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
Objection Deadline: June 26, 2006 at 4:00 p.m. Hearing Date: June 29, 2006 at 2:00 p.m.

DEBTORS MOTION FOR ENTRY OF AN ORDER AUTHORIZING DEBTORS TO REJECT CERTAIN UNEXPIRED LEASES The above-captioned debtors (collectively, the Debtors) hereby move the Court (the Motion) for the entry of an order, substantially in the form of Exhibit A, authorizing the Debtors to reject certain unexpired leases of nonresidential real property. In support of this Motion, the Debtors respectfully state as follows:

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.

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0555927060614000000000015

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Preliminary Statement The Debtors Motion presents a simple and straightforward request pursuant to section 365(a) of the Bankruptcy Code to reject two unexpired leases of nonresidential real property. Despite the Motions inherent simplicity, the Debtors anticipate that the counterparty to the leases (the Landlord) will object to the Debtors request to reject some and not all of the leased premises within the parties Master Lease. As discussed more fully below, the Landlords objection must fail and the Debtors Motion should be granted because, as a matter of law, each of the leased premises within the Master Lease is severable for purposes of assumption and rejection. 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 basis for the relief requested herein is section 365(a) 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 Rule 1015(b) of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules). 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). 2
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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, including DaimlerChrysler AG, Ford Motor Company, General Motors Corporation, Honda Motor Company, Inc., Nissan Motor Company Unlimited and Toyota SA. 7. Certain of the Debtors entered into an Amended and Restated Lease Agreement of

nonresidential real property (the Master Lease) with Fabric (DE) GP on June 27, 2002, which amends and restates the parties original Lease Agreement (the Original Lease), dated September 28, 2001.2 The Master Lease relates to six demised premises located in six different locales. (See Master Lease, attached hereto as Exhibit B.) 8. Among the demised premises in the Master Lease is the nonresidential real

property associated with the Debtors plant in Manchester, Michigan (the Manchester Premises). The Manchester Premises operated as a stand-alone plastics plant dedicated to the Debtors General Motors instrument and door panel program, up until the plants recent closure in February 2006. (Affidavit of James D. Moore (Moore Aff.), attached hereto as Exhibit C, at 4.) 9. The Master Lease also includes nonresidential real property associated with the

Debtors plant in Farmville, North Carolina (the Farmville Premises). The Farmville Premises continues to operate as a stand-alone plant in the Debtors Fabrics business unit dedicated to the Debtors production of automotive and non-automotive knit products. (Moore Aff., at 6.) Due to the unprofitability of the Debtors Fabrics business, however, the Debtors anticipate that the Farmville plant will be closed in the fall of 2006. (Moore Aff., at 8.)
2 The demised premises in the Master Lease, including the premises the Debtors seek to reject pursuant to the Motion, were originally owned by the Debtors before being sold to the Landlord on or about September 2001. After such sale, the Debtors entered into the Original Lease for such demised premises. The Debtors reserve their rights to seek to avoid such transactions pursuant to, among other things, chapter 5 of the Bankruptcy Code.

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Relief Requested 10. The Debtors are currently paying rent for the Manchester and Farmville Premises.

Due to their unprofitability, these plants either have been or will be closed in the future. Because the continued payment of rent by the Debtors for the Manchester and Farmville Premises provides no benefit to the estates, the Debtors request that the Court find the Master Lease severable as to those premises and set the effective date of the rejection of those premises to be the earlier of (a) the date set forth on Exhibit D and (b) the date the Debtors surrender the premises. Basis for Relief Rejection Of The Manchester And Farmville Premises Should Be Authorized By The Court Pursuant To Section 365(a) 11. The Debtors rejection of the Manchester and Farmville Premises should be

authorized by this Court, pursuant to section 365(a) of the Bankruptcy Code, for two reasons. First, as a threshold matter, the Master Lease is severable as to the Manchester and Farmville Premises because of (a) the differing nature and purpose of the agreements, (b) the separate and distinct consideration for the agreements and (c) the non-interrelatedness of the obligations of the parties to the document. Second, the Debtors, in the proper exercise of their business judgment, have determined that the Manchester and Farmville premises should be rejected. In particular, the closure of the Debtors plants in Manchester, Michigan and Farmville, North Carolina is an important step in the Debtors attempt to consolidate operations and reorganize as profitable entities. The Court should thus allow the Debtors to reject what would otherwise be burdensome leases with no benefit to the estates. Accordingly, the Debtors respectfully request that this Court find the Master Lease severable and approve the Debtors rejection of the Manchester and Farmville Premises.

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A. 12.

