THIS IS NOT A SOLICITATION OF ACCEPTANCES OF THE FIRST AMENDED JOINT PLAN OF COLLINS & AIKMAN CORPORATION AND ITS

DEBTOR SUBSIDIARIES. ACCEPTANCES MAY NOT BE SOLICITED UNTIL A DISCLOSURE STATEMENT HAS BEEN APPROVED BY THE COURT. THIS DISCLOSURE STATEMENT IS BEING SUBMITTED FOR APPROVAL BUT HAS NOT YET BEEN APPROVED BY THE COURT. APPENDIX C TO THIS DISCLOSURE STATEMENT, THE LIQUIDATION ANALYSIS, WILL BE PROVIDED IN A SUBSEQUENT FILING NO LATER THAN JANUARY 15, 2007

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

DISCLOSURE STATEMENT FOR THE FIRST AMENDED JOINT PLAN OF COLLINS & AIKMAN CORPORATION AND ITS DEBTOR SUBSIDIARIES KIRKLAND & ELLIS LLP 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 CARSON FISCHER, P.L.C. Joseph M. Fischer (P13452) Lawrence A. Lichtman (P35403) 4111 West Andover Road - Second Floor Bloomfield Hills, Michigan 48302 Telephone: (248) 644-4840 Facsimile: (248) 644-1832 Co-Counsel for the Debtors

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.

K&E 11548126.1

0W[;',6

0555927071222000000000004

$n

-andDavid L. Eaton (IL 3122303) Ray C. Schrock (IL 6257005) Marc J. Carmel (IL 6272032) Scott R. Zemnick (IL 6276224) 200 East Randolph Drive Chicago, Illinois 60601 Telephone: (312) 861-2000 Facsimile: (312) 861-2200 Co-Counsel for the Debtors Dated: December 22, 2006

K&E 11548126.1

TABLE OF CONTENTS

ARTICLE I. SUMMARY ...........................................................................................................................................1 A. The Debtors Principal Assets and Indebtedness ........................................................................................2 B. Foreign Subsidiaries and European Affiliates.............................................................................................2 C. The Purpose of the Plan ..............................................................................................................................2 D. Treatment of Claims and Equity Interests...................................................................................................2 E. Claims Estimates.........................................................................................................................................4 F. Preservation of Rights of Action.................................................................................................................5 G. The Releasing Parties..................................................................................................................................6 H. Compromise and Settlement .......................................................................................................................6 I. Releases by the Debtors ..............................................................................................................................7 J. Third Party Release.....................................................................................................................................7 K. Exculpation .................................................................................................................................................8 L. Injunction ....................................................................................................................................................9 M. Consummation of the Plan..........................................................................................................................9 N. Certain Factors to Be Considered Prior to Voting ......................................................................................9 O. Voting and Confirmation ............................................................................................................................9 ARTICLE II. GENERAL INFORMATION .............................................................................................................11 A. The Debtors Businesses...........................................................................................................................11 B. The Debtors Industry ...............................................................................................................................13 C. Prepetition Capital Structure of the Debtors .............................................................................................14 D. Directors of Collins & Aikman Corporation.............................................................................................15 ARTICLE III. THE CHAPTER 11 CASES..............................................................................................................15 A. Events Leading to the Chapter 11 Cases...................................................................................................15 B. Crisis Period Surrounding the Filing of the Chapter 11 Cases..................................................................17 C. Initiation of the Chapter 11 Cases .............................................................................................................18 D. Appointment of the Creditors Committee .................................................................................................18 E. The Debtors Initial Stabilization Initiatives .............................................................................................18 F. The Debtors Aggressive Restructuring Initiatives ...................................................................................20 G. The Debtors Attempts to Reorganize.......................................................................................................21 H. Certain Administrative Matters in the Chapter 11 Cases ..........................................................................26 I. Litigation and Investigations.....................................................................................................................31 ARTICLE IV. THE SALE PROCESS......................................................................................................................37 A. Customer Agreement with the Original Equipment Manufacturers..........................................................37 B. Sale of Carpet & Acoustics .......................................................................................................................39 C. Sale of Plastics ..........................................................................................................................................40 D. Labor, Pension and Retiree Benefits .........................................................................................................41 ARTICLE V. SUMMARY OF THE PLAN..............................................................................................................42 A. Overview of Chapter 11............................................................................................................................42 B. Classification and Treatment of Claims and Equity Interests ...................................................................43 C. Means for Implementation of the Plan......................................................................................................48 D. Treatment of Executory Contracts and Unexpired Leases ........................................................................53 E. Provisions Governing Distributions ..........................................................................................................56 F. Procedures for Resolving Disputed Claims ..............................................................................................58 G. Conditions Precedent to Confirmation and Consummation of the Plan....................................................59 H. Cramdown.................................................................................................................................................60
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I. J. K. L.

Settlement, Release, Injunction and Related Provisions ...........................................................................60 Injunction ..................................................................................................................................................63 Retention of Jurisdiction ...........................................................................................................................63 Miscellaneous Provisions..........................................................................................................................63

ARTICLE VI. STATUTORY REQUIREMENTS FOR CONFIRMATION OF THE PLAN .................................64 A. The Confirmation Hearing ........................................................................................................................64 B. Confirmation Standards ............................................................................................................................64 C. Financial Feasibility..................................................................................................................................65 D. Best Interests of Creditors Test .................................................................................................................65 E. Acceptance by Impaired Classes...............................................................................................................66 F. Confirmation without Acceptance by All Impaired Classes .....................................................................66 ARTICLE VII. CERTAIN FACTORS TO BE CONSIDERED PRIOR TO VOTING............................................67 A. Certain Bankruptcy Considerations ..........................................................................................................68 B. Risks Relating to the Sale Process ............................................................................................................69 C. Other Risks................................................................................................................................................70 D. Liquidation under Chapter 7 .....................................................................................................................70 ARTICLE VIII. CERTAIN FEDERAL INCOME TAX CONSEQUENCES..........................................................71 A. Certain United States Federal Income Tax Consequences to the Debtors ................................................71 B. Certain United States Federal Income Tax Consequences to the Holders of Class 1 and Class 2 C. D. E.
Claims .......................................................................................................................................................72 Certain United States Federal Income Tax Consequences to the Holders of Class 3 Claims ...................72 Certain United States Federal Income Tax Consequences to the Holders of Class 5 Claims, Class 6 Claims and Class 7 Claims ...........................................................................................................73 Receipt of Interests in Post-Consummation Trust and in the Litigation Trust ..........................................74

ARTICLE IX. VOTING INSTRUCTIONS..............................................................................................................75 A. Voting Record Date ..................................................................................................................................75 B. Voting Deadline ........................................................................................................................................75 C. Holders of Claims Entitled to Vote ...........................................................................................................76 D. Voting Procedures.....................................................................................................................................76 E. Tabulation of Votes...................................................................................................................................77 F. Votes Required for Acceptance by a Class ...............................................................................................80 ARTICLE X. RECOMMENDATION ......................................................................................................................80

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K&E 11548126.1

THIS DISCLOSURE STATEMENT FOR THE FIRST AMENDED JOINT PLAN OF COLLINS & AIKMAN CORPORATION AND ITS DEBTOR SUBSIDIARIES (THIS DISCLOSURE STATEMENT) CONTAINS, AMONG OTHER THINGS, SUMMARIES OF CERTAIN PROVISIONS OF THE PLAN, CERTAIN STATUTORY PROVISIONS, CERTAIN DOCUMENTS RELATED TO THE PLAN AND CERTAIN EVENTS IN THE DEBTORS CHAPTER 11 CASES. ALTHOUGH THE DEBTORS BELIEVE THAT THESE SUMMARIES ARE FAIR AND ACCURATE, THESE SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY TO THE EXTENT THAT THE SUMMARIES DO NOT SET FORTH THE ENTIRE TEXT OF SUCH DOCUMENTS OR STATUTORY PROVISIONS OR EVERY DETAIL OF SUCH EVENTS. THE INFORMATION INCLUDED HEREIN IS FOR PURPOSES OF SOLICITING ACCEPTANCE OF THE PLAN AND SHOULD NOT BE RELIED UPON FOR ANY PURPOSE OTHER THAN TO DETERMINE WHETHER AND HOW TO VOTE ON THE PLAN. THE SUMMARIES OF THE DOCUMENTS THAT ARE ATTACHED HERETO OR INCORPORATED BY REFERENCE HEREIN ARE QUALIFIED IN THEIR ENTIRETY BY SUCH INFORMATION AND DOCUMENTS. IN THE EVENT OF ANY INCONSISTENCY OR DISCREPANCY BETWEEN A DESCRIPTION IN THIS DISCLOSURE STATEMENT AND THE TERMS AND PROVISIONS OF THE PLAN OR ANY OTHER DOCUMENTS INCORPORATED HEREIN BY REFERENCE, THE PLAN OR SUCH OTHER DOCUMENTS, AS THE CASE MAY BE, SHALL GOVERN FOR ALL PURPOSES. FACTUAL INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT HAS BEEN PROVIDED BY THE DEBTORS MANAGEMENT EXCEPT WHERE OTHERWISE SPECIFICALLY NOTED. THE DEBTORS DO NOT WARRANT OR REPRESENT THAT THE INFORMATION CONTAINED HEREIN IS WITHOUT ANY MATERIAL INACCURACY OR OMISSION. THE STATEMENTS CONTAINED HEREIN ARE MADE AS OF THE DATE HEREOF UNLESS OTHERWISE SPECIFIED. HOLDERS OF CLAIMS AND EQUITY INTERESTS REVIEWING THIS DISCLOSURE STATEMENT SHOULD NOT INFER THAT THERE HAVE BEEN NO CHANGES IN THE FACTS SET FORTH HEREIN BETWEEN THE DATE HEREOF AND THE TIME OF SUCH REVIEW. EACH HOLDER OF A CLAIM ENTITLED TO VOTE ON THE PLAN SHOULD CAREFULLY REVIEW THE PLAN, THIS DISCLOSURE STATEMENT AND EXHIBITS TO THE PLAN IN THEIR ENTIRETY BEFORE CASTING A BALLOT. THIS DISCLOSURE STATEMENT DOES NOT CONSTITUTE LEGAL, BUSINESS, FINANCIAL OR TAX ADVICE. ANY PERSONS DESIRING ANY SUCH ADVICE OR OTHER ADVICE SHOULD CONSULT WITH THEIR OWN ADVISORS. NO PARTY IS AUTHORIZED TO GIVE ANY INFORMATION WITH RESPECT TO THE PLAN OTHER THAN THAT WHICH IS CONTAINED IN THIS DISCLOSURE STATEMENT. NO REPRESENTATIONS CONCERNING THE DEBTORS OR THE VALUE OF THEIR PROPERTY HAVE BEEN AUTHORIZED BY THE DEBTORS OTHER THAN AS SET FORTH IN THIS DISCLOSURE STATEMENT. ANY INFORMATION, REPRESENTATIONS OR INDUCEMENTS MADE TO OBTAIN AN ACCEPTANCE OF THE PLAN THAT ARE OTHER THAN, OR INCONSISTENT WITH, THE INFORMATION CONTAINED HEREIN AND IN THE PLAN SHOULD NOT BE RELIED UPON BY ANY HOLDER OF A CLAIM OR EQUITY INTEREST. WITH RESPECT TO CONTESTED MATTERS, ADVERSARY PROCEEDINGS AND OTHER PENDING, THREATENED OR POTENTIAL LITIGATION OR ACTIONS, THIS DISCLOSURE STATEMENT DOES NOT CONSTITUTE AND MAY NOT BE CONSTRUED AS AN ADMISSION OF FACT, LIABILITY, STIPULATION OR WAIVER, BUT RATHER AS A STATEMENT MADE IN SETTLEMENT NEGOTIATIONS AND PROTECTED BY RULE 408 OF THE FEDERAL RULES OF EVIDENCE. THIS DISCLOSURE STATEMENT HAS NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE SEC), NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE STATEMENTS CONTAINED HEREIN. SEE ARTICLE VII OF THIS DISCLOSURE STATEMENT, ENTITLED CERTAIN FACTORS TO BE CONSIDERED PRIOR TO VOTING, FOR A DISCUSSION OF CERTAIN CONSIDERATIONS IN CONNECTION WITH A DECISION BY A HOLDER OF AN IMPAIRED CLAIM TO VOTE TO ACCEPT OR REJECT THE PLAN. THIS DISCLOSURE STATEMENT HAS BEEN DETERMINED BY THE BANKRUPTCY COURT TO CONTAIN ADEQUATE INFORMATION AS REQUIRED BY SECTION 1125 OF THE BANKRUPTCY CODE, WHICH DETERMINATION DOES NOT CONSTITUTE A RECOMMENDATION OR APPROVAL OF THE PLAN.

iv
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UNLESS OTHERWISE STATED, ANY CAPITALIZED TERM USED HEREIN SHALL HAVE THE MEANING ASSIGNED TO SUCH TERM HEREIN OR, IF NO MEANING IS SO ASSIGNED, THE MEANING ASSIGNED TO SUCH TERM IN THE PLAN. OBJECTIONS TO CONFIRMATION OF THE PLAN MUST BE FILED AND SERVED ON OR BEFORE [MONTH DAY], 2007 (THE PLAN OBJECTION DEADLINE), IN ACCORDANCE WITH THE SOLICITATION NOTICE FILED AND SERVED ON HOLDERS OF CLAIMS, HOLDERS OF EQUITY INTERESTS AND OTHER PARTIES IN INTEREST. UNLESS OBJECTIONS TO CONFIRMATION ARE TIMELY SERVED AND FILED IN COMPLIANCE WITH THE SOLICITATION NOTICE, THEY MAY NOT BE CONSIDERED BY THE BANKRUPTCY COURT. THE BANKRUPTCY COURT HAS SCHEDULED THE CONFIRMATION HEARING TO COMMENCE ON [MONTH DAY], 2007 AT [ :] [A./P.M.] PREVAILING EASTERN TIME, BEFORE THE HONORABLE STEVEN W. RHODES, UNITED STATES BANKRUPTCY JUDGE, IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF MICHIGAN, SOUTHERN DIVISION, 211 WEST FORT STREET, DETROIT, MICHIGAN 48226. THE CONFIRMATION HEARING MAY BE ADJOURNED FROM TIME TO TIME BY THE BANKRUPTCY COURT WITHOUT FURTHER NOTICE ON OR PRIOR TO THE PLAN OBJECTION DEADLINE. IF THE DEBTORS ADJOURN THE CONFIRMATION HEARING AFTER THE PLAN OBJECTION DEADLINE, THE DEBTORS SHALL PROVIDE WRITTEN NOTICE OF SUCH ADJOURNMENT TO ANY OBJECTING PARTY AND THE CORE GROUP AND THE 2002 LIST (AS DEFINED IN THE FIRST AMENDED NOTICE, CASE MANAGEMENT AND ADMINISTRATIVE PROCEDURES FILED ON JUNE 9, 2005 [DOCKET NO. 294]).

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ARTICLE I.
SUMMARY The following summary is qualified in its entirety by the more detailed information contained in the Plan and elsewhere in this Disclosure Statement. On May 17, 2005 (the Petition Date), Collins & Aikman Corporation, Collins & Aikman Products Co. and substantially all of their direct and indirect wholly-owned subsidiaries incorporated or organized in the United States (additional 36 entities) (each a Debtor, and collectively, the Debtors) filed voluntary petitions for relief commencing cases (each a Chapter 11 Case, and collectively, the Chapter 11 Cases) under chapter 11 of the Bankruptcy Code, 11 U.S.C. 1011330 (the Bankruptcy Code), in the United States Bankruptcy Court for the Eastern District of Michigan (the Bankruptcy Court). Collins & Aikman Corporation has been a leading supplier of automotive components, systems and modules to the largest automotive original equipment manufacturers, including DaimlerChrysler Corporation (DaimlerChrysler), Ford Motor Company (Ford), General Motors Corporation (General Motors), Honda of America Manufacturing, Inc. (Honda), Nissan North America, Inc. (Nissan), AutoAlliance International, Inc., and Toyota Engineering Motor Manufacturing North America, Inc. (Toyota) and certain of their affiliates (other than Nissan and Toyota, each, an OEM). Collins & Aikman Corporation conducts all operating activities through its wholly-owned subsidiary, Collins & Aikman Products Co., and direct and indirect subsidiaries of Collins & Aikman Products Co. (Collins & Aikman Corporation, Collins & Aikman Products Co. and their direct and indirect subsidiaries are hereinafter collectively referred to as C&A or the Company). Throughout the Chapter 11 Cases, C&A has operated in two business segments: Plastics and Soft Trim. Through its Plastics segment, C&A manufactures a full range of plastic-based automotive interior products, including instrument panels and instrument panel components, door panels, consoles and other trim components, as well as exterior products including front and rear bumper parts. C&A also assembles and sequences the delivery of complex systems and modules that incorporate these products and products from other suppliers, including cockpits, door modules and front and rear fascia modules. C&As Soft Trim segment manufactures a variety of automotive carpet and acoustics products (the Carpet & Acoustics business) and convertible roof systems. C&A is headquartered in Southfield, Michigan. As a result of various factors described more fully herein, the Debtors management, in consultation with key constituencies in the Chapter 11 Cases, including the Prepetition Lenders, the OEMs and the Creditors Committee, have determined that the reorganization of the Debtors as a going concern is not feasible. Consequently, the Debtors have embarked on a sale process (the Sale Process) to maximize the value that can be realized from the Debtors businesses and assets. The Sale Process contemplates, among other things: (i) a going concern sale of the Carpet & Acoustics business in the Debtors Soft Trim segment; (ii) going concern sales of certain plants or divisions in the Debtors Plastics business segment and the Debtors Convertibles business; (iii) an orderly wind-down of the Debtors non-salable business operations in cooperation with the OEMs; (iv) sales of all remaining assets; and (v) preservation of the Debtors working capital assets and mitigation of administrative claims and other wind-down costs to the extent possible. For a description of the status and expectations with regard to the Sale Process, see Article IV herein. To fairly and expeditiously monetize and distribute the proceeds realized from the Sale Process and certain retained causes of action (the Retained Causes of Action) consistent with the Bankruptcy Code, the Debtors have proposed their First Amended Joint Plan of Collins & Aikman Corporation and Its Debtor Subsidiaries pursuant to chapter 11 of the Bankruptcy Code (as it may be amended or supplemented from time to time, the Plan). This Disclosure Statement is being furnished by the Debtors pursuant to section 1125 of the Bankruptcy Code in connection with the solicitation of votes for the acceptance or rejection of the Plan in accordance with the Bankruptcy Code and the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules). A copy of the Plan is attached hereto as Appendix A. This Disclosure Statement describes certain aspects of the Plan, including the treatment of Claims against and Equity Interests in the Debtors and describes certain aspects of the Debtors operations, the Sale Process and other related matters.

1
K&E 11548126.1

A.

The Debtors Principal Assets and Indebtedness

The principal assets of Collins & Aikman Corporation include the stock of Collins & Aikman Products Co. and its direct and indirect subsidiaries. The principal assets of Collins & Aikman Products Co. include its automotive parts supply businesses and the stock of its direct and indirect subsidiaries. The principal indebtedness of Collins & Aikman Corporation, Collins & Aikman Products Co. and their Debtor subsidiaries includes: (1) DIP Facility Claims; (2) OEM Junior Secured DIP Claims; (3) Prepetition Facility Claims; (4) Senior Notes Claims; and (5) Senior Subordinated Note Claims. Collins & Aikman Products Co. is the primary borrower with respect to the DIP Facility, the OEM Subordinated DIP Loan, the Prepetition Facility, the Senior Notes and the Senior Subordinated Notes. Each of the Debtors is either jointly and severally liable for such indebteness or a guarantor of such indebtedness.

B.

Foreign Subsidiaries and European Affiliates

None of C&As foreign subsidiaries are Debtors. The subsidiaries of Collins & Aikman Products Co. incorporated or organized in Canada and Mexico did not file for bankruptcy protection and continue to operate as part of C&A outside of such proceedings. C&As non-Debtor subsidiaries organized in Canada and Mexico operate twelve manufacturing and sequencing facilities in Canada and five manufacturing facilities in Mexico, respectively. On July 15, 2005, the Debtors European affiliates (each, a European Debtor, and collectively, the European Debtors) commenced administration proceedings in accordance with English insolvency law (the UK Proceedings). The English court appointed certain administrators in the UK Proceedings to act in the best interests of the creditors of the European Debtors (the UK Administrators). Further, to facilitate efficient administration, the Bankruptcy Court and the English court each approved an insolvency protocol to govern information exchange and other issues arising in and between the UK Proceedings and the Chapter 11 Cases. On November 28, 2005, after holding discussions with over 100 parties interested in purchasing some or all of the European Debtors assets, the UK Administrators agreed to sell substantially all of the European Debtors assets to IAC Acquisition Corporation Limited (which the Debtors understand to be an entity funded by, among others, WL Ross & Co. LLC and Franklin Mutual Advisors LLC) in a series of individual transactions for an aggregate purchase price in excess of $100 million. As part of the sale, the Debtors agreed to transfer and license certain intellectual property to IAC Acquisition Corporation Limited for approximately $12.5 million. The sale substantially closed on March 3, 2006.

C.

The Purpose of the Plan

The Plan provides for the continuation of the Sale Process and realization on the Retained Causes of Action for the benefit of the Holders of Allowed Claims. Cash on hand and cash generated by the Sale Process and Retained Causes of Action will be segregated and distributed to Holders of Allowed Claims after the Effective Date of the Plan. The Debtors believe that the Plan maximizes recoveries for Holders of Allowed Claims and strongly recommend that you vote to accept the Plan (if you are entitled to vote). The Debtors believe that any alternative to Confirmation of the Plan, such as conversion of the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code or attempts by another party in interest to file a plan, would result in significant delays, litigation and additional costs and, ultimately, would lower the recoveries for Holders of Allowed Claims.

D.

Treatment of Claims and Equity Interests

Except for unclassified Administrative Claims and Priority Tax Claims, the Plan divides all Claims against and Equity Interests in the Debtors into various Classes. The table set forth below summarizes the Classes of Claims and Equity Interests under the Plan, the treatment and projected recovery of such Classes under the Plan and such Classes entitlement to vote on the Plan.

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K&E 11548126.1

1.

Summary and Treatment of Unclassified Claims Plan Treatment Unless otherwise agreed to by the Holder and the applicable Debtor or Post-Consummation Trust, payment in full in Cash. Unless otherwise agreed to by the Holder and the applicable Debtor or Post-Consummation Trust, (a) a Tax Note, (b) Cash payments over a period not exceeding six years after the date of assessment of such Claim of a value, as of the Effective Date, equal to the allowed amount of such Claim or (c) a combination of Cash and a Tax Note. Projected Recovery Under the Plan 100.0%

Claim Administrative Claims

Priority Tax Claims

100.0%

2.

Summary of Classification and Treatment of Claims and Equity Interests Projected Recovery Under the Plan 100.0%

Class 1

Claim Other Secured Claims

Plan Treatment of Class (a) Payment in full in Cash, (b) return of collateral securing such Claim and interest required to be paid under section 506(b) of the Bankruptcy Code or (c) treatment otherwise rendering such Claim Unimpaired. Unless otherwise agreed to by the Holder and the Debtor or Plan Administrator, (a) payment in full in Cash or (b) treatment otherwise rendering such Claim Unimpaired. (a) Pro Rata share of the Prepetition Facility Distribution, (b) Pro Rata share of the Post-Consummation Trust Beneficial Interests, (c) Pro Rata share of the percentage of the Litigation Recovery Interests that is set forth on Exhibit C to the Plan, (d) retention of all adequate protection payments except those that were deferred by order of the Bankruptcy Court, (e) payment of the Agents reasonable attorneys and financial advisor fees and (e) releases and exculpation provided in Article XII of the Plan. Releases and exculpation provided in Article XII of the Plan. Pro Rata share of the percentage of the Litigation Recovery Interests that is set forth on Exhibit C to the Plan. 3

Status Unimpaired

Voting Rights Deemed to Accept

Other Priority Claims

100.0%

Unimpaired

Deemed to Accept

Prepetition Facility Claims

[ ]%

Impaired

Entitled to Vote

4 5

OEM Claims General Unsecured Claims

[ ]% [ ]%

Impaired Impaired

Entitled to Vote Entitled to Vote

K&E 11548126.1

Class 6

Claim Senior Note Claims and PBGC Claims Senior Subordinated Note Claims

Plan Treatment of Class Pro Rata share of the percentage of the Litigation Recovery Interests that is set forth on Exhibit C to the Plan. Pro Rata share of the percentage of the Litigation Recovery Interests that is set forth on Exhibit C to the Plan; provided that such Pro Rata share will first be distributed to Holders of Allowed Senior Note Claims until such Claims have been paid in full. Not entitled to receive any distribution or retain any property under the Plan. Not entitled to receive any distribution or retain any property under the Plan. Not entitled to receive any distribution or retain any property under the Plan; provided that Claims of a European Debtor will be deemed Allowed General Unsecured Claims and not Intercompany Claims.

Projected Recovery Under the Plan [ ]%

Status Impaired

Voting Rights Entitled to Vote Entitled to Vote

[ ]%

Impaired

8 9 10

Equity Interests Subordinated Securities Claims Intercompany Claims

0% 0% 0%

Impaired Impaired Impaired

Deemed to Reject Deemed to Reject Deemed to Reject

E.

Claims Estimates

As of December 20, 2006, the Debtors Claims Agent had received approximately 9,049 Claims. The total amounts of Claims filed against one or more of the Debtors were as follows: (1) 1,025 Secured Claims in the total amount of $3,091,616,331; (2) 43 Administrative Claims in the total amount of $2,380,409; (3) 905 Priority Claims in the total amount of $7,537,867,410; and (4) 7,077 Unsecured Claims in the total amount of $42,659,002,339. The Debtors believe that many of the filed proofs of Claim are invalid, untimely, duplicative and/or overstated. Therefore, the Debtors are in the process of objecting to such Claims. Through withdrawal of claims and disallowance by the Bankruptcy Court after objection, 554 claims totaling $4,414,393,899 have been expunged. The Debtors estimate that, at the conclusion of the Claims objection, reconciliation and resolution process, the aggregate amount of claims will be as follows: (1) Allowed Administrative Claims will be approximately $70 million; (2) Allowed Secured Claims will be approximately $827 million; (3) Allowed Priority Claims will be approximately $12 million; (4) Allowed Senior Note Claims will be approximately $521 million; (5) Allowed Senior Subordinated Note Claims will be approximately $428 million; and (6) Allowed General Unsecured Claims will be approximately $539 million. The estimate of Allowed Administrative Claims includes, among others, the final payment due under the KERP, payments contemplated by a new key employee retention plan, severance expenses, professional fees, cure costs from the assumption of executory contracts to be assigned to potential purchasers (which may or may not be paid by such purchasers), property taxes, early termination penalties under postpetition contracts and certain Administrative Claim requests reflected on the Claims Register and docket for which the Debtors reasonably expect there to be a distribution. The Administrative Claim estimate does not include $30 million arising from the OEM Administrative DIP Claims, payment of which is expected to be waived by the OEMs as part of the Customer Agreement. Further, the estimate of Allowed Secured Claims does not include the OEM Subordinated DIP Loan in the amount of $82.5 million, payment of which is expected to be waived by the OEMs as part of the Customer Agreement.

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K&E 11548126.1

The estimates set forth herein are approximate and based upon numerous assumptions and there is no guarantee that the ultimate amount of Claims will conform to these estimates. Numerous Claims have been asserted in unliquidated amounts. Further, additional Claims may be filed or identified during the Claims objection, reconciliation and resolution process that may materially affect the foregoing estimates. Although the Debtors believe that certain Claims are without merit and intend to object to all such Claims, there can be no assurance that these objections will be successful.

F.

Preservation of Rights of Action

1.

Maintenance of Causes of Action

Pursuant to the Plan, and except as otherwise provided therein or in any Final Order with respect to any Causes of Action that are barred, waived, relinquished, released, settled or compromised, on the Effective Date, all of the Debtors rights to commence and pursue, as appropriate, any and all Causes of Action, whether arising before or after the Petition Date, in any court or other tribunal in an adversary proceeding or contested matter Filed in one or more of the Chapter 11 Cases, including the following actions and any Causes of Actions specified on Exhibit A to the Plan, shall be transferred to the Post-Consummation Trust and the Litigation Trust, as applicable: (a) objections to Claims under the Plan; and (b) any other litigation or Causes of Action, whether legal, equitable or statutory in nature, arising out of, or in connection with the Debtors businesses, assets or operations or otherwise affecting the Debtors, including possible claims against the following types of parties, both domestic and foreign, for the following types of claims: (i) Causes of Action against vendors, suppliers of goods or services, or other parties for overpayments, back charges, duplicate payments, improper holdbacks, deposits, warranties, guarantees, indemnities or setoff; (ii) Causes of Action against utilities, vendors, suppliers of services or goods, or other parties for wrongful or improper termination, suspension of services or supply of goods, or failure to meet other contractual or regulatory obligations; (iii) Causes of Action against vendors, suppliers of goods or services, or other parties for failure to fully perform or to condition performance on additional requirements under contracts with any one or more of the Debtors before the assumption or rejection of the subject contracts; (iv) Causes of Action for any liens, including mechanics, artisans, materialmens, possessory or statutory liens held by any one or more of the Debtors; (v) Causes of Action for payments, deposits, holdbacks, reserves or other amounts owed by any creditor, lessor, utility, supplier, vendor, insurer, surety, factor, lender, bondholder, lessor or other party; (vi) Causes of Action against any current or former director, officer, employee or agent of the Debtors arising out of employment related matters, including Causes of Action regarding intellectual property, confidentiality obligations, employment contracts, wage and benefit overpayments, travel, contractual covenants, or employee fraud or wrongdoing; (vii) Causes of Action against any professional services provider or any other party arising out of financial reporting; (viii) Causes of Action arising out of environmental or contaminant exposure matters against landlords, lessors, environmental consultants, environmental agencies or suppliers of environmental services or goods; (ix) Causes of Action against insurance carriers, reinsurance carriers, underwriters or surety bond issuers relating to coverage, indemnity, contribution, reimbursement or other matters; (x) counterclaims and defenses relating to notes, bonds or other contract obligations; (xi) Causes of Action against local, state, federal and foreign taxing authorities for refunds of overpayments or other payments; (xii) Causes of Action against attorneys, accountants, consultants or other professional service providers relating to services rendered; (xiii) contract, tort or equitable Causes of Action that may exist or subsequently arise; (xiv) any intracompany or intercompany Causes of Action; (xv) Causes of Action of the Debtors arising under section 362 of the Bankruptcy Code; (xvi) equitable subordination Causes of Action arising under section 510 of the Bankruptcy Code or other applicable law; (xvii) turnover Causes of Action arising under sections 542 or 543 of the Bankruptcy Code; (xviii) Causes of Action arising under chapter 5 of the Bankruptcy Code, including preferences under section 547 of the Bankruptcy Code; (xix) Causes of Action against any union arising from, among other things, state or federal law or under a collective bargaining agreement, including any wrongful or illegal acts, any wrongful termination, suspension of performance, defamation or failure to meet other contract or regulatory obligations; and (xx) Causes of Action for unfair competition, interference with contract or potential business advantage, conversion, infringement of intellectual property or other business tort claims. The Post-Consummation Trust and the Litigation Trust will be transferred the foregoing Causes of Action notwithstanding the rejection of any executory contract or unexpired lease during the Debtors Chapter 11 Cases. In accordance with section 1123(b)(3) of the Bankruptcy Code, any claims, rights and Causes of Action that the respective Debtors may hold against any Person shall vest in the Post-Consummation Trust and the Litigation Trust, as the case may be. The Post-Consummation Trust or the Litigation Trust, through its authorized agents or representatives, will have and may exclusively enforce any and all such claims, rights or Causes of Action transferred to it, and all other 5
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similar claims arising pursuant to applicable state laws, including fraudulent transfer claims, if any, and all other Causes of Action of a trustee and debtor-in-possession pursuant to the Bankruptcy Code. The Post-Consummation Trust and the Litigation Trust will have the exclusive right, authority and discretion to determine and to initiate, file, prosecute, enforce, abandon, settle, compromise, release, withdraw or litigate to judgment any and all such claims, rights and Causes of Action transferred to it, and to decline to do any of the foregoing without the consent or approval of any third party and without any further notice to or action, order or approval of the Bankruptcy Court. The Litigation Trust will be transferred all of the Litigation Trust Claims and the Post-Consummation Trust will be transferred any and all other Causes of Action. The Post-Consummation Trust will have the right to object to all administrative expenses and Claims which, if Allowed, would entitle the Holder thereof to payments or other distributions from the Post-Consummation Trust and the Litigation Trust will have the right to object to all Claims other than Prepetition Facility Claims which, if Allowed, would entitle the Holder thereof to payments or other distributions from the Litigation Trust.

2.

Preservation of All Causes of Action Not Expressly Settled or Released

Unless a claim or Cause of Action against a creditor or other Person is expressly waived, relinquished, released, compromised or settled in the Plan or any Final Order, the Debtors expressly reserve such claim or Cause of Action in the Plan for later adjudication by the Debtors or the Post-Consummation Trust or the Litigation Trust, as applicable and, therefore, no preclusion doctrine, including the doctrines of res judicata, collateral estoppel, issue preclusion, claim preclusion, waiver, estoppel (judicial, equitable or otherwise) or laches will apply to such claims or Causes of Action upon or after the Confirmation or Consummation of the Plan based on this Disclosure Statement, the Plan or the Confirmation Order, except where such claims or Causes of Action have been expressly waived, relinquished, released, compromised, or settled in the Plan or a Final Order. In addition, the Debtors and the Trusts expressly reserve the right to pursue or adopt any claims not so waived, relinquished, released, compromised or settled that are alleged in any lawsuit in which the Debtors are a defendant or an interested party, against any Person, including the plaintiffs or co-defendants in such lawsuits. Any Person to whom the Debtors have incurred an obligation (whether on account of services, purchase, sale of goods or otherwise), or who has received services from the Debtors or a transfer of money or property of the Debtors, or who has transacted business with the Debtors, or leased equipment or property from the Debtors should assume that such obligation, transfer or transaction may be reviewed by the Post-Consummation Trust or the Litigation Trust, as applicable, subsequent to the Effective Date and may, to the extent not theretofore expressly waived, relinquished, released, compromised or settled, be the subject of an action after the Effective Date, whether or not: (a) such Person has Filed a proof of claim against the Debtors in the Chapter 11 Cases; (b) such Persons proof of claim has been objected to; (c) such Persons Claim was included in the Debtors Schedules; or (d) such Persons scheduled Claim has been objected to by the Debtors or has been identified by the Debtors as disputed, contingent, or unliquidated.

G.

The Releasing Parties

The Releasing Parties include the Creditors Committee, each member of the Creditors Committee serving as of the Effective Date, the DIP Lenders, the DIP Agent, the Prepetition Lenders, the Agent, the Steering Committee, each member of the Steering Committee, all Holders of Claims in Class 3 and each of the OEMs.

H.

Compromise and Settlement

As of the Effective Date, the Plan constitutes a settlement, compromise and release, including for substantive consolidation purposes, of rights arising from or relating to the allowance, classification and treatment of all Allowed Claims and Allowed Equity Interests and their respective distributions and treatments hereunder take into account for and conform to the relative priority and rights of the Claims and Equity Interests in each Class in connection with any contractual, legal and equitable subordination rights relating thereto whether arising under general principles of equitable subordination, section 510(b) and (c) of the Bankruptcy Code, substantive consolidation or otherwise. The Confirmation Order will constitute the Bankruptcy Courts finding and determination that the settlements reflected in the Plan, including all issues pertaining to claims for substantive consolidation (which are settled by the distributions in the Plan) are (1) in the best interests of the Debtors and their Estates, (2) fair, equitable and reasonable, (3) made in good faith and (4) approved by the Bankruptcy Court pursuant to section 363 of the Bankruptcy Code and Bankruptcy Rule 9019. In addition, the allowance, classification and treatment of Allowed Claims take into account any causes of action, claims or counterclaims, whether under the Bankruptcy Code or otherwise under applicable law, that may exist: (1) between the 6
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Debtors and the Releasing Parties; and (2) as between the Releasing Parties (to the extent set forth in the Third Party Release). As of the Effective Date, any and all such causes of action, claims and counterclaims are settled, compromised and released pursuant to the Plan. The Confirmation Order will approve all such releases of contractual, legal and equitable subordination rights, causes of action, claims and counterclaims against each such Releasing Party that are satisfied, compromised and settled pursuant to the Plan. Nothing in Article XII.A of the Plan will compromise or settle in any way whatsoever, any Claims or Causes of Action that the Debtors or any Trust may have against the NonReleased Parties.

I.

Releases by the Debtors

Notwithstanding anything contained in the Plan to the contrary, on the Effective Date and effective as of the Effective Date, for the good and valuable consideration provided by each of the Debtor Releasees, including: (1) the discharge of claims and all other good and valuable consideration paid pursuant to the Plan; and (2) the services of the Debtors present officers and directors in facilitating the expeditious implementation of the transactions contemplated by the Plan, each of the Debtors will provide a full discharge and release to the Debtor Releasees (and each such Debtor Releasee so released will be deemed released and discharged by the Debtors) and each such Debtor Releasees respective properties from any and all claims, causes of action and any other debts, obligations, rights, suits, damages, actions, interests, Causes of Action, remedies, and liabilities whatsoever, whether known or unknown, foreseen or unforeseen, suspected or unsuspected, liquidated or unliquidated, contingent or fixed, currently existing or hereafter arising, in law, equity or otherwise, whether for tort, fraud, contract, violations of federal or state securities laws, or otherwise, based in whole or in part upon any act or omission, transaction, or other occurrence or circumstances existing or taking place prior to or on the Effective Date arising from or related in any way to the Debtors, including those that any of the Debtors or either Trust would have been legally entitled to assert (whether individually or collectively) or that any Holder of a Claim or Equity Interest or other Person would have been legally entitled to assert for or on behalf of any of the Debtors or any of their Estates and further including those in any way related to the Chapter 11 Cases or the Plan; provided that the foregoing Debtor Release will not operate to waive or release any Debtor Releasee from any Causes of Action set forth on Exhibit A to the Plan. Notwithstanding anything contained in the Plan to the contrary, the Debtors will not have released nor be deemed to have released by operation of Article XII.B of the Plan or otherwise any of the Causes of Action set forth on Exhibit A to the Plan or any other claims, causes of action, debts, obligations, rights, suits, damages, actions, interests, remedies or liabilities that they or either Trust may have now or in the future against the NonReleased Parties. Entry of the Confirmation Order will constitute the Bankruptcy Courts approval, pursuant to section 363 of the Bankruptcy Code and Bankruptcy Rule 9019, of the releases provided under Article XI.B of the Plan, which includes by reference each of the related provisions and definitions contained in the Plan, and further, will constitute the Bankruptcy Courts finding that such release is: (1) in exchange for good and valuable consideration provided by the Debtor Releasees, representing good faith settlement and compromise of the claims released; (2) in the best interests of the Debtors and all Holders of Claims; (3) fair, equitable and reasonable; (4) approved after due notice and opportunity for hearing; and (5) a bar to the Debtors or either Trust asserting any Claim released against any of the Debtor Releasees or their property. As used herein, Debtor Releasees includes (a) all officers, directors and employees and their respective subsidiaries employed by the Debtors at any time within six months immediately prior to the Effective Date, (b) all attorneys, financial advisors, accountants, investment bankers, investment advisors, actuaries, professionals, agents, affiliates and representatives of the Debtors and their subsidiaries and (c) the Releasing Parties, their respective predecessors and successors in interest, and all of their respective current and former members, officers, directors, employees, partners, attorneys, financial advisors, accountants, investment bankers, investment advisors, actuaries, professionals, agents, affiliates and representatives. Notwithstanding the foregoing, no Non-Released Parties will be Debtor Releasees.

7
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J.

Third Party Release

As of the Effective Date, in consideration for the obligations of the Debtors and the Trusts under the Plan and the Cash, other contracts, instruments, releases, agreements or documents to be entered into or delivered in connection with the Plan (1) each Holder of a Claim that votes in favor of the Plan and (2) to the fullest extent permissible under applicable law, as such law may be extended or interpreted subsequent to the Effective Date, each Person that has held, holds or may hold a Claim or Equity Interest or at any time was a Holder of a Claim or Equity Interest of any of the Debtors and that does not vote on the Plan or votes against the Plan will be deemed to forever release, waive and discharge all claims (including Derivative Claims), causes of action and any other debts, obligations, rights, suits, damages, actions, interests, remedies and liabilities (other than the right to enforce the obligations of the Debtors or the Trusts under the Plan and the contracts, instruments, releases, agreements and documents delivered thereunder), whether known or unknown, foreseen or unforeseen, suspected or unsuspected, liquidated or unliquidated, contingent or fixed, currently existing or hereafter arising, in law, equity or otherwise, that are based in whole or in part on any act, omission, transaction or other occurrence taking place on or prior to the Effective Date in any way relating to a Debtor, the Chapter 11 Cases or the Plan that such Person has, had or may have against any Debtor Releasee or Releasing Party (which release will be in addition to the discharge of Claims and termination of Equity Interests provided in the Plan and under the Confirmation Order and the Bankruptcy Code). Notwithstanding anything contained in the Plan to the contrary, the Releasing Parties will not have released nor deemed to have released by operation of Article XII.C of the Plan or otherwise any claims or causes of action that they, the Debtors or either Trust may have now or in the future against the Non-Released Parties. Entry of the Confirmation Order will constitute the Bankruptcy Courts approval pursuant to section 363 of the Bankruptcy Code and Bankruptcy Rule 9019 of the release provided under Article XII.C of the Plan, which includes by reference each of the related provisions and definitions contained in the Plan, and further, will constitute the Bankruptcy Courts finding that such release is: (1) in exchange for good and valuable consideration provided by the Debtor Releasees and the Releasing Parties, representing good faith settlement and compromise of the claims released; (2) in the best interests of the Debtors and all Holders of Claims; (3) fair, equitable, and reasonable; (4) approved after due notice and opportunity for hearing; and (5) a bar to any of the Releasing Parties asserting any claim released against any of the Debtor Releasees or the Releasing Parties or their respective property.

K.

Exculpation

Notwithstanding anything contained in the Plan to the contrary, the Exculpated Parties will neither have nor incur any liability to any Person for any prepetition or postpetition act taken or omitted to be taken in connection with or related to formulating, negotiating, preparing, disseminating, implementing or administering the Plan, the Disclosure Statement or any contract, instrument, release or other agreement or document created or entered into in connection with the Plan, or any other prepetition or postpetition act taken or omitted to be taken in connection with or in contemplation of the restructuring of the Debtors or confirming or consummating the Plan; provided that the foregoing provisions of Article XII.D of the Plan will have no effect on the liability of any Person that results from any such act or omission that is determined in a Final Order to have constituted gross negligence or willful misconduct; provided further that each Exculpated Party will be entitled to rely upon the advice of counsel concerning his, her or its duties pursuant to, or in connection with, the Plan; provided still further that the foregoing Exculpation will not apply to any acts or omissions expressly set forth in and preserved by the Plan. Notwithstanding anything contained in the Plan to the contrary, the Exculpated Parties will not include the Non-Released Parties, and the Plan will not exculpate nor be deemed to have exculpated any of the Non-Released Parties for any acts they have taken, whether in contemplation of the restructuring of the Debtors, in confirming or consummating the Plan, or otherwise. As use herein, Exculpated Parties means: (a) the Debtors; (b) the Trusts; (c) the Releasing Parties (not including members of the Creditors Committee not serving as of the Effective Date) and their respective predecessors and successors in interest; and (d) all of the current (and former as it relates to the Persons 8
K&E 11548126.1

described in foregoing clause (c)) officers, directors, employees, members, partners, investment advisors, attorneys, actuaries, financial advisors, accountants, investment bankers, agents, professionals, affiliates and representatives of each of the foregoing Persons (in each case in his, her or its capacity as such). Notwithstanding the foregoing, no Non-Released Parties will be Exculpated Parties.

L.

Injunction

IF YOU ACCEPT ANY DISTRIBUTION PURSUANT TO THE PLAN, YOU WILL BE DEEMED TO HAVE SPECIFICALLY CONSENTED TO THE FOLLOWING INJUNCTIONS SET FORTH IN ARTICLE XII.E OF THE PLAN. From and after the Effective Date, Entities holding Claims to be discharged or Equity Interests to be terminated pursuant to the Plan will be permanently enjoined from taking any of the following actions on account of any such Claims or Equity Interests: (1) commencing or continuing in any manner any action or other proceeding against the Debtors, either Trust or their respective property, other than to enforce any right to a distribution pursuant to the Plan; (2) enforcing, attaching, collecting or recovering in any manner any judgment, award, decree or order against the Debtors, either Trust or their respective property, other than as permitted pursuant to clause (1), above; (3) creating, perfecting or enforcing any lien or encumbrance against the Debtors, either Trust or their respective property; (4) asserting a setoff, right of subrogation or recoupment of any kind against any debt, liability or obligation due to the Debtors or either Trust; and (5) commencing or continuing any action, in any manner, in any place that does not comply with or is inconsistent with the provisions of the Plan. From and after the Effective Date, all Entities that have held, currently hold or may hold any claims, causes of action and any other debts, obligations, rights, suits, damages, actions, interests, remedies or liabilities that are to be released pursuant to the Plan will be permanently enjoined from taking any of the following actions against any released Person or its property on account of such released claims, obligations, suits, judgments, damages, demands, debts, rights, causes of action or liabilities: (1) commencing or continuing in any manner any action or other proceeding; (2) enforcing, attaching, collecting or recovering in any manner any judgment, award, decree or order; (3) creating, perfecting or enforcing any lien or encumbrance; (4) asserting a setoff, right of subrogation or recoupment of any kind against any debt, liability or obligation due to any released Person; and (5) commencing or continuing any action, in any manner, in any place that does not comply with or is inconsistent with the provisions of the Plan.

M.

Consummation of the Plan

Following Confirmation of the Plan, the Plan will be consummated on the Effective Date, which shall be a Business Day selected by the Debtors after the Confirmation Date on which (1) no stay of the Confirmation Order is in effect and (2) all conditions to Consummation of the Plan have been satisfied or waived. Distributions to be made under the Plan will be made on or as soon as reasonably practicable after the Effective Date in accordance with the Plan.

N.

Certain Factors to Be Considered Prior to Voting

HOLDERS OF CLAIMS ENTITLED TO VOTE ON THE PLAN SHOULD CAREFULLY CONSIDER THE RISKS SET FORTH IN ARTICLE VII HEREIN PRIOR TO ACCEPTING OR REJECTING THE PLAN.

O.

Voting and Confirmation

Section 1128(a) of the Bankruptcy Code requires the Bankruptcy Court, after notice, to hold a hearing on Confirmation of the Plan (the Confirmation Hearing). Section 1128(b) of the Bankruptcy Code provides that any party-in-interest may object to Confirmation of the Plan. The Classes entitled to vote shall have accepted the Plan if (1) the Holders of at least two-thirds in dollar amount of the Allowed Claims actually voting in each such Class, as applicable, have voted to accept the Plan and (2) the Holders of more than one-half in number of the Allowed Claims actually voting in each such Class, as applicable, have voted to accept the Plan. Assuming the requisite acceptances are obtained, the Debtors intend to seek Confirmation of the Plan at the Confirmation Hearing scheduled to commence on [Month Day], 2007, at [ :] [a/p].m. prevailing Eastern 9
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Time, before the Bankruptcy Court. Section 1129(a)(10) of the Bankruptcy Code shall be satisfied for purposes of Confirmation by acceptance of the Plan by at least one Class of Claims that is Impaired under the Plan. THE DEBTORS WILL SEEK CONFIRMATION OF THE PLAN UNDER SECTION 1129(B) OF THE BANKRUPTCY CODE WITH RESPECT TO ANY IMPAIRED CLASSES PRESUMED TO REJECT THE PLAN, AND THE DEBTORS RESERVE THE RIGHT TO DO SO WITH RESPECT TO ANY OTHER REJECTING CLASS OR TO MODIFY THE PLAN. The Bankruptcy Court has approved __________, 2007 at 5:00 p.m. prevailing Pacific Time, as the voting deadline (the Voting Deadline) for delivering Ballots and Master Ballots with respect to the Plan. The Debtors may extend the Voting Deadline without further order of the Court, provided the Debtors shall be documented in the Voting Report (as defined below). To be counted as votes to accept or reject the Plan, all Ballots and Master Ballots must be properly executed, completed and delivered by: (1) first class mail; (2) overnight courier; or (3) personal delivery so that they are actually received no later than the Voting Deadline by the Debtors solicitation agent, Kurtzman Carson Consultants LLC (the Solicitation Agent) at the following address: Collins & Aikman Ballot Processing c/o Kurtzman Carson Consultants LLC 12910 Culver Boulevard, Suite I Los Angeles, California 90066 The Solicitation Agent will answer questions regarding the procedures and requirements for voting to accept or reject the Plan and for objecting to the Plan, provide additional copies of all materials and oversee the voting tabulation. The Solicitation Agent will also process and tabulate ballots for each Class entitled to vote to accept or reject the Plan at the following address. Collins & Aikman Solicitation c/o Kurtzman Carson Consultants LLC 12910 Culver Boulevard, Suite I Los Angeles, California 90066 If you have any questions on voting procedures, please call the Solicitation Agent at the following toll free number: (888) 201-2205. TO BE COUNTED, BALLOTS (OR MASTER BALLOTS OF THE RESPECTIVE NOMINEE HOLDER, IF APPLICABLE) INDICATING ACCEPTANCE OR REJECTION OF THE PLAN MUST BE RECEIVED BY THE SOLICITATION AGENT NO LATER THAN 4:00 P.M. PREVAILING EASTERN TIME ON [MONTH DAY], 2006 ANY BALLOT RECEIVED AFTER THE VOTING DEADLINE SHALL NOT BE COUNTED. THE DEBTORS BELIEVE THAT THE PLAN IS IN THE BEST INTEREST OF ALL OF THEIR CREDITORS. THE DEBTORS RECOMMEND THAT ALL HOLDERS OF CLAIMS AGAINST THE DEBTORS WHOSE VOTES ARE BEING SOLICITED SUBMIT BALLOTS TO ACCEPT THE PLAN.

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ARTICLE II.
GENERAL INFORMATION The Debtors submit this Disclosure Statement pursuant to section 1125 of the Bankruptcy Code, for use in the solicitation of votes on the Plan dated December 22, 2006, which is attached hereto as Appendix A. This Disclosure Statement sets forth certain information regarding the Debtors prepetition history, significant events that have occurred during the Chapter 11 Cases, the Debtors remaining operations and the Sale Process. This Disclosure Statement also describes the terms and provisions of the Plan, including certain alternatives to the Plan, certain effects of Confirmation of the Plan, certain risk factors associated with the Plan and the manner in which distributions will be made under the Plan. In addition, this Disclosure Statement discusses the Confirmation process and the voting procedures that Holders of Claims must follow for their votes to be counted. FOR A DESCRIPTION OF THE PLAN AND VARIOUS FACTORS TO BE CONSIDERED PERTAINING TO THE PLAN AS IT RELATES TO HOLDERS OF CLAIMS AGAINST AND EQUITY INTERESTS IN THE DEBTORS, SEE ARTICLES V AND VII HEREIN. THIS DISCLOSURE STATEMENT CONTAINS, AMONG OTHER THINGS, SUMMARIES OF CERTAIN PROVISIONS OF THE PLAN, CERTAIN STATUTORY PROVISIONS, CERTAIN DOCUMENTS RELATED TO THE PLAN AND CERTAIN EVENTS IN THE DEBTORS CHAPTER 11 CASES. ALTHOUGH THE DEBTORS BELIEVE THAT THESE SUMMARIES ARE FAIR AND ACCURATE, THESE SUMMARIES ARE QUALIFIED IN THEIR ENTIRETY TO THE EXTENT THAT THE SUMMARIES DO NOT SET FORTH THE ENTIRE TEXT OF SUCH DOCUMENTS OR STATUTORY PROVISIONS OR EVERY DETAIL OF SUCH EVENTS. THE INFORMATION INCLUDED HEREIN IS FOR PURPOSES OF SOLICITING ACCEPTANCE OF THE PLAN AND SHOULD NOT BE RELIED UPON FOR ANY PURPOSE OTHER THAN TO DETERMINE WHETHER AND HOW TO VOTE ON THE PLAN. THE SUMMARIES OF THE DOCUMENTS THAT ARE ATTACHED HERETO OR INCORPORATED BY REFERENCE HEREIN ARE QUALIFIED IN THEIR ENTIRETY BY SUCH INFORMATION AND DOCUMENTS. IN THE EVENT OF ANY INCONSISTENCY OR DISCREPANCY BETWEEN A DESCRIPTION IN THIS DISCLOSURE STATEMENT AND THE TERMS AND PROVISIONS OF THE PLAN OR ANY OTHER DOCUMENTS INCORPORATED HEREIN BY REFERENCE, THE PLAN OR SUCH OTHER DOCUMENTS, AS THE CASE MAY BE, SHALL GOVERN FOR ALL PURPOSES. FACTUAL INFORMATION CONTAINED IN THIS DISCLOSURE STATEMENT HAS BEEN PROVIDED BY THE DEBTORS MANAGEMENT EXCEPT WHERE OTHERWISE SPECIFICALLY NOTED. THE DEBTORS DO NOT WARRANT OR REPRESENT THAT THE INFORMATION CONTAINED HEREIN IS WITHOUT ANY MATERIAL INACCURACY OR OMISSION.

A.

The Debtors Businesses

1.

Corporate Structure

The Debtors consist of Collins & Aikman Corporation, a Delaware corporation, Collins & Aikman Products Co., a Delaware corporation, and 36 direct and indirect wholly-owned subsidiaries of Collins & Aikman Products Co., all of which are incorporated or organized in the United States. In addition, Collins & Aikman Corporation has direct and indirect wholly-owned subsidiaries incorporated or organized in Canada and Mexico that were not included in the Debtors Chapter 11 Cases. The Debtors also had direct and indirect subsidiaries incorporated or organized in Europe that were not included in the Chapter 11 Cases. As discussed below, substantially all of the assets of these European affiliates were sold through European restructuring proceedings and the remaining assets are being liquidated in those proceedings. The Debtors also have minority equity interests in a number of non-wholly owned subsidiaries, none of which is included in the Chapter 11 Cases. Attached hereto as Appendix B is a chart reflecting the corporate structure of Collins & Aikman Corporation and its subsidiaries as of December 22, 2006.

