-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, V/rDVTdnToD42yAgga0aDXSociBZf07Rr6TF9z/dsYayppSQSgaz+08psphCJ9cu /+WXS3NkUs/clckFlsjj+Q== 0000950168-98-000906.txt : 19980330 0000950168-98-000906.hdr.sgml : 19980330 ACCESSION NUMBER: 0000950168-98-000906 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19971227 FILED AS OF DATE: 19980327 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COLLINS & AIKMAN CORP CENTRAL INDEX KEY: 0000846815 STANDARD INDUSTRIAL CLASSIFICATION: CARPETS AND RUGS [2273] IRS NUMBER: 133489233 STATE OF INCORPORATION: DE FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-10218 FILM NUMBER: 98576249 BUSINESS ADDRESS: STREET 1: PO BOX 32665 STREET 2: 701 MCCULLOUGH DR CITY: CHARLOTTE STATE: NC ZIP: 28262 BUSINESS PHONE: 7045482350 MAIL ADDRESS: STREET 1: PO BOX 562237 CITY: CHARLOTTE STATE: NC ZIP: 28256-2237 FORMER COMPANY: FORMER CONFORMED NAME: COLLINS & AIKMAN HOLDINGS CORP/DE DATE OF NAME CHANGE: 19930914 FORMER COMPANY: FORMER CONFORMED NAME: COLLINS & AIKMAN HOLDINGS CORP DATE OF NAME CHANGE: 19930114 FORMER COMPANY: FORMER CONFORMED NAME: WCI HOLDINGS CORP DATE OF NAME CHANGE: 19920703 10-K 1 COLLINS & AIKMAN CORP. 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 27, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-10218 ------------------------------ COLLINS & AIKMAN CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 13-3489233 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER) 701 MCCULLOUGH DRIVE CHARLOTTE, NORTH CAROLINA 28262 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (704) 547-8500 SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED - ------------------- ----------------------------------------- Common Stock New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of voting stock held by non-affiliates of the Registrant was $98,171,752 as of March 25, 1998. As of March 25, 1998, the number of outstanding shares of the Registrant's common stock, $.01 par value, was 65,611,864 shares. DOCUMENTS INCORPORATED BY REFERENCE: (1) Proxy Statement for 1998 Annual Meeting of Stockholders to be filed within 120 days of December 27, 1997 - Items 10, 11, 12 and 13.* * Only the portions of this document expressly described in the items listed are incorporated by reference herein. COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES FORM 10-K ANNUAL REPORT INDEX Item 1. Business, page 1. Item 2. Properties, page 4. Item 3. Legal Proceedings, page 4. Item 4. Submission of Matters to a Vote of Security Holders, page 5. Executive Officers of the Registrant, page 5. Item 5. Market for Registrant's Common Equity and Related Stockholder Matters, page 6. Item 6. Selected Financial Data, page 7. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, page 8. Item 7A. Quantitative and Qualitative Disclosures About Market Risk, page 21. Item 8. Financial Statements and Supplementary Data, page 21. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure, page 21. Item 10. Directors and Executive Officers of the Registrant, page 22. Item 11. Executive Compensation, page 22. Item 12. Security Ownership of Certain Beneficial Owners and Management, page 22. Item 13. Certain Relationships and Related Transactions, page 22. Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K, page 23. i PART I ITEM 1. BUSINESS DEVELOPMENT Collins & Aikman Corporation (the "Company") is a global supplier of automotive interior systems, including textile and plastic trim, acoustics and convertible top systems. The Company (formerly Collins & Aikman Holdings Corporation) is a Delaware corporation which was formed on September 21, 1988. As of December 27, 1997, Blackstone Capital Partners, L.P. ("Blackstone Partners") and Wasserstein Perella Partners, L.P. ("WP Partners") and their respective affiliates collectively own approximately 82% of the Common Stock of the Company. The Company conducts all of its operating activities through its wholly-owned Collins & Aikman Products Co. ("C&A Products") subsidiary. Predecessors of C&A Products have been in operation for more than a century. During 1997, the Company continued to execute its automotive growth strategy. This strategy focuses the Company's resources on expanding its core automotive business in North America and globally as well as adding complementary product offerings. To that end, in 1997 and early 1998 the Company completed several strategic corporate development projects and divested the remainder of its significant non-automotive operations, all as discussed below. On December 16, 1997, the Company acquired from Perstorp A.B. ("Perstorp") the remaining interest in the Collins & Aikman/Perstorp automotive acoustics joint venture with operations in Sweden, Belgium and France. The Company received the interest in settlement of certain disputed claims by the Company against Perstorp arising from the Company's December 1996, and August 1997 purchases from Perstorp of certain of its automotive supply operations in North America, the United Kingdom, Spain and Germany. On December 4, 1997, the Company entered into a joint venture with Courtaulds Textiles (Holdings) Limited ("Courtaulds"), a publicly-owned, international textiles and clothing manufacturer located in the United Kingdom, to manufacture automotive interior fabrics for European customers. The Company and Courtaulds each have a 50% ownership interest in the joint venture. The joint venture allows the Company to expand its automotive fabrics operations in Europe and to further serve the European automotive market. Customers served by the joint venture include the Rover Group, Toyota and the Opel division of General Motors. On November 5, 1997, the Company announced that it entered into an agreement to sell its Imperial Wallcoverings, Inc. subsidiary ("Wallcoverings") to a company sponsored by an affiliate of Blackstone Partners. In connection with the sale, the Company recorded a loss of approximately $21.1 million, net of income taxes in the third quarter of 1997. The sale closed on March 13, 1998 for a purchase price of $71.2 million in cash, subject to adjustment, and an option to acquire 6.7% of the common stock of the purchaser outstanding as of closing. The purchaser includes both Wallcoverings and the wallcovering and vinyl units of Borden Inc., which the purchaser also acquired. On October 29, 1997, the Company entered into a joint venture with Kigass Automotive Group ("Kigass") to manufacture plastic trim products in the United Kingdom. The Company and Kigass each owned 50% of the joint venture. On February 2, 1998, the Company acquired Kigass for approximately $24.2 million, subject to post-closing adjustment. On August 31, 1997, the Company purchased certain automotive acoustics assets and assumed certain liabilities in Germany from Perstorp for approximately $13.6 million. On July 24, 1997, JPS Automotive L. P. ("JPS Automotive"), a subsidiary of the Company acquired in December 1996, completed the sale of its Air Restraint and Technical Products Division, an airbag and industrial fabric business ("Airbag"), to Safety Components International, Inc. for a purchase price of approximately $56 million. No gain or loss was recorded on the sale since the sales price approximated the acquisition fair value of Airbag. Pursuant to the indenture governing the JPS Automotive 11-1/8% Senior Notes due 2001 (the "JPS Automotive Senior Notes"), in connection with the sale of Airbag, the Company caused JPS Automotive to make an offer to purchase (up to the amount of the net proceeds from the sale) the JPS Automotive Senior Notes at 100% of their principal amount. Pursuant to such offer, which expired September 16, 1997, JPS Automotive repurchased and retired $23 thousand principal amount of JPS Automotive Senior Notes. During October 1997, the Company caused JPS Automotive to use a portion of the proceeds remaining from the sale of Airbag to make a distribution of $35.0 million to C&A Products, as permitted under the restricted payments provisions of the JPS Automotive Senior Notes Indenture. 1 On July 16, 1997, the Company completed its sale of the Mastercraft Group, a manufacturer of flat woven upholstery fabric, to Joan Fabrics Corporation, for a purchase price of approximately $310 million, subject to adjustment. A portion of the net proceeds was used to reduce the Company's long-term debt. On February 6, 1997, the Company completed the sale of its Floorcoverings subsidiary ("Floorcoverings") for net proceeds of approximately $195.6 million. The proceeds were used to pay down debt incurred to finance the Company's automotive acquisition strategy. The Company has accounted for the financial results and net assets of Floorcoverings, the Mastercraft Group (which were formerly reported in the Interior Furnishings segment), Airbag, and Wallcoverings as discontinued operations. Accordingly, previously reported financial results for all periods have been restated to reflect those four businesses as discontinued operations. GENERAL The Company is a global supplier of automotive interior systems, including textile and plastic trim, acoustics and convertible top systems with 1997 net sales of approximately $1.6 billion. The Company competes in five principal automotive product groups--carpet and acoustics, automotive fabrics, accessory floor mats, convertible top systems, and plastic-based interior systems. The Company's acquisitions in 1996 of Collins & Aikman Plastics, Inc. ("C&A Plastics"), a subsidiary of the Company formerly known as Manchester Plastics, JPS Automotive and Perstorp's automotive supply operations (primarily acoustical products) in North America, the United Kingdom and Spain ("Perstorp Components"), as well as the acquisitions and joint ventures in 1997 which are discussed above, significantly increased the Company's content per build through growth in existing product lines and the addition of complementary product offerings. The Company's sales are dependent on certain significant customers. In 1997, 1996, and 1995, direct and indirect sales to each of General Motors Corporation, Ford Motor Company and Chrysler Corporation accounted for 10% or more of the Company's net sales. Automotive industry demand historically has been influenced by both cyclical factors and long-term growth trends in the driving age population and real per capita income. Annual new car and light truck sales historically have been cyclical. In the most recent cycle, North American light vehicle sales declined from an average of 15.4 million units per year in 1986-1988 to a low of 12.3 million units in 1991. For the last five years, North American light vehicle sales have averaged 14.9 million units. PRODUCTS The Company operates in five principal automotive product groups: carpet and acoustics, automotive fabrics, accessory floor mats, convertible top systems and plastic-based interior systems. The Company also produces certain other automotive and non-automotive products. CARPET AND ACOUSTICS. The Company's Carpet and Acoustics group has three primary product lines: molded floor carpets, luggage compartment trim and acoustical products. Molded floor carpets include polyethylene, barrier-backed and molded urethane underlay carpet. In 1997, 1996 and 1995, net sales of molded floor carpets were $350.2 million, $234.1 million and $231.8 million, respectively. Luggage compartment trim includes one-piece molded trunk systems and assemblies, wheelhouse covers and center pan mats, seatbacks, tireboard covers and other trunk trim products. In 1997, 1996 and 1995, net sales of luggage compartment trim were $94.6 million, $51.4 million and $52.4 million, respectively. The Company entered the acoustical product market with its December 1996 acquisition of Perstorp's North American, United Kingdom and Spanish automotive supply operations and a joint venture interest in Perstorp's operations in Sweden, Belgium and France. The Company acquired certain of Perstorp's German automotive supply operations in August 1997 and acquired full ownership of the operations in Sweden, Belgium and France in December 1997. These operations supply acoustical products to both domestic and international automotive manufacturers. Products manufactured include interior dash insulators, damping materials and engine compartment NVH (noise, vibration and harshness) systems. These products can be combined with molded floor carpets to provide complete interior floor systems to the automotive industry. In 1997, the Company's net sales of acoustical products were $188.8 million. 2 AUTOMOTIVE FABRICS. The Company manufactures a wide variety of bodycloth, including flat-wovens, velvets and knits. The Company also laminates foam to bodycloth. In 1997, 1996 and 1995, the Company had net sales of bodycloth of $283.7 million, $243.9 million and $327.5 million, respectively. The Company's automotive fabrics group also manufactures small volumes of certain other products, such as headliner fabrics, velvet furniture fabrics, casket liners and woven fabrics for various commercial and industrial markets. ACCESSORY FLOOR MATS. The Company produces carpeted automotive accessory floor mats for North American produced and imported vehicles and for export to Europe. In 1997, 1996 and 1995, net sales of accessory floor mats were $134.6 million, $83.7 million, and $80.3 million, respectively. This group also produces residential floor mats. CONVERTIBLE TOP SYSTEMS. The Company designs and manufactures convertible top systems through its Dura Convertible Systems subsidiary ("Dura"). In October 1993, Dura began shipping its "Top-in-a-Box" system, in which it designs and manufactures all aspects of a convertible top, including the framework, trim set, backlight and power actuating system. Net sales of convertible top systems in 1997, 1996, and 1995 were $86.6 million, $100.2 million and $58.2 million, respectively. PLASTIC-BASED INTERIOR SYSTEMS. In January 1996, the Company acquired C&A Plastics, a manufacturer of automotive door panels, headrests, floor console systems and instrument panel components. The acquisition of C&A Plastics added a broad range of molded plastic components to the Company's textile-based automotive interior trim products. Net sales of plastic interior trim components in 1997 and 1996 were $294.3 million and $176.4 million, respectively. COMPETITION The automotive supply business is highly competitive. The Company has competitors in respect of each of its automotive products, some of which may have substantially greater financial and other resources than the Company. The Company's competitors in molded plastic components include subsidiaries of certain U.S. automotive and light vehicle manufacturers. The Company principally competes for new business at the design stage of new models and upon the redesign of existing models. The Company is vulnerable to a decrease in demand for the models that generate the most sales for the Company, a failure to obtain purchase orders for new or redesigned models and pricing pressure from the major automotive companies. FACILITIES At December 27, 1997, the Company had 58 manufacturing, warehouse and other facilities located in the U.S., Canada, Mexico, the United Kingdom, Spain, Austria, Germany, Sweden, Belgium, France and Japan aggregating approximately 10.0 million square feet. The majority of these facilities are located in North Carolina, South Carolina, Ohio and Michigan and in Ontario and Quebec, Canada. Approximately 90% of the total square footage of these facilities is owned and the remainder is leased. Many facilities are strategically located to provide just-in-time ("JIT") inventory delivery to the Company's customers. Capacity at any plant depends, among other things, on the product being produced, the processes and equipment used and tooling. This varies periodically, depending on demand and shifts in production between plants. The Company currently estimates that its plants generally operate at between 50% and 100% of capacity. The increasing demand for accessory floormats posed capacity issues during 1997. However, the addition of capacity in Tennessee in early 1998 is beginning to alleviate the situation. Except for the foregoing constraints, which the Company believes are short-term, the Company's capacity utilization is generally in line with its past experience in similar economic situations, and the Company believes that its facilities are sufficient to meet existing needs. FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES The Company's revenues, operating profit and identifiable assets for the last three fiscal years attributable to the Company's geographic areas and export sales from the United States to foreign countries are disclosed in Note 21 to the Consolidated Financial Statements. 3 RAW MATERIALS Raw materials and other supplies used in the Company's continuing operations are normally available from a variety of competing suppliers. With respect to most materials, the loss of a single or even a few suppliers would not have a material adverse effect on the Company. For a discussion of raw material price trends, see "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Liquidity and Capital Resources". ENVIRONMENTAL MATTERS See "ITEM 3. LEGAL PROCEEDINGS - Environmental Matters" and "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Environmental Matters". EMPLOYEES As of December 27, 1997, the Company's continuing operations employed approximately 15,100 persons on a full-time or full-time equivalent basis. Approximately 4,600 of such employees are represented by labor unions. Management believes that the Company's relations with its employees and with the unions that represent certain of them are generally good. YEAR 2000 ISSUES For a discussion of the impact of Year 2000 compliance issues, see "ITEM 7. MANAGEMENT'S DISCUSSION AND ANLYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Impact of Year 2000 Compliance." ITEM 2. PROPERTIES For information concerning the principal physical properties of the Company and its various operating divisions, see "ITEM 1. BUSINESS". ITEM 3. LEGAL PROCEEDINGS Except as described below, the Company and its subsidiaries are not a party to any material pending legal proceedings, other than ordinary routine litigation incidental to their businesses. ENVIRONMENTAL MATTERS The Company is legally or contractually responsible or alleged to be responsible for the investigation and remediation of contamination, or has received notices that it is a potentially responsible party (a "PRP"), at various other sites. These sites include, among others, the following: a site formerly operated by Stamina Mills, Inc., a former subsidiary of a former indirect subsidiary of the Company, in North Smithfield, Rhode Island; a site adjacent to a facility formerly operated by Wickes Manufacturing's former Bohn Heat Transfer division located at Beardstown, Illinois; a site formerly owned and operated by Wickes Manufacturing's alleged former Daybrook, Ottawa division located at Bowling Green, Ohio; a site owned and formerly operated by a Company subsidiary located at Elmira, California; the Reliable Equipment Superfund Site located at Grand Rapids, Michigan; the Butterworth Landfill Superfund Site located at Grand Rapids, Michigan; a site owned and formerly operated by Wickes Manufacturing's former Mechanical Components division located at Mancelona, Michigan; the former Albert Van Luit plant site owned by a Company subsidiary located at North Hollywood, California; the Stringfellow Superfund Site located at Riverside County, California; and certain sites associated with the former Wickes Engineering business. In addition to the environmental sites and proceedings listed above, the Company is and has been a party or PRP at other sites and involved in other proceedings from time to time. The majority of environmental site costs have been incurred in connection with the North Smithfield, Rhode Island; Elmira, California; and North Hollywood, California sites. In estimating the total future cost of investigation and remediation, the Company has considered, among other things, the Company's prior experience in remediating contaminated sites, remediation efforts by other parties, data released by the United States Environmental Protection Agency, the professional judgment of the Company's environmental experts, outside environmental specialists and other experts, and the likelihood that other parties which have been named as PRPs will have the financial resources to fulfill their obligations at sites where they and the Company may be jointly and severally liable. Under the theory of joint and several liability, the Company could be liable 4 for the full costs of investigation and remediation even if additional parties are found to be responsible under the applicable laws. It is difficult to estimate the total cost of investigation and remediation due to various factors including incomplete information regarding particular sites and other PRPs, uncertainty regarding the extent of environmental problems and the Company's share, if any, of liability for such problems, the selection of alternative compliance approaches, the complexity of environmental laws and regulations and changes in cleanup standards and techniques. When it has been possible to provide reasonable estimates of the Company's liability with respect to environmental sites, provisions have been made in accordance with generally accepted accounting principles. The Company records its best estimate when it believes it is probable that an environmental liability has been incurred and the amount of loss can be reasonably estimated. The Company also considers estimates of certain reasonably possible environmental liabilities in determining the aggregate amount of environmental reserves. As of December 27, 1997, the Company has established reserves of approximately $46.5 million for the estimated future costs related to all its known environmental sites. In the opinion of management, based on the facts presently known to it, the environmental costs and contingencies will not have a material adverse effect on the Company's consolidated financial condition or future results of operations. However, there can be no assurance that the Company has identified or properly assessed all potential environmental liability arising from the activities or properties of the Company, its present and former subsidiaries and their corporate predecessors. The Company is seeking insurance coverage for a portion of the defense costs and liability it has incurred and may incur in connection with the environmental proceedings described above. Coverage issues have not been resolved. While the Company has received some payments from certain insurance carriers, there can be no assurance that additional payments will be received. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. EXECUTIVE OFFICERS OF THE REGISTRANT (Pursuant to Instruction G(3) of the General Instructions to Form 10-K, the following information is included herein as an unnumbered item in lieu of being included in the Company's definitive Proxy Statement). The following is a list of the names and ages (as of March 25, 1998) of all the executive officers of the Company and a description of all positions and offices with the Company held by each such person and each such person's principal occupations and employment during the past five years. All executive officers hold office at the pleasure of the Company's Board of Directors.
NAME AGE POSITION ---- --- -------- Thomas E. Hannah 59 Chief Executive Officer Dennis E. Hiller 43 President of Automotive Carpet and Acoustics Group John D. Moose 61 President of Automotive Fabrics Division Elizabeth R. Philipp 41 Executive Vice President, General Counsel and Secretary J. Michael Stepp 53 Executive Vice President and Chief Financial Officer
THOMAS E. HANNAH has been a director of the Company and Chief Executive Officer of the Company since July 1994. Mr. Hannah was President and Chief Executive Officer of Collins & Aikman Textile and Wallcoverings Group, a division of a wholly owned subsidiary of the Company, from November 1991 until July 1994 and prior to that date was President and Chief Executive Officer of the Collins & Aikman Textile Group. Mr. Hannah was named an executive officer of the Company for purposes hereof in April 1993. DENNIS E. HILLER has been President of the Automotive Carpet and Acoustics Group since December 1996 and was President of the Automotive Carpet division from November 1994 to December 1996. Mr. Hiller was President of The Akro Corporation, an indirect subsidiary of the Company, from 1992 until November 1994 and Manager, Fabricated Products for the Company prior to that. Mr. Hiller was named an executive officer of the Company for purposes hereof in April 1996. JOHN D. MOOSE has been President of the Automotive Fabrics division since October 1994 and was President of the North American Auto Group from June 1989 until October 1994. Mr. Moose was named an executive officer of the Company for purposes hereof in April 1994. Mr. Moose joined a wholly owned subsidiary of the Company in 1960. 5 ELIZABETH R. PHILIPP has been Executive Vice President, General Counsel and Secretary of the Company since April 1994. Ms. Philipp was Vice President, General Counsel and Secretary of the Company from April 1993 to April 1994 and Vice President and General Counsel from September 1990 to April 1993. J. MICHAEL STEPP has been Executive Vice President and Chief Financial Officer since April 1995. Mr. Stepp was Executive Vice President, Chief Financial Officer and a Director of Purolator Products Company from December 1992 to January 1995. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Stock has been traded on the New York Stock Exchange under the symbol "CKC" since July 7, 1994. At March 23, 1998, there were 145 holders of record. The following table lists the high and low sales prices for the Common Stock for the full quarterly periods during the two most recent fiscal years.
FISCAL 1997 FISCAL 1996 -------------------- ------------------ HIGH LOW HIGH LOW ---- --- ---- --- First Quarter 10-1/2 6 8-1/4 6-1/8 Second Quarter 12-1/8 8-5/8 7-1/8 5-1/2 Third Quarter 11-11/16 10 7 5-7/8 Fourth Quarter 11-3/16 7-15/16 6-5/8 5-3/4
No dividend or similar distribution with respect to the Common Stock has been paid by the Company since its incorporation in 1988. Any payment of future dividends and the amounts thereof will be dependent upon the Company's earnings, financial requirements and other factors deemed relevant by the Company's Board of Directors. Certain restrictive covenants contained in the agreements governing the Company's credit facilities and subordinated notes limit the Company's ability to make dividend and other payments. See "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Liquidity and Capital Resources" and Note 11 to the Consolidated Financial Statements. 6 ITEM 6. SELECTED FINANCIAL DATA (in thousands, except per share data)
FISCAL YEAR ENDED ------------------------------------------------------------------------------------ DECEMBER 27, DECEMBER 28, JANUARY 27, JANUARY 28, JANUARY 29, 1997 1996 (1) 1996 1995 1994 ---- -------- ---- ---- ---- STATEMENT OF OPERATIONS DATA: Net sales................................. $ 1,629,332 $ 1,053,821 $ 902,017 $ 906,997 $ 689,286 Gross margin.............................. 232,211 188,475 161,925 172,487 120,250 Selling, general and administrative expenses............................... 118,432 82,699 65,996 68,304 71,397 Management equity plan expense............ - - - - 26,736 Goodwill amortization..................... 6,669 3,872 270 - 1,657 Impairment of long-lived assets(2)........ 22,600 - - - 77,559 Operating income (loss)................... 84,510 101,904 95,659 104,183 (57,099) Interest expense, net(3).................. 77,581 39,850 22,150 44,440 70,449 Loss on sale of receivables(4)............ 4,700 4,533 6,246 6,124 - Income (loss) from continuing operations before income taxes......... 2,907 57,408 67,263 51,361 (132,081) Income tax expense (benefit).............. 12,998 24,442 (139,959) 10,031 9,580 Income (loss) from continuing operations............................. (10,091) 32,966 207,222 41,330 (141,661) Income (loss) from discontinued operations, including disposals, net of income taxes........................... 166,047 14,468 (781) 34,416 (136,003) Income (loss) before extraordinary items.................................. 155,956 47,434 206,441 75,746 (277,664) Net income (loss)......................... 155,235 40,824 206,441 (30,782) (277,664) Income (loss) from continuing operations:(5) Per basic share........................ (0.15) 0.48 2.96 (1.06) (5.87) Per diluted share...................... (0.15) 0.47 2.91 (1.06) (5.87) BALANCE SHEET DATA (AT PERIOD END): Total assets.............................. $ 1,302,392 $ 1,530,289 $ 991,361 $ 578,900 $ 819,819 Long-term debt, including current portion................................ 782,677 1,175,594 759,966 557,039 914,938 Redeemable preferred stock................ - - - - 122,368 Common stockholders' deficit.............. (66,850) (194,578) (227,852) (412,622) (702,220) OTHER DATA (FROM CONTINUING OPERATIONS): Capital expenditures...................... $ 56,521 $ 35,000 $ 53,156 $ 56,193 $ 29,266 Depreciation and leasehold amortization........................... 42,712 24,457 24,146 24,648 23,259 EBITDA (6)................................ 165,950 134,299 124,086 128,831 72,559
(1) 1996 was a 48-week year. (2) In 1997, C&A Plastics wrote down fixed assets by $5.1 million and reduced goodwill by $17.5 million to reflect impairments in the carrying values of certain assets and goodwill associated with two of its manufacturing facilities. See Notes to Consolidated Financial Statements. 7 (3) Excludes amounts related to discontinued operations as follows:
DECEMBER 27, DECEMBER 28, JANUARY 27, JANUARY 28, JANUARY 29, 1997 1996 1996 1995 1994 --------- --------- --------- --------- ---------- The Mastercraft Group, Floorcoverings, Airbag and Wallcoverings................ $ 12,539 $ 26,734 $ 26,454 $ 31,243 $ 40,842 Operations discontinued prior to fiscal 1995.................................... - - - - 18,871 --------- --------- --------- --------- ---------- $ 12,539 $ 26,734 $ 26,454 $ 31,243 $ 59,713 ========= ========= ========= ========= ==========
(4) Excludes amounts allocated to discontinued operations totaling $0.6 million, $2.2 million, $2.4 million and $1.5 million in 1997, 1996, 1995 and 1994, respectively. (5) The earnings per share amounts have been restated to comply with Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS No. 128). For further discussion of earnings per share and the impact of SFAS 128, see the Notes to Consolidated Financial Statements. (6) EBITDA represents earnings before deductions for net interest expense, loss on sale of receivables, income taxes, depreciation, amortization, other income and expense, and the non-cash portion of non-recurring charges. EBITDA does not represent and should not be considered as an alternative to net income or cash flow from operations as determined by generally accepted accounting principles. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RECENT DEVELOPMENTS ACQUISITIONS AND JOINT VENTURES On August 31, 1997, the Company purchased certain automotive acoustic assets and assumed certain liabilities in Germany from Perstorp for approximately $13.6 million. On October 29, 1997, the Company entered into a joint venture agreement with Kigass to manufacture plastic trim products in the United Kingdom. The Company and Kigass each owned 50% of the joint venture. On February 2, 1998, the Company acquired Kigass for approximately $24.2 million, subject to post-closing adjustment. On December 4, 1997, the Company entered into a joint venture with Courtaulds, a publicly-owned, international textiles and clothing manufacturer located in the United Kingdom, to manufacture automotive interior fabrics for European customers. The Company and Courtaulds each have a 50% ownership in the joint venture. On December 16, 1997, the Company acquired Perstorp's remaining interest in the Collins & Aikman/Perstorp automotive acoustics joint venture with operations in Sweden, Belgium and France. The Company received the ownership interest in settlement of certain disputed claims by the Company against Perstorp arising from the Company's December 1996 and August 1997 purchases from Perstorp. The resulting goodwill is being amortized on a straight line basis over 40 years. DISCONTINUED OPERATIONS On November 5, 1997, the Company announced that it entered into an agreement to sell Wallcoverings to a company sponsored by Blackstone Capital Partners III Merchant Banking Fund LP, an affiliate of Blackstone Partners. The purchaser entered into a separate agreement to purchase the wallcovering and vinyl units of Borden Inc. (the "Borden Business") and stated that it intended to combine Wallcoverings with the Borden Business. The sale closed on March 13, 1998. The purchase price for Wallcoverings included $71.2 million in cash, subject to adjustment, and an option to acquire 6.7% of the common stock of the purchaser (which includes Wallcoverings and the Borden Business) outstanding on the date of closing. In connection with the transaction, the Company recorded a loss of approximately $21.1 million, net of income taxes, in the third quarter of 1997 to adjust the recorded value to the expected proceeds. Accordingly, no gain or loss was recognized at the sale date. Wallcoverings has been a discontinued operation since April, 1996. 8 On July 24, 1997, JPS Automotive completed the sale of Airbag, its airbag and industrial fabric business, to Safety Components International, Inc. for a purchase price of approximately $56 million. No gain or loss was recorded on the sale since the sales price approximated the acquisition fair value of Airbag. Pursuant to the indenture governing the JPS Automotive Senior Notes, in connection with such sale, the Company caused JPS Automotive to make an offer to purchase (up to the amount of the net proceeds from the sale) the JPS Automotive Senior Notes. During October 1997, the Company caused JPS Automotive to use a portion of the proceeds remaining from the sale of Airbag to make a distribution of $35 million to C&A Products, as permitted under the restricted payment provisions of the JPS Automotive Senior Notes indenture. See "- Liquidity and Capital Resources". The Company used the proceeds of this distribution to reduce its long-term debt. On July 16, 1997, the Company completed its sale of the Mastercraft Group, a manufacturer of flat woven upholstery fabric, to Joan Fabrics Corporation, for a purchase price of approximately $310 million, subject to adjustment. A portion of the net proceeds was used to reduce the Company's long-term debt. The sale resulted in a net after-tax gain of $97.5 million. On February 6, 1997, the Company completed the sale of its Floorcoverings subsidiary for net proceeds of $195.6 million. The net proceeds were used to pay down debt incurred to finance the Company's automotive strategy. The sale resulted in a net after-tax gain of $85.3 million. The Company has accounted for the financial results and net assets of Wallcoverings, Floorcoverings, the Mastercraft Group and Airbag as discontinued operations. Accordingly, previously reported financial results for all periods have been restated to reflect these businesses as discontinued operations. See Note 15 to the Consolidated Financial Statements for information regarding discontinued operations. $400 MILLION SUBORDINATED NOTE OFFERING On June 10, 1996, the Company's wholly-owned subsidiary, C&A Products, issued $400 million principal amount of 11-1/2% Senior Subordinated Notes due 2006 (the "Subordinated Notes"), which are guaranteed by the Company. The Subordinated Notes were sold at a price equal to 100% of their principal amount. The Company used approximately $356.8 million of the total net proceeds of $387.0 million to repay $348.2 million principal amount of the outstanding bank borrowings plus accrued interest on such borrowings and related fees and expenses, and used the remainder for general corporate purposes. GENERAL The Company is a global supplier of automotive interior systems, including textile and plastic trim, acoustics and convertible top systems. The Company's net sales in fiscal 1997 were $1,629.3 million compared to $1,053.8 million in fiscal 1996. During 1996, the Company changed it fiscal year end to the last Saturday in December. Fiscal 1996 was a 48-week period which ended on December 28, 1996. All prior years refer to the fiscal year of the Company which ended on the last Saturday of January of the following year. Fiscal 1997 and 1995 were 52-week periods. Capitalized terms that are used in this discussion and not defined herein have the meanings assigned to such terms in the Notes to Consolidated Financial Statements. The automotive supply industry in which the Company competes is cyclical and is influenced by the level of North American vehicle production. Management believes the long term trends in the design and manufacture of automotive products include the increased use of plastic components, the increased sourcing of interior systems and U.S. automotive manufacturers' movement to fewer suppliers and to suppliers with engineering and design capabilities. The Company anticipates the reduction in the supply chain will result in integration whereby the complete interior of an automobile will be co-designed and developed with fewer suppliers who will manufacture and deliver required components. The Company anticipates these capabilities will be essential to its long term stategic positioning as a key supplier within the automotive industry and with its customers. 9 RESULTS OF OPERATIONS
FISCAL YEAR ENDED -------------------------------------------------------- DECEMBER 27, DECEMBER 28, JANUARY 27, 1997 1996 1996 --------------- --------------- --------------- (52 WEEKS) (48 WEEKS) (52 WEEKS) (IN MILLIONS) Net sales.......................................................... $ 1,629.3 $ 1,053.8 $ 902.0 Cost of goods sold................................................. 1,397.1 865.3 740.1 Gross margin....................................................... 232.2 188.5 161.9 Selling, general and administrative expenses....................... 118.4 82.7 66.0 Goodwill amortization.............................................. 6.7 3.9 0.3 Impairment of long-lived assets.................................... 22.6 - - Operating income................................................... 84.5 101.9 95.7 Gross margin percentages........................................... 14.3% 17.9% 18.0% Operating margin percentages....................................... 5.2% 9.7% 10.6% EBITDA (1)......................................................... $ 166.0 $ 134.3 $ 124.1
(1) EBITDA represents earnings before deductions for net interest expense, loss on sale of receivables, income taxes, depreciation, amortization, other income and expense and the non-cash portion of non-recurring charges. EBITDA does not represent and should not be considered as an alternative to net income or cash flow from operations as determined by generally accepted accounting principles. 1997 COMPARED TO 1996 As a result of the Company's decision to change its year-end, fiscal 1996 was a 48-week period as compared to fiscal 1997, which was a 52-week period. Therefore, sales in all product lines and the associated costs and expenses were impacted by reporting a longer period in 1997. Additional significant increases in sales and associated costs and expenses resulted from the Company's 1996 acquisitions. A discussion of the results of operations for the Company follows: NET SALES: The Company's net sales increased 54.6% to $1,629.3 million in 1997, up $575.5 million from 1996. The majority of this increase resulted from the December 1996 acquisitions of JPS Automotive and Perstorp Components, which together generated revenues of $422.5 million in fiscal 1997. Sales to General Motors and Chrysler during 1997 were negatively impacted by United Auto Workers' strikes in the second quarter. The decrease in net sales attributable to these strikes is estimated at $17.4 million. Sales to General Motors during 1996 were negatively impacted by the United Auto Workers' strike in March 1996 and the Canadian Auto Workers' strike in October 1996. The decrease in net sales attributed to these strikes is estimated at $33.5 million. Sales in the Company's five principal product groups are discussed below. CARPET AND ACOUSTICS: Molded carpet sales increased 49.6% to $350.2 million in 1997, up $116.1 million from 1996 sales, primarily as a result of the JPS Automotive acquisition and increased sales to the European automotive market. Overall, average sales prices declined due to the acquisition of JPS Automotive and the impact of currency rates on sales in Canada. Sales were also positively impacted by increased sales to the Dodge Dakota and Durango and Toyota T100. These increases were partially offset by decreased sales to the Buick Century/Oldsmobile Ciera, Chrysler Minivan and Ford Mustang. Luggage compartment trim sales increased 84.0% to $94.6 million, up $43.2 million from 1996 primarily due to the acquisition of JPS Automotive. Overall, average sales prices increased due to the acquisition of JPS Automotive. Sales increases also resulted from higher Toyota Camry volumes and the full year impact of the Buick Park Avenue and Subaru Legacy Wagon both of which started production in mid-1996. Sales also increased to the Dodge Dakota and Durango. Acoustical products, which was acquired in December 1996 and August 1997, contributed $188.8 million in net sales to the North American and European automotive markets during 1997. AUTOMOTIVE FABRICS: Automotive bodycloth sales increased 16.3% to $283.7 million in 1997, up $39.8 million from 1996. Average sales prices were relatively unchanged from 1996. An increase in sales resulting from the acquisition of JPS Automotive was offset by reduced sales for the Chrysler LH, Minivans and the Ford Contour/Mercury Mystique and Ford Explorer. 10 ACCESSORY FLOOR MATS: Accessory floor mat sales increased 60.8% to $134.6 million, up $50.9 million over 1996. The overall increase is attributable to increased sales to General Motors' minivans, the Oldsmobile Cutlass, Buick Regal, Pontiac Grand Prix, Toyota Camry, Nissan Maxima and Sentra and new export programs, offset by decreased sales to the Honda Accord and Civic and Mitsubishi Galant. CONVERTIBLE TOP SYSTEMS: Convertible top systems sales decreased 13.5% to $86.6 million, down $13.6 million from 1996, principally due to decreased production of the Chrysler Sebring and the Ford Mustang convertibles. PLASTIC-BASED INTERIOR TRIM SYSTEMS: Plastic interior trim component sales increased 66.9% to $294.3 million, up $117.9 million from 1996. This increase in sales relates primarily to the launch during the latter part of 1996 of new programs for which C&A Plastics is the supplier as well as the negative impact of a General Motors strike on C&A Plastics' sales for the first quarter of 1996. New programs increasing 1997 sales included the Cadillac Concours/Deville, Buick Century and Regal, Chevrolet Malibu and the Ford Econoline. These increases were partially offset by decreases to the Chevrolet Corsica/Beretta. OTHER: In addition, the Company had $196.5 million and $158.6 million in sales of non-automotive products in fiscal 1997 and 1996, respectively, which are spread among four of the Company's five principal product groups discussed above. Approximately 35% of the Company's sales were attributable to products utilized in vehicles built outside of North America. The above factors resulted in an increase in the Company's average revenue per North American-produced vehicle to approximately $89 for 1997 up from approximately $68 for 1996. The Company's content per build in Europe was approximately $17 in 1997 including the operations in Sweden, Belgium and France which were jointly owned in 1997. GROSS MARGIN: For 1997, gross margin was 14.3%, down from 17.9% in 1996. During the third quarter of 1997, the Company incurred charges of approximately $57.9 million principally related to C&A Plastics. These charges, which primarily related to manufacturing inefficiencies experienced by C&A Plastics related to product launches and record volume for its products, included asset impairments, reductions in goodwill, provisions for certain programs operating at a loss, inventory adjustments, certain previously deferred costs and other provisions. Of the $57.9 million of charges, $34.0 million is included in cost of goods sold, $22.6 million is discussed below as impairment of long lived assets and $1.3 million relates to selling costs. Adjusted for certain of the charges taken by C&A Plastics, gross margin was 15.2%. The decrease in gross margin is attributable primarily to lower margins in products sold by JPS Automotive and Perstorp Components, the decrease in sales of higher margin convertible top systems and manufacturing inefficiencies and product launch costs at C&A Plastics and Akro. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and administrative expenses increased 44.5% to $125.1 million, up $38.5 million from 1996. This increase is primarily due to the acquisitions of JPS Automotive and Perstorp Components in December 1996. As a percentage of sales, selling, general and administrative expenses decreased to 7.7% in 1997 from 8.2% in 1996. IMPAIRMENT OF LONG LIVED ASSETS: During the third quarter of 1997, C&A Plastics wrote down fixed assets by $5.1 million to realizable value and reduced its goodwill by $17.5 million, as a result of an evaluation of the recoverability of the long lived assets of C&A Plastics that was conducted in connection with the determination of the charges discussed above. INTEREST EXPENSE: Interest expense allocated to continuing operations, net of interest income of $5.7 million in 1997 and $4.0 million in 1996, increased $37.7 million to $77.6 million in 1997 from $39.9 million in 1996. The overall increase in interest expense was due to a higher amount of overall outstanding indebtedness, primarily related to the JPS Automotive and Perstorp Components acquisitions, as well as higher interest rates associated with the $400 million principal amount of the Subordinated Notes issued by C&A Products in June 1996. The Subordinated Notes are guaranteed by the Company. Total net interest expense, including amounts allocated to discontinued operations, was $90.1 million in 1997 and $66.6 million in 1996. LOSS ON SALE OF RECEIVABLES: The Company sells on a continuous basis, though its Carcorp subsidiary, interests in a pool of accounts receivable. In connection with the receivable sales, a loss of $4.7 million, net of amounts allocated to discontinued operations, was incurred in 1997 compared to a loss of $4.5 million, net of amounts allocated to discontinued operations, in 1996. Total loss on sale of receivables, including amounts allocated to discontinued operations, was $5.3 million in 1997 and $6.7 million in 1996. 11 OTHER (INCOME) EXPENSE: In 1997, the Company recognized a gain of $1.7 million related to the sale of the Borg Textiles Division of its principal Canadian subsidiary, and income of $0.9 million related to its investment in the Collins & Aikman/Perstorp joint venture. These gains were offset by a $1.9 million loss on foreign currency transactions. The Company recognized a $0.1 million loss on foreign currency transactions in 1996. The loss in 1997 is primarily due to fluctuations in the Canadian dollar. INCOME TAXES: In 1997, the Company recognized a $13.0 million tax provision compared to a $24.4 million provision in 1996. The Company's effective tax rate in 1997 was 447%, compared to 42% in 1996. The higher tax rate in 1997 is primarily due to the inclusion in the income tax calculation of nondeductible goodwill including the $17.5 million of goodwill written off by C&A Plastics. DISCONTINUED OPERATIONS: The Company's income from discontinued operations was $4.3 million in 1997 compared to $14.5 million in 1996. The decrease results primarily from the sale of Floorcoverings in February 1997 and the sale of the Mastercraft Group in July 1997. The sale of Floorcoverings for approximately $195.6 million was completed in February 1997 and resulted in a gain of $85.3 million net of income taxes of $53.4 million. The sale of the Mastercraft Group was completed in July 1997 for approximately $310.0 million, resulting in a gain on the sale of discontinued operations of $97.5 million, net of taxes of $65.0 million. In connection with the agreement to sell Wallcoverings, the Company recorded a loss of $21.2 million, net of an income tax benefit of $33.0 million, during the third quarter of 1997 to adjust the recorded value to the expected proceeds. EXTRAORDINARY LOSS: In 1997, the Company recognized a loss of $0.7 million, net of income taxes of $0.4 million, in connection with the purchase by JPS Automotive of $19.4 million principal amount of JPS Automotive Senior Notes on the open market at prices in excess of carrying values. In 1996, the Company recognized a non-cash extraordinary charge of $6.6 million, net of income taxes of $4.7 million, related to the refinancing of its bank facilities. The refinancing was done in conjunction with the Company's offering of the Subordinated Notes. NET INCOME: The combined effect of the foregoing resulted in net income of $155.2 million in 1997 compared to net income of $40.8 million in 1996. 1996 COMPARED TO 1995 As a result of the Company's decision to change its year-end, fiscal 1996 was a 48-week period as compared to fiscal 1995 which was a 52-week period. Therefore, sales in all product lines and the associated costs and expenses were impacted by reporting a shorter period. A discussion of the results of operations for the Company follows: NET SALES: The Company's net sales increased 16.8% to $1,053.8 million in 1996, up $151.8 million over 1995. The majority of this increase resulted from the January 1996 acquisition of C&A Plastics, which had sales for 1996 of $176.3 million compared with $10.8 million in fiscal 1995. Increased sales in three of the Company's products (molded carpet, convertible top systems and accessory mats) were offset by a decrease in sales of automotive bodycloth. In addition, sales also increased as a result of the JPS Automotive and Perstorp Components acquisitions, which generated combined sales of $11.9 million from December 11, 1996 through year end. Sales in 1996 were also negatively impacted by the March 1996 and October 1996 strikes at General Motors discussed above. CARPET AND ACOUSTICS: Molded carpet sales increased 1.0% to $234.1 million, up $2.3 million over 1995. The increase in sales was due to a 1.5% increase in average selling price as well as increased sales in Europe as a result of the Company's expansion into that market. The increase in average selling price is partially attributable to a shift in automotive original equipment manufacturer ("OEM") production to higher content vehicles, such as the Chrysler Voyager. For the year, the overall increase in molded carpet sales was principally related to increased sales to the Chrysler Voyager and T300 Truck and the Chevrolet C/K Truck line. These increases were partially offset by decreased sales to the Ford Explorer, the Chevrolet Camaro and Lumina and the Pontiac Grand Prix. Luggage compartment trim sales decreased 1.9% to $51.4 million, from $52.4 million in 1995. This decrease in sales was primarily due to the shorter fiscal year partially offset by a 9.3% increase in average selling price. The increase in average selling price reflects the OEMs' continued move to one-piece luggage compartments. During the year, luggage compartment trim sales increased to the Honda Civic, Pontiac Grand Prix and Toyota Camry. These increases were offset by decreased sales to the Honda Accord and Ford Explorer. The acoustics operations acquired on December 11, 1996 contributed $5.6 million in sales. 12 AUTOMOTIVE FABRICS: Automotive bodycloth sales decreased 25.5% to $243.9 million in 1996, down $83.6 million from 1995. The decline in sales was due to a decrease in unit shipments on a comparable basis, which was partially mitigated by a 3.8% increase in average selling price due primarily to a shift in product mix. Automotive bodycloth sales were negatively impacted by an estimated $12.6 million as a result of the General Motors strikes. The overall decrease in automotive bodycloth for the year was principally related to decreased sales to the Ford Thunderbird, Mustang, Escort, and F-Series Truck and the Chevrolet Cavalier. These decreases were partially offset by increased sales to the Mercury Sable and the Chrysler Grand Cherokee and Breeze. ACCESSORY FLOOR MATS: Accessory floor mat sales increased 4.3% to $83.7 million, up $3.4 million over 1995. The increase in sales was primarily due to increased unit volume. For the year the overall increase in accessory mat sales was principally related to increased sales to the Subaru Legacy, the Chrysler Caravan/Voyager, the Toyota Camry and the Honda Civic and Accord. These increases were partially offset by decreased sales to the Chrysler Cirrus and Chevrolet Camaro. CONVERTIBLE TOP SYSTEMS: Convertible top systems sales increased 72.2% to $100.2 million, up $42.0 million from 1995. The increase in net sales resulted from the increased shipments of the Chrysler Sebring partially offset by reduced OEM production of the Ford Mustang convertible and the scheduled discontinuance of the Chrysler LeBaron convertible. PLASTIC-BASED INTERIOR TRIM SYSTEMS: C&A Plastics, which was acquired in January 1996, contributed $176.3 million in sales of plastic interior trim components during fiscal 1996 compared to $10.8 million in fiscal 1995. C&A Plastics' sales in 1996 were negatively impacted by the General Motors strikes in the amount of $9.4 million and delays in the launch of certain new programs. OTHER: In addition, the Company had $158.6 million and $141.0 million in sales of non-automotive products in fiscal 1996 and 1995, respectively, which are spread among four of the Company's five principal product groups discussed above. These factors resulted in an increase in the Company's average revenue per North American-produced vehicle to approximately $68 for 1996 from approximately $54 for 1995. GROSS MARGIN: For 1996, gross margin was 17.9% of sales, down from 18.0% in 1995. The decrease in gross margin was attributable primarily to the lower sales to General Motors and lower margins in plastic components partially offset by the increase in the higher margin convertible top systems sales. In addition, C&A Plastics reduced its gross profit by $3 million for a one-time special charge in December 1996 related to a disagreement with a customer over goods supplied. During 1995, the Company recorded a $2.4 million charge related to a plant closing and the write-off of certain assets in its molded carpet operations. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and administrative expenses of $82.7 million in 1996 were $16.8 million higher than in 1995. The increase resulted primarily from the acquisitions of C&A Plastics in January 1996 and Amco Convertible Fabrics in October 1995 and increased general and administrative costs due to expansion in Mexico and Europe. Selling, general and administrative expenses as a percentage of sales increased to 7.8% in 1996 from 7.3% in 1995. INTEREST EXPENSE: Interest expense, allocated to continuing operations, net of interest income of $4.0 million in 1996 and $1.6 million in 1995, increased to $39.9 million in 1996 from $22.2 million in 1995. In 1996, net interest expense, including amounts allocated to discontinued operations increased to $66.6 million from $48.5 million in 1995. The overall increase in interest expense was due to the higher amount of overall outstanding indebtedness primarily related to the $197 million credit facility that was entered into in connection with the acquisition of C&A Plastics in January 1996 (the "Term Loan B Facility") as well as the higher interest rates associated with the Subordinated Notes issued in June 1996. LOSS ON SALE OF RECEIVABLES: Beginning with the recapitalization in July 1994, the Company has sold on a continuous basis, through its Carcorp subsidiary, interests in a pool of accounts receivable. In connection with the receivables sales, a loss of $4.5 million, net of amounts allocated to discontinued operations, was incurred in 1996 compared to a loss of $6.2 million, net of amounts allocated to discontinued operations, in 1995. Total loss on sale of receivables, including amounts allocated to discontinued operations, decreased to $6.7 million in 1996 from $8.7 million in 1995. This decrease resulted from the shorter fiscal year in 1996 as well as an overall decrease in the outstanding interest sold under the variable portion of the accounts receivable facility during 1996. The decrease in the outstanding interest sold resulted primarily from the use of proceeds from the Subordinated Notes offering to satisfy a portion of the Company's liquidity needs. OTHER EXPENSE: In 1996, the Company recognized $.1 million in net foreign currency transaction losses related to obligations to be settled in currencies other than the functional currency of its foreign operations. 13 INCOME TAXES: In 1996, the Company recognized a $24.4 million tax provision compared with a $140.0 million benefit in 1995. The increase in the Company's tax expense and reported rate results from the Company's recognition of certain deferred tax assets in 1995. In 1995, the benefit principally resulted from a reduction of valuation allowances against the Company's Federal net operating loss carryforwards and other deferred tax assets, offset by $9.9 million in current foreign, state, franchise and Federal alternative minimum taxes. DISCONTINUED OPERATIONS: The Company's income from discontinued operations was $14.3 million in 1996 compared to a loss of $0.8 million in 1995. The increase relates primarily to Wallcoverings' results subsequent to April 29, 1996 being charged to the Company's existing discontinued operations reserves. Additionally, in 1995, Wallcoverings reported a $23.3 million loss which resulted from certain charges for the write-down of inventory, the consolidation of operations and the closing of facilities. Excluding the impact of Wallcoverings, income from discontinued operations declined due to the increase in reported tax rates which was partially offset by improved operating results for both the Mastercraft Group and Floorcoverings. EXTRAORDINARY LOSS: During 1996, the Company recognized a non-cash charge of $6.6 million, net of income taxes of $4.7 million, related to the refinancing of its bank credit facilities. The refinancing was done in conjunction with C&A Products' issuance of the Subordinated Notes. NET INCOME: The combined effect of the foregoing resulted in net income of $40.8 million in 1996 compared to net income of $206.4 million in 1995. LIQUIDITY AND CAPITAL RESOURCES The Company and its subsidiaries had cash and cash equivalents totaling $24.0 million and $14.3 million at December 27, 1997 and December 28, 1996, respectively. The Company had a total of $232.0 million of borrowing availability under its credit arrangements as of December 27, 1997. The total was comprised of $217.8 million under the Revolving Facility, approximately $11.2 million under bank demand lines of credit in Canada and Austria, and $3.0 million available under the Receivables Facility. As part of a recapitalization in 1994, the Company entered into credit facilities consisting of (i) a Term Loan Facility, (ii) a Revolving Facility (together with the Term Loan Facility, the "Credit Agreement Facilities") and (iii) a bridge receivables facility, which was terminated and replaced with the Receivables Facility described below. On December 22, 1995, the Company and C&A Products entered into a $197 million credit facility (the "Term Loan B Facility") to finance the January 1996 purchase of C&A Plastics. On June 3, 1996, the Company and C&A Products entered into an amendment and restatement (the "Amendment") of the Credit Agreement Facilities and the Term Loan B Facility (collectively, the "Bank Credit Facilities"). The Amendment was effected in connection with the sale of the Subordinated Notes described below and the use of proceeds from such sale to repay various outstanding loans under the Credit Agreement Facilities. As a result of the Amendment and the repayment of a portion of the Credit Agreement Facilities with a portion of the proceeds from the Subordinated Notes, the Bank Credit Facilities consisted of (i) the Term Loan Facility, in an aggregate principal amount of $195 million (including a $45 million facility in Canada), payable in installments until final maturity on July 13, 2002, (ii) the Term Loan B Facility, in the principal amount of $195.8 million, payable in installments until final maturity on December 31, 2002, and (iii) the Revolving Facility, having an aggregate principal amount of up to $250 million and terminating on July 13, 2001. On February 6, 1997, the Company sold its Floorcoverings subsidiary for $195.6 million. The net proceeds were used to pay down the outstanding portion of the Revolving Facility and a portion of the Receivables Facility. The Company completed the sale of the Mastercraft Group in July 1997 for a purchase price of approximately $310 million, subject to adjustment. The Company utilized a portion of the net proceeds from the sale to further reduce long-term debt. In addition, effective July 16, 1997, receivables generated by members of the Mastercraft Group ceased to be sold in connection with the Receivables Facility, as discussed below. Also, the Company completed the sale of Airbag in July 1997 for a purchase price of approximately $56 million. Pursuant to the indenture governing the JPS Automotive Senior Notes, in connection with such sale, the Company caused JPS Automotive to make an offer to purchase (up to the amount of the net proceeds from the sale) the JPS Automotive Senior Notes at 100% of their principal amount. Pursuant to such offer (which expired September 16, 1997), JPS Automotive repurchased and retired $23 thousand principal amount of JPS Automotive Senior Notes. In December 1997, the Company repaid $88.5 million under the Term Loan Facility (including $27 million under the Canadian facility) and $13.5 million under the Term Loan B Facility. At December 27, 1997, the Company had $10.0 million outstanding on the Revolving Credit Facility, $17.6 million on the Term Loan Facility and $167.4 million on the Term Loan B Facility. 14 The Bank Credit Facilities, which are guaranteed by the Company and its U.S. subsidiaries (subject to certain exceptions), contain restrictive covenants including maintenance of EBITDA (i.e. earnings before interest, taxes, depreciation, amortization and other non-cash charges) and interest coverage ratios, leverage and liquidity tests and various other restrictive covenants which are customary for such facilities. Certain of these tests and covenants were waived for the second, third and fourth quarters of 1997 and the first quarter of 1998 in connection with the charges incurred at C&A Plastics and the sales of the Mastercraft Group and Floorcoverings. The Company requires a modification of these tests and covenants for the remainder of 1998 and beyond due to these sales and its increasing international presence and expects to renegotiate them in connection with a broader modification of its existing credit facilities to conform to the Company's current corporate and financing structure. The Company expects this modification to occur in the first half of 1998. In addition, C&A Products is generally prohibited from paying dividends or making other distributions to the Company except to the extent necessary to allow the Company to (w) pay taxes and ordinary expenses, (x) make permitted repurchases of shares or options, (y) make permitted investments in finance, foreign or acquired subsidiaries and (z) pay permitted dividends. In addition, the Company is permitted to pay dividends and repurchase shares of the Company in any fiscal year in an aggregate amount equal to the greater of (i) $12 million (which amount was increased to $24 million for fiscal 1997) and (ii) if certain financial ratios are satisfied, 25% of the Company's consolidated net income for the previous fiscal year, and is permitted to pay additional dividends in amounts representing certain net proceeds from the sale of Wallcoverings. The Company's obligations under the Bank Credit Facilities are secured by a pledge of the stock of C&A Products and its significant subsidiaries. On June 10, 1996, C&A Products issued $400 million principal amount of Subordinated Notes, which mature in 2006. The Subordinated Notes are guaranteed by the Company. The indenture governing the Subordinated Notes generally prohibits the Company, C&A Products and any Restricted Subsidiary (as defined) from making certain payments and investments (generally, dividends and distributions on their capital stock; repurchases or redemptions of their capital stock; repayment prior to maturity of debt subordinated to the Subordinated Notes; and investments (other than permitted investments)) ("Restricted Payments") if (i) there is a default under the Subordinated Notes or (ii) after giving pro forma effect to the Restricted Payment, C&A Products could not incur at least $1.00 of additional indebtedness under the indenture's general test for the incurrence of indebtedness, which is a specified ratio (currently 2.0 to 1.0 and increasing to 2.25 to 1.0 after June 30, 1998) of cash flow to interest expense or (iii) the aggregate of all such Restricted Payments from the issue date exceeds a specified threshold (based, generally, on 50% of cumulative consolidated net income since the quarter in which the issue date occurred plus 100% of the net proceeds of capital contributions to C&A Products from stock issuances by the Company). These prohibitions are subject to a number of significant exceptions, including dividends to stockholders of the Company or stock repurchases not exceeding $10 million in any fiscal year or $20 million in the aggregate until the maturity of the Subordinated Notes, dividends to stockholders of the Company of the net available proceeds from the sale or other disposition of Wallcoverings and dividends to the Company to permit it to pay its operating and administrative expenses. The Subordinated Notes indenture also contains other restrictive covenants (including, among others, limitations on the incurrence of indebtedness, asset dispositions and transactions with affiliates) which are customary for such securities. These covenants are also subject to a number of significant exceptions. In connection with the closing of the acquisition of JPS Automotive (the "JPS Automotive Acquisition"), in early December 1996 the Company amended the Bank Credit Facilities primarily to allow for the existence of the JPS Automotive Senior Notes and to allow the Company to use the proceeds from the sale of Floorcoverings to pay down the Revolving Facility and a portion of the Receivables Facility. As part of the JPS Automotive Acquisition, the Company paid off approximately $15 million of outstanding bank indebtedness of JPS Automotive. The cash portion of the purchase price of the JPS Automotive Acquisition, the purchase price for the acquisition of a minority interest in a JPS Automotive subsidiary and the bank indebtedness at JPS Automotive that was repaid at the time of closing were funded through the Company's Revolving Facility. In addition, as a result of the JPS Automotive Acquisition, holders of the JPS Automotive Senior Notes had the right to put their notes to JPS Automotive at a price of 101% of their principal amount plus accrued interest. Approximately $3.9 million principal amount of JPS Automotive Senior Notes were so put to JPS Automotive and then purchased by JPS Automotive in the first quarter of 1997. During the second quarter of 1997, an additional $19.4 million principal amount of JPS Automotive Notes were purchased by JPS Automotive on the open market and retired. No open market purchases were made during the third and fourth quarters of 1997, although $23 thousand principal amount of JPS Automotive Senior Notes were repurchased and retired pursuant to an offer to purchase due to the sale of Airbag. After giving effect to the above, JPS Automotive had as of December 27, 1997 approximately $91.8 million of indebtedness outstanding (including a premium of $3.2 million) related to the JPS Automotive Senior Notes. The Company is operating JPS Automotive as a restricted subsidiary under the Bank Credit Facilities and the indenture governing the Subordinated Notes. The indenture governing the JPS Automotive Senior Notes generally prohibits JPS Automotive from making certain restricted payments and investments (generally, dividends and distributions on its equity interests; purchases or redemptions of its equity interests; purchases of any indebtedness subordinated to the JPS Automotive Senior Notes; 15 and investments other than as permitted) ("JPS Automotive Restricted Payments") unless (i) there is no default under the JPS Automotive Senior Notes indenture; (ii) after giving pro forma effect to the JPS Automotive Restricted Payment, JPS Automotive would be permitted to incur at least $1.00 of additional indebtedness under the indenture's general test for the incurrence of indebtedness which is a specified ratio (currently 2.5 to 1.0) of cashflow to interest expense, and (iii) the aggregate of all JPS Automotive Restricted Payments from the issue date is less than a specified threshold (based, generally, on 50% of JPS Automotive's cumulative consolidated net income since the issue date plus 100% of the aggregate net cash proceeds of the issuance by JPS Automotive of certain equity and convertible debt securities and cash contributions to JPS Automotive) (the "JPS Automotive Restricted Payments Tests"). These conditions were satisfied immediately following the closing of the JPS Automotive Acquisition and as of December 27, 1997. The JPS Automotive Restricted Payments Tests are subject to a number of significant exceptions. The indenture governing the JPS Automotive Senior Notes also contains other restrictive covenants (including, among others, limitations on the incurrence of indebtedness and issuance of preferred stock, asset dispositions and transactions with affiliates including the Company and C&A Products) which are customary for such securities. These covenants are also subject to a number of significant exceptions. Additionally, in December 1996, in connection with the JPS Automotive Acquisition, the Company entered into a $200 million delayed draw term loan (the "Delayed Draw Term Loan"). The Delayed Draw Term Loan is a 5.25 year term loan which was entered into to finance or refinance the purchase of any JPS Automotive Senior Notes put by the holders to JPS Automotive as a result of the change in control resulting from the JPS Automotive Acquisition or otherwise acquired. The Company was entitled to draw upon the Delayed Draw Term Loan until December 11, 1997. Prior to the JPS Automotive Acquisition, the Company had purchased in the open market $68.0 million principal amount of JPS Automotive Senior Notes, which were subsequently retired by JPS Automotive. As of December 27, 1997, $23.8 million had been drawn under the Delayed Draw Term Loan and there was no further availability. The Delayed Draw Term Loan's security and restrictive covenants are identical to those in the Bank Credit Facilities. Certain of these tests and covenants were waived for the second, third and fourth quarters of 1997 and the first quarter of 1998 in connection with the charges incurred at C&A Plastics and the sales of the Mastercraft Group and Floorcoverings. The Company requires a modification of these tests and covenants for the remainder of 1998 and beyond due to these sales and its increasing international presence and expects to renegotiate them in connection with a broader modification of its existing credit facilities to conform to the Company's current corporate and financing structure. The Company expects this modification to occur in the first half of 1998. On March 31, 1995, C&A Products entered, through the Trust formed by Carcorp, into the Receivables Facility, comprised of (i) term certificates, which were issued on March 31, 1995, in an aggregate face amount of $110 million and have a term of five years and (ii) variable funding certificates, which represent revolving commitments of up to an aggregate of $75 million and have a term of five years. Carcorp purchases on a revolving basis and transfers to the Trust virtually all trade receivables generated by C&A Products and certain of its subsidiaries (the "Sellers"). The certificates represent the right to receive payments generated by the receivables held by the Trust. Availability under the variable funding certificates at any time depends primarily on the amount of receivables generated by the Sellers from sales to the automotive industry, the rate of collection on those receivables and other characteristics of those receivables which affect their eligibility (such as the bankruptcy or downgrading below investment grade of the obligor, delinquency and excessive concentration). Based on these criteria, at December 27, 1997 approximately $3.0 million was available under the variable funding certificates, none of which was utilized. In connection with the proposed disposition of Wallcoverings, Wallcoverings was terminated as a Seller of receivables under the Receivables Facility on September 21, 1996. The Company also terminated Floorcoverings as of February 6, 1997 as a Seller of receivables under the Receivables Facility in connection with the Company's sale of Floorcoverings. On March 25, 1997, the Trust redeemed $30 million face value of term certificates primarily as a result of the Trust collecting Wallcoverings and Floorcoverings receivables which were not replaced by eligible receivables. In connection with the sale of the Mastercraft Group, effective July 16, 1997 receivables generated by the Mastercraft Group ceased to be sold to Carcorp and transferred to the Trust, and the Company terminated Ack-Ti-Lining, Inc., a member of the Mastercraft Group, as a Seller of receivables under the Receivables Facility. The collections of these Mastercraft Group receivables resulted in the redemption of $30 million face value of term certificates on November 25, 1997. The reduction in the term certificates was offset by increases in the variable funding certificates through the addition of C&A Plastics and its subsidiaries as Sellers under the facility. 16 The proceeds received by Carcorp from collections on receivables, after the payment of expenses and amounts due on the certificates, are used to purchase new receivables from the Sellers. Collections on receivables are required to remain in the Trust if at any time the Trust does not contain sufficient eligible receivables to support the outstanding certificates. The Receivables Facility contains certain other restrictions on Carcorp (including maintenance of $25 million net worth) and on the Sellers (including limitations on liens on receivables, modifications of the terms of receivables, and changes in credit and collection practices) customary for facilities of this type. The commitments under the Receivables Facility are subject to termination prior to their term upon the occurrence of certain events, including payment defaults, breach of covenants, bankruptcy, insufficient eligible receivables to support the outstanding certificates, default by C&A Products in servicing the receivables and, in the case of the variable funding certificates, failure of the receivables to satisfy certain performance criteria. The Company also has outstanding indebtedness totaling approximately $49.8 million at its subsidiaries operating in Sweden, Belgium and France constituting the former operations of the Collins & Aikman/Perstorp Joint Venture. This debt consists of: (i) a 120 million Swedish krona loan ($15.5 million at December 27, 1997), which bears interest at the Stockholm interbank offered rate for Krona denominated deposits ("STIBOR") plus 0.75% and is secured by a pledge of the operating assets of the Swedish operating subsidiary; (ii) a 108 million Swedish krona loan ($13.9 million at December 27, 1997), which bears interest at STIBOR plus 0.75% and is due in June 1998; (iii) a 100 million Swedish krona loan ($12.9 million at December 27, 1997), which bears interest at STIBOR plus 1.0% and was repaid in February 1998; and (iv) a 200 million Belgium franc loan ($5.5 million at December 27, 1997), which bears interest at the Brussels interbank offered rate for deposits denominated in Belgian francs ("BIBOR") plus 1% and is secured by a pledge of the operating assets of the Belgian operating subsidiary. In addition, Perstorp has provided a loan in the amount of 75 million Belgian francs ($2.0 million at December 27, 1997), to the Belgian subsidiary, which bears interest at BIBOR plus 1% and is due on August 1, 1998. The Company has a master equipment lease agreement for a maximum of $50 million of machinery and equipment. At December 27, 1997, the Company had $20.0 million of potential availability under this master lease for future machinery and equipment requirements of the Company subject to the lessor's approval. In the year ended December 27, 1997, the Company made lease payments relating to continuing operations of approximately $5.6 million for machinery and equipment sold and leased back under this master lease. The Company expects lease payments for continuing operations under this master lease to be $5.8 million during fiscal 1998. The Company's principal sources of funds are cash generated from continuing operating activities, borrowings under the Bank Credit Facilities and the sale of receivables under the Receivables Facility. Net cash provided by the operating activities of the Company's continuing operations was $98.9 million for 1997. The Company's principal uses of funds from operating activities and borrowings for the next several years are expected to be to fund interest and principal payments on its indebtedness, net working capital increases and capital expenditures. At December 27, 1997, the Company had total outstanding indebtedness of $782.7 million (excluding approximately $22.1 million of outstanding letters of credit and $.4 million of indebtedness of the discontinued operations) at an average interest rate of 9.9% per annum. Of the total outstanding indebtedness, $618.8 million relates to the Bank Credit Facilities and the Subordinated Notes. The Company's Board of Directors authorized the expenditure of up to $10 million in 1998 to repurchase shares of the Company's Common Stock at management's discretion. The Company believes it has sufficient liquidity under its existing credit arrangements to effect the repurchase program. The Company spent $19.7 million to repurchase shares during fiscal 1997 and $9.6 million to repurchase shares during fiscal 1996. Indebtedness under the Term Loan Facility, the Revolving Facility and the Delayed Draw Term Loan bears interest at a per annum rate equal to the Company's choice of (i) Chase Manhattan Bank's ("Chase's") Alternate Base Rate (which is the highest of Chase's announced prime rate, the Federal Funds Rate plus .5% and Chase's base certificate of deposit rate plus 1%) plus a margin (the "ABR Margin") ranging from 0% to .75% or (ii) the offered rates for Eurodollar deposits ("LIBOR") of one, two, three, six, nine or twelve months, as selected by the Company, plus a margin ranging from 1% to 1.75%. Margins, which are subject to adjustment based on changes in the Company's ratios of senior funded debt to EBITDA and cash interest expense to EBITDA, were 1.75% in the case of the "LIBOR Margin" and .75% in the case of the ABR Margin on December 27, 1997. Such margins will increase by .25% over the margins then in effect on July 13, 1999. Indebtedness under the Term Loan B Facility bears interest at a per annum rate equal to the Company's choice of (i) Chase's Alternate Base Rate (as described above) plus a margin of 1.25% or (ii) LIBOR of one, two, three or six months, as selected by the Company, plus a margin of 2.25%. The weighted average rate of interest on the Bank Credit Facilities and the Delayed Draw Term Loan at December 27, 1997 was 8.0%. The weighted average interest rate on the sold interests under the Receivables Facility at December 27, 1997 was 6.75%. Under the Receivables Facility, the term certificates bear interest at an average rate equal to one month LIBOR plus .34% per 17 annum and the variable funding certificates bear interest, at Carcorp's option, at LIBOR plus .40% per annum or a prime rate. The Subordinated Notes bear interest at a rate of 11.5% per annum. The JPS Automotive Senior Notes bear interest at a rate of 11.125% per annum. Cash interest paid was $93.0 million and $60.0 million for the fiscal years ended December 27, 1997 and December 28, 1996, respectively. Due to the variable interest rates under the Bank Credit Facilities, the Delayed Draw Term Loan and the Receivables Facility, the Company is sensitive to increases in interest rates. Accordingly, during April 1996, the Company limited its exposure through April 2, 1998 on $80 million of notional principal amount utilizing zero cost collars with 4.75% floors and a weighted average cap of 7.86%. In addition, during April 1997, the Company entered into a two year interest rate swap agreement in which the Company effectively exchanged $27.0 million of 11-1/2% fixed rate debt for floating rate debt at six month LIBOR plus a 4.72% margin. In connection with this swap agreement, the Company also limited its interest rate exposure by entering into an 8.50% cap on LIBOR on $27.0 million of notional principal amount. Based upon amounts outstanding at December 27, 1997, a .5% increase in LIBOR (6.0% at December 27, 1997) would impact interest costs by approximately $1.1 million annually on the Bank Credit Facilities and the Delayed Draw Term Loan and $1.0 million annually on the Receivables Facility. During April 1997, the Company entered into an agreement to limit its foreign currency exposure related to $45.0 million of US dollar denominated borrowings of a Canadian subsidiary. The agreement swaps LIBOR based interest rates for the Canadian equivalent as well as fixes the exchange rate for the principal balance when the amount comes due in 2002. At December 27, 1997, the remaining $18.0 million of U.S. dollar denominated borrowings of the Canadian subsidiary were hedged under this agreement. The current maturities of long-term debt primarily consist of the current portion of the Bank Credit Facilities, vendor financing, industrial revenue bonds and other miscellaneous debt. The maturities of long-term debt of the Company's continuing operations for 1998, 1999, 2000, 2001 and 2002 are $30.3 million, $28.2 million, $59.9 million, $128.9 million and $80.9 million, respectively. The JPS Automotive Senior Notes will mature in 2001. In addition, the Bank Credit Facilities and the Delayed Draw Term Loan provide for mandatory prepayments of the Term Loan and Term Loan B Facilities and the Delayed Draw Term Loan with certain excess cash flow of the Company, net cash proceeds of certain asset sales or other dispositions by the Company other than proceeds generated from the sale of Floorcoverings or Wallcoverings, net cash proceeds of certain sale/leaseback transactions and net cash proceeds of certain issuances of debt obligations. The indenture governing the Subordinated Notes provides that in the event of certain asset dispositions, C&A Products must apply net proceeds (to the extent not reinvested in the business) first to repay Senior Indebtedness (as defined, which includes the Bank Credit Facilities and the Delayed Draw Term Loan) and then, to the extent of remaining net proceeds, to make an offer to purchase outstanding Subordinated Notes at 100% of their principal amount plus accrued interest. C&A Products must also make an offer to purchase outstanding Subordinated Notes at 101% of their principal amount plus accrued interest if a Change in Control (as defined) of the Company occurs. In addition, the Delayed Draw Term Loan will require quarterly installments of approximately $2.2 million beginning in July 1999 and ending January 2002. In addition, the indenture governing the JPS Automotive Senior Notes requires JPS Automotive to apply the net proceeds from the sale of assets of JPS Automotive to offer to purchase JPS Automotive Senior Notes, to the extent not applied within 270 days of such asset sale to an investment in capital expenditures or other long term tangible assets of JPS Automotive, to permanently reduce senior indebtedness of JPS Automotive or to purchase JPS Automotive Senior Notes in the open market. As discussed above, the Company caused JPS Automotive to make such an offer to purchase JPS Automotive Senior Notes in connection with the sale of Airbag. The Company makes capital expenditures on a recurring basis for replacements and improvements. As of December 27, 1997, the Company's continuing operations had approximately $28.6 million in outstanding capital expenditure commitments. The Company currently anticipates that its capital expenditures for continuing operations including its outstanding commitments in fiscal 1998 will aggregate approximately $85 million, a portion of which may be financed through leasing. The Company's capital expenditures in future years will depend upon demand for the Company's products and changes in technology. The Company is sensitive to price movements in its raw material supply base. During fiscal 1997, prices for most of the Company's primary raw materials remained constant with price levels at December 28, 1996. While the Company may not be able to pass on future raw material price increases to its customers, it believes that a significant portion of the increased cost can be offset by continued results of its value engineering/value analysis and cost improvement programs and by continued reductions in the cost of nonconformance. 18 Since Wallcoverings was classified as a discontinued operation in April 1996, Wallcoverings has continued to experience sales declines. From April 1996 through October 1997, the Company has expended approximately $67.1 million to fund operations, working capital and capital expenditures and to replace receivables previously sold to Carcorp. Of these amounts, $21.0 million represents repayments of intercompany amounts owed to Wallcoverings. From November 1, 1997 through its disposition, the Company expended approximately $19.2 million prior to the disposition of Wallcoverings principally to fund Wallcoverings' operations, working capital and capital expenditure requirements. Of this amount, $13.2 million was the responsibility of the purchaser of Wallcoverings under the sales agreement and an estimate, which is subject to adjustment, was included in the purchase price paid at closing. The Company has significant obligations relating to postretirement, casualty, environmental, lease and other liabilities of discontinued operations. In connection with the sale and acquisition of certain businesses, the Company has indemnified the purchasers and sellers for certain environmental liabilities, lease obligations and other matters. In addition, the Company is contingently liable with respect to certain lease and other obligations assumed by certain purchasers and may be required to honor such obligations if such purchasers are unable or unwilling to do so. Management currently anticipates that the net cash requirements of its discontinued operations, excluding Wallcoverings, will be approximately $19 million in fiscal 1998. However, because the requirements of the Company's discontinued operations are largely a function of contingencies, it is possible that the actual net cash requirements of the Company's discontinued operations could differ materially from management's estimates. Management believes that the Company's cash needs relating to discontinued operations can be provided by operating activities from continuing operations and by borrowings under the Bank Credit Facilities. TAX MATTERS At December 27, 1997, the Company had outstanding net operating loss carryforwards ("NOLs") of approximately $119.4 million for Federal income tax purposes. Substantially all of these NOLs expire over the period from 2008 to 2011. The Company also has unused Federal tax credits of approximately $14.9 million, $2.2 million of which expire during the period 1998 to 2006. Approximately $17.1 million of the Company's NOLs and $2.2 million of the Company's unused Federal tax credits may be used only against the income and apportioned tax liability of the specific corporate entity that generated such losses or credits or its successors. Future sales of common stock by the Company or its principal shareholders, or changes in the composition of its principal shareholders, could constitute a "change in control" that would result in annual limitations on the Company's use of its NOLs and unused tax credits. Management cannot predict whether such a "change in control" will occur. If such a "change in control" were to occur, the resulting annual limitations on the use of NOLs and tax credits would depend on the value of the equity of the Company and the amount of "built-in gain" or "built-in loss" in the Company's assets at the time of the "change in control", which cannot be known at this time. In fiscal 1995, the Company's continuing business segments generated substantial operating income, consistent with historical trends, that, when combined with the post-recapitalization capital structure, resulted in income for both tax and financial reporting purposes. The proposed disposition of Wallcoverings that was announced in April 1996 further clarified management's assessment of the Company's likely future performance. Management considered these factors as well as the future outlook for its continuing businesses in concluding that it was more likely than not that previously unrecognized net deferred tax assets totaling approximately $150 million would be realized. Similarly, management concluded that it was more likely than not that net deferred tax assets of $74.6 million and $148.4 million at December 27, 1997 and December 28, 1996, respectively, will be realized. While continued operating performance at current levels is sufficient to realize these assets, the Company's ability to generate future taxable income is dependent on numerous factors, including general economic conditions, the state of the automotive industry and other factors beyond management's control. Therefore, there can be no assurance that the Company will meet its expectation of future taxable income. The valuation allowance at December 27, 1997 provides for certain deferred tax assets that in management's assessment may not be realized due to tax limitations on the use of such amounts or that relate to tax attributes that are subject to uncertainty due to the long-term nature of their realization. In fiscal 1995, the California Franchise Tax Board issued a notice of tax assessment for approximately $11.8 million related to the treatment of the sale of certain foreign subsidiaries during 1987. The Company disputes the assessment and has filed a protest with the Franchise Tax Board. If the Franchise Tax Board were to maintain its position and such position were to be upheld in litigation, the Company would also become liable for the payment of interest which is currently estimated to be $19.6 million. In the opinion of management, the final determination of any additional tax and interest liability related to this matter will not have a material adverse effect on the Company's 19 consolidated financial condition or future results of operations. ENVIRONMENTAL MATTERS The Company is subject to Federal, state and local environmental laws and regulations that (i) affect ongoing operations and may increase capital costs and operating expenses and (ii) impose liability for the costs of investigation and remediation and otherwise related to on-site and off-site soil and groundwater contamination. The Company's management believes that it has obtained, and is in material compliance with, all material environmental permits and approvals necessary to conduct its various businesses. Environmental compliance costs for continuing businesses currently are accounted for as normal operating expenses or capital expenditures of such business units. In the opinion of management, based on the facts presently known to it, such environmental compliance costs will not have a material adverse effect on the Company's consolidated financial condition or future results of operations. The Company is legally or contractually responsible or alleged to be responsible for the investigation and remediation of contamination at various sites. It also has received notices that it is a potentially responsible party ("PRP") in a number of proceedings. The Company may be named as a PRP at other sites in the future, including with respect to divested and acquired businesses. The Company is currently engaged in investigation or remediation at certain sites. In estimating the total cost of investigation and remediation, the Company has considered, among other things, the Company's prior experience in remediating contaminated sites, remediation efforts by other parties, data released by the United States Environmental Protection Agency, the professional judgment of the Company's environmental experts, outside environmental specialists and other experts, and the likelihood that other parties which have been named as PRPs will have the financial resources to fulfill their obligations at sites where they and the Company may be jointly and severally liable. Under the theory of joint and several liability, the Company could be liable for the full costs of investigation and remediation even if additional parties are found to be responsible under the applicable laws. It is difficult to estimate the total cost of investigation and remediation due to various factors including incomplete information regarding particular sites and other PRPs, uncertainty regarding the extent of environmental problems and the Company's share, if any, of liability for such problems, the selection of alternative compliance approaches, the complexity of environmental laws and regulations and changes in cleanup standards and techniques. When it has been possible to provide reasonable estimates of the Company's liability with respect to environmental sites, provisions have been made in accordance with generally accepted accounting principles. As of December 27, 1997, including sites relating to the acquisition of C&A Plastics, JPS Automotive and Perstorp Components and excluding sites at which the Company's participation is anticipated to be de minimis or otherwise insignificant or where the Company is being indemnified by a third party for the liability, there are 25 sites where the Company is participating in the investigation or remediation of the site, either directly or through financial contribution, and 9 additional sites where the Company is alleged to be responsible for costs of investigation or remediation. As of December 27, 1997, the Company's estimate of its liability for these 34 sites, which exclude sites related to Wallcoverings, is approximately $33.8 million. As of December 27, 1997, the Company has established reserves of approximately $46.5 million for the estimated future costs related to all its known environmental sites, excluding sites related to Wallcoverings. In the opinion of management, based on the facts presently known to it, the environmental costs and contingencies will not have a material adverse effect on the Company's consolidated financial condition or future results of operations. However, there can be no assurance that the Company has identified or properly assessed all potential environmental liability arising from the activities or properties of the Company, its present and former subsidiaries and their corporate predecessors. IMPACT OF YEAR 2000 COMPLIANCE In order to improve operating performance, the Company has undertaken, or will undertake in the near future, a number of significant information systems initiatives. One goal of such systems initiatives is to make the Company's systems Year 2000 compliant. Based upon a recent assessment, the Company expects at this time that the cost of the overall information systems initiatives (which includes the cost of ensuring that its remaining computer systems are Year 2000 compliant) should not have a material adverse effect on the Company. The Company has completed a preliminary assessment of each of its operations and their Year 2000 readiness and believes that appropriate actions are being taken. The Company currently expects to complete its overall Year 2000 remediation prior to any anticipated impact on its operations. The Company believes that, with modifications to existing software and conversions to new systems, the Year 2000 issue should not pose significant operational problems for its computer systems. However, if such modifications and conversions are not made, or are not completed timely, the Year 2000 issue could have a material adverse impact on the operations of the Company. Whether such modifications and conversions are timely completed may to some extent depend on the availability of outside consultants as well as establishing reliable telecommunication links with the Company's operations in Europe and Mexico. Further, while the Company has initiated communications with a number of its significant suppliers to determine the extent to which the Company's interface systems are 20 vulnerable to those third parties' failure to remediate their own Year 2000 issues, and plans to initiate similar communications with the balance of its major suppliers and major customers in 1998, there is no guarantee that the systems of other companies on which the Company's systems rely will be timely converted and would not have an adverse effect on the Company's systems. CURRENCY RATE EXPOSURE The primary purpose of the Company's foreign currency hedging activities is to protect against the volatility associated with foreign currency purchase transactions. Corporate policy prescribes the range of allowable hedging activity. The Company primarily utilizes forward exchange contracts and purchased options with durations of generally less than 12 months. Gains and losses related to qualifying hedges of foreign currency firm commitments or anticipated transactions are included in the basis of the underlying transactions. To the extent that a qualifying hedge is terminated or ceases to be effective as a hedge, any deferred gains and losses up to that point continue to be deferred and are included in the basis of the underlying transaction. All other foreign exchange contracts are marked-to-market on a current basis and are generally charged to other income (expense). To the extent that the anticipated transactions are no longer likely to occur, the related hedges are closed with gains or losses charged to earnings on a current basis. Based on the Company's overall currency rate exposure at December 27, 1997, including derivative and other foreign currency sensitive instruments, a near-term change in currency rates in amounts indicated by historical currency rate movements would not materially affect the consolidated financial position, results of operations, or cash flows of the Company. SAFE HARBOR STATEMENT This Form 10-K contains statements which, to the extent they are not historical fact, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the "Safe Harbor Acts"). All forward-looking statements involve risks and uncertainties. The forward-looking statements in this Form 10-K are intended to be subject to the safe harbor protection provided by the Safe Harbor Acts. Risks and uncertainties that could cause actual results to vary materially from those anticipated in the forward-looking statements included in this Form 10-K include industry-based factors such as possible declines in the North American automobile and light truck build, labor strikes at the Company's major customers, changes in consumer preferences, dependence on significant automotive customers, the level of competition in the automotive supply industry and Year 2000 compliance issues, as well as factors more specific to the Company such as the substantial leverage of the Company and its subsidiaries, limitations imposed by the Company's debt facilities and changes made in connection with the integration of operations acquired by the Company. The Company's divisions may also be affected by changes in the popularity of particular car models or the loss of programs on particular car models. For a discussion of certain of these and other important factors which may affect the Company's operations, products and markets, see "ITEM 1. BUSINESS" and the above discussion in this "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and also see the Company's other filings with the Securities and Exchange Commission. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Disclosures are not required at this time. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See the Consolidated Financial Statements of Collins & Aikman Corporation and subsidiaries included herein and listed on the Index to Financial Statements set forth in Item 14 (a) of this Form 10-K report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 21 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by Item 401 of Regulation S-K regarding executive officers is set forth in Part I hereof under the caption "Executive Officers of the Registrant" and the information required by Item 401 of Regulation S-K regarding directors is incorporated herein by reference to that portion of the Registrant's definitive Proxy Statement to be used in connection with its 1998 Annual Meeting of Stockholders, which will be filed in final form with the Commission not later than 120 days after December 27, 1997 (the "Proxy Statement"), captioned "Election of Directors--Information as to Nominees and Other Directors". Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Company's knowledge, in the Proxy Statement. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated herein by reference to that portion of the Proxy Statement captioned "Executive Compensation". ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is incorporated herein by reference to those portions of the Proxy Statement captioned "Voting Securities and Principal Stockholders", "Security Ownership of Management" and "Election of Directors--Information as to Nominees and Other Directors". ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is incorporated herein by reference to that portion of the Proxy Statement captioned "Compensation Committee Interlocks and Insider Participation". 22 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1) FINANCIAL STATEMENTS:
PAGE NUMBER Report of Independent Public Accountants F-1 Consolidated Statements of Operations for the fiscal years ended December 27, 1997, December 28, 1996, and January 27, 1996 F-2 Consolidated Balance Sheets at December 27, 1997 and December 28, 1996 F-3 Consolidated Statements of Cash Flows for the fiscal years ended December 27, 1997, December 28, 1996, and January 27, 1996 F-4 Consolidated Statements of Common Stockholders' Deficit for the fiscal years ended December 27, 1997, December 28, 1996, and January 27, 1996 F-5 Notes to Consolidated Financial Statements F-6
(a) (2) FINANCIAL SCHEDULES: The following financial statement schedules of Collins & Aikman Corporation for the fiscal years ended December 27, 1997, December 28, 1996, and January 27, 1996 are filed as part of this Report and should be read in conjunction with the Consolidated Financial Statements of Collins & Aikman Corporation.
PAGE NUMBER Report of Independent Public Accountants on Schedules....................................................... S-1 Schedule I-Condensed Financial Information of the Registrant................................................ S-2 Schedule II-Valuation and Qualifying Accounts............................................................... S-5
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are omitted because they are not required, are inapplicable, or the information is included in the Consolidated Financial Statements or Notes thereto. (a) (3) EXHIBITS: Please note that in the following description of exhibits, the title of any document entered into, or filing made, prior to July 7, 1994 reflects the name of the entity a party thereto or filing, as the case may be, at such time. Accordingly, documents and filings described below may refer to Collins & Aikman Holdings Corporation, Collins & Aikman Group, Inc. or Wickes Companies, Inc., if such documents and filings were made prior to July 7, 1994. 23
Exhibit Number Description - ------ ----------- 2.1 - Mastercraft Group Acquisition Agreement dated as of April 25, 1997 among Collins & Aikman Products Co., Joan Fabrics Corporation and MC Group Acquisition Company L.L.C., is hereby incorporated by reference to Exhibit 2.1 of Collins & Aikman Corporation's Report on Form 10-Q for this fiscal quarter ended March 29, 1997. 2.2 - Asset Purchase Agreement dated as of June 30, 1997 by and between JPS Automotive L.P. and Safety Components International, Inc. is hereby incorporated by reference to Exhibit 2.1 of JPS Automotive L.P.'s and JPS Automotive Products Corp.'s Current Report on Form 8-K dated July 24, 1997. 2.3 - Closing Agreement dated July 24, 1997 between JPS Automotive L.P., Safety Components International, Inc. and Safety Components Fabric Technologies, Inc. is hereby incorporated by reference to Exhibit 2.2 of JPS Automotive L.P.'s and JPS Automotive Products Corp.'s Current Report on Form 8-K dated July 24, 1997. 2.4 - Amended and Restated Acquisition Agreement dated as of November 4, 1997 and amended and restated as of March 9, 1998, among Collins & Aikman Products Co., Imperial Wallcoverings Inc. and BDPI Holdings Corporation. 3.1 - Restated Certificate of Incorporation of Collins & Aikman Corporation is hereby incorporated by reference to Exhibit 4.1 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended July 30, 1994. 3.2 - By-laws of Collins & Aikman Corporation, as amended, are hereby incorporated by reference to Exhibit 3.2 of Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended January 27, 1996. 3.3 - Certificate of Elimination of Cumulative Exchangeable Redeemable Preferred Stock of Collins & Aikman Corporation is hereby incorporated by reference to Exhibit 3.3 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended October 28, 1995. 4.1 - Specimen Stock Certificate for the Common Stock is hereby incorporated by reference to Exhibit 4.3 of Amendment No. 3 to Collins & Aikman Holdings Corporation's Registration Statement on Form S-2 (Registration No. 33-53179) filed June 21, 1994. 4.2 - Indenture, dated as of June 1, 1996, between Collins & Aikman Products Co., Collins & Aikman Corporation and First Union National Bank of North Carolina, as Trustee, is hereby incorporated by reference to Exhibit 4.2 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended April 27, 1996. 4.3 - First Supplemental Indenture dated as of June 1, 1996, between Collins & Aikman Products Co., Collins & Aikman Corporation and First Union National Bank of North Carolina, as Trustee, is hereby incorporated by reference to Exhibit 4.3 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended April 27, 1996. 4.4 - Amended and Restated Credit Agreement, dated as of June 3, 1996, among Collins & Aikman Products Co., as Borrower, Collins & Aikman Canada Inc., as Canadian Borrower, Collins & Aikman Corporation, as Guarantor, the lenders named therein, Bank of America N.T.S.A. and NationsBank, N.A., as Managing Agents, and Chemical Bank, as Administrative Agent, is hereby incorporated by reference to Exhibit 4.1 of Collins & Aikman Corporation's Current Report on Form 8-K dated June 3, 1996. 4.5 - Amendment, dated as of December 5, 1996, to the Amended and Restated Credit Agreement, dated as of June 3, 1996, among Collins & Aikman Products Co., as Borrower, Collins & Aikman Canada Inc., as Canadian Borrower, Collins & Aikman Corporation, as Guarantor, the Lenders parties thereto, and The Chase Manhattan Bank, as Administrative Agent, is hereby incorporated by reference to Exhibit 4.5 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended October 26, 1996. 24 Exhibit Number Description - ------ ----------- 4.6 - Waiver, dated as of June 28, 1997, to the Amended and Restated Credit Agreement, dated as of June 3, 1996 among Collins & Aikman Products Co., Collins & Aikman Canada, Inc., Collins & Aikman Corporation, the Lenders parties thereto and The Chase Manhattan Bank, as Administrative Agent is hereby incorporated by reference to Exhibit 4.6 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended June 28, 1997. 4.7 - Waiver, dated as of October 27, 1997, to the Amended and Restated Credit Agreement, dated as of June 3, 1996 among Collins & Aikman Products Co., Collins & Aikman Canada Inc., Collins & Aikman Corporation, the Lenders parties thereto, and The Chase Manhattan Bank, as Administrative Agent is hereby incorporated by reference to Exhibit 4.7 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended September 27, 1997. 4.8 - Waiver, dated as of January 12, 1998, to the Amended and Restated Credit Agreement, dated as of June 3, 1996 among Collins & Aikman Products Co., Collins & Aikman Canada Inc., Collins & Aikman Corporation the Lenders parties thereto, and The Chase Manhattan Bank, as Administrative Agent. 4.9 - Credit Agreement, dated as of December 5, 1996, among Collins & Aikman Products Co., as Borrower, Collins & Aikman Corporation, as Guarantor, the Lenders named therein and The Chase Manhattan Bank, as Administrative Agent, is hereby incorporated by reference to Exhibit 4.6 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended October 26, 1996. 4.10 - Waiver, dated as of June 28, 1997, to the Credit Agreement, dated as of December 5, 1996, among Collins & Aikman Products Co., Collins & Aikman Corporation, the Lenders parties thereto and The Chase Manhattan Bank, as Administrative Agent is hereby incorporated by reference to Exhibit 4.8 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended June 28, 1997. 4.11 - Waiver, dated as of October 27, 1997, to the Credit Agreement, dated as of December 5, 1996, among Collins & Aikman Products Co., Collins & Aikman Corporation, the Lenders parties thereto, and The Chase Manhattan Bank, as Administrative Agent is hereby incorporated by reference to Exhibit 4.10 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended September 27, 1997. 4.12 Waiver, dated as of January 12, 1998, to the Credit Agreement, dated as of December 5, 1996, among Collins & Aikman Products Co., Collins & Aikman Corporation, the Lenders parties thereto and The Chase Manhattan Bank, as Administrative Agent. 4.13 Waiver, dated as of March 27, 1998 to the Amended and Restated Credit Agreement dated as of June 3, 1996 among Collins & Aikman Products Co., Collins & Aikman Canada Inc., Collins & Aikman Corporation, the Lenders parties thereto, and The Chase Manhattan Bank, as Administrative Agent. 4.14 Waiver, dated as of March 27, 1998 to the Credit Agreement, dated as of December 5, 1996, among Collins & Aikman Products Co., Collins & Aikman Corporation, the Lenders parties thereto, and The Chase Manhattan Bank, as Administrative Agent. 25 Exhibit Number Description - ------ ----------- 4.15 Amendment, dated as of March 27, 1997 to the Amended and Restated Credit Agreement, dated as of June 3, 1996, among Collins & Aikman Products Co., Collins & Aikman Canada Inc., Collins & Aikman Corporation, the Lenders parties thereto, and The Chase Manhattan Bank, as Administrative Agent. 4.16 Amendment, dated as of March 27, 1997, to the Credit Agreement, dated as of December 5, 1996, among Collins & Aikman Products Co., Collins & Aikman Corporation, the Lenders parties thereto, and The Chase Manhattan Bank, as Administrative Agent. 4.17 - Indenture dated as of June 28, 1994, between JPS Automotive Products Corp., as Issuer, JPS Automotive L.P., as Guarantor and Shawmut Bank Connecticut, N.A., as Trustee, is hereby incorporated by reference to Exhibit 4.2 of JPS Automotive Corp.'s Registration Statement on Form S-1, Registration No. 33-75510. 4.18 - First Supplemental Indenture, dated as of October 5, 1994, between JPS Automotive Products Corp. and JPS Automotive L.P., as Co-Obligors, and Shawmut Bank Connecticut, N.A., as Trustee is hereby incorporated by reference to Exhibit 4.48A of JPS Automotive L.P.'s and JPS Automotive Products Corp.'s Report on Form 10-Q for the fiscal quarter ended October 2, 1994. Collins & Aikman Corporation agrees to furnish to the Commission upon request in accordance with Item 601 (b)(4) (iii) (A) of Regulation S-K copies of instruments defining the rights of holders of long-term debt of Collins & Aikman Corporation or any of its subsidiaries, which debt does not exceed 10% of the total assets of Collins & Aikman Corporation and its subsidiaries on a consolidated basis. 10.1 - Amended and Restated Stockholders Agreement dated as of June 29, 1994 among the Company, Collins & Aikman Group, Inc., Blackstone Capital Partners L.P. and Wasserstein Perella Partners, L.P. is hereby incorporated by reference to Exhibit 10.1 of Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended January 28, 1995. 10.2 - Employment Agreement dated as of July 18, 1990 between Wickes Companies, Inc. and an executive officer is hereby incorporated by reference to Exhibit 10.3 of Wickes Companies, Inc.'s Report on Form 10-K for the fiscal year ended January 26, 1991.* 10.3 - Letter Agreement dated as of May 16, 1991 and Employment Agreement dated as of July 22, 1992 between Collins & Aikman Corporation and an executive officer is hereby incorporated by reference to Exhibit 10.7 of Collins & Aikman Holdings Corporation's Report on Form 10-K for the fiscal year ended January 30, 1993.* 10.4 - First Amendment to Employment Agreement dated as of February 24, 1994 between Collins & Aikman Corporation and an executive officer is hereby incorporated by reference to Exhibit 10.7 of Collins & Aikman Holdings Corporation's Registration Statement on Form S-2 (Registration No. 33-53179) filed April 19, 1994.* 10.5 - Second Amendment, dated as of October 3, 1996, to the Employment Agreement, dated as of July 22, 1992, as amended, between Collins & Aikman Products Co. and an executive officer is hereby incorporated by reference to Exhibit 10.26 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended October 26, 1996.* 10.6 - Third Amendment dated as of August 1, 1997, to the Employment Agreement dated as of July 22, 1992, as amended, between the Corporation and an executive officer is hereby incorporated by reference to Exhibit 10.35 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended September 27, 1997.* 10.7 - Letter Agreement dated as of May 16, 1991 between Collins & Aikman Corporation and an executive officer is hereby incorporated by reference to Exhibit 10.14 of Collins & Aikman Holdings Corporation's Registration Statement on Form S-2 (Registration No. 33-53179) filed April 19, 1994.* 10.8 - Employment Agreement dated as of April 6, 1995 between Collins & Aikman Products Co. and an executive officer is hereby incorporated by reference to Exhibit 10.24 of Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended January 28, 1995.* 10.9 - Letter Agreement dated as of June 30, 1995 between Collins & Aikman Corporation and an executive officer is hereby incorporated by reference to Exhibit 10.6 of Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended January 27, 1996.* 10.10 - Letter Agreement dated October 9, 1992 between Collins & Aikman Corporation and an executive officer.* 10.11 - Collins & Aikman Corporation 1997 Executive Incentive Compensation Plan is hereby incorporated by reference to Exhibit 10.9 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended September 27, 1997.* * Management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to Item 14 (c) of this report. 26 Exhibit Number Description - ------ ----------- 10.12 - Collins & Aikman Corporation Supplemental Retirement Income Plan is hereby incorporated by reference to Exhibit 10.23 of Amendment No. 5 to Collins & Aikman Holdings Corporation's Registration Statement on Form S-2 (Registration No. 33-53179) filed July 6, 1994.* 10.13 - 1993 Employee Stock Option Plan, as amended and restated, is hereby incorporated by reference to Exhibit 10.13 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended April 29, 1995.* 10.14 - 1994 Employee Stock Option Plan, as amended through February 7, 1997, is hereby incorporated by reference to Exhibit 10.12 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended March 29, 1997.* 10.15 - 1994 Directors Stock Option Plan is hereby incorporated by reference to Exhibit 10.15 of Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended January 28, 1995.* 10.16 - Excess Benefit Plan of Collins & Aikman Corporation is hereby incorporated by reference to Exhibit 10.25 of Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended January 28, 1995.* 10.17 - Change in control agreement dated March 17, 1998 between Collins & Aikman Corporation and an executive officer.* 10.18 - Change in control agreement dated March 17, 1998 between Collins & Aikman Corporation and an executive officer.* 10.19 - Change in control agreement dated March 17, 1998 between Collins & Aikman Corporation and an executive officer.* 10.20 - Change in control agreement dated March 17, 1998 between Collins & Aikman Corporation and an executive officer.* 10.21 - Lease, executed as of the 1st day of June 1987, between Dura Corporation and Dura Acquisition Corp. is hereby incorporated by reference to Exhibit 10.24 of Amendment No. 5 to Collins & Aikman Holdings Corporation's Registration Statement on Form S-2 (Registration No. 33-53179) filed July 6, 1994. 10.22 - Amended and Restated Receivables Sale Agreement dated as of March 30, 1995 among Collins & Aikman Products Co., Ack-Ti-Lining, Inc., WCA Canada Inc., Imperial Wallcoverings, Inc., The Akro Corporation, Dura Convertible Systems Inc., each of the other subsidiaries of Collins & Aikman Products Co. from time to time parties thereto and Carcorp, Inc. is hereby incorporated by reference to Exhibit 10.18 of Collins & Aikman Corporation's Report on Form 10-K to the fiscal year ended January 28, 1995. 10.23 - Servicing Agreement, dated as of March 30, 1995, among Carcorp, Inc., Collins & Aikman Products Co., as Master Servicer, each of the subsidiaries of Collins & Aikman Products Co. from time to time parties thereto and Chemical Bank, as Trustee is hereby incorporated by reference to Exhibit 10.19 of Collins & Aikman Corporation's Report on Form 10-K to the fiscal year ended January 28, 1995. 10.24 - Pooling Agreement, dated as of March 30, 1995, among Carcorp, Inc., Collins & Aikman Products Co., as Master Servicer and Chemical Bank, as Trustee, is hereby incorporated by reference to Exhibit 10.20 of Collins & Aikman Corporation's Report on Form 10-K to the fiscal year ended January 28, 1995. 10.25 - Series 1995-1 Supplement, dated as of March 30, 1995, among Carcorp, Inc., Collins & Aikman Products Co., as Master Servicer and Chemical Bank, as Trustee, is hereby incorporated by reference to Exhibit 10.21 of Collins & Aikman Corporation's Report on Form 10-K to the fiscal year ended January 28, 1995. * Management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to Item 14 (c) of this report. 27 Exhibit Number Description - ------ ----------- 10.26 - Series 1995-2 Supplement, dated as of March 30, 1995, among Carcorp, Inc., Collins & Aikman Products Co., as Master Servicer, the Initial Purchasers parties thereto, Societe Generale, as Agent for the Purchasers and Chemical Bank, as Trustee is hereby incorporated by reference to Exhibit 10.22 of Collins & Aikman Corporation's Report on Form 10-K to the fiscal year ended January 28, 1995. 10.27 - Amendment No. 1, dated September 5, 1995, among Carcorp, Inc., as Company, Collins & Aikman Products Co., as Master Servicer, and Chemical Bank, as Trustee, to the Pooling Agreement, dated as of March 30, 1995, among the Company, the Master Servicer and Trustee is hereby incorporated by reference to Exhibit 10.2 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended July 29, 1995. 10.28 - Amendment No. 2, dated October 25, 1995, among Carcorp, Inc., as Company, Collins & Aikman Products Co., as Master Servicer, and Chemical Bank, as Trustee, to the Pooling Agreement, dated as of March 30, 1995, among the Company, the Master Servicer and the Trustee is hereby incorporated by reference to Exhibit 10.2 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended October 28, 1995. 10.29 - Amendment No. 1, dated February 29, 1996, to the Series 1995-1 Supplement, dated as of March 30, 1995, among Carcorp, Inc., Collins & Aikman Products Co., as Master Servicer, and Chemical Bank, as Trustee, is hereby incorporated by reference to Exhibit 10.20 of Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended January 27, 1996. 10.30 - Amendment No. 1, dated February 29, 1996, to the Series 1995-2 Supplement, dated as of March 30, 1995, among Carcorp, Inc., Collins & Aikman Products Co., as Master Servicer, Societe Generale, as agent, and Chemical Bank, as Trustee, is hereby incorporated by reference to Exhibit 10.21 of Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended January 27, 1996. 10.31 - Master Equipment Lease Agreement dated as of September 30, 1994, between NationsBanc Leasing Corporation of North Carolina and Collins & Aikman Products Co. is hereby incorporated by reference to Exhibit 10.27 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended October 29, 1994. 10.32 - Equity Purchase Agreement by and among JPSGP, Inc., Foamex - JPS Automotive L.P. and Collins & Aikman Products Co. dated August 28, 1996 is hereby incorporated by reference to Exhibit 2.1 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended July 27, 1996. 10.33 - Amendment No. 1 to Equity Purchase Agreement by and among JPSGP, Inc., Foamex - JPS Automotive L.P., Foamex International Inc. and Collins & Aikman Products Co. dated as of December 11, 1996 is hereby incorporated by reference to Exhibit 2.2 of Collins & Aikman Corporation's Current Report on Form 8-K dated December 10, 1996. 10.34 - Equity Purchase Agreement by and among Seiren U.S.A. Corporation, Seiren Automotive Textile Corporation, Seiren Co., Ltd. and Collins & Aikman Products Co. dated December 11, 1996, is hereby incorporated by reference to Exhibit 2.3 of Collins & Aikman Corporation's Current Report on Form 8-K dated December 10, 1996. 10.35 - Acquisition Agreement between Perstorp A.B. and Collins & Aikman Products Co. dated December 11, 1996 is hereby incorporated by reference to Exhibit 2.4 of Collins & Aikman Corporation's Current Report on Form 8-K dated December 10, 1996. 10.36 - Agreement among Perstorp A. B., Perstorp GmbH, Perstorp Biotec A.B. and Collins & Aikman Products Co. dated December 11, 1996 is hereby incorporated by reference to Exhibit 2.5 of Collins & Aikman Corporation's Current Report on Form 8-K dated December 10, 1996. 28 Exhibit Number Description - ------ ----------- 10.37 - Shareholders Agreement among Collins & Aikman Products Co., Collins & Aikman Europe, Inc., Perstorp GmbH, Perstorp A.B., Perstorp Biotec A.B., Perstorp Components N.V. and Perstorp Components A.B., dated December 11, 1996 is hereby incorporated by reference to Exhibit 2.6 of Collins & Aikman Corporation's Current Report on Form 8-K dated December 10, 1996. 10.38 - Acquisition Agreement dated as of December 9, 1996 among Collins & Aikman Products Co., Collins & Aikman Floor Coverings Group, Inc., Collins & Aikman Floor Coverings, Inc., CAF Holdings, Inc. and CAF Acquisition Corp. is hereby incorporated by reference to Exhibit 2.7 of Collins & Aikman Corporation's Current Report on Form 8-K dated December 10, 1996. 11 - Computation of Earnings Per Share. 21 - Subsidiaries of the Registrant. 23 - Consent of Arthur Andersen LLP 27 - Financial Data Schedule. 99 - Voting Agreement between Blackstone Capital Partners L.P. and Wasserstein Perella Partners, L.P. is hereby incorporated by reference to Exhibit 99 of Amendment No. 4 to Collins & Aikman Holdings Corporation's Registration Statement on Form S-2 (Registration No. 33-53179) filed June 27, 1994. (B) REPORTS ON FORM 8-K During the last quarter of the fiscal year for which this report on Form 10-K was filed, the Company filed no reports on Form 8-K.
29 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 27th day of March, 1998. COLLINS & AIKMAN CORPORATION By: /s/ David A. Stockman By: /s/ Randall J. Weisenburger ------------------------------- -------------------------------- DAVID A. STOCKMAN RANDALL J. WEISENBURGER CO-CHAIRMAN OF THE BOARD OF DIRECTORS CO-CHAIRMAN OF THE BOARD OF DIRECTORS Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE - --------------------------------- --------------------------------------- ------------------------------ /s/ David A. Stockman Co-Chairman of the March 27, 1998 - ---------------------------------- DAVID A. STOCKMAN Board of Directors /s/ Randall J. Weisenburger Co-Chairman of the March 27, 1998 - ---------------------------------- RANDALL J. WEISENBURGER Board of Directors /s/ Thomas E. Hannah Director and Chief Executive Officer March 27, 1998 - ----------------------------------- (Principal Executive Officer) THOMAS E. HANNAH /s/ J. Michael Stepp Executive Vice President and Chief March 27, 1998 - ----------------------------------- Financial Officer (Principal Financial and J. MICHAEL STEPP Accounting Officer) /s/ Robert C. Clark Director March 27, 1998 - ------------------------------------ ROBERT C. CLARK /s/ George L. Majoros, Jr. Director March 27, 1998 - -------------------------------- GEORGE L. MAJOROS, JR. /s/ James J. Mossman Director March 27, 1998 - -------------------------------- JAMES J. MOSSMAN /s/ Warren B. Rudman Director March 27, 1998 - ------------------------------ WARREN B. RUDMAN /s/ Stephen A. Schwarzman Director March 27, 1998 - --------------------------- STEPHEN A. SCHWARZMAN /s/ W. Townsend Ziebold, Jr. Director March 27, 1998 - ------------------------------ W. TOWNSEND ZIEBOLD, JR.
30 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of Collins & Aikman Corporation: We have audited the accompanying consolidated balance sheets of Collins & Aikman Corporation (a Delaware Corporation) and subsidiaries as of December 27, 1997 and December 28, 1996 and the related consolidated statements of operations, cash flows, and common stockholders' deficit for each of the three fiscal years in the period ended December 27, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Collins & Aikman Corporation and subsidiaries as of December 27, 1997 and December 28, 1996 and the results of their operations and their cash flows for each of the three fiscal years in the period ended December 27, 1997, in conformity with generally accepted accounting principles. ARTHUR ANDERSEN LLP Charlotte, North Carolina February 9, 1998 (except with respect to the matters discussed in Note 26, as to which the date is March 13, 1998). F-1 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL YEAR ENDED --------------------------------------------- DECEMBER 27, DECEMBER 28, JANUARY 27, 1997 1996 1996 ------------- ------------ ------------ (52 WEEKS) (48 WEEKS) (52 WEEKS) Net sales .................................................... $ 1,629,332 $ 1,053,821 $ 902,017 ------------- ------------ ------------ Cost of goods sold ........................................... 1,397,121 865,346 740,092 Selling, general and administrative expenses ................. 125,101 86,571 66,266 Impairment of long lived assets .............................. 22,600 -- -- 1,544,822 951,917 806,358 ------------- ------------ ------------ Operating income ............................................. 84,510 101,904 95,659 Interest expense, net of interest income of $5,685, $3,987, and $1,556 ................................................. 77,581 39,850 22,150 Loss on sale of receivables .................................. 4,700 4,533 6,246 Other (income) expense ....................................... (678) 113 -- ------------- ------------ ------------ Income from continuing operations before income taxes ........ 2,907 57,408 67,263 Income tax expense (benefit) ................................. 12,998 24,442 (139,959) ------------- ------------ ------------ Income from continuing operations ............................ (10,091) 32,966 207,222 Income (loss) from discontinued operations, net of income taxes of $2,835, $9,317 and $844 .......................... 4,306 14,468 (781) Gain on sale of discontinued operations, net of income taxes of $85,358 .......................................... 161,741 -- -- ------------- ------------ ------------ Income before extraordinary loss ............................. 155,956 47,434 206,441 Extraordinary loss, net of income taxes of $443, $4,709 and $0 (721) (6,610) -- ------------- ------------ ------------ Net income ................................................... $ 155,235 $ 40,824 $ 206,441 ============= ============ ============ Net income (loss) per basic common share: Continuing operations .................................... $ (0.15) $ 0.48 $ 2.96 Discontinued operations .................................. 0.06 0.21 (0.01) Gain on sale of discontinued operations .................. 2.44 -- -- Extraordinary item ....................................... (0.01) (0.10) -- ------------- ------------ ------------ Net income ............................................... $ 2.34 $ 0.59 $ 2.95 ============= ============ ============ Net income (loss) per diluted common share: Continuing operations .................................... $ (0.15) $ 0.47 $ 2.91 Discontinued operations .................................. 0.06 0.21 (0.01) Gain on sale of discontinued operations .................. 2.44 -- -- Extraordinary item ....................................... (0.01) (0.10) -- ------------- ------------ ------------ Net income ............................................... $ 2.34 $ 0.58 $ 2.90 ============= ============ ============ Average common shares outstanding: Basic .................................................... 66,337 68,997 70,015 ============= ============ ============ Diluted .................................................. 66,337 69,887 71,181 ============= ============ ============
The Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. F-2 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS)
DECEMBER 27, DECEMBER 28, 1997 1996 ------------------ ------------------ ASSETS Current Assets: Cash and cash equivalents.................................................... $ 24,004 $ 14,314 Accounts and other receivables, net of allowances of $9,275 and $10,380.................................................................. 198,125 200,763 Inventories.................................................................. 142,042 121,971 Net assets of discontinued operations........................................ 53,004 263,523 Other........................................................................ 92,116 128,762 ------------------ ------------------ Total current assets..................................................... 509,291 729,333 Property, plant and equipment, net.............................................. 388,087 351,282 Deferred tax assets............................................................. 59,293 91,690 Goodwill, net................................................................... 263,007 283,271 Other assets.................................................................... 82,714 74,713 ------------------ ------------------ $ 1,302,392 $ 1,530,289 ================== ================== LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT Current Liabilities: Notes payable................................................................ $ 1,314 $ 1,920 Current maturities of long-term debt......................................... 30,301 37,565 Accounts payable............................................................. 135,468 123,899 Accrued expenses............................................................. 148,201 176,147 ------------------ ------------------ Total current liabilities................................................ 315,284 339,531 Long-term debt.................................................................. 752,376 1,138,029 Other, including postretirement benefit obligation.............................. 301,582 247,307 Commitments and contingencies................................................... Common Stockholders' Deficit: Common stock (150,000 shares authorized, 70,521 shares issued and 65,851 shares outstanding at December 27, 1997, 70,521 705 705 shares issued and 67,723 shares outstanding at December 28, 1996) Other paid-in capital........................................................ 585,890 585,207 Accumulated deficit.......................................................... (576,851) (729,315) Foreign currency translation adjustments..................................... (29,123) (20,798) Pension equity adjustment.................................................... (10,700) (10,165) Treasury stock, at cost (4,670 shares at December 27, 1997 and 2,798 shares at December 28, 1996).............................................. (36,771) (20,212) ------------------ ------------------ Total common stockholders' deficit....................................... (66,850) (194,578) ------------------ ------------------ $ 1,302,392 $ 1,530,289 ================== ==================
The Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. F-3 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
FISCAL YEAR ENDED ------------------------------------------------------ DECEMBER 27, DECEMBER 28, JANUARY 27, 1997 1996 1996 ---------------- --------------- ---------------- (52 WEEKS) (48 WEEKS) (52 WEEKS) OPERATING ACTIVITIES Income (loss) from continuing operations............................... $ (10,091) $ 32,966 $ 207,222 Adjustments to derive cash flow from continuing operating activities: Impairment of long lived assets..................................... 22,600 - - Deferred income tax expense (benefit)............................... 4,251 12,228 (149,822) Depreciation and leasehold amortization............................. 42,712 24,457 24,146 Goodwill amortization............................................... 6,669 3,872 270 Amortization of other assets and liabilities........................ 7,592 7,545 5,995 (Increase) decrease in accounts and other receivables............... 35,819 (22,333) 2,762 (Increase) decrease in inventories.................................. (8,078) (1,006) 5,593 Increase (decrease) in interest and dividends payable............... (520) 7,784 1,353 Increase (decrease) in accounts payable............................. (4,126) (8,734) 2,136 Other, net.......................................................... 2,053 332 (21,548) ---------------- --------------- ---------------- Net cash provided by continuing operating activities.............. 98,881 57,111 78,107 ---------------- --------------- ---------------- Cash provided by (used in) Wallcoverings, Floorcoverings, Airbag and the Mastercraft Group discontinued operations (4,719) (2,631) 24,861 Cash used in other discontinued operations............................. (12,252) (6,160) (22,886) ---------------- --------------- ---------------- Net cash provided by (used in) discontinued operations............ (16,971) (8,791) 1,975 ---------------- --------------- ---------------- INVESTING ACTIVITIES Additions to property, plant and equipment............................. (71,775) (78,454) (93,698) Sales of property, plant and equipment................................. 5,879 4,119 2,733 Proceeds from sale-leaseback arrangements.............................. - - 32,818 Acquisitions of businesses, net of cash acquired....................... 3,447 (225,256) (190,338) Net proceeds from disposition of discontinued operations............... 562,100 - - Other, net ............................................................ (92,534) (10,198) (5,507) ---------------- --------------- ---------------- Net cash provided by (used in) investing activities............... 407,117 (309,789) (253,992) ---------------- --------------- ---------------- FINANCING ACTIVITIES Issuance of long-term debt............................................. 12,235 453,475 213,658 Proceeds from (reduction of) participating interests in accounts receivable, net of redemptions............................. (13,000) 7,000 (17,000) Repayment and defeasance of long-term debt............................. (261,416) (286,406) (18,979) Net borrowings (repayments) on revolving credit facilities............. (194,000) 127,804 5,000 Purchases of treasury stock............................................ (19,715) (9,594) (11,736) Other, net ............................................................ (3,441) (17,473) 627 ---------------- --------------- ---------------- Net cash provided by (used in) financing activities............... (479,337) 274,806 171,570 ---------------- --------------- ---------------- Increase (decrease) in cash and cash equivalents....................... 9,690 13,337 (2,340) Cash and cash equivalents at beginning of year......................... 14,314 977 3,317 ---------------- --------------- ---------------- Cash and cash equivalents at end of year............................... $ 24,004 $ 14,314 $ 977 ================ =============== ================
The Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. F-4 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' DEFICIT (IN THOUSANDS)
FOREIGN OTHER CURRENCY PENSION COMMON PAID-IN ACCUMULATED TRANSLATION EQUITY TREASURY STOCK CAPITAL DEFICIT ADJUSTMENTS ADJUSTMENT STOCK TOTAL --------- ----------- -------------- ------------ ------------ ------------ ----------- BALANCE AT JANUARY 28, 1995 $ 705 $ 586,281 $ (976,549) $ (13,655) $ (9,404) $ - $ (412,622) Compensation expense adjustment..... - (567) - - - - (567) Net income.......................... - - 206,441 - - - 206,441 Purchase of treasury stock (1,542 shares).......................... - - - - - (11,736) (11,736) Exercise of stock options (95 shares) - (245) (31) - - 658 382 Foreign currency translation adjustments...................... - - - (10,064) - - (10,064) Pension equity adjustment........... - - - - 314 - 314 --------- ----------- -------------- ------------ ------------ ------------ ----------- BALANCE AT JANUARY 27, 1996 705 585,469 (770,139) (23,719) (9,090) (11,078) (227,852) Compensation expense adjustment..... - 60 - - - - 60 Net income.......................... - - 40,824 - - - 40,824 Purchase of treasury stock (1,420 shares).......................... - - - - - (9,594) (9,594) Exercise of stock options (69 shares) - (322) - - - 460 138 Foreign currency translation adjustments...................... - - - 2,921 - - 2,921 Pension equity adjustment........... - - - - (1,075) - (1,075) --------- ----------- -------------- ------------ ------------ ------------ ----------- BALANCE AT DECEMBER 28, 1996 705 585,207 (729,315) (20,798) (10,165) (20,212) (194,578) Compensation expense adjustment..... - 683 - - - - 683 Net income.......................... - - 155,235 - - - 155,235 Purchase of treasury stock (2,245 shares).......................... - - - - - (19,715) (19,715) Exercise of stock options (373 shares) - - (2,771) - - 3,156 385 Foreign currency translation adjustments...................... - - - (8,325) - - (8,325) Pension equity adjustment........... - - - - (535) - (535) --------- ----------- -------------- ------------ ------------ ------------ ----------- BALANCE AT DECEMBER 27, 1997 $ 705 $ 585,890 $ (576,851) $ (29,123) $ (10,700) $ (36,771) $ (66,850) ========= =========== ============== ============ ============ ============ ===========
The Notes to Consolidated Financial Statements are an integral part of these consolidated financial statements. F-5 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION: Collins & Aikman Corporation (the "Company") (formerly Collins & Aikman Holdings Corporation) is a Delaware corporation. As of December 27, 1997, Blackstone Capital Partners L.P. ("Blackstone Partners") and Wasserstein Perella Partners L.P. ("WP Partners") and their respective affiliates collectively own approximately 82% of the common stock of the Company. The Company conducts all of its operating activities through its wholly-owned Collins & Aikman Products Co. ("C&A Products") subsidiary. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: BASIS OF PRESENTATION - The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany items have been eliminated in consolidation. Certain prior year items have been reclassified to conform with the fiscal 1997 presentation and are primarily related to the reclassification of JPS Automotive L.P.'s ("JPS Automotive") discontinued airbag and industrial fabric operation ("Airbag"). See Note 15. The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. FISCAL YEAR - Fiscal 1997 was a 52-week year which ended on December 27, 1997. During fiscal 1996, the Company changed its fiscal year to end on the last Saturday of December. Fiscal 1996 was a 48-week year which ended on December 28, 1996. Fiscal 1995 was a 52-week year which ended on January 27, 1996. See Note 5. EARNINGS (LOSS) PER SHARE - Basic earnings per share is based on income available to common shareholders divided by the weighted average number of common shares outstanding. Diluted earnings per share is based on income available to common shareholders divided by the sum of the weighted average number of common shares outstanding and all diluted potential common shares. Diluted potential common shares include shares issued upon the assumed exercise of employee stock options less the number of treasury shares assumed to be purchased from the proceeds, including applicable compensation expense. See Note 25. CASH AND CASH EQUIVALENTS - Cash and cash equivalents include all cash balances and highly liquid investments with an original maturity of three months or less. ACCOUNTS AND OTHER RECEIVABLES - Accounts and other receivables consist primarily of the Company's trade receivables and the retained interest in the Receivables Facility. See Note 12. The Company has provided an allowance against uncollectible accounts. In June 1996, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities" ("SFAS No. 125") which was amended by Statement of Financial Accounting Standards No. 127, "Amendment to SFAS No. 125". SFAS No. 125, as amended, establishes standards of accounting for transfers of assets in which the transferor has some continuing involvement with the assets transferred or with the transferee. It also clarifies the accounting for arrangements whereby assets are set aside for the extinguishment of a liability. The Company adopted the provisions of SFAS No. 125 on December 29, 1996. The Company's Receivables Facility complies with the provisions of SFAS No. 125, and, accordingly, adoption of this statement did not have a material impact on the Company's consolidated financial position or results of operations. INVENTORIES - Inventories are valued at the lower of cost or market, but not in excess of net realizable value. Cost is determined on the first-in, first-out basis. INSURANCE DEPOSITS - Other current assets as of December 27, 1997 and December 28, 1996 included $1.2 million and $0.5 million, respectively, which were on deposit with an insurer to cover a portion of the self-insured portion of the Company's workers' compensation, automotive and general liability insurance. The Company's reserves for these claims were determined based upon actuarial analyses and aggregated $21.3 million and $18.0 million at December 27, 1997 and December 28, 1996, respectively. Of these reserves, $4.7 million were classified in current liabilities at December 27, 1997 and December 28, 1996. F-6 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PROPERTY, PLANT AND EQUIPMENT - Property, plant and equipment are stated at cost. Provisions for depreciation are primarily computed on a straight-line basis over the estimated useful lives of the assets, presently ranging from 3 to 40 years. Leasehold improvements are amortized over the lesser of the lease term or the estimated useful lives of the improvements. LONG LIVED ASSETS - In the fourth quarter of fiscal 1995, the Company adopted Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121"). SFAS No. 121 establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed of. SFAS No. 121 requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, and that certain long-lived assets and identifiable intangibles to be disposed of be reported at the lower of carrying amount or fair value less cost to sell. The adoption of SFAS No. 121 did not have a material impact on the Company's consolidated results of operations. During the third quarter of fiscal 1997, Collins & Aikman Plastics, Inc. ("C&A Plastics"), a wholly-owned subsidiary of the Company, incurred charges of $31.3 million for provisions for certain programs operating at a loss, inventory adjustments, certain previously deferred costs and other provisions. These charges primarily related to manufacturing inefficiencies experienced by C&A Plastics related to product launches and record volume for its products. In addition, the recoverability of C&A Plastics' assets and goodwill was evaluated and the Company determined that the carrying values of certain assets and the goodwill allocated to two of its manufacturing facilities were impaired. Accordingly, the Company wrote down fixed assets by $5.1 million and the carrying value of goodwill was reduced by $17.5 million. The adjustments were determined based on management's estimate of the future cash flows generated by the assets and their values. GOODWILL - Goodwill, representing the excess of purchase price over the fair value of net assets of the acquired entities, is being amortized on a straight-line basis over a period of forty years. Amortization of goodwill applicable to continuing operations for fiscal years 1997 and 1996 was $6.7 million and $3.9 million, respectively. Accumulated amortization at December 27, 1997 and December 28, 1996 was $10.9 million, and $4.2 million, respectively. The carrying value of goodwill at an enterprise level is reviewed periodically based on the non-discounted cash flows and pretax income of the entities acquired over the remaining amortization periods. At December 27, 1997, the Company believes the recorded value of goodwill in the amount of $263.0 million is fully recoverable. See Note 3. DERIVATIVE FINANCIAL INSTRUMENTS - The Company utilizes derivative financial instruments to manage risks associated with foreign exchange rate and interest rate market volatility. Gains and losses on hedges of existing assets or liabilities are included in the carrying amounts of those assets or liabilities and are ultimately recognized in income as part of those carrying amounts. Gains and losses related to qualifying hedges of firm commitments or anticipated transactions are deferred and are recognized in income or as adjustments of carrying amounts when the hedged transaction occurs. Gains and losses on derivative contracts that do not qualify as hedges are recognized currently in other income (expense). The Company does not hold or issue derivative financial instruments for trading purposes. See Note 6. To the extent that a qualifying hedge is terminated or ceases to be effective as a hedge, any deferred gains and losses up to that point continue to be deferred and are included in the basis of the underlying transaction. To the extent that the anticipated transactions are no longer likely to occur, the related hedges are closed with gains or losses charged to earnings on a current basis. FOREIGN CURRENCY - Foreign currency activity is reported in accordance with Statement of Financial Accounting Standards No. 52, "Foreign Currency Translation" ("SFAS No. 52"). SFAS No. 52 generally provides that the assets and liabilities of foreign operations be translated at the current exchange rates as of the end of the accounting period and that revenues and expenses be translated using average exchange rates. The resulting translation adjustments arising from foreign currency translations are accumulated as a separate component of common stockholders' deficit. Gains and losses resulting from foreign currency transactions are recognized in other income (expense). Recorded balances that are denominated in a currency other than the functional currency are adjusted to reflect the exchange rate at the balance sheet date. ENVIRONMENTAL - The Company records its best estimate when it believes it is probable that an environmental liability has been incurred and the amount of loss can be reasonably estimated. The Company also considers estimates of certain reasonably possible environmental liabilities in determining the aggregate amount of environmental reserves. Accruals for environmental liabilities are generally included in the consolidated balance sheet as other non-current F-7 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS liabilities at undiscounted amounts and exclude claims for recoveries from insurance or other third parties. Accruals for insurance or other third party recoveries for environmental liabilities are recorded when it is probable that the claim will be realized. In October 1996, the American Institute of Certified Public Accountants issued Statement of Position 96-1, "Environmental Remediation Liabilities" ("SOP 96-1"). SOP 96-1 provides authoritative guidance on specific accounting issues related to the recognition, measurement, display and disclosure of environmental remediation liabilities. SOP 96-1 addresses only those actions undertaken in response to a threat of litigation or assertion of a claim. It does not address accounting for pollution control costs with respect to current operations or for costs of future site restoration or closure required upon cessation of operations. The Company adopted the provisions of SOP 96-1 on December 29, 1996. Adoption of this standard did not have a material impact on the Company's consolidated financial position or results of operations. NEWLY ISSUED ACCOUNTING STANDARDS - In June 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No. 130 establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. SFAS No. 130 requires that an enterprise classify items of other comprehensive income by their nature in a financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional paid-in capital in the equity section of a statement of financial position. This statement is effective for fiscal years beginning after December 15, 1997. In June 1997, the FASB also issued Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS No. 131"). SFAS No. 131 requires that a public business enterprise report financial and descriptive information about its reportable operating segments. Generally, financial information is required to be reported on the basis that is used internally for evaluating segment performance. This statement also requires that a public business enterprise report descriptive information about the way that the operating segments were determined and the products and services provided by the operating segments. SFAS No. 131 is effective for financial statements for periods beginning after December 15, 1997. The Company has not determined the impact of this statement on its disclosure requirements. 3. ACQUISITIONS AND JOINT VENTURES: On December 4, 1997, the Company entered into a joint venture with Courtaulds Textiles (Holdings) Limited ("Courtaulds") to manufacture automotive interior fabrics in the United Kingdom. The Company and Courtaulds each own 50% of the joint venture. The Company's investment in the joint venture of $5.9 million has been included in other assets in the accompanying December 27, 1997 consolidated balance sheet. On October 29, 1997, the Company entered into a joint venture with Kigass Automotive Group ("Kigass") to manufacture automotive interior plastic trim products in the United Kingdom. The Company and Kigass each own 50% of the joint venture. The Company's investment in the joint venture of $0.7 million has been included in other assets in the accompanying December 27, 1997 consolidated balance sheet. On February 2, 1998, the Company acquired Kigass for approximately $24.2 million, subject to post closing adjustment. See Note 26. On August 31, 1997, the Company purchased certain automotive acoustics assets in Germany and assumed certain liabilities from Perstorp AB ("Perstorp") for approximately $13.6 million. On December 11, 1996, the Company acquired Perstorp's automotive supply operations (primarily acoustical products) in North America, the United Kingdom and Spain (collectively referred to as "Perstorp Components") for $108 million. In addition, in December 1996, the Company and Perstorp entered into a joint venture agreement (the "Collins & Aikman/Perstorp Joint Venture") relating to Perstorp's automotive supply operations (primarily acoustical and plastic components) in Sweden, Belgium and France. During 1997, the Company finalized the purchase price for the Perstorp Components acquisition with the seller. In settlement of disputed claims by the Company against Perstorp arising from the December 1996 and August 1997 acquisitions, Perstorp transferred its 50% interest in the Collins & Aikman/Perstorp Joint Venture to the Company on December 16, 1997. The Company is in the process of finalizing the allocation of the purchase price for the newly-acquired interest. Goodwill resulting from these 1996 and 1997 acquisitions is approximately $25.0 million. F-8 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On December 11, 1996, the Company also acquired JPS Automotive for $220 million, consisting of approximately $195 million of indebtedness of JPS Automotive and approximately $25 million of cash. The Company also acquired the minority interest in a JPS Automotive subsidiary for $10 million. The purchase price allocation related to the JPS Automotive acquisition established certain reserves related to management's plans to rationalize certain acquired manufacturing facilities. See Note 16. During 1997, the Company finalized the purchase price and received approximately $11.2 million from the seller as a reduction of the purchase price. On May 1, 1996, the Company acquired the business of BTR Fatati Limited ("Fatati"), a manufacturer and supplier of molded floor carpets and luggage compartment trim for the European automotive market. On January 3, 1996, the Company completed the acquisition of C&A Plastics (formerly known as Manchester Plastics) for a purchase price of approximately $184.0 million, including $40.4 million of debt extinguished in connection with the acquisition. In November 1995, the Company acquired certain assets of Amco Manufacturing Corporation and its Mexican affiliate, Omca, Inc. (collectively "Amco"), for approximately $7 million. The results of operations of the acquired companies are included in the Company's consolidated statements of operations for the periods in which they were owned by the Company. The acquisitions were accounted for under the purchase method of accounting. The excess of the purchase price for each acquisition over the estimated fair value of the tangible and identifiable intangible net assets acquired is being amortized over a period of forty years on a straight line basis. In determining the amortization period of goodwill assigned to these automotive industry acquisitions, management assessed the impact of these acquisitions on the Company's ability to strategically position itself with the long term trends in the design and manufacture of automotive products. The trends that management has identified are the increased use of plastic components, the increased sourcing of interior systems and U.S. automotive manufacturers' movement to fewer suppliers and to suppliers with engineering and design capabilities. The Company anticipates the reduction in the supply chain will result in integration whereby the complete interior of an automobile will be co-designed and developed with fewer suppliers who will manufacture and deliver required components. The Company anticipates these capabilities will be essential to its long term strategic positioning as a key supplier within the automotive industry and with its customers. 4. PRO FORMA INFORMATION: Set forth below are unaudited pro forma consolidated results from continuing operations assuming (i) the fiscal 1997 acquisition of Perstorp's interest in the Collins & Aikman/Perstorp Joint Venture (see Note 3) had occurred as of the beginning of fiscal 1997 and 1996, (ii) the 1996 acquisitions of JPS Automotive and Perstorp Components had occurred as of the beginning of fiscal 1996, and (iii) the issuance of the Subordinated Notes, the application of the net proceeds to pay down indebtedness and the amendments to the Bank Credit Facilities (as defined in Note 11) had occurred as of the beginning of fiscal 1996 (in thousands, except per share amounts):
FISCAL YEAR ENDED ---------------------------------------------------- DECEMBER 27, 1997 DECEMBER 28, 1996 -------------------------- ------------------------ (52 WEEKS) (48 WEEKS) Net sales.......................................................... $ 1,768,944 $ 1,539,741 Operating income................................................... 89,478 126,870 Interest expense, net.............................................. 80,624 72,406 Loss on the sale of receivables.................................... 4,700 4,533 Income (loss) from continuing operations........................... (8,201) 29,952 Income (loss) from continuing operations per common share: Per basic common share.......................................... $ (0.12) $ 0.43 Per diluted common share........................................ (0.12) 0.43 Average shares outstanding: Basic........................................................... 66,337 68,997 Diluted......................................................... 66,337 69,887
F-9 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS After giving effect to the adjustments above, net income (loss) for fiscal 1997 and 1996 on a pro forma basis would have been $157.1 million and $42.4 million, respectively. Set forth below are unaudited pro forma consolidated results from continuing operations assuming (i) the fiscal 1996 acquisitions of JPS Automotive and Perstorp Components (see Note 3) had occurred as of the beginning of fiscal 1996 and 1995, (ii) the issuance of the Subordinated Notes, the application of the net proceeds to pay down indebtedness and the amendment to the Bank Credit Facilities (as defined in Note 11) had occurred as of the beginning of fiscal 1996 and 1995 and (iii) the fiscal 1995 acquisitions of C&A Plastics and Amco (see Note 3) had occurred as of the beginning of fiscal 1995 (in thousands, except per share amounts):
FISCAL YEAR ENDED --------------------------------------------------------- DECEMBER 28, 1996 JANUARY 27, 1996 ---------------------------- -------------------------- (48 WEEKS) (52 WEEKS) Net sales..................................................... $ 1,414,828 $ 1,554,114 Operating income.............................................. 123,635 136,547 Interest expense, net......................................... 69,088 73,786 Loss on the sale of receivables............................... 4,533 6,246 Income from continuing operations............................. 29,819 196,457 Income from continuing operations: Per basic common share..................................... $ 0.43 $ 2.81 Per diluted common share................................... 0.43 2.76 Average common shares outstanding: Basic...................................................... 68,997 70,015 Diluted.................................................... 69,887 71,181
After giving effect to the adjustments above, net income for fiscal 1996 and 1995 on a pro forma basis would have been $42.1 million and $189.3 million, respectively. The extraordinary loss in fiscal 1996 would have been eliminated because the pro forma adjustments assume that the transaction that created the extraordinary loss would have occurred at the beginning of the year. Set forth below are unaudited pro forma consolidated results from continuing operations assuming (i) the fiscal 1995 acquisitions of C&A Plastics and Amco (see Note 3) had occurred as of the beginning of fiscal 1995 and 1994 (ii) the July 1994 common stock offering and recapitalization had occurred as of the beginning of fiscal 1994 (in thousands, except per share amounts):
FISCAL YEAR ENDED --------------------------------------------------------- JANUARY 27, 1996 JANUARY 28, 1995 ------------------------ -------------------------- (52 WEEKS) (52 WEEKS) Net sales.............................................. $ 1,084,080 $ 1,084,094 Operating income....................................... 99,947 127,365 Interest expense, net.................................. 37,050 39,713 Loss on the sale of receivables........................ 6,246 7,799 Income from continuing operations...................... 196,362 65,729 Income from continuing operations: Per basic common share............................. $ 2.80 $ 1.26 Per diluted common share........................... 2.76 1.26 Average common shares outstanding: Basic.............................................. 70,015 52,186 Diluted............................................ 71,181 52,186
After giving effect to the adjustments above, net income for fiscal 1995 and 1994 would have been $195.6 million and $118.5 million, respectively. The pro forma adjustments identified above for fiscal 1995 would not impact the results from discontinued operations as presented. The income from discontinued operations for fiscal 1994 after giving effect to the pro forma adjustments would have increased as a result of reduced allocated interest expense. The extraordinary loss in fiscal 1994 would have been eliminated as a result of the recapitalization occurring at the beginning of fiscal 1994. F-10 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 5. CHANGE IN FISCAL YEAR: During fiscal 1996, the Company changed its fiscal year-end to the last Saturday in December. As a result of this change, fiscal 1996 was a 48-week period. The following information presents comparative data for the 52 and 53-week periods ended December 27, 1997 and December 28, 1996 (in thousands, except per share amounts):
PERIOD ENDED -------------------------------------------- DECEMBER 28, 1996 DECEMBER 27, 1997 (UNAUDITED) (52 WEEKS) (53 WEEKS) ----------------- ------------------ Net sales.......................................................... $ 1,629,332 $ 1,140,027 Operating income................................................... 84,510 108,796 Income (loss) from continuing operations........................... (10,091) 185,008 Income (loss) from discontinued operations......................... 4,306 (6,752) Gain on sale of discontinued operations............................ 161,741 - Extraordinary loss................................................. (721) (6,610) Net income......................................................... 155,235 171,646 Net income (loss) per basic share: Continuing operations............................................ $ (0.15) $ 2.68 Discontinued operations.......................................... 0.06 (0.10) Gain on sale of discontinued operations.......................... 2.44 - Extraordinary loss............................................... (0.01) (0.10) ----------------- ------------------ Net income....................................................... $ 2.34 $ 2.48 ================= ================== Net income (loss) per diluted share: Continuing operations............................................ $ (0.15) $ 2.65 Discontinued operations.......................................... 0.06 (0.10) Gain on sale of discontinued operations.......................... 2.44 - Extraordinary loss............................................... (0.01) (0.10) ----------------- ------------------ Net income....................................................... $ 2.34 $ 2.45 ================= ==================
The following information presents comparative data for the 48 and 47-week periods ended December 28, 1996 and December 23, 1995 (in thousands, except per share amounts):
PERIOD ENDED -------------------------------------------- DECEMBER 23, 1995 DECEMBER 28, 1996 (UNAUDITED) (48 WEEKS) (47 WEEKS) ----------------- ------------------ Net sales.......................................................... $ 1,053,821 $ 815,811 Operating income................................................... 101,904 88,767 Income from continuing operations.................................. 32,966 55,180 Income from discontinued operations................................ 14,468 20,440 Extraordinary loss................................................. (6,610) - Net income......................................................... 40,824 75,620 Net income (loss) per basic share: Continuing operations............................................ $ 0.48 $ 0.79 Discontinued operations.......................................... 0.21 0.29 Extraordinary loss............................................... (0.10) - ----------------- ------------------ Net income....................................................... $ 0.59 $ 1.08 ================= ================== Net income (loss) per diluted share: Continuing operations............................................ $ 0.47 $ 0.77 Discontinued operations.......................................... 0.21 0.29 Extraordinary loss............................................... (0.10) - ----------------- ------------------ Net income....................................................... $ 0.58 $ 1.06 ================= ==================
F-11 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 6. INTEREST RATE AND FOREIGN CURRENCY PROTECTION PROGRAMS: The Company has limited its exposure through April 2, 1998 on $80 million of notional principal amount utilizing zero cost collars with 4.75% floors and a weighted average cap of 7.86%. In addition, during April 1997, the Company entered into a two year interest rate swap agreement in which the Company effectively exchanged $27 million of 11-1/2% fixed rate debt for floating rate debt at six month LIBOR plus a 4.72% margin. In connection with this swap agreement, the Company also limited its interest rate exposure by entering into an 8.50% cap on LIBOR on $27 million of notional principal amount. Payments to be received, if any, as a result of these agreements are accrued as an adjustment to interest expense. The effect of the above interest rate protection agreements on the operating results of the Company was to decrease interest expense by $0.1 million in fiscal 1997 and increase interest expense by $0.7 million and $0.7 million in fiscal 1996 and 1995, respectively. The primary purpose of the Company's foreign currency hedging activities is to protect against the volatility associated with foreign currency purchase transactions. Corporate policy prescribes the range of allowable hedging activity. The Company primarily utilizes forward exchange contracts and purchased options with durations of generally less than 12 months. The Company has in place forward exchange contracts denominated in multiple currencies which will mature during fiscal 1998. These contracts, which aggregated a U.S. dollar equivalent of $13.0 million at December 27, 1997, are to manage the currency volatility associated with purchase transactions. The fair value of these contracts approximated the contract value at December 27, 1997. During April 1997, the Company entered into an agreement to limit its foreign currency exposure related to $45 million of US dollar denominated borrowings of a Canadian subsidiary. The agreement swaps LIBOR based interest rates for the Canadian equivalent as well as fixes the exchange rate for the principal balance when the remaining amount comes due in 2002. During fiscal 1997, this agreement resulted in reductions of interest expense and other expenses of approximately $1.7 million. At December 27, 1997, the remaining $18 million of U.S. dollar denominated borrowings of the Canadian subsidiary were hedged under this agreement. See Note 11. 7. INVENTORIES: Inventory balances are summarized below (in thousands):
DECEMBER 27, DECEMBER 28, 1997 1996 ------------------ ------------------ Raw materials................................................. $ 72,862 $ 60,438 Work in process............................................... 31,066 26,192 Finished goods................................................ 38,114 35,341 ------------------ ------------------ $ 142,042 $ 121,971 ================== ==================
8. OTHER CURRENT ASSETS: Other current asset balances are summarized below (in thousands):
DECEMBER 27, DECEMBER 28, 1997 1996 ------------------ ------------------ Deferred tax assets........................................... $ 33,345 $ 63,911 Prepaid tooling and molds..................................... 32,460 24,319 Other......................................................... 26,311 40,532 ------------------ ------------------ $ 92,116 $ 128,762 ================== ==================
F-12 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 9. PROPERTY, PLANT AND EQUIPMENT, NET: Property, plant and equipment, net, are summarized below (in thousands):
DECEMBER 27, DECEMBER 28, 1997 1996 ------------------ ------------------ Land and improvements......................................... $ 24,177 $ 26,511 Buildings..................................................... 129,507 118,137 Machinery and equipment....................................... 414,136 375,294 Leasehold improvements........................................ 1,830 1,840 Construction in progress...................................... 30,589 19,149 ------------------ ------------------ 600,239 540,931 Less accumulated depreciation and amortization................ (212,152) (189,649) ------------------ ------------------ $ 388,087 $ 351,282 ================== ==================
Depreciation and leasehold amortization of property, plant and equipment applicable to continuing operations was $42.7 million, $24.5 million, and $24.1 million for fiscal 1997, 1996 and 1995, respectively. 10. ACCRUED EXPENSES: Accrued expenses are summarized below (in thousands):
DECEMBER 27, DECEMBER 28, 1997 1996 ------------------ ------------------ Payroll and employee benefits................................. $ 40,181 $ 51,777 Interest...................................................... 15,495 15,023 Other......................................................... 92,525 109,347 ------------------ ------------------ $ 148,201 $ 176,147 ================== ==================
11. LONG-TERM DEBT: Long-term debt is summarized below (in thousands):
DECEMBER 27, DECEMBER 28, 1997 1996 ------------------ ------------------ Bank Credit Facilities: Revolving Credit Facility.................................. $ 10,000 $ 204,000 Term Loan Facility......................................... 17,566 190,333 Term Loan B Facility....................................... 167,380 193,250 Delayed Draw Term Loan..................................... 23,845 53,000 Public Indebtedness: 11-1/2% Senior Subordinated Notes.......................... 400,000 400,000 JPS Automotive 11-1/8% Senior Notes........................ 91,843 117,221 Other......................................................... 72,043 17,790 ------------------ ------------------ Total debt.................................................... 782,677 1,175,594 Less current maturities....................................... (30,301) (37,565) ------------------ ------------------ $ 752,376 $ 1,138,029 ================== ==================
F-13 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS BANK CREDIT FACILITIES The Bank Credit Facilities of C&A Products consist of a (i) $250 million Revolving Credit Facility due July 2001, (ii) $195 million Term Loan Facility due in quarterly installments through July 2002, (iii) Term Loan B Facility in the original principal amount of $195.8 million due in quarterly installments through December 2002 and (iv) Delayed Draw Term Loan Facility, which was entered into in December 1996 and is payable in quarterly installments through March 2002. In June 1996, the Company amended and restated the Revolving Credit, Term Loan, and Term Loan B Facilities in connection with the sale of $400 million in Senior Subordinated Notes (discussed below). The amendment resulted in the use of proceeds from such sale to repay various outstanding amounts under the Revolving and Term Loan Facilities. In connection with such amendment and repayment, the Company recognized a non-cash extraordinary charge of $6.6 million, net of income taxes of $4.7 million. In December 1996, in connection with the acquisition of JPS Automotive, the Company amended the Revolving Credit, Term Loan and Term Loan B Facilities to allow for the existence of the JPS Automotive 11-1/8% Senior Notes ("JPS Automotive Senior Notes") and to allow the Company to retain proceeds from the sale of the Company's Floorcoverings subsidiary ("Floorcoverings"). Additionally, in December 1996, the Company entered into a $200 million Delayed Draw Term Loan Facility to finance or refinance the purchase of JPS Automotive Senior Notes. As of December 11, 1997, the Company was no longer entitled to draw additional funds against the Delayed Draw Term Loan Facility. At December 27, 1997, the Delayed Draw Term Loan Facility outstanding balance was $23.8 million, and is due in quarterly installments of approximately $2.2 million beginning in July 1999 and ending January 2002. The $23.8 million was drawn to refinance and repurchase a portion of the $68 million of JPS Automotive Senior notes purchased by the Company prior to its acquisition of JPS Automotive and subsequently retired by JPS Automotive. The Company used the majority of the proceeds received from the 1997 dispositions of the discontinued operations (described in Note 15 below) to repay indebtedness. In conjunction with the February 1997 disposition of Floorcoverings, the Company applied approximately $100.0 million of the net proceeds to the Revolving Credit Facility and $30.0 million of such proceeds against the Receivables Facility (see Note 12). Under the terms of the credit agreement, the Company was required to apply approximately $78.4 million of the proceeds received in the Mastercraft Group disposition as repayment of the Term Loan Facility and the Term Loan B Facility (together the "Term Loan Facilities"). In December 1997, the Company repaid $88.5 million under the Term Loan Facility (including $27.0 million on the Canadian facility), $13.5 million on the Term Loan B Facility and $13.0 million on the Delayed Draw Term Loan Facility. As a result of these repayments, the Company is not required to make quarterly installments on the Term Loan Facilities until 1999. The Bank Credit Facilities, which are guaranteed by the Company and its U.S. subsidiaries (subject to certain exceptions), contain restrictive covenants including maintenance of EBITDA (i.e. earnings before interest, taxes, depreciation, amortization and other non-cash charges) and interest coverage ratios, leverage and liquidity tests and various other restrictive covenants which are customary for such facilities. In addition, C&A Products is generally prohibited from paying dividends or making other distributions to the Company except for the Company's expenses and for permitted dividends or stock repurchases and in certain other circumstances. Dividends paid are limited to a maximum of $12 million per fiscal year unless certain conditions are satisfied (in which case the Bank Credit Facilities limit dividends paid in any year to a maximum of 25% of net income for the prior year and amounts representing net proceeds from the sale of Imperial Wallcoverings Inc. subsidiary ("Wallcoverings"). In addition, the Bank Credit Facilities provide for mandatory prepayments with certain excess cash flows of the Company and certain other transactions. After giving effect to waivers obtained for fiscal 1997, the Company was in compliance with all restrictive covenants at December 27, 1997. The Company's obligations under the Bank Credit Facilities are secured by a pledge of the stock of C&A Products and its significant subsidiaries. Indebtedness under the Term Loan Facility, Revolving Credit Facility and the Delayed Draw Term Loan bears interest at a per annum rate equal to the Company's choice of (i) Chase Manhattan Bank's ("Chase's") Alternate Base Rate plus a margin (the "ABR Margin") ranging from 0% to .75% or (ii) the offered rates for Eurodollar deposits ("LIBOR") plus a margin (the "LIBOR Margin") ranging from 1% to 1.75%. Pursuant to the terms of the Term Loan Facility, the F-14 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Revolving Credit Facility and the Delayed Draw Term Loan Facility, at December 27, 1997, the ABR Margin is .75% and the LIBOR Margin is 1.75%. Indebtedness under the Term Loan B Facility bears interest at a per annum rate equal to the Company's choice of (i) Chase's Alternate Base Rate plus a margin of 1.25% or (ii) the offered rates for LIBOR plus a margin of 2.25%. The weighted average rate of interest on the balances outstanding under the Bank Credit Facilities at December 27, 1997 was 8.0%. The Company had a total of $229.0 million of borrowing availability under the Bank Credit Facilities and other credit lines as of December 27, 1997. The total is comprised of approximately $217.8 million under the Revolving Facility, approximately $10.9 million under demand lines of credit in Canada and Austria and approximately $0.3 million under a C&A Plastics demand line of credit. At December 27, 1997, the Company had approximately $22.1 million outstanding in letters of credit. PUBLIC INDEBTEDNESS: In June 1996, the Company's wholly-owned subsidiary, C&A Products, issued at face value $400 million principal amount of 11-1/2% Senior Subordinated Notes due 2006 (the "Subordinated Notes"), which are guaranteed by the Company. The Company used approximately $356.8 million of the total net proceeds of $387.0 million to repay $348.2 million principal amount of outstanding bank borrowings plus accrued interest on such borrowings and related fees and expenses and used the remainder for general corporate purposes. The indenture governing the Subordinated Notes generally prohibits the Company, C&A Products and any Restricted Subsidiary (as defined) from making certain payments and investments unless a certain financial test is satisfied and the aggregate amount of such payments and investments since the issue date is less than a specified amount. The prohibition is subject to a number of significant exceptions, including dividends to stockholders of the Company or stock repurchases not exceeding $10 million in any fiscal year or $20 million in the aggregate, dividends to stockholders of the Company or stock repurchases in the amount of the net proceeds from the sale of Wallcoverings and dividends to the Company to permit it to pay its operating and administrative expenses. The Subordinated Notes indenture also contains other restrictive covenants (including, among others, limitations on the incurrence of indebtedness, asset dispositions and transactions with affiliates) which are customary for such securities. These covenants are also subject to a number of significant exceptions. On the JPS Automotive acquisition date, $180 million principal amount of JPS Automotive 11-1/8% Senior Notes due 2001 (the "JPS Automotive Senior Notes") were outstanding. Of this amount, $68 million had been purchased by the Company in the open market and were subsequently contributed to or repurchased by JPS Automotive. The remaining $112 million face value of JPS Automotive Senior Notes were recorded at a market value of $117.2 million on the date of the acquisition. Holders of the JPS Automotive Senior Notes had the right to put their notes to JPS Automotive at a price of 101% of their principal amount plus accrued interest as a result of the JPS Automotive acquisition. Approximately $3.9 million principal amount of JPS Automotive Senior Notes were so put to JPS Automotive and then repurchased by JPS Automotive on March 10, 1997. In addition, JPS Automotive repurchased $23 thousand of JPS Automotive Senior notes in conjunction with an offer to purchase as a result of the 1997 sale of the Airbag subsidiary. See Note 15. In addition, during 1997, JPS Automotive purchased $19.4 million of JPS Automotive Senior Notes in the open market. These notes were subsequently retired. The indenture governing the JPS Automotive Senior Notes generally prohibits JPS Automotive from making certain payments and investments (generally, dividends and distributions on its equity interests; purchases or redemptions of its equity interests; purchases of any indebtedness subordinated to the JPS Automotive Senior Notes; and investments other than as permitted) unless a certain financial test is satisfied and the aggregate amount of such payments and investments since the issue date is less than a specified amount (the "JPS Automotive Restricted Payments Tests"). These conditions were satisfied immediately following the closing of the JPS Automotive Acquisition. The JPS Automotive Restricted Payments Tests are subject to a number of significant exceptions. The indenture governing the JPS Automotive Senior Notes also contains other restrictive covenants (including, among others, limitations on the incurrence of indebtedness and preferred stock, asset dispositions and transactions with affiliates including the Company and C&A Products) which are customary for such securities. These covenants are also subject to a number of significant exceptions. OTHER INDEBTEDNESS: The Company has outstanding indebtedness totaling approximately $49.8 million at its subsidiaries operating in Sweden, Belgium and France constituting the former operations of the Collins & Aikman/Perstorp Joint Venture. This debt consists of: (i) a 120 million Swedish krona loan ($15.5 million at December 27, 1997), which bears interest at the Stockholm interbank offered rate for Krona - denominated deposits ("STIBOR") plus 0.75% and is secured by a pledge of the operating assets of the Swedish operating subsidiary; (ii) a 108 million Swedish krona loan ($13.9 million at December 27, 1997), which bears interest at STIBOR plus 0.75% and is due in June 1998; (iii) a 100 million Swedish krona loan ($12.9 million at December 27, 1997), which bears interest at F-15 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS STIBOR plus 1% and was repaid in February 1998; and (iv) a 200 million Belgium franc loan ($5.5 million at December 27, 1997), which bears interest at the Brussels interbank offered rate for deposits denominated in Belgian francs ("BIBOR") plus 1% and is secured by a pledge of the operating assets of the Belgian operating subsidiary. In addition, Perstorp has provided a loan in the amount of 75 million Belgian francs ($2.0 million at December 27, 1997), to the Belgian subsidiary, which bears interest at BIBOR plus 1% and is due on August 1, 1998. At December 27, 1997, the scheduled annual maturities of long-term debt are as follows (in thousands): FISCAL YEAR ENDING December 1998........................................ $ 30,301 December 1999........................................ 28,205 December 2000........................................ 59,877 December 2001........................................ 128,859 December 2002........................................ 80,903 Later Years.......................................... 454,532 --------- $ 782,677 ========= Total interest paid by the Company on all indebtedness was $93.0 million, $60.0 million, and $45.8 million for fiscal 1997, 1996 and 1995, respectively. 12. RECEIVABLES FACILITY: During fiscal 1994, C&A Products and certain of its subsidiaries (the "Sellers") sold approximately $190.0 million of customer trade receivables to Carcorp, Inc. ("Carcorp"), a wholly-owned, bankruptcy remote subsidiary of C&A Products which, in turn, sold an undivided senior interest in the receivables pool for $136.8 million to Chase pursuant to a Receivables Transfer and Servicing Agreement with Chase, as administrative agent (the "Bridge Receivables Facility"). On March 31, 1995, C&A Products repaid the Bridge Receivables Facility and entered, through a trust formed by Carcorp, into the Receivables Facility, comprised of (i) term certificates, which were issued on March 31, 1995, in an aggregate face amount of $110 million and have a term of five years and (ii) variable funding certificates, which represent revolving commitments of up to an aggregate of $75 million and have a term of five years. Carcorp purchases on a revolving basis and transfers to the trust virtually all trade receivables generated by the "Sellers. The certificates represent the right to receive payments generated by the receivables held by the trust. In connection with the proposed disposition by the Company of Wallcoverings, as discussed in Note 15, Wallcoverings was terminated as a Seller of receivables under the Receivables Facility on September 21, 1996. Also, in connection with the sale of Floorcoverings, as discussed in Note 15, Floorcoverings was terminated as a Seller of receivables under the Receivables Facility on February 6, 1997. On March 25, 1997, the Trust redeemed $30.0 million face value of term certificates primarily as a result of the Trust collecting Wallcoverings and Floorcoverings receivables which were not replaced with eligible receivables. In connection with the sale of the Mastercraft Group, as discussed in Note 15, effective July 16, 1997, receivables generated by members of the Mastercraft Group ceased to be sold and Ack-Ti-Lining, Inc., a member of the Mastercraft Group, was terminated as a Seller of receivables under the Receivables Facility. On November 25, 1997, the Trust redeemed $30.0 million face value of term certificate as a result of the Trust collecting Mastercraft receivables which were not replaced with eligible receivables. Effective June 2, 1997, C&A Plastics and its subsidiaries and the domestic operations of Amco were added as Sellers of receivables under the Receivables Facility. Availability under the variable funding certificates at any time depends primarily on the amount of receivables generated by the Sellers from sales to the automotive industry, the rate of collection on those receivables and other characteristics of those receivables that affect their eligibility (such as bankruptcy or downgrading below investment grade of the obligor, delinquency and excessive concentration). Based on these criteria, at December 27, 1997 approximately $75.0 million was available under the variable funding certificates, of which $72.0 million was utilized. As of December 27, 1997, $50.0 million of the term certificates remained outstanding. In connection with the receivables sales, losses of $4.7 million, $4.5 million, and $6.2 million were incurred for continuing operations in fiscal 1997, 1996, and 1995 respectively. F-16 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS As of December 27, 1997 and December 28, 1996, Carcorp's total receivables pool was $193.4 million and $178.0 million, respectively. As of December 27, 1997 and December 28, 1996, the holders of term certificates and variable funding certificates collectively had invested $122.0 million and $135.0 million, respectively, to purchase an undivided senior interest (net of settlements in transit) in the trust's receivables pool and, accordingly, such receivables were not reflected in the Company's accounts and other receivables balances as of those dates. 13. LEASE COMMITMENTS: The Company is lessee under various long-term operating leases for land and buildings for periods up to forty years. The majority of these leases contain renewal provisions. In addition, the Company leases transportation, operating and administrative equipment for periods ranging from one to ten years. On September 30, 1994, the Company entered into a master equipment lease agreement. Pursuant to that agreement, during fiscal 1995 the Company sold and leased back equipment utilized in its manufacturing operations. During fiscal 1995, equipment of its continuing operations having aggregate net book values totaling $18.8 million was removed from the balance sheet and gains realized on the sale totaling approximately $.1 million, were deferred and are being recognized as an adjustment to rent expense over the lease terms. Payments under the lease began in 1995 and the Company made lease payments related to continuing operations of approximately $5.6 million, $4.0 million and $4.6 million for fiscal 1997, 1996, and 1995, respectively. The Company has a purchase option on the equipment at the end of the lease term based on the fair market value of the equipment and has additional options to cause the sale of some or all of the equipment or to purchase some or all of the equipment at prices determined under the agreement. The Company has classified the leases as operating. The Company may sell and lease back additional equipment in the future under the same master lease agreement, subject to the lessor's approval. At December 27, 1997, future minimum lease payments under operating leases for continuing operations are as follows (in thousands): FISCAL YEAR ENDING December 1998........................................ $ 18,606 December 1999........................................ 17,427 December 2000........................................ 15,409 December 2001........................................ 13,862 December 2002........................................ 12,374 Later years........................................... 11,892 ------------ $ 89,570 ============ Rental expense of continuing operations under operating leases was $15.4 million, $15.2 million, and $13.2 million for fiscal 1997, 1996 and 1995, respectively. Obligations under capital leases are not significant. 14. EMPLOYEE BENEFIT PLANS: DEFINED BENEFIT PLANS Subsidiaries of the Company have defined benefit pension plans covering substantially all employees who meet eligibility requirements. Plan benefits are generally based on years of service and employees' compensation during their years of employment. Funding of retirement costs for these plans complies with the minimum funding requirements specified by the Employee Retirement Income Security Act. Assets of the pension plans are invested primarily in equity and fixed income securities. F-17 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The net periodic pension cost of continuing operations for fiscal 1997, 1996 and 1995 includes the following components (in thousands):
DECEMBER 27, DECEMBER 28, JANUARY 27, 1997 1996 1996 ----------------- ------------------ ----------------- (52 WEEKS) (48 WEEKS) (52 WEEKS) Service cost................................................. $ 7,294 $ $4,043 $ 3,341 Interest cost on projected benefit obligation and service cost.............................................. 9,640 6,905 6,218 Actual gain on assets........................................ (13,027) (11,066) (9,446) Net amortization and deferral................................ 3,475 4,773 4,922 ----------------- ------------------ ----------------- Net periodic pension cost.................................... $ 7,382 $ 4,655 $ 5,035 ================= ================== =================
The following table sets forth the plans' funded status and amounts recognized in the Company's consolidated balance sheets, excluding Wallcoverings, Floorcoverings, Airbag, and the Mastercraft Group at December 27, 1997 and December 28, 1996 (in thousands):
DECEMBER 27, 1997 DECEMBER 28, 1996 ------------------------------------- ------------------------------------- ASSETS ACCUMULATED ASSETS ACCUMULATED EXCEED BENEFITS EXCEED BENEFITS ACCUMULATED EXCEED ACCUMULATED EXCEED BENEFITS ASSETS BENEFITS ASSETS ----------------- ------------------ ----------------- ------------------ Actuarial present value of benefit obligations: Vested benefit obligation..................... $ (31,255) $ (94,945) $ (24,633) $ (81,046) ================= ================== ================= ================== Accumulated benefit obligation................ $ (32,356) $ (102,789) $ (25,417) $ (89,982) ================= ================== ================= ================== Projected benefit obligation.................. (34,151) (107,644) (28,068) (95,995) Plan assets at fair value......................... 39,791 82,259 35,923 73,382 ----------------- ------------------ ----------------- ------------------ Projected benefit obligation less than (in excess of) plan assets....................... 5,640 (25,385) 7,855 (22,613) Unrecognized net loss (gain)...................... (113) 17,995 (1,401) 13,700 Prior service amounts not yet recognized in net periodic pension cost....................... 1,649 (2,107) 907 (2,664) Adjustment required to recognize minimum liability....................................... - (12,175) - (7,359) ----------------- ------------------ ----------------- ------------------ Pension asset (liability) recognized in the consolidated balance sheets ................... $ 7,176 $ (21,672) $ 7,361 $ (18,936) ================= ================== ================= ==================
The weighted average discount rate used in determining the above actuarial present value of the projected benefit obligation of each of the Company's plans was 7.0% and 7.6% at December 27, 1997 and December 28, 1996, respectively. The weighted average expected rate of increase in future compensation levels is 4.5% and 5.4%, respectively, and the expected long-term rate of return on plan assets was 9% in fiscal 1997 and 1996. The provisions of Statement of Financial Accounting Standards No. 87, "Employers' Accounting for Pensions" ("SFAS No. 87") require companies with any plans that have an unfunded accumulated benefit obligation to recognize an additional minimum pension liability, an offsetting intangible pension asset and, in certain situations, a contra-equity balance. In accordance with the provisions of SFAS No. 87, the consolidated balance sheets at December 27, 1997 and December 28, 1996 include an intangible pension asset of $0.2 million; an additional minimum pension liability of $10.9 million and $10.4 million, respectively; and a contra-equity balance of $10.7 million and $10.2 million, respectively. These amounts relate to all operations of the Company and are reflected in the Company's consolidated balance sheets. F-18 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DEFINED CONTRIBUTION PLANS Subsidiaries of the Company sponsor defined contribution plans covering employees who meet eligibility requirements. Subsidiary contributions are based on formulas or are at the Company's discretion as specified in the plan documents. Contributions related to continuing operations were $3.5 million, $2.8 million and $2.7 million for fiscal 1997, 1996 and 1995, respectively. POSTRETIREMENT BENEFIT PLANS Subsidiaries of the Company have provided postretirement life and health coverage for certain retirees under plans currently in effect. Many of the subsidiaries' domestic employees may be eligible for coverage if they reach retirement age while still employed by the Company. The net periodic postretirement benefit cost of continuing operations, determined on the accrual basis, includes the following components (in thousands):
FISCAL YEAR ENDED DECEMBER 27, DECEMBER 28, JANUARY 27, 1997 1996 1996 ------------------- ------------------- --------------- (52 WEEKS) (48 WEEKS) (52 WEEKS) Service cost................................................. $ 1,204 $ 769 $ 670 Interest cost on accumulated postretirement benefit obligation........................................ 4,362 1,756 1,884 Net amortization............................................. (2,345) (934) (1,206) ------------------- ------------------- --------------- Net periodic postretirement benefit cost..................... $ 3,221 $ 1,591 $ 1,348 =================== =================== ===============
The following table sets forth the amount of net postretirement benefit obligation included in the Company's consolidated balance sheets, excluding Wallcoverings, Floorcoverings, Airbag, and the Mastercraft Group (in thousands):
DECEMBER 27, DECEMBER 28, 1997 1996 --------------- ---------------- Retirees....................................................................... $ 41,077 $ 35,217 Fully eligible active plan participants........................................ 11,637 8,814 Other active plan participants................................................. 14,373 10,176 --------------- ---------------- Accumulated postretirement benefit obligation.................................. 67,087 54,207 Unrecognized prior service gain from plan amendments........................... 12,455 13,942 Unrecognized net gain.......................................................... 8,325 11,781 --------------- ---------------- Net postretirement benefit obligation.......................................... $ 87,867 $ 79,930 =============== ================
The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7% at December 27, 1997 and 7.5% at December 28, 1996. The Company does not fund its postretirement benefit plans. For purposes of the December 27, 1997 and December 28, 1996 valuations, a 9% and a 10%, respectively, annual rate of increase in the per capita cost of covered health care benefits was assumed; the rate was assumed to decrease 1 percentage point per year to 6% and remain at that level thereafter. The health care cost trend rate assumption has an impact on the amounts reported; however, the Company's obligation is limited by certain amended provisions of the various plans, as further described below. To illustrate, increasing the assumed health care cost trend rates by 1 percentage point in each year would increase the accumulated postretirement benefit obligation as of December 27, 1997 by $1.1 million and the aggregate of the service and interest cost components of net periodic postretirement benefit cost for the year then ended by $0.1 million. F-19 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Effective April 1, 1994, the Company amended the postretirement benefit plan which covers substantially all of the eligible current and retired employees of the Company's continuing operations in the United States. Pursuant to the amendment, the Company's obligation for future inflation of health care costs will be limited to 6% per year through March 31, 1998. Subsequent to March 1998, the Company's portion of coverage costs will not be adjusted for inflation in health care costs. 15. DISCONTINUED OPERATIONS: On July 24, 1997, JPS Automotive completed the sale of Airbag to Safety Components International, Inc. for a purchase price of $56.3 million, subject to adjustment. No gain or loss was recorded on the sale since the sales price approximated the acquisition fair value of Airbag. Pursuant to the indenture governing the JPS Automotive Senior Notes, in connection with the sale of Airbag, the Company caused JPS Automotive to make an offer to purchase (up to the amount of the net proceeds from the sale) the JPS Automotive Senior Notes at 100% of their principal amount. Pursuant to such offer (which expired September 16, 1997), JPS Automotive repurchased and retired $23 thousand principal amount of JPS Automotive Senior Notes. During October 1997, the Company caused JPS Automotive to use a portion of the proceeds remaining from the sale of Airbag to make a distribution of $35.0 million to C&A Products, as permitted under the restricted payments provisions of the JPS Automotive Senior Notes indenture. See Note 11. On July 16, 1997, the Company completed its sale of the Mastercraft Group for a purchase price of approximately $310 million, subject to adjustment. A portion of the net proceeds from the sale was used to reduce the Company's long-term debt. The sale resulted in a net after-tax gain of $97.5 million. On February 6, 1997, the Company completed the sale of its Floorcoverings subsidiary for $195.6 million and the net proceeds were used to pay down debt incurred to finance the Company's automotive strategy. The sale resulted in a net after-tax gain of $85.3 million. On April 9, 1996, the Company announced a proposed plan to spin off Wallcoverings to the Company's stockholders in the form of a stock dividend. On October 28, 1997, the Company announced that it received a proposal for the acquisition of Wallcoverings and was reviewing all its options with respect to Wallcoverings. On November 5, 1997, the Company announced that it entered into an agreement to sell Wallcoverings to a company sponsored by an affiliate of Blackstone Partners. The transaction closed on March 13, 1998. See Note 26. The Company has accounted for the financial results and net assets of Airbag, the Mastercraft Group, Floorcoverings and Wallcoverings as discontinued operations. Accordingly, previously reported financial results for all periods have been restated to reflect these businesses as discontinued operations. Net sales of discontinued operations in fiscal 1997, 1996 and 1995 were $200.4 million, $443.3 million and $594.7 million, respectively. The following information relates to income (loss) from discontinued operations, net of income taxes (in thousands):
FISCAL YEAR ENDED ----------------------------------------------------------------- DECEMBER 27, DECEMBER 28, JANUARY 27, 1997 1996 1996 ------------------ ------------------- ------------------- (52 WEEKS) (48 WEEKS) (52 WEEKS) Mastercraft Group $ 3,401 $ 6,376 $ 8,406 Floorcoverings 518 7,598 14,094 Airbag 387 145 - Wallcoverings - 349 (23,281) ------------------ ------------------- ------------------- $ 4,306 $ 14,468 $ (781) ================== =================== ===================
Wallcoverings incurred operating losses subsequent to April 29, 1996 which were charged to the Company's existing discontinued operations reserves. Wallcoverings' operating losses were in excess of management's forecasted expectations as of the date of discontinuance but within previously established accruals. Included in the loss on sale of Wallcoverings discussed above were expected operating losses to be incurred through the date of disposition. Included in Wallcoverings' first quarter 1995 loss were $9.9 million in charges related to the consolidation of distribution activities F-20 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS and the closure of the segment's Hammond, Indiana facility. See Note 16 for further discussion on facility closings. Additionally, $3.0 million in charges related to the impairment of assets and $10.8 million related to a write-down of inventory were incurred in the first quarter of 1995. Net interest expense of discontinued operations (including amounts attributable to discontinued operations) was $12.5 million, $26.7 million and $26.5 million in fiscal 1997, 1996 and 1995, respectively. Interest expense of $12.6 million, $26.5 million and $25.4 million during fiscal 1997, 1996, and 1995, respectively, was allocated to discontinued operations based upon the ratio of net book value of discontinued operations (including reserves for loss on disposal) to consolidated invested capital. In addition, a portion of loss on sale of receivables has been allocated to discontinued operations based on the ratio of (x) receivables included in the trust's receivable pool related to Floorcoverings and the Mastercraft Group to (y) the total trust's receivables pool. For fiscal 1997, 1996 and 1995, amounts allocated to discontinued operations for the loss on sale of receivables totaled $.6 million, $2.2 million and $2.4 million, respectively. In connection with the retained lease liabilities of certain discontinued operations, the Company has future minimum lease payments and future sublease rental receipts at December 27, 1997 as follows (in thousands):
Minimum Lease Sublease Rental Fiscal Years Ending Payments Receipts - ----------------------------------------------------------- -------------- --------------- December 1998............................................... $ 6,551 $ 2,750 December 1999............................................... 5,040 3,078 December 2000............................................... 3,168 3,060 December 2001............................................... 2,500 2,542 December 2002............................................... 2,106 2,321 Later years................................................. 10,512 11,746 -------------- -------------- $ 29,877 $ 25,497 ============== ==============
16. FACILITY CLOSING COSTS: In January 1996, the Company in its continuing operations provided for the cost to rationalize one manufacturing facility affecting approximately 90 employees. Additionally, the Company provided for the cost to exit one manufacturing and three distribution centers in its discontinued Wallcoverings segment. The Wallcoverings closings affected approximately 200 employees. The closure of the three distribution centers was delayed until 1997 due to construction delays at the new Knoxville distribution center which became operational in 1997. In connection with the acquisition of JPS Automotive, the Company eliminated certain redundant sales and administrative functions, closed one manufacturing facility in 1997 and finalized plans to exit two additional manufacturing facilities in 1998. In addition, the Company is in the process of relocating certain manufacturing processes from a facility acquired from JPS Automotive to an existing facility. These actions affect approximately 640 employees. Original estimates of the total costs accrued for the shutdown of facilities and severance and other personnel costs were $2.2 million and $7.0 million, respectively. During 1997, the Company revised these estimates upon finalization of the plans and increased the accruals for the shutdown of facilities and severance and other personnel costs to $2.7 million and $7.7 million, respectively. The components of the reserves for these facilities are as follows (in thousands):
REMAINING RESERVE ORIGINAL RESERVE CHANGES IN RESERVE DECEMBER 27,1997 ---------------------------- --------------------------- --------------------------- CONTINUING DISCONTINUED CONTINUING DISCONTINUED CONTINUING DISCONTINUED OPERATIONS OPERATIONS OPERATIONS OPERATIONS OPERATIONS OPERATIONS Anticipated losses associated with the disposal of property, plant and equipment............................. $ 385 $ 5,721 $ (385) $ (5,721) $ - - Anticipated expenditures to close and dispose of idled facilities.......... 3,259 2,766 (430) (1,902) 2,829 864 Anticipated severance benefits.......... 8,061 1,410 (3,214) (1,285) 4,847 125 --------- ------------- ----------- ------------- ----------- ------------ $ 11,705 $ 9,897 $ (4,029) $ (8,908) $ 7,676 $ 989 ========= ============= =========== ============= =========== ============
F-21 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 17. STOCK OPTION PLANS: The 1994 Employee Stock Option Plan ("1994 Plan") was adopted as a successor to the 1993 Employee Stock Option Plan to facilitate awards to certain key employees and to consultants. The 1994 Plan authorizes the issuance of up to 2,980,534 shares of common stock and provides that no options may be granted after 10 years from the effective date of this plan. Options vest, in each case, as specified by the Company's compensation committee, generally over three years after issuance. At December 27, 1997, options representing 1,897,379 shares of common stock were available for grants. Effective February 23, 1995, the Company adopted the 1994 Directors Stock Option Plan which provides for the issuance of options to acquire a maximum of 600,000 shares of common stock to directors who are not part of management and are not affiliated with a major stockholder. As of December 27, 1997, 70,000 options had been granted. Stock option activity under the plans is as follows:
DECEMBER 27, 1997 DECEMBER 28, 1996 JANUARY 27, 1996 -------------------------- -------------------------- -------------------------- WEIGHTED WEIGHTED WEIGHTED NUMBER AVERAGE NUMBER OF AVERAGE NUMBER AVERAGE OF EXERCISE SHARES EXERCISE OF EXERCISE SHARES PRICE PRICE SHARES PRICE ------------ ------------ ------------ ------------ ------------ ------------ Outstanding beginning of year............ 3,287,106 $ 5.25 3,298,036 $ 5.12 3,096,802 $ 4.64 Awarded.................................. 584,000 8.33 145,000 6.71 431,500 8.21 Cancelled................................ (83,127) 6.46 (19,492) 4.10 (135,003) 4.79 Exercised................................ (370,210) 4.70 (69,022) 3.99 (95,263) 3.99 Surrendered.............................. (685,574) 5.57 (67,416) 3.99 - ------------ ------------ ------------ Outstanding at end of year............... 2,732,195 $ 5.86 3,287,106 $ 5.25 3,298,036 $ 5.12 ============ ============ =============
At December 27, 1997, December 28, 1996 and January 27, 1996, 1,858,685, 2,709,094 and 1,251,887, respectively, of the outstanding options were exercisable at a weighted average price of $4.78, $4.74 and $4.66, respectively. Of the total options outstanding at December 27, 1997, 1,508,324 have an exercise price in the range of $3.99 and $4.43 with a weighted average exercise price of $4.00 and a weighted average contractual life of 6 years. These options are currently exercisable at a weighted average exercise price of $4.00. The remaining 1,223,871 of total options outstanding at December 27, 1997 have an exercise price in the range of $6.00 and $11.75 with a weighted average exercise price of $8.16 and a weighted average contractual life of 8 years; 350,361 of these options are currently exercisable at a weighted average exercise price of $8.15. Upon a change of control, as defined, all of the above options become fully vested and exercisable. In October 1995, Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123") was issued. SFAS No. 123 encourages companies to adopt the fair value method for compensation expense recognition related to employee stock options. Existing accounting requirements of Accounting Principles Board Opinion No. 25 ("APB No. 25") use the intrinsic value method in determining compensation expense which represents the excess of the market price of the stock over the exercise price on the measurement date. The Company elected to continue to utilize the accounting provisions of APB No. 25 rules for stock options, and is required to provide pro forma disclosures of what net income and earnings per share would have been had the Company adopted the new fair value method for recognition purposes. The following information is presented as if the Company had adopted SFAS No. 123 and restated its results (in thousands, except per share amounts): F-22 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FISCAL YEAR ENDED ------------------------------------------------------- DECEMBER 27, DECEMBER 28, JANUARY 27, 1997 1996 1996 --------------- --------------- -------------- (52 WEEKS) (48 WEEKS) (52 WEEKS) Net income: As reported.................................... $ 155,235 $ 40,824 $ 206,441 Pro forma...................................... 154,525 40,261 206,148 Basic EPS: As reported.................................... $ 2.34 $ 0.59 $ 2.95 Pro forma...................................... 2.33 0.58 2.94 Diluted EPS: As reported.................................... $ 2.34 $ 0.58 $ 2.90 Pro forma...................................... 2.33 0.58 2.90
For the above information, the fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants in fiscal 1997, 1996 and 1995: expected volatility of 40%, expected lives of 10 years which equals the lives of the grants, the risk free interest rate ranged from 5.94% to 7.82% and a zero expected dividend rate. The weighted average grant-date fair value of an option granted during fiscal 1997, 1996 and 1995 was $5.41, $4.32 and $5.27, respectively. Because the SFAS No. 123 method of accounting has not been applied to options granted prior to January 28, 1995, the above pro forma amounts may not be representative of the compensation costs to be expected in future years. 18. INCOME TAXES: The provisions for income taxes applicable to continuing operations for fiscal 1997, 1996 and 1995 are summarized as follows (in thousands):
FISCAL YEAR ENDED --------------------------------------------------------- DECEMBER 27, DECEMBER 28, JANUARY 27, 1997 1996 1996 ------------------- ------------------ ---------------- (52 WEEKS) (48 WEEKS) (52 WEEKS) Current Federal.......................................... $ - $ 250 $ 1,330 State............................................ 2,600 2,006 2,293 Foreign.......................................... 6,147 9,958 6,240 ------------------- ------------------ ---------------- 8,747 12,214 9,863 Deferred Federal.......................................... 4,833 9,871 (140,705) State............................................ 882 1,811 (9,050) Foreign.......................................... (1,464) 546 (67) ------------------- ------------------ ---------------- 4,251 12,228 (149,822) ------------------- ------------------ ---------------- Income tax expense (benefit)........................ $ 12,998 $ 24,442 $ (139,959) =================== ================== ================
Domestic and foreign components of income from continuing operations before income taxes are summarized as follows (in thousands):
FISCAL YEAR ENDED --------------------------------------------------------- DECEMBER 27, DECEMBER 28, JANUARY 27, 1997 1996 1996 ------------------- ------------------ ---------------- (52 WEEKS) (48 WEEKS) (52 WEEKS) Domestic......................................... $ (4,545) $ 25,905 $ 53,545 Foreign.......................................... 7,452 31,503 13,718 ------------------- ------------------ ---------------- $ 2,907 $ 57,408 $ 67,263 =================== ================== ================
F-23 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS A reconciliation between income taxes computed at the statutory Federal rate of 35% and the provisions for income taxes applicable to continuing operations is as follows (in thousands):
FISCAL YEAR ENDED ---------------------------------------------------------- DECEMBER 27, DECEMBER 28, JANUARY 27, 1997 1996 1996 ------------------ ------------------ ----------------- (52 WEEKS) (48 WEEKS) (52 WEEKS) Amount at statutory Federal rate...................... $ 1,017 $ 20,093 $ 23,542 State taxes, net of Federal income tax................ 2,263 2,481 1,490 Tax differential on foreign earnings.................. 123 (698) 925 Foreign losses with no tax benefit.................... 1,436 176 447 Foreign dividend income............................... - 410 800 Amortization and write-down of goodwill............... 7,770 1,243 95 Other................................................. 389 737 1,250 Change in valuation allowance......................... - - (168,508) ------------------ ------------------ ----------------- Income tax expense (benefit).......................... $ 12,998 $ 24,442 $ (139,959) ================== ================== =================
Deferred income taxes are provided for the temporary differences between the financial reporting and tax basis of the Company's assets and liabilities. The components of the net deferred tax assets as of December 27, 1997 and December 28, 1996 were as follows (in thousands):
DECEMBER 27, DECEMBER 28, 1997 1996 --------------- --------------- Deferred tax assets: Employee benefits, including postretirement benefits..................... $ 35,041 $ 54,512 Net operating loss carryforwards......................................... 41,796 101,099 Investment tax credit carryforwards...................................... 2,200 4,200 Alternative minimum tax credits.......................................... 12,650 8,500 Other liabilities and reserves........................................... 81,018 71,125 Valuation allowance...................................................... (40,586) (44,277) --------------- ---------------- Total deferred tax assets........................................... 132,119 195,159 Deferred tax liabilities: Property, plant and equipment............................................ (50,245) (39,146) Undistributed earnings of foreign subsidiaries........................... (7,226) (7,600) --------------- --------------- Total deferred tax liabilities...................................... (57,471) (46,746) --------------- --------------- Net deferred tax asset .................................................... $ 74,648 $ 148,413 =============== ================
The valuation allowance at December 27, 1997 and December 28, 1996 provides for certain deferred tax assets that in management's assessment may not be realized due to tax limitations on the use of such amounts or that relate to tax attributes that are subject to uncertainty due to the long-term nature of their realization. During fiscal 1997 the valuation allowance decreased $3.7 million from fiscal 1996. This decrease resulted primarily from the expiration of tax credits and restricted net operating loss carryforwards. During fiscal 1996, the valuation allowance decreased $7.3 million from fiscal 1995. The above amounts have been classified in the consolidated balance sheets as follows (in thousands):
DECEMBER 27, DECEMBER 28, 1997 1996 --------------- -------------------- Deferred tax assets (liabilities): Current, included in other current assets......................... $ 33,345 $ 63,911 Current foreign, included in accrued expenses..................... (395) - Noncurrent........................................................ 59,293 91,690 Noncurrent foreign, included in other noncurrent liabilities..................................................... (17,595) (7,188) ---------------- -------------------- $ 74,648 $ 148,413 ================ ====================
F-24 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS In fiscal 1995, the Company's continuing business segments generated substantial operating income, consistent with historical trends, that, when combined with the post-recapitalization capital structure, resulted in income for both tax and financial reporting purposes. The then proposed spin-off of Wallcoverings that was announced in April 1996 further clarified management's assessment of the Company's likely future performance. Management considered these factors as well as the future outlook for its continuing businesses in concluding that it is more likely than not that previously unrecognized net deferred tax assets totaling approximately $150 million would be realized. Similarly, management concluded that it was more likely than not that net deferred tax assets of $74.6 million and $148.4 million at December 27, 1997 and December 28, 1996, respectively, will be realized. While continued operating performance at current levels is sufficient to realize these assets, the Company's ability to generate future taxable income is dependent on numerous factors, including general economic conditions, the state of the automotive industry and other factors beyond management's control. Therefore, there can be no assurance that the Company will meet its expectation of future taxable income. Deferred income taxes and withholding taxes have been provided on earnings of the Company's foreign subsidiaries to the extent it is anticipated that the earnings will be remitted in the future as dividends. Deferred income taxes and withholding taxes have not been provided on the remaining undistributed earnings of foreign subsidiaries as such amounts are deemed to be permanently reinvested. The cumulative undistributed earnings on which the Company has not provided deferred income taxes and withholding taxes are not significant. At December 27, 1997, the Company had the following tax attributes carryforwards available for Federal income tax purposes (in thousands):
EXPIRATION AMOUNT DATES -------------- -------------- Net operating losses - regular tax Preacquisition, subject to limitations................................. $ 17,124 2000-2009 Postacquisition, unrestricted.......................................... 102,294 2008-2011 -------------- $ 119,418 ============== Net operating losses - alternative minimum tax Preacquisition, subject to limitations................................. $ 14,948 2000-2009 Postacquisition, unrestricted.......................................... 35,836 2008-2011 -------------- $ 50,784 ============== Investment tax and other credits Preacquisition, subject to limitations................................. $ 2,200 1998-2006 ============== Alternative minimum tax credits........................................ $ 12,650 ==============
The above amounts include the tax attributes of Wallcoverings. In addition, the Company's net deferred tax assets at December 27, 1997 include amounts related to Wallcoverings. At December 28, 1996, the amounts attributable to Wallcoverings were excluded since they would not have been available to the Company under the proposed spin-off plan contemplated at that time. Approximately $17.1 million of the Company's NOLs and $2.2 million of the Company's unused Federal tax credits may be used only against the income and apportioned tax liability of the specific corporate entity that generated such losses or credits or its successors. Future sales of common stock by the Company or its principal stockholders, or changes in the composition of its principal stockholders, could constitute a "change in control" that would result in annual limitations on the Company's use of its NOLs and unused tax credits. Management cannot predict whether such a "change in control" will occur. If such a "change in control" were to occur, the resulting annual limitations on the use of NOLs and tax credits would depend on the value of the equity of the Company and the amount of "built-in gain" or "built-in loss" in the Company's assets at the time of the "change in control", which cannot be known at this time. In fiscal 1995, the California Franchise Tax Board issued a notice of tax assessment for approximately $11.8 million related to the treatment of the sale of certain foreign subsidiaries during 1987. The Company disputes the assessment and has filed a protest with the Franchise Tax Board. If the Franchise Tax Board were to maintain its position and such position were to be upheld in litigation, the Company would also become liable for the payment of interest which is currently estimated to be $19.6 million. In the opinion of management, the final determination of any F-25 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS additional tax and interest liability related to this matter will not have a material adverse effect on the Company's consolidated financial condition or results of future operations. Income taxes paid, net of refunds, were $40.4 million, $10.4 million, and $13.5 million for fiscal 1997, 1996 and 1995, respectively. 19. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS: The estimated fair values of the Company's continuing operations' financial instruments are summarized as follows (in thousands):
DECEMBER 27, 1997 DECEMBER 28, 1996 -------------------------------- ------------------------------- CARRYING ESTIMATED CARRYING ESTIMATED AMOUNT FAIR VALUE AMOUNT FAIR VALUE -------------- -------------- -------------- ------------- Long-term investments........................ $ 3,125 $ 3,125 $ 3,255 $ 3,255 Interest rate protection agreements.......... - 296 - - Long-term debt............................... 782,675 838,975 1,176,219 1,214,919
The following methods and assumptions were used to estimate these fair values: LONG-TERM INVESTMENTS - Fair value approximates carrying value. INTEREST RATE PROTECTION AGREEMENTS - The fair value of interest rate cap and corridor agreements is based on quoted market prices as if the agreements were entered into on the measurement date. LONG-TERM DEBT - The fair value of the Subordinated Notes and JPS Automotive Senior Notes is based upon quoted market price. The fair value of the other long-term debt of the Company approximates the carrying value. Carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts and other receivables, accounts payable and accrued expenses approximate fair value due to the short-term nature of these instruments. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and therefore, cannot be determined with precision changes in assumptions could significantly affect these estimates. 20. RELATED PARTY TRANSACTIONS: During fiscal 1997, the Company incurred fees and expenses for services performed by Blackstone Partners and WP Partners, or their respective affiliates, in connection with the dispositions of Floorcoverings, Mastercraft Group and Wallcoverings of approximately $2.6 million, $4.0 million, and $0.8 million, respectively. During fiscal 1996, the Company incurred fees and expenses for services performed by Blackstone Partners and WP Partners, or their respective affiliates, in connection with the 1996 acquisitions of JPS Automotive and Perstorp Components and the joint venture entered into with Perstorp of approximately $2.7 million, $1.2 million and $0.8 million, respectively. During 1995, the Company incurred fees and expenses for services performed by Blackstone Partners and WP Partners, or their respective affiliates, in connection with the 1995 acquisition of C&A Plastics totaling $2.5 million. In addition, Wasserstein Perella Securities, Inc., ("WP Securities") an affiliate of WP Partners, acted as the lead underwriter in the Subordinated Notes offering and was paid fees of approximately $5.4 million by C&A Products in connection therewith. On November 5, 1997, the Company announced that it entered into an agreement to sell Wallcoverings to a company sponsored by an affiliate of Blackstone Partners. The transaction was approved by a special committee of the Company's Board of Directors composed of independent directors. The sale closed on March 13, 1998. See Notes 15 and 26. Under the Amended and Restated Stockholders' Agreement among the Company, C&A Products, Blackstone Partners and WP Partners, the Company pays Blackstone Partners and WP Partners, or their respective affiliates, each an annual monitoring fee of $1.0 million, which is payable in quarterly installments. F-26 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 21. INFORMATION ABOUT THE COMPANY'S OPERATIONS: The Company's continuing operations primarily supply automotive interior systems - textile and plastic trim, acoustics and convertible tops - to the global automotive industry. The Company performs periodic credit evaluations of its customers' financial condition and, although the Company does not generally require collateral, it does require cash payments in advance when the assessment of credit risk associated with a customer is substantially higher than normal. Receivables generally are due within 45 days, and credit losses have consistently been within management's expectations and are provided for in the consolidated financial statements. Direct and indirect sales to significant customers in excess of ten percent of consolidated net sales from continuing operations are as follows:
1997 1996 1995 ---- ---- ---- General Motors Corporation....................... 37.1% 34.0% 33.3% Ford Motor Company............................... 14.2% 15.4% 16.6% Chrysler Corporation............................. 16.2% 21.1% 18.2%
Information about the Company's continuing operations in different geographic areas for fiscal 1997, 1996 and 1995 is presented below (in thousands). These amounts have been restated to reflect Floorcoverings, Wallcoverings, Airbag and the Mastercraft Group as discontinued operations (see Note 15):
UNITED OTHER DISCONTINUED STATES CANADA MEXICO COUNTRIES OPERATIONS CONSOLIDATED ----------- ----------- ----------- ------------ -------------- --------------- FISCAL 1997 Net sales.............................. $ 1,089,114 $ 348,056 $ 71,706 $ 120,456 $ - $ 1,629,332 Operating income (a)................... 35,875 23,166 20,980 4,489 - 84,510 Depreciation and amortization (b)...... 37,928 10,332 2,722 5,991 - 56,973 Identifiable assets ................... 787,118 217,649 36,164 208,457 53,004 1,302,392 Capital expenditures .................. 38,576 13,797 660 3,488 15,254 71,775 UNITED OTHER DISCONTINUED STATES CANADA MEXICO COUNTRIES OPERATIONS CONSOLIDATED ----------- ----------- ----------- ------------ -------------- --------------- FISCAL 1996 Net sales.............................. $ 716,710 $ 233,334 $ 74,287 $ 29,490 $ - $ 1,053,821 Operating income (a)................... 43,542 38,599 18,686 1,077 - 101,904 Depreciation and amortization (b)...... 28,862 3,734 2,133 1,145 - 35,874 Identifiable assets ................... 907,275 235,064 38,771 85,656 263,523 1,530,289 Capital expenditures .................. 24,570 6,141 1,763 2,526 43,454 78,454 UNITED OTHER DISCONTINUED STATES CANADA MEXICO COUNTRIES OPERATIONS CONSOLIDATED ----------- ----------- ----------- ------------ -------------- --------------- FISCAL 1995 Net sales.............................. $ 762,293 $ 123,958 $ 14,466 $ 1,300 $ - $ 902,017 Operating income (loss) (a)............ 75,083 20,426 (5) 155 - 95,659 Depreciation and amortization (b)...... 26,276 2,795 1,190 150 - 30,411 Identifiable assets ................... 549,782 245,943 24,579 10,032 161,025 991,361 Capital expenditures................... 39,269 5,055 1,739 7,093 40,542 93,698
(a) Operating income (loss) is determined by deducting all operating expenses, including goodwill write-off and other costs, from revenues. Operating expenses do not include interest expense. Corporate services provided by the Company have been allocated to the business units based on a combination of estimated use and the relative sales of the business units to the total consolidated operations of the Company. (b) Depreciation and amortization includes the amortization of goodwill and other assets and liabilities. Intersegment sales between geographic areas are not material. For fiscal years 1997, 1996 and 1995, export sales from the United States to foreign countries were $136.7 million, $69.9 million and $77.8 million, respectively. As of December 27, 1997, the Company's continuing operations employed approximately 15,100 persons on a full-time or full-time equivalent basis. Approximately 4,600 of such employees are represented by labor unions. Approximately 3,000 employees are represented by collective bargaining agreements that expire during fiscal 1998. F-27 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 22. COMMITMENTS AND CONTINGENCIES: ENVIRONMENTAL The Company is legally or contractually responsible or alleged to be responsible for the investigation and remediation of contamination at various sites. It also has received notices that it is a potentially responsible party ("PRP") in a number of proceedings. The Company may be named as a PRP at other sites in the future, including with respect to divested and acquired businesses. The Company is currently engaged in investigation or remediation at certain sites. In estimating the total cost of investigation and remediation, the Company has considered, among other things, the Company's prior experience in remediating contaminated sites, remediation efforts by other parties, data released by the EPA, the professional judgment of the Company's environmental experts, outside environmental specialists and other experts, and the likelihood that other parties which have been named as PRPs will have the financial resources to fulfill their obligations at sites where they and the Company may be jointly and severally liable. Under the theory of joint and several liability, the Company could be liable for the full costs of investigation and remediation even if additional parties are found to be responsible under the applicable laws. It is difficult to estimate the total cost of investigation and remediation due to various factors including incomplete information regarding particular sites and other PRPs, uncertainty regarding the extent of environmental problems and the Company's share, if any, of liability for such problems, the selection of alternative compliance approaches, the complexity of environmental laws and regulations and changes in cleanup standards and techniques. When it has been possible to provide reasonable estimates of the Company's liability with respect to environmental sites, provisions have been made in accordance with generally accepted accounting principles. The Company records its best estimate when it believes it is probable that an environmental liability has been incurred and the amount of loss can be reasonably estimated. The Company also considers estimates of certain reasonably possible environmental liabilities in determining the aggregate amount of environmental reserves. In its assessment the Company makes its best estimate of the liability based upon information available to the Company at that time, including the professional judgment of the Company's environmental experts, outside environmental specialists and other experts. As of December 27, 1997, excluding sites at which the Company's participation is anticipated to be de minimis or otherwise insignificant or where the Company is being indemnified by a third party for the liability, there are 25 sites where the Company is participating in the investigation or remediation of the site either directly or through financial contribution, and 9 additional sites where the Company is alleged to be responsible for costs of investigation or remediation. As of December 27, 1997, the Company's estimate of its liability for these 34 sites, which exclude sites related to Wallcoverings, is approximately $33.8 million. As of December 27, 1997, the Company has established reserves of approximately $46.5 million for the estimated future costs related to all its known environmental sites, excluding sites related to Wallcoverings. In the opinion of management, based on the facts presently known to it, the environmental costs and contingencies will not have a material adverse effect on the Company's consolidated financial condition or future results of operations. However, there can be no assurance that the Company has identified or properly assessed all potential environmental liability arising from the activities or properties of the Company, its present and former subsidiaries and their corporate predecessors. The Company is subject to Federal, state and local environmental laws and regulations that (i) affect ongoing operations and may increase capital costs and operating expenses and (ii) impose liability for the costs of investigation and remediation and certain other damages related to on-site and off-site contamination. The Company's management believes that it has obtained, and is in material compliance with, all material environmental permits and approvals necessary to conduct its various businesses. Environmental compliance costs for continuing businesses currently are accounted for as normal operating expenses or capital expenditures of such business units. In the opinion of management, based on the facts presently known to it, such environmental compliance costs will not have a material adverse effect on the Company's consolidated financial condition or future results of operations. LITIGATION The Company and its subsidiaries have lawsuits and claims pending against them and have certain guarantees outstanding which were made in the ordinary course of business. The ultimate outcome of the legal proceedings to which the Company is a party will not, in the opinion of the Company's management based on the facts presently known to it, have a material adverse effect on the Company's consolidated financial condition or future results of operations. F-28 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OTHER COMMITMENTS The majority of the leased properties of the Company's previously divested businesses have been assigned to third parties. Although releases have been obtained from the lessors of certain properties, C&A Products remains contingently liable under most of the leases. C&A Products' future liability for these leases, in management's opinion, based on the facts presently known to it, will not have a material adverse effect on the Company's consolidated financial condition or future results of operations. F-29 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 23. QUARTERLY FINANCIAL DATA (UNAUDITED): (in thousands, except for per share data) The quarterly data below is based on the Company's previous fiscal periods and has been restated to reflect Wallcoverings, Floorcoverings, Airbag and the Mastercraft Group as discontinued operations.
FISCAL 1997 ------------------------------------------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER -------------- -------------- -------------- -------------- (3 MONTHS) (3 MONTHS) (3 MONTHS) (3 MONTHS) Net sales as previously reported..................... $ 432,252 $ 416,018 $ 368,008 $ 429,746 Less discontinued operations......................... 16,692 - - - -------------- -------------- -------------- -------------- Net sales as restated................................ $ 415,560 $ 416,018 $ 368,008 $ 429,746 ============== ============== ============== ============== Gross margin as previously reported.................. $ 72,331 $ 72,189 $ 16,953 $ 72,824 Less discontinued operations......................... 2,086 - - - -------------- -------------- -------------- -------------- Gross margin as restated............................. $ 70,245 $ 72,189 $ 16,953 (a) $ 72,824 ============== ============== ============== ============== Income (loss) from continuing operations as previously reported ............................ $ 11,307 $ 11,600 $ (57,919) $ 9,046 Less discontinued operations......................... 42 - - - -------------- -------------- -------------- -------------- Income (loss) from continuing operations as restated........................................... $ 11,265 $ 11,600 $ (57,919) (a) $ 9,046 ============== ============== ============== ============== Income before extraordinary loss..................... $ 97,478 $ 15,481 $ 33,951 $ 9,046 ============== ============== ============== ============== Net income .......................................... $ 97,478 $ 14,760 $ 33,951 $ 9,046 ============== ============== ============== ============== Basic earnings per share............................. $ 1.45 $ 0.22 $ 0.51 $ 0.14 ============== ============== ============== ============== Diluted earnings per share........................... $ 1.43 $ 0.22 $ 0.50 $ 0.14 ============== ============== ============== ============== Common stock prices High............................................... $ 10-1/2 $ 12-1/8 $ 11-11/16 $ 11-3/16 ============== ============== ============== ============== Low................................................ $ 6 $ 8-5/8 $ 10 $ 7-15/16 ============== ============== ============== ============== FISCAL 1996 ------------------------------------------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER ---------------- -------------- -------------- -------------- (3 MONTHS) (3 MONTHS) (3 MONTHS) (2 MONTHS) Net sales as previously reported..................... $ 373,611 $ 347,609 $ 371,027 $ 204,098 Less discontinued operations......................... 90,678 71,911 77,825 2,110 -------------- -------------- -------------- -------------- Net sales as restated................................ $ 282,933 $ 275,698 $ 293,202 $ 201,988 ============== ============== ============== ============== Gross margin as previously reported.................. $ 77,956 $ 69,739 $ 71,868 $ 30,817 Less discontinued operations......................... 25,460 16,900 19,346 199 -------------- -------------- -------------- -------------- Gross margin as restated............................. $ 52,496 $ 52,839 $ 52,522 $ 30,618 ============== ============== ============== ============== Income (loss) from continuing operations as previously reported ............................ $ 14,786 $ 11,804 $ 13,697 $ (2,110) Less discontinued operations......................... 1,610 1,346 2,110 145 -------------- -------------- -------------- -------------- Income (loss) from continuing operations as restated........................................... $ 13,176 $ 10,458 $ 11,587 $ (2,255) ============== ============== ============== ============== Income before extraordinary loss..................... $ 15,142 $ 15,521 $ 15,922 $ 849 ============== ============== ============== ============== Net income .......................................... $ 15,142 $ 8,911 $ 15,922 $ 849 ============== ============== ============== ============== Basic and diluted earnings per share................. $ 0.22 $ 0.13 $ 0.23 $ 0.01 ============== ============== ============== ============== Common stock prices High............................................... $ 8-1/4 $ 7-1/8 $ 7 $ 6-5/8 ============== ============== ============== ============== Low................................................ $ 6-1/8 $ 5-1/2 $ 5-7/8 $ 5-3/4 ============== ============== ============== ==============
(a) In the third quarter of 1997, the Company incurred charges of $57.9 million primarily related to C&A Plastics for asset impairments, reductions in goodwill, provisions for certain programs operating at a loss, inventory adjustments and other provisions. Of the $57.9 million in charges, $34.0 million is included in cost of goods sold, $22.6 million as impairment of long-lived assets and $1.3 million relates to selling costs. The Company's operations are not subject to significant seasonal influences. F-30 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 24. SIGNIFICANT SUBSIDIARY: The Company conducts all of its operating activities through its wholly-owned subsidiary C&A Products. The following represents summarized consolidated financial information of C&A Products and its subsidiaries for the fiscal years ending, (in thousands):
DECEMBER 27, DECEMBER 28, JANUARY 27, 1997 1996 1996 --------------- ------------- --------------- Current assets.............................................. $ 508,864 $ 728,586 $ 455,729 Noncurrent assets........................................... 792,199 800,594 534,389 Current liabilities......................................... 315,268 339,519 231,898 Noncurrent liabilities...................................... 1,051,376 1,382,754 984,698 Net sales................................................... 1,629,332 1,053,821 902,017 Gross margin................................................ 232,211 188,475 161,925 Income from continuing operations........................... (10,338) 32,768 207,900 Income before extraordinary item............................ 155,709 47,236 207,119 Net income ................................................. 154,988 40,626 207,119
The consolidated financial information for fiscal 1997 and 1996 has been restated to reflect Airbag as a discontinued operation. Separate financial statements of C&A Products are not presented because they would not be material to the holders of any debt securities of C&A Products that may be issued, there being no material differences between the financial statements of C&A Products and the Company. The absence of separate financial statements of C&A Products is also based upon the fact that any debt of C&A Products issued, and the assumption that any debt to be issued, under the Registration Statement on Form S-3 filed by the Company and C&A Products (Registration No. 33-62665) is or will be fully and unconditionally guaranteed by the Company. 25. EARNINGS PER SHARE The Company adopted SFAS No. 128, "Earnings Per Share," (SFAS No. 128) in December 1997. Basic earnings per common share were computed by dividing net income by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share were determined assuming the exercise of the stock options issued under the Company's stock option plans (see Note 17). The following table reconciles the number of common shares used in the basic and diluted earnings per share from continuing operations.
FISCAL YEAR ENDED FISCAL YEAR ENDED FISCAL YEAR ENDED DECEMBER 27, 1997 DECEMBER 28, 1996 JANUARY 27, 1996 ---------------------------------- --------------------------------- --------------------------------- (52 WEEKS) (48 WEEKS) (52 WEEKS) PER-SHARE PER-SHARE PER-SHARE INCOME SHARES AMOUNT INCOME SHARES AMOUNT INCOME SHARES AMOUNT ----------- -------- ---------- ---------- -------- --------- ---------- -------- --------- BASIC EARNINGS PER SHARE $ (10,091) 66,337 $ (0.15) $ 32,966 68,997 $ 0.48 $ 207,222 70,015 $ 2.96 Effect of stock option plans - - - - 890 (0.01) - 1,166 (0.05) ----------- -------- ---------- ---------- -------- --------- ---------- -------- --------- DILUTED EARNINGS PER SHARE $ (10,091) 66,337 $ (0.15) $ 32,966 69,887 $ 0.47 $ 207,222 71,181 $ 2.91 =========== ======== ========== ========== ======== ========= ========== ======== =========
F-31 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The Company has restated earnings per share for fiscal years 1996 and 1995 to conform to SFAS No. 128. The effect of this accounting change on previously reported earnings per share data for income from continuing operations is as follows: FISCAL YEAR ENDED ---------------------------------- DECEMBER 26, JANUARY 27, 1996 1996 ---------------- ------------- PER SHARE AMOUNTS: Primary earnings per share as previously reported $ 0.47 $ 2.91 Effect of SFAS No. 128 0.01 0.05 ---------------- ------------- Basic earnings per share $ 0.48 $ 2.96 ================ ============= 26. SUBSEQUENT EVENTS As discussed in Note 3, the Company acquired Kigass on February 2, 1998. The total purchase price for the acquisition was approximately $24.2 million, subject to adjustment. Kigass is a privately-held, automotive interior plastic products manufacturer headquartered in the United Kingdom. Under the terms of the agreement, the Company assumed effective control of Kigass on January 1, 1998. The Company had previously entered into a joint venture agreement with Kigass in October 1997. On March 13, 1998, the Company completed its sale of Wallcoverings to an affiliate of Blackstone Partners for a purchase price of $71.2 million, subject to adjustment, and an option for 6.7% of the common stock of the purchaser (which includes Wallcoverings and the wallcovering and vinyl units of Borden, Inc.) outstanding as of the closing date. In connection with the sale, the Company recorded a loss of approximately $21.1 million, net of an estimated tax benefit of $33.0 million, in the third quarter of 1997 to adjust the recorded value to the expected proceeds. Accordingly, no gain or loss was recognized at the sale date. F-32 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES To Collins & Aikman Corporation: We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements of Collins & Aikman Corporation and subsidiaries included in this Form 10-K, and have issued our report thereon dated February 9, 1998 (except with respect to the matters discussed in Note 26 to those financial statements, as to which the date is March 13, 1998). Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in Item 14 of this Form 10-K are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Charlotte, North Carolina, February 9, 1998. S-1 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED BALANCE SHEETS (IN THOUSANDS)
DECEMBER 27, DECEMBER 28, ASSETS 1997 1996 ----------------- ------------------ Current Assets: Cash .............................................................. $ 415 $ 747 Other .............................................................. 12 - ----------------- ------------------ Total current assets.............................................. 427 747 Other assets........................................................... 902 362 ----------------- ------------------ $ 1,329 $ 1,109 ================= ================== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities.................................................... $ 16 $ 12 Share of accumulated losses in excess of investments in subsidiaries ...................................................... 65,581 193,093 Other noncurrent liabilities........................................... 2,582 2,582 Commitments and contingencies (Note 1)................................. Common stock........................................................... 705 705 Other stockholders' deficit............................................ (67,555) (195,283) ----------------- ------------------ Total stockholders' deficit....................................... (66,850) (194,578) ----------------- ------------------ $ 1,329 $ 1,109 ================= ==================
The Notes to the Condensed Financial Statements are an integral part of these condensed financial statements. S-2 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED STATEMENTS OF OPERATIONS (IN THOUSANDS)
FISCAL YEAR ENDED ------------------------------------------------------- DECEMBER 27, DECEMBER 28, JANUARY 27, 1997 1996 1996 ----------------- ---------------- ----------------- Other expenses....................................................... $ (589) $ (592) $ (1,023) Interest income...................................................... 836 790 345 ----------------- ---------------- ----------------- Income (loss) from operations before equity in income of subsidiary 247 198 (678) Equity in income of subsidiary....................................... 154,988 40,626 207,119 ----------------- ---------------- ----------------- Net income........................................................... $ 155,235 $ 40,824 $ 206,441 ================= ================ =================
The Notes to the Condensed Financial Statements are an integral part of these condensed financial statements. S-3 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
DECEMBER 27, DECEMBER 28, JANUARY 27, 1997 1996 1996 ---------------- --------------- ---------------- OPERATING ACTIVITIES Net cash provided by (used in) operating activities................ $ (332) $ 122 $ (544) FINANCING ACTIVITIES Purchases of treasury stock........................................ (19,715) (9,594) (11,736) Proceeds from exercise of stock options............................ 385 138 382 Intercompany transfers (to) from subsidiary........................ (2,094) 6,104 - Dividends received from subsidiary................................. 21,424 3,000 12,000 ------ ------ ------ Net cash provided by (used in) financing activities................ - (352) 646 ------ ------ ------ Net increase (decrease) in cash.................................... (332) (230) 102 Cash at beginning of year.......................................... 747 977 875 ------ ------ ------ Cash at end of year................................................ $ 415 $ 747 $ 977 ====== ====== =======
NOTES TO CONDENSED FINANCIAL STATEMENTS 1. PRESENTATION: These condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading. For disclosures regarding commitments and contingencies, see Notes 17 and 23, respectively, to Consolidated Financial Statements. 2. SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR ADDITIONAL DISCLOSURES. S-4 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS FOR THE FISCAL YEARS ENDED DECEMBER 27, 1997, DECEMBER 28, 1996 AND JANUARY 27, 1996 (IN THOUSANDS)
BALANCE ADDITIONS CHARGE AT RESULTING TO COSTS CHARGED BALANCE AT BEGINNING FROM AND TO OTHER END OF DESCRIPTION OF YEAR ACQUISITIONS EXPENSES ACCOUNTS DEDUCTIONS YEAR - -------------------------- ----------- ------------ --------- ---------------- -------------------- ---------- FISCAL YEAR ENDED DECEMBER 27, 1997 Allowance for doubtful accounts............... $ 10,380 $ - $ 604 $ 96 (b) $ (1,805) (c) $ 9,275 FISCAL YEAR ENDED DECEMBER 28, 1996 Allowance for doubtful accounts............... $ 3,381 $ 6,461 $ 899 $ 37 (b) $ (398) (c) $ 10,380 FISCAL YEAR ENDED JANUARY 27, 1996 (a) Allowance for doubtful accounts............... $ 5,102 $ 166 $ 432 $ 58 (b) $ (2,377) (c) $ 3,381
(a) The amounts for fiscal year ended January 27, 1996 have been restated to exclude amounts related to discontinued operations. (b) Reclassifications and collection of accounts previously written off. (c) Reclassifications to discontinued operations and other accounts and uncollectible amounts written off. S-5 EX-2 2 EXHIBIT 2.4 Exhibit 2.4 AMENDED AND RESTATED ACQUISITION AGREEMENT This Amended and Restated Acquisition Agreement (the "Agreement") is dated as of the 4th day of November, 1997, and amended and restated as of the 9th day of March, 1998, among Collins & Aikman Products Co., a Delaware corporation ("Seller"), Imperial Wallcoverings, Inc., a Delaware corporation ("Imperial"), and BDPI Holdings Corporation, a Delaware corporation ("Purchaser"). RECITALS: A. Imperial, together with its wholly owned subsidiaries Imperial Wallcoverings Limited, a company incorporated in England ("Imperial UK") and Marketing Service, Inc., a Delaware corporation ("MSI") and Imperial Wallcoverings (Canada) Inc. ("Imperial Canada"), Canadian corporation owned by Imperial and Collins & Aikman Canada Inc., an Ontario corporation and indirect wholly owned subsidiary of Seller ("C&A Canada") (Imperial UK and MSI being referred to herein collectively as the "Subsidiaries" and, together with Imperial and Imperial Canada, the "Company" and Imperial UK, MSI and Imperial being referred to herein as the "Purchased Imperial Companies"), is presently engaged in the business (the "Business") of the development, production, manufacture, marketing, distribution and sale of paper and vinyl decorative surface products and related products for residential, commercial and industrial applications ("Products") and performing certain related services; B. Seller is the record and beneficial owner of all of the issued and outstanding shares of Common Stock, par value $0.01 per share, of Imperial (the "Imperial Shares") and C&A Canada is the record and beneficial owner of 3,100,000 issued and outstanding shares of common stock, without par value, of Imperial Canada, which shares, together with the 1,000,000 shares of common stock of Imperial Canada owned of record and beneficially by Imperial, represent all of the issued and outstanding shares of capital stock of Imperial Canada; C. Seller intends to cause C&A Canada to own all of the issued and outstanding shares of common stock of Imperial Canada and to cause Imperial Canada to be liquidated (the "Imperial Canada Liquidation") prior to the Closing, with the result that C&A Canada will have all right, title and interest in and to the assets, and be subject to all of the obligations and liabilities, of Imperial Canada; D. Purchaser intends to effect the recapitalization (the "Borden Recap") of Borden Decorative Products Holdings, Inc. ("BDPH") pursuant to, among other transactions, the merger of 1 Purchaser into BDPH (the "Merger"), whereupon all rights and obligations of Purchaser hereunder will be, by virtue of the Merger, vested in BDPH (which will be renamed "The Imperial Home Decor Group Inc." following the Merger); E Seller desires to sell, assign and deliver ("Transfer") to Purchaser, and Purchaser desires to purchase and accept from Seller, the Imperial Shares on the terms and subject to the conditions set forth in this Agreement; F. Seller desires to cause C&A Canada to Transfer to Purchaser or its assignee (and, where applicable the term "Purchaser" will also refer to such assignee), and Purchaser desires to purchase and accept from C&A Canada, the C&A Imperial Canada Assets and to assume the C&A Imperial Canada Assumed Liabilities (together, the "Imperial Canada Business Acquisition"). NOW, THEREFORE, the parties hereto agree as follows: I. PURCHASE AND SALE OF SHARES 1.1. Purchase and Sale of Shares. On the terms and subject to the conditions hereof, at the Closing, Seller will Transfer, or cause to be Transferred, to Purchaser, and Purchaser will purchase and accept from Seller and C&A Canada, the Imperial Shares and the C&A Imperial Canada Assets, free and clear of all Liens, for the amount determined pursuant to Section 1.3 and in consideration of the grant of the Option to be delivered at Closing pursuant to Section 4.3.3 and the assumption of the C&A Imperial Canada Assumed Liabilities (such amount, together with the Option and the C&A Imperial Canada Assumed Liabilities, the "Purchase Price"). Notwithstanding any other provision hereof, in no event will the total amount of the accounts payable and accrued liabilities included in the C&A Imperial Canada Assumed Liabilities (other than any liabilities under the Canadian Pension Plan) exceed $5.0 million. For purposes of this Agreement, (a) the "C&A Imperial Canada Assets" means all assets, properties and rights, of whatever kind and nature, real or personal, tangible or intangible, contractual or legal, wherever located, as of the Closing that would have been owned or held by Imperial Canada but for the Imperial Canada Liquidation except for any right, title or interest in, to or under that certain Credit Agreement dated as of July 12, 1994, between Canadian Imperial Bank of Commerce, WCA Canada Inc. and Imperial Canada (the "Imperial Canada Credit Agreement") and (b) "C&A Imperial Canada Assumed Liabilities" means all obligations and liabilities, fixed or contingent, primary or secondary, direct or indirect, absolute or contingent, known or unknown, whether or not accrued, as of the Closing that would have been obligations or liabilities of Imperial Canada but for the Imperial Canada Liquidation, 2 except for (i) any Indebtedness of C&A Canada and (ii) such of the foregoing as are retained by Seller or any of its Post-Closing Affiliates hereunder or as to which Seller has agreed to indemnify the Purchaser or the Purchased Imperial Companies under any provision of Article VI and (iii) any obligation or liability under the Imperial Canada Credit Agreement. 1.2. Closing Payment. (a) The cash portion of the Purchase Price will be (i) $58 million, plus the amount of cash of Imperial UK as of immediately prior to the Closing, less $500,000 (the "Base Amount"), (ii) plus the Adjustment Amount, and (iii) minus the amount of any Indebtedness of any Purchased Imperial Companies outstanding immediately prior to the Closing (calculated after giving effect to any payments of any such Indebtedness prior to the Closing and in accordance with this Agreement (provided, however, that nothing in this Section 1.2 will be deemed to constitute an authorization of the incurrence or maintenance of any such Indebtedness by the Company)). For purposes of this Agreement (A) "Adjustment Amount" means, if Net Cash Flow is negative, a positive amount equal to such negative Net Cash Flow and, if Net Cash Flow is positive, a negative amount equal to such positive Net Cash Flow; (B) "Indebtedness" means any liability or obligation (whether primary or secondary as a guarantor or other surety other than arising out of the endorsement of checks for collection in the ordinary course of business), for borrowed money, for deferred purchase price of any asset (other than obligations to pay for inventory purchased in the ordinary course of business), under a capitalized lease and any other liability or obligation which should be shown as indebtedness on a consolidated balance sheet for the Company prepared in accordance with GAAP, whether or not evidenced by a note, bond or similar instrument, and any prepayment penalties, accrued interest or other amounts due on or in respect of any of the foregoing; and (C) the term "Net Cash Flow" means an amount, for the period from and including November 2, 1997 through the opening of business on the Closing Date, calculated in accordance with Schedule 1.2, giving effect to an additional deemed positive cash flow amount (regardless of the actual amount thereof) of $6.0 million. (b) Not less than two business days prior to the Closing Date, Seller and Purchaser will jointly prepare estimates of the Adjustment Amount and Indebtedness (such estimated Adjustment Amount minus such estimated Indebtedness being the "Estimated Purchase Price Adjustment Amount"), determined in accordance with Section 1.2(a) and based upon their respective review of monthly financial information then available to Seller and Purchaser and their respective inquiries of personnel responsible for the preparation of financial information relating to the Company in the ordinary course thereof. If the parties are unable so to 3 agree on the Estimated Purchase Price Adjustment Amount, then the amount thereof as estimated by Deloitte & Touche LLP, Purchaser's independent accountants ("D&T"), in good faith will be the Estimated Purchase Price Adjustment Amount for all purposes of this Agreement and the amount to be paid by Purchaser at the Closing will be the Base Amount, plus or minus, as the case may be, the Estimated Purchase Price Adjustment Amount (such amount, the "Closing Payment"). (c) On the Closing Date, Purchaser will cause to be paid by wire transfer of immediately available funds to such account as Seller has theretofore designated an amount equal to the Closing Payment. 1.3. Purchase Price Adjustment. (a) In order finally to determine the Purchase Price, the Closing Payment will be increased or decreased, as the case may be, by the amount, if any, by which the Adjustment Amount and Indebtedness, each as finally determined in accordance with this Section 1.3, differ (on a combined basis) from the amounts thereof reflected in the Estimated Purchase Price Adjustment Amount. For purposes of this Agreement, (x) the adjustment referred to in the immediately preceding sentence will be finally calculated on a net basis and (y) all determinations of the actual amounts thereof (the "Actual Purchase Price Adjustment Amount") will be determined by reference to the amounts thereof required to be shown, with respect to Indebtedness, on a consolidated balance sheet as of the opening of business on the Closing Date and, with respect to Net Cash Flow, on a consolidated statement of cash flows for the period from and including November 2, 1997 through the opening of business on the Closing Date (collectively, the "Closing Statement"), each on a basis consistent with, and using the same accounting principles, policies, practices and procedures used in preparing, the Financial Statements and in accordance with Schedule 1.2 and Section 1.2(a). (b) Within 60 calendar days after the Closing Date, Purchaser will in good faith prepare and deliver, or cause to be prepared and delivered, to Seller a Closing Statement setting forth Purchaser's determination of the Actual Purchase Price Adjustment Amount. The parties and their respective authorized representatives will be entitled to review, during normal business hours, the books, records and work papers of the Company to prepare or review, as the case may be, the Closing Statement and to determine the Actual Purchase Price Adjustment Amount. Without limiting the generality or effect of any other provision hereof, (i) the parties will provide the other parties and their authorized representatives access, during normal business hours, to the facilities, personnel and accounting and other records of the Company and the parties, as the case may be, to the extent reasonably determined by such other parties to be necessary to 4 permit Purchaser to prepare or have prepared the Closing Statement and to compute the Actual Purchase Price Adjustment Amounts as herein provided and to permit Seller to review such Closing Statement and computation (including, if requested by Seller, such access as may be necessary or appropriate to permit Arthur Andersen L.L.P. ("AA") to perform an audit of Net Cash Flow); provided, however, that the parties will conduct any such review in a manner that does not unreasonably interfere with the conduct of any other party's business, and (ii) Seller will take such actions as may be reasonably requested by Purchaser to close, or to assist Purchaser in closing, as of the opening of business on the Closing Date, or as of the Closing, as the case may be, the books and accounting records of the Company and otherwise reasonably to cooperate with Purchaser and its representatives in the preparation of the Closing Statement. Concurrently with the delivery of the Closing Statement, Seller will use its reasonable efforts to cause AA to provide Purchaser access to any of such firm's workpapers, trial balances and similar materials prepared in connection with such firm's audits or reviews of any of the Financial Statements (the "Workpapers"). (c) If, within 45 calendar days after the date of Purchaser's delivery of its computation of the Actual Purchase Price Adjustment Amount, Seller determines in good faith that such computations are inaccurate, Seller will give written notice to Purchaser within such 45 calendar day period (i) setting forth Seller's computation of Actual Purchase Price Adjustment Amount and (ii) specifying in reasonable detail Seller's basis for its disagreement with Purchaser's computations. The failure by Seller so to express its disagreement or provide such specification within such 45 calendar day period will constitute Seller's acceptance of Purchaser's computation of the Actual Purchase Price Adjustment Amounts. If Purchaser and Seller are unable to resolve any disagreement between them within ten calendar days after the giving of notice of such disagreement, the items in dispute will be referred for determination to KPMG Peat Marwick LLP (the "Accountants") as promptly as practicable. The Accountants will make a determination as to each of the items in dispute, which determination will be (A) in writing, (B) furnished to each of the parties hereto as promptly as practicable after the items in dispute have been referred to the Accountants, (C) made in accordance with this Agreement, and (D) conclusive and binding upon each of the parties hereto. In connection with their determination of the disputed items, the Accountants will be entitled to rely on the Workpapers and the Company's books and records, and the fees and expenses of the Accountants will be shared equally by Purchaser and Seller (except as provided below). Purchaser and Seller will use reasonable efforts to cause the Accountants to render their decision as soon as practicable, including without limitation by promptly complying with all reasonable requests by 5 the Accountants for information, books, records and similar items. If the determination of the Accountants represents an outcome more favorable to either Purchaser or Seller than the midpoint of such parties' last written settlement offers related to all items in dispute, in the aggregate, submitted to the other party at least two calendar days before the referral of the matter to the Accountants (each a "Last Offer"), then the party obtaining such favorable result will be deemed the "Prevailing Party" and the other party will be deemed the "Non-Prevailing Party". For purposes hereof, all of the fees and expenses of the Accountants, will be borne by the Non-Prevailing Party. No party will disclose to the Accountants, and the Accountants will not consider for any purpose, any settlement offer (other than the Last Offer) made by any party. (d) To the extent that the Actual Purchase Price Adjustment Amount, determined as provided in this Section 1.3 is more or less than the Estimated Purchase Price Adjustment Amount, Seller or Purchaser, as applicable, will, within ten calendar days after the final determination of the Actual Purchase Price Adjustment Amount, calculated on a net basis, pursuant to this Section 1.3, make or, in the case of Purchaser, cause to be made payment by wire transfer of immediately available funds of the amount of such difference, together with interest thereon from the Closing Date to the date of payment (at a rate equal to The Chase Manhattan Bank's prime rate, as publicly announced and in effect from time to time during such period, plus 2.0%, calculated on the basis of the actual number of days elapsed over 365), to such account as has been designated by Purchaser or Seller, as applicable. 1.4. Intercompany Obligations. Notwithstanding any other provision hereof, except for the receivables and payables described in Schedule 1.4 ("Post-Closing AR/AP"), any amount owed by Seller or any of its Affiliates other than the Purchased Imperial Companies (collectively, "Post-Closing Affiliates"), or owed by any of the Purchased Imperial Companies to Seller or any Post-Closing Affiliate, in respect of liabilities, obligations or assets of the Purchased Imperial Companies of a type that would be shown on a consolidated balance sheet of any of the Purchased Imperial Companies as "Investments and Advances From (To) Collins & Aikman Products Co." will be settled at or prior to the Closing and will not be reflected in the Closing Statement. Effective immediately after the Closing, all intercompany liabilities and obligations owing from Seller or any Post-Closing Affiliate to any of the Purchased Imperial Companies or owing from any of the Purchased Imperial Companies to Seller or any Post-Closing Affiliate (except for any Post-Closing AR/AP) that is not settled as contemplated by the immediately preceding sentence will be netted against each other and the net balance thereof will be discharged and deemed forgiven without further action or payment, 6 will be deemed contributed to or deducted from capital of the appropriate Purchased Imperial Company and all such amounts will be excluded from the determination of Net Cash Flow or Indebtedness under Sections 1.2 and 1.3. As a result, immediately following the Closing, there will be no further liability or obligation in respect of any such matters between Seller or any Post-Closing Affiliate, on the one hand, and the Purchased Imperial Companies, on the other hand, except as expressly provided herein. Any holder of a note or other evidence of indebtedness deemed settled pursuant to this Section 1.4 will surrender such note or other evidence of indebtedness to the obligor thereon. In addition, and without limiting the generality or effect of the foregoing, effective as of immediately prior to the Closing, all contracts and other obligations, other than the Transaction Documents and other than as set forth on Schedule 1.4, between or among the Purchased Imperial Companies or any of the Subsidiaries, on the one hand, and Seller or any Post-Closing Affiliate, on the other hand, will be terminated without further action to the extent that they would otherwise apply to any period or act occurring after the Closing. Notwithstanding anything to the contrary in this Agreement, Purchaser will not assume any liability or obligation (other than those listed on Schedule 1.4) owed by Imperial Canada to Seller or any Post-Closing Affiliate of a type that would be shown on a balance sheet of Imperial Canada and any such liability or obligation will not be included in the C&A Imperial Canada Assumed Liabilities. II. REPRESENTATIONS AND WARRANTIES 2.1. Representations and Warranties of Seller. Subject to Section 2.3, Seller represents and warrants to Purchaser as follows: 2.1.1. The Imperial Shares. (a) Except as set forth on Schedule 2.1.1, (i) Seller owns free and clear of any mortgages, liens, security interests or other encumbrances (collectively, "Liens") the number of Imperial Shares listed in Schedule 2.1.1, which Shares represent all of the issued and outstanding shares of capital stock of Imperial, and (ii) C&A Canada owns the shares of common stock of Imperial Canada listed in Schedule 2.1.1 as owned by C&A Canada (the "C&A Canada-Owned Imperial Canada Shares"), which shares, together with the shares of common stock of Imperial Canada listed in Schedule 2.1.1 as owned by Imperial (the "Imperial-Owned Imperial Canada Shares"), represent all of the issued and outstanding shares of capital stock of Imperial Canada. (b) The Imperial Shares are duly authorized, validly issued and outstanding, fully paid and nonassessable. The Imperial 7 Shares have not been issued in violation of, and are not subject to, any preemptive rights, and there are no outstanding convertible or exchangeable securities, calls, options or similar Contracts relating to the Imperial Shares or that may require the Company to issue to any person or entity any shares of any of its capital stock. Except as listed or described on Schedule 2.1.1, there are no voting trust or other Contracts restricting the voting, dividend rights or disposition of the Imperial Shares. (c) Except as set forth in Schedule 2.1.1, Seller owns the Imperial Shares beneficially and of record free and clear of all Liens and at the Closing will Transfer its entire right, title and interest in and to the Imperial Shares to Purchaser. (d) The Company does not own, beneficially or of record, any stock or other ownership interests in, or control, any other entity other than the Subsidiaries, all of the issued and outstanding share capital of which is owned by Imperial free and clear of all Liens (except for the C&A Canada-Owned Imperial Canada Shares and as set forth on Schedule 2.1.1); and, except as set forth on Schedule 2.1.1, there are no outstanding convertible or exchangeable securities or agreements giving any person or entity any right to acquire shares of capital stock of either of the Subsidiaries and no voting trusts or other Contracts restricting the voting, dividend rights or disposition of shares of either of the Subsidiaries. 2.1.2. Authorization and Effect of Agreement. Seller has the requisite corporate power to execute and deliver this Agreement and the other agreements or instruments referred to herein other than the Recapitalization Agreement, dated as of the date hereof, between Borden, Inc., BDPH and Purchaser (the "Borden Agreement") (collectively, the "Transaction Documents") to which Seller is a party and to perform the transactions contemplated hereby to be performed by it. All necessary corporate action required to be taken under the Delaware General Corporation Law for the due authorization of the execution and delivery by Seller of the Transaction Documents to which Seller is a party and the performance by Seller of the transactions contemplated thereby to be performed by it has been duly taken by Seller. Each Transaction Document to which Seller is a party has been, or will be, as the case may be, duly executed and delivered by Seller, and, assuming the due execution and delivery of such Transaction Document by Purchaser, constitutes, or will constitute, as the case may be, valid and binding obligations of Seller enforceable in accordance with its terms. Imperial and each of the Subsidiaries is a corporation duly organized, validly existing and in good standing under the Laws of its jurisdiction of incorporation. 8 2.1.3. No Restrictions. The execution and delivery of the Transaction Documents by Seller, C&A Canada and Imperial to which they are parties does not, and the performance by Seller, C&A Canada and Imperial of the transactions contemplated thereby to be performed by them will not, conflict with, or result in any violation of, or constitute a default (with or without notice or lapse of time or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or the loss of a benefit under, (i) any provision of the Certificate of Incorporation or By-laws or comparable governing documents of Seller, C&A Canada, Imperial or any of the Subsidiaries, (ii) any material lease, agreement, or other contract or legally binding contractual right or obligation (a "Contract") of the Company, (iii) any permit or approval ("Permit") issued under any domestic, foreign or other statute, law, ordinance, rule, regulation, judgment, order, injunction, decree or ruling or common law obligation ("Law") of any domestic, foreign or other court, government, governmental agency, authority, entity or instrumentality ("Governmental Entity"), or (iv) any Law (other than a Law requiring a Permit), other than, as to clauses (ii), (iii) and (iv), any such conflicts, violations or defaults as are listed or described on Schedule 2.1.3 or which, individually or in the aggregate, could not reasonably be expected to result in a material undisclosed liability of the Company. No consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required to be obtained or made by or with respect to Seller or the Company in connection with the execution and delivery by Seller and C&A Canada of the Transaction Documents to which they are a party or the performance by Seller and C&A Canada of the transactions contemplated thereby to be performed by them, except (i) for the filing of a premerger notification report by an Affiliate of Seller under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), if applicable in the circumstances, (ii) for such of the foregoing as are listed or described on Schedule 2.1.3, and (iii) for such consents, approvals, orders, authorizations of, or registrations, declarations or filings with, any Governmental Entity, which, individually or in the aggregate, if not obtained or made, could not reasonably be expected to result in a material undisclosed liability of the Company. 2.1.4. Financial Statements. (a) Attached as Schedule 2.1.4(a) are the audited consolidated balance sheets of the Company as of January 27, 1996 and December 28, 1996, the related audited consolidated statements of stockholders' equity, operations and cash flows for the fiscal years then ended, accompanied by the accountant's reports thereon, the unaudited combined balance sheet of the Company as of September 26, 1997 (the "Balance Sheet") and the unaudited combined statements of operations for the combined first two fiscal quarters of 1996 and 9 1997 (collectively, with the related notes, the "Financial Statements"). The audited Financial Statements present fairly, in all material respects, the consolidated financial position of the Company as of the dates thereof and the consolidated results of its operations and cash flows for the periods specified in conformity with United States generally accepted accounting principles, consistently applied ("GAAP"), except as set forth in Schedule 2.1.4(a). (b) Seller will deliver audited consolidated balance sheets of the Company as of September 26, 1997 and the related audited consolidated statements of stockholders' equity, operations and cash flows for the nine month periods ended September 26, 1997 (collectively, with the related notes, the "Offering Financial Statements") as promptly as practicable and in any event by November 30, 1997. The Offering Financial Statements will present fairly, in all material respects, the consolidated financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods specified in conformity with GAAP. (c) The Company does not have, and as of immediately prior to the Closing will not have, any liabilities or obligations, whether known or unknown, absolute, accrued, contingent or otherwise, whether due or to become due, including any uninsured liabilities, and whether arising by virtue of a breach of or under any Law, any lawsuit or claim or otherwise, that would be required by GAAP to be shown as a liability on a consolidated balance sheet of the Company except (i) as and to the extent set forth in the Balance Sheet or specifically disclosed in the notes thereto, (ii) liabilities incurred in the ordinary course of business consistent with past practice and not prohibited by this Agreement, which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, (iii) as set forth in Schedule 2.1.4(c), and (iv) other liabilities for which Seller is responsible pursuant to this Agreement. (d) Except as listed or described on Schedule 2.1.4(d), (i) from September 26, 1997 to November 4, 1997, the Company has conducted the Business only in the ordinary course, consistent with past practice, (ii) since September 26, 1997 through November 4, 1997, the Company has not taken any action which would have constituted a violation of Section 3.5 if Section 3.5 had applied since September 26, 1997, and (iii) during the period from September 26, 1997 to the Closing Date, there has not been any Material Adverse Effect, including any damage, destruction, loss or abandonment (whether or not covered by insurance) which, individually or in the aggregate, has or, to the Knowledge of Seller, could reasonably be expected to have, a Material Adverse Effect, other than, as applied to the accuracy 10 of this representation in respect of the period between the date hereof and the Closing Date, changes or effects after the date hereof that result from general economic conditions or competitive circumstances in the markets in which the Business is conducted. (e) For purposes of this Agreement, the term "Material Adverse Effect" means an event, circumstance or occurrence that has a material adverse effect on the Business or the consolidated financial condition or results of operations of the Company relative, in the case of financial condition or results of operations, to the management projections for the Business set forth in Schedule 2.1.4(e). 2.1.5. Brokers. No broker, investment banker, financial advisor or other person (other than BancBoston Securities, Inc. and Wasserstein Perella & Co., Inc., the fees and expenses of which will be paid by Seller) is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement. 2.2. Representations and Warranties of Purchaser. Subject to Section 2.3, Purchaser represents and warrants to Seller as follows: 2.2.1. Authorization and Effect of Agreement. Purchaser has the requisite corporate power to execute and deliver this Agreement and to perform the transactions contemplated hereby to be performed by it. All necessary corporate action required to be taken under the Delaware General Corporation Law for the due authorization of the execution and delivery by Purchaser of this Agreement and the performance by Purchaser of the transactions contemplated hereby to be performed has been duly taken by Purchaser. This Agreement has been duly executed and delivered by Purchaser and, assuming the due execution and delivery of this Agreement by Seller constitutes a valid and binding obligation of Purchaser, enforceable in accordance with its terms. 2.2.2. No Restrictions. The execution and delivery of this Agreement by Purchaser does not, and the performance by Purchaser of the transactions contemplated hereby to be performed by it will not, conflict with, or result in any material violation of, or constitute a material default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or the loss of a material benefit under, any provision of the charter or bylaws or comparable governing documents of Purchaser, or any material Contract or Permit applicable to Purchaser other than any such conflicts, violations or defaults which, 11 individually or in the aggregate, could not reasonably be expected to result in a material undisclosed liability of Purchaser. No material consent, approval, order or authorization of, or registration, declaration or filing with, any Governmental Entity is required to be obtained or made by or with respect to Purchaser in connection with the execution and delivery of this Agreement by Purchaser or the performance by Purchaser of the transactions contemplated hereby to be performed by either of them, except (i) for such of the foregoing as are listed or described on Schedule 2.2.2 and (ii) for such consents, approvals, orders, authorizations of, or registrations, declarations or filings with, any Governmental Entity, which, individually or in the aggregate if not obtained or made, could not reasonably be expected to result in a material undisclosed liability of Purchaser. 2.2.3. Financial Capacity. Purchaser has in hand a commitment letter (the "Commitment Letter"), which is currently in effect and a true and correct copy of which has been previously provided to Seller, from the financial institutions indicated therein, as well as the equity commitment letter of Blackstone Capital Partners III Merchant Banking Fund, L.P. ("Blackstone"), to provide the secured debt and equity financing contemplated by Purchaser for the transactions described in this Agreement and has obtained a highly confident letter, a true and correct copy of which has been previously provided to Seller, with respect to the subordinated debt financing so contemplated. Blackstone has undertaken to provide the equity capital contemplated by the Commitment Letter, and a true and correct copy of such undertaking has been previously provided to Seller. 2.2.4. Disclosure. As of the date hereof, to the Knowledge of Purchaser, (a) Seller is not in breach of any of its representations and warranties set forth in Section 2.1.4 and (b) Purchaser has furnished to Seller's financial advisors all material information pertaining to the Company and the Borden Recap that such financial advisors have requested prior to the date hereof. 2.3. Certain Limitations on Representations and Warranties. (a) Each of the parties is a sophisticated legal entity that was advised by experienced counsel and, to the extent it deemed necessary, other advisors in connection with this Agreement. Accordingly, each of the parties hereby acknowledges that (i) there are no representations or warranties by or on behalf of any party hereto or any of its respective Affiliates or representatives other than those expressly set forth in this Agreement and (ii) the parties' respective rights, obligations and remedies with respect to this Agreement and the events giving rise thereto will be solely and exclusively as set forth in the Transaction Documents. 12 (b) Any representation and warranty made in this Agreement by Seller will be deemed for all purposes to be qualified by the disclosures made in any Schedule specifically referred to in such representation or warranty and by the information disclosed in any other Schedule if the relevance of such information to such representation and warranty is reasonably apparent on its face. References in this Article to matters "primarily" relating to the Business are to matters which predominantly relate to the Business rather than predominantly to one of either Seller's or any Post-Closing Affiliate's other businesses or to the businesses or operations of Seller or any Post-Closing Affiliate generally. III. COVENANTS 3.1. Investigation by Purchaser. (a) Prior to the Closing, upon reasonable notice from Purchaser to Seller given in accordance with this Agreement, Seller will, and will cause the Company to, afford to the officers, attorneys, accountants or other authorized representatives of Purchaser reasonable access during normal business hours to the facilities and the books and records of the Company so as to afford Purchaser a reasonable opportunity to make, at its sole cost and expense, such review, examination and investigation of the Company as Purchaser may reasonably desire to make, including without limitation a so-called "Phase I" (i.e., documentary review and walk-through site inspection) preliminary environmental evaluation; provided, however, that no borings or other so-called "Phase II" environmental examinations will be performed without Seller's prior written consent, which consent may be given or withheld in Seller's sole discretion. Purchaser will be permitted to make extracts from or to make copies of such books and records as may be reasonably necessary. Prior to the Closing, Seller will furnish to Purchaser, or cause to be furnished to Purchaser, such financial and operating data and other information pertaining to the Company as Purchaser may reasonably request; provided, however, that nothing in this Agreement will obligate Seller to take actions that would unreasonably disrupt the normal course of business of itself, any Post-Closing Affiliate or the Company, violate the terms of any applicable Law or rules of any national stock exchange applicable to it or its Affiliates or any Contract to which any of them is a party or to which any of them or any of their assets are subject (to the extent described in reasonable detail in response to any request for information specified above) or grant access to any of their proprietary or confidential information not related to the Business. (b) Subject to Section 3.2, whether or not the Closing occurs, Purchaser will, and will cause its Affiliates other than Seller to, treat in confidence all documents, materials and other information (including without limitation information relating to 13 supply and sales agreements and relationships with third persons or entities) disclosed by any other party that is not its Affiliate, whether before, during or after the course of the negotiations leading to the execution of this Agreement or thereafter, including without limitation in its investigation of the other parties and in the preparation of agreements, schedules and other documents relating to the consummation of the transactions contemplated hereby. Prior to the Closing, and in the event that this Agreement is terminated, neither Purchaser nor any of its Affiliates will, and if the Closing occurs, Seller will not and will cause its Affiliates not to, disclose to any third party any confidential information, except as required by Law or rules of any national stock exchange or any Governmental Authority applicable to it or its Affiliates or Purchaser determines is required to be disclosed in connection with the financing described in Section 2.2.3, subject to Seller's right to review and reasonably object to such disclosure. If this Agreement is terminated, Purchaser and each of its Affiliates will return to Seller all originals and copies of all non-public documents and materials of the type provided for in this Section 3.1 which have been furnished or made available in connection with this Agreement, and Purchaser will destroy all notes, analyses, compilations, studies or other documents which contain or otherwise reflect such information. 3.2. Press Releases. Prior to the Closing, no party will issue or cause the publication of any press release or other public announcement with respect to this Agreement or the transactions contemplated hereby without the prior consent of the other parties, which consent will not be unreasonably withheld or delayed; provided, however, that nothing herein will prohibit any party from issuing or causing publication of any such press release or public announcement to the extent that such party determines such action to be required by Law or the rules of any national stock exchange applicable to it or its Affiliates or prohibit Purchaser from making any disclosure it determines may be reasonably necessary in furtherance of obtaining the financing contemplated by Section 2.2.3, in which event the party making such determination will, if practicable in the circumstances, use reasonable efforts to allow the other parties reasonable time to comment on such release or announcement in advance of its issuance. 3.3. Regulatory Filings. (a) Not later than two business days after the date hereof, Purchaser will, and Seller will cause the ultimate parent entity of Seller to, make such filings, if any, as may be required by the HSR Act with respect to the consummation of the transactions contemplated by this Agreement. Thereafter, Purchaser will, and Seller will cause the ultimate parent entity of Seller to, file or cause to be filed as promptly as practicable with the United States Federal Trade Commission 14 (the "FTC") and the United States Department of Justice (the "DOJ") supplemental information, if any, which may be required or requested by the FTC or the DOJ pursuant to the HSR Act. To the extent required by Law, Seller will make, or cause any of its Affiliates to make, such filings and use its reasonable efforts to obtain the governmental approvals and the other third party consents (if any) referred to in Section 2.1.3, and Purchaser will each make such filings and use its reasonable efforts to obtain the governmental approvals and the other third party consents (if any) referred to in Section 2.2.2. All filings referred to in this Section 3.3(a) will comply in all material respects with the requirements of the respective Laws pursuant to which they are made. (b) Without limiting the generality or effect of Section 3.3(a), each of the parties will (i) use their respective reasonable efforts to comply as expeditiously as possible with all lawful requests of Governmental Entities for additional information and documents pursuant to the HSR Act, if applicable, (ii) not (A) extend any waiting period under the HSR Act or (B) enter into any agreement with any Governmental Entity not to consummate the transactions contemplated by this Agreement, except with the prior consent of each of the other parties hereto, and (iii) cooperate with each other and use reasonable efforts to prevent the entry of, and to cause the lifting or removal of, any temporary restraining order, preliminary injunction or other judicial or administrative order which may be entered into in connection with the transactions contemplated by this Agreement, including without limitation the execution, delivery and performance by the appropriate entity of such divestiture agreements or other actions, as the case may be, as may be necessary to secure the expiration or termination of the applicable waiting periods under the HSR Act or the removal, dissolution, stay or dismissal of any temporary restraining order, preliminary injunction or other judicial or administrative order which prevents the consummation of the transactions contemplated hereby or requires as a condition thereto that all or any part of the Business be held separate and, prior to or after the Closing, pursue the underlying litigation or administrative proceeding diligently and in good faith. 3.4. Injunctions. Without limiting the generality or effect of any provision of Section 3.3, Section 3.6 or Section 3.9 or Article IV, if any Governmental Entity having jurisdiction over any party issues or otherwise promulgates any injunction, decree or similar order prior to the Closing which prohibits the consummation of the transactions contemplated hereby, the parties will use their respective reasonable efforts to have such injunction dissolved or otherwise eliminated as promptly as possible and, prior to or after the Closing, to pursue the underlying litigation diligently and in good faith. 15 3.5. Operation of the Business. Except in connection with or as a result of any matter listed or described on Schedule 3.5, as expressly contemplated herein or as otherwise consented to by Purchaser or requested by Purchaser or any of its Affiliates, from the date hereof to the Closing Date, Seller will cause the Company to: (a) Use reasonable efforts to keep the Business intact (including without limitation relationships with customers, employees, suppliers and others) and not take or permit to be taken or do or suffer to be done anything other than in the ordinary course of business of the Business as presently conducted, and use reasonable efforts to maintain the goodwill associated with the Business; without limiting the generality or effect of the foregoing, (i) in all events Seller will take all actions so that, as of immediately prior to the Closing, the total accounts payable and accrued liabilities (other than any liabilities under the Canadian Pension Plan) included in the C&A Imperial Canada Assumed Liabilities total not more than $5.0 million and (ii) not effect any transaction between Imperial Canada or C&A Canada, on the one hand, and any of the Purchased Imperial Companies, on the other hand, except in the ordinary course of business; (b) Continue existing practices relating to maintenance of the assets owned, leased or otherwise held by the Company for use in the Business ("Assets") in good repair, ordinary wear and tear excepted, and continue to make capital expenditures substantially in accordance with budgets previously delivered to Purchaser (and Imperial hereby agrees to continue to make capital expenditures only substantially in accordance with budgets previously delivered to Purchaser unless each other party otherwise consents); (c) Not purchase, sell, lease or dispose of, or enter into any Contract for the purchase, sale, lease or disposition of, or subject to Lien, any of the Assets other than (i) Products or (ii) in the ordinary course of business of the Business; (d) Not adopt or make any amendment to any Employee Plan or increase the general rates of compensation of Employees, except (i) as required by Law or (ii) pursuant to any Contract in effect on the date of this Agreement (Seller representing that, to the Knowledge of Seller, no Contract providing for such adoption, amendment or increase is in effect other than collective bargaining agreements the terms of which have been previously disclosed to Purchaser); 16 (e) Not enter into, amend, modify or cancel any material Contract except in the ordinary course of business consistent with past practice; (f) Not incur indebtedness for borrowed money, or assume, guarantee, endorse or otherwise become responsible for the obligations of any other person or entity, or make loans or advances to any person or entity (other than advances to Employees in the ordinary course of business consistent with past practice reflected on the Company's books and records); (g) Not enter into any joint venture, partnership or similar arrangement; (h) Not amend its Certificate of Incorporation or By-Laws; (i) Not dispose of, permit to lapse or otherwise fail to preserve any of its Intellectual Property or other similar rights, dispose of or permit to lapse any material Permit, or dispose of or disclose to any person or entity other than an authorized representative of Purchaser, any trade secret (except for such of the foregoing as may occur by operation of Law or the terms of any of the foregoing); (j) Not make any change in the accounting methods, principles or practices of the Business, except as required by GAAP; (k) Not sell or factor any account receivable of the Business or otherwise participate in any accounts receivable facility other than to accept payments made by account debtors to the Company at an existing lock-box of the Company (which lock-box arrangement will be terminated as promptly as practicable); (l) With respect to the Pension Plan for Salaried Employees of Imperial Wallcoverings (Canada), Inc.(the "Canadian Pension Plan"), (1) not withdraw any assets from the Canadian Pension Plan other than to pay benefits in accordance with its existing terms, (2) not make any amendment to the Canadian Pension Plan and (3) other than as may be required by Law, make any change to the actuarial assumptions used in determining the actuarial present value of the liabilities of the Canadian Pension Plan; (m) Not fail to pay when due any amount owed to a third party, including without limitation, any Taxes, in accordance with the applicable payment terms; 17 (n) Not prepay any obligation of the Company other than (i) in the ordinary course of business consistent with past practice or (ii) Indebtedness; and (o) Not enter into a Contract to do any of the foregoing (other than as may be required by Section 3.5(a) or 3.5(b). For purposes of this Agreement, "Intellectual Property" means all patents and trademarks and all material trade names, service marks and registered copyrights, and registrations and applications therefor, used or held for use in the conduct of the Business. 3.6. Satisfaction of Conditions. Without limiting the generality or effect of any provision of Section 3.3, 3.4 or 3.9 or Article IV, prior to the Closing, each of the parties hereto will use its respective reasonable efforts with due diligence and in good faith to satisfy promptly all conditions required hereby to be satisfied by such party in order to expedite the consummation of the transactions contemplated hereby. 3.7. Negotiations With Others. From the date hereof until the termination of this Agreement in accordance with its terms or the Closing, Seller and its Affiliates will not, and will cause its and their respective officers, directors, investment bankers, attorneys, accountants and other agents not to: (i) initiate, solicit (including by way of furnishing information) or accept, any offer or proposal which constitutes, an Alternative Proposal or (ii) in the event of an unsolicited Alternative Proposal, engage in substantive discussions or negotiations, or enter into any Contract, with, or furnish information to, any Person relating to any Alternative Proposal. All such negotiations prior to the date hereof have been terminated. For purposes of this Agreement, "Alternative Proposal" means any proposal or offer from any Person relating to any acquisition or purchase of all or substantially all of the assets or common stock of the Company or any merger, consolidation, business combination or similar transaction involving the Company, other than the transactions contemplated by this Agreement. 3.8. Certain Additional Covenants. Seller will use its reasonable best efforts to cause the independent accountants that issued the reports relating to the Offering Financial Statements to consent to Purchaser's use of the Offering Financial Statements as may be required by applicable Law in the disclosure documents relating to the financing contemplated by this Agreement or any subsequent financing involving a public offering. 18 3.9. Efforts to Consummate. Subject to the terms and conditions herein provided, Seller and Purchaser will use their reasonable efforts to take or cause to be taken, all actions and to do, or cause to be done, all things necessary to consummate and make effective the transactions contemplated by this Agreement and to cooperate with the other in connection with the foregoing. Seller will, at its sole expense, cause to be included in the assets and properties of the Company prior to the Closing all assets, properties, permits, authorizations, rights and related obligations which are being used or held for use primarily or exclusively by the Company (whether or not such assets, properties, permits, authorizations, rights and related obligations are presently owned or held by the Company), all on terms and conditions, and pursuant to documentation, reasonably acceptable to Purchaser. 3.10. Resignations. Prior to the Closing, upon Purchaser's specific request, Seller will cause to resign or to be removed from office such officers and directors of Imperial and each of the Subsidiaries whose full-time employment is not in the Business. 3.11. Certain Conditions. Notwithstanding any other provision hereof, in the event that the condition to the Closing set forth in Section 4.2.4 is not satisfied, Purchaser will have no liability or obligation to Seller or any other Person under any provision of, or actual or alleged breach of, this Article III (other than Section 3.1(b) or 3.2), the parties hereby expressly acknowledging and agreeing that Purchaser will have no liability or obligation hereunder if the Borden Recap shall not have been consummated. 3.12. Certain Pre-Closing Transactions. Prior to the Closing, Seller will cause Imperial to Transfer to C&A Canada the Imperial-Owned Imperial Canada Shares for $1.00 and will cause the Imperial Canada Liquidation to be effected with the result described in the recitals to this Agreement; such Transfer and Imperial Canada Liquidation will be deemed not to constitute a breach of any representation, warranty or covenant herein. IV. THE CLOSING 4.1. Conditions Precedent to Obligations of Purchaser and Seller. The obligations of Purchaser and Seller under this Agreement to consummate the transactions contemplated hereby will be subject to the satisfaction, at or prior to the Closing, of the conditions that there shall be no injunction, restraining order or decree of any nature of any court or governmental agency or body of competent jurisdiction that is in effect that prohibits the Closing and the waiting period (and any extension thereof) applicable to the Imperial Canada Business Acquisition 19 and the purchase and sale of the Imperial Shares contemplated hereby under the HSR Act shall have lapsed or been terminated. The foregoing conditions may be waived (i) insofar as it is a condition to the obligations of Purchaser, by Purchaser at its option and (ii) insofar as it is a condition to the obligations of Seller, by Seller at its option. 4.2. Additional Conditions Precedent to Obligations of Purchaser. The obligations of Purchaser under this Agreement to consummate the transactions contemplated hereby will be subject to the satisfaction, at or prior to the Closing, of all of the following conditions, any one or more of which may be waived at the option of Purchaser: 4.2.1. No Material Breach. There shall have been no material breach by Seller in the performance of any of the covenants herein to be performed by it in whole or in part prior to the Closing. 4.2.2. Transfer Documents, Etc. Seller shall have delivered or caused to be delivered to Purchaser the certificates representing the Imperial Shares, and certificates representing all shares of capital stock of the Subsidiaries, which certificates shall have been duly endorsed for transfer or accompanied by duly executed stock powers, with (if applicable) any required tax stamps affixed thereto and a Bill of Sale and other transfer documents for the C&A Imperial Canada Assets, including without limitation, a deed of sale for the owned real property included in the C&A Imperial Canada Assets, in a form reasonably acceptable to Purchaser. 4.2.3. Other Documents. Seller shall have duly executed and delivered to Purchaser a Management Services Agreement in substantially the form of Schedule 4.2.3(a) (the "MSA") and a Noncompetition Agreement in substantially the form of Schedule 4.2.3(b) (the "NCA"), and Seller shall have delivered to Purchaser an opinion of Cravath, Swaine & Moore, counsel to Seller, substantially to the effect set forth in Schedule 4.2.3(c). 4.2.4. Borden Closing. The conditions to the obligations of Purchaser to consummate the Borden Recap shall have been satisfied or duly waived in accordance with the requirements thereof. 4.2.5. Material Adverse Change. Since September 26, 1997, there shall not have occurred (a) a Material Adverse Effect or (b) any event which could reasonably be expected to have a Material Adverse Effect. 20 4.2.6. No Litigation. There shall not be pending or threatened any litigation seeking to enjoin this Agreement or the transactions contemplated hereby or the Borden Recap or seeking substantial damages as a result thereof. 4.2.7. Certain Approvals. All filings and approvals specified in Schedule 2.1.3 shall have been made or obtained and shall be in full force and effect. 4.2.8. Release of Liens. Seller shall have delivered to Purchaser evidence reasonably satisfactory to Purchaser of the release and termination of all Liens in respect of Indebtedness and any guarantees of indebtedness of Seller or any Post-Closing Affiliate. 4.2.9. Evidence of Imperial Canada Liquidation. Seller shall have furnished to Purchaser evidence reasonably satisfactory to Purchaser that the Imperial Canada Liquidation has been effected and that, as a result of the Imperial Canada Liquidation, C&A Canada has all right, title and interest in and to the assets of Imperial Canada. 4.3. Additional Conditions Precedent to Obligations of Seller. The obligations of Seller under this Agreement to consummate the transactions contemplated hereby will be subject to the satisfaction, at or prior to the Closing, of all the following conditions, any one or more of which may be waived at the option of Seller: 4.3.1. No Material Breach. There shall have been no material breach by Purchaser in the performance of any of the covenants herein to be performed by it in whole or in part prior to the Closing. 4.3.2. Closing Payment. Purchaser shall have delivered the Closing Payment to Seller in the manner specified in Section 1.2. 4.3.3. Option. Purchaser shall have executed and delivered to Seller an Option Agreement in substantially the form of Exhibit A (the "Option Agreement") under which Seller will have the right (the "Option") to purchase 6.7% of the common stock of BDPH issuable in the Merger calculated as specified in Footnote 1 of Exhibit A at an initial option exercise price (the "Initial Exercise Price") calculated in accordance with Note 2 of Exhibit A and otherwise on the terms set forth in Exhibit A. The Initial Exercise Price will be proportionately increased to the extent that stockholders of Purchaser make any additional contributions to the capital of BDPH to fund any adjustments required by Section 1.3 and the comparable provisions of the Borden Agreement. 21 4.3.4. Other Documents. Purchaser shall have caused the Company to have duly executed and delivered to Seller the MSA and the NCA, and Purchaser shall have delivered to Seller an opinion of Jones, Day, Reavis & Pogue, counsel to Purchaser, substantially to the effect set forth in Schedule 4.3.4. 4.4. The Closing. Subject to the fulfillment or waiver of the conditions precedent specified in Sections 4.1, 4.2 and 4.3, the consummation of the purchase and sale of the Shares contemplated hereby (the "Closing") will take place on December 31, 1997 (or as soon as practicable thereafter as all of the conditions to the Closing set forth in Section 4.3 are satisfied or waived) (the actual date of the Closing, the "Closing Date"). The Closing will take place at 10:00 A.M., Eastern Time, at the offices of Jones, Day, Reavis & Pogue, 599 Lexington Avenue, New York, New York 10022 or at such other time or place or on such date as shall be agreed upon the parties. At the Closing, the parties will execute and deliver such transfer and assumption documentation as may be customary to evidence the Transfer of the C&A Imperial Canada Assets and the assumption of the C&A Imperial Canada Assumed Liabilities, as contemplated herein. 4.5. Termination. Notwithstanding anything contained in this Agreement to the contrary, this Agreement may be terminated at any time prior to the Closing: (a) By the mutual written consent of Purchaser and Seller; (b) By Purchaser or Seller if the Closing shall not have occurred on or before May 31, 1998 (the "Drop Dead Date"); (c) By either Purchaser or Seller if there shall have been entered a final, nonappealable order or injunction of any Governmental Entity restraining or prohibiting the consummation of the transactions contemplated hereby or any material part thereof; (d) By Purchaser, in its sole discretion, on December 5, 1997 or, if later, the fifth day following Seller's delivery of the Offering Financial Statements, but neither before nor after such date, if the Offering Financial Statements reflect an adverse difference from the financial information for the first three quarters of fiscal year 1997 previously provided to Purchaser by Imperial in any material respect as determined by Purchaser, which determination will be conclusive for all purposes; or 22 (e) By Purchaser, in its sole discretion, by notice given to Seller prior to 5:00 p.m., New York time, on November 5, 1997. In the event of the termination of this Agreement under this Section 4.5, each party hereto will pay all of its own fees and expenses. There will be no further liability hereunder on the part of any party hereto if this Agreement is so terminated, except under Sections 3.1(b), 3.2 and 7.2 or by reason of a breach of any covenant or representation or warranty contained in this Agreement, including without limitation the covenants contained in Sections 3.3, 3.4 and 3.7. V. SURVIVAL AND INDEMNIFICATION 5.1. Survival of Representations, Warranties and Covenants. (a) Each of the representations and warranties contained in Article II and in the last sentence of Section 6.1.3(a) will survive the Closing and remain in full force and effect until the later of (i) the expiration of the applicable statute of limitations and (ii) the fifth anniversary of the Closing Date, except that the representations and warranties contained in clauses (ii) and (iii) of the first sentence of Section 2.1.3 and Sections 2.1.4, 2.2.2 and 2.2.4 will not survive the Closing. Any claim for indemnification with respect to such matters which is not asserted by a notice given as herein provided specifically identifying the particular breach underlying such claim (whether or not the Indemnifiable Loss has been actually incurred as of the date of such notice) and the facts and Indemnifiable Loss relating thereto (to the extent reasonably determinable as of the date of such notice), within such specified periods of survival may not be pursued and is hereby irrevocably waived. (b) The covenants contained in Sections 3.1(b), 3.3(b), 3.4, 3.5(a)(i)-(ii), 3.5(l), 3.5(m), 3.5(n), 3.8 and 3.9 (second sentence only), in this Article V and in Articles I, VI and VII (the "Post-Closing Covenants") will survive the Closing and remain in effect indefinitely unless a specified period is otherwise set forth in this Agreement (in which event such specified period will control). All other covenants contained in this Agreement will terminate, without further action, upon the occurrence of the Closing, with the result that any claim for an alleged breach of any such covenant may not be pursued and is hereby irrevocably waived. 5.2. Limitations on Liability. (a) For purposes of this Agreement, (i) "Indemnity Payment" means any amount of Indemnifiable Losses required to be paid pursuant to this Agreement, (ii) "Indemnitee" means any person or entity entitled to indemnification under this Agreement, (iii) "Indemnifying 23 Party" means any person or entity required to provide indemnification under this Agreement, (iv) "Indemnifiable Losses" means any and all claims, demands, actions, suits or proceedings (by any person or entity, including without limitation any Governmental Entity), settlements and compromises relating thereto and reasonable attorneys' fees and expenses in connection therewith or in enforcing the Indemnifying Party's obligations hereunder, losses, liabilities, costs and expenses, reduced by the amount of insurance proceeds actually received from any person or entity that is not an Affiliate of the Indemnitee, and (v) "Third Party Claim" means any claim, demand, action, suit or proceeding made or brought by any person or entity who or which is not a party to this Agreement or an Affiliate of a party to this Agreement. (b) After the Closing, as between Seller and any Post-Closing Affiliate, on the one hand, and Purchaser, the Purchased Imperial Companies and any Affiliate of either of them, on the other hand, the rights and obligations set forth in this Article V will be the sole and exclusive remedies for breach of this Agreement. 5.3. Indemnification. (a) Subject to Sections 5.1, 5.2 and 5.4, Seller will indemnify, defend and hold harmless Purchaser and its Affiliates and their respective directors, officers, partners, shareholders, employees, agents and representatives (including, without limitation, any predecessor or successor to any of the foregoing) (such persons and entities, "Purchaser Indemnitees") from and against any and all Indemnifiable Losses relating to, resulting from or arising out of: (i) Any breach by Seller of any of the representations or warranties of Seller contained in this Agreement; (ii) Any breach by Seller of any Post-Closing Covenant of Seller contained in this Agreement; (iii) Any controlled group liability under (A) Title IV of ERISA, (B) Section 302 of ERISA, (C) Sections 412 and 4971 of the Internal Revenue Code of 1986, as amended (the "Code"), (D) continuation coverage requirements of Sections 601, et seq. of ERISA and Section 4980B of the Code, and (E) corresponding or similar provisions of foreign Laws, other than such liabilities that arise solely out of, or relate solely to, Employees or Former Employees; (iv) All Indemnifiable Losses incurred by any Purchaser Indemnitee by reason of any liability or obligation of Seller or any of its Post-Closing Affiliates that does not solely arise out of the Business or the Company; and 24 (v) The assertion against Purchaser or any of its Affiliates of any liability or obligation of Imperial Canada or C&A Canada that is not a C&A Imperial Canada Assumed Liability. (b) Subject to Sections 5.1, 5.2 and 5.4, Purchaser will, and, if the Closing occurs, Imperial, jointly and severally with Purchaser will, indemnify, defend and hold harmless Seller and each Post-Closing Affiliate and their respective directors, officers, partners, shareholders, employees, agents and representatives (including, without limitation, any predecessor or successor to any of the foregoing) (such persons and entities, "Seller Indemnitees") from and against any and all Indemnifiable Losses relating to, resulting from or arising out of: (i) Any breach by Purchaser of any of the representations or warranties of Purchaser contained in this Agreement; (ii) Any breach by Purchaser of any Post-Closing Covenant of Purchaser contained in this Agreement; (iii) The Assumed Push-Down Liabilities; (iv) All Indemnifiable Losses incurred by any Seller Indemnitee by reason of any liability or obligation of the Company that solely arises out of the Business or the operations of the Company, provided, however, that this Section 5.3(b)(iv) will not apply to any matter for which Purchaser is entitled to indemnification under Section 5.3(a); and (v) The assertion against Seller or any of its Post-Closing Affiliates of any C&A Imperial Canada Assumed Liability. 5.4. Defense of Claims. (a) If any Indemnitee receives notice of the assertion or commencement of any Third Party Claim against such Indemnitee with respect to which an Indemnifying Party is obligated to provide indemnification under this Agreement, the Indemnitee will give such Indemnifying Party reasonably prompt written notice thereof, but in any event not later than 30 calendar days after receipt of such written notice of such Third Party Claim. Such notice by the Indemnitee will describe the Third Party Claim in reasonable detail, will include copies of all material written evidence thereof and will indicate the estimated amount, if reasonably practicable, of the Indemnifiable Loss that has been or may be sustained by the Indemnitee. The Indemnifying Party will have the right to participate in, or, by giving written notice to the Indemnitee, to assume, the defense of any Third Party Claim at such Indemnifying Party's own expense and by such 25 Indemnifying Party's own counsel (reasonably satisfactory to the Indemnitee), and the Indemnitee will cooperate in good faith in such defense. (b) If, within ten calendar days after giving notice of a Third Party Claim to an Indemnifying Party pursuant to Section 5.4(a), an Indemnitee receives written notice from the Indemnifying Party that the Indemnifying Party has elected to assume the defense of such Third Party Claim as provided in the last sentence of Section 5.4(a), the Indemnifying Party will not be liable for any legal expenses subsequently incurred by the Indemnitee in connection with the defense thereof; provided, however, that if the Indemnifying Party fails to take reasonable steps necessary to defend diligently such Third Party Claim within ten calendar days after receiving written notice from the Indemnitee that the Indemnitee believes the Indemnifying Party has failed to take such steps or if the Indemnifying Party has not undertaken fully to indemnify the Indemnitee in respect of all Indemnifiable Losses relating to the matter, the Indemnitee may assume its own defense, and the Indemnifying Party will be liable for all reasonable costs or expenses paid or incurred in connection therewith. Without the prior written consent of the Indemnitee, the Indemnifying Party will not enter into any settlement of any Third Party Claim which would lead to liability or create any financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder, or which provides for injunctive or other non-monetary relief applicable to the Indemnitee or does not include an unconditional release of all Indemnified Parties. If a firm offer is made to settle a Third Party Claim without leading to liability or the creation of a financial or other obligation on the part of the Indemnitee for which the Indemnitee is not entitled to indemnification hereunder and the Indemnifying Party desires to accept and agree to such offer, the Indemnifying Party will give written notice to the Indemnitee to that effect. If the Indemnitee fails to consent to such firm offer within ten calendar days after its receipt of such notice, the Indemnitee may continue to contest or defend such Third Party Claim and, in such event, the maximum liability of the Indemnifying Party as to such Third Party Claim will not exceed the amount of such settlement offer. (c) Any claim by an Indemnitee on account of an Indemnifiable Loss which does not result from a Third Party Claim (a "Direct Claim") will be asserted by giving the Indemnifying Party reasonably prompt written notice thereof, but in any event not later than 30 calendar days after the Indemnitee becomes aware of such Direct Claim. Such notice by the Indemnitee will describe the Direct Claim in reasonable detail, will include copies of all material written evidence thereof and will indicate the estimated amount, if reasonably practicable, of the 26 Indemnifiable Loss that has been or may be sustained by the Indemnitee. The Indemnifying Party will have a period of 30 calendar days within which to respond in writing to such Direct Claim. If the Indemnifying Party does not so respond within such 30 calendar day period, the Indemnifying Party will be deemed to have rejected such claim, in which event the Indemnitee will be free to pursue such remedies as may be available to the Indemnitee on the terms and subject to the provisions of this Agreement. (d) A failure to give timely notice or to include any specified information in any notice as provided in Sections 5.4(a), 5.4(b) or 5.4(c) will not affect the rights or obligations of any party hereunder except and only to the extent that, as a result of such failure, any party which was entitled to receive such notice was deprived of its right to recover any payment under its applicable insurance coverage or was otherwise prejudiced as a result of such failure. (e) If the amount of any Indemnifiable Loss, at any time subsequent to the making of an Indemnity Payment to the Indemnitee, is reduced by recovery, settlement or otherwise under or pursuant to any insurance coverage, or pursuant to any claim, recovery, settlement, rebate or other payment by or against any other person or entity, the amount of such reduction, less any costs, expenses, premiums or taxes incurred in connection therewith, will promptly be repaid by the Indemnitee to the Indemnifying Party. Upon making any Indemnity Payment the Indemnifying Party will, to the extent of such Indemnity Payment, be subrogated to all rights of the Indemnitee against any third person or entity that is not an Affiliate of the Indemnitee in respect of the Indemnifiable Loss to which the Indemnity Payment relates; provided, however, that (i) the Indemnifying Party shall then be in compliance with its obligations under this Agreement in respect of such Indemnifiable Loss and (ii) until the Indemnitee recovers full payment of its Indemnifiable Loss, any and all claims of the Indemnifying Party against any such third person or entity on account of said Indemnity Payment will be subrogated and subordinated in right of payment to the Indemnitee's rights against such third person or entity. Without limiting the generality or effect of any other provision hereof, each such Indemnitee and Indemnifying Party will duly execute upon request all instruments reasonably necessary to evidence and perfect the above-described subrogation and subordination rights. VI. OTHER POST-CLOSING COVENANTS 6.1. Personnel Matters. 6.1.1. Employees and Employee Benefit Plans. (a) Purchaser and Imperial, jointly and severally, will indemnify Seller and 27 each of its Affiliates for any Indemnifiable Loss relating to, resulting from or arising out of any change by Purchaser or any of its affiliates, including the Company, in employee plan benefits or levels of compensation following the Closing Date from those existing on the Closing Date or any liability or obligation to any Employee in the event that Purchaser or any of its affiliates, including the Company, terminates the employment of any person who is an Employee as of the Closing Date. Subject to Section 6.1.4, effective as of the Closing Date, Purchaser will, or will cause one of its Affiliates to, offer employment to each person employed as of the Closing Date by C&A Canada that would have been employed by Imperial Canada but for the Imperial Canada Liquidation ("Imperial Canada Employees"). (b) Purchaser agrees that, under any employee benefit plan made available or established after the Closing, Employees will receive credit for their years of service with Seller, any Post-Closing Affiliate or the Company prior to the Closing in determining eligibility and vesting thereunder, and in determining the amount of benefits under any applicable sick leave, vacation or severance plan. Purchaser will, or will cause one of its Affiliates to, cover Employees and Former Employees as of the Closing under a group health plan and waive any preexisting condition limitations applicable to Employees under any group health plan made available to Employees to the extent that an Employee's condition would not have operated as a preexisting condition limitation under any applicable group health plan prior to the Closing, and Purchaser will, or will cause one of its Affiliates to, take all action necessary to ensure that Employees and Former Employees are given full credit for all co-payments and deductibles incurred under any group health plan for the plan year that includes the Closing Date. (c) For purposes of this Agreement, the term "Employee Plan" means each employee benefit plan as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and each other material plan, program, agreement or arrangement, whether or not subject to ERISA, that (i) provides benefits for Employees or Former Employees and (ii) is maintained by Seller, any Post-Closing Affiliate or the Company or to which Seller, any Post-Closing Affiliate or the Company contributes or is obligated to contribute, or under which Seller, any Post-Closing Affiliate or the Company is liable in respect of Employees or Former Employees. As used in this Agreement, (A) the term "Employee" means each person (if any) listed or described as such on Schedule 6.1.1 and each person who is an Imperial Canada Employee or is employed by the Company as of the Closing(Seller hereby covenanting that no such person will be so employed who also works for Seller or any Post-Closing Affiliate) and (B) the term "Former Employee" means any person formerly so employed by the Company in the conduct of the 28 Business but does not include person who became an employee of Seller (or any entity that is or was an Affiliate of Seller) following the termination of their employment with the Company. The terms "Employee" and "Former Employee" will include, where an Employee Plan provides benefits for beneficiaries or dependents, the beneficiaries and dependents of an Employee or Former Employee. 6.1.2. Assumption of Obligations. (a) Effective as of the Closing, Purchaser will cause the Company to assume and be solely responsible for all liabilities and obligations of any of Seller and each Post-Closing Affiliate arising at any time and relating to the employment or termination of employment of any Employee or Former Employee, except to the extent that any of such liabilities or obligations are expressly retained by any Seller or any Post-Closing Affiliate pursuant to this Section 6.1. Notwithstanding the foregoing but subject to the provisions of Section 6.1.1, Seller will retain and be solely responsible for all liabilities and obligations relating to or arising out of the deemed termination of any Imperial Canada Employee arising solely by virtue of the fact that the Imperial Canada Business Transaction is in the form of a sale to Purchaser of assets rather than the capital stock of Imperial Canada. (b) Except as provided in Section 6.1.3, effective as of the Closing, Purchaser will cause the Company to, assume and be solely responsible for all liabilities and obligations of Seller or any Post-Closing Affiliate with respect to Employees and Former Employees under any Employee Plan and Seller and each Post-Closing Affiliate will be relieved of all liabilities and obligations with respect to such Employee Plans. The liabilities and obligations assumed by Purchaser and all of its Affiliates pursuant to this Section 6.1.2(b) include without limitation (i) any liability or obligation relating to (x) short-term and long-term disability benefits, (y) group medical benefits, and (z) retiree health and life insurance benefits; including in each case any claims for disability, medical, health and life insurance benefits incurred prior to the Closing; and (ii) any liability or obligation to provide such Employees and Former Employees and their qualified beneficiaries with continuation coverage (within the meaning of Section 4980B(f)(2) of the Code) under each Employee Plan that is a group health plan, and any liability or obligation relating to such coverage, including without limitation any liability or obligation to provide such Employees and Former Employees with the notice required under Section 4980B(f)(6) of the Code with respect to qualifying events that occur as a result of the Transfer of the Assets. Notwithstanding the foregoing, neither Purchaser nor any of its Affiliates will assume any liabilities or obligations with respect to Seller's cafeteria plan arrangement arising out of any 29 failure of Seller to set forth the terms of such plan in a written plan document. (c) Purchaser and Seller will, and Seller will cause C&A Canada to, take all steps (i) as are necessary (including obtaining all required governmental or third party consents) to effect the assumption by Purchaser or one of Purchaser's Affiliates of the Employee Benefit Plans (other than the plans referred to in Section 6.1.3) maintained or sponsored by Imperial Canada prior to the Imperial Canada Liquidation and the collective bargaining agreements covering Employees employed by Imperial Canada prior to the Imperial Canada Liquidation and (ii) as are reasonably calculated to ensure that Purchaser or its Affiliate assuming such plans and collective bargaining agreements do not incur any obligations or liabilities with respect to such plans and agreements that are greater than, or in addition to, C&A Canada's obligations or liabilities as successor to Imperial Canada's obligations or liabilities under the terms of such plans and agreements as of the Closing Date. 6.1.3. Retirement Plans. (a) As of the Closing, Seller will cause Employees to fully vest in their accrued benefits under the Collins & Aikman Corporation Employees' Profit Sharing and Personal Savings Plan (the "Savings Plan") and the Collins & Aikman Corporation Employees' Pension Account Plan (the "Pension Plan" and, together with the Savings Plan, the "Retirement Plans"). Except as provided in Section 6.1.3(b), neither Purchaser nor any of its Affiliates will assume any liabilities or obligations with respect to the Retirement Plans, which will be retained by Seller. As soon as practicable after the Closing, to the extent permitted by Law and the terms of the Pension Plan, Seller will permit distributions to Employees of their accrued benefits under the Pension Plan. Purchaser will, or will cause one of its Affiliates to, take all action necessary to cause one or more qualified retirement plans maintained by Purchaser or any one of its Affiliates to accept an eligible rollover distribution (within the meaning of Section 402(f)(2) of the Code) of the amounts distributed from the Pension Plan to each Employee who shall become an employee of Purchaser's affiliated group and a rollover contribution (within the meaning of Section 408(d)(3) of the Code) with respect to such amounts. To the extent distributions from the Pension Plan are not permitted under Law, Purchaser and Seller will take such mutually agreed upon action with respect to Employees' benefits, whether that be a spin-off, trustee-to-trustee transfer to a plan maintained by Purchaser or any of its Affiliates, or retention in the Pension Plan for eventual distribution pursuant to the terms of such plan. All distributions under the Pension Plan will satisfy all requirements for funding as are required by Law giving effect to the transactions contemplated by this Agreement. Seller represents and warrants that distributions to Employees as 30 contemplated by this Section 6.1.3 are permitted by the terms of the Pension Plan. (b) As soon as reasonably practicable following the Closing, Seller will cause the trustee of the Savings Plan to transfer the account balances of Employees and Former Employees to the trustee of a qualified defined contribution plan maintained by Purchaser or any one of its Affiliates ("Purchaser's Plan"). Such transferred account balances will be made in cash except to the extent any portion of an account balance represents a participant loan, in which case the participant's loan obligation will be transferred to the trustee of Purchaser's Plan. The assets transferred from the Savings Plan to Purchaser's Plan will be equal to the account balances of the transferring Employees and Former Employees as of the valuation date immediately preceding the date of transfer. No transfer of assets to Purchaser's Plan will occur until Purchaser and Seller have received such assurances as are reasonable that the applicable provisions of the Code have been satisfied. Purchaser will take such action as may be necessary to cause Purchaser's Plan to provide each such Employee and Former Employee after the transfer with an initial account balance that is at least equal to the account balance transferred with respect to such Employee and Former Employee from the Savings Plan, and to provide all benefits protected by law, including optional forms of benefit. (c) Purchaser and Seller will, and Seller will cause Imperial Canada to, take all steps as are necessary or reasonably requested by Purchaser, to transfer the sponsorship of the Canadian Pension Plan to Purchaser, or one of Purchaser's Affiliates (including obtaining all required governmental and third party consents). To the extent such a transfer is not permitted by the terms of the Canadian Pension Plan or applicable Law, Seller and Purchaser will permit distributions or make other arrangements in the same manner as contemplated with respect to Pension Plan by the third and fourth sentences of Section 6.1.3(a), subject to applicable law. 6.1.4. Employment and Plan Amendments or Terminations. Except as provided in Section 6.1.1, no provision of this Section 6.1 will limit Purchaser's or any of its Affiliates' right and authority to discontinue, suspend or modify the employment of any Employee or benefits provided to any or all Employees or Former Employees after the Closing; provided, however, that in the event of any such discontinuance, suspension or modification Purchaser will, or will cause one of its Affiliates to, remain liable for all Employee Plan and other employee benefit liabilities or obligations assumed pursuant to this Agreement and will indemnify, defend and hold harmless Seller, each Post-Closing Affiliate and their respective directors, officers, partners, 31 employees, agents and representatives (including without limitation any predecessor or successor to any of the foregoing) from and against any and all Indemnifiable Losses they may suffer or incur as a result thereof. Neither Seller nor any Post-Closing Affiliate will be liable for any liability or obligation that may arise from the amendment or termination by Purchaser or any of its Affiliates of any employee benefit plan assumed, established or continued by Purchaser or any of its Affiliates under this Section 6.1. 6.1.5. Transitional Matters. Each of Seller and Purchaser will use its respective reasonable efforts to cooperate to (a) transfer to Purchaser or any of its Affiliates any insurance and administrative services contracts that Purchaser wishes to continue with respect to any Employee Plan that Purchaser or any of its Affiliates is assuming or continuing pursuant to this Agreement and (b) cause any insurance carrier administering workers' compensation and other employee benefit liabilities or obligations assumed by Purchaser or any of its Affiliates to deal directly with Purchaser or such Affiliate. 6.1.6. Employee Information. Each of Seller and Purchaser will provide the other, in a timely manner, any information with respect to any Employee's or Former Employee's employment with and compensation from Seller, any Post-Closing Affiliate or Purchaser or any of its Affiliates, as the case may be, or rights or benefits under any employee benefit plan which the other party hereto may reasonably request. 6.2. General Post-Closing Matters. 6.2.1. Post-Closing Notifications. Purchaser and Seller will, and each will cause its respective Affiliates to, comply with any post-Closing notification or other requirements, to the extent then applicable to such party, of any antitrust, trade competition, investment, control or other Law of any Governmental Entity having jurisdiction over the Business. 6.2.2. Access. (a) On the Closing Date, or as soon thereafter as practicable, and in no event later than 30 calendar days after the Closing Date, Seller will deliver or cause to be delivered to Purchaser all original agreements, documents, books, records, including without limitation Employee records and records relating to obligations of the Company to Employees under Employee Plans retained or assumed by Purchaser or the Company hereunder, and files primarily relating to the Business or the Company (collectively, "Records") in the possession of Seller or any Post-Closing Affiliate to the extent not in the possession of the Company or Purchaser, subject to the following exceptions: 32 (i) Purchaser recognizes that certain Records may contain only incidental information relating to the Company or may primarily relate to Seller or any Post-Closing Affiliate, or the businesses of Seller or any Post-Closing Affiliate other than the Business, and Seller and its Post-Closing Affiliates may retain such Records and Seller may deliver appropriately excised copies of such Records; and (ii) Seller and each Post-Closing Affiliate may retain any Tax Returns so long as true and complete copies of the portions thereof relating to the Business are delivered to Purchaser at or before the Closing or made available to Purchaser following the Closing. After the Closing, each party will, and will cause its Affiliates to, retain all Records (except those Records referred to in Section 6.2.2(a)(i) and (ii)) required to be retained pursuant to obligations imposed by any applicable Law. Except as provided in the immediately preceding sentence, each party will, and will cause its Affiliates to, retain all Records for a period of seven years after the Closing Date. After the end of such seven-year period, before disposing, or permitting its Affiliates to dispose, of any such Records, each party will, and will cause its Affiliates to, give notice to such effect to the other party and give the other party at its cost and expense an opportunity to remove and retain all or any part of such Records as the other party may elect. (b) After the Closing, upon reasonable notice, each party hereto will give, or cause to be given, to the representatives, employees, counsel and accountants of the other parties hereto access, during normal business hours, to Records relating to periods prior to or including the Closing, and will permit such persons to examine and copy such Records to the extent reasonably requested by the other party in connection with tax and financial reporting matters (including, without limitation, any Tax Return relating to state or local real property transfer or gains taxes), audits, legal proceedings, governmental investigations and other business purposes and to make inquiries relating thereto of the relevant personnel; provided, however, that nothing herein will obligate any party to take actions that would unreasonably disrupt the normal course of its business, violate the terms of any contract to which it is a party or to which it or any of its assets is subject or grant access to any of its proprietary, confidential or classified information (except to the extent required for purposes of defending or prosecuting any third party lawsuits or administrative or other adjudicative proceedings ("Legal Proceedings")). Each party will, and will cause its respective Affiliates controlled by it to, provide or make available to the other and the other's respective Affiliates access to employees of Purchaser and the Company for the purposes 33 of, and with the limitations described in, the preceding sentence (including without limitation for the purpose of providing, and preparing to provide, testimony in connection with third party Legal Proceedings). 6.2.3. Certain Tax Matters. (a) Seller will prepare and file or cause to be prepared and filed all Income Tax Returns for the Purchased Imperial Companies required to be filed with the appropriate foreign, United States, state and local taxing authorities for any taxable period that ends on or before the Closing Date (each a "Pre-Closing Tax Period"). Seller will prepare and, if required to do so by applicable Law, deliver to Purchaser for signing and filing any Income Tax Returns of the Purchased Imperial Companies with respect to any Pre-Closing Tax Period (including any short period) that have not been filed prior to the Closing Date. Seller will pay all Taxes required to be paid with respect to such Tax Returns. Seller will prepare and file or cause to be prepared and filed all Income Tax Returns for Imperial Canada and will pay all Income Taxes required to be paid with respect to such Tax Returns. (b) Except as otherwise provided in Section 6.2.3(a) or Section 6.2.3(c), Purchaser will prepare and file or cause to be prepared and filed all Tax Returns for the Purchased Imperial Companies that are required to be filed with the appropriate United States, state, local and foreign taxing authorities for all periods as to which such Tax Returns are due after the Closing Date (taking into account all extensions of due dates). Subject to Section 6.2.3(r) and Section 6.2.3(v), Purchaser will pay or cause to be paid all Taxes required to be paid with respect to such Tax Returns. (c) With respect to any taxable period that would otherwise include but not end on the Closing Date, to the extent permissible pursuant to applicable Law, Seller will, and Purchaser will cause the Purchased Imperial Companies and Imperial Canada to, insofar as possible, (i) take all steps as are or may be reasonably necessary, including without limitation the filing of elections or returns with applicable taxing authorities, to cause such period to end on the Closing Date or (ii) if clause (i) is inapplicable, report (insofar as possible) the operations of the Purchased Imperial Companies only for the portion of such period ending on the Closing Date in a combined, consolidated or unitary Tax Return filed by Seller or a Post-Closing Affiliate, and report the operations of Imperial Canada only for the portion of such period ending at the close of business on the Closing Date, notwithstanding that such taxable period does not end on the Closing Date. If clause (ii) applies to a taxable period of the Purchased Imperial Companies, the portion of such taxable period included in such return filed by Seller will be treated as a Pre-Closing Tax Period described in 34 Section 6.2.3(a) and Purchaser will not be responsible for filing such return for such portion of such year pursuant to Section 6.2.3(b), provided that the foregoing will not relieve Purchaser of its obligation under Section 6.2.3(b) to file a Tax Return reporting the operations of the Purchased Imperial Companies for the portion of such taxable period beginning after the Closing Date. If it is not possible for a Tax Return to be filed for Non-Income Taxes that reports the operations of Imperial Canada only for the period ending at the close of business on the Closing Date, the parties shall cooperate in preparing a return for the whole taxable period. (d) Purchaser will prepare and deliver, or will cause to be prepared and delivered, within 60 calendar days of receipt of Seller's request therefor, to Seller, Seller's standard international, federal and state Income Tax Return data gathering packages relating to the Purchased Imperial Companies, and Seller's standard Tax Return data gathering packages relating to the Non-Income Taxes of Imperial Canada (if appropriate pursuant to Section 6.2.3(c)). Such packages will be prepared on a basis consistent with the prior year's Income Tax or Non-Income Tax (if appropriate) Returns. In addition to providing such packages to Seller, Purchaser will promptly provide or cause to be provided to Seller such other information as Seller may reasonably request in order for the operations of the Company to be properly reported in such Income Tax or Non-Income Tax(if appropriate) Returns. (e) Seller will indemnify, defend and hold harmless Purchaser and each of its Affiliates from and against any and all liability for any taxable period as a result of Treasury Regulation Section 1.1502-6 (or any comparable provision of state, local or foreign law) for Income Taxes of any corporation, other than the Purchased Imperial Companies which is or has been affiliated with Seller or Collins & Aikman Corporation, a Delaware corporation ("C&A Corp."). (f) Purchaser is eligible to and will make a timely and effective election under Section 338(g) of the Code (and any comparable provision of state or local law) with respect to the purchase of the Imperial Shares hereunder. Both Seller and Purchaser are eligible to, and Purchaser will make and Seller will cause C&A Corp. to make, a timely and effective election under Section 338(h)(10) of the Code (and any comparable provision of state or local law) with respect to such purchase (the "Section 338(h)(10) Election"). (g) At the Closing, Purchaser will deliver to Seller a completed Internal Revenue Service Form 8023A, and the required schedules thereto ("Form 8023A"), providing for the Section 338(h)(10) Election. Provided that the information on such Form 35 8023A is, in the reasonable determination of Seller, correct and complete in all material respects, Seller will, at the Closing, execute and deliver such Form 8023A to Purchaser. If any changes or supplements are required to the Form 8023A as a result of any information that is first available after the Closing, Seller and Purchaser will promptly agree upon and make such changes. Purchaser and Seller (or C&A Corp.) will timely file the Form 8023A, and any required supplements thereto, and will provide written evidence to the other that it has done so. (h) Purchaser and Seller agree that neither of them will take, or permit their Affiliates to take, any action to modify or revoke the elections contained in or the content of any Form 8023A without the express written consent of the other party. (i) Seller will pay and indemnify and hold Purchaser and Imperial harmless from (i) any and all Taxes arising from the Section 338(h)(10) Election and (ii) any Tax liability, cost or expense arising out of the failure to pay such Tax. Seller will also pay any state or local Tax (and indemnify and hold Purchaser and the Purchased Imperial Companies harmless against any Tax liability, cost or expense arising out of any failure to pay such Tax) attributable to any election under state or local law comparable to the election available under Section 338(g) of the Code (or which results from the making of an election under Section 338(g) of the Code) with respect to Purchaser's acquisition of the Purchased Imperial Companies. (j) Purchaser and Seller agree to report transactions under this Agreement consistent with the Section 338(h)(10) Election and will take no position contrary thereto unless required to do so pursuant to a final determination by any Taxing authority or judicial proceeding. (k) Seller will cause any tax sharing agreements between the Company and Seller or any other Post-Closing Affiliate to be terminated, effective as of the Closing Date, to the extent that any such agreement relates to the Company. (l) Purchaser and Seller agree that for purposes of all Tax Returns and other appropriate documents, (i) $10 million of the Purchase Price will be allocated to the Imperial Canada Business Acquisition, (ii) the balance of the Purchase Price and the liabilities of the Purchased Imperial Companies (plus other relevant items) will be allocated to the assets of the Purchased Imperial Companies (with the Option deemed for this purpose to be valued at $6 million) in a manner consistent with the purchase price allocation to be determined by the parties in accordance with Treasury Regulation Section 1.338(h)(10)-1, and (iii) the sum of $10 million and the C&A Imperial Assumed Liabilities will be allocated among the C&A Imperial Canada Assets as follows: 36 (A) Purchaser will propose such an allocation and (B) if Seller disagrees in good faith, after consultation with its Canadian tax advisors, with Purchaser's proposed allocation, Purchaser, Seller and their respective Canadian tax advisors will negotiate to determine such an allocation based on the principle that Purchaser's proposed allocation will be used to the maximum extent permitted by Canadian tax law. Such allocation as finally determined will be evidenced by a writing signed by Seller and Purchaser. The parties agree that, if requested by Seller, the parties will make any election under Canadian tax law necessary to permit C&A Canada or Imperial Canada to treat any loss on accounts receivable as an ordinary loss unless Purchaser determines in its sole discretion that such election could have a negative impact on Purchaser or any of its Affiliates. (m) On or before the Closing Date, Seller agrees to provide Purchaser and the Company with all required clearance certificates or similar documents that may be required by any state, local or other Taxing authority in order, to the extent allowed, to relieve Purchaser of any obligation to withhold any portion of the Purchase Price. If necessary to avoid sales or use Taxes, Seller will, to the extent allowed, provide Purchaser with all appropriate state and local resale certificates. (n) Seller will furnish to Purchaser on or before the Closing Date a certification of Seller's non-foreign status as set forth in Treasury Regulation Section 1.1445-2(b). (o) Seller, Purchaser and the Company will reasonably cooperate with each other in connection with the preparation and filing of all Tax Returns or any audit examinations for any period, including without limitation the timely furnishing or making available of records, books of account and any other information necessary for the preparation of the Tax Returns. (p) (i) With respect to any Income Tax Return of the Purchased Imperial Companies for a Pre-Closing Tax Period and any Income Tax Return of Imperial Canada for any tax period, Seller and its duly appointed representatives will have the sole right, at its or their expense, to supervise or otherwise coordinate any examination process and to negotiate, resolve, settle or contest any asserted Tax deficiencies or assert and prosecute any claims for refund; notwithstanding the foregoing, without the express written consent of Purchaser or Imperial, which consent will not be unreasonably withheld or delayed, Seller will not file any amended Tax Return, settle any Tax claim or assessment, or surrender any right to claim a refund of Tax, if such action could have the effect of increasing the Tax liabilities of the Purchased Imperial Companies or Purchaser. 37 (ii) With respect to any other Tax Return of C&A Imperial Canada or the Purchased Imperial Companies, Purchaser, the Purchased Imperial Companies and their duly appointed representatives will have the sole right, at the expense of Purchaser or the Purchased Imperial Companies, to supervise or otherwise coordinate any examination process and to negotiate, resolve, settle or contest any asserted Tax deficiencies or assert and prosecute any claims for refund; notwithstanding the foregoing, without the express written consent of Seller, which consent will not be unreasonably withheld or delayed, neither Purchaser nor the Purchased Imperial Companies will file any amended Tax Return, settle any Tax claim or assessment, or surrender any right to claim a refund of Tax, if such action could have the effect of increasing the Tax liabilities of Seller or any Post-Closing Affiliate. (iii) Each party hereto will notify the other within 30 calendar days (unless action is required sooner, then as soon as practicable) of the assertion of any claim or the commencement of any suit, action, proceeding, investigation or audit with respect to the operations of the Company that is the subject of this Section 6.2.3(p), and will provide the other copies (subject to deletion of nonrelevant information) of all correspondence relating to such contest. (q) (i) "Income Tax" or "Income Taxes" means all Taxes imposed on, measured by or which require reference to, net or taxable income (including any income, franchise, estimated, alternative, minimum, add-on minimum or other Tax imposed on, measured by or which require reference to, net or taxable income), together with interest and penalties thereon and estimated payments thereof, (ii) "Taxes" means all federal, state, local, foreign and other taxes (including without limitation income, profits, premium, estimated, excise, sales, use, occupancy, gross receipts, franchise, ad valorem, severance, capital levy, production, transfer, withholding, social security, employment, unemployment compensation, payroll-related and property taxes, alternative minimum, estimated stamp, value added, windfall profits, import duties and other governmental charges and assessments), whether or not measured in whole or in part by net income, and including deficiencies, interest, additions to tax or additional amounts, interest and penalties with respect thereto (such term shall also include any "Taxes" as to which the Company is liable as a successor or transferee or pursuant to a contractual obligation), (iii) "Non-Income Taxes" means all Taxes that are not Income Taxes, and (iv) "Tax Returns" means all returns, reports or information returns or statements relating to Taxes as are required to be filed with any United States, state, local and foreign taxing authorities. 38 (r) Seller will defend, indemnify and hold harmless Purchaser and the Purchased Imperial Companies and their respective directors, officers, employees, agents and representatives (including, without limitation, any predecessor or successor to any of the foregoing) from and against any breach of a covenant contained in this Section 6.2.3 and against the following Taxes and, except as otherwise provided in Section 6.2.3(s), against any loss, damage, liability, or expense, including reasonable fees for attorneys and consultants, incurred in contesting or otherwise in connection with any such Taxes and in enforcing their rights under this Section 6.2.3: (i) all Income Taxes imposed on the Purchased Imperial Companies with respect to taxable periods ending before or on the Closing Date, (ii) all Income Taxes of Imperial Canada with respect to any Tax period, (iii) with respect to taxable periods beginning before the Closing Date and ending after the Closing Date, Income Taxes imposed on the Purchased Imperial Companies that are allocable, pursuant to Section 6.2.3(s), to the portion of such period ending on the Closing Date, (iv) all Non-Income Taxes of Imperial Canada that arise or accrue after the close of business on the Closing Date, and (v) all Canadian Non-Income Taxes arising out of or related to the pre-Closing transfer pricing practices of Seller and its Affiliates. (s) Purchaser will, and, if the Closing occurs, Imperial jointly and severally with Purchaser will, indemnify, defend and hold harmless Seller, each Post-Closing Affiliate and their respective directors, officers, partners, employees, agents and representatives (including, without limitation, any predecessor to any of the foregoing) from and against (i) all Income Taxes imposed on the Purchased Imperial Companies with respect to taxable periods beginning after the Closing Date and, with respect to taxable periods beginning before the Closing Date and ending after the Closing Date, Income Taxes imposed on the Purchased Imperial Companies that are allocable, pursuant to Section 6.2.3(t), to the portion of such period beginning after the Closing Date, (ii) all Income Taxes relating to or arising out of the operation by Purchaser or any of its Affiliates of the business of Imperial Canada after the Closing Date, (iii) all Non-Income Taxes of the Purchased Imperial Companies with respect to any Tax period and Non-Income Taxes of Imperial Canada that arise or accrue through the close of business on the Closing Date, in each case other than sales and transfer Taxes which are Seller's responsibility pursuant to Section 6.2.3(v) and Taxes which are Seller's responsibility pursuant to Section 6.2.3(r)(v), and (iv) any loss, damage, liability, or expense, including reasonable fees for attorneys and consultants, incurred in contesting or otherwise in connection with any such Taxes and in enforcing their rights under this Section 6.2.3. 39 (t) In the case of Income Taxes of the Purchased Imperial Companies and Non-Income Taxes of Imperial Canada that are payable with respect to a taxable period that begins before the Closing Date and ends after the Closing Date, the portion of any such Tax that is allocable to the portion of the period ending on the Closing Date or, in the case of Non-Income Taxes of Imperial Canada, at the close of business on the Closing Date, will be deemed equal to the amount that would be payable if the taxable year ended immediately prior to the Closing Date (including the taxable years of organizations in which the Company owns a partnership interest or equity interest) (except that, solely for purposes of determining the marginal tax rate applicable to income or receipts during such period in a jurisdiction in which such tax rate depends upon the level of income or receipts, annualized income or receipts may be taken into account if appropriate for an equitable sharing of such Taxes). The portion of Tax allocable to the portion of the period ending on the Closing Date shall be computed on a per diem basis in the case of Taxes that are neither (x) Income Taxes nor (y) imposed in connection with any sale or other transfer or assignment of property, real or personal, tangible or intangible. (u) Any Tax refund (or comparable benefit resulting from a reduction in Tax liability) for a period ending on or before the Closing Date arising out of the carryback of a loss or credit incurred by the Purchased Imperial Companies in a taxable period (or allocable portion thereof) ending after the Closing Date will be the property of Purchaser and, if received by Seller or any Post-Closing Affiliate will be paid over promptly to Purchaser (including any interest received from or credited thereon by the applicable taxing authority). Any other Income Tax refund for a period ending on or before the Closing Date or for the allocable portion of a period including the Closing Date will be the property of Seller. Purchaser will pay or cause the Company to pay to Seller all refunds or credits of Taxes (including any interest received from or credited thereon by the applicable taxing authority) received by Purchaser or any of its Affiliates after the Closing Date and attributable to Income Taxes paid by the Purchased Imperial Companies or any other Post-Closing Affiliate with respect to a Pre-Closing Tax Period or by Seller. Such payment will be made to Seller promptly after receipt of any such refund from, or allowance of such credit by, the relevant taxing authority. In all other events, any Tax refund will be the property of the Purchased Imperial Companies and paid to the Purchased Imperial Companies. (v) Seller and Purchaser will each pay one-half of all sales and transfer Taxes, if any, which may be payable with respect to the consummation of the transactions contemplated by this Agreement, including any and all sales, transfer, recording and other Taxes arising from the Imperial Canada Business 40 Acquisition being effected in the form of a purchase and sale of assets rather than a stock acquisition, and to the extent any exemptions from such Taxes are available Seller and Purchaser will cooperate to prepare any certificates or other documents necessary to claim such exemptions. 6.2.4. Insurance. With respect to any loss, liability or damage suffered by Purchased Imperial Companies after the Closing Date relating to, resulting from or arising out of the conduct of the Business prior to the Closing Date or included in the C&A Imperial Canada Assumed Liabilities, for which Seller or any Post-Closing Affiliate would be entitled to assert, or cause any other Person to assert, a claim for recovery under any policy of insurance maintained by Seller or a Post-Closing Affiliate or for the benefit of Seller or the Company, in respect of the Business, products, employees or the Company ("Insurance"), at the request of Purchaser, Seller will use its reasonable efforts to assert, or to assist Purchaser or the Purchased Imperial Companies to assert, one or more claims under such Insurance covering such loss, liability or damage if Purchaser or any of the Purchased Imperial Companies is not itself entitled to assert such claim, provided that all of Seller's and any Post-Closing Affiliate's out-of-pocket costs and expenses incurred in connection with the foregoing, including without limitation any liability, obligation or expense referred to in the last sentence of this Section 6.2.4, are promptly reimbursed by Purchaser. Seller will be deemed, solely for the purpose of asserting claims for Insurance pursuant to the immediately preceding sentence, to have assumed or retained liability for such loss, liability or damage to the extent of the policy limits of the applicable policy of Insurance; provided, however, that (a) Purchaser's obligations under Section 5.3(b) will not be affected by the provisions of this Section 6.2.4 and (b) with respect to any claim made at the request of Purchaser or the Purchased Imperial Companies by Seller or any Seller Affiliate under any Insurance pursuant to this Section 6.2.4, Purchaser will indemnify, defend and hold harmless Seller and each Post-Closing Affiliate and their respective directors, officers, partners, employees, agents and representatives (including without limitation any predecessor or successor of any of the foregoing) from and against any Indemnifiable Loss relating to, resulting from or arising out of any deductible, policy limit, obligation, indemnity, reinsurance due to the liquidation or insolvency of the reinsurer, self-insurance retention, premium adjustments resulting from claims made at the request of Purchaser or the Purchased Imperial Companies under this Section 6.2.4 or other like arrangement by which any such entity retains any liability or obligation under any such policy of Insurance or otherwise. 6.2.5. Receivables. As of the Closing, Seller will terminate any agreements to which Imperial or any of the 41 Subsidiaries is a party that is related to the accounts receivables facility operated by a finance subsidiary of Seller for its affiliates and Seller will indemnify, defend and hold harmless the Company or Purchaser for any Indemnifiable Loss arising out of the Company's prior participation in this facility or performance under such agreements, provided, however, that the foregoing indemnity obligation will not apply to any loss on the sale of receivables prior to the Closing Date or the collection (or failure to collect) the receivables. Seller hereby agrees that all monies (regardless of any prior discount or loss on sale) collected after the Closing by Seller or any Post-Closing Affiliate with respect to receivables attributable to the Company will be paid to the Company within three business days of Seller's or Post-Closing Affiliate's receipt thereof. 6.2.6. Surety Obligations. (a) From and after the Closing, Purchaser will, and will cause the Company to, use reasonable efforts to obtain and have issued replacements for any guarantee, performance bond, letter of credit or other agreement guaranteeing or securing liabilities and obligations (including without limitation in respect of operating or other leases and the surety bonds listed on Schedule 6.2.6) (collectively, "Surety Obligations") relating to the Business or the Company under which Seller or any Post-Closing Affiliate has any liability to a third party and to obtain any amendments, novations, releases, waivers, consents or approvals necessary to release Seller and each Post-Closing Affiliate to such Surety Obligations from all liability thereunder relating to the Business or the Company, in each case as promptly as practicable. In the event and for the period that Purchaser and the Company fail to obtain any such replacement, amendment, novation, release, waiver, consent or approval, without limiting the generality of Section 5.3(b), Purchaser will indemnify, defend, and hold harmless Seller and each Post-Closing Affiliate and their respective directors, officers, partners, employees, agents and representatives (including without limitation the predecessors or successors of any of the foregoing) from and against any Indemnifiable Loss relating to, resulting from or arising out of any such failure by Purchaser or the Company. (b) From and after the Closing, Seller will use reasonable efforts to obtain and have issued replacements for any Surety Obligations relating to any business other than the Business or any Post-Closing Affiliate or under which the Company has any liability to a third party and to obtain any amendments, novations, releases, waivers, consents or approvals necessary to release the Company from all liability thereunder relating to any business other than the Business or any Post-Closing Affiliate, in each case as promptly as practicable. In the event and for the period that Seller fails to obtain any such replacement, amendment, novation, release, waiver, consent or approval, 42 without limiting the generality of Section 5.3(a), Seller will indemnify, defend, and hold harmless the Company and its respective Affiliates, directors, officers, partners, employees, agents and representatives (including without limitation the predecessors or successors of any of the foregoing) from and against any Indemnifiable Loss relating to, resulting from or arising out of any such failure by Seller. 6.2.7. Assumed Push-Down Liabilities. Without further action, effective as of the Closing, the Company will assume the liabilities of Seller listed on Schedule 6.2.7 (the "Assumed Push-Down Liabilities") but only to the extent related exclusively to the Business. 6.2.8. 1994 Financial Statements. Seller will deliver as promptly as practicable after Purchaser's written request, audited consolidated balance sheets of the Company as of January 28, 1995 and the related audited consolidated statements of stockholders' equity, operations and cash flows for the fiscal year then ended, accompanied by the accountant's report thereon. 6.2.9. Certain Contracts. (a) Notwithstanding anything to the contrary in this Agreement, to the extent that (i) any Contract that is a C&A Imperial Canada Asset (an "Assumed Contract") is not capable of being assigned to Purchaser in connection with the Closing without the consent or waiver of a third Person (including without limitation a Governmental Entity) which has not been obtained on or before the Closing Date, or (ii) any of the transactions contemplated by this Agreement constituted or would constitute a breach of any Assumed Contract, or a violation of any Law or Order or other governmental edict, Seller will be deemed not to have Transferred, and will not be obligated to Transfer, to Purchaser any direct or indirect right, title or interest in or to any such Contract without first having obtained all necessary consents and waivers. Seller will use reasonable efforts to obtain such consents and waivers as may be necessary to cure such potential breach or violation; provided, however, but without affecting Seller's obligations under Section 5.3, Seller will not be obligated to pay any consideration therefor to the party from whom the consent or waiver is requested. Purchaser agrees that neither Seller nor any of its Affiliates will have any liability whatsoever arising out of or relating to the failure to obtain any consents or waivers that may have been or may be required in connection with the transactions contemplated by this Agreement or because of a breach of, default under or termination of any Assumed Contract as a result thereof. (b) To the extent that the consents and waivers referred to in the immediately preceding paragraph are not obtained, or until the breaches or violations referred to in the 43 immediately preceding paragraph are resolved, Seller will use reasonable efforts, (i) with reasonable costs of Purchaser and its Affiliates related thereto to be promptly reimbursed by Seller, to provide to Purchaser, at its request, the benefits of any such Contract and cooperate in any reasonable and lawful arrangement designed to provide such benefits to Purchaser, without incurring any financial obligation to Seller or any of its Affiliates, and (ii) with reasonable costs of Seller and its Affiliates related thereto to be promptly reimbursed by Purchaser, to enforce, at the request and for the account of Purchaser, any rights of Seller arising from any such Contract against the other party or parties to such Contract (including the right to elect to terminate in accordance with the terms thereof upon the advice of Purchaser). Notwithstanding any provision to the contrary contained herein, Purchaser will perform or pay for the benefit of the other party or parties thereto the obligations of Seller under or in connection with any such Contract and will indemnify and hold Seller and its Affiliates harmless from any Indemnifiable Losses relating to, resulting from or arising out of any failure by Purchaser so to perform or pay. Purchaser will comply with all reasonable requests of Seller for cooperation in connection with the performance of Seller's obligations under this Section 6.2.9. VII. MISCELLANEOUS PROVISIONS 7.1. Notices. All notices and other communications required or permitted hereunder will be in writing and, unless otherwise provided in this Agreement, will be deemed to have been duly given when delivered in person or by a nationally recognized overnight courier service or when dispatched during normal business hours by electronic facsimile transfer (confirmed in writing by mail simultaneously dispatched) to the appropriate party at the address specified below: (a) If to Purchaser, to: BDPI Holdings Corporation c/o The Blackstone Group 345 Park Avenue New York, New York 10154 Facsimile No.: (212) 754-8720 Attention: Mr. David A. Stockman Senior Managing Director 44 with a copy to: Jones, Day, Reavis & Pogue 599 Lexington Avenue New York, New York 10022 Facsimile No.: (212) 755-7306 Attention: Robert A. Profusek, Esq. (b) If to Seller, to: Collins & Aikman Products Co. 701 McCullough Drive Charlotte, North Carolina 28262 Facsimile No.: (704) 548-2010 Attention: Corporate Counsel with a copy to: Collins & Aikman Products Co. 1556 Third Avenue Suite 603 New York, New York 10128 Facsimile No.: (212) 410-9314 Attention: Elizabeth R. Philipp, Esq. Executive Vice President - Law or to such other address or addresses as any such party may from time to time designate as to itself by like notice. 7.2. Expenses. Except as otherwise expressly provided herein, (a) Seller will pay or cause to be paid all expenses incurred by Seller incident to this Agreement and in preparing to consummate and consummating the transactions provided for herein and (b) Purchaser will pay any expenses incurred by it incident to this Agreement and in preparing to consummate and consummating the transactions provided for herein, including without limitation the fees and expenses of any broker, finder, financial advisor or similar person engaged by such party. 7.3. Successors and Assigns. (a) Subject to Section 7.3(b), this Agreement will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but will not be assignable or delegatable by any party without the prior written consent of the other parties hereto. Notwithstanding the foregoing sentence, Purchaser may assign any of its rights or obligations under this Agreement to any lender to Purchaser or any subsidiary of Purchaser as security for obligations to such lender in respect of the financing arrangements entered into in connection with the 45 transactions contemplated hereby and any refinancings, extensions, refundings or renewals thereof, or to any subsidiary of Purchaser or BDPH or any entity of which Purchaser is a subsidiary, provided however, that no assignment hereunder shall in any way affect Purchaser's or the Company's obligations or liabilities under this Agreement. (b) Nothing in this Agreement is intended to limit Purchaser's ability to sell or to Transfer the Shares following the Closing Date provided that such sale or Transfer will not result in a termination of any of Purchaser's covenants, duties, responsibilities, obligations or liabilities hereunder, including without limitation under Sections 3.1(b) and Articles V and VI, unless the person or entity acquiring the Shares pursuant to such sale or Transfer assumes all of such covenants, duties, responsibilities, obligations and liabilities in a written instrument reasonably satisfactory to Seller. 7.4. Waiver. Either Purchaser or Seller by written notice to the other may (a) extend the time for performance of any of the obligations or other actions of the other under this Agreement, (b) waive any inaccuracies in the representations or warranties of the other contained in this Agreement, (c) waive compliance with any of the conditions or covenants of the other contained in this Agreement, or (d) waive or modify performance of any of the obligations of the other under this Agreement; provided, however, that neither Purchaser nor Seller may, without the prior written consent of the other, make or grant such extension of time, waiver of inaccuracies or compliance or waiver or modification of performance with respect to its (or any of its Affiliates') representations, warranties, conditions or covenants hereunder. Except as provided in the immediately preceding sentence, no action taken pursuant to this Agreement will be deemed to constitute a waiver of compliance with any representations, warranties or covenants contained in this Agreement and will not operate or be construed as a waiver of any subsequent breach, whether of a similar or dissimilar nature. 7.5. Entire Agreement. This Agreement (including the Schedules hereto) supersedes any other agreement, whether written or oral, that may have been made or entered into by any party or any of their respective Affiliates (or by any director, officer or representative thereof) prior to the date hereof relating to the matters contemplated hereby. This Agreement (together with the Schedules hereto) constitutes the entire agreement by and among the parties hereto and there are no agreements or commitments by or among such parties or their Affiliates except as expressly set forth herein. 7.6. Amendments, Supplements, Etc. This Agreement may be amended or supplemented at any time by additional written 46 agreements as may mutually be determined by Purchaser and Seller to be necessary, desirable or expedient to further the purposes of this Agreement, or to clarify the intention of the parties hereto. 7.7. Rights of the Parties. Except as provided in Article V or in Sections 6.2.3 and 7.3, nothing expressed or implied in this Agreement is intended or will be construed to confer upon or give any person or entity other than the parties hereto and their respective Affiliates any rights or remedies under or by reason of this Agreement or any transaction contemplated hereby. 7.8. Further Assurances. From time to time, whether at or after the Closing as and when requested by either Purchaser or Seller, the other will execute and deliver, or cause to be executed and delivered, all such documents and instruments as may be reasonably necessary or otherwise reasonably requested by Purchaser or Seller to consummate the transactions contemplated by this Agreement or otherwise to carry out the intent and purpose of this Agreement and to assure that the Company holds all of the assets, properties, permits, authorizations, rights and related obligations used or held for use primarily or exclusively in the Business, including without limitation the proper filing, registration or recordation of such documents and instruments. 7.9. Applicable Law; Jurisdiction. This Agreement and the legal relations among the parties hereto will be governed by and construed in accordance with the substantive Laws of the State of New York, without giving effect to the principles of conflict of laws thereof. 7.10. Titles and Headings. Titles and headings to Sections herein are inserted for convenience of reference only, and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. 7.11. Certain Interpretive Matters and Definitions. (a) Unless the context otherwise requires, (i) all references to Sections or Schedules are to Sections or Schedules of or to this Agreement, (ii) each term defined in this Agreement has the meaning assigned to it, (iii) each accounting term not otherwise defined in this Agreement has the meaning assigned to it in accordance with GAAP, (iv) "or" is disjunctive but not necessarily exclusive, (v) words in the singular include the plural and vice versa, (vi) the terms "subsidiary" and "Affiliate" have the meanings given to those terms in Rule 12b-2 of Regulation 12B under the Securities Exchange Act of 1934, as amended, provided, however, that, except with respect to Section 1.3, none of Purchaser, its parent or any entity controlled by either of them will be deemed to be Affiliates of Seller and none Seller, C&A Corp. or any entity controlled by either of them will be deemed to be Affiliates of Purchaser, (vii) 47 all references to "$" or dollar amounts will be to lawful currency of the United States of America, and (viii) "Knowledge of Seller" means solely to the actual knowledge of the persons listed on Schedule 7.11(a), and (ix) "Knowledge of Purchaser" means solely to the actual knowledge of the persons listed on Schedule 7.11(b). (b) No provision of this Agreement will be interpreted in favor of, or against, any of the parties hereto by reason of the extent to which any such party or its counsel participated in the drafting thereof or by reason of the extent to which any such provision is inconsistent with any prior draft hereof or thereof. 7.12. Bulk Transfer Laws. Purchaser hereby waives compliance by Seller with the provisions of any so-called "bulk transfer" Law of any jurisdiction in connection with the sale of the C&A Imperial Canada Assets to Purchaser. 48 IN WITNESS WHEREOF, the parties hereto have executed this Agreement the day and year first above written. COLLINS & AIKMAN PRODUCTS CO. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer IMPERIAL WALLCOVERINGS, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer BDPI HOLDINGS CORPORATION By: /s/ William T. Fenstermaker Name: William T. Fenstermaker Title: Vice President
Schedules and Exhibits (Omitted) -------------------------------- Exhibit A -Option Agreement Schedule 1.2 -Net Cash Flow Schedule 1.4 -Intercompany Obligations Schedule 2.1.1 -Capitalization of Imperial and Imperial Canada Schedule 2.1.3 -Conflicts; consents Schedule 2.1.4 -Financial Statements Schedule 2.1.4(c) -Undisclosed Liabilities Schedule 2.1.4(d) -Conduct of the Business since September 26, 1997 Schedule 2.1.4(e) -Management Projections for the Business Schedule 2.2.2 -Buyer Consents and Appraisals Schedule 3.5 -Operation of the Business Schedule 4.2.3(a) -Form of Management Services Agreement Schedule 4.2.3(b) -Non-Competition Agreement Schedule 4.2.3(c) -Opinion of Cravath, Swaine & Moore Schedule 4.3.4 -Opinion of Jones, Day Reavis & Pogue Schedule 6.1.1 -Employees Schedule 6.2.6 -Surety Obligations Schedule 6.2.7 -Assumed Push - Down Liabilities Schedule 7.11 -Knowledge of Seller Schedule 7.11(b) -Knowledge of Purchaser Collins & Aikman Corporation hereby undertakes to furnish supplementally a copy of any omitted exhibit or schedule to the Commission upon request.
EX-4 3 EXHIBIT 4.8 Exhibit 4.8 AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF JUNE 3, 1996 AMENDMENT AND WAIVER AMENDMENT AND WAIVER, dated as of January 12, 1998 (this "Amendment and Waiver"), under the Amended and Restated Credit Agreement, dated as of June 3, 1996 (as amended prior to the date hereof and as further amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among COLLINS & AIKMAN PRODUCTS CO., a Delaware corporation (the "Borrower"), COLLINS & AIKMAN CANADA INC., a Canadian corporation (the "Canadian Borrower"), COLLINS & AIKMAN CORPORATION, a Delaware corporation ("Holdings"), the financial institutions parties thereto (the "Lenders") and THE CHASE MANHATTAN BANK, a New York banking corporation, as agent to the lenders thereunder (in such capacity, the "Administrative Agent"). W I T N E S S E T H: WHEREAS, the Borrower, the Canadian Borrower and Holdings have requested the Lenders to amend and to waive certain covenants in the Credit Agreement as set forth herein; and WHEREAS, the Lenders are willing to amend and to waive such covenants in the Credit Agreement on and subject to the terms and conditions thereof; NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each of the parties hereto, the parties agree as follows: SECTION 1. Definitions. Unless otherwise defined herein, terms defined in the Credit Agreement are used herein as therein defined. SECTION 2. Amendment of Section 6.01 (Indebtedness). (a) Subsection 6.01(d) of the Credit Agreement is hereby amended by deleting from clause (iv) thereof the amount "$200,000,000" and substituting therefor the amount "$225,000,000". (b) Subsection 6.01 of the Credit Agreement is hereby amended by deleting from clause (r) thereof the amount "$200,000,000" and substituting therefor the amount "$225,000,000". SECTION 3. Amendment of Section 6.07 (Investments, Loans and Advances). Subsection 6.07 of the Credit Agreement is hereby amended by deleting from clause (l) thereof the amount "$200,000,000" and substituting therefor the amount "$225,000,000". 1 SECTION 4. Waiver of Section 6.14 (Interest Coverage Ratio). Section 6.14 of the Credit Agreement is hereby waived for the fiscal quarter ending December 27, 1997; provided that such waiver is effective only if the Interest Coverage Ratio is at least 1.70 to 1.00 for such fiscal quarter. SECTION 5. Representations and Warranties. The parties hereto hereby represent and warrant to the Administrative Agent and each Lender that after giving effect to the waivers contained herein, each party hereto hereby confirms, reaffirms and restates the representations and warranties set forth in Article III of the Credit Agreement as if made on and as of the Effective Date, except as they may specifically relate to an earlier date; provided that such representations and warranties shall be and hereby are amended so that all references to the Agreement therein shall be deemed a reference to (i) the Credit Agreement, (ii) this Amendment and Waiver and (iii) the Credit Agreement as amended by this Amendment and Waiver. SECTION 6. Conditions Precedent. This Amendment and Waiver shall become effective as of the date hereof (the "Effective Date") when each of the conditions precedent set forth below shall have been fulfilled: (a) Amendment and Waiver. The Administrative Agent shall have received this Amendment and Waiver, executed and delivered by a duly authorized officer of each of the Borrower, the Canadian Borrower, Holdings and the Required Lenders. (b) No Default or Event of Default. On and as of the Effective Date and after giving effect to this Amendment and Waiver and the transactions contemplated hereby, no Default or Event of Default shall have occurred and be continuing. (c) Representations and Warranties. The representations and warranties made by the Borrower and the Canadian Borrower in the Credit Agreement and herein after giving effect to this Amendment and Waiver and the transactions contemplated hereby shall be true and correct in all material respects on and as of the Effective Date as if made on such date, except where such representations and warranties relate to an earlier date in which case such representations and warranties shall be true and correct as of such earlier date. (d) Acknowledgement and Consent. The Administrative Agent shall have received from each of Holdings, the Borrower, the Canadian Borrower and the other Loan Parties with respect to each Loan Document to which it is a party a duly executed Acknowledgment and Consent, substantially in the form of Exhibit A hereto. SECTION 7. Continuing Effect of Credit Agreement. This Amendment and Waiver shall not constitute an amendment or waiver of any provision of the Credit Agreement not expressly referred to herein and shall not be construed as an amendment, waiver or consent to any action on the part of any party hereto that would require an amendment, waiver or consent of the Administrative Agent or the Lenders except as expressly stated herein. Except as expressly waived hereby, the provisions of the Credit Agreement are and shall remain in full force and effect. 2 SECTION 8. Expenses. The Borrower and the Canadian Borrower agree to pay or reimburse the Administrative Agent for all of its reasonable out-of-pocket costs and expenses incurred in connection with (a) the negotiation, preparation, execution and delivery of this Amendment and Waiver and any other documents prepared in connection herewith, and consummation of the transactions contemplated hereby and thereby, including the fees and expenses of Simpson Thacher & Bartlett, counsel to the Administrative Agent, and (b) the enforcement or preservation of any rights under this Amendment and Waiver and any other such documents. SECTION 9. GOVERNING LAW. THIS AMENDMENT AND WAIVER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. SECTION 10. Counterparts. This Amendment and Waiver may be executed in any number of counterparts by the parties hereto, each of which counterparts when so executed shall be an original, but all counterparts taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment and Waiver to be duly executed and delivered by their respective duly authorized officers as of the day and year first above written. COLLINS & AIKMAN PRODUCTS CO.
By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and CHIEF FINANCIAL OFFICER COLLINS & AIKMAN CANADA INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President and Chief Financial Officer COLLINS & AIKMAN CORPORATION By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer 3 THE CHASE MANHATTAN BANK, as Administrative Agent and as a Lender By /s/ Rosemary Bradley Name: Rosemary Bradley Title: Vice President BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Managing Agent and a Lender By /s/ Linda A. Carper Name: Linda A. Carper Title: Managing Director NATIONSBANK, N.A., as Managing Agent and a Lender By /s/ E. Phifer Helms Name: E. Phifer Helms Title: Senior Vice President AERIES FINANCE LTD. By /s/ Andrew Ian Wignall Name: Andrew Ian Wignall Title: Director CERES FINANCE LTD. By /s/ John H. Cullinane Name: John H. Cullinane Title: Director 4 STRATA FUNDING LTD. By /s/ John H. Cullinane Name: John H. Cullinane Title: Director BANK OF IRELAND - GRAND CAYMAN BRANCH By /s/ Michael G. Doyle Name: Michael G. Doyle Title: Assistant Vice President THE BANK OF NEW YORK By /s/ Ann Marie Hughes Name: Ann Marie Hughes Title: Assistant Vice President THE BANK OF NOVA SCOTIA By: /s/ William E. Zarrett Name: William E. Zarrett Title: Senior Relationship Manager BANK OF SCOTLAND By /s/ Annie Chin Tat Name: Annie Chin Title: Vice President 5 BANK OF TOKYO - MITSUBISHI TRUST COMPANY By /s/ Pamela Donnelly Name: P. Donnelly Title: Vice President BRANCH BANKING AND TRUST COMPANY By /s/ Thatcher L. Townsend III Name: Thatcher L. Townsend III Title: Vice President OCTAGON CREDIT INVESTORS LOAN PORTFOLIO (a unit of The Chase Manhattan Bank) By /s/ Richard W. Stewart Name: Richard W. Stewart Title: Managing Director CIBC INC. By /s/ Roger Colden Name: Roger Colden Title: Executive Director, CIBC Oppenheimer Corp., agent COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE By /s/ Anthony Rock Name: Anthony Rock Title: Vice President By /s/ Sean Mounier Name: Sean Mounier Title: First Vice President 6 COMMERCIAL LOAN FUNDING TRUST I By: Lehman Commercial Paper Inc., not in its individual capacity but solely as administrative agent By /s/ Michele Swanson Name: Michele Swanson Title: Authorized Signatory CREDIT LYONNAIS, NEW YORK BRANCH AND CREDIT LYONNAIS ATLANTA AGENCY By /s/ Robert Ivosevich Name: Robert Ivosevich Title: Senior Vice President By Name: Title: CREDITANSTALT CORPORATE FINANCE, INC. By /s/ Robert M. Biringer Name: Robert M. Biringer Title: Executive Vice President By /s/ William E. McCollum Name: William E. McCollum Title: Senior Associate CRESCENT/MACH I PARTNERS, L.P. By: TCW Asset Management Company its Investment Manager By /s/ Justin L. Driscoll Name: Justin L. Driscoll Title: Senior Vice President CRESTAR BANK By: CypressTree Investment Management Company, as Portfolio Manager By /s/ Philip C. Robbins Name: Philip C. Robbins Title: Assistant Vice President 7 CYPRESS TREE INVESTMENT PARTNERS I By Name: Title: DRESDNER BANK, A.G. NEW YORK AND GRAND CAYMAN BRANCHES By /s/ Beverly G. Cason Name: Beverly G. Cason Title: Vice President By /s/ Thomas J. Nadramia Name: Thomas J. Nadramia Title: Vice President ERSTE BANK By /s/ John S. Runnion Name: John S. Runnion Title: First Vice President By /s/ Rima Terradista Name: Rima Terradista Title: Vice President FIRST UNION NATIONAL BANK By /s/ David Silendo Name: David Silendo Title: Vice PResident FUJI BANK, LIMITED By Name: Title: 8 INDOSUEZ CAPITAL FUNDING II LTD. By: Indosuez Capital, as Portfolio Advisor By Name: Title: THE INDUSTRIAL BANK OF JAPAN, LTD. By /s/ Takuya Honjo Name: Takuya Honjo Title: Senior Vice President THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED, NEW YORK BRANCH By /s/ Shuichi Tajima Name: Shuichi Tajima Title: Deputy General Manager MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. By Name: Title: MERRILL LYNCH PRIME RATE PORTFOLIO By: Merrill Lynch Asset Management, L.P., as Investment Advisor By Name: Title: 9 MORGAN STANLEY SENIOR FUNDING, INC. By /s/ Christopher A. Pucillo Name: Christopher A. Pucillo Title: Vice President PARIBAS CAPITAL FUNDING LLC By /s/ Eric A. Green Name: Eric A. Green Title: Director SENIOR HIGH INCOME PORTFOLIO, INC. By Name: Title: THE MITSUBISHI TRUST AND BANKING CORPORATION By /s/ Beatrice Kossodo Name: Beatrice Kossodo Title: Senior Vice President THE FIRST NATIONAL BANK OF CHICAGO By /s/ Lori J. McCarthy Name: Lori J. McCarthy Title: Vice President 10 NEW YORK LIFE INSURANCE COMPANY By Name: Title: NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION By Name: Title: SOCIETE GENERALE By /s/ Ralph Saheb Name: Ralph Saheb Title: Vice President, Regional Operations Manager SUNTRUST BANK, ATLANTA By /s/ Jeffrey D. Drucker Name: Jeffrey D. Drucker Title: Banking Officer By /s/ Raymond B. King Name: Raymond B. King Title: Vice President THE SUMITOMO TRUST & BANKING CO., LTD. New York Branch By /s/ Suraj D. Bhatia Name: Suraj D. Bhatia Title: Senior Vice President 11 THE TORONTO-DOMINION BANK By /s/ Debbie A. Greene Name: Debbie A. Greene Title: Manager, Credit Administration THE TRAVELERS INSURANCE COMPANY By Name: Title: UNITED STATES NATIONAL BANK OF OREGON By Name: Title: WACHOVIA BANK, N.A. (formerly known as WACHOVIA BANK, N.A.) By /s/ Sarah T,. Warren Name: Sarah T. Warren Title: Vice President WELLS FARGO BANK By Name: Title: 12 THE YASUDA TRUST & BANKING CO., LTD. By Name: Title: NATEXIS BANQUE BFCE By: /s/ G. Kevin Dooley Name: G. Kevin Dooley Title: Vice President By: /s/ Jordan Sadler Name: Jordan Sadler Title: Associate SENIOR DEBT PORTFOLIO By: Boston Management and Research, as Investment Advisor By: /s/ Payson F. Swaffield Name: Payson F. Swaffield Title: Vice President
13 EXHIBIT A TO AMENDMENT AND WAIVER ACKNOWLEDGEMENT AND CONSENT Each of the undersigned corporations hereby: (a) acknowledges and consents to the execution, delivery and performance of the Amendment and Waiver, dated as of January 12, 1998 (the "Amendment and Waiver") to the Amended and Restated Credit Agreement dated as of June 3, 1996 (as the same may be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among Collins & Aikman Canada Inc. (the "Canadian Borrower") Collins & Aikman Products Co. (the "Borrower"), Collins & Aikman Corporation ("Holdings"), the several banks and other institutions from time to time parties to the Credit Agreement (the "Lenders") and The Chase Manhattan Bank, as administrative agent to the lenders thereunder (in such capacity, the "Administrative Agent"); and (b) agrees that such execution, delivery and performance shall not in any way affect such corporation's obligations under any Loan Document (as defined in the Credit Agreement) to which such corporation is a party, which obligations on the date hereof remain absolute and unconditional and are not subject to any defense, set-off or counterclaim; Dated: January 12, 1998
COLLINS & AIKMAN PRODUCTS CO. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AIKMAN CANADA INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President and Chief Financial Officer COLLINS & AIKMAN CORPORATION By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer PACJ, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer 1 THE AKRO CORPORATION By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer DURA CONVERTIBLE SYSTEMS, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer IMPERIAL WALLCOVERINGS, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer MARKETING SERVICE, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President GREFAB, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President WICKES ASSET MANAGEMENT, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President 2 COLLINS & AIKMAN INTERNATIONAL CORPORATION By: /s/ Leonard F. Ferro Name: Leonard F. Ferro Title: Vice President, Treasurer WICKES MANUFACTURING COMPANY By: /s/ Robert L. Johnson, Jr. Name: Robert L. Johnson, Jr. Title: Assistant Treasurer WICKES REALTY, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President AMCO CONVERTIBLE FABRICS, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AIKMAN PLASTICS, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer HUGHES PLASTICS, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer 3 COLLINS & AIKMAN PROPERTIES, INC. By: /s/ Leonard F. Ferro Name: Leonard F. Ferro Title: Secretary and Treasurer COLLINS & AIKMAN CARPET & ACOUSTICS (MI), INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AIKMAN CARPET & ACOUSTICS (TN), INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer
4 EX-4 4 EXHIBIT 4.12 Exhibit 4.12 CREDIT AGREEMENT DATED AS OF DECEMBER 5, 1996 AMENDMENT AND WAIVER AMENDMENT AND WAIVER, dated as of January 12, 1998 (this "Amendment and Waiver"), under the Credit Agreement, dated as of December 5, 1996 (as amended prior to the date hereof and as further amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among COLLINS & AIKMAN PRODUCTS CO., a Delaware corporation (the "Borrower"), COLLINS & AIKMAN CORPORATION, a Delaware corporation ("Holdings"), the financial institutions parties thereto (the "Lenders") and THE CHASE MANHATTAN BANK, a New York banking corporation, as agent to the lenders thereunder (in such capacity, the "Administrative Agent"). W I T N E S S E T H: WHEREAS, the Borrower and Holdings have requested the Lenders to amend and to waive certain covenants in the Credit Agreement as set forth herein; and WHEREAS, the Lenders are willing to amend and to waive such covenants in the Credit Agreement on and subject to the terms and conditions thereof; NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each of the parties hereto, the parties agree as follows: SECTION 1. Definitions. Unless otherwise defined herein, terms defined in the Credit Agreement are used herein as therein defined. SECTION 2. Amendment of Section 6.01 (Indebtedness). (a) Subsection 6.01(d) of the Credit Agreement is hereby amended by deleting from clause (iv) thereof the amount "$200,000,000" and substituting therefor the amount "$225,000,000". (b) Subsection 6.01 of the Credit Agreement is hereby amended by deleting from clause (r) thereof the amount "$200,000,000" and substituting therefor the amount "$225,000,000". SECTION 3. Amendment of Section 6.07 (Investments, Loans and Advances). Subsection 6.07 of the Credit Agreement is hereby amended by deleting from clause (l) thereof the amount "$200,000,000" and substituting therefor the amount "$225,000,000". SECTION 4. Waiver of Section 6.14 (Interest Coverage Ratio). Section 6.14 of the Credit Agreement is hereby waived for the fiscal quarter ending December 27, 1997; provided that such waiver is effective only if the Interest Coverage Ratio is at least 1.70 to 1.00 for such fiscal quarter. 1 SECTION 5. Representations and Warranties. The parties hereto hereby represent and warrant to the Administrative Agent and each Lender that after giving effect to the waivers contained herein, each party hereto hereby confirms, reaffirms and restates the representations and warranties set forth in Article III of the Credit Agreement as if made on and as of the Effective Date, except as they may specifically relate to an earlier date; provided that such representations and warranties shall be and hereby are amended so that all references to the Agreement therein shall be deemed a reference to (i) the Credit Agreement, (ii) this Amendment and Waiver and (iii) the Credit Agreement as amended and waived by this Amendment and Waiver. SECTION 6. Conditions Precedent. This Amendment and Waiver shall become effective as of the date hereof (the "Effective Date") when each of the conditions precedent set forth below shall have been fulfilled: (c) Amendment and Waiver. The Administrative Agent shall have received this Amendment and Waiver, executed and delivered by a duly authorized officer of each of the Borrower, Holdings and the Required Lenders. (d) No Default or Event of Default. On and as of the Effective Date and after giving effect to this Amendment and Waiver and the transactions contemplated hereby, no Default or Event of Default shall have occurred and be continuing. (e) Representations and Warranties. The representations and warranties made by the Borrower in the Credit Agreement and herein after giving effect to this Amendment and Waiver and the transactions contemplated hereby shall be true and correct in all material respects on and as of the Effective Date as if made on such date, except where such representations and warranties relate to an earlier date in which case such representations and warranties shall be true and correct as of such earlier date. (f) Acknowledgement and Consent. The Administrative Agent shall have received from each of Holdings, the Borrower and the other Loan Parties with respect to each Loan Document to which it is a party a duly executed Acknowledgment and Consent, substantially in the form of Exhibit A hereto. SECTION 7. Continuing Effect of Credit Agreement. This Amendment and Waiver shall not constitute an amendment or waiver of any provision of the Credit Agreement not expressly referred to herein and shall not be construed as an amendment, waiver or consent to any action on the part of any party hereto that would require an amendment, waiver or consent of the Administrative Agent or the Lenders except as expressly stated herein. Except as expressly waived hereby, the provisions of the Credit Agreement are and shall remain in full force and effect. SECTION 8. Expenses. The Borrower agrees to pay or reimburse the Administrative Agent for all of its reasonable out-of-pocket costs and expenses incurred in connection with (a) the negotiation, preparation, execution and delivery of this Amendment and Waiver and any other documents prepared in connection herewith, and consummation of 2 the transactions contemplated hereby and thereby, including the fees and expenses of Simpson Thacher & Bartlett, counsel to the Administrative Agent, and (b) the enforcement or preservation of any rights under this Amendment and Waiver and any other such documents. SECTION 9. GOVERNING LAW. THIS AMENDMENT AND WAIVER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. SECTION 10. Counterparts. This Amendment and Waiver may be executed in any number of counterparts by the parties hereto, each of which counterparts when so executed shall be an original, but all counterparts taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment and Waiver to be duly executed and delivered by their respective duly authorized officers as of the day and year first above written.
COLLINS & AIKMAN PRODUCTS CO. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AIKMAN CORPORATION By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer THE CHASE MANHATTAN BANK, as Administrative Agent and as a Lender By /s/ Rosemary Bradley Name: Rosemary Bradley Title: Vice President 3 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By /s/ Linda A. Carper Name: Linda A. Carper Title: Managing Director NATIONSBANK, N.A. By /s/ E. Phifer Helms Name: E. Phifer Helms Title: Senior Vice President BANK OF IRELAND - GRAND CAYMAN BRANCH By /s/ Michael G. Doyle Name: Michael G. Doyle Title: Assistant Vice President THE BANK OF NEW YORK By /s/ Ann Marie Hughes Name: Ann Marie Hughes Title: Assistant Vice President THE BANK OF NOVA SCOTIA By: /s/ William E. Zarrett Name: William E. Zarrett Title: Senior Relationship Manager 4 BANK OF TOKYO - MITSUBISHI TRUST COMPANY By /s/ Pamela Donnelly Name: P. Donnelly Title: Vice President BRANCH BANKING AND TRUST COMPANY By /s/ Thatcher L. Townsend III Name: Thatcher L. Townsend III Title: Vice President CIBC INC. By /s/ Roger Colden Name: Roger Colden Title: Executive Director, CIBC Oppenheimer Corp., as agent COMERICA BANK By /s Michael T. Shea Name: Michael T. Shea Title: Vice President COMMERCIAL LOAN FUNDING TRUST I By: Lehman Commercial Paper Inc., not in its individual capacity but solely as administrative agent By /s/ Michele Swanson Name: Michele Swanson Title: Authorized Signatory 5 COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK, B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH By Name: Title: By Name: Title: CREDIT AGRICOLE INDOSUEZ By /s/ David Bouhl Name: David Bouhl Title: F.V.P., Head of Corporate Banking, Chicago By /s/ Katherine L. Abbott Name: Katherine L. Abbott Title: First Vice President CREDIT LYONNAIS, NEW YORK BRANCH AND CREDIT LYONNAIS ATLANTA AGENCY By Name: Title: By Name: Title: CREDITANSTALT CORPORATE FINANCE, INC. By /s/ Robert M. Biringer Name: Robert M. Biringer Title: Executive Vice President By /s/ William E. McCollum Name: William E. McCollum Title: Senior Associate 6 DRESDNER BANK, A.G. NEW YORK AND GRAND CAYMAN BRANCHES By /s/ Beverly G. Cason Name: Beverly G. Cason Title: Vice President By /s/ Thomas J. Nadramia Name: Thomas J. Nadramia Title: Vice President FIRST NATIONAL BANK OF CHICAGO By /s/ Lori J. McCarthy Name: Lori J. McCarthy Title: Vice President FIRST UNION NATIONAL BANK By /s/ David Silendo Name: David Silendo Title: Vice PResident FUJI BANK By Name: Title: 7 THE LONG-TERM CREDIT BANK OF JAPAN, LIMITED, NEW YORK BRANCH By /s/ Shuichi Tajima Name: Shuichi Tajima Title: Deputy General Manager THE ROYAL BANK OF SCOTLAND, PLC By Name: Title: SOCIETE GENERALE By /s/ Ralph Saheb Name: Ralph Saheb Title: Vice President, Regional Operations Manager SUMITOMO BANK, LIMITED By /s/ Gary Franke Name: Gary Franke Title: Vice President THE SUMITOMO TRUST & BANKING CO., LTD. By /s/ Suraj Bhatia Name: Suraj Bhatia Title: Senior Vice President 8 SUNTRUST BANK, ATLANTA By /s/ Jeffrey D. Drucker Name: Jeffrey D. Drucker Title: Banking Officer By /s/ Raymond B. King Name: Raymond B. King Title: Vice President THE TORONTO-DOMINION (NEW YORK), INC. By /s/ Debbie A. Greene Name: Debbie A. Greene Title: Vice President WACHOVIA BANK, N.A. formerly known as WACHOVIA BANK OF NORTH CAROLINA, N.A. By /s/ Sarah T. Warren Name: Sarah T. Warren Title: Vice President WELLS FARGO BANK By Name: Title: ALLIED SIGNAL INC. By Name: Title:
9 EXHIBIT A TO AMENDMENT AND WAIVER ACKNOWLEDGEMENT AND CONSENT Each of the undersigned corporations hereby: (a) acknowledges and consents to the execution, delivery and performance of the Amendment and Waiver, dated as of January 12, 1998 (the "Amendment and Waiver") under the Credit Agreement dated as of December 5, 1996 (as the same may be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among Collins & Aikman Products Co. (the "Borrower"), Collins & Aikman Corporation ("Holdings"), the several banks and other institutions from time to time parties to the Credit Agreement (the "Lenders") and The Chase Manhattan Bank, as administrative agent to the lenders thereunder (in such capacity, the "Administrative Agent"); and (b) agrees that such execution, delivery and performance shall not in any way affect such corporation's obligations under any Loan Document (as defined in the Credit Agreement) to which such corporation is a party, which obligations on the date hereof remain absolute and unconditional and are not subject to any defense, set-off or counterclaim. Dated: January 12, 1998
COLLINS & AIKMAN PRODUCTS CO. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AIKMAN CANADA INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President and Chief Financial Officer COLLINS & AIKMAN CORPORATION By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer PACJ, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer 1 THE AKRO CORPORATION By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer DURA CONVERTIBLE SYSTEMS, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer IMPERIAL WALLCOVERINGS, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer MARKETING SERVICE, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President GREFAB, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President WICKES ASSET MANAGEMENT, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President 2 COLLINS & AIKMAN INTERNATIONAL CORPORATION By: /s/ Leonard F. Ferro Name: Leonard F. Ferro Title: Vice President, Treasurer WICKES MANUFACTURING COMPANY By: /s/ Robert L. Johnson, Jr. Name: Robert L. Johnson, Jr. Title: Assistant Treasurer WICKES REALTY, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President AMCO CONVERTIBLE FABRICS, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President COLLINS & AIKMAN PLASTICS, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President HUGHES PLASTICS, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer 3 COLLINS & AIKMAN PROPERTIES, INC. By: /s/ Leonard F. Ferro Name: Leonard F. Ferro Title: Secretary and Treasurer COLLINS & AIKMAN CARPET & ACOUSTICS (MI), INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AIKMAN CARPET & ACOUSTICS (TN), INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer 4
EX-4 5 EXHIBIT 4.13 Exhibit 4.13 AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF JUNE 3, 1996 WAIVER WAIVER, dated as of March 27, 1998 (this "Waiver"), under the Amended and Restated Credit Agreement, dated as of June 3, 1996 (as amended prior to the date hereof and as further amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among COLLINS & AIKMAN PRODUCTS CO., a Delaware corporation (the "Borrower"), COLLINS & AIKMAN CANADA INC., a Canadian corporation (the "Canadian Borrower"), COLLINS & AIKMAN CORPORATION, a Delaware corporation ("Holdings"), the financial institutions parties thereto (the "Lenders") and THE CHASE MANHATTAN BANK, a New York banking corporation, as agent to the lenders thereunder (in such capacity, the "Administrative Agent"). W I T N E S S E T H: WHEREAS, the Borrower, the Canadian Borrower and Holdings have requested the Lenders to waive certain covenants in the Credit Agreement as set forth herein; and WHEREAS, the Lenders are willing to waive such covenants in the Credit Agreement on and subject to the terms and conditions thereof; NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each of the parties hereto, the parties agree as follows: SECTION 1. Definitions. Unless otherwise defined herein, terms defined in the Credit Agreement are used herein as therein defined. SECTION 2. Waiver of Section 6.14 (Interest Coverage Ratio). Section 6.14 of the Credit Agreement is hereby waived for the fiscal quarter ending March 28, 1998; provided that such waiver is effective only if the Interest Coverage Ratio is at least 1.75 to 1.00 for such fiscal quarter. SECTION 3. Waiver of Section 6.16 (Leverage Ratio). Section 6.16 of the Credit Agreement is hereby waived for the fiscal quarter ending March 28, 1998; provided that such waiver is effective only if the Leverage Ratio is no greater than 2.50 to 1.00 for such fiscal quarter. SECTION 4. Representations and Warranties. The parties hereto hereby represent and warrant to the Administrative Agent and each Lender that after giving effect to 1 the waivers contained herein, each party hereto hereby confirms, reaffirms and restates the representations and warranties set forth in Article III of the Credit Agreement as if made on and as of the Waiver Effective Date, except as they may specifically relate to an earlier date; provided that such representations and warranties shall be and hereby are amended so that all references to the Agreement therein shall be deemed a reference to (i) the Credit Agreement, (ii) this Waiver and (iii) the Credit Agreement as amended by this Waiver. SECTION 5. Conditions Precedent. This Waiver shall become effective as of the date hereof (the "Waiver Effective Date") when each of the conditions precedent set forth below shall have been fulfilled: (c) Waiver. The Administrative Agent shall have received this Waiver, executed and delivered by a duly authorized officer of each of the Borrower, the Canadian Borrower, Holdings and the Required Lenders. (d) No Default or Event of Default. On and as of the Waiver Effective Date and after giving effect to this Waiver and the transactions contemplated hereby, no Default or Event of Default shall have occurred and be continuing. (e) Representations and Warranties. The representations and warranties made by the Borrower and the Canadian Borrower in the Credit Agreement and herein after giving effect to this Waiver and the transactions contemplated hereby shall be true and correct in all material respects on and as of the Waiver Effective Date as if made on such date, except where such representations and warranties relate to an earlier date in which case such representations and warranties shall be true and correct as of such earlier date. (f) Acknowledgement and Consent. The Administrative Agent shall have received from each of Holdings, the Borrower, the Canadian Borrower and the other Loan Parties with respect to each Loan Document to which it is a party a duly executed Acknowledgment and Consent, substantially in the form of Exhibit A hereto. SECTION 6. Continuing Effect of Credit Agreement. This Waiver shall not constitute an amendment or waiver of any provision of the Credit Agreement not expressly referred to herein and shall not be construed as an amendment, waiver or consent to any action on the part of any party hereto that would require an amendment, waiver or consent of the Administrative Agent or the Lenders except as expressly stated herein. Except as expressly waived hereby, the provisions of the Credit Agreement are and shall remain in full force and effect. SECTION 7. Expenses. The Borrower and the Canadian Borrower agree to pay or reimburse the Administrative Agent for all of its reasonable out-of-pocket costs and expenses incurred in connection with (a) the negotiation, preparation, execution and delivery of this Waiver and any other documents prepared in connection herewith, and consummation of the transactions contemplated hereby and thereby, including the fees and expenses of Simpson Thacher & Bartlett, counsel to the Administrative Agent, and (b) the enforcement or preservation of any rights under this Waiver and any other such documents. 2 SECTION 8. GOVERNING LAW. THIS WAIVER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. SECTION 9. Counterparts. This Waiver may be executed in any number of counterparts by the parties hereto, each of which counterparts when so executed shall be an original, but all counterparts taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be duly executed and delivered by their respective duly authorized officers as of the day and year first above written.
COLLINS & AIKMAN PRODUCTS CO. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AIKMAN CANADA INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President and Chief Financial Officer COLLINS & AIKMAN CORPORATION By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer 3 THE CHASE MANHATTAN BANK, as Administrative Agent and as a Lender By _______________________________ Name: Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Managing Agent and a Lender By Name: Title: NATIONSBANK, N.A., as Managing Agent and a Lender By Name: Title: AERIES FINANCE LTD. By Name: Title: CERES FINANCE LTD. By Name: Title: 4 STRATA FUNDING LTD. By Name: Title: THE BANK OF NEW YORK By Name: Title: THE BANK OF NOVA SCOTIA By: _______________________________________ Name: Title: BANK OF SCOTLAND By Name: Title: BANK OF TOKYO - MITSUBISHI TRUST COMPANY By Name: Title: 5 BRANCH BANKING AND TRUST COMPANY By Name: Title: OCTAGON CREDIT INVESTORS LOAN PORTFOLIO (a unit of The Chase Manhattan Bank) By Name: Title: CIBC INC. By Name: Title: COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE By Name: Title: COMMERCIAL LOAN FUNDING TRUST I By Name: Title: 6 CREDIT LYONNAIS, NEW YORK BRANCH AND CREDIT LYONNAIS ATLANTA AGENCY By Name: Title: CREDITANSTALT CORPORATE FINANCE, INC. By Name: Title: CRESCENT/MACH I PARTNERS, L.P. By: TCW Asset Management Company its Investment Manager By Name: Title: CRESTAR BANK By Name: Title: CYPRESS TREE INVESTMENT PARTNERS I By Name: Title: 7 DRESDNER BANK, A.G. By Name: Title: FIRST UNION NATIONAL BANK OF NORTH CAROLINA By Name: Title: FUJI BANK, LIMITED By Name: Title: INDOSUEZ CAPITAL FUNDING II LTD. By: Indosuez Capital, as Portfolio Advisor By Name: Title: THE INDUSTRIAL BANK OF JAPAN, LTD. By Name: Title: 8 THE LONG-TERM CREDIT BANK OF JAPAN LTD., NEW YORK BRANCH By Name: Title: MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. By Name: Title: MERRILL LYNCH PRIME RATE PORTFOLIO By: Merrill Lynch Asset Management, L.P., as Investment Advisor By Name: Title: PARIBAS CAPITAL FUNDING LLC By Name: Title: SENIOR HIGH INCOME PORTFOLIO, INC. By Name: Title: 9 THE MITSUBISHI TRUST AND BANKING CORPORATION By Name: Title: THE FIRST NATIONAL BANK OF CHICAGO By Name: Title: NEW YORK LIFE INSURANCE COMPANY By Name: Title: NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION By Name: Title: SOCIETE GENERALE By Name: Title: 10 SUNTRUST BANK, ATLANTA By Name: Title: By Name: Title: THE SUMITOMO TRUST & BANKING CO., LTD. By Name: Title: THE TORONTO-DOMINION BANK By Name: Title: TORONTO DOMINION (TEXAS), INC. By Name: Title: THE TRAVELERS INSURANCE COMPANY By Name: Title: 11 UNITED STATES NATIONAL BANK OF OREGON By Name: Title: WACHOVIA BANK OF NORTH CAROLINA, N.A. By Name: Title: WELLS FARGO BANK By Name: Title: THE YASUDA TRUST & BANKING CO., LTD. By Name: Title: NATEXIS BANQUE BFCE By: Name: Title: 12 SENIOR DEBT PORTFOLIO By: Boston Management and Research, as Investment Advisor By: Name: Title: ERSTE BANK By: Name: Title:
13 EXHIBIT A TO WAIVER ACKNOWLEDGEMENT AND CONSENT Each of the undersigned corporations hereby: (a) acknowledges and consents to the execution, delivery and performance of the Waiver, dated as of March 27, 1998 (the "Waiver") to the Amended and Restated Credit Agreement dated as of June 3, 1996 (as the same may be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among Collins & Aikman Canada Inc. (the "Canadian Borrower") Collins & Aikman Products Co. (the "Borrower"), Collins & Aikman Corporation ("Holdings"), the several banks and other institutions from time to time parties to the Credit Agreement (the "Lenders") and The Chase Manhattan Bank, as administrative agent to the lenders thereunder (in such capacity, the "Administrative Agent"); and (b) agrees that such execution, delivery and performance shall not in any way affect such corporation's obligations under any Loan Document (as defined in the Credit Agreement) to which such corporation is a party, which obligations on the date hereof remain absolute and unconditional and are not subject to any defense, set-off or counterclaim; Dated: March 27, 1998
COLLINS & AIKMAN PRODUCTS CO. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AIKMAN CANADA INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President and Chief Financial Officer COLLINS & AIKMAN CORPORATION By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer PACJ, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer 1 THE AKRO CORPORATION By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer DURA CONVERTIBLE SYSTEMS, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer GREFAB, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President WICKES ASSET MANAGEMENT, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President COLLINS & AIKMAN INTERNATIONAL CORPORATION By /s/ Leonard F. Ferro Name: Leonard F. Ferro Title: Vice President, Treasurer WICKES MANUFACTURING COMPANY By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President 2 WICKES REALTY, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President AMCO CONVERTIBLE FABRICS, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AIKMAN PLASTICS, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer HUGHES PLASTICS, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AIKMAN PROPERTIES, INC. By /s/ Leonard F. Ferro Name: Leonard F. Ferro Title: Secretary and Treasurer
3 EX-4 6 EXHIBIT 4.14 Exhibit 4.14 CREDIT AGREEMENT DATED AS OF DECEMBER 5, 1996 WAIVER WAIVER, dated as of March 27, 1998 (this "Waiver"), under the Credit Agreement, dated as of December 5, 1996 (as amended prior to the date hereof and as further amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among COLLINS & AIKMAN PRODUCTS CO., a Delaware corporation (the "Borrower"), COLLINS & AIKMAN CORPORATION, a Delaware corporation ("Holdings"), the financial institutions parties thereto (the "Lenders") and THE CHASE MANHATTAN BANK, a New York banking corporation, as agent to the lenders thereunder (in such capacity, the "Administrative Agent"). W I T N E S S E T H: WHEREAS, the Borrower and Holdings have requested the Lenders to waive certain covenants in the Credit Agreement as set forth herein; and WHEREAS, the Lenders are willing to waive such covenants in the Credit Agreement on and subject to the terms and conditions thereof; NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by each of the parties hereto, the parties agree as follows: SECTION 1. Definitions. Unless otherwise defined herein, terms defined in the Credit Agreement are used herein as therein defined. SECTION 2. Waiver of Section 6.14 (Interest Coverage Ratio). Section 6.14 of the Credit Agreement is hereby waived for the fiscal quarter ending March 28, 1998; provided that such waiver is effective only if the Interest Coverage Ratio is at least 1.75 to 1.00 for such fiscal quarter. SECTION 3. Waiver of Section 6.16 (Leverage Ratio). Section 6.16 of the Credit Agreement is hereby waived for the fiscal quarter ending March 28, 1998; provided that such waiver is effective only if the Leverage Ratio is no greater than 2.50 to 1.00 for such fiscal quarter. SECTION 4. Representations and Warranties. The parties hereto hereby represent and warrant to the Administrative Agent and each Lender that after giving effect to the waivers contained herein, each party hereto hereby confirms, reaffirms and restates the representations and warranties set forth in Article III of the Credit Agreement as if made on 1 and as of the Waiver Effective Date, except as they may specifically relate to an earlier date; provided that such representations and warranties shall be and hereby are amended so that all references to the Agreement therein shall be deemed a reference to (i) the Credit Agreement, (ii) this Waiver and (iii) the Credit Agreement as waived by this Waiver. SECTION 5. Conditions Precedent. This Waiver shall become effective as of the date hereof (the "Waiver Effective Date") when each of the conditions precedent set forth below shall have been fulfilled: (a) Waiver. The Administrative Agent shall have received this Waiver, executed and delivered by a duly authorized officer of each of the Borrower, Holdings and the Required Lenders. (b) No Default or Event of Default. On and as of the Waiver Effective Date and after giving effect to this Waiver and the transactions contemplated hereby, no Default or Event of Default shall have occurred and be continuing. (c) Representations and Warranties. The representations and warranties made by the Borrower in the Credit Agreement and herein after giving effect to this Waiver and the transactions contemplated hereby shall be true and correct in all material respects on and as of the Waiver Effective Date as if made on such date, except where such representations and warranties relate to an earlier date in which case such representations and warranties shall be true and correct as of such earlier date. (d) Acknowledgement and Consent. The Administrative Agent shall have received from each of Holdings, the Borrower and the other Loan Parties with respect to each Loan Document to which it is a party a duly executed Acknowledgment and Consent, substantially in the form of Exhibit A hereto. SECTION 6. Continuing Effect of Credit Agreement. This Waiver shall not constitute an amendment or waiver of any provision of the Credit Agreement not expressly referred to herein and shall not be construed as an amendment, waiver or consent to any action on the part of any party hereto that would require an amendment, waiver or consent of the Administrative Agent or the Lenders except as expressly stated herein. Except as expressly waived hereby, the provisions of the Credit Agreement are and shall remain in full force and effect. SECTION 7. Expenses. The Borrower agrees to pay or reimburse the Administrative Agent for all of its reasonable out-of-pocket costs and expenses incurred in connection with (a) the negotiation, preparation, execution and delivery of this Waiver and any other documents prepared in connection herewith, and consummation of the transactions contemplated hereby and thereby, including the fees and expenses of Simpson Thacher & Bartlett, counsel to the Administrative Agent, and (b) the enforcement or preservation of any rights under this Waiver and any other such documents. 2 SECTION 8. GOVERNING LAW. THIS WAIVER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. SECTION 9. Counterparts. This Waiver may be executed in any number of counterparts by the parties hereto, each of which counterparts when so executed shall be an original, but all counterparts taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Waiver to be duly executed and delivered by their respective duly authorized officers as of the day and year first above written.
COLLINS & AIKMAN PRODUCTS CO. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AIKMAN CORPORATION By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer THE CHASE MANHATTAN BANK, as Administrative Agent and as a Lender By Name: Title: 3 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By__ Name: Title: NATIONSBANK, N.A. By Name: Title: THE BANK OF NEW YORK By Name: Title: THE BANK OF NOVA SCOTIA By Name: Title: BANK OF TOKYO - MITSUBISHI TRUST COMPANY By Name: Title: 4 BRANCH BANKING AND TRUST COMPANY By Name: Title: CREDIT AGRICOLE DE INDOSUEZ By Name: Title: CIBC INC. By Name: Title: COMERICA BANK By Name: Title: COMMERCIAL LOAN FUNDING TRUST I By Name: Title: 5 COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK, B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH By Name: Title: By Name: Title: CREDIT LYONNAIS, NEW YORK BRANCH AND CREDIT LYONNAIS ATLANTA AGENCY By Name: Title: By Name: Title: CREDITANSTALT CORPORATE FINANCE, INC. By Name: Title: 6 DRESDNER BANK, A.G. By Name: Title: By Name: Title: FIRST NATIONAL BANK OF CHICAGO By Name: Title: FIRST UNION NATIONAL BANK OF NORTH CAROLINA By Name: Title: FUJI BANK By Name: Title: THE LONG-TERM CREDIT BANK OF JAPAN LTD., NEW YORK BRANCH By Name: Title: 7 MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED By Name: Title: THE ROYAL BANK OF SCOTLAND, PLC By Name: Title: SOCIETE GENERALE By Name: Title: SUMITOMO BANK, LIMITED By Name: Title: THE SUMITOMO TRUST & BANKING CO., LTD. By Name: Title: 8 SUNTRUST BANK, ATLANTA By Name: Title: By Name: Title: THE TORONTO-DOMINION (NEW YORK), INC. By Name: Title: WACHOVIA BANK OF NORTH CAROLINA, N.A. By Name: Title: WELLS FARGO BANK By Name: Title:
9 EXHIBIT A TO WAIVER ACKNOWLEDGEMENT AND CONSENT Each of the undersigned corporations hereby: (a) acknowledges and consents to the execution, delivery and performance of the Waiver, dated as of March 27, 1998 (the "Waiver") under the Credit Agreement dated as of December 5, 1996 (as the same may be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among Collins & Aikman Products Co. (the "Borrower"), Collins & Aikman Corporation ("Holdings"), the several banks and other institutions from time to time parties to the Credit Agreement (the "Lenders") and The Chase Manhattan Bank, as administrative agent to the lenders thereunder (in such capacity, the "Administrative Agent"); and (b) agrees that such execution, delivery and performance shall not in any way affect such corporation's obligations under any Loan Document (as defined in the Credit Agreement) to which such corporation is a party, which obligations on the date hereof remain absolute and unconditional and are not subject to any defense, set-off or counterclaim. Dated: March 27, 1998
COLLINS & AIKMAN PRODUCTS CO. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AIKMAN CANADA INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President and Chief Financial Officer COLLINS & AIKMAN CORPORATION By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer 1 PACJ, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer THE AKRO CORPORATION By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer DURA CONVERTIBLE SYSTEMS, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer GREFAB, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President WICKES ASSET MANAGEMENT, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President COLLINS & AIKMAN INTERNATIONAL CORPORATION By /s/ Leonard F. Ferro Name: Leonard F. Ferro Title: Vice President, Treasurer 2 WICKES MANUFACTURING COMPANY By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President WICKES REALTY, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President AMCO CONVERTIBLE FABRICS, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AIKMAN PLASTICS, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer HUGHES PLASTICS, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AIKMAN PROPERTIES, INC. By /s/ Leonard F. Ferro Name: Leonard F. Ferro Title: Secretary and Treasurer
3 EX-4 7 EXHIBIT 4.15 Exhibit 4.15 AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF JUNE 3, 1996 AMENDMENT AMENDMENT, dated as of March 27, 1997 (this "Amendment"), to the Amended and Restated Credit Agreement, dated as of June 3, 1996 (as amended prior to the date hereof and as further amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among COLLINS & AIKMAN PRODUCTS CO., a Delaware corporation (the "Borrower"), COLLINS & AIKMAN CANADA INC., a Canadian corporation (the "Canadian Borrower"), COLLINS & AIKMAN CORPORATION, a Delaware corporation ("Holdings"), the financial institutions parties thereto (the "Lenders") and THE CHASE MANHATTAN BANK (formerly known as Chemical Bank), a New York banking corporation, as agent to the lenders thereunder (in such capacity, the "Administrative Agent"). W I T N E S S E T H: WHEREAS, the Borrower, the Canadian Borrower and Holdings have requested the Lenders to amend the Credit Agreement as set forth herein; and WHEREAS, the Lenders are willing to amend the Credit Agreement on and subject to the terms and conditions thereof; NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each of the parties hereto, the parties agree as follows: SECTION 1. Definitions. Unless otherwise defined herein, terms defined in the Credit Agreement are used herein as therein defined. SECTION 2. Amendment of Section 6.02 (Dividends and Distributions). Section 6.02(b) of the Credit Agreement is hereby amended by inserting immediately at the end thereof the phrase" plus an additional $12,000,000 for the period from April 1, 1997 through December 31, 1997". SECTION 3. Representations and Warranties. The parties hereto hereby represent and warrant to the Administrative Agent and each Lender that after giving effect to the amendments contained herein, each party hereto hereby confirms, reaffirms and restates the representations and warranties set forth in Article III of the Credit Agreement as if made on and as of the Amendment Effective Date, except as they may specifically relate to an earlier date; provided that such representations and warranties shall be and hereby are amended so that all references to the Agreement therein shall be deemed a reference to (i) the Credit Agreement, (ii) this Amendment and (iii) the Credit Agreement as amended by this Amendment. 1 SECTION 4. Conditions Precedent. This Amendment shall become effective as of the date hereof (the "Amendment Effective Date") when each of the conditions precedent set forth below shall have been fulfilled: (a) Amendment. The Administrative Agent shall have received this Amendment, executed and delivered by a duly authorized officer of each of the Borrower, the Canadian Borrower, Holdings and the Required Lenders. (b) No Default or Event of Default. On and as of the Amendment Effective Date and after giving effect to this Amendment and the transactions contemplated hereby, no Default or Event of Default shall have occurred and be continuing. (c) Representations and Warranties. The representations and warranties made by the Borrower and the Canadian Borrower in the Credit Agreement and herein after giving effect to this Amendment and the transactions contemplated hereby shall be true and correct in all material respects on and as of the Amendment Effective Date as if made on such date, except where such representations and warranties relate to an earlier date in which case such representations and warranties shall be true and correct as of such earlier date. (d) Acknowledgement, Consent and Amendment. The Administrative Agent shall have received from each of Holdings, the Borrower, the Canadian Borrower and the other Loan Parties with respect to each Loan Document to which it is a party a duly executed Acknowledgment, Consent and Amendment, substantially in the form of Exhibit A hereto. SECTION 5. Continuing Effect of Credit Agreement. This Amendment shall not constitute an amendment or waiver of any provision of the Credit Agreement not expressly referred to herein and shall not be construed as an amendment, waiver or consent to any action on the part of any party hereto that would require an amendment, waiver or consent of the Administrative Agent or the Lenders except as expressly stated herein. Except as expressly amended and waived hereby, the provisions of the Credit Agreement are and shall remain in full force and effect. SECTION 6. Expenses. The Borrower and the Canadian Borrower agree to pay or reimburse the Administrative Agent for all of its reasonable out-of-pocket costs and expenses incurred in connection with (a) the negotiation, preparation, execution and delivery of this Amendment and any other documents prepared in connection herewith, and consummation of the transactions contemplated hereby and thereby, including the fees and expenses of Simpson Thacher & Bartlett, counsel to the Administrative Agent, and (b) the enforcement or preservation of any rights under this Amendment and any other such documents. 2 SECTION 7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. SECTION 8. Counterparts. This Amendment may be executed in any number of counterparts by the parties hereto, each of which counterparts when so executed shall be an original, but all counterparts taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective duly authorized officers as of the day and year first above written.
COLLINS & AIKMAN PRODUCTS CO. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AIKMAN CANADA INC. By /s/ Ronald T. Lindsay Name: Ronald T. Lindsay Title: Vice President COLLINS & AIKMAN CORPORATION By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer THE CHASE MANHATTAN BANK, as Administrative Agent and as a Lender By /s/ Rosemary Bradley Name: Rosemary Bradley Title: Vice President 3 BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION, as Managing Agent and a Lender by /s/ Linda A. Carper Name: Linda A. Carper Title: Managing Director NATIONSBANK, N.A., as Managing Agent and aLender by /s/ Joseph R. Netzel Name: Joseph R. Netzel Title: Vice President AERIES FINANCE LTD. By /s/ Andrew Ian Wignall Name: Andrew Ian Wignall Title: Director CERES FINANCE LTD. By /s/ Derrie Boggess Name: Derri Boggess Title: Director STRATA FUNDING LTD. By /s/ Derrie Boggess Name: Derrie Boggess Title: Director 4 RESTRUCTURED OBLIGATIONS BACKED BY SENIOR ASSETS B.V. By: Chancellor LGT Senior Secured Management, Inc., as Portfolio Advisor By /s/ Christopher E. Jansen Name: Christopher E. Jansen Title: Managing Director BANK OF IRELAND - GRAND CAYMAN BRANCH By /s/ John G. Cusack Name: John G. Cusack Title: Assistant Vice President THE BANK OF NEW YORK By /s/ Ann Marie Beeble Name: Ann Marie Beeble Title: Assistant Vice President THE BANK OF NOVA SCOTIA By /s/ Willam E. Zarrett Name: William E. Zarrett Title: Senior Relationship Manager BANK OF SCOTLAND By /s/ Annie Chin Tat Name: Annie Chin Tat Title: Assistant Vice President 5 BANK OF TOKYO - MITSUBISHI TRUST COMPANY By Name: Title: BANQUE PARIBAS By Name: Title: BRANCH BANKING AND TRUST COMPANY By /s/ W. Rufus Yates Name: W. Rufus Yates Title: Senior Vice President OCTAGON CREDIT INVESTORS LOAN PORTFOLIO (a unit of The Chase Manhattan Bank) By /s/ Richard W. Stewart Name: Richard W. Stewart Title: Managing Director CIBC INC. By /s/ Roger Colden Name: Roger Colden Title: Director, CIBC Wood Gundy Securities Corp. AS AGENT 6 COMPAGNIE FINANCIERE DE CIC ET DE L'UNION EUROPEENNE By /s/ Sean Mounier Name: Sean Mounier Title: First Vice President By /s/ Brian O'Leary Name: Brian O'Leary Title: Vice President CREDIT LYONNAIS, NEW YORK BRANCH AND CREDIT LYONNAIS ATLANTA AGENCY By /s/ Robert Ivosevich Name: Robert Ivosevich Title: Senior Vice President By Name: Title: CREDITANSTALT CORPORATE FINANCE, INC. By /s/ W. Craig Stamm Name: W. Craig Stamm Title: Senior Associate By /s/ Robert M. Biringer Name: Robert M. Biringer Title: EVP CRESCENT/MACH I PARTNERS, L.P. By: TCW Asset Management Company its Investment Manager By Name: Title: 7 CRESTAR BANK By Name: Title: DRESDNER BANK, A.G. NEW YORK AND GRAND CAYMAN BRANCHE By /s/ Tomas J. Nadramia Name: Thomas J. Nadramia Title: Vice President By /s/ Christopher E. Sarisky Name: Christoper E. Sarisky Title: Assistant Treasurer FIRST UNION NATIONAL BANK OF NORTH CAROLINA By /s/ David Silendo Name: David Silendo Title: Vice President FUJI BANK By Name: Title: GIROCREDIT BANK By /s/ John Redding Name: John Redding Title: Vice President By /s/ Richard Stone Name: Richard Stone Title: First Vice President 8 INDOSUEZ CAPITAL FUNDING II LTD. By: Indosuez Capital, as Portfolio Advisor By /s/ Francoise Berthelot Name: Francoise Berthelot Title: Vice President THE INDUSTRIAL BANK OF JAPAN, LTD. By /s/ Takuya Honjo Name: Takuya Honjo Title: Senior Vice President THE LONG-TERM CREDIT BANK OF JAPAN LTD., NEW YORK BRANCH By /s/ Shuichi Tajima Name: Shuichi Tajima Title: Deputy General Manager MERRILL LYNCH SENIOR FLOATING RATE FUND, INC. By Name: Title: MERRILL LYNCH PRIME RATE PORTFOLIO By: Merrill Lynch Asset Management, L.P., as Investment Advisor By /s/ Patricia Loret de Mola Name: Patricia Lore de Mola Title: Senior Vice President 9 SENIOR HIGH INCOME PORTFOLIO, INC. By Name: Title: SENIOR HIGH INCOME PORTFOLIO, INC., as successor in interest to SENIOR HIGH INCOME PORTFOLIO II, INC. By Name: Title: SENIOR HIGH INCOME PORTFOLIO, INC., as successor in interest to SENIOR STRATEGIC INCOME FUND, INC. By Name: THE MITSUBISHI TRUST AND BANKING CORPORATION By Name: Title: NBD BANK By Name: Title: 10 NEW YORK LIFE INSURANCE AND ANNUITY CORPORATION By NEW YORK LIFE INSURANCE COMPANY By /s/ Steven M. Benerento Name: Steven M. Benerento Title: Assistant Vice President THE NIPPON CREDIT BANK, LTD. By /s/ Clifford Abramsky Name: Clifford Abramsky Title: Senior Manager SOCIETE GENERALE By /s/ Ralph Saheb Name: Ralph Saheb Title: Vice President, Manager THE SUMITOMO TRUST & BANKING CO., LTD. By /s/ Suraj P. Bhatia Name: Suraj P. Bhatia Title: Senior Vice President, Manager, Corporate Finance Dept. SUNTRUST BANK, ATLANTA By /s/ Jeffrey D. Drucker Name: Jeffrey D. Drucker Title: Banking Officer By /s/ David W. Penter Name: David W. Penter Title: Group Vice President 11 THE TORONTO-DOMINION BANK By /s/ Debbie A. Greene Name: Debbie A. Greene Title: Manager, Credit Administration THE TRAVELERS INSURANCE COMPANY By Name: Title: THE TRAVELERS INDEMNITY COMPANY By Name: Title: UNITED STATES NATIONAL BANK OF OREGON By /s/ David Wynde Name: David Wynde Title: Senior Vice President VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST By Name: Title: 12 WACHOVIA BANK OF NORTH CAROLINA, N.A. By /s/ Paul G. Grube Name: Paul G. Grube Title: Senior Vice President WELLS FARGO BANK By /s/ Delia B. Fance Name: Delia B. Fance Title: Vice President THE YASUDA TRUST & BANKING CO., LTD. By /s/ Morikazu Kimura Name: Morikazu Kimura Title: Chief Representative BANQUE FRANCAISE DU COMMERCE EXTERIEUR By: Name: Title: SENIOR DEBT PORTFOLIO By: Boston Management and Research, as Investment Advisor By: Name: Title: 13 PARIBAS CAPITAL FUNDING LLC By: Name: Title: ML CBO IV (CAYMAN) LTD. By: Protective Asset Management LLC, as Collateral Manager By: /s/ James Dondero Name: /s/ James Dondero, CPA, CFA Title: President
14 EXHIBIT A TO AMENDMENT ACKNOWLEDGEMENT, CONSENT AND AMENDMENT Each of the undersigned corporations hereby: (a) acknowledges and consents to the execution, delivery and performance of the Amendment, dated as of March 27, 1997 (the "Amendment") to the Amended and Restated Credit Agreement dated as of June 3, 1996 (as the same may be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among Collins & Aikman Canada Inc. (the "Canadian Borrower") Collins & Aikman Products Co. (the "Borrower"), Collins & Aikman Corporation ("Holdings"), the several banks and other institutions from time to time parties to the Credit Agreement (the "Lenders") and The Chase Manhattan Bank, as administrative agent to the lenders thereunder (in such capacity, the "Administrative Agent"); and (b) agrees that such execution, delivery and performance shall not in any way affect such corporation's obligations under any Loan Document (as defined in the Credit Agreement) to which such corporation is a party, which obligations on the date hereof remain absolute and unconditional and are not subject to any defense, set-off or counterclaim; Dated: March 27, 1997
COLLINS & AIKMAN PRODUCTS CO. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AIKMAN CANADA INC. By /s/ Ronald T. Lindsay Name: Ronald T. Lindsay Title: Vice President COLLINS & AIKMAN CORPORATION By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer PACJ, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer 1 THE AKRO CORPORATION By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer DURA CONVERTIBLE SYSTEMS, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President IMPERIAL WALLCOVERINGS, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer MARKETING SERVICE, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President GREFAB, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President WICKES ASSET MANAGEMENT, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President 2 COLLINS & AIKMAN INTERNATIONAL CORPORATION By /s/ Leonard F. Ferro Name: Leonard F. Ferro Title: Vice President, Treasurer WICKES MANUFACTURING COMPANY By /s/ Robert Johnson, Jr. Name: Robert Johnson, Jr. Title: Assistant Treasurer WICKES REALTY, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President ACK-TI-LINING, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President AMCO CONVERTIBLE FABRICS, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer 3 MANCHESTER PLASTICS, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer HUGHES PLASTICS, INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AIKMAN PROPERTIES, INC. (f/k/a COLLINS & AIKMAN FLOOR COVERINGS) GROUP, INC. By: /s/ Leonard F. Ferro Name: Leonard F. Ferro Title: Secretary and Treasurer COLLINS & AIKMAN CARPE& ACOUSTICS (TN), Inc. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AIKMAN CARPET & ACOUSTICS (MI), INC. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer
4 EX-4 8 EXHIBIT 4.16 Exhibit 4.16 CREDIT AGREEMENT DATED AS OF DECEMBER 5, 1996 AMENDMENT AMENDMENT, dated as of March 27, 1997 (this "Amendment"), to the Credit Agreement, dated as of December 5, 1996 (as amended prior to the date hereof and as further amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among COLLINS & AIKMAN PRODUCTS CO., a Delaware corporation (the "Borrower"), COLLINS & AIKMAN CORPORATION, a Delaware corporation ("Holdings"), the financial institutions parties thereto (the "Lenders") and THE CHASE MANHATTAN BANK, a New York banking corporation, as agent to the lenders thereunder (in such capacity, the "Administrative Agent"). W I T N E S S E T H: WHEREAS, the Borrower and Holdings have requested the Lenders to amend the Credit Agreement as set forth herein; and WHEREAS, the Lenders are willing to amend the Credit Agreement on and subject to the terms and conditions thereof; NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by each of the parties hereto, the parties agree as follows: SECTION 1. Definitions. Unless otherwise defined herein, terms defined in the Credit Agreement are used herein as therein defined. SECTION 2. Amendment of Section 6.02 (Dividends and Distributions). Section 6.02(b) of the Credit Agreement is hereby amended by inserting immediately at the end thereof the phrase" plus an additional $12,000,000 for the period from April 1, 1997 through December 31, 1997". SECTION 3. Representations and Warranties. The parties hereto hereby represent and warrant to the Administrative Agent and each Lender that after giving effect to the amendments contained herein, each party hereto hereby confirms, reaffirms and restates the representations and warranties set forth in Article III of the Credit Agreement as if made on and as of the Amendment Effective Date, except as they may specifically relate to an earlier date; provided that such representations and warranties shall be and hereby are amended so that all references to the Agreement therein shall be deemed a reference to (i) the Credit Agreement, (ii) this Amendment and (iii) the Credit Agreement as amended by this Amendment. 1 SECTION 4. Conditions Precedent. This Amendment shall become effective as of the date hereof (the "Amendment Effective Date") when each of the conditions precedent set forth below shall have been fulfilled: (a) Amendment. The Administrative Agent shall have received this Amendment, executed and delivered by a duly authorized officer of each of the Borrower, Holdings and the Required Lenders. (b) No Default or Event of Default. On and as of the Amendment Effective Date and after giving effect to this Amendment and the transactions contemplated hereby, no Default or Event of Default shall have occurred and be continuing. (c) Representations and Warranties. The representations and warranties made by the Borrower in the Credit Agreement and herein after giving effect to this Amendment and the transactions contemplated hereby shall be true and correct in all material respects on and as of the Amendment Effective Date as if made on such date, except where such representations and warranties relate to an earlier date in which case such representations and warranties shall be true and correct as of such earlier date. (d) Acknowledgement, Consent and Amendment. The Administrative Agent shall have received from each of Holdings, the Borrower and the other Loan Parties with respect to each Loan Document to which it is a party a duly executed Acknowledgment, Consent and Amendment, substantially in the form of Exhibit A hereto. SECTION 5. Continuing Effect of Credit Agreement. This Amendment shall not constitute an amendment or waiver of any provision of the Credit Agreement not expressly referred to herein and shall not be construed as an amendment, waiver or consent to any action on the part of any party hereto that would require an amendment, waiver or consent of the Administrative Agent or the Lenders except as expressly stated herein. Except as expressly amended and waived hereby, the provisions of the Credit Agreement are and shall remain in full force and effect. SECTION 6. Expenses. The Borrower agrees to pay or reimburse the Administrative Agent for all of its reasonable out-of-pocket costs and expenses incurred in connection with (a) the negotiation, preparation, execution and delivery of this Amendment and any other documents prepared in connection herewith, and consummation of the transactions contemplated hereby and thereby, including the fees and expenses of Simpson Thacher & Bartlett, counsel to the Administrative Agent, and (b) the enforcement or preservation of any rights under this Amendment and any other such documents. SECTION 7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK. 2 SECTION 8. Counterparts. This Amendment may be executed in any number of counterparts by the parties hereto, each of which counterparts when so executed shall be an original, but all counterparts taken together shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective duly authorized officers as of the day and year first above written.
COLLINS & AIKMAN PRODUCTS CO. By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AIKMAN CORPORATION By /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer THE CHASE MANHATTAN BANK, as Administrative Agent and as a Lender By /s/ Rosemary Bradley Name: Rosemary Bradley Title: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION by /s/ Linda A. Carper Name: Linda A. Carper Title: Managing Director 3 NATIONSBANK, N.A. by /s/ Joseph R. Netzel Name: Joseph R. Netzel Title: Vice President BANK OF IRELAND - GRAND CAYMAN BRANCH By /s/ John G. Cusack Name: John G. Cusack Title: Assistant Vice President THE BANK OF NEW YORK By /s/ Ann Marie Beeble Name: Ann Marie Beeble Title: Assistant Vice President THE BANK OF NOVA SCOTIA By /s/ William E. Zarrett Name: William E. Zarrett Title: Senior Relationship Manager BANK OF TOKYO - MITSUBISHI TRUST COMPANY By /s/ W. Rufus Yates Name: W. Rufus Yates Title: Senior Vice President 4 BRANCH BANKING AND TRUST COMPANY By Name: Title: CAISSE NATIONALE DE CREDIT AGRICOLE By /s/ David Bouhl Name: David Bouhl Title: First Vice President CIBC INC. By /s/ Roger Colden Name: Roger Colden Title: Director, CIBC Wood Gundy Securities Corp. AS AGENT COMERICA BANK By /s/ Deborah S. Albrecht Name: Deborah S. Albrecht Title: Account Officer COOPERATIEVE CENTRALE RAIFFEISEN-BOERENLEENBANK, B.A., "RABOBANK NEDERLAND", NEW YORK BRANCH By /s/ Michel de Rennaly Name: Michel de Rennaly Title: Deputy General Manager By /s/ Angela R. Reilly Name: Angela R. Reilly Title: Vice President 5 CREDIT LYONNAIS, NEW YORK BRANCH AND CREDIT LYONNAIS ATLANTA AGENCY By /s/ Robert Ivosevich Name: Robert Ivosevich Title: Senior Vice President By Name: Title: CREDITANSTALT CORPORATE FINANCE, INC. By /s/ Robert M. Biringer Name: Robert M. Biringer Title: Executive Vice President By /s/ W. Craig Stamm Name: W. Craig Stamm Title: Senior Associate DRESDNER BANK, A.G. NEW YORK AND GRAND CAYMAN BRANCHES By /s/ Thomas J. Nadramia Name: Thomas J. Nadramia Title: Vice President By /s/ Christopher E. Sarisky Name: Christopher E. Sarisky Title: Assistant Treasurer FIRST UNION NATIONAL BANK OF NORTH CAROLINA By /s/ David Silendo Name: David Silendo Title: Vice President 6 FUJI BANK By Name: Title: THE LONG-TERM CREDIT BANK OF JAPAN LTD., NEW YORK BRANCH By /s/ Shuichi Tajima Name: Shiuchi Tajima Title: Deputy General Manager NBD BANK By Name: Title: THE NIPPON CREDIT BANK, LTD. By /s/ Clifford Abramsky Name: Clifford Abramsky Title: Senior Manager THE ROYAL BANK OF SCOTLAND, PLC By /s/ Derek Bonnar Name: Derek Bonnar Title: Vice President 7 SOCIETE GENERALE By /s/ Ralph Saheb Name: Ralph Saheb Title: Vice President, Manager SUMITOMO BANK, LIMITED By /s/ Suraj P. Bhatia Name: Suraj P. Bhatia Title: Senior Vice President, Manager, Corporate Finance Dept. THE SUMITOMO TRUST & BANKING CO., LTD. By Name: Title: SUNTRUST BANK, ATLANTA By /s/ Jeffrey D. Drucker Name: Jeffrey D. Drucker Title: Banking Officer By /s/ David W. Penter Name: David W. Penter Title: Group Vice President THE TORONTO-DOMINION (NEW YORK), INC. By /s/ Debbie A. Greene Name: Debbie A. Greene Title: Vice President 8 VAN KAMPEN AMERICAN CAPITAL PRIME RATE INCOME TRUST By Name: Title: WACHOVIA BANK OF NORTH CAROLINA, N.A. By /s/ Paul G. Grube Name: Paul G. Grube Title: Senior Vice President ALLIED SIGNAL INC. By Name: Title:
9 EXHIBIT A TO AMENDMENT ACKNOWLEDGEMENT, CONSENT AND AMENDMENT Each of the undersigned corporations hereby: (a) acknowledges and consents to the execution, delivery and performance of the Amendment, dated as of March 27, 1997 (the "Amendment") to the Credit Agreement dated as of December 5, 1996 (as the same may be amended, supplemented or otherwise modified from time to time, the "Credit Agreement"), among Collins & Aikman Products Co. (the "Borrower"), Collins & Aikman Corporation ("Holdings"), the several banks and other institutions from time to time parties to the Credit Agreement (the "Lenders") and The Chase Manhattan Bank, as administrative agent to the lenders thereunder (in such capacity, the "Administrative Agent"); and (b) agrees that such execution, delivery and performance shall not in any way affect such corporation's obligations under any Loan Document (as defined in the Credit Agreement) to which such corporation is a party, which obligations on the date hereof remain absolute and unconditional and are not subject to any defense, set-off or counterclaim; Dated: March 27, 1997
COLLINS & AIKMAN PRODUCTS CO. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AIKMAN CANADA INC. By: /s/ Ronald T. Lindsay Name: Ronald T. Lindsay Title: Vice President COLLINS & AIKMAN CORPORATION By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer PACJ, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer 1 THE AKRO CORPORATION By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer DURA CONVERTIBLE SYSTEMS, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer IMPERIAL WALLCOVERINGS, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer MARKETING SERVICE, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President GREFAB, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President WICKES ASSET MANAGEMENT, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President 2 COLLINS & AIKMAN INTERNATIONAL CORPORATION By: /s/ Leonard F. Ferro Name: Leonard F. Ferro Title: Vice President, Treasurer WICKES MANUFACTURING COMPANY By: /s/ Robert L. Johnson, Jr. Name: Robert L. Johnson, Jr. Title: Assistant Treasurer WICKES REALTY, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Vice President ACK-TI-LINING, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer AMCO CONVERTIBLE FABRICS, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer 3 MANCHESTER PLASTICS, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer HUGHES PLASTICS, INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AKIMAN PROPERTIES, INC. (f/k/a COLLINS & AIKMAN FLOOR COVERINGS) GROUP, INC. By: /s/ Leonard F. Ferro Name: Leonard F. Ferro Title: Secretary and Treasurer COLLINS & AIKMAN CARPET & ACOUSTICS (MI), INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer COLLINS & AIKMAN CARPET & ACOUSTICS (TN), INC. By: /s/ J. Michael Stepp Name: J. Michael Stepp Title: Executive Vice President and Chief Financial Officer
4 EX-10 9 EXHIBIT 10.10 Exhibit 10.10 October 9, 1992 Mr. Dennis Hiller The Akro Corporation 1212 Seventh Street, S.W. Canton, Ohio 44707 Dear Dennis: This is to advise you that in the event your employment with Collins & Aikman Corporation (the "Company") is terminated by the Company or any successor company (other than for "Cause") at any time within three months prior to or one year following a "change in control" of the Company, then in lieu of any severance that may be available to you under any severance pay policy or practices of the Company or any of its subsidiaries or under any employment agreement, you shall receive an amount equal to two times your annual base salary as in effect at the time of such termination. Such amount shall be paid, at the sole discretion of the Company, either in a lump sum promptly after your termination or on a periodic basis for the two-year period following your termination in accordance with the Company's normal pay practice. For purposes hereof, a "change of control" shall mean the sale or transfer, whether in one transaction or several, of more than 50% of the voting common stock of the Company to any person or persons other than Collins & Aikman Group, Inc. or any subsidiary or affiliate of Collins & Aikman Group, Inc. For purposes thereof, "Cause" shall mean (i) fraud or misappropriation with respect to any business of the Company or an affiliate of the Company or intentional, material damage to any property or business of the Company or an affiliate of the Company, (ii) willful failure by you to perform your duties and responsibilities and to carry out your authority, (iii) willful malfeasance or misfeasance or breach of fiduciary duty or representation to the Company or an affiliate of the Company, (iv) willful failure to act in accordance with any specific lawful instructions of a majority of the Board of Directors of the Company or an affiliate of the Company or (v) conviction of you of a felony. This letter agreement shall not create an employment agreement and shall not affect the right of the Company to terminate your employment at any time without notice. The Company may terminate this letter agreement, if, prior to the date that is three months prior to a change of control of the Company, you cease to hold your current position or a higher executive position with the Company. Very truly yours /s/ James R. Birle James R. Birle Co-Chairman of the Board Accepted: /s/ Dennis Hiller EX-10 10 EXHIBIT 10.17 Exhibit 10.17 CHANGE IN CONTROL AGREEMENT THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") is made and entered into this 17th day of March, 1998, by and between COLLINS & AIKMAN CORPORATION, a Delaware corporation (the "Company"), and THOMAS E. HANNAH (the "Executive"). Statement of Purpose The Company wishes to encourage the continued service and dedication of Executive in the event of any actual or contemplated Change in Control (as defined below) of the Company. The Company has determined that these objectives are best accomplished by providing Executive with individual financial security pursuant to the terms of this Agreement, which the Company believes are fair and reasonable and consistent with the practices of other major corporations. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the Company and Executive hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) Change in Control means and shall be deemed to have occurred upon: (i) the acquisition, directly or indirectly, by any "person" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) within any 12 month period of more than 80% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors, including, but not limited to, by merger, consolidation or similar corporate transaction or by purchase; excluding, however, the following ("Excluded Transactions"): (A) any acquisition of beneficial ownership by the Company, any subsidiary of the Company, Wasserstein Perella Partners, L.P., Blackstone Capital Partners L.P. or an affiliate of any of the foregoing, (B) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary of the Company, and (C) any merger, consolidation or other form of business acquisition or combination transaction in which, immediately after the transaction and giving effect thereto and the issuance of securities therein, holders of Common Stock of the Company beneficially own or are entitled to receive equity securities of the acquiring, surviving or resulting entity (or any parent company or other affiliate thereof) that, in the aggregate, represent more than 20% of the combined voting power entitled to be cast generally; or (ii) the sale of any business, businesses or assets of the Company in any single transaction or series of related transactions effected within any 12-month period which, on an aggregate basis, produced at least 80% of the consolidated net sales of the Company, calculated by giving pro forma effect to such transactions, and any acquisitions effected during the relevant period, for the fiscal year immediately preceding such transaction or, if applicable, the first such transaction in the 12-month period in which the transaction or series of related transactions occurred, excluding, however, any Excluded Transaction. (b) Change in Control Period means the period commencing three months prior to the date of a Change in Control and ending on the first anniversary of such date or if later, the expiration of the 45 day period referred to in Section 1(d)(3) below. (c) Code means the Internal Revenue Code of 1986, as amended. (d) Constructive Termination means a termination of Executive's employment by Executive during a Change in Control Period which is due to: (i) the involuntary relocation of Executive to any office or location more than fifty (50) miles from the office or location at which Executive is then located; (ii) a material reduction in Executive's total compensation and benefit package; or (iii) a significant reduction in Executive's responsibilities, position or authority (including changes resulting from the assignment to Executive of any duties inconsistent with his responsibilities, position or authority in effect immediately prior to the Change in Control Period); provided, however, that, notwithstanding any other provision hereof, no event or circumstance will constitute "Constructive Termination" for purposes of this Agreement (A) if Termination For Cause exists or (B) unless (1) Executive shall have given notice to the Company of Executive's determination of the occurrence of such event, (2) such event constitutes one of the events specified in clauses (i) - (iii) above, and (3) such event shall be continuing as of the end of 45 days after the giving of such notice. (e) Date of Termination means the later of (i) the date of receipt of the Notice of Termination by the Company or Executive, as the case may be, or (ii) any later date specified therein (which shall be not more than thirty (30) days after the giving of such notice). (f) ERISA means the Employee Retirement Income Security Act of 1974, as amended. (g) Involuntary Termination means a termination of Executive's employment by the Company during a Change in Control Period other than a Termination For Cause. Termination of Executive's employment during a Change in Control Period by reason of Executive's death or disability shall not be considered an Involuntary Termination. (h) Notice of Termination means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide the basis for termination of Executive's employment under the provision so indicated, and (iii) if the termination date is other than the date of receipt of such notice, specifies the termination date (which shall be not more than thirty (30) days after the giving of such notice). (i) Termination For Cause means a termination of Executive's employment by the Company as a result of: (i) Executive's fraud or misappropriation with respect to the business of the Company or intentional damage to the property or business of the Company or any substantial asset; (ii) willful failure by Executive to perform his duties and responsibilities and to carry out his authority; (iii) willful malfeasance or misfeasance or breach of fiduciary duty or misrepresentation to the Company or its stockholders; (iv) willful failure to act in accordance with any specific lawful instructions of a majority of the Board of Directors of the Company; or (v) conviction of Executive of a felony. 2. Benefits Upon Involuntary Termination or Constructive Termination During Change in Control Period. Subject to the limitations of Section 3, in the event of an Involuntary Termination or Constructive Termination of Executive for which the Date of Termination is within a Change in Control Period, the Company shall pay to Executive the following benefits in a lump sum payment (without discounting to present value) within 30 days of the Date of Termination: (a) to the extent not theretofore paid, Executive's base salary through the Date of Termination; (b) a pro rata bonus equal to (1) Executive's target bonus immediately preceding the Change in Control Period multiplied by (2) a fraction, the numerator of which is the number of whole months (rounded for portions of months) elapsed in the relevant bonus year prior to the Date of Termination, and the denominator of which is 12; (c) twenty-four (24) months of base salary based on the monthly rate of base salary in effect immediately preceding the Change in Control Period, or if greater, the rate of Base Salary in effect immediately preceding the Date of Termination; and (d) Executive's target annual bonus in effect immediately preceding the Change in Control Period multiplied by two (2). In addition, (i) the Company shall offer Executive the opportunity to purchase his Company automobile at its net book value as of the Date of Termination, (ii) Executive shall be deemed to continue as an employee of the Company for 2 years following the Date of Termination for purposes of eligibility and vesting (but not benefit accrual), under any otherwise applicable retirement income plan or arrangement, and (iii) Executive will be entitled to continue to participate in all welfare benefit plans for such 2 year period or, if earlier, the period ending on the date the Executive obtains new full-time employment. Subject to the limitations of Section 3, the Company shall also reimburse Executive for the cost of any continued coverage elected by Executive for himself and his eligible dependents under the Company's group health plan(s) at the end of the welfare benefit continuation period described in clause (iii) of the immediately preceding sentence pursuant to Section 4980B of the Code and Section 601 ET SEQ. of ERISA. 3. Limitation on Benefits. (a) General. Any benefits payable or to be provided to Executive, whether pursuant to this Agreement or otherwise, which constitute Parachute Payments (as defined below) shall be subject to the limitation of this Section 3 so that the benefits payable or to be provided to Executive under this Agreement, as well as any payments or benefits provided outside of this Agreement, shall not cause the Company to have paid an Excess Parachute Payment (as defined below). Accordingly, anything in this Agreement to the contrary notwithstanding, in the event that the certified public accountants regularly employed by the Company immediately prior to a Change in Control (the "Accounting Firm") shall determine that Executive's receipt of all Parachute Payments would cause the Company to pay an Excess Parachute Payment, it shall determine the Reduced Amount, and the aggregate Parachute Payments shall be reduced to such Reduced Amount in accordance with the provisions of Section 3(c) below. (b) Definitions. For purposes of this Section 3: (i) "Excess Parachute Payment" shall have the same meaning as the term "excess parachute payment" defined in Section 280G(b)(1) of the Code; (ii) "Parachute Payment" shall mean any payment or distribution in the nature of compensation to or for the benefit of Executive which is contingent on a "change" under and within the meaning of Section 280G(b)(2)(A)(i) of the Code, whether paid or payable pursuant to this Agreement or otherwise; (iii) "Present Value" shall mean such value determined in accordance with Section 280G(d)(4) of the Code; and (iv) "Reduced Amount" shall mean the largest aggregate amount of Parachute Payments Executive may receive without causing the Company to have paid an Excess Parachute Payment. (c) Limitation. If the Accounting Firm determines that Parachute Payments should be limited to the Reduced Amount, the Company shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof, and Executive may then elect, in Executive's sole discretion, which and how much of the Parachute Payments, including without limitation Parachute Payments made outside of this Agreement, shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Parachute Payments is equal to the Reduced Amount), and shall advise the Company in writing of such election within 10 days of Executive's receipt of notice. If no such election is made by Executive within such 10 day period, the Company may elect which of Parachute Payments, including without limitation Parachute Payments made outside of this Agreement, shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Parachute Payments is equal to the Reduced Amount) and shall notify Executive promptly of such election. All determinations made by the Accounting Firm under this Section 3 shall be binding upon the Company and Executive and shall be made within 45 days immediately following the Date of Termination. As promptly as practicable following such determination, the Company shall pay to or distribute for the benefit of Executive such Parachute Payments as are then due to Executive under this Agreement. 4. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future eligibility or participation in any benefit, bonus, incentive or other plan provided by the Company and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any stock option or other agreements with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan or program of the Company subsequent to the Date of Termination shall be payable in accordance with such plan or program. 5. Full Settlement. The Company's obligation to make payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or other parties. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement. The Company agrees to pay, to the full extent provided by law, all legal fees and expenses which Executive may reasonably incur as a result of any contest by the Company or others of the validity or enforceability of, or liability under, any provision of this Agreement or as a result of any contest by Executive about the amount of any payment pursuant to this Agreement. 6. No Duplication of Benefits. Notwithstanding anything to the contrary herein, the lump sum payment due to Executive under Section 2 hereof shall be reduced by the amount of cash severance or salary continuation benefits paid to Executive pursuant to any other plan or policy of the Company or a written employment agreement between the Company (or one of its affiliates) and Executive, it being the intent of the parties that Executive shall not receive post-employment benefits hereunder and under such other plan, policy or written employment agreement. 7. Succession. This Agreement shall inure to the benefit of and shall be binding upon the Company and its successors and assignees, but, without the prior written consent of Executive, this Agreement may not be assigned other than in connection with a merger, sale, consolidation or similar transaction of all or substantially all of the business and/or assets of the Company in which the successor or assignee assumes (whether by operation of law or express assumption) all obligations of the Company hereunder. The Company shall require any successor to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The obligations and duties of Executive hereunder shall be personal and not assignable otherwise than by the laws of descent and distribution. 8. Miscellaneous. (a) Applicable Law. This Agreement shall be governed, construed and interpreted in accordance with the laws of the State of North Carolina. (b) Notices. All notices and communications hereunder shall be in writing and shall be given by hand delivery to the other party by registered or certified mail, return receipt requested, postage prepaid, or by overnight mail, addressed as follows: If to Executive: Mr. Thomas E. Hannah 837 Glendalyn Avenue Spartanburg, South Carolina 29302 If to the Company: Collins & Aikman Products Co. 701 McCullough Drive P.O. Box 32665 Charlotte, North Carolina 28232 Attention: Chief Executive Officer or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) Validity. The invalidity or unenforceability of any provision of this contract shall not affect the validity or enforceability of any other provision of this Agreement. (d) Tax Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) Waiver. The waiver of the breach of any term or of any condition of this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition hereof. (f) Entire Agreement. This instrument contains the entire agreement of the parties relating to the subject matter hereof, and it replaces and supersedes any prior agreements between the parties relating to said subject matter. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto. (g) No Right of Employment. Executive and the Company acknowledge that the employment of Executive by the Company is "at will," and prior to the date of a Change in Control, may be terminated by either Executive or the Company at any time. Upon a termination of Executive's employment prior to the date of a Change in Control, there shall be no further rights under this Agreement and this Agreement shall terminate and be of no further force and effect. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. EXECUTIVE: /s/ Thomas E. Hannah Thomas E. Hannah COMPANY: COLLINS & AIKMAN CORPORATION By: /s/ Thomas E. Hannah Thomas E. Hannah President & Chief Executive Officer EX-10 11 EXHIBIT 10.18 Exhibit 10.18 CHANGE IN CONTROL AGREEMENT THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") is made and entered into this 17th day of March, 1998, by and between COLLINS & AIKMAN CORPORATION, a Delaware corporation (the "Company"), and J. MICHAEL STEPP (the "Executive"). Statement of Purpose The Company wishes to encourage the continued service and dedication of Executive in the event of any actual or contemplated Change in Control (as defined below) of the Company. The Company has determined that these objectives are best accomplished by providing Executive with individual financial security pursuant to the terms of this Agreement, which the Company believes are fair and reasonable and consistent with the practices of other major corporations. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the Company and Executive hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) Change in Control means and shall be deemed to have occurred upon: (i) the acquisition, directly or indirectly, by any "person" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) within any 12 month period of more than 80% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors, including, but not limited to, by merger, consolidation or similar corporate transaction or by purchase; excluding, however, the following ("Excluded Transactions"): (A) any acquisition of beneficial ownership by the Company, any subsidiary of the Company, Wasserstein Perella Partners, L.P., Blackstone Capital Partners L.P. or an affiliate of any of the foregoing, (B) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary of the Company, and (C) any merger, consolidation or other form of business acquisition or combination transaction in which, immediately after the transaction and giving effect thereto and the issuance of securities therein, holders of Common Stock of the Company beneficially own or are entitled to receive equity securities of the acquiring, surviving or resulting entity (or any parent company or other affiliate thereof) that, in the aggregate, represent more than 20% of the combined voting power entitled to be cast generally; or (ii) the sale of any business, businesses or assets of the Company in any single transaction or series of related transactions effected within any 12-month period which, on an aggregate basis, produced at least 80% of the consolidated net sales of the Company, calculated by giving pro forma effect to such transactions, and any acquisitions effected during the relevant period, for the fiscal year immediately preceding such transaction or, if applicable, the first such transaction in the 12-month period in which the transaction or series of related transactions occurred, excluding, however, any Excluded Transaction. (b) Change in Control Period means the period commencing three months prior to the date of a Change in Control and ending on the first anniversary of such date or if later, the expiration of the 45 day period referred to in Section 1(d)(3) below. (c) Code means the Internal Revenue Code of 1986, as amended. (d) Constructive Termination means a termination of Executive's employment by Executive during a Change in Control Period which is due to: (i) the involuntary relocation of Executive to any office or location more than fifty (50) miles from the office or location at which Executive is then located; (ii) a material reduction in Executive's total compensation and benefit package; or (iii) a significant reduction in Executive's responsibilities, position or authority (including changes resulting from the assignment to Executive of any duties inconsistent with his responsibilities, position or authority in effect immediately prior to the Change in Control Period); provided, however, that, notwithstanding any other provision hereof, no event or circumstance will constitute "Constructive Termination" for purposes of this Agreement (A) if Termination For Cause exists or (B) unless (1) Executive shall have given notice to the Company of Executive's determination of the occurrence of such event, (2) such event constitutes one of the events specified in clauses (i) - (iii) above, and (3) such event shall be continuing as of the end of 45 days after the giving of such notice. (e) Date of Termination means the later of (i) the date of receipt of the Notice of Termination by the Company or Executive, as the case may be, or (ii) any later date specified therein (which shall be not more than thirty (30) days after the giving of such notice). (f) ERISA means the Employee Retirement Income Security Act of 1974, as amended. (g) Involuntary Termination means a termination of Executive's employment by the Company during a Change in Control Period other than a Termination For Cause. Termination of Executive's employment during a Change in Control Period by reason of Executive's death or disability shall not be considered an Involuntary Termination. (h) Notice of Termination means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide the basis for termination of Executive's employment under the provision so indicated, and (iii) if the termination date is other than the date of receipt of such notice, specifies the termination date (which shall be not more than thirty (30) days after the giving of such notice). (i) Termination For Cause means a termination of Executive's employment by the Company as a result of: (i) Executive's fraud or misappropriation with respect to the business of the Company or intentional damage to the property or business of the Company or any substantial asset; (ii) willful failure by Executive to perform his duties and responsibilities and to carry out his authority; (iii) willful malfeasance or misfeasance or breach of fiduciary duty or misrepresentation to the Company or its stockholders; (iv) willful failure to act in accordance with any specific lawful instructions of a majority of the Board of Directors of the Company; or (v) conviction of Executive of a felony. 2. Benefits Upon Involuntary Termination or Constructive Termination During Change in Control Period. Subject to the limitations of Section 3, in the event of an Involuntary Termination or Constructive Termination of Executive for which the Date of Termination is within a Change in Control Period, the Company shall pay to Executive the following benefits in a lump sum payment (without discounting to present value) within 30 days of the Date of Termination: (a) to the extent not theretofore paid, Executive's base salary through the Date of Termination; (b) a pro rata bonus equal to (1) Executive's target bonus immediately preceding the Change in Control Period multiplied by (2) a fraction, the numerator of which is the number of whole months (rounded for portions of months) elapsed in the relevant bonus year prior to the Date of Termination, and the denominator of which is 12; (c) twenty-four (24) months of base salary based on the monthly rate of base salary in effect immediately preceding the Change in Control Period, or if greater, the rate of Base Salary in effect immediately preceding the Date of Termination; and (d) Executive's target annual bonus in effect immediately preceding the Change in Control Period multiplied by two (2). In addition, (i) the Company shall offer Executive the opportunity to purchase his Company automobile at its net book value as of the Date of Termination, (ii) Executive shall be deemed to continue as an employee of the Company for 2 years following the Date of Termination for purposes of eligibility and vesting (but not benefit accrual), under any otherwise applicable retirement income plan or arrangement, and (iii) Executive will be entitled to continue to participate in all welfare benefit plans for such 2 year period or, if earlier, the period ending on the date the Executive obtains new full-time employment. Subject to the limitations of Section 3, the Company shall also reimburse Executive for the cost of any continued coverage elected by Executive for himself and his eligible dependents under the Company's group health plan(s) at the end of the welfare benefit continuation period described in clause (iii) of the immediately preceding sentence pursuant to Section 4980B of the Code and Section 601 ET SEQ. of ERISA. 3. Limitation on Benefits. (a) General. Any benefits payable or to be provided to Executive, whether pursuant to this Agreement or otherwise, which constitute Parachute Payments (as defined below) shall be subject to the limitation of this Section 3 so that the benefits payable or to be provided to Executive under this Agreement, as well as any payments or benefits provided outside of this Agreement, shall not cause the Company to have paid an Excess Parachute Payment (as defined below). Accordingly, anything in this Agreement to the contrary notwithstanding, in the event that the certified public accountants regularly employed by the Company immediately prior to a Change in Control (the "Accounting Firm") shall determine that Executive's receipt of all Parachute Payments would cause the Company to pay an Excess Parachute Payment, it shall determine the Reduced Amount, and the aggregate Parachute Payments shall be reduced to such Reduced Amount in accordance with the provisions of Section 3(c) below. (b) Definitions. For purposes of this Section 3: (i) "Excess Parachute Payment" shall have the same meaning as the term "excess parachute payment" defined in Section 280G(b)(1) of the Code; (ii) "Parachute Payment" shall mean any payment or distribution in the nature of compensation to or for the benefit of Executive which is contingent on a "change" under and within the meaning of Section 280G(b)(2)(A)(i) of the Code, whether paid or payable pursuant to this Agreement or otherwise; (iii) "Present Value" shall mean such value determined in accordance with Section 280G(d)(4) of the Code; and (iv) "Reduced Amount" shall mean the largest aggregate amount of Parachute Payments Executive may receive without causing the Company to have paid an Excess Parachute Payment. (c) Limitation. If the Accounting Firm determines that Parachute Payments should be limited to the Reduced Amount, the Company shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof, and Executive may then elect, in Executive's sole discretion, which and how much of the Parachute Payments, including without limitation Parachute Payments made outside of this Agreement, shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Parachute Payments is equal to the Reduced Amount), and shall advise the Company in writing of such election within 10 days of Executive's receipt of notice. If no such election is made by Executive within such 10 day period, the Company may elect which of Parachute Payments, including without limitation Parachute Payments made outside of this Agreement, shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Parachute Payments is equal to the Reduced Amount) and shall notify Executive promptly of such election. All determinations made by the Accounting Firm under this Section 3 shall be binding upon the Company and Executive and shall be made within 45 days immediately following the Date of Termination. As promptly as practicable following such determination, the Company shall pay to or distribute for the benefit of Executive such Parachute Payments as are then due to Executive under this Agreement. 4. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future eligibility or participation in any benefit, bonus, incentive or other plan provided by the Company and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any stock option or other agreements with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan or program of the Company subsequent to the Date of Termination shall be payable in accordance with such plan or program. 5. Full Settlement. The Company's obligation to make payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or other parties. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement. The Company agrees to pay, to the full extent provided by law, all legal fees and expenses which Executive may reasonably incur as a result of any contest by the Company or others of the validity or enforceability of, or liability under, any provision of this Agreement or as a result of any contest by Executive about the amount of any payment pursuant to this Agreement. 6. No Duplication of Benefits. Notwithstanding anything to the contrary herein, the lump sum payment due to Executive under Section 2 hereof shall be reduced by the amount of cash severance or salary continuation benefits paid to Executive pursuant to any other plan or policy of the Company or a written employment agreement between the Company (or one of its affiliates) and Executive, it being the intent of the parties that Executive shall not receive post-employment benefits hereunder and under such other plan, policy or written employment agreement. 7. Succession. This Agreement shall inure to the benefit of and shall be binding upon the Company and its successors and assignees, but, without the prior written consent of Executive, this Agreement may not be assigned other than in connection with a merger, sale, consolidation or similar transaction of all or substantially all of the business and/or assets of the Company in which the successor or assignee assumes (whether by operation of law or express assumption) all obligations of the Company hereunder. The Company shall require any successor to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The obligations and duties of Executive hereunder shall be personal and not assignable otherwise than by the laws of descent and distribution. 8. Miscellaneous. (a) Applicable Law. This Agreement shall be governed, construed and interpreted in accordance with the laws of the State of North Carolina. (b) Notices. All notices and communications hereunder shall be in writing and shall be given by hand delivery to the other party by registered or certified mail, return receipt requested, postage prepaid, or by overnight mail, addressed as follows: If to Executive: Mr. J. Michael Stepp 7021 Old Dairy Lane Charlotte, North Carolina 28211 If to the Company: Collins & Aikman Products Co. 701 McCullough Drive P.O. Box 32665 Charlotte, North Carolina 28232 Attention: Chief Executive Officer or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) Validity. The invalidity or unenforceability of any provision of this contract shall not affect the validity or enforceability of any other provision of this Agreement. (d) Tax Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) Waiver. The waiver of the breach of any term or of any condition of this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition hereof. (f) Entire Agreement. This instrument contains the entire agreement of the parties relating to the subject matter hereof, and it replaces and supersedes any prior agreements between the parties relating to said subject matter. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto. (g) No Right of Employment. Executive and the Company acknowledge that the employment of Executive by the Company is "at will," and prior to the date of a Change in Control, may be terminated by either Executive or the Company at any time. Upon a termination of Executive's employment prior to the date of a Change in Control, there shall be no further rights under this Agreement and this Agreement shall terminate and be of no further force and effect. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. EXECUTIVE: /s/ J. Michael Stepp J. Michael Stepp COMPANY: COLLINS & AIKMAN CORPORATION By: /s/ Thomas E. Hannah Thomas E. Hannah President & Chief Executive Officer EX-10 12 EXHIBIT 10.19 Exhibit 10.19 CHANGE IN CONTROL AGREEMENT THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") is made and entered into this 17th day of March, 1998, by and between COLLINS & AIKMAN CORPORATION, a Delaware corporation (the "Company"), and DENNIS E. HILLER (the "Executive"). Statement of Purpose The Company wishes to encourage the continued service and dedication of Executive in the event of any actual or contemplated Change in Control (as defined below) of the Company. The Company has determined that these objectives are best accomplished by providing Executive with individual financial security pursuant to the terms of this Agreement, which the Company believes are fair and reasonable and consistent with the practices of other major corporations. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the Company and Executive hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) Change in Control means and shall be deemed to have occurred upon: (i) the acquisition, directly or indirectly, by any "person" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) within any 12 month period of more than 80% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors, including, but not limited to, by merger, consolidation or similar corporate transaction or by purchase; excluding, however, the following ("Excluded Transactions"): (A) any acquisition of beneficial ownership by the Company, any subsidiary of the Company, Wasserstein Perella Partners, L.P., Blackstone Capital Partners L.P. or an affiliate of any of the foregoing, (B) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary of the Company, and (C) any merger, consolidation or other form of business acquisition or combination transaction in which, immediately after the transaction and giving effect thereto and the issuance of securities therein, holders of Common Stock of the Company beneficially own or are entitled to receive equity securities of the acquiring, surviving or resulting entity (or any parent company or other affiliate thereof) that, in the aggregate, represent more than 20% of the combined voting power entitled to be cast generally; or (ii) the sale of any business, businesses or assets of the Company in any single transaction or series of related transactions effected within any 12-month period which, on an aggregate basis, produced at least 80% of the consolidated net sales of the Company, calculated by giving pro forma effect to such transactions, and any acquisitions effected during the relevant period, for the fiscal year immediately preceding such transaction or, if applicable, the first such transaction in the 12-month period in which the transaction or series of related transactions occurred, excluding, however, any Excluded Transaction. (b) Change in Control Period means the period commencing three months prior to the date of a Change in Control and ending on the first anniversary of such date or if later, the expiration of the 45 day period referred to in Section 1(d)(3) below. (c) Code means the Internal Revenue Code of 1986, as amended. (d) Constructive Termination means a termination of Executive's employment by Executive during a Change in Control Period which is due to: (i) the involuntary relocation of Executive to any office or location more than fifty (50) miles from the office or location at which Executive is then located; (ii) a material reduction in Executive's total compensation and benefit package; or (iii) a significant reduction in Executive's responsibilities, position or authority (including changes resulting from the assignment to Executive of any duties inconsistent with his responsibilities, position or authority in effect immediately prior to the Change in Control Period); provided, however, that, notwithstanding any other provision hereof, no event or circumstance will constitute "Constructive Termination" for purposes of this Agreement (A) if Termination For Cause exists or (B) unless (1) Executive shall have given notice to the Company of Executive's determination of the occurrence of such event, (2) such event constitutes one of the events specified in clauses (i) - (iii) above, and (3) such event shall be continuing as of the end of 45 days after the giving of such notice. (e) Date of Termination means the later of (i) the date of receipt of the Notice of Termination by the Company or Executive, as the case may be, or (ii) any later date specified therein (which shall be not more than thirty (30) days after the giving of such notice). (f) ERISA means the Employee Retirement Income Security Act of 1974, as amended. (g) Involuntary Termination means a termination of Executive's employment by the Company during a Change in Control Period other than a Termination For Cause. Termination of Executive's employment during a Change in Control Period by reason of Executive's death or disability shall not be considered an Involuntary Termination. (h) Notice of Termination means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide the basis for termination of Executive's employment under the provision so indicated, and (iii) if the termination date is other than the date of receipt of such notice, specifies the termination date (which shall be not more than thirty (30) days after the giving of such notice). (i) Termination For Cause means a termination of Executive's employment by the Company as a result of: (i) Executive's fraud or misappropriation with respect to the business of the Company or intentional damage to the property or business of the Company or any substantial asset; (ii) willful failure by Executive to perform his duties and responsibilities and to carry out his authority; (iii) willful malfeasance or misfeasance or breach of fiduciary duty or misrepresentation to the Company or its stockholders; (iv) willful failure to act in accordance with any specific lawful instructions of a majority of the Board of Directors of the Company; or (v) conviction of Executive of a felony. 2. Benefits Upon Involuntary Termination or Constructive Termination During Change in Control Period. Subject to the limitations of Section 3, in the event of an Involuntary Termination or Constructive Termination of Executive for which the Date of Termination is within a Change in Control Period, the Company shall pay to Executive the following benefits in a lump sum payment (without discounting to present value) within 30 days of the Date of Termination: (a) to the extent not theretofore paid, Executive's base salary through the Date of Termination; (b) a pro rata bonus equal to (1) Executive's target bonus immediately preceding the Change in Control Period multiplied by (2) a fraction, the numerator of which is the number of whole months (rounded for portions of months) elapsed in the relevant bonus year prior to the Date of Termination, and the denominator of which is 12; (c) twenty-four (24) months of base salary based on the monthly rate of base salary in effect immediately preceding the Change in Control Period, or if greater, the rate of Base Salary in effect immediately preceding the Date of Termination; and (d) Executive's target annual bonus in effect immediately preceding the Change in Control Period multiplied by two (2). In addition, (i) the Company shall offer Executive the opportunity to purchase his Company automobile at its net book value as of the Date of Termination, (ii) Executive shall be deemed to continue as an employee of the Company for 2 years following the Date of Termination for purposes of eligibility and vesting (but not benefit accrual), under any otherwise applicable retirement income plan or arrangement, and (iii) Executive will be entitled to continue to participate in all welfare benefit plans for such 2 year period or, if earlier, the period ending on the date the Executive obtains new full-time employment. Subject to the limitations of Section 3, the Company shall also reimburse Executive for the cost of any continued coverage elected by Executive for himself and his eligible dependents under the Company's group health plan(s) at the end of the welfare benefit continuation period described in clause (iii) of the immediately preceding sentence pursuant to Section 4980B of the Code and Section 601 ET SEQ. of ERISA. 3. Limitation on Benefits. (a) General. Any benefits payable or to be provided to Executive, whether pursuant to this Agreement or otherwise, which constitute Parachute Payments (as defined below) shall be subject to the limitation of this Section 3 so that the benefits payable or to be provided to Executive under this Agreement, as well as any payments or benefits provided outside of this Agreement, shall not cause the Company to have paid an Excess Parachute Payment (as defined below). Accordingly, anything in this Agreement to the contrary notwithstanding, in the event that the certified public accountants regularly employed by the Company immediately prior to a Change in Control (the "Accounting Firm") shall determine that Executive's receipt of all Parachute Payments would cause the Company to pay an Excess Parachute Payment, it shall determine the Reduced Amount, and the aggregate Parachute Payments shall be reduced to such Reduced Amount in accordance with the provisions of Section 3(c) below. (b) Definitions. For purposes of this Section 3: (i) "Excess Parachute Payment" shall have the same meaning as the term "excess parachute payment" defined in Section 280G(b)(1) of the Code; (ii) "Parachute Payment" shall mean any payment or distribution in the nature of compensation to or for the benefit of Executive which is contingent on a "change" under and within the meaning of Section 280G(b)(2)(A)(i) of the Code, whether paid or payable pursuant to this Agreement or otherwise; (iii) "Present Value" shall mean such value determined in accordance with Section 280G(d)(4) of the Code; and (iv) "Reduced Amount" shall mean the largest aggregate amount of Parachute Payments Executive may receive without causing the Company to have paid an Excess Parachute Payment. (c) Limitation. If the Accounting Firm determines that Parachute Payments should be limited to the Reduced Amount, the Company shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof, and Executive may then elect, in Executive's sole discretion, which and how much of the Parachute Payments, including without limitation Parachute Payments made outside of this Agreement, shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Parachute Payments is equal to the Reduced Amount), and shall advise the Company in writing of such election within 10 days of Executive's receipt of notice. If no such election is made by Executive within such 10 day period, the Company may elect which of Parachute Payments, including without limitation Parachute Payments made outside of this Agreement, shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Parachute Payments is equal to the Reduced Amount) and shall notify Executive promptly of such election. All determinations made by the Accounting Firm under this Section 3 shall be binding upon the Company and Executive and shall be made within 45 days immediately following the Date of Termination. As promptly as practicable following such determination, the Company shall pay to or distribute for the benefit of Executive such Parachute Payments as are then due to Executive under this Agreement. 4. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future eligibility or participation in any benefit, bonus, incentive or other plan provided by the Company and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any stock option or other agreements with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan or program of the Company subsequent to the Date of Termination shall be payable in accordance with such plan or program. 5. Full Settlement. The Company's obligation to make payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or other parties. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement. The Company agrees to pay, to the full extent provided by law, all legal fees and expenses which Executive may reasonably incur as a result of any contest by the Company or others of the validity or enforceability of, or liability under, any provision of this Agreement or as a result of any contest by Executive about the amount of any payment pursuant to this Agreement. 6. No Duplication of Benefits. Notwithstanding anything to the contrary herein, the lump sum payment due to Executive under Section 2 hereof shall be reduced by the amount of cash severance or salary continuation benefits paid to Executive pursuant to any other plan or policy of the Company or a written employment agreement between the Company (or one of its affiliates) and Executive, it being the intent of the parties that Executive shall not receive post-employment benefits hereunder and under such other plan, policy or written employment agreement. 7. Succession. This Agreement shall inure to the benefit of and shall be binding upon the Company and its successors and assignees, but, without the prior written consent of Executive, this Agreement may not be assigned other than in connection with a merger, sale, consolidation or similar transaction of all or substantially all of the business and/or assets of the Company in which the successor or assignee assumes (whether by operation of law or express assumption) all obligations of the Company hereunder. The Company shall require any successor to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The obligations and duties of Executive hereunder shall be personal and not assignable otherwise than by the laws of descent and distribution. 8. Miscellaneous. (a) Applicable Law. This Agreement shall be governed, construed and interpreted in accordance with the laws of the State of North Carolina. (b) Notices. All notices and communications hereunder shall be in writing and shall be given by hand delivery to the other party by registered or certified mail, return receipt requested, postage prepaid, or by overnight mail, addressed as follows: If to Executive: Mr. Dennis E. Hiller 19327 River Falls Drive Davidson, North Carolina 28036 If to the Company: Collins & Aikman Products Co. 701 McCullough Drive P.O. Box 32665 Charlotte, North Carolina 28232 Attention: Chief Executive Officer or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) Validity. The invalidity or unenforceability of any provision of this contract shall not affect the validity or enforceability of any other provision of this Agreement. (d) Tax Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) Waiver. The waiver of the breach of any term or of any condition of this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition hereof. (f) Entire Agreement. This instrument contains the entire agreement of the parties relating to the subject matter hereof, and it replaces and supersedes any prior agreements between the parties relating to said subject matter. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto. (g) No Right of Employment. Executive and the Company acknowledge that the employment of Executive by the Company is "at will," and prior to the date of a Change in Control, may be terminated by either Executive or the Company at any time. Upon a termination of Executive's employment prior to the date of a Change in Control, there shall be no further rights under this Agreement and this Agreement shall terminate and be of no further force and effect. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. EXECUTIVE: /s/ Dennis E. Hiller Dennis E. Hiller COMPANY: COLLINS & AIKMAN CORPORATION By: /s/ Thomas E. Hannah Thomas E. Hannah President & Chief Executive Officer EX-10 13 EXHIBIT 10.20 Exhibit 10.20 CHANGE IN CONTROL AGREEMENT THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") is made and entered into this 17th day of March, 1998, by and between COLLINS & AIKMAN CORPORATION, a Delaware corporation (the "Company"), and ELIZABETH R. PHILIPP (the "Executive"). Statement of Purpose The Company wishes to encourage the continued service and dedication of Executive in the event of any actual or contemplated Change in Control (as defined below) of the Company. The Company has determined that these objectives are best accomplished by providing Executive with individual financial security pursuant to the terms of this Agreement, which the Company believes are fair and reasonable and consistent with the practices of other major corporations. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the Company and Executive hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) Change in Control means and shall be deemed to have occurred upon: (i) the acquisition, directly or indirectly, by any "person" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) within any 12 month period of more than 80% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors, including, but not limited to, by merger, consolidation or similar corporate transaction or by purchase; excluding, however, the following ("Excluded Transactions"): (A) any acquisition of beneficial ownership by the Company, any subsidiary of the Company, Wasserstein Perella Partners, L.P., Blackstone Capital Partners L.P. or an affiliate of any of the foregoing, (B) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary of the Company, and (C) any merger, consolidation or other form of business acquisition or combination transaction in which, immediately after the transaction and giving effect thereto and the issuance of securities therein, holders of Common Stock of the Company beneficially own or are entitled to receive equity securities of the acquiring, surviving or resulting entity (or any parent company or other affiliate thereof) that, in the aggregate, represent more than 20% of the combined voting power entitled to be cast generally; or (ii) the sale of any business, businesses or assets of the Company in any single transaction or series of related transactions effected within any 12-month period which, on an aggregate basis, produced at least 80% of the consolidated net sales of the Company, calculated by giving pro forma effect to such transactions, and any acquisitions effected during the relevant period, for the fiscal year immediately preceding such transaction or, if applicable, the first such transaction in the 12-month period in which the transaction or series of related transactions occurred, excluding, however, any Excluded Transaction. (b) Change in Control Period means the period commencing three months prior to the date of a Change in Control and ending on the first anniversary of such date or if later, the expiration of the 45 day period referred to in Section 1(d)(3) below. (c) Code means the Internal Revenue Code of 1986, as amended. (d) Constructive Termination means a termination of Executive's employment by Executive during a Change in Control Period which is due to: (i) the involuntary relocation of Executive to any office or location more than fifty (50) miles from the office or location at which Executive is then located; (ii) a material reduction in Executive's total compensation and benefit package; or (iii) a significant reduction in Executive's responsibilities, position or authority (including changes resulting from the assignment to Executive of any duties inconsistent with his responsibilities, position or authority in effect immediately prior to the Change in Control Period); provided, however, that, notwithstanding any other provision hereof, no event or circumstance will constitute "Constructive Termination" for purposes of this Agreement (A) if Termination For Cause exists or (B) unless (1) Executive shall have given notice to the Company of Executive's determination of the occurrence of such event, (2) such event constitutes one of the events specified in clauses (i) - (iii) above, and (3) such event shall be continuing as of the end of 45 days after the giving of such notice. (e) Date of Termination means the later of (i) the date of receipt of the Notice of Termination by the Company or Executive, as the case may be, or (ii) any later date specified therein (which shall be not more than thirty (30) days after the giving of such notice). (f) ERISA means the Employee Retirement Income Security Act of 1974, as amended. (g) Involuntary Termination means a termination of Executive's employment by the Company during a Change in Control Period other than a Termination For Cause. Termination of Executive's employment during a Change in Control Period by reason of Executive's death or disability shall not be considered an Involuntary Termination. (h) Notice of Termination means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide the basis for termination of Executive's employment under the provision so indicated, and (iii) if the termination date is other than the date of receipt of such notice, specifies the termination date (which shall be not more than thirty (30) days after the giving of such notice). (i) Termination For Cause means a termination of Executive's employment by the Company as a result of: (i) Executive's fraud or misappropriation with respect to the business of the Company or intentional damage to the property or business of the Company or any substantial asset; (ii) willful failure by Executive to perform his duties and responsibilities and to carry out his authority; (iii) willful malfeasance or misfeasance or breach of fiduciary duty or misrepresentation to the Company or its stockholders; (iv) willful failure to act in accordance with any specific lawful instructions of a majority of the Board of Directors of the Company; or (v) conviction of Executive of a felony. 2. Benefits Upon Involuntary Termination or Constructive Termination During Change in Control Period. Subject to the limitations of Section 3, in the event of an Involuntary Termination or Constructive Termination of Executive for which the Date of Termination is within a Change in Control Period, the Company shall pay to Executive the following benefits in a lump sum payment (without discounting to present value) within 30 days of the Date of Termination: (a) to the extent not theretofore paid, Executive's base salary through the Date of Termination; (b) a pro rata bonus equal to (1) Executive's target bonus immediately preceding the Change in Control Period multiplied by (2) a fraction, the numerator of which is the number of whole months (rounded for portions of months) elapsed in the relevant bonus year prior to the Date of Termination, and the denominator of which is 12; (c) twenty-four (24) months of base salary based on the monthly rate of base salary in effect immediately preceding the Change in Control Period, or if greater, the rate of Base Salary in effect immediately preceding the Date of Termination; and (d) Executive's target annual bonus in effect immediately preceding the Change in Control Period multiplied by two (2). In addition, (i) the Company shall offer Executive the opportunity to purchase his Company automobile at its net book value as of the Date of Termination, (ii) Executive shall be deemed to continue as an employee of the Company for 2 years following the Date of Termination for purposes of eligibility and vesting (but not benefit accrual), under any otherwise applicable retirement income plan or arrangement, and (iii) Executive will be entitled to continue to participate in all welfare benefit plans for such 2 year period or, if earlier, the period ending on the date the Executive obtains new full-time employment. Subject to the limitations of Section 3, the Company shall also reimburse Executive for the cost of any continued coverage elected by Executive for himself and his eligible dependents under the Company's group health plan(s) at the end of the welfare benefit continuation period described in clause (iii) of the immediately preceding sentence pursuant to Section 4980B of the Code and Section 601 ET SEQ. of ERISA. 3. Limitation on Benefits. (a) General. Any benefits payable or to be provided to Executive, whether pursuant to this Agreement or otherwise, which constitute Parachute Payments (as defined below) shall be subject to the limitation of this Section 3 so that the benefits payable or to be provided to Executive under this Agreement, as well as any payments or benefits provided outside of this Agreement, shall not cause the Company to have paid an Excess Parachute Payment (as defined below). Accordingly, anything in this Agreement to the contrary notwithstanding, in the event that the certified public accountants regularly employed by the Company immediately prior to a Change in Control (the "Accounting Firm") shall determine that Executive's receipt of all Parachute Payments would cause the Company to pay an Excess Parachute Payment, it shall determine the Reduced Amount, and the aggregate Parachute Payments shall be reduced to such Reduced Amount in accordance with the provisions of Section 3(c) below. (b) Definitions. For purposes of this Section 3: (i) "Excess Parachute Payment" shall have the same meaning as the term "excess parachute payment" defined in Section 280G(b)(1) of the Code; (ii) "Parachute Payment" shall mean any payment or distribution in the nature of compensation to or for the benefit of Executive which is contingent on a "change" under and within the meaning of Section 280G(b)(2)(A)(i) of the Code, whether paid or payable pursuant to this Agreement or otherwise; (iii) "Present Value" shall mean such value determined in accordance with Section 280G(d)(4) of the Code; and (iv) "Reduced Amount" shall mean the largest aggregate amount of Parachute Payments Executive may receive without causing the Company to have paid an Excess Parachute Payment. (c) Limitation. If the Accounting Firm determines that Parachute Payments should be limited to the Reduced Amount, the Company shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof, and Executive may then elect, in Executive's sole discretion, which and how much of the Parachute Payments, including without limitation Parachute Payments made outside of this Agreement, shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Parachute Payments is equal to the Reduced Amount), and shall advise the Company in writing of such election within 10 days of Executive's receipt of notice. If no such election is made by Executive within such 10 day period, the Company may elect which of Parachute Payments, including without limitation Parachute Payments made outside of this Agreement, shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Parachute Payments is equal to the Reduced Amount) and shall notify Executive promptly of such election. All determinations made by the Accounting Firm under this Section 3 shall be binding upon the Company and Executive and shall be made within 45 days immediately following the Date of Termination. As promptly as practicable following such determination, the Company shall pay to or distribute for the benefit of Executive such Parachute Payments as are then due to Executive under this Agreement. 4. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future eligibility or participation in any benefit, bonus, incentive or other plan provided by the Company and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any stock option or other agreements with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan or program of the Company subsequent to the Date of Termination shall be payable in accordance with such plan or program. 5. Full Settlement. The Company's obligation to make payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or other parties. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement. The Company agrees to pay, to the full extent provided by law, all legal fees and expenses which Executive may reasonably incur as a result of any contest by the Company or others of the validity or enforceability of, or liability under, any provision of this Agreement or as a result of any contest by Executive about the amount of any payment pursuant to this Agreement. 6. No Duplication of Benefits. Notwithstanding anything to the contrary herein, the lump sum payment due to Executive under Section 2 hereof shall be reduced by the amount of cash severance or salary continuation benefits paid to Executive pursuant to any other plan or policy of the Company or a written employment agreement between the Company (or one of its affiliates) and Executive, it being the intent of the parties that Executive shall not receive post-employment benefits hereunder and under such other plan, policy or written employment agreement. 7. Succession. This Agreement shall inure to the benefit of and shall be binding upon the Company and its successors and assignees, but, without the prior written consent of Executive, this Agreement may not be assigned other than in connection with a merger, sale, consolidation or similar transaction of all or substantially all of the business and/or assets of the Company in which the successor or assignee assumes (whether by operation of law or express assumption) all obligations of the Company hereunder. The Company shall require any successor to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The obligations and duties of Executive hereunder shall be personal and not assignable otherwise than by the laws of descent and distribution. 8. Miscellaneous. (a) Applicable Law. This Agreement shall be governed, construed and interpreted in accordance with the laws of the State of North Carolina. (b) Notices. All notices and communications hereunder shall be in writing and shall be given by hand delivery to the other party by registered or certified mail, return receipt requested, postage prepaid, or by overnight mail, addressed as follows: If to Executive: Elizabeth R. Philipp 1056 Fifth Avenue Apt. 9C New York, New York 10028 If to the Company: Collins & Aikman Products Co. 701 McCullough Drive P.O. Box 32665 Charlotte, North Carolina 28232 Attention: Chief Executive Officer or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) Validity. The invalidity or unenforceability of any provision of this contract shall not affect the validity or enforceability of any other provision of this Agreement. (d) Tax Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) Waiver. The waiver of the breach of any term or of any condition of this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition hereof. (f) Entire Agreement. This instrument contains the entire agreement of the parties relating to the subject matter hereof, and it replaces and supersedes any prior agreements between the parties relating to said subject matter. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto. (g) No Right of Employment. Executive and the Company acknowledge that the employment of Executive by the Company is "at will," and prior to the date of a Change in Control, may be terminated by either Executive or the Company at any time. Upon a termination of Executive's employment prior to the date of a Change in Control, there shall be no further rights under this Agreement and this Agreement shall terminate and be of no further force and effect. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. EXECUTIVE: /s/ Elizabeth R. Philipp Elizabeth R. Philipp COMPANY: COLLINS & AIKMAN CORPORATION By: /s/ Thomas E. Hannah Thomas E. Hannah President & Chief Executive Officer EX-11 14 EXHIBIT 11 Exhibit 11 COLLINS & AIKMAN CORPORATION COMPUTATION OF EARNINGS PER SHARE IN THOUSANDS, EXCEPT PER SHARE DATA (UNAUDITED)
FISCAL YEAR ENDED ------------------------------------------------------- DECEMBER 27, DECEMBER 28, JANUARY 27, 1997 1996 1996 ----------------- ------------------- -------------- Average shares outstanding during the period................. 66,337 68,997 70,015 ----------------- ------------------- -------------- Incremental shares under stock options computed under the treasury stock method using the average market price of issuer's stock during the period.......................... - 1,119 1,166 ----------------- ------------------- -------------- Total shares for diluted EPS............................ 66,337 69,887 71,181 ================= =================== ============== Income (loss) applicable to common shareholders: Continuing operations................................... $ (10,091) $ 33,111 $ 207,222 Discontinued operations................................. 4,306 14,323 (781) Gain on sale of discontinued operations 161,741 - - Income before extraordinary loss........................ 155,956 47,434 206,441 Extraordinary item...................................... (721) (6,610) - ----------------- ------------------- -------------- Net income.............................................. $ 155,235 $ 40,824 $ 206,441 ================= =================== ============== Income (loss) per basic common share: Continuing operations................................... $ (0.15) $ 0.48 $ 2.96 Discontinued operations................................. 0.06 0.21 (.01) Gain on sale of discontinued operations 2.44 - - Extraordinary item...................................... (0.01) (0.10) - ----------------- ------------------- -------------- Net income (loss)....................................... $ 2.34 $ 0.59 $ 2.95 ================= =================== ============== Income (loss) per diluted common share:...................... Continuing operations................................... $ (0.15) $ 0.47 $ 2.91 Discontinued operations................................. 0.06 0.21 (0.01) Gain on sale of discontinued operations................. 2.44 - - Extraordinary item...................................... (0.01) (0.10) - ----------------- ------------------- -------------- Net income (loss) $ 2.34 $ 0.58 $ 2.90 ================= =================== ==============
EX-21 15 EXHIBIT 21 Exhibit 21 SUBSIDIARIES OF COLLINS & AIKMAN CORPORATION
COMPANY JURISDICTION - ------- ------------ Collins & Aikman Products Co. Delaware The Akro Corporation Delaware Carcorp, Inc. Delaware Cepco, Incorporated Delaware Collins & Aikman Asset Services, Inc. Delaware CW Management Corporation(1) Delaware Hopkins Services, Inc.(2) Minnesota SAF Services Corporation(3) Delaware Collins & Aikman Automotive International, Inc. Delaware Collins & Aikman Carpet & Acoustics (MI), Inc. Delaware Collins & Aikman Carpet & Acoustics (TN), Inc. Tennessee Collins & Aikman Export Corporation U.S. Virgin Isles Collins & Aikman Holdings Canada Inc. Canada Collins & Aikman Canada Inc. Canada Collins & Aikman Carpet & Acoustics (Canada) Inc. Canada Imperial Wallcoverings (Canada) Inc. Canada Collins & Aikman International Corporation Delaware Collins & Aikman Europe, Inc. Delaware Collins & Aikman (Gibraltar) Limited Gibraltar/Delaware Collins & Aikman Europe S.A. Luxembourg C&A (Gibraltar) Gibraltar Collins & Aikman Automotive Holding GmbH Germany Collins & Aikman Automotive Systems GmbH Germany Dura Convertible Systems GmbH Germany Collins & Aikman Automotive Systems S.A.(4) Spain Collins & Aikman Holding AB(5) Sweden - -------- (1) 10% owned by Willis Corroon Corporation of North Carolina (2) 10% owned by by O'Brien & Gere of North America, Inc. (3) 10% owned by Unicare, Inc. (4) One share owned by J. Michael Stepp (5) 50% owned by Collins & Aikman Products Co. Collins & Aikman Automotive Systems N.V. Belgium Collins & Aikman Automotive System AB Sweden Collins & Aikman Products GmbH Austria Collins & Aikman Holdings Limited United Kingdom Collins & Aikman Automotive Systems Limited United Kingdom Collins & Aikman Automotive Carpet Products (UK) Limited(1) United Kingdom Collins & Aikman Europe Limited United Kingdom Abex Plastic Products Limited United Kingdom Kigass Engineering Limited United Kingdom Manchester Kigass International Limited(1) United Kingdom Premier Springs & Pressings Limited United Kingdom Collins & Aikman Europe B.V. Netherlands Collins & Aikman Holdings, S.A. de C.V.(2) Mexico Amco de Mexico, S.A. de C.V. Mexico Collins & Aikman de Mexico, S.A. de C.V.(3) Mexico Collins & Aikman Carpet & Acoustics, S.A. de C.V. Mexico Dura Convertible Systems de Mexico, S.A. de C.V.(4) Mexico Collins & Aikman Plastics, Inc. Delaware Collins & Aikman Plastics, Ltd. Canada Hughes Plastics, Incorporated Michigan Collins & Aikman Properties, Inc. Delaware Sequoia Pacific Development Company Delaware Dura Convertible Systems, Inc. Delaware Amco Convertible Fabrics, Inc. Delaware Gamble Development Company Minnesota Grefab, Inc. New York JPS Automotive L.P.(5) Delaware Cramerton Automotive Products, Inc. Delaware JPS Automotive Products Corp. Delaware JPS Mexico Corporation Delaware Ole's, Inc. California Ole's Nevada, Inc. Nevada PACJ, Inc. Delaware Simmons Universal Corporation Delaware Wickes Asset Management, Inc. Delaware Wickes Manufacturing Company Delaware Wickes Products, Inc. Delaware Wickes Realty, Inc. Delaware
- -------- (1) 50% owned by Kigass Engineering Limited (2) One share owned by Habinus Trading Company (3) One share owned by The Akro Corporation (4) One share owned by Dura Convertible Systems, Inc. (5) General partner interest owned by PACJ, Inc. EX-23 16 EXHIBIT 23 Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included in this Form 10-K into the Company's previously filed Registration Statements File No. 33-53323, No. 33-53324, No. 33-60997 and No. 333-34569. ARTHUR ANDERSEN LLP Charlotte, North Carolina, March 26, 1998. EX-27 17 FDS -- COLLINS & AIKMAN
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS FOR THE FISCAL YEAR ENDED DECEMBER 27, 1997 AND SUCH IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 12-MOS DEC-31-1997 DEC-31-1997 24,004 0 207,400 9,275 142,042 509,291 514,978 126,891 1,302,392 302,803 764,857 0 0 705 (67,555) 1,302,392 1,629,332 1,629,332 1,397,121 1,397,121 (678) 604 77,581 2,907 12,998 (10,091) 4,306 (721) 0 155,235 2.34 2.34 EPS-BASIC
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