seller to consummate the transactions contemplated by this
Agreement or otherwise to carry out the intent and purpose of this Agreement and
to assure that the Company holds all of the assets, properties, permits,
authorizations, rights and related obligations used or held for use primarily or
exclusively in the Business, including without limitation the proper filing,
registration or recordation of such documents and instruments.
7.9. Applicable Law; Jurisdiction. 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.
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, provided, however,
that, except with respect to Section 1.3, none of Purchaser, its parent or any
entity controlled by either of them will be deemed to be Affiliates of Seller
and none Seller, C&A Corp. or any entity controlled by either of them will be
deemed to be Affiliates of Purchaser, (vii)
47
<PAGE>
all references to "$" or dollar amounts will be to lawful currency of the United
States of America, and (viii) "Knowledge of Seller" means solely to the actual
knowledge of the persons listed on Schedule 7.11(a), and (ix) "Knowledge of
Purchaser" means solely to the actual knowledge of the persons listed on
Schedule 7.11(b).
(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
or thereof.
7.12. 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 C&A Imperial Canada Assets to
Purchaser.
48
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
COLLINS & AIKMAN PRODUCTS CO.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial
Officer
IMPERIAL WALLCOVERINGS, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial
Officer
BDPI HOLDINGS CORPORATION
By: /s/ William T. Fenstermaker
Name: William T. Fenstermaker
Title: Vice President
<PAGE>
<TABLE>
<CAPTION>
Schedules and Exhibits (Omitted)
--------------------------------
<S> <C>
Exhibit A -Option Agreement
Schedule 1.2 -Net Cash Flow
Schedule 1.4 -Intercompany Obligations
Schedule 2.1.1 -Capitalization of Imperial and Imperial Canada
Schedule 2.1.3 -Conflicts; consents
Schedule 2.1.4 -Financial Statements
Schedule 2.1.4(c) -Undisclosed Liabilities
Schedule 2.1.4(d) -Conduct of the Business since September 26, 1997
Schedule 2.1.4(e) -Management Projections for the Business
Schedule 2.2.2 -Buyer Consents and Appraisals
Schedule 3.5 -Operation of the Business
Schedule 4.2.3(a) -Form of Management Services Agreement
Schedule 4.2.3(b) -Non-Competition Agreement
Schedule 4.2.3(c) -Opinion of Cravath, Swaine & Moore
Schedule 4.3.4 -Opinion of Jones, Day Reavis & Pogue
Schedule 6.1.1 -Employees
Schedule 6.2.6 -Surety Obligations
Schedule 6.2.7 -Assumed Push - Down Liabilities
Schedule 7.11 -Knowledge of Seller
Schedule 7.11(b) -Knowledge of Purchaser
Collins & Aikman Corporation hereby undertakes to furnish supplementally
a copy of any omitted exhibit or schedule to the Commission upon request.
</TABLE>
Exhibit 4.8
AMENDED AND RESTATED
CREDIT AGREEMENT DATED
AS OF JUNE 3, 1996
AMENDMENT AND WAIVER
AMENDMENT AND WAIVER, dated as of January 12, 1998 (this
"Amendment and Waiver"), under the Amended and Restated Credit Agreement, dated
as of June 3, 1996 (as amended prior to the date hereof and as further amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among COLLINS & AIKMAN PRODUCTS CO., a Delaware corporation (the "Borrower"),
COLLINS & AIKMAN CANADA INC., a Canadian corporation (the "Canadian Borrower"),
COLLINS & AIKMAN CORPORATION, a Delaware corporation ("Holdings"), the financial
institutions parties thereto (the "Lenders") and THE CHASE MANHATTAN BANK, a New
York banking corporation, as agent to the lenders thereunder (in such capacity,
the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Canadian Borrower and Holdings have
requested the Lenders to amend and to waive certain covenants in the Credit
Agreement as set forth herein; and
WHEREAS, the Lenders are willing to amend and to waive such
covenants in the Credit Agreement on and subject to the terms and conditions
thereof;
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by each of the parties
hereto, the parties agree as follows:
SECTION 1. Definitions. Unless otherwise defined herein, terms
defined in the Credit Agreement are used herein as therein defined.
SECTION 2. Amendment of Section 6.01 (Indebtedness). (a)
Subsection 6.01(d) of the Credit Agreement is hereby amended by deleting from
clause (iv) thereof the amount "$200,000,000" and substituting therefor the
amount "$225,000,000".
(b) Subsection 6.01 of the Credit Agreement is hereby amended by
deleting from clause (r) thereof the amount "$200,000,000" and substituting
therefor the amount "$225,000,000".
SECTION 3. Amendment of Section 6.07 (Investments, Loans and
Advances). Subsection 6.07 of the Credit Agreement is hereby amended by deleting
from clause (l) thereof the amount "$200,000,000" and substituting therefor the
amount "$225,000,000".
1
<PAGE>
SECTION 4. Waiver of Section 6.14 (Interest Coverage Ratio).
Section 6.14 of the Credit Agreement is hereby waived for the fiscal quarter
ending December 27, 1997; provided that such waiver is effective only if the
Interest Coverage Ratio is at least 1.70 to 1.00 for such fiscal quarter.
SECTION 5. Representations and Warranties. The parties hereto
hereby represent and warrant to the Administrative Agent and each Lender that
after giving effect to the waivers contained herein, each party hereto hereby
confirms, reaffirms and restates the representations and warranties set forth in
Article III of the Credit Agreement as if made on and as of the Effective Date,
except as they may specifically relate to an earlier date; provided that such
representations and warranties shall be and hereby are amended so that all
references to the Agreement therein shall be deemed a reference to (i) the
Credit Agreement, (ii) this Amendment and Waiver and (iii) the Credit Agreement
as amended by this Amendment and Waiver.
SECTION 6. Conditions Precedent. This Amendment and Waiver
shall become effective as of the date hereof (the "Effective Date") when each of
the conditions precedent set forth below shall have been fulfilled:
(a) Amendment and Waiver. The Administrative Agent shall have
received this Amendment and Waiver, executed and delivered by a duly authorized
officer of each of the Borrower, the Canadian Borrower, Holdings and the
Required Lenders.
(b) No Default or Event of Default. On and as of the Effective
Date and after giving effect to this Amendment and Waiver and the transactions
contemplated hereby, no Default or Event of Default shall have occurred and be
continuing.
(c) Representations and Warranties. The representations and
warranties made by the Borrower and the Canadian Borrower in the Credit
Agreement and herein after giving effect to this Amendment and Waiver and the
transactions contemplated hereby shall be true and correct in all material
respects on and as of the Effective Date as if made on such date, except where
such representations and warranties relate to an earlier date in which case such
representations and warranties shall be true and correct as of such earlier
date.
(d) Acknowledgement and Consent. The Administrative Agent
shall have received from each of Holdings, the Borrower, the Canadian Borrower
and the other Loan Parties with respect to each Loan Document to which it is a
party a duly executed Acknowledgment and Consent, substantially in the form of
Exhibit A hereto.
SECTION 7. Continuing Effect of Credit Agreement. This
Amendment and Waiver shall not constitute an amendment or waiver of any
provision of the Credit Agreement not expressly referred to herein and shall not
be construed as an amendment, waiver or consent to any action on the part of any
party hereto that would require an amendment, waiver or consent of the
Administrative Agent or the Lenders except as expressly stated herein. Except as
expressly waived hereby, the provisions of the Credit Agreement are and shall
remain in full force and effect.
2
<PAGE>
SECTION 8. Expenses. The Borrower and the Canadian Borrower
agree to pay or reimburse the Administrative Agent for all of its reasonable
out-of-pocket costs and expenses incurred in connection with (a) the
negotiation, preparation, execution and delivery of this Amendment and Waiver
and any other documents prepared in connection herewith, and consummation of the
transactions contemplated hereby and thereby, including the fees and expenses of
Simpson Thacher & Bartlett, counsel to the Administrative Agent, and (b) the
enforcement or preservation of any rights under this Amendment and Waiver and
any other such documents.
SECTION 9. GOVERNING LAW. THIS AMENDMENT AND WAIVER SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
SECTION 10. Counterparts. This Amendment and Waiver may be
executed in any number of counterparts by the parties hereto, each of which
counterparts when so executed shall be an original, but all counterparts taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment and Waiver to be duly executed and delivered by their respective duly
authorized officers as of the day and year first above written.
COLLINS & AIKMAN PRODUCTS CO.
<TABLE>
<CAPTION>
<S> <C>
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and CHIEF FINANCIAL OFFICER
COLLINS & AIKMAN CANADA INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President and Chief Financial Officer
COLLINS & AIKMAN CORPORATION
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President
and Chief Financial Officer
3
<PAGE>
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Lender
By /s/ Rosemary Bradley
Name: Rosemary Bradley
Title: Vice President
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Managing Agent and a Lender
By /s/ Linda A. Carper
Name: Linda A. Carper
Title: Managing Director
NATIONSBANK, N.A., as Managing Agent and a Lender
By /s/ E. Phifer Helms
Name: E. Phifer Helms
Title: Senior Vice President
AERIES FINANCE LTD.
By /s/ Andrew Ian Wignall
Name: Andrew Ian Wignall
Title: Director
CERES FINANCE LTD.
By /s/ John H. Cullinane
Name: John H. Cullinane
Title: Director
4
<PAGE>
STRATA FUNDING LTD.
By /s/ John H. Cullinane
Name: John H. Cullinane
Title: Director
BANK OF IRELAND - GRAND CAYMAN BRANCH
By /s/ Michael G. Doyle
Name: Michael G. Doyle
Title: Assistant Vice President
THE BANK OF NEW YORK
By /s/ Ann Marie Hughes
Name: Ann Marie Hughes
Title: Assistant Vice President
THE BANK OF NOVA SCOTIA
By: /s/ William E. Zarrett
Name: William E. Zarrett
Title: Senior Relationship Manager
BANK OF SCOTLAND
By /s/ Annie Chin Tat
Name: Annie Chin
Title: Vice President
5
<PAGE>
BANK OF TOKYO - MITSUBISHI TRUST COMPANY
By /s/ Pamela Donnelly
Name: P. Donnelly
Title: Vice President
BRANCH BANKING AND TRUST COMPANY
By /s/ Thatcher L. Townsend III
Name: Thatcher L. Townsend III
Title: Vice President
OCTAGON CREDIT INVESTORS LOAN PORTFOLIO (a unit of The
Chase Manhattan Bank)
By /s/ Richard W. Stewart
Name: Richard W. Stewart
Title: Managing Director
CIBC INC.
By /s/ Roger Colden
Name: Roger Colden
Title: Executive Director, CIBC Oppenheimer Corp., agent
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE
By /s/ Anthony Rock
Name: Anthony Rock
Title: Vice President
By /s/ Sean Mounier
Name: Sean Mounier
Title: First Vice President
6
<PAGE>
COMMERCIAL LOAN FUNDING TRUST I
By: Lehman Commercial Paper Inc., not in its individual capacity but
solely as administrative agent
By /s/ Michele Swanson
Name: Michele Swanson
Title: Authorized Signatory
CREDIT LYONNAIS, NEW YORK BRANCH AND CREDIT LYONNAIS ATLANTA AGENCY
By /s/ Robert Ivosevich
Name: Robert Ivosevich
Title: Senior Vice President
By
Name:
Title:
CREDITANSTALT CORPORATE FINANCE, INC.
By /s/ Robert M. Biringer
Name: Robert M. Biringer
Title: Executive Vice President
By /s/ William E. McCollum
Name: William E. McCollum
Title: Senior Associate
CRESCENT/MACH I PARTNERS, L.P.
By: TCW Asset Management Company
its Investment Manager
By /s/ Justin L. Driscoll
Name: Justin L. Driscoll
Title: Senior Vice President
CRESTAR BANK
By: CypressTree Investment Management Company, as Portfolio Manager
By /s/ Philip C. Robbins
Name: Philip C. Robbins
Title: Assistant Vice President
7
<PAGE>
CYPRESS TREE INVESTMENT PARTNERS I
By
Name:
Title:
DRESDNER BANK, A.G. NEW YORK AND GRAND CAYMAN BRANCHES
By /s/ Beverly G. Cason
Name: Beverly G. Cason
Title: Vice President
By /s/ Thomas J. Nadramia
Name: Thomas J. Nadramia
Title: Vice President
ERSTE BANK
By /s/ John S. Runnion
Name: John S. Runnion
Title: First Vice President
By /s/ Rima Terradista
Name: Rima Terradista
Title: Vice President
FIRST UNION NATIONAL BANK
By /s/ David Silendo
Name: David Silendo
Title: Vice PResident
FUJI BANK, LIMITED
By
Name:
Title:
8
<PAGE>
INDOSUEZ CAPITAL FUNDING II LTD.
By: Indosuez Capital, as Portfolio Advisor
By
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, LTD.
By /s/ Takuya Honjo
Name: Takuya Honjo
Title: Senior Vice President
THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED, NEW YORK BRANCH
By /s/ Shuichi Tajima
Name: Shuichi Tajima
Title: Deputy General Manager
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By
Name:
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management, L.P.,
as Investment Advisor
By
Name:
Title:
9
<PAGE>
MORGAN STANLEY SENIOR FUNDING, INC.
By /s/ Christopher A. Pucillo
Name: Christopher A. Pucillo
Title: Vice President
PARIBAS CAPITAL FUNDING LLC
By /s/ Eric A. Green
Name: Eric A. Green
Title: Director
SENIOR HIGH INCOME PORTFOLIO, INC.
By
Name:
Title:
THE MITSUBISHI TRUST AND BANKING CORPORATION
By /s/ Beatrice Kossodo
Name: Beatrice Kossodo
Title: Senior Vice President
THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Lori J. McCarthy
Name: Lori J. McCarthy
Title: Vice President
10
<PAGE>
NEW YORK LIFE INSURANCE COMPANY
By
Name:
Title:
NEW YORK LIFE INSURANCE AND ANNUITY
CORPORATION
By
Name:
Title:
SOCIETE GENERALE
By /s/ Ralph Saheb
Name: Ralph Saheb
Title: Vice President, Regional Operations Manager
SUNTRUST BANK, ATLANTA
By /s/ Jeffrey D. Drucker
Name: Jeffrey D. Drucker
Title: Banking Officer
By /s/ Raymond B. King
Name: Raymond B. King
Title: Vice President
THE SUMITOMO TRUST & BANKING CO., LTD.
New York Branch
By /s/ Suraj D. Bhatia
Name: Suraj D. Bhatia
Title: Senior Vice President
11
<PAGE>
THE TORONTO-DOMINION BANK
By /s/ Debbie A. Greene
Name: Debbie A. Greene
Title: Manager, Credit Administration
THE TRAVELERS INSURANCE COMPANY
By
Name:
Title:
UNITED STATES NATIONAL BANK OF OREGON
By
Name:
Title:
WACHOVIA BANK, N.A. (formerly known as WACHOVIA BANK, N.A.)
By /s/ Sarah T,. Warren
Name: Sarah T. Warren
Title: Vice President
WELLS FARGO BANK
By
Name:
Title:
12
<PAGE>
THE YASUDA TRUST & BANKING CO., LTD.
By
Name:
Title:
NATEXIS BANQUE BFCE
By: /s/ G. Kevin Dooley
Name: G. Kevin Dooley
Title: Vice President
By: /s/ Jordan Sadler
Name: Jordan Sadler
Title: Associate
SENIOR DEBT PORTFOLIO
By: Boston Management and Research, as Investment Advisor
By: /s/ Payson F. Swaffield
Name: Payson F. Swaffield
Title: Vice President
</TABLE>
13
<PAGE>
EXHIBIT A TO
AMENDMENT AND WAIVER
ACKNOWLEDGEMENT AND CONSENT
Each of the undersigned corporations hereby:
(a) acknowledges and consents to the execution, delivery and
performance of the Amendment and Waiver, dated as of January 12, 1998 (the
"Amendment and Waiver") to the Amended and Restated Credit Agreement dated as of
June 3, 1996 (as the same may be amended, supplemented or otherwise modified
from time to time, the "Credit Agreement"), among Collins & Aikman Canada Inc.
(the "Canadian Borrower") Collins & Aikman Products Co. (the "Borrower"),
Collins & Aikman Corporation ("Holdings"), the several banks and other
institutions from time to time parties to the Credit Agreement (the "Lenders")
and The Chase Manhattan Bank, as administrative agent to the lenders thereunder
(in such capacity, the "Administrative Agent"); and
(b) agrees that such execution, delivery and performance shall not in
any way affect such corporation's obligations under any Loan Document (as
defined in the Credit Agreement) to which such corporation is a party, which
obligations on the date hereof remain absolute and unconditional and are not
subject to any defense, set-off or counterclaim;
Dated: January 12, 1998
<TABLE>
<CAPTION>
<S> <C>
COLLINS & AIKMAN PRODUCTS CO.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
COLLINS & AIKMAN CANADA INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President and Chief Financial Officer
COLLINS & AIKMAN CORPORATION
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
PACJ, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
1
<PAGE>
THE AKRO CORPORATION
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
DURA CONVERTIBLE SYSTEMS, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
IMPERIAL WALLCOVERINGS, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
MARKETING SERVICE, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
GREFAB, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
WICKES ASSET
MANAGEMENT, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
2
<PAGE>
COLLINS & AIKMAN INTERNATIONAL CORPORATION
By: /s/ Leonard F. Ferro
Name: Leonard F. Ferro
Title: Vice President, Treasurer
WICKES MANUFACTURING COMPANY
By: /s/ Robert L. Johnson, Jr.