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2.

The Debtors Businesses a. Introduction

Collins & Aikman Corporation was incorporated in 1988 and conducted all of its operating activities through its wholly-owned subsidiary Collins & Aikman Products Co., predecessors of which had been in operation since 1843. The Debtors and their non-Debtor subsidiaries were combined from a series of acquisitions designed to create a competitive tier I supplier capable of supplying the major hard-trim and Soft-Trim components of a vehicles interior. In 2001, C&A completed the following three significant acquisitions, in total, that approximately doubled the size of the Debtors: Becker Group L.L.C., a supplier of plastic components to the automotive industry, was acquired on May 16, 2001, at a transaction value of approximately $330 million; Joan Automotive Fabrics and Western Avenue Dyers, L.P., a supplier of body cloth to the automotive industry with yarn dyeing capabilities, was acquired on September 24, 2001, at a transaction value of approximately $360 million; and Textron Automotive Companys Trim division, one of the largest suppliers of instrument panels, fully-assembled cockpit modules and exterior trim components with operations in North America, Europe and South America, was acquired on December 20, 2001, at a transaction value of approximately $940 million.

At the time of the filing of the Chapter 11 Cases, the Debtors held leading market share positions in their primary product areas in North America. The Big 3 (collectively, DaimlerChrysler, Ford and General Motors) accounted for approximately 80% of the Debtors revenues in 2005, while foreign-based Honda, Nissan and Toyota, together with several tier I suppliers, accounted for the remaining 20%. b. Business Segments

Throughout the Chapter 11 Cases, the Debtors have operated in two business segments: Plastics and Soft Trim. (i) Plastics

The Debtors manufacture a wide range of plastic-based automotive interior products, including instrument panels and instrument panel components, door panels, consoles and various other trim components. The Debtors also manufacture plastic-based automotive exterior products consisting of front and rear bumper fascias, wheel flares and cladding. In addition, the Debtors assemble and sequence the delivery of complex systems and modules that incorporate these products as well as products from other suppliers. These product assemblies included cockpits, door modules and front and rear fascia modules. (ii) Soft Trim

Through their Soft Trim segment, the Debtors manufacture a variety of automotive carpet and acoustics products and convertible roof systems. Carpet & Acoustics. The Debtors carpet and acoustics products include molded non-woven and tufted carpet, alternative molded flooring, accessory mats and acoustics systems consisting of absorbing materials, damping materials, engine compartment noise vibration and harshness systems and interior insulators. The Debtors evolved from a North American carpet producer to become a market leader in a broad range of automotive floor systems, luggage compartment trim, dash insulators and other acoustic products. Convertible Roof Systems. The Debtors design, engineer and manufacture all aspects of a convertible roof including the framework, trim set, backlights, well slings, tonneau covers and power actuating system. On January 13, 2006, Wilhelm Karmann GMBH filed a lawsuit against Dura Convertible Systems, Inc., an indirect, wholly-owned subsidiary of Collins & Aikman Corporation, alleging patent infringement with respect to a product manufactured by the Debtors. On March 30, 2006, ASC Incorporated filed a lawsuit against Dura Convertible Systems, Inc., alleging patent

12
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infringement with respect to a product manufactured by the Debtors. For a discussion of the patent litigation, see Article III.I.4 herein.

B.

The Debtors Industry

Historically, large vehicle manufacturers operated internal divisions to provide a wide range of parts for their vehicles. More recently and on an accelerated basis, vehicle manufacturers have moved towards a competitive sourcing process for a wide range of automotive parts as they seek lower-priced, higher-technology and more innovative products. These manufacturers rigorously evaluate suppliers on the basis of product, quality, price competitiveness, technical expertise and development capability, new product innovation, reliability and timeliness of delivery, product design capability, leanness of facilities, operational flexibility, customer service and overall management. The Debtors faced significant competition, on an individual product basis, from a number of different suppliers in the automotive part supplier industry. The Debtors major independent competitors in the various product markets includes ASC Incorporated, Automotive Components Holdings LLC, Cadence Innovation LLC, Delphi Corporation, Faurecia SA, HP Pelzer Automotive Systems, Inc., Johnson Controls, Inc., Lear Corporation, Magna International Inc. (Intier Automotive Interiors and Car Top Systems), Plastech Engineered Products, Inc., Rieter Holding AG, Viam Manufacturing Inc. and Visteon Corporation. Contributing to the stresses in the industry, many of the Debtors major customers and competitors are implementing their own restructuring initiatives both in and outside of bankruptcy. Moreover, the following key trends have been affecting the automotive part supplier industry over the past several years: Shift in market share from domestic OEMs. The market share shift from domestic to foreign OEMs (primarily Toyota, Nissan and Honda, collectively, the New Domestics) has had a dramatic impact on domestic automotive part suppliers. The resulting reduced vehicle volumes have directly impacted revenues and cash flows of many domestic suppliers and created significant excess manufacturing and sequencing capacity. This dynamic has led many suppliers to agree to reduced pricing on new programs so as to absorb idle capacity, further constraining already tight margins. Ongoing industry consolidation. The automotive parts industry is consolidating as suppliers seek to achieve operating synergies through business combinations, removing excess capacity, acquiring complementary technologies, building stronger customer relationships and following their customers to new locations outside of the United States as such customers restructure operations to improve their overall cost structure. Increasing vehicle manufacturer demand for modules and systems. To simplify assembly and design processes and reduce costs, vehicle manufacturers increasingly require their large-scale suppliers to provide fully-engineered systems and pre-assembled combinations of components rather than individual components. Vehicle manufacturers also increasingly require the support of multiple products on any given assembly line, driving the need for suppliers to be able to handle extremely complex modules and systems consisting of multiple components. Design of several model derivatives from a single vehicle platform or architecture. Vehicle manufacturers have moved to designing and producing multiple vehicle models from a single vehicle platform. This is accomplished by varying the design of high profile components to create different vehicle models and standardizing other components across the platform to reduce the overall cost of design and manufacture of each model. Increased competitive intensity and market pressures on vehicle manufacturers. Vehicle manufacturers are under increasing pressure to adjust to changing consumer preferences and to incorporate technological advances. As a result, they are shortening product development times to introduce vehicles and features that match prevailing consumer preferences. Increased cost and pricing pressures. Automotive suppliers have experienced increased costs and significant downward pricing pressure as a result of a number of factors. Some of the primary factors include additional 13
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responsibilities that suppliers are expected to absorb related to engineering and design, warranty coverage and support for the customers entry into new global markets while, at the same time, having to absorb the impact of year-over-year price reductions, increased raw material costs, rising health care costs and decreased vehicle volumes for the domestic OEMs. Growing perceived quality and acoustical performance requirements. The quality of surface materials and execution of manufacturing techniques in vehicles continues to improve, largely driven by demand for greater levels of craftsmanship from the end consumer. Additionally, the need to control the noise and vibration in the passenger compartment has increased for all vehicle types from luxury to entry-level. Prepetition Capital Structure of the Debtors

C.

1.

Collins & Aikman Corporation a. Prepetition Facility

As of the Petition Date, the Debtors operations were financed, in part, by a Senior Secured Credit Facility (the Prepetition Facility) pursuant to a Senior Secured Credit Agreement, dated December 20, 2001, and amended and restated as of September 1, 2004, by and among Collins & Aikman Corporation and substantially all of its domestic direct and indirect subsidiaries (collectively the Guarantor Parties), and a syndicate of lending institutions led by JPMorgan Chase Bank, N.A. (JPMorgan) as administrative agent (the Agent). The Prepetition Facility was secured by substantially all of the assets of Collins & Aikman Corporation, Collins & Aikman Products Co. and certain of Collins & Aikman Products Co.s subsidiaries (each of which are Debtors). The Prepetition Facility was comprised of a $473 million Tranche B-1 term loan with a stated maturity date of August 31, 2011, a $170 million supplemental revolving credit facility (which included $56.3 million of undrawn letters of credit as of the Petition Date) that had a stated maturity date of August 31, 2009, and a $105 million revolving credit facility that also had a stated maturity dated of August 31, 2009. As of the Petition Date, there was approximately $748 million outstanding under the Prepetition Facility (plus accrued and unpaid interest). b. Common Stock

As of May 17, 2005, Collins & Aikman Corporation had 83,630,087 shares of common stock outstanding. c. Foreign Debt

While the majority of the Debtors foreign operations were funded through Collins & Aikman Products Co., the foreign subsidiaries (all of which are non-Debtors) had approximately $3.5 million of funded debt as of the Petition Date. In addition, under the DIP Credit Agreement, the Debtors also agreed to guaranty obligations of their European affiliates owed under an overdraft facility issued by JPMorgan. Approximately $21 million is owed under that facility.

2.

Collins & Aikman Products Co. a. The Indentures

On December 20, 2001, Collins & Aikman Products Co. issued $500 million in aggregate principal amount of 10 3/4% Senior Notes, due 2011 (the Senior Notes). BNY Midwest Trust Company serves as indenture trustee to the Senior Notes. The Guarantor Parties have guaranteed the Senior Notes on a senior unsecured basis. As of the Petition Date, there was approximately $500 million in aggregate principal amount outstanding under the Senior Notes with accrued and unpaid interest of approximately $20.7 million. On August 26, 2004, Collins & Aikman Products Co. issued $415 million in aggregate principal amount of 12 7/8% Senior Subordinated Notes, due August 15, 2012 (the Senior Subordinated Notes). Law Debenture Trust Company of New York serves as indenture trustee under the Senior Subordinated Notes. The Guarantor Parties have guaranteed the Senior Subordinated Notes on a senior unsecured basis. As of the Petition Date, there was approximately $401 million in aggregate principal amount outstanding under the Senior Subordinated Notes with accrued and unpaid interest of approximately $13.4 million. 14
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b.

Receivables Facility

Before the Petition Date, Collins & Aikman Products Co. had an agreement to sell, on an ongoing basis, the trade accounts receivable of certain business operations to Carcorp, Inc. (Carcorp), a wholly-owned, bankruptcyremote, special purpose subsidiary under an accounts receivable securitization facility (the Receivables Facility). From time to time, subject to certain conditions, Carcorp sold an undivided fractional ownership interest in a pool of up to $250 million worth of domestic and certain Canadian receivables to a committed facility provided by General Electric Credit Corporation (GECC). The Receivables Facility was originally set to mature in December 2004. In December 2004, GECC and Collins & Aikman Products Co. agreed to extend the Receivables Facility until March 2006 and amend certain provisions thereof. Until the Petition Date, the Receivables Facility was an important source of ongoing liquidity to Collins & Aikman Products Co. As of the Petition Date, there was approximately $127 million outstanding under the Receivables Facility and, at such time, it was fully drawn relative to available collateral. For a description of the current status of the Receivables Facility, see Article III.H.6 herein. c. Preferred Stock

As of May 17, 2005, Collins & Aikman Products Co. had 56,218 shares of Series A Redeemable Preferred Stock outstanding and 143,700 shares of Series B Redeemable Preferred Stock outstanding. All shares of the Collins & Aikman Products Co. preferred stock are held by Textron Holdco Inc.

D.

Directors of Collins & Aikman Corporation The following persons comprise the current Board of Directors of Collins & Aikman Corporation:

Name
Dean Robert C. Clark Marshall A. Cohen Stephen F. Cooper David C. Dauch Anthony Hardwick Richard C. Jelinek Timothy D. Leuliette Leonard LoBiondo Frank E. Macher Sen. Warren B. Rudman On the Petition Date, Messrs. J. Michael Stepp, W. Gerald McConnell and Daniel P. Tredwell served as directors of Collins & Aikman Corporation. Mr. Stepp resigned effective April 27, 2006, and Messrs. McConnell and Tredwell resigned as of May 10, 2006. Prior to their tenure with the Debtors, each of these former directors had served in a senior management capacity with Heartland Industrial Partners LP, the companys majority shareholder, and Mr. Tredwell was one of Heartlands co-founders.

ARTICLE III.
THE CHAPTER 11 CASES

A.

Events Leading to the Chapter 11 Cases

The automotive part supplier industry is characterized by significant overcapacity and fierce competition. In the period leading up to the Petition Date, a series of developments resulted in a reduction of the Debtors liquidity position, thereby limiting its ability to meet near-term payment obligations and restricting its ability to continue to pursue necessary growth and development initiatives. The worsening liquidity problem was exacerbated by the fact that the Debtors concentrated customer base, largely comprised of the Big 3, were in the process of scaling back production due 15
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to significant market share shifts, increasing the demands on the Debtors for further pricing concessions. This loss of business from major customers, combined with a reduction in accelerated payment programs by customers and pricing concessions, further reduced sales and hurt liquidity. Competitive forces and pricing pressures also contributed to the Debtors losses. In the years immediately preceding the Petition Date, the Debtors suffered significant losses. In 2003, the Debtors incurred a net loss of $57.5 million on net sales of $4.0 billion. In 2004, the Debtors reported a net loss of $800.1 million on net sales of $3.9 billion. Reflective of a downturn in the automotive parts supplier marketplace, the Debtors financial condition deteriorated further in the first six months of 2005 and the Debtors experienced net losses of $117.0 million for the first six months of calendar year 2005 on six month net sales of $2.0 billion. The Debtors are significantly affected by the cyclical industry in which they compete and the level of vehicle production in North America. The Big 3, which make up a majority of the Debtors revenues, have lost market share in recent years to foreign competition. The Debtors believe the following significant issues, among others, substantially contributed to the deterioration of the Debtors financial performance:

1.

Increasing Commodity Prices

The Debtors liquidity problems were also fueled by increases in certain commodity prices from their suppliers. Many of the Debtors sales contracts required that they provide products at predetermined prices and that, in some cases, these amounts decline over the course of the contracts. In 2004 and 2005, the Debtors experienced significant price increases of many of their raw material inputs, such as polypropylene, polyurethane, TPO, ABS, polyester and nylon. These raw material cost increases resulted in reduced margins because the Debtors were unable to pass these material cost increases on to their customers.

2.

Pressure from the Debtors Leveraged Structure

In recent years, the Debtors made a series of debt-financed acquisitions. Due to market factors described above, leverage and the failure of these acquisitions to produce expected gains, it became increasingly difficult for the Debtors to meet their debt service obligations from their operations. Moreover, covenant restrictions in certain of their debt instruments restricted the Debtors from raising capital to fund their operations in addition to the approximately $1.6 billion of funded debt obligations as of the Petition Date. At the same time, to secure new business in the automotive parts supplier industry, it has become increasingly important for automotive parts suppliers to expend significant amounts of capital for engineering, development, tooling and other costs and to seek to recoup these costs through pricing over time. Without the capital to finance these necessary investments, the Debtors ability to maintain future operations became increasingly uncertain. Moreover, in the second half of 2004, certain of the OEMs gave notice that they were terminating their accelerated payment programs for all of their suppliers, including the Debtors. The termination of these programs had a material adverse impact on the Debtors short-term liquidity position by pushing back the dates by which the Debtors received future payments. Although the Debtors responded with greater utilization of the Receivables Facility, the termination by the OEMs nevertheless significantly affected liquidity.

3.

Difficulty Integrating Numerous Acquired Businesses

The Debtors have devoted considerable efforts beginning in 2001 to integrating numerous acquired companies. On the Petition Date, recent acquisitions accounted for 48 of the Debtors 102 plants and facilities and approximately 50% of the Debtors employees. A combination of factors impeded the Debtors ability to integrate effectively these acquisitions and achieve aniticipated efficiencies and economies of scale, including: (a) rapid, large and complex acquisitions; (b) geographic location of certain acquired companies in countries where the Debtors did not previously maintain operations and (c) higher than anticipated management turnover.

16
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4.

Pressure from Customers

An increasingly competitive vehicle production environment for domestic OEMs in recent years led to a decline in the market share and overall production of the Debtors largest North American customers. In 2004, combined automotive production in North America by General Motors and Ford declined by approximately 10%. Because the Debtors typically supply their customers on a requirements basis, the decreased production by the Debtors customers had a direct impact on the Debtors revenue and cash flows. Given the Debtors dependence on domestic OEMs, competitive pressures on domestic OEMs necessarily affected the Debtors. Certain OEMs responded to market pressures, in part, by asking suppliers, including the Debtors, to lower prices. Throughout 2004, these OEMs in the automotive industry demanded price decreases and givebacks in the range of 3% to 4%. Certain of the Debtors competitors, responding to overcapacity in the industry brought on by a decline in overall sales, lowered prices to maintain volume and utilization, which further pressured the Debtors to lower prices. Furthermore, in an attempt to maintain business, restore strained relations with the Debtors customers and compete for new programs, prior management negotiated contracts with the Debtors customers for certain programs that ultimately were determined to be uneconomical.

5.

Pressure from Market Forces

Due to their leveraged capital structure and their customers elimination of accelerated payment programs, the Debtors relied heavily on their Receivables Facility to generate cash for their operations. In May 2005, however, Standard & Poors simultaneously downgraded the credit ratings of Ford and General Motors to below investment grade status. This downgrade resulted in a change in the Debtors receivables concentration limits relative to these customers and, consequently, required a partial paydown of the Receivables Facility and reduced ongoing availability under the Receivables Facility. While the Debtors obtained a waiver and amendment to their Receivables Facility to address these immediate liquidity issues, they continued to face long-term liquidity challenges. In addition, the Debtors were fully drawn under their Prepetition Facility and needed a similar covenant waiver under the Prepetition Facility to ultimately secure the Receivables Facility waiver. The Debtors announced that they would seek such a waiver to their Prepetition Facility and more favorable payment terms from the downgraded customers to further benefit liquidity prior to the final phase-in of the amended Receivables Facility terms, but cautioned that even with more favorable terms, the modified terms of the Receivables Facility would remain a challenge for the Debtors. Ultimately, the Debtors had insufficient liquidity to meet their imminent debt obligations.

B.

Crisis Period Surrounding the Filing of the Chapter 11 Cases

Immediately prior to the Petition Date, the Debtors had been operating with almost no working capital, had no source of liquidity and were highly leveraged. At that time, among other things, the Debtors had a negative cash balance and faced imminent interruptions in production. The Debtors cash management systems were not reliable. Moreover, numerous vendors had stopped shipping product and inventories were nearly depleted. Exacerbating these issues was the lack of managerial and human resource capacity to operate and manage the Debtors extremely complex operations. The Debtors management team had been impaired. C&As previous CEO, David A. Stockman was fired on May 11, 2006, and replaced with interim management. The Debtors advisors and interim management inherited a company with an organizational structure that had been flattened to the point that key personnel were absent from critical management areas and plants and business units were reporting almost directly to Mr. Stockman. In addition, the Debtors were suffering significant turnover problems at every level of their operations. In the first 10 months of 2005, the Debtors lost over 198 corporate employees. These managerial and human resource deficiencies contributed to the already existing inefficiencies and inadequacies throughout the C&As manufacturing processes and information reporting systems. With regard to their internal monitoring, it is well known that there were allegations of significant accounting irregularities at C&A prior to the Petition Date. These accounting irregularities created significant uncertainty as to the integrity and reliability of the Debtors books, records, internal financial statements and previous filings with the SEC. This directly impaired the efforts of the Debtors advisors to develop an understanding of the facts of the Debtors financial condition, comprehensively identify and evaluate options and design strategies and action plans for the immediate stabilization and long-term rehabilitation of the Debtors businesses. 17
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C.

Initiation of the Chapter 11 Cases

On May 17, 2005, the Debtors filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code. The Debtors restructuring professionals had been introduced to the Debtors situation only 72 hours before the filings. The Debtors continue to conduct their businesses and manage 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 Bankruptcy Court entered an order jointly administering these cases pursuant to Bankruptcy Rule 1015(b).

D.

Appointment of the Creditors Committee

On May 24, 2005, the United States trustee appointed an official committee of unsecured creditors pursuant to section 1102 of the Bankruptcy Code (the Creditors Committee). The members of the Creditors Committee currently include: Barclays Capital; BNY Midwest Trust Company; Delphi Corporation; Law Debenture Trust Company of New York; Pension Benefit Guaranty Corporation (the PBGC); The Brown Corporation of America; UAW; and USWA. The Creditors Committee retained Akin, Gump, Strauss, Hauer & Feld and Butzel Long PC as its legal advisors, Alvarez & Marsal, LLC as its operational and strategic advisor and Chanin Capital Partners, LLC as its investment bankers. Since the formation of the Creditors Committee, the Debtors have consulted with the Creditors Committee concerning all aspects of the Chapter 11 Cases. The Debtors have kept the Creditors Committee informed about their operations and the Creditors Committee has, together with the Debtors management and advisors, participated actively in, among other things, a review of the Debtors business plan and operations. Additionally, the Debtors and their advisors have met with the Creditors Committee and its advisors on numerous occasions, including in connection with the Sale Process and negotiation of the Plan.

E.

The Debtors Initial Stabilization Initiatives

Immediately following the Petition Date, the Debtors interim management and advisors were forced to concentrate their efforts not on the Debtors operational and managerial problems, but instead on generating the liquidity, stability and infrastructure necessary to simply identify those problems while, at the same time, maintaining uninterrupted production. Only then would the restructuring advisors be able to focus on pursuing restructuring initiatives to further stabilize the Debtors operations and prepare for emergence from chapter 11 protection. Several of these preliminary initiatives are described in further detail below.

1.

Securing Postpetition Financing

As of the Petition Date, the Debtors did not have any cash on hand and did not have any way of generating unencumbered cash to finance operations. This made securing and obtaining approval of financing a necessary focus at the beginning of the Chapter 11 Cases. Thus far, the Debtors have had to seek approval for three separate financing arrangements. The negotiation and approval of each of these debtor-in-possession financing transactions required significant resources of the Debtors in the initial stages of these Chapter 11 Cases. a. DIP Credit Arrangement

Initially, on the Petition Date, the Bankruptcy Court entered an order granting the Debtors interim authority to borrow $150 million in debtor-in-possession financing from a syndicate of lenders led by JPMorgan, who also serves as the agent for the Debtors Prepetition Facility, pursuant to the DIP Credit Agreement. Under the DIP Credit Agreement, the Debtors also agreed to guaranty obligations of their European affiliates owed under an overdraft facility issued by JPMorgan. Approximately $21 million is owed under that facility. This debtor-in-possession financing was approved on a final basis on July 25, 2005, and was limited to the $150 million that the Debtors already had borrowed prior to such date. b. Customer Financing Arrangements

To address their further cash needs during the first weeks of the Chapter 11 Cases, on June 23, 2005, the Debtors sought authority to borrow $30 million from their largest customers under the OEM Administrative DIP Claims. 18
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In addition, the Debtors obtained approval of that certain debtor-in-possession junior secured financing (the OEM Subordinated DIP Loan) provided under the Price Adjustment, Non-Resourcing and DIP Financing Arrangement for Collins & Aikman and Its Affiliated Debtors, by and among Collins & Aikman Corporation, the OEMs and JPMorgan, as approved on a final basis by the Bankruptcy Court on August 11, 2005 [Docket No. 916] (the Customer Financing Agreement). The OEM Subordinated DIP Loan provided the Debtors with, among other things, $82.5 million in immediate price increases, $82.5 million in additional financing and a definitive timetable for the renegotiation of contracts and formulation of a business plan. c. Accelerated Payment Terms

The Debtors also reached an agreement with its six largest customers establishing five-day payment terms on all outstanding invoices and future invoices for a specified period. This represented a significant acceleration of payment terms, providing further liquidity at a critical period.

2.

Capital Expenditure, Tooling and Launch Costs

The Customer Financing Agreement provided the Debtors with the opportunity to continue to finance investment in capital expenditures and tooling with assistance from certain customers. It also presented a number of challenges because the Debtors and their customers had to develop the infrastructure and processes to request funding from an outside source that was not a part of the practices of the Debtors or their customers before the Customer Financing Agreement. To address the situation with capital expenditure, tooling and launch costs, the Debtors and five of the six customers who are party to the Customer Financing Agreement agreed to the protocol that was documented with the final approval of the Customer Financing Agreement. This protocol was established to give the Company the liquidity to make the up-front capital investments necessary to develop customer programs. The protocol to facilitate the arrangement and the funding arrangement were unprecedented in the industry.

3.

Establishment of Cash Management System

When the Debtors commenced the Chapter 11 Cases, they did not have adequate cash reporting capabilities. Not only did the Debtors not have the right infrastructure to produce the reports, the Debtors treasury department was focused solely on near-term spending. The Debtors reporting and systems did not emphasize managing accounts receivables and cash flows, including the nature of disbursements. Continuing as a going concern and developing restructuring initiatives required an ability to track and forecast cash needs accurately to avoid cash shortfalls that might interrupt operations. The Debtors, with the help of their financial advisors, began producing a daily cash report to provide management, the treasury department and the purchasing department with an understanding of the cash flow performance and ongoing cash requirements of the businesses. This enabled the Debtors to forecast, and then adjust, their cash needs to operate in a more stable and predictable manner. While the Debtors were able to stabilize their cash management system in the short term, the Debtors accounting systems continued to be a source of uncertainty that complicated key initiatives in the Chapter 11 Cases.

4.

Stabilization of the Debtors Supply Chain

The Debtors do business with over 700 vendors of raw materials and purchased parts utilized in manufacturing and sequencing operations, many on a just-in-time basis. After the Petition Date, many of the Debtors vendors sought changes in business terms, including transitioning to cash on delivery or even cash in advance terms to continue shipping. Negotiating with, and resolving the concerns of, such vendors has required considerable efforts by the Debtors and their advisors. Despite these challenges, and without the benefit of any so-called critical vendor program, the Debtors were able to avoid material interruptions in production throughout the Chapter 11 Cases.

5.

New Management Hires and Retention of Professionals

As of the Petition Date, the Debtors had insufficient human resources to engage in the difficult operational and financial restructuring necessary to create a viable enterprise. The Debtors required knowledgeable management to 19
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assist them in restructuring their businesses and developing, negotiating and confirming a chapter 11 plan of reorganization. Accordingly, the Debtors, in consultation with their major constituencies, decided it was in their best interests to seek to retain John R. Boken as their Chief Restructuring Officer, which request the Bankruptcy Court granted on June 9, 2005. To address operational leadership needs, with the input of the Board of Directors, Frank E. Macher was hired as President and Chief Executive Officer in July 2005. After being hired, Mr. Macher and other members of the Debtors senior management took a critical look at the Debtors management resources in a number of key areas and determined that they needed to rebuild the senior management team to improve the Debtors prospects for maximizing recoveries for creditors. With the addition of several new executives, the Debtors obtained the resources necessary to ensure that they could meet their customer commitments in the short term, seek to implement cost savings, launch awarded business and work toward winning new programs. In addition, the Debtors established a Restructuring Committee of the Board of Directors. The Board of Directors has held numerous regular meetings since the Petition Date, including special meetings to address particular issues that required more immediate attention. Additionally, individual members of the Board of Directors have focused on specific issues, including assisting with the improvement of the management team, communicating with major constituencies regarding the Debtors activities and analyzing the Debtors long-term options.

6.

Renegotiation of Customer Contracts

The Debtors established an aggressive schedule for the analysis and renegotiation of unprofitable contracts. The Debtors senior management and the Debtors advisors dedicated extensive resources to the task of identifying the component parts that the Debtors manufacture and determining the profitability and strategic benefit to the Debtors of each of those parts. On October 14, 2005, the Bankruptcy Court approved the Debtors renegotiated contracts with their six largest customers. The renegotiated contracts included: price increases on existing projects; a one-time surcharge to provide interim liquidity; certain raw materials price indexing; an extension through the end of September 2006 of the customers commitment to five-day net payment terms of accounts receivables; an extension of the customers commitment to fund capital expenditure, tooling and launch costs as discussed above; certain continued assurances by the customers not to resource programs away from the Debtors; and assurances that the Debtors would be removed from the customers nobid lists.

F.

The Debtors Aggressive Restructuring Initiatives

Due to the upheaval and state of the Company at the time of the Petition Date, it was only after several months that the Debtors had the basic infrastructure and necessary liquidity to begin even to address the restructuring initiatives and operational changes that would be needed to negotiate and consummate a chapter 11 plan. Late in 2005, the Debtors management and advisors initiated a dual-track process to explore two possibilities for emergence: (1) a stand-alone reorganization and, (2) at the prompting of the Prepetition Lenders, a sale of the Debtors in whole or in part.

1.

Development of a Business Plan

Integral to both dual-track processes was the development of a sustainable business plan to generate confidence in creditors, customers and potential acquirers that the Debtors could become a cost-efficient provider of automotive parts and a viable stand-alone entity. The Debtors recognized that operating their businesses based on the previous model was not a viable alternative. At the direction and under the leadership of Mr. Macher, in the fourth quarter of 2005, the Companys management team endeavored to develop a business plan that would include (a) a strategic plan for the Company, (b) a plan for operational improvements and cost cutting initiatives and (c) the development of revised financial projections reflective of the anticipated changes to the businesses. The Debtors began a comprehensive evaluation of their entire business model, including the potential rationalization of certain operations. The Debtors believed that increased efficiency could be gained in consolidating the plant layout and centralizing the Debtors purchasing and financial systems. At the same time, the Debtors were considering to what extent they could increase revenue in a way that also increased profits. The Debtors evaluated their competitive position and analyzed how to leverage their competitive advantages. 20
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2.

Operational and Cost-Cutting Initiatives

In the process of developing a business plan, the Debtors management identified several possible opportunities to improve the performance of their operations, increase efficiency and cut costs. The Debtors management and financial advisors agreed that the Debtors initiatives should be focused on fixing the Debtors Plastics segment, which was the source of the revenue shortfalls and operational shortcomings. The infrastructure of the Debtors Plastics segment and information reporting systems were woefully inadequate and key personnel were absent from critical management areas. In addition, the Debtors continued to have great difficulty maintaining and hiring personnel to manage the business. The Debtors Carpet & Acoustics business was profitable under the direction of Mr. Millard King, President of the Debtors Soft Trim segment. Compounding the issues in the Plastics segment, prior to the Petition Date, to raise cash, the Company had entered into numerous sale and lease-back transactions that created an enormously high fixed cost structure that thinned the profit margins in the Plastics segment. Many of the Debtors plants were below capacity and their operating equipment was underutilized. As a result of these and other factors, a high-volume of production was required to justify the significant capital, tooling and launch required for new projects in the Plastics segment. To address these shortcomings, the Company hires included Mr. Dennis Profitt as President of the Debtors Plastics segment to investigate and enhance operations and Ms. Susan Armstrong as Executive Vice President of Strategic Planning to spearhead cost saving, including the consolidation and closing of plants.

3.

Revenue Enhancement Initiatives

In addition to these operational and cost-cutting initiatives, the Company aimed to repair relationships with existing customers and expand the scope of business opportunities. The Big 3 have historically accounted for the majority of the Debtors revenue. Recently, the New Domestics have been increasing their market share in North America. As part of their key initiatives, the Debtors sought to increase business awards from the New Domestics. In addition, the Debtors sought to (a) attract certain targeted short lead-time new awards, (b) obtain awards of takeaway business, i.e., takeover of projects currently manufactured by competitors, (c) win-back certain programs lost in 2004 and 2005; and (d) increase business awards from the New Domestics.

4.

Financial Projections

In conjunction with the strategic and operational aspects of the business plan, the Debtors worked to generate financial projections and reports that would reflect the prospective and actual performance of the Company inclusive of its cost-cutting, revenue enhancements and other restructuring initiatives. To facilitate the ongoing dual-track development of a stand-alone reorganization and M&A process and the swift timeline necessary for emergence, the Debtors management initially developed certain top-down preliminary estimates summarizing the Companys expected financial results. By early 2006, the Debtors had developed a comprehensive business plan that took into account every component part they produced and included means to enhance profitability. In addition, the Debtors had prepared financial projections through 2010 (the Initial Forecasts) for use in marketing the Debtors businesses and negotiating a plan of reorganization that superseded the initial top-down preliminary estimates. These Initial Forecasts took into account the expected revenue enhancements and cost savings predicted by the Debtors management and were premised upon sustained volumes from the OEMs. The Initial Forecasts were shared with the Creditors Committee, the Agent and the OEMs, among other constituencies in the Chapter 11 Cases. Based on the Initial Forecasts, it appeared that the Debtors would have sufficient revenue to support their pension plan and labor and certain retiree benefit costs. Thus, it did not appear at that time that the Debtors could justify renegotiating, rejecting or canceling these costs under the standards of sections 1113 or 1114 of the Bankruptcy Code.

G.

The Debtors Attempts to Reorganize

Because of the nature and dynamic state of the automotive component parts supplier industry and the significant changes that were needed at the Company, the Debtors and their advisors had a relatively brief window of opportunity to implement their aggressive restructuring initiatives. As explained below, to maximize the value of the Estates through a 21
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stand-alone reorganization or going concern sale, it was critical that the Debtors establish that they could become cost-efficient provider of automotive component parts and a viable stand-alone entity in 2006. In the automotive component parts supplier industry, programs are awarded by OEMs well in advance of the time that the supplier generates revenue from the sale of parts. This is due to the engineering, development and tooling that must be undertaken prior to initiating production. Towards the end of 2004, the Company had been placed on the OEMs no-bid lists based on their poor financial performance. Generally, OEMs do not award business to suppliers in bankruptcy. As a result of the foregoing, the Debtors projections forecast a significant program run-off in 2007 and 2008 as the Companys awarded programs ended and were not replaced due to the loss of quoting activity in 2004 and 2005 for programs in 2007 and 2008. This projected program run-off would lead to a steep decline in revenue and concomitant inability to fund or finance operations unless the Debtors were able to realize their planned revenue enhancements, including attracting short lead-time new awards, obtaining takeaway business and winning back certain programs lost in 2004 and 2005. In the Plastics segment, this decline in revenue was especially significant. The engineering, development and tooling for Plastics programs are more capital intensive and can take as long as three years before such programs begin to generate revenue, far longer than programs in the Debtors Soft Trim segment. To obtain revenue enhancements for 2007 and 2008, the Debtors needed to establish to the OEMs that they would be able to complete the programs and deliver the product in a timely fashion, which, in turn, required significant progress towards viability and emergence from chapter 11 protection, including a plan of reorganization, by the third quarter of 2006. Further emphasizing the need to expedite the process, many of the favorable terms of the Customer Financing Agreements and renegotiated customer contracts were set to expire at the end of September 2006. At the same time that management began implementing their operational and cost-cutting initiatives and seeking revenue enhancements, the Debtors and their advisors turned their attention to reorganization alternatives.

1.

The M&A Process and Plan Negotiations in Early 2006

In December 2005, the Debtors initiated a process to sell the company in whole or in part as part of its dual-track restructuring process (the M&A Process). The Debtors four primary businesses, for purposes of the M&A Process, included the following: (a) Plastics; (b) Carpet & Acoustics; (c) Convertible Roof Systems; and (d) Fabrics. Carpet & Acoustics, Convertible Roof Systems and Fabrics comprised the Soft Trim segment. Prior to contacting potentially interested parties, the Debtors and their advisors expended significant efforts preparing financial forecasts, an electronic data room stocked with financial and legal documents, information memoranda (including a 103-page information memorandum providing a comprehensive overview of the Debtors businesses) and other materials. The evaluation materials were prepared to allow potential buyers to assess an acquisition of the consolidated entity as well as the individual businesses. The Debtors and their advisors developed lists of qualified, potentiallyinterested parties comprised of strategic buyers, including both domestic and foreign automotive suppliers, and financial buyers, including private equity firms and hedge funds. The Debtors and their advisors solicited input on potential buyers from parties-in-interest including the agents to the Prepetition Facility and the DIP Facility (the Agents) and the Creditors Committee. The Debtors advisors contacted over 45 parties potentially interested in purchasing the consolidated entity and numerous parties interested in one or more of the four primary businesses. Nineteen of the parties interested in the consolidated entity signed confidentiality agreements and received a draft information memorandum containing preliminary estimates summarizing the Companys expected financial results. In February 2006, the Debtors provided supplemental financial information including the Initial Forecasts for the period 2007 through 2010. In March 2006, the Debtors sought and received preliminary, non-binding indications of interest and engaged in active negotiations with six interested parties. The initial indications of interest received included a purchase of the Debtors on a consolidated basis, the purchase of individual businesses and an equity investment in the form of a plan of reorganization with an equity sponsor. After reviewing each of the indications of interest, the Debtors, in consultation with the Agents and the Creditors Committee, determined to permit certain of the interested parties to advance to the next stage of the M&A Process. The Debtors allowed a number of interested parties to conduct comprehensive due diligence, which included management presentations, access to the electronic data room and plant tours. Concurrently with the extensive due diligence efforts of the interested parties, the Debtors entered into negotiations with certain parties whose indications of interest appeared to have the highest likelihood to maximize the value of the Debtors Estates. To assist in the negotiation and evaluation of the indications of interest, the Debtors, in consultation with the Agents and the Creditors Committee, drafted and circulated, among other things, a detailed term sheet template to the interested parties. 22
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The Debtors and their advisors conducted extensive negotiations with certain parties, which resulted in the exchange of numerous term sheets. In addition, the Debtors advisors began drafting and negotiating prospective plans of reorganization.

2.

Shortfalls and Development of Forecasts

In late Spring 2006, the Debtors and their advisors endeavored to strike a deal that would pave the way for emergence. Unfortunately, at the same time, the Debtors discovered that their actual results for the first four months of 2006 were below the projections in the Initial Forecasts. The root causes of the shortfalls, which stemmed from the Plastics segment, were not immediately apparent. It became clear that the M&A Process would not be able to be consummated based upon the Initial Forecasts and, at the same time, a plan of reorganization could not be supported by the Initial Forecasts. Furthermore, the Debtors were attempting to secure revenue enhancements to support their business plan by winning takeaway business. Winning this takeaway business required the Debtors to achieve their forecasts and the inability to do so further stalled the Debtors reorganization efforts. Considering the Debtors brief window of opportunity for reorganization or sale as a going concern and the considerable progress that had been made at that time along the dual-track towards emergence, the Debtors management prepared a new set of interim forecasts based upon actual results for the first several months of 2006 and the previously developed business plan. Because of the brief window of opportunity available to reorganize and emerge, the revised interim forecasts were based on preliminary assumptions while related analyses and support materials were still being validated. These forecasts reflected lower EBITDA than the Initial Forecasts. Certain parties continued to be interested in acquiring the Debtors businesses, however, and it appeared that the Debtors may be able to achieve a sale of the entire business or a stand-alone reorganization. In addition, the Debtors continued to negotiate with customers regarding revenue enhancements, including a significant opportunity from one of the OEMs for takeaway business. Throughout this process, the Debtors shared financial information, including the revised forecasts, and sought input from the Creditors Committee, the Agent and the OEMs regarding restructuring initiatives. In addition, for the majority of the case, the advisors to the Creditors Committee and the OEMs were on the ground at the Debtors offices with access to volumes of information. The Debtors and their advisors continued to work with the Creditors Committee, the Agent and the OEMs in this fashion and aggressively negotiate and pursue dual-tracks for emergence. Also, based on the reductions in EBITDA reflected in the revised forecast, the Debtors analyzed the potential to achieve labor and retiree benefit concessions pursuant to negotiated resolutions, which were preferred, or resort to exercising the Debtors rights under sections 1113 and 1114 of the Bankruptcy Code and cancellation the Debtors pension plan. Pursuit of these alternatives ultimately led the Debtors to (i) terminate certain post-retirement life insurance, medical and dental coverage for non union retirees in early 2006, (ii) amend their Pension Plan to cease future benefit accruals for non-union participants after June 2006 and (iii) cease making minimum funding contributions to the Pension Plan beginning in July 2006. The Debtors performance in May and June 2006 continued to fall short of the revised expectations as a result of a number of factors. For one, the business plan assumed consistent volumes by the OEMs, but production volumes declined, especially on platforms in the Debtors Plastics segment. In addition, the cost reductions assumed in the forecasts were not materializing. Shortly thereafter, Mr. Profitts employment was terminated as President of the Plastics operation. Mr. Profitt was replaced by Mr. James Wynalek. The magnitude of the issues made it apparent that the Debtors projections would need to be revised and that a turnaround of the Plastics business would take longer than had previously been expected.

3.

Depressed Outlook for the Debtors Plastics Division

Much of the shortfall in financial performance was experienced in the Debtors Plastics segment. The volume of business for the Plastics segment was decreasing and opportunities to grow the business were limited. At the same time, the engineering, development, tooling and other up-front costs are greater for the products produced in the Plastics division and this requires substantial up-front capital to fund new business. Exacerbating these dynamics was the general outlook of investors and lenders in the North American auto-industry that have been more and more resistant to fund these up-front costs. Three factors produced a significant decline in the current and future business that the Debtors could expect for the Plastics segment. First, the Debtors had not received awards of new business since late 2004 and this lack of quoting 23
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activity led to an absence of long-term agreements with the OEMs for production in the years 2007 and beyond. Second, through the beginning of 2006, the OEMs had been reducing volumes and cutting back on platforms serviced by the Debtors Plastics segment. Finally, the market for Plastics component parts was shrinking. The market share of the New Domestics was and is increasing in comparison to the domestic OEMs that support the lions share of the Debtors Plastics production. With regard to the type of products produced by the Debtors Plastics segment, the New Domestics often transplant their own keiretsu suppliers, leaving less business for North American suppliers. For these reasons, several of the Debtors competitors in the Plastics industry are scaling back their operations or ceasing operations entirely with respect to these products. As a result of these developments, continuing operational issues and the high fixed costs across the Plastics segment and low profit margins for assembling and sequencing projects, the pay-off for investing up-front capital was diminished and it became increasingly difficult for the Debtors to justify the expenditure of the up-front capital needed to develop new business.

4.

Revised Projections and Decision to Pursue Stand-Alone Plan

In June 2006, parties continued to be interested in acquiring the Debtors remaining assets. The Debtors management appeared close to a deal for a significant portion of takeaway business that would provide revenue to stabilize operations in the second half of 2006 and 2007. Also, significant progress had been made towards negotiating a plan of reorganization acceptable to the Debtors creditors and parties in interest. At the same time, however, the Debtors financial performance continued to fall below forecasts. In late June and early July 2006, the Debtors received revised indications of interest from several interested parties. Nevertheless, all offers had numerous conditions to closing that presented significant execution risk, including: (a) agreements with the OEMs that would provide long term business arrangements; (b) receiving significant modifications to labor related expenses, including to collective bargaining agreements, retiree benefits and pension obligations; (c) negotiating an alternative resin supply agreement that would result in significant material cost savings; and (d) achieving financial metrics with respect to cash, working capital and EBITDA that the Debtors were very unlikely to achieve in light of current operational performance and results. Moreover, even if the transactions could close, all of the offers for the Debtors valued the Debtors below the par value of the Prepetition Facility Claims. Given that the proceeds of such a sale would be entirely subject to the Prepetition Lenders secured claims, the Debtors sought the input of the Prepetition Lenders regarding the path forward. After reviewing the latest forecasts and the substantial information available regarding the Debtors businesses and engaging in direct negotiations with interested parties regarding their indications of interest, the agent for the Prepetition Lenders and the informal steering committee for Prepetition Lenders (the Steering Committee), expressed their belief that the Debtors could obtain a higher return by filing a stand-alone plan of reorganization that exchanged the Prepetition Facility Claims for equity in a reorganized enterprise if (a) appropriate revisions could be obtained in the Debtors component parts contracts with its major customers, (b) the Debtors major customers did not suffer additional sales volume deterioration and (c) adequate exit financing could be obtained. To give the Debtors as strong an opportunity as possible to turnaround the Plastics business and become viable competitors, the Prepetition Lenders, the Agent and the Steering Committee indicated support for a stand-alone plan of reorganization under which the claims of the Prepetition Lenders would be converted entirely into equity of the reorganized Debtors if the conditions to the Plan were satisfied. As the Debtors needed the Prepetition Lenders support to confirm a plan in light of the latest indications of interest, after deliberation, the Debtors agreed that filing a plan would achieve a better result for all creditors.

5.

The Stand-Alone Plan

At the end of July and beginning of August 2006, the Debtors advisors assiduously worked with the Debtors management and the Prepetition Lenders to negotiate and prepare a stand-alone plan of reorganization and related disclosure statement with the goal of filing of such documents by the end of August 2006. Concurrently, the Debtors management began preparing revised financial projections to demonstrate the feasibility of the stand-alone plan and support a valuation of the Debtors as a going concern to be prepared by the Debtors advisors. By the end of August 2006, a stand-alone plan and related disclosure statement had been drafted. As discussed above, the stand-alone plan required support from the Prepetition Lenders to obtain confirmation. To provide this support, the Prepetition Lenders required certain conditions to be satisfied, including, among other things, (a) long term 24
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deals with the OEMs that included assurances of revenue and profitability factors (such as raw material indexing and price-down limitations), non-resourcing commitments and other assurances that would be significant departures from industry practice and (b) exit financing that would provide sufficient working capital and capital expenditure requirements for new business. The Debtors and the Prepetition Lenders also sought the support of the Creditors Committee and continued to negotiate the treatment of their claims under a stand-alone plan. To maintain a path to emergence targeted to the end of 2006, on August 30, 2006, the Debtors filed their Joint Plan of Reorganization of Collins & Aikman Corporation and Its Debtor Subsidiaries [Docket No. 3234] (the Stand-Alone Plan) and related disclosure statement [Docket No. 3233] without the supporting financial projections and valuation. To obtain arrangements with the OEMs consistent with the Prepetition Lenders requirements, the Debtors distributed draft agreements to each of the Debtors major customers on August 28, 2006. While negotiations with the OEMs proceeded, the Debtors, the Prepetition Lenders and the members of the Creditors Committee and their advisors also met on a number of occasions and attended countless telephone conferences to negotiate a distribution to unsecured creditors under the Stand-Alone Plan that would garner the support of the Creditors Committee. With negotiations taking place in earnest that would impact final projections and feasibility, the Debtors targeted mid-October 2006 for the filing of the financial projections to support the Stand-Alone Plan and incorporate the new customer agreements. During September and early October 2006, however, the foundations for the Debtors projections continued to fluctuate as a result of the reductions in the customers projected volumes, continued production shortfalls and customer negotiations. Further, the negotiations with the OEMs were proving unsuccessful despite the best efforts of all parties. At this time, the Debtors and their advisors prepared revised projections incorporating known problems and risk adjusting for the uncertainty of the outcome of the OEM negotiations, raw material supply arrangement and several additional variables that influenced the outlook for their businesses. The projections reflected a substantial risk that the Debtors would not be able to sustain operations without even greater concessions from the OEMs than earlier expected. The Prepetition Lenders and the Debtors agreed to reengage the OEMs, this time seeking even more concessions. Again, despite the parties willingness to explore alternatives, no agreement could be reached. In addition, it had become increasingly clear that exit financing would be difficult to achieve given given the historical operating performance and many uncertainties in the financial projections. At this time, the Debtors and their major constituencies each agreed that the Stand-Alone Plan was not feasible and the Debtors should seek to monetize their assets through the Sale Process.

6.

Wind-Down of the Debtors Fabrics Business

Early in 2006, the Debtors and their advisors determined that the Fabrics business was not a core business and, further, that a sale of the Fabrics business was preferable to the continued combination of Fabrics with their other operations. As a result, the Debtors pursued a sale of the Debtors Fabrics business. Based on the initial market response, however, the Debtors and their advisors quickly realized that a liquidation was the only feasible option. The financial performance of the Fabrics business had been deteriorating for some time due both to firm-specific and industry pressures. From 2003 to 2005, revenue declined by 37% and was forecast to continue to decline. In addition, the Fabrics business generated negative EBITDA and cash flow in 2005. The Debtors advisors had contacted approximately 40 potentially interested parties, 13 of whom signed confidentiality agreements and received an information memorandum. The Debtors received a number of non-binding indications of interest but, after conducting additional due diligence on the Fabrics business, including meetings with management and participating in plant visits, each potentially interested party notified the Debtors that they were not interested in pursuing an acquisition of the Fabrics business on a going-concern basis. On June 1, 2006, the Bankruptcy Court entered an order authorizing the Debtors to wind-down the Fabrics business. In accordance therewith, the Debtors began the process of conducting an orderly wind-down of the Fabrics segment. As of December 20, 2006, the Debtors have realized proceeds of approximately $13 million and expect additional proceeds of at least $4 to $6 million. As part of the wind-down of the Fabrics business, the Debtors provided severance and retention payments to the employees of the Fabrics business as recognition of the importance of their efforts in the orderly wind-down. Additionally, to minimize administrative claims, the Debtors established expedited procedures to reject or assume and assign the executory contracts and unexpired leases entered into for the Fabrics business. To facilitate the sale of certain assets of the Fabrics business, the Debtors also received court approval to increase the overall limit on sales of de minimis assets with a selling price equal to or less than $1 million from $30 million to $50 million. 25
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7.

Uncertainty Regarding the Debtors Convertible Roof Systems Business

In November 2005, the Debtors had also initiated an M&A Process for their Convertible Roof Systems business, contacting 36 potentially interested parties, 19 of whom signed confidentiality agreements and received an information memorandum describing the business. On or about January 6, 2006, the Debtors received indications of interest from four potentially interested parties who subsequently engaged in substantial due diligence on the business, including management presentations and plant visits. On or about March 17, 2006, the Debtors received firm written offers from three interested parties, but, based on the undesirable level of consideration offered, the Debtors determined that a sale of the Convertible Roof Systems business was not likely to maximize value for the Estates. On January 13, 2006, and March 30, 2006, respectively, Wilhelm Karmann GMBH and ASC Incorporated filed lawsuits against Dura Convertible Systems, Inc., an indirect, wholly-owned subsidiary of Collins & Aikman Corporation, alleging patent infringement with respect to products manufactured by the Convertible Roof Systems business. For a discussion of the patent litigation, see Article III.I.4 below. Despite these problems, the Debtors have continued to market the Convertible Roof Systems business and reinitiated contact with potentially interested parties, providing updated information and continuing the due diligence process, however, the Debtors have not been able to sell the business, due, in large part, to the uncertainty arising from the patent infringement litigation.

H.

Certain Administrative Matters in the Chapter 11 Cases

1.

Management Retention Initiatives

To retain those employees who had skill sets deemed essential to the future success of the Debtors businesses, the Debtors developed a key employee retention plan (the KERP). On December 16, 2005, the Bankruptcy Court granted the Debtors authority to implement the KERP. The KERP was comprised of a retention component (the Retention Plan) and a success sharing component (the Success Sharing Plan). The Retention Plan provided payments to encourage key employees to continue their employment with the Debtors through the Chapter 11 Cases. The Debtors identified approximately 220 employees who would be eligible to participate in the Retention Plan. Pursuant to the Bankruptcy Courts order, total payments under the Retention Plan cannot exceed $9.3 million, save costs associated with the plant closing portion of the Retention Plan. Two installments totaling 50% of the retention payments have been paid and the final 50% is due to employees either 45 days after the Effective Date or upon effectuation of a sale transaction of the subject employees business unit. The Retention Plan also established a discretionary pool of $250,000 for employees not otherwise covered by the KERP. This discretionary pool allowed the Debtors to address retention needs that arose after implementation of the KERP. The Retention Plan also contained a separate allocation for employees who were affected by plant closings. This component of the Retention Plan authorizes the Debtors to provide severance benefits of no more than twelve weeks of base salary and continued medical benefits to salaried employees. Total payments to such employees are not to exceed $3.5 million. Participants in the plant-closing portion of the Retention Plan were not eligible for participation in the other provisions of the KERP. The Success Sharing Plan contemplated payments to encourage officers and other highly-ranked management personnel to continue their employment with the Debtors. The Success Sharing Plan consists of three primary components: (a) payment of up to 12 months of base pay for severance (according to an employees Court-approved employment agreement or at the discretion of the Chief Executive Officer and the Board of Directors); (b) an annual bonus program; and (c) a bonus consisting of a success sharing pool (the Success Sharing Pool) payable upon confirmation of a plan or effectuation of sale transactions involving substantially all of the Debtors assets. Each Success Sharing Plan participant is entitled to an annual bonus of up to 50% of base salary, paid semi-annually, guaranteed for the first year following approval of the KERP and thereafter based on achievement of EBITDA levels as agreed by the Debtors, the Committee and the Steering Committee. Funding for the Success Sharing Pool requires either that (y) the Debtors reorganized enterprise value or (z) the proceeds received from a sale of substantially all of the Debtors assets is more than $1.2 billion. The Debtors do not expect that the Success Sharing Pool will be funded as a consequence of the Plan.

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2.

Executory Contracts and Unexpired Leases

Executory Contract and Lease Rejections. As of the Petition Date, the Debtors were parties to thousands of Executory Contracts and Unexpired Leases. The Debtors have reviewed the Executory Contracts and Unexpired Leases of personal property to which they are counterparties. The Debtors have sought to reject approximately 225 of the Executory Contracts and Unexpired Leases. In addition, the Debtors have rejected approximately 20 real property leases as part of their decision to discontinue or consolidate certain business operations. Section 365(d)(4) Deadline. By order dated July 8, 2005, the Bankruptcy Court extended the time within which the Debtors must assume or reject unexpired leases of non-residential real property pursuant to section 365(d)(4) of the Bankruptcy Code through and including January 16, 2006, and by order dated January 6, 2006, the Bankruptcy Court further extended the time within which the Debtors must assume or reject the vast majority of the unexpired leases of non-residential real property pursuant to section 365(d)(4) of the Bankruptcy Code through and including the date a plan of reorganization is confirmed in the Chapter 11 Cases. For certain real property leases, however, the Debtors agreed to make the decision on whether to assume or reject real property leases before the confirmation date. On December 14, 2006, the Court extended the deadline for the Debtors to assume or assign some of these leases until March 14, 2007, and the Debtors have reserved their rights to further extend these deadlines. In connection with the Sale Process, the Debtors expect that favorable Executory Contracts and Unexpired Leases will be assumed and assigned to purchasers to maximize the recovery to the estate. To the extent that Executory Contracts and Unexpired Leases are unfavorable or relate to businesses or assets that are liquidated or wound-down, the Debtors expect that such contracts and leases will be rejected.

3.

