IN THE UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION In re: ) ) COLLINS & AIKMAN CORPORATION,

et al.1 ) ) Debtors. ) ) ) ) ) ) ) Chapter 11 Case No. 05-55927 (SWR) (Jointly Administered) (Tax Identification #13-3489233) Honorable Steven W. Rhodes
Proposed Hearing Date (If Necessary): September 30, 2005 at 9:30 a.m. Proposed Objection Deadline: September 28, 2005 at 4:00 p.m.

DEBTORS MOTION FOR ORDER AUTHORIZING ENTRY INTO AGREEMENT WITH HONDA OF AMERICA MANUFACTURING INC. PROVIDING FOR IMMEDIATE PRICE RELIEF AND OTHER RELATED BENEFITS The above-captioned debtors (collectively, the Debtors) hereby move the Court (the Motion) for the entry of an order authorizing the Debtors to enter into an agreement with Honda of America Manufacturing Inc. and its affiliates (collectively, the Customer) providing for immediate price relief and other related benefits, substantially on the terms set forth on the

The Debtors in the jointly administered cases include: Collins & Aikman Corporation; Amco Convertible Fabrics, Inc., Case No. 05-55949; Becker Group, LLC (d/b/a/ Collins & Aikman Premier Mold), Case No. 05-55977; Brut Plastics, Inc., Case No. 05-55957; Collins & Aikman (Gibraltar) Limited, Case No. 05-55989; Collins & Aikman Accessory Mats, Inc. (f/k/a the Akro Corporation), Case No. 05-55952; Collins & Aikman Asset Services, Inc., Case No. 05-55959; Collins & Aikman Automotive (Argentina), Inc. (f/k/a Textron Automotive (Argentina), Inc.), Case No. 05-55965; Collins & Aikman Automotive (Asia), Inc. (f/k/a Textron Automotive (Asia), Inc.), Case No. 0555991; Collins & Aikman Automotive Exteriors, Inc. (f/k/a Textron Automotive Exteriors, Inc.), Case No. 05-55958; Collins & Aikman Automotive Interiors, Inc. (f/k/a Textron Automotive Interiors, Inc.), Case No. 05-55956; Collins & Aikman Automotive International, Inc., Case No. 05-55980; Collins & Aikman Automotive International Services, Inc. (f/k/a Textron Automotive International Services, Inc.), Case No. 05-55985; Collins & Aikman Automotive Mats, LLC, Case No. 05-55969; Collins & Aikman Automotive Overseas Investment, Inc. (f/k/a Textron Automotive Overseas Investment, Inc.), Case No. 05-55978; Collins & Aikman Automotive Services, LLC, Case No. 05-55981; Collins & Aikman Canada Domestic Holding Company, Case No. 05-55930; Collins & Aikman Carpet & Acoustics (MI), Inc., Case No. 05-55982; Collins & Aikman Carpet & Acoustics (TN), Inc., Case No. 05-55984; Collins & Aikman Development Company, Case No. 05-55943; Collins & Aikman Europe, Inc., Case No. 05-55971; Collins & Aikman Fabrics, Inc. (d/b/a Joan Automotive Industries, Inc.), Case No. 05-55963; Collins & Aikman Intellimold, Inc. (d/b/a M&C Advanced Processes, Inc.), Case No. 05-55976; Collins & Aikman Interiors, Inc., Case No. 05-55970; Collins & Aikman International Corporation, Case No. 05-55951; Collins & Aikman Plastics, Inc., Case No. 05-55960; Collins & Aikman Products Co., Case No. 05-55932; Collins & Aikman Properties, Inc., Case No. 0555964; Comet Acoustics, Inc., Case No. 05-55972; CW Management Corporation, Case No. 05-55979; Dura Convertible Systems, Inc., Case No. 05-55942; Gamble Development Company, Case No. 05-55974; JPS Automotive, Inc. (d/b/a PACJ, Inc.), Case No. 05-55935; New Baltimore Holdings, LLC, Case No. 05-55992; Owosso Thermal Forming, LLC, Case No. 05-55946; Southwest Laminates, Inc. (d/b/a Southwest Fabric Laminators Inc.), Case No. 05-55948; Wickes Asset Management, Inc., Case No. 05-55962; and Wickes Manufacturing Company, Case No. 05-55968.

K&E 10739046.2

0W[;%)7

0555927050923000000000011

+P

term sheet (the Term Sheet) attached hereto as Exhibit B.2 In support of this Motion, the Debtors respectfully state as follows: Jurisdiction 1. The Court has jurisdiction over this matter pursuant to 28 U.S.C. 1334.