Name: Robert L. Johnson, Jr.
Title: Assistant Treasurer
WICKES REALTY, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
AMCO CONVERTIBLE FABRICS, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
COLLINS & AIKMAN PLASTICS, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
HUGHES PLASTICS, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
3
<PAGE>
COLLINS & AIKMAN PROPERTIES, INC.
By: /s/ Leonard F. Ferro
Name: Leonard F. Ferro
Title: Secretary and Treasurer
COLLINS & AIKMAN CARPET & ACOUSTICS (MI), INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
COLLINS & AIKMAN CARPET & ACOUSTICS (TN), INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
</TABLE>
4
Exhibit 4.12
CREDIT AGREEMENT DATED
AS OF DECEMBER 5, 1996
AMENDMENT AND WAIVER
AMENDMENT AND WAIVER, dated as of January 12, 1998 (this
"Amendment and Waiver"), under the Credit Agreement, dated as of December 5,
1996 (as amended prior to the date hereof and as further amended, supplemented
or otherwise modified from time to time, the "Credit Agreement"), among COLLINS
& AIKMAN PRODUCTS CO., a Delaware corporation (the "Borrower"), COLLINS & AIKMAN
CORPORATION, a Delaware corporation ("Holdings"), the financial institutions
parties thereto (the "Lenders") and THE CHASE MANHATTAN BANK, a New York banking
corporation, as agent to the lenders thereunder (in such capacity, the
"Administrative Agent").
W I T N E S S E T H:
WHEREAS, the Borrower and Holdings have requested the Lenders
to amend and to waive certain covenants in the Credit Agreement as set forth
herein; and
WHEREAS, the Lenders are willing to amend and to waive such
covenants in the Credit Agreement on and subject to the terms and conditions
thereof;
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by each of the parties
hereto, the parties agree as follows:
SECTION 1. Definitions. Unless otherwise defined herein,
terms defined in the Credit Agreement are used herein as therein defined.
SECTION 2. Amendment of Section 6.01 (Indebtedness). (a)
Subsection 6.01(d) of the Credit Agreement is hereby amended by deleting from
clause (iv) thereof the amount "$200,000,000" and substituting therefor the
amount "$225,000,000".
(b) Subsection 6.01 of the Credit Agreement is hereby amended by
deleting from clause (r) thereof the amount "$200,000,000" and substituting
therefor the amount "$225,000,000".
SECTION 3. Amendment of Section 6.07 (Investments, Loans and
Advances). Subsection 6.07 of the Credit Agreement is hereby amended by deleting
from clause (l) thereof the amount "$200,000,000" and substituting therefor the
amount "$225,000,000".
SECTION 4. Waiver of Section 6.14 (Interest Coverage Ratio).
Section 6.14 of the Credit Agreement is hereby waived for the fiscal quarter
ending December 27, 1997; provided that such waiver is effective only if the
Interest Coverage Ratio is at least 1.70 to 1.00 for such fiscal quarter.
1
<PAGE>
SECTION 5. Representations and Warranties. The parties hereto
hereby represent and warrant to the Administrative Agent and each Lender that
after giving effect to the waivers contained herein, each party hereto hereby
confirms, reaffirms and restates the representations and warranties set forth in
Article III of the Credit Agreement as if made on and as of the Effective Date,
except as they may specifically relate to an earlier date; provided that such
representations and warranties shall be and hereby are amended so that all
references to the Agreement therein shall be deemed a reference to (i) the
Credit Agreement, (ii) this Amendment and Waiver and (iii) the Credit Agreement
as amended and waived by this Amendment and Waiver.
SECTION 6. Conditions Precedent. This Amendment and Waiver
shall become effective as of the date hereof (the "Effective Date") when each of
the conditions precedent set forth below shall have been fulfilled:
(c) Amendment and Waiver. The Administrative Agent shall have
received this Amendment and Waiver, executed and delivered by a duly authorized
officer of each of the Borrower, Holdings and the Required Lenders.
(d) No Default or Event of Default. On and as of the Effective
Date and after giving effect to this Amendment and Waiver and the transactions
contemplated hereby, no Default or Event of Default shall have occurred and be
continuing.
(e) Representations and Warranties. The representations and
warranties made by the Borrower in the Credit Agreement and herein after giving
effect to this Amendment and Waiver and the transactions contemplated hereby
shall be true and correct in all material respects on and as of the Effective
Date as if made on such date, except where such representations and warranties
relate to an earlier date in which case such representations and warranties
shall be true and correct as of such earlier date.
(f) Acknowledgement and Consent. The Administrative Agent
shall have received from each of Holdings, the Borrower and the other Loan
Parties with respect to each Loan Document to which it is a party a duly
executed Acknowledgment and Consent, substantially in the form of Exhibit A
hereto.
SECTION 7. Continuing Effect of Credit Agreement. This
Amendment and Waiver shall not constitute an amendment or waiver of any
provision of the Credit Agreement not expressly referred to herein and shall not
be construed as an amendment, waiver or consent to any action on the part of any
party hereto that would require an amendment, waiver or consent of the
Administrative Agent or the Lenders except as expressly stated herein. Except as
expressly waived hereby, the provisions of the Credit Agreement are and shall
remain in full force and effect.
SECTION 8. Expenses. The Borrower agrees to pay or reimburse
the Administrative Agent for all of its reasonable out-of-pocket costs and
expenses incurred in connection with (a) the negotiation, preparation, execution
and delivery of this Amendment and Waiver and any other documents prepared in
connection herewith, and consummation of
2
<PAGE>
the transactions contemplated hereby and thereby, including the fees and
expenses of Simpson Thacher & Bartlett, counsel to the Administrative Agent, and
(b) the enforcement or preservation of any rights under this Amendment and
Waiver and any other such documents.
SECTION 9. GOVERNING LAW. THIS AMENDMENT AND WAIVER SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
SECTION 10. Counterparts. This Amendment and Waiver may be
executed in any number of counterparts by the parties hereto, each of which
counterparts when so executed shall be an original, but all counterparts taken
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment and Waiver to be duly executed and delivered by their respective duly
authorized officers as of the day and year first above written.
<TABLE>
<CAPTION>
<S> <C>
COLLINS & AIKMAN PRODUCTS CO.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
COLLINS & AIKMAN CORPORATION
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Lender
By /s/ Rosemary Bradley
Name: Rosemary Bradley
Title: Vice President
3
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By /s/ Linda A. Carper
Name: Linda A. Carper
Title: Managing Director
NATIONSBANK, N.A.
By /s/ E. Phifer Helms
Name: E. Phifer Helms
Title: Senior Vice President
BANK OF IRELAND - GRAND CAYMAN BRANCH
By /s/ Michael G. Doyle
Name: Michael G. Doyle
Title: Assistant Vice President
THE BANK OF NEW YORK
By /s/ Ann Marie Hughes
Name: Ann Marie Hughes
Title: Assistant Vice President
THE BANK OF NOVA SCOTIA
By: /s/ William E. Zarrett
Name: William E. Zarrett
Title: Senior Relationship Manager
4
<PAGE>
BANK OF TOKYO - MITSUBISHI TRUST COMPANY
By /s/ Pamela Donnelly
Name: P. Donnelly
Title: Vice President
BRANCH BANKING AND TRUST COMPANY
By /s/ Thatcher L. Townsend III
Name: Thatcher L. Townsend III
Title: Vice President
CIBC INC.
By /s/ Roger Colden
Name: Roger Colden
Title: Executive Director, CIBC Oppenheimer Corp., as agent
COMERICA BANK
By /s Michael T. Shea
Name: Michael T. Shea
Title: Vice President
COMMERCIAL LOAN FUNDING TRUST I
By: Lehman Commercial Paper Inc., not in its individual capacity but
solely as administrative agent
By /s/ Michele Swanson
Name: Michele Swanson
Title: Authorized Signatory
5
<PAGE>
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK, B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH
By
Name:
Title:
By
Name:
Title:
CREDIT AGRICOLE INDOSUEZ
By /s/ David Bouhl
Name: David Bouhl
Title: F.V.P., Head of Corporate Banking, Chicago
By /s/ Katherine L. Abbott
Name: Katherine L. Abbott
Title: First Vice President
CREDIT LYONNAIS, NEW YORK BRANCH AND CREDIT LYONNAIS ATLANTA AGENCY
By
Name:
Title:
By
Name:
Title:
CREDITANSTALT CORPORATE FINANCE, INC.
By /s/ Robert M. Biringer
Name: Robert M. Biringer
Title: Executive Vice President
By /s/ William E. McCollum
Name: William E. McCollum
Title: Senior Associate
6
<PAGE>
DRESDNER BANK, A.G. NEW YORK AND GRAND CAYMAN BRANCHES
By /s/ Beverly G. Cason
Name: Beverly G. Cason
Title: Vice President
By /s/ Thomas J. Nadramia
Name: Thomas J. Nadramia
Title: Vice President
FIRST NATIONAL BANK OF CHICAGO
By /s/ Lori J. McCarthy
Name: Lori J. McCarthy
Title: Vice President
FIRST UNION NATIONAL BANK
By /s/ David Silendo
Name: David Silendo
Title: Vice PResident
FUJI BANK
By
Name:
Title:
7
<PAGE>
THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED, NEW YORK BRANCH
By /s/ Shuichi Tajima
Name: Shuichi Tajima
Title: Deputy General Manager
THE ROYAL BANK OF SCOTLAND, PLC
By
Name:
Title:
SOCIETE GENERALE
By /s/ Ralph Saheb
Name: Ralph Saheb
Title: Vice President, Regional Operations Manager
SUMITOMO BANK, LIMITED
By /s/ Gary Franke
Name: Gary Franke
Title: Vice President
THE SUMITOMO TRUST & BANKING CO., LTD.
By /s/ Suraj Bhatia
Name: Suraj Bhatia
Title: Senior Vice President
8
<PAGE>
SUNTRUST BANK, ATLANTA
By /s/ Jeffrey D. Drucker
Name: Jeffrey D. Drucker
Title: Banking Officer
By /s/ Raymond B. King
Name: Raymond B. King
Title: Vice President
THE TORONTO-DOMINION (NEW YORK), INC.
By /s/ Debbie A. Greene
Name: Debbie A. Greene
Title: Vice President
WACHOVIA BANK, N.A. formerly known as
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By /s/ Sarah T. Warren
Name: Sarah T. Warren
Title: Vice President
WELLS FARGO BANK
By
Name:
Title:
ALLIED SIGNAL INC.
By
Name:
Title:
</TABLE>
9
<PAGE>
EXHIBIT A TO
AMENDMENT AND WAIVER
ACKNOWLEDGEMENT AND CONSENT
Each of the undersigned corporations hereby:
(a) acknowledges and consents to the execution, delivery and
performance of the Amendment and Waiver, dated as of January 12, 1998 (the
"Amendment and Waiver") under the Credit Agreement dated as of December 5, 1996
(as the same may be amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among Collins & Aikman Products Co. (the
"Borrower"), Collins & Aikman Corporation ("Holdings"), the several banks and
other institutions from time to time parties to the Credit Agreement (the
"Lenders") and The Chase Manhattan Bank, as administrative agent to the lenders
thereunder (in such capacity, the "Administrative Agent"); and
(b) agrees that such execution, delivery and performance shall not in
any way affect such corporation's obligations under any Loan Document (as
defined in the Credit Agreement) to which such corporation is a party, which
obligations on the date hereof remain absolute and unconditional and are not
subject to any defense, set-off or counterclaim.
Dated: January 12, 1998
<TABLE>
<CAPTION>
<S> <C>
COLLINS & AIKMAN PRODUCTS CO.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial
Officer
COLLINS & AIKMAN CANADA INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President and Chief Financial Officer
COLLINS & AIKMAN CORPORATION
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial
Officer
PACJ, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial
Officer
1
<PAGE>
THE AKRO CORPORATION
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial
Officer
DURA CONVERTIBLE SYSTEMS, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial
Officer
IMPERIAL WALLCOVERINGS, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial
Officer
MARKETING SERVICE, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
GREFAB, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
WICKES ASSET
MANAGEMENT, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
2
<PAGE>
COLLINS & AIKMAN INTERNATIONAL CORPORATION
By: /s/ Leonard F. Ferro
Name: Leonard F. Ferro
Title: Vice President, Treasurer
WICKES MANUFACTURING COMPANY
By: /s/ Robert L. Johnson, Jr.
Name: Robert L. Johnson, Jr.
Title: Assistant Treasurer
WICKES REALTY, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
AMCO CONVERTIBLE FABRICS, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President
COLLINS & AIKMAN PLASTICS, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President
HUGHES PLASTICS, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial
Officer
3
<PAGE>
COLLINS & AIKMAN PROPERTIES, INC.
By: /s/ Leonard F. Ferro
Name: Leonard F. Ferro
Title: Secretary and Treasurer
COLLINS & AIKMAN CARPET & ACOUSTICS (MI), INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial
Officer
COLLINS & AIKMAN CARPET & ACOUSTICS (TN), INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial
Officer
4
</TABLE>
Exhibit 4.13
AMENDED AND RESTATED
CREDIT AGREEMENT DATED
AS OF JUNE 3, 1996
WAIVER
WAIVER, dated as of March 27, 1998 (this "Waiver"), under the
Amended and Restated Credit Agreement, dated as of June 3, 1996 (as amended
prior to the date hereof and as further amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among COLLINS & AIKMAN
PRODUCTS CO., a Delaware corporation (the "Borrower"), COLLINS & AIKMAN CANADA
INC., a Canadian corporation (the "Canadian Borrower"), COLLINS & AIKMAN
CORPORATION, a Delaware corporation ("Holdings"), the financial institutions
parties thereto (the "Lenders") and THE CHASE MANHATTAN BANK, a New York banking
corporation, as agent to the lenders thereunder (in such capacity, the
"Administrative Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Canadian Borrower and Holdings have
requested the Lenders to waive certain covenants in the Credit Agreement as set
forth herein; and
WHEREAS, the Lenders are willing to waive such covenants in
the Credit Agreement on and subject to the terms and conditions thereof;
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by each of the parties
hereto, the parties agree as follows:
SECTION 1. Definitions. Unless otherwise defined herein,
terms defined in the Credit Agreement are used herein as therein defined.
SECTION 2. Waiver of Section 6.14 (Interest Coverage Ratio).
Section 6.14 of the Credit Agreement is hereby waived for the fiscal quarter
ending March 28, 1998; provided that such waiver is effective only if the
Interest Coverage Ratio is at least 1.75 to 1.00 for such fiscal quarter.
SECTION 3. Waiver of Section 6.16 (Leverage Ratio). Section
6.16 of the Credit Agreement is hereby waived for the fiscal quarter ending
March 28, 1998; provided that such waiver is effective only if the Leverage
Ratio is no greater than 2.50 to 1.00 for such fiscal quarter.
SECTION 4. Representations and Warranties. The parties hereto
hereby represent and warrant to the Administrative Agent and each Lender that
after giving effect to
1
<PAGE>
the waivers contained herein, each party hereto hereby confirms, reaffirms and
restates the representations and warranties set forth in Article III of the
Credit Agreement as if made on and as of the Waiver Effective Date, except as
they may specifically relate to an earlier date; provided that such
representations and warranties shall be and hereby are amended so that all
references to the Agreement therein shall be deemed a reference to (i) the
Credit Agreement, (ii) this Waiver and (iii) the Credit Agreement as amended by
this Waiver.
SECTION 5. Conditions Precedent. This Waiver shall become
effective as of the date hereof (the "Waiver Effective Date") when each of the
conditions precedent set forth below shall have been fulfilled:
(c) Waiver. The Administrative Agent shall have received this
Waiver, executed and delivered by a duly authorized officer of each of the
Borrower, the Canadian Borrower, Holdings and the Required Lenders.
(d) No Default or Event of Default. On and as of the Waiver
Effective Date and after giving effect to this Waiver and the transactions
contemplated hereby, no Default or Event of Default shall have occurred and be
continuing.
(e) Representations and Warranties. The representations and
warranties made by the Borrower and the Canadian Borrower in the Credit
Agreement and herein after giving effect to this Waiver and the transactions
contemplated hereby shall be true and correct in all material respects on and as
of the Waiver Effective Date as if made on such date, except where such
representations and warranties relate to an earlier date in which case such
representations and warranties shall be true and correct as of such earlier
date.
(f) Acknowledgement and Consent. The Administrative Agent
shall have received from each of Holdings, the Borrower, the Canadian Borrower
and the other Loan Parties with respect to each Loan Document to which it is a
party a duly executed Acknowledgment and Consent, substantially in the form of
Exhibit A hereto.