Exclusivity

Section 1121(b) of the Bankruptcy Code establishes an initial period of 120 days after the Bankruptcy Court enters an order for relief under chapter 11 of the Bankruptcy Code during which only the debtor may file a plan. If the debtor files a plan within such 120-day period, section 1121(c)(3) of the Bankruptcy Code extends the exclusivity period by an additional 60 days to permit the debtor to seek acceptances of such plan. Section 1121(d) of the Bankruptcy Code also permits a bankruptcy court to extend these exclusivity periods for cause. Without further order of the Bankruptcy Court, the Debtors initial exclusivity period to file a plan would have expired on September 14, 2005. However, by orders dated September 12, 2005, January 6, 2006, April 12, 2006, May 11, 2006, July 13, 2006, September 27, 2006, October 24, 2006 and December 14, 2006, the Bankruptcy Court extended the periods of the Debtors exclusive authority. The current date for the Debtors to file a plan of reorganization is through and including January 12, 2006, and the current date to seek acceptance of a plan is through and including March 14, 2007. The Debtors have reserved their rights to further extend these deadlines.

4.

Avoidance Actions

The Debtors are currently investigating prepetition transfers that may be avoided under Chapter 5 of the Bankruptcy Code or relevant and applicable state law, such as the Uniform Fraudulent Transfer Act. Among other things, the Debtors are looking at transfers made to insiders, transfers for which the Debtors may not have received reasonably equivalent value in exchange for the transfer and transfers made while the Debtors were insolvent or by which the Debtors became insolvent as a result of the transfer. As a preliminary matter, the Debtors have identified numerous significant transfers made by the Debtors in the years preceding the bankruptcy petition. In particular, the Debtors believe that various mergers and acquisitions, along with numerous sale-leaseback transactions may be avoidable under applicable law. With respect to potential actions under section 547 of the Bankruptcy Code, in the ninety days preceding the filing of the Chapter 11 Cases, the Debtors made approximately 96,000 payments totaling approximately $618 million to approximately 3,900 different parties. Approximately 210 of the 3,900 parties each received total payments in excess of $500,000 during that period, amounting to payments of approximately $486 million (or 78.6% of payments during the 90-day period). With respect to payments to insiders during the one-year period preceding the filing of the Chapter 11 Cases, the Debtors made payments totaling approximately $7.4 million to approximately 32 entities. Also during this one-year period, the Debtors transferred $244 million among various Debtor and non-Debtor affiliates.

27
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The Debtors are continuing and will continue to investigate the facts and circumstances of each of these transfers. To the extent that the Debtors believe that any transfers are likely to be avoidable through litigation, the Debtors anticipate that such potential claims may be pursued by the Litigation Trust or the Post-Consummation Trust. A non-exhaustive list of Retained Causes of Action that may be pursued after Confirmation of the Plan, along with prospective defendants or other adversaries to such actions, will be provided in Exhibit A to the Plan. See Article V.C.5 hereof for a more detailed description of the Retained Causes of Action.

5.

Claims

On August 12, 2005, the Debtors filed their schedules of assets and liabilities and statement of financial affairs (collectively, the Schedules) with the Bankruptcy Court. Interested parties may review the Schedules at the office of the Clerk of the United States Bankruptcy Court for the Eastern District of Michigan, Southern Division, 211 West Fort Street, Suite 1825, Detroit, Michigan 48226 or by visiting www.kccllc.net/collinsaikman. On August 11, 2005, the Bankruptcy Court entered an order setting a claims bar date on March 22, 2006, for substantially all entities to file proofs of claim. When the Debtors committed to initiating a sale process for their businesses along with continuing to pursue a viable stand-alone plan of reorganization, it became apparent that accelerating the bar date would enhance the Debtors ability to make progress. On November 22, 2005, the Bankruptcy Court entered an order setting the bar date on January 11, 2006, for substantially all entities to file proofs of claim (the Bar Date). Pursuant to the procedures approved in the order, the Debtors served notices of the Bar Date with customized proofs of claim to more than 10,000 entities listed on the Schedules, served notices of the Bar Date with blank proofs of claim to more than 110,000 additional entities and published notice of the Bar Date in the Wall Street Journal, USA Today (National Edition) and the Detroit Free Press/Detroit News. Claims Estimates. As of December 20, 2006, the Debtors Claims Agent had received approximately 9,049 Claims. The total amounts of Claims filed against one or more of the Debtors were as follows: (1) 1,025 Secured Claims in the total amount of $3,091,616,331; (2) 43 Administrative Claims in the total amount of $2,380,409; (3) 905 Priority Claims in the total amount of $7,537,867,410; and (4) 7,077 Unsecured Claims in the total amount of $42,659,002,339. The Debtors believe that many of the filed proofs of Claim are invalid, untimely, duplicative and/or overstated. Therefore, the Debtors are in the process of objecting to such Claims. Through withdrawal of claims and disallowance by the Bankruptcy Court after objection, 554 claims totaling $4,414,393,899 have been expunged. The Debtors estimate that, at the conclusion of the Claims objection, reconciliation and resolution process, the aggregate amount of claims will be as follows: (1) Allowed Administrative Claims will be approximately $70 million; (2) Allowed Secured Claims will be approximately $827 million; (3) Allowed Priority Claims will be approximately $12 million; (4) Allowed Senior Note Claims will be approximately $521 million; (5) Allowed Senior Subordinated Note Claims will be approximately $428 million; and (6) Allowed General Unsecured Claims will be approximately $539 million. The estimate of Allowed Administrative Claims includes, among others, the final payment due under the KERP, payments contemplated by a new key employee retention plan, severance expenses, professional fees, cure costs from the assumption of executory contracts to be assigned to potential purchasers (which may or may not be paid by such purchasers), property taxes, early termination penalties under postpetition contracts and certain Administrative Claim requests reflected on the Claims Register and docket for which the Debtors reasonably expect there to be a distribution. The Administrative Claim estimate does not include $30 million arising from the OEM Administrative DIP Claims, payment of which is expected to be waived by the OEMs as part of the Customer Agreement. Further, the estimate of Allowed Secured Claims does not include the OEM Subordinated DIP Loan in the amount of $82.5 million, payment of which is expected to be waived by the OEMs as part of the Customer Agreement. The estimates set forth herein are approximate and based upon numerous assumptions and there is no guarantee that the ultimate amount of Claims will conform to these estimates. Numerous Claims have been asserted in unliquidated amounts. Further, additional Claims may be filed or identified during the Claims objection, reconciliation and resolution process that may materially affect the foregoing estimates. Although the Debtors believe that certain Claims are without merit and intend to object to all such Claims, there can be no assurance that these objections will be successful.

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6.

Receivables Facility Paydown

As set forth in Article II.C.2.b herein, the Debtors utilized the Receivables Facility as a source of liquidity prepetition. As of the Petition Date, there was approximately $127 million outstanding under the Receivables Facility. Postpetition, the Debtors have not sold receivables to Carcorp, and have repaid these obligations as they receive payments on account of the receivables sold to Carcorp prepetition. The Debtors serviced, administered and collected the receivables on behalf of Carcorp and GECC. After the Petition Date, the Debtors and GECC worked together to collect the prepetition accounts receivable. As the receivables were converted to cash through payments by customers, and no new receivables are added to the pool, the outstanding balance under the Receivables Facility was eliminated. On October 13, 2006, the Court entered an order approving the stipulation between the Debtors and GECC fixing the amount of the final payoff and resolving all claims under Receivables Facility. The Debtors have no further obligations under the Receivables Facility.

7.

European Operations

As of the Petition Date, the Debtors had several foreign subsidiaries and affiliates located throughout Europe. The European Debtors were experiencing severe financial difficulties and, on July 15, 2005, the European Debtors commenced the UK Proceedings. As part of the UK Proceedings, the English court appointed the UK Administrators to act in the best interests of the creditors of the European Debtors. Because the simultaneous Chapter 11 Cases and the UK Proceedings presented numerous jurisdictional issues, including as a result of the intercompany creditors and intercompany, cross-border debt, the United States Bankruptcy Court and the English bankruptcy court each approved an insolvency protocol designed to: (a) promote the orderly and efficient administration of the two insolvency proceedings; (b) harmonize and coordinate activities undertaken and information exchanged in connection with the insolvency proceedings; (c) honor the independence and integrity of the United States and English courts; and (d) promote international cooperation and respect for comity among the United States and English courts. The UK Administrators marketed the European Debtors assets in connection with a potential sale of such assets in accordance with the usual practice, procedure and timescale for fulfilling such a strategy in an English lawgoverned administration. In particular, the sale process focused on (a) a sale of a core group of twelve plants and (b) multiple sales of certain individual sites. On July 29, 2005, the UK Administrators publicly advertised the potential sales in the Financial Times and contacted numerous potential buyers. The UK Administrators held discussions with over 100 interested parties, including potential buyers for: (a) substantially all of the European business as a going concern; (b) groups of plants by country; (c) groups of plants by product type; and (d) individual plants. On August 10, 2005, first round bids were received from a number of interested parties and, on October 21, 2005, second round bids were received. The UK Administrators received two bids for the core group of assets and several bids for single sites and small groups of sites. On November 4, 2005, the final round of bids were received. Following discussions with the two major bidders for the core group of assets, the UK Administrators concluded that IAC Acquisition Corporation Limited (an entity funded by WL Ross & Co. LLC and Franklin Mutual Advisers LLC) was the successful bidder of the core group of assets. The UK Administrators then reviewed all of the bids received for single sites and small groups of sites and determined that such bids were all less favorable on a site-by-site basis than the bid received from IAC Acquisition Corporation Limited for the core group of assets. Therefore, the UK Administrators proceeded with IAC Acquisition Corporation Limited regarding a sale of the European Debtors core group of assets in a series of transactions and, on November 28, 2005, executed a master sale agreement for the sale of substantially all of the European Debtors assets for a purchase price in excess of $100 million. The sale transactions closed on March 3, 2006. As part of the sale, the Debtors agreed to transfer and license certain of their intellectual property rights to the European Debtors for the benefit of IAC Acquisition Corporation Limited. Specifically, the Debtors entered into a transition services agreement for the continuation of certain information technology support and related services traditionally provided by the Debtors to the European Debtors, an intellectual property license agreement relating to the license of certain intellectual property used for the conduct of one of the European Debtors foreign subsidiaries and an assignment and license agreement relating to the assignment and license of certain intellectual property used by the European Debtors in the conduct of their business. To assist in determining and negotiating a fair value for these 29
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intellectual property rights, the Debtors engaged Consor, Inc., an internationally recognized expert in valuing intellectual property. The Debtors received approximately $12.5 million in aggregate consideration for the licensed and transferred intellectual property. During 2001, Collins & Aikman acquired 100% of the voting shares of a holding company owning 56.5% of the economic interest in Plascar Industria de Componentes Plasticos Ltda. (Plascar), a Brazilian manufacturer of interior trim parts. The acquisition of Plascar was structured such that Collins & Aikman Europe S.A. (Luxco) owned 99.99% of the holding company and Collins & Aikman International Corporation owned the remaining 0.01%. Plascar fell under the control of the UK Administrators via the Administrators appointment over Luxco. The UK Administrators led a process to solicit bids for Luxcos interests in Plascar. Ultimately, Plascar was sold to International Automotive Components Group Brazil, a joint venture between WL Ross & Co. LLC and Franklin Mutual Advisers, LLC.

8.

European Intercompany Claims and Interests

The Debtors asserted approximately $350 million of claims against nineteen European Debtors, as summarized in the following table. Additionally, the Debtors have equity interests in the European Debtors for which the Debtors may receive a recovery, to the extent such European Debtors are solvent. European Debtor Name Collins & Aikman Automotive Company Italia, S.r.l. Collins & Aikman Automotive Fabrics Limited Collins & Aikman Automotive Floormats Europe B.V. Collins & Aikman Automotive Holding Gmbh Collins & Aikman Automotive Limited Collins & Aikman Automotive s.r.o. Collins & Aikman Automotive Systems AB Collins & Aikman Automotive Systems S.L. Collins & Aikman Automotive Systems, GmbH Collins & Aikman Automotive Trim B.V. Collins & Aikman Automotive Trim B.V.B.A. Collins & Aikman Automotive Trim GmbH Collins & Aikman Automotive Trim Limited Collins & Aikman Europe B.V. Collins & Aikman Europe S.A. Collins & Aikman Holding AB Collins & Aikman Holdings B.V. Collins & Aikman Products, GmbH Dura Convertible Systems GmbH Total Claim Filed $252,567 87,899 25,420 233,758 496,185 1,718,138 1,018,431 5,801,163 3,734,426 8,915,425 1,213,731 1,872,505 219,808 7,579,940 247,261,305 229 67,510,279 2,356,111 106,357 $350,403,450

Conditioned upon acceptance of the claims in the administration process, the Debtors preliminarily estimate an aggregate recovery of approximately $58 to $70 million from the above claims, with over 90% of that amount coming from Collins & Aikman Europe S.A., Collins & Aikman Holdings B.V. and Collins & Aikman Automotive Trim B.V. The Debtors do not expect to receive any value from their directly or indirectly held equity interests in the European Debtors. The Debtors anticipate that an initial distribution on account of claims against the European Debtors will be made on or before December 31, 2006, with the final distribution being made on or before June 30, 2007. Claims against Collins & Aikman Europe S.A. arise primarily from intercompany promissory notes held by Debtor Collins & Aikman Products Co. A specific intercompany promissory note accounts for approximately $85 million of the total estimated claims. The remaining claims arise from a master intercompany note agreement. Claims arising from this master intercompany note agreement likely will not be settled prior to the initial distribution. The claim against Collins & Aikman Holdings B.V. arises from a specific intercompany note held by Collins & Aikman Products Co. The claims against Collins & Aikman Automotive Trim B.V. and the remainder of the smaller claims arise from corporate overhead allocations substantiated by corporate overhead agreements and trade receivables substantiated by trade invoices.

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The foregoing estimates are approximate and based upon multiple assumptions regarding the timing and outcome of the claims process in the UK Proceedings. There is no guarantee that the timing or amounts of actual recoveries will conform to the estimates stated herein.

9.

Mexican Operations

C&A operates five manufacturing facilities in Mexico through its non-Debtor subsidiaries organized in Mexico to support its North American customers with facilities in the region. The Mexican operations capabilities include Plastics and Soft Trim, including convertible roof systems. Primary customers include Ford, General Motors, DaimlerChrysler and Volkswagen. C&As operations in Hermosillo, Mexico support the Ford CD388 platform (currently producing the Ford Fusion, Mercury Milan and Lincoln Zephyr) exclusively from a supplier park adjacent to Fords assembly plant. From this location C&A supplies a full range of interior products. The Debtors are marketing their interests in their non-Debtor subsidiaries in Mexico in conjunction with the Sale Process.

10.

Canadian Operations

C&A currently operates twelve manufacturing and sequencing facilities in Canada through its non-Debtor subsidiaries organized in Canada to support its North American customers with facilities in the region. The Canadian operations provide plastic material processing and molding, as well as, carpet and acoustics manufacturing capabilities. Primary customers include Ford, General Motors, DaimlerChrysler and Honda. The Debtors Canadian non-Debtor subsidiaries and their Debtor-equity holder have been assessed by the Canadian revenue authorities for non-resident withholding tax on certain payments made in 1994 and 1995 by the Canadian non-Debtor subsidiaries to their Debtor-parent. In issuing the assessments, the Canadian revenue authorities relied upon a general anti-avoidance rule in the Canadian tax legislation to seek to recharacterize the returns of capital made by the Canadian non-Debtor subsidiaries as dividends subject to withholding tax. The assessments were for an aggregate amount of approximately C$17 million, including interest. The assessments are currently under appeal to the Tax Court of Canada.

11.

Deferral of Adequate Protection Payments

Pursuant to the final order approving the DIP Facility [Docket No. 809] (the Final DIP Order), the Court approved the payment of certain adequate protection obligations (the Adequate Protection Payments) to the Prepetition Lenders. Specifically, the Final DIP Order provides that the Debtors shall pay to the Prepetition Lenders on a monthly basis, among other things, accrued but unpaid interest and all accrued but unpaid letter of credit and other fees. The Adequate Protection Payments are approximately $7.2 million per month. By motion dated August 22, 2006, the Debtors sought Court approval to defer a certain portion of the Debtors obligation to make the Adequate Protection Payments for the months of September through December 2006 until January 1, 2007. The Court approved the motion by order dated August 29, 2006 [Docket No. 3214]. The payments deferred by this order and a portion of the Adequate Protection Payments for January 2007 were deferred to February 1, 2007, pursuant to an interim order entered by the Court on December 14, 2006 [Docket No. 3758]. This deferral and the deferral of a certain portion of the Adequate Protection Payments for February through June 2007 is scheduled to be heard on January 11, 2007. If this motion receives final approval, the portion of the Adequate Protection Payments for the period September 2006 through June 2007 will be deferred until August 1, 2007. Provided that the Effective Date is on or before August 1, 2007, these deferred payments will be resolved when the Holders of the Prepetition Facility Claims receive distributions under the Plan.

I.

Litigation and Investigations

1.

Automatic Stay

The filing of the bankruptcy petitions on the Petition Date triggered the immediate imposition of the automatic stay under section 362 of the Bankruptcy Code, which, with limited exceptions, enjoined the commencement or continuation of all collection efforts and actions by Holders of Claims, the enforcement of liens against property of the Debtors and the continuation of litigation against the Debtors. The automatic stay remains in effect until the Debtors emergence from chapter 11 protection. 31
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In re Collins & Aikman Corp. Securities Litigation. Four purported class actions were filed between April and June 2005 in the United States District Court for the Southern District of New York against the Debtors and their former and current senior officers and/or directors, alleging violations of sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. These cases include the following: Hanna Kleinpeter-Fleck v. Collins & Aikman Corp., David A. Stockman, J. Michael Stepp and Bryce M. Koth, Civ. No. 05-CV-3791 (MBM); K.J. Egleston v. Jerry L. Mosingo, David A. Stockman, J. Michael Stepp, and Bryce M. Koth, Civ. No. 05-CV-04950 (MBM); Akerman v. Collins & Aikman Corp., David A. Stockman, J. Michael Stepp, and Bryce M. Koth, Civ. No. 05-CV-5098 (MBM) and Gariddi v. Jerry L. Mosingo, David A. Stockman, J. Michael Stepp, and Bryce M. Koth, Civ. No. 05-CV-5251(MBM). Upon the commencement of the Chapter 11 Cases, the cases naming the Debtors as a defendant were stayed as against the Debtors. The proposed lead plaintiff K.J. Egleston, however, indicated his intention to continue to prosecute the cases as against the remaining non-debtor defendants. Accordingly, plaintiff K.J. Egleston filed a motion to consolidate the pending actions and to be appointed lead plaintiff for the purported class. Pursuant to an order issued by Judge Mukasey of the United States District Court for the Southern District of New York on November 22, 2005, the proposed lead plaintiff K.J. Egleston filed a consolidated class action complaint on January 13, 2006, on behalf of all plaintiffs who purchased the common stock of Collins & Aikman Corporation between May 15, 2003 and March 17, 2005, entitled In re Collins & Aikman Corporation Securities Litigation, Civ. No. 05-CV-03791 (MBM). The consolidated complaint does not name the Debtors as a defendant, but instead names only certain former officers and directors of the Debtors including David A. Stockman, J. Michael Stepp, Bryce M. Koth and Jerry L. Mosingo. The consolidated complaint also names as defendants Heartland Industrial Partners LP and Heartland, LLC. The courts order also required defendants to file any motions to dismiss by March 3, 2006, and stayed all discovery pending further order of the court. In response, the defendants filed both motions to dismiss and a motion to transfer venue, pursuant to 28 U.S.C. 1404(a), to the Eastern District of Michigan. The Court granted the defendants motion to transfer venue on July 11, 2006, and the case is now pending before the Honorable Arthur J. Tarnow and Magistrate Judge Steven D. Pope in the United States District Court for the Eastern District of Michigan. The defendants motions to dismiss are still pending. MacKay Shields Litigation. On July 8, 2005, plaintiff MacKay Shields LLC filed a state court action in the State of Michigan, Circuit Court of Wayne County, captioned MacKay Shields LLC v. Heartland Industrial Partners, L.P., et al., File No. 05-520229CZ, against Heartland Industrial Partners, L.P., Heartland Industrial Associates, L.L.C. and various former and current officers and directors of Collins & Aikman Corporation and Heartland LLC, including David A. Stockman, J. Michael Stepp, Timothy D. Leuliette, Daniel P. Tredwell, W. Gerald McConnell, Samuel Valenti, III, John A. Galante, Bryce M. Koth and Robert Krause. The action alleges that, between August 2004 and May 2005, the defendants made a series of materially false and misleading statements regarding the Debtors financial statements and operating condition, which induced MacKay Shields to purchase $153 million face amount of the Debtors debt. On November 9, 2005, the action was removed to the United States District Court for the Eastern District of Michigan. On October 17, 2006, the action was dismissed without prejudice. Debtors Adversary Proceeding. On February 1, 2006, the Debtors instituted an adversary proceeding in the Bankruptcy Court seeking a declaration that, pursuant to section 362(a)(1), (3) of the Bankruptcy Code, the automatic stay is extended to stay the continued prosecution of the In re Collins & Aikman Corp. Securities Litigation and the MacKay Shields litigation described above and the commencement of any similar securities-related claims against the non-Debtor directors and officers of the Debtors during the pendency of the Chapter 11 Cases. Alternatively, to the extent prosecution of the court actions is not automatically stayed by operation of section 362 of the Bankruptcy Code, the Debtors requested the entry of a supplemental injunction, pursuant to section 105 of the Bankruptcy Code, prohibiting both the continued prosecution of the court actions and the commencement of any similar securities-related claims against the non-debtor directors and officers during the pendency of the Chapter 11 Cases. In May 2006, the Bankruptcy Court denied the Debtors motion without prejudice to seek a stay of the securities-related actions once discovery in those cases begins. Patterson Litigation. On March 23, 2004, plaintiffs filed a second amended complaint in the case of Wanda Patterson et al. v. Heartland Industrial Partners, LLP et. al., United States District Court for the Northern District of Ohio, Eastern Division (the District Court), Case No. 5:03-CV-1596, against several defendants, including Collins & Aikman Corporation, Collins & Aikman Products Co. and Collins & Aikman Accessory Mats, Inc., each of which is a Debtor. In this action, the nominal plaintiffs are employees at the Debtors Holmsville, Ohio facility. The second amended complaint alleges that neutrality agreements entered into by certain of the Debtors and the United Steel, Paper, 32
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and Forestry, Rubber Manufacturing, Energy, Allied Industrial and Service Workers International Union (the USW), a labor organization, violate section 320 of the Labor-Management Relations Act, 29 U.S.C. 186. In particular, plaintiffs make the novel claim that the neutrality agreements provide a thing of value to the USW in violation of the antibribery provisions of 29 U.S.C. 186 because such agreements allegedly amount to valuable organizing assistance to the USW. Upon the commencement of the Chapter 11 Cases, this action was stayed in its entirety. At the time, the parties summary judgment motions were almost fully briefed. On or around September 13, 2005, plaintiffs filed a motion in the Bankruptcy Court seeking relief from the automatic stay so that the parties could complete summary judgment briefing and proceed with prosecution of their action. The Debtors filed an objection on September 28, 2005, and defendant USW filed a Joinder of Motion for Relief from Automatic Stay on October 3, 2005. On October 13, 2005, the parties entered into a stipulation whereby the automatic stay was modified for the limited purpose of allowing the filing and briefing of the dispositive summary judgment motions in the District Court to be completed, allowing the District Court to rule on such motions, permitting the filing of any subsequent appeals on any dispositive summary judgment ruling made by the District Court, if necessary, and allowing the District Court to rule on a disputed protective order pending before it. The automatic stay remains in place as to any other proceedings in this action and specifically prevents the reopening of discovery or any advancement to trial in this action. Lawson Litigation. On various dates before the Petition Date, plaintiffs filed a number of civil and/or class actions before the Court of Common Pleas in the State of South Carolina captioned as T.J. Lawson and Tammy Lawson, James M. Reid and Renee F. Reid, Bennie Skates and Cathy Skates, Robert A. Price, and David Swofford and Karen Swofford, Individually and on Behalf of a Class of Person Similarly Situated v. Healthtex, Inc., f/k/a Health-Tex, Inc., f/k/a HT Contracting Corporation; Collins & Aikman Corporation, f/k/a C&A Fashion Knits, Inc., and Collins & Aikman Products Co.; Spartanburg County Industries, Inc.; Chesebrough-Ponds, Inc.; VF Corporation; VF Playwear Inc.; Harold Waddell; Ed Justice; and Ronnie Coggins, Case No. 2003-CP-42-4231 and T.J. Lawson, Tammy Lawson; individually, and Tammy Lawson as Guardian ad Litem for Brandon Lawson, Amber Lawson and Joshua Lawson vs. Healthtex, Inc., f/k/a Health-Tex, Inc., f/k/a HT Contracting Corporation; Collins & Aikman Corporation, f/k/a C&A Fashion Knits, Inc., and Collins & Aikman Products Company; VF Corporation; VF Playwear Inc.; Ed Justice and Ronnie Coggins, Case No. 2004-CP-42-3810. The plaintiffs actions allege that the Debtors directly or indirectly owned and operated the Healthtex plant site in Cowpens, South Carolina between 1970 and 1981, and that during the Debtors operations, numerous and extensive amounts of hazardous substances, pollutants and contaminants used and handled by the Debtors were released into the environment. The plaintiffs further allege that the resulting contamination of the groundwater and surrounding areas was due to the Debtors negligence, recklessness, gross negligence and wanton and willful behavior. The plaintiffs seek monetary damages for related property damages. Prior to the Petition Date, significant fact discovery had taken place. However, various discovery and pre-trial proceedings had yet to be conducted including, inter alia, the completion of class certification briefing and hearing, dispositive motions, additional depositions of former and current Debtors employees, expert discovery and trial. Upon the Debtors chapter 11 filings, the plaintiffs actions were stayed in their entirety. On or around August 23, 2005, plaintiffs filed a motion seeking relief from the automatic stay. On September 9, 2005, the Debtors filed an objection. Argument was heard on plaintiffs motion before the Bankruptcy Court on October 24, 2005. The Court denied plaintiffs motion.

2.

Internal Investigations

On March 17, 2005, the Debtors publicly announced that during the course of finalizing their financial statements for their fiscal year ended December 31, 2004, they had identified certain accounting for supplier rebates that resulted in revenue recognition that was premature or inappropriate or that was inconsistent with relevant accounting standards and their policies and practices. At that time, the Debtors also announced that they had initiated an internal review of these matters and that they expected certain restatements of their financial results would be required. The Debtors further stated that they would not be able to file their Annual Report on Form 10-K containing fiscal 2004 audited financial statements with the SEC on time. The Debtors stated that they required additional time to complete the review of the accounting issues described above, their financial reporting process and their controls over financial reporting. In connection with the Companys discovery of these accounting issues, the Audit Committee of C&A commenced an independent investigation into these matters and retained independent counsel from the law firm of Davis 33
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Polk & Wardwell (DPW) to assist them in the investigation. During the course of the Audit Committees investigation, it was determined that the scope of the investigation would also include the Debtors forecasts for the first quarter of 2005, as well as other matters concerning accounts receivable. The Audit Committees independent counsel, DPW, has been assisted by forensic accountants from Ernst & Young in seeking to determine the facts surrounding, the extent, and the cause of any accounting or other financial irregularities within the scope of the Audit Committees investigation. In connection with the Audit Committees investigation and inquiries from the SEC and Department of Justice (DOJ) as described below, extensive work has been performed by the Audit Committees independent counsel and forensic accountants relating to the retrieval, archival, review and analysis of information, documents, and data from the Debtors, in both electronic and paper format. To date, over two million pages of documents have been reviewed. In addition, over 70 witnesses have been interviewed by independent counsel for the Audit Committee at various locations around the United States. Although the Audit Committee has completed significant amount of work, the Audit Committees investigation remains on-going, and the Audit Committee continues to assist the SEC and DOJ with the investigations described below.

3.

Government Investigations

On June 20, 2005, the Debtors received a voluntary document request from the SEC relating to certain aspects of the Debtors accounting practices and financial reporting. At that time, the SEC requested certain documents, files and records pertaining to these matters. A formal subpoena subsequently was issued by the SEC in September 2005 requiring additional documents relating to the Debtors accounting practices, financial statements and related financial information, and customer and vendor relationships. From the outset of the SECs investigation, the Audit Committee has kept the SEC informed as to the scope and progress of the Audit Committees investigation. On or about August 5, 2005, the Debtors received a grand jury subpoena from the United States Attorneys Office for the Southern District of New York, seeking documents and information relating to the Debtors financial statements and reporting, accounts receivable, and supplier and customer rebates. The Debtors have been and continues to fully cooperate with the SEC and DOJ in these investigations, which are ongoing. The Bankruptcy Court has entered orders approving stipulations by and between the Debtors and the SEC extending the Bar Date for the SEC to file a proof of claim in the Chapter 11 Cases, with the most recent order dated December 13, 2006, approving an extension until January 15, 2006.

4.

Patent Litigation

Wilhelm Karmann Litigation. On December 2, 2005, Wilhelm Karmann GMBH (Karmann) filed a motion in the Bankruptcy Court seeking relief from the automatic stay to pursue a patent infringement action in the United States District Court for the Eastern District of Michigan against one of the Debtors, Dura Convertible Systems, Inc. (Dura) for alleged pre- and postpetition infringement. In its motion, Karmann alleged that Duras convertible top system for the 2005 Ford Mustang, a program that constitutes one of Duras largest programs for 2005, infringes Karmanns 474 patent, which relates to a folding top for a passenger car with a convertible folding roof. The Bankruptcy Court denied Karmanns motion in its entirety. On January 13, 2006, Karmann filed a complaint for patent infringement in the Bankruptcy Court seeking an injunction and damages against Dura for its alleged pre- and postpetition infringement of Karmanns 474 patent. Dura answered and counterclaimed on March 10, 2006. The parties completed fact and expert discovery. The parties filed cross motions for summary judgment on the issues of invalidity and infringement, initiated by Duras filing of its motion for summary judgment of the asserted claims of the 474 patent on June 6, 2006. The Bankruptcy Court conducted oral arguments on the parties summary judgment motions on June 13, 2006, and issued an oral preliminary claim construction ruling on July 18, 2006, but has yet to issue a final ruling on the parties summary judgment motions. The Bankruptcy Court requested additional briefing on the issue of invalidity by August 1, 2006. The Bankruptcy Court previously had set a trial date of July 18, 2006, but vacated that date to allow time to evaluate and rule on the parties summary judgment motions. On October 10, 2006, the District Court denied plaintiffs request to withdraw the reference from the Bankruptcy Court. The parties are currently in settlement discussions.

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ASC Litigation. On March 30, 2006, ASC, Inc. (ASC) filed a complaint in the Bankruptcy Court against Dura. ASC alleges infringement of four patents and charges Duras convertible tops for the Dodge Viper and 2005 Ford Mustang of infringement. On June 21, 2006, Dura answered and counterclaimed for non-infringement and invalidity of the asserted patents. The Bankruptcy Court held an initial scheduling conference on August 14, 2006 and, on August 15, 2006, entered an order setting a trial date of January 9, 2007. Dura and ASC have reached a settlement of the litigation that will allow the Debtors to continue to manufacture convertible tops for the Dodge Viper and 2005 Ford Mustang under the patents licensed from ASC. The Debtors filed a motion to approve the settlement with the Court on December 13, 2006 [Docket No. 3738].

5.

Financing Arrangements with General Electric Capital Corporation

Beginning in 2001, Collins & Aikman Products Co. (C&A Products) entered into three so-called master lease agreements (dated August 7, 2001, the GECC Phase I Agreement, dated December 20, 2001, the GECC Phase II Agreement, dated June 25, 2004, the GECC Phase III Agreement, and collectively, the GECC Financing Arrangements) with GECC. C&A Products entered into the GECC Phase I Agreement and GECC Phase II Agreement to raise capital to fund a series of significant corporate acquisitions. The parties structured the GECC Financing Arrangements as sale-leaseback transactions. Under these sale-leaseback transactions, C&A Products sold to GECC equipment essential to their operation. GECC subsequently leased such equipment back to the Debtors. At no point did the equipment ever leave C&A Products possession. Moreover, despite the lease obligations having a present valuation of more than $47 million, the fair market value of the equipment sold was approximately $12.5 million. The GECC Phase III Agreement was similar in structure to the GECC Phase I Agreement and GECC Phase II Agreement, but it was necessitated by different circumstances. In 2004, C&A Products was experiencing serious financial problems. As a result, C&A Products used the Phase III Agreement to raise capital to sustain its businesses. Again, C&A Products sold equipment vital to its operations to GECC and subsequently leased the equipment back from GECC. Just as with the GECC Phase I Agreement and GECC Phase II Agreement, C&A Products leased the equipment and obligated itself to lease payments with a present value that was far more than the fair market value of the equipment; agreeing to lease payments with a present value of approximately $20 million for equipment fairly valued at just over $6 million. GECCs Motion to Compel Payments. The Debtors believed that after applying the facts of the GECC Financing Arrangements to the relevant law, the GECC Financing Arrangements did not constitute leases under section 365 of the Bankruptcy Code and therefore the Debtors did not make payments under the GECC Financial Arrangements after filing for bankruptcy. On April 18, 2006, GECC filed a motion in the Bankruptcy Court to compel the Debtors to pay rent and taxes under the terms of the GECC Financing Arrangements. In its motion, GECC alleged that under section 365, the Debtors were obligated to make payments pursuant to the terms of the GECC Financing Arrangements until such time as the Debtors rejected such leases pursuant to section 365. On May 5, 2006, the Debtors opposed GECCs motion arguing that the GECC Financing Arrangements, despite their designation as master lease agreements, are, in fact, sale transactions not subject to the provisions of section 365 of the Bankruptcy Code. To address GECCs motion, the Bankruptcy Court scheduled a limited evidentiary hearing to consider the likelihood that the Bankruptcy Court, after a full determination of the issue in the Recharacterization Litigation (as defined herein), would find that the GECC Financing Arrangements were lease transactions subject to section 365 of the Bankruptcy Code. The Bankruptcy Court reasoned that (a) if it were more likely than not that the arrangements were financings, the Debtors would not be compelled to make payments while the Recharacterization Litigation was adjudicated, and (b) if it believed the GECC Financing Arrangements were more likely than not to be true leases, then GECC was entitled to payments in a manner consistent with the obligations under the GECC Financing Arrangements. On June 1, 2006, the Bankruptcy Court heard arguments and reviewed factual evidence related to GECC and the Debtors respective positions. After a preliminary review of the facts at issue in the dispute, the Bankruptcy Court held that it is more likely than not that the GECC Financing Arrangements will be recharacterized as secured financing agreements. On June 9, 2006, the Bankruptcy Court entered the order denying GECCs motion to compel payments under the GECC Financing Arrangements in its entirety.

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On the same day, GECC appealed the decision. The Debtors opposed GECCs right to appeal arguing that the Bankruptcy Courts order is not final and, further, that the appeal could not satisfy the necessary prerequisites to justify an interlocutory appeal. On August 30, 2006, the District Court found that the Bankruptcy Courts order was not final and denied leave to appeal the interlocutory order and dismissed GECCs appeal. Recharacterization Litigation. On April 19, 2006, the Debtors filed a complaint seeking to recharacterize the GECC Financing Arrangements as sale transactions. If the Debtors are successful, section 365 of the Bankruptcy Code will be inapplicable to the Debtors obligations under the agreements and the transactions with GECC will be treated as financing arrangements between GECC and the Debtors. If this were to occur, GECC may be entitled to a claim against the Debtors for obligations owing by the Debtors to GECC, a portion of which may be secured by the value of the equipment that is the subject of the GECC Financing Arrangements. On May 19, 2006, GECC filed its answer to the Debtors complaint. In subsequent part, GECC restated its belief that the GECC Financing Arrangements constitute leases to be paid under section 365 of the Bankruptcy Code. After conducting some discovery, GECC and the Debtors agreed to a stay of the proceedings while they pursue a negotiated resolution. The Debtors expect that certain of the subject equipment will be transferred to purchasers as part of the Sale Process. GECCs claims will be classified separately under the Plan and receive a treatment that has not been determined at the time of the filing of this Disclosure Statement.

6.

The Debtors Operations in Hermosillo, Mexico

Collins & Aikman Automotive Hermosillo S.A. de C.V. (C&A Hermosillo) is a non-Debtor indirect subsidiary of the Debtors. C&A Hermosillo operates a plant in Hermosillo, Mexico that manufactures interior parts for automobiles. On November 8, 2004, one of GECCs indirect subsidiaries, GE Capital de Mexico, S. de R. L. de C.V. (GE Mexico), entered into a series of agreements, including a construction agency agreement (Construction Agency Agreement), with C&A Hermosillo for GE Mexico to provide the initial financing for the C&A Hermosillo plant and equipment. GE Mexico and GECC (collectively, the GE Entities) contend that the filing of the Chapter 11 Cases was an event of default under the Construction Agency Agreement. Shortly after the Petition Date, the Debtors and the GE Entities entered into a series of standstill agreements that precluded the GE Entities from taking any action with respect to C&A Hermosillo. Those standstill agreements expired on October 15, 2005. Seven months later, on May 19, 2006, GE Mexico sent C&A Hermosillo a letter threatening to commence any legal or other action and to exercise any or all rights and remedies provided for by the Construction Agency Agreement and related agreements with respect to C&A Hermosillo. On May 31, 2006, the Debtors commenced an adversary proceeding in the Bankruptcy Court and filed a motion seeking to enjoin the GE Entities from taking any action with respect to C&A Hermosillo. A hearing was held on June 19, 2006. At that hearing, the Bankruptcy Court raised several evidentiary questions to be addressed at a hearing scheduled on June 27, 2006. After discussions with the GE Entities and before the June 27, 2006 hearing, the Debtors voluntarily withdrew their adversary proceeding and the motion without prejudice as the Debtors intended to resolve the issues related to the adversary proceeding in conjunction with the sale of the Hermosillo operations as contemplated in the Sale Process.

7.

Litigation Regarding Certain Property Taxes for Leased Real Property

On or about February 9, 2006, Fabric (DE) GP (Fabric-Lessor) filed a motion to compel payment of unpaid taxes seeking the allowance and payment of an administrative expense claim on account of the Debtors alleged failure to pay certain taxes pursuant to a lease agreement dated June 27, 2002. Fabric-Lessor argued that the taxes must be paid by the Debtors as postpetition expenses, pursuant to section 365(d)(3) of the Bankruptcy Code because they were billed to the Debtors after the Petition Date. The Debtors objected to the motion, arguing that the taxes at issue were assessed by the relevant taxing authorities, either partially or entirely, for a prepetition period and therefore not entitled to administrative expense claim status. Under such circumstances, the Debtors argued that Fabric-Lessor should only be entitled to payment of the portion of the taxes that accrued postpetition.

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On April 6, 2006, the Bankruptcy Court granted Fabric-Lessors motion and ordered that the Debtors pay the taxes billed to the Debtor[s] after the bankruptcy was file[d], pursuant to section 365(d)(3), even though such taxes were assessed, either entirely or partially, for a prepetition period. The Debtors timely filed an appeal to the United States District Court for the Eastern District of Michigan on April 28, 2006, seeking reversal of the Bankruptcy Courts order. The appeal was fully briefed as of June 21, 2006, and on June 23, 2006, the Creditors Committee filed a motion for leave to file a brief amicus curiae in support of the Debtors position. On September 22, 2006, the Debtors notified the District Court that the parties were currently engaged in settlement negotiations that would resolve the appeal and requested that this Court withhold issuing any ruling or judgment on the until such negotiations have concluded. The appeal is pending.

8.

Litigation Regarding Alleged Asbestos Related Liabilities

The Debtors are parties to lawsuits alleging personal injury from exposure to asbestos containing materials used in boilers manufactured by the Debtors as part of their former boiler operations, which were sold in 1966. As of the Petition Date, the Debtors were parties to approximately 1,400 pending cases alleging liability in connection with the boiler business. Historically, the Debtors have paid $3.9 million in total defense costs and $2.1 million in total indemnity claims. The average historical settlement amount is de minimis. These defense and indemnity costs have been substantially covered by the Debtors primary insurance carriers under a claims handling agreement that expires in August 2006; however, the claims handling agreement is subject to an evergreen clause that extends the term of the claims handling agreement indefinitely absent notice of termination. The Debtors have primary, excess and umbrella insurance coverage for various periods available for asbestos-related boiler and other claims. Under the current claims handling agreement, the Debtors primary carriers have agreed to cover approximately 82% of certain defense and settlement costs up to a limit of approximately $73 million for all claims made, subject to reservations of rights. The excess insurance coverage, which varies in availability from year to year, is approximately $619 million in aggregate for all claims made. In addition to the boiler claims described above, the Debtors have been named in a small number of asbestosrelated lawsuits related to their prior retail lumber and building materials business. In 1988, the Debtors divested their retail lumber and building materials business to Wickes Lumber Co. (now Wickes Inc.). As part of this divestiture, Wickes Inc. assumed responsibility for all liabilities associated with this business, including those associated with certain asbestos-related claims, and the Debtors agreed to give Wickes Inc. access to their general liability insurance policies referenced above to cover such liabilities. Wickes Inc. filed a voluntary petition for reorganization under chapter 11 of the Bankruptcy Code in early 2004. As of the filing date in that case, there were approximately 4,000 claims pending against Wickes Inc.

ARTICLE IV.
THE SALE PROCESS The Debtors management, in consultation with key constituencies in the Chapter 11 Cases, including the Prepetition Lenders, the OEMs and the Creditors Committee, have determined that the stand-alone reorganization of the Debtors is not feasible. To maximize the value that can be realized from the Debtors businesses and assets, the Debtors have embarked on a sale process (the Sale Process) that contemplates, among other things: (i) a going concern sale of the Carpet & Acoustics business in the Debtors Soft Trim segment; (ii) going concern sales of certain plants or divisions in the Debtors Plastics business segment and the Debtors Convertibles business; (iii) an orderly wind-down of the Debtors non-salable business operations in cooperation with the OEMs; (iv) sales of all remaining assets; and (v) preservation of the Debtors working capital assets and mitigation of administrative claims and other wind-down costs to the extent possible. The Debtors believe that the Sale Process will be substantially complete within eight months. Due to the significant number of variables affecting the Sale Process, the Debtors cannot predict the amount, if any, of net recoveries from the disposition of those assets.

A.

Customer Agreement with the Original Equipment Manufacturers

In furtherance of each of the goals of the Sale Process, the Debtors worked diligently with the Agents and the OEMs throughout November and early December to negotiate a comprehensive agreement (the Customer Agreement) outlining their respective roles and responsibilities in the Sale Process and forming the basis of the Plan. The Debtors filed a motion seeking Court approval of the Customer Agreement on December 12, 2006 [Docket No. 3720]. The

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Customer Agreement was approved on an interim basis by the Bankruptcy Court on December 14, 2006 [Docket No. 3758]. A hearing on final approval of the Customer Agreement is set for January 11, 2007. A copy of the Customer Agreement is attached to the Plan as Exhibit H.2 The principal terms of the Customer Agreement are as follows:3 Parties: The parties to the Customer Agreement (the Parties) include, among others: (i) the Debtors and other relevant non-Debtor subsidiaries and affiliates, but, for the avoidance of doubt, expressly excluding Collins & Aikman Automotive Hermosillo, S.A. de C.V.; (ii) certain of the Debtors major customers (the Customers), including (a) General Motors Corporation, for itself and on behalf of GM de Mexico s. de R.L. de C.V. and GM of Canada Limited, (b) DaimlerChrysler Corporation, for itself, DaimlerChrysler Canada, Inc. and DaimlerChrysler Motor Company, LLC, (c) Ford Motor Company and (d) AutoAlliance International, Inc.; and (iii) the Agents. Effective Date of the Customer Agreement: The Customer Agreement is effective as of November 26, 2006. Plan: The Debtors shall file a plan and accompanying disclosure statement that conforms with the term sheet attached to the Customer Agreement (the Plan Term Sheet) and is otherwise consistent with the provisions of the Customer Agreement. The Parties agree to support such a plan so long as the plan contains the claims treatment and releases set forth in the Plan Term Sheet. The Debtors believe that the Plan satisfies these requirements. Plastics & Convertible Roof Systems Payments: From the effective date of the Customer Agreement through certain agreed upon dates, certain Customers agree to pay certain costs incurred in the operation of certain plants in the Debtors Plastics and Convertible Roof Systems segments in accordance with a funding protocol and budget. Administration Expenses; Suppliers and Agents Professional Fees and Expenses: From the effective date of the Customer Agreement through certain agreed upon dates, certain Customers agree to fund administration expenses in accordance with a funding protocol and budget. From the effective date of the Customer Agreement through certain agreed upon dates, certain Customers agree to fund a portion of the Debtors Estates professional fees and expenses and the professional fees and expenses and the professional fees and expenses of the Agents and their advisors pursuant to a funding protocol and budget. In addition, the Prepetition Lenders have consented to the use of cash collateral to fund certain administrative and priority claims to certain prescribed limits. Retention: Certain Customers agree to fund retention bonuses for certain employees and officers of the Debtors. Limitation of Setoffs: The Customers agree not to exercise any setoff or reductions against postpetition accounts payable, other than certain ordinary course setoffs subject to certain other restrictions. Treatment of Customer Claims: In consideration of, among other things, the releases in favor of the Customers, each of the Customers agrees that: (i) any claim arising from any rights to its repayment approved by the Bankruptcy Court for (a) the launch costs paid by the Customers during the Chapter 11 Cases (other than launch costs incurred in connection with the Debtors Hermosillo, Mexico plant), (b) claims arising under the OEM Subordinated DIP Loan and (c) the OEM Administrative DIP Claims will be waived and discharged; (ii) any claim for cap-ex shall be treated as provided by the agreements relating to such cap-ex funding and the

2 3

Certain exhibits to the Customer Agreement are not attached to the Plan due to the sensitive commercial information in such exhibits. These exhibits were filed under seal pursuant to a protective order entered by the Bankruptcy Court on December 13, 2006 [Docket No. 3731]. The summary provided in this Disclosure Statement is for the convenience of the Bankruptcy Court and parties in interest only and is subject in every respect to the Customer Agreement. In the event of a conflict between the Customer Agreement and this summary, the Customer Agreement shall govern.

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Court order(s) approving such agreements or as set forth in the Plan Term Sheet (other than in the case of Hermosillo, which shall be treated in accordance with a separate Hermosillo agreement); (iii) it will not assert a claim against the Debtors in the Chapter 11 Cases for special or consequential damages and such claims shall be waived and discharged; (iv) any other administrative expense claim against the Debtors for damages, including the November surcharge and, if applicable, the December/January surcharge, the amounts paid pursuant to the Customer Agreement and all other special or consequential damages arising out of or in any way relating to the Debtors inability to perform, or breach of performance, under the Debtors production and service contracts relating to the Plastics and Convertible Roof Systems plants will be waived and discharged; and (v) any other claim that would otherwise have to be paid in cash in full (absent agreement to different treatment by the holder thereof) pursuant to section 1129(a)(9)(A) of the Bankruptcy Code under a confirmed chapter 11 plan will be waived and discharged. Sale Process: Until certain agreed upon target sale closing dates, the Customers agree to support the Sale Process with respect to certain plants and divisions listed on an exhibit to the Customer Agreement. Inventory Purchase: On the fifth business day following entry of an order approving the Customer Agreement on a final basis, certain Customers shall purchase certain inventory from the Debtors. Resourcing: Each of the Customers agrees not to resource its programs currently subject to an issued purchase order and in production at the Debtors plants set forth on an exhibit to the Customer Agreement until certain agreed upon dates. Sale of Carpet & Acoustics

B.

1.

Description of the Operations

The Debtors Carpet & Acoustics segment is profitable and generates significant cash flow. It benefits from broad product offerings and significant product development capabilities. Carpet & Acoustics enjoys a reputation for high-quality products and is a low-cost provider in the industry. The manufacturing operation actively practices LEAN Manufacturing modeled after the Toyota Production Systems, and there is significant vertical integration throughout the value chain. These and other factors have contributed to the Carpet & Acoustics segment holding a leading market share in the carpet and acoustics supply industry. Specifically, the Carpet & Acoustics segment produces molded non-woven and tufted carpet, alternative molded flooring, accessory mats and acoustics systems consisting of absorbing materials, damping materials, engine compartment noise vibration and harshness systems and interior insulators. While acoustical products are often combined with molded floor carpet to provide complete interior floor systems, there are four separate carpet and acoustics product categories: Molded Floor Systems. Molded floor systems consist of thermoformed compression molded carpets. These carpets are provided with a barrier or an absorptive noise, vibration and harshness (NVH) system. The barrier system includes polyethylene, barrier back and a fiber underlay system or a foam-in-place system. Additional products include Tuflor, a durable and washable proprietary thermoplastic flooring product. The products in molded floor systems are highly-engineered and their manufacture requires a high degree of precision. The Debtors are the number one producer of molded floor and acoustic systems in the North American market. Luggage Compartment Trim. The other major carpeted area of the vehicle is the luggage compartment, which includes one-piece molded trunk systems and assemblies, wheelhouse covers and center pan mats, seatbacks, tireboard covers and other trunk trim products. The Debtors are a leading supplier of luggage compartment trim in the North American market. Accessory Floormats. The Debtors manufacture automotive accessory floormats and cargo mats by adhering rubber backing to tufted carpet and adding aesthetic and practical features such as the appearance of hand-sewn edges and patented moisture trapping construction. Largely due to this product differentiation, the Debtors have become the largest fully-integrated automotive floormat producer in North America.

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Acoustical Products. Acoustical products include: interior dash insulators that insulate the passenger compartment from engine compartment noise and heat; damping materials that control noise in the floor, overhead systems and sides of the vehicle; and engine compartment NVH systems. Consumer demand for increased performance and quality improvements has driven the need for enhanced acoustical properties and better sound-field engineering across all vehicle segments.

2.

Sale Process for Carpet & Acoustics

Based on the extensive M&A Process conducted during the Chapter 11 Cases, the Debtors expect that the sale of the Carpet & Acoustics assets will yield a significant recovery for the Estates. The Debtors intend to provide the maximum recovery to the Debtors Estates from the Carpet & Acoustics assets through an expedited sale process to prevent any loss of value from the uncertainties and pressures surrounding the Sale Process. Coincident with this, the Debtors will segregate the positive cash flow generated by Carpet & Acoustics operations while the sale is pending and segregate the proceeds of the sale of the operations for the benefit of creditors in the Chapter 11 Cases. In conjuction with the Customer Agreement, the Debtors obtained long term non-resourcing commitments from the OEMs for the Carpet & Acoustics business and obtained OEM support for the expedited sale process, which will enhance the value achieved in the sale. In mid-October 2006, the Debtors and their advisors initiated the sale process for the Carpet & Acoustics business as a stand-alone entity. Given the brief window of opportunity to pursue a sale of the Debtors businesses and the results of the previous M&A Process, the Debtors and their advisors approached 13 potentially interested parties to submit an indication of interest by November 6, 2006. Potentially interested parties were provided a 144 page management presentation, access to management and plant tours. The Debtors received five indications of interest on November 6, 2006 and negotiated with each party to improve the terms of their interest. The Debtors and their advisors received three revised indications of interest that were then shared with the Agents and the Steering Committee. The Steering Committee together with the Debtors selected a final bidder subject to that bidder further revising their indication of interest to incorporate certain additional concessions. In early December, the Debtors and their advisors completed negotiating the revised indication of interest and, upon approval from the Steering Committee, the Debtors accepted the indication of interest. As described in a press release issued on December 13, 2006, the indication of interest is subject to due diligence and the negotiation of definitive documentation among other items. The Debtors expect to file a sale motion in January 2007. The final executed indication of interest was heavily negotiated by the Debtors and their advisors and represented a significant improvement in terms versus the original indication of interest submitted on November 6, 2006.

C.

Sale of Plastics

1.

Segmentation of Plastics Business

As described in Article III.G.3, the Debtors Plastics division continues to suffer due to declining volumes, an inability to achieve forecast cost saving initiatives, high up-front capital costs and an inability to achieve significant targeted take-away business. Because no potentially interested party had expressed interest in the Plastics division as a whole for a value in excess of liquidation value, the Debtors, in consultation with advisors to the Prepetition Lenders and the OEMs, divided the Plastics business into five operating segments in order to maximize value through the sales process. The five operating segments are as follows: (i) Interiors, (ii) Exteriors, (iii) Precision Small Parts, (iv) Hermosillo and (v) Other. The Other category includes individual plants that may be sold or closed through an orderly wind-down process.

2.

Sale Process for Plastics

In November and December 2006, the Debtors and their advisors generated information packages on each of the five operating segments and contacted over 70 potentially interested parties, many of whom had been previously contacted through the M&A Process, to solicit interest. To coordinate the sale of the numerous Plastics plants o expedited timetable, the Debtors, with the support of the Steering Committee, may retain additional investment bankers with specific and considerable knowledge and expertise in the automotive parts supply industry.

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D.

Labor, Pension and Retiree Benefits

1.

Nonqualified Plan Benefits for Active and Retired Employees

Prior to the Petition Date, the Debtors maintained various nonqualified deferred compensation plans. The Debtors (or their predecessors) established certain rabbi trusts from which many of these benefits were paid. Pursuant to the terms of the nonqualified plans, associated rabbi trusts and applicable law, any amounts in trust remained subject to the general creditors of the Debtors. The Debtors stopped making payments under these plans effective soon after the Petition Date. The Debtors estimate claims regarding these benefits in the aggregate amount of approximately $34 million. All such nonqualified plans are expected to be terminated as part of the Sale Process.

2.

The Debtors Pension Plan

The Debtors maintain one consolidated tax-qualified United States defined benefit pension plan entitled the Collins & Aikman Pension Plan (Pension Plan). The Debtors amended the Pension Plan to cease future benefit accruals for non-union participants effective June 30, 2006. The cessation of future benefit accruals will result in an approximate $7 million reduction in benefit accruals. In conjunction with the cessation of benefit accruals under their United States qualified defined benefit plan, the Debtors authorized an enhanced matching contribution under the Debtors defined contribution plan of up to 4% effective as of July 1, 2006 for non-union employees. The Debtors ceased making minimum funding contributions to the Pension Plan in July 2006 and anticipate that no further contributions will be made to the Pension Plan. The Debtors have failed to meet the minimum funding standard for the 2005 plan year and an accumulated funding deficiency has been incurred. Outside of bankruptcy, under the Employee Retirement Income Security Act of 1974, as amended (ERISA) and the Internal Revenue Code, a lien arises in favor of the PBGC when unpaid minimum funding contributions exceed $1 million. In bankruptcy, however, the automatic stay prevents the PBGC from perfecting and enforcing its alleged liens against the Debtors. Notwithstanding the automatic stay, it is possible that the PBGC could attempt to perfect such liens against non-Debtor entities. In addition, because an accumulated funding deficiency has occurred, the Debtors and each controlled group member will be jointly and severally liable for an excise tax to the Internal Revenue Service in the amount of 10% of the outstanding missed contribution for the 2005 plan year. If the accumulated funding deficiency is not corrected within the required period, the Debtors and each controlled group member will be jointly and severally liable for an additional 100% excise tax. The excise taxes will be general, unsecured claims against the Debtors; however, the Internal Revenue Service could seek to hold non-Debtor entities liable for such excise taxes as well. As part of the Sale Process, the Pension Plan will either be terminated by the Debtors involuntarily or by the PBGC voluntarily.