The Master Lease Is Severable As To The Manchester And Farmville Premises. As a threshold matter, the Master Lease should be deemed severable as to the

Manchester and Farmville Premises. Indeed, it is well settled that where a contract, though contained in a single document, is divisible into several different agreements, some of the divisible agreements may be assumed or rejected under 365 without assuming or rejecting the entire contract. See In re Cafeteria Operators, L.P., 299 B.R. 384, 389 (Bankr. N.D. Tex. 2003) (citing In re Convenience USA, Inc., No. 01-81478, 2002 WL 230772, at *2 (Bankr. M.D. N.C. 2002)) (internal citation omitted); In the Matter of Hollys, Inc., 140 B.R. 643, 681 (Bankr. W.D. Mich. 1992) (A single writing may contain more than one contract for 365 assumptionrejection purposes.); In re FFP Operating Partners, LP, No. 03-90171-BJH-11, 2004 WL 3007079, at *1 (Bankr. N.D. Tex. 2004) ([I]f a lease or contract contains several different agreements, and the lease or contract can be severed under applicable non-bankruptcy law, section 365 allows assumption or rejection of the severable portions of the lease or contract.). 13. Courts analyzing the issue of severability generally look to the state law

governing the agreement to determine whether an agreement is divisible for section 365 assumption and rejection purposes. See Cafeteria Operators, 299 B.R. at 389 (applying

Michigan law to find master lease severable as to certain leased properties); see also Convenience USA, 2002 WL 230772, at *2 (applying Texas law to find lease severable as to certain leased properties); FFP Operating Partners, 2004 WL 3007079, at *1 (same); In re Pollock, 139 B.R. 938, 940 (9th Cir. B.A.P. 1992) (applying California law to find note payments severable from sublease). In this case, the Master Lease indicates that Michigan law applies to the Manchester Premises and North Carolina law applies to the Farmville Premises. (Exhibit B, at 36(j) (This Lease shall be governed by and construed and enforced in

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accordance with the Laws of the State); see also id., at p. 9 (defining State as the state in which the relevant Related Premises is located).) 14. Under Michigan law, a contract is deemed severable when, in its nature and

purpose, it is susceptible of division or apportionment. Dumas v. Auto Club Ins. Assoc., 437 Mich. 521, 537, 473 N.W.2d 652, 659 (1991) (quoting City of Lansing v. Lansing Twp., 356 Mich. 641, 97 N.W.2d 804 (1959)). As the Michigan Supreme Court explained in Dumas: The singleness or apportionability of the consideration appears to be the principal test. The question is ordinarily determined by inquiring whether the contract embraces one or more subject matters, whether the obligation is due at the same time to the same person, and whether the consideration is entire or apportioned. Id.; see also Tecorp Entertainment Ltd. v. Heartbreakers, Inc. No. 209861, 2001 WL 740007, at *3 (Mich. App. Feb. 9, 2001) (citing interdependency of promises and apportionability of consideration as two principal factors in determining severability of contract provision under Michigan law); McMullen v. Meijer, Inc., 166 Fed. Appx. 164, 168 (6th Cir. 2006) (noting that contract is severable under Michigan law when, in its nature and purpose, it is susceptible of division and apportionment); Stevenson v. Brotherhoods Mut. Ben., 312 Mich. 81, 88, 19 N.W.2d 494, 497 (1945) (stating that severability of contract depends, to some extent, upon the intention of the parties, and this must be discovered in each case by considering the language employed and the subject-matter of the contract). 15. Similarly, under North Carolina law, a severable contract is one in its nature and

purpose susceptible of division and apportionment, having two or more parts, in respect to matters and things contemplated and embraced by it, not necessarily dependent upon each other, nor is it intended by the parties that they shall be. Mebane Lumber Co. v. Avery & Bullock Builders, Inc., 270 N.C. 337, 342, 154 S.E.2d 665, 668 (N.C. 1967); see also Turner v. Atlantic

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Mortgage & Inv. Co., 32 N.C. App. 565, 570, 233 S.E.2d 80, 83 (N.C. Ct. App. 1977) (finding contract divisible under North Carolina law). 16. Consistent with the contract principles of severability under Michigan and North

Carolina state law, bankruptcy courts routinely apply a three-factor test when determining the severability of a contract: (1) the differing nature and purpose of the agreements; (2) the separate and distinct consideration for the agreements; and (3) the non-interrelatedness of the obligations of the parties to the document. Hollys Inc., 140 B.R. at 681 (citing In re Gardinier, Inc., 831 F.2d 974, 975-76 (11th Cir. 1987)); see also Pollock, 139 B.R. at 940-41 (applying Gardinier factors to find note agreement severable from lease); In re Royster Co., 137 B.R. 530, 532 (Bankr. M.D. Fla. 1992) (applying Gardinier factors to find riders to lease agreement severable).3 As discussed more fully below, application of the severability test to the facts at issue in this case demonstrates that the Master Lease warrants severability of the Manchester and Farmville Premises. 17. First, the nature and purpose of the Master Lease renders each of the Manchester

and Farmville Premises severable. The Master Lease relates to six separate and distinct locations scattered over a wide area in six different cities and four different states, including Manchester, Michigan; Albemarle, North Carolina; Farmville, North Carolina; Old Fort, North Carolina; Holmesville, Ohio; and Springfield, Tennessee. (See Exhibit B; see also Moore Aff., at 2.) Moreover, the Manchester Premises, up until the recent closure of the plant, was operated as a separate, stand-alone plant independent of the other five demised premises. (Moore Aff., at 43 An analogous three-factor test used by several bankruptcy courts, including the court in Cafeteria Operators, when applying Michigan law, involves analysis of (a) the intent of the parties, (b) the subject matter of the agreement and (c) the conduct of the parties. Cafeteria Operators, 299 B.R. at 389-90; see also Convenience USA, 2002 WL 230772, at *3 (The determination of whether a contract is divisible depends primarily upon the intent of the parties, the subject matter of the agreement and the conduct of the parties.); FFP Operating Partners, 2004 WL 3007079, at *2 (finding that contracts severability depends on several factors: (1) the intent of the parties; (2) the subject matter of the agreement; and (3) the conduct of the parties.). Under either articulation of the severability test, the analysis remains the same.

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5.) Likewise, the Farmville Premises continue to operate as a stand-alone plant in the Debtors Fabrics business unit dedicated to the Debtors production of automotive and non-automotive knit products. (Id., at 6.) Indeed, there is nothing in the Master Lease to suggest that the various plants operating on the leased premises cannot be operated separately and independently of each other and in accordance with the major terms and provisions of the Master []lease Agreement. Cafeteria Operators, 299 B.R. at 392 (finding master lease severable as to different leased facilities independently operated and scattered across multiple states); Convenience USA, 2002 WL 230772, at *6 (finding lease severable as to 27 separate and distinct convenience stores located in 18 different cities and scattered over a wide area of North Carolina.); FFP Operating Partners, 2004 WL 3007079, at *5 (finding lease severable as to 20 separate convenience stores located on 20 separate parcels of real property located in 10 Texas cities). Accordingly, the differing nature and purpose of the Master Lease as to each of the Manchester and Farmville Premises strongly favors severability. Hollys, 140 B.R. at 681 (finding contract clauses severable where nature and purpose of clauses were totally different from other aspects of agreement); Cafeteria Operators, 299 B.R. at 392 (finding master lease severable where nature and purpose of agreement involved numerous independently operated leased properties). 18. Second, consideration is separate and distinct for each of the demised premises in

the Master Lease, including the Manchester and Farmville Premises. Exhibit G in the Master Lease allocates the Basic Rent among the six demised premises based on a calculated percentage. (See Exhibit B, at Exhibit G-1.) More specifically, the Manchester Premises have an 8.4% allocation of Basic Rent, while the Farmville Premises have a 26.7% allocation. (Id.) In fact, while the Debtors paid the monthly rent in a lump sum payment, each of the demised

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premises was separately responsible for payment of their allocated percentage of the rent. (Moore Aff., at 10.) Moreover, the Master Lease allocated separate acquisition costs to each of the six demised premises for purposes of determining value of the property upon condemnation and/or casualty. (See Exhibit B, at Exhibit F-1.) Such apportionment of rent and acquisition costs among the demised premises, including the Manchester and Farmville Premises, strongly favors severability of the Master Lease. See Dumas, 437 Mich. at 537, 473 N.W.2d at 659 (stating that [t]he singleness or apportionability of the consideration appears to be the principal test of severability under Michigan law) (internal quotation omitted); see also Stevenson, 312 Mich. at 88, 19 N.W.2d at 497 (When the price is expressly apportioned by the contract, or the apportionment may be implied by law to each item to be performed, the contract will generally be held to be severable.) (internal quotation omitted); Cafeteria Operators, 299 B.R. at 390 (finding master lease severable where, among other things, lump sum basic rent payment was nonetheless apportioned among the 43 individual premises within the lease); Convenience USA, 2002 WL 230772, at *6 (finding master lease severable despite single rent payment, where lease schedule specifically set forth an allocation of the annual and monthly rent for each of the 27 properties); FFP Operating Partners, 2004 WL 3007079, at *5-6 (finding master lease severable where lump sum rent payment can be apportioned among the properties pursuant to certain rent allocation schedules provided by landlord). 19. Third, the language of the Master Lease and the conduct of the parties indicate

that the Debtors obligations with respect to the Manchester and Farmville Premises are wholly independent from those obligations relating to the other demised premises. For example, the Master Lease allows for termination of up to two demised premises during the two renewal terms and for termination of certain demised premises upon their casualty or condemnation, without

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termination of the Master Lease as to the remaining premises. (See Exhibit B, at 5(b) (Tenant shall have the right . . . to terminate this Lease with respect to up to and including two . . . Related Premises, leaving Lease intact with respect to remaining premises); see also id., at 18 (In the event of the termination of this Lease as to the Affected Premises . . . this Lease shall remain in full force and effect as to the Remaining Premises).) 20. In addition, the Master Lease allows the Debtors to sublet two premises and to

substitute up to one demised premise with substitute properties, without termination of the Master Lease as to the other remaining premises. (See Exhibit B, at 21(b) (Tenant shall have the right . . . to enter into one or more subleases that demise up to one hundred percent (100%) of the leasable space in any two of the Related Premises . . . ); see also id., at 35(a) (Tenant shall have the right with respect to up to and including any one . . . Related Premises that are no longer economic or suitable for Tenants continued use and occupancy . . . to convey to Landlord a substitute property).) 21. Moreover, the Master Lease specifically provides for different state law to apply

to each of the demised premises, depending on their location. (Exhibit B, at 36(j) (This Lease shall be governed by and construed and enforced in accordance with the Laws of the State); see also id., at p. 9 (defining State as the state in which the relevant Related Premises is located).) Accordingly, Michigan law applies to the Manchester Premises and North Carolina law applies to the Farmville Premises. 22. Taken together, these express lease provisions provide strong evidence that the

Master Lease was intended to be severable as to each of the demised premises, including the Manchester and Farmville Premises. Convenience USA, 2002 WL 230772, at *5 (finding lease provisions reflected an intent to have a divisible contract where the parties elected to have a

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contract under which the lease of some of the properties may be terminated without affecting the continuing lease of the remaining properties); Cafeteria Operators, 299 B.R. at 391 (finding lease provision that enables debtor to sublet one or more of the leased properties indicative of the parties intent that the Master Sublease Agreement is divisible); FFP Operating Partners, 2004 WL 3007079, at *3 (finding that destruction and condemnation provisions of the Lease reflect an intent to form a severable contract where Lease not terminated if one or more leased properties is destroyed or condemned). 23. The conduct of the parties further reflects an intent to create a severable contract.

For instance, just one year after the Original Lease was signed, the parties substituted the Manchester Premises for the previously leased premises in Marshall, Michigan (the Marshall Premises). (See Exhibit B, at 4, 37; see also Moore Aff., at 3, 14.) The severance of the Marshall Premises from the Master Lease terminated the Debtors lease obligations with respect to the Marshall Premises, but left the Debtors obligations with respect to the remaining premises intact. (Exhibit B, at 4, 37.) Such conduct further reflects an intent to create a severable contract. FFP Operating Partners, 2004 WL 3007079, at *6 (finding conduct of parties

reflected intent to create severable contract where [t]wo (2) properties have been severed out of the Lease without affect upon the remaining properties covered by the Lease). 24. While it is true, as the Landlord will no doubt argue, that the Master Lease

agreement contains a cross-default and integration provision (see Exhibit B, at 3(d)), it is well established that cross-default provisions do not integrate executory contracts or unexpired leases that otherwise are separate or severable. Convenience USA, 2002 WL 230772, at *7 (finding lease severable despite cross-default provision) (citing In re Plitt Amusement Co. of Washington, Inc., 233 B.R. 837, 847 (Bankr. C.D. Cal. 1999)); see also FFP Operating Partners, 2004 WL

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3007079, at *4 (same). Instead, when determining the severability of the contract at issue, such provisions are simply one fact that must be weighed with all of the other evidence. FFP Operating Partners, 2004 WL 3007079, at *4. As discussed above, the differing nature and purpose of the lease agreements, the apportionable consideration and the non-interrelatedness of the obligations at issue provide ample evidence that the Master Lease is severable as to the Manchester and Farmville Premises for purposes of rejection or assumption. (See Motion, at 18-24, supra.) 25. Likewise, the integration language in the Master Lease does not preclude a

finding that the Manchester and Farmville Premises are severable for purposes of rejection or assumption. See, e.g., Cafeteria Operators, 299 B.R. at 391 (finding lease severable despite presence of integration clause); see also Royster, 137 B.R. at 531 (finding riders to lease agreement severable despite presence of integration clause, which stated that each rider shall become a part of the Car Service Contract). The courts decision in Cafeteria Operators, 299 B.R. 384 (Bankr. N.D. Tex. 2003), is directly on point. In that case, the debtors sought to reject 13 out of 43 leased properties that were part of a Master Sublease Agreement with the landlord. See id. at 388. As in this case, the Master Sublease established common terms for all of the properties, which were otherwise independently operated and scattered across multiple states. Id. at 392. The Master Sublease included an integration clause, similar to the one at issue here, which stated in relevant part that this Sublease is an integrated and single Sublease enforceable with respect to all or any of the Premises in accordance with its terms notwithstanding that multiple properties are covered hereby. Id. at 391 (emphasis added). The court ultimately determined that the Master Sublease was severable as to each of the 43 leased

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properties, despite the presence of the integration clause. See id. The same finding is warranted here. 26. Moreover, and in any event, the cross-default and integration provision in the

Master Lease should not be enforced. This is so because the sole purpose of that provision is to hinder the Debtors ability to reject the individual demised premises within the Master Lease a purpose that directly contravenes the policy underlying section 365 of the Bankruptcy Code. It is well settled that the Debtors ability to assume or reject unexpired leases is one of its fundamental rights under the Bankruptcy Code. See NLRB v. Bildisco & Bildisco, 465 U.S. 513, 528, 104 S. Ct. 1188, 1197 (1984) (noting that the authority to reject an executory contract is vital to the basic purpose to a Chapter 11 reorganization, because rejection can release the debtors estate from burdensome obligations that can impede a successful reorganization); see also In re Wolflin Oil, L.L.C., 318 B.R. 392, 398 (Bankr. N.D. Tex. 2004) (recognizing that cross-default provision must be carefully scrutinize[d] to determine whether enforcement of the provision would contravene an overriding federal bankruptcy policy and thus impermissibly hamper the debtors reorganization) (citing In re Liljeberg Enterprises, Inc., 304 F.3d 410, 445 (5th Cir. 2002)). Consequently, lease provisions have been rendered invalid and unenforceable when, as in this case, they are used to prevent a debtor from exercising its right to assume, reject or assign an otherwise burdensome and unprofitable contract. See, e.g., Convenience USA, 2002 WL 230772, at *7 (stating that cross-default provisions are unenforceable in bankruptcy where they would restrict the debtors ability to fully utilize the provisions of 365 with respect to an executory contract or unexpired lease); Plitt Amusement, 233 B.R. at 847 (cross-default provisions must be disregarded in the bankruptcy law analysis, because they are impermissible restrictions on assumption and assignment); In re Garrett Road Supermarket, Inc., No. 88-

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11524S, 1988 WL 98777, at *1 (Bankr. E.D. Pa. 1988) (refusing to enforce cross-default provisions where their enforcement would frustrate the policy of 365 allowing the Debtor broad powers to assume or reject executory contracts); In re Sanshoe Worldwide Corp., 139 B.R. 585, 597 (S.D.N.Y. 1992) (finding that cross-default provisions do not limit the ability of a debtor to assign one of the leases while rejecting the other in the course of a reorganization proceeding); In re Sambos Restaurants, Inc., 24 B.R. 755, 757-58 (Bankr. C.D. Cal. 1982) (finding cross-default provisions unenforceable to the extent they limited debtors ability to assume and assign executory contracts under bankruptcy law); Wolflin Oil, 318 B.R. at 398 (declining to enforce cross-default provisions, noting that such provisions are, in the bankruptcy context, inherently suspect); In re Braniff, Inc., 118 B.R. 819, 842-43 (Bankr. M.D. Fla. 1989) ([c]lauses that purport to terminate agreements when action is taken to further a reorganization are ipso facto clauses that are invalid and hamper the reorganization process). Accordingly, the presence of an integration and cross-default provision in the Master Lease should not hinder the Debtors ability to reject the Manchester and Farmville Premises, both of which provide no benefit to the estates. B. The Debtors, In The Proper Exercise Of Their Business Judgment, Have Determined That The Manchester And Farmville Premises Should Be Rejected. Section 365(a) of the Bankruptcy Code provides that a debtor in possession

27.

subject to the courts approval, may . . . reject any executory contract or unexpired lease of the debtor. 11 U.S.C. 365(a). This provision allows a trustee to relieve the bankruptcy estate of burdensome agreements which have not been completely performed. Stewart Title Guar. Co. v. Old Republic Natl Title Co., 83 F.3d 735, 741 (5th Cir. 1996) (citing In the Matter of Muerexco Petroleum, Inc., 15 F.3d 60, 62 (5th Cir. 1994)).

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28.

The standard applied to determine whether the rejection of an executory contract

or unexpired lease should be authorized is the business judgment standard. See Matter of McLouth Steel Corp., 20 B.R. 688, 692 (Bankr. E.D. Mich. 1982); see also Bildisco, 465 U.S. at 524; In re Orion Pictures Corp., 4 F.3d 1095, 1098-99 (2nd Cir. 1993); In re Chi-Feng Huang, 23 B.R. 798, 800 (9th Cir. 1982) (holding that whether an executory contract should be rejected is a matter within the business judgment of the trustee); In re Federated Dept. Stores, Inc., 131 B.R. 808, 811 (S.D. Ohio 1991) (Courts traditionally have applied the business judgment standard in determining whether to authorize the rejection of executory contracts and unexpired leases.). Under that standard, rejection of an executory contract or unexpired lease is deemed appropriate where such rejection would benefit the estate. See In re Sharon Steel Corp., 872 F.2d 36, 40 (3d Cir. 1989); In re Hawaii Dimensions, Inc., 47 B.R. 425, 427 (Bankr. D. Haw. 1985) (Under the business judgment test, a court should approve a debtors proposed rejection if such rejection will benefit the estate.). 29. Upon finding that the Debtors have exercised their sound business judgment in

determining that rejection of the Lease would benefit the estate and, thus, is in the best interests of the Debtors, their creditors and all parties in interest, the Court should approve the rejection under section 365(a). See, e.g., In re Bradlees Stores, Inc., 194 B.R. 555, 558 n.1 (Bankr. S.D.N.Y. 1996); In re Summit Land Co., 13 B.R. 310, 315 (Bankr. D. Utah 1981) (holding that absent extraordinary circumstances, court approval of a debtors decision to assume or reject an executory contract should be granted as a matter of course). Stated differently, as long as a debtors business judgment has been reasonably exercised, a court should approve the assumption or rejection of an executory contract or unexpired lease. See, e.g., Bildisco, 462 U.S. at 523; Sharon Steel, 872 F.2d at 39-40.

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30.

The Debtors have evaluated the Master Lease as to the Manchester and Farmville

Premises and, in the exercise of their business judgment, have determined that the Manchester and Farmville Premises should each be rejected.4 In particular, the Debtors recently closed their plant in Manchester, Michigan in February 2006. (Moore Aff., at 4.) The Manchester

Premises were dedicated to the Debtors General Motors instrument and door panel program, which was recently terminated. (Id.) The Debtors also recently announced that they would be closing their plant in Farmville, North Carolina. (Id., at 8.) The effective date of rejection requested in this Motion is consistent with the Debtors timing of these plant closures. The Debtors believe that the rejection date requested herein will provide the Debtors sufficient time to wind down their operations at the plants and surrender the premises. Thus, the Debtors believe that the rejection of the Manchester and Farmville Premises subsequent to the closing of the Debtors plants in Manchester, Michigan and Farmville, North Carolina is appropriate and in the best interests of the estates. Notice 31. Notice of this Motion has been given to the Core Group as required by the

Case Management Procedures and the counterparty to the Lease at the addresses listed on Exhibit D.5 In light of the nature of the relief requested, the Debtors submit that no further notice is required.

The Debtors have or may have claims against the counterparty to the Master Lease arising under, or independently of, the Master Lease and/or the Manchester and Farmville Premises. The Debtors do not waive such claims by the filing of this Motion or by rejecting the Manchester and Farmville Premises. Capitalized terms used in this paragraph 31 not otherwise defined herein shall have the meanings set forth in the First Amended Notice, Case Management and Administrative Procedures filed on June 9, 2005 [Docket No. 294].

16
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No Prior Request 32. court. WHEREFORE, the Debtors respectfully request the entry of an order, substantially in the form attached hereto as Exhibit A, (a) authorizing the rejection of the Manchester and Farmville Premises and (b) granting such other and further relief as the Court deems appropriate. Dated: June 14, 2006 KIRKLAND & ELLIS LLP /s/ Marc J. Carmel 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) 4111 West Andover Road - Second Floor Bloomfield Hills, Michigan 48302 Telephone: (248) 644-4840 Facsimile: (248) 644-1832 Co-Counsel for the Debtors No prior motion for the relief requested herein has been made to this or any other

17
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EXHIBIT A

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 THE DEBTORS TO REJECT CERTAIN UNEXPIRED LEASES Upon the motion (the Motion)2 of the above-captioned debtors

(collectively, the Debtors) for entry of an order authorizing the Debtors to reject certain unexpired leases [Docket No. ___]; it appearing that the relief requested is in the best interest of the Debtors estates, their creditors and other parties in 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

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 11168736.6

proceeding and the Motion in this District is proper pursuant to 28 U.S.C. 1408 and 1409; it appearing that 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 Master Lease as to the Manchester and Farmville Premises listed on

Exhibit D to the Motion is rejected effective as of the earlier of (a) the date set forth on Exhibit D and (b) the date the Debtors surrender the premises. 3. The Debtors do not waive any claims that they have or may have against the

counterparty to the Master Lease, whether or not such claims are related to the rejection of the Master Lease or the Manchester and Farmville Premises. 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. 6. The Court retains jurisdiction with respect to all matters arising from or related to

the implementation of this Order.

2
K&E 11168736.6

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

NOTICE AND OPPORTUNITY TO RESPOND TO DEBTORS MOTION FOR ENTRY OF AN ORDER AUTHORIZING DEBTORS TO REJECT CERTAIN UNEXPIRED LEASES PLEASE TAKE NOTICE THAT the above-captioned debtors (collectively,

the Debtors) have filed their Motion for Entry of an Order Authorizing Debtors to Reject Certain Unexpired Leases (the Motion). PLEASE TAKE FURTHER NOTICE THAT your rights may be affected. You may wish to review the Motion and discuss it with your attorney, if you have one in these cases. (If you do not have an attorney, you may wish to consult one.)

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 11168736.6

PLEASE TAKE FURTHER NOTICE THAT in accordance with the First Amended Notice, Case Management and Administrative Procedures filed on June 9, 2005

[Docket No. 294] (the Case Management Procedures), if you wish to object to the Court granting the relief sought in the Motion, or if you want the Court to otherwise consider your views on the Motion, no later than June 26, 2006 at 4:00 p.m. prevailing Eastern Time, or such shorter time as the Court may hereafter order and of which you may receive subsequent notice, you or your attorney must file with the Court a written response, explaining your position at:2 United States Bankruptcy Court 211 West Fort Street, Suite 2100 Detroit, Michigan 48226 PLEASE TAKE FURTHER NOTICE THAT if you mail your response to the Court for filing, you must mail it early enough so the court will receive it on or before the date above. PLEASE TAKE FURTHER NOTICE THAT you must also serve the documents so that they are received on or before June 26, 2006 at 4:00 p.m. prevailing Eastern Time, in accordance with the Case Management Procedures, including to: Kirkland & Ellis LLP Attn: Richard M. Cieri Citigroup Center 153 East 53rd Street New York, NY 10022 Facsimile: (212) 446-4900 E-mail: rcieri@kirkland.com -and-

Response or answer must comply with Rule 8(b), (c) and (e) of the Federal Rules of Civil Procedure.

2
K&E 11168736.6

Kirkland & Ellis LLP Attn: David L. Eaton Ray C. Schrock Marc J. Carmel 200 East Randolph Drive Chicago, Illinois 60601 Facsimile: (312) 861-2200 E-mail: deaton@kirkland.com rschrock@kirkland.com mcarmel@kirkland.com -andCarson Fischer, P.L.C. Attn: Joseph M. Fischer 4111 West Andover Road - Second Floor Bloomfield Hills, Michigan 48302 Facsimile: (248) 644-1832 E-mail: jfischer@carsonfischer.com PLEASE TAKE FURTHER NOTICE THAT if no responses to the Motion are timely filed and served, the Court may grant the Motion and enter the order without a hearing as set forth in Rule 9014-1 of the Local Rules for the United States Bankruptcy Court for the Eastern District of Michigan.

3
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Dated: June 14, 2006

KIRKLAND & ELLIS LLP /s/ Marc J. Carmel 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) 4111 West Andover Road - Second Floor Bloomfield Hills, Michigan 48302 Telephone: (248) 644-4840 Facsimile: (248) 644-1832 Co-Counsel for the Debtors

4
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CERTIFICATE OF SERVICE I, Marc J. Carmel, an attorney, certify that on the 14th day of June, 2006, I caused to be served, by e-mail, facsimile and by overnight delivery, in the manner and to the parties set forth on the attached service lists, a true and correct copy of the foregoing Debtors Motion for Entry of an Order Authorizing Debtors to Reject Certain Unexpired Leases. Dated: June 14, 2006 /s/ Marc J. Carmel Marc J. Carmel

K&E 10898184.3

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In re: Collins & Aikman Corp., et al. Case No. 05-55927 (SWR)

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Jim Cambio Of Ingersoll Joseph T. Deters

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treasReg@michigan.gov shuttkimberlyj@michigan.gov steve.e.spence@usdoj.gov laplante@millercanfield.com tpryce@ford.com jcambio@tax.ri.gov elantz@town.ingersoll.on.ca radom@butzel.com treasurer@tos.state.oh.us tsherick@honigman.com Frank.Chaffiotte@cit.com e-rental@ur.com msaintdenis@ville.farnham.qc.ca blanderson@eastman.com kandrews@e-bbk.com wdiehl@e-bbk.com bbyrne@e-bbk.com

In re: Collins & Aikman Corp., et al. Case No. 05-55927 (SWR)

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In re: Collins & Aikman Corp., et al. Case No. 05-55927 (SWR)

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In re: Collins & Aikman Corp., et al. Case No. 05-55927 (SWR)

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Canada

PO Box 6529

Canada Customs & Rev Agency Technology Ctr 875 Heron Rd Industry Canada Als Financial Postal Station D Box 2330 700 Leigh Capreol 11 Station St Ottawa Technology Centre Midwest Regional Office 175 W Jackson Blvd Ste 900 Peter Pantaleo Erin Casey & Alice Eaton 425 Lexington Ave Department Of Revenue Dept Of Commerce & Nat Res PO Box 30004 Matthew Rick Asst Attorney General PO Box 30754 State Of Michigan Mc Dept 77833 State Secondary Complex 7150 Harris Dr PO Box 30015 430 W Allegan St Jennifer Nelles US Trustee First Plaza County Of Fresno Office of Child Support 211 W Fort St Ste 700 24901 Northwestern Hwy 302 1985 Blvd Se PO Box 1192 21 Albert St 126 North Pearl St 1306 E Triumph Dr 356 Main St

875 Heron Rd

Canada Canada Canada Canada Canada

50 N Ripley St

PO Box 30744

PO Box 2228

Canada

PO Box 67

In re: Collins & Aikman Corp., et al. Case No. 05-55927 (SWR)

Page 2 of 3

Served via Overnight Mail

CREDITOR NAME Town Of Farmville Town Of Gananoque Town Of Old Fort Town Of Pageland Town Of Troy Tr Associates Treasurer City Of Detroit Unifi Inc Uniform Color Co United States Attorney for the Eastern District of Michigan Valeo Inc Vespera Lowell Llc Village Of Holmesville Village Of Rantoul Visteon Climate Control W9 Lws Real Estate Limited Wachtell Lipton Rosen & Katz Wellington Green LLC

CREDITOR NOTICE NAME Farmville Downtown Partnership

Fsia Inc

Randy Lueth Attn Civil Division Jerry Dittrich Blue Point Capital Bpv Lowell LLC

ADDRESS1 115 West Church St 30 King St East PO Box 520 PO Box 67 315 North Main St 200 E Big Beaver PO Box 33525 7201 W Friendly Ave 12003 Toepher Rd 211 W Fort St Ste 2001 3000 University Dr 10 Livingston Pl 2nd Fl 205 Millersburg Rd 333 S Tanner One Village Center Dr

ADDRESS2 PO Box 100

CITY Farmville Gananoque Old Fort Pageland Troy Troy Detroit Greensboro Warren Detroit Auburn Hills Greenwichn Holmesville Rantoul Van Buren Township Charlotte New York Bingham Farms

STATE NC ON NC SC NC MI MI NC MI MI MI CT OH IL MI NC NY MI

ZIP 27828-1621 K7G 2T6 28762 29728 27371 48083 48232 27410-6237 48089-3171 48226 48326-2356 06830 44633 61866 48111 28262-2337 10019 48025

COUNTRY Canada

PO Box 113

Ste PO RFQ Office

co Lincoln Harris Llc Hal Novikoff

10101 Claude Freeman Dr Ste 200 N 51 W 52nd St 31100 Telegraph Rd Ste 200

In re: Collins & Aikman Corp., et al. Case No. 05-55927 (SWR)

Page 3 of 3

EXHIBIT B

EXHIBIT C

EXHIBIT D

Counterparty

Counterparty Address

Description of Contract Master Lease, as amended on June 27, 2002, as to the Manchester, Michigan premises.

Fabric (DE) GP c/o WP Carey & Co. LLC

Attn: WP Carey & Co. LLC 50 Rockefeller Plaza, 2nd Floor New York, New York 10020 Attn: Chairman, Real Estate Department Reed Smith LLP 2500 One Liberty Place Philadelphia, PA 19103 Attn: Timothy A. Fusco Miller, Canfield, Paddock & Stone, P.L.C. 150 West Jefferson, Suite 2500 Detroit, Michigan 48226 Attn: Alan J. Lipkin Willkie Farr & Gallagher LLP 787 Seventh Avenue New York, New York 10019

Effective Date of Rejection June 29, 2006

Fabric (DE) GP c/o WP Carey & Co. LLC

Same as above

Master Lease, as amended on June 27, 2002, as to the Farmville, North Carolina premises.

December 31, 2006

K&E 11168736.6