SECTION 6. Continuing Effect of Credit Agreement. This Waiver
shall not constitute an amendment or waiver of any provision of the Credit
Agreement not expressly referred to herein and shall not be construed as an
amendment, waiver or consent to any action on the part of any party hereto that
would require an amendment, waiver or consent of the Administrative Agent or the
Lenders except as expressly stated herein. Except as expressly waived hereby,
the provisions of the Credit Agreement are and shall remain in full force and
effect.
SECTION 7. Expenses. The Borrower and the Canadian Borrower
agree to pay or reimburse the Administrative Agent for all of its reasonable
out-of-pocket costs and expenses incurred in connection with (a) the
negotiation, preparation, execution and delivery of this Waiver and any other
documents prepared in connection herewith, and consummation of the transactions
contemplated hereby and thereby, including the fees and expenses of Simpson
Thacher & Bartlett, counsel to the Administrative Agent, and (b) the enforcement
or preservation of any rights under this Waiver and any other such documents.
2
<PAGE>
SECTION 8. GOVERNING LAW. THIS WAIVER SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
SECTION 9. Counterparts. This Waiver may be executed in any
number of counterparts by the parties hereto, each of which counterparts when so
executed shall be an original, but all counterparts taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver
to be duly executed and delivered by their respective duly authorized officers
as of the day and year first above written.
<TABLE>
<CAPTION>
<S> <C>
COLLINS & AIKMAN PRODUCTS CO.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
COLLINS & AIKMAN CANADA INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President and Chief Financial Officer
COLLINS & AIKMAN CORPORATION
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
3
<PAGE>
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Lender
By _______________________________
Name:
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Managing Agent and a Lender
By
Name:
Title:
NATIONSBANK, N.A., as Managing Agent and a Lender
By
Name:
Title:
AERIES FINANCE LTD.
By
Name:
Title:
CERES FINANCE LTD.
By
Name:
Title:
4
<PAGE>
STRATA FUNDING LTD.
By
Name:
Title:
THE BANK OF NEW YORK
By
Name:
Title:
THE BANK OF NOVA SCOTIA
By: _______________________________________
Name:
Title:
BANK OF SCOTLAND
By
Name:
Title:
BANK OF TOKYO - MITSUBISHI TRUST COMPANY
By
Name:
Title:
5
<PAGE>
BRANCH BANKING AND TRUST COMPANY
By
Name:
Title:
OCTAGON CREDIT INVESTORS LOAN PORTFOLIO (a unit of The
Chase Manhattan Bank)
By
Name:
Title:
CIBC INC.
By
Name:
Title:
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE
By
Name:
Title:
COMMERCIAL LOAN FUNDING TRUST I
By
Name:
Title:
6
<PAGE>
CREDIT LYONNAIS, NEW YORK BRANCH AND CREDIT LYONNAIS ATLANTA AGENCY
By
Name:
Title:
CREDITANSTALT CORPORATE FINANCE, INC.
By
Name:
Title:
CRESCENT/MACH I PARTNERS, L.P.
By: TCW Asset Management Company
its Investment Manager
By
Name:
Title:
CRESTAR BANK
By
Name:
Title:
CYPRESS TREE INVESTMENT PARTNERS I
By
Name:
Title:
7
<PAGE>
DRESDNER BANK, A.G.
By
Name:
Title:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By
Name:
Title:
FUJI BANK, LIMITED
By
Name:
Title:
INDOSUEZ CAPITAL FUNDING II LTD.
By: Indosuez Capital, as Portfolio Advisor
By
Name:
Title:
THE INDUSTRIAL BANK OF JAPAN, LTD.
By
Name:
Title:
8
<PAGE>
THE LONG-TERM CREDIT BANK OF JAPAN LTD., NEW YORK BRANCH
By
Name:
Title:
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By
Name:
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management, L.P.,
as Investment Advisor
By
Name:
Title:
PARIBAS CAPITAL FUNDING LLC
By
Name:
Title:
SENIOR HIGH INCOME PORTFOLIO, INC.
By
Name:
Title:
9
<PAGE>
THE MITSUBISHI TRUST AND BANKING CORPORATION
By
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By
Name:
Title:
NEW YORK LIFE INSURANCE COMPANY
By
Name:
Title:
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
By
Name:
Title:
SOCIETE GENERALE
By
Name:
Title:
10
<PAGE>
SUNTRUST BANK, ATLANTA
By
Name:
Title:
By
Name:
Title:
THE SUMITOMO TRUST & BANKING CO., LTD.
By
Name:
Title:
THE TORONTO-DOMINION BANK
By
Name:
Title:
TORONTO DOMINION (TEXAS), INC.
By
Name:
Title:
THE TRAVELERS INSURANCE COMPANY
By
Name:
Title:
11
<PAGE>
UNITED STATES NATIONAL BANK OF OREGON
By
Name:
Title:
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By
Name:
Title:
WELLS FARGO BANK
By
Name:
Title:
THE YASUDA TRUST & BANKING CO., LTD.
By
Name:
Title:
NATEXIS BANQUE BFCE
By:
Name:
Title:
12
<PAGE>
SENIOR DEBT PORTFOLIO
By: Boston Management and Research, as Investment Advisor
By:
Name:
Title:
ERSTE BANK
By:
Name:
Title:
</TABLE>
13
<PAGE>
EXHIBIT A TO
WAIVER
ACKNOWLEDGEMENT AND CONSENT
Each of the undersigned corporations hereby:
(a) acknowledges and consents to the execution, delivery and
performance of the Waiver, dated as of March 27, 1998 (the "Waiver") to the
Amended and Restated Credit Agreement dated as of June 3, 1996 (as the same may
be amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among Collins & Aikman Canada Inc. (the "Canadian Borrower")
Collins & Aikman Products Co. (the "Borrower"), Collins & Aikman Corporation
("Holdings"), the several banks and other institutions from time to time parties
to the Credit Agreement (the "Lenders") and The Chase Manhattan Bank, as
administrative agent to the lenders thereunder (in such capacity, the
"Administrative Agent"); and
(b) agrees that such execution, delivery and performance shall not in
any way affect such corporation's obligations under any Loan Document (as
defined in the Credit Agreement) to which such corporation is a party, which
obligations on the date hereof remain absolute and unconditional and are not
subject to any defense, set-off or counterclaim;
Dated: March 27, 1998
<TABLE>
<CAPTION>
<S> <C>
COLLINS & AIKMAN PRODUCTS CO.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
COLLINS & AIKMAN CANADA INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President and Chief Financial Officer
COLLINS & AIKMAN CORPORATION
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
PACJ, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
1
<PAGE>
THE AKRO CORPORATION
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
DURA CONVERTIBLE SYSTEMS, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
GREFAB, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
WICKES ASSET
MANAGEMENT, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
COLLINS & AIKMAN INTERNATIONAL CORPORATION
By /s/ Leonard F. Ferro
Name: Leonard F. Ferro
Title: Vice President, Treasurer
WICKES MANUFACTURING COMPANY
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
2
<PAGE>
WICKES REALTY, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
AMCO CONVERTIBLE FABRICS, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
COLLINS & AIKMAN PLASTICS, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
HUGHES PLASTICS, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
COLLINS & AIKMAN PROPERTIES, INC.
By /s/ Leonard F. Ferro
Name: Leonard F. Ferro
Title: Secretary and Treasurer
</TABLE>
3
Exhibit 4.14
CREDIT AGREEMENT DATED
AS OF DECEMBER 5, 1996
WAIVER
WAIVER, dated as of March 27, 1998 (this "Waiver"), under the
Credit Agreement, dated as of December 5, 1996 (as amended prior to the date
hereof and as further amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among COLLINS & AIKMAN PRODUCTS CO., a Delaware
corporation (the "Borrower"), COLLINS & AIKMAN CORPORATION, a Delaware
corporation ("Holdings"), the financial institutions parties thereto (the
"Lenders") and THE CHASE MANHATTAN BANK, a New York banking corporation, as
agent to the lenders thereunder (in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, the Borrower and Holdings have requested the Lenders
to waive certain covenants in the Credit Agreement as set forth herein; and
WHEREAS, the Lenders are willing to waive such covenants in
the Credit Agreement on and subject to the terms and conditions thereof;
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged by each of the parties
hereto, the parties agree as follows:
SECTION 1. Definitions. Unless otherwise defined herein,
terms defined in the Credit Agreement are used herein as therein defined.
SECTION 2. Waiver of Section 6.14 (Interest Coverage Ratio).
Section 6.14 of the Credit Agreement is hereby waived for the fiscal quarter
ending March 28, 1998; provided that such waiver is effective only if the
Interest Coverage Ratio is at least 1.75 to 1.00 for such fiscal quarter.
SECTION 3. Waiver of Section 6.16 (Leverage Ratio). Section
6.16 of the Credit Agreement is hereby waived for the fiscal quarter ending
March 28, 1998; provided that such waiver is effective only if the Leverage
Ratio is no greater than 2.50 to 1.00 for such fiscal quarter.
SECTION 4. Representations and Warranties. The parties hereto
hereby represent and warrant to the Administrative Agent and each Lender that
after giving effect to the waivers contained herein, each party hereto hereby
confirms, reaffirms and restates the representations and warranties set forth in
Article III of the Credit Agreement as if made on
1
<PAGE>
and as of the Waiver Effective Date, except as they may specifically relate to
an earlier date; provided that such representations and warranties shall be and
hereby are amended so that all references to the Agreement therein shall be
deemed a reference to (i) the Credit Agreement, (ii) this Waiver and (iii) the
Credit Agreement as waived by this Waiver.
SECTION 5. Conditions Precedent. This Waiver shall become
effective as of the date hereof (the "Waiver Effective Date") when each of the
conditions precedent set forth below shall have been fulfilled:
(a) Waiver. The Administrative Agent shall have received this
Waiver, executed and delivered by a duly authorized officer of each of the
Borrower, Holdings and the Required Lenders.
(b) No Default or Event of Default. On and as of the Waiver
Effective Date and after giving effect to this Waiver and the transactions
contemplated hereby, no Default or Event of Default shall have occurred and be
continuing.
(c) Representations and Warranties. The representations and
warranties made by the Borrower in the Credit Agreement and herein after giving
effect to this Waiver and the transactions contemplated hereby shall be true and
correct in all material respects on and as of the Waiver Effective Date as if
made on such date, except where such representations and warranties relate to an
earlier date in which case such representations and warranties shall be true and
correct as of such earlier date.
(d) Acknowledgement and Consent. The Administrative Agent
shall have received from each of Holdings, the Borrower and the other Loan
Parties with respect to each Loan Document to which it is a party a duly
executed Acknowledgment and Consent, substantially in the form of Exhibit A
hereto.
SECTION 6. Continuing Effect of Credit Agreement. This Waiver
shall not constitute an amendment or waiver of any provision of the Credit
Agreement not expressly referred to herein and shall not be construed as an
amendment, waiver or consent to any action on the part of any party hereto that
would require an amendment, waiver or consent of the Administrative Agent or the
Lenders except as expressly stated herein. Except as expressly waived hereby,
the provisions of the Credit Agreement are and shall remain in full force and
effect.
SECTION 7. Expenses. The Borrower agrees to pay or reimburse
the Administrative Agent for all of its reasonable out-of-pocket costs and
expenses incurred in connection with (a) the negotiation, preparation, execution
and delivery of this Waiver and any other documents prepared in connection
herewith, and consummation of the transactions contemplated hereby and thereby,
including the fees and expenses of Simpson Thacher & Bartlett, counsel to the
Administrative Agent, and (b) the enforcement or preservation of any rights
under this Waiver and any other such documents.
2
<PAGE>
SECTION 8. GOVERNING LAW. THIS WAIVER SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW
YORK.
SECTION 9. Counterparts. This Waiver may be executed in any
number of counterparts by the parties hereto, each of which counterparts when so
executed shall be an original, but all counterparts taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Waiver
to be duly executed and delivered by their respective duly authorized officers
as of the day and year first above written.
<TABLE>
<CAPTION>
<S> <C>
COLLINS & AIKMAN PRODUCTS CO.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
COLLINS & AIKMAN CORPORATION
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Lender
By
Name:
Title:
3
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By__
Name:
Title:
NATIONSBANK, N.A.
By
Name:
Title:
THE BANK OF NEW YORK
By
Name:
Title:
THE BANK OF NOVA SCOTIA
By
Name:
Title:
BANK OF TOKYO - MITSUBISHI TRUST COMPANY
By
Name:
Title:
4
<PAGE>
BRANCH BANKING AND TRUST COMPANY
By
Name:
Title:
CREDIT AGRICOLE DE INDOSUEZ
By
Name:
Title:
CIBC INC.
By
Name:
Title:
COMERICA BANK
By
Name:
Title:
COMMERCIAL LOAN FUNDING TRUST I
By
Name:
Title:
5
<PAGE>
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK, B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH
By
Name:
Title:
By
Name:
Title:
CREDIT LYONNAIS, NEW YORK BRANCH AND CREDIT LYONNAIS ATLANTA AGENCY
By
Name:
Title:
By
Name:
Title:
CREDITANSTALT CORPORATE FINANCE, INC.
By
Name:
Title:
6
<PAGE>
DRESDNER BANK, A.G.
By
Name:
Title:
By
Name:
Title:
FIRST NATIONAL BANK OF CHICAGO
By
Name:
Title:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By
Name:
Title:
FUJI BANK
By
Name:
Title:
THE LONG-TERM CREDIT BANK OF JAPAN LTD., NEW YORK BRANCH
By
Name:
Title:
7
<PAGE>
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By
Name:
Title:
THE ROYAL BANK OF SCOTLAND, PLC
By
Name:
Title:
SOCIETE GENERALE
By
Name:
Title:
SUMITOMO BANK, LIMITED
By
Name:
Title:
THE SUMITOMO TRUST & BANKING CO., LTD.
By
Name:
Title:
8
<PAGE>
SUNTRUST BANK, ATLANTA
By
Name:
Title:
By
Name:
Title:
THE TORONTO-DOMINION (NEW YORK), INC.
By
Name:
Title:
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By
Name:
Title:
WELLS FARGO BANK
By
Name:
Title:
</TABLE>
9
<PAGE>
EXHIBIT A TO
WAIVER
ACKNOWLEDGEMENT AND CONSENT
Each of the undersigned corporations hereby:
(a) acknowledges and consents to the execution, delivery and
performance of the Waiver, dated as of March 27, 1998 (the "Waiver") under the
Credit Agreement dated as of December 5, 1996 (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among Collins & Aikman Products Co. (the "Borrower"), Collins & Aikman
Corporation ("Holdings"), the several banks and other institutions from time to
time parties to the Credit Agreement (the "Lenders") and The Chase Manhattan
Bank, as administrative agent to the lenders thereunder (in such capacity, the
"Administrative Agent"); and
(b) agrees that such execution, delivery and performance shall not in
any way affect such corporation's obligations under any Loan Document (as
defined in the Credit Agreement) to which such corporation is a party, which
obligations on the date hereof remain absolute and unconditional and are not
subject to any defense, set-off or counterclaim.
Dated: March 27, 1998
<TABLE>
<CAPTION>
<S> <C>
COLLINS & AIKMAN PRODUCTS CO.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
COLLINS & AIKMAN CANADA INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President and Chief Financial Officer
COLLINS & AIKMAN CORPORATION
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
1
<PAGE>
PACJ, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
THE AKRO CORPORATION
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
DURA CONVERTIBLE SYSTEMS, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
GREFAB, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
WICKES ASSET
MANAGEMENT, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
COLLINS & AIKMAN INTERNATIONAL CORPORATION
By /s/ Leonard F. Ferro
Name: Leonard F. Ferro
Title: Vice President, Treasurer
2
<PAGE>
WICKES MANUFACTURING COMPANY
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
WICKES REALTY, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
AMCO CONVERTIBLE FABRICS, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
COLLINS & AIKMAN PLASTICS, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
HUGHES PLASTICS, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
COLLINS & AIKMAN PROPERTIES, INC.
By /s/ Leonard F. Ferro
Name: Leonard F. Ferro
Title: Secretary and Treasurer
</TABLE>
3
Exhibit 4.15
AMENDED AND RESTATED
CREDIT AGREEMENT DATED
AS OF JUNE 3, 1996
AMENDMENT
AMENDMENT, dated as of March 27, 1997 (this "Amendment"), to
the Amended and Restated Credit Agreement, dated as of June 3, 1996 (as amended
prior to the date hereof and as further amended, supplemented or otherwise
modified from time to time, the "Credit Agreement"), among COLLINS & AIKMAN
PRODUCTS CO., a Delaware corporation (the "Borrower"), COLLINS & AIKMAN CANADA
INC., a Canadian corporation (the "Canadian Borrower"), COLLINS & AIKMAN
CORPORATION, a Delaware corporation ("Holdings"), the financial institutions
parties thereto (the "Lenders") and THE CHASE MANHATTAN BANK (formerly known as
Chemical Bank), a New York banking corporation, as agent to the lenders
thereunder (in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Canadian Borrower and Holdings have
requested the Lenders to amend the Credit Agreement as set forth herein; and
WHEREAS, the Lenders are willing to amend the Credit Agreement
on and subject to the terms and conditions thereof;
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by each of the parties
hereto, the parties agree as follows:
SECTION 1. Definitions. Unless otherwise defined herein,
terms defined in the Credit Agreement are used herein as therein defined.