3.

Other Post-Employment Benefits for Retired Employees

Because of the need to reduce costs, the Debtors addressed their obligations to provide medical and life insurance benefits to retirees. Pursuant to the terms of such benefits, the Debtors enacted several changes to their nonvested other post-employment benefits (OPEB) for non-union retired employees (and their dependents), effective February 28, 2006. The Debtors terminated post-retirement life insurance coverage for all non-union retirees and postretirement medical and dental and Medicare supplemental coverage for non-union retirees (and their dependents) who have attained Medicare eligibility. Certain retirees (and their dependents) who are under age-65 may continue to purchase medical, dental and vision insurance, but they must pay 100% of the cost of such coverage. Under section 1114 of the Bankruptcy Code, a debtor in possession generally must timely pay and may not modify vested retiree benefits unless the Bankruptcy Court orders such modifications or the debtor and the retirees authorized representative agree to the modification of such benefits. Section 1114 of the Bankruptcy Code does not apply, however, to situations in which a debtor chooses to terminate non-vested retiree benefits pursuant to its contractual rights. In such cases, a debtor may unilaterally terminate retiree benefits. The Debtors have unilaterally terminated non-union, non-vested retiree welfare benefits pursuant to the terms of such benefits.

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4.

The Debtors Intend to Negotiate with Union Retirees Where OPEB Liabilities Exist

Certain former employees of the Debtors and former employees of entities to which the Debtors are successors were covered by collective bargaining agreements that provided retiree medical benefits. As of the date of the filing of this Disclosure Statement, the Debtors have not sought to modify such benefits. As part of the Sale Process, however, the Debtors intend to yet negotiate with union representatives for the retirees regarding modifications of such benefits as the Debtors will be liquidating and it is very unlikely that a purchaser would assume such obligations. To the extent such benefits are not vested, the Debtors intend to modify the benefits pursuant to their terms. To the extent the retiree benefits are vested, the Debtors may pursue modifications to such benefits under section 1114 of the Bankruptcy Code. If the Debtors seek to modify vested retiree benefits, the Debtors will be committed to working constructively with the representative of the retirees to reach a consensual resolution.

ARTICLE V.
SUMMARY OF THE PLAN THIS SECTION PROVIDES A SUMMARY OF THE STRUCTURE AND MEANS FOR IMPLEMENTATION OF THE PLAN AND THE CLASSIFICATION AND TREATMENT OF CLAIMS AND EQUITY INTERESTS UNDER THE PLAN, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE PLAN (AS WELL AS THE EXHIBITS THERETO AND DEFINITIONS THEREIN). THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT INCLUDE SUMMARIES OF THE PROVISIONS CONTAINED IN THE PLAN AND IN THE DOCUMENTS REFERRED TO THEREIN. THE STATEMENTS CONTAINED IN THIS DISCLOSURE STATEMENT DO NOT PURPORT TO BE PRECISE OR COMPLETE STATEMENTS OF ALL THE TERMS AND PROVISIONS OF THE PLAN OR DOCUMENTS REFERRED TO THEREIN, AND REFERENCE IS MADE TO THE PLAN AND TO SUCH DOCUMENTS FOR THE FULL AND COMPLETE STATEMENT OF SUCH TERMS AND PROVISIONS OF THE PLAN OR DOCUMENTS REFERRED TO THEREIN. THE PLAN ITSELF AND THE DOCUMENTS THEREIN CONTROL THE ACTUAL TREATMENT OF CLAIMS AGAINST, AND EQUITY INTERESTS IN, THE DEBTORS UNDER THE PLAN AND WILL, UPON THE OCCURRENCE OF THE EFFECTIVE DATE, BE BINDING UPON ALL HOLDERS OF CLAIMS AGAINST AND EQUITY INTERESTS IN THE DEBTORS, THE DEBTORS ESTATES, THE POST-CONSUMMATION TRUST, ALL PARTIES RECEIVING PROPERTY UNDER THE PLAN AND OTHER PARTIES IN INTEREST. IN THE EVENT OF ANY CONFLICT BETWEEN THIS DISCLOSURE STATEMENT AND THE PLAN OR ANY OTHER OPERATIVE DOCUMENT, THE TERMS OF THE PLAN AND/OR SUCH OTHER OPERATIVE DOCUMENT SHALL CONTROL. The purpose of the Plan is to fairly and expeditiously liquidate and distribute the proceeds realized from the Sale Process consistent with the Bankruptcy Code. The Debtors believe that the the Plan is in the best interests of Holders of Claims and parties in interest. If the Plan is not confirmed, the Debtors believe that they will be forced either to file an alternate plan of reorganization or liquidate under chapter 7 of the Bankruptcy Code. Under these alternative scenarios, the Debtors believe that the Holders of Claims would realize a less favorable distribution of value, or, in certain cases, none at all.

A.

Overview of Chapter 11

The commencement of a chapter 11 case creates an estate that is comprised of all of the legal and equitable interests of the debtor as of the filing date. The Bankruptcy Code provides that the debtor may continue to operate its business and remain in possession of its property as a debtor-in-possession. The consummation of a plan of reorganization is the principal objective of a chapter 11 case. A plan of reorganization sets forth the means for satisfying claims against, and equity interests in, a debtor. Confirmation of a plan of reorganization by a bankruptcy court makes the plan binding upon the debtor, any issuer of securities under the plan, any person or entity acquiring property under the plan and any holder of claims of or holder of equity interests in the debtor, whether or not such holders of claims or equity interests (1) is impaired under or has accepted the plan or (2) receives or retains any property under the plan. Subject to certain limited exceptions and other than as provided in

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the plan itself or the confirmation order, a confirmation order discharges the debtor from any debt that arose prior to the date of confirmation of the plan and substitutes therewith the obligations specified under the confirmed plan. A chapter 11 plan may specify that the legal, contractual and equitable rights of the holders of claims or equity interests in certain classes are to remain unaltered by the plan. Such classes are referred to as unimpaired and, because of such favorable treatment, are deemed to accept the plan. Accordingly, the Debtors need not solicit votes from the holders of claims or equity interests in such classes. A chapter 11 plan also may specify that certain classes will not receive any distribution of property or retain any claim against a debtor. Such classes are deemed not to accept the plan and, therefore, need not be solicited to vote to accept or reject the plan. Any classes that are receiving a distribution of property under the plan but are not unimpaired will be solicited to vote to accept or reject the plan. Section 1123 of the Bankruptcy Code provides that a plan of reorganization shall classify the debtors holders of claims and equity interests. In compliance therewith, the Plan divides Claims and Equity Interests into various Classes and sets forth the treatment for each Class. The Debtors also are required, as discussed above, under section 1122 of the Bankruptcy Code, to classify Claims and Equity Interests into Classes that contain Claims and Equity Interests that are substantially similar to the other Claims and Equity Interests in such Classes. The Debtors believe that the Plan has classified all Claims and Equity Interests in compliance with the provisions of section 1122 of the Bankruptcy Code, but it is possible that a Holder of a Claim or Equity Interest may challenge the classification of Claims and Equity Interests and that the Bankruptcy Court may find that a different classification is required for the Plan to be confirmed. In such event, the Debtors intend, to the extent permitted by the Bankruptcy Court and the Plan, to make such reasonable modifications of the classifications under the Plan to permit Confirmation and to use the Plan acceptances received in this solicitation for the purpose of obtaining the approval of the reconstituted Class or Classes of which the accepting Holder is ultimately deemed to be a member. Any such reclassification could adversely affect the Class in which such Holder was initially a member, or any other Class under the Plan, by changing the composition of such Class and the vote required of that Class for approval of the Plan.

B.

Classification and Treatment of Claims and Equity Interests

Except for unclassified Administrative Claims and Priority Tax Claims, the Plan divides all Claims against and Equity Interests in the Debtors into various Classes. Except for Class 3 Prepetition Facility Claims, a Claim or Equity Interest is classified in a particular Class only to the extent that such Claim or Equity Interest qualifies within the description of that Class and, is classified in other Classes to the extent that any remainder of the Claim or Equity Interest qualifies within the description of another Class. All payments and other distributions stated in this Article to be made by the Debtors shall, (a) if made on or before the Effective Date, be made by the Debtors and (b) if made after the Effective Date, be made by the PostConsummation Trust or the Litigation Trust, as applicable.

1.

Administrative Claims

Administrative Claims include Claims for costs and expenses of administration of the Chapter 11 Cases allowed under sections 503(b), 507(b) or 1114(e)(2) of the Bankruptcy Code, including: (a) the actual and necessary costs and expenses of preserving the respective Estates and operating the businesses of the Debtors (such as wages, salaries, commissions for services and payments for inventories, leased equipment and premises), including Claims under the DIP Credit Agreement, incurred after the Petition Date; (b) compensation for legal, financial advisory, accounting and other services rendered after the Petition Date, and reimbursement of expenses incurred in connection therewith, awarded or allowed under sections 330(a) or 331 of the Bankruptcy Code, including Fee Claims; and (c) all fees and charges assessed against the Estates under chapter 123 of title 28, United States Code, 28 U.S.C. 1911. Except as provided in the following subsections regarding statutory fees, ordinary course liabilities, DIP Facility Claims and Administrative Claims of Indenture Trustees, and subject to the bar date provisions summarized below, unless otherwise agreed by the Holder of an Administrative Claim and the applicable Debtor or the Post-Consummation Trust, each Holder of an Allowed Administrative Claim will receive, in full satisfaction of its Administrative Claim, Cash equal to the Allowed amount of such Administrative Claim either (i) on the Effective Date or (ii) if the Administrative Claim is not allowed as of the Effective Date, no more than 30 days after the date on which an order allowing such Administrative Claim becomes a Final Order or a Stipulation of Amount and Nature of Claim is executed by the Post-Consummation Trust and the Holder of the Administrative Claim. 43
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a.

Statutory Fees

On or before the Effective Date, Administrative Claims for fees payable pursuant to 28 U.S.C. 1930 will be paid by the Debtors in Cash equal to the amount of such Administrative Claims. After the Effective Date, all fees payable pursuant to 28 U.S.C. 1930 will be paid by the Post-Consummation Trust in accordance therewith until the closing of the Chapter 11 Cases pursuant to section 350(a) of the Bankruptcy Code. b. Ordinary Course Liabilities

Subject to the bar dates for administrative claims discussed below, Administrative Claims based on liabilities incurred by a Debtor in the ordinary course of its business will be paid by the Debtors pursuant to the terms and conditions of the particular transaction giving rise to such Administrative Claims or, if and to the extent that such ordinary course obligations are assumed by the purchaser (or purchasers) in connection with the Soft-Trim Sales Transaction or any Remaining Sales Transactions, by such purchaser (or purchasers), in each case, without any further action by the Holders of such Administrative Claims. c. DIP Facility Claims

DIP Facility Claims include all DIP Obligations, as defined in the Final DIP Order [Docket No. 809], outstanding as of the Effective Date under that certain debtor-in-possession senior, secured credit facility entered into pursuant to (a) that certain Amended and Restated Revolving Credit, Term Loan and Guaranty Agreement (the DIP Credit Agreement), dated as of July 28, 2005, as it may be subsequently amended and modified, by and among Collins & Aikman Products Co., as borrower, substantially all of the domestic direct and indirect subsidiaries of Collins & Aikman Corporation, as guarantors, the DIP Agent, and certain other lenders named therein; (b) all amendments and restatements thereto and extensions thereof; and (c) all security agreements, other agreements and instruments related to the documents identified in (a) and (b) (the DIP Credit Agreement). Under the DIP Credit Agreement, the Debtors also agreed to guaranty obligations of their European affiliates owed under an overdraft facility issued by JPMorgan. All DIP Facility Claims shall be Allowed in full. On the Effective Date, the DIP Agent, on its own behalf and on behalf of the DIP Lenders, shall receive cash in an amount equal to 100% of the unpaid DIP Facility Claims (including cash collateral to be held and applied in accordance with the DIP Credit Agreement in respect of all undrawn letters of credit outstanding as of the Effective Date under the DP Facility). d. Administrative Claims of Indenture Trustees

In full satisfaction of the Indenture Trustees Administrative Claims, if any, any charging lien held by the Indenture Trustees will be preserved. Distributions received by Holders of Allowed Claims in respect of Senior Notes and Senior Subordinated Notes pursuant to the Plan will be reduced on account of payment of the Indenture Trustees Administrative Claims. e. Bar Dates

Except as provided in the following paragraphs, unless previously Filed, requests for payment of Administrative Claims that arise on or before [_______, 2007] must be Filed and served on the Debtors in accordance with the Administrative Claims Bar Date Order, to be entered by the Bankruptcy Court. Holders of Administrative Claims that are required to File and serve a request for payment of such Administrative Claims and that do not File and serve such a request by the applicable bar date will be forever barred from asserting such Administrative Claims against the Debtors, the Trusts or their respective property, and such Administrative Claims will be deemed discharged as of the Effective Date. Objections to such requests must be Filed and served on the Post-Consummation Trust and the requesting party by the later of (a) 180 days after the Effective Date and (b) 90 days after the Filing of the applicable request for payment of Administrative Claims. Holders of Administrative Claims that arise after [____, 2007] will not be required to File or serve any request for payment of such Administrative Claims. Administrative Claims that arise after [____, 2007] will be paid by the Post-Consummation Trust pursuant to the terms and conditions of the particular transaction giving rise to such Administrative Claims or, if and to the extent that such ordinary course obligations are assumed by the purchaser (or purchasers) in connection with the Soft-Trim Sales Transaction or Remaining Sales Transactions, by such purchaser (or purchasers), without any further action by the Holders of such Administrative Claims.

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Holders of DIP Facility Claims and Administrative Claims based on trade or vendor liabilities incurred by a Debtor in the ordinary course of its business will not be required to File or serve any request for payment of such Administrative Claims. Professionals or other Persons asserting a Fee Claim for services rendered before the Effective Date must File and serve on the Post-Consummation Trust and such other Persons who are designated by the Bankruptcy Rules, the Confirmation Order, the Fee Order or other order of the Bankruptcy Court an application for final allowance of such Fee Claim no later than 30 days after the Effective Date; provided that any professional who may receive compensation or reimbursement of expenses pursuant to the Ordinary Course Professionals Order may continue to receive such compensation and reimbursement of expenses for services rendered before the Effective Date, without further Bankruptcy Court review or approval, pursuant to the Ordinary Course Professionals Order. Objections to any Fee Claim must be Filed and served on the Post-Consummation Trust and the requesting party by the later of (a) 60 days after the Effective Date and (b) 30 days after the Filing of the applicable request for payment of the Fee Claim. To the extent necessary, the Confirmation Order will amend and supersede any previously entered order of the Bankruptcy Court, including the Fee Order, regarding the payment of Fee Claims.

2.

Priority Tax Claims

Priority Tax Claims include any and all Claims of a governmental unit of the kind specified in section 507(a)(7) of the Bankruptcy Code. Each Holder of an Allowed Priority Tax Claim will receive on, or as soon as practicable after the Effective Date, 100% of the unpaid Allowed amount of such Claim in Cash or, at the sole option of the PostConsummation Trust, a promissory note with terms substantially set forth on Exhibit G to the Plan, issued by the Post-Consummation Trust, providing for equal semi-annual cash payments commencing six months after the Effective Date and concluding six years after the date of assessment (a Tax Note); or a combination of Cash and a Tax Note. Any claim or demand for penalty relating to any Priority Tax Claim shall be disallowed, and the Holder of an Allowed Priority Tax Claim shall not assess or attempt to collect such penalty from the Post-Consummation Trust or the Debtors. Notwithstanding the foregoing, the Holder of an Allowed Priority Tax Claim may receive such other, less favorable treatment as may be agreed upon by the Holder of the Allowed Priority Tax Claim and the Debtors or the PostConsummation Trust.

3.

Class 1 - Other Secured Claims

Other Secured Claims include any and all Secured Claims against the Debtors other than Prepetition Facility Claims, Intercompany Claims or Claims of the Indenture Trustees. Other Secured Claims also includes, to the extent they are secured, all Allowed Claims held by each of the OEMs, Nissan North America Inc. and Toyota Engineering & Motor Manufacturing North America, Inc. under Section 22 of the Customer Agreement and Section 2.05 of the July 8, 2005 Agreement approved by court order dated August 11, 2005 [Docket No. 916], as applicable, for costs incurred, or cash payments made, after the effective date of the Customer Agreement or the effective date of the July 8, 2005 Agreement, as applicable, including: (a) costs or payments for installation and commissioning of newlyacquired equipment and plant and equipment set-up expenses and rearrangement; and (b) relocation and refurbishment costs for existing plant, property and equipment that are pre-approved by the applicable party (the OEM Cap-Ex Claims). Class 1 is Unimpaired and deemed to accept the Plan. On or as soon as practicable after the Effective Date, each Holder of an Allowed Class 1 Claim will receive, in full and final satisfaction of such Allowed Class 1 Claim, one of the following treatments, in the sole discretion of the Plan Administrator: (i) the Debtors or the Plan Administrator will pay in full (in Cash) any such Allowed Other Secured Claim; (ii) the Debtors or the Plan Administrator will satisfy any such Allowed Other Secured Claim by delivering the collateral securing any such Claim and paying any interest required to be paid under section 506(b) of the Bankruptcy Code; or (iii) the Debtors or the Plan Administrator will otherwise treat any such Allowed Other Secured Claim in any other manner such that the Claim will be rendered Unimpaired pursuant to section 1124 of the Bankruptcy Code.

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4.

Class 2 - Other Priority Claims

Other Priority Claims include any and all Claims accorded priority in right of payment under sections 507(a)(4), (5), (6)or (7) of the Bankruptcy Code. Class 2 is Unimpaired and deemed to accept the Plan. The legal, equitable and contractual rights of the Holders of Allowed Class 2 Claims are unaltered by the Plan. Unless otherwise agreed to by the Holders of the Allowed Other Priority Claims and the Debtors or the Plan Administrator, each Holder of an Allowed Class 2 Claim will receive, in full and final satisfaction of such Allowed Class 2 Claim, one of the following treatments, in the sole discretion of the Debtors or the Plan Administrator: (i) the Debtors or the Plan Administrator will pay the Allowed Other Priority Claim in full in Cash on the Effective Date or as soon thereafter as is practicable; provided that Other Priority Claims representing obligations incurred in the ordinary course of business will be paid in full in Cash when such Other Priority Claims become due and owing in the ordinary course of business; or (ii) the Debtors or the Plan Administrator will otherwise treat any such Allowed Other Priority Claim in any other manner such that the Claim will be rendered Unimpaired.

5.

Class 3 - Prepetition Facility Claims

Prepetition Facility Claims means the total amount outstanding under the Prepetition Facility as of the Effective Date. Class 3 is Impaired. On or as soon as practicable after the Effective Date, each Holder of an Allowed Class 3 Claim will receive from the Debtors or the Plan Administrator, in full and final satisfaction of such Claim, the following treatment: (i) its Pro Rata share of the Debtors cash as of the Effective Date (including any cash of or recoveries from non-Debtor affiliates that is available to the Debtors), after giving effect to or making provision for the (a) cash payments required under the Plan, including the amount of cash required to be included in the Residual Assets transferred to the Post-Consummation Trust and (b) cash needed to be retained to enable the Debtors to comply with the Customer Agreement.; (ii) its Pro Rata share of the beneficial interests in the Post-Consummation Trust, which interests shall entitle the holders thereof to continuing distributions by the Post-Consummation Trust of the proceeds recovered from the liquidation of the Post-Consummation Trust Assets, including but not limited to, the distribution of the net proceeds recovered on account of the Remaining Sales Transactions; (iii) its Pro Rata share of the percentage of the Litigation Recovery Interests set forth on Exhibit C to the Plan; (iv) retention of all adequate protection payments made in respect of the Prepetition Facility, including payment of all fees and professional fees payable under the Final DIP Order accrued through the Effective Date (other than adequate protection payments deferred pursuant to Bankruptcy Court order, which shall be deemed satisfied by the treatment provided in the Plan for Prepetition Facility Claims; (v) payment of the reasonable fees and expenses of the Agents attorneys and financial advisor incurred in connection with the consummation, administration and enforcement of the Plan; and (vi) the applicable releases and exculpation contained in Article XII of the Plan. The Prepetition Facility Claims shall be Allowed in full. The unsecured portions of Prepetition Facility Claims, if any, will not be separately classified under the Plan, and the Holders of Prepetition Facility Claims will not be entitled to vote on the Plan or receive any additional distributions under the Plan on account of such unsecured Claims.

6.

Class 4 - OEM Claims

OEM Claims include any and all Claims held by each of the OEMs, including: (a) any Claim arising from any rights to repayment approved by the Bankruptcy Court for (i) the launch costs paid by the OEMs during the Chapter 11 Cases (other than launch costs incurred in connection with the Debtors Hermosillo, Mexico plant), (ii) the $82.5 million aggregate amount junior secured debtor in possession loan claims and (iii) the $30 million aggregate amount administrative loans; (b) any Claim for special or consequential damages; (c) any other Claim for damages, including any prior surcharges, the amounts paid pursuant to the Customer Agreement and all other special or consequential damages arising out of or in any way relating to the Debtors inability to perform, or breach of performance, under production and service contracts; and (d) any other Claim that would otherwise have to be paid in Cash in full (absent agreement to different treatment by the Holder thereof) pursuant to section 1129(a)(9)(A) of the Bankruptcy Code under a confirmed chapter 11 plan., but excluding (x) any administrative expense claims for damages up to $25 million in the aggregate arising from shipments after the effective date of the Customer Agreement of component parts manufactured

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by the Debtors Carpet & Acoustics business segment that are expressly permissible under Section 9 of the Customer Agreement and (y) OEM Cap-Ex Claims but solely to the extent they constitute Secured Claims. Class 4 is Impaired. On the Effective Date, all OEM Claims will be waived in consideration of the releases provided in Article XII.B of the Plan.

7.

Class 5 - General Unsecured Claims

General Unsecured Claims include any and all Claims that are not: (a) Administrative Claims; (b) DIP Facility Claims; (c) Priority Tax Claims; (d) Other Secured Claims; (e) Other Priority Claims; (f) Prepetition Facility Claims; (g) OEM Claims; (h) PBGC Claims; (i) Senior Note Claims; (j) Senior Subordinated Note Claims; (k) Equity Interests; (l) Subordinated Securities Claims; or (m) Intercompany Claims. Class 5 is Impaired. Although under the absolute priority rule the Holders of General Unsecured Claims are not entitled to any distributions, to facilitate a consensual Plan, if a Holder of an Allowed General Unsecured Claim votes to accept the Plan, such Holder will receive, on or as soon as practicable after the Effective Date, in full and final satisfaction of such Allowed General Unsecured Claim its Pro Rata share of the percentage of Litigation Recovery Interests set forth on Exhibit C to the Plan.

8.

Class 6 - Senior Note Claims and PBGC Claims

Senior Note Claims include any and all Claims arising under those certain 10-3/4% unsecured senior notes due 2011 issued pursuant to that certain indenture, dated as of December 20, 2001, by and among Collins & Aikman Products Co., as issuer, substantially all of the domestic direct and indirect subsidiaries of Collins & Aikman Corporation, as guarantors, and BNY Midwest Trust Company, as indenture trustee, as the same may have been subsequently modified, amended or supplemented, together with all instruments and agreements related thereto. PBGC Claims include any and all Claims of the Pension Benefit Guaranty Corporation relating to the Collins & Aikman Pension Plan, including any and all Claims arising from the termination of such pension plan; provided that PBGC Claims will not include any Administrative Claims or Priority Claims that may be held by the Pension Benefit Guaranty Corporation. Class 6 is Impaired. Although under the absolute priority rule the Holders of Allowed Senior Note Claim and PBGC Claims are not entitled to any distributions, to facilitate a consensual Plan, if a Holder of an Allowed Senior Note Claim and PBGC Claim votes to accept the Plan, such Holder will receive, on or as soon as practicable after the Effective Date, in full and final satisfaction of such Allowed Senior Note Claim and PBGC Claim the percentage of Litigation Recovery Interests set forth on Exhibit C to the Plan.

9.

Class 7 - Senior Subordinated Note Claims

Senior Subordinated Note Claims include any and all Claims arising under those certain 12-7/8% senior subordinated notes due August 15, 2012, issued pursuant to that certain indenture, dated as of August 26, 2004, by and among Collins & Aikman Products Co., as issuer, substantially all of the domestic direct and indirect subsidiaries of Collins & Aikman Corporation, as guarantors, and BNY Midwest Trust Company, as indenture trustee, as the same may have been subsequently modified, amended or supplemented, together with all instruments and agreements related thereto. Class 7 is Impaired. Although under the absolute priority rule the Holders of Allowed Senior Subordinated Note Claims are not entitled to any distributions, to facilitate a consensual Plan, if a Holder of an Allowed Senior Subordinated Note Claim votes to accept the Plan, such Holder will receive, on or as soon as practicable after the Effective Date, in full and final satisfaction of such Allowed Senior Subordinated Note Claim its Pro Rata share of the percentage of Litigation Recovery Interests set forth on Exhibit C to the Plan. In accordance with the subordination provisions of the Senior Subordinated Note Indenture, distributions on account of Class 7 Claims will first be distributed to the Holders of Allowed Senior Note Claims on a Pro Rata basis until such Allowed Senior Note Claims have been paid in full.

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10.

Class 8 - Equity Interests

Equity Interests include all equity interests in any of the Debtors, including all issued, unissued, authorized or outstanding shares of stock, together with any warrants, options or contract rights to purchase or acquire such interests at any time. Class 8 is Impaired and deemed to reject the Plan. On the Effective Date, all Equity Interests will be deemed canceled and will be of no further force and effect, whether surrendered for cancellation or otherwise, and Holders thereof will not receive a distribution under the Plan in respect of such Equity Interests.

11.

Class 9 - Subordinated Securities Claims

Subordinated Securities Claims include Claims of the type described in, and subject to subordination under, section 510(b) of the Bankruptcy Code, including any and all Claims whatsoever, whether known or unknown, foreseen or unforeseen, currently existing or hereafter arising, arising from rescission of a purchase or sale of a security of the Debtors or an affiliate of the Debtors, for damages arising from the purchase, sale or holding of such securities, or for reimbursement, indemnification or contribution allowed under section 502 of the Bankruptcy Code on account of such a Claim. Class 9 Claims are Impaired and deemed to reject the Plan. On the Effective Date, Subordinated Securities Claims will be canceled, and the Holders thereof will not receive a distribution under the Plan in respect of such Claims.

12.

Class 10 - Intercompany Claims

Intercompany Claims include any and all Claims and Equity Interests of a Debtor against and in another Debtor. Class 10 is Impaired and deemed to reject the Plan. On the Effective Date, Intercompany Claims will be canceled, and the Holders thereof will not receive a distribution under the Plan in respect of such Claims; provided that Claims of a European Debtor against a Debtor arising from intercompany transactions with the Debtor will be deemed Allowed General Unsecured Claims only to the extent that such Debtors intercompany claims against such European Debtor are deemed allowed in such European Debtors respective administration proceedings pending under English Insolvency Law.

C.

Means for Implementation of the Plan

1.

Sale of Assets

On or prior to the Effective Date, the Debtors will consummate the Soft-Trim Sale Transaction. Both prior to and subsequent to the Effective Date, the Debtors and the Post-Consummation Trust, as applicable, will consummate the Remaining Sales Transactions.

2.

The Post-Consummation Trust a. Establishment of the Post-Consummation Trust

On the Effective Date, the Debtors, on their own behalf and on behalf of the Holders of Allowed Prepetition Facility Claims, will execute the Post-Consummation Trust Agreement and take all other steps necessary to establish the Post-Consummation Trust pursuant to the Post-Consummation Trust Agreement. On the Effective Date, and in accordance with and pursuant to the terms of the Plan, the Debtors will transfer to the Post-Consummation Trust all of their rights, title and interests in all assets of the Debtors that are not divested prior to the Effective Date including, but not limited to, as a result of the Soft-Trim Sales Transaction or any Remaining Sales Transactions that are consummated prior to the Effective Date (the Residual Assets). In connection with the transfer of such assets, including rights and Causes of Action, any attorney-client privilege, work-product privilege, or other privilege or immunity attaching to any documents or communications (whether written or oral) transferred to the PostConsummation Trust will vest in the Post-Consummation Trust and its representatives, and the Debtors and the Post Consummation Trust will be authorized to take all necessary actions to effectuate the transfer of such privileges.

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b.

Funding Expenses of the Post-Consummation Trust

Except as set forth in Article IV.B.1 of the Plan, the Debtors will not be obligated to provide any funding with respect to the Post-Consummation Trust after they transfer the Residual Assets to the Post-Consummation Trust. As more fully described in the Post-Consummation Trust Agreement, any Cash in the Post-Consummation Trust will be applied in accordance with the terms of the Post Consummation Trust Budget, first, to the fees, costs, expenses (each of the foregoing in amounts not to exceed amounts approved pursuant to the Post-Consummation Trust Budget) and liabilities of the Plan Administrator, second, to satisfy any other administrative and Wind-Down Expenses of the PostConsummation Trust (each of the foregoing in amounts not to exceed amounts approved pursuant to the PostConsummation Trust Budget) and, third, to the distributions provided for pursuant to the Plan c. Appointment of the Plan Administrator

On the Effective Date and in compliance with the provisions of the Plan the Plan Administrator, as designated by the Agent, in consultation with the Prepetition Lenders and the Creditors Committee, will be appointed in accordance with the Post-Consummation Trust Agreement and the Post-Consummation Trust will be administered by the Plan Administrator in accordance with the Post-Consummation Trust Agreement. d. Termination of the Post-Consummation Trust and Plan Administrator

The Post-Consummation Trust will terminate as soon as practicable, but in no event later than the fifth anniversary of the Effective Date; provided, that, on or prior to the date six months prior to such termination, the Bankruptcy Court, upon motion by a party in interest, may extend the term of the Post-Consummation Trust for a finite period if such an extension is necessary to liquidate the Post-Consummation Trust Assets or to complete any distribution required under the Plan. Notwithstanding the foregoing, multiple extensions may be obtained so long as Bankruptcy Court approval is obtained at least six (6) months prior to the expiration of each extended term; provided, that the Plan Administrator receives an opinion of counsel or a favorable ruling from the Internal Revenue Service that any further extension would not adversely affect the status of the Post-Consummation Trust as a grantor trust for federal income tax purposes. The duties, responsibilities and powers of the Plan Administrator will terminate in accordance with the terms of the Post-Consummation Trust Agreement. e. Exculpation; Indemnification

The Plan Administrator, the Post-Consummation Trust, the professionals of the Post-Consummation Trust, the Post-Consummation Advisory Trust Board and their representatives will be exculpated and indemnified pursuant to the terms of the Post-Consummation Trust Agreement.

3.

The Litigation Trust a. Establishment of the Litigation Trust

On the Effective Date, the Debtors, on their own behalf and on behalf of the Holders of Allowed Claims entitled to Litigation Trust Recovery Interests pursuant to the Plan, will execute the Litigation Trust Agreement and take all other steps necessary to establish the Litigation Trust pursuant to the Litigation Trust Agreement. On the Effective Date, and in accordance with and pursuant to the terms of the Plan, the Debtors will transfer to the Litigation Trust all of their rights, title and interests in all of the Litigation Trust Claims, as identified in the Litigation Trust Agreement, including any Causes of Action arising under chapter 5 of the Bankruptcy Code that are not released under the Plan or other Bankruptcy Court-approved settlements (the Litigation Trust Claims). In connection with the transfer of such assets, any attorney-client privilege, work-product privilege, or other privilege or immunity attaching to any documents or communications (whether written or oral) transferred to the Litigation Trust will vest in the Litigation Trust and its representatives, and the Debtors and the Litigation Trust will be authorized to take all necessary actions to effectuate the transfer of such privileges.

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b.

Funding Expenses of the Litigation Trust

The Debtors will not be obligated to provide any funding with respect to the Litigation Trust after they transfer the Litigation Trust Claims to the Litigation Trust. As more fully described in the Post-Consummation Trust Agreement and the Litigation Trust Agreement, (a) the Post-Consummation Trust will advance to the Litigation Trust up to an aggregate of $3 million to cover the reasonable costs of investigating, prosecuting, resolving and reconciling Claims upon submission of appropriate invoices therefor and (b) such advance will be repaid from the first available net proceeds realized from the Litigation Trust Claims. As more fully described in the Litigation Trust Agreement, any Cash in the Litigation Trust will be applied, first, to the fees, costs, expenses and liabilities of the Litigation Trust Administrator, second, to repay such advance and, third, to the distributions provided for pursuant to the Plan. c. Appointment of the Litigation Trust Administrator

On the Effective Date and in compliance with the provisions of the Plan the Litigation Trust Administrator, as designated by the Agent, in consultation with the Prepetition Lenders and the Creditors Committee, will be appointed in accordance with the Litigation Trust Agreement and the Litigation Trust will be administered by the Litigation Trust Administrator in accordance with the Litigation Trust Agreement. d. Termination of the Litigation Trust Administrator

The Litigation Trust will terminate as soon as practicable, but in no event later than the fifth anniversary of the Effective Date; provided, that, on or prior to the date six months prior to such termination, the Bankruptcy Court, upon motion by a party in interest, may extend the term of the Litigation Trust for a finite period if such an extension is necessary to liquidate the Litigation Trust Claims. Notwithstanding the foregoing, multiple extensions may be obtained so long as Bankruptcy Court approval is obtained at least six (6) months prior to the expiration of each extended term; provided, that the Litigation Trust Administrator receives an opinion of counsel or a favorable ruling from the Internal Revenue Service that any further extension would not adversely affect the status of the Litigation Trust as a grantor trust for federal income tax purposes. The duties, responsibilities and powers of the Litigation Trust Administrator will terminate in accordance with the terms of the Litigation Trust Agreement. e. Exculpation; Indemnification

The Litigation Trust Administrator, the Litigation Trust, the professionals of the Litigation Trust and their representatives will be exculpated and indemnified pursuant to the terms of the Litigation Trust Agreement.

4.

Corporate Action

Upon the entry of the Confirmation Order by the Bankruptcy Court, all matters provided under the Plan involving the corporate structure of the Debtors will be deemed authorized and approved without any requirement of further action by the Debtors, the Debtors shareholders or the Debtors boards of directors. To the extent such action has not been completed prior to the Effective Date, the Debtors (and their boards of directors) shall dissolve or otherwise terminate their existence following the Effective Date and are authorized to dissolve or terminate the existence of wholly-owned non-Debtor subsidiaries following the Effective Date as well as any remaining health, welfare or benefit plans.

5.

Preservation of Rights of Action a. Maintenance of Causes of Action

Pursuant to the Plan, and except as otherwise provided therein or in any Final Order with respect to any Causes of Action that are barred, waived, relinquished, released, settled or compromised, on the Effective Date, all of the Debtors rights to commence and pursue, as appropriate, any and all Causes of Action, whether arising before or after the Petition Date, in any court or other tribunal in an adversary proceeding or contested matter Filed in one or more of the Chapter 11 Cases, including the following actions and any Causes of Actions specified on Exhibit A to the Plan, shall be transferred to the Post-Consummation Trust and the Litigation Trust, as applicable: (a) objections to Claims under the 50
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Plan; and (b) any other litigation or Causes of Action, whether legal, equitable or statutory in nature, arising out of, or in connection with the Debtors businesses, assets or operations or otherwise affecting the Debtors, including possible claims against the following types of parties, both domestic and foreign, for the following types of claims: (i) Causes of Action against vendors, suppliers of goods or services, or other parties for overpayments, back charges, duplicate payments, improper holdbacks, deposits, warranties, guarantees, indemnities or setoff; (ii) Causes of Action against utilities, vendors, suppliers of services or goods, or other parties for wrongful or improper termination, suspension of services or supply of goods, or failure to meet other contractual or regulatory obligations; (iii) Causes of Action against vendors, suppliers of goods or services, or other parties for failure to fully perform or to condition performance on additional requirements under contracts with any one or more of the Debtors before the assumption or rejection of the subject contracts; (iv) Causes of Action for any liens, including mechanics, artisans, materialmens, possessory or statutory liens held by any one or more of the Debtors; (v) Causes of Action for payments, deposits, holdbacks, reserves or other amounts owed by any creditor, lessor, utility, supplier, vendor, insurer, surety, factor, lender, bondholder, lessor or other party; (vi) Causes of Action against any current or former director, officer, employee or agent of the Debtors arising out of employment related matters, including Causes of Action regarding intellectual property, confidentiality obligations, employment contracts, wage and benefit overpayments, travel, contractual covenants, or employee fraud or wrongdoing; (vii) Causes of Action against any professional services provider or any other party arising out of financial reporting; (viii) Causes of Action arising out of environmental or contaminant exposure matters against landlords, lessors, environmental consultants, environmental agencies or suppliers of environmental services or goods; (ix) Causes of Action against insurance carriers, reinsurance carriers, underwriters or surety bond issuers relating to coverage, indemnity, contribution, reimbursement or other matters; (x) counterclaims and defenses relating to notes, bonds or other contract obligations; (xi) Causes of Action against local, state, federal and foreign taxing authorities for refunds of overpayments or other payments; (xii) Causes of Action against attorneys, accountants, consultants or other professional service providers relating to services rendered; (xiii) contract, tort or equitable Causes of Action that may exist or subsequently arise; (xiv) any intracompany or intercompany Causes of Action; (xv) Causes of Action of the Debtors arising under section 362 of the Bankruptcy Code; (xvi) equitable subordination Causes of Action arising under section 510 of the Bankruptcy Code or other applicable law; (xvii) turnover Causes of Action arising under sections 542 or 543 of the Bankruptcy Code; (xviii) Causes of Action arising under chapter 5 of the Bankruptcy Code, including preferences under section 547 of the Bankruptcy Code; (xix) Causes of Action against any union arising from, among other things, state or federal law or under a collective bargaining agreement, including any wrongful or illegal acts, any wrongful termination, suspension of performance, defamation or failure to meet other contract or regulatory obligations; and (xx) Causes of Action for unfair competition, interference with contract or potential business advantage, conversion, infringement of intellectual property or other business tort claims. The Post-Consummation Trust and the Litigation Trust will be transferred the foregoing Causes of Action notwithstanding the rejection of any executory contract or unexpired lease during the Debtors Chapter 11 Cases. In accordance with section 1123(b)(3) of the Bankruptcy Code, any claims, rights and Causes of Action that the respective Debtors may hold against any Person shall vest in the Post-Consummation Trust and the Litigation Trust, as the case may be. The Post-Consummation Trust or the Litigation Trust, through its authorized agents or representatives, will have and may exclusively enforce any and all such claims, rights or Causes of Action transferred to it, and all other similar claims arising pursuant to applicable state laws, including fraudulent transfer claims, if any, and all other Causes of Action of a trustee and debtor-in-possession pursuant to the Bankruptcy Code. The Post-Consummation Trust and the Litigation Trust will have the exclusive right, authority and discretion to determine and to initiate, file, prosecute, enforce, abandon, settle, compromise, release, withdraw or litigate to judgment any and all such claims, rights and Causes of Action transferred to it, and to decline to do any of the foregoing without the consent or approval of any third party and without any further notice to or action, order or approval of the Bankruptcy Court. The Litigation Trust will be transferred all of the Litigation Trust Claims and the Post-Consummation Trust will be transferred any and all other Causes of Action. The Post-Consummation Trust will have the right to object to all administrative expenses and Claims which, if Allowed, would entitle the Holder thereof to payments or other distributions from the Post-Consummation Trust and the Litigation Trust will have the right to object to all Claims other than Prepetition Facility Claims which, if Allowed, would entitle the Holder thereof to payments or other distributions from the Litigation Trust.

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b.

Preservation of All Causes of Action Not Expressly Settled or Released

Unless a claim or Cause of Action against a creditor or other Person is expressly waived, relinquished, released, compromised or settled in the Plan or any Final Order, the Debtors expressly reserve such claim or Cause of Action in the Plan for later adjudication by the Debtors and, therefore, no preclusion doctrine, including the doctrines of res judicata, collateral estoppel, issue preclusion, claim preclusion, waiver, estoppel (judicial, equitable or otherwise) or laches will apply to such claims or Causes of Action upon or after the Confirmation or Consummation of the Plan based on this Disclosure Statement, the Plan or the Confirmation Order, except where such claims or Causes of Action have been expressly waived, relinquished, released, compromised, or settled in the Plan or a Final Order. In addition, the Debtors and the successor entities pursuant to the Plan expressly reserve the right to pursue or adopt any claims not so waived, relinquished, released, compromised or settled that are alleged in any lawsuit in which the Debtors are a defendant or an interested party, against any person or entity, including the plaintiffs or co-defendants in such lawsuits. Any Person to whom the Debtors have incurred an obligation (whether on account of services, purchase, sale of goods or otherwise), or who has received services from the Debtors or a transfer of money or property of the Debtors, or who has transacted business with the Debtors, or leased equipment or property from the Debtors should assume that such obligation, transfer or transaction may be reviewed by the Post-Consummation Trust subsequent to the Effective Date and may, to the extent not theretofore expressly waived, relinquished, released, compromised or settled, be the subject of an action after the Effective Date, whether or not: (a) such Person has Filed a proof of claim against the Debtors in the Chapter 11 Cases; (b) such Persons proof of claim has been objected to; (c) such Persons Claim was included in the Debtors Schedules; or (d) such Persons scheduled Claim has been objected to by the Debtors or has been identified by the Debtors as disputed, contingent, or unliquidated.

6.

Certain Employee, Retiree and Workers Compensation Benefits a. Employee Benefits

On or before the Effective Date and except as otherwise set forth herein, the PBGC or the Debtors, as applicable, will terminate the Debtors existing employee benefit policies, plans and agreements identified on Exhibit D to the Plan. b. Retiree Medical Benefits

From and after the Effective Date, neither the Debtors nor the Trusts will be obligated to pay retiree benefits (as defined in section 1114(a) of the Bankruptcy Code) or any similar health and medical benefits in accordance with the terms of the retiree benefit plans or other agreements governing the payment of such benefits. c. Pension Plan

From and after the Effective Date, neither the Debtors nor the Trusts will be obligated to pay any benefits in accordance with the terms of any pension plans, including the Collins & Aikman Pension Plan, or other agreements governing the payment of such benefits. d. Workers Compensation Benefits

From and after the Effective Date, neither the Debtors nor the Trusts will continue to pay workers compensation benefits in accordance with the Workers Compensation Order. e. Implementation of the KERP and Success Sharing Plan

To the extent the Debtors have not already implemented all or part of the KERP or the Success Sharing Plan prior to the Effective Date, on and after the Effective Date the Post-Consummation Trust shall implement the KERP and the Success Sharing Plan perform any and all obligations thereunder, including the payment of performance bonuses, emergence bonuses and severance amounts contemplated thereby.

7.

Limitations on Amounts to Be Distributed to the Holders of Allowed Insured Claims

Distributions under the Plan to each Holder of an Allowed Insured Claim will be in accordance with the treatment provided under the Plan for the Class in which such Allowed Insured Claim is classified, but solely to the 52
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extent that such Allowed Insured Claim is not satisfied from proceeds payable to the Holder thereof under any pertinent insurance policies and applicable law. Nothing in Article IV.G of the Plan constitutes a waiver of any claims, obligations, suits, judgments, damages, demands, debts, rights, causes of action or liabilities that any Person may hold against any other Person, including the Debtors insurance carriers.

8.

Cancellation and Surrender of Instruments, Securities and Other Documentation

Except as provided in any contract, instrument or other agreement or document entered into or delivered in connection with the Plan, on the Effective Date and concurrently with the applicable distributions made pursuant to Article III of the Plan, the DIP Facility, the Prepetition Credit Facility, the Senior Note Indenture, the Senior Subordinated Note Indenture, the Senior Notes, the Senior Subordinated Notes and the Equity Interests will be canceled and of no further force and effect, without any further action on the part of any Debtor or either of the Trusts. The Holders of or parties to such canceled instruments, securities and other documentation will have no rights arising from or relating to such instruments, securities and other documentation or the cancellation thereof, except the rights provided pursuant to the Plan. No distribution under the Plan will be made to or on behalf of any Holder of an Allowed Claim evidenced by Senior Notes or Senior Subordinated Notes unless and until such instruments or securities are received by the Litigation Trust to the extent required in Article VI.I of the Plan.

9.

Creation of Professional Escrow Account

On the Effective Date, the Plan Administrator will establish the Professional Escrow Account and transfer the amounts necessary (based on estimates of Accrued Professional Fees as of the Effective Date provided by each Professional to the Debtors immediately before the Effective Date) to ensure the payment of all Accrued Professional Compensation through the Effective Date. Additionally, on the Effective Date, all amounts in the Carve Out Account will be transferred to and deposited in the Professional Escrow Account. Any amounts remaining in the Professional Escrow Account after payment of all Accrued Professional Compensation through the Effective Date will become PostConsummation Trust Assets and be available to the Post-Consummation Trust for distribution to its Beneficiaries in accordance with the Post-Consummation Trust Agreement.

10.

Release of Liens

Except as otherwise provided in the Plan or in any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, on the Effective Date and concurrently with the applicable distributions made pursuant to Article III of the Plan, all mortgages, deeds of trust, liens or other security interests against the property of any Estate will be fully released and discharged, and all of the right, title and interest of any holder of such mortgages, deeds of trust, liens or other security interests, including any rights to any collateral thereunder, will revert to the applicable Post-Consummation Trust and its successors and assigns.

11.

Effectuating Documents; Further Transactions; Exemption from Certain Transfer Taxes

The Post-Consummation Trust will be authorized to execute, deliver, file or record such contracts, instruments, releases and other agreements or documents and take such actions as may be necessary or appropriate to effectuate and implement the provisions of the Plan. The Plan Administrator, the Secretary of each Debtor and/or any Assistant Secretary of each Debtor will be authorized to certify or attest to any of the foregoing actions. Pursuant to section 1146(c) of the Bankruptcy Code, the following will not be subject to any stamp tax, real estate transfer tax or similar tax: (1) the making or assignment of any lease or sublease; or (2) the making or delivery of any deed or other instrument of transfer under, in furtherance of or in connection with the Plan, including: (a) any merger agreements; (b) agreements of consolidation, restructuring, disposition, liquidation or dissolution; (c) deeds; (d) bills of sale; or (e) assignments executed in connection with any Restructuring Transaction pursuant to the Plan.

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D.

Treatment of Executory Contracts and Unexpired Leases

1.

Executory Contracts and Unexpired Leases to Be Assumed or Assumed and Assigned

Except as otherwise provided in the Plan, on the Effective Date, pursuant to section 365 of the Bankruptcy Code, the applicable Debtor or Debtors will assume and assign to the Post-Consummation Trust or the applicable purchaser of the Debtors assets under the Soft-Trim Sales Transaction or Remaining Sales Transaction, as indicated, each of the Executory Contracts and Unexpired Leases listed on Exhibit E to the Plan. Each contract and lease listed on Exhibit E to the Plan will be assumed only to the extent that any such contract or lease constitutes an Executory Contract or Unexpired Lease. Listing a contract or lease on Exhibit E to the Plan does not constitute an admission by a Debtor or the Post-Consummation Trust that such contract or lease is an Executory Contract or Unexpired Lease or that a Debtor or the Post-Consummation Trust has any liability thereunder. Each Executory Contract and Unexpired Lease listed on Exhibit E to the Plan includes any modifications, amendments, supplements, restatements or other agreements made directly or indirectly by any agreement, instrument or other document that in any manner affects such contract or lease, irrespective of whether such agreement, instrument or other document is listed on Exhibit E to the Plan, unless any such modification, amendment, supplement, restatement or other agreement is rejected pursuant to Article V.C to the Plan. As of the effective time of an applicable Restructuring Transaction, any Executory Contract or Unexpired Lease to be held by any Debtor or another surviving, resulting or acquiring corporation in an applicable Restructuring Transaction, will be deemed assigned to the applicable Person, pursuant to section 365 of the Bankruptcy Code. Entry of the Confirmation Order by the Bankruptcy Court will constitute approval of the assumption or conditional assumption of the Executory Contracts and Unexpired Leases to be assumed under the Plan as of the Effective Date pursuant to Sections 365 and 1123 of the Bankruptcy Code. Each Executory Contract and Unexpired Lease that is assumed will vest in and be fully enforceable by the Post-Consummation Trust or any applicable assignee in accordance with its terms, except as may be modified by the provisions of the Plan, any order of the Bankruptcy Court authorizing or providing for its assumption, or applicable law.

2.

Payments Related to the Assumption of Executory Contracts and Unexpired Leases

To the extent that such Claims constitute monetary defaults, the Cure Amount Claims associated with each Executory Contract and Unexpired Lease to be assumed pursuant to the Plan will be satisfied, pursuant to section 365(b)(1) of the Bankruptcy Code, at the option of the Debtor assuming such contract or lease or the assignee of such Debtor, if any: (a) by payment of the Cure Amount Claim in Cash on the Effective Date; or (b) on such other terms as are agreed to by the parties to such Executory Contract or Unexpired Lease. If there is a dispute regarding: (a) the amount of any Cure Amount Claim; (b) the ability of the Post-Consummation Trust or any assignee to provide adequate assurance of future performance (within the meaning of section 365 of the Bankruptcy Code) under the contract or lease to be assumed; or (c) any other matter pertaining to assumption or assumption and assignment of such contract or lease, the payment of any Cure Amount Claim required by section 365(b)(1) of the Bankruptcy Code will be made following the entry of a Final Order resolving the dispute and approving the assumption. For assumptions of Executory Contracts or Unexpired Leases between Debtors, the Debtor assuming such contract may cure any monetary default (a) by treating such amount as either a direct or indirect contribution to capital or distribution (as appropriate) or (b) through adjusting an intercompany account balance accordingly in lieu of payment in Cash.

3.

Executory Contracts and Unexpired Leases to Be Rejected

On the Effective Date, except for an Executory Contract or Unexpired Lease that was previously assumed, assumed and assigned or rejected by an order of the Bankruptcy Court or that is assumed pursuant to Article V.A, each Executory Contract and Unexpired Lease entered into by a Debtor prior to the Petition Date will be rejected pursuant to section 365 of the Bankruptcy Code. The Executory Contracts and Unexpired Leases to be rejected will include the Executory Contracts and Unexpired Leases listed on Exhibit F. Each contract and lease listed on Exhibit F will be rejected only to the extent that any such contract or lease constitutes an Executory Contract or Unexpired Lease. Listing a contract or lease on Exhibit F will not constitute an admission by a Debtor or the Post-Consummation Trust that such contract or lease is an Executory Contract or Unexpired Lease or that a Debtor or the Post-Consummation Trust has any liability thereunder. Any Executory Contract and Unexpired Lease not listed on Exhibit F and not previously assumed, 54
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assumed and assigned or rejected by an order of the Bankruptcy Court (other than those Executory Contracts and Unexpired Leases identified on Exhibit E) will be rejected irrespective of whether such contract is listed on Exhibit F. The Confirmation Order will constitute an order of the Bankruptcy Court approving such rejections pursuant to section 365 of the Bankruptcy Code as of the Effective Date.

4.

Bar Date for Rejection Damages

Notwithstanding anything in the Bar Date Order to the contrary, if the rejection of an Executory Contract or Unexpired Lease, including pursuant to Article V.C of the Plan, gives rise to a Claim (including any Claims arising from those indemnification obligations described in Article V.E of the Plan) by the other party or parties to such contract or lease, such Claim will be forever barred and will not be enforceable against the Debtors, the Post-Consummation Trust, their respective successors or their respective properties unless a proof of Claim is Filed and served on the Post Consummation Trust, pursuant to the procedures specified in the notice of the entry of the Confirmation Order or an order of the Bankruptcy Court, no later than 30 days after the Confirmation Date.

5.

Obligations to Indemnify Directors, Officers and Employees

The obligations of each Debtor to indemnify any person serving as one of its directors, officers or employees as of or following the Effective Date will, to the extent constituting an executory contract, be deemed rejected as of the Effective Date. Neither the Debtors nor either of the Trusts will have any obligation on or after the Effective Date to pay or perform such indemnification obligations. Notwithstanding the foregoing, such directors, officers and employees will have the benefit of any and all directors and officers liability insurance policies that may be in effect, but neither the Debtors nor either of the Trusts will have any obligation on or after the Effective Date to pay premiums thereunder.

6.

Contracts and Leases Entered into After the Petition Date

Contracts and leases entered into after the Petition Date by any Debtor, including any Executory Contracts and Unexpired Leases assumed by such Debtor, will either (i) be performed by the Debtors or the Post-Consummation Trust in the ordinary course of its business; or (ii) terminated, with the relevant counterparty required to file a Claim asserting any alleged damages within the applicable Bar Date.

7.

Reservation of Rights

Neither the exclusion nor inclusion of any contract or lease by the Debtors on any Exhibit to the Plan constitutes an admission by the Debtors that any such contract or lease is in fact an Executory Contract or Unexpired Lease or that any Debtor or the Post-Consummation Trust, or their respective Affiliates, has any liability thereunder. Nothing in the Plan waives, excuses, limits, diminishes, or otherwise alters any of the defenses, Claims, Causes of Action, or other rights of the Debtors and the Post-Consummation Trust under any executory or non-executory contract or any unexpired or expired lease. Nothing in the Plan increases, augments, or adds to any of the duties, obligations, responsibilities, or liabilities of the Debtors or the Post-Consummation Trust under any executory or non-executory contract or any unexpired or expired lease. In the Plan, the Debtors and the Post-Consummation Trust reserve the right to alter, amend, modify, or supplement Exhibit E to the Plan and/or Exhibit F to the Plan, at any time through and including ninety (90) days after the Effective Date. If there is a dispute regarding whether a contract or lease is or was executory or unexpired at the time of assumption or rejection, the Plan provides that the Debtors shall have thirty (30) days following entry of a Final Order resolving such dispute to alter their treatment of such contract or lease.

E.

Provisions Governing Distributions

1.

Time of Distributions

Except as otherwise provided in Article VI of the Plan and as to DIP Facility Claims and Prepetition Facility Claims, distributions of Cash to be made on the Effective Date to Holders of Claims that are allowed as of the Effective Date will be deemed made on the Effective Date if made on the Effective Date or as promptly thereafter as practicable, 55
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but in any event no later than: (i) 90 days after the Effective Date and (ii) 90 days after such later date when the applicable conditions of Article V.B of the Plan (regarding cure payments for Executory Contracts and Unexpired Leases being assumed), Article VI.D.2 of the Plan (regarding undeliverable distributions) or Article VI.I of the plan (regarding surrender of canceled instruments and securities) are satisfied. Distributions on account of Claims that become Allowed Claims after the Effective Date will be made pursuant to Articles VI.G and VII.C of the Plan. On each Quarterly Distribution Date, distributions also will be made, pursuant to Article VII.C of the Plan, to Holders of Disputed Claims as of the Effective Date that were Allowed during the preceding calendar quarter and to Holders of Allowed Claims entitled to post-Consummation payments from the Post-Consummation Trust or the Litigation Trust, as applicable, pursuant to the Plan. Such quarterly distributions will be in the full amount that the Plan provides for Allowed Claims in the applicable Class.

2.

Method of Distributions to Holders of Claims

The Post-Consummation Trust, or such Third Party Disbursing Agents as the Post-Consummation Trust may employ in its sole discretion, will make all distributions required under the Plan on behalf of Administrative Claims, Priority Claims, Other Secured Claims, Other Priority Claims and Prepetition Facility Claims (to the extent the Plan provides such distributions are to come from the Post-Consummation Trust). The Litigation Trust, or such Third Party Disbursing Agents as the Litigation Trust may employ in its sole discretion, will make all distributions required under the Plan on behalf of Prepetition Facility Claims (to the extent the Plan provides such distributions are to come from the Post-Consummation Trust) and Claims in Classes 5, 6 and 7. Each Disbursing Agent and Third Party Disbursing Agent will serve without bond, and any Disbursing Agent and Third Party Disbursing Agent may employ or contract with other Entities to assist in or make the distributions required by the Plan. Each Third Party Disbursing Agent providing services related to distributions pursuant to the Plan will receive from the Trust that employs it reasonable compensation for such services and reimbursement of reasonable out-of-pocket expenses incurred in connection with such services without Bankruptcy Court approval. These payments will be made on terms agreed to with the employing Trust.

3.

Delivery of Distributions Generally

Except as provided in Article VI.D.1(b) of the Plan, distributions to Holders of Allowed Claims will be made (i) to the addresses set forth on the respective proofs of Claim Filed by Holders of such Claims; (ii) to the addresses set forth in any written certification of address change delivered to the relevant Disbursing Agent (including pursuant to a letter of transmittal delivered to the relevant Disbursing Agent) after the date of Filing of any related proof of Claim; or (iii) to the addresses reflected in the applicable Debtors Schedules if no proof of Claim has been Filed and the relevant Disbursing Agent has not received a written notice of a change of address.

4.

Distributions to Holders of the Prepetition Facility Claims

Distributions of Cash to Holders of Prepetition Facility Claims will be made on the Effective Date by the Plan Administrator, the Post-Consummation Trust or a Disbursing Agent to the Agent, JPMorgan, for the Pro Rata benefit of the Holders of Prepetition Facility Claims. Distributions to Holders of Prepetition Facility Claims shall be effected by wire transfer of immediately available funds.

5.

Distributions to Holders of the Senior Note Claims

Subject to the requirements of Article VI.I of the Plan, distributions to Holders of Allowed Senior Note Claims will be made by a Disbursing Agent to the record holders of the Senior Notes as of the Distribution Record Date as identified on a record holder register to be provided to the Disbursing Agent by the Senior Note Indenture Trustee within five Business Days after the Distribution Record Date. This record holder register will provide the name, address and holdings of each respective registered Holder of Senior Notes as of the Distribution Record Date.

6.

Undeliverable Distributions Held By Disbursing Agents

If any distribution to a Holder of an Allowed Claim is returned to a Disbursing Agent as undeliverable, no further distributions will be made to such Holder unless and until the applicable Disbursing Agent is notified by written 56
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certification of such Holders then-current address. Undeliverable distributions will remain in the possession of the applicable Disbursing Agent until such time as a distribution becomes deliverable. Undeliverable Cash will be held in segregated bank accounts in the name of the applicable Disbursing Agent for the benefit of the potential claimants of such funds. Any Disbursing Agent holding undeliverable cash will invest such cash in a manner consistent with the investment and deposit guidelines of the Post-Consummation Trust or the Litigation Trust, as applicable. On each distribution date provided for in the Post-Consummation Trust Agreement and Litigation Trust Agreement, as the case may be, the applicable Trust or applicable Disbursing Agents will make distributions to the Beneficiaries of such Trust in accordance with the Plan and relevant Trust Agreement. Each such distribution will include, to the extent applicable, a Pro Rata share of the net yield earned by the applicable Disbursing Agent from the investment of any undeliverable cash from the date that such distribution would have first been due had it then been deliverable to the date that such distribution becomes deliverable. Any Holder of an Allowed Claim that does not assert a claim pursuant to the Plan for an undeliverable distribution to be made by a Disbursing Agent within two years after the later of (i) the Effective Date and (ii) the last date on which a distribution was deliverable will have its claim for such undeliverable distribution discharged and will be forever barred from asserting any such claim against the Post-Consummation Trust or its respective property. Unclaimed Cash will become Post-Consummation Trust Assets and transferred to the Post-Consummation Trust, free of any restrictions thereon, and any such Cash held by a Third Party Disbursing Agent will be returned to the Post-Consummation Trust. Nothing contained in the Plan or the law will require any Debtor, any Trust or any Disbursing Agent to attempt to locate any Holder of an Allowed Claim.

7.

Distribution Record Date

The Distribution Record Date will be the date set by the Bankruptcy Court for determining the Holders of Claims entitled to vote on the Plan. As of the close of business on the Distribution Record Date, the respective transfer registers for the Senior Notes and the Senior Subordinated Notes, as maintained by the Debtors or the Indenture Trustees, will be closed. The applicable Disbursing Agent will have no obligation to recognize the transfer or sale of any Senior Note Claim or Senior Subordinated Note Claim that occurs after the close of business on the Distribution Record Date, and any Disbursing Agent will be entitled for all purposes herein to recognize and make distributions only to those Holders of Senior Note Claims and Senior Subordinated Note Claims who are Holders of such Claims as of the close of business on the Distribution Record Date. Except as otherwise provided in a Final Order of the Bankruptcy Court, the transferees of Claims in Classes 3, 5, 6 and 7 that are transferred pursuant to Bankruptcy Rule 3001 on or prior to the Distribution Record Date will be treated as the Holders of such Claims for all purposes, notwithstanding that any period provided by Bankruptcy Rule 3001 for objecting to such transfer has not expired by the Distribution Record Date.

8.

Means of Cash Payments

Except as otherwise specified herein, Cash payments made pursuant to the Plan will be in U.S. currency by checks drawn on a domestic bank selected by the applicable Debtor or the applicable Trust or, at the option of the applicable Debtor or the applicable Trust, by wire transfer from a domestic bank; provided that Cash payments to foreign Holders of Allowed Claims may be made, at the option of the applicable Debtor or the applicable Trust, in such funds and by such means as are necessary or customary in a particular foreign jurisdiction. Cash payments made pursuant to the Plan on behalf of DIP Facility Claims and Prepetition Facility Claims will be made to the respective administrative agent on the Effective Date and future distribution dates by wire transfer of immediately available funds.

9.

De Minimis Distributions

No Disbursing Agent will distribute Cash to the Holder of an Allowed Claim in an Impaired Class if the amount of Cash to be distributed on account of such Claim is less than $25. Any Holder of an Allowed Claim on account of which the amount of Cash to be distributed is less than $25 will have its claim for such distribution discharged and will be forever barred from asserting any such claim against the Post-Consummation Trust, the Litigation Trust or their respective property.

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10.

Compliance with Tax Requirements

To the extent applicable, each Disbursing Agent will comply with all tax withholding and reporting requirements imposed on it by any governmental unit, and all distributions pursuant to the Plan will be subject to such withholding and reporting requirements. Each Disbursing Agent will be authorized to take any actions that may be necessary or appropriate to comply with such withholding and reporting requirements. Notwithstanding any other provision of the Plan, each Person receiving a distribution of Cash pursuant to the Plan will have sole and exclusive responsibility for the satisfaction and payment of any tax obligations imposed on it by any governmental unit on account of such distribution, including income, withholding and other tax obligations.

11.

Setoffs

Except with respect to claims of a Debtor or a Trust released pursuant to the Plan or any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, each Trust or, as instructed by the applicable Debtor or applicable Trust, a Third Party Disbursing Agent may, pursuant to section 553 of the Bankruptcy Code or applicable nonbankruptcy law, set off against any Allowed Claim and the distributions to be made pursuant to the Plan on account of such Claim (before any distribution is made on account of such Claim) the claims, rights and causes of action of any nature that any Debtor or the applicable Trust may hold against the Holder of such Allowed Claim; provided that neither the failure to effect a setoff nor the allowance of any Claim hereunder will constitute a waiver or release by the applicable Debtor or the applicable Trust of any claims, rights and Causes of Action that the Debtor or the applicable Trust may possess against Holder of a Claim.

12.

Surrender of Canceled Instruments or Securities

As a condition precedent to receiving any distribution pursuant to the Plan on account of an Allowed Claim evidenced by Senior Notes or Senior Subordinated Notes, the Holder of such Claim must surrender, in accordance with the provisions of Article II.I of the Plan, the applicable Senior Notes or Senior Subordinated Notes to the Litigation Trust or Disbursing Agent, together with any letter of transmittal required by the Litigation Trust or Disbursing Agent. Pending such surrender, any distributions pursuant to the Plan on account of any such Claim will be treated as an undeliverable distribution pursuant to Article VI.D.2 of the Plan.

F.

Procedures for Resolving Disputed Claims

1.

Objections to Claims

All objections to Claims must be Filed by the Claims Objection Bar Date, and (a) if Filed prior to the Effective Date, such objections will be served only on the Holders of such Claims and the parties on the then-applicable service list in the Chapter 11 Cases; and (b) if Filed after the Effective Date, such objections will be served only on the Holders of such Claims and the United States trustee. If an objection has not been Filed to a proof of Claim or a scheduled Claim by the Claims Objection Bar Date, the Claim to which the proof of Claim or scheduled Claim relates will be treated as an Allowed Claim if such Claim has not been allowed earlier. An objection is deemed to have been timely Filed as to all Tort Claims, thus making each such Claim a Disputed Claim as of the Claims Objection Bar Date.

2.

Authority to Prosecute Objections

After the Effective Date, except as provided in the following paragraph, only the Debtors or the Post-Consummation Trust will have the authority to File, settle, compromise, withdraw or litigate to judgment objections to Claims. After the Effective Date, the Post-Consummation Trust may settle or compromise any Disputed Claim without approval of the Bankruptcy Court; provided that (a) the Post-Consummation Trust will promptly File with the Bankruptcy Court a written notice of any settlement or compromise of a Claim with a Face Amount in excess of $1,000,000 and (b) the Agent and the United States trustee will be authorized to contest the proposed settlement or compromise by Filing a written objection with the Bankruptcy Court and serving such objection on the Post-Consummation Trust within 20 days of the service of the settlement notice. If no such objection is Filed, the applicable settlement or compromise will be deemed final without further action of the Bankruptcy Court, however, the Post-Consummation Trust will be authorized, but not required, to file a certification of no objection and file an order to the Bankruptcy Court on account of such settlements and compromises.

58
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Notwithstanding the foregoing, after the Effective Date, only the Litigation Trust will have the authority to File, settle, compromise, withdraw or litigate to judgment objections to Claims in Classes 5, 6 and 8. After the Effective Date, the Litigation Trust may settle or compromise any Disputed Claim without approval of the Bankruptcy Court; provided that (a) the Litigation Trust will promptly File with the Bankruptcy Court a written notice of any settlement or compromise of a Claim with a Face Amount in excess of $25,000,000 and (b) the Agent and the United States trustee will be authorized to contest the proposed settlement or compromise by Filing a written objection with the Bankruptcy Court and serving such objection on the Post-Consummation Trust no later than 20 days after the service of the settlement notice. If no such objection is Filed, the applicable settlement or compromise will be deemed final without further action of the Bankruptcy Court, however, the Litigation Trust will be authorized, but not required, to file a certification of no objection and submit an order to the Bankruptcy Court on account of such settlements and compromises.

3.

Treatment of the Disputed Claims

Notwithstanding any other provisions of the Plan, no payments or distributions will be made on account of a Disputed Claim until such Claim becomes an Allowed Claim.

G.

D&O Insurance

The Post-Consummation Trust shall maintain customary insurance coverage for the protection of Persons serving as administrators and overseers of the Post-Consummation Trust on and after the Effective Date.

H.

Conditions Precedent to Confirmation and Consummation of the Plan

1.

Conditions to Confirmation

The following are conditions precedent to Confirmation of this Plan that must be (i) satisfied or (ii) waived in accordance with Article X of the Plan: (a) The Bankruptcy Court shall have entered the Confirmation Order in form and substance reasonably acceptable to the Debtors and the Agent. The Plan and Exhibits thereto (as confirmed or approved by the Confirmation Order) shall be in form and substance satisfactory to the Debtors and the Agent, in consultation with the Prepetition Lenders. The Bankruptcy Court shall have entered a final order (which shall not have been vacated or stayed), approving the Customer Agreement. The Debtors shall have consummated the Soft-Trim Sales Transaction. The Bankruptcy Court shall have entered an order or the Debtors shall have entered into an agreement with the PBGC, either of which shall provide that the Collins & Aikman Pension Plan and other pension obligations for the Debtors United States employees is terminated. The Bankruptcy Court shall have entered an order (which shall not have been vacated or stayed), which shall provide that the Post-Consummation Trust has no OPEB Liability, or the Confirmation Order shall provide for such relief.

(b)

(c)

(d) (e)

(f)

2.

Conditions Precedent to Consummation

The following are conditions precedent to Consummation of this Plan that must be (i) satisfied or (ii) waived in accordance with Article VIII.C of the Plan: (a) All conditions to Confirmation of this Plan set forth in Article X.A shall remain satisfied. 59
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(b)

Each order of the Bankruptcy Court referred to in Article X.A shall have become a Final Order. The Post-Consummation Trust Agreement and all related agreements shall have been executed The Residual Assets shall have been transferred to the Post-Consummation Trust and the Residual Assets shall include no less that $3 million in Cash. The Litigation Trust Agreement and all related agreements shall have been executed. The Litigation Trust Assets shall have been transferred to the Litigation Trust. The Professional Escrow Account shall have been funded. All other actions, documents and agreements necessary to implement the Plan as of the Effective Date shall have been delivered and all conditions precedent thereto shall have been satisfied or waived.

(c)

(d)

(e) (f) (g) (h)

3.

Waiver of Conditions

The Debtors, in the Debtors discretion and with the consent of the Agent, in consultation with the Prepetition Lenders, may waive any of the conditions to Confirmation of the Plan set forth in Article X.A of the Plan or Consummation of the Plan set forth in Article X.B of the Plan at any time, without notice, without leave or order of the Bankruptcy Court, and without any formal action other than proceeding to confirm or consummate the Plan.

4.

Effect of Non-Occurrence of Conditions to Consummation

If the Consummation of the Plan does not occur, the Plan will be null and void in all respects and nothing contained in the Plan or this Disclosure Statement will: (a) constitute a waiver or release of any Claims by or against, or any Equity Interests in any Debtor; (b) prejudice in any manner the rights of any Debtor or any other party; or (c) constitute an admission, acknowledgment, offer or undertaking by any Debtor in any respect.

I.

Cramdown

The Debtors expect to request Confirmation of the Plan under section 1129(b) of the Bankruptcy Code with respect to any Impaired Class that does not accept the Plan pursuant to section 1126 of the Bankruptcy Code.

J.

Settlement, Release, Injunction and Related Provisions

1.

Compromise and Settlement

As of the Effective Date, the Plan constitutes a settlement, compromise and release, including for substantive consolidation purposes, of rights arising from or relating to the allowance, classification and treatment of all Allowed Claims and Allowed Equity Interests and their respective distributions and treatments hereunder take into account for and conform to the relative priority and rights of the Claims and Equity Interests in each Class in connection with any contractual, legal and equitable subordination rights relating thereto whether arising under general principles of equitable subordination, section 510(b) and (c) of the Bankruptcy Code, substantive consolidation or otherwise. The Confirmation Order will constitute the Bankruptcy Courts finding and determination that the settlements reflected in the Plan, including all issues pertaining to claims for substantive consolidation (which are settled by the distributions in the Plan) are (1) in the best interests of the Debtors and their Estates, (2) fair, equitable and reasonable, (3) made in good faith and (4) approved by the Bankruptcy Court pursuant to section 363 of the Bankruptcy Code and Bankruptcy Rule 9019. In addition, the allowance, classification and treatment of Allowed Claims take into account any causes of action, claims or counterclaims, whether under the Bankruptcy Code or otherwise under applicable law, that may exist: (1) between the Debtors and the Releasing Parties; and (2) as between the Releasing Parties (to the extent set forth in the Third Party Release). As of the Effective Date, any and all such causes of action, claims and counterclaims are settled, compromised 60
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and released pursuant to the Plan. The Confirmation Order will approve all such releases of contractual, legal and equitable subordination rights, causes of action, claims and counterclaims against each such Releasing Party that are satisfied, compromised and settled pursuant to the Plan. Nothing in Article XII.A of the Plan will compromise or settle in any way whatsoever, any Claims or Causes of Action that the Debtors or any Trust may have against the NonReleased Parties.

2.

Releases by the Debtors

Notwithstanding anything contained in the Plan to the contrary, on the Effective Date and effective as of the Effective Date, for the good and valuable consideration provided by each of the Debtor Releasees, including: (1) the discharge of claims and all other good and valuable consideration paid pursuant to the Plan; and (2) the services of the officers and directors employed by the Debtors at any time within six months immediately prior to the Effective Date in facilitating the expeditious implementation of the transactions contemplated by the Plan, each of the Debtors will provide a full discharge and release to the Debtor Releasees (and each such Debtor Releasee so released will be deemed released and discharged by the Debtors) and each such Debtor Releasees respective properties from any and all claims, causes of action and any other debts, obligations, rights, suits, damages, actions, interests, Causes of Action, remedies, and liabilities whatsoever, whether known or unknown, foreseen or unforeseen, suspected or unsuspected, liquidated or unliquidated, contingent or fixed, currently existing or hereafter arising, in law, equity or otherwise, whether for tort, fraud, contract, violations of federal or state securities laws, or otherwise, based in whole or in part upon any act or omission, transaction, or other occurrence or circumstances existing or taking place prior to or on the Effective Date arising from or related in any way to the Debtors, including those that any of the Debtors or either Trust would have been legally entitled to assert (whether individually or collectively) or that any Holder of a Claim or Equity Interest or other Person would have been legally entitled to assert for or on behalf of any of the Debtors or any of their Estates and further including those in any way related to the Chapter 11 Cases or the Plan; provided that the foregoing Debtor Release will not operate to waive or release any Debtor Releasee from any Causes of Action set forth on Exhibit A to the Plan. Notwithstanding anything contained in the Plan to the contrary, the Debtors will not have released nor be deemed to have released by operation of Article XII.B of the Plan or otherwise any of the Causes of Action set forth on Exhibit A to the Plan or any other claims, causes of action, debts, obligations, rights, suits, damages, actions, interests, remedies or liabilities that they or either Trust may have now or in the future against the NonReleased Parties. Entry of the Confirmation Order will constitute the Bankruptcy Courts approval, pursuant to section 363 of the Bankruptcy Code and Bankruptcy Rule 9019, of the releases provided under Article XII.B of the Plan, which includes by reference each of the related provisions and definitions contained in the Plan, and further, will constitute the Bankruptcy Courts finding that such release is: (1) in exchange for good and valuable consideration provided by the Debtor Releasees, representing good faith settlement and compromise of the claims released; (2) in the best interests of the Debtors and all Holders of Claims; (3) fair, equitable and reasonable; (4) approved after due notice and opportunity for hearing; and (5) a bar to the Debtors and both Trusts asserting any Claim released against any of the Debtor Releasees or their property. As used herein, Debtor Releasees includes (a) all officers, directors and employees and their respective subsidiaries employed by the Debtors at any time within six months immediately prior to the Effective Date, (b) all attorneys, financial advisors, accountants, investment bankers, investment advisors, actuaries, professionals, agents, affiliates and representatives of the Debtors and their subsidiaries and (c) the Releasing Parties, their respective predecessors and successors in interest, and all of their respective current and former members, officers, directors, employees, partners, attorneys, financial advisors, accountants, investment bankers, investment advisors, actuaries, professionals, agents, affiliates and representatives. Notwithstanding the foregoing, no Non-Released Parties will be Debtor Releasees.

3.

Third Party Release

As of the Effective Date, in consideration for the obligations of the Debtors and the Trusts under the Plan and the Cash, other contracts, instruments, releases, agreements or documents to be entered into or delivered in 61
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connection with the Plan (1) each Holder of a Claim that votes in favor of the Plan and (2) to the fullest extent permissible under applicable law, as such law may be extended or interpreted subsequent to the Effective Date, each Person that has held, holds or may hold a Claim or Equity Interest or at any time was a Holder of a Claim or Equity Interest of any of the Debtors and that does not vote on the Plan or votes against the Plan will be deemed to forever release, waive and discharge all claims (including Derivative Claims), causes of action and any other debts, obligations, rights, suits, damages, actions, interests, remedies and liabilities (other than the right to enforce the Debtors or either Trusts obligations under the Plan and the contracts, instruments, releases, agreements and documents delivered thereunder), whether known or unknown, foreseen or unforeseen, suspected or unsuspected, liquidated or unliquidated, contingent or fixed, currently existing or hereafter arising, in law, equity or otherwise, that are based in whole or in part on any act, omission, transaction or other occurrence taking place on or prior to the Effective Date in any way relating to a Debtor, the Chapter 11 Cases or the Plan that such Person has, had or may have against any Debtor Releasee or Releasing Party (which release will be in addition to the discharge of Claims and termination of Equity Interests provided in the Plan and under the Confirmation Order and the Bankruptcy Code). Notwithstanding anything contained in the Plan to the contrary, the Releasing Parties will not have released nor deemed to have released by operation of Article XII.C of the Plan or otherwise any claims or causes of action that they, the Debtors or either Trust may have now or in the future against the Non-Released Parties. Entry of the Confirmation Order will constitute the Bankruptcy Courts approval pursuant to section 363 of the Bankruptcy Code and Bankruptcy Rule 9019 of the release provided under Article XI.C of the Plan, which includes by reference each of the related provisions and definitions contained in the Plan, and further, will constitute the Bankruptcy Courts finding that such release is: (1) in exchange for good and valuable consideration provided by the Debtor Releasees and the Releasing Parties, representing good faith settlement and compromise of the claims released; (2) in the best interests of the Debtors and all Holders of Claims; (3) fair, equitable, and reasonable; (4) approved after due notice and opportunity for hearing; and (5) a bar to any of the Releasing Parties asserting any claim released against any of the Debtor Releasees or the Releasing Parties or their respective property.

4.

Exculpation

Notwithstanding anything contained in the Plan to the contrary, the Exculpated Parties will neither have nor incur any liability to any Person for any prepetition or postpetition act taken or omitted to be taken in connection with or related to formulating, negotiating, preparing, disseminating, implementing or administering the Plan, the Disclosure Statement or any contract, instrument, release or other agreement or document created or entered into in connection with the Plan, or any other prepetition or postpetition act taken or omitted to be taken in connection with or in contemplation of the restructuring of the Debtors or confirming or consummating the Plan; provided that the foregoing provisions of Article XII.D of the Plan will have no effect on the liability of any Person that results from any such act or omission that is determined in a Final Order to have constituted gross negligence or willful misconduct; provided further that each Exculpated Party will be entitled to rely upon the advice of counsel concerning his, her or its duties pursuant to, or in connection with, the Plan; provided still further that the foregoing Exculpation will not apply to any acts or omissions expressly set forth in and preserved by the Plan. Notwithstanding anything contained in the Plan to the contrary, the Exculpated Parties will not include the Non-Released Parties, and the Plan will not exculpate nor be deemed to have exculpated any of the Non-Released Parties for any acts they have taken, whether in contemplation of the restructuring of the Debtors, in confirming or consummating the Plan, or otherwise. As use herein, Exculpated Parties means: (a) the Debtors; (b) the Trusts; (c) the Releasing Parties (not including members of the Creditors Committee not serving as of the Effective Date) and their respective predecessors and successors in interest; and (d) all of the current (and former as it relates to the Persons described in foregoing clause (c)) officers, directors, employees, members, partners, investment advisors, attorneys, actuaries, financial advisors, accountants, investment bankers, agents, professionals, affiliates and representatives of each of the foregoing Persons (in each case in his, her or its capacity as such). Notwithstanding the foregoing, no Non-Released Parties will be Exculpated Parties. 62
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K.

Injunction

IF YOU ACCEPT ANY DISTRIBUTION PURSUANT TO THE PLAN, YOU WILL BE DEEMED TO HAVE SPECIFICALLY CONSENTED TO THE FOLLOWING INJUNCTIONS SET FORTH IN ARTICLE XII.E OF THE PLAN. From and after the Effective Date, Persons holding Claims to be discharged or Equity Interests to be terminated pursuant to the Plan will be permanently enjoined from taking any of the following actions on account of any such Claims or Equity Interests: (1) commencing or continuing in any manner any action or other proceeding against the Debtors, either Trust or their respective property, other than to enforce any right to a distribution pursuant to the Plan; (2) enforcing, attaching, collecting or recovering in any manner any judgment, award, decree or order against the Debtors, either Trust or their respective property, other than as permitted pursuant to clause (1), above; (3) creating, perfecting or enforcing any lien or encumbrance against the Debtors, either Trust or their respective property; (4) asserting a setoff, right of subrogation or recoupment of any kind against any debt, liability or obligation due to the Debtors or either Trust; and (5) commencing or continuing any action, in any manner, in any place that does not comply with or is inconsistent with the provisions of the Plan. From and after the Effective Date, all Persons that have held, currently hold or may hold any claims, causes of action and any other debts, obligations, rights, suits, damages, actions, interests, remedies or liabilities that are to be released pursuant to the Plan will be permanently enjoined from taking any of the following actions against any released Person or its property on account of such released claims, obligations, suits, judgments, damages, demands, debts, rights, causes of action or liabilities: (1) commencing or continuing in any manner any action or other proceeding; (2) enforcing, attaching, collecting or recovering in any manner any judgment, award, decree or order; (3) creating, perfecting or enforcing any lien or encumbrance; (4) asserting a setoff, right of subrogation or recoupment of any kind against any debt, liability or obligation due to any released Person; and (5) commencing or continuing any action, in any manner, in any place that does not comply with or is inconsistent with the provisions of the Plan.

L.

Retention of Jurisdiction

Notwithstanding the entry of the Confirmation Order and the occurrence of the Effective Date, the Bankruptcy Court will retain jurisdiction over the Chapter 11 Cases after the Effective Date as is legally permissible.

M.

Miscellaneous Provisions

1.

Special Provisions Regarding the Treatment of Allowed Secondary Liability Claims

Secondary Liability Claims include Claims that arise from a Debtor being liable as a guarantor of, or otherwise being jointly, severally or secondarily liable for, any contractual, tort or other obligation of another Debtor. On the Effective Date, Holders of Allowed Secondary Liability Claims will be entitled to only one distribution in respect of such underlying Allowed Claim. No multiple recovery on account of any Allowed Secondary Liability Claim will be provided or permitted. The Allowed Secondary Liability Claims arising from or related to any Debtors joint or several liability for the obligations under any (a) Allowed Claim that is being Reinstated under the Plan or (b) Executory Contract or Unexpired Lease that is being assumed or deemed assumed by another Debtor or under any Executory Contract or Unexpired Lease that is being assumed by and assigned to another Debtor or any other entity will be Reinstated.

2.

Dissolution of the Creditors Committee

On the Effective Date, the Creditors Committee will dissolve and the members of the Creditors Committee will be released and discharged from all duties and obligations arising from or related to the Chapter 11 Cases. The Professionals retained by the Creditors Committee and the members thereof will not be entitled to assert any Fee Claim for any services rendered or expenses incurred after the Effective Date, except for services rendered and expenses incurred in connection with any applications for allowance of compensation and reimbursement of expenses pending on

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the Effective Date or Filed and served after the Effective Date pursuant to Article III.A.1(f)(ii)(a) of the Plan and in connection with any appeal of the Confirmation Order.

3.

Modification or Revocation of the Plan

Pursuant to the Plan, with the prior written consent of the Creditors Committee, the Debtors or the Post-Consummation Trust, as applicable, reserve the right to alter, amend or modify the Plan before its substantial consummation. In addition, the Debtors reserve the right to revoke or withdraw the Plan as to any or all of the Debtors prior to the Confirmation Date.

ARTICLE VI.
STATUTORY REQUIREMENTS FOR CONFIRMATION OF THE PLAN The following is a brief summary of the Plan Confirmation process. Holders of Claims and Equity Interests are encouraged to review the relevant provisions of the Bankruptcy Code and to consult their own attorneys.

A.

The Confirmation Hearing

Section 1128(a) of the Bankruptcy Code requires the Bankruptcy Court, after notice, to hold a hearing on Confirmation of the Plan (the Confirmation Hearing). Section 1128(b) of the Bankruptcy Code provides that any party-in-interest may object to Confirmation of the Plan. THE BANKRUPTCY COURT HAS SCHEDULED THE CONFIRMATION HEARING TO COMMENCE ON [MONTH DAY], 2007 AT [ :] [A./P.M.] PREVAILING EASTERN TIME, BEFORE THE HONORABLE STEVEN W. RHODES, UNITED STATES BANKRUPTCY JUDGE, IN THE UNITED STATES BANKRUPTCY COURT FOR THE EASTERN DISTRICT OF MICHIGAN, SOUTHERN DIVISION, 211 WEST FORT STREET, DETROIT, MICHIGAN 48226. THE CONFIRMATION HEARING MAY BE ADJOURNED FROM TIME TO TIME BY THE BANKRUPTCY COURT WITHOUT FURTHER NOTICE OTHER THAN AN ANNOUNCEMENT OF THE ADJOURNED DATE MADE AT THE CONFIRMATION HEARING OR ANY ADJOURNMENT THEREOF; PROVIDED, IF THE DEBTORS ADJOURN THE CONFIRMATION HEARING AFTER THE PLAN OBJECTION DEADLINE, THE DEBTORS SHALL PROVIDE WRITTEN NOTICE OF SUCH ADJOURNMENT TO AND ANY OBJECTING PARTY AND THE CORE GROUP AND THE 2002 LIST (AS DEFINED IN THE FIRST AMENDED NOTICE, CASE MANAGEMENT AND ADMINISTRATIVE PROCEDURES FILED ON JUNE 9, 2005 [DOCKET NO. 294]). OBJECTIONS TO CONFIRMATION OF THE PLAN MUST BE FILED AND SERVED ON OR BEFORE [MONTH DAY], 2007, IN ACCORDANCE WITH THE SOLICITATION NOTICE FILED AND SERVED ON HOLDERS OF CLAIMS, HOLDERS OF EQUITY INTERESTS AND OTHER PARTIES IN INTEREST. UNLESS OBJECTIONS TO CONFIRMATION ARE TIMELY SERVED AND FILED IN COMPLIANCE WITH THE SOLICITATION NOTICE, THEY MAY NOT BE CONSIDERED BY THE BANKRUPTCY COURT.

B.

Confirmation Standards

To confirm the Plan, the Bankruptcy Court must find that, among other things, the requirements of section 1129 of the Bankruptcy Code have been satisfied. The requirements of section 1129 of the Bankruptcy Code are summarized below. 1. 2. 3. 4. The Plan complies with the applicable provisions of the Bankruptcy Code. The Debtors, as Plan proponents, will have complied with the applicable provisions of the Bankruptcy Code. The Plan has been proposed in good faith and not by any means forbidden by law. Any payment made or promised under the Plan for services or for costs and expenses in, or in connection with, the Chapter 11 Cases, or in connection with the Plan and incident to the cases, has 64
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been disclosed to the Bankruptcy Court, and any such payment made before the Confirmation of the Plan is reasonable, or if such payment is to be fixed after the Confirmation of the Plan, such payment is subject to the approval of the Bankruptcy Court as reasonable. 5. With respect to each Class of Impaired Claims or Equity Interests, either each Holder of a Claim or Equity Interest of such Class has accepted the Plan or will receive or retain under the Plan on account of such Claim or Equity Interest, property of a value, as of the Effective Date of the Plan, that is not less than the amount that such Holder would receive or retain if the Debtors were liquidated on such date under chapter 7 of the Bankruptcy Code. Each Class of Claims or Equity Interests that is entitled to vote on the Plan either has accepted the Plan or is not impaired under the Plan, or the Plan can be confirmed without the approval of each voting Class pursuant to section 1129(b) of the Bankruptcy Code. Except to the extent that the Holder of a particular Claim will agree to a different treatment of such Claim, the Plan provides that Allowed Administrative and Allowed Other Priority Claims will be paid in full on the Effective Date, or as soon as reasonably practicable thereafter. At least one Class of Impaired Claims or Equity Interests will accept the Plan, determined without including any acceptance of the Plan by any insider holding a Claim or Equity Interest of such Class. Confirmation of the Plan is not likely to be followed by the liquidation, or the need for further financial reorganization, of the Debtors or any successor to the Debtors under the Plan, unless such liquidation or reorganization is proposed in the Plan. All fees of the type described in 28 U.S.C. 1930, including the fees of the United States trustee, will be paid as of the Effective Date. The Plan addresses payment of retiree benefits in accordance with section 1114 of the Bankruptcy Code.

6.

7.

8. 9.

10. 11.

The Debtors believe that the Plan satisfies the requirements of section 1129 of the Bankruptcy Code, including, without limitation, that (i) the Plan satisfies or will satisfy all of the statutory requirements of chapter 11 of the Bankruptcy Code, (ii) the Debtors have complied or will have complied with all of the requirements of chapter 11 of the Bankruptcy Code and (iii) the Plan has been proposed in good faith.

C.

Financial Feasibility

Section 1129(a)(11) of the Bankruptcy Code requires that the Bankruptcy Court find, as a condition to Confirmation, that Confirmation is not likely to be followed by the liquidation of the Debtors, unless such liquidation is proposed in the Plan, or the need for further financial reorganization. The Plan contemplates that all assets of the Debtors ultimately will be disposed of and all proceeds of the assets will be distributed to the Creditors pursuant to the terms of the Plan. Since no further reorganization of the Debtors will be possible, the Debtors believe that the Plan meets the feasibility requirement. In addition, based upon the proceeds resulting from the sale of the Carpet & Acoustics segment, the Debtors believe that sufficient funds will exist at confirmation to make all payments required by the Plan.

D.

Best Interests of Creditors Test

Often called the best interests test, section 1129(a)(7) of the Bankruptcy Code requires that the Bankruptcy Court find, as a condition to Confirmation, that each Holder of a Claim or Equity Interest in each Impaired Class: (1) has accepted the Plan; or (2) will receive or retain under the Plan property of a value, as of the Effective Date, that is not less than the amount that such Person would receive if the Debtors were liquidated under chapter 7 of the Bankruptcy Code. To make these findings, the Bankruptcy Court must: (a) estimate the Cash proceeds (the Liquidation Proceeds) that a chapter 7 trustee would generate if each Debtors Chapter 11 Case were converted to a chapter 7 case and the assets of such Debtors Estate were liquidated; (b) determine the distribution (Liquidation Distribution) that each non-accepting Holder of a Claim or Equity Interest would receive from the Liquidation Proceeds under the priority scheme dictated in

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chapter 7; and (c) compare each Holders Liquidation Distribution to the distribution under the Plan (Plan Distribution) that such Holder would receive if the Plan were Confirmed and consummated. To assist the Bankruptcy Court in making the findings required under section 1129(a)(7), the Debtors management, together with KZC Services, LLC, the Debtors restructuring consultants, and Lazard Frres & Co. LLC, the Debtors financial advisors, prepared the Liquidation Analysis attached as Appendix C hereto. The Debtors believe that in liquidation under chapter 7, additional administrative expenses involved in the appointment of a trustee and attorneys, accountants, and other professionals to assist such trustee, along with decreased operational efficiencies, substantial likelihood of immediate customer resourcing of all programs and along with the increased wind-down costs associated with the breach of the Customer Agreement, would cause a substantial diminution in the value of the estates and the amounts available for distribution to creditors. Specifically, in a liquidation under chapter 7, there would be no recovery for unsecured creditors classified in Classes 4, 5, 6, and 7 under the Plan. As made clear by the Liquidation Analysis, the proceeds of a liquidation would not surpass amounts owed on account of the Prepetition Facility Claims. Because all proceeds of any liquidation would be subject to the liens and security interests of the Holders of the Prepetition Facility Claims, nothing would be left for unsecured creditors. The recovery under the Plan provided to Classes 4, 5, 6, and 7 is provided only because the acceptance of the Plan by Class 3, Prepetition Facility Claims, permits such recovery pursuant to certain provisions of chapter 11 of the Bankruptcy Code, which provisions would not be applicable in a chapter 7 proceeding. The Liquidation Analysis further demonstrates that the Holders of Prepetition Facility Claims would receive considerably less in a chapter 7 liquidation.

E.

Acceptance by Impaired Classes

The Bankruptcy Code also requires, as a condition to confirmation, that each class of claims or equity interests that is impaired under a plan accept the plan, with the exception described in the following section. A class that is not impaired under a plan of reorganization is deemed to have accepted the plan and, therefore, solicitation of acceptances with respect to such class is not required. A class is impaired unless the plan (1) leaves unaltered the legal, equitable and contractual rights to which the claim or equity interest entitles the holder of such claim or equity interest or (2) cures any default and reinstates the original terms of the obligation. Section 1126(c) of the Bankruptcy Code defines acceptance of a plan by a class of impaired claims as acceptance by holders of at least two-thirds in dollar amount and more than one-half in number of claims in that class, but for that purpose counts only those who actually vote to accept or to reject the plan. Thus, a class of claims will have voted to accept the plan only if two-thirds in amount and a majority in number actually voting cast their ballots in favor of acceptance. Under section 1126(d) of the Bankruptcy Code, a class of equity interests has accepted the plan if holders of such equity interests holding at least two-thirds in amount actually voting have voted to accept the plan.

F.

Confirmation without Acceptance by All Impaired Classes

Section 1129(b) of the Bankruptcy Code allows a bankruptcy court to confirm a plan, even if such plan has not been accepted by all impaired classes entitled to vote on such plan; provided that such plan has been accepted by at least one impaired class. Section 1129(b) of the Bankruptcy Code states that notwithstanding the failure of an impaired class to accept a plan of reorganization, the plan shall be confirmed, on request of the proponent of the plan, in a procedure commonly known as cram-down, so long as the plan does not discriminate unfairly and is fair and equitable with respect to each class of claims or equity interests that is impaired under, and has not accepted, the plan. In general, a plan does not discriminate unfairly if it provides a treatment to the class that is substantially equivalent to the treatment that is provided to other classes that have equal rank. In determining whether a plan discriminates unfairly, courts will take into account a number of factors. Accordingly, two classes of Holders of Unsecured Claims could be treated differently without unfairly discriminating against either class.

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The condition that a plan be fair and equitable with respect to a non-accepting class of secured claims includes the requirements that: (1) the holders of such secured claims retain the liens securing such claims to the extent of the allowed amount of the secured claims, whether the property subject to the liens is retained by the debtor or transferred to another entity under the plan; and (2) each holder of a secured claim in the class receives deferred cash payments totaling at least the allowed amount of such claim with a present value, as of the effective date of the debtors plan, at least equivalent to the value of the secured claimants interest in the debtors property subject to the liens. The condition that a plan be fair and equitable with respect to a non-accepting class of unsecured claims includes the requirement that either: (1) the plan provides that each holder of a claim of such class receive or retain on account of such claim property of a value, as of the Effective Date, equal to the allowed amount of such claim; or (2) the holder of any claim or equity interest that is junior to the claims of such class will not receive or retain any property under the plan on account of such junior claim or equity interest. The condition that a plan be fair and equitable with respect to a non-accepting class of equity interests includes the requirements that either: (1) the plan provide that each holder of an equity interest in such class receive or retain under the plan, on account of such equity interest, property of a value, as of the Effective Date, equal to the greater of (a) the allowed amount of any fixed liquidation preference to which such holder is entitled, (b) any fixed redemption price to which such holder is entitled or (c) the value of such interest; or (2) if the class does not receive such an amount as required under (1), no class of equity interests junior to the non-accepting class may receive a distribution under the plan. The Debtors shall seek Confirmation of the Plan pursuant to section 1129(b) of the Bankruptcy Code with respect to any Impaired Class, as applicable, presumed to reject the Plan, and the Debtors reserve the right to do so with respect to any other rejecting Class of Claims or Equity Interests, as applicable, or to modify the Plan. Section 1129(a)(10) of the Bankruptcy Code shall be satisfied for purposes of Confirmation by acceptance of the Plan by at least one Class that is Impaired under the Plan. The Debtors submit that if the Debtors cram-down the Plan pursuant to Section 1129(b) of the Bankruptcy Code, the Plan will be structured such that it does not discriminate unfairly and satisfies the fair and equitable requirement. With respect to the unfair discrimination requirement, all Classes under the Plan are provided treatment that is substantially equivalent to the treatment that is provided to other Classes that have equal rank. If the Debtors seek to cram-down the Plan on Holders of Secured Claims, all such Holders shall receive a distribution that satisfies the fair and equitable requirement. With respect to fair and equitable requirement with respect to Holders of Unsecured Claims, such Holders will not receive a distribution equal to the Allowed amount of their Claims, but no junior Claim or Equity Interest receives any distribution under the Plan. Holders of Equity Interests will receive no distribution under the Plan, but there is no junior Claim or Equity Interest that will receive any distribution under the Plan either. Therefore, the requirements of section 1129(b) of the Bankruptcy Code would be satisfied in the event that the Debtors are required to cram down.

ARTICLE VII.
CERTAIN FACTORS TO BE CONSIDERED PRIOR TO VOTING HOLDERS OF CLAIMS AND EQUITY INTERESTS SHOULD READ AND CONSIDER CAREFULLY THE FACTORS SET FORTH BELOW, AS WELL AS THE OTHER INFORMATION SET FORTH IN THIS DISCLOSURE STATEMENT AND THE DOCUMENTS DELIVERED TOGETHER HEREWITH, REFERRED TO OR INCORPORATED BY REFERENCE HEREIN, PRIOR TO VOTING TO ACCEPT OR REJECT THE PLAN. THESE FACTORS SHOULD NOT, HOWEVER, BE REGARDED AS CONSTITUTING THE ONLY RISKS INVOLVED IN CONNECTION WITH THE PLAN AND ITS IMPLEMENTATION.

A.

Certain Bankruptcy Considerations

1.

The Debtors May Not Be Able to Obtain Confirmation of the Plan

The Debtors cannot ensure that they will receive the requisite acceptances to confirm the Plan. Even if the Debtors receive the requisite acceptances, the Debtors cannot ensure that the Bankruptcy Court will confirm the Plan. A non-accepting Holder of Claims or Equity Interests might challenge the adequacy of this Disclosure Statement or the balloting procedures and results as not being in compliance with the Bankruptcy Code or Bankruptcy Rules. Even if the 67
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Bankruptcy Court determined that this Disclosure Statement and the balloting procedures and results were appropriate, the Bankruptcy Court could still decline to confirm the Plan if it found that any of the statutory requirements for Confirmation had not been met, including that the terms of the Plan are fair and equitable to non-accepting Classes. Section 1129 of the Bankruptcy Code sets forth the requirements for confirmation and requires, among other things: (a) a finding by the Bankruptcy Court that the Plan does not unfairly discriminate and is fair and equitable with respect to any non-accepting Classes; (b) Confirmation of the Plan is not likely to be followed by a liquidation, unless such liquidation is proposed in the plan, or a need for further financial reorganization; and (c) the value of distributions to non-accepting Holders of Claims and Equity Interests within a particular Class under the Plan will not be less than the value of distributions such Holders would receive if the Debtors were liquidated under chapter 7 of the Bankruptcy Code.

2.

The Bankruptcy Court May Not Approve the Compromises and Settlements Contemplated by the Plan, Including for Substantive Consolidation Purposes

As described in more detail in Article V.I.1 herein, the Plan constitutes a settlement, compromise and release, including for substantive consolidation purposes, of rights arising from or relating to the allowance, classification and treatment of all Allowed Claims and Allowed Equity Interests and their respective distributions and treatments hereunder take into account for and conform to the relative priority and rights of the Claims and Equity Interests in each Class in connection with any contractual, legal and equitable subordination rights relating thereto whether arising under general principles of equitable subordination, section 510(b) and (c) of the Bankruptcy Code, substantive consolidation or otherwise. This settlement, compromise and release requires approval by the Bankruptcy Court in the Confirmation Order. The Debtors cannot ensure that the Bankruptcy Court will approve of the settlement described in Article XII.A of the Plan.

3.

Parties in Interest May Object to the Debtors Classification of Claims

Section 1122 of the Bankruptcy Code provides that a chapter 11 plan of reorganization may place a claim or an equity interest in a particular class only if such claim or equity interest is substantially similar to the other claims or equity interests in such class. The Debtors believe that the classification of Claims and Equity Interests under the Plan complies with the requirements set forth in the Bankruptcy Code. The Debtors believe that Claims that are subject to indentures, including the Senior Note Claims and the Senior Subordinated Note Claims are properly separated from each other and from General Unsecured Claims against the Debtors. Certain Holders of Claims may object to this.

4.

The Debtors May Object to the Amount or Secured or Priority Status of a Claim

The Debtors reserve the right to object to the amount or the secured or priority status of any Claim or Equity Interest. The estimates set forth in this Disclosure Statement cannot be relied on by any Holder of Claims or Equity Interest whose Claim or Equity Interest is subject to an objection. Any such Holder of a Claim or Equity Interest may not receive its specified share of the estimated distributions described in this Disclosure Statement.

5.

The Actual Allowed Amounts of Claims May Differ from the Estimated Claims and Adversely Affect the Percentage Recovery on Unsecured Claims

The estimated Claims set forth in this Disclosure Statement are based on various assumptions. Should one or more of the underlying assumptions ultimately prove to be incorrect, the actual amounts of Allowed Claims may differ significantly from the estimated amount of Allowed Claims contained herein. As a result, such differences may materially and adversely affect the recovery to Holders of such Claims under the Plan.

6.

Holders of Prepetition Facility Claims May Not Support the Plan

Pursuant to the Customer Agreement, the Agent for the Prepetition Lenders under the Prepetition Facility has consented to support the Plan so long as the Plan contains the claims treatment and releases set forth in the Plan Term Sheet appended to the Customer Agreement. In addition, the Steering Committee has consented to support the Plan so long as the plan contains the claims treatment and releases set forth in the Plan Term Sheet appended to the Customer Agreement. Nevertheless, the members of the Steering Committee are entitled to sell their Prepetition Facility Claims and, as a result, the composition of the Steering Committee may change and it could attempt to withdraw its consent. If either the Agent or the Steering Committee objects to the Plan, the Debtors cannot ensure that the Bankruptcy Court will confirm the Plan. 68
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7.

Administrative Expenses and Priority Claims May Exceed Expected Levels

Section 1129(a) of the Bankruptcy Code requires that, in order to confirm a chapter 11 plan, administrative expenses of the chapter 11 case and various classes of priority claims must be paid in cash in full, unless the respective holders of such expenses and claims agree to less favorable treatment. The Customer Agreement contemplates the use of cash collateral, to which the Agent has consented under the Customer Agreement, and the Steering Committee also has consented, to pay certain types and amounts of administrative expenses and priority claims so that the Plan can be confirmed. The Debtors currently expect that the amount of allowed administrative expenses and priority claims will not exceed such amounts, but there can be no assurance that such amounts will not be exceeded or, if such amounts are exceeded, that either (a) the Prepetition Lenders would agree to the use of a larger portion of their cash collateral to satisfy such expenses and claims or (b) claimants would consent to a less favorable treatment.

B.

Risks Relating to the Sale Process

1.

The Debtors May Be Unable to Close the Carpet & Acoustics Sale Transaction

The Debtors currently expect that the Sale Process will culminate in the consummation of a sale of its Carpet & Acoustics segment to a stalking horse or alternative purchaser with a higher and better offer. The Debtors will incur considerable cost and expense in connection with the sale process, and may ultimately be obligated to reimburse the outof-pocket expenses of a stalking horse or certain other potential purchasers. There are many factors outside of the Debtors control that will affect the Debtors ability to locate a stalking horse and consummate a sales transaction involving the Carpet & Acoustics segment on acceptable terms and conditions, including the ability of a stalking horse or an alternative purchaser to finance the transaction, the ability of the Debtors to obtain necessary consents to the sale or transfer of certain of their assets, the ability of the Debtors to obtain regulatory and other governmental approval of a transaction and the ability of the Debtors to negotiate a definitive agreement for the sale of the Carpet & Acoustics segment on acceptable terms. Moreover, it is possible that the Debtors may not be able to meet various closing conditions, and that either a stalking horse or an alternative purchaser would elect to cancel any asset purchase agreement as a result of these failures. The Debtors can provide no assurance that they will be successful in consummating a sale transaction involving the Carpet & Acoustics segment. If the Debtors are unable to successfully complete a sale of the Carpet & Acoustics segment and consummate a sale transaction of the Carpet & Acoustics segment, it could have a material adverse effect on the business, financial condition and results of operations of the Debtors and the value of the Debtors Estates. Additionally, the Debtors may be obligated to reimburse the out-of-pocket expenses of any stalking horse and certain potential purchasers regardless of whether a sale transaction is consummated, and such expenses could be significant.

2.

Expenses of Wind-Down Greater than Anticipated or Default by OEMs under Customer Agreement

The Debtors cannot ensure that the expenses of the wind-down of their non-salable businesses for which the Debtors are responsible will not be greater than the proceeds realized in the Sale Process. In addition, the Customer Agreement and the Plan contemplate the segregation of sale proceeds from the Sale Process from certain of the expenses of the Sale Process for which the OEMs are obligated pursuant to the Customer Agreement. The Debtors cannot ensure that the OEMs will not default on these obligations or otherwise shift these expenses to the Debtors, including by filing for bankruptcy protection. In addition, there are significant factors outside the Debtors control that may lead to the unenforceability of the Customer Agreement or inability to effectuate the Customer Agreement. If the OEMs default on their obligations under the Customer Agreement or otherwise shift expenses to the Debtors, it could have a material adverse effect on the business, financial condition and results of operations of the Debtors and the value of the Debtors Estates.

3.

Failure to Obtain Approval of the Customer Agreement

The Debtors cannot ensure that the Customer Agreement will be approved by the Bankruptcy Court on a final basis. Although the Debtors believe that the Customer Agreement satisfies the standards required for approval of agreements by the Bankruptcy Court and the parties to the Customer Agreement are contractually bound not to object to approval, other parties in interest in the Chapter 11 Cases may object and the Bankruptcy Court may sustain those objections. If the Bankruptcy Court does not approve the Customer Agreement on a final basis, it could have a material

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adverse effect on the business, financial condition and results of operations of the Debtors and the value of the Debtors Estates.

C.

Other Risks

1.

The Litigation Trust May Not Realize Any Recovery

Although certain assets will be transferred to the Litigation Trust, including the Litigation Trust Claims and $3 million to pursue the Litigation Trust Claims, there is no guarantee that the Litigation Trust will realize a recovery on the Litigation Trust Claims or that such recoveries will exceed the $3 million that must be reimbursed to the Post-Consummation Trust. The Litigation Trust Claims are contingent and unliquidated, and the prosecution of the Litigation Trust Claims may be vigorously defended.

D.

Liquidation under Chapter 7

If no plan of reorganization can be confirmed, the Debtors Chapter 11 Cases may be converted to cases under chapter 7 of the Bankruptcy Code in which a trustee would be elected or appointed to liquidate the assets of the Debtors for distribution to the holders of Claims and, if permitted, Equity Interests in accordance with the priorities established by the Bankruptcy Code. A discussion of the effect that a chapter 7 liquidation would have on the recovery of Holders of Allowed Claims and Allowed Equity Interests is set forth in Article VI.C herein. THESE RISK FACTORS CONTAIN CERTAIN STATEMENTS THAT ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. WORDS SUCH AS EXPECT, PLANS, ANTICIPATES, INDICATES, BELIEVES, FORECAST, GUIDANCE, OUTLOOK AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARDLOOKING STATEMENTS. ADDITIONALLY, FORWARD-LOOKING STATEMENTS INCLUDE STATEMENTS WHICH DO NOT RELATE SOLELY TO HISTORICAL FACTS, SUCH AS STATEMENTS WHICH IDENTIFY UNCERTAINTIES OR TRENDS, DISCUSS THE POSSIBLE FUTURE EFFECTS OF CURRENT KNOWN TRENDS OR UNCERTAINTIES OR WHICH INDICATE THAT THE FUTURE EFFECTS OF KNOWN TRENDS OR UNCERTAINTIES CANNOT BE PREDICTED, GUARANTEED OR ASSURED. THESE STATEMENTS ARE SUBJECT TO A NUMBER OF ASSUMPTIONS, RISKS AND UNCERTAINTIES, MANY OF WHICH ARE BEYOND THE CONTROL OF THE DEBTORS, INCLUDING, WITHOUT LIMITATION, THOSE DESCRIBED ELSEWHERE IN THIS DISCLOSURE STATEMENT, THE IMPLEMENTATION OF THE PLAN, THE CONTINUING AVAILABILITY OF SUFFICIENT BORROWING CAPACITY OR OTHER FINANCING TO FUND OPERATIONS, THE CLOSING OF SALE TRANSACTIONS, THE ABILITY OF THE DEBTORS TO SUCCESSFULLY NEGOTIATE A DEFINITIVE AGREEMENT FOR THE SALE OF THE CARPET & ACOUSTICS SEGMENT, NATURAL DISASTERS AND UNUSUAL WEATHER CONDITIONS, TERRORIST ACTIONS OR ACTS OF WAR, ACTIONS OF GOVERNMENTAL BODIES, AND OTHER MARKET AND COMPETITIVE CONDITIONS. HOLDERS OF CLAIMS AND EQUITY INTERESTS ARE CAUTIONED THAT THE FORWARDLOOKING STATEMENTS SPEAK AS OF THE DATE MADE AND ARE NOT GUARANTEES OF FUTURE PERFORMANCE. ACTUAL RESULTS OR DEVELOPMENTS MAY DIFFER MATERIALLY FROM THE EXPECTATIONS EXPRESSED OR IMPLIED IN THE FORWARD-LOOKING STATEMENTS, AND THE DEBTORS UNDERTAKE NO OBLIGATION TO UPDATE ANY SUCH STATEMENTS. ADDITIONAL RISKS AND UNCERTAINTIES NOT PRESENTLY KNOWN TO THE DEBTORS OR THAT THE DEBTORS CURRENTLY BELIEVE TO BE IMMATERIAL MAY ALSO IMPAIR THE DEBTORS BUSINESS, FINANCIAL CONDITION, RESULTS OF OPERATIONS AND THE VALUE OF THE DEBTORS ESTATE. IF ANY OF THE RISKS OCCUR, THE DEBTORS BUSINESS, FINANCIAL CONDITION, OPERATING RESULTS AND THE VALUE OF THE DEBTORS ESTATE, AS WELL AS THE DEBTORS ABILITY TO CONSUMMATE THE PLAN COULD BE MATERIALLY ADVERSELY AFFECTED.

ARTICLE VIII.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following discussion summarizes certain federal income tax consequences of the implementation of the Plan to the Debtors, and certain Holders of Claims. The following summary is based on the Internal Revenue Code of 1986, as amended (the Tax Code), Treasury Regulations promulgated thereunder (the Regulations), judicial decisions and published administrative rules and pronouncements of the Internal Revenue Service as in effect on the date 70
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hereof. Changes in such rules or new interpretations thereof may have retroactive effect and could significantly affect the federal income tax consequences described below. The federal income tax consequences of the Plan are complex and are subject to significant uncertainties. The Debtors have not requested and will not request a ruling from the Internal Revenue Service or an opinion of counsel with respect to any of the tax aspects of the Plan. Thus, no assurance can be given as to the interpretation that the Internal Revenue Service will adopt. In addition, this summary does not address foreign, state or local tax consequences of the Plan, nor does it purport to address the federal income tax consequences of the Plan to special classes of taxpayers (such as Persons who are related to the Debtors within the meaning of the Tax Code, foreign taxpayers, broker-dealers, banks, mutual funds, insurance companies, financial institutions, small business investment companies, regulated investment companies, tax exempt organizations, investors in pass-through entities and the Holders of Claims who are themselves in bankruptcy). Furthermore, this discussion assumes that Holders of Claims hold only Claims in a single Class. Holders of Claims should consult their own tax advisors as to the effect such ownership may have on the federal income tax consequences described below. This discussion assumes that, except as recharacterized by an Order of the Bankruptcy Court, the various debt and other arrangements to which the Debtors are a party will be respected for federal income tax purposes in accordance with their form. ACCORDINGLY, THE FOLLOWING SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT A SUBSTITUTE FOR CAREFUL TAX PLANNING AND ADVICE BASED UPON THE INDIVIDUAL CIRCUMSTANCES PERTAINING TO A HOLDER OF A CLAIM. ALL HOLDERS OF CLAIMS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS FOR THE FEDERAL, STATE, LOCAL AND OTHER TAX CONSEQUENCES APPLICABLE UNDER THE PLAN. INTERNAL REVENUE SERVICE CIRCULAR 230 DISCLOSURE: TO ENSURE COMPLIANCE WITH REQUIREMENTS IMPOSED BY THE UNITED STATE INTERNAL REVENUE SERVICE, ANY TAX ADVICE CONTAINED IN THIS DISCLOSURE STATEMENT (INCLUDING ANY ATTACHMENTS) IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING TAX-RELATED PENALTIES UNDER THE TAX CODE. TAX ADVICE CONTAINED IN THIS DISCLOSURE STATEMENT (INCLUDING ANY ATTACHMENTS) IS NOT WRITTEN TO SUPPORT THE PROMOTION, MARKETING OR RECOMMENDATION TO ANOTHER PARTY OF THE TRANSACTIONS OR MATTERS ADDRESSED BY THIS DISCLOSURE STATEMENT. EACH TAXPAYER SHOULD SEEK ADVICE BASED ON THE TAXPAYERS PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.

A.

Certain United States Federal Income Tax Consequences to the Debtors

Under the Plan, the Debtors are transferring substantially all their remaining assets to the Post Consummation Trust and the Litigation Trust. These transfers of assets may result in the recognition of taxable gain or loss to the Debtors, based on the difference between the fair market value of these assets and the Debtors tax basis in these assets. To the extent that the Debtors realize gain from the transfer of these assets the Debtors believe that they will have sufficient operating losses and net operating losses to shelter these gains, although there could be some liability to the Debtors in certain states and under the federal alternative minimum tax.

B.

Certain United States Federal Income Tax Consequences to the Holders of Class 1 and Class 2 Claims

Pursuant to the Plan, Holders of Class 1 Other Secured Claims whose claims are not reinstated, and the Holders of Class 2 Other Priority Claims will receive in full satisfaction and discharge of their Claims either Cash or the Collateral securing their Claims. A Holder who receives Cash or Collateral in exchange for its Claim pursuant to the Plan generally will recognize income, gain or loss for federal income tax purposes in an amount equal to the difference between (1) the amount of Cash or the value of the Collateral received in exchange for its Claim and (2) the Holders adjusted tax basis in its Claim. The character of such gain or loss as capital gain or loss or as ordinary income or loss will be determined by a number of factors, including the tax status of the Holder, the nature of the Claim in such Holders hands, whether the Claim constitutes a capital asset in the hands of the Holder, whether the Claim was purchased at a discount and whether and to what extent the Holder has previously claimed a bad debt deduction with respect to its Claim. 71
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To the extent that any amount received by a Holder of a Claim is attributable to accrued interest, such amount should be taxable to the Holder as interest income. Conversely, a Holder of a Claim may be able to recognize a deductible loss (or, possibly, a write off against a reserve for worthless debts) to the extent that any accrued interest on the Claim was previously included in the Holders gross income but was not paid in full by the Debtors. Such loss may be ordinary, but the tax law is unclear on this point. The extent to which the consideration received by the Holder of a Claim will be attributable to accrued interest is unclear. Nevertheless, the Regulations generally treat a payment under a debt instrument first as a payment of accrued and untaxed interest and then as a payment of principal.

C.

Certain United States Federal Income Tax Consequences to the Holders of Class 3 Claims

Pursuant to the Plan, Holders of Class 3 Prepetition Facility Claims will receive, in full satisfaction and discharge of their Claims, Cash, Post-Consummation Trust Beneficial Interests, and Litigation Recovery Interests. The amount received, if any, under the Litigation Recovery Interests is contingent on the outcome of the Litigation Trust Claims placed into the Litigation Trust. The Holder should recognize gain or loss equal to the difference between (i) the sum of (a) the amount of Cash received and (b) the fair market value of both its Post-Consummation Trust Beneficial Interests and the Litigation Recovery Interests as of the Effective Date (to the extent such Cash, Post-Consummation Trust Beneficial Interests, and Litigation Recovery Interests are not allocable to accrued interest) and (2) the Holders tax basis in the Claims surrendered by the Holder. Such gain or loss should be capital in nature (subject to the market discount rules described below) and should be long term capital gain or loss if the Claims were held for more than one year by the Holder. To the extent that a portion of the Cash, Post-Consummation Trust Beneficial Interests, and Litigation Recovery Interests received in the exchange is allocable to accrued interest, the Holder may recognize ordinary income, which is addressed in the discussion below regarding accrued interest. A Holders tax basis in the Post-Consummation Trust Beneficial Interests and Litigation Recovery Interests received should equal their fair market value as of the Effective Date. A Holders holding period for the Post-Consummation Trust Beneficial Interests and the Litigation Recovery Interests should begin on the day following the Effective Date. It is plausible that a Holder could treat the transaction as an open transaction for tax purposes, in which case the recognition of any gain or loss on the transaction might be deferred pending the determination of the amount of the Litigation Recovery Interests received. The federal income tax consequences of an open transaction are uncertain and highly complex, and a Holder should consult with its own tax advisor if it believes open transaction treatment might be appropriate. To the extent that any amount received by a Holder of a Claim is attributable to accrued interest, such amount should be taxable to the Holder as interest income. Conversely, a Holder of a Claim may be able to recognize a deductible loss (or, possibly, a write off against a reserve for worthless debts) to the extent that any accrued interest on the Claims was previously included in the Holders gross income but was not paid in full by the Debtors. Such loss may be ordinary, but the tax law is unclear on this point. The extent to which the consideration received by a Holder of a Claim will be attributable to accrued interest is unclear. Nevertheless, the Regulations generally treat a payment under a debt instrument first as a payment of accrued and untaxed interest and then as a payment of principal. Under the market discount provisions of sections 1276 through 1278 of the Tax Code, some or all of the gain realized by a Holder of a Claim who exchanges the Claim for Cash, the Post-Consummation Trust Beneficial Interests and Litigation Recovery Interests on the Effective Date may be treated as ordinary income (instead of capital gain) to the extent of the amount of market discount on the Claim. In general, a debt instrument is considered to have been acquired with market discount if its holders adjusted tax basis in the debt instrument is less than (i) the sum of all remaining payments to be made on the debt instrument, excluding qualified stated interest, or (ii) in the case of a debt instrument issued with original issue discount, its adjusted issue price by at least a de minimis amount (equal to 0.25% of the sum of all remaining payments to be made on the Claim, excluding qualified stated interest, multiplied by the number of remaining whole years to maturity). Any gain recognized by a Holder on the taxable disposition of Claims that had been acquired with market discount should be treated as ordinary income to the extent of the market discount that accrued thereon while such

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Claims were considered to be held by the Holder (unless the Holder elected to include market discount in income as it accrued).

D.

Certain United States Federal Income Tax Consequences to the Holders of Class 5 Claims, Class 6 Claims and Class 7 Claims

Pursuant to the Plan, Holders of Class 5 General Unsecured Claims, Class 6 Senior Note Claims and PBGC Claims and Class 7 Senior Subordinated Note Claims will receive, in full satisfaction and discharge of their Claims, Litigation Recovery Interests. The amount received, if any, under the Litigation Recovery Interests is contingent on the outcome of the Litigation Trust Claims placed into the Litigation Trust. The Holder should recognize gain or loss equal to the difference between (1) the fair market value of the Litigation Recovery Interests as of the Effective Date received that is not allocable to accrued interest and (2) the Holders tax basis in the Claims surrendered by the Holder. Such gain or loss should be capital in nature (subject to the market discount rules described below) and should be long term capital gain or loss if the Claims were held for more than one year by the Holder. To the extent that a portion of the Litigation Recovery Interests received in the exchange is allocable to accrued interest, the Holder may recognize ordinary income, which is addressed in the discussion below regarding accrued interest. A Holders tax basis in the Litigation Recovery Interests received should equal their fair market value as of the Effective Date. A Holders holding period for the Litigation Recovery Interests should begin on the day following the Effective Date. It is plausible that a Holder could treat the transaction as an open transaction for tax purposes, in which case the recognition of any gain or loss on the transaction might be deferred pending the determination of the amount of the Litigation Recovery Interests received. The federal income tax consequences of an open transaction are uncertain and highly complex, and a Holder should consult with its own tax advisor if it believes open transaction treatment might be appropriate. To the extent that any amount received by a Holder of a Claim is attributable to accrued interest, such amount should be taxable to the Holder as interest income. Conversely, a Holder of a Claim may be able to recognize a deductible loss (or, possibly, a write off against a reserve for worthless debts) to the extent that any accrued interest on the Claims was previously included in the Holders gross income but was not paid in full by the Debtors. Such loss may be ordinary, but the tax law is unclear on this point. The extent to which the consideration received by a Holder of a Claim will be attributable to accrued interest is unclear. Nevertheless, the Regulations generally treat a payment under a debt instrument first as a payment of accrued and untaxed interest and then as a payment of principal. Under the market discount provisions of sections 1276 through 1278 of the Tax Code, some or all of the gain realized by a Holder of a Claim who exchanges the Claim for Litigation Recovery Interests or Cash on the Effective Date may be treated as ordinary income (instead of capital gain) to the extent of the amount of market discount on the Claim. In general, a debt instrument is considered to have been acquired with market discount if its holders adjusted tax basis in the debt instrument is less than (i) the sum of all remaining payments to be made on the debt instrument, excluding qualified stated interest, or (ii) in the case of a debt instrument issued with original issue discount, its adjusted issue price by at least a de minimis amount (equal to 0.25% of the sum of all remaining payments to be made on the Claim, excluding qualified stated interest, multiplied by the number of remaining whole years to maturity). Any gain recognized by a Holder on the taxable disposition of Claims that had been acquired with market discount should be treated as ordinary income to the extent of the market discount that accrued thereon while such Claims were considered to be held by the Holder (unless the Holder elected to include market discount in income as it accrued).

E.

Receipt of Interests in Post-Consummation Trust and in the Litigation Trust

On the Effective Date, the Post-Consummation Trust and the Litigation Trust shall be settled and are currently anticipated to exist as either grantor trusts or partnerships, in each case, for the benefit of certain creditors. Subject to definitive guidance from the IRS or a court of competent jurisdiction to the contrary (including the receipt of an adverse determination by the IRS upon audit if not contested by the Plan Administrator or the Litigation Trust Administrator), pursuant to Treasury Regulation Section 1.671-1(a) and/or Treasury Regulation Section 301.7701 4(d) and related regulations, the Plan Administrator and the Litigation Trust Administrator may designate and file returns for each of the 73
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Post-Consummation Trust and the Litigation Trust as a grantor trust and/or liquidating trust and therefore, for federal income tax purposes, the Post-Consummation Trusts and Litigation Trusts taxable income (or loss) should be allocated pro rata to its beneficiaries. The Plan Administrator and the Litigation Trust Administrator intend to take a position on Post-Consummation Trusts and Litigation Trusts tax return that the Post-Consummation Trust and the Litigation Trust, respectively, should each be treated as a grantor trust set up for the benefit of creditors. Holders of Claims that receive a beneficial interest in the Post-Consummation Trust and in the Litigation Trust will be required to report on their U.S. federal income tax returns their share of the Post-Consummation Trusts and the Litigation Trusts items of income, gain, loss, deduction and credit in the year recognized by the Post-Consummation Trust and the Litigation Trust, respectively, whether or not each of the Post-Consummation Trust and the Litigation Trust is taxed as a partnership or a grantor trust. This requirement may result in Holders being subject to tax on their allocable share of the Post-Consummation Trusts and the Litigation Trusts taxable income prior to receiving any cash distributions from the Post-Consummation Trust and the Litigation Trust. In general, holders of interest in the PostConsummation Trust and in the Litigation Trust will not be subject to tax on their receipt of distributions from the trust. Any Post-Consummation Trust Assets and Litigation Trust Assets held by the Post-Consummation Trust and the Litigation Trust on account of Disputed Claims shall be treated as held in trust by the Post-Consummation Trust and the Litigation Trust as fiduciary for the benefit of the holders of Disputed Claims (each a Disputed Claims Reserve). Under section 468B(g) of the Tax Code, amounts earned by an escrow account, settlement fund or similar fund must be subject to current tax. Although certain Treasury Regulations have been issued under this section, no Treasury Regulations have as yet been promulgated to address the tax treatment of such accounts in a bankruptcy setting. Thus, depending on the facts of a particular situation, such an account could be treated as a separately taxable trust, as a grantor trust treated as owned by the holders of disputed claims or by the Debtor (or, if applicable, any of its successors), or otherwise. On February 1, 1999, the IRS issued proposed Treasury Regulations that, if finalized in their current form, would specify the tax treatment of reserves of the type here involved that are established after the date such Treasury Regulations become final. In general, such Treasury Regulations would tax such a reserve as a qualified settlement fund under Treasury Regulation sections 1.468B-1 et seq. and thus subject to a separate entity level tax. As to previously established escrows and the like, such Treasury Regulations would provide that the IRS would not challenge any reasonably, consistently applied method of taxation for income earned by the escrow or account, and any reasonably, consistently applied method for reporting such income. Absent definitive guidance from the IRS or a court of competent jurisdiction to the contrary, the PostConsummation Trust and the Litigation Trust shall (i) treat each Disputed Claims Reserve as a discrete trust for federal income tax purposes, consisting of separate and independent shares to be established in respect of each disputed claim in the class of claims to which such reserve relates, in accordance with the trust provisions of Code, and (ii) to the extent permitted by applicable law, report consistently for state and local income tax purposes. In addition, pursuant to the Plan, all parties shall report consistently with such treatment. Accordingly, subject to issuance of definitive guidance, the Post-Consummation Trust and the Litigation Trust, in each case as fiduciary for Holders of Disputed Claims, will report as subject to a separate entity level tax any amounts earned by their respective Disputed Claims Reserves, except to the extent such earnings are distributed by such fiduciary during the same taxable year. In such event, any amount earned by a Disputed Claims Reserve that is distributed to a holder during the same taxable year will be includible in such holders gross income. Distributions from a Disputed Claims Reserve will be made to Holders of Disputed Claims when such claims are subsequently Allowed and to Holders of previously Allowed claims when any Disputed Claims are subsequently disallowed. Such distributions (other than amounts attributable to earnings) should be taxable to the recipient in accordance with the principles discussed above. Holders of Claims are urged to consult their tax advisors regarding the tax consequences of the right to receive and of the receipt (if any) of property from the Post-Consummation Trust and/or the Litigation Trust and each Holder of a Disputed Claim is urged to consult its tax advisor regarding the potential tax treatment of the Disputed Claim Reserve, distributions therefrom, and any tax consequences to such Holder relating thereto.

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THE FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN ARE COMPLEX. THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE RELEVANT TO A PARTICULAR HOLDER IN LIGHT OF SUCH HOLDERS CIRCUMSTANCES AND INCOME TAX SITUATION. ALL HOLDERS OF CLAIMS OR EQUITY INTERESTS SHOULD CONSULT WITH THEIR TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE TRANSACTION CONTEMPLATED BY THE PLAN, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS AND OF ANY CHANGE IN APPLICABLE TAX LAWS.

ARTICLE IX.
VOTING INSTRUCTIONS The following is a brief summary regarding voting on the Plan. Holders of Claims and Equity Interests are encouraged to review the relevant provisions of the Bankruptcy Code and to consult their own attorneys. Additional information regarding voting procedures is set forth in the Solicitation Notice accompanying this Disclosure Statement. Pursuant to order dated [Month/Day], 2007 [Docket No. ] (the Solicitation Procedures Order), the Bankruptcy Court approved the Debtors Motion for Order Approving Debtors Disclosure Statement and Relief Related Thereto [Docket No. ] (the Solicitation Procedures Motion) and the Solicitation Procedures (the Solicitation Procedures) attached thereto. Capitalized terms used in the Article IX that are not otherwise defined herein shall have the meaning assigned to such terms in the Solicitation Procedures Motion and documents filed therewith. THE DEBTORS BELIEVE THAT THE PLAN IS IN THE BEST INTEREST OF ALL OF THEIR CREDITORS. THE DEBTORS RECOMMEND THAT ALL HOLDERS OF CLAIMS AGAINST THE DEBTORS WHOSE VOTES ARE BEING SOLICITED SUBMIT BALLOTS TO ACCEPT THE PLAN.

A.

Voting Record Date

The Bankruptcy Court has approved __________, 2007 at 5:00 p.m. prevailing Pacific Time as the record date (the Voting Record Date) for purposes of determining which creditors are entitled to vote on the Plan.

B.

Voting Deadline

The Bankruptcy Court has approved __________, 2007 at 5:00 p.m. prevailing Pacific Time, as the voting deadline (the Voting Deadline) for delivering Ballots and Master Ballots with respect to the Plan. The Debtors may extend the Voting Deadline without further order of the Court, provided the Debtors shall be documented in the Voting Report (as defined below). To be counted as votes to accept or reject the Plan, all Ballots and Master Ballots must be properly executed, completed and delivered by: (1) first class mail; (2) overnight courier; or (3) personal delivery so that they are actually received no later than the Voting Deadline by the Debtors solicitation agent, Kurtzman Carson Consultants LLC (the Solicitation Agent) at the following address: Collins & Aikman Ballot Processing c/o Kurtzman Carson Consultants LLC 12910 Culver Boulevard, Suite I Los Angeles, California 90066

C.
claims:

Holders of Claims Entitled to Vote Only the following Holders of Claims in Classes 3, 4, 5, 6 and 7 shall be entitled to vote with regard to such (1) the holders of claims for which proofs of claim have been timely filed, as reflected on the official claims register, as of the close of business on the Voting Record Date, with the exception of those claims subject to a pending objection filed before the Voting Deadline, unless such claims are allowed for voting purposes pursuant to the procedures in Paragraph D.5 herein; provided that, to the extent that the Debtors have reached a settlement on a claim for which a proof of claim has

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been timely filed, the terms of such settlement shall govern for purposes of determining the holder of the claim and the amount of the claim; (2) the holders of claims that are listed in the Debtors Schedules, with the exception of those claims that are listed on the Schedules as contingent, disputed or unliquidated claims (excluding such claims on the Schedules that have been superseded by a timely-filed proof of claim); all entities that hold claims pursuant to an agreement or settlement with the Debtors executed prior to the Voting Record Date, as reflected in a court pleading, stipulation, agreement or other document filed with the Bankruptcy Court, in an order entered by the Bankruptcy Court or in a document executed by the Debtors pursuant to authority granted by the Bankruptcy Court, regardless of whether a proof of claim has been filed; and all entities identified by the Agent in a written list delivered to the Debtors as being holders of a Prepetition Facility Claim as of the Voting Record Date.

(3)

(4)

The assignee of a transferred and assigned claim shall be permitted to vote such claim only if the appropriate documentation of such transfer has been noted on the Bankruptcy Courts docket as of the close of business on the Voting Record Date. Only those beneficial owners of the Debtors public Indentures as reflected in the records maintained by The Depository Trust Company and/or the applicable indenture trustee as of the close of business on the Voting Record Date shall be entitled to vote claims based on such Indentures.

D.

Voting Procedures The following materials shall constitute the solicitation documents (collectively, the Solicitation Documents): (1) (2) (3) (4) the Solicitation Notice; the appropriate Ballot(s) and/or Master Ballot(s) and applicable Voting Instructions; a pre-addressed, postage pre-paid return envelope; the Disclosure Statement, as approved by the Bankruptcy Court (with all appendices thereto, including the Plan), the Plan Supplement and any other supplements or amendments to these documents that may be filed with the Bankruptcy Court; the Solicitation Procedures Order; the Solicitation Procedures; any supplemental Solicitation Documents the Debtors may file with the Bankruptcy Court or that the Bankruptcy Court orders to be made available; and a CD-Rom containing the documents listed in (d), (e), (f) and (g).

(5) (6) (7)

(8)

The Debtors will cause to be served on the Core Group (as defined in the First Amended Notice, Case Management and Administrative Procedures filed on June 9, 2005 [Docket No. 294]) all of the Solicitation Documents (as defined below), except the Plan Supplement. The Solicitation Notice will instruct the Core Group and the 2002 List that the Plan Supplement can be obtained by accessing the Debtors Website at http://www.kccllc.net/collinsaikman or by requesting a copy of such documents from the Debtors Solicitation Agent by writing to the Solicitation Agents Address or by telephone at (888) 201-2205. The Solicitation Agent will answer questions regarding the procedures and requirements for voting to accept or reject the Plan and for objecting to the Plan, provide additional copies of all materials and oversee the voting tabulation. 76
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The Solicitation Agent will also process and tabulate ballots for each Class entitled to vote to accept or reject the Plan at the following address. Collins & Aikman Solicitation c/o Kurtzman Carson Consultants LLC 12910 Culver Boulevard, Suite I Los Angeles, California 90066

E.

Tabulation of Votes

In tabulating votes, the following hierarchy shall be used to determine the claim amount associated with the vote of the holder of such claim: (1) the claim amount settled or agreed upon by the Debtors prior to the Voting Record Date, as reflected in a court pleading, stipulation, agreement or other document filed with the Bankruptcy Court, in an order entered by the Bankruptcy Court or in a document executed by the Debtors pursuant to authority granted by the Bankruptcy Court, regardless of whether a proof of claim has been filed; the claim amount allowed (temporarily or otherwise) pursuant to the procedures set forth in Paragraph D.5 herein; the claim amount contained on a proof of claim that has been [timely] filed (or deemed timely filed by the Bankruptcy Court); provided that Ballots cast by creditors whose claims are not listed on the Debtors Schedules, but who [timely] file proofs of claim in unliquidated or unknown amounts that are not the subject of an objection filed before the Voting Deadline, will count for satisfying the numerosity requirement of section 1126(c) of the Bankruptcy Code and will count as Ballots for claims in the amount of $1.00 solely for purposes of satisfying the dollar amount provisions of section 1126(c); the claim amount listed in the Debtors Schedules, provided that such claim is not scheduled as contingent, or unliquidated and has not been paid; if a claim holder identifies a claim amount on its Ballot that is less than the amount otherwise calculated in accordance with the tabulation procedures, the claim will be temporarily allowed for voting purposes in the lesser amount identified on such Ballot; and in the absence of any of the foregoing, zero.

(2)

(3)

(4)

(5)

(6)

The following voting procedures and standard assumptions shall be used in tabulating ballots: (1) Except as otherwise provided herein, unless the Ballot or Master Ballot being furnished is timely submitted on or prior to the Voting Deadline, the Debtors shall reject such Ballot or Master Ballot as invalid and, therefore, decline to count it in connection with confirmation of the Plan. The Solicitation Agent will date and time-stamp all Ballots and Master Ballots when received. In accordance with Local Rule 3018-1, on or before the date of the Confirmation Hearing, the Debtors shall file with the Bankruptcy Court a verified summary of the ballot count in accordance with section 1126(c), (d) of the Bankruptcy Code (the Voting Report). The Voting Report shall detail any defective, irregular or otherwise invalid Ballots and Master Ballots that were waived by the Debtors or were not waived and, therefore, not counted by the Debtors. To relieve the Office of the Clerk of the Court of the heavy administrative burden associated with filing all original ballots with the Bankruptcy Court in accordance with Local Rule 3018-1, the Solicitation Agent will retain an electronic copy of the original Ballots and Master Ballots for a period of one year after the Effective Date of the Plan, unless otherwise ordered by the Bankruptcy Court. 77
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(2) (3)

(4)

The method of delivery of Ballots or Master Ballots to be sent to the Solicitation Agent is at the election and risk of each holder of a claim entitled to vote but, except as otherwise provided in the Solicitation Order, such delivery will be deemed made only when the original executed Ballot or Master Ballot is actually received by the Solicitation Agent. An original executed Ballot or Master Ballot is required. Delivery of a Ballot or Master Ballot to the Solicitation Agent by facsimile, email or any other electronic means will not be valid. No Ballot or Master Ballot should be sent to any of the Debtors, their agents (other than the Solicitation Agent), any indenture trustee (unless specifically instructed to do so) or the Debtors financial or legal advisors and, if so sent, will not be counted. If multiple Ballots or Master Ballots are received from the same holder of a claim with respect to the same claims prior to the Voting Deadline, the last Ballot or Master Ballot timely received will be deemed to reflect that voters intent and will supersede and revoke any prior Ballot or Master Ballot with respect to the same claim. Creditors holding claims in a class that is designated as impaired and entitled to vote under the Plan shall receive only the Ballot appropriate for that impaired class. To avoid duplication and reduce expenses, creditors who have filed duplicate claims in any given class shall be entitled to receive only one Ballot for voting their claims with respect to that class.4 Holders of claims must vote all of their claims within a particular class either to accept or reject the Plan and may not split their vote. Accordingly, a Ballot that partially rejects and partially accepts the Plan (or any portion of a Master Ballot reflecting a Ballot that partially rejects and partially accepts the Plan) will not be counted. If a Ballot or Master Ballot is signed by trustees, executors, administrators, guardians, attorneysin-fact, officers of corporations or others acting in a fiduciary or representative capacity on holders or Beneficial Holders behalf, such entities must indicate such capacity when signing and, if required or requested by the applicable Nominee or its agent, the Solicitation Agent, the Debtors or the Bankruptcy Court, must submit proper evidence to the requesting party to so act on behalf of such holder or Beneficial Holder. The Debtors, subject to contrary order of the Bankruptcy Court, may waive any defects or irregularities as to any Ballot or Master Ballot at any time, either before or after the close of voting and any such waivers shall be documented in the Voting Report. Neither the Debtors, nor any other entity, will be under any duty to provide notification of defects or irregularities with respect to delivered Ballots and Master Ballots other than as provided in the Voting Report, nor will any of them incur any liability for failure to provide such notification. Unless waived or as ordered by the Bankruptcy Court, any defect or irregularity in connection with the delivery of a Ballot or Master Ballot must be cured prior to the Voting Deadline or such Ballot or Master Ballot will not be counted. If a designation of lack of good faith is requested by a party-in-interest under section 1126(e) of the Bankruptcy Code, such vote will be counted by the Debtors unless otherwise ordered by the Bankruptcy Court in accordance with section 1126(e).

(5)

(6)

(7)

(8)

(9)

(10)

(11)

(12)

(13)

(14)

Attached as Exhibit K to the Solicitation Procedures Motion is a list of all multi-debtor claims that will receive only one Ballot for their identical claims asserted in the same class of the Plan for purposes of this instruction.

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(15)

Subject to any contrary order of the Bankruptcy Court, the Debtors reserve the right to reject any Ballot or Master Ballot not in proper form, the acceptance of which, in the opinion of the Debtors, would not be in accordance with the provisions of the Bankruptcy Code or the Bankruptcy Rules and any such rejection will be documented in the Voting Report. If a claim is listed in the Schedules as being a non-priority claim (or is not listed in the Schedules) and a proof of claim is filed as a priority claim (in whole or in part), such claim will be temporarily allowed for voting purposes as a non-priority claim in an amount that such claim would have been so allowed in accordance with the other tabulation procedures had such proof of claim been filed as a non-priority claim. If a claim is listed in the Schedules as being an unsecured claim (or is not listed in the Schedules) and a proof of claim is filed as a secured claim (in whole or in part), such claim will be temporarily allowed for voting purposes as an unsecured claim in an amount that such claim would have been so allowed in accordance with the other tabulation procedures had such proof of claim being filed as an unsecured claim. If a claim has been allowed for voting purposes by order of the Bankruptcy Court, such claim shall be temporarily allowed for voting purposes only and not for purposes of allowance or distribution. If an objection to a claim is filed, such claim shall be treated in accordance with the procedures set forth in Paragraph D.5 herein. The following Ballots and Master Ballots shall not be counted in determining the acceptance or rejection of the Plan: (i) any Ballot or Master Ballot that is illegible or contains insufficient information to permit the identification of the creditor; (ii) any Ballot or Master Ballot cast by an entity that does not hold a claim in a class that is entitled to vote on the Plan; (iii) any Ballot or Master Ballot cast for a claim scheduled as contingent, unliquidated or disputed for which no proof of claim was timely filed; and (iv) any unsigned Ballot or Master Ballot.

(16)

(17)

(18)

(19)

(20)

In addition, the following additional procedures shall apply to Beneficial Holders Claims: (1) The Debtors shall cause to be served the appropriate number of copies of Ballots to each Beneficial Holder holding a claim as of the Voting Record Date, including Nominees identified by the Solicitation Agent as entities through which Beneficial Holders hold their claims relating to Indentures. Any Nominee that is a holder of record with respect to Indentures shall vote on behalf of Beneficial Holders of such Indentures by (i) immediately distributing the Solicitation Documents, including Ballots it receives from the Solicitation Agent to all such Beneficial Holders, (ii) promptly collecting Ballots from such Beneficial Holders that cast votes on the Plan, (iii) compiling and validating the votes and other relevant information of all such Beneficial Holders on the Master Ballot and (iv) transmitting the Master Ballot to the Solicitation Agent by the Voting Deadline. Any Beneficial Holder holding Indentures as a record holder in its own name should vote on the Plan by completing and signing a Ballot and returning it directly to the Solicitation Agent on or before the Voting Deadline. Any trustee (unless otherwise empowered to do so) will not be entitled to vote on behalf of the holders of Beneficial Holder Claims; rather, each such holder of a Beneficial Holder Claims must submit his or her own Ballot. Any Beneficial Holder holding Indentures in street name through a Nominee must vote on the Plan through such Nominee by completing and signing the Ballot and returning such Ballot to the appropriate Nominee as promptly as possible and in sufficient time to allow such Nominee to 79
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(2)

(3)

(4)

(5)

process the Ballot and return the Master Ballot to the Solicitation Agent prior to the Voting Deadline. Any Beneficial Holder holding Indentures in street name who submits a Ballot to the Solicitation Agent will not be counted. (6) Any Ballot returned to a Nominee by a Beneficial Holder will not be counted for purposes of accepting or rejecting the Plan until such Nominee properly completes and delivers to the Solicitation Agent a Master Ballot that reflects the vote of such Beneficial Holder by the Voting Deadline. Nominees shall retain all Ballots returned by Beneficial Holders for a period of one year after the Effective Date of the Plan. If a Beneficial Holder holds Indentures through more than one Nominee or through multiple accounts, such Beneficial Holder may receive more than one Ballot and each such Beneficial Holder should execute a separate Ballot for each block of Indentures that it holds through any Nominee and must return each such Ballot to the appropriate Nominee. If a Beneficial Holder holds a portion of its Indentures through a Nominee or Nominees and another portion in its own name as the record holder, such Beneficial Holder should follow the procedures described in Paragraph D.4.b.iii herein to vote the portion held in its own name and the procedures described in the rest of this Paragraph D.4.b herein to vote the portion held by all Nominees.

(7)

(8)

(9)

F.

Votes Required for Acceptance by a Class

The Classes entitled to vote shall have accepted the Plan if (1) the Holders of at least two-thirds in dollar amount of the Allowed Claims actually voting in each such Class, as applicable, have voted to accept the Plan and (2) the Holders of more than one-half in number of the Allowed Claims actually voting in each such Class, as applicable, have voted to accept the Plan. THE DEBTORS WILL SEEK CONFIRMATION OF THE PLAN UNDER SECTION 1129(B) OF THE BANKRUPTCY CODE WITH RESPECT TO ANY IMPAIRED CLASSES PRESUMED TO REJECT THE PLAN, AND THE DEBTORS RESERVE THE RIGHT TO DO SO WITH RESPECT TO ANY OTHER REJECTING CLASS OR TO MODIFY THE PLAN.

ARTICLE X.
RECOMMENDATION In the opinion of the Debtors, the Plan is preferable to the alternatives described herein because it provides for a larger distribution to the Holders of Claims than would otherwise result in a liquidation under Chapter 7 of the Bankruptcy Code. In addition, any alternative other than Confirmation of the Plan could result in extensive delays and increased administrative expenses resulting in smaller distributions to the Holders of Claims. Accordingly, the Debtors recommend that Holders of Claims entitled to vote on the Plan support Confirmation of the Plan and vote to accept the Plan.

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Respectfully Submitted,

COLLINS & AIKMAN CORPORATION (for itself and on behalf of its Debtor subsidiaries)

/s/ John R. Boken Name: John R. Boken Title: Chief Restructuring Officer

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APPENDIX 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

FIRST AMENDED JOINT PLAN OF COLLINS & AIKMAN CORPORATION AND ITS DEBTOR SUBSIDIARIES KIRKLAND & ELLIS LLP 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) Scott R. Zemnick (IL 6276224) 200 East Randolph Drive Chicago, Illinois 60601 Telephone: (312) 861-2000 Facsimile: (312) 861-2200 Co-Counsel for the Debtors
1

CARSON FISCHER, P.L.C. Joseph M. Fischer (P13452) Lawrence A. Lichtman (P35403) 4111 West Andover Road -- Second Floor Bloomfield Hills, Michigan 48302 Telephone: (248) 644-4840 Facsimile: (248) 644-1832 Co-Counsel for the Debtors

Dated: December 22, 2006

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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TABLE OF CONTENTS INTRODUCTION .........................................................................................................................................................1 ARTICLE I. DEFINED TERMS, RULES OF INTERPRETATION AND COMPUTATION OF TIME ..................1 A. Defined Terms ..................................................................................................................................1 1. 2. 3. 4. 5. 6. 7. 8. 9. Accrued Professional Compensation ....................................................................................1 Administrative Claim............................................................................................................1 Administrative Claims Bar Date Order.................................................................................1 Agent.....................................................................................................................................1 Allowed.................................................................................................................................1 Allowed . . . Claim ................................................................................................................2 Allowed Equity Interest ........................................................................................................2 Ballot.....................................................................................................................................2 Bankruptcy Code ..................................................................................................................2

10. Bankruptcy Court..................................................................................................................2 11. Bankruptcy Rules..................................................................................................................2 12. Bar Date ................................................................................................................................2 13. Bar Date Order......................................................................................................................2 14. Beneficial Holder ..................................................................................................................2 15. Beneficiaries .........................................................................................................................2 16. Business Day.........................................................................................................................2 17. Carve Out Account ...............................................................................................................2 18. Cash ......................................................................................................................................2 19. Cash Investment Yield..........................................................................................................2 20. Cash Management Order ......................................................................................................2 21. Cause of Action ....................................................................................................................2 22. Chapter 11 Case ....................................................................................................................3 23. Claim.....................................................................................................................................3 24. Claims Objection Bar Date ...................................................................................................3 25. Class......................................................................................................................................3 26. Confirmation.........................................................................................................................3 27. Confirmation Date ................................................................................................................3 28. Confirmation Hearing ...........................................................................................................3 29. Confirmation Order...............................................................................................................3 30. Consummation ......................................................................................................................3 31. Core Group ...........................................................................................................................3 32. Creditors Committee .............................................................................................................3 33. Cure Amount Claim..............................................................................................................3

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34. Customer Agreement ............................................................................................................3 35. Debtor ...................................................................................................................................3 36. Debtor Releasees...................................................................................................................3 37. Debtors..................................................................................................................................4 38. Deemed .................................................................................................................................4 39. Derivative Claim...................................................................................................................4 40. DIP Agent .............................................................................................................................4 41. DIP Credit Agreement ..........................................................................................................4 42. DIP Facility...........................................................................................................................4 43. DIP Facility Claims...............................................................................................................4 44. DIP Lenders ..........................................................................................................................4 45. Disbursing Agent ..................................................................................................................4 46. Disclosure Statement ............................................................................................................4 47. Disputed . . . Claim ...............................................................................................................4 48. Disputed Claims Reserve ......................................................................................................5 49. Distribution Record Date ......................................................................................................5 50. Document Reviewing Centers ..............................................................................................5 51. Effective Date .......................................................................................................................5 52. English Insolvency Law........................................................................................................5 53. Entity.....................................................................................................................................5 54. Equity Interest.......................................................................................................................5 55. Estate.....................................................................................................................................5 56. Estates ...................................................................................................................................5 57. European Debtors..................................................................................................................5 58. Exculpated Parties.................................................................................................................5 59. Executory Contract ...............................................................................................................5 60. Face Amount.........................................................................................................................5 61. Fee Claim..............................................................................................................................6 62. Fee Order ..............................................................................................................................6 63. File or Filed .......................................................................................................................6 64. Final Decree..........................................................................................................................6 65. Final DIP Order ....................................................................................................................6 66. Final Order............................................................................................................................6 67. General Unsecured Claims....................................................................................................6 68. Holder ...................................................................................................................................6 69. Impaired ................................................................................................................................6 70. Impaired Claim .....................................................................................................................6 ii
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71. Indenture Trustees.................................................................................................................7 72. Insured Claim........................................................................................................................7 73. Intercompany Claims ............................................................................................................7 74. July 8, 2005 Agreement ........................................................................................................7 75. KERP ....................................................................................................................................7 76. Litigation Recovery Interests ................................................................................................7 77. Litigation Trust .....................................................................................................................7 78. Litigation Trust Administrator ..............................................................................................7 79. Litigation Trust Agreement...................................................................................................7 80. Litigation Trust Assets..........................................................................................................7 81. Litigation Trust Claims .........................................................................................................7 82. Master Ballots .......................................................................................................................7 83. Nominee................................................................................................................................7 84. Non-Released Parties ............................................................................................................7 85. OEM Cap-Ex Claims ............................................................................................................7 86. OEM Claims .........................................................................................................................8 87. OEMs....................................................................................................................................8 88. OPEB Liability .....................................................................................................................8 89. Ordinary Course Professionals Order ...................................................................................8 90. Other Priority Claims ............................................................................................................8 91. Other Secured Claims ...........................................................................................................8 92. PBGC Claims........................................................................................................................8 93. Person ...................................................................................................................................8 94. Petition Date .........................................................................................................................8 95. Plan .......................................................................................................................................8 96. Plan Administrator ................................................................................................................9 97. Plan Objection Deadline .......................................................................................................9 98. Post-Consummation Trust.....................................................................................................9 99. Post-Consummation Trust Advisory Board ..........................................................................9 100. Post-Consummation Trust Agreement..................................................................................9 101. Post-Consummation Trust Assets .........................................................................................9 102. Post-Consummation Trust Beneficial Interests.....................................................................9 103. Post-Consummation Trust Budget ........................................................................................9 104. Prepetition Credit Agreement ...............................................................................................9 105. Prepetition Facility................................................................................................................9 106. Prepetition Facility Claims....................................................................................................9 107. Prepetition Facility Distribution............................................................................................9 iii
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108. Prepetition Lenders .............................................................................................................10 109. Priority Claims ....................................................................................................................10 110. Priority Tax Claims.............................................................................................................10 111. Pro Rata ..............................................................................................................................10 112. Professional.........................................................................................................................10 113. Professional Escrow Account .............................................................................................10 114. Quarterly Distribution Date ................................................................................................10 115. Releasing Parties.................................................................................................................10 116. Remaining Sales Transactions ............................................................................................10 117. Required Prepetition Lenders..............................................................................................10 118. Residual Assets ...................................................................................................................10 119. Restructuring Transactions .................................................................................................10 120. Schedules ............................................................................................................................10 121. Secondary Liability Claim ..................................................................................................10 122. Secured Claim.....................................................................................................................11 123. Securities Act ......................................................................................................................11 124. Senior Note Claims .............................................................................................................11 125. Senior Note Indenture .........................................................................................................11 126. Senior Note Indenture Trustee ............................................................................................11 127. Senior Notes........................................................................................................................11 128. Senior Subordinated Note Claims.......................................................................................11 129. Senior Subordinated Note Indenture...................................................................................11 130. Senior Subordinated Note Indenture Trustee ......................................................................11 131. Senior Subordinated Notes..................................................................................................11 132. Soft-Trim Sales Transaction ...............................................................................................11 133. Steering Committee ............................................................................................................11 134. Stipulation of Amount and Nature of Claim .......................................................................11 135. Subordinated Securities Claims ..........................................................................................12 136. Success Sharing Plan ..........................................................................................................12 137. Tax Note .............................................................................................................................12 138. Third Party Disbursing Agent .............................................................................................12 139. Tort Claim...........................................................................................................................12 140. Trusts ..................................................................................................................................12 141. Unexpired Lease .................................................................................................................12 142. Unimpaired .........................................................................................................................12 143. Uninsured Claim .................................................................................................................12 144. Unsecured Claims ...............................................................................................................12 iv
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145. Voting Deadline ..................................................................................................................12 146. Voting Instructions..............................................................................................................12 147. Wind-Down Expenses ........................................................................................................12 148. Workers Compensation Order ...........................................................................................12 B. Rules of Interpretation and Computation of Time ..........................................................................13 1. 2. Rules of Interpretation............................................................................................................13 Computation of Time .............................................................................................................13

ARTICLE II. CLASSES OF CLAIMS AND EQUITY INTERESTS ........................................................................13 A. Unimpaired Classes of Claims ........................................................................................................13 1. 2. B. Class 1 (Other Secured Claims)..............................................................................................13 Class 2 (Other Priority Claims) ..............................................................................................13

Impaired Classes of Claims and Equity Interests............................................................................13 1. 2. 3. 4. 5. 6. 7. 8. Class 3 (Prepetition Facility Claims)......................................................................................13 Class 4 (OEM Claims)............................................................................................................13 Class 5 (General Unsecured Claims)......................................................................................13 Class 6 (Senior Note Claims and PBGC Claims) ...................................................................13 Class 7 (Senior Subordinated Note Claims) ...........................................................................14 Class 8 (Equity Interests)........................................................................................................14 Class 9 (Subordinated Securities Claims)...............................................................................14 Class 10 (Intercompany Claims) ............................................................................................14

ARTICLE III. TREATMENT OF CLAIMS AND EQUITY INTERESTS................................................................14 A. Unclassified Claims ........................................................................................................................14 1. 2. B. Payment of Administrative Claims.........................................................................................14 Payment of Priority Tax Claims .............................................................................................16

Unimpaired Classes of Claims ........................................................................................................16 1. 2. Class 1 Claims (Other Secured Claims) .................................................................................16 Class 2 Claims (Other Priority Claims) ..................................................................................16

C.

Impaired Classes of Claims and Equity Interests............................................................................16 1. 2. 3. 4. 5. 6. 7. 8. Class 3 Claims (Prepetition Facility Claims)..........................................................................16 Class 4 Claims (OEM Claims) ...............................................................................................17 Class 5 Claims (General Unsecured Claims)..........................................................................17 Class 6 Claims (Senior Note Claims and PBGC Claims).......................................................17 Class 7 Claims (Senior Subordinated Note Claims) ...............................................................17 Class 8 Equity Interests (Equity Interests)..............................................................................17 Class 9 Claims (Subordinated Securities Claims) ..................................................................17 Class 10 Claims (Intercompany Claims) ................................................................................18

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D. E.

Special Provisions Regarding the Indenture Trustees Administrative Claims and Allowed Claims ..............................................................................................................................18 Special Provisions Regarding the Treatment of Allowed Secondary Liability Claims...................18

ARTICLE IV. MEANS FOR IMPLEMENTATION OF THE PLAN........................................................................18 A. B. Sale of Assets..................................................................................................................................18 The Post-Consummation Trust .......................................................................................................18 1. 2. 3. C. Establishment of the Post-Consummation Trust ....................................................................18 Funding Expenses of the Post-Consummation Trust..............................................................19 Appointment of the Plan Administrator .................................................................................19

The Litigation Trust ........................................................................................................................19 1. 2. 3. Establishment of the Litigation Trust .....................................................................................19 Funding Expenses of the Litigation Trust ..............................................................................19 Appointment of the Litigation Trust Administrator ...............................................................19

D. E.

Corporate Action.............................................................................................................................19 Preservation of Rights of Action.....................................................................................................20 1. 2. Maintenance of Causes of Action...........................................................................................20 Preservation of All Causes of Action Not Expressly Settled or Released ..............................21

F.

Certain Employee, Retiree and Workers Compensation Benefits .................................................21 1. 2. 3. 4. 5. Employee Benefits .................................................................................................................21 Retiree Medical Benefits ........................................................................................................21 Pension Plan ...........................................................................................................................22 Workers Compensation Benefits...........................................................................................22 Implementation of the KERP and Success Sharing Plan........................................................22

G. H. I. J. K.

Limitations on Amounts to Be Distributed to the Holders of Allowed Insured Claims..................22 Cancellation and Surrender of Instruments, Securities and Other Documentation .........................22 Creation of Professional Escrow Account ......................................................................................22 Release of Liens ..............................................................................................................................23 Effectuating Documents; Further Transactions; Exemption from Certain Transfer Taxes.............23

ARTICLE V. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES ..............................23 A. Executory Contracts and Unexpired Leases to Be Assumed or Assumed and Assigned................23 1. 2. 3. 4. B. C. D. Assumption and Assignment Generally .................................................................................23 Assumptions and Assignments of Executory Contracts and Unexpired Leases.....................23 Assignments Related to the Restructuring Transactions ........................................................23 Approval of Assumptions and Assignments...........................................................................24

Payments Related to the Assumption of Executory Contracts and Unexpired Leases....................24 Executory Contracts and Unexpired Leases to Be Rejected ...........................................................24 Bar Date for Rejection Damages.....................................................................................................24

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E. F. G.

Obligations to Indemnify Directors, Officers and Employees ........................................................25 Contracts and Leases Entered into After the Petition Date .............................................................25 Reservation of Rights......................................................................................................................25

ARTICLE VI. PROVISIONS GOVERNING DISTRIBUTIONS ..............................................................................25 A. B. C. D. Distributions for Claims Allowed as of the Effective Date.............................................................25 Method of Distributions to Holders of Claims................................................................................26 Compensation and Reimbursement for Services Related to Distributions......................................26 Delivery of Distributions and Undeliverable or Unclaimed Distributions......................................26 1. 2. E. F. G. Delivery of Distributions........................................................................................................26 Undeliverable Distributions Held by the Disbursing Agents .................................................26

Distribution Record Date ................................................................................................................27 Means of Cash Payments ................................................................................................................27 Timing and Calculation of Amounts to Be Distributed ..................................................................28 1. 2. 3. Allowed Claims......................................................................................................................28 De Minimis Distributions .......................................................................................................28 Compliance with Tax Requirements ......................................................................................28

H. I.

Setoffs .............................................................................................................................................28 Surrender of Canceled Instruments or Securities ............................................................................28 1. 2. 3. Tender of Senior Notes or Senior Subordinated Notes...........................................................29 Lost, Stolen, Mutilated or Destroyed Senior Notes or Senior Subordinated Notes ................29 Failure to Surrender Senior Notes or Senior Subordinated Notes ..........................................29

ARTICLE VII. PROCEDURES FOR RESOLVING DISPUTED CLAIMS..............................................................29 A. Prosecution of Objections to Claims...............................................................................................29 1. 2. B. C. Objections to Claims ..............................................................................................................29 Authority to Prosecute Objections..........................................................................................30

Treatment of the Disputed Claims ..................................................................................................30 Distributions on Account of the Disputed Claims Once Allowed...................................................30

ARTICLE VIII. THE POST-CONSUMMATION TRUST; THE PLAN ADMINISTRATOR .................................30 A. B. C. D. E. F. G. H. I. Generally.........................................................................................................................................30 Purpose of the Post-Consummation Trust.......................................................................................31 Transfer of Assets to the Post-Consummation Trust.......................................................................31 Distribution; Withholding ...............................................................................................................31 D&O Insurance ...............................................................................................................................32 Post-Consummation Trust Implementation ....................................................................................32 Disputed Claims Reserve ................................................................................................................32 Termination of the Post-Consummation Trust................................................................................32 Termination of the Plan Administrator ...........................................................................................32 vii
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J.

Exculpation; Indemnification..........................................................................................................32

ARTICLE IX. THE LITIGATION TRUST; THE LITIGATION TRUST ADMINISTRATOR ...............................33 A. B. C. D. E. F. G. H. I. J. Generally.........................................................................................................................................33 Purpose of the Litigation Trust .......................................................................................................33 Transfer of Assets to the Litigation Trust .......................................................................................33 Distribution; Withholding ...............................................................................................................33 D&O Insurance ...............................................................................................................................33 Litigation Trust Implementation .....................................................................................................34 Disputed Claims Reserve ................................................................................................................34 Termination of the Litigation Trust.................................................................................................34 Termination of the Litigation Trust Administrator .........................................................................34 Exculpation; Indemnification..........................................................................................................34

ARTICLE X. CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THE PLAN...35 A. B. C. D. Conditions to Confirmation ............................................................................................................35 Conditions Precedent to Consummation .........................................................................................35 Waiver of Conditions ......................................................................................................................36 Effect of Non-Occurrence of Conditions to Consummation...........................................................36

ARTICLE XI. CRAMDOWN .....................................................................................................................................36 ARTICLE XII. SETTLEMENT, RELEASE, INJUNCTION AND RELATED PROVISIONS ................................36 A. B. C. D. E. Compromise and Settlement ...........................................................................................................36 Releases by the Debtors ..................................................................................................................36 Third Party Releases .......................................................................................................................37 Exculpation .....................................................................................................................................38 Injunction ........................................................................................................................................38

ARTICLE XIII. RETENTION OF JURISDICTION ..................................................................................................39 ARTICLE XIV. MISCELLANEOUS PROVISIONS.................................................................................................40 A. B. C. D. E. F. G. H. Dissolution of the Creditors Committee..........................................................................................40 Modification of the Plan .................................................................................................................40 Revocation of the Plan ....................................................................................................................40 Severability of Plan Provisions .......................................................................................................40 Consultation ....................................................................................................................................41 Successors and Assigns...................................................................................................................41 Service of Certain Plan Exhibits and Disclosure Statement Exhibits .............................................41 Service of Documents .....................................................................................................................41

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TABLE OF EXHIBITS1 Exhibit A Exhibit B Exhibit C Exhibit D Nonexclusive List of the Retained Causes of Action2 Terms of the Post-Consummation Trust Agreement3 Terms of the Litigation Trust Agreement3 Employment and Other Agreements and Plans (that are in effect or will take effect as of the Effective Date)3 Schedule of the Executory Contracts and Unexpired Leases to Be Assumed and Assigned3 Nonexclusive Schedule of the Executory Contracts and Unexpired Leases to Be Rejected3 Terms of the Tax Note2 Customer Agreement2

Exhibit E Exhibit F Exhibit G Exhibit H

1 2 3

Except as otherwise indicated, all Exhibits will be available for review after they are Filed during regular business hours at the Document Reviewing Centers. To be Filed and available for review at the Document Reviewing Centers no later than ten days before the hearing on the Disclosure Statement. To be Filed and available for review at the Document Reviewing Centers no later than ten days before the Confirmation Hearing.

K&E 11547813.1

INTRODUCTION Collins & Aikman Corporation and the other Debtors propose the following Plan for the resolution of the outstanding claims against and equity interests in the Debtors. The Debtors are proponents of the Plan within the meaning of section 1129 of the Bankruptcy Code. Reference is made to the Debtors Disclosure Statement, filed contemporaneously with the Plan, for a discussion of the Debtors history, businesses, properties and for a summary and analysis of the Plan. There also are other agreements and documents, which are or will be filed with the Bankruptcy Court, that are referenced in the Plan or the Disclosure Statement and that will be available for review. ARTICLE I. DEFINED TERMS, RULES OF INTERPRETATION AND COMPUTATION OF TIME A. Defined Terms

As used in the Plan, capitalized terms have the meanings set forth below. Any capitalized term that is not otherwise defined herein, but that is used in the Bankruptcy Code or the Bankruptcy Rules, will have the meaning given to that term in the Bankruptcy Code or the Bankruptcy Rules, as applicable. 1. Accrued Professional Compensation means, at any time, all accrued fees and expenses (including, as applicable, success fees) for services rendered by all Professionals in the Chapter 11 Cases that the Bankruptcy Court has not denied by Final Order, to the extent such fees and expenses have not been paid, regardless of whether a fee application has been filed for such amount. To the extent a court denies by Final Order a Professionals fees or expenses, such amounts will no longer be considered Accrued Professional Compensation. 2. Administrative Claim means a Claim for costs and expenses of administration of the Chapter 11 Cases allowed under sections 503(b), 507(b) or 1114(e)(2) of the Bankruptcy Code, including: (a) the actual and necessary costs and expenses of preserving the respective Estates and operating the businesses of the Debtors (such as wages, salaries, commissions for services and payments for inventories, leased equipment and premises), including Claims under the DIP Credit Agreement, incurred after the Petition Date; (b) compensation for legal, financial advisory, accounting and other services rendered after the Petition Date, and reimbursement of expenses incurred in connection therewith, awarded or allowed under sections 330(a) or 331 of the Bankruptcy Code, including Fee Claims; and (c) all fees and charges assessed against the Estates under chapter 123 of title 28, United States Code, 28 U.S.C. 1911-1930. 3. Administrative Claims Bar Date Order means that certain order entered by the Bankruptcy Court establishing a bar date for filing requests for payment of Administrative Claims. 4. Agreement. Agent means JPMorgan Chase Bank, N.A., as administrative agent under the Prepetition Credit

5. Allowed means, with respect to Claims or Equity Interests, (a) any Claim against or Equity Interest in a Debtor, proof of which is timely Filed, or by order of the Bankruptcy Court is not or will not be required to be Filed, (b) any Claim that has been or is hereafter listed in the Schedules as neither contingent, unliquidated nor disputed, and for which no timely proof of Claim has been Filed or (c) any Claim or Equity Interest Allowed pursuant to the Plan; provided that, with respect to any Claim or Equity Interest described in clauses (a) or (b) above, such Claim or Equity Interest will be Allowed only if (1) no objection to the allowance thereof has been interposed within the applicable period of time fixed by the Plan, the Bankruptcy Code, the Bankruptcy Rules or the Bankruptcy Court or (2) such an objection is so interposed and the Claim or Equity Interest has been Allowed by a Final Order (but only if such allowance was not solely for the purpose of voting to accept or reject the Plan). Except as otherwise specified in the Plan or a Final Order of the Bankruptcy Court, the amount of an Allowed Claim will not include interest on such Claim from and after the Petition Date.

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6. Allowed . . . Claim means an Allowed Claim in the particular Class or category specified. Any reference herein to a particular Allowed Claim includes both the secured and unsecured portions of such Claim. 7. Allowed Equity Interest means an Allowed Equity Interest in Class 8.

8. Ballot means the form or forms distributed to each Holder of an Impaired Claim entitled to vote on the Plan on which the Holder indicates acceptance or rejection of the Plan or any election for treatment of such Claim under the Plan. 9. Bankruptcy Code means title 11 of the United States Code, 11 U.S.C. 101-1330, as now in effect or hereafter amended and, in each case, applicable to the Chapter 11 Cases. 10. Bankruptcy Court means the United States District Court having jurisdiction over the Chapter 11 Cases and, to the extent of any reference made pursuant to 28 U.S.C. 157, the bankruptcy unit of such District Court. 11. Bankruptcy Rules means, collectively, the Federal Rules of Bankruptcy Procedure and the local rules for the Bankruptcy Court, as now in effect or hereafter amended and, in each case, applicable to the Chapter 11 Cases. 12. Bar Date means the applicable bar date by which a proof of Claim must be or must have been Filed, as established by an order of the Bankruptcy Court, including the Bar Date Order and the Confirmation Order. 13. Bar Date Order means that certain Order Establishing a Bar Date for Filing Proofs of Claim and Approving the Manner and Notice Thereof entered by the Bankruptcy Court on November 22, 2005 [Docket No. 1803]. 14. Beneficial Holder means the Person holding the beneficial interest in a Claim or Equity Interest. 15. Beneficiaries means the Holders of Claims that are to be satisfied under the Plan by postEffective Date distributions to be made by the Post-Consummation Trust or the Litigation Trust, as applicable. 16. Business Day means any day, other than a Saturday, Sunday or legal holiday (as defined in Bankruptcy Rule 9006(a)). 17. Carve Out Account means that certain segregated trust account maintained at JPMorgan Chase Bank, N.A. pursuant to the DIP Credit Agreement for the benefit of the Professionals, which account contains funds for the payment of fees and expenses incurred by the Professionals and is not property of an Estate. 18. Cash means cash and cash equivalents.

19. Cash Investment Yield means the net yield earned by the applicable Disbursing Agent from the investment of cash held pending distribution pursuant to the Plan, which investment will be in a manner consistent with the applicable Trusts investment and deposit guidelines. 20. Cash Management Order means that certain First Day Order (A) Authorizing (I) Continued Use of Existing Cash Management System on an Interim Basis, (II) Maintenance of Existing Bank Accounts and (III) Continued Use of Existing Business Forms; and (B) (I) Granting Administrative Priority Status to Postpetition Intercompany Claims and (II) Authorizing Continued Performance Under Intercompany Arrangement and Historical Practices entered by the Bankruptcy Court on May 17, 2005 [Docket No. 40]. 21. Cause of Action means any and all claims, causes of action, demands, rights, actions, suits, obligations, liabilities, accounts, defenses, offsets, powers, privileges, licenses and franchises of any kind or 2
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character whatsoever, known or unknown, contingent or non-contingent, matured or unmatured, suspected or unsuspected, foreseen or unforeseen, currently existing or hereafter arising, in contract or in tort, in law or in equity, or under any other theory of law. Without limiting the generality of the foregoing, when referring to Causes of Action of the Debtors or their Estates, Causes of Action will include, but not be limited to: (a) rights of setoff, counterclaim or recoupment and claims on contracts or for breaches of duties imposed by law; (b) the right to object to Claims or Equity Interests; (c) Claims pursuant to sections 362, 510, 542, 543, 544 through 550, or 553 of the Bankruptcy Code; and (d) such Claims and defenses as fraud, mistake, duress and usury. 22. Chapter 11 Case means (a) when used with reference to a particular Debtor, the chapter 11 case pending for that Debtor in the Bankruptcy Court and (b) when used with reference to all Debtors, the chapter 11 cases pending for the Debtors in the Bankruptcy Court. 23. Claim means a claim, as defined in section 101 of the Bankruptcy Code, against any Debtor.

24. Claims Objection Bar Date means, for all Claims that have not been Allowed, the latest of: (a) 180 days after the Effective Date; (b) 180 days after the Filing of a proof of Claim for such Claim; and (c) such other period of limitation as may be specifically fixed by the Plan, the Confirmation Order, the Bankruptcy Rules or a Final Order for objecting to such Claim. 25. Class means a class of Claims or Equity Interests, as described in Article II.

26. Confirmation means the entry of the Confirmation Order on the docket of the Bankruptcy Court. 27. Confirmation Date means the date upon which the Confirmation Order is entered by the Bankruptcy Court on its docket, within the meaning of Bankruptcy Rules 5003 and 9021. 28. Confirmation Hearing means the hearing held by the Bankruptcy Court on Confirmation of the Plan, as such hearing may be continued from time to time. 29. 30. Confirmation Order means the order of the Bankruptcy Court confirming the Plan. Consummation means the occurrence of the Effective Date.

31. Core Group means the parties defined in the First Amended Notice, Case Management and Administrative Procedures filed on June 9, 2005 [Docket No. 294] as the Core Group. 32. Creditors Committee means the official committee of unsecured creditors of the Debtors appointed by the United States trustee in the Chapter 11 Cases pursuant to section 1102 of the Bankruptcy Code. 33. Cure Amount Claim means a Claim based upon a Debtors defaults on an Executory Contract or Unexpired Lease at the time such contract or lease is assumed by that Debtor under section 365 of the Bankruptcy Code. 34. Customer Agreement means that certain agreement entered into by and between, among others, the Debtors, the Agent, the DIP Agent, DaimlerChrysler Corporation, Ford Motor Company, General Motors Corporation, Honda of America Manufacturing, Inc. and AutoAlliance International, Inc., and approved on an interim basis by order of the Bankruptcy Court on December 14, 2006 [Docket No. 3758]. 35. Debtor means, as the context requires, any of the Debtors.

36. Debtor Releasees means (a) all officers, directors and employees and their respective subsidiaries employed by the Debtors at any time within six months immediately prior to the Effective Date, (b) all attorneys, financial advisors, accountants, investment bankers, investment advisors, actuaries, professionals, agents, affiliates and representatives of the Debtors and their subsidiaries and (c) the Releasing Parties, their respective 3
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predecessors and successors in interest, and all of their respective current and former members, officers, directors, employees, partners, attorneys, financial advisors, accountants, investment bankers, investment advisors, actuaries, professionals, agents, affiliates and representatives; provided that no Non-Released Parties will be Debtor Releasees. 37. Debtors means, collectively, the debtors identified on the cover page to this Plan.

38. Deemed means, for any particular Claim, (a) the scheduled amount of such Claim, unless a proof of Claim was Filed with respect to such Claim, in which case the proof of Claim amount supersedes the scheduled amount, (b) the amount asserted in Filed proofs of Claim for which there are not corresponding scheduled amounts and (c) if a Filed proof of Claim does not assert a sum certain, the Deemed amount will be determined by court order. In all events, if the amount of a Claim is determined or estimated for any purposes by Final Order or stipulation, then that amount will be the Deemed amount for that Claim. 39. Derivative Claim means a claim that is property of any of the Debtors Estates pursuant to section 541 of the Bankruptcy Code. 40. Agreement. DIP Agent means JPMorgan Chase Bank, N.A., as administrative agent under the DIP Credit

41. DIP Credit Agreement means (a) that certain Amended and Restated Revolving Credit, Term Loan and Guaranty Agreement, dated as of July 28, 2005, as it may be subsequently amended and modified, by and among Collins & Aikman Products Co., as borrower, substantially all of the domestic direct and indirect subsidiaries of Collins & Aikman Corporation, as guarantors, the DIP Agent, and certain other lenders named therein; (b) all amendments and restatements thereto and extensions thereof; and (c) all security agreements, other agreements and instruments related to the documents identified in (a) and (b) of this definition. 42. DIP Facility means that certain debtor-in-possession senior, secured credit facility entered into pursuant to the DIP Credit Agreement. 43. DIP Facility Claims means all DIP Obligations (as defined in the Final DIP Order) outstanding under the DIP Facility as of the Effective Date. 44. DIP Lenders means the lenders under the DIP Credit Agreement.

45. Disbursing Agent means the Post-Consummation Trust or the Litigation Trust, as applicable, in its capacity as a disbursing agent pursuant to Article VI.B, or any Third Party Disbursing Agent. 46. Disclosure Statement means the disclosure statement (including all exhibits and schedules thereto or referenced therein) that relates to the Plan, as approved by the Bankruptcy Court pursuant to section 1125 of the Bankruptcy Code, as the same may be amended, modified or supplemented. 47. Disputed . . . Claim means:

(a) if no proof of Claim has been Filed by the applicable Bar Date or has otherwise been deemed timely Filed under applicable law: (i) a Claim that is listed on a Debtors Schedules as other than contingent, unliquidated or disputed, but as to which the applicable Debtor, the applicable Trust or, prior to the Confirmation Date, any other party in interest, has Filed an objection by the Claims Objection Bar Date and such objection has not been withdrawn or denied by a Final Order; or (ii) a Claim that is listed on a Debtors Schedules as contingent, unliquidated or disputed; or (b) if a proof of Claim or request for payment of an Administrative Claim has been Filed by the Bar Date or has otherwise been deemed timely Filed under applicable law: (i) a Claim for which no corresponding Claim is listed on a Debtors Schedules; (ii) a Claim for which a corresponding Claim is listed on a Debtors Schedules as other than contingent, unliquidated or disputed, but the nature or amount of the Claim as asserted in the

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proof of Claim varies from the nature and amount of such Claim as it is listed on the Schedules; (iii) a Claim for which a corresponding Claim is listed on a Debtors Schedules as contingent, unliquidated or disputed; (iv) a Claim for which an objection has been Filed by the applicable Debtor, the applicable Trust or, prior to the Confirmation Date, any other party in interest, by the Claims Objection Bar Date, and such objection has not been withdrawn or denied by a Final Order; or (v) a Tort Claim. 48. Disputed Claims Reserve means a reserve for any distributions to be set aside by the Person administering a Trust on account of Disputed Claims. 49. Distribution Record Date means the date set by the Bankruptcy Court for determining the Holders of Claims entitled to vote on the Plan. 50. Document Reviewing Centers means, collectively: (a) the offices of Kirkland & Ellis LLP at 200 East Randolph Drive, Chicago, Illinois 60601; and (b) any other locations designated by the Debtors at which any party in interest may review all of the exhibits and schedules to the Plan and the Disclosure Statement. 51. Effective Date means a day, as determined by the Debtors and the Agent that is the Business Day as soon as reasonably practicable after all conditions to the Effective Date in Article X.B have been met or waived pursuant to Article X.C. 52. 53. English Insolvency Law means the English Insolvency Act of 1986. Entity means an entity, as defined in section 101 of the Bankruptcy Code.

54. Equity Interest means all equity interests in any of the Debtors, including all issued, unissued, authorized or outstanding shares of stock, together with any warrants, options or contract rights to purchase or acquire such interests at any time. 55. Estate means, as to each Debtor, the estate created for that Debtor in its Chapter 11 Case pursuant to section 541 of the Bankruptcy Code. 56. Estates means, collectively, the estates created for the Debtors in the Chapter 11 Cases pursuant to section 541 of the Bankruptcy Code. 57. European Debtors means the Debtors European subsidiaries that, on July 15, 2005, petitioned for administration orders pursuant to Schedule B1 of the English Insolvency Law in the Companies Court of the High Court of Justice, Chancery Division in London, England. For purposes of clarification, the European Debtors are not Debtors in the Chapter 11 Cases. 58. Exculpated Parties means: (a) the Debtors; (b) the Trusts; (c) the Releasing Parties (not including members of the Creditors Committee not serving as of the Effective Date) and their respective predecessors and successors in interest; and (d) all of the current (and former as it relates to the Persons described in foregoing clause (c)) officers, directors, employees, members, partners, investment advisors, attorneys, actuaries, financial advisors, accountants, investment bankers, agents, professionals, affiliates and representatives of each of the foregoing Persons (in each case in his, her or its capacity as such); provided that no Non-Released Parties will be Exculpated Parties. 59. Executory Contract means a contract to which one or more of the Debtors is a party that is subject to assumption or rejection under section 365 of the Bankruptcy Code. 60. Face Amount means:

(a) when used with reference to a Disputed Insured Claim, either (i) the full stated amount claimed by the Holder of such Claim in any proof of Claim Filed by the Bar Date, or otherwise deemed timely Filed under applicable law, if the proof of Claim specifies only a liquidated amount; (ii) if no proof of Claim is Filed by the Bar

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Date or otherwise deemed timely filed under applicable law, the full amount of the Claim listed on the Debtors Schedules provided that such amount is not listed as contingent, unliquidated or disputed; or (iii) the applicable deductible under the relevant insurance policy, minus any reimbursement obligations of the applicable Debtor to the insurance carrier for sums expended by the insurance carrier on account of such Claim (including defense costs), if such amount is less than the amount specified in (i) or (ii) above or the proof of Claim specifies an unliquidated amount; and (b) when used with reference to a Disputed Uninsured Claim, either: (i) the full stated amount claimed by the Holder of such Claim in any proof of Claim Filed by the Bar Date or otherwise deemed timely Filed under applicable law, if the proof of Claim specifies only a liquidated amount; or (ii) the amount of the Claim acknowledged by the applicable Debtor or the applicable Trust in any objection Filed to such Claim or in the Schedules as an noncontingent, liquidated and undisputed Claim, estimated by the Bankruptcy Court pursuant to section 502(c) of the Bankruptcy Code or proposed by the Debtors or the Post-Consummation Trust and approved by the United States trustee, if no proof of Claim has been Filed by the Bar Date or has otherwise been deemed timely Filed under applicable law or if the proof of Claim specifies an unliquidated amount. 61. Fee Claim means a Claim under sections 330(a), 331, 503 or 1103 of the Bankruptcy Code for compensation of a Professional or other Person for services rendered or expenses incurred in the Chapter 11 Cases. 62. Fee Order means that certain Administrative Order Establishing Procedures for Monthly Compensation and Reimbursement of Expenses for Professionals and Official Committee Members entered by the Bankruptcy Court on June 9, 2005 [Docket No. 290]. 63. File or Filed means file, filed or filing with the Bankruptcy Court or its authorized designee in the Chapter 11 Cases. 64. Final Decree means the decree contemplated under Bankruptcy Rule 3022.

65. Final DIP Order means the Final Order (I) Authorizing Debtors (A) to Obtain Post-Petition Financing Pursuant to 11 U.S.C. 105, 361, 362, 364(c)(1), 364(c)(2), 364(c)(3), 364(d)(1) and 364(e) and (B) to Utilize Cash Collateral Pursuant to 11 U.S.C. 363 and (II) Granting Adequate Protection to Pre-Petition Secured Parties Pursuant to 11 U.S.C. 361, 362, 363 and 364 entered by the Bankruptcy Court on July 28, 2005 [Docket No. 809]. 66. Final Order means an order or judgment of the Bankruptcy Court, or other court of competent jurisdiction, as entered on the docket in any Chapter 11 Case or the docket of any other court of competent jurisdiction, that has not been reversed, stayed, vacated, modified or amended, and as to which the time to appeal or seek certiorari or move for a new trial, reargument or rehearing has expired, and no appeal or petition for certiorari or other proceedings for a new trial, reargument or rehearing has been timely taken, or as to which any appeal that has been taken or any petition for certiorari that has been timely filed has been withdrawn or resolved by the highest court to which the order or judgment was appealed or from which certiorari was sought or as to which the new trial, reargument or rehearing has been denied or resulted in no modification of such order. 67. General Unsecured Claims means any Claim against the Debtors that is not a/an: (a) Administrative Claim; (b) DIP Facility Claim; (c) Priority Tax Claim; (d) Other Secured Claim; (e) Other Priority Claim; (f) Prepetition Facility Claim; (g) OEM Claim; (h) PBGC Claim; (i) Senior Note Claim; (j) Senior Subordinated Note Claim; (k) Equity Interest; (l) Subordinated Securities Claim; or (m) Intercompany Claim. 68. Holder means a Person holding a Claim or an Equity Interest.

69. Impaired means, with respect to any Class of Claims or Equity Interests, Claims or Equity Interests that are impaired within the meaning of section 1124 of the Bankruptcy Code. 70. Impaired Claim means a Claim classified in an Impaired Class.

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71. Indenture Trustees means, collectively, the Senior Note Indenture Trustee and the Senior Subordinated Note Indenture Trustee. 72. Insured Claim means any Claim arising from an incident or occurrence alleged to have occurred prior to the Effective Date that is covered under an insurance policy, other than a workers compensation insurance policy, applicable to the Debtors or their businesses. 73. Intercompany Claims means any and all Claims and Equity Interests of a Debtor against and in another Debtor. 74. July 8, 2005 Agreement means that certain agreement entered into by and between, among others, the Debtors, the Agent, the DIP Agent, DaimlerChrysler Corporation, Ford Motor Company, General Motors Corporation, Honda of America Manufacturing, Inc., Nissan North America Inc. and Toyota Engineering & Motor Manufacturing North America, Inc., and approved by order of the Bankruptcy Court on August 11, 2005 [Docket No. 916]. 75. KERP means that certain key employee retention program described in the Debtors Motion for an Order Authorizing the Debtors to Implement a Key Employee Retention Program filed November 7, 2005 [Docket No. 1635] and approved by the Bankruptcy Court on December 16, 2005 [Docket No. 1901]. 76. Litigation Recovery Interests means the interests in the recovery, if any, of the Litigation Trust. 77. Litigation Trust means that certain litigation trust to be formed on the Effective Date, pursuant to the Litigation Trust Agreement. 78. Litigation Trust Administrator means the Person designated by the Agent, in consultation with the Prepetition Lenders and the Creditors Committee, on or before the Confirmation Date and retained as of the Effective Date as the employee or fiduciary responsible for administering the Litigation Trust in accordance with the Plan and the Litigation Trust Agreement, and any successor appointed in accordance with the Litigation Trust Agreement. 79. Litigation Trust Agreement means that certain trust agreement, substantially on the terms set forth on Exhibit C, that will govern the Litigation Trust. 80. Litigation Trust Assets means those assets, including the Litigation Trust Claims, to be transferred to and owned by the Litigation Trust, pursuant to the Litigation Trust Agreement. 81. Litigation Trust Claims means any and all Causes of Action identified in the Litigation Trust Agreement, which shall include any Causes of Action arising under chapter 5 of the Bankruptcy Code that are not released under the Plan or other Bankruptcy Court-approved settlements. 82. Master Ballots mean the master ballots accompanying the Disclosure Statement upon which Holders of Impaired Claims will indicate their acceptance or rejection of the Plan in accordance with the Voting Instructions. 83. Nominee means any broker, dealer, commercial bank, trust company, savings and loan, financial institution or other nominee in whose name securities were registered or held of record on behalf of a Beneficial Holder. 84. Non-Released Parties means any Person listed as a potential defendant in any of the Causes of Action set forth on Exhibit A. 85. OEM Cap-Ex Claims means any and all Allowed Claims held by each of the OEMs, Nissan North America Inc. and Toyota Engineering & Motor Manufacturing North America, Inc. under Section 22

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of the Customer Agreement and Section 2.05 of the July 8, 2005 Agreement, as applicable, for costs incurred, or cash payments made, after the effective date of the Customer Agreement or the effective date of the July 8, 2005 Agreement, as applicable, including: (a) costs or payments for installation and commissioning of newly-acquired equipment and plant and equipment set-up expenses and rearrangement; and (b) relocation and refurbishment costs for existing plant, property and equipment that are pre-approved by the applicable party. 86. OEM Claims means any and all Claims held by each of the OEMs, including: (a) any Claim arising from any rights to repayment approved by the Bankruptcy Court for (i) the launch costs paid by the OEMs during the Chapter 11 Cases (other than launch costs incurred in connection with the Debtors Hermosillo, Mexico plant), (ii) the $82.5 million aggregate amount junior secured debtor in possession loan claims and (iii) the $30 million aggregate amount administrative loans; (b) any Claim for special or consequential damages; (c) any other Claim for damages, including any prior surcharges, the amounts paid pursuant to the Customer Agreement and all other special or consequential damages arising out of or in any way relating to the Debtors inability to perform, or breach of performance, under production and service contracts; and (d) any other Claim that would otherwise have to be paid in Cash in full (absent agreement to different treatment by the Holder thereof) pursuant to section 1129(a)(9)(A) of the Bankruptcy Code under a confirmed chapter 11 plan., but excluding (x) any administrative expense claims for damages up to $25 million in the aggregate arising from shipments after the effective date of the Customer Agreement of component parts manufactured by the Debtors carpet & acoustics business segment that are expressly permissible under Section 9 of the Customer Agreement and (y) OEM Cap-Ex Claims but solely to the extent they constitute Secured Claims. 87. OEMs means DaimlerChrysler Corporation, Ford Motor Company, General Motors Corporation, Honda of America Manufacturing, Inc., AutoAlliance International, Inc. and their respective affiliates and representatives. 88. OPEB Liability means any and all Claims that are subject to section 1114 of the Bankruptcy Code. 89. Ordinary Course Professionals Order means that certain Order Authorizing the Debtors to Employ and Compensate Certain Professionals Utilized in the Ordinary Course of the Debtors Businesses entered by the Bankruptcy Court on June 9, 2005 [Docket No. 293]. 90. Other Priority Claims means any and all Claims accorded priority in right of payment under section 507(a) of the Bankruptcy Code, other than a Priority Tax Claim or an Administrative Claim. 91. Other Secured Claims means any and all Secured Claims against the Debtors not specifically described herein, including OEM Cap-Ex Claims but solely to the extent they constitute Secured Claims; provided that Other Secured Claims will not include Prepetition Facility Claims, Intercompany Claims or Claims of the Indenture Trustees. 92. PBGC Claims means any and all Claims of the Pension Benefit Guaranty Corporation relating to the Collins & Aikman Pension Plan, including any and all Claims arising from the termination of such pension plan; provided that PBGC Claims will not include any Administrative Claims or Priority Claims that may be held by the Pension Benefit Guaranty Corporation. 93. Person means an individual, corporation, partnership, joint venture, association, joint stock company, limited liability company, limited liability partnership, trust, trustee, United States trustee, estate, unincorporated organization, government, governmental unit (as defined in the Bankruptcy Code), agency, or political subdivision thereof, or other Entity. 94. Petition Date means May 17, 2005.

95. Plan means this First Amended Joint Plan of Collins & Aikman Corporation and Its Debtor Subsidiaries, and all exhibits attached hereto or referenced herein, as the same may be amended, modified or supplemented.

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96. Plan Administrator means the Person designated by the Agent, in consultation with the Prepetition Lenders, on or before the Confirmation Date and retained as of the Effective Date as the employee or fiduciary responsible for implementing the applicable provisions of the Plan and administering the PostConsummation Trust in accordance with the Plan and the Post-Consummation Trust Agreement, and any successor appointed in accordance with the Post-Consummation Trust Agreement. 97. Plan Objection Deadline means the deadline established by the Bankruptcy Court for filing and serving objections to the Confirmation of the Plan. 98. Post-Consummation Trust means that certain trust to be created on the Effective Date in accordance with the provisions of Article VIII of the Plan and the Post-Consummation Trust Agreement for the benefit of Holders of Prepetition Facility Claims. 99. Post-Consummation Trust Advisory Board means the committee appointed pursuant to the Post-Consummation Trust Agreement to oversee the Post-Consummation Trust and the Plan Administrator. 100. Post-Consummation Trust Agreement means that certain trust agreement, in form and substance satisfactory to the Debtors and the Agent, that, among other things, (a) establishes and governs the PostConsummation Trust, (b) describes the powers, duties and responsibilities of the Plan Administrator and the liquidation and distribution of proceeds of the Post-Consummation Trust Assets and (c) describes the powers, duties and responsibilities of the Post-Consummation Trust Advisory Board. 101. Post-Consummation Trust Assets means all assets held from time to time by the PostConsummation Trust, including, but not limited to, the Residual Assets. 102. Post-Consummation Trust Beneficial Interests means the beneficial interests in the PostConsummation Trust, which interests shall entitle the holders thereof to continuing distributions by the PostConsummation Trust of the proceeds recovered from the liquidation of the Post-Consummation Trust Assets, including, but not limited to, the distribution of the net proceeds recovered on account of the Remaining Sales Transactions. 103. Post-Consummation Trust Budget means the budget, in form and substance satisfactory to the Debtors and the Agent, for Wind-Down Expenses projected to be paid by the Post-Consummation Trust (including, Administrative Claims, Other Secured Claims and Priority Claims under the Plan), which budget shall be an exhibit to the Post-Consummation Trust Agreement. 104. Prepetition Credit Agreement means that certain credit agreement, dated as of December 20, 2001, by and among Collins & Aikman Products Co., as borrower, substantially all of the domestic direct and indirect subsidiaries of Collins & Aikman Corporation, as guarantors, the Agent and certain other lenders named therein, as amended and restated as of September 1, 2004, as the same may have been subsequently modified, amended or supplemented, together with all instruments and agreements related thereto. 105. Prepetition Facility means that certain senior secured credit facility entered into pursuant to the Prepetition Credit Agreement. 106. Prepetition Facility Claims means the total amount outstanding under the Prepetition Facility as of the Effective Date. 107. Prepetition Facility Distribution means the cash of the Debtors as of the Effective Date (including any cash of or recoveries from non-Debtor affiliates that is available to the Debtors), after giving effect to or making provision for the (a) cash payments required under the Plan, including the amount of cash required to be included in the Residual Assets transferred to the Post-Consummation Trust and (b) cash needed to be retained to enable the Debtors to comply with the Customer Agreement.

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108. Agreement. 109.

Prepetition Lenders means the lenders from time to time under the Prepetition Credit

Priority Claims means, collectively, Priority Tax Claims and Other Priority Claims.

110. Priority Tax Claims means any and all Claims of a governmental unit of the kind specified in section 507(a)(8) of the Bankruptcy Code. 111. Pro Rata means the proportion that the amount of an Allowed Claim or an Allowed Equity Interest in a particular Class bears to the aggregate amount of Allowed Claims or the aggregate number of Allowed Equity Interests in such Class. 112. Professional means any professional employed in the Chapter 11 Cases pursuant to sections 327 or 1103 of the Bankruptcy Code or any professional or other Person seeking compensation or reimbursement of expenses in connection with the Chapter 11 Cases pursuant to section 503(b)(4) of the Bankruptcy Code. 113. Professional Escrow Account means an interest-bearing savings account to be funded and maintained in trust for the Post-Consummation Trust on and after the Effective Date solely for the purpose of paying all fees and expenses of Professionals in these Chapter 11 Cases. The Professional Escrow Account will not constitute property of the Post-Consummation Trust. 114. Quarterly Distribution Date means the last Business Day of the month following the end of each calendar quarter after the Effective Date; provided that if the Effective Date is within 45 days of the end of a calendar quarter, the first Quarterly Distribution Date will be the last Business Day of the month following the end of the first calendar quarter after the calendar quarter in which the Effective Date falls. 115. Releasing Parties means the Creditors Committee, each member of the Creditors Committee serving as of the Effective Date, the DIP Lenders, the DIP Agent, the Prepetition Lenders, the Agent, the Steering Committee, each member of the Steering Committee, all Holders of Claims in Class 3 and each of the OEMs. 116. Remaining Sales Transactions means the sale of all or substantially all of the Debtors assets through one or more sales conducted both prior and subsequent to Confirmation of the Plan, but not including the sale of any assets by virtue of the Soft-Trim Sales Transaction. 117. Required Prepetition Lenders means Prepetition Lenders holding, in the aggregate, two-thirds in amount and a majority in number of the Prepetition Facility Claims. 118. Residual Assets means all assets of the Debtors that are not divested prior to the Effective Date, including, but not limited to, as a result of the Soft-Trim Sales Transaction or any Remaining Sales Transactions that are consummated prior to the Effective Date. 119. Restructuring Transactions means, collectively, those mergers, consolidations, restructurings, dispositions, liquidations or dissolutions that the Debtors and the Plan Administrator determine to be necessary or appropriate to effectuate the purpose of the Plan. 120. Schedules means the schedules of assets and liabilities and the statements of financial affairs Filed by the Debtors, as required by section 521 of the Bankruptcy Code and the Official Bankruptcy Forms, as the same may have been or may be amended, modified or supplemented. 121. Secondary Liability Claim means a Claim that arises from a Debtor being liable as a guarantor of, or otherwise being jointly, severally or secondarily liable for, any contractual, tort or other obligation of another Debtor, including any Claim based on: (a) guaranties of collection, payment or performance; (b) indemnity bonds, obligations to indemnify or obligations to hold harmless; (c) performance bonds; (d) contingent liabilities arising

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out of contractual obligations or out of undertakings (including any assignment or other transfer) with respect to leases, operating agreements or other similar obligations made or given by a Debtor relating to the obligations or performance of another Debtor; (e) vicarious liability; (f) liabilities arising out of piercing the corporate veil, alter ego liability or similar legal theories; or (g) any other joint or several liability that any Debtor may have in respect of any obligation that is the basis of a Claim. 122. Secured Claim means a Claim that is secured by a lien on property in which an Estate has an interest or that is subject to setoff under section 553 of the Bankruptcy Code, to the extent of the value of the interest of the Holder of the Claim in the applicable Estates interest in such property or to the extent of the amount subject to setoff, as applicable, as determined pursuant to section 506(a) of the Bankruptcy Code and, if applicable, section 1129(b) of the Bankruptcy Code. 123. Securities Act means the Securities Act of 1933, 15 U.S.C. 77a-77aa, as now in effect or hereafter amended. 124. Senior Note Claims means any and all Claims arising from the Senior Notes.

125. Senior Note Indenture means that certain indenture, dated as of December 20, 2001, by and among Collins & Aikman Products Co., as issuer, substantially all of the domestic direct and indirect subsidiaries of Collins & Aikman Corporation, as guarantors, and BNY Midwest Trust Company, as indenture trustee, as the same may have been subsequently modified, amended or supplemented, together with all instruments and agreements related thereto. 126. Senior Note Indenture Trustee means BNY Midwest Trust Company, as trustee under the Senior Note Indenture. 127. Senior Notes means those certain 10-3/4% unsecured senior notes due 2011 issued pursuant to the Senior Note Indenture. 128. Senior Subordinated Note Claims means any and all Claims arising from the Senior Subordinated Notes. 129. Senior Subordinated Note Indenture means that certain indenture, dated as of August 26, 2004, by and among Collins & Aikman Products Co., as issuer, substantially all of the domestic direct and indirect subsidiaries of Collins & Aikman Corporation, as guarantors, and BNY Midwest Trust Company, as indenture trustee, as the same may have been subsequently modified, amended or supplemented, together with all instruments and agreements related thereto. 130. Senior Subordinated Note Indenture Trustee means The Law Debenture Company, as trustee under the Senior Subordinated Note Indenture. 131. Senior Subordinated Notes means those certain 12-7/8% senior subordinated notes due August 15, 2012, issued pursuant to the Senior Subordinated Note Indenture. 132. Soft-Trim Sales Transaction means the sale or sales of all or substantially all of the Debtors assets involved in the business of operating its Carpet & Acoustics business segment, which business segment includes the manufacturing of a variety of automotive flooring and acoustics products, such as carpet, accessory mats and alternative molded flooring, absorbing materials, damping materials and engine compartment and interior insulators. 133. Steering Committee means the unofficial Steering Committee of the Prepetition Lenders.

134. Stipulation of Amount and Nature of Claim means a stipulation or other agreement between the applicable Debtor or the Post-Consummation Trust and a Holder of a Claim or Equity Interest, or an agreed order of the Bankruptcy Court, establishing the amount and nature of a Claim or Equity Interest.

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135. Subordinated Securities Claims means Claims of the type described in, and subject to subordination under, section 510(b) of the Bankruptcy Code, including any and all Claims whatsoever, whether known or unknown, foreseen or unforeseen, suspected or unsuspected, currently existing or hereafter arising, arising from rescission of a purchase or sale of a security of the Debtors or an affiliate of the Debtors, for damages arising from the purchase, sale or holding of such securities, or for reimbursement, indemnification or contribution allowed under section 502 of the Bankruptcy Code on account of such a Claim. 136. Success Sharing Plan means that certain success sharing plan approved by the (a) Order Approving Employment Agreements of Frank Macher, as President and Chief Executive Officer, and Other Members of Debtors New Management Team [Docket No. 1144] and (b) Order Authorizing the Implementation of a Key Employee Retention Program [Docket No. 1901]. For clarity, no success sharing plan that has been terminated before the Effective Date shall be a Success Sharing Plan. 137. Tax Note means a promissory note, with terms substantially set forth on Exhibit G, issued by the Post-Consummation Trust delivered to a Holder of an Allowed Priority Tax Claim providing for equal cash payments, made semi-annually, commencing six months after the Effective Date and concluding six years after the date of assessment of the tax that is the subject of the relevant Allowed Priority Tax Claim. 138. Third Party Disbursing Agent means a Person designated by the Post-Consummation Trust or the Litigation Trust, as applicable, to act as a Disbursing Agent pursuant to Article VI.B. 139. Tort Claim means any Claim that has not been settled, compromised or otherwise resolved that: (a) arises out of allegations of personal injury, wrongful death, property damage, products liability or similar legal theories of recovery; or (b) arises under any federal, state or local statute, rule, regulation or ordinance governing, regulating or relating to health, safety, hazardous substances or the environment. 140. Trusts means, collectively, the Post-Consummation Trust and the Litigation Trust.

141. Unexpired Lease means a lease to which one or more of the Debtors is a party that is subject to assumption or rejection under section 365 of the Bankruptcy Code. 142. Unimpaired means, with respect to a Class of Claims or Equity Interests, a Claim or Equity Interest that is unimpaired within the meaning of section 1124 of the Bankruptcy Code. 143. Uninsured Claim means any Claim that is not an Insured Claim.

144. Unsecured Claims means, collectively, General Unsecured Claims, Senior Note Claims, PBGC Claims and Senior Subordinated Note Claims. 145. Voting Deadline means the deadline that is specified in the Disclosure Statement, the Ballots or related solicitation documents approved by the Bankruptcy Court for submitting Ballots and Master Ballots to accept or reject the Plan in accordance with section 1126 of the Bankruptcy Code. 146. Voting Instructions means the instructions for voting on the Plan contained in the section of the Disclosure Statement entitled VOTING INSTRUCTIONS and in the Ballots and the Master Ballots. 147. Wind-Down Expenses means the costs and expenses necessary to administer and perform the contemplated functions of the Post-Consummation Trust in accordance with the Post-Consummation Trust Budget. 148. Workers Compensation Order means that certain First Day Order: (A) Authorizing the Debtors to Continue to Pay and Honor Certain Prepetition Claims for (i) Wages, Salaries and Other Compensation, (ii) Withholdings and Deductions and (iii) Reimbursable Employee Expenses; (B) Authorizing the Debtors to Continue to Provide Employee Benefits in the Ordinary Course of Business; (C) Authorizing the Debtors to Pay All Related Costs and Expenses; and (D) Directing Banks to Receive, Honor and Pay All Checks and Electronic Payment Requests Related to the Foregoing, entered by the Bankruptcy Court on May 17, 2005 [Docket No. 48].

12
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B.

Rules of Interpretation and Computation of Time 1. Rules of Interpretation

For purposes of the Plan, unless otherwise provided herein: (a) whenever from the context it is appropriate, each term, whether stated in the singular or the plural, will include both the singular and the plural; (b) unless otherwise provided in the Plan, any reference in the Plan to a contract, instrument, release or other agreement or document being in a particular form or on particular terms and conditions means that such document will be substantially in such form or substantially on such terms and conditions; (c) any reference in the Plan to an existing document or exhibit Filed or to be Filed means such document or exhibit, as it may have been or may be amended, modified or supplemented pursuant to the Plan or Confirmation Order; (d) any reference to a Person as a Holder of a Claim or Equity Interest includes that Persons successors, assigns and affiliates; (e) all references in the Plan to Sections, Articles and Exhibits are references to Sections, Articles and Exhibits of or to the Plan; (f) the words herein, hereunder and hereto refer to the Plan in its entirety rather than to a particular portion of the Plan; (g) captions and headings to Articles and Sections are inserted for convenience of reference only and are not intended to be a part of or to affect the interpretation of the Plan; (h) subject to the provisions of any contract, certificates of incorporation, by-laws, similar constituent documents, instrument, release or other agreement or document entered into or delivered in connection with the Plan, the rights and obligations arising under the Plan will be governed by, and construed and enforced in accordance with, federal law, including the Bankruptcy Code and the Bankruptcy Rules; and (i) the rules of construction set forth in section 102 of the Bankruptcy Code will apply. 2. Computation of Time

In computing any period of time prescribed or allowed hereby, the provisions of Bankruptcy Rule 9006(a) will apply. ARTICLE II. CLASSES OF CLAIMS AND EQUITY INTERESTS All Claims and Equity Interests, except Administrative Claims and Priority Tax Claims, are placed in the following Classes. In accordance with section 1123(a)(1) of the Bankruptcy Code, Administrative Claims and Priority Tax Claims, as described in Article III.A, have not been classified and thus are excluded from the following Classes. A Claim or Equity Interest is classified in a particular Class only to the extent that the Claim or Equity Interest qualifies within the description of that Class and is classified in other Classes to the extent that any remainder of the Claim or Equity Interest qualifies within the description of such other Classes. A. Unimpaired Classes of Claims 1. Class 1 (Other Secured Claims): Other Secured Claims against any Debtor.

2. Class 2 (Other Priority Claims): Priority Claims against any Debtor that are entitled to priority under section 507(a)(4), (5), (6) or (7) of the Bankruptcy Code. B. Impaired Classes of Claims and Equity Interests 1. 2. 3. 4. any Debtor. Class 3 (Prepetition Facility Claims): Prepetition Facility Claims against any Debtor. Class 4 (OEM Claims): OEM Claims against any Debtor. Class 5 (General Unsecured Claims): General Unsecured Claims against any Debtor. Class 6 (Senior Note Claims and PBGC Claims): Senior Note Claims and PBGC Claims against

13
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5. Debtor. 6. 7. 8.

Class 7 (Senior Subordinated Note Claims):

Senior Subordinated Note Claims against any

Class 8 (Equity Interests): Equity Interests in any Debtor. Class 9 (Subordinated Securities Claims): Subordinated Securities Claims against any Debtor. Class 10 (Intercompany Claims): Intercompany Claims that are not Administrative Claims. ARTICLE III. TREATMENT OF CLAIMS AND EQUITY INTERESTS

All payments and other distributions stated in this Article to be made by the Debtors shall, (a) if made on or before the Effective Date, be made by the Debtors and (b) if made after the Effective Date, be made by the PostConsummation Trust or the Litigation Trust, as applicable. A. Unclassified Claims 1. Payment of Administrative Claims (a) Administrative Claims in General

Except as specified in this Article III.A.1, and subject to the bar date provisions herein, unless otherwise agreed to by the Holder of an Administrative Claim and the applicable Debtor or the Post-Consummation Trust, each Holder of an Allowed Administrative Claim will receive, in full satisfaction of its Administrative Claim, Cash equal to the Allowed amount of such Administrative Claim either (i) on the Effective Date or (ii) if the Administrative Claim is not allowed as of the Effective Date, no more than 30 days after the date on which an order allowing such Administrative Claim becomes a Final Order or a Stipulation of Amount and Nature of Claim is executed by the Post-Consummation Trust and the Holder of the Administrative Claim. (b) Statutory Fees

On or before the Effective Date, Administrative Claims for fees payable pursuant to 28 U.S.C. 1930 will be paid by the Debtors in Cash equal to the amount of such Administrative Claims. After the Effective Date, all fees payable pursuant to 28 U.S.C. 1930 will be paid by the Post-Consummation Trust in accordance therewith until the closing of the Chapter 11 Cases pursuant to section 350(a) of the Bankruptcy Code. (c) Ordinary Course Liabilities

Subject to Article III.A.1(f), Administrative Claims based on liabilities incurred by a Debtor in the ordinary course of its business will be paid by the Debtors pursuant to the terms and conditions of the particular transaction giving rise to such Administrative Claims or, if and to the extent that such ordinary course obligations are assumed by the purchaser (or purchasers) in connection with the Soft-Trim Sales Transaction or any Remaining Sales Transactions, by such purchaser (or purchasers), in each case without any further action by the Holders of such Administrative Claims. (d) DIP Facility Claims

All DIP Facility Claims shall be Allowed in full. On the Effective Date, the DIP Agent, on its own behalf and on behalf of the DIP Lenders, shall receive cash in an amount equal to 100% of the unpaid DIP Facility Claims (including cash collateral to be held and applied in accordance with the DIP Credit Agreement in respect of all undrawn letters of credit outstanding as of the Effective Date under the DIP Facility).

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(e)

Administrative Claims of Indenture Trustees

Any Administrative Claims of the Indenture Trustees will be treated pursuant to the terms of Article III.D. (f) Bar Dates for Administrative Claims (i) General Bar Date Provisions (A) Administrative Claims Arising On or Before [______, 2007]

Except as otherwise provided in Article III.A.1(f)(ii), unless previously Filed, requests for payment of Administrative Claims that arise on or before [_______, 2007] must be Filed and served on the Debtors in accordance with the Administrative Claims Bar Date Order. Holders of Administrative Claims that are required to File and serve a request for payment of such Administrative Claims and that do not File and serve such a request by the applicable bar date will be forever barred from asserting such Administrative Claims against the Debtors, the Trusts or their respective property, and such Administrative Claims will be deemed discharged as of the Effective Date. Objections to such requests must be Filed and served on the Post-Consummation Trust and the requesting party by the later of (a) 180 days after the Effective Date and (b) 90 days after the Filing of the applicable request for payment of Administrative Claims. (B) Administrative Claims Arising After [______, 2007]

Holders of Administrative Claims that arise after [____, 2007] will not be required to File or serve any request for payment of such Administrative Claims. Administrative Claims that arise after [____, 2007] will be paid by the Post-Consummation Trust pursuant to the terms and conditions of the particular transaction giving rise to such Administrative Claims or, if and to the extent that such ordinary course obligations are assumed by the purchaser (or purchasers) in connection with the Soft-Trim Sales Transaction or any Remaining Sales Transactions, by such purchaser (or purchasers), in each case without any further action by the Holders of such Administrative Claims. (ii) Bar Dates for Certain Administrative Claims (A) Professional Compensation

Professionals or other Persons asserting a Fee Claim for services rendered before the Effective Date must File and serve on the Post-Consummation Trust and such other Persons who are designated by the Bankruptcy Rules, the Confirmation Order, the Fee Order or other order of the Bankruptcy Court an application for final allowance of such Fee Claim no later than 30 days after the Effective Date; provided that any professional who may receive compensation or reimbursement of expenses pursuant to the Ordinary Course Professionals Order may continue to receive such compensation and reimbursement of expenses for services rendered before the Effective Date, without further Bankruptcy Court review or approval, pursuant to the Ordinary Course Professionals Order. Objections to any Fee Claim must be Filed and served on the Post-Consummation Trust and the requesting party by the later of (i) 60 days after the Effective Date and (ii) 30 days after the Filing of the applicable request for payment of the Fee Claim. To the extent necessary, the Confirmation Order will amend and supersede any previously entered order of the Bankruptcy Court, including the Fee Order, regarding the payment of Fee Claims. (B) Ordinary Course Liabilities

Holders of Administrative Claims based on trade or vendor liabilities incurred by a Debtor in the ordinary course of its business will not be required to File or serve any request for payment of such Administrative Claims. Such Administrative Claims will be satisfied pursuant to Article III.A.1(c).

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(C)

DIP Facility Claims

Holders of DIP Facility Claims will not be required to File or serve any request for payment of such Claims. Such Claims will be satisfied pursuant to Article III.A.1(d). 2. Payment of Priority Tax Claims

Each Holder of an Allowed Priority Tax Claim will receive 100% of the unpaid Allowed amount of such Claim in Cash or, at the sole option of the Post-Consummation Trust, a Tax Note or a combination of Cash and a Tax Note, on or as soon as practicable after the Effective Date. Any claim or demand for penalty relating to any Priority Tax Claim shall be disallowed, and the Holder of an Allowed Priority Tax Claim shall not assess or attempt to collect such penalty from the Post-Consummation Trust or the Debtors. Notwithstanding the foregoing, the Holder of an Allowed Priority Tax Claim may receive such other, less favorable treatment as may be agreed upon by the Holder of the Allowed Priority Tax Claim and the Debtors or the Post-Consummation Trust. B. Unimpaired Classes of Claims

1. Class 1 Claims (Other Secured Claims) are Unimpaired. Subject to the provisions of sections 502(b)(3) and 506(d) of the Bankruptcy Code, on or as soon as practicable after the Effective Date, each Holder of an Allowed Class 1 Claim will receive, in full and final satisfaction of such Allowed Class 1 Claim, one of the following treatments, in the sole discretion of the Plan Administrator: (a) Claim; (b) the Debtors or the Plan Administrator will satisfy any such Allowed Other Secured Claim by delivering the collateral securing any such Claim and paying any interest required to be paid under section 506(b) of the Bankruptcy Code; or (c) the Debtors or the Plan Administrator will otherwise treat any such Allowed Other Secured Claim in any other manner such that the Claim will be rendered Unimpaired. 2. Class 2 Claims (Other Priority Claims) are Unimpaired. The legal, equitable and contractual rights of the Holders of Allowed Class 2 Claims are unaltered by the Plan. Unless otherwise agreed to by the Holders of the Allowed Other Priority Claims and the Debtors or the Plan Administrator, each Holder of an Allowed Class 2 Claim will receive, in full and final satisfaction of such Allowed Class 2 Claim, one of the following treatments, in the sole discretion of the Plan Administrator: (a) the Debtors or the Plan Administrator will pay the Allowed Other Priority Claim in full in Cash on the Effective Date or as soon thereafter as is practicable; provided that Other Priority Claims representing obligations incurred in the ordinary course of business will be paid in full in Cash when such Other Priority Claims become due and owing in the ordinary course of business; or (b) the Debtors or the Plan Administrator will otherwise treat the Allowed Other Priority Claim in any other manner such that the Claim will be rendered Unimpaired. C. Impaired Classes of Claims and Equity Interests the Debtors or the Plan Administrator will pay in full in Cash any such Allowed Other Secured

1. Class 3 Claims (Prepetition Facility Claims) are Impaired. On or as soon as practicable after the Effective Date, each Holder of an Allowed Class 3 Claim will receive from the Debtors or the Plan Administrator, in full and final satisfaction of such Claim, the following treatment: (a) (b) its Pro Rata share of the Prepetition Facility Distribution; its Pro Rata share of the Post-Consummation Trust Beneficial Interests; 16
K&E 11547813.1

(c)

its Pro Rata share of ___% of the Litigation Recovery Interests set forth on Exhibit C;

(d) retention of all adequate protection payments made in respect of the Prepetition Facility, including payment of all fees and professional fees payable under the Final DIP Order accrued through the Effective Date (other than adequate protection payments deferred pursuant to Bankruptcy Court order, which shall be deemed satisfied by the treatment provided herein for the Prepetition Facility Claims); (e) payment of the reasonable fees and expenses of the Agents attorneys and financial advisor incurred in connection with the consummation, administration and enforcement of the Plan; and (f) the applicable releases and exculpation contained in Article XII.

The Prepetition Facility Claims shall be Allowed in full. The unsecured portions of Prepetition Facility Claims, if any, will not be separately classified under the Plan, and the Holders of Prepetition Facility Claims will not be entitled to vote on the Plan or receive any additional distributions under the Plan on account of such unsecured Claims. 2. Class 4 Claims (OEM Claims) are Impaired. On the Effective Date, all OEM Claims will be waived in consideration of the releases provided in Article XII.B. 3. Class 5 Claims (General Unsecured Claims) are Impaired. Although under the absolute priority rule the Holders of General Unsecured Claims are not entitled to any distributions, to facilitate a consensual Plan, if a Holder of an Allowed General Unsecured Claim votes to accept the Plan, such Holder will receive, on or as soon as practicable after the Effective Date, in full and final satisfaction of such Allowed General Unsecured Claim its Pro Rata share of ___% of the Litigation Recovery Interests set forth on Exhibit C. 4. Class 6 Claims (Senior Note Claims and PBGC Claims) are Impaired. Although under the absolute priority rule the Holders of Senior Note Claims and PBGC Claims are not entitled to any distributions, to facilitate a consensual Plan, if a Holder of an Allowed Senior Note Claim or PBGC Claim votes to accept the Plan, such Holder will receive, on or as soon as practicable after the Effective Date, in full and final satisfaction of such Allowed Senior Note Claim or PBGC Claim its Pro Rata share of ___% of the Litigation Recovery Interests set forth on Exhibit C. 5. Class 7 Claims (Senior Subordinated Note Claims) are Impaired. Although under the absolute priority rule the Holders of Senior Subordinated Note Claims are not entitled to any distributions, to facilitate a consensual Plan, if a Holder of an Allowed Senior Subordinated Note Claim votes to accept the Plan, such Holder will receive, on or as soon as practicable after the Effective Date, in full and final satisfaction of such Allowed Senior Subordinated Note Claim its Pro Rata share of the percentage of the Litigation Recovery Interests set forth on Exhibit C (collectively, the Subordinated Note Share); provided that the Subordinated Note Share will first be distributed to the Holders of Allowed Senior Note Claims on a Pro Rata basis until such Allowed Senior Note Claims have been paid in full in accordance with the subordination provisions of the Senior Subordinated Note Indenture. If and only to the extent that the Senior Note Claims are paid in full pursuant to the Plan, the remaining portion of the Subordinated Note Share, if any, will be distributed to the Holders of Allowed Senior Subordinated Note Claims. 6. Class 8 Equity Interests (Equity Interests) are Impaired. On the Effective Date, all Equity Interests will be deemed canceled and will be of no further force and effect, whether surrendered for cancellation or otherwise, and Holders thereof will not receive a distribution under the Plan in respect of such Claims. 7. Class 9 Claims (Subordinated Securities Claims) are Impaired. On the Effective Date, Subordinated Securities Claims will be canceled, and Holders thereof will not receive a distribution under the Plan in respect of such Claims.

17
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8. Class 10 Claims (Intercompany Claims) are Impaired. On the Effective Date, Intercompany Claims will be canceled, and Holders thereof will not receive a distribution under the Plan in respect of such Claims; provided that Claims of a European Debtor against a Debtor arising from intercompany transactions with the Debtor will be deemed Allowed General Unsecured Claims only to the extent that such Debtors intercompany claims against such European Debtor are deemed allowed in such European Debtors respective administration proceedings pending under English Insolvency Law. D. Special Provisions Regarding the Indenture Trustees Administrative Claims and Allowed Claims

In full satisfaction of the Indenture Trustees Administrative Claims, if any, any charging lien held by the Indenture Trustees will be preserved. Distributions received by Holders of Allowed Claims in respect of Senior Notes and Senior Subordinated Notes pursuant to the Plan will be reduced on account of payment of the Indenture Trustees Administrative Claims. E. Special Provisions Regarding the Treatment of Allowed Secondary Liability Claims

The classification and treatment of Allowed Claims under the Plan take into consideration all Allowed Secondary Liability Claims. On the Effective Date, Holders of Allowed Secondary Liability Claims will be entitled to only one distribution in respect of such underlying Allowed Claim. No multiple recovery on account of any Allowed Secondary Liability Claim will be provided or permitted. The Allowed Secondary Liability Claims arising from or related to any Debtors joint or several liability for the obligations under any (1) Allowed Claim that is being Reinstated under the Plan or (2) Executory Contract or Unexpired Lease that is being assumed or deemed assumed by another Debtor or under any Executory Contract or Unexpired Lease that is being assumed by and assigned to another Debtor or any other entity will be Reinstated. ARTICLE IV. MEANS FOR IMPLEMENTATION OF THE PLAN A. Sale of Assets

On or prior to the Effective Date, the Debtors shall consummate the Soft-Trim Sale Transaction. Both prior to and subsequent to the Effective Date, the Debtors and the Post-Consummation Trust, as applicable, shall consummate the Remaining Sales Transactions. B. The Post-Consummation Trust 1. Establishment of the Post-Consummation Trust

On the Effective Date, the Debtors, on their own behalf and on behalf of the Holders of Allowed Prepetition Facility Claims shall execute the Post-Consummation Trust Agreement and shall take all other steps necessary to establish the Post-Consummation Trust pursuant to the Post-Consummation Trust Agreement as further described in Article VIII herein. On the Effective Date, and in accordance with and pursuant to the terms of the Plan, the Debtors shall transfer to the Post-Consummation Trust all of their rights, title and interests in all of the Residual Assets. In connection with the transfer of such assets, including rights and Causes of Action, any attorneyclient privilege, work-product privilege, or other privilege or immunity attaching to any documents or communications (whether written or oral) transferred to the Post-Consummation Trust shall vest in the PostConsummation Trust and its representatives, and the Debtors and the Post-Consummation Trust are authorized to take all necessary actions to effectuate the transfer of such privileges.

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2.

Funding Expenses of the Post-Consummation Trust

Except as set forth in Article IV.B.1, the Debtors shall not be obligated to provide any funding with respect to the Post-Consummation Trust after they transfer the Residual Assets to the Post-Consummation Trust. As more fully described in the Post-Consummation Trust Agreement, any Cash in the Post-Consummation Trust shall be applied in accordance with the terms of the Post-Consummation Trust Budget, first, to the fees, costs, expenses (each of the foregoing in amounts not to exceed amounts approved pursuant to the Post-Consummation Trust Budget) and liabilities of the Plan Administrator, second, to satisfy any other administrative and Wind-Down Expenses of the Post-Consummation Trust (each of the foregoing in amounts not to exceed amounts approved pursuant to the Post-Consummation Trust Budget) and, third, to the distributions provided for pursuant to the Plan. 3. Appointment of the Plan Administrator

On the Effective Date and in compliance with the provisions of the Plan, the Plan Administrator shall be appointed in accordance with the Post-Consummation Trust Agreement and the Post-Consummation Trust shall be administered by the Plan Administrator in accordance with the Post-Consummation Trust Agreement. C. The Litigation Trust 1. Establishment of the Litigation Trust

On the Effective Date, the Debtors, on their own behalf and on behalf of Holders of Allowed Claims entitled to the Litigation Trust Recovery Interests pursuant to the Plan shall execute the Litigation Trust Agreement and shall take all other steps necessary to establish the Litigation Trust pursuant to the Litigation Trust Agreement as further described in Article IX herein. On the Effective Date, and in accordance with and pursuant to the terms of the Plan, the Debtors shall transfer to the Litigation Trust all of their rights, title and interests in all of the Litigation Trust Claims. In connection with the transfer of such assets, any attorney-client privilege, work-product privilege, or other privilege or immunity attaching to any documents or communications (whether written or oral) transferred to the Litigation Trust shall vest in the Litigation Trust and its representatives, and the Debtors and the Litigation Trust are authorized to take all necessary actions to effectuate the transfer of such privileges. 2. Funding Expenses of the Litigation Trust

The Debtors shall not be obligated to provide any funding with respect to the Litigation Trust after they transfer the Litigation Trust Claims to the Litigation Trust. As more fully described in the Post-Consummation Trust Agreement and the Litigation Trust Agreement, (a) the Post-Consummation Trust shall advance to the Litigation Trust up to an aggregate of $3 million to cover the reasonable costs of investigating, prosecuting and resolving, and reconciling Claims upon submission of appropriate invoices therefor and (b) such advance shall be repaid from the first available net proceeds realized from the Litigation Trust Claims. As more fully described in the Litigation Trust Agreement, any Cash in the Litigation Trust shall be applied, first, to the fees, costs, expenses and liabilities of the Litigation Trust Administrator, second, to repay such advance and, third, to the distributions provided for pursuant to the Plan. 3. Appointment of the Litigation Trust Administrator

On the Effective Date and in compliance with the provisions of the Plan, the Litigation Trust Administrator shall be appointed in accordance with the Litigation Trust Agreement and the Litigation Trust shall be administered by the Litigation Trust Administrator in accordance with the Litigation Trust Agreement. D. Corporate Action

Upon the entry of the Confirmation Order by the Bankruptcy Court, all matters provided for under the Plan involving the corporate structure of the Debtors shall be deemed authorized and approved without any requirement of further action by the Debtors, the Debtors shareholders or the Debtors boards of directors. To the extent such 19
K&E 11547813.1

action has not been completed prior to the Effective Date, the Debtors (and their boards of directors) shall dissolve or otherwise terminate their existence following the Effective Date and are authorized to dissolve or terminate the existence of wholly-owned non-Debtor subsidiaries following the Effective Date as well as any remaining health, welfare or benefit plans. E. Preservation of Rights of Action 1. Maintenance of Causes of Action

Except as otherwise provided in the Plan (including Article XII.B), on the Effective Date, all of the Debtors rights to commence and pursue, as appropriate, any and all Causes of Action, whether arising before or after the Petition Date, in any court or other tribunal in an adversary proceeding or contested matter Filed in one or more of the Chapter 11 Cases, including the following actions and any Causes of Actions specified on Exhibit A, shall be transferred to the Post-Consummation Trust and the Litigation Trust, as applicable: (a) objections to Claims under the Plan; and (b) any other litigation or Causes of Action, whether legal, equitable or statutory in nature, arising out of, or in connection with the Debtors businesses, assets or operations or otherwise affecting the Debtors, including possible claims against the following types of parties, both domestic and foreign, for the following types of claims: (i) Causes of Action against vendors, suppliers of goods or services, or other parties for overpayments, back charges, duplicate payments, improper holdbacks, deposits, warranties, guarantees, indemnities or setoff; (ii) Causes of Action against utilities, vendors, suppliers of services or goods, or other parties for wrongful or improper termination, suspension of services or supply of goods, or failure to meet other contractual or regulatory obligations; (iii) Causes of Action against vendors, suppliers of goods or services, or other parties for failure to fully perform or to condition performance on additional requirements under contracts with any one or more of the Debtors before the assumption or rejection of the subject contracts; (iv) Causes of Action for any liens, including mechanics, artisans, materialmens, possessory or statutory liens held by any one or more of the Debtors; (v) Causes of Action for payments, deposits, holdbacks, reserves or other amounts owed by any creditor, lessor, utility, supplier, vendor, insurer, surety, factor, lender, bondholder, lessor or other party; (vi) Causes of Action against any current or former director, officer, employee or agent of the Debtors arising out of employment related matters, including Causes of Action regarding intellectual property, confidentiality obligations, employment contracts, wage and benefit overpayments, travel, contractual covenants, or employee fraud or wrongdoing; (vii) Causes of Action against any professional services provider or any other party arising out of financial reporting; (viii) Causes of Action arising out of environmental or contaminant exposure matters against landlords, lessors, environmental consultants, environmental agencies or suppliers of environmental services or goods; (ix) Causes of Action against insurance carriers, reinsurance carriers, underwriters or surety bond issuers relating to coverage, indemnity, contribution, reimbursement or other matters; (x) counterclaims and defenses relating to notes, bonds or other contract obligations; (xi) Causes of Action against local, state, federal and foreign taxing authorities for refunds of overpayments or other payments; (xii) Causes of Action against attorneys, accountants, consultants or other professional service providers relating to services rendered; (xiii) contract, tort or equitable Causes of Action that may exist or subsequently arise; (xiv) any intracompany or intercompany Causes of Action; (xv) Causes of Action of the Debtors arising under section 362 of the Bankruptcy Code; (xvi) equitable subordination Causes of Action arising under section 510 of the Bankruptcy Code or other applicable law; (xvii) turnover Causes of Action arising under sections 542 or 543 of the Bankruptcy Code; (xviii) Causes of Action arising under chapter 5 of the Bankruptcy Code, including preferences under section 547 of the Bankruptcy Code; (xix) Causes of Action against any union arising from, among other things, state or federal law or under a collective bargaining agreement, including any wrongful or illegal acts, any wrongful termination, suspension of performance, defamation or failure to meet other contract or regulatory obligations; and (xx) Causes of Action for unfair competition, interference with contract or potential business advantage, conversion, infringement of intellectual property or other business tort claims. The Post-Consummation Trust and the Litigation Trust, as applicable, shall be transferred the foregoing Causes of Action notwithstanding the rejection of any executory contract or unexpired lease during the Debtors Chapter 11 Cases, including under the Plan. In accordance with section 1123(b)(3) of the Bankruptcy Code, any claims, rights and Causes of Action that the respective Debtors may hold against any Person shall vest in the PostConsummation Trust and the Litigation Trust, as applicable. The Post-Consummation Trust or the Litigation Trust, 20
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as applicable, through its authorized agents or representatives, shall have and may exclusively enforce any and all such claims, rights or Causes of Action transferred to it, and all other similar claims arising pursuant to applicable state laws, including fraudulent transfer claims, if any, and all other Causes of Action of a trustee and debtor-in-possession pursuant to the Bankruptcy Code. The Post-Consummation Trust and the Litigation Trust, as applicable, shall have the exclusive right, authority and discretion to determine and to initiate, file, prosecute, enforce, abandon, settle, compromise, release, withdraw or litigate to judgment any and all such claims, rights and Causes of Action transferred to it, and to decline to do any of the foregoing without the consent or approval of any third party and without any further notice to or action, order or approval of the Bankruptcy Court. For clarity, the Litigation Trust shall be transferred all of the Litigation Trust Claims and the PostConsummation Trust shall be transferred any and all other Causes of Action. The Post-Consummation Trust shall have the right to object to all administrative expenses and Claims which, if Allowed, would entitle the Holder thereof to payments or other distributions from the Post-Consummation Trust and the Litigation Trust shall have the right to object to all Claims other than Prepetition Facility Claims which, if Allowed, would entitle the Holder thereof to payments or other distributions from the Litigation Trust. 2. Preservation of All Causes of Action Not Expressly Settled or Released

Unless a claim or Cause of Action against a creditor or other Person is expressly waived, relinquished, released, compromised or settled in the Plan or any Final Order, the Debtors expressly reserve such claim or Cause of Action for later adjudication by the Debtors or the Post-Consummation Trust or the Litigation Trust, as applicable, and, therefore, no preclusion doctrine, including the doctrines of res judicata, collateral estoppel, issue preclusion, claim preclusion, waiver, estoppel (judicial, equitable or otherwise) or laches shall apply to such claims or Causes of Action upon or after the Confirmation or Consummation of the Plan based on the Disclosure Statement, the Plan or the Confirmation Order, except where such claims or Causes of Action have been expressly waived, relinquished, released, compromised or settled in the Plan or a Final Order. In addition, the Debtors and the Trusts expressly reserve the right to pursue or adopt any claims or Causes of Action not so waived, relinquished, released, compromised or settled that are alleged in any lawsuit in which the Debtors are a defendant or an interested party, against any Person, including the plaintiffs or co-defendants in such lawsuits. Any Person to whom the Debtors have incurred an obligation (whether on account of services, purchase, sale of goods or otherwise), or who has received services from the Debtors or a transfer of money or property of the Debtors, or who has transacted business with the Debtors, or leased equipment or property from the Debtors should assume that such obligation, transfer or transaction may be reviewed by the Post-Consummation Trust or the Litigation Trust, as applicable, subsequent to the Effective Date and may, to the extent not theretofore expressly waived, relinquished, released, compromised or settled, be the subject of an action after the Effective Date, whether or not: (a) such Person has Filed a proof of Claim against the Debtors in the Chapter 11 Cases; (b) such Persons proof of Claim has been objected to; (c) such Persons Claim was included in the Debtors Schedules; or (d) such Persons scheduled Claim has been objected to by the Debtors or has been identified by the Debtors as contingent, unliquidated or disputed. F. Certain Employee, Retiree and Workers Compensation Benefits 1. Employee Benefits

On or before the Effective Date and except as otherwise set forth herein, the Pension Benefit Guaranty Corporation or the Debtors, as applicable, will terminate the Debtors existing employee benefit policies, plans and agreements identified on Exhibit D. 2. Retiree Medical Benefits

From and after the Effective Date, neither the Debtors nor the Trusts will be obligated to pay retiree benefits (as defined in section 1114(a) of the Bankruptcy Code) or any similar health and medical benefits in accordance with the terms of the retiree benefit plans or other agreements governing the payment of such benefits.

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3.

Pension Plan

From and after the Effective Date, neither the Debtors nor the Trusts will be obligated to pay any benefits in accordance with the terms of any pension plans, including the Collins & Aikman Pension Plan, or other agreements governing the payment of such benefits. 4. Workers Compensation Benefits

From and after the Effective Date, neither the Debtors nor the Trusts will continue to pay workers compensation benefits in accordance with the Workers Compensation Order. 5. Implementation of the KERP and Success Sharing Plan

To the extent the Debtors have not already implemented all or part of the KERP or the Success Sharing Plan prior to the Effective Date, on and after the Effective Date the Post-Consummation Trust shall implement the KERP and the Success Sharing Plan and perform any and all obligations thereunder, including the payment of performance bonuses and severance amounts contemplated thereby. G. Limitations on Amounts to Be Distributed to the Holders of Allowed Insured Claims

Distributions under the Plan to each Holder of an Allowed Insured Claim will be in accordance with the treatment provided under the Plan for the Class in which such Allowed Insured Claim is classified, but solely to the extent that such Allowed Insured Claim is not satisfied from proceeds payable to the Holder thereof under any pertinent insurance policies and applicable law. Nothing in this Article IV.G will constitute a waiver of any claims, obligations, suits, judgments, damages, demands, debts, rights, causes of action or liabilities that any Person may hold against any other Person, including the Debtors insurance carriers. H. Cancellation and Surrender of Instruments, Securities and Other Documentation

Except as provided in any contract, instrument or other agreement or document entered into or delivered in connection with the Plan, on the Effective Date and concurrently with the applicable distributions made pursuant to Article III, the DIP Facility, the Prepetition Credit Facility, the Senior Note Indenture, the Senior Subordinated Note Indenture, the Senior Notes, the Senior Subordinated Notes and the Equity Interests will be canceled and of no further force and effect, without any further action on the part of any Debtor or either of the Trusts. The Holders of or parties to such canceled instruments, securities and other documentation will have no rights arising from or relating to such instruments, securities and other documentation or the cancellation thereof, except the rights provided pursuant to the Plan; provided that no distribution under the Plan will be made to or on behalf of any Holder of an Allowed Claim evidenced by Senior Notes or Senior Subordinated Notes unless and until such instruments or securities are received by the Litigation Trust to the extent required in Article VI.I. I. Creation of Professional Escrow Account

On the Effective Date, the Plan Administrator will establish the Professional Escrow Account and transfer the amounts necessary (based on estimates of Accrued Professional Fees as of the Effective Date provided by each Professional to the Debtors immediately before the Effective Date) to ensure the payment of all Accrued Professional Compensation through the Effective Date. Additionally, on the Effective Date, all amounts in the Carve Out Account will be transferred to and deposited in the Professional Escrow Account. Any amounts remaining in the Professional Escrow Account after payment of all Accrued Professional Compensation through the Effective Date will become Post-Consummation Trust Assets and be available to the Post-Consummation Trust for distribution to its Beneficiaries in accordance with the Post-Consummation Trust Agreement.

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J.

Release of Liens

Except as otherwise provided in the Plan or in any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, on the Effective Date and concurrently with the applicable distributions made pursuant to Article III, all mortgages, deeds of trust, liens or other security interests against the property of any Estate will be fully released and discharged, and all of the right, title and interest of any holder of such mortgages, deeds of trust, liens or other security interests, including any rights to any collateral thereunder, will revert to the Post-Consummation Trust and its successors and assigns. K. Effectuating Documents; Further Transactions; Exemption from Certain Transfer Taxes

The Post-Consummation Trust will be authorized to execute, deliver, file or record such contracts, instruments, releases and other agreements or documents and take such actions as may be necessary or appropriate to effectuate and implement the provisions of the Plan. The Plan Administrator, the Secretary of each Debtor and any Assistant Secretary of each Debtor will be authorized to certify or attest to any of the foregoing actions. Pursuant to section 1146(c) of the Bankruptcy Code, the following will not be subject to any stamp tax, real estate transfer tax or similar tax: (1) the making or assignment of any lease or sublease; or (2) the making or delivery of any deed or other instrument of transfer under, in furtherance of or in connection with the Plan, including: (a) any merger agreements; (b) agreements of consolidation, restructuring, disposition, liquidation or dissolution; (c) deeds; (d) bills of sale; or (e) assignments executed in connection with any Restructuring Transaction pursuant to the Plan. ARTICLE V. TREATMENT OF EXECUTORY CONTRACTS AND UNEXPIRED LEASES A. Executory Contracts and Unexpired Leases to Be Assumed or Assumed and Assigned 1. Assumption and Assignment Generally

Except as otherwise provided in the Plan or in any contract, instrument, release or other agreement or document entered into in connection with the Plan, on the Effective Date, pursuant to section 365 of the Bankruptcy Code, the applicable Debtor or Debtors will assume and assign to the Post-Consummation Trust or the applicable purchaser of the Debtors assets under the Soft-Trim Sales Transaction or Remaining Sales Transaction, as indicated, each of the Executory Contracts and Unexpired Leases listed on Exhibit E. Each contract and lease listed on Exhibit E will be assumed only to the extent that any such contract or lease constitutes an Executory Contract or Unexpired Lease. Listing a contract or lease on Exhibit E does not constitute an admission by a Debtor or the Post-Consummation Trust that such contract or lease is an Executory Contract or Unexpired Lease or that a Debtor or the Post-Consummation Trust has any liability thereunder. 2. Assumptions and Assignments of Executory Contracts and Unexpired Leases

Each Executory Contract and Unexpired Lease listed on Exhibit E includes any modifications, amendments, supplements, restatements or other agreements made directly or indirectly by any agreement, instrument or other document that in any manner affects such contract or lease, irrespective of whether such agreement, instrument or other document is listed on Exhibit E, unless any such modification, amendment, supplement, restatement or other agreement is rejected pursuant to Article V.C. 3. Assignments Related to the Restructuring Transactions

As of the effective time of an applicable Restructuring Transaction, any Executory Contract or Unexpired Lease to be held by any Debtor or another surviving, resulting or acquiring corporation in an applicable Restructuring Transaction, will be deemed assigned to the applicable Person, pursuant to section 365 of the Bankruptcy Code. 23
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4.

Approval of Assumptions and Assignments

Entry of the Confirmation Order by the Bankruptcy Court shall constitute approval of the assumption or conditional assumption of the Executory Contracts and Unexpired Leases to be assumed under the Plan as of the Effective Date pursuant to Sections 365 and 1123 of the Bankruptcy Code. Each Executory Contract and Unexpired Lease that is assumed shall vest in and be fully enforceable by the Post-Consummation Trust or any applicable assignee in accordance with its terms, except as may be modified by the provisions of the Plan, any order of the Bankruptcy Court authorizing or providing for its assumption, or applicable law. B. Payments Related to the Assumption of Executory Contracts and Unexpired Leases

To the extent that such Claims constitute monetary defaults, the Cure Amount Claims associated with each Executory Contract and Unexpired Lease to be assumed pursuant to the Plan will be satisfied, pursuant to section 365(b)(1) of the Bankruptcy Code, at the option of the Debtor assuming such contract or lease or the assignee of such Debtor, if any: (a) by payment of the Cure Amount Claim in Cash on the Effective Date; or (b) on such other terms as are agreed to by the parties to such Executory Contract or Unexpired Lease. If there is a dispute regarding: (a) the amount of any Cure Amount Claim; (b) the ability of the Post-Consummation Trust or any assignee to provide adequate assurance of future performance (within the meaning of section 365 of the Bankruptcy Code) under the contract or lease to be assumed; or (c) any other matter pertaining to assumption or assumption and assignment of such contract or lease, the payment of any Cure Amount Claim required by section 365(b)(1) of the Bankruptcy Code will be made following the entry of a Final Order resolving the dispute and approving the assumption. For assumptions of Executory Contracts or Unexpired Leases between Debtors, the Debtor assuming such contract may cure any monetary default (a) by treating such amount as either a direct or indirect contribution to capital or distribution (as appropriate) or (b) through adjusting an intercompany account balance accordingly in lieu of payment in Cash. C. Executory Contracts and Unexpired Leases to Be Rejected

On the Effective Date, except for an Executory Contract or Unexpired Lease that was previously assumed, assumed and assigned or rejected by an order of the Bankruptcy Court or that is assumed pursuant to Article V.A, each Executory Contract and Unexpired Lease entered into by a Debtor prior to the Petition Date will be rejected pursuant to section 365 of the Bankruptcy Code. The Executory Contracts and Unexpired Leases to be rejected will include the Executory Contracts and Unexpired Leases listed on Exhibit F. Each contract and lease listed on Exhibit F will be rejected only to the extent that any such contract or lease constitutes an Executory Contract or Unexpired Lease. Listing a contract or lease on Exhibit F does not constitute an admission by a Debtor or the PostConsummation Trust that such contract or lease is an Executory Contract or Unexpired Lease or that a Debtor or the Post-Consummation Trust has any liability thereunder. Any Executory Contract and Unexpired Lease not listed on Exhibit F and not previously assumed, assumed and assigned or rejected by an order of the Bankruptcy Court (other than those Executory Contracts and Unexpired Leases identified on Exhibit E) will be rejected irrespective of whether such contract is listed on Exhibit F. The Confirmation Order will constitute an order of the Bankruptcy Court approving such rejections pursuant to section 365 of the Bankruptcy Code as of the Effective Date. D. Bar Date for Rejection Damages

Notwithstanding anything in the Bar Date Order to the contrary, if the rejection of an Executory Contract or Unexpired Lease, including pursuant to Article V.C, gives rise to a Claim (including any Claims arising from those indemnification obligations described in Article V.E) by the other party or parties to such contract or lease, such Claim will be forever barred and will not be enforceable against the Debtors, the Post-Consummation Trust, their respective successors or their respective properties unless a proof of Claim is Filed and served on the PostConsummation Trust, pursuant to the procedures specified in the notice of the entry of the Confirmation Order or an order of the Bankruptcy Court, no later than 30 days after the Confirmation Date.

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E.

Obligations to Indemnify Directors, Officers and Employees

The obligations of each Debtor to indemnify any person serving as one of its directors, officers or employees as of or following the Effective Date shall, to the extent constituting an executory contract, be deemed rejected as of the Effective Date. Neither the Debtors nor either of the Trusts shall have any obligation on or after the Effective Date to pay or perform such indemnification obligations. Notwithstanding the foregoing, such directors, officers and employees shall have the benefit of any and all directors and officers liability insurance policies that may be in effect, but neither the Debtors nor either of the Trusts shall have any obligation on or after the Effective Date to pay premiums thereunder. F. Contracts and Leases Entered into After the Petition Date

Contracts and leases entered into after the Petition Date by any Debtor, including any Executory Contracts and Unexpired Leases assumed by such Debtor, will either be (i) performed by the Post-Consummation Trust in the ordinary course of its business or (ii) terminated, with the relevant counterparty required to file a Claim asserting any alleged damages within the applicable Bar Date. G. Reservation of Rights

Neither the exclusion nor inclusion of any contract or lease by the Debtors on any Exhibit to the Plan, nor anything contained in the Plan, shall constitute an admission by the Debtors that any such contract or lease is or is not in fact an Executory Contract or Unexpired Lease or that any Debtor or the Post-Consummation Trust, or their respective Affiliates, has any liability thereunder. Nothing in the Plan shall waive, excuse, limit, diminish or otherwise alter any of the defenses, Claims, Causes of Action or other rights of the Debtors and the Post-Consummation Trust under any executory or nonexecutory contract or any unexpired or expired lease. Nothing in the Plan shall increase, augment or add to any of the duties, obligations, responsibilities or liabilities of the Debtors or the Post-Consummation Trust under any executory or non-executory contract or any unexpired or expired lease. At any time through and including 90 days after the Effective Date, the Debtors and the Post-Consummation Trust reserve the right to alter, amend, modify or supplement Exhibit E and Exhibit F. If there is a dispute regarding whether a contract or lease is or was executory or unexpired at the time of assumption or rejection, then the Debtors shall have 30 days following entry of a Final Order resolving such dispute to amend their decision to assume or reject such contract or lease. ARTICLE VI. PROVISIONS GOVERNING DISTRIBUTIONS A. Distributions for Claims Allowed as of the Effective Date

Except as otherwise provided in this Article VI and as to DIP Facility Claims and Prepetition Facility Claims, distributions of Cash to be made on the Effective Date to Holders of Claims that are allowed as of the Effective Date will be deemed made on the Effective Date if made on the Effective Date or as promptly thereafter as practicable, but in any event no later than: (i) 90 days after the Effective Date; and (ii) 90 days after such later date when the applicable conditions of Article V.B (regarding cure payments for Executory Contracts and Unexpired Leases being assumed), Article VI.D.2 (regarding undeliverable distributions) or Article VI.I (regarding surrender of canceled instruments and securities) are satisfied. Distributions on account of Claims that become Allowed Claims after the Effective Date will be made pursuant to Article VI.G and Article VII.C.

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B.

Method of Distributions to Holders of Claims

The Post-Consummation Trust, or such Third Party Disbursing Agents as the Post-Consummation Trust may employ in its sole discretion, will make all distributions required under the Plan on behalf of Administrative Claims, Priority Claims, Other Secured Claims, Other Priority Claims and Prepetition Facility Claims (to the extent the Plan provides such distributions are to come from the Post-Consummation Trust). The Litigation Trust, or such Third Party Disbursing Agents as the Litigation Trust may employ in its sole discretion, will make all distributions required under the Plan on behalf of Prepetition Facility Claims (to the extent the Plan provides such distributions are to come from the Litigation Trust) and Claims in Classes 5, 6 and 7. Each Disbursing Agent and Third Party Disbursing Agent will serve without bond, and any Disbursing Agent and Third Party Disbursing Agent may employ or contract with other Persons to assist in or make the distributions required by the Plan. C. Compensation and Reimbursement for Services Related to Distributions

Each Third Party Disbursing Agent providing services related to distributions pursuant to the Plan will receive from the Trust that employs it reasonable compensation for such services and reimbursement of reasonable out-of-pocket expenses incurred in connection with such services without Bankruptcy Court approval. These payments will be made on terms agreed to with the employing Trust. D. Delivery of Distributions and Undeliverable or Unclaimed Distributions 1. Delivery of Distributions (a) Generally

Except as provided in Article VI.D.1(b), distributions to Holders of Allowed Claims will be made by a Disbursing Agent: (i) to the addresses set forth on the respective proofs of Claim Filed by Holders of such Claims; (ii) to the addresses set forth in any written certification of address change delivered to the relevant Disbursing Agent (including pursuant to a letter of transmittal delivered to the relevant Disbursing Agent) after the date of Filing of any related proof of Claim; or (iii) to the addresses reflected in the applicable Debtors Schedules if no proof of Claim has been Filed and the relevant Disbursing Agent has not received a written notice of a change of address. (b) Special Provision for Distribution to Holders of the Prepetition Facility Claims

Distributions of Cash to the Holders of Prepetition Facility Claims will be made by the Plan Administrator or a Disbursing Agent to the Agent for the Pro Rata benefit of the Holders of Prepetition Facility Claims. Distributions of Cash to the Agent shall be effected by wire transfer of immediately available funds. (c) Special Provisions for Distributions to Holders of the Senior Note Claims

Subject to the requirements of Article VI.I, distributions to Holders of Allowed Senior Note Claims will be made by a Disbursing Agent to the record holders of the Senior Notes as of the Distribution Record Date as identified on a record holder register to be provided to the Disbursing Agent by the Senior Note Indenture Trustee within five Business Days after the Distribution Record Date. This record holder register will provide the name, address and holdings of each respective registered Holder of Senior Notes as of the Distribution Record Date. 2. Undeliverable Distributions Held by the Disbursing Agents (a) Holding and Investment of Undeliverable Distributions

If any distribution to a Holder of an Allowed Claim is returned to a Disbursing Agent as undeliverable, no further distributions will be made to such Holder unless and until the applicable Disbursing Agent is notified by 26
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written certification of such Holders then-current address. Undeliverable distributions will remain in the possession of the applicable Disbursing Agent pursuant to this Article VI.D.2(a) until such time as a distribution becomes deliverable. Undeliverable Cash will be held in segregated bank accounts in the name of the applicable Disbursing Agent for the benefit of the potential claimants of such funds. Any Disbursing Agent holding undeliverable cash will invest such Cash in a manner consistent with the investment and deposit guidelines of the Post-Consummation Trust or the Litigation Trust, as applicable. (b) After Distributions Become Deliverable

On each distribution date provided for in the Post-Consummation Trust Agreement and Litigation Trust Agreement, as the case may be, the applicable Trust or the applicable Disbursing Agents will make distributions to the Beneficiaries of such Trust in accordance with the Plan and the relevant Trust Agreement. Each such distribution will include, to the extent applicable, a Pro Rata share of the Cash Investment Yield from the investment of any undeliverable cash from the date that such distribution would have first been due had it then been deliverable to the date that such distribution becomes deliverable. (c) Failure to Claim Undeliverable Distributions

Any Holder of an Allowed Claim that does not assert a claim pursuant to the Plan for an undeliverable distribution to be made by a Disbursing Agent within two years after the later of (i) the Effective Date and (ii) the last date on which a distribution was deliverable will have its claim for such undeliverable distribution discharged and will be forever barred from asserting any such claim against the Post-Consummation Trust or its respective property. Unclaimed Cash will become Post-Consummation Trust Assets and transferred to the Post-Consummation Trust, free of any restrictions thereon, and any such Cash held by a Third Party Disbursing Agent will be returned to the Post-Consummation Trust. Nothing contained in the Plan or the law will require any Debtor, any Trust or any Disbursing Agent to attempt to locate any Holder of an Allowed Claim. E. Distribution Record Date

1. As of the close of business on the Distribution Record Date, the respective transfer registers for the Prepetition Facility Claims, the Senior Notes and the Senior Subordinated Notes, as maintained by the Debtors, the Agent or the Indenture Trustees, as applicable, will be closed. The applicable Disbursing Agent will have no obligation to recognize the transfer or sale of any Prepetition Facility Claim, Senior Note Claim or Senior Subordinated Note Claim that occurs after the close of business on the Distribution Record Date, and any Disbursing Agent will be entitled for all purposes herein to recognize and make distributions only to those Holders of Prepetition Facility Claims, the Holders of Senior Note Claims or the Holders of Senior Subordinated Note Claims who are Holders of such Claims as of the close of business on the Distribution Record Date. 2. Except as otherwise provided in a Final Order of the Bankruptcy Court, the transferees of Claims in Classes 3, 5, 6 and 7 that are transferred pursuant to Bankruptcy Rule 3001 on or prior to the Distribution Record Date will be treated as the Holders of such Claims for all purposes, notwithstanding that any period provided by Bankruptcy Rule 3001 for objecting to such transfer has not expired by the Distribution Record Date. F. Means of Cash Payments

Except as otherwise specified herein, Cash payments made pursuant to the Plan will be in U.S. currency by checks drawn on a domestic bank selected by the applicable Debtor or the applicable Trust or, at the option of the applicable Debtor or the applicable Trust, by wire transfer from a domestic bank; provided that Cash payments to foreign Holders of Allowed Claims may be made, at the option of the applicable Debtor or the applicable Trust, in such funds and by such means as are necessary or customary in a particular foreign jurisdiction. Cash payments made pursuant to the Plan on behalf of DIP Facility Claims and Prepetition Facility Claims will be made to the respective administrative agent on the Effective Date and future distribution dates by wire transfer of immediately available funds.

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G.

Timing and Calculation of Amounts to Be Distributed 1. Allowed Claims

Subject to Article VI.A, on the Effective Date, each Holder of an Allowed Claim will receive the full amount of the distributions that the Plan provides for Allowed Claims in the applicable Class as of the Effective Date. On each Quarterly Distribution Date, distributions also will be made, pursuant to Article VII.C, to Holders of Disputed Claims in any such Class that were Allowed during the preceding calendar quarter and to Holders of Allowed Claims entitled to post-Consummation payments from the Post-Consummation Trust or the Litigation Trust, as applicable, pursuant to the Plan. Such quarterly distributions also will be in the full amount that the Plan provides for Allowed Claims in the applicable Class. 2. De Minimis Distributions

No Disbursing Agent will distribute Cash to the Holder of an Allowed Claim in an Impaired Class if the amount of Cash to be distributed on account of such Claim is less than $25. Any Holder of an Allowed Claim on account of which the amount of Cash to be distributed is less than $25 will have its claim for such distribution discharged and will be forever barred from asserting any such claim against the Post-Consummation Trust, the Litigation Trust or their respective property. Any such Cash that is retained by the Post-Consummation Trust or the Litigation Trust on account of this provision shall be made available for the distribution to Holders of all other Allowed Claims that are permissible under the terms of this Plan. 3. Compliance with Tax Requirements

(a) In connection with the Plan, to the extent applicable, each Disbursing Agent will comply with all tax withholding and reporting requirements imposed on it by any governmental unit, and all distributions pursuant to the Plan will be subject to such withholding and reporting requirements. Each Disbursing Agent will be authorized to take any actions that may be necessary or appropriate to comply with such withholding and reporting requirements. (b) Notwithstanding any other provision of the Plan, each Person receiving a distribution of Cash pursuant to the Plan will have sole and exclusive responsibility for the satisfaction and payment of any tax obligations imposed on it by any governmental unit on account of such distribution, including income, withholding and other tax obligations. H. Setoffs

Except with respect to claims of a Debtor or a Trust released pursuant to the Plan or any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, each Trust or, as instructed by the applicable Debtor or applicable Trust, a Third Party Disbursing Agent may, pursuant to section 553 of the Bankruptcy Code or applicable nonbankruptcy law, set off against any Allowed Claim and the distributions to be made pursuant to the Plan on account of such Claim (before any distribution is made on account of such Claim) the claims, rights and causes of action of any nature that any Debtor or Trust may hold against the Holder of such Allowed Claim; provided that neither the failure to effect a setoff nor the allowance of any Claim hereunder will constitute a waiver or release by the applicable Debtor or the applicable Trust of any claims, rights and Causes of Action that the Debtor or the Post-Consummation Trust may possess against such Holder of a Claim. I. Surrender of Canceled Instruments or Securities

As a condition precedent to receiving any distribution pursuant to the Plan on account of an Allowed Claim evidenced by Senior Notes or Senior Subordinated Notes, the Holder of such Claim must tender, as specified in this Article VI.I, the applicable Senior Notes or Senior Subordinated Notes to the Litigation Trust or Disbursing Agent, together with any letter of transmittal required by the Litigation Trust or Disbursing Agent. Pending such surrender,

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any distributions pursuant to the Plan on account of any such Claim will be treated as an undeliverable distribution pursuant to Article VI.D.2. 1. Tender of Senior Notes or Senior Subordinated Notes

Except as provided in Article VI.I.2 for lost, stolen, mutilated or destroyed Senior Notes or Senior Subordinated Notes, each Holder of an Allowed Senior Note Claim or Senior Subordinated Note Claim must tender the applicable Senior Notes or Senior Subordinated Notes to the Litigation Trust in accordance with a letter of transmittal to be provided to such Holders by the Litigation Trust or Disbursing Agent as promptly as practicable following the Effective Date. The letter of transmittal will include, among other provisions, customary provisions with respect to the authority of the Holder of the applicable Senior Notes or Senior Subordinated Notes to act and the authenticity of any signatures required thereon. All surrendered Senior Notes or Senior Subordinated Notes will be marked as canceled and delivered to the Litigation Trust or Disbursing Agent. 2. Lost, Stolen, Mutilated or Destroyed Senior Notes or Senior Subordinated Notes

Any Holder of an Allowed Senior Note Claim or Senior Subordinated Note Claim with respect to which the underlying Senior Note or Senior Subordinated Note has been lost, stolen, mutilated or destroyed must, in lieu of surrendering such Senior Note or Senior Subordinated Note, deliver to the Litigation Trust or Disbursing Agent: (a) evidence satisfactory to the Litigation Trust or Disbursing Agent of the loss, theft, mutilation or destruction; and (b) such security or indemnity as may be required by the Litigation Trust to hold the Litigation Trust harmless from any damages, liabilities or costs incurred in treating such individual as a Holder of a Senior Note or Senior Subordinated Note. Upon compliance with this Article VI.I.2 by a Holder of an Allowed Senior Note Claim or Senior Subordinated Note Claim, such Holder will, for all purposes under the Plan, be deemed to have surrendered the applicable Senior Note or Senior Subordinated Note. 3. Failure to Surrender Senior Notes or Senior Subordinated Notes

Any Holder of an Allowed Senior Note Claim or Senior Subordinated Note Claim that fails to surrender or is not deemed to have surrendered the applicable Senior Notes or Senior Subordinated Notes within two years after the Effective Date will have its right to distribution pursuant to the Plan on account of such Senior Note Claim or Senior Subordinated Note Claim discharged and will be forever barred from asserting any such Claim against the Litigation Trust or its respective property. ARTICLE VII. PROCEDURES FOR RESOLVING DISPUTED CLAIMS A. Prosecution of Objections to Claims 1. Objections to Claims

All objections to Claims must be Filed by the Claims Objection Bar Date, and (a) if Filed prior to the Effective Date, such objections will be served only on the Holders of such Claims and the parties on the thenapplicable service list in the Chapter 11 Cases and (b) if Filed after the Effective Date, such objections will be served only on the Holders of such Claims and the United States trustee. If an objection has not been Filed to a proof of Claim or a scheduled Claim by the Claims Objection Bar Date, the Claim to which the proof of Claim or scheduled Claim relates will be treated as an Allowed Claim if such Claim has not been Allowed earlier. An objection is deemed to have been timely Filed as to all Tort Claims, thus making each such Claim a Disputed Claim as of the Claims Objection Bar Date. Each such Tort Claim will remain a Disputed Claim until it becomes an Allowed Claim by a Final Order.

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2.

Authority to Prosecute Objections

After the Effective Date, except as provided in the following paragraph, only the Debtors or the PostConsummation Trust will have the authority to File, settle, compromise, withdraw or litigate to judgment objections to Claims. After the Effective Date, the Post-Consummation Trust may settle or compromise any Disputed Claim without approval of the Bankruptcy Court; provided that (a) the Post-Consummation Trust will promptly File with the Bankruptcy Court a written notice of any settlement or compromise of a Claim with a Face Amount in excess of $1,000,000 and (b) the Agent and the United States trustee will be authorized to contest the proposed settlement or compromise by Filing a written objection with the Bankruptcy Court and serving such objection on the PostConsummation Trust within 20 days of the service of the settlement notice. If such objection is filed and the PostConsummation Trust and the objecting party are unable to consensually resolve such objection, the objection will be set for hearing before the Bankruptcy Court. If no such objection is Filed, the applicable settlement or compromise will be deemed final without further action of the Bankruptcy Court; provided that the Post-Consummation Trust shall be authorized, but not required, to file a certification of no objection and submit an order to the Bankruptcy Court on account of such settlements and compromises. Notwithstanding the foregoing, after the Effective Date, only the Litigation Trust will have the authority to File, settle, compromise, withdraw or litigate to judgment objections to Claims in Classes 5, 6 and 7. After the Effective Date, the Litigation Trust may settle or compromise any Disputed Claim without approval of the Bankruptcy Court; provided that (a) the Litigation Trust will promptly File with the Bankruptcy Court a written notice of any settlement or compromise of a Claim with a Face Amount in excess of $25,000,000 and (b) the Agent and the United States trustee will be authorized to contest the proposed settlement or compromise by Filing a written objection with the Bankruptcy Court and serving such objection on the Post-Consummation Trust no later than 20 days after the service of the settlement notice. If such objection is filed and the Litigation Trust and the objecting party are unable to consensually resolve such objection, the objection will be set for hearing before the Bankruptcy Court. If no such objection is Filed, the applicable settlement or compromise will be deemed final without further action of the Bankruptcy Court; provided that the Litigation Trust shall be authorized, but not required, to file a certification of no objection and submit an order to the Bankruptcy Court on account of such settlements and compromises. B. Treatment of the Disputed Claims

Notwithstanding any other provisions of the Plan, no payments or distributions will be made on account of a Disputed Claim until such Claim becomes an Allowed Claim. C. Distributions on Account of the Disputed Claims Once Allowed

On each Quarterly Distribution Date, the applicable Disbursing Agent will make all distributions on account of any Disputed Claim that has become an Allowed Claim during the preceding calendar quarter. Such distributions will be made pursuant to the provisions of the Plan governing the applicable Class. ARTICLE VIII. THE POST-CONSUMMATION TRUST; THE PLAN ADMINISTRATOR A. Generally

The powers, authority, responsibilities and duties of the Post-Consummation Trust and the Plan Administrator are set forth in and shall be governed by the Post-Consummation Trust Agreement. The Agent shall designate the initial Plan Administrator.

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B.

Purpose of the Post-Consummation Trust

The Post-Consummation Trust shall be established for the primary purpose of liquidating its assets with no objective to continue or engage in the conduct of a trade or business, except to the extent reasonably necessary to, and consistent with, the liquidating purpose of the Post-Consummation Trust. Upon the transfer of the PostConsummation Trust Assets, the Debtors will have no reversionary or further interest in or with respect to the PostConsummation Trust Assets or the Post-Consummation Trust. For all federal income tax purposes, the Beneficiaries of the Post-Consummation Trust shall be treated as grantors and owners thereof and it is intended that the PostConsummation Trust be classified as a liquidating trust under Section 301.7701-4 of the Treasury Regulations and that such trust is owned by the Beneficiaries. Accordingly, for federal income tax purposes, it is intended that the Beneficiaries be treated as if they had received a distribution of an undivided interest in the Post-Consummation Trust Assets and then contributed such interests to the Post-Consummation Trust. Accordingly, the PostConsummation Trust shall, in an expeditious but orderly manner, liquidate and convert to Cash the PostConsummation Trust Assets, make timely distributions to the Beneficiaries and not unduly prolong its duration. The Post-Consummation Trust shall not be deemed a successor-in-interest of the Debtors for any purpose other than as specifically set forth herein or in the Post-Consummation Trust Agreement. The Post-Consummation Trust is intended to qualify as a grantor trust for federal income tax purposes with the Beneficiaries treated as grantors and owners of the trust. C. Transfer of Assets to the Post-Consummation Trust

The Debtors and the Plan Administrator shall establish the Post-Consummation Trust on behalf of the Beneficiaries pursuant to the Post-Consummation Trust Agreement, to be treated as the grantors and deemed owners of the Post-Consummation Trust Assets and the Debtors shall, as set forth below, transfer, assign and deliver to the Post-Consummation Trust, on behalf of the Beneficiaries, all of their rights, titles and interests in the Post-Consummation Trust Assets, including Claims and Causes of Action of the Debtors, other than any Claims and Causes of Action waived, exculpated, released or transferred to the Litigation Trust in accordance with the provisions herein, notwithstanding any prohibition of assignability under non-bankruptcy law. The PostConsummation Trust shall agree to accept and hold the Post-Consummation Trust Assets in the Post-Consummation Trust for the benefit of the Beneficiaries, subject to the terms of the Plan and the Post-Consummation Trust Agreement. On the Effective Date, the Debtors shall transfer the Post-Consummation Trust Assets to the PostConsummation Trust for the benefit of the Beneficiaries. Notwithstanding any prohibition of assignability under applicable non-bankruptcy law, all the Residual Assets (other than the assets transferred to the Litigation Trust) shall vest in the Post-Consummation Trust in accordance with section 1141 of the Bankruptcy Code. Upon the transfer of the Post-Consummation Trust Assets to the Post-Consummation Trust, the Debtors shall have no interest in or with respect to such Post-Consummation Trust Assets or the Post-Consummation Trust. D. Distribution; Withholding

The Plan Administrator shall make distributions to the Beneficiaries of the Post-Consummation Trust as provided in the Post-Consummation Trust Agreement. The Post-Consummation Trust may withhold from amounts distributable to any Person any and all amounts, determined in the Plan Administrators sole discretion, to be required by the Plan, any law, regulation, rule, ruling, directive or other governmental requirement. After appropriate reserves have been established to fund amounts required under this Plan and as identified in the Post-Consummation Trust Budget (including, but not limited to, amounts to pay Allowed Administrative Claims, Priority Claims, Wind-Down Expenses and the fees and expenses of the Plan Administrator and the Post-Consummation Trust), the funds to be distributed to the Holders of Allowed Prepetition Facility Claims, other than the Prepetition Facility Distribution, shall be distributed to such Holders on a Pro Rata basis at the sole discretion of the Plan Administrator.

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E.

D&O Insurance

The Post-Consummation Trust shall maintain customary insurance coverage for the protection of Persons serving as administrators and overseers of the Post-Consummation Trust on and after the Effective Date. F. Post-Consummation Trust Implementation

On the Effective Date, the Post-Consummation Trust will be established and become effective for the benefit of the Holders of Allowed Claims entitled to distributions from the Post-Consummation Trust under the Plan. The Post-Consummation Trust Agreement shall contain provisions customary to trust agreements utilized in comparable circumstances, including, but not limited to, any and all provisions necessary to ensure the continued treatment of the Post-Consummation Trust as a grantor trust and the Holders of Allowed Claims as the grantors and owners thereof for federal income tax purposes. All parties (including the Debtors, the Plan Administrator and the Holders of Allowed Claims) shall execute any documents or other instruments as necessary to cause title to the Residual Assets to be transferred to the Post-Consummation Trust. G. Disputed Claims Reserve

The Plan Administrator shall maintain, in accordance with the Plan Administrators powers and responsibilities under this Plan and the Post-Consummation Trust Agreement, a Disputed Claims Reserve. The Plan Administrator shall, in his sole discretion, distribute such amounts (net of any expenses, including any taxes relating thereto), as provided herein and in the Post-Consummation Trust Agreement, as such Disputed Claims are resolved by Final Order, and such amounts shall be distributable in respect of such Disputed Claims as such amounts would have been distributable had the Disputed Claims been Allowed Claims as of the Effective Date. The PostConsummation Trust will pay taxes on the taxable net income or gain allocable to Holders of Disputed Claims on behalf of such Holders and, when such Disputed Claims are ultimately resolved, Holders whose Disputed Claims are determined to be Allowed Claims will receive distributions from the Post-Consummation Trust net of the taxes that the Post-Consummation Trust previously paid on their behalf. H. Termination of the Post-Consummation Trust

The Post-Consummation Trust will terminate as soon as practicable, but in no event later than the fifth anniversary of the Effective Date; provided that, on or prior to the date six months prior to such termination, the Bankruptcy Court, upon motion by a party in interest, may extend the term of the Post-Consummation Trust for a finite period if such an extension is necessary to liquidate the Post-Consummation Trust Assets or to complete any distribution required under the Plan. Notwithstanding the foregoing, multiple extensions may be obtained so long as Bankruptcy Court approval is obtained at least six months prior to the expiration of each extended term; provided that the Plan Administrator receives an opinion of counsel or a favorable ruling from the Internal Revenue Service that any further extension would not adversely affect the status of the Post-Consummation Trust as a grantor trust for federal income tax purposes. I. Termination of the Plan Administrator

The duties, responsibilities and powers of the Plan Administrator shall terminate in accordance with the terms of the Post-Consummation Trust Agreement. J. Exculpation; Indemnification

The Plan Administrator, the Post-Consummation Trust, the professionals of the Post-Consummation Trust, the Post-Consummation Advisory Trust Board and their representatives shall be exculpated and indemnified pursuant to the terms of the Post-Consummation Trust Agreement.

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ARTICLE IX. THE LITIGATION TRUST; THE LITIGATION TRUST ADMINISTRATOR A. Generally

The powers, authority, responsibilities and duties of the Litigation Trust and the Litigation Trust Administrator are set forth in and shall be governed by the Litigation Trust Agreement. The Agent, in consultation with the Prepetition Lenders and the Creditors Committee, shall designate the initial Litigation Trust Administrator. B. Purpose of the Litigation Trust

The Litigation Trust shall be established for the primary purpose of liquidating its assets with no objective to continue or engage in the conduct of a trade or business, except to the extent reasonably necessary to, and consistent with, the liquidating purpose of the Litigation Trust. Upon the transfer of the Litigation Trust Assets, the Debtors will have no reversionary or further interest in or with respect to the Litigation Trust Assets or the Litigation Trust. For all federal income tax purposes, the Beneficiaries of the Litigation Trust shall be treated as grantors and owners thereof and it is intended that the Litigation Trust be classified as a liquidating trust under Section 301.7701-4 of the Treasury Regulations and that such trust is owned by the Beneficiaries. Accordingly, for federal income tax purposes, it is intended that the Beneficiaries be treated as if they had received a distribution of an undivided interest in the Litigation Trust Assets and then contributed such interests to the Litigation Trust. Accordingly, the Litigation Trust shall, in an expeditious but orderly manner, liquidate and convert to Cash the Litigation Trust Assets, make timely distributions to the Beneficiaries and not unduly prolong its duration. The Litigation Trust shall not be deemed a successor-in-interest of the Debtors for any purpose other than as specifically set forth herein or in the Litigation Trust Agreement. The Litigation Trust is intended to qualify as a grantor trust for federal income tax purposes with the Beneficiaries treated as grantors and owners of the trust. C. Transfer of Assets to the Litigation Trust

The Debtors and the Litigation Trust Administrator shall establish the Litigation Trust on behalf of the Beneficiaries pursuant to the Litigation Trust Agreement, to be treated as the grantors and deemed owners of the Litigation Trust Assets and the Debtors shall, as set forth below, transfer, assign and deliver to the Litigation Trust, on behalf of the Beneficiaries, all of their right, title and interests in the Litigation Trust Assets, notwithstanding any prohibition of assignability under non-bankruptcy law. The Litigation Trust shall agree to accept and hold the Litigation Trust Assets in the Litigation Trust for the benefit of the Beneficiaries, subject to the terms of the Plan and the Litigation Trust Agreement. On the Effective Date, the Debtors shall transfer the Litigation Trust Assets to the Litigation Trust for the benefit of the Beneficiaries. Notwithstanding any prohibition of assignability under applicable non-bankruptcy law, all the Litigation Trust Claims shall vest in the Litigation Trust in accordance with section 1141 of the Bankruptcy Code. Upon the transfer of the Litigation Trust Assets to the Litigation Trust, the Debtors shall have no interest in or with respect to such Litigation Trust Assets or the Litigation Trust. D. Distribution; Withholding

The Litigation Trust Administrator shall make distributions to the Beneficiaries of the Litigation Trust as provided in the Litigation Trust Agreement. The Litigation Trust may withhold from amounts distributable to any Person any and all amounts, determined in the Litigation Trust Administrators sole discretion, to be required by the Plan, any law, regulation, rule, ruling, directive or other governmental requirement. E. D&O Insurance

The Litigation Trust shall maintain customary insurance coverage for the protection of Persons serving as administrators and overseers of the Litigation Trust on and after the Effective Date. 33
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F.

Litigation Trust Implementation

On the Effective Date, the Litigation Trust will be established and become effective for the benefit of the Holders of Allowed Claims entitled to distributions from the Litigation Trust under the Plan. The Litigation Trust Agreement shall contain provisions customary to trust agreements utilized in comparable circumstances, including, but not limited to, any and all provisions necessary to ensure the continued treatment of the Litigation Trust as a grantor trust and the Holders of Allowed Claims as the grantors and owners thereof for federal income tax purposes. All parties (including the Debtors, the Litigation Trust Administrator and the Holders of Allowed Claims) shall execute any documents or other instruments as necessary to cause title to the Litigation Trust Claims to be transferred to the Litigation Trust. G. Disputed Claims Reserve

The Litigation Trust Administrator shall maintain, in accordance with the Litigation Trust Administrators powers and responsibilities under this Plan and the Litigation Trust Agreement, a Disputed Claims Reserve. The Litigation Trust Administrator shall, in his sole discretion, distribute such amounts (net of any expenses, including any taxes relating thereto), as provided herein and in the Litigation Trust Agreement, as such Disputed Claims are resolved by Final Order, and such amounts shall be distributable in respect of such Disputed Claims as such amounts would have been distributable had the Disputed Claims been Allowed Claims as of the Effective Date. The Litigation Trust will pay taxes on the taxable net income or gain allocable to Holders of Disputed Claims on behalf of such Holders and, when such Disputed Claims are ultimately resolved, Holders whose Disputed Claims are determined to be Allowed Claims will receive distributions from the Litigation Trust net of the taxes that the Litigation Trust previously paid on their behalf. H. Termination of the Litigation Trust

The Litigation Trust will terminate as soon as practicable, but in no event later than the fifth anniversary of the Effective Date; provided that, on or prior to the date six months prior to such termination, the Bankruptcy Court, upon motion by a party in interest, may extend the term of the Litigation Trust for a finite period if such an extension is necessary to liquidate the Litigation Trust Claims. Notwithstanding the foregoing, multiple extensions may be obtained so long as Bankruptcy Court approval is obtained at least six months prior to the expiration of each extended term; provided that the Litigation Trust Administrator receives an opinion of counsel or a favorable ruling from the Internal Revenue Service that any further extension would not adversely affect the status of the Litigation Trust as a grantor trust for federal income tax purposes. I. Termination of the Litigation Trust Administrator

The duties, responsibilities and powers of the Litigation Trust Administrator shall terminate in accordance with the terms of the Litigation Trust Agreement. J. Exculpation; Indemnification

The Litigation Trust Administrator, the Litigation Trust, the professionals of the Litigation Trust and their representatives shall be exculpated and indemnified pursuant to the terms of the Litigation Trust Agreement.

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ARTICLE X. CONDITIONS PRECEDENT TