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: May 24, 2007 at 2:00 p.m. Proposed Objection Deadline: May 22, 2007 at 4:00 p.m.

DEBTORS MOTION FOR THE ENTRY OF AN ORDER APPROVING SETTLEMENT AGREEMENT BETWEEN CERTAIN DEBTORS AND FABRIC (DE) GP AND RELATED RELIEF The above-captioned debtors (collectively, the Debtors) hereby move the Court (this Motion) for the entry of an order, substantially in the form of Exhibit A, authorizing Debtors Collins & Aikman Products Co., Collins & Aikman Automotive Mats, LLC, Collins & Aikman Carpet & Acoustics (TN), Inc. and Collins & Aikman Plastics, Inc. (collectively, the Tenant) to enter into an agreement with Fabric (DE) GP (the Landlord), substantially on the terms set forth on

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. 05-55991; 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. 05-55964; 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. 0555946; Southwest Laminates, Inc. (d/b/a Southwest Fabric Laminators Inc.), Case No. 05-55948; Wickes Asset Management, Inc., Case No. 0555962; and Wickes Manufacturing Company, Case No. 05-55968.

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the term sheet attached hereto as Exhibit B (the Settlement Agreement),2 and authorizing the Debtors to take all actions contemplated thereunder. In support of the 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 363(b) and 365 of the

Bankruptcy Code, 11 U.S.C. 101-1330 (the Bankruptcy Code) and Rule 9019 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules). 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. 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. On January 11, 2007, the Court approved on a final basis that certain Customer

Agreement (the Customer Agreement) by and between the Debtors, the agents for the Debtors senior, secured prepetition and postpetition lenders (the Agents) and certain of the Debtors major

The Debtors request that the authority granted by this motion extend to authority to enter into an agreement substantially in conformity with the Settlement Agreement.

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customers [Docket No. 3890]. The Customer Agreement, among other things, provides for a framework to facilitate the orderly sale of a majority of the Debtors businesses with the support of the Agents and the Debtors major customers. 7. On January 24, 2007, the Debtors filed the First Amended Joint Plan of Collins &

Aikman Corporation and Its Debtor Subsidiaries [Docket No. 3976] (the Plan). On January 26, 2007, the Court entered an order approving the Debtors amended disclosure statement related to the Plan [Docket No. 3988]. Pursuant to this order, the Debtors commenced the solicitation process in connection with the Plan. The Plan is supported by the unofficial steering committee for the Debtors senior, secured prepetition lenders, the Committee and the Debtors customers. The Court has scheduled a hearing on confirmation of the Plan for June 5, 2007. The Master Lease 8. The Tenant entered into an Amended and Restated Lease Agreement of

nonresidential real property (the Master Lease) with Landlord on June 27, 2002. 9. The Master Lease relates to six demised premises of nonresidential real property

located in six different locales associated with the Debtors facilities in (a)(i) Manchester, Michigan and (ii) Farmville, North Carolina (the Fabrics Properties), and (b)(i) Albemarle, North Carolina, (ii) Holmesville, Ohio, (iii) Old Fort, North Carolina and (iv) Springfield, Tennessee (collectively, the Carpet & Acoustics Properties, and together with the Fabrics Properties, the Master Lease Properties). 10. The Debtors have ceased operations and closed the facilities associated with the

Fabrics Properties in connection with the wind-down of the Debtors Fabrics business segment approved by this Courts Order Authorizing the Wind-Down of the Debtors Fabrics Business and Certain Related Actions dated June 1, 2006 [Docket No. 2785]. The Debtors facilities associated

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with the Carpet & Acoustics Properties continue to operate as part of the Debtors Carpet & Acoustics business segment. 11. On June 14, 2006, in conjunction with the wind-down of the facilities at the

Fabrics Properties, the Debtors filed their Motion for Entry of an Order Authorizing Debtors to Reject Certain Unexpired Leases [Docket No. 2838] (the Motion to Sever & Reject), seeking to sever the Master Lease and reject the agreement(s) to lease the Fabrics Properties. On

August 22, 2006, the Landlord filed its Amended Objection and Memorandum of Law in Opposition to the Motion to Sever & Reject [Docket No. 3180]. At the request of the parties, the Court has adjourned the hearing on the Motion to Sever & Reject. On April 19, 2007, the Court set a hearing date of May 24, 2007. The Settlement Agreement, if approved, would, among other things, settle this contested matter between the Debtors and the Landlord. Disputed Tax Obligations 12. On February 9, 2006, the Landlord filed its Motion to Compel Payment of Unpaid

Taxes Due Post-Petition Under a Non-Residential Real Property Lease [Docket No. 2162] (the Landlord Tax Motion), seeking to compel the Tenant to pay certain property tax obligations relating to the Master Lease Properties that accrued before, but became due after, the Petition Date (the Disputed Tax Obligations). On March 3, 2006, the Debtors filed their Objection to the Landlord Tax Motion [Docket No. 2293] and the Committee filed a joinder to the Debtors Objection [Docket No. 2295]. 13. After a hearing on the matter, on April 27, 2006, the Court granted the

Landlord Tax Motion and ordered that the Debtors pay the Disputed Tax Obligations [Docket No. 2662] (the Tax Order). In accordance with the Tax Order, the Debtors paid the Disputed Tax Obligations.

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14.

On April 28, 2006, the Debtors filed a notice of appeal seeking reversal of the

Tax Order (the Appeal) in the Bankruptcy Court and the United States District Court for the Eastern District of Michigan (the District Court). See Case No. 2:06-cv-12013 (E.D. Mich.). After full briefing of the Appeal, because the parties continued to seek an out-of-court resolution to the dispute, the Debtors filed a Notice of Withholding Issuing Ruling or Judgment and the District Court has not ruled on the Appeal. 15. In the interest of resolving the Appeal as part of the Settlement Agreement, the

Debtors have agreed to withdraw the Appeal, but only if the order approving the Settlement Agreement provides that the Tax Order shall not have any precedential effect. To preserve the Debtors arguments min the Appeal, the order approving the Settlement Agreement must provide that the Tax Order is limited to its facts. The Debtors would not agree to withdraw the Appeal if the Tax Order were considered law of the case in these chapter 11 cases or could otherwise be used to estop the Debtors from pursuing the arguments raised in their objection to the Landlord Tax Motion and subsequent Appeal. The Complaint 16. On May 11, 2007, the Debtors filed an adversary proceeding against