SECTION 2. Amendment of Section 6.02 (Dividends and
Distributions). Section 6.02(b) of the Credit Agreement is hereby amended by
inserting immediately at the end thereof the phrase" plus an additional
$12,000,000 for the period from April 1, 1997 through December 31, 1997".
SECTION 3. Representations and Warranties. The parties hereto
hereby represent and warrant to the Administrative Agent and each Lender that
after giving effect to the amendments contained herein, each party hereto hereby
confirms, reaffirms and restates the representations and warranties set forth in
Article III of the Credit Agreement as if made on and as of the Amendment
Effective Date, except as they may specifically relate to an earlier date;
provided that such representations and warranties shall be and hereby are
amended so that all references to the Agreement therein shall be deemed a
reference to (i) the Credit Agreement, (ii) this Amendment and (iii) the Credit
Agreement as amended by this Amendment.
1
<PAGE>
SECTION 4. Conditions Precedent. This Amendment shall become
effective as of the date hereof (the "Amendment Effective Date") when each of
the conditions precedent set forth below shall have been fulfilled:
(a) Amendment. The Administrative Agent shall have received
this Amendment, executed and delivered by a duly authorized officer of each of
the Borrower, the Canadian Borrower, Holdings and the Required Lenders.
(b) No Default or Event of Default. On and as of the Amendment
Effective Date and after giving effect to this Amendment and the transactions
contemplated hereby, no Default or Event of Default shall have occurred and be
continuing.
(c) Representations and Warranties. The representations and
warranties made by the Borrower and the Canadian Borrower in the Credit
Agreement and herein after giving effect to this Amendment and the transactions
contemplated hereby shall be true and correct in all material respects on and as
of the Amendment Effective Date as if made on such date, except where such
representations and warranties relate to an earlier date in which case such
representations and warranties shall be true and correct as of such earlier
date.
(d) Acknowledgement, Consent and Amendment. The Administrative
Agent shall have received from each of Holdings, the Borrower, the Canadian
Borrower and the other Loan Parties with respect to each Loan Document to which
it is a party a duly executed Acknowledgment, Consent and Amendment,
substantially in the form of Exhibit A hereto.
SECTION 5. Continuing Effect of Credit Agreement. This
Amendment shall not constitute an amendment or waiver of any provision of the
Credit Agreement not expressly referred to herein and shall not be construed as
an amendment, waiver or consent to any action on the part of any party hereto
that would require an amendment, waiver or consent of the Administrative Agent
or the Lenders except as expressly stated herein. Except as expressly amended
and waived hereby, the provisions of the Credit Agreement are and shall remain
in full force and effect.
SECTION 6. Expenses. The Borrower and the Canadian Borrower
agree to pay or reimburse the Administrative Agent for all of its reasonable
out-of-pocket costs and expenses incurred in connection with (a) the
negotiation, preparation, execution and delivery of this Amendment and any other
documents prepared in connection herewith, and consummation of the transactions
contemplated hereby and thereby, including the fees and expenses of Simpson
Thacher & Bartlett, counsel to the Administrative Agent, and (b) the enforcement
or preservation of any rights under this Amendment and any other such documents.
2
<PAGE>
SECTION 7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK.
SECTION 8. Counterparts. This Amendment may be executed in
any number of counterparts by the parties hereto, each of which counterparts
when so executed shall be an original, but all counterparts taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective duly authorized
officers as of the day and year first above written.
<TABLE>
<CAPTION>
<S> <C>
COLLINS & AIKMAN PRODUCTS CO.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
COLLINS & AIKMAN CANADA INC.
By /s/ Ronald T. Lindsay
Name: Ronald T. Lindsay
Title: Vice President
COLLINS & AIKMAN CORPORATION
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Lender
By /s/ Rosemary Bradley
Name: Rosemary Bradley
Title: Vice President
3
<PAGE>
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Managing Agent and a Lender
by /s/ Linda A. Carper
Name: Linda A. Carper
Title: Managing Director
NATIONSBANK, N.A., as Managing Agent and aLender
by /s/ Joseph R. Netzel
Name: Joseph R. Netzel
Title: Vice President
AERIES FINANCE LTD.
By /s/ Andrew Ian Wignall
Name: Andrew Ian Wignall
Title: Director
CERES FINANCE LTD.
By /s/ Derrie Boggess
Name: Derri Boggess
Title: Director
STRATA FUNDING LTD.
By /s/ Derrie Boggess
Name: Derrie Boggess
Title: Director
4
<PAGE>
RESTRUCTURED OBLIGATIONS BACKED BY SENIOR ASSETS B.V.
By: Chancellor LGT Senior Secured Management, Inc., as Portfolio
Advisor
By /s/ Christopher E. Jansen
Name: Christopher E. Jansen
Title: Managing Director
BANK OF IRELAND - GRAND CAYMAN BRANCH
By /s/ John G. Cusack
Name: John G. Cusack
Title: Assistant Vice President
THE BANK OF NEW YORK
By /s/ Ann Marie Beeble
Name: Ann Marie Beeble
Title: Assistant Vice President
THE BANK OF NOVA SCOTIA
By /s/ Willam E. Zarrett
Name: William E. Zarrett
Title: Senior Relationship Manager
BANK OF SCOTLAND
By /s/ Annie Chin Tat
Name: Annie Chin Tat
Title: Assistant Vice President
5
<PAGE>
BANK OF TOKYO - MITSUBISHI TRUST COMPANY
By
Name:
Title:
BANQUE PARIBAS
By
Name:
Title:
BRANCH BANKING AND TRUST COMPANY
By /s/ W. Rufus Yates
Name: W. Rufus Yates
Title: Senior Vice President
OCTAGON CREDIT INVESTORS LOAN PORTFOLIO (a unit of The
Chase Manhattan Bank)
By /s/ Richard W. Stewart
Name: Richard W. Stewart
Title: Managing Director
CIBC INC.
By /s/ Roger Colden
Name: Roger Colden
Title: Director, CIBC Wood Gundy Securities Corp. AS AGENT
6
<PAGE>
COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE
By /s/ Sean Mounier
Name: Sean Mounier
Title: First Vice President
By /s/ Brian O'Leary
Name: Brian O'Leary
Title: Vice President
CREDIT LYONNAIS, NEW YORK BRANCH AND CREDIT LYONNAIS ATLANTA AGENCY
By /s/ Robert Ivosevich
Name: Robert Ivosevich
Title: Senior Vice President
By
Name:
Title:
CREDITANSTALT CORPORATE FINANCE, INC.
By /s/ W. Craig Stamm
Name: W. Craig Stamm
Title: Senior Associate
By /s/ Robert M. Biringer
Name: Robert M. Biringer
Title: EVP
CRESCENT/MACH I PARTNERS, L.P.
By: TCW Asset Management Company
its Investment Manager
By
Name:
Title:
7
<PAGE>
CRESTAR BANK
By
Name:
Title:
DRESDNER BANK, A.G. NEW YORK AND GRAND CAYMAN BRANCHE
By /s/ Tomas J. Nadramia
Name: Thomas J. Nadramia
Title: Vice President
By /s/ Christopher E. Sarisky
Name: Christoper E. Sarisky
Title: Assistant Treasurer
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By /s/ David Silendo
Name: David Silendo
Title: Vice President
FUJI BANK
By
Name:
Title:
GIROCREDIT BANK
By /s/ John Redding
Name: John Redding
Title: Vice President
By /s/ Richard Stone
Name: Richard Stone
Title: First Vice President
8
<PAGE>
INDOSUEZ CAPITAL FUNDING II LTD.
By: Indosuez Capital, as Portfolio Advisor
By /s/ Francoise Berthelot
Name: Francoise Berthelot
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN, LTD.
By /s/ Takuya Honjo
Name: Takuya Honjo
Title: Senior Vice President
THE LONG-TERM CREDIT BANK OF JAPAN LTD., NEW YORK BRANCH
By /s/ Shuichi Tajima
Name: Shuichi Tajima
Title: Deputy General Manager
MERRILL LYNCH SENIOR FLOATING RATE FUND, INC.
By
Name:
Title:
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management, L.P.,
as Investment Advisor
By /s/ Patricia Loret de Mola
Name: Patricia Lore de Mola
Title: Senior Vice President
9
<PAGE>
SENIOR HIGH INCOME PORTFOLIO, INC.
By
Name:
Title:
SENIOR HIGH INCOME PORTFOLIO,
INC., as successor in interest
to SENIOR HIGH INCOME PORTFOLIO
II, INC.
By
Name:
Title:
SENIOR HIGH INCOME PORTFOLIO,
INC., as successor in interest
to SENIOR STRATEGIC INCOME FUND,
INC.
By
Name:
THE MITSUBISHI TRUST AND BANKING CORPORATION
By
Name:
Title:
NBD BANK
By
Name:
Title:
10
<PAGE>
NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION
By NEW YORK LIFE INSURANCE COMPANY
By /s/ Steven M. Benerento
Name: Steven M. Benerento
Title: Assistant Vice President
THE NIPPON CREDIT BANK, LTD.
By /s/ Clifford Abramsky
Name: Clifford Abramsky
Title: Senior Manager
SOCIETE GENERALE
By /s/ Ralph Saheb
Name: Ralph Saheb
Title: Vice President, Manager
THE SUMITOMO TRUST & BANKING CO., LTD.
By /s/ Suraj P. Bhatia
Name: Suraj P. Bhatia
Title: Senior Vice President, Manager, Corporate Finance Dept.
SUNTRUST BANK, ATLANTA
By /s/ Jeffrey D. Drucker
Name: Jeffrey D. Drucker
Title: Banking Officer
By /s/ David W. Penter
Name: David W. Penter
Title: Group Vice President
11
<PAGE>
THE TORONTO-DOMINION BANK
By /s/ Debbie A. Greene
Name: Debbie A. Greene
Title: Manager, Credit Administration
THE TRAVELERS INSURANCE COMPANY
By
Name:
Title:
THE TRAVELERS INDEMNITY COMPANY
By
Name:
Title:
UNITED STATES NATIONAL BANK OF OREGON
By /s/ David Wynde
Name: David Wynde
Title: Senior Vice President
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
By
Name:
Title:
12
<PAGE>
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By /s/ Paul G. Grube
Name: Paul G. Grube
Title: Senior Vice President
WELLS FARGO BANK
By /s/ Delia B. Fance
Name: Delia B. Fance
Title: Vice President
THE YASUDA TRUST & BANKING CO., LTD.
By /s/ Morikazu Kimura
Name: Morikazu Kimura
Title: Chief Representative
BANQUE FRANCAISE DU COMMERCE EXTERIEUR
By:
Name:
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research, as Investment Advisor
By:
Name:
Title:
13
<PAGE>
PARIBAS CAPITAL FUNDING LLC
By:
Name:
Title:
ML CBO IV (CAYMAN) LTD.
By: Protective Asset Management LLC, as Collateral Manager
By: /s/ James Dondero
Name: /s/ James Dondero, CPA, CFA
Title: President
</TABLE>
14
<PAGE>
EXHIBIT A TO
AMENDMENT
ACKNOWLEDGEMENT, CONSENT AND AMENDMENT
Each of the undersigned corporations hereby:
(a) acknowledges and consents to the execution, delivery and
performance of the Amendment, dated as of March 27, 1997 (the "Amendment") to
the Amended and Restated Credit Agreement dated as of June 3, 1996 (as the same
may be amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among Collins & Aikman Canada Inc. (the "Canadian
Borrower") Collins & Aikman Products Co. (the "Borrower"), Collins & Aikman
Corporation ("Holdings"), the several banks and other institutions from time to
time parties to the Credit Agreement (the "Lenders") and The Chase Manhattan
Bank, as administrative agent to the lenders thereunder (in such capacity, the
"Administrative Agent"); and
(b) agrees that such execution, delivery and performance shall not in
any way affect such corporation's obligations under any Loan Document (as
defined in the Credit Agreement) to which such corporation is a party, which
obligations on the date hereof remain absolute and unconditional and are not
subject to any defense, set-off or counterclaim;
Dated: March 27, 1997
<TABLE>
<CAPTION>
<S> <C>
COLLINS & AIKMAN PRODUCTS CO.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
COLLINS & AIKMAN CANADA INC.
By /s/ Ronald T. Lindsay
Name: Ronald T. Lindsay
Title: Vice President
COLLINS & AIKMAN CORPORATION
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
PACJ, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
1
<PAGE>
THE AKRO CORPORATION
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
DURA CONVERTIBLE SYSTEMS, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President
IMPERIAL WALLCOVERINGS, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
MARKETING SERVICE, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
GREFAB, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
WICKES ASSET
MANAGEMENT, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
2
<PAGE>
COLLINS & AIKMAN INTERNATIONAL CORPORATION
By /s/ Leonard F. Ferro
Name: Leonard F. Ferro
Title: Vice President, Treasurer
WICKES MANUFACTURING COMPANY
By /s/ Robert Johnson, Jr.
Name: Robert Johnson, Jr.
Title: Assistant Treasurer
WICKES REALTY, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
ACK-TI-LINING, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President
AMCO CONVERTIBLE FABRICS, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
3
<PAGE>
MANCHESTER PLASTICS, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
HUGHES PLASTICS, INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
COLLINS & AIKMAN PROPERTIES, INC. (f/k/a COLLINS & AIKMAN FLOOR
COVERINGS) GROUP, INC.
By: /s/ Leonard F. Ferro
Name: Leonard F. Ferro
Title: Secretary and Treasurer
COLLINS & AIKMAN CARPE& ACOUSTICS (TN), Inc.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
COLLINS & AIKMAN CARPET & ACOUSTICS (MI), INC.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
</TABLE>
4
Exhibit 4.16
CREDIT AGREEMENT DATED
AS OF DECEMBER 5, 1996
AMENDMENT
AMENDMENT, dated as of March 27, 1997 (this "Amendment"), to
the Credit Agreement, dated as of December 5, 1996 (as amended prior to the date
hereof and as further amended, supplemented or otherwise modified from time to
time, the "Credit Agreement"), among COLLINS & AIKMAN PRODUCTS CO., a Delaware
corporation (the "Borrower"), COLLINS & AIKMAN CORPORATION, a Delaware
corporation ("Holdings"), the financial institutions parties thereto (the
"Lenders") and THE CHASE MANHATTAN BANK, a New York banking corporation, as
agent to the lenders thereunder (in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, the Borrower and Holdings have requested the Lenders
to amend the Credit Agreement as set forth herein; and
WHEREAS, the Lenders are willing to amend the Credit Agreement
on and subject to the terms and conditions thereof;
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged by each of the parties
hereto, the parties agree as follows:
SECTION 1. Definitions. Unless otherwise defined herein,
terms defined in the Credit Agreement are used herein as therein defined.
SECTION 2. Amendment of Section 6.02 (Dividends and
Distributions). Section 6.02(b) of the Credit Agreement is hereby amended by
inserting immediately at the end thereof the phrase" plus an additional
$12,000,000 for the period from April 1, 1997 through December 31, 1997".
SECTION 3. Representations and Warranties. The parties hereto
hereby represent and warrant to the Administrative Agent and each Lender that
after giving effect to the amendments contained herein, each party hereto hereby
confirms, reaffirms and restates the representations and warranties set forth in
Article III of the Credit Agreement as if made on and as of the Amendment
Effective Date, except as they may specifically relate to an earlier date;
provided that such representations and warranties shall be and hereby are
amended so that all references to the Agreement therein shall be deemed a
reference to (i) the Credit Agreement, (ii) this Amendment and (iii) the Credit
Agreement as amended by this Amendment.
1
<PAGE>
SECTION 4. Conditions Precedent. This Amendment shall become
effective as of the date hereof (the "Amendment Effective Date") when each of
the conditions precedent set forth below shall have been fulfilled:
(a) Amendment. The Administrative Agent shall have received
this Amendment, executed and delivered by a duly authorized officer of each of
the Borrower, Holdings and the Required Lenders.
(b) No Default or Event of Default. On and as of the Amendment
Effective Date and after giving effect to this Amendment and the transactions
contemplated hereby, no Default or Event of Default shall have occurred and be
continuing.
(c) Representations and Warranties. The representations and
warranties made by the Borrower in the Credit Agreement and herein after giving
effect to this Amendment and the transactions contemplated hereby shall be true
and correct in all material respects on and as of the Amendment Effective Date
as if made on such date, except where such representations and warranties relate
to an earlier date in which case such representations and warranties shall be
true and correct as of such earlier date.
(d) Acknowledgement, Consent and Amendment. The Administrative
Agent shall have received from each of Holdings, the Borrower and the other Loan
Parties with respect to each Loan Document to which it is a party a duly
executed Acknowledgment, Consent and Amendment, substantially in the form of
Exhibit A hereto.
SECTION 5. Continuing Effect of Credit Agreement. This
Amendment shall not constitute an amendment or waiver of any provision of the
Credit Agreement not expressly referred to herein and shall not be construed as
an amendment, waiver or consent to any action on the part of any party hereto
that would require an amendment, waiver or consent of the Administrative Agent
or the Lenders except as expressly stated herein. Except as expressly amended
and waived hereby, the provisions of the Credit Agreement are and shall remain
in full force and effect.
