<PAGE>
UNITED STATES
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 25, 1999
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)
5755 New King Court
Troy, Michigan 48098
(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (248) 824-2500
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
registered
Common Stock, $.01 par value
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. [_]
The aggregate market value of voting stock held by non-affiliates of the
Registrant was $39,860,060 as of March 15, 2000.
As of March 15, 2000, the number of outstanding shares of the Registrant's
common stock, $.01 par value, was 61,879,272 shares.
DOCUMENTS INCORPORATED BY REFERENCE:
(1) Proxy Statement for 2000 Annual Meeting of Stockholders to be filed within
120 days of December 25, 1999--Part III, 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.
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 20.
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.
<PAGE>
PART I
Item 1. Business
Development
Collins & Aikman Corporation (the "Company") is the global leader in
automotive floor and acoustic systems, and is a leading supplier of automotive
fabric, interior trim 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 25, 1999, Blackstone Capital
Partners, L.P. ("Blackstone Partners") and Wasserstein Perella Partners, L.P.
("WP Partners") and their respective affiliates collectively own approximately
87% 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.
On February 10, 1999, the Company announced a comprehensive plan (the
"Reorganization") to reorganize its global automotive carpet, acoustics,
plastics and accessory floormats businesses into two divisions: North American
Automotive Interior Systems, headquartered in the Detroit metropolitan area,
and European Automotive Interior Systems, headquartered in Wiesbaden, Germany.
The Company subsequently implemented a global account manager structure for
each of its automotive original equipment manufacturer ("OEM") customers. The
Company undertook the Reorganization to reduce costs and improve operating
efficiencies throughout operations and to more effectively respond to the
OEMs' demand for complete interior trim systems and more sophisticated
components, based on increased levels of design and styling support and
quieter automobile interiors. The Reorganization and global account manager
structure has enabled the Company to increase customer service on a global
basis and maintain local expertise to provide specialized sales, marketing,
development, design, engineering and program management services capable of
delivering interior modules, systems and individual components.
As part of the Reorganization, the Company also established the Specialty
Automotive Products division, which includes the Company's automotive fabrics
and Dura Convertible Systems businesses. Although these products have not
historically been sold in conjunction with the Company's other interior trim
offerings, the Company's new strategy of leveraging its acoustic capabilities
with its design and styling expertise is anticipated to change the marketing
approach for most of the Company's products.
Thomas E. Evans joined the Company as Chief Executive Officer on April 22,
1999. Mr. Evans replaced Thomas E. Hannah, who retired from the Company on
June 30, 1999. Mr. Evans also serves as a director and Chairman of the
Company's Board of Directors. Mr. Evans, 48 years old, was formerly President
of Tenneco Automotive, a subsidiary of Tenneco, Inc. Prior to that, Mr. Evans
held several management positions, the last being Senior Vice President of
Operations, at Case Corporation, a subsidiary of Tenneco, Inc.
The Company announced on February 10, 1999 that it anticipated incurring a
restructuring charge related to the Reorganization of approximately $8 million
to $9 million. However, in connection with the change in the Company's Chief
Executive Officer and the Company's operating results in the first quarter,
the Company delayed certain aspects of the Reorganization while the Company's
new Chief Executive Officer, Thomas E. Evans, reviewed the plan. Upon final
completion of the Reorganization plan, the Company recognized a pre-tax
restructuring charge of $33.4 million in 1999. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Recent Developments" for additional discussion of the restructuring charge.
On July 26, 1999, the Company announced that Rajesh K. Shah had been named
Executive Vice President and Chief Financial Officer. Mr. Shah replaced J.
Michael Stepp. Mr. Shah, 48 years old, was formerly Vice President and Chief
Financial Officer of UT Automotive. Prior to that, Mr. Shah held several
management positions with Varity Corporation.
1
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General
The Company is the global leader in automotive floor and acoustic systems,
and is a leading supplier of automotive fabric, interior trim and convertible
top systems, with 1999 net sales of approximately $1.9 billion. The Company
operates through three divisions: North American Automotive Interior Systems,
European Automotive Interior Systems and Specialty Automotive Products. The
Company's North American Automotive Interior Systems and European Automotive
Interior Systems divisions compete in five principal product lines -- molded
floor carpet, acoustical products, luggage compartment trim, accessory
floormats, and plastic-based interior trim modules, systems and components.
The Company's Specialty Automotive Products division competes in automotive
fabrics and convertible top systems.
The Company's North American Automotive Interior Systems and European
Automotive Interior Systems divisions sell principally to automotive OEMs. The
Specialty Automotive Products division sells automotive fabrics to other
automotive suppliers, including suppliers with which the Company competes in
certain product lines. Convertible top systems, also marketed through the
Specialty Automotive Products division, are sold directly to OEMs. The
majority of customers for all three divisions are located in the North
American and European markets.
Approximately 18% of the Company's sales for 1999 were attributable to
products utilized in vehicles built outside of North America, compared to
approximately 20% in 1998. The Company is dependent on certain significant
customers. In 1999, 1998 and 1997, direct and indirect sales to each of
General Motors Corporation, Ford Motor Company and DaimlerChrysler AG
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
trends in the driving age population and disposable income. Although the
Company's operations are not subject to significant seasonal influences, the
Company has historically experienced sales declines during the OEMs' scheduled
summer shut-downs usually occurring in the third quarter of the year.
Products
The Company's North American Automotive Interior Systems and European
Automotive Interior Systems divisions include the following product groups:
molded floor carpet, acoustical products, luggage compartment trim, accessory
floormats and plastic-based interior trim modules, systems and components. The
Specialty Automotive Products division produces automotive fabrics and
convertible top systems. The Company's automotive products are used primarily
in automobiles and light trucks. The Company also produces other automotive
and non-automotive products. In 1999, approximately 96% of the Company's sales
were automotive-related, compared to approximately 63% in 1996.
Molded Floor Carpet. Molded floor carpets primarily include polyethylene,
barrier-backed and molded urethane underlay carpet. In 1999, 1998 and 1997,
the Company's net sales of molded floor carpets were $468.0 million, $417.0
million and $384.7 million, respectively.
Acoustical Products. Acoustical products primarily include interior dash
insulators, damping materials and engine compartment NVH (noise, vibration and
harshness) systems. Acoustical products can be combined with molded floor
carpets to provide complete interior floor systems. In 1999, 1998 and 1997,
the Company's net sales of acoustical products were $209.8 million, $225.1
million, and $167.8 million, respectively.
Luggage Compartment Trim. 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 1999, 1998 and
1997, the Company's net sales of luggage compartment trim were $90.6 million,
$95.9 million and $101.0 million, respectively.
Accessory Floormats. Accessory automotive floormats include rubber-backed,
carpeted floormats typically installed to preserve the quality of original
floor carpets. In 1999, 1998 and 1997, the Company's net sales of accessory
floormats were $165.9 million, $157.2 million and $139.3 million,
respectively. The Company did not have floormat operations in Europe prior to
its acquisition of Collins & Aikman Automotive Floormats Europe, B.V. ("C&A
Floormats Europe") (previously named Pepers Beheer B.V.) in June 1998. The
Company also produces residential and commercial floormats.
2
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Plastic-based Interior Trim Modules, Systems and Components. The Company
manufactures automotive door panels, headrests, pillar trim, floor console
systems and instrument panel components. At the beginning of 1998, the Company
acquired Collins & Aikman Plastics (UK) Limited ("C&A Plastics UK")
(previously named Kigass Automotive Group), which increased the Company's
capacity to provide plastic-based trim and systems in Europe. The Company's
net sales of plastic-based interior trim modules, systems and components, in
1999, 1998 and 1997 were $435.4 million, $417.5 million and $294.6 million,
respectively.
Automotive Fabrics. The Company's automotive fabrics operations produce a
wide variety of automotive fabric, including flat-wovens, velvets and knits,
and headliner fabric. The Company also laminates foam to bodycloth. In 1999,
1998 and 1997, the Company had net sales of automotive fabrics of $269.5
million, $267.2 million and $319.0 million, respectively. The Company also
manufactures other non-automotive products, which accounted for approximately
four percent of the Company's sales in 1999.
Convertible Top Systems. The Company designs and manufactures convertible
top systems for vehicles built in North America and Europe. The Company
markets and sells to OEMs 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. The Company's net sales of
convertible top systems in 1999, 1998 and 1997 were $118.9 million, $104.3
million and $88.8 million, respectively.
For additional discussion on the Company's operating segments, including
each segment's revenues from external customers, operating income and total
assets, see Note 20 to the Consolidated Financial Statements.
Competition
The automotive supply business is highly competitive. The Company has
competitors in each of its automotive product lines, some of which have
substantially greater financial and other resources than the Company. The
Company's competitors in molded plastic components also include subsidiaries
of certain automotive and light vehicle manufacturers. The automotive supply
business for interior surfaces is highly concentrated in North America due
mostly to substantial capital requirements and required sophistication in
design and styling capability. For the majority of the Company's product lines
in North America, the Company normally competes for new business against only
a few other automotive suppliers.
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 associated with vehicle build in North America and
Europe, a failure to obtain purchase orders for new or redesigned models, a
shift in consumer taste away from products that the Company manufactures and
pricing pressure from its major customers. The Company believes the principal
competitive factors in its industry are quality, price, customer service,
design and engineering capability and reputation with the customer.
Working Capital
The Company's working capital consists of accounts receivable, inventory
and accounts payable, which are typical for automotive suppliers. Accounts
receivable are primarily concentrated with large companies such as General
Motors, Ford, DaimlerChrysler and Toyota, which have historically paid within
terms. Inventories are maintained for specific automobile and light truck
models and quantities are based on demand forecasts provided by the customer.
Inventories are mostly required to be delivered on a just-in-time ("JIT")
basis. The Company maintains normal terms and conditions with its vendors.
In 1999, the Company implemented a new compensation program, based in part
upon maximizing cash flow and increasing asset utilization. This new focus
resulted in a 24% reduction in its investment in working capital (including
accounts receivable, inventory and accounts payable) to $168 million in 1999,
compared to $221 million in 1998.
3
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Facilities
At December 25, 1999, the Company had 63 manufacturing, warehouse and other
facilities located in the U.S., Canada, Mexico, the United Kingdom, Spain,
Austria, Germany, Sweden, Belgium, France, the Netherlands and Japan
aggregating approximately 9.6 million square feet. Approximately 79% of the
total square footage of these facilities is owned and the remainder is leased.
Many facilities are strategically located to provide JIT inventory delivery to
the Company's customers. Capacity at any plant depends, among other things, on
the product being produced and the processes, tooling and equipment used.
Capacity is also impacted by product demand and shifts in production between
plants. The Company currently estimates that the majority of its plants
generally operate at between 80% and 100% of capacity. The Company does have
certain isolated plants that operate at capacity levels around 50% due to
production demands at the specific facilities. The Company's capacity
utilization is consistent with 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
20 to the Consolidated Financial Statements.
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 25, 1999, the Company's continuing operations employed
approximately 15,600 persons on a full-time or full-time equivalent basis.
Approximately 5,800 of such employees are represented by labor unions.
Approximately 1,400 employees are represented by collective bargaining
agreements that expire during 2000. Management believes that the Company's
relations with its employees represented by labor unions and its other
employees are generally good. When completed, the Reorganization will affect
approximately 1,100 employees.
Year 2000 Issues
For a discussion of the impact of Year 2000 compliance issues, see "Item 7.
Management's Discussion and Analysis 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 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.
4
<PAGE>
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
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, except for certain
costs incurred at acquired locations. Environmental compliance costs relating
to conditions existing at the time the locations were purchased are generally
charged to reserves established in purchase accounting. 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 25, 1999, 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 23 sites
where the Company is participating in the investigation or remediation of the
site, either directly or through financial contribution, and 8 additional
sites where the Company is alleged to be responsible for costs of
investigation or remediation. As of December 25, 1999, the Company's estimate
of its liability for the 31 sites is approximately $22.9 million. As of
December 25, 1999, the Company has established reserves of approximately $30.5
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.
Item 4. Submission of Matters to a Vote of Security Holders
None.
5
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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 15, 2000, there were
approximately 1,900 beneficial holders. 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 1999 Fiscal 1998
------------- ---------------
High Low High Low
------ ------ ------- -------
<S> <C> <C> <C> <C>
First Quarter......... 6 1/4 4 1/8 9 11/16 7 11/16
Second Quarter........ 7 7/16 4 9 1/2 6 13/16
Third Quarter......... 7 5/8 4 9/16 7 1/2 6 3/16
Fourth Quarter........ 7 4 7/8 7 7/16 4 15/16
</TABLE>
On March 1, 1999, the Company paid a special dividend of approximately $6.2
million, representing $0.10 per share on all outstanding shares of Common
Stock held by stockholders of record at the close of business on February 22,
1999. On May 28, 1999, the Company paid a special dividend related to the
distribution of proceeds from the sale of the Company's Imperial
Wallcoverings, Inc. subsidiary ("Wallcoverings") of approximately $44.0
million, representing $0.71 per share on all outstanding shares of Common
Stock held by stockholders of record as of the close of business on May 20,
1999. No other dividends or similar distributions with respect to the Common
Stock have 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 10 to the
Consolidated Financial Statements.
6
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Item 6. Selected Financial Data
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------------------
December 25, December 26, December 27, December 28, January 27,
1999 1998 1997 1996 (1) 1996
------------ ------------ ------------ ------------ -----------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net sales............... $1,898,597 $1,825,469 $1,629,332 $1,053,821 $ 902,017
Gross margin............ 284,717 248,225 233,160 188,475 164,325
Selling, general and
administrative
expenses............... 145,784 142,724 119,381 82,699 65,996
Restructuring charge and
impairment of long-
lived assets (2)...... 33,391 -- 22,600 -- 2,400
Goodwill amortization... 7,023 7,023 6,669 3,872 270
Operating income........ 98,519 98,478 84,510 101,904 95,659
Interest expense, net
(3).................... 92,045 82,004 77,581 39,850 22,150
Loss on sale of
receivables (4)........ 5,356 6,066 4,700 4,533 6,246
Income (loss) from
continuing operations
before income taxes.... (1,119) 5,193 2,907 57,408 67,263
Income tax expense
(benefit).............. 246 5,284 12,998 24,442 (139,959)
Income (loss) from
continuing operations.. (1,365) (91) (10,091) 32,966 207,222
Income (loss) from
discontinued
operations, including
disposals, net of
income taxes........... -- -- 166,047 14,468 (781)
Income (loss) before
extraordinary items and
cumulative effect of a
change in accounting
principle.............. (1,365) (91) 155,956 47,434 206,441
Net income (loss) (5)... (10,215) (3,815) 155,235 40,824 206,441
Per Share Data:
Income (loss) from
continuing operations
per basic share........ (0.16) -- (0.15) 0.48 2.96
Income (loss) from
continuing operations
per diluted share...... (0.16) -- (0.15) 0.47 2.91
Dividends per share..... 0.81 -- -- -- --
Balance Sheet Data (at
period end):
Total assets............ $1,348,890 $1,382,211 $1,302,392 $1,530,289 $ 991,361
Long-term debt,
including current
portion................ 912,542 866,049 772,934 1,175,594 759,966
Common stockholders'
deficit................ (151,121) (79,771) (66,850) (194,578) (227,852)
Other Data (from
continuing operations):
Capital expenditures.... $ 86,430 $ 95,847 $ 56,521 $ 35,000 $ 53,156
Depreciation and
amortization........... 71,474 67,074 58,840 32,395 28,427
EBITDA (6).............. 183,354 167,547 165,950 134,299 124,086
</TABLE>
- --------
(1) 1996 was a 48-week year.
(2) In 1999, the Company recorded a restructuring charge for the
Reorganization consisting of $13.4 million of asset impairment and $20.0
million primarily related to severance accruals. In 1997, the Company
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. In
fiscal 1995, the Company incurred a charge of $2.4 million related
primarily to the closure of a carpet plant and the write down of fixed
assets at another carpet plant. See Notes to Consolidated Financial
Statements.
(3) Excludes amounts allocated to discontinued operations totaling $12.5
million, $26.7 million, and $26.5 million in 1997, 1996 and 1995,
respectively. No amounts were allocated to discontinued operations in 1999
and 1998.
7
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(4) Excludes amounts allocated to discontinued operations totaling $0.6
million, $2.2 million, and $2.4 million in 1997, 1996, and 1995,
respectively. No amounts were allocated to discontinued operations in 1999
and 1998.
(5) In 1999, the Company recorded an $8.9 million charge for the cumulative
effect of a change in accounting principle related to start-up costs.
(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
Dividends
On March 1, 1999, the Company paid a special dividend of approximately $6.2
million, representing $0.10 per share on all outstanding shares of Common
Stock held by stockholders of record at the close of business on February 22,
1999. On May 28, 1999, the Company paid a special dividend relating to the
distribution of the proceeds from the sale of Wallcoverings of approximately
$44.0 million, representing $0.71 per share on all outstanding shares of
Common Stock held by stockholders of record as of the close of business on May
20, 1999.
Reorganization
On February 10, 1999, the Company announced the Reorganization, a
comprehensive plan to reorganize its global automotive carpet, acoustics,
plastics and accessory floormats businesses into two divisions: North American
Automotive Interior Systems, headquartered in the Detroit metropolitan area,
and European Automotive Interior Systems, headquartered in Wiesbaden, Germany.
In addition, the Company implemented a global account manager structure for
each of the Company's automotive original equipment manufacturer ("OEM")
customers. The Company undertook the Reorganization to reduce costs and
improve operating efficiencies throughout the Company's operations and to more
effectively respond to the OEMs' demand for complete interior trim systems and
more sophisticated components. The Reorganization and global account manager
structure has allowed the Company to increase customer service on a global
basis and maintain local expertise to provide specialized sales, marketing,
development, design, engineering and program management services capable of
delivering interior module systems and individual components.
As part of the Reorganization, the Company also established the Specialty
Automotive Products division, which includes the Company's automotive fabrics
and Dura Convertible Systems businesses. Although these products have not
historically been sold in conjunction with the Company's other interior trim
offerings, the Company's new strategy of leveraging its acoustic capabilities
with its design and styling expertise is anticipated to change the marketing
approach for most of the Company's products.
The Company announced on February 10, 1999 that it anticipated incurring a
restructuring charge related to the Reorganization of approximately $8 million
to $9 million. However, in connection with the change in the Company's Chief
Executive Officer and the Company's operating results in the first quarter,
the Company delayed certain aspects of the Reorganization while the Company's
new Chief Executive Officer, Thomas E. Evans, reviewed the plan. Upon final
completion of the Reorganization plan, the Company recognized a pre-tax
restructuring charge of $33.4 million, including $13.4 million of asset
impairments, $15.0 million of severance costs and $5.0 million related to the
termination of sales commission contracts at the Company's North American
plastics operations.
The Reorganization includes the closure of three facilities. The Homer,
Michigan plastics facility was closed in August, 1999 and its operations were
relocated to an existing plastics facility. The Cramerton, North Carolina
fabrics facility was sold in September, 1999, for $6.0 million. The facility's
operations are in the process of being located to another fabrics facility.
The acoustics facility in Vastra Frolunda, Sweden, is scheduled to be closed
in September, 2000. Approximately $4.7 million in severance costs have been
provided for employees at these facilities.
8
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The remaining severance costs for operating personnel primarily relate to
employee reductions at C&A Plastics UK and in a number of the Company's North
American operations. Severance costs for management and administrative
personnel primarily relate to employee reductions at the Company's former
North Carolina corporate headquarters and at the North American Automotive
Interior Systems division. When completed, the Reorganization will affect
approximately 1,100 employees.
The Company currently expects the Reorganization plan to be substantially
completed by December, 2000. In addition to the restructuring charge, the
Company expensed certain costs for relocation and start up of operations
related to the closed facilities. These expenses amounted to approximately $4
million during 1999. The Company currently estimates that the total cost of
the Reorganization, including the restructuring charge, will be approximately
$43 million, of which approximately $10 million represents other one-time
costs, which are expensed as incurred.
General
The Company is the global leader in automotive floor and acoustic systems,
and is a leading supplier of automotive fabrics, interior trim and convertible
top systems. The Company's net sales in fiscal 1999 were $1,898.6 million
compared to $1,825.5 million in fiscal 1998. During 1996, the Company changed
its fiscal year end to the last Saturday in December. Fiscal 1996 was a 48-
week period which ended on December 28, 1996. Years prior to 1996 refer to the
fiscal year of the Company which ended on the last Saturday of January of the
following year. Capitalized terms that are used in this discussion and not
defined herein have the meanings assigned to such terms in the Notes to
Consolidated Financial Statements.
The automotive supply industry in which the Company competes is cyclical
and is influenced by the level of North American and European vehicle
production. Management believes the long-term trends in the design and
manufacture of automotive interiors include an increased emphasis on
acoustics. Management further believes that changes to vehicle interiors,
including voice-activated internet access, e-mail capabilities and
navigational systems will require enhanced acoustical properties relative to
today's light vehicles. Additionally, the Company believes that by utilizing
its design and styling capabilities across all of its product lines, it will
be able to provide customers with interiors with better color matching, lower
costs and more harmonious interior environments. Management believes that
these interior surface products can serve as "carriers" for the Company's
acoustic products, and by selling these products together, the Company can
differentiate its products from those of its competitors, provide greater
value to its customers and enhance its product potential.
Results of Operations
1999 Compared to 1998
The Divisions
The Company operates three divisions, with seven primary product lines. For
additional information regarding the Company's divisions, see Note 20 to the
Consolidated Financial Statements.
North American Automotive Interior Systems
Net Sales: Net sales for the North American Automotive Interior Systems
division increased 8.1% to $1,151.7 million, up $86.3 million from 1998. The
increase in sales was driven by a stronger automobile and light truck build in
North America in 1999. A strike at General Motors, the Company's largest
customer, negatively impacted sales in 1998 by approximately $37.1 million.
Operating Income: Operating income for the division increased 20.0% to $89.4
million, up $14.9 million from 1998. The increase is primarily due to
increased sales volume, partially offset by unfavorable changes in sales mix
and price discounts at several of the division's operations and the incurrence
of significant start-up costs related to starting production of various
interior modules for the General Motors GMX-270 at the Company's Manchester,
Michigan facility. In addition, the division incurred certain costs related to
the closure and relocation of the Homer, Michigan, plastics facility into
another plastic facility and relocation expenses associated with the
establishment of the division's headquarters in the Detroit metropolitan area.
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European Automotive Interior Systems
Net Sales: Net sales for the European Automotive Interior Systems division
decreased 9.4% to $306.4 million, down $31.7 million from 1998. The decrease
is primarily due to weak demand for acoustical products from Rover, Ford and
Volvo.
Operating Income: Operating income decreased 75.2% to $2.3 million, down $6.9
million from 1998. The decrease is primarily related to operational
inefficiencies at the division's plastics operations in the United Kingdom.
These inefficiencies derived from system implementation difficulties, which
caused temporary delays and inaccuracies in scheduling, shipping and materials
management information. In addition, the division experienced manufacturing
inefficiences associated with volume declines on Rover, Ford and Volvo
products. Operating losses were also incurred at a manufacturing facility at
Vastra Frolunda, Sweden, principally due to volume declines. The Vastra
Frolunda facility is being closed as part of the Reorganization discussed
above. The division also incurred a high level of relocation expenses
associated with the establishment of its headquarters in Wiesbaden, Germany,
and consulting expenses associated with system upgrades and Year 2000
compliance efforts.
Specialty Automotive Products
Net Sales: Net sales for the Specialty Automotive Products division increased
4.4% to $440.5 million, up $18.5 million from 1998. Excluding the impact of
the General Motors strike, sales increased $11.5 million, primarily due to
strong demand for the Ford Mustang at the division's convertible top systems
operations.
Operating Income: Operating income for the division increased 178.7% to $39.6
million, up $25.4 million from 1998. The increase is primarily due to
increased volume at the convertible top systems operations and cost-cutting
efforts at the automotive fabrics operations. In 1998, the automotive fabrics
operations experienced unfavorable manufacturing variances related to a
decline in volume. The volume decline resulted from increased demand for
leather seating, program run-outs, and unfavorable product mix factors. In
addition, the fabrics operations incurred charges related to idle equipment.
The increase in operating income in 1999 was partially offset by the impact of
certain costs related to the closure and relocation of the Cramerton, North
Carolina, fabrics facility into another fabrics facility.
The Company as a Whole
Net Sales: The Company's net sales increased 4.0% to $1,898.6 million, up
$73.1 million from 1998, resulting primarily from the factors discussed above.
Gross Margin: Gross margin for the Company was 15.0% in 1999, up from 13.6% in
1998. The increase in gross margin is primarily due to increased volume and
improved manufacturing efficiencies at the Company's North American Automotive
Interior Systems division. In addition, gross margin at the Company's
Specialty Automotive Products division improved over prior year results, which
were impacted by lower sales volumes and manufacturing inefficiencies caused
by increased demand for leather seating applications and charges for idle
equipment. These increases were partially offset by the manufacturing
inefficiencies experienced at the Company's European Automotive Interior
Systems resulting from volume declines and system implementation difficulties
at the division's plastics operations.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased 2.0% to $152.8 million, up $3.1 million from
1998. The increase is primarily due to costs associated with system upgrades,
the establishment of the Company's new headquarters in the Detroit
metropolitan area and Wiesbaden, Germany and Year 2000 compliance efforts,
partially offset by cost-cutting measures at the Specialty Automotive Products
division and lower personnel costs at the Company's former North Carolina
headquarters due to employee reductions. As a percentage of sales, selling,
general and administrative expenses declined to 8.0% in 1999, compared to 8.2%
in 1998.
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Restructuring Charge: The Company recognized a $33.4 million charge in 1999
relating to the Reorganization plan discussed above.
Interest Expense: Interest expense, net of interest income of $2.4 million and
$3.7 million in 1999 and 1998, respectively, increased $10.0 million to $92.0
million in 1999. The increase is primarily due to higher levels of outstanding
debt in 1999. The weighted average interest rates were 9.6% and 9.7% in 1999
and 1998, respectively.
Loss on the Sale of Receivables: The Company sells on a continuous basis,
through its Carcorp, Inc. subsidiary ("Carcorp"), interests in a pool of
accounts receivable. In connection with the receivable sales, a loss of $5.4
million was recognized in 1999, compared to a loss of $6.1 million in 1998.
The decrease in the loss on sale of receivables is primarily due to a lower
interest rate and decreased borrowings on the receivables facility during
1999.
Other Expense: The Company recognized other expense of $2.2 million, compared
to other expense of $5.3 million in 1998. The decrease is primarily due to
higher foreign currency transaction losses associated with the Canadian dollar
in 1998.
Income Taxes: The Company recognized income tax expense of $0.2 million in
1999, compared to income tax expense of $5.3 million in 1998. The Company's
effective tax rate was (22%) in 1999, compared to 102% in 1998. The decrease
in the Company's effective tax rate is primarily due to lower foreign taxes
and non-recurring tax credits.
Extraordinary Charge: In 1998, the Company recognized a non-cash extraordinary
charge of $3.6 million, net of income taxes of $2.4 million, relating to the
refinancing of the Company's bank facilities and a charge of $0.1 million, net
of income taxes of $90 thousand, recognized in connection with the repurchase
of $2.6 million principal amount of JPS Automotive 11 1/8% Senior Notes due
2001 (the "JPS Automotive Senior Notes") at market prices in excess of
carrying values.
Cumulative Effect of a Change in Accounting Principle: The Company adopted the
provisions of Statement of Position No. 98-5, "Reporting on the Cost of Start-
Up Activities" ("SOP 98-5") at the beginning of 1999. SOP 98-5 provides
guidance on the financial reporting of start-up costs and organization costs
and requires that all nongovernmental entities expense the costs of start-up
activities as these costs are incurred instead of being capitalized and
amortized. The cumulative effect of adopting SOP 98-5 resulted in a charge of
$8.9 million, net of income taxes of $5.1 million.
Net Loss: The combined effect of the foregoing resulted in a net loss of $10.2
million in 1999, compared to a net loss of $3.8 million in 1998.
1998 Compared to 1997
The Divisions
North American Automotive Interior Systems
Net Sales: Net sales for the North American Automotive Interior Systems
division increased 1.1% to $1,065.5 million in 1998, up $11.9 million from
1997. This increase is due in part to the August 1998 acquisition of
Industrias Enjema, S.A. de C.V. ("Enjema"), which generated sales of $8.3
million. In addition, the division generated sales increases in four of its
five product lines. These sales increases were partially offset by the effect
of the General Motors strike in the second and third quarters of 1998, which
negatively impacted sales by $37.1 million. Strikes at DaimlerChrysler and
General Motors in the second quarter of 1997 negatively impacted sales by
$10.7 million.
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Operating Income: Operating income for the division increased 86.0% to $74.5
million in 1998, up from $40.1 million in 1997. During the third quarter of
1997, the division 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 in connection with
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 in charges, $34.0 million is included in cost
of goods sold, $22.6 million is included in impairment of long-lived assets
and $1.3 million is included in selling costs. In 1998, the division's
operating income was negatively impacted by the General Motors strike. The
division experienced sales volume losses to General Motors during the strike
and also incurred a number of cost increases as the division resumed
production following the strike. Many of General Motors' post-strike plant
start-ups were erratic, causing the division certain manufacturing
inefficiencies and cost overruns, especially at C&A Plastics. The division
also experienced delays in achieving planned cost reductions due to these
strike-related factors. Manufacturing inefficiencies associated with the
closure of the division's Salisbury, North Carolina, carpet manufacturing
operations, which were relocated to the division's Parker plant in Greenville,
South Carolina and relocation of certain manufacturing operations from the
Parker plant to the division's Albemarle, North Carolina plant, also
contributed to the decrease. The division's floormat operations also incurred
a $2.0 million unfavorable inventory adjustment. In addition, the division
incurred increased expenditures at C&A Plastics in 1998 in connection with
improvement programs and increased costs relating to systems upgrades and Year
2000 compliance efforts. As a percentage of sales, operating margin for the
division increased to 7.0% in 1998 from 3.8% in 1997.
European Automotive Interior Systems
Net Sales: Net sales for the European Automotive Interior Systems division
increased 180.6% to $338.0 million in 1998, up $217.6 million from 1997. The
increase is primarily due to several acquisitions in 1997 and 1998, including
certain operations of Perstorp A.B. ("Perstorp") located in Germany (the
"German Operations") in August 1997, the remaining interest in the Collins &
Aikman/Perstorp joint venture in Sweden, Belgium and France (the "Collins &
Aikman/Perstorp Joint Venture") in December 1997, C&A Plastics UK in February
1998, and C&A Floormats Europe in June 1998. These entities generated combined
incremental sales of $213.1 million in 1998.
Operating Income: Operating income for the division increased 107.6% to $9.2
million in 1998, up $4.8 million from 1997. The increase is primarily due to
the acquisitions of the German Operations, the remaining interest in the
Collins & Aikman/Perstorp Joint Venture, C&A Plastics UK and C&A Floormats
Europe. These entities generated combined incremental operating income of $4.1
million in 1998. As a percentage of sales, operating margin decreased to 2.7%
in 1998 from 3.6% in 1997, primarily due to costs associated with systems
upgrades and Year 2000 compliance efforts incurred in 1998.
Specialty Automotive Products
Net Sales: Net sales for the Specialty Automotive Products division decreased
7.3% to $422.0 million in 1998, down $33.4 million from 1997. The sales
decrease was primarily due to lower automotive fabric sales caused by an
increased demand for leather seating applications, an unfavorable mix on
several models and a decrease in build on several key vehicles. The decrease
in automotive fabric sales was partially offset by an increase in convertible
top systems due to sales to the Ford Mustang, General Motors Corvette and
Chrysler Sebring. The General Motors strike in the second and third quarters
of 1998 negatively impacted the division's sales by $7.0 million. The strikes
at DaimlerChrysler and General Motors during the second quarter of 1997
impacted the division's sales by $6.7 million.
Operating Income: Operating income for the division decreased 62.7% to $14.2
million in 1998, down $23.9 million from 1997. The Company's automotive
fabrics operations experienced unfavorable manufacturing variances resulting
from lower volume, program run-outs and an unfavorable product mix and also
incurred charges related to idle equipment. In addition, the division incurred
costs associated with systems upgrades and Year 2000 compliance efforts. As a
percentage of sales, operating margin decreased to 3.4% in 1998 from 8.4% in
1997.
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The Company as a Whole
Net Sales: The Company's net sales increased 12.0% to $1,825.5 million in
1998, up $196.1 million from 1997, resulting primarily from the factors
discussed above.
Gross Margin: Gross margin for the Company was 13.6% in 1998, down from 14.3%
in 1997. 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 in connection with 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 in
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 was
included in selling costs. Adjusted for certain of the charges taken by C&A
Plastics, gross margin was 15.2% in 1997. The decrease in gross margin is due
in part to the 1998 General Motors strike. The Company experienced sales
volume losses to General Motors during the strike and also incurred a number
of cost increases as the Company resumed production following the strike. Many
of General Motors' post-strike plant start-ups were erratic, causing the
Company certain manufacturing inefficiencies and cost overruns, especially at
C&A Plastics. The Company also experienced delays in achieving planned cost
reductions due to these strike-related factors. In addition, manufacturing
inefficiencies associated with the closure of the Company's Salisbury, North
Carolina carpet manufacturing operations, which were relocated to the
Company's Parker plant in Greenville, South Carolina, and relocation of
certain manufacturing operations from the Parker plant to the Company's
Albemarle, North Carolina plant also contributed to the decrease. The
Company's automotive fabrics operations experienced unfavorable manufacturing
variances resulting from lower volume, program run-outs and an unfavorable
product mix and also incurred charges related to idle equipment.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased 18.8% in 1998 to $149.7 million, up from
$126.1 million in 1997. The increase is primarily attributable to the
Company's recent acquisitions of C&A Plastics UK, the German Operations,
Perstorp's remaining interest in the operations constituting the former
Collins & Aikman/Perstorp Joint Venture, C&A Floormats Europe and Enjema.
These operations had combined incremental selling, general and administrative
expenses of $20.6 million. The remaining increase is due to costs associated
with systems upgrades, Year 2000 compliance efforts and increased expenditures
at C&A Plastics in connection with improvement programs. As a percentage of
sales, selling, general and administrative expenses increased to 8.2% in 1998
from 7.7% in 1997. The increase as a percentage of sales is primarily due to
lower sales volumes in automotive fabrics.
Impairment of Long Lived Assets: As previously discussed, during the third
quarter of 1997, C&A Plastics wrote down fixed assets by $5.1 million to net
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 $3.7 million and $5.7 million in 1998 and 1997,
respectively, increased $4.4 million to $82.0 million in 1998 from $77.6
million in 1997. The increase is due to a higher outstanding debt balance in
1998. Total net interest expense, including amounts allocated to discontinued
operations, was $90.1 million in 1997. No amounts were allocated to
discontinued operations in 1998.
Loss on the Sale of Receivables: The Company sells on a continuous basis,
through its Carcorp subsidiary, interests in a pool of accounts receivable. In
connection with the receivables sales, a loss of $6.1 million was recognized
in 1998, compared to a loss of $4.7 million in 1997. The increase in the loss
on the sale of receivables is due to an increase in sales. In addition, C&A
Plastics was added as a seller under the Receivables Facility (as hereinafter
defined) during June 1997. Total loss on the sale of receivables, including
amounts allocated to discontinued operations, was $5.3 million in 1997.
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Other (Income) Expense: The Company recognized foreign currency transaction
losses of $4.8 million in 1998, compared to $1.9 million in 1997. These losses
incurred in 1998 were primarily due to the strengthening of the U.S. dollar
against the Canadian dollar. Other expense in 1998 also includes the loss from
the Company's joint venture with Courtaulds of $0.1 million. Other income in
1997 also includes income from the Collins & Aikman/Perstorp Joint Venture of
$0.9 million and a $1.7 million gain on the sale of the Borg Textiles division
in the third quarter of 1997.
Income Taxes: The Company recognized a provision for income taxes of $5.3
million in 1998, compared to $13.0 million in 1997. The Company's effective
tax rate in 1998 was 102%, compared to 447% in 1997. The decrease in the
Company's tax expense and effective rate is due primarily to lower non-
deductible goodwill in 1998 compared to 1997, which included the $17.5 million
of goodwill written off by C&A Plastics.
Discontinued Operations: No income from discontinued operations has been
reflected in 1998, as the operations of the Company's Imperial Wallcoverings
Inc. subsidiary ("Wallcoverings") prior to its sale were charged to the
Company's discontinued operations reserves. The Company's income from
discontinued operations of $4.3 million in 1997 includes the operations of the
Company's Mastercraft Group and Floorcoverings subsidiary ("Floorcoverings")
and JPS Automotive's Air Restraint and Technical Products Division ("Airbag").
Losses incurred by Wallcoverings from April 29, 1996 to the date of sale have
been charged to the Company's existing discontinued operations reserves.
Wallcoverings was sold on March 13, 1998 to Imperial Home Decor Group, Inc, an
affiliate of Blackstone Partners, for $71.9 million and an option for 6.7% of
the common stock of Imperial Home Decor Group, Inc. The Company recorded a
loss of $21.1 million, net of income tax benefits, in September 1997, to
adjust the recorded value of Wallcoverings to the expected proceeds.
Accordingly, no gain or loss resulted from the sale of Wallcoverings.
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 $309.5 million, resulting in a gain on the sale of
discontinued operations of $97.5 million, net of income taxes of $65.0
million. The Company sold Airbag for approximately $56 million. No gain or
loss was recorded on the sale since the sales price approximated the
acquisition fair value and book value of Airbag.
Extraordinary Loss: In 1998, the Company recognized an extraordinary loss
consisting of a non-cash extraordinary charge of $3.6 million, net of income
taxes of $2.4 million, relating to the refinancing of the Company's bank
facilities and a charge of $0.1 million, net of income taxes of $90 thousand,
recognized in connection with the repurchase of $2.6 million principal amount
of JPS Automotive Senior Notes on the market at prices in excess of carrying
values. 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.
Net Income (Loss): The combined effect of the foregoing resulted in a net loss
of $3.8 million, compared to net income of $155.2 million in 1997.
Liquidity and Capital Resources
The Company and its subsidiaries had cash and cash equivalents totaling
$14.0 million and $23.8 million at December 25, 1999 and December 26, 1998,
respectively. The Company had $144.2 million of borrowing availability under
its credit arrangements as of December 25, 1999. The total was comprised of
$119.2 million under the Company's revolving credit facility (including $16.4
million available to the Canadian Borrowers, as hereinafter defined),
approximately $24.9 million under bank demand lines of credit in Canada and
Austria, a line of credit for certain other European locations, and $0.1
million available under the Receivables Facility. Availability as of December
25, 1999 under the revolving credit facility was reduced by outstanding
letters of credit of $19.2 million.
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On May 28, 1998, the Company entered into new credit facilities consisting
of: (i) a senior secured term loan facility in the amount of $100 million
payable in quarterly installments until final maturity on December 31, 2003
(the "Term Loan A Facility"); (ii) a senior secured term loan facility in the
principal amount of $125 million payable in quarterly installments until final
maturity on June 30, 2005 (the "Term Loan B Facility" and, together with the
Term Loan A Facility and the Term Loan C Facility, as hereinafter defined, the
"Term Loan Facilities"); and (iii) a senior secured revolving credit facility
in an aggregate principal amount of up to $250 million terminating on December
31, 2003, of which $60 million (or the equivalent thereof in Canadian dollars)
is available to two of the Company's Canadian subsidiaries (the "Canadian
Borrowers"), and of which up to $50 million is available as a letter of credit
facility (the "Revolving Credit Facility" and together with the Term Loan
Facilities, the "Credit Agreement Facilities"). On May 13, 1999, the Company
closed on a senior secured term loan facility in the principal amount of $100
million, payable in quarterly installments beginning December 1999 through
final maturity in December 2005 (the "Term Loan C Facility"). The proceeds
from the Term Loan C Facility were used to pay the $44.0 million special
dividend previously discussed, repay amounts outstanding under the Company's
Revolving Credit Facility and for general corporate purposes.
At December 25, 1999, the Company had outstanding $85.0 million under the
Term Loan A Facility, $122.0 million under the Term Loan B Facility, $100.0
million under the Term Loan C Facility, and $111.6 million under the Revolving
Credit Facility (including $43.6 million borrowed by the Canadian Borrowers).
The Credit Agreement Facilities, which are guaranteed by the Company and
its U.S. subsidiaries (subject to certain exceptions), contain restrictive
covenants including maintenance of interest coverage and leverage ratios and
various other restrictive covenants which are customary for such facilities.
Effective March 8, 1999, the Company, in view of the decreased sales of
automotive fabrics and the General Motors strike, obtained an amendment to the
Credit Agreement Facilities primarily in order to modify the covenants
relating to interest coverage and leverage ratios throughout the existing
terms of the Credit Agreement Facilities. The amendment resulted generally in
an increase in the interest rates charged under the Credit Agreement
Facilities. For additional discussion of the Credit Agreement Facilities and
related restrictive covenants, see Note 10 to the Consolidated Financial
Statements.
On June 10, 1996, C&A Products issued at face value $400 million principal
amount of 11 1/2% Senior Subordinated Notes due 2006 (the "Subordinated
Notes"). The Subordinated Notes indenture contains 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. The Company does not currently meet the Subordinated Notes
indenture's general test for the incurrence of indebtedness, and does not
expect to meet such test during 2000. However, the Company expects all its
borrowing needs for the foreseeable future to be allowed under exceptions for
permitted indebtedness in the indenture. For additional discussion of the
Subordinated Notes, see Note 10 to the Consolidated Financial Statements.
At December 25, 1999, JPS Automotive had approximately $87.4 million of
indebtedness outstanding (including a premium of $1.3 million) related to the
JPS Automotive Senior Notes. The Company is operating JPS Automotive as a
restricted subsidiary under the Credit Agreement Facilities and the indenture
governing the Subordinated Notes. For additional discussion of the JPS
Automotive Senior Notes, see Note 10 to the Consolidated Financial Statements.
C&A Products utilized a receivable facility (the "Receivables Facility"),
entered into through the Trust formed by Carcorp, comprised of (i) term
certificates in an aggregate face amount of $50 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 purchased on a revolving basis and transferred to the Trust
virtually all trade receivables generated by C&A Products and certain of its
subsidiaries (the "Sellers") in the United States and Canada. The certificates
represented the right to receive payments generated by the receivables held by
the Trust.
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Availability under the variable funding certificates at any time depended
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
25, 1999 the maximum amount available under the variable funding certificates
was $66.5 million, of which $0.1 million was not utilized.
On December 27, 1999, the Company entered into a new receivables facility
(the "New Receivables Facility"), replacing the Receivables Facility. The New
Receivables Facility utilizes funding provided by commercial paper conduits
sponsored by three of the Company's lenders under its Credit Agreement
Facilities. Carcorp remains the purchaser of the Sellers' trade receivables,
transferring rights to collections on those receivables to the conduits. The
conduits in turn issue commercial paper which is collateralized by those
rights. The liquidity facilities backing the New Receivables Facility have
terms of 364 days, renewable annually for up to five years.
The total funding available to the Company on a revolving basis under the
New Receivables Facility is up to $171.6 million, depending upon criteria
similar to those in the Receivables Facility. On December 27, 1999, the
Company funded $120 million through the New Receivables Facility, leaving
approximately $12 million available, but unutilized. The interest rate on sold
interests is equal to the rate paid by the conduits to the holders of the
commercial paper plus a margin of .70% and dealer fees of .05% (6.66% at
inception). In addition, the Company pays .25% on the unused committed portion
of the facility. See Note 11 to the Consolidated Financial Statements for
further information regarding the New Receivables Facility.
The Company has a master equipment lease agreement for a maximum of $50
million of machinery and equipment. At December 25, 1999, the Company had
approximately $20 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 25, 1999, the Company made lease
payments relating to continuing operations of approximately $5.8 million for
machinery and equipment sold and leased back under this master lease. The
Company expects lease payments for continuing operations under this master
lease to be approximately $6.1 million during fiscal 2000.
The Company's principal sources of funds are cash generated from continuing
operating activities, borrowings under the Credit Agreement Facilities and the
sale of receivables under the New Receivables Facility. Net cash provided by
the continuing operating activities of the Company was $95.1 million for 1999.
In 1999, the Company implemented a new compensation program, based in part
upon maximizing cash flow and increasing asset utilization. This new focus
resulted in a 24% reduction in working capital (including accounts receivable,
inventory and accounts payable) to $168 million in 1999, compared to $221
million in 1998.
The Company's principal uses of funds from operating activities and
borrowings for the next several years are expected to fund interest and
principal payments on its indebtedness, net working capital increases and
capital expenditures. At December 25, 1999, the Company had total outstanding
indebtedness of $912.5 million (excluding approximately $19.2 million of
outstanding letters of credit) at a weighted average interest rate of 9.95%
per annum. Of the total outstanding indebtedness, $818.6 million relates to
the Credit Agreement Facilities and the Subordinated Notes.
See Notes 10 and 11 to the Consolidated Financial Statements for
information regarding the interest rates on the Credit Agreement Facilities,
Subordinated Notes, JPS Automotive Senior Notes, Receivables Facility and New
Receivables Facility. Cash interest paid was $91.9 million and $86.6 million
for the fiscal years ended December 25, 1999 and December 26, 1998,
respectively.
Due to the variable interest rates under the Credit Agreement Facilities
and the Receivables Facility, the Company is sensitive to changes in interest
rates. Based upon amounts outstanding at December 25, 1999, a .5% increase in
each of LIBOR and Canadian bankers' acceptance rates (6.5% and 5.2%,
respectively, at December 25, 1999) would impact interest costs by
approximately $2.1 million annually on the Credit Agreement Facilities and
$0.6 million annually on the Receivables Facility.
16
<PAGE>
The current maturities of long-term debt primarily consist of the current
portion of the Credit Agreement Facilities, vendor financing, an industrial
revenue bond and other miscellaneous debt. The maturities of long-term debt of
the Company's continuing operations during 2000, 2001, 2002, 2003, and 2004,
are $28.0 million, $116.4 million, $32.9 million, $28.3 million and $165.4
million, respectively. The JPS Automotive Senior Notes will mature in 2001. In
addition, the Credit Agreement Facilities provide for mandatory prepayments of
the Term Loan Facilities with certain excess cash flow of the Company, net
cash proceeds of certain asset sales or other dispositions by the Company, net
cash proceeds of certain sale/leaseback transactions and net cash proceeds of
certain issuances of debt obligations. The indenture governing the
Subordinated Notes provides that in the event of certain asset dispositions,
C&A Products must apply net proceeds (to the extent not reinvested in the
business) first to repay Senior Indebtedness (as defined, which includes the
Credit Agreement Facilities) and then, to the extent of remaining net
proceeds, to make an offer to purchase outstanding Subordinated Notes at 100%
of their principal amount plus accrued interest. C&A Products must also make
an offer to purchase outstanding Subordinated Notes at 101% of their principal
amount plus accrued interest if a Change in Control (as defined) of the
Company occurs. In addition, the indenture governing the JPS Automotive Senior
Notes requires JPS Automotive to apply the net proceeds from the sale of
assets of JPS Automotive to offer to purchase JPS Automotive Senior Notes, to
the extent not applied within 270 days of such asset sale to an investment in
capital expenditures or other long term tangible assets of JPS Automotive, to
permanently reduce senior indebtedness of JPS Automotive or to purchase JPS
Automotive Senior Notes in the open market.
The Company's Board of Directors authorized the expenditure of up to $25
million in 1999 to repurchase shares of the Company's Common Stock at
management's discretion. This amount was reduced to approximately $2 million
by the approximately $6.2 million special dividend paid on March 1, 1999 and
the approximately $44.0 million special dividend paid on May 28, 1999. The
Company believes it has sufficient liquidity under its existing credit
arrangements to effect the repurchase program. The Company spent approximately
$1.8 million and $25.0 million to repurchase shares during fiscal 1999 and
1998, respectively.
The Company makes capital expenditures on a recurring basis for
replacements and improvements. As of December 25, 1999, the Company's
continuing operations had approximately $10.9 million in outstanding capital
expenditure commitments. The Company currently anticipates that its capital
expenditures for continuing operations for fiscal 2000 will be in the range of
$70 to $80 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 1999, prices for most of the Company's primary raw
materials remained constant with price levels at December 26, 1998. While the
Company may not be able to pass on future raw material price increases to its
customers, it believes that a portion of the increased cost can be offset
through value engineering/value analysis in conjunction with its major
customers and by continued reductions in the cost of off-quality products and
processes.
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. On January 5,
2000, Imperial Home Decor Group, Inc., which purchased Wallcoverings in March,
1998, filed voluntary petitions for protection under chapter 11 of the U.S.
Bankruptcy Code. The Company is currently assessing the impact of that
bankruptcy filing. Management currently anticipates that the net cash
requirements of its discontinued operations will be approximately $22 million
in fiscal 2000. 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 its credit facilities.
17
<PAGE>
Tax Matters
At December 25, 1999, the Company had outstanding net operating loss
carryforwards ("NOLs") of approximately $268.1 million for Federal income tax
purposes. Substantially all of these NOLs expire over the period from 2008 to
2019. The Company also has unused Federal tax credits of approximately $18.9
million, $6.7 million of which expire during the period 2000 to 2019.
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.
Management has reviewed the Company's operating results for recent years as
well as the outlook for its continuing businesses in concluding it is more
likely than not that the net deferred tax assets of $91.9 million at December
25, 1999 will be realized. A major goal of the Reorganization is to lower the
overall cost structure of the Company and thereby increase profitability.
These factors along with the timing of the reversal of its temporary
differences and the expiration dates of its NOLs were also considered in
reaching this conclusion. 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 25, 1999 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.
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 relate 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.
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
18
<PAGE>
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 25, 1999, 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 23 sites where the Company is participating in the
investigation or remediation of the site, either directly or through financial
contribution, and 8 additional sites where the Company is alleged to be
responsible for costs of investigation or remediation. As of
December 25, 1999, the Company's estimate of its liability for these 31 sites,
is approximately $22.9 million. As of December 25, 1999, the Company has
established reserves of approximately $30.5 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.
Impact of Year 2000 Compliance
The Company has currently not experienced any significant systems or other
Year 2000 problems. The Company's comprehensive plan to address Year 2000
issues (the "Year 2000 Plan") included the acceleration of the Company's
Business Systems Integration Plan (the "BSIP Plan"). The BSIP Plan was
initiated in connection with the Company's 1996 acquisitions to create common
manufacturing, financial reporting and cost control information systems
throughout the Company as a whole. The total cost of the Company's Year 2000
Plan, including $29 million of costs associated with the BSIP Plan, was $33
million. Included in this amount is $7 million of salaries and other payroll
costs of Company employees to the extent that they devoted a portion of their
time to the project. Approximately $21 million of the total costs were
incurred during 1999. The Company expensed and capitalized these costs in
accordance with appropriate accounting policies.
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 general economic conditions in the market in which the Company
operates and industry-based factors such as possible declines in the North
American and European automobile and light truck builds, 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, pricing pressure from automotive customers, risks associated
with conducting business in foreign countries and Year 2000 readiness 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 and the implementation of the global
reorganization program. The Company's divisions may also be affected by
changes in the popularity of particular vehicle models, particular interior
trim packages or the loss of programs on particular vehicle models and risks
associated with conducting business in foreign countries. 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.
19
<PAGE>
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Risk Management
The Company is exposed to market risk from changes in interest rates and
foreign exchange rates. To modify the risk from these interest rate and
foreign currency exchange rate fluctuations, the Company enters into various
hedging transactions that have been authorized pursuant to policies and
procedures. The Company does not use derivative financial instruments for
trading purposes.
Interest Rate Exposure
The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's long-term debt obligations. The interest rate
exposure for the Company's variable rate debt obligations is currently indexed
to LIBOR, for U.S.-denominated debt, or the Canadian bankers' acceptance rate,
for Canadian-denominated debt, of one, two, three or six months, as selected
by the Company. While the Company has used interest rate swaps and other
interest rate protection agreements to modify its exposure to interest rate
movements and to reduce borrowing rates, no such agreements were in place at
December 25, 1999.
The table below provides information about the Company's derivative
financial instruments and other financial instruments that are sensitive to
changes in interest rates, including debt obligations. The table presents
principal cash flows and related weighted average interest rates by expected
maturity dates for the Company's debt obligations. Weighted average variable
interest rates are based on implied LIBOR and Canadian bankers' acceptance
forward rates in the yield curve at the reporting date. The information is
presented in U.S. dollar equivalents, which is the Company's reporting
currency. The instrument's actual cash flows are denominated in both U.S.
dollar ($US) and Canadian dollar ($CAD), as indicated in parentheses (dollar
amounts in thousands).
<TABLE>
<CAPTION>
Expected Maturity Date Fair Value
-------------------------------------------------------- December 25,
2000 2001 2002 2003 2004 Thereafter Total 1999
------- ------- ------- ------- -------- ---------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Debt:
Fixed rate ($US)....... $86,043 $400,000 $486,043 $481,915
Average interest
rate................. 11.1% 11.5%
Variable rate ($US).... $26,750 $28,000 $31,750 $27,375 $121,125 $140,000 $375,000 $375,000
Average interest
rate................. 9.6% 9.7% 9.7% 9.3% 9.5% 10.1%
Variable rate ($CAD)... $ 43,622 $ 43,622 $ 43,622
Average interest
rate................. 9.2%
</TABLE>
Currency Rate Exposure
The Company is subject to currency rate exposure primarily related to
foreign currency purchase and sale transactions and intercompany and third
party loans. The primary purpose of the Company's foreign currency hedging
activities is to protect against the volatility associated with these foreign
currency exposures. The Company primarily utilizes forward exchange contracts
and purchased options with durations of generally less than 12 months.
On January 1, 1999, eleven of the fifteen member countries of the European
Union (the "Participating Countries") established fixed conversion rates
between their existing sovereign currencies and the Euro. The Participating
Countries have agreed to adopt the Euro as their common currency on that date.
The conversion did not have a material adverse effect on the Company's
consolidated financial position or results of operations.
At December 25, 1999, the Company had the following foreign currency
forward contracts outstanding: (i) British pounds for Euros with a U.S. dollar
equivalent notional amount of $5.0 million, a weighted average contract rate
of 1.495 Euros and an unrealized loss of $0.3 million and (ii) Euros for
Swedish krona with a U.S. dollar equivalent notional amount of $0.1 million
and a weighted average contract rate of 0.054 krona. These contracts mature in
2000. The information presented does not fully reflect the net foreign
exchange rate exposure of the Company because it does not include the
intercompany funding arrangements denominated in foreign currencies and the
foreign currency-denominated cash flows from anticipated sales and purchases.
Management believes that the foreign currency exposure relating to these items
would substantially offset the exposures discussed above.
20
<PAGE>
The Company also had option contracts with a U.S. dollar equivalent
notional amount of $45 million outstanding at December 25, 1999 with a
weighted average strike price of Canadian $1.53. These contracts allow the
Company's Canadian operations to buy U.S. dollars for Canadian dollars. These
contracts expire periodically in 2000.
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 and directors is incorporated herein by reference to that portion of
the Registrant's definitive Proxy Statement to be used in connection with its
2000 Annual Meeting of Stockholders, which will be filed in final form with
the Commission not later than 120 days after December 25, 1999 (the "Proxy
Statement"), captioned "Executive Officers of the Company" and "Election of
Directors -- Information as to Nominees and Other Directors". The information
required by Item 405 of Regulation S-K regarding disclosure of delinquent
filers is incorporated herein by reference to that portion of the proxy
statement captioned "Section 16(a) Beneficial Ownership Reporting Compliance".
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 those portions of the Proxy Statement captioned "Compensation Committee
Interlocks and Insider Participation", and "Information as to Nominees and
Other Directors -- Certain Relationships".
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 25, 1999, December 26, 1998 and December 27, 1997............ F-2
Consolidated Balance Sheets at December 25, 1999 and December 26,
1998.................................................................. F-3
Consolidated Statements of Cash Flows for the fiscal years ended
December 25, 1999, December 26, 1998 and December 27, 1997............ F-4
Consolidated Statements of Common Stockholders' Deficit for the fiscal
years ended December 25, 1999, December 26, 1998 and December 27,
1997.................................................................. 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 25, 1999, December 26, 1998, and December
27, 1997 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.
<TABLE>
<CAPTION>
Exhibit
Number Description
<C> <S>
3.1 Restated Certificate of Incorporation of Collins & Aikman Corporation
is hereby incorporated by reference to Exhibit 3.1 of Collins & Aikman
Corporation's Report on Form 10-Q for the fiscal quarter ended June
26, 1999.
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.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
<C> <S>
4.2 Indenture, dated as of June 1,1996, between Collins & Aikman Product
Co., Collins & Aikman Corporation and First Union National Bank of
North Carolina, as Trustee, is hereby incorporated by reference to
Exhibit 4.1 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 Credit Agreement, dated as of May 28, 1998, among Collins & Aikman
Products Co., as Borrower, Collins & Aikman Canada, Inc. and Collins &
Aikman Plastics, Ltd., as Canadian Borrowers, Collins & Aikman
Corporation, as Guarantor, the lenders named therein, Bank of America
N.T.S.A., as Documentation Agent, The Chase Manhattan Bank, as
Administrative Agent, and The Chase Manhattan Bank of Canada, as
Canadian Administrative Agent, is hereby incorporated by reference to
Exhibit 4.4 of Collins & Aikman Corporation's Report on Form 10-Q for
the fiscal quarter ended June 27, 1998.
4.5 Waiver dated as of October 27, 1998 under the Credit Agreement dated
as of May 28, 1998, among Collins & Aikman Products Co., Collins &
Aikman Canada, Inc. and Collins & Aikman Plastics, Ltd., as Canadian
Borrowers, Collins & Aikman Corporation, as Guarantor, the Lender
Parties thereto, Bank of America, N.T.S.A., as Documentation Agent,
The Chase Manhattan Bank, as Administrative Agent, and The Chase
Manhattan Bank of Canada, as Canadian 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
September 26, 1998.
4.6 Waiver dated as of December 22, 1998 under the Credit Agreement dated
as of May 28, 1998, among Collins & Aikman Products Co., Collins &
Aikman Canada, Inc. and Collins & Aikman Corporation, as Guarantor,
the Lender Parties thereto, Bank of America, N.T.S.A., as
Documentation Agent, The Chase Manhattan Bank, as Administrative
Agent, and The Chase Manhattan Bank of Canada, as Canadian
Administrative Agent is hereby incorporated by reference to Exhibit
4.6 of Collins & Aikman Corporation's Report on Form 10-K for the year
ended December 26, 1998.
4.7 Amendment and Waiver dated as of March 8, 1999, among Collins & Aikman
Products Co., Collins & Aikman Canada, Inc., Collins & Aikman Plastics
Ltd., Collins & Aikman Corporation, as Guarantor, the Lender Parties
thereto, Bank of America N.T.S.A., as Documentation Agent, The Chase
Manhattan Bank, as Administrative Agent, and The Chase Manhattan Bank
of Canada, as Canadian Administrative Agent is hereby incorporated by
reference to Exhibit 4.7 of Collins & Aikman Corporation's Report on
Form 10-K for the year ended December 26, 1998.
4.8 Tranche C Term Loan Supplement dated as of May 12, 1999 to the Credit
Agreement dated as of May 28, 1998 among Collins & Aikman Products
Co., Collins & Aikman Canada, Inc., Collins & Aikman Plastics, Ltd.,
Collins & Aikman Corporation, the Financial Institutions parties
thereto, Bank of America N.T.S.A., as Documentation Agent, The Chase
Manhattan Bank, as Administrative Agent, and The Chase Manhattan Bank
of Canada, as Canadian Administrative Agent is hereby incorporated by
reference to Exhibit 4.1 of Collins & Aikman Corporation's Report on
Form 10-Q for the fiscal quarter ended June 26, 1999.
4.9 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.
4.10 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.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
<C> <S>
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 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 March 23, 1999 with an executive officer is
hereby incorporated by reference to Exhibit 10.7 of Collins & Aikman
Corporation's Report on Form 10-K for the fiscal year ended December
26, 1998.*
10.8 Amended and Restated Employment Agreement dated as of January 20, 1999
between Collins & Aikman Products Co. and an executive officer is
hereby incorporated by reference to Collins & Aikman Corporation's
Report on Form 10-K for the fiscal year ended December 26, 1998.*
10.9 Employment Agreement dated as of January 20, 1999 between Collins &
Aikman Products Co. and an executive officer is hereby incorporated by
reference to Exhibit 10.9 of Collins & Aikman Corporation's Form 10-K
for the fiscal year ended December 26, 1998.*
10.10 Employment Agreement dated as of April 22, 1999 between Collins &
Aikman Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.10 of Collins & Aikman Corporation's Report on
Form 10-Q for the fiscal quarter ended March 27, 1999.*
10.11 Letter agreement dated as of May 12, 1999 with an executive officer is
hereby incorporated by reference to Exhibit 10.2 of Collins & Aikman
Corporation's Report on Form 10-Q for the fiscal quarter ended June
26, 1999.*
10.12 Collins & Aikman Corporation 1998 Executive Incentive Compensation
Plan is hereby incorporated by reference to Exhibit 10.10 of Collins &
Aikman Corporation's Report on Form 10-K for the fiscal year ended
December 26, 1998.*
</TABLE>
- --------
* 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.
25
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
<C> <S>
10.13 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 Amendment to Collins & Aikman Corporation Supplemental Retirement
Income Plan is hereby incorporated by reference to Exhibit 10.12 of
the Collins & Aikman Corporation's Report on Form 10-K for the fiscal
year ended December 26, 1998.*
10.15 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.*
10.16 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.*
10.17 1994 Directors Stock Option Plan as amended and restated is hereby
incorporated by reference to Exhibit 10.15 to Collins & Aikman
Corporation's Report on Form 10-K for the year ended December 26,
1998.*
10.18 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.*
10.19 1994 Employee Stock Option Plan, as amended and restated through June
3, 1999 is hereby incorporated by reference to Exhibit 10.2 of
Collins & Aikman Corporation's Report on Form 10-Q for the fiscal
quarter ended June 26, 1999
10.20 Change in control agreement dated March 17, 1998 between Collins &
Aikman Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.17 of Collins & Aikman Corporation's Report
on Form 10-K for the fiscal year ended December 27, 1997.*
10.21 Change in control agreement dated March 17, 1998 between Collins &
Aikman Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.18 of Collins & Aikman Corporation's Report
on Form 10-K for the fiscal year ended December 27, 1997.*
10.22 Change in control agreement dated March 17, 1998 between Collins &
Aikman Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.19 of Collins & Aikman Corporation's Report
on Form 10-K for the fiscal year ended December 27, 1997.*
10.23 Change in control agreement dated March 17, 1998 between Collins &
Aikman Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.20 of Collins & Aikman Corporation's Report
on Form 10-K for the fiscal year ended December 27, 1997.*
10.24 Change in control agreement dated March 17, 1998 between Collins &
Aikman Corporation and an executive officer is hereby incorporated by
reference to Exhibit 10.22 of Collins & Aikman Corporation's report
on Form 10-Q for the fiscal quarter ended March 28, 1998.*
10.25 Change in control agreement dated August 9, 1999 between Collins &
Aikman Corporation and an executive officer.*
10.26 Change in control agreement dated March 17, 1998 between Collins &
Aikman Corporation and an executive officer.*
10.27 Change in control agreement dated March 17 ,1998 between Collins &
Aikman Corporation and an executive officer.*
10.28 Change in control agreement dated July 26, 1999 between Collins &
Aikman Corporation and an executive officer.*
</TABLE>
- --------
* 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>
<TABLE>
<CAPTION>
Exhibit
Number Description
<C> <S>
10.29 Change in control agreement dated March 17, 1998 between Collins &
Aikman Corporation and an executive officer.*
10.30 Employment Agreement dated October 1, 1999 between Collins & Aikman
Products Co. and an executive officer.*
10.31 Severance Benefit Agreement dated July 26, 1999 between Collins &
Aikman Corporation and an executive officer.*
10.32 Severance Benefit Agreement dated August 9, 1999 between Collins &
Aikman Corporation and an executive officer.*
10.33 Letter agreement dated December 17, 1999 between Collins & Aikman
Corporation and an executive officer.*
10.34 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.
10.35 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.
10.36 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.
10.37 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.
10.38 Series 1995-1 Supplement, dated as of March 30, 1995, among Carcorp,
Inc., Collins & Aikman Products Co., as Master Servicer and Chemical
Bank, as Trustee, is hereby incorporated by reference to Exhibit 10.21
of Collins & Aikman Corporation's Report on Form 10-K to the fiscal
year ended January 28, 1995.
10.39 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.
10.40 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.
10.41 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.
</TABLE>
- --------
* 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>
<TABLE>
<CAPTION>
Exhibit
Number Description
<C> <S>
10.42 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.
10.43 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.
10.44 Receivables Transfer Agreement dated December 27, 1999, among Carcorp,
Inc. as Transferor, Collins & Aikman Products Co. as Guarantor and as
Collection Agent, Park Avenue Receivables Corporation and Redwood
Receivables Corporation,, as Initial Purchasers, The Several Financial
Institutions Party Hereto from time to time, as Liquidity Banks, The
Several Agent Banks Party Hereto from time to time, as Funding Agents
and The Chase Manhattan Bank, as Administrative Agent.
10.45 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.
10.46 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.
10.47 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.
10.48 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.
10.49 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.
10.50 Agreement among Perstorp A.B., Perstorp GmbH, Perstorp Biotec A.B. and
Collins & Aikman Products Co. dated December 11, 1996 is hereby
incorporated by reference to Exhibit 2.5 of Collins & Aikman
Corporation's current report on Form 8-K dated December 10, 1996.
10.51 Settlement and Amendment Agreement dated as of December 16, 1997 by
and among Collins & Aikman Products Co., Perstorp A.B., Perstorp GmbH,
Collins & Aikman Holding A.B., Collins & Aikman Automotive Systems
GmbH, Collins & Aikman Automotive Systems N.V., Collins & Aikman
Automotive Systems A.B. and Perstorp Components GmbH and related
Letter Amendment Agreement is hereby incorporated by reference to
Exhibit 10.38 of Collins & Aikman Corporation's Report or Form 10-Q
for the fiscal quarter ended September 26, 1998.
10.52 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.
10.53 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 the fiscal quarter ended March 29, 1997.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description
<C> <S>
10.54 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.
10.55 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.
10.56 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 is hereby incorporated by reference to Exhibit 2.4 of
Collins & Aikman Corporation's Report on Form 10-K for the fiscal year
ended December 27, 1997.
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.
</TABLE>
(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.
29
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities and
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 22nd day of
March, 2000.
COLLINS & AIKMAN CORPORATION
By: /s/ Thomas E. Evans
-------------------------------
Thomas E. Evans
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/ Thomas E. Evans Chairman of the Board of March 22, 2000
______________________________________ Directors and Chief
Thomas E. Evans Executive Officer
(Principal Executive
Officer)
/s/ Rajesh K. Shah Executive Vice President March 22, 2000
______________________________________ and Chief Financial
Rajesh K. Shah Officer (Principal
Financial and Accounting
Officer)
/s/ Bruce R. Barnes Director March 22, 2000
______________________________________
Bruce R. Barnes
/s/ Robert C. Clark Director March 22, 2000
______________________________________
Robert C. Clark
/s/ Marc S. Goldberg Director March 22, 2000
______________________________________
Marc S. Goldberg
/s/ Richard C. Lappin Director March 22, 2000
______________________________________
Richard C. Lappin
/s/ George L. Majoros, Jr. Director March 22, 2000
______________________________________
George L. Majoros, Jr.
______________________________________ Director March 22, 2000
James J. Mossman
/s/ Warren B. Rudman Director March 22, 2000
______________________________________
Warren B. Rudman
/s/ Neil P. Simpkins Director March 22, 2000
______________________________________
Neil P. Simpkins
</TABLE>
30
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Collins & Aikman Corporation:
We have audited the accompanying consolidated balance sheets of Collins &
Aikman Corporation (a Delaware Corporation) and subsidiaries as of December
25, 1999 and December 26, 1998, 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 25, 1999. 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 auditing standards generally
accepted in the United States. 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 financial statements referred to above present fairly,
in all material respects, the financial position of Collins & Aikman
Corporation and subsidiaries as of December 25, 1999, and December 26, 1998,
and the results of their operations and their cash flows for each of the three
fiscal years in the period ended December 25, 1999, in conformity with
generally accepted accounting principles in the United States.
As explained in Note 4 to the consolidated financial statements, effective
December 27, 1998, the Company changed its method of accounting for start-up
costs and organization costs in accordance with SOP 98-5, "Reporting on the
Costs of Start-up Activities."
Arthur Andersen LLP
Charlotte, North Carolina,
March 1, 2000
F-1
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------
December 25, December 26, December 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net sales.............................. $1,898,597 $1,825,469 $1,629,332
Cost of goods sold..................... 1,613,880 1,577,244 1,396,172
---------- ---------- ----------
Gross profit........................... 284,717 248,225 233,160
Selling, general and administrative
expenses.............................. 152,807 149,747 126,050
Restructuring charge and impairment of
long-lived assets..................... 33,391 -- 22,600
---------- ---------- ----------
Operating income....................... 98,519 98,478 84,510
Interest expense, net of interest
income of $2,452, $3,725 and $5,685... 92,045 82,004 77,581
Loss on sale of receivables............ 5,356 6,066 4,700
Other expense (income)................. 2,237 5,215 (678)
---------- ---------- ----------
Income (loss) from continuing
operations before income taxes........ (1,119) 5,193 2,907
Income tax expense..................... 246 5,284 12,998
---------- ---------- ----------
Loss from continuing operations........ (1,365) (91) (10,091)
Income from discontinued operations,
net of income
taxes of $2,835....................... -- -- 4,306
Gain on sale of discontinued
operations, net of income
taxes of $85,358...................... -- -- 161,741
---------- ---------- ----------
Income (loss) before extraordinary loss
and cumulative effect of change in
accounting principle.................. (1,365) (91) 155,956
Extraordinary loss from debt
extinguishment, net of income taxes
of $2,482 and $443.................... -- (3,724) (721)
Cumulative effect of a change in
accounting principle, net
of income taxes of $5,083............. (8,850) -- --
---------- ---------- ----------
Net income (loss)...................... $ (10,215) $ (3,815) $ 155,235
========== ========== ==========
Net income (loss) per basic and diluted
common share:
Continuing operations................. $ (0.02) $ -- $ (0.15)
Discontinued operations............... -- -- 0.06
Gain on sale of discontinued
operations........................... -- -- 2.44
Extraordinary loss.................... -- (0.06) (0.01)
Cumulative effect of a change in
accounting principle................. (0.14) -- --
---------- ---------- ----------
Net income (loss)..................... $ (0.16) $ (0.06) $ 2.34
========== ========== ==========
Average common shares outstanding:
Basic and diluted..................... 61,952 64,348 66,337
========== ========== ==========
</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 25, December 26,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.......................... $ 13,980 $ 23,755
Accounts and other receivables, net of allowances
of $8,557 and $7,228.............................. 233,819 237,645
Inventories........................................ 132,625 152,840
Other.............................................. 84,942 86,445
---------- ----------
Total current assets.............................. 465,366 500,685
Property, plant and equipment, net.................. 443,526 447,121
Deferred tax assets................................. 86,235 70,632
Goodwill, net....................................... 256,362 264,138
Other assets........................................ 97,401 99,635
---------- ----------
$1,348,890 $1,382,211
========== ==========
LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT
Current Liabilities:
Short-term borrowings.............................. $ 3,088 $ 10,954
Current maturities of long-term debt............... 27,992 19,942
Accounts payable................................... 198,466 169,808
Accrued expenses................................... 132,709 143,302
---------- ----------
Total current liabilities......................... 362,255 344,006
Long-term debt...................................... 884,550 846,107
Other, including post-retirement benefit
obligation......................................... 253,206 271,869
Commitments and contingencies.......................
Common stock (150,000 shares authorized, 70,521
shares issued and 61,904 shares outstanding at
December 25, 1999 and 150,000 shares authorized,
70,521 shares
issued and 62,182 shares outstanding at December
26, 1998).......................................... 705 705
Other paid-in capital............................... 585,484 585,401
Accumulated deficit................................. (641,117) (580,666)
Accumulated other comprehensive loss................ (33,260) (23,427)
Treasury stock, at cost (8,617 shares at December
25, 1999 and 8,339 shares at December 26, 1998).... (62,933) (61,784)
---------- ----------
Total common stockholders' deficit................ (151,121) (79,771)
---------- ----------
$1,348,890 $1,382,211
========== ==========
</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 25, December 26, December 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Loss from continuing operations.......... $ (1,365) $ (91) $ (10,091)
Adjustments to derive cash flow from
continuing operating activities:
Impairment of long lived assets......... 13,361 -- 22,600
Deferred income tax expense (benefit)... (6,800) (7,233) 4,252
Depreciation and leasehold
amortization........................... 58,230 52,608 42,712
Goodwill amortization................... 7,023 7,023 6,669
Amortization of other assets............ 6,221 7,443 9,459
Decrease (increase) in accounts and
other receivables...................... 1,826 (5,980) 35,819
Decrease (increase) in inventories...... 20,215 (4,841) (8,078)
Increase (decrease) in interest
payable................................ 946 (2,629) (520)
Increase (decrease) in accounts
payable................................ 28,658 10,031 (4,126)
Other, net.............................. (33,252) (42,466) 5,713
-------- -------- ---------
Net cash provided by continuing
operating activities.................. 95,063 13,865 104,409
-------- -------- ---------
Cash used in Wallcoverings,
Floorcoverings, Airbag and the
Mastercraft Group discontinued
operations.............................. -- (15,052) (4,719)
Cash used in other discontinued
operations.............................. (16,770) (14,043) (12,252)
-------- -------- ---------
Net cash used in discontinued
operations............................ (16,770) (29,095) (16,971)
-------- -------- ---------
INVESTING ACTIVITIES
Additions to property, plant and
equipment............................... (86,430) (98,991) (71,775)
Sales of property, plant and equipment... 10,126 7,953 5,879
Acquisitions of businesses, net of cash
acquired................................ (425) (25,257) 3,447
Net proceeds from disposition of
discontinued operations................. -- 71,200 562,100
Other, net............................... 3,997 (1,239) (99,102)
-------- -------- ---------
Net cash provided by (used in)
investing activities.................. (72,732) (46,334) 400,549
-------- -------- ---------
FINANCING ACTIVITIES
Issuance of long-term debt............... 100,000 225,000 109
Proceeds from (reduction of)
participating interests in accounts
receivable, net of redemptions.......... 2,000 (7,500) (13,000)
Repayment of long-term debt.............. (20,607) (264,480) (256,379)
Increase (decrease) on short-term
borrowings.............................. (7,405) (1,358) 7,089
Net borrowings (repayments) on revolving
credit facilities....................... (35,293) 136,717 (194,000)
Purchases of treasury stock.............. (2,097) (25,013) (19,715)
Dividends paid........................... (50,198) -- --
Other, net............................... (1,736) (2,051) (2,401)
-------- -------- ---------
Net cash provided by (used in)
financing activities.................. (15,336) 61,315 (478,297)
-------- -------- ---------
Increase (decrease) in cash and cash
equivalents............................. (9,775) (249) 9,690
Cash and cash equivalents at beginning of
year.................................... 23,755 24,004 14,314
-------- -------- ---------
Cash and cash equivalents at end of
year.................................... $ 13,980 $ 23,755 $ 24,004
======== ======== =========
</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>
Accumulated
Current Year Other Other
Comprehensive Accumulated Comprehensive Common Paid-in Treasury
Income (Loss) Total Deficit Loss Stock Capital Stock
------------- --------- ----------- ------------- ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 28, 1996.. $(194,578) $(729,315) $(30,963) $705 $585,207 $(20,212)
Comprehensive income:
Net income................... $ 155,235 155,235 155,235 -- -- -- --
Other comprehensive income,
net of tax:
Foreign currency translation
adjustments................ (8,325) (8,325) -- (8,325) -- -- --
Pension equity adjustment... (535) (535) -- (535) -- -- --
---------
$ 146,375
=========
Compensation expense.......... 683 -- -- -- 683 --
Purchase of treasury stock
(2,245 shares)............... (19,715) -- -- -- -- (19,715)
Exercise of stock options
(373 shares)................. 385 (2,771) -- -- -- 3,156
--------- --------- -------- ---- -------- --------
Balance at December 27, 1997.. (66,850) (576,851) (39,823) 705 585,890 (36,771)
Comprehensive income:
Net loss..................... $ (3,815) (3,815) (3,815) -- -- -- --
Other comprehensive income,
net of tax:
Foreign currency translation
adjustments................ 7,569 7,569 -- 7,569 -- -- --
Pension equity adjustment... 8,827 8,827 -- 8,827 -- -- --
---------
$ 12,581
=========
Compensation expense.......... (489) -- -- -- (489) --
Purchase of treasury stock
(3,669 shares)............... (25,013) -- -- -- -- (25,013)
--------- --------- -------- ---- -------- --------
Balance at December 26, 1998.. (79,771) (580,666) (23,427) 705 585,401 (61,784)
Comprehensive income:
Net loss..................... $ (10,215) (10,215) (10,215) -- -- -- --
Other comprehensive income,
net of tax:
Foreign currency translation
adjustments................ (10,649) (10,649) -- (10,649) -- -- --
Pension equity adjustment... 816 816 -- 816 -- -- --
---------
$ (20,048)
=========
Compensation expense.......... 545 -- -- -- 545 --
Dividends..................... (50,198) (50,198)
Purchase of treasury stock
(385 shares)................. (2,097) -- -- -- -- (2,097)
Exercise of stock options
(107 shares)................. 448 (38) -- -- (462) 948
--------- --------- -------- ---- -------- --------
Balance at December 25, 1999.. $(151,121) $(641,117) $(33,260) $705 $585,484 $(62,933)
========= ========= ======== ==== ======== ========
</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 25, 1999,
Blackstone Capital Partners L.P. ("Blackstone Partners") and Wasserstein
Perella Partners L.P. ("WP Partners") and their respective affiliates
collectively own approximately 87% 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 1999 presentation.
Use of Estimates -- 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 1999, 1998 and 1997 were 52-week years which ended on
December 25, 1999, December 26, 1998 and December 27, 1997.
Earnings 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 which may be 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 24.
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 11. The Company has provided an allowance
against uncollectible accounts.
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 and Reserves -- Other current assets as of December 25,
1999 and December 26, 1998 included $1.2 million, which was on deposit with an
insurer to cover a portion of the Company's self-insured workers'
compensation, automotive and general liability insurance. The Company's
reserves for these claims were determined based upon actuarial analyses and
aggregated $20.4 million and $18.4 million at December 25, 1999 and December
26, 1998, respectively. Of these reserves, $5.4 million and $6.3 million were
classified in accrued expenses at December 25, 1999 and December 26, 1998,
respectively.
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.
F-6
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. Summary of Significant Accounting Policies -- (Continued)
Long-Lived Assets -- Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed Of", 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. During fiscal 1999, the Company incurred a charge of $13.4
million relating to asset impairments recognized in the Reorganization (See
Note 15). 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 demand 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, at that time 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 40 years. Amortization of goodwill
applicable to continuing operations was $7.0 million for fiscal 1999 and 1998
and $6.7 million for fiscal 1997. Accumulated amortization at December 25,
1999 and December 26, 1998 was $24.9 million and $17.9 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 25, 1999, the
Company believes the recorded value of goodwill in the amount of $256.4
million is fully recoverable. See Note 3.
Revenue Recognition -- The Company recognizes revenue from product sales
when it has shipped the goods to the customer. The Company generally allows
its customers the right of return only in the case of defective products. The
Company provides a reserve for estimated defective product costs at the time
of the sale of the products.
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 the assets or
liabilities are liquidated. 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 5.
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.
F-7
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. Summary of Significant Accounting Policies -- (Continued)
Foreign Currency -- Foreign currency activity is reported in accordance
with SFAS No. 52, "Foreign Currency Translation". 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 component of other comprehensive income.
Gains and losses resulting from foreign currency transactions are
recognized in other income (expense). The Company recognized a gain from
foreign currency transactions of $0.5 million in fiscal 1999, and losses of
$4.8 million and $1.9 million in fiscal 1998 and 1997, respectively. Recorded
balances that are denominated in a currency other than the functional currency
are adjusted to the functional currency using the exchange rate at the balance
sheet date.
Environmental -- The Company records an estimated loss when it is probable
that an environmental liability has been incurred and the amount of the loss
can be reasonably estimated. The Company also considers estimates of certain
reasonably possible environmental liabilities in determining the aggregate
amount of environmental reserves. The Company reviews all environmental claims
from time to time and adjusts the reserves accordingly. Accruals for
environmental liabilities are generally included in the consolidated balance
sheet as other non-current 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.
Newly Issued Accounting Standards -- In September 1999, the Financial
Accounting Standards Board's ("FASB") Emerging Issues Task Force ("EITF")
reached a consensus regarding EITF Issue No. 99-5, "Accounting for Pre-
Production Costs Related to Long-Term Supply Arrangements". EITF No. 99-5
requires that design and development costs for products to be sold under long-
term supply arrangements be expensed as incurred, and costs incurred for
molds, dies and other tools that will be used in producing the products under
long-term supply arrangements be capitalized and amortized over the shorter of
the expected useful life of the assets or the term of the supply arrangement.
The consensus can be applied prospectively to costs incurred after December
31, 1999 or as a cumulative effect of a change in accounting principle as of
the beginning of a company's fiscal year. The Company is currently analyzing
the impact of EITF No. 99-5.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met.
Special accounting for qualifying hedges allows a derivative's gains and
losses to offset related results on the hedged item in the income statement,
and requires that a company formally document, designate, and assess the
effectiveness of transactions that receive hedge accounting. In July 1999, the
FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging
Activities--Deferral of the Effective Date of FASB Statement No. 133, an
Amendment of FASB Statement No. 133". Under SFAS No. 137, SFAS No. 133 is now
effective for fiscal years beginning after June 15, 2000. A company may also
implement SFAS No. 133 as of the beginning of any fiscal quarter after
issuance. SFAS No. 133 cannot be applied retroactively. The Company is
currently analyzing the impact of adoption of SFAS No. 133. The adoption of
SFAS No. 133 could increase volatility in earnings and other comprehensive
income.
In April 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position ("SOP") 98-5, "Reporting on the Costs
of Start-up Activities". See Note 4.
F-8
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
2. Summary of Significant Accounting Policies -- (Continued)
In March 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use". SOP 98-1 provides
guidance on the accounting for the costs of computer software developed or
obtained for internal use. SOP 98-1 was adopted by the Company on December 27,
1998 and was applied to internal-use computer software costs incurred in
fiscal 1999. The adoption of this standard did not have a material impact on
its consolidated financial position or results of operations.
3. Acquisitions and Joint Ventures
On August 26, 1998, the Company acquired from a third party the remaining
50% interest in Industrias Enjema, S.A. de C.V. ("Enjema"), 50% of which was
already owned by the Company's JPS Automotive L.P. subsidiary ("JPS
Automotive"). The total purchase price for the acquisition was approximately
$1.0 million. Enjema is a carpet systems manufacturer located in Mexico. In
September 1998, JPS Automotive distributed its 50% ownership interest in
Enjema to the Company. Enjema's operating assets were transferred to an
existing facility in Mexico during 1999.
On June 30, 1998, the Company acquired for approximately $4.7 million
Pepers Beheer B.V., an automotive accessory floormat manufacturer located in
the Netherlands, which has been renamed Collins & Aikman Automotive Floormats
Europe, B.V. ("C&A Floormats Europe"). Under the terms of the purchase
agreement, the Company is required to make additional contingent payments to
the sellers in amounts of up to approximately $3.6 million if C&A Floormats
Europe meets certain operating goals in fiscal 1998 and fiscal 1999. The
Company paid into escrow approximately $0.4 million during 1999 for operating
goals met in fiscal 1998, which the sellers will receive in 2000 if the
Company has no claims against the escrowed funds prior to such release. The
Company currently estimates that it will pay into escrow approximately $0.7
million during 2000 for operating goals met in fiscal 1999.
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 $5.6 million at December 25, 1999 and $5.8 million at December 26,
1998 has been included in other assets in the accompanying consolidated
balance sheets.
