-----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, RXb2qY3bb2LZiL/byxfRMWy9xTe7WjEn+kJvlVp7/yfqzt9BoO/+FHWgJZpaf/qL d5kPMMXmsrnuwiWXa6Xjiw== 0001067312-00-000120.txt : 20000327 0001067312-00-000120.hdr.sgml : 20000327 ACCESSION NUMBER: 0001067312-00-000120 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19991225 FILED AS OF DATE: 20000324 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: 577819 BUSINESS ADDRESS: STREET 1: 701 MCCULLOUGH DR CITY: CHARLOTTE STATE: NC ZIP: 28262 BUSINESS PHONE: 7045482350 MAIL ADDRESS: STREET 1: 701 MCCULLOUGH DRIVE CITY: CHARLOTTE STATE: NC ZIP: 28262 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 FORM 10-K FOR THE YEAR ENDING DECEMBER 25, 1999 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 25, 1999 OR [_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-10218 Collins & Aikman Corporation (Exact name of registrant as specified in its charter) Delaware 13-3489233 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 5755 New King Court Troy, Michigan 48098 (Address of principal executive offices, including zip code) Registrant's telephone number, including area code: (248) 824-2500 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, $.01 par value New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] The aggregate market value of voting stock held by non-affiliates of the Registrant was $39,860,060 as of March 15, 2000. As of March 15, 2000, the number of outstanding shares of the Registrant's common stock, $.01 par value, was 61,879,272 shares. DOCUMENTS INCORPORATED BY REFERENCE: (1) Proxy Statement for 2000 Annual Meeting of Stockholders to be filed within 120 days of December 25, 1999--Part III, Items 10, 11, 12 and 13.* * Only the portions of this document expressly described in the items listed are incorporated by reference herein. COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES FORM 10-K ANNUAL REPORT INDEX Item 1. Business, page 1. Item 2. Properties, page 4. Item 3. Legal Proceedings, page 4. Item 4. Submission of Matters to a Vote of Security Holders, page 5. Item 5. Market for Registrant's Common Equity and Related Stockholder Matters, page 6. Item 6. Selected Financial Data, page 7. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations, page 8. Item 7A. Quantitative and Qualitative Disclosures About Market Risk, page 20. Item 8. Financial Statements and Supplementary Data, page 21. Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure, page 21. Item 10. Directors and Executive Officers of the Registrant, page 22. Item 11. Executive Compensation, page 22. Item 12. Security Ownership of Certain Beneficial Owners and Management, page 22. Item 13. Certain Relationships and Related Transactions, page 22. Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K, page 23. PART I Item 1. Business Development Collins & Aikman Corporation (the "Company") is the global leader in automotive floor and acoustic systems, and is a leading supplier of automotive fabric, interior trim and convertible top systems. The Company (formerly Collins & Aikman Holdings Corporation) is a Delaware corporation which was formed on September 21, 1988. As of December 25, 1999, Blackstone Capital Partners, L.P. ("Blackstone Partners") and Wasserstein Perella Partners, L.P. ("WP Partners") and their respective affiliates collectively own approximately 87% of the Common Stock of the Company. The Company conducts all of its operating activities through its wholly-owned Collins & Aikman Products Co. ("C&A Products") subsidiary. Predecessors of C&A Products have been in operation for more than a century. On February 10, 1999, the Company announced a comprehensive plan (the "Reorganization") to reorganize its global automotive carpet, acoustics, plastics and accessory floormats businesses into two divisions: North American Automotive Interior Systems, headquartered in the Detroit metropolitan area, and European Automotive Interior Systems, headquartered in Wiesbaden, Germany. The Company subsequently implemented a global account manager structure for each of its automotive original equipment manufacturer ("OEM") customers. The Company undertook the Reorganization to reduce costs and improve operating efficiencies throughout operations and to more effectively respond to the OEMs' demand for complete interior trim systems and more sophisticated components, based on increased levels of design and styling support and quieter automobile interiors. The Reorganization and global account manager structure has enabled the Company to increase customer service on a global basis and maintain local expertise to provide specialized sales, marketing, development, design, engineering and program management services capable of delivering interior modules, systems and individual components. As part of the Reorganization, the Company also established the Specialty Automotive Products division, which includes the Company's automotive fabrics and Dura Convertible Systems businesses. Although these products have not historically been sold in conjunction with the Company's other interior trim offerings, the Company's new strategy of leveraging its acoustic capabilities with its design and styling expertise is anticipated to change the marketing approach for most of the Company's products. Thomas E. Evans joined the Company as Chief Executive Officer on April 22, 1999. Mr. Evans replaced Thomas E. Hannah, who retired from the Company on June 30, 1999. Mr. Evans also serves as a director and Chairman of the Company's Board of Directors. Mr. Evans, 48 years old, was formerly President of Tenneco Automotive, a subsidiary of Tenneco, Inc. Prior to that, Mr. Evans held several management positions, the last being Senior Vice President of Operations, at Case Corporation, a subsidiary of Tenneco, Inc. The Company announced on February 10, 1999 that it anticipated incurring a restructuring charge related to the Reorganization of approximately $8 million to $9 million. However, in connection with the change in the Company's Chief Executive Officer and the Company's operating results in the first quarter, the Company delayed certain aspects of the Reorganization while the Company's new Chief Executive Officer, Thomas E. Evans, reviewed the plan. Upon final completion of the Reorganization plan, the Company recognized a pre-tax restructuring charge of $33.4 million in 1999. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-- Recent Developments" for additional discussion of the restructuring charge. On July 26, 1999, the Company announced that Rajesh K. Shah had been named Executive Vice President and Chief Financial Officer. Mr. Shah replaced J. Michael Stepp. Mr. Shah, 48 years old, was formerly Vice President and Chief Financial Officer of UT Automotive. Prior to that, Mr. Shah held several management positions with Varity Corporation. 1 General The Company is the global leader in automotive floor and acoustic systems, and is a leading supplier of automotive fabric, interior trim and convertible top systems, with 1999 net sales of approximately $1.9 billion. The Company operates through three divisions: North American Automotive Interior Systems, European Automotive Interior Systems and Specialty Automotive Products. The Company's North American Automotive Interior Systems and European Automotive Interior Systems divisions compete in five principal product lines -- molded floor carpet, acoustical products, luggage compartment trim, accessory floormats, and plastic-based interior trim modules, systems and components. The Company's Specialty Automotive Products division competes in automotive fabrics and convertible top systems. The Company's North American Automotive Interior Systems and European Automotive Interior Systems divisions sell principally to automotive OEMs. The Specialty Automotive Products division sells automotive fabrics to other automotive suppliers, including suppliers with which the Company competes in certain product lines. Convertible top systems, also marketed through the Specialty Automotive Products division, are sold directly to OEMs. The majority of customers for all three divisions are located in the North American and European markets. Approximately 18% of the Company's sales for 1999 were attributable to products utilized in vehicles built outside of North America, compared to approximately 20% in 1998. The Company is dependent on certain significant customers. In 1999, 1998 and 1997, direct and indirect sales to each of General Motors Corporation, Ford Motor Company and DaimlerChrysler AG accounted for 10% or more of the Company's net sales. Automotive industry demand historically has been influenced by both cyclical factors and long-term trends in the driving age population and disposable income. Although the Company's operations are not subject to significant seasonal influences, the Company has historically experienced sales declines during the OEMs' scheduled summer shut-downs usually occurring in the third quarter of the year. Products The Company's North American Automotive Interior Systems and European Automotive Interior Systems divisions include the following product groups: molded floor carpet, acoustical products, luggage compartment trim, accessory floormats and plastic-based interior trim modules, systems and components. The Specialty Automotive Products division produces automotive fabrics and convertible top systems. The Company's automotive products are used primarily in automobiles and light trucks. The Company also produces other automotive and non-automotive products. In 1999, approximately 96% of the Company's sales were automotive-related, compared to approximately 63% in 1996. Molded Floor Carpet. Molded floor carpets primarily include polyethylene, barrier-backed and molded urethane underlay carpet. In 1999, 1998 and 1997, the Company's net sales of molded floor carpets were $468.0 million, $417.0 million and $384.7 million, respectively. Acoustical Products. Acoustical products primarily include interior dash insulators, damping materials and engine compartment NVH (noise, vibration and harshness) systems. Acoustical products can be combined with molded floor carpets to provide complete interior floor systems. In 1999, 1998 and 1997, the Company's net sales of acoustical products were $209.8 million, $225.1 million, and $167.8 million, respectively. Luggage Compartment Trim. Luggage compartment trim includes one-piece molded trunk systems and assemblies, wheelhouse covers and center pan mats, seatbacks, tireboard covers and other trunk trim products. In 1999, 1998 and 1997, the Company's net sales of luggage compartment trim were $90.6 million, $95.9 million and $101.0 million, respectively. Accessory Floormats. Accessory automotive floormats include rubber-backed, carpeted floormats typically installed to preserve the quality of original floor carpets. In 1999, 1998 and 1997, the Company's net sales of accessory floormats were $165.9 million, $157.2 million and $139.3 million, respectively. The Company did not have floormat operations in Europe prior to its acquisition of Collins & Aikman Automotive Floormats Europe, B.V. ("C&A Floormats Europe") (previously named Pepers Beheer B.V.) in June 1998. The Company also produces residential and commercial floormats. 2 Plastic-based Interior Trim Modules, Systems and Components. The Company manufactures automotive door panels, headrests, pillar trim, floor console systems and instrument panel components. At the beginning of 1998, the Company acquired Collins & Aikman Plastics (UK) Limited ("C&A Plastics UK") (previously named Kigass Automotive Group), which increased the Company's capacity to provide plastic-based trim and systems in Europe. The Company's net sales of plastic-based interior trim modules, systems and components, in 1999, 1998 and 1997 were $435.4 million, $417.5 million and $294.6 million, respectively. Automotive Fabrics. The Company's automotive fabrics operations produce a wide variety of automotive fabric, including flat-wovens, velvets and knits, and headliner fabric. The Company also laminates foam to bodycloth. In 1999, 1998 and 1997, the Company had net sales of automotive fabrics of $269.5 million, $267.2 million and $319.0 million, respectively. The Company also manufactures other non-automotive products, which accounted for approximately four percent of the Company's sales in 1999. Convertible Top Systems. The Company designs and manufactures convertible top systems for vehicles built in North America and Europe. The Company markets and sells to OEMs its "Top-in-a-Box" system, in which it designs and manufactures all aspects of a convertible top, including the framework, trim set, backlight and power actuating system. The Company's net sales of convertible top systems in 1999, 1998 and 1997 were $118.9 million, $104.3 million and $88.8 million, respectively. For additional discussion on the Company's operating segments, including each segment's revenues from external customers, operating income and total assets, see Note 20 to the Consolidated Financial Statements. Competition The automotive supply business is highly competitive. The Company has competitors in each of its automotive product lines, some of which have substantially greater financial and other resources than the Company. The Company's competitors in molded plastic components also include subsidiaries of certain automotive and light vehicle manufacturers. The automotive supply business for interior surfaces is highly concentrated in North America due mostly to substantial capital requirements and required sophistication in design and styling capability. For the majority of the Company's product lines in North America, the Company normally competes for new business against only a few other automotive suppliers. The Company principally competes for new business at the design stage of new models and upon the redesign of existing models. The Company is vulnerable to a decrease in demand associated with vehicle build in North America and Europe, a failure to obtain purchase orders for new or redesigned models, a shift in consumer taste away from products that the Company manufactures and pricing pressure from its major customers. The Company believes the principal competitive factors in its industry are quality, price, customer service, design and engineering capability and reputation with the customer. Working Capital The Company's working capital consists of accounts receivable, inventory and accounts payable, which are typical for automotive suppliers. Accounts receivable are primarily concentrated with large companies such as General Motors, Ford, DaimlerChrysler and Toyota, which have historically paid within terms. Inventories are maintained for specific automobile and light truck models and quantities are based on demand forecasts provided by the customer. Inventories are mostly required to be delivered on a just-in-time ("JIT") basis. The Company maintains normal terms and conditions with its vendors. In 1999, the Company implemented a new compensation program, based in part upon maximizing cash flow and increasing asset utilization. This new focus resulted in a 24% reduction in its investment in working capital (including accounts receivable, inventory and accounts payable) to $168 million in 1999, compared to $221 million in 1998. 3 Facilities At December 25, 1999, the Company had 63 manufacturing, warehouse and other facilities located in the U.S., Canada, Mexico, the United Kingdom, Spain, Austria, Germany, Sweden, Belgium, France, the Netherlands and Japan aggregating approximately 9.6 million square feet. Approximately 79% of the total square footage of these facilities is owned and the remainder is leased. Many facilities are strategically located to provide JIT inventory delivery to the Company's customers. Capacity at any plant depends, among other things, on the product being produced and the processes, tooling and equipment used. Capacity is also impacted by product demand and shifts in production between plants. The Company currently estimates that the majority of its plants generally operate at between 80% and 100% of capacity. The Company does have certain isolated plants that operate at capacity levels around 50% due to production demands at the specific facilities. The Company's capacity utilization is consistent with past experience in similar economic situations, and the Company believes that its facilities are sufficient to meet existing needs. Foreign and Domestic Operations and Export Sales The Company's revenues, operating profit and identifiable assets for the last three fiscal years attributable to the Company's geographic areas and export sales from the United States to foreign countries are disclosed in Note 20 to the Consolidated Financial Statements. Raw Materials Raw materials and other supplies used in the Company's continuing operations are normally available from a variety of competing suppliers. With respect to most materials, the loss of a single or even a few suppliers would not have a material adverse effect on the Company. For a discussion of raw material price trends, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-- Liquidity and Capital Resources". Environmental Matters See "Item 3. Legal Proceedings -- Environmental Matters" and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Environmental Matters". Employees As of December 25, 1999, the Company's continuing operations employed approximately 15,600 persons on a full-time or full-time equivalent basis. Approximately 5,800 of such employees are represented by labor unions. Approximately 1,400 employees are represented by collective bargaining agreements that expire during 2000. Management believes that the Company's relations with its employees represented by labor unions and its other employees are generally good. When completed, the Reorganization will affect approximately 1,100 employees. Year 2000 Issues For a discussion of the impact of Year 2000 compliance issues, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Impact of Year 2000 Compliance." Item 2. Properties For information concerning the principal physical properties of the Company and its operating divisions, see "Item 1. Business". Item 3. Legal Proceedings Except as described below, the Company and its subsidiaries are not a party to any material pending legal proceedings, other than ordinary routine litigation incidental to their businesses. 4 Environmental Matters The Company is subject to Federal, state and local environmental laws and regulations that (i) affect ongoing operations and may increase capital costs and operating expenses and (ii) impose liability for the costs of investigation and remediation and otherwise related to on-site and off-site contamination. The Company's management believes that it has obtained, and is in material compliance with, all material environmental permits and approvals necessary to conduct its various businesses. Environmental compliance costs for continuing businesses currently are accounted for as normal operating expenses or capital expenditures of such business units, except for certain costs incurred at acquired locations. Environmental compliance costs relating to conditions existing at the time the locations were purchased are generally charged to reserves established in purchase accounting. In the opinion of management, based on the facts presently known to it, such environmental compliance costs will not have a material adverse effect on the Company's consolidated financial condition or future results of operations. The Company is legally or contractually responsible or alleged to be responsible for the investigation and remediation of contamination at various sites. It also has received notices that it is a potentially responsible party ("PRP") in a number of proceedings. The Company may be named as a PRP at other sites in the future, including with respect to divested and acquired businesses. The Company is currently engaged in investigation or remediation at certain sites. In estimating the total cost of investigation and remediation, the Company has considered, among other things, the Company's prior experience in remediating contaminated sites, remediation efforts by other parties, data released by the United States Environmental Protection Agency, the professional judgment of the Company's environmental experts, outside environmental specialists and other experts, and the likelihood that other parties which have been named as PRPs will have the financial resources to fulfill their obligations at sites where they and the Company may be jointly and severally liable. Under the theory of joint and several liability, the Company could be liable for the full costs of investigation and remediation even if additional parties are found to be responsible under the applicable laws. It is difficult to estimate the total cost of investigation and remediation due to various factors including incomplete information regarding particular sites and other PRPs, uncertainty regarding the extent of environmental problems and the Company's share, if any, of liability for such problems, the selection of alternative compliance approaches, the complexity of environmental laws and regulations and changes in cleanup standards and techniques. When it has been possible to provide reasonable estimates of the Company's liability with respect to environmental sites, provisions have been made in accordance with generally accepted accounting principles. As of December 25, 1999, excluding sites at which the Company's participation is anticipated to be de minimis or otherwise insignificant or where the Company is being indemnified by a third party for the liability, there are 23 sites where the Company is participating in the investigation or remediation of the site, either directly or through financial contribution, and 8 additional sites where the Company is alleged to be responsible for costs of investigation or remediation. As of December 25, 1999, the Company's estimate of its liability for the 31 sites is approximately $22.9 million. As of December 25, 1999, the Company has established reserves of approximately $30.5 million for the estimated future costs related to all its known environmental sites. In the opinion of management, based on the facts presently known to it, the environmental costs and contingencies will not have a material adverse effect on the Company's consolidated financial condition or future results of operations. However, there can be no assurance that the Company has identified or properly assessed all potential environmental liability arising from the activities or properties of the Company, its present and former subsidiaries and their corporate predecessors. Item 4. Submission of Matters to a Vote of Security Holders None. 5 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters The Company's Common Stock has been traded on the New York Stock Exchange under the symbol "CKC" since July 7, 1994. At March 15, 2000, there were approximately 1,900 beneficial holders. The following table lists the high and low sales prices for the Common Stock for the full quarterly periods during the two most recent fiscal years.
Fiscal 1999 Fiscal 1998 ------------- --------------- High Low High Low ------ ------ ------- ------- First Quarter......... 6 1/4 4 1/8 9 11/16 7 11/16 Second Quarter........ 7 7/16 4 9 1/2 6 13/16 Third Quarter......... 7 5/8 4 9/16 7 1/2 6 3/16 Fourth Quarter........ 7 4 7/8 7 7/16 4 15/16
On March 1, 1999, the Company paid a special dividend of approximately $6.2 million, representing $0.10 per share on all outstanding shares of Common Stock held by stockholders of record at the close of business on February 22, 1999. On May 28, 1999, the Company paid a special dividend related to the distribution of proceeds from the sale of the Company's Imperial Wallcoverings, Inc. subsidiary ("Wallcoverings") of approximately $44.0 million, representing $0.71 per share on all outstanding shares of Common Stock held by stockholders of record as of the close of business on May 20, 1999. No other dividends or similar distributions with respect to the Common Stock have been paid by the Company since its incorporation in 1988. Any payment of future dividends and the amounts thereof will be dependent upon the Company's earnings, financial requirements and other factors deemed relevant by the Company's Board of Directors. Certain restrictive covenants contained in the agreements governing the Company's credit facilities and subordinated notes limit the Company's ability to make dividend and other payments. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" and Note 10 to the Consolidated Financial Statements. 6 Item 6. Selected Financial Data
Fiscal Year Ended --------------------------------------------------------------- December 25, December 26, December 27, December 28, January 27, 1999 1998 1997 1996 (1) 1996 ------------ ------------ ------------ ------------ ----------- (in thousands, except per share data) Statement of Operations Data: Net sales............... $1,898,597 $1,825,469 $1,629,332 $1,053,821 $ 902,017 Gross margin............ 284,717 248,225 233,160 188,475 164,325 Selling, general and administrative expenses............... 145,784 142,724 119,381 82,699 65,996 Restructuring charge and impairment of long- lived assets (2)...... 33,391 -- 22,600 -- 2,400 Goodwill amortization... 7,023 7,023 6,669 3,872 270 Operating income........ 98,519 98,478 84,510 101,904 95,659 Interest expense, net (3).................... 92,045 82,004 77,581 39,850 22,150 Loss on sale of receivables (4)........ 5,356 6,066 4,700 4,533 6,246 Income (loss) from continuing operations before income taxes.... (1,119) 5,193 2,907 57,408 67,263 Income tax expense (benefit).............. 246 5,284 12,998 24,442 (139,959) Income (loss) from continuing operations.. (1,365) (91) (10,091) 32,966 207,222 Income (loss) from discontinued operations, including disposals, net of income taxes........... -- -- 166,047 14,468 (781) Income (loss) before extraordinary items and cumulative effect of a change in accounting principle.............. (1,365) (91) 155,956 47,434 206,441 Net income (loss) (5)... (10,215) (3,815) 155,235 40,824 206,441 Per Share Data: Income (loss) from continuing operations per basic share........ (0.16) -- (0.15) 0.48 2.96 Income (loss) from continuing operations per diluted share...... (0.16) -- (0.15) 0.47 2.91 Dividends per share..... 0.81 -- -- -- -- Balance Sheet Data (at period end): Total assets............ $1,348,890 $1,382,211 $1,302,392 $1,530,289 $ 991,361 Long-term debt, including current portion................ 912,542 866,049 772,934 1,175,594 759,966 Common stockholders' deficit................ (151,121) (79,771) (66,850) (194,578) (227,852) Other Data (from continuing operations): Capital expenditures.... $ 86,430 $ 95,847 $ 56,521 $ 35,000 $ 53,156 Depreciation and amortization........... 71,474 67,074 58,840 32,395 28,427 EBITDA (6).............. 183,354 167,547 165,950 134,299 124,086
- -------- (1) 1996 was a 48-week year. (2) In 1999, the Company recorded a restructuring charge for the Reorganization consisting of $13.4 million of asset impairment and $20.0 million primarily related to severance accruals. In 1997, the Company wrote down fixed assets by $5.1 million and reduced goodwill by $17.5 million to reflect impairments in the carrying values of certain assets and goodwill associated with two of its manufacturing facilities. In fiscal 1995, the Company incurred a charge of $2.4 million related primarily to the closure of a carpet plant and the write down of fixed assets at another carpet plant. See Notes to Consolidated Financial Statements. (3) Excludes amounts allocated to discontinued operations totaling $12.5 million, $26.7 million, and $26.5 million in 1997, 1996 and 1995, respectively. No amounts were allocated to discontinued operations in 1999 and 1998. 7 (4) Excludes amounts allocated to discontinued operations totaling $0.6 million, $2.2 million, and $2.4 million in 1997, 1996, and 1995, respectively. No amounts were allocated to discontinued operations in 1999 and 1998. (5) In 1999, the Company recorded an $8.9 million charge for the cumulative effect of a change in accounting principle related to start-up costs. (6) EBITDA represents earnings before deductions for net interest expense, loss on sale of receivables, income taxes, depreciation, amortization, other income and expense, and the non-cash portion of non-recurring charges. EBITDA does not represent and should not be considered as an alternative to net income or cash flow from operations as determined by generally accepted accounting principles. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Recent Developments Dividends On March 1, 1999, the Company paid a special dividend of approximately $6.2 million, representing $0.10 per share on all outstanding shares of Common Stock held by stockholders of record at the close of business on February 22, 1999. On May 28, 1999, the Company paid a special dividend relating to the distribution of the proceeds from the sale of Wallcoverings of approximately $44.0 million, representing $0.71 per share on all outstanding shares of Common Stock held by stockholders of record as of the close of business on May 20, 1999. Reorganization On February 10, 1999, the Company announced the Reorganization, a comprehensive plan to reorganize its global automotive carpet, acoustics, plastics and accessory floormats businesses into two divisions: North American Automotive Interior Systems, headquartered in the Detroit metropolitan area, and European Automotive Interior Systems, headquartered in Wiesbaden, Germany. In addition, the Company implemented a global account manager structure for each of the Company's automotive original equipment manufacturer ("OEM") customers. The Company undertook the Reorganization to reduce costs and improve operating efficiencies throughout the Company's operations and to more effectively respond to the OEMs' demand for complete interior trim systems and more sophisticated components. The Reorganization and global account manager structure has allowed the Company to increase customer service on a global basis and maintain local expertise to provide specialized sales, marketing, development, design, engineering and program management services capable of delivering interior module systems and individual components. As part of the Reorganization, the Company also established the Specialty Automotive Products division, which includes the Company's automotive fabrics and Dura Convertible Systems businesses. Although these products have not historically been sold in conjunction with the Company's other interior trim offerings, the Company's new strategy of leveraging its acoustic capabilities with its design and styling expertise is anticipated to change the marketing approach for most of the Company's products. The Company announced on February 10, 1999 that it anticipated incurring a restructuring charge related to the Reorganization of approximately $8 million to $9 million. However, in connection with the change in the Company's Chief Executive Officer and the Company's operating results in the first quarter, the Company delayed certain aspects of the Reorganization while the Company's new Chief Executive Officer, Thomas E. Evans, reviewed the plan. Upon final completion of the Reorganization plan, the Company recognized a pre-tax restructuring charge of $33.4 million, including $13.4 million of asset impairments, $15.0 million of severance costs and $5.0 million related to the termination of sales commission contracts at the Company's North American plastics operations. The Reorganization includes the closure of three facilities. The Homer, Michigan plastics facility was closed in August, 1999 and its operations were relocated to an existing plastics facility. The Cramerton, North Carolina fabrics facility was sold in September, 1999, for $6.0 million. The facility's operations are in the process of being located to another fabrics facility. The acoustics facility in Vastra Frolunda, Sweden, is scheduled to be closed in September, 2000. Approximately $4.7 million in severance costs have been provided for employees at these facilities. 8 The remaining severance costs for operating personnel primarily relate to employee reductions at C&A Plastics UK and in a number of the Company's North American operations. Severance costs for management and administrative personnel primarily relate to employee reductions at the Company's former North Carolina corporate headquarters and at the North American Automotive Interior Systems division. When completed, the Reorganization will affect approximately 1,100 employees. The Company currently expects the Reorganization plan to be substantially completed by December, 2000. In addition to the restructuring charge, the Company expensed certain costs for relocation and start up of operations related to the closed facilities. These expenses amounted to approximately $4 million during 1999. The Company currently estimates that the total cost of the Reorganization, including the restructuring charge, will be approximately $43 million, of which approximately $10 million represents other one-time costs, which are expensed as incurred. General The Company is the global leader in automotive floor and acoustic systems, and is a leading supplier of automotive fabrics, interior trim and convertible top systems. The Company's net sales in fiscal 1999 were $1,898.6 million compared to $1,825.5 million in fiscal 1998. During 1996, the Company changed its fiscal year end to the last Saturday in December. Fiscal 1996 was a 48- week period which ended on December 28, 1996. Years prior to 1996 refer to the fiscal year of the Company which ended on the last Saturday of January of the following year. Capitalized terms that are used in this discussion and not defined herein have the meanings assigned to such terms in the Notes to Consolidated Financial Statements. The automotive supply industry in which the Company competes is cyclical and is influenced by the level of North American and European vehicle production. Management believes the long-term trends in the design and manufacture of automotive interiors include an increased emphasis on acoustics. Management further believes that changes to vehicle interiors, including voice-activated internet access, e-mail capabilities and navigational systems will require enhanced acoustical properties relative to today's light vehicles. Additionally, the Company believes that by utilizing its design and styling capabilities across all of its product lines, it will be able to provide customers with interiors with better color matching, lower costs and more harmonious interior environments. Management believes that these interior surface products can serve as "carriers" for the Company's acoustic products, and by selling these products together, the Company can differentiate its products from those of its competitors, provide greater value to its customers and enhance its product potential. Results of Operations 1999 Compared to 1998 The Divisions The Company operates three divisions, with seven primary product lines. For additional information regarding the Company's divisions, see Note 20 to the Consolidated Financial Statements. North American Automotive Interior Systems Net Sales: Net sales for the North American Automotive Interior Systems division increased 8.1% to $1,151.7 million, up $86.3 million from 1998. The increase in sales was driven by a stronger automobile and light truck build in North America in 1999. A strike at General Motors, the Company's largest customer, negatively impacted sales in 1998 by approximately $37.1 million. Operating Income: Operating income for the division increased 20.0% to $89.4 million, up $14.9 million from 1998. The increase is primarily due to increased sales volume, partially offset by unfavorable changes in sales mix and price discounts at several of the division's operations and the incurrence of significant start-up costs related to starting production of various interior modules for the General Motors GMX-270 at the Company's Manchester, Michigan facility. In addition, the division incurred certain costs related to the closure and relocation of the Homer, Michigan, plastics facility into another plastic facility and relocation expenses associated with the establishment of the division's headquarters in the Detroit metropolitan area. 9 European Automotive Interior Systems Net Sales: Net sales for the European Automotive Interior Systems division decreased 9.4% to $306.4 million, down $31.7 million from 1998. The decrease is primarily due to weak demand for acoustical products from Rover, Ford and Volvo. Operating Income: Operating income decreased 75.2% to $2.3 million, down $6.9 million from 1998. The decrease is primarily related to operational inefficiencies at the division's plastics operations in the United Kingdom. These inefficiencies derived from system implementation difficulties, which caused temporary delays and inaccuracies in scheduling, shipping and materials management information. In addition, the division experienced manufacturing inefficiences associated with volume declines on Rover, Ford and Volvo products. Operating losses were also incurred at a manufacturing facility at Vastra Frolunda, Sweden, principally due to volume declines. The Vastra Frolunda facility is being closed as part of the Reorganization discussed above. The division also incurred a high level of relocation expenses associated with the establishment of its headquarters in Wiesbaden, Germany, and consulting expenses associated with system upgrades and Year 2000 compliance efforts. Specialty Automotive Products Net Sales: Net sales for the Specialty Automotive Products division increased 4.4% to $440.5 million, up $18.5 million from 1998. Excluding the impact of the General Motors strike, sales increased $11.5 million, primarily due to strong demand for the Ford Mustang at the division's convertible top systems operations. Operating Income: Operating income for the division increased 178.7% to $39.6 million, up $25.4 million from 1998. The increase is primarily due to increased volume at the convertible top systems operations and cost-cutting efforts at the automotive fabrics operations. In 1998, the automotive fabrics operations experienced unfavorable manufacturing variances related to a decline in volume. The volume decline resulted from increased demand for leather seating, program run-outs, and unfavorable product mix factors. In addition, the fabrics operations incurred charges related to idle equipment. The increase in operating income in 1999 was partially offset by the impact of certain costs related to the closure and relocation of the Cramerton, North Carolina, fabrics facility into another fabrics facility. The Company as a Whole Net Sales: The Company's net sales increased 4.0% to $1,898.6 million, up $73.1 million from 1998, resulting primarily from the factors discussed above. Gross Margin: Gross margin for the Company was 15.0% in 1999, up from 13.6% in 1998. The increase in gross margin is primarily due to increased volume and improved manufacturing efficiencies at the Company's North American Automotive Interior Systems division. In addition, gross margin at the Company's Specialty Automotive Products division improved over prior year results, which were impacted by lower sales volumes and manufacturing inefficiencies caused by increased demand for leather seating applications and charges for idle equipment. These increases were partially offset by the manufacturing inefficiencies experienced at the Company's European Automotive Interior Systems resulting from volume declines and system implementation difficulties at the division's plastics operations. Selling, General and Administrative Expenses: Selling, general and administrative expenses increased 2.0% to $152.8 million, up $3.1 million from 1998. The increase is primarily due to costs associated with system upgrades, the establishment of the Company's new headquarters in the Detroit metropolitan area and Wiesbaden, Germany and Year 2000 compliance efforts, partially offset by cost-cutting measures at the Specialty Automotive Products division and lower personnel costs at the Company's former North Carolina headquarters due to employee reductions. As a percentage of sales, selling, general and administrative expenses declined to 8.0% in 1999, compared to 8.2% in 1998. 10 Restructuring Charge: The Company recognized a $33.4 million charge in 1999 relating to the Reorganization plan discussed above. Interest Expense: Interest expense, net of interest income of $2.4 million and $3.7 million in 1999 and 1998, respectively, increased $10.0 million to $92.0 million in 1999. The increase is primarily due to higher levels of outstanding debt in 1999. The weighted average interest rates were 9.6% and 9.7% in 1999 and 1998, respectively. Loss on the Sale of Receivables: The Company sells on a continuous basis, through its Carcorp, Inc. subsidiary ("Carcorp"), interests in a pool of accounts receivable. In connection with the receivable sales, a loss of $5.4 million was recognized in 1999, compared to a loss of $6.1 million in 1998. The decrease in the loss on sale of receivables is primarily due to a lower interest rate and decreased borrowings on the receivables facility during 1999. Other Expense: The Company recognized other expense of $2.2 million, compared to other expense of $5.3 million in 1998. The decrease is primarily due to higher foreign currency transaction losses associated with the Canadian dollar in 1998. Income Taxes: The Company recognized income tax expense of $0.2 million in 1999, compared to income tax expense of $5.3 million in 1998. The Company's effective tax rate was (22%) in 1999, compared to 102% in 1998. The decrease in the Company's effective tax rate is primarily due to lower foreign taxes and non-recurring tax credits. Extraordinary Charge: In 1998, the Company recognized a non-cash extraordinary charge of $3.6 million, net of income taxes of $2.4 million, relating to the refinancing of the Company's bank facilities and a charge of $0.1 million, net of income taxes of $90 thousand, recognized in connection with the repurchase of $2.6 million principal amount of JPS Automotive 11 1/8% Senior Notes due 2001 (the "JPS Automotive Senior Notes") at market prices in excess of carrying values. Cumulative Effect of a Change in Accounting Principle: The Company adopted the provisions of Statement of Position No. 98-5, "Reporting on the Cost of Start- Up Activities" ("SOP 98-5") at the beginning of 1999. SOP 98-5 provides guidance on the financial reporting of start-up costs and organization costs and requires that all nongovernmental entities expense the costs of start-up activities as these costs are incurred instead of being capitalized and amortized. The cumulative effect of adopting SOP 98-5 resulted in a charge of $8.9 million, net of income taxes of $5.1 million. Net Loss: The combined effect of the foregoing resulted in a net loss of $10.2 million in 1999, compared to a net loss of $3.8 million in 1998. 1998 Compared to 1997 The Divisions North American Automotive Interior Systems Net Sales: Net sales for the North American Automotive Interior Systems division increased 1.1% to $1,065.5 million in 1998, up $11.9 million from 1997. This increase is due in part to the August 1998 acquisition of Industrias Enjema, S.A. de C.V. ("Enjema"), which generated sales of $8.3 million. In addition, the division generated sales increases in four of its five product lines. These sales increases were partially offset by the effect of the General Motors strike in the second and third quarters of 1998, which negatively impacted sales by $37.1 million. Strikes at DaimlerChrysler and General Motors in the second quarter of 1997 negatively impacted sales by $10.7 million. 11 Operating Income: Operating income for the division increased 86.0% to $74.5 million in 1998, up from $40.1 million in 1997. During the third quarter of 1997, the division incurred charges of approximately $57.9 million principally related to C&A Plastics. These charges, which primarily related to manufacturing inefficiencies experienced by C&A Plastics in connection with product launches and record volume for its products, included asset impairments, reductions in goodwill, provisions for certain programs operating at a loss, inventory adjustments, certain previously deferred costs and other provisions. Of the $57.9 million in charges, $34.0 million is included in cost of goods sold, $22.6 million is included in impairment of long-lived assets and $1.3 million is included in selling costs. In 1998, the division's operating income was negatively impacted by the General Motors strike. The division experienced sales volume losses to General Motors during the strike and also incurred a number of cost increases as the division resumed production following the strike. Many of General Motors' post-strike plant start-ups were erratic, causing the division certain manufacturing inefficiencies and cost overruns, especially at C&A Plastics. The division also experienced delays in achieving planned cost reductions due to these strike-related factors. Manufacturing inefficiencies associated with the closure of the division's Salisbury, North Carolina, carpet manufacturing operations, which were relocated to the division's Parker plant in Greenville, South Carolina and relocation of certain manufacturing operations from the Parker plant to the division's Albemarle, North Carolina plant, also contributed to the decrease. The division's floormat operations also incurred a $2.0 million unfavorable inventory adjustment. In addition, the division incurred increased expenditures at C&A Plastics in 1998 in connection with improvement programs and increased costs relating to systems upgrades and Year 2000 compliance efforts. As a percentage of sales, operating margin for the division increased to 7.0% in 1998 from 3.8% in 1997. European Automotive Interior Systems Net Sales: Net sales for the European Automotive Interior Systems division increased 180.6% to $338.0 million in 1998, up $217.6 million from 1997. The increase is primarily due to several acquisitions in 1997 and 1998, including certain operations of Perstorp A.B. ("Perstorp") located in Germany (the "German Operations") in August 1997, the remaining interest in the Collins & Aikman/Perstorp joint venture in Sweden, Belgium and France (the "Collins & Aikman/Perstorp Joint Venture") in December 1997, C&A Plastics UK in February 1998, and C&A Floormats Europe in June 1998. These entities generated combined incremental sales of $213.1 million in 1998. Operating Income: Operating income for the division increased 107.6% to $9.2 million in 1998, up $4.8 million from 1997. The increase is primarily due to the acquisitions of the German Operations, the remaining interest in the Collins & Aikman/Perstorp Joint Venture, C&A Plastics UK and C&A Floormats Europe. These entities generated combined incremental operating income of $4.1 million in 1998. As a percentage of sales, operating margin decreased to 2.7% in 1998 from 3.6% in 1997, primarily due to costs associated with systems upgrades and Year 2000 compliance efforts incurred in 1998. Specialty Automotive Products Net Sales: Net sales for the Specialty Automotive Products division decreased 7.3% to $422.0 million in 1998, down $33.4 million from 1997. The sales decrease was primarily due to lower automotive fabric sales caused by an increased demand for leather seating applications, an unfavorable mix on several models and a decrease in build on several key vehicles. The decrease in automotive fabric sales was partially offset by an increase in convertible top systems due to sales to the Ford Mustang, General Motors Corvette and Chrysler Sebring. The General Motors strike in the second and third quarters of 1998 negatively impacted the division's sales by $7.0 million. The strikes at DaimlerChrysler and General Motors during the second quarter of 1997 impacted the division's sales by $6.7 million. Operating Income: Operating income for the division decreased 62.7% to $14.2 million in 1998, down $23.9 million from 1997. The Company's automotive fabrics operations experienced unfavorable manufacturing variances resulting from lower volume, program run-outs and an unfavorable product mix and also incurred charges related to idle equipment. In addition, the division incurred costs associated with systems upgrades and Year 2000 compliance efforts. As a percentage of sales, operating margin decreased to 3.4% in 1998 from 8.4% in 1997. 12 The Company as a Whole Net Sales: The Company's net sales increased 12.0% to $1,825.5 million in 1998, up $196.1 million from 1997, resulting primarily from the factors discussed above. Gross Margin: Gross margin for the Company was 13.6% in 1998, down from 14.3% in 1997. During the third quarter of 1997, the Company incurred charges of approximately $57.9 million principally related to C&A Plastics. These charges, which primarily related to manufacturing inefficiencies experienced by C&A Plastics in connection with product launches and record volume for its products, included asset impairments, reductions in goodwill, provisions for certain programs operating at a loss, inventory adjustments, certain previously deferred costs and other provisions. Of the $57.9 million in charges, $34.0 million is included in cost of goods sold, $22.6 million is discussed below as impairment of long-lived assets and $1.3 million was included in selling costs. Adjusted for certain of the charges taken by C&A Plastics, gross margin was 15.2% in 1997. The decrease in gross margin is due in part to the 1998 General Motors strike. The Company experienced sales volume losses to General Motors during the strike and also incurred a number of cost increases as the Company resumed production following the strike. Many of General Motors' post-strike plant start-ups were erratic, causing the Company certain manufacturing inefficiencies and cost overruns, especially at C&A Plastics. The Company also experienced delays in achieving planned cost reductions due to these strike-related factors. In addition, manufacturing inefficiencies associated with the closure of the Company's Salisbury, North Carolina carpet manufacturing operations, which were relocated to the Company's Parker plant in Greenville, South Carolina, and relocation of certain manufacturing operations from the Parker plant to the Company's Albemarle, North Carolina plant also contributed to the decrease. The Company's automotive fabrics operations experienced unfavorable manufacturing variances resulting from lower volume, program run-outs and an unfavorable product mix and also incurred charges related to idle equipment. Selling, General and Administrative Expenses: Selling, general and administrative expenses increased 18.8% in 1998 to $149.7 million, up from $126.1 million in 1997. The increase is primarily attributable to the Company's recent acquisitions of C&A Plastics UK, the German Operations, Perstorp's remaining interest in the operations constituting the former Collins & Aikman/Perstorp Joint Venture, C&A Floormats Europe and Enjema. These operations had combined incremental selling, general and administrative expenses of $20.6 million. The remaining increase is due to costs associated with systems upgrades, Year 2000 compliance efforts and increased expenditures at C&A Plastics in connection with improvement programs. As a percentage of sales, selling, general and administrative expenses increased to 8.2% in 1998 from 7.7% in 1997. The increase as a percentage of sales is primarily due to lower sales volumes in automotive fabrics. Impairment of Long Lived Assets: As previously discussed, during the third quarter of 1997, C&A Plastics wrote down fixed assets by $5.1 million to net realizable value and reduced its goodwill by $17.5 million, as a result of an evaluation of the recoverability of the long lived assets of C&A Plastics that was conducted in connection with the determination of the charges discussed above. Interest Expense: Interest expense allocated to continuing operations, net of interest income of $3.7 million and $5.7 million in 1998 and 1997, respectively, increased $4.4 million to $82.0 million in 1998 from $77.6 million in 1997. The increase is due to a higher outstanding debt balance in 1998. Total net interest expense, including amounts allocated to discontinued operations, was $90.1 million in 1997. No amounts were allocated to discontinued operations in 1998. Loss on the Sale of Receivables: The Company sells on a continuous basis, through its Carcorp subsidiary, interests in a pool of accounts receivable. In connection with the receivables sales, a loss of $6.1 million was recognized in 1998, compared to a loss of $4.7 million in 1997. The increase in the loss on the sale of receivables is due to an increase in sales. In addition, C&A Plastics was added as a seller under the Receivables Facility (as hereinafter defined) during June 1997. Total loss on the sale of receivables, including amounts allocated to discontinued operations, was $5.3 million in 1997. 13 Other (Income) Expense: The Company recognized foreign currency transaction losses of $4.8 million in 1998, compared to $1.9 million in 1997. These losses incurred in 1998 were primarily due to the strengthening of the U.S. dollar against the Canadian dollar. Other expense in 1998 also includes the loss from the Company's joint venture with Courtaulds of $0.1 million. Other income in 1997 also includes income from the Collins & Aikman/Perstorp Joint Venture of $0.9 million and a $1.7 million gain on the sale of the Borg Textiles division in the third quarter of 1997. Income Taxes: The Company recognized a provision for income taxes of $5.3 million in 1998, compared to $13.0 million in 1997. The Company's effective tax rate in 1998 was 102%, compared to 447% in 1997. The decrease in the Company's tax expense and effective rate is due primarily to lower non- deductible goodwill in 1998 compared to 1997, which included the $17.5 million of goodwill written off by C&A Plastics. Discontinued Operations: No income from discontinued operations has been reflected in 1998, as the operations of the Company's Imperial Wallcoverings Inc. subsidiary ("Wallcoverings") prior to its sale were charged to the Company's discontinued operations reserves. The Company's income from discontinued operations of $4.3 million in 1997 includes the operations of the Company's Mastercraft Group and Floorcoverings subsidiary ("Floorcoverings") and JPS Automotive's Air Restraint and Technical Products Division ("Airbag"). Losses incurred by Wallcoverings from April 29, 1996 to the date of sale have been charged to the Company's existing discontinued operations reserves. Wallcoverings was sold on March 13, 1998 to Imperial Home Decor Group, Inc, an affiliate of Blackstone Partners, for $71.9 million and an option for 6.7% of the common stock of Imperial Home Decor Group, Inc. The Company recorded a loss of $21.1 million, net of income tax benefits, in September 1997, to adjust the recorded value of Wallcoverings to the expected proceeds. Accordingly, no gain or loss resulted from the sale of Wallcoverings. The sale of Floorcoverings for approximately $195.6 million was completed in February 1997 and resulted in a gain of $85.3 million, net of income taxes of $53.4 million. The sale of the Mastercraft Group was completed in July 1997 for approximately $309.5 million, resulting in a gain on the sale of discontinued operations of $97.5 million, net of income taxes of $65.0 million. The Company sold Airbag for approximately $56 million. No gain or loss was recorded on the sale since the sales price approximated the acquisition fair value and book value of Airbag. Extraordinary Loss: In 1998, the Company recognized an extraordinary loss consisting of a non-cash extraordinary charge of $3.6 million, net of income taxes of $2.4 million, relating to the refinancing of the Company's bank facilities and a charge of $0.1 million, net of income taxes of $90 thousand, recognized in connection with the repurchase of $2.6 million principal amount of JPS Automotive Senior Notes on the market at prices in excess of carrying values. In 1997, the Company recognized a loss of $0.7 million, net of income taxes of $0.4 million, in connection with the purchase by JPS Automotive of $19.4 million principal amount of JPS Automotive Senior Notes on the open market at prices in excess of carrying values. Net Income (Loss): The combined effect of the foregoing resulted in a net loss of $3.8 million, compared to net income of $155.2 million in 1997. Liquidity and Capital Resources The Company and its subsidiaries had cash and cash equivalents totaling $14.0 million and $23.8 million at December 25, 1999 and December 26, 1998, respectively. The Company had $144.2 million of borrowing availability under its credit arrangements as of December 25, 1999. The total was comprised of $119.2 million under the Company's revolving credit facility (including $16.4 million available to the Canadian Borrowers, as hereinafter defined), approximately $24.9 million under bank demand lines of credit in Canada and Austria, a line of credit for certain other European locations, and $0.1 million available under the Receivables Facility. Availability as of December 25, 1999 under the revolving credit facility was reduced by outstanding letters of credit of $19.2 million. 14 On May 28, 1998, the Company entered into new credit facilities consisting of: (i) a senior secured term loan facility in the amount of $100 million payable in quarterly installments until final maturity on December 31, 2003 (the "Term Loan A Facility"); (ii) a senior secured term loan facility in the principal amount of $125 million payable in quarterly installments until final maturity on June 30, 2005 (the "Term Loan B Facility" and, together with the Term Loan A Facility and the Term Loan C Facility, as hereinafter defined, the "Term Loan Facilities"); and (iii) a senior secured revolving credit facility in an aggregate principal amount of up to $250 million terminating on December 31, 2003, of which $60 million (or the equivalent thereof in Canadian dollars) is available to two of the Company's Canadian subsidiaries (the "Canadian Borrowers"), and of which up to $50 million is available as a letter of credit facility (the "Revolving Credit Facility" and together with the Term Loan Facilities, the "Credit Agreement Facilities"). On May 13, 1999, the Company closed on a senior secured term loan facility in the principal amount of $100 million, payable in quarterly installments beginning December 1999 through final maturity in December 2005 (the "Term Loan C Facility"). The proceeds from the Term Loan C Facility were used to pay the $44.0 million special dividend previously discussed, repay amounts outstanding under the Company's Revolving Credit Facility and for general corporate purposes. At December 25, 1999, the Company had outstanding $85.0 million under the Term Loan A Facility, $122.0 million under the Term Loan B Facility, $100.0 million under the Term Loan C Facility, and $111.6 million under the Revolving Credit Facility (including $43.6 million borrowed by the Canadian Borrowers). The Credit Agreement Facilities, which are guaranteed by the Company and its U.S. subsidiaries (subject to certain exceptions), contain restrictive covenants including maintenance of interest coverage and leverage ratios and various other restrictive covenants which are customary for such facilities. Effective March 8, 1999, the Company, in view of the decreased sales of automotive fabrics and the General Motors strike, obtained an amendment to the Credit Agreement Facilities primarily in order to modify the covenants relating to interest coverage and leverage ratios throughout the existing terms of the Credit Agreement Facilities. The amendment resulted generally in an increase in the interest rates charged under the Credit Agreement Facilities. For additional discussion of the Credit Agreement Facilities and related restrictive covenants, see Note 10 to the Consolidated Financial Statements. On June 10, 1996, C&A Products issued at face value $400 million principal amount of 11 1/2% Senior Subordinated Notes due 2006 (the "Subordinated Notes"). The Subordinated Notes indenture contains restrictive covenants (including, among others, limitations on the incurrence of indebtedness, asset dispositions and transactions with affiliates) which are customary for such securities. These covenants are also subject to a number of significant exceptions. The Company does not currently meet the Subordinated Notes indenture's general test for the incurrence of indebtedness, and does not expect to meet such test during 2000. However, the Company expects all its borrowing needs for the foreseeable future to be allowed under exceptions for permitted indebtedness in the indenture. For additional discussion of the Subordinated Notes, see Note 10 to the Consolidated Financial Statements. At December 25, 1999, JPS Automotive had approximately $87.4 million of indebtedness outstanding (including a premium of $1.3 million) related to the JPS Automotive Senior Notes. The Company is operating JPS Automotive as a restricted subsidiary under the Credit Agreement Facilities and the indenture governing the Subordinated Notes. For additional discussion of the JPS Automotive Senior Notes, see Note 10 to the Consolidated Financial Statements. C&A Products utilized a receivable facility (the "Receivables Facility"), entered into through the Trust formed by Carcorp, comprised of (i) term certificates in an aggregate face amount of $50 million and have a term of five years and (ii) variable funding certificates, which represent revolving commitments of up to an aggregate of $75 million and have a term of five years. Carcorp purchased on a revolving basis and transferred to the Trust virtually all trade receivables generated by C&A Products and certain of its subsidiaries (the "Sellers") in the United States and Canada. The certificates represented the right to receive payments generated by the receivables held by the Trust. 15 Availability under the variable funding certificates at any time depended primarily on the amount of receivables generated by the Sellers from sales to the automotive industry, the rate of collection on those receivables and other characteristics of those receivables which affect their eligibility (such as the bankruptcy or downgrading below investment grade of the obligor, delinquency and excessive concentration). Based on these criteria, at December 25, 1999 the maximum amount available under the variable funding certificates was $66.5 million, of which $0.1 million was not utilized. On December 27, 1999, the Company entered into a new receivables facility (the "New Receivables Facility"), replacing the Receivables Facility. The New Receivables Facility utilizes funding provided by commercial paper conduits sponsored by three of the Company's lenders under its Credit Agreement Facilities. Carcorp remains the purchaser of the Sellers' trade receivables, transferring rights to collections on those receivables to the conduits. The conduits in turn issue commercial paper which is collateralized by those rights. The liquidity facilities backing the New Receivables Facility have terms of 364 days, renewable annually for up to five years. The total funding available to the Company on a revolving basis under the New Receivables Facility is up to $171.6 million, depending upon criteria similar to those in the Receivables Facility. On December 27, 1999, the Company funded $120 million through the New Receivables Facility, leaving approximately $12 million available, but unutilized. The interest rate on sold interests is equal to the rate paid by the conduits to the holders of the commercial paper plus a margin of .70% and dealer fees of .05% (6.66% at inception). In addition, the Company pays .25% on the unused committed portion of the facility. See Note 11 to the Consolidated Financial Statements for further information regarding the New Receivables Facility. The Company has a master equipment lease agreement for a maximum of $50 million of machinery and equipment. At December 25, 1999, the Company had approximately $20 million of potential availability under this master lease for future machinery and equipment requirements of the Company subject to the lessor's approval. In the year ended December 25, 1999, the Company made lease payments relating to continuing operations of approximately $5.8 million for machinery and equipment sold and leased back under this master lease. The Company expects lease payments for continuing operations under this master lease to be approximately $6.1 million during fiscal 2000. The Company's principal sources of funds are cash generated from continuing operating activities, borrowings under the Credit Agreement Facilities and the sale of receivables under the New Receivables Facility. Net cash provided by the continuing operating activities of the Company was $95.1 million for 1999. In 1999, the Company implemented a new compensation program, based in part upon maximizing cash flow and increasing asset utilization. This new focus resulted in a 24% reduction in working capital (including accounts receivable, inventory and accounts payable) to $168 million in 1999, compared to $221 million in 1998. The Company's principal uses of funds from operating activities and borrowings for the next several years are expected to fund interest and principal payments on its indebtedness, net working capital increases and capital expenditures. At December 25, 1999, the Company had total outstanding indebtedness of $912.5 million (excluding approximately $19.2 million of outstanding letters of credit) at a weighted average interest rate of 9.95% per annum. Of the total outstanding indebtedness, $818.6 million relates to the Credit Agreement Facilities and the Subordinated Notes. See Notes 10 and 11 to the Consolidated Financial Statements for information regarding the interest rates on the Credit Agreement Facilities, Subordinated Notes, JPS Automotive Senior Notes, Receivables Facility and New Receivables Facility. Cash interest paid was $91.9 million and $86.6 million for the fiscal years ended December 25, 1999 and December 26, 1998, respectively. Due to the variable interest rates under the Credit Agreement Facilities and the Receivables Facility, the Company is sensitive to changes in interest rates. Based upon amounts outstanding at December 25, 1999, a .5% increase in each of LIBOR and Canadian bankers' acceptance rates (6.5% and 5.2%, respectively, at December 25, 1999) would impact interest costs by approximately $2.1 million annually on the Credit Agreement Facilities and $0.6 million annually on the Receivables Facility. 16 The current maturities of long-term debt primarily consist of the current portion of the Credit Agreement Facilities, vendor financing, an industrial revenue bond and other miscellaneous debt. The maturities of long-term debt of the Company's continuing operations during 2000, 2001, 2002, 2003, and 2004, are $28.0 million, $116.4 million, $32.9 million, $28.3 million and $165.4 million, respectively. The JPS Automotive Senior Notes will mature in 2001. In addition, the Credit Agreement Facilities provide for mandatory prepayments of the Term Loan Facilities with certain excess cash flow of the Company, net cash proceeds of certain asset sales or other dispositions by the Company, net cash proceeds of certain sale/leaseback transactions and net cash proceeds of certain issuances of debt obligations. The indenture governing the Subordinated Notes provides that in the event of certain asset dispositions, C&A Products must apply net proceeds (to the extent not reinvested in the business) first to repay Senior Indebtedness (as defined, which includes the Credit Agreement Facilities) and then, to the extent of remaining net proceeds, to make an offer to purchase outstanding Subordinated Notes at 100% of their principal amount plus accrued interest. C&A Products must also make an offer to purchase outstanding Subordinated Notes at 101% of their principal amount plus accrued interest if a Change in Control (as defined) of the Company occurs. In addition, the indenture governing the JPS Automotive Senior Notes requires JPS Automotive to apply the net proceeds from the sale of assets of JPS Automotive to offer to purchase JPS Automotive Senior Notes, to the extent not applied within 270 days of such asset sale to an investment in capital expenditures or other long term tangible assets of JPS Automotive, to permanently reduce senior indebtedness of JPS Automotive or to purchase JPS Automotive Senior Notes in the open market. The Company's Board of Directors authorized the expenditure of up to $25 million in 1999 to repurchase shares of the Company's Common Stock at management's discretion. This amount was reduced to approximately $2 million by the approximately $6.2 million special dividend paid on March 1, 1999 and the approximately $44.0 million special dividend paid on May 28, 1999. The Company believes it has sufficient liquidity under its existing credit arrangements to effect the repurchase program. The Company spent approximately $1.8 million and $25.0 million to repurchase shares during fiscal 1999 and 1998, respectively. The Company makes capital expenditures on a recurring basis for replacements and improvements. As of December 25, 1999, the Company's continuing operations had approximately $10.9 million in outstanding capital expenditure commitments. The Company currently anticipates that its capital expenditures for continuing operations for fiscal 2000 will be in the range of $70 to $80 million, a portion of which may be financed through leasing. The Company's capital expenditures in future years will depend upon demand for the Company's products and changes in technology. The Company is sensitive to price movements in its raw material supply base. During fiscal 1999, prices for most of the Company's primary raw materials remained constant with price levels at December 26, 1998. While the Company may not be able to pass on future raw material price increases to its customers, it believes that a portion of the increased cost can be offset through value engineering/value analysis in conjunction with its major customers and by continued reductions in the cost of off-quality products and processes. The Company has significant obligations relating to postretirement, casualty, environmental, lease and other liabilities of discontinued operations. In connection with the sale and acquisition of certain businesses, the Company has indemnified the purchasers and sellers for certain environmental liabilities, lease obligations and other matters. In addition, the Company is contingently liable with respect to certain lease and other obligations assumed by certain purchasers and may be required to honor such obligations if such purchasers are unable or unwilling to do so. On January 5, 2000, Imperial Home Decor Group, Inc., which purchased Wallcoverings in March, 1998, filed voluntary petitions for protection under chapter 11 of the U.S. Bankruptcy Code. The Company is currently assessing the impact of that bankruptcy filing. Management currently anticipates that the net cash requirements of its discontinued operations will be approximately $22 million in fiscal 2000. However, because the requirements of the Company's discontinued operations are largely a function of contingencies, it is possible that the actual net cash requirements of the Company's discontinued operations could differ materially from management's estimates. Management believes that the Company's cash needs relating to discontinued operations can be provided by operating activities from continuing operations and by borrowings under its credit facilities. 17 Tax Matters At December 25, 1999, the Company had outstanding net operating loss carryforwards ("NOLs") of approximately $268.1 million for Federal income tax purposes. Substantially all of these NOLs expire over the period from 2008 to 2019. The Company also has unused Federal tax credits of approximately $18.9 million, $6.7 million of which expire during the period 2000 to 2019. Future sales of common stock by the Company or its principal shareholders, or changes in the composition of its principal shareholders, could constitute a "change in control" that would result in annual limitations on the Company's use of its NOLs and unused tax credits. Management cannot predict whether such a "change in control" will occur. If such a "change in control" were to occur, the resulting annual limitations on the use of NOLs and tax credits would depend on the value of the equity of the Company and the amount of "built-in gain" or "built-in loss" in the Company's assets at the time of the "change in control", which cannot be known at this time. Management has reviewed the Company's operating results for recent years as well as the outlook for its continuing businesses in concluding it is more likely than not that the net deferred tax assets of $91.9 million at December 25, 1999 will be realized. A major goal of the Reorganization is to lower the overall cost structure of the Company and thereby increase profitability. These factors along with the timing of the reversal of its temporary differences and the expiration dates of its NOLs were also considered in reaching this conclusion. The Company's ability to generate future taxable income is dependent on numerous factors, including general economic conditions, the state of the automotive industry and other factors beyond management's control. Therefore, there can be no assurance that the Company will meet its expectation of future taxable income. The valuation allowance at December 25, 1999 provides for certain deferred tax assets that in management's assessment may not be realized due to tax limitations on the use of such amounts or that relate to tax attributes that are subject to uncertainty due to the long-term nature of their realization. Environmental Matters The Company is subject to Federal, state and local environmental laws and regulations that (i) affect ongoing operations and may increase capital costs and operating expenses and (ii) impose liability for the costs of investigation and remediation and otherwise relate to on-site and off-site contamination. The Company's management believes that it has obtained, and is in material compliance with, all material environmental permits and approvals necessary to conduct its various businesses. Environmental compliance costs for continuing businesses currently are accounted for as normal operating expenses or capital expenditures of such business units. In the opinion of management, based on the facts presently known to it, such environmental compliance costs will not have a material adverse effect on the Company's consolidated financial condition or future results of operations. The Company is legally or contractually responsible or alleged to be responsible for the investigation and remediation of contamination at various sites. It also has received notices that it is a potentially responsible party ("PRP") in a number of proceedings. The Company may be named as a PRP at other sites in the future, including with respect to divested and acquired businesses. The Company is currently engaged in investigation or remediation at certain sites. In estimating the total cost of investigation and remediation, the Company has considered, among other things, the Company's prior experience in remediating contaminated sites, remediation efforts by other parties, data released by the United States Environmental Protection Agency, the professional judgment of the Company's environmental experts, outside environmental specialists and other experts, and the likelihood that other parties which have been named as PRPs will have the financial resources to fulfill their obligations at sites where they and the Company may be jointly and severally liable. Under the theory of joint and several liability, the Company could be liable for the full costs of investigation and remediation even if additional parties are found to be responsible under the applicable laws. It is difficult to estimate the total cost of investigation and remediation due to various factors including incomplete information regarding particular sites and other PRPs, uncertainty regarding the extent of environmental problems and the Company's share, if any, of 18 liability for such problems, the selection of alternative compliance approaches, the complexity of environmental laws and regulations and changes in cleanup standards and techniques. When it has been possible to provide reasonable estimates of the Company's liability with respect to environmental sites, provisions have been made in accordance with generally accepted accounting principles. As of December 25, 1999, excluding sites at which the Company's participation is anticipated to be de minimis or otherwise insignificant or where the Company is being indemnified by a third party for the liability, there are 23 sites where the Company is participating in the investigation or remediation of the site, either directly or through financial contribution, and 8 additional sites where the Company is alleged to be responsible for costs of investigation or remediation. As of December 25, 1999, the Company's estimate of its liability for these 31 sites, is approximately $22.9 million. As of December 25, 1999, the Company has established reserves of approximately $30.5 million for the estimated future costs related to all its known environmental sites. In the opinion of management, based on the facts presently known to it, the environmental costs and contingencies will not have a material adverse effect on the Company's consolidated financial condition or future results of operations. However, there can be no assurance that the Company has identified or properly assessed all potential environmental liability arising from the activities or properties of the Company, its present and former subsidiaries and their corporate predecessors. Impact of Year 2000 Compliance The Company has currently not experienced any significant systems or other Year 2000 problems. The Company's comprehensive plan to address Year 2000 issues (the "Year 2000 Plan") included the acceleration of the Company's Business Systems Integration Plan (the "BSIP Plan"). The BSIP Plan was initiated in connection with the Company's 1996 acquisitions to create common manufacturing, financial reporting and cost control information systems throughout the Company as a whole. The total cost of the Company's Year 2000 Plan, including $29 million of costs associated with the BSIP Plan, was $33 million. Included in this amount is $7 million of salaries and other payroll costs of Company employees to the extent that they devoted a portion of their time to the project. Approximately $21 million of the total costs were incurred during 1999. The Company expensed and capitalized these costs in accordance with appropriate accounting policies. Safe Harbor Statement This Form 10-K contains statements which, to the extent they are not historical fact, constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the "Safe Harbor Acts"). All forward-looking statements involve risks and uncertainties. The forward-looking statements in this Form 10-K are intended to be subject to the safe harbor protection provided by the Safe Harbor Acts. Risks and uncertainties that could cause actual results to vary materially from those anticipated in the forward-looking statements included in this Form 10-K include general economic conditions in the market in which the Company operates and industry-based factors such as possible declines in the North American and European automobile and light truck builds, labor strikes at the Company's major customers, changes in consumer preferences, dependence on significant automotive customers, the level of competition in the automotive supply industry, pricing pressure from automotive customers, risks associated with conducting business in foreign countries and Year 2000 readiness issues, as well as factors more specific to the Company such as the substantial leverage of the Company and its subsidiaries, limitations imposed by the Company's debt facilities and changes made in connection with the integration of operations acquired by the Company and the implementation of the global reorganization program. The Company's divisions may also be affected by changes in the popularity of particular vehicle models, particular interior trim packages or the loss of programs on particular vehicle models and risks associated with conducting business in foreign countries. For a discussion of certain of these and other important factors which may affect the Company's operations, products and markets, see "Item 1. Business" and the above discussion in this "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and also see the Company's other filings with the Securities and Exchange Commission. 19 Item 7A. Quantitative and Qualitative Disclosures About Market Risk Risk Management The Company is exposed to market risk from changes in interest rates and foreign exchange rates. To modify the risk from these interest rate and foreign currency exchange rate fluctuations, the Company enters into various hedging transactions that have been authorized pursuant to policies and procedures. The Company does not use derivative financial instruments for trading purposes. Interest Rate Exposure The Company's exposure to market risk for changes in interest rates relates primarily to the Company's long-term debt obligations. The interest rate exposure for the Company's variable rate debt obligations is currently indexed to LIBOR, for U.S.-denominated debt, or the Canadian bankers' acceptance rate, for Canadian-denominated debt, of one, two, three or six months, as selected by the Company. While the Company has used interest rate swaps and other interest rate protection agreements to modify its exposure to interest rate movements and to reduce borrowing rates, no such agreements were in place at December 25, 1999. The table below provides information about the Company's derivative financial instruments and other financial instruments that are sensitive to changes in interest rates, including debt obligations. The table presents principal cash flows and related weighted average interest rates by expected maturity dates for the Company's debt obligations. Weighted average variable interest rates are based on implied LIBOR and Canadian bankers' acceptance forward rates in the yield curve at the reporting date. The information is presented in U.S. dollar equivalents, which is the Company's reporting currency. The instrument's actual cash flows are denominated in both U.S. dollar ($US) and Canadian dollar ($CAD), as indicated in parentheses (dollar amounts in thousands).
Expected Maturity Date Fair Value -------------------------------------------------------- December 25, 2000 2001 2002 2003 2004 Thereafter Total 1999 ------- ------- ------- ------- -------- ---------- -------- ------------ Debt: Fixed rate ($US)....... $86,043 $400,000 $486,043 $481,915 Average interest rate................. 11.1% 11.5% Variable rate ($US).... $26,750 $28,000 $31,750 $27,375 $121,125 $140,000 $375,000 $375,000 Average interest rate................. 9.6% 9.7% 9.7% 9.3% 9.5% 10.1% Variable rate ($CAD)... $ 43,622 $ 43,622 $ 43,622 Average interest rate................. 9.2%
Currency Rate Exposure The Company is subject to currency rate exposure primarily related to foreign currency purchase and sale transactions and intercompany and third party loans. The primary purpose of the Company's foreign currency hedging activities is to protect against the volatility associated with these foreign currency exposures. The Company primarily utilizes forward exchange contracts and purchased options with durations of generally less than 12 months. On January 1, 1999, eleven of the fifteen member countries of the European Union (the "Participating Countries") established fixed conversion rates between their existing sovereign currencies and the Euro. The Participating Countries have agreed to adopt the Euro as their common currency on that date. The conversion did not have a material adverse effect on the Company's consolidated financial position or results of operations. At December 25, 1999, the Company had the following foreign currency forward contracts outstanding: (i) British pounds for Euros with a U.S. dollar equivalent notional amount of $5.0 million, a weighted average contract rate of 1.495 Euros and an unrealized loss of $0.3 million and (ii) Euros for Swedish krona with a U.S. dollar equivalent notional amount of $0.1 million and a weighted average contract rate of 0.054 krona. These contracts mature in 2000. The information presented does not fully reflect the net foreign exchange rate exposure of the Company because it does not include the intercompany funding arrangements denominated in foreign currencies and the foreign currency-denominated cash flows from anticipated sales and purchases. Management believes that the foreign currency exposure relating to these items would substantially offset the exposures discussed above. 20 The Company also had option contracts with a U.S. dollar equivalent notional amount of $45 million outstanding at December 25, 1999 with a weighted average strike price of Canadian $1.53. These contracts allow the Company's Canadian operations to buy U.S. dollars for Canadian dollars. These contracts expire periodically in 2000. Item 8. Financial Statements and Supplementary Data See the Consolidated Financial Statements of Collins & Aikman Corporation and subsidiaries included herein and listed on the Index to Financial Statements set forth in Item 14 (a) of this Form 10-K report. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. 21 PART III Item 10. Directors and Executive Officers of the Registrant The information required by Item 401 of Regulation S-K regarding executive officers and directors is incorporated herein by reference to that portion of the Registrant's definitive Proxy Statement to be used in connection with its 2000 Annual Meeting of Stockholders, which will be filed in final form with the Commission not later than 120 days after December 25, 1999 (the "Proxy Statement"), captioned "Executive Officers of the Company" and "Election of Directors -- Information as to Nominees and Other Directors". The information required by Item 405 of Regulation S-K regarding disclosure of delinquent filers is incorporated herein by reference to that portion of the proxy statement captioned "Section 16(a) Beneficial Ownership Reporting Compliance". Item 11. Executive Compensation The information required by this Item is incorporated herein by reference to that portion of the Proxy Statement captioned "Executive Compensation". Item 12. Security Ownership of Certain Beneficial Owners and Management The information required by this Item is incorporated herein by reference to those portions of the Proxy Statement captioned "Voting Securities and Principal Stockholders", "Security Ownership of Management" and "Election of Directors -- Information as to Nominees and Other Directors". Item 13. Certain Relationships and Related Transactions The information required by this Item is incorporated herein by reference to those portions of the Proxy Statement captioned "Compensation Committee Interlocks and Insider Participation", and "Information as to Nominees and Other Directors -- Certain Relationships". 22 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 25, 1999, December 26, 1998 and December 27, 1997............ F-2 Consolidated Balance Sheets at December 25, 1999 and December 26, 1998.................................................................. F-3 Consolidated Statements of Cash Flows for the fiscal years ended December 25, 1999, December 26, 1998 and December 27, 1997............ F-4 Consolidated Statements of Common Stockholders' Deficit for the fiscal years ended December 25, 1999, December 26, 1998 and December 27, 1997.................................................................. F-5 Notes to Consolidated Financial Statements............................. F-6
(a) (2) Financial Schedules: The following financial statement schedules of Collins & Aikman Corporation for the fiscal years ended December 25, 1999, December 26, 1998, and December 27, 1997 are filed as part of this Report and should be read in conjunction with the Consolidated Financial Statements of Collins & Aikman Corporation.
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.
Exhibit Number Description 3.1 Restated Certificate of Incorporation of Collins & Aikman Corporation is hereby incorporated by reference to Exhibit 3.1 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended June 26, 1999. 3.2 By-laws of Collins & Aikman Corporation, as amended, are hereby incorporated by reference to Exhibit 3.2 of Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended January 27, 1996. 3.3 Certificate of Elimination of Cumulative Exchangeable Redeemable Preferred Stock of Collins & Aikman Corporation is hereby incorporated by reference to Exhibit 3.3 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended October 28, 1995. 4.1 Specimen Stock Certificate for the Common Stock is hereby incorporated by reference to Exhibit 4.3 of Amendment No. 3 to Collins & Aikman Holdings Corporation's Registration Statement on Form S-2 (Registration No. 33-53179) filed June 21, 1994.
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Exhibit Number Description 4.2 Indenture, dated as of June 1,1996, between Collins & Aikman Product Co., Collins & Aikman Corporation and First Union National Bank of North Carolina, as Trustee, is hereby incorporated by reference to Exhibit 4.1 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended April 27, 1996. 4.3 First Supplemental Indenture dated as of June 1, 1996, between Collins & Aikman Products Co., Collins & Aikman Corporation and First Union National Bank of North Carolina, as Trustee, is hereby incorporated by reference to Exhibit 4.3 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended April 27, 1996. 4.4 Credit Agreement, dated as of May 28, 1998, among Collins & Aikman Products Co., as Borrower, Collins & Aikman Canada, Inc. and Collins & Aikman Plastics, Ltd., as Canadian Borrowers, Collins & Aikman Corporation, as Guarantor, the lenders named therein, Bank of America N.T.S.A., as Documentation Agent, The Chase Manhattan Bank, as Administrative Agent, and The Chase Manhattan Bank of Canada, as Canadian Administrative Agent, is hereby incorporated by reference to Exhibit 4.4 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended June 27, 1998. 4.5 Waiver dated as of October 27, 1998 under the Credit Agreement dated as of May 28, 1998, among Collins & Aikman Products Co., Collins & Aikman Canada, Inc. and Collins & Aikman Plastics, Ltd., as Canadian Borrowers, Collins & Aikman Corporation, as Guarantor, the Lender Parties thereto, Bank of America, N.T.S.A., as Documentation Agent, The Chase Manhattan Bank, as Administrative Agent, and The Chase Manhattan Bank of Canada, as Canadian Administrative Agent is hereby incorporated by reference to Exhibit 4.5 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended September 26, 1998. 4.6 Waiver dated as of December 22, 1998 under the Credit Agreement dated as of May 28, 1998, among Collins & Aikman Products Co., Collins & Aikman Canada, Inc. and Collins & Aikman Corporation, as Guarantor, the Lender Parties thereto, Bank of America, N.T.S.A., as Documentation Agent, The Chase Manhattan Bank, as Administrative Agent, and The Chase Manhattan Bank of Canada, as Canadian Administrative Agent is hereby incorporated by reference to Exhibit 4.6 of Collins & Aikman Corporation's Report on Form 10-K for the year ended December 26, 1998. 4.7 Amendment and Waiver dated as of March 8, 1999, among Collins & Aikman Products Co., Collins & Aikman Canada, Inc., Collins & Aikman Plastics Ltd., Collins & Aikman Corporation, as Guarantor, the Lender Parties thereto, Bank of America N.T.S.A., as Documentation Agent, The Chase Manhattan Bank, as Administrative Agent, and The Chase Manhattan Bank of Canada, as Canadian Administrative Agent is hereby incorporated by reference to Exhibit 4.7 of Collins & Aikman Corporation's Report on Form 10-K for the year ended December 26, 1998. 4.8 Tranche C Term Loan Supplement dated as of May 12, 1999 to the Credit Agreement dated as of May 28, 1998 among Collins & Aikman Products Co., Collins & Aikman Canada, Inc., Collins & Aikman Plastics, Ltd., Collins & Aikman Corporation, the Financial Institutions parties thereto, Bank of America N.T.S.A., as Documentation Agent, The Chase Manhattan Bank, as Administrative Agent, and The Chase Manhattan Bank of Canada, as Canadian Administrative Agent is hereby incorporated by reference to Exhibit 4.1 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended June 26, 1999. 4.9 Indenture dated as of June 28, 1994, between JPS Automotive Products Corp., as Issuer, JPS Automotive L.P., as Guarantor and Shawmut Bank Connecticut, N.A., as Trustee, is hereby incorporated by reference to Exhibit 4.2 of JPS Automotive Corp.'s Registration Statement on Form S-1, Registration No. 33-75510. 4.10 First Supplemental Indenture, dated as of October 5, 1994, between JPS Automotive Products Corp. and JPS Automotive L.P., as Co-Obligors, and Shawmut Bank Connecticut, N.A., as Trustee is hereby incorporated by reference to Exhibit 4.48A of JPS Automotive L.P.'s and JPS Automotive Products Corp.'s Report on Form 10-Q for the fiscal quarter ended October 2, 1994.
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Exhibit Number Description Collins & Aikman Corporation agrees to furnish to the Commission upon request in accordance with Item 601 (b)(4) (iii) (A) of Regulation S-K copies of instruments defining the rights of holders of long-term debt of Collins & Aikman Corporation or any of its subsidiaries, which debt does not exceed 10% of the total assets of Collins & Aikman Corporation and its subsidiaries on a consolidated basis. 10.1 Amended and Restated Stockholders Agreement dated as of June 29, 1994 among the Company, Collins & Aikman Group, Inc., Blackstone Capital Partners L.P. and Wasserstein Perella Partners, L.P. is hereby incorporated by reference to Exhibit 10.1 of Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended January 28, 1995. 10.2 Employment Agreement dated as of July 18, 1990 between Wickes Companies, Inc. and an executive officer is hereby incorporated by reference to Exhibit 10.3 of Wickes Companies, Inc.'s Report on Form 10-K for the fiscal year ended January 26, 1991.* 10.3 Employment Agreement dated as of July 22, 1992 between Collins & Aikman Corporation and an executive officer is hereby incorporated by reference to Exhibit 10.7 of Collins & Aikman Holdings Corporation's Report on Form 10-K for the fiscal year ended January 30, 1993.* 10.4 First Amendment to Employment Agreement dated as of February 24, 1994 between Collins & Aikman Corporation and an executive officer is hereby incorporated by reference to Exhibit 10.7 of Collins & Aikman Holdings Corporation's Registration Statement on Form S-2 (Registration No. 33-53179) filed April 19, 1994.* 10.5 Second Amendment, dated as of October 3, 1996, to the Employment Agreement, dated as of July 22, 1992, as amended, between Collins & Aikman Products Co. and an executive officer is hereby incorporated by reference to Exhibit 10.26 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended October 26, 1996.* 10.6 Third Amendment dated as of August 1, 1997, to the Employment Agreement dated as of July 22, 1992, as amended, between the Corporation and an executive officer is hereby incorporated by reference to Exhibit 10.35 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended September 27, 1997.* 10.7 Letter Agreement dated March 23, 1999 with an executive officer is hereby incorporated by reference to Exhibit 10.7 of Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended December 26, 1998.* 10.8 Amended and Restated Employment Agreement dated as of January 20, 1999 between Collins & Aikman Products Co. and an executive officer is hereby incorporated by reference to Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended December 26, 1998.* 10.9 Employment Agreement dated as of January 20, 1999 between Collins & Aikman Products Co. and an executive officer is hereby incorporated by reference to Exhibit 10.9 of Collins & Aikman Corporation's Form 10-K for the fiscal year ended December 26, 1998.* 10.10 Employment Agreement dated as of April 22, 1999 between Collins & Aikman Corporation and an executive officer is hereby incorporated by reference to Exhibit 10.10 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended March 27, 1999.* 10.11 Letter agreement dated as of May 12, 1999 with an executive officer is hereby incorporated by reference to Exhibit 10.2 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended June 26, 1999.* 10.12 Collins & Aikman Corporation 1998 Executive Incentive Compensation Plan is hereby incorporated by reference to Exhibit 10.10 of Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended December 26, 1998.*
- -------- * Management contract or compensatory plan or arrangement required to be filed as an exhibit to this form pursuant to Item 14 (c) of this report. 25
Exhibit Number Description 10.13 Collins & Aikman Corporation Supplemental Retirement Income Plan is hereby incorporated by reference to Exhibit 10.23 of Amendment No. 5 to Collins & Aikman Holdings Corporation's Registration Statement on Form S-2 (Registration No. 33-53179) filed July 6, 1994.* 10.13 Amendment to Collins & Aikman Corporation Supplemental Retirement Income Plan is hereby incorporated by reference to Exhibit 10.12 of the Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended December 26, 1998.* 10.15 1993 Employee Stock Option Plan, as amended and restated, is hereby incorporated by reference to Exhibit 10.13 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended April 29, 1995.* 10.16 1994 Employee Stock Option Plan, as amended through February 7, 1997, is hereby incorporated by reference to Exhibit 10.12 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended March 29, 1997.* 10.17 1994 Directors Stock Option Plan as amended and restated is hereby incorporated by reference to Exhibit 10.15 to Collins & Aikman Corporation's Report on Form 10-K for the year ended December 26, 1998.* 10.18 Excess Benefit Plan of Collins & Aikman Corporation is hereby incorporated by reference to Exhibit 10.25 of Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended January 28, 1995.* 10.19 1994 Employee Stock Option Plan, as amended and restated through June 3, 1999 is hereby incorporated by reference to Exhibit 10.2 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended June 26, 1999 10.20 Change in control agreement dated March 17, 1998 between Collins & Aikman Corporation and an executive officer is hereby incorporated by reference to Exhibit 10.17 of Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended December 27, 1997.* 10.21 Change in control agreement dated March 17, 1998 between Collins & Aikman Corporation and an executive officer is hereby incorporated by reference to Exhibit 10.18 of Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended December 27, 1997.* 10.22 Change in control agreement dated March 17, 1998 between Collins & Aikman Corporation and an executive officer is hereby incorporated by reference to Exhibit 10.19 of Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended December 27, 1997.* 10.23 Change in control agreement dated March 17, 1998 between Collins & Aikman Corporation and an executive officer is hereby incorporated by reference to Exhibit 10.20 of Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended December 27, 1997.* 10.24 Change in control agreement dated March 17, 1998 between Collins & Aikman Corporation and an executive officer is hereby incorporated by reference to Exhibit 10.22 of Collins & Aikman Corporation's report on Form 10-Q for the fiscal quarter ended March 28, 1998.* 10.25 Change in control agreement dated August 9, 1999 between Collins & Aikman Corporation and an executive officer.* 10.26 Change in control agreement dated March 17, 1998 between Collins & Aikman Corporation and an executive officer.* 10.27 Change in control agreement dated March 17 ,1998 between Collins & Aikman Corporation and an executive officer.* 10.28 Change in control agreement dated July 26, 1999 between Collins & Aikman Corporation and an executive officer.*
- -------- * 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 10.29 Change in control agreement dated March 17, 1998 between Collins & Aikman Corporation and an executive officer.* 10.30 Employment Agreement dated October 1, 1999 between Collins & Aikman Products Co. and an executive officer.* 10.31 Severance Benefit Agreement dated July 26, 1999 between Collins & Aikman Corporation and an executive officer.* 10.32 Severance Benefit Agreement dated August 9, 1999 between Collins & Aikman Corporation and an executive officer.* 10.33 Letter agreement dated December 17, 1999 between Collins & Aikman Corporation and an executive officer.* 10.34 Lease, executed as of the 1st day of June 1987, between Dura Corporation and Dura Acquisition Corp. is hereby incorporated by reference to Exhibit 10.24 of Amendment No. 5 to Collins & Aikman Holdings Corporation's Registration Statement on Form S-2 (Registration No. 33-53179) filed July 6, 1994. 10.35 Amended and Restated Receivables Sale Agreement dated as of March 30, 1995 among Collins & Aikman Products Co., Ack-Ti-Lining, Inc., WCA Canada Inc., Imperial Wallcoverings, Inc., The Akro Corporation, Dura Convertible Systems Inc., each of the other subsidiaries of Collins & Aikman Products Co. from time to time parties thereto and Carcorp, Inc. is hereby incorporated by reference to Exhibit 10.18 of Collins & Aikman Corporation's Report on Form 10-K to the fiscal year ended January 28, 1995. 10.36 Servicing Agreement, dated as of March 30, 1995, among Carcorp, Inc., Collins & Aikman Products Co., as Master Servicer, each of the subsidiaries of Collins & Aikman Products Co. from time to time parties thereto and Chemical Bank, as Trustee is hereby incorporated by reference to Exhibit 10.19 of Collins & Aikman Corporation's Report on Form 10-K to the fiscal year ended January 28, 1995. 10.37 Pooling Agreement, dated as of March 30, 1995, among Carcorp, Inc., Collins & Aikman Products Co., as Master Servicer and Chemical Bank, as Trustee, is hereby incorporated by reference to Exhibit 10.20 of Collins & Aikman Corporation's Report on Form 10-K to the fiscal year ended January 28, 1995. 10.38 Series 1995-1 Supplement, dated as of March 30, 1995, among Carcorp, Inc., Collins & Aikman Products Co., as Master Servicer and Chemical Bank, as Trustee, is hereby incorporated by reference to Exhibit 10.21 of Collins & Aikman Corporation's Report on Form 10-K to the fiscal year ended January 28, 1995. 10.39 Series 1995-2 Supplement, dated as of March 30, 1995, among Carcorp, Inc., Collins & Aikman Products Co., as Master Servicer, the Initial Purchasers parties thereto, Societe Generale, as Agent for the Purchasers and Chemical Bank, as Trustee is hereby incorporated by reference to Exhibit 10.22 of Collins & Aikman Corporation's Report on Form 10-K to the fiscal year ended January 28, 1995. 10.40 Amendment No. 1, dated September 5, 1995, among Carcorp, Inc., as Company, Collins & Aikman Products Co., as Master Servicer, and Chemical Bank, as Trustee, to the Pooling Agreement, dated as of March 30, 1995, among the Company, the Master Servicer and Trustee is hereby incorporated by reference to Exhibit 10.2 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended July 29, 1995. 10.41 Amendment No. 2, dated October 25, 1995, among Carcorp, Inc., as Company, Collins & Aikman Products Co., as Master Servicer, and Chemical Bank, as Trustee, to the Pooling Agreement, dated as of March 30, 1995, among the Company, the Master Servicer and the Trustee is hereby incorporated by reference to Exhibit 10.2 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended October 28, 1995.
- -------- * 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 10.42 Amendment No. 1, dated February 29, 1996, to the Series 1995-1 Supplement, dated as of March 30, 1995, among Carcorp, Inc., Collins & Aikman Products Co., as Master Servicer, and Chemical Bank, as Trustee, is hereby incorporated by reference to Exhibit 10.20 of Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended January 27, 1996. 10.43 Amendment No. 1, dated February 29, 1996, to the Series 1995-2 Supplement, dated as of March 30, 1995, among Carcorp, Inc., Collins & Aikman Products Co., as Master Servicer, Societe Generale, as agent, and Chemical Bank, as Trustee, is hereby incorporated by reference to Exhibit 10.21 of Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended January 27, 1996. 10.44 Receivables Transfer Agreement dated December 27, 1999, among Carcorp, Inc. as Transferor, Collins & Aikman Products Co. as Guarantor and as Collection Agent, Park Avenue Receivables Corporation and Redwood Receivables Corporation,, as Initial Purchasers, The Several Financial Institutions Party Hereto from time to time, as Liquidity Banks, The Several Agent Banks Party Hereto from time to time, as Funding Agents and The Chase Manhattan Bank, as Administrative Agent. 10.45 Master Equipment Lease Agreement dated as of September 30, 1994, between NationsBanc Leasing Corporation of North Carolina and Collins & Aikman Products Co. is hereby incorporated by reference to Exhibit 10.27 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended October 29, 1994. 10.46 Equity Purchase Agreement by and among JPSGP, Inc., Foamex--JPS Automotive L.P. and Collins & Aikman Products Co. dated August 28, 1996 is hereby incorporated by reference to Exhibit 2.1 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended July 27, 1996. 10.47 Amendment No. 1 to Equity Purchase Agreement by and among JPSGP, Inc., Foamex--JPS Automotive L.P., Foamex International Inc. and Collins & Aikman Products Co. dated as of December 11, 1996 is hereby incorporated by reference to Exhibit 2.2 of Collins & Aikman Corporation's Current Report on Form 8-K dated December 10, 1996. 10.48 Equity Purchase Agreement by and among Seiren U.S.A. Corporation, Seiren Automotive Textile Corporation, Seiren Co., Ltd. and Collins & Aikman Products Co. dated December 11, 1996, is hereby incorporated by reference to Exhibit 2.3 of Collins & Aikman Corporation's Current Report on Form 8-K dated December 10, 1996. 10.49 Acquisition Agreement between Perstorp A.B. and Collins & Aikman Products Co. dated December 11, 1996 is hereby incorporated by reference to Exhibit 2.4 of Collins & Aikman Corporation's Current Report on Form 8-K dated December 10, 1996. 10.50 Agreement among Perstorp A.B., Perstorp GmbH, Perstorp Biotec A.B. and Collins & Aikman Products Co. dated December 11, 1996 is hereby incorporated by reference to Exhibit 2.5 of Collins & Aikman Corporation's current report on Form 8-K dated December 10, 1996. 10.51 Settlement and Amendment Agreement dated as of December 16, 1997 by and among Collins & Aikman Products Co., Perstorp A.B., Perstorp GmbH, Collins & Aikman Holding A.B., Collins & Aikman Automotive Systems GmbH, Collins & Aikman Automotive Systems N.V., Collins & Aikman Automotive Systems A.B. and Perstorp Components GmbH and related Letter Amendment Agreement is hereby incorporated by reference to Exhibit 10.38 of Collins & Aikman Corporation's Report or Form 10-Q for the fiscal quarter ended September 26, 1998. 10.52 Acquisition Agreement dated as of December 9, 1996 among Collins & Aikman Products Co., Collins & Aikman Floor Coverings Group, Inc., Collins & Aikman Floor Coverings, Inc., CAF Holdings, Inc., and CAF Acquisition Corp. is hereby incorporated by reference to Exhibit 2.7 of Collins & Aikman Corporation's Current Report on Form 8-K dated December 10, 1996. 10.53 Mastercraft Group Acquisition Agreement dated as of April 25, 1997 among Collins & Aikman Products Co., Joan Fabrics Corporation and MC Group Acquisition Company L.L.C., is hereby incorporated by reference to Exhibit 2.1 of Collins & Aikman Corporation's Report on Form 10-Q for the fiscal quarter ended March 29, 1997.
28
Exhibit Number Description 10.54 Asset Purchase Agreement dated as of June 30, 1997 by and between JPS Automotive L.P. and Safety Components International, Inc. is hereby incorporated by reference to Exhibit 2.1 of JPS Automotive L.P.'s and JPS Automotive Products Corp.'s Current Report on Form 8-K dated July 24, 1997. 10.55 Closing Agreement dated July 24, 1997 between JPS Automotive L.P., Safety Components International, Inc. and Safety Components Fabric Technologies, Inc. is hereby incorporated by reference to Exhibit 2.2 of JPS Automotive L.P.'s and JPS Automotive Products Corp.'s Current Report on Form 8-K dated July 24, 1997. 10.56 Amended and Restated Acquisition Agreement dated as of November 4, 1997 and amended and restated as of March 9, 1998, among Collins & Aikman Products Co., Imperial Wallcoverings Inc. and BDPI Holdings Corporation is hereby incorporated by reference to Exhibit 2.4 of Collins & Aikman Corporation's Report on Form 10-K for the fiscal year ended December 27, 1997. 21 Subsidiaries of the Registrant. 23 Consent of Arthur Andersen LLP. 27 Financial Data Schedule. 99 Voting Agreement between Blackstone Capital Partners L.P. and Wasserstein Perella Partners, L.P. is hereby incorporated by reference to Exhibit 99 of Amendment No. 4 to Collins & Aikman Holdings Corporation's Registration Statement on Form S-2 (Registration No. 33- 53179) filed June 27, 1994.
(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 and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 22nd day of March, 2000. COLLINS & AIKMAN CORPORATION By: /s/ Thomas E. Evans ------------------------------- Thomas E. Evans Chairman of the Board of Directors Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Thomas E. Evans Chairman of the Board of March 22, 2000 ______________________________________ Directors and Chief Thomas E. Evans Executive Officer (Principal Executive Officer) /s/ Rajesh K. Shah Executive Vice President March 22, 2000 ______________________________________ and Chief Financial Rajesh K. Shah Officer (Principal Financial and Accounting Officer) /s/ Bruce R. Barnes Director March 22, 2000 ______________________________________ Bruce R. Barnes /s/ Robert C. Clark Director March 22, 2000 ______________________________________ Robert C. Clark /s/ Marc S. Goldberg Director March 22, 2000 ______________________________________ Marc S. Goldberg /s/ Richard C. Lappin Director March 22, 2000 ______________________________________ Richard C. Lappin /s/ George L. Majoros, Jr. Director March 22, 2000 ______________________________________ George L. Majoros, Jr. ______________________________________ Director March 22, 2000 James J. Mossman /s/ Warren B. Rudman Director March 22, 2000 ______________________________________ Warren B. Rudman /s/ Neil P. Simpkins Director March 22, 2000 ______________________________________ Neil P. Simpkins
30 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Collins & Aikman Corporation: We have audited the accompanying consolidated balance sheets of Collins & Aikman Corporation (a Delaware Corporation) and subsidiaries as of December 25, 1999 and December 26, 1998, and the related consolidated statements of operations, cash flows, and common stockholders' deficit for each of the three fiscal years in the period ended December 25, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Collins & Aikman Corporation and subsidiaries as of December 25, 1999, and December 26, 1998, and the results of their operations and their cash flows for each of the three fiscal years in the period ended December 25, 1999, in conformity with generally accepted accounting principles in the United States. As explained in Note 4 to the consolidated financial statements, effective December 27, 1998, the Company changed its method of accounting for start-up costs and organization costs in accordance with SOP 98-5, "Reporting on the Costs of Start-up Activities." Arthur Andersen LLP Charlotte, North Carolina, March 1, 2000 F-1 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)
Fiscal Year Ended -------------------------------------- December 25, December 26, December 27, 1999 1998 1997 ------------ ------------ ------------ Net sales.............................. $1,898,597 $1,825,469 $1,629,332 Cost of goods sold..................... 1,613,880 1,577,244 1,396,172 ---------- ---------- ---------- Gross profit........................... 284,717 248,225 233,160 Selling, general and administrative expenses.............................. 152,807 149,747 126,050 Restructuring charge and impairment of long-lived assets..................... 33,391 -- 22,600 ---------- ---------- ---------- Operating income....................... 98,519 98,478 84,510 Interest expense, net of interest income of $2,452, $3,725 and $5,685... 92,045 82,004 77,581 Loss on sale of receivables............ 5,356 6,066 4,700 Other expense (income)................. 2,237 5,215 (678) ---------- ---------- ---------- Income (loss) from continuing operations before income taxes........ (1,119) 5,193 2,907 Income tax expense..................... 246 5,284 12,998 ---------- ---------- ---------- Loss from continuing operations........ (1,365) (91) (10,091) Income from discontinued operations, net of income taxes of $2,835....................... -- -- 4,306 Gain on sale of discontinued operations, net of income taxes of $85,358...................... -- -- 161,741 ---------- ---------- ---------- Income (loss) before extraordinary loss and cumulative effect of change in accounting principle.................. (1,365) (91) 155,956 Extraordinary loss from debt extinguishment, net of income taxes of $2,482 and $443.................... -- (3,724) (721) Cumulative effect of a change in accounting principle, net of income taxes of $5,083............. (8,850) -- -- ---------- ---------- ---------- Net income (loss)...................... $ (10,215) $ (3,815) $ 155,235 ========== ========== ========== Net income (loss) per basic and diluted common share: Continuing operations................. $ (0.02) $ -- $ (0.15) Discontinued operations............... -- -- 0.06 Gain on sale of discontinued operations........................... -- -- 2.44 Extraordinary loss.................... -- (0.06) (0.01) Cumulative effect of a change in accounting principle................. (0.14) -- -- ---------- ---------- ---------- Net income (loss)..................... $ (0.16) $ (0.06) $ 2.34 ========== ========== ========== Average common shares outstanding: Basic and diluted..................... 61,952 64,348 66,337 ========== ========== ==========
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 25, December 26, 1999 1998 ------------ ------------ ASSETS Current Assets: Cash and cash equivalents.......................... $ 13,980 $ 23,755 Accounts and other receivables, net of allowances of $8,557 and $7,228.............................. 233,819 237,645 Inventories........................................ 132,625 152,840 Other.............................................. 84,942 86,445 ---------- ---------- Total current assets.............................. 465,366 500,685 Property, plant and equipment, net.................. 443,526 447,121 Deferred tax assets................................. 86,235 70,632 Goodwill, net....................................... 256,362 264,138 Other assets........................................ 97,401 99,635 ---------- ---------- $1,348,890 $1,382,211 ========== ========== LIABILITIES AND COMMON STOCKHOLDERS' DEFICIT Current Liabilities: Short-term borrowings.............................. $ 3,088 $ 10,954 Current maturities of long-term debt............... 27,992 19,942 Accounts payable................................... 198,466 169,808 Accrued expenses................................... 132,709 143,302 ---------- ---------- Total current liabilities......................... 362,255 344,006 Long-term debt...................................... 884,550 846,107 Other, including post-retirement benefit obligation......................................... 253,206 271,869 Commitments and contingencies....................... Common stock (150,000 shares authorized, 70,521 shares issued and 61,904 shares outstanding at December 25, 1999 and 150,000 shares authorized, 70,521 shares issued and 62,182 shares outstanding at December 26, 1998).......................................... 705 705 Other paid-in capital............................... 585,484 585,401 Accumulated deficit................................. (641,117) (580,666) Accumulated other comprehensive loss................ (33,260) (23,427) Treasury stock, at cost (8,617 shares at December 25, 1999 and 8,339 shares at December 26, 1998).... (62,933) (61,784) ---------- ---------- Total common stockholders' deficit................ (151,121) (79,771) ---------- ---------- $1,348,890 $1,382,211 ========== ==========
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 25, December 26, December 27, 1999 1998 1997 ------------ ------------ ------------ OPERATING ACTIVITIES Loss from continuing operations.......... $ (1,365) $ (91) $ (10,091) Adjustments to derive cash flow from continuing operating activities: Impairment of long lived assets......... 13,361 -- 22,600 Deferred income tax expense (benefit)... (6,800) (7,233) 4,252 Depreciation and leasehold amortization........................... 58,230 52,608 42,712 Goodwill amortization................... 7,023 7,023 6,669 Amortization of other assets............ 6,221 7,443 9,459 Decrease (increase) in accounts and other receivables...................... 1,826 (5,980) 35,819 Decrease (increase) in inventories...... 20,215 (4,841) (8,078) Increase (decrease) in interest payable................................ 946 (2,629) (520) Increase (decrease) in accounts payable................................ 28,658 10,031 (4,126) Other, net.............................. (33,252) (42,466) 5,713 -------- -------- --------- Net cash provided by continuing operating activities.................. 95,063 13,865 104,409 -------- -------- --------- Cash used in Wallcoverings, Floorcoverings, Airbag and the Mastercraft Group discontinued operations.............................. -- (15,052) (4,719) Cash used in other discontinued operations.............................. (16,770) (14,043) (12,252) -------- -------- --------- Net cash used in discontinued operations............................ (16,770) (29,095) (16,971) -------- -------- --------- INVESTING ACTIVITIES Additions to property, plant and equipment............................... (86,430) (98,991) (71,775) Sales of property, plant and equipment... 10,126 7,953 5,879 Acquisitions of businesses, net of cash acquired................................ (425) (25,257) 3,447 Net proceeds from disposition of discontinued operations................. -- 71,200 562,100 Other, net............................... 3,997 (1,239) (99,102) -------- -------- --------- Net cash provided by (used in) investing activities.................. (72,732) (46,334) 400,549 -------- -------- --------- FINANCING ACTIVITIES Issuance of long-term debt............... 100,000 225,000 109 Proceeds from (reduction of) participating interests in accounts receivable, net of redemptions.......... 2,000 (7,500) (13,000) Repayment of long-term debt.............. (20,607) (264,480) (256,379) Increase (decrease) on short-term borrowings.............................. (7,405) (1,358) 7,089 Net borrowings (repayments) on revolving credit facilities....................... (35,293) 136,717 (194,000) Purchases of treasury stock.............. (2,097) (25,013) (19,715) Dividends paid........................... (50,198) -- -- Other, net............................... (1,736) (2,051) (2,401) -------- -------- --------- Net cash provided by (used in) financing activities.................. (15,336) 61,315 (478,297) -------- -------- --------- Increase (decrease) in cash and cash equivalents............................. (9,775) (249) 9,690 Cash and cash equivalents at beginning of year.................................... 23,755 24,004 14,314 -------- -------- --------- Cash and cash equivalents at end of year.................................... $ 13,980 $ 23,755 $ 24,004 ======== ======== =========
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)
Accumulated Current Year Other Other Comprehensive Accumulated Comprehensive Common Paid-in Treasury Income (Loss) Total Deficit Loss Stock Capital Stock ------------- --------- ----------- ------------- ------ -------- -------- Balance at December 28, 1996.. $(194,578) $(729,315) $(30,963) $705 $585,207 $(20,212) Comprehensive income: Net income................... $ 155,235 155,235 155,235 -- -- -- -- Other comprehensive income, net of tax: Foreign currency translation adjustments................ (8,325) (8,325) -- (8,325) -- -- -- Pension equity adjustment... (535) (535) -- (535) -- -- -- --------- $ 146,375 ========= Compensation expense.......... 683 -- -- -- 683 -- Purchase of treasury stock (2,245 shares)............... (19,715) -- -- -- -- (19,715) Exercise of stock options (373 shares)................. 385 (2,771) -- -- -- 3,156 --------- --------- -------- ---- -------- -------- Balance at December 27, 1997.. (66,850) (576,851) (39,823) 705 585,890 (36,771) Comprehensive income: Net loss..................... $ (3,815) (3,815) (3,815) -- -- -- -- Other comprehensive income, net of tax: Foreign currency translation adjustments................ 7,569 7,569 -- 7,569 -- -- -- Pension equity adjustment... 8,827 8,827 -- 8,827 -- -- -- --------- $ 12,581 ========= Compensation expense.......... (489) -- -- -- (489) -- Purchase of treasury stock (3,669 shares)............... (25,013) -- -- -- -- (25,013) --------- --------- -------- ---- -------- -------- Balance at December 26, 1998.. (79,771) (580,666) (23,427) 705 585,401 (61,784) Comprehensive income: Net loss..................... $ (10,215) (10,215) (10,215) -- -- -- -- Other comprehensive income, net of tax: Foreign currency translation adjustments................ (10,649) (10,649) -- (10,649) -- -- -- Pension equity adjustment... 816 816 -- 816 -- -- -- --------- $ (20,048) ========= Compensation expense.......... 545 -- -- -- 545 -- Dividends..................... (50,198) (50,198) Purchase of treasury stock (385 shares)................. (2,097) -- -- -- -- (2,097) Exercise of stock options (107 shares)................. 448 (38) -- -- (462) 948 --------- --------- -------- ---- -------- -------- Balance at December 25, 1999.. $(151,121) $(641,117) $(33,260) $705 $585,484 $(62,933) ========= ========= ======== ==== ======== ========
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 25, 1999, Blackstone Capital Partners L.P. ("Blackstone Partners") and Wasserstein Perella Partners L.P. ("WP Partners") and their respective affiliates collectively own approximately 87% of the common stock of the Company. The Company conducts all of its operating activities through its wholly- owned Collins & Aikman Products Co. ("C&A Products") subsidiary. 2. Summary of Significant Accounting Policies Basis of Presentation -- The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany items have been eliminated in consolidation. Certain prior year items have been reclassified to conform with the fiscal 1999 presentation. Use of Estimates -- The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fiscal Year -- Fiscal 1999, 1998 and 1997 were 52-week years which ended on December 25, 1999, December 26, 1998 and December 27, 1997. Earnings Per Share -- Basic earnings per share is based on income available to common shareholders divided by the weighted average number of common shares outstanding. Diluted earnings per share is based on income available to common shareholders divided by the sum of the weighted average number of common shares outstanding and all diluted potential common shares. Diluted potential common shares include shares which may be issued upon the assumed exercise of employee stock options less the number of treasury shares assumed to be purchased from the proceeds, including applicable compensation expense. See Note 24. Cash and Cash Equivalents -- Cash and cash equivalents include all cash balances and highly liquid investments with an original maturity of three months or less. Accounts and Other Receivables -- Accounts and other receivables consist primarily of the Company's trade receivables and the retained interest in the Receivables Facility. See Note 11. The Company has provided an allowance against uncollectible accounts. Inventories -- Inventories are valued at the lower of cost or market, but not in excess of net realizable value. Cost is determined on the first-in, first-out basis. Insurance Deposits and Reserves -- Other current assets as of December 25, 1999 and December 26, 1998 included $1.2 million, which was on deposit with an insurer to cover a portion of the Company's self-insured workers' compensation, automotive and general liability insurance. The Company's reserves for these claims were determined based upon actuarial analyses and aggregated $20.4 million and $18.4 million at December 25, 1999 and December 26, 1998, respectively. Of these reserves, $5.4 million and $6.3 million were classified in accrued expenses at December 25, 1999 and December 26, 1998, respectively. Property, Plant and Equipment -- Property, plant and equipment are stated at cost. Provisions for depreciation are primarily computed on a straight-line basis over the estimated useful lives of the assets, presently ranging from 3 to 40 years. Leasehold improvements are amortized over the lesser of the lease term or the estimated useful lives of the improvements. F-6 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 2. Summary of Significant Accounting Policies -- (Continued) Long-Lived Assets -- Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long- Lived Assets to be Disposed Of", establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed of. SFAS No. 121 requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable, and that certain long-lived assets and identifiable intangibles to be disposed of be reported at the lower of carrying amount or fair value less cost to sell. During fiscal 1999, the Company incurred a charge of $13.4 million relating to asset impairments recognized in the Reorganization (See Note 15). During the third quarter of fiscal 1997, Collins & Aikman Plastics, Inc. ("C&A Plastics"), a wholly-owned subsidiary of the Company, incurred charges of $31.3 million for provisions for certain programs operating at a loss, inventory adjustments, certain previously deferred costs and other provisions. These charges primarily related to manufacturing inefficiencies experienced by C&A Plastics related to product launches and record demand for its products. In addition, the recoverability of C&A Plastics' assets and goodwill was evaluated and the Company determined that the carrying values of certain assets and the goodwill allocated to two of its manufacturing facilities were impaired. Accordingly, at that time the Company wrote down fixed assets by $5.1 million and the carrying value of goodwill was reduced by $17.5 million. The adjustments were determined based on management's estimate of the future cash flows generated by the assets and their values. Goodwill -- Goodwill, representing the excess of purchase price over the fair value of net assets of the acquired entities, is being amortized on a straight-line basis over a period of 40 years. Amortization of goodwill applicable to continuing operations was $7.0 million for fiscal 1999 and 1998 and $6.7 million for fiscal 1997. Accumulated amortization at December 25, 1999 and December 26, 1998 was $24.9 million and $17.9 million, respectively. The carrying value of goodwill at an enterprise level is reviewed periodically based on the non-discounted cash flows and pretax income of the entities acquired over the remaining amortization periods. At December 25, 1999, the Company believes the recorded value of goodwill in the amount of $256.4 million is fully recoverable. See Note 3. Revenue Recognition -- The Company recognizes revenue from product sales when it has shipped the goods to the customer. The Company generally allows its customers the right of return only in the case of defective products. The Company provides a reserve for estimated defective product costs at the time of the sale of the products. Derivative Financial Instruments -- The Company utilizes derivative financial instruments to manage risks associated with foreign exchange rate and interest rate market volatility. Gains and losses on hedges of existing assets or liabilities are included in the carrying amounts of those assets or liabilities and are ultimately recognized in income as the assets or liabilities are liquidated. Gains and losses related to qualifying hedges of firm commitments or anticipated transactions are deferred and are recognized in income or as adjustments of carrying amounts when the hedged transaction occurs. Gains and losses on derivative contracts that do not qualify as hedges are recognized currently in other income (expense). The Company does not hold or issue derivative financial instruments for trading purposes. See Note 5. To the extent that a qualifying hedge is terminated or ceases to be effective as a hedge, any deferred gains and losses up to that point continue to be deferred and are included in the basis of the underlying transaction. To the extent that the anticipated transactions are no longer likely to occur, the related hedges are closed with gains or losses charged to earnings on a current basis. F-7 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 2. Summary of Significant Accounting Policies -- (Continued) Foreign Currency -- Foreign currency activity is reported in accordance with SFAS No. 52, "Foreign Currency Translation". SFAS No. 52 generally provides that the assets and liabilities of foreign operations be translated at the current exchange rates as of the end of the accounting period and that revenues and expenses be translated using average exchange rates. The resulting translation adjustments arising from foreign currency translations are accumulated as a component of other comprehensive income. Gains and losses resulting from foreign currency transactions are recognized in other income (expense). The Company recognized a gain from foreign currency transactions of $0.5 million in fiscal 1999, and losses of $4.8 million and $1.9 million in fiscal 1998 and 1997, respectively. Recorded balances that are denominated in a currency other than the functional currency are adjusted to the functional currency using the exchange rate at the balance sheet date. Environmental -- The Company records an estimated loss when it is probable that an environmental liability has been incurred and the amount of the loss can be reasonably estimated. The Company also considers estimates of certain reasonably possible environmental liabilities in determining the aggregate amount of environmental reserves. The Company reviews all environmental claims from time to time and adjusts the reserves accordingly. Accruals for environmental liabilities are generally included in the consolidated balance sheet as other non-current liabilities at undiscounted amounts and exclude claims for recoveries from insurance or other third parties. Accruals for insurance or other third party recoveries for environmental liabilities are recorded when it is probable that the claim will be realized. Newly Issued Accounting Standards -- In September 1999, the Financial Accounting Standards Board's ("FASB") Emerging Issues Task Force ("EITF") reached a consensus regarding EITF Issue No. 99-5, "Accounting for Pre- Production Costs Related to Long-Term Supply Arrangements". EITF No. 99-5 requires that design and development costs for products to be sold under long- term supply arrangements be expensed as incurred, and costs incurred for molds, dies and other tools that will be used in producing the products under long-term supply arrangements be capitalized and amortized over the shorter of the expected useful life of the assets or the term of the supply arrangement. The consensus can be applied prospectively to costs incurred after December 31, 1999 or as a cumulative effect of a change in accounting principle as of the beginning of a company's fiscal year. The Company is currently analyzing the impact of EITF No. 99-5. In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133 establishes accounting and reporting standards requiring that every derivative instrument (including certain derivative instruments embedded in other contracts) be recorded in the balance sheet as either an asset or liability measured at its fair value. SFAS No. 133 requires that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows a derivative's gains and losses to offset related results on the hedged item in the income statement, and requires that a company formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. In July 1999, the FASB issued SFAS No. 137, "Accounting for Derivative Instruments and Hedging Activities--Deferral of the Effective Date of FASB Statement No. 133, an Amendment of FASB Statement No. 133". Under SFAS No. 137, SFAS No. 133 is now effective for fiscal years beginning after June 15, 2000. A company may also implement SFAS No. 133 as of the beginning of any fiscal quarter after issuance. SFAS No. 133 cannot be applied retroactively. The Company is currently analyzing the impact of adoption of SFAS No. 133. The adoption of SFAS No. 133 could increase volatility in earnings and other comprehensive income. In April 1998, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position ("SOP") 98-5, "Reporting on the Costs of Start-up Activities". See Note 4. F-8 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 2. Summary of Significant Accounting Policies -- (Continued) In March 1998, the AICPA issued SOP 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use". SOP 98-1 provides guidance on the accounting for the costs of computer software developed or obtained for internal use. SOP 98-1 was adopted by the Company on December 27, 1998 and was applied to internal-use computer software costs incurred in fiscal 1999. The adoption of this standard did not have a material impact on its consolidated financial position or results of operations. 3. Acquisitions and Joint Ventures On August 26, 1998, the Company acquired from a third party the remaining 50% interest in Industrias Enjema, S.A. de C.V. ("Enjema"), 50% of which was already owned by the Company's JPS Automotive L.P. subsidiary ("JPS Automotive"). The total purchase price for the acquisition was approximately $1.0 million. Enjema is a carpet systems manufacturer located in Mexico. In September 1998, JPS Automotive distributed its 50% ownership interest in Enjema to the Company. Enjema's operating assets were transferred to an existing facility in Mexico during 1999. On June 30, 1998, the Company acquired for approximately $4.7 million Pepers Beheer B.V., an automotive accessory floormat manufacturer located in the Netherlands, which has been renamed Collins & Aikman Automotive Floormats Europe, B.V. ("C&A Floormats Europe"). Under the terms of the purchase agreement, the Company is required to make additional contingent payments to the sellers in amounts of up to approximately $3.6 million if C&A Floormats Europe meets certain operating goals in fiscal 1998 and fiscal 1999. The Company paid into escrow approximately $0.4 million during 1999 for operating goals met in fiscal 1998, which the sellers will receive in 2000 if the Company has no claims against the escrowed funds prior to such release. The Company currently estimates that it will pay into escrow approximately $0.7 million during 2000 for operating goals met in fiscal 1999. On December 4, 1997, the Company entered into a joint venture with Courtaulds Textiles (Holdings) Limited ("Courtaulds") to manufacture automotive interior fabrics in the United Kingdom. The Company and Courtaulds each own 50% of the joint venture. The Company's investment in the joint venture of $5.6 million at December 25, 1999 and $5.8 million at December 26, 1998 has been included in other assets in the accompanying consolidated balance sheets. The Company entered into a joint venture agreement to manufacture plastic trim products in the United Kingdom with Kigass Automotive Group ("Kigass") in October 1997 in which the Company and Kigass each owned 50% of the joint venture. The Company acquired Kigass on February 2, 1998. The purchase price for the acquisition was approximately $25.2 million. Kigass has been renamed Collins & Aikman Plastics (UK) Limited ("C&A Plastics UK"). Under the terms of the purchase agreement, the Company assumed effective control of C&A Plastics UK on January 1, 1998. C&A Plastics UK's customers include Nissan, Opel and Rover. Goodwill resulting from the acquisition was $15.0 million. On August 31, 1997, the Company purchased certain automotive acoustics assets in Germany and assumed certain liabilities from Perstorp AB ("Perstorp") for approximately $13.6 million. On December 11, 1996, the Company acquired Perstorp's automotive supply operations (primarily acoustical products) in North America, the United Kingdom and Spain (collectively referred to as "Perstorp Components") for $108 million. In addition, in December 1996, the Company and Perstorp entered into a joint venture agreement (the "Collins & Aikman/Perstorp Joint Venture") relating to Perstorp's automotive supply operations (primarily acoustical and plastic components) in Sweden, Belgium and France. During 1997, the Company finalized the purchase price for the Perstorp Components acquisition with the seller. In settlement of disputed claims by the Company against Perstorp arising from the December 1996 and August 1997 acquisitions, F-9 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 3. Acquisitions and Joint Ventures -- (Continued) Perstorp transferred its 50% interest in the Collins & Aikman/Perstorp Joint Venture to the Company on December 16, 1997. Goodwill resulting from these 1996 and 1997 acquisitions is approximately $14.5 million. If the Company had acquired the Collins & Aikman/Perstorp Joint Venture at the beginning of fiscal 1997, pro forma sales, operating income and loss from continuing operations would have been $1,768.9 million, $89.5 million and $(8.2) million, respectively, in 1997. On December 11, 1996, the Company also acquired JPS Automotive L.P. for $220 million, consisting of approximately $195 million of indebtedness of JPS Automotive and approximately $25 million of cash. The Company also acquired the minority interest in a JPS Automotive subsidiary for $10 million. During 1997, the Company finalized the purchase price and received approximately $11.2 million from the seller as a reduction of the purchase price. The purchase price allocation related to the JPS Automotive acquisition included goodwill of approximately $105.9 million and certain reserves related to management's plans to rationalize certain acquired manufacturing facilities. See Note 15. The results of operations of the acquired companies are included in the Company's consolidated statements of operations for the periods in which they were owned by the Company. The acquisitions were accounted for under the purchase method of accounting. The excess of the purchase price for each acquisition over the estimated fair value of the tangible and identifiable intangible net assets acquired is being amortized over a period of 40 years on a straight line basis. In determining the amortization period of goodwill assigned to these acquisitions, management assessed the impact on the Company's ability to strategically position itself with the long term trends in the design and manufacture of automotive products. The trends that management has identified include, but are not limited to, increased use of plastic components, the increased sourcing of interior systems and automotive manufacturers' movement to fewer suppliers and to suppliers with engineering and design capabilities. The Company anticipates the reduction in the supply chain may result in integration whereby the complete interior of an automobile will be co-designed and developed with fewer suppliers who will manufacture and deliver required components. The Company anticipates these capabilities will be essential to its long term strategic positioning as a key supplier within the automotive industry and with its customers. 4. Change in Accounting Principle In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start- up Activities". SOP 98-5 provides guidance on the financial reporting of start-up costs and organization costs and requires that all non-governmental entities expense the costs of start-up activities as these costs are incurred instead of being capitalized and amortized. The Company adopted SOP 98-5 on December 27, 1998. The initial impact of adopting SOP 98-5 resulted in a charge of approximately $8.9 million, net of income taxes of $5.1 million, which has been reflected as a cumulative effect of a change in accounting principle in the accompanying consolidated statement of operations for the fiscal year ended December 25, 1999. 5. Interest Rate And Foreign Currency Protection Programs During April 1997, the Company entered into a two year interest rate swap agreement in which the Company effectively exchanged $27 million of 11 1/2% fixed rate debt for floating rate debt at six month LIBOR plus a 4.72% margin. In connection with this swap agreement, the Company also limited its interest rate exposure by entering into an 8.50% cap on LIBOR on $27 million of notional principal amount. Payments to be received, if any, as a result of these agreements are accrued as an adjustment to interest expense. The effect of the above interest rate protection agreements and similar agreements which expired in prior years on the operating results of the Company was to decrease interest expense by $0.2 million, $0.3 million and $0.1 million in fiscal 1999, 1998 and 1997, respectively. F-10 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 5. Interest Rate And Foreign Currency Protection Programs -- (Continued) The primary purpose of the Company's foreign currency hedging activities is to protect against the volatility associated with intercompany funding arrangements, third party loans and foreign currency purchase and sale transactions. Corporate policy prescribes the range of allowable hedging activity. The Company primarily utilizes forward exchange contracts and purchased options with durations of generally less than 12 months. The Company has in place forward exchange contracts denominated in multiple currencies which will mature during fiscal 2000. These contracts, which aggregated a U.S. dollar equivalent of $95.6 million at December 25, 1999, are to manage the currency volatility associated with purchase transactions. The fair value of these contracts approximated the contract value at December 25, 1999. During 1999 and 1998, the Company purchased option contracts giving the Company the right to purchase U.S. dollars for use by its Canadian operations. The premiums associated with these contracts are amortized over the contracts' terms which are one year or less. The total notional amount purchased was $130.4 million with associated premiums of $2.2 million. The total notional amount outstanding at December 25, 1999 was $45.0 million. During April 1997, the Company entered into an agreement to limit its foreign currency exposure related to $45 million of U.S. dollar denominated borrowings of a Canadian subsidiary. The agreement swapped LIBOR based interest rates for the Canadian equivalent as well as fixed the exchange rate for the principal balance upon maturation. During fiscal 1997, this agreement resulted in reductions of interest expense and other expenses of approximately $1.7 million. This agreement was terminated on June 1, 1998 as a result of the repayment of the Canadian term loan. The term loan balance was repaid in conjunction with the refinancing and replacement of the Company's credit facilities. See Note 11 for additional information on the new credit facility. 6. Inventories Inventory balances are summarized below (in thousands):
December 25, December 26, 1999 1998 ------------ ------------ Raw materials................................... $ 69,182 $ 79,285 Work in process................................. 27,073 32,408 Finished goods.................................. 36,370 41,147 -------- -------- $132,625 $152,840 ======== ========
7. Other Current Assets Other current asset balances are summarized below (in thousands):
December 25, December 26, 1999 1998 ------------ ------------ Deferred tax assets............................. $23,868 $30,027 Prepaid tooling and molds....................... 27,361 27,011 Other........................................... 33,713 29,407 ------- ------- $84,942 $86,445 ======= =======
F-11 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 8. Property, Plant and Equipment, Net Property, plant and equipment, net, are summarized below (in thousands):
December 25, December 26, 1999 1998 ------------ ------------ Land and improvements......................... $ 19,827 $ 25,260 Buildings..................................... 156,261 146,577 Machinery and equipment....................... 551,288 481,532 Leasehold improvements........................ 5,749 1,171 Construction in progress...................... 29,340 53,673 -------- -------- 762,465 708,213 Less accumulated depreciation and amortization................................. (318,939) (261,092) -------- -------- $443,526 $447,121 ======== ========
Depreciation and leasehold amortization of property, plant and equipment applicable to continuing operations was $58.2 million, $52.6 million, and $42.7 million for fiscal 1999, 1998 and 1997, respectively. 9. Accrued Expenses Accrued expenses are summarized below (in thousands):
December 25, December 26, 1999 1998 ------------ ------------ Payroll and employee benefits................... $ 41,362 $ 46,733 Interest........................................ 13,582 12,636 Insurance....................................... 18,246 13,351 Restructuring reserves.......................... 13,518 1,940 Other........................................... 46,001 68,642 -------- -------- $132,709 $143,302 ======== ========
10. Long-Term Debt Long-term debt is summarized below (in thousands):
December 25, December 26, 1999 1998 ------------ ------------ Bank Credit Facilities: Revolving Credit Facility, including $43.6 million by the Canadian Borrowers at December 25, 1999 and $57.4 million at December 26, 1998................. $ 111,621 $143,878 Term Loan A Facility................................ 85,000 100,000 Term Loan B Facility................................ 122,000 125,000 Term Loan C Facility................................ 100,000 -- Public Indebtedness: 11 1/2% Senior Subordinated Notes................... 400,000 400,000 JPS Automotive 11 1/8% Senior Notes, including premiums of $1.3 million and $2.2 million, respectively..................... 87,370 88,247 Other................................................ 6,551 8,924 --------- -------- Total debt........................................... 912,542 866,049 Less current maturities.............................. (27,992) (19,942) --------- -------- $ 884,550 $846,107 ========= ========
F-12 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 10. Long-Term Debt -- (Continued) Bank Credit Facilities On May 28, 1998, the Company entered, through C&A Products, into new credit facilities consisting of: (i) a senior secured term loan facility in the amount of $100 million payable in quarterly installments until final maturity on December 31, 2003 (the "Term Loan A Facility"); (ii) a senior secured term loan facility in the principal amount of $125 million payable in quarterly installments until final maturity on June 30, 2005 (the "Term Loan B Facility" and, together with the Term Loan A Facility and Term Loan C Facility, as hereinafter defined, the "Term Loan Facilities"); and (iii) a senior secured revolving credit facility in an aggregate principal amount of up to $250 million terminating on December 31, 2003, of which $60 million (or the equivalent thereof in Canadian dollars) is available to two of the Company's Canadian subsidiaries (the "Canadian Borrowers"), and of which up to $50 million is available as a letter of credit facility (the "Revolving Credit Facility" and together with the Term Loan Facilities, the "Credit Agreement Facilities"). In addition, the Credit Agreement Facilities include a provision for a Term Loan C credit facility (the "Term Loan C Facility") of up to $150 million. On May 13, 1999, the Company closed on the Term Loan C Facility in the principal amount of $100 million. The Term Loan C Facility is payable in quarterly installments beginning in December 1999 through final maturity in December 2005. The Company used approximately $44 million of the proceeds from the Term Loan C Facility to pay a special dividend to shareholders on May 28, 1999. See Note 16. The remaining proceeds were used to repay amounts outstanding on the Revolving Credit Facility and for general corporate purposes. The Credit Agreement Facilities, which are guaranteed by the Company and its U.S. subsidiaries (subject to certain exceptions), contain restrictive covenants including maintenance of interest coverage and leverage ratios and various other restrictive covenants which are customary for such facilities. Effective March 8, 1999, the Company, in view of the decreased sales of automotive fabrics and the General Motors strike in 1998, obtained an amendment to the Credit Agreement Facilities primarily to modify the covenants relating to interest coverage and leverage ratios. The amendment resulted generally in an increase in the interest rates charged under the Credit Agreement Facilities. In addition, under the Credit Agreement Facilities, C&A Products is generally prohibited from paying dividends or making other distributions to the Company except to the extent necessary to allow the Company to (w) pay taxes and ordinary expenses, (x) make permitted repurchases of shares or options, (y) make permitted investments in finance, foreign, or acquired subsidiaries and (z) pay permitted dividends. The Company is permitted to pay dividends and repurchase shares of the Company (i) in any fiscal year in an aggregate amount up to $12 million and (ii) if certain financial ratios are satisfied for the period from April 28, 1996 through the last day of the Company's most recently ended fiscal quarter, in an aggregate amount equal to 50% of the Company cumulative consolidated net income for that period and, in addition, is permitted to pay dividends and repurchase shares in amounts representing net proceeds from the sale of the Company's Imperial Wallcoverings, Inc. subsidiary ("Wallcoverings"). The Company's ability to pay dividends is also restricted by the indenture governing the Subordinated Notes discussed below. The Company's obligations under the Credit Agreement Facilities are secured by a pledge of stock of C&A Products and its significant subsidiaries and certain intercompany indebtedness. Indebtedness under the Term Loan A Facility and U.S. dollar-denominated indebtedness under the Revolving Credit Facility as amended March 8, 1999 bears interest at a per annum rate equal to the Company's choice of (i) The Chase Manhattan Bank's ("Chase's") Alternate Base Rate (which is the highest of Chase's announced prime rate, the Federal Funds Rate plus .5% and Chase's base certificate of deposit rate plus 1%) plus a margin (the "ABR/Canadian Prime Rate Margin") ranging from .25% to 1.25% or (ii) the offered rates for Eurodollar deposits ("LIBOR") of one, two, three, six, nine or twelve months, as selected by the Company, plus a margin (the "LIBOR/BA Margin") ranging from 1.25% to 2.25%. Margins, which are subject to adjustment based on changes in the Company's ratio of funded debt to EBITDA (i.e., earnings before interest, taxes, depreciation, amortization and other non-cash charges) were 2.25% in the case of the LIBOR/BA Margin and 1.25% in the case of the ABR/Canadian Prime Rate Margin on December 25, 1999. Canadian-dollar F-13 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 10. Long-Term Debt -- (Continued) denominated indebtedness incurred by the Canadian Borrowers under the Revolving Credit Facility bears interest at a per annum rate equal to the Canadian Borrowers' choice of (i) the Canadian Prime Rate (which is the greater of Chase's prime rate for Canadian dollar-denominated loans in Canada and the Canadian dollar-denominated one month bankers' acceptance rate plus 1.00%) plus the ABR/Canadian Prime Rate Margin or (ii) the bill of exchange rate ("Bankers' Acceptance" or "BA") denominated in Canadian dollars for one, two, three or six months plus the LIBOR/BA Margin. Indebtedness under the Term Loan B Facility as amended March 8, 1999 bears interest at a per annum rate equal to the Company's choice of (i) Chase's Alternate Base Rate (as described above) plus a margin ranging from 1.25% to 1.75% (the "Tranche B ABR Margin") or (ii) LIBOR of one, two, three, or six months, as selected by the Company, plus a margin ranging from 2.25% to 2.75% (the "Tranche B LIBOR Margin"). The Tranche B ABR Margin and the Tranche B LIBOR Margin, were 1.75% and 2.75%, respectively, at December 25, 1999. Indebtness under the Term Loan C Facility bears interest at a per annum rate equal to LIBOR plus 3.25% or Chase's Alternate Base Rate plus 2.25%. The weighted average rate of interest on the Credit Agreement Facilities at December 25, 1999 was 8.67%. Public Indebtedness In June 1996, the Company's wholly-owned subsidiary, C&A Products, issued at face value $400 million principal amount of 11 1/2% Senior Subordinated Notes due 2006 (the "Subordinated Notes"), which are guaranteed by the Company. The Company used approximately $356.8 million of the total net proceeds of $387.0 million to repay $348.2 million principal amount of outstanding bank borrowings plus accrued interest on such borrowings and related fees and expenses and used the remainder for general corporate purposes. The indenture governing the Subordinated Notes generally prohibits the Company, C&A Products and any Restricted Subsidiary (as defined) from making certain payments and investments unless a certain financial test is satisfied and the aggregate amount of such payments and investments since the issue date is less than a specified amount. The prohibition is subject to a number of significant exceptions, including dividends to stockholders of the Company or stock repurchases not exceeding $10 million in any fiscal year or $20 million in the aggregate, dividends to stockholders of the Company or stock repurchases in the amount of the net proceeds from the sale of Wallcoverings and dividends to the Company to permit it to pay its operating and administrative expenses. The Subordinated Notes indenture also contains other restrictive covenants (including, among others, limitations on the incurrence of indebtedness, asset dispositions and transactions with affiliates) which are customary for such securities. These covenants are also subject to a number of significant exceptions. The Company does not currently meet the Subordinated Notes indenture's general test for the incurrence of indebtedness, and does not expect to meet such test during 2000. However, the Company expects all of its borrowing needs for the foreseeable future to be allowed under exceptions for permitted indebtedness in the indenture. As of the JPS Automotive acquisition date, $180 million principal amount of JPS Automotive 11 1/8% Senior Notes due 2001 (the "JPS Automotive Senior Notes") were outstanding. Of this amount, $68 million had been purchased by the Company in the open market and were subsequently contributed to or repurchased by JPS Automotive. The remaining $112 million face value of JPS Automotive Senior Notes were recorded at a market value of $117.2 million on the date of the acquisition. Through retirements of the JPS Automotive Senior Notes primarily during 1997 and 1998, the Company reduced the outstanding face value to $86.1 million at December 25, 1999. The indenture governing the JPS Automotive Senior Notes generally prohibits JPS Automotive from making certain payments and investments (generally, dividends and distributions on its equity interests; purchases or redemptions of its equity interests; purchases of any indebtedness subordinated to the JPS Automotive Senior Notes; and investments other than as permitted) unless a certain financial test is satisfied and the aggregate amount of such payments and investments since the issue date is less than a specified amount (the "JPS Automotive Restricted Payments Tests"). These conditions were satisfied immediately following the closing of the JPS Automotive Acquisition and as of December 25, 1999. The JPS Automotive Restricted Payments Tests F-14 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 10. Long-Term Debt -- (Continued) are subject to a number of significant exceptions. The indenture governing the JPS Automotive Senior Notes also contains other restrictive covenants (including, among others, limitations on the incurrence of indebtedness and preferred stock, asset dispositions and transactions with affiliates including the Company and C&A Products) which are customary for such securities. These covenants are also subject to a number of significant exceptions. At December 25, 1999, the scheduled annual maturities of long-term debt are as follows (in thousands):
Fiscal Year Ending ------------------ December 2000.................................................. $ 27,992 December 2001.................................................. 116,435 December 2002.................................................. 32,860 December 2003.................................................. 28,278 December 2004.................................................. 165,446 Later Years.................................................... 541,531 --------- $ 912,542 =========
Total interest paid by the Company on all indebtedness was $91.9 million, $86.6 million and $93.0 million for fiscal 1999, 1998 and 1997, respectively. 11. Receivables Facility On March 31, 1995, C&A Products entered, through a trust formed by Carcorp, Inc., ("Carcorp"), a wholly-owned, bankruptcy remote subsidiary of C&A Products, into a receivables facility (the "Receivables Facility"), comprised of (i) term certificates, which were issued on March 31, 1995 in an aggregate face amount of $110 million having a term of five years and (ii) variable funding certificates, which represented revolving commitments of up to an aggregate of $75 million having a term of five years. Carcorp purchased on a revolving basis and transferred to the Trust virtually all trade receivables generated by C&A Products and certain of its subsidiaries (the "Sellers") in the United States and Canada. The certificates represented the right to receive payments generated by the receivables held by the Trust. Availability under the variable funding certificates at any time depended primarily on the amount of receivables generated by the Sellers from sales to the automotive industry, the rate of collection on those receivables and other characteristics of those receivables which affect their eligibility (such as the bankruptcy or downgrading below investment grade of the obligor, delinquency and excessive concentration). Based on these criteria, at December 25, 1999 the maximum amount available under the variable funding certificates was $66.5 million, of which $0.1 million was not utilized. The proceeds received by Carcorp from collections on receivables, after the payment of expenses and amounts due on the certificates, were used to purchase new receivables from the Sellers. Collections on receivables were deemed to remain in trust if at any time the facility does not contain sufficient eligible receivables to support the outstanding certificates. The weighted average interest rate on the sold interests under the Receivables Facility at December 25, 1999 was 6.4%. Under the Receivables Facility, the term certificates bore interest at an average rate equal to one month LIBOR plus .34% annum and the variable funding certificates bore interest, at Carcorp's option, at LIBOR plus .40% per annum or a prime rate. F-15 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 11. Receivables Facility -- (Continued) In connection with the receivables sales, losses of $5.4 million, $6.1 million, and $4.7 million were incurred for continuing operations in fiscal 1999, 1998, and 1997 respectively. As of December 25, 1999 and December 26, 1998, Carcorp's total receivables pool was $214.8 million and $202.4 million, respectively. As of December 25, 1999 and December 26, 1998, the holders of term certificates and variable funding certificates collectively had invested $116.5 million and $114.5 million, respectively, to purchase an undivided senior interest (net of settlements in transit) in the Trust's receivables pool and, accordingly, such receivables were not reflected in the Company's accounts and other receivables balances as of those dates. On December 27, 1999, the Company entered into a new receivables facility (the "New Receivables Facility"), replacing the Receivables Facility. The New Receivables Facility utilizes funding provided by commercial paper conduits sponsored by three of the Company's lenders under its Credit Agreement Facilities. Carcorp remains the purchaser of the Sellers' trade receivables, transferring rights to collections on those receivables to the conduits. The conduits in turn issue commercial paper which is collateralized by those rights. Availability under the New Receivables Facility at any time depends primarily on the amount of receivables generated by the Sellers and the rate of collection on those receivables and other characteristics of those receivables that affect their eligibility (such as bankruptcy or downgrading below investment grade of the obligor, delinquency and excessive concentration). The liquidity facilities backing the New Receivables Facility have terms of 364 days, renewable annually for up to five years. The total funding available to the Company on a revolving basis under the New Receivables Facility is up to $171.6 million, depending upon criteria similar to those in the Receivables Facility. On December 27, 1999, the Company funded $120 million through the New Receivables Facility, leaving approximately $12 million available, but unutilized. The interest rate on sold interests is equal to the rate paid by the conduits to the holders of the commercial paper plus a margin of .70% and dealer fees of .05% (6.66% at inception). In addition, the Company pays .25% on the unused committed portion of the facility. The New Receivables Facility contains certain other restrictions on Carcorp (including maintenance of $40 million net worth) and on the Sellers (including limitations on liens on receivables, modifications of the terms of receivables, and change in credit and collection practices) customary for facilities of this type. The commitments under the New Receivables Facility are subject to termination prior to their term upon the occurrence of certain events, including payment defaults, breach of covenants, including defined interest coverage and leverage ratios, bankruptcy, insufficient eligible receivables to support the outstanding certificates, default by C&A Products in servicing the receivables and failure of the receivables to satisfy certain performance criteria. 12. Lease Commitments The Company is the lessee under various long-term operating leases for land and buildings for periods up to forty years. The majority of these leases contain renewal provisions. In addition, the Company leases transportation, operating and administrative equipment for periods ranging from one to ten years. The Company maintains a master equipment lease arrangement with a bank. The Company made lease payments under this arrangement related to continuing operations of approximately $5.8 million, $5.4 million and $5.6 million for fiscal 1999, 1998 and 1997, respectively. The Company has a purchase option on the equipment at the end of the lease term based on the fair market value of the equipment and has additional options to cause the sale of some or all of the equipment or to purchase some or all of the equipment at prices determined under the agreement. The Company has classified the leases as operating. The Company may sell and lease back additional equipment in the future under the same master lease agreement, subject to the lessor's approval. F-16 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 12. Lease Commitments -- (Continued) At December 25, 1999, future minimum lease payments under operating leases for continuing operations are as follows (in thousands):
Fiscal Year Ending ------------------ December 2000.................................... $18,243 December 2001.................................... 14,714 December 2002.................................... 11,935 December 2003.................................... 8,787 December 2004.................................... 6,694 Later Years...................................... 8,107 ------- $68,480 =======
Rental expense of continuing operations under operating leases was $21.5 million, $17.3 million, and $15.4 million for fiscal 1999, 1998 and 1997, respectively. Obligations under capital leases are not significant. 13. Employee Benefit Plans Defined Pension and Postretirement Benefit Plans Subsidiaries of the Company have defined benefit pension plans covering substantially all employees who meet eligibility requirements. Plan benefits are generally based on years of service and employees' compensation during their years of employment. Funding of retirement costs for these plans complies with the minimum funding requirements specified by the Employee Retirement Income Security Act. Assets of the pension plans are invested primarily in equity and fixed income securities. Subsidiaries of the Company have also provided postretirement life and health coverage for certain retirees under plans currently in effect. Many of the subsidiaries' domestic and Canadian employees may be eligible for coverage if they reach retirement age while still employed by the Company. Most of these plans are contributory. In general, future increases in costs are fully passed on to the retiree. However, future increases in costs for the Canadian divisions and limited domestic operations are shared between the Company and the retiree. F-17 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 13. Employee Benefit Plans -- (Continued) The following tables provide a reconciliation of the projected benefit obligation, a reconciliation of plan assets, the funded status of the plans, and amounts recognized in the Company's consolidated balance sheets at December 25, 1999 and December 26, 1998 (in thousands):
Pension Benefits Postretirement Benefits ------------------------- ------------------------- Fiscal Year Ended Fiscal Year Ended December 25, December 26, December 25, December 26, 1999 1998 1999 1998 ------------ ------------ ------------ ------------ Change in benefit obligation: Benefit obligation at beginning of year........ $166,153 $158,605 $ 65,955 $ 77,500 Service cost.............. 9,084 8,713 1,552 1,611 Interest cost............. 10,946 10,709 4,262 4,589 Amendments................ 1,059 1,719 -- (60) Actuarial loss (gain)..... (5,617) 12,592 (10,844) (3,925) Employee contributions.... -- -- 865 995 Discontinued operations, including effect of disposition.............. -- (7,960) -- (9,729) Benefits paid............. (11,603) (16,175) (4,911) (5,026) Currency adjustment....... 518 (2,050) 592 -- -------- -------- -------- -------- Benefit obligation at end of year.................. $170,540 $166,153 $ 57,471 $ 65,955 ======== ======== ======== ======== Change in plan assets: Fair value of plan assets at beginning of year..... $144,221 $136,126 $ -- $ -- Actual return on plan assets................... 21,202 17,504 -- -- Employer contributions.... 4,740 16,368 4,046 4,031 Employee contributions.... -- -- 865 995 Discontinued operations, including effect of disposition.............. -- (8,073) -- -- Benefits paid............. (11,603) (16,175) (4,911) (5,026) Currency adjustment....... 696 (1,529) -- -- -------- -------- -------- -------- Fair value of plan assets at end of year........... $159,256 $144,221 $ -- $ -- ======== ======== ======== ======== Reconciliation of funded status to net amount recognized: Funded status............. $(11,284) $(21,932) $(57,471) $(65,955) Unrecognized net loss (gain)................... 7,934 22,995 (20,548) (10,306) Unrecognized prior service cost (gain).............. 2,478 1,324 (9,251) (11,066) -------- -------- -------- -------- Net amount recognized..... $ (872) $ 2,387 $(87,270) $(87,327) ======== ======== ======== ======== Amounts recognized in the consolidated balance sheet consist of: Prepaid benefit cost...... $ 13,884 $ 18,666 $ -- $ -- Accrued benefit liability................ (19,448) (21,473) (87,270) (87,327) Intangible asset.......... 3,045 2,146 -- -- Accumulated other comprehensive loss....... 1,647 3,048 -- -- -------- -------- -------- -------- Net amount recognized..... $ (872) $ 2,387 $(87,270) $(87,327) ======== ======== ======== ========
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $37.6 million, $35.5 million, and $17.5 million, respectively, as of December 25, 1999 and $34.7 million, $32.5 million and $12.1 million respectively, as of December 26, 1998. F-18 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 13. Employee Benefit Plans -- (Continued) The net periodic benefit cost of continuing operations for fiscal 1999, 1998, and 1997 includes the following components (in thousands):
Pension Benefits -------------------------------------- Fiscal Year Ended December 25, December 26, December 27, 1999 1998 1997 ------------ ------------ ------------ Components of net periodic benefit cost: Service cost........................... $ 9,084 $ 8,713 $7,295 Interest cost.......................... 10,946 10,709 9,640 Expected return on plan assets......... (12,392) (11,805) (9,701) Amortization of prior service cost (gain)................................ 38 426 (377) Recognized net actuarial loss.......... 690 699 525 ------- ------- ------ Net periodic benefit cost.............. $ 8,366 $ 8,742 $7,382 ======= ======= ====== Postretirement Benefits -------------------------------------- Fiscal Year Ended December 25, December 26, December 27, 1999 1998 1997 ------------ ------------ ------------ Components of net periodic benefit cost: Service cost........................... $ 1,552 $ 1,611 $1,328 Interest cost.......................... 4,262 4,589 4,428 Amortization of prior service cost..... (1,443) (1,511) (1,492) Recognized net actuarial gain (927) (775) (854) ------- ------- ------ Net periodic benefit cost.............. $ 3,444 $ 3,914 $3,410 ======= ======= ======
Weighted average assumptions are summarized as follows.
Pension Postretirement Benefits Benefits ---------- ----------------- 1999 1998 1999 1998 ---- ---- ------- ------- Discount rate............................ 7.3% 6.6% 7.6% 6.7% Expected return on plan assets........... 9.0% 9.0% N/A N/A Rate of compensation increase ........... 4.5% 4.5% N/A N/A
For measurement purposes, health care costs for domestic plans were assumed to increase 7% in 2000 grading down by 1% per year to a constant level of 6% annual increase. Health care costs for Canadian plans were assumed to increase approximately 9.5% during 2000 grading down by 0.5% per year to a constant level of approximately 5.0% annual increase. Assumed health care cost trend rates have a significant effect on the amounts reported for postretirement benefits. A one-percentage-point change in assumed health care cost trend rates would have the following effects (in thousands):
1-Percentage-Point 1-Percentage-Point Increase Decrease ------------------ ------------------ Effect on total of service and interest cost components....... $ 293 $ (251) Effect on postretirement benefit obligation..................... $2,117 $(1,750)
F-19 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 13. Employee Benefit Plans -- (Continued) Defined Contribution Plans Subsidiaries of the Company sponsor defined contribution plans covering employees who meet eligibility requirements. Subsidiary contributions are based on formulas or are at the Company's discretion as specified in the plan documents. Contributions relating to continuing operations were $3.0 million, $3.5 million, and $3.5 million in fiscal 1999, 1998, and 1997, respectively. 14. Discontinued Operations On March 13, 1998, the Company completed the sale of Wallcoverings to Imperial Home Decor Group, Inc., ("Imperial Home Decor") an affiliate of Blackstone Partners, for a sales price of $71.9 million and an option for 6.7% of the common stock of Imperial Home Decor (which includes Wallcoverings and the former wallcovering and vinyl units of Borden, Inc.) outstanding as of the closing date. The proceeds were used to repay long-term debt. In connection with the sale, the Company recorded a loss of approximately $21.1 million (net of an estimated income tax benefit) in the third quarter of 1997 to adjust the recorded value to the expected proceeds. Accordingly, no gain or loss was recognized at the sale date. Losses incurred by Wallcoverings from April 29, 1996, (the date of Wallcoverings' discontinuance) to the date of sale were charged to the Company's existing discontinued operations reserves. The Wallcoverings operating losses were in excess of management's forecasted expectations as of the date of discontinuance but within previously established accruals. On January 5, 2000, Imperial Home Decor filed voluntary petitions for protection under chapter 11 of the U.S. Bankruptcy Code. The Company is currently assessing the impact of that bankruptcy filing. On July 24, 1997, JPS Automotive completed the sale of its Air Restraint and Technical Products Division, an airbag and industrial fabric business ("Airbag"), to Safety Components International, Inc. for a purchase price of approximately $56 million. No gain or loss was recorded on the sale since the sales price approximated the acquisition fair value and book value of Airbag. On July 16, 1997, the Company completed its sale of the Mastercraft Group for a purchase price of approximately $309.5 million. A portion of the net proceeds from the sale was used to reduce the Company's long-term debt. The sale resulted in a net after-tax gain of $97.5 million. On February 6, 1997, the Company completed the sale of its Floorcoverings subsidiary for $195.6 million and the net proceeds were used to pay down debt incurred to finance the Company's automotive strategy. The sale resulted in a net after-tax gain of $85.3 million. The Company has accounted for the financial results and net assets of the Mastercraft Group, Floorcoverings, Airbag and Wallcoverings as discontinued operations. Information about the Company's discontinued operations is below (in thousands):
Fiscal Year Ended ------------------------- December 26, December 27, 1998 1997 ------------ ------------ Net sales(a).................................... $ -- $200,350 Net income...................................... -- 4,306 Identifiable assets............................. -- 53,004 Capital expenditures............................ 3,144 15,254
(a) Amount is not included in consolidated totals. F-20 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 14. Discontinued Operations -- (Continued) Net interest expense of discontinued operations (including amounts attributable to discontinued operations) was $12.5 million in fiscal 1997. Interest expense of $12.6 million during fiscal 1997 was allocated to discontinued operations based upon the ratio of net book value of discontinued operations (including reserves for loss on disposal) to consolidated invested capital. No interest expense was allocated to discontinued operations for fiscal 1999 and 1998. In addition, a portion of the loss on sale of receivables has been allocated to discontinued operations based on the ratio of (x) receivables included in the trust's receivable pool related to Floorcoverings and the Mastercraft Group to (y) the total trust's receivables pool. For fiscal 1997, amounts allocated to discontinued operations for the loss on sale of receivables totaled $0.6 million. No allocation of loss on sale of receivables was made to discontinued operations in fiscal 1999 and 1998. In connection with the retained lease liabilities of certain discontinued operations, the Company has future minimum lease payments and future sublease rental receipts at December 25, 1999 as follows (in thousands):
Minimum Lease Sublease Rental Fiscal Years Ending Payments Receipts ------------------- ------------- --------------- December 2000............................. $ 2,562 $ 2,120 December 2001............................. 2,141 2,239 December 2002............................. 1,918 2,117 December 2003............................. 1,767 1,876 December 2004............................. 1,650 1,600 Later years............................... 7,175 8,806 ------- ------- $17,213 $18,758 ======= =======
15. Restructuring On February 10, 1999, the Company announced a comprehensive plan (the "Reorganization") to reorganize its global automotive carpet, acoustics, plastics and accessory floormats businesses into two divisions: North American Automotive Interior Systems, headquartered in the Detroit metropolitan area, and European Automotive Interior Systems, headquartered in Wiesbaden, Germany. In addition, the Company subsequently implemented a global account manager structure for each of the Company's automotive original equipment manufacturer ("OEM") customers. The Company undertook the Reorganization to reduce costs and improve operating efficiencies through the Company's operations and to more effectively respond to the OEMs' demand for complete interior trim systems and more sophisticated components. As part of the Reorganization, the Company also established the Specialty Automotive Products division, which includes the Company's automotive fabrics and Dura Convertible Systems businesses. Although these products have not historically been sold in conjunction with the Company's other interior trim offerings, the Company's new strategy of leveraging its acoustic capabilities with its design and styling expertise is anticipated to change the marketing approach for all of the Company's products. The Company announced on February 10, 1999 that it anticipated incurring a restructuring charge related to the Reorganization of approximately $8 million to $9 million. However, in connection with the change in the Company's Chief Executive Officer and the Company's operating results in the first quarter, the Company delayed certain aspects of the Reorganization while the Company's new Chief Executive Officer reviewed the plan. Upon final completion of the Reorganization plan, the Company recognized a pre-tax restructuring charge of $33.4 million, including $13.4 million of asset impairments, $15.0 million of severance costs and $5.0 million related to the termination of sales commission contracts at the Company's North American plastics operations. F-21 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 15. Restructuring -- (Continued) The Reorganization includes the closure of three facilities. The Homer, Michigan plastics facility was closed in August 1999 and its operations were relocated to an existing plastics facility. The Cramerton, North Carolina fabrics facility was sold in September 1999, for $6.0 million. The facility's operations are in the process of being located to another fabrics facility. The acoustics facility in Vastra Frolunda, Sweden, is scheduled to be closed in September, 2000. The Company recognized $13.4 million in asset impairments, primarily relating to buildings, machinery and equipment located at these three sites. The impairment amounts were determined based upon management's estimates of the values to be realized upon disposition of these assets. The remaining severance costs for operating personnel primarily relate to employees at C&A Plastics UK and the Company's fabrics, convertibles and accessory floormats operations. The severance costs for management and administrative personnel primarily relate to employees at the Company's former North Carolina headquarters and North American Automotive Interior Systems division. At December 25, 1999 approximately 600 employees had been terminated. When completed, the Reorganization will affect approximately 1,100 employees. The Company currently expects the Reorganization plan to be substantially completed by December 2000. The components of the reserves for the restructuring charges are as follows (in thousands):
Changes Original in Remaining Reserve Reserve Reserve -------- ------- --------- Anticipated severance benefits.................... $15,061 $(4,843) $10,218 Anticipated payments related to the termination of sales commission arrangements.................... 4,969 (1,669) 3,300 ------- ------- ------- $20,030 $(6,512) $13,518 ======= ======= =======
In connection with the acquisition of JPS Automotive in 1996, the Company eliminated certain redundant sales and administrative functions and closed one manufacturing facility in 1997, a second facility in January 1998, and a third facility in June 1998 and completed the relocation of certain manufacturing processes from a JPS Automotive facility to an existing C&A Products facility during 1999. These actions affected approximately 640 employees. Total costs accrued for the shutdown of facilities and severance and other personnel costs were $2.7 million and $7.7 million, respectively. These reserves were utilized by the end of 1999. 16. Common Stockholders' Deficit Dividends On February 10, 1999, the Company declared a special dividend of approximately $6.2 million, representing $0.10 per share on all outstanding shares of common stock held by stockholders of record as of the close of business on February 22, 1999. The dividend was paid on March 1, 1999. On May 13, 1999, the Company declared another special dividend relating to the distribution of the proceeds from the sale of Wallcoverings of approximately $44.0 million, representing $0.71 per share on all outstanding shares of common stock held by stockholders of record as of the close of business on May 20, 1999. The dividend was paid on May 28, 1999. In connection with these dividends, the amount authorized by the Company's Board of Directors for the Company's 1999 share repurchase program was reduced from $25 million to approximately $2 million. F-22 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 16. Common Stockholders' Deficit -- (Continued) Accumulated Other Comprehensive Loss The accumulated balances and activity for each component of Accumulated Other Comprehensive Loss are as follows (in thousands):
Foreign Accumulated Currency Pension Other Translation Equity Comprehensive Adjustments Adjustment Loss ----------- ---------- ------------- Balance at December 28, 1996............... $(20,798) $(10,165) $(30,963) Change in balance......................... (8,325) (535) (8,860) -------- -------- -------- Balance at December 27, 1997............... (29,123) (10,700) (39,823) Change in balance......................... 7,569 8,827 16,396 -------- -------- -------- Balance at December 26, 1998............... (21,554) (1,873) (23,427) Change in balance......................... (10,649) 816 (9,833) -------- -------- -------- Balance at December 25, 1999............... $(32,203) $ (1,057) $(33,260) ======== ======== ========
The income tax benefit (expense) for the pension equity adjustment was ($0.5) million and $1.2 million for fiscal 1999 and 1998, respectively. No income taxes have been provided for the foreign currency translation adjustments. Stock Option Plans The 1994 Employee Stock Option Plan ("1994 Plan") was adopted as a successor to the 1993 Employee Stock Option Plan to facilitate awards to certain key employees and consultants. The Plan was amended on June 3, 1999 primarily to increase the number of shares available for issuance under the Plan from 2,980,534 to 3,980,534, subject to approval by the common stockholders. The 1994 Plan provides that no options may be granted after 10 years from the effective date of this plan. Options vest, in each case, as specified by the Company's compensation committee, generally over three years after issuance. At December 25, 1999, options representing 822,537 shares of common stock were available for grants. Effective February 23, 1995, the Company adopted the 1994 Directors Stock Option Plan which provides for the issuance of options to acquire a maximum of 600,000 shares of common stock to directors who are not part of management and are not affiliated with a major stockholder. As of December 25, 1999, 120,000 options had been granted. On January 14, 1997, the Company adopted the 1997 United Kingdom Scheme, which provides for the issuance of options to key employees under the 1994 Plan. As of December 25, 1999, 29,974 options had been granted. F-23 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 16. Common Stockholders' Deficit -- (Continued) Stock option activity under the plans is as follows:
December 25, 1999 December 26, 1998 December 27, 1997 ------------------- ------------------- ------------------- Weighted Weighted Weighted Average Average Average Number of Exercise Number of Exercise Number of Exercise Shares Price Shares Price Shares Price --------- -------- --------- -------- --------- -------- Outstanding beginning of year................... 3,141,195 $6.23 2,732,195 $5.86 3,287,106 $5.25 Awarded................. 2,024,000 5.19 480,000 8.65 584,000 8.33 Cancelled............... (337,000) 8.10 (71,000) 8.56 (83,127) 6.46 Exercised............... (107,240) 3.99 -- -- (373,570) 4.70 Surrendered............. -- -- -- -- (682,214) 5.57 --------- --------- --------- Outstanding at end of year................... 4,720,955 $5.70 3,141,195 $6.23 2,732,195 $5.86 ========= ========= =========
At December 25, 1999, December 26, 1998 and December 27, 1997, 2,098,555, 2,129,095, and 1,858,685, respectively, of the outstanding options were exercisable at a weighted average price of $5.40, $5.22, and $4.78, respectively. Of the total options outstanding at December 25, 1999, 1,447,084 have an exercise price in the range of $3.99 and $4.43 with a weighted average exercise price of $4.01 and a weighted average contractual life of 5 years; 1,397,084 of these options are currently exercisable at a weighted average price of $4.00. The remaining 3,273,871 of total options outstanding at December 25, 1999 have an exercise price in the range of $5.00 and $11.75 with a weighted average exercise price of $6.44 and a weighted average contractual life of 8 years; 701,471 of these options are currently exercisable at a weighted average exercise price of $8.18. Upon a change of control, as defined, all of the above options become fully vested and exercisable. SFAS No. 123, "Accounting for Stock-Based Compensation", encourages companies to adopt the fair value method for compensation expense recognition related to employee stock options. Existing accounting requirements of Accounting Principles Board Opinion No. 25 ("APB No. 25") use the intrinsic value method in determining compensation expense which represents the excess of the market price of the stock over the exercise price on the measurement date. The Company has elected to continue to utilize the accounting provisions of APB No. 25 for stock options, and is required to provide pro forma disclosures of net income and earnings per share had the Company adopted the fair value method for recognition purposes. The following information is presented as if the Company had adopted SFAS No. 123 and restated its results (in thousands, except per share amounts):
Fiscal Year Ended -------------------------------------- December 25, December 26, December 27, 1999 1998 1997 ------------ ------------ ------------ Net income (loss): As reported.............................. $(10,215) $(3,815) $155,235 Pro forma................................ (12,355) (5,017) 154,525 Basic EPS: As reported.............................. $ (0.16) $ (0.06) $ 2.34 Pro forma................................ (0.20) (0.07) 2.33 Diluted EPS: As reported.............................. $ (0.16) $ (0.06) $ 2.34 Pro forma................................ (0.20) (0.07) 2.33
F-24 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 16. Common Stockholders' Deficit -- (Continued) For the above information, the fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants in fiscal 1999, 1998 and 1997: expected volatility was 84% in 1999 and 40% in 1998 and 1997, expected lives of 10 years which equals the lives of the grants, the risk free interest rate ranged from 5.16% to 7.10% and a zero expected dividend rate. The weighted average grant-date fair value of an option granted during fiscal 1999, 1998 and 1997 was $4.50, $5.43 and $5.41, respectively. Because the SFAS No. 123 method of accounting has not been applied to options granted prior to January 28, 1995, the above pro forma amounts may not be representative of the compensation costs to be expected in future years. 17. Income Taxes The provisions for income taxes applicable to continuing operations for fiscal 1999, 1998 and 1997 are summarized as follows (in thousands):
Fiscal Year Ended -------------------------------------- December 25, December 26, December 27, 1999 1998 1997 ------------ ------------ ------------ Current Federal................................ $ -- $ -- $ -- State.................................. 2,100 2,900 2,600 Foreign................................ 4,946 9,617 6,146 -------- ------- ------- 7,046 12,517 8,746 Deferred Federal................................ (6,289) (7,097) 4,833 State.................................. (523) (1,075) 882 Foreign................................ 12 939 (1,463) -------- ------- ------- (6,800) (7,233) 4,252 -------- ------- ------- Income tax expense....................... $ 246 $ 5,284 $12,998 ======== ======= =======
Domestic and foreign components of income (loss) from continuing operations before income taxes are summarized as follows (in thousands):
Fiscal Year Ended -------------------------------------- December 25, December 26, December 27, 1999 1998 1997 ------------ ------------ ------------ Domestic................................. $ (16,638) $(26,900) $(4,545) Foreign.................................. 15,519 32,093 7,452 --------- -------- ------- $ (1,119) $ 5,193 $ 2,907 ========= ======== =======
F-25 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 17. Income Taxes -- (Continued) A reconciliation between income taxes computed at the statutory U.S. Federal rate of 35% and the provisions for income taxes applicable to continuing operations is as follows (in thousands):
Fiscal Year Ended -------------------------------------- December 25, December 26, December 27, 1999 1998 1997 ------------ ------------ ------------ Amount at statutory Federal rate.. $ (391) $1,818 $ 1,017 State taxes, net of Federal income tax.............................. 1,025 1,187 2,263 Tax differential on foreign earnings......................... (792) 134 123 Foreign losses with no tax benefit.......................... 318 379 1,436 Amortization and write-down of goodwill......................... 1,513 1,470 7,770 General business tax credits, net ................................. (2,011) (124) (60) Other............................. 584 420 449 ------- ------ ------- Income tax expense................ $ 246 $5,284 $12,998 ======= ====== =======
Deferred income taxes are provided for the temporary differences between the financial reporting and tax basis of the Company's assets and liabilities. The components of the net deferred tax assets as of December 25, 1999 and December 26, 1998 were as follows (in thousands):
December 25, December 26, 1999 1998 ------------ ------------ Deferred tax assets: Employee benefits, including postretirement benefits.................................... $ 38,105 $ 31,695 Net operating loss carryforwards............. 99,955 79,902 General business tax credits................. 8,202 1,130 Alternative minimum tax credit carryforwards............................... 12,189 12,190 Other liabilities and reserves............... 51,039 74,386 Valuation allowance.......................... (52,115) (44,320) -------- -------- Total deferred tax assets.................. 157,375 154,983 -------- -------- Deferred tax liabilities: Property, plant and equipment................ (58,266) (66,153) Undistributed earnings of foreign subsidiaries................................ (7,226) (7,226) -------- -------- Total deferred tax liabilities............. (65,492) (73,379) -------- -------- Net deferred tax asset......................... $ 91,883 $ 81,604 ======== ========
The valuation allowance at December 25, 1999 and December 26, 1998 provides for certain deferred tax assets that in management's assessment may not be realized due to tax limitations on the use of such amounts or that relate to tax attributes that are subject to uncertainty due to the long-term nature of their realization. During fiscal 1999, the valuation allowance increased $7.8 million from fiscal 1998. This increase resulted primarily from the increase in tax credit and loss carryforwards that may not be utilized in future periods, offset by a decrease in preacquisition NOLs due to a change in the tax regulations. During fiscal 1998, the valuation allowance decreased $1.3 million from fiscal 1997 primarily due to the expiration of tax credits. F-26 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--Continued) 17. Income Taxes -- (Continued) The above amounts have been classified in the consolidated balance sheets as follows (in thousands):
December 25, December 26, 1999 1998 ------------ ------------ Deferred tax assets (liabilities): Current domestic and foreign, included in other current assets........................ $ 23,868 $ 30,027 Current foreign, included in accrued expenses.................................... (351) -- Noncurrent domestic and foreign.............. 86,235 70,632 Noncurrent foreign, included in other noncurrent liabilities...................... (17,869) (19,055) -------- -------- $ 91,883 $ 81,604 ======== ========
Management has reviewed the Company's operating results for recent years as well as the outlook for its continuing operations in concluding that it is more likely than not that the net deferred tax assets of $91.9 million at December 25, 1999 will be realized. The Company announced a reorganization on February 10, 1999 (see Note 16) to better align itself in the marketplace. A major goal of this reorganization is to lower the overall cost structure of the Company and thereby increase profitability. These factors along with the timing of the reversal of its temporary differences and the expiration date of its NOLs were also considered in reaching this conclusion. The Company's ability to generate future taxable income is dependent on numerous factors, including general economic conditions, the state of the automotive industry and other factors beyond management's control. Therefore, there can be no assurance that the Company will meet its expectation of future taxable income. Deferred income taxes and withholding taxes have been provided on earnings of the Company's foreign subsidiaries to the extent it is anticipated that the earnings will be remitted in the future as dividends. Deferred income taxes and withholding taxes have not been provided on the remaining undistributed earnings of foreign subsidiaries as such amounts are deemed to be permanently reinvested. The cumulative undistributed earnings on which the Company has not provided deferred income taxes and withholding taxes are not significant. At December 25, 1999, the Company had the following tax attribute carryforwards available for U.S. Federal income tax purposes (in thousands):
Expiration Amount Dates -------- ---------- Net operating losses -- regular tax: Preacquisition, subject to limitations............ $ 8,894 2002-2009 Postacquisition, unrestricted..................... 10,280 2000-2006 Postacquisition, unrestricted..................... 248,910 2008-2019 -------- $268,084 ======== Net operating losses -- alternative minimum tax: Preacquisition, subject to limitations............ $ 6,604 2002-2009 Postacquisition, unrestricted..................... 9,644 2000-2006 Postacquisition, unrestricted..................... 222,040 2008-2019 -------- $238,288 ======== General business tax credits: Preacquisition, subject to limitations............ $ 710 2000-2003 Postacquisition unrestricted...................... 6,004 2004-2019 -------- $ 6,714 ======== Alternative minimum tax credits................... $ 12,189 ========
F-27 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 17. Income Taxes -- (Continued) Future sales of common stock by the Company or its principal stockholders, or changes in the composition of its principal stockholders, could constitute a "change in control" that would result in annual limitations on the Company's use of its NOLs and unused tax credits. Management cannot predict whether such a "change in control" will occur. If such a "change in control" were to occur, the resulting annual limitations on the use of NOLs and tax credits would depend on the value of the equity of the Company and the amount of "built-in gain" or "built-in loss" in the Company's assets at the time of the "change in control", which cannot be known at this time. Income taxes paid (refunds received) were $3.0 million, $(6.0) million, and $40.4 million for fiscal 1999, 1998 and 1997, respectively. 18. Disclosures About Fair Value of Financial Instruments The estimated fair values of the Company's continuing operations' financial instruments are summarized as follows (in thousands):
December 25, 1999 December 26, 1998 ------------------ ------------------ Estimated Estimated Carrying Fair Carrying Fair Amount Value Amount Value -------- --------- -------- --------- Long-term investments............... $ 2,891 $ 2,891 $ 3,332 $ 3,332 Long-term debt...................... $912,542 $907,087 $866,049 $885,386
The following methods and assumptions were used to estimate these fair values: Long-Term Investments -- Fair value approximates carrying value. Long-Term Debt -- The fair value of the Subordinated Notes and JPS Automotive Senior Notes is based upon quoted market price. The fair value of the other long-term debt of the Company approximates the carrying value. Carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, accounts and other receivables, accounts payable and accrued expenses approximate fair value due to the short-term nature of these instruments. Fair value estimates are made at a specific point in time, based on relevant market information about the financial instruments. These estimates are subjective in nature and involve uncertainties and matters of significant judgement and therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. 19. Related Party Transactions On March 13, 1998, the Company completed the sale of Wallcoverings to an affiliate of Blackstone Partners. See Note 14. During fiscal 1998, the Company incurred fees and expenses of $0.1 million for services performed by Blackstone Partners or its affiliates for the 1996 acquisitions of JPS Automotive and Perstorp Components and the 1997 acquisition of the remaining interest in the Collins & Aikman/Perstorp Joint Venture. During fiscal 1997, the Company incurred fees and expenses for services performed by Blackstone Partners and WP Partners, or their respective affiliates, in connection with the dispositions of Floorcoverings and Mastercraft Group of approximately $2.6 million and $4.0 million, respectively. The Company also incurred fees and expenses for services performed by WP Partners, or their respective affiliates, in connection with the disposition of Wallcoverings of approximately $0.7 million in 1997. F-28 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 19. Related Party Transaction --- (Continued) Under the Amended and Restated Stockholders' Agreement among the Company, C&A Products, Blackstone Partners and WP Partners, the Company pays Blackstone Partners and WP Partners, or their respective affiliates, each an annual monitoring fee of $1.0 million, which is payable in quarterly installments. 20. Information About the Company's Operations In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information". SFAS No. 131 requires that a public business enterprise report financial and descriptive information about its reportable operating segments. Generally, financial information is required to be reported on the basis that is used internally for evaluating segment performance. SFAS No. 131 also requires that a public business enterprise report descriptive information about the way that the operating segments were determined and the products and services provided by the operating segments On February 10, 1999, the Company announced the Reorganization, a comprehensive plan to reorganize its global automotive carpet, acoustics, plastics and accessory floormats businesses into two divisions: North American Automotive Interior Systems, headquartered in the Detroit metropolitan area, and European Automotive Interior Systems, headquartered in Wiesbaden, Germany. As part of the Reorganization, the Company has also established the Specialty Automotive Products division, which includes the Company's automotive fabrics and Dura Convertible Systems businesses. The Company's reportable segments reflect these newly established divisions. Financial data for all periods has been presented on this basis. North American Automotive Interior Systems and European Automotive Interior Systems include the following product groups: molded floor carpet, luggage compartment trim, acoustical products, accessory floormats and plastic-based interior modules, systems and components. The Specialty Automotive Products division includes automotive fabrics and convertible top systems. The three divisions also produce other automotive and non-automotive products. The accounting policies of the divisions are the same as those described in the Summary of Significant Accounting Policies (See Note 2). The Company evaluates performance based on profit or loss from operations before interest expense, foreign exchange gains and losses, loss on sale of receivables, other income and expense, and income taxes. Information about the Company's divisions is presented below (in thousands).
Fiscal Year Ended December 25, 1999 ------------------------------------------------------------------ North American European Specialty Automotive Automotive Automotive Interior Systems Interior Systems Products Other (a) Total ---------------- ---------------- ---------- --------- ---------- External revenues....... $1,151,751 $306,374 $440,472 $ -- $1,898,597 Inter-segment revenues.. 85,233 27,422 16,649 (129,304) -- Depreciation and amortization........... 38,614 17,127 14,849 884 71,474 Operating income (loss)................. 89,374 2,292 39,596 (32,743) 98,519 Total assets............ 798,959 241,631 234,723 73,577 1,348,890 Capital expenditures.... 45,758 23,472 12,687 4,513 86,430
F-29 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 20. Information About the Company's Operations -- (Continued)
Fiscal Year Ended December 26, 1998 ------------------------------------------------------------------ North American European Specialty Automotive Automotive Automotive Interior Systems Interior Systems Products Other (a) Total ---------------- ---------------- ---------- --------- ---------- External revenues....... $1,065,461 $338,030 $421,978 $ -- $1,825,469 Inter-segment revenues.. 163,432 26,287 29,516 (219,235) -- Depreciation and amortization........... 34,348 16,832 14,871 1,023 67,074 Operating income........ 74,485 9,242 14,206 545 98,478 Total assets............ 788,054 260,023 267,129 67,005 1,382,211 Capital expenditures.... 53,550 12,440 20,537 12,464 98,991 Fiscal Year Ended December 27, 1997 ------------------------------------------------------------------ North American European Specialty Automotive Automotive Automotive Interior Systems Interior Systems Products Other (a) Total ---------------- ---------------- ---------- --------- ---------- External revenues....... $1,053,546 $120,456 $455,330 $ -- $1,629,332 Inter-segment revenues.. 65,869 2,938 $ 23,798 (92,605) -- Depreciation and amortization........... 37,260 6,000 14,628 952 58,840 Operating income........ 40,055(b) 4,451 38,074 1,930 84,510 Total assets............ 740,463 183,378 271,396 107,155 1,302,392 Capital expenditures.... 35,327 3,488 15,733 17,227 71,775
- -------- (a) Other includes the Company's discontinued operations (see Note 14), non- operating units, the effect of eliminating entries and in 1999, restructuring charges and impairment of long-lived assets of $33.4 million (See Note 15). (b) Includes impairment of long-lived assets of $22.6 million. Sales for the Company's primary product groups are as follows (in thousands):
Fiscal Year Ended -------------------------------------- December 25, December 26, December 27, 1999 1998 1997 ------------ ------------ ------------ Molded floor carpet.................... $ 468,008 $ 416,971 $ 384,714 Luggage compartment trim............... 90,582 95,897 101,034 Acoustical products.................... 209,772 225,130 167,758 Accessory floormats.................... 165,931 157,209 139,292 Plastic-based interior trim modules, systems and components................ 435,366 417,534 294,555 Automotive fabrics..................... 269,475 267,185 318,979 Convertible top systems................ 118,916 104,348 88,801 Other.................................. 140,547 141,195 134,199 ---------- ---------- ---------- Total.................................. $1,898,597 $1,825,469 $1,629,332 ========== ========== ==========
The Company performs periodic credit evaluations of its customers' financial condition and, although the Company does not generally require collateral, it does require cash payments in advance when the assessment of credit risk associated with a customer is substantially higher than normal. Receivables generally are due within 45 days, and credit losses have consistently been within management's expectations and are provided for in the consolidated financial statements. F-30 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 20. Information About the Company's Operations -- (Continued) Direct and indirect sales to significant customers in excess of ten percent of consolidated net sales from continuing operations are as follows:
1999 1998 1997 ---- ---- ---- General Motors Corporation............................. 31.5% 31.2% 37.1% Ford Motor Company..................................... 20.4% 19.9% 14.2% DaimlerChrysler AG..................................... 18.9% 18.3% 17.4%
Information about the Company's continuing operations in different geographic areas for fiscal 1999, 1998 and 1997 is presented below (in thousands).
Fiscal Year Ended Fiscal Year Ended Fiscal Year Ended December 25, 1999 December 26, 1998 December 27, 1997 --------------------- --------------------- --------------------- Long-Lived Long-Lived Long-Lived Net Sales Assets Net Sales Assets Net Sales Assets ---------- ---------- ---------- ---------- ---------- ---------- United States........... $1,092,546 $550,760 $1,047,862 $452,281 $1,089,114 $436,466 Canada.................. 398,439 87,729 356,361 186,711 348,056 182,649 Mexico.................. 101,238 20,296 83,216 17,234 71,706 16,044 United Kingdom.......... 121,689 64,277 143,716 61,449 84,956 34,063 Other (a)............... 184,685 74,227 194,314 83,508 35,500 64,586 ---------- -------- ---------- -------- ---------- -------- Consolidated............ $1,898,597 $797,289 $1,825,469 $801,183 $1,629,332 $733,808 ========== ======== ========== ======== ========== ========
- -------- (a) Other includes Sweden, Spain, Belgium, Germany, Austria, France, and the Netherlands and, for long-lived assets, the Company's discontinued operations (See Note 14). Intersegment sales between geographic areas are not material. For fiscal years 1999, 1998 and 1997, export sales from the United States to foreign countries were $80.5 million, $104.9 million and $136.7 million, respectively. As of December 25, 1999, the Company's continuing operations employed approximately 15,600 persons on a full-time or full-time equivalent basis. Approximately 5,800 of such employees are represented by labor unions. Approximately 1,400 employees are represented by collective bargaining agreements that expire during fiscal 2000. 21. Commitments and Contingencies Environmental The Company is legally or contractually responsible or alleged to be responsible for the investigation and remediation of contamination at various sites. It also has received notices that it is a potentially responsible party ("PRP") in a number of proceedings. The Company may be named as a PRP at other sites in the future, including with respect to divested and acquired businesses. The Company is currently engaged in investigation or remediation at certain sites. In estimating the total cost of investigation and remediation, the Company has considered, among other things, the Company's prior experience in remediating contaminated sites, remediation efforts by other parties, data released by the EPA, the professional judgment of the Company's environmental experts, outside environmental specialists and other experts, and the likelihood that other parties which have been named as PRPs will have the financial resources to fulfill their obligations at sites where they and the Company may be jointly and severally liable. Under the theory of joint and several liability, the Company could be liable for the full costs of investigation and remediation even if additional parties are found to be responsible under the F-31 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 21. Commitments and Contingencies -- (Continued) applicable laws. It is difficult to estimate the total cost of investigation and remediation due to various factors including incomplete information regarding particular sites and other PRPs, uncertainty regarding the extent of environmental problems and the Company's share, if any, of liability for such problems, the selection of alternative compliance approaches, the complexity of environmental laws and regulations and changes in cleanup standards and techniques. When it has been possible to provide reasonable estimates of the Company's liability with respect to environmental sites, provisions have been made in accordance with generally accepted accounting principles. The Company records its best estimate when it believes it is probable that an environmental liability has been incurred and the amount of loss can be reasonably estimated. The Company also considers estimates of certain reasonably possible environmental liabilities in determining the aggregate amount of environmental reserves. In its assessment the Company makes its best estimate of the liability based upon information available to the Company at that time, including the professional judgment of the Company's environmental experts, outside environmental specialists and other experts. As of December 25, 1999, excluding sites at which the Company's participation is anticipated to be de minimis or otherwise insignificant or where the Company is being indemnified by a third party for the liability, there are 23 sites where the Company is participating in the investigation or remediation of the site either directly or through financial contribution, and 8 additional sites where the Company is alleged to be responsible for costs of investigation or remediation. As of December 25, 1999, the Company's estimate of its liability for these 31 sites is approximately $22.9 million. As of December 25, 1999, the Company has established reserves of approximately $30.5 million for the estimated future costs related to all its known environmental sites. In the opinion of management, based on the facts presently known to it, the environmental costs and contingencies will not have a material adverse effect on the Company's consolidated financial condition or future results of operations. However, there can be no assurance that the Company has identified or properly assessed all potential environmental liability arising from the activities or properties of the Company, its present and former subsidiaries and their corporate predecessors. The Company is subject to Federal, state and local environmental laws and regulations that (i) affect ongoing operations and may increase capital costs and operating expenses and (ii) impose liability for the costs of investigation and remediation and otherwise related to on-site and off-site contamination. The Company's management believes that it has obtained, and is in material compliance with, all material environmental permits and approvals necessary to conduct its various businesses. Environmental compliance costs for continuing businesses currently are accounted for as normal operating expenses or capital expenditures of such business units. In the opinion of management, based on the facts presently known to it, such environmental compliance costs will not have a material adverse effect on the Company's consolidated financial condition or future results of operations. Litigation The Company and its subsidiaries have lawsuits and claims pending against them and have certain guarantees outstanding which were made in the ordinary course of business. The ultimate outcome of the legal proceedings to which the Company is a party will not, in the opinion of the Company's management based on the facts presently known to it, have a material adverse effect on the Company's consolidated financial condition or future results of operations. Other Commitments As of December 25, 1999, the Company's continuing operations had approximately $10.9 million in outstanding capital expenditure commitments. The majority of the leased properties of the Company's previously divested businesses have been assigned to third parties. Although releases have been obtained from the lessors of certain properties, C&A Products remains contingently liable under most of the leases. C&A Products' future liability for these leases, in management's opinion, based on the facts presently known to it, will not have a material adverse effect on the Company's consolidated financial condition or future results of operations. F-32 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 22. Quarterly Financial Data (unaudited) The quarterly data below is based on the Company's fiscal periods (in thousands, except per share amounts).
Fiscal 1999 -------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter -------- -------- -------- -------- Net sales......................... $478,337 $486,821 $427,873 $505,566 Gross margin...................... 70,588 78,262 64,163 71,704 Income (loss) from continuing operations(a).................... 2,316 5,318 (6,484) (2,515) Income (loss) before extraordinary loss and cumulative effect of change in accounting principle ................................. 2,316 5,318 (6,484) (2,515) Net income (loss)................. (6,534) 5,318 (6,484) (2,515) Basic and diluted income (loss) per share........................ (0.10) 0.09 (0.10) (0.04) Common stock prices High............................ 6 1/4 7 7/16 7 5/8 7 Low............................. 4 1/8 4 4 9/16 4 7/8 Fiscal 1998 -------------------------------------- First Second Third Fourth Quarter Quarter Quarter Quarter -------- -------- -------- -------- Net sales......................... $478,140 $463,335 $377,928 $506,066 Gross margin...................... 78,732 63,815 38,577 67,101 Income (loss) from continuing operations....................... 8,678 (482) (8,354) 67 Income (loss) before extraordinary loss............................. 8,678 (482) (8,354) 67 Net income (loss)................. 8,678 (4,161) (8,354) 22 Basic and diluted income (loss) per share........................ 0.13 (0.06) (0.13) -- Common stock prices High............................ 9 11/16 9 1/12 7 1/2 7 7/16 Low............................. 7 11/16 6 13/16 6 3/16 4 15/16
(a) During 1999, the Company incurred restructuring charges and impairment of long-lived assets of $4.6 million in the second quarter, $15.3 million in the third quarter and $13.5 million in the fourth quarter. The Company's operations are not subject to significant seasonal influences. F-33 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 23. Significant Subsidiary The Company conducts all of its operating activities through its wholly- owned subsidiary, C&A Products. The following represents summarized consolidated financial information of C&A Products and its subsidiaries (in thousands):
December 25, December 26, December 27, 1999 1998 1997 ------------ ------------ ------------ Current assets..................... $ 465,312 $ 510,303 $ 508,864 Noncurrent assets.................. 883,524 871,815 792,199 Current liabilities................ 362,226 343,807 315,268 Noncurrent liabilities............. 1,135,174 1,115,394 1,051,376 Net sales.......................... 1,898,597 1,825,469 1,629,332 Gross margin....................... 284,717 248,225 233,160 Income (loss) from continuing operations........................ (980) 300 (10,338) Income (loss) before extraordinary item and cumulative effect of a change in accounting principle ... (980) 300 155,709 Net income (loss).................. (9,830) (3,424) 154,988
Separate financial statements of C&A Products are not presented because they would not be material to the holders of any debt securities of C&A Products that may be issued, there being no material differences between the financial statements of C&A Products and the Company. The absence of separate financial statements of C&A Products is also based upon the fact that any debt of C&A Products issued, and the assumption that any debt to be issued, under the Registration Statement on Form S-3 filed by the Company and C&A Products (Registration No. 33-62665) is or will be fully and unconditionally guaranteed by the Company. 24. Earnings Per Share The Company adopted SFAS No. 128, "Earnings Per Share," in December 1997. Basic earnings per common share were computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the year. Diluted earnings per common share were determined assuming the exercise of the stock options issued under the Company's stock option plans (see Note 16). There were no reconciling items between basic earnings per common share and diluted earnings per common share for 1999, 1998 and 1997 because the effects of the stock options would have been anti-dilutive. The incremental dilutive shares (in thousands) would have been 432, 700 and 1,155 in 1999, 1998 and 1997, respectively. F-34 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES To Collins & Aikman Corporation: We have audited, in accordance with auditing standards generally accepted in the United States, the consolidated financial statements of Collins & Aikman Corporation and subsidiaries included in this Form 10-K, and have issued our report thereon dated March 1, 2000. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in Item 14 of this Form 10-K are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Arthur Andersen LLP Charlotte, North Carolina, March 1, 2000 S-1 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES SCHEDULE I -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED BALANCE SHEETS (in thousands)
December 25, December 26, 1999 1998 ------------ ------------ ASSETS Current Assets: Cash.............................................. $ 54 $ 81 Other............................................. -- 12 --------- -------- Total current assets............................ 54 93 Other assets........................................ -- -- --------- -------- $ 54 $ 93 ========= ======== LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities................................. $ 29 $ 199 Share of accumulated losses in excess of investments in subsidiaries.................................... 148,564 77,083 Other noncurrent liabilities........................ 2,582 2,582 Common stock........................................ 705 705 Other stockholders' deficit......................... (151,826) (80,476) --------- -------- Total stockholders' deficit..................... (151,121) (79,771) --------- -------- $ 54 $ 93 ========= ========
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 25, December 26, December 27, 1999 1998 1997 ------------ ------------ ------------ Other expenses......................... $ (514) $ (608) $ (589) Interest income........................ 129 217 836 -------- ------- -------- Income (loss) from operations before equity in income (loss) of subsidiary............................ (385) (391) 247 Equity in income (loss) of subsidiary.. (9,830) (3,424) 154,988 -------- ------- -------- Net income (loss)...................... $(10,215) $(3,815) $155,235 ======== ======= ========
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 25, December 26, December 27, 1999 1998 1997 ------------ ------------ ------------ OPERATING ACTIVITIES Net cash used in operating activities.. $ (27) $ (334) $ (332) -------- -------- -------- FINANCING ACTIVITIES Purchases of treasury stock............ (2,097) (25,013) (19,715) Proceeds from exercise of stock options............................... 448 -- 385 Intercompany transfers (to) from subsidiary............................ 1,649 (5,987) (2,094) Dividends paid to shareholders......... (50,198) -- -- Dividends received from subsidiary..... 50,198 31,000 21,424 -------- -------- -------- Net cash used in financing activities.. -- -- -- -------- -------- -------- Net decrease in cash................... (27) (334) (332) Cash at beginning of year.............. 81 415 747 -------- -------- -------- Cash at end of year.................... $ 54 $ 81 $ 415 ======== ======== ========
Notes to Condensed Financial Statements 1. Presentation: These condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although the Company believes that the disclosures made are adequate to make the information presented not misleading. For disclosures regarding commitments and contingencies, see Notes 12, 14 and 21 to Consolidated Financial Statements. 2. See Notes to Consolidated Financial Statements for additional disclosures. S-4 COLLINS & AIKMAN CORPORATION AND SUBSIDIARIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS For the Fiscal Years Ended December 25, 1999, December 26, 1998 and December 27, 1997 (in thousands)
Additions Balance at Resulting Charge to Charged Beginning from Costs and to Other Balance at Description of Year Acquisitions Expenses Accounts Deductions End of Year - ----------- ---------- ------------ --------- -------- ---------- ----------- Fiscal Year Ended December 25, 1999 Allowance for doubtful accounts $ 7,228 $-- $ 2,384 $1,210(a) $(2,265)(c) $ 8,557 Restructuring reserves $ 1,940 $-- $20,030 $ -- $(8,452)(d) $13,518 Fiscal Year Ended December 26, 1998 Allowance for doubtful accounts $ 9,275 $247 $ 3,751 $ 482(a) $(6,527)(c) $ 7,228 Restructuring reserves $ 7,676 $-- $ -- $ -- $(5,736)(d) $ 1,940 Fiscal Year Ended December 27, 1997 Allowance for doubtful accounts $10,380 $-- $ 604 $ 96(a) $(1,805)(b) $ 9,275 Restructuring reserves $ 9,694 $-- $ -- $1,200 $(3,218)(d) $ 7,676
- -------- (a) Reclassifications and collection of accounts previously written off. (b) Reclassifications to discontinued operations and other accounts and uncollectible amounts written off. (c) Reclassifications to other accounts, uncollectible amounts written off, and the elimination of amounts included in the allowance due from Enjema which was considered as a component of the Company's purchase cost for the remaining 50% interest in Enjema. (d) Spending against the established reserves. See Note 15 to the Consolidated Financial Statements. S-5 EX-10.25 2 CHANGE IN CONTROL AGMT. DATED AUGUST 9, 1999 EXHIBIT 10.25 CHANGE IN CONTROL AGREEMENT THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") is made and entered into this 9th day of August, 1999, by and between COLLINS & AIKMAN CORPORATION, a Delaware corporation (the "Company"), and JONATHAN PEISNER (the "Executive"). Statement of Purpose The Company wishes to encourage the continued service and dedication of Executive in the event of any actual or contemplated Change in Control (as defined below) of the Company. The Company has determined that these objectives are best accomplished by providing Executive with individual financial security pursuant to the terms of this Agreement, which the Company believes are fair and reasonable and consistent with the practices of other major corporations. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the Company and Executive hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) Change in Control means and shall be deemed to have occurred upon: (i) the acquisition, directly or indirectly, by any "person" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) within any 12 month period of more than 80% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors, including, but not limited to, by merger, consolidation or similar corporate transaction or by purchase; excluding, however, the following ("Excluded Transactions"): (A) any acquisition of beneficial ownership by the Company, any subsidiary of the Company, Wasserstein Perella Partners, L.P., Blackstone Capital Partners L.P. or an affiliate of any of the foregoing, (B) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary of the Company, and (C) any merger, consolidation or other form of business acquisition or combination transaction in which, immediately after the transaction and giving effect thereto and the issuance of securities therein, holders of Common Stock of the Company beneficially own or are entitled to receive equity securities of the acquiring, surviving or resulting entity (or any parent company or other affiliate thereof) that, in the aggregate, represent more than 20% of the combined voting power entitled to be cast generally; or (ii) the sale of any business, businesses or assets of the Company in any single transaction or series of related transactions effected within any 12-month period which, on an aggregate basis, produced at least 80% of the consolidated net sales of the Company, calculated by giving pro forma effect to such transactions, and any acquisitions effected during the relevant period, for the fiscal year immediately preceding such transaction or, if applicable, the first such transaction in the 12-month period in which the transaction or series of related transactions occurred, excluding, however, any Excluded Transaction. (b) Change in Control Period means the period commencing three months prior to the date of a Change in Control and ending on the first anniversary of such date or if later, the expiration of the 45 day period referred to in Section 1(d)(3) below. (c) Code means the Internal Revenue Code of 1986, as amended. (d) Constructive Termination means a termination of Executive's employment by Executive during a Change in Control Period which is due to: (i) the involuntary relocation of Executive to any office or location more than fifty (50) miles from the office or location at which Executive is then located; (ii) a material reduction in Executive's total compensation and benefit package; or (iii) a significant reduction in Executive's responsibilities, position or authority (including changes resulting from the assignment to Executive of any duties inconsistent with his responsibilities, position or authority in effect immediately prior to the Change in Control Period); provided, however, that, notwithstanding any other provision hereof, no event or circumstance will constitute "Constructive Termination" for purposes of this Agreement (A) if Termination For Cause exists or (B) unless (1) Executive shall have given notice to the Company of Executive's determination of the occurrence of such event, (2) such event constitutes one of the events specified in clauses (i) - (iii) above, and (3) such event shall be continuing as of the end of 45 days after the giving of such notice. (e) Date of Termination means the later of (i) the date of receipt of the Notice of Termination by the Company or Executive, as the case may be, or (ii) any later date specified therein (which shall be not more than thirty (30) days after the giving of such notice). (f) ERISA means the Employee Retirement Income Security Act of 1974, as amended. (g) Involuntary Termination means a termination of Executive's employment by the Company during a Change in Control Period other than a Termination For Cause. Termination of Executive's employment during a Change in Control Period by reason of Executive's death or disability shall not be considered an Involuntary Termination. 2 (h) Notice of Termination means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide the basis for termination of Executive's employment under the provision so indicated, and (iii) if the termination date is other than the date of receipt of such notice, specifies the termination date (which shall be not more than thirty (30) days after the giving of such notice). (i) Termination For Cause means a termination of Executive's employment by the Company as a result of: (i) Executive's fraud or misappropriation with respect to the business of the Company or intentional damage to the property or business of the Company or any substantial asset; (ii) willful failure by Executive to perform his duties and responsibilities and to carry out his authority; (iii) willful malfeasance or misfeasance or breach of fiduciary duty or misrepresentation to the Company or its stockholders; (iv) willful failure to act in accordance with any specific lawful instructions of a majority of the Board of Directors of the Company; or (v) conviction of Executive of a felony. 2. Benefits Upon Involuntary Termination or Constructive Termination During Change in Control Period. Subject to the limitations of Section 3, in the event of an Involuntary Termination or Constructive Termination of Executive for which the Date of Termination is within a Change in Control Period, the Company shall pay to Executive the following benefits in a lump sum payment (without discounting to present value) within 30 days of the Date of Termination: (a) to the extent not theretofore paid, Executive's base salary through the Date of Termination; (b) a pro rata bonus equal to (1) Executive's target bonus immediately preceding the Change in Control Period multiplied by (2) a fraction, the numerator of which is the number of whole months (rounded for portions of months) elapsed in the relevant bonus year prior to the Date of Termination, and the denominator of which is 12; (c) twenty-four (24) months of base salary based on the monthly rate of base salary in effect immediately preceding the Change in Control Period, or if greater, the rate of Base Salary in effect immediately preceding the Date of Termination; and 3 (d) Executive's target annual bonus in effect immediately preceding the Change in Control Period multiplied by two (2). In addition, (i) the Company shall offer Executive the opportunity to purchase his Company automobile at its net book value as of the Date of Termination, (ii) Executive shall be deemed to continue as an employee of the Company for 2 years following the Date of Termination for purposes of eligibility and vesting (but not benefit accrual), under any otherwise applicable retirement income plan or arrangement, and (iii) Executive will be entitled to continue to participate in all welfare benefit plans for such 2 year period or, if earlier, the period ending on the date the Executive obtains new full-time employment. Subject to the limitations of Section 3, the Company shall also reimburse Executive for the cost of any continued coverage elected by Executive for himself and his eligible dependents under the Company's group health plan(s) at the end of the welfare benefit continuation period described in clause (iii) of the immediately preceding sentence pursuant to Section 4980B of the Code and Section 601 et seq. of ERISA. 3. Limitation on Benefits. (a) General. Any benefits payable or to be provided to Executive, whether pursuant to this Agreement or otherwise, which constitute Parachute Payments (as defined below) shall be subject to the limitation of this Section 3 so that the benefits payable or to be provided to Executive under this Agreement, as well as any payments or benefits provided outside of this Agreement, shall not cause the Company to have paid an Excess Parachute Payment (as defined below). Accordingly, anything in this Agreement to the contrary notwithstanding, in the event that the certified public accountants regularly employed by the Company immediately prior to a Change in Control (the "Accounting Firm") shall determine that Executive's receipt of all Parachute Payments would cause the Company to pay an Excess Parachute Payment, it shall determine the Reduced Amount, and the aggregate Parachute Payments shall be reduced to such Reduced Amount in accordance with the provisions of Section 3(c) below. (b) Definitions. For purposes of this Section 3: (i) "Excess Parachute Payment" shall have the same meaning as the term "excess parachute payment" defined in Section 280G(b)(1) of the Code; (ii) "Parachute Payment" shall mean any payment or distribution in the nature of compensation to or for the benefit of Executive which is contingent on a "change" under and within the meaning of Section 280G(b)(2)(A)(i) of the Code, whether paid or payable pursuant to this Agreement or otherwise; (iii) "Present Value" shall mean such value determined in accordance with Section 280G(d)(4) of the Code; and (iv) "Reduced Amount" shall mean the largest aggregate amount of Parachute Payments Executive may receive without causing the Company to have paid an Excess Parachute Payment. 4 (c) Limitation. If the Accounting Firm determines that Parachute Payments should be limited to the Reduced Amount, the Company shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof, and Executive may then elect, in Executive's sole discretion, which and how much of the Parachute Payments, including without limitation Parachute Payments made outside of this Agreement, shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Parachute Payments is equal to the Reduced Amount), and shall advise the Company in writing of such election within 10 days of Executive's receipt of notice. If no such election is made by Executive within such 10 day period, the Company may elect which of Parachute Payments, including without limitation Parachute Payments made outside of this Agreement, shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Parachute Payments is equal to the Reduced Amount) and shall notify Executive promptly of such election. All determinations made by the Accounting Firm under this Section 3 shall be binding upon the Company and Executive and shall be made within 45 days immediately following the Date of Termination. As promptly as practicable following such determination, the Company shall pay to or distribute for the benefit of Executive such Parachute Payments as are then due to Executive under this Agreement. 4. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future eligibility or participation in any benefit, bonus, incentive or other plan provided by the Company and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any stock option or other agreements with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan or program of the Company subsequent to the Date of Termination shall be payable in accordance with such plan or program. 5. Full Settlement. The Company's obligation to make payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or other parties. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement. The Company agrees to pay, to the full extent provided by law, all legal fees and expenses which Executive may reasonably incur as a result of any contest by the Company or others of the validity or enforceability of, or liability under, any provision of this Agreement or as a result of any contest by Executive about the amount of any payment pursuant to this Agreement. 6. No Duplication of Benefits. Notwithstanding anything to the contrary herein, the lump sum payment due to Executive under Section 2 hereof shall be reduced by the amount of cash severance or salary continuation benefits paid to Executive pursuant to any other plan or policy of the Company or a written employment agreement between the Company (or one of its affiliates) and Executive, it being the intent of the parties that Executive shall not receive post-employment benefits hereunder and under such other plan, policy or written employment agreement. 5 7. Succession. This Agreement shall inure to the benefit of and shall be binding upon the Company and its successors and assignees, but, without the prior written consent of Executive, this Agreement may not be assigned other than in connection with a merger, sale, consolidation or similar transaction of all or substantially all of the business and/or assets of the Company in which the successor or assignee assumes (whether by operation of law or express assumption) all obligations of the Company hereunder. The Company shall require any successor to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The obligations and duties of Executive hereunder shall be personal and not assignable otherwise than by the laws of descent and distribution. 8. Miscellaneous. (a) Applicable Law. This Agreement shall be governed, construed and interpreted in accordance with the laws of the State of Michigan. (b) Notices. All notices and communications hereunder shall be in writing and shall be given by hand delivery to the other party by registered or certified mail, return receipt requested, postage prepaid, or by overnight mail, addressed as follows: If to Executive: Mr. Jonathan Peisner 6105 Pinecroft Drive West Bloomfield, Michigan 48322 If to the Company: Collins & Aikman Corporation 701 McCullough Drive P.O. Box 32665 Charlotte, North Carolina 28232 Attention: Chairman and Chief Executive Officer or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) Validity. The invalidity or unenforceability of any provision of this contract shall not affect the validity or enforceability of any other provision of this Agreement. (d) Tax Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as shall be required to be withheld pursuant to any applicable law or regulation. 6 (e) Waiver. The waiver of the breach of any term or of any condition of this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition hereof. (f) Entire Agreement. This instrument contains the entire agreement of the parties relating to the subject matter hereof, and it replaces and supersedes any prior agreements between the parties relating to said subject matter. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto. (g) No Right of Employment. Executive and the Company acknowledge that the employment of Executive by the Company is "at will," and prior to the date of a Change in Control, may be terminated by either Executive or the Company at any time. Upon a termination of Executive's employment prior to the date of a Change in Control, there shall be no further rights under this Agreement and this Agreement shall terminate and be of no further force and effect. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. EXECUTIVE: /s/ Jonathan Peisner -------------------------------------- Jonathan Peisner COMPANY: COLLINS & AIKMAN CORPORATION By: /s/ Thomas E. Evans ---------------------------------- Thomas E. Evans Chairman and Chief Executive Officer 7 EX-10.26 3 CHANGE IN CONTROL AGMT. DATED MARCH 17, 1998 EXHIBIT 10.26 CHANGE IN CONTROL AGREEMENT THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") is made and entered into this 17th day of March, 1998, by and between COLLINS & AIKMAN CORPORATION, a Delaware corporation (the "Company"), and DEAN GASKINS (the "Executive"). Statement of Purpose The Company wishes to encourage the continued service and dedication of Executive in the event of any actual or contemplated Change in Control (as defined below) of the Company. The Company has determined that these objectives are best accomplished by providing Executive with individual financial security pursuant to the terms of this Agreement, which the Company believes are fair and reasonable and consistent with the practices of other major corporations. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the Company and Executive hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) Change in Control means and shall be deemed to have occurred upon: (i) the acquisition, directly or indirectly, by any "person" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) within any 12 month period of more than 80% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors, including, but not limited to, by merger, consolidation or similar corporate transaction or by purchase; excluding, however, the following ("Excluded Transactions"): (A) any acquisition of beneficial ownership by the Company, any subsidiary of the Company, Wasserstein Perella Partners, L.P., Blackstone Capital Partners L.P. or an affiliate of any of the foregoing, (B) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary of the Company, and (C) any merger, consolidation or other form of business acquisition or combination transaction in which, immediately after the transaction and giving effect thereto and the issuance of securities therein, holders of Common Stock of the Company beneficially own or are entitled to receive equity securities of the acquiring, surviving or resulting entity (or any parent company or other affiliate thereof) that, in the aggregate, represent more than 20% of the combined voting power entitled to be cast generally; or (ii) the sale of any business, businesses or assets of the Company in any single transaction or series of related transactions effected within any 12-month period which, on an aggregate basis, produced at least 80% of the consolidated net sales of the Company, calculated by giving pro forma effect to such transactions, and any acquisitions effected during the relevant period, for the fiscal year immediately preceding such transaction or, if applicable, the first such transaction in the 12-month period in which the transaction or series of related transactions occurred, excluding, however, any Excluded Transaction. (b) Change in Control Period means the period commencing three months prior to the date of a Change in Control and ending on the first anniversary of such date or if later, the expiration of the 45 day period referred to in Section 1(d)(3) below. (c) Code means the Internal Revenue Code of 1986, as amended. (d) Constructive Termination means a termination of Executive's employment by Executive during a Change in Control Period which is due to: (i) the involuntary relocation of Executive to any office or location more than fifty (50) miles from the office or location at which Executive is then located; (ii) a material reduction in Executive's total compensation and benefit package; or (iii) a significant reduction in Executive's responsibilities, position or authority (including changes resulting from the assignment to Executive of any duties inconsistent with his responsibilities, position or authority in effect immediately prior to the Change in Control Period); provided, however, that, notwithstanding any other provision hereof, no event or circumstance will constitute "Constructive Termination" for purposes of this Agreement (A) if Termination For Cause exists or (B) unless (1) Executive shall have given notice to the Company of Executive's determination of the occurrence of such event, (2) such event constitutes one of the events specified in clauses (i) - (iii) above, and (3) such event shall be continuing as of the end of 45 days after the giving of such notice. (e) Date of Termination means the later of (i) the date of receipt of the Notice of Termination by the Company or Executive, as the case may be, or (ii) any later date specified therein (which shall be not more than thirty (30) days after the giving of such notice). (f) ERISA means the Employee Retirement Income Security Act of 1974, as amended. (g) Involuntary Termination means a termination of Executive's employment by the Company during a Change in Control Period other than a Termination For Cause. Termination of Executive's employment during a Change in Control Period by reason of Executive's death or disability shall not be considered an Involuntary Termination. 2 (h) Notice of Termination means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide the basis for termination of Executive's employment under the provision so indicated, and (iii) if the termination date is other than the date of receipt of such notice, specifies the termination date (which shall be not more than thirty (30) days after the giving of such notice). (i) Termination For Cause means a termination of Executive's employment by the Company as a result of: (i) Executive's fraud or misappropriation with respect to the business of the Company or intentional damage to the property or business of the Company or any substantial asset; (ii) willful failure by Executive to perform his duties and responsibilities and to carry out his authority; (iii) willful malfeasance or misfeasance or breach of fiduciary duty or misrepresentation to the Company or its stockholders; (iv) willful failure to act in accordance with any specific lawful instructions of a majority of the Board of Directors of the Company; or (v) conviction of Executive of a felony. 2. Benefits Upon Involuntary Termination or Constructive Termination During Change in Control Period. Subject to the limitations of Section 3, in the event of an Involuntary Termination or Constructive Termination of Executive for which the Date of Termination is within a Change in Control Period, the Company shall pay to Executive the following benefits in a lump sum payment (without discounting to present value) within 30 days of the Date of Termination: (a) to the extent not theretofore paid, Executive's base salary through the Date of Termination; (b) a pro rata bonus equal to (1) Executive's target bonus immediately preceding the Change in Control Period multiplied by (2) a fraction, the numerator of which is the number of whole months (rounded for portions of months) elapsed in the relevant bonus year prior to the Date of Termination, and the denominator of which is 12; (c) twenty-four (24) months of base salary based on the monthly rate of base salary in effect immediately preceding the Change in Control Period, or if greater, the rate of Base Salary in effect immediately preceding the Date of Termination; and 3 (d) Executive's target annual bonus in effect immediately preceding the Change in Control Period multiplied by two (2). In addition, (i) the Company shall offer Executive the opportunity to purchase his Company automobile at its net book value as of the Date of Termination, (ii) Executive shall be deemed to continue as an employee of the Company for 2 years following the Date of Termination for purposes of eligibility and vesting (but not benefit accrual), under any otherwise applicable retirement income plan or arrangement, and (iii) Executive will be entitled to continue to participate in all welfare benefit plans for such 2 year period or, if earlier, the period ending on the date the Executive obtains new full-time employment. Subject to the limitations of Section 3, the Company shall also reimburse Executive for the cost of any continued coverage elected by Executive for himself and his eligible dependents under the Company's group health plan(s) at the end of the welfare benefit continuation period described in clause (iii) of the immediately preceding sentence pursuant to Section 4980B of the Code and Section 601 et seq. of ERISA. 3. Limitation on Benefits. (a) General. Any benefits payable or to be provided to Executive, whether pursuant to this Agreement or otherwise, which constitute Parachute Payments (as defined below) shall be subject to the limitation of this Section 3 so that the benefits payable or to be provided to Executive under this Agreement, as well as any payments or benefits provided outside of this Agreement, shall not cause the Company to have paid an Excess Parachute Payment (as defined below). Accordingly, anything in this Agreement to the contrary notwithstanding, in the event that the certified public accountants regularly employed by the Company immediately prior to a Change in Control (the "Accounting Firm") shall determine that Executive's receipt of all Parachute Payments would cause the Company to pay an Excess Parachute Payment, it shall determine the Reduced Amount, and the aggregate Parachute Payments shall be reduced to such Reduced Amount in accordance with the provisions of Section 3(c) below. (b) Definitions. For purposes of this Section 3: (i) "Excess Parachute Payment" shall have the same meaning as the term "excess parachute payment" defined in Section 280G(b)(1) of the Code; (ii) "Parachute Payment" shall mean any payment or distribution in the nature of compensation to or for the benefit of Executive which is contingent on a "change" under and within the meaning of Section 280G(b)(2)(A)(i) of the Code, whether paid or payable pursuant to this Agreement or otherwise; (iii) "Present Value" shall mean such value determined in accordance with Section 280G(d)(4) of the Code; and (iv) "Reduced Amount" shall mean the largest aggregate amount of Parachute Payments Executive may receive without causing the Company to have paid an Excess Parachute Payment. 4 (c) Limitation. If the Accounting Firm determines that Parachute Payments should be limited to the Reduced Amount, the Company shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof, and Executive may then elect, in Executive's sole discretion, which and how much of the Parachute Payments, including without limitation Parachute Payments made outside of this Agreement, shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Parachute Payments is equal to the Reduced Amount), and shall advise the Company in writing of such election within 10 days of Executive's receipt of notice. If no such election is made by Executive within such 10 day period, the Company may elect which of Parachute Payments, including without limitation Parachute Payments made outside of this Agreement, shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Parachute Payments is equal to the Reduced Amount) and shall notify Executive promptly of such election. All determinations made by the Accounting Firm under this Section 3 shall be binding upon the Company and Executive and shall be made within 45 days immediately following the Date of Termination. As promptly as practicable following such determination, the Company shall pay to or distribute for the benefit of Executive such Parachute Payments as are then due to Executive under this Agreement. 4. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future eligibility or participation in any benefit, bonus, incentive or other plan provided by the Company and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any stock option or other agreements with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan or program of the Company subsequent to the Date of Termination shall be payable in accordance with such plan or program. 5. Full Settlement. The Company's obligation to make payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or other parties. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement. The Company agrees to pay, to the full extent provided by law, all legal fees and expenses which Executive may reasonably incur as a result of any contest by the Company or others of the validity or enforceability of, or liability under, any provision of this Agreement or as a result of any contest by Executive about the amount of any payment pursuant to this Agreement. 6. No Duplication of Benefits. Notwithstanding anything to the contrary herein, the lump sum payment due to Executive under Section 2 hereof shall be reduced by the amount of cash severance or salary continuation benefits paid to Executive pursuant to any other plan or policy of the Company or a written employment agreement between the Company (or one of its affiliates) and Executive, it being the intent of the parties that Executive shall not receive post-employment benefits hereunder and under such other plan, policy or written employment agreement. 5 7. Succession. This Agreement shall inure to the benefit of and shall be binding upon the Company and its successors and assignees, but, without the prior written consent of Executive, this Agreement may not be assigned other than in connection with a merger, sale, consolidation or similar transaction of all or substantially all of the business and/or assets of the Company in which the successor or assignee assumes (whether by operation of law or express assumption) all obligations of the Company hereunder. The Company shall require any successor to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The obligations and duties of Executive hereunder shall be personal and not assignable otherwise than by the laws of descent and distribution. 8. Miscellaneous. (a) Applicable Law. This Agreement shall be governed, construed and interpreted in accordance with the laws of the State of Michigan. (b) Notices. All notices and communications hereunder shall be in writing and shall be given by hand delivery to the other party by registered or certified mail, return receipt requested, postage prepaid, or by overnight mail, addressed as follows: If to Executive: Mr. Dean Gaskins #1 Sylvan Court Spartanburg, South Carolina 29302 If to the Company: Collins & Aikman Corporation 701 McCullough Drive P.O. Box 32665 Charlotte, North Carolina 28232 Attention: Chairman and Chief Executive Officer or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) Validity. The invalidity or unenforceability of any provision of this contract shall not affect the validity or enforceability of any other provision of this Agreement. (d) Tax Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as shall be required to be withheld pursuant to any applicable law or regulation. 6 (e) Waiver. The waiver of the breach of any term or of any condition of this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition hereof. (f) Entire Agreement. This instrument contains the entire agreement of the parties relating to the subject matter hereof, and it replaces and supersedes any prior agreements between the parties relating to said subject matter. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto. (g) No Right of Employment. Executive and the Company acknowledge that the employment of Executive by the Company is "at will," and prior to the date of a Change in Control, may be terminated by either Executive or the Company at any time. Upon a termination of Executive's employment prior to the date of a Change in Control, there shall be no further rights under this Agreement and this Agreement shall terminate and be of no further force and effect. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. EXECUTIVE: /s/ Dean Gaskins --------------------------------- Dean Gaskins COMPANY: COLLINS & AIKMAN CORPORATION By: /s/ Thomas E. Hannah ------------------------------ Thomas E. Hannah Chairman and Chief Executive Officer 7 EX-10.27 4 CHANGE IN CONTROL AGMT. DATED MARCH 17, 1998 EXHIBIT 10.27 CHANGE IN CONTROL AGREEMENT THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") is made and entered into this 17th day of March, 1998, by and between COLLINS & AIKMAN CORPORATION, a Delaware corporation (the "Company"), and REED A. WHITE (the "Executive"). Statement of Purpose The Company wishes to encourage the continued service and dedication of Executive in the event of any actual or contemplated Change in Control (as defined below) of the Company. The Company has determined that these objectives are best accomplished by providing Executive with individual financial security pursuant to the terms of this Agreement, which the Company believes are fair and reasonable and consistent with the practices of other major corporations. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the Company and Executive hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) Change in Control means and shall be deemed to have occurred upon: (i) the acquisition, directly or indirectly, by any "person" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) within any 12 month period of more than 80% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors, including, but not limited to, by merger, consolidation or similar corporate transaction or by purchase; excluding, however, the following ("Excluded Transactions"): (A) any acquisition of beneficial ownership by the Company, any subsidiary of the Company, Wasserstein Perella Partners, L.P., Blackstone Capital Partners L.P. or an affiliate of any of the foregoing, (B) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary of the Company, and (C) any merger, consolidation or other form of business acquisition or combination transaction in which, immediately after the transaction and giving effect thereto and the issuance of securities therein, holders of Common Stock of the Company beneficially own or are entitled to receive equity securities of the acquiring, surviving or resulting entity (or any parent company or other affiliate thereof) that, in the aggregate, represent more than 20% of the combined voting power entitled to be cast generally; or (ii) the sale of any business, businesses or assets of the Company in any single transaction or series of related transactions effected within any 12-month period which, on an aggregate basis, produced at least 80% of the consolidated net sales of the Company, calculated by giving pro forma effect to such transactions, and any acquisitions effected during the relevant period, for the fiscal year immediately preceding such transaction or, if applicable, the first such transaction in the 12-month period in which the transaction or series of related transactions occurred, excluding, however, any Excluded Transaction. (b) Change in Control Period means the period commencing three months prior to the date of a Change in Control and ending on the first anniversary of such date or if later, the expiration of the 45 day period referred to in Section 1(d)(3) below. (c) Code means the Internal Revenue Code of 1986, as amended. (d) Constructive Termination means a termination of Executive's employment by Executive during a Change in Control Period which is due to: (i) the involuntary relocation of Executive to any office or location more than fifty (50) miles from the office or location at which Executive is then located; (ii) a material reduction in Executive's total compensation and benefit package; or (iii) a significant reduction in Executive's responsibilities, position or authority (including changes resulting from the assignment to Executive of any duties inconsistent with his responsibilities, position or authority in effect immediately prior to the Change in Control Period); provided, however, that, notwithstanding any other provision hereof, no event or circumstance will constitute "Constructive Termination" for purposes of this Agreement (A) if Termination For Cause exists or (B) unless (1) Executive shall have given notice to the Company of Executive's determination of the occurrence of such event, (2) such event constitutes one of the events specified in clauses (i) - (iii) above, and (3) such event shall be continuing as of the end of 45 days after the giving of such notice. (e) Date of Termination means the later of (i) the date of receipt of the Notice of Termination by the Company or Executive, as the case may be, or (ii) any later date specified therein (which shall be not more than thirty (30) days after the giving of such notice). (f) ERISA means the Employee Retirement Income Security Act of 1974, as amended. (g) Involuntary Termination means a termination of Executive's employment by the Company during a Change in Control Period other than a Termination For Cause. Termination of Executive's employment during a Change in Control Period by reason of Executive's death or disability shall not be considered an Involuntary Termination. 2 (h) Notice of Termination means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide the basis for termination of Executive's employment under the provision so indicated, and (iii) if the termination date is other than the date of receipt of such notice, specifies the termination date (which shall be not more than thirty (30) days after the giving of such notice). (i) Termination For Cause means a termination of Executive's employment by the Company as a result of: (i) Executive's fraud or misappropriation with respect to the business of the Company or intentional damage to the property or business of the Company or any substantial asset; (ii) willful failure by Executive to perform his duties and responsibilities and to carry out his authority; (iii) willful malfeasance or misfeasance or breach of fiduciary duty or misrepresentation to the Company or its stockholders; (iv) willful failure to act in accordance with any specific lawful instructions of a majority of the Board of Directors of the Company; or (v) conviction of Executive of a felony. 2. Benefits Upon Involuntary Termination or Constructive Termination During Change in Control Period. Subject to the limitations of Section 3, in the event of an Involuntary Termination or Constructive Termination of Executive for which the Date of Termination is within a Change in Control Period, the Company shall pay to Executive the following benefits in a lump sum payment (without discounting to present value) within 30 days of the Date of Termination: (a) to the extent not theretofore paid, Executive's base salary through the Date of Termination; (b) a pro rata bonus equal to (1) Executive's target bonus immediately preceding the Change in Control Period multiplied by (2) a fraction, the numerator of which is the number of whole months (rounded for portions of months) elapsed in the relevant bonus year prior to the Date of Termination, and the denominator of which is 12; (c) twenty-four (24) months of base salary based on the monthly rate of base salary in effect immediately preceding the Change in Control Period, or if greater, the rate of Base Salary in effect immediately preceding the Date of Termination; and 3 (d) Executive's target annual bonus in effect immediately preceding the Change in Control Period multiplied by two (2). In addition, (i) the Company shall offer Executive the opportunity to purchase his Company automobile at its net book value as of the Date of Termination, (ii) Executive shall be deemed to continue as an employee of the Company for 2 years following the Date of Termination for purposes of eligibility and vesting (but not benefit accrual), under any otherwise applicable retirement income plan or arrangement, and (iii) Executive will be entitled to continue to participate in all welfare benefit plans for such 2 year period or, if earlier, the period ending on the date the Executive obtains new full-time employment. Subject to the limitations of Section 3, the Company shall also reimburse Executive for the cost of any continued coverage elected by Executive for himself and his eligible dependents under the Company's group health plan(s) at the end of the welfare benefit continuation period described in clause (iii) of the immediately preceding sentence pursuant to Section 4980B of the Code and Section 601 et seq. of ERISA. 3. Limitation on Benefits. (a) General. Any benefits payable or to be provided to Executive, whether pursuant to this Agreement or otherwise, which constitute Parachute Payments (as defined below) shall be subject to the limitation of this Section 3 so that the benefits payable or to be provided to Executive under this Agreement, as well as any payments or benefits provided outside of this Agreement, shall not cause the Company to have paid an Excess Parachute Payment (as defined below). Accordingly, anything in this Agreement to the contrary notwithstanding, in the event that the certified public accountants regularly employed by the Company immediately prior to a Change in Control (the "Accounting Firm") shall determine that Executive's receipt of all Parachute Payments would cause the Company to pay an Excess Parachute Payment, it shall determine the Reduced Amount, and the aggregate Parachute Payments shall be reduced to such Reduced Amount in accordance with the provisions of Section 3(c) below. (b) Definitions. For purposes of this Section 3: (i) "Excess Parachute Payment" shall have the same meaning as the term "excess parachute payment" defined in Section 280G(b)(1) of the Code; (ii) "Parachute Payment" shall mean any payment or distribution in the nature of compensation to or for the benefit of Executive which is contingent on a "change" under and within the meaning of Section 280G(b)(2)(A)(i) of the Code, whether paid or payable pursuant to this Agreement or otherwise; (iii) "Present Value" shall mean such value determined in accordance with Section 280G(d)(4) of the Code; and (iv) "Reduced Amount" shall mean the largest aggregate amount of Parachute Payments Executive may receive without causing the Company to have paid an Excess Parachute Payment. 4 (c) Limitation. If the Accounting Firm determines that Parachute Payments should be limited to the Reduced Amount, the Company shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof, and Executive may then elect, in Executive's sole discretion, which and how much of the Parachute Payments, including without limitation Parachute Payments made outside of this Agreement, shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Parachute Payments is equal to the Reduced Amount), and shall advise the Company in writing of such election within 10 days of Executive's receipt of notice. If no such election is made by Executive within such 10 day period, the Company may elect which of Parachute Payments, including without limitation Parachute Payments made outside of this Agreement, shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Parachute Payments is equal to the Reduced Amount) and shall notify Executive promptly of such election. All determinations made by the Accounting Firm under this Section 3 shall be binding upon the Company and Executive and shall be made within 45 days immediately following the Date of Termination. As promptly as practicable following such determination, the Company shall pay to or distribute for the benefit of Executive such Parachute Payments as are then due to Executive under this Agreement. 4. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future eligibility or participation in any benefit, bonus, incentive or other plan provided by the Company and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any stock option or other agreements with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan or program of the Company subsequent to the Date of Termination shall be payable in accordance with such plan or program. 5. Full Settlement. The Company's obligation to make payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or other parties. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement. The Company agrees to pay, to the full extent provided by law, all legal fees and expenses which Executive may reasonably incur as a result of any contest by the Company or others of the validity or enforceability of, or liability under, any provision of this Agreement or as a result of any contest by Executive about the amount of any payment pursuant to this Agreement. 6. No Duplication of Benefits. Notwithstanding anything to the contrary herein, the lump sum payment due to Executive under Section 2 hereof shall be reduced by the amount of cash severance or salary continuation benefits paid to Executive pursuant to any other plan or policy of the Company or a written employment agreement between the Company (or one of its affiliates) and Executive, it being the intent of the parties that Executive shall not receive post-employment benefits hereunder and under such other plan, policy or written employment agreement. 5 7. Succession. This Agreement shall inure to the benefit of and shall be binding upon the Company and its successors and assignees, but, without the prior written consent of Executive, this Agreement may not be assigned other than in connection with a merger, sale, consolidation or similar transaction of all or substantially all of the business and/or assets of the Company in which the successor or assignee assumes (whether by operation of law or express assumption) all obligations of the Company hereunder. The Company shall require any successor to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The obligations and duties of Executive hereunder shall be personal and not assignable otherwise than by the laws of descent and distribution. 8. Miscellaneous. (a) Applicable Law. This Agreement shall be governed, construed and interpreted in accordance with the laws of the State of Michigan. (b) Notices. All notices and communications hereunder shall be in writing and shall be given by hand delivery to the other party by registered or certified mail, return receipt requested, postage prepaid, or by overnight mail, addressed as follows: If to Executive: Mr. Reed A. White 6250 West U.S. 223 Adrian, Michigan 49221 If to the Company: Collins & Aikman Corporation 701 McCullough Drive P.O. Box 32665 Charlotte, North Carolina 28232 Attention: Chairman and Chief Executive Officer or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) Validity. The invalidity or unenforceability of any provision of this contract shall not affect the validity or enforceability of any other provision of this Agreement. (d) Tax Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as shall be required to be withheld pursuant to any applicable law or regulation. 6 (e) Waiver. The waiver of the breach of any term or of any condition of this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition hereof. (f) Entire Agreement. This instrument contains the entire agreement of the parties relating to the subject matter hereof, and it replaces and supersedes any prior agreements between the parties relating to said subject matter. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto. (g) No Right of Employment. Executive and the Company acknowledge that the employment of Executive by the Company is "at will," and prior to the date of a Change in Control, may be terminated by either Executive or the Company at any time. Upon a termination of Executive's employment prior to the date of a Change in Control, there shall be no further rights under this Agreement and this Agreement shall terminate and be of no further force and effect. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. EXECUTIVE: /s/ Reed A. White --------------------------------------------- Reed A. White COMPANY: COLLINS & AIKMAN CORPORATION By: /s/ Thomas E. Hannah ----------------------------------------- Thomas E. Hannah Chairman and Chief Executive Officer 7 EX-10.28 5 CHANGE IN CONTROL AGMT. DATED JULY 26, 1999 EXHIBIT 10.28 CHANGE IN CONTROL AGREEMENT THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") is made and entered into this 26th day of July, 1999, by and between COLLINS & AIKMAN CORPORATION, a Delaware corporation (the "Company"), and RAJESH K. SHAH (the "Executive"). Statement of Purpose The Company wishes to encourage the continued service and dedication of Executive in the event of any actual or contemplated Change in Control (as defined below) of the Company. The Company has determined that these objectives are best accomplished by providing Executive with individual financial security pursuant to the terms of this Agreement, which the Company believes are fair and reasonable and consistent with the practices of other major corporations. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the Company and Executive hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) Change in Control means and shall be deemed to have occurred upon: (i) the acquisition, directly or indirectly, by any "person" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) within any 12 month period of more than 80% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors, including, but not limited to, by merger, consolidation or similar corporate transaction or by purchase; excluding, however, the following ("Excluded Transactions"): (A) any acquisition of beneficial ownership by the Company, any subsidiary of the Company, Wasserstein Perella Partners, L.P., Blackstone Capital Partners L.P. or an affiliate of any of the foregoing, (B) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary of the Company, and (C) any merger, consolidation or other form of business acquisition or combination transaction in which, immediately after the transaction and giving effect thereto and the issuance of securities therein, holders of Common Stock of the Company beneficially own or are entitled to receive equity securities of the acquiring, surviving or resulting entity (or any parent company or other affiliate thereof) that, in the aggregate, represent more than 20% of the combined voting power entitled to be cast generally; or (ii) the sale of any business, businesses or assets of the Company in any single transaction or series of related transactions effected within any 12-month period which, on an aggregate basis, produced at least 80% of the consolidated net sales of the Company, calculated by giving pro forma effect to such transactions, and any acquisitions effected during the relevant period, for the fiscal year immediately preceding such transaction or, if applicable, the first such transaction in the 12-month period in which the transaction or series of related transactions occurred, excluding, however, any Excluded Transaction. (b) Change in Control Period means the period commencing three months prior to the date of a Change in Control and ending on the first anniversary of such date or if later, the expiration of the 45 day period referred to in Section 1(d)(3) below. (c) Code means the Internal Revenue Code of 1986, as amended. (d) Constructive Termination means a termination of Executive's employment by Executive during a Change in Control Period which is due to: (i) the involuntary relocation of Executive to any office or location more than fifty (50) miles from the office or location at which Executive is then located; (ii) a material reduction in Executive's total compensation and benefit package; or (iii) a significant reduction in Executive's responsibilities, position or authority (including changes resulting from the assignment to Executive of any duties inconsistent with his responsibilities, position or authority in effect immediately prior to the Change in Control Period); provided, however, that, notwithstanding any other provision hereof, no event or circumstance will constitute "Constructive Termination" for purposes of this Agreement (A) if Termination For Cause exists or (B) unless (1) Executive shall have given notice to the Company of Executive's determination of the occurrence of such event, (2) such event constitutes one of the events specified in clauses (i) - (iii) above, and (3) such event shall be continuing as of the end of 45 days after the giving of such notice. (e) Date of Termination means the later of (i) the date of receipt of the Notice of Termination by the Company or Executive, as the case may be, or (ii) any later date specified therein (which shall be not more than thirty (30) days after the giving of such notice). (f) ERISA means the Employee Retirement Income Security Act of 1974, as amended. (g) Involuntary Termination means a termination of Executive's employment by the Company during a Change in Control Period other than a Termination For Cause. Termination of Executive's employment during a Change in Control Period by reason of Executive's death or disability shall not be considered an Involuntary Termination. 2 (h) Notice of Termination means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide the basis for termination of Executive's employment under the provision so indicated, and (iii) if the termination date is other than the date of receipt of such notice, specifies the termination date (which shall be not more than thirty (30) days after the giving of such notice). (i) Termination For Cause means a termination of Executive's employment by the Company as a result of: (i) Executive's fraud or misappropriation with respect to the business of the Company or intentional damage to the property or business of the Company or any substantial asset; (ii) willful failure by Executive to perform his duties and responsibilities and to carry out his authority; (iii) willful malfeasance or misfeasance or breach of fiduciary duty or misrepresentation to the Company or its stockholders; (iv) willful failure to act in accordance with any specific lawful instructions of a majority of the Board of Directors of the Company; or (v) conviction of Executive of a felony. 2. Benefits Upon Involuntary Termination or Constructive Termination During Change in Control Period. Subject to the limitations of Section 3, in the event of an Involuntary Termination or Constructive Termination of Executive for which the Date of Termination is within a Change in Control Period, the Company shall pay to Executive the following benefits in a lump sum payment (without discounting to present value) within 30 days of the Date of Termination: (a) to the extent not theretofore paid, Executive's base salary through the Date of Termination; (b) a pro rata bonus equal to (1) Executive's target bonus immediately preceding the Change in Control Period multiplied by (2) a fraction, the numerator of which is the number of whole months (rounded for portions of months) elapsed in the relevant bonus year prior to the Date of Termination, and the denominator of which is 12; (c) twenty-four (24) months of base salary based on the monthly rate of base salary in effect immediately preceding the Change in Control Period, or if greater, the rate of Base Salary in effect immediately preceding the Date of Termination; and 3 (d) Executive's target annual bonus in effect immediately preceding the Change in Control Period multiplied by two (2). In addition, (i) the Company shall offer Executive the opportunity to purchase his Company automobile at its net book value as of the Date of Termination, (ii) Executive shall be deemed to continue as an employee of the Company for 2 years following the Date of Termination for purposes of eligibility and vesting (but not benefit accrual), under any otherwise applicable retirement income plan or arrangement, and (iii) Executive will be entitled to continue to participate in all welfare benefit plans for such 2 year period or, if earlier, the period ending on the date the Executive obtains new full-time employment. Subject to the limitations of Section 3, the Company shall also reimburse Executive for the cost of any continued coverage elected by Executive for himself and his eligible dependents under the Company's group health plan(s) at the end of the welfare benefit continuation period described in clause (iii) of the immediately preceding sentence pursuant to Section 4980B of the Code and Section 601 et seq. of ERISA. 3. Limitation on Benefits. (a) General. Any benefits payable or to be provided to Executive, whether pursuant to this Agreement or otherwise, which constitute Parachute Payments (as defined below) shall be subject to the limitation of this Section 3 so that the benefits payable or to be provided to Executive under this Agreement, as well as any payments or benefits provided outside of this Agreement, shall not cause the Company to have paid an Excess Parachute Payment (as defined below). Accordingly, anything in this Agreement to the contrary notwithstanding, in the event that the certified public accountants regularly employed by the Company immediately prior to a Change in Control (the "Accounting Firm") shall determine that Executive's receipt of all Parachute Payments would cause the Company to pay an Excess Parachute Payment, it shall determine the Reduced Amount, and the aggregate Parachute Payments shall be reduced to such Reduced Amount in accordance with the provisions of Section 3(c) below. (b) Definitions. For purposes of this Section 3: (i) "Excess Parachute Payment" shall have the same meaning as the term "excess parachute payment" defined in Section 280G(b)(1) of the Code; (ii) "Parachute Payment" shall mean any payment or distribution in the nature of compensation to or for the benefit of Executive which is contingent on a "change" under and within the meaning of Section 280G(b)(2)(A)(i) of the Code, whether paid or payable pursuant to this Agreement or otherwise; (iii) "Present Value" shall mean such value determined in accordance with Section 280G(d)(4) of the Code; and (iv) "Reduced Amount" shall mean the largest aggregate amount of Parachute Payments Executive may receive without causing the Company to have paid an Excess Parachute Payment. 4 (c) Limitation. If the Accounting Firm determines that Parachute Payments should be limited to the Reduced Amount, the Company shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof, and Executive may then elect, in Executive's sole discretion, which and how much of the Parachute Payments, including without limitation Parachute Payments made outside of this Agreement, shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Parachute Payments is equal to the Reduced Amount), and shall advise the Company in writing of such election within 10 days of Executive's receipt of notice. If no such election is made by Executive within such 10 day period, the Company may elect which of Parachute Payments, including without limitation Parachute Payments made outside of this Agreement, shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Parachute Payments is equal to the Reduced Amount) and shall notify Executive promptly of such election. All determinations made by the Accounting Firm under this Section 3 shall be binding upon the Company and Executive and shall be made within 45 days immediately following the Date of Termination. As promptly as practicable following such determination, the Company shall pay to or distribute for the benefit of Executive such Parachute Payments as are then due to Executive under this Agreement. 4. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future eligibility or participation in any benefit, bonus, incentive or other plan provided by the Company and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any stock option or other agreements with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan or program of the Company subsequent to the Date of Termination shall be payable in accordance with such plan or program. 5. Full Settlement. The Company's obligation to make payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or other parties. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement. The Company agrees to pay, to the full extent provided by law, all legal fees and expenses which Executive may reasonably incur as a result of any contest by the Company or others of the validity or enforceability of, or liability under, any provision of this Agreement or as a result of any contest by Executive about the amount of any payment pursuant to this Agreement. 6. No Duplication of Benefits. Notwithstanding anything to the contrary herein, the lump sum payment due to Executive under Section 2 hereof shall be reduced by the amount of cash severance or salary continuation benefits paid to Executive pursuant to any other plan or policy of the Company or a written employment agreement between the Company (or one of its affiliates) and Executive, it being the intent of the parties that Executive shall not receive post-employment benefits hereunder and under such other plan, policy or written employment agreement. 5 7. Succession. This Agreement shall inure to the benefit of and shall be binding upon the Company and its successors and assignees, but, without the prior written consent of Executive, this Agreement may not be assigned other than in connection with a merger, sale, consolidation or similar transaction of all or substantially all of the business and/or assets of the Company in which the successor or assignee assumes (whether by operation of law or express assumption) all obligations of the Company hereunder. The Company shall require any successor to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The obligations and duties of Executive hereunder shall be personal and not assignable otherwise than by the laws of descent and distribution. 8. Miscellaneous. (a) Applicable Law. This Agreement shall be governed, construed and interpreted in accordance with the laws of the State of Michigan. (b) Notices. All notices and communications hereunder shall be in writing and shall be given by hand delivery to the other party by registered or certified mail, return receipt requested, postage prepaid, or by overnight mail, addressed as follows: If to Executive: Mr. Rajesh K. Shah 11693 Hunters Creek Drive Plymouth, Michigan 48170 If to the Company: Collins & Aikman Corporation 701 McCullough Drive P.O. Box 32665 Charlotte, North Carolina 28232 Attention: Chairman and Chief Executive Officer or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) Validity. The invalidity or unenforceability of any provision of this contract shall not affect the validity or enforceability of any other provision of this Agreement. (d) Tax Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as shall be required to be withheld pursuant to any applicable law or regulation. 6 (e) Waiver. The waiver of the breach of any term or of any condition of this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition hereof. (f) Entire Agreement. This instrument contains the entire agreement of the parties relating to the subject matter hereof, and it replaces and supersedes any prior agreements between the parties relating to said subject matter. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto. (g) No Right of Employment. Executive and the Company acknowledge that the employment of Executive by the Company is "at will," and prior to the date of a Change in Control, may be terminated by either Executive or the Company at any time. Upon a termination of Executive's employment prior to the date of a Change in Control, there shall be no further rights under this Agreement and this Agreement shall terminate and be of no further force and effect. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. EXECUTIVE: /s/ Rajesh K. Shah ---------------------------------------- Rajesh K. Shah COMPANY: COLLINS & AIKMAN CORPORATION By: /s/ Thomas E. Evans ------------------------------------ Thomas E. Evans Chairman and Chief Executive Officer 7 EX-10.29 6 CHANGE IN CONTROL AGMT. DATED MARCH 17, 1998 EXHIBIT 10.29 CHANGE IN CONTROL AGREEMENT THIS CHANGE IN CONTROL AGREEMENT (the "Agreement") is made and entered into this 17th day of March, 1998, by and between COLLINS & AIKMAN CORPORATION, a Delaware corporation (the "Company"), and RONALD T. LINDSAY (the "Executive"). Statement of Purpose The Company wishes to encourage the continued service and dedication of Executive in the event of any actual or contemplated Change in Control (as defined below) of the Company. The Company has determined that these objectives are best accomplished by providing Executive with individual financial security pursuant to the terms of this Agreement, which the Company believes are fair and reasonable and consistent with the practices of other major corporations. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the Company and Executive hereby agree as follows: 1. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) Change in Control means and shall be deemed to have occurred upon: (i) the acquisition, directly or indirectly, by any "person" (within the meaning of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended) within any 12 month period of more than 80% of the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors, including, but not limited to, by merger, consolidation or similar corporate transaction or by purchase; excluding, however, the following ("Excluded Transactions"): (A) any acquisition of beneficial ownership by the Company, any subsidiary of the Company, Wasserstein Perella Partners, L.P., Blackstone Capital Partners L.P. or an affiliate of any of the foregoing, (B) any acquisition by an employee benefit plan (or related trust) sponsored or maintained by the Company or any subsidiary of the Company, and (C) any merger, consolidation or other form of business acquisition or combination transaction in which, immediately after the transaction and giving effect thereto and the issuance of securities therein, holders of Common Stock of the Company beneficially own or are entitled to receive equity securities of the acquiring, surviving or resulting entity (or any parent company or other affiliate thereof) that, in the aggregate, represent more than 20% of the combined voting power entitled to be cast generally; or (ii) the sale of any business, businesses or assets of the Company in any single transaction or series of related transactions effected within any 12-month period which, on an aggregate basis, produced at least 80% of the consolidated net sales of the Company, calculated by giving pro forma effect to such transactions, and any acquisitions effected during the relevant period, for the fiscal year immediately preceding such transaction or, if applicable, the first such transaction in the 12-month period in which the transaction or series of related transactions occurred, excluding, however, any Excluded Transaction. (b) Change in Control Period means the period commencing three months prior to the date of a Change in Control and ending on the first anniversary of such date or if later, the expiration of the 45 day period referred to in Section 1(d)(3) below. (c) Code means the Internal Revenue Code of 1986, as amended. (d) Constructive Termination means a termination of Executive's employment by Executive during a Change in Control Period which is due to: (i) the involuntary relocation of Executive to any office or location more than fifty (50) miles from the office or location at which Executive is then located; (ii) a material reduction in Executive's total compensation and benefit package; or (iii) a significant reduction in Executive's responsibilities, position or authority (including changes resulting from the assignment to Executive of any duties inconsistent with his responsibilities, position or authority in effect immediately prior to the Change in Control Period); provided, however, that, notwithstanding any other provision hereof, no event or circumstance will constitute "Constructive Termination" for purposes of this Agreement (A) if Termination For Cause exists or (B) unless (1) Executive shall have given notice to the Company of Executive's determination of the occurrence of such event, (2) such event constitutes one of the events specified in clauses (i) - (iii) above, and (3) such event shall be continuing as of the end of 45 days after the giving of such notice. (e) Date of Termination means the later of (i) the date of receipt of the Notice of Termination by the Company or Executive, as the case may be, or (ii) any later date specified therein (which shall be not more than thirty (30) days after the giving of such notice). (f) ERISA means the Employee Retirement Income Security Act of 1974, as amended. (g) Involuntary Termination means a termination of Executive's employment by the Company during a Change in Control Period other than a Termination For Cause. Termination of Executive's employment during a Change in Control Period by reason of Executive's death or disability shall not be considered an Involuntary Termination. 2 (h) Notice of Termination means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide the basis for termination of Executive's employment under the provision so indicated, and (iii) if the termination date is other than the date of receipt of such notice, specifies the termination date (which shall be not more than thirty (30) days after the giving of such notice). (i) Termination For Cause means a termination of Executive's employment by the Company as a result of: (i) Executive's fraud or misappropriation with respect to the business of the Company or intentional damage to the property or business of the Company or any substantial asset; (ii) willful failure by Executive to perform his duties and responsibilities and to carry out his authority; (iii) willful malfeasance or misfeasance or breach of fiduciary duty or misrepresentation to the Company or its stockholders; (iv) willful failure to act in accordance with any specific lawful instructions of a majority of the Board of Directors of the Company; or (v) conviction of Executive of a felony. 2. Benefits Upon Involuntary Termination or Constructive Termination During Change in Control Period. Subject to the limitations of Section 3, in the event of an Involuntary Termination or Constructive Termination of Executive for which the Date of Termination is within a Change in Control Period, the Company shall pay to Executive the following benefits in a lump sum payment (without discounting to present value) within 30 days of the Date of Termination: (a) to the extent not theretofore paid, Executive's base salary through the Date of Termination; (b) a pro rata bonus equal to (1) Executive's target bonus immediately preceding the Change in Control Period multiplied by (2) a fraction, the numerator of which is the number of whole months (rounded for portions of months) elapsed in the relevant bonus year prior to the Date of Termination, and the denominator of which is 12; (c) twelve (12) months of base salary based on the monthly rate of base salary in effect immediately preceding the Change in Control Period, or if greater, the rate of Base Salary in effect immediately preceding the Date of Termination; and 3 (d) Executive's target annual bonus in effect immediately preceding the Change in Control Period multiplied by two (2). In addition, (i) the Company shall offer Executive the opportunity to purchase his Company automobile at its net book value as of the Date of Termination, (ii) Executive shall be deemed to continue as an employee of the Company for 2 years following the Date of Termination for purposes of eligibility and vesting (but not benefit accrual), under any otherwise applicable retirement income plan or arrangement, and (iii) Executive will be entitled to continue to participate in all welfare benefit plans for such 2 year period or, if earlier, the period ending on the date the Executive obtains new full-time employment. Subject to the limitations of Section 3, the Company shall also reimburse Executive for the cost of any continued coverage elected by Executive for himself and his eligible dependents under the Company's group health plan(s) at the end of the welfare benefit continuation period described in clause (iii) of the immediately preceding sentence pursuant to Section 4980B of the Code and Section 601 et seq. of ERISA. 3. Limitation on Benefits. (a) General. Any benefits payable or to be provided to Executive, whether pursuant to this Agreement or otherwise, which constitute Parachute Payments (as defined below) shall be subject to the limitation of this Section 3 so that the benefits payable or to be provided to Executive under this Agreement, as well as any payments or benefits provided outside of this Agreement, shall not cause the Company to have paid an Excess Parachute Payment (as defined below). Accordingly, anything in this Agreement to the contrary notwithstanding, in the event that the certified public accountants regularly employed by the Company immediately prior to a Change in Control (the "Accounting Firm") shall determine that Executive's receipt of all Parachute Payments would cause the Company to pay an Excess Parachute Payment, it shall determine the Reduced Amount, and the aggregate Parachute Payments shall be reduced to such Reduced Amount in accordance with the provisions of Section 3(c) below. (b) Definitions. For purposes of this Section 3: (i) "Excess Parachute Payment" shall have the same meaning as the term "excess parachute payment" defined in Section 280G(b)(1) of the Code; (ii) "Parachute Payment" shall mean any payment or distribution in the nature of compensation to or for the benefit of Executive which is contingent on a "change" under and within the meaning of Section 280G(b)(2)(A)(i) of the Code, whether paid or payable pursuant to this Agreement or otherwise; (iii) "Present Value" shall mean such value determined in accordance with Section 280G(d)(4) of the Code; and (iv) "Reduced Amount" shall mean the largest aggregate amount of Parachute Payments Executive may receive without causing the Company to have paid an Excess Parachute Payment. 4 (c) Limitation. If the Accounting Firm determines that Parachute Payments should be limited to the Reduced Amount, the Company shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof, and Executive may then elect, in Executive's sole discretion, which and how much of the Parachute Payments, including without limitation Parachute Payments made outside of this Agreement, shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Parachute Payments is equal to the Reduced Amount), and shall advise the Company in writing of such election within 10 days of Executive's receipt of notice. If no such election is made by Executive within such 10 day period, the Company may elect which of Parachute Payments, including without limitation Parachute Payments made outside of this Agreement, shall be eliminated or reduced (as long as after such election the Present Value of the aggregate Parachute Payments is equal to the Reduced Amount) and shall notify Executive promptly of such election. All determinations made by the Accounting Firm under this Section 3 shall be binding upon the Company and Executive and shall be made within 45 days immediately following the Date of Termination. As promptly as practicable following such determination, the Company shall pay to or distribute for the benefit of Executive such Parachute Payments as are then due to Executive under this Agreement. 4. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future eligibility or participation in any benefit, bonus, incentive or other plan provided by the Company and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any stock option or other agreements with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan or program of the Company subsequent to the Date of Termination shall be payable in accordance with such plan or program. 5. Full Settlement. The Company's obligation to make payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against Executive or other parties. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement. The Company agrees to pay, to the full extent provided by law, all legal fees and expenses which Executive may reasonably incur as a result of any contest by the Company or others of the validity or enforceability of, or liability under, any provision of this Agreement or as a result of any contest by Executive about the amount of any payment pursuant to this Agreement. 6. No Duplication of Benefits. Notwithstanding anything to the contrary herein, the lump sum payment due to Executive under Section 2 hereof shall be reduced by the amount of cash severance or salary continuation benefits paid to Executive pursuant to any other plan or policy of the Company or a written employment agreement between the Company (or one of its affiliates) and Executive, it being the intent of the parties that Executive shall not receive post-employment benefits hereunder and under such other plan, policy or written employment agreement. 5 7. Succession. This Agreement shall inure to the benefit of and shall be binding upon the Company and its successors and assignees, but, without the prior written consent of Executive, this Agreement may not be assigned other than in connection with a merger, sale, consolidation or similar transaction of all or substantially all of the business and/or assets of the Company in which the successor or assignee assumes (whether by operation of law or express assumption) all obligations of the Company hereunder. The Company shall require any successor to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The obligations and duties of Executive hereunder shall be personal and not assignable otherwise than by the laws of descent and distribution. 8. Miscellaneous. (a) Applicable Law. This Agreement shall be governed, construed and interpreted in accordance with the laws of the State of Michigan. (b) Notices. All notices and communications hereunder shall be in writing and shall be given by hand delivery to the other party by registered or certified mail, return receipt requested, postage prepaid, or by overnight mail, addressed as follows: If to Executive: Mr. Ronald T. Lindsay 1214 Belgrave Place Charlotte, North Carolina 28203 If to the Company: Collins & Aikman Corporation 701 McCullough Drive P.O. Box 32665 Charlotte, North Carolina 28232 Attention: Chairman and Chief Executive Officer or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) Validity. The invalidity or unenforceability of any provision of this contract shall not affect the validity or enforceability of any other provision of this Agreement. (d) Tax Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as shall be required to be withheld pursuant to any applicable law or regulation. 6 (e) Waiver. The waiver of the breach of any term or of any condition of this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition hereof. (f) Entire Agreement. This instrument contains the entire agreement of the parties relating to the subject matter hereof, and it replaces and supersedes any prior agreements between the parties relating to said subject matter. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto. (g) No Right of Employment. Executive and the Company acknowledge that the employment of Executive by the Company is "at will," and prior to the date of a Change in Control, may be terminated by either Executive or the Company at any time. Upon a termination of Executive's employment prior to the date of a Change in Control, there shall be no further rights under this Agreement and this Agreement shall terminate and be of no further force and effect. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. EXECUTIVE: /s/ Ronald T. Lindsay ---------------------------------------- Ronald T. Lindsay COMPANY: COLLINS & AIKMAN CORPORATION By: /s/ Thomas E. Hannah ------------------------------------ Thomas E. Hannah Chairman and Chief Executive Officer 7 EX-10.30 7 EMPLOYMENT AGREEMENT DATED OCTOBER 1, 1999 Exhibit 10.30 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT (this "Agreement") is made and entered into as of October 1, 1999, by and between COLLINS & AIKMAN PRODUCTS CO., a Delaware corporation (the "Company"), and RONALD T. LINDSAY ("Employee"). W I T N E S S E T H WHEREAS, Employee is currently employed by the Company; and WHEREAS, the Company wishes to retain Employee's services by providing Employee the compensation and benefits set forth in this Agreement. NOW, THEREFORE, in consideration of Employee's continued employment and the mutual agreements contained herein, the parties agree as follows: 1. Term of Employment. The Company hereby agrees to employ Employee, and Employee hereby accepts employment, for a period of three (3) years, commencing October 1, 1999 and ending September 30, 2002, subject to the terms and conditions of this Agreement. At the end of such initial three year term, unless the Company shall have given Employee 60 days prior written notice of its intention to terminate this Agreement at the end of the initial term hereof, the term of this Agreement shall automatically be extended by an additional one year period. Thereafter, unless the Company shall have given Employee 60 days prior written notice of its intention to terminate this Agreement at the end of the term then in effect, the term of this Agreement shall automatically be extended by an additional one year period. 2. Position and Location of Employment. During the term of this Agreement, Employee shall be employed in the position of Senior Vice President, Secretary and General Counsel of Collins & Aikman Corporation, the Company and the affiliates thereof, and shall perform such services for the Company and its affiliates as may be assigned to him from time to time by the Chairman or the Board of Directors of the Company. Employee shall devote his full time and attention to the affairs of the Company and his duties in such position. The location for Employee's position shall be the Company's Worldwide Headquarters in Troy, Michigan upon the opening of the Company's Worldwide Headquarters or by January 1, 2000, whichever is later. Employee shall relocate to the Troy, Michigan area with his wife and any minor children as soon as practicable after the conclusion of the 1999-2000 academic year, but no later than August 1, 2000. 3. Compensation. (a) Base Salary. The Company shall pay to Employee base salary at an annual rate of not less than $215,000 during the term of his employment hereunder. Such amount shall be reviewed annually by the Board of Directors of the Company or an appropriate committee thereof (the Company's Board of Directors or such committee being referred to herein as the "Compensation Board") and may be increased in the sole discretion of the Compensation Board. (b) Bonus Plan. During the term of Employee's employment hereunder, Employee shall be eligible to participate in the Company's annual Executive Incentive Compensation Plan (the "EIC Plan") in accordance with the applicable provisions of the EIC Plan. The standard bonus for Employee under the EIC Plan initially shall be forty percent (40%) of Employee's base salary and shall be reviewed by the Compensation Board from time-to-time during the term of Employee's employment hereunder. Notwithstanding the foregoing, Employee's 1999 bonus shall be calculated as follows: (i) one-half ( 1/2) of the 1999 bonus shall be based on Employee's base salary and standard bonus in effect immediately preceding October 1, 1999 and (ii) one-half ( 1/2) of the 1999 bonus shall be based on Employee's base salary and standard bonus as set forth in this Agreement. (c) Stock Options. Employee is a participant in the Collins & Aikman Corporation 1994 Employee Stock Option Plan (the "Option Plan") and shall be granted the option to purchase up to an additional 40,000 shares of the Common Stock of Collins & Aikman Corporation, in accordance with the applicable terms and conditions of the Option Plan and an Option Agreement between Collins & Aikman Corporation and Employee to be entered into, dated and effective as of October 14, 1999. The option price for all such shares shall be the closing price of Collins & Aikman Corporation shares on the New York Stock Exchange as of October 14, 1999. Subject to the terms and conditions of the Option Plan and the Option Agreement, the option of Employee to purchase up to the 40,000 shares shall vest as follows:
- --------------------------------------------------------------------------------------------------- VESTING DATE TOTAL NUMBER OF PERCENTAGE VESTED SHARES VESTED - --------------------------------------------------------------------------------------------------- October 1, 2000 13,334 33% - --------------------------------------------------------------------------------------------------- October 1, 2001 26,667 66% - --------------------------------------------------------------------------------------------------- October 1, 2002 40,000 100% - ---------------------------------------------------------------------------------------------------
4. Benefits and Perquisites. (a) General. Employee shall be entitled to such fringe benefits and perquisites, and to participate in such pension, profit sharing and benefit plans as are generally made available to executives of the Company during the term hereof, including major medical, extended medical and disability insurance, supplemental retirement income plan, group term life insurance and appropriate annual holidays, sick days and vacation time. Included in such benefits to Employee, the Company shall furnish the use of an automobile subject to applicable Company policies and practice and shall reimburse Employee for normal gasoline and maintenance charges, subject to proper allocation of personal use for income tax purposes. The Company also shall pay the monthly dues at a country club in the Troy, Michigan area of Employee's choice. The Company shall not be liable for the initiation fee or any other charges or fees payable by Employee to such club. (b) Relocation Expenses. The Company shall reimburse Employee for the reasonable expenses incurred by Employee in connection with the relocation of Employee and his wife and any minor children from Charlotte, North Carolina to the Troy, Michigan area, in accordance with the relocation policy of the Company. In lieu of the $6,000 relocation allowance payable to 2 Employee under such relocation policy, the Company shall pay Employee a one-time relocation allowance of $50,000, payable in a lump sum payment upon completion of the purchase of a principal residence by Employee in the Troy, Michigan area. In addition to the payment of the relocation allowance as provided in this Paragraph 4(b), the Company shall pay Employee an additional amount such that after all applicable federal, state and local income, employment and other taxes on Employee's relocation allowance and on any additional amount payable in accordance with this sentence, Employee has received the entire $50,000 relocation allowance on an after-tax basis. 5. Reimbursement of Expenses. The Company shall reimburse Employee for all reasonable travel, entertainment and other reasonable business expenses reasonably incurred by Employee in connection with the performance of his duties hereunder, provided that Employee furnishes to the Company adequate records or other evidence respecting such expenditures. 6. Termination of Employment. Employee's employment under this Agreement may be terminated: (a) by the Company for Cause, which means: (i) fraud or misappropriation with respect to the business of the Company or intentional material damage to the property or business of the Company, (ii) willful failure by Employee to perform his duties and responsibilities and to carry out his authority, (iii) willful malfeasance or misfeasance or breach of fiduciary duty or representation to the Company or its stockholders, (iv) willful failure to act in accordance with any specific lawful instructions of a majority of the Board of Directors of the Company, or (v) conviction of Employee of a felony (which shall be referred to as a "For Cause Termination"); (b) by the Company for any reason other than a For Cause Termination (which shall be referred to as a "No Cause Termination"); (c) by Employee for any reason other than a "Constructive Termination" (as defined below) at any time (which shall be referred to as a "Voluntary Termination"); or (d) by Employee within 30 days after the occurrence of one or more of the following: (i) a material reduction in Employee's total compensation and benefits package, (ii) an adverse change (in the judgment of Employee) in Employee's responsibilities, position (including status, office, title, reporting relationships or working conditions), authority or duties, or (iii) the Company's giving notice of the non-renewal of this Agreement at the end of the term then in effect pursuant to Paragraph 1 hereof (which shall be referred to as a "Constructive Termination"); provided, however, no event or circumstance described in clause (i) or (ii) shall give rise to a "Constructive Termination" for purposes of this Agreement unless Employee shall have given notice to the Company of Employee's determination of the occurrence of an event or circumstance described in clause (i) or (ii) and such event or circumstance shall be continuing as of the end of 45 days after the giving of such notice. 3 7. Benefits Upon Termination. (a) Termination as a Result of Voluntary Termination or For Cause Termination. If Employee's employment under this Agreement is terminated as a result of a Voluntary Termination or a For Cause Termination, the Company shall pay Employee (i) his unpaid base salary under Paragraph 3(a) accrued to the date on which his employment terminates (the "Termination Date"), (ii) any accrued but unused vacation and (iii) all benefits earned by Employee under any employee benefit plans and programs sponsored by the Company in which Employee participates. (b) Termination as a Result of No Cause Termination or Constructive Termination. If Employee's employment under this Agreement is terminated as a result of a No Cause Termination or a Constructive Termination, the Company shall pay to Employee the following benefits: (i) Employee's unpaid base salary accrued to the Termination Date and any accrued but unused vacation; (ii) One (1) times Employee's standard bonus based on the standard bonus in effect immediately preceding the Termination Date; and (iii) Employee's base salary for the greater of (A) twelve (12) months or (B) the remaining term of this Agreement, based on the rate of base salary in effect immediately preceding the Termination Date. The amount due to Employee pursuant to 7(b)(iii) above shall be paid, at the sole discretion of the Compensation Board, either in a lump sum or on a periodic basis in accordance with the Company's normal pay practice. In addition, all outstanding stock options granted to Employee under the Option Plan will immediately vest upon a No Cause Termination or a Constructive Termination prior to the expiration of the term of this Agreement and will continue to be fully exercisable until the earlier of ninety (90) days after the Termination Date or the original expiration date of said options. The Company shall also cause Employee to receive all benefits earned by Employee under all employee benefit plans and programs sponsored by the Company in which Employee participates. 8. Representations and Covenants of Employee. (a) Conduct. Employee will at all times refrain from taking any action or making any statements, written or oral, which are intended to and do disparage the goodwill or reputation of the Company or any of its subsidiaries or affiliates or any directors or officers thereof or which could adversely affect the morale of employees of the Company or its subsidiaries. (b) Performance of Duties. In consideration of the payments to be made hereunder, Employee agrees that during the term of his employment under this Agreement, he shall devote 4 his entire business time and attention to the performance of his duties hereunder and serve the Company diligently and to the best of his abilities. (c) Company Information. Employee agrees that so long as he is employed by the Company and following any termination of his employment Employee will keep confidential all confidential information and trade secrets of the Company and any of its subsidiaries or affiliates and will not disclose such information to any person without the prior approval of the Board of Directors of the Company or use such information for any purpose other than in the course of fulfilling his duties of employment with the Company pursuant to this Agreement. It is understood that for purposes of this Agreement the term "confidential information" is to be construed broadly to include all material nonpublic or proprietary information. 9. Release. In consideration of the compensation continuance available in certain events pursuant to this Agreement, Employee unconditionally releases and covenants not to sue the Company and its subsidiaries and affiliates and directors, officers, employees and stockholders thereof, from any and all claims, liabilities and obligations of any nature pertaining to termination of employment other than those explicitly provided for by this Agreement including, without limitation, any claims arising out of alleged legal restrictions on the Company's rights to terminate its employees, such as any implied contract of employment or termination contrary to public policy. 10. Governing Law. The validity, interpretation and performance of this Agreement shall be governed by the laws of Michigan, regardless of the laws that might be applied under applicable principles of conflicts of laws. 11. Amendment of CIC Agreement; Entire Agreement and Survivorship. (a) Employee and Collins & Aikman Corporation hereby agree that Sections 2(c) and 2(d) of that certain Change in Control Agreement between Employee and Collins & Aikman Corporation dated March 17, 1998 (the "CIC Agreement") are amended effective as of the date hereof to read as follows: "(c) twenty-four (24) months of base salary based on the monthly rate of base salary in effect immediately preceding the Change in Control Period, or if greater, the rate of Base Salary in effect immediately preceding the Date of Termination; and (d) two (2) times Executive's target annual bonus in effect immediately preceding the Change in Control Period." (b) This Agreement and the CIC Agreement (as amended by Paragraph 11(a) above) and all other agreements and plans referred to in this Agreement constitute the entire agreement and understanding between the parties hereto with respect to the matters referred to herein and therein and supersede all prior agreements and understandings between the parties hereto with respect to the matters referred to herein and therein. The representations, warranties and 5 covenants of Employee contained in parts (a) and (c) of Paragraph 8, and the release contained in Paragraph 9 shall survive the expiration or termination of this Agreement by either party. 12. Notice. Any written notice required to be given by one party to the other party hereunder shall be deemed effective if mailed by certified or registered mail: To the Company: Collins & Aikman Products Co. 701 McCullough Drive Charlotte, North Carolina 26262 Attention: Harold R. Sunday To Employee: Ronald T. Lindsay 1214 Belgrave Place Charlotte, North Carolina 28203 or such other address as may be stated in notice given under this Paragraph 12. 13. Severability. The invalidity, illegality or enforceability of any provision of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of this Agreement or such provision in any other jurisdiction, it being the intent of the parties hereto that all rights and obligations of the parties hereto under this Agreement shall be enforceable to the fullest extent permitted by law. 14. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their personal representatives, and, in the case of the Company, its successors and assigns, and Paragraph 9 shall also inure to the benefit of the other persons and entities identified therein; provided, however, that Employee shall not, without the prior written consent of the Company, transfer, assign, convey, pledge or encumber this Agreement or any interest under this Agreement. Employee understands that the assignment of this Agreement or any benefits hereof or obligations hereunder by the Company to any of its subsidiaries or affiliates or to any purchaser of all or a substantial portion of the assets of the Company or of any affiliated company then employing Employee, and the employment of Employee by such subsidiary or affiliate or by any such purchaser or by any successor of the Company in a merger or consolidation, shall not be deemed a termination of Employee's employment for purposes of Paragraphs 6 and 7 or otherwise. 15. Amendment. This Agreement may be amended or canceled only by an instrument in writing duly executed and delivered by each party to this Agreement. 16. Tax Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as shall be required to be withheld pursuant to any applicable law or regulation. 17. Headings. Headings contained in this Agreement are for or convenience only and shall not limit this Agreement or affect the interpretation thereof. 6 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. /s/ Ronald T. Lindsay --------------------------------------- Ronald T. Lindsay COLLINS & AIKMAN PRODUCTS CO. By: /s/ Thomas E. Evans ---------------------------------- Thomas E. Evans Chairman and Chief Executive Officer Collins & Aikman Corporation has joined in the execution of this Agreement for purposes of Paragraphs 2, 3(c) and 11 above. COLLINS & AIKMAN CORPORATION By: ---------------------------------- Thomas E. Evans Chairman and Chief Executive Officer 7 EX-10.31 8 SEVERANCE BENEFIT AGREEMENT DTD. JULY 26, 1999 Exhibit 10.31 SEVERANCE BENEFIT AGREEMENT THIS SEVERANCE BENEFIT AGREEMENT (the "Agreement") is made and entered into this 26th day of July, 1999, by and between COLLINS & AIKMAN CORPORATION, a Delaware corporation (the "Company"), and RAJESH K. SHAH ("Executive"). Statement of Purpose The Company wishes to encourage the continued service and dedication of Executive by providing Executive with severance benefits if his employment with the Company is terminated for certain reasons, as described herein. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the Company and Executive hereby agree as follows: 1. Term of Agreement. The initial term of this Agreement shall extend for a period of two years, commencing on the date hereof and ending July 25, 2001. At the end of such initial two year term, unless the Company shall have given Executive 60 days prior written notice of its intention to terminate this Agreement at the end of the initial term hereof, the term of this Agreement shall automatically be extended by an additional one year period. Thereafter, unless the Company shall have given Executive 60 days prior written notice of its intention to terminate this Agreement at the end of the term then in effect, the term of this Agreement shall automatically be extended by an additional one year period. 2. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) Constructive Termination means the Executive's termination of his employment with the Company and its subsidiaries at any time during the 90 day period beginning on: (i) the termination of this Agreement at the end of the term then in effect; (ii) the involuntary relocation of Executive to any office or location more than fifty (50) miles from the office or location at which Executive is then located; (iii) a material reduction in Executive's total compensation and benefits package; or (iv) a significant reduction in Executive's responsibilities, position or authority (including changes resulting from the assignment to Executive of any duties inconsistent with his responsibilities, position or authority); provided, however, that, notwithstanding any other provision hereof, no event or circumstance described in clause (iii) or (iv) above shall rise to a "Constructive Termination" for purposes of this Agreement unless Executive shall have given notice to the Company of Executive's determination of the occurrence of an event specified in clause (iii) or (iv) above and such event shall be continuing as of the end of 45 days after the giving of such notice. (b) Date of Termination means the later of (i) the date of receipt of the Notice of Termination by the Company or Executive, as the case may be, or (ii) any later date specified therein (which shall be not more than 30 days after the giving of such notice). (c) Involuntary Termination means a termination of Executive's employment by the Company other than a Termination For Cause or by reason of Executive's death or disability. (d) Notice of Termination means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide the basis for termination of Executive's employment under the provision so indicated, and (iii) if the termination date is other than the date of receipt of such notice, specifies the termination date (which shall be not more than 30 days after the giving of such notice). (e) Termination For Cause means a termination of Executive's employment by the Company as a result of: (i) fraud or misappropriation with respect to any business of the Company or intentional material damage to any property or business of the Company or an affiliate of the Company; (ii) willful failure by Executive to perform his duties and responsibilities and to carry out his authority; (iii) willful malfeasance or misfeasance or breach of fiduciary duty or representation to the Company or its owners or an affiliate of the Company; (iv) willful failure to act in accordance with any specific lawful instructions of the Chairman and CEO or a majority of the Board of Directors of the Company; or (v) conviction of Executive of a felony. 3. Benefits Upon Involuntary Termination or Constructive Termination. In the event of an Involuntary Termination or Constructive Termination of Executive, the Company shall pay to Executive the following benefits and no other salary, bonus, benefits or other compensation: (a) to the extent not theretofore paid, Executive's base salary through the Date of Termination; 2 (b) any unpaid cash bonus Executive is entitled to receive for the prior fiscal year of the Company; (c) Executive's accrued and vested benefits under employee benefit plans sponsored by the Company; (d) the product of (i) 1.5 times (ii) Executive's target annual bonus under the Executive Incentive Compensation Plan for the current fiscal year; and (e) Executive's base salary for the greater of (i) eighteen (18) months or (ii) the remaining term of this Agreement, based on the rate of base salary in effect immediately preceding the Termination Date. The amount due to Executive pursuant to Section 3(e) shall be paid, at the sole discretion of the Company, either in a lump sum or on a periodic basis in accordance with normal pay practices. Notwithstanding the foregoing, the Company shall not be obligated to pay Executive any amount pursuant to Section 3(d) or (e) unless Executive executes and delivers to the Company a release of the parties set forth in Section 4 hereof, such release to be dated as of the Date of Termination and to contain the provisions set forth in Section 4 hereof. In addition, all outstanding stock options granted to Executive under the Collins & Aikman Corporation Stock Option Plan will immediately vest upon an Involuntary Termination or a Constructive Termination prior to the expiration of the term of this Agreement and will continue to be fully exercisable until the earlier of ninety (90) days after the Termination Date or the original expiration date of said options. 4. Release. In consideration of the severance benefits available in certain events pursuant to this Agreement, Executive unconditionally releases the Company and its subsidiaries and affiliates and directors, officers, employees and stockholders thereof, from any and all claims, liabilities and obligations of any nature pertaining to the terms of his employment or the termination of employment other than those explicitly provided for by this Agreement including, without limitation, any claims arising out of alleged legal restrictions on the Company's rights to terminate its employees, such as any termination contrary to public policy or to laws prohibiting discrimination (including, without limitation, the Age Discrimination in Employment Act). 5. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future eligibility or participation in any benefit, bonus, incentive or other plan provided by the Company and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any stock option or other agreements with the Company. Amounts which are vested benefits or which Executive is otherwise entitled to receive under any plan or program of the Company subsequent to the Date of Termination shall be payable in accordance with such plan or program. 6. Succession. This Agreement shall inure to the benefit of and shall be binding upon the Company and its successors and assignees, but, without the prior written consent of Executive, this Agreement may not be assigned other than in connection with a merger, sale, 3 consolidation or similar transaction of all or substantially all of the business and/or assets of the Company in which the successor or assignee assumes (whether by operation of law or express assumption) all obligations of the Company hereunder. The Company shall require any successor to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The obligations and duties of Executive hereunder shall be personal and not assignable otherwise than by the laws of descent and distribution. 7. Miscellaneous. (a) Applicable Law. This Agreement shall be governed, construed and interpreted in accordance with the laws of the State of Michigan. (b) Notices. All notices and communications hereunder shall be in writing and shall be given by hand delivery to the other party by registered or certified mail, return receipt requested, postage prepaid, or by overnight mail, addressed as follows: If to Executive: Mr. Rajesh K. Shah 11693 Hunters Creek Drive Plymouth, Michigan 48170 If to the Company: Collins & Aikman Corporation 701 McCullough Drive P.O. Box 32665 Charlotte, North Carolina 28232 Attention: Chairman and Chief Executive Officer or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) Validity. The invalidity or unenforceability of any provision of this contract shall not affect the validity or enforceability of any other provision of this Agreement. (d) Tax Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) Waiver. The waiver of the breach of any term or of any condition of this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition hereof. 4 (f) Entire Agreement. This instrument contains the entire agreement of the parties relating to the subject matter hereof, and it replaces and supersedes any prior agreements between the parties relating to said subject matter. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto. (g) No Right of Employment. Executive and the Company acknowledge that the employment of Executive by the Company is "at will" and may be terminated by either Executive or the Company at any time. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. EXECUTIVE: /s/ Rajesh K. Shah -------------------------------------- Rajesh K. Shah COMPANY: COLLINS & AIKMAN CORPORATION By: /s/ Thomas E. Evans ---------------------------------- Thomas E. Evans Chairman and Chief Executive Officer 5 EX-10.32 9 SEVERANCE BENEFIT AGMT. DTD. AUGUST 9, 1999 EXHIBIT 10.32 SEVERANCE BENEFIT AGREEMENT THIS SEVERANCE BENEFIT AGREEMENT (the "Agreement") is made and entered into this 9th day of August, 1999, by and between COLLINS & AIKMAN CORPORATION, a Delaware corporation (the "Company"), and JONATHAN PEISNER ("Executive"). Statement of Purpose The Company wishes to encourage the continued service and dedication of Executive by providing Executive with severance benefits if his employment with the Company is terminated for certain reasons, as described herein. NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the Company and Executive hereby agree as follows: 1. Term of Agreement. The initial term of this Agreement shall extend for a period of two years, commencing on the date hereof and ending August 8, 2001. At the end of such initial two year term, unless the Company shall have given Executive 60 days prior written notice of its intention to terminate this Agreement at the end of the initial term hereof, the term of this Agreement shall automatically be extended by an additional one year period. Thereafter, unless the Company shall have given Executive 60 days prior written notice of its intention to terminate this Agreement at the end of the term then in effect, the term of this Agreement shall automatically be extended by an additional one year period. 2. Definitions. For purposes of this Agreement, the following terms shall have the following meanings: (a) Constructive Termination means the Executive's termination of his employment with the Company and its subsidiaries at any time during the 90 day period beginning on: (i) the termination of this Agreement at the end of the term then in effect; (ii) the involuntary relocation of Executive to any office or location more than fifty (50) miles from the office or location at which Executive is then located; (iii) a material reduction in Executive's total compensation and benefits package; or (iv) a significant reduction in Executive's responsibilities, position or authority (including changes resulting from the assignment to Executive of any duties inconsistent with his responsibilities, position or authority); provided, however, that, notwithstanding any other provision hereof, no event or circumstance described in clause (iii) or (iv) above shall rise to a "Constructive Termination" for purposes of this Agreement unless Executive shall have given notice to the Company of Executive's determination of the occurrence of an event specified in clause (iii) or (iv) above and such event shall be continuing as of the end of 45 days after the giving of such notice. (b) Date of Termination means the later of (i) the date of receipt of the Notice of Termination by the Company or Executive, as the case may be, or (ii) any later date specified therein (which shall be not more than 30 days after the giving of such notice). (c) Involuntary Termination means a termination of Executive's employment by the Company other than a Termination For Cause or by reason of Executive's death or disability. (d) Notice of Termination means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide the basis for termination of Executive's employment under the provision so indicated, and (iii) if the termination date is other than the date of receipt of such notice, specifies the termination date (which shall be not more than 30 days after the giving of such notice). (e) Termination For Cause means a termination of Executive's employment by the Company as a result of: (i) fraud or misappropriation with respect to any business of the Company or intentional material damage to any property or business of the Company or an affiliate of the Company; (ii) willful failure by Executive to perform his duties and responsibilities and to carry out his authority; (iii) willful malfeasance or misfeasance or breach of fiduciary duty or representation to the Company or its owners or an affiliate of the Company; (iv) willful failure to act in accordance with any specific lawful instructions of the Chairman and CEO or a majority of the Board of Directors of the Company; or (v) conviction of Executive of a felony. 3. Benefits Upon Involuntary Termination or Constructive Termination. In the event of an Involuntary Termination or Constructive Termination of Executive, the Company shall pay to Executive the following benefits and no other salary, bonus, benefits or other compensation: (a) to the extent not theretofore paid, Executive's base salary through the Date of Termination; 2 (b) any unpaid cash bonus Executive is entitled to receive for the prior fiscal year of the Company; (c) Executive's accrued and vested benefits under employee benefit plans sponsored by the Company; (d) a pro-rata bonus under the Executive Incentive Compensation Plan for the current fiscal year (based on the number of months of such fiscal year preceding the Date of Termination over twelve (12)); (e) Executive's base salary for the greater of 12 months or the remaining term of this Agreement, based on the rate of base salary in effect immediately preceding the Date of Termination, which shall be paid to Executive on a periodic basis in accordance with the Company's normal pay practices commencing with the first payroll payment date following the Date of Termination; (f) all of Executive's benefits and perquisites with the Company in effect immediately prior to the Date of Termination (other than short and long term disability insurance) until the earlier of (i) the expiration of the payment period for the amount due under this Section 3(e) or (ii) the date Executive becomes employed by another employer; and (g) outplacement services for a reasonable period of time following the Date of Termination, the provider of which shall be selected by the Company. Notwithstanding the foregoing, the Company shall not be obligated to pay or provide Executive any amount or benefit pursuant to Section 3(d), 3(e), 3(f) or 3(g) unless Executive executes and delivers to the Company a release of the parties set forth in Section 4 hereof, such release to be dated as of the Date of Termination and to contain the provisions set forth in Section 4 hereof. 4. Release. In consideration of the severance benefits available in certain events pursuant to this Agreement, Executive unconditionally releases the Company and its subsidiaries and affiliates and directors, officers, employees and stockholders thereof, from any and all claims, liabilities and obligations of any nature pertaining to the terms of his employment or the termination of employment other than those explicitly provided for by this Agreement including, without limitation, any claims arising out of alleged legal restrictions on the Company's rights to terminate its employees, such as any termination contrary to public policy or to laws prohibiting discrimination (including, without limitation, the Age Discrimination in Employment Act). 5. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or limit Executive's continuing or future eligibility or participation in any benefit, bonus, incentive or other plan provided by the Company and for which Executive may qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under any stock option or other agreements with the Company. Amounts which are vested benefits or which Executive is 3 otherwise entitled to receive under any plan or program of the Company subsequent to the Date of Termination shall be payable in accordance with such plan or program. 6. Succession. This Agreement shall inure to the benefit of and shall be binding upon the Company and its successors and assignees, but, without the prior written consent of Executive, this Agreement may not be assigned other than in connection with a merger, sale, consolidation or similar transaction of all or substantially all of the business and/or assets of the Company in which the successor or assignee assumes (whether by operation of law or express assumption) all obligations of the Company hereunder. The Company shall require any successor to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. The obligations and duties of Executive hereunder shall be personal and not assignable otherwise than by the laws of descent and distribution. 7. Miscellaneous. (a) Applicable Law. This Agreement shall be governed, construed and interpreted in accordance with the laws of the State of Michigan. (b) Notices. All notices and communications hereunder shall be in writing and shall be given by hand delivery to the other party by registered or certified mail, return receipt requested, postage prepaid, or by overnight mail, addressed as follows: If to Executive: Mr. Jonathan Peisner 6105 Pinecroft Drive West Bloomfield, Michigan 48322 If to the Company: Collins & Aikman Corporation 701 McCullough Drive P.O. Box 32665 Charlotte, North Carolina 28232 Attention: Chairman and Chief Executive Officer or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) Validity. The invalidity or unenforceability of any provision of this contract shall not affect the validity or enforceability of any other provision of this Agreement. 4 (d) Tax Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state and local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) Waiver. The waiver of the breach of any term or of any condition of this Agreement shall not be deemed to constitute the waiver of any other breach of the same or any other term or condition hereof. (f) Entire Agreement. This instrument contains the entire agreement of the parties relating to the subject matter hereof, and it replaces and supersedes any prior agreements between the parties relating to said subject matter. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto. (g) No Right of Employment. Executive and the Company acknowledge that the employment of Executive by the Company is "at will" and may be terminated by either Executive or the Company at any time. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date and year first above written. EXECUTIVE: /s/ Jonathan Peisner ---------------------------------------------- Jonathan Peisner COMPANY: COLLINS & AIKMAN CORPORATION By: /s/ Thomas E. Evans ------------------------------------------ Thomas E. Evans Chairman and Chief Executive Officer 5 EX-10.33 10 LETTER AGMT. DTD. DECEMBER 17, 1999 EXHIBIT 10.33 December 17, 1999 Mr. J. Michael Stepp 7021 Old Dairy Lane Charlotte, North Carolina 28211 In re: Severance Benefits Dear Michael: This letter confirms our recent conversations about your termination of employment with Collins & Aikman Corporation (the "Company") and the compensation and benefits the Company has agreed to provide to you pursuant to your Employment and Retention Agreement dated January 1, 1999 (the "Employment Agreement"). Your employment with the Company will terminate effective as of December 31, 1999. In consideration of your service to the Company for 1999, we have agreed that you will receive a 1999 bonus under the Company's annual Executive Incentive Compensation Plan of $150,000. In addition, pursuant to Section 3.2(b) of the Employment Agreement, you will receive a one-time Transition Bonus of $300,000. Both bonuses will be paid to you on or before January 31, 2000. We have also agreed that you will receive the following benefits in connection with the termination of your employment with the Company: Lump Sum Severance Benefit. In accordance with Section 5.2(b) of the Employment Agreement, you will receive a severance benefit of $415,000, to be paid to you in a lump sum payment on or before January 31, 2000. Purchase of Automobile. You have the option, exercisable by written notice to the Company on or before January 15, 2000, to purchase the automobile furnished to you by the Company (a 1998 Volvo) for $15,000. Other Benefits. The Company will provide you with the benefits described in clauses (IV), (V) and (VI) of Section 5.2(b) of the Employment Agreement. The covenants made by you in Section 6.2 of the Employment Agreement will continue in accordance with the terms of the Employment Agreement. In consideration of the arrangements outlined in this letter and pursuant to Section 5.3 of the Employment Agreement, you will execute and deliver to the Company the General Release attached as Exhibit A to the Employment Agreement (a copy of which is also enclosed). Mr. J. Michael Stepp December 17, 1999 Page 2 The Company acknowledges that your termination of employment was by mutual consent and was not in any way related to your job performance. You are subject to being rehired by the Company in the future in a mutually agreeable executive level position. If this letter accurately sets forth our understanding on these matters, please so indicate by signing and returning to me the enclosed copy of this letter (and the accompanying General Release). Very truly yours, /s/ Thomas E. Evans ------------------------------------ Thomas E. Evans Chairman and Chief Executive Officer Agreed and Accepted: /s/ J. Michael Stepp - ------------------------------------ J. Michael Stepp December 20, 1999 - ------------------------------------ Date RELEASE RELEASE (the "Release") dated as of December 20, 1999, by J. Michael Stepp ("Employee") in favor of Collins & Aikman Corporation, a Delaware corporation (the "Company"). WHEREAS, pursuant to that certain Employment and Retention Agreement by and between the Company and Employee dated as of January 1, 1999 and that certain letter agreement by and between the Company and Employee dated December 17, 1999 (collectively, the "Agreement"), the Company agreed to provide Employee with certain severance and retention benefits (the "Benefits") and Employee agreed to accept the Benefits, all on the terms and conditions set forth in the Agreement; and WHEREAS, pursuant to Section 5.3 of the Agreement, Employee shall not be entitled to receive certain severance benefits unless Employee executes and delivers to the Company a release of the parties as set forth in Section 7 of the Agreement, such release to be dated as of the Termination Date (as such term is defined in the Agreement); NOW, THEREFORE, for good and valuable consideration in connection with the receipt of the Benefits, Employee agrees as follows: 1. Release. Employee unconditionally releases the Company and its subsidiaries and affiliates and directors, officers, employees and stockholders thereof, from any and all claims, liabilities and obligations of any nature pertaining to the terms of his employment or the termination of his employment other than those explicitly provided for by the Agreement including, without limitation, any claims arising out of alleged legal restrictions on the Company's rights to terminate its employees, such as any termination contrary to public policy or to laws prohibiting discrimination (including, without limitation, the Age Discrimination in Employment Act). 2. Governing Law. The validity, interpretation and performance of this Release shall be governed by the laws of the State of New York, regardless of the laws that might be applied under applicable principles of conflicts of laws. Employee hereby waives any right such party may have to a trial by jury. 3. Miscellaneous. In executing this Release, Employee has not relied upon any statement, representation or promise, whether written or oral, of the Company or any of its subsidiaries or affiliates, or of any representative or attorney for the Company or any of its subsidiaries or affiliates, except for statements expressly set forth in this Release. Employee has read this Release carefully and knows and understands the contents hereof. IN WITNESS WHEREOF, Employee has executed this Release as of the date and year first above written. /s/ J. Michael Stepp ---------------------------------------------- J. MICHAEL STEPP EX-10.44 11 RECEIVABLES TRANSFER AGMT. DATED DECEMBER 27, 1999 RECEIVABLES TRANSFER AGREEMENT by and among PARK AVENUE RECEIVABLES CORPORATION, as an Initial Purchaser and REDWOOD RECEIVABLES CORPORATION as an Initial Purchaser and LIBERTY STREET FUNDING CORP. as an Initial Purchaser and CARCORP, INC., as Transferor, and COLLINS & AIKMAN PRODUCTS CO., as Guarantor and as Collection Agent and THE SEVERAL FINANCIAL INSTITUTIONS PARTY HERETO FROM TIME TO TIME, as Liquidity Banks and THE SEVERAL AGENT BANKS PARTY HERETO FROM TIME TO TIME, as Funding Agents and THE CHASE MANHATTAN BANK, as Administrative Agent Dated as of December 27, 1999 TABLE OF CONTENTS ARTICLE I DEFINITIONS................................................1 SECTION 1.1 Certain Defined Terms................................1 SECTION 1.2 Other Terms..........................................1 SECTION 1.3 Computation of Time Periods..........................1 ARTICLE II PURCHASES AND SETTLEMENTS..................................2 SECTION 2.1 Facility.............................................2 SECTION 2.2 Transfers; Certificates; Eligible Receivables........2 SECTION 2.3 Selection of Tranche Periods and Tranche Rates.......5 SECTION 2.4 PARCO Discount, Yield, Fees and Other Costs and Expenses.........................................7 SECTION 2.5 Non-Liquidation Settlement and Reinvestment Procedures...........................................8 SECTION 2.6 Liquidation Settlement Procedures...................10 SECTION 2.7 Fees................................................13 SECTION 2.8 Protection of Ownership Interest of the Initial Purchasers and the PARCO APA Banks..................13 SECTION 2.9 Deemed Collections, Application of Payments.........14 SECTION 2.10 Payments and Computations, Etc......................15 SECTION 2.11 Reports.............................................16 SECTION 2.12 Collection Accounts.................................16 SECTION 2.13 Right of Setoff.....................................17 SECTION 2.14 Sharing of Payments, Etc............................17 SECTION 2.15 Broken Funding......................................17 SECTION 2.16 Conversion and Continuation of Outstanding, Tranches Funded by the PARCO APA Banks..............19 SECTION 2.17 Illegality..........................................19 SECTION 2.18 Inability to Determine PARCO Eurodollar Rate........20 SECTION 2.19 Exchange of Canadian Dollars into U.S. Dollars......21 SECTION 2.20 Procedure for Decreasing the Facility Limit.........22 ARTICLE III REPRESENTATIONS AND WARRANTIES............................22 SECTION 3.1 Representations and Warranties of the Transferor....22 SECTION 3.2 Reaffirmation of Representations and Warranties by the Transferor...................................26 SECTION 3.3 Representations and Warranties of the Collection Agent...............................................26 i ARTICLE IV CONDITIONS PRECEDENT......................................27 SECTION 4.1 Conditions to Effectiveness.........................27 SECTION 4.2 Conditions to Each Transfer.........................30 ARTICLE V COVENANTS.................................................32 SECTION 5.1 Affirmative Covenants of Transferor.................32 SECTION 5.2 Negative Covenants of the Transferor................37 SECTION 5.3 Covenants of the Collection Agent and the Guarantor...........................................40 SECTION 5.4 Negative Covenants of the Collection Agent and the Guarantor...................................41 ARTICLE VI ADMINISTRATION AND COLLECTIONS............................42 SECTION 6.1 Appointment of Collection Agent.....................42 SECTION 6.2 Duties of Collection Agent..........................42 SECTION 6.3 Rights After Designation of New Collection Agent...............................................44 SECTION 6.4 Collection Agent Default............................44 SECTION 6.5 Responsibilities of the Transferor and each Seller..............................................46 SECTION 6.6 Collection Agent Indemnification of Indemnified Parties.................................46 SECTION 6.7 Maintenance of Property; Insurance..................46 SECTION 6.8 Grant of License....................................47 ARTICLE VII INDEMNIFICATION; EXPENSES; RELATED MATTERS................47 SECTION 7.1 Indemnities by the Transferor.......................47 SECTION 7.2 Indemnity for Reserves and Expenses.................50 SECTION 7.3 Indemnity for Taxes.................................51 SECTION 7.4 Other Costs, Expenses and Related Matters...........53 ARTICLE VIII TERMINATION EVENTS........................................54 SECTION 8.1 Termination Events..................................54 SECTION 8.2 Remedies Upon the Occurrence of a Termination Event...................................57 ARTICLE IX THE ADMINISTRATIVE AGENT..................................57 SECTION 9.1 Appointment.........................................57 SECTION 9.2 Delegation of Duties................................58 SECTION 9.3 Exculpatory Provisions..............................58 SECTION 9.4 Reliance by Administrative Agent....................59 ii SECTION 9.5 Action Upon Events of Termination and Collection Agent Defaults, Reports and Notices......59 SECTION 9.6 Non-Reliance on Administrative Agent................59 SECTION 9.7 Indemnification.....................................60 SECTION 9.8 Successor Administrative Agent......................60 ARTICLE X MISCELLANEOUS.............................................61 SECTION 10.1 Term of Agreement...................................61 SECTION 10.2 Waivers; Amendments.................................61 SECTION 10.3 Notices.............................................61 SECTION 10.4 Governing Law, Submission to Jurisdiction, Integration.........................................64 SECTION 10.5 Severability; Counterparts..........................65 SECTION 10.6 Successors and Assigns..............................65 SECTION 10.7 Confidentiality.....................................65 SECTION 10.8 No Bankruptcy Petition Against the Initial Purchasers..........................................66 SECTION 10.9 Limited Recourse....................................66 SECTION 10.10 Characterization of the Transactions Contemplated by the Agreement....................................67 SECTION 10.11 Waiver of Setoff....................................68 SECTION 10.12 Chase Conflict Waiver...............................68 SECTION 10.13 GE Capital Conflict Waiver..........................68 SECTION 10.14 The Bank of Nova Scotia Conflict Waiver.............69 SECTION 10.15 Liability of Funding Agents.........................69 SECTION 10.16 Tax Treatment.......................................70 SECTION 10.17 Canadian Taxes......................................70 SECTION 10.18 Funding Agent Consents..............................70 iii EXHIBITS AND ANNEX EXHIBIT A Credit and Collection Policy* EXHIBIT B List of Lock-Box Banks and Accounts EXHIBIT C Form of Lock-Box Agreement EXHIBIT D Form of Settlement Report* EXHIBIT E Form of Weekly Report* EXHIBIT F Form of Daily Report* EXHIBIT G Form of Transfer Certificate EXHIBIT H List of Transferor's Actions and Suits EXHIBIT I List of Collection Agent's Actions and Suits* EXHIBIT J Location of Records EXHIBIT K List of Subsidiaries, Divisions and Tradenames EXHIBIT L Form of Secretary's Certificate EXHIBIT M Agreed Upon Procedures* EXHIBIT N Form of Guaranty EXHIBIT O Form of Required Currency Hedge Assignment Annex X Schedule of Definitions Schedule I List of Initial Purchasers, Liquidity Banks, Funding Agents, Facility Limit, Purchase Limits and Commitments Schedule II List of Equipment and Software Schedule III List of C&A Fiscal Periods for the Year 2000 Schedule 3.1(q) Material Adverse Effect *Omitted. The Company will furnish upon the Commission's request. iv RECEIVABLES TRANSFER AGREEMENT RECEIVABLES TRANSFER AGREEMENT (as amended, supplemented or otherwise modified and in effect from time to time, this "Agreement"), dated as of December 27, 1999, by and among CARCORP, INC., a Delaware corporation, as transferor (in such capacity, the "Transferor"), COLLINS & AIKMAN PRODUCTS CO., a Delaware corporation ("C&A"), as guarantor (in such capacity, the "Guarantor") and as collection agent (in such capacity, the "Collection Agent"), PARK AVENUE RECEIVABLES CORPORATION, a Delaware corporation ("PARCO"), REDWOOD RECEIVABLES CORPORATION, a Delaware corporation ("Redwood") and LIBERTY STREET FUNDING CORP., a Delaware corporation ("Liberty") (collectively, the "Initial Purchasers"; each individually, an "Initial Purchaser"), the several financial institutions set forth opposite the name of PARCO on Schedule I (collectively, the "Liquidity Banks") and the agent bank set forth opposite the name of each Initial Purchaser on Schedule I and its permitted successor and assign (in such capacity, the "Funding Agent" with respect to such Initial Purchaser) and THE CHASE MANHATTAN BANK, a New York state banking corporation, as administrative agent for the benefit of the Initial Purchasers, PARCO APA Banks and Funding Agents (in such capacity, the "Administrative Agent"). PRELIMINARY STATEMENTS WHEREAS, the Transferor may desire to sell, convey, transfer and assign, from time to time, undivided percentage interests in certain rights to receive and related assets, and PARCO may desire to, and Redwood, Liberty and, if requested by PARCO, the PARCO APA Banks, shall, accept such sale, conveyance, transfer and assignment of such undivided percentage interests, subject to the terms and conditions of this Agreement. NOW, THEREFORE, the parties hereby agree as follows: ARTICLE I DEFINITIONS SECTION 1.1 Certain Defined Terms. Capitalized terms used herein shall have the meanings assigned to such terms in, or incorporated by reference into, Annex X attached hereto, which Annex X is incorporated by reference herein. SECTION 1.2 Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP, consistently applied. All terms used in Article 9 of the Relevant UCC, and not specifically defined herein, are used herein as defined in such Article 9. SECTION 1.3 Computation of Time Periods. Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including", the words "to" and "until" each means "to but excluding", and the word "within" means "from and excluding a specified date and to and including a later specified date". 1 ARTICLE II PURCHASES AND SETTLEMENTS SECTION 2.1 Facility. Upon the terms and subject to the conditions set forth herein and in the other Transaction Documents prior to the Termination Date, (x) the Transferor may, at its option, sell, convey, transfer and assign to the Administrative Agent, on behalf of PARCO (prior to an occurrence of a PARCO Wind-Down Event), Redwood (prior to a Redwood Termination Date), Liberty (prior to a Liberty Termination Event) and the PARCO APA Banks (following an occurrence of a PARCO Wind-Down Event), and (y) the Administrative Agent, on behalf of PARCO, may, acting at the direction of PARCO (prior to an occurrence of a PARCO Wind-Down Event), and the Administrative Agent, on behalf of the PARCO APA Banks (following an occurrence of a PARCO Wind-Down Event but subject to Section 2.2 of the PARCO Asset Purchase Agreement), Redwood (prior to an occurrence of a Redwood Termination Date or Termination Date) and Liberty (prior to an occurrence of a Liberty Termination Event or Termination Date) shall accept such sale, conveyance, transfer and assignment from the Transferor of, without recourse except as provided herein, undivided percentage ownership interests in the Receivables, together with Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto, from time to time. Pursuant to Section 9.1 of this Agreement, the Administrative Agent shall act as agent on behalf of the Initial Purchasers, the PARCO APA Banks and the Funding Agents, as applicable, with respect to such undivided percentage ownership interest, including but not limited to acting as a secured party hereunder on behalf of the Initial Purchasers, the PARCO APA Banks and the Funding Agents. By accepting any sale, conveyance, transfer and assignment hereunder, none of the Administrative Agent, nor the Initial Purchasers, nor the PARCO APA Banks nor any Funding Agent assumes or shall have any obligations or liability under any of the Contracts, all of which shall remain the obligations and liabilities of the Sellers. SECTION 2.2 Transfers; Certificates; Eligible Receivables. (a) Incremental Transfers. Prior to the Termination Date, upon the terms and subject to the conditions set forth herein and in the other Transaction Documents, (x) the Transferor may, at its option from time to time on a Weekly Report Date, convey, sell, transfer and assign to the Administrative Agent, on behalf of PARCO (prior to an occurrence of a PARCO Wind-Down Event), Redwood (prior to a Redwood Termination Date), Liberty (prior to a Liberty Termination Event) and to the PARCO APA Banks (following an occurrence of a PARCO Wind-Down Event) and (y) the Administrative Agent, on behalf of PARCO, may, at the direction of PARCO from time to time (prior to an occurrence of a PARCO Wind-Down Event), and the Administrative Agent, on behalf of Redwood (prior to an occurrence of a Redwood Termination Date), Liberty (prior to an occurrence of a Liberty Termination Event) and the PARCO APA Banks (following an occurrence of a PARCO Wind-Down Event but subject to Section 2.2 of the PARCO Asset Purchase Agreement), shall accept such sale, conveyance, transfer and assignment from the Transferor, without recourse except as provided herein, of undivided percentage ownership interests in the Receivables, together with Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto (each, an "Incremental Transfer"); provided that after giving effect to each Incremental Transfer, (i) the Aggregate Net Investment shall not exceed the Facility Limit, (ii) in the case of PARCO and the PARCO APA 2 Banks, the aggregate outstanding PARCO Net Investment hereunder shall not exceed the PARCO Purchase Limit, (iii) in the case of Redwood, the aggregate outstanding Redwood Net Investment hereunder shall not exceed the Redwood Purchase Limit, and, (iv) in the case of Liberty, the aggregate outstanding Liberty Net Investment hereunder shall not exceed the Liberty Purchase Limit, provided further, that the conditions set forth in Section 4.2 shall have been satisfied before giving effect to any such Incremental Transfer. The Transferor shall, by notice to the Administrative Agent given by telecopy, offer to sell, convey, transfer and assign to PARCO (prior to an occurrence of a PARCO Wind-Down Event), Redwood (prior to an occurrence of a Redwood Termination Date) or Liberty (prior to an occurrence of a Liberty Termination Event) or to the PARCO APA Banks (following an occurrence of a PARCO Wind-Down Event) undivided percentage ownership interests in the Receivables and Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto not later than 11:00 a.m. (New York time) (i) with respect to Redwood and Liberty, two (2) Business Days prior to the proposed date of any Incremental Transfer and (ii) with respect to PARCO and the PARCO APA Banks (A) prior to a PARCO Wind-Down Event, if the Transferor requests a PARCO CP Tranche(s), two (2) Business Days prior to the proposed date of any Incremental Transfer, (B) after the occurrence of a PARCO Wind-Down Event, if the Transferor requests a PARCO BR Tranche(s) from the PARCO APA Banks, on the Business Day prior to the proposed date of any Incremental Transfer, and (C) after the occurrence of a PARCO Wind-Down Event, if the Transferor requests that any portion of the Aggregate Net Investment related to such Incremental Transfer is to be allocated by the PARCO APA Banks to a PARCO Eurodollar Tranche, three (3) Business Days prior to the proposed date of any Incremental Transfer. Promptly upon receipt by the Administrative Agent of any such notice, the Administrative Agent shall deliver a copy thereof to the applicable Funding Agents (but in no event later than 1:00 p.m. New York time on the same day). Upon receipt of funds from the related Initial Purchaser or PARCO APA Bank, as applicable, the Funding Agents will make such funds available to the Transferor by 4:00 p.m. (New York time) on the proposed date of any Incremental Transfer. Each such notice shall specify (w) the amount of the proposed increase to the Aggregate Net Investment; (x) the desired Transfer Price (which shall be at least $3,000,000 or integral multiples of $100,000 in excess thereof) or, to the extent that the then available unused portion of the Facility Limit or, is less than such amount, such applicable lesser amount equal to such available portion of the Facility Limit, and (y) the desired date of such Incremental Transfer. The Funding Agent will promptly notify the applicable Initial Purchasers and/or the applicable PARCO APA Banks, as applicable, of the applicable Funding Agent's receipt of any request for an Incremental Transfer to be made to such Person. At its option, each Initial Purchaser shall accept or reject any such offer by notice given to the Transferor, the Administrative Agent and the applicable Funding Agent by telephone and telecopy. Each Incremental Transfer and each subsequent Incremental Transfer may be made to PARCO and shall be made to Redwood, Liberty and the PARCO APA Banks (following a PARCO Wind-Down Event), ratably, as applicable, in accordance with the applicable Purchase Limit. Each notice of proposed Transfer shall be irrevocable and binding on the Transferor, and the Transferor shall indemnify the Administrative Agent, the Initial Purchasers and the PARCO APA Banks against any loss or expense reasonably incurred by the 3 Administrative Agent, Initial Purchasers, the Liberty APA Banks and the PARCO APA Banks, either directly or indirectly, as a result of any failure by the Transferor to complete such Incremental Transfer, including, without limitation, any loss (including loss of anticipated profits) or expense incurred by the Administrative Agent, Initial Purchasers, the Liberty APA Banks and the PARCO APA Banks, either directly or indirectly, by reason of the liquidation or reemployment of funds acquired by the Initial Purchasers, the Liberty APA Banks or the PARCO APA Banks (including, without limitation, funds obtained by issuing Commercial Paper or promissory notes, obtaining deposits as loans from third parties and reemployment of funds) for the Initial Purchasers, the Liberty APA Banks or the PARCO APA Banks, as applicable, to fund such Incremental Transfer. On the date of the initial Incremental Transfer, the Administrative Agent shall deliver written confirmation of the following to the Transferor: (i) as provided by the Funding Agents, the cash portion of the Transfer Price, and (ii) as provided by the PARCO Funding Agent to the Administrative Agent, the Tranche Period(s) and the Tranche Rate(s) relating to the portion of such Transfer allocated to PARCO or the PARCO APA Banks. On the date of the initial Incremental Transfer, the Transferor shall deliver to the Administrative Agent, (and the Administrative Agent shall deliver to each applicable Funding Agent) the Transfer Certificate in the form of Exhibit G hereto (the "Transfer Certificate"). The Administrative Agent shall indicate the amount of the initial Incremental Transfer allocated to each applicable Initial Purchaser or PARCO APA Bank, together with the date thereof on the grid attached to the Transfer Certificate or record in a similar manner on its administrative system. On the date of each subsequent Incremental Transfer, the Administrative Agent, shall send written confirmation to the Transferor of the following: (i) as provided by the Funding Agents, the cash portion of the Transfer Price, and (ii) as provided by the PARCO Funding Agent to the Administrative Agent, the Tranche Period(s) and the Tranche Rate(s) relating to the portion of such Transfer allocated to PARCO or the PARCO APA Banks applicable to such Incremental Transfer. As provided by each Funding Agent to the Administrative Agent, the Administrative Agent shall record on the grid attached to the Transfer Certificate or record in a similar manner on its administrative system the amount of the Incremental Transfer together with the date thereof as well as any decrease in the Aggregate Net Investment, PARCO Net Investment, Liberty Net Investment and Redwood Net Investment (each as reported by each respective Funding Agent). The Transfer Certificate shall evidence the Incremental Transfers; provided, however, that the failure of the Administrative Agent to so evidence any Incremental Transfer shall not affect the validity of any Incremental Transfer. Following each Incremental Transfer, the Administrative Agent shall deposit to the Transferor's account at the location indicated in Section 9.3 hereof, in immediately available funds by 4:00 p.m. on the date of the Incremental Transfer, an amount equal to the cash portion of the Transfer Price for such Incremental Transfer made to the Initial Purchasers or the PARCO APA Banks, as applicable. (b) Reinvestment Transfers. On each Business Day occurring after the initial Incremental Transfer hereunder and prior to the Termination Date, the Transferor hereby agrees to sell, convey, transfer and assign to the Administrative Agent, on behalf of PARCO (prior to an occurrence of a PARCO Wind-Down Event), Redwood (prior to a Redwood Termination Date), Liberty (prior to a Liberty Termination Event) and the PARCO APA Banks (following an occurrence of a PARCO Wind-Down Event), and the Administrative Agent, on behalf of and acting at the direction of PARCO (prior to an occurrence of a PARCO Wind-Down Event) may 4 agree to purchase and, the Administrative Agent, on behalf of the PARCO APA Banks (following an occurrence of a PARCO Wind-Down Event but subject to Section 2.2 of the PARCO Asset Purchase Agreement), Redwood (prior to a Redwood Termination Date) and Liberty (prior to a Liberty Termination Event) shall purchase from the Transferor undivided percentage ownership interests in each and every Receivable, together with Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto, to the extent that Collections are available for such Transfer in accordance with Section 2.5 hereof. The Transferor agrees to maintain, at all times prior to the Termination Date, a Net Receivables Balance in an amount at least sufficient to maintain the Percentage Factor at an amount not greater than the Maximum Percentage Factor. (c) All Transfers. Each Transfer shall constitute a purchase by the Administrative Agent, on behalf of the applicable Initial Purchasers and PARCO APA Banks of undivided percentage ownership interests in each and every Receivable, together with Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto, then existing, as well as in each and every Receivable, together with Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto, which arises at any time after the date of such Transfer. The Initial Purchasers' (and, following an occurrence of a PARCO Wind-Down Event but subject to Section 2.2 of the PARCO Asset Purchase Agreement, the PARCO APA Banks') aggregate undivided percentage ownership interest in the Receivables, together with the Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto, shall equal the Percentage Factor in effect from time to time. (d) Percentage Factor. The Percentage Factor shall be initially computed as of the opening of business of the Collection Agent on the date of the initial Incremental Transfer hereunder. Thereafter, until the Termination Date, the Percentage Factor shall be automatically recomputed as of the close of business of the Collection Agent on each day (other than a day after the Termination Date). The Percentage Factor shall remain constant from the time as of which any such computation or recomputation is made until the time as of which the next such recomputation, if any, shall be made. At all times on and after the Termination Date until the date on which the Aggregate Net Investment has been reduced to zero and all accrued PARCO Discount, Yield, Servicing Fees and all other Aggregate Unpaids have been paid in full, the Percentage Factor shall be 100%. Following any assignment of any portion of the Transferred Interest to a PARCO APA Bank pursuant to the PARCO Asset Purchase Agreement, the PARCO Funding Agent shall, on each Business Day, calculate PARCO's and each applicable PARCO APA Bank's pro rata interest in the Percentage Factor, based on the PARCO Purchase Limit and the PARCO APA Bank Commitment, and regularly report thereon to PARCO and the PARCO APA Banks (with copies thereof to the Transferor and Administrative Agent). SECTION 2.3 Selection of Tranche Periods and Tranche Rates. (a) Transferred Interest Held by PARCO or the PARCO APA Banks Prior to the Termination Date. At all times hereafter, but prior to the Termination Date, the Transferor may, subject to PARCO's approval and the limitations described below, request Tranche Periods and allocate a portion of the PARCO Net Investment to each selected Tranche Period, so that the aggregate amounts allocated to outstanding Tranche Periods at all times shall equal the PARCO Net Investment held by PARCO. The Transferor shall give the Administrative Agent irrevocable 5 notice by telephone of the new requested Tranche Period(s) not later than 11:00 a.m. (New York time) (i) prior to the occurrence of a PARCO Wind-Down Event, if the Transferor requests a PARCO CP Tranche(s), two (2) Business Days prior to the expiration of any then existing Tranche Period(s), (ii) after the occurrence of a PARCO Wind-Down Event, if the Transferor requests a PARCO BR Tranche(s), on the day of the expiration of any then existing Tranche Period(s), and (iii) after the occurrence of a PARCO Wind-Down Event, if the Transferor requests that any portion of the PARCO Net Investment related to such Incremental Transfer is to be allocated to a PARCO Eurodollar Tranche(s), three (3) Business Days prior to the expiration of any then existing Tranche Period; provided, however, that PARCO may select, in its sole discretion, any such new Tranche Period if (i) the Transferor fails to provide such notice on a timely basis or (ii) the PARCO Funding Agent, on behalf of PARCO, determines, in its sole discretion, that the Tranche Period requested by the Transferor is unavailable or for any reason commercially undesirable. Promptly upon receipt by the Administrative Agent of any such notice, the Administrative Agent shall deliver a copy thereof to the PARCO Funding Agent (but in no event later than 1:00 p.m. New York time on the same day). PARCO confirms that it is its intention to allocate all or substantially all of the portion of the Aggregate Net Investment held by it to one or more PARCO CP Tranche Periods; provided that PARCO may determine, from time to time, in its sole discretion, that funding such portion of the Aggregate Net Investment by means of one or more PARCO CP Tranche Periods is not possible or is not desirable for any reason. (b) Transferred Interest Held by PARCO Following the Termination Date. At all times on and after the Termination Date, with respect to any portion of the Transferred Interest which shall not have been transferred to the PARCO APA Banks, PARCO or the PARCO Funding Agent, as applicable, shall select all Tranche Periods and Tranche Rates applicable thereto. (c) Transferred Interest Held by the PARCO APA Banks Prior to the Termination Date. At all times with respect to any portion of the Transferred Interest transferred to the PARCO APA Banks (or any of them) pursuant to the PARCO Asset Purchase Agreement, but prior to the Termination Date, the initial Tranche Period applicable to such portion of the PARCO Net Investment allocable thereto shall be a period of not greater than three (3) days, and such Tranche shall be a PARCO BR Tranche. Thereafter (but prior to the Termination Date or the occurrence and continuation of a Potential Termination Event), with respect to such portion, and with respect to any other portion of the Transferred Interest held by the PARCO APA Banks (or any of them), the Tranche Period applicable thereto shall be, at the Transferor's option, either a PARCO BR Tranche or a PARCO Eurodollar Tranche. The Transferor shall give the Administrative Agent irrevocable notice by telephone of the new requested Tranche Period no later than 11:00 a.m. (New York Time) (i) if the Transferor requests a PARCO BR Tranche, on the day of the expiration of any then existing Tranche Period and (ii) if the Transferor requests a PARCO Eurodollar Tranche, three (3) Business Days prior to the expiration of any then existing Tranche Period. Promptly upon receipt by the Administrative Agent of any such notice, the Administrative Agent shall deliver a copy thereof to the PARCO Funding Agent (but in no event later than 1:00 p.m. New York time on the same day). Any Tranche Period maintained by the PARCO APA Banks which is outstanding on the Termination Date shall end on the Termination Date. 6 (d) After the Termination Date, Transferred Interest Held by the PARCO APA Banks. At all times on and after the Termination Date, with respect to any portion of the Transferred Interest which shall have been owned by, or transferred to, the PARCO APA Banks (or any of them), the PARCO Funding Agent shall select all Tranche Periods and Tranche Rates applicable thereto. SECTION 2.4 PARCO Discount, Yield, Fees and Other Costs and Expenses. (a) Notwithstanding the limitation on recourse under Section 2.1 hereof, the Transferor shall pay, as and when due in accordance with this Agreement and the other Transaction Documents, all fees hereunder, PARCO Discount, Yield, Servicing Fees and other Aggregate Unpaids. The Transferor shall pay in the manner set forth in Sections 2.5, 2.6 and 2.10 to the Administrative Agent, on behalf of the PARCO Funding Agent, PARCO and/or the PARCO APA Banks, as applicable, an amount equal to the accrued and unpaid PARCO Discount for such Tranche Period together with, in the event any portion of the Transferred Interest is held by PARCO, an amount equal to the discount accrued on PARCO's Commercial Paper to the extent such Commercial Paper was issued in order to fund the Transferred Interest in an amount in excess of the cash portion of the Transfer Price of an Incremental Transfer; provided that (i) in the event of any repayment or prepayment of a BR Tranche or a PARCO Eurodollar Tranche, accrued PARCO Discount on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (ii) in the event of any conversion of a PARCO BR Tranche to a PARCO Eurodollar Tranche or any conversion of a PARCO Eurodollar Tranche to a PARCO BR Tranche, accrued interest on such PARCO BR Tranche or PARCO Eurodollar Tranche shall be payable on the effective date of such conversion. PARCO Discount shall accrue with respect to each Tranche on each day including the first day but not the last day of the Tranche Period related thereto. The Transferor shall pay in the manner set forth in Sections 2.5, 2.6 and 2.10 to the Administrative Agent, on behalf of the Redwood Funding Agent and Redwood, the Redwood Yield and, on behalf of the Liberty Funding Agent and Liberty, the Liberty Yield and, each of the Redwood Yield and the Liberty Yield shall accrue with respect to each calendar month on each day including the first day and the last day of the calendar month related thereto. (b) Each Initial Purchaser shall be entitled to receive a fee with respect to each Settlement Period (or portion thereof) during such period (the "Utilization Fee") which shall accrue on each day during such Settlement Period in an amount equal to the product of (i) the Utilization Fee Rate, times (ii) the applicable Net Investment on such day. The Utilization Fee shall be payable in accordance with Sections 2.5, 2.6 and 2.10 on each Settlement Date. (c) Prior to the Termination Date, Redwood, Liberty, PARCO (prior to an occurrence of a PARCO Wind-Down Event) and the PARCO APA Banks (following an occurrence of a PARCO Wind-Down Event) shall be entitled to receive a fee with respect to each Settlement Period (or portion thereof) (the "Unused Fee") which shall accrue on each day during such Settlement Period in an amount equal to the product of (i) the Unused Fee Rate, times, (ii) the excess of the Commitment with respect to Redwood, Liberty and the PARCO APA Banks over the Redwood Net Investment, Liberty Net Investment, PARCO Net Investment (prior to an occurrence of a PARCO Wind-Down Event) and PARCO APA Bank Commitment 7 (following a PARCO Wind-Down Event), as applicable, on such day. The Unused Fee shall be payable in accordance with Sections 2.5, 2.6 and 2.10 on each Settlement Date. Nothing in this Agreement or the other Transaction Documents shall limit in any way the obligations of the Transferor to pay the amounts set forth in this Section 2.4. SECTION 2.5 Non-Liquidation Settlement and Reinvestment Procedures. (a) On each day after the date of any Incremental Transfer but prior to the Termination Date, and provided that no Potential Termination Event shall have occurred and be continuing, the Collection Agent shall: (i) set aside and hold in trust for the Administrative Agent on behalf of the Initial Purchasers and the PARCO APA Banks, as applicable (or deposit into the Collection Accounts if so required pursuant to Section 2.12 hereof), an amount equal to the Percentage Factor of Collections received by the Transferor, the Sellers or the Collection Agent or deposited into a Lock-Box Account or the Collection Accounts on or prior to such day and not previously accounted for or applied (the "Paid Percentage Factor"); (ii) set aside from the Paid Percentage Factor and deposit in the Collection Accounts for the Initial Purchasers and the PARCO APA Banks, as applicable, allocable to each in accordance with their respective Pro Rata Shares, an amount equal to all PARCO Discount, Yield, Indemnified Amounts, Additional Amounts, the Utilization Fee, the Unused Fee and the Servicing Fee accrued through such day and not so previously set aside or paid; (iii) set aside from the Paid Percentage Factor an amount sufficient to purchase, or payable with respect to the purchase price of, the Required Currency Hedge (if applicable); (iv) set aside from the Paid Percentage Factor and purchase from the Transferor, subject to Sections 2.5(d) and 2.5(e), additional undivided percentage interests in each Receivable pursuant to Section 2.2(b) hereof; and (v) set aside and hold in trust for the Initial Purchasers and the PARCO APA Banks, as applicable, and subject to Sections 2.5(d) and 2.5(e), release on each Business Day to the Transferor free of such trust, upon the prior approval of the Administrative Agent, an amount equal to the Paid Percentage Factor of Collections remaining after application of Collections as provided in clauses (i), (ii), (iii) and (iv) of this Section 2.5(a); provided, however, on any date on which a Daily Report is required to be delivered to the Administrative Agent pursuant to Section 2.11(iii), the Administrative Agent shall only release such funds (if any) to the Transferor pursuant to clause (v) above upon the Administrative Agent's receipt of the Daily Report; otherwise, such monies will be so released to the Transferor upon the Administrative Agent's receipt of the Weekly Report delivered immediately following any such date and upon the prior approval of the Administrative Agent. 8 (b) From amounts set aside as described in Section 2.5(a)(ii) and, with respect to clause (vi) below, Section 2.5(a)(iii): (i) On the last day of each Tranche Period or on each Settlement Date in the event the PARCO Funding Agent selects pooled funding, the Collection Agent shall transfer to the Administrative Agent, for the benefit of the PARCO Funding Agent, on behalf of PARCO and/or the PARCO APA Banks, as applicable, from the amounts allocable to PARCO and/or the PARCO APA Banks, in the manner set forth in Section 2.10 an amount equal to the accrued and unpaid PARCO Discount for such Tranche Period or previous calendar month, if applicable; (ii) On each Settlement Date, from the amounts allocable to each of Redwood and Liberty, the Collection Agent shall transfer to the Administrative Agent, (A) for the benefit of the Redwood Funding Agent, Redwood and the Redwood Secured Parties, an amount equal to the accrued and unpaid Redwood Yield as of the end of the immediately preceding calendar month, and (B) for the benefit of Liberty and the Liberty Funding Agent an amount equal to the accrued and unpaid Liberty Yield as of the end of the immediately preceding calendar month; (iii) On each Settlement Date, from the amounts set aside as described in Section 2.5(a)(ii) after application pursuant to Section 2.5(b)(i) and (ii), the Collection Agent shall transfer to the Administrative Agent, for the benefit of the Funding Agents, the Initial Purchasers and the PARCO APA Banks, as applicable, in the manner set forth in Section 2.10 an amount equal to the accrued and unpaid Utilization Fee and Unused Fee for the related Settlement Period; (iv) On each Settlement Date, from the amounts set aside as described in Section 2.5(a)(ii) after application pursuant to Section 2.5(b)(i), (ii), and (iii), deposit into its own account an amount equal to the accrued and unpaid Servicing Fee; (v) On each Settlement Date, from the amounts set aside as described in Section 2.5(a)(ii) after application pursuant to Section 2.5(b)(i), (ii), (iii), and (iv), the Collection Agent shall transfer to the Administrative Agent, for the benefit of the Funding Agents, the Initial Purchasers, the Redwood Liquidity Lenders, the Liberty APA Banks and the PARCO APA Banks, as applicable, in the manner set forth in Section 2.10, an amount equal to (A) all Indemnified Amounts and/or Additional Amounts incurred and payable, and (B) any other amounts required to be paid under this Agreement not previously paid as of the end of the immediately preceding Settlement Period; and (vi) On each Settlement Date, from the amounts set aside as described in Section 2.5(a)(iii), the Collection Agent shall purchase, or make payments due with respect to the purchase price of, the Required Currency Hedge (if applicable); provided, that such amounts set forth in Sections 2.5(b)(i), (ii), (iii), (iv) and (v) will be based on an invoice (based on information which shall be given by each Funding Agent by 10:00 9 a.m. New York time on the second (2nd) Business Day of each month) provided by the Administrative Agent to the Collection Agent on the second (2nd) Business Day of each month. Each Funding Agent, upon its receipt of such amounts in the Funding Account, shall distribute such amounts to the Initial Purchasers and/or the Liberty APA Banks and/or the PARCO APA Banks and/or the Redwood Liquidity Lenders entitled thereto as set forth above; provided that if the Funding Agent shall have insufficient funds to pay all of the above amounts in full on any such date, the Funding Agent shall notify the Transferor and the Transferor shall immediately pay to the Funding Agent, from funds previously paid to the Transferor, an amount equal to such insufficiency. (c) Subject to subsection 2.5(d) below, the Collection Agent shall remit to the Transferor, on each Business Day prior to the Termination Date, and provided that no Potential Termination Event shall have occurred and be continuing, upon the Administrative Agent's receipt of the most recent Weekly Report (or Daily Report if required pursuant to Section 2.11) and with the Administrative Agent's prior approval, such portion of Collections not allocated to (i) the Initial Purchasers, the Liberty APA Banks and the PARCO APA Banks, (ii) the Collection Agent as payment of the Servicing Fee or (iii) the provider of the Required Currency Hedge. So long as all of the above amounts are paid in full on the day due, such Collections remitted to the Transferor are available to pay any Transferor Subordinated Obligation then due and owing and for other ordinary business purposes of the Transferor. (d) Prior to a Termination Date or Potential Termination Date but after a Redwood Termination Date, a portion of all funds to be applied pursuant to Sections 2.5(a)(iv), 2.5(a)(v) and 2.5(c) shall be released to Redwood until the Redwood Net Investment is reduced to zero based on the quotient, as determined at the time of the Redwood Termination Date, of the Redwood Net Investment divided by the Aggregate Net Investment. Prior to a Termination Date or Potential Termination Date but after a Liberty Termination Event, a portion of all funds to be applied pursuant to Section 2.5(a)(iv), 2.5(a)(v) and 2.5(c) shall be released to Liberty until the Liberty Net Investment is reduced to zero based on the quotient, as determined at the time of the Liberty Termination Event, of the Liberty Net Investment divided by the Aggregate Net Investment. SECTION 2.6 Liquidation Settlement Procedures. (a) If at any time on or prior to the Termination Date, the Percentage Factor is greater than the Maximum Percentage Factor, then the Transferor shall immediately transfer to the Administrative Agent, for the benefit of the Funding Agents, Initial Purchasers and/or the PARCO APA Banks, as applicable, in the manner set forth in Section 2.10 from previously received Collections that have been released to or set aside for the Transferor pursuant to Section 2.5, an amount that will result in a Percentage Factor less than or equal to the Maximum Percentage Factor. Such amount shall be applied to the reduction of the Aggregate Net Investment in a manner to be determined by the Funding Agents. (b) On the Termination Date and on each day thereafter, and on each day on which a Potential Termination Event has occurred and is continuing, the Collection Agent shall in the following priority: 10 (i) set aside and hold in trust for the Administrative Agent on behalf of the Initial Purchasers and/or the PARCO APA Banks, as applicable (or deposit into the Collection Account if so required pursuant to Section 2.12 hereof), the Percentage Factor of all Collections received by the Transferor, the Sellers or the Collection Agent or deposited into a Lock-Box Account or the Collection Accounts on such day; (ii) set aside and hold in trust for the Transferor such portion of Collections deposited in the Collection Accounts not allocated to the Administrative Agent on behalf of the Initial Purchasers and/or the PARCO APA Banks, as applicable, or the Collection Agent; and (iii) transfer to the Administrative Agent, for the benefit of the Funding Agents, the Initial Purchasers or the PARCO APA Banks, as applicable, in the manner set forth in Section 2.10 any amounts set aside for the Initial Purchasers and/or the PARCO APA Banks pursuant to Section 2.5 above. (c) (i) On the last day of each Tranche Period and on each Settlement Date to occur on or after the Termination Date or during the continuation of a Potential Termination Event, the Collection Agent shall transfer to the Administrative Agent, for the benefit of the Funding Agents, the Initial Purchasers and the PARCO APA Banks, as applicable, in the manner set forth in Section 2.10 the amounts so set aside for the Initial Purchasers and the PARCO APA Banks pursuant to Section 2.6(b)(i) but not to exceed (together with amounts pursuant to Section 2.6(b)(iii) above) transferred to the Administrative Agent the sum of (i): (A) for the account of the PARCO Funding Agent for the benefit of PARCO and the PARCO APA Banks the accrued PARCO Discount for such Tranche Period or previous calendar month, as applicable, (B) for the account of the Redwood Funding Agent for the benefit of Redwood, the accrued and unpaid Redwood Yield for the previous calendar month, (C) for the account of the Liberty Funding Agent for the benefit of Liberty, the accrued and unpaid Liberty Yield for the previous calendar month, (D) the portion of the Aggregate Net Investment allocated to such Tranche Period or such previous calendar month, as applicable, and (E) all other Aggregate Unpaids. (ii) On such day, the Collection Agent shall deposit to its account, from the amounts set aside for the Initial Purchasers and the PARCO APA Banks pursuant to the preceding sentence which remain after payment in full of the aforementioned amounts, the accrued Servicing Fee for such Tranche Period. (iii) If there shall be insufficient funds on deposit for the Collection Agent to distribute funds in payment in full of the aforementioned amounts, the Collection Agent shall distribute funds: 11 (A) first, (1) in payment of the accrued PARCO Discount for the account of the PARCO Funding Agent for the benefit of PARCO and/or the PARCO APA Banks, as applicable, (2) in payment of the accrued Redwood Yield for the account of the Redwood Funding Agent for the benefit of Redwood, and (3) in payment of the accrued Liberty Yield for the account of the Liberty Funding Agent for the benefit of Liberty; provided that the payments in items (1), (2) and (3) shall be payable ratably based on the Net Investment of each such Person at such time, (B) second, if the Transferor or C&A or any Affiliate thereof is not then the Collection Agent, to the Collection Agent's account, in payment of the Servicing Fee payable to the Collection Agent, (C) third, in reduction of the Aggregate Net Investment allocated to any Tranche Period or any Settlement Period, as applicable, ending on such date, (D) fourth, in payment of all fees (including, but not limited to, the Utilization Fee and the Unused Fee) payable by the Transferor hereunder, (E) fifth in payment of the Aggregate Net Investment until the Aggregate Net Investment has been reduced to zero, (F) sixth, in payment of all other Aggregate Unpaids (including, but not limited to, all Transferor Subordinated Obligations owed by the Transferor to the Funding Agents, the Initial Purchasers, the PARCO APA Banks and the Administrative Agent pursuant to Sections 7.1, 7.2, 7.3 and 7.4), (G) seventh, to the Eligible Counterparties, any breakage and termination costs due and owing, and (H) eighth, if C&A is the Collection Agent, to its account as Collection Agent, in payment of the accrued and unpaid Servicing Fee payable to such Person as Collection Agent; provided, that payment of the Servicing Fee pursuant to this eighth clause shall be considered a Transferor Subordinated Obligation. The Administrative Agent, upon its receipt of such amounts in the Administrative Agent's account, shall distribute such amounts to the Initial Purchasers, the PARCO APA Banks and the Funding Agents entitled thereto as set forth above; provided that if the Administrative Agent shall have insufficient funds to pay all of the above amounts in full on any such date, the Administrative Agent shall pay such amounts in the order of priority set forth above and, with respect to any such category above for which the Administrative Agent shall have insufficient funds to pay all amounts owing on such date, on a pro rata basis based upon the portion that each such Person's Net Investment constitutes of the Aggregate Net Investment at such time among all such Persons entitled to payment thereof. (d) Following the date on which the Aggregate Net Investment has been reduced to zero and all accrued PARCO Discount, Yield, Servicing Fees and all other Aggregate Unpaids have been paid in full, 12 (i) the Collection Agent shall recompute the Percentage Factor, (ii) the Administrative Agent, on behalf of the Initial Purchasers, the PARCO APA Banks and the Redwood Secured Parties shall be considered to have reconveyed to the Transferor all of the Initial Purchasers' and the PARCO APA Banks' right, title and interest in, to and under the Receivables and Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto, (iii) the Collection Agent shall pay to the Transferor any remaining Collections set aside and held by the Collection Agent pursuant to Section 2.6(b)(i), and (iv) the Administrative Agent, on behalf of the Initial Purchasers, the PARCO APA Banks and the Redwood Secured Parties, shall execute and deliver to the Transferor, at the Transferor's expense, such documents or instruments as are necessary to terminate the Initial Purchasers' and the PARCO APA Banks' interest in the Receivables and Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto. Any such documents shall be prepared by or on behalf of the Transferor. On the last day of each Tranche Period, the Collection Agent shall remit to the Transferor such portion of Collections set aside for the Transferor pursuant to this Section 2.6. SECTION 2.7 Fees. Notwithstanding any limitation on recourse contained in this Agreement, the Transferor shall pay the following non-refundable fees: (a) On each Settlement Date from the Collection Accounts, to the Administrative Agent, for the benefit of the Funding Agents, the Initial Purchasers and the PARCO APA Banks, as applicable, in the manner set forth in Sections 2.5, 2.6 and 2.10, the Utilization Fee and the Unused Fee. (b) On the date of execution hereof, to Chase Securities Inc. solely for its own account, the Structuring Fee. (c) On the date of execution hereof, to Redwood, Liberty and the PARCO APA Banks, 0.50% of the applicable Commitment of Redwood, Liberty and the PARCO APA Banks. SECTION 2.8 Protection of Ownership Interest of the Initial Purchasers and the PARCO APA Banks. (a) The Transferor, C&A and each other Seller each agree that it will, from time to time, at its sole expense, promptly execute and deliver all instruments and documents and take all actions as may be necessary or as the Administrative Agent may reasonably request in order to perfect or protect the Transferred Interest or to enable the Administrative Agent, on behalf of the Initial Purchasers, the PARCO APA Banks, the Funding Agents or the Redwood Secured Parties to exercise or enforce any of its rights hereunder. Without limiting the foregoing, the Transferor and each Seller will, upon the request of the Administrative Agent, on behalf of the Initial Purchasers or any of the PARCO APA Banks, in order to accurately reflect this 13 purchase and sale transaction, (x) execute and file such financing or continuation statements or amendments thereto or assignments thereof (as permitted pursuant to Section 9.6 hereof) as may be requested by the Administrative Agent for the benefit of the Initial Purchasers and the PARCO APA Banks and (y) mark its respective master data processing records with a legend describing the conveyance to the Transferor (in the case of each Seller) and the Administrative Agent for the benefit of the Initial Purchasers , the PARCO APA Banks and the Funding Agents, of the Transferred Interest as reasonably requested by the Administrative Agent. The Transferor, C&A and each other Seller shall, upon the reasonable request of the Administrative Agent, obtain such additional search reports as the Administrative Agent, for the benefit of the Initial Purchasers, the PARCO APA Banks and the Funding Agents, shall reasonably request. To the fullest extent permitted by applicable law, the Administrative Agent shall be permitted to sign and file continuation statements and amendments thereto and assignments thereof without the Transferor's, C&A's or any other Seller's signature. Carbon, photographic or other reproduction of this Agreement or any financing statement shall be sufficient as a financing statement. Neither the Transferor, C&A nor any other Seller shall change its respective name, identity or corporate structure (within the meaning of Section 9-402(7) of the Relevant UCC), nor relocate its respective chief executive office or any office where Records are kept unless it shall have: (i) given the Administrative Agent at least thirty (30) days' prior notice thereof and (ii) prepared at Transferor's, C&A's or such other Seller's expense, as applicable, and delivered to the Administrative Agent all financing statements, instruments and other documents necessary to preserve and protect the Transferred Interest or reasonably requested by the Administrative Agent in connection with such change or relocation. Any filings under the Relevant UCC or otherwise that are occasioned by such change in name or location shall be made at the expense of Transferor, C&A or such other Seller, as applicable. (b) The Collection Agent shall instruct all Obligors to cause all Collections to be deposited directly into a Lock-Box Account. Any Lock-Box Account maintained by a Lock-Box Bank pursuant to the related Lock-Box Agreement shall be owned by the Transferor; provided, however, that any such Lock-Box Account shall be under the exclusive dominion and control of the Administrative Agent which is hereby granted to the Administrative Agent by C&A and the Transferor. The Collection Agent shall be permitted to give instructions to the Lock-Box Banks for so long as neither a Collection Agent Default nor any other Termination Event has occurred hereunder. The Collection Agent shall not add any bank as a Lock-Box Bank to those listed on Exhibit B attached hereto unless such bank has entered into a Lock-Box Agreement. The Collection Agent shall not terminate any bank as a Lock-Box Bank unless the Administrative Agent shall have received fifteen (15) days' prior notice of such termination. If the Transferor, a Seller or the Collection Agent receives any Collections, the Transferor, such Seller or the Collection Agent, as applicable, shall immediately, but in any event within one Business Day of receipt, remit such Collections to a Lock-Box Account. SECTION 2.9 Deemed Collections, Application of Payments. (a) If on any day the Administrative Agent notifies the Transferor or the Transferor discovers that any of the representations or warranties made herein is untrue or incorrect with respect to a Receivable in any material respect as of the date such representation or warranty was made and any applicable cure period, if any, has passed, then the Transferor shall be deemed to have received on such day a Collection of such Receivable in full, and the 14 Transferor shall, on such day, pay to the Collection Agent an amount equal to the Outstanding Balance of such Receivable and such amount shall be allocated and applied by the Collection Agent as a Collection allocable to the Transferred Interest in accordance with Section 2.5 or 2.6 hereof, as applicable. The Aggregate Net Investment shall be reduced by the amount of such payment actually received by the Funding Agents. Simultaneously with any such payment by the Transferor, the Administrative Agent, on behalf of the Initial Purchasers and the PARCO APA Banks, as the case may be, shall convey all of its right, title and interest in such Receivable and Related Security to the Transferor and shall take all action reasonably requested by the Transferor to effectuate such conveyance. (b) If on any day a Receivable becomes a Diluted Receivable, the Transferor shall be deemed to have received on such day a Collection of such Receivable in the amount of such Dilution Adjustment, and the Transferor shall pay to the Collection Agent an amount equal to such Dilution Adjustment. Any such amount shall be applied by the Collection Agent as a Collection in accordance with Section 2.5 or 2.6 hereof, as applicable. The Aggregate Net Investment shall be reduced by the amount of such payment actually received by the Funding Agents. (c) Any payment by an Obligor in respect of a Receivable shall, except as otherwise specified by such Obligor or otherwise required by contract or law and unless otherwise instructed by the Initial Purchasers, be applied as a Collection of any Receivable of such Obligor included in the Transferred Interest (starting with the oldest such Receivable) to the extent of any amounts then due and payable thereunder before being applied to any other receivable or other indebtedness of such Obligor. SECTION 2.10 Payments and Computations, Etc. All amounts to be paid or deposited by the Transferor or the Collection Agent hereunder shall be paid or deposited in accordance with the terms hereof no later than 12:00 P.M. (New York time) on the day when due in immediately available funds to a special account (account number) in the name of the Administrative Agent and maintained at Chase's office at 450 West 33rd Street in The City of New York. Any payments to be made by the Transferor or the Collection Agent pursuant to Sections 2.5 and 2.6 shall be made by withdrawing funds from any or all of the Collection Accounts, at the option of the Collection Agent or, in the event of a Potential Termination Event or Termination Event, at the option of the Administrative Agent. The Transferor shall, to the extent permitted by law, pay to the Administrative Agent, for the benefit of the applicable Funding Agent, Initial Purchaser and the PARCO APA Banks, interest on all amounts not paid or deposited when due hereunder as follows: (a) to the PARCO Funding Agent for the benefit of PARCO and/or the PARCO APA Banks, 2% per annum plus the Applicable Margin plus the PARCO Base Rate on the share of such amounts allocable to PARCO and the PARCO APA Banks; (b) to the Redwood Funding Agent for the benefit of Redwood, the Redwood Yield on the share of such amounts allocable to Redwood; and (c) to the Liberty Funding Agent for the benefit of Liberty, 2% plus the Liberty Base Rate on the share of such amounts allocable to Liberty. All computations of PARCO Discount, Yield, interest and all per annum fees hereunder shall be made on the basis of a year of 360 days (or, in the case of PARCO Discount calculated at the Base Rate, a year of 365 or 366 days, as applicable) for the actual number of days (including the first but excluding the last day) elapsed. Any computations by the Administrative Agent or a Funding Agent of amounts payable by the Transferor hereunder shall be binding upon 15 the Transferor absent manifest error. Promptly upon receipt of any amounts due and owing to the Initial Purchasers, the PARCO APA Banks and the Funding Agents hereunder on any Business Day, the Administrative Agent shall, by no later than 3:00 p.m. (New York time), remit such amounts in immediately available funds to such Persons by depositing such amounts in the applicable Funding Account, until otherwise notified in writing by the applicable Funding Agent. SECTION 2.11 Reports. The Collection Agent shall prepare and forward to the Administrative Agent (i) on the Monthly Settlement Report Date of each month, a Settlement Report as of the end of the last day of the immediately preceding Settlement Period, (ii) on each Weekly Report Date, a Weekly Report as of the end of the last day of the immediately preceding Weekly Settlement Period, (iii) on each Business Day (prior to an Incremental Transfer on such day) (A) after the Guarantor shall have permitted either (1) the Interest Coverage Ratio during any period set forth in subsection (a) of the definition of "Interest Coverage Ratio" to be less than the ratio set forth in such definition for such period or (2) the Leverage Ratio during any period set forth in subsection (a) of the definition of "Leverage Ratio" to be greater than the ratio set forth in such definition for such period, and continuing until the Administrative Agent shall have notified the Guarantor otherwise (at the direction of all of the Initial Purchasers and the PARCO APA Banks) and (B) on which Collections received by the Transferor, the Sellers or the Collection Agent or deposited into a Lock-Box Account or the Collection Accounts on such Business Day equal or exceed $7,500,000, a Daily Report if the Transferor wishes to have funds released to it pursuant to Section 2.5(a)(v) prior to the delivery of the next Weekly Report, and (iv) as soon as reasonably practicable, from time to time, such other information as the Administrative Agent may reasonably request. With respect to subsection 2.11(iii)(A) herein, the Collection Agent may again provide a Weekly Report after the Guarantor has complied with the Interest Coverage Ratio or Leverage Ratio for two (2) consecutive fiscal quarters; unless such requirement shall have been waived by the Administrative Agent with the prior consent of the Funding Agents. SECTION 2.12 Collection Accounts. There shall be established on the day of the initial Incremental Transfer hereunder and maintained, for the benefit of the Administrative Agent, the Funding Agents, the Initial Purchasers and the PARCO APA Banks, three segregated accounts (collectively, the "Collection Accounts"), each bearing a designation clearly indicating that the funds deposited therein are held for the benefit of the Administrative Agent, the Initial Purchasers, the Funding Agents and the PARCO APA Banks. The Collection Agent shall deposit all Collections into the Collection Account within one Business Day of (i) deposit thereof into a Lock-Box Account or (ii) receipt thereof by the Transferor, a Seller or the Collection Agent as follows: (i) an account in the United States to hold all Collections received in the United States (the "U.S. Dollar Collection Account"), (ii) an account in Canada to hold all Collections received in Canada that are paid in U.S. Dollars (the "Canada/U.S. Dollar Collection Account") and (iii) an account in Canada to hold all Collections received in Canada that are paid in Canadian Dollars (the "Canada/Canadian Dollar Collection Account"). All funds which are deposited in the United States, shall be deposited into the U.S. Dollar Collection Account; all funds which are deposited in Canada in U.S. Dollars, shall be deposited into the Canada/U.S. Dollar Collection Account; and all funds which are deposited in Canada in Canadian Dollars, shall be deposited into the Canada/Canadian Dollar Collection Account. All such deposits to the U.S. Dollar Collection Account and the Canada/U.S. Dollar Collection Account shall be made in U.S. Dollars. All such deposits to the Canada/Canadian Dollar Collection Account shall be made in 16 Canadian Dollars. Funds on deposit in the Collection Accounts shall be invested by the Administrative Agent in Permitted Investments selected by the Collection Agent that will mature so that sufficient funds will be available prior to the last day of each successive Tranche Period or each Settlement Date, as applicable, following such investment. On the last day of each Tranche Period or each Settlement Date, as applicable, all interest and earnings (net of losses and investment expenses) on funds on deposit in the Collection Accounts shall be retained in the Collection Accounts and be available to make any payments required to be made hereunder (including PARCO Discount and Yield) by the Transferor. On the date on which the Aggregate Net Investment is zero and all accrued PARCO Discount, Yield, Servicing Fees and all other Aggregate Unpaids have been paid in full, any funds remaining on deposit in the Collection Accounts shall be paid to the Transferor. SECTION 2.13 Right of Setoff. The Administrative Agent and each of the Initial Purchasers, the Liberty APA Banks and the PARCO APA Banks are hereby authorized (in addition to any other rights they may have) at any time after the occurrence of the Termination Date, or during the continuation of a Potential Termination Event, to set-off, appropriate and apply (without presentment, demand, protest or other notice which are hereby expressly waived) any deposits and any other indebtedness held or owing by the Administrative Agent, the Initial Purchasers, the Liberty APA Banks or such PARCO APA Bank to, or for the account of, the Transferor against the amount of the Aggregate Unpaids owing by the Transferor to such Person (even if contingent or unmatured). SECTION 2.14 Sharing of Payments, Etc. If the Initial Purchasers, the Liberty APA Banks or any PARCO APA Bank (for purposes of this Section 2.14 only, being a "Recipient") shall obtain any payment (whether voluntary, involuntary, through the exercise of any right of setoff, or otherwise) on account of any interest in the Transferred Interest owned by it in excess of its ratable share of payments on account of any interest in the Transferred Interest obtained by the Initial Purchasers and/or the Liberty APA Banks and/or the PARCO APA Banks entitled thereto, such Recipient shall forthwith purchase from the Initial Purchasers and/or the Liberty APA Banks and/or the PARCO APA Banks entitled to a share of such amount participations in the percentage interests owned by such Persons as shall be necessary to cause such Recipient to share the excess payment ratably with each such other Person entitled thereto; provided, however, that if all or any portion of such excess payment is thereafter recovered from such Recipient, such purchase from each such other Person shall be rescinded and each such other Person shall repay to the Recipient the purchase price paid by such Recipient for such participation to the extent of such recovery, together with an amount equal to such other Person's ratable share (according to the proportion of (a) the amount of such other Person's required payment to (b) the total amount so recovered from the Recipient) of any interest or other amount paid or payable by the Recipient in respect of the total amount so recovered. SECTION 2.15 Broken Funding. (a) In the event of the payment of any principal of any PARCO Eurodollar Tranche other than on the last day of the PARCO Eurodollar Tranche Period applicable thereto (including as a result of the occurrence of the Termination Date or an optional prepayment of a PARCO Eurodollar Tranche), (b) the conversion of any PARCO Eurodollar Tranche other than on the last day of the related PARCO Eurodollar Tranche Period, or (c) any failure to borrow, 17 convert, continue or prepay any PARCO Eurodollar Tranche on the date specified in any notice delivered pursuant hereto, then, in any such event, the Transferor shall compensate the applicable PARCO APA Banks for the loss, cost and expense attributable to such event. Such loss, cost or expense to any PARCO APA Bank shall be deemed to include an amount determined by such PARCO APA Bank to be the excess, if any, of (i) the amount of PARCO Discount which would have accrued on the principal amount of such PARCO Eurodollar Tranche had such event not occurred, at the PARCO Eurodollar Rate that would have been applicable to such PARCO Eurodollar Tranche, for the period from the date of such event to the last day of the PARCO Eurodollar Tranche Period (or, in the case of a failure to borrow, convert or continue, for the period that would have been the related PARCO Eurodollar Tranche Period), over (ii) the amount of interest which would accrue on such principal amount for such period at the interest rate which such PARCO APA Bank would bid were it to bid, at the commencement of such period, for dollar deposits of a comparable amount and period from other banks in the interbank eurodollar market. Within forty-five (45) days after any PARCO APA Bank hereunder receives actual knowledge of any of the events specified in this Section 2.15(a), a certificate of such PARCO APA Bank setting forth any amount or amounts that such PARCO APA Bank is entitled to receive pursuant to this Section 2.15(a) and the reason(s) therefor shall be delivered to the Transferor by the Administrative Agent (with a copy delivered by the Administrative Agent to the PARCO Funding Agent) and shall be conclusive absent manifest error. The Transferor shall pay to the Administrative Agent on behalf of each such PARCO APA Bank the amount shown as due on any such certificate within ten (10) days after receipt thereof. (b) The Transferor shall pay to the Administrative Agent for the account of Redwood, upon request of Redwood, such amount or amounts as shall compensate Redwood for any loss, cost or expense incurred by Redwood in the ordinary course (as reasonably determined by Redwood) as a result of any reduction by the Transferor in the Redwood Net Investment (and accompanying loss of Redwood Yield thereon) other than on the maturity date of the Commercial Paper (or other financing source) funding such Redwood Net Investment, which compensation shall include an amount equal to any loss or expense incurred by Redwood during the period from the date of such reduction to (but excluding) the maturity date of such Commercial Paper (or other financing source) if the rate of interest obtainable by Redwood upon the redeployment of funds in an amount equal to such reduction is less than the interest rate applicable to such Commercial Paper (or other financing source). The reasonable determination by Redwood of the amount of any such loss or expense shall be set forth in a written notice to the Transferor in reasonable detail and shall be final, binding and conclusive on the Transferor (absent manifest error) for all purposes. (c) The Transferor shall pay to the Administrative Agent for the account of Liberty, upon request of Liberty, such amount or amounts as shall compensate Liberty for any loss, cost or expense incurred by Liberty in the ordinary course (as reasonably determined by Liberty) as a result of any reduction by the Transferor in the Liberty Net Investment (and accompanying loss of Liberty Yield thereon) other than on the maturity date of the Commercial Paper (or other financing source) funding such Liberty Net Investment, which compensation shall include an amount equal to any loss or expense incurred by Liberty during the period from the date of such reduction to (but excluding) the maturity date of such Commercial Paper (or other financing source) if the rate of interest obtainable by Liberty upon the redeployment of funds in an amount equal to such reduction is less than the interest rate applicable to such 18 Commercial Paper (or other financing source). The reasonable determination by Liberty of the amount of any such loss or expense shall be set forth in a written notice to the Transferor in reasonable detail and shall be final, binding and conclusive on the Transferor (absent manifest error) for all purposes. SECTION 2.16 Conversion and Continuation of Outstanding, Tranches Funded by the PARCO APA Banks. Prior to the occurrence of the Termination Date or a Potential Termination Event, (a) each PARCO BR Tranche hereunder may, at the option of the Transferor, be converted to a PARCO Eurodollar Tranche and (b) each PARCO Eurodollar Tranche may, at the option of the Transferor, be continued as a PARCO Eurodollar Tranche or converted to a PARCO BR Tranche. If the Termination Date has occurred or a Potential Termination Event has occurred and is continuing, then (i) no outstanding Tranche funded by the PARCO APA Banks may be converted to, or continued as, a PARCO Eurodollar Tranche and (ii) unless repaid, each PARCO Eurodollar Tranche shall be converted to a PARCO BR Tranche on the last day of the Tranche Period related thereto. For any such conversion or continuation, the Transferor shall give the Administrative Agent irrevocable notice (each, a "Conversion/Continuation Notice") of such request not later than 10:00 a.m. (New York time) (i) in the case of a conversion of a PARCO BR Tranche into a PARCO Eurodollar Tranche, or a continuation of a PARCO Eurodollar Tranche as a PARCO Eurodollar Tranche, three (3) Business Days before the date of such conversion or continuation, as applicable, and (ii) following the Termination Date or the occurrence and continuation of a Potential Termination Event, in the case of a conversion of a PARCO Eurodollar Tranche into a PARCO BR Tranche or a continuation of a PARCO BR Tranche as a PARCO BR Tranche, on the Business Day of such conversion. Promptly upon receipt by the Administrative Agent of any such notice, the Administrative Agent shall deliver a copy thereof to the PARCO Funding Agent (but in no event later than the close of business on the same day). If a Conversion/Continuation Notice has not been timely delivered with respect to any PARCO BR Tranche or PARCO Eurodollar Tranche, such funding shall be automatically continued as, or converted to, a PARCO BR Tranche. Each Conversion/Continuation Notice shall specify (a) the requested date (which shall be a Business Day) of such conversion or continuation, (b) the aggregate amount and rate option applicable to the Tranche which is to be converted or continued and (c) the amount and rate option(s) of Tranche(s) into which such Tranche is to be converted or continued. SECTION 2.17 Illegality. (a) Notwithstanding any other provision herein, if, after the Closing Date, the adoption of any Law or bank regulatory guideline or any amendment or change in the interpretation of any existing or future Law or bank regulatory guideline by any Official Body charged with the administration, interpretation or application thereof, or the compliance with any directive of any Official Body (in the case of any bank regulatory guideline, whether or not having the force of Law), shall make it unlawful for a PARCO APA Bank to acquire or maintain a PARCO Eurodollar Tranche as contemplated by this Agreement, (i) the Administrative Agent on behalf of such PARCO APA Bank shall, within forty-five (45) days after receiving actual knowledge thereof, deliver a certificate to the Transferor (with a copy to the PARCO Funding Agent) setting forth the basis for such illegality, which certificate shall be conclusive absent manifest error, (ii) the commitment of such PARCO APA Bank hereunder to make a portion of a PARCO Eurodollar Tranche, continue any portion of a PARCO Eurodollar Tranche as such and 19 convert a PARCO BR Tranche to a PARCO Eurodollar Tranche shall forthwith be canceled, and such cancellation shall remain in effect so long as the circumstance described above exists, and (iii) such PARCO APA Bank's portion of any PARCO Eurodollar Tranche then outstanding shall be converted automatically to a PARCO BR Tranche on the last day of the related PARCO Eurodollar Tranche Period, or within such earlier period as required by law. If any such conversion of a portion of a PARCO Eurodollar Tranche occurs on a day which is not the last day of the related PARCO Eurodollar Tranche Period, the Transferor shall, pursuant to Section 2.15, pay to the Administrative Agent on behalf of such PARCO APA Bank such amounts, if any, as may be required to compensate such PARCO APA Bank. If circumstances subsequently change so that it is no longer unlawful for an affected PARCO APA Bank to acquire or to maintain a portion of a PARCO Eurodollar Tranche as contemplated hereunder, such PARCO APA Bank will, as soon as reasonably practicable after such PARCO APA Bank knows of such change in circumstances, notify the Transferor, the Administrative Agent and the PARCO Funding Agent, and upon receipt of such notice, the obligations of such PARCO APA Bank to acquire or maintain its acquisition of portions of PARCO Eurodollar Tranches or to convert its portion of a PARCO BR Tranche into portions of PARCO Eurodollar Tranches shall be reinstated. (b) Each PARCO APA Bank agrees that, upon the occurrence of any event giving rise to the operation of Section 2.17(a) with respect to such PARCO APA Bank, it will, if requested by the Transferor and to the extent permitted by law or by the relevant Official Body, endeavor in good faith to change the office at which it books its portions of Eurodollar Tranches hereunder if such change would make it lawful for such PARCO APA Bank to continue to acquire or to maintain its acquisition of portions of PARCO Eurodollar Tranches hereunder; provided, however, that such change may be made in such manner that such PARCO APA Bank, in its sole determination, suffers no unreimbursed cost or expense or any other disadvantage whatsoever. SECTION 2.18 Inability to Determine PARCO Eurodollar Rate. If, prior to the first day of any PARCO Eurodollar Tranche Period: (1) the Administrative Agent shall have determined (which determination in the absence of manifest error shall be conclusive and binding upon the Transferor) that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the PARCO Eurodollar Rate for such PARCO Eurodollar Tranche Period; or (2) the Administrative Agent shall have received notice from one or more PARCO APA Banks that the PARCO Eurodollar Rate determined or to be determined for such PARCO Eurodollar Tranche Period will not adequately and fairly reflect the cost to such PARCO APA Banks (as conclusively certified by such PARCO APA Banks) of purchasing or maintaining their affected portions of PARCO Eurodollar Tranches during such PARCO Eurodollar Tranche Period; then, in either such event, the Administrative Agent shall give telecopy or telephonic notice thereof (confirmed in writing) to the Transferor and the PARCO APA Banks as soon as 20 practicable (but, in any event, within thirty (30) days after such determination or notice, as applicable) thereafter. Until such notice has been withdrawn by the Administrative Agent, no further PARCO Eurodollar Tranches shall be made. The Administrative Agent agrees to withdraw any such notice as soon as reasonably practicable after the Administrative Agent is notified of a change in circumstances which makes such notice inapplicable. SECTION 2.19 Exchange of Canadian Dollars into U.S. Dollars. All amounts transferred from a Canada/Canadian Dollar Collection Account to the U.S. Dollar Collection Account shall be exchanged by the Collection Agent or the Administrative Agent into U.S. Dollars, and if by the Administrative Agent, then only at the written direction of the Collection Agent. Subject to the last paragraph in this Section 2.19, the Collection Agent shall solicit offer quotations from at least two Authorized Foreign Exchange Dealers for effecting such exchange and shall compare such offer quotations to the Required Currency Hedge and select the execution which will require the least amount of Canadian Dollars to purchase one (1) U.S. Dollar. The Collection Agent shall then direct the Administrative Agent in writing to effect such exchange with the Authorized Foreign Exchange Dealer or the Eligible Counterparty as soon thereafter as is reasonably practicable. The Collection Agent shall notify the Administrative Agent in writing of the name and payment instructions of the Authorized Foreign Exchange Dealer or Eligible Counterparty, and shall direct the Administrative Agent in writing to execute the trade. The Administrative Agent shall withdraw the portion of the Canadian Dollars from the appropriate Canada/Canadian Dollar Collection Account required to be paid pursuant to such agreement or agreements and make the payments described in the payment instructions provided pursuant to the preceding sentence, all in accordance with the written instructions of the Collection Agent. The Collection Agent shall maintain written records of any quotations received in response to any solicitations made pursuant to this Section 2.19 and shall make the same available to the Administrative Agent promptly upon request. If, as a result of changes in customary market practice in, or other changes relating to, the currency exchange markets in Canada, the Collection Agent is unable to comply with the terms thereof in respect of the purchase of U.S. Dollars with Canadian Dollars, then the parties hereto will use all reasonable efforts to agree on the terms of an amendment hereto and to amend the terms hereof in order to permit such compliance with the terms hereof or to reflect such customary market practice. The foregoing shall be the exclusive method by which amounts may be transferred by the Administrative Agent from a Canada/Canadian Dollar Collection Account to the U.S. Dollar Collection Account; provided, however, as an alternate transfer method, the Collection Agent may transfer the required amount of U.S. Dollars, calculated in accordance with the Canadian Exchange Percentage, to the U.S. Dollar Collection Account and upon completion of such transfer, the Administrative Agent shall distribute from such Canada/Canadian Dollar Collection Account the corresponding amount of Canadian Dollars to or upon the order of the Collection Agent; and provided further that the amount of U.S. Dollars 21 transferred is not less than the amount of U.S. Dollars that would have been transferred using the Valuation Price. The Administrative Agent shall, in no event whatsoever, be responsible for any loss or damages arising out of or with respect to any currency exchange pursuant to this Article II except to the extent provided in Article IX. SECTION 2.20 Procedure for Decreasing the Facility Limit. On any Settlement Date prior to a Termination Date, upon the written request of the Transferor, the aggregate Facility Limit may be permanently reduced (a "Decrease") by the Collection Agent; provided that the Transferor shall have given the Collection Agent and the Administrative Agent irrevocable written notice (effective upon receipt) of the amount of such Decrease prior to 10:00 a.m. New York time on a Business Day that is at least ten (10) days prior to such Decrease; provided, that any such Decrease shall be in an amount equal to $10,000,000 and integral multiples of $1,000,000 in excess thereof and provided, further, no Decrease may cause the Facility Limit to be lower than $100,000,000 or the Facility Limit to be less than the Aggregate Net Investment. Upon receipt of notice required in Section 2.20 from the Transferor, the Administrative Agent shall forward a copy of such notice to each Funding Agent with respect to each Initial Purchaser or PARCO APA Bank, no later than 2:00 p.m. (New York time), on the day received. Following a Decrease, Schedule I attached hereto shall be replaced with a revised Schedule I that reflects the reduced Facility Limit, as well as the reduced Purchase Limits and Commitments, where applicable, of the Initial Purchasers and PARCO APA Banks. Each Purchase Limit and Commitment, if applicable, shall be reduced pro rata in accordance with subsection 2.5(e). ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.1 Representations and Warranties of the Transferor. The Transferor hereby represents and warrants to the Administrative Agent, each Funding Agent, the Initial Purchasers and the PARCO APA Banks that: (a) Corporate Existence and Power. The Transferor is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all corporate power and all governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is now conducted. The Transferor is duly qualified to do business in, and is in good standing in, every other jurisdiction in which the nature of its business requires it to be so qualified. (b) Corporate and Governmental Authorization; Contravention. The execution, delivery and performance by the Transferor of this Agreement and the other Transaction Documents to which the Transferor is a party (i) are within the Transferor's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) require no action by or in respect of, or filing with, any Official Body or official thereof (except as contemplated by Section 2.8 hereof or as have been taken or filed), (iv) do not contravene, or 22 constitute a default under, any provision of applicable Law or of the Certificate of Incorporation or Bylaws of the Transferor, or accelerate or permit the acceleration of any performance required by any agreement or other instrument binding upon the Transferor, or (v) do not result in the creation or imposition of any Adverse Claim on the assets of the Transferor or any of its Subsidiaries (except as contemplated by Section 2.8 hereof). (c) Binding Effect. Each of this Agreement and the other Transaction Documents to which the Transferor is a party constitutes, and the Transfer Certificate, upon payment of the Transfer Price set forth therein, will constitute the legal, valid and binding obligation of the Transferor, enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws affecting the rights of creditors generally and general equitable principles (whether considered in a proceeding at law or in equity). (d) Perfection. Immediately preceding each Transfer hereunder, the Transferor shall be the owner of all of the Receivables, free and clear of all Adverse Claims. On or prior to each Transfer and each recomputation of the Transferred Interest, all financing statements and other documents required to be recorded or filed in order to perfect and protect the Transferred Interest against all creditors of, and purchasers from, the Transferor and each Seller will have been duly filed in each filing office necessary for such purpose, and all filing fees and taxes, if any, payable in connection with such filings shall have been paid in full. (e) Accuracy of Information. All information contained in this Agreement or the Transaction Documents or heretofore furnished by or on behalf of the Transferor to the Administrative Agent, the Initial Purchasers, any PARCO APA Bank or any Funding Agent for purposes of, or in connection with, this Agreement and the other Transaction Documents is, and all such information hereafter furnished by or on behalf of the Transferor (including, without limitation, the Settlement Reports, the Weekly Reports, any other reports delivered pursuant to Section 2.11 hereof and the Transferor's financial statements) to the Administrative Agent, the Initial Purchasers, any PARCO APA Bank or any Funding Agent will be, true and accurate in every material respect, on the date such information is stated or certified. (f) Tax Status. The Transferor has filed all tax returns (Federal, State and local) required to be filed by it and has paid or made adequate provision for the payment of all taxes, assessments and other governmental charges (including for such purposes, the setting aside of appropriate reserves for taxes, assessments and other governmental charges being contested in good faith). (g) Action, Suits. There are no actions, suits or proceedings pending or, to the knowledge of the Transferor threatened, against or affecting the Transferor or its respective properties, in or before any court, arbitrator or other body. Except as set forth in Exhibit H hereof regarding any Affiliates of the Transferor, there are no actions, suits or proceedings pending or, to the knowledge of the Transferor threatened, against or affecting any Affiliate of the Transferor or its respective properties, in or before any court, arbitrator or other body which may, individually or in the aggregate, have a Material Adverse Effect or that involve this Agreement or the transactions contemplated hereby. 23 (h) Use of Proceeds. No proceeds of any Transfer will be used by the Transferor to acquire any security in any transaction which is subject to Section 13 or 14 of the Securities Exchange Act of 1934, as amended. (i) Place of Business. The principal place of business and chief executive office of the Transferor are located at the address of the Transferor indicated in Section 9.3 hereof and always have been located in Clark County, Nevada, and the offices where the Transferor keeps all its Records and Related Security, are located at the address(es) described on Exhibit J or such other locations notified to the Administrative Agent and the Funding Agents in accordance with Section 2.8 hereof in jurisdictions where all action required by Section 2.8 hereof has been taken and completed. (j) Good Title. Upon each Transfer and each recomputation of the Transferred Interest, the Administrative Agent, on behalf of the Initial Purchasers and the PARCO APA Banks, shall acquire (A) a valid undivided percentage ownership interest to the extent of the Transferred Interest or (B) a first priority perfected security interest in each Receivable that exists on the date of such Transfer and recomputation and in the Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto, in either case free and clear of any Adverse Claim. (k) Tradenames, Etc. As of the date hereof (i) the Transferor has only the subsidiaries and divisions listed on Exhibit K hereto; and (ii) the Transferor has, within the last five (5) years, operated only under the tradenames identified in Exhibit K hereto or as otherwise disclosed in writing to the Administrative Agent, and, within the last five (5) years, has not changed its name, merged with or into or consolidated with any other corporation or been the subject of any proceeding under Title 11, United States Code (Bankruptcy), except as disclosed in Exhibit K hereto or as disclosed by the Transferor in writing to the Administrative Agent. (l) Nature of Receivables. Each Receivable (i) represented by the Transferor or the Collection Agent to be an Eligible Receivable (including in any Settlement Report, Weekly Report or other report delivered pursuant to Section 2.11 hereof) or (ii) included in the calculation of the Net Receivables Balance in fact satisfies at such time the definition of "Eligible Receivable" and is an "eligible asset" as defined in Rule 3a-7 under the Investment Company Act of 1940, as amended, and is not a Defaulted Receivable. (m) Coverage Requirement, Amount of Receivables. The Percentage Factor on any date does not exceed the Maximum Percentage Factor. As of December 17, 1999, the Outstanding Balance of the Receivables in existence was $218,695,000 and the Net Receivables Balance was $170,318,000. (n) Credit and Collection Policy. Since September 30, 1999, there have been no material changes in the Credit and Collection Policy, other than as permitted hereunder. Since such date, no material adverse change has occurred in the overall rate of collection of the Receivables. (o) Collections and Servicing. Since September 30, 1999, there has been no material adverse change in the ability of the Collection Agent (to the extent it is C&A, the 24 Transferor or any Subsidiary or Affiliate of any of the foregoing) to service and collect the Receivables. (p) No Termination Event or Potential Termination Event. No event has occurred and is continuing and no condition exists which constitutes a Termination Event or a Potential Termination Event. (q) Material Adverse Effect. Between the date of its formation and the Closing Date, (i) the Transferor has not incurred any obligations, contingent or non-contingent liabilities, liabilities for charges, long-term leases or unusual forward or long-term commitments that, alone or in the aggregate, could reasonably be expected to have a Material Adverse Effect, (ii) no contract, lease or other agreement or instrument has been entered into by the Transferor or has become binding upon the Transferor's assets and no law or regulation applicable to the Transferor has been adopted that has had or could reasonably be expected to have a Material Adverse Effect and (iii) the Transferor is not in default and no third party is in default under any material contract, lease or other agreement or instrument to which the Transferor is a party that alone or in the aggregate could reasonably be expected to have a Material Adverse Effect. Between the date of the formation of the Transferor and the Closing Date, no event has occurred that alone or together with other events could reasonably be expected to have a Material Adverse Effect, other than as listed on Schedule 3.1(q). (r) Not an Investment Company. The Transferor is not, and is not controlled by, an "investment company" or an "affiliated person" of, "promoter" or "principal underwriter" for, an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or is exempt from all provisions of such Act. (s) ERISA. (i) Each of the Transferor and its ERISA Affiliates is in compliance in all material respects with ERISA and (ii) no lien exists in favor of the Pension Benefit Guaranty Corporation on any of the Receivables. No ERISA Event has occurred with respect to Title IV Plans of the Transferor or its ERISA Affiliates that have an aggregate Unfunded Pension Liability equal to or greater than $10,000,000. (t) Lock-Box Accounts. The names and addresses of all the Lock-Box Banks, together with the account numbers of the Lock-Box Accounts at such Lock-Box Banks, are specified in Exhibit B hereto (or at such other Lock-Box Banks and/or with such other Lock-Box Accounts as have been notified to the Administrative Agent and for which Lock-Box Agreements have been executed in accordance with Section 2.8(b) hereof and delivered to the Collection Agent and the Administrative Agent). All Obligors have been instructed to make payment to a Lock-Box Account, and only Collections are deposited into a Lock-Box Account. (u) Bulk Sales. No transaction contemplated hereby or by the Receivables Purchase Agreement or the other Transaction Documents requires compliance with any "bulk sales" act or similar law. (v) Transfers Under Receivables Purchase Agreement. Each Receivable which has been transferred to the Transferor by the Sellers has been purchased by the Transferor 25 from the Sellers pursuant to, and in accordance with, the terms of the Receivables Purchase Agreement. (w) Preference, Voidability. The Transferor shall have given reasonably equivalent value to the applicable Seller in consideration for the transfer to the Transferor of the Receivables and Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto from the applicable Seller, and each such transfer shall not have been made for or on account of an antecedent debt owed by the applicable Seller to the Transferor. (x) Year 2000. The Transferor has reviewed the areas within its business and operations which it believes would reasonably be expected to be materially adversely affected by, and has developed a plan to address on a timely basis, the "Year 2000 Problem" (that is, the risk that computer applications used by the Transferor may be unable to recognize and perform properly date-sensitive functions involving certain dates occurring in or after the year 2000). (y) Solvency. Both before and after giving effect to (i) the transactions contemplated by this Agreement and the other Transaction Documents and (ii) the payment and accrual of all transaction costs in connection with the foregoing, the Transferor is and will be Solvent. (z) Full Disclosure. No information contained in this Agreement, any of the other Transaction Documents, the Senior Credit Facility Confidential Information Memorandum, the Rating Agency Book or, any registration statement or annual, quarterly, monthly or other regular report which the Transferor or any of its Affiliates filed with the Securities and Exchange Commission since January 1, 1999 contains any untrue statement of a material fact (taken as a whole) nor has the Transferor or its Affiliates failed to provide to the Administrative Agent, the Initial Purchasers, the Funding Agents or the Liquidity Banks any material information necessary to make the information provided by the Transferor or its Affiliates in such documents or filings (taken as a whole) not misleading in any material respect in light of the circumstances under and for the purposes for which such information was provided; provided, however, that this representation or warranty shall not relate to any projections or forward looking statements in any such documents provided by the Transferor or its Affiliates. SECTION 3.2 Reaffirmation of Representations and Warranties by the Transferor. On each day that a Transfer is made hereunder, the Transferor, by accepting the proceeds of such Transfer, whether delivered to the Transferor pursuant to subsection 2.2(a) or Section 2.5 hereof, shall be deemed to have certified that all representations and warranties described in Section 3.1 hereof are true and correct on and as of such day as though made on and as of such day. SECTION 3.3 Representations and Warranties of the Collection Agent. The Collection Agent represents and warrants (solely as to itself) to the Administrative Agent, the Initial Purchasers, each PARCO APA Bank and each Funding Agent as of the date it becomes a Collection Agent hereunder that: (a) Corporate Existence and Power. The Collection Agent is a corporation duly organized, validly existing and in good standing under the laws of its respective jurisdiction 26 of incorporation and has all corporate power and all material governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is now conducted, except where the failure to obtain such licenses, authorizations, consents and approvals would not have a Material Adverse Effect. The Collection Agent is duly qualified to do business in, and is in good standing in, every other jurisdiction in which the nature of its business requires it to be so qualified, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. (b) Corporate and Governmental Authorization, Contravention. The execution, delivery and performance by the Collection Agent of this Agreement (i) are within the Collection Agent's corporate powers, (ii) have been duly authorized by all necessary corporate action on the Collection Agent's part, (iii) require no action by or in respect of, or filing with, any Official Body or official thereof (except for the filing of UCC financing statements as required by this Agreement or as have been taken or filed and, with respect to filings other than UCC financing statements, filings where the failure to file will not have a Material Adverse Effect), (iv) do not contravene, or constitute a default under, any provision of applicable Law or of the organizational documents of the Collection Agent or of any agreement or other material instrument binding upon the Collection Agent, except where such contravention or default would not have a Material Adverse Effect, or (v) result in the creation or imposition of any Adverse Claim on the assets of the Collection Agent or any of its Affiliates (except those created by this Agreement). (c) Binding Effect. This Agreement constitutes the legal, valid and binding obligations of the Collection Agent, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws affecting the rights of creditors generally and general equitable principles (whether considered in a proceeding at law or in equity). (d) Action, Suits. Except as set forth in Exhibit I hereto, there are no actions, suits or proceedings pending, or to the knowledge of the Collection Agent, threatened, against the Collection Agent, or any Affiliate of the Collection Agent, or its respective properties, in or before any court, arbitrator or other body, which may, individually or in the aggregate, have a Material Adverse Effect. (e) Year 2000. The Collection Agent has reviewed the areas within its business and operations which it believes would reasonably be expected to be materially adversely affected by, and has developed a plan to address on a timely basis, the "Year 2000 Problem" (that is, the risk that computer applications used by the Collection Agent may be unable to recognize and perform properly date-sensitive functions involving certain dates occurring in or after the year 2000). ARTICLE IV CONDITIONS PRECEDENT SECTION 4.1 Conditions to Effectiveness. This Agreement shall become effective on the first day on which the Administrative Agent and each Funding Agent, on behalf 27 of the Initial Purchasers and the PARCO APA Banks, shall have received the following documents, instruments and fees, all of which shall be in a form and substance reasonably acceptable to the Administrative Agent and each Funding Agent: (a) A Certificate of the Secretary of the Transferor in substantially the form of Exhibit L hereto certifying (i) the names and signatures of the officers and employees authorized on its behalf to execute this Agreement and any other documents to be delivered by it hereunder (on which Certificate the Administrative Agent, the Funding Agents, the Initial Purchasers and the PARCO APA Banks may conclusively rely until such time as the Administrative Agent, on behalf of the Initial Purchasers, the PARCO APA Banks and the Funding Agents, shall receive from the Transferor a revised Certificate meeting the requirements of this clause (a)(i)), (ii) a copy of the Transferor's Certificate of Incorporation, certified by the Secretary of State of the State of Delaware, (iii) a copy of the Transferor's By-Laws, (iv) a copy of resolutions of the Board of Directors of the Transferor approving this transaction and (v) a certificate of the Secretary of State of the State of Delaware certifying the Transferor's good standing under the laws of the State of Delaware. (b) A Certificate of the Secretary of Collins & Aikman Products Co. in substantially the form of Exhibit L hereto certifying (i) the names and signatures of the officers and employees authorized on its behalf to execute this Agreement and any other documents to be delivered by it hereunder (on which Certificate the Administrative Agent, the Funding Agents, the Initial Purchasers and the PARCO APA Banks may conclusively rely until such time as the Administrative Agent, on behalf of the Initial Purchasers, the PARCO APA Banks and the Funding Agents, shall receive from C&A a revised Certificate meeting the requirements of this clause (b)(i)), (ii) a copy of C&A's Certificate of Incorporation, certified by the Secretary of State of the State of Delaware, (iii) a copy of C&A's By-Laws, (iv) a copy of resolutions of the Board of Directors of C&A approving this transaction and (v) a certificate of the Secretary of State of the State of Delaware certifying C&A's good standing under the laws of the State of Delaware. (c) Executed copies of the Lock-box Agreements relating to each of the Lock-Box Banks and the Lock-Box Accounts. (d) An opinion of Stroock & Stroock & Lavan, LLP, special counsel to the Transferor and the Sellers (excluding the Canadian Sellers), addressed to the Administrative Agent, the Initial Purchasers, the PARCO APA Banks and each Funding Agent, in form and substance reasonably acceptable to the Administrative Agent and each Funding Agent, regarding substantive consolidation in the event of a bankruptcy of a Seller and such other matters as the Administrative Agent or a Funding Agent may reasonably request. (e) An opinion of Stroock & Stroock & Lavan, LLP, special counsel to the Transferor and the Sellers (excluding the Canadian Sellers), addressed to the Administrative Agent, the Initial Purchasers, the PARCO APA Banks and the Funding Agent, in form and substance reasonably acceptable to the Administrative Agent and each Funding Agent, regarding "true sale" between each Seller and the Transferor in the event of a bankruptcy of a Seller and such other matters as the Administrative Agent or a Funding Agent may reasonably request. 28 (f) An opinion of special counsel to each Seller, addressed to the Administrative Agent, the Initial Purchasers, the PARCO APA Banks and each Funding Agent, in form and substance reasonably acceptable to the Administrative Agent and each Funding Agent, regarding the validity, perfection and priority of the security interest granted by each Seller to the Transferor and such other matters as the Administrative Agent or a Funding Agent may reasonably request. (g) An opinion of Canadian special counsel to each Canadian Seller, addressed to the Administrative Agent, the Initial Purchasers, the PARCO APA Banks and each Funding Agent, in form and substance reasonably acceptable to the Administrative Agent and each Funding Agent, regarding substantive consolidation in the event of a bankruptcy of a Canadian Seller and regarding "true sale" between each Canadian Seller and the Transferor in the event of a bankruptcy of a Canadian Seller. (h) An opinion of special counsel to the Transferor, addressed to the Administrative Agent, the Initial Purchasers, the PARCO APA Banks and each Funding Agent, in form and substance reasonably acceptable to the Administrative Agent and each Funding Agent, regarding the validity, perfection and priority of the security interest granted by the Transferor to the Administrative Agent, on behalf of the Initial Purchasers and the PARCO APA Banks and such other matters as the Administrative Agent or a Funding Agent may reasonably request. (i) An opinion of Stroock & Stroock & Lavan, LLP, special counsel to the Transferor and each Seller, addressed to the Administrative Agent, the Initial Purchasers, the PARCO APA Banks and each Funding Agent, in form and substance reasonably acceptable to the Administrative Agent and each Funding Agent, regarding the enforceability of the Transaction Documents to which each is a party and the validity of the creation of the security interest. (j) An opinion of the general counsel of each Seller, the Guarantor and the Transferor, addressed to the Administrative Agent, the Initial Purchasers, the PARCO APA Banks and each Funding Agent, in form and substance reasonably acceptable to the Administrative Agent and each Funding Agent, regarding certain corporate matters. (k) An executed copy of this Agreement and each other Transaction Document to be executed by the Transferor, the Guarantor, the Collection Agent and each Seller. (l) An executed copy of the Liberty Liquidity Asset Purchase Agreement. (m) Confirmation from the Redwood Funding Agent that the transaction contemplated by the Redwood Liquidity Documents has been consummated. (n) Evidence that the Structuring Fee has been paid to Chase Securities Inc. (o) (i) A Weekly Report dated as of the most recent Weekly Report Date immediately preceding the Closing Date and (ii) a Settlement Report for the month of November 1999. 29 (p) The executed Fee Letters and payment of all fees required to be paid on the Closing Date, and reimbursement of the Administrative Agent, the Funding Agents, the Initial Purchasers and the PARCO APA Banks for all costs and expenses of the closing of the transaction (including legal fees and costs) subject to the maximum amounts set forth in the Engagement Letter between the Transferor and Chase Securities Inc. referred to in the Fee Letters. (q) The following financial information of the Parent and its Subsidiaries: (i) audited financial statements prepared in accordance with GAAP on a consolidated and consolidating basis (consolidating statements need not be audited by such accountants) for the period December 28, 1997 through December 26, 1998 and (ii) consolidated and consolidating unaudited financial statements for the fiscal quarter ended September 25, 1999. (r) Evidence of the establishment of the Collection Accounts. (s) A letter from S&P confirming its rating of each Initial Purchasers' Commercial Paper or that such rating will not be withdrawn or downgraded after giving effect to this Agreement and the transactions contemplated hereby. (t) A letter from Moody's confirming its rating of each Initial Purchasers' Commercial Paper or that such rating will not be withdrawn or downgraded after giving effect to this Agreement and the transactions contemplated hereby. (u) A Certificate of a Responsible Officer of each Seller and a Responsible Officer of the Transferor certifying that the representations and warranties of each Seller set forth in Section 4.1 of the Receivables Purchase Agreement and the Transferor set forth in Section 3.1 hereof are true and correct in all material respects as of the Closing Date. (v) After giving effect to the transactions contemplated hereby, the Transferor shall have outstanding no indebtedness or preferred stock other than (i) financing under the Facility and (ii) other indebtedness as agreed upon by each Funding Agent and PARCO APA Banks. (w) Each Funding Agent has performed a review of the Credit and Collection Policy. (x) An executed copy of the Guaranty, substantially in the form of Exhibit N, executed and delivered by the Guarantor to the Administrative Agent. (y) The Required Currency Hedge shall be in place for the required Hedge Notional Amount. SECTION 4.2 Conditions to Each Transfer. The right of the Transferor to sell Transferred Interests pursuant to Section 2.2 and the obligation, if any, of the Initial Purchasers and PARCO APA Banks to purchase such Transferred Interests is subject to the conditions that on the applicable Transfer Date: 30 (a) No Termination Event or Potential Termination Event shall have occurred and then be continuing; (b) The Termination Date shall not have occurred or, in the case of Liberty, no Liberty Termination Event shall have occurred, or, in the case of Redwood, no Redwood Termination Date shall have occurred; (c) The representations and warranties set forth in Section 3.1 hereof and Section 4.1 of the Receivables Purchase Agreement shall be true and correct on and as of such date (except to the extent such representations and warranties relate solely to an earlier date, and then as of such earlier date); (d) Executed copies of proper financing statements (Form UCC-1), dated a date reasonably near to the Closing Date, naming the Transferor as the debtor and the Administrative Agent (for the benefit of the Initial Purchasers, the Funding Agents and the PARCO APA Banks) as a secured party, and other similar instruments or documents as may be necessary or, in the reasonable opinion of the Administrative Agent, desirable under the Relevant UCC of all appropriate jurisdictions or any comparable Law to perfect the Administrative Agent's (for the benefit of the Initial Purchasers, the Funding Agents and the PARCO APA Banks) security interest in all Receivables, Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto; (e) Executed copies of proper financing statements (Form UCC-1), dated a date reasonably near to the Closing Date, naming each Seller as debtor/seller, the Transferor as secured party/purchaser, and the Administrative Agent (for the benefit of the Initial Purchasers, the Funding Agents and the PARCO APA Banks), as assignee of the secured party/purchaser, and other similar instruments or documents as may be necessary or, in the reasonable opinion of the Administrative Agent, desirable under the Relevant UCC of all appropriate jurisdictions or any comparable Law to perfect the Transferor's ownership or security interest in all Receivables, Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto; (f) Executed copies of proper financing statements (Form UCC-3), if any, necessary to terminate all security interests and other rights of any person in Receivables previously granted by the Transferor; (g) Executed copies of proper financing statements (Form UCC-3) necessary to terminate all security interests and other rights of any person in Receivables previously granted by any Seller; (h) Certified copies of request for information or copies (Form UCC- 11) (or a similar search report certified by parties reasonably acceptable to the Administrative Agent), dated a date reasonably near the Closing Date, listing all effective financing statements which name the Transferor and any Seller (under their respective present names and any previous names) as seller or debtor and which are filed in jurisdictions in which the filings were made pursuant to items (d) and (e) above together with copies of such financing statements (none of which shall cover any Receivables or Contracts unless released in accordance with paragraph (f) or (g) above); 31 (i) A Weekly Report shall have been delivered to the Administrative Agent; (j) The Required Currency Hedge shall be in place for the required Hedge Notional Amount; and (k) The Administrative Agent and each Funding Agent shall have received such other approvals, opinions or documents as it may reasonably request. ARTICLE V COVENANTS SECTION 5.1 Affirmative Covenants of Transferor. At all times from the date hereof to the later to occur of (i) the Termination Date and (ii) the date on which the Aggregate Net Investment has been reduced to zero, all accrued PARCO Discount, Yield, Servicing Fees and all other Aggregate Unpaids shall have been paid in full, in cash, unless the Administrative Agent and each Funding Agent shall otherwise consent in writing (which consent shall be obtained by the Administrative Agent): (a) Financial Reporting. The Transferor will, and will cause the Guarantor and each of the Guarantor's Subsidiaries to, maintain, for itself and each of its respective Subsidiaries, a system of accounting established and administered in accordance with GAAP, and furnish to the Administrative Agent (and with respect to clause (vi) below, each Rating Agency): (i) Annual Reporting. Within ninety (90) days after the close of the Transferor's and the Guarantor's fiscal years, (x) audited financial statements of the Parent, prepared in accordance with GAAP on a consolidated and consolidating basis (consolidating statements need not be audited by such accountants) for the Parent and its Subsidiaries, including balance sheets as of the end of such period, related statements of operations, shareholder's equity and cash flows, accompanied by an unqualified audit report certified by independent certified public accountants, reasonably acceptable to the Administrative Agent, prepared in accordance with GAAP and any management letter prepared by said accountants and by a certificate of said accountants that, in the course of the foregoing, nothing has come to their attention to cause such accountants to believe that any Termination Event or Potential Termination Event has occurred, or if, in the opinion of such accountants, any Termination Event or Potential Termination Event shall exist, stating the nature and status thereof and (y) unaudited financial statements for the Transferor certified by its senior financial officer. (ii) Quarterly Reporting. Within forty-five (45) days after the close of the first three (3) quarterly periods of each of the Transferor's and the Guarantor's fiscal years, for (x) the Transferor and (y) for the Parent and its Subsidiaries, in each case, consolidated and consolidating unaudited balance sheets as at the close of each such period and consolidated and consolidating related statements of operations, shareholder's equity and cash flows for the period from the beginning of such fiscal year to the end of such quarter, all certified by its senior financial officer. 32 (iii) Compliance Certificate. Together with the financial statements required hereunder, a compliance certificate signed by the Transferor's or the Guarantor's, as applicable, chief financial officer stating that (x) the attached financial statements have been prepared in accordance with GAAP and accurately reflect the financial condition of the Transferor or the Parent, as applicable, and (y) to the best of such Person's knowledge, no Termination Event or Potential Termination Event exists, or if any Termination Event or Potential Termination Event exists, stating the nature and status thereof (iv) Shareholders Statements and Reports. Promptly upon the furnishing thereof to the shareholders of the Transferor or the Parent copies of all financial statements, reports and proxy statements so furnished. (v) S.E.C. Filings. Promptly upon the filing thereof, the Guarantor shall notify the Administrative Agent of all registration statements and annual, quarterly, monthly or other regular reports which the Parent or any Affiliate files with the Securities and Exchange Commission. (vi) Notice of Termination Events or Potential Termination Events. Immediately, and in any event within one (1) Business Day after the Transferor obtains knowledge of the occurrence of each Termination Event or each Potential Termination Event, a statement of the chief financial officer or chief accounting officer of the Transferor setting forth details of such Termination Event or Potential Termination Event and the action which the Transferor proposes to take with respect thereto. (vii) Change in Credit and Collection Policy and Debt Ratings. Within ten (10) Business Days after the date any material change in or amendment to the Credit and Collection Policy is made, a copy of the Credit and Collection Policy then in effect indicating such change or amendment. Within five (5) days after the date of any change in the Transferor's or the Guarantor's public or private debt ratings, if any, a written certification of the Transferor's or the Guarantor's public and private debt ratings after giving effect to any such change. (viii) Credit and Collection Policy. Within ninety (90) days after the close of each of the Guarantor's and the Transferor's fiscal years, a complete copy of the Credit and Collection Policy then in effect. (ix) ERISA. Promptly after the filing or receiving thereof, copies of all reports and notices with respect to any Reportable Event (as defined in Article IV of ERISA) which either (i) the Transferor, any Seller, the Guarantor or any ERISA Affiliate of the Transferor, the Guarantor or any Seller files under ERISA with the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor or (ii) the Transferor, the Guarantor, any Seller or any ERISA Affiliates of the Transferor, the Guarantor or any Seller receives from the Internal Revenue Service, the Pension Benefit Guaranty Corporation or the U.S. Department of Labor. The Transferor shall give the Administrative Agent prompt written notice of any event that could result in the 33 imposition of a Lien under Section 412 of the Internal Revenue Code or Section 302 or 4068 of ERISA. (x) Other Information. Such other information (including non-financial information) as the Administrative Agent may from time to time reasonably request with respect to any Seller, the Transferor, the Guarantor or any Subsidiary of any of the foregoing. (b) Conduct of Business. The Transferor will carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted and do all things necessary to remain duly incorporated, validly existing and in good standing as a domestic corporation in its jurisdiction of incorporation and to maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted to the extent that the failure to maintain such requisite authority would have a Material Adverse Effect. (c) Compliance with Laws. The Transferor will, and will cause each Seller and each of the Transferor's and the Seller's Affiliates to, comply with all Laws to which it or its respective properties may be subject, except where the failure to so comply would not have a Material Adverse Effect. The Transfer of the Receivables hereunder, the application of the proceeds thereof and consummation of the transactions contemplated by this Agreement and the other Transaction Documents will not violate any provision of any statute or any rule, regulation or order issued by the Securities and Exchange Commission. (d) Furnishing of Information and Inspection of Records. The Transferor will, and will cause the Guarantor and each Seller to, furnish to the Administrative Agent from time to time such information with respect to the Receivables as the Administrative Agent may reasonably request, including, without limitation, listings identifying the Outstanding Balance for each Receivable, together with an aging of Receivables. The Transferor will, and will cause the Guarantor and each Seller to, at any time and from time to time during regular business hours and upon reasonable notice permit the Administrative Agent, or its agents or representatives, (i) to examine and make copies of and abstracts from all Records and (ii) to visit the offices and properties of the Transferor, the Guarantor or any Seller, as applicable, for the purpose of examining such Records, and to discuss matters relating to Receivables or the Transferor's, the Guarantor's or any Seller's performance hereunder and under the other Transaction Documents to which such Person is a party with any of the officers, directors, employees or independent public accountants of the Transferor, the Guarantor or any Seller, as applicable, having knowledge of such matters. Upon a Potential Termination Event or Termination Event, each of the Initial Purchasers, Funding Agents, PARCO APA Banks and Administrative Agent may have without notice, immediate access to all Records and the offices and properties of the Transferor. (e) Keeping of Records and Books of Account. The Transferor will, and will cause the Guarantor and each Seller to, maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Receivables in the event of the destruction of the originals thereof), and keep and maintain, all documents, books, records and other information reasonably necessary or advisable for the collection of all Receivables (including, without limitation, records adequate to permit the daily identification of 34 each new Receivable and all Collections of and adjustments to each existing Receivable). The Transferor will, and will cause the Guarantor and each Seller to, give the Administrative Agent prompt notice of any material change in the administrative and operating procedures of the Transferor, the Guarantor or such Seller, as applicable, referred to in the previous sentence. (f) Communication with Accountants. The Transferor authorizes the Initial Purchasers, the PARCO APA Banks, the Collection Agent, the Administrative Agent and each Funding Agent to communicate directly with its independent certified public accountants, and authorizes and shall instruct those accountants and advisors to disclose and make available to the Initial Purchasers, the PARCO APA Banks, the Collection Agent, the Administrative Agent and each Funding Agent any and all financial statements and other supporting financial documents, schedules and information relating to the Transferor (including copies of any issued management letters) with respect to the business, financial condition and other affairs of the Transferor. The Transferor agrees to render the Initial Purchasers, the PARCO APA Banks, the Collection Agent, the Administrative Agent and each Funding Agent at such applicable Person's own cost and expense, such clerical and other assistance as may be reasonably requested with regard to the foregoing. If any Potential Termination Event or Termination Event shall have occurred and be continuing, the Transferor shall, promptly upon request therefor, assist the Administrative Agent in delivering to the Initial Purchasers, the PARCO APA Banks and the Funding Agents Records reflecting activity through the close of business on the Business Day immediately preceding the date of such request. (g) Performance and Compliance with Receivables and Contracts. The Transferor, at its expense, will, and will cause each Seller to, timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by the Transferor or such Seller under the Contracts related to the Receivables. (h) Credit and Collection Policy. The Transferor will, and will cause each Seller to, comply in all material respects with the Credit and Collection Policy in regard to each Receivable and the related Contract. (i) Collections. The Transferor shall, and shall cause each Seller to, instruct all Obligors to cause all Collections to be deposited directly to a Lock-Box Account. (j) Collections Received. The Transferor shall, and shall cause each Seller to, hold in trust, and deposit immediately (but in any event no later than one Business Day following its receipt thereof) to a Lock-Box Account all Collections received from time to time by the Transferor or any Seller, as the case may be. (k) Sale Treatment. Subject to the provisions of Section 10.16, the Transferor will not, and will not permit any Seller to, account for (including for accounting purposes), or otherwise treat, the transactions contemplated by the Receivables Purchase Agreement in any manner other than as a sale of Receivables by a Seller to the Transferor. In addition, the Transferor shall, and shall cause each Seller to, disclose (in a footnote or otherwise) in all of its respective financial statements (including any such financial statements consolidated with any other Persons' financial statements) the existence and nature of the transaction contemplated hereby and by the Receivables Purchase Agreement and the interest of the Transferor (in the case 35 of each Seller's financial statements), the Initial Purchasers and the PARCO APA Banks in the Receivables and Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto. (l) Enforcement of Receivables Purchase Agreement. The Transferor shall use its best efforts to enforce all rights held by it under the Receivables Purchase Agreement and shall not waive any breach of any covenant contained in Section 5.1 thereunder without the prior written consent of each Funding Agent as obtained by the Administrative Agent. (m) Separate Existence. The Transferor shall at all times: (i) maintain its own deposit account or accounts, separate from those of any Affiliate, with commercial banking institutions and ensure that the funds of the Transferor will not be diverted to any other Person or for other than corporate uses of the Transferor, nor will such funds be commingled with the funds of any Seller or any Subsidiary or Affiliate of a Seller other than as a result of commingling of payments by an Obligor which payments shall be segregated within the time period provided in Section 5.2(e); (ii) to the extent that it shares the same officers or other employees as any of its stockholders or Affiliates, the salaries of and the expenses related to providing benefits to such officers and other employees shall be fairly allocated among such entities, and each such entity shall bear its fair share of the salary and benefit costs associated with all such common officers and employees; (iii) to the extent that it jointly contracts with any of its stockholders or Affiliates to do business with vendors or service providers or to share overhead expenses, the costs incurred in so doing shall be allocated fairly among such entities, and each such entity shall bear its fair share of such costs. To the extent that the Transferor contracts or does business with venders or service providers where the goods and services provided are partially for the benefit of any other Person, the costs incurred in so doing shall be fairly allocated to or among such entities for whose benefit the goods or services are provided, and each such entity shall bear its fair share of such costs; (iv) enter into all material transactions between the Transferor and any of its Affiliates, whether currently existing or hereafter entered into, only on an arm's length basis, it being understood and agreed that the transactions contemplated in the Transaction Documents meet the requirements of this clause (iv); (v) maintain office space separate from the office space of each Seller and their Affiliates and, to the extent that the Transferor and any of its stockholders or Affiliates have offices in the same location, there shall be a fair and appropriate allocation of overhead costs among them, and each such entity shall bear its fair share of such expenses; (vi) issue separate financial statements prepared not less frequently than quarterly and prepared in accordance with GAAP; 36 (vii) conduct its affairs strictly in accordance with its certificate of incorporation and observe all necessary, appropriate and customary corporate formalities, including, but not limited to, holding all regular and special stockholders' and directors' meetings appropriate to authorize all corporate action, keeping separate and accurate minutes of its meetings, passing all resolutions or consents necessary to authorize actions taken or to be taken, and maintaining accurate and separate books, records and accounts, including, but not limited to, payroll and intercompany transaction accounts; (viii) not assume or guarantee any of the liabilities of any Seller or any Affiliate thereof; (ix) take, or refrain from taking, as the case may be, all other actions that are necessary to be taken or not to be taken in order to comply with this Section 5.1(m); and (x) will comply with all assumptions made in the Stroock & Stroock & Lavan "true sale" opinion dated as of December 27, 1999. (n) Required Currency Hedges. (i) On the Closing Date and on each Transfer Date thereafter, the Transferor shall have the Required Currency Hedge in place for the Required Hedge Notional Amount. The Transferor agrees that at any time that it enters into any Required Currency Hedge, it shall have funds available to make payment of fees or other amounts due in connection with the purchase of such Required Currency Hedge at the time that such payments are due and payable thereunder. (i) The Transferor agrees that at any time that it enters into any Required Currency Hedge, it shall execute and deliver to the Administrative Agent, for the benefit of the Initial Purchasers, PARCO APA Banks and Funding Agents, an assignment of all amounts payable to the Transferor under such Required Currency Hedge substantially in the form of Exhibit O (each, a "Required Currency Hedge Assignment"). (ii) If any time the commercial paper or short term deposit ratings from any Rating Agency assigned to a Counterparty is such that the Counterparty is no longer an Eligible Counterparty, the Transferor shall (x) to the extent permitted under the Required Currency Hedge to which such Counterparty is a party, require such Counterparty to secure its obligations under such Required Currency Hedge or (y) replace the Counterparty with an Eligible Counterparty within the earlier of (A) 30 days or (B) within 5 days in the event that the Counterparty's commercial paper rating or short-term deposit rating is withdrawn or downgraded below A-2 or P-2. (o) Minimum Net Worth. The Transferor shall at all times have a net worth (as defined in accordance with GAAP) of at least $40,000,000. SECTION 5.2 Negative Covenants of the Transferor. During the term of this Agreement, unless each Funding Agent shall otherwise consent in writing, which consent shall be obtained by the Administrative Agent: (a) No Sales, Liens, Etc. Except as otherwise provided herein and in the Receivables Purchase Agreement, the Transferor will not, and will not permit any Seller to, sell, 37 assign (by operation of law or otherwise) or otherwise dispose of, or create any Adverse Claim upon (or file any financing statement) or with respect to (x) any Transferor Collateral, (y) any inventory or goods, the sale of which may give rise to a Collection, or (z) any Lock-Box Account to which any Collections of any Receivable are sent, or assign any right to receive income in respect thereof (b) No Extension or Amendment of Receivables. Except as otherwise permitted in Section 6.2 hereof, the Transferor will not, and will not permit any Seller to, extend, amend or otherwise modify the terms of any Receivable, or amend, modify or waive any term or condition of any Contract related thereto except in accordance with the Credit and Collection Policy. (c) No Change in Business or the Credit and Collection Policy. The Transferor will not, and will not permit any Seller to, make any change in the character of its business or in the Credit and Collection Policy, which change would, in either case, impair the collectibility of any Receivable or otherwise have a Material Adverse Effect. (d) No Mergers, Etc. The Transferor will not without the prior written consent of each Funding Agent (which consent shall be obtained by the Administrative Agent), and except as otherwise permitted pursuant to the Receivables Purchase Agreement, will not permit any Seller to, (i) consolidate or merge with or into any other Person, or (ii) sell, lease or transfer all or substantially all of its assets to any other Person, provided, that a Seller may merge with or into another Seller or with another Person if (A)(1) such Seller is the corporation surviving such consolidation or merger or (2) the Person into or with whom the Seller is merged or consolidated is an Affiliate and the surviving corporation assumes in writing all duties and liabilities of the Seller under the Transaction Documents, and (B) immediately after and giving effect to such consolidation or merger, no Termination Event or Potential Termination Event shall have occurred and be continuing. (e) Change in Payment Instructions to Obligors, Deposits to Lock-Box Accounts. The Transferor will not, and will not permit any Seller to, add or terminate any bank as a Lock-Box Bank or any account as a Lock-Box Account to or from those listed in Exhibit B hereto or make any change in its instructions to the Obligors regarding payments to be made to any Lock-Box Account, unless (i) such instructions are to deposit such payments to another existing Lock-Box Account or (ii) the Administrative Agent and each Funding Agent shall have received written notice of such addition, termination or change at least thirty (30) days prior thereto and the Administrative Agent shall have received a Lock-Box Agreement executed by each new Lock-Box Bank or an existing Lock-Box Bank with respect to each new Lock-Box Account, as applicable. The Transferor will use reasonable commercial efforts to not, and will use reasonable commercial efforts to not permit, any Seller to deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Lock-Box Account cash or cash proceeds other than Collections of Receivables. However, in the event any Seller deposits or otherwise credits, or causes or permits to be so deposited or credited, to any Lock-Box Account, cash or cash proceeds other than Collections of Receivables, such Seller shall segregate or cause to be segregated any such cash or cash proceeds from Collections within 5 (five) days of deposit or credit to any Lock-Box Account. 38 (f) Change of Name, Etc. The Transferor will not, and will not permit a Seller to, change its name, identity or structure or the location of its chief executive office or the location at which any Records or Transferor Collateral is located, unless at least ten (10) days prior to the effective date of any such change the Transferor or Seller, as applicable, delivers to the Administrative and each Funding Agent and the Collection Agent (i) such documents, instruments or agreements, executed by the Transferor or Seller, as applicable, as are necessary to reflect such change and to continue the perfection of the Administrative Agent's (on behalf of the Initial Purchasers and the PARCO APA Banks) ownership interests or security interests in the Receivables and Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto and (ii) new or revised Lock-Box Agreements executed by the Lock-Box Banks which reflect such change and enable the Administrative Agent to continue to exercise its rights contained in Section 2.8 hereof. (g) Amendment to Receivables Purchase Agreement. The Transferor will not, and will not permit any Seller to, amend, modify, or supplement the Receivables Purchase Agreement, except with the prior written consent of the Administrative Agent and each Funding Agent; nor shall the Transferor take, or permit any Seller to take, any other action under the Receivables Purchase Agreement that shall have a material adverse effect on the Administrative Agent, a Funding Agent, the Initial Purchasers or any PARCO APA Bank or which is inconsistent with the terms of this Agreement. (h) Other Debt. Except as provided for herein, the Transferor will not create, incur, assume or suffer to exist any Indebtedness whether current or funded, other than (i) Indebtedness of the Transferor representing fees, expenses and indemnities arising hereunder or under the Receivables Purchase Agreement for the Purchase Price of the Receivables under the Receivables Purchase Agreement, and (ii) other Indebtedness incurred in the ordinary course of its business in an amount not to exceed $9,850 at any one time outstanding. (i) ERISA Matters. (i) To the extent applicable, the Transferor will not, and will not permit any Seller to, (A) engage or permit any of its respective ERISA Affiliates to engage in any prohibited transaction (as defined in Section 4975 of the Code and Section 406 of ERISA) for which an exemption is not available or has not previously been obtained from the U.S. Department of Labor; (B) fail to make any payments to any Multiemployer Plan that the Transferor, any Seller or any ERISA Affiliate of the Transferor or any Seller is required to make under the agreement relating to such Multiemployer Plan or any law pertaining thereto; (C) terminate any Benefit Plan so as to result in any liability; or (D) permit to exist any occurrence of any reportable event described in Title IV of ERISA, if such prohibited transactions, failures to make payment, terminations and reportable events described in clauses (A), (B), (C) and (D) above would in the aggregate have a Material Adverse Effect. (ii) To the extent applicable, the Transferer will not, and will not permit any Seller to exist any accumulated funding deficiency (as defined in Section 302(a) of ERISA and Section 412(a) of the Code) or funding deficiency with respect to any Benefit Plan other than a Multiemployer Plan. 39 (iii) To the extent applicable, the Transferor will not, and will not permit any Seller to cause or permit any of its ERISA Affiliates to cause or permit the occurrence of an ERISA Event with respect to Title IV Plans of the Transferor, the Sellers or its ERISA Affiliates that have an aggregate Unfunded Pension Liability equal to or greater than $10,000,000. (j) Payment to Sellers. With respect to any Receivable sold by a Seller to the Transferor, the Transferor shall, and shall cause each Seller to, effect such sale under, and pursuant to the terms of, the Receivables Purchase Agreement, including, without limitation, the payment by the Transferor either in cash to or by a capital contribution from such Seller of an amount equal to the Purchase Price for such Receivable as required by the terms of the Receivables Purchase Agreement. SECTION 5.3 Covenants of the Collection Agent and the Guarantor. At all times from the date hereof to the date on which the Aggregate Unpaids shall be equal to zero, unless the Administrative Agent and each Funding Agent shall otherwise consent in writing (which consent shall be obtained by the Administrative Agent): (a) Credit and Collection Policy. The Collection Agent and the Guarantor will comply in all material respects with the Credit and Collection Policy in regard to each Receivable and the related Contract. (b) Collections Received. The Collection Agent and the Guarantor shall hold in trust, and deposit as soon as reasonably practicable (but in any event no later than one Business Day following its receipt thereof) to a Lock-Box Account all Collections received from time to time by the Collection Agent or any Seller, respectively. (c) Notice of Termination Events, Potential Termination Events or Collection Agent Defaults. Immediately, and in any event within one (1) Business Day after the Collection Agent or the Guarantor obtains knowledge of the occurrence of each Termination Event, Potential Termination Event or Collection Agent Default, the Collection Agent or the Guarantor, respectively, will furnish to the Administrative Agent, each Funding Agent and each Rating Agency a statement of a Responsible Officer of the Collection Agent or the Guarantor, respectively, setting forth details of such Termination Event, Potential Termination Event or Collection Agent Default, and the action which the Collection Agent, the Guarantor, the Transferor or a Seller proposes to take with respect thereto. (d) Conduct of Business. The Collection Agent and the Guarantor will do all things necessary to remain duly incorporated, validly existing and in good standing as a domestic corporation in its jurisdiction of incorporation and maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted to the extent that the failure to maintain such would have a Material Adverse Effect. (e) Compliance with Laws. The Collection Agent and the Guarantor will comply in all respects with all Laws with respect to the Receivables to the extent that any non-compliance would be a Material Adverse Effect. 40 (f) Further Information. The Collection Agent and the Guarantor shall furnish or cause to be furnished to the Administrative Agent and, after a Termination Event or a Potential Termination Event, any Funding Agent such other information relating to the Receivables and readily available public information regarding the financial condition of the Collection Agent or the Guarantor, as applicable, as soon as reasonably practicable, and in such form and detail, as the Administrative Agent may reasonably request and, after a Termination Event or a Potential Termination Event, as any Funding Agent may reasonably request. SECTION 5.4 Negative Covenants of the Collection Agent and the Guarantor. At all times from the date hereof to the date on which the Aggregate Unpaids shall be equal to zero, unless the Administrative Agent and each Funding Agent shall otherwise consent in writing which consent shall be obtained by the Administrative Agent: (a) No Sales, Liens, Etc. Except as otherwise provided herein and in the Receivables Purchase Agreement, neither the Collection Agent nor the Guarantor will sell, assign (by operation of law or otherwise) or otherwise dispose of, or create any Adverse Claim upon (or file any financing statement) or with respect to (w) any of the Receivables, Related Security, the Required Currency Hedge, Collections or Proceeds with respect thereto, (x) any inventory or goods, the sale of which may give rise to a Collection, (y) the Transferor Collateral or (z) any Lock-Box Account to which any Collections of any Receivable are sent, or assign any right to receive income in respect thereof (b) Consolidations, Mergers and Sales of Assets. Neither the Collection Agent nor the Guarantor shall without the prior written consent of each Funding Agent, which consent shall be obtained by the Administrative Agent (i) consolidate or merge with or into any other Person or (ii) sell, lease or otherwise transfer all or substantially all of its assets to any other Person; provided that the Collection Agent or the Guarantor, as applicable, may consolidate or merge with another Person if (A)(1) the Collection Agent or the Guarantor, as applicable, is the corporation surviving such consolidation or merger or (2) the Person into or with whom the Collection Agent or the Guarantor, as applicable, is merged or consolidated is an Affiliate and the surviving corporation assumes in writing all duties and liabilities of the Collection Agent or the Guarantor, as applicable, hereunder and (B) immediately after and giving effect to such consolidation or merger, no Termination Event or Potential Termination Event shall have occurred and be continuing. (c) Lock-Box Accounts. Except as permitted pursuant to Sections 2.5, 2.6, 2.12 and 5.2(e) of this Agreement or as otherwise permitted under the Transaction Documents, neither the Collection Agent nor the Guarantor shall make, or cause or permit any other Person to make any transfer of funds on deposit in a Lock-Box Account. (d) Modifications of Receivables or Contracts. The Collection Agent shall not extend, amend, forgive, discharge, compromise, waive, cancel or otherwise modify the terms of any Receivable or amend, modify or waive any term or condition of any Contract related thereto; provided, that the Collection Agent may take such actions as are expressly permitted by the terms of any Transaction Document or the Credit and Collection Policy. 41 ARTICLE VI ADMINISTRATION AND COLLECTIONS SECTION 6.1 Appointment of Collection Agent. The servicing, administering and collection of the Receivables shall be conducted by such Person (the "Collection Agent") so designated from time to time in accordance with this Section 6.1. Until the Administrative Agent gives notice to C&A of the designation of a new Collection Agent pursuant to this Section 6.1, C&A is hereby designated as, and hereby agrees to perform the duties and obligations of, the Collection Agent pursuant to the terms hereof. The Collection Agent may not delegate any of its rights, duties or obligations hereunder, or designate a substitute Collection Agent, without the prior written consent of the Administrative Agent; provided that C&A shall be permitted to delegate its duties hereunder to any of its Affiliates or their agents and may use sub Collection Agents, but such delegation shall not relieve C&A of its duties and obligations hereunder. The Administrative Agent may, and upon the direction of the Required Participants the Administrative Agent shall, after the occurrence of a Collection Agent Default or any other Termination Event, designate as Collection Agent any Person (including itself) to succeed C&A or any successor Collection Agent, on the condition in each case that any such Person so designated shall agree to perform the duties and obligations of the Collection Agent pursuant to the terms hereof. SECTION 6.2 Duties of Collection Agent. (a) The Collection Agent shall take or cause to be taken all such action as may be reasonably necessary or advisable to collect each Receivable from time to time, all in accordance with applicable Laws, with reasonable care and diligence, and in accordance with the Credit and Collection Policy. Each of the Transferor, the Administrative Agent, the Initial Purchasers, each Funding Agent and the PARCO APA Banks, hereby appoints as its agent the Collection Agent, from time to time designated pursuant to Section 6.1 hereof, to enforce its respective rights and interests in and under the Receivables and Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto. To the extent permitted by applicable Law, each of the Transferor, C&A (to the extent not then acting as Collection Agent hereunder) and each other Seller hereby grants to any Collection Agent appointed hereunder an irrevocable power of attorney to take in the Transferor's and/or each Seller's name and on behalf of the Transferor or a Seller any and all steps necessary or desirable, in the reasonable determination of the Collection Agent, to collect all amounts due under any and all Receivables, including, without limitation, endorsing the Transferor's and/or a Seller's name on checks and other instruments representing Collections and enforcing such Receivables and the related Contracts. The Collection Agent shall set aside for the account of the Transferor and the Initial Purchasers their respective allocable shares of the Collections of Receivables in accordance with Sections 2.5 and 2.6 hereof. The Collection Agent shall segregate and deposit to the Administrative Agent's account the Initial Purchasers' allocable share of Collections of Receivables when required pursuant to Article II hereof. The Collection Agent agrees that prior to making any material change in the Credit and Collection Policy in effect on the Closing Date, it shall give at least ten (10) Business Days' prior written notice to the Administrative Agent and the Transferor of such changes; provided, however, that in the case of any material change in its Credit and Collection Policy made pursuant to any Requirement of Law as to which it is unable 42 to give ten (10) Business Days' prior written notice, then the Collection Agent shall give written notice to the Administrative Agent and the Transferor of such changes as soon as reasonably practicable prior to the implementation of such changes. In the event that any such changes (except changes that are necessary under any Requirement of Law) could reasonably be expected to materially and adversely affect the rights of the Initial Purchasers or the PARCO APA Banks, then such changes shall not become effective without the prior written consent of each Funding Agent, which consent shall be obtained by the Administrative Agent. The Transferor shall deliver to the Collection Agent and the Collection Agent shall hold in trust for the Transferor, the Administrative Agent, the Initial Purchasers, each Funding Agent and the PARCO APA Banks, in accordance with their respective interests, all Records which evidence or relate to Receivables, Related Security, the Required Currency Hedge or Collections. The Collection Agent, if other than the Transferor or C&A or an Affiliate of the Transferor or C&A, shall as soon as practicable upon demand, deliver to C&A all Records in its possession which evidence or relate to indebtedness of an Obligor which is not a Receivable. The Collection Agent shall, as soon as practicable following receipt thereof, turn over to C&A any collections of any indebtedness of any Person which is not on account of a Receivable. Notwithstanding anything to the contrary contained herein, following the occurrence of a Termination Event and during the continuation of a Potential Termination Event, the Administrative Agent shall have the absolute and unlimited right to direct the Collection Agent (whether the Collection Agent is C&A or any other Person) to commence or settle any legal action to enforce collection of any Receivable or to foreclose upon or repossess any Related Security. The Collection Agent shall not make the Administrative Agent, a Funding Agent, an Initial Purchaser or any of the PARCO APA Banks a party to any litigation without the prior written consent of such Person. (b) If the Collection Agent is not the Transferor, C&A or an Affiliate of the Transferor or C&A, the Collection Agent, by giving three (3) Business Days' prior written notice to the Administrative Agent, may revise the Servicing Fee; provided that such revised Servicing Fee shall be a reasonable fee agreed upon by the Collection Agent and the Administrative Agent on an arms-length basis reflecting rates and terms prevailing at such time. (c) On or before ninety (90) days after the end of each fiscal year of the Collection Agent, beginning with the fiscal year ending December 30, 2000, the Collection Agent shall cause a firm of independent public accountants acceptable to the Administrative Agent at the expense of the Transferor (who may also render other services to the Collection Agent, the Transferor, C&A or any Affiliates of any of the foregoing) to furnish a report to the Administrative Agent performing such agreed upon procedures with respect to the Collection Agent's servicing procedures and internal control system as may be reasonably requested by the Administrative Agent. The scope of the review shall be as set forth in Exhibit M hereto. The Collection Agent shall cause such firm of nationally recognized independent certified public accountants to furnish such report to the Administrative Agent using generally accepted auditing standards to the effect that they have compared the mathematical calculations of each amount set forth in five Weekly Reports and three Settlement Statements in a sample randomly chosen during such annual period and delivered by the Collection Agent pursuant to Section 2.11 during the period covered by such report with the Collection Agent's computer reports that were the source of such amounts and that on the basis of such comparison, such 43 accountants are of the opinion that such amounts are in agreement, except for such exceptions as they believe to be immaterial and such other exceptions as shall be set forth in such report. (d) Notwithstanding anything to the contrary contained in this Article VI, the Collection Agent, if not the Transferor, C&A or any Affiliate of the Transferor or C&A, shall have no obligation to collect, enforce or take any other action described in this Article VI with respect to any indebtedness that is not included in the Transferred Interest other than to deliver to the Transferor the collections and documents with respect to any such indebtedness as described in Section 6.2(a) hereof. SECTION 6.3 Rights After Designation of New Collection Agent. At any time following the designation of a new Collection Agent (other than C&A) pursuant to Section 6.1 hereof: (i) The Administrative Agent may, at its option, or shall, at the direction of the Required Participants, direct that payment of all amounts payable under any Receivable be made directly to the Administrative Agent or its designee for the benefit of the Funding Agents, the Initial Purchasers and the PARCO APA Banks. (ii) The Transferor shall, at the Administrative Agent's request and at the Transferor's expense, give notice of the Initial Purchasers', the Transferor's and/or the PARCO APA Banks' ownership of Receivables to each Obligor and direct that payments be made directly to the Administrative Agent or its designee. (iii) The Transferor shall, at the Administrative Agent's request, (A) assemble all of the Records, and shall make the same available to the Administrative Agent or its designee at a place selected by the Administrative Agent or its designee, and (B) segregate all cash, checks and other instruments received by it from time to time constituting Collections of Receivables in a manner acceptable to the Administrative Agent and shall, promptly upon receipt, remit all such cash, checks and instruments, duly endorsed or with duly executed instruments of transfer, to the Administrative Agent or its designee. (iv) The Transferor and each Seller hereby authorize the Administrative Agent to take any and all steps in the Transferor's or any Seller's name and on behalf of the Transferor and any Seller necessary or desirable, in the reasonable determination of the Administrative Agent, to collect all amounts due under any and all Receivables, including, without limitation, endorsing the Transferor's or any Seller's name on checks and other instruments representing Collections and enforcing such Receivables and the related Contracts. SECTION 6.4 Collection Agent Default. The occurrence of any one or more of the following events shall constitute a Collection Agent default (each, a "Collection Agent Default"): (a) (i) the Collection Agent or, to the extent that the Transferor, C&A or any Affiliate of the Transferor or C&A is then acting as Collection Agent, the Transferor, C&A or such Affiliate, as applicable, shall fail to observe or perform any term, covenant or agreement 44 hereunder (other than as referred to in clause (ii) or clause (iii) of this Section 6.4(a)) or under any of the other Transaction Documents to which such Person is a party or by which such Person is bound, and such failure shall remain unremedied for ten (10) days following the earlier to occur of receipt of notice thereof by the Collection Agent from the Administrative Agent or a Funding Agent or discovery thereof by the Collection Agent, or (ii) the Collection Agent or, to the extent that the Transferor, C&A or any Affiliate of the Transferor or C&A is then acting as Collection Agent, the Transferor, C&A or such Affiliate, as applicable, shall fail to make any payment or deposit required to be made by it hereunder when due or the Collection Agent shall fail to observe or perform any term, covenant or agreement on the Collection Agent's part to be performed under Section 2.8(b) hereof, or (iii) the Collection Agent fails to deliver any Weekly Report or Settlement Report within one (1) Business Day of the date when due; or (b) any representation, warranty, certification or statement made by the Collection Agent or the Transferor, C&A or any Affiliate of the Transferor or C&A (in the event that the Transferor, C&A or such Affiliate is then acting as the Collection Agent) in this Agreement, the Receivables Purchase Agreement or in any of the other Transaction Documents or in any certificate or report delivered by it pursuant to any of the foregoing shall prove to have been incorrect in any material respect when made or deemed made; provided, however, that (i) to the extent any breach of any such representation or warranty may be cured within ten (10) days, the Collection Agent shall have ten (10) days following the earlier to occur of receipt of notice thereof by the Collection Agent from the Administrative Agent or a Funding Agent or discovery thereof by the Collection Agent to make such representation and warranty true and correct in all material respects, (ii) if any such representation and warranty relates to a Receivable for which the Transferor has paid to the Collection Agent an amount equal to the Outstanding Balance of such Receivable pursuant to Section 2.9(a) hereof or (iii) the breach of the representation or warranty of the Collection Agent has been cured within the time period provided for herein, then the breach of such representation or warranty shall not give rise to a Collection Agent Default under this subsection (b); or (c) (i) failure of the Collection Agent or any of its Affiliates to pay when due any amounts due under any agreement under which any Indebtedness greater than $10,000,000 is governed; or (ii) any Indebtedness of the Collection Agent or any of its Affiliates greater than $10,000,000 shall be declared to be due and payable or required to be prepaid (other than by a regularly scheduled payment) by reason of a breach or default of same prior to the scheduled date of maturity thereof; or (d) (i) any Event of Bankruptcy shall occur with respect to the Collection Agent or (ii) an Event of Bankruptcy shall occur with respect to an Affiliate of the Collection Agent, which in the reasonable opinion of the Administrative Agent is a Material Adverse Effect; or (e) there shall have occurred any material adverse change in the operations of the Collection Agent since the end of last fiscal year ending prior to the date of its appointment as Collection Agent hereunder or any other event shall have occurred which, in the commercially reasonable judgment of the Administrative Agent, materially and adversely affects the Collection Agent's ability to either collect the Receivables or to perform under this Agreement. 45 SECTION 6.5 Responsibilities of the Transferor and each Seller. Anything herein to the contrary notwithstanding, the Transferor shall, and/or shall cause each Seller to, (i) perform all of each Seller's obligations under the Contracts related to the Receivables to the same extent as if interests in such Receivables had not been sold hereunder and under the Receivables Purchase Agreement and the exercise by the Administrative Agent, a Funding Agent, the Initial Purchasers and the PARCO APA Banks of their rights hereunder and under the Receivables Purchase Agreement shall not relieve the Transferor or such Seller from such obligations and (ii) pay when due any taxes, including without limitation, any sales taxes payable in connection with the Receivables and their creation and satisfaction. Neither the Administrative Agent, nor the Funding Agents, nor the Initial Purchasers nor any of the PARCO APA Banks shall have any obligation or liability with respect to any Receivable or related Contracts, nor shall it be obligated to perform any of the obligations of a Seller thereunder. SECTION 6.6 Collection Agent Indemnification of Indemnified Parties. The Collection Agent shall indemnify and hold harmless the Indemnified Parties, from and against any loss, liability, expense, damage or injury suffered or sustained solely by reason of any breach by the Collection Agent of any of its representations, warranties or covenants contained in this Agreement, including any judgment, award, settlement, reasonable attorneys' fees and other costs or expenses reasonably incurred in connection with the defense of any actual action, proceeding or claim; provided, however, that (i) the Collection Agent shall not indemnify the Indemnified Parties if such acts or omissions were attributable directly or indirectly to fraud, gross negligence, breach of fiduciary duty or willful misconduct by any such Indemnified Party and (ii) neither the Collection Agent nor any of the directors, officers, employees or agents of the Collection Agent in its capacity as Collection Agent shall be under any liability to the Indemnified Parties for any action taken or for refraining from the taking of any action in good faith in its capacity as Collection Agent pursuant to this Agreement; provided, further, however that the immediately preceding proviso shall not protect the Collection Agent or any such director, officer, employee or agent against any liability which would otherwise be imposed by reason of willful misfeasance, bad faith or gross negligence in the performance of duties or by reason of reckless disregard of obligations and duties hereunder. The Collection Agent and any director, officer, employee or agent of the Collection Agent may rely in good faith on any document of any kind prima facie properly executed and submitted by any Person (other than the Collection Agent or an Affiliate of the Collection Agent) respecting any matters arising hereunder. Any indemnification pursuant to this Section shall be had only from the assets of the Collection Agent and shall not be payable from Collections, except to the extent such Collections are released to the Collection Agent in accordance with Sections 2.5 and 2.6. The provisions of such indemnity shall run directly to and be enforceable by such Indemnified Parties. Without limiting the foregoing, each Seller, by transferring interests in the Receivables to the Transferor, the Transferor, by transferring interests in the Receivables to the Initial Purchasers and/or the PARCO APA Banks, and the Initial Purchasers and the PARCO APA Banks, by acquiring such interest in the Receivables, acknowledge that each Seller has transferred such Receivables and the Transferor, the Initial Purchasers and the PARCO APA Banks, as applicable, have assumed all risk of payment and collection with respect thereto. SECTION 6.7 Maintenance of Property; Insurance. The Collection Agent will (i) keep all property and assets useful and necessary in its business as Collection Agent in good working order and condition (normal wear and tear excepted), (ii) maintain, with financially 46 sound and reputable insurance companies, insurance on all its property and assets necessary in its business as Collection Agent in at least such amounts and against at least such risks (and with such risk retention) as are usually insured against in the same general area by companies of established repute engaged in the same or a similar business and reasonably satisfactory to the Administrative Agent and each Funding Agent, (iii) furnish to the Transferor, the Administrative Agent and each Funding Agent upon written request, full information as to the insurance carried, (iv) within five days of receipt of notice from any insurer, furnish the Transferor, the Administrative Agent with a copy of any notice of cancellation or material change in coverage from that existing on the Closing Date and (v) forthwith, furnish the Transferor and the Administrative Agent with notice of any cancellation or nonrenewal of coverage by the Collection Agent. The Collection Agent will (A) maintain disaster recovery systems and back-up computer and other information management systems that, in the Collection Agent's reasonable judgment, are sufficient to protect its business as Collection Agent against material interruption or loss in the event of damage to, or loss or destruction of, its primary computer and information management systems and (B) furnish to the Transferor and the Administrative Agent, upon written request, full information as to such disaster recovery systems and back-up computer and information management systems. SECTION 6.8 Grant of License. For the purpose of enabling the Administrative Agent or a successor Collection Agent to perform the functions of servicing and collecting the Receivables upon a Collection Agent Default, the Collection Agent and each Seller hereby (i) assigns, to the extent permitted, to the Administrative Agent for the benefit of the Funding Agents, the Initial Purchasers and the PARCO APA Banks and shall be deemed to assign to the Administrative Agent for the benefit of the Funding Agents, the Initial Purchasers and the PARCO APA Banks and any successor Collection Agent all rights owned or hereinafter acquired by any Seller or the Collection Agent (by license, sublicense, lease, easement or otherwise) in and to any equipment together with a copy of any software listed on Schedule II hereto, (ii) agrees to use its best efforts to assist the Administrative Agent for the benefit of the Funding Agents, the Initial Purchasers and the PARCO APA Banks to arrange licensing agreements with all software vendors and other applicable persons in a manner and to the extent reasonably appropriate to effectuate the servicing of the Receivables, and (iii) deliver to the Administrative Agent executed copies of any landlord waivers in a form reasonably acceptable to the Administrative Agent, that may be necessary to grant to the Administrative Agent access to any leased premises of the Collection Agent for which the Administrative Agent may require access to perform the collection and administrative functions to be performed by the Administrative Agent under the Transaction Documents. ARTICLE VII INDEMNIFICATION; EXPENSES; RELATED MATTERS SECTION 7.1 Indemnities by the Transferor. Without limiting any other rights which the Administrative Agent, the Funding Agents, the Initial Purchasers, the Liberty APA Banks or the PARCO APA Banks may have hereunder or under applicable Law, the Transferor hereby agrees to indemnify the Administrative Agent, the Initial Purchasers, the Liberty APA Banks, the Redwood Secured Parties, the PARCO APA Banks and each Funding Agent and any successors and permitted assigns and their respective officers, directors, agents and employees 47 (collectively, "Indemnified Parties") from and against any and all damages, losses, claims, liabilities, costs and expenses, including, without limitation, reasonable attorneys' fees and disbursements (all of the foregoing being collectively referred to as "Indemnified Amounts") awarded against or incurred by any of them in any action or proceeding between the Transferor and any of the Indemnified Parties or between any of the Indemnified Parties and any third party or otherwise arising out of or as a result of this Agreement, the other Transaction Documents, the ownership, either directly or indirectly, by a Funding Agent, the Initial Purchasers or any PARCO APA Bank of the Transferred Interest or any of the other transactions contemplated hereby or thereby, excluding, however, (i) Indemnified Amounts to the extent resulting from gross negligence or willful misconduct on the part of an Indemnified Party or (ii) recourse (except as otherwise specifically provided in this Agreement) for uncollectible Receivables; provided that any Indemnified Amounts owed under this Section 7.1 shall be payable in accordance with Sections 2.5 and 2.6 and shall be Transferor Subordinated Obligations. Without limiting the generality of the foregoing, the Transferor shall indemnify each Indemnified Party for Indemnified Amounts relating to or resulting from: (a) any representation or warranty made by the Transferor or any officers of the Transferor under this Agreement, any of the other Transaction Documents, any Settlement Report, any Weekly Report or any other written information or report delivered by the Transferor pursuant hereto or thereto, which shall have been false or incorrect in any material respect when made or deemed made; (b) the failure by the Transferor to comply in any material respect with any applicable Law, with respect to any Receivable or the related Contract, or the nonconformity in any material respect of any Receivable or the related Contract with any such applicable Law; (c) any dispute, claim, offset or defense (other than discharge in bankruptcy) of an Obligor to the payment of any Receivable (including, without limitation, a defense based on such Receivable or the related Contract not being the legal, valid and binding obligation of such Obligor enforceable against it in accordance with its terms), or any other claim resulting from the sale of merchandise or provision of services related to such Receivable or the furnishing or failure to furnish such merchandise or services; (d) any products liability claim or personal injury or property damage suit or other similar or related claim or action of whatever sort arising out of or in connection with merchandise which is the subject of any Receivable; (e) the failure by the Transferor to comply in any material respect with any term, provision or covenant contained in this Agreement or any of the other Transaction Documents to which it is a party or to perform any of its respective duties under the Contracts; (f) the failure of the Transferor to pay when due any taxes, including without limitation, sales, excise or personal property taxes payable in connection with any of the Receivables; 48 (g) any repayment by any Indemnified Party of any amount previously distributed in reduction of Aggregate Net Investment which such Indemnified Party believes in good faith is required to be made; (h) the commingling by the Transferor of Collections of Receivables at any time with other funds to the extent not otherwise permitted pursuant to this Agreement and the other Transaction Documents; (i) any investigation, litigation or proceeding related to this Agreement, any of the other Transaction Documents, the use of proceeds of Transfers by the Transferor, the ownership of Transferred Interests, or any Receivable, Related Security, Required Currency Hedge or Contract; (j) the failure of any Lock-Box Bank to remit any amounts held in the Lock-Box Accounts pursuant to the instructions of the Collection Agent, the Transferor, the Administrative Agent, C&A or the Funding Agent (to the extent such Person is entitled to give such instructions in accordance with the terms hereof and of any applicable Lock-Box Agreement) whether by reason of the exercise of set-off rights or otherwise; (k) any failure of the Transferor to give reasonably equivalent value to any Seller in consideration of the purchase by the Transferor from any Seller of any Receivable, or any attempt by any Person to void, rescind or set-aside any such transfer under statutory provisions or common law or equitable action, including, without limitation, any provision of the Bankruptcy Code; (l) any action taken by the Transferor in the enforcement or collection of any Receivable; provided, that the Transferor shall not be liable for Indemnified Amounts attributable to the fraud, gross negligence, breach of fiduciary duty or willful misconduct of any Collection Agent in the enforcement or collection of any Receivable if such Collection Agent is not the Transferor, C&A or any Affiliate of the Transferor or C&A; (m) any failure by the Transferor to complete an Incremental Transfer following the receipt by the Administrative Agent of notice of a proposed Transfer from the Transferor pursuant to Section 2.2 due to no fault of the Administrative Agent, Initial Purchasers, the Funding Agent or the PARCO APA Banks; or (n) the failure of any Seller, the Collection Agent (if an Affiliate of the Transferor) or the Transferor to be Year 2000 Compliant. provided, however, that if the Initial Purchasers enter into agreements for the purchase of interests in receivables from one or more Other Transferors, the Initial Purchasers shall ratably allocate such Indemnified Amounts related to the Initial Purchasers' program documents to the Transferor and each Other Transferor; and provided, further, that if such Indemnified Amounts are attributable to the Transferor and not attributable to any Other Transferor, the Transferor shall be solely liable for such Indemnified Amounts or if such Indemnified Amounts are attributable to Other Transferors and not attributable to the Transferor, such Other Transferors shall be solely liable for such Indemnified Amounts. 49 SECTION 7.2 Indemnity for Reserves and Expenses. (a) If after the date hereof, the adoption of any Law or bank regulatory guideline or any amendment or change in the interpretation of any existing or future Law or bank regulatory guideline by any Official Body charged with the administration, interpretation or application thereof, or the compliance with any directive of any Official Body (in the case of any bank regulatory guideline, whether or not having the force of Law), other than Laws, interpretations, guidelines or directives relating to Taxes: (i) shall impose, modify or deem applicable any reserve, special deposit or similar requirement (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System) against assets of, deposits with or for the account of, or credit extended by, any Indemnified Party or shall impose on any Indemnified Party or on the United States market for certificates of deposit or the London interbank market any other condition affecting this Agreement, the other Transaction Documents, the ownership, maintenance or financing of the Transferred Interest, the Receivables or payments of amounts due hereunder or its obligation to advance funds hereunder or under the other Transaction Documents; or (ii) imposes upon any Indemnified Party any other expense deemed by such Indemnified Party to be material (including, without limitation, reasonable attorneys' fees and expenses, and expenses of litigation or preparation therefor in contesting any of the foregoing provided, C&A may settle such litigation in C&A's sole discretion) with respect to this Agreement, the other Transaction Documents, the ownership, maintenance or financing of the Transferred Interest, the Receivables or payments of amounts due hereunder or its obligation to advance funds hereunder or otherwise in respect of this Agreement or the other Transaction Documents, and the result of any of the foregoing is to increase the cost to such Indemnified Party with respect to this Agreement, the other Transaction Documents, the ownership, maintenance or financing of the Transferred Interest, the Receivables, the obligations hereunder, the funding of any Purchases hereunder or under the other Transaction Documents, by an amount reasonably deemed by such Indemnified Party to be material, then, within ten (10) Business Days after demand by such Indemnified Party through the Administrative Agent, the Transferor or C&A shall pay to the Administrative Agent, for the benefit of such Indemnified Party, such additional amount or amounts as will compensate such Indemnified Party for such increased cost or reduction; provided that no such amount shall be payable with respect to any period commencing more than two hundred and seventy (270) days prior to the date the Administrative Agent first notifies the Transferor or C&A of its intention to demand compensation therefor under this subsection 7.2(a); provided further that if such change in Law giving rise to such increased costs or reductions is retroactive, then such 270-day period shall be extended to include the period of retroactive effect thereof. In making demand hereunder, the applicable Indemnified Party shall submit to the Transferor a certificate as to such increased costs incurred which shall provide in detail the basis for such claim. (b) If any Indemnified Party shall have determined that after the date hereof, the adoption of any applicable Law or bank regulatory guideline regarding capital adequacy, or 50 any change therein, or any change in the interpretation thereof by any Official Body, or any directive regarding capital adequacy (in the case of any bank regulatory guideline, whether or not having the force of Law) of any such Official Body, has or would have, due to an increase in the amount of capital required to be maintained by such Indemnified Party, the effect of reducing the rate of return on capital of such Indemnified Party (or its Guarantor) as a consequence of such Indemnified Party's obligations hereunder or with respect hereto to a level below that which such Indemnified Party (or its Guarantor) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount reasonably deemed by such Indemnified Party to be material, then from time to time, within ten (10) Business Days after demand by such Indemnified Party through the Administrative Agent, the Transferor or C&A shall pay to the Administrative Agent, for the benefit of such Indemnified Party, such additional amount or amounts as will compensate such Indemnified Party (or its Guarantor) for such reduction; provided that no such amount shall be payable with respect to any period commencing more than two hundred and seventy (270) days prior to the date the Administrative Agent first notifies the Transferor or C&A of its intention to demand compensation therefor under this subsection 7.2(b); provided further that if such change in Law, giving rise to such increased costs or reductions is retroactive, then such 270-day period shall be extended to include the period of retroactive effect thereof In making demand hereunder, the applicable Indemnified Party shall submit to the Transferor a certificate as to such increased costs incurred which shall provide in detail the basis for such claim. (c) Anything in this Section 7.2 to the contrary notwithstanding, if the Initial Purchasers enter into agreements for the acquisition of interests in receivables from one or more Other Transferors, the Initial Purchasers shall ratably allocate the liability for any amounts under this Section 7.2 ("Section 7.2 Costs") to the Transferor and C&A and each Other Transferor; provided, however, that if such Section 7.2 Costs are attributable to the Transferor or C&A and not attributable to any Other Transferor, the Transferor and C&A shall be solely liable for such Section 7.2 Costs or if such Section 7.2 Costs are attributable to Other Transferors and not attributable to the Transferor or C&A such Other Transferors shall be solely liable for such Section 7.2 Costs. (d) All amounts owed by the Transferor pursuant to this Section 7.2 shall be payable in accordance with Sections 2.5 and 2.6 and shall be Transferor Subordinated Obligations. Any amounts owed by C&A pursuant to this Section shall be had only from the assets of C&A and shall not be payable from Collections, except to the extent such Collections are released to C&A in accordance with Sections 2.5 and 2.6. SECTION 7.3 Indemnity for Taxes. (a) All payments made by the Transferor, any Seller or the Collection Agent to the Administrative Agent for the benefit of the Funding Agents, the Initial Purchasers and the PARCO APA Banks under this Agreement and any other Transaction Document shall be made free and clear of, and without deduction or withholding for or on account of, any present or future income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied, collected, withheld or assessed by any Official Body, excluding (i) taxes imposed on the net income of the Administrative Agent or any other Indemnified Party, however denominated, (ii) taxes that would not have been imposed if the 51 Indemnified Party had timely complied with the requirements of Section 7.3(b) hereof, and (iii) franchise taxes imposed on the net income of the Administrative Agent or any other Indemnified Party, in each case imposed: (1) by the United States or any political subdivision or taxing authority thereof or therein; (2) by any jurisdiction under the laws of which the Administrative Agent or such Indemnified Party or lending office is organized or in which its lending office is located, managed or controlled or in which its principal office is located or any political subdivision or taxing authority thereof or therein; or (3) by reason of any connection between the jurisdiction imposing such tax and the Administrative Agent, such Indemnified Party or such lending office other than a connection arising solely from this Agreement or any other Transaction Document or any transaction hereunder or thereunder (all such non-excluded taxes, levies, imposts, duties, charges, fees, deductions or withholdings, collectively or individually, "Taxes"). If any such Taxes are required to be withheld from any amounts payable to the Administrative Agent or any Indemnified Party hereunder, the amounts so payable to the Administrative Agent or such Indemnified Party shall be increased to the extent necessary to yield to the Administrative Agent or such Indemnified Party (after payment of all Taxes) all amounts payable hereunder at the rates or in the amounts specified in this Agreement and the other Transaction Documents. The Transferor or C&A shall indemnify the Administrative Agent or any such Indemnified Party for the full amount of any such Taxes within thirty (30) days after the date of written demand therefor by the Administrative Agent. All amounts owed by the Transferor pursuant to this subsection 7.3(a) shall be payable in accordance with Sections 2.5 and 2.6 and shall be Transferor Subordinated Obligations. Any amounts owed by C&A or the Collection Agent pursuant to this Section shall be had only from the assets of C&A or the Collection Agent, as applicable, and shall not be payable from Collections, except to the extent such Collections are released to C&A or the Collection Agent, as applicable, in accordance with Sections 2.5 and 2.6. (b) Each Indemnified Party that is not incorporated under the laws of the United States of America or a State thereof or the District of Columbia shall: (i) deliver to the Transferor and the Administrative Agent (A) two duly completed copies of IRS Form 1001 or Form 4224, or successor applicable form, as the case may be, and (B) an IRS Form W-8 or W-9, or successor applicable form, as the case may be; (ii) deliver to the Transferor and the Administrative Agent two (2) further copies of any such form or certification on or before the date that any such form or certification expires or becomes obsolete and after the occurrence of any event requiring a change in the most recent form previously delivered by it to the Transferor; and (iii) obtain such extensions of time for filing and complete such forms or certifications as may reasonably be requested by the Transferor or the Administrative Agent; unless, in any such case, an event (including, without limitation, any change in treaty, law or regulation) has occurred prior to the date on which any such delivery would otherwise be required which, regardless of the identity of the Indemnified Party, renders all such forms inapplicable or which, regardless of the identity of the Indemnified Party, would prevent such 52 Indemnified Party from duly completing and delivering any such form with respect to it, and such Indemnified Party so advises the Transferor and the Administrative Agent. Each such Indemnified Party so organized shall certify (i) in the case of an IRS Form 1001 or IRS Form 4224 (or successor applicable form), that it is entitled to receive payments under this Agreement and the other Transaction Documents without deduction or withholding of any United States federal income taxes and (ii) in the case of an IRS Form W-8 or IRS Form W-9 (or successor applicable form), that it is entitled to an exemption from United States backup withholding tax. Each Person that is an Initial Purchaser under the Transaction Documents, or which otherwise becomes a party to this Agreement as a PARCO APA Bank, shall, prior to the effectiveness of such assignment, participation or addition, as applicable, be required to provide all of the forms and statements required pursuant to this Section 7.3. SECTION 7.4 Other Costs, Expenses and Related Matters. (a) The Transferor agrees, upon receipt of a written invoice, to pay or cause to be paid, and to save the Administrative Agent, the Initial Purchasers, the Liberty APA Banks, the PARCO APA Banks and each Funding Agent harmless against liability for the payment of, all reasonable out-of-pocket expenses (including, without limitation, reasonable attorneys', accountants' and other third parties' fees and expenses, any filing fees and expenses incurred by officers or employees of the Administrative Agent, the Initial Purchasers, the Liberty APA Banks, the PARCO APA Banks and/or a Funding Agent) or intangible, documentary or recording taxes incurred by or on behalf of the Administrative Agent, the Initial Purchasers, the Liberty APA Banks, any PARCO APA Bank and a Funding Agent (i) in connection with the negotiation, execution, delivery and preparation of this Agreement, the other Transaction Documents and any documents or instruments delivered pursuant hereto and thereto and the transactions contemplated hereby or thereby (including, without limitation, the perfection or protection of the Transferred Interest) and (ii) from time to time upon receipt of prior written notice thereof from the Administrative Agent, a Funding Agent, the Initial Purchasers, the Liberty APA Banks, or the PARCO APA Banks, as applicable (a) relating to any amendments, waivers or consents under this Agreement, any Asset Purchase Agreement and the other Transaction Documents, (b) arising in connection with the Administrative Agent's, the Initial Purchasers', any Liberty APA Banks' or any PARCO APA Bank's or a Funding Agent's enforcement or preservation of rights (including, without limitation, the perfection and protection of the Transferred Interest under this Agreement), or (c) arising in connection with any audit, dispute, disagreement, litigation or preparation for litigation involving this Agreement or any of the other Transaction Documents (all of such amounts, collectively, "Transaction Costs"). All Transaction Costs owed by the Transferor pursuant to this subsection 7.4(a) shall be payable in accordance with Section 2.5 and 2.6, shall be subject to the maximum amount set forth in the engagement letter between C&A and Chase Securities Inc. and shall be Transferor Subordinated Obligations. (b) The Transferor shall pay the Administrative Agent, for the account of the Initial Purchasers and the PARCO APA Banks, as applicable, on demand any Early Collection Fee due on account of the reduction of a Tranche on any day prior to the last day of its Tranche Period. 53 (c) The Administrative Agent will within forty-five (45) days after receipt of notice of any event occurring after the date hereof which will entitle an Indemnified Party to compensation pursuant to this Article VII, notify the Transferor and C&A in writing. Any notice by the Administrative Agent claiming compensation under this Article VII and setting forth the additional amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error, provided that such claim is made in good faith and on a reasonable basis. In determining such amount, the Administrative Agent or any applicable Indemnified Party may use any reasonable averaging and attributing methods. (d) If any Seller is required to pay any additional amount to any PARCO APA Bank pursuant to Sections 7.2 or 7.3, then such PARCO APA Bank shall use reasonable efforts (which shall not require such PARCO APA Bank to incur an unreimbursed loss or unreimbursed cost or expense or otherwise take any action inconsistent with its internal policies or legal or regulatory restrictions or suffer any disadvantage or burden reasonably deemed by it to be significant) (A) to file any certificate or document reasonably requested in writing by such Seller or (B) to assign its rights and delegate and transfer its obligations hereunder to another of its offices, branches or affiliates, if such filing or assignment would reduce amounts payable pursuant to Sections 7.2 or 7.3, as the case may be, in the future. ARTICLE VIII TERMINATION EVENTS SECTION 8.1 Termination Events. The occurrence of any one or more of the following events shall constitute a Termination Event: (a) the Transferor, any Seller or the Collection Agent shall fail to make any payment or deposit to be made by it hereunder or under any of the Transaction Documents and such failure shall continue for one (1) Business Day after the date such payment or deposit became due hereunder or thereunder; or (b) any representation, warranty, certification or statement made by the Transferor, the Guarantor or any Seller in this Agreement, any other Transaction Document to which it is a party or in any other document delivered pursuant hereto or thereto shall prove to have been incorrect in any material respect when made or deemed made, provided, however, that if any such representation, warranty, certification or statement relates to a Receivable for which the Transferor has paid to the Collection Agent an amount equal to the Outstanding Balance of such Receivable pursuant to subsection 2.9(a) hereof or if a breach of the representation and warranty in Section 3.1, 3.2 or 3.3 has been corrected within the time period provided for herein, and in the case of Section 3.1(f) or Section 3.1(s)(i) within 15 days of notice thereof, then the breach of such representation or warranty shall not give rise to a Termination Event under this subsection (b); or (c) Failure on the part of any Seller, the Guarantor or the Transferor to observe or perform in any material respect any other term, covenant or agreement in this Agreement or any other Transaction Document within the time period provided for such performance; or 54 (d) (i) failure of the Transferor, any Seller, the Guarantor or any Affiliate of the Transferor, the Guarantor or any Seller to pay when due any material amounts due under any agreement to which any such Person is a party and under which any Indebtedness greater than $10,000,000 is governed; or (ii) the material default by the Transferor, the Guarantor, any Seller or any Affiliate of the Transferor, the Guarantor or any Seller in the performance of any material term, provision or condition contained in any agreement to which any such Person is a party and under which any Indebtedness owing by the Transferor, the Guarantor, any Seller or any Affiliate of the Transferor, the Guarantor or any Seller greater than $10,000,000 was created or is governed, regardless of whether such event is an "event of default" or "default" under any such agreement, which is a Material Adverse Effect; or (iii) any Indebtedness owing by the Transferor, the Guarantor, any Seller or any Affiliate of the Transferor, the Guarantor or any Seller greater than $10,000,000 shall be declared to be due and payable or required to be prepaid (other than by a regularly scheduled payment) by reason of a breach or default of same prior to the date of maturity thereof; or (e) (i) any Event of Bankruptcy shall occur with respect to the Transferor, or (ii) an Event of Bankruptcy shall occur with respect to the Guarantor or any Seller or Affiliate of the Guarantor or any Seller which, in the reasonable opinion of the Administrative Agent, is a Material Adverse Effect; or (f) the Administrative Agent, on behalf of the Funding Agents, the Initial Purchasers and the PARCO APA Banks, shall, for any reason, fail or cease to have a valid and perfected first priority ownership or security interest in the Receivables and Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto, and any other Transferor Collateral free and clear of any Adverse Claims; or (g) a Collection Agent Default shall have occurred; or (h) the Purchase Termination Date shall have occurred under the Receivables Purchase Agreement; or (i) without obtaining the prior written consent of each Funding Agent, which consents shall be obtained by the Administrative Agent, the Transferor or any Seller or the Guarantor shall enter into any transaction or merger whereby it is not the surviving entity (other than a merger permitted pursuant to either Section 5.2(d) or Section 5.4(b) hereof); or (j) there shall have occurred a Material Adverse Effect with respect to the Transferor or any Seller since the Closing Date; or (k) the institution of any litigation, arbitration proceedings or governmental proceeding involving any Seller or the Transferor or the Receivables which would be reasonably likely to have a Material Adverse Effect; or (l) (i) the Percentage Factor exceeds the Maximum Percentage Factor unless the Transferor deposits to the Funding Accounts on the next Business Day, for the benefit of the Initial Purchasers and/or the PARCO APA Banks, as applicable, from previously received Collections that have been released to or set aside for the Transferor pursuant to Section 2.5 hereof or other funds available to the Transferor, an amount that brings the Percentage Factor to 55 less than or equal to the Maximum Percentage Factor or increases the balance of the Receivables on the next Business Day so as to reduce the Percentage Factor to less than or equal to 100%; or (ii) the Aggregate Net Investment exceeds the Facility Limit; or (m) the average Dilution Ratio for the three (3) preceding Settlement Periods exceeds 4.00%; or (n) the average Aged Receivables Ratio for the three (3) preceding Settlement Periods exceeds 6.50%; or (o) (i) one or more judgments for the payment of money in an aggregate amount in excess of $10,000,000 shall be rendered against a Seller, the Collection Agent, the Guarantor or their Subsidiaries or any combination thereof and the same shall remain undischarged for a period of thirty (30) consecutive days during which execution shall not be effectively stayed or to the extent that an insurance carrier has accepted a claim for coverage thereto; (ii) one or more judgments for the payment of money shall be rendered against the Transferor and shall not have been satisfied; or (iii) any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Transferor, a Seller, the Collection Agent, the Guarantor, or their Subsidiaries to enforce any such judgment; or (p) the Collection Agent shall fail to deliver to the Administrative Agent any report required to be delivered by it under the terms of the Transaction Documents within one (1) Business Day of (i) with respect to any Settlement Report or Weekly Report, when such report was due or (ii) with respect to any other report, receipt by the Collection Agent of written notice from the Administrative Agent that such report is due; or (q) the imposition of (i) tax liens against the Transferor, (ii) tax liens against any Seller or the Guarantor unless such lien would not have a Material Adverse Effect and has been released within fifteen (15) days of the earlier of (a) the date such Seller or the Guarantor, as applicable, has knowledge of the imposition of such tax lien or (b) the date on which such Seller or the Guarantor, as applicable, receives notice of the imposition of such tax lien, and (iii) ERISA liens; or (r) there shall have occurred a Change in Control; or (s) the Guarantor shall permit the Interest Coverage Ratio to be less than the ratio set forth in subsection (b) of the definition of "Interest Coverage Ratio" for such period; or (t) the Guarantor shall permit the Leverage Ratio during any period set forth in subsection (b) of the definition of "Leverage Ratio" to be greater than the ratio set forth in such definition for such period; or (u) C&A and the Sellers (in the aggregate) fail to maintain 100% ownership of the Transferor. 56 SECTION 8.2 Remedies Upon the Occurrence of a Termination Event. (a) Upon the occurrence of any Termination Event, the Administrative Agent may, or at the direction of the Required Purchaser Groups shall, by notice to the Transferor and the Collection Agent, declare the Termination Date to have occurred, provided, however, that in the case of any event described in Section 8.1(e)(i), 8.1(f), 8.1(h), 8.1(l), or 8.1(q)(i) or 8.1(q)(iii) above, the Termination Date shall be deemed to have occurred automatically upon the occurrence of such event. At all times after the declaration or automatic occurrence of the Termination Date pursuant to Section 8.2(a), (i) the PARCO Base Rate plus 2.00% plus the Applicable Margin shall be the Tranche Rate applicable to the PARCO Net Investment for all existing and future Tranches (ii) the Redwood Yield shall be payable with respect to the Redwood Net Investment and (iii) the Liberty Base Rate plus 2.00% shall be payable with respect to the Liberty Net Investment. If an event or condition shall have occurred which constitutes a Potential Termination Event, the Administrative Agent may, by notice to the Transferor, declare such event or condition a Potential Termination Event. (b) In addition, if any Termination Event or Potential Termination Event occurs hereunder, (i) the Administrative Agent shall promptly notify the Transferor in writing whether it has declared a Termination Event or a Potential Termination Event and whether it will be exercising the remedies specified in this Section 8.2, (ii) the Administrative Agent, on behalf of the Funding Agents, the Initial Purchasers and the PARCO APA Banks, shall have all of the rights and remedies provided to a secured creditor or a purchaser of accounts under the Relevant UCC by applicable law in respect thereto, (iii) the Facility Limit shall be reduced as of each calendar date thereafter to equal the Aggregate Net Investment as of such date, (iv) each Purchase Limit shall be reduced as of each calendar date thereafter to equal the applicable Net Investment as of such date, (v) the Percentage Factor shall be increased to 100%, (vi) each Commitment shall be reduced as of each calendar date thereafter, to equal its Pro Rata Share of 102% of the Aggregate Net Investment as of such date, and (vii) no Commercial Paper with respect to the Transferor will thereafter be issued by the Initial Purchasers. ARTICLE IX THE ADMINISTRATIVE AGENT SECTION 9.1 Appointment. Each Initial Purchaser, PARCO APA Bank and Funding Agent hereby irrevocably designates and appoints Chase as Administrative Agent hereunder, and authorizes the Administrative Agent to take such action on its behalf under the provisions of this Agreement and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Agreement, together with such other powers as are reasonably incidental thereto, unless as otherwise directed by the Required Purchaser Groups. To the extent the Administrative Agent takes any such action, the Transferor, each Seller, the Guarantor and the Collection Agent, in dealing with the Administrative Agent, shall have the right to assume such approval has been obtained and such direction is being followed absent actual knowledge to the contrary. Notwithstanding any provision to the contrary elsewhere in this Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein, or any fiduciary relationship with any Initial Purchaser, PARCO APA Bank or Funding Agent, and no implied 57 covenants, functions, responsibilities, duties, obligations or liabilities on the part of the Administrative Agent shall be read into this Agreement or the other Transaction Documents or shall otherwise exist against the Administrative Agent. In performing its functions and duties hereunder, the Administrative Agent shall act solely as the agent of the Initial Purchasers, the PARCO APA Banks and the Funding Agents under the Transaction Documents, and the Administrative Agent does not assume, nor shall be deemed to have assumed, any obligation or relationship of trust or agency with or for any such Person. SECTION 9.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement by or through its subsidiaries, affiliates, agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct (other than the gross negligence or willful misconduct) of any agents or attorneys-in-fact selected by it with reasonable care. SECTION 9.3 Exculpatory Provisions. (a) Notwithstanding any provision of this Agreement or any other Transaction Document: (i) the Administrative Agent shall not have any obligations under this Agreement or any other Transaction Document other than those specifically set forth herein and therein, and no implied obligations of the Administrative Agent shall be read into this Agreement or any other Transaction Document; and (ii) in no event shall the Administrative Agent be liable under or in connection with this Agreement or any other Transaction Document for indirect, special, or consequential losses or damages of any kind, including lost profits, even if advised of the possibility thereof and regardless of the form of action by which such losses or damages maybe claimed. Neither the Administrative Agent nor any of its respective directors, officers, agents or employees shall be liable for any action taken or omitted to be taken in good faith by it or them under or in connection with this Agreement or any other Transaction Document, except for its or their own gross negligence or willful misconduct. Without limiting the foregoing, the Administrative Agent (a) may consult with legal counsel (including counsel for the Initial Purchasers, the PARCO APA Banks and the Funding Agents), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts, (b) shall not be responsible to the Initial Purchasers, the PARCO APA Banks, the Funding Agents, the Sellers, the Collection Agent or the Counterparties for any statements, warranties or representations (other than its own statements) made in or in connection with this Agreement or the other Transaction Documents, (c) shall not be responsible to the Initial Purchasers, the PARCO APA Banks, the Funding Agents, the Sellers, the Collection Agent or the Counterparties for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or the other Transaction Documents (other than the legality, validity, enforceability or genuineness of its own execution, authorization and performance hereof and thereof), (d) shall incur no liability under or in respect of any of the Commercial Paper or other obligations of the Initial Purchasers, the PARCO APA Banks and the Counterparties under this Agreement or the other Transaction Documents and (e) shall incur no liability under or in respect of this Agreement or the other Transaction Documents by acting in good faith upon any notice (including notice by telephone), consent, certificate or other instrument or writing (which may be by facsimile) believed by it to be genuine and signed or sent by the proper party or parties. Notwithstanding anything else herein or in the other Transaction Documents, it is agreed that where the Administrative Agent may be required under 58 this Agreement or the other Transaction Documents to give notice of any event or condition or to take any action as a result of the occurrence of any event or the existence of any condition, the Administrative Agent agrees to give such notice or take such action only to the extent that it has actual knowledge of the occurrence of such event or the existence of such condition, and shall incur no liability for any failure to give such notice or take such action in the absence of such knowledge. All notices, documents and reports received by the Administrative Agent hereunder or under the other Transaction Documents shall be promptly provided by the Administrative Agent to each Funding Agent, by facsimile or mail as deemed appropriate by the Administrative Agent. SECTION 9.4 Reliance by Administrative Agent. The Administrative Agent shall in all cases be entitled to rely, and shall be fully protected in relying, in good faith, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to each of the Initial Purchasers, the Funding Agents and the PARCO APA Banks), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent shall in all cases be fully justified in failing or refusing to take any action in good faith under this Agreement, any other Transaction Document or any other document furnished in connection herewith or therewith unless it shall first receive such advice or concurrence of the Funding Agents, as it deems appropriate, or it shall first be indemnified to its satisfaction by the Funding Agents or otherwise against any and all liability, cost and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, in good faith under this Agreement, the other Transaction Documents or any other document furnished in connection herewith or therewith in accordance with a request of the Funding Agents, and such request and any action taken or failure to act pursuant thereto shall be binding upon the Funding Agents, the Initial Purchasers, the PARCO APA Banks and the Counterparties. SECTION 9.5 Action Upon Events of Termination and Collection Agent Defaults, Reports and Notices. To the extent the Administrative Agent is entitled to consent to or withhold its consent of any waiver or amendment of this Agreement or other Transaction Documents in accordance with the terms hereof or thereof or otherwise take action upon the occurrence of a Termination Event or a Collection Agent Default, the Administrative Agent shall (i) give prompt notice to the Funding Agents of any such waiver, amendment, Termination Event or Collection Agent Default of which it is aware and (ii) take such action with respect to such waiver, amendment, Termination Event or Collection Agent Default as shall be directed by all Funding Agents (unless the direction of the Required Purchaser Groups or Required Participants is expressly required with respect to a specific provision). SECTION 9.6 Non-Reliance on Administrative Agent. Each of the parties hereto expressly acknowledges that neither the Administrative Agent, nor any of its officers, directors, employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Administrative Agent hereafter taken, including, without limitation, any review of the affairs of either the Sellers or the Collection Agent, shall be deemed to constitute any representation or warranty by the Administrative Agent. Except as expressly 59 provided herein, the Administrative Agent shall not have any duty or responsibility to provide any Person other than each Funding Agent, each Initial Purchaser or each PARCO APA Bank with any credit or other information concerning the business, operations, property, prospects, financial and other condition or creditworthiness of the Sellers, the Collection Agent, the Initial Purchasers, the PARCO APA Banks, the Funding Agents or the Counterparties which may come into the possession of the Administrative Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. SECTION 9.7 Indemnification. The Funding Agents and the PARCO APA Banks agree to indemnify the Administrative Agent and its officers, directors, employees, representatives and agents (to the extent not reimbursed by the Transferor or the Collection Agent under the Transaction Documents, and without limiting the obligation of such Persons to do so in accordance with the terms of the Transaction Documents), on a pro rata basis, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for the Administrative Agent or the affected Person in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not the Administrative Agent or such affected Person shall be designated a party thereto) that may at any time be imposed on, incurred by or asserted against the Administrative Agent or such affected Person as a result of, or arising out of, or in any way related to or by reason of, any of the transactions contemplated hereunder or under the Transaction Documents or any other document furnished in connection herewith or therewith (but excluding any such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Administrative Agent or such affected Person). SECTION 9.8 Successor Administrative Agent. The Administrative Agent may, upon five (5) days' notice to each Funding Agent (with a copy to the Transferor and the Collection Agent), and the Administrative Agent will, at the direction of the Required Purchaser Groups, resign as Administrative Agent; provided, in either case, that a Funding Agent or a PARCO APA Bank agrees to become the successor Administrative Agent hereunder in accordance with the next sentence with the approval of the Required Purchaser Groups. If the Administrative Agent shall resign as Administrative Agent under this Agreement, then the Required Purchaser Groups during such period shall appoint from among the Funding Agents or the PARCO APA Banks a successor agent, whereupon such successor agent shall succeed to the rights, powers and duties of the Administrative Agent, and the term "Administrative Agent" shall mean such successor agent, effective upon its acceptance of such appointment and its delivery of a duly executed counterpart of this Agreement and an acknowledgment to each Funding Agent, and the former Administrative Agent's rights, powers and duties as Administrative Agent shall be terminated, without any other or further act or deed on the part of such former Administrative Agent or any of the parties to this Agreement. After the retiring Administrative Agent's resignation hereunder as Administrative Agent, the provisions of this Article IX shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. Notice of the appointment of a successor Administrative Agent shall be provided by the new Administrative Agent to the Transferor and the Collection Agent. 60 ARTICLE X MISCELLANEOUS SECTION 10.1 Term of Agreement. This Agreement shall terminate on the date following the Termination Date upon which the Aggregate Net Investment has been reduced to zero, and all accrued PARCO Discount, the Yield, Servicing Fees and all other Aggregate Unpaids have been paid in full, in each case, in cash; provided, however, that (i) the rights and remedies of the Administrative Agent, each Funding Agent, the Initial Purchasers and the PARCO APA Banks with respect to any representation and warranty made or deemed to be made by the Transferor pursuant to this Agreement, (ii) the indemnification and payment provisions of each Asset Purchase Agreement, (iii) the indemnification provisions in Section 6.6 and Article VII hereof, and (iv) the agreements set forth in Section 10.8 and 10.9 hereof, shall be continuing and shall survive any termination of this Agreement. SECTION 10.2 Waivers; Amendments. No failure or delay on the part of the Administrative Agent, a Funding Agent, the Initial Purchasers or any PARCO APA Bank in exercising any power, right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other further exercise thereof or the exercise of any other power, right or remedy. The rights and remedies herein provided shall be cumulative and nonexclusive of any rights or remedies provided by law. Any provision of this Agreement may be amended if, but only if, such amendment is in writing and is signed by the parties hereto and the Required Participants, and the Rating Agencies have provided in writing confirmation that such amendment will not result in a reduction or withdrawal of the rating of any Initial Purchaser's Commercial Paper; provided that the consent of the Redwood Funding Agent shall be required for any amendment, modification or supplement relating to (i) the addition of a Seller pursuant to Section 7.2 of the Receivables Purchase Agreement, (ii) any reference herein, or in any other Transaction Document, to Redwood, any Redwood Secured Parties, any Redwood Program Document or Redwood Yield or any component thereof (including without limitation the definition of any of the foregoing), (iii) the definitions of "Interest Coverage Ratio," "Leverage Ratio," "Eligible Obligor," "Eligible Receivables," "Termination Date," "Purchase Termination Date," "Required Purchaser Groups," "Percentage Factor" and "Maximum Percentage Factor" and any defined terms incorporated therein, (iv) the reduction or postponement of the time for payment of any fee or other amount payable to or on behalf of Redwood or (v) this Section 10.2; provided further, that the consent of the Liberty Funding Agent shall be required for any amendment, modification or supplement relating to (i) the addition of a Seller pursuant to Section 7.2 of the Receivables Purchase Agreement, (ii) any reference herein, or in any other Transaction Document, to Liberty, Liberty Purchase Limit, Liberty Net Investment or Liberty Yield or any component thereof (including without limitation the definition of any of the foregoing), (iii) the definitions of "Percentage Factor" and "Maximum Percentage Factor" and any defined terms incorporated therein, (iv) the reduction or postponement of the time for payment of any fee or other amount payable to or on behalf of Liberty or (v) this Section 10.2. SECTION 10.3 Notices. Except as provided below, all communications and notices provided for hereunder shall be in writing (including telecopy or electronic facsimile transmission or similar writing) and shall be given to the other party at its address or telecopy 61 number set forth below or at such other address or telecopy number as such party may hereafter specify for the purposes of notice to such party. Each such notice or other communication shall be effective (i) if given by telecopy, when such telecopy is transmitted to the telecopy number specified in this Section 10.3 and confirmation is received, (ii) if given by mail three (3) Business Days following such posting, postage prepaid, U.S. certified or registered, (iii) if given by overnight courier, one (1) Business Day after deposit thereof with a national overnight courier service, or (iv) if given by any other means, when received at the address specified in this Section 10.3. However, anything in this Section 10.3 to the contrary notwithstanding, the Transferor hereby authorizes the Administrative Agent to effect Transfers, Tranche Period and Tranche Rate selections based on telephonic notices made by any Person which the Administrative Agent in good faith believes to be acting on behalf of the Transferor. The Transferor agrees to deliver promptly to the Administrative Agent (and the Administrative Agent will promptly deliver to each Funding Agent) a written confirmation of each telephonic notice signed by an authorized officer of Transferor. However, the absence of such confirmation shall not affect the validity of such notice. If the written confirmation differs in any material respect from the action taken by the Administrative Agent, the records of the Administrative Agent shall govern absent manifest error. If to the Initial Purchasers: PARK AVENUE RECEIVABLES CORPORATION c/o Global Securitization Services, LLC 25 West 43rd Street, Suite 704 New York, New York 10036 Attention: President Telephone: (212) 302-5151 Telecopy: (212) 302-8767 (with a copy to the PARCO Funding Agent) REDWOOD RECEIVABLES CORPORATION c/o General Electric Capital Corporation 3001 Summer Street, 2nd Floor Stamford, Connecticut 06927 Attention: Conduit Administrator Telephone: (203) 961-5488 Telecopy: (203) 961-2953 If to the Redwood Funding Agent: GENERAL ELECTRIC CAPITAL CORPORATION 201 High Ridge Road Stamford, Connecticut 06927 Attention: Vice President-Portfolio/Collins & Aikman Telephone: (203) 316-7608 Telecopy: (203) 316-7821 62 LIBERTY STREET FUNDING CORP. c/o Global Securitization Service, LLC 25 West 43rd Street, Suite 704 New York, New York 10036 Attention: Andrew L. Stidd Telephone: (212) 302-8330 Telecopy: (212) 302-8767 With a copy to: THE BANK OF NOVA SCOTIA One Liberty Plaza New York, New York 10006 Attention: Dorothy Poli Telephone: (212) 225-5000 Telecopy: (212) 225-5090 If to the Transferor: CARCORP, INC. 101 Convention Center Drive Suite 850 Las Vegas, Nevada 89109 Attention: Monte Miller Telephone: (702) 387-0864 Telecopy: (702) 598-3651 Payment Information: US Bank of Nevada Las Vegas, Nevada ABA # 121201694 Account # 153700076455 Reference Name: Carcorp Inc. If to COLLINS & AIKMAN PRODUCTS CO.: COLLINS & AIKMAN PRODUCTS CO. 701 McCullough Drive Charlotte, North Carolina 28262 Attention: Assistant Treasurer Telephone: (704) 547-8500 Telecopy: (704) 548-2314 63 If to the Administrative Agent: THE CHASE MANHATTAN BANK 450 West 33rd Street 15th Floor New York, NY 10001 Attention: Craig Kantor Structured Finance Services Telephone: (212) 946-7861 Telecopy: (212) 946-7776 If to the PARCO Funding Agent: THE CHASE MANHATTAN BANK 450 West 33rd Street 15th Floor New York, NY 10001 Attention: Craig Kantor Structured Finance Services Telephone: (212) 946-7861 Telecopy: (212) 946-7776 If to the PARCO APA Banks, at their respective addresses set forth in the PARCO Asset Purchase Agreement. SECTION 10.4 Governing Law, Submission to Jurisdiction, Integration. (a) This Agreement shall be governed by, and construed in accordance with the laws of the State of New York. Each of the parties hereto hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York state court sitting in The City of New York for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. Each of the parties hereto hereby irrevocably waives, to the fullest extent it may effectively do so, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Nothing in this Section 10.4 shall affect the right of the Administrative Agent, the Funding Agents, the Initial Purchasers or the PARCO APA Banks to bring any action or proceeding against the Transferor, the Guarantor, any Seller, the Collection Agent, or their respective properties in the courts of other jurisdictions. (b) Each of the parties hereto hereby waives any right to have a jury participate in resolving any dispute, whether sounding in contract, tort or otherwise among any of them arising out of, connected with, relating to or incidental to the relationship between them in connection with this Agreement or the other Transaction Documents. (c) This Agreement and the other Transaction Documents contain the final and complete integration of all prior expressions by the parties hereto with respect to the subject 64 matter hereof and shall constitute the entire Agreement among the parties hereto with respect to the subject matter hereof superseding all prior oral or written understandings. SECTION 10.5 Severability; Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement. Any provisions of this Agreement which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 10.6 Successors and Assigns. This Agreement shall be binding on the parties hereto and their respective successors and assigns; provided, however, that neither the Transferor, the Guarantor, C&A nor any other Seller may assign any of its rights or delegate any of its duties hereunder or under any of the other Transaction Documents to which it is a party without the prior written consent of (i) the Administrative Agent and (ii) each Funding Agent (which consent shall be obtained by the Administrative Agent). No provision of this Agreement shall in any manner restrict the ability of the Initial Purchasers or any PARCO APA Bank to assign, participate, grant security interests in, or otherwise transfer any portion of the Transferred Interest. No provision of the Transaction Documents shall in any manner restrict the ability of PARCO to assign, participate, grant security interests in, or otherwise transfer any portion of its PARCO Interest. Without limiting the foregoing, PARCO may, in one or a series of transactions, transfer all or any portion of its PARCO Interest, and its rights and obligations under the Transaction Documents to a Conduit Assignee. No provision of the Transaction Documents shall in any manner restrict the ability of Redwood to assign, participate, grant security interests in, or otherwise transfer any portion of its interest in the Transferred Interest. Without limiting the foregoing, Redwood may, in one or a series of transactions, transfer all or any portion of its interest in the Transferred Interest, and its rights and obligations under the Transaction Documents to the Redwood Liquidity Lenders. SECTION 10.7 Confidentiality. (a) Each of the Transferor, the Guarantor, C&A and each other Seller shall maintain, and shall cause each officer, employee and agent of itself and its Affiliates to maintain, the confidentiality of the Transaction Documents and all other confidential proprietary information with respect to the Administrative Agent, the Initial Purchasers, the Funding Agents and the PARCO APA Banks and each of their respective businesses obtained by them in connection with the structuring, negotiation and execution of the transactions contemplated herein and in the other Transaction Documents, except for information that has become publicly available or information disclosed (i) to legal counsel, accountants and other professional advisors to the Transferor, C&A, any other Seller and their Affiliates, (ii) as required by law, regulation, the requirements of the New York Stock Exchange or legal process or (iii) in connection with any legal or regulatory proceeding to which the Transferor, the Guarantor, C&A, any other Seller or any of their Affiliates is subject. Each of the Transferor, the Guarantor, C&A and each other Seller hereby consents to the disclosure of any non-public information with respect to it received by the Administrative Agent, the Initial Purchasers, the Funding Agents or 65 any PARCO APA Bank from the Transferor, Guarantor, C&A or any other Sellers to (i) any of the Initial Purchasers, the Administrative Agent, the Funding Agents, any PARCO APA Bank, (ii) legal counsel, accountants and other professional advisors to the Administrative Agent, the Initial Purchasers, the Funding Agents, a PARCO APA Bank or their Affiliates, (iii) as required by law, regulation or legal process, (iv) in connection with any legal or regulatory proceeding to which the Administrative Agent, the Initial Purchasers, the Funding Agents, a PARCO APA Bank or any of their Affiliates is subject, (v) any nationally recognized rating agency providing a rating or proposing to provide a rating to the Initial Purchasers' Commercial Paper, (vi) any placement agent which proposes to offer and sell the Initial Purchasers' Commercial Paper, (vii) any provider of the Initial Purchasers' program-wide liquidity or credit support facilities, (viii) any potential PARCO APA Bank or (ix) any Participant or potential Participant; provided, that the Administrative Agent, the Initial Purchasers, the Funding Agents or any PARCO APA Bank, as the case may be, shall advise any such recipient of information that the information they receive is non-public information and may not be disclosed or used for any other purposes other than that for which it is disclosed to such recipient without the prior written consent of the Guarantor and C&A. (b) Each of the Administrative Agent, the Initial Purchasers, the Funding Agents and the PARCO APA Banks shall maintain, and shall cause each officer, employee and agent of itself and its Affiliates to maintain, the confidentiality of the Transaction Documents and all other confidential proprietary information with respect to the Transferor, the Guarantor, C&A, any other Seller and their Affiliates and each of their respective businesses obtained by them in connection with the structuring, negotiation and execution of the transactions contemplated herein and in the other Transaction Documents, except for information that has become publicly available or information disclosed (i) to legal counsel, accountants and other professional advisors to the Administrative Agent, the Initial Purchasers, the Funding Agents, a PARCO APA Bank or their Affiliates, (ii) as required by law, regulation or legal process or (iii) in connection with any legal or regulatory proceeding to which the Administrative Agent, the Initial Purchasers, the Funding Agents, a PARCO APA Bank or any of their Affiliates is subject, (iv) any nationally recognized rating agency providing a rating or proposing to provide a rating to the Initial Purchasers' Commercial Paper, (v) any placement agent which proposes to offer and sell the Initial Purchasers' Commercial Paper, (vi) any provider of the Initial Purchasers' program-wide liquidity or credit support facilities, (vii) any potential PARCO APA Bank or (viii) any Participant or potential Participant. SECTION 10.8 No Bankruptcy Petition Against the Initial Purchasers. Each of the Transferor, the Guarantor, C&A and each other Seller hereby covenants and agrees that, prior to the date which is one year and one day after the payment in full of all outstanding Commercial Paper or other indebtedness of the Initial Purchasers, it will not institute against, or join any other Person in instituting against, the Initial Purchasers any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of the United States or any State of the United States. SECTION 10.9 Limited Recourse. Notwithstanding anything to the contrary contained herein, the obligations of the Initial Purchasers under this Agreement are solely the corporate obligations of the Initial Purchasers and, in the case of obligations of the Initial Purchasers other than Commercial Paper, shall be payable at such time as funds are actually 66 received by, or are available to, the Initial Purchasers in excess of funds necessary to pay in full all outstanding Commercial Paper and, to the extent funds are not available to pay such obligations, the claims relating thereto shall not constitute a claim against the Initial Purchasers but shall continue to accrue. Each party hereto agrees that the payment of any claim (as defined in Section 101 of the Bankruptcy Code) of any such party shall be subordinated to the payment in full of all Commercial Paper. No recourse under any obligation, covenant or agreement of the Initial Purchasers contained in this Agreement shall be had against any incorporator, stockholder, officer, director, member, manager, employee or agent of the Initial Purchasers, the PARCO Administrative Agent, the Administrative Agent, or any of their Affiliates (solely by virtue of such capacity) by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise; it being expressly agreed and understood that this Agreement is solely a corporate obligation of the Initial Purchasers, and that no personal liability whatever shall attach to or be incurred by any incorporator, stockholder, officer, director, member, manager, employee or agent of the Initial Purchasers, the PARCO Administrative Agent, the Administrative Agent, or any of their Affiliates (solely by virtue of such capacity) or any of them under or by reason of any of the obligations, covenants or agreements of the Initial Purchasers contained in this Agreement, or implied therefrom, and that any and all personal liability for breaches by the Initial Purchasers of any of such obligations, covenants or agreements, either at common law or at equity, or by statute, rule or regulation, of every such incorporator, stockholder, officer, director, member, manager, employee or agent is hereby expressly waived as a condition of and in consideration for the execution of this Agreement; provided that the foregoing shall not relieve any such Person from any liability it might otherwise have as a result of fraudulent actions taken or fraudulent omissions made by them. SECTION 10.10 Characterization of the Transactions Contemplated by the Agreement. (a) It is the intention of the parties that the transactions contemplated hereby constitute the sale of the Transferred Interest, conveying good title thereto free and clear of any Adverse Claims to the Initial Purchasers, the PARCO APA Banks and the Funding Agents, and that the Transferred Interest not be part of the Transferor's estate in the event of an insolvency. If, notwithstanding the foregoing, the transactions contemplated hereby should be deemed a financing, the parties intend that the Transferor shall be deemed to have granted to the Administrative Agent, on behalf of the Initial Purchasers, the PARCO APA Banks and the Funding Agents, and the Transferor hereby grants to the Administrative Agent, on behalf of the Initial Purchasers, the PARCO APA Banks and the Funding Agents, to secure the Aggregate Unpaids a first priority perfected and continuing security interest in all of the Transferor's right, title and interest in, to and under the Receivables, together with Related Security, the Required Currency Hedge, and Collections and Proceeds with respect thereto, together with all monies from time to time on deposit in the Collection Account and any Lock-Box Account, and together with all of the Transferor's rights under the Receivables Purchase Agreement and all other Transaction Documents and any Proceeds of any of the foregoing assets (the "Transferor Collateral"), and that this Agreement shall constitute a security agreement under applicable Law. The Transferor hereby assigns to the Administrative Agent, on behalf of the Initial Purchasers, the PARCO APA Banks and the Funding Agents, all of its rights and remedies under the 67 Receivables Purchase Agreement with respect to the Receivables and with respect to any obligations thereunder of any Seller with respect to the Receivables. The Transferor agrees that it shall not give any consent or waiver required or permitted to be given under the Receivables Purchase Agreement without the prior consent of each Funding Agent which consent shall be obtained by the Administrative Agent. (b) Each of the Transferor and the Collection Agent acknowledges and consents to the grant by Redwood to the Redwood Collateral Agent pursuant to the Redwood Collateral Agent Agreement of a security interest upon all of the Administrative Agent's right, title and interest in, to and under the Transferor Collateral on behalf of Redwood and acknowledges the rights of the Redwood Collateral Agent thereunder and the covenants made by the Transferor in favor of the Administrative Agent set forth therein, and further acknowledges and consents that, upon the occurrence and during the continuance of a Potential Termination Event or a Termination Event, the Administrative Agent shall enforce the provisions of the Receivables Transfer Agreement and the Transaction Documents to which Redwood is a party and the Redwood Collateral Agent shall be entitled to all the rights and remedies of Redwood thereunder. In addition, each of the Transferor and the Collection Agent hereby authorizes the Redwood Collateral Agent to rely on the representations and warranties made by it in the Transaction Documents to which it is a party and in any other certificates or documents furnished by it to any party in connection therewith. SECTION 10.11 Waiver of Setoff. Each of the Administrative Agent, Funding Agents, the Transferor, the Guarantor, the Collection Agent, and each Seller hereby waives any right of setoff it may have or to which it may be entitled under this Agreement from time to time against the Initial Purchasers or their assets. SECTION 10.12 Chase Conflict Waiver. Chase acts as PARCO Funding Agent and as PARCO Administrative Agent for PARCO, as issuing and paying agent for PARCO's Commercial Paper, as provider of other backup facilities for PARCO, as Administrative Agent hereunder, and may provide other services or facilities from time to time (the "Chase Roles"). Without limiting the generality of Section 4.8 of the PARCO Asset Purchase Agreement, each of the parties hereto hereby acknowledges and consents to any and all Chase Roles, waives any objections it may have to any actual or potential conflict of interest caused by Chase's acting as the PARCO Funding Agent or as a PARCO APA Bank under the PARCO Asset Purchase Agreement and acting as or maintaining any of the Chase Roles, and agrees that in connection with any Chase Role, Chase may take, or refrain from taking, any action which it in its discretion deems appropriate. SECTION 10.13 GE Capital Conflict Waiver. GE Capital acts as Redwood Funding Agent, as Redwood Collateral Agent, as Redwood Liquidity Agent and as a Redwood Liquidity Lender and may provide other services or facilities from time to time (the "GE Capital Roles"). Each of the parties hereto hereby acknowledges and consents to any and all GE Capital Roles, waives any objections it may have to any actual or potential conflict of interest caused by GE Capital's acting as the Redwood Funding Agent or as a Redwood Collateral Agent, Redwood Liquidity Lender or Redwood Liquidity Agent under the Redwood Liquidity Loan Agreement and acting as or maintaining any of the GE Capital Roles, and agrees that in connection with any 68 GE Capital Role, GE Capital may take, or refrain from taking, any action which it in its discretion deems appropriate. SECTION 10.14 The Bank of Nova Scotia Conflict Waiver. The Bank of Nova Scotia acts as Liberty Funding Agent and as Liberty Administrative Agent for Liberty, as issuing and paying agent for Liberty's Commercial Paper, as provider of other backup facilities for Liberty hereunder, and may provide other services or facilities from time to time ("The Bank of Nova Scotia Roles"). Each of the parties hereto hereby acknowledges and consents to any and all The Bank of Nova Scotia Roles, waives any objections it may have to any actual or potential conflict of interest caused by The Bank of Nova Scotia's acting as the Liberty Funding Agent or as a Liberty APA Bank under the Liberty Liquidity Asset Purchase Agreement and acting as or maintaining any of The Bank of Nova Scotia Roles, and agrees that in connection with any The Bank of Nova Scotia Role, The Bank of Nova Scotia may take, or refrain from taking, any action which it in its discretion deems appropriate. SECTION 10.15 Liability of Funding Agents. Notwithstanding any provision of this Agreement, (i) the Funding Agents shall not have any obligations under this Agreement other than those specifically set forth herein, and no implied obligations of the Funding Agents shall be read into this Agreement; and (ii) in no event shall the Funding Agents be liable under or in connection with this Agreement for indirect, special, or consequential losses or damages of any kind, including lost profits, even if advised of the possibility thereof and regardless of the form of action by which such losses or damages may be claimed. Neither the Funding Agents nor any of their directors, officers, agents or employees shall be liable for any action taken or omitted to be taken in good faith by them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limiting the foregoing, a Funding Agent (a) may consult with legal counsel (including counsel for the Initial Purchasers), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts, (b) shall not be responsible to the Administrative Agent, the Initial Purchasers, the Transferor, the Guarantor, any Seller or the Collection Agent for any statements, warranties or representations (other than their own respective statements) made in or in connection with this Agreement or the other Transaction Documents, (c) shall not be responsible to the Administrative Agent, the Initial Purchasers, the Guarantor, the Transferor, any Seller or the Collection Agent for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or the other Transaction Documents, (other than the legality, validity, enforceability or genuineness of its own execution, authorization and performance hereof and thereof), (d) shall incur no liability under or in respect of any of the Commercial Paper or other obligations of the Initial Purchasers under this Agreement or the other Transaction Documents and (e) shall incur no liability under or in respect of this Agreement or the other Transaction Documents by acting upon any notice (including notice by telephone), consent, certificate or other instrument or writing (which may be by facsimile) believed by it to be genuine and signed or sent by the proper party or parties. Notwithstanding anything else herein or in the other Transaction Documents, it is agreed that where a Funding Agent may be required under this Agreement or the other Transaction Documents to give notice of any event or condition or to take any action as a result of the occurrence of any event or the existence of any condition, each Funding Agent agrees to give such notice or take such action only to the extent that it has actual knowledge of the occurrence of such event or the existence of 69 such condition, and shall incur no liability for any failure to give such notice or take such action in the absence of such knowledge. SECTION 10.16 Tax Treatment. The Transferor has entered into this Agreement with the intention that, for Federal, State and local income, single business and franchise tax purposes, the Incremental Transfers will qualify as indebtedness of the Transferor secured by the Receivables, Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto. Each of the parties hereto agree to treat the Incremental Transfers for Federal, State and local income, single business and franchise tax purposes as indebtedness of the Transferor. SECTION 10.17 Canadian Taxes. The Transferor represents and warrants to the Administrative Agent and each Funding Agent for the benefit of the Initial Purchasers and PARCO APA Banks that it has not assumed in any manner whatsoever any obligation of the Sellers under the Receivables Purchase Agreement (i) to make collections and remittances in respect of any Canadian goods and services tax, any Canadian provincial sales tax or any other similar Canadian tax or (ii) to file any returns in respect of such taxes with Canadian tax authorities and that it was not contemplated by either any Seller under the Receivables Purchase Agreement or the Transferor that such obligation was to be assumed by the Transferor. The parties hereto agree that neither the Administrative Agent, the Initial Purchasers nor the PARCO APA Banks are assuming the in any manner whatsoever any obligation of the Sellers under the Receivables Purchase Agreement to collect such taxes, make such remittances and file such returns, and that it is not contemplated by the parties hereto that any such obligation is hereby assumed by the Initial Purchasers, the PARCO APA Banks, the Administrative Agent or any Funding Agent. The Transferor hereby indemnifies the Administrative Agent and each Funding Agent for the benefit of the Initial Purchasers and PARCO APA Banks and holds them harmless from and against any assessments, withholding taxes, claims, or other demands for payment of such taxes by Canadian tax authorities, as well as interest and penalties; provided that any payments made by the Transferor pursuant to this subsection shall be made solely from funds available to the Transferor which are not otherwise required to be applied to the payment of any amounts pursuant to this Agreement (other than to the Transferor), shall be non-recourse other than with respect to such funds, and shall not constitute a claim against the Transferor to the extent that insufficient funds exist to make such payment. It is understood that all of the invoices in respect of the Receivables with Canadian Obligors of the Sellers under the Receivables Purchase Agreement will bear the GST registration number of such Seller. SECTION 10.18 Funding Agent Consents. For instances where the Administrative Agent has undertaken to obtain the consents of the Funding Agents, the Administrative Agent agrees that it will seek to obtain such consents without unreasonable delay. 70 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Receivables Transfer Agreement as of the date first written above. PARK AVENUE RECEIVABLES CORPORATION, as an Initial Purchaser By: --------------------------------- Name: ------------------------------- Title: ------------------------------ CARCORP, INC., as Transferor By: --------------------------------- Name: ------------------------------- Title: ------------------------------ COLLINS & AIKMAN PRODUCTS CO., as Guarantor and as Collection Agent By: --------------------------------- Name: ------------------------------- Title: ------------------------------ THE CHASE MANHATTAN BANK, as PARCO Funding Agent By: --------------------------------- Name: ------------------------------- Title: ------------------------------ THE CHASE MANHATTAN BANK, as Administrative Agent By: --------------------------------- Name: ------------------------------- Title: ------------------------------ THE CHASE MANHATTAN BANK, as a Liquidity Bank By: --------------------------------- Name: ------------------------------- Title: ------------------------------ REDWOOD RECEIVABLES CORPORATION, as an Initial Purchaser By: --------------------------------- Name: Denis M. Creeden Title: Assistant Secretary GENERAL ELECTRIC CAPITAL CORPORATION, as Redwood Funding Agent By: --------------------------------- Name: Denis M. Creeden Title: Duly Authorized Signatory LIBERTY STREET FUNDING CORP., as an Initial Purchaser By: --------------------------------- Name: ------------------------------- Title: ------------------------------ THE BANK OF NOVA SCOTIA, as Liberty Funding Agent By: --------------------------------- Name: ------------------------------- Title: ------------------------------ EXHIBIT A Credit and Collection Policy A-1 EXHIBIT B List of Lock-Box Banks and Accounts
BANK ACCOUNT NUMBER - ---- -------------- Northern Trust Bank 76279 50 South LaSalle Street 30176279 Chicago, IL 60675 30276279 Canadian Imperial Bank of Commerce 22-43318 1155 Ren-L vesque West 12th Floor 04-46718 Montreal (Quebec) Canada H3B3Z4 Toronto Dominion Bank 0311544 Commercial Banking Centre 0685452 Windsor, Ontario N9A 6J8 0685460 Canada 0685479 0686467 7302759 7302783 7302872 7320196 Wachovia Bank, N.A. 1860-084622 400 South Tryon Street 1867-084609 Charlotte, North Carolina 28202 1865-084610 1863-084611 1861-084612 1869-084613 1867-084614 U.S. Collection Account - Chase Manhattan Bank 323883680 Canada/CAD Collection Account - Toronto Dominion Bank 317569 Canada/USD Collection Account - Toronto Dominion Bank 7305758
B-1 EXHIBIT C [Form Of Lock-Box Agreement] [Date] [Name and Address of Lock-Box Bank] Re: Carcorp., Inc. Lock-Box Account No[s]. Ladies and Gentlemen: Carcorp, Inc. (the "Transferor") hereby notifies you that in connection with certain transactions involving its accounts receivable, it has transferred exclusive dominion of its lock-box account no[s]. maintained with you (collectively the "Accounts") to The Chase Manhattan Bank, as administrative agent (the "Administrative Agent") and that Transferor will transfer exclusive control of the Accounts to the Administrative Agent effective upon delivery to you of the Notice of Effectiveness (as hereinafter defined). The accounts receivables are being transferred to the Transferor pursuant to the Receivables Purchase Agreement, among Collins & Aikman Products Co. and its direct and indirect Subsidiaries named therein, each as sellers, and the Transferor as the Purchaser and the other sellers from time to time named therein and, transferred by the Transferor to the Administrative Agent on behalf of the Initial Purchasers and the PARCO APA Banks pursuant to the Receivables Transfer Agreement, among the Transferor, Collins & Aikman Products Co., as guarantor and as collection agent (in its capacity as collection agent, the "Collection Agent"), Park Avenue Receivables Corporation, Redwood Receivables Corporation, Liberty Street Funding Corp., the PARCO APA Banks (as listed on Schedule I to the Receivables Transfer Agreement), the Funding Agents (as listed on Schedule I to the Receivables Transfer Agreement) and the Administrative Agent. In furtherance of the foregoing, Transferor and the Administrative Agent hereby instruct you, beginning on the date of your receipt of the Notice of Effectiveness: (i) to collect the monies, checks, instruments and other items of payment mailed to the Accounts, (ii) to deposit into the Accounts all such monies, checks, instruments and other items of payment or all funds collected with respect thereto (unless otherwise instructed by the Administrative Agent); and (iii) to transfer all funds deposited and collected in the Accounts pursuant to instructions given to you by the Administrative Agent from time to time. You are hereby further instructed: (i) unless and until the Administrative Agent notifies you to the contrary at any time after your receipt of the Notice of Effectiveness, to make such transfers from the Accounts at such times and in such manner as Collection Agent, in its capacity as Collection Agent for the Administrative Agent, shall from time to time instruct to the extent such instructions are not inconsistent with the instructions set forth herein, and (ii) to permit the Collection Agent (in its capacity as Collection Agent for the Administrative Agent) and the Administrative Agent to obtain upon request any information relating to the Accounts, including, without limitation, any information regarding the balance or activity of the Accounts. C-1 Transferor also hereby notifies you that, beginning on the date of your receipt of the Notice of Effectiveness and notwithstanding anything herein or elsewhere to the contrary, but subject to the concurrent rights of the Collection Agent in the preceding paragraph, the Administrative Agent, and not Transferor or the Collection Agent, shall be irrevocably entitled to exercise any and all rights in respect of or in connection with the Accounts, including, without limitation, the right to specify when payments are to be made out of or in connection with the Accounts. The Administrative Agent have a continuing interest in all of the checks and their proceeds and all monies and earnings, if any, thereon in the Accounts, and you shall be the Administrative Agent's agent for the purpose of holding and collecting such property. The monies, checks, instruments and other items of payment mailed to, and funds deposited to, the Accounts will not be subject to deduction, set-off, banker's lien, or any other right in favor of any person other than the Administrative Agent (except that you may set off (i) all amounts due to you in respect of your customary fees and expenses for the routine maintenance and operation of the Accounts, and (ii) the face amount of any checks which have been credited to the Accounts but are subsequently returned unpaid because of uncollected or insufficient funds). This Agreement may not be terminated at any time by Transferor or you without providing thirty (30) days' prior written notice to the Administrative Agent and the Collection Agent. Neither this Agreement nor any provision hereof may be changed, amended, modified or waived orally but only by an instrument in writing signed by the Administrative Agent, Transferor and you. You shall not assign or transfer your rights or obligations hereunder (other than to the Administrative Agent) without thirty (30) days' prior written notice to the Administrative Agent and Transferor. Subject to the preceding sentence, this Agreement shall be binding upon each of the parties hereto and their respective successors and assigns, and shall inure to the benefit of, and be enforceable by, the Administrative Agent, each of the parties hereto and their respective successors and assigns. You hereby represent that the person signing this Agreement on your behalf is duly authorized by you to so sign. You agree to give the Administrative Agent, Transferor and Collection Agent prompt notice if the Accounts become subject to any writ, garnishment, judgment, warrant of attachment, execution or similar process. TRANSFEROR AGREES TO INDEMNIFY AND HOLD YOU HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, COSTS AND EXPENSES (INCLUDING REASONABLE ATTORNEYS' FEES) WHICH YOU MAY SUFFER OR INCUR IN CONNECTION WITH THIS AGREEMENT OR THE MAINTENANCE OF THE ACCOUNTS, INCLUDING BUT NOT LIMITED TO THOSE WHICH IN WHOLE OR IN PART ARISE OUT OF YOUR NEGLIGENCE, BUT NOT INCLUDING THOSE ARISING OUT OF YOUR GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. IN NO EVENT SHALL YOU BE LIABLE FOR ANY INCIDENTAL, INDIRECT, PUNITIVE OR CONSEQUENTIAL DAMAGES. C-2 Notwithstanding any other provision of this Agreement, you shall not be liable for any failure, inability to perform, or delay in performance hereunder, if such failure, inability, or delay is due to acts of God, war, civil commotion, governmental action, fire, explosion, terrorist activities, strikes, other industrial disturbances, equipment malfunction, outages of computers, action, non-action or delayed action on the part of Transferor, Collection Agent or the Administrative Agent, or any other entity or any other causes that are beyond your reasonable control, or for any such failure, or delay resulting from your reasonable belief that the action would violate any guideline, rule or regulation of any governmental authority. Any notice, demand or other communication required or permitted to be given hereunder shall be in writing and may be personally served or sent by facsimile or by courier service or by United States mail and shall be deemed to have been delivered when delivered in person or by courier service or by facsimile or three (3) Business Days after deposit in the United States mail (registered or certified, with postage prepaid and properly addressed). For the purposes hereof, the addresses of the parties hereto shall be as set forth below each party's name below, or, as to each party, at such other address as may be designated by such party in a written notice to the other party and the Administrative Agent. Please agree to the terms of, and acknowledge receipt of, this notice by signing in the space provided below. C-3 The transfer of control of the Accounts, referred to in the first paragraph of this letter, shall become effective upon delivery to you of a notice (the "Notice of Effectiveness") in substantially the form attached hereto as Annex "1". Very truly yours, CARCORP, INC. By: ------------------------------ Title: --------------------------- Date: ---------------------------- Bank of America Plaza 300 South Fourth Street, Suite 1100 Las Vegas, NV 89101 Attention: Monte Miller Facsimile No.: (702) 598-3651 ACKNOWLEDGED AND AGREED: [NAME OF LOCK-BOX BANK] THE CHASE MANHATTAN BANK, as Administrative Agent By: By: -------------------------------------- ------------------------------ Title: Title: ----------------------------------- --------------------------- Date: Date: ------------------------------------ ---------------------------- [Address] 450 West 33rd Street Attention: 15th Floor ------------------------------- Facsimile No.: New York, NY 10001 --------------------------- Attention: Craig Kantor Facsimile No.: (212) 946-7776 COLLINS & AIKMAN PRODUCTS CO., as Collection Agent By: -------------------------------------- Title: ----------------------------------- Date: ------------------------------------ 701 McCullough Drive P.O. Box 32665 Charlotte, NC 28232 Attention: Assistant Treasurer Facsimile No.: (704) 548-2314 C-4 ANNEX I TO LOCK-BOX AGREEMENT [FORM OF NOTICE OF EFFECTIVENESS] DATED: , 199 ----------- -- TO: [Name of Lock-Box Bank] [Address] ATTN: Re: Lock-Box Account No[s]. Ladies and Gentlemen: We hereby give you notice that the transfer of control of the above-referenced Lock-Box Account[s], as described in our letter agreement with you dated , 199 is effective as of the date hereof. You are hereby instructed to comply immediately with the instructions set forth in that letter. Very truly yours, CARCORP, INC. By: ------------------------- Title: ---------------------- ACKNOWLEDGED AND AGREED: [NAME OF LOCK-BOX BANK] By: -------------------------------------- Title: ----------------------------------- Date: ------------------------------------ [Address] Attention: ------------------------------- Facsimile No.: --------------------------- C-5 EXHIBIT D [FORM OF SETTLEMENT REPORT] D-1 EXHIBIT E [FORM OF WEEKLY REPORT] E-1 EXHIBIT F [FORM OF DAILY REPORT] F-1 EXHIBIT G [FORM OF TRANSFER CERTIFICATE] TRANSFER CERTIFICATE Reference is made to the Receivables Transfer Agreement dated as of December __, 1999 (the "Agreement") among Carcorp, Inc., as transferor (in such capacity, the "Transferor"), Collins and Aikman Products Co., as Guarantor and as Collection Agent (in such capacity, the "Collection Agent"), Park Avenue Receivables Corporation, Redwood Receivables Corporation and Liberty Street Funding Corporation ("the Initial Purchasers"), the several financial institutions party thereto from time to time as PARCO APA Banks, the Funding Agents, and The Chase Manhattan Bank, as administrative agent (the "Administrative Agent"). Terms defined in the Agreement, or incorporated therein by reference, are used herein as therein defined. The Transferor hereby conveys, transfers and assigns to the Administrative Agent, for the benefit of the Initial Purchasers and the PARCO APA Banks, an undivided ownership interest in the Receivables and the Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto (each, an "Incremental Transfer"). Each Incremental Transfer by the Transferor to the Initial Purchasers, and each reduction or increase in the Aggregate Net Investment in respect of each Incremental Transfer evidenced hereby, shall be indicated by the Administrative Agent on the grid attached hereto which is part of this Transfer Certificate. This Transfer Certificate is made without recourse except as otherwise provided in the Agreement. This Transfer Certificate shall be governed by, and construed in accordance with, the laws of the State of New York. IN WITNESS WHEREOF, the undersigned has caused this Transfer Certificate to be duly executed and delivered by its duly authorized officer as of the date first above written. CARCORP, INC. By: ------------------------------ Name: ---------------------------- Title: --------------------------- G-1 GRID
- ----------------------------------------------------------------------------------------------------------------------------------- Amount of Transfer Allocated to: Aggregate Net ------------- Investment (Giving ------------------ Date of Incremental Amount of Effect to Incremental Person Making -------------------- ---------- ---------------------- ------------- Transfer Incremental Transfer PARCO Liberty Redwood PARCO APA Transfer) Notation -------- -------------------- ----- ------- ------- --------- -------- -------- Banks ----- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------------------
G-2 EXHIBIT H LIST OF TRANSFEROR'S ACTIONS AND SUITS None. H-1 EXHIBIT I LIST OF COLLECTION AGENT'S ACTIONS AND SUITS I-1 EXHIBIT J LOCATION OF RECORDS AND RELATED SECURITY FOR THE TRANSFEROR Bank of America Plaza 300 South Fourth Street Suite 1100 Las Vegas, Nevada 89101 701 McCallough Drive Charlotte, North Carolina 28262 J-1 EXHIBIT K LIST OF SUBSIDIARIES, DIVISIONS AND TRADENAMES
Principal Divisions/ place of Trade- business State of names Name of Company Corporate Address (state) incorporation (if any) - --------------- ----------------- ------- ------------- -------- Collins & Aikman Products 701 McCullough Drive North Carolina Delaware none Co. Charlotte, NC 28262 Carcorp, Inc. Bank of America Plaza Nevada Delaware none 300 South Fourth Street Suite 1100 Las Vegas, NV 89101 Collins & Aikman North America Michigan Delaware none Carpet & Acoustics (MI) Head Office/Tech. Center Inc. 47785 Anchor Court Plymouth, MI 48170 Collins & Aikman 2409 Industrial Drive Tennessee Tennessee none Carpet & Acoustics (TN) Springfield, TN 37172 Inc. Collins & Aikman Canton Plant Ohio Delaware The Akro Accessory Mats Inc. 1212 Seventh St. SW Corporation Canton, OH 44711 Dura Convertible East Plant Michigan Delaware none Systems, Inc. 1365 East Beecher Street Adrian, MI 49221 Amco Convertible Adrian Plant Michigan Delaware none Fabrics, Inc. ("Amco") 545 Industrial Drive Adrian, MI 49247 Collins & Aikman 5755 New King Court Michigan Delaware none Plastics, Inc. Troy, MI 48098
K-1
Principal Divisions/ place of Trade- business State of names Name of Company Corporate Address (state) incorporation (if any) - --------------- ----------------- ------- ------------- -------- Collins & Aikman Farnham Plant Quebec Ontario none Canada Inc. 150 Collins Street Farnham, Quebec J2N 2N8 Collins & Aikman Scarborough Division Ontario Ontario none Plastics, Ltd. 165 Milner Ave. Scarborough, Ontario M1S 4G7
List of Former Names and Merged Companies K-2 EXHIBIT L Form of Secretary's Certificate I, , the undersigned [Assistant] Secretary of (the "Company"), a Delaware corporation, DO HEREBY CERTIFY that: 1. Attached hereto as Annex A is a true and complete copy of the Certificate of Incorporation of the Company, certified by the Secretary of State of the State of Delaware. 2. Attached hereto as Annex B is a true and complete copy of the By-laws of the Company as in effect on the date hereof. 3. Attached hereto as Annex C is a true and complete copy of the resolutions duly adopted by the Board of Directors of the Company adopted on December __, 1999, authorizing the execution, delivery and performance of each of the documents mentioned therein, which resolutions have not been revoked, modified, amended or rescinded and are still in full force and effect. 4. Attached hereto as Annex D are copies of good standing certificates of the Company certified by the Securities of State of the States of Delaware and . 5. On and as of the date hereof, the below-named persons are duly qualified officers or representatives of the Company holding the respective offices or positions below set opposite their names and are authorized to execute on behalf of the Company all of the Transaction Documents (as defined in the below-mentioned Receivables Transfer Agreement) to which the Company is a party and the signatures below set opposite their names are their genuine signatures: Name Office Signature - ---- ------ --------- L-1 Capitalized terms not otherwise defined herein shall have the meanings set forth in the Receivables Transfer Agreement, dated December 27, 1999 among Carcorp, Inc., as Transferor, Collins & Aikman Products Co., as Guarantor and Collection Agent, Park Avenue Receivables Corporation, as an Initial Purchaser, Redwood Receivables Corporation, as an Initial Purchaser, Liberty Street Funding Corp., as an Initial Purchaser, the several financial institutions party thereto from time to time, as PARCO APA Banks, the several agent banks party thereto from time to time, as Funding Agents, and The Chase Manhattan Bank, as Administrative Agent. WITNESS my hand and seal of the Company as of this 27th day of December 1999. - ------------------------------ Name: Title: [Assistant] Secretary] [SEAL] I, , the undersigned, a of the Company, DO HEREBY CERTIFY that: 1. is the duly elected and qualified [Assistant] Secretary of the Company and the signature above is his genuine signature. 2. The representations and warranties of the Company contained in each of the Transaction Documents to which the Company is a party are true and correct as if made on the date hereof. WITNESS my hand as of this 27th day of December 1999. - ------------------------------ Name: Title: L-2 EXHIBIT M AGREED UPON PROCEDURES M-1 EXHIBIT N [FORM OF GUARANTY] LIMITED GUARANTY This Limited Guaranty (as amended, supplemented or otherwise modified and in effect from time to time, the "Guaranty") is executed as of the 27th day of December, 1999 by Collins & Aikman Products Co., a corporation organized and existing under the laws of the State of Delaware (the "Guarantor"), in favor of The Chase Manhattan Bank, as administrative agent (in such capacity, the "Administrative Agent"), on behalf of the Funding Agents, the Initial Purchasers and the PARCO APA Banks (together, the Funding Agents, the Initial Purchasers and the PARCO APA Banks are referred to herein as the "Beneficiaries"). PRELIMINARY STATEMENTS WHEREAS, pursuant to a receivables purchase agreement, dated as of December 27, 1999 (as amended, supplemented or otherwise modified and in effect from time to time, the "Receivables Purchase Agreement"), between Collins & Aikman Products Co. ("C&A"), C&A's wholly-owned direct and indirect Subsidiaries listed on Schedule D attached thereto, each as a seller thereunder (each a "Seller", and collectively, the "Sellers"), and Carcorp, Inc., a Delaware corporation (the "Receivables Company"), as purchaser thereunder, each Seller has agreed to sell from time to time, and Receivables Company has agreed to purchase from time to time, the Receivables; WHEREAS, pursuant to (i) a Receivables Transfer Agreement, dated as of December 27, 1999 (as amended, supplemented or otherwise modified and in effect from time to time, the "Receivables Transfer Agreement"), between C&A, as Guarantor and as collection agent thereunder (the "Collection Agent"), Receivables Company, as transferor thereunder, the Initial Purchasers, the PARCO APA Banks from time to time party thereto, the Funding Agents and the Administrative Agent, (ii) an Asset Purchase Agreement, dated as of December 27, 1999 (as amended, supplemented or otherwise modified and in effect from time to time, the "PARCO Asset Purchase Agreement"), by and among PARCO, the PARCO APA Banks and the PARCO Funding Agent, (iii) the Redwood Liquidity Loan Agreement and (iv) the Liberty Liquidity Asset Purchase Agreement, Receivables Company has agreed to sell from time to time, and the Administrative Agent, on behalf of the Initial Purchasers and the PARCO APA Banks, has agreed to purchase from time to time, on the terms and conditions set forth in the Receivables Transfer Agreement and the Asset Purchase Agreements, undivided interests in the Receivables; WHEREAS, the Guarantor is the direct or indirect owner of 100% of the outstanding capital stock of each of the other Sellers; and WHEREAS, it is a condition precedent to the execution and delivery of the Receivables Transfer Agreement that the Guarantor execute this Guaranty and deliver it to the Administrative Agent for the benefit of the Beneficiaries. In consideration for the execution and delivery of the Receivables Transfer Agreement and the Asset Purchase Agreements by the Beneficiaries, as applicable, and for other good and N-1 valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the Guarantor, the Guarantor agrees as follows: 1. Definitions. Unless otherwise defined in this Guaranty, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in, or incorporated by reference into, the Receivables Transfer Agreement. As used herein, "Facility Documents" shall mean, collectively, the Receivables Purchase Agreement, the Receivables Transfer Agreement and each Asset Purchase Agreement. 2. Guaranty of Obligations. The Guarantor unconditionally guarantees the full and prompt payment when due of all of the payment obligations and the timely performance of all of the performance obligations of the Sellers of every kind and nature now or hereafter existing, or due or to become due, under the Facility Documents (collectively, the "Obligations"); provided that, such Obligations shall not include amounts not collected in respect of any Receivable as a result of the creditworthiness of an Obligor, including, but not limited to, amounts required to be returned to an Obligor as a voidable preference. The Guarantor shall pay all reasonable costs and expenses including, without limitation, all court costs and reasonable attorney's fees and expenses paid or incurred by the Administrative Agent and the Beneficiaries in connection with (a) the collection of all or any part of the Obligations from the Guarantor and (b) the prosecution or defense of any action by or against the Administrative Agent, the Beneficiaries or Receivables Company in connection with, or relating to, the Obligations, whether involving the Sellers, the Collection Agent, the Guarantor, Receivables Company or any other party (including, but not limited to, a trustee in a bankruptcy or a debtor-in-possession). 3. Validity of Obligations; Irrevocability. The Guarantor agrees that subject to the proviso set forth in Section 2 above its obligations under this Guaranty shall be unconditional, irrespective of (i) the validity, enforceability, discharge, disaffirmance, settlement or compromise (by any Person, including a trustee in a bankruptcy or a debtor-in-possession) of the Obligations or of the Facility Documents or any Contract, (ii) the absence of any attempt to collect the Obligations from a Seller or the Collection Agent or any other party, (iii) the waiver or consent by any Person with respect to any provision of any instrument evidencing the Obligations, (iv) any change of the time, manner or place of payment or performance, or any other term of any of the Obligations, (v) any law, regulation or order of any jurisdiction affecting any term of any of the Obligations or rights of any Person with respect thereto, (vi) the failure by any Person to take any steps to perfect and maintain perfected its interest in the Receivables or any security or collateral related to the Obligations or (vii) any other circumstances which might otherwise constitute a legal or equitable discharge or defense of a guarantor. The Guarantor agrees that the Administrative Agent and the Beneficiaries shall be under no obligation to marshal any assets in favor or against or in payment of any or all of the Obligations. The Guarantor further agrees that, to the extent a payment is made by a Seller or the Collection Agent under the Facility Documents, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to such Seller or the Collection Agent, its estate, trustee, receiver or any other party, under any bankruptcy, insolvency or similar state or federal law, common law or equitable cause, then to the extent of such payment or repayment, the Obligation or part thereof which has been paid, reduced or satisfied by such amount shall be reinstated and continued in full force and effect as of the date such initial payment, reduction or satisfaction occurred. The Guarantor waives all set-offs and N-2 counterclaims and all presentments, demands for performance, notices of dishonor and notice of acceptance of this Guaranty. The Guarantor agrees that its obligations under this Guaranty shall be irrevocable. 4. Several Obligations. The obligations of the Guarantor hereunder are separate and apart from the Sellers or any other Person, and are primary obligations concerning which the Guarantor is the principal obligor. The Guarantor agrees that this Guaranty shall not be discharged except by payment in full of the Obligations and complete performance of the obligations of the Guarantor hereunder. The obligations of the Guarantor hereunder shall not be affected in any way by the release or discharge of a Seller from the performance of any of the Obligations (other than the full and final payment of all of the Obligations), whether occurring by reason of law or any other cause, whether similar or dissimilar to the foregoing. 5. Subrogation Rights. If any amount shall be paid to the Guarantor on account of subrogation rights at any time when all the Obligations shall not have been paid in full, such amount shall be held in trust for the benefit of the Administrative Agent, on behalf of the Beneficiaries, and shall forthwith be paid to the Administrative Agent to be applied to the Obligations. If (a) the Guarantor shall make payment to the Administrative Agent of or perform all or any part of the Obligations and (b) all the Obligations shall be paid and performed in full, the Administrative Agent will, at the Guarantor's request, execute and deliver to the Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to the Guarantor of any interest in the Obligations resulting from such payment or performance by the Guarantor. The Guarantor hereby agrees that it shall have no rights of subrogation with respect to amounts due to the Administrative Agent or the Beneficiaries until such time as all obligations of the Sellers to the Receivables Company, the Administrative Agent and the Beneficiaries have been paid or performed in full and the Receivables Transfer Agreement has been terminated. 6. Rights of Set-Off. The Guarantor hereby authorizes the Administrative Agent, on behalf of the Beneficiaries, at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (whether general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Administrative Agent or the Beneficiaries to or for the credit or the account of Receivables Company against any and all of the obligations of the Guarantor now or hereafter existing under this Guaranty. The Guarantor hereby acknowledges that rights of the Administrative Agent, on behalf of the Beneficiaries, described in this Section 4 are in addition to all other rights and remedies (including, without limitation, other rights of set-off) the Administrative Agent and the Beneficiaries may have. 7. Representations and Warranties. The Guarantor hereby represents and warrants to the Administrative Agent, for the benefit of the Beneficiaries, as of the date hereof, as follows: a. Corporate Existence and Power. The Guarantor is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all corporate power and all material governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is now conducted. The Guarantor is duly qualified to do N-3 business in, and is in good standing in, every other jurisdiction in which the nature of its business requires it to be so qualified, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. b. Corporate and Governmental Authorization; Contravention. The execution, delivery and performance by the Guarantor of this Guaranty and the other Facility Documents to which the Guarantor is a party are within the Guarantor's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any Official Body or official thereof, and do not contravene, or constitute a default under, any provision of applicable law, rule or regulation or of the Certificate of Incorporation or Bylaws of the Guarantor or of any material agreement, judgment, injunction, order, writ, decree or other instrument binding upon the Guarantor or result in the creation or imposition of any Adverse Claim on the assets of the Guarantor or any of its Subsidiaries. c. Binding Effect. Each of this Guaranty and the other Facility Documents to which the Guarantor is a party constitutes the legal, valid and binding obligation of the Guarantor, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws affecting the rights of creditors and general equitable principles (whether considered in a proceeding at law or in equity). d. Accuracy of Information. All information heretofore furnished by the Guarantor to the Administrative Agent or the Beneficiaries for purposes of or in connection with this Guaranty, the other Facility Documents or any transaction contemplated hereby or thereby is, and all such information hereafter furnished by the Guarantor to the Administrative Agent or the Beneficiaries will be, true and accurate in every material respect on the date such information is stated or certified. e. Tax Status. The Guarantor has filed all tax returns (Federal, state and local) required to be filed and has paid prior to delinquency or made adequate provision for the payment of all taxes, assessments and other governmental charges (including for such purposes, the setting aside of appropriate reserves for taxes, assessments and other governmental charges being contested in good faith). f. Action, Suits. There are no actions, suits or proceedings pending, or to the knowledge of the Guarantor threatened, against or affecting the Guarantor or any Affiliate of the Guarantor or their respective properties, in or before any court, arbitrator or other body, which may, individually or in the aggregate, have a Material Adverse Effect. g. Not an Investment Company. The Guarantor is not, nor is it controlled by, an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or is exempt from all provisions of such Act. h. Year 2000. The Guarantor has reviewed the areas within its business and operations which it believes would reasonably be expected to be materially adversely affected by, and has developed a plan to address on a timely basis, the "Year 2000 N-4 Problem" (that is, the risk that computer applications used by the Collection Agent may be unable to recognize and perform properly date-sensitive functions involving certain dates occurring in or after the year 2000). 8. Governing Law. The Guaranty shall be governed by, and construed in accordance with, the laws of the State of New York. [REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK] N-5 IN WITNESS WHEREOF, this Guaranty has been duly executed by the Guarantor as of the 27th day of December, 1999. COLLINS & AIKMAN PRODUCTS CO., as Guarantor By: ----------------------------- Name: Title: Acknowledged and accepted as of The date first above written: THE CHASE MANHATTAN BANK, As Administrative Agent for the benefit of Beneficiaries By: ----------------------------- Name: Title: N-6 EXHIBIT O [FORM OF REQUIRED CURRENCY HEDGE ASSIGNMENT] WHEREAS, Carcorp, Inc. (the "Transferor"), Collins & Aikman Products Co., in its capacity as Guarantor and Collection Agent (the "Collection Agent"), the Initial Purchasers, the PARCO APA Banks and The Chase Manhattan Bank, not in its individual capacity, but solely as administrative agent (in such capacity, the "Administrative Agent") have entered into a Receivables Transfer Agreement (as amended, supplemented or otherwise modified from time to time, the "Receivables Transfer Agreement") dated as of December 27, 1999, providing for, among other things, the transfer of undivided percentage interests in certain receivables and related assets thereunder; WHEREAS, the Transferor and the Sellers have entered into the Receivables Purchase Agreement dated as of December 27, 1999 to provide for the sale of the Receivables and the Related Security; WHEREAS, the Transferor has entered into a Required Currency Hedge with The Chase Manhattan Bank; and WHEREAS, pursuant to subsection 5.1(n)(ii) of the Receivables Transfer Agreement, the Transferor has agreed to deliver this Required Currency Hedge Assignment of the Required Currency Hedge to the Administrative Agent for the benefit of the Initial Purchasers, the PARCO APA Banks and the Funding Agents; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants herein contained, the parties hereto agree as follows: I Definitions. Capitalized terms used in this Required Currency Hedge Assignment shall have the respective meanings assigned to such terms in the Annex X to the Receivables Transfer Agreement. II Assignment. In order to secure and to provide for the payment of amounts due pursuant to the Receivables Transfer Agreement, the Transferor hereby assigns, conveys, transfers, delivers and sets over unto the Administrative Agent, its successors and assigns, and grants to the Administrative Agent in each case for the benefit of the Initial Purchasers, the PARCO APA Banks and the Funding Agents, a security interest in, all right, title and interest of the Transferor in and to the Required Currency Hedge including, without limitation, all moneys due and to become due to the Transferor thereunder or in connection therewith, whether payable as fees, expenses, costs, indemnities, damages for the breach of such Required Currency Hedge or otherwise, and all rights, remedies, powers, privileges and claims of the Transferor under or with respect to such Required Currency Hedge (whether arising pursuant to the terms of such Required Currency Hedge or otherwise available to the Transferor at law or in equity), including, without limitation, the right of the Transferor to enforce the obligations of the Counterparties thereunder and to give or withhold any and all consents, requests, notices, directions, approvals, extensions or waivers under or with respect to such Required Currency Hedge to the same extent as the Transferor could but for the assignment and security interest granted hereby. O-1 III Successors and Assigns. This Required Currency Hedge Assignment and the covenants set forth herein shall be binding upon and inure to the benefit of the Transferor, the Administrative Agent, the Funding Agents, the Initial Purchasers and the PARCO APA Banks, respectively, and their respective successors and permitted assigns. IV Governing Law. THIS ASSIGNMENT SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. V Limitation of Liability. It is expressly understood and agreed by the parties hereto that (a) this Required Currency Hedge Assignment is executed and delivered by The Chase Manhattan Bank, not individually or personally but solely as Administrative Agent, in the exercise of the powers and authority conferred and vested in it, (b) each of the representations, undertakings and agreements herein made on the part of the Administrative Agent are made and intended not as personal representations, undertakings and agreements by The Chase Manhattan Bank, (c) nothing herein contained shall be construed as creating any liability of the Administrative Agent, individually or personally, to perform any covenant under the Required Currency Hedge Assignment either expressed or implied contained herein, all such liability, if any, being expressly waived by the parties who are signatories to this Required Currency Hedge Assignment and by any Person claiming by, through or under such parties; provided, however, the Administrative Agent shall be liable in its individual capacity for its own willful misconduct or negligence and (d) under no circumstances shall the Administrative Agent be personally liable for the payment of any indebtedness or expenses or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken under any Required Currency Hedge Assignment; provided further, that the foregoing clauses (a) through (d) shall survive the resignation or removal of the Administrative Agent. The Transferor hereby agrees to indemnify and hold harmless the Administrative Agent, the Funding Agents, the Initial Purchasers and the PARCO APA Banks (each, an "indemnified person") from and against any loss, liability, expense, damage or injury suffered or sustained by reason of any acts, omissions or alleged acts or omissions arising out of, or relating to, activities of the Transferor pursuant to any Required Currency Hedge Assignment to which it is a party, including but not limited to any judgment, award, settlement, reasonable attorneys' fees and other reasonable costs or expenses incurred in connection with the defense of any actual or threatened action, proceeding or claim, except to the extent such loss, liability, expense, damage or injury resulted from the negligence, bad faith or willful misconduct of an indemnified person; provided that any payments made by the Transferor pursuant to this subsection shall be made solely from funds available to the Transferor which are not otherwise required to be applied to the payment of any amounts pursuant to the Receivables Transfer Agreement (other than to the Transferor), shall be non-recourse other than with respect to such funds, and shall not constitute a claim against the Transferor to the extent that insufficient funds exist to make such payment. O-2 IN WITNESS WHEREOF, the parties hereto have caused this Required Currency Hedge Assignment to be executed as of the date first above written by their respective duly authorized officers. CARCORP, INC. By: ------------------------------- Name: Title: THE CHASE MANHATTAN BANK, not in its individual capacity, but solely as Administrative Agent By: ------------------------------- Name: Title: ACKNOWLEDGED: [NAME OF COUNTERPARTY] By: ------------------------------- Name: Title: O-3 ANNEX X "Additional Amounts" means any amounts payable to any Affected Party under Section 2.15 of the Receivables Transfer Agreement. "Additional Seller Supplement" shall mean each such Additional Seller Supplement, substantially in the form of Exhibit C to the Receivables Purchase Agreement. "Adjusted Carrying Cost Reserve Ratio" shall mean, as of any Monthly Settlement Report Date and continuing until, but not including, the next Monthly Settlement Report Date, an amount (expressed as a percentage) equal to (i) the product of (a) 1.5 times Days Sales Outstanding as of such day and (b) the highest Base Rate in effect as of such day plus 1.25%, divided by (ii) 365. "Adjusted Servicing Fee Reserve Ratio" shall mean, as of any Monthly Settlement Report Date and continuing until, but not including, the next Monthly Settlement Report Date, an amount, expressed as a percentage, equal to (i) the product of (A) the Servicing Fee Percentage and (B) 1.5 times Days Sales Outstanding as of such earlier Monthly Settlement Report Date divided by (ii) 360. "Administrative Agent" shall mean Chase, as administrative agent on behalf of the Initial Purchasers, the PARCO APA Banks and the Funding Agents, and its permitted successors and assigns in such capacity. "Advance" shall have the meaning specified in subsection 3.2(a) of the Receivables Purchase Agreement. "Advance Limit" shall have the meaning specified in subsection 3.2(a) of the Receivables Purchase Agreement. "Adverse Claim" shall mean a lien, security interest, charge or encumbrance, or other right or claim in, of or on any Person's assets or properties in favor of any other Person (including any UCC financing statement or any similar instrument filed against such Person's assets or properties), other than a Permitted Encumbrance. "Affected APA Bank" shall have the meaning specified in Section 5.5(c) of the PARCO Asset Purchase Agreement. "Affected Party" means each of the following persons: each Initial Purchaser, each Funding Agent, the Administrative Agent, each PARCO APA Bank, each Liberty APA Bank and each Affiliate of the foregoing persons. "Affiliate" shall mean, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, such Person. A Person shall be deemed to control another Person if the controlling Person possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of voting stock, by contract or otherwise. "Aged Receivables Ratio" shall mean, as of the last day of each Settlement Period, the percentage equivalent of a fraction, the numerator of which shall be the sum of (a) the aggregate unpaid balance of Receivables that were 61 to 90 days past due and (b) the aggregate amount of Receivables that were charged off as uncollectible prior to the day that is 91 days after its original due date during such Settlement Period, and the denominator of which shall be the aggregate amount of all Receivables originated or acquired by the Sellers during the fourth prior Settlement Period (including the Settlement Period ended on such day). "Aggregate Commitment" shall mean, at any time, the sum of the Commitments then in effect, as set forth in Schedule I to the Receivables Transfer Agreement. "Aggregate Net Investment" shall mean, at any time, the sum of the PARCO Net Investment, the Redwood Net Investment and the Liberty Net Investment. "Aggregate Unpaids" shall mean, at any time, an amount equal to the sum of (i) the aggregate accrued and unpaid PARCO Discount with respect to all Tranche Periods or Settlement Periods, as applicable, at such time, (ii) the aggregate accrued and unpaid Redwood Yield at such time, (iii) the aggregate accrued and unpaid Liberty Yield at such time, (iv) the Aggregate Net Investment at such time, (v) any Additional Amounts, (vi) any Indemnified Amounts and (vii) all other amounts owed (whether due or accrued) hereunder by the Transferor or the Guarantor to each Initial Purchaser and the PARCO APA Banks at such time. "Applicable Margin" shall mean on any date of determination, (i) for Eurodollar Tranche Periods, 1.50%; provided however that after the occurrence of a Termination Event or Potential Termination Event, the Applicable Margin shall equal 2.25% and (ii) for BR Tranche Periods 0.75%; provided, however that after the occurrence of a Termination Event or Potential Termination Event, the Applicable Margin shall equal 1.25%. "Asset Purchase Agreement" shall mean the PARCO Asset Purchase Agreement, the Liberty Liquidity Asset Purchase Agreement and the Redwood Liquidity Loan Agreement. "Authorized Foreign Exchange Dealer" shall mean any foreign exchange dealer authorized by applicable law to deal and engage in foreign exchange transactions relating to Canadian Dollars selected by the Collection Agent and reasonably acceptable to the Administrative Agent. "Bankruptcy Code" shall mean 11 U.S.C.(Section)101-1330. "Base Rate" or "BR" shall mean the PARCO Base Rate or the Liberty Base Rate, as applicable. "Benefit Plan" shall mean any employee benefit plan as defined in Section 3(3) of ERISA in respect of which the Transferor, a Seller or any ERISA Affiliate of the Transferor or a Seller is, or at any time during the immediately preceding six (6) years was, an "employer" as defined in Section 3(5) of ERISA. "Business Day" shall mean (i) with respect to any matters relating to the Eurodollar Rate, a day on which banks are open for business in The City of New York and on 2 which dealings in Dollars are carried on in the London interbank market and (ii) for all other purposes, any day other than a Saturday, Sunday or other day on which banking institutions or trust companies in the State of New York generally or The City of New York are authorized or obligated by law, executive order or governmental decree to be closed. "C&A" shall mean Collins & Aikman Products Co., a Delaware corporation, and its permitted successors and assigns. "Canada/Canadian Dollar Collection Account" shall have the meaning specified in subsection 2.12(a) of the Receivables Transfer Agreement. "Canada/U.S. Dollar Collection Account" shall have the meaning specified in subsection 2.12(a) of the Receivables Transfer Agreement. "Canadian Dollar Receivables" shall mean Receivables payable in Canadian Dollars sold to the Transferor pursuant to the Receivables Purchase Agreement. "Canadian Dollars" shall mean dollars in lawful currency of Canada. "Canadian Exchange Percentage" shall mean, at any date of determination, the rate at which Canadian Dollars may be exchanged into U.S. Dollars (expressed as the percentage of Canadian Dollars per U.S. Dollars), as reported in The Wall Street Journal on the immediately preceding Business Day. In the event that such rate does not appear in The Wall Street Journal on such immediately preceding Business Day, the Canadian Exchange Percentage shall be determined by reference to the relevant Bloomberg currency page (or, if such rate does not appear on any Bloomberg currency page, on the relevant page of the Reuters Monitor Money Rates Service) as of the close of business of the immediately preceding Business Day. In the event that such rate does not appear on any Bloomberg page or the relevant page of the Reuters Monitor Money Rates Service, the Canadian Exchange Percentage shall be determined by reference to such other publicly available service for displaying exchange rates with respect to Canadian Dollars as may be selected by the Administrative Agent, and prior to a Termination Event or Potential Termination Event, which is not reasonably objected to by the Transferor. "Capitalized Lease" of a Person shall mean any lease of property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP. "Carrying Cost Reserve Ratio" shall mean as of any Monthly Settlement Report Date and continuing until, but not including, the next Monthly Settlement Report Date, an amount (expressed as a percentage) equal to (i) the product of (a) two (2) times Days Sales Outstanding as of such day and (b) the highest Base Rate in effect as of such day plus 1.25%, divided by (ii) 365. "Change in Control" shall have the meaning as defined in the Senior Credit Facility. "Charges" shall mean (i) all federal, state, county, city, municipal, local, foreign or other governmental taxes (including taxes owed to the PBGC at the time due and payable); (ii) 3 all levies, assessments, charges or claims of any governmental entity or any claims of statutory lienholders, the nonpayment of which could give rise by operation of law to a Lien or Adverse Claim and (iii) any such taxes, levies, assessment, charges or claims which constitute a lien or encumbrance on any property of any Seller or the Transferor. "Chase" shall mean The Chase Manhattan Bank, in its individual capacity, and its successors and assigns. "Chase Roles" shall have the meaning specified in Section 4.10 of the PARCO Asset Purchase Agreement and Section 10.12 of the Receivables Transfer Agreement. "Closing Date" shall mean December 27, 1999. "Code" shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder. "Collection Accounts" shall mean the accounts, established by the Administrative Agent, for the benefit of the Initial Purchasers and the PARCO APA Banks, pursuant to subsection 2.12(a) of the Receivables Transfer Agreement. "Collection Agent" shall mean, at any time, the Person then authorized pursuant to Section 6.1 of the Receivables Transfer Agreement to service, administer and collect Receivables and initially shall be C&A. "Collection Agent Default" shall have the meaning specified in Section 6.4 of the Receivables Transfer Agreement. "Collections" shall mean, with respect to any Receivable, all cash collections and other cash proceeds of such Receivable, including, without limitation, all Finance Charges, if any, and cash proceeds of Related Security with respect to such Receivable and any Deemed Collections. "Commercial Paper" shall mean the short-term promissory notes of the Initial Purchasers issued by the Initial Purchasers in the United States commercial paper market. "Commitments" shall mean each of the PARCO APA Bank Commitments, the Liberty Liquidity Commitment and the Redwood Liquidity Commitment. "Concentration Factor" shall mean, on any day with respect to any Obligor, except for a Special Obligor, a percentage equal to the following: (i) with respect to Receivables of any Obligor with short-term or long-term ratings of at least A-1 or A by S&P, respectively, and at least P-1 or A2 by Moody's respectively, 12.0%; (ii) with respect to Receivables of any Obligor with short-term or long-term ratings of at least A-2 or BBB by S&P, respectively, and at least P-2 or Baa2 by Moody's, respectively, 6.0%; 4 (iii) with respect to Receivables of any Obligor with short-term and long-term ratings at or below A-3 or BBB- by S&P, respectively, and P-3 or Baa3 by Moody's, respectively, 3.0%; and (iv) with respect to Receivables of any Obligor with no short-term or long-term ratings by S&P and Moody's, 3.0%. The Concentration Factor for Obligors with split ratings shall be determined based upon the lower of the two ratings. "Conduit Assignee" shall mean any special purpose vehicle issuing indebtedness in the commercial paper market that is administered by Chase. "Contract" shall mean, with respect to a Obligor, an agreement governing the sale of merchandise or the rendering of services by the related Seller and pursuant to which such Obligor shall be obligated to pay for such merchandise or services. "Contributed Receivables" shall have the meaning specified in subsection 3.2(b) of the Receivables Purchase Agreement. "Conversion/Continuation Notice" shall have the meaning specified in Section 2.16 of the Receivables Transfer Agreement. "Counterparty" shall mean a Person who is a party to a Required Currency Hedge with the Transferor. "CP Holder" shall mean any Person that holds record or beneficial ownership of Commercial Paper. "CP Rate" shall mean the PARCO CP Rate or the Liberty CP rate, as applicable. "Credit and Collection Policy" shall mean the Sellers' credit and collection policy or policies relating to Contracts and Receivables existing on the Closing Date and referred to in Exhibit A attached to the Receivables Transfer Agreement, as amended, supplemented or otherwise modified and in effect from time to time in compliance with subsection 5.2(c) of the Receivables Transfer Agreement. "Daily Report" shall mean a report, in substantially the form attached to the Receivables Transfer Agreement as Exhibit F. "Days Sales Outstanding" shall mean, as of any Monthly Settlement Report Date and continuing until (but not including) the next Monthly Settlement Report Date, the number of calendar days equal to the product of (i) 91 and (ii) the amount obtained by dividing (A) the Net Receivables Balance as of the last day of the Settlement Period immediately preceding such earlier Monthly Settlement Report Date by (B) the aggregate principal amount of Receivables which arose during the three (3) consecutive Settlement Periods immediately preceding such earlier Monthly Settlement Report Date. 5 "Decrease" shall have the meaning set forth in Section 2.20 of the Receivables Transfer Agreement. "Deemed Collections" shall mean any Collections on any Receivable deemed to have been received pursuant to subsection 2.9(a) of the Receivables Transfer Agreement. "Defaulted Receivable" shall mean a Receivable: (i) as to which any payment, or part thereof (other than as a result of a Dilution Adjustment), remains unpaid for ninety (90) days or more from the original due date for such Receivable; (ii) as to which an Event of Bankruptcy has occurred and is continuing with respect to the Obligor thereof; (iii) which has been identified by the Transferor, C&A or the applicable Seller as uncollectible; or (iv) which, in accordance with the Credit and Collection Policy, has been or should be written off as uncollectible. "Defaulting PARCO APA Bank" shall have the meaning specified in subsection 2.2(b) of the PARCO Asset Purchase Agreement. "Delinquent Receivable" shall mean a Receivable as to which any payment, or part thereof, remains unpaid for more than sixty (60) days or more from the original due date for such Receivable. "Diluted Receivable" shall mean any Receivable which is the subject of a reduction or cancellation as a result of any defective, rejected or returned merchandise or services and all credits, rebates, discounts, disputes, warranty claims, repossessed or returned goods, chargebacks, allowances, other dilutive factors and any other billing or other adjustment (whether effected through the granting of credits against the applicable Receivables or by the issuance of a check or other payment in respect of (and as payment for) such reduction). "Dilution Adjustments" shall mean, collectively, the adjustments, cancellations and reductions described in the definition of "Diluted Receivable." "Dilution Horizon" shall mean the number of days from the invoicing of a Receivable until a Dilution Adjustment with respect to such Receivable is issued by a Seller or a Seller receives notice that a Dilution Adjustment will have to be issued in respect of such Receivable. "Dilution Horizon Factor" shall mean (i) for the period from the Closing Date until the sixth Monthly Settlement Report Date, 1.83 and (ii) for any six-month period thereafter (beginning and ending on a Monthly Settlement Report Date) a fraction, the numerator of which is the dollar weighted average Dilution Horizon of the Sellers (based upon the Dilution Adjustment of the selected Receivables) for such period (which shall be calculated by the Collection Agent, in accordance with its past procedures for such calculations), and the denominator of which is 30; provided however, that if the Dilution Horizon Factor for any period is less than the Dilution Horizon Factor for the immediately preceding period, then the actual Dilution Horizon Factor for such current period shall be recalculated to equal a fraction, the numerator of which is equal to the average of the numerators used to calculate the Dilution Horizon Factor for such immediately preceding period and such current period and the denominator of which is 30. 6 "Dilution Period" shall mean as of any Monthly Settlement Report Date and continuing until (but not including) the next Monthly Settlement Report Date, the quotient of (i) the product of (A) the principal amount of Receivables originated or acquired by the Sellers during the Settlement Period immediately preceding such earlier Monthly Settlement Report Date and (B) the Dilution Horizon Factor divided by (ii) the Net Receivables Balance as of the last day of the Settlement Period preceding such earlier Monthly Settlement Report Date. "Dilution Ratio" shall mean, as of the last day of each Settlement Period, the percentage equivalent of a fraction, the numerator of which is the aggregate amount of Dilution Adjustments made during such Settlement Period and the denominator of which is the aggregate principal amount of all Receivables originated or acquired by the Sellers during the Settlement Period immediately preceding the Settlement Period ended on such day. "Dilution Reserve Ratio" shall mean, as of any Monthly Settlement Report Date, and continuing until (but not including) the next Monthly Settlement Report Date, an amount (expressed as a percentage) that is calculated as follows: DRR = [(c * d) + [(e-d) * (e/d)]] * f Where: DRR = Dilution Reserve Ratio; c = 2.0; d = the twelve-month rolling average of the Dilution Ratio that occurred during the period of twelve consecutive Settlement Periods ending immediately prior to such earlier Monthly Settlement Report Date; e = the highest Dilution Ratio that occurred during the period of twelve consecutive Settlement Periods ending prior to such earlier Monthly Settlement Report Date; and f = the Dilution Period. "Dollars" or "$" shall mean the lawful currency of the United States. "Early Collection Fee" shall mean, for any Tranche Period during which the portion of the PARCO Net Investment that was allocated to such Tranche Period is reduced for any reason whatsoever, the excess, if any, of (i) the additional PARCO Discount that would have accrued during such Tranche Period if such reductions had not occurred, minus (ii) the income, if any, received by the recipient of such reductions from investing the proceeds of such reductions. "EBITDA" shall have the meaning defined in the Senior Credit Facility. "Eligible Counterparty" shall mean a Counterparty with commercial paper or short-term deposit ratings of A-1+ or P-1, or such other rating as shall be required in the Asset Purchase Agreement. The initial Eligible Counterparty shall be The Chase Manhattan Bank. 7 "Eligible Obligor" shall mean as of any date of determination, each Obligor, in respect of a Receivable, that satisfies the following eligibility criteria: (i) it is a resident of the United States; provided however, that Obligors resident in Canada shall be deemed to be Eligible Obligors if (x) the Receivables of such Obligor would otherwise be Eligible Receivables and (y) the aggregate principal amount of such Receivables does not exceed 20.0% of the Outstanding Balance of the Eligible Receivables then held by the Transferor; provided further, that if an Obligor is located in the Northwest Territories, it shall not be deemed to be an Eligible Obligor until, as evidenced by an opinion of counsel, all actions are taken that are required to be taken to perfect the Transferor's security interest in the Receivables of any such Obligor and such Obligor is approved by S&P; (ii) it is not a domestic or foreign government or any agency, department or instrumentality thereof; (iii) it is not a Seller or an Affiliate of a Seller; (iv) it is not the subject of an Event of Bankruptcy; and (v) it is not an Obligor with respect to which more than 25% of its outstanding Receivables are more than sixty (60) days past due. "Eligible Receivable" shall mean, at any time, any Receivable: (i) which has been (a) either originated by a Seller or acquired by a Seller from an Affiliate, and (b) subsequently sold to the Transferor pursuant to (and in accordance with) the Receivables Purchase Agreement, and to which the Transferor has good title thereto, free and clear of all Adverse Claims; (ii) which is not a Defaulted Receivable or Delinquent Receivable; (iii) which is an "account" or "general intangible" (and not "chattel paper" or an "instrument") within the meaning of Article 9 of the Relevant UCC; or, if applicable, under the provisions of similar legislation of any province of Canada; (iv) which is denominated and required to be settled only in U.S. Dollars or Canadian Dollars in the United States or Canada, provided that if the Required Currency Hedge is not in place or a Counterparty ceases to be an Eligible Counterparty and is not replaced within thirty (30) days (or, in the event the Counterparty's commercial paper rating or short-term deposit rating is withdrawn or downgraded below A-2 or P-2, five (5) days), then Canadian Dollar Receivables will not be included as Eligible Receivables; and provided further that if the Required Currency Hedge is for a notional amount less than the Required Hedge Notional Amount, then the principal amount of Canadian Dollar Receivables included as Eligible Receivables will be limited to the actual notional amount of the Required Currency Hedge calculated using the Valuation Price; 8 (v) which, arises under a Contract that, together with the Receivable related thereto, is in full force and effect and constitutes the legal, valid and binding obligation of the related Obligor, enforceable against such Obligor in accordance with its terms, except as may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar Laws relating to or affecting creditors' rights generally and (b) general principles of equity, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing and the possible unavailability of specific performance, regardless of whether considered in a proceeding at equity or at law; (vi) which (i) does not contravene any applicable law, rule or regulation and the applicable Seller is not in violation of any law, rule or regulation in connection with it, in each case which would in any way render such Receivable unenforceable or would otherwise impair in any material respect the collectibility of such Receivable and (ii) is not subject to any investigation or proceeding known by such Seller that would reasonably be expected to adversely affect its payment or enforceability; (vii) which is an account receivable representing all or part of the sales price of merchandise, insurance or services within the meaning of Section 3(c)(5) of the Investment Company Act of 1940, as amended, and is an "eligible asset" as defined in Rule 3a-7 under such Act; (viii) which is not a Receivable for which the applicable Seller has established an offsetting specific reserve; provided that a Receivable subject only in part to the foregoing shall be an Eligible Receivable to the extent not so subject; (ix) which is not a Receivable with original payment terms in excess of sixty (60) days from its original billing date, or in respect of which the applicable Seller has (i) altered the basis of the aging from the initial due date for payment such that the final due date extends to a date more than sixty (60) days from its original due date or (ii) otherwise made any modification except in the ordinary course of business and consistent with the Credit and Collection Policy of such Seller; (x) as to which, all required consents, approvals and authorizations (including, without limitation, any consent of the Obligor thereof required for the assignment and sale thereof to the Transferor and/or the Initial Purchasers) have been obtained; (xi) as to which the applicable Seller is not in default in any material respect under the terms of the Contract, if any, from which such Receivable arose; (xii) as to which all right, title and interest has been validly sold to the Transferor by the applicable Seller pursuant to the Receivables Purchase Agreement and by the Transferor to the Administrative Agent on behalf of the Initial Purchasers or the PARCO APA Banks pursuant to the Receivables Transfer Agreement; 9 (xiii) as to which (together with the Collections and Related Security) the Transferor or the Administrative Agent on behalf of the Initial Purchasers (or the PARCO APA Banks) will have legal and beneficial ownership therein free and clear of all liens other than Permitted Encumbrances and such Receivable (together with the Collections and Related Security) has been the subject of either a valid transfer from the Transferor to the Administrative Agent on behalf of the Initial Purchasers (or the PARCO APA Banks) or, alternatively, the grant of a first priority perfected security interest therein to the Administrative Agent on behalf of the Initial Purchasers (or the PARCO APA Banks) free and clear of all liens other than Permitted Encumbrances; (xiv) which is not subject to any dispute in whole or in part or to any offset, counterclaim, defense, rescission, recoupment or subordination; provided that a Receivable subject only in part to any of the foregoing shall be an Eligible Receivable to the extent not so subject; (xv) as to which neither the Transferor nor the applicable Seller has (i) taken any action that would impair the rights of the Administrative Agent, a Funding Agent, the Initial Purchasers or the PARCO APA Banks or (ii) failed to take any action that was necessary to avoid impairing the rights therein of the Administrative Agent, a Funding Agent, the Initial Purchasers or the PARCO APA Banks; (xvi) as to which, as of the date of purchase of such Receivable, each of the representations and warranties made in the Receivables Purchase Agreement by the applicable Seller with respect to such Receivable is true and correct in all material respects; (xvii) as to which the goods related thereto shall have been shipped or the services related thereto shall have been performed and the Receivable shall have been billed to the related Obligor; and (xviii) which arose in the ordinary course of business from the sale of goods, products or services of the Sellers or their Affiliates and in accordance with the Credit and Collection Policy and, at such date of determination, the Receivables Purchase Agreement has not been terminated with respect to such Seller. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended, supplemented or otherwise modified and in effect from time to time, and the rules and regulations promulgated thereunder. "ERISA Affiliate" shall mean, with respect to any Person, (i) any corporation which is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code (as in effect from time to time, the "Code")) as such Person; (ii) a trade or business (whether or not incorporated) under common control (within the meaning of Section 414(c) of the Code) with such Person; or (iii) a member of the same affiliated service group (within the meaning of Section 414(n) of the Code) as such Person, any corporation described in clause (i) above or any trade or business described in clause (ii) above. 10 "ERISA Event" shall mean any of the following: (i) the filing pursuant to Section 412(d) of the Code or Section 303(d) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (ii) the receipt by such Person or any ERISA Affiliate from the Pension Benefit Guaranty Corporation or a plan administrator of any notice relating to an intention to terminate any Plan or Plans or to appoint a trustee to administer any Plan; (iii) the incurrence by such Person or any of its ERISA Affiliates of any liability with respect to the withdrawal or partial withdrawal from any Plan or Multiemployer Plan; (iv) any "reportable event" as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived), (v) the incurrence by such Person or any of its ERISA Affiliates of any liability under Title IV of ERISA with respect to the termination of any Plan or (vi) the receipt by such Person or any ERISA Affiliate of any notice, or the receipt by any Multiemployer Plan from such Person or any ERISA Affiliate of any notice, concerning the imposition of Withdrawal Liability or a determination that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA. "Eurodollar Rate" means the PARCO Eurodollar Rate or the Liberty Eurodollar Rate, as applicable. "Event of Bankruptcy" shall mean, with respect to any Person, (i) that such Person (a) shall generally not pay its debts as such debts become due or (b) shall admit in writing its inability to pay its debts generally or (c) shall make a general assignment for the benefit of creditors; (ii) any proceeding shall be instituted by or against such Person seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property and, in the case of a proceeding instituted by a party other than such Person, such proceeding shall continue undismissed, unstayed and in effect for a period of sixty (60) consecutive days or (iii) if such Person is a corporation, such Person or any Subsidiary shall take any corporate action to authorize any of the actions set forth in the preceding clauses (i) or (ii). "Facility" shall mean the purchase by the Initial Purchasers or the PARCO APA Banks of Transferred Interests from the Transferor pursuant to the Receivables Transfer Agreement in exchange for the Transfer Price. "Facility Limit" shall mean the "Facility Limit" set forth on Schedule I of the Receivables Transfer Agreement, subject to Decreases at the option of the Transferor pursuant to Section 2.20 of the Receivables Transfer Agreement; provided, further, that from and after the Termination Date, the Facility Limit shall at all times equal the Aggregate Net Investment. "Federal Funds Rate" shall mean, for any day, an interest rate per annum equal to (a) the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or (b) if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 11:00 A.M. (New York time) 11 on such day on such transactions received by the Administrative Agent from three (3) Federal funds brokers of recognized standing selected by the Administrative Agent in its sole discretion. "Fee Letter" shall mean each of the letter agreements, dated the Closing Date, between the Guarantor, the Transferor and a Funding Agent, for the benefit of the Initial Purchasers and the PARCO APA Banks with respect to the fees to be paid by the Transferor under the Transaction Documents, as amended, supplemented or otherwise modified and in effect from time to time. "Finance Charges" shall mean, with respect to a Contract, any finance, interest, late or similar charges owing by an Obligor pursuant to such Contract. "Funding Account" means any of (a) the accounts established by the PARCO Funding Agent, for the benefit of PARCO and the PARCO APA Banks, pursuant to subsection 2.4(a) of the PARCO Asset Purchase Agreement, (b) the account established by the Redwood Funding Agent, for the benefit of Redwood and the Redwood Secured Parties, pursuant to Section 3A.01 of the Redwood Liquidity Loan Agreement, (c) the account established by the Liberty Funding Agent, for the benefit of Liberty and (d) any other accounts established by a Funding Agent, for the benefit of the Initial Purchasers and/or the PARCO APA Banks and/or the Redwood Secured Parties and/or the Liberty APA Banks. "Funding Agent" means each of the PARCO Funding Agent, the Liberty Funding Agent and the Redwood Funding Agent. Except where the context otherwise requires, any reference to the "Funding Agents" shall be deemed to be a reference to each and every Funding Agent. "GAAP" shall mean generally accepted accounting principles, in effect from time to time, set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such accounting profession. "GE Capital" means General Electric Capital Corporation, a New York corporation, and its successors and assigns. "GE Capital Roles" shall have the meaning specified in Section 10.13 of the Receivables Transfer Agreement. "Governmental Authority" shall mean any nation or government, any State or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guarantor" shall mean C&A and its permitted successors and assigns. "Guaranty" shall mean that certain Guaranty, in substantially the form of Exhibit N to the Receivables Transfer Agreement, dated as of December 27, 1999, as amended, supplemented or otherwise modified and in effect from time to time. 12 "Incremental Transfer" shall have the meaning specified in subsection 2.2(a) of the Receivables Transfer Agreement. "Indebtedness" shall mean, with respect to any Person, such Person's (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of property other than accounts payable arising in the ordinary course of such Person's business on terms customary in the trade, (iii) obligations, whether or not assumed, secured by liens or payable out of the proceeds or production from property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by notes, acceptances, or other instruments, (v) Capitalized Lease obligations and (vi) obligations for which such Person is obligated pursuant to a guaranty. "Indemnified Amounts" shall have the meaning specified in Section 7.1 of the Receivables Transfer Agreement. "Indemnified Parties" shall have the meaning specified in Section 7.1 of the Receivables Transfer Agreement. "Initial Purchasers" shall mean PARCO, Redwood and Liberty. "Insurance Proceeds" shall mean any amounts paid pursuant to any insurance policies covering any Obligor with respect to its Contract other than proceeds of such insurance policies used to purchase replacement property in accordance with the Credit and Collection Policy. "Interest Coverage Ratio" shall be calculated as set forth in the Senior Credit Facility, provided that: (a) for purposes set forth in Section 2.11 of the Receivables Transfer Agreement, such ratio shall be compared to the ratio set forth below opposite the applicable time period: Period Ending: Ratio: ------------- ----- January 1999-June 2000 1.75 to 1.0 July 2000-December 2000 2.00 to 1.0 January 2001-December 2001 2.25 to 1.0 January 2002 and thereafter 2.75 to 1.0 (b) for purposes set forth in Section 8.1 of the Receivables Transfer Agreement and Section 9.1 of the Receivables Purchase Agreement, such ratio shall be compared to the ratio set forth below opposite the applicable time period: Period Ending: Ratio: ------------- ----- January 1999-June 2000 1.60 to 1.0 July 2000-December 2000 1.75 to 1.0 January 2001 and thereafter 2.00 to 1.0 13 "Law" shall mean any law (including common law), constitution, statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of any Official Body. "Leverage Ratio" shall be calculated as set forth in the Senior Credit Facility, provided, that: (a) for purposes set forth in Section 2.11 of the Receivables Transfer Agreement, such ratio shall be compared to the ratio set forth below opposite the applicable time period: Period Ending: Ratio: ------------- ----- July 1999-December 1999 5.25 to 1.0 January 2000-June 2000 5.00 to 1.0 July 2000-December 2000 4.50 to 1.0 January 2001-December 2001 4.00 to 1.0 January 2002 and thereafter 3.75 to 1.0 (b) for purposes set forth in Section 8.1 of the Receivables Transfer Agreement and Section 9.1 of the Receivables Purchase Agreement, such ratio shall be compared to the ratio set forth below opposite the applicable time period: Period Ending: Ratio: ------------- ----- July 1999-December 1999 5.50 to 1.0 January 2000-June 2000 5.25 to 1.0 July 2000 and thereafter 4.75 to 1.0 "Liberty" shall mean Liberty Street Funding Corp., a Delaware corporation, and its successors and assigns. "Liberty Administrative Agent" shall mean The Bank of Nova Scotia, as administrative agent on behalf of Liberty, and its permitted successors and assigns in such capacity. "Liberty Alternate Rate" means for any Settlement Period, an interest rate per annum equal to (a) 1.5% above the Liberty Eurodollar Rate for such Settlement Period; provided, however, that in the case of (i) the Liberty Funding Agent having been notified by Liberty or a Liberty APA Bank that the introduction of or any change in or in the interpretation of any law or regulation makes it unlawful, or any central bank or other governmental authority asserting that it is unlawful, for Liberty or such Liberty APA Bank to fund any portion of the Liberty Net Investment (based on the Liberty Eurodollar Rate) (and the Liberty Funding Agent shall not have been subsequently notified that such circumstances no longer exist), or 14 (ii) the inability of any Liberty APA Bank by reason of circumstances affecting the London interbank market generally, to obtain U.S. dollars in such market to fund its investments for such Settlement Period, the "Liberty Alternate Rate" for each such Settlement Period shall be an interest rate per annum equal to the Liberty Base Rate in effect on each day of such Settlement Period. "Liberty APA Banks" shall mean the Persons listed on the signature pages to the Liberty Liquidity Asset Purchase Agreement as "Purchasers", (including, without limitation, The Bank of Nova Scotia), and the Persons which from time to time may become a party to the Liberty Liquidity Asset Purchase Agreement as "Purchasers" in accordance with Section 9 thereof. "Liberty Base Rate" means, for any day, a fluctuating interest rate per annum as shall be in effect from time to time, which rate shall be at all times equal to the higher of: (a) the rate of interest in effect for such day as publicly announced from time to time by the Liberty Funding Agent in New York, New York as its reference rate. Such reference rate is set by the Liberty Funding Agent based upon various factors, including the Liberty Funding Agent's costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above or below such announced rate, and (b) 0.50% per annum above the latest Federal Funds Rate. "Liberty CP Rate" means, for any Settlement Period, the per annum rate equivalent to the weighted average cost (as determined by the Liberty Administrative Agent and which shall include commissions of placement agents and dealers, incremental carrying costs incurred with respect to Commercial Paper of Liberty maintained on dates other than those on which corresponding funds are received by Liberty, other borrowings by Liberty (other than under any program support agreements of Liberty) and any other costs associated with the issuance of such Commercial Paper that are allocated, in whole or in part, by the Liberty Administrative Agent to fund or maintain Liberty's Net Investment (and which may be also allocated in part to the funding of other assets of Liberty)); provided, however, that if any component of such rate is a discount rate, in calculating the CP Rate for such portion of capital for such Settlement Period, the Transferor shall for such component use the rate resulting from converting such discount rate to an interest bearing equivalent rate per annum. "Liberty Eurodollar Rate" means, for any Settlement Period, an interest rate per annum (rounded upward to the nearest 1/16th of 1%) determined pursuant to the following formula: LIBERTY LIBOR RATE --------------------------------------------------------- 100% - Liberty Eurodollar Rate Reserve Percentage where Liberty Eurodollar Rate Reserve Percentage means, for any Settlement Period, the maximum reserve percentage (expressed as a decimal, rounded upward to the nearest 1/100th of 15 1%) in effect on the date LIBOR for such Settlement Period is determined under regulations issued from time to time by the Federal Reserve Board for determining the maximum reserve requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as Eurocurrency liabilities) having a term comparable to such Settlement Period. "Liberty Funding Agent" shall mean The Bank of Nova Scotia, in its capacity as funding agent for the benefit of Liberty and the Liberty APA Banks, and any successor and assigns thereto. "Liberty Interest" shall mean, on any day, the portion of the beneficial interest of Liberty in the Receivables and Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto, which beneficial interest shall equal the product of (i) the Percentage Factor on such day multiplied by (ii) the quotient of (A) Liberty's Net Investment on such day divided by (B) the Aggregate Net Investment on such day multiplied by (iii) the Outstanding Balance of all Receivables. "Liberty LIBOR Rate" means the rate of interest per annum determined by the Liberty Administrative Agent to be the arithmetic mean (rounded upward to the nearest 1/16th of 1%) of the rates at which dollar deposits in the approximate amount of the portion of the Liberty Net Investment to be funded at the Liberty Eurodollar Rate during such Settlement Period would be offered by major banks in the London interbank market to the Liberty Funding Agent at its request at or about 11:00 a.m. (London time) on the second Business Day before the commencement of such Settlement Period. "Liberty Liquidity Commitment" shall mean, with respect to Liberty, the amount set forth on Schedule I attached to the Receivables Transfer Agreement equal at all times to 102% of Liberty's Pro Rata Share of the Facility Limit. "Liberty Liquidity Asset Purchase Agreement" shall mean that certain Asset Purchase Agreement, dated as of December 22, 1999, by and among the Liberty Funding Agent, the Liberty APA Banks and Liberty, as the same may from time to time be amended, supplemented or otherwise modified and in effect. "Liberty Net Investment" shall mean an amount equal to the result of: (i) the sum of cash amounts paid to the Transferor by Liberty for each Incremental Transfer minus (ii) the aggregate amount of Collections received and applied by the Liberty Funding Agent to reduce such Liberty Net Investment pursuant to Section 2.5, 2.6 or 2.9 of the Receivables Transfer Agreement; provided that the Liberty Net Investment shall be restored and reinstated in the amount of any Collections so received and applied if, at any time, the distribution of such Collections is rescinded or must otherwise be returned for any reason. "Liberty Purchase Limit" means, at any time, the amount set forth on Schedule I attached to the Receivables Transfer Agreement; provided, however, that at all times on and after the Termination Date, the "Liberty Purchase Limit" means the aggregate outstanding Liberty Net Investment. 16 "Liberty Termination Event" shall mean the occurrence of either of the following events: (a) all commitments of the Liberty APA Banks under the Liberty Liquidity Asset Purchase Agreement shall have terminated; or (b) a Termination Event or Potential Termination Event shall have occurred and be continuing. "Liberty Yield" means with respect to any Settlement Period an amount equal to the product of (i) the Liberty Yield Rate in effect for such Settlement Period, (ii) the average daily Liberty Net Investment outstanding during such Settlement Period and (iii) a fraction of the numerator of which is the actual number of days in such Settlement Period and the denominator of which is 360. "Liberty Yield Rate" means for any Settlement Period, the weighted average of the following rates: (a) to the extent that Liberty funds or maintains the Liberty Net Investment during such Settlement Period (or portion thereof) by issuing its Commercial Paper, the Liberty CP Rate for such Settlement Period; and (b) to the extent Liberty funds or maintains the Liberty Investment during such Settlement Period (or portion thereof) other than by issuing its Commercial Paper, a rate equal to the Liberty Alternate Rate for such Settlement Period. provided, however, upon the Termination Date the Liberty Yield Rate shall be the Liberty Base Rate plus 2%. "Lien" shall mean any mortgage or deed of trust, pledge, hypothecation, assignment, deposit arrangement, lien, charge, claim, security interest, easement or encumbrance, or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including any lease or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of, or agreement to give, any financing statement perfecting a security interest under the UCC or comparable law of any jurisdiction). "Liquidity Banks" shall mean the PARCO APA Banks. "Litigation" shall have the meaning specified in Section 4.1(h) of the Receivables Purchase Agreement. "Lock-Box Account" shall mean an account maintained by the Transferor at a Lock-Box Bank for the purpose of receiving Collections from Receivables. 17 "Lock-Box Agreement" shall mean each agreement among the Transferor, the Collection Agent, the Administrative Agent and the applicable Lock-Box Bank in substantially the form of Exhibit C to the Receivables Transfer Agreement. "Lock-Box Bank" shall mean each of the banks set forth in Exhibit B to the Receivables Transfer Agreement, and such banks as may be added thereto or deleted therefrom pursuant to Section 2.8 of the Receivables Transfer Agreement. "Loss and Dilution Reserve Ratio" shall mean, on any day, the greater of (i) the Minimum Loss Reserve and (ii) the sum of (A) the Loss Reserve Ratio and (B) the Dilution Reserve Ratio. "Loss Reserve Ratio" shall mean, as of any Monthly Settlement Report Date, and continuing until (but not including) the next Monthly Settlement Report Date, an amount (expressed as a percentage) that is calculated as follows: LRR = [(a * b)/c] * d * e Where: LRR = Loss Reserve Ratio; a = the aggregate principal amount of (i) Receivables originated or acquired by the Sellers during the two Settlement Periods immediately preceding such earlier Monthly Settlement Report Date and (ii) 25% of the Receivables originated or acquired by the Sellers in the third Settlement Period immediately preceding such Monthly Settlement Report Date; b = the highest three-month rolling average of the Aged Receivables Ratio that occurred during the period of twelve consecutive Settlement Periods ending prior to such earlier Settlement Report Date; c = the Net Receivables Balance as of the last day of the Settlement Period immediately preceding such earlier Monthly Settlement Report Date; d = 2.0; and e = the Payment Terms Factor. "Manager" shall mean Global Securitization Services, LLC, a Delaware limited liability company. "Material Adverse Effect" shall mean any event or condition which would have a material adverse effect on (i) the collectibility of the Receivables, (ii) the condition (financial or otherwise), businesses or properties of the Transferor, the Guarantor or any other Seller, (iii) the ability of the Transferor, the Guarantor or any other Seller to perform its respective obligations under the Transaction Documents to which it is a party and (iv) the interests of the Administrative Agent, a Funding Agent, an Initial Purchaser or the PARCO APA Banks under 18 the Transaction Documents; provided, however, that an event or condition resulting in a material adverse change in the condition (financial or otherwise) of any Seller will not be deemed to have a Material Adverse Effect unless such event or condition, in the Administrative Agent's reasonable discretion, with the consent of each Funding Agent which shall be obtained by the Administrative Agent, is reasonably likely to result in a material adverse change in the condition (financial or otherwise) of any other Seller, the Transferor or the Guarantor. "Maximum Percentage Factor" shall mean 100%. "Minimum Loss Reserve" shall mean, as of any Monthly Settlement Report Date and continuing until (but not including) the next Monthly Settlement Report Date, an amount (expressed as a percentage) that is calculated as follows: MLR = (a*b)+c Where: MLR = Minimum Loss Reserve; a = the average of the Dilution Ratio during the period of the twelve consecutive Settlement Periods ending prior to such earlier Monthly Settlement Report Date; b = the Dilution Period; and c = 12 %. "Monthly Settlement Report Date" shall mean the tenth Business Day following the end of each fiscal month of C&A; which fiscal months for the year 2000 are set forth on Schedule III to the Receivables Transfer Agreement. "Moody's" shall mean Moody's Investors Service, Inc., and its successors and assigns. "Multiemployer Plan" shall mean a "multiemployer plan" as defined in Section 4001(a)(3) of ERISA with respect to which a Seller, the Transferor, the Guarantor or any ERISA Affiliate of a Seller, the Transferor or the Guarantor is making, is obligated to make, or has made or been obligated to make, contributions on behalf of participants who are or were employed by any of them. "Net Investment" shall mean any of the PARCO Net Investment, the Liberty Net Investment or the Redwood Net Investment. "Net Receivables Balance" shall mean, at any time, the Outstanding Balance of the Eligible Receivables at such time, as reduced by the aggregate amount by which the Outstanding Balance of all Eligible Receivables of each Obligor exceeds the Concentration Factor or Special Obligor Concentration Factor, as applicable, for such Obligor. 19 "Non-Defaulting PARCO APA Bank" shall have the meaning specified in subsection 2.2(b) of the PARCO Asset Purchase Agreement. "Obligor" shall mean a Person obligated to make payments for the provision of goods and services pursuant to a Contract. "Official Body" shall mean any government or political subdivision or any agency, authority, bureau, central bank, commission, department or instrumentality of any such government or political subdivision, or any court, tribunal, grand jury or arbitrator, in each case whether foreign or domestic. "Other Transferor" shall mean any Person, other than the Transferor, that has entered into a receivables purchase agreement, receivables transfer agreement, loan agreement or funding agreement with PARCO. "Outstanding Balance" shall mean, with respect to any Receivable at any time, the then outstanding principal amount thereof, excluding any accrued and outstanding Finance Charges related thereto. "Paid Percentage Factor" shall have the meaning set forth in Section 2.5(a)(i) of the Receivables Transfer Agreement. "PARCO" shall mean the Park Avenue Receivables Corporation, a Delaware corporation, and its successors and assigns. "PARCO Administrative Agent" shall mean The Chase Manhattan Bank, as administrative agent on behalf of PARCO, and its permitted successors and assigns in such capacity. "PARCO Adjusted Liquidity Price" shall mean, in determining the PARCO Purchase Price of any portion of the PARCO Interest on any PARCO Purchase Date, an amount equal to: OC + (PF * NDR ) where: PF = the product of (i) the Percentage Factor on such PARCO Purchase Date, times (ii) the quotient of (A) the PARCO Net Investment divided by (B) the Aggregate Net Investment. OC = the sum of (i) all Collections received by the Sellers, the Collection Agent or the Transferor which are due and owing to PARCO under the Transaction Documents and which have not yet been remitted to PARCO plus (ii) all Deemed Collections due and owing to PARCO pursuant to subsection 2.9(a) of the Receivables Transfer Agreement plus (iii) all amounts due and owing to PARCO 20 in respect of Diluted Receivables pursuant to subsection 2.9(b) of the Receivables Transfer Agreement. NDR = the aggregate Outstanding Balance of all Receivables which are not Defaulted Receivables. Each of the foregoing shall be determined from the most recent Weekly Report or Daily Report delivered to PARCO. "PARCO Asset Purchase Agreement" shall mean that certain Asset Purchase Agreement, dated as of December 27, 1999, by and among the PARCO Funding Agent, the PARCO APA Banks and PARCO, as the same may from time to time be amended, supplemented or otherwise modified and in effect. "PARCO APA Bank Commitment" shall mean, with respect to any or all PARCO APA Banks, the amount set forth on Schedule I attached to the Receivables Transfer Agreement equal at all times to 102% of the PARCO APA Bank's Pro Rata Share of the Facility Limit, as the same may be reduced from time to time in accordance with Section 2.5 or subsection 5.5(c) of the PARCO Asset Purchase Agreement. "PARCO APA Banks" shall mean the Persons listed on Annex I to the PARCO Asset Purchase Agreement (including, without limitation, Chase), and the Persons which from time to time may become a party to the PARCO Asset Purchase Agreement in accordance with Section 5.5(c) thereof. "PARCO Base Rate" shall mean, a rate per annum equal to the sum of (x) the greater of (i) the prime rate of interest announced by the PARCO Funding Agent from time to time, changing when and as said prime rate changes (such rate not necessarily being the lowest or best rate charged by the PARCO Funding Agent) and (ii) the sum of (A) 1.50% and (B) the rate equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day that is a Business Day, the average of the quotations for such day for such transactions received by the PARCO Funding Agent from three (3) Federal funds brokers of recognized standing selected by it and (y) the Applicable Margin. "PARCO BR Tranche" shall mean a Tranche as to which PARCO Discount is calculated at the PARCO Base Rate. "PARCO BR Tranche Period" shall mean, with respect to a PARCO BR Tranche after a PARCO Wind-Down Event, a period of one (1) day. If such PARCO BR Tranche Period would end on a day which is not a Business Day, such PARCO BR Tranche Period shall end on the next succeeding Business Day. "PARCO Commitment Expiry Date" shall mean the earliest to occur of (i) the date on which all amounts due and owing to PARCO and the PARCO APA Banks under the Receivables Transfer Agreement and the other Transaction Documents have been indefeasibly 21 paid in full, (ii) following a Termination Date (not including pursuant to clause (iii) of the definition of Termination Date), the date on which the PARCO Interest has been reduced to zero pursuant to Section 2.5 of the PARCO Asset Purchase Agreement, and (iii) December 25, 2000 (as may be extended for an additional 364 days from time to time in writing by PARCO, the PARCO Funding Agent and the PARCO APA Banks). "PARCO CP Rate" shall mean, with respect to any PARCO CP Tranche Period requested by the Transferor and agreed to by PARCO or selected by the PARCO Funding Agent, the rate equivalent to the rate (or if more than one rate, the weighted average of the rates) at which PARCO's Commercial Paper having a term equal to such PARCO CP Tranche Period may be sold by any placement agent or commercial paper dealer selected by PARCO on the first day of such PARCO CP Tranche Period, plus the amount of any placement agent or commercial paper dealer fees and commissions incurred or to be incurred in connection with such sale; provided, however, that if the rate (or rates) as agreed between any such agent or dealer and PARCO is a discount rate, then the "PARCO CP Rate" shall mean the rate equivalent to the rate (or if more than one rate, the weighted average of the rates) resulting from PARCO's converting such discount rate (or rates) to an interest-bearing equivalent rate per annum, however, in the event the Transferor does not request a PARCO CP Tranche Period or the PARCO Funding Agent does not select a PARCO CP Tranche Period, the rate will equal a blended rate of all outstanding Commercial Paper of PARCO, as determined by the PARCO Funding Agent. "PARCO CP Tranche" shall mean a Tranche as to which PARCO Discount is calculated at the PARCO CP Rate. "PARCO CP Tranche Period" shall mean, with respect to a PARCO CP Tranche, a period of days not to exceed sixty (60) days commencing on a Business Day requested by the Transferor and agreed to by PARCO or selected by the PARCO Funding Agent pursuant to Section 2.3 of the Receivables Transfer Agreement. If a PARCO CP Tranche Period would end on a day which is not a Business Day, such PARCO CP Tranche Period shall end on the next succeeding Business Day. "PARCO Discount" means, (a) with respect to any Tranche Period pertaining to PARCO: (TR x TNI x AD) ------------- YD Where: TR = the PARCO Tranche Rate applicable to such Tranche Period; TNI = the portion of the PARCO Net Investment allocated to such Tranche Period; AD = the actual number of days during such Tranche Period; and 22 YD = either (i) if the PARCO Tranche Rate is the PARCO CP Rate or the PARCO Eurodollar Rate, 360 or (ii) if the PARCO Tranche Rate is the PARCO Base Rate, 365 or 366, as applicable; or (b) with respect to any Settlement Period pertaining to PARCO: (PF x PNI x AD) ------------- YD Where: PF = the weighted average rate of PARCO's Commercial Paper funded by pooled funding allocated to the Facility for such Settlement Period; PNI = the portion of the PARCO Net Investment funded by pooled funding during such Settlement Period; AD = the actual number of days during such Settlement Period; and YD = 360. provided, however, that no provision of the Receivables Transfer Agreement shall require the payment or permit the collection of PARCO Discount in excess of the maximum amount permitted by applicable law; and provided, further, that PARCO Discount shall not be considered paid by any distribution if, at any time, such distribution is rescinded or must be returned for any reason. "PARCO Eurodollar Rate" shall mean, with respect to any PARCO Eurodollar Tranche Period, the Applicable Margin plus a rate per annum equal to the sum (rounded upwards, if necessary, to the next higher 1/100 of 1%) of (i) the rate obtained by dividing (A) the applicable PARCO LIBOR Rate by (B) a percentage equal to 100% minus the reserve percentage used for determining the maximum reserve requirement as specified in Regulation D (including, without limitation, any marginal, emergency, supplemental, special or other reserves) that is applicable to the PARCO Funding Agent during such PARCO Eurodollar Tranche Period in respect of eurocurrency or eurodollar funding, lending or liabilities (or, if more than one percentage shall be so applicable, the daily average of such percentage for those days in such PARCO Eurodollar Tranche Period during which any such percentage shall be applicable) plus (ii) the then daily net annual assessment rate (rounded upwards, if necessary, to the nearest 1/100 of 1%) as estimated by the PARCO Funding Agent for determining the current annual assessment payable by the PARCO Funding Agent to the Federal Deposit Insurance Corporation in respect of eurocurrency or eurodollar funding, lending or liabilities. "PARCO Eurodollar Tranche" shall mean a Tranche as to which PARCO Discount is calculated at the PARCO Eurodollar Rate. "PARCO Eurodollar Tranche Period" shall mean, with respect to a PARCO Eurodollar Tranche, following a PARCO Wind-Down Event but prior to a Termination Date, a 23 period of up to three (3) months requested by the Transferor and agreed to by the PARCO Funding Agent commencing on a Business Day requested by the Transferor and agreed to by the PARCO Funding Agent; provided, however, that if such PARCO Eurodollar Tranche Period would expire on a day which is not a Business Day, such PARCO Eurodollar Tranche Period shall expire on the next succeeding Business Day; provided, further, that if such PARCO Eurodollar Tranche Period would expire on (a) a day which is not a Business Day but is a day of the month after which no further Business Day occurs in such month, such PARCO Eurodollar Tranche Period shall expire on the next preceding Business Day or (b) a Business Day for which there is no numerically corresponding day in the applicable subsequent calendar month, such PARCO Eurodollar Tranche Period shall expire on the last Business Day of such month. "PARCO Funding Agent" shall mean Chase, in its capacity as funding agent for the benefit of PARCO and the PARCO APA Banks, and any successor and assigns thereto. "PARCO Funding Balance" shall mean, with respect to any PARCO APA Bank at any time of determination thereof, an amount equal to (a) such PARCO APA Bank's Pro Rata Share multiplied by (b) all amounts due and owing to PARCO in respect of the PARCO Interest under the Transaction Documents as at such date. "PARCO Insolvency Event" shall mean the occurrence of any one or more of the following: (i) any proceeding shall have been instituted by PARCO seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of any order for relief or the appointment of a receiver, trustee or other similar official for it or any substantial part of its property, or (ii) any proceeding of the type described in the foregoing clause (i) shall be instituted against PARCO and shall have remained undismissed for a period of sixty (60) consecutive days, or an order granting relief requested in any such proceeding shall be entered. "PARCO Interest" shall mean, on any day, the portion of the beneficial interest of PARCO in the Receivables and Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto, which beneficial interest shall equal the product of (i) the Percentage Factor on such day multiplied by (ii) the quotient of (A) PARCO's Net Investment on such day divided by (B) the Aggregate Net Investment on such day multiplied by (iii) the Outstanding Balance of all Receivables. "PARCO LIBOR Rate" shall mean, with respect to any PARCO Eurodollar Tranche Period, the rate at which deposits in dollars are offered to the PARCO Funding Agent, in the London interbank market at approximately 11:00 A.M. (London time) two (2) Business Days before the first day of such PARCO Eurodollar Tranche Period in an amount approximately equal to the PARCO Eurodollar Tranche to which the PARCO Eurodollar Rate is to apply and for a period of time approximately equal to the applicable PARCO Eurodollar Tranche Period. "PARCO Net Investment" shall mean an amount equal to the result of: (i) the sum of cash amounts paid to the Transferor by PARCO and/or the PARCO APA Banks for each Incremental Transfer minus (ii) the aggregate amount of Collections received and applied by the 24 PARCO Funding Agent to reduce such PARCO Net Investment pursuant to Section 2.5, 2.6 or 2.9 of the Receivables Transfer Agreement; provided that the PARCO Net Investment shall be restored and reinstated in the amount of any Collections so received and applied if, at any time, the distribution of such Collections is rescinded or must otherwise be returned for any reason. "PARCO Purchase" shall mean any assignment by PARCO to the PARCO APA Banks of the PARCO Interest pursuant to Section 2.1 of the PARCO Asset Purchase Agreement. "PARCO Purchase Date" shall mean the date specified by PARCO in a PARCO Sale Notice as being the effective date of PARCO's assignment to the PARCO APA Banks of the PARCO Interest specified therein. "PARCO Purchase Limit" means, at any time, the amount set forth on Schedule I attached to the Receivables Transfer Agreement; provided, however, that at all times on and after the Termination Date, the "PARCO Purchase Limit" means the aggregate outstanding PARCO Net Investment, as reduced pursuant to the terms of the PARCO Asset Purchase Agreement. "PARCO Purchase Price" shall mean, with respect to the PARCO Asset Purchase Agreement, at any PARCO Purchase Date, an amount equal to the lesser of (i) the PARCO Net Investment and (ii) the PARCO Adjusted Liquidity Price, as clauses (i) and (ii) shall be increased by the sum of (A) all accrued and unpaid PARCO Discount on all outstanding PARCO Tranches of PARCO's Commercial Paper issued by PARCO to fund the PARCO Net Investment from the issuance date(s) thereof to and including the PARCO Purchase Date plus (B) the aggregate PARCO Discount to accrue on all outstanding PARCO Tranches of Commercial Paper issued by PARCO to fund the PARCO Net Investment from and including the PARCO Purchase Date to and excluding the maturity date of each such PARCO Tranche. "PARCO Purchase Price Deficit" shall have the meaning specified in subsection 2.2(b) of the PARCO Asset Purchase Agreement. "PARCO Sale Notice" shall mean an irrevocable written notice given by an authorized signer or authorized officer of PARCO (or on behalf of PARCO by Chase, in its capacity as PARCO Administrative Agent) to the PARCO Funding Agent committing to sell, assign and transfer to the PARCO APA Banks, the PARCO Interest, which notice shall designate (i) the applicable PARCO Purchase Date, (ii) the PARCO Interest and the Aggregate Net Investment, (iii) the PARCO Purchase Price (including a calculation of the PARCO Purchase Price), (iv) that no PARCO Insolvency Event has occurred and (v) wire transfer instructions specifying the account(s) into which the proceeds of the PARCO Purchase Price shall be deposited. "PARCO Tranche Rate" means (i) for any PARCO CP Tranche and any PARCO CP Tranche Period prior to the occurrence of a PARCO Wind-Down Event, the PARCO CP Rate, (ii) for any PARCO Eurodollar Tranche and any PARCO Eurodollar Tranche Period following the occurrence of a PARCO Wind-Down Event but prior to a Termination Date, the PARCO Eurodollar Rate and (iii) for any PARCO BR Tranche and any PARCO BR Tranche Period following a Termination Date or the occurrence of a PARCO Wind-Down Event, the PARCO Base Rate. 25 "PARCO Wind-Down Event" shall mean the occurrence of any of the following events: (a) on the fifth Business Day prior to the date specified in clause (iii) of the definition of "PARCO Commitment Expiry Date" (after giving effect to any extensions), the PARCO APA Banks' Aggregate Commitment has not been extended for an additional 364 days; (b) any provider of PARCO's program liquidity and/or letter of credit facilities shall have given notice that an event of default has occurred and is continuing under its agreement with PARCO; (c) PARCO has notified the Transferor that it does not wish to, or is unable to, provide financing to the Transferor; (d) PARCO's Commercial Paper shall not be rated at least A-1/P-1 by S&P and Moody's, respectively; and (e) a Termination Event or Potential Termination Event shall have occurred and be continuing (not including a Termination Date that occurs pursuant to clause (i) of the definition of "Termination Date"). "Parent" shall mean Collins & Aikman Corporation, a Delaware corporation, as the holder of 100% of the issued and outstanding capital stock of C&A. "Participant" shall have the meaning specified in subsection 5.5(b) of the PARCO Asset Purchase Agreement. "Payment Terms Factor" shall mean (i) for the period from the Closing Date until the third Monthly Settlement Report Date, 1.11 and (ii) for each three-month period to occur thereafter, a fraction, the numerator of which is the sum of (A) the weighted average payment terms (based upon the principal amount of the Receivables and expressed as a number of days) for the Receivables generated or acquired by the Sellers during such period and (B) 60, and the denominator of which is 90; provided, however, that if the Payment Terms Factor for any period is less than the Payment Terms Factor for the immediately preceding periods, then the actual Payment Terms Factor for such current period shall be recalculated to equal a fraction, the numerator of which is equal to the average of the numerators used to calculate the Payment Terms Factor for such current period and the three immediately preceding periods (without giving effect to this proviso) and the denominator of which is 90 provided, further, the Payment Terms Factor shall never be less than 1.0. "Pension Plan" shall mean a Plan described in Section 3(2) of ERISA. 26 "Percentage Factor" shall mean the fraction (expressed as a percentage) computed on any date of determination as follows: ( NI x [1+(LDRR+CCRR)] + (SFRR * OBR) ) --------- ---------- 1-LDRR 1-LDRR +$100,000 ---------------------------------------------------------------- NRB Where: NI = the Aggregate Net Investment on the date of such computation; LDRR = the Loss and Dilution Reserve Ratio on the date of such computation; CCRR = the Carrying Cost Reserve Ratio on the date of such computation; SFRR = the Servicing Fee Reserve Ratio on the date of such computation; OBR = the Outstanding Balance of all Receivables on the date of such computation; and NRB = the Net Receivables Balance on the date of such computation. The Percentage Factor shall be calculated by the Collection Agent on the day of the initial Incremental Transfer hereunder. Thereafter, until the Termination Date, the Collection Agent shall recompute the Percentage Factor at the time of each Incremental Purchase pursuant to subsection 2.2(a) of the Receivables Transfer Agreement and as of the close of business on each Business Day and report such recomputations to the Administrative Agent in the Weekly Report, Settlement Report and as otherwise requested by the Administrative Agent. The Percentage Factor shall remain constant from the time as of which any such computation or recomputation is made until the time as of which the next such recomputation shall be made, notwithstanding any additional Receivables arising, any Incremental Transfer made pursuant to such subsection 2.2(a) or any reinvestment Transfer made pursuant to Section 2.2(b) and 2.5 of the Receivables Transfer Agreement during any period between computations of the Percentage Factor. The Percentage Factor shall remain constant at 100% at all times on and after the Termination Date until such time as the Administrative Agent, on behalf of the Initial Purchasers and the PARCO APA Banks, shall have received the Aggregate Unpaids, in cash, at which time the Percentage Factor shall be recomputed in accordance with Section 2.6 of the Receivables Transfer Agreement. "Permitted Encumbrance" means any of the following: (i) liens, charges or other encumbrances for taxes and assessments which are not yet due and payable or which are being contested in good faith and for which reserves have been established, if required in accordance with GAAP; (ii) liens of or resulting from any judgment or award, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which the 27 Transferor and/or a Seller shall at any time in good faith be prosecuting an appeal or proceeding for a review and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (iii) liens, charges or other encumbrances or priority claims incidental to the conduct of business or the ownership of properties and assets (including mechanics', carriers', repairers', warehousemen's and statutory landlords' liens and liens to secure the performance of leases) and deposits, pledges or liens to secure statutory obligations, surety or appeal bonds or other liens of like general nature incurred in the ordinary course of business and not in connection with the borrowing of money, provided in each case, the obligation secured is not overdue, or, if overdue, is being contested in good faith by appropriate actions or proceedings and with respect to which adequate reserves or other appropriate provisions are being maintained in accordance with GAAP; (iv) liens, charges or encumbrances in favor of any Initial Purchaser, any PARCO APA Bank or any Funding Agent; and (v) lien, charges, imperfections in title or other encumbrances which, in the aggregate do not exceed $100,000 and which, individually or in the aggregate, do not materially interfere with the rights hereunder of an Initial Purchaser, any PARCO APA Bank or any Funding Agent in the Receivables. "Permitted Investments" shall mean any of the following (a) negotiable instruments or securities represented by instruments in bearer or registered or in book-entry form which evidence (i) obligations fully guaranteed by the United States of America; (ii) obligations of any agency of the United States of America; (iii) time deposits in, or bankers acceptances issued by, any depositary institution or trust company incorporated under the laws of the United States of America or any state thereof and subject to supervision and examination by Federal or state banking or depositary institution authorities; provided, however, that at the time of investment or contractual commitment to invest therein, the certificates of deposit or short-term deposits, if any, or long-term unsecured debt obligations (other than such obligation whose rating is based on collateral or on the credit of a Person other than such institution or trust company) of such depositary institution or trust company shall have a credit rating from Moody's and S&P of at least P-1 and "A-1", respectively, in the case of the certificates of deposit or short-term deposits, or a rating not lower than one of the two highest investment categories granted by Moody's and by S&P; (iv) certificates of deposit having, at the time of investment or contractual commitment to invest therein, a rating from Moody's and S&P of at least P-1 and "A-1", respectively; or (v) investments in money market funds rated in the highest investment category or otherwise approved in writing by Moody's and S&P; (b) demand deposits in any depositary institution or trust company referred to in (a)(iii) above; (c) commercial paper (having original or remaining maturities of no more than 30 days) having, at the time of investment or contractual commitment to invest therein, a credit rating from Moody's and S&P of at least P-1 and "A-1", respectively; (d) Eurodollar time deposits having a credit rating from Moody's and S&P of at least P-1 and "A-1", respectively; (e) repurchase agreements involving any of the Permitted Investments described in clauses (a)(i), (a)(iv) and (d) of this definition so long as the other party to the repurchase agreement has at the time of investment therein, a rating from Moody's and 28 S&P of at least P-1 and "A-1", respectively; and (f) any other investment permitted by each of the Funding Agents, Moody's and S&P. "Person" shall mean any corporation, limited liability company, natural person, firm, joint venture, partnership, trust, unincorporated organization, enterprise, government or any department or agency of any government. "Plan" shall mean, at any time, an "employee benefit plan," as defined in Section 3(3) of ERISA, that a Seller, the Transferor, the Guarantor or ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by a Seller, the Transferor, the Guarantor or ERISA Affiliate. "Potential Termination Event" shall mean an event which but for the lapse of time or the giving of notice, or both, would unavoidably constitute a Termination Event. "Proceeds" shall mean "proceeds" as defined in Section 9-306(1) of the Relevant UCC. "Program Fee" shall have the meaning specified in the Fee Letter. "Pro Rata Share" shall mean, on any date of determination, (i) with respect to any PARCO APA Bank, the ratio (expressed as a percentage) of such PARCO APA Bank's pro rata share of the PARCO Purchase Limit to the Facility Limit at such time, (ii) with respect to Redwood, the ratio (expressed as a percentage) of the Redwood Purchase Limit to the Facility Limit at such time, (iii) with respect to Liberty, the ratio (expressed as a percentage) of the Liberty Purchase Limit to the Facility Limit at such time and (iv) with respect to PARCO, the ratio (expressed as a percentage) of the PARCO Purchase Limit to the Facility Limit at such time. "Purchase Discount" shall mean, on any Business Day on which Receivables are sold by a Seller to the Transferor pursuant to the Receivables Purchase Agreement, an amount, calculated in good faith by the Transferor, equal to the sum of (a) the Adjusted Carrying Cost Reserve Ratio, (b) the Adjusted Servicing Fee Reserve Ratio and (c) a ratio that reflects historical loss experience, future loss exposure and a reasonable profit. The total of the ratio defined in clause (c) shall not exceed 0.35%. "Purchase Limit" means either the PARCO Purchase Limit, the Liberty Purchase Limit or the Redwood Purchase Limit. "Purchase Price" shall, with respect to the Receivables Purchase Agreement, have the meaning set forth in Section 3.1 of the Receivables Purchase Agreement. "Purchase Termination Date" shall have the meaning specified in Section 9.1 of the Receivables Purchase Agreement. "Purchased Receivables" shall have the meaning specified in subsection 3.2(b) of the Receivables Purchase Agreement. 29 "Purchaser" shall have the meaning specified in subsection 5.5(c) of the PARCO Asset Purchase Agreement. "Purchaser Group" means any of (i) prior to a PARCO Wind-Down Event, PARCO and after a PARCO Wind-Down Event, the PARCO APA Banks, (ii) Redwood and (iii) Liberty. "Rating Agency" shall mean Moody's, S&P and any other nationally recognized statistical rating organization from which a rating for Commercial Paper, requested by the Initial Purchasers, is currently in effect. "Rating Agency Book" shall mean the rating agency book, dated November 1999 prepared in connection with the Facility. "Receivable" shall mean all indebtedness owed to a Seller by an Obligor under a Contract, whether constituting an account or general intangible, arising in connection with the sale or lease of merchandise or the rendering of services by the related Seller, and includes the right to payment of any Finance Charges and other obligations of such Obligor with respect thereto. Notwithstanding the foregoing, once a Receivable has been deemed collected pursuant to Section 2.9 of the Receivables Transfer Agreement, it shall no longer constitute a Receivable under the Receivables Transfer Agreement. "Receivables Purchase Agreement" shall mean the Receivables Purchase Agreement, dated as of December 27, 1999, by and between C&A, as seller, C&A's wholly-owned direct and indirect Subsidiaries listed on Exhibit D thereto, as sellers, and the Transferor, as purchaser, as such agreement may be amended, supplemented or otherwise modified and in effect from time to time. "Receivables Transfer Agreement" shall mean the Receivables Transfer Agreement, dated as of December 27, 1999, by and between the Transferor, C&A, as guarantor and as collection agent, the Initial Purchasers, the PARCO APA Banks, the Funding Agents and the Administrative Agent, as such agreement may be amended, supplemented or otherwise modified and in effect from time to time. "Recipient" shall have the meaning specified in Section 2.14 of the Receivables Transfer Agreement. "Records" shall mean all Contracts and other documents, books, records and other information (including, without limitation, computer programs, tapes, disks, punch cards, data processing software and related property and rights) maintained with respect to Receivables and the related Obligors. "Redwood" means Redwood Receivables Corporation, a Delaware corporation, and its successors and assigns. 30 "Redwood Collateral Agent" shall mean GE Capital, in its capacity as collateral agent for Redwood and the Redwood Secured Parties under the Redwood Liquidity Documents. "Redwood Collateral Agent Agreement" shall mean that certain Second Amended and Restated Collateral Agent and Security Agreement dated as of June 29, 1995, among Redwood, the Redwood Depositary and GE Capital, in its capacities as (a) collateral agent, (b) operating agent, (c) the liquidity agent and (d) Redwood Letter of Credit Agent, as amended pursuant to that certain Amendment No. 1 to Second Amended and Restated Collateral Agent and Security Agreement dated as of February 27, 1996, as amended pursuant to that certain Amendment No. 2 to Second Amended and Restated Collateral Agent and Security Agreement dated as of January 4, 1997, as amended pursuant to that certain Amendment No. 3 to Second Amended and Restated Collateral Agent and Security Agreement dated as of January 24, 1997. "Redwood Depositary" shall mean Bankers Trust Company, or any other Person designated as the successor Redwood Depositary pursuant to and in accordance with the terms of the Redwood Depositary Agreement, in its capacity as issuing and paying agent or trustee in connection with the issuance of commercial paper by Redwood. "Redwood Depositary Agreement" shall mean that certain Depositary Agreement dated March 15, 1994, by and between Redwood and the Redwood Depositary and consented to by GE Capital, as liquidity agent for Redwood. "Redwood Funding Account" means that certain segregated deposit account established by Redwood and maintained with the Redwood Depositary designated as the "Redwood Receivables Corporation - Collection Account (C&A)," account number ABA No. 021001033, or such other account established in accordance with the requirements set forth in Section 3A.01 of the Redwood Liquidity Loan Agreement. "Redwood Funding Agent" means GE Capital, in its capacity as funding agent for the benefit of Redwood and the Redwood Secured Parties, and any of their respective successors and assigns under the Receivables Transfer Agreement and the Transaction Documents. "Redwood Interest" means on any day, the portion of the beneficial interest of Redwood in the Receivables and Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto, which beneficial interest shall equal the product of (i) the Percentage Factor on such day multiplied by (ii) the quotient of (A) Redwood's Net Investment on such day divided by (B) the Aggregate Net Investment on such day multiplied by (iii) the Outstanding Balance of all Receivables. "Redwood Letter of Credit" shall mean that certain Irrevocable Letter of Credit No. RRC-2 dated June 29, 1995, issued by the Redwood Letter of Credit Providers at the request of Redwood in favor of the Redwood Collateral Agent pursuant to the Redwood Letter of Credit Agreement. "Redwood Letter of Credit Agent" shall mean GE Capital, in its capacity as agent for the Redwood Letter of Credit Providers under the Redwood Letter of Credit Agreement. 31 "Redwood Letter of Credit Agreement" shall mean that certain Second Amended and Restated Letter of Credit Reimbursement Agreement dated as of June 29, 1995, among Redwood, the Redwood Letter of Credit Agent, the Redwood Letter of Credit Providers and GE Capital as collateral agent, as amended pursuant to that certain Amendment No. 1 to Second Amended and Restated Letter of Credit Reimbursement Agreement dated as of February 27, 1996, as amended pursuant to that certain Amendment No. 2 to Second Amended and Restated Letter of Credit Reimbursement Agreement dated as of January 24, 1997. "Redwood Letter of Credit Providers" shall mean, initially, GE Capital, in its capacity as issuer of the Redwood Letter of Credit under the Redwood Letter of Credit Agreement, and thereafter its successors and permitted assigns in such capacity. "Redwood Liquidity Agent" shall mean GE Capital, in its capacity as agent for the Redwood Liquidity Lenders pursuant to the Redwood Liquidity Loan Agreement. "Redwood Liquidity Commitment" shall mean, with respect to Redwood, the amount set forth on Schedule I attached to the Receivables Transfer Agreement equal at all times to 103% of Redwood's Pro Rata Share of the Facility Limit. "Redwood Liquidity Documents" shall mean the Redwood Liquidity Loan Agreement and all other documents and instruments executed in connection with the consummation of the transaction contemplated by the Redwood Liquidity Loan Agreement. "Redwood Liquidity Lenders" shall mean, collectively, GE Capital and any other provider of Redwood Liquidity Loans under the Redwood Liquidity Loan Agreement. "Redwood Liquidity Loan Agreement" shall mean that certain Redwood Liquidity Loan Agreement dated as of December 27, 1999, among Redwood and GE Capital, in its capacities as (a) the operating agent for Redwood, (b) the Redwood Collateral Agent, (c) the initial Redwood Liquidity Lender and (d) the Redwood Liquidity Agent, as amended, restated, supplemented or otherwise modified from time to time. "Redwood Liquidity Loans" shall mean any and all borrowings by Redwood under the Redwood Liquidity Loan Agreement. "Redwood LOC Draws" shall mean any payments made to Redwood in connection with the Redwood Letter of Credit and allocated to the Transferor. "Redwood Net Investment" shall mean an amount equal to the result of: (i) the sum of cash amounts paid to the Transferor by Redwood for each Incremental Transfer minus (ii) the aggregate amount of Collections received and applied by the Redwood Funding Agent to reduce such Redwood Net Investment pursuant to Section 2.5, 2.6 or 2.9 of the Receivables Transfer Agreement; provided that the Redwood Net Investment shall be restored and reinstated in the amount of any Collections so received and applied if, at any time, the distribution of such Collections is rescinded or must otherwise be returned for any reason. "Redwood Program Documents" shall mean the Redwood Letter of Credit Agreement, the Redwood Liquidity Loan Agreement, the Redwood Collateral Agent Agreement, 32 the Redwood Depositary Agreement, the Commercial Paper issued by Redwood, the Operating Agent Agreement dated as of March 15, 1994 between Redwood and GE Capital as operating agent, each Accession Agreement entered into in substantially the form of Exhibit A to the Redwood Collateral Agent Agreement and the dealer agreements entered into by Redwood for the distribution of its Commercial Paper. "Redwood Purchase Limit" means, at any time, the amount set forth on Schedule I attached to the Receivables Transfer Agreement; provided, however, that at all times on and after the Redwood Termination Date, the "Redwood Purchase Limit" means the aggregate outstanding Redwood Net Investment. "Redwood Secured Parties" means the Redwood Collateral Agent, the CP Holders, the Redwood Depositary, the Redwood Liquidity Agent, the Redwood Liquidity Lenders, the Redwood Letter of Credit Agent and the Redwood Letter of Credit Providers. "Redwood Termination Date" means the earlier of (a) the Termination Date and (b) the date elected by Redwood or the Redwood Funding Agent, by notice to the Transferor and the Administrative Agent upon the occurrence of a Redwood Termination Event, as the Redwood Termination Date. "Redwood Termination Event" means any one or more of the following events: (a) a Redwood LOC Draw shall have occurred; (b) the obligations of the Redwood Liquidity Lenders to make Redwood Liquidity Loans shall have terminated and not otherwise been replaced; (c) an event of default under the Redwood Collateral Agent Agreement or any other Redwood Program Document shall have occurred; or (d) the short term debt rating of a Redwood Liquidity Lender shall have been downgraded by a Rating Agency and such Redwood Liquidity Lender shall not have been replaced in accordance with the terms of the Redwood Liquidity Agreement within 30 days thereafter. "Redwood Yield" shall have the meaning specified in Schedule I to Annex X. "Related Security" shall mean, with respect to any Receivable, all of a Seller's and Transferor's right, title and interest in, to and under: (a) all other accounts, contract rights, chattel paper, instruments, Records, general intangibles and other obligations of any Obligor with respect to any Receivable or related Contract, now or hereafter existing, whether or not arising out of or in connection with the sale or lease of goods or the rendering of services; (b) all other security interests or liens and property subject thereto from time to time, if any, purporting to secure payment of such Receivable, whether pursuant to the Contract related to such Receivable or otherwise, together with all financing statements (or other similar instruments) signed by an Obligor describing any collateral securing such Receivable; (c) all guarantees, indemnities, warranties, insurance (and proceeds and premium refunds thereof) or other agreements or arrangements of any kind 33 from time to time supporting or securing payment of such Receivable whether pursuant to the Contract related to such Receivable or otherwise; (d) in the case of the Administrative Agent for the benefit of the Initial Purchasers, the Funding Agents and the PARCO APA Banks and additionally, in the case of the Redwood Funding Agent for the benefit of Redwood and the Redwood Secured Parties, all rights and remedies of the Transferor under the Transaction Documents, together with all financing statements (or other similar instruments) filed by the Transferor against the Seller in connection therewith; and (e) all Proceeds of any of the foregoing. "Relevant UCC" shall mean, with respect to any State, the Uniform Commercial Code as from time to time in effect in such State. "Required Currency Hedge" shall mean one or more foreign currency instruments including currency options, currency hedges and similar items, acceptable to the Administrative Agent, exercisable at any time, with an Eligible Counterparty providing for the delivery by such Eligible Counterparty of U.S. Dollars in exchange for the receipt of Canadian Dollars. "Required Currency Hedge Assignments" shall be substantially in the form attached as Exhibit O to the Receivables Transfer Agreement. "Required Hedge Notional Amount" shall mean an amount denominated in U.S. Dollars, which represents the portion of Net Receivables Balance allocable to the Canadian Dollar Receivables, as calculated in the most recent Settlement Report. "Required Participants" shall mean Redwood, Liberty and PARCO APA Banks having Pro Rata Shares in the aggregate at least equal to 51% or, if the Commitments have been terminated, having a Net Investment at least equal to 51% of the Aggregate Net Investment; provided that the Commitment of any Defaulting PARCO APA Bank that has not paid all amounts due and owing by it in respect of Purchases it was obligated to make shall not be included in the Commitments for purposes of this definition. "Required Purchaser Groups" means, in the aggregate Purchaser Groups whose Purchase Limits equal or exceed 66 2/3% of the Facility Limit. "Requirements of Law" shall mean, as to any Person, the organizational documents of such Person, and any law, treaty, rule or regulation or determination of an arbitrator or a court or other Official Body, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer" shall mean, with respect to any Person, the Chairman, the President, the Controller, any Vice President, the Secretary, the Treasurer, or any other officer of such Person customarily performing functions similar to those performed by any of the above-designated officers and also, with respect to a particular matter any other officer to whom such 34 matter is referred because of such officer's knowledge of and familiarity with the particular subject. "Section 7.2 Costs" shall have the meaning specified in subsection 7.2(c) of the Receivables Transfer Agreement. "Seller Addition Date" shall have the meaning specified in Section 7.2 of the Receivables Purchase Agreement. "Seller Collateral" shall have the meaning set forth in Section 2.1(d) of the Receivables Purchase Agreement. "Seller Note" shall have the meaning specified in Section 8.1 of the Receivables Purchase Agreement. "Sellers" shall mean C&A, the other wholly-owned direct and indirect Subsidiaries of C&A listed as sellers on Exhibit D to the Receivables Purchase Agreement and any additional Sellers that become a party to the Receivables Purchase Agreement pursuant to the terms thereof, and each of their successors and permitted assigns. "Senior Credit Facility" shall mean the Credit Agreement dated as of May 28, 1998 among Collins & Aikman Products Co., Collins & Aikman Canada Inc., Collins & Aikman Plastics, Ltd., Collins & Aikman Corporation, the lenders named therein, Bank of America NT&SA, The Chase Manhattan Bank and The Chase Manhattan Bank of Canada (including any amendments or modifications thereto) as in effect from time to time. "Senior Credit Facility Confidential Information Memorandum" shall mean the information memorandum prepared in connection with the Senior Credit Facility dated April 1999. "Servicing Fee" shall mean the fees payable by the Transferor to the Collection Agent in an amount equal to the Servicing Fee Percentage multiplied by the amount of the aggregate Outstanding Balance of the Receivables. Such fee shall accrue from the date of the initial purchase of an interest by an Initial Purchaser in the Receivables to the later of the Termination Date or the date on which the Percentage Factor is reduced to zero. On or prior to the Termination Date, and provided that no Potential Termination Event shall have occurred and be continuing, such fee shall be payable only from Collections pursuant to, and subject to the priority of payments set forth in, Section 2.5 of the Receivables Transfer Agreement. After the Termination Date or during the continuation of a Potential Termination Event, such fee shall be payable only from Collections pursuant to, and subject to the priority of payments set forth in, Section 2.6 of the Receivables Transfer Agreement. "Servicing Fee Percentage" shall mean 1.0% per annum. "Servicing Fee Reserve Ratio" shall mean, as of any Monthly Settlement Report Date and continuing until, but not including, the next Monthly Settlement Report Date, an amount, expressed as a percentage, equal to (i) the product of (A) the Servicing Fee Percentage 35 and (B) 2 times Days Sales Outstanding as of such earlier Monthly Settlement Report Date divided by (ii) 360. "Settlement Date" shall mean initially, February 7, 2000 and thereafter, the fifth (5th) Business Day of each month. "Settlement Period" shall mean (i) with respect to the final Settlement Period, the period ending on the Termination Date or Purchase Termination Date and beginning with the first day of the fiscal month in which such Termination Date or Purchase Termination Date occurs, and (ii) with respect to all Settlement Periods other than the final Settlement Period, the period of days from and including the first day of a fiscal month of C&A to and including the last day of such fiscal month. "Settlement Report" shall mean a report, in substantially the form attached to the Receivables Transfer Agreement as Exhibit D or in such other form as is mutually agreed to by the Transferor and the Administrative Agent with the consent of the Funding Agents, which consent shall be obtained by the Administrative Agent, delivered by the Collection Agent to the Administrative Agent pursuant to Section 2.11 of the Receivables Transfer Agreement. "Solvent" shall mean, with respect to any Person on a particular date, that on such date (a) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person; (b) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its Indebtedness as they become absolute and matured; (c) such Person does not intend to, and does not believe that it will, incur Indebtedness or liabilities beyond such Person's ability to pay as such Indebtedness and liabilities mature; and (d) such Person is not engaged in a business or transaction, and is not about to engage in a business or transaction, for which such Person's property would constitute an unreasonably small capital. The amount of contingent liabilities (such as Litigation, guaranties and Unfunded Pension Liabilities) at any time shall be computed as the amount that, in light of all the facts and circumstances existing at the time, represents the amount that can reasonably be expected to become an actual or matured liability. "Special Obligor" shall mean each of those Obligors designated by the Administrative Agent which may, individually, exceed the Concentration Factor, but is approved by the Administrative Agent based upon its credit quality. As of the Closing Date each of the following shall be designated as a Special Obligor so long as each Special Obligor maintains short term ratings of at least A-1 and P-1 by S&P and Moody's, respectively, and long term ratings of at least A and A2 by S&P and Moody's, respectively: General Motors Corp., Ford Motor Company and DaimlerChrysler AG. "Special Obligor Concentration Factor" shall mean, on any day (i) with respect to General Motors Corp. (and its Affiliates with equal or greater credit ratings by all Rating Agencies which rate the applicable Affiliates or, with an executed support agreement between such Affiliates and General Motors Corp. which is currently in effect), so long as General Motors Corp. remains a Special Obligor, a percentage equal to 39%, (ii) with respect to Ford Motor Company (and its Affiliates with equal or greater credit ratings by all Rating Agencies which rate the applicable Affiliates or, with an executed support agreement between such 36 Affiliates and Ford Motor Company which is currently in effect), so long as Ford Motor Company remains a Special Obligor, a percentage equal to 25%, (iii) with respect to DaimlerChrysler AG (and its Affiliates with equal or greater credit ratings by all Rating Agencies which rate the applicable Affiliates or, with an executed support agreement between such Affiliates and DaimlerChrysler AG which is currently in effect), so long as DaimlerChrysler AG remains a Special Obligor, a percentage equal to 25% and (iv) with respect to any other Special Obligor, a percentage specified by the Administrative Agent (with the prior written consent of the Required Participants) in a written notice to the Sellers, the Transferor, the Initial Purchasers, the PARCO APA Banks and the Rating Agencies. "Standard & Poor's" or "S&P" shall mean Standard & Poor's, a division of The McGraw-Hill Companies, Inc., and its successors and assigns. "Structuring Fee" shall have the meaning specified in the Fee Letter. "Subsidiary" of a Person shall mean any Person more than 50% of the outstanding voting interests of which shall at any time be owned or controlled, directly or indirectly, by such Person or by one or more Subsidiaries of such Person or any similar business organization which is so owned or controlled. "Taxes" shall have the meaning specified in subsection 7.3(a) of the Receivables Transfer Agreement. "Termination Date" shall mean the earliest of (i) the Business Day designated by the Transferor to the Initial Purchasers as the Termination Date at any time following the later of (A) repayment in full of all Commercial Paper then outstanding or (B) thirty (30) days' written notice by the Transferor to the Initial Purchasers, (ii) the day upon which a Termination Date is declared or automatically occurs relating to a Termination Event or Potential Termination Event pursuant to subsection 8.2(a) of the Receivables Transfer Agreement, (iii) two (2) Business Days prior to the occurrence of the PARCO Commitment Expiry Date, a Redwood Termination Date and a Liberty Termination Event or (iv) the Purchase Termination Date. "Termination Event" shall mean an event described in Section 8.1 of the Receivables Transfer Agreement. "Title IV Plan" shall mean a Pension Plan (other than a Multiemployer Plan) that is covered by Title IV of ERISA and that a Seller, the Transferor, the Guarantor or an ERISA Affiliate maintains, contributes to or has an obligation to contribute to on behalf of participants who are or were employed by any of them. "The Bank of Nova Scotia Roles" shall have the meaning specified in Section 10.14 of the Receivables Transfer Agreement. "Tranche" shall mean a portion of the Aggregate Net Investment allocated to a Tranche Period pursuant to Section 2.3 of the Receivables Transfer Agreement. "Tranche Period" shall mean a PARCO CP Tranche Period, a PARCO BR Tranche Period or a PARCO Eurodollar Tranche Period. 37 "Tranche Rate" shall mean the applicable PARCO Tranche Rate. "Transaction Costs" shall have the meaning specified in subsection 7.4(a) of the Receivables Transfer Agreement. "Transaction Documents" shall mean, collectively, the Receivables Transfer Agreement, the Receivables Purchase Agreement, the Fee Letter, the Guaranty, the Lock-Box Agreements and all of the other instruments, documents, certificates and other agreements executed and delivered by a Seller, the Collection Agent, the Guarantor or the Transferor in connection with any of the foregoing, in each case, as the same may be amended, restated, supplemented or otherwise modified from time to time. "Transfer" shall mean a conveyance, transfer and assignment by the Transferor to the Initial Purchasers or the PARCO APA Banks of an undivided percentage ownership interest in Receivables, together with Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto, pursuant to, and in accordance with, the Receivables Transfer Agreement (including, without limitation, as a result of any reinvestment of Collections in Transferred Interests pursuant to Section 2.2(b) and 2.5) of the Receivables Transfer Agreement). "Transfer Certificate" shall have the meaning specified in subsection 2.2(a) of the Receivables Transfer Agreement. "Transfer Date" shall mean, with respect to each Transfer, the Business Day on which such Transfer is made. "Transfer Price" shall mean, with respect to any Incremental Transfer, the sum of the amounts paid to the Transferor by each Initial Purchaser or the PARCO APA Banks, as applicable, as described in the applicable Transfer Certificate. The Transfer Price for any Transfer shall be equal to the product of (i) the Net Receivables Balance of Receivables transferred in any Incremental Transfer, times (ii) the Percentage Factor. "Transfer Supplement" shall have the meaning specified in Section 5.5(c) of the PARCO Asset Purchase Agreement. "Transferor" shall mean Carcorp, Inc., a Delaware corporation, and its successors and permitted assigns. "Transferor Collateral" shall have the meaning set forth in Section 10.10 of the Receivables Transfer Agreement. "Transferor Subordinated Obligation" shall mean any payment obligation or other liability designated as such in Sections 2.6(c), 7.1, 7.2(d), 7.3(a) and 7.4(a) in the Receivables Transfer Agreement, each of which payment obligations and other liabilities shall (i) be subordinated and subject to the prior payment in full of all Transferor Unsubordinated Obligations then due, (ii) be made solely from funds available to the Transferor that are not required to be applied to Transferor Unsubordinated Obligations then due and (iii) not constitute a general recourse claim against the Transferor, but only a claim against the Transferor to the 38 extent of funds available to the Transferor after satisfying all Transferor Unsubordinated Obligations then due. "Transferor Unsubordinated Obligations" shall mean all payment obligations and other liabilities of the Transferor under the Receivables Transfer Agreement that are not designated as Transferor Subordinated Obligations. "Transferred Interest" shall mean, on any date of determination, an undivided percentage ownership interest of the Initial Purchasers and/or the PARCO APA Banks, as applicable, in (i) each and every then outstanding Receivable, (ii) all Related Security with respect to each such Receivable, (iii) the Required Currency Hedge, (iv) all Collections with respect thereto, and (v) other Proceeds of the foregoing, which undivided ownership interest shall be equal to the Percentage Factor at such time, and only at such time (without regard to prior calculations). The Transferred Interest in each Receivable, together with Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto, shall at all times be equal to the Transferred Interest in each other Receivable, together with Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto. To the extent that the Transferred Interest shall decrease as a result of a recalculation of the Percentage Factor, the Initial Purchasers and/or the PARCO APA Banks, as applicable, shall be considered to have reconveyed to the Transferor an undivided percentage ownership interest in each Receivable, together with Related Security, the Required Currency Hedge, Collections and Proceeds with respect thereto, in an amount equal to such decrease such that, in each case, the Transferred Interest in each Receivable shall be equal to the Transferred Interest in each other Receivable. "Transferred Receivables" shall have the meaning specified in subsection 3.2(b) of the Receivables Purchase Agreement. "UCC" shall mean, with respect to any jurisdiction, the Uniform Commercial Code as the same may, from time to time, be enacted and in effect in such jurisdiction. "Unfunded Pension Liability" shall mean, at any time, the aggregate amount, if any, of the sum of (a) the amount by which the present value of all accrued benefits under each Title IV Plan exceeds the fair market value of all assets of such Title IV Plan allocable to such benefits, all determined as of the most recent valuation date for each such Title IV Plan using the actuarial assumptions for funding purposes in effect under such Title IV Plan (and not the assumptions used by the Pension Benefit Guaranty Corporation in calculating such amounts), and (b) for a period of five years following a transaction that might reasonably be expected to be covered by Section 4069 of ERISA, the liabilities (whether or not accrued) that could be avoided by a Seller or any ERISA Affiliate as a result of such transaction. "Unused Fee" shall have the meaning specified in subsection 2.4(c) of the Receivables Transfer Agreement. "Unused Fee Rate" shall have the meaning as defined in each Fee Letter. "U.S." or "United States" means the United States of America and its territories. 39 "U.S. Dollar Collection Account" shall have the meaning specified in subsection 2.12(a) of the Receivables Transfer Agreement. "Utilization Fee" shall have the meaning specified in subsection 2.4(b) of the Receivables Transfer Agreement. "Utilization Fee Rate" shall have the meaning as defined in each Fee Letter. "Valuation Price" shall mean as of any date of determination, the strike price of any outstanding Required Currency Hedge that would require the highest amount of Canadian Dollars to purchase one U.S. Dollar. "Weekly Report" shall mean a report, in substantially the form attached to the Receivables Transfer Agreement as Exhibit E or in such other form as is mutually agreed to by the Transferor and the Funding Agents, delivered by (i) the Sellers to the Purchaser and the Administrative Agent pursuant to Section 7.1(f) of the Receivables Purchase Agreement and (ii) by the Collection Agent to the Administrative Agent pursuant to Section 2.11 of the Receivables Transfer Agreement. "Weekly Report Date" shall mean the second Business Day following the last Business Day of the preceding week. "Weekly Settlement Period" shall mean the period of days from and including the Sunday of any calendar week to and including the Saturday of the same calendar week. "Withdrawal Liability" shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA. "Year 2000 Compliant" shall mean that neither performance nor functionality of any computer hardware or software is materially affected by dates prior to, during or after the year 2000, and in particular that (i) no value for any current date causes any material interruption in operation, (ii) date-based functionality behaves consistently for dates prior to, during and after the year 2000, (iii) in all interfaces and data storage, the century in any date is specified either explicitly or by unambiguous algorithms or interfacing rules and (iv) the year 2000 is recognized as a leap year. "Yield" shall mean the Redwood Yield and the Liberty Yield. 40 Schedule I Determination of "Redwood Yield" REDWOOD YIELD = Sum of Daily Yields for each day in the Settlement Period 1. Daily Yield = CP Interest Amount + Liquidity Interest Amount + LOC Interest Amount + Margin Amount 2. Daily Yield Rate = (Daily Yield/Redwood Net Investment) x 360 3. CP Interest Amount = Carcorp CP Net Amount x Daily Weighted Average CP Rate x Redwood Funding Factor 3a. Carcorp CP Net Amount = Redwood Net Investment - Carcorp Liquidity Loans Outstanding + Carcorp Liquidity Deposits - Carcorp LOC Draws Outstanding + Carcorp LOC Deposits 3b. Weighted Average CP Rate = Average of the rate of interest for all tranches of CP Outstanding issued by Redwood, weighted by CP issued by Redwood Outstanding in each tranche 3c. Daily Weighted Average CP Rate = Weighted Average CP Rate/360 3d. Redwood Funding Factor = Net Proceeds Amount/Aggregate CP Net Amount 4. Liquidity Interest Amount = Carcorp Outstanding Liquidity Loans x (Liquidity Interest Rate/360) 5. LOC Interest Amount = Carcorp LOC Draws Outstanding x Carcorp Daily LOC Rate 5a. Carcorp Daily LOC Rate = (CP Interest Amount + Liquidity Interest Amount) /Carcorp Senior Debt 6. Margin Amount = Prior to a Redwood Termination Event or a Termination Event: Redwood Net Investment x Daily Margin Subsequent to a Redwood Termination Event or a Termination Event: Redwood Net Investment x Daily Default Margin Definitions Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to them in Annex X. "Aggregate CP Net Amount" shall mean the sum of the CP Net Amounts for all Borrowers and Sellers. "Borrower" shall have the meaning assigned to it in the Redwood Liquidity Loan Agreement. "Carcorp CP Net Amount" shall mean the CP Net Amount with respect to the Transferor. "Carcorp Liquidity Deposits" shall have the meaning assigned to it in the Redwood Liquidity Loan Agreement. "Carcorp Liquidity Loans Outstanding" shall have the meaning assigned to it in the Redwood Liquidity Loan Agreement. "Carcorp LOC Deposits" shall have the meaning assigned to it in the Redwood Liquidity Loan Agreement. "Carcorp LOC Draws Outstanding" shall have the meaning assigned to it in the Redwood Liquidity Loan Agreement. "Carcorp Senior Debt" shall mean the sum of Carcorp CP Net Amount and Carcorp Liquidity Loans Outstanding. "CP Net Amount" shall mean, with respect to any Borrower or Seller, an amount equal to the equivalent (for that Borrower or Seller) of (a) Redwood Net Investment, minus (b) Carcorp Liquidity Loans Outstanding, plus (c) Carcorp Liquidity Deposits, minus (d) Carcorp LOC Draws Outstanding, plus (e) Carcorp LOC Deposits. "Daily Margin" shall mean a per diem percentage rate at any time during a Settlement Period equal to (a) 0.70% divided by (b) 360. "Daily Default Margin" shall mean per diem percentage rate at any time during a Settlement Period equal to (a) the Daily Margin for such Settlement Period plus (b)(i) two percent (2.0%) divided by (ii) 360. "Liquidity Interest Rate" shall have the meaning assigned to it in the Redwood Liquidity Loan Agreement. "Net Proceeds Amount" shall have the meaning assigned to it in the Redwood Liquidity Loan Agreement. "Seller" shall have the meaning assigned to it in the Redwood Liquidity Loan Agreement. ii SCHEDULE I LIST OF INITIAL PURCHASERS, LIQUIDITY BANKS, FUNDING AGENTS, FACILITY LIMIT, PURCHASE LIMITS AND COMMITMENTS
Initial Purchaser Liquidity Bank Funding Agent Purchase Limit Commitment - ----------------- -------------- ------------- -------------- -------------- Park Avenue The Chase The Chase $57,189,542.48 $58,333,333.33 Receivables Manhattan Manhattan (Chase's Corporation Bank Bank Commitment) Redwood N/A General Electric $57,189,542.48 $58,905,228.75 Receivables Capital (Redwood's Corporation Corporation Commitment) Liberty Street The Bank of $57,189,542.48 $58,333,333.33 Funding Corp. Nova Scotia (Liberty's Commitment) Facility Limit = $171,568,627.44
SCHEDULE II EQUIPMENT AND SOFTWARE SCHEDULE III LIST OF C&A FISCAL PERIODS FOR THE YEAR 2000
- -------------------------------------------- ------------------------------------------ 1ST QUARTER 2ND QUARTER - -------------------------------------------- ------------------------------------------ FIRST PERIOD FOURTH PERIOD - -------------------------------------------- ------------------------------------------ MONTH SUN MON TUES WED THUR FRI SAT MONTH SUN MON TUES WED THUR FRI SAT - -------------------------------------------- ------------------------------------------ DEC 25 27 28 29 30 31 MAR 27 28 29 30 31 - -------------------------------------------- ------------------------------------------ JAN 1 APR 1 - -------------------------------------------- ------------------------------------------ 2 3 4 5 6 7 8 2 3 4 5 6 7 8 - -------------------------------------------- ------------------------------------------ 9 10 11 12 13 14 15 9 10 11 12 13 14 15 - -------------------------------------------- ------------------------------------------ 16 17 18 19 20 21 22 16 17 18 19 20 21 22 - -------------------------------------------- ------------------------------------------ 23 24 25 26 27 28 29 23 24 25 26 27 28 29 - -------------------------------------------- ------------------------------------------ - -------------------------------------------- ------------------------------------------ SECOND PERIOD FIFTH PERIOD - -------------------------------------------- ------------------------------------------ - -------------------------------------------- ------------------------------------------ MONTH SUN MON TUES WED THUR FRI SAT MONTH SUN MON TUES WED THUR FRI SAT - -------------------------------------------- ------------------------------------------ JAN 30 31 APR 30 - -------------------------------------------- ------------------------------------------ FEB 1 2 3 4 5 MAY 1 2 3 4 5 6 - -------------------------------------------- ------------------------------------------ 6 7 8 9 10 11 12 7 8 9 10 11 12 13 - -------------------------------------------- ------------------------------------------ 13 14 15 16 17 18 19 14 15 16 17 18 19 20 - -------------------------------------------- ------------------------------------------ 20 21 22 23 24 25 26 21 22 23 24 25 26 27 - -------------------------------------------- ------------------------------------------ - -------------------------------------------- ------------------------------------------ THIRD PERIOD SIXTH PERIOD - -------------------------------------------- ------------------------------------------ - -------------------------------------------- ------------------------------------------ MONTH SUN MON TUES WED THUR FRI SAT MONTH SUN MON TUES WED THUR FRI SAT - -------------------------------------------- ------------------------------------------ FEB 27 28 29 MAY 28 29 30 31 - -------------------------------------------- ------------------------------------------ MAR 1 2 3 4 JUNE 1 2 3 - -------------------------------------------- ------------------------------------------ 5 6 7 8 9 10 11 4 5 6 7 8 9 10 - -------------------------------------------- ------------------------------------------ 12 13 14 15 16 17 18 11 12 13 14 15 16 17 - -------------------------------------------- ------------------------------------------ 19 20 21 22 23 24 25 18 19 20 21 22 23 24 - -------------------------------------------- ------------------------------------------ - -------------------------------------------- ------------------------------------------ 3RD QUARTER 4TH QUARTER - -------------------------------------------- ------------------------------------------ SEVENTH PERIOD TENTH PERIOD - -------------------------------------------- ------------------------------------------ MONTH SUN MON TUES WED THUR FRI SAT MONTH SUN MON TUES WED THUR FRI SAT - -------------------------------------------- ------------------------------------------ JUNE 25 26 27 28 29 30 SEPT 24 25 26 27 28 29 30 - -------------------------------------------- ------------------------------------------ JULY 1 OCT 1 2 3 4 5 6 7 - -------------------------------------------- ------------------------------------------ 2 3 4 5 6 7 8 8 9 10 11 12 13 14 - -------------------------------------------- ------------------------------------------ 9 10 11 12 13 14 15 15 16 17 18 19 20 21 - -------------------------------------------- ------------------------------------------ 16 17 18 19 20 21 22 22 23 24 25 26 27 28 - -------------------------------------------- ------------------------------------------ 23 24 25 26 27 28 29 - -------------------------------------------- ------------------------------------------ - -------------------------------------------- ------------------------------------------ EIGHTH PERIOD ELEVENTH PERIOD - -------------------------------------------- ------------------------------------------ MONTH SUN MON TUES WED THUR FRI SAT MONTH SUN MON TUES WED THUR FRI SAT - -------------------------------------------- ------------------------------------------ JULY 30 31 OCT 29 30 31 - -------------------------------------------- ------------------------------------------ AUG 1 2 3 4 5 NOV 1 2 3 4 - -------------------------------------------- ------------------------------------------ 6 7 8 9 10 11 12 5 6 7 8 9 10 11 - -------------------------------------------- ------------------------------------------ 13 14 15 16 17 18 19 12 13 14 15 16 17 18 - -------------------------------------------- ------------------------------------------ 20 21 22 23 24 25 26 19 20 21 22 23 24 25 - -------------------------------------------- ------------------------------------------ - -------------------------------------------- ------------------------------------------ NINTH PERIOD TWELFTH PERIOD - -------------------------------------------- ------------------------------------------ MONTH SUN MON TUES WED THUR FRI SAT MONTH SUN MON TUES WED THUR FRI SAT - -------------------------------------------- ------------------------------------------ AUG 27 27 29 30 31 NOV 26 27 28 29 30 - -------------------------------------------- ------------------------------------------ SEPT 1 2 DEC 1 2 - -------------------------------------------- ------------------------------------------ 3 4 5 6 7 8 9 3 4 5 6 7 8 9 - -------------------------------------------- ------------------------------------------ 10 11 12 13 14 15 16 10 11 12 13 14 15 16 - -------------------------------------------- ------------------------------------------ 17 18 19 20 21 22 23 17 18 19 20 21 22 23 - -------------------------------------------- ------------------------------------------ 24 25 26 27 28 29 30 - -------------------------------------------- ------------------------------------------
SCHEDULE 3.1(Q) MATERIAL ADVERSE EFFECT None -------------------------------------------------------------------- RECEIVABLES PURCHASE AGREEMENT Among COLLINS & AIKMAN PRODUCTS CO. AND ITS WHOLLY-OWNED DIRECT AND INDIRECT SUBSIDIARIES NAMED HEREIN, AS SELLERS AND CARCORP, INC., AS PURCHASER AND THE OTHER SELLERS FROM TIME TO TIME NAMED HEREIN DATED AS OF DECEMBER 27, 1999 ------------------------------------------------------------------- ARTICLE I DEFINITIONS..............................................................1 SECTION 1.1. DEFINITIONS................................................1 SECTION 1.2. OTHER TERMS................................................1 SECTION 1.3. COMPUTATION OF TIME PERIODS................................2 ARTICLE II PURCHASE, CONVEYANCE AND SERVICING OF RECEIVABLES........................2 SECTION 2.1. SALES......................................................2 ARTICLE III CONSIDERATION AND PAYMENT; REPORTING; ADMINISTRATION.....................3 SECTION 3.1. PURCHASE PRICE.............................................3 SECTION 3.2. PAYMENT OF PURCHASE PRICE..................................3 SECTION 3.3. SETTLEMENT REPORT..........................................4 ARTICLE IV REPRESENTATIONS AND WARRANTIES...........................................4 SECTION 4.1. SELLERS' REPRESENTATIONS AND WARRANTIES....................4 SECTION 4.2. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES BY THE SELLERS; NOTICE OF BREACH..................................9 ARTICLE V COVENANTS OF THE SELLERS.................................................9 SECTION 5.1. COVENANTS OF THE SELLERS...................................9 ARTICLE VI REPURCHASE OBLIGATION...................................................15 SECTION 6.1. MANDATORY REPURCHASE......................................15 SECTION 6.2. DILUTIONS, ETC............................................15 ARTICLE VII CONDITIONS PRECEDENT....................................................15 SECTION 7.1. CONDITIONS PRECEDENT TO PURCHASER'S PURCHASES OF RECEIVABLES...............................................15 SECTION 7.2. CONDITIONS PRECEDENT TO THE ADDITION OF A SELLER..........16 ARTICLE VIII SELLER NOTE.............................................................19 SECTION 8.1. SELLER NOTE...............................................19 SECTION 8.2. SOLE AND EXCLUSIVE REMEDY/SUBORDINATION...................19 SECTION 8.3. OFFSETS, ETC..............................................19 ARTICLE IX TERM AND TERMINATION....................................................20 SECTION 9.1. TERM......................................................20 SECTION 9.2. EFFECT OF TERMINATION.....................................20 ARTICLE X MISCELLANEOUS PROVISIONS................................................21 SECTION 10.1. AMENDMENTS, ETC...........................................21 SECTION 10.2. GOVERNING LAW; SUBMISSION TO JURISDICTION.................21 SECTION 10.3. NOTICES...................................................21 SECTION 10.4. SEVERABILITY OF PROVISIONS................................22 SECTION 10.5. ASSIGNMENTS GENERALLY.....................................23 SECTION 10.6. FURTHER ASSURANCES........................................23 SECTION 10.7. NO WAIVER; CUMULATIVE REMEDIES............................23 SECTION 10.8. COUNTERPARTS..............................................23 SECTION 10.9. BINDING EFFECT; THIRD-PARTY BENEFICIARIES.................23 SECTION 10.10.MERGER AND INTEGRATION....................................23 SECTION 10.11 HEADINGS..................................................24 SECTION 10.12.EXHIBITS..................................................24 SECTION 10.13.ADDITION OF SELLERS.......................................24 EXHIBITS EXHIBIT A Principal Place of Business, Chief Executive Office and Location of Records..............................................A-1 EXHIBIT B Form of Seller Note..............................................B-1 EXHIBIT C Form of Additional Seller Supplement.............................C-1 EXHIBIT D Sellers..........................................................D-1 SCHEDULE 4.1(e) Material Adverse Effect SCHEDULE 4.1(h) Litigation ii RECEIVABLES PURCHASE AGREEMENT This RECEIVABLES PURCHASE AGREEMENT, dated as of December 27, 1999 (as amended, supplemented or otherwise modified and in effect from time to time, this "Agreement"), among COLLINS & AIKMAN PRODUCTS CO., a Delaware corporation ("C&A"), as a seller, C&A's wholly-owned direct and indirect Subsidiaries listed on Exhibit D hereto as sellers (C&A and such Subsidiaries are each referred to herein as a "Seller", and, together with the other sellers that become parties hereto pursuant to the terms of this Agreement, the "Sellers") and CARCORP, INC., a Delaware corporation, as purchaser (in such capacity, the "Purchaser"). W I T N E S S E T H : WHEREAS, the Purchaser desires to purchase from time to time certain rights to receive and related assets existing on the Closing Date and thereafter until the Purchase Termination Date; and WHEREAS, the Sellers desire to sell and assign from time to time such rights to receive and related assets to the Purchaser upon the terms and conditions hereinafter set forth; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed by and among the Purchaser and the Sellers as follows: ARTICLE I DEFINITIONS SECTION 1.1. Definitions. All capitalized terms used herein have the meanings specified herein or, if not so specified, the meaning specified in, or incorporated by reference into, Annex X to the Receivables Transfer Agreement, dated as of December 27, 1999 (as amended, supplemented or otherwise modified and in effect from time to time, the "Receivables Transfer Agreement"), by and among the Purchaser, as Transferor thereunder, C&A, as Guarantor and as Collection Agent thereunder, the Initial Purchasers, the Liquidity Banks, The Chase Manhattan Bank, as Administrative Agent thereunder, and the Funding Agents. SECTION 1.2. Other Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP, consistently applied. All terms used in Article 9 of the Relevant UCC, and not specifically defined herein, are used herein as defined in such Article 9. SECTION 1.3. Computation of Time Periods. Unless otherwise stated in this Agreement, in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding," and the word "within" means "from and excluding a specified date and to and including a later specified date." ARTICLE II PURCHASE, CONVEYANCE AND SERVICING OF RECEIVABLES SECTION 2.1. Sales. (a) Upon the terms and subject to the conditions set forth herein, each Seller hereby sells, assigns, transfers and conveys to the Purchaser, and the Purchaser hereby purchases from each Seller, all of such Seller's right, title and interest, whether now owned or hereafter acquired and wherever located, in, to and under such Seller's Receivables outstanding on the Closing Date and thereafter owned by such Seller through any Purchase Termination Date, together with all Related Security and Collections with respect thereto and all Proceeds of the foregoing. Such undivided interest in the Receivables, expressed as a Dollar amount, shall be equal to the Outstanding Balance of the Receivables from time to time. Any sale, assignment, transfer and conveyance hereunder does not constitute an assumption by the Purchaser of any obligations of the Sellers or any other Person to the Obligors or to any other Person in connection with the Receivables or under any Related Security or any other agreement or instrument relating to the Receivables. (b) Each Seller agrees to record and file on or prior to the Closing Date, at its own expense, a financing statement or statements (or other similar filings) with respect to such Seller's Receivables and the other property described in Section 2.1(a) sold by such Seller hereunder meeting the requirements of applicable law in such manner and in such jurisdictions as are necessary to perfect and protect the interests of the Purchaser created hereby under the Relevant UCC or other applicable laws against all creditors of, and purchasers from, such Seller, and to deliver either the originals of such financing statements (or other similar filings) or a file-stamped copy of such financing statements (or other similar filings) or other evidence of such filings to the Purchaser on or prior to the Closing Date. (c) Each Seller agrees that from time to time, at its expense, it will promptly execute and deliver all instruments and documents and take all actions as may be necessary or as the Purchaser may reasonably request in order to perfect or protect the interest of the Purchaser in the Receivables purchased hereunder or to enable the Purchaser to exercise or enforce any of its rights hereunder. Without limiting the foregoing, each Seller will, in order to accurately reflect this purchase and sale transaction, execute and file such financing or continuation statements or amendments thereto or assignments thereof (as permitted pursuant hereto) as may be requested by the Purchaser and mark its respective master data processing records (or related subledger) with a legend describing the purchase by the Purchaser of such Seller's Receivables and the lien of the Administrative Agent pursuant to the Receivables Transfer Agreement and stating "An interest in these rights to receive has been granted to The Chase Manhattan Bank, as 2 Administrative Agent, on behalf of the Initial Purchasers, the Liquidity Banks and the Funding Agents, pursuant to a Receivables Transfer Agreement dated as of December 27, 1999." Each Seller shall, upon request of the Purchaser, obtain such additional search reports as the Purchaser shall reasonably request. To the fullest extent permitted by applicable law, the Purchaser shall be permitted to sign and file continuation statements and amendments thereto and assignments thereof without any Seller's signature. Carbon, photographic or other reproduction of this Agreement or any financing statement shall be sufficient as a financing statement. (d) It is the express intent of the Sellers and the Purchaser that each conveyance of the Receivables by a Seller to the Purchaser pursuant to this Agreement be construed as a sale of such Receivables by such Seller to the Purchaser. Further, it is not the intention of the Sellers and the Purchaser that such conveyance be deemed a grant of a security interest in the Receivables by any Seller to the Purchaser to secure a debt or other obligation of such Seller. However, in the event that, notwithstanding the intent of the parties, any Seller's Receivables are construed to constitute property of the applicable Seller, then (i) this Agreement also shall be deemed to be, and hereby is, a security agreement within the meaning of the Relevant UCC or other applicable laws; and (ii) any of the conveyances by a Seller provided for in this Agreement shall be deemed to be, and such Seller hereby grants to the Purchaser, a security interest in, to and under all of such Seller's right, title and interest in, to and under such Seller's Receivables, together with all Related Security and Collections with respect thereto and all Proceeds of the foregoing (the "Seller Collateral"), to secure the rights of the Purchaser set forth in this Agreement or as may be determined in connection therewith by applicable law. The Sellers and the Purchaser shall, to the extent consistent with this Agreement, take such actions as may be necessary to ensure that, if this Agreement were deemed to create a security interest in the Receivables, such security interest would be deemed to be a perfected security interest in favor of the Purchaser under applicable law and will be maintained as such throughout the term of this Agreement. ARTICLE III CONSIDERATION AND PAYMENT; REPORTING; ADMINISTRATION SECTION 3.1. Purchase Price. The purchase price for the Receivables and related property conveyed to the Purchaser by the Sellers under this Agreement on any Business Day shall be a Dollar amount equal to the product of (i) the aggregate Outstanding Balance of the Receivables sold on such Business Day, and (ii) one minus the then applicable Purchase Discount (the "Purchase Price"). SECTION 3.2. Payment of Purchase Price. (a) The Purchase Price for each Receivable sold hereunder on any Business Day shall be paid or provided for on such Business Day (i) by payment in immediately available funds to the extent such funds are available in excess of necessary working capital, (ii) with respect to Receivables sold by C&A to the Purchaser hereunder, with the consent of C&A, by means of capital contributed by C&A to the Purchaser in the form of a contribution of the additional Receivables, (iii) at the option of the Collection Agent, on behalf of the applicable 3 Seller, (subject to the provisions of Article VIII), by means of an addition to the principal amount of the applicable Seller Note in an aggregate amount up to the remaining portion of the Purchase Price (each, an "Advance"); provided, however, that the aggregate amount of all Seller Notes on any Business Day shall not exceed 49% of (x) the aggregate Purchase Price of the Receivables purchased hereunder existing on such Business Day minus (y) an amount equal to the Aggregate Net Investment (the "Advance Limit") or (iv) any combination of the foregoing. The Collection Agent may evidence such additional principal amounts by recording the date and amount thereof on the grid attached to the applicable Seller Note; provided, however, that the failure to make any such recordation or any error in such grid shall not adversely affect any Seller's rights. No sales of Receivables shall be made hereunder on and after the Purchase Termination Date. (b) The Receivables with respect to which the Purchase Price therefor is paid pursuant to Section 3.2(a)(i) and (iii) are referred to herein as "Purchased Receivables" and the Receivables with respect to which the Purchase Price therefor is paid pursuant to Section 3.2(a)(ii) are referred to herein as "Contributed Receivables." The Purchased Receivables and the Contributed Receivables are collectively referred to herein as the "Transferred Receivables." (c) The Collection Agent shall be responsible, in its sole discretion but in accordance with subsection 3.2(a), for allocating among the Sellers the payment of the Purchase Price for Receivables either in the form of cash received from the Purchaser or as an addition to the principal amount of the applicable Seller Note. The Purchaser shall be entitled to pay all amounts in respect of the Purchase Price of Receivables and Related Security to an account of the Collection Agent for allocation by the Collection Agent to the Sellers, and each of the Sellers hereby appoints the Collection Agent as its agent for the purposes of receiving such payments and making such allocations and hereby authorizes the Purchaser to make all payments due to such Seller directly to, or as directed by, the Collection Agent. The Collection Agent hereby accepts and agrees to such appointment. All payments under this Agreement shall be made not later than 3:00 p.m. (New York City time) on the date specified therefor in Dollars in same day funds or by check, as the Collection Agent shall elect and to the bank account designated in writing by the Collection Agent to the Purchaser. SECTION 3.3. Settlement Report. On the Monthly Settlement Report Date of each of C&A's fiscal months, C&A shall deliver to the Purchaser a monthly report, substantially in the form of Exhibit D attached to the Receivables Transfer Agreement, showing (i) the aggregate Purchase Price of Receivables acquired or generated by the Sellers in the preceding month and (ii) the aggregate Outstanding Balance of such Receivables that are Eligible Receivables. ARTICLE IV REPRESENTATIONS AND WARRANTIES SECTION 4.1. Sellers' Representations and Warranties. Each Seller severally represents and warrants to the Purchaser as of the Closing Date and on each Business Day on which Receivables are sold hereunder by it with respect to itself: 4 (a) Corporate Existence and Power. Such Seller is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all corporate power and all material governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is now conducted, except where the failure to obtain such licenses, authorizations, consents and approvals would not have a Material Adverse Effect. Such Seller is duly qualified to do business in, and is in good standing in, every other jurisdiction in which the nature of its business requires it to be so qualified, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. (b) Corporate and Governmental Authorization; Contravention. The execution, delivery and performance by such Seller of the Transaction Documents to which it is a party (i) are within such Seller's corporate powers, (ii) have been duly authorized by all necessary corporate action, (iii) require no action by or in respect of, or filing with, any Official Body or official thereof (except for the filing of UCC financing statements or similar filings under applicable law as required by this Agreement or as have been taken or filed and, with respect to filings other than UCC financing statements or similar filings under applicable law, filings where the failure to file will not have a Material Adverse Effect), (iv) do not contravene, or constitute a default under, any provision of applicable Law or of the Certificate of Incorporation, Articles or Bylaws, as applicable, of such Seller, (v) do not contravene or constitute a default under any agreement or other instrument binding upon such Seller except where such contravention or default would not have a Material Adverse Effect, or (vi) result in the creation or imposition of any Adverse Claim on the assets of such Seller, or any of its Affiliates (except those created by this Agreement). (c) Valid Sale; Binding Effect. Each purchase of Receivables and Related Security by the Purchaser hereunder shall constitute a valid sale and assignment by the applicable Seller to the Purchaser, enforceable against creditors of, and purchasers from, such Seller, subject to applicable bankruptcy, insolvency, moratorium or other similar laws affecting the rights of creditors and general equitable principles (whether considered in a proceeding at law or in equity). Each of the Transaction Documents to which such Seller is a party will constitute the legal, valid and binding obligation of such Seller, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws affecting the rights of creditors and general equitable principles (whether considered in a proceeding at law or in equity). The security interest granted to the Purchaser by such Seller pursuant to Section 2.1(d) will at all times be a fully perfected first priority security interest in and to the Seller Collateral transferred by such Seller. (d) Quality of Title. Immediately preceding the sale by it of Receivables, Related Security, Collections with respect thereto and all Proceeds of the foregoing pursuant to this Agreement, such Seller was the owner of all of its Receivables, free and clear of all Adverse Claims. On or prior to the date hereof and on or prior to each Business Day on which Receivables are sold by it hereunder, (i) all financing statements and other documents required to be recorded or filed in order to perfect and protect the interest of the Purchaser in, to and under the Receivables against all creditors of and purchasers from the applicable Seller will have been duly filed in each filing office necessary for such purpose and all filing fees and taxes, if any, 5 payable in connection with such filings shall have been paid in full, and (ii) Purchaser will either acquire (A) valid title to and the sole record and beneficial ownership in, or (B) a first priority perfected security interest in, each such Receivable purchased, assigned or otherwise acquired on such date, in each case free and clear of any Adverse Claim or restrictions on transferability. None of the Seller Collateral has been sold, assigned or otherwise disposed of other than pursuant hereto and the Receivables Transfer Agreement and there are no Adverse Claims upon or with respect to the Seller Collateral other than pursuant hereto and the Receivables Transfer Agreement. (e) Material Adverse Effect. Commencing on the last day of the 1998 fiscal year of C&A and ending on the Closing Date, (i) such Seller has not incurred any obligations, contingent or non-contingent liabilities, liabilities for Charges, long-term leases or unusual forward or long-term commitments that, alone or in the aggregate, could reasonably be expected to have a Material Adverse Effect, other than, with respect to a Material Adverse Effect as listed on Schedule 4.1(e), (ii) no contract, lease or other agreement or instrument has been entered into by such Seller or has become binding upon such Seller's assets and no law or regulation applicable to such Seller has been adopted that has had or could reasonably be expected to have a Material Adverse Effect on such Seller, and (iii) such Seller is not in default and to the knowledge of such Seller, no third party is in default under any material contract, lease or other agreement or instrument to which such Seller is a party that alone or in the aggregate could reasonably be expected to have a Material Adverse Effect. Commencing on the last day of the 1998 fiscal year of C&A and ending on the Closing Date no event has occurred that alone or together with other events could reasonably be expected to have a Material Adverse Effect, other than, with respect to a Material Adverse Effect with respect to such Seller as listed on Schedule 4.1(e). (f) Accuracy of Information. All information heretofore furnished by such Seller to the Purchaser and the Funding Agents for purposes of or in connection with this Agreement, any other Transaction Document, or any transaction contemplated hereby or thereby is, and all such information hereafter furnished by such Seller to the Purchaser, the Funding Agents, the Initial Purchasers and the PARCO APA Banks will be, true and accurate in every material respect, on the date such information is stated or certified. (g) Tax Status. Such Seller has withheld or deducted and remitted all amounts required to be withheld or deducted and remitted by the applicable legislation, and has filed all tax returns (Federal, State, Provincial and local) required to be filed by it and has paid or made adequate provision for the payment of all taxes, assessments and other governmental charges (including for such purposes, the setting aside of appropriate reserves for taxes, assessments and other governmental charges being contested in good faith). (h) Action, Suits. There are no actions, suits or proceedings pending, or to the knowledge of such Seller threatened, against or affecting such Seller or any Affiliate of such Seller or their respective properties, in or before any court, arbitrator or other body ("Litigation"), which may, individually or in the aggregate, have a Material Adverse Effect or that involve this Agreement or the transactions contemplated hereby. Schedule 4.1(h) sets forth 6 all Litigation that seeks damages in excess of $5,000,000, except to the extent an insurance carrier has accepted a claim for coverage. (i) Place of Business. The principal place of business and chief executive office of such Seller are located at the addresses described on Exhibit A hereof, and the offices where such Seller keeps all of its Records and Related Security thereof are located at the addresses described on Exhibit A hereof, or such other locations notified to the Purchaser in accordance with this Agreement in jurisdictions where all action required by the terms of this Agreement has been taken and completed. (j) Solvency. Both before and after giving effect to (i) the transactions contemplated by the Transaction Documents and (ii) the payment and accrual of all transaction costs in connection with the foregoing, such Seller is not and will not be insolvent, does not, and will not, have unreasonably small capital with which to carry on its business, is, and will be, able to pay its debts generally as they become due and payable, and its liabilities do not, and will not, exceed its assets. (k) Tradenames, Etc. As of the date hereof: (i) such Seller has only the subsidiaries and divisions listed on Exhibit K to the Receivables Transfer Agreement; and (ii) such Seller has, within the last five (5) years, operated only under the tradenames identified on Exhibit K to the Receivables Transfer Agreement, and, within the last five (5) years, has not changed its name, merged with or into or consolidated with any other corporation or been the subject of any proceeding under Title 11, United States Code (Bankruptcy), except as disclosed in Exhibit K to the Receivables Transfer Agreement. (l) Nature of Receivables. Each Receivable sold by such Seller to the Purchaser hereunder is an Eligible Receivable. Each Receivable sold by such Seller and included in the calculation of the Net Receivables Balance in fact satisfies at such time the definition of "Eligible Receivable" and is an "eligible asset" as defined in Rule 3a-7 under the Investment Company Act of 1940, as amended, and is not a Defaulted Receivable. (m) Credit and Collection Policy. Since the end of the Seller's fiscal period ending in September 1999, there have been no material changes in the Credit and Collection Policy other than as permitted hereunder. Since such date, no material adverse change has occurred in the overall rate of collection of the Receivables sold by it. (n) Collections and Servicing. Since the end of the Seller's fiscal period ending in September 1999, there has been no material adverse change in the ability of such Seller to service and collect its Receivables. (o) Binding Effect of Receivables and Contract. Each Receivable and related Contract sold by it constitutes a legal, valid and binding obligation of the related Obligor, enforceable against the related Obligor, subject to applicable bankruptcy, insolvency, moratorium or similar laws affecting the rights of creditors and general equity principles (whether considered in a proceeding at law or in equity). 7 (p) Not an Investment Company. Such Seller is not, nor is such Seller controlled by, an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," within the meaning of the Investment Company Act of 1940, as amended, or is exempt from all provisions of such Act. (q) ERISA. To the extent applicable, such Seller and its ERISA Affiliates are in compliance in all material respects with ERISA and the provisions of the Code that are applicable to ERISA, and no lien exists in favor of the Pension Benefit Guaranty Corporation on any of the Receivables. There are no pending or, to the knowledge of such Seller, threatened claims (other than claims for benefits in the normal course), sanctions, actions or lawsuits, asserted or instituted against such Plan of such Seller or its ERISA Affiliates or any Person as fiduciary or sponsor of any such Plan of such Seller or its ERISA Affiliates. No ERISA Event has occurred with respect to Title IV Plans of such Seller or its ERISA Affiliates that have an aggregate Unfunded Pension Liability equal to or greater than $10,000,000. (r) Lock-Box Accounts. The names and addresses of all the Lock-Box Banks, together with the account numbers of the Lock-Box Accounts at such Lock- Box Banks, are specified in Exhibit B to the Receivables Transfer Agreement (or at such other Lock-Box Banks and/or with such other Lock-Box Accounts, as have been notified to the Administrative Agent and for which Lock-Box Agreements have been executed in accordance with Section 2.8(b) of the Receivables Transfer Agreement and delivered to the Collection Agent, the Administrative Agent and the Funding Agents). All Obligors (or their designees) have been instructed to cause all payments to be made to a Lock-Box Account. (s) Bulk Sales. No transaction contemplated by this Agreement or the other Transaction Documents requires compliance with any bulk sales act or similar law. (t) Year 2000 Plan. Such Seller has reviewed the areas within its business and operations which it believes would reasonably be expected to be materially adversely by, and has developed a plan to address on a timely basis, the "Year 2000 Problem" (that is, the risk that computer applications used by such Seller may be unable to recognize and perform properly date-sensitive functions involving certain dates occurring in or after the year 2000). (u) Full Disclosure. No information contained in this Agreement, any of the other Transaction Documents, the Senior Credit Facility Confidential Information Memorandum, the Rating Agency Book or, since January 1, 1999, any registration statement or annual, quarterly, monthly or other regular report which such Seller or any of its Affiliates filed with the Securities and Exchange Commission contains any untrue statement of a material fact (taken as a whole) nor has such Seller or its Affiliates failed to provide to the Purchaser, the Administrative Agent, the Initial Purchasers, the Funding Agents or the Liquidity Banks any material information necessary to make information provided by such Seller or its Affiliates in such documents or filings (taken as a whole) not misleading in any material respect in light of the circumstances under, and for the purposes for, which such information was provided; provided, however, that this representation or warranty shall not relate to any projections or forward looking statements in any such documents provided by such Seller or its Affiliates. 8 SECTION 4.2. Reaffirmation of Representations and Warranties by the Sellers; Notice of Breach. On the Closing Date and on each Business Day on which Receivables are sold by a Seller hereunder, such Seller shall be deemed to have certified that all representations and warranties described in Section 4.1 are true and correct on and as of such day as though made on and as of such day. The representations and warranties set forth in Section 4.1 shall survive (i) the conveyance of the Receivables to the Purchaser, (ii) the termination of the rights and obligations of the Purchaser and the Sellers under this Agreement and (iii) the termination of the rights and obligations of the Transferor, C&A, the Administrative Agent and the Funding Agents under the Receivables Transfer Agreement. Upon discovery by the Purchaser or any Seller of a breach of any of the foregoing representations and warranties, the party discovering such breach shall give written notice to the others by the end of the Business Day of such discovery. ARTICLE V COVENANTS OF THE SELLERS SECTION 5.1. Covenants of the Sellers. Each Seller hereby covenants and agrees with the Purchaser that, for so long as this Agreement is in effect, and until all Receivables, an interest in which has been sold to the Purchaser pursuant hereto, shall have been paid in full or written-off as uncollectible, and all amounts owed by such Seller pursuant to this Agreement have been paid in full, unless the Purchaser otherwise consents in writing, such Seller covenants and agrees as follows: (a) Conduct of Business. Such Seller will, and will cause each of its Subsidiaries to, (i) carry on and conduct its business in substantially the same manner and in substantially the same fields of enterprise as it is presently conducted and do all things necessary to remain duly incorporated, validly existing and in good standing as a domestic corporation in its jurisdiction of incorporation, (ii) maintain all requisite authority to conduct its business in each jurisdiction in which its business is conducted to the extent that the failure to maintain such authority would have a Material Adverse Effect, and (iii) maintain its principal place of business and chief executive office and the office at which it keeps its Records and Related Security at the locations specified in Exhibit A, or upon 30 days' prior written notice to the Purchaser, at such other locations in a jurisdiction where all action requested by the Purchaser and the Administrative Agent pursuant to Section 4.1(d) shall have been taken with respect to the Receivables and Related Security. (b) Compliance with Laws. Such Seller will, and will cause each of its Subsidiaries to (i) comply in all material respects with all Laws to which it may be subject and (ii) perform each of its obligations under the Transaction Documents, except, in each case, where the failure to so comply would not have a Material Adverse Effect. (c) Furnishing of Information and Inspection of Records. Such Seller will furnish to the Purchaser from time to time such information with respect to such Seller's Receivables as the Purchaser may reasonably request, including, without limitation, listings identifying the Obligors and the Outstanding Balance for each of its Receivables, together with 9 an aging of such Receivables. Such Seller will, at any time and from time to time during regular business hours and upon reasonable notice permit the Purchaser, or its agents or representatives, (i) to examine and make copies of and abstracts from all Records and (ii) to visit the offices and properties of such Seller for the purpose of examining such Records, and to discuss matters relating to its Receivables or such Seller's performance hereunder and under the other Transaction Documents to which such Seller is a party with any of the officers, directors, employees or independent public accountants of such Seller having knowledge of such matters. Upon a Potential Termination Event or Termination Event, the Initial Purchasers, the PARCO APA Banks, Funding Agents and Administrative Agent shall, without notice, have immediate access to all Records and to visit the offices and properties of each Seller. (d) Keeping of Records and Books of Account. Such Seller will maintain a system of accounting established and administered in accordance with GAAP, consistently applied, and will maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing Receivables in the event of the destruction of the originals thereof), and keep and maintain, or obtain, as and when required, all Records and all documents, books, records and other information reasonably necessary or advisable for the collection of all Receivables (including, without limitation, (i) records adequate to permit the daily identification of each Receivable and all Collections of and adjustments to each existing Receivable and (ii) records of all payments received, credits granted and merchandise returned with respect thereto). Such Seller will give the Purchaser prompt notice of any material change in the administrative and operating procedures referred to in the previous sentence. (e) Communication with Accountants. Such Seller authorizes the Purchaser, the Collection Agent, the Administrative Agent and each Funding Agent to communicate directly with its independent certified public accountants, and authorizes and shall instruct those accountants and advisors to disclose and make available to the Purchaser, the Collection Agent, the Administrative Agent and each Funding Agent any and all financial statements and other supporting financial documents, schedules and information relating to such Seller (including copies of any issued management letters) with respect to the business, financial condition and other affairs of such Seller. Such Seller agrees to render the Purchaser, the Collection Agent, the Administrative Agent and each Funding Agent at such Person's own cost and expense, such clerical and other assistance as may be reasonably requested with regard to the foregoing. If any Potential Termination Event or Termination Event shall have occurred and be continuing, such Seller shall, promptly upon request therefor, assist the Purchaser in delivering to the Administrative Agent and the Funding Agents Records reflecting activity through the close of business on the Business Day immediately preceding the date of such request. (f) Performance and Compliance with Receivables and Contracts. Such Seller at its expense will timely and fully perform and comply with all material provisions, covenants and other promises required to be observed by it under the Contracts related to the Receivables. (g) Credit and Collection Policy. Such Seller will comply in all material respects with the Credit and Collection Policy in regard to each Receivable and the related Contract. 10 (h) Collections. Such Seller shall instruct all Obligors (or their designees) to cause all Collections to be deposited directly to a Lock-Box Account. (i) Collections Received. Such Seller shall hold in trust, and deposit immediately (but in any event no later one Business Day following its receipt thereof) to a Lock-Box Account all Collections received from time to time by such Seller. (j) Sale Treatment. Such Seller agrees to treat each conveyance hereunder for all purposes (including, without limitation, tax and financial accounting purposes) as a sale and, to the extent any such reporting is required, shall report the transactions contemplated by this Agreement on all relevant books, records, tax returns, financial statements and other applicable documents as a sale of the Receivables to the Purchaser. (k) No Sales, Liens, Etc. Except as otherwise provided herein, such Seller will not sell, assign (by operation of law or otherwise) or otherwise dispose of, or create any Adverse Claim upon (or the filing of any financing statement) or with respect to (x) any of its Receivables, Related Security, Required Currency Hedge, Collections or Proceeds with respect thereto, (y) any inventory or goods, the sale of which may give rise to a Collection, or (z) any Lock-Box Account to which any Collections of any of its Receivables are sent, or assign any right to receive income in respect thereof. (l) No Extension or Amendment of Receivables. Such Seller will not extend, amend or otherwise modify the terms of any Receivable, or amend, modify or waive any term or condition of any Contract related thereto, except as provided in the Receivables Transfer Agreement or as contemplated by the Credit and Collection Policy, without the prior written consent of the Purchaser and each Funding Agent (which consent shall be obtained by the Administrative Agent). (m) No Change in Business or Credit and Collection Policy. Except as provided in the Receivables Transfer Agreement, such Seller will not make any change in the character of its business or in the Credit and Collection Policy, which change would, in either case, impair the collectibility of any Receivable or otherwise have a Material Adverse Effect. (n) No Mergers, Etc. Such Seller will not, without the prior written consent of each Funding Agent (which consent shall be obtained by the Administrative Agent), (i) consolidate or merge with or into any other Person, or (ii) sell, lease or transfer all or substantially all of its assets to any other Person; provided, that a Seller may merge with or into another Seller or with another Person if (A)(1) such Seller is the corporation surviving such consolidation or merger or (2) the Person into or with which the Seller is merged or consolidated is an Affiliate and the surviving corporation assumes in writing all duties and liabilities of the Seller under the Transaction Documents and (B) immediately after and giving effect to such consolidation or merger, no Termination Event or Potential Termination Event shall have occurred and be continuing under the Receivables Transfer Agreement. (o) Change in Payment Instructions to Obligors; Deposits to Lock-Box Accounts. Such Seller will not add or terminate, or make any change to, any Lock-Box Account, 11 except in accordance with the Receivables Transfer Agreement. Such Seller will use reasonable commercial efforts to not deposit or otherwise credit, or cause or permit to be so deposited or credited, to any Lock-Box Account, cash or cash proceeds other than Collections of Receivables and in any event shall segregate, or cause to be segregated, any such cash or cash proceeds from Collections within five (5) days of deposit or credit to any Lock-Box Account. (p) Change of Name, Etc. Such Seller shall not change its name, identity or structure or the location of its chief executive office, unless at least ten (10) days prior to the effective date of any such change such Seller delivers to the Purchaser and the Administrative Agent (i) such documents, instruments or agreements, executed by the applicable Seller as are necessary to reflect such change and to continue the perfection of the Purchaser's interest in the Receivables, Related Security, Collections and Proceeds with respect thereto and (ii) new or revised Lock-Box Agreements executed by the Lock-Box Banks which reflect such change and enable the Administrative Agent, on behalf of the Funding Agents, the Initial Purchasers and the PARCO APA Banks, to exercise its rights under the Transaction Documents. (q) Indemnification. Such Seller severally agrees to indemnify, defend and hold the Purchaser harmless from and against any and all loss, liability, damage, judgment, claim, deficiency, or expense (including interest, penalties, reasonable attorneys' fees and amounts paid in settlement) to which the Purchaser may become subject insofar as such loss, liability, damage, judgment, claim, deficiency, or expense arises out of or is based upon a breach by such Seller of its representations, warranties and covenants contained herein, or any information certified in any schedule or certificate delivered by such Seller hereunder or in connection with the Transaction Documents, being untrue in any material respect at any time; provided that in no event shall this Section 5.1(q) be construed to require a Seller to indemnify the Purchaser for amounts related to the uncollectibility of any Receivable for credit-related reasons pertaining to the related Obligor, including, but not limited to, amounts that are required to be returned to the related Obligor as a voidable preference. In addition, such Seller shall severally indemnify the Administrative Agent, the Funding Agents, the Redwood Secured Parties, the Initial Purchasers and each of the PARCO APA Banks from any and all losses, claims, damages, liabilities or expenses incurred by any of them and resulting from the failure of such Seller to be Year 2000 Compliant. Any indemnification pursuant to this Section 5.1(q) shall be had only from the assets of the Sellers and shall not be payable from Collections, except to the extent such Collections are released to a Seller in accordance with the Receivables Transfer Agreement. The obligations of the Sellers under this Section 5.1(q) shall be considered to have been relied upon by the Purchaser, the Administrative Agent and the Funding Agents and shall survive the execution, delivery, performance and termination of this Agreement for a period of three (3) years following the Purchase Termination Date, regardless of any investigation made by the Purchaser, the Administrative Agent or the Funding Agents or on behalf of any of them. (r) ERISA. (i) To the extent applicable, such Seller will not (A) engage or permit any of its ERISA Affiliates to engage in any prohibited transaction (as defined in Section 4975 of the Code and Section 406 of ERISA) for which an exemption is not available or has not previously been obtained from the U.S. Department of Labor; (B) fail to make 12 any payments to any Multiemployer Plan that such Seller or any ERISA Affiliate of such Seller is required to make under the agreement relating to such Multiemployer Plan or any law pertaining thereto; (C) terminate any Benefit Plan so as to result in any liability; or (D) permit to exist any occurrence of any reportable event described in Title IV of ERISA, if such prohibited transactions, failures to make payment, terminations and reportable events described in clauses (A), (B), (C) and (D) above would in the aggregate have a Material Adverse Effect. (ii) To the extent applicable, such Seller will not permit to exist any accumulated funding deficiency (as defined in Section 302(a) of ERISA and Section 412(a) of the Code) or funding deficiency with respect to any Benefit Plan other than a Multiemployer Plan. (iii) To the extent applicable, such Seller will not cause or permit it or any of its ERISA Affiliates to cause or permit the occurrence of an ERISA Event with respect to Title IV Plans of such Seller or its ERISA Affiliates that have an aggregate Unfunded Pension Liability equal to or greater than $10,000,000. (s) Insurance. Except to the extent failure to do so would not reasonably be expected to cause a Material Adverse Effect, such Seller shall (i) keep its insurable properties adequately insured at all times by financially sound and responsible insurers and maintain such other insurance, to such extent and against such risks, including fire and other risks insured against by extended coverage, as is customary with companies of the same or similar size in the same or similar businesses, (ii) maintain in full force and effect public liability insurance against claims for personal injury or death or property damage occurring upon, on, about or in connection with the use of any properties owned, occupied or controlled by it or any of its Subsidiaries, as the case may be, in such amounts and with such deductibles as are customary with companies of the same or similar size in the same or similar businesses and in the same geographic area and (iii) maintain such other insurance as may be required by Law, and will cause each of its Subsidiaries to do so. (t) Notice of Material Event. Such Seller shall promptly inform the Purchaser in writing of the occurrence of any event, circumstance or condition that has had or could reasonably be expected to have a material adverse effect with respect to such Seller, in each case setting forth the details thereof and what action, if any, such Seller proposes to take with respect thereto. (u) Capital Structure and Business. No Seller shall: (i) make any changes in any of its business objectives, purposes or operations that could have or result in a Material Adverse Effect or (ii) amend, supplement or otherwise modify its certificate or articles of incorporation or bylaws in a manner that could have or result in a Material Adverse Effect. (v) Separate Existence. Such Seller shall at all times: (i) maintain its own deposit account or accounts, separate from those of the Purchaser, with commercial banking institutions and ensure that the funds of such 13 Seller will not be diverted to the Purchaser or for other than corporate uses of such Seller, nor will such funds be commingled with the funds of the Purchaser; (ii) to the extent that it shares the same officers or other employees with the Purchaser, the salaries of and the expenses related to providing benefits to such officers and other employees shall be fairly allocated among such Seller and the Purchaser, and each such entity shall bear its fair share of the salary and benefit costs associated with all such common officers and employees; (iii) to the extent that it jointly contracts with the Purchaser to do business with vendors or service providers or to share overhead expenses, the costs incurred in so doing shall be allocated fairly among such Seller and the Purchaser, and each such entity shall bear its fair share of such costs. To the extent that the Seller contracts or does business with venders or service providers where the goods and services provided are partially for the benefit of the Purchaser, the costs incurred in so doing shall be fairly allocated to or among such Seller and the Purchaser for whose benefit the goods or services are provided, and each such entity shall bear its fair share of such costs; (iv) enter into all material transactions between the Seller and the Purchaser, whether currently existing or hereafter entered into, only on an arm's length basis, it being understood and agreed that the transactions contemplated in the Transaction Documents meet the requirements of this clause (iv); (v) maintain office space separate from the office space of the Purchaser and, to the extent that the Seller and the Purchaser have offices in the same location, there shall be a fair and appropriate allocation of overhead costs among them, and each such entity shall bear its fair share of such expenses; (vi) issue separate financial statements prepared not less frequently than quarterly and prepared in accordance with GAAP; (vii) conduct its affairs strictly in accordance with its certificate of incorporation and observe all necessary, appropriate and customary corporate formalities, including, but not limited to, holding all regular and special stockholders' and directors' meetings appropriate to authorize all corporate action, keeping separate and accurate minutes of its meetings, passing all resolutions or consents necessary to authorize actions taken or to be taken, and maintaining accurate and separate books, records and accounts, including, but not limited to, payroll and intercompany transaction accounts; (viii) not assume or guarantee any of the liabilities of the Purchaser, and (ix) take, or refrain from taking, as the case may be, all other actions that are necessary to be taken or not to be taken in order to comply with this Section 5.1(v) . 14 ARTICLE VI REPURCHASE OBLIGATION SECTION 6.1. Mandatory Repurchase. (a) Breach of Warranty. If, on any day, any Receivable which has been sold by any Seller hereunder and which has been reported by such Seller as an Eligible Receivable, shall fail to meet the conditions set forth in the definition of Eligible Receivable on the date of such sale and in connection with the circumstances giving rise to such breach (i) the rights and interests of the Purchaser in such Receivable, Related Security or Collections with respect thereto or the Proceeds thereof are in any manner materially and adversely impaired or (ii) such Receivable is not available to the Purchaser free and clear of any Adverse Claim, such Seller shall be deemed to have received on such day a Collection of such Receivable in full and shall on such day pay to the Purchaser an amount equal to the aggregate Outstanding Balance of such Receivable. (b) Reconveyance Under Certain Circumstances. Each Seller agrees that, if on any date the Administrative Agent, a Funding Agent or the Transferor notifies such Seller or such Seller discovers that any of the representations and warranties made herein is untrue or incorrect with respect to a Receivable in any material respect as of the date such representation or warranty was made and such untruth or incorrectness will adversely affect the collectibility of, or the lien upon, such Receivable, such Seller shall accept the reconveyance of such Receivable on such date. In the event of a reconveyance under this Section 6.1(b), the applicable Seller shall pay to the Purchaser in immediately available funds on such date of reconveyance an amount equal to the Outstanding Balance of any such Receivable. SECTION 6.2. Dilutions, Etc. Each Seller agrees that if on any day the Outstanding Balance of a Receivable an interest in which has been sold by such Seller hereunder is either (x) reduced as a result of defective, rejected or returned goods or other dilution factor, any billing adjustment or other adjustment, or (y) reduced or cancelled as a result of (i) a setoff or offset in respect of any claim by any Person (whether such claim arises out of the same or a related transaction or an unrelated transaction), or (ii) any action by any Federal or state taxing authority or as a result of the payment by any Obligor of any portion of a Receivable constituting a tax or governmental fee or charge to any Person other than the Purchaser, then such Seller shall be deemed to have received on such day a collection of such Receivable in the amount of such reduction, cancellation or payment made by the Obligor and shall on such day pay to the Purchaser an amount equal to such reduction or cancellation. ARTICLE VII CONDITIONS PRECEDENT SECTION 7.1. Conditions Precedent to Purchaser's Purchases of Receivables. The obligations of the Purchaser to purchase the Receivables on the Closing Date and on any 15 Business Day on which Receivables are sold hereunder shall be subject to the satisfaction of the following conditions: (a) All representations and warranties of the Sellers contained in this Agreement shall be true and correct on the Closing Date and on the applicable Business Day of sale, with the same effect as though such representations and warranties had been made on such date (except to the extent such representations and warranties relate solely to an earlier date, and then as of such earlier date); (b) All information concerning the Receivables provided to the Purchaser shall be true and correct in all material respects as of the Closing Date, in the case of any Receivables sold on the Closing Date, or the date such Receivables sold to the Purchaser, in the case of any Receivables created and sold by any Seller to the Purchaser after the Closing Date; (c) Each Seller shall have substantially performed all other obligations required to be performed by the provisions of this Agreement and the other Transaction Documents to which it is a party; (d) The Sellers shall have either filed or caused to be filed the financing statement(s) (or other similar instruments) required to be filed pursuant to Section 2.1(b); (e) All corporate and legal proceedings, and all instruments in connection with the transactions contemplated by this Agreement and the other Transaction Documents and Redwood Liquidity Documents shall be satisfactory in form and substance to the Purchaser, and the Purchaser shall have received from the Sellers copies of all documents (including, without limitation, records of corporate proceedings) relevant to the transactions herein contemplated as the Purchaser may reasonably have requested; (f) On the Closing Date, the Sellers shall deliver to the Purchaser and the Administrative Agent a Weekly Report for the Weekly Settlement Period immediately preceding the Closing Date; and (g) the Purchase Termination Date shall not have occurred. SECTION 7.2. Conditions Precedent to the Addition of a Seller. The obligation of the Purchaser to purchase Receivables and Related Security hereunder from a Subsidiary of C&A requested to be an additional Seller pursuant to Section 10.13 is subject to the conditions precedent that the Purchaser shall have received on or before the date designated for the addition of such Seller (the "Seller Addition Date") and in form and substance satisfactory to the Purchaser: (a) Additional Seller Supplement. An Additional Seller Supplement substantially in the form of Exhibit C attached hereto (with a copy for the Administrative Agent and each Funding Agent) duly executed and delivered by such Seller; (b) Secretary's Certificate. A certificate of the Secretary or an Assistant Secretary of such Seller, dated the related Seller Addition Date, and certifying (i) that attached 16 thereto is a true and complete copy of the by-laws of such Seller, as in effect on the Seller Addition Date and at all times since a date prior to the date of the resolutions described in clause (ii) below, (ii) that attached hereto is a true and complete copy of the resolutions, in form and substance reasonably satisfactory to the Purchaser, of the Board of Directors of such Seller or committees thereof authorizing the execution, delivery and performance of this Agreement and the other Transaction Documents to which it is a party and the transactions contemplated hereby and thereby, and that such resolutions have not been amended, modified, revoked or rescinded and are in full force and effect, (iii) that the certificate of incorporation of such Seller has not been amended since the date of the last amendment thereto shown on the certificate of good standing (or its equivalent) furnished pursuant to subsection (e) below and (iv) as to the incumbency and specimen signature of each officer executing the Additional Seller Supplement and any other Transaction Documents or any other document delivered in connection therewith on behalf of such Seller (on which certificates the Purchaser may conclusively rely until such time as the Purchaser shall receive from such Seller a revised certificate with respect to such Seller meeting the requirements of this subsection (b)); (c) Officer's Certificate. A certificate of a Responsible Officer of C&A, dated the related Seller Addition Date, and certifying such Seller is in the same or a related line of business as the existing Sellers as of the related Seller Addition Date; (d) Corporate Documents. The organizational documents, including all amendments thereto, of such Seller, certified as of a recent date by the Secretary of State or other appropriate authority of the state of incorporation, as the case may be; (e) Good Standing Certificates. Certificates of compliance, of status or of good standing, dated as of a recent date, from the Secretary of State or other appropriate authority of such jurisdiction, with respect to such Seller in each State where the ownership, lease or operation of property or the conduct of business requires it to qualify as a foreign corporation, except where the failure to so qualify would not have a Material Adverse Effect; (f) Consents, Licenses, Approvals, Etc. A Certificate dated the related Seller Addition Date of a Responsible Officer of such Seller either (i) attaching copies of all consents (including, without limitation, consents under loan agreements and indentures to which any Seller or its Affiliates are parties), licenses and approvals required in connection with the execution, delivery and performance by such Seller of the Additional Seller Supplement and the validity and enforceability of the Additional Seller Supplement against such Seller, and such consents, licenses and approvals shall be in full force and effect or (ii) stating that no such consents, licenses and approvals are so required; (g) No Litigation. Confirmation that there is no pending or, to its knowledge after due inquiry, threatened action or proceeding affecting such Seller or any of its Subsidiaries before any Governmental Authority that could reasonably be expected to have a Material Adverse Effect; (h) Lockboxes. A Lockbox Account with respect to Receivables to be sold by such Seller shall have been established in the name of the Purchaser, each invoice issued to an 17 Obligor on and after the related Seller Addition Date shall indicate that payments in respect of its Receivable shall be made by such Obligor to a Lockbox Account or by wire transfer or other electronic payment to a Lockbox Account or a Collection Account and the Collection Agent shall have delivered with respect to each Lockbox Account a Lockbox Agreement signed by the Purchaser, the Administrative Agent and the applicable Lockbox Bank; (i) UCC Certificate; UCC Financing Statements. Executed copies of such proper financing statements (or other similar instruments), filed and recorded at such Seller's expense prior to the related Seller Addition Date, naming such Seller as the seller and the Purchaser as the purchaser of the Receivables and the Related Security, in proper form for filing in each jurisdiction in which the Purchaser (or any of its assignees) deems it necessary or desirable to perfect the Purchaser's ownership interest in all Receivables and Related Security under the UCC or any comparable law of such jurisdiction; (j) UCC Searches. Written search reports, listing all effective financing statements (or other similar instruments) that name such Seller as debtor or assignor and that are filed in the jurisdictions in which filings were made pursuant to subsection (i) above and in any other jurisdictions that the Purchaser (or any of its assignees) determines are necessary or appropriate, together with copies of such financing statements (none of which, except for those described in subsection (i) above, shall cover any Receivables or Related Security), and tax and judgment lien searches showing no liens that are not permitted by the Transaction Documents; (k) List of Obligors. A microfiche, typed or printed list or other tangible evidence reasonably acceptable to the Purchaser showing, as of a date acceptable to the Purchaser prior to the related Seller Addition Date, the Obligors whose Receivables are to be transferred to the Purchaser and the balance of the Receivables with respect to each such Obligor as of such date; (l) Back-up Servicing Arrangements. Evidence that such Seller maintains disaster recovery systems and back-up computer and other information management systems that, in the Purchaser's reasonable judgment, are sufficient to protect such Seller's business against material interruption or loss or destruction of its primary computer and information management systems; (m) Systems. Evidence, reasonably satisfactory to the Purchaser, the Administrative Agent and each Funding Agent, that such additional Seller's systems, procedures and record keeping relating to the Receivables remain in all material respects sufficient and satisfactory in order to permit the purchase and administration of the Receivables in accordance with the terms and intent of this Agreement; and (n) such other approvals, opinions or documents as the Purchaser (or any of its assignees) may reasonably request from such additional Seller. 18 ARTICLE VIII SELLER NOTE SECTION 8.1. Seller Note. On the Closing Date or Seller Addition Date, as applicable, the Purchaser shall issue to each Seller a note substantially in the form of Exhibit B (each, as amended, supplemented or otherwise modified from time to time, a "Seller Note"). The aggregate principal amount of a Seller Note at any time shall be equal to the difference between (a) the aggregate principal amount on the issuance thereof and each addition to the principal amount of such Seller Note pursuant to the terms of Section 3.2 as of such time, minus (b) the aggregate amount of all payments made in respect of the principal of such Seller Note as of such time. All payments made in respect of a Seller Note shall be allocated, first, to pay accrued and unpaid interest thereon, and second, to pay the outstanding principal amount thereof. Interest on the outstanding principal amount of a Seller Note shall accrue at a rate per annum equal to the highest Base Rate in effect during the applicable Settlement Period plus the percentage agreed to from time to time by the applicable Seller, the Purchaser and the Administrative Agent, which initially shall be 2%, from and including the Closing Date or Seller Addition Date, as applicable, to but excluding the last day of each Settlement Period and shall be paid (x) on each Settlement Date with respect to the principal amount of the Seller Note outstanding from time to time during the Settlement Period immediately preceding such Settlement Date and/or (y) on the maturity date thereof; provided, however, that, to the maximum extent permitted by law, accrued interest on a Seller Note which is not so paid shall be added, at the request of such Seller, to the principal amount of such Seller Note. Principal hereunder not paid or prepaid pursuant to the terms hereof shall be payable on the maturity date of a Seller Note. Default in the payment of principal or interest under a Seller Note shall not constitute a Purchase Termination Event under this Agreement, a Collection Agent Default or a Termination Event under the Receivables Transfer Agreement. SECTION 8.2. Sole and Exclusive Remedy/Subordination. The Purchaser shall be obligated to repay Advances by a Seller under a Seller Note only to the extent of funds available to the Purchaser from Collections on the Receivables and, to the extent that such payments are insufficient to pay all amounts owing to a Seller under a Seller Note, such Seller shall not have any claim against the Purchaser for such amounts and no further or additional recourse shall be available against Purchaser. Each Seller Note shall be fully subordinated to any rights of the Administrative Agent, on behalf of the Funding Agents, the Initial Purchasers and the PARCO APA Banks pursuant to the Receivables Transfer Agreement and the Asset Purchase Agreements, and shall not evidence any rights in the Receivables or Related Security. SECTION 8.3. Offsets, etc. The Purchaser may offset any amount due and owing by a Seller against any amount due and owing by Purchaser to such Seller under the terms of the applicable Seller Note. 19 ARTICLE IX TERM AND TERMINATION SECTION 9.1. Term. This Agreement shall commence as of the first day on which all of the conditions precedent have been satisfied and shall continue in full force and effect until the date following the earlier of (i) the date designated by the Purchaser or C&A as the Purchase Termination Date at any time following ten (10) days' written notice to the other (with a copy thereof to the Administrative Agent), (ii) the date on which the Administrative Agent, on behalf of the Initial Purchasers and the PARCO APA Banks, declares a Termination Event or a Potential Termination Event pursuant to the Receivables Transfer Agreement, (iii) upon the occurrence of an Event of Bankruptcy with respect to either the Purchaser or any Seller; provided, however, that an Event of Bankruptcy with respect to a Seller that does not have a Material Adverse Effect will only result in a termination of the Purchaser's obligation to purchase Receivables from such Seller, (iv) the date on which either the Purchaser or any Seller becomes unable for any reason to purchase or re-purchase the interest of the Purchaser in any Receivable in accordance with the provisions of this Agreement or defaults on its obligations hereunder, which default continues unremedied for more than ten (10) days after written notice, (v) the day on which the Collection Agent delivers a Weekly Report or a Daily Report that indicates that the Guarantor shall have permitted the Interest Coverage Ratio during any period set forth in subsection (b) the definition of "Interest Coverage Ratio" to be less than the ratio set forth in such definition for such period, (vi) the day on which the Collection Agent delivers a Weekly Report or a Daily Report that indicates that the Guarantor shall have permitted the Leverage Ratio during any period set forth in subsection (b) the definition of "Leverage Ratio" to be greater than the ratio set forth in such definition for such period, or (vii) the first anniversary of the Closing Date unless extended (any such date being a "Purchase Termination Date"); provided, however, that the termination of this Agreement pursuant to this Section 9.1 hereof shall not discharge any Person from any obligations incurred prior to such termination, including, without limitation, any obligations to make any payments with respect to the interest of the Purchaser in any Receivable sold prior to such termination. SECTION 9.2. Effect of Termination. Following the termination of this Agreement pursuant to Section 9.1, no Seller shall sell, and the Purchaser shall not purchase, any interests in any Receivables. No termination, rejection or failure to assume the executory obligations of this Agreement in any Event of Bankruptcy with respect to any Seller or the Purchaser shall be deemed to impair or affect the obligations pertaining to any executed sale or executed obligations, including, without limitation, pre-termination breaches of representations and warranties by any Seller or the Purchaser. Without limiting the foregoing, prior to termination, the failure of any Seller to deliver computer records of its Receivables or any reports regarding its Receivables shall not render such transfer or obligation executory, nor shall the continued duties of the parties pursuant to this Agreement render an executed sale executory. 20 ARTICLE X MISCELLANEOUS PROVISIONS SECTION 10.1. Amendments, Etc. This Agreement and the rights and obligations of the parties hereunder may not be amended, supplemented, waived or otherwise modified except in an instrument in writing signed by the Purchaser and the Sellers and consented to in writing by each Funding Agent (with the consent of the Required Participants); provided, however, the Administrative Agent may consent (without the consent of the Funding Agents) to any amendments, waivers, or other modifications in order to cure any ambiguities or correct any mistakes hereunder. Any reconveyance executed in accordance with the provisions hereof shall not be considered an amendment or modification to this Agreement. SECTION 10.2. Governing Law; Submission to Jurisdiction. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of New York. (b) The parties hereto hereby submit to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York state court sitting in The City of New York for purposes of all legal proceedings arising out of or relating to this agreement or the transactions contemplated hereby. Each party hereto hereby irrevocably waives, to the fullest extent it may effectively do so, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. Nothing in this Section 10.2 shall affect the right of the Purchaser to bring any other action or proceeding against any Seller or its property in the courts of other jurisdictions. SECTION 10.3. Notices. All demands, notices and communications hereunder shall be in writing and shall be deemed to have been duly given if personally delivered at or mailed by registered mail, return receipt requested, to: (a) in the case of the Purchaser: CARCORP, INC. 101 Convention Center Drive Suite 850 Las Vegas, Nevada 89109 Attention: Monte Miller Telephone: (702) 387-0864 Telecopy: (702) 598-3651 (b) in the case of C&A: COLLINS & AIKMAN PRODUCTS CO. 701 McCullough Drive Charlotte, North Carolina 28262 21 Attention: Assistant Treasurer Telephone: (704) 547-8500 Telecopy: (704) 548-2314 (c) in the case of each other Seller: to the address set forth opposite such Seller's name on Exhibit D or in the applicable Additional Seller Supplement; (d) in the case of the Redwood Funding Agent GENERAL ELECTRIC CAPITAL CORPORATION 201 High Ridge Road Stamford, Connecticut 06927 Attention: Conduit Administrator Telephone: (203) 316-7608 Telecopy: (203) 316-7821 (e) in the case of Liberty Funding Agent The BANK OF NOVA SCOTIA One Liberty Plaza New York, New York 90006 Attention: Dorothy Poli Telephone: (212) 225-5000 Telecopy: (212) 225-5090 (f) in each case, with a copy to: THE CHASE MANHATTAN BANK, as the Administrative Agent 450 West 33rd Street 15th Floor New York, New York 10001 Attention: Craig Kantor Structured Finance Services Telephone: (212) 946-7861 Telecopy: (212) 946-7776 or, as to each party, at such other address as shall be designated by such party in a written notice to each other party. SECTION 10.4. Severability of Provisions. If any one or more of the covenants, agreements, provisions or terms of this Agreement shall for any reason whatsoever be held invalid, then such covenants, agreements, provisions, or terms shall be deemed severable from the remaining covenants, agreements, provisions, or terms of this Agreement and shall in no way affect the validity or enforceability of the other provisions of this Agreement. 22 SECTION 10.5. Assignments Generally. This Agreement may not be assigned by the parties hereto, except that the Purchaser may assign its rights hereunder pursuant to the Receivables Transfer Agreement (including all of its right, title and interest in, to, and under the Receivables sold hereunder) to the Administrative Agent for the benefit of the Funding Agents, the Initial Purchasers and the PARCO APA Banks as security for the Purchaser's repayment obligations under the Receivables Transfer Agreement. The Purchaser hereby notifies each Seller (and each Seller hereby acknowledges) that the Purchaser, pursuant to the Receivables Transfer Agreement, has assigned its rights (but not its obligations) (including all of its right, title and interest in, to, and under the Receivables sold hereunder) hereunder to the Administrative Agent for the benefit of the Funding Agents, the Initial Purchasers and the PARCO APA Banks. The Purchaser also hereby notifies each Seller (and each Seller hereby acknowledges) that Redwood has assigned its rights (but not its obligations) under the Transaction Documents to the Redwood Secured Parties. All rights of the Purchaser hereunder may be exercised by the Administrative Agent to the extent of its rights hereunder and under the other Transaction Documents. SECTION 10.6. Further Assurances. The Purchaser and the Sellers agree to do and perform, from time to time, any and all acts and to execute any and all further instruments required or reasonably requested by the other party more fully to effect the purposes of this Agreement and the other Transaction Documents, including, without limitation, the execution of any financing statements or continuation statements or equivalent documents relating to the Receivables for filing under the provisions of the Relevant UCC or other laws of any applicable jurisdiction. SECTION 10.7. No Waiver; Cumulative Remedies. No failure to exercise and no delay in exercising, on the part of the Purchaser, any Seller, the Administrative Agent or a Funding Agent, any right, remedy, power or privilege hereunder, shall operate as a waiver thereof; nor shall any single or partial exercise of any right, remedy, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, remedy, power or privilege. The rights, remedies, powers and privileges herein provided are cumulative and not exhaustive of any rights, remedies, powers and privilege provided by law. SECTION 10.8. Counterparts. This Agreement may be executed in two or more counterparts including telecopy transmission thereof (and by different parties on separate counterparts), each of which shall be an original, but all of which together shall constitute one and the same instrument. SECTION 10.9. Binding Effect; Third-Party Beneficiaries. This Agreement and the other Transaction Documents will inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. The Administrative Agent, the Initial Purchasers, the PARCO APA Banks and each Funding Agent are each intended by the parties hereto to be third-party beneficiaries of this Agreement. SECTION 10.10. Merger and Integration. Except as specifically stated otherwise herein, this Agreement and the other Transaction Documents set forth the entire understanding of 23 the parties relating to the subject matter hereof, and all prior understandings, written or oral, are superseded by this Agreement and the other Transaction Documents. SECTION 10.11. Headings. The headings herein are for purposes of reference only and shall not otherwise affect the meaning or interpretation of any provision hereof. SECTION 10.12. Exhibits. The schedules and exhibits referred to herein shall constitute a part of this Agreement and are incorporated into this Agreement for all purposes. SECTION 10.13. Addition of Sellers. Subject to the terms and conditions hereof, from time to time one or more wholly-owned direct or indirect Subsidiaries of C&A may become additional Sellers parties hereto. If any such Subsidiary wishes to become an additional Seller, C&A shall submit a request to such effect in writing to Purchaser, the Administrative Agent, the Funding Agents and each Rating Agency. If C&A, the Purchaser, the Administrative Agent, and each Funding Agent shall have agreed to any such request (such consent not to be unreasonably withheld or delayed from the date such request is received and such consent of each Funding Agent being obtained by the Administrative Agent), such wholly-owned Subsidiary shall become an additional Seller party hereto on the related Seller Addition Date upon satisfaction of the conditions set forth in Section 7.2. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] 24 IN WITNESS WHEREOF, the Purchaser and the Sellers each have caused this Receivables Purchase Agreement to be duly executed by their respective officers as of the day and year first above written. COLLINS & AIKMAN PRODUCTS CO., as a Seller By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ COLLINS & AIKMAN CARPET & ACOUSTICS (MI) INC., as a Seller By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ COLLINS & AIKMAN CARPET & ACOUSTICS (TN) INC., as a Seller By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ COLLINS & AIKMAN ACCESSORY MATS INC., as a Seller By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ DURA CONVERTIBLE SYSTEMS, INC., as a Seller By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ AMCO CONVERTIBLE FABRICS, INC., as a Seller By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ COLLINS & AIKMAN PLASTICS, INC., as a Seller By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ COLLINS & AIKMAN CANADA INC., as a Seller By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ COLLINS & AIKMAN PLASTICS, LTD., as a Seller By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ CARCORP, INC., as Purchaser By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ Acknowledged and agreed as of the date first above written: THE CHASE MANHATTAN BANK, as Administrative Agent for the benefit of the Funding Agents, the Initial Purchasers and the PARCO APA Banks By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- EXHIBIT A PRINCIPAL PLACE OF BUSINESS, CHIEF EXECUTIVE OFFICE AND LOCATION OF RECORDS AND RELATED SECURITY Name of Company Principal Place of Business/ - --------------- Chief Executive Office ---------------------------- Collins & Aikman Products Co. 701 McCullough Drive Charlotte, NC 28262 or 5755 New King Court Troy, MI 48098 Collins & Aikman Carpet & Acoustics (MI)Inc. North America Head Office/Tech. Center 47785 Anchor Court Plymouth, MI 48170 Collins & Aikman Carpet & Acoustics (TN)Inc. 2409 Industrial Drive Springfield, TN 37172 Collins & Aikman Accessory Mats Inc. Canton Plant 1212 Seventh Street, SW Canton, OH 44711 Dura Convertible Systems, Inc. East Plant 1365 East Beecher Street Adrian, MI 49221 Amco Convertible Fabrics, Inc. Adrian Plant 545 Industrial Drive Adrian, MI 49247 Collins & Aikman Plastics, Inc. 5755 New King Court Troy, MI 48098 Collins & Aikman Canada Inc. Farnham Plant 150 Collins Street Farnham, Quebec J2N 2N8 Collins & Aikman Plastics, Ltd. Scarborough Division 165 Milner Avenue Scarborough, Ontario M1S 4G7 A-1 LOCATION OF RECORDS AND RELATED SECURITY FOR ALL U.S. SELLERS: 701 McCullough Drive and each Seller's respective principal Charlotte, North Carolina 28262 place of business and chief executive office LOCATION OF RECORDS AND RELATED SECURITY FOR EACH CANADIAN SELLER: For each Canadian Seller: 5755 New King Court Troy, MI 48098, 701 McCullough Drive Charlotte, NC 28262 and Collins & Aikman Canada Inc. Farnham Plant 150 Collins Street Farnham, Quebec J2N 2N8 Collins & Aikman Plastics, Ltd. Scarborough Division 165 Milner Avenue Scarborough, Ontario M1S 4G7 A-2 EXHIBIT B FORM OF SELLER NOTE December 27, 1999 FOR VALUE RECEIVED, the undersigned, CARCORP, INC., a Delaware corporation (the "Maker"), hereby promises to pay to the order of [SELLER], (the "Payee"), on the later of (i) the first anniversary of the Closing Date or (ii) the Purchase Termination Date, the lesser of (i) the Advance Limit or (ii) the aggregate unpaid principal amount of all Advances to the Maker from the Payee pursuant to the terms of the Receivables Purchase Agreement, in lawful money of the United States of America in immediately available funds, and to pay interest from the date thereof on the principal amount hereof from time to time outstanding, in like funds, at said office, at the rate per annum set forth in the Receivables Purchase Agreement and shall be payable in arrears on the last Business Day of each of the Maker's fiscal months. The Maker hereby waives diligence, presentment, demand, protest and notice of any kind whatsoever. The non-exercise by the holder hereof of any of its rights hereunder in any particular instance shall not constitute a waiver thereof in that or any subsequent instance. All borrowings evidenced by this Seller Note and all payments and prepayments of the principal hereof and interest hereon and the respective dates thereof shall be endorsed by the holder hereof on the schedule attached hereto and made a part hereof, or on a continuation thereof which shall be attached hereto and made a part hereof, or otherwise recorded by such holder in its internal records; provided, however, that the failure of the holder hereof to make such a notation or any error in such a notation shall not in any manner affect the obligation of the Maker to make payments of principal and interest in accordance with the terms of this Seller Note and the Receivables Purchase Agreement. The Maker shall have the right to prepay and, subject to the limitations set forth in the Receivables Purchase Agreement, reborrow Advances made to it without penalty or premium. This Seller Note is one of the Seller Notes referred to in the Receivables Purchase Agreement, which, among other things, contains provisions for the subordination of this Seller Note to the rights of certain parties under the Receivables Transfer Agreement, all upon the terms and conditions therein specified. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in, or incorporated by reference into, the Receivables Purchase Agreement dated as of the date hereof between the Maker and the Payee (as such agreement may from time to time be amended, supplemented or otherwise modified and in effect, the "Receivables Purchase Agreement"). B-1 This Seller Note shall be governed by, and construed in accordance with, the laws of the State of New York. CARCORP, INC. By: ----------------------------- Name: Title: B-2 Advances and Payments
Unpaid Principal Person Making Date Advance Principal/Interest Balance of Note the Notation - ---- ------- ------------------ ---------------- -------------
B-3 EXHIBIT C [FORM OF ADDITIONAL SELLER SUPPLEMENT] SUPPLEMENT, dated [ ], to the Receivables Purchase Agreement, dated as of December 27, 1999 (as amended, supplemented or otherwise modified from time to time in accordance with its terms, the "Receivables Purchase Agreement"), among Collins & Aikman Products, Co. ("C&A"), as a Seller, the other Sellers named on Exhibit D thereto or added pursuant to a prior Additional Seller Supplement and Carcorp, Inc., as the Purchaser. W I T N E S S E T H: WHEREAS, the Receivables Purchase Agreement provides that any wholly- owned direct or indirect Subsidiary of C&A, although not originally a Seller thereunder, may become a Seller under the Receivables Purchase Agreement upon the satisfaction of each of the conditions precedent set forth in Sections 7.2 and 10.13 of the Receivables Purchase Agreement; WHEREAS, the undersigned was not an original Seller under the Receivables Purchase Agreement but now desires to become a Seller thereunder. NOW, THEREFORE, the undersigned hereby agrees as follows: The undersigned agrees to be bound by all of the provisions of the Receivables Purchase Agreement applicable to a Seller thereunder and agrees that it shall, on the date this Supplement is accepted by C&A, the Purchaser, the Administrative Agent and each Funding Agent and each of the conditions precedent set forth in Section 7.2 of the Receivables Purchase Agreement have been satisfied, become a Seller for all purposes of the Receivables Purchase Agreement to the same extent as if originally a party thereto. C-1 IN WITNESS WHEREOF, the undersigned has caused this Supplement to be executed and delivered by a duly authorized officer on the date first above written. [Insert name of Seller] By: --------------------------------------- Name: ------------------------------------- Title: ------------------------------------ [address] Accepted as of the date first above written: COLLINS & AIKMAN PRODUCTS CO. By: -------------------------- Name: ------------------------ Title: ----------------------- Accepted as of the date first above written: CARCORP, INC. By: -------------------------- Name: ------------------------ Title: ----------------------- Acknowledged as of the date first above written: THE CHASE MANHATTAN BANK, as Administrative Agent By: -------------------------- Name: ------------------------ Title: ----------------------- C-2 THE CHASE MANHATTAN BANK, as PARCO Funding Agent By: -------------------------- Name: ------------------------ Title: ----------------------- GENERAL ELECTRIC CAPITAL CORPORATION, as Redwood Funding Agent By: -------------------------- Name: ------------------------ Title: ----------------------- THE BANK OF NOVA SCOTIA, as Liberty Funding Agent By: -------------------------- Name: ------------------------ Title: ----------------------- C-3 EXHIBIT D SELLERS IN ADDITION TO C&A Name State of Incorporation ---- ---------------------- Collins & Aikman Carpet & Delaware Acoustics (MI) Inc. Collins & Aikman Carpet & Tennessee Acoustics (TN) Inc. Collins & Aikman Accessory Mats Inc. Delaware Dura Convertible Systems, Inc. Delaware Amco Convertible Fabrics, Inc. Delaware Collins & Aikman Plastics, Inc. Delaware Collins & Aikman Canada Inc. Ontario Collins & Aikman Plastics, Ltd. Ontario D-1 SCHEDULE 4.1(e) Material Adverse Effect 4.1(e)-1 SCHEDULE 4.1(h) Litigation 4.1(h)-1 ------------------------------------------------------------------ ASSET PURCHASE AGREEMENT by and among PARK AVENUE RECEIVABLES CORPORATION, THE CHASE MANHATTAN BANK, as Funding Agent, and THE SEVERAL FINANCIAL INSTITUTIONS PARTY HERETO FROM TIME TO TIME, as APA Banks Dated as of December 27, 1999 (Collins & Aikman Products Co. and its Subsidiaries' Receivables) ------------------------------------------------------------------ TABLE OF CONTENTS ----------------- Page ---- ARTICLE I DEFINITIONS...................................................... 1 SECTION 1.1. Incorporation by Reference.......................... 1 SECTION 1.2. Other Defined Terms................................. 1 ARTICLE II PURCHASE COMMITMENT.............................................. 5 SECTION 2.1. Liquidity Purchases................................. 5 SECTION 2.2. Several Commitments of the APA Banks................ 6 SECTION 2.3. Nonrecourse Nature of Transactions.................. 7 SECTION 2.4. Payments; Indemnity................................. 7 SECTION 2.5. Reduction of Commitments............................ 8 SECTION 2.6. Issuance of Commercial Paper by PARCO............... 8 ARTICLE III REPRESENTATIONS AND WARRANTIES................................... 8 SECTION 3.1. PARCO Disclaimer of Representations and Warranties.. 8 SECTION 3.2. Representations and Warranties of the APA Banks..... 9 ARTICLE IV THE FUNDING AGENT................................................ 10 SECTION 4.1. Appointment......................................... 10 SECTION 4.2. Delegation of Duties................................ 10 SECTION 4.3. Exculpatory Provisions.............................. 10 SECTION 4.4. Reliance by Funding Agent........................... 11 SECTION 4.5. Notice of Events of Default and other Events; Voting.............................................. 11 SECTION 4.6. Non-Reliance on Funding Agent....................... 11 SECTION 4.7. Indemnification..................................... 12 SECTION 4.8. Funding Agent in its Individual Capacity............ 12 SECTION 4.9. Successor Funding Agent............................. 12 SECTION 4.10. Chase Conflict Waiver............................... 13 ARTICLE V MISCELLANEOUS.................................................... 13 SECTION 5.1. Waivers; Amendments, etc............................ 13 SECTION 5.2. Notices............................................. 14 SECTION 5.3. Governing Law; Submission to Jurisdiction........... 14 SECTION 5.4. Severability; Counterparts; Waiver of Setoff........ 14 i SECTION 5.5. Successors and Assigns; Participations; Assignments......................................... 14 SECTION 5.6. Effectiveness of this Agreement..................... 16 SECTION 5.7. No Petition......................................... 16 SECTION 5.8. Waiver of Trial by Jury............................. 17 SECTION 5.9. Limited Recourse.................................... 17 SECTION 5.10. Liability of Funding Agent.......................... 17 ii ANNEXES AND EXHIBITS ANNEX I APA Banks EXHIBIT A Form of Transfer Supplement EXHIBIT B Form of Opinion of Counsel EXHIBIT C Notice Addresses iii ASSET PURCHASE AGREEMENT (Collins & Aikman Products Co. and its Subsidiaries' Receivables) THIS ASSET PURCHASE AGREEMENT, dated as of December 27, 1999 (as amended, supplemented or otherwise modified and in effect from time to time, this "Agreement"), is by and among PARK AVENUE RECEIVABLES CORPORATION, a Delaware corporation (together with its successors and assigns, "PARCO"), THE SEVERAL FINANCIAL INSTITUTIONS PARTY HERETO FROM TIME TO TIME, and THE CHASE MANHATTAN BANK, as Funding Agent, with respect to the transactions contemplated by herein and in that certain Receivables Transfer Agreement (as defined herein). The parties hereto agree as follows: ARTICLE I DEFINITIONS SECTION 1.1. Incorporation by Reference. Capitalized terms used herein and not otherwise defined herein shall have the meanings attributed to such terms in, or incorporated by reference into, Annex X to the Receivables Transfer Agreement. SECTION 1.2. Other Defined Terms. As used in this Agreement, the following terms have the following meanings: "Affected APA Bank" shall have the meaning specified in Section 5.5(c). "Aggregate Commitment" shall mean $61,200,000. "Agreement" shall have the meaning specified in the recitals hereto. "APA Banks" shall mean the Persons listed on Annex I hereto (including, without limitation, Chase), and the Persons which from time to time may become a party hereto in accordance with Section 5.5(c). "Article" shall mean a numbered article of this Agreement, unless otherwise specified. "Chase" shall mean The Chase Manhattan Bank, in its individual capacity, and its successors. "Chase Roles" shall have the meaning specified in Section 4.10. "Commitment Expiry Date" shall mean the earliest to occur of (i) the date on which all amounts due and owing to PARCO and the APA Banks in respect of the Transferred Interests have been indefeasibly paid in full, (ii) following a Termination Date, (not including 1 pursuant to clause (iii) of the definition of Termination Date), and (iii) December 25, 2000 (as may be extended for an additional 364 days from time to time in writing by PARCO, the Funding Agent and the APA Banks). "Defaulting APA Bank" shall have the meaning specified in Section 2.2(b). "Discount" shall mean, with respect to any Commercial Paper issued by PARCO, the interest or discount component thereof. "Face Amount" shall mean, with respect to any Commercial Paper issued by PARCO, the amount due at maturity thereof (including the discount component thereof or any interest thereon, as applicable). "Fee Letter" shall mean the Fee Letter, dated as of December 27, 1999, between C&A and the Funding Agent, on behalf of PARCO and the APA Banks, as the same may from time to time be amended, supplemented or otherwise modified and in effect. "Funding Account" shall have the meaning specified in Section 2.4. "Funding Balance" shall mean, with respect to any APA Bank at any time of determination thereof, an amount equal to such APA Bank's Pro Rata Share of all amounts due and owing to PARCO in respect of Transferred Interests Payments as at such date. "Manager" shall mean Global Securitization Services, LLC, a Delaware limited liability company, as manager on behalf of PARCO, and its successors and assigns in such capacity. "Non-Defaulting APA Bank" shall have the meaning specified in Section 2.2(b). "Obligor" shall mean any Person obligated to make payments in respect of a Receivable. "OECD Country" shall mean a country that is a member of the grouping of countries that are full members of the Organization of Economic Cooperation and Development. "Originators" shall mean collectively, C&A and each other Seller that becomes a party to the Receivables Purchase Agreement, and their respective successors and assigns. "PARCO" shall have the meaning specified in the recitals hereto. "Participant" shall have the meaning specified in Section 5.5(b). "Placement Agent" shall mean, on any day with respect to PARCO, any Person that has agreed, with the consent of PARCO, to offer and sell PARCO's Commercial Paper. 2 "Pro Rata Share" shall mean, on any date of determination, with respect to any APA Bank, the ratio (expressed as a percentage) of such APA Bank's PARCO APA Bank Commitment to the Aggregate Commitment at such time. "Purchase" shall mean any assignment by PARCO to the APA Banks of all of its right, title and interest in and to the Transferred Interests Payments pursuant to Section 2.1. "Purchase Date" shall mean the date specified by PARCO in a Sale Notice as being the effective date of PARCO's assignment to the APA Banks of all of its right, title and interest in and to Transferred Interests Payments specified therein. "Purchase Price" shall mean, at any Purchase Date with respect to PARCO, an amount equal to the lesser of (i) the PARCO Net Investment and (ii) the PARCO Adjusted Liquidity Price, as clauses (i) and (ii) shall be increased by the sum of (A) all accrued and unpaid Discount on all outstanding Tranches of PARCO's Commercial Paper issued to fund the PARCO Net Investment from the issuance date(s) thereof to and including the Purchase Date plus (B) the aggregate Discount to accrue on all outstanding Tranches of PARCO's Commercial Paper issued to fund the PARCO Net Investment from and including the Purchase Date, to and excluding the maturity date of each such Tranche. "Purchase Price Deficit" shall have the meaning specified in Section 2.2(b). "Rating Confirmation" shall mean, with respect to PARCO and any subject amendment, modification, waiver or other action to be taken pursuant to the terms of this Agreement, either (i) a confirmation by each of the Rating Agencies that such proposed amendment, modification, waiver or action shall not result in a downgrade or withdrawal of each Rating Agency's then current rating of the Commercial Paper or any other debt securities, rated at the request of PARCO, by each such Rating Agency or (ii) the delay in the taking of such action or the delay in the effectiveness of such proposed amendment, modification or waiver, until thirty (30) days following the maturity date of all commercial paper or other debt securities rated, at the request of PARCO, by a Rating Agency, outstanding at the time the confirmation referred to in clause (i) is requested. "Receivables Transfer Agreement" shall mean the Receivables Transfer Agreement, dated as of December 27, 1999, among Carcorp, Inc., as Transferor, C&A, as Guarantor and as Collection Agent, the Initial Purchasers, the several financial institutions party thereto from time to time as PARCO APA Banks, the Funding Agents and Chase, as Administrative Agent. "Required APA Banks" shall mean APA Banks having Pro Rata Shares in the aggregate at least equal to 66 2/3%; provided that the PARCO APA Bank Commitment of any Defaulting APA Bank that has not paid all amounts due and owing by it in respect of purchases it was obligated to make shall not be included in the PARCO APA Bank Commitments for purposes of this definition. 3 "Sale Notice" shall mean an irrevocable written notice given by an authorized signer or authorized officer of PARCO (or on behalf of PARCO by Chase, in its capacity as PARCO Administrative Agent) to the Funding Agent committing to sell, assign and transfer to the APA Banks, all of PARCO's right, title and interest in and to Transferred Interests Payments, which notice shall designate (a) the applicable Purchase Date, (b) the aggregate amount of PARCO's Transferred Interests Payments and its related PARCO Net Investment, (c) the Purchase Price (including a calculation of the Purchase Price), (d) that no PARCO Insolvency Event has occurred and (e) wire transfer instructions specifying the account(s) into which the proceeds of the Purchase Price shall be deposited. "Section" shall mean a numbered section of this Agreement unless otherwise specified. "Tranche" shall mean any tranche of PARCO's Commercial Paper. "Transaction Parties" shall have the meaning specified in Section 3.1. "Transfer Supplement" shall have the meaning specified in Section 5.5(c). "Transferred Interests Payments" shall mean, on any day, all payments of Discount and principal scheduled to be made pursuant to the terms of the Receivables Transfer Agreement on and after such day, which term shall include all payments scheduled to have been paid prior to (but not including) such day, but which remain accrued and unpaid on such day. [REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK] 4 ARTICLE II PURCHASE COMMITMENT SECTION 2.1. Liquidity Purchases. (a) Sales by PARCO. From time to time prior to the Commitment Expiry Date, upon the occurrence of a PARCO Wind-Down Event, PARCO shall be obligated to deliver a Sale Notice to the Funding Agent. Each Sale Notice shall be delivered by PARCO to the Funding Agent prior to 12:30 P.M. (New York time) on the Purchase Date and shall constitute an irrevocable offer by PARCO to sell all of its beneficial interest in Transferred Interests Payments at the Purchase Price. Each Sale Notice delivered by PARCO shall be deemed to be a representation and warranty by PARCO that no PARCO Insolvency Event shall have occurred and be continuing. Each APA Bank hereby agrees to purchase from PARCO such APA Bank's Pro Rata Share of PARCO's Transferred Interests Payments for a purchase price equal to such APA Bank's Pro Rata Share of the Purchase Price on the Purchase Date (which date, subject to Section 2.1(b) below, may be the same as the date of the Sale Notice). Notwithstanding anything to the contrary set forth in this Agreement, no APA Bank shall have any obligation to purchase Transferred Interests Payments or any portion thereof from PARCO if, on such Purchase Date, a PARCO Insolvency Event shall have occurred and be continuing. The Funding Agent shall promptly advise each APA Bank (by telecopy or by telephone call promptly confirmed in writing by telecopy) of the receipt and content of any Sale Notice delivered to it by PARCO and shall promptly advise PARCO of each APA Bank's Pro Rata Share of the Purchase Price thereunder. The Purchase Price shall be deposited in immediately available funds into the account(s) specified by PARCO in the related Sale Notice. (b) Timing of Sale Notice and Purchase Date. If, at or prior to 12:30 P.M. (New York time) on any Business Day, PARCO delivers a Sale Notice to the Funding Agent specifying that the Purchase Date shall be the same date as the date of the Sale Notice, the Funding Agent shall, by no later than 1:00 P.M. (New York time) on such Business Day, notify each APA Bank of such Sale Notice. Each APA Bank shall make a purchase of Transferred Interests Payments by advancing immediately available funds on such date to the account of PARCO maintained at the principal office of the Funding Agent no later than 2:00 P.M. (New York time). Notwithstanding the fact that the Purchase Date may occur on a date which is later than the date on which the Sale Notice is delivered to the Funding Agent, the several obligations of each APA Bank to accept such transfer and to make payment of the amounts required to be paid by it pursuant to Section 2.2 shall arise immediately upon receipt by the Funding Agent of the Sale Notice. Regardless of when the Sale Notice is received, any APA Bank may designate any one or more of its domestic or foreign branches, offices or affiliates 5 through which it will fund its Pro Rata Share of the Purchase Price for a Purchase, and the term "APA Bank" shall include any such branch, office or affiliate for such purpose. SECTION 2.2. Several Commitments of the APA Banks. (a) Funding upon Receipt of the Sale Notice. Each APA Bank hereby absolutely and unconditionally (except as provided in Section 2.1(a)) severally commits to PARCO and to the Funding Agent to provide the Funding Agent, on the Purchase Date (if notice has been given in accordance with Section 2.1(b)) at the principal office of the Funding Agent in The City of New York for delivery to PARCO, with immediately available funds in an amount equal to such APA Bank's Pro Rata Share of the Purchase Price, whereupon such APA Bank shall become an assignee of PARCO under the Transaction Documents with an undivided interest in PARCO's Transferred Interests Payments equal to such APA Bank's Pro Rata Share of PARCO's Transferred Interests Payments. The APA Banks' several obligations under this Section 2.2(a) to provide the Funding Agent with funds shall terminate on the Commitment Expiry Date. Notwithstanding anything contained in this Section 2.2(a) or elsewhere in this Agreement to the contrary, no APA Bank shall be obligated to provide the Funding Agent with aggregate funds in connection with a Purchase in an amount that would exceed such APA Bank's unused PARCO APA Bank Commitment then in effect. The failure of any APA Bank to make its Pro Rata Share of the Purchase Price available to the Funding Agent shall not relieve any other APA Bank of its obligations hereunder. (b) Defaulting APA Banks. If, by 2:00 P.M. (New York time), one or more APA Banks (each, a "Defaulting APA Bank", and each APA Bank other than the Defaulting APA Bank being referred to as a "Non-Defaulting APA Bank") fails to make its Pro Rata Share of the Purchase Price available to the Funding Agent pursuant to Section 2.1(a) (the aggregate amount not so made available to the Funding Agent being herein called the "Purchase Price Deficit"), then the Funding Agent shall, by no later than 2:30 P.M. (New York time), instruct each Non-Defaulting APA Bank to pay, by no later than 3:00 P.M. (New York time), in immediately available funds, to the account designated by the Funding Agent, an amount equal to the lesser of (x) such Non-Defaulting APA Bank's proportionate share (based upon the relative Commitments of the Non-Defaulting APA Banks) of the Purchase Price Deficit and (y) its unused PARCO APA Bank Commitment. A Defaulting APA Bank shall forthwith, upon demand, pay to the Funding Agent for the ratable benefit of the Non-Defaulting APA Banks all amounts paid by each Non-Defaulting APA Bank on behalf of such Defaulting APA Bank, together with interest thereon, for each day from the date a payment was made by a Non-Defaulting APA Bank until the date such Non-Defaulting APA Bank has been paid such amounts in full, at a rate per annum equal to the sum of the Federal Funds Rate plus 2%. In addition, without prejudice to any other rights that PARCO may have under applicable law, each Defaulting APA Bank shall pay to PARCO forthwith upon demand, the difference between the Defaulting APA Bank's unpaid Pro Rata Share of the Purchase Price and the amount paid with respect thereto by the Non-Defaulting APA Banks, 6 together with interest thereon, for each day from the date of the Funding Agent's request for such Defaulting APA Bank's Pro Rata Share of the Purchase Price pursuant to Section 2.1(b) until the date the requisite amount is paid to PARCO in full, at a rate per annum equal to the sum of the Federal Funds Rate plus 2%. SECTION 2.3. Nonrecourse Nature of Transactions. Each of the Funding Agent and the APA Banks hereby agrees that all Purchases shall be without recourse of any kind to PARCO or the Funding Agent, except as expressly provided in Sections 4.3 and 4.7 with respect to the Funding Agent. SECTION 2.4. Payments; Indemnity. (a) Payments Generally. On or prior to the Closing Date, the Funding Agent shall establish a demand deposit account with Chase for the benefit of PARCO and the APA Banks (the "Funding Account"), into which all payments received by the Funding Agent from the Collection Agent, C&A, any of the other Originators or the Transferor in respect of the PARCO Interest shall be deposited. The Funding Agent, on behalf of PARCO and the APA Banks, shall have the sole right of withdrawal from the Funding Account. For so long as any amounts remain due and owing to PARCO or the APA Banks hereunder or pursuant to the Receivables Transfer Agreement, the Funding Agent shall distribute all payments received by it in respect of the PARCO Interest immediately after receipt thereof by (i) transferring to PARCO its Transferred Interests Payments and (ii) immediately after giving effect to the payment in clause (a)(i), if any, transferring the remainder of any such payments to the APA Banks ratably in accordance with their Pro Rata Shares (calculated without regard to that portion of the PARCO APA Bank Commitment of a Defaulting APA Bank which such Defaulting APA Bank failed to fund pursuant to this Agreement); provided, that any amounts transferred to the Administrative Agent by the Transferor pursuant to the first sentence of Section 2.6 of the Receivables Transfer Agreement and deposited by the Administrative Agent in the Funding Account in accordance with Section 2.10 of the Receivables Transfer Agreement shall remain in the Funding Account until transferred to PARCO and/or the APA Banks, as applicable, on the last day of Tranche Periods selected by the Funding Agent in reduction of the Aggregate Net Investment. Such transfers shall be made by the Funding Agent by withdrawing funds on deposit in the Funding Account and remitting such funds to the accounts of PARCO and the several APA Banks specified by each of them from time to time. Funds transferred to the Administrative Agent by the Transferor pursuant to the first sentence of Section 2.6 of the Receivables Transfer Agreement and deposited by the Administrative Agent in the Funding Account in accordance with Section 2.10 of the Receivables Transfer Agreement shall be invested by the Funding Agent in Permitted Investments that will mature so that such funds will be available prior to the last day of each successive Tranche Period following such investment. On the last day of each Tranche Period, all interest and earnings (net of losses and investment expenses) on funds on deposit in the Funding Account shall be retained in the Funding Account and be available to make any payments required to be made under the Transaction Documents 7 by the Transferor to PARCO and the APA Banks. On the date on which the Aggregate Net Investment is zero and all accrued Discount and all other Aggregate Unpaids have been paid in full, any funds remaining on deposit in the Funding Account shall be paid to the Transferor. (b) Requests for Indemnity under the Transaction Documents. The Funding Agent shall, at the written request of any APA Bank, make demand of PARCO for payment of any amounts from time to time claimed by such APA Bank pursuant to the terms of the Receivables Transfer Agreement, and the Funding Agent shall, upon its receipt of such amounts, distribute them to each such APA Bank ratably in accordance with their respective Pro Rata Shares (calculated without regard to that portion of the PARCO APA Bank Commitment of a Defaulting APA Bank which such Defaulting APA Bank failed to fund pursuant to this Agreement); provided that no such demand shall be made of PARCO except to the extent that such claim arises out of, or relates to, PARCO's beneficial interest in the Transferred Interests. (c) Payments Conditional upon Receipt from the Administrative Agent, PARCO, the Collection Agent, the Originators or the Transferor. Anything in this Agreement to the contrary notwithstanding, the Funding Agent shall have no obligation to make any payments to the APA Banks unless and until it has received such amounts from the Administrative Agent, PARCO, the Collection Agent, the Originators or the Transferor pursuant to the terms of the Receivables Transfer Agreement. SECTION 2.5. Reduction of Commitments. The PARCO APA Bank Commitment of each APA Bank and the Aggregate Commitment shall be automatically reduced to zero on the Commitment Expiry Date. Following a Termination Date, each PARCO APA Bank Commitment shall be reduced as of each calendar date thereafter, to equal its Pro Rata Share of 102% of the PARCO Net Investment. SECTION 2.6. Issuance of Commercial Paper by PARCO. For so long as this Agreement is in full force and effect, PARCO shall not issue Commercial Paper with respect to the Transferred Interests on any day if, after giving effect to such issuance and the use of proceeds thereof, the Face Amount of all outstanding Commercial Paper issued by PARCO with respect to the Transferred Interests on such day would exceed 102% of the sum of the Transfer Prices related to all PARCO Interests (after giving effect to the issuance and payment of such Commercial Paper on such day). ARTICLE III REPRESENTATIONS AND WARRANTIES SECTION 3.1. PARCO Disclaimer of Representations and Warranties. By executing and delivering any Sale Notice pursuant to Section 2.2(a), (a) PARCO makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Receivables Transfer Agreement 8 or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Transaction Documents, and (b) PARCO makes no representation or warranty and assumes no responsibility with respect to the financial condition of the Collection Agent, the Originators, the Transferor or any Obligor (collectively, the "Transaction Parties") or the Funding Agent or the Administrative Agent, or the performance or observance by the Transaction Parties, the Funding Agent or the Administrative Agent of any of their respective obligations under the Receivables Transfer Agreement or the Transaction Documents. SECTION 3.2. Representations and Warranties of the APA Banks. Each of the APA Banks (a) confirms that it has received copies of the Transaction Documents; (b) represents and warrants to the Funding Agent and PARCO that it has, independently and without reliance upon the Funding Agent, PARCO or any other APA Bank, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, prospects, financial and other conditions and creditworthiness of the Transaction Parties, and made its own decision to enter into this Agreement; (c) represents that it will, independently and without reliance upon the Funding Agent, PARCO or any other APA Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Agreement and the Transaction Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, prospects, financial and other condition and creditworthiness of the Transaction Parties; (d) appoints and authorizes the Funding Agent to take such action as agent on its behalf and to exercise such powers under this Agreement and the Transaction Documents as are delegated to the Funding Agent by the terms hereof and thereof, together with such powers as are reasonably incidental thereto; (e) represents and warrants that it is a corporation or a banking association duly organized and validly existing under the laws of its jurisdiction of incorporation or organization and has all corporate power to perform its obligations hereunder; (f) represents and warrants that no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance by it of this Agreement, which has not otherwise been obtained; (g) represents and warrants that the execution, delivery and performance of this Agreement are within its corporate powers, have been duly authorized by all necessary corporate action, do not contravene or violate (i) its charter, certificate or articles of incorporation or association or by-laws, (ii) any law, rule or regulation applicable to it, (iii) any restrictions under any agreement, contract or instrument to which it is a party or any of its property is bound or (iv) any order, writ, judgment, award, injunction or decree binding on or affecting it or its property, and do not result in the creation or imposition of any adverse claim on its assets, which contravention or violation in any of the foregoing cases could have a material adverse effect on its financial condition or its ability to perform its obligations hereunder; (h) represents and warrants that this Agreement constitutes its legal, valid and binding obligations enforceable against it in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization or other similar laws relating to limiting creditors' rights generally and by equitable principles (regardless of whether such enforceability is considered in a proceeding in equity or at law); and (i) represents and warrants that this Agreement has been duly authorized, 9 executed and delivered by it. ARTICLE IV THE FUNDING AGENT SECTION 4.1. Appointment. PARCO and each APA Bank hereby irrevocably designates and appoints Chase as Funding Agent on its behalf under the Transaction Documents and under Section 2.4(a) of this Agreement, and each APA Bank hereby irrevocably designates and appoints Chase as Funding Agent on its behalf under this Agreement. In furtherance of the foregoing, PARCO and each APA Bank hereby authorizes the Funding Agent to take such action on its behalf under the provisions of this Agreement and the Transaction Documents and to exercise such powers and perform such duties as are expressly delegated to the Funding Agent by the terms of the Agreement and the Transaction Documents, together with such other powers as are reasonably incidental hereto or thereto. Notwithstanding any provision to the contrary elsewhere in this Agreement or the Transaction Documents, the Funding Agent shall not have any duties or responsibilities, except those expressly set forth herein or therein, or any fiduciary relationship with any APA Bank or PARCO, and no implied covenants, functions, responsibilities, duties, obligations or liabilities on the part of the Funding Agent shall be read into this Agreement or any Transaction Document or shall otherwise exist against the Funding Agent. The provisions of this Article IV are solely for the benefit of the Funding Agent, PARCO and the APA Banks. In performing its functions and duties solely under this Agreement (except with respect to Section 2.4(a) hereof), subject to the provisions of Section 5.10 hereof, the Funding Agent shall act solely as the agent of the APA Banks and does not assume, nor shall be deemed to have assumed, any obligation or relationship of trust or agency with or for PARCO. SECTION 4.2. Delegation of Duties. The Funding Agent may execute any of its duties under this Agreement by or through its subsidiaries, affiliates, agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The Funding Agent shall not be responsible for the negligence or misconduct of any agents or attorneys-in-fact selected by it with reasonable care. SECTION 4.3. Exculpatory Provisions. Neither the Funding Agent nor any of its directors, officers, agents or employees shall be (a) liable for any action lawfully taken or omitted to be taken by it or them or any Person described in Section 4.2 under or in connection with this Agreement or the Transaction Documents (except for its, their or such Person's own gross negligence or willful misconduct), or (b) responsible in any manner to PARCO and the APA Banks for any recitals, statements, representations or warranties contained in this Agreement or the Transaction Documents or in any certificate, report, statement or other document referred to or provided for in, or received under or in connection with, such agreements or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of the Transaction Documents, this Agreement or any other document furnished in connection therewith or herewith, or for any failure of PARCO or an APA Bank to perform its obligations under this Agreement or any Transaction Document or for the satisfaction of any condition 10 specified in this Agreement or the Transaction Documents. The Funding Agent shall not be under any obligation to any APA Bank to ascertain or to inquire as to the observance or performance of any of the agreements or covenants contained in, or conditions of, the Transaction Documents, or to inspect the properties, books or records of the Transaction Parties. SECTION 4.4. Reliance by Funding Agent. The Funding Agent shall in all cases be entitled to rely, and shall be fully protected in relying, upon any note, writing, resolution, notice, consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype message, statement, order or other document or conversation believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to PARCO and the APA Banks), independent accountants and other experts selected by the Funding Agent. The Funding Agent shall in all cases be fully justified in failing or refusing to take any action under this Agreement, the Transaction Documents or any other document furnished in connection herewith or therewith unless it shall first receive such advice or concurrence of the Required Participants, the Required APA Banks or all of the APA Banks, as applicable, as it deems appropriate, or it shall first be indemnified to its satisfaction by the APA Banks against any and all liability, cost and expense which may be incurred by it by reason of taking or continuing to take any such action. The Funding Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Agreement or any Transaction Document or any other document furnished in connection herewith or therewith in accordance with a request of the Required Participants, the Required APA Banks or all of the APA Banks, as applicable, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the APA Banks. SECTION 4.5. Notice of Events of Default and other Events; Voting. The Funding Agent shall not be deemed to have knowledge or notice of the occurrence of any Termination Event unless the Funding Agent has received notice from any APA Bank, an Initial Purchaser or any Transaction Party referring to the Transaction Documents stating that a Termination Event has occurred with respect to the Transferred Interests and describing such event. If the Funding Agent receives such a notice, the Funding Agent shall promptly give notice thereof to PARCO, each APA Bank and each Rating Agency. Subject to the provisions of Section 5.1(b), to the extent the Funding Agent is entitled to consent to or withhold its consent of any waiver or amendment of any Transaction Document in accordance with the terms thereof, the Funding Agent shall (a) give prompt notice to PARCO, the APA Banks and the Rating Agencies of any such waiver or amendment of which it is aware, and (b) take such action with respect to such waiver, amendment, or Termination Event as shall be directed by the Required Participants; provided, however, that unless and until the Funding Agent shall have received such directions, the Funding Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Termination Event as the Funding Agent shall deem advisable and in the best interests of the APA Banks. SECTION 4.6. Non-Reliance on Funding Agent. PARCO and each APA Bank expressly acknowledges that neither the Funding Agent, nor any of its officers, directors, 11 employees, agents, attorneys-in-fact or affiliates has made any representations or warranties to it and that no act by the Funding Agent hereafter taken, including, without limitation, any review of the affairs of PARCO, the APA Banks or any Transaction Party, shall be deemed to constitute any representation or warranty by the Funding Agent. The Funding Agent shall not have any duty or responsibility to provide PARCO or any APA Bank with any credit or other information concerning the business, operations, property, prospects, financial and other condition or creditworthiness of PARCO, the APA Banks or the Transaction Parties which may come into the possession of the Funding Agent or any of its officers, directors, employees, agents, attorneys-in-fact or affiliates. SECTION 4.7. Indemnification. The APA Banks agree to indemnify the Funding Agent and its officers, directors, employees, representatives and agents (to the extent not reimbursed by the Transaction Parties, and without limiting the obligation of any Transaction Party to do so in accordance with the terms of the Transaction Documents), ratably according to their Pro Rata Shares, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever (including, without limitation, the reasonable fees and disbursements of counsel for the Funding Agent or the affected Person in connection with any investigative, administrative or judicial proceeding commenced or threatened, whether or not the Funding Agent or such affected Person shall be designated a party thereto) that may at any time be imposed on, incurred by or asserted against the Funding Agent or such affected Person as a result of, or arising out of, or in any way related to or by reason of, any of the transactions contemplated hereunder or under the Transaction Documents or the execution, delivery or performance of this Agreement, any Transaction Document or any other document furnished in connection herewith or therewith (but excluding any such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting solely from the gross negligence or willful misconduct of the Funding Agent or such affected Person). SECTION 4.8. Funding Agent in its Individual Capacity. The Funding Agent and its Affiliates may make loans to, accept deposits from and generally engage in any kind of business with PARCO or any Transaction Party or any Affiliate of such Persons as though the Funding Agent were not the Funding Agent hereunder. With respect to its acquisition of Transferred Interests Payments pursuant to this Agreement, the Funding Agent shall have the same rights and powers under this Agreement as any APA Bank and may exercise the same as though it were not the Funding Agent, and the terms "APA Bank" and "APA Banks" shall include the Funding Agent in its individual capacity as an APA Bank. SECTION 4.9. Successor Funding Agent. The Funding Agent may, upon five (5) days' notice to PARCO, the APA Banks and the Rating Agencies, and the Funding Agent will, upon the direction of the Required APA Banks (calculated without regard to the Pro Rata Share of Chase or any Affiliate of Chase), resign as Funding Agent; provided, in either case, that an APA Bank agrees to become the successor Funding Agent hereunder in accordance with the next sentence. If the Funding Agent shall resign as Funding Agent under this Agreement, then the Required APA Banks during such period shall appoint from among the APA Banks a 12 successor agent, whereupon such successor agent shall succeed to the rights, powers and duties of the Funding Agent, and the term "Funding Agent" shall mean such successor agent, effective upon its acceptance of such appointment, and the former Funding Agent's rights, powers and duties as Funding Agent shall be terminated, without any other or further act or deed on the part of such former Funding Agent or any of the parties to this Agreement. After the retiring Funding Agent's resignation hereunder as Funding Agent, the provisions of this Article IV shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Funding Agent under this Agreement. SECTION 4.10. Chase Conflict Waiver. Chase acts as PARCO Administrative Agent, as issuing and paying agent for PARCO's Commercial Paper, as provider of other backup facilities for PARCO, as Administrative Agent, and may provide other services or facilities from time to time (the "Chase Roles"). Without limiting the generality of Section 4.8, each APA Bank hereby acknowledges and consents to any and all Chase Roles, waives any objections it may have to any actual or potential conflict of interest caused by Chase's acting as the Funding Agent or as an APA Bank hereunder and acting as or maintaining any of the Chase Roles, and agrees that in connection with any Chase Role, Chase may take, or refrain from taking, any action which it in its discretion deems appropriate. The APA Banks are hereby notified that PARCO may delegate responsibility for signing and/or sending Sale Notices to Chase as PARCO Administrative Agent. ARTICLE V MISCELLANEOUS SECTION 5.1. Waivers; Amendments, etc. (a) No Waiver; Remedies Cumulative. No failure or delay on the part of the Funding Agent or any APA Bank in exercising any power, right or remedy under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or remedy preclude any other further exercise thereof or the exercise of any other power, right or remedy. The rights and remedies herein provided shall be cumulative and nonexclusive of any rights and remedies provided by law. Any waiver of this Agreement shall be effective only for the specific purpose for which given. (b) Amendments, Etc. This Agreement may be amended, supplemented, modified or waived with the written consent of all of the parties hereto; provided that no such amendment, supplement, modification or waiver shall become effective without prior written notice to each of the Rating Agencies. Notwithstanding the foregoing, without the consent of the APA Banks, the Funding Agent and PARCO may amend this Agreement solely to add additional Persons as APA Banks. Any such amendment, supplement, modification or waiver shall apply to each of the APA Banks equally and shall be binding upon PARCO, the APA Banks and the Funding Agent. In the case of any waiver, PARCO, the APA Banks and the Funding Agent shall be restored to their former positions and rights hereunder. 13 (c) Integration. This Agreement and the Transaction Documents contain a final and complete integration of all prior expressions by the parties hereto with respect to the subject matter hereof and shall constitute the entire agreement among the parties hereto with respect to the subject matter hereof, superseding all prior oral or written understandings. SECTION 5.2. Notices. Except as otherwise expressly provided herein, all communications and notices provided for hereunder shall be in writing and shall be (a) hand-delivered by messenger, (b) sent by reputable overnight or second business day courier, or (c) sent by telecopy or similar electronic transmission directed to the applicable address or telecopy number, as the case may be, set forth on Exhibit C hereto (as amended from time to time) or at such other address or telecopy number as any party may hereafter specify in writing to the Funding Agent for the purpose of receiving notices. Each such notice or other communication shall be effective only upon receipt thereof. SECTION 5.3. Governing Law; Submission to Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York. SECTION 5.4. Severability; Counterparts; Waiver of Setoff. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. Any provisions of this Agreement which are prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Each APA Bank and the Funding Agent hereby waives any right of setoff it may have or to which it may be entitled under this Agreement from time to time against PARCO or its assets. SECTION 5.5. Successors and Assigns; Participations; Assignments. (a) Successors and Assigns. This Agreement shall be binding upon the parties hereto and their respective successors and permitted assigns. No APA Bank may participate, assign or sell any portion of its rights hereunder except as required by operation of law, in connection with the merger, consolidation or dissolution of any APA Bank or as provided in this Section 5.5. No assignment hereunder shall become effective without a Rating Confirmation. (b) Participations. Any APA Bank may, with the consent of the Funding Agent and in the ordinary course of its business and in accordance with applicable law, at any time sell to one or more Persons (each, a "Participant") participating interests in its rights and obligations hereunder and under the Transaction Documents; provided, however, that each Participant shall purchase an identical percentage in such selling APA Bank's Commitment, unused PARCO APA Bank Commitment and Funding Balance; provided, further, that each Participant shall, prior to 14 the effectiveness of such participation, be required to provide all of the forms and statements required pursuant to subsection 7.3(b) of the Receivables Transfer Agreement and shall, as of the date such Person becomes a Participant comply with the provisions of subsection 7.3(b) and Section 10.9 of the Receivables Transfer Agreement. Notwithstanding any such sale by an APA Bank of participating interests to a Participant, such APA Bank's rights and obligations under this Agreement shall remain unchanged, such APA Bank shall remain solely responsible for the performance thereof, and PARCO and the Funding Agent shall continue to deal solely and directly with such APA Bank in connection with such APA Bank's rights and obligations under this Agreement and the Transaction Documents. Each APA Bank agrees that any agreement between such APA Bank and any such Participant in respect of such participating interest shall not restrict such APA Bank's right to agree to any amendment, supplement, waiver or modification to this Agreement. (c) Assignments to Purchasers. (i) Any APA Bank may at any time and from time to time, upon the prior written consent of PARCO and the Funding Agent, assign to one or more accredited investors or other Persons ("Purchaser(s)") all or any part of its rights and obligations under this Agreement and the Transaction Documents pursuant to a supplement to this Agreement, substantially in the form of Exhibit A hereto (each, a "Transfer Supplement"), executed by the Purchaser, such selling APA Bank and, as applicable, the Funding Agent; and provided however that (A) each Purchaser shall purchase an identical percentage in such selling APA Bank's Commitment, unused PARCO APA Bank Commitment and Funding Balance, (B) any such assignment cannot be for an amount less than the lesser of (1) $10,000,000 and (2) such selling APA Bank's Commitment or Funding Balance (calculated at the time of such assignment), (C) each Purchaser must be a financial institution incorporated in an OECD Country rated at least A-1/P-1 (or the equivalent short-term rating) by the Rating Agencies and (D) each Purchaser shall deliver to the Funding Agent and PARCO an opinion of such Purchaser's counsel in substantially the form of Exhibit B hereto. (ii) Each of the APA Banks agrees that in the event that it shall cease to have short-term debt ratings of at least A-1 by S&P and at least P-1 by Moody's, or, if such APA Bank does not have short-term debt which is rated by S&P's and Moody's, in the event that the parent corporation of such APA Bank has rated short-term debt, such parent corporation ceases to have short-term debt ratings of at least A-1 by S&P and at least P-1 by Moody's (each, an "Affected APA Bank"), such Affected APA Bank shall be obliged, at the request of PARCO and the Funding Agent, to assign all of its rights and obligations hereunder to (x) one or more other APA Banks selected by PARCO and the Funding Agent which are willing to accept such assignment, or (y) another financial institution rated at least A-1/P-1 (or the equivalent short- term rating) by the Rating Agencies 15 nominated by the Funding Agent and consented to by PARCO (which consent shall not be unreasonably withheld) and the Funding Agent, and willing to participate in this facility through the Commitment Expiry Date in the place of such Affected APA Bank; provided that (i) the Affected APA Bank receives payment in full, pursuant to a Transfer Supplement and/or, as applicable, an assignment, of an amount equal to the Affected APA Bank's Funding Balance and any other amounts due and owing under the Transaction Documents in respect of such Affected APA Bank's Funding Balance and (ii) such nominated financial institution, if not an existing APA Bank, satisfies all the requirements of this Agreement and provides the Funding Agent with an opinion of counsel in substantially the form of Exhibit B hereto. (iii) Upon (A) execution of a Transfer Supplement, (B) delivery of an executed copy thereof to PARCO, the Funding Agent and the Administrative Agent and delivery to the Funding Agent and PARCO of an opinion of such Purchaser's counsel in substantially the form of Exhibit B hereto, (C) payment, if applicable, by the Purchaser to such selling APA Bank of an amount equal to the purchase price agreed between such selling APA Bank and the Purchaser and (D) receipt by PARCO of a Rating Confirmation, such selling APA Bank shall be released from its obligations hereunder and under the Transaction Documents to the extent of such assignment and the Purchaser shall, for all purposes, be an APA Bank party to this Agreement and, if and when applicable, an assignee of PARCO's right to receive Transferred Interests Payments under the Transaction Documents and shall have all the rights and obligations of an APA Bank under this Agreement to the same extent as if it were an original party hereto or thereto, and no further consent or action by PARCO, the APA Banks or the Funding Agent shall be required. The amount of the assigned portion of the selling APA Bank's Funding Balance allocable to the Purchaser shall be equal to the Transferred Percentage (as defined in the Transfer Supplement) of such selling APA Bank's Funding Balance which is transferred thereunder regardless of the purchase price paid therefor. Such Transfer Supplement shall be deemed to amend this Agreement to the extent, and only to the extent, necessary to reflect the addition of the Purchaser as an APA Bank and the resulting adjustment of the selling APA Bank's Commitment arising from the purchase by the Purchaser of all or a portion of the selling APA Bank's rights, obligations, and interest hereunder and under the Transaction Documents. SECTION 5.6. Effectiveness of this Agreement. This Agreement, and the obligations of the Funding Agent and the APA Banks hereunder, shall become effective when the Funding Agent has received counterparts hereof, duly executed by the Funding Agent, PARCO and each of the APA Banks. SECTION 5.7. No Petition. The Funding Agent, each APA Bank and PARCO hereby covenant and agree that, prior to the date which is one year and one day after the payment 16 in full of all outstanding Commercial Paper of PARCO, such party will not institute against, or join any other Person in instituting against, PARCO any bankruptcy, reorganization, arrangement, insolvency or liquidation proceedings or other similar proceeding under the laws of any jurisdiction. The provisions of this Section 5.7 shall survive termination of this Agreement. SECTION 5.8. Waiver of Trial by Jury. To the extent permitted by applicable law, the Funding Agent, each APA Bank and PARCO irrevocably waives all right of trial by jury in any action, proceeding or counterclaim arising out of or in connection with this Agreement or the operative documents or any matter arising hereunder or thereunder. SECTION 5.9. Limited Recourse. Notwithstanding anything to the contrary contained herein, the obligations of PARCO under this Agreement are solely the corporate obligations of PARCO and, in the case of obligations of PARCO other than Commercial Paper, shall be payable at such time as funds are received by or are available to PARCO in excess of funds necessary to pay in full all outstanding Commercial Paper and, to the extent funds are not available to pay such obligations, the claims relating thereto shall not constitute a claim against PARCO but shall continue to accrue. Each party hereto agrees that the payment of any claim (as defined in Section 101 of Title 11 of the Bankruptcy Code) of any such party shall be subordinated to the payment in full of all Commercial Paper. No recourse under any obligation, covenant or agreement of PARCO contained in this Agreement shall be had against any incorporator, stockholder, officer, director, employee or agent of PARCO, the Administrative Agent, the PARCO Administrative Agent, the Funding Agent, the Manager or any of their Affiliates (solely by virtue of such capacity) by the enforcement of any assessment or by any legal or equitable proceeding, by virtue of any statute or otherwise; it being expressly agreed and understood that this Agreement is solely a corporate obligation of PARCO individually, and that no personal liability whatever shall attach to or be incurred by any incorporator, stockholder, officer, director, employee or agent of PARCO, the Administrative Agent, the PARCO Administrative Agent, the Funding Agent, the Manager or any of their Affiliates (solely by virtue of such capacity) or any of them under or by reason of any of the obligations, covenants or agreements of PARCO contained in this Agreement, or implied therefrom, and that any and all personal liability for breaches by PARCO of any of such obligations, covenants or agreements, either at common law or at equity, or by statute, rule or regulation, of every such incorporator, stockholder, officer, director, employee or agent is hereby expressly waived as a condition of and in consideration for the execution of this Agreement; provided that the foregoing shall not relieve any such Person from any liability it might otherwise have as a result of fraudulent actions taken or omissions made by them. The provisions of this Section 5.9 shall survive termination of this Agreement. SECTION 5.10. Liability of Funding Agent. Notwithstanding any provision of this Agreement: (i) the Funding Agent shall not have any obligations under this Agreement other than those specifically set forth herein, and no implied obligations of the Funding Agent shall be read into this Agreement; and (ii) in no event shall the Funding Agent be liable under or in connection with this Agreement for indirect, special, or consequential losses or damages of 17 any kind, including lost profits, even if advised of the possibility thereof and regardless of the form of action by which such losses or damages may be claimed. Neither the Funding Agent nor any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken in good faith by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limiting the foregoing, the Funding Agent (a) may consult with legal counsel (including counsel for the Initial Purchasers and the APA Banks), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts, (b) shall not be responsible to PARCO for any statements, warranties or representations made in or in connection with this Agreement or the Transaction Documents, (c) shall not be responsible to PARCO for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or the Transaction Documents, (d) shall incur no liability under or in respect of any of the Commercial Paper or other obligations of PARCO under this Agreement or the Transaction Documents and (e) shall incur no liability under or in respect of this Agreement or the Transaction Documents by acting upon any notice (including notice by telephone), consent, certificate or other instrument or writing (which may be by facsimile) believed by it to be genuine and signed or sent by the proper party or parties. Notwithstanding anything else herein or in the Transaction Documents, it is agreed that where the Funding Agent may be required under this Agreement or the Transaction Documents to give notice of any event or condition or to take any action as a result of the occurrence of any event or the existence of any condition, the Funding Agent agrees to give such notice or take such action only to the extent that it has actual knowledge of the occurrence of such event or the existence of such condition, and shall incur no liability for any failure to give such notice or take such action in the absence of such knowledge. [REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK] 18 IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase Agreement to be executed and delivered by their duty authorized officers or signatories as of the date hereof. PARK AVENUE RECEIVABLES CORPORATION By: ---------------------------- Name: -------------------------- Title: ------------------------- THE CHASE MANHATTAN BANK, as Funding Agent By: ---------------------------- Name: -------------------------- Title: ------------------------- THE CHASE MANHATTAN BANK, as an APA Bank By: ---------------------------- Name: -------------------------- Title: ------------------------- ANNEX 1 APA Banks The Chase Manhattan Bank Annex 1 - Page 1 EXHIBIT A [FORM OF TRANSFER SUPPLEMENT] THIS TRANSFER SUPPLEMENT is entered into as of the _____ day of ________, 19/20__, by and between ____________________ ("Seller") and _____________ ("Purchaser"). PRELIMINARY STATEMENTS A. This Transfer Supplement is being executed and delivered in accordance with Section 5.5(c) of that certain Asset Purchase Agreement, dated as of December 27, 1999 (as amended, supplemented or otherwise modified and in effect from time to time, the "Agreement"), by and among Park Avenue Receivables Corporation, a Delaware corporation, the several APA Banks party thereto from time to time, and The Chase Manhattan Bank, a New York banking corporation, individually and as Funding Agent. Capitalized terms used herein and not otherwise defined herein are used with the meanings set forth in, or incorporated by reference into, the Agreement. B. The Seller is an APA Bank party to the Agreement, and the Purchaser wishes to become an APA Bank thereunder. C. The Seller is selling and assigning to the Purchaser an undivided ___% (the "Transferred Percentage") interest in all of Seller's rights and obligations under the Agreement and the Transaction Documents, including, without limitation, the Seller's Commitment and (if applicable) the Seller's Funding Balance as set forth herein. The parties hereto hereby agree as follows: 1. The transfer effected by this Transfer Supplement shall become effective (the "Transfer Effective Date") two (2) Business Days (or such other date selected by the Funding Agent in its sole discretion) following the date on which a transfer effective notice substantially in the form of Schedule II to this Transfer Supplement ("Transfer Effective Notice") is delivered by the Funding Agent to PARCO, the Seller and the Purchaser. From and after the Transfer Effective Date, the Purchaser shall be an APA Bank party to the Agreement for all purposes thereof as if the Purchaser were an original party thereto and the Purchaser agrees to be bound by all of the terms and provisions contained therein. 2. If there is no related PARCO Net Investment on the Transfer Effective Date, Seller shall be deemed to have hereby transferred and assigned to the Purchaser, without recourse, representation or warranty (except as provided in paragraph 6 below), and the Purchaser shall be deemed to have hereby irrevocably taken, received and assumed from the A-1 Seller, the Transferred Percentage of the Seller's Commitment and all rights and obligations associated therewith under the terms of the Agreement, including, without limitation, the Transferred Percentage of the Seller's future funding obligations under Section 2.2(a) of the Agreement. 3. If there is a related PARCO Net Investment, at or before 12:00 noon, local time of the Seller, on the Transfer Effective Date, the Purchaser shall pay to the Seller, in immediately available funds, an amount equal to the sum of (i) the Transferred Percentage of an amount equal to the Seller's Funding Balance (such amount, being hereinafter referred to as the "Purchaser's Funding Balance"); (ii) all accrued but unpaid (whether or not then due) interest attributable to the Purchaser's Funding Balance; and (iii) accrued but unpaid fees and other costs and expenses payable in respect of the Purchaser's Funding Balance for the period commencing upon each date such unpaid amounts commence accruing, to and including the Transfer Effective Date (the "Purchaser's Acquisition Cost"), whereupon, the Seller shall be deemed to have transferred and assigned to the Purchaser, without recourse, representation or warranty (except as provided in paragraph 6 below), and the Purchaser shall be deemed to have hereby irrevocably taken, received and assumed from the Seller, the Transferred Percentage of the Seller's Commitment and its Funding Balance and all related rights and obligations under the Agreement and the Transaction Documents, including, without limitation, the Transferred Percentage of the Seller's future funding obligations under Section 2.2(a) of the Agreement. 4. Concurrently with the execution and delivery hereof, the Seller will provide to the Purchaser copies of all documents requested by the Purchaser which were delivered to such Seller pursuant to the Agreement. 5. Each of the parties to this Transfer Supplement agrees that at any time and from time to time upon the written request of any other party, it will execute and deliver such further documents and do such further acts and things as such other party may reasonably request in order to effect the purposes of this Transfer Supplement. 6. By executing and delivering this Transfer Supplement, the Seller and the Purchaser confirm to and agree with each other, the Funding Agent and the APA Banks as follows: (a) other than the representation and warranty that it has not created any Adverse Claim upon any interest being transferred hereunder, the Seller makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made by any other Person in or in connection with the Agreement or the Transaction Documents or the execution, legality, validity, enforceability, genuineness, sufficiency or value thereof or any other instrument or document furnished pursuant thereto or the perfection, priority, condition, value or sufficiency of any collateral; (b) the Seller makes no representation or warranty and assumes no responsibility with respect to the financial condition of PARCO, the Funding Agent, the Administrative Agent or any Transaction Party, any surety or any guarantor or the performance or observance by PARCO, any Transaction Party, the Administrative Agent or the Funding Agent of any of their respective obligations under the Agreement or any Transaction Document or any other instrument or document furnished pursuant thereto or in connection therewith; (c) A-2 the Purchaser confirms that it has received a copy of the Agreement and the Transaction Documents, together with such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Transfer Supplement; (d) the Purchaser will, independently and without reliance upon the Funding Agent, PARCO or any other APA Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Agreement or the Transaction Documents; (e) the Purchaser appoints and authorizes the Funding Agent to take such action as agent on its behalf and to exercise such powers under the Agreement as are delegated to the Funding Agent by the terms thereof, together with such powers as are reasonably incidental thereto; (f) the Purchaser was not formed for the purpose of acquiring the interest being acquired hereunder; and (h) the Purchaser agrees that it will perform in accordance with their terms all of the obligations which, by the terms of the Agreement and the Transaction Documents, are required to be performed by it as an APA Bank or as the holder of PARCO's interest thereunder. 7. Each party hereto represents and warrants to and agrees with the Funding Agent that it is aware of and will comply with the provisions of (i) the Agreement, including, without limitation, Sections 2.2, 5.5(c) and 5.7 thereof and (ii) Sections 7.3(b) and 10.9 of the Receivables Transfer Agreement. 8. Schedule I hereto sets forth the revised PARCO APA Bank Commitment of the Seller and the PARCO APA Bank Commitment of the Purchaser, as well as administrative information with respect to the Purchaser. 9. This Transfer Supplement shall be governed by, and construed in accordance with, the laws of the State of New York. A-3 IN WITNESS WHEREOF, the parties hereto have caused this Transfer Supplement to be executed by their respective duly authorized officers of the date hereof. [SELLER] By: ---------------------------- Name: -------------------------- Title: ------------------------- [PURCHASER] By: ---------------------------- Name: -------------------------- Title: ------------------------- A-4 SCHEDULE I TO TRANSFER SUPPLEMENT LIST OF PURCHASING OFFICES, ADDRESSES FOR NOTICES AND COMMITMENT AMOUNTS Date: _______________, 19/20___ Transferred Percentage: _____%
Pro PARCO APA PARCO APA Outstanding Rata Seller Bank Bank Funding Balance Share Commitment Commitment [existing] [revised] - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Pro PARCO APA Outstanding Rata Purchaser Bank Funding Balance Share Commitment [initial] - --------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------
Purchaser's Addresses for Notices: ________________________ ________________________ ________________________ Attention: Telephone: Telecopy: SI-1 SCHEDULE II TO TRANSFER SUPPLEMENT TRANSFER EFFECTIVE NOTICE TO: ___________________, Seller ___________________ ___________________ TO: ___________________, Purchaser ___________________ ___________________ The undersigned, as Funding Agent under the Asset Purchase Agreement, dated as of December 27, 1999 (as amended, supplemented or otherwise modified and in effect from time to time), by and among Park Avenue Receivables Corporation, a Delaware corporation, the several APA Banks party thereto from time to time, and The Chase Manhattan Bank, a New York banking corporation, individually and as Funding Agent, hereby acknowledges receipt of executed counterparts of a completed Transfer Supplement dated as of ______, 19/20__ between ___________, as Seller, and _____________, as Purchaser. Capitalized terms defined in such Transfer Supplement are used herein as therein defined or incorporated by reference therein. 1. Pursuant to such Transfer Supplement, you are advised that the Transfer Effective Date will be ___________, 19/20__. 2. The Funding Agent each hereby consents to the Transfer Supplement as required by Section 5.5(c) of the Agreement. -------------- [3. Pursuant to such Transfer Supplement, the Purchaser is required to pay $_______ to the Seller at or before 12:00 noon (local time of the Seller) on the Transfer Effective Date in immediately available funds.] Very truly yours, THE CHASE MANHATTAN BANK, as Funding Agent By: ------------------------ Authorized Signatory SII-1 EXHIBIT B FORM OF OPINION OF COUNSEL
Park Avenue Receivables Corporation Standard & Poor's Ratings Services, a c/o Global Securitization Services, LLC division of The McGraw-Hill 25 West 43rd Street, Suite 704 Companies, Inc. New York, New York 10036 25 Broadway New York, New York 10004 The Chase Manhattan Bank, as Moody's Investors Service, Inc. Administrative Agent, Depositary, 99 Church Street Liquidity Agent, Liquidity Bank, New York, New York 10007 L/C Agent and L/C Bank 270 Park Avenue New York, New York 10017
Re: Transfer Supplement dated as of __________ with [Name of Bank] Ladies and Gentlemen: We have acted as counsel for [Name of Bank] (the "Bank") in connection with (i) the Asset Purchase Agreement, dated as of December 27, 1999 (as amended, supplemented or otherwise modified to the date hereof, the "Agreement"; terms defined therein and not otherwise defined in this letter shall have the respective meanings ascribed therein), by and among Park Avenue Receivables Corporation, a Delaware corporation, the several APA Banks party thereto from time to time, and The Chase Manhattan Bank, a New York banking corporation, individually and as Funding Agent, and (ii) the Transfer Supplement (the "Transfer Supplement"), dated as of ____________, 19/20__, between [Name of Seller] as "Seller" (as defined therein) and the Bank as "Purchaser" (as defined therein), consented to by the Funding Agent. 1. The Bank is a ______________________ organized, validly existing and in good standing under the laws of ___________________. The Bank has the corporate power and authority to execute and deliver the Transfer Supplement and to perform its obligations under the Asset Purchase Agreement. 2. No governmental approval or other action, which has not been obtained or taken and is not in full force and effect, is required to authorize, or is required in connection with, the execution or delivery by the Bank of the Transfer Supplement or the performance by the Bank of its obligations thereunder and under the Asset Purchase Agreement. 3. Neither the execution and delivery of the Transfer Supplement by the Bank, nor the consummation of the transactions contemplated thereby and by the Asset Purchase Agreement, will contravene, or result in a violation of, any law applicable to the Bank. B-1 4. The Transfer Supplement has been duly authorized, executed and delivered by the Bank, and the Asset Purchase Agreement, as amended by the Transfer Supplement, constitutes the legal, valid and binding obligation of the Bank, enforceable against the Bank in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, receivership, conservatorship or other similar laws, regulations and administrative orders of general application relating to or affecting the enforcement of creditors' rights in general and the rights of creditors of banks as the same may be applied in the event of the bankruptcy, insolvency, receivership, conservatorship or other similar event in respect of the Bank or by general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 5. With the exception of obligations being given priority by statute or regulation, the obligations of the Bank under the Asset Purchase Agreement, as amended by the Transfer Supplement, will rank pari passu with all obligations of the Bank which are not contractually subordinated to payment of such obligations. Very truly yours, [NOTE THAT ADDITIONAL OPINIONS MAY BE REQUIRED FROM FOREIGN APA BANKS] B-2 EXHIBIT C NOTICE ADDRESSES If to PARCO: Park Avenue Receivables Corporation c/o Global Securitization Services, LLC 25 West 43rd Street, Suite 704 New York, New York 10036 Attention: Vice President Telephone: (212) 302-5151 Telecopy: (212) 302-8767 If to the Funding Agent: The Chase Manhattan Bank 450 West 33rd Street, 15th Floor New York, New York 10001 Attention: Craig Kantor Structured Finance Services Telephone: (212) 946-7861 Telecopy: (212) 946-7776 If to Chase as an APA Bank: The Chase Manhattan Bank 450 West 33rd Street, 15th Floor New York, New York 10001 Attention: Craig Kantor Structured Finance Services Telephone: (212) 946-7861 Telecopy: (212) 946-7776 C-1 If to C&A: Collins & Aikman Products Co. 701 McCullough Drive Charlotte, North Carolina 28262 Attention: Assistant Treasurer Telephone: (704) 547-8500 Telecopy: (704) 548-2314 If to the Collection Agent: Collins & Aikman Products Co. 701 McCullough Drive Charlotte, North Carolina 28262 Attention: Assistant Treasurer Telephone: (704) 547-8500 Telecopy: (704) 548-2314 If to the Transferor: Carcorp, Inc. 101 Convention Center Drive Suite 850 Las Vegas, Nevada 89109 Attention: Monte Miller Telephone: (702) 387-0864 Telecopy: (702) 598-3651 C-2 LIMITED GUARANTY This Limited Guaranty (as amended, supplemented or otherwise modified and in effect from time to time, the "Guaranty") is executed as of the 27th day of December, 1999 by Collins & Aikman Products Co., a corporation organized and existing under the laws of the State of Delaware (the "Guarantor"), in favor of The Chase Manhattan Bank, as administrative agent (in such capacity, the "Administrative Agent"), on behalf of the Funding Agents, the Initial Purchasers and the PARCO APA Banks (together, the Funding Agents, the Initial Purchasers and the PARCO APA Banks are referred to herein as the "Beneficiaries"). PRELIMINARY STATEMENTS WHEREAS, pursuant to a receivables purchase agreement, dated as of December 27, 1999 (as amended, supplemented or otherwise modified and in effect from time to time, the "Receivables Purchase Agreement"), between Collins & Aikman Products Co. ("C&A"), C&A's wholly-owned direct and indirect Subsidiaries listed on Schedule D attached thereto, each as a seller thereunder (each a "Seller", and collectively, the "Sellers"), and Carcorp, Inc., a Delaware corporation (the "Receivables Company"), as purchaser thereunder, each Seller has agreed to sell from time to time, and Receivables Company has agreed to purchase from time to time, the Receivables; WHEREAS, pursuant to (i) a Receivables Transfer Agreement, dated as of December 27, 1999 (as amended, supplemented or otherwise modified and in effect from time to time, the "Receivables Transfer Agreement"), between C&A, as Guarantor and as collection agent thereunder (the "Collection Agent"), Receivables Company, as transferor thereunder, the Initial Purchasers, the PARCO APA Banks from time to time party thereto, the Funding Agents and the Administrative Agent, (ii) an Asset Purchase Agreement, dated as of December 27, 1999 (as amended, supplemented or otherwise modified and in effect from time to time, the "PARCO Asset Purchase Agreement"), by and among PARCO, the PARCO APA Banks and the PARCO Funding Agent, (iii) the Redwood Liquidity Loan Agreement and (iv) the Liberty Liquidity Asset Purchase Agreement, Receivables Company has agreed to sell from time to time, and the Administrative Agent, on behalf of the Initial Purchasers and the PARCO APA Banks, has agreed to purchase from time to time, on the terms and conditions set forth in the Receivables Transfer Agreement and the Asset Purchase Agreements, undivided interests in the Receivables; WHEREAS, the Guarantor is the direct or indirect owner of 100% of the outstanding capital stock of each of the other Sellers; and WHEREAS, it is a condition precedent to the execution and delivery of the Receivables Transfer Agreement that the Guarantor execute this Guaranty and deliver it to the Administrative Agent for the benefit of the Beneficiaries. In consideration for the execution and delivery of the Receivables Transfer Agreement and the Asset Purchase Agreements by the Beneficiaries, as applicable, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged by the Guarantor, the Guarantor agrees as follows: 1 1. Definitions. Unless otherwise defined in this Guaranty, capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in, or incorporated by reference into, the Receivables Transfer Agreement. As used herein, "Facility Documents" shall mean, collectively, the Receivables Purchase Agreement, the Receivables Transfer Agreement and each Asset Purchase Agreement. 2. Guaranty of Obligations. The Guarantor unconditionally guarantees the full and prompt payment when due of all of the payment obligations and the timely performance of all of the performance obligations of the Sellers of every kind and nature now or hereafter existing, or due or to become due, under the Facility Documents (collectively, the "Obligations"); provided that, such Obligations shall not include amounts not collected in respect of any Receivable as a result of the creditworthiness of an Obligor, including, but not limited to, amounts required to be returned to an Obligor as a voidable preference. The Guarantor shall pay all reasonable costs and expenses including, without limitation, all court costs and reasonable attorney's fees and expenses paid or incurred by the Administrative Agent and the Beneficiaries in connection with (a) the collection of all or any part of the Obligations from the Guarantor and (b) the prosecution or defense of any action by or against the Administrative Agent, the Beneficiaries or Receivables Company in connection with, or relating to, the Obligations, whether involving the Sellers, the Collection Agent, the Guarantor, Receivables Company or any other party (including, but not limited to, a trustee in a bankruptcy or a debtor-in-possession). 3. Validity of Obligations; Irrevocability. The Guarantor agrees that subject to the proviso set forth in Section 2 above its obligations under this Guaranty shall be unconditional, irrespective of (i) the validity, enforceability, discharge, disaffirmance, settlement or compromise (by any Person, including a trustee in a bankruptcy or a debtor-in-possession) of the Obligations or of the Facility Documents or any Contract, (ii) the absence of any attempt to collect the Obligations from a Seller or the Collection Agent or any other party, (iii) the waiver or consent by any Person with respect to any provision of any instrument evidencing the Obligations, (iv) any change of the time, manner or place of payment or performance, or any other term of any of the Obligations, (v) any law, regulation or order of any jurisdiction affecting any term of any of the Obligations or rights of any Person with respect thereto, (vi) the failure by any Person to take any steps to perfect and maintain perfected its interest in the Receivables or any security or collateral related to the Obligations or (vii) any other circumstances which might otherwise constitute a legal or equitable discharge or defense of a guarantor. The Guarantor agrees that the Administrative Agent and the Beneficiaries shall be under no obligation to marshal any assets in favor or against or in payment of any or all of the Obligations. The Guarantor further agrees that, to the extent a payment is made by a Seller or the Collection Agent under the Facility Documents, which payment or payments or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside and/or required to be repaid to such Seller or the Collection Agent, its estate, trustee, receiver or any other party, under any bankruptcy, insolvency or similar state or federal law, common law or equitable cause, then to the extent of such payment or repayment, the Obligation or part thereof which has been paid, reduced or satisfied by such amount shall be reinstated and continued in full force and effect as of the date such initial payment, reduction or satisfaction occurred. The Guarantor waives all set-offs and counterclaims and all presentments, demands for performance, notices of dishonor and notice of acceptance of this Guaranty. The Guarantor agrees that its obligations under this Guaranty shall be irrevocable. 2 4. Several Obligations. The obligations of the Guarantor hereunder are separate and apart from the Sellers or any other Person, and are primary obligations concerning which the Guarantor is the principal obligor. The Guarantor agrees that this Guaranty shall not be discharged except by payment in full of the Obligations and complete performance of the obligations of the Guarantor hereunder. The obligations of the Guarantor hereunder shall not be affected in any way by the release or discharge of a Seller from the performance of any of the Obligations (other than the full and final payment of all of the Obligations), whether occurring by reason of law or any other cause, whether similar or dissimilar to the foregoing. 5. Subrogation Rights. If any amount shall be paid to the Guarantor on account of subrogation rights at any time when all the Obligations shall not have been paid in full, such amount shall be held in trust for the benefit of the Administrative Agent, on behalf of the Beneficiaries, and shall forthwith be paid to the Administrative Agent to be applied to the Obligations. If (a) the Guarantor shall make payment to the Administrative Agent of or perform all or any part of the Obligations and (b) all the Obligations shall be paid and performed in full, the Administrative Agent will, at the Guarantor's request, execute and deliver to the Guarantor appropriate documents, without recourse and without representation or warranty, necessary to evidence the transfer by subrogation to the Guarantor of any interest in the Obligations resulting from such payment or performance by the Guarantor. The Guarantor hereby agrees that it shall have no rights of subrogation with respect to amounts due to the Administrative Agent or the Beneficiaries until such time as all obligations of the Sellers to the Receivables Company, the Administrative Agent and the Beneficiaries have been paid or performed in full and the Receivables Transfer Agreement has been terminated. 6. Rights of Set-Off. The Guarantor hereby authorizes the Administrative Agent, on behalf of the Beneficiaries, at any time and from time to time, to the fullest extent permitted by law, to set off and apply any and all deposits (whether general or special, time or demand, provisional or final) at any time held and other indebtedness at any time owing by the Administrative Agent or the Beneficiaries to or for the credit or the account of Receivables Company against any and all of the obligations of the Guarantor now or hereafter existing under this Guaranty. The Guarantor hereby acknowledges that rights of the Administrative Agent, on behalf of the Beneficiaries, described in this Section 4 are in addition to all other rights and remedies (including, without limitation, other rights of set-off) the Administrative Agent and the Beneficiaries may have. 7. Representations and Warranties. The Guarantor hereby represents and warrants to the Administrative Agent, for the benefit of the Beneficiaries, as of the date hereof, as follows: (a) Corporate Existence and Power. The Guarantor is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation and has all corporate power and all material governmental licenses, authorizations, consents and approvals required to carry on its business in each jurisdiction in which its business is now conducted. The Guarantor is duly qualified to do business in, and is in good standing in, every other jurisdiction in which the nature of its business requires it to be so qualified, except where the failure to be so qualified or in good standing would not have a Material Adverse Effect. 3 (b) Corporate and Governmental Authorization; Contravention. The execution, delivery and performance by the Guarantor of this Guaranty and the other Facility Documents to which the Guarantor is a party are within the Guarantor's corporate powers, have been duly authorized by all necessary corporate action, require no action by or in respect of, or filing with, any Official Body or official thereof, and do not contravene, or constitute a default under, any provision of applicable law, rule or regulation or of the Certificate of Incorporation or Bylaws of the Guarantor or of any material agreement, judgment, injunction, order, writ, decree or other instrument binding upon the Guarantor or result in the creation or imposition of any Adverse Claim on the assets of the Guarantor or any of its Subsidiaries. (c) Binding Effect. Each of this Guaranty and the other Facility Documents to which the Guarantor is a party constitutes the legal, valid and binding obligation of the Guarantor, enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws affecting the rights of creditors and general equitable principles (whether considered in a proceeding at law or in equity). (d) Accuracy of Information. All information heretofore furnished by the Guarantor to the Administrative Agent or the Beneficiaries for purposes of or in connection with this Guaranty, the other Facility Documents or any transaction contemplated hereby or thereby is, and all such information hereafter furnished by the Guarantor to the Administrative Agent or the Beneficiaries will be, true and accurate in every material respect on the date such information is stated or certified. (e) Tax Status. The Guarantor has filed all tax returns (Federal, state and local) required to be filed and has paid prior to delinquency or made adequate provision for the payment of all taxes, assessments and other governmental charges (including for such purposes, the setting aside of appropriate reserves for taxes, assessments and other governmental charges being contested in good faith). (f) Action, Suits. There are no actions, suits or proceedings pending, or to the knowledge of the Guarantor threatened, against or affecting the Guarantor or any Affiliate of the Guarantor or their respective properties, in or before any court, arbitrator or other body, which may, individually or in the aggregate, have a Material Adverse Effect. (g) Not an Investment Company. The Guarantor is not, nor is it controlled by, an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or is exempt from all provisions of such Act. (h) Year 2000. The Guarantor has reviewed the areas within its business and operations which it believes would reasonably be expected to be materially adversely affected by, and has developed a plan to address on a timely basis, the "Year 2000 Problem" (that is, the risk that computer applications used by the Collection Agent may be unable to recognize and perform properly date-sensitive functions involving certain dates occurring in or after the year 2000). 4 8. Governing Law. The Guaranty shall be governed by, and construed in accordance with, the laws of the State of New York. [REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK] 5 IN WITNESS WHEREOF, this Guaranty has been duly executed by the Guarantor as of the 27th day of December, 1999. COLLINS & AIKMAN PRODUCTS CO., as Guarantor By: --------------------------------- Name: Title: Acknowledged and accepted as of The date first above written: THE CHASE MANHATTAN BANK, As Administrative Agent for the benefit of Beneficiaries By: ---------------------------- Name: Title: 6 EX-21 12 SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 SUBSIDIARIES OF COLLINS & AIKMAN CORPORATION COMPANY JURISDICTION - ------- ------------ Collins & Aikman Products Co. Delaware Carcorp, Inc. Delaware Cepco, Incorporated Delaware Collins & Aikman Accessory Mats, Inc. Delaware Collins & Aikman Asset Services, Inc. Delaware CW Management Corporation/1/ Delaware Hopkins Services, Inc./2/ Minnesota SAF Services Corporation/3/ Delaware Collins & Aikman Automotive International, Inc. Delaware Collins & Aikman Carpet & Acoustics (MI), Inc. Delaware Collins & Aikman Carpet & Acoustics (TN), Inc. Tennessee Collins & Aikman Export Corporation U.S. Virgin Isles Collins & Aikman Holdings Canada Inc. Canada Collins & Aikman Canada Inc. Canada C & A Canada International Holdings Limited/4/ Canada Collins & Aikman Luxembourg, S.A. Luxembourg Imperial Wallcoverings (Canada) Inc. Canada Collins & Aikman International Corporation Delaware Collins & Aikman Europe, Inc. Delaware Collins & Aikman (Gibraltar) Limited Gibraltar/Delaware Collins & Aikman Europe S.A./5/ Luxembourg C&A (Gibraltar) Gibraltar C&A (Gibraltar) No. 2 Gibraltar Collins & Aikman Automotive Holding GmbH Germany Collins & Aikman Automotive Systems GmbH Germany - ---------------- /1/ 10% owned by Willis Corroon Corporation of North Carolina /2/ 10% owned by by O'brien & Gere or North America, Inc. /3/ 10% owned by Unicare, Inc. /4/ 76% owned by Collins & Aikman Plastics, Ltd. /5/ 29% owned by Collins & Aikman Luxembourg, S.A. Dura Convertible Systems GmbH Germany Collins & Aikman Automotive Systems N.V./6/ Belgium Collins & Aikman Automotive Systems S.L./7/ Spain Collins & Aikman Europe B.V. Netherlands Collins & Aikman Automotive Floormats Europe B.V. Netherlands Collins & Aikman Holding AB Sweden Collins & Aikman Automotive Systems AB Sweden Collins & Aikman Products GmbH/8/ Austria Collins & Aikman Holdings Limited United Kingdom Collins & Aikman Automotive Systems Limited United Kingdom Collins & Aikman Automotive Carpet Products (UK) Limited United Kingdom Collins & Aikman Plastics (UK) Limited United Kingdom Abex Plastic Products Limited United Kingdom Manchester Kigass International Limited United Kingdom Premier Springs & Pressings Limited United Kingdom Collins & Aikman Holdings, S.A. de C.V./9/ Mexico Amco de Mexico, S.A. de C.V./10/ Mexico - --------------- /6/ Ten shares owned by Collins & Aikman Automotive Systems AB /7/ One share owned by Collins & Aikman Holdings Limited /8/ 4% owned by Collins & Aikman Products Co. /9/ One share owned by Habinus Trading Company Collins & Aikman de Mexico, S.A. de C.V./11/ Mexico Collins & Aikman Carpet & Acoustics, S.A. de C.V./12/ Mexico Dura Convertible Systems de Mexico, S.A. de C.V./13/ Mexico Industrias Enjema, S.A. de C.V./14/ Mexico Servitop, S.A. de C.V./15/ Mexico - ------------------ /10/ One share owned by Habinus Trading Company /11/ One share owned by The Akro Corporation /12/ 25% owned by Pablo Sidaoui Dib and Alberto Sidaoui Dib /13/ One share owned by Dura Convertible Systems, Inc. /14/ One share owned by Collins & Aikman International Corporation /15/ One share owned by Amco de Mexico, S.A. de C.V. Servitrim, S.A. de C.V./16/ Mexico Collins & Aikman Plastics, Inc. Delaware Collins & Aikman Plastics, Ltd. Canada Collins & Aikman Properties, Inc. Delaware Dura Convertible Systems, Inc. Delaware Amco Convertible Fabrics, Inc. Delaware Gamble Development Company Minnesota Grefab, Inc. New York Ole's, Inc. California JPS Automotive, Inc. Delaware Cramerton Automotive Products, Inc. Delaware JPS Automotive Products Corp. Delaware Simmons Universal Corporation Delaware Waterstone Insurance, Inc. Vermont Wickes Asset Management, Inc. Delaware Wickes Manufacturing Company Delaware Wickes Realty, Inc. Delaware - ---------------------- /16/ One share owned by Dura Convertible Systems de Mexico, S.A. de C.V EX-23 13 CONSENT OF ARTHUR ANDERSEN LLP EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our reports included in this Form 10-K into the Company's previously filed Registration Statments File No. 33-53321, No. 33-53323, No. 33-60997 and No. 333-34569. ARTHUR ANDERSEN LLP Charlotte, North Carolina, March 21, 2000. EX-27 14 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 25, 1999 AND SUCH IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-25-1999 DEC-27-1998 DEC-25-1999 13,980 0 242,876 8,557 132,625 465,366 758,481 314,955 1,348,890 362,255 884,550 0 0 705 (151,826) 1,348,890 1,898,597 1,898,597 1,613,880 152,807 7,593 2,502 92,045 (1,119) 246 (1,365) 0 0 (8,850) (10,215) (0.16) (0.16)
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