SECTION 6. Expenses. The Borrower agrees to pay or reimburse
the Administrative Agent for all of its reasonable out-of-pocket costs and
expenses incurred in connection with (a) the negotiation, preparation, execution
and delivery of this Amendment and any other documents prepared in connection
herewith, and consummation of the transactions contemplated hereby and thereby,
including the fees and expenses of Simpson Thacher & Bartlett, counsel to the
Administrative Agent, and (b) the enforcement or preservation of any rights
under this Amendment and any other such documents.
SECTION 7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF
NEW YORK.
2
<PAGE>
SECTION 8. Counterparts. This Amendment may be executed in
any number of counterparts by the parties hereto, each of which counterparts
when so executed shall be an original, but all counterparts taken together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed and delivered by their respective duly authorized
officers as of the day and year first above written.
<TABLE>
<CAPTION>
<S> <C>
COLLINS & AIKMAN PRODUCTS CO.
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
COLLINS & AIKMAN CORPORATION
By /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
THE CHASE MANHATTAN BANK,
as Administrative Agent and as a Lender
By /s/ Rosemary Bradley
Name: Rosemary Bradley
Title:
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
by /s/ Linda A. Carper
Name: Linda A. Carper
Title: Managing Director
3
<PAGE>
NATIONSBANK, N.A.
by /s/ Joseph R. Netzel
Name: Joseph R. Netzel
Title: Vice President
BANK OF IRELAND - GRAND CAYMAN BRANCH
By /s/ John G. Cusack
Name: John G. Cusack
Title: Assistant Vice President
THE BANK OF NEW YORK
By /s/ Ann Marie Beeble
Name: Ann Marie Beeble
Title: Assistant Vice President
THE BANK OF NOVA SCOTIA
By /s/ William E. Zarrett
Name: William E. Zarrett
Title: Senior Relationship Manager
BANK OF TOKYO - MITSUBISHI TRUST COMPANY
By /s/ W. Rufus Yates
Name: W. Rufus Yates
Title: Senior Vice President
4
<PAGE>
BRANCH BANKING AND TRUST COMPANY
By
Name:
Title:
CAISSE NATIONALE DE CREDIT AGRICOLE
By /s/ David Bouhl
Name: David Bouhl
Title: First Vice President
CIBC INC.
By /s/ Roger Colden
Name: Roger Colden
Title: Director, CIBC Wood Gundy Securities Corp. AS AGENT
COMERICA BANK
By /s/ Deborah S. Albrecht
Name: Deborah S. Albrecht
Title: Account Officer
COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK, B.A., "RABOBANK
NEDERLAND", NEW YORK BRANCH
By /s/ Michel de Rennaly
Name: Michel de Rennaly
Title: Deputy General Manager
By /s/ Angela R. Reilly
Name: Angela R. Reilly
Title: Vice President
5
<PAGE>
CREDIT LYONNAIS, NEW YORK BRANCH AND CREDIT LYONNAIS ATLANTA AGENCY
By /s/ Robert Ivosevich
Name: Robert Ivosevich
Title: Senior Vice President
By
Name:
Title:
CREDITANSTALT CORPORATE FINANCE, INC.
By /s/ Robert M. Biringer
Name: Robert M. Biringer
Title: Executive Vice President
By /s/ W. Craig Stamm
Name: W. Craig Stamm
Title: Senior Associate
DRESDNER BANK, A.G. NEW YORK AND GRAND CAYMAN BRANCHES
By /s/ Thomas J. Nadramia
Name: Thomas J. Nadramia
Title: Vice President
By /s/ Christopher E. Sarisky
Name: Christopher E. Sarisky
Title: Assistant Treasurer
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
By /s/ David Silendo
Name: David Silendo
Title: Vice President
6
<PAGE>
FUJI BANK
By
Name:
Title:
THE LONG-TERM CREDIT BANK OF JAPAN LTD., NEW YORK BRANCH
By /s/ Shuichi Tajima
Name: Shiuchi Tajima
Title: Deputy General Manager
NBD BANK
By
Name:
Title:
THE NIPPON CREDIT BANK, LTD.
By /s/ Clifford Abramsky
Name: Clifford Abramsky
Title: Senior Manager
THE ROYAL BANK OF SCOTLAND, PLC
By /s/ Derek Bonnar
Name: Derek Bonnar
Title: Vice President
7
<PAGE>
SOCIETE GENERALE
By /s/ Ralph Saheb
Name: Ralph Saheb
Title: Vice President, Manager
SUMITOMO BANK, LIMITED
By /s/ Suraj P. Bhatia
Name: Suraj P. Bhatia
Title: Senior Vice President, Manager, Corporate Finance Dept.
THE SUMITOMO TRUST & BANKING CO., LTD.
By
Name:
Title:
SUNTRUST BANK, ATLANTA
By /s/ Jeffrey D. Drucker
Name: Jeffrey D. Drucker
Title: Banking Officer
By /s/ David W. Penter
Name: David W. Penter
Title: Group Vice President
THE TORONTO-DOMINION (NEW YORK), INC.
By /s/ Debbie A. Greene
Name: Debbie A. Greene
Title: Vice President
8
<PAGE>
VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST
By
Name:
Title:
WACHOVIA BANK OF NORTH CAROLINA, N.A.
By /s/ Paul G. Grube
Name: Paul G. Grube
Title: Senior Vice President
ALLIED SIGNAL INC.
By
Name:
Title:
</TABLE>
9
<PAGE>
EXHIBIT A TO
AMENDMENT
ACKNOWLEDGEMENT, CONSENT AND AMENDMENT
Each of the undersigned corporations hereby:
(a) acknowledges and consents to the execution, delivery and
performance of the Amendment, dated as of March 27, 1997 (the "Amendment") to
the Credit Agreement dated as of December 5, 1996 (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement"),
among Collins & Aikman Products Co. (the "Borrower"), Collins & Aikman
Corporation ("Holdings"), the several banks and other institutions from time to
time parties to the Credit Agreement (the "Lenders") and The Chase Manhattan
Bank, as administrative agent to the lenders thereunder (in such capacity, the
"Administrative Agent"); and
(b) agrees that such execution, delivery and performance shall not in
any way affect such corporation's obligations under any Loan Document (as
defined in the Credit Agreement) to which such corporation is a party, which
obligations on the date hereof remain absolute and unconditional and are not
subject to any defense, set-off or counterclaim;
Dated: March 27, 1997
<TABLE>
<CAPTION>
<S> <C>
COLLINS & AIKMAN PRODUCTS CO.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
COLLINS & AIKMAN CANADA INC.
By: /s/ Ronald T. Lindsay
Name: Ronald T. Lindsay
Title: Vice President
COLLINS & AIKMAN CORPORATION
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
PACJ, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
1
<PAGE>
THE AKRO CORPORATION
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
DURA CONVERTIBLE SYSTEMS, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
IMPERIAL WALLCOVERINGS, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
MARKETING SERVICE, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
GREFAB, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
WICKES ASSET
MANAGEMENT, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
2
<PAGE>
COLLINS & AIKMAN INTERNATIONAL CORPORATION
By: /s/ Leonard F. Ferro
Name: Leonard F. Ferro
Title: Vice President, Treasurer
WICKES MANUFACTURING COMPANY
By: /s/ Robert L. Johnson, Jr.
Name: Robert L. Johnson, Jr.
Title: Assistant Treasurer
WICKES REALTY, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Vice President
ACK-TI-LINING, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
AMCO CONVERTIBLE FABRICS, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
3
<PAGE>
MANCHESTER PLASTICS, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
HUGHES PLASTICS, INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
COLLINS & AKIMAN PROPERTIES, INC. (f/k/a
COLLINS & AIKMAN FLOOR COVERINGS)
GROUP, INC.
By: /s/ Leonard F. Ferro
Name: Leonard F. Ferro
Title: Secretary and Treasurer
COLLINS & AIKMAN CARPET & ACOUSTICS (MI), INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
COLLINS & AIKMAN CARPET & ACOUSTICS (TN), INC.
By: /s/ J. Michael Stepp
Name: J. Michael Stepp
Title: Executive Vice President and Chief Financial Officer
</TABLE>
4
Exhibit 10.10
October 9, 1992
Mr. Dennis Hiller
The Akro Corporation
1212 Seventh Street, S.W.
Canton, Ohio 44707
Dear Dennis:
This is to advise you that in the event your employment with Collins &
Aikman Corporation (the "Company") is terminated by the Company or any successor
company (other than for "Cause") at any time within three months prior to or one
year following a "change in control" of the Company, then in lieu of any
severance that may be available to you under any severance pay policy or
practices of the Company or any of its subsidiaries or under any employment
agreement, you shall receive an amount equal to two times your annual base
salary as in effect at the time of such termination. Such amount shall be paid,
at the sole discretion of the Company, either in a lump sum promptly after your
termination or on a periodic basis for the two-year period following your
termination in accordance with the Company's normal pay practice. For purposes
hereof, a "change of control" shall mean the sale or transfer, whether in one
transaction or several, of more than 50% of the voting common stock of the
Company to any person or persons other than Collins & Aikman Group, Inc. or any
subsidiary or affiliate of Collins & Aikman Group, Inc. For purposes thereof,
"Cause" shall mean (i) fraud or misappropriation with respect to any business of
the Company or an affiliate of the Company or intentional, material damage to
any property or business of the Company or an affiliate of the Company, (ii)
willful failure by you to perform your duties and responsibilities and to carry
out your authority, (iii) willful malfeasance or misfeasance or breach of
fiduciary duty or representation to the Company or an affiliate of the Company,
(iv) willful failure to act in accordance with any specific lawful instructions
of a majority of the Board of Directors of the Company or an affiliate of the
Company or (v) conviction of you of a felony.
This letter agreement shall not create an employment agreement and
shall not affect the right of the Company to terminate your employment at any
time without notice. The Company may terminate this letter agreement, if, prior
to the date that is three months prior to a change of control of the Company,
you cease to hold your current position or a higher executive position with the
Company.
Very truly yours
/s/ James R. Birle
James R. Birle
Co-Chairman of the Board
Accepted:
/s/ Dennis Hiller
Exhibit 10.17
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") is made and entered
into this 17th day of March, 1998, by and between COLLINS & AIKMAN CORPORATION,
a Delaware corporation (the "Company"), and THOMAS E. HANNAH (the "Executive").
Statement of Purpose
The Company wishes to encourage the continued service and dedication of
Executive in the event of any actual or contemplated Change in Control (as
defined below) of the Company. The Company has determined that these objectives
are best accomplished by providing Executive with individual financial security
pursuant to the terms of this Agreement, which the Company believes are fair and
reasonable and consistent with the practices of other major corporations.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Company and Executive hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) Change in Control means and shall be deemed to have occurred
upon:
(i) the acquisition, directly or indirectly, by any "person"
(within the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended) within any 12 month period of more
than 80% of the combined voting power of the then outstanding voting
securities of the 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 ("Excluded Transactions"): (A) any acquisition of beneficial
ownership by the Company, any subsidiary of the Company, Wasserstein
Perella Partners, L.P., Blackstone Capital Partners L.P. or an
affiliate of any of the foregoing, (B) any acquisition by an employee
benefit plan (or related trust) sponsored or maintained by the Company
or any subsidiary of the Company, and (C) any merger, consolidation or
other form of business acquisition or combination transaction in which,
immediately after the transaction and giving effect thereto and the
issuance of securities therein, holders of Common Stock of the Company
beneficially own or are entitled to receive equity securities of the
acquiring, surviving or resulting entity (or any parent company or
other affiliate thereof) that, in the aggregate, represent more than
20% of the combined voting power entitled to be cast generally; or
(ii) the sale of any business, businesses or assets of the
Company in any single transaction or series of related transactions
effected within any 12-month period which, on an aggregate basis,
produced at least 80% of the consolidated net sales of the Company,
calculated by giving pro forma effect to such transactions, and any
acquisitions effected during the relevant period, for the fiscal year
immediately preceding such transaction or, if applicable, the first
such transaction in the 12-month period in which the transaction or
series of related transactions occurred, excluding, however, any
Excluded Transaction.
(b) Change in Control Period means the period commencing three months
prior to the date of a Change in Control and ending on the first anniversary of
such date or if later, the expiration of the 45 day period referred to in
Section 1(d)(3) below.
(c) Code means the Internal Revenue Code of 1986, as amended.
(d) Constructive Termination means a termination of Executive's
employment by Executive during a Change in Control Period which is due to:
(i) the involuntary relocation of Executive to any office or
location more than fifty (50) miles from the office or location at
which Executive is then located;
(ii) a material reduction in Executive's total compensation
and benefit package; or
<PAGE>
(iii) a significant reduction in Executive's responsibilities,
position or authority (including changes resulting from the assignment
to Executive of any duties inconsistent with his responsibilities,
position or authority in effect immediately prior to the Change in
Control Period);
provided, however, that, notwithstanding any other provision hereof, no event or
circumstance will constitute "Constructive Termination" for purposes of this
Agreement (A) if Termination For Cause exists or (B) unless (1) Executive shall
have given notice to the Company of Executive's determination of the occurrence
of such event, (2) such event constitutes one of the events specified in clauses
(i) - (iii) above, and (3) such event shall be continuing as of the end of 45
days after the giving of such notice.
(e) Date of Termination means the later of (i) the date of receipt of
the Notice of Termination by the Company or Executive, as the case may be, or
(ii) any later date specified therein (which shall be not more than thirty (30)
days after the giving of such notice).
(f) ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
(g) Involuntary Termination means a termination of Executive's
employment by the Company during a Change in Control Period other than a
Termination For Cause. Termination of Executive's employment during a Change in
Control Period by reason of Executive's death or disability shall not be
considered an Involuntary Termination.
(h) Notice of Termination means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) sets
forth in reasonable detail the facts and circumstances claimed to provide the
basis for termination of Executive's employment under the provision so
indicated, and (iii) if the termination date is other than the date of receipt
of such notice, specifies the termination date (which shall be not more than
thirty (30) days after the giving of such notice).
(i) Termination For Cause means a termination of Executive's employment
by the Company as a result of:
(i) Executive's fraud or misappropriation with respect to the
business of the Company or intentional damage to the property or
business of the Company or any substantial asset;
(ii) willful failure by Executive to perform his duties and
responsibilities and to carry out his authority;
(iii) willful malfeasance or misfeasance or breach of
fiduciary duty or misrepresentation to the Company or its stockholders;
(iv) willful failure to act in accordance with any specific
lawful instructions of a majority of the Board of Directors of the
Company; or
(v) conviction of Executive of a felony.
2. Benefits Upon Involuntary Termination or Constructive Termination
During Change in Control Period. Subject to the limitations of Section 3, in the
event of an Involuntary Termination or Constructive Termination of Executive for
which the Date of Termination is within a Change in Control Period, the Company
shall pay to Executive the following benefits in a lump sum payment (without
discounting to present value) within 30 days of the Date of Termination:
(a) to the extent not theretofore paid, Executive's base
salary through the Date of Termination;
(b) a pro rata bonus equal to (1) Executive's target bonus
immediately preceding the Change in Control Period multiplied by (2) a
fraction, the numerator of which is the number of whole months (rounded
for portions of months) elapsed in the relevant bonus year prior to the
Date of Termination, and the denominator of which is 12;
(c) twenty-four (24) months of base salary based on the
monthly rate of base salary in effect immediately preceding the Change
in Control Period, or if greater, the rate of Base Salary in effect
immediately
<PAGE>
preceding the Date of Termination; and
(d) Executive's target annual bonus in effect immediately
preceding the Change in Control Period multiplied by two (2).
In addition, (i) the Company shall offer Executive the opportunity to purchase
his Company automobile at its net book value as of the Date of Termination, (ii)
Executive shall be deemed to continue as an employee of the Company for 2 years
following the Date of Termination for purposes of eligibility and vesting (but
not benefit accrual), under any otherwise applicable retirement income plan or
arrangement, and (iii) Executive will be entitled to continue to participate in
all welfare benefit plans for such 2 year period or, if earlier, the period
ending on the date the Executive obtains new full-time employment. Subject to
the limitations of Section 3, the Company shall also reimburse Executive for the
cost of any continued coverage elected by Executive for himself and his eligible
dependents under the Company's group health plan(s) at the end of the welfare
benefit continuation period described in clause (iii) of the immediately
preceding sentence pursuant to Section 4980B of the Code and Section 601 ET SEQ.
of ERISA.
3. Limitation on Benefits.
(a) General. Any benefits payable or to be provided to Executive,
whether pursuant to this Agreement or otherwise, which constitute Parachute
Payments (as defined below) shall be subject to the limitation of this Section 3
so that the benefits payable or to be provided to Executive under this
Agreement, as well as any payments or benefits provided outside of this
Agreement, shall not cause the Company to have paid an Excess Parachute Payment
(as defined below). Accordingly, anything in this Agreement to the contrary
notwithstanding, in the event that the certified public accountants regularly
employed by the Company immediately prior to a Change in Control (the
"Accounting Firm") shall determine that Executive's receipt of all Parachute
Payments would cause the Company to pay an Excess Parachute Payment, it shall
determine the Reduced Amount, and the aggregate Parachute Payments shall be
reduced to such Reduced Amount in accordance with the provisions of Section 3(c)
below.
(b) Definitions. For purposes of this Section 3:
(i) "Excess Parachute Payment" shall have the same meaning as
the term "excess parachute payment" defined in Section 280G(b)(1) of
the Code;
(ii) "Parachute Payment" shall mean any payment or
distribution in the nature of compensation to or for the benefit of
Executive which is contingent on a "change" under and within the
meaning of Section 280G(b)(2)(A)(i) of the Code, whether paid or
payable pursuant to this Agreement or otherwise;
(iii) "Present Value" shall mean such value determined in
accordance with Section 280G(d)(4) of the Code; and
(iv) "Reduced Amount" shall mean the largest aggregate amount
of Parachute Payments Executive may receive without causing the Company
to have paid an Excess Parachute Payment.
(c) Limitation. If the Accounting Firm determines that Parachute
Payments should be limited to the Reduced Amount, the Company shall promptly
give Executive notice to that effect and a copy of the detailed calculation
thereof, and Executive may then elect, in Executive's sole discretion, which and
how much of the Parachute Payments, including without limitation Parachute
Payments made outside of this Agreement, shall be eliminated or reduced (as long
as after such election the Present Value of the aggregate Parachute Payments is
equal to the Reduced Amount), and shall advise the Company in writing of such
election within 10 days of Executive's receipt of notice. If no such election is
made by Executive within such 10 day period, the Company may elect which of
Parachute Payments, including without limitation Parachute Payments made outside
of this Agreement, shall be eliminated or reduced (as long as after such
election the Present Value of the aggregate Parachute Payments is equal to the
Reduced Amount) and shall notify Executive promptly of such election. All
determinations made by the Accounting Firm under this Section 3 shall be binding
upon the Company and Executive and shall be made within 45 days immediately
following the Date of Termination. As promptly as practicable following such
determination, the Company shall pay to or distribute for the benefit of
Executive such Parachute Payments as are then due to Executive under this
Agreement.
4. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent
or limit Executive's continuing or future eligibility or participation in any
benefit, bonus, incentive or other plan provided by the Company and for which
Executive may qualify,
<PAGE>
nor shall anything herein limit or otherwise affect such rights as Executive may
have under any stock option or other agreements with the Company. Amounts which
are vested benefits or which Executive is otherwise entitled to receive under
any plan or program of the Company subsequent to the Date of Termination shall
be payable in accordance with such plan or program.
5. Full Settlement. The Company's obligation to make payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against Executive or other
parties. In no event shall Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to Executive
under any of the provisions of this Agreement. The Company agrees to pay, to the
full extent provided by law, all legal fees and expenses which Executive may
reasonably incur as a result of any contest by the Company or others of the
validity or enforceability of, or liability under, any provision of this
Agreement or as a result of any contest by Executive about the amount of any
payment pursuant to this Agreement.
6. No Duplication of Benefits. Notwithstanding anything to the contrary
herein, the lump sum payment due to Executive under Section 2 hereof shall be
reduced by the amount of cash severance or salary continuation benefits paid to
Executive pursuant to any other plan or policy of the Company or a written
employment agreement between the Company (or one of its affiliates) and
Executive, it being the intent of the parties that Executive shall not receive
post-employment benefits hereunder and under such other plan, policy or written
employment agreement.
7. Succession. This Agreement shall inure to the benefit of and shall
be binding upon the Company and its successors and assignees, but, without the
prior written consent of Executive, this Agreement may not be assigned other
than in connection with a merger, sale, consolidation or similar transaction of
all or substantially all of the business and/or assets of the Company in which
the successor or assignee assumes (whether by operation of law or express
assumption) all obligations of the Company hereunder. The Company shall require
any successor to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession had taken place. The obligations and duties of Executive
hereunder shall be personal and not assignable otherwise than by the laws of
descent and distribution.
8. Miscellaneous.
(a) Applicable Law. This Agreement shall be governed, construed and
interpreted in accordance with the laws of the State of North Carolina.
(b) Notices. All notices and communications hereunder shall be in
writing and shall be given by hand delivery to the other party by registered or
certified mail, return receipt requested, postage prepaid, or by overnight mail,
addressed as follows:
If to Executive:
Mr. Thomas E. Hannah
837 Glendalyn Avenue
Spartanburg, South Carolina 29302
If to the Company:
Collins & Aikman Products Co.
701 McCullough Drive
P.O. Box 32665
Charlotte, North Carolina 28232
Attention: Chief Executive Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) Validity. The invalidity or unenforceability of any provision of
this contract shall not affect the validity or enforceability of any other
provision of this Agreement.
(d) Tax Withholding. The Company may withhold from any amounts payable
under this Agreement such federal, state
<PAGE>
and local taxes as shall be required to be withheld pursuant to any applicable
law or regulation.
(e) Waiver. The waiver of the breach of any term or of any condition of
this Agreement shall not be deemed to constitute the waiver of any other breach
of the same or any other term or condition hereof.
(f) Entire Agreement. This instrument contains the entire agreement of
the parties relating to the subject matter hereof, and it replaces and
supersedes any prior agreements between the parties relating to said subject
matter. No modifications of this Agreement shall be valid unless made in writing
and signed by the parties hereto.
(g) No Right of Employment. Executive and the Company acknowledge that
the employment of Executive by the Company is "at will," and prior to the date
of a Change in Control, may be terminated by either Executive or the Company at
any time. Upon a termination of Executive's employment prior to the date of a
Change in Control, there shall be no further rights under this Agreement and
this Agreement shall terminate and be of no further force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
EXECUTIVE:
/s/ Thomas E. Hannah
Thomas E. Hannah
COMPANY:
COLLINS & AIKMAN CORPORATION
By: /s/ Thomas E. Hannah
Thomas E. Hannah
President & Chief Executive Officer
Exhibit 10.18
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") is made and entered
into this 17th day of March, 1998, by and between COLLINS & AIKMAN CORPORATION,
a Delaware corporation (the "Company"), and J. MICHAEL STEPP (the "Executive").
Statement of Purpose
The Company wishes to encourage the continued service and dedication of
Executive in the event of any actual or contemplated Change in Control (as
defined below) of the Company. The Company has determined that these objectives
are best accomplished by providing Executive with individual financial security
pursuant to the terms of this Agreement, which the Company believes are fair and
reasonable and consistent with the practices of other major corporations.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Company and Executive hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) Change in Control means and shall be deemed to have occurred
upon:
(i) the acquisition, directly or indirectly, by any "person"
(within the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended) within any 12 month period of more
than 80% of the combined voting power of the then outstanding voting
securities of the 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 ("Excluded Transactions"): (A) any acquisition of beneficial
ownership by the Company, any subsidiary of the Company, Wasserstein
Perella Partners, L.P., Blackstone Capital Partners L.P. or an
affiliate of any of the foregoing, (B) any acquisition by an employee
benefit plan (or related trust) sponsored or maintained by the Company
or any subsidiary of the Company, and (C) any merger, consolidation or
other form of business acquisition or combination transaction in which,
immediately after the transaction and giving effect thereto and the
issuance of securities therein, holders of Common Stock of the Company
beneficially own or are entitled to receive equity securities of the
acquiring, surviving or resulting entity (or any parent company or
other affiliate thereof) that, in the aggregate, represent more than
20% of the combined voting power entitled to be cast generally; or
(ii) the sale of any business, businesses or assets of the
Company in any single transaction or series of related transactions
effected within any 12-month period which, on an aggregate basis,
produced at least 80% of the consolidated net sales of the Company,
calculated by giving pro forma effect to such transactions, and any
acquisitions effected during the relevant period, for the fiscal year
immediately preceding such transaction or, if applicable, the first
such transaction in the 12-month period in which the transaction or
series of related transactions occurred, excluding, however, any
Excluded Transaction.
(b) Change in Control Period means the period commencing three months
prior to the date of a Change in Control and ending on the first anniversary of
such date or if later, the expiration of the 45 day period referred to in
Section 1(d)(3) below.
(c) Code means the Internal Revenue Code of 1986, as amended.
(d) Constructive Termination means a termination of Executive's
employment by Executive during a Change in Control Period which is due to:
(i) the involuntary relocation of Executive to any office or
location more than fifty (50) miles from the office or location at
which Executive is then located;
<PAGE>
(ii) a material reduction in Executive's total compensation
and benefit package; or
(iii) a significant reduction in Executive's responsibilities,
position or authority (including changes resulting from the assignment
to Executive of any duties inconsistent with his responsibilities,
position or authority in effect immediately prior to the Change in
Control Period);
provided, however, that, notwithstanding any other provision hereof, no event or
circumstance will constitute "Constructive Termination" for purposes of this
Agreement (A) if Termination For Cause exists or (B) unless (1) Executive shall
have given notice to the Company of Executive's determination of the occurrence
of such event, (2) such event constitutes one of the events specified in clauses
(i) - (iii) above, and (3) such event shall be continuing as of the end of 45
days after the giving of such notice.
(e) Date of Termination means the later of (i) the date of receipt of
the Notice of Termination by the Company or Executive, as the case may be, or
(ii) any later date specified therein (which shall be not more than thirty (30)
days after the giving of such notice).
(f) ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
(g) Involuntary Termination means a termination of Executive's
employment by the Company during a Change in Control Period other than a
Termination For Cause. Termination of Executive's employment during a Change in
Control Period by reason of Executive's death or disability shall not be
considered an Involuntary Termination.
(h) Notice of Termination means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) sets
forth in reasonable detail the facts and circumstances claimed to provide the
basis for termination of Executive's employment under the provision so
indicated, and (iii) if the termination date is other than the date of receipt
of such notice, specifies the termination date (which shall be not more than
thirty (30) days after the giving of such notice).
(i) Termination For Cause means a termination of Executive's employment
by the Company as a result of:
(i) Executive's fraud or misappropriation with respect to the
business of the Company or intentional damage to the property or
business of the Company or any substantial asset;
(ii) willful failure by Executive to perform his duties and
responsibilities and to carry out his authority;
(iii) willful malfeasance or misfeasance or breach of
fiduciary duty or misrepresentation to the Company or its stockholders;
(iv) willful failure to act in accordance with any specific
lawful instructions of a majority of the Board of Directors of the
Company; or
(v) conviction of Executive of a felony.
2. Benefits Upon Involuntary Termination or Constructive Termination
During Change in Control Period. Subject to the limitations of Section 3, in the
event of an Involuntary Termination or Constructive Termination of Executive for
which the Date of Termination is within a Change in Control Period, the Company
shall pay to Executive the following benefits in a lump sum payment (without
discounting to present value) within 30 days of the Date of Termination:
(a) to the extent not theretofore paid, Executive's base
salary through the Date of Termination;
(b) a pro rata bonus equal to (1) Executive's target bonus
immediately preceding the Change in Control Period multiplied by (2) a
fraction, the numerator of which is the number of whole months (rounded
for portions of months) elapsed in the relevant bonus year prior to the
Date of Termination, and the denominator of which is 12;
(c) twenty-four (24) months of base salary based on the
monthly rate of base salary in effect
<PAGE>
immediately preceding the Change in Control Period, or if greater, the
rate of Base Salary in effect immediately preceding the Date of
Termination; and
(d) Executive's target annual bonus in effect immediately
preceding the Change in Control Period multiplied by two (2).
In addition, (i) the Company shall offer Executive the opportunity to purchase
his Company automobile at its net book value as of the Date of Termination, (ii)
Executive shall be deemed to continue as an employee of the Company for 2 years
following the Date of Termination for purposes of eligibility and vesting (but
not benefit accrual), under any otherwise applicable retirement income plan or
arrangement, and (iii) Executive will be entitled to continue to participate in
all welfare benefit plans for such 2 year period or, if earlier, the period
ending on the date the Executive obtains new full-time employment. Subject to
the limitations of Section 3, the Company shall also reimburse Executive for the
cost of any continued coverage elected by Executive for himself and his eligible
dependents under the Company's group health plan(s) at the end of the welfare
benefit continuation period described in clause (iii) of the immediately
preceding sentence pursuant to Section 4980B of the Code and Section 601 ET SEQ.
of ERISA.
3. Limitation on Benefits.
(a) General. Any benefits payable or to be provided to Executive,
whether pursuant to this Agreement or otherwise, which constitute Parachute
Payments (as defined below) shall be subject to the limitation of this Section 3
so that the benefits payable or to be provided to Executive under this
Agreement, as well as any payments or benefits provided outside of this
Agreement, shall not cause the Company to have paid an Excess Parachute Payment
(as defined below). Accordingly, anything in this Agreement to the contrary
notwithstanding, in the event that the certified public accountants regularly
employed by the Company immediately prior to a Change in Control (the
"Accounting Firm") shall determine that Executive's receipt of all Parachute
Payments would cause the Company to pay an Excess Parachute Payment, it shall
determine the Reduced Amount, and the aggregate Parachute Payments shall be
reduced to such Reduced Amount in accordance with the provisions of Section 3(c)
below.
(b) Definitions. For purposes of this Section 3:
(i) "Excess Parachute Payment" shall have the same meaning as
the term "excess parachute payment" defined in Section 280G(b)(1) of
the Code;
(ii) "Parachute Payment" shall mean any payment or
distribution in the nature of compensation to or for the benefit of
Executive which is contingent on a "change" under and within the
meaning of Section 280G(b)(2)(A)(i) of the Code, whether paid or
payable pursuant to this Agreement or otherwise;
(iii) "Present Value" shall mean such value determined in
accordance with Section 280G(d)(4) of the Code; and
(iv) "Reduced Amount" shall mean the largest aggregate amount
of Parachute Payments Executive may receive without causing the Company
to have paid an Excess Parachute Payment.
(c) Limitation. If the Accounting Firm determines that Parachute
Payments should be limited to the Reduced Amount, the Company shall promptly
give Executive notice to that effect and a copy of the detailed calculation
thereof, and Executive may then elect, in Executive's sole discretion, which and
how much of the Parachute Payments, including without limitation Parachute
Payments made outside of this Agreement, shall be eliminated or reduced (as long
as after such election the Present Value of the aggregate Parachute Payments is
equal to the Reduced Amount), and shall advise the Company in writing of such
election within 10 days of Executive's receipt of notice. If no such election is
made by Executive within such 10 day period, the Company may elect which of
Parachute Payments, including without limitation Parachute Payments made outside
of this Agreement, shall be eliminated or reduced (as long as after such
election the Present Value of the aggregate Parachute Payments is equal to the
Reduced Amount) and shall notify Executive promptly of such election. All
determinations made by the Accounting Firm under this Section 3 shall be binding
upon the Company and Executive and shall be made within 45 days immediately
following the Date of Termination. As promptly as practicable following such
determination, the Company shall pay to or distribute for the benefit of
Executive such Parachute Payments as are then due to Executive under this
Agreement.
4. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent
or limit Executive's continuing or future
<PAGE>
eligibility or participation in any benefit, bonus, incentive or other plan
provided by the Company and for which Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as Executive may have under any
stock option or other agreements with the Company. Amounts which are vested
benefits or which Executive is otherwise entitled to receive under any plan or
program of the Company subsequent to the Date of Termination shall be payable in
accordance with such plan or program.
5. Full Settlement. The Company's obligation to make payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against Executive or other
parties. In no event shall Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to Executive
under any of the provisions of this Agreement. The Company agrees to pay, to the
full extent provided by law, all legal fees and expenses which Executive may
reasonably incur as a result of any contest by the Company or others of the
validity or enforceability of, or liability under, any provision of this
Agreement or as a result of any contest by Executive about the amount of any
payment pursuant to this Agreement.
6. No Duplication of Benefits. Notwithstanding anything to the contrary
herein, the lump sum payment due to Executive under Section 2 hereof shall be
reduced by the amount of cash severance or salary continuation benefits paid to
Executive pursuant to any other plan or policy of the Company or a written
employment agreement between the Company (or one of its affiliates) and
Executive, it being the intent of the parties that Executive shall not receive
post-employment benefits hereunder and under such other plan, policy or written
employment agreement.
7. Succession. This Agreement shall inure to the benefit of and shall
be binding upon the Company and its successors and assignees, but, without the
prior written consent of Executive, this Agreement may not be assigned other
than in connection with a merger, sale, consolidation or similar transaction of
all or substantially all of the business and/or assets of the Company in which
the successor or assignee assumes (whether by operation of law or express
assumption) all obligations of the Company hereunder. The Company shall require
any successor to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession had taken place. The obligations and duties of Executive
hereunder shall be personal and not assignable otherwise than by the laws of
descent and distribution.
8. Miscellaneous.
(a) Applicable Law. This Agreement shall be governed, construed and
interpreted in accordance with the laws of the State of North Carolina.
(b) Notices. All notices and communications hereunder shall be in
writing and shall be given by hand delivery to the other party by registered or
certified mail, return receipt requested, postage prepaid, or by overnight mail,
addressed as follows:
If to Executive:
Mr. J. Michael Stepp
7021 Old Dairy Lane
Charlotte, North Carolina 28211
If to the Company:
Collins & Aikman Products Co.
701 McCullough Drive
P.O. Box 32665
Charlotte, North Carolina 28232
Attention: Chief Executive Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) Validity. The invalidity or unenforceability of any provision of
this contract shall not affect the validity or enforceability of any other
provision of this Agreement.
<PAGE>
(d) Tax Withholding. The Company may withhold from any amounts payable
under this Agreement such federal, state and local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(e) Waiver. The waiver of the breach of any term or of any condition of
this Agreement shall not be deemed to constitute the waiver of any other breach
of the same or any other term or condition hereof.
(f) Entire Agreement. This instrument contains the entire agreement of
the parties relating to the subject matter hereof, and it replaces and
supersedes any prior agreements between the parties relating to said subject
matter. No modifications of this Agreement shall be valid unless made in writing
and signed by the parties hereto.
(g) No Right of Employment. Executive and the Company acknowledge that
the employment of Executive by the Company is "at will," and prior to the date
of a Change in Control, may be terminated by either Executive or the Company at
any time. Upon a termination of Executive's employment prior to the date of a
Change in Control, there shall be no further rights under this Agreement and
this Agreement shall terminate and be of no further force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
EXECUTIVE:
/s/ J. Michael Stepp
J. Michael Stepp
COMPANY:
COLLINS & AIKMAN CORPORATION
By: /s/ Thomas E. Hannah
Thomas E. Hannah
President & Chief Executive Officer
Exhibit 10.19
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") is made and entered
into this 17th day of March, 1998, by and between COLLINS & AIKMAN CORPORATION,
a Delaware corporation (the "Company"), and DENNIS E. HILLER (the "Executive").
Statement of Purpose
The Company wishes to encourage the continued service and dedication of
Executive in the event of any actual or contemplated Change in Control (as
defined below) of the Company. The Company has determined that these objectives
are best accomplished by providing Executive with individual financial security
pursuant to the terms of this Agreement, which the Company believes are fair and
reasonable and consistent with the practices of other major corporations.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Company and Executive hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) Change in Control means and shall be deemed to have occurred
upon:
(i) the acquisition, directly or indirectly, by any "person"
(within the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended) within any 12 month period of more
than 80% of the combined voting power of the then outstanding voting
securities of the 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 ("Excluded Transactions"): (A) any acquisition of beneficial
ownership by the Company, any subsidiary of the Company, Wasserstein
Perella Partners, L.P., Blackstone Capital Partners L.P. or an
affiliate of any of the foregoing, (B) any acquisition by an employee
benefit plan (or related trust) sponsored or maintained by the Company
or any subsidiary of the Company, and (C) any merger, consolidation or
other form of business acquisition or combination transaction in which,
immediately after the transaction and giving effect thereto and the
issuance of securities therein, holders of Common Stock of the Company
beneficially own or are entitled to receive equity securities of the
acquiring, surviving or resulting entity (or any parent company or
other affiliate thereof) that, in the aggregate, represent more than
20% of the combined voting power entitled to be cast generally; or
(ii) the sale of any business, businesses or assets of the
Company in any single transaction or series of related transactions
effected within any 12-month period which, on an aggregate basis,
produced at least 80% of the consolidated net sales of the Company,
calculated by giving pro forma effect to such transactions, and any
acquisitions effected during the relevant period, for the fiscal year
immediately preceding such transaction or, if applicable, the first
such transaction in the 12-month period in which the transaction or
series of related transactions occurred, excluding, however, any
Excluded Transaction.
(b) Change in Control Period means the period commencing three months
prior to the date of a Change in Control and ending on the first anniversary of
such date or if later, the expiration of the 45 day period referred to in
Section 1(d)(3) below.
(c) Code means the Internal Revenue Code of 1986, as amended.
(d) Constructive Termination means a termination of Executive's
employment by Executive during a Change in Control Period which is due to:
(i) the involuntary relocation of Executive to any office or
location more than fifty (50) miles from the office or location at
which Executive is then located;
<PAGE>
(ii) a material reduction in Executive's total compensation
and benefit package; or
(iii) a significant reduction in Executive's responsibilities,
position or authority (including changes resulting from the assignment
to Executive of any duties inconsistent with his responsibilities,
position or authority in effect immediately prior to the Change in
Control Period);
provided, however, that, notwithstanding any other provision hereof, no event or
circumstance will constitute "Constructive Termination" for purposes of this
Agreement (A) if Termination For Cause exists or (B) unless (1) Executive shall
have given notice to the Company of Executive's determination of the occurrence
of such event, (2) such event constitutes one of the events specified in clauses
(i) - (iii) above, and (3) such event shall be continuing as of the end of 45
days after the giving of such notice.
(e) Date of Termination means the later of (i) the date of receipt of
the Notice of Termination by the Company or Executive, as the case may be, or
(ii) any later date specified therein (which shall be not more than thirty (30)
days after the giving of such notice).
(f) ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
(g) Involuntary Termination means a termination of Executive's
employment by the Company during a Change in Control Period other than a
Termination For Cause. Termination of Executive's employment during a Change in
Control Period by reason of Executive's death or disability shall not be
considered an Involuntary Termination.
(h) Notice of Termination means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) sets
forth in reasonable detail the facts and circumstances claimed to provide the
basis for termination of Executive's employment under the provision so
indicated, and (iii) if the termination date is other than the date of receipt
of such notice, specifies the termination date (which shall be not more than
thirty (30) days after the giving of such notice).
(i) Termination For Cause means a termination of Executive's employment
by the Company as a result of:
(i) Executive's fraud or misappropriation with respect to the
business of the Company or intentional damage to the property or
business of the Company or any substantial asset;
(ii) willful failure by Executive to perform his duties and
responsibilities and to carry out his authority;
(iii) willful malfeasance or misfeasance or breach of
fiduciary duty or misrepresentation to the Company or its stockholders;
(iv) willful failure to act in accordance with any specific
lawful instructions of a majority of the Board of Directors of the
Company; or
(v) conviction of Executive of a felony.
2. Benefits Upon Involuntary Termination or Constructive Termination
During Change in Control Period. Subject to the limitations of Section 3, in the
event of an Involuntary Termination or Constructive Termination of Executive for
which the Date of Termination is within a Change in Control Period, the Company
shall pay to Executive the following benefits in a lump sum payment (without
discounting to present value) within 30 days of the Date of Termination:
(a) to the extent not theretofore paid, Executive's base
salary through the Date of Termination;
(b) a pro rata bonus equal to (1) Executive's target bonus
immediately preceding the Change in Control Period multiplied by (2) a
fraction, the numerator of which is the number of whole months (rounded
for portions of months) elapsed in the relevant bonus year prior to the
Date of Termination, and the denominator of which is 12;
(c) twenty-four (24) months of base salary based on the
monthly rate of base salary in effect
<PAGE>
immediately preceding the Change in Control Period, or if greater, the
rate of Base Salary in effect immediately preceding the Date of
Termination; and
(d) Executive's target annual bonus in effect immediately
preceding the Change in Control Period multiplied by two (2).
In addition, (i) the Company shall offer Executive the opportunity to purchase
his Company automobile at its net book value as of the Date of Termination, (ii)
Executive shall be deemed to continue as an employee of the Company for 2 years
following the Date of Termination for purposes of eligibility and vesting (but
not benefit accrual), under any otherwise applicable retirement income plan or
arrangement, and (iii) Executive will be entitled to continue to participate in
all welfare benefit plans for such 2 year period or, if earlier, the period
ending on the date the Executive obtains new full-time employment. Subject to
the limitations of Section 3, the Company shall also reimburse Executive for the
cost of any continued coverage elected by Executive for himself and his eligible
dependents under the Company's group health plan(s) at the end of the welfare
benefit continuation period described in clause (iii) of the immediately
preceding sentence pursuant to Section 4980B of the Code and Section 601 ET SEQ.
of ERISA.
3. Limitation on Benefits.
(a) General. Any benefits payable or to be provided to Executive,
whether pursuant to this Agreement or otherwise, which constitute Parachute
Payments (as defined below) shall be subject to the limitation of this Section 3
so that the benefits payable or to be provided to Executive under this
Agreement, as well as any payments or benefits provided outside of this
Agreement, shall not cause the Company to have paid an Excess Parachute Payment
(as defined below). Accordingly, anything in this Agreement to the contrary
notwithstanding, in the event that the certified public accountants regularly
employed by the Company immediately prior to a Change in Control (the
"Accounting Firm") shall determine that Executive's receipt of all Parachute
Payments would cause the Company to pay an Excess Parachute Payment, it shall
determine the Reduced Amount, and the aggregate Parachute Payments shall be
reduced to such Reduced Amount in accordance with the provisions of Section 3(c)
below.
(b) Definitions. For purposes of this Section 3:
(i) "Excess Parachute Payment" shall have the same meaning as
the term "excess parachute payment" defined in Section 280G(b)(1) of
the Code;
(ii) "Parachute Payment" shall mean any payment or
distribution in the nature of compensation to or for the benefit of
Executive which is contingent on a "change" under and within the
meaning of Section 280G(b)(2)(A)(i) of the Code, whether paid or
payable pursuant to this Agreement or otherwise;
(iii) "Present Value" shall mean such value determined in
accordance with Section 280G(d)(4) of the Code; and
(iv) "Reduced Amount" shall mean the largest aggregate amount
of Parachute Payments Executive may receive without causing the Company
to have paid an Excess Parachute Payment.
(c) Limitation. If the Accounting Firm determines that Parachute
Payments should be limited to the Reduced Amount, the Company shall promptly
give Executive notice to that effect and a copy of the detailed calculation
thereof, and Executive may then elect, in Executive's sole discretion, which and
how much of the Parachute Payments, including without limitation Parachute
Payments made outside of this Agreement, shall be eliminated or reduced (as long
as after such election the Present Value of the aggregate Parachute Payments is
equal to the Reduced Amount), and shall advise the Company in writing of such
election within 10 days of Executive's receipt of notice. If no such election is
made by Executive within such 10 day period, the Company may elect which of
Parachute Payments, including without limitation Parachute Payments made outside
of this Agreement, shall be eliminated or reduced (as long as after such
election the Present Value of the aggregate Parachute Payments is equal to the
Reduced Amount) and shall notify Executive promptly of such election. All
determinations made by the Accounting Firm under this Section 3 shall be binding
upon the Company and Executive and shall be made within 45 days immediately
following the Date of Termination. As promptly as practicable following such
determination, the Company shall pay to or distribute for the benefit of
Executive such Parachute Payments as are then due to Executive under this
Agreement.
4. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent
or limit Executive's continuing or future
<PAGE>
eligibility or participation in any benefit, bonus, incentive or other plan
provided by the Company and for which Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as Executive may have under any
stock option or other agreements with the Company. Amounts which are vested
benefits or which Executive is otherwise entitled to receive under any plan or
program of the Company subsequent to the Date of Termination shall be payable in
accordance with such plan or program.
5. Full Settlement. The Company's obligation to make payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against Executive or other
parties. In no event shall Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to Executive
under any of the provisions of this Agreement. The Company agrees to pay, to the
full extent provided by law, all legal fees and expenses which Executive may
reasonably incur as a result of any contest by the Company or others of the
validity or enforceability of, or liability under, any provision of this
Agreement or as a result of any contest by Executive about the amount of any
payment pursuant to this Agreement.
6. No Duplication of Benefits. Notwithstanding anything to the contrary
herein, the lump sum payment due to Executive under Section 2 hereof shall be
reduced by the amount of cash severance or salary continuation benefits paid to
Executive pursuant to any other plan or policy of the Company or a written
employment agreement between the Company (or one of its affiliates) and
Executive, it being the intent of the parties that Executive shall not receive
post-employment benefits hereunder and under such other plan, policy or written
employment agreement.
7. Succession. This Agreement shall inure to the benefit of and shall
be binding upon the Company and its successors and assignees, but, without the
prior written consent of Executive, this Agreement may not be assigned other
than in connection with a merger, sale, consolidation or similar transaction of
all or substantially all of the business and/or assets of the Company in which
the successor or assignee assumes (whether by operation of law or express
assumption) all obligations of the Company hereunder. The Company shall require
any successor to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession had taken place. The obligations and duties of Executive
hereunder shall be personal and not assignable otherwise than by the laws of
descent and distribution.
8. Miscellaneous.
(a) Applicable Law. This Agreement shall be governed, construed and
interpreted in accordance with the laws of the State of North Carolina.
(b) Notices. All notices and communications hereunder shall be in
writing and shall be given by hand delivery to the other party by registered or
certified mail, return receipt requested, postage prepaid, or by overnight mail,
addressed as follows:
If to Executive:
Mr. Dennis E. Hiller
19327 River Falls Drive
Davidson, North Carolina 28036
If to the Company:
Collins & Aikman Products Co.
701 McCullough Drive
P.O. Box 32665
Charlotte, North Carolina 28232
Attention: Chief Executive Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) Validity. The invalidity or unenforceability of any provision of
this contract shall not affect the validity or enforceability of any other
provision of this Agreement.
<PAGE>
(d) Tax Withholding. The Company may withhold from any amounts payable
under this Agreement such federal, state and local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(e) Waiver. The waiver of the breach of any term or of any condition of
this Agreement shall not be deemed to constitute the waiver of any other breach
of the same or any other term or condition hereof.
(f) Entire Agreement. This instrument contains the entire agreement of
the parties relating to the subject matter hereof, and it replaces and
supersedes any prior agreements between the parties relating to said subject
matter. No modifications of this Agreement shall be valid unless made in writing
and signed by the parties hereto.
(g) No Right of Employment. Executive and the Company acknowledge that
the employment of Executive by the Company is "at will," and prior to the date
of a Change in Control, may be terminated by either Executive or the Company at
any time. Upon a termination of Executive's employment prior to the date of a
Change in Control, there shall be no further rights under this Agreement and
this Agreement shall terminate and be of no further force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
EXECUTIVE:
/s/ Dennis E. Hiller
Dennis E. Hiller
COMPANY:
COLLINS & AIKMAN CORPORATION
By: /s/ Thomas E. Hannah
Thomas E. Hannah
President & Chief Executive Officer
Exhibit 10.20
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") is made and entered
into this 17th day of March, 1998, by and between COLLINS & AIKMAN CORPORATION,
a Delaware corporation (the "Company"), and ELIZABETH R. PHILIPP (the
"Executive").
Statement of Purpose
The Company wishes to encourage the continued service and dedication of
Executive in the event of any actual or contemplated Change in Control (as
defined below) of the Company. The Company has determined that these objectives
are best accomplished by providing Executive with individual financial security
pursuant to the terms of this Agreement, which the Company believes are fair and
reasonable and consistent with the practices of other major corporations.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Company and Executive hereby agree as follows:
1. Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
(a) Change in Control means and shall be deemed to have occurred
upon:
(i) the acquisition, directly or indirectly, by any "person"
(within the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended) within any 12 month period of more
than 80% of the combined voting power of the then outstanding voting
securities of the 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 ("Excluded Transactions"): (A) any acquisition of beneficial
ownership by the Company, any subsidiary of the Company, Wasserstein
Perella Partners, L.P., Blackstone Capital Partners L.P. or an
affiliate of any of the foregoing, (B) any acquisition by an employee
benefit plan (or related trust) sponsored or maintained by the Company
or any subsidiary of the Company, and (C) any merger, consolidation or
other form of business acquisition or combination transaction in which,
immediately after the transaction and giving effect thereto and the
issuance of securities therein, holders of Common Stock of the Company
beneficially own or are entitled to receive equity securities of the
acquiring, surviving or resulting entity (or any parent company or
other affiliate thereof) that, in the aggregate, represent more than
20% of the combined voting power entitled to be cast generally; or
(ii) the sale of any business, businesses or assets of the
Company in any single transaction or series of related transactions
effected within any 12-month period which, on an aggregate basis,
produced at least 80% of the consolidated net sales of the Company,
calculated by giving pro forma effect to such transactions, and any
acquisitions effected during the relevant period, for the fiscal year
immediately preceding such transaction or, if applicable, the first
such transaction in the 12-month period in which the transaction or
series of related transactions occurred, excluding, however, any
Excluded Transaction.
(b) Change in Control Period means the period commencing three months
prior to the date of a Change in Control and ending on the first anniversary of
such date or if later, the expiration of the 45 day period referred to in
Section 1(d)(3) below.
(c) Code means the Internal Revenue Code of 1986, as amended.
(d) Constructive Termination means a termination of Executive's
employment by Executive during a Change in Control Period which is due to:
(i) the involuntary relocation of Executive to any office or
location more than fifty (50) miles from the office or location at
which Executive is then located;
<PAGE>
(ii) a material reduction in Executive's total compensation
and benefit package; or
(iii) a significant reduction in Executive's responsibilities,
position or authority (including changes resulting from the assignment
to Executive of any duties inconsistent with his responsibilities,
position or authority in effect immediately prior to the Change in
Control Period);
provided, however, that, notwithstanding any other provision hereof, no event or
circumstance will constitute "Constructive Termination" for purposes of this
Agreement (A) if Termination For Cause exists or (B) unless (1) Executive shall
have given notice to the Company of Executive's determination of the occurrence
of such event, (2) such event constitutes one of the events specified in clauses
(i) - (iii) above, and (3) such event shall be continuing as of the end of 45
days after the giving of such notice.
(e) Date of Termination means the later of (i) the date of receipt of
the Notice of Termination by the Company or Executive, as the case may be, or
(ii) any later date specified therein (which shall be not more than thirty (30)
days after the giving of such notice).
(f) ERISA means the Employee Retirement Income Security Act of 1974, as
amended.
(g) Involuntary Termination means a termination of Executive's
employment by the Company during a Change in Control Period other than a
Termination For Cause. Termination of Executive's employment during a Change in
Control Period by reason of Executive's death or disability shall not be
considered an Involuntary Termination.
(h) Notice of Termination means a written notice which (i) indicates
the specific termination provision in this Agreement relied upon, (ii) sets
forth in reasonable detail the facts and circumstances claimed to provide the
basis for termination of Executive's employment under the provision so
indicated, and (iii) if the termination date is other than the date of receipt
of such notice, specifies the termination date (which shall be not more than
thirty (30) days after the giving of such notice).
(i) Termination For Cause means a termination of Executive's employment
by the Company as a result of:
(i) Executive's fraud or misappropriation with respect to the
business of the Company or intentional damage to the property or
business of the Company or any substantial asset;
(ii) willful failure by Executive to perform his duties and
responsibilities and to carry out his authority;
(iii) willful malfeasance or misfeasance or breach of
fiduciary duty or misrepresentation to the Company or its stockholders;
(iv) willful failure to act in accordance with any specific
lawful instructions of a majority of the Board of Directors of the
Company; or
(v) conviction of Executive of a felony.
2. Benefits Upon Involuntary Termination or Constructive Termination
During Change in Control Period. Subject to the limitations of Section 3, in the
event of an Involuntary Termination or Constructive Termination of Executive for
which the Date of Termination is within a Change in Control Period, the Company
shall pay to Executive the following benefits in a lump sum payment (without
discounting to present value) within 30 days of the Date of Termination:
(a) to the extent not theretofore paid, Executive's base
salary through the Date of Termination;
(b) a pro rata bonus equal to (1) Executive's target bonus
immediately preceding the Change in Control Period multiplied by (2) a
fraction, the numerator of which is the number of whole months (rounded
for portions of months) elapsed in the relevant bonus year prior to the
Date of Termination, and the denominator of which is 12;
(c) twenty-four (24) months of base salary based on the
monthly rate of base salary in effect
<PAGE>
immediately preceding the Change in Control Period, or if greater, the
rate of Base Salary in effect immediately preceding the Date of
Termination; and
(d) Executive's target annual bonus in effect immediately
preceding the Change in Control Period multiplied by two (2).
In addition, (i) the Company shall offer Executive the opportunity to purchase
his Company automobile at its net book value as of the Date of Termination, (ii)
Executive shall be deemed to continue as an employee of the Company for 2 years
following the Date of Termination for purposes of eligibility and vesting (but
not benefit accrual), under any otherwise applicable retirement income plan or
arrangement, and (iii) Executive will be entitled to continue to participate in
all welfare benefit plans for such 2 year period or, if earlier, the period
ending on the date the Executive obtains new full-time employment. Subject to
the limitations of Section 3, the Company shall also reimburse Executive for the
cost of any continued coverage elected by Executive for himself and his eligible
dependents under the Company's group health plan(s) at the end of the welfare
benefit continuation period described in clause (iii) of the immediately
preceding sentence pursuant to Section 4980B of the Code and Section 601 ET SEQ.
of ERISA.
3. Limitation on Benefits.
(a) General. Any benefits payable or to be provided to Executive,
whether pursuant to this Agreement or otherwise, which constitute Parachute
Payments (as defined below) shall be subject to the limitation of this Section 3
so that the benefits payable or to be provided to Executive under this
Agreement, as well as any payments or benefits provided outside of this
Agreement, shall not cause the Company to have paid an Excess Parachute Payment
(as defined below). Accordingly, anything in this Agreement to the contrary
notwithstanding, in the event that the certified public accountants regularly
employed by the Company immediately prior to a Change in Control (the
"Accounting Firm") shall determine that Executive's receipt of all Parachute
Payments would cause the Company to pay an Excess Parachute Payment, it shall
determine the Reduced Amount, and the aggregate Parachute Payments shall be
reduced to such Reduced Amount in accordance with the provisions of Section 3(c)
below.
(b) Definitions. For purposes of this Section 3:
(i) "Excess Parachute Payment" shall have the same meaning as
the term "excess parachute payment" defined in Section 280G(b)(1) of
the Code;
(ii) "Parachute Payment" shall mean any payment or
distribution in the nature of compensation to or for the benefit of
Executive which is contingent on a "change" under and within the
meaning of Section 280G(b)(2)(A)(i) of the Code, whether paid or
payable pursuant to this Agreement or otherwise;
(iii) "Present Value" shall mean such value determined in
accordance with Section 280G(d)(4) of the Code; and
(iv) "Reduced Amount" shall mean the largest aggregate amount
of Parachute Payments Executive may receive without causing the Company
to have paid an Excess Parachute Payment.
(c) Limitation. If the Accounting Firm determines that Parachute
Payments should be limited to the Reduced Amount, the Company shall promptly
give Executive notice to that effect and a copy of the detailed calculation
thereof, and Executive may then elect, in Executive's sole discretion, which and
how much of the Parachute Payments, including without limitation Parachute
Payments made outside of this Agreement, shall be eliminated or reduced (as long
as after such election the Present Value of the aggregate Parachute Payments is
equal to the Reduced Amount), and shall advise the Company in writing of such
election within 10 days of Executive's receipt of notice. If no such election is
made by Executive within such 10 day period, the Company may elect which of
Parachute Payments, including without limitation Parachute Payments made outside
of this Agreement, shall be eliminated or reduced (as long as after such
election the Present Value of the aggregate Parachute Payments is equal to the
Reduced Amount) and shall notify Executive promptly of such election. All
determinations made by the Accounting Firm under this Section 3 shall be binding
upon the Company and Executive and shall be made within 45 days immediately
following the Date of Termination. As promptly as practicable following such
determination, the Company shall pay to or distribute for the benefit of
Executive such Parachute Payments as are then due to Executive under this
Agreement.
4. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent
or limit Executive's continuing or future
<PAGE>
eligibility or participation in any benefit, bonus, incentive or other plan
provided by the Company and for which Executive may qualify, nor shall anything
herein limit or otherwise affect such rights as Executive may have under any
stock option or other agreements with the Company. Amounts which are vested
benefits or which Executive is otherwise entitled to receive under any plan or
program of the Company subsequent to the Date of Termination shall be payable in
accordance with such plan or program.
5. Full Settlement. The Company's obligation to make payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against Executive or other
parties. In no event shall Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to Executive
under any of the provisions of this Agreement. The Company agrees to pay, to the
full extent provided by law, all legal fees and expenses which Executive may
reasonably incur as a result of any contest by the Company or others of the
validity or enforceability of, or liability under, any provision of this
Agreement or as a result of any contest by Executive about the amount of any
payment pursuant to this Agreement.
6. No Duplication of Benefits. Notwithstanding anything to the contrary
herein, the lump sum payment due to Executive under Section 2 hereof shall be
reduced by the amount of cash severance or salary continuation benefits paid to
Executive pursuant to any other plan or policy of the Company or a written
employment agreement between the Company (or one of its affiliates) and
Executive, it being the intent of the parties that Executive shall not receive
post-employment benefits hereunder and under such other plan, policy or written
employment agreement.
7. Succession. This Agreement shall inure to the benefit of and shall
be binding upon the Company and its successors and assignees, but, without the
prior written consent of Executive, this Agreement may not be assigned other
than in connection with a merger, sale, consolidation or similar transaction of
all or substantially all of the business and/or assets of the Company in which
the successor or assignee assumes (whether by operation of law or express
assumption) all obligations of the Company hereunder. The Company shall require
any successor to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession had taken place. The obligations and duties of Executive
hereunder shall be personal and not assignable otherwise than by the laws of
descent and distribution.
8. Miscellaneous.
(a) Applicable Law. This Agreement shall be governed, construed and
interpreted in accordance with the laws of the State of North Carolina.
(b) Notices. All notices and communications hereunder shall be in
writing and shall be given by hand delivery to the other party by registered or
certified mail, return receipt requested, postage prepaid, or by overnight mail,
addressed as follows:
If to Executive:
Elizabeth R. Philipp
1056 Fifth Avenue
Apt. 9C
New York, New York 10028
If to the Company:
Collins & Aikman Products Co.
701 McCullough Drive
P.O. Box 32665
Charlotte, North Carolina 28232
Attention: Chief Executive Officer
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(c) Validity. The invalidity or unenforceability of any provision of
this contract shall not affect the validity or enforceability of any other
provision of this Agreement.
<PAGE>
(d) Tax Withholding. The Company may withhold from any amounts payable
under this Agreement such federal, state and local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
(e) Waiver. The waiver of the breach of any term or of any condition of
this Agreement shall not be deemed to constitute the waiver of any other breach
of the same or any other term or condition hereof.
(f) Entire Agreement. This instrument contains the entire agreement of
the parties relating to the subject matter hereof, and it replaces and
supersedes any prior agreements between the parties relating to said subject
matter. No modifications of this Agreement shall be valid unless made in writing
and signed by the parties hereto.
(g) No Right of Employment. Executive and the Company acknowledge that
the employment of Executive by the Company is "at will," and prior to the date
of a Change in Control, may be terminated by either Executive or the Company at
any time. Upon a termination of Executive's employment prior to the date of a
Change in Control, there shall be no further rights under this Agreement and
this Agreement shall terminate and be of no further force and effect.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
EXECUTIVE:
/s/ Elizabeth R. Philipp
Elizabeth R. Philipp
COMPANY:
COLLINS & AIKMAN CORPORATION
By: /s/ Thomas E. Hannah
Thomas E. Hannah
President & Chief Executive Officer
Exhibit 11
COLLINS & AIKMAN CORPORATION
COMPUTATION OF EARNINGS PER SHARE
IN THOUSANDS, EXCEPT PER SHARE DATA
(UNAUDITED)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------------
DECEMBER 27, DECEMBER 28, JANUARY 27,
1997 1996 1996
----------------- ------------------- --------------
<S> <C> <C> <C>
Average shares outstanding during the period................. 66,337 68,997 70,015
----------------- ------------------- --------------
Incremental shares under stock options computed under the
treasury stock method using the average market price of
issuer's stock during the period.......................... - 1,119 1,166
----------------- ------------------- --------------
Total shares for diluted EPS............................ 66,337 69,887 71,181
================= =================== ==============
Income (loss) applicable to common shareholders:
Continuing operations................................... $ (10,091) $ 33,111 $ 207,222
Discontinued operations................................. 4,306 14,323 (781)
Gain on sale of discontinued operations 161,741 - -
Income before extraordinary loss........................ 155,956 47,434 206,441
Extraordinary item...................................... (721) (6,610) -
----------------- ------------------- --------------
Net income.............................................. $ 155,235 $ 40,824 $ 206,441
================= =================== ==============
Income (loss) per basic common share:
Continuing operations................................... $ (0.15) $ 0.48 $ 2.96
Discontinued operations................................. 0.06 0.21 (.01)
Gain on sale of discontinued operations 2.44 - -
Extraordinary item...................................... (0.01) (0.10) -
----------------- ------------------- --------------
Net income (loss)....................................... $ 2.34 $ 0.59 $ 2.95
================= =================== ==============
Income (loss) per diluted common share:......................
Continuing operations................................... $ (0.15) $ 0.47 $ 2.91
Discontinued operations................................. 0.06 0.21 (0.01)
Gain on sale of discontinued operations................. 2.44 - -
Extraordinary item...................................... (0.01) (0.10) -
----------------- ------------------- --------------
Net income (loss) $ 2.34 $ 0.58 $ 2.90
================= =================== ==============
</TABLE>
Exhibit 21
SUBSIDIARIES OF COLLINS & AIKMAN CORPORATION
<TABLE>
<CAPTION>
COMPANY JURISDICTION
- ------- ------------
<S> <C>
Collins & Aikman Products Co. Delaware
The Akro Corporation Delaware
Carcorp, Inc. Delaware
Cepco, Incorporated Delaware
Collins & Aikman Asset Services, Inc. Delaware
CW Management Corporation(1) Delaware
Hopkins Services, Inc.(2) Minnesota
SAF Services Corporation(3) Delaware
Collins & Aikman Automotive International, Inc. Delaware
Collins & Aikman Carpet & Acoustics (MI), Inc. Delaware
Collins & Aikman Carpet & Acoustics (TN), Inc. Tennessee
Collins & Aikman Export Corporation U.S. Virgin Isles
Collins & Aikman Holdings Canada Inc. Canada
Collins & Aikman Canada Inc. Canada
Collins & Aikman Carpet & Acoustics (Canada) Inc. Canada
Imperial Wallcoverings (Canada) Inc. Canada
Collins & Aikman International Corporation Delaware
Collins & Aikman Europe, Inc. Delaware
Collins & Aikman (Gibraltar) Limited Gibraltar/Delaware
Collins & Aikman Europe S.A. Luxembourg
C&A (Gibraltar) Gibraltar
Collins & Aikman Automotive Holding GmbH Germany
Collins & Aikman Automotive Systems GmbH Germany
Dura Convertible Systems GmbH Germany
Collins & Aikman Automotive Systems S.A.(4) Spain
Collins & Aikman Holding AB(5) Sweden
- --------
(1) 10% owned by Willis Corroon Corporation of North Carolina
(2) 10% owned by by O'Brien & Gere of North America, Inc.
(3) 10% owned by Unicare, Inc.
(4) One share owned by J. Michael Stepp
(5) 50% owned by Collins & Aikman Products Co.
<PAGE>
Collins & Aikman Automotive Systems N.V. Belgium
Collins & Aikman Automotive System AB Sweden
Collins & Aikman Products GmbH Austria
Collins & Aikman Holdings Limited United Kingdom
Collins & Aikman Automotive Systems Limited United Kingdom
Collins & Aikman Automotive Carpet Products (UK) Limited(1) United Kingdom
Collins & Aikman Europe Limited United Kingdom
Abex Plastic Products Limited United Kingdom
Kigass Engineering Limited United Kingdom
Manchester Kigass International Limited(1) United Kingdom
Premier Springs & Pressings Limited United Kingdom
Collins & Aikman Europe B.V. Netherlands
Collins & Aikman Holdings, S.A. de C.V.(2) Mexico
Amco de Mexico, S.A. de C.V. Mexico
Collins & Aikman de Mexico, S.A. de C.V.(3) Mexico
Collins & Aikman Carpet & Acoustics, S.A. de C.V. Mexico
Dura Convertible Systems de Mexico, S.A. de C.V.(4) Mexico
Collins & Aikman Plastics, Inc. Delaware
Collins & Aikman Plastics, Ltd. Canada
Hughes Plastics, Incorporated Michigan
Collins & Aikman Properties, Inc. Delaware
Sequoia Pacific Development Company Delaware
Dura Convertible Systems, Inc. Delaware
Amco Convertible Fabrics, Inc. Delaware
Gamble Development Company Minnesota
Grefab, Inc. New York
JPS Automotive L.P.(5) Delaware
Cramerton Automotive Products, Inc. Delaware
JPS Automotive Products Corp. Delaware
JPS Mexico Corporation Delaware
Ole's, Inc. California
Ole's Nevada, Inc. Nevada
PACJ, Inc. Delaware
Simmons Universal Corporation Delaware
Wickes Asset Management, Inc. Delaware
Wickes Manufacturing Company Delaware
Wickes Products, Inc. Delaware
Wickes Realty, Inc. Delaware
</TABLE>
- --------
(1) 50% owned by Kigass Engineering Limited
(2) One share owned by Habinus Trading Company
(3) One share owned by The Akro Corporation
(4) One share owned by Dura Convertible Systems, Inc.
(5) General partner interest owned by PACJ, Inc.
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in this Form 10-K into the Company's
previously filed Registration Statements File No. 33-53323, No. 33-53324, No.
33-60997 and No. 333-34569.
ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
March 26, 1998.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 27, 1997 AND SUCH IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 24,004
<SECURITIES> 0
<RECEIVABLES> 207,400
<ALLOWANCES> 9,275
<INVENTORY> 142,042
<CURRENT-ASSETS> 509,291
<PP&E> 514,978
<DEPRECIATION> 126,891
<TOTAL-ASSETS> 1,302,392
<CURRENT-LIABILITIES> 302,803
<BONDS> 764,857
0
0
<COMMON> 705
<OTHER-SE> (67,555)
<TOTAL-LIABILITY-AND-EQUITY> 1,302,392
<SALES> 1,629,332
<TOTAL-REVENUES> 1,629,332
<CGS> 1,397,121
<TOTAL-COSTS> 1,397,121
<OTHER-EXPENSES> (678)
<LOSS-PROVISION> 604
<INTEREST-EXPENSE> 77,581
<INCOME-PRETAX> 2,907
<INCOME-TAX> 12,998
<INCOME-CONTINUING> (10,091)
<DISCONTINUED> 4,306
<EXTRAORDINARY> (721)
<CHANGES> 0
<NET-INCOME> 155,235
<EPS-PRIMARY> 2.34<F1>
<EPS-DILUTED> 2.34
<FN>
<F1>EPS-BASIC
</FN>
</TABLE>