The Company entered into a joint venture agreement to manufacture plastic
trim products in the United Kingdom with Kigass Automotive Group ("Kigass") in
October 1997 in which the Company and Kigass each owned 50% of the joint
venture. The Company acquired Kigass on February 2, 1998. The purchase price
for the acquisition was approximately $25.2 million. Kigass has been renamed
Collins & Aikman Plastics (UK) Limited ("C&A Plastics UK"). Under the terms of
the purchase agreement, the Company assumed effective control of C&A Plastics
UK on January 1, 1998. C&A Plastics UK's customers include Nissan, Opel and
Rover. Goodwill resulting from the acquisition was $15.0 million.
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,
F-9
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. Acquisitions and Joint Ventures -- (Continued)
Perstorp transferred its 50% interest in the Collins & Aikman/Perstorp Joint
Venture to the Company on December 16, 1997. Goodwill resulting from these
1996 and 1997 acquisitions is approximately $14.5 million. If the Company had
acquired the Collins & Aikman/Perstorp Joint Venture at the beginning of
fiscal 1997, pro forma sales, operating income and loss from continuing
operations would have been $1,768.9 million, $89.5 million and $(8.2) million,
respectively, in 1997.
On December 11, 1996, the Company also acquired JPS Automotive L.P. 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. During
1997, the Company finalized the purchase price and received approximately
$11.2 million from the seller as a reduction of the purchase price. The
purchase price allocation related to the JPS Automotive acquisition included
goodwill of approximately $105.9 million and certain reserves related to
management's plans to rationalize certain acquired manufacturing facilities.
See Note 15.
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 40 years on a straight line
basis. In determining the amortization period of goodwill assigned to these
acquisitions, management assessed the impact 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
include, but are not limited to, increased use of plastic components, the
increased sourcing of interior systems and automotive manufacturers' movement
to fewer suppliers and to suppliers with engineering and design capabilities.
The Company anticipates the reduction in the supply chain may 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. Change in Accounting Principle
In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start-
up Activities". SOP 98-5 provides guidance on the financial reporting of
start-up costs and organization costs and requires that all non-governmental
entities expense the costs of start-up activities as these costs are incurred
instead of being capitalized and amortized. The Company adopted SOP 98-5 on
December 27, 1998. The initial impact of adopting SOP 98-5 resulted in a
charge of approximately $8.9 million, net of income taxes of $5.1 million,
which has been reflected as a cumulative effect of a change in accounting
principle in the accompanying consolidated statement of operations for the
fiscal year ended December 25, 1999.
5. Interest Rate And Foreign Currency Protection Programs
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 and similar
agreements which expired in prior years on the operating results of the
Company was to decrease interest expense by $0.2 million, $0.3 million and
$0.1 million in fiscal 1999, 1998 and 1997, respectively.
F-10
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. Interest Rate And Foreign Currency Protection Programs -- (Continued)
The primary purpose of the Company's foreign currency hedging activities is
to protect against the volatility associated with intercompany funding
arrangements, third party loans and foreign currency purchase and sale
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 2000. These contracts, which aggregated a U.S.
dollar equivalent of $95.6 million at December 25, 1999, are to manage the
currency volatility associated with purchase transactions. The fair value of
these contracts approximated the contract value at December 25, 1999.
During 1999 and 1998, the Company purchased option contracts giving the
Company the right to purchase U.S. dollars for use by its Canadian operations.
The premiums associated with these contracts are amortized over the contracts'
terms which are one year or less. The total notional amount purchased was
$130.4 million with associated premiums of $2.2 million. The total notional
amount outstanding at December 25, 1999 was $45.0 million.
During April 1997, the Company entered into an agreement to limit its
foreign currency exposure related to $45 million of U.S. dollar denominated
borrowings of a Canadian subsidiary. The agreement swapped LIBOR based
interest rates for the Canadian equivalent as well as fixed the exchange rate
for the principal balance upon maturation. During fiscal 1997, this agreement
resulted in reductions of interest expense and other expenses of approximately
$1.7 million. This agreement was terminated on June 1, 1998 as a result of the
repayment of the Canadian term loan. The term loan balance was repaid in
conjunction with the refinancing and replacement of the Company's credit
facilities. See Note 11 for additional information on the new credit facility.
6. Inventories
Inventory balances are summarized below (in thousands):
<TABLE>
<CAPTION>
December 25, December 26,
1999 1998
------------ ------------
<S> <C> <C>
Raw materials................................... $ 69,182 $ 79,285
Work in process................................. 27,073 32,408
Finished goods.................................. 36,370 41,147
-------- --------
$132,625 $152,840
======== ========
</TABLE>
7. Other Current Assets
Other current asset balances are summarized below (in thousands):
<TABLE>
<CAPTION>
December 25, December 26,
1999 1998
------------ ------------
<S> <C> <C>
Deferred tax assets............................. $23,868 $30,027
Prepaid tooling and molds....................... 27,361 27,011
Other........................................... 33,713 29,407
------- -------
$84,942 $86,445
======= =======
</TABLE>
F-11
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. Property, Plant and Equipment, Net
Property, plant and equipment, net, are summarized below (in thousands):
<TABLE>
<CAPTION>
December 25, December 26,
1999 1998
------------ ------------
<S> <C> <C>
Land and improvements......................... $ 19,827 $ 25,260
Buildings..................................... 156,261 146,577
Machinery and equipment....................... 551,288 481,532
Leasehold improvements........................ 5,749 1,171
Construction in progress...................... 29,340 53,673
-------- --------
762,465 708,213
Less accumulated depreciation and
amortization................................. (318,939) (261,092)
-------- --------
$443,526 $447,121
======== ========
</TABLE>
Depreciation and leasehold amortization of property, plant and equipment
applicable to continuing operations was $58.2 million, $52.6 million, and $42.7
million for fiscal 1999, 1998 and 1997, respectively.
9. Accrued Expenses
Accrued expenses are summarized below (in thousands):
<TABLE>
<CAPTION>
December 25, December 26,
1999 1998
------------ ------------
<S> <C> <C>
Payroll and employee benefits................... $ 41,362 $ 46,733
Interest........................................ 13,582 12,636
Insurance....................................... 18,246 13,351
Restructuring reserves.......................... 13,518 1,940
Other........................................... 46,001 68,642
-------- --------
$132,709 $143,302
======== ========
</TABLE>
10. Long-Term Debt
Long-term debt is summarized below (in thousands):
<TABLE>
<CAPTION>
December 25, December 26,
1999 1998
------------ ------------
<S> <C> <C>
Bank Credit Facilities:
Revolving Credit Facility, including $43.6 million
by the Canadian Borrowers at December 25, 1999 and
$57.4 million at December 26, 1998................. $ 111,621 $143,878
Term Loan A Facility................................ 85,000 100,000
Term Loan B Facility................................ 122,000 125,000
Term Loan C Facility................................ 100,000 --
Public Indebtedness:
11 1/2% Senior Subordinated Notes................... 400,000 400,000
JPS Automotive 11 1/8% Senior Notes, including
premiums of $1.3 million
and $2.2 million, respectively..................... 87,370 88,247
Other................................................ 6,551 8,924
--------- --------
Total debt........................................... 912,542 866,049
Less current maturities.............................. (27,992) (19,942)
--------- --------
$ 884,550 $846,107
========= ========
</TABLE>
F-12
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Long-Term Debt -- (Continued)
Bank Credit Facilities
On May 28, 1998, the Company entered, through C&A Products, into new credit
facilities consisting of: (i) a senior secured term loan facility in the
amount of $100 million payable in quarterly installments until final maturity
on December 31, 2003 (the "Term Loan A Facility"); (ii) a senior secured term
loan facility in the principal amount of $125 million payable in quarterly
installments until final maturity on June 30, 2005 (the "Term Loan B Facility"
and, together with the Term Loan A Facility and Term Loan C Facility, as
hereinafter defined, the "Term Loan Facilities"); and (iii) a senior secured
revolving credit facility in an aggregate principal amount of up to $250
million terminating on December 31, 2003, of which $60 million (or the
equivalent thereof in Canadian dollars) is available to two of the Company's
Canadian subsidiaries (the "Canadian Borrowers"), and of which up to $50
million is available as a letter of credit facility (the "Revolving Credit
Facility" and together with the Term Loan Facilities, the "Credit Agreement
Facilities"). In addition, the Credit Agreement Facilities include a provision
for a Term Loan C credit facility (the "Term Loan C Facility") of up to $150
million. On May 13, 1999, the Company closed on the Term Loan C Facility in
the principal amount of $100 million. The Term Loan C Facility is payable in
quarterly installments beginning in December 1999 through final maturity in
December 2005. The Company used approximately $44 million of the proceeds from
the Term Loan C Facility to pay a special dividend to shareholders on May 28,
1999. See Note 16. The remaining proceeds were used to repay amounts
outstanding on the Revolving Credit Facility and for general corporate
purposes.
The Credit Agreement Facilities, which are guaranteed by the Company and
its U.S. subsidiaries (subject to certain exceptions), contain restrictive
covenants including maintenance of interest coverage and leverage ratios and
various other restrictive covenants which are customary for such facilities.
Effective March 8, 1999, the Company, in view of the decreased sales of
automotive fabrics and the General Motors strike in 1998, obtained an
amendment to the Credit Agreement Facilities primarily to modify the covenants
relating to interest coverage and leverage ratios. The amendment resulted
generally in an increase in the interest rates charged under the Credit
Agreement Facilities. In addition, under the Credit Agreement Facilities, 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. The Company is
permitted to pay dividends and repurchase shares of the Company (i) in any
fiscal year in an aggregate amount up to $12 million and (ii) if certain
financial ratios are satisfied for the period from April 28, 1996 through the
last day of the Company's most recently ended fiscal quarter, in an aggregate
amount equal to 50% of the Company cumulative consolidated net income for that
period and, in addition, is permitted to pay dividends and repurchase shares
in amounts representing net proceeds from the sale of the Company's Imperial
Wallcoverings, Inc. subsidiary ("Wallcoverings"). The Company's ability to pay
dividends is also restricted by the indenture governing the Subordinated Notes
discussed below. The Company's obligations under the Credit Agreement
Facilities are secured by a pledge of stock of C&A Products and its
significant subsidiaries and certain intercompany indebtedness.
Indebtedness under the Term Loan A Facility and U.S. dollar-denominated
indebtedness under the Revolving Credit Facility as amended March 8, 1999
bears interest at a per annum rate equal to the Company's choice of (i) The
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/Canadian
Prime Rate Margin") ranging from .25% to 1.25% 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 (the "LIBOR/BA Margin") ranging from
1.25% to 2.25%. Margins, which are subject to adjustment based on changes in
the Company's ratio of funded debt to EBITDA (i.e., earnings before interest,
taxes, depreciation, amortization and other non-cash charges) were 2.25% in
the case of the LIBOR/BA Margin and 1.25% in the case of the ABR/Canadian
Prime Rate Margin on December 25, 1999. Canadian-dollar
F-13
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Long-Term Debt -- (Continued)
denominated indebtedness incurred by the Canadian Borrowers under the
Revolving Credit Facility bears interest at a per annum rate equal to the
Canadian Borrowers' choice of (i) the Canadian Prime Rate (which is the
greater of Chase's prime rate for Canadian dollar-denominated loans in Canada
and the Canadian dollar-denominated one month bankers' acceptance rate plus
1.00%) plus the ABR/Canadian Prime Rate Margin or (ii) the bill of exchange
rate ("Bankers' Acceptance" or "BA") denominated in Canadian dollars for one,
two, three or six months plus the LIBOR/BA Margin. Indebtedness under the Term
Loan B Facility as amended March 8, 1999 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 ranging from 1.25% to 1.75% (the "Tranche B ABR Margin")
or (ii) LIBOR of one, two, three, or six months, as selected by the Company,
plus a margin ranging from 2.25% to 2.75% (the "Tranche B LIBOR Margin"). The
Tranche B ABR Margin and the Tranche B LIBOR Margin, were 1.75% and 2.75%,
respectively, at December 25, 1999. Indebtness under the Term Loan C Facility
bears interest at a per annum rate equal to LIBOR plus 3.25% or Chase's
Alternate Base Rate plus 2.25%. The weighted average rate of interest on the
Credit Agreement Facilities at December 25, 1999 was 8.67%.
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. The Company does not currently
meet the Subordinated Notes indenture's general test for the incurrence of
indebtedness, and does not expect to meet such test during 2000. However, the
Company expects all of its borrowing needs for the foreseeable future to be
allowed under exceptions for permitted indebtedness in the indenture.
As of 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. Through retirements of the JPS Automotive Senior
Notes primarily during 1997 and 1998, the Company reduced the outstanding face
value to $86.1 million at December 25, 1999. 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 and as of December 25, 1999. The JPS Automotive
Restricted Payments Tests
F-14
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
10. Long-Term Debt -- (Continued)
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.
At December 25, 1999, the scheduled annual maturities of long-term debt are
as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ending
------------------
<S> <C>
December 2000.................................................. $ 27,992
December 2001.................................................. 116,435
December 2002.................................................. 32,860
December 2003.................................................. 28,278
December 2004.................................................. 165,446
Later Years.................................................... 541,531
---------
$ 912,542
=========
</TABLE>
Total interest paid by the Company on all indebtedness was $91.9 million,
$86.6 million and $93.0 million for fiscal 1999, 1998 and 1997, respectively.
11. Receivables Facility
On March 31, 1995, C&A Products entered, through a trust formed by Carcorp,
Inc., ("Carcorp"), a wholly-owned, bankruptcy remote subsidiary of C&A
Products, into a receivables facility (the "Receivables Facility"), comprised
of (i) term certificates, which were issued on March 31, 1995 in an aggregate
face amount of $110 million having a term of five years and (ii) variable
funding certificates, which represented revolving commitments of up to an
aggregate of $75 million having a term of five years. Carcorp purchased on a
revolving basis and transferred to the Trust virtually all trade receivables
generated by C&A Products and certain of its subsidiaries (the "Sellers") in
the United States and Canada. The certificates represented the right to
receive payments generated by the receivables held by the Trust.
Availability under the variable funding certificates at any time depended
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
25, 1999 the maximum amount available under the variable funding certificates
was $66.5 million, of which $0.1 million was not utilized.
The proceeds received by Carcorp from collections on receivables, after the
payment of expenses and amounts due on the certificates, were used to purchase
new receivables from the Sellers. Collections on receivables were deemed to
remain in trust if at any time the facility does not contain sufficient
eligible receivables to support the outstanding certificates.
The weighted average interest rate on the sold interests under the
Receivables Facility at December 25, 1999 was 6.4%. Under the Receivables
Facility, the term certificates bore interest at an average rate equal to one
month LIBOR plus .34% annum and the variable funding certificates bore
interest, at Carcorp's option, at LIBOR plus .40% per annum or a prime rate.
F-15
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
11. Receivables Facility -- (Continued)
In connection with the receivables sales, losses of $5.4 million, $6.1
million, and $4.7 million were incurred for continuing operations in fiscal
1999, 1998, and 1997 respectively.
As of December 25, 1999 and December 26, 1998, Carcorp's total receivables
pool was $214.8 million and $202.4 million, respectively. As of December 25,
1999 and December 26, 1998, the holders of term certificates and variable
funding certificates collectively had invested $116.5 million and $114.5
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.
On December 27, 1999, the Company entered into a new receivables facility
(the "New Receivables Facility"), replacing the Receivables Facility. The New
Receivables Facility utilizes funding provided by commercial paper conduits
sponsored by three of the Company's lenders under its Credit Agreement
Facilities. Carcorp remains the purchaser of the Sellers' trade receivables,
transferring rights to collections on those receivables to the conduits. The
conduits in turn issue commercial paper which is collateralized by those
rights. Availability under the New Receivables Facility at any time depends
primarily on the amount of receivables generated by the Sellers and 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). The liquidity facilities backing the New Receivables Facility
have terms of 364 days, renewable annually for up to five years.
The total funding available to the Company on a revolving basis under the
New Receivables Facility is up to $171.6 million, depending upon criteria
similar to those in the Receivables Facility. On December 27, 1999, the
Company funded $120 million through the New Receivables Facility, leaving
approximately $12 million available, but unutilized. The interest rate on sold
interests is equal to the rate paid by the conduits to the holders of the
commercial paper plus a margin of .70% and dealer fees of .05% (6.66% at
inception). In addition, the Company pays .25% on the unused committed portion
of the facility. The New Receivables Facility contains certain other
restrictions on Carcorp (including maintenance of $40 million net worth) and
on the Sellers (including limitations on liens on receivables, modifications
of the terms of receivables, and change in credit and collection practices)
customary for facilities of this type. The commitments under the New
Receivables Facility are subject to termination prior to their term upon the
occurrence of certain events, including payment defaults, breach of covenants,
including defined interest coverage and leverage ratios, bankruptcy,
insufficient eligible receivables to support the outstanding certificates,
default by C&A Products in servicing the receivables and failure of the
receivables to satisfy certain performance criteria.
12. Lease Commitments
The Company is the lessee under various long-term operating leases for land
and buildings for periods up to forty years. The majority of these leases
contain renewal provisions. In addition, the Company leases transportation,
operating and administrative equipment for periods ranging from one to ten
years.
The Company maintains a master equipment lease arrangement with a bank. The
Company made lease payments under this arrangement related to continuing
operations of approximately $5.8 million, $5.4 million and $5.6 million for
fiscal 1999, 1998 and 1997, 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.
F-16
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. Lease Commitments -- (Continued)
At December 25, 1999, future minimum lease payments under operating leases
for continuing operations are as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ending
------------------
<S> <C>
December 2000.................................... $18,243
December 2001.................................... 14,714
December 2002.................................... 11,935
December 2003.................................... 8,787
December 2004.................................... 6,694
Later Years...................................... 8,107
-------
$68,480
=======
</TABLE>
Rental expense of continuing operations under operating leases was $21.5
million, $17.3 million, and $15.4 million for fiscal 1999, 1998 and 1997,
respectively. Obligations under capital leases are not significant.
13. Employee Benefit Plans
Defined Pension and Postretirement 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.
Subsidiaries of the Company have also provided postretirement life and
health coverage for certain retirees under plans currently in effect. Many of
the subsidiaries' domestic and Canadian employees may be eligible for coverage
if they reach retirement age while still employed by the Company. Most of
these plans are contributory. In general, future increases in costs are fully
passed on to the retiree. However, future increases in costs for the Canadian
divisions and limited domestic operations are shared between the Company and
the retiree.
F-17
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
13. Employee Benefit Plans -- (Continued)
The following tables provide a reconciliation of the projected benefit
obligation, a reconciliation of plan assets, the funded status of the plans,
and amounts recognized in the Company's consolidated balance sheets at
December 25, 1999 and December 26, 1998 (in thousands):
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
------------------------- -------------------------
Fiscal Year Ended Fiscal Year Ended
December 25, December 26, December 25, December 26,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Change in benefit
obligation:
Benefit obligation at
beginning of year........ $166,153 $158,605 $ 65,955 $ 77,500
Service cost.............. 9,084 8,713 1,552 1,611
Interest cost............. 10,946 10,709 4,262 4,589
Amendments................ 1,059 1,719 -- (60)
Actuarial loss (gain)..... (5,617) 12,592 (10,844) (3,925)
Employee contributions.... -- -- 865 995
Discontinued operations,
including effect of
disposition.............. -- (7,960) -- (9,729)
Benefits paid............. (11,603) (16,175) (4,911) (5,026)
Currency adjustment....... 518 (2,050) 592 --
-------- -------- -------- --------
Benefit obligation at end
of year.................. $170,540 $166,153 $ 57,471 $ 65,955
======== ======== ======== ========
Change in plan assets:
Fair value of plan assets
at beginning of year..... $144,221 $136,126 $ -- $ --
Actual return on plan
assets................... 21,202 17,504 -- --
Employer contributions.... 4,740 16,368 4,046 4,031
Employee contributions.... -- -- 865 995
Discontinued operations,
including effect of
disposition.............. -- (8,073) -- --
Benefits paid............. (11,603) (16,175) (4,911) (5,026)
Currency adjustment....... 696 (1,529) -- --
-------- -------- -------- --------
Fair value of plan assets
at end of year........... $159,256 $144,221 $ -- $ --
======== ======== ======== ========
Reconciliation of funded
status to net amount
recognized:
Funded status............. $(11,284) $(21,932) $(57,471) $(65,955)
Unrecognized net loss
(gain)................... 7,934 22,995 (20,548) (10,306)
Unrecognized prior service
cost (gain).............. 2,478 1,324 (9,251) (11,066)
-------- -------- -------- --------
Net amount recognized..... $ (872) $ 2,387 $(87,270) $(87,327)
======== ======== ======== ========
Amounts recognized in the
consolidated balance
sheet consist of:
Prepaid benefit cost...... $ 13,884 $ 18,666 $ -- $ --
Accrued benefit
liability................ (19,448) (21,473) (87,270) (87,327)
Intangible asset.......... 3,045 2,146 -- --
Accumulated other
comprehensive loss....... 1,647 3,048 -- --
-------- -------- -------- --------
Net amount recognized..... $ (872) $ 2,387 $(87,270) $(87,327)
======== ======== ======== ========
</TABLE>
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $37.6 million, $35.5 million, and $17.5 million,
respectively, as of December 25, 1999 and $34.7 million, $32.5 million and
$12.1 million respectively, as of December 26, 1998.
F-18
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
13. Employee Benefit Plans -- (Continued)
The net periodic benefit cost of continuing operations for fiscal 1999,
1998, and 1997 includes the following components (in thousands):
<TABLE>
<CAPTION>
Pension Benefits
--------------------------------------
Fiscal Year Ended
December 25, December 26, December 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Components of net periodic benefit cost:
Service cost........................... $ 9,084 $ 8,713 $7,295
Interest cost.......................... 10,946 10,709 9,640
Expected return on plan assets......... (12,392) (11,805) (9,701)
Amortization of prior service cost
(gain)................................ 38 426 (377)
Recognized net actuarial loss.......... 690 699 525
------- ------- ------
Net periodic benefit cost.............. $ 8,366 $ 8,742 $7,382
======= ======= ======
<CAPTION>
Postretirement Benefits
--------------------------------------
Fiscal Year Ended
December 25, December 26, December 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Components of net periodic benefit cost:
Service cost........................... $ 1,552 $ 1,611 $1,328
Interest cost.......................... 4,262 4,589 4,428
Amortization of prior service cost..... (1,443) (1,511) (1,492)
Recognized net actuarial gain (927) (775) (854)
------- ------- ------
Net periodic benefit cost.............. $ 3,444 $ 3,914 $3,410
======= ======= ======
</TABLE>
Weighted average assumptions are summarized as follows.
<TABLE>
<CAPTION>
Pension Postretirement
Benefits Benefits
---------- -----------------
1999 1998 1999 1998
---- ---- ------- -------
<S> <C> <C> <C> <C>
Discount rate............................ 7.3% 6.6% 7.6% 6.7%
Expected return on plan assets........... 9.0% 9.0% N/A N/A
Rate of compensation increase ........... 4.5% 4.5% N/A N/A
</TABLE>
For measurement purposes, health care costs for domestic plans were assumed
to increase 7% in 2000 grading down by 1% per year to a constant level of 6%
annual increase. Health care costs for Canadian plans were assumed to increase
approximately 9.5% during 2000 grading down by 0.5% per year to a constant
level of approximately 5.0% annual increase.
Assumed health care cost trend rates have a significant effect on the
amounts reported for postretirement benefits. A one-percentage-point change in
assumed health care cost trend rates would have the following effects (in
thousands):
<TABLE>
<CAPTION>
1-Percentage-Point 1-Percentage-Point
Increase Decrease
------------------ ------------------
<S> <C> <C>
Effect on total of service and
interest cost components....... $ 293 $ (251)
Effect on postretirement benefit
obligation..................... $2,117 $(1,750)
</TABLE>
F-19
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
13. Employee Benefit Plans -- (Continued)
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 relating to continuing operations were $3.0 million,
$3.5 million, and $3.5 million in fiscal 1999, 1998, and 1997, respectively.
14. Discontinued Operations
On March 13, 1998, the Company completed the sale of Wallcoverings to
Imperial Home Decor Group, Inc., ("Imperial Home Decor") an affiliate of
Blackstone Partners, for a sales price of $71.9 million and an option for 6.7%
of the common stock of Imperial Home Decor (which includes Wallcoverings and
the former wallcovering and vinyl units of Borden, Inc.) outstanding as of the
closing date. The proceeds were used to repay long-term debt. In connection
with the sale, the Company recorded a loss of approximately $21.1 million (net
of an estimated income tax benefit) 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. Losses incurred by Wallcoverings from
April 29, 1996, (the date of Wallcoverings' discontinuance) to the date of
sale were charged to the Company's existing discontinued operations reserves.
The Wallcoverings operating losses were in excess of management's forecasted
expectations as of the date of discontinuance but within previously
established accruals. On January 5, 2000, Imperial Home Decor filed voluntary
petitions for protection under chapter 11 of the U.S. Bankruptcy Code. The
Company is currently assessing the impact of that bankruptcy filing.
On July 24, 1997, JPS Automotive 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 and book value of Airbag.
On July 16, 1997, the Company completed its sale of the Mastercraft Group
for a purchase price of approximately $309.5 million. 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.
The Company has accounted for the financial results and net assets of the
Mastercraft Group, Floorcoverings, Airbag and Wallcoverings as discontinued
operations. Information about the Company's discontinued operations is below
(in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------
December 26, December 27,
1998 1997
------------ ------------
<S> <C> <C>
Net sales(a).................................... $ -- $200,350
Net income...................................... -- 4,306
Identifiable assets............................. -- 53,004
Capital expenditures............................ 3,144 15,254
</TABLE>
(a) Amount is not included in consolidated totals.
F-20
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
14. Discontinued Operations -- (Continued)
Net interest expense of discontinued operations (including amounts
attributable to discontinued operations) was $12.5 million in fiscal 1997.
Interest expense of $12.6 million during fiscal 1997 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. No interest expense was allocated to discontinued operations for
fiscal 1999 and 1998. In addition, a portion of the loss on sale of
receivables has been allocated to discontinued operations based on the ratio
of (x) receivables included in the trust's receivable pool related to
Floorcoverings and the Mastercraft Group to (y) the total trust's receivables
pool. For fiscal 1997, amounts allocated to discontinued operations for the
loss on sale of receivables totaled $0.6 million. No allocation of loss on
sale of receivables was made to discontinued operations in fiscal 1999 and
1998.
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 25, 1999 as follows (in thousands):
<TABLE>
<CAPTION>
Minimum Lease Sublease Rental
Fiscal Years Ending Payments Receipts
------------------- ------------- ---------------
<S> <C> <C>
December 2000............................. $ 2,562 $ 2,120
December 2001............................. 2,141 2,239
December 2002............................. 1,918 2,117
December 2003............................. 1,767 1,876
December 2004............................. 1,650 1,600
Later years............................... 7,175 8,806
------- -------
$17,213 $18,758
======= =======
</TABLE>
15. Restructuring
On February 10, 1999, the Company announced a comprehensive plan (the
"Reorganization") to reorganize its global automotive carpet, acoustics,
plastics and accessory floormats businesses into two divisions: North American
Automotive Interior Systems, headquartered in the Detroit metropolitan area,
and European Automotive Interior Systems, headquartered in Wiesbaden, Germany.
In addition, the Company subsequently implemented a global account manager
structure for each of the Company's automotive original equipment manufacturer
("OEM") customers. The Company undertook the Reorganization to reduce costs
and improve operating efficiencies through the Company's operations and to
more effectively respond to the OEMs' demand for complete interior trim
systems and more sophisticated components. As part of the Reorganization, the
Company also established the Specialty Automotive Products division, which
includes the Company's automotive fabrics and Dura Convertible Systems
businesses. Although these products have not historically been sold in
conjunction with the Company's other interior trim offerings, the Company's
new strategy of leveraging its acoustic capabilities with its design and
styling expertise is anticipated to change the marketing approach for all of
the Company's products.
The Company announced on February 10, 1999 that it anticipated incurring a
restructuring charge related to the Reorganization of approximately $8 million
to $9 million. However, in connection with the change in the Company's Chief
Executive Officer and the Company's operating results in the first quarter,
the Company delayed certain aspects of the Reorganization while the Company's
new Chief Executive Officer reviewed the plan. Upon final completion of the
Reorganization plan, the Company recognized a pre-tax restructuring charge of
$33.4 million, including $13.4 million of asset impairments, $15.0 million of
severance costs and $5.0 million related to the termination of sales
commission contracts at the Company's North American plastics operations.
F-21
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
15. Restructuring -- (Continued)
The Reorganization includes the closure of three facilities. The Homer,
Michigan plastics facility was closed in August 1999 and its operations were
relocated to an existing plastics facility. The Cramerton, North Carolina
fabrics facility was sold in September 1999, for $6.0 million. The facility's
operations are in the process of being located to another fabrics facility.
The acoustics facility in Vastra Frolunda, Sweden, is scheduled to be closed
in September, 2000. The Company recognized $13.4 million in asset impairments,
primarily relating to buildings, machinery and equipment located at these
three sites. The impairment amounts were determined based upon management's
estimates of the values to be realized upon disposition of these assets.
The remaining severance costs for operating personnel primarily relate to
employees at C&A Plastics UK and the Company's fabrics, convertibles and
accessory floormats operations. The severance costs for management and
administrative personnel primarily relate to employees at the Company's former
North Carolina headquarters and North American Automotive Interior Systems
division. At December 25, 1999 approximately 600 employees had been
terminated. When completed, the Reorganization will affect approximately 1,100
employees. The Company currently expects the Reorganization plan to be
substantially completed by December 2000.
The components of the reserves for the restructuring charges are as follows
(in thousands):
<TABLE>
<CAPTION>
Changes
Original in Remaining
Reserve Reserve Reserve
-------- ------- ---------
<S> <C> <C> <C>
Anticipated severance benefits.................... $15,061 $(4,843) $10,218
Anticipated payments related to the termination of
sales commission arrangements.................... 4,969 (1,669) 3,300
------- ------- -------
$20,030 $(6,512) $13,518
======= ======= =======
</TABLE>
In connection with the acquisition of JPS Automotive in 1996, the Company
eliminated certain redundant sales and administrative functions and closed one
manufacturing facility in 1997, a second facility in January 1998, and a third
facility in June 1998 and completed the relocation of certain manufacturing
processes from a JPS Automotive facility to an existing C&A Products facility
during 1999. These actions affected approximately 640 employees. Total costs
accrued for the shutdown of facilities and severance and other personnel costs
were $2.7 million and $7.7 million, respectively. These reserves were utilized
by the end of 1999.
16. Common Stockholders' Deficit
Dividends
On February 10, 1999, the Company declared a special dividend of
approximately $6.2 million, representing $0.10 per share on all outstanding
shares of common stock held by stockholders of record as of the close of
business on February 22, 1999. The dividend was paid on March 1, 1999. On May
13, 1999, the Company declared another special dividend relating to the
distribution of the proceeds from the sale of Wallcoverings of approximately
$44.0 million, representing $0.71 per share on all outstanding shares of
common stock held by stockholders of record as of the close of business on May
20, 1999. The dividend was paid on May 28, 1999. In connection with these
dividends, the amount authorized by the Company's Board of Directors for the
Company's 1999 share repurchase program was reduced from $25 million to
approximately $2 million.
F-22
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Common Stockholders' Deficit -- (Continued)
Accumulated Other Comprehensive Loss
The accumulated balances and activity for each component of Accumulated
Other Comprehensive Loss are as follows (in thousands):
<TABLE>
<CAPTION>
Foreign Accumulated
Currency Pension Other
Translation Equity Comprehensive
Adjustments Adjustment Loss
----------- ---------- -------------
<S> <C> <C> <C>
Balance at December 28, 1996............... $(20,798) $(10,165) $(30,963)
Change in balance......................... (8,325) (535) (8,860)
-------- -------- --------
Balance at December 27, 1997............... (29,123) (10,700) (39,823)
Change in balance......................... 7,569 8,827 16,396
-------- -------- --------
Balance at December 26, 1998............... (21,554) (1,873) (23,427)
Change in balance......................... (10,649) 816 (9,833)
-------- -------- --------
Balance at December 25, 1999............... $(32,203) $ (1,057) $(33,260)
======== ======== ========
</TABLE>
The income tax benefit (expense) for the pension equity adjustment was
($0.5) million and $1.2 million for fiscal 1999 and 1998, respectively. No
income taxes have been provided for the foreign currency translation
adjustments.
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 consultants. The Plan was amended on June 3, 1999
primarily to increase the number of shares available for issuance under the
Plan from 2,980,534 to 3,980,534, subject to approval by the common
stockholders. The 1994 Plan 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 25, 1999, options representing 822,537 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 25, 1999, 120,000
options had been granted.
On January 14, 1997, the Company adopted the 1997 United Kingdom Scheme,
which provides for the issuance of options to key employees under the 1994
Plan. As of December 25, 1999, 29,974 options had been granted.
F-23
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Common Stockholders' Deficit -- (Continued)
Stock option activity under the plans is as follows:
<TABLE>
<CAPTION>
December 25, 1999 December 26, 1998 December 27, 1997
------------------- ------------------- -------------------
Weighted Weighted Weighted
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Shares Price Shares Price Shares Price
--------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding beginning of
year................... 3,141,195 $6.23 2,732,195 $5.86 3,287,106 $5.25
Awarded................. 2,024,000 5.19 480,000 8.65 584,000 8.33
Cancelled............... (337,000) 8.10 (71,000) 8.56 (83,127) 6.46
Exercised............... (107,240) 3.99 -- -- (373,570) 4.70
Surrendered............. -- -- -- -- (682,214) 5.57
--------- --------- ---------
Outstanding at end of
year................... 4,720,955 $5.70 3,141,195 $6.23 2,732,195 $5.86
========= ========= =========
</TABLE>
At December 25, 1999, December 26, 1998 and December 27, 1997, 2,098,555,
2,129,095, and 1,858,685, respectively, of the outstanding options were
exercisable at a weighted average price of $5.40, $5.22, and $4.78,
respectively.
Of the total options outstanding at December 25, 1999, 1,447,084 have an
exercise price in the range of $3.99 and $4.43 with a weighted average
exercise price of $4.01 and a weighted average contractual life of 5 years;
1,397,084 of these options are currently exercisable at a weighted average
price of $4.00. The remaining 3,273,871 of total options outstanding at
December 25, 1999 have an exercise price in the range of $5.00 and $11.75 with
a weighted average exercise price of $6.44 and a weighted average contractual
life of 8 years; 701,471 of these options are currently exercisable at a
weighted average exercise price of $8.18. Upon a change of control, as
defined, all of the above options become fully vested and exercisable.
SFAS No. 123, "Accounting for Stock-Based Compensation", 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 has elected to continue to utilize the accounting provisions
of APB No. 25 for stock options, and is required to provide pro forma
disclosures of net income and earnings per share had the Company adopted the
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):
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------
December 25, December 26, December 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Net income (loss):
As reported.............................. $(10,215) $(3,815) $155,235
Pro forma................................ (12,355) (5,017) 154,525
Basic EPS:
As reported.............................. $ (0.16) $ (0.06) $ 2.34
Pro forma................................ (0.20) (0.07) 2.33
Diluted EPS:
As reported.............................. $ (0.16) $ (0.06) $ 2.34
Pro forma................................ (0.20) (0.07) 2.33
</TABLE>
F-24
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
16. Common Stockholders' Deficit -- (Continued)
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 1999, 1998 and 1997:
expected volatility was 84% in 1999 and 40% in 1998 and 1997, expected lives
of 10 years which equals the lives of the grants, the risk free interest rate
ranged from 5.16% to 7.10% and a zero expected dividend rate. The weighted
average grant-date fair value of an option granted during fiscal 1999, 1998
and 1997 was $4.50, $5.43 and $5.41, 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.
17. Income Taxes
The provisions for income taxes applicable to continuing operations for
fiscal 1999, 1998 and 1997 are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------
December 25, December 26, December 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Current
Federal................................ $ -- $ -- $ --
State.................................. 2,100 2,900 2,600
Foreign................................ 4,946 9,617 6,146
-------- ------- -------
7,046 12,517 8,746
Deferred
Federal................................ (6,289) (7,097) 4,833
State.................................. (523) (1,075) 882
Foreign................................ 12 939 (1,463)
-------- ------- -------
(6,800) (7,233) 4,252
-------- ------- -------
Income tax expense....................... $ 246 $ 5,284 $12,998
======== ======= =======
</TABLE>
Domestic and foreign components of income (loss) from continuing operations
before income taxes are summarized as follows (in thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------
December 25, December 26, December 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Domestic................................. $ (16,638) $(26,900) $(4,545)
Foreign.................................. 15,519 32,093 7,452
--------- -------- -------
$ (1,119) $ 5,193 $ 2,907
========= ======== =======
</TABLE>
F-25
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
17. Income Taxes -- (Continued)
A reconciliation between income taxes computed at the statutory U.S.
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 25, December 26, December 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Amount at statutory Federal rate.. $ (391) $1,818 $ 1,017
State taxes, net of Federal income
tax.............................. 1,025 1,187 2,263
Tax differential on foreign
earnings......................... (792) 134 123
Foreign losses with no tax
benefit.......................... 318 379 1,436
Amortization and write-down of
goodwill......................... 1,513 1,470 7,770
General business tax credits, net
................................. (2,011) (124) (60)
Other............................. 584 420 449
------- ------ -------
Income tax expense................ $ 246 $5,284 $12,998
======= ====== =======
</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 25, 1999 and
December 26, 1998 were as follows (in thousands):
<TABLE>
<CAPTION>
December 25, December 26,
1999 1998
------------ ------------
<S> <C> <C>
Deferred tax assets:
Employee benefits, including postretirement
benefits.................................... $ 38,105 $ 31,695
Net operating loss carryforwards............. 99,955 79,902
General business tax credits................. 8,202 1,130
Alternative minimum tax credit
carryforwards............................... 12,189 12,190
Other liabilities and reserves............... 51,039 74,386
Valuation allowance.......................... (52,115) (44,320)
-------- --------
Total deferred tax assets.................. 157,375 154,983
-------- --------
Deferred tax liabilities:
Property, plant and equipment................ (58,266) (66,153)
Undistributed earnings of foreign
subsidiaries................................ (7,226) (7,226)
-------- --------
Total deferred tax liabilities............. (65,492) (73,379)
-------- --------
Net deferred tax asset......................... $ 91,883 $ 81,604
======== ========
</TABLE>
The valuation allowance at December 25, 1999 and December 26, 1998 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 1999, the valuation allowance increased $7.8
million from fiscal 1998. This increase resulted primarily from the increase
in tax credit and loss carryforwards that may not be utilized in future
periods, offset by a decrease in preacquisition NOLs due to a change in the
tax regulations. During fiscal 1998, the valuation allowance decreased $1.3
million from fiscal 1997 primarily due to the expiration of tax credits.
F-26
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued)
17. Income Taxes -- (Continued)
The above amounts have been classified in the consolidated balance sheets
as follows (in thousands):
<TABLE>
<CAPTION>
December 25, December 26,
1999 1998
------------ ------------
<S> <C> <C>
Deferred tax assets (liabilities):
Current domestic and foreign, included in
other current assets........................ $ 23,868 $ 30,027
Current foreign, included in accrued
expenses.................................... (351) --
Noncurrent domestic and foreign.............. 86,235 70,632
Noncurrent foreign, included in other
noncurrent liabilities...................... (17,869) (19,055)
-------- --------
$ 91,883 $ 81,604
======== ========
</TABLE>
Management has reviewed the Company's operating results for recent years as
well as the outlook for its continuing operations in concluding that it is
more likely than not that the net deferred tax assets of $91.9 million at
December 25, 1999 will be realized. The Company announced a reorganization on
February 10, 1999 (see Note 16) to better align itself in the marketplace. A
major goal of this reorganization is to lower the overall cost structure of
the Company and thereby increase profitability. These factors along with the
timing of the reversal of its temporary differences and the expiration date of
its NOLs were also considered in reaching this conclusion. 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 25, 1999, the Company had the following tax attribute
carryforwards available for U.S. Federal income tax purposes (in thousands):
<TABLE>
<CAPTION>
Expiration
Amount Dates
-------- ----------
<S> <C> <C>
Net operating losses -- regular tax:
Preacquisition, subject to limitations............ $ 8,894 2002-2009
Postacquisition, unrestricted..................... 10,280 2000-2006
Postacquisition, unrestricted..................... 248,910 2008-2019
--------
$268,084
========
Net operating losses -- alternative minimum tax:
Preacquisition, subject to limitations............ $ 6,604 2002-2009
Postacquisition, unrestricted..................... 9,644 2000-2006
Postacquisition, unrestricted..................... 222,040 2008-2019
--------
$238,288
========
General business tax credits:
Preacquisition, subject to limitations............ $ 710 2000-2003
Postacquisition unrestricted...................... 6,004 2004-2019
--------
$ 6,714
========
Alternative minimum tax credits................... $ 12,189
========
</TABLE>
F-27
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
17. Income Taxes -- (Continued)
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.
Income taxes paid (refunds received) were $3.0 million, $(6.0) million, and
$40.4 million for fiscal 1999, 1998 and 1997, respectively.
18. 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 25, 1999 December 26, 1998
------------------ ------------------
Estimated Estimated
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Long-term investments............... $ 2,891 $ 2,891 $ 3,332 $ 3,332
Long-term debt...................... $912,542 $907,087 $866,049 $885,386
</TABLE>
The following methods and assumptions were used to estimate these fair
values:
Long-Term Investments -- Fair value approximates carrying value.
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.
19. Related Party Transactions
On March 13, 1998, the Company completed the sale of Wallcoverings to an
affiliate of Blackstone Partners. See Note 14.
During fiscal 1998, the Company incurred fees and expenses of $0.1 million
for services performed by Blackstone Partners or its affiliates for the 1996
acquisitions of JPS Automotive and Perstorp Components and the 1997
acquisition of the remaining interest in the Collins & Aikman/Perstorp Joint
Venture. 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 and
Mastercraft Group of approximately $2.6 million and $4.0 million,
respectively. The Company also incurred fees and expenses for services
performed by WP Partners, or their respective affiliates, in connection with
the disposition of Wallcoverings of approximately $0.7 million in 1997.
F-28
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
19. Related Party Transaction --- (Continued)
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.
20. Information About the Company's Operations
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information". 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. SFAS No. 131 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
On February 10, 1999, the Company announced the Reorganization, a
comprehensive plan to reorganize its global automotive carpet, acoustics,
plastics and accessory floormats businesses into two divisions: North American
Automotive Interior Systems, headquartered in the Detroit metropolitan area,
and European Automotive Interior Systems, headquartered in Wiesbaden, Germany.
As part of the Reorganization, the Company has also established the Specialty
Automotive Products division, which includes the Company's automotive fabrics
and Dura Convertible Systems businesses. The Company's reportable segments
reflect these newly established divisions. Financial data for all periods has
been presented on this basis. North American Automotive Interior Systems and
European Automotive Interior Systems include the following product groups:
molded floor carpet, luggage compartment trim, acoustical products, accessory
floormats and plastic-based interior modules, systems and components. The
Specialty Automotive Products division includes automotive fabrics and
convertible top systems. The three divisions also produce other automotive and
non-automotive products.
The accounting policies of the divisions are the same as those described in
the Summary of Significant Accounting Policies (See Note 2). The Company
evaluates performance based on profit or loss from operations before interest
expense, foreign exchange gains and losses, loss on sale of receivables, other
income and expense, and income taxes.
Information about the Company's divisions is presented below (in
thousands).
<TABLE>
<CAPTION>
Fiscal Year Ended December 25, 1999
------------------------------------------------------------------
North American European Specialty
Automotive Automotive Automotive
Interior Systems Interior Systems Products Other (a) Total
---------------- ---------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
External revenues....... $1,151,751 $306,374 $440,472 $ -- $1,898,597
Inter-segment revenues.. 85,233 27,422 16,649 (129,304) --
Depreciation and
amortization........... 38,614 17,127 14,849 884 71,474
Operating income
(loss)................. 89,374 2,292 39,596 (32,743) 98,519
Total assets............ 798,959 241,631 234,723 73,577 1,348,890
Capital expenditures.... 45,758 23,472 12,687 4,513 86,430
</TABLE>
F-29
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
20. Information About the Company's Operations -- (Continued)
<TABLE>
<CAPTION>
Fiscal Year Ended December 26, 1998
------------------------------------------------------------------
North American European Specialty
Automotive Automotive Automotive
Interior Systems Interior Systems Products Other (a) Total
---------------- ---------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
External revenues....... $1,065,461 $338,030 $421,978 $ -- $1,825,469
Inter-segment revenues.. 163,432 26,287 29,516 (219,235) --
Depreciation and
amortization........... 34,348 16,832 14,871 1,023 67,074
Operating income........ 74,485 9,242 14,206 545 98,478
Total assets............ 788,054 260,023 267,129 67,005 1,382,211
Capital expenditures.... 53,550 12,440 20,537 12,464 98,991
<CAPTION>
Fiscal Year Ended December 27, 1997
------------------------------------------------------------------
North American European Specialty
Automotive Automotive Automotive
Interior Systems Interior Systems Products Other (a) Total
---------------- ---------------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C>
External revenues....... $1,053,546 $120,456 $455,330 $ -- $1,629,332
Inter-segment revenues.. 65,869 2,938 $ 23,798 (92,605) --
Depreciation and
amortization........... 37,260 6,000 14,628 952 58,840
Operating income........ 40,055(b) 4,451 38,074 1,930 84,510
Total assets............ 740,463 183,378 271,396 107,155 1,302,392
Capital expenditures.... 35,327 3,488 15,733 17,227 71,775
</TABLE>
- --------
(a) Other includes the Company's discontinued operations (see Note 14), non-
operating units, the effect of eliminating entries and in 1999,
restructuring charges and impairment of long-lived assets of $33.4 million
(See Note 15).
(b) Includes impairment of long-lived assets of $22.6 million.
Sales for the Company's primary product groups are as follows (in
thousands):
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------
December 25, December 26, December 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Molded floor carpet.................... $ 468,008 $ 416,971 $ 384,714
Luggage compartment trim............... 90,582 95,897 101,034
Acoustical products.................... 209,772 225,130 167,758
Accessory floormats.................... 165,931 157,209 139,292
Plastic-based interior trim modules,
systems and components................ 435,366 417,534 294,555
Automotive fabrics..................... 269,475 267,185 318,979
Convertible top systems................ 118,916 104,348 88,801
Other.................................. 140,547 141,195 134,199
---------- ---------- ----------
Total.................................. $1,898,597 $1,825,469 $1,629,332
========== ========== ==========
</TABLE>
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.
F-30
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
20. Information About the Company's Operations -- (Continued)
Direct and indirect sales to significant customers in excess of ten percent
of consolidated net sales from continuing operations are as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
General Motors Corporation............................. 31.5% 31.2% 37.1%
Ford Motor Company..................................... 20.4% 19.9% 14.2%
DaimlerChrysler AG..................................... 18.9% 18.3% 17.4%
</TABLE>
Information about the Company's continuing operations in different
geographic areas for fiscal 1999, 1998 and 1997 is presented below (in
thousands).
<TABLE>
<CAPTION>
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended
December 25, 1999 December 26, 1998 December 27, 1997
--------------------- --------------------- ---------------------
Long-Lived Long-Lived Long-Lived
Net Sales Assets Net Sales Assets Net Sales Assets
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
United States........... $1,092,546 $550,760 $1,047,862 $452,281 $1,089,114 $436,466
Canada.................. 398,439 87,729 356,361 186,711 348,056 182,649
Mexico.................. 101,238 20,296 83,216 17,234 71,706 16,044
United Kingdom.......... 121,689 64,277 143,716 61,449 84,956 34,063
Other (a)............... 184,685 74,227 194,314 83,508 35,500 64,586
---------- -------- ---------- -------- ---------- --------
Consolidated............ $1,898,597 $797,289 $1,825,469 $801,183 $1,629,332 $733,808
========== ======== ========== ======== ========== ========
</TABLE>
- --------
(a) Other includes Sweden, Spain, Belgium, Germany, Austria, France, and the
Netherlands and, for long-lived assets, the Company's discontinued
operations (See Note 14).
Intersegment sales between geographic areas are not material. For fiscal
years 1999, 1998 and 1997, export sales from the United States to foreign
countries were $80.5 million, $104.9 million and $136.7 million, respectively.
As of December 25, 1999, the Company's continuing operations employed
approximately 15,600 persons on a full-time or full-time equivalent basis.
Approximately 5,800 of such employees are represented by labor unions.
Approximately 1,400 employees are represented by collective bargaining
agreements that expire during fiscal 2000.
21. 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
F-31
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
21. Commitments and Contingencies -- (Continued)
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
25, 1999, 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 23 sites where the
Company is participating in the investigation or remediation of the site
either directly or through financial contribution, and 8 additional sites
where the Company is alleged to be responsible for costs of investigation or
remediation. As of December 25, 1999, the Company's estimate of its liability
for these 31 sites is approximately $22.9 million. As of December 25, 1999,
the Company has established reserves of approximately $30.5 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 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
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.
Other Commitments
As of December 25, 1999, the Company's continuing operations had
approximately $10.9 million in outstanding capital expenditure 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-32
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
22. Quarterly Financial Data (unaudited)
The quarterly data below is based on the Company's fiscal periods (in
thousands, except per share amounts).
<TABLE>
<CAPTION>
Fiscal 1999
--------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales......................... $478,337 $486,821 $427,873 $505,566
Gross margin...................... 70,588 78,262 64,163 71,704
Income (loss) from continuing
operations(a).................... 2,316 5,318 (6,484) (2,515)
Income (loss) before extraordinary
loss and cumulative effect of
change in accounting principle
................................. 2,316 5,318 (6,484) (2,515)
Net income (loss)................. (6,534) 5,318 (6,484) (2,515)
Basic and diluted income (loss)
per share........................ (0.10) 0.09 (0.10) (0.04)
Common stock prices
High............................ 6 1/4 7 7/16 7 5/8 7
Low............................. 4 1/8 4 4 9/16 4 7/8
<CAPTION>
Fiscal 1998
--------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales......................... $478,140 $463,335 $377,928 $506,066
Gross margin...................... 78,732 63,815 38,577 67,101
Income (loss) from continuing
operations....................... 8,678 (482) (8,354) 67
Income (loss) before extraordinary
loss............................. 8,678 (482) (8,354) 67
Net income (loss)................. 8,678 (4,161) (8,354) 22
Basic and diluted income (loss)
per share........................ 0.13 (0.06) (0.13) --
Common stock prices
High............................ 9 11/16 9 1/12 7 1/2 7 7/16
Low............................. 7 11/16 6 13/16 6 3/16 4 15/16
</TABLE>
(a) During 1999, the Company incurred restructuring charges and impairment of
long-lived assets of $4.6 million in the second quarter, $15.3 million in
the third quarter and $13.5 million in the fourth quarter.
The Company's operations are not subject to significant seasonal
influences.
F-33
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
23. 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 (in
thousands):
<TABLE>
<CAPTION>
December 25, December 26, December 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Current assets..................... $ 465,312 $ 510,303 $ 508,864
Noncurrent assets.................. 883,524 871,815 792,199
Current liabilities................ 362,226 343,807 315,268
Noncurrent liabilities............. 1,135,174 1,115,394 1,051,376
Net sales.......................... 1,898,597 1,825,469 1,629,332
Gross margin....................... 284,717 248,225 233,160
Income (loss) from continuing
operations........................ (980) 300 (10,338)
Income (loss) before extraordinary
item and cumulative effect of a
change in accounting principle ... (980) 300 155,709
Net income (loss).................. (9,830) (3,424) 154,988
</TABLE>
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.
24. Earnings Per Share
The Company adopted SFAS No. 128, "Earnings Per Share," in December 1997.
Basic earnings per common share were computed by dividing net income (loss) 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
16). There were no reconciling items between basic earnings per common share
and diluted earnings per common share for 1999, 1998 and 1997 because the
effects of the stock options would have been anti-dilutive. The incremental
dilutive shares (in thousands) would have been 432, 700 and 1,155 in 1999,
1998 and 1997, respectively.
F-34
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To Collins & Aikman Corporation:
We have audited, in accordance with auditing standards generally accepted
in the United States, the consolidated financial statements of Collins &
Aikman Corporation and subsidiaries included in this Form 10-K, and have
issued our report thereon dated March 1, 2000. 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,
March 1, 2000
S-1
<PAGE>
COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
December 25, December 26,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash.............................................. $ 54 $ 81
Other............................................. -- 12
--------- --------
Total current assets............................ 54 93
Other assets........................................ -- --
--------- --------
$ 54 $ 93
========= ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities................................. $ 29 $ 199
Share of accumulated losses in excess of investments
in subsidiaries.................................... 148,564 77,083
Other noncurrent liabilities........................ 2,582 2,582
Common stock........................................ 705 705
Other stockholders' deficit......................... (151,826) (80,476)
--------- --------
Total stockholders' deficit..................... (151,121) (79,771)
--------- --------
$ 54 $ 93
========= ========
</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 25, December 26, December 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Other expenses......................... $ (514) $ (608) $ (589)
Interest income........................ 129 217 836
-------- ------- --------
Income (loss) from operations before
equity in income (loss) of
subsidiary............................ (385) (391) 247
Equity in income (loss) of subsidiary.. (9,830) (3,424) 154,988
-------- ------- --------
Net income (loss)...................... $(10,215) $(3,815) $155,235
======== ======= ========
</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 25, December 26, December 27,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net cash used in operating activities.. $ (27) $ (334) $ (332)
-------- -------- --------
FINANCING ACTIVITIES
Purchases of treasury stock............ (2,097) (25,013) (19,715)
Proceeds from exercise of stock
options............................... 448 -- 385
Intercompany transfers (to) from
subsidiary............................ 1,649 (5,987) (2,094)
Dividends paid to shareholders......... (50,198) -- --
Dividends received from subsidiary..... 50,198 31,000 21,424
-------- -------- --------
Net cash used in financing activities.. -- -- --
-------- -------- --------
Net decrease in cash................... (27) (334) (332)
Cash at beginning of year.............. 81 415 747
-------- -------- --------
Cash at end of year.................... $ 54 $ 81 $ 415
======== ======== ========
</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 12, 14 and 21 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 25, 1999, December 26, 1998 and December
27, 1997
(in thousands)
<TABLE>
<CAPTION>
Additions
Balance at Resulting Charge to Charged
Beginning from Costs and to Other Balance at
Description of Year Acquisitions Expenses Accounts Deductions End of Year
- ----------- ---------- ------------ --------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Fiscal Year Ended
December 25, 1999
Allowance for doubtful
accounts $ 7,228 $-- $ 2,384 $1,210(a) $(2,265)(c) $ 8,557
Restructuring reserves $ 1,940 $-- $20,030 $ -- $(8,452)(d) $13,518
Fiscal Year Ended
December 26, 1998
Allowance for doubtful
accounts $ 9,275 $247 $ 3,751 $ 482(a) $(6,527)(c) $ 7,228
Restructuring reserves $ 7,676 $-- $ -- $ -- $(5,736)(d) $ 1,940
Fiscal Year Ended
December 27, 1997
Allowance for doubtful
accounts $10,380 $-- $ 604 $ 96(a) $(1,805)(b) $ 9,275
Restructuring reserves $ 9,694 $-- $ -- $1,200 $(3,218)(d) $ 7,676
</TABLE>
- --------
(a) Reclassifications and collection of accounts previously written off.
(b) Reclassifications to discontinued operations and other accounts and
uncollectible amounts written off.
(c) Reclassifications to other accounts, uncollectible amounts written off, and
the elimination of amounts included in the allowance due from Enjema which
was considered as a component of the Company's purchase cost for the
remaining 50% interest in Enjema.
(d) Spending against the established reserves. See Note 15 to the Consolidated
Financial Statements.
S-5
<PAGE>
EXHIBIT 10.25
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") is made and entered
into this 9th day of August, 1999, by and between COLLINS & AIKMAN CORPORATION,
a Delaware corporation (the "Company"), and JONATHAN PEISNER (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
<PAGE>
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
(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.
2
<PAGE>
(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 preceding the Date of Termination; and
3
<PAGE>
(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.
4
<PAGE>
(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, 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.
5
<PAGE>
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 Michigan.
(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. Jonathan Peisner
6105 Pinecroft Drive
West Bloomfield, Michigan 48322
If to the Company:
Collins & Aikman Corporation
701 McCullough Drive
P.O. Box 32665
Charlotte, North Carolina 28232
Attention: Chairman and 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 and local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
6
<PAGE>
(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/ Jonathan Peisner
--------------------------------------
Jonathan Peisner
COMPANY:
COLLINS & AIKMAN CORPORATION
By: /s/ Thomas E. Evans
----------------------------------
Thomas E. Evans
Chairman and Chief Executive
Officer
7
<PAGE>
EXHIBIT 10.26
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 DEAN GASKINS (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
<PAGE>
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
(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.
2
<PAGE>
(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
preceding the Date of Termination; and
3
<PAGE>
(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.
4
<PAGE>
(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, 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.
5
<PAGE>
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 Michigan.
(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. Dean Gaskins
#1 Sylvan Court
Spartanburg, South Carolina 29302
If to the Company:
Collins & Aikman Corporation
701 McCullough Drive
P.O. Box 32665
Charlotte, North Carolina 28232
Attention: Chairman and 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 and local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
6
<PAGE>
(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/ Dean Gaskins
---------------------------------
Dean Gaskins
COMPANY:
COLLINS & AIKMAN CORPORATION
By: /s/ Thomas E. Hannah
------------------------------
Thomas E. Hannah
Chairman and Chief Executive
Officer
7
<PAGE>
EXHIBIT 10.27
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 REED A. WHITE (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
<PAGE>
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
(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.
2
<PAGE>
(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 preceding the Date of Termination; and
3
<PAGE>
(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.
4
<PAGE>
(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, 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.
5
<PAGE>
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 Michigan.
(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. Reed A. White
6250 West U.S. 223
Adrian, Michigan 49221
If to the Company:
Collins & Aikman Corporation
701 McCullough Drive
P.O. Box 32665
Charlotte, North Carolina 28232
Attention: Chairman and 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 and local taxes as shall be
required to be withheld pursuant to any applicable law or regulation.
6
<PAGE>
(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/ Reed A. White
---------------------------------------------
Reed A. White
COMPANY:
COLLINS & AIKMAN CORPORATION
By: /s/ Thomas E. Hannah
-----------------------------------------
Thomas E. Hannah
Chairman and Chief Executive Officer
7
<PAGE>
EXHIBIT 10.28
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") is made and entered into
this 26th day of July, 1999, by and between COLLINS & AIKMAN CORPORATION, a
Delaware corporation (the "Company"), and RAJESH K. SHAH (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
<PAGE>
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
(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.
2
<PAGE>
(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
preceding the Date of Termination; and
3
<PAGE>
(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.
4
<PAGE>
(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, 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.
5
<PAGE>
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 Michigan.
(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. Rajesh K. Shah
11693 Hunters Creek Drive
Plymouth, Michigan 48170
If to the Company:
Collins & Aikman Corporation
701 McCullough Drive
P.O. Box 32665
Charlotte, North Carolina 28232
Attention: Chairman and 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 and local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
6
<PAGE>
(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/ Rajesh K. Shah
----------------------------------------
Rajesh K. Shah
COMPANY:
COLLINS & AIKMAN CORPORATION
By: /s/ Thomas E. Evans
------------------------------------
Thomas E. Evans
Chairman and Chief Executive Officer
7
<PAGE>
EXHIBIT 10.29
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 RONALD T. LINDSAY (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
<PAGE>
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
(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.
2
<PAGE>
(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) twelve (12) 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 preceding the
Date of Termination; and
3
<PAGE>
(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.
4
<PAGE>
(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, 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.
5
<PAGE>
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 Michigan.
(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. Ronald T. Lindsay
1214 Belgrave Place
Charlotte, North Carolina 28203
If to the Company:
Collins & Aikman Corporation
701 McCullough Drive
P.O. Box 32665
Charlotte, North Carolina 28232
Attention: Chairman and 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 and local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
6
<PAGE>
(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/ Ronald T. Lindsay
----------------------------------------
Ronald T. Lindsay
COMPANY:
COLLINS & AIKMAN CORPORATION
By: /s/ Thomas E. Hannah
------------------------------------
Thomas E. Hannah
Chairman and Chief Executive Officer
7
<PAGE>
Exhibit 10.30
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of
October 1, 1999, by and between COLLINS & AIKMAN PRODUCTS CO., a Delaware
corporation (the "Company"), and RONALD T. LINDSAY ("Employee").
W I T N E S S E T H
WHEREAS, Employee is currently employed by the Company; and
WHEREAS, the Company wishes to retain Employee's services by providing
Employee the compensation and benefits set forth in this Agreement.
NOW, THEREFORE, in consideration of Employee's continued employment and the
mutual agreements contained herein, the parties agree as follows:
1. Term of Employment. The Company hereby agrees to employ Employee, and
Employee hereby accepts employment, for a period of three (3) years, commencing
October 1, 1999 and ending September 30, 2002, subject to the terms and
conditions of this Agreement. At the end of such initial three year term,
unless the Company shall have given Employee 60 days prior written notice of its
intention to terminate this Agreement at the end of the initial term hereof, the
term of this Agreement shall automatically be extended by an additional one year
period. Thereafter, unless the Company shall have given Employee 60 days prior
written notice of its intention to terminate this Agreement at the end of the
term then in effect, the term of this Agreement shall automatically be extended
by an additional one year period.
2. Position and Location of Employment. During the term of this
Agreement, Employee shall be employed in the position of Senior Vice President,
Secretary and General Counsel of Collins & Aikman Corporation, the Company and
the affiliates thereof, and shall perform such services for the Company and its
affiliates as may be assigned to him from time to time by the Chairman or the
Board of Directors of the Company. Employee shall devote his full time and
attention to the affairs of the Company and his duties in such position. The
location for Employee's position shall be the Company's Worldwide Headquarters
in Troy, Michigan upon the opening of the Company's Worldwide Headquarters or by
January 1, 2000, whichever is later. Employee shall relocate to the Troy,
Michigan area with his wife and any minor children as soon as practicable after
the conclusion of the 1999-2000 academic year, but no later than August 1, 2000.
3. Compensation.
(a) Base Salary. The Company shall pay to Employee base salary at an
annual rate of not less than $215,000 during the term of his employment
hereunder. Such amount shall be reviewed annually by the Board of Directors of
the Company or an appropriate committee thereof (the Company's Board of
Directors or such committee being referred to herein as the "Compensation
Board") and may be increased in the sole discretion of the Compensation Board.
<PAGE>
(b) Bonus Plan. During the term of Employee's employment hereunder,
Employee shall be eligible to participate in the Company's annual Executive
Incentive Compensation Plan (the "EIC Plan") in accordance with the applicable
provisions of the EIC Plan. The standard bonus for Employee under the EIC Plan
initially shall be forty percent (40%) of Employee's base salary and shall be
reviewed by the Compensation Board from time-to-time during the term of
Employee's employment hereunder. Notwithstanding the foregoing, Employee's 1999
bonus shall be calculated as follows: (i) one-half ( 1/2) of the 1999 bonus
shall be based on Employee's base salary and standard bonus in effect
immediately preceding October 1, 1999 and (ii) one-half ( 1/2) of the 1999 bonus
shall be based on Employee's base salary and standard bonus as set forth in this
Agreement.
(c) Stock Options. Employee is a participant in the Collins & Aikman
Corporation 1994 Employee Stock Option Plan (the "Option Plan") and shall be
granted the option to purchase up to an additional 40,000 shares of the Common
Stock of Collins & Aikman Corporation, in accordance with the applicable terms
and conditions of the Option Plan and an Option Agreement between Collins &
Aikman Corporation and Employee to be entered into, dated and effective as of
October 14, 1999. The option price for all such shares shall be the closing
price of Collins & Aikman Corporation shares on the New York Stock Exchange as
of October 14, 1999. Subject to the terms and conditions of the Option Plan and
the Option Agreement, the option of Employee to purchase up to the 40,000 shares
shall vest as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------
VESTING DATE TOTAL NUMBER OF PERCENTAGE VESTED
SHARES VESTED
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
October 1, 2000 13,334 33%
- ---------------------------------------------------------------------------------------------------
October 1, 2001 26,667 66%
- ---------------------------------------------------------------------------------------------------
October 1, 2002 40,000 100%
- ---------------------------------------------------------------------------------------------------
</TABLE>
4. Benefits and Perquisites.
(a) General. Employee shall be entitled to such fringe benefits and
perquisites, and to participate in such pension, profit sharing and benefit
plans as are generally made available to executives of the Company during the
term hereof, including major medical, extended medical and disability insurance,
supplemental retirement income plan, group term life insurance and appropriate
annual holidays, sick days and vacation time. Included in such benefits to
Employee, the Company shall furnish the use of an automobile subject to
applicable Company policies and practice and shall reimburse Employee for normal
gasoline and maintenance charges, subject to proper allocation of personal use
for income tax purposes. The Company also shall pay the monthly dues at a
country club in the Troy, Michigan area of Employee's choice. The Company shall
not be liable for the initiation fee or any other charges or fees payable by
Employee to such club.
(b) Relocation Expenses. The Company shall reimburse Employee for the
reasonable expenses incurred by Employee in connection with the relocation of
Employee and his wife and any minor children from Charlotte, North Carolina to
the Troy, Michigan area, in accordance with the relocation policy of the
Company. In lieu of the $6,000 relocation allowance payable to
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<PAGE>
Employee under such relocation policy, the Company shall pay Employee a one-time
relocation allowance of $50,000, payable in a lump sum payment upon completion
of the purchase of a principal residence by Employee in the Troy, Michigan area.
In addition to the payment of the relocation allowance as provided in this
Paragraph 4(b), the Company shall pay Employee an additional amount such that
after all applicable federal, state and local income, employment and other taxes
on Employee's relocation allowance and on any additional amount payable in
accordance with this sentence, Employee has received the entire $50,000
relocation allowance on an after-tax basis.
5. Reimbursement of Expenses. The Company shall reimburse Employee for
all reasonable travel, entertainment and other reasonable business expenses
reasonably incurred by Employee in connection with the performance of his duties
hereunder, provided that Employee furnishes to the Company adequate records or
other evidence respecting such expenditures.
6. Termination of Employment. Employee's employment under this
Agreement may be terminated:
(a) by the Company for Cause, which means: (i) fraud or
misappropriation with respect to the business of the Company or intentional
material damage to the property or business of the Company, (ii) willful
failure by Employee to perform his duties and responsibilities and to carry
out his authority, (iii) willful malfeasance or misfeasance or breach of
fiduciary duty or representation to the Company or its 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 Employee of a felony (which shall be referred to as a "For Cause
Termination");
(b) by the Company for any reason other than a For Cause Termination
(which shall be referred to as a "No Cause Termination");
(c) by Employee for any reason other than a "Constructive
Termination" (as defined below) at any time (which shall be referred to as
a "Voluntary Termination"); or
(d) by Employee within 30 days after the occurrence of one or more of
the following: (i) a material reduction in Employee's total compensation
and benefits package, (ii) an adverse change (in the judgment of Employee)
in Employee's responsibilities, position (including status, office, title,
reporting relationships or working conditions), authority or duties, or
(iii) the Company's giving notice of the non-renewal of this Agreement at
the end of the term then in effect pursuant to Paragraph 1 hereof (which
shall be referred to as a "Constructive Termination"); provided, however,
no event or circumstance described in clause (i) or (ii) shall give rise to
a "Constructive Termination" for purposes of this Agreement unless Employee
shall have given notice to the Company of Employee's determination of the
occurrence of an event or circumstance described in clause (i) or (ii) and
such event or circumstance shall be continuing as of the end of 45 days
after the giving of such notice.
3
<PAGE>
7. Benefits Upon Termination.
(a) Termination as a Result of Voluntary Termination or For Cause
Termination. If Employee's employment under this Agreement is terminated as
a result of a Voluntary Termination or a For Cause Termination, the Company
shall pay Employee (i) his unpaid base salary under Paragraph 3(a) accrued
to the date on which his employment terminates (the "Termination Date"),
(ii) any accrued but unused vacation and (iii) all benefits earned by
Employee under any employee benefit plans and programs sponsored by the
Company in which Employee participates.
(b) Termination as a Result of No Cause Termination or Constructive
Termination. If Employee's employment under this Agreement is terminated
as a result of a No Cause Termination or a Constructive Termination, the
Company shall pay to Employee the following benefits:
(i) Employee's unpaid base salary accrued to the Termination
Date and any accrued but unused vacation;
(ii) One (1) times Employee's standard bonus based on the
standard bonus in effect immediately preceding the Termination Date;
and
(iii) Employee's base salary for the greater of (A) twelve (12)
months or (B) the remaining term of this Agreement, based on the rate
of base salary in effect immediately preceding the Termination Date.
The amount due to Employee pursuant to 7(b)(iii) above shall be paid, at
the sole discretion of the Compensation Board, either in a lump sum or on a
periodic basis in accordance with the Company's normal pay practice.
In addition, all outstanding stock options granted to Employee under
the Option Plan will immediately vest upon a No Cause Termination or a
Constructive Termination prior to the expiration of the term of this
Agreement and will continue to be fully exercisable until the earlier of
ninety (90) days after the Termination Date or the original expiration date
of said options. The Company shall also cause Employee to receive all
benefits earned by Employee under all employee benefit plans and programs
sponsored by the Company in which Employee participates.
8. Representations and Covenants of Employee.
(a) Conduct. Employee will at all times refrain from taking any
action or making any statements, written or oral, which are intended to and
do disparage the goodwill or reputation of the Company or any of its
subsidiaries or affiliates or any directors or officers thereof or which
could adversely affect the morale of employees of the Company or its
subsidiaries.
(b) Performance of Duties. In consideration of the payments to be
made hereunder, Employee agrees that during the term of his employment
under this Agreement, he shall devote
4
<PAGE>
his entire business time and attention to the performance of his duties
hereunder and serve the Company diligently and to the best of his
abilities.
(c) Company Information. Employee agrees that so long as he is
employed by the Company and following any termination of his employment
Employee will keep confidential all confidential information and trade
secrets of the Company and any of its subsidiaries or affiliates and will
not disclose such information to any person without the prior approval of
the Board of Directors of the Company or use such information for any
purpose other than in the course of fulfilling his duties of employment
with the Company pursuant to this Agreement. It is understood that for
purposes of this Agreement the term "confidential information" is to be
construed broadly to include all material nonpublic or proprietary
information.
9. Release. In consideration of the compensation continuance
available in certain events pursuant to this Agreement, Employee unconditionally
releases and covenants not to sue the Company and its subsidiaries and
affiliates and directors, officers, employees and stockholders thereof, from any
and all claims, liabilities and obligations of any nature pertaining to
termination of employment other than those explicitly provided for by this
Agreement including, without limitation, any claims arising out of alleged legal
restrictions on the Company's rights to terminate its employees, such as any
implied contract of employment or termination contrary to public policy.
10. Governing Law. The validity, interpretation and performance of
this Agreement shall be governed by the laws of Michigan, regardless of the laws
that might be applied under applicable principles of conflicts of laws.
11. Amendment of CIC Agreement; Entire Agreement and Survivorship.
(a) Employee and Collins & Aikman Corporation hereby agree that
Sections 2(c) and 2(d) of that certain Change in Control Agreement between
Employee and Collins & Aikman Corporation dated March 17, 1998 (the "CIC
Agreement") are amended effective as of the date hereof to read as follows:
"(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 preceding the Date of Termination; and
(d) two (2) times Executive's target annual bonus in effect
immediately preceding the Change in Control Period."
(b) This Agreement and the CIC Agreement (as amended by Paragraph
11(a) above) and all other agreements and plans referred to in this Agreement
constitute the entire agreement and understanding between the parties hereto
with respect to the matters referred to herein and therein and supersede all
prior agreements and understandings between the parties hereto with respect to
the matters referred to herein and therein. The representations, warranties and
5
<PAGE>
covenants of Employee contained in parts (a) and (c) of Paragraph 8, and the
release contained in Paragraph 9 shall survive the expiration or termination of
this Agreement by either party.
12. Notice. Any written notice required to be given by one party to
the other party hereunder shall be deemed effective if mailed by certified or
registered mail:
To the Company: Collins & Aikman Products Co.
701 McCullough Drive
Charlotte, North Carolina 26262
Attention: Harold R. Sunday
To Employee: Ronald T. Lindsay
1214 Belgrave Place
Charlotte, North Carolina 28203
or such other address as may be stated in notice given under this Paragraph 12.
13. Severability. The invalidity, illegality or enforceability of
any provision of this Agreement in any jurisdiction shall not affect the
validity, legality or enforceability of the remainder of this Agreement in such
jurisdiction or the validity, legality or enforceability of this Agreement or
such provision in any other jurisdiction, it being the intent of the parties
hereto that all rights and obligations of the parties hereto under this
Agreement shall be enforceable to the fullest extent permitted by law.
14. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their personal representatives,
and, in the case of the Company, its successors and assigns, and Paragraph 9
shall also inure to the benefit of the other persons and entities identified
therein; provided, however, that Employee shall not, without the prior written
consent of the Company, transfer, assign, convey, pledge or encumber this
Agreement or any interest under this Agreement. Employee understands that the
assignment of this Agreement or any benefits hereof or obligations hereunder by
the Company to any of its subsidiaries or affiliates or to any purchaser of all
or a substantial portion of the assets of the Company or of any affiliated
company then employing Employee, and the employment of Employee by such
subsidiary or affiliate or by any such purchaser or by any successor of the
Company in a merger or consolidation, shall not be deemed a termination of
Employee's employment for purposes of Paragraphs 6 and 7 or otherwise.
15. Amendment. This Agreement may be amended or canceled only by an
instrument in writing duly executed and delivered by each party to this
Agreement.
16. 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.
17. Headings. Headings contained in this Agreement are for or
convenience only and shall not limit this Agreement or affect the interpretation
thereof.
6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
/s/ Ronald T. Lindsay
---------------------------------------
Ronald T. Lindsay
COLLINS & AIKMAN PRODUCTS CO.
By: /s/ Thomas E. Evans
----------------------------------
Thomas E. Evans
Chairman and Chief Executive Officer
Collins & Aikman Corporation has joined in the execution of this
Agreement for purposes of Paragraphs 2, 3(c) and 11 above.
COLLINS & AIKMAN CORPORATION
By:
----------------------------------
Thomas E. Evans
Chairman and Chief Executive Officer
7
<PAGE>
Exhibit 10.31
SEVERANCE BENEFIT AGREEMENT
THIS SEVERANCE BENEFIT AGREEMENT (the "Agreement") is made and entered into
this 26th day of July, 1999, by and between COLLINS & AIKMAN CORPORATION, a
Delaware corporation (the "Company"), and RAJESH K. SHAH ("Executive").
Statement of Purpose
The Company wishes to encourage the continued service and dedication of
Executive by providing Executive with severance benefits if his employment with
the Company is terminated for certain reasons, as described herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Company and Executive hereby agree as follows:
1. Term of Agreement. The initial term of this Agreement shall extend
for a period of two years, commencing on the date hereof and ending July 25,
2001. At the end of such initial two year term, unless the Company shall have
given Executive 60 days prior written notice of its intention to terminate this
Agreement at the end of the initial term hereof, the term of this Agreement
shall automatically be extended by an additional one year period. Thereafter,
unless the Company shall have given Executive 60 days prior written notice of
its intention to terminate this Agreement at the end of the term then in effect,
the term of this Agreement shall automatically be extended by an additional one
year period.
2. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) Constructive Termination means the Executive's termination of his
employment with the Company and its subsidiaries at any time during the 90 day
period beginning on:
(i) the termination of this Agreement at the end of the term then
in effect;
(ii) 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;
(iii) a material reduction in Executive's total compensation and
benefits package; or
(iv) 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);
provided, however, that, notwithstanding any other provision hereof, no event or
circumstance described in clause (iii) or (iv) above shall rise to a
"Constructive Termination" for purposes of
<PAGE>
this Agreement unless Executive shall have given notice to the Company of
Executive's determination of the occurrence of an event specified in clause
(iii) or (iv) above and such event shall be continuing as of the end of 45 days
after the giving of such notice.
(b) 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 30 days after the
giving of such notice).
(c) Involuntary Termination means a termination of Executive's employment
by the Company other than a Termination For Cause or by reason of Executive's
death or disability.
(d) 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 30 days after the
giving of such notice).
(e) Termination For Cause means a termination of Executive's employment by
the Company as a result of:
(i) fraud or misappropriation with respect to any business 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 Executive to perform his duties and
responsibilities and to carry out his authority;
(iii) willful malfeasance or misfeasance or breach of fiduciary duty
or representation to the Company or its owners or an affiliate of the
Company;
(iv) willful failure to act in accordance with any specific lawful
instructions of the Chairman and CEO or a majority of the Board of
Directors of the Company; or
(v) conviction of Executive of a felony.
3. Benefits Upon Involuntary Termination or Constructive Termination. In
the event of an Involuntary Termination or Constructive Termination of
Executive, the Company shall pay to Executive the following benefits and no
other salary, bonus, benefits or other compensation:
(a) to the extent not theretofore paid, Executive's base salary
through the Date of Termination;
2
<PAGE>
(b) any unpaid cash bonus Executive is entitled to receive for the
prior fiscal year of the Company;
(c) Executive's accrued and vested benefits under employee benefit
plans sponsored by the Company;
(d) the product of (i) 1.5 times (ii) Executive's target annual bonus
under the Executive Incentive Compensation Plan for the current fiscal
year; and
(e) Executive's base salary for the greater of (i) eighteen (18)
months or (ii) the remaining term of this Agreement, based on the rate of
base salary in effect immediately preceding the Termination Date.
The amount due to Executive pursuant to Section 3(e) shall be paid, at the sole
discretion of the Company, either in a lump sum or on a periodic basis in
accordance with normal pay practices. Notwithstanding the foregoing, the
Company shall not be obligated to pay Executive any amount pursuant to Section
3(d) or (e) unless Executive executes and delivers to the Company a release of
the parties set forth in Section 4 hereof, such release to be dated as of the
Date of Termination and to contain the provisions set forth in Section 4 hereof.
In addition, all outstanding stock options granted to Executive under the
Collins & Aikman Corporation Stock Option Plan will immediately vest upon an
Involuntary Termination or a Constructive Termination prior to the expiration of
the term of this Agreement and will continue to be fully exercisable until the
earlier of ninety (90) days after the Termination Date or the original
expiration date of said options.
4. Release. In consideration of the severance benefits available in
certain events pursuant to this Agreement, Executive unconditionally releases
the Company and its subsidiaries and affiliates and directors, officers,
employees and stockholders thereof, from any and all claims, liabilities and
obligations of any nature pertaining to the terms of his employment or the
termination of employment other than those explicitly provided for by this
Agreement including, without limitation, any claims arising out of alleged legal
restrictions on the Company's rights to terminate its employees, such as any
termination contrary to public policy or to laws prohibiting discrimination
(including, without limitation, the Age Discrimination in Employment Act).
5. 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, 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.
6. 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,
3
<PAGE>
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.
7. Miscellaneous.
(a) Applicable Law. This Agreement shall be governed, construed and
interpreted in accordance with the laws of the State of Michigan.
(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. Rajesh K. Shah
11693 Hunters Creek Drive
Plymouth, Michigan 48170
If to the Company:
Collins & Aikman Corporation
701 McCullough Drive
P.O. Box 32665
Charlotte, North Carolina 28232
Attention: Chairman and 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 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.
4
<PAGE>
(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 may be terminated by
either Executive or the Company at any time.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
EXECUTIVE:
/s/ Rajesh K. Shah
--------------------------------------
Rajesh K. Shah
COMPANY:
COLLINS & AIKMAN CORPORATION
By: /s/ Thomas E. Evans
----------------------------------
Thomas E. Evans
Chairman and Chief Executive Officer
5
<PAGE>
EXHIBIT 10.32
SEVERANCE BENEFIT AGREEMENT
THIS SEVERANCE BENEFIT AGREEMENT (the "Agreement") is made and entered into
this 9th day of August, 1999, by and between COLLINS & AIKMAN CORPORATION, a
Delaware corporation (the "Company"), and JONATHAN PEISNER ("Executive").
Statement of Purpose
The Company wishes to encourage the continued service and dedication of
Executive by providing Executive with severance benefits if his employment with
the Company is terminated for certain reasons, as described herein.
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Company and Executive hereby agree as follows:
1. Term of Agreement. The initial term of this Agreement shall extend
for a period of two years, commencing on the date hereof and ending August 8,
2001. At the end of such initial two year term, unless the Company shall have
given Executive 60 days prior written notice of its intention to terminate this
Agreement at the end of the initial term hereof, the term of this Agreement
shall automatically be extended by an additional one year period. Thereafter,
unless the Company shall have given Executive 60 days prior written notice of
its intention to terminate this Agreement at the end of the term then in effect,
the term of this Agreement shall automatically be extended by an additional one
year period.
2. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) Constructive Termination means the Executive's termination of his
employment with the Company and its subsidiaries at any time during the 90 day
period beginning on:
(i) the termination of this Agreement at the end of the term then in
effect;
(ii) 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;
(iii) a material reduction in Executive's total compensation and
benefits package; or
(iv) 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);
provided, however, that, notwithstanding any other provision hereof, no event or
circumstance described in clause (iii) or (iv) above shall rise to a
"Constructive Termination" for purposes of
<PAGE>
this Agreement unless Executive shall have given notice to the Company of
Executive's determination of the occurrence of an event specified in clause
(iii) or (iv) above and such event shall be continuing as of the end of 45 days
after the giving of such notice.
(b) 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 30 days after the
giving of such notice).
(c) Involuntary Termination means a termination of Executive's employment
by the Company other than a Termination For Cause or by reason of Executive's
death or disability.
(d) 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 30 days after the
giving of such notice).
(e) Termination For Cause means a termination of Executive's employment by
the Company as a result of:
(i) fraud or misappropriation with respect to any business 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 Executive to perform his duties and
responsibilities and to carry out his authority;
(iii) willful malfeasance or misfeasance or breach of fiduciary duty
or representation to the Company or its owners or an affiliate of the
Company;
(iv) willful failure to act in accordance with any specific lawful
instructions of the Chairman and CEO or a majority of the Board of
Directors of the Company; or
(v) conviction of Executive of a felony.
3. Benefits Upon Involuntary Termination or Constructive Termination. In
the event of an Involuntary Termination or Constructive Termination of
Executive, the Company shall pay to Executive the following benefits and no
other salary, bonus, benefits or other compensation:
(a) to the extent not theretofore paid, Executive's base salary
through the Date of Termination;
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<PAGE>
(b) any unpaid cash bonus Executive is entitled to receive for the
prior fiscal year of the Company;
(c) Executive's accrued and vested benefits under employee benefit
plans sponsored by the Company;
(d) a pro-rata bonus under the Executive Incentive Compensation Plan
for the current fiscal year (based on the number of months of such fiscal
year preceding the Date of Termination over twelve (12));
(e) Executive's base salary for the greater of 12 months or the
remaining term of this Agreement, based on the rate of base salary in
effect immediately preceding the Date of Termination, which shall be paid
to Executive on a periodic basis in accordance with the Company's normal
pay practices commencing with the first payroll payment date following the
Date of Termination;
(f) all of Executive's benefits and perquisites with the Company in
effect immediately prior to the Date of Termination (other than short and
long term disability insurance) until the earlier of (i) the expiration of
the payment period for the amount due under this Section 3(e) or (ii) the
date Executive becomes employed by another employer; and
(g) outplacement services for a reasonable period of time following
the Date of Termination, the provider of which shall be selected by the
Company.
Notwithstanding the foregoing, the Company shall not be obligated to pay or
provide Executive any amount or benefit pursuant to Section 3(d), 3(e), 3(f) or
3(g) unless Executive executes and delivers to the Company a release of the
parties set forth in Section 4 hereof, such release to be dated as of the Date
of Termination and to contain the provisions set forth in Section 4 hereof.