W.P. Carey & Co., L.L.C. seeking, among other things, to avoid a transfer of $298,501.32 as a preferential transfer subject to avoidance under section 547 of the Bankruptcy Code or a fraudulent transfer subject to avoidance under section 548 of the Bankruptcy Code (the Avoidance Action). The Carpet & Acoustics Sale 17. On April 20, 2007, the Debtors filed their Motion for the Entry of Orders Approving

Bidding Procedures, Sale of Substantially All of the Assets of the Debtors Carpet & Acoustics Business Free and Clear of Liens, Claims, Encumbrances and Interests and Related Relief [Docket No. 4538] (the Carpet & Acoustics Sale Motion), seeking (a) the sale, subject to higher 5
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and better offers, of substantially all of the assets of the Debtors Carpet & Acoustics business segment (including the Carpet & Acoustic Properties) to International Automotive Components Group North America, Inc. (the Buyer) pursuant to a certain asset purchase agreement (the Carpet & Acoustics Sale Agreement) and (b) certain bidding procedures, attached as Exhibit D to the Carpet & Acoustics Sale Motion (the Bidding Procedures). 18. By Order dated May 1, 2007 [Docket No. 4594], the Court (a) approved the

Bidding Procedures, (b) scheduled an auction to be conducted by the Debtors on May 29, 2007, in the event a Qualified Bid (as defined in the Bidding Procedures) is received and (c) set a hearing on approval of the Carpet & Acoustics sale for June 5, 2007. 19. Pursuant to Article X.A. of the Plan, confirmation and effectiveness of the Plan is

conditioned upon, among other things, the Debtors having consummated the sale of the Debtors Carpet & Acoustics business segment. The Settlement Agreement 20. After significant negotiation, the Debtors and the Landlord have agreed to the

Settlement Agreement which, among other things: (a) provides for the modification of the Master Lease such that it applies only to the Carpet & Acoustics Properties (as modified, the Carpet & Acoustics Lease), followed by the assumption and assignment of the Carpet & Acoustics Lease in connection with the Carpet & Acoustics sale; (b) settles outstanding obligations owed by the Tenant to the Landlord under the leases associated with the Fabrics Properties and provides for the purchase of the Fabrics Properties by the Debtors; and (c) otherwise resolves outstanding disputes between the Tenant and the Landlord, including the Motion to Sever & Reject and the Appeal.

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21.

The principal terms of the Settlement Agreement are as follows:3 a. Assumption and Assignment of the Carpet & Acoustics Lease: Upon satisfaction of the Conditions Precedent (described below): i. Tenant will be deemed to assume the Carpet & Acoustics Lease and assign such lease to Buyer, which lease will be on substantially the same terms as the Master Lease, subject to the terms of the Settlement Agreement, including: A. Basic Rent: $2,392,924.08 per annum, which amount is that portion of the Basic Rent due under the Master Lease that is attributable to the Carpet & Acoustics Properties. Renewal: The right to renew shall only be exercised with respect to all four Carpet & Acoustics Properties collectively. Go-Forward Letter of Credit: Buyer shall provide a replacement letter of credit in accordance with Section 34 of the Master Lease in the amount of 1.5 multiplied by the amount of any outstanding rent obligations attributable to the Carpet & Acoustics Lease.

B. C.

ii. iii. b.

The Debtors will pay the Cure Payment (see below) to the Landlord. The Debtors will purchase the Fabrics Properties from the Landlord for $9,586,444 (the Sale Price).

Cure Payment: $321,062.31 for fees and costs due under the Master Lease through November 30, 2006; plus amounts as may be required to satisfy and remove all valid liens on the Carpet & Acoustics Properties based on amounts owed by the Tenant for the period through November 30, 2006; plus the actual fees and costs incurred by Landlord in connection with the defeasance of the mortgages on the Master Lease Properties for the period from November 30, 2006 through the date of Satisfaction of the Conditions Precedent, but no more than $1,100,000 in the aggregate. Release: Upon the assumption of the Carpet & Acoustics Lease, the Debtors shall be deemed to have waived and released (a) Landlord from all claims and causes of action it may have against Landlord, including any claims based on liability under chapter 5 of the Bankruptcy Code and (b) Landlords

c.

The following summary of the Settlement Agreement is provided for the convenience of the Court and parties in interest. To the extent that there are any discrepancies between this summary and the Settlement Agreement, the terms and conditions of the Settlement Agreement shall govern. Capitalized terms used in the summary of the Settlement Agreement that are not defined herein shall have the meanings set forth in the Settlement Agreement.

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affiliates from all claims and causes of action it may have against such affiliates on account of the Master Lease under chapter 5 of the Bankruptcy Code. d. e. Continued Performance: The Tenant shall comply with all obligations of the Master Lease until the closing of the Carpet & Acoustics sale. Existing Letter of Credit: In connection with the defeasance of the Landlords mortgages on the Master Lease Properties and the posting of the Go-Forward Letters of Credit, the entire amount of the existing letter of credit shall be drawn (either by the Landlord or the mortgagee of the Master Lease Properties) and immediately paid to the Landlord as a credit against the Sale Price. Allowed Claims: Landlord will have an allowed general unsecured claim against the Debtors combined estates of $14,080,908. Conditions Precedent: Subject to waiver by written agreement of each of the parties, the following are the Conditions Precedent: i. ii. Approval of the Settlement Agreement by the Court; Inclusion in the order approving the Settlement Agreement of a provision limiting the scope of the Tax Order as precedent or law of the case to the facts and circumstances of the contested matter initiated by the Landlord Tax Motion; Release by Tenant of all claims against Landlord; The closing of the Carpet & Acoustics sale; and The closing of the sale of the Fabrics Properties.

f. g.

iii. iv. v. h.

Dismissal of Appeal: Within two business days of the satisfaction of the Conditions Precedent, the Debtors shall seek dismissal of the Appeal. Relief Requested

22.

By this Motion, the Debtors seek an order: (a) approving and authorizing the Debtors

to enter into the Settlement Agreement, on the terms set forth on the term sheet attached hereto as Exhibit B; (b) authorizing the Debtors to take all actions contemplated thereunder, including assumption and assignment of the Carpet & Acoustics Lease and purchasing the Fabrics Properties from the Landlord; (c) providing that the Tax Order shall be limited to the facts and circumstances of

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the contested matter arising out of the Landlord Tax Motion; (d) requesting that the Court stay all of the deadlines for the Avoidance Action beginning with the deadline for the defendant to answer or otherwise respond to such action until 30 days after the parties know that the Conditions Precedent cannot be met or will not be waived; and (e) requiring the delivery or remittance to the Landlord of the existing letter of credit posted by the Tenant pursuant to paragraph 34 of the Master Lease (the Existing Letter of Credit), or the proceeds thereof. 23. The agent to the Debtors prepetition senior, secured lenders supports the relief

requested in this Motion. Basis for Relief I. Approval of the Settlement Agreement and Purchase of the Fabrics Properties Is Appropriate Under Bankruptcy Rule 9019 and Section 363(b) of the Bankruptcy Code 24. Bankruptcy Rule 9019(a) provides, in pertinent part, that [o]n motion by the [debtor

in possession] and after notice and a hearing, the court may approve a compromise or settlement. Fed. R. Bankr. P. 9019(a). 25. Compromises are tools for expediting the administration of the case and reducing

administrative costs and are favored in bankruptcy. See Protective Comm. of Independent Stockholders of TMT Trailer Ferry, Inc. v. Anderson, 390 U.S. 414, 424 (1968) (In administering reorganization proceedings in an economic and practical matter it will often be wise to arrange the settlement of claims.); In re Fishell, 1995 WL 66622, at *2 (6th Cir. 1995); In re Haven, Inc., 2005 WL 927666, at *1 (6th Cir. B.A.P. 2005); In re Dow Corning Corp., 192 B.R. 415, 421 (AJS) (Bankr. E.D. Mich. 1996); see also Fogel v. Zell, 221 F.3d 955, 960 (7th Cir. 2000); In re Martin, 91 F.3d 389, 393 (3d Cir. 1996) (To minimize litigation and expedite the administration of a bankruptcy case, [c]ompromises are favored in bankruptcy.) (quoting 9 Collier on Bankruptcy 9019.03[1] (15th Ed. 1993)). Moreover, various courts have endorsed the use of 9
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Bankruptcy Rule 9019 to resolve disputes. See, e.g., Bartel v. Bar Harbour Airways, Inc., 196 B.R. 268, 271 (S.D.N.Y. 1996); In re Check Reporting Service, Inc., 137 B.R. 653, 656 (Bankr. W.D. Mich. 1992); In re Miller, 148 B.R. 510, 516 (Bankr. N.D. Ill. 1992); In re Planned Systems, Inc., 82 B.R. 919, 921 (Bankr. S.D. Ohio 1988). 26. Generally, a settlement should be approved if it is determined to be fair and equitable

and does not fall below the lowest level of reasonableness. See Bauer v. Commerce Union Bank, 859 F.2d 438, 441 (6th Cir. 1988); In re Haven, Inc. 2005 WL 927666, at *3 (6th Cir. B.A.P. 2005); Dow Corning, 192 B.R. at 421. In determining whether a compromise satisfies this standard, courts ordinarily consider: (a) the probability of success in the litigation; (b) the difficulties, if any, to be encountered in the matter of collection; (c) the complexity and expense of the litigation involved; and (d) the paramount interest of creditors and proper deference to their reasonable views. See, e.g., In re Bard, 49 Fed. Appx. 528, 530 (6th Cir. 2002); In re Dow Corning Corp., 2003 WL 22218449, at *1 (DPH) (Bankr. E.D. Mich. 2003); In re Dalen, 259 B.R. 586, 611-13 (Bankr. W.D. Mich. 2001); In re Stinson, Inc., 221 B.R. 726, 732 (SWR) (Bankr. E.D. Mich. 1998). 27. Section 363(b) allows a trustee or debtor in possession to use property of the estate

other than in the ordinary course of business after appropriate notice and hearing. See 11 U.S.C. 363(b)(1). Section 363(b)(1) provides that [t]he trustee, 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)(1). Courts within the Sixth Circuit have held that transactions should be approved under section 363 when they are supported by sound business judgment. See, e.g., Stephens Indus., Inc. v. McClung, 789 F.2d 386, 390 (6th Cir. 1986) (concluding that a court can authorize a sale of a Debtors assets when a sound business purpose dictates such action); In re

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Embrace Sys. Corp., 178 B.R. 112, 124 (Bankr. W.D. Mich. 1995); see also In re North American Royalties, Inc., 276 B.R. 860, 866 (Bankr. E.D. Tenn. 2002). 28. The Settlement Agreement (a) is fair and equitable and does not fall below the lowest

level of reasonableness and (b) the Debtors decision to enter into the Settlement Agreement, including the purchase of the Fabrics Properties, is clearly an exercise of their sound business judgment. First and foremost, the Settlement Agreement is integral to the Carpet & Acoustics sale, and the expected proceeds of that sale represent the most valuable asset in the Debtors estates. Additionally, the consummation of the Carpet & Acoustics sale is a condition precedent to confirmation of the Plan. 29. Second, the Settlement Agreement resolves a number of issues between the Debtors

and the Landlord, including: (a) the Appeal currently pending before the District Court; (b) the Motion to Sever & Reject currently pending in this Court; (c) the cure costs related to the prospective assumption of the Master Lease or Carpet & Acoustics Lease; and (d) the unsecured claims of the Landlord in these cases. If left unresolved, resolution of these issues would undoubtedly result in continued costly and time-consuming litigation. The expenses incurred to resolve such disputes would be an additional burden to the estates and their creditors. 30. Third, permitting the Debtors to purchase the Fabrics Properties will allow them to

minimize their damages under the Master Lease. Were the Court were to find against the Debtors on their Motion to Sever & Reject, given the critical nature of the Master Lease to the Carpet & Acoustics sale, the Debtors likely would be required to assume the Master Lease as a whole, incurring an obligation to pay rent and certain carrying costs for the Fabrics Properties through the termination of the Master Lease in 2021. These expenses exceed the Sale Price. Moreover, by purchasing the Fabrics Properties as set forth in the Settlement Agreement, the Debtors will be able

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to sell such properties (which is likely to gain more value than if the Debtors attempted to sublease their rights under the Master Lease) to realize a gain on the prospective sale of the Fabrics Properties. 31. Finally, the Settlement Agreement provides that the proceeds of the Existing Letter of