This matter is a core proceeding within the meaning of 28 U.S.C. 157(b)(2). 2. 3. Venue is proper pursuant to 28 U.S.C. 1408 and 1409. The statutory bases for the relief requested herein are sections 105(a) and

363(b) of the Bankruptcy Code, 11 U.S.C. 101-1330 (the Bankruptcy Code). Background 4. On May 17, 2005 (the Petition Date), the Debtors filed their voluntary

petitions for relief under chapter 11 of the Bankruptcy Code. The Debtors are operating their businesses and managing their properties as debtors in possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code. No trustee or examiner has been appointed in these cases. On the Petition Date, the Court entered an order jointly administering these cases pursuant to Bankruptcy Rule 1015(b). 5. On May 24, 2005, the United States Trustee appointed an official

committee of unsecured creditors pursuant to section 1102 of the Bankruptcy Code (the Committee). 6. The Debtors and their non-debtor affiliates are leading global suppliers of

automotive components, systems and modules to all of the worlds largest vehicle manufacturers,
2

Contemporaneously with the filing of this Motion, the Debtors filed the Motion for Entry of Protective Order Authorizing the Filing of Certain Documents under Seal. Accordingly, Exhibit B is not attached to this Motion.

2
K&E 10739046.2

including DaimlerChrysler AG, Ford Motor Company, General Motors Corporation, Honda Motor Company, Inc., Nissan Motor Company Unlimited, Porsche Cars GB, Renault Crateur D Automobiles, Toyota SA and Volkswagen AG. Renegotiation of Unprofitable Contracts 7. On July 5, 2005, the Debtors filed a motion [Docket No. 586] (the

Customer Financing Motion) seeking approval of the Customer Financing Agreement that provided the Debtors with, among other things, $82.5 million in immediate price increases, $82.5 million in additional financing and a definitive timetable for the renegotiation of contracts. On July 8, 2005, the Court entered an order [Docket No. 654] approving the Customer Financing Motion on an interim basis. Subsequently, on August 11, 2005, the Court entered an order [Docket No. 916] approving the Customer Financing Motion on a final basis. 8. As agreed under the Customer Financing Agreement, the Debtors

established an aggressive schedule for the analysis and renegotiation of unprofitable contracts with their customers. To accomplish this task, the Debtors senior management and the Debtors advisors dedicated extensive resources to the task of identifying the product lines they manufacture for their customers and determining the profitability and strategic benefit to the Debtors of each of those product lines. This required a detailed and extensive analysis of numerous contracts. 9. In analyzing each of their existing purchase orders and related documents

with the Customer (collectively, the Contracts), the Debtors and their advisors performed the following analyses, among others: identified the appropriate financial benchmarks that must be achieved for the Debtors to continue performing under the Contracts based on the risk involved; 3
K&E 10739046.2

performed a detailed review of the raw materials used in connection with each product line, including a true-up for actual costs based on current market rates; identified and quantified the significant issues causing the product line to be unprofitable, including below-market pricing, declining order volume, raw material prices, direct labor rates and manufacturing inefficiencies; assessed the impact of any unpaid engineering and design costs on Contract pricing; analyzed the potential impact on the relevant production plant(s) if the product line were no longer produced, including the impact on plant utilization, machinery and equipment needs and alternative programs that could be substituted; evaluated potential initiatives that could reduce costs, such as outsourcing product lines and switching manufacturing locations; and developed a raw material pricing index proposal that would provide for a periodic modification of selling prices based on the changing market prices for key raw materials. 10. As a result of their analyses, the Debtors, in the exercise of their business

judgment, determined that many of the Contracts under their current terms and conditions were no longer economical, profitable or beneficial to their ongoing operations. In particular, such Contracts contained unfavorable pricing, payment or raw materials pricing terms and did not provide any ongoing benefits to the Debtors estates sufficient for the Debtors to justify continuing to honor their obligations thereunder. Indeed, such terms precluded the Debtors from generating any profit, or in some cases, sufficient profit relative to the risks involved, which caused the Debtors to continue to suffer significant financial losses. 11. In an attempt to stem the incurrence of such losses, the Debtors negotiated

pricing and payment terms under the Contracts and other benefits relevant to the Debtors relationship with the Customer to a level that would justify continued performance under the Contracts. In particular, the Debtors senior management and the Debtors advisors

communicated extensively with the Customer through numerous in-person meetings, telephone

4
K&E 10739046.2

conferences and correspondence to negotiate price increases necessary for the Debtors to achieve an adequate return on the Contracts. During these meetings, among other things, the Debtors and their advisors reviewed the relevant Contracts with the Customer, explaining the rationale and justification for the requested price increases. In addition, the Customer requested significant follow-up detail and analyses from the Debtors supporting such price increases, substantially all of which the Debtors provided to the Customer. 12. As a result of such negotiations, the Debtors are pleased to present to the

Court the Agreement with the Customer, the terms of which will achieve substantial benefits to the Debtors ongoing business operations and their estates. Relief Requested 13. By this Motion, the Debtors respectfully request that the Court enter an

order, pursuant to sections 105(a) and 363(b) of the Bankruptcy Code, authorizing the Debtors to enter into the Agreement with the Customer, substantially on the terms set forth on the Term Sheet attached hereto as Exhibit B. The Agreement 14. The complete terms of the Agreement with the Customer are set forth on

the Term Sheet attached hereto as Exhibit B. As a general overview, the basic terms of certain portions of the Agreement are as follows:3 (a) (b)
3

increases in interim and/or permanent pricing terms for certain or all programs; the Customers commitment not to re-source for a certain period;

Terms used in this paragraph 14 but not otherwise defined herein shall have the meanings ascribed to such terms in the Term Sheet. The summary provided herein is for the convenience of parties only and is subject in every respect to the Term Sheet. In the event of a conflict between the Term Sheet and this summary, the Term Sheet shall govern.

5
K&E 10739046.2

(c) (d)

continued acceleration of payment terms; and certain confidential, customer-specific terms that inure to the benefit of the Debtors estates. Benefits of the Agreement 15. Section 363 of the Bankruptcy Code provides that a debtor, after notice

and a hearing, may use, sell or lease, other than in the ordinary course of business, property of the estate. 11 U.S.C. 363(b). To approve the use, sale or lease of property outside of the ordinary course of business, this Court need only determine that the Debtors decision to enter into the Agreement is supported by an articulated business justification. See, e.g., In re

Chateaugay Corp., 973 F.2d 141, 143 (2d Cir. 1992) (holding that a judge determining a 363(b) application must find from the evidence presented a good business reason to grant such application); Committee of Equity Sec. Holders v. Lionel Corp. (In re Lionel Corp.), 722 F.2d 1063, 1070 (2d Cir. 1983). See also In re Schipper, 933 F.2d 513, 515 (7th Cir. 1991); Stephens Ind., Inc. v. McClung, 789 F.2d 386, 389-90 (6th Cir. 1986); In re Abbott Dairies of Pa., Inc., 788 F.2d 143, 145-47 (3d Cir. 1986); In re Continental Airlines, Inc., 780 F.2d 1223 (5th Cir. 1986); In re Telesphere Communications, Inc., 179 B.R. 544, 522 (Bankr. N.D. Ill. 1999); In re Embrace Systems Corp., 178 B.R. 112, 124-25 (Bankr. W.D. Mich. 1995); In re Delaware & Hudson R.R. Co., 124 B.R. 169, 175-76 (D. Del. 1991).

16.

Once a debtor has articulated a valid business justification, the business

judgment rule arises as a presumption . . . that in making a business decision the directors of a corporation acted on an informed basis, in good faith and in the honest belief that the action was in the best interest of the company. In re S.N.A. Nut Co., 186 B.R. 98, 102 (Bankr. N.D. Ill. 1995) (citing Smith v. Van Gorkom, 488 A.2d 858, 872 (Del. 1985)); see also Stephens Ind., Inc.

6
K&E 10739046.2

v. McClung, 789 F.2d 386, 389-90 (6th Cir. 1986) (citing In re Lionel Corp., 722 F.2d 1063 at 1070); In re Country Manor of Kenton, Inc. 172 B.R. 217, 221-22 (Bankr. N.D. Ohio 1994); In re Integrated Resources, Inc., 147 B.R. 650, 656 (S.D.N.Y. 1992); In re Johns-Manville Corp., 60 B.R. 612, 615-16 (Bankr. S.D.N.Y. 1986). Indeed, when applying the business judgment standard, courts show great deference to a debtors business decisions. See In re First

Wellington Canyon Assoc., 1989 WL 106838, *3 (N.D. Ill. 1989) (Under this test, the debtors business judgment must be accorded deference unless shown that the bankrupts decision was taken in bad faith or in gross abuse of the bankrupts retained discretion); see also In re Quality Stores, Inc., 272 B.R. 643, 647 (Bankr. W.D. Mich. 2002). 17. The Debtors have exercised sound business judgment in the matter before

the Court. First, the Customer has agreed to provide changes in pricing terms for certain or all programs, which represents a significant commitment to the Debtors from the Customer. 18. Second, much of the Debtors liquidity problems are exacerbated by the

business model of Tier 1 suppliers to the automotive industry, which requires that the supplier advance certain capital expenditures, launch costs and tooling costs months, or even years, prior to recovering such costs from the customer once component parts are ready to ship. The Customers willingness to continue funding capital expenditures, launch costs and tooling for a certain period could greatly improve the Debtors liquidity. 19. Third, the Customer has agreed not to re-source for a particular period.

The Debtors vigorously negotiated this protection, and in the Debtors business judgment, this provision protects the Debtors estates by ensuring that the Customer is committed to working with the Debtors beyond September 30, 2005. As set forth above, absent an agreement not to re-

7
K&E 10739046.2

source, the Debtors ability to reorganize or to maximize value in a sale process would be severely compromised. 20. Finally, the Agreement contains certain customer-specific provisions and

continues certain aspects of the Customer Financing Agreement, which provisions provide substantial benefits to the Debtors estates. 21. The Debtors cannot overstate that the Agreement represents a good faith

effort among the Debtors and the Customer to attack the most pressing challenges facing the Debtors and re-affirming a relationship that will afford the Debtors a meaningful opportunity to reorganize. Not only is the Agreement a major accomplishment that provides immensely

valuable benefits to the Debtors estates, the Agreement demonstrates that the Debtors and the Customer are willing to work together to try to find a consensual resolution and reorganize the Debtors operations. Indeed, the Agreement is necessary for the Debtors to achieve stability and have a reasonable prospect of a stable business environment, which will maximize value for these estates through a plan of reorganization or sale. 22. For all of the foregoing reasons, the Debtors respectfully submit that they

have exercised sound business judgment in entering into the Agreement. Notice 23. Notice of this Motion has been given to the Primary Service List as

required by the Case Management Procedures.4 In light of the nature of the relief requested, the Debtors submit that no further notice is required.

Capitalized terms used in this paragraph 23 not otherwise defined herein shall have the meanings set forth in the First Amended Notice, Case Management and Administrative Procedures [Docket No. 294].

8
K&E 10739046.2

No Prior Request 24. any other court. No prior motion for the relief requested herein has been made to this or

9
K&E 10739046.2

WHEREFORE, the Debtors respectfully request the entry of an order, substantially in the form attached hereto as Exhibit A, (a) authorizing the Debtors to enter into the Agreement, substantially on the terms set forth on the Term Sheet attached hereto as Exhibit B; and (b) granting such other and further relief as the Court deems appropriate. Dated: September 23, 2005 KIRKLAND & ELLIS LLP /s/ Ray C. Schrock Richard M. Cieri (NY RC 6062) Citigroup Center 153 East 53rd Street New York, New York 10022 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 -andDavid L. Eaton (IL 3122303) Ray C. Schrock (IL 6257005) Marc J. Carmel (IL 6272032) 200 East Randolph Drive Chicago, Illinois 60601 Telephone: (312) 861-2000 Facsimile: (312) 861-2200 -andCARSON FISCHER, P.L.C. Joseph M. Fischer (P13452) 300 East Maple Road, Third Floor Birmingham, Michigan 48009 Telephone: (248) 644-4840 Facsimile: (248) 644-1832 Co-Counsel for the Debtors

10
K&E 10739046.2

EXHIBIT A

K&E 10739046.2

IN THE UNITED STATES BANKRUPTCY COURT EASTERN DISTRICT OF MICHIGAN SOUTHERN DIVISION In re: COLLINS & AIKMAN CORPORATION, et al.1 Debtors. ) ) ) ) ) ) ) ) Chapter 11 Case No. 05-55927 (SWR) (Jointly Administered) (Tax Identification #13-3489233) Honorable Steven W. Rhodes

ORDER AUTHORIZING ENTRY INTO AGREEMENT WITH HONDA OF AMERICA MANUFACTURING INC. PROVIDING FOR IMMEDIATE PRICE RELIEF AND OTHER RELATED BENEFITS Upon the motion (the Motion)
2

of

the

above-captioned

debtors

(collectively, the Debtors) for an order authorizing the Debtors to enter into an agreement (the Agreement) with Honda of America Manufacturing Inc. and its affiliates (collectively, the Customer) providing for immediate price relief and other related benefits; it appearing that the relief requested is in the best interest of the Debtors estates, their creditors and other parties in

The Debtors in the jointly administered cases include: Collins & Aikman Corporation; Amco Convertible Fabrics, Inc., Case No. 05-55949; Becker Group, LLC (d/b/a/ Collins & Aikman Premier Mold), Case No. 05-55977; Brut Plastics, Inc., Case No. 05-55957; Collins & Aikman (Gibraltar) Limited, Case No. 05-55989; Collins & Aikman Accessory Mats, Inc. (f/k/a the Akro Corporation), Case No. 05-55952; Collins & Aikman Asset Services, Inc., Case No. 05-55959; Collins & Aikman Automotive (Argentina), Inc. (f/k/a Textron Automotive (Argentina), Inc.), Case No. 05-55965; Collins & Aikman Automotive (Asia), Inc. (f/k/a Textron Automotive (Asia), Inc.), Case No. 0555991; Collins & Aikman Automotive Exteriors, Inc. (f/k/a Textron Automotive Exteriors, Inc.), Case No. 05-55958; Collins & Aikman Automotive Interiors, Inc. (f/k/a Textron Automotive Interiors, Inc.), Case No. 05-55956; Collins & Aikman Automotive International, Inc., Case No. 05-55980; Collins & Aikman Automotive International Services, Inc. (f/k/a Textron Automotive International Services, Inc.), Case No. 05-55985; Collins & Aikman Automotive Mats, LLC, Case No. 05-55969; Collins & Aikman Automotive Overseas Investment, Inc. (f/k/a Textron Automotive Overseas Investment, Inc.), Case No. 05-55978; Collins & Aikman Automotive Services, LLC, Case No. 05-55981; Collins & Aikman Canada Domestic Holding Company, Case No. 05-55930; Collins & Aikman Carpet & Acoustics (MI), Inc., Case No. 05-55982; Collins & Aikman Carpet & Acoustics (TN), Inc., Case No. 05-55984; Collins & Aikman Development Company, Case No. 05-55943; Collins & Aikman Europe, Inc., Case No. 05-55971; Collins & Aikman Fabrics, Inc. (d/b/a Joan Automotive Industries, Inc.), Case No. 05-55963; Collins & Aikman Intellimold, Inc. (d/b/a M&C Advanced Processes, Inc.), Case No. 05-55976; Collins & Aikman Interiors, Inc., Case No. 05-55970; Collins & Aikman International Corporation, Case No. 05-55951; Collins & Aikman Plastics, Inc., Case No. 05-55960; Collins & Aikman Products Co., Case No. 05-55932; Collins & Aikman Properties, Inc., Case No. 0555964; Comet Acoustics, Inc., Case No. 05-55972; CW Management Corporation, Case No. 05-55979; Dura Convertible Systems, Inc., Case No. 05-55942; Gamble Development Company, Case No. 05-55974; JPS Automotive, Inc. (d/b/a PACJ, Inc.), Case No. 05-55935; New Baltimore Holdings, LLC, Case No. 05-55992; Owosso Thermal Forming, LLC, Case No. 05-55946; Southwest Laminates, Inc. (d/b/a Southwest Fabric Laminators Inc.), Case No. 05-55948; Wickes Asset Management, Inc., Case No. 05-55962; and Wickes Manufacturing Company, Case No. 05-55968. Capitalized terms used but not otherwise defined herein shall have the meanings set forth in the Motion.

K&E 10739046.2

interest; it appearing that this Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334; it appearing that this proceeding is a core proceeding pursuant to 28 U.S.C. 157; it appearing that venue of this proceeding and the Motion in this District is proper pursuant to 28 U.S.C. 1408 and 1409; notice of the Motion and the opportunity for a hearing on the Motion was appropriate under the particular circumstances and that no other or further notice need be given; and after due deliberation and sufficient cause appearing therefor, it is hereby ORDERED 1. 2. The Motion is granted in its entirety. The Debtors are authorized to enter into the Agreement, substantially on

the terms set forth on the Term Sheet attached to the Motion as Exhibit B. 3. The Contracts are hereby amended as set forth in the Agreement, provided

that no prepetition contracts are being assumed or rejected, and any prepetition claims that the Debtors and the Customer have against one another are expressly reserved. 4. The Debtors are authorized to take all actions necessary to effectuate the

relief granted pursuant to this Order in accordance with the Motion. 5. The terms and conditions of this Order shall be immediately effective and

enforceable upon its entry. The Court retains jurisdiction to enforce the terms of the Agreement and with respect to all other matters arising from or related to the implementation of this Order.

Dated: ____________________, 2005 United States Bankruptcy Judge

2
K&E 10739046.2

EXHIBIT B1

Contemporaneously with the filing of this Motion, the Debtors filed the Motion for Entry of Protective Order Authorizing the Filing of Certain Documents under Seal. Accordingly, Exhibit B is not attached to this Motion.

K&E 10739046.2