4. Release. In consideration of the severance benefits available in
certain events pursuant to this Agreement, Executive unconditionally releases
the Company and its subsidiaries and affiliates and directors, officers,
employees and stockholders thereof, from any and all claims, liabilities and
obligations of any nature pertaining to the terms of his employment or the
termination of employment other than those explicitly provided for by this
Agreement including, without limitation, any claims arising out of alleged legal
restrictions on the Company's rights to terminate its employees, such as any
termination contrary to public policy or to laws prohibiting discrimination
(including, without limitation, the Age Discrimination in Employment Act).
5. 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, 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
3
<PAGE>
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.
6. 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.
7. Miscellaneous.
(a) Applicable Law. This Agreement shall be governed, construed and
interpreted in accordance with the laws of the State of Michigan.
(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. Jonathan Peisner
6105 Pinecroft Drive
West Bloomfield, Michigan 48322
If to the Company:
Collins & Aikman Corporation
701 McCullough Drive
P.O. Box 32665
Charlotte, North Carolina 28232
Attention: Chairman and 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.
4
<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 may be terminated by
either Executive or the Company at any time.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date and year first above written.
EXECUTIVE:
/s/ Jonathan Peisner
----------------------------------------------
Jonathan Peisner
COMPANY:
COLLINS & AIKMAN CORPORATION
By: /s/ Thomas E. Evans
------------------------------------------
Thomas E. Evans
Chairman and Chief Executive Officer
5
<PAGE>
EXHIBIT 10.33
December 17, 1999
Mr. J. Michael Stepp
7021 Old Dairy Lane
Charlotte, North Carolina 28211
In re: Severance Benefits
Dear Michael:
This letter confirms our recent conversations about your termination of
employment with Collins & Aikman Corporation (the "Company") and the
compensation and benefits the Company has agreed to provide to you pursuant to
your Employment and Retention Agreement dated January 1, 1999 (the "Employment
Agreement").
Your employment with the Company will terminate effective as of December
31, 1999. In consideration of your service to the Company for 1999, we have
agreed that you will receive a 1999 bonus under the Company's annual Executive
Incentive Compensation Plan of $150,000. In addition, pursuant to Section
3.2(b) of the Employment Agreement, you will receive a one-time Transition Bonus
of $300,000. Both bonuses will be paid to you on or before January 31, 2000.
We have also agreed that you will receive the following benefits in connection
with the termination of your employment with the Company:
Lump Sum Severance Benefit. In accordance with Section 5.2(b) of the
Employment Agreement, you will receive a severance benefit of $415,000, to
be paid to you in a lump sum payment on or before January 31, 2000.
Purchase of Automobile. You have the option, exercisable by written notice
to the Company on or before January 15, 2000, to purchase the automobile
furnished to you by the Company (a 1998 Volvo) for $15,000.
Other Benefits. The Company will provide you with the benefits described
in clauses (IV), (V) and (VI) of Section 5.2(b) of the Employment
Agreement.
The covenants made by you in Section 6.2 of the Employment Agreement will
continue in accordance with the terms of the Employment Agreement. In
consideration of the arrangements outlined in this letter and pursuant to
Section 5.3 of the Employment Agreement, you will execute and deliver to the
Company the General Release attached as Exhibit A to the Employment Agreement (a
copy of which is also enclosed).
<PAGE>
Mr. J. Michael Stepp
December 17, 1999
Page 2
The Company acknowledges that your termination of employment was by mutual
consent and was not in any way related to your job performance. You are subject
to being rehired by the Company in the future in a mutually agreeable executive
level position.
If this letter accurately sets forth our understanding on these matters,
please so indicate by signing and returning to me the enclosed copy of this
letter (and the accompanying General Release).
Very truly yours,
/s/ Thomas E. Evans
------------------------------------
Thomas E. Evans
Chairman and Chief Executive Officer
Agreed and Accepted:
/s/ J. Michael Stepp
- ------------------------------------
J. Michael Stepp
December 20, 1999
- ------------------------------------
Date
<PAGE>
RELEASE
RELEASE (the "Release") dated as of December 20, 1999, by J. Michael Stepp
("Employee") in favor of Collins & Aikman Corporation, a Delaware corporation
(the "Company").
WHEREAS, pursuant to that certain Employment and Retention Agreement by and
between the Company and Employee dated as of January 1, 1999 and that certain
letter agreement by and between the Company and Employee dated December 17, 1999
(collectively, the "Agreement"), the Company agreed to provide Employee with
certain severance and retention benefits (the "Benefits") and Employee agreed to
accept the Benefits, all on the terms and conditions set forth in the Agreement;
and
WHEREAS, pursuant to Section 5.3 of the Agreement, Employee shall not be
entitled to receive certain severance benefits unless Employee executes and
delivers to the Company a release of the parties as set forth in Section 7 of
the Agreement, such release to be dated as of the Termination Date (as such term
is defined in the Agreement);
NOW, THEREFORE, for good and valuable consideration in connection with the
receipt of the Benefits, Employee agrees as follows:
1. Release. Employee unconditionally releases the Company and its
subsidiaries and affiliates and directors, officers, employees and stockholders
thereof, from any and all claims, liabilities and obligations of any nature
pertaining to the terms of his employment or the termination of his employment
other than those explicitly provided for by the Agreement including, without
limitation, any claims arising out of alleged legal restrictions on the
Company's rights to terminate its employees, such as any termination contrary to
public policy or to laws prohibiting discrimination (including, without
limitation, the Age Discrimination in Employment Act).
2. Governing Law. The validity, interpretation and performance of
this Release shall be governed by the laws of the State of New York, regardless
of the laws that might be applied under applicable principles of conflicts of
laws. Employee hereby waives any right such party may have to a trial by jury.
3. Miscellaneous. In executing this Release, Employee has not
relied upon any statement, representation or promise, whether written or oral,
of the Company or any of its subsidiaries or affiliates, or of any
representative or attorney for the Company or any of its subsidiaries or
affiliates, except for statements expressly set forth in this Release. Employee
has read this Release carefully and knows and understands the contents hereof.
IN WITNESS WHEREOF, Employee has executed this Release as of the date and
year first above written.
/s/ J. Michael Stepp
----------------------------------------------
J. MICHAEL STEPP
<PAGE>
RECEIVABLES TRANSFER AGREEMENT
by and among
PARK AVENUE RECEIVABLES CORPORATION,
as an Initial Purchaser
and
REDWOOD RECEIVABLES CORPORATION
as an Initial Purchaser
and
LIBERTY STREET FUNDING CORP.
as an Initial Purchaser
and
CARCORP, INC.,
as Transferor,
and
COLLINS & AIKMAN PRODUCTS CO.,
as Guarantor and
as Collection Agent
and
THE SEVERAL FINANCIAL INSTITUTIONS
PARTY HERETO
FROM TIME TO TIME,
as Liquidity Banks
and
THE SEVERAL AGENT BANKS
PARTY HERETO
FROM TIME TO TIME,
as Funding Agents
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
Dated as of December 27, 1999
<PAGE>
TABLE OF CONTENTS
ARTICLE I DEFINITIONS................................................1
SECTION 1.1 Certain Defined Terms................................1
SECTION 1.2 Other Terms..........................................1
SECTION 1.3 Computation of Time Periods..........................1
ARTICLE II PURCHASES AND SETTLEMENTS..................................2
SECTION 2.1 Facility.............................................2
SECTION 2.2 Transfers; Certificates; Eligible Receivables........2
SECTION 2.3 Selection of Tranche Periods and Tranche Rates.......5
SECTION 2.4 PARCO Discount, Yield, Fees and Other Costs
and Expenses.........................................7
SECTION 2.5 Non-Liquidation Settlement and Reinvestment
Procedures...........................................8
SECTION 2.6 Liquidation Settlement Procedures...................10
SECTION 2.7 Fees................................................13
SECTION 2.8 Protection of Ownership Interest of the Initial
Purchasers and the PARCO APA Banks..................13
SECTION 2.9 Deemed Collections, Application of Payments.........14
SECTION 2.10 Payments and Computations, Etc......................15
SECTION 2.11 Reports.............................................16
SECTION 2.12 Collection Accounts.................................16
SECTION 2.13 Right of Setoff.....................................17
SECTION 2.14 Sharing of Payments, Etc............................17
SECTION 2.15 Broken Funding......................................17
SECTION 2.16 Conversion and Continuation of Outstanding,
Tranches Funded by the PARCO APA Banks..............19
SECTION 2.17 Illegality..........................................19
SECTION 2.18 Inability to Determine PARCO Eurodollar Rate........20
SECTION 2.19 Exchange of Canadian Dollars into U.S. Dollars......21
SECTION 2.20 Procedure for Decreasing the Facility Limit.........22
ARTICLE III REPRESENTATIONS AND WARRANTIES............................22
SECTION 3.1 Representations and Warranties of the Transferor....22
SECTION 3.2 Reaffirmation of Representations and Warranties
by the Transferor...................................26
SECTION 3.3 Representations and Warranties of the Collection
Agent...............................................26
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ARTICLE IV CONDITIONS PRECEDENT......................................27
SECTION 4.1 Conditions to Effectiveness.........................27
SECTION 4.2 Conditions to Each Transfer.........................30
ARTICLE V COVENANTS.................................................32
SECTION 5.1 Affirmative Covenants of Transferor.................32
SECTION 5.2 Negative Covenants of the Transferor................37
SECTION 5.3 Covenants of the Collection Agent and the
Guarantor...........................................40
SECTION 5.4 Negative Covenants of the Collection Agent
and the Guarantor...................................41
ARTICLE VI ADMINISTRATION AND COLLECTIONS............................42
SECTION 6.1 Appointment of Collection Agent.....................42
SECTION 6.2 Duties of Collection Agent..........................42
SECTION 6.3 Rights After Designation of New Collection
Agent...............................................44
SECTION 6.4 Collection Agent Default............................44
SECTION 6.5 Responsibilities of the Transferor and each
Seller..............................................46
SECTION 6.6 Collection Agent Indemnification of
Indemnified Parties.................................46
SECTION 6.7 Maintenance of Property; Insurance..................46
SECTION 6.8 Grant of License....................................47
ARTICLE VII INDEMNIFICATION; EXPENSES; RELATED MATTERS................47
SECTION 7.1 Indemnities by the Transferor.......................47
SECTION 7.2 Indemnity for Reserves and Expenses.................50
SECTION 7.3 Indemnity for Taxes.................................51
SECTION 7.4 Other Costs, Expenses and Related Matters...........53
ARTICLE VIII TERMINATION EVENTS........................................54
SECTION 8.1 Termination Events..................................54
SECTION 8.2 Remedies Upon the Occurrence of a
Termination Event...................................57
ARTICLE IX THE ADMINISTRATIVE AGENT..................................57
SECTION 9.1 Appointment.........................................57
SECTION 9.2 Delegation of Duties................................58
SECTION 9.3 Exculpatory Provisions..............................58
SECTION 9.4 Reliance by Administrative Agent....................59
ii
<PAGE>
SECTION 9.5 Action Upon Events of Termination and
Collection Agent Defaults, Reports and Notices......59
SECTION 9.6 Non-Reliance on Administrative Agent................59
SECTION 9.7 Indemnification.....................................60
SECTION 9.8 Successor Administrative Agent......................60
ARTICLE X MISCELLANEOUS.............................................61
SECTION 10.1 Term of Agreement...................................61
SECTION 10.2 Waivers; Amendments.................................61
SECTION 10.3 Notices.............................................61
SECTION 10.4 Governing Law, Submission to Jurisdiction,
Integration.........................................64
SECTION 10.5 Severability; Counterparts..........................65
SECTION 10.6 Successors and Assigns..............................65
SECTION 10.7 Confidentiality.....................................65
SECTION 10.8 No Bankruptcy Petition Against the Initial
Purchasers..........................................66
SECTION 10.9 Limited Recourse....................................66
SECTION 10.10 Characterization of the Transactions Contemplated
by the Agreement....................................67
SECTION 10.11 Waiver of Setoff....................................68
SECTION 10.12 Chase Conflict Waiver...............................68
SECTION 10.13 GE Capital Conflict Waiver..........................68
SECTION 10.14 The Bank of Nova Scotia Conflict Waiver.............69
SECTION 10.15 Liability of Funding Agents.........................69
SECTION 10.16 Tax Treatment.......................................70
SECTION 10.17 Canadian Taxes......................................70
SECTION 10.18 Funding Agent Consents..............................70
iii
<PAGE>
EXHIBITS AND ANNEX
EXHIBIT A Credit and Collection Policy*
EXHIBIT B List of Lock-Box Banks and Accounts
EXHIBIT C Form of Lock-Box Agreement
EXHIBIT D Form of Settlement Report*
EXHIBIT E Form of Weekly Report*
EXHIBIT F Form of Daily Report*
EXHIBIT G Form of Transfer Certificate
EXHIBIT H List of Transferor's Actions and Suits
EXHIBIT I List of Collection Agent's Actions and Suits*
EXHIBIT J Location of Records
EXHIBIT K List of Subsidiaries, Divisions and Tradenames
EXHIBIT L Form of Secretary's Certificate
EXHIBIT M Agreed Upon Procedures*
EXHIBIT N Form of Guaranty
EXHIBIT O Form of Required Currency Hedge Assignment
Annex X Schedule of Definitions
Schedule I List of Initial Purchasers, Liquidity Banks, Funding
Agents, Facility Limit, Purchase Limits and Commitments
Schedule II List of Equipment and Software
Schedule III List of C&A Fiscal Periods for the Year 2000
Schedule 3.1(q) Material Adverse Effect
*Omitted. The Company will furnish upon the Commission's request.
iv
<PAGE>
RECEIVABLES TRANSFER AGREEMENT
RECEIVABLES TRANSFER AGREEMENT (as amended, supplemented or otherwise
modified and in effect from time to time, this "Agreement"), dated as of
December 27, 1999, by and among CARCORP, INC., a Delaware corporation, as
transferor (in such capacity, the "Transferor"), COLLINS & AIKMAN PRODUCTS CO.,
a Delaware corporation ("C&A"), as guarantor (in such capacity, the "Guarantor")
and as collection agent (in such capacity, the "Collection Agent"), PARK AVENUE
RECEIVABLES CORPORATION, a Delaware corporation ("PARCO"), REDWOOD RECEIVABLES
CORPORATION, a Delaware corporation ("Redwood") and LIBERTY STREET FUNDING
CORP., a Delaware corporation ("Liberty") (collectively, the "Initial
Purchasers"; each individually, an "Initial Purchaser"), the several financial
institutions set forth opposite the name of PARCO on Schedule I (collectively,
the "Liquidity Banks") and the agent bank set forth opposite the name of each
Initial Purchaser on Schedule I and its permitted successor and assign (in such
capacity, the "Funding Agent" with respect to such Initial Purchaser) and THE
CHASE MANHATTAN BANK, a New York state banking corporation, as administrative
agent for the benefit of the Initial Purchasers, PARCO APA Banks and Funding
Agents (in such capacity, the "Administrative Agent").
PRELIMINARY STATEMENTS
WHEREAS, the Transferor may desire to sell, convey, transfer and
assign, from time to time, undivided percentage interests in certain rights to
receive and related assets, and PARCO may desire to, and Redwood, Liberty and,
if requested by PARCO, the PARCO APA Banks, shall, accept such sale, conveyance,
transfer and assignment of such undivided percentage interests, subject to the
terms and conditions of this Agreement.
NOW, THEREFORE, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Defined Terms. Capitalized terms used herein shall
have the meanings assigned to such terms in, or incorporated by reference into,
Annex X attached hereto, which Annex X is incorporated by reference herein.
SECTION 1.2 Other Terms. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP, consistently applied. All
terms used in Article 9 of the Relevant UCC, and not specifically defined
herein, are used herein as defined in such Article 9.
SECTION 1.3 Computation of Time Periods. Unless otherwise stated in
this Agreement, in the computation of a period of time from a specified date to
a later specified date, the word "from" means "from and including", the words
"to" and "until" each means "to but excluding", and the word "within" means
"from and excluding a specified date and to and including a later specified
date".
1
<PAGE>
ARTICLE II
PURCHASES AND SETTLEMENTS
SECTION 2.1 Facility. Upon the terms and subject to the conditions set
forth herein and in the other Transaction Documents prior to the Termination
Date, (x) the Transferor may, at its option, sell, convey, transfer and assign
to the Administrative Agent, on behalf of PARCO (prior to an occurrence of a
PARCO Wind-Down Event), Redwood (prior to a Redwood Termination Date), Liberty
(prior to a Liberty Termination Event) and the PARCO APA Banks (following an
occurrence of a PARCO Wind-Down Event), and (y) the Administrative Agent, on
behalf of PARCO, may, acting at the direction of PARCO (prior to an occurrence
of a PARCO Wind-Down Event), and the Administrative Agent, on behalf of the
PARCO APA Banks (following an occurrence of a PARCO Wind-Down Event but subject
to Section 2.2 of the PARCO Asset Purchase Agreement), Redwood (prior to an
occurrence of a Redwood Termination Date or Termination Date) and Liberty (prior
to an occurrence of a Liberty Termination Event or Termination Date) shall
accept such sale, conveyance, transfer and assignment from the Transferor of,
without recourse except as provided herein, undivided percentage ownership
interests in the Receivables, together with Related Security, the Required
Currency Hedge, Collections and Proceeds with respect thereto, from time to
time. Pursuant to Section 9.1 of this Agreement, the Administrative Agent shall
act as agent on behalf of the Initial Purchasers, the PARCO APA Banks and the
Funding Agents, as applicable, with respect to such undivided percentage
ownership interest, including but not limited to acting as a secured party
hereunder on behalf of the Initial Purchasers, the PARCO APA Banks and the
Funding Agents. By accepting any sale, conveyance, transfer and assignment
hereunder, none of the Administrative Agent, nor the Initial Purchasers, nor the
PARCO APA Banks nor any Funding Agent assumes or shall have any obligations or
liability under any of the Contracts, all of which shall remain the obligations
and liabilities of the Sellers.
SECTION 2.2 Transfers; Certificates; Eligible Receivables.
(a) Incremental Transfers. Prior to the Termination Date, upon the
terms and subject to the conditions set forth herein and in the other
Transaction Documents, (x) the Transferor may, at its option from time to time
on a Weekly Report Date, convey, sell, transfer and assign to the Administrative
Agent, on behalf of PARCO (prior to an occurrence of a PARCO Wind-Down Event),
Redwood (prior to a Redwood Termination Date), Liberty (prior to a Liberty
Termination Event) and to the PARCO APA Banks (following an occurrence of a
PARCO Wind-Down Event) and (y) the Administrative Agent, on behalf of PARCO,
may, at the direction of PARCO from time to time (prior to an occurrence of a
PARCO Wind-Down Event), and the Administrative Agent, on behalf of Redwood
(prior to an occurrence of a Redwood Termination Date), Liberty (prior to an
occurrence of a Liberty Termination Event) and the PARCO APA Banks (following an
occurrence of a PARCO Wind-Down Event but subject to Section 2.2 of the PARCO
Asset Purchase Agreement), shall accept such sale, conveyance, transfer and
assignment from the Transferor, without recourse except as provided herein, of
undivided percentage ownership interests in the Receivables, together with
Related Security, the Required Currency Hedge, Collections and Proceeds with
respect thereto (each, an "Incremental Transfer"); provided that after giving
effect to each Incremental Transfer, (i) the Aggregate Net Investment shall not
exceed the Facility Limit, (ii) in the case of PARCO and the PARCO APA
2
<PAGE>
Banks, the aggregate outstanding PARCO Net Investment hereunder shall not exceed
the PARCO Purchase Limit, (iii) in the case of Redwood, the aggregate
outstanding Redwood Net Investment hereunder shall not exceed the Redwood
Purchase Limit, and, (iv) in the case of Liberty, the aggregate outstanding
Liberty Net Investment hereunder shall not exceed the Liberty Purchase Limit,
provided further, that the conditions set forth in Section 4.2 shall have been
satisfied before giving effect to any such Incremental Transfer.
The Transferor shall, by notice to the Administrative Agent given by
telecopy, offer to sell, convey, transfer and assign to PARCO (prior to an
occurrence of a PARCO Wind-Down Event), Redwood (prior to an occurrence of a
Redwood Termination Date) or Liberty (prior to an occurrence of a Liberty
Termination Event) or to the PARCO APA Banks (following an occurrence of a PARCO
Wind-Down Event) undivided percentage ownership interests in the Receivables and
Related Security, the Required Currency Hedge, Collections and Proceeds with
respect thereto not later than 11:00 a.m. (New York time) (i) with respect to
Redwood and Liberty, two (2) Business Days prior to the proposed date of any
Incremental Transfer and (ii) with respect to PARCO and the PARCO APA Banks (A)
prior to a PARCO Wind-Down Event, if the Transferor requests a PARCO CP
Tranche(s), two (2) Business Days prior to the proposed date of any Incremental
Transfer, (B) after the occurrence of a PARCO Wind-Down Event, if the Transferor
requests a PARCO BR Tranche(s) from the PARCO APA Banks, on the Business Day
prior to the proposed date of any Incremental Transfer, and (C) after the
occurrence of a PARCO Wind-Down Event, if the Transferor requests that any
portion of the Aggregate Net Investment related to such Incremental Transfer is
to be allocated by the PARCO APA Banks to a PARCO Eurodollar Tranche, three (3)
Business Days prior to the proposed date of any Incremental Transfer. Promptly
upon receipt by the Administrative Agent of any such notice, the Administrative
Agent shall deliver a copy thereof to the applicable Funding Agents (but in no
event later than 1:00 p.m. New York time on the same day). Upon receipt of funds
from the related Initial Purchaser or PARCO APA Bank, as applicable, the Funding
Agents will make such funds available to the Transferor by 4:00 p.m. (New York
time) on the proposed date of any Incremental Transfer. Each such notice shall
specify (w) the amount of the proposed increase to the Aggregate Net Investment;
(x) the desired Transfer Price (which shall be at least $3,000,000 or integral
multiples of $100,000 in excess thereof) or, to the extent that the then
available unused portion of the Facility Limit or, is less than such amount,
such applicable lesser amount equal to such available portion of the Facility
Limit, and (y) the desired date of such Incremental Transfer. The Funding Agent
will promptly notify the applicable Initial Purchasers and/or the applicable
PARCO APA Banks, as applicable, of the applicable Funding Agent's receipt of any
request for an Incremental Transfer to be made to such Person. At its option,
each Initial Purchaser shall accept or reject any such offer by notice given to
the Transferor, the Administrative Agent and the applicable Funding Agent by
telephone and telecopy.
Each Incremental Transfer and each subsequent Incremental Transfer may
be made to PARCO and shall be made to Redwood, Liberty and the PARCO APA Banks
(following a PARCO Wind-Down Event), ratably, as applicable, in accordance with
the applicable Purchase Limit.
Each notice of proposed Transfer shall be irrevocable and binding on
the Transferor, and the Transferor shall indemnify the Administrative Agent, the
Initial Purchasers and the PARCO APA Banks against any loss or expense
reasonably incurred by the
3
<PAGE>
Administrative Agent, Initial Purchasers, the Liberty APA Banks and the PARCO
APA Banks, either directly or indirectly, as a result of any failure by the
Transferor to complete such Incremental Transfer, including, without limitation,
any loss (including loss of anticipated profits) or expense incurred by the
Administrative Agent, Initial Purchasers, the Liberty APA Banks and the PARCO
APA Banks, either directly or indirectly, by reason of the liquidation or
reemployment of funds acquired by the Initial Purchasers, the Liberty APA Banks
or the PARCO APA Banks (including, without limitation, funds obtained by issuing
Commercial Paper or promissory notes, obtaining deposits as loans from third
parties and reemployment of funds) for the Initial Purchasers, the Liberty APA
Banks or the PARCO APA Banks, as applicable, to fund such Incremental Transfer.
On the date of the initial Incremental Transfer, the Administrative
Agent shall deliver written confirmation of the following to the Transferor: (i)
as provided by the Funding Agents, the cash portion of the Transfer Price, and
(ii) as provided by the PARCO Funding Agent to the Administrative Agent, the
Tranche Period(s) and the Tranche Rate(s) relating to the portion of such
Transfer allocated to PARCO or the PARCO APA Banks. On the date of the initial
Incremental Transfer, the Transferor shall deliver to the Administrative Agent,
(and the Administrative Agent shall deliver to each applicable Funding Agent)
the Transfer Certificate in the form of Exhibit G hereto (the "Transfer
Certificate"). The Administrative Agent shall indicate the amount of the initial
Incremental Transfer allocated to each applicable Initial Purchaser or PARCO APA
Bank, together with the date thereof on the grid attached to the Transfer
Certificate or record in a similar manner on its administrative system. On the
date of each subsequent Incremental Transfer, the Administrative Agent, shall
send written confirmation to the Transferor of the following: (i) as provided by
the Funding Agents, the cash portion of the Transfer Price, and (ii) as provided
by the PARCO Funding Agent to the Administrative Agent, the Tranche Period(s)
and the Tranche Rate(s) relating to the portion of such Transfer allocated to
PARCO or the PARCO APA Banks applicable to such Incremental Transfer. As
provided by each Funding Agent to the Administrative Agent, the Administrative
Agent shall record on the grid attached to the Transfer Certificate or record in
a similar manner on its administrative system the amount of the Incremental
Transfer together with the date thereof as well as any decrease in the Aggregate
Net Investment, PARCO Net Investment, Liberty Net Investment and Redwood Net
Investment (each as reported by each respective Funding Agent). The Transfer
Certificate shall evidence the Incremental Transfers; provided, however, that
the failure of the Administrative Agent to so evidence any Incremental Transfer
shall not affect the validity of any Incremental Transfer. Following each
Incremental Transfer, the Administrative Agent shall deposit to the Transferor's
account at the location indicated in Section 9.3 hereof, in immediately
available funds by 4:00 p.m. on the date of the Incremental Transfer, an amount
equal to the cash portion of the Transfer Price for such Incremental Transfer
made to the Initial Purchasers or the PARCO APA Banks, as applicable.
(b) Reinvestment Transfers. On each Business Day occurring after the
initial Incremental Transfer hereunder and prior to the Termination Date, the
Transferor hereby agrees to sell, convey, transfer and assign to the
Administrative Agent, on behalf of PARCO (prior to an occurrence of a PARCO
Wind-Down Event), Redwood (prior to a Redwood Termination Date), Liberty (prior
to a Liberty Termination Event) and the PARCO APA Banks (following an occurrence
of a PARCO Wind-Down Event), and the Administrative Agent, on behalf of and
acting at the direction of PARCO (prior to an occurrence of a PARCO Wind-Down
Event) may
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agree to purchase and, the Administrative Agent, on behalf of the PARCO APA
Banks (following an occurrence of a PARCO Wind-Down Event but subject to Section
2.2 of the PARCO Asset Purchase Agreement), Redwood (prior to a Redwood
Termination Date) and Liberty (prior to a Liberty Termination Event) shall
purchase from the Transferor undivided percentage ownership interests in each
and every Receivable, together with Related Security, the Required Currency
Hedge, Collections and Proceeds with respect thereto, to the extent that
Collections are available for such Transfer in accordance with Section 2.5
hereof. The Transferor agrees to maintain, at all times prior to the Termination
Date, a Net Receivables Balance in an amount at least sufficient to maintain the
Percentage Factor at an amount not greater than the Maximum Percentage Factor.
(c) All Transfers. Each Transfer shall constitute a purchase by the
Administrative Agent, on behalf of the applicable Initial Purchasers and PARCO
APA Banks of undivided percentage ownership interests in each and every
Receivable, together with Related Security, the Required Currency Hedge,
Collections and Proceeds with respect thereto, then existing, as well as in each
and every Receivable, together with Related Security, the Required Currency
Hedge, Collections and Proceeds with respect thereto, which arises at any time
after the date of such Transfer. The Initial Purchasers' (and, following an
occurrence of a PARCO Wind-Down Event but subject to Section 2.2 of the PARCO
Asset Purchase Agreement, the PARCO APA Banks') aggregate undivided percentage
ownership interest in the Receivables, together with the Related Security, the
Required Currency Hedge, Collections and Proceeds with respect thereto, shall
equal the Percentage Factor in effect from time to time.
(d) Percentage Factor. The Percentage Factor shall be initially
computed as of the opening of business of the Collection Agent on the date of
the initial Incremental Transfer hereunder. Thereafter, until the Termination
Date, the Percentage Factor shall be automatically recomputed as of the close of
business of the Collection Agent on each day (other than a day after the
Termination Date). The Percentage Factor shall remain constant from the time as
of which any such computation or recomputation is made until the time as of
which the next such recomputation, if any, shall be made. At all times on and
after the Termination Date until the date on which the Aggregate Net Investment
has been reduced to zero and all accrued PARCO Discount, Yield, Servicing Fees
and all other Aggregate Unpaids have been paid in full, the Percentage Factor
shall be 100%. Following any assignment of any portion of the Transferred
Interest to a PARCO APA Bank pursuant to the PARCO Asset Purchase Agreement, the
PARCO Funding Agent shall, on each Business Day, calculate PARCO's and each
applicable PARCO APA Bank's pro rata interest in the Percentage Factor, based on
the PARCO Purchase Limit and the PARCO APA Bank Commitment, and regularly report
thereon to PARCO and the PARCO APA Banks (with copies thereof to the Transferor
and Administrative Agent).
SECTION 2.3 Selection of Tranche Periods and Tranche Rates.
(a) Transferred Interest Held by PARCO or the PARCO APA Banks Prior to
the Termination Date. At all times hereafter, but prior to the Termination Date,
the Transferor may, subject to PARCO's approval and the limitations described
below, request Tranche Periods and allocate a portion of the PARCO Net
Investment to each selected Tranche Period, so that the aggregate amounts
allocated to outstanding Tranche Periods at all times shall equal the PARCO Net
Investment held by PARCO. The Transferor shall give the Administrative Agent
irrevocable
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notice by telephone of the new requested Tranche Period(s) not later than 11:00
a.m. (New York time) (i) prior to the occurrence of a PARCO Wind-Down Event, if
the Transferor requests a PARCO CP Tranche(s), two (2) Business Days prior to
the expiration of any then existing Tranche Period(s), (ii) after the occurrence
of a PARCO Wind-Down Event, if the Transferor requests a PARCO BR Tranche(s), on
the day of the expiration of any then existing Tranche Period(s), and (iii)
after the occurrence of a PARCO Wind-Down Event, if the Transferor requests that
any portion of the PARCO Net Investment related to such Incremental Transfer is
to be allocated to a PARCO Eurodollar Tranche(s), three (3) Business Days prior
to the expiration of any then existing Tranche Period; provided, however, that
PARCO may select, in its sole discretion, any such new Tranche Period if (i) the
Transferor fails to provide such notice on a timely basis or (ii) the PARCO
Funding Agent, on behalf of PARCO, determines, in its sole discretion, that the
Tranche Period requested by the Transferor is unavailable or for any reason
commercially undesirable. Promptly upon receipt by the Administrative Agent of
any such notice, the Administrative Agent shall deliver a copy thereof to the
PARCO Funding Agent (but in no event later than 1:00 p.m. New York time on the
same day). PARCO confirms that it is its intention to allocate all or
substantially all of the portion of the Aggregate Net Investment held by it to
one or more PARCO CP Tranche Periods; provided that PARCO may determine, from
time to time, in its sole discretion, that funding such portion of the Aggregate
Net Investment by means of one or more PARCO CP Tranche Periods is not possible
or is not desirable for any reason.
(b) Transferred Interest Held by PARCO Following the Termination Date.
At all times on and after the Termination Date, with respect to any portion of
the Transferred Interest which shall not have been transferred to the PARCO APA
Banks, PARCO or the PARCO Funding Agent, as applicable, shall select all Tranche
Periods and Tranche Rates applicable thereto.
(c) Transferred Interest Held by the PARCO APA Banks Prior to the
Termination Date. At all times with respect to any portion of the Transferred
Interest transferred to the PARCO APA Banks (or any of them) pursuant to the
PARCO Asset Purchase Agreement, but prior to the Termination Date, the initial
Tranche Period applicable to such portion of the PARCO Net Investment allocable
thereto shall be a period of not greater than three (3) days, and such Tranche
shall be a PARCO BR Tranche. Thereafter (but prior to the Termination Date or
the occurrence and continuation of a Potential Termination Event), with respect
to such portion, and with respect to any other portion of the Transferred
Interest held by the PARCO APA Banks (or any of them), the Tranche Period
applicable thereto shall be, at the Transferor's option, either a PARCO BR
Tranche or a PARCO Eurodollar Tranche. The Transferor shall give the
Administrative Agent irrevocable notice by telephone of the new requested
Tranche Period no later than 11:00 a.m. (New York Time) (i) if the Transferor
requests a PARCO BR Tranche, on the day of the expiration of any then existing
Tranche Period and (ii) if the Transferor requests a PARCO Eurodollar Tranche,
three (3) Business Days prior to the expiration of any then existing Tranche
Period. Promptly upon receipt by the Administrative Agent of any such notice,
the Administrative Agent shall deliver a copy thereof to the PARCO Funding Agent
(but in no event later than 1:00 p.m. New York time on the same day). Any
Tranche Period maintained by the PARCO APA Banks which is outstanding on the
Termination Date shall end on the Termination Date.
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(d) After the Termination Date, Transferred Interest Held by the PARCO
APA Banks. At all times on and after the Termination Date, with respect to any
portion of the Transferred Interest which shall have been owned by, or
transferred to, the PARCO APA Banks (or any of them), the PARCO Funding Agent
shall select all Tranche Periods and Tranche Rates applicable thereto.
SECTION 2.4 PARCO Discount, Yield, Fees and Other Costs and Expenses.
(a) Notwithstanding the limitation on recourse under Section 2.1
hereof, the Transferor shall pay, as and when due in accordance with this
Agreement and the other Transaction Documents, all fees hereunder, PARCO
Discount, Yield, Servicing Fees and other Aggregate Unpaids. The Transferor
shall pay in the manner set forth in Sections 2.5, 2.6 and 2.10 to the
Administrative Agent, on behalf of the PARCO Funding Agent, PARCO and/or the
PARCO APA Banks, as applicable, an amount equal to the accrued and unpaid PARCO
Discount for such Tranche Period together with, in the event any portion of the
Transferred Interest is held by PARCO, an amount equal to the discount accrued
on PARCO's Commercial Paper to the extent such Commercial Paper was issued in
order to fund the Transferred Interest in an amount in excess of the cash
portion of the Transfer Price of an Incremental Transfer; provided that (i) in
the event of any repayment or prepayment of a BR Tranche or a PARCO Eurodollar
Tranche, accrued PARCO Discount on the principal amount repaid or prepaid shall
be payable on the date of such repayment or prepayment and (ii) in the event of
any conversion of a PARCO BR Tranche to a PARCO Eurodollar Tranche or any
conversion of a PARCO Eurodollar Tranche to a PARCO BR Tranche, accrued interest
on such PARCO BR Tranche or PARCO Eurodollar Tranche shall be payable on the
effective date of such conversion. PARCO Discount shall accrue with respect to
each Tranche on each day including the first day but not the last day of the
Tranche Period related thereto. The Transferor shall pay in the manner set forth
in Sections 2.5, 2.6 and 2.10 to the Administrative Agent, on behalf of the
Redwood Funding Agent and Redwood, the Redwood Yield and, on behalf of the
Liberty Funding Agent and Liberty, the Liberty Yield and, each of the Redwood
Yield and the Liberty Yield shall accrue with respect to each calendar month on
each day including the first day and the last day of the calendar month related
thereto.
(b) Each Initial Purchaser shall be entitled to receive a fee with
respect to each Settlement Period (or portion thereof) during such period (the
"Utilization Fee") which shall accrue on each day during such Settlement Period
in an amount equal to the product of (i) the Utilization Fee Rate, times (ii)
the applicable Net Investment on such day. The Utilization Fee shall be payable
in accordance with Sections 2.5, 2.6 and 2.10 on each Settlement Date.
(c) Prior to the Termination Date, Redwood, Liberty, PARCO (prior to
an occurrence of a PARCO Wind-Down Event) and the PARCO APA Banks (following an
occurrence of a PARCO Wind-Down Event) shall be entitled to receive a fee with
respect to each Settlement Period (or portion thereof) (the "Unused Fee") which
shall accrue on each day during such Settlement Period in an amount equal to the
product of (i) the Unused Fee Rate, times, (ii) the excess of the Commitment
with respect to Redwood, Liberty and the PARCO APA Banks over the Redwood Net
Investment, Liberty Net Investment, PARCO Net Investment (prior to an occurrence
of a PARCO Wind-Down Event) and PARCO APA Bank Commitment
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(following a PARCO Wind-Down Event), as applicable, on such day. The Unused Fee
shall be payable in accordance with Sections 2.5, 2.6 and 2.10 on each
Settlement Date.
Nothing in this Agreement or the other Transaction Documents shall
limit in any way the obligations of the Transferor to pay the amounts set forth
in this Section 2.4.
SECTION 2.5 Non-Liquidation Settlement and Reinvestment Procedures.
(a) On each day after the date of any Incremental Transfer but
prior to the Termination Date, and provided that no Potential Termination Event
shall have occurred and be continuing, the Collection Agent shall:
(i) set aside and hold in trust for the Administrative Agent on
behalf of the Initial Purchasers and the PARCO APA Banks, as applicable (or
deposit into the Collection Accounts if so required pursuant to Section
2.12 hereof), an amount equal to the Percentage Factor of Collections
received by the Transferor, the Sellers or the Collection Agent or
deposited into a Lock-Box Account or the Collection Accounts on or prior to
such day and not previously accounted for or applied (the "Paid Percentage
Factor");
(ii) set aside from the Paid Percentage Factor and deposit in the
Collection Accounts for the Initial Purchasers and the PARCO APA Banks, as
applicable, allocable to each in accordance with their respective Pro Rata
Shares, an amount equal to all PARCO Discount, Yield, Indemnified Amounts,
Additional Amounts, the Utilization Fee, the Unused Fee and the Servicing
Fee accrued through such day and not so previously set aside or paid;
(iii) set aside from the Paid Percentage Factor an amount sufficient
to purchase, or payable with respect to the purchase price of, the Required
Currency Hedge (if applicable);
(iv) set aside from the Paid Percentage Factor and purchase from the
Transferor, subject to Sections 2.5(d) and 2.5(e), additional undivided
percentage interests in each Receivable pursuant to Section 2.2(b) hereof;
and
(v) set aside and hold in trust for the Initial Purchasers and the
PARCO APA Banks, as applicable, and subject to Sections 2.5(d) and 2.5(e),
release on each Business Day to the Transferor free of such trust, upon the
prior approval of the Administrative Agent, an amount equal to the Paid
Percentage Factor of Collections remaining after application of Collections
as provided in clauses (i), (ii), (iii) and (iv) of this Section 2.5(a);
provided, however, on any date on which a Daily Report is required to be
delivered to the Administrative Agent pursuant to Section 2.11(iii), the
Administrative Agent shall only release such funds (if any) to the Transferor
pursuant to clause (v) above upon the Administrative Agent's receipt of the
Daily Report; otherwise, such monies will be so released to the Transferor upon
the Administrative Agent's receipt of the Weekly Report delivered immediately
following any such date and upon the prior approval of the Administrative Agent.
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(b) From amounts set aside as described in Section 2.5(a)(ii) and,
with respect to clause (vi) below, Section 2.5(a)(iii):
(i) On the last day of each Tranche Period or on each Settlement
Date in the event the PARCO Funding Agent selects pooled funding, the
Collection Agent shall transfer to the Administrative Agent, for the
benefit of the PARCO Funding Agent, on behalf of PARCO and/or the PARCO APA
Banks, as applicable, from the amounts allocable to PARCO and/or the PARCO
APA Banks, in the manner set forth in Section 2.10 an amount equal to the
accrued and unpaid PARCO Discount for such Tranche Period or previous
calendar month, if applicable;
(ii) On each Settlement Date, from the amounts allocable to each of
Redwood and Liberty, the Collection Agent shall transfer to the
Administrative Agent, (A) for the benefit of the Redwood Funding Agent,
Redwood and the Redwood Secured Parties, an amount equal to the accrued and
unpaid Redwood Yield as of the end of the immediately preceding calendar
month, and (B) for the benefit of Liberty and the Liberty Funding Agent an
amount equal to the accrued and unpaid Liberty Yield as of the end of the
immediately preceding calendar month;
(iii) On each Settlement Date, from the amounts set aside as
described in Section 2.5(a)(ii) after application pursuant to Section
2.5(b)(i) and (ii), the Collection Agent shall transfer to the
Administrative Agent, for the benefit of the Funding Agents, the Initial
Purchasers and the PARCO APA Banks, as applicable, in the manner set forth
in Section 2.10 an amount equal to the accrued and unpaid Utilization Fee
and Unused Fee for the related Settlement Period;
(iv) On each Settlement Date, from the amounts set aside as
described in Section 2.5(a)(ii) after application pursuant to Section
2.5(b)(i), (ii), and (iii), deposit into its own account an amount equal to
the accrued and unpaid Servicing Fee;
(v) On each Settlement Date, from the amounts set aside as
described in Section 2.5(a)(ii) after application pursuant to Section
2.5(b)(i), (ii), (iii), and (iv), the Collection Agent shall transfer to
the Administrative Agent, for the benefit of the Funding Agents, the
Initial Purchasers, the Redwood Liquidity Lenders, the Liberty APA Banks
and the PARCO APA Banks, as applicable, in the manner set forth in Section
2.10, an amount equal to (A) all Indemnified Amounts and/or Additional
Amounts incurred and payable, and (B) any other amounts required to be paid
under this Agreement not previously paid as of the end of the immediately
preceding Settlement Period; and
(vi) On each Settlement Date, from the amounts set aside as
described in Section 2.5(a)(iii), the Collection Agent shall purchase, or
make payments due with respect to the purchase price of, the Required
Currency Hedge (if applicable);
provided, that such amounts set forth in Sections 2.5(b)(i), (ii), (iii),
(iv) and (v) will be based on an invoice (based on information which shall be
given by each Funding Agent by 10:00
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a.m. New York time on the second (2nd) Business Day of each month) provided by
the Administrative Agent to the Collection Agent on the second (2nd) Business
Day of each month.
Each Funding Agent, upon its receipt of such amounts in the Funding
Account, shall distribute such amounts to the Initial Purchasers and/or the
Liberty APA Banks and/or the PARCO APA Banks and/or the Redwood Liquidity
Lenders entitled thereto as set forth above; provided that if the Funding Agent
shall have insufficient funds to pay all of the above amounts in full on any
such date, the Funding Agent shall notify the Transferor and the Transferor
shall immediately pay to the Funding Agent, from funds previously paid to the
Transferor, an amount equal to such insufficiency.
(c) Subject to subsection 2.5(d) below, the Collection Agent shall
remit to the Transferor, on each Business Day prior to the Termination Date, and
provided that no Potential Termination Event shall have occurred and be
continuing, upon the Administrative Agent's receipt of the most recent Weekly
Report (or Daily Report if required pursuant to Section 2.11) and with the
Administrative Agent's prior approval, such portion of Collections not allocated
to (i) the Initial Purchasers, the Liberty APA Banks and the PARCO APA Banks,
(ii) the Collection Agent as payment of the Servicing Fee or (iii) the provider
of the Required Currency Hedge. So long as all of the above amounts are paid in
full on the day due, such Collections remitted to the Transferor are available
to pay any Transferor Subordinated Obligation then due and owing and for other
ordinary business purposes of the Transferor.
(d) Prior to a Termination Date or Potential Termination Date but
after a Redwood Termination Date, a portion of all funds to be applied pursuant
to Sections 2.5(a)(iv), 2.5(a)(v) and 2.5(c) shall be released to Redwood until
the Redwood Net Investment is reduced to zero based on the quotient, as
determined at the time of the Redwood Termination Date, of the Redwood Net
Investment divided by the Aggregate Net Investment. Prior to a Termination Date
or Potential Termination Date but after a Liberty Termination Event, a portion
of all funds to be applied pursuant to Section 2.5(a)(iv), 2.5(a)(v) and 2.5(c)
shall be released to Liberty until the Liberty Net Investment is reduced to zero
based on the quotient, as determined at the time of the Liberty Termination
Event, of the Liberty Net Investment divided by the Aggregate Net Investment.
SECTION 2.6 Liquidation Settlement Procedures.
(a) If at any time on or prior to the Termination Date, the
Percentage Factor is greater than the Maximum Percentage Factor, then the
Transferor shall immediately transfer to the Administrative Agent, for the
benefit of the Funding Agents, Initial Purchasers and/or the PARCO APA Banks, as
applicable, in the manner set forth in Section 2.10 from previously received
Collections that have been released to or set aside for the Transferor pursuant
to Section 2.5, an amount that will result in a Percentage Factor less than or
equal to the Maximum Percentage Factor. Such amount shall be applied to the
reduction of the Aggregate Net Investment in a manner to be determined by the
Funding Agents.
(b) On the Termination Date and on each day thereafter, and on each
day on which a Potential Termination Event has occurred and is continuing, the
Collection Agent shall in the following priority:
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(i) set aside and hold in trust for the Administrative Agent on
behalf of the Initial Purchasers and/or the PARCO APA Banks, as applicable
(or deposit into the Collection Account if so required pursuant to Section
2.12 hereof), the Percentage Factor of all Collections received by the
Transferor, the Sellers or the Collection Agent or deposited into a
Lock-Box Account or the Collection Accounts on such day;
(ii) set aside and hold in trust for the Transferor such portion of
Collections deposited in the Collection Accounts not allocated to the
Administrative Agent on behalf of the Initial Purchasers and/or the PARCO
APA Banks, as applicable, or the Collection Agent; and
(iii) transfer to the Administrative Agent, for the benefit of the
Funding Agents, the Initial Purchasers or the PARCO APA Banks, as
applicable, in the manner set forth in Section 2.10 any amounts set aside
for the Initial Purchasers and/or the PARCO APA Banks pursuant to Section
2.5 above.
(c) (i) On the last day of each Tranche Period and on each
Settlement Date to occur on or after the Termination Date or during the
continuation of a Potential Termination Event, the Collection Agent shall
transfer to the Administrative Agent, for the benefit of the Funding Agents, the
Initial Purchasers and the PARCO APA Banks, as applicable, in the manner set
forth in Section 2.10 the amounts so set aside for the Initial Purchasers and
the PARCO APA Banks pursuant to Section 2.6(b)(i) but not to exceed (together
with amounts pursuant to Section 2.6(b)(iii) above) transferred to the
Administrative Agent the sum of (i):
(A) for the account of the PARCO Funding Agent for the benefit
of PARCO and the PARCO APA Banks the accrued PARCO Discount for such Tranche
Period or previous calendar month, as applicable,
(B) for the account of the Redwood Funding Agent for the
benefit of Redwood, the accrued and unpaid Redwood Yield for the previous
calendar month,
(C) for the account of the Liberty Funding Agent for the
benefit of Liberty, the accrued and unpaid Liberty Yield for the previous
calendar month,
(D) the portion of the Aggregate Net Investment allocated to
such Tranche Period or such previous calendar month, as applicable, and
(E) all other Aggregate Unpaids.
(ii) On such day, the Collection Agent shall deposit to its account,
from the amounts set aside for the Initial Purchasers and the PARCO APA
Banks pursuant to the preceding sentence which remain after payment in full
of the aforementioned amounts, the accrued Servicing Fee for such Tranche
Period.
(iii) If there shall be insufficient funds on deposit for the
Collection Agent to distribute funds in payment in full of the
aforementioned amounts, the Collection Agent shall distribute funds:
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(A) first, (1) in payment of the accrued PARCO Discount for the
account of the PARCO Funding Agent for the benefit of PARCO and/or the PARCO APA
Banks, as applicable, (2) in payment of the accrued Redwood Yield for the
account of the Redwood Funding Agent for the benefit of Redwood, and (3) in
payment of the accrued Liberty Yield for the account of the Liberty Funding
Agent for the benefit of Liberty; provided that the payments in items (1), (2)
and (3) shall be payable ratably based on the Net Investment of each such Person
at such time,
(B) second, if the Transferor or C&A or any Affiliate thereof
is not then the Collection Agent, to the Collection Agent's account, in payment
of the Servicing Fee payable to the Collection Agent,
(C) third, in reduction of the Aggregate Net Investment
allocated to any Tranche Period or any Settlement Period, as applicable, ending
on such date,
(D) fourth, in payment of all fees (including, but not limited
to, the Utilization Fee and the Unused Fee) payable by the Transferor hereunder,
(E) fifth in payment of the Aggregate Net Investment until the
Aggregate Net Investment has been reduced to zero,
(F) sixth, in payment of all other Aggregate Unpaids
(including, but not limited to, all Transferor Subordinated Obligations owed by
the Transferor to the Funding Agents, the Initial Purchasers, the PARCO APA
Banks and the Administrative Agent pursuant to Sections 7.1, 7.2, 7.3 and 7.4),
(G) seventh, to the Eligible Counterparties, any breakage and
termination costs due and owing, and
(H) eighth, if C&A is the Collection Agent, to its account as
Collection Agent, in payment of the accrued and unpaid Servicing Fee payable to
such Person as Collection Agent; provided, that payment of the Servicing Fee
pursuant to this eighth clause shall be considered a Transferor Subordinated
Obligation.
The Administrative Agent, upon its receipt of such amounts in the Administrative
Agent's account, shall distribute such amounts to the Initial Purchasers, the
PARCO APA Banks and the Funding Agents entitled thereto as set forth above;
provided that if the Administrative Agent shall have insufficient funds to pay
all of the above amounts in full on any such date, the Administrative Agent
shall pay such amounts in the order of priority set forth above and, with
respect to any such category above for which the Administrative Agent shall have
insufficient funds to pay all amounts owing on such date, on a pro rata basis
based upon the portion that each such Person's Net Investment constitutes of the
Aggregate Net Investment at such time among all such Persons entitled to payment
thereof.
(d) Following the date on which the Aggregate Net Investment has
been reduced to zero and all accrued PARCO Discount, Yield, Servicing Fees and
all other Aggregate Unpaids have been paid in full,
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(i) the Collection Agent shall recompute the Percentage Factor,
(ii) the Administrative Agent, on behalf of the Initial Purchasers,
the PARCO APA Banks and the Redwood Secured Parties shall be considered to
have reconveyed to the Transferor all of the Initial Purchasers' and the
PARCO APA Banks' right, title and interest in, to and under the Receivables
and Related Security, the Required Currency Hedge, Collections and Proceeds
with respect thereto,
(iii) the Collection Agent shall pay to the Transferor any remaining
Collections set aside and held by the Collection Agent pursuant to Section
2.6(b)(i), and
(iv) the Administrative Agent, on behalf of the Initial Purchasers,
the PARCO APA Banks and the Redwood Secured Parties, shall execute and
deliver to the Transferor, at the Transferor's expense, such documents or
instruments as are necessary to terminate the Initial Purchasers' and the
PARCO APA Banks' interest in the Receivables and Related Security, the
Required Currency Hedge, Collections and Proceeds with respect thereto.
Any such documents shall be prepared by or on behalf of the Transferor. On the
last day of each Tranche Period, the Collection Agent shall remit to the
Transferor such portion of Collections set aside for the Transferor pursuant to
this Section 2.6.
SECTION 2.7 Fees. Notwithstanding any limitation on recourse contained
in this Agreement, the Transferor shall pay the following non-refundable fees:
(a) On each Settlement Date from the Collection Accounts, to the
Administrative Agent, for the benefit of the Funding Agents, the Initial
Purchasers and the PARCO APA Banks, as applicable, in the manner set forth in
Sections 2.5, 2.6 and 2.10, the Utilization Fee and the Unused Fee.
(b) On the date of execution hereof, to Chase Securities Inc.
solely for its own account, the Structuring Fee.
(c) On the date of execution hereof, to Redwood, Liberty and the
PARCO APA Banks, 0.50% of the applicable Commitment of Redwood, Liberty and the
PARCO APA Banks.
SECTION 2.8 Protection of Ownership Interest of the Initial Purchasers
and the PARCO APA Banks.
(a) The Transferor, C&A and each other Seller each agree that it
will, from time to time, at its sole expense, promptly execute and deliver all
instruments and documents and take all actions as may be necessary or as the
Administrative Agent may reasonably request in order to perfect or protect the
Transferred Interest or to enable the Administrative Agent, on behalf of the
Initial Purchasers, the PARCO APA Banks, the Funding Agents or the Redwood
Secured Parties to exercise or enforce any of its rights hereunder. Without
limiting the foregoing, the Transferor and each Seller will, upon the request of
the Administrative Agent, on behalf of the Initial Purchasers or any of the
PARCO APA Banks, in order to accurately reflect this
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purchase and sale transaction, (x) execute and file such financing or
continuation statements or amendments thereto or assignments thereof (as
permitted pursuant to Section 9.6 hereof) as may be requested by the
Administrative Agent for the benefit of the Initial Purchasers and the PARCO APA
Banks and (y) mark its respective master data processing records with a legend
describing the conveyance to the Transferor (in the case of each Seller) and the
Administrative Agent for the benefit of the Initial Purchasers , the PARCO APA
Banks and the Funding Agents, of the Transferred Interest as reasonably
requested by the Administrative Agent. The Transferor, C&A and each other Seller
shall, upon the reasonable request of the Administrative Agent, obtain such
additional search reports as the Administrative Agent, for the benefit of the
Initial Purchasers, the PARCO APA Banks and the Funding Agents, shall reasonably
request. To the fullest extent permitted by applicable law, the Administrative
Agent shall be permitted to sign and file continuation statements and amendments
thereto and assignments thereof without the Transferor's, C&A's or any other
Seller's signature. Carbon, photographic or other reproduction of this Agreement
or any financing statement shall be sufficient as a financing statement. Neither
the Transferor, C&A nor any other Seller shall change its respective name,
identity or corporate structure (within the meaning of Section 9-402(7) of the
Relevant UCC), nor relocate its respective chief executive office or any office
where Records are kept unless it shall have: (i) given the Administrative Agent
at least thirty (30) days' prior notice thereof and (ii) prepared at
Transferor's, C&A's or such other Seller's expense, as applicable, and delivered
to the Administrative Agent all financing statements, instruments and other
documents necessary to preserve and protect the Transferred Interest or
reasonably requested by the Administrative Agent in connection with such change
or relocation. Any filings under the Relevant UCC or otherwise that are
occasioned by such change in name or location shall be made at the expense of
Transferor, C&A or such other Seller, as applicable.
(b) The Collection Agent shall instruct all Obligors to cause all
Collections to be deposited directly into a Lock-Box Account. Any Lock-Box
Account maintained by a Lock-Box Bank pursuant to the related Lock-Box Agreement
shall be owned by the Transferor; provided, however, that any such Lock-Box
Account shall be under the exclusive dominion and control of the Administrative
Agent which is hereby granted to the Administrative Agent by C&A and the
Transferor. The Collection Agent shall be permitted to give instructions to the
Lock-Box Banks for so long as neither a Collection Agent Default nor any other
Termination Event has occurred hereunder. The Collection Agent shall not add any
bank as a Lock-Box Bank to those listed on Exhibit B attached hereto unless such
bank has entered into a Lock-Box Agreement. The Collection Agent shall not
terminate any bank as a Lock-Box Bank unless the Administrative Agent shall have
received fifteen (15) days' prior notice of such termination. If the Transferor,
a Seller or the Collection Agent receives any Collections, the Transferor, such
Seller or the Collection Agent, as applicable, shall immediately, but in any
event within one Business Day of receipt, remit such Collections to a Lock-Box
Account.
SECTION 2.9 Deemed Collections, Application of Payments.
(a) If on any day the Administrative Agent notifies the Transferor
or the Transferor discovers that any of the representations or warranties made
herein is untrue or incorrect with respect to a Receivable in any material
respect as of the date such representation or warranty was made and any
applicable cure period, if any, has passed, then the Transferor shall be deemed
to have received on such day a Collection of such Receivable in full, and the
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Transferor shall, on such day, pay to the Collection Agent an amount equal to
the Outstanding Balance of such Receivable and such amount shall be allocated
and applied by the Collection Agent as a Collection allocable to the Transferred
Interest in accordance with Section 2.5 or 2.6 hereof, as applicable. The
Aggregate Net Investment shall be reduced by the amount of such payment actually
received by the Funding Agents. Simultaneously with any such payment by the
Transferor, the Administrative Agent, on behalf of the Initial Purchasers and
the PARCO APA Banks, as the case may be, shall convey all of its right, title
and interest in such Receivable and Related Security to the Transferor and shall
take all action reasonably requested by the Transferor to effectuate such
conveyance.
(b) If on any day a Receivable becomes a Diluted Receivable, the
Transferor shall be deemed to have received on such day a Collection of such
Receivable in the amount of such Dilution Adjustment, and the Transferor shall
pay to the Collection Agent an amount equal to such Dilution Adjustment. Any
such amount shall be applied by the Collection Agent as a Collection in
accordance with Section 2.5 or 2.6 hereof, as applicable. The Aggregate Net
Investment shall be reduced by the amount of such payment actually received by
the Funding Agents.
(c) Any payment by an Obligor in respect of a Receivable shall,
except as otherwise specified by such Obligor or otherwise required by contract
or law and unless otherwise instructed by the Initial Purchasers, be applied as
a Collection of any Receivable of such Obligor included in the Transferred
Interest (starting with the oldest such Receivable) to the extent of any amounts
then due and payable thereunder before being applied to any other receivable or
other indebtedness of such Obligor.
SECTION 2.10 Payments and Computations, Etc. All amounts to be paid or
deposited by the Transferor or the Collection Agent hereunder shall be paid or
deposited in accordance with the terms hereof no later than 12:00 P.M. (New York
time) on the day when due in immediately available funds to a special account
(account number) in the name of the Administrative Agent and maintained at
Chase's office at 450 West 33rd Street in The City of New York. Any payments to
be made by the Transferor or the Collection Agent pursuant to Sections 2.5 and
2.6 shall be made by withdrawing funds from any or all of the Collection
Accounts, at the option of the Collection Agent or, in the event of a Potential
Termination Event or Termination Event, at the option of the Administrative
Agent. The Transferor shall, to the extent permitted by law, pay to the
Administrative Agent, for the benefit of the applicable Funding Agent, Initial
Purchaser and the PARCO APA Banks, interest on all amounts not paid or deposited
when due hereunder as follows: (a) to the PARCO Funding Agent for the benefit of
PARCO and/or the PARCO APA Banks, 2% per annum plus the Applicable Margin plus
the PARCO Base Rate on the share of such amounts allocable to PARCO and the
PARCO APA Banks; (b) to the Redwood Funding Agent for the benefit of Redwood,
the Redwood Yield on the share of such amounts allocable to Redwood; and (c) to
the Liberty Funding Agent for the benefit of Liberty, 2% plus the Liberty Base
Rate on the share of such amounts allocable to Liberty. All computations of
PARCO Discount, Yield, interest and all per annum fees hereunder shall be made
on the basis of a year of 360 days (or, in the case of PARCO Discount calculated
at the Base Rate, a year of 365 or 366 days, as applicable) for the actual
number of days (including the first but excluding the last day) elapsed. Any
computations by the Administrative Agent or a Funding Agent of amounts payable
by the Transferor hereunder shall be binding upon
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the Transferor absent manifest error. Promptly upon receipt of any amounts due
and owing to the Initial Purchasers, the PARCO APA Banks and the Funding Agents
hereunder on any Business Day, the Administrative Agent shall, by no later than
3:00 p.m. (New York time), remit such amounts in immediately available funds to
such Persons by depositing such amounts in the applicable Funding Account, until
otherwise notified in writing by the applicable Funding Agent.
SECTION 2.11 Reports. The Collection Agent shall prepare and forward
to the Administrative Agent (i) on the Monthly Settlement Report Date of each
month, a Settlement Report as of the end of the last day of the immediately
preceding Settlement Period, (ii) on each Weekly Report Date, a Weekly Report as
of the end of the last day of the immediately preceding Weekly Settlement
Period, (iii) on each Business Day (prior to an Incremental Transfer on such
day) (A) after the Guarantor shall have permitted either (1) the Interest
Coverage Ratio during any period set forth in subsection (a) of the definition
of "Interest Coverage Ratio" to be less than the ratio set forth in such
definition for such period or (2) the Leverage Ratio during any period set forth
in subsection (a) of the definition of "Leverage Ratio" to be greater than the
ratio set forth in such definition for such period, and continuing until the
Administrative Agent shall have notified the Guarantor otherwise (at the
direction of all of the Initial Purchasers and the PARCO APA Banks) and (B) on
which Collections received by the Transferor, the Sellers or the Collection
Agent or deposited into a Lock-Box Account or the Collection Accounts on such
Business Day equal or exceed $7,500,000, a Daily Report if the Transferor wishes
to have funds released to it pursuant to Section 2.5(a)(v) prior to the delivery
of the next Weekly Report, and (iv) as soon as reasonably practicable, from time
to time, such other information as the Administrative Agent may reasonably
request. With respect to subsection 2.11(iii)(A) herein, the Collection Agent
may again provide a Weekly Report after the Guarantor has complied with the
Interest Coverage Ratio or Leverage Ratio for two (2) consecutive fiscal
quarters; unless such requirement shall have been waived by the Administrative
Agent with the prior consent of the Funding Agents.
SECTION 2.12 Collection Accounts. There shall be established on the
day of the initial Incremental Transfer hereunder and maintained, for the
benefit of the Administrative Agent, the Funding Agents, the Initial Purchasers
and the PARCO APA Banks, three segregated accounts (collectively, the
"Collection Accounts"), each bearing a designation clearly indicating that the
funds deposited therein are held for the benefit of the Administrative Agent,
the Initial Purchasers, the Funding Agents and the PARCO APA Banks. The
Collection Agent shall deposit all Collections into the Collection Account
within one Business Day of (i) deposit thereof into a Lock-Box Account or (ii)
receipt thereof by the Transferor, a Seller or the Collection Agent as follows:
(i) an account in the United States to hold all Collections received in the
United States (the "U.S. Dollar Collection Account"), (ii) an account in Canada
to hold all Collections received in Canada that are paid in U.S. Dollars (the
"Canada/U.S. Dollar Collection Account") and (iii) an account in Canada to hold
all Collections received in Canada that are paid in Canadian Dollars (the
"Canada/Canadian Dollar Collection Account"). All funds which are deposited in
the United States, shall be deposited into the U.S. Dollar Collection Account;
all funds which are deposited in Canada in U.S. Dollars, shall be deposited into
the Canada/U.S. Dollar Collection Account; and all funds which are deposited in
Canada in Canadian Dollars, shall be deposited into the Canada/Canadian Dollar
Collection Account. All such deposits to the U.S. Dollar Collection Account and
the Canada/U.S. Dollar Collection Account shall be made in U.S. Dollars. All
such deposits to the Canada/Canadian Dollar Collection Account shall be made in
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Canadian Dollars. Funds on deposit in the Collection Accounts shall be invested
by the Administrative Agent in Permitted Investments selected by the Collection
Agent that will mature so that sufficient funds will be available prior to the
last day of each successive Tranche Period or each Settlement Date, as
applicable, following such investment. On the last day of each Tranche Period or
each Settlement Date, as applicable, all interest and earnings (net of losses
and investment expenses) on funds on deposit in the Collection Accounts shall be
retained in the Collection Accounts and be available to make any payments
required to be made hereunder (including PARCO Discount and Yield) by the
Transferor. On the date on which the Aggregate Net Investment is zero and all
accrued PARCO Discount, Yield, Servicing Fees and all other Aggregate Unpaids
have been paid in full, any funds remaining on deposit in the Collection
Accounts shall be paid to the Transferor.
SECTION 2.13 Right of Setoff. The Administrative Agent and each of the
Initial Purchasers, the Liberty APA Banks and the PARCO APA Banks are hereby
authorized (in addition to any other rights they may have) at any time after the
occurrence of the Termination Date, or during the continuation of a Potential
Termination Event, to set-off, appropriate and apply (without presentment,
demand, protest or other notice which are hereby expressly waived) any deposits
and any other indebtedness held or owing by the Administrative Agent, the
Initial Purchasers, the Liberty APA Banks or such PARCO APA Bank to, or for the
account of, the Transferor against the amount of the Aggregate Unpaids owing by
the Transferor to such Person (even if contingent or unmatured).
SECTION 2.14 Sharing of Payments, Etc. If the Initial Purchasers, the
Liberty APA Banks or any PARCO APA Bank (for purposes of this Section 2.14 only,
being a "Recipient") shall obtain any payment (whether voluntary, involuntary,
through the exercise of any right of setoff, or otherwise) on account of any
interest in the Transferred Interest owned by it in excess of its ratable share
of payments on account of any interest in the Transferred Interest obtained by
the Initial Purchasers and/or the Liberty APA Banks and/or the PARCO APA Banks
entitled thereto, such Recipient shall forthwith purchase from the Initial
Purchasers and/or the Liberty APA Banks and/or the PARCO APA Banks entitled to a
share of such amount participations in the percentage interests owned by such
Persons as shall be necessary to cause such Recipient to share the excess
payment ratably with each such other Person entitled thereto; provided, however,
that if all or any portion of such excess payment is thereafter recovered from
such Recipient, such purchase from each such other Person shall be rescinded and
each such other Person shall repay to the Recipient the purchase price paid by
such Recipient for such participation to the extent of such recovery, together
with an amount equal to such other Person's ratable share (according to the
proportion of (a) the amount of such other Person's required payment to (b) the
total amount so recovered from the Recipient) of any interest or other amount
paid or payable by the Recipient in respect of the total amount so recovered.
SECTION 2.15 Broken Funding.
(a) In the event of the payment of any principal of any PARCO
Eurodollar Tranche other than on the last day of the PARCO Eurodollar Tranche
Period applicable thereto (including as a result of the occurrence of the
Termination Date or an optional prepayment of a PARCO Eurodollar Tranche), (b)
the conversion of any PARCO Eurodollar Tranche other than on the last day of the
related PARCO Eurodollar Tranche Period, or (c) any failure to borrow,
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convert, continue or prepay any PARCO Eurodollar Tranche on the date specified
in any notice delivered pursuant hereto, then, in any such event, the Transferor
shall compensate the applicable PARCO APA Banks for the loss, cost and expense
attributable to such event. Such loss, cost or expense to any PARCO APA Bank
shall be deemed to include an amount determined by such PARCO APA Bank to be the
excess, if any, of (i) the amount of PARCO Discount which would have accrued on
the principal amount of such PARCO Eurodollar Tranche had such event not
occurred, at the PARCO Eurodollar Rate that would have been applicable to such
PARCO Eurodollar Tranche, for the period from the date of such event to the last
day of the PARCO Eurodollar Tranche Period (or, in the case of a failure to
borrow, convert or continue, for the period that would have been the related
PARCO Eurodollar Tranche Period), over (ii) the amount of interest which would
accrue on such principal amount for such period at the interest rate which such
PARCO APA Bank would bid were it to bid, at the commencement of such period, for
dollar deposits of a comparable amount and period from other banks in the
interbank eurodollar market. Within forty-five (45) days after any PARCO APA
Bank hereunder receives actual knowledge of any of the events specified in this
Section 2.15(a), a certificate of such PARCO APA Bank setting forth any amount
or amounts that such PARCO APA Bank is entitled to receive pursuant to this
Section 2.15(a) and the reason(s) therefor shall be delivered to the Transferor
by the Administrative Agent (with a copy delivered by the Administrative Agent
to the PARCO Funding Agent) and shall be conclusive absent manifest error. The
Transferor shall pay to the Administrative Agent on behalf of each such PARCO
APA Bank the amount shown as due on any such certificate within ten (10) days
after receipt thereof.
(b) The Transferor shall pay to the Administrative Agent for the
account of Redwood, upon request of Redwood, such amount or amounts as shall
compensate Redwood for any loss, cost or expense incurred by Redwood in the
ordinary course (as reasonably determined by Redwood) as a result of any
reduction by the Transferor in the Redwood Net Investment (and accompanying loss
of Redwood Yield thereon) other than on the maturity date of the Commercial
Paper (or other financing source) funding such Redwood Net Investment, which
compensation shall include an amount equal to any loss or expense incurred by
Redwood during the period from the date of such reduction to (but excluding) the
maturity date of such Commercial Paper (or other financing source) if the rate
of interest obtainable by Redwood upon the redeployment of funds in an amount
equal to such reduction is less than the interest rate applicable to such
Commercial Paper (or other financing source). The reasonable determination by
Redwood of the amount of any such loss or expense shall be set forth in a
written notice to the Transferor in reasonable detail and shall be final,
binding and conclusive on the Transferor (absent manifest error) for all
purposes.
(c) The Transferor shall pay to the Administrative Agent for the
account of Liberty, upon request of Liberty, such amount or amounts as shall
compensate Liberty for any loss, cost or expense incurred by Liberty in the
ordinary course (as reasonably determined by Liberty) as a result of any
reduction by the Transferor in the Liberty Net Investment (and accompanying loss
of Liberty Yield thereon) other than on the maturity date of the Commercial
Paper (or other financing source) funding such Liberty Net Investment, which
compensation shall include an amount equal to any loss or expense incurred by
Liberty during the period from the date of such reduction to (but excluding) the
maturity date of such Commercial Paper (or other financing source) if the rate
of interest obtainable by Liberty upon the redeployment of funds in an amount
equal to such reduction is less than the interest rate applicable to such
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Commercial Paper (or other financing source). The reasonable determination by
Liberty of the amount of any such loss or expense shall be set forth in a
written notice to the Transferor in reasonable detail and shall be final,
binding and conclusive on the Transferor (absent manifest error) for all
purposes.
SECTION 2.16 Conversion and Continuation of Outstanding, Tranches
Funded by the PARCO APA Banks. Prior to the occurrence of the Termination Date
or a Potential Termination Event, (a) each PARCO BR Tranche hereunder may, at
the option of the Transferor, be converted to a PARCO Eurodollar Tranche and (b)
each PARCO Eurodollar Tranche may, at the option of the Transferor, be continued
as a PARCO Eurodollar Tranche or converted to a PARCO BR Tranche. If the
Termination Date has occurred or a Potential Termination Event has occurred and
is continuing, then (i) no outstanding Tranche funded by the PARCO APA Banks may
be converted to, or continued as, a PARCO Eurodollar Tranche and (ii) unless
repaid, each PARCO Eurodollar Tranche shall be converted to a PARCO BR Tranche
on the last day of the Tranche Period related thereto. For any such conversion
or continuation, the Transferor shall give the Administrative Agent irrevocable
notice (each, a "Conversion/Continuation Notice") of such request not later than
10:00 a.m. (New York time) (i) in the case of a conversion of a PARCO BR Tranche
into a PARCO Eurodollar Tranche, or a continuation of a PARCO Eurodollar Tranche
as a PARCO Eurodollar Tranche, three (3) Business Days before the date of such
conversion or continuation, as applicable, and (ii) following the Termination
Date or the occurrence and continuation of a Potential Termination Event, in the
case of a conversion of a PARCO Eurodollar Tranche into a PARCO BR Tranche or a
continuation of a PARCO BR Tranche as a PARCO BR Tranche, on the Business Day of
such conversion. Promptly upon receipt by the Administrative Agent of any such
notice, the Administrative Agent shall deliver a copy thereof to the PARCO
Funding Agent (but in no event later than the close of business on the same
day). If a Conversion/Continuation Notice has not been timely delivered with
respect to any PARCO BR Tranche or PARCO Eurodollar Tranche, such funding shall
be automatically continued as, or converted to, a PARCO BR Tranche. Each
Conversion/Continuation Notice shall specify (a) the requested date (which shall
be a Business Day) of such conversion or continuation, (b) the aggregate amount
and rate option applicable to the Tranche which is to be converted or continued
and (c) the amount and rate option(s) of Tranche(s) into which such Tranche is
to be converted or continued.
SECTION 2.17 Illegality.
(a) Notwithstanding any other provision herein, if, after the
Closing Date, the adoption of any Law or bank regulatory guideline or any
amendment or change in the interpretation of any existing or future Law or bank
regulatory guideline by any Official Body charged with the administration,
interpretation or application thereof, or the compliance with any directive of
any Official Body (in the case of any bank regulatory guideline, whether or not
having the force of Law), shall make it unlawful for a PARCO APA Bank to acquire
or maintain a PARCO Eurodollar Tranche as contemplated by this Agreement, (i)
the Administrative Agent on behalf of such PARCO APA Bank shall, within
forty-five (45) days after receiving actual knowledge thereof, deliver a
certificate to the Transferor (with a copy to the PARCO Funding Agent) setting
forth the basis for such illegality, which certificate shall be conclusive
absent manifest error, (ii) the commitment of such PARCO APA Bank hereunder to
make a portion of a PARCO Eurodollar Tranche, continue any portion of a PARCO
Eurodollar Tranche as such and
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convert a PARCO BR Tranche to a PARCO Eurodollar Tranche shall forthwith be
canceled, and such cancellation shall remain in effect so long as the
circumstance described above exists, and (iii) such PARCO APA Bank's portion of
any PARCO Eurodollar Tranche then outstanding shall be converted automatically
to a PARCO BR Tranche on the last day of the related PARCO Eurodollar Tranche
Period, or within such earlier period as required by law.
If any such conversion of a portion of a PARCO Eurodollar Tranche
occurs on a day which is not the last day of the related PARCO Eurodollar
Tranche Period, the Transferor shall, pursuant to Section 2.15, pay to the
Administrative Agent on behalf of such PARCO APA Bank such amounts, if any, as
may be required to compensate such PARCO APA Bank. If circumstances subsequently
change so that it is no longer unlawful for an affected PARCO APA Bank to
acquire or to maintain a portion of a PARCO Eurodollar Tranche as contemplated
hereunder, such PARCO APA Bank will, as soon as reasonably practicable after
such PARCO APA Bank knows of such change in circumstances, notify the
Transferor, the Administrative Agent and the PARCO Funding Agent, and upon
receipt of such notice, the obligations of such PARCO APA Bank to acquire or
maintain its acquisition of portions of PARCO Eurodollar Tranches or to convert
its portion of a PARCO BR Tranche into portions of PARCO Eurodollar Tranches
shall be reinstated.
(b) Each PARCO APA Bank agrees that, upon the occurrence of any
event giving rise to the operation of Section 2.17(a) with respect to such PARCO
APA Bank, it will, if requested by the Transferor and to the extent permitted by
law or by the relevant Official Body, endeavor in good faith to change the
office at which it books its portions of Eurodollar Tranches hereunder if such
change would make it lawful for such PARCO APA Bank to continue to acquire or to
maintain its acquisition of portions of PARCO Eurodollar Tranches hereunder;
provided, however, that such change may be made in such manner that such PARCO
APA Bank, in its sole determination, suffers no unreimbursed cost or expense or
any other disadvantage whatsoever.
SECTION 2.18 Inability to Determine PARCO Eurodollar Rate. If, prior
to the first day of any PARCO Eurodollar Tranche Period:
(1) the Administrative Agent shall have determined (which
determination in the absence of manifest error shall be conclusive and
binding upon the Transferor) that, by reason of circumstances affecting the
relevant market, adequate and reasonable means do not exist for
ascertaining the PARCO Eurodollar Rate for such PARCO Eurodollar Tranche
Period; or
(2) the Administrative Agent shall have received notice from one or
more PARCO APA Banks that the PARCO Eurodollar Rate determined or to be
determined for such PARCO Eurodollar Tranche Period will not adequately and
fairly reflect the cost to such PARCO APA Banks (as conclusively certified
by such PARCO APA Banks) of purchasing or maintaining their affected
portions of PARCO Eurodollar Tranches during such PARCO Eurodollar Tranche
Period;
then, in either such event, the Administrative Agent shall give telecopy or
telephonic notice thereof (confirmed in writing) to the Transferor and the PARCO
APA Banks as soon as
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practicable (but, in any event, within thirty (30) days after such determination
or notice, as applicable) thereafter. Until such notice has been withdrawn by
the Administrative Agent, no further PARCO Eurodollar Tranches shall be made.
The Administrative Agent agrees to withdraw any such notice as soon as
reasonably practicable after the Administrative Agent is notified of a change in
circumstances which makes such notice inapplicable.
SECTION 2.19 Exchange of Canadian Dollars into U.S. Dollars.
All amounts transferred from a Canada/Canadian Dollar Collection
Account to the U.S. Dollar Collection Account shall be exchanged by the
Collection Agent or the Administrative Agent into U.S. Dollars, and if by the
Administrative Agent, then only at the written direction of the Collection
Agent. Subject to the last paragraph in this Section 2.19, the Collection Agent
shall solicit offer quotations from at least two Authorized Foreign Exchange
Dealers for effecting such exchange and shall compare such offer quotations to
the Required Currency Hedge and select the execution which will require the
least amount of Canadian Dollars to purchase one (1) U.S. Dollar. The Collection
Agent shall then direct the Administrative Agent in writing to effect such
exchange with the Authorized Foreign Exchange Dealer or the Eligible
Counterparty as soon thereafter as is reasonably practicable.
The Collection Agent shall notify the Administrative Agent in writing
of the name and payment instructions of the Authorized Foreign Exchange Dealer
or Eligible Counterparty, and shall direct the Administrative Agent in writing
to execute the trade. The Administrative Agent shall withdraw the portion of the
Canadian Dollars from the appropriate Canada/Canadian Dollar Collection Account
required to be paid pursuant to such agreement or agreements and make the
payments described in the payment instructions provided pursuant to the
preceding sentence, all in accordance with the written instructions of the
Collection Agent.
The Collection Agent shall maintain written records of any quotations
received in response to any solicitations made pursuant to this Section 2.19 and
shall make the same available to the Administrative Agent promptly upon request.
If, as a result of changes in customary market practice in, or other
changes relating to, the currency exchange markets in Canada, the Collection
Agent is unable to comply with the terms thereof in respect of the purchase of
U.S. Dollars with Canadian Dollars, then the parties hereto will use all
reasonable efforts to agree on the terms of an amendment hereto and to amend the
terms hereof in order to permit such compliance with the terms hereof or to
reflect such customary market practice.
The foregoing shall be the exclusive method by which amounts may be
transferred by the Administrative Agent from a Canada/Canadian Dollar Collection
Account to the U.S. Dollar Collection Account; provided, however, as an
alternate transfer method, the Collection Agent may transfer the required amount
of U.S. Dollars, calculated in accordance with the Canadian Exchange Percentage,
to the U.S. Dollar Collection Account and upon completion of such transfer, the
Administrative Agent shall distribute from such Canada/Canadian Dollar
Collection Account the corresponding amount of Canadian Dollars to or upon the
order of the Collection Agent; and provided further that the amount of U.S.
Dollars
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transferred is not less than the amount of U.S. Dollars that would have been
transferred using the Valuation Price.
The Administrative Agent shall, in no event whatsoever, be responsible
for any loss or damages arising out of or with respect to any currency exchange
pursuant to this Article II except to the extent provided in Article IX.
SECTION 2.20 Procedure for Decreasing the Facility Limit.
On any Settlement Date prior to a Termination Date, upon the written
request of the Transferor, the aggregate Facility Limit may be permanently
reduced (a "Decrease") by the Collection Agent; provided that the Transferor
shall have given the Collection Agent and the Administrative Agent irrevocable
written notice (effective upon receipt) of the amount of such Decrease prior to
10:00 a.m. New York time on a Business Day that is at least ten (10) days prior
to such Decrease; provided, that any such Decrease shall be in an amount equal
to $10,000,000 and integral multiples of $1,000,000 in excess thereof and
provided, further, no Decrease may cause the Facility Limit to be lower than
$100,000,000 or the Facility Limit to be less than the Aggregate Net Investment.
Upon receipt of notice required in Section 2.20 from the Transferor, the
Administrative Agent shall forward a copy of such notice to each Funding Agent
with respect to each Initial Purchaser or PARCO APA Bank, no later than 2:00
p.m. (New York time), on the day received. Following a Decrease, Schedule I
attached hereto shall be replaced with a revised Schedule I that reflects the
reduced Facility Limit, as well as the reduced Purchase Limits and Commitments,
where applicable, of the Initial Purchasers and PARCO APA Banks. Each Purchase
Limit and Commitment, if applicable, shall be reduced pro rata in accordance
with subsection 2.5(e).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Transferor. The
Transferor hereby represents and warrants to the Administrative Agent, each
Funding Agent, the Initial Purchasers and the PARCO APA Banks that:
(a) Corporate Existence and Power. The Transferor is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate power and all governmental
licenses, authorizations, consents and approvals required to carry on its
business in each jurisdiction in which its business is now conducted. The
Transferor is duly qualified to do business in, and is in good standing in,
every other jurisdiction in which the nature of its business requires it to be
so qualified.
(b) Corporate and Governmental Authorization; Contravention. The
execution, delivery and performance by the Transferor of this Agreement and the
other Transaction Documents to which the Transferor is a party (i) are within
the Transferor's corporate powers, (ii) have been duly authorized by all
necessary corporate action, (iii) require no action by or in respect of, or
filing with, any Official Body or official thereof (except as contemplated by
Section 2.8 hereof or as have been taken or filed), (iv) do not contravene, or
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constitute a default under, any provision of applicable Law or of the
Certificate of Incorporation or Bylaws of the Transferor, or accelerate or
permit the acceleration of any performance required by any agreement or other
instrument binding upon the Transferor, or (v) do not result in the creation or
imposition of any Adverse Claim on the assets of the Transferor or any of its
Subsidiaries (except as contemplated by Section 2.8 hereof).
(c) Binding Effect. Each of this Agreement and the other
Transaction Documents to which the Transferor is a party constitutes, and the
Transfer Certificate, upon payment of the Transfer Price set forth therein, will
constitute the legal, valid and binding obligation of the Transferor,
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws affecting the rights of
creditors generally and general equitable principles (whether considered in a
proceeding at law or in equity).
(d) Perfection. Immediately preceding each Transfer hereunder, the
Transferor shall be the owner of all of the Receivables, free and clear of all
Adverse Claims. On or prior to each Transfer and each recomputation of the
Transferred Interest, all financing statements and other documents required to
be recorded or filed in order to perfect and protect the Transferred Interest
against all creditors of, and purchasers from, the Transferor and each Seller
will have been duly filed in each filing office necessary for such purpose, and
all filing fees and taxes, if any, payable in connection with such filings shall
have been paid in full.
(e) Accuracy of Information. All information contained in this
Agreement or the Transaction Documents or heretofore furnished by or on behalf
of the Transferor to the Administrative Agent, the Initial Purchasers, any PARCO
APA Bank or any Funding Agent for purposes of, or in connection with, this
Agreement and the other Transaction Documents is, and all such information
hereafter furnished by or on behalf of the Transferor (including, without
limitation, the Settlement Reports, the Weekly Reports, any other reports
delivered pursuant to Section 2.11 hereof and the Transferor's financial
statements) to the Administrative Agent, the Initial Purchasers, any PARCO APA
Bank or any Funding Agent will be, true and accurate in every material respect,
on the date such information is stated or certified.
(f) Tax Status. The Transferor has filed all tax returns (Federal,
State and local) required to be filed by it and has paid or made adequate
provision for the payment of all taxes, assessments and other governmental
charges (including for such purposes, the setting aside of appropriate reserves
for taxes, assessments and other governmental charges being contested in good
faith).
(g) Action, Suits. There are no actions, suits or proceedings
pending or, to the knowledge of the Transferor threatened, against or affecting
the Transferor or its respective properties, in or before any court, arbitrator
or other body. Except as set forth in Exhibit H hereof regarding any Affiliates
of the Transferor, there are no actions, suits or proceedings pending or, to the
knowledge of the Transferor threatened, against or affecting any Affiliate of
the Transferor or its respective properties, in or before any court, arbitrator
or other body which may, individually or in the aggregate, have a Material
Adverse Effect or that involve this Agreement or the transactions contemplated
hereby.
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(h) Use of Proceeds. No proceeds of any Transfer will be used by
the Transferor to acquire any security in any transaction which is subject to
Section 13 or 14 of the Securities Exchange Act of 1934, as amended.
(i) Place of Business. The principal place of business and chief
executive office of the Transferor are located at the address of the Transferor
indicated in Section 9.3 hereof and always have been located in Clark County,
Nevada, and the offices where the Transferor keeps all its Records and Related
Security, are located at the address(es) described on Exhibit J or such other
locations notified to the Administrative Agent and the Funding Agents in
accordance with Section 2.8 hereof in jurisdictions where all action required by
Section 2.8 hereof has been taken and completed.
(j) Good Title. Upon each Transfer and each recomputation of the
Transferred Interest, the Administrative Agent, on behalf of the Initial
Purchasers and the PARCO APA Banks, shall acquire (A) a valid undivided
percentage ownership interest to the extent of the Transferred Interest or (B) a
first priority perfected security interest in each Receivable that exists on the
date of such Transfer and recomputation and in the Related Security, the
Required Currency Hedge, Collections and Proceeds with respect thereto, in
either case free and clear of any Adverse Claim.
(k) Tradenames, Etc. As of the date hereof (i) the Transferor has
only the subsidiaries and divisions listed on Exhibit K hereto; and (ii) the
Transferor has, within the last five (5) years, operated only under the
tradenames identified in Exhibit K hereto or as otherwise disclosed in writing
to the Administrative Agent, and, within the last five (5) years, has not
changed its name, merged with or into or consolidated with any other corporation
or been the subject of any proceeding under Title 11, United States Code
(Bankruptcy), except as disclosed in Exhibit K hereto or as disclosed by the
Transferor in writing to the Administrative Agent.
(l) Nature of Receivables. Each Receivable (i) represented by the
Transferor or the Collection Agent to be an Eligible Receivable (including in
any Settlement Report, Weekly Report or other report delivered pursuant to
Section 2.11 hereof) or (ii) included in the calculation of the Net Receivables
Balance in fact satisfies at such time the definition of "Eligible Receivable"
and is an "eligible asset" as defined in Rule 3a-7 under the Investment Company
Act of 1940, as amended, and is not a Defaulted Receivable.
(m) Coverage Requirement, Amount of Receivables. The Percentage
Factor on any date does not exceed the Maximum Percentage Factor. As of December
17, 1999, the Outstanding Balance of the Receivables in existence was
$218,695,000 and the Net Receivables Balance was $170,318,000.
(n) Credit and Collection Policy. Since September 30, 1999, there
have been no material changes in the Credit and Collection Policy, other than as
permitted hereunder. Since such date, no material adverse change has occurred in
the overall rate of collection of the Receivables.
(o) Collections and Servicing. Since September 30, 1999, there has
been no material adverse change in the ability of the Collection Agent (to the
extent it is C&A, the
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Transferor or any Subsidiary or Affiliate of any of the foregoing) to service
and collect the Receivables.
(p) No Termination Event or Potential Termination Event. No event
has occurred and is continuing and no condition exists which constitutes a
Termination Event or a Potential Termination Event.
(q) Material Adverse Effect. Between the date of its formation and
the Closing Date, (i) the Transferor has not incurred any obligations,
contingent or non-contingent liabilities, liabilities for charges, long-term
leases or unusual forward or long-term commitments that, alone or in the
aggregate, could reasonably be expected to have a Material Adverse Effect, (ii)
no contract, lease or other agreement or instrument has been entered into by the
Transferor or has become binding upon the Transferor's assets and no law or
regulation applicable to the Transferor has been adopted that has had or could
reasonably be expected to have a Material Adverse Effect and (iii) the
Transferor is not in default and no third party is in default under any material
contract, lease or other agreement or instrument to which the Transferor is a
party that alone or in the aggregate could reasonably be expected to have a
Material Adverse Effect. Between the date of the formation of the Transferor and
the Closing Date, no event has occurred that alone or together with other events
could reasonably be expected to have a Material Adverse Effect, other than as
listed on Schedule 3.1(q).
(r) Not an Investment Company. The Transferor is not, and is not
controlled by, an "investment company" or an "affiliated person" of, "promoter"
or "principal underwriter" for, an "investment company" within the meaning of
the Investment Company Act of 1940, as amended, or is exempt from all provisions
of such Act.
(s) ERISA. (i) Each of the Transferor and its ERISA Affiliates is
in compliance in all material respects with ERISA and (ii) no lien exists in
favor of the Pension Benefit Guaranty Corporation on any of the Receivables. No
ERISA Event has occurred with respect to Title IV Plans of the Transferor or its
ERISA Affiliates that have an aggregate Unfunded Pension Liability equal to or
greater than $10,000,000.
(t) Lock-Box Accounts. The names and addresses of all the Lock-Box
Banks, together with the account numbers of the Lock-Box Accounts at such
Lock-Box Banks, are specified in Exhibit B hereto (or at such other Lock-Box
Banks and/or with such other Lock-Box Accounts as have been notified to the
Administrative Agent and for which Lock-Box Agreements have been executed in
accordance with Section 2.8(b) hereof and delivered to the Collection Agent and
the Administrative Agent). All Obligors have been instructed to make payment to
a Lock-Box Account, and only Collections are deposited into a Lock-Box Account.
(u) Bulk Sales. No transaction contemplated hereby or by the
Receivables Purchase Agreement or the other Transaction Documents requires
compliance with any "bulk sales" act or similar law.
(v) Transfers Under Receivables Purchase Agreement. Each Receivable
which has been transferred to the Transferor by the Sellers has been purchased
by the Transferor
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from the Sellers pursuant to, and in accordance with, the terms of the
Receivables Purchase Agreement.
(w) Preference, Voidability. The Transferor shall have given
reasonably equivalent value to the applicable Seller in consideration for the
transfer to the Transferor of the Receivables and Related Security, the Required
Currency Hedge, Collections and Proceeds with respect thereto from the
applicable Seller, and each such transfer shall not have been made for or on
account of an antecedent debt owed by the applicable Seller to the Transferor.
(x) Year 2000. The Transferor has reviewed the areas within its
business and operations which it believes would reasonably be expected to be
materially adversely affected by, and has developed a plan to address on a
timely basis, the "Year 2000 Problem" (that is, the risk that computer
applications used by the Transferor may be unable to recognize and perform
properly date-sensitive functions involving certain dates occurring in or after
the year 2000).
(y) Solvency. Both before and after giving effect to (i) the
transactions contemplated by this Agreement and the other Transaction Documents
and (ii) the payment and accrual of all transaction costs in connection with the
foregoing, the Transferor is and will be Solvent.
(z) Full Disclosure. No information contained in this Agreement,
any of the other Transaction Documents, the Senior Credit Facility Confidential
Information Memorandum, the Rating Agency Book or, any registration statement or
annual, quarterly, monthly or other regular report which the Transferor or any
of its Affiliates filed with the Securities and Exchange Commission since
January 1, 1999 contains any untrue statement of a material fact (taken as a
whole) nor has the Transferor or its Affiliates failed to provide to the
Administrative Agent, the Initial Purchasers, the Funding Agents or the
Liquidity Banks any material information necessary to make the information
provided by the Transferor or its Affiliates in such documents or filings (taken
as a whole) not misleading in any material respect in light of the circumstances
under and for the purposes for which such information was provided; provided,
however, that this representation or warranty shall not relate to any
projections or forward looking statements in any such documents provided by the
Transferor or its Affiliates.
SECTION 3.2 Reaffirmation of Representations and Warranties by the
Transferor. On each day that a Transfer is made hereunder, the Transferor, by
accepting the proceeds of such Transfer, whether delivered to the Transferor
pursuant to subsection 2.2(a) or Section 2.5 hereof, shall be deemed to have
certified that all representations and warranties described in Section 3.1
hereof are true and correct on and as of such day as though made on and as of
such day.
SECTION 3.3 Representations and Warranties of the Collection Agent.
The Collection Agent represents and warrants (solely as to itself) to the
Administrative Agent, the Initial Purchasers, each PARCO APA Bank and each
Funding Agent as of the date it becomes a Collection Agent hereunder that:
(a) Corporate Existence and Power. The Collection Agent is a
corporation duly organized, validly existing and in good standing under the laws
of its respective jurisdiction
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of incorporation and has all corporate power and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business in each jurisdiction in which its business is now conducted, except
where the failure to obtain such licenses, authorizations, consents and
approvals would not have a Material Adverse Effect. The Collection Agent is duly
qualified to do business in, and is in good standing in, every other
jurisdiction in which the nature of its business requires it to be so qualified,
except where the failure to be so qualified or in good standing would not have a
Material Adverse Effect.
(b) Corporate and Governmental Authorization, Contravention. The
execution, delivery and performance by the Collection Agent of this Agreement
(i) are within the Collection Agent's corporate powers, (ii) have been duly
authorized by all necessary corporate action on the Collection Agent's part,
(iii) require no action by or in respect of, or filing with, any Official Body
or official thereof (except for the filing of UCC financing statements as
required by this Agreement or as have been taken or filed and, with respect to
filings other than UCC financing statements, filings where the failure to file
will not have a Material Adverse Effect), (iv) do not contravene, or constitute
a default under, any provision of applicable Law or of the organizational
documents of the Collection Agent or of any agreement or other material
instrument binding upon the Collection Agent, except where such contravention or
default would not have a Material Adverse Effect, or (v) result in the creation
or imposition of any Adverse Claim on the assets of the Collection Agent or any
of its Affiliates (except those created by this Agreement).
(c) Binding Effect. This Agreement constitutes the legal, valid and
binding obligations of the Collection Agent, enforceable in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium or other similar
laws affecting the rights of creditors generally and general equitable
principles (whether considered in a proceeding at law or in equity).
(d) Action, Suits. Except as set forth in Exhibit I hereto, there
are no actions, suits or proceedings pending, or to the knowledge of the
Collection Agent, threatened, against the Collection Agent, or any Affiliate of
the Collection Agent, or its respective properties, in or before any court,
arbitrator or other body, which may, individually or in the aggregate, have a
Material Adverse Effect.
(e) Year 2000. The Collection Agent has reviewed the areas within
its business and operations which it believes would reasonably be expected to be
materially adversely affected by, and has developed a plan to address on a
timely basis, the "Year 2000 Problem" (that is, the risk that computer
applications used by the Collection Agent may be unable to recognize and perform
properly date-sensitive functions involving certain dates occurring in or after
the year 2000).
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.1 Conditions to Effectiveness. This Agreement shall become
effective on the first day on which the Administrative Agent and each Funding
Agent, on behalf
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of the Initial Purchasers and the PARCO APA Banks, shall have received the
following documents, instruments and fees, all of which shall be in a form and
substance reasonably acceptable to the Administrative Agent and each Funding
Agent:
(a) A Certificate of the Secretary of the Transferor in
substantially the form of Exhibit L hereto certifying (i) the names and
signatures of the officers and employees authorized on its behalf to execute
this Agreement and any other documents to be delivered by it hereunder (on which
Certificate the Administrative Agent, the Funding Agents, the Initial Purchasers
and the PARCO APA Banks may conclusively rely until such time as the
Administrative Agent, on behalf of the Initial Purchasers, the PARCO APA Banks
and the Funding Agents, shall receive from the Transferor a revised Certificate
meeting the requirements of this clause (a)(i)), (ii) a copy of the Transferor's
Certificate of Incorporation, certified by the Secretary of State of the State
of Delaware, (iii) a copy of the Transferor's By-Laws, (iv) a copy of
resolutions of the Board of Directors of the Transferor approving this
transaction and (v) a certificate of the Secretary of State of the State of
Delaware certifying the Transferor's good standing under the laws of the State
of Delaware.
(b) A Certificate of the Secretary of Collins & Aikman Products
Co. in substantially the form of Exhibit L hereto certifying (i) the names and
signatures of the officers and employees authorized on its behalf to execute
this Agreement and any other documents to be delivered by it hereunder (on which
Certificate the Administrative Agent, the Funding Agents, the Initial Purchasers
and the PARCO APA Banks may conclusively rely until such time as the
Administrative Agent, on behalf of the Initial Purchasers, the PARCO APA Banks
and the Funding Agents, shall receive from C&A a revised Certificate meeting the
requirements of this clause (b)(i)), (ii) a copy of C&A's Certificate of
Incorporation, certified by the Secretary of State of the State of Delaware,
(iii) a copy of C&A's By-Laws, (iv) a copy of resolutions of the Board of
Directors of C&A approving this transaction and (v) a certificate of the
Secretary of State of the State of Delaware certifying C&A's good standing under
the laws of the State of Delaware.
(c) Executed copies of the Lock-box Agreements relating to each of
the Lock-Box Banks and the Lock-Box Accounts.
(d) An opinion of Stroock & Stroock & Lavan, LLP, special counsel
to the Transferor and the Sellers (excluding the Canadian Sellers), addressed to
the Administrative Agent, the Initial Purchasers, the PARCO APA Banks and each
Funding Agent, in form and substance reasonably acceptable to the Administrative
Agent and each Funding Agent, regarding substantive consolidation in the event
of a bankruptcy of a Seller and such other matters as the Administrative Agent
or a Funding Agent may reasonably request.
(e) An opinion of Stroock & Stroock & Lavan, LLP, special counsel
to the Transferor and the Sellers (excluding the Canadian Sellers), addressed to
the Administrative Agent, the Initial Purchasers, the PARCO APA Banks and the
Funding Agent, in form and substance reasonably acceptable to the Administrative
Agent and each Funding Agent, regarding "true sale" between each Seller and the
Transferor in the event of a bankruptcy of a Seller and such other matters as
the Administrative Agent or a Funding Agent may reasonably request.
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(f) An opinion of special counsel to each Seller, addressed to the
Administrative Agent, the Initial Purchasers, the PARCO APA Banks and each
Funding Agent, in form and substance reasonably acceptable to the Administrative
Agent and each Funding Agent, regarding the validity, perfection and priority of
the security interest granted by each Seller to the Transferor and such other
matters as the Administrative Agent or a Funding Agent may reasonably request.
(g) An opinion of Canadian special counsel to each Canadian Seller,
addressed to the Administrative Agent, the Initial Purchasers, the PARCO APA
Banks and each Funding Agent, in form and substance reasonably acceptable to the
Administrative Agent and each Funding Agent, regarding substantive consolidation
in the event of a bankruptcy of a Canadian Seller and regarding "true sale"
between each Canadian Seller and the Transferor in the event of a bankruptcy of
a Canadian Seller.
(h) An opinion of special counsel to the Transferor, addressed to
the Administrative Agent, the Initial Purchasers, the PARCO APA Banks and each
Funding Agent, in form and substance reasonably acceptable to the Administrative
Agent and each Funding Agent, regarding the validity, perfection and priority of
the security interest granted by the Transferor to the Administrative Agent, on
behalf of the Initial Purchasers and the PARCO APA Banks and such other matters
as the Administrative Agent or a Funding Agent may reasonably request.
(i) An opinion of Stroock & Stroock & Lavan, LLP, special counsel
to the Transferor and each Seller, addressed to the Administrative Agent, the
Initial Purchasers, the PARCO APA Banks and each Funding Agent, in form and
substance reasonably acceptable to the Administrative Agent and each Funding
Agent, regarding the enforceability of the Transaction Documents to which each
is a party and the validity of the creation of the security interest.
(j) An opinion of the general counsel of each Seller, the Guarantor
and the Transferor, addressed to the Administrative Agent, the Initial
Purchasers, the PARCO APA Banks and each Funding Agent, in form and substance
reasonably acceptable to the Administrative Agent and each Funding Agent,
regarding certain corporate matters.
(k) An executed copy of this Agreement and each other Transaction
Document to be executed by the Transferor, the Guarantor, the Collection Agent
and each Seller.
(l) An executed copy of the Liberty Liquidity Asset Purchase
Agreement.
(m) Confirmation from the Redwood Funding Agent that the
transaction contemplated by the Redwood Liquidity Documents has been
consummated.
(n) Evidence that the Structuring Fee has been paid to Chase
Securities Inc.
(o) (i) A Weekly Report dated as of the most recent Weekly Report
Date immediately preceding the Closing Date and (ii) a Settlement Report for the
month of November 1999.
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(p) The executed Fee Letters and payment of all fees required to be
paid on the Closing Date, and reimbursement of the Administrative Agent, the
Funding Agents, the Initial Purchasers and the PARCO APA Banks for all costs and
expenses of the closing of the transaction (including legal fees and costs)
subject to the maximum amounts set forth in the Engagement Letter between the
Transferor and Chase Securities Inc. referred to in the Fee Letters.
(q) The following financial information of the Parent and its
Subsidiaries: (i) audited financial statements prepared in accordance with GAAP
on a consolidated and consolidating basis (consolidating statements need not be
audited by such accountants) for the period December 28, 1997 through December
26, 1998 and (ii) consolidated and consolidating unaudited financial statements
for the fiscal quarter ended September 25, 1999.
(r) Evidence of the establishment of the Collection Accounts.
(s) A letter from S&P confirming its rating of each Initial
Purchasers' Commercial Paper or that such rating will not be withdrawn or
downgraded after giving effect to this Agreement and the transactions
contemplated hereby.
(t) A letter from Moody's confirming its rating of each Initial
Purchasers' Commercial Paper or that such rating will not be withdrawn or
downgraded after giving effect to this Agreement and the transactions
contemplated hereby.
(u) A Certificate of a Responsible Officer of each Seller and a
Responsible Officer of the Transferor certifying that the representations and
warranties of each Seller set forth in Section 4.1 of the Receivables Purchase
Agreement and the Transferor set forth in Section 3.1 hereof are true and
correct in all material respects as of the Closing Date.
(v) After giving effect to the transactions contemplated hereby,
the Transferor shall have outstanding no indebtedness or preferred stock other
than (i) financing under the Facility and (ii) other indebtedness as agreed upon
by each Funding Agent and PARCO APA Banks.
(w) Each Funding Agent has performed a review of the Credit and
Collection Policy.
(x) An executed copy of the Guaranty, substantially in the form of
Exhibit N, executed and delivered by the Guarantor to the Administrative Agent.
(y) The Required Currency Hedge shall be in place for the required
Hedge Notional Amount.
SECTION 4.2 Conditions to Each Transfer. The right of the Transferor
to sell Transferred Interests pursuant to Section 2.2 and the obligation, if
any, of the Initial Purchasers and PARCO APA Banks to purchase such Transferred
Interests is subject to the conditions that on the applicable Transfer Date:
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(a) No Termination Event or Potential Termination Event shall have
occurred and then be continuing;
(b) The Termination Date shall not have occurred or, in the case of
Liberty, no Liberty Termination Event shall have occurred, or, in the case of
Redwood, no Redwood Termination Date shall have occurred;
(c) The representations and warranties set forth in Section 3.1
hereof and Section 4.1 of the Receivables Purchase Agreement shall be true and
correct on and as of such date (except to the extent such representations and
warranties relate solely to an earlier date, and then as of such earlier date);
(d) Executed copies of proper financing statements (Form UCC-1),
dated a date reasonably near to the Closing Date, naming the Transferor as the
debtor and the Administrative Agent (for the benefit of the Initial Purchasers,
the Funding Agents and the PARCO APA Banks) as a secured party, and other
similar instruments or documents as may be necessary or, in the reasonable
opinion of the Administrative Agent, desirable under the Relevant UCC of all
appropriate jurisdictions or any comparable Law to perfect the Administrative
Agent's (for the benefit of the Initial Purchasers, the Funding Agents and the
PARCO APA Banks) security interest in all Receivables, Related Security, the
Required Currency Hedge, Collections and Proceeds with respect thereto;
(e) Executed copies of proper financing statements (Form UCC-1),
dated a date reasonably near to the Closing Date, naming each Seller as
debtor/seller, the Transferor as secured party/purchaser, and the Administrative
Agent (for the benefit of the Initial Purchasers, the Funding Agents and the
PARCO APA Banks), as assignee of the secured party/purchaser, and other similar
instruments or documents as may be necessary or, in the reasonable opinion of
the Administrative Agent, desirable under the Relevant UCC of all appropriate
jurisdictions or any comparable Law to perfect the Transferor's ownership or
security interest in all Receivables, Related Security, the Required Currency
Hedge, Collections and Proceeds with respect thereto;
(f) Executed copies of proper financing statements (Form UCC-3), if
any, necessary to terminate all security interests and other rights of any
person in Receivables previously granted by the Transferor;
(g) Executed copies of proper financing statements (Form UCC-3)
necessary to terminate all security interests and other rights of any person in
Receivables previously granted by any Seller;
(h) Certified copies of request for information or copies (Form
UCC- 11) (or a similar search report certified by parties reasonably acceptable
to the Administrative Agent), dated a date reasonably near the Closing Date,
listing all effective financing statements which name the Transferor and any
Seller (under their respective present names and any previous names) as seller
or debtor and which are filed in jurisdictions in which the filings were made
pursuant to items (d) and (e) above together with copies of such financing
statements (none of which shall cover any Receivables or Contracts unless
released in accordance with paragraph (f) or (g) above);
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(i) A Weekly Report shall have been delivered to the Administrative
Agent;
(j) The Required Currency Hedge shall be in place for the required
Hedge Notional Amount; and
(k) The Administrative Agent and each Funding Agent shall have
received such other approvals, opinions or documents as it may reasonably
request.
ARTICLE V
COVENANTS
SECTION 5.1 Affirmative Covenants of Transferor. At all times from the
date hereof to the later to occur of (i) the Termination Date and (ii) the date
on which the Aggregate Net Investment has been reduced to zero, all accrued
PARCO Discount, Yield, Servicing Fees and all other Aggregate Unpaids shall have
been paid in full, in cash, unless the Administrative Agent and each Funding
Agent shall otherwise consent in writing (which consent shall be obtained by the
Administrative Agent):
(a) Financial Reporting. The Transferor will, and will cause the
Guarantor and each of the Guarantor's Subsidiaries to, maintain, for itself and
each of its respective Subsidiaries, a system of accounting established and
administered in accordance with GAAP, and furnish to the Administrative Agent
(and with respect to clause (vi) below, each Rating Agency):
(i) Annual Reporting. Within ninety (90) days after the close of
the Transferor's and the Guarantor's fiscal years, (x) audited financial
statements of the Parent, prepared in accordance with GAAP on a
consolidated and consolidating basis (consolidating statements need not be
audited by such accountants) for the Parent and its Subsidiaries, including
balance sheets as of the end of such period, related statements of
operations, shareholder's equity and cash flows, accompanied by an
unqualified audit report certified by independent certified public
accountants, reasonably acceptable to the Administrative Agent, prepared in
accordance with GAAP and any management letter prepared by said accountants
and by a certificate of said accountants that, in the course of the
foregoing, nothing has come to their attention to cause such accountants to
believe that any Termination Event or Potential Termination Event has
occurred, or if, in the opinion of such accountants, any Termination Event
or Potential Termination Event shall exist, stating the nature and status
thereof and (y) unaudited financial statements for the Transferor certified
by its senior financial officer.
(ii) Quarterly Reporting. Within forty-five (45) days after the
close of the first three (3) quarterly periods of each of the Transferor's
and the Guarantor's fiscal years, for (x) the Transferor and (y) for the
Parent and its Subsidiaries, in each case, consolidated and consolidating
unaudited balance sheets as at the close of each such period and
consolidated and consolidating related statements of operations,
shareholder's equity and cash flows for the period from the beginning of
such fiscal year to the end of such quarter, all certified by its senior
financial officer.
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(iii) Compliance Certificate. Together with the financial statements
required hereunder, a compliance certificate signed by the Transferor's or
the Guarantor's, as applicable, chief financial officer stating that (x)
the attached financial statements have been prepared in accordance with
GAAP and accurately reflect the financial condition of the Transferor or
the Parent, as applicable, and (y) to the best of such Person's knowledge,
no Termination Event or Potential Termination Event exists, or if any
Termination Event or Potential Termination Event exists, stating the nature
and status thereof
(iv) Shareholders Statements and Reports. Promptly upon the
furnishing thereof to the shareholders of the Transferor or the Parent
copies of all financial statements, reports and proxy statements so
furnished.
(v) S.E.C. Filings. Promptly upon the filing thereof, the Guarantor
shall notify the Administrative Agent of all registration statements and
annual, quarterly, monthly or other regular reports which the Parent or any
Affiliate files with the Securities and Exchange Commission.
(vi) Notice of Termination Events or Potential Termination Events.
Immediately, and in any event within one (1) Business Day after the
Transferor obtains knowledge of the occurrence of each Termination Event or
each Potential Termination Event, a statement of the chief financial
officer or chief accounting officer of the Transferor setting forth details
of such Termination Event or Potential Termination Event and the action
which the Transferor proposes to take with respect thereto.
(vii) Change in Credit and Collection Policy and Debt Ratings. Within
ten (10) Business Days after the date any material change in or amendment
to the Credit and Collection Policy is made, a copy of the Credit and
Collection Policy then in effect indicating such change or amendment.
Within five (5) days after the date of any change in the Transferor's or
the Guarantor's public or private debt ratings, if any, a written
certification of the Transferor's or the Guarantor's public and private
debt ratings after giving effect to any such change.
(viii) Credit and Collection Policy. Within ninety (90) days after the
close of each of the Guarantor's and the Transferor's fiscal years, a
complete copy of the Credit and Collection Policy then in effect.
(ix) ERISA. Promptly after the filing or receiving thereof, copies
of all reports and notices with respect to any Reportable Event (as defined
in Article IV of ERISA) which either (i) the Transferor, any Seller, the
Guarantor or any ERISA Affiliate of the Transferor, the Guarantor or any
Seller files under ERISA with the Internal Revenue Service, the Pension
Benefit Guaranty Corporation or the U.S. Department of Labor or (ii) the
Transferor, the Guarantor, any Seller or any ERISA Affiliates of the
Transferor, the Guarantor or any Seller receives from the Internal Revenue
Service, the Pension Benefit Guaranty Corporation or the U.S. Department of
Labor. The Transferor shall give the Administrative Agent prompt written
notice of any event that could result in the
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imposition of a Lien under Section 412 of the Internal Revenue Code or
Section 302 or 4068 of ERISA.
(x) Other Information. Such other information (including
non-financial information) as the Administrative Agent may from time to
time reasonably request with respect to any Seller, the Transferor, the
Guarantor or any Subsidiary of any of the foregoing.
(b) Conduct of Business. The Transferor will carry on and conduct
its business in substantially the same manner and in substantially the same
fields of enterprise as it is presently conducted and do all things necessary to
remain duly incorporated, validly existing and in good standing as a domestic
corporation in its jurisdiction of incorporation and to maintain all requisite
authority to conduct its business in each jurisdiction in which its business is
conducted to the extent that the failure to maintain such requisite authority
would have a Material Adverse Effect.
(c) Compliance with Laws. The Transferor will, and will cause each
Seller and each of the Transferor's and the Seller's Affiliates to, comply with
all Laws to which it or its respective properties may be subject, except where
the failure to so comply would not have a Material Adverse Effect. The Transfer
of the Receivables hereunder, the application of the proceeds thereof and
consummation of the transactions contemplated by this Agreement and the other
Transaction Documents will not violate any provision of any statute or any rule,
regulation or order issued by the Securities and Exchange Commission.
(d) Furnishing of Information and Inspection of Records. The
Transferor will, and will cause the Guarantor and each Seller to, furnish to the
Administrative Agent from time to time such information with respect to the
Receivables as the Administrative Agent may reasonably request, including,
without limitation, listings identifying the Outstanding Balance for each
Receivable, together with an aging of Receivables. The Transferor will, and will
cause the Guarantor and each Seller to, at any time and from time to time during
regular business hours and upon reasonable notice permit the Administrative
Agent, or its agents or representatives, (i) to examine and make copies of and
abstracts from all Records and (ii) to visit the offices and properties of the
Transferor, the Guarantor or any Seller, as applicable, for the purpose of
examining such Records, and to discuss matters relating to Receivables or the
Transferor's, the Guarantor's or any Seller's performance hereunder and under
the other Transaction Documents to which such Person is a party with any of the
officers, directors, employees or independent public accountants of the
Transferor, the Guarantor or any Seller, as applicable, having knowledge of such
matters. Upon a Potential Termination Event or Termination Event, each of the
Initial Purchasers, Funding Agents, PARCO APA Banks and Administrative Agent may
have without notice, immediate access to all Records and the offices and
properties of the Transferor.
(e) Keeping of Records and Books of Account. The Transferor will,
and will cause the Guarantor and each Seller to, maintain and implement
administrative and operating procedures (including, without limitation, an
ability to recreate records evidencing Receivables in the event of the
destruction of the originals thereof), and keep and maintain, all documents,
books, records and other information reasonably necessary or advisable for the
collection of all Receivables (including, without limitation, records adequate
to permit the daily identification of
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each new Receivable and all Collections of and adjustments to each existing
Receivable). The Transferor will, and will cause the Guarantor and each Seller
to, give the Administrative Agent prompt notice of any material change in the
administrative and operating procedures of the Transferor, the Guarantor or such
Seller, as applicable, referred to in the previous sentence.
(f) Communication with Accountants. The Transferor authorizes the
Initial Purchasers, the PARCO APA Banks, the Collection Agent, the
Administrative Agent and each Funding Agent to communicate directly with its
independent certified public accountants, and authorizes and shall instruct
those accountants and advisors to disclose and make available to the Initial
Purchasers, the PARCO APA Banks, the Collection Agent, the Administrative Agent
and each Funding Agent any and all financial statements and other supporting
financial documents, schedules and information relating to the Transferor
(including copies of any issued management letters) with respect to the
business, financial condition and other affairs of the Transferor. The
Transferor agrees to render the Initial Purchasers, the PARCO APA Banks, the
Collection Agent, the Administrative Agent and each Funding Agent at such
applicable Person's own cost and expense, such clerical and other assistance as
may be reasonably requested with regard to the foregoing. If any Potential
Termination Event or Termination Event shall have occurred and be continuing,
the Transferor shall, promptly upon request therefor, assist the Administrative
Agent in delivering to the Initial Purchasers, the PARCO APA Banks and the
Funding Agents Records reflecting activity through the close of business on the
Business Day immediately preceding the date of such request.
(g) Performance and Compliance with Receivables and Contracts. The
Transferor, at its expense, will, and will cause each Seller to, timely and
fully perform and comply with all material provisions, covenants and other
promises required to be observed by the Transferor or such Seller under the
Contracts related to the Receivables.
(h) Credit and Collection Policy. The Transferor will, and will
cause each Seller to, comply in all material respects with the Credit and
Collection Policy in regard to each Receivable and the related Contract.
(i) Collections. The Transferor shall, and shall cause each Seller
to, instruct all Obligors to cause all Collections to be deposited directly to a
Lock-Box Account.
(j) Collections Received. The Transferor shall, and shall cause
each Seller to, hold in trust, and deposit immediately (but in any event no
later than one Business Day following its receipt thereof) to a Lock-Box Account
all Collections received from time to time by the Transferor or any Seller, as
the case may be.
(k) Sale Treatment. Subject to the provisions of Section 10.16, the
Transferor will not, and will not permit any Seller to, account for (including
for accounting purposes), or otherwise treat, the transactions contemplated by
the Receivables Purchase Agreement in any manner other than as a sale of
Receivables by a Seller to the Transferor. In addition, the Transferor shall,
and shall cause each Seller to, disclose (in a footnote or otherwise) in all of
its respective financial statements (including any such financial statements
consolidated with any other Persons' financial statements) the existence and
nature of the transaction contemplated hereby and by the Receivables Purchase
Agreement and the interest of the Transferor (in the case
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of each Seller's financial statements), the Initial Purchasers and the PARCO APA
Banks in the Receivables and Related Security, the Required Currency Hedge,
Collections and Proceeds with respect thereto.
(l) Enforcement of Receivables Purchase Agreement. The Transferor
shall use its best efforts to enforce all rights held by it under the
Receivables Purchase Agreement and shall not waive any breach of any covenant
contained in Section 5.1 thereunder without the prior written consent of each
Funding Agent as obtained by the Administrative Agent.
(m) Separate Existence. The Transferor shall at all times:
(i) maintain its own deposit account or accounts, separate from
those of any Affiliate, with commercial banking institutions and ensure
that the funds of the Transferor will not be diverted to any other Person
or for other than corporate uses of the Transferor, nor will such funds be
commingled with the funds of any Seller or any Subsidiary or Affiliate of a
Seller other than as a result of commingling of payments by an Obligor
which payments shall be segregated within the time period provided in
Section 5.2(e);
(ii) to the extent that it shares the same officers or other
employees as any of its stockholders or Affiliates, the salaries of and the
expenses related to providing benefits to such officers and other employees
shall be fairly allocated among such entities, and each such entity shall
bear its fair share of the salary and benefit costs associated with all
such common officers and employees;
(iii) to the extent that it jointly contracts with any of its
stockholders or Affiliates to do business with vendors or service providers
or to share overhead expenses, the costs incurred in so doing shall be
allocated fairly among such entities, and each such entity shall bear its
fair share of such costs. To the extent that the Transferor contracts or
does business with venders or service providers where the goods and
services provided are partially for the benefit of any other Person, the
costs incurred in so doing shall be fairly allocated to or among such
entities for whose benefit the goods or services are provided, and each
such entity shall bear its fair share of such costs;
(iv) enter into all material transactions between the Transferor and
any of its Affiliates, whether currently existing or hereafter entered
into, only on an arm's length basis, it being understood and agreed that
the transactions contemplated in the Transaction Documents meet the
requirements of this clause (iv);
(v) maintain office space separate from the office space of each
Seller and their Affiliates and, to the extent that the Transferor and any
of its stockholders or Affiliates have offices in the same location, there
shall be a fair and appropriate allocation of overhead costs among them,
and each such entity shall bear its fair share of such expenses;
(vi) issue separate financial statements prepared not less
frequently than quarterly and prepared in accordance with GAAP;
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(vii) conduct its affairs strictly in accordance with its certificate
of incorporation and observe all necessary, appropriate and customary
corporate formalities, including, but not limited to, holding all regular
and special stockholders' and directors' meetings appropriate to authorize
all corporate action, keeping separate and accurate minutes of its
meetings, passing all resolutions or consents necessary to authorize
actions taken or to be taken, and maintaining accurate and separate books,
records and accounts, including, but not limited to, payroll and
intercompany transaction accounts;
(viii) not assume or guarantee any of the liabilities of any Seller or
any Affiliate thereof;
(ix) take, or refrain from taking, as the case may be, all other
actions that are necessary to be taken or not to be taken in order to
comply with this Section 5.1(m); and
(x) will comply with all assumptions made in the Stroock & Stroock
& Lavan "true sale" opinion dated as of December 27, 1999.
(n) Required Currency Hedges. (i) On the Closing Date and on each
Transfer Date thereafter, the Transferor shall have the Required Currency Hedge
in place for the Required Hedge Notional Amount. The Transferor agrees that at
any time that it enters into any Required Currency Hedge, it shall have funds
available to make payment of fees or other amounts due in connection with the
purchase of such Required Currency Hedge at the time that such payments are due
and payable thereunder.
(i) The Transferor agrees that at any time that it enters into any
Required Currency Hedge, it shall execute and deliver to the Administrative
Agent, for the benefit of the Initial Purchasers, PARCO APA Banks and
Funding Agents, an assignment of all amounts payable to the Transferor
under such Required Currency Hedge substantially in the form of Exhibit O
(each, a "Required Currency Hedge Assignment").
(ii) If any time the commercial paper or short term deposit ratings
from any Rating Agency assigned to a Counterparty is such that the
Counterparty is no longer an Eligible Counterparty, the Transferor shall
(x) to the extent permitted under the Required Currency Hedge to which such
Counterparty is a party, require such Counterparty to secure its
obligations under such Required Currency Hedge or (y) replace the
Counterparty with an Eligible Counterparty within the earlier of (A) 30
days or (B) within 5 days in the event that the Counterparty's commercial
paper rating or short-term deposit rating is withdrawn or downgraded below
A-2 or P-2.
(o) Minimum Net Worth. The Transferor shall at all times have a net
worth (as defined in accordance with GAAP) of at least $40,000,000.
SECTION 5.2 Negative Covenants of the Transferor. During the term of
this Agreement, unless each Funding Agent shall otherwise consent in writing,
which consent shall be obtained by the Administrative Agent:
(a) No Sales, Liens, Etc. Except as otherwise provided herein and
in the Receivables Purchase Agreement, the Transferor will not, and will not
permit any Seller to, sell,
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assign (by operation of law or otherwise) or otherwise dispose of, or create any
Adverse Claim upon (or file any financing statement) or with respect to (x) any
Transferor Collateral, (y) any inventory or goods, the sale of which may give
rise to a Collection, or (z) any Lock-Box Account to which any Collections of
any Receivable are sent, or assign any right to receive income in respect
thereof
(b) No Extension or Amendment of Receivables. Except as otherwise
permitted in Section 6.2 hereof, the Transferor will not, and will not permit
any Seller to, extend, amend or otherwise modify the terms of any Receivable, or
amend, modify or waive any term or condition of any Contract related thereto
except in accordance with the Credit and Collection Policy.
(c) No Change in Business or the Credit and Collection Policy. The
Transferor will not, and will not permit any Seller to, make any change in the
character of its business or in the Credit and Collection Policy, which change
would, in either case, impair the collectibility of any Receivable or otherwise
have a Material Adverse Effect.
(d) No Mergers, Etc. The Transferor will not without the prior
written consent of each Funding Agent (which consent shall be obtained by the
Administrative Agent), and except as otherwise permitted pursuant to the
Receivables Purchase Agreement, will not permit any Seller to, (i) consolidate
or merge with or into any other Person, or (ii) sell, lease or transfer all or
substantially all of its assets to any other Person, provided, that a Seller may
merge with or into another Seller or with another Person if (A)(1) such Seller
is the corporation surviving such consolidation or merger or (2) the Person into
or with whom the Seller is merged or consolidated is an Affiliate and the
surviving corporation assumes in writing all duties and liabilities of the
Seller under the Transaction Documents, and (B) immediately after and giving
effect to such consolidation or merger, no Termination Event or Potential
Termination Event shall have occurred and be continuing.
(e) Change in Payment Instructions to Obligors, Deposits to
Lock-Box Accounts. The Transferor will not, and will not permit any Seller to,
add or terminate any bank as a Lock-Box Bank or any account as a Lock-Box
Account to or from those listed in Exhibit B hereto or make any change in its
instructions to the Obligors regarding payments to be made to any Lock-Box
Account, unless (i) such instructions are to deposit such payments to another
existing Lock-Box Account or (ii) the Administrative Agent and each Funding
Agent shall have received written notice of such addition, termination or change
at least thirty (30) days prior thereto and the Administrative Agent shall have
received a Lock-Box Agreement executed by each new Lock-Box Bank or an existing
Lock-Box Bank with respect to each new Lock-Box Account, as applicable. The
Transferor will use reasonable commercial efforts to not, and will use
reasonable commercial efforts to not permit, any Seller to deposit or otherwise
credit, or cause or permit to be so deposited or credited, to any Lock-Box
Account cash or cash proceeds other than Collections of Receivables. However, in
the event any Seller deposits or otherwise credits, or causes or permits to be
so deposited or credited, to any Lock-Box Account, cash or cash proceeds other
than Collections of Receivables, such Seller shall segregate or cause to be
segregated any such cash or cash proceeds from Collections within 5 (five) days
of deposit or credit to any Lock-Box Account.
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(f) Change of Name, Etc. The Transferor will not, and will not
permit a Seller to, change its name, identity or structure or the location of
its chief executive office or the location at which any Records or Transferor
Collateral is located, unless at least ten (10) days prior to the effective date
of any such change the Transferor or Seller, as applicable, delivers to the
Administrative and each Funding Agent and the Collection Agent (i) such
documents, instruments or agreements, executed by the Transferor or Seller, as
applicable, as are necessary to reflect such change and to continue the
perfection of the Administrative Agent's (on behalf of the Initial Purchasers
and the PARCO APA Banks) ownership interests or security interests in the
Receivables and Related Security, the Required Currency Hedge, Collections and
Proceeds with respect thereto and (ii) new or revised Lock-Box Agreements
executed by the Lock-Box Banks which reflect such change and enable the
Administrative Agent to continue to exercise its rights contained in Section 2.8
hereof.
(g) Amendment to Receivables Purchase Agreement. The Transferor
will not, and will not permit any Seller to, amend, modify, or supplement the
Receivables Purchase Agreement, except with the prior written consent of the
Administrative Agent and each Funding Agent; nor shall the Transferor take, or
permit any Seller to take, any other action under the Receivables Purchase
Agreement that shall have a material adverse effect on the Administrative Agent,
a Funding Agent, the Initial Purchasers or any PARCO APA Bank or which is
inconsistent with the terms of this Agreement.
(h) Other Debt. Except as provided for herein, the Transferor will
not create, incur, assume or suffer to exist any Indebtedness whether current or
funded, other than (i) Indebtedness of the Transferor representing fees,
expenses and indemnities arising hereunder or under the Receivables Purchase
Agreement for the Purchase Price of the Receivables under the Receivables
Purchase Agreement, and (ii) other Indebtedness incurred in the ordinary course
of its business in an amount not to exceed $9,850 at any one time outstanding.
(i) ERISA Matters.
(i) To the extent applicable, the Transferor will not, and will not
permit any Seller to, (A) engage or permit any of its respective ERISA
Affiliates to engage in any prohibited transaction (as defined in Section
4975 of the Code and Section 406 of ERISA) for which an exemption is not
available or has not previously been obtained from the U.S. Department of
Labor; (B) fail to make any payments to any Multiemployer Plan that the
Transferor, any Seller or any ERISA Affiliate of the Transferor or any
Seller is required to make under the agreement relating to such
Multiemployer Plan or any law pertaining thereto; (C) terminate any Benefit
Plan so as to result in any liability; or (D) permit to exist any
occurrence of any reportable event described in Title IV of ERISA, if such
prohibited transactions, failures to make payment, terminations and
reportable events described in clauses (A), (B), (C) and (D) above would in
the aggregate have a Material Adverse Effect.
(ii) To the extent applicable, the Transferer will not, and will not
permit any Seller to exist any accumulated funding deficiency (as defined
in Section 302(a) of ERISA and Section 412(a) of the Code) or funding
deficiency with respect to any Benefit Plan other than a Multiemployer
Plan.
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(iii) To the extent applicable, the Transferor will not, and will not
permit any Seller to cause or permit any of its ERISA Affiliates to cause
or permit the occurrence of an ERISA Event with respect to Title IV Plans
of the Transferor, the Sellers or its ERISA Affiliates that have an
aggregate Unfunded Pension Liability equal to or greater than $10,000,000.
(j) Payment to Sellers. With respect to any Receivable sold by a
Seller to the Transferor, the Transferor shall, and shall cause each Seller to,
effect such sale under, and pursuant to the terms of, the Receivables Purchase
Agreement, including, without limitation, the payment by the Transferor either
in cash to or by a capital contribution from such Seller of an amount equal to
the Purchase Price for such Receivable as required by the terms of the
Receivables Purchase Agreement.
SECTION 5.3 Covenants of the Collection Agent and the Guarantor. At
all times from the date hereof to the date on which the Aggregate Unpaids shall
be equal to zero, unless the Administrative Agent and each Funding Agent shall
otherwise consent in writing (which consent shall be obtained by the
Administrative Agent):
(a) Credit and Collection Policy. The Collection Agent and the
Guarantor will comply in all material respects with the Credit and Collection
Policy in regard to each Receivable and the related Contract.
(b) Collections Received. The Collection Agent and the Guarantor
shall hold in trust, and deposit as soon as reasonably practicable (but in any
event no later than one Business Day following its receipt thereof) to a
Lock-Box Account all Collections received from time to time by the Collection
Agent or any Seller, respectively.
(c) Notice of Termination Events, Potential Termination Events or
Collection Agent Defaults. Immediately, and in any event within one (1) Business
Day after the Collection Agent or the Guarantor obtains knowledge of the
occurrence of each Termination Event, Potential Termination Event or Collection
Agent Default, the Collection Agent or the Guarantor, respectively, will furnish
to the Administrative Agent, each Funding Agent and each Rating Agency a
statement of a Responsible Officer of the Collection Agent or the Guarantor,
respectively, setting forth details of such Termination Event, Potential
Termination Event or Collection Agent Default, and the action which the
Collection Agent, the Guarantor, the Transferor or a Seller proposes to take
with respect thereto.
(d) Conduct of Business. The Collection Agent and the Guarantor
will do all things necessary to remain duly incorporated, validly existing and
in good standing as a domestic corporation in its jurisdiction of incorporation
and maintain all requisite authority to conduct its business in each
jurisdiction in which its business is conducted to the extent that the failure
to maintain such would have a Material Adverse Effect.
(e) Compliance with Laws. The Collection Agent and the Guarantor
will comply in all respects with all Laws with respect to the Receivables to the
extent that any non-compliance would be a Material Adverse Effect.
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(f) Further Information. The Collection Agent and the Guarantor
shall furnish or cause to be furnished to the Administrative Agent and, after a
Termination Event or a Potential Termination Event, any Funding Agent such other
information relating to the Receivables and readily available public information
regarding the financial condition of the Collection Agent or the Guarantor, as
applicable, as soon as reasonably practicable, and in such form and detail, as
the Administrative Agent may reasonably request and, after a Termination Event
or a Potential Termination Event, as any Funding Agent may reasonably request.
SECTION 5.4 Negative Covenants of the Collection Agent and the
Guarantor. At all times from the date hereof to the date on which the Aggregate
Unpaids shall be equal to zero, unless the Administrative Agent and each Funding
Agent shall otherwise consent in writing which consent shall be obtained by the
Administrative Agent:
(a) No Sales, Liens, Etc. Except as otherwise provided herein and
in the Receivables Purchase Agreement, neither the Collection Agent nor the
Guarantor will sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create any Adverse Claim upon (or file any financing statement)
or with respect to (w) any of the Receivables, Related Security, the Required
Currency Hedge, Collections or Proceeds with respect thereto, (x) any inventory
or goods, the sale of which may give rise to a Collection, (y) the Transferor
Collateral or (z) any Lock-Box Account to which any Collections of any
Receivable are sent, or assign any right to receive income in respect thereof
(b) Consolidations, Mergers and Sales of Assets. Neither the
Collection Agent nor the Guarantor shall without the prior written consent of
each Funding Agent, which consent shall be obtained by the Administrative Agent
(i) consolidate or merge with or into any other Person or (ii) sell, lease or
otherwise transfer all or substantially all of its assets to any other Person;
provided that the Collection Agent or the Guarantor, as applicable, may
consolidate or merge with another Person if (A)(1) the Collection Agent or the
Guarantor, as applicable, is the corporation surviving such consolidation or
merger or (2) the Person into or with whom the Collection Agent or the
Guarantor, as applicable, is merged or consolidated is an Affiliate and the
surviving corporation assumes in writing all duties and liabilities of the
Collection Agent or the Guarantor, as applicable, hereunder and (B) immediately
after and giving effect to such consolidation or merger, no Termination Event or
Potential Termination Event shall have occurred and be continuing.
(c) Lock-Box Accounts. Except as permitted pursuant to
Sections 2.5, 2.6, 2.12 and 5.2(e) of this Agreement or as otherwise permitted
under the Transaction Documents, neither the Collection Agent nor the Guarantor
shall make, or cause or permit any other Person to make any transfer of funds on
deposit in a Lock-Box Account.
(d) Modifications of Receivables or Contracts. The Collection Agent
shall not extend, amend, forgive, discharge, compromise, waive, cancel or
otherwise modify the terms of any Receivable or amend, modify or waive any term
or condition of any Contract related thereto; provided, that the Collection
Agent may take such actions as are expressly permitted by the terms of any
Transaction Document or the Credit and Collection Policy.
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ARTICLE VI
ADMINISTRATION AND COLLECTIONS
SECTION 6.1 Appointment of Collection Agent. The servicing,
administering and collection of the Receivables shall be conducted by such
Person (the "Collection Agent") so designated from time to time in accordance
with this Section 6.1. Until the Administrative Agent gives notice to C&A of the
designation of a new Collection Agent pursuant to this Section 6.1, C&A is
hereby designated as, and hereby agrees to perform the duties and obligations
of, the Collection Agent pursuant to the terms hereof. The Collection Agent may
not delegate any of its rights, duties or obligations hereunder, or designate a
substitute Collection Agent, without the prior written consent of the
Administrative Agent; provided that C&A shall be permitted to delegate its
duties hereunder to any of its Affiliates or their agents and may use sub
Collection Agents, but such delegation shall not relieve C&A of its duties and
obligations hereunder. The Administrative Agent may, and upon the direction of
the Required Participants the Administrative Agent shall, after the occurrence
of a Collection Agent Default or any other Termination Event, designate as
Collection Agent any Person (including itself) to succeed C&A or any successor
Collection Agent, on the condition in each case that any such Person so
designated shall agree to perform the duties and obligations of the Collection
Agent pursuant to the terms hereof.
SECTION 6.2 Duties of Collection Agent.
(a) The Collection Agent shall take or cause to be taken all such
action as may be reasonably necessary or advisable to collect each Receivable
from time to time, all in accordance with applicable Laws, with reasonable care
and diligence, and in accordance with the Credit and Collection Policy. Each of
the Transferor, the Administrative Agent, the Initial Purchasers, each Funding
Agent and the PARCO APA Banks, hereby appoints as its agent the Collection
Agent, from time to time designated pursuant to Section 6.1 hereof, to enforce
its respective rights and interests in and under the Receivables and Related
Security, the Required Currency Hedge, Collections and Proceeds with respect
thereto. To the extent permitted by applicable Law, each of the Transferor, C&A
(to the extent not then acting as Collection Agent hereunder) and each other
Seller hereby grants to any Collection Agent appointed hereunder an irrevocable
power of attorney to take in the Transferor's and/or each Seller's name and on
behalf of the Transferor or a Seller any and all steps necessary or desirable,
in the reasonable determination of the Collection Agent, to collect all amounts
due under any and all Receivables, including, without limitation, endorsing the
Transferor's and/or a Seller's name on checks and other instruments representing
Collections and enforcing such Receivables and the related Contracts. The
Collection Agent shall set aside for the account of the Transferor and the
Initial Purchasers their respective allocable shares of the Collections of
Receivables in accordance with Sections 2.5 and 2.6 hereof. The Collection Agent
shall segregate and deposit to the Administrative Agent's account the Initial
Purchasers' allocable share of Collections of Receivables when required pursuant
to Article II hereof. The Collection Agent agrees that prior to making any
material change in the Credit and Collection Policy in effect on the Closing
Date, it shall give at least ten (10) Business Days' prior written notice to the
Administrative Agent and the Transferor of such changes; provided, however, that
in the case of any material change in its Credit and Collection Policy made
pursuant to any Requirement of Law as to which it is unable
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to give ten (10) Business Days' prior written notice, then the Collection Agent
shall give written notice to the Administrative Agent and the Transferor of such
changes as soon as reasonably practicable prior to the implementation of such
changes. In the event that any such changes (except changes that are necessary
under any Requirement of Law) could reasonably be expected to materially and
adversely affect the rights of the Initial Purchasers or the PARCO APA Banks,
then such changes shall not become effective without the prior written consent
of each Funding Agent, which consent shall be obtained by the Administrative
Agent. The Transferor shall deliver to the Collection Agent and the Collection
Agent shall hold in trust for the Transferor, the Administrative Agent, the
Initial Purchasers, each Funding Agent and the PARCO APA Banks, in accordance
with their respective interests, all Records which evidence or relate to
Receivables, Related Security, the Required Currency Hedge or Collections. The
Collection Agent, if other than the Transferor or C&A or an Affiliate of the
Transferor or C&A, shall as soon as practicable upon demand, deliver to C&A all
Records in its possession which evidence or relate to indebtedness of an Obligor
which is not a Receivable. The Collection Agent shall, as soon as practicable
following receipt thereof, turn over to C&A any collections of any indebtedness
of any Person which is not on account of a Receivable. Notwithstanding anything
to the contrary contained herein, following the occurrence of a Termination
Event and during the continuation of a Potential Termination Event, the
Administrative Agent shall have the absolute and unlimited right to direct the
Collection Agent (whether the Collection Agent is C&A or any other Person) to
commence or settle any legal action to enforce collection of any Receivable or
to foreclose upon or repossess any Related Security. The Collection Agent shall
not make the Administrative Agent, a Funding Agent, an Initial Purchaser or any
of the PARCO APA Banks a party to any litigation without the prior written
consent of such Person.
(b) If the Collection Agent is not the Transferor, C&A or an
Affiliate of the Transferor or C&A, the Collection Agent, by giving three (3)
Business Days' prior written notice to the Administrative Agent, may revise the
Servicing Fee; provided that such revised Servicing Fee shall be a reasonable
fee agreed upon by the Collection Agent and the Administrative Agent on an
arms-length basis reflecting rates and terms prevailing at such time.
(c) On or before ninety (90) days after the end of each fiscal year
of the Collection Agent, beginning with the fiscal year ending December 30,
2000, the Collection Agent shall cause a firm of independent public accountants
acceptable to the Administrative Agent at the expense of the Transferor (who may
also render other services to the Collection Agent, the Transferor, C&A or any
Affiliates of any of the foregoing) to furnish a report to the Administrative
Agent performing such agreed upon procedures with respect to the Collection
Agent's servicing procedures and internal control system as may be reasonably
requested by the Administrative Agent. The scope of the review shall be as set
forth in Exhibit M hereto.
The Collection Agent shall cause such firm of nationally recognized
independent certified public accountants to furnish such report to the
Administrative Agent using generally accepted auditing standards to the effect
that they have compared the mathematical calculations of each amount set forth
in five Weekly Reports and three Settlement Statements in a sample randomly
chosen during such annual period and delivered by the Collection Agent pursuant
to Section 2.11 during the period covered by such report with the Collection
Agent's computer reports that were the source of such amounts and that on the
basis of such comparison, such
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accountants are of the opinion that such amounts are in agreement, except for
such exceptions as they believe to be immaterial and such other exceptions as
shall be set forth in such report.
(d) Notwithstanding anything to the contrary contained in this
Article VI, the Collection Agent, if not the Transferor, C&A or any Affiliate of
the Transferor or C&A, shall have no obligation to collect, enforce or take any
other action described in this Article VI with respect to any indebtedness that
is not included in the Transferred Interest other than to deliver to the
Transferor the collections and documents with respect to any such indebtedness
as described in Section 6.2(a) hereof.
SECTION 6.3 Rights After Designation of New Collection Agent. At any
time following the designation of a new Collection Agent (other than C&A)
pursuant to Section 6.1 hereof:
(i) The Administrative Agent may, at its option, or shall, at the
direction of the Required Participants, direct that payment of all amounts
payable under any Receivable be made directly to the Administrative Agent
or its designee for the benefit of the Funding Agents, the Initial
Purchasers and the PARCO APA Banks.
(ii) The Transferor shall, at the Administrative Agent's request and
at the Transferor's expense, give notice of the Initial Purchasers', the
Transferor's and/or the PARCO APA Banks' ownership of Receivables to each
Obligor and direct that payments be made directly to the Administrative
Agent or its designee.
(iii) The Transferor shall, at the Administrative Agent's request,
(A) assemble all of the Records, and shall make the same available to the
Administrative Agent or its designee at a place selected by the
Administrative Agent or its designee, and (B) segregate all cash, checks
and other instruments received by it from time to time constituting
Collections of Receivables in a manner acceptable to the Administrative
Agent and shall, promptly upon receipt, remit all such cash, checks and
instruments, duly endorsed or with duly executed instruments of transfer,
to the Administrative Agent or its designee.
(iv) The Transferor and each Seller hereby authorize the
Administrative Agent to take any and all steps in the Transferor's or any
Seller's name and on behalf of the Transferor and any Seller necessary or
desirable, in the reasonable determination of the Administrative Agent, to
collect all amounts due under any and all Receivables, including, without
limitation, endorsing the Transferor's or any Seller's name on checks and
other instruments representing Collections and enforcing such Receivables
and the related Contracts.
SECTION 6.4 Collection Agent Default. The occurrence of any one or
more of the following events shall constitute a Collection Agent default (each,
a "Collection Agent Default"):
(a) (i) the Collection Agent or, to the extent that the Transferor,
C&A or any Affiliate of the Transferor or C&A is then acting as Collection
Agent, the Transferor, C&A or such Affiliate, as applicable, shall fail to
observe or perform any term, covenant or agreement
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hereunder (other than as referred to in clause (ii) or clause (iii) of this
Section 6.4(a)) or under any of the other Transaction Documents to which such
Person is a party or by which such Person is bound, and such failure shall
remain unremedied for ten (10) days following the earlier to occur of receipt of
notice thereof by the Collection Agent from the Administrative Agent or a
Funding Agent or discovery thereof by the Collection Agent, or (ii) the
Collection Agent or, to the extent that the Transferor, C&A or any Affiliate of
the Transferor or C&A is then acting as Collection Agent, the Transferor, C&A or
such Affiliate, as applicable, shall fail to make any payment or deposit
required to be made by it hereunder when due or the Collection Agent shall fail
to observe or perform any term, covenant or agreement on the Collection Agent's
part to be performed under Section 2.8(b) hereof, or (iii) the Collection Agent
fails to deliver any Weekly Report or Settlement Report within one (1) Business
Day of the date when due; or
(b) any representation, warranty, certification or statement made
by the Collection Agent or the Transferor, C&A or any Affiliate of the
Transferor or C&A (in the event that the Transferor, C&A or such Affiliate is
then acting as the Collection Agent) in this Agreement, the Receivables Purchase
Agreement or in any of the other Transaction Documents or in any certificate or
report delivered by it pursuant to any of the foregoing shall prove to have been
incorrect in any material respect when made or deemed made; provided, however,
that (i) to the extent any breach of any such representation or warranty may be
cured within ten (10) days, the Collection Agent shall have ten (10) days
following the earlier to occur of receipt of notice thereof by the Collection
Agent from the Administrative Agent or a Funding Agent or discovery thereof by
the Collection Agent to make such representation and warranty true and correct
in all material respects, (ii) if any such representation and warranty relates
to a Receivable for which the Transferor has paid to the Collection Agent an
amount equal to the Outstanding Balance of such Receivable pursuant to Section
2.9(a) hereof or (iii) the breach of the representation or warranty of the
Collection Agent has been cured within the time period provided for herein, then
the breach of such representation or warranty shall not give rise to a
Collection Agent Default under this subsection (b); or
(c) (i) failure of the Collection Agent or any of its Affiliates to
pay when due any amounts due under any agreement under which any Indebtedness
greater than $10,000,000 is governed; or (ii) any Indebtedness of the Collection
Agent or any of its Affiliates greater than $10,000,000 shall be declared to be
due and payable or required to be prepaid (other than by a regularly scheduled
payment) by reason of a breach or default of same prior to the scheduled date of
maturity thereof; or
(d) (i) any Event of Bankruptcy shall occur with respect to the
Collection Agent or (ii) an Event of Bankruptcy shall occur with respect to an
Affiliate of the Collection Agent, which in the reasonable opinion of the
Administrative Agent is a Material Adverse Effect; or
(e) there shall have occurred any material adverse change in the
operations of the Collection Agent since the end of last fiscal year ending
prior to the date of its appointment as Collection Agent hereunder or any other
event shall have occurred which, in the commercially reasonable judgment of the
Administrative Agent, materially and adversely affects the Collection Agent's
ability to either collect the Receivables or to perform under this Agreement.
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SECTION 6.5 Responsibilities of the Transferor and each Seller.
Anything herein to the contrary notwithstanding, the Transferor shall, and/or
shall cause each Seller to, (i) perform all of each Seller's obligations under
the Contracts related to the Receivables to the same extent as if interests in
such Receivables had not been sold hereunder and under the Receivables Purchase
Agreement and the exercise by the Administrative Agent, a Funding Agent, the
Initial Purchasers and the PARCO APA Banks of their rights hereunder and under
the Receivables Purchase Agreement shall not relieve the Transferor or such
Seller from such obligations and (ii) pay when due any taxes, including without
limitation, any sales taxes payable in connection with the Receivables and their
creation and satisfaction. Neither the Administrative Agent, nor the Funding
Agents, nor the Initial Purchasers nor any of the PARCO APA Banks shall have any
obligation or liability with respect to any Receivable or related Contracts, nor
shall it be obligated to perform any of the obligations of a Seller thereunder.
SECTION 6.6 Collection Agent Indemnification of Indemnified Parties.
The Collection Agent shall indemnify and hold harmless the Indemnified Parties,
from and against any loss, liability, expense, damage or injury suffered or
sustained solely by reason of any breach by the Collection Agent of any of its
representations, warranties or covenants contained in this Agreement, including
any judgment, award, settlement, reasonable attorneys' fees and other costs or
expenses reasonably incurred in connection with the defense of any actual
action, proceeding or claim; provided, however, that (i) the Collection Agent
shall not indemnify the Indemnified Parties if such acts or omissions were
attributable directly or indirectly to fraud, gross negligence, breach of
fiduciary duty or willful misconduct by any such Indemnified Party and (ii)
neither the Collection Agent nor any of the directors, officers, employees or
agents of the Collection Agent in its capacity as Collection Agent shall be
under any liability to the Indemnified Parties for any action taken or for
refraining from the taking of any action in good faith in its capacity as
Collection Agent pursuant to this Agreement; provided, further, however that the
immediately preceding proviso shall not protect the Collection Agent or any such
director, officer, employee or agent against any liability which would otherwise
be imposed by reason of willful misfeasance, bad faith or gross negligence in
the performance of duties or by reason of reckless disregard of obligations and
duties hereunder. The Collection Agent and any director, officer, employee or
agent of the Collection Agent may rely in good faith on any document of any kind
prima facie properly executed and submitted by any Person (other than the
Collection Agent or an Affiliate of the Collection Agent) respecting any matters
arising hereunder. Any indemnification pursuant to this Section shall be had
only from the assets of the Collection Agent and shall not be payable from
Collections, except to the extent such Collections are released to the
Collection Agent in accordance with Sections 2.5 and 2.6. The provisions of such
indemnity shall run directly to and be enforceable by such Indemnified Parties.
Without limiting the foregoing, each Seller, by transferring interests in the
Receivables to the Transferor, the Transferor, by transferring interests in the
Receivables to the Initial Purchasers and/or the PARCO APA Banks, and the
Initial Purchasers and the PARCO APA Banks, by acquiring such interest in the
Receivables, acknowledge that each Seller has transferred such Receivables and
the Transferor, the Initial Purchasers and the PARCO APA Banks, as applicable,
have assumed all risk of payment and collection with respect thereto.
SECTION 6.7 Maintenance of Property; Insurance. The Collection Agent
will (i) keep all property and assets useful and necessary in its business as
Collection Agent in good working order and condition (normal wear and tear
excepted), (ii) maintain, with financially
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sound and reputable insurance companies, insurance on all its property and
assets necessary in its business as Collection Agent in at least such amounts
and against at least such risks (and with such risk retention) as are usually
insured against in the same general area by companies of established repute
engaged in the same or a similar business and reasonably satisfactory to the
Administrative Agent and each Funding Agent, (iii) furnish to the Transferor,
the Administrative Agent and each Funding Agent upon written request, full
information as to the insurance carried, (iv) within five days of receipt of
notice from any insurer, furnish the Transferor, the Administrative Agent with a
copy of any notice of cancellation or material change in coverage from that
existing on the Closing Date and (v) forthwith, furnish the Transferor and the
Administrative Agent with notice of any cancellation or nonrenewal of coverage
by the Collection Agent. The Collection Agent will (A) maintain disaster
recovery systems and back-up computer and other information management systems
that, in the Collection Agent's reasonable judgment, are sufficient to protect
its business as Collection Agent against material interruption or loss in the
event of damage to, or loss or destruction of, its primary computer and
information management systems and (B) furnish to the Transferor and the
Administrative Agent, upon written request, full information as to such disaster
recovery systems and back-up computer and information management systems.
SECTION 6.8 Grant of License. For the purpose of enabling the
Administrative Agent or a successor Collection Agent to perform the functions of
servicing and collecting the Receivables upon a Collection Agent Default, the
Collection Agent and each Seller hereby (i) assigns, to the extent permitted, to
the Administrative Agent for the benefit of the Funding Agents, the Initial
Purchasers and the PARCO APA Banks and shall be deemed to assign to the
Administrative Agent for the benefit of the Funding Agents, the Initial
Purchasers and the PARCO APA Banks and any successor Collection Agent all rights
owned or hereinafter acquired by any Seller or the Collection Agent (by license,
sublicense, lease, easement or otherwise) in and to any equipment together with
a copy of any software listed on Schedule II hereto, (ii) agrees to use its best
efforts to assist the Administrative Agent for the benefit of the Funding
Agents, the Initial Purchasers and the PARCO APA Banks to arrange licensing
agreements with all software vendors and other applicable persons in a manner
and to the extent reasonably appropriate to effectuate the servicing of the
Receivables, and (iii) deliver to the Administrative Agent executed copies of
any landlord waivers in a form reasonably acceptable to the Administrative
Agent, that may be necessary to grant to the Administrative Agent access to any
leased premises of the Collection Agent for which the Administrative Agent may
require access to perform the collection and administrative functions to be
performed by the Administrative Agent under the Transaction Documents.
ARTICLE VII
INDEMNIFICATION; EXPENSES; RELATED MATTERS
SECTION 7.1 Indemnities by the Transferor. Without limiting any other
rights which the Administrative Agent, the Funding Agents, the Initial
Purchasers, the Liberty APA Banks or the PARCO APA Banks may have hereunder or
under applicable Law, the Transferor hereby agrees to indemnify the
Administrative Agent, the Initial Purchasers, the Liberty APA Banks, the Redwood
Secured Parties, the PARCO APA Banks and each Funding Agent and any successors
and permitted assigns and their respective officers, directors, agents and
employees
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(collectively, "Indemnified Parties") from and against any and all damages,
losses, claims, liabilities, costs and expenses, including, without limitation,
reasonable attorneys' fees and disbursements (all of the foregoing being
collectively referred to as "Indemnified Amounts") awarded against or incurred
by any of them in any action or proceeding between the Transferor and any of the
Indemnified Parties or between any of the Indemnified Parties and any third
party or otherwise arising out of or as a result of this Agreement, the other
Transaction Documents, the ownership, either directly or indirectly, by a
Funding Agent, the Initial Purchasers or any PARCO APA Bank of the Transferred
Interest or any of the other transactions contemplated hereby or thereby,
excluding, however, (i) Indemnified Amounts to the extent resulting from gross
negligence or willful misconduct on the part of an Indemnified Party or (ii)
recourse (except as otherwise specifically provided in this Agreement) for
uncollectible Receivables; provided that any Indemnified Amounts owed under this
Section 7.1 shall be payable in accordance with Sections 2.5 and 2.6 and shall
be Transferor Subordinated Obligations. Without limiting the generality of the
foregoing, the Transferor shall indemnify each Indemnified Party for Indemnified
Amounts relating to or resulting from:
(a) any representation or warranty made by the Transferor or any
officers of the Transferor under this Agreement, any of the other Transaction
Documents, any Settlement Report, any Weekly Report or any other written
information or report delivered by the Transferor pursuant hereto or thereto,
which shall have been false or incorrect in any material respect when made or
deemed made;
(b) the failure by the Transferor to comply in any material respect
with any applicable Law, with respect to any Receivable or the related Contract,
or the nonconformity in any material respect of any Receivable or the related
Contract with any such applicable Law;
(c) any dispute, claim, offset or defense (other than discharge in
bankruptcy) of an Obligor to the payment of any Receivable (including, without
limitation, a defense based on such Receivable or the related Contract not being
the legal, valid and binding obligation of such Obligor enforceable against it
in accordance with its terms), or any other claim resulting from the sale of
merchandise or provision of services related to such Receivable or the
furnishing or failure to furnish such merchandise or services;
(d) any products liability claim or personal injury or property
damage suit or other similar or related claim or action of whatever sort arising
out of or in connection with merchandise which is the subject of any Receivable;
(e) the failure by the Transferor to comply in any material respect
with any term, provision or covenant contained in this Agreement or any of the
other Transaction Documents to which it is a party or to perform any of its
respective duties under the Contracts;
(f) the failure of the Transferor to pay when due any taxes,
including without limitation, sales, excise or personal property taxes payable
in connection with any of the Receivables;
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(g) any repayment by any Indemnified Party of any amount previously
distributed in reduction of Aggregate Net Investment which such Indemnified
Party believes in good faith is required to be made;
(h) the commingling by the Transferor of Collections of Receivables
at any time with other funds to the extent not otherwise permitted pursuant to
this Agreement and the other Transaction Documents;
(i) any investigation, litigation or proceeding related to this
Agreement, any of the other Transaction Documents, the use of proceeds of
Transfers by the Transferor, the ownership of Transferred Interests, or any
Receivable, Related Security, Required Currency Hedge or Contract;
(j) the failure of any Lock-Box Bank to remit any amounts held in
the Lock-Box Accounts pursuant to the instructions of the Collection Agent, the
Transferor, the Administrative Agent, C&A or the Funding Agent (to the extent
such Person is entitled to give such instructions in accordance with the terms
hereof and of any applicable Lock-Box Agreement) whether by reason of the
exercise of set-off rights or otherwise;
(k) any failure of the Transferor to give reasonably equivalent
value to any Seller in consideration of the purchase by the Transferor from any
Seller of any Receivable, or any attempt by any Person to void, rescind or
set-aside any such transfer under statutory provisions or common law or
equitable action, including, without limitation, any provision of the Bankruptcy
Code;
(l) any action taken by the Transferor in the enforcement or
collection of any Receivable; provided, that the Transferor shall not be liable
for Indemnified Amounts attributable to the fraud, gross negligence, breach of
fiduciary duty or willful misconduct of any Collection Agent in the enforcement
or collection of any Receivable if such Collection Agent is not the Transferor,
C&A or any Affiliate of the Transferor or C&A;
(m) any failure by the Transferor to complete an Incremental
Transfer following the receipt by the Administrative Agent of notice of a
proposed Transfer from the Transferor pursuant to Section 2.2 due to no fault of
the Administrative Agent, Initial Purchasers, the Funding Agent or the PARCO APA
Banks; or
(n) the failure of any Seller, the Collection Agent (if an
Affiliate of the Transferor) or the Transferor to be Year 2000 Compliant.
provided, however, that if the Initial Purchasers enter into agreements for the
purchase of interests in receivables from one or more Other Transferors, the
Initial Purchasers shall ratably allocate such Indemnified Amounts related to
the Initial Purchasers' program documents to the Transferor and each Other
Transferor; and provided, further, that if such Indemnified Amounts are
attributable to the Transferor and not attributable to any Other Transferor, the
Transferor shall be solely liable for such Indemnified Amounts or if such
Indemnified Amounts are attributable to Other Transferors and not attributable
to the Transferor, such Other Transferors shall be solely liable for such
Indemnified Amounts.
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SECTION 7.2 Indemnity for Reserves and Expenses.
(a) If after the date hereof, the adoption of any Law or bank
regulatory guideline or any amendment or change in the interpretation of any
existing or future Law or bank regulatory guideline by any Official Body charged
with the administration, interpretation or application thereof, or the
compliance with any directive of any Official Body (in the case of any bank
regulatory guideline, whether or not having the force of Law), other than Laws,
interpretations, guidelines or directives relating to Taxes:
(i) shall impose, modify or deem applicable any reserve, special
deposit or similar requirement (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve
System) against assets of, deposits with or for the account of, or credit
extended by, any Indemnified Party or shall impose on any Indemnified Party
or on the United States market for certificates of deposit or the London
interbank market any other condition affecting this Agreement, the other
Transaction Documents, the ownership, maintenance or financing of the
Transferred Interest, the Receivables or payments of amounts due hereunder
or its obligation to advance funds hereunder or under the other Transaction
Documents; or
(ii) imposes upon any Indemnified Party any other expense deemed by
such Indemnified Party to be material (including, without limitation,
reasonable attorneys' fees and expenses, and expenses of litigation or
preparation therefor in contesting any of the foregoing provided, C&A may
settle such litigation in C&A's sole discretion) with respect to this
Agreement, the other Transaction Documents, the ownership, maintenance or
financing of the Transferred Interest, the Receivables or payments of
amounts due hereunder or its obligation to advance funds hereunder or
otherwise in respect of this Agreement or the other Transaction Documents,
and the result of any of the foregoing is to increase the cost to such
Indemnified Party with respect to this Agreement, the other Transaction
Documents, the ownership, maintenance or financing of the Transferred Interest,
the Receivables, the obligations hereunder, the funding of any Purchases
hereunder or under the other Transaction Documents, by an amount reasonably
deemed by such Indemnified Party to be material, then, within ten (10) Business
Days after demand by such Indemnified Party through the Administrative Agent,
the Transferor or C&A shall pay to the Administrative Agent, for the benefit of
such Indemnified Party, such additional amount or amounts as will compensate
such Indemnified Party for such increased cost or reduction; provided that no
such amount shall be payable with respect to any period commencing more than two
hundred and seventy (270) days prior to the date the Administrative Agent first
notifies the Transferor or C&A of its intention to demand compensation therefor
under this subsection 7.2(a); provided further that if such change in Law giving
rise to such increased costs or reductions is retroactive, then such 270-day
period shall be extended to include the period of retroactive effect thereof. In
making demand hereunder, the applicable Indemnified Party shall submit to the
Transferor a certificate as to such increased costs incurred which shall provide
in detail the basis for such claim.
(b) If any Indemnified Party shall have determined that after the
date hereof, the adoption of any applicable Law or bank regulatory guideline
regarding capital adequacy, or
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any change therein, or any change in the interpretation thereof by any Official
Body, or any directive regarding capital adequacy (in the case of any bank
regulatory guideline, whether or not having the force of Law) of any such
Official Body, has or would have, due to an increase in the amount of capital
required to be maintained by such Indemnified Party, the effect of reducing the
rate of return on capital of such Indemnified Party (or its Guarantor) as a
consequence of such Indemnified Party's obligations hereunder or with respect
hereto to a level below that which such Indemnified Party (or its Guarantor)
could have achieved but for such adoption, change, request or directive (taking
into consideration its policies with respect to capital adequacy) by an amount
reasonably deemed by such Indemnified Party to be material, then from time to
time, within ten (10) Business Days after demand by such Indemnified Party
through the Administrative Agent, the Transferor or C&A shall pay to the
Administrative Agent, for the benefit of such Indemnified Party, such additional
amount or amounts as will compensate such Indemnified Party (or its Guarantor)
for such reduction; provided that no such amount shall be payable with respect
to any period commencing more than two hundred and seventy (270) days prior to
the date the Administrative Agent first notifies the Transferor or C&A of its
intention to demand compensation therefor under this subsection 7.2(b); provided
further that if such change in Law, giving rise to such increased costs or
reductions is retroactive, then such 270-day period shall be extended to include
the period of retroactive effect thereof In making demand hereunder, the
applicable Indemnified Party shall submit to the Transferor a certificate as to
such increased costs incurred which shall provide in detail the basis for such
claim.
(c) Anything in this Section 7.2 to the contrary notwithstanding,
if the Initial Purchasers enter into agreements for the acquisition of interests
in receivables from one or more Other Transferors, the Initial Purchasers shall
ratably allocate the liability for any amounts under this Section 7.2 ("Section
7.2 Costs") to the Transferor and C&A and each Other Transferor; provided,
however, that if such Section 7.2 Costs are attributable to the Transferor or
C&A and not attributable to any Other Transferor, the Transferor and C&A shall
be solely liable for such Section 7.2 Costs or if such Section 7.2 Costs are
attributable to Other Transferors and not attributable to the Transferor or C&A
such Other Transferors shall be solely liable for such Section 7.2 Costs.
(d) All amounts owed by the Transferor pursuant to this Section 7.2
shall be payable in accordance with Sections 2.5 and 2.6 and shall be Transferor
Subordinated Obligations. Any amounts owed by C&A pursuant to this Section shall
be had only from the assets of C&A and shall not be payable from Collections,
except to the extent such Collections are released to C&A in accordance with
Sections 2.5 and 2.6.
SECTION 7.3 Indemnity for Taxes.
(a) All payments made by the Transferor, any Seller or the
Collection Agent to the Administrative Agent for the benefit of the Funding
Agents, the Initial Purchasers and the PARCO APA Banks under this Agreement and
any other Transaction Document shall be made free and clear of, and without
deduction or withholding for or on account of, any present or future income,
stamp or other taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, now or hereafter imposed, levied, collected, withheld or assessed
by any Official Body, excluding (i) taxes imposed on the net income of the
Administrative Agent or any other Indemnified Party, however denominated, (ii)
taxes that would not have been imposed if the
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Indemnified Party had timely complied with the requirements of Section 7.3(b)
hereof, and (iii) franchise taxes imposed on the net income of the
Administrative Agent or any other Indemnified Party, in each case imposed: (1)
by the United States or any political subdivision or taxing authority thereof or
therein; (2) by any jurisdiction under the laws of which the Administrative
Agent or such Indemnified Party or lending office is organized or in which its
lending office is located, managed or controlled or in which its principal
office is located or any political subdivision or taxing authority thereof or
therein; or (3) by reason of any connection between the jurisdiction imposing
such tax and the Administrative Agent, such Indemnified Party or such lending
office other than a connection arising solely from this Agreement or any other
Transaction Document or any transaction hereunder or thereunder (all such
non-excluded taxes, levies, imposts, duties, charges, fees, deductions or
withholdings, collectively or individually, "Taxes"). If any such Taxes are
required to be withheld from any amounts payable to the Administrative Agent or
any Indemnified Party hereunder, the amounts so payable to the Administrative
Agent or such Indemnified Party shall be increased to the extent necessary to
yield to the Administrative Agent or such Indemnified Party (after payment of
all Taxes) all amounts payable hereunder at the rates or in the amounts
specified in this Agreement and the other Transaction Documents. The Transferor
or C&A shall indemnify the Administrative Agent or any such Indemnified Party
for the full amount of any such Taxes within thirty (30) days after the date of
written demand therefor by the Administrative Agent. All amounts owed by the
Transferor pursuant to this subsection 7.3(a) shall be payable in accordance
with Sections 2.5 and 2.6 and shall be Transferor Subordinated Obligations. Any
amounts owed by C&A or the Collection Agent pursuant to this Section shall be
had only from the assets of C&A or the Collection Agent, as applicable, and
shall not be payable from Collections, except to the extent such Collections are
released to C&A or the Collection Agent, as applicable, in accordance with
Sections 2.5 and 2.6.
(b) Each Indemnified Party that is not incorporated under the laws
of the United States of America or a State thereof or the District of Columbia
shall:
(i) deliver to the Transferor and the Administrative Agent (A) two
duly completed copies of IRS Form 1001 or Form 4224, or successor
applicable form, as the case may be, and (B) an IRS Form W-8 or W-9, or
successor applicable form, as the case may be;
(ii) deliver to the Transferor and the Administrative Agent two (2)
further copies of any such form or certification on or before the date that
any such form or certification expires or becomes obsolete and after the
occurrence of any event requiring a change in the most recent form
previously delivered by it to the Transferor; and
(iii) obtain such extensions of time for filing and complete such
forms or certifications as may reasonably be requested by the Transferor or
the Administrative Agent;
unless, in any such case, an event (including, without limitation, any change in
treaty, law or regulation) has occurred prior to the date on which any such
delivery would otherwise be required which, regardless of the identity of the
Indemnified Party, renders all such forms inapplicable or which, regardless of
the identity of the Indemnified Party, would prevent such
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Indemnified Party from duly completing and delivering any such form with respect
to it, and such Indemnified Party so advises the Transferor and the
Administrative Agent. Each such Indemnified Party so organized shall certify (i)
in the case of an IRS Form 1001 or IRS Form 4224 (or successor applicable form),
that it is entitled to receive payments under this Agreement and the other
Transaction Documents without deduction or withholding of any United States
federal income taxes and (ii) in the case of an IRS Form W-8 or IRS Form W-9 (or
successor applicable form), that it is entitled to an exemption from United
States backup withholding tax. Each Person that is an Initial Purchaser under
the Transaction Documents, or which otherwise becomes a party to this Agreement
as a PARCO APA Bank, shall, prior to the effectiveness of such assignment,
participation or addition, as applicable, be required to provide all of the
forms and statements required pursuant to this Section 7.3.
SECTION 7.4 Other Costs, Expenses and Related Matters.
(a) The Transferor agrees, upon receipt of a written invoice, to
pay or cause to be paid, and to save the Administrative Agent, the Initial
Purchasers, the Liberty APA Banks, the PARCO APA Banks and each Funding Agent
harmless against liability for the payment of, all reasonable out-of-pocket
expenses (including, without limitation, reasonable attorneys', accountants' and
other third parties' fees and expenses, any filing fees and expenses incurred by
officers or employees of the Administrative Agent, the Initial Purchasers, the
Liberty APA Banks, the PARCO APA Banks and/or a Funding Agent) or intangible,
documentary or recording taxes incurred by or on behalf of the Administrative
Agent, the Initial Purchasers, the Liberty APA Banks, any PARCO APA Bank and a
Funding Agent (i) in connection with the negotiation, execution, delivery and
preparation of this Agreement, the other Transaction Documents and any documents
or instruments delivered pursuant hereto and thereto and the transactions
contemplated hereby or thereby (including, without limitation, the perfection or
protection of the Transferred Interest) and (ii) from time to time upon receipt
of prior written notice thereof from the Administrative Agent, a Funding Agent,
the Initial Purchasers, the Liberty APA Banks, or the PARCO APA Banks, as
applicable (a) relating to any amendments, waivers or consents under this
Agreement, any Asset Purchase Agreement and the other Transaction Documents, (b)
arising in connection with the Administrative Agent's, the Initial Purchasers',
any Liberty APA Banks' or any PARCO APA Bank's or a Funding Agent's enforcement
or preservation of rights (including, without limitation, the perfection and
protection of the Transferred Interest under this Agreement), or (c) arising in
connection with any audit, dispute, disagreement, litigation or preparation for
litigation involving this Agreement or any of the other Transaction Documents
(all of such amounts, collectively, "Transaction Costs"). All Transaction Costs
owed by the Transferor pursuant to this subsection 7.4(a) shall be payable in
accordance with Section 2.5 and 2.6, shall be subject to the maximum amount set
forth in the engagement letter between C&A and Chase Securities Inc. and shall
be Transferor Subordinated Obligations.
(b) The Transferor shall pay the Administrative Agent, for the
account of the Initial Purchasers and the PARCO APA Banks, as applicable, on
demand any Early Collection Fee due on account of the reduction of a Tranche on
any day prior to the last day of its Tranche Period.
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(c) The Administrative Agent will within forty-five (45) days after
receipt of notice of any event occurring after the date hereof which will
entitle an Indemnified Party to compensation pursuant to this Article VII,
notify the Transferor and C&A in writing. Any notice by the Administrative Agent
claiming compensation under this Article VII and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive in the absence
of manifest error, provided that such claim is made in good faith and on a
reasonable basis. In determining such amount, the Administrative Agent or any
applicable Indemnified Party may use any reasonable averaging and attributing
methods.
(d) If any Seller is required to pay any additional amount to any
PARCO APA Bank pursuant to Sections 7.2 or 7.3, then such PARCO APA Bank shall
use reasonable efforts (which shall not require such PARCO APA Bank to incur an
unreimbursed loss or unreimbursed cost or expense or otherwise take any action
inconsistent with its internal policies or legal or regulatory restrictions or
suffer any disadvantage or burden reasonably deemed by it to be significant) (A)
to file any certificate or document reasonably requested in writing by such
Seller or (B) to assign its rights and delegate and transfer its obligations
hereunder to another of its offices, branches or affiliates, if such filing or
assignment would reduce amounts payable pursuant to Sections 7.2 or 7.3, as the
case may be, in the future.
ARTICLE VIII
TERMINATION EVENTS
SECTION 8.1 Termination Events. The occurrence of any one or more of
the following events shall constitute a Termination Event:
(a) the Transferor, any Seller or the Collection Agent shall fail
to make any payment or deposit to be made by it hereunder or under any of the
Transaction Documents and such failure shall continue for one (1) Business Day
after the date such payment or deposit became due hereunder or thereunder; or
(b) any representation, warranty, certification or statement made
by the Transferor, the Guarantor or any Seller in this Agreement, any other
Transaction Document to which it is a party or in any other document delivered
pursuant hereto or thereto shall prove to have been incorrect in any material
respect when made or deemed made, provided, however, that if any such
representation, warranty, certification or statement relates to a Receivable for
which the Transferor has paid to the Collection Agent an amount equal to the
Outstanding Balance of such Receivable pursuant to subsection 2.9(a) hereof or
if a breach of the representation and warranty in Section 3.1, 3.2 or 3.3 has
been corrected within the time period provided for herein, and in the case of
Section 3.1(f) or Section 3.1(s)(i) within 15 days of notice thereof, then the
breach of such representation or warranty shall not give rise to a Termination
Event under this subsection (b); or
(c) Failure on the part of any Seller, the Guarantor or the
Transferor to observe or perform in any material respect any other term,
covenant or agreement in this Agreement or any other Transaction Document within
the time period provided for such performance; or
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(d) (i) failure of the Transferor, any Seller, the Guarantor or any
Affiliate of the Transferor, the Guarantor or any Seller to pay when due any
material amounts due under any agreement to which any such Person is a party and
under which any Indebtedness greater than $10,000,000 is governed; or (ii) the
material default by the Transferor, the Guarantor, any Seller or any Affiliate
of the Transferor, the Guarantor or any Seller in the performance of any
material term, provision or condition contained in any agreement to which any
such Person is a party and under which any Indebtedness owing by the Transferor,
the Guarantor, any Seller or any Affiliate of the Transferor, the Guarantor or
any Seller greater than $10,000,000 was created or is governed, regardless of
whether such event is an "event of default" or "default" under any such
agreement, which is a Material Adverse Effect; or (iii) any Indebtedness owing
by the Transferor, the Guarantor, any Seller or any Affiliate of the Transferor,
the Guarantor or any Seller greater than $10,000,000 shall be declared to be due
and payable or required to be prepaid (other than by a regularly scheduled
payment) by reason of a breach or default of same prior to the date of maturity
thereof; or
(e) (i) any Event of Bankruptcy shall occur with respect to the
Transferor, or (ii) an Event of Bankruptcy shall occur with respect to the
Guarantor or any Seller or Affiliate of the Guarantor or any Seller which, in
the reasonable opinion of the Administrative Agent, is a Material Adverse
Effect; or
(f) the Administrative Agent, on behalf of the Funding Agents, the
Initial Purchasers and the PARCO APA Banks, shall, for any reason, fail or cease
to have a valid and perfected first priority ownership or security interest in
the Receivables and Related Security, the Required Currency Hedge, Collections
and Proceeds with respect thereto, and any other Transferor Collateral free and
clear of any Adverse Claims; or
(g) a Collection Agent Default shall have occurred; or
(h) the Purchase Termination Date shall have occurred under the
Receivables Purchase Agreement; or
(i) without obtaining the prior written consent of each Funding
Agent, which consents shall be obtained by the Administrative Agent, the
Transferor or any Seller or the Guarantor shall enter into any transaction or
merger whereby it is not the surviving entity (other than a merger permitted
pursuant to either Section 5.2(d) or Section 5.4(b) hereof); or
(j) there shall have occurred a Material Adverse Effect with
respect to the Transferor or any Seller since the Closing Date; or
(k) the institution of any litigation, arbitration proceedings or
governmental proceeding involving any Seller or the Transferor or the
Receivables which would be reasonably likely to have a Material Adverse Effect;
or
(l) (i) the Percentage Factor exceeds the Maximum Percentage Factor
unless the Transferor deposits to the Funding Accounts on the next Business Day,
for the benefit of the Initial Purchasers and/or the PARCO APA Banks, as
applicable, from previously received Collections that have been released to or
set aside for the Transferor pursuant to Section 2.5 hereof or other funds
available to the Transferor, an amount that brings the Percentage Factor to
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less than or equal to the Maximum Percentage Factor or increases the balance of
the Receivables on the next Business Day so as to reduce the Percentage Factor
to less than or equal to 100%; or (ii) the Aggregate Net Investment exceeds the
Facility Limit; or
(m) the average Dilution Ratio for the three (3) preceding
Settlement Periods exceeds 4.00%; or
(n) the average Aged Receivables Ratio for the three (3) preceding
Settlement Periods exceeds 6.50%; or
(o) (i) one or more judgments for the payment of money in an
aggregate amount in excess of $10,000,000 shall be rendered against a Seller,
the Collection Agent, the Guarantor or their Subsidiaries or any combination
thereof and the same shall remain undischarged for a period of thirty (30)
consecutive days during which execution shall not be effectively stayed or to
the extent that an insurance carrier has accepted a claim for coverage thereto;
(ii) one or more judgments for the payment of money shall be rendered against
the Transferor and shall not have been satisfied; or (iii) any action shall be
legally taken by a judgment creditor to attach or levy upon any assets of the
Transferor, a Seller, the Collection Agent, the Guarantor, or their Subsidiaries
to enforce any such judgment; or
(p) the Collection Agent shall fail to deliver to the
Administrative Agent any report required to be delivered by it under the terms
of the Transaction Documents within one (1) Business Day of (i) with respect to
any Settlement Report or Weekly Report, when such report was due or (ii) with
respect to any other report, receipt by the Collection Agent of written notice
from the Administrative Agent that such report is due; or
(q) the imposition of (i) tax liens against the Transferor, (ii)
tax liens against any Seller or the Guarantor unless such lien would not have a
Material Adverse Effect and has been released within fifteen (15) days of the
earlier of (a) the date such Seller or the Guarantor, as applicable, has
knowledge of the imposition of such tax lien or (b) the date on which such
Seller or the Guarantor, as applicable, receives notice of the imposition of
such tax lien, and (iii) ERISA liens; or
(r) there shall have occurred a Change in Control; or
(s) the Guarantor shall permit the Interest Coverage Ratio to be
less than the ratio set forth in subsection (b) of the definition of "Interest
Coverage Ratio" for such period; or
(t) the Guarantor shall permit the Leverage Ratio during any period
set forth in subsection (b) of the definition of "Leverage Ratio" to be greater
than the ratio set forth in such definition for such period; or
(u) C&A and the Sellers (in the aggregate) fail to maintain 100%
ownership of the Transferor.
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SECTION 8.2 Remedies Upon the Occurrence of a Termination Event.
(a) Upon the occurrence of any Termination Event, the
Administrative Agent may, or at the direction of the Required Purchaser Groups
shall, by notice to the Transferor and the Collection Agent, declare the
Termination Date to have occurred, provided, however, that in the case of any
event described in Section 8.1(e)(i), 8.1(f), 8.1(h), 8.1(l), or 8.1(q)(i) or
8.1(q)(iii) above, the Termination Date shall be deemed to have occurred
automatically upon the occurrence of such event. At all times after the
declaration or automatic occurrence of the Termination Date pursuant to Section
8.2(a), (i) the PARCO Base Rate plus 2.00% plus the Applicable Margin shall be
the Tranche Rate applicable to the PARCO Net Investment for all existing and
future Tranches (ii) the Redwood Yield shall be payable with respect to the
Redwood Net Investment and (iii) the Liberty Base Rate plus 2.00% shall be
payable with respect to the Liberty Net Investment. If an event or condition
shall have occurred which constitutes a Potential Termination Event, the
Administrative Agent may, by notice to the Transferor, declare such event or
condition a Potential Termination Event.
(b) In addition, if any Termination Event or Potential Termination
Event occurs hereunder, (i) the Administrative Agent shall promptly notify the
Transferor in writing whether it has declared a Termination Event or a Potential
Termination Event and whether it will be exercising the remedies specified in
this Section 8.2, (ii) the Administrative Agent, on behalf of the Funding
Agents, the Initial Purchasers and the PARCO APA Banks, shall have all of the
rights and remedies provided to a secured creditor or a purchaser of accounts
under the Relevant UCC by applicable law in respect thereto, (iii) the Facility
Limit shall be reduced as of each calendar date thereafter to equal the
Aggregate Net Investment as of such date, (iv) each Purchase Limit shall be
reduced as of each calendar date thereafter to equal the applicable Net
Investment as of such date, (v) the Percentage Factor shall be increased to
100%, (vi) each Commitment shall be reduced as of each calendar date thereafter,
to equal its Pro Rata Share of 102% of the Aggregate Net Investment as of such
date, and (vii) no Commercial Paper with respect to the Transferor will
thereafter be issued by the Initial Purchasers.
ARTICLE IX
THE ADMINISTRATIVE AGENT
SECTION 9.1 Appointment. Each Initial Purchaser, PARCO APA Bank and
Funding Agent hereby irrevocably designates and appoints Chase as Administrative
Agent hereunder, and authorizes the Administrative Agent to take such action on
its behalf under the provisions of this Agreement and to exercise such powers
and perform such duties as are expressly delegated to the Administrative Agent
by the terms of this Agreement, together with such other powers as are
reasonably incidental thereto, unless as otherwise directed by the Required
Purchaser Groups. To the extent the Administrative Agent takes any such action,
the Transferor, each Seller, the Guarantor and the Collection Agent, in dealing
with the Administrative Agent, shall have the right to assume such approval has
been obtained and such direction is being followed absent actual knowledge to
the contrary. Notwithstanding any provision to the contrary elsewhere in this
Agreement, the Administrative Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any fiduciary
relationship with any Initial Purchaser, PARCO APA Bank or Funding Agent, and no
implied
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covenants, functions, responsibilities, duties, obligations or liabilities on
the part of the Administrative Agent shall be read into this Agreement or the
other Transaction Documents or shall otherwise exist against the Administrative
Agent. In performing its functions and duties hereunder, the Administrative
Agent shall act solely as the agent of the Initial Purchasers, the PARCO APA
Banks and the Funding Agents under the Transaction Documents, and the
Administrative Agent does not assume, nor shall be deemed to have assumed, any
obligation or relationship of trust or agency with or for any such Person.
SECTION 9.2 Delegation of Duties. The Administrative Agent may execute
any of its duties under this Agreement by or through its subsidiaries,
affiliates, agents or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Administrative
Agent shall not be responsible for the negligence or misconduct (other than the
gross negligence or willful misconduct) of any agents or attorneys-in-fact
selected by it with reasonable care.
SECTION 9.3 Exculpatory Provisions. (a) Notwithstanding any provision
of this Agreement or any other Transaction Document: (i) the Administrative
Agent shall not have any obligations under this Agreement or any other
Transaction Document other than those specifically set forth herein and therein,
and no implied obligations of the Administrative Agent shall be read into this
Agreement or any other Transaction Document; and (ii) in no event shall the
Administrative Agent be liable under or in connection with this Agreement or any
other Transaction Document for indirect, special, or consequential losses or
damages of any kind, including lost profits, even if advised of the possibility
thereof and regardless of the form of action by which such losses or damages
maybe claimed. Neither the Administrative Agent nor any of its respective
directors, officers, agents or employees shall be liable for any action taken or
omitted to be taken in good faith by it or them under or in connection with this
Agreement or any other Transaction Document, except for its or their own gross
negligence or willful misconduct. Without limiting the foregoing, the
Administrative Agent (a) may consult with legal counsel (including counsel for
the Initial Purchasers, the PARCO APA Banks and the Funding Agents), independent
public accountants and other experts selected by it and shall not be liable for
any action taken or omitted to be taken in good faith by it in accordance with
the advice of such counsel, accountants or experts, (b) shall not be responsible
to the Initial Purchasers, the PARCO APA Banks, the Funding Agents, the Sellers,
the Collection Agent or the Counterparties for any statements, warranties or
representations (other than its own statements) made in or in connection with
this Agreement or the other Transaction Documents, (c) shall not be responsible
to the Initial Purchasers, the PARCO APA Banks, the Funding Agents, the Sellers,
the Collection Agent or the Counterparties for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of this Agreement or
the other Transaction Documents (other than the legality, validity,
enforceability or genuineness of its own execution, authorization and
performance hereof and thereof), (d) shall incur no liability under or in
respect of any of the Commercial Paper or other obligations of the Initial
Purchasers, the PARCO APA Banks and the Counterparties under this Agreement or
the other Transaction Documents and (e) shall incur no liability under or in
respect of this Agreement or the other Transaction Documents by acting in good
faith upon any notice (including notice by telephone), consent, certificate or
other instrument or writing (which may be by facsimile) believed by it to be
genuine and signed or sent by the proper party or parties. Notwithstanding
anything else herein or in the other Transaction Documents, it is agreed that
where the Administrative Agent may be required under
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this Agreement or the other Transaction Documents to give notice of any event or
condition or to take any action as a result of the occurrence of any event or
the existence of any condition, the Administrative Agent agrees to give such
notice or take such action only to the extent that it has actual knowledge of
the occurrence of such event or the existence of such condition, and shall incur
no liability for any failure to give such notice or take such action in the
absence of such knowledge. All notices, documents and reports received by the
Administrative Agent hereunder or under the other Transaction Documents shall be
promptly provided by the Administrative Agent to each Funding Agent, by
facsimile or mail as deemed appropriate by the Administrative Agent.
SECTION 9.4 Reliance by Administrative Agent. The Administrative Agent
shall in all cases be entitled to rely, and shall be fully protected in relying,
in good faith, upon any note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or teletype message,
statement, order or other document or conversation believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to each of the Initial Purchasers, the Funding Agents and
the PARCO APA Banks), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent shall in all cases be fully
justified in failing or refusing to take any action in good faith under this
Agreement, any other Transaction Document or any other document furnished in
connection herewith or therewith unless it shall first receive such advice or
concurrence of the Funding Agents, as it deems appropriate, or it shall first be
indemnified to its satisfaction by the Funding Agents or otherwise against any
and all liability, cost and expense which may be incurred by it by reason of
taking or continuing to take any such action. The Administrative Agent shall in
all cases be fully protected in acting, or in refraining from acting, in good
faith under this Agreement, the other Transaction Documents or any other
document furnished in connection herewith or therewith in accordance with a
request of the Funding Agents, and such request and any action taken or failure
to act pursuant thereto shall be binding upon the Funding Agents, the Initial
Purchasers, the PARCO APA Banks and the Counterparties.
SECTION 9.5 Action Upon Events of Termination and Collection Agent
Defaults, Reports and Notices. To the extent the Administrative Agent is
entitled to consent to or withhold its consent of any waiver or amendment of
this Agreement or other Transaction Documents in accordance with the terms
hereof or thereof or otherwise take action upon the occurrence of a Termination
Event or a Collection Agent Default, the Administrative Agent shall (i) give
prompt notice to the Funding Agents of any such waiver, amendment, Termination
Event or Collection Agent Default of which it is aware and (ii) take such action
with respect to such waiver, amendment, Termination Event or Collection Agent
Default as shall be directed by all Funding Agents (unless the direction of the
Required Purchaser Groups or Required Participants is expressly required with
respect to a specific provision).
SECTION 9.6 Non-Reliance on Administrative Agent. Each of the parties
hereto expressly acknowledges that neither the Administrative Agent, nor any of
its officers, directors, employees, agents, attorneys-in-fact or affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent hereafter taken, including, without limitation, any review
of the affairs of either the Sellers or the Collection Agent, shall be deemed to
constitute any representation or warranty by the Administrative Agent. Except as
expressly
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provided herein, the Administrative Agent shall not have any duty or
responsibility to provide any Person other than each Funding Agent, each Initial
Purchaser or each PARCO APA Bank with any credit or other information concerning
the business, operations, property, prospects, financial and other condition or
creditworthiness of the Sellers, the Collection Agent, the Initial Purchasers,
the PARCO APA Banks, the Funding Agents or the Counterparties which may come
into the possession of the Administrative Agent or any of its officers,
directors, employees, agents, attorneys-in-fact or affiliates.
SECTION 9.7 Indemnification. The Funding Agents and the PARCO APA
Banks agree to indemnify the Administrative Agent and its officers, directors,
employees, representatives and agents (to the extent not reimbursed by the
Transferor or the Collection Agent under the Transaction Documents, and without
limiting the obligation of such Persons to do so in accordance with the terms of
the Transaction Documents), on a pro rata basis, from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever (including,
without limitation, the reasonable fees and disbursements of counsel for the
Administrative Agent or the affected Person in connection with any
investigative, administrative or judicial proceeding commenced or threatened,
whether or not the Administrative Agent or such affected Person shall be
designated a party thereto) that may at any time be imposed on, incurred by or
asserted against the Administrative Agent or such affected Person as a result
of, or arising out of, or in any way related to or by reason of, any of the
transactions contemplated hereunder or under the Transaction Documents or any
other document furnished in connection herewith or therewith (but excluding any
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting solely from the gross
negligence or willful misconduct of the Administrative Agent or such affected
Person).
SECTION 9.8 Successor Administrative Agent. The Administrative Agent
may, upon five (5) days' notice to each Funding Agent (with a copy to the
Transferor and the Collection Agent), and the Administrative Agent will, at the
direction of the Required Purchaser Groups, resign as Administrative Agent;
provided, in either case, that a Funding Agent or a PARCO APA Bank agrees to
become the successor Administrative Agent hereunder in accordance with the next
sentence with the approval of the Required Purchaser Groups. If the
Administrative Agent shall resign as Administrative Agent under this Agreement,
then the Required Purchaser Groups during such period shall appoint from among
the Funding Agents or the PARCO APA Banks a successor agent, whereupon such
successor agent shall succeed to the rights, powers and duties of the
Administrative Agent, and the term "Administrative Agent" shall mean such
successor agent, effective upon its acceptance of such appointment and its
delivery of a duly executed counterpart of this Agreement and an acknowledgment
to each Funding Agent, and the former Administrative Agent's rights, powers and
duties as Administrative Agent shall be terminated, without any other or further
act or deed on the part of such former Administrative Agent or any of the
parties to this Agreement. After the retiring Administrative Agent's resignation
hereunder as Administrative Agent, the provisions of this Article IX shall inure
to its benefit as to any actions taken or omitted to be taken by it while it was
Administrative Agent under this Agreement. Notice of the appointment of a
successor Administrative Agent shall be provided by the new Administrative Agent
to the Transferor and the Collection Agent.
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ARTICLE X
MISCELLANEOUS
SECTION 10.1 Term of Agreement. This Agreement shall terminate on the
date following the Termination Date upon which the Aggregate Net Investment has
been reduced to zero, and all accrued PARCO Discount, the Yield, Servicing Fees
and all other Aggregate Unpaids have been paid in full, in each case, in cash;
provided, however, that (i) the rights and remedies of the Administrative Agent,
each Funding Agent, the Initial Purchasers and the PARCO APA Banks with respect
to any representation and warranty made or deemed to be made by the Transferor
pursuant to this Agreement, (ii) the indemnification and payment provisions of
each Asset Purchase Agreement, (iii) the indemnification provisions in Section
6.6 and Article VII hereof, and (iv) the agreements set forth in Section 10.8
and 10.9 hereof, shall be continuing and shall survive any termination of this
Agreement.
SECTION 10.2 Waivers; Amendments. No failure or delay on the part of
the Administrative Agent, a Funding Agent, the Initial Purchasers or any PARCO
APA Bank in exercising any power, right or remedy under this Agreement shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such power, right or remedy preclude any other further exercise thereof or the
exercise of any other power, right or remedy. The rights and remedies herein
provided shall be cumulative and nonexclusive of any rights or remedies provided
by law. Any provision of this Agreement may be amended if, but only if, such
amendment is in writing and is signed by the parties hereto and the Required
Participants, and the Rating Agencies have provided in writing confirmation that
such amendment will not result in a reduction or withdrawal of the rating of any
Initial Purchaser's Commercial Paper; provided that the consent of the Redwood
Funding Agent shall be required for any amendment, modification or supplement
relating to (i) the addition of a Seller pursuant to Section 7.2 of the
Receivables Purchase Agreement, (ii) any reference herein, or in any other
Transaction Document, to Redwood, any Redwood Secured Parties, any Redwood
Program Document or Redwood Yield or any component thereof (including without
limitation the definition of any of the foregoing), (iii) the definitions of
"Interest Coverage Ratio," "Leverage Ratio," "Eligible Obligor," "Eligible
Receivables," "Termination Date," "Purchase Termination Date," "Required
Purchaser Groups," "Percentage Factor" and "Maximum Percentage Factor" and any
defined terms incorporated therein, (iv) the reduction or postponement of the
time for payment of any fee or other amount payable to or on behalf of Redwood
or (v) this Section 10.2; provided further, that the consent of the Liberty
Funding Agent shall be required for any amendment, modification or supplement
relating to (i) the addition of a Seller pursuant to Section 7.2 of the
Receivables Purchase Agreement, (ii) any reference herein, or in any other
Transaction Document, to Liberty, Liberty Purchase Limit, Liberty Net Investment
or Liberty Yield or any component thereof (including without limitation the
definition of any of the foregoing), (iii) the definitions of "Percentage
Factor" and "Maximum Percentage Factor" and any defined terms incorporated
therein, (iv) the reduction or postponement of the time for payment of any fee
or other amount payable to or on behalf of Liberty or (v) this Section 10.2.
SECTION 10.3 Notices. Except as provided below, all communications and
notices provided for hereunder shall be in writing (including telecopy or
electronic facsimile transmission or similar writing) and shall be given to the
other party at its address or telecopy
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number set forth below or at such other address or telecopy number as such party
may hereafter specify for the purposes of notice to such party. Each such notice
or other communication shall be effective (i) if given by telecopy, when such
telecopy is transmitted to the telecopy number specified in this Section 10.3
and confirmation is received, (ii) if given by mail three (3) Business Days
following such posting, postage prepaid, U.S. certified or registered, (iii) if
given by overnight courier, one (1) Business Day after deposit thereof with a
national overnight courier service, or (iv) if given by any other means, when
received at the address specified in this Section 10.3. However, anything in
this Section 10.3 to the contrary notwithstanding, the Transferor hereby
authorizes the Administrative Agent to effect Transfers, Tranche Period and
Tranche Rate selections based on telephonic notices made by any Person which the
Administrative Agent in good faith believes to be acting on behalf of the
Transferor. The Transferor agrees to deliver promptly to the Administrative
Agent (and the Administrative Agent will promptly deliver to each Funding Agent)
a written confirmation of each telephonic notice signed by an authorized officer
of Transferor. However, the absence of such confirmation shall not affect the
validity of such notice. If the written confirmation differs in any material
respect from the action taken by the Administrative Agent, the records of the
Administrative Agent shall govern absent manifest error.
If to the Initial Purchasers:
PARK AVENUE RECEIVABLES CORPORATION
c/o Global Securitization Services, LLC
25 West 43rd Street, Suite 704
New York, New York 10036
Attention: President
Telephone: (212) 302-5151
Telecopy: (212) 302-8767
(with a copy to the PARCO Funding Agent)
REDWOOD RECEIVABLES CORPORATION
c/o General Electric Capital Corporation
3001 Summer Street, 2nd Floor
Stamford, Connecticut 06927
Attention: Conduit Administrator
Telephone: (203) 961-5488
Telecopy: (203) 961-2953
If to the Redwood Funding Agent:
GENERAL ELECTRIC CAPITAL CORPORATION
201 High Ridge Road
Stamford, Connecticut 06927
Attention: Vice President-Portfolio/Collins & Aikman
Telephone: (203) 316-7608
Telecopy: (203) 316-7821
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LIBERTY STREET FUNDING CORP.
c/o Global Securitization Service, LLC
25 West 43rd Street, Suite 704
New York, New York 10036
Attention: Andrew L. Stidd
Telephone: (212) 302-8330
Telecopy: (212) 302-8767
With a copy to:
THE BANK OF NOVA SCOTIA
One Liberty Plaza
New York, New York 10006
Attention: Dorothy Poli
Telephone: (212) 225-5000
Telecopy: (212) 225-5090
If to the Transferor:
CARCORP, INC.
101 Convention Center Drive
Suite 850
Las Vegas, Nevada 89109
Attention: Monte Miller
Telephone: (702) 387-0864
Telecopy: (702) 598-3651
Payment Information:
US Bank of Nevada
Las Vegas, Nevada
ABA # 121201694
Account # 153700076455
Reference Name: Carcorp Inc.
If to COLLINS & AIKMAN PRODUCTS CO.:
COLLINS & AIKMAN PRODUCTS CO.
701 McCullough Drive
Charlotte, North Carolina 28262
Attention: Assistant Treasurer
Telephone: (704) 547-8500
Telecopy: (704) 548-2314
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If to the Administrative Agent:
THE CHASE MANHATTAN BANK
450 West 33rd Street
15th Floor
New York, NY 10001
Attention: Craig Kantor
Structured Finance Services
Telephone: (212) 946-7861
Telecopy: (212) 946-7776
If to the PARCO Funding Agent:
THE CHASE MANHATTAN BANK
450 West 33rd Street
15th Floor
New York, NY 10001
Attention: Craig Kantor
Structured Finance Services
Telephone: (212) 946-7861
Telecopy: (212) 946-7776
If to the PARCO APA Banks, at their respective addresses set forth in
the PARCO Asset Purchase Agreement.
SECTION 10.4 Governing Law, Submission to Jurisdiction, Integration.
(a) This Agreement shall be governed by, and construed in
accordance with the laws of the State of New York. Each of the parties hereto
hereby submits to the nonexclusive jurisdiction of the United States District
Court for the Southern District of New York and of any New York state court
sitting in The City of New York for purposes of all legal proceedings arising
out of or relating to this Agreement or the transactions contemplated hereby.
Each of the parties hereto hereby irrevocably waives, to the fullest extent it
may effectively do so, any objection which it may now or hereafter have to the
laying of the venue of any such proceeding brought in such a court and any claim
that any such proceeding brought in such a court has been brought in an
inconvenient forum. Nothing in this Section 10.4 shall affect the right of the
Administrative Agent, the Funding Agents, the Initial Purchasers or the PARCO
APA Banks to bring any action or proceeding against the Transferor, the
Guarantor, any Seller, the Collection Agent, or their respective properties in
the courts of other jurisdictions.
(b) Each of the parties hereto hereby waives any right to have a
jury participate in resolving any dispute, whether sounding in contract, tort or
otherwise among any of them arising out of, connected with, relating to or
incidental to the relationship between them in connection with this Agreement or
the other Transaction Documents.
(c) This Agreement and the other Transaction Documents contain the
final and complete integration of all prior expressions by the parties hereto
with respect to the subject
64
<PAGE>
matter hereof and shall constitute the entire Agreement among the parties hereto
with respect to the subject matter hereof superseding all prior oral or written
understandings.
SECTION 10.5 Severability; Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
Agreement. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
SECTION 10.6 Successors and Assigns. This Agreement shall be binding
on the parties hereto and their respective successors and assigns; provided,
however, that neither the Transferor, the Guarantor, C&A nor any other Seller
may assign any of its rights or delegate any of its duties hereunder or under
any of the other Transaction Documents to which it is a party without the prior
written consent of (i) the Administrative Agent and (ii) each Funding Agent
(which consent shall be obtained by the Administrative Agent). No provision of
this Agreement shall in any manner restrict the ability of the Initial
Purchasers or any PARCO APA Bank to assign, participate, grant security
interests in, or otherwise transfer any portion of the Transferred Interest. No
provision of the Transaction Documents shall in any manner restrict the ability
of PARCO to assign, participate, grant security interests in, or otherwise
transfer any portion of its PARCO Interest. Without limiting the foregoing,
PARCO may, in one or a series of transactions, transfer all or any portion of
its PARCO Interest, and its rights and obligations under the Transaction
Documents to a Conduit Assignee. No provision of the Transaction Documents shall
in any manner restrict the ability of Redwood to assign, participate, grant
security interests in, or otherwise transfer any portion of its interest in the
Transferred Interest. Without limiting the foregoing, Redwood may, in one or a
series of transactions, transfer all or any portion of its interest in the
Transferred Interest, and its rights and obligations under the Transaction
Documents to the Redwood Liquidity Lenders.
SECTION 10.7 Confidentiality.
(a) Each of the Transferor, the Guarantor, C&A and each other
Seller shall maintain, and shall cause each officer, employee and agent of
itself and its Affiliates to maintain, the confidentiality of the Transaction
Documents and all other confidential proprietary information with respect to the
Administrative Agent, the Initial Purchasers, the Funding Agents and the PARCO
APA Banks and each of their respective businesses obtained by them in connection
with the structuring, negotiation and execution of the transactions contemplated
herein and in the other Transaction Documents, except for information that has
become publicly available or information disclosed (i) to legal counsel,
accountants and other professional advisors to the Transferor, C&A, any other
Seller and their Affiliates, (ii) as required by law, regulation, the
requirements of the New York Stock Exchange or legal process or (iii) in
connection with any legal or regulatory proceeding to which the Transferor, the
Guarantor, C&A, any other Seller or any of their Affiliates is subject. Each of
the Transferor, the Guarantor, C&A and each other Seller hereby consents to the
disclosure of any non-public information with respect to it received by the
Administrative Agent, the Initial Purchasers, the Funding Agents or
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<PAGE>
any PARCO APA Bank from the Transferor, Guarantor, C&A or any other Sellers to
(i) any of the Initial Purchasers, the Administrative Agent, the Funding Agents,
any PARCO APA Bank, (ii) legal counsel, accountants and other professional
advisors to the Administrative Agent, the Initial Purchasers, the Funding
Agents, a PARCO APA Bank or their Affiliates, (iii) as required by law,
regulation or legal process, (iv) in connection with any legal or regulatory
proceeding to which the Administrative Agent, the Initial Purchasers, the
Funding Agents, a PARCO APA Bank or any of their Affiliates is subject, (v) any
nationally recognized rating agency providing a rating or proposing to provide a
rating to the Initial Purchasers' Commercial Paper, (vi) any placement agent
which proposes to offer and sell the Initial Purchasers' Commercial Paper, (vii)
any provider of the Initial Purchasers' program-wide liquidity or credit support
facilities, (viii) any potential PARCO APA Bank or (ix) any Participant or
potential Participant; provided, that the Administrative Agent, the Initial
Purchasers, the Funding Agents or any PARCO APA Bank, as the case may be, shall
advise any such recipient of information that the information they receive is
non-public information and may not be disclosed or used for any other purposes
other than that for which it is disclosed to such recipient without the prior
written consent of the Guarantor and C&A.
(b) Each of the Administrative Agent, the Initial Purchasers, the
Funding Agents and the PARCO APA Banks shall maintain, and shall cause each
officer, employee and agent of itself and its Affiliates to maintain, the
confidentiality of the Transaction Documents and all other confidential
proprietary information with respect to the Transferor, the Guarantor, C&A, any
other Seller and their Affiliates and each of their respective businesses
obtained by them in connection with the structuring, negotiation and execution
of the transactions contemplated herein and in the other Transaction Documents,
except for information that has become publicly available or information
disclosed (i) to legal counsel, accountants and other professional advisors to
the Administrative Agent, the Initial Purchasers, the Funding Agents, a PARCO
APA Bank or their Affiliates, (ii) as required by law, regulation or legal
process or (iii) in connection with any legal or regulatory proceeding to which
the Administrative Agent, the Initial Purchasers, the Funding Agents, a PARCO
APA Bank or any of their Affiliates is subject, (iv) any nationally recognized
rating agency providing a rating or proposing to provide a rating to the Initial
Purchasers' Commercial Paper, (v) any placement agent which proposes to offer
and sell the Initial Purchasers' Commercial Paper, (vi) any provider of the
Initial Purchasers' program-wide liquidity or credit support facilities, (vii)
any potential PARCO APA Bank or (viii) any Participant or potential Participant.
SECTION 10.8 No Bankruptcy Petition Against the Initial Purchasers.
Each of the Transferor, the Guarantor, C&A and each other Seller hereby
covenants and agrees that, prior to the date which is one year and one day after
the payment in full of all outstanding Commercial Paper or other indebtedness of
the Initial Purchasers, it will not institute against, or join any other Person
in instituting against, the Initial Purchasers any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings or other similar proceeding
under the laws of the United States or any State of the United States.
SECTION 10.9 Limited Recourse. Notwithstanding anything to the
contrary contained herein, the obligations of the Initial Purchasers under this
Agreement are solely the corporate obligations of the Initial Purchasers and, in
the case of obligations of the Initial Purchasers other than Commercial Paper,
shall be payable at such time as funds are actually
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<PAGE>
received by, or are available to, the Initial Purchasers in excess of funds
necessary to pay in full all outstanding Commercial Paper and, to the extent
funds are not available to pay such obligations, the claims relating thereto
shall not constitute a claim against the Initial Purchasers but shall continue
to accrue. Each party hereto agrees that the payment of any claim (as defined in
Section 101 of the Bankruptcy Code) of any such party shall be subordinated to
the payment in full of all Commercial Paper.
No recourse under any obligation, covenant or agreement of the Initial
Purchasers contained in this Agreement shall be had against any incorporator,
stockholder, officer, director, member, manager, employee or agent of the
Initial Purchasers, the PARCO Administrative Agent, the Administrative Agent, or
any of their Affiliates (solely by virtue of such capacity) by the enforcement
of any assessment or by any legal or equitable proceeding, by virtue of any
statute or otherwise; it being expressly agreed and understood that this
Agreement is solely a corporate obligation of the Initial Purchasers, and that
no personal liability whatever shall attach to or be incurred by any
incorporator, stockholder, officer, director, member, manager, employee or agent
of the Initial Purchasers, the PARCO Administrative Agent, the Administrative
Agent, or any of their Affiliates (solely by virtue of such capacity) or any of
them under or by reason of any of the obligations, covenants or agreements of
the Initial Purchasers contained in this Agreement, or implied therefrom, and
that any and all personal liability for breaches by the Initial Purchasers of
any of such obligations, covenants or agreements, either at common law or at
equity, or by statute, rule or regulation, of every such incorporator,
stockholder, officer, director, member, manager, employee or agent is hereby
expressly waived as a condition of and in consideration for the execution of
this Agreement; provided that the foregoing shall not relieve any such Person
from any liability it might otherwise have as a result of fraudulent actions
taken or fraudulent omissions made by them.
SECTION 10.10 Characterization of the Transactions Contemplated by the
Agreement.
(a) It is the intention of the parties that the transactions
contemplated hereby constitute the sale of the Transferred Interest, conveying
good title thereto free and clear of any Adverse Claims to the Initial
Purchasers, the PARCO APA Banks and the Funding Agents, and that the Transferred
Interest not be part of the Transferor's estate in the event of an insolvency.
If, notwithstanding the foregoing, the transactions contemplated hereby should
be deemed a financing, the parties intend that the Transferor shall be deemed to
have granted to the Administrative Agent, on behalf of the Initial Purchasers,
the PARCO APA Banks and the Funding Agents, and the Transferor hereby grants to
the Administrative Agent, on behalf of the Initial Purchasers, the PARCO APA
Banks and the Funding Agents, to secure the Aggregate Unpaids a first priority
perfected and continuing security interest in all of the Transferor's right,
title and interest in, to and under the Receivables, together with Related
Security, the Required Currency Hedge, and Collections and Proceeds with respect
thereto, together with all monies from time to time on deposit in the Collection
Account and any Lock-Box Account, and together with all of the Transferor's
rights under the Receivables Purchase Agreement and all other Transaction
Documents and any Proceeds of any of the foregoing assets (the "Transferor
Collateral"), and that this Agreement shall constitute a security agreement
under applicable Law. The Transferor hereby assigns to the Administrative Agent,
on behalf of the Initial Purchasers, the PARCO APA Banks and the Funding Agents,
all of its rights and remedies under the
67
<PAGE>
Receivables Purchase Agreement with respect to the Receivables and with respect
to any obligations thereunder of any Seller with respect to the Receivables. The
Transferor agrees that it shall not give any consent or waiver required or
permitted to be given under the Receivables Purchase Agreement without the prior
consent of each Funding Agent which consent shall be obtained by the
Administrative Agent.
(b) Each of the Transferor and the Collection Agent acknowledges
and consents to the grant by Redwood to the Redwood Collateral Agent pursuant to
the Redwood Collateral Agent Agreement of a security interest upon all of the
Administrative Agent's right, title and interest in, to and under the Transferor
Collateral on behalf of Redwood and acknowledges the rights of the Redwood
Collateral Agent thereunder and the covenants made by the Transferor in favor of
the Administrative Agent set forth therein, and further acknowledges and
consents that, upon the occurrence and during the continuance of a Potential
Termination Event or a Termination Event, the Administrative Agent shall enforce
the provisions of the Receivables Transfer Agreement and the Transaction
Documents to which Redwood is a party and the Redwood Collateral Agent shall be
entitled to all the rights and remedies of Redwood thereunder. In addition, each
of the Transferor and the Collection Agent hereby authorizes the Redwood
Collateral Agent to rely on the representations and warranties made by it in the
Transaction Documents to which it is a party and in any other certificates or
documents furnished by it to any party in connection therewith.
SECTION 10.11 Waiver of Setoff. Each of the Administrative Agent,
Funding Agents, the Transferor, the Guarantor, the Collection Agent, and each
Seller hereby waives any right of setoff it may have or to which it may be
entitled under this Agreement from time to time against the Initial Purchasers
or their assets.
SECTION 10.12 Chase Conflict Waiver. Chase acts as PARCO Funding Agent
and as PARCO Administrative Agent for PARCO, as issuing and paying agent for
PARCO's Commercial Paper, as provider of other backup facilities for PARCO, as
Administrative Agent hereunder, and may provide other services or facilities
from time to time (the "Chase Roles"). Without limiting the generality of
Section 4.8 of the PARCO Asset Purchase Agreement, each of the parties hereto
hereby acknowledges and consents to any and all Chase Roles, waives any
objections it may have to any actual or potential conflict of interest caused by
Chase's acting as the PARCO Funding Agent or as a PARCO APA Bank under the PARCO
Asset Purchase Agreement and acting as or maintaining any of the Chase Roles,
and agrees that in connection with any Chase Role, Chase may take, or refrain
from taking, any action which it in its discretion deems appropriate.
SECTION 10.13 GE Capital Conflict Waiver. GE Capital acts as Redwood
Funding Agent, as Redwood Collateral Agent, as Redwood Liquidity Agent and as a
Redwood Liquidity Lender and may provide other services or facilities from time
to time (the "GE Capital Roles"). Each of the parties hereto hereby acknowledges
and consents to any and all GE Capital Roles, waives any objections it may have
to any actual or potential conflict of interest caused by GE Capital's acting as
the Redwood Funding Agent or as a Redwood Collateral Agent, Redwood Liquidity
Lender or Redwood Liquidity Agent under the Redwood Liquidity Loan Agreement and
acting as or maintaining any of the GE Capital Roles, and agrees that in
connection with any
68
<PAGE>
GE Capital Role, GE Capital may take, or refrain from taking, any action which
it in its discretion deems appropriate.
SECTION 10.14 The Bank of Nova Scotia Conflict Waiver. The Bank of
Nova Scotia acts as Liberty Funding Agent and as Liberty Administrative Agent
for Liberty, as issuing and paying agent for Liberty's Commercial Paper, as
provider of other backup facilities for Liberty hereunder, and may provide other
services or facilities from time to time ("The Bank of Nova Scotia Roles"). Each
of the parties hereto hereby acknowledges and consents to any and all The Bank
of Nova Scotia Roles, waives any objections it may have to any actual or
potential conflict of interest caused by The Bank of Nova Scotia's acting as the
Liberty Funding Agent or as a Liberty APA Bank under the Liberty Liquidity Asset
Purchase Agreement and acting as or maintaining any of The Bank of Nova Scotia
Roles, and agrees that in connection with any The Bank of Nova Scotia Role, The
Bank of Nova Scotia may take, or refrain from taking, any action which it in its
discretion deems appropriate.
SECTION 10.15 Liability of Funding Agents. Notwithstanding any
provision of this Agreement, (i) the Funding Agents shall not have any
obligations under this Agreement other than those specifically set forth herein,
and no implied obligations of the Funding Agents shall be read into this
Agreement; and (ii) in no event shall the Funding Agents be liable under or in
connection with this Agreement for indirect, special, or consequential losses or
damages of any kind, including lost profits, even if advised of the possibility
thereof and regardless of the form of action by which such losses or damages may
be claimed. Neither the Funding Agents nor any of their directors, officers,
agents or employees shall be liable for any action taken or omitted to be taken
in good faith by them under or in connection with this Agreement, except for its
or their own gross negligence or willful misconduct. Without limiting the
foregoing, a Funding Agent (a) may consult with legal counsel (including counsel
for the Initial Purchasers), independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be
taken in good faith by it in accordance with the advice of such counsel,
accountants or experts, (b) shall not be responsible to the Administrative
Agent, the Initial Purchasers, the Transferor, the Guarantor, any Seller or the
Collection Agent for any statements, warranties or representations (other than
their own respective statements) made in or in connection with this Agreement or
the other Transaction Documents, (c) shall not be responsible to the
Administrative Agent, the Initial Purchasers, the Guarantor, the Transferor, any
Seller or the Collection Agent for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or the other
Transaction Documents, (other than the legality, validity, enforceability or
genuineness of its own execution, authorization and performance hereof and
thereof), (d) shall incur no liability under or in respect of any of the
Commercial Paper or other obligations of the Initial Purchasers under this
Agreement or the other Transaction Documents and (e) shall incur no liability
under or in respect of this Agreement or the other Transaction Documents by
acting upon any notice (including notice by telephone), consent, certificate or
other instrument or writing (which may be by facsimile) believed by it to be
genuine and signed or sent by the proper party or parties. Notwithstanding
anything else herein or in the other Transaction Documents, it is agreed that
where a Funding Agent may be required under this Agreement or the other
Transaction Documents to give notice of any event or condition or to take any
action as a result of the occurrence of any event or the existence of any
condition, each Funding Agent agrees to give such notice or take such action
only to the extent that it has actual knowledge of the occurrence of such event
or the existence of
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<PAGE>
such condition, and shall incur no liability for any failure to give such notice
or take such action in the absence of such knowledge.
SECTION 10.16 Tax Treatment. The Transferor has entered into this
Agreement with the intention that, for Federal, State and local income, single
business and franchise tax purposes, the Incremental Transfers will qualify as
indebtedness of the Transferor secured by the Receivables, Related Security, the
Required Currency Hedge, Collections and Proceeds with respect thereto. Each of
the parties hereto agree to treat the Incremental Transfers for Federal, State
and local income, single business and franchise tax purposes as indebtedness of
the Transferor.
SECTION 10.17 Canadian Taxes. The Transferor represents and warrants
to the Administrative Agent and each Funding Agent for the benefit of the
Initial Purchasers and PARCO APA Banks that it has not assumed in any manner
whatsoever any obligation of the Sellers under the Receivables Purchase
Agreement (i) to make collections and remittances in respect of any Canadian
goods and services tax, any Canadian provincial sales tax or any other similar
Canadian tax or (ii) to file any returns in respect of such taxes with Canadian
tax authorities and that it was not contemplated by either any Seller under the
Receivables Purchase Agreement or the Transferor that such obligation was to be
assumed by the Transferor. The parties hereto agree that neither the
Administrative Agent, the Initial Purchasers nor the PARCO APA Banks are
assuming the in any manner whatsoever any obligation of the Sellers under the
Receivables Purchase Agreement to collect such taxes, make such remittances and
file such returns, and that it is not contemplated by the parties hereto that
any such obligation is hereby assumed by the Initial Purchasers, the PARCO APA
Banks, the Administrative Agent or any Funding Agent. The Transferor hereby
indemnifies the Administrative Agent and each Funding Agent for the benefit of
the Initial Purchasers and PARCO APA Banks and holds them harmless from and
against any assessments, withholding taxes, claims, or other demands for payment
of such taxes by Canadian tax authorities, as well as interest and penalties;
provided that any payments made by the Transferor pursuant to this subsection
shall be made solely from funds available to the Transferor which are not
otherwise required to be applied to the payment of any amounts pursuant to this
Agreement (other than to the Transferor), shall be non-recourse other than with
respect to such funds, and shall not constitute a claim against the Transferor
to the extent that insufficient funds exist to make such payment. It is
understood that all of the invoices in respect of the Receivables with Canadian
Obligors of the Sellers under the Receivables Purchase Agreement will bear the
GST registration number of such Seller.
SECTION 10.18 Funding Agent Consents. For instances where the
Administrative Agent has undertaken to obtain the consents of the Funding
Agents, the Administrative Agent agrees that it will seek to obtain such
consents without unreasonable delay.
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IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Receivables Transfer Agreement as of the date first written
above.
PARK AVENUE RECEIVABLES
CORPORATION, as an Initial Purchaser
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
CARCORP, INC., as Transferor
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
COLLINS & AIKMAN PRODUCTS CO., as
Guarantor and as Collection Agent
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
THE CHASE MANHATTAN BANK, as
PARCO Funding Agent
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
THE CHASE MANHATTAN BANK, as
Administrative Agent
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
THE CHASE MANHATTAN BANK, as a
Liquidity Bank
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE>
REDWOOD RECEIVABLES CORPORATION, as
an Initial Purchaser
By:
---------------------------------
Name: Denis M. Creeden
Title: Assistant Secretary
GENERAL ELECTRIC CAPITAL CORPORATION,
as Redwood Funding Agent
By:
---------------------------------
Name: Denis M. Creeden
Title: Duly Authorized Signatory
LIBERTY STREET FUNDING CORP., as an
Initial Purchaser
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
THE BANK OF NOVA SCOTIA, as Liberty
Funding Agent
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
<PAGE>
EXHIBIT A
Credit and Collection Policy
A-1
<PAGE>
EXHIBIT B
List of Lock-Box Banks and Accounts
<TABLE>
<CAPTION>
BANK ACCOUNT NUMBER
- ---- --------------
<S> <C>
Northern Trust Bank 76279
50 South LaSalle Street 30176279
Chicago, IL 60675 30276279
Canadian Imperial Bank of Commerce 22-43318
1155 Ren-L vesque West 12th Floor 04-46718
Montreal (Quebec) Canada H3B3Z4
Toronto Dominion Bank 0311544
Commercial Banking Centre 0685452
Windsor, Ontario N9A 6J8 0685460
Canada 0685479
0686467
7302759
7302783
7302872
7320196
Wachovia Bank, N.A. 1860-084622
400 South Tryon Street 1867-084609
Charlotte, North Carolina 28202 1865-084610
1863-084611
1861-084612
1869-084613
1867-084614
U.S. Collection Account - Chase Manhattan Bank 323883680
Canada/CAD Collection Account - Toronto Dominion Bank 317569
Canada/USD Collection Account - Toronto Dominion Bank 7305758
</TABLE>
B-1
<PAGE>
EXHIBIT C
[Form Of Lock-Box Agreement]
[Date]
[Name and Address
of Lock-Box Bank]
Re: Carcorp., Inc.
Lock-Box Account No[s].
Ladies and Gentlemen:
Carcorp, Inc. (the "Transferor") hereby notifies you that in
connection with certain transactions involving its accounts receivable, it has
transferred exclusive dominion of its lock-box account no[s].
maintained with you (collectively the "Accounts") to The
Chase Manhattan Bank, as administrative agent (the "Administrative Agent") and
that Transferor will transfer exclusive control of the Accounts to the
Administrative Agent effective upon delivery to you of the Notice of
Effectiveness (as hereinafter defined). The accounts receivables are being
transferred to the Transferor pursuant to the Receivables Purchase Agreement,
among Collins & Aikman Products Co. and its direct and indirect Subsidiaries
named therein, each as sellers, and the Transferor as the Purchaser and the
other sellers from time to time named therein and, transferred by the Transferor
to the Administrative Agent on behalf of the Initial Purchasers and the PARCO
APA Banks pursuant to the Receivables Transfer Agreement, among the Transferor,
Collins & Aikman Products Co., as guarantor and as collection agent (in its
capacity as collection agent, the "Collection Agent"), Park Avenue Receivables
Corporation, Redwood Receivables Corporation, Liberty Street Funding Corp., the
PARCO APA Banks (as listed on Schedule I to the Receivables Transfer Agreement),
the Funding Agents (as listed on Schedule I to the Receivables Transfer
Agreement) and the Administrative Agent.
In furtherance of the foregoing, Transferor and the Administrative
Agent hereby instruct you, beginning on the date of your receipt of the Notice
of Effectiveness: (i) to collect the monies, checks, instruments and other items
of payment mailed to the Accounts, (ii) to deposit into the Accounts all such
monies, checks, instruments and other items of payment or all funds collected
with respect thereto (unless otherwise instructed by the Administrative Agent);
and (iii) to transfer all funds deposited and collected in the Accounts pursuant
to instructions given to you by the Administrative Agent from time to time.
You are hereby further instructed: (i) unless and until the
Administrative Agent notifies you to the contrary at any time after your receipt
of the Notice of Effectiveness, to make such transfers from the Accounts at such
times and in such manner as Collection Agent, in its capacity as Collection
Agent for the Administrative Agent, shall from time to time instruct to the
extent such instructions are not inconsistent with the instructions set forth
herein, and (ii) to permit the Collection Agent (in its capacity as Collection
Agent for the Administrative Agent) and the Administrative Agent to obtain upon
request any information relating to the Accounts, including, without limitation,
any information regarding the balance or activity of the Accounts.
C-1
<PAGE>
Transferor also hereby notifies you that, beginning on the date of
your receipt of the Notice of Effectiveness and notwithstanding anything herein
or elsewhere to the contrary, but subject to the concurrent rights of the
Collection Agent in the preceding paragraph, the Administrative Agent, and not
Transferor or the Collection Agent, shall be irrevocably entitled to exercise
any and all rights in respect of or in connection with the Accounts, including,
without limitation, the right to specify when payments are to be made out of or
in connection with the Accounts. The Administrative Agent have a continuing
interest in all of the checks and their proceeds and all monies and earnings, if
any, thereon in the Accounts, and you shall be the Administrative Agent's agent
for the purpose of holding and collecting such property. The monies, checks,
instruments and other items of payment mailed to, and funds deposited to, the
Accounts will not be subject to deduction, set-off, banker's lien, or any other
right in favor of any person other than the Administrative Agent (except that
you may set off (i) all amounts due to you in respect of your customary fees and
expenses for the routine maintenance and operation of the Accounts, and (ii) the
face amount of any checks which have been credited to the Accounts but are
subsequently returned unpaid because of uncollected or insufficient funds).
This Agreement may not be terminated at any time by Transferor or you
without providing thirty (30) days' prior written notice to the Administrative
Agent and the Collection Agent. Neither this Agreement nor any provision hereof
may be changed, amended, modified or waived orally but only by an instrument in
writing signed by the Administrative Agent, Transferor and you.
You shall not assign or transfer your rights or obligations hereunder
(other than to the Administrative Agent) without thirty (30) days' prior written
notice to the Administrative Agent and Transferor. Subject to the preceding
sentence, this Agreement shall be binding upon each of the parties hereto and
their respective successors and assigns, and shall inure to the benefit of, and
be enforceable by, the Administrative Agent, each of the parties hereto and
their respective successors and assigns.
You hereby represent that the person signing this Agreement on your
behalf is duly authorized by you to so sign.
You agree to give the Administrative Agent, Transferor and Collection
Agent prompt notice if the Accounts become subject to any writ, garnishment,
judgment, warrant of attachment, execution or similar process.
TRANSFEROR AGREES TO INDEMNIFY AND HOLD YOU HARMLESS FROM AND AGAINST
ANY AND ALL LIABILITIES, LOSSES, COSTS AND EXPENSES (INCLUDING REASONABLE
ATTORNEYS' FEES) WHICH YOU MAY SUFFER OR INCUR IN CONNECTION WITH THIS AGREEMENT
OR THE MAINTENANCE OF THE ACCOUNTS, INCLUDING BUT NOT LIMITED TO THOSE WHICH IN
WHOLE OR IN PART ARISE OUT OF YOUR NEGLIGENCE, BUT NOT INCLUDING THOSE ARISING
OUT OF YOUR GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. IN NO EVENT SHALL YOU BE
LIABLE FOR ANY INCIDENTAL, INDIRECT, PUNITIVE OR CONSEQUENTIAL DAMAGES.
C-2
<PAGE>
Notwithstanding any other provision of this Agreement, you shall not
be liable for any failure, inability to perform, or delay in performance
hereunder, if such failure, inability, or delay is due to acts of God, war,
civil commotion, governmental action, fire, explosion, terrorist activities,
strikes, other industrial disturbances, equipment malfunction, outages of
computers, action, non-action or delayed action on the part of Transferor,
Collection Agent or the Administrative Agent, or any other entity or any other
causes that are beyond your reasonable control, or for any such failure, or
delay resulting from your reasonable belief that the action would violate any
guideline, rule or regulation of any governmental authority.
Any notice, demand or other communication required or permitted to be
given hereunder shall be in writing and may be personally served or sent by
facsimile or by courier service or by United States mail and shall be deemed to
have been delivered when delivered in person or by courier service or by
facsimile or three (3) Business Days after deposit in the United States mail
(registered or certified, with postage prepaid and properly addressed). For the
purposes hereof, the addresses of the parties hereto shall be as set forth below
each party's name below, or, as to each party, at such other address as may be
designated by such party in a written notice to the other party and the
Administrative Agent.
Please agree to the terms of, and acknowledge receipt of, this notice
by signing in the space provided below.
C-3
<PAGE>
The transfer of control of the Accounts, referred to in the first
paragraph of this letter, shall become effective upon delivery to you of a
notice (the "Notice of Effectiveness") in substantially the form attached hereto
as Annex "1".
Very truly yours,
CARCORP, INC.
By:
------------------------------
Title:
---------------------------
Date:
----------------------------
Bank of America Plaza
300 South Fourth Street, Suite 1100
Las Vegas, NV 89101
Attention: Monte Miller
Facsimile No.: (702) 598-3651
ACKNOWLEDGED AND AGREED:
[NAME OF LOCK-BOX BANK] THE CHASE MANHATTAN BANK, as
Administrative Agent
By: By:
-------------------------------------- ------------------------------
Title: Title:
----------------------------------- ---------------------------
Date: Date:
------------------------------------ ----------------------------
[Address] 450 West 33rd Street
Attention: 15th Floor
-------------------------------
Facsimile No.: New York, NY 10001
---------------------------
Attention: Craig Kantor
Facsimile No.: (212) 946-7776
COLLINS & AIKMAN PRODUCTS CO., as Collection Agent
By:
--------------------------------------
Title:
-----------------------------------
Date:
------------------------------------
701 McCullough Drive
P.O. Box 32665
Charlotte, NC 28232
Attention: Assistant Treasurer
Facsimile No.: (704) 548-2314
C-4
<PAGE>
ANNEX I
TO LOCK-BOX AGREEMENT
[FORM OF NOTICE OF EFFECTIVENESS]
DATED: , 199
----------- --
TO: [Name of Lock-Box Bank]
[Address]
ATTN:
Re: Lock-Box Account No[s].
Ladies and Gentlemen:
We hereby give you notice that the transfer of control of the
above-referenced Lock-Box Account[s], as described in our letter agreement with
you dated , 199 is effective as of the
date hereof. You are hereby instructed to comply immediately with the
instructions set forth in that letter.
Very truly yours,
CARCORP, INC.
By:
-------------------------
Title:
----------------------
ACKNOWLEDGED AND AGREED:
[NAME OF LOCK-BOX BANK]
By:
--------------------------------------
Title:
-----------------------------------
Date:
------------------------------------
[Address]
Attention:
-------------------------------
Facsimile No.:
---------------------------
C-5
<PAGE>
EXHIBIT D
[FORM OF SETTLEMENT REPORT]
D-1
<PAGE>
EXHIBIT E
[FORM OF WEEKLY REPORT]
E-1
<PAGE>
EXHIBIT F
[FORM OF DAILY REPORT]
F-1
<PAGE>
EXHIBIT G
[FORM OF TRANSFER CERTIFICATE]
TRANSFER CERTIFICATE
Reference is made to the Receivables Transfer Agreement dated as of
December __, 1999 (the "Agreement") among Carcorp, Inc., as transferor (in such
capacity, the "Transferor"), Collins and Aikman Products Co., as Guarantor and
as Collection Agent (in such capacity, the "Collection Agent"), Park Avenue
Receivables Corporation, Redwood Receivables Corporation and Liberty Street
Funding Corporation ("the Initial Purchasers"), the several financial
institutions party thereto from time to time as PARCO APA Banks, the Funding
Agents, and The Chase Manhattan Bank, as administrative agent (the
"Administrative Agent"). Terms defined in the Agreement, or incorporated therein
by reference, are used herein as therein defined.
The Transferor hereby conveys, transfers and assigns to the
Administrative Agent, for the benefit of the Initial Purchasers and the PARCO
APA Banks, an undivided ownership interest in the Receivables and the Related
Security, the Required Currency Hedge, Collections and Proceeds with respect
thereto (each, an "Incremental Transfer"). Each Incremental Transfer by the
Transferor to the Initial Purchasers, and each reduction or increase in the
Aggregate Net Investment in respect of each Incremental Transfer evidenced
hereby, shall be indicated by the Administrative Agent on the grid attached
hereto which is part of this Transfer Certificate.
This Transfer Certificate is made without recourse except as otherwise
provided in the Agreement.
This Transfer Certificate shall be governed by, and construed in
accordance with, the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned has caused this Transfer
Certificate to be duly executed and delivered by its duly authorized officer as
of the date first above written.
CARCORP, INC.
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
G-1
<PAGE>
GRID
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Amount of Transfer Allocated to: Aggregate Net
-------------
Investment (Giving
------------------
Date of Incremental Amount of Effect to Incremental Person Making
-------------------- ---------- ---------------------- -------------
Transfer Incremental Transfer PARCO Liberty Redwood PARCO APA Transfer) Notation
-------- -------------------- ----- ------- ------- --------- -------- --------
Banks
-----
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
G-2
<PAGE>
EXHIBIT H
LIST OF TRANSFEROR'S ACTIONS AND SUITS
None.
H-1
<PAGE>
EXHIBIT I
LIST OF COLLECTION AGENT'S ACTIONS AND SUITS
I-1
<PAGE>
EXHIBIT J
LOCATION OF RECORDS AND RELATED SECURITY FOR THE TRANSFEROR
Bank of America Plaza
300 South Fourth Street
Suite 1100
Las Vegas, Nevada 89101
701 McCallough Drive
Charlotte, North Carolina 28262
J-1
<PAGE>
EXHIBIT K
LIST OF SUBSIDIARIES, DIVISIONS AND TRADENAMES
<TABLE>
<CAPTION>
Principal Divisions/
place of Trade-
business State of names
Name of Company Corporate Address (state) incorporation (if any)
- --------------- ----------------- ------- ------------- --------
<S> <C> <C> <C> <C>
Collins & Aikman Products 701 McCullough Drive North Carolina Delaware none
Co. Charlotte, NC 28262
Carcorp, Inc. Bank of America Plaza Nevada Delaware none
300 South Fourth Street
Suite 1100
Las Vegas, NV 89101
Collins & Aikman North America Michigan Delaware none
Carpet & Acoustics (MI) Head Office/Tech. Center
Inc. 47785 Anchor Court
Plymouth, MI 48170
Collins & Aikman 2409 Industrial Drive Tennessee Tennessee none
Carpet & Acoustics (TN) Springfield, TN 37172
Inc.
Collins & Aikman Canton Plant Ohio Delaware The Akro
Accessory Mats Inc. 1212 Seventh St. SW Corporation
Canton, OH 44711
Dura Convertible East Plant Michigan Delaware none
Systems, Inc. 1365 East Beecher Street
Adrian, MI 49221
Amco Convertible Adrian Plant Michigan Delaware none
Fabrics, Inc. ("Amco") 545 Industrial Drive
Adrian, MI 49247
Collins & Aikman 5755 New King Court Michigan Delaware none
Plastics, Inc. Troy, MI 48098
</TABLE>
K-1
<PAGE>
<TABLE>
<CAPTION>
Principal Divisions/
place of Trade-
business State of names
Name of Company Corporate Address (state) incorporation (if any)
- --------------- ----------------- ------- ------------- --------
<S> <C> <C> <C> <C>
Collins & Aikman Farnham Plant Quebec Ontario none
Canada Inc. 150 Collins Street
Farnham, Quebec
J2N 2N8
Collins & Aikman Scarborough Division Ontario Ontario none
Plastics, Ltd. 165 Milner Ave.
Scarborough, Ontario M1S 4G7
</TABLE>
List of Former Names and Merged Companies
K-2
<PAGE>
EXHIBIT L
Form of Secretary's Certificate
I, , the undersigned [Assistant] Secretary of
(the "Company"), a
Delaware corporation, DO HEREBY CERTIFY that:
1. Attached hereto as Annex A is a true and complete copy of the
Certificate of Incorporation of the Company, certified by the Secretary of State
of the State of Delaware.
2. Attached hereto as Annex B is a true and complete copy of the
By-laws of the Company as in effect on the date hereof.
3. Attached hereto as Annex C is a true and complete copy of the
resolutions duly adopted by the Board of Directors of the Company adopted on
December __, 1999, authorizing the execution, delivery and performance of each
of the documents mentioned therein, which resolutions have not been revoked,
modified, amended or rescinded and are still in full force and effect.
4. Attached hereto as Annex D are copies of good standing
certificates of the Company certified by the Securities of State of the States
of Delaware and .
5. On and as of the date hereof, the below-named persons are duly
qualified officers or representatives of the Company holding the respective
offices or positions below set opposite their names and are authorized to
execute on behalf of the Company all of the Transaction Documents (as defined in
the below-mentioned Receivables Transfer Agreement) to which the Company is a
party and the signatures below set opposite their names are their genuine
signatures:
Name Office Signature
- ---- ------ ---------
L-1
<PAGE>
Capitalized terms not otherwise defined herein shall have the meanings
set forth in the Receivables Transfer Agreement, dated December 27, 1999 among
Carcorp, Inc., as Transferor, Collins & Aikman Products Co., as Guarantor and
Collection Agent, Park Avenue Receivables Corporation, as an Initial Purchaser,
Redwood Receivables Corporation, as an Initial Purchaser, Liberty Street Funding
Corp., as an Initial Purchaser, the several financial institutions party thereto
from time to time, as PARCO APA Banks, the several agent banks party thereto
from time to time, as Funding Agents, and The Chase Manhattan Bank, as
Administrative Agent.
WITNESS my hand and seal of the Company as of this 27th day of
December 1999.
- ------------------------------
Name:
Title: [Assistant] Secretary]
[SEAL]
I, , the undersigned, a of the
Company, DO HEREBY CERTIFY that:
1. is the duly elected and qualified
[Assistant] Secretary of the Company and the signature above is his genuine
signature.
2. The representations and warranties of the Company contained in
each of the Transaction Documents to which the Company is a party are true and
correct as if made on the date hereof.
WITNESS my hand as of this 27th day of December 1999.
- ------------------------------
Name:
Title:
L-2
<PAGE>
EXHIBIT M
AGREED UPON PROCEDURES
M-1
<PAGE>
EXHIBIT N
[FORM OF GUARANTY]
LIMITED GUARANTY
This Limited Guaranty (as amended, supplemented or otherwise modified
and in effect from time to time, the "Guaranty") is executed as of the 27th day
of December, 1999 by Collins & Aikman Products Co., a corporation organized and
existing under the laws of the State of Delaware (the "Guarantor"), in favor of
The Chase Manhattan Bank, as administrative agent (in such capacity, the
"Administrative Agent"), on behalf of the Funding Agents, the Initial Purchasers
and the PARCO APA Banks (together, the Funding Agents, the Initial Purchasers
and the PARCO APA Banks are referred to herein as the "Beneficiaries").
PRELIMINARY STATEMENTS
WHEREAS, pursuant to a receivables purchase agreement, dated as of
December 27, 1999 (as amended, supplemented or otherwise modified and in effect
from time to time, the "Receivables Purchase Agreement"), between Collins &
Aikman Products Co. ("C&A"), C&A's wholly-owned direct and indirect Subsidiaries
listed on Schedule D attached thereto, each as a seller thereunder (each a
"Seller", and collectively, the "Sellers"), and Carcorp, Inc., a Delaware
corporation (the "Receivables Company"), as purchaser thereunder, each Seller
has agreed to sell from time to time, and Receivables Company has agreed to
purchase from time to time, the Receivables;
WHEREAS, pursuant to (i) a Receivables Transfer Agreement, dated as of
December 27, 1999 (as amended, supplemented or otherwise modified and in effect
from time to time, the "Receivables Transfer Agreement"), between C&A, as
Guarantor and as collection agent thereunder (the "Collection Agent"),
Receivables Company, as transferor thereunder, the Initial Purchasers, the PARCO
APA Banks from time to time party thereto, the Funding Agents and the
Administrative Agent, (ii) an Asset Purchase Agreement, dated as of December 27,
1999 (as amended, supplemented or otherwise modified and in effect from time to
time, the "PARCO Asset Purchase Agreement"), by and among PARCO, the PARCO APA
Banks and the PARCO Funding Agent, (iii) the Redwood Liquidity Loan Agreement
and (iv) the Liberty Liquidity Asset Purchase Agreement, Receivables Company has
agreed to sell from time to time, and the Administrative Agent, on behalf of the
Initial Purchasers and the PARCO APA Banks, has agreed to purchase from time to
time, on the terms and conditions set forth in the Receivables Transfer
Agreement and the Asset Purchase Agreements, undivided interests in the
Receivables;
WHEREAS, the Guarantor is the direct or indirect owner of 100% of the
outstanding capital stock of each of the other Sellers; and
WHEREAS, it is a condition precedent to the execution and delivery of
the Receivables Transfer Agreement that the Guarantor execute this Guaranty and
deliver it to the Administrative Agent for the benefit of the Beneficiaries.
In consideration for the execution and delivery of the Receivables
Transfer Agreement and the Asset Purchase Agreements by the Beneficiaries, as
applicable, and for other good and
N-1
<PAGE>
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the Guarantor, the Guarantor agrees as follows:
1. Definitions. Unless otherwise defined in this Guaranty,
capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in, or incorporated by reference into, the
Receivables Transfer Agreement. As used herein, "Facility Documents" shall mean,
collectively, the Receivables Purchase Agreement, the Receivables Transfer
Agreement and each Asset Purchase Agreement.
2. Guaranty of Obligations. The Guarantor unconditionally
guarantees the full and prompt payment when due of all of the payment
obligations and the timely performance of all of the performance obligations of
the Sellers of every kind and nature now or hereafter existing, or due or to
become due, under the Facility Documents (collectively, the "Obligations");
provided that, such Obligations shall not include amounts not collected in
respect of any Receivable as a result of the creditworthiness of an Obligor,
including, but not limited to, amounts required to be returned to an Obligor as
a voidable preference. The Guarantor shall pay all reasonable costs and expenses
including, without limitation, all court costs and reasonable attorney's fees
and expenses paid or incurred by the Administrative Agent and the Beneficiaries
in connection with (a) the collection of all or any part of the Obligations from
the Guarantor and (b) the prosecution or defense of any action by or against the
Administrative Agent, the Beneficiaries or Receivables Company in connection
with, or relating to, the Obligations, whether involving the Sellers, the
Collection Agent, the Guarantor, Receivables Company or any other party
(including, but not limited to, a trustee in a bankruptcy or a
debtor-in-possession).
3. Validity of Obligations; Irrevocability. The Guarantor agrees
that subject to the proviso set forth in Section 2 above its obligations under
this Guaranty shall be unconditional, irrespective of (i) the validity,
enforceability, discharge, disaffirmance, settlement or compromise (by any
Person, including a trustee in a bankruptcy or a debtor-in-possession) of the
Obligations or of the Facility Documents or any Contract, (ii) the absence of
any attempt to collect the Obligations from a Seller or the Collection Agent or
any other party, (iii) the waiver or consent by any Person with respect to any
provision of any instrument evidencing the Obligations, (iv) any change of the
time, manner or place of payment or performance, or any other term of any of the
Obligations, (v) any law, regulation or order of any jurisdiction affecting any
term of any of the Obligations or rights of any Person with respect thereto,
(vi) the failure by any Person to take any steps to perfect and maintain
perfected its interest in the Receivables or any security or collateral related
to the Obligations or (vii) any other circumstances which might otherwise
constitute a legal or equitable discharge or defense of a guarantor. The
Guarantor agrees that the Administrative Agent and the Beneficiaries shall be
under no obligation to marshal any assets in favor or against or in payment of
any or all of the Obligations. The Guarantor further agrees that, to the extent
a payment is made by a Seller or the Collection Agent under the Facility
Documents, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to such Seller or the Collection Agent, its estate,
trustee, receiver or any other party, under any bankruptcy, insolvency or
similar state or federal law, common law or equitable cause, then to the extent
of such payment or repayment, the Obligation or part thereof which has been
paid, reduced or satisfied by such amount shall be reinstated and continued in
full force and effect as of the date such initial payment, reduction or
satisfaction occurred. The Guarantor waives all set-offs and
N-2
<PAGE>
counterclaims and all presentments, demands for performance, notices of dishonor
and notice of acceptance of this Guaranty. The Guarantor agrees that its
obligations under this Guaranty shall be irrevocable.
4. Several Obligations. The obligations of the Guarantor hereunder
are separate and apart from the Sellers or any other Person, and are primary
obligations concerning which the Guarantor is the principal obligor. The
Guarantor agrees that this Guaranty shall not be discharged except by payment in
full of the Obligations and complete performance of the obligations of the
Guarantor hereunder. The obligations of the Guarantor hereunder shall not be
affected in any way by the release or discharge of a Seller from the performance
of any of the Obligations (other than the full and final payment of all of the
Obligations), whether occurring by reason of law or any other cause, whether
similar or dissimilar to the foregoing.
5. Subrogation Rights. If any amount shall be paid to the
Guarantor on account of subrogation rights at any time when all the Obligations
shall not have been paid in full, such amount shall be held in trust for the
benefit of the Administrative Agent, on behalf of the Beneficiaries, and shall
forthwith be paid to the Administrative Agent to be applied to the Obligations.
If (a) the Guarantor shall make payment to the Administrative Agent of or
perform all or any part of the Obligations and (b) all the Obligations shall be
paid and performed in full, the Administrative Agent will, at the Guarantor's
request, execute and deliver to the Guarantor appropriate documents, without
recourse and without representation or warranty, necessary to evidence the
transfer by subrogation to the Guarantor of any interest in the Obligations
resulting from such payment or performance by the Guarantor. The Guarantor
hereby agrees that it shall have no rights of subrogation with respect to
amounts due to the Administrative Agent or the Beneficiaries until such time as
all obligations of the Sellers to the Receivables Company, the Administrative
Agent and the Beneficiaries have been paid or performed in full and the
Receivables Transfer Agreement has been terminated.
6. Rights of Set-Off. The Guarantor hereby authorizes the
Administrative Agent, on behalf of the Beneficiaries, at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and
all deposits (whether general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by the Administrative
Agent or the Beneficiaries to or for the credit or the account of Receivables
Company against any and all of the obligations of the Guarantor now or hereafter
existing under this Guaranty. The Guarantor hereby acknowledges that rights of
the Administrative Agent, on behalf of the Beneficiaries, described in this
Section 4 are in addition to all other rights and remedies (including, without
limitation, other rights of set-off) the Administrative Agent and the
Beneficiaries may have.
7. Representations and Warranties. The Guarantor hereby represents
and warrants to the Administrative Agent, for the benefit of the Beneficiaries,
as of the date hereof, as follows:
a. Corporate Existence and Power. The Guarantor is a
corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation and has all
corporate power and all material governmental licenses,
authorizations, consents and approvals required to carry on its
business in each jurisdiction in which its business is now conducted.
The Guarantor is duly qualified to do
N-3
<PAGE>
business in, and is in good standing in, every other jurisdiction in
which the nature of its business requires it to be so qualified,
except where the failure to be so qualified or in good standing would
not have a Material Adverse Effect.
b. Corporate and Governmental Authorization; Contravention.
The execution, delivery and performance by the Guarantor of this
Guaranty and the other Facility Documents to which the Guarantor is a
party are within the Guarantor's corporate powers, have been duly
authorized by all necessary corporate action, require no action by or
in respect of, or filing with, any Official Body or official thereof,
and do not contravene, or constitute a default under, any provision of
applicable law, rule or regulation or of the Certificate of
Incorporation or Bylaws of the Guarantor or of any material agreement,
judgment, injunction, order, writ, decree or other instrument binding
upon the Guarantor or result in the creation or imposition of any
Adverse Claim on the assets of the Guarantor or any of its
Subsidiaries.
c. Binding Effect. Each of this Guaranty and the other
Facility Documents to which the Guarantor is a party constitutes the
legal, valid and binding obligation of the Guarantor, enforceable in
accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws affecting the rights of
creditors and general equitable principles (whether considered in a
proceeding at law or in equity).
d. Accuracy of Information. All information heretofore
furnished by the Guarantor to the Administrative Agent or the
Beneficiaries for purposes of or in connection with this Guaranty, the
other Facility Documents or any transaction contemplated hereby or
thereby is, and all such information hereafter furnished by the
Guarantor to the Administrative Agent or the Beneficiaries will be,
true and accurate in every material respect on the date such
information is stated or certified.
e. Tax Status. The Guarantor has filed all tax returns
(Federal, state and local) required to be filed and has paid prior to
delinquency or made adequate provision for the payment of all taxes,
assessments and other governmental charges (including for such
purposes, the setting aside of appropriate reserves for taxes,
assessments and other governmental charges being contested in good
faith).
f. Action, Suits. There are no actions, suits or proceedings
pending, or to the knowledge of the Guarantor threatened, against or
affecting the Guarantor or any Affiliate of the Guarantor or their
respective properties, in or before any court, arbitrator or other
body, which may, individually or in the aggregate, have a Material
Adverse Effect.
g. Not an Investment Company. The Guarantor is not, nor is it
controlled by, an "investment company" within the meaning of the
Investment Company Act of 1940, as amended, or is exempt from all
provisions of such Act.
h. Year 2000. The Guarantor has reviewed the areas within its
business and operations which it believes would reasonably be expected
to be materially adversely affected by, and has developed a plan to
address on a timely basis, the "Year 2000
N-4
<PAGE>
Problem" (that is, the risk that computer applications used by the
Collection Agent may be unable to recognize and perform properly
date-sensitive functions involving certain dates occurring in or after
the year 2000).
8. Governing Law. The Guaranty shall be governed by, and construed
in accordance with, the laws of the State of New York.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
N-5
<PAGE>
IN WITNESS WHEREOF, this Guaranty has been duly executed by the
Guarantor as of the 27th day of December, 1999.
COLLINS & AIKMAN PRODUCTS CO.,
as Guarantor
By:
-----------------------------
Name:
Title:
Acknowledged and accepted as of
The date first above written:
THE CHASE MANHATTAN BANK,
As Administrative Agent for the benefit of Beneficiaries
By:
-----------------------------
Name:
Title:
N-6
<PAGE>
EXHIBIT O
[FORM OF REQUIRED CURRENCY HEDGE ASSIGNMENT]
WHEREAS, Carcorp, Inc. (the "Transferor"), Collins & Aikman Products
Co., in its capacity as Guarantor and Collection Agent (the "Collection Agent"),
the Initial Purchasers, the PARCO APA Banks and The Chase Manhattan Bank, not in
its individual capacity, but solely as administrative agent (in such capacity,
the "Administrative Agent") have entered into a Receivables Transfer Agreement
(as amended, supplemented or otherwise modified from time to time, the
"Receivables Transfer Agreement") dated as of December 27, 1999, providing for,
among other things, the transfer of undivided percentage interests in certain
receivables and related assets thereunder;
WHEREAS, the Transferor and the Sellers have entered into the
Receivables Purchase Agreement dated as of December 27, 1999 to provide for the
sale of the Receivables and the Related Security;
WHEREAS, the Transferor has entered into a Required Currency Hedge
with The Chase Manhattan Bank; and
WHEREAS, pursuant to subsection 5.1(n)(ii) of the Receivables Transfer
Agreement, the Transferor has agreed to deliver this Required Currency Hedge
Assignment of the Required Currency Hedge to the Administrative Agent for the
benefit of the Initial Purchasers, the PARCO APA Banks and the Funding Agents;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, the parties hereto agree as follows:
I Definitions. Capitalized terms used in this Required Currency
Hedge Assignment shall have the respective meanings assigned to such terms in
the Annex X to the Receivables Transfer Agreement.
II Assignment. In order to secure and to provide for the payment
of amounts due pursuant to the Receivables Transfer Agreement, the Transferor
hereby assigns, conveys, transfers, delivers and sets over unto the
Administrative Agent, its successors and assigns, and grants to the
Administrative Agent in each case for the benefit of the Initial Purchasers, the
PARCO APA Banks and the Funding Agents, a security interest in, all right, title
and interest of the Transferor in and to the Required Currency Hedge including,
without limitation, all moneys due and to become due to the Transferor
thereunder or in connection therewith, whether payable as fees, expenses, costs,
indemnities, damages for the breach of such Required Currency Hedge or
otherwise, and all rights, remedies, powers, privileges and claims of the
Transferor under or with respect to such Required Currency Hedge (whether
arising pursuant to the terms of such Required Currency Hedge or otherwise
available to the Transferor at law or in equity), including, without limitation,
the right of the Transferor to enforce the obligations of the Counterparties
thereunder and to give or withhold any and all consents, requests, notices,
directions, approvals, extensions or waivers under or with respect to such
Required Currency Hedge to the same extent as the Transferor could but for the
assignment and security interest granted hereby.
O-1
<PAGE>
III Successors and Assigns. This Required Currency Hedge
Assignment and the covenants set forth herein shall be binding upon and inure to
the benefit of the Transferor, the Administrative Agent, the Funding Agents, the
Initial Purchasers and the PARCO APA Banks, respectively, and their respective
successors and permitted assigns.
IV Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
V Limitation of Liability. It is expressly understood and agreed
by the parties hereto that (a) this Required Currency Hedge Assignment is
executed and delivered by The Chase Manhattan Bank, not individually or
personally but solely as Administrative Agent, in the exercise of the powers and
authority conferred and vested in it, (b) each of the representations,
undertakings and agreements herein made on the part of the Administrative Agent
are made and intended not as personal representations, undertakings and
agreements by The Chase Manhattan Bank, (c) nothing herein contained shall be
construed as creating any liability of the Administrative Agent, individually or
personally, to perform any covenant under the Required Currency Hedge Assignment
either expressed or implied contained herein, all such liability, if any, being
expressly waived by the parties who are signatories to this Required Currency
Hedge Assignment and by any Person claiming by, through or under such parties;
provided, however, the Administrative Agent shall be liable in its individual
capacity for its own willful misconduct or negligence and (d) under no
circumstances shall the Administrative Agent be personally liable for the
payment of any indebtedness or expenses or be liable for the breach or failure
of any obligation, representation, warranty or covenant made or undertaken under
any Required Currency Hedge Assignment; provided further, that the foregoing
clauses (a) through (d) shall survive the resignation or removal of the
Administrative Agent.
The Transferor hereby agrees to indemnify and hold harmless the
Administrative Agent, the Funding Agents, the Initial Purchasers and the PARCO
APA Banks (each, an "indemnified person") from and against any loss, liability,
expense, damage or injury suffered or sustained by reason of any acts, omissions
or alleged acts or omissions arising out of, or relating to, activities of the
Transferor pursuant to any Required Currency Hedge Assignment to which it is a
party, including but not limited to any judgment, award, settlement, reasonable
attorneys' fees and other reasonable costs or expenses incurred in connection
with the defense of any actual or threatened action, proceeding or claim, except
to the extent such loss, liability, expense, damage or injury resulted from the
negligence, bad faith or willful misconduct of an indemnified person; provided
that any payments made by the Transferor pursuant to this subsection shall be
made solely from funds available to the Transferor which are not otherwise
required to be applied to the payment of any amounts pursuant to the Receivables
Transfer Agreement (other than to the Transferor), shall be non-recourse other
than with respect to such funds, and shall not constitute a claim against the
Transferor to the extent that insufficient funds exist to make such payment.
O-2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Required
Currency Hedge Assignment to be executed as of the date first above written by
their respective duly authorized officers.
CARCORP, INC.
By:
-------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, not in
its individual capacity, but solely
as Administrative Agent
By:
-------------------------------
Name:
Title:
ACKNOWLEDGED:
[NAME OF COUNTERPARTY]
By:
-------------------------------
Name:
Title:
O-3
<PAGE>
ANNEX X
"Additional Amounts" means any amounts payable to any Affected Party
under Section 2.15 of the Receivables Transfer Agreement.
"Additional Seller Supplement" shall mean each such Additional Seller
Supplement, substantially in the form of Exhibit C to the Receivables Purchase
Agreement.
"Adjusted Carrying Cost Reserve Ratio" shall mean, as of any Monthly
Settlement Report Date and continuing until, but not including, the next Monthly
Settlement Report Date, an amount (expressed as a percentage) equal to (i) the
product of (a) 1.5 times Days Sales Outstanding as of such day and (b) the
highest Base Rate in effect as of such day plus 1.25%, divided by (ii) 365.
"Adjusted Servicing Fee Reserve Ratio" shall mean, as of any Monthly
Settlement Report Date and continuing until, but not including, the next Monthly
Settlement Report Date, an amount, expressed as a percentage, equal to (i) the
product of (A) the Servicing Fee Percentage and (B) 1.5 times Days Sales
Outstanding as of such earlier Monthly Settlement Report Date divided by (ii)
360.
"Administrative Agent" shall mean Chase, as administrative agent on
behalf of the Initial Purchasers, the PARCO APA Banks and the Funding Agents,
and its permitted successors and assigns in such capacity.
"Advance" shall have the meaning specified in subsection 3.2(a) of the
Receivables Purchase Agreement.
"Advance Limit" shall have the meaning specified in subsection 3.2(a)
of the Receivables Purchase Agreement.
"Adverse Claim" shall mean a lien, security interest, charge or
encumbrance, or other right or claim in, of or on any Person's assets or
properties in favor of any other Person (including any UCC financing statement
or any similar instrument filed against such Person's assets or properties),
other than a Permitted Encumbrance.
"Affected APA Bank" shall have the meaning specified in Section 5.5(c)
of the PARCO Asset Purchase Agreement.
"Affected Party" means each of the following persons: each Initial
Purchaser, each Funding Agent, the Administrative Agent, each PARCO APA Bank,
each Liberty APA Bank and each Affiliate of the foregoing persons.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. A Person shall be deemed to control another
Person if the controlling Person possesses, directly or indirectly, the power to
direct or cause the direction of the management or policies of the controlled
Person, whether through ownership of voting stock, by contract or otherwise.
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"Aged Receivables Ratio" shall mean, as of the last day of each
Settlement Period, the percentage equivalent of a fraction, the numerator of
which shall be the sum of (a) the aggregate unpaid balance of Receivables that
were 61 to 90 days past due and (b) the aggregate amount of Receivables that
were charged off as uncollectible prior to the day that is 91 days after its
original due date during such Settlement Period, and the denominator of which
shall be the aggregate amount of all Receivables originated or acquired by the
Sellers during the fourth prior Settlement Period (including the Settlement
Period ended on such day).
"Aggregate Commitment" shall mean, at any time, the sum of the
Commitments then in effect, as set forth in Schedule I to the Receivables
Transfer Agreement.
"Aggregate Net Investment" shall mean, at any time, the sum of the
PARCO Net Investment, the Redwood Net Investment and the Liberty Net Investment.
"Aggregate Unpaids" shall mean, at any time, an amount equal to the
sum of (i) the aggregate accrued and unpaid PARCO Discount with respect to all
Tranche Periods or Settlement Periods, as applicable, at such time, (ii) the
aggregate accrued and unpaid Redwood Yield at such time, (iii) the aggregate
accrued and unpaid Liberty Yield at such time, (iv) the Aggregate Net Investment
at such time, (v) any Additional Amounts, (vi) any Indemnified Amounts and (vii)
all other amounts owed (whether due or accrued) hereunder by the Transferor or
the Guarantor to each Initial Purchaser and the PARCO APA Banks at such time.
"Applicable Margin" shall mean on any date of determination, (i) for
Eurodollar Tranche Periods, 1.50%; provided however that after the occurrence of
a Termination Event or Potential Termination Event, the Applicable Margin shall
equal 2.25% and (ii) for BR Tranche Periods 0.75%; provided, however that after
the occurrence of a Termination Event or Potential Termination Event, the
Applicable Margin shall equal 1.25%.
"Asset Purchase Agreement" shall mean the PARCO Asset Purchase
Agreement, the Liberty Liquidity Asset Purchase Agreement and the Redwood
Liquidity Loan Agreement.
"Authorized Foreign Exchange Dealer" shall mean any foreign exchange
dealer authorized by applicable law to deal and engage in foreign exchange
transactions relating to Canadian Dollars selected by the Collection Agent and
reasonably acceptable to the Administrative Agent.
"Bankruptcy Code" shall mean 11 U.S.C.(Section)101-1330.
"Base Rate" or "BR" shall mean the PARCO Base Rate or the Liberty Base
Rate, as applicable.
"Benefit Plan" shall mean any employee benefit plan as defined in
Section 3(3) of ERISA in respect of which the Transferor, a Seller or any ERISA
Affiliate of the Transferor or a Seller is, or at any time during the
immediately preceding six (6) years was, an "employer" as defined in Section
3(5) of ERISA.
"Business Day" shall mean (i) with respect to any matters relating to
the Eurodollar Rate, a day on which banks are open for business in The City of
New York and on
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which dealings in Dollars are carried on in the London interbank
market and (ii) for all other purposes, any day other than a Saturday, Sunday or
other day on which banking institutions or trust companies in the State of New
York generally or The City of New York are authorized or obligated by law,
executive order or governmental decree to be closed.
"C&A" shall mean Collins & Aikman Products Co., a Delaware
corporation, and its permitted successors and assigns.
"Canada/Canadian Dollar Collection Account" shall have the meaning
specified in subsection 2.12(a) of the Receivables Transfer Agreement.
"Canada/U.S. Dollar Collection Account" shall have the meaning
specified in subsection 2.12(a) of the Receivables Transfer Agreement.
"Canadian Dollar Receivables" shall mean Receivables payable in
Canadian Dollars sold to the Transferor pursuant to the Receivables Purchase
Agreement.
"Canadian Dollars" shall mean dollars in lawful currency of Canada.
"Canadian Exchange Percentage" shall mean, at any date of
determination, the rate at which Canadian Dollars may be exchanged into U.S.
Dollars (expressed as the percentage of Canadian Dollars per U.S. Dollars), as
reported in The Wall Street Journal on the immediately preceding Business Day.
In the event that such rate does not appear in The Wall Street Journal on such
immediately preceding Business Day, the Canadian Exchange Percentage shall be
determined by reference to the relevant Bloomberg currency page (or, if such
rate does not appear on any Bloomberg currency page, on the relevant page of the
Reuters Monitor Money Rates Service) as of the close of business of the
immediately preceding Business Day. In the event that such rate does not appear
on any Bloomberg page or the relevant page of the Reuters Monitor Money Rates
Service, the Canadian Exchange Percentage shall be determined by reference to
such other publicly available service for displaying exchange rates with respect
to Canadian Dollars as may be selected by the Administrative Agent, and prior to
a Termination Event or Potential Termination Event, which is not reasonably
objected to by the Transferor.
"Capitalized Lease" of a Person shall mean any lease of property by
such Person as lessee which would be capitalized on a balance sheet of such
Person prepared in accordance with GAAP.
"Carrying Cost Reserve Ratio" shall mean as of any Monthly Settlement
Report Date and continuing until, but not including, the next Monthly Settlement
Report Date, an amount (expressed as a percentage) equal to (i) the product of
(a) two (2) times Days Sales Outstanding as of such day and (b) the highest Base
Rate in effect as of such day plus 1.25%, divided by (ii) 365.
"Change in Control" shall have the meaning as defined in the Senior
Credit Facility.
"Charges" shall mean (i) all federal, state, county, city, municipal,
local, foreign or other governmental taxes (including taxes owed to the PBGC at
the time due and payable); (ii)
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all levies, assessments, charges or claims of any governmental entity or any
claims of statutory lienholders, the nonpayment of which could give rise by
operation of law to a Lien or Adverse Claim and (iii) any such taxes, levies,
assessment, charges or claims which constitute a lien or encumbrance on any
property of any Seller or the Transferor.
"Chase" shall mean The Chase Manhattan Bank, in its individual
capacity, and its successors and assigns.
"Chase Roles" shall have the meaning specified in Section 4.10 of the
PARCO Asset Purchase Agreement and Section 10.12 of the Receivables Transfer
Agreement.
"Closing Date" shall mean December 27, 1999.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations promulgated thereunder.
"Collection Accounts" shall mean the accounts, established by the
Administrative Agent, for the benefit of the Initial Purchasers and the PARCO
APA Banks, pursuant to subsection 2.12(a) of the Receivables Transfer Agreement.
"Collection Agent" shall mean, at any time, the Person then authorized
pursuant to Section 6.1 of the Receivables Transfer Agreement to service,
administer and collect Receivables and initially shall be C&A.
"Collection Agent Default" shall have the meaning specified in Section
6.4 of the Receivables Transfer Agreement.
"Collections" shall mean, with respect to any Receivable, all cash
collections and other cash proceeds of such Receivable, including, without
limitation, all Finance Charges, if any, and cash proceeds of Related Security
with respect to such Receivable and any Deemed Collections.
"Commercial Paper" shall mean the short-term promissory notes of the
Initial Purchasers issued by the Initial Purchasers in the United States
commercial paper market.
"Commitments" shall mean each of the PARCO APA Bank Commitments, the
Liberty Liquidity Commitment and the Redwood Liquidity Commitment.
"Concentration Factor" shall mean, on any day with respect to any
Obligor, except for a Special Obligor, a percentage equal to the following:
(i) with respect to Receivables of any Obligor with short-term or
long-term ratings of at least A-1 or A by S&P, respectively, and at least
P-1 or A2 by Moody's respectively, 12.0%;
(ii) with respect to Receivables of any Obligor with short-term or
long-term ratings of at least A-2 or BBB by S&P, respectively, and at
least P-2 or Baa2 by Moody's, respectively, 6.0%;
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(iii) with respect to Receivables of any Obligor with short-term and
long-term ratings at or below A-3 or BBB- by S&P, respectively, and P-3 or
Baa3 by Moody's, respectively, 3.0%; and
(iv) with respect to Receivables of any Obligor with no short-term or
long-term ratings by S&P and Moody's, 3.0%.
The Concentration Factor for Obligors with split ratings shall be
determined based upon the lower of the two ratings.
"Conduit Assignee" shall mean any special purpose vehicle issuing
indebtedness in the commercial paper market that is administered by Chase.
"Contract" shall mean, with respect to a Obligor, an agreement
governing the sale of merchandise or the rendering of services by the related
Seller and pursuant to which such Obligor shall be obligated to pay for such
merchandise or services.
"Contributed Receivables" shall have the meaning specified in
subsection 3.2(b) of the Receivables Purchase Agreement.
"Conversion/Continuation Notice" shall have the meaning specified in
Section 2.16 of the Receivables Transfer Agreement.
"Counterparty" shall mean a Person who is a party to a Required
Currency Hedge with the Transferor.
"CP Holder" shall mean any Person that holds record or beneficial
ownership of Commercial Paper.
"CP Rate" shall mean the PARCO CP Rate or the Liberty CP rate, as
applicable.
"Credit and Collection Policy" shall mean the Sellers' credit and
collection policy or policies relating to Contracts and Receivables existing on
the Closing Date and referred to in Exhibit A attached to the Receivables
Transfer Agreement, as amended, supplemented or otherwise modified and in effect
from time to time in compliance with subsection 5.2(c) of the Receivables
Transfer Agreement.
"Daily Report" shall mean a report, in substantially the form attached
to the Receivables Transfer Agreement as Exhibit F.
"Days Sales Outstanding" shall mean, as of any Monthly Settlement
Report Date and continuing until (but not including) the next Monthly Settlement
Report Date, the number of calendar days equal to the product of (i) 91 and (ii)
the amount obtained by dividing (A) the Net Receivables Balance as of the last
day of the Settlement Period immediately preceding such earlier Monthly
Settlement Report Date by (B) the aggregate principal amount of Receivables
which arose during the three (3) consecutive Settlement Periods immediately
preceding such earlier Monthly Settlement Report Date.
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"Decrease" shall have the meaning set forth in Section 2.20 of the
Receivables Transfer Agreement.
"Deemed Collections" shall mean any Collections on any Receivable
deemed to have been received pursuant to subsection 2.9(a) of the Receivables
Transfer Agreement.
"Defaulted Receivable" shall mean a Receivable: (i) as to which any
payment, or part thereof (other than as a result of a Dilution Adjustment),
remains unpaid for ninety (90) days or more from the original due date for such
Receivable; (ii) as to which an Event of Bankruptcy has occurred and is
continuing with respect to the Obligor thereof; (iii) which has been identified
by the Transferor, C&A or the applicable Seller as uncollectible; or (iv) which,
in accordance with the Credit and Collection Policy, has been or should be
written off as uncollectible.
"Defaulting PARCO APA Bank" shall have the meaning specified in
subsection 2.2(b) of the PARCO Asset Purchase Agreement.
"Delinquent Receivable" shall mean a Receivable as to which any
payment, or part thereof, remains unpaid for more than sixty (60) days or more
from the original due date for such Receivable.
"Diluted Receivable" shall mean any Receivable which is the subject of
a reduction or cancellation as a result of any defective, rejected or returned
merchandise or services and all credits, rebates, discounts, disputes, warranty
claims, repossessed or returned goods, chargebacks, allowances, other dilutive
factors and any other billing or other adjustment (whether effected through the
granting of credits against the applicable Receivables or by the issuance of a
check or other payment in respect of (and as payment for) such reduction).
"Dilution Adjustments" shall mean, collectively, the adjustments,
cancellations and reductions described in the definition of "Diluted
Receivable."
"Dilution Horizon" shall mean the number of days from the invoicing of
a Receivable until a Dilution Adjustment with respect to such Receivable is
issued by a Seller or a Seller receives notice that a Dilution Adjustment will
have to be issued in respect of such Receivable.
"Dilution Horizon Factor" shall mean (i) for the period from the
Closing Date until the sixth Monthly Settlement Report Date, 1.83 and (ii) for
any six-month period thereafter (beginning and ending on a Monthly Settlement
Report Date) a fraction, the numerator of which is the dollar weighted average
Dilution Horizon of the Sellers (based upon the Dilution Adjustment of the
selected Receivables) for such period (which shall be calculated by the
Collection Agent, in accordance with its past procedures for such calculations),
and the denominator of which is 30; provided however, that if the Dilution
Horizon Factor for any period is less than the Dilution Horizon Factor for the
immediately preceding period, then the actual Dilution Horizon Factor for such
current period shall be recalculated to equal a fraction, the numerator of which
is equal to the average of the numerators used to calculate the Dilution Horizon
Factor for such immediately preceding period and such current period and the
denominator of which is 30.
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"Dilution Period" shall mean as of any Monthly Settlement Report Date
and continuing until (but not including) the next Monthly Settlement Report
Date, the quotient of (i) the product of (A) the principal amount of Receivables
originated or acquired by the Sellers during the Settlement Period immediately
preceding such earlier Monthly Settlement Report Date and (B) the Dilution
Horizon Factor divided by (ii) the Net Receivables Balance as of the last day of
the Settlement Period preceding such earlier Monthly Settlement Report Date.
"Dilution Ratio" shall mean, as of the last day of each Settlement
Period, the percentage equivalent of a fraction, the numerator of which is the
aggregate amount of Dilution Adjustments made during such Settlement Period and
the denominator of which is the aggregate principal amount of all Receivables
originated or acquired by the Sellers during the Settlement Period immediately
preceding the Settlement Period ended on such day.
"Dilution Reserve Ratio" shall mean, as of any Monthly Settlement
Report Date, and continuing until (but not including) the next Monthly
Settlement Report Date, an amount (expressed as a percentage) that is calculated
as follows:
DRR = [(c * d) + [(e-d) * (e/d)]] * f
Where:
DRR = Dilution Reserve Ratio;
c = 2.0;
d = the twelve-month rolling average of the Dilution Ratio that occurred
during the period of twelve consecutive Settlement Periods ending
immediately prior to such earlier Monthly Settlement Report Date;
e = the highest Dilution Ratio that occurred during the period of twelve
consecutive Settlement Periods ending prior to such earlier Monthly
Settlement Report Date; and
f = the Dilution Period.
"Dollars" or "$" shall mean the lawful currency of the United States.
"Early Collection Fee" shall mean, for any Tranche Period during which
the portion of the PARCO Net Investment that was allocated to such Tranche
Period is reduced for any reason whatsoever, the excess, if any, of (i) the
additional PARCO Discount that would have accrued during such Tranche Period if
such reductions had not occurred, minus (ii) the income, if any, received by the
recipient of such reductions from investing the proceeds of such reductions.
"EBITDA" shall have the meaning defined in the Senior Credit Facility.
"Eligible Counterparty" shall mean a Counterparty with commercial
paper or short-term deposit ratings of A-1+ or P-1, or such other rating as
shall be required in the Asset Purchase Agreement. The initial Eligible
Counterparty shall be The Chase Manhattan Bank.
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"Eligible Obligor" shall mean as of any date of determination, each
Obligor, in respect of a Receivable, that satisfies the following eligibility
criteria:
(i) it is a resident of the United States; provided however, that
Obligors resident in Canada shall be deemed to be Eligible Obligors if (x)
the Receivables of such Obligor would otherwise be Eligible Receivables and
(y) the aggregate principal amount of such Receivables does not exceed
20.0% of the Outstanding Balance of the Eligible Receivables then held by
the Transferor; provided further, that if an Obligor is located in the
Northwest Territories, it shall not be deemed to be an Eligible Obligor
until, as evidenced by an opinion of counsel, all actions are taken that
are required to be taken to perfect the Transferor's security interest in
the Receivables of any such Obligor and such Obligor is approved by S&P;
(ii) it is not a domestic or foreign government or any agency,
department or instrumentality thereof;
(iii) it is not a Seller or an Affiliate of a Seller;
(iv) it is not the subject of an Event of Bankruptcy; and
(v) it is not an Obligor with respect to which more than 25% of
its outstanding Receivables are more than sixty (60) days past due.
"Eligible Receivable" shall mean, at any time, any Receivable:
(i) which has been (a) either originated by a Seller or acquired by a
Seller from an Affiliate, and (b) subsequently sold to the Transferor
pursuant to (and in accordance with) the Receivables Purchase
Agreement, and to which the Transferor has good title thereto, free
and clear of all Adverse Claims;
(ii) which is not a Defaulted Receivable or Delinquent Receivable;
(iii) which is an "account" or "general intangible" (and not "chattel
paper" or an "instrument") within the meaning of Article 9 of the
Relevant UCC; or, if applicable, under the provisions of similar
legislation of any province of Canada;
(iv) which is denominated and required to be settled only in U.S. Dollars
or Canadian Dollars in the United States or Canada, provided that if
the Required Currency Hedge is not in place or a Counterparty ceases
to be an Eligible Counterparty and is not replaced within thirty (30)
days (or, in the event the Counterparty's commercial paper rating or
short-term deposit rating is withdrawn or downgraded below A-2 or
P-2, five (5) days), then Canadian Dollar Receivables will not be
included as Eligible Receivables; and provided further that if the
Required Currency Hedge is for a notional amount less than the
Required Hedge Notional Amount, then the principal amount of Canadian
Dollar Receivables included as Eligible Receivables will be limited
to the actual notional amount of the Required Currency Hedge
calculated using the Valuation Price;
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(v) which, arises under a Contract that, together with the Receivable
related thereto, is in full force and effect and constitutes the
legal, valid and binding obligation of the related Obligor,
enforceable against such Obligor in accordance with its terms,
except as may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium or similar Laws relating to or affecting
creditors' rights generally and (b) general principles of equity,
including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and the possible
unavailability of specific performance, regardless of whether
considered in a proceeding at equity or at law;
(vi) which (i) does not contravene any applicable law, rule or
regulation and the applicable Seller is not in violation of any
law, rule or regulation in connection with it, in each case which
would in any way render such Receivable unenforceable or would
otherwise impair in any material respect the collectibility of such
Receivable and (ii) is not subject to any investigation or
proceeding known by such Seller that would reasonably be expected
to adversely affect its payment or enforceability;
(vii) which is an account receivable representing all or part of the
sales price of merchandise, insurance or services within the
meaning of Section 3(c)(5) of the Investment Company Act of 1940,
as amended, and is an "eligible asset" as defined in Rule 3a-7
under such Act;
(viii) which is not a Receivable for which the applicable Seller has
established an offsetting specific reserve; provided that a
Receivable subject only in part to the foregoing shall be an
Eligible Receivable to the extent not so subject;
(ix) which is not a Receivable with original payment terms in excess of
sixty (60) days from its original billing date, or in respect of
which the applicable Seller has (i) altered the basis of the aging
from the initial due date for payment such that the final due date
extends to a date more than sixty (60) days from its original due
date or (ii) otherwise made any modification except in the ordinary
course of business and consistent with the Credit and Collection
Policy of such Seller;
(x) as to which, all required consents, approvals and authorizations
(including, without limitation, any consent of the Obligor thereof
required for the assignment and sale thereof to the Transferor
and/or the Initial Purchasers) have been obtained;
(xi) as to which the applicable Seller is not in default in any material
respect under the terms of the Contract, if any, from which such
Receivable arose;
(xii) as to which all right, title and interest has been validly sold to
the Transferor by the applicable Seller pursuant to the Receivables
Purchase Agreement and by the Transferor to the Administrative
Agent on behalf of the Initial Purchasers or the PARCO APA Banks
pursuant to the Receivables Transfer Agreement;
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(xiii) as to which (together with the Collections and Related Security)
the Transferor or the Administrative Agent on behalf of the Initial
Purchasers (or the PARCO APA Banks) will have legal and beneficial
ownership therein free and clear of all liens other than Permitted
Encumbrances and such Receivable (together with the Collections and
Related Security) has been the subject of either a valid transfer
from the Transferor to the Administrative Agent on behalf of the
Initial Purchasers (or the PARCO APA Banks) or, alternatively, the
grant of a first priority perfected security interest therein to
the Administrative Agent on behalf of the Initial Purchasers (or
the PARCO APA Banks) free and clear of all liens other than
Permitted Encumbrances;
(xiv) which is not subject to any dispute in whole or in part or to any
offset, counterclaim, defense, rescission, recoupment or
subordination; provided that a Receivable subject only in part to
any of the foregoing shall be an Eligible Receivable to the extent
not so subject;
(xv) as to which neither the Transferor nor the applicable Seller has
(i) taken any action that would impair the rights of the
Administrative Agent, a Funding Agent, the Initial Purchasers or
the PARCO APA Banks or (ii) failed to take any action that was
necessary to avoid impairing the rights therein of the
Administrative Agent, a Funding Agent, the Initial Purchasers or
the PARCO APA Banks;
(xvi) as to which, as of the date of purchase of such Receivable, each of
the representations and warranties made in the Receivables Purchase
Agreement by the applicable Seller with respect to such Receivable
is true and correct in all material respects;
(xvii) as to which the goods related thereto shall have been shipped or
the services related thereto shall have been performed and the
Receivable shall have been billed to the related Obligor; and
(xviii) which arose in the ordinary course of business from the sale of
goods, products or services of the Sellers or their Affiliates and
in accordance with the Credit and Collection Policy and, at such
date of determination, the Receivables Purchase Agreement has not
been terminated with respect to such Seller.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended, supplemented or otherwise modified and in effect from time to
time, and the rules and regulations promulgated thereunder.
"ERISA Affiliate" shall mean, with respect to any Person, (i) any
corporation which is a member of the same controlled group of corporations
(within the meaning of Section 414(b) of the Code (as in effect from time to
time, the "Code")) as such Person; (ii) a trade or business (whether or not
incorporated) under common control (within the meaning of Section 414(c) of the
Code) with such Person; or (iii) a member of the same affiliated service group
(within the meaning of Section 414(n) of the Code) as such Person, any
corporation described in clause (i) above or any trade or business described in
clause (ii) above.
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"ERISA Event" shall mean any of the following: (i) the filing pursuant
to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a
waiver of the minimum funding standard with respect to any Plan; (ii) the
receipt by such Person or any ERISA Affiliate from the Pension Benefit Guaranty
Corporation or a plan administrator of any notice relating to an intention to
terminate any Plan or Plans or to appoint a trustee to administer any Plan;
(iii) the incurrence by such Person or any of its ERISA Affiliates of any
liability with respect to the withdrawal or partial withdrawal from any Plan or
Multiemployer Plan; (iv) any "reportable event" as defined in Section 4043 of
ERISA or the regulations issued thereunder with respect to a Plan (other than an
event for which the 30-day notice period is waived), (v) the incurrence by such
Person or any of its ERISA Affiliates of any liability under Title IV of ERISA
with respect to the termination of any Plan or (vi) the receipt by such Person
or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan
from such Person or any ERISA Affiliate of any notice, concerning the imposition
of Withdrawal Liability or a determination that a Multiemployer Plan is, or is
expected to be, insolvent or in reorganization, within the meaning of Title IV
of ERISA.
"Eurodollar Rate" means the PARCO Eurodollar Rate or the Liberty
Eurodollar Rate, as applicable.
"Event of Bankruptcy" shall mean, with respect to any Person, (i) that
such Person (a) shall generally not pay its debts as such debts become due or
(b) shall admit in writing its inability to pay its debts generally or (c) shall
make a general assignment for the benefit of creditors; (ii) any proceeding
shall be instituted by or against such Person seeking to adjudicate it as
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee or other similar official for it or any substantial part of
its property and, in the case of a proceeding instituted by a party other than
such Person, such proceeding shall continue undismissed, unstayed and in effect
for a period of sixty (60) consecutive days or (iii) if such Person is a
corporation, such Person or any Subsidiary shall take any corporate action to
authorize any of the actions set forth in the preceding clauses (i) or (ii).
"Facility" shall mean the purchase by the Initial Purchasers or the
PARCO APA Banks of Transferred Interests from the Transferor pursuant to the
Receivables Transfer Agreement in exchange for the Transfer Price.
"Facility Limit" shall mean the "Facility Limit" set forth on Schedule
I of the Receivables Transfer Agreement, subject to Decreases at the option of
the Transferor pursuant to Section 2.20 of the Receivables Transfer Agreement;
provided, further, that from and after the Termination Date, the Facility Limit
shall at all times equal the Aggregate Net Investment.
"Federal Funds Rate" shall mean, for any day, an interest rate per
annum equal to (a) the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal Reserve
Bank of New York, or (b) if such rate is not so published for any day which is a
Business Day, the average of the quotations at approximately 11:00 A.M. (New
York time)
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on such day on such transactions received by the Administrative Agent from three
(3) Federal funds brokers of recognized standing selected by the Administrative
Agent in its sole discretion.
"Fee Letter" shall mean each of the letter agreements, dated the
Closing Date, between the Guarantor, the Transferor and a Funding Agent, for the
benefit of the Initial Purchasers and the PARCO APA Banks with respect to the
fees to be paid by the Transferor under the Transaction Documents, as amended,
supplemented or otherwise modified and in effect from time to time.
"Finance Charges" shall mean, with respect to a Contract, any finance,
interest, late or similar charges owing by an Obligor pursuant to such Contract.
"Funding Account" means any of (a) the accounts established by the
PARCO Funding Agent, for the benefit of PARCO and the PARCO APA Banks, pursuant
to subsection 2.4(a) of the PARCO Asset Purchase Agreement, (b) the account
established by the Redwood Funding Agent, for the benefit of Redwood and the
Redwood Secured Parties, pursuant to Section 3A.01 of the Redwood Liquidity Loan
Agreement, (c) the account established by the Liberty Funding Agent, for the
benefit of Liberty and (d) any other accounts established by a Funding Agent,
for the benefit of the Initial Purchasers and/or the PARCO APA Banks and/or the
Redwood Secured Parties and/or the Liberty APA Banks.
"Funding Agent" means each of the PARCO Funding Agent, the Liberty
Funding Agent and the Redwood Funding Agent. Except where the context otherwise
requires, any reference to the "Funding Agents" shall be deemed to be a
reference to each and every Funding Agent.
"GAAP" shall mean generally accepted accounting principles, in effect
from time to time, set forth in the opinions and pronouncements of the
Accounting Principles Board of the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board or in such other statements by such accounting profession.
"GE Capital" means General Electric Capital Corporation, a New York
corporation, and its successors and assigns.
"GE Capital Roles" shall have the meaning specified in Section 10.13
of the Receivables Transfer Agreement.
"Governmental Authority" shall mean any nation or government, any
State or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantor" shall mean C&A and its permitted successors and assigns.
"Guaranty" shall mean that certain Guaranty, in substantially the form
of Exhibit N to the Receivables Transfer Agreement, dated as of December 27,
1999, as amended, supplemented or otherwise modified and in effect from time to
time.
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"Incremental Transfer" shall have the meaning specified in subsection
2.2(a) of the Receivables Transfer Agreement.
"Indebtedness" shall mean, with respect to any Person, such Person's
(i) obligations for borrowed money, (ii) obligations representing the deferred
purchase price of property other than accounts payable arising in the ordinary
course of such Person's business on terms customary in the trade, (iii)
obligations, whether or not assumed, secured by liens or payable out of the
proceeds or production from property now or hereafter owned or acquired by such
Person, (iv) obligations which are evidenced by notes, acceptances, or other
instruments, (v) Capitalized Lease obligations and (vi) obligations for which
such Person is obligated pursuant to a guaranty.
"Indemnified Amounts" shall have the meaning specified in Section 7.1
of the Receivables Transfer Agreement.
"Indemnified Parties" shall have the meaning specified in Section 7.1
of the Receivables Transfer Agreement.
"Initial Purchasers" shall mean PARCO, Redwood and Liberty.
"Insurance Proceeds" shall mean any amounts paid pursuant to any
insurance policies covering any Obligor with respect to its Contract other than
proceeds of such insurance policies used to purchase replacement property in
accordance with the Credit and Collection Policy.
"Interest Coverage Ratio" shall be calculated as set forth in the
Senior Credit Facility, provided that:
(a) for purposes set forth in Section 2.11 of the Receivables Transfer
Agreement, such ratio shall be compared to the ratio set forth below opposite
the applicable time period:
Period Ending: Ratio:
------------- -----
January 1999-June 2000 1.75 to 1.0
July 2000-December 2000 2.00 to 1.0
January 2001-December 2001 2.25 to 1.0
January 2002 and thereafter 2.75 to 1.0
(b) for purposes set forth in Section 8.1 of the Receivables Transfer
Agreement and Section 9.1 of the Receivables Purchase Agreement, such ratio
shall be compared to the ratio set forth below opposite the applicable time
period:
Period Ending: Ratio:
------------- -----
January 1999-June 2000 1.60 to 1.0
July 2000-December 2000 1.75 to 1.0
January 2001 and thereafter 2.00 to 1.0
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"Law" shall mean any law (including common law), constitution,
statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or
award of any Official Body.
"Leverage Ratio" shall be calculated as set forth in the Senior Credit
Facility, provided, that:
(a) for purposes set forth in Section 2.11 of the Receivables Transfer
Agreement, such ratio shall be compared to the ratio set forth below opposite
the applicable time period:
Period Ending: Ratio:
------------- -----
July 1999-December 1999 5.25 to 1.0
January 2000-June 2000 5.00 to 1.0
July 2000-December 2000 4.50 to 1.0
January 2001-December 2001 4.00 to 1.0
January 2002 and thereafter 3.75 to 1.0
(b) for purposes set forth in Section 8.1 of the Receivables Transfer
Agreement and Section 9.1 of the Receivables Purchase Agreement, such ratio
shall be compared to the ratio set forth below opposite the applicable time
period:
Period Ending: Ratio:
------------- -----
July 1999-December 1999 5.50 to 1.0
January 2000-June 2000 5.25 to 1.0
July 2000 and thereafter 4.75 to 1.0
"Liberty" shall mean Liberty Street Funding Corp., a Delaware
corporation, and its successors and assigns.
"Liberty Administrative Agent" shall mean The Bank of Nova Scotia, as
administrative agent on behalf of Liberty, and its permitted successors and
assigns in such capacity.
"Liberty Alternate Rate" means for any Settlement Period, an interest
rate per annum equal to (a) 1.5% above the Liberty Eurodollar Rate for such
Settlement Period; provided, however, that in the case of
(i) the Liberty Funding Agent having been notified by Liberty or
a Liberty APA Bank that the introduction of or any change in or in the
interpretation of any law or regulation makes it unlawful, or any
central bank or other governmental authority asserting that it is
unlawful, for Liberty or such Liberty APA Bank to fund any portion of
the Liberty Net Investment (based on the Liberty Eurodollar Rate) (and
the Liberty Funding Agent shall not have been subsequently notified
that such circumstances no longer exist), or
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<PAGE>
(ii) the inability of any Liberty APA Bank by reason of
circumstances affecting the London interbank market generally, to
obtain U.S. dollars in such market to fund its investments for such
Settlement Period,
the "Liberty Alternate Rate" for each such Settlement Period shall be an
interest rate per annum equal to the Liberty Base Rate in effect on each day of
such Settlement Period.
"Liberty APA Banks" shall mean the Persons listed on the signature
pages to the Liberty Liquidity Asset Purchase Agreement as "Purchasers",
(including, without limitation, The Bank of Nova Scotia), and the Persons which
from time to time may become a party to the Liberty Liquidity Asset Purchase
Agreement as "Purchasers" in accordance with Section 9 thereof.
"Liberty Base Rate" means, for any day, a fluctuating interest rate
per annum as shall be in effect from time to time, which rate shall be at all
times equal to the higher of:
(a) the rate of interest in effect for such day as publicly
announced from time to time by the Liberty Funding Agent in New York,
New York as its reference rate. Such reference rate is set by the
Liberty Funding Agent based upon various factors, including the
Liberty Funding Agent's costs and desired return, general economic
conditions and other factors, and is used as a reference point for
pricing some loans, which may be priced at, above or below such
announced rate, and
(b) 0.50% per annum above the latest Federal Funds Rate.
"Liberty CP Rate" means, for any Settlement Period, the per annum rate
equivalent to the weighted average cost (as determined by the Liberty
Administrative Agent and which shall include commissions of placement agents and
dealers, incremental carrying costs incurred with respect to Commercial Paper of
Liberty maintained on dates other than those on which corresponding funds are
received by Liberty, other borrowings by Liberty (other than under any program
support agreements of Liberty) and any other costs associated with the issuance
of such Commercial Paper that are allocated, in whole or in part, by the Liberty
Administrative Agent to fund or maintain Liberty's Net Investment (and which may
be also allocated in part to the funding of other assets of Liberty)); provided,
however, that if any component of such rate is a discount rate, in calculating
the CP Rate for such portion of capital for such Settlement Period, the
Transferor shall for such component use the rate resulting from converting such
discount rate to an interest bearing equivalent rate per annum.
"Liberty Eurodollar Rate" means, for any Settlement Period, an
interest rate per annum (rounded upward to the nearest 1/16th of 1%) determined
pursuant to the following formula:
LIBERTY LIBOR RATE
---------------------------------------------------------
100% - Liberty Eurodollar Rate Reserve Percentage
where Liberty Eurodollar Rate Reserve Percentage means, for any Settlement
Period, the maximum reserve percentage (expressed as a decimal, rounded upward
to the nearest 1/100th of
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1%) in effect on the date LIBOR for such Settlement Period is determined under
regulations issued from time to time by the Federal Reserve Board for
determining the maximum reserve requirement (including any emergency,
supplemental or other marginal reserve requirement) with respect to Eurocurrency
funding (currently referred to as Eurocurrency liabilities) having a term
comparable to such Settlement Period.
"Liberty Funding Agent" shall mean The Bank of Nova Scotia, in its
capacity as funding agent for the benefit of Liberty and the Liberty APA Banks,
and any successor and assigns thereto.
"Liberty Interest" shall mean, on any day, the portion of the
beneficial interest of Liberty in the Receivables and Related Security, the
Required Currency Hedge, Collections and Proceeds with respect thereto, which
beneficial interest shall equal the product of (i) the Percentage Factor on such
day multiplied by (ii) the quotient of (A) Liberty's Net Investment on such day
divided by (B) the Aggregate Net Investment on such day multiplied by (iii) the
Outstanding Balance of all Receivables.
"Liberty LIBOR Rate" means the rate of interest per annum determined
by the Liberty Administrative Agent to be the arithmetic mean (rounded upward to
the nearest 1/16th of 1%) of the rates at which dollar deposits in the
approximate amount of the portion of the Liberty Net Investment to be funded at
the Liberty Eurodollar Rate during such Settlement Period would be offered by
major banks in the London interbank market to the Liberty Funding Agent at its
request at or about 11:00 a.m. (London time) on the second Business Day before
the commencement of such Settlement Period.
"Liberty Liquidity Commitment" shall mean, with respect to Liberty,
the amount set forth on Schedule I attached to the Receivables Transfer
Agreement equal at all times to 102% of Liberty's Pro Rata Share of the Facility
Limit.
"Liberty Liquidity Asset Purchase Agreement" shall mean that certain
Asset Purchase Agreement, dated as of December 22, 1999, by and among the
Liberty Funding Agent, the Liberty APA Banks and Liberty, as the same may from
time to time be amended, supplemented or otherwise modified and in effect.
"Liberty Net Investment" shall mean an amount equal to the result of:
(i) the sum of cash amounts paid to the Transferor by Liberty for each
Incremental Transfer minus (ii) the aggregate amount of Collections received and
applied by the Liberty Funding Agent to reduce such Liberty Net Investment
pursuant to Section 2.5, 2.6 or 2.9 of the Receivables Transfer Agreement;
provided that the Liberty Net Investment shall be restored and reinstated in the
amount of any Collections so received and applied if, at any time, the
distribution of such Collections is rescinded or must otherwise be returned for
any reason.
"Liberty Purchase Limit" means, at any time, the amount set forth on
Schedule I attached to the Receivables Transfer Agreement; provided, however,
that at all times on and after the Termination Date, the "Liberty Purchase
Limit" means the aggregate outstanding Liberty Net Investment.
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"Liberty Termination Event" shall mean the occurrence of either of the
following events:
(a) all commitments of the Liberty APA Banks under the Liberty
Liquidity Asset Purchase Agreement shall have terminated; or
(b) a Termination Event or Potential Termination Event shall have
occurred and be continuing.
"Liberty Yield" means with respect to any Settlement Period an amount
equal to the product of (i) the Liberty Yield Rate in effect for such Settlement
Period, (ii) the average daily Liberty Net Investment outstanding during such
Settlement Period and (iii) a fraction of the numerator of which is the actual
number of days in such Settlement Period and the denominator of which is 360.
"Liberty Yield Rate" means for any Settlement Period, the weighted
average of the following rates:
(a) to the extent that Liberty funds or maintains the Liberty Net
Investment during such Settlement Period (or portion thereof) by
issuing its Commercial Paper, the Liberty CP Rate for such
Settlement Period; and
(b) to the extent Liberty funds or maintains the Liberty Investment
during such Settlement Period (or portion thereof) other than by
issuing its Commercial Paper, a rate equal to the Liberty
Alternate Rate for such Settlement Period.
provided, however, upon the Termination Date the Liberty Yield Rate shall be the
Liberty Base Rate plus 2%.
"Lien" shall mean any mortgage or deed of trust, pledge,
hypothecation, assignment, deposit arrangement, lien, charge, claim, security
interest, easement or encumbrance, or preference, priority or other security
agreement or preferential arrangement of any kind or nature whatsoever
(including any lease or title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the filing
of, or agreement to give, any financing statement perfecting a security interest
under the UCC or comparable law of any jurisdiction).
"Liquidity Banks" shall mean the PARCO APA Banks.
"Litigation" shall have the meaning specified in Section 4.1(h) of the
Receivables Purchase Agreement.
"Lock-Box Account" shall mean an account maintained by the Transferor
at a Lock-Box Bank for the purpose of receiving Collections from Receivables.
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"Lock-Box Agreement" shall mean each agreement among the Transferor,
the Collection Agent, the Administrative Agent and the applicable Lock-Box Bank
in substantially the form of Exhibit C to the Receivables Transfer Agreement.
"Lock-Box Bank" shall mean each of the banks set forth in Exhibit B to
the Receivables Transfer Agreement, and such banks as may be added thereto or
deleted therefrom pursuant to Section 2.8 of the Receivables Transfer Agreement.
"Loss and Dilution Reserve Ratio" shall mean, on any day, the greater
of (i) the Minimum Loss Reserve and (ii) the sum of (A) the Loss Reserve Ratio
and (B) the Dilution Reserve Ratio.
"Loss Reserve Ratio" shall mean, as of any Monthly Settlement Report
Date, and continuing until (but not including) the next Monthly Settlement
Report Date, an amount (expressed as a percentage) that is calculated as
follows:
LRR = [(a * b)/c] * d * e
Where:
LRR = Loss Reserve Ratio;
a = the aggregate principal amount of (i) Receivables originated or
acquired by the Sellers during the two Settlement Periods immediately
preceding such earlier Monthly Settlement Report Date and (ii) 25% of
the Receivables originated or acquired by the Sellers in the third
Settlement Period immediately preceding such Monthly Settlement Report
Date;
b = the highest three-month rolling average of the Aged Receivables Ratio
that occurred during the period of twelve consecutive Settlement
Periods ending prior to such earlier Settlement Report Date;
c = the Net Receivables Balance as of the last day of the Settlement
Period immediately preceding such earlier Monthly Settlement Report
Date;
d = 2.0; and
e = the Payment Terms Factor.
"Manager" shall mean Global Securitization Services, LLC, a Delaware
limited liability company.
"Material Adverse Effect" shall mean any event or condition which
would have a material adverse effect on (i) the collectibility of the
Receivables, (ii) the condition (financial or otherwise), businesses or
properties of the Transferor, the Guarantor or any other Seller, (iii) the
ability of the Transferor, the Guarantor or any other Seller to perform its
respective obligations under the Transaction Documents to which it is a party
and (iv) the interests of the Administrative Agent, a Funding Agent, an Initial
Purchaser or the PARCO APA Banks under
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<PAGE>
the Transaction Documents; provided, however, that an event or condition
resulting in a material adverse change in the condition (financial or otherwise)
of any Seller will not be deemed to have a Material Adverse Effect unless such
event or condition, in the Administrative Agent's reasonable discretion, with
the consent of each Funding Agent which shall be obtained by the Administrative
Agent, is reasonably likely to result in a material adverse change in the
condition (financial or otherwise) of any other Seller, the Transferor or the
Guarantor.
"Maximum Percentage Factor" shall mean 100%.
"Minimum Loss Reserve" shall mean, as of any Monthly Settlement Report
Date and continuing until (but not including) the next Monthly Settlement Report
Date, an amount (expressed as a percentage) that is calculated as follows:
MLR = (a*b)+c
Where:
MLR = Minimum Loss Reserve;
a = the average of the Dilution Ratio during the period of the
twelve consecutive Settlement Periods ending prior to such
earlier Monthly Settlement Report Date;
b = the Dilution Period; and
c = 12 %.
"Monthly Settlement Report Date" shall mean the tenth Business Day
following the end of each fiscal month of C&A; which fiscal months for the year
2000 are set forth on Schedule III to the Receivables Transfer Agreement.
"Moody's" shall mean Moody's Investors Service, Inc., and its
successors and assigns.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA with respect to which a Seller, the Transferor, the
Guarantor or any ERISA Affiliate of a Seller, the Transferor or the Guarantor is
making, is obligated to make, or has made or been obligated to make,
contributions on behalf of participants who are or were employed by any of them.
"Net Investment" shall mean any of the PARCO Net Investment, the
Liberty Net Investment or the Redwood Net Investment.
"Net Receivables Balance" shall mean, at any time, the Outstanding
Balance of the Eligible Receivables at such time, as reduced by the aggregate
amount by which the Outstanding Balance of all Eligible Receivables of each
Obligor exceeds the Concentration Factor or Special Obligor Concentration
Factor, as applicable, for such Obligor.
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"Non-Defaulting PARCO APA Bank" shall have the meaning specified in
subsection 2.2(b) of the PARCO Asset Purchase Agreement.
"Obligor" shall mean a Person obligated to make payments for the
provision of goods and services pursuant to a Contract.
"Official Body" shall mean any government or political subdivision or
any agency, authority, bureau, central bank, commission, department or
instrumentality of any such government or political subdivision, or any court,
tribunal, grand jury or arbitrator, in each case whether foreign or domestic.
"Other Transferor" shall mean any Person, other than the Transferor,
that has entered into a receivables purchase agreement, receivables transfer
agreement, loan agreement or funding agreement with PARCO.
"Outstanding Balance" shall mean, with respect to any Receivable at
any time, the then outstanding principal amount thereof, excluding any accrued
and outstanding Finance Charges related thereto.
"Paid Percentage Factor" shall have the meaning set forth in Section
2.5(a)(i) of the Receivables Transfer Agreement.
"PARCO" shall mean the Park Avenue Receivables Corporation, a Delaware
corporation, and its successors and assigns.
"PARCO Administrative Agent" shall mean The Chase Manhattan Bank, as
administrative agent on behalf of PARCO, and its permitted successors and
assigns in such capacity.
"PARCO Adjusted Liquidity Price" shall mean, in determining
the PARCO Purchase Price of any portion of the PARCO Interest on any PARCO
Purchase Date, an amount equal to:
OC + (PF * NDR )
where:
PF = the product of (i) the Percentage Factor on such PARCO
Purchase Date, times (ii) the quotient of (A) the PARCO Net
Investment divided by (B) the Aggregate Net Investment.
OC = the sum of (i) all Collections received by the Sellers,
the Collection Agent or the Transferor which are due and
owing to PARCO under the Transaction Documents and which
have not yet been remitted to PARCO plus (ii) all Deemed
Collections due and owing to PARCO pursuant to subsection
2.9(a) of the Receivables Transfer Agreement plus (iii) all
amounts due and owing to PARCO
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in respect of Diluted Receivables pursuant to subsection
2.9(b) of the Receivables Transfer Agreement.
NDR = the aggregate Outstanding Balance of all Receivables which
are not Defaulted Receivables.
Each of the foregoing shall be determined from the most recent Weekly
Report or Daily Report delivered to PARCO.
"PARCO Asset Purchase Agreement" shall mean that certain Asset
Purchase Agreement, dated as of December 27, 1999, by and among the PARCO
Funding Agent, the PARCO APA Banks and PARCO, as the same may from time to time
be amended, supplemented or otherwise modified and in effect.
"PARCO APA Bank Commitment" shall mean, with respect to any or all
PARCO APA Banks, the amount set forth on Schedule I attached to the Receivables
Transfer Agreement equal at all times to 102% of the PARCO APA Bank's Pro Rata
Share of the Facility Limit, as the same may be reduced from time to time in
accordance with Section 2.5 or subsection 5.5(c) of the PARCO Asset Purchase
Agreement.
"PARCO APA Banks" shall mean the Persons listed on Annex I to the
PARCO Asset Purchase Agreement (including, without limitation, Chase), and the
Persons which from time to time may become a party to the PARCO Asset Purchase
Agreement in accordance with Section 5.5(c) thereof.
"PARCO Base Rate" shall mean, a rate per annum equal to the sum of (x)
the greater of (i) the prime rate of interest announced by the PARCO Funding
Agent from time to time, changing when and as said prime rate changes (such rate
not necessarily being the lowest or best rate charged by the PARCO Funding
Agent) and (ii) the sum of (A) 1.50% and (B) the rate equal to the weighted
average of the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for such
day (or, if such day is not a Business Day, for the next preceding Business Day)
by the Federal Reserve Bank of New York, or, if such rate is not so published
for any day that is a Business Day, the average of the quotations for such day
for such transactions received by the PARCO Funding Agent from three (3) Federal
funds brokers of recognized standing selected by it and (y) the Applicable
Margin.
"PARCO BR Tranche" shall mean a Tranche as to which PARCO Discount is
calculated at the PARCO Base Rate.
"PARCO BR Tranche Period" shall mean, with respect to a PARCO BR
Tranche after a PARCO Wind-Down Event, a period of one (1) day. If such PARCO BR
Tranche Period would end on a day which is not a Business Day, such PARCO BR
Tranche Period shall end on the next succeeding Business Day.
"PARCO Commitment Expiry Date" shall mean the earliest to occur of (i)
the date on which all amounts due and owing to PARCO and the PARCO APA Banks
under the Receivables Transfer Agreement and the other Transaction Documents
have been indefeasibly
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paid in full, (ii) following a Termination Date (not including pursuant to
clause (iii) of the definition of Termination Date), the date on which the PARCO
Interest has been reduced to zero pursuant to Section 2.5 of the PARCO Asset
Purchase Agreement, and (iii) December 25, 2000 (as may be extended for an
additional 364 days from time to time in writing by PARCO, the PARCO Funding
Agent and the PARCO APA Banks).
"PARCO CP Rate" shall mean, with respect to any PARCO CP Tranche
Period requested by the Transferor and agreed to by PARCO or selected by the
PARCO Funding Agent, the rate equivalent to the rate (or if more than one rate,
the weighted average of the rates) at which PARCO's Commercial Paper having a
term equal to such PARCO CP Tranche Period may be sold by any placement agent or
commercial paper dealer selected by PARCO on the first day of such PARCO CP
Tranche Period, plus the amount of any placement agent or commercial paper
dealer fees and commissions incurred or to be incurred in connection with such
sale; provided, however, that if the rate (or rates) as agreed between any such
agent or dealer and PARCO is a discount rate, then the "PARCO CP Rate" shall
mean the rate equivalent to the rate (or if more than one rate, the weighted
average of the rates) resulting from PARCO's converting such discount rate (or
rates) to an interest-bearing equivalent rate per annum, however, in the event
the Transferor does not request a PARCO CP Tranche Period or the PARCO Funding
Agent does not select a PARCO CP Tranche Period, the rate will equal a blended
rate of all outstanding Commercial Paper of PARCO, as determined by the PARCO
Funding Agent.
"PARCO CP Tranche" shall mean a Tranche as to which PARCO Discount is
calculated at the PARCO CP Rate.
"PARCO CP Tranche Period" shall mean, with respect to a PARCO CP
Tranche, a period of days not to exceed sixty (60) days commencing on a Business
Day requested by the Transferor and agreed to by PARCO or selected by the PARCO
Funding Agent pursuant to Section 2.3 of the Receivables Transfer Agreement. If
a PARCO CP Tranche Period would end on a day which is not a Business Day, such
PARCO CP Tranche Period shall end on the next succeeding Business Day.
"PARCO Discount" means, (a) with respect to any Tranche Period
pertaining to PARCO:
(TR x TNI x AD)
-------------
YD
Where:
TR = the PARCO Tranche Rate applicable to such Tranche Period;
TNI = the portion of the PARCO Net Investment allocated to such
Tranche Period;
AD = the actual number of days during such Tranche Period; and
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YD = either (i) if the PARCO Tranche Rate is the PARCO CP Rate
or the PARCO Eurodollar Rate, 360 or (ii) if the PARCO
Tranche Rate is the PARCO Base Rate, 365 or 366, as
applicable; or
(b) with respect to any Settlement Period pertaining to PARCO:
(PF x PNI x AD)
-------------
YD
Where:
PF = the weighted average rate of PARCO's Commercial Paper
funded by pooled funding allocated to the Facility for such
Settlement Period;
PNI = the portion of the PARCO Net Investment funded by pooled
funding during such Settlement Period;
AD = the actual number of days during such Settlement Period;
and
YD = 360.
provided, however, that no provision of the Receivables Transfer
Agreement shall require the payment or permit the collection of PARCO Discount
in excess of the maximum amount permitted by applicable law; and provided,
further, that PARCO Discount shall not be considered paid by any distribution
if, at any time, such distribution is rescinded or must be returned for any
reason.
"PARCO Eurodollar Rate" shall mean, with respect to any PARCO
Eurodollar Tranche Period, the Applicable Margin plus a rate per annum equal to
the sum (rounded upwards, if necessary, to the next higher 1/100 of 1%) of (i)
the rate obtained by dividing (A) the applicable PARCO LIBOR Rate by (B) a
percentage equal to 100% minus the reserve percentage used for determining the
maximum reserve requirement as specified in Regulation D (including, without
limitation, any marginal, emergency, supplemental, special or other reserves)
that is applicable to the PARCO Funding Agent during such PARCO Eurodollar
Tranche Period in respect of eurocurrency or eurodollar funding, lending or
liabilities (or, if more than one percentage shall be so applicable, the daily
average of such percentage for those days in such PARCO Eurodollar Tranche
Period during which any such percentage shall be applicable) plus (ii) the then
daily net annual assessment rate (rounded upwards, if necessary, to the nearest
1/100 of 1%) as estimated by the PARCO Funding Agent for determining the current
annual assessment payable by the PARCO Funding Agent to the Federal Deposit
Insurance Corporation in respect of eurocurrency or eurodollar funding, lending
or liabilities.
"PARCO Eurodollar Tranche" shall mean a Tranche as to which PARCO
Discount is calculated at the PARCO Eurodollar Rate.
"PARCO Eurodollar Tranche Period" shall mean, with respect to a PARCO
Eurodollar Tranche, following a PARCO Wind-Down Event but prior to a Termination
Date, a
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period of up to three (3) months requested by the Transferor and agreed to by
the PARCO Funding Agent commencing on a Business Day requested by the Transferor
and agreed to by the PARCO Funding Agent; provided, however, that if such PARCO
Eurodollar Tranche Period would expire on a day which is not a Business Day,
such PARCO Eurodollar Tranche Period shall expire on the next succeeding
Business Day; provided, further, that if such PARCO Eurodollar Tranche Period
would expire on (a) a day which is not a Business Day but is a day of the month
after which no further Business Day occurs in such month, such PARCO Eurodollar
Tranche Period shall expire on the next preceding Business Day or (b) a Business
Day for which there is no numerically corresponding day in the applicable
subsequent calendar month, such PARCO Eurodollar Tranche Period shall expire on
the last Business Day of such month.
"PARCO Funding Agent" shall mean Chase, in its capacity as funding
agent for the benefit of PARCO and the PARCO APA Banks, and any successor and
assigns thereto.
"PARCO Funding Balance" shall mean, with respect to any PARCO APA Bank
at any time of determination thereof, an amount equal to (a) such PARCO APA
Bank's Pro Rata Share multiplied by (b) all amounts due and owing to PARCO in
respect of the PARCO Interest under the Transaction Documents as at such date.
"PARCO Insolvency Event" shall mean the occurrence of any one or more
of the following: (i) any proceeding shall have been instituted by PARCO seeking
to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of it
or its debts under any law relating to bankruptcy, insolvency or reorganization
or relief of debtors, or seeking the entry of any order for relief or the
appointment of a receiver, trustee or other similar official for it or any
substantial part of its property, or (ii) any proceeding of the type described
in the foregoing clause (i) shall be instituted against PARCO and shall have
remained undismissed for a period of sixty (60) consecutive days, or an order
granting relief requested in any such proceeding shall be entered.
"PARCO Interest" shall mean, on any day, the portion of the beneficial
interest of PARCO in the Receivables and Related Security, the Required Currency
Hedge, Collections and Proceeds with respect thereto, which beneficial interest
shall equal the product of (i) the Percentage Factor on such day multiplied by
(ii) the quotient of (A) PARCO's Net Investment on such day divided by (B) the
Aggregate Net Investment on such day multiplied by (iii) the Outstanding Balance
of all Receivables.
"PARCO LIBOR Rate" shall mean, with respect to any PARCO Eurodollar
Tranche Period, the rate at which deposits in dollars are offered to the PARCO
Funding Agent, in the London interbank market at approximately 11:00 A.M.
(London time) two (2) Business Days before the first day of such PARCO
Eurodollar Tranche Period in an amount approximately equal to the PARCO
Eurodollar Tranche to which the PARCO Eurodollar Rate is to apply and for a
period of time approximately equal to the applicable PARCO Eurodollar Tranche
Period.
"PARCO Net Investment" shall mean an amount equal to the result of:
(i) the sum of cash amounts paid to the Transferor by PARCO and/or the PARCO APA
Banks for each Incremental Transfer minus (ii) the aggregate amount of
Collections received and applied by the
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PARCO Funding Agent to reduce such PARCO Net Investment pursuant to Section 2.5,
2.6 or 2.9 of the Receivables Transfer Agreement; provided that the PARCO Net
Investment shall be restored and reinstated in the amount of any Collections so
received and applied if, at any time, the distribution of such Collections is
rescinded or must otherwise be returned for any reason.
"PARCO Purchase" shall mean any assignment by PARCO to the PARCO APA
Banks of the PARCO Interest pursuant to Section 2.1 of the PARCO Asset Purchase
Agreement.
"PARCO Purchase Date" shall mean the date specified by PARCO in a
PARCO Sale Notice as being the effective date of PARCO's assignment to the PARCO
APA Banks of the PARCO Interest specified therein.
"PARCO Purchase Limit" means, at any time, the amount set forth on
Schedule I attached to the Receivables Transfer Agreement; provided, however,
that at all times on and after the Termination Date, the "PARCO Purchase Limit"
means the aggregate outstanding PARCO Net Investment, as reduced pursuant to the
terms of the PARCO Asset Purchase Agreement.
"PARCO Purchase Price" shall mean, with respect to the PARCO Asset
Purchase Agreement, at any PARCO Purchase Date, an amount equal to the lesser of
(i) the PARCO Net Investment and (ii) the PARCO Adjusted Liquidity Price, as
clauses (i) and (ii) shall be increased by the sum of (A) all accrued and unpaid
PARCO Discount on all outstanding PARCO Tranches of PARCO's Commercial Paper
issued by PARCO to fund the PARCO Net Investment from the issuance date(s)
thereof to and including the PARCO Purchase Date plus (B) the aggregate PARCO
Discount to accrue on all outstanding PARCO Tranches of Commercial Paper issued
by PARCO to fund the PARCO Net Investment from and including the PARCO Purchase
Date to and excluding the maturity date of each such PARCO Tranche.
"PARCO Purchase Price Deficit" shall have the meaning specified in
subsection 2.2(b) of the PARCO Asset Purchase Agreement.
"PARCO Sale Notice" shall mean an irrevocable written notice given by
an authorized signer or authorized officer of PARCO (or on behalf of PARCO by
Chase, in its capacity as PARCO Administrative Agent) to the PARCO Funding Agent
committing to sell, assign and transfer to the PARCO APA Banks, the PARCO
Interest, which notice shall designate (i) the applicable PARCO Purchase Date,
(ii) the PARCO Interest and the Aggregate Net Investment, (iii) the PARCO
Purchase Price (including a calculation of the PARCO Purchase Price), (iv) that
no PARCO Insolvency Event has occurred and (v) wire transfer instructions
specifying the account(s) into which the proceeds of the PARCO Purchase Price
shall be deposited.
"PARCO Tranche Rate" means (i) for any PARCO CP Tranche and any PARCO
CP Tranche Period prior to the occurrence of a PARCO Wind-Down Event, the PARCO
CP Rate, (ii) for any PARCO Eurodollar Tranche and any PARCO Eurodollar Tranche
Period following the occurrence of a PARCO Wind-Down Event but prior to a
Termination Date, the PARCO Eurodollar Rate and (iii) for any PARCO BR Tranche
and any PARCO BR Tranche Period following a Termination Date or the occurrence
of a PARCO Wind-Down Event, the PARCO Base Rate.
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"PARCO Wind-Down Event" shall mean the occurrence of any of the
following events:
(a) on the fifth Business Day prior to the date specified in clause
(iii) of the definition of "PARCO Commitment Expiry Date" (after
giving effect to any extensions), the PARCO APA Banks' Aggregate
Commitment has not been extended for an additional 364 days;
(b) any provider of PARCO's program liquidity and/or letter of
credit facilities shall have given notice that an event of
default has occurred and is continuing under its agreement with
PARCO;
(c) PARCO has notified the Transferor that it does not wish to, or
is unable to, provide financing to the Transferor;
(d) PARCO's Commercial Paper shall not be rated at least A-1/P-1 by
S&P and Moody's, respectively; and
(e) a Termination Event or Potential Termination Event shall have
occurred and be continuing (not including a Termination Date
that occurs pursuant to clause (i) of the definition of
"Termination Date").
"Parent" shall mean Collins & Aikman Corporation, a Delaware
corporation, as the holder of 100% of the issued and outstanding capital stock
of C&A.
"Participant" shall have the meaning specified in subsection 5.5(b) of
the PARCO Asset Purchase Agreement.
"Payment Terms Factor" shall mean (i) for the period from the Closing
Date until the third Monthly Settlement Report Date, 1.11 and (ii) for each
three-month period to occur thereafter, a fraction, the numerator of which is
the sum of (A) the weighted average payment terms (based upon the principal
amount of the Receivables and expressed as a number of days) for the Receivables
generated or acquired by the Sellers during such period and (B) 60, and the
denominator of which is 90; provided, however, that if the Payment Terms Factor
for any period is less than the Payment Terms Factor for the immediately
preceding periods, then the actual Payment Terms Factor for such current period
shall be recalculated to equal a fraction, the numerator of which is equal to
the average of the numerators used to calculate the Payment Terms Factor for
such current period and the three immediately preceding periods (without giving
effect to this proviso) and the denominator of which is 90 provided, further,
the Payment Terms Factor shall never be less than 1.0.
"Pension Plan" shall mean a Plan described in Section 3(2) of ERISA.
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"Percentage Factor" shall mean the fraction (expressed as a
percentage) computed on any date of determination as follows:
( NI x [1+(LDRR+CCRR)] + (SFRR * OBR) )
--------- ----------
1-LDRR 1-LDRR +$100,000
----------------------------------------------------------------
NRB
Where:
NI = the Aggregate Net Investment on the date of such computation;
LDRR = the Loss and Dilution Reserve Ratio on the date of such
computation;
CCRR = the Carrying Cost Reserve Ratio on the date of such
computation;
SFRR = the Servicing Fee Reserve Ratio on the date of such
computation;
OBR = the Outstanding Balance of all Receivables on the date of such
computation; and
NRB = the Net Receivables Balance on the date of such computation.
The Percentage Factor shall be calculated by the Collection Agent on
the day of the initial Incremental Transfer hereunder. Thereafter, until the
Termination Date, the Collection Agent shall recompute the Percentage Factor at
the time of each Incremental Purchase pursuant to subsection 2.2(a) of the
Receivables Transfer Agreement and as of the close of business on each Business
Day and report such recomputations to the Administrative Agent in the Weekly
Report, Settlement Report and as otherwise requested by the Administrative
Agent. The Percentage Factor shall remain constant from the time as of which any
such computation or recomputation is made until the time as of which the next
such recomputation shall be made, notwithstanding any additional Receivables
arising, any Incremental Transfer made pursuant to such subsection 2.2(a) or any
reinvestment Transfer made pursuant to Section 2.2(b) and 2.5 of the Receivables
Transfer Agreement during any period between computations of the Percentage
Factor. The Percentage Factor shall remain constant at 100% at all times on and
after the Termination Date until such time as the Administrative Agent, on
behalf of the Initial Purchasers and the PARCO APA Banks, shall have received
the Aggregate Unpaids, in cash, at which time the Percentage Factor shall be
recomputed in accordance with Section 2.6 of the Receivables Transfer Agreement.
"Permitted Encumbrance" means any of the following:
(i) liens, charges or other encumbrances for taxes and assessments which
are not yet due and payable or which are being contested in good faith
and for which reserves have been established, if required in
accordance with GAAP;
(ii) liens of or resulting from any judgment or award, the time for the
appeal or petition for rehearing of which shall not have expired, or
in respect of which the
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Transferor and/or a Seller shall at any time in good faith be
prosecuting an appeal or proceeding for a review and with respect to
which adequate reserves or other appropriate provisions are being
maintained in accordance with GAAP;
(iii) liens, charges or other encumbrances or priority claims incidental to
the conduct of business or the ownership of properties and assets
(including mechanics', carriers', repairers', warehousemen's and
statutory landlords' liens and liens to secure the performance of
leases) and deposits, pledges or liens to secure statutory
obligations, surety or appeal bonds or other liens of like general
nature incurred in the ordinary course of business and not in
connection with the borrowing of money, provided in each case, the
obligation secured is not overdue, or, if overdue, is being contested
in good faith by appropriate actions or proceedings and with respect
to which adequate reserves or other appropriate provisions are being
maintained in accordance with GAAP;
(iv) liens, charges or encumbrances in favor of any Initial Purchaser, any
PARCO APA Bank or any Funding Agent; and
(v) lien, charges, imperfections in title or other encumbrances which, in
the aggregate do not exceed $100,000 and which, individually or in the
aggregate, do not materially interfere with the rights hereunder of an
Initial Purchaser, any PARCO APA Bank or any Funding Agent in the
Receivables.
"Permitted Investments" shall mean any of the following (a) negotiable
instruments or securities represented by instruments in bearer or registered or
in book-entry form which evidence (i) obligations fully guaranteed by the United
States of America; (ii) obligations of any agency of the United States of
America; (iii) time deposits in, or bankers acceptances issued by, any
depositary institution or trust company incorporated under the laws of the
United States of America or any state thereof and subject to supervision and
examination by Federal or state banking or depositary institution authorities;
provided, however, that at the time of investment or contractual commitment to
invest therein, the certificates of deposit or short-term deposits, if any, or
long-term unsecured debt obligations (other than such obligation whose rating is
based on collateral or on the credit of a Person other than such institution or
trust company) of such depositary institution or trust company shall have a
credit rating from Moody's and S&P of at least P-1 and "A-1", respectively, in
the case of the certificates of deposit or short-term deposits, or a rating not
lower than one of the two highest investment categories granted by Moody's and
by S&P; (iv) certificates of deposit having, at the time of investment or
contractual commitment to invest therein, a rating from Moody's and S&P of at
least P-1 and "A-1", respectively; or (v) investments in money market funds
rated in the highest investment category or otherwise approved in writing by
Moody's and S&P; (b) demand deposits in any depositary institution or trust
company referred to in (a)(iii) above; (c) commercial paper (having original or
remaining maturities of no more than 30 days) having, at the time of investment
or contractual commitment to invest therein, a credit rating from Moody's and
S&P of at least P-1 and "A-1", respectively; (d) Eurodollar time deposits having
a credit rating from Moody's and S&P of at least P-1 and "A-1", respectively;
(e) repurchase agreements involving any of the Permitted Investments described
in clauses (a)(i), (a)(iv) and (d) of this definition so long as the other party
to the repurchase agreement has at the time of investment therein, a rating from
Moody's and
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S&P of at least P-1 and "A-1", respectively; and (f) any other investment
permitted by each of the Funding Agents, Moody's and S&P.
"Person" shall mean any corporation, limited liability company,
natural person, firm, joint venture, partnership, trust, unincorporated
organization, enterprise, government or any department or agency of any
government.
"Plan" shall mean, at any time, an "employee benefit plan," as defined
in Section 3(3) of ERISA, that a Seller, the Transferor, the Guarantor or ERISA
Affiliate maintains, contributes to or has an obligation to contribute to on
behalf of participants who are or were employed by a Seller, the Transferor, the
Guarantor or ERISA Affiliate.
"Potential Termination Event" shall mean an event which but for the
lapse of time or the giving of notice, or both, would unavoidably constitute a
Termination Event.
"Proceeds" shall mean "proceeds" as defined in Section 9-306(1) of the
Relevant UCC.
"Program Fee" shall have the meaning specified in the Fee Letter.
"Pro Rata Share" shall mean, on any date of determination, (i) with
respect to any PARCO APA Bank, the ratio (expressed as a percentage) of such
PARCO APA Bank's pro rata share of the PARCO Purchase Limit to the Facility
Limit at such time, (ii) with respect to Redwood, the ratio (expressed as a
percentage) of the Redwood Purchase Limit to the Facility Limit at such time,
(iii) with respect to Liberty, the ratio (expressed as a percentage) of the
Liberty Purchase Limit to the Facility Limit at such time and (iv) with respect
to PARCO, the ratio (expressed as a percentage) of the PARCO Purchase Limit to
the Facility Limit at such time.
"Purchase Discount" shall mean, on any Business Day on which
Receivables are sold by a Seller to the Transferor pursuant to the Receivables
Purchase Agreement, an amount, calculated in good faith by the Transferor, equal
to the sum of (a) the Adjusted Carrying Cost Reserve Ratio, (b) the Adjusted
Servicing Fee Reserve Ratio and (c) a ratio that reflects historical loss
experience, future loss exposure and a reasonable profit. The total of the ratio
defined in clause (c) shall not exceed 0.35%.
"Purchase Limit" means either the PARCO Purchase Limit, the Liberty
Purchase Limit or the Redwood Purchase Limit.
"Purchase Price" shall, with respect to the Receivables Purchase
Agreement, have the meaning set forth in Section 3.1 of the Receivables Purchase
Agreement.
"Purchase Termination Date" shall have the meaning specified in
Section 9.1 of the Receivables Purchase Agreement.
"Purchased Receivables" shall have the meaning specified in subsection
3.2(b) of the Receivables Purchase Agreement.
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"Purchaser" shall have the meaning specified in subsection 5.5(c) of
the PARCO Asset Purchase Agreement.
"Purchaser Group" means any of (i) prior to a PARCO Wind-Down Event,
PARCO and after a PARCO Wind-Down Event, the PARCO APA Banks, (ii) Redwood and
(iii) Liberty.
"Rating Agency" shall mean Moody's, S&P and any other nationally
recognized statistical rating organization from which a rating for Commercial
Paper, requested by the Initial Purchasers, is currently in effect.
"Rating Agency Book" shall mean the rating agency book, dated November
1999 prepared in connection with the Facility.
"Receivable" shall mean all indebtedness owed to a Seller by an
Obligor under a Contract, whether constituting an account or general intangible,
arising in connection with the sale or lease of merchandise or the rendering of
services by the related Seller, and includes the right to payment of any Finance
Charges and other obligations of such Obligor with respect thereto.
Notwithstanding the foregoing, once a Receivable has been deemed
collected pursuant to Section 2.9 of the Receivables Transfer Agreement, it
shall no longer constitute a Receivable under the Receivables Transfer
Agreement.
"Receivables Purchase Agreement" shall mean the Receivables Purchase
Agreement, dated as of December 27, 1999, by and between C&A, as seller, C&A's
wholly-owned direct and indirect Subsidiaries listed on Exhibit D thereto, as
sellers, and the Transferor, as purchaser, as such agreement may be amended,
supplemented or otherwise modified and in effect from time to time.
"Receivables Transfer Agreement" shall mean the Receivables Transfer
Agreement, dated as of December 27, 1999, by and between the Transferor, C&A, as
guarantor and as collection agent, the Initial Purchasers, the PARCO APA Banks,
the Funding Agents and the Administrative Agent, as such agreement may be
amended, supplemented or otherwise modified and in effect from time to time.
"Recipient" shall have the meaning specified in Section 2.14 of the
Receivables Transfer Agreement.
"Records" shall mean all Contracts and other documents, books, records
and other information (including, without limitation, computer programs, tapes,
disks, punch cards, data processing software and related property and rights)
maintained with respect to Receivables and the related Obligors.
"Redwood" means Redwood Receivables Corporation, a Delaware
corporation, and its successors and assigns.
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"Redwood Collateral Agent" shall mean GE Capital, in its capacity as
collateral agent for Redwood and the Redwood Secured Parties under the Redwood
Liquidity Documents.
"Redwood Collateral Agent Agreement" shall mean that certain Second
Amended and Restated Collateral Agent and Security Agreement dated as of June
29, 1995, among Redwood, the Redwood Depositary and GE Capital, in its
capacities as (a) collateral agent, (b) operating agent, (c) the liquidity agent
and (d) Redwood Letter of Credit Agent, as amended pursuant to that certain
Amendment No. 1 to Second Amended and Restated Collateral Agent and Security
Agreement dated as of February 27, 1996, as amended pursuant to that certain
Amendment No. 2 to Second Amended and Restated Collateral Agent and Security
Agreement dated as of January 4, 1997, as amended pursuant to that certain
Amendment No. 3 to Second Amended and Restated Collateral Agent and Security
Agreement dated as of January 24, 1997.
"Redwood Depositary" shall mean Bankers Trust Company, or any other
Person designated as the successor Redwood Depositary pursuant to and in
accordance with the terms of the Redwood Depositary Agreement, in its capacity
as issuing and paying agent or trustee in connection with the issuance of
commercial paper by Redwood.
"Redwood Depositary Agreement" shall mean that certain Depositary
Agreement dated March 15, 1994, by and between Redwood and the Redwood
Depositary and consented to by GE Capital, as liquidity agent for Redwood.
"Redwood Funding Account" means that certain segregated deposit
account established by Redwood and maintained with the Redwood Depositary
designated as the "Redwood Receivables Corporation - Collection Account (C&A),"
account number ABA No. 021001033, or such other account established in
accordance with the requirements set forth in Section 3A.01 of the Redwood
Liquidity Loan Agreement.
"Redwood Funding Agent" means GE Capital, in its capacity as funding
agent for the benefit of Redwood and the Redwood Secured Parties, and any of
their respective successors and assigns under the Receivables Transfer Agreement
and the Transaction Documents.
"Redwood Interest" means on any day, the portion of the beneficial
interest of Redwood in the Receivables and Related Security, the Required
Currency Hedge, Collections and Proceeds with respect thereto, which beneficial
interest shall equal the product of (i) the Percentage Factor on such day
multiplied by (ii) the quotient of (A) Redwood's Net Investment on such day
divided by (B) the Aggregate Net Investment on such day multiplied by (iii) the
Outstanding Balance of all Receivables.
"Redwood Letter of Credit" shall mean that certain Irrevocable Letter
of Credit No. RRC-2 dated June 29, 1995, issued by the Redwood Letter of Credit
Providers at the request of Redwood in favor of the Redwood Collateral Agent
pursuant to the Redwood Letter of Credit Agreement.
"Redwood Letter of Credit Agent" shall mean GE Capital, in its
capacity as agent for the Redwood Letter of Credit Providers under the Redwood
Letter of Credit Agreement.
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"Redwood Letter of Credit Agreement" shall mean that certain Second
Amended and Restated Letter of Credit Reimbursement Agreement dated as of June
29, 1995, among Redwood, the Redwood Letter of Credit Agent, the Redwood Letter
of Credit Providers and GE Capital as collateral agent, as amended pursuant to
that certain Amendment No. 1 to Second Amended and Restated Letter of Credit
Reimbursement Agreement dated as of February 27, 1996, as amended pursuant to
that certain Amendment No. 2 to Second Amended and Restated Letter of Credit
Reimbursement Agreement dated as of January 24, 1997.
"Redwood Letter of Credit Providers" shall mean, initially, GE
Capital, in its capacity as issuer of the Redwood Letter of Credit under the
Redwood Letter of Credit Agreement, and thereafter its successors and permitted
assigns in such capacity.
"Redwood Liquidity Agent" shall mean GE Capital, in its capacity as
agent for the Redwood Liquidity Lenders pursuant to the Redwood Liquidity Loan
Agreement.
"Redwood Liquidity Commitment" shall mean, with respect to Redwood,
the amount set forth on Schedule I attached to the Receivables Transfer
Agreement equal at all times to 103% of Redwood's Pro Rata Share of the Facility
Limit.
"Redwood Liquidity Documents" shall mean the Redwood Liquidity Loan
Agreement and all other documents and instruments executed in connection with
the consummation of the transaction contemplated by the Redwood Liquidity Loan
Agreement.
"Redwood Liquidity Lenders" shall mean, collectively, GE Capital and
any other provider of Redwood Liquidity Loans under the Redwood Liquidity Loan
Agreement.
"Redwood Liquidity Loan Agreement" shall mean that certain Redwood
Liquidity Loan Agreement dated as of December 27, 1999, among Redwood and GE
Capital, in its capacities as (a) the operating agent for Redwood, (b) the
Redwood Collateral Agent, (c) the initial Redwood Liquidity Lender and (d) the
Redwood Liquidity Agent, as amended, restated, supplemented or otherwise
modified from time to time.
"Redwood Liquidity Loans" shall mean any and all borrowings by Redwood
under the Redwood Liquidity Loan Agreement.
"Redwood LOC Draws" shall mean any payments made to Redwood in
connection with the Redwood Letter of Credit and allocated to the Transferor.
"Redwood Net Investment" shall mean an amount equal to the result of:
(i) the sum of cash amounts paid to the Transferor by Redwood for each
Incremental Transfer minus (ii) the aggregate amount of Collections received and
applied by the Redwood Funding Agent to reduce such Redwood Net Investment
pursuant to Section 2.5, 2.6 or 2.9 of the Receivables Transfer Agreement;
provided that the Redwood Net Investment shall be restored and reinstated in the
amount of any Collections so received and applied if, at any time, the
distribution of such Collections is rescinded or must otherwise be returned for
any reason.
"Redwood Program Documents" shall mean the Redwood Letter of Credit
Agreement, the Redwood Liquidity Loan Agreement, the Redwood Collateral Agent
Agreement,
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the Redwood Depositary Agreement, the Commercial Paper issued by Redwood, the
Operating Agent Agreement dated as of March 15, 1994 between Redwood and GE
Capital as operating agent, each Accession Agreement entered into in
substantially the form of Exhibit A to the Redwood Collateral Agent Agreement
and the dealer agreements entered into by Redwood for the distribution of its
Commercial Paper.
"Redwood Purchase Limit" means, at any time, the amount set forth on
Schedule I attached to the Receivables Transfer Agreement; provided, however,
that at all times on and after the Redwood Termination Date, the "Redwood
Purchase Limit" means the aggregate outstanding Redwood Net Investment.
"Redwood Secured Parties" means the Redwood Collateral Agent, the CP
Holders, the Redwood Depositary, the Redwood Liquidity Agent, the Redwood
Liquidity Lenders, the Redwood Letter of Credit Agent and the Redwood Letter of
Credit Providers.
"Redwood Termination Date" means the earlier of (a) the Termination
Date and (b) the date elected by Redwood or the Redwood Funding Agent, by notice
to the Transferor and the Administrative Agent upon the occurrence of a Redwood
Termination Event, as the Redwood Termination Date.
"Redwood Termination Event" means any one or more of the following
events: (a) a Redwood LOC Draw shall have occurred; (b) the obligations of the
Redwood Liquidity Lenders to make Redwood Liquidity Loans shall have terminated
and not otherwise been replaced; (c) an event of default under the Redwood
Collateral Agent Agreement or any other Redwood Program Document shall have
occurred; or (d) the short term debt rating of a Redwood Liquidity Lender shall
have been downgraded by a Rating Agency and such Redwood Liquidity Lender shall
not have been replaced in accordance with the terms of the Redwood Liquidity
Agreement within 30 days thereafter.
"Redwood Yield" shall have the meaning specified in Schedule I to
Annex X.
"Related Security" shall mean, with respect to any Receivable, all of
a Seller's and Transferor's right, title and interest in, to and under:
(a) all other accounts, contract rights, chattel paper, instruments,
Records, general intangibles and other obligations of any
Obligor with respect to any Receivable or related Contract, now
or hereafter existing, whether or not arising out of or in
connection with the sale or lease of goods or the rendering of
services;
(b) all other security interests or liens and property subject
thereto from time to time, if any, purporting to secure payment
of such Receivable, whether pursuant to the Contract related to
such Receivable or otherwise, together with all financing
statements (or other similar instruments) signed by an Obligor
describing any collateral securing such Receivable;
(c) all guarantees, indemnities, warranties, insurance (and proceeds
and premium refunds thereof) or other agreements or arrangements
of any kind
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from time to time supporting or securing payment of such
Receivable whether pursuant to the Contract related to such
Receivable or otherwise;
(d) in the case of the Administrative Agent for the benefit of the
Initial Purchasers, the Funding Agents and the PARCO APA Banks
and additionally, in the case of the Redwood Funding Agent for
the benefit of Redwood and the Redwood Secured Parties, all
rights and remedies of the Transferor under the Transaction
Documents, together with all financing statements (or other
similar instruments) filed by the Transferor against the Seller
in connection therewith; and
(e) all Proceeds of any of the foregoing.
"Relevant UCC" shall mean, with respect to any State, the Uniform
Commercial Code as from time to time in effect in such State.
"Required Currency Hedge" shall mean one or more foreign currency
instruments including currency options, currency hedges and similar items,
acceptable to the Administrative Agent, exercisable at any time, with an
Eligible Counterparty providing for the delivery by such Eligible Counterparty
of U.S. Dollars in exchange for the receipt of Canadian Dollars.
"Required Currency Hedge Assignments" shall be substantially in the
form attached as Exhibit O to the Receivables Transfer Agreement.
"Required Hedge Notional Amount" shall mean an amount denominated in
U.S. Dollars, which represents the portion of Net Receivables Balance allocable
to the Canadian Dollar Receivables, as calculated in the most recent Settlement
Report.
"Required Participants" shall mean Redwood, Liberty and PARCO APA
Banks having Pro Rata Shares in the aggregate at least equal to 51% or, if the
Commitments have been terminated, having a Net Investment at least equal to 51%
of the Aggregate Net Investment; provided that the Commitment of any Defaulting
PARCO APA Bank that has not paid all amounts due and owing by it in respect of
Purchases it was obligated to make shall not be included in the Commitments for
purposes of this definition.
"Required Purchaser Groups" means, in the aggregate Purchaser Groups
whose Purchase Limits equal or exceed 66 2/3% of the Facility Limit.
"Requirements of Law" shall mean, as to any Person, the organizational
documents of such Person, and any law, treaty, rule or regulation or
determination of an arbitrator or a court or other Official Body, in each case
applicable to or binding upon such Person or any of its property or to which
such Person or any of its property is subject.
"Responsible Officer" shall mean, with respect to any Person, the
Chairman, the President, the Controller, any Vice President, the Secretary, the
Treasurer, or any other officer of such Person customarily performing functions
similar to those performed by any of the above-designated officers and also,
with respect to a particular matter any other officer to whom such
34
<PAGE>
matter is referred because of such officer's knowledge of and familiarity with
the particular subject.
"Section 7.2 Costs" shall have the meaning specified in subsection
7.2(c) of the Receivables Transfer Agreement.
"Seller Addition Date" shall have the meaning specified in Section 7.2
of the Receivables Purchase Agreement.
"Seller Collateral" shall have the meaning set forth in Section 2.1(d)
of the Receivables Purchase Agreement.
"Seller Note" shall have the meaning specified in Section 8.1 of the
Receivables Purchase Agreement.
"Sellers" shall mean C&A, the other wholly-owned direct and indirect
Subsidiaries of C&A listed as sellers on Exhibit D to the Receivables Purchase
Agreement and any additional Sellers that become a party to the Receivables
Purchase Agreement pursuant to the terms thereof, and each of their successors
and permitted assigns.
"Senior Credit Facility" shall mean the Credit Agreement dated as of
May 28, 1998 among Collins & Aikman Products Co., Collins & Aikman Canada Inc.,
Collins & Aikman Plastics, Ltd., Collins & Aikman Corporation, the lenders named
therein, Bank of America NT&SA, The Chase Manhattan Bank and The Chase Manhattan
Bank of Canada (including any amendments or modifications thereto) as in effect
from time to time.
"Senior Credit Facility Confidential Information Memorandum" shall
mean the information memorandum prepared in connection with the Senior Credit
Facility dated April 1999.
"Servicing Fee" shall mean the fees payable by the Transferor to the
Collection Agent in an amount equal to the Servicing Fee Percentage multiplied
by the amount of the aggregate Outstanding Balance of the Receivables. Such fee
shall accrue from the date of the initial purchase of an interest by an Initial
Purchaser in the Receivables to the later of the Termination Date or the date on
which the Percentage Factor is reduced to zero. On or prior to the Termination
Date, and provided that no Potential Termination Event shall have occurred and
be continuing, such fee shall be payable only from Collections pursuant to, and
subject to the priority of payments set forth in, Section 2.5 of the Receivables
Transfer Agreement. After the Termination Date or during the continuation of a
Potential Termination Event, such fee shall be payable only from Collections
pursuant to, and subject to the priority of payments set forth in, Section 2.6
of the Receivables Transfer Agreement.
"Servicing Fee Percentage" shall mean 1.0% per annum.
"Servicing Fee Reserve Ratio" shall mean, as of any Monthly Settlement
Report Date and continuing until, but not including, the next Monthly Settlement
Report Date, an amount, expressed as a percentage, equal to (i) the product of
(A) the Servicing Fee Percentage
35
<PAGE>
and (B) 2 times Days Sales Outstanding as of such earlier Monthly Settlement
Report Date divided by (ii) 360.
"Settlement Date" shall mean initially, February 7, 2000 and
thereafter, the fifth (5th) Business Day of each month.
"Settlement Period" shall mean (i) with respect to the final
Settlement Period, the period ending on the Termination Date or Purchase
Termination Date and beginning with the first day of the fiscal month in which
such Termination Date or Purchase Termination Date occurs, and (ii) with respect
to all Settlement Periods other than the final Settlement Period, the period of
days from and including the first day of a fiscal month of C&A to and including
the last day of such fiscal month.
"Settlement Report" shall mean a report, in substantially the form
attached to the Receivables Transfer Agreement as Exhibit D or in such other
form as is mutually agreed to by the Transferor and the Administrative Agent
with the consent of the Funding Agents, which consent shall be obtained by the
Administrative Agent, delivered by the Collection Agent to the Administrative
Agent pursuant to Section 2.11 of the Receivables Transfer Agreement.
"Solvent" shall mean, with respect to any Person on a particular date,
that on such date (a) the fair value of the property of such Person is greater
than the total amount of liabilities, including contingent liabilities, of such
Person; (b) the present fair salable value of the assets of such Person is not
less than the amount that will be required to pay the probable liability of such
Person on its Indebtedness as they become absolute and matured; (c) such Person
does not intend to, and does not believe that it will, incur Indebtedness or
liabilities beyond such Person's ability to pay as such Indebtedness and
liabilities mature; and (d) such Person is not engaged in a business or
transaction, and is not about to engage in a business or transaction, for which
such Person's property would constitute an unreasonably small capital. The
amount of contingent liabilities (such as Litigation, guaranties and Unfunded
Pension Liabilities) at any time shall be computed as the amount that, in light
of all the facts and circumstances existing at the time, represents the amount
that can reasonably be expected to become an actual or matured liability.
"Special Obligor" shall mean each of those Obligors designated by the
Administrative Agent which may, individually, exceed the Concentration Factor,
but is approved by the Administrative Agent based upon its credit quality. As of
the Closing Date each of the following shall be designated as a Special Obligor
so long as each Special Obligor maintains short term ratings of at least A-1 and
P-1 by S&P and Moody's, respectively, and long term ratings of at least A and A2
by S&P and Moody's, respectively: General Motors Corp., Ford Motor Company and
DaimlerChrysler AG.
"Special Obligor Concentration Factor" shall mean, on any day (i) with
respect to General Motors Corp. (and its Affiliates with equal or greater credit
ratings by all Rating Agencies which rate the applicable Affiliates or, with an
executed support agreement between such Affiliates and General Motors Corp.
which is currently in effect), so long as General Motors Corp. remains a Special
Obligor, a percentage equal to 39%, (ii) with respect to Ford Motor Company (and
its Affiliates with equal or greater credit ratings by all Rating Agencies which
rate the applicable Affiliates or, with an executed support agreement between
such
36
<PAGE>
Affiliates and Ford Motor Company which is currently in effect), so long as Ford
Motor Company remains a Special Obligor, a percentage equal to 25%, (iii) with
respect to DaimlerChrysler AG (and its Affiliates with equal or greater credit
ratings by all Rating Agencies which rate the applicable Affiliates or, with an
executed support agreement between such Affiliates and DaimlerChrysler AG which
is currently in effect), so long as DaimlerChrysler AG remains a Special
Obligor, a percentage equal to 25% and (iv) with respect to any other Special
Obligor, a percentage specified by the Administrative Agent (with the prior
written consent of the Required Participants) in a written notice to the
Sellers, the Transferor, the Initial Purchasers, the PARCO APA Banks and the
Rating Agencies.
"Standard & Poor's" or "S&P" shall mean Standard & Poor's, a division
of The McGraw-Hill Companies, Inc., and its successors and assigns.
"Structuring Fee" shall have the meaning specified in the Fee Letter.
"Subsidiary" of a Person shall mean any Person more than 50% of the
outstanding voting interests of which shall at any time be owned or controlled,
directly or indirectly, by such Person or by one or more Subsidiaries of such
Person or any similar business organization which is so owned or controlled.
"Taxes" shall have the meaning specified in subsection 7.3(a) of the
Receivables Transfer Agreement.
"Termination Date" shall mean the earliest of (i) the Business Day
designated by the Transferor to the Initial Purchasers as the Termination Date
at any time following the later of (A) repayment in full of all Commercial Paper
then outstanding or (B) thirty (30) days' written notice by the Transferor to
the Initial Purchasers, (ii) the day upon which a Termination Date is declared
or automatically occurs relating to a Termination Event or Potential Termination
Event pursuant to subsection 8.2(a) of the Receivables Transfer Agreement, (iii)
two (2) Business Days prior to the occurrence of the PARCO Commitment Expiry
Date, a Redwood Termination Date and a Liberty Termination Event or (iv) the
Purchase Termination Date.
"Termination Event" shall mean an event described in Section 8.1 of
the Receivables Transfer Agreement.
"Title IV Plan" shall mean a Pension Plan (other than a Multiemployer
Plan) that is covered by Title IV of ERISA and that a Seller, the Transferor,
the Guarantor or an ERISA Affiliate maintains, contributes to or has an
obligation to contribute to on behalf of participants who are or were employed
by any of them.
"The Bank of Nova Scotia Roles" shall have the meaning specified in
Section 10.14 of the Receivables Transfer Agreement.
"Tranche" shall mean a portion of the Aggregate Net Investment
allocated to a Tranche Period pursuant to Section 2.3 of the Receivables
Transfer Agreement.
"Tranche Period" shall mean a PARCO CP Tranche Period, a PARCO BR
Tranche Period or a PARCO Eurodollar Tranche Period.
37
<PAGE>
"Tranche Rate" shall mean the applicable PARCO Tranche Rate.
"Transaction Costs" shall have the meaning specified in subsection
7.4(a) of the Receivables Transfer Agreement.
"Transaction Documents" shall mean, collectively, the Receivables
Transfer Agreement, the Receivables Purchase Agreement, the Fee Letter, the
Guaranty, the Lock-Box Agreements and all of the other instruments, documents,
certificates and other agreements executed and delivered by a Seller, the
Collection Agent, the Guarantor or the Transferor in connection with any of the
foregoing, in each case, as the same may be amended, restated, supplemented or
otherwise modified from time to time.
"Transfer" shall mean a conveyance, transfer and assignment by the
Transferor to the Initial Purchasers or the PARCO APA Banks of an undivided
percentage ownership interest in Receivables, together with Related Security,
the Required Currency Hedge, Collections and Proceeds with respect thereto,
pursuant to, and in accordance with, the Receivables Transfer Agreement
(including, without limitation, as a result of any reinvestment of Collections
in Transferred Interests pursuant to Section 2.2(b) and 2.5) of the Receivables
Transfer Agreement).
"Transfer Certificate" shall have the meaning specified in subsection
2.2(a) of the Receivables Transfer Agreement.
"Transfer Date" shall mean, with respect to each Transfer, the
Business Day on which such Transfer is made.
"Transfer Price" shall mean, with respect to any Incremental Transfer,
the sum of the amounts paid to the Transferor by each Initial Purchaser or the
PARCO APA Banks, as applicable, as described in the applicable Transfer
Certificate. The Transfer Price for any Transfer shall be equal to the product
of (i) the Net Receivables Balance of Receivables transferred in any Incremental
Transfer, times (ii) the Percentage Factor.
"Transfer Supplement" shall have the meaning specified in Section
5.5(c) of the PARCO Asset Purchase Agreement.
"Transferor" shall mean Carcorp, Inc., a Delaware corporation, and its
successors and permitted assigns.
"Transferor Collateral" shall have the meaning set forth in Section
10.10 of the Receivables Transfer Agreement.
"Transferor Subordinated Obligation" shall mean any payment obligation
or other liability designated as such in Sections 2.6(c), 7.1, 7.2(d), 7.3(a)
and 7.4(a) in the Receivables Transfer Agreement, each of which payment
obligations and other liabilities shall (i) be subordinated and subject to the
prior payment in full of all Transferor Unsubordinated Obligations then due,
(ii) be made solely from funds available to the Transferor that are not required
to be applied to Transferor Unsubordinated Obligations then due and (iii) not
constitute a general recourse claim against the Transferor, but only a claim
against the Transferor to the
38
<PAGE>
extent of funds available to the Transferor after satisfying all Transferor
Unsubordinated Obligations then due.
"Transferor Unsubordinated Obligations" shall mean all payment
obligations and other liabilities of the Transferor under the Receivables
Transfer Agreement that are not designated as Transferor Subordinated
Obligations.
"Transferred Interest" shall mean, on any date of determination, an
undivided percentage ownership interest of the Initial Purchasers and/or the
PARCO APA Banks, as applicable, in (i) each and every then outstanding
Receivable, (ii) all Related Security with respect to each such Receivable,
(iii) the Required Currency Hedge, (iv) all Collections with respect thereto,
and (v) other Proceeds of the foregoing, which undivided ownership interest
shall be equal to the Percentage Factor at such time, and only at such time
(without regard to prior calculations). The Transferred Interest in each
Receivable, together with Related Security, the Required Currency Hedge,
Collections and Proceeds with respect thereto, shall at all times be equal to
the Transferred Interest in each other Receivable, together with Related
Security, the Required Currency Hedge, Collections and Proceeds with respect
thereto. To the extent that the Transferred Interest shall decrease as a result
of a recalculation of the Percentage Factor, the Initial Purchasers and/or the
PARCO APA Banks, as applicable, shall be considered to have reconveyed to the
Transferor an undivided percentage ownership interest in each Receivable,
together with Related Security, the Required Currency Hedge, Collections and
Proceeds with respect thereto, in an amount equal to such decrease such that, in
each case, the Transferred Interest in each Receivable shall be equal to the
Transferred Interest in each other Receivable.
"Transferred Receivables" shall have the meaning specified in
subsection 3.2(b) of the Receivables Purchase Agreement.
"UCC" shall mean, with respect to any jurisdiction, the Uniform
Commercial Code as the same may, from time to time, be enacted and in effect in
such jurisdiction.
"Unfunded Pension Liability" shall mean, at any time, the aggregate
amount, if any, of the sum of (a) the amount by which the present value of all
accrued benefits under each Title IV Plan exceeds the fair market value of all
assets of such Title IV Plan allocable to such benefits, all determined as of
the most recent valuation date for each such Title IV Plan using the actuarial
assumptions for funding purposes in effect under such Title IV Plan (and not the
assumptions used by the Pension Benefit Guaranty Corporation in calculating such
amounts), and (b) for a period of five years following a transaction that might
reasonably be expected to be covered by Section 4069 of ERISA, the liabilities
(whether or not accrued) that could be avoided by a Seller or any ERISA
Affiliate as a result of such transaction.
"Unused Fee" shall have the meaning specified in subsection 2.4(c) of
the Receivables Transfer Agreement.
"Unused Fee Rate" shall have the meaning as defined in each Fee
Letter.
"U.S." or "United States" means the United States of America and its
territories.
39
<PAGE>
"U.S. Dollar Collection Account" shall have the meaning specified in
subsection 2.12(a) of the Receivables Transfer Agreement.
"Utilization Fee" shall have the meaning specified in subsection
2.4(b) of the Receivables Transfer Agreement.
"Utilization Fee Rate" shall have the meaning as defined in each Fee
Letter.
"Valuation Price" shall mean as of any date of determination, the
strike price of any outstanding Required Currency Hedge that would require the
highest amount of Canadian Dollars to purchase one U.S. Dollar.
"Weekly Report" shall mean a report, in substantially the form
attached to the Receivables Transfer Agreement as Exhibit E or in such other
form as is mutually agreed to by the Transferor and the Funding Agents,
delivered by (i) the Sellers to the Purchaser and the Administrative Agent
pursuant to Section 7.1(f) of the Receivables Purchase Agreement and (ii) by the
Collection Agent to the Administrative Agent pursuant to Section 2.11 of the
Receivables Transfer Agreement.
"Weekly Report Date" shall mean the second Business Day following the
last Business Day of the preceding week.
"Weekly Settlement Period" shall mean the period of days from and
including the Sunday of any calendar week to and including the Saturday of the
same calendar week.
"Withdrawal Liability" shall mean liability to a Multiemployer Plan as
a result of a complete or partial withdrawal from such Multiemployer Plan, as
such terms are defined in Part I of Subtitle E of Title IV of ERISA.
"Year 2000 Compliant" shall mean that neither performance nor
functionality of any computer hardware or software is materially affected by
dates prior to, during or after the year 2000, and in particular that (i) no
value for any current date causes any material interruption in operation, (ii)
date-based functionality behaves consistently for dates prior to, during and
after the year 2000, (iii) in all interfaces and data storage, the century in
any date is specified either explicitly or by unambiguous algorithms or
interfacing rules and (iv) the year 2000 is recognized as a leap year.
"Yield" shall mean the Redwood Yield and the Liberty Yield.
40
<PAGE>
Schedule I
Determination of "Redwood Yield"
REDWOOD YIELD = Sum of Daily Yields for each day in the
Settlement Period
1. Daily Yield = CP Interest Amount + Liquidity Interest
Amount + LOC Interest Amount + Margin Amount
2. Daily Yield Rate = (Daily Yield/Redwood Net Investment) x 360
3. CP Interest Amount = Carcorp CP Net Amount x Daily Weighted
Average CP Rate x Redwood Funding Factor
3a. Carcorp CP Net Amount = Redwood Net Investment - Carcorp Liquidity
Loans Outstanding + Carcorp Liquidity
Deposits - Carcorp LOC Draws Outstanding +
Carcorp LOC Deposits
3b. Weighted Average
CP Rate = Average of the rate of interest for all
tranches of CP Outstanding issued by
Redwood, weighted by CP issued by Redwood
Outstanding in each tranche
3c. Daily Weighted
Average CP Rate = Weighted Average CP Rate/360
3d. Redwood Funding
Factor = Net Proceeds Amount/Aggregate CP Net Amount
4. Liquidity Interest
Amount = Carcorp Outstanding Liquidity Loans x
(Liquidity Interest Rate/360)
5. LOC Interest Amount = Carcorp LOC Draws Outstanding x Carcorp
Daily LOC Rate
5a. Carcorp Daily LOC
Rate = (CP Interest Amount + Liquidity Interest
Amount) /Carcorp Senior Debt
6. Margin Amount = Prior to a Redwood Termination Event or a
Termination Event: Redwood Net Investment x
Daily Margin
Subsequent to a Redwood Termination Event or
a Termination Event: Redwood Net Investment
x Daily Default Margin
<PAGE>
Definitions
Capitalized terms used herein and not otherwise defined shall have the
respective meanings ascribed to them in Annex X.
"Aggregate CP Net Amount" shall mean the sum of the CP Net Amounts for
all Borrowers and Sellers.
"Borrower" shall have the meaning assigned to it in the Redwood
Liquidity Loan Agreement.
"Carcorp CP Net Amount" shall mean the CP Net Amount with respect to
the Transferor.
"Carcorp Liquidity Deposits" shall have the meaning assigned to it in
the Redwood Liquidity Loan Agreement.
"Carcorp Liquidity Loans Outstanding" shall have the meaning assigned
to it in the Redwood Liquidity Loan Agreement.
"Carcorp LOC Deposits" shall have the meaning assigned to it in the
Redwood Liquidity Loan Agreement.
"Carcorp LOC Draws Outstanding" shall have the meaning assigned to it
in the Redwood Liquidity Loan Agreement.
"Carcorp Senior Debt" shall mean the sum of Carcorp CP Net Amount and
Carcorp Liquidity Loans Outstanding.
"CP Net Amount" shall mean, with respect to any Borrower or Seller, an
amount equal to the equivalent (for that Borrower or Seller) of (a) Redwood Net
Investment, minus (b) Carcorp Liquidity Loans Outstanding, plus (c) Carcorp
Liquidity Deposits, minus (d) Carcorp LOC Draws Outstanding, plus (e) Carcorp
LOC Deposits.
"Daily Margin" shall mean a per diem percentage rate at any time
during a Settlement Period equal to (a) 0.70% divided by (b) 360.
"Daily Default Margin" shall mean per diem percentage rate at any time
during a Settlement Period equal to (a) the Daily Margin for such Settlement
Period plus (b)(i) two percent (2.0%) divided by (ii) 360.
"Liquidity Interest Rate" shall have the meaning assigned to it in the
Redwood Liquidity Loan Agreement.
"Net Proceeds Amount" shall have the meaning assigned to it in the
Redwood Liquidity Loan Agreement.
"Seller" shall have the meaning assigned to it in the Redwood
Liquidity Loan Agreement.
ii
<PAGE>
SCHEDULE I
LIST OF
INITIAL PURCHASERS,
LIQUIDITY BANKS, FUNDING AGENTS,
FACILITY LIMIT, PURCHASE LIMITS
AND COMMITMENTS
<TABLE>
<CAPTION>
Initial Purchaser Liquidity Bank Funding Agent Purchase Limit Commitment
- ----------------- -------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Park Avenue The Chase The Chase $57,189,542.48 $58,333,333.33
Receivables Manhattan Manhattan (Chase's
Corporation Bank Bank Commitment)
Redwood N/A General Electric $57,189,542.48 $58,905,228.75
Receivables Capital (Redwood's
Corporation Corporation Commitment)
Liberty Street The Bank of $57,189,542.48 $58,333,333.33
Funding Corp. Nova Scotia (Liberty's
Commitment)
Facility Limit = $171,568,627.44
</TABLE>
<PAGE>
SCHEDULE II
EQUIPMENT AND SOFTWARE
<PAGE>
SCHEDULE III
LIST OF C&A FISCAL PERIODS FOR THE YEAR 2000
<TABLE>
<CAPTION>
<S><C>
- -------------------------------------------- ------------------------------------------
1ST QUARTER 2ND QUARTER
- -------------------------------------------- ------------------------------------------
FIRST PERIOD FOURTH PERIOD
- -------------------------------------------- ------------------------------------------
MONTH SUN MON TUES WED THUR FRI SAT MONTH SUN MON TUES WED THUR FRI SAT
- -------------------------------------------- ------------------------------------------
DEC 25 27 28 29 30 31 MAR 27 28 29 30 31
- -------------------------------------------- ------------------------------------------
JAN 1 APR 1
- -------------------------------------------- ------------------------------------------
2 3 4 5 6 7 8 2 3 4 5 6 7 8
- -------------------------------------------- ------------------------------------------
9 10 11 12 13 14 15 9 10 11 12 13 14 15
- -------------------------------------------- ------------------------------------------
16 17 18 19 20 21 22 16 17 18 19 20 21 22
- -------------------------------------------- ------------------------------------------
23 24 25 26 27 28 29 23 24 25 26 27 28 29
- -------------------------------------------- ------------------------------------------
- -------------------------------------------- ------------------------------------------
SECOND PERIOD FIFTH PERIOD
- -------------------------------------------- ------------------------------------------
- -------------------------------------------- ------------------------------------------
MONTH SUN MON TUES WED THUR FRI SAT MONTH SUN MON TUES WED THUR FRI SAT
- -------------------------------------------- ------------------------------------------
JAN 30 31 APR 30
- -------------------------------------------- ------------------------------------------
FEB 1 2 3 4 5 MAY 1 2 3 4 5 6
- -------------------------------------------- ------------------------------------------
6 7 8 9 10 11 12 7 8 9 10 11 12 13
- -------------------------------------------- ------------------------------------------
13 14 15 16 17 18 19 14 15 16 17 18 19 20
- -------------------------------------------- ------------------------------------------
20 21 22 23 24 25 26 21 22 23 24 25 26 27
- -------------------------------------------- ------------------------------------------
<CAPTION>
- -------------------------------------------- ------------------------------------------
THIRD PERIOD SIXTH PERIOD
- -------------------------------------------- ------------------------------------------
- -------------------------------------------- ------------------------------------------
MONTH SUN MON TUES WED THUR FRI SAT MONTH SUN MON TUES WED THUR FRI SAT
- -------------------------------------------- ------------------------------------------
FEB 27 28 29 MAY 28 29 30 31
- -------------------------------------------- ------------------------------------------
MAR 1 2 3 4 JUNE 1 2 3
- -------------------------------------------- ------------------------------------------
5 6 7 8 9 10 11 4 5 6 7 8 9 10
- -------------------------------------------- ------------------------------------------
12 13 14 15 16 17 18 11 12 13 14 15 16 17
- -------------------------------------------- ------------------------------------------
19 20 21 22 23 24 25 18 19 20 21 22 23 24
- -------------------------------------------- ------------------------------------------
<CAPTION>
- -------------------------------------------- ------------------------------------------
3RD QUARTER 4TH QUARTER
- -------------------------------------------- ------------------------------------------
SEVENTH PERIOD TENTH PERIOD
- -------------------------------------------- ------------------------------------------
MONTH SUN MON TUES WED THUR FRI SAT MONTH SUN MON TUES WED THUR FRI SAT
- -------------------------------------------- ------------------------------------------
JUNE 25 26 27 28 29 30 SEPT 24 25 26 27 28 29 30
- -------------------------------------------- ------------------------------------------
JULY 1 OCT 1 2 3 4 5 6 7
- -------------------------------------------- ------------------------------------------
2 3 4 5 6 7 8 8 9 10 11 12 13 14
- -------------------------------------------- ------------------------------------------
9 10 11 12 13 14 15 15 16 17 18 19 20 21
- -------------------------------------------- ------------------------------------------
16 17 18 19 20 21 22 22 23 24 25 26 27 28
- -------------------------------------------- ------------------------------------------
23 24 25 26 27 28 29
- -------------------------------------------- ------------------------------------------
<CAPTION>
- -------------------------------------------- ------------------------------------------
EIGHTH PERIOD ELEVENTH PERIOD
- -------------------------------------------- ------------------------------------------
MONTH SUN MON TUES WED THUR FRI SAT MONTH SUN MON TUES WED THUR FRI SAT
- -------------------------------------------- ------------------------------------------
JULY 30 31 OCT 29 30 31
- -------------------------------------------- ------------------------------------------
AUG 1 2 3 4 5 NOV 1 2 3 4
- -------------------------------------------- ------------------------------------------
6 7 8 9 10 11 12 5 6 7 8 9 10 11
- -------------------------------------------- ------------------------------------------
13 14 15 16 17 18 19 12 13 14 15 16 17 18
- -------------------------------------------- ------------------------------------------
20 21 22 23 24 25 26 19 20 21 22 23 24 25
- -------------------------------------------- ------------------------------------------
<CAPTION>
- -------------------------------------------- ------------------------------------------
NINTH PERIOD TWELFTH PERIOD
- -------------------------------------------- ------------------------------------------
MONTH SUN MON TUES WED THUR FRI SAT MONTH SUN MON TUES WED THUR FRI SAT
- -------------------------------------------- ------------------------------------------
AUG 27 27 29 30 31 NOV 26 27 28 29 30
- -------------------------------------------- ------------------------------------------
SEPT 1 2 DEC 1 2
- -------------------------------------------- ------------------------------------------
3 4 5 6 7 8 9 3 4 5 6 7 8 9
- -------------------------------------------- ------------------------------------------
10 11 12 13 14 15 16 10 11 12 13 14 15 16
- -------------------------------------------- ------------------------------------------
17 18 19 20 21 22 23 17 18 19 20 21 22 23
- -------------------------------------------- ------------------------------------------
24 25 26 27 28 29 30
- -------------------------------------------- ------------------------------------------
</TABLE>
<PAGE>
SCHEDULE 3.1(Q)
MATERIAL ADVERSE EFFECT
None
<PAGE>
--------------------------------------------------------------------
RECEIVABLES PURCHASE AGREEMENT
Among
COLLINS & AIKMAN PRODUCTS CO.
AND ITS WHOLLY-OWNED
DIRECT AND INDIRECT
SUBSIDIARIES NAMED HEREIN,
AS SELLERS
AND
CARCORP, INC.,
AS PURCHASER
AND THE OTHER SELLERS FROM TIME TO TIME
NAMED HEREIN
DATED AS OF DECEMBER 27, 1999
-------------------------------------------------------------------
<PAGE>
ARTICLE I
DEFINITIONS..............................................................1
SECTION 1.1. DEFINITIONS................................................1
SECTION 1.2. OTHER TERMS................................................1
SECTION 1.3. COMPUTATION OF TIME PERIODS................................2
ARTICLE II
PURCHASE, CONVEYANCE AND SERVICING OF RECEIVABLES........................2
SECTION 2.1. SALES......................................................2
ARTICLE III
CONSIDERATION AND PAYMENT; REPORTING; ADMINISTRATION.....................3
SECTION 3.1. PURCHASE PRICE.............................................3
SECTION 3.2. PAYMENT OF PURCHASE PRICE..................................3
SECTION 3.3. SETTLEMENT REPORT..........................................4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES...........................................4
SECTION 4.1. SELLERS' REPRESENTATIONS AND WARRANTIES....................4
SECTION 4.2. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES BY THE
SELLERS; NOTICE OF BREACH..................................9
ARTICLE V
COVENANTS OF THE SELLERS.................................................9
SECTION 5.1. COVENANTS OF THE SELLERS...................................9
ARTICLE VI
REPURCHASE OBLIGATION...................................................15
SECTION 6.1. MANDATORY REPURCHASE......................................15
SECTION 6.2. DILUTIONS, ETC............................................15
ARTICLE VII
CONDITIONS PRECEDENT....................................................15
SECTION 7.1. CONDITIONS PRECEDENT TO PURCHASER'S PURCHASES OF
RECEIVABLES...............................................15
SECTION 7.2. CONDITIONS PRECEDENT TO THE ADDITION OF A SELLER..........16
ARTICLE VIII
SELLER NOTE.............................................................19
SECTION 8.1. SELLER NOTE...............................................19
SECTION 8.2. SOLE AND EXCLUSIVE REMEDY/SUBORDINATION...................19
SECTION 8.3. OFFSETS, ETC..............................................19
<PAGE>
ARTICLE IX
TERM AND TERMINATION....................................................20
SECTION 9.1. TERM......................................................20
SECTION 9.2. EFFECT OF TERMINATION.....................................20
ARTICLE X
MISCELLANEOUS PROVISIONS................................................21
SECTION 10.1. AMENDMENTS, ETC...........................................21
SECTION 10.2. GOVERNING LAW; SUBMISSION TO JURISDICTION.................21
SECTION 10.3. NOTICES...................................................21
SECTION 10.4. SEVERABILITY OF PROVISIONS................................22
SECTION 10.5. ASSIGNMENTS GENERALLY.....................................23
SECTION 10.6. FURTHER ASSURANCES........................................23
SECTION 10.7. NO WAIVER; CUMULATIVE REMEDIES............................23
SECTION 10.8. COUNTERPARTS..............................................23
SECTION 10.9. BINDING EFFECT; THIRD-PARTY BENEFICIARIES.................23
SECTION 10.10.MERGER AND INTEGRATION....................................23
SECTION 10.11 HEADINGS..................................................24
SECTION 10.12.EXHIBITS..................................................24
SECTION 10.13.ADDITION OF SELLERS.......................................24
EXHIBITS
EXHIBIT A Principal Place of Business, Chief Executive Office and
Location of Records..............................................A-1
EXHIBIT B Form of Seller Note..............................................B-1
EXHIBIT C Form of Additional Seller Supplement.............................C-1
EXHIBIT D Sellers..........................................................D-1
SCHEDULE 4.1(e) Material Adverse Effect
SCHEDULE 4.1(h) Litigation
ii
<PAGE>
RECEIVABLES PURCHASE AGREEMENT
This RECEIVABLES PURCHASE AGREEMENT, dated as of December 27, 1999 (as
amended, supplemented or otherwise modified and in effect from time to time,
this "Agreement"), among COLLINS & AIKMAN PRODUCTS CO., a Delaware corporation
("C&A"), as a seller, C&A's wholly-owned direct and indirect Subsidiaries listed
on Exhibit D hereto as sellers (C&A and such Subsidiaries are each referred to
herein as a "Seller", and, together with the other sellers that become parties
hereto pursuant to the terms of this Agreement, the "Sellers") and CARCORP,
INC., a Delaware corporation, as purchaser (in such capacity, the "Purchaser").
W I T N E S S E T H :
WHEREAS, the Purchaser desires to purchase from time to time certain
rights to receive and related assets existing on the Closing Date and thereafter
until the Purchase Termination Date; and
WHEREAS, the Sellers desire to sell and assign from time to time such
rights to receive and related assets to the Purchaser upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, it is hereby agreed by and among
the Purchaser and the Sellers as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Definitions. All capitalized terms used herein have the
meanings specified herein or, if not so specified, the meaning specified in, or
incorporated by reference into, Annex X to the Receivables Transfer Agreement,
dated as of December 27, 1999 (as amended, supplemented or otherwise modified
and in effect from time to time, the "Receivables Transfer Agreement"), by and
among the Purchaser, as Transferor thereunder, C&A, as Guarantor and as
Collection Agent thereunder, the Initial Purchasers, the Liquidity Banks, The
Chase Manhattan Bank, as Administrative Agent thereunder, and the Funding
Agents.
SECTION 1.2. Other Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, consistently applied.
All terms used in Article 9 of the Relevant UCC, and not specifically defined
herein, are used herein as defined in such Article 9.
<PAGE>
SECTION 1.3. Computation of Time Periods. Unless otherwise stated in
this Agreement, in the computation of a period of time from a specified date to
a later specified date, the word "from" means "from and including" and the words
"to" and "until" each means "to but excluding," and the word "within" means
"from and excluding a specified date and to and including a later specified
date."
ARTICLE II
PURCHASE, CONVEYANCE AND SERVICING OF RECEIVABLES
SECTION 2.1. Sales.
(a) Upon the terms and subject to the conditions set forth herein,
each Seller hereby sells, assigns, transfers and conveys to the Purchaser, and
the Purchaser hereby purchases from each Seller, all of such Seller's right,
title and interest, whether now owned or hereafter acquired and wherever
located, in, to and under such Seller's Receivables outstanding on the Closing
Date and thereafter owned by such Seller through any Purchase Termination Date,
together with all Related Security and Collections with respect thereto and all
Proceeds of the foregoing. Such undivided interest in the Receivables, expressed
as a Dollar amount, shall be equal to the Outstanding Balance of the Receivables
from time to time. Any sale, assignment, transfer and conveyance hereunder does
not constitute an assumption by the Purchaser of any obligations of the Sellers
or any other Person to the Obligors or to any other Person in connection with
the Receivables or under any Related Security or any other agreement or
instrument relating to the Receivables.
(b) Each Seller agrees to record and file on or prior to the Closing
Date, at its own expense, a financing statement or statements (or other similar
filings) with respect to such Seller's Receivables and the other property
described in Section 2.1(a) sold by such Seller hereunder meeting the
requirements of applicable law in such manner and in such jurisdictions as are
necessary to perfect and protect the interests of the Purchaser created hereby
under the Relevant UCC or other applicable laws against all creditors of, and
purchasers from, such Seller, and to deliver either the originals of such
financing statements (or other similar filings) or a file-stamped copy of such
financing statements (or other similar filings) or other evidence of such
filings to the Purchaser on or prior to the Closing Date.
(c) Each Seller agrees that from time to time, at its expense, it
will promptly execute and deliver all instruments and documents and take all
actions as may be necessary or as the Purchaser may reasonably request in order
to perfect or protect the interest of the Purchaser in the Receivables purchased
hereunder or to enable the Purchaser to exercise or enforce any of its rights
hereunder. Without limiting the foregoing, each Seller will, in order to
accurately reflect this purchase and sale transaction, execute and file such
financing or continuation statements or amendments thereto or assignments
thereof (as permitted pursuant hereto) as may be requested by the Purchaser and
mark its respective master data processing records (or related subledger) with a
legend describing the purchase by the Purchaser of such Seller's Receivables and
the lien of the Administrative Agent pursuant to the Receivables Transfer
Agreement and stating "An interest in these rights to receive has been granted
to The Chase Manhattan Bank, as
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Administrative Agent, on behalf of the Initial Purchasers, the Liquidity Banks
and the Funding Agents, pursuant to a Receivables Transfer Agreement dated as of
December 27, 1999." Each Seller shall, upon request of the Purchaser, obtain
such additional search reports as the Purchaser shall reasonably request. To the
fullest extent permitted by applicable law, the Purchaser shall be permitted to
sign and file continuation statements and amendments thereto and assignments
thereof without any Seller's signature. Carbon, photographic or other
reproduction of this Agreement or any financing statement shall be sufficient as
a financing statement.
(d) It is the express intent of the Sellers and the Purchaser that
each conveyance of the Receivables by a Seller to the Purchaser pursuant to this
Agreement be construed as a sale of such Receivables by such Seller to the
Purchaser. Further, it is not the intention of the Sellers and the Purchaser
that such conveyance be deemed a grant of a security interest in the Receivables
by any Seller to the Purchaser to secure a debt or other obligation of such
Seller. However, in the event that, notwithstanding the intent of the parties,
any Seller's Receivables are construed to constitute property of the applicable
Seller, then (i) this Agreement also shall be deemed to be, and hereby is, a
security agreement within the meaning of the Relevant UCC or other applicable
laws; and (ii) any of the conveyances by a Seller provided for in this Agreement
shall be deemed to be, and such Seller hereby grants to the Purchaser, a
security interest in, to and under all of such Seller's right, title and
interest in, to and under such Seller's Receivables, together with all Related
Security and Collections with respect thereto and all Proceeds of the foregoing
(the "Seller Collateral"), to secure the rights of the Purchaser set forth in
this Agreement or as may be determined in connection therewith by applicable
law. The Sellers and the Purchaser shall, to the extent consistent with this
Agreement, take such actions as may be necessary to ensure that, if this
Agreement were deemed to create a security interest in the Receivables, such
security interest would be deemed to be a perfected security interest in favor
of the Purchaser under applicable law and will be maintained as such throughout
the term of this Agreement.
ARTICLE III
CONSIDERATION AND PAYMENT; REPORTING; ADMINISTRATION
SECTION 3.1. Purchase Price. The purchase price for the Receivables
and related property conveyed to the Purchaser by the Sellers under this
Agreement on any Business Day shall be a Dollar amount equal to the product of
(i) the aggregate Outstanding Balance of the Receivables sold on such Business
Day, and (ii) one minus the then applicable Purchase Discount (the "Purchase
Price").
SECTION 3.2. Payment of Purchase Price.
(a) The Purchase Price for each Receivable sold hereunder on any
Business Day shall be paid or provided for on such Business Day (i) by payment
in immediately available funds to the extent such funds are available in excess
of necessary working capital, (ii) with respect to Receivables sold by C&A to
the Purchaser hereunder, with the consent of C&A, by means of capital
contributed by C&A to the Purchaser in the form of a contribution of the
additional Receivables, (iii) at the option of the Collection Agent, on behalf
of the applicable
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Seller, (subject to the provisions of Article VIII), by means of an addition to
the principal amount of the applicable Seller Note in an aggregate amount up to
the remaining portion of the Purchase Price (each, an "Advance"); provided,
however, that the aggregate amount of all Seller Notes on any Business Day shall
not exceed 49% of (x) the aggregate Purchase Price of the Receivables purchased
hereunder existing on such Business Day minus (y) an amount equal to the
Aggregate Net Investment (the "Advance Limit") or (iv) any combination of the
foregoing. The Collection Agent may evidence such additional principal amounts
by recording the date and amount thereof on the grid attached to the applicable
Seller Note; provided, however, that the failure to make any such recordation or
any error in such grid shall not adversely affect any Seller's rights. No sales
of Receivables shall be made hereunder on and after the Purchase Termination
Date.
(b) The Receivables with respect to which the Purchase Price therefor
is paid pursuant to Section 3.2(a)(i) and (iii) are referred to herein as
"Purchased Receivables" and the Receivables with respect to which the Purchase
Price therefor is paid pursuant to Section 3.2(a)(ii) are referred to herein as
"Contributed Receivables." The Purchased Receivables and the Contributed
Receivables are collectively referred to herein as the "Transferred
Receivables."
(c) The Collection Agent shall be responsible, in its sole discretion
but in accordance with subsection 3.2(a), for allocating among the Sellers the
payment of the Purchase Price for Receivables either in the form of cash
received from the Purchaser or as an addition to the principal amount of the
applicable Seller Note. The Purchaser shall be entitled to pay all amounts in
respect of the Purchase Price of Receivables and Related Security to an account
of the Collection Agent for allocation by the Collection Agent to the Sellers,
and each of the Sellers hereby appoints the Collection Agent as its agent for
the purposes of receiving such payments and making such allocations and hereby
authorizes the Purchaser to make all payments due to such Seller directly to, or
as directed by, the Collection Agent. The Collection Agent hereby accepts and
agrees to such appointment. All payments under this Agreement shall be made not
later than 3:00 p.m. (New York City time) on the date specified therefor in
Dollars in same day funds or by check, as the Collection Agent shall elect and
to the bank account designated in writing by the Collection Agent to the
Purchaser.
SECTION 3.3. Settlement Report. On the Monthly Settlement Report Date
of each of C&A's fiscal months, C&A shall deliver to the Purchaser a monthly
report, substantially in the form of Exhibit D attached to the Receivables
Transfer Agreement, showing (i) the aggregate Purchase Price of Receivables
acquired or generated by the Sellers in the preceding month and (ii) the
aggregate Outstanding Balance of such Receivables that are Eligible Receivables.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Sellers' Representations and Warranties. Each Seller
severally represents and warrants to the Purchaser as of the Closing Date and on
each Business Day on which Receivables are sold hereunder by it with respect to
itself:
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(a) Corporate Existence and Power. Such Seller is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and has all corporate power and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business in each jurisdiction in which its business is now conducted,
except where the failure to obtain such licenses, authorizations, consents and
approvals would not have a Material Adverse Effect. Such Seller is duly
qualified to do business in, and is in good standing in, every other
jurisdiction in which the nature of its business requires it to be so qualified,
except where the failure to be so qualified or in good standing would not have a
Material Adverse Effect.
(b) Corporate and Governmental Authorization; Contravention. The
execution, delivery and performance by such Seller of the Transaction Documents
to which it is a party (i) are within such Seller's corporate powers, (ii) have
been duly authorized by all necessary corporate action, (iii) require no action
by or in respect of, or filing with, any Official Body or official thereof
(except for the filing of UCC financing statements or similar filings under
applicable law as required by this Agreement or as have been taken or filed and,
with respect to filings other than UCC financing statements or similar filings
under applicable law, filings where the failure to file will not have a Material
Adverse Effect), (iv) do not contravene, or constitute a default under, any
provision of applicable Law or of the Certificate of Incorporation, Articles or
Bylaws, as applicable, of such Seller, (v) do not contravene or constitute a
default under any agreement or other instrument binding upon such Seller except
where such contravention or default would not have a Material Adverse Effect, or
(vi) result in the creation or imposition of any Adverse Claim on the assets of
such Seller, or any of its Affiliates (except those created by this Agreement).
(c) Valid Sale; Binding Effect. Each purchase of Receivables and
Related Security by the Purchaser hereunder shall constitute a valid sale and
assignment by the applicable Seller to the Purchaser, enforceable against
creditors of, and purchasers from, such Seller, subject to applicable
bankruptcy, insolvency, moratorium or other similar laws affecting the rights of
creditors and general equitable principles (whether considered in a proceeding
at law or in equity). Each of the Transaction Documents to which such Seller is
a party will constitute the legal, valid and binding obligation of such Seller,
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws affecting the rights of creditors
and general equitable principles (whether considered in a proceeding at law or
in equity). The security interest granted to the Purchaser by such Seller
pursuant to Section 2.1(d) will at all times be a fully perfected first priority
security interest in and to the Seller Collateral transferred by such Seller.
(d) Quality of Title. Immediately preceding the sale by it of
Receivables, Related Security, Collections with respect thereto and all Proceeds
of the foregoing pursuant to this Agreement, such Seller was the owner of all of
its Receivables, free and clear of all Adverse Claims. On or prior to the date
hereof and on or prior to each Business Day on which Receivables are sold by it
hereunder, (i) all financing statements and other documents required to be
recorded or filed in order to perfect and protect the interest of the Purchaser
in, to and under the Receivables against all creditors of and purchasers from
the applicable Seller will have been duly filed in each filing office necessary
for such purpose and all filing fees and taxes, if any,
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payable in connection with such filings shall have been paid in full, and (ii)
Purchaser will either acquire (A) valid title to and the sole record and
beneficial ownership in, or (B) a first priority perfected security interest in,
each such Receivable purchased, assigned or otherwise acquired on such date, in
each case free and clear of any Adverse Claim or restrictions on
transferability. None of the Seller Collateral has been sold, assigned or
otherwise disposed of other than pursuant hereto and the Receivables Transfer
Agreement and there are no Adverse Claims upon or with respect to the Seller
Collateral other than pursuant hereto and the Receivables Transfer Agreement.
(e) Material Adverse Effect. Commencing on the last day of the 1998
fiscal year of C&A and ending on the Closing Date, (i) such Seller has not
incurred any obligations, contingent or non-contingent liabilities, liabilities
for Charges, long-term leases or unusual forward or long-term commitments that,
alone or in the aggregate, could reasonably be expected to have a Material
Adverse Effect, other than, with respect to a Material Adverse Effect as listed
on Schedule 4.1(e), (ii) no contract, lease or other agreement or instrument has
been entered into by such Seller or has become binding upon such Seller's assets
and no law or regulation applicable to such Seller has been adopted that has had
or could reasonably be expected to have a Material Adverse Effect on such
Seller, and (iii) such Seller is not in default and to the knowledge of such
Seller, no third party is in default under any material contract, lease or other
agreement or instrument to which such Seller is a party that alone or in the
aggregate could reasonably be expected to have a Material Adverse Effect.
Commencing on the last day of the 1998 fiscal year of C&A and ending on the
Closing Date no event has occurred that alone or together with other events
could reasonably be expected to have a Material Adverse Effect, other than, with
respect to a Material Adverse Effect with respect to such Seller as listed on
Schedule 4.1(e).
(f) Accuracy of Information. All information heretofore furnished by
such Seller to the Purchaser and the Funding Agents for purposes of or in
connection with this Agreement, any other Transaction Document, or any
transaction contemplated hereby or thereby is, and all such information
hereafter furnished by such Seller to the Purchaser, the Funding Agents, the
Initial Purchasers and the PARCO APA Banks will be, true and accurate in every
material respect, on the date such information is stated or certified.
(g) Tax Status. Such Seller has withheld or deducted and remitted all
amounts required to be withheld or deducted and remitted by the applicable
legislation, and has filed all tax returns (Federal, State, Provincial and
local) required to be filed by it and has paid or made adequate provision for
the payment of all taxes, assessments and other governmental charges (including
for such purposes, the setting aside of appropriate reserves for taxes,
assessments and other governmental charges being contested in good faith).
(h) Action, Suits. There are no actions, suits or proceedings
pending, or to the knowledge of such Seller threatened, against or affecting
such Seller or any Affiliate of such Seller or their respective properties, in
or before any court, arbitrator or other body ("Litigation"), which may,
individually or in the aggregate, have a Material Adverse Effect or that involve
this Agreement or the transactions contemplated hereby. Schedule 4.1(h) sets
forth
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all Litigation that seeks damages in excess of $5,000,000, except to the extent
an insurance carrier has accepted a claim for coverage.
(i) Place of Business. The principal place of business and chief
executive office of such Seller are located at the addresses described on
Exhibit A hereof, and the offices where such Seller keeps all of its Records and
Related Security thereof are located at the addresses described on Exhibit A
hereof, or such other locations notified to the Purchaser in accordance with
this Agreement in jurisdictions where all action required by the terms of this
Agreement has been taken and completed.
(j) Solvency. Both before and after giving effect to (i) the
transactions contemplated by the Transaction Documents and (ii) the payment and
accrual of all transaction costs in connection with the foregoing, such Seller
is not and will not be insolvent, does not, and will not, have unreasonably
small capital with which to carry on its business, is, and will be, able to pay
its debts generally as they become due and payable, and its liabilities do not,
and will not, exceed its assets.
(k) Tradenames, Etc. As of the date hereof: (i) such Seller has only
the subsidiaries and divisions listed on Exhibit K to the Receivables Transfer
Agreement; and (ii) such Seller has, within the last five (5) years, operated
only under the tradenames identified on Exhibit K to the Receivables Transfer
Agreement, and, within the last five (5) years, has not changed its name, merged
with or into or consolidated with any other corporation or been the subject of
any proceeding under Title 11, United States Code (Bankruptcy), except as
disclosed in Exhibit K to the Receivables Transfer Agreement.
(l) Nature of Receivables. Each Receivable sold by such Seller to the
Purchaser hereunder is an Eligible Receivable. Each Receivable sold by such
Seller and included in the calculation of the Net Receivables Balance in fact
satisfies at such time the definition of "Eligible Receivable" and is an
"eligible asset" as defined in Rule 3a-7 under the Investment Company Act of
1940, as amended, and is not a Defaulted Receivable.
(m) Credit and Collection Policy. Since the end of the Seller's
fiscal period ending in September 1999, there have been no material changes in
the Credit and Collection Policy other than as permitted hereunder. Since such
date, no material adverse change has occurred in the overall rate of collection
of the Receivables sold by it.
(n) Collections and Servicing. Since the end of the Seller's fiscal
period ending in September 1999, there has been no material adverse change in
the ability of such Seller to service and collect its Receivables.
(o) Binding Effect of Receivables and Contract. Each Receivable and
related Contract sold by it constitutes a legal, valid and binding obligation of
the related Obligor, enforceable against the related Obligor, subject to
applicable bankruptcy, insolvency, moratorium or similar laws affecting the
rights of creditors and general equity principles (whether considered in a
proceeding at law or in equity).
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(p) Not an Investment Company. Such Seller is not, nor is such Seller
controlled by, an "investment company" or an "affiliated person" of, or
"promoter" or "principal underwriter" for, an "investment company," within the
meaning of the Investment Company Act of 1940, as amended, or is exempt from all
provisions of such Act.
(q) ERISA. To the extent applicable, such Seller and its ERISA
Affiliates are in compliance in all material respects with ERISA and the
provisions of the Code that are applicable to ERISA, and no lien exists in favor
of the Pension Benefit Guaranty Corporation on any of the Receivables. There are
no pending or, to the knowledge of such Seller, threatened claims (other than
claims for benefits in the normal course), sanctions, actions or lawsuits,
asserted or instituted against such Plan of such Seller or its ERISA Affiliates
or any Person as fiduciary or sponsor of any such Plan of such Seller or its
ERISA Affiliates. No ERISA Event has occurred with respect to Title IV Plans of
such Seller or its ERISA Affiliates that have an aggregate Unfunded Pension
Liability equal to or greater than $10,000,000.
(r) Lock-Box Accounts. The names and addresses of all the Lock-Box
Banks, together with the account numbers of the Lock-Box Accounts at such Lock-
Box Banks, are specified in Exhibit B to the Receivables Transfer Agreement (or
at such other Lock-Box Banks and/or with such other Lock-Box Accounts, as have
been notified to the Administrative Agent and for which Lock-Box Agreements have
been executed in accordance with Section 2.8(b) of the Receivables Transfer
Agreement and delivered to the Collection Agent, the Administrative Agent and
the Funding Agents). All Obligors (or their designees) have been instructed to
cause all payments to be made to a Lock-Box Account.
(s) Bulk Sales. No transaction contemplated by this Agreement or the
other Transaction Documents requires compliance with any bulk sales act or
similar law.
(t) Year 2000 Plan. Such Seller has reviewed the areas within its
business and operations which it believes would reasonably be expected to be
materially adversely by, and has developed a plan to address on a timely basis,
the "Year 2000 Problem" (that is, the risk that computer applications used by
such Seller may be unable to recognize and perform properly date-sensitive
functions involving certain dates occurring in or after the year 2000).
(u) Full Disclosure. No information contained in this Agreement, any
of the other Transaction Documents, the Senior Credit Facility Confidential
Information Memorandum, the Rating Agency Book or, since January 1, 1999, any
registration statement or annual, quarterly, monthly or other regular report
which such Seller or any of its Affiliates filed with the Securities and
Exchange Commission contains any untrue statement of a material fact (taken as a
whole) nor has such Seller or its Affiliates failed to provide to the Purchaser,
the Administrative Agent, the Initial Purchasers, the Funding Agents or the
Liquidity Banks any material information necessary to make information provided
by such Seller or its Affiliates in such documents or filings (taken as a whole)
not misleading in any material respect in light of the circumstances under, and
for the purposes for, which such information was provided; provided, however,
that this representation or warranty shall not relate to any projections or
forward looking statements in any such documents provided by such Seller or its
Affiliates.
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SECTION 4.2. Reaffirmation of Representations and Warranties by the
Sellers; Notice of Breach. On the Closing Date and on each Business Day on which
Receivables are sold by a Seller hereunder, such Seller shall be deemed to have
certified that all representations and warranties described in Section 4.1 are
true and correct on and as of such day as though made on and as of such day. The
representations and warranties set forth in Section 4.1 shall survive (i) the
conveyance of the Receivables to the Purchaser, (ii) the termination of the
rights and obligations of the Purchaser and the Sellers under this Agreement and
(iii) the termination of the rights and obligations of the Transferor, C&A, the
Administrative Agent and the Funding Agents under the Receivables Transfer
Agreement. Upon discovery by the Purchaser or any Seller of a breach of any of
the foregoing representations and warranties, the party discovering such breach
shall give written notice to the others by the end of the Business Day of such
discovery.
ARTICLE V
COVENANTS OF THE SELLERS
SECTION 5.1. Covenants of the Sellers. Each Seller hereby covenants
and agrees with the Purchaser that, for so long as this Agreement is in effect,
and until all Receivables, an interest in which has been sold to the Purchaser
pursuant hereto, shall have been paid in full or written-off as uncollectible,
and all amounts owed by such Seller pursuant to this Agreement have been paid in
full, unless the Purchaser otherwise consents in writing, such Seller covenants
and agrees as follows:
(a) Conduct of Business. Such Seller will, and will cause each of its
Subsidiaries to, (i) carry on and conduct its business in substantially the same
manner and in substantially the same fields of enterprise as it is presently
conducted and do all things necessary to remain duly incorporated, validly
existing and in good standing as a domestic corporation in its jurisdiction of
incorporation, (ii) maintain all requisite authority to conduct its business in
each jurisdiction in which its business is conducted to the extent that the
failure to maintain such authority would have a Material Adverse Effect, and
(iii) maintain its principal place of business and chief executive office and
the office at which it keeps its Records and Related Security at the locations
specified in Exhibit A, or upon 30 days' prior written notice to the Purchaser,
at such other locations in a jurisdiction where all action requested by the
Purchaser and the Administrative Agent pursuant to Section 4.1(d) shall have
been taken with respect to the Receivables and Related Security.
(b) Compliance with Laws. Such Seller will, and will cause each of
its Subsidiaries to (i) comply in all material respects with all Laws to which
it may be subject and (ii) perform each of its obligations under the Transaction
Documents, except, in each case, where the failure to so comply would not have a
Material Adverse Effect.
(c) Furnishing of Information and Inspection of Records. Such Seller
will furnish to the Purchaser from time to time such information with respect to
such Seller's Receivables as the Purchaser may reasonably request, including,
without limitation, listings identifying the Obligors and the Outstanding
Balance for each of its Receivables, together with
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an aging of such Receivables. Such Seller will, at any time and from time to
time during regular business hours and upon reasonable notice permit the
Purchaser, or its agents or representatives, (i) to examine and make copies of
and abstracts from all Records and (ii) to visit the offices and properties of
such Seller for the purpose of examining such Records, and to discuss matters
relating to its Receivables or such Seller's performance hereunder and under the
other Transaction Documents to which such Seller is a party with any of the
officers, directors, employees or independent public accountants of such Seller
having knowledge of such matters. Upon a Potential Termination Event or
Termination Event, the Initial Purchasers, the PARCO APA Banks, Funding Agents
and Administrative Agent shall, without notice, have immediate access to all
Records and to visit the offices and properties of each Seller.
(d) Keeping of Records and Books of Account. Such Seller will
maintain a system of accounting established and administered in accordance with
GAAP, consistently applied, and will maintain and implement administrative and
operating procedures (including, without limitation, an ability to recreate
records evidencing Receivables in the event of the destruction of the originals
thereof), and keep and maintain, or obtain, as and when required, all Records
and all documents, books, records and other information reasonably necessary or
advisable for the collection of all Receivables (including, without limitation,
(i) records adequate to permit the daily identification of each Receivable and
all Collections of and adjustments to each existing Receivable and (ii) records
of all payments received, credits granted and merchandise returned with respect
thereto). Such Seller will give the Purchaser prompt notice of any material
change in the administrative and operating procedures referred to in the
previous sentence.
(e) Communication with Accountants. Such Seller authorizes the
Purchaser, the Collection Agent, the Administrative Agent and each Funding Agent
to communicate directly with its independent certified public accountants, and
authorizes and shall instruct those accountants and advisors to disclose and
make available to the Purchaser, the Collection Agent, the Administrative Agent
and each Funding Agent any and all financial statements and other supporting
financial documents, schedules and information relating to such Seller
(including copies of any issued management letters) with respect to the
business, financial condition and other affairs of such Seller. Such Seller
agrees to render the Purchaser, the Collection Agent, the Administrative Agent
and each Funding Agent at such Person's own cost and expense, such clerical and
other assistance as may be reasonably requested with regard to the foregoing. If
any Potential Termination Event or Termination Event shall have occurred and be
continuing, such Seller shall, promptly upon request therefor, assist the
Purchaser in delivering to the Administrative Agent and the Funding Agents
Records reflecting activity through the close of business on the Business Day
immediately preceding the date of such request.
(f) Performance and Compliance with Receivables and Contracts. Such
Seller at its expense will timely and fully perform and comply with all material
provisions, covenants and other promises required to be observed by it under the
Contracts related to the Receivables.
(g) Credit and Collection Policy. Such Seller will comply in all
material respects with the Credit and Collection Policy in regard to each
Receivable and the related Contract.
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(h) Collections. Such Seller shall instruct all Obligors (or their
designees) to cause all Collections to be deposited directly to a Lock-Box
Account.
(i) Collections Received. Such Seller shall hold in trust, and
deposit immediately (but in any event no later one Business Day following its
receipt thereof) to a Lock-Box Account all Collections received from time to
time by such Seller.
(j) Sale Treatment. Such Seller agrees to treat each conveyance
hereunder for all purposes (including, without limitation, tax and financial
accounting purposes) as a sale and, to the extent any such reporting is
required, shall report the transactions contemplated by this Agreement on all
relevant books, records, tax returns, financial statements and other applicable
documents as a sale of the Receivables to the Purchaser.
(k) No Sales, Liens, Etc. Except as otherwise provided herein, such
Seller will not sell, assign (by operation of law or otherwise) or otherwise
dispose of, or create any Adverse Claim upon (or the filing of any financing
statement) or with respect to (x) any of its Receivables, Related Security,
Required Currency Hedge, Collections or Proceeds with respect thereto, (y) any
inventory or goods, the sale of which may give rise to a Collection, or (z) any
Lock-Box Account to which any Collections of any of its Receivables are sent, or
assign any right to receive income in respect thereof.
(l) No Extension or Amendment of Receivables. Such Seller will not
extend, amend or otherwise modify the terms of any Receivable, or amend, modify
or waive any term or condition of any Contract related thereto, except as
provided in the Receivables Transfer Agreement or as contemplated by the Credit
and Collection Policy, without the prior written consent of the Purchaser and
each Funding Agent (which consent shall be obtained by the Administrative
Agent).
(m) No Change in Business or Credit and Collection Policy. Except as
provided in the Receivables Transfer Agreement, such Seller will not make any
change in the character of its business or in the Credit and Collection Policy,
which change would, in either case, impair the collectibility of any Receivable
or otherwise have a Material Adverse Effect.
(n) No Mergers, Etc. Such Seller will not, without the prior written
consent of each Funding Agent (which consent shall be obtained by the
Administrative Agent), (i) consolidate or merge with or into any other Person,
or (ii) sell, lease or transfer all or substantially all of its assets to any
other Person; provided, that a Seller may merge with or into another Seller or
with another Person if (A)(1) such Seller is the corporation surviving such
consolidation or merger or (2) the Person into or with which the Seller is
merged or consolidated is an Affiliate and the surviving corporation assumes in
writing all duties and liabilities of the Seller under the Transaction Documents
and (B) immediately after and giving effect to such consolidation or merger, no
Termination Event or Potential Termination Event shall have occurred and be
continuing under the Receivables Transfer Agreement.
(o) Change in Payment Instructions to Obligors; Deposits to Lock-Box
Accounts. Such Seller will not add or terminate, or make any change to, any
Lock-Box Account,
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except in accordance with the Receivables Transfer Agreement. Such Seller will
use reasonable commercial efforts to not deposit or otherwise credit, or cause
or permit to be so deposited or credited, to any Lock-Box Account, cash or cash
proceeds other than Collections of Receivables and in any event shall segregate,
or cause to be segregated, any such cash or cash proceeds from Collections
within five (5) days of deposit or credit to any Lock-Box Account.
(p) Change of Name, Etc. Such Seller shall not change its name,
identity or structure or the location of its chief executive office, unless at
least ten (10) days prior to the effective date of any such change such Seller
delivers to the Purchaser and the Administrative Agent (i) such documents,
instruments or agreements, executed by the applicable Seller as are necessary to
reflect such change and to continue the perfection of the Purchaser's interest
in the Receivables, Related Security, Collections and Proceeds with respect
thereto and (ii) new or revised Lock-Box Agreements executed by the Lock-Box
Banks which reflect such change and enable the Administrative Agent, on behalf
of the Funding Agents, the Initial Purchasers and the PARCO APA Banks, to
exercise its rights under the Transaction Documents.
(q) Indemnification. Such Seller severally agrees to indemnify,
defend and hold the Purchaser harmless from and against any and all loss,
liability, damage, judgment, claim, deficiency, or expense (including interest,
penalties, reasonable attorneys' fees and amounts paid in settlement) to which
the Purchaser may become subject insofar as such loss, liability, damage,
judgment, claim, deficiency, or expense arises out of or is based upon a breach
by such Seller of its representations, warranties and covenants contained
herein, or any information certified in any schedule or certificate delivered by
such Seller hereunder or in connection with the Transaction Documents, being
untrue in any material respect at any time; provided that in no event shall this
Section 5.1(q) be construed to require a Seller to indemnify the Purchaser for
amounts related to the uncollectibility of any Receivable for credit-related
reasons pertaining to the related Obligor, including, but not limited to,
amounts that are required to be returned to the related Obligor as a voidable
preference. In addition, such Seller shall severally indemnify the
Administrative Agent, the Funding Agents, the Redwood Secured Parties, the
Initial Purchasers and each of the PARCO APA Banks from any and all losses,
claims, damages, liabilities or expenses incurred by any of them and resulting
from the failure of such Seller to be Year 2000 Compliant. Any indemnification
pursuant to this Section 5.1(q) shall be had only from the assets of the Sellers
and shall not be payable from Collections, except to the extent such Collections
are released to a Seller in accordance with the Receivables Transfer Agreement.
The obligations of the Sellers under this Section 5.1(q) shall be considered to
have been relied upon by the Purchaser, the Administrative Agent and the Funding
Agents and shall survive the execution, delivery, performance and termination of
this Agreement for a period of three (3) years following the Purchase
Termination Date, regardless of any investigation made by the Purchaser, the
Administrative Agent or the Funding Agents or on behalf of any of them.
(r) ERISA.
(i) To the extent applicable, such Seller will not (A) engage or
permit any of its ERISA Affiliates to engage in any prohibited transaction
(as defined in Section 4975 of the Code and Section 406 of ERISA) for which
an exemption is not available or has not previously been obtained from the
U.S. Department of Labor; (B) fail to make
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any payments to any Multiemployer Plan that such Seller or any ERISA
Affiliate of such Seller is required to make under the agreement relating
to such Multiemployer Plan or any law pertaining thereto; (C) terminate any
Benefit Plan so as to result in any liability; or (D) permit to exist any
occurrence of any reportable event described in Title IV of ERISA, if such
prohibited transactions, failures to make payment, terminations and
reportable events described in clauses (A), (B), (C) and (D) above would in
the aggregate have a Material Adverse Effect.
(ii) To the extent applicable, such Seller will not permit to
exist any accumulated funding deficiency (as defined in Section 302(a) of
ERISA and Section 412(a) of the Code) or funding deficiency with respect to
any Benefit Plan other than a Multiemployer Plan.
(iii) To the extent applicable, such Seller will not cause or
permit it or any of its ERISA Affiliates to cause or permit the occurrence
of an ERISA Event with respect to Title IV Plans of such Seller or its
ERISA Affiliates that have an aggregate Unfunded Pension Liability equal to
or greater than $10,000,000.
(s) Insurance. Except to the extent failure to do so would not
reasonably be expected to cause a Material Adverse Effect, such Seller shall (i)
keep its insurable properties adequately insured at all times by financially
sound and responsible insurers and maintain such other insurance, to such extent
and against such risks, including fire and other risks insured against by
extended coverage, as is customary with companies of the same or similar size in
the same or similar businesses, (ii) maintain in full force and effect public
liability insurance against claims for personal injury or death or property
damage occurring upon, on, about or in connection with the use of any properties
owned, occupied or controlled by it or any of its Subsidiaries, as the case may
be, in such amounts and with such deductibles as are customary with companies of
the same or similar size in the same or similar businesses and in the same
geographic area and (iii) maintain such other insurance as may be required by
Law, and will cause each of its Subsidiaries to do so.
(t) Notice of Material Event. Such Seller shall promptly inform the
Purchaser in writing of the occurrence of any event, circumstance or condition
that has had or could reasonably be expected to have a material adverse effect
with respect to such Seller, in each case setting forth the details thereof and
what action, if any, such Seller proposes to take with respect thereto.
(u) Capital Structure and Business. No Seller shall: (i) make any
changes in any of its business objectives, purposes or operations that could
have or result in a Material Adverse Effect or (ii) amend, supplement or
otherwise modify its certificate or articles of incorporation or bylaws in a
manner that could have or result in a Material Adverse Effect.
(v) Separate Existence. Such Seller shall at all times:
(i) maintain its own deposit account or accounts, separate from
those of the Purchaser, with commercial banking institutions and ensure
that the funds of such
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Seller will not be diverted to the Purchaser or for other than corporate
uses of such Seller, nor will such funds be commingled with the funds of
the Purchaser;
(ii) to the extent that it shares the same officers or other
employees with the Purchaser, the salaries of and the expenses related to
providing benefits to such officers and other employees shall be fairly
allocated among such Seller and the Purchaser, and each such entity shall
bear its fair share of the salary and benefit costs associated with all
such common officers and employees;
(iii) to the extent that it jointly contracts with the Purchaser
to do business with vendors or service providers or to share overhead
expenses, the costs incurred in so doing shall be allocated fairly among
such Seller and the Purchaser, and each such entity shall bear its fair
share of such costs. To the extent that the Seller contracts or does
business with venders or service providers where the goods and services
provided are partially for the benefit of the Purchaser, the costs incurred
in so doing shall be fairly allocated to or among such Seller and the
Purchaser for whose benefit the goods or services are provided, and each
such entity shall bear its fair share of such costs;
(iv) enter into all material transactions between the Seller and
the Purchaser, whether currently existing or hereafter entered into, only
on an arm's length basis, it being understood and agreed that the
transactions contemplated in the Transaction Documents meet the
requirements of this clause (iv);
(v) maintain office space separate from the office space of the
Purchaser and, to the extent that the Seller and the Purchaser have offices
in the same location, there shall be a fair and appropriate allocation of
overhead costs among them, and each such entity shall bear its fair share
of such expenses;
(vi) issue separate financial statements prepared not less
frequently than quarterly and prepared in accordance with GAAP;
(vii) conduct its affairs strictly in accordance with its
certificate of incorporation and observe all necessary, appropriate and
customary corporate formalities, including, but not limited to, holding all
regular and special stockholders' and directors' meetings appropriate to
authorize all corporate action, keeping separate and accurate minutes of
its meetings, passing all resolutions or consents necessary to authorize
actions taken or to be taken, and maintaining accurate and separate books,
records and accounts, including, but not limited to, payroll and
intercompany transaction accounts;
(viii) not assume or guarantee any of the liabilities of the
Purchaser, and
(ix) take, or refrain from taking, as the case may be, all other
actions that are necessary to be taken or not to be taken in order to
comply with this Section 5.1(v) .
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ARTICLE VI
REPURCHASE OBLIGATION
SECTION 6.1. Mandatory Repurchase.
(a) Breach of Warranty. If, on any day, any Receivable which has been
sold by any Seller hereunder and which has been reported by such Seller as an
Eligible Receivable, shall fail to meet the conditions set forth in the
definition of Eligible Receivable on the date of such sale and in connection
with the circumstances giving rise to such breach (i) the rights and interests
of the Purchaser in such Receivable, Related Security or Collections with
respect thereto or the Proceeds thereof are in any manner materially and
adversely impaired or (ii) such Receivable is not available to the Purchaser
free and clear of any Adverse Claim, such Seller shall be deemed to have
received on such day a Collection of such Receivable in full and shall on such
day pay to the Purchaser an amount equal to the aggregate Outstanding Balance of
such Receivable.
(b) Reconveyance Under Certain Circumstances. Each Seller agrees
that, if on any date the Administrative Agent, a Funding Agent or the Transferor
notifies such Seller or such Seller discovers that any of the representations
and warranties made herein is untrue or incorrect with respect to a Receivable
in any material respect as of the date such representation or warranty was made
and such untruth or incorrectness will adversely affect the collectibility of,
or the lien upon, such Receivable, such Seller shall accept the reconveyance of
such Receivable on such date. In the event of a reconveyance under this Section
6.1(b), the applicable Seller shall pay to the Purchaser in immediately
available funds on such date of reconveyance an amount equal to the Outstanding
Balance of any such Receivable.
SECTION 6.2. Dilutions, Etc. Each Seller agrees that if on any day
the Outstanding Balance of a Receivable an interest in which has been sold by
such Seller hereunder is either (x) reduced as a result of defective, rejected
or returned goods or other dilution factor, any billing adjustment or other
adjustment, or (y) reduced or cancelled as a result of (i) a setoff or offset in
respect of any claim by any Person (whether such claim arises out of the same or
a related transaction or an unrelated transaction), or (ii) any action by any
Federal or state taxing authority or as a result of the payment by any Obligor
of any portion of a Receivable constituting a tax or governmental fee or charge
to any Person other than the Purchaser, then such Seller shall be deemed to have
received on such day a collection of such Receivable in the amount of such
reduction, cancellation or payment made by the Obligor and shall on such day pay
to the Purchaser an amount equal to such reduction or cancellation.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.1. Conditions Precedent to Purchaser's Purchases of
Receivables. The obligations of the Purchaser to purchase the Receivables on the
Closing Date and on any
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Business Day on which Receivables are sold hereunder shall be subject to the
satisfaction of the following conditions:
(a) All representations and warranties of the Sellers contained in
this Agreement shall be true and correct on the Closing Date and on the
applicable Business Day of sale, with the same effect as though such
representations and warranties had been made on such date (except to the extent
such representations and warranties relate solely to an earlier date, and then
as of such earlier date);
(b) All information concerning the Receivables provided to the
Purchaser shall be true and correct in all material respects as of the Closing
Date, in the case of any Receivables sold on the Closing Date, or the date such
Receivables sold to the Purchaser, in the case of any Receivables created and
sold by any Seller to the Purchaser after the Closing Date;
(c) Each Seller shall have substantially performed all other
obligations required to be performed by the provisions of this Agreement and the
other Transaction Documents to which it is a party;
(d) The Sellers shall have either filed or caused to be filed the
financing statement(s) (or other similar instruments) required to be filed
pursuant to Section 2.1(b);
(e) All corporate and legal proceedings, and all instruments in
connection with the transactions contemplated by this Agreement and the other
Transaction Documents and Redwood Liquidity Documents shall be satisfactory in
form and substance to the Purchaser, and the Purchaser shall have received from
the Sellers copies of all documents (including, without limitation, records of
corporate proceedings) relevant to the transactions herein contemplated as the
Purchaser may reasonably have requested;
(f) On the Closing Date, the Sellers shall deliver to the Purchaser
and the Administrative Agent a Weekly Report for the Weekly Settlement Period
immediately preceding the Closing Date; and
(g) the Purchase Termination Date shall not have occurred.
SECTION 7.2. Conditions Precedent to the Addition of a Seller. The
obligation of the Purchaser to purchase Receivables and Related Security
hereunder from a Subsidiary of C&A requested to be an additional Seller pursuant
to Section 10.13 is subject to the conditions precedent that the Purchaser shall
have received on or before the date designated for the addition of such Seller
(the "Seller Addition Date") and in form and substance satisfactory to the
Purchaser:
(a) Additional Seller Supplement. An Additional Seller Supplement
substantially in the form of Exhibit C attached hereto (with a copy for the
Administrative Agent and each Funding Agent) duly executed and delivered by such
Seller;
(b) Secretary's Certificate. A certificate of the Secretary or an
Assistant Secretary of such Seller, dated the related Seller Addition Date, and
certifying (i) that attached
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thereto is a true and complete copy of the by-laws of such Seller, as in effect
on the Seller Addition Date and at all times since a date prior to the date of
the resolutions described in clause (ii) below, (ii) that attached hereto is a
true and complete copy of the resolutions, in form and substance reasonably
satisfactory to the Purchaser, of the Board of Directors of such Seller or
committees thereof authorizing the execution, delivery and performance of this
Agreement and the other Transaction Documents to which it is a party and the
transactions contemplated hereby and thereby, and that such resolutions have not
been amended, modified, revoked or rescinded and are in full force and effect,
(iii) that the certificate of incorporation of such Seller has not been amended
since the date of the last amendment thereto shown on the certificate of good
standing (or its equivalent) furnished pursuant to subsection (e) below and (iv)
as to the incumbency and specimen signature of each officer executing the
Additional Seller Supplement and any other Transaction Documents or any other
document delivered in connection therewith on behalf of such Seller (on which
certificates the Purchaser may conclusively rely until such time as the
Purchaser shall receive from such Seller a revised certificate with respect to
such Seller meeting the requirements of this subsection (b));
(c) Officer's Certificate. A certificate of a Responsible Officer of
C&A, dated the related Seller Addition Date, and certifying such Seller is in
the same or a related line of business as the existing Sellers as of the related
Seller Addition Date;
(d) Corporate Documents. The organizational documents, including all
amendments thereto, of such Seller, certified as of a recent date by the
Secretary of State or other appropriate authority of the state of incorporation,
as the case may be;
(e) Good Standing Certificates. Certificates of compliance, of status
or of good standing, dated as of a recent date, from the Secretary of State or
other appropriate authority of such jurisdiction, with respect to such Seller in
each State where the ownership, lease or operation of property or the conduct of
business requires it to qualify as a foreign corporation, except where the
failure to so qualify would not have a Material Adverse Effect;
(f) Consents, Licenses, Approvals, Etc. A Certificate dated the
related Seller Addition Date of a Responsible Officer of such Seller either (i)
attaching copies of all consents (including, without limitation, consents under
loan agreements and indentures to which any Seller or its Affiliates are
parties), licenses and approvals required in connection with the execution,
delivery and performance by such Seller of the Additional Seller Supplement and
the validity and enforceability of the Additional Seller Supplement against such
Seller, and such consents, licenses and approvals shall be in full force and
effect or (ii) stating that no such consents, licenses and approvals are so
required;
(g) No Litigation. Confirmation that there is no pending or, to its
knowledge after due inquiry, threatened action or proceeding affecting such
Seller or any of its Subsidiaries before any Governmental Authority that could
reasonably be expected to have a Material Adverse Effect;
(h) Lockboxes. A Lockbox Account with respect to Receivables to be
sold by such Seller shall have been established in the name of the Purchaser,
each invoice issued to an
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Obligor on and after the related Seller Addition Date shall indicate that
payments in respect of its Receivable shall be made by such Obligor to a Lockbox
Account or by wire transfer or other electronic payment to a Lockbox Account or
a Collection Account and the Collection Agent shall have delivered with respect
to each Lockbox Account a Lockbox Agreement signed by the Purchaser, the
Administrative Agent and the applicable Lockbox Bank;
(i) UCC Certificate; UCC Financing Statements. Executed copies of
such proper financing statements (or other similar instruments), filed and
recorded at such Seller's expense prior to the related Seller Addition Date,
naming such Seller as the seller and the Purchaser as the purchaser of the
Receivables and the Related Security, in proper form for filing in each
jurisdiction in which the Purchaser (or any of its assignees) deems it necessary
or desirable to perfect the Purchaser's ownership interest in all Receivables
and Related Security under the UCC or any comparable law of such jurisdiction;
(j) UCC Searches. Written search reports, listing all effective
financing statements (or other similar instruments) that name such Seller as
debtor or assignor and that are filed in the jurisdictions in which filings were
made pursuant to subsection (i) above and in any other jurisdictions that the
Purchaser (or any of its assignees) determines are necessary or appropriate,
together with copies of such financing statements (none of which, except for
those described in subsection (i) above, shall cover any Receivables or Related
Security), and tax and judgment lien searches showing no liens that are not
permitted by the Transaction Documents;
(k) List of Obligors. A microfiche, typed or printed list or other
tangible evidence reasonably acceptable to the Purchaser showing, as of a date
acceptable to the Purchaser prior to the related Seller Addition Date, the
Obligors whose Receivables are to be transferred to the Purchaser and the
balance of the Receivables with respect to each such Obligor as of such date;
(l) Back-up Servicing Arrangements. Evidence that such Seller
maintains disaster recovery systems and back-up computer and other information
management systems that, in the Purchaser's reasonable judgment, are sufficient
to protect such Seller's business against material interruption or loss or
destruction of its primary computer and information management systems;
(m) Systems. Evidence, reasonably satisfactory to the Purchaser, the
Administrative Agent and each Funding Agent, that such additional Seller's
systems, procedures and record keeping relating to the Receivables remain in all
material respects sufficient and satisfactory in order to permit the purchase
and administration of the Receivables in accordance with the terms and intent of
this Agreement; and
(n) such other approvals, opinions or documents as the Purchaser (or
any of its assignees) may reasonably request from such additional Seller.
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ARTICLE VIII
SELLER NOTE
SECTION 8.1. Seller Note. On the Closing Date or Seller Addition Date,
as applicable, the Purchaser shall issue to each Seller a note substantially in
the form of Exhibit B (each, as amended, supplemented or otherwise modified from
time to time, a "Seller Note"). The aggregate principal amount of a Seller Note
at any time shall be equal to the difference between (a) the aggregate principal
amount on the issuance thereof and each addition to the principal amount of such
Seller Note pursuant to the terms of Section 3.2 as of such time, minus (b) the
aggregate amount of all payments made in respect of the principal of such Seller
Note as of such time. All payments made in respect of a Seller Note shall be
allocated, first, to pay accrued and unpaid interest thereon, and second, to pay
the outstanding principal amount thereof. Interest on the outstanding principal
amount of a Seller Note shall accrue at a rate per annum equal to the highest
Base Rate in effect during the applicable Settlement Period plus the percentage
agreed to from time to time by the applicable Seller, the Purchaser and the
Administrative Agent, which initially shall be 2%, from and including the
Closing Date or Seller Addition Date, as applicable, to but excluding the last
day of each Settlement Period and shall be paid (x) on each Settlement Date with
respect to the principal amount of the Seller Note outstanding from time to time
during the Settlement Period immediately preceding such Settlement Date and/or
(y) on the maturity date thereof; provided, however, that, to the maximum extent
permitted by law, accrued interest on a Seller Note which is not so paid shall
be added, at the request of such Seller, to the principal amount of such Seller
Note. Principal hereunder not paid or prepaid pursuant to the terms hereof shall
be payable on the maturity date of a Seller Note. Default in the payment of
principal or interest under a Seller Note shall not constitute a Purchase
Termination Event under this Agreement, a Collection Agent Default or a
Termination Event under the Receivables Transfer Agreement.
SECTION 8.2. Sole and Exclusive Remedy/Subordination. The Purchaser
shall be obligated to repay Advances by a Seller under a Seller Note only to the
extent of funds available to the Purchaser from Collections on the Receivables
and, to the extent that such payments are insufficient to pay all amounts owing
to a Seller under a Seller Note, such Seller shall not have any claim against
the Purchaser for such amounts and no further or additional recourse shall be
available against Purchaser. Each Seller Note shall be fully subordinated to any
rights of the Administrative Agent, on behalf of the Funding Agents, the Initial
Purchasers and the PARCO APA Banks pursuant to the Receivables Transfer
Agreement and the Asset Purchase Agreements, and shall not evidence any rights
in the Receivables or Related Security.
SECTION 8.3. Offsets, etc. The Purchaser may offset any amount due and
owing by a Seller against any amount due and owing by Purchaser to such Seller
under the terms of the applicable Seller Note.
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ARTICLE IX
TERM AND TERMINATION
SECTION 9.1. Term. This Agreement shall commence as of the first day
on which all of the conditions precedent have been satisfied and shall continue
in full force and effect until the date following the earlier of (i) the date
designated by the Purchaser or C&A as the Purchase Termination Date at any time
following ten (10) days' written notice to the other (with a copy thereof to the
Administrative Agent), (ii) the date on which the Administrative Agent, on
behalf of the Initial Purchasers and the PARCO APA Banks, declares a Termination
Event or a Potential Termination Event pursuant to the Receivables Transfer
Agreement, (iii) upon the occurrence of an Event of Bankruptcy with respect to
either the Purchaser or any Seller; provided, however, that an Event of
Bankruptcy with respect to a Seller that does not have a Material Adverse Effect
will only result in a termination of the Purchaser's obligation to purchase
Receivables from such Seller, (iv) the date on which either the Purchaser or any
Seller becomes unable for any reason to purchase or re-purchase the interest of
the Purchaser in any Receivable in accordance with the provisions of this
Agreement or defaults on its obligations hereunder, which default continues
unremedied for more than ten (10) days after written notice, (v) the day on
which the Collection Agent delivers a Weekly Report or a Daily Report that
indicates that the Guarantor shall have permitted the Interest Coverage Ratio
during any period set forth in subsection (b) the definition of "Interest
Coverage Ratio" to be less than the ratio set forth in such definition for such
period, (vi) the day on which the Collection Agent delivers a Weekly Report or a
Daily Report that indicates that the Guarantor shall have permitted the Leverage
Ratio during any period set forth in subsection (b) the definition of "Leverage
Ratio" to be greater than the ratio set forth in such definition for such
period, or (vii) the first anniversary of the Closing Date unless extended (any
such date being a "Purchase Termination Date"); provided, however, that the
termination of this Agreement pursuant to this Section 9.1 hereof shall not
discharge any Person from any obligations incurred prior to such termination,
including, without limitation, any obligations to make any payments with respect
to the interest of the Purchaser in any Receivable sold prior to such
termination.
SECTION 9.2. Effect of Termination. Following the termination of this
Agreement pursuant to Section 9.1, no Seller shall sell, and the Purchaser shall
not purchase, any interests in any Receivables. No termination, rejection or
failure to assume the executory obligations of this Agreement in any Event of
Bankruptcy with respect to any Seller or the Purchaser shall be deemed to impair
or affect the obligations pertaining to any executed sale or executed
obligations, including, without limitation, pre-termination breaches of
representations and warranties by any Seller or the Purchaser. Without limiting
the foregoing, prior to termination, the failure of any Seller to deliver
computer records of its Receivables or any reports regarding its Receivables
shall not render such transfer or obligation executory, nor shall the continued
duties of the parties pursuant to this Agreement render an executed sale
executory.
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ARTICLE X
MISCELLANEOUS PROVISIONS
SECTION 10.1. Amendments, Etc. This Agreement and the rights and
obligations of the parties hereunder may not be amended, supplemented, waived or
otherwise modified except in an instrument in writing signed by the Purchaser
and the Sellers and consented to in writing by each Funding Agent (with the
consent of the Required Participants); provided, however, the Administrative
Agent may consent (without the consent of the Funding Agents) to any amendments,
waivers, or other modifications in order to cure any ambiguities or correct any
mistakes hereunder. Any reconveyance executed in accordance with the provisions
hereof shall not be considered an amendment or modification to this Agreement.
SECTION 10.2. Governing Law; Submission to Jurisdiction.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the State of New York.
(b) The parties hereto hereby submit to the nonexclusive jurisdiction
of the United States District Court for the Southern District of New York and of
any New York state court sitting in The City of New York for purposes of all
legal proceedings arising out of or relating to this agreement or the
transactions contemplated hereby. Each party hereto hereby irrevocably waives,
to the fullest extent it may effectively do so, any objection which it may now
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum. Nothing in this Section 10.2 shall affect
the right of the Purchaser to bring any other action or proceeding against any
Seller or its property in the courts of other jurisdictions.
SECTION 10.3. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by registered mail, return receipt requested,
to:
(a) in the case of the Purchaser:
CARCORP, INC.
101 Convention Center Drive
Suite 850
Las Vegas, Nevada 89109
Attention: Monte Miller
Telephone: (702) 387-0864
Telecopy: (702) 598-3651
(b) in the case of C&A:
COLLINS & AIKMAN PRODUCTS CO.
701 McCullough Drive
Charlotte, North Carolina 28262
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Attention: Assistant Treasurer
Telephone: (704) 547-8500
Telecopy: (704) 548-2314
(c) in the case of each other Seller: to the address set forth
opposite such Seller's name on Exhibit D or in the applicable
Additional Seller Supplement;
(d) in the case of the Redwood Funding Agent
GENERAL ELECTRIC CAPITAL CORPORATION
201 High Ridge Road
Stamford, Connecticut 06927
Attention: Conduit Administrator
Telephone: (203) 316-7608
Telecopy: (203) 316-7821
(e) in the case of Liberty Funding Agent
The BANK OF NOVA SCOTIA
One Liberty Plaza
New York, New York 90006
Attention: Dorothy Poli
Telephone: (212) 225-5000
Telecopy: (212) 225-5090
(f) in each case, with a copy to:
THE CHASE MANHATTAN BANK,
as the Administrative Agent
450 West 33rd Street
15th Floor
New York, New York 10001
Attention: Craig Kantor
Structured Finance Services
Telephone: (212) 946-7861
Telecopy: (212) 946-7776
or, as to each party, at such other address as shall be designated by such party
in a written notice to each other party.
SECTION 10.4. Severability of Provisions. If any one or more of the
covenants, agreements, provisions or terms of this Agreement shall for any
reason whatsoever be held invalid, then such covenants, agreements, provisions,
or terms shall be deemed severable from the remaining covenants, agreements,
provisions, or terms of this Agreement and shall in no way affect the validity
or enforceability of the other provisions of this Agreement.
22
<PAGE>
SECTION 10.5. Assignments Generally. This Agreement may not be
assigned by the parties hereto, except that the Purchaser may assign its rights
hereunder pursuant to the Receivables Transfer Agreement (including all of its
right, title and interest in, to, and under the Receivables sold hereunder) to
the Administrative Agent for the benefit of the Funding Agents, the Initial
Purchasers and the PARCO APA Banks as security for the Purchaser's repayment
obligations under the Receivables Transfer Agreement. The Purchaser hereby
notifies each Seller (and each Seller hereby acknowledges) that the Purchaser,
pursuant to the Receivables Transfer Agreement, has assigned its rights (but not
its obligations) (including all of its right, title and interest in, to, and
under the Receivables sold hereunder) hereunder to the Administrative Agent for
the benefit of the Funding Agents, the Initial Purchasers and the PARCO APA
Banks. The Purchaser also hereby notifies each Seller (and each Seller hereby
acknowledges) that Redwood has assigned its rights (but not its obligations)
under the Transaction Documents to the Redwood Secured Parties. All rights of
the Purchaser hereunder may be exercised by the Administrative Agent to the
extent of its rights hereunder and under the other Transaction Documents.
SECTION 10.6. Further Assurances. The Purchaser and the Sellers agree
to do and perform, from time to time, any and all acts and to execute any and
all further instruments required or reasonably requested by the other party more
fully to effect the purposes of this Agreement and the other Transaction
Documents, including, without limitation, the execution of any financing
statements or continuation statements or equivalent documents relating to the
Receivables for filing under the provisions of the Relevant UCC or other laws of
any applicable jurisdiction.
SECTION 10.7. No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Purchaser, any Seller, the
Administrative Agent or a Funding Agent, any right, remedy, power or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights, remedies, powers and privileges herein provided are
cumulative and not exhaustive of any rights, remedies, powers and privilege
provided by law.
SECTION 10.8. Counterparts. This Agreement may be executed in two or
more counterparts including telecopy transmission thereof (and by different
parties on separate counterparts), each of which shall be an original, but all
of which together shall constitute one and the same instrument.
SECTION 10.9. Binding Effect; Third-Party Beneficiaries. This
Agreement and the other Transaction Documents will inure to the benefit of and
be binding upon the parties hereto and their respective successors and permitted
assigns. The Administrative Agent, the Initial Purchasers, the PARCO APA Banks
and each Funding Agent are each intended by the parties hereto to be third-party
beneficiaries of this Agreement.
SECTION 10.10. Merger and Integration. Except as specifically stated
otherwise herein, this Agreement and the other Transaction Documents set forth
the entire understanding of
23
<PAGE>
the parties relating to the subject matter hereof, and all prior understandings,
written or oral, are superseded by this Agreement and the other Transaction
Documents.
SECTION 10.11. Headings. The headings herein are for purposes of
reference only and shall not otherwise affect the meaning or interpretation of
any provision hereof.
SECTION 10.12. Exhibits. The schedules and exhibits referred to herein
shall constitute a part of this Agreement and are incorporated into this
Agreement for all purposes.
SECTION 10.13. Addition of Sellers. Subject to the terms and
conditions hereof, from time to time one or more wholly-owned direct or indirect
Subsidiaries of C&A may become additional Sellers parties hereto. If any such
Subsidiary wishes to become an additional Seller, C&A shall submit a request to
such effect in writing to Purchaser, the Administrative Agent, the Funding
Agents and each Rating Agency. If C&A, the Purchaser, the Administrative Agent,
and each Funding Agent shall have agreed to any such request (such consent not
to be unreasonably withheld or delayed from the date such request is received
and such consent of each Funding Agent being obtained by the Administrative
Agent), such wholly-owned Subsidiary shall become an additional Seller party
hereto on the related Seller Addition Date upon satisfaction of the conditions
set forth in Section 7.2.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
24
<PAGE>
IN WITNESS WHEREOF, the Purchaser and the Sellers each have caused this
Receivables Purchase Agreement to be duly executed by their respective officers
as of the day and year first above written.
COLLINS & AIKMAN PRODUCTS CO.,
as a Seller
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
COLLINS & AIKMAN CARPET & ACOUSTICS
(MI) INC., as a Seller
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
COLLINS & AIKMAN CARPET & ACOUSTICS
(TN) INC., as a Seller
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
COLLINS & AIKMAN ACCESSORY MATS INC.,
as a Seller
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
DURA CONVERTIBLE SYSTEMS, INC., as a Seller
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
<PAGE>
AMCO CONVERTIBLE FABRICS, INC., as a Seller
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
COLLINS & AIKMAN PLASTICS, INC., as a
Seller
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
COLLINS & AIKMAN CANADA INC., as a Seller
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
COLLINS & AIKMAN PLASTICS, LTD., as a
Seller
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
CARCORP, INC.,
as Purchaser
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
<PAGE>
Acknowledged and agreed as
of the date first above written:
THE CHASE MANHATTAN BANK,
as Administrative Agent for the benefit
of the Funding Agents, the Initial
Purchasers and the PARCO APA Banks
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
<PAGE>
EXHIBIT A
PRINCIPAL PLACE OF BUSINESS, CHIEF EXECUTIVE OFFICE
AND LOCATION OF RECORDS AND RELATED SECURITY
Name of Company Principal Place of Business/
- --------------- Chief Executive Office
----------------------------
Collins & Aikman Products Co. 701 McCullough Drive
Charlotte, NC 28262
or
5755 New King Court
Troy, MI 48098
Collins & Aikman Carpet & Acoustics (MI)Inc. North America
Head Office/Tech. Center
47785 Anchor Court
Plymouth, MI 48170
Collins & Aikman Carpet & Acoustics (TN)Inc. 2409 Industrial Drive
Springfield, TN 37172
Collins & Aikman Accessory Mats Inc. Canton Plant
1212 Seventh Street, SW
Canton, OH 44711
Dura Convertible Systems, Inc. East Plant
1365 East Beecher Street
Adrian, MI 49221
Amco Convertible Fabrics, Inc. Adrian Plant
545 Industrial Drive
Adrian, MI 49247
Collins & Aikman Plastics, Inc. 5755 New King Court
Troy, MI 48098
Collins & Aikman Canada Inc. Farnham Plant
150 Collins Street
Farnham, Quebec
J2N 2N8
Collins & Aikman Plastics, Ltd. Scarborough Division
165 Milner Avenue
Scarborough, Ontario
M1S 4G7
A-1
<PAGE>
LOCATION OF RECORDS AND RELATED SECURITY FOR ALL U.S. SELLERS:
701 McCullough Drive and each Seller's respective principal
Charlotte, North Carolina 28262 place of business and chief executive
office
LOCATION OF RECORDS AND RELATED SECURITY FOR EACH CANADIAN SELLER:
For each Canadian Seller:
5755 New King Court
Troy, MI 48098,
701 McCullough Drive
Charlotte, NC 28262
and
Collins & Aikman Canada Inc. Farnham Plant
150 Collins Street
Farnham, Quebec
J2N 2N8
Collins & Aikman Plastics, Ltd. Scarborough Division
165 Milner Avenue
Scarborough, Ontario
M1S 4G7
A-2
<PAGE>
EXHIBIT B
FORM OF SELLER NOTE
December 27, 1999
FOR VALUE RECEIVED, the undersigned, CARCORP, INC., a Delaware
corporation (the "Maker"), hereby promises to pay to the order of [SELLER], (the
"Payee"), on the later of (i) the first anniversary of the Closing Date or (ii)
the Purchase Termination Date, the lesser of (i) the Advance Limit or (ii) the
aggregate unpaid principal amount of all Advances to the Maker from the Payee
pursuant to the terms of the Receivables Purchase Agreement, in lawful money of
the United States of America in immediately available funds, and to pay interest
from the date thereof on the principal amount hereof from time to time
outstanding, in like funds, at said office, at the rate per annum set forth in
the Receivables Purchase Agreement and shall be payable in arrears on the last
Business Day of each of the Maker's fiscal months.
The Maker hereby waives diligence, presentment, demand, protest and
notice of any kind whatsoever. The non-exercise by the holder hereof of any of
its rights hereunder in any particular instance shall not constitute a waiver
thereof in that or any subsequent instance.
All borrowings evidenced by this Seller Note and all payments and
prepayments of the principal hereof and interest hereon and the respective dates
thereof shall be endorsed by the holder hereof on the schedule attached hereto
and made a part hereof, or on a continuation thereof which shall be attached
hereto and made a part hereof, or otherwise recorded by such holder in its
internal records; provided, however, that the failure of the holder hereof to
make such a notation or any error in such a notation shall not in any manner
affect the obligation of the Maker to make payments of principal and interest in
accordance with the terms of this Seller Note and the Receivables Purchase
Agreement.
The Maker shall have the right to prepay and, subject to the
limitations set forth in the Receivables Purchase Agreement, reborrow Advances
made to it without penalty or premium.
This Seller Note is one of the Seller Notes referred to in the
Receivables Purchase Agreement, which, among other things, contains provisions
for the subordination of this Seller Note to the rights of certain parties under
the Receivables Transfer Agreement, all upon the terms and conditions therein
specified. Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in, or incorporated by reference into,
the Receivables Purchase Agreement dated as of the date hereof between the Maker
and the Payee (as such agreement may from time to time be amended, supplemented
or otherwise modified and in effect, the "Receivables Purchase Agreement").
B-1
<PAGE>
This Seller Note shall be governed by, and construed in accordance
with, the laws of the State of New York.
CARCORP, INC.
By:
-----------------------------
Name:
Title:
B-2
<PAGE>
Advances and Payments
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Unpaid Principal Person Making
Date Advance Principal/Interest Balance of Note the Notation
- ---- ------- ------------------ ---------------- -------------
</TABLE>
B-3
<PAGE>
EXHIBIT C
[FORM OF ADDITIONAL SELLER SUPPLEMENT]
SUPPLEMENT, dated [ ], to the Receivables Purchase
Agreement, dated as of December 27, 1999 (as amended, supplemented or otherwise
modified from time to time in accordance with its terms, the "Receivables
Purchase Agreement"), among Collins & Aikman Products, Co. ("C&A"), as a Seller,
the other Sellers named on Exhibit D thereto or added pursuant to a prior
Additional Seller Supplement and Carcorp, Inc., as the Purchaser.
W I T N E S S E T H:
WHEREAS, the Receivables Purchase Agreement provides that any wholly-
owned direct or indirect Subsidiary of C&A, although not originally a Seller
thereunder, may become a Seller under the Receivables Purchase Agreement upon
the satisfaction of each of the conditions precedent set forth in Sections 7.2
and 10.13 of the Receivables Purchase Agreement;
WHEREAS, the undersigned was not an original Seller under the
Receivables Purchase Agreement but now desires to become a Seller thereunder.
NOW, THEREFORE, the undersigned hereby agrees as follows:
The undersigned agrees to be bound by all of the provisions of the
Receivables Purchase Agreement applicable to a Seller thereunder and agrees that
it shall, on the date this Supplement is accepted by C&A, the Purchaser, the
Administrative Agent and each Funding Agent and each of the conditions precedent
set forth in Section 7.2 of the Receivables Purchase Agreement have been
satisfied, become a Seller for all purposes of the Receivables Purchase
Agreement to the same extent as if originally a party thereto.
C-1
<PAGE>
IN WITNESS WHEREOF, the undersigned has caused this Supplement to be
executed and delivered by a duly authorized officer on the date first above
written.
[Insert name of Seller]
By:
---------------------------------------
Name:
-------------------------------------
Title:
------------------------------------
[address]
Accepted as of the date
first above written:
COLLINS & AIKMAN PRODUCTS CO.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
Accepted as of the date
first above written:
CARCORP, INC.
By:
--------------------------
Name:
------------------------
Title:
-----------------------
Acknowledged as of the date
first above written:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By:
--------------------------
Name:
------------------------
Title:
-----------------------
C-2
<PAGE>
THE CHASE MANHATTAN BANK,
as PARCO Funding Agent
By:
--------------------------
Name:
------------------------
Title:
-----------------------
GENERAL ELECTRIC CAPITAL CORPORATION,
as Redwood Funding Agent
By:
--------------------------
Name:
------------------------
Title:
-----------------------
THE BANK OF NOVA SCOTIA,
as Liberty Funding Agent
By:
--------------------------
Name:
------------------------
Title:
-----------------------
C-3
<PAGE>
EXHIBIT D
SELLERS IN ADDITION TO C&A
Name State of Incorporation
---- ----------------------
Collins & Aikman Carpet & Delaware
Acoustics (MI) Inc.
Collins & Aikman Carpet & Tennessee
Acoustics (TN) Inc.
Collins & Aikman Accessory Mats Inc. Delaware
Dura Convertible Systems, Inc. Delaware
Amco Convertible Fabrics, Inc. Delaware
Collins & Aikman Plastics, Inc. Delaware
Collins & Aikman Canada Inc. Ontario
Collins & Aikman Plastics, Ltd. Ontario
D-1
<PAGE>
SCHEDULE 4.1(e)
Material Adverse Effect
4.1(e)-1
<PAGE>
SCHEDULE 4.1(h)
Litigation
4.1(h)-1
<PAGE>
------------------------------------------------------------------
ASSET PURCHASE AGREEMENT
by and among
PARK AVENUE RECEIVABLES CORPORATION,
THE CHASE MANHATTAN BANK,
as Funding Agent,
and
THE SEVERAL FINANCIAL INSTITUTIONS
PARTY HERETO FROM TIME TO TIME,
as APA Banks
Dated as of December 27, 1999
(Collins & Aikman Products Co. and its Subsidiaries' Receivables)
------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
DEFINITIONS...................................................... 1
SECTION 1.1. Incorporation by Reference.......................... 1
SECTION 1.2. Other Defined Terms................................. 1
ARTICLE II
PURCHASE COMMITMENT.............................................. 5
SECTION 2.1. Liquidity Purchases................................. 5
SECTION 2.2. Several Commitments of the APA Banks................ 6
SECTION 2.3. Nonrecourse Nature of Transactions.................. 7
SECTION 2.4. Payments; Indemnity................................. 7
SECTION 2.5. Reduction of Commitments............................ 8
SECTION 2.6. Issuance of Commercial Paper by PARCO............... 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES................................... 8
SECTION 3.1. PARCO Disclaimer of Representations and Warranties.. 8
SECTION 3.2. Representations and Warranties of the APA Banks..... 9
ARTICLE IV
THE FUNDING AGENT................................................ 10
SECTION 4.1. Appointment......................................... 10
SECTION 4.2. Delegation of Duties................................ 10
SECTION 4.3. Exculpatory Provisions.............................. 10
SECTION 4.4. Reliance by Funding Agent........................... 11
SECTION 4.5. Notice of Events of Default and other Events;
Voting.............................................. 11
SECTION 4.6. Non-Reliance on Funding Agent....................... 11
SECTION 4.7. Indemnification..................................... 12
SECTION 4.8. Funding Agent in its Individual Capacity............ 12
SECTION 4.9. Successor Funding Agent............................. 12
SECTION 4.10. Chase Conflict Waiver............................... 13
ARTICLE V
MISCELLANEOUS.................................................... 13
SECTION 5.1. Waivers; Amendments, etc............................ 13
SECTION 5.2. Notices............................................. 14
SECTION 5.3. Governing Law; Submission to Jurisdiction........... 14
SECTION 5.4. Severability; Counterparts; Waiver of Setoff........ 14
i
<PAGE>
SECTION 5.5. Successors and Assigns; Participations;
Assignments......................................... 14
SECTION 5.6. Effectiveness of this Agreement..................... 16
SECTION 5.7. No Petition......................................... 16
SECTION 5.8. Waiver of Trial by Jury............................. 17
SECTION 5.9. Limited Recourse.................................... 17
SECTION 5.10. Liability of Funding Agent.......................... 17
ii
<PAGE>
ANNEXES AND EXHIBITS
ANNEX I APA Banks
EXHIBIT A Form of Transfer Supplement
EXHIBIT B Form of Opinion of Counsel
EXHIBIT C Notice Addresses
iii
<PAGE>
ASSET PURCHASE AGREEMENT
(Collins & Aikman Products Co. and its Subsidiaries' Receivables)
THIS ASSET PURCHASE AGREEMENT, dated as of December 27, 1999 (as amended,
supplemented or otherwise modified and in effect from time to time, this
"Agreement"), is by and among PARK AVENUE RECEIVABLES CORPORATION, a Delaware
corporation (together with its successors and assigns, "PARCO"), THE SEVERAL
FINANCIAL INSTITUTIONS PARTY HERETO FROM TIME TO TIME, and THE CHASE MANHATTAN
BANK, as Funding Agent, with respect to the transactions contemplated by herein
and in that certain Receivables Transfer Agreement (as defined herein).
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1. Incorporation by Reference. Capitalized terms used
herein and not otherwise defined herein shall have the meanings attributed to
such terms in, or incorporated by reference into, Annex X to the Receivables
Transfer Agreement.
SECTION 1.2. Other Defined Terms. As used in this Agreement, the
following terms have the following meanings:
"Affected APA Bank" shall have the meaning specified in
Section 5.5(c).
"Aggregate Commitment" shall mean $61,200,000.
"Agreement" shall have the meaning specified in the recitals hereto.
"APA Banks" shall mean the Persons listed on Annex I hereto
(including, without limitation, Chase), and the Persons which from time to time
may become a party hereto in accordance with Section 5.5(c).
"Article" shall mean a numbered article of this Agreement, unless
otherwise specified.
"Chase" shall mean The Chase Manhattan Bank, in its individual
capacity, and its successors.
"Chase Roles" shall have the meaning specified in Section 4.10.
"Commitment Expiry Date" shall mean the earliest to occur of (i) the
date on which all amounts due and owing to PARCO and the APA Banks in respect of
the Transferred Interests have been indefeasibly paid in full, (ii) following a
Termination Date, (not including
1
<PAGE>
pursuant to clause (iii) of the definition of Termination Date), and (iii)
December 25, 2000 (as may be extended for an additional 364 days from time to
time in writing by PARCO, the Funding Agent and the APA Banks).
"Defaulting APA Bank" shall have the meaning specified in
Section 2.2(b).
"Discount" shall mean, with respect to any Commercial Paper issued by
PARCO, the interest or discount component thereof.
"Face Amount" shall mean, with respect to any Commercial Paper issued
by PARCO, the amount due at maturity thereof (including the discount component
thereof or any interest thereon, as applicable).
"Fee Letter" shall mean the Fee Letter, dated as of December 27, 1999,
between C&A and the Funding Agent, on behalf of PARCO and the APA Banks, as the
same may from time to time be amended, supplemented or otherwise modified and in
effect.
"Funding Account" shall have the meaning specified in Section 2.4.
"Funding Balance" shall mean, with respect to any APA Bank at any time
of determination thereof, an amount equal to such APA Bank's Pro Rata Share of
all amounts due and owing to PARCO in respect of Transferred Interests Payments
as at such date.
"Manager" shall mean Global Securitization Services, LLC, a Delaware
limited liability company, as manager on behalf of PARCO, and its successors and
assigns in such capacity.
"Non-Defaulting APA Bank" shall have the meaning specified in
Section 2.2(b).
"Obligor" shall mean any Person obligated to make payments in respect
of a Receivable.
"OECD Country" shall mean a country that is a member of the grouping
of countries that are full members of the Organization of Economic Cooperation
and Development.
"Originators" shall mean collectively, C&A and each other Seller that
becomes a party to the Receivables Purchase Agreement, and their respective
successors and assigns.
"PARCO" shall have the meaning specified in the recitals hereto.
"Participant" shall have the meaning specified in Section 5.5(b).
"Placement Agent" shall mean, on any day with respect to PARCO, any
Person that has agreed, with the consent of PARCO, to offer and sell PARCO's
Commercial Paper.
2
<PAGE>
"Pro Rata Share" shall mean, on any date of determination, with
respect to any APA Bank, the ratio (expressed as a percentage) of such APA
Bank's PARCO APA Bank Commitment to the Aggregate Commitment at such time.
"Purchase" shall mean any assignment by PARCO to the APA Banks of all
of its right, title and interest in and to the Transferred Interests Payments
pursuant to Section 2.1.
"Purchase Date" shall mean the date specified by PARCO in a Sale
Notice as being the effective date of PARCO's assignment to the APA Banks of all
of its right, title and interest in and to Transferred Interests Payments
specified therein.
"Purchase Price" shall mean, at any Purchase Date with respect to
PARCO, an amount equal to the lesser of (i) the PARCO Net Investment and (ii)
the PARCO Adjusted Liquidity Price, as clauses (i) and (ii) shall be increased
by the sum of (A) all accrued and unpaid Discount on all outstanding Tranches of
PARCO's Commercial Paper issued to fund the PARCO Net Investment from the
issuance date(s) thereof to and including the Purchase Date plus (B) the
aggregate Discount to accrue on all outstanding Tranches of PARCO's Commercial
Paper issued to fund the PARCO Net Investment from and including the Purchase
Date, to and excluding the maturity date of each such Tranche.
"Purchase Price Deficit" shall have the meaning specified in
Section 2.2(b).
"Rating Confirmation" shall mean, with respect to PARCO and any
subject amendment, modification, waiver or other action to be taken pursuant to
the terms of this Agreement, either (i) a confirmation by each of the Rating
Agencies that such proposed amendment, modification, waiver or action shall not
result in a downgrade or withdrawal of each Rating Agency's then current rating
of the Commercial Paper or any other debt securities, rated at the request of
PARCO, by each such Rating Agency or (ii) the delay in the taking of such action
or the delay in the effectiveness of such proposed amendment, modification or
waiver, until thirty (30) days following the maturity date of all commercial
paper or other debt securities rated, at the request of PARCO, by a Rating
Agency, outstanding at the time the confirmation referred to in clause (i) is
requested.
"Receivables Transfer Agreement" shall mean the Receivables Transfer
Agreement, dated as of December 27, 1999, among Carcorp, Inc., as Transferor,
C&A, as Guarantor and as Collection Agent, the Initial Purchasers, the several
financial institutions party thereto from time to time as PARCO APA Banks, the
Funding Agents and Chase, as Administrative Agent.
"Required APA Banks" shall mean APA Banks having Pro Rata Shares in
the aggregate at least equal to 66 2/3%; provided that the PARCO APA Bank
Commitment of any Defaulting APA Bank that has not paid all amounts due and
owing by it in respect of purchases it was obligated to make shall not be
included in the PARCO APA Bank Commitments for purposes of this definition.
3
<PAGE>
"Sale Notice" shall mean an irrevocable written notice given by an
authorized signer or authorized officer of PARCO (or on behalf of PARCO by
Chase, in its capacity as PARCO Administrative Agent) to the Funding Agent
committing to sell, assign and transfer to the APA Banks, all of PARCO's right,
title and interest in and to Transferred Interests Payments, which notice shall
designate (a) the applicable Purchase Date, (b) the aggregate amount of PARCO's
Transferred Interests Payments and its related PARCO Net Investment, (c) the
Purchase Price (including a calculation of the Purchase Price), (d) that no
PARCO Insolvency Event has occurred and (e) wire transfer instructions
specifying the account(s) into which the proceeds of the Purchase Price shall be
deposited.
"Section" shall mean a numbered section of this Agreement unless
otherwise specified.
"Tranche" shall mean any tranche of PARCO's Commercial Paper.
"Transaction Parties" shall have the meaning specified in Section 3.1.
"Transfer Supplement" shall have the meaning specified in
Section 5.5(c).
"Transferred Interests Payments" shall mean, on any day, all payments
of Discount and principal scheduled to be made pursuant to the terms of the
Receivables Transfer Agreement on and after such day, which term shall include
all payments scheduled to have been paid prior to (but not including) such day,
but which remain accrued and unpaid on such day.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
4
<PAGE>
ARTICLE II
PURCHASE COMMITMENT
SECTION 2.1. Liquidity Purchases.
(a) Sales by PARCO. From time to time prior to the Commitment
Expiry Date, upon the occurrence of a PARCO Wind-Down Event, PARCO shall be
obligated to deliver a Sale Notice to the Funding Agent. Each Sale Notice
shall be delivered by PARCO to the Funding Agent prior to 12:30 P.M. (New
York time) on the Purchase Date and shall constitute an irrevocable offer
by PARCO to sell all of its beneficial interest in Transferred Interests
Payments at the Purchase Price. Each Sale Notice delivered by PARCO shall
be deemed to be a representation and warranty by PARCO that no PARCO
Insolvency Event shall have occurred and be continuing. Each APA Bank
hereby agrees to purchase from PARCO such APA Bank's Pro Rata Share of
PARCO's Transferred Interests Payments for a purchase price equal to such
APA Bank's Pro Rata Share of the Purchase Price on the Purchase Date (which
date, subject to Section 2.1(b) below, may be the same as the date of the
Sale Notice). Notwithstanding anything to the contrary set forth in this
Agreement, no APA Bank shall have any obligation to purchase Transferred
Interests Payments or any portion thereof from PARCO if, on such Purchase
Date, a PARCO Insolvency Event shall have occurred and be continuing. The
Funding Agent shall promptly advise each APA Bank (by telecopy or by
telephone call promptly confirmed in writing by telecopy) of the receipt
and content of any Sale Notice delivered to it by PARCO and shall promptly
advise PARCO of each APA Bank's Pro Rata Share of the Purchase Price
thereunder. The Purchase Price shall be deposited in immediately available
funds into the account(s) specified by PARCO in the related Sale Notice.
(b) Timing of Sale Notice and Purchase Date. If, at or prior to
12:30 P.M. (New York time) on any Business Day, PARCO delivers a Sale
Notice to the Funding Agent specifying that the Purchase Date shall be the
same date as the date of the Sale Notice, the Funding Agent shall, by no
later than 1:00 P.M. (New York time) on such Business Day, notify each APA
Bank of such Sale Notice. Each APA Bank shall make a purchase of
Transferred Interests Payments by advancing immediately available funds on
such date to the account of PARCO maintained at the principal office of the
Funding Agent no later than 2:00 P.M. (New York time). Notwithstanding the
fact that the Purchase Date may occur on a date which is later than the
date on which the Sale Notice is delivered to the Funding Agent, the
several obligations of each APA Bank to accept such transfer and to make
payment of the amounts required to be paid by it pursuant to Section 2.2
shall arise immediately upon receipt by the Funding Agent of the Sale
Notice. Regardless of when the Sale Notice is received, any APA Bank may
designate any one or more of its domestic or foreign branches, offices or
affiliates
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through which it will fund its Pro Rata Share of the Purchase Price for a
Purchase, and the term "APA Bank" shall include any such branch, office or
affiliate for such purpose.
SECTION 2.2. Several Commitments of the APA Banks.
(a) Funding upon Receipt of the Sale Notice. Each APA Bank
hereby absolutely and unconditionally (except as provided in Section
2.1(a)) severally commits to PARCO and to the Funding Agent to provide the
Funding Agent, on the Purchase Date (if notice has been given in accordance
with Section 2.1(b)) at the principal office of the Funding Agent in The
City of New York for delivery to PARCO, with immediately available funds in
an amount equal to such APA Bank's Pro Rata Share of the Purchase Price,
whereupon such APA Bank shall become an assignee of PARCO under the
Transaction Documents with an undivided interest in PARCO's Transferred
Interests Payments equal to such APA Bank's Pro Rata Share of PARCO's
Transferred Interests Payments. The APA Banks' several obligations under
this Section 2.2(a) to provide the Funding Agent with funds shall terminate
on the Commitment Expiry Date. Notwithstanding anything contained in this
Section 2.2(a) or elsewhere in this Agreement to the contrary, no APA Bank
shall be obligated to provide the Funding Agent with aggregate funds in
connection with a Purchase in an amount that would exceed such APA Bank's
unused PARCO APA Bank Commitment then in effect. The failure of any APA
Bank to make its Pro Rata Share of the Purchase Price available to the
Funding Agent shall not relieve any other APA Bank of its obligations
hereunder.
(b) Defaulting APA Banks. If, by 2:00 P.M. (New York time), one
or more APA Banks (each, a "Defaulting APA Bank", and each APA Bank other
than the Defaulting APA Bank being referred to as a "Non-Defaulting APA
Bank") fails to make its Pro Rata Share of the Purchase Price available to
the Funding Agent pursuant to Section 2.1(a) (the aggregate amount not so
made available to the Funding Agent being herein called the "Purchase Price
Deficit"), then the Funding Agent shall, by no later than 2:30 P.M. (New
York time), instruct each Non-Defaulting APA Bank to pay, by no later than
3:00 P.M. (New York time), in immediately available funds, to the account
designated by the Funding Agent, an amount equal to the lesser of (x) such
Non-Defaulting APA Bank's proportionate share (based upon the relative
Commitments of the Non-Defaulting APA Banks) of the Purchase Price Deficit
and (y) its unused PARCO APA Bank Commitment. A Defaulting APA Bank shall
forthwith, upon demand, pay to the Funding Agent for the ratable benefit of
the Non-Defaulting APA Banks all amounts paid by each Non-Defaulting APA
Bank on behalf of such Defaulting APA Bank, together with interest thereon,
for each day from the date a payment was made by a Non-Defaulting APA Bank
until the date such Non-Defaulting APA Bank has been paid such amounts in
full, at a rate per annum equal to the sum of the Federal Funds Rate plus
2%. In addition, without prejudice to any other rights that PARCO may have
under applicable law, each Defaulting APA Bank shall pay to PARCO forthwith
upon demand, the difference between the Defaulting APA Bank's unpaid Pro
Rata Share of the Purchase Price and the amount paid with respect thereto
by the Non-Defaulting APA Banks,
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together with interest thereon, for each day from the date of the Funding
Agent's request for such Defaulting APA Bank's Pro Rata Share of the
Purchase Price pursuant to Section 2.1(b) until the date the requisite
amount is paid to PARCO in full, at a rate per annum equal to the sum of
the Federal Funds Rate plus 2%.
SECTION 2.3. Nonrecourse Nature of Transactions. Each of the Funding
Agent and the APA Banks hereby agrees that all Purchases shall be without
recourse of any kind to PARCO or the Funding Agent, except as expressly provided
in Sections 4.3 and 4.7 with respect to the Funding Agent.
SECTION 2.4. Payments; Indemnity.
(a) Payments Generally. On or prior to the Closing Date, the
Funding Agent shall establish a demand deposit account with Chase for the
benefit of PARCO and the APA Banks (the "Funding Account"), into which all
payments received by the Funding Agent from the Collection Agent, C&A, any
of the other Originators or the Transferor in respect of the PARCO Interest
shall be deposited. The Funding Agent, on behalf of PARCO and the APA
Banks, shall have the sole right of withdrawal from the Funding Account.
For so long as any amounts remain due and owing to PARCO or the APA Banks
hereunder or pursuant to the Receivables Transfer Agreement, the Funding
Agent shall distribute all payments received by it in respect of the PARCO
Interest immediately after receipt thereof by (i) transferring to PARCO its
Transferred Interests Payments and (ii) immediately after giving effect to
the payment in clause (a)(i), if any, transferring the remainder of any
such payments to the APA Banks ratably in accordance with their Pro Rata
Shares (calculated without regard to that portion of the PARCO APA Bank
Commitment of a Defaulting APA Bank which such Defaulting APA Bank failed
to fund pursuant to this Agreement); provided, that any amounts transferred
to the Administrative Agent by the Transferor pursuant to the first
sentence of Section 2.6 of the Receivables Transfer Agreement and deposited
by the Administrative Agent in the Funding Account in accordance with
Section 2.10 of the Receivables Transfer Agreement shall remain in the
Funding Account until transferred to PARCO and/or the APA Banks, as
applicable, on the last day of Tranche Periods selected by the Funding
Agent in reduction of the Aggregate Net Investment. Such transfers shall be
made by the Funding Agent by withdrawing funds on deposit in the Funding
Account and remitting such funds to the accounts of PARCO and the several
APA Banks specified by each of them from time to time. Funds transferred to
the Administrative Agent by the Transferor pursuant to the first sentence
of Section 2.6 of the Receivables Transfer Agreement and deposited by the
Administrative Agent in the Funding Account in accordance with Section 2.10
of the Receivables Transfer Agreement shall be invested by the Funding
Agent in Permitted Investments that will mature so that such funds will be
available prior to the last day of each successive Tranche Period following
such investment. On the last day of each Tranche Period, all interest and
earnings (net of losses and investment expenses) on funds on deposit in the
Funding Account shall be retained in the Funding Account and be available
to make any payments required to be made under the Transaction Documents
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by the Transferor to PARCO and the APA Banks. On the date on which the
Aggregate Net Investment is zero and all accrued Discount and all other
Aggregate Unpaids have been paid in full, any funds remaining on deposit in
the Funding Account shall be paid to the Transferor.
(b) Requests for Indemnity under the Transaction Documents. The
Funding Agent shall, at the written request of any APA Bank, make demand of
PARCO for payment of any amounts from time to time claimed by such APA Bank
pursuant to the terms of the Receivables Transfer Agreement, and the
Funding Agent shall, upon its receipt of such amounts, distribute them to
each such APA Bank ratably in accordance with their respective Pro Rata
Shares (calculated without regard to that portion of the PARCO APA Bank
Commitment of a Defaulting APA Bank which such Defaulting APA Bank failed
to fund pursuant to this Agreement); provided that no such demand shall be
made of PARCO except to the extent that such claim arises out of, or
relates to, PARCO's beneficial interest in the Transferred Interests.
(c) Payments Conditional upon Receipt from the Administrative
Agent, PARCO, the Collection Agent, the Originators or the Transferor.
Anything in this Agreement to the contrary notwithstanding, the Funding
Agent shall have no obligation to make any payments to the APA Banks unless
and until it has received such amounts from the Administrative Agent,
PARCO, the Collection Agent, the Originators or the Transferor pursuant to
the terms of the Receivables Transfer Agreement.
SECTION 2.5. Reduction of Commitments. The PARCO APA Bank Commitment
of each APA Bank and the Aggregate Commitment shall be automatically reduced to
zero on the Commitment Expiry Date. Following a Termination Date, each PARCO APA
Bank Commitment shall be reduced as of each calendar date thereafter, to equal
its Pro Rata Share of 102% of the PARCO Net Investment.
SECTION 2.6. Issuance of Commercial Paper by PARCO. For so long as
this Agreement is in full force and effect, PARCO shall not issue Commercial
Paper with respect to the Transferred Interests on any day if, after giving
effect to such issuance and the use of proceeds thereof, the Face Amount of all
outstanding Commercial Paper issued by PARCO with respect to the Transferred
Interests on such day would exceed 102% of the sum of the Transfer Prices
related to all PARCO Interests (after giving effect to the issuance and payment
of such Commercial Paper on such day).
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1. PARCO Disclaimer of Representations and Warranties. By
executing and delivering any Sale Notice pursuant to Section 2.2(a), (a) PARCO
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
the Receivables Transfer Agreement
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or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Transaction Documents, and (b) PARCO makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Collection Agent, the Originators, the Transferor or any Obligor
(collectively, the "Transaction Parties") or the Funding Agent or the
Administrative Agent, or the performance or observance by the Transaction
Parties, the Funding Agent or the Administrative Agent of any of their
respective obligations under the Receivables Transfer Agreement or the
Transaction Documents.
SECTION 3.2. Representations and Warranties of the APA Banks. Each of
the APA Banks (a) confirms that it has received copies of the Transaction
Documents; (b) represents and warrants to the Funding Agent and PARCO that it
has, independently and without reliance upon the Funding Agent, PARCO or any
other APA Bank, and based on such documents and information as it has deemed
appropriate, made its own appraisal of and investigation into the business,
operations, property, prospects, financial and other conditions and
creditworthiness of the Transaction Parties, and made its own decision to enter
into this Agreement; (c) represents that it will, independently and without
reliance upon the Funding Agent, PARCO or any other APA Bank, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit analysis, appraisals and decisions in taking or not taking
action under this Agreement and the Transaction Documents, and to make such
investigation as it deems necessary to inform itself as to the business,
operations, property, prospects, financial and other condition and
creditworthiness of the Transaction Parties; (d) appoints and authorizes the
Funding Agent to take such action as agent on its behalf and to exercise such
powers under this Agreement and the Transaction Documents as are delegated to
the Funding Agent by the terms hereof and thereof, together with such powers as
are reasonably incidental thereto; (e) represents and warrants that it is a
corporation or a banking association duly organized and validly existing under
the laws of its jurisdiction of incorporation or organization and has all
corporate power to perform its obligations hereunder; (f) represents and
warrants that no authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by it of this Agreement, which has
not otherwise been obtained; (g) represents and warrants that the execution,
delivery and performance of this Agreement are within its corporate powers, have
been duly authorized by all necessary corporate action, do not contravene or
violate (i) its charter, certificate or articles of incorporation or association
or by-laws, (ii) any law, rule or regulation applicable to it, (iii) any
restrictions under any agreement, contract or instrument to which it is a party
or any of its property is bound or (iv) any order, writ, judgment, award,
injunction or decree binding on or affecting it or its property, and do not
result in the creation or imposition of any adverse claim on its assets, which
contravention or violation in any of the foregoing cases could have a material
adverse effect on its financial condition or its ability to perform its
obligations hereunder; (h) represents and warrants that this Agreement
constitutes its legal, valid and binding obligations enforceable against it in
accordance with its terms, except as such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization or other similar laws relating
to limiting creditors' rights generally and by equitable principles (regardless
of whether such enforceability is considered in a proceeding in equity or at
law); and (i) represents and warrants that this Agreement has been duly
authorized,
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executed and delivered by it.
ARTICLE IV
THE FUNDING AGENT
SECTION 4.1. Appointment. PARCO and each APA Bank hereby irrevocably
designates and appoints Chase as Funding Agent on its behalf under the
Transaction Documents and under Section 2.4(a) of this Agreement, and each APA
Bank hereby irrevocably designates and appoints Chase as Funding Agent on its
behalf under this Agreement. In furtherance of the foregoing, PARCO and each
APA Bank hereby authorizes the Funding Agent to take such action on its behalf
under the provisions of this Agreement and the Transaction Documents and to
exercise such powers and perform such duties as are expressly delegated to the
Funding Agent by the terms of the Agreement and the Transaction Documents,
together with such other powers as are reasonably incidental hereto or thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement or the
Transaction Documents, the Funding Agent shall not have any duties or
responsibilities, except those expressly set forth herein or therein, or any
fiduciary relationship with any APA Bank or PARCO, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities on the part of
the Funding Agent shall be read into this Agreement or any Transaction Document
or shall otherwise exist against the Funding Agent. The provisions of this
Article IV are solely for the benefit of the Funding Agent, PARCO and the APA
Banks. In performing its functions and duties solely under this Agreement
(except with respect to Section 2.4(a) hereof), subject to the provisions of
Section 5.10 hereof, the Funding Agent shall act solely as the agent of the APA
Banks and does not assume, nor shall be deemed to have assumed, any obligation
or relationship of trust or agency with or for PARCO.
SECTION 4.2. Delegation of Duties. The Funding Agent may execute any
of its duties under this Agreement by or through its subsidiaries, affiliates,
agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Funding Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care.
SECTION 4.3. Exculpatory Provisions. Neither the Funding Agent nor
any of its directors, officers, agents or employees shall be (a) liable for any
action lawfully taken or omitted to be taken by it or them or any Person
described in Section 4.2 under or in connection with this Agreement or the
Transaction Documents (except for its, their or such Person's own gross
negligence or willful misconduct), or (b) responsible in any manner to PARCO and
the APA Banks for any recitals, statements, representations or warranties
contained in this Agreement or the Transaction Documents or in any certificate,
report, statement or other document referred to or provided for in, or received
under or in connection with, such agreements or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of the Transaction
Documents, this Agreement or any other document furnished in connection
therewith or herewith, or for any failure of PARCO or an APA Bank to perform its
obligations under this Agreement or any Transaction Document or for the
satisfaction of any condition
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specified in this Agreement or the Transaction Documents. The Funding Agent
shall not be under any obligation to any APA Bank to ascertain or to inquire as
to the observance or performance of any of the agreements or covenants contained
in, or conditions of, the Transaction Documents, or to inspect the properties,
books or records of the Transaction Parties.
SECTION 4.4. Reliance by Funding Agent. The Funding Agent shall in
all cases be entitled to rely, and shall be fully protected in relying, upon any
note, writing, resolution, notice, consent, certificate, affidavit, letter,
cablegram, telegram, telecopy, telex or teletype message, statement, order or
other document or conversation believed by it to be genuine and correct and to
have been signed, sent or made by the proper Person or Persons and upon advice
and statements of legal counsel (including, without limitation, counsel to PARCO
and the APA Banks), independent accountants and other experts selected by the
Funding Agent. The Funding Agent shall in all cases be fully justified in
failing or refusing to take any action under this Agreement, the Transaction
Documents or any other document furnished in connection herewith or therewith
unless it shall first receive such advice or concurrence of the Required
Participants, the Required APA Banks or all of the APA Banks, as applicable, as
it deems appropriate, or it shall first be indemnified to its satisfaction by
the APA Banks against any and all liability, cost and expense which may be
incurred by it by reason of taking or continuing to take any such action. The
Funding Agent shall in all cases be fully protected in acting, or in refraining
from acting, under this Agreement or any Transaction Document or any other
document furnished in connection herewith or therewith in accordance with a
request of the Required Participants, the Required APA Banks or all of the APA
Banks, as applicable, and such request and any action taken or failure to act
pursuant thereto shall be binding upon all the APA Banks.
SECTION 4.5. Notice of Events of Default and other Events; Voting.
The Funding Agent shall not be deemed to have knowledge or notice of the
occurrence of any Termination Event unless the Funding Agent has received notice
from any APA Bank, an Initial Purchaser or any Transaction Party referring to
the Transaction Documents stating that a Termination Event has occurred with
respect to the Transferred Interests and describing such event. If the Funding
Agent receives such a notice, the Funding Agent shall promptly give notice
thereof to PARCO, each APA Bank and each Rating Agency. Subject to the
provisions of Section 5.1(b), to the extent the Funding Agent is entitled to
consent to or withhold its consent of any waiver or amendment of any Transaction
Document in accordance with the terms thereof, the Funding Agent shall (a) give
prompt notice to PARCO, the APA Banks and the Rating Agencies of any such waiver
or amendment of which it is aware, and (b) take such action with respect to such
waiver, amendment, or Termination Event as shall be directed by the Required
Participants; provided, however, that unless and until the Funding Agent shall
have received such directions, the Funding Agent may (but shall not be obligated
to) take such action, or refrain from taking such action, with respect to such
Termination Event as the Funding Agent shall deem advisable and in the best
interests of the APA Banks.
SECTION 4.6. Non-Reliance on Funding Agent. PARCO and each APA Bank
expressly acknowledges that neither the Funding Agent, nor any of its officers,
directors,
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employees, agents, attorneys-in-fact or affiliates has made any representations
or warranties to it and that no act by the Funding Agent hereafter taken,
including, without limitation, any review of the affairs of PARCO, the APA Banks
or any Transaction Party, shall be deemed to constitute any representation or
warranty by the Funding Agent. The Funding Agent shall not have any duty or
responsibility to provide PARCO or any APA Bank with any credit or other
information concerning the business, operations, property, prospects, financial
and other condition or creditworthiness of PARCO, the APA Banks or the
Transaction Parties which may come into the possession of the Funding Agent or
any of its officers, directors, employees, agents, attorneys-in-fact or
affiliates.
SECTION 4.7. Indemnification. The APA Banks agree to indemnify the
Funding Agent and its officers, directors, employees, representatives and agents
(to the extent not reimbursed by the Transaction Parties, and without limiting
the obligation of any Transaction Party to do so in accordance with the terms of
the Transaction Documents), ratably according to their Pro Rata Shares, from and
against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever (including, without limitation, the reasonable fees and
disbursements of counsel for the Funding Agent or the affected Person in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not the Funding Agent or such affected
Person shall be designated a party thereto) that may at any time be imposed on,
incurred by or asserted against the Funding Agent or such affected Person as a
result of, or arising out of, or in any way related to or by reason of, any of
the transactions contemplated hereunder or under the Transaction Documents or
the execution, delivery or performance of this Agreement, any Transaction
Document or any other document furnished in connection herewith or therewith
(but excluding any such liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements resulting solely
from the gross negligence or willful misconduct of the Funding Agent or such
affected Person).
SECTION 4.8. Funding Agent in its Individual Capacity. The Funding
Agent and its Affiliates may make loans to, accept deposits from and generally
engage in any kind of business with PARCO or any Transaction Party or any
Affiliate of such Persons as though the Funding Agent were not the Funding Agent
hereunder. With respect to its acquisition of Transferred Interests Payments
pursuant to this Agreement, the Funding Agent shall have the same rights and
powers under this Agreement as any APA Bank and may exercise the same as though
it were not the Funding Agent, and the terms "APA Bank" and "APA Banks" shall
include the Funding Agent in its individual capacity as an APA Bank.
SECTION 4.9. Successor Funding Agent. The Funding Agent may, upon
five (5) days' notice to PARCO, the APA Banks and the Rating Agencies, and the
Funding Agent will, upon the direction of the Required APA Banks (calculated
without regard to the Pro Rata Share of Chase or any Affiliate of Chase), resign
as Funding Agent; provided, in either case, that an APA Bank agrees to become
the successor Funding Agent hereunder in accordance with the next sentence. If
the Funding Agent shall resign as Funding Agent under this Agreement, then the
Required APA Banks during such period shall appoint from among the APA Banks a
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successor agent, whereupon such successor agent shall succeed to the rights,
powers and duties of the Funding Agent, and the term "Funding Agent" shall mean
such successor agent, effective upon its acceptance of such appointment, and the
former Funding Agent's rights, powers and duties as Funding Agent shall be
terminated, without any other or further act or deed on the part of such former
Funding Agent or any of the parties to this Agreement. After the retiring
Funding Agent's resignation hereunder as Funding Agent, the provisions of this
Article IV shall inure to its benefit as to any actions taken or omitted to be
taken by it while it was Funding Agent under this Agreement.
SECTION 4.10. Chase Conflict Waiver. Chase acts as PARCO
Administrative Agent, as issuing and paying agent for PARCO's Commercial Paper,
as provider of other backup facilities for PARCO, as Administrative Agent, and
may provide other services or facilities from time to time (the "Chase Roles").
Without limiting the generality of Section 4.8, each APA Bank hereby
acknowledges and consents to any and all Chase Roles, waives any objections it
may have to any actual or potential conflict of interest caused by Chase's
acting as the Funding Agent or as an APA Bank hereunder and acting as or
maintaining any of the Chase Roles, and agrees that in connection with any Chase
Role, Chase may take, or refrain from taking, any action which it in its
discretion deems appropriate. The APA Banks are hereby notified that PARCO may
delegate responsibility for signing and/or sending Sale Notices to Chase as
PARCO Administrative Agent.
ARTICLE V
MISCELLANEOUS
SECTION 5.1. Waivers; Amendments, etc.
(a) No Waiver; Remedies Cumulative. No failure or delay on the
part of the Funding Agent or any APA Bank in exercising any power, right or
remedy under this Agreement shall operate as a waiver thereof, nor shall
any single or partial exercise of any such power, right or remedy preclude
any other further exercise thereof or the exercise of any other power,
right or remedy. The rights and remedies herein provided shall be
cumulative and nonexclusive of any rights and remedies provided by law. Any
waiver of this Agreement shall be effective only for the specific purpose
for which given.
(b) Amendments, Etc. This Agreement may be amended,
supplemented, modified or waived with the written consent of all of the
parties hereto; provided that no such amendment, supplement, modification
or waiver shall become effective without prior written notice to each of
the Rating Agencies. Notwithstanding the foregoing, without the consent of
the APA Banks, the Funding Agent and PARCO may amend this Agreement solely
to add additional Persons as APA Banks. Any such amendment, supplement,
modification or waiver shall apply to each of the APA Banks equally and
shall be binding upon PARCO, the APA Banks and the Funding Agent. In the
case of any waiver, PARCO, the APA Banks and the Funding Agent shall be
restored to their former positions and rights hereunder.
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(c) Integration. This Agreement and the Transaction Documents
contain a final and complete integration of all prior expressions by the
parties hereto with respect to the subject matter hereof and shall
constitute the entire agreement among the parties hereto with respect to
the subject matter hereof, superseding all prior oral or written
understandings.
SECTION 5.2. Notices. Except as otherwise expressly provided herein,
all communications and notices provided for hereunder shall be in writing and
shall be (a) hand-delivered by messenger, (b) sent by reputable overnight or
second business day courier, or (c) sent by telecopy or similar electronic
transmission directed to the applicable address or telecopy number, as the case
may be, set forth on Exhibit C hereto (as amended from time to time) or at such
other address or telecopy number as any party may hereafter specify in writing
to the Funding Agent for the purpose of receiving notices. Each such notice or
other communication shall be effective only upon receipt thereof.
SECTION 5.3. Governing Law; Submission to Jurisdiction. This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of New York.
SECTION 5.4. Severability; Counterparts; Waiver of Setoff. This
Agreement may be executed in any number of counterparts and by different parties
hereto in separate counterparts, each of which when so executed shall be deemed
to be an original and all of which when taken together shall constitute one and
the same agreement. Any provisions of this Agreement which are prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. Each APA Bank and the Funding Agent hereby waives any right
of setoff it may have or to which it may be entitled under this Agreement from
time to time against PARCO or its assets.
SECTION 5.5. Successors and Assigns; Participations; Assignments.
(a) Successors and Assigns. This Agreement shall be binding upon
the parties hereto and their respective successors and permitted assigns.
No APA Bank may participate, assign or sell any portion of its rights
hereunder except as required by operation of law, in connection with the
merger, consolidation or dissolution of any APA Bank or as provided in this
Section 5.5. No assignment hereunder shall become effective without a
Rating Confirmation.
(b) Participations. Any APA Bank may, with the consent of the
Funding Agent and in the ordinary course of its business and in accordance
with applicable law, at any time sell to one or more Persons (each, a
"Participant") participating interests in its rights and obligations
hereunder and under the Transaction Documents; provided, however, that each
Participant shall purchase an identical percentage in such selling APA
Bank's Commitment, unused PARCO APA Bank Commitment and Funding Balance;
provided, further, that each Participant shall, prior to
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the effectiveness of such participation, be required to provide all of the
forms and statements required pursuant to subsection 7.3(b) of the
Receivables Transfer Agreement and shall, as of the date such Person
becomes a Participant comply with the provisions of subsection 7.3(b) and
Section 10.9 of the Receivables Transfer Agreement. Notwithstanding any
such sale by an APA Bank of participating interests to a Participant, such
APA Bank's rights and obligations under this Agreement shall remain
unchanged, such APA Bank shall remain solely responsible for the
performance thereof, and PARCO and the Funding Agent shall continue to deal
solely and directly with such APA Bank in connection with such APA Bank's
rights and obligations under this Agreement and the Transaction Documents.
Each APA Bank agrees that any agreement between such APA Bank and any such
Participant in respect of such participating interest shall not restrict
such APA Bank's right to agree to any amendment, supplement, waiver or
modification to this Agreement.
(c) Assignments to Purchasers.
(i) Any APA Bank may at any time and from time to time,
upon the prior written consent of PARCO and the Funding Agent, assign
to one or more accredited investors or other Persons ("Purchaser(s)")
all or any part of its rights and obligations under this Agreement and
the Transaction Documents pursuant to a supplement to this Agreement,
substantially in the form of Exhibit A hereto (each, a "Transfer
Supplement"), executed by the Purchaser, such selling APA Bank and, as
applicable, the Funding Agent; and provided however that (A) each
Purchaser shall purchase an identical percentage in such selling APA
Bank's Commitment, unused PARCO APA Bank Commitment and Funding
Balance, (B) any such assignment cannot be for an amount less than the
lesser of (1) $10,000,000 and (2) such selling APA Bank's Commitment
or Funding Balance (calculated at the time of such assignment), (C)
each Purchaser must be a financial institution incorporated in an OECD
Country rated at least A-1/P-1 (or the equivalent short-term rating)
by the Rating Agencies and (D) each Purchaser shall deliver to the
Funding Agent and PARCO an opinion of such Purchaser's counsel in
substantially the form of Exhibit B hereto.
(ii) Each of the APA Banks agrees that in the event that it
shall cease to have short-term debt ratings of at least A-1 by S&P and
at least P-1 by Moody's, or, if such APA Bank does not have short-term
debt which is rated by S&P's and Moody's, in the event that the parent
corporation of such APA Bank has rated short-term debt, such parent
corporation ceases to have short-term debt ratings of at least A-1 by
S&P and at least P-1 by Moody's (each, an "Affected APA Bank"), such
Affected APA Bank shall be obliged, at the request of PARCO and the
Funding Agent, to assign all of its rights and obligations hereunder
to (x) one or more other APA Banks selected by PARCO and the Funding
Agent which are willing to accept such assignment, or (y) another
financial institution rated at least A-1/P-1 (or the equivalent short-
term rating) by the Rating Agencies
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nominated by the Funding Agent and consented to by PARCO (which
consent shall not be unreasonably withheld) and the Funding Agent, and
willing to participate in this facility through the Commitment Expiry
Date in the place of such Affected APA Bank; provided that (i) the
Affected APA Bank receives payment in full, pursuant to a Transfer
Supplement and/or, as applicable, an assignment, of an amount equal to
the Affected APA Bank's Funding Balance and any other amounts due and
owing under the Transaction Documents in respect of such Affected APA
Bank's Funding Balance and (ii) such nominated financial institution,
if not an existing APA Bank, satisfies all the requirements of this
Agreement and provides the Funding Agent with an opinion of counsel in
substantially the form of Exhibit B hereto.
(iii) Upon (A) execution of a Transfer Supplement, (B)
delivery of an executed copy thereof to PARCO, the Funding Agent and
the Administrative Agent and delivery to the Funding Agent and PARCO
of an opinion of such Purchaser's counsel in substantially the form of
Exhibit B hereto, (C) payment, if applicable, by the Purchaser to such
selling APA Bank of an amount equal to the purchase price agreed
between such selling APA Bank and the Purchaser and (D) receipt by
PARCO of a Rating Confirmation, such selling APA Bank shall be
released from its obligations hereunder and under the Transaction
Documents to the extent of such assignment and the Purchaser shall,
for all purposes, be an APA Bank party to this Agreement and, if and
when applicable, an assignee of PARCO's right to receive Transferred
Interests Payments under the Transaction Documents and shall have all
the rights and obligations of an APA Bank under this Agreement to the
same extent as if it were an original party hereto or thereto, and no
further consent or action by PARCO, the APA Banks or the Funding Agent
shall be required. The amount of the assigned portion of the selling
APA Bank's Funding Balance allocable to the Purchaser shall be equal
to the Transferred Percentage (as defined in the Transfer Supplement)
of such selling APA Bank's Funding Balance which is transferred
thereunder regardless of the purchase price paid therefor. Such
Transfer Supplement shall be deemed to amend this Agreement to the
extent, and only to the extent, necessary to reflect the addition of
the Purchaser as an APA Bank and the resulting adjustment of the
selling APA Bank's Commitment arising from the purchase by the
Purchaser of all or a portion of the selling APA Bank's rights,
obligations, and interest hereunder and under the Transaction
Documents.
SECTION 5.6. Effectiveness of this Agreement. This Agreement, and the
obligations of the Funding Agent and the APA Banks hereunder, shall become
effective when the Funding Agent has received counterparts hereof, duly executed
by the Funding Agent, PARCO and each of the APA Banks.
SECTION 5.7. No Petition. The Funding Agent, each APA Bank and PARCO
hereby covenant and agree that, prior to the date which is one year and one day
after the payment
16
<PAGE>
in full of all outstanding Commercial Paper of PARCO, such party will not
institute against, or join any other Person in instituting against, PARCO any
bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings
or other similar proceeding under the laws of any jurisdiction. The provisions
of this Section 5.7 shall survive termination of this Agreement.
SECTION 5.8. Waiver of Trial by Jury. To the extent permitted by
applicable law, the Funding Agent, each APA Bank and PARCO irrevocably waives
all right of trial by jury in any action, proceeding or counterclaim arising out
of or in connection with this Agreement or the operative documents or any matter
arising hereunder or thereunder.
SECTION 5.9. Limited Recourse. Notwithstanding anything to the
contrary contained herein, the obligations of PARCO under this Agreement are
solely the corporate obligations of PARCO and, in the case of obligations of
PARCO other than Commercial Paper, shall be payable at such time as funds are
received by or are available to PARCO in excess of funds necessary to pay in
full all outstanding Commercial Paper and, to the extent funds are not available
to pay such obligations, the claims relating thereto shall not constitute a
claim against PARCO but shall continue to accrue. Each party hereto agrees that
the payment of any claim (as defined in Section 101 of Title 11 of the
Bankruptcy Code) of any such party shall be subordinated to the payment in full
of all Commercial Paper.
No recourse under any obligation, covenant or agreement of PARCO
contained in this Agreement shall be had against any incorporator, stockholder,
officer, director, employee or agent of PARCO, the Administrative Agent, the
PARCO Administrative Agent, the Funding Agent, the Manager or any of their
Affiliates (solely by virtue of such capacity) by the enforcement of any
assessment or by any legal or equitable proceeding, by virtue of any statute or
otherwise; it being expressly agreed and understood that this Agreement is
solely a corporate obligation of PARCO individually, and that no personal
liability whatever shall attach to or be incurred by any incorporator,
stockholder, officer, director, employee or agent of PARCO, the Administrative
Agent, the PARCO Administrative Agent, the Funding Agent, the Manager or any of
their Affiliates (solely by virtue of such capacity) or any of them under or by
reason of any of the obligations, covenants or agreements of PARCO contained in
this Agreement, or implied therefrom, and that any and all personal liability
for breaches by PARCO of any of such obligations, covenants or agreements,
either at common law or at equity, or by statute, rule or regulation, of every
such incorporator, stockholder, officer, director, employee or agent is hereby
expressly waived as a condition of and in consideration for the execution of
this Agreement; provided that the foregoing shall not relieve any such Person
from any liability it might otherwise have as a result of fraudulent actions
taken or omissions made by them. The provisions of this Section 5.9 shall
survive termination of this Agreement.
SECTION 5.10. Liability of Funding Agent. Notwithstanding any
provision of this Agreement: (i) the Funding Agent shall not have any
obligations under this Agreement other than those specifically set forth herein,
and no implied obligations of the Funding Agent shall be read into this
Agreement; and (ii) in no event shall the Funding Agent be liable under or in
connection with this Agreement for indirect, special, or consequential losses or
damages of
17
<PAGE>
any kind, including lost profits, even if advised of the possibility thereof and
regardless of the form of action by which such losses or damages may be claimed.
Neither the Funding Agent nor any of its directors, officers, agents or
employees shall be liable for any action taken or omitted to be taken in good
faith by it or them under or in connection with this Agreement, except for its
or their own gross negligence or willful misconduct. Without limiting the
foregoing, the Funding Agent (a) may consult with legal counsel (including
counsel for the Initial Purchasers and the APA Banks), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts, (b) shall not be responsible to
PARCO for any statements, warranties or representations made in or in connection
with this Agreement or the Transaction Documents, (c) shall not be responsible
to PARCO for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of this Agreement or the Transaction Documents, (d) shall
incur no liability under or in respect of any of the Commercial Paper or other
obligations of PARCO under this Agreement or the Transaction Documents and (e)
shall incur no liability under or in respect of this Agreement or the
Transaction Documents by acting upon any notice (including notice by telephone),
consent, certificate or other instrument or writing (which may be by facsimile)
believed by it to be genuine and signed or sent by the proper party or parties.
Notwithstanding anything else herein or in the Transaction Documents, it is
agreed that where the Funding Agent may be required under this Agreement or the
Transaction Documents to give notice of any event or condition or to take any
action as a result of the occurrence of any event or the existence of any
condition, the Funding Agent agrees to give such notice or take such action only
to the extent that it has actual knowledge of the occurrence of such event or
the existence of such condition, and shall incur no liability for any failure to
give such notice or take such action in the absence of such knowledge.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
18
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase
Agreement to be executed and delivered by their duty authorized officers or
signatories as of the date hereof.
PARK AVENUE RECEIVABLES CORPORATION
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
THE CHASE MANHATTAN BANK, as
Funding Agent
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
THE CHASE MANHATTAN BANK, as an
APA Bank
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
<PAGE>
ANNEX 1
APA Banks
The Chase Manhattan Bank
Annex 1 - Page 1
<PAGE>
EXHIBIT A
[FORM OF TRANSFER SUPPLEMENT]
THIS TRANSFER SUPPLEMENT is entered into as of the _____ day of ________,
19/20__, by and between ____________________ ("Seller") and _____________
("Purchaser").
PRELIMINARY STATEMENTS
A. This Transfer Supplement is being executed and delivered in accordance
with Section 5.5(c) of that certain Asset Purchase Agreement, dated as of
December 27, 1999 (as amended, supplemented or otherwise modified and in effect
from time to time, the "Agreement"), by and among Park Avenue Receivables
Corporation, a Delaware corporation, the several APA Banks party thereto from
time to time, and The Chase Manhattan Bank, a New York banking corporation,
individually and as Funding Agent. Capitalized terms used herein and not
otherwise defined herein are used with the meanings set forth in, or
incorporated by reference into, the Agreement.
B. The Seller is an APA Bank party to the Agreement, and the Purchaser
wishes to become an APA Bank thereunder.
C. The Seller is selling and assigning to the Purchaser an undivided ___%
(the "Transferred Percentage") interest in all of Seller's rights and
obligations under the Agreement and the Transaction Documents, including,
without limitation, the Seller's Commitment and (if applicable) the Seller's
Funding Balance as set forth herein.
The parties hereto hereby agree as follows:
1. The transfer effected by this Transfer Supplement shall become
effective (the "Transfer Effective Date") two (2) Business Days (or such other
date selected by the Funding Agent in its sole discretion) following the date on
which a transfer effective notice substantially in the form of Schedule II to
this Transfer Supplement ("Transfer Effective Notice") is delivered by the
Funding Agent to PARCO, the Seller and the Purchaser. From and after the
Transfer Effective Date, the Purchaser shall be an APA Bank party to the
Agreement for all purposes thereof as if the Purchaser were an original party
thereto and the Purchaser agrees to be bound by all of the terms and provisions
contained therein.
2. If there is no related PARCO Net Investment on the Transfer Effective
Date, Seller shall be deemed to have hereby transferred and assigned to the
Purchaser, without recourse, representation or warranty (except as provided in
paragraph 6 below), and the Purchaser shall be deemed to have hereby irrevocably
taken, received and assumed from the
A-1
<PAGE>
Seller, the Transferred Percentage of the Seller's Commitment and all rights and
obligations associated therewith under the terms of the Agreement, including,
without limitation, the Transferred Percentage of the Seller's future funding
obligations under Section 2.2(a) of the Agreement.
3. If there is a related PARCO Net Investment, at or before 12:00 noon,
local time of the Seller, on the Transfer Effective Date, the Purchaser shall
pay to the Seller, in immediately available funds, an amount equal to the sum of
(i) the Transferred Percentage of an amount equal to the Seller's Funding
Balance (such amount, being hereinafter referred to as the "Purchaser's Funding
Balance"); (ii) all accrued but unpaid (whether or not then due) interest
attributable to the Purchaser's Funding Balance; and (iii) accrued but unpaid
fees and other costs and expenses payable in respect of the Purchaser's Funding
Balance for the period commencing upon each date such unpaid amounts commence
accruing, to and including the Transfer Effective Date (the "Purchaser's
Acquisition Cost"), whereupon, the Seller shall be deemed to have transferred
and assigned to the Purchaser, without recourse, representation or warranty
(except as provided in paragraph 6 below), and the Purchaser shall be deemed to
have hereby irrevocably taken, received and assumed from the Seller, the
Transferred Percentage of the Seller's Commitment and its Funding Balance and
all related rights and obligations under the Agreement and the Transaction
Documents, including, without limitation, the Transferred Percentage of the
Seller's future funding obligations under Section 2.2(a) of the Agreement.
4. Concurrently with the execution and delivery hereof, the Seller will
provide to the Purchaser copies of all documents requested by the Purchaser
which were delivered to such Seller pursuant to the Agreement.
5. Each of the parties to this Transfer Supplement agrees that at any
time and from time to time upon the written request of any other party, it will
execute and deliver such further documents and do such further acts and things
as such other party may reasonably request in order to effect the purposes of
this Transfer Supplement.
6. By executing and delivering this Transfer Supplement, the Seller and
the Purchaser confirm to and agree with each other, the Funding Agent and the
APA Banks as follows: (a) other than the representation and warranty that it has
not created any Adverse Claim upon any interest being transferred hereunder, the
Seller makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made by any other
Person in or in connection with the Agreement or the Transaction Documents or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value thereof or any other instrument or document furnished pursuant thereto or
the perfection, priority, condition, value or sufficiency of any collateral; (b)
the Seller makes no representation or warranty and assumes no responsibility
with respect to the financial condition of PARCO, the Funding Agent, the
Administrative Agent or any Transaction Party, any surety or any guarantor or
the performance or observance by PARCO, any Transaction Party, the
Administrative Agent or the Funding Agent of any of their respective obligations
under the Agreement or any Transaction Document or any other instrument or
document furnished pursuant thereto or in connection therewith; (c)
A-2
<PAGE>
the Purchaser confirms that it has received a copy of the Agreement and the
Transaction Documents, together with such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into this Transfer Supplement; (d) the Purchaser will, independently and without
reliance upon the Funding Agent, PARCO or any other APA Bank, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Agreement
or the Transaction Documents; (e) the Purchaser appoints and authorizes the
Funding Agent to take such action as agent on its behalf and to exercise such
powers under the Agreement as are delegated to the Funding Agent by the terms
thereof, together with such powers as are reasonably incidental thereto; (f) the
Purchaser was not formed for the purpose of acquiring the interest being
acquired hereunder; and (h) the Purchaser agrees that it will perform in
accordance with their terms all of the obligations which, by the terms of the
Agreement and the Transaction Documents, are required to be performed by it as
an APA Bank or as the holder of PARCO's interest thereunder.
7. Each party hereto represents and warrants to and agrees with the
Funding Agent that it is aware of and will comply with the provisions of (i) the
Agreement, including, without limitation, Sections 2.2, 5.5(c) and 5.7 thereof
and (ii) Sections 7.3(b) and 10.9 of the Receivables Transfer Agreement.
8. Schedule I hereto sets forth the revised PARCO APA Bank Commitment of
the Seller and the PARCO APA Bank Commitment of the Purchaser, as well as
administrative information with respect to the Purchaser.
9. This Transfer Supplement shall be governed by, and construed in
accordance with, the laws of the State of New York.
A-3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Transfer Supplement
to be executed by their respective duly authorized officers of the date hereof.
[SELLER]
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
[PURCHASER]
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
A-4
<PAGE>
SCHEDULE I TO TRANSFER SUPPLEMENT
LIST OF PURCHASING OFFICES, ADDRESSES
FOR NOTICES AND COMMITMENT AMOUNTS
Date: _______________, 19/20___
Transferred Percentage: _____%
<TABLE>
<CAPTION>
Pro
PARCO APA PARCO APA Outstanding Rata
Seller Bank Bank Funding Balance Share
Commitment Commitment
[existing] [revised]
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------
Pro
PARCO APA Outstanding Rata
Purchaser Bank Funding Balance Share
Commitment
[initial]
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
</TABLE>
Purchaser's Addresses for Notices:
________________________
________________________
________________________
Attention:
Telephone:
Telecopy:
SI-1
<PAGE>
SCHEDULE II TO TRANSFER SUPPLEMENT
TRANSFER EFFECTIVE NOTICE
TO: ___________________, Seller
___________________
___________________
TO: ___________________, Purchaser
___________________
___________________
The undersigned, as Funding Agent under the Asset Purchase Agreement, dated
as of December 27, 1999 (as amended, supplemented or otherwise modified and in
effect from time to time), by and among Park Avenue Receivables Corporation, a
Delaware corporation, the several APA Banks party thereto from time to time, and
The Chase Manhattan Bank, a New York banking corporation, individually and as
Funding Agent, hereby acknowledges receipt of executed counterparts of a
completed Transfer Supplement dated as of ______, 19/20__ between ___________,
as Seller, and _____________, as Purchaser. Capitalized terms defined in such
Transfer Supplement are used herein as therein defined or incorporated by
reference therein.
1. Pursuant to such Transfer Supplement, you are advised that the
Transfer Effective Date will be ___________, 19/20__.
2. The Funding Agent each hereby consents to the Transfer Supplement as
required by Section 5.5(c) of the Agreement.
--------------
[3. Pursuant to such Transfer Supplement, the Purchaser is required to pay
$_______ to the Seller at or before 12:00 noon (local time of the Seller) on the
Transfer Effective Date in immediately available funds.]
Very truly yours,
THE CHASE MANHATTAN BANK,
as Funding Agent
By:
------------------------
Authorized Signatory
SII-1
<PAGE>
EXHIBIT B
FORM OF OPINION OF COUNSEL
<TABLE>
<CAPTION>
<S> <C>
Park Avenue Receivables Corporation Standard & Poor's Ratings Services, a
c/o Global Securitization Services, LLC division of The McGraw-Hill
25 West 43rd Street, Suite 704 Companies, Inc.
New York, New York 10036 25 Broadway
New York, New York 10004
The Chase Manhattan Bank, as Moody's Investors Service, Inc.
Administrative Agent, Depositary, 99 Church Street
Liquidity Agent, Liquidity Bank, New York, New York 10007
L/C Agent and L/C Bank
270 Park Avenue
New York, New York 10017
</TABLE>
Re: Transfer Supplement dated as of __________ with [Name of Bank]
Ladies and Gentlemen:
We have acted as counsel for [Name of Bank] (the "Bank") in
connection with (i) the Asset Purchase Agreement, dated as of December 27, 1999
(as amended, supplemented or otherwise modified to the date hereof, the
"Agreement"; terms defined therein and not otherwise defined in this letter
shall have the respective meanings ascribed therein), by and among Park Avenue
Receivables Corporation, a Delaware corporation, the several APA Banks party
thereto from time to time, and The Chase Manhattan Bank, a New York banking
corporation, individually and as Funding Agent, and (ii) the Transfer Supplement
(the "Transfer Supplement"), dated as of ____________, 19/20__, between [Name of
Seller] as "Seller" (as defined therein) and the Bank as "Purchaser" (as defined
therein), consented to by the Funding Agent.
1. The Bank is a ______________________ organized, validly existing
and in good standing under the laws of ___________________. The Bank has the
corporate power and authority to execute and deliver the Transfer Supplement and
to perform its obligations under the Asset Purchase Agreement.
2. No governmental approval or other action, which has not been
obtained or taken and is not in full force and effect, is required to authorize,
or is required in connection with, the execution or delivery by the Bank of the
Transfer Supplement or the performance by the Bank of its obligations thereunder
and under the Asset Purchase Agreement.
3. Neither the execution and delivery of the Transfer Supplement by
the Bank, nor the consummation of the transactions contemplated thereby and by
the Asset Purchase Agreement, will contravene, or result in a violation of, any
law applicable to the Bank.
B-1
<PAGE>
4. The Transfer Supplement has been duly authorized, executed and
delivered by the Bank, and the Asset Purchase Agreement, as amended by the
Transfer Supplement, constitutes the legal, valid and binding obligation of the
Bank, enforceable against the Bank in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, receivership,
conservatorship or other similar laws, regulations and administrative orders of
general application relating to or affecting the enforcement of creditors'
rights in general and the rights of creditors of banks as the same may be
applied in the event of the bankruptcy, insolvency, receivership,
conservatorship or other similar event in respect of the Bank or by general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
5. With the exception of obligations being given priority by statute
or regulation, the obligations of the Bank under the Asset Purchase Agreement,
as amended by the Transfer Supplement, will rank pari passu with all obligations
of the Bank which are not contractually subordinated to payment of such
obligations.
Very truly yours,
[NOTE THAT ADDITIONAL OPINIONS MAY BE REQUIRED FROM
FOREIGN APA BANKS]
B-2
<PAGE>
EXHIBIT C
NOTICE ADDRESSES
If to PARCO:
Park Avenue Receivables Corporation
c/o Global Securitization Services, LLC
25 West 43rd Street, Suite 704
New York, New York 10036
Attention: Vice President
Telephone: (212) 302-5151
Telecopy: (212) 302-8767
If to the Funding Agent:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Craig Kantor
Structured Finance Services
Telephone: (212) 946-7861
Telecopy: (212) 946-7776
If to Chase as an APA Bank:
The Chase Manhattan Bank
450 West 33rd Street, 15th Floor
New York, New York 10001
Attention: Craig Kantor
Structured Finance Services
Telephone: (212) 946-7861
Telecopy: (212) 946-7776
C-1
<PAGE>
If to C&A:
Collins & Aikman Products Co.
701 McCullough Drive
Charlotte, North Carolina 28262
Attention: Assistant Treasurer
Telephone: (704) 547-8500
Telecopy: (704) 548-2314
If to the Collection Agent:
Collins & Aikman Products Co.
701 McCullough Drive
Charlotte, North Carolina 28262
Attention: Assistant Treasurer
Telephone: (704) 547-8500
Telecopy: (704) 548-2314
If to the Transferor:
Carcorp, Inc.
101 Convention Center Drive
Suite 850
Las Vegas, Nevada 89109
Attention: Monte Miller
Telephone: (702) 387-0864
Telecopy: (702) 598-3651
C-2
<PAGE>
LIMITED GUARANTY
This Limited Guaranty (as amended, supplemented or otherwise modified
and in effect from time to time, the "Guaranty") is executed as of the 27th day
of December, 1999 by Collins & Aikman Products Co., a corporation organized and
existing under the laws of the State of Delaware (the "Guarantor"), in favor of
The Chase Manhattan Bank, as administrative agent (in such capacity, the
"Administrative Agent"), on behalf of the Funding Agents, the Initial Purchasers
and the PARCO APA Banks (together, the Funding Agents, the Initial Purchasers
and the PARCO APA Banks are referred to herein as the "Beneficiaries").
PRELIMINARY STATEMENTS
WHEREAS, pursuant to a receivables purchase agreement, dated as of
December 27, 1999 (as amended, supplemented or otherwise modified and in effect
from time to time, the "Receivables Purchase Agreement"), between Collins &
Aikman Products Co. ("C&A"), C&A's wholly-owned direct and indirect Subsidiaries
listed on Schedule D attached thereto, each as a seller thereunder (each a
"Seller", and collectively, the "Sellers"), and Carcorp, Inc., a Delaware
corporation (the "Receivables Company"), as purchaser thereunder, each Seller
has agreed to sell from time to time, and Receivables Company has agreed to
purchase from time to time, the Receivables;
WHEREAS, pursuant to (i) a Receivables Transfer Agreement, dated as of
December 27, 1999 (as amended, supplemented or otherwise modified and in effect
from time to time, the "Receivables Transfer Agreement"), between C&A, as
Guarantor and as collection agent thereunder (the "Collection Agent"),
Receivables Company, as transferor thereunder, the Initial Purchasers, the PARCO
APA Banks from time to time party thereto, the Funding Agents and the
Administrative Agent, (ii) an Asset Purchase Agreement, dated as of December 27,
1999 (as amended, supplemented or otherwise modified and in effect from time to
time, the "PARCO Asset Purchase Agreement"), by and among PARCO, the PARCO APA
Banks and the PARCO Funding Agent, (iii) the Redwood Liquidity Loan Agreement
and (iv) the Liberty Liquidity Asset Purchase Agreement, Receivables Company has
agreed to sell from time to time, and the Administrative Agent, on behalf of the
Initial Purchasers and the PARCO APA Banks, has agreed to purchase from time to
time, on the terms and conditions set forth in the Receivables Transfer
Agreement and the Asset Purchase Agreements, undivided interests in the
Receivables;
WHEREAS, the Guarantor is the direct or indirect owner of 100% of the
outstanding capital stock of each of the other Sellers; and
WHEREAS, it is a condition precedent to the execution and delivery of
the Receivables Transfer Agreement that the Guarantor execute this Guaranty and
deliver it to the Administrative Agent for the benefit of the Beneficiaries.
In consideration for the execution and delivery of the Receivables
Transfer Agreement and the Asset Purchase Agreements by the Beneficiaries, as
applicable, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by the Guarantor, the Guarantor
agrees as follows:
1
<PAGE>
1. Definitions. Unless otherwise defined in this Guaranty,
capitalized terms used herein and not otherwise defined herein shall have the
meanings assigned to such terms in, or incorporated by reference into, the
Receivables Transfer Agreement. As used herein, "Facility Documents" shall mean,
collectively, the Receivables Purchase Agreement, the Receivables Transfer
Agreement and each Asset Purchase Agreement.
2. Guaranty of Obligations. The Guarantor unconditionally
guarantees the full and prompt payment when due of all of the payment
obligations and the timely performance of all of the performance obligations of
the Sellers of every kind and nature now or hereafter existing, or due or to
become due, under the Facility Documents (collectively, the "Obligations");
provided that, such Obligations shall not include amounts not collected in
respect of any Receivable as a result of the creditworthiness of an Obligor,
including, but not limited to, amounts required to be returned to an Obligor as
a voidable preference. The Guarantor shall pay all reasonable costs and expenses
including, without limitation, all court costs and reasonable attorney's fees
and expenses paid or incurred by the Administrative Agent and the Beneficiaries
in connection with (a) the collection of all or any part of the Obligations from
the Guarantor and (b) the prosecution or defense of any action by or against the
Administrative Agent, the Beneficiaries or Receivables Company in connection
with, or relating to, the Obligations, whether involving the Sellers, the
Collection Agent, the Guarantor, Receivables Company or any other party
(including, but not limited to, a trustee in a bankruptcy or a
debtor-in-possession).
3. Validity of Obligations; Irrevocability. The Guarantor agrees
that subject to the proviso set forth in Section 2 above its obligations under
this Guaranty shall be unconditional, irrespective of (i) the validity,
enforceability, discharge, disaffirmance, settlement or compromise (by any
Person, including a trustee in a bankruptcy or a debtor-in-possession) of the
Obligations or of the Facility Documents or any Contract, (ii) the absence of
any attempt to collect the Obligations from a Seller or the Collection Agent or
any other party, (iii) the waiver or consent by any Person with respect to any
provision of any instrument evidencing the Obligations, (iv) any change of the
time, manner or place of payment or performance, or any other term of any of the
Obligations, (v) any law, regulation or order of any jurisdiction affecting any
term of any of the Obligations or rights of any Person with respect thereto,
(vi) the failure by any Person to take any steps to perfect and maintain
perfected its interest in the Receivables or any security or collateral related
to the Obligations or (vii) any other circumstances which might otherwise
constitute a legal or equitable discharge or defense of a guarantor. The
Guarantor agrees that the Administrative Agent and the Beneficiaries shall be
under no obligation to marshal any assets in favor or against or in payment of
any or all of the Obligations. The Guarantor further agrees that, to the extent
a payment is made by a Seller or the Collection Agent under the Facility
Documents, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside and/or
required to be repaid to such Seller or the Collection Agent, its estate,
trustee, receiver or any other party, under any bankruptcy, insolvency or
similar state or federal law, common law or equitable cause, then to the extent
of such payment or repayment, the Obligation or part thereof which has been
paid, reduced or satisfied by such amount shall be reinstated and continued in
full force and effect as of the date such initial payment, reduction or
satisfaction occurred. The Guarantor waives all set-offs and counterclaims and
all presentments, demands for performance, notices of dishonor and notice of
acceptance of this Guaranty. The Guarantor agrees that its obligations under
this Guaranty shall be irrevocable.
2
<PAGE>
4. Several Obligations. The obligations of the Guarantor hereunder
are separate and apart from the Sellers or any other Person, and are primary
obligations concerning which the Guarantor is the principal obligor. The
Guarantor agrees that this Guaranty shall not be discharged except by payment in
full of the Obligations and complete performance of the obligations of the
Guarantor hereunder. The obligations of the Guarantor hereunder shall not be
affected in any way by the release or discharge of a Seller from the performance
of any of the Obligations (other than the full and final payment of all of the
Obligations), whether occurring by reason of law or any other cause, whether
similar or dissimilar to the foregoing.
5. Subrogation Rights. If any amount shall be paid to the Guarantor
on account of subrogation rights at any time when all the Obligations shall not
have been paid in full, such amount shall be held in trust for the benefit of
the Administrative Agent, on behalf of the Beneficiaries, and shall forthwith be
paid to the Administrative Agent to be applied to the Obligations. If (a) the
Guarantor shall make payment to the Administrative Agent of or perform all or
any part of the Obligations and (b) all the Obligations shall be paid and
performed in full, the Administrative Agent will, at the Guarantor's request,
execute and deliver to the Guarantor appropriate documents, without recourse and
without representation or warranty, necessary to evidence the transfer by
subrogation to the Guarantor of any interest in the Obligations resulting from
such payment or performance by the Guarantor. The Guarantor hereby agrees that
it shall have no rights of subrogation with respect to amounts due to the
Administrative Agent or the Beneficiaries until such time as all obligations of
the Sellers to the Receivables Company, the Administrative Agent and the
Beneficiaries have been paid or performed in full and the Receivables Transfer
Agreement has been terminated.
6. Rights of Set-Off. The Guarantor hereby authorizes the
Administrative Agent, on behalf of the Beneficiaries, at any time and from time
to time, to the fullest extent permitted by law, to set off and apply any and
all deposits (whether general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by the Administrative
Agent or the Beneficiaries to or for the credit or the account of Receivables
Company against any and all of the obligations of the Guarantor now or hereafter
existing under this Guaranty. The Guarantor hereby acknowledges that rights of
the Administrative Agent, on behalf of the Beneficiaries, described in this
Section 4 are in addition to all other rights and remedies (including, without
limitation, other rights of set-off) the Administrative Agent and the
Beneficiaries may have.
7. Representations and Warranties. The Guarantor hereby represents
and warrants to the Administrative Agent, for the benefit of the Beneficiaries,
as of the date hereof, as follows:
(a) Corporate Existence and Power. The Guarantor is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all corporate power and
all material governmental licenses, authorizations, consents and approvals
required to carry on its business in each jurisdiction in which its
business is now conducted. The Guarantor is duly qualified to do business
in, and is in good standing in, every other jurisdiction in which the
nature of its business requires it to be so qualified, except where the
failure to be so qualified or in good standing would not have a Material
Adverse Effect.
3
<PAGE>
(b) Corporate and Governmental Authorization; Contravention.
The execution, delivery and performance by the Guarantor of this Guaranty
and the other Facility Documents to which the Guarantor is a party are
within the Guarantor's corporate powers, have been duly authorized by all
necessary corporate action, require no action by or in respect of, or
filing with, any Official Body or official thereof, and do not contravene,
or constitute a default under, any provision of applicable law, rule or
regulation or of the Certificate of Incorporation or Bylaws of the
Guarantor or of any material agreement, judgment, injunction, order, writ,
decree or other instrument binding upon the Guarantor or result in the
creation or imposition of any Adverse Claim on the assets of the Guarantor
or any of its Subsidiaries.
(c) Binding Effect. Each of this Guaranty and the other
Facility Documents to which the Guarantor is a party constitutes the legal,
valid and binding obligation of the Guarantor, enforceable in accordance
with its terms, subject to applicable bankruptcy, insolvency, moratorium or
other similar laws affecting the rights of creditors and general equitable
principles (whether considered in a proceeding at law or in equity).
(d) Accuracy of Information. All information heretofore
furnished by the Guarantor to the Administrative Agent or the Beneficiaries
for purposes of or in connection with this Guaranty, the other Facility
Documents or any transaction contemplated hereby or thereby is, and all
such information hereafter furnished by the Guarantor to the Administrative
Agent or the Beneficiaries will be, true and accurate in every material
respect on the date such information is stated or certified.
(e) Tax Status. The Guarantor has filed all tax returns
(Federal, state and local) required to be filed and has paid prior to
delinquency or made adequate provision for the payment of all taxes,
assessments and other governmental charges (including for such purposes,
the setting aside of appropriate reserves for taxes, assessments and other
governmental charges being contested in good faith).
(f) Action, Suits. There are no actions, suits or proceedings
pending, or to the knowledge of the Guarantor threatened, against or
affecting the Guarantor or any Affiliate of the Guarantor or their
respective properties, in or before any court, arbitrator or other body,
which may, individually or in the aggregate, have a Material Adverse
Effect.
(g) Not an Investment Company. The Guarantor is not, nor is it
controlled by, an "investment company" within the meaning of the Investment
Company Act of 1940, as amended, or is exempt from all provisions of such
Act.
(h) Year 2000. The Guarantor has reviewed the areas within its
business and operations which it believes would reasonably be expected to
be materially adversely affected by, and has developed a plan to address on
a timely basis, the "Year 2000 Problem" (that is, the risk that computer
applications used by the Collection Agent may be unable to recognize and
perform properly date-sensitive functions involving certain dates occurring
in or after the year 2000).
4
<PAGE>
8. Governing Law. The Guaranty shall be governed by, and construed
in accordance with, the laws of the State of New York.
[REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK]
5
<PAGE>
IN WITNESS WHEREOF, this Guaranty has been duly executed by the
Guarantor as of the 27th day of December, 1999.
COLLINS & AIKMAN PRODUCTS CO.,
as Guarantor
By:
---------------------------------
Name:
Title:
Acknowledged and accepted as of
The date first above written:
THE CHASE MANHATTAN BANK,
As Administrative Agent for the benefit of Beneficiaries
By:
----------------------------
Name:
Title:
6
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF COLLINS & AIKMAN CORPORATION
COMPANY JURISDICTION
- ------- ------------
Collins & Aikman Products Co. Delaware
Carcorp, Inc. Delaware
Cepco, Incorporated Delaware
Collins & Aikman Accessory Mats, Inc. 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
C & A Canada International Holdings Limited/4/ Canada
Collins & Aikman Luxembourg, S.A. Luxembourg
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./5/ Luxembourg
C&A (Gibraltar) Gibraltar
C&A (Gibraltar) No. 2 Gibraltar
Collins & Aikman Automotive Holding GmbH Germany
Collins & Aikman Automotive Systems GmbH Germany
- ----------------
/1/ 10% owned by Willis Corroon Corporation of North Carolina
/2/ 10% owned by by O'brien & Gere or North America, Inc.
/3/ 10% owned by Unicare, Inc.
/4/ 76% owned by Collins & Aikman Plastics, Ltd.
/5/ 29% owned by Collins & Aikman Luxembourg, S.A.
<PAGE>
Dura Convertible Systems GmbH Germany
Collins & Aikman Automotive Systems N.V./6/ Belgium
Collins & Aikman Automotive Systems S.L./7/ Spain
Collins & Aikman Europe B.V. Netherlands
Collins & Aikman Automotive Floormats Europe B.V. Netherlands
Collins & Aikman Holding AB Sweden
Collins & Aikman Automotive Systems AB Sweden
Collins & Aikman Products GmbH/8/ Austria
Collins & Aikman Holdings Limited United Kingdom
Collins & Aikman Automotive Systems Limited United Kingdom
Collins & Aikman Automotive Carpet Products
(UK) Limited United Kingdom
Collins & Aikman Plastics (UK) Limited United Kingdom
Abex Plastic Products Limited United Kingdom
Manchester Kigass International Limited United Kingdom
Premier Springs & Pressings Limited United Kingdom
Collins & Aikman Holdings, S.A. de C.V./9/ Mexico
Amco de Mexico, S.A. de C.V./10/ Mexico
- ---------------
/6/ Ten shares owned by Collins & Aikman Automotive Systems AB
/7/ One share owned by Collins & Aikman Holdings Limited
/8/ 4% owned by Collins & Aikman Products Co.
/9/ One share owned by Habinus Trading Company
<PAGE>
Collins & Aikman de Mexico, S.A. de C.V./11/ Mexico
Collins & Aikman Carpet & Acoustics, S.A. de C.V./12/ Mexico
Dura Convertible Systems de Mexico, S.A. de C.V./13/ Mexico
Industrias Enjema, S.A. de C.V./14/ Mexico
Servitop, S.A. de C.V./15/ Mexico
- ------------------
/10/ One share owned by Habinus Trading Company
/11/ One share owned by The Akro Corporation
/12/ 25% owned by Pablo Sidaoui Dib and Alberto Sidaoui Dib
/13/ One share owned by Dura Convertible Systems, Inc.
/14/ One share owned by Collins & Aikman International Corporation
/15/ One share owned by Amco de Mexico, S.A. de C.V.
<PAGE>
Servitrim, S.A. de C.V./16/ Mexico
Collins & Aikman Plastics, Inc. Delaware
Collins & Aikman Plastics, Ltd. Canada
Collins & Aikman Properties, Inc. Delaware
Dura Convertible Systems, Inc. Delaware
Amco Convertible Fabrics, Inc. Delaware
Gamble Development Company Minnesota
Grefab, Inc. New York
Ole's, Inc. California
JPS Automotive, Inc. Delaware
Cramerton Automotive Products, Inc. Delaware
JPS Automotive Products Corp. Delaware
Simmons Universal Corporation Delaware
Waterstone Insurance, Inc. Vermont
Wickes Asset Management, Inc. Delaware
Wickes Manufacturing Company Delaware
Wickes Realty, Inc. Delaware
- ----------------------
/16/ One share owned by Dura Convertible Systems de Mexico, S.A. de C.V
<PAGE>
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 Statments File No. 33-53321, No. 33-53323, No. 33-60997 and
No. 333-34569.
ARTHUR ANDERSEN LLP
Charlotte, North Carolina,
March 21, 2000.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 25, 1999 AND SUCH IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-25-1999
<PERIOD-START> DEC-27-1998
<PERIOD-END> DEC-25-1999
<CASH> 13,980
<SECURITIES> 0
<RECEIVABLES> 242,876
<ALLOWANCES> 8,557
<INVENTORY> 132,625
<CURRENT-ASSETS> 465,366
<PP&E> 758,481
<DEPRECIATION> 314,955
<TOTAL-ASSETS> 1,348,890
<CURRENT-LIABILITIES> 362,255
<BONDS> 884,550
0
0
<COMMON> 705
<OTHER-SE> (151,826)
<TOTAL-LIABILITY-AND-EQUITY> 1,348,890
<SALES> 1,898,597
<TOTAL-REVENUES> 1,898,597
<CGS> 1,613,880
<TOTAL-COSTS> 152,807
<OTHER-EXPENSES> 7,593
<LOSS-PROVISION> 2,502
<INTEREST-EXPENSE> 92,045
<INCOME-PRETAX> (1,119)
<INCOME-TAX> 246
<INCOME-CONTINUING> (1,365)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (8,850)
<NET-INCOME> (10,215)
<EPS-BASIC> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