Credit will be used to pay for a portion of the Sale Price of the Fabrics Properties, which benefits the Debtors by allowing them to realize some value from the Existing Letter of Credit, which would otherwise be tied up in payment of rent for unused property. This maximizes the value of the Existing Letter of Credit to the Debtors. 32. As part of the Settlement Agreement, the Debtors agreed to waive and release certain

claims and causes of action, including the ones brought in the Avoidance Action if the Conditions Precedent are met (or waived). Given that the Debtors believe that this is the most likely result, the Debtors believe that it would be a waste of resources for the parties to engage in the litigation involved with the Avoidance Action until it is clear that such litigation is necessary. The Debtors would prefer to withdraw the action without prejudice and re-file if pursuing such causes of action became appropriate at a later date, but this course of action is not possible given the 2-year statute of limitations for the Avoidance Action. Consequently, the Debtors believe that it is reasonable for the Court to stay all of the deadlines for the Avoidance Action beginning with the deadline for the defendant to answer or otherwise respond to such action until 30 days after the parties know that the Conditions Precedent cannot be met or will not be waived. 33. Accordingly, the Debtors respectfully assert that their decision to enter into the

Settlement Agreement is in the best interest of the Debtors estates and constitutes a sound exercise of their business judgment.

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II.

Assumption and Assignment of the Carpet & Acoustics Lease Is Authorized Under Section 365 of the Bankruptcy Code 34. Section 365(a), (b) of the Bankruptcy Code authorizes a debtor in possession to

assume, subject to the courts approval, executory contracts or unexpired leases of the debtor. See 11 U.S.C. 365(a), (b). Under section 365(a), a debtor, subject to the courts approval, may assume or reject any executory contract or unexpired lease of the debtor. 11 U.S.C. 365(a). Section 365(b)(1), in turn, codifies the requirements for assuming an unexpired lease or executory contract of a debtor, providing that: (b) (1) If there has been a default in an executory contract or unexpired lease of the debtor, the trustee may not assume such contract or lease unless, at the time of assumption of such contract or lease, the trustee (A) cures, or provides adequate assurance that the trustee will promptly cure, such default other than a default that is a breach of a provision relating to the satisfaction of any provision (other than a penalty rate or penalty provision) relating to a default arising from any failure to perform nonmonetary obligations under an unexpired lease of real property, if it is impossible for the trustee to cure such default by performing nonmonetary acts at and after the time of assumption, except that if such default arises from a failure to operate in accordance with a nonresidential real property lease, then such default shall be cured by performance at and after the time of assumption in accordance with such lease, and pecuniary losses resulting from such default shall be compensated in accordance with the provisions of this paragraph; (B) compensates, or provides adequate assurance that the trustee will promptly compensate, a party other than the debtor to such contract or lease, for any actual pecuniary loss to such party resulting from such default; and (C) provides adequate assurance of future performance under such contract or lease. 11 U.S.C. 365(b)(l). 35. The standard applied to determine whether assumption (or rejection) of an executory

contract or unexpired lease should be authorized is the business judgment standard. See Matter of 13
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McLouth Steel Corp., 20 B.R. 688, 692 (Bankr. E.D. Mich. 1982); see also NLRB v. Bildisco & Bildisco, 465 U.S. 513, 524 (1984); In re Orion Pictures Corp., 4 F.3d 1095, 1098-99 (2d Cir. 1993). 36. Upon finding that the Debtors have exercised their sound business judgment in

determining that assumption is in the best interests of the Debtors, their creditors and parties in interest, the Court should approve the assumption under section 365. See, e.g., In re Sharon Steel Corp., 872 F.2d 36, 39-40 (3d Cir. 1989); In re Bradlees Stores, Inc., 194 B.R. 555, 558 n.1 (Bankr. S.D.N.Y. 1996); In re Johns-Manville Corp., 60 B.R. 612, 615-16 (Bankr. S.D.N.Y. 1986) ([T]he Code favors the continued operation of a business by a debtor and a presumption of reasonableness attaches to a debtors management decisions.); 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); Smith v. Van Gorkom, 488 A.2d 858, 872 (Del. 1985) ([t]he business judgment rule is 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 taken was in the best interests of the company.). 37. In the present case, the Debtors assumption and assignment of the Carpet &

Acoustics Lease to the Buyer meets the business judgment standard and satisfies the requirements of section 365 of the Bankruptcy Code. As discussed above, the Carpet & Acoustics sale will provide significant benefits to the Debtors estates. Because the Debtors cannot obtain the benefits of the Carpet & Acoustics sale without the assumption of the Carpet & Acoustics Lease, the assumption (and assignment) of these Carpet & Acoustics Lease is undoubtedly a sound exercise of the Debtors business judgment. 38. Further, a debtor in possession may assign an executory contract or an unexpired

lease of the debtor if it assumes the agreement in accordance with section 365(a), and provides

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adequate assurance of future performance by the assignee, whether or not there has been a default under the agreement. See 11 U.S.C. 365(f)(2). Courts in the Sixth Circuit have held that adequate assurance under section 365 does not require an absolute guarantee of performance. See, e.g., Allied Technology, Inc. v. R.B. Brunemann & Sons, Inc., 25 B.R. 484, 498 (Bankr. S.D. Ohio 1982); Hennen v. Dayton Power and Light Co., 17 B.R. 720, 725 (Bankr. S.D. Ohio 1982). Among other things, adequate assurance may be provided by demonstrating the assignees financial health and experience in managing the type of enterprise or property assigned. See, e.g., Richmond Leasing Co. v. Capital Bank, N.A., 762 F.2d 1303, 1310 (5th Cir. 1985) (holding adequate assurance was present where debtors revenues and income were sufficient to make lease payments); In re Bygaph, Inc., 56 B.R. 596, 605-06 (Bankr. S.D.N.Y. 1986) (stating that adequate assurance of future performance is present when the prospective assignee of a lease from the debtor has financial resources and has expressed willingness to devote sufficient funding to the business to give it a strong likelihood of succeeding). 39. The meaning of adequate assurance of future performance depends on the facts and

circumstances of each case, but should be given practical, pragmatic construction. In re Sanshoe Worldwide Corp., 139 B.R. 585, 592 (S.D.N.Y. 1992) (citations omitted), affd, 993 F.2d 300 (2d Cir. 1993). 40. Here, the Debtors and the Landlord have agreed upon the Cure Payment necessary to

assume the Carpet & Acoustics Lease as set forth in the Settlement Agreement, which payment is in settlement of all amounts currently owed under the Master Lease. Furthermore, the

Settlement Agreement provides a mechanism by which the Debtors will provide the Landlord with adequate assurance of the Buyers future performance under the Carpet & Acoustics Lease and, if not satisfactory to the Landlord, provides that the Debtors will furnish such assurance at a later date.

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Notice 41. Notice of this Motion has been given to the Core Group, the 2002 List, the Landlord,

the Landlords mortgage lender, the Buyer and other interested parties 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. No Prior Request 42. court. WHEREFORE, the Debtors respectfully request the entry of an order, substantially in the form attached hereto as Exhibit A, (a) approving and authorizing the Debtors to enter into the Settlement Agreement, (b) authorizing the Debtors to take all actions contemplated thereunder, including assumption and assignment of the Carpet & Acoustics Lease and purchasing the Fabrics Properties from the Landlord, (c) providing that the Tax Order shall be limited to the facts and circumstances of the contested matter arising out of the Landlord Tax Motion, (d) requesting that the Court stay all of the deadlines for the Avoidance Action beginning with the deadline for the defendant to answer or otherwise respond until 30 days after the parties know that the Conditions Precedent cannot be met or will not be waived, (e) requiring the delivery or remittance to the Landlord of the Existing Letter of Credit, or the proceeds thereof and (f) granting such other and further relief as is just and proper. No prior motion for the relief requested herein has been made to this or any other

Capitalized terms used in this paragraph 39 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].

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Dated: May 17, 2007

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 West - Second Floor Bloomfield Hills, Michigan 48302 Telephone: (248) 644-4840 Facsimile: (248) 644-1832 Co-Counsel for the Debtors

17
K&E 11814071.9

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 APPROVING SETTLEMENT AGREEMENT BETWEEN CERTAIN DEBTORS AND FABRIC (DE) GP AND RELATED RELIEF Upon the motion (the Motion)2 of the above-captioned debtors (collectively, the Debtors) for the entry of an order approving and authorizing the Debtors to enter into the Settlement Agreement and authorizing the Debtors to take all actions contemplated thereunder [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 the Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334; it appearing that this proceeding is a core proceeding

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. 05-55991; 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. 05-55964; 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. 0555946; Southwest Laminates, Inc. (d/b/a Southwest Fabric Laminators Inc.), Case No. 05-55948; Wickes Asset Management, Inc., Case No. 0555962; 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 11814071.9

pursuant to 28 U.S.C. 157(b)(2); it appearing that venue of this 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. 3. The Motion is granted in its entirety. The Settlement Agreement is approved. The Debtors are authorized to enter into an agreement substantially in conformity

with the Settlement Agreement, and if the Debtors enter into such an agreement, it is approved to the extent the Settlement Agreement is approved. 4. The Debtors are authorized to purchase the Fabrics Properties from the Landlord on

the terms set forth in the Settlement Agreement and take any and all actions reasonably necessary to consummate such sale in all respects. 5. If the Conditions Precedent set forth in the Settlement Agreement are satisfied, the

Debtors are authorized to assume the Carpet & Acoustics Lease pursuant to section 365 of the Bankruptcy Code and assign the Carpet & Acoustics Lease to Buyer. 6. The Cure Payment (as defined in the Settlement Agreement) is the cure amount

payable under section 365 of the Bankruptcy Code and, if the Conditions Precedent set forth in the Settlement Agreement are satisfied and the Cure Payment paid, the Landlord shall be forever barred from objecting to adequate assurance of future performance and asserting any additional cure or other amounts against the Debtors, their estates and the Buyer with respect to the Master Lease, and will be deemed to consent to the proposed assumption and assignment of the Carpet & Acoustics Lease.

2
K&E 11814071.9

7.

The Court hereby stays all of the deadlines for the Avoidance Action that begin on or

after the deadline for the defendant in such action to answer or otherwise respond to such action until 30 days after the parties know that the Conditions Precedent cannot be met or will not be waived. 8. The delivery or remittance of the Existing Letter of Credit to Landlord or the

proceeds thereof to Landlord is required and the amount of the Existing Letter of Credit shall be drawn by Landlord or its designee and not cancelled and the proceeds thereof shall be paid immediately to Landlord. 9. The Tax Order is limited strictly to the facts and circumstances arising in the context

of the Landlord Tax Motion and the Tax Order shall not provide the basis for any law of the case, estoppel or other decision or order that would preclude the Debtors from raising any argument in defense of liability for tax obligations. 10. The Debtors are authorized to take all actions necessary to effectuate the relief

granted pursuant to this Order in accordance with the Motion. 11. upon its entry. 12. The Court retains jurisdiction with respect to all matters arising from or related to the The terms and conditions of this Order shall be immediately effective and enforceable

implementation of this Order.

3
K&E 11814071.9

CERTIFICATE OF SERVICE I, Marc J. Carmel, an attorney, certify that on the 17th day of May, 2007, 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 the Entry of an Order Approving Settlement Agreement Between Certain Debtors and Fabric (DE) GP and Related Relief. Dated: May 17, 2007 /s/ Marc J. Carmel Marc J. Carmel

K&E 11814071.9

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(no valid e-mail) CREDITOR NAME American General Finance Attorney General of MI Barclays Bank PLC Bayer Material Sciences BNY Midwest Trust Company BNY Midwest Trust Company Brown Corporation Burr & Forman LLP City Of Albemarle City Of Battle Creek City Of Marshall City Of Sterling Heights Clark Hill PLC Colbert & Winstead PC Colbond Inc Contrarian Capital Management LLC Coolidge Wall Womsley & Lombard Dayton Bag & Burlap Co El Paso Natural Gas Company Enerflex Solutions LLC Exxon Chemicals Intertex World Resources Trintex Corp Kilpatrick & Associates PC Lake Erie Products Lambert Leser Isackson Cook & Giunta PC McLane Graf Raulerson & Middleton PA Meridian Magnesium Miller Canfield Paddock & Stone PLC Missouri Dept of Revenue Office of Finance of Los Angeles Office of the US Attorney Paul Weiss Rifkind Wharton & Garrison LLP Pension Benefit Guaranty Corporation Pine River Plastics Inc Progressive Moulded Products Revenue Canada Riverfront Plastic Products Inc Ronald A Leggett Select Industries Corp South Carolina Dept Of Revenue Southco Standard Federal Bank Stark Reagan PC State Of Michigan Teknor Financial Corporation TG North America Third Avenue Trust Town Of Lincoln Finance Office Treasurer Of State Unique Fabricating Inc Valiant Tool & Mold Inc Vericorr Packaging fka CorrFlex Packaging CREDITOR NOTICE NAME Matthew H Rick Mr David Bullock Linda Vesci Mary Callahan Roxane Ellwalleger Mark Ferderber Shannon E Hoff Utilities Department Income Tax Division Maurice S Evans City Manager James P Bulhinger City Treasurer E Todd Sable Amy Wood Malone Don Brown Seth Lax Steven M Wachstein Esq Jeff Rutter Michael J McGinnis Todd McCallum Law Dept Bill Weeks Richardo Kilpatrick Leonora Baughman Lilia Roman Susan M Cook Joseph A Foster Jose J Bartolomei Steven A Ginther Bankruptcy Auditor Julia Pidgeon Asst US Atty Stephen J Shimshak & Netanella T Zahavi Sara Eagle & Gail Perry Barb Krzywiecki Dan Thiffault George Tabry Collector Of Revenue Christine Brown Sales & Use Tax Division Lorraine Zinar Holly Matthews Joseph A Ahern Linda King Bruce B Galletly Raymond Soucie W James Hall Joseph T Deters Tom Tekieke General Fax Adriana Avila FAX 217-356-5469 517-373-2060 212-412-1706 412-777-4736 312-827-8542 312-827-8542 616-527-3385 205-458-5100 704-984-9445 269-966-3629 269-781-3835 586-276-4077 313-965-8252 615-321-9555 828-665-5005 203-629-1977 937-223-6705 937-258-0029 713-420-5669 248-430-0134 281-588-4606 770-258-3901 248-377-0800 630-595-0336 989-894-2232 603-625-5650 517-663-2714 313-496-8452 573-751-7232 213-368-7076 313-226-3800 212-757-3990 202-326-4112 810-329-9388 905-760-3371 902-432-6287 734-281-4483 314-622-4413 937-233-7640 803-898-5147 610-361-6082 248-816-4376 248-641-9921 517-241-8077 401-725-5160 248-280-2110 212-735-0003 401-333-3648 614-644-7313 248-853-8422 519-944-7748 586-939-4216

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

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(no valid e-mail) CREDITOR NAME Viacom Inc William R Garchow CREDITOR NOTICE NAME JoAnn Haller FAX 412-642-5614 989-832-0077

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

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CREDITOR NOTICE NAME Rob Morgan Michael S Stamer Philip C Dublin

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Mike Keith Charlie Burrill Harry W Miller III Jay Truty Ms Amy Evans Thomas B Radom Attn Receiver General International Tax Service

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ADDRESS1 1062 S 4th Ave 590 Madison Ave PO Box 16253 PO Box 849 1609 Biddle Ave 709 Taylor St 3 1st National Plaza Ste 3300 Law Dept 100 Bloomfield Hills Pkwy Ste 100 1 5 Notre Ave 2204 Walkley Rd PO Box 8040 104 3rd St NW PO Box 9951 484 Middle Rd PO Box 818 200 South Main St 303 W Commonwealth Ave 711 Pennington Ave

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City of Kalamazoo City Of Longview City Of Los Angeles City Of Phoenix City Of Roxboro City Of St Joseph City Of Williamston City Treasurer Collector Of Revenue Collins & Aikman Corp Legal Dept Columbia Center 10th Fl 321 Settlers Rd 4500 Dorr St 885 Third Ave Ste 3300 7000 N Green Bay Ave Kellie Schone Jayson Macyda DuPont Legal D 7156 400 Renaissance Center One SeaGate 24th Fl 4611 North 32nd St 50 Rockefeller Plz 2nd Fl Timothy A Fusco

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CREDITOR NAME Attn Chairman Real Estate Dept Alan Lipkin 1084 Doris Rd 47690 E Anchor Ct Auburn Hills Plymouth MI MI 787 Seventh Ave New York NY 10019 48326-2613 48170 2500 One Liberty Pl Philadelphia PA 19103

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STATE

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Fabric (DE) GP c/o WP Carey & Co LLC Reed Smith LLP

Fabric (DE) GP c/o WP Carey & Co LLC Willkie Farr & Gallagher LLP Fisher Automotive Systems Fisher America Inc William Stiefel Freudenberg Nok Inc

Director's Office for Taxpayer Services Division

Ga Dept Of Revenue Gaston County Ge Capital Ge Capital Ge Capital Ge Capital Comm Serv Astro Dye General Motors Corp Harford County Revenue Heritage Environmental Svcs Inc Hicks Casey & Foster PC PO Box 300 Attn Lease Administration

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Highwoods Forsyth Lp

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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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CREDITOR NOTICE NAME

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CREDITOR NAME Town Of Troy Tr Associates Treasurer City Of Detroit Distressed Debt & Special Situations Stamford Greensboro Holland MI MI MI CT OH IL MI CT NC MI

Fsia Inc

ADDRESS1 315 North Main St 200 E Big Beaver PO Box 33525

CITY Troy Troy Detroit

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ZIP 27371 48083 48232

Rick Feinstein

Randy Lueth 211 W Fort St Ste 2001 3000 University Dr 12341 E 9 Mile Rd 10 Livingston Pl 2nd Fl 205 Millersburg Rd 333 S Tanner One Village Center Dr

677 Washington Blvd 7201 W Friendly Ave 942 Brooks Ave

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Attn Civil Division Jerry Dittrich Terry Nardone Blue Point Capital Bpv Lowell LLC

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10101 Claude Freeman Dr Ste 200 N 51 W 52nd St 31100 Telegraph Rd Ste 200 26200 American Dr Ste 305

Charlotte New York Bingham Farms Southfield

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

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EXHIBIT B

Execution Version

TERM SHEET BETWEEN FABRIC (DE) GP (LANDLORD), AND COLLINS & AIKMAN PRODUCTS CO., COLLINS & AIKMAN AUTOMOTIVE MATS, LLC, COLLINS & AIKMAN CARPET & ACOUSTICS (TN), INC., COLLINS & AIKMAN PLASTICS, INC. (COLLECTIVELY, TENANT) The Lease The Leasehold Agreement, dated September 28, 2001, between Landlord and Tenant, as amended and restated by the First Amended and Restated Lease Agreement, dated June 27, 2002 (collectively, the Lease). The Lease encompasses six industrial facilities located in: (i) Manchester, Michigan; (ii) Albemarle, North Carolina; (iii) Farmville, North Carolina; (iv) Old Fort, North Carolina; (v) Holmesville, Ohio; and (vi) Springfield, Tennessee. The Guaranty The Go-Forward Properties The Guaranty and Suretyship Agreement, dated as of January 15, 2002, of Collins & Aikman Corporation to Landlord. Albemarle, North Carolina; Holmesville, Ohio; Old Fort, North Carolina; and Springfield, Tennessee Manchester, Michigan; and Farmville, North Carolina The Order Pursuant To Section 365(d)(3) Of The Bankruptcy Code Compelling Payment Of Unpaid Taxes Due Post-Petition Under A NonResidential Real Property Lease entered by the Bankruptcy Court on April 27, 2006. The appeal of the 365(d)(3) Order filed by Tenant with the United States District Court for the Eastern District of Michigan. The motion filed by Tenant and certain affiliates (collectively, the Debtors) entitled Debtors Motion For Entry Of An Order Authorizing Debtors To Reject Certain Unexpired Leases, dated June 14, 2006. The sale of all or substantially all of the Debtors Carpet & Acoustics business (the Business) to a court approved purchaser (the Buyer). 13.5% Upon Satisfaction of the Conditions Precedent (defined below): (i) Tenant shall be deemed to have assumed the Lease, as amended in conformity with the terms set forth herein, executed by Tenant and Landlord for the Go-Forward Properties (the Go-Forward Properties Lease), and simultaneously with such assumption, the Go-Forward Properties Lease shall be assigned to Buyer; (ii) the Debtors shall pay Landlord the Cure Payment (defined below); and (iii) the Debtors shall pay to Landlord the Sale Price (defined below) for the purchase by the Debtors and sale of the Subject Properties to the Debtors.

The Subject Properties The 365(d)(3) Order

The Appeal The Motion

The Sale Cap Rate The Go-Forward Properties Lease and the Subject Properties Lease

K&E 11557698.16

Amendment to Lease; The GoForward Properties

The Go-Forward Properties Lease will be on substantially the same terms as the Lease subject to the terms herein, including, at a minimum, the following changes: (i) Basic Rent. Upon the closing of the Sale, the annual basic rent obligation shall be no less than $2,392,924.081 and shall be subject to any CPI increases pursuant to the terms of the Lease. (ii) Renewal. The right to renew the Lease shall only be for all four of the Go-Forward Properties collectively. (iii) Substitution of Properties. The right to substitute a property shall be eliminated. (iv) Lease Guaranty. Except in the event Buyers parent company is the tenant under the Go-Forward Properties Lease, Buyer shall be required to cause an entity acceptable to Landlord to provide a guaranty on the same terms and conditions as the Guaranty (the Lease Guaranty). (v) Replacement Letter of Credit. Immediately upon assignment of the Go-Forward Properties Lease, Buyer shall be required to deliver to Landlord a replacement letter of credit in accordance with Section 34 of the Lease in the amount of: (a) 1.5 multiplied by (b) the annual basic rent obligation for the Go-Forward Properties then due under the Go-Forward Properties Lease (the Go-Forward Properties Letter of Credit).

Adequate Assurance of Future Performance

The Landlord agrees that the Go-Forward Properties Letter of Credit and, if any, the Lease Guaranty shall satisfy all requirements to provide adequate assurance of Buyers future performance under the Go-Forward Properties Lease; provided Landlord receives the organizational chart and financial information for the Buyer as well as for the party providing the Lease Guaranty, if any, reasonably satisfactory to Landlord, which Landlord shall confirm to Tenant within ten (10) business days of receiving such information. Otherwise, Tenant shall provide adequate assurance of further performance as set forth in Section 365(b)(1)(C) of the Bankruptcy Code. Tenant shall comply with all obligations under the Lease until the closing of the Sale of the Business.

Obligations Prior to Assumption of GoForward Properties Purchase and Sale of The Subject Properties
1

The Debtors shall purchase the Subject Properties from Landlord for $9,586,444.00 (the Sale Price). The sale shall be subject to and contingent upon the defeasance of the mortgages encumbering the

The amount set forth represents the pro-rated annual basic rent obligation due under the Lease with respect to the Go-Forward Properties as of December 15, 2006. To the extent such rent increases in accordance with the terms of the Lease prior to the assignment of the Lease to Buyer, such increase shall be the required annual basic rent due under the Go-Forward Properties Lease.

K&E 11557698.16

Subject Properties as agreed to between Landlord and its mortgage lender, which defeasance may be addressed as set forth in the Conditions Precedent section herein if the defeasance has not been completed on or prior to the closing of the Sale of the Business. Existing Letter of Credit In connection with the defeasance of the mortgages and the posting of the Go-Forward Properties Letter of Credit, the entire amount of the letter of credit held pursuant to Section 34 of the Lease (the Existing Letter of Credit) shall be drawn and the proceeds thereof shall be paid immediately to Landlord and applied as a credit against the Sale Price subject to: (a) Landlords mortgage lenders consent and delivery or remittance of the proceeds to Landlord; or (b) an order of the Bankruptcy Court requiring the delivery or remittance of the Existing Letter of Credit or the proceeds thereof to Landlord. For the avoidance of doubt, the amount of the Existing Letter of Credit shall be drawn by Landlord or its designee and not cancelled and the proceeds thereof shall be paid immediately to Landlord. Simultaneously with the assumption by Tenant of the Go-Forward Properties Lease, Tenant shall pay to Landlord: (a) $321,062.31 for the accrued but unpaid fees and costs required to be paid under the Lease for the period through November 30, 2006; plus (b) such amounts as may be required to satisfy and remove all valid liens on the Go-Forward Properties for amounts owed by the Tenant under the Lease, if any, as the cure payment for the period through November 30, 2006; provided that to the extent the Tenant disputes any liens on the Go-Forward Properties incurred prior to assumption of the Go-Forward Properties Lease, Tenant shall fund an escrow for such liens in an amount up to $200,000, and if the amount required to fund such escrow exceeds $200,000, the parties shall negotiate in good faith for a mutually satisfactory arrangement. Additionally, Tenant will be required to pay all accrued but unpaid fees and costs required to be paid under the Lease, including rent, taxes, and reasonable attorneys fees and costs, and the actual fees and costs incurred by Landlord in connection with the defeasance of the mortgages in an amount of up to $1,100,000, for the period November 30, 2006 through the date of the Satisfaction of the Conditions Precedent upon the later of: (a) one (1) business day after the effective date of the assumption of the Go-Forward Properties Lease by Tenant; and (b) five (5) business days after delivery to Tenant of Landlords Statement of such cure amount; provided, however, Tenant shall withhold payments for amounts due if it has a bona fide dispute regarding the validity of such amounts and Tenant provides written notice to Landlord of such dispute within five (5) business days of receipt of the Landlords Statement of such cure amount; provided, further, subject to the immediately preceding clause, Tenant will be required to pay all accrued but unpaid fees and costs required to be paid under the Lease with respect to the Subject Properties, including rent, taxes, and reasonable attorneys fees and costs, through the date of the
K&E 11557698.16

Cure Payment

closing of the sale of the Subject Properties. Unless otherwise agreed in writing by the parties, any disputes shall be resolved by the parties within ten (10) business days of Landlords receipt of the required written notice and, absent that, the Debtor shall be required to file an expedited motion with the Bankruptcy Court seeking a resolution of the outstanding matters. For the avoidance of doubt, Buyer and/or Tenant also shall be required to pay all outstanding accrued but unpaid fees and costs required under the Lease with respect to the Go-Forward Properties such as real property taxes due as of the date of the Satisfaction of the Conditions Precedent as and when invoiced, provided such requirement does not result in a double payment to Landlord. Landlord shall irrevocably retain the benefit of all payments made by the Debtors under the 365(d)(3) Order. Tenant acknowledges and agrees that upon execution by Tenant and Landlord of the purchase and sale agreement for the Subject Properties, Tenant or its successor shall be liable for any and all accrued and unpaid amounts on the Subject Properties, including all unpaid pre or post petition taxes, and Landlord shall have no liability for any such amount. Allowed Claims Regardless of whether Landlord votes in favor of the Debtors proposed chapter 11 plan (but conditioned on Landlord not voting to reject the proposed chapter 11 plan), Landlord shall have an aggregate allowed general unsecured claim against each Tenant of not less than $14,080,908.00, which amount represents, the difference between the net present value of the rent related to the Subject Properties and the Sale Price, which allowed claims shall not be subject to setoff, recoupment or reduction for any reason. Notwithstanding the prior sentence, such allowed claims may be reduced to a single claim if the Debtors are substantively consolidated or the Debtors chapter 11 plan otherwise provides for a single recovery to creditors with joint and several claims and Landlord hereby agrees not to object to substantive consolidation of the Debtors so long as Landlords claim(s) are treated the same as other allowed general unsecured claims against the Debtors. Upon the assumption by Tenant of the Go-Forward Properties Lease, Tenant shall be deemed to have waived and released (a) Landlord from all claims and causes of action it may have against Landlord, including any claims based on liability under chapter 5 of title 11 of the United States Code, (b) Landlords affiliates from all claims and causes of action it may have against such affiliates on account of the Lease based on liability under chapter 5 of title 11 of the United States Code and (c) Tenant shall dismiss Adversary Proceeding No. 07-05016, currently pending before the Bankruptcy Court, and any other actions waived and released by this Term Sheet that have been filed.

Releases

Conditions Precedent The Bankruptcy Court entering an order approving the agreement memorializing the terms set forth in this Term Sheet with a provision that the 365(d)(3) Order is limited to the specific facts of the motion for K&E 11557698.16 5

which such order was entered and has no precedential effect (the Approval Order). Any and all claims and causes of action are waived and released as set forth in the Releases. The Closing of the Sale of the Business. The Closing of the sale of the Subject Properties to Tenant; provided, however, to the extent the defeasance of the mortgages encumbering the Subject Properties has not been completed on or prior to the Closing of the Sale of the Business, Tenant shall have escrowed the Sale Price plus fees and costs incurred or to be incurred by Landlord in connection with the defeasance of the mortgages (subject to the cap provided in the Cure Payment section above) plus all unpaid taxes less the difference between the Existing Letter of Credit and the Go-Forward Properties Letter of Credit, as security for the closing of the sale of the Subject Properties; provided, the credit for the difference between the Existing Letter of Credit and the Go-Forward Properties Letter of Credit is conditioned upon Buyer posting the Go-Forward Properties Letter of Credit. In the event the Closing of the sale of the Subject Properties does not occur, such amount automatically shall be released and paid to Landlord. The Conditions Precedent shall be considered satisfied upon the Satisfaction of the Conditions Precedent satisfaction of each Condition Precedent or written agreement of the Parties to waive each of the Conditions Precedent that has not been satisfied, which waiver can be general or a waiver of a Condition Precedent with respect to a specific term of the agreement conditioned on the satisfaction of such Condition Precedent. Withdrawal of Motion Notwithstanding the fact that the Satisfaction of the Conditions Precedent may not have occurred, within two (2) business days of filing the motion seeking approval of the agreement memorializing the terms set forth herein, the Debtors shall withdraw the Motion without prejudice, and upon the Satisfaction of the Conditions Precedent, the Motion shall be deemed withdrawn with prejudice. Within two (2) business days of the Satisfaction of the Conditions Precedent, the Debtors shall promptly seek to have the Appeal dismissed; provided that if an order has been entered affirming the 365(d)(3) Order, the Debtors shall promptly request that the District Court vacate such order and the Landlord shall support such request. If the Term Sheet has not been approved by the Bankruptcy Court within 30 days hereof, either party may terminate the obligations set forth herein, and the Term Sheet shall be null and void and of no further effect.

Dismissal of Appeal

Deadline

K&E 11557698.16

IN WITNESS WHEREOF, Landlord and Tenant have caused this Term Sheet to be executed on their behalf by their officers thereunto duly authorized, as of the ___ day of May, 2007. FABRIC (DE) GP By: Name: Its Duly Authorized Signatory COLLINS & AIKMAN PRODUCTS CO. By: Name: Its Duly Authorized Signatory COLLINS & AIKMAN AUTOMOTIVE MATS, LLC By: Name: Its Duly Authorized Signatory COLLINS & AIKMAN CARPET & ACOUSTICS (TN), INC. By: Name: Its Duly Authorized Signatory COLLINS & AIKMAN PLASTICS, INC. By: Name: Its Duly Authorized Signatory

K&E 11557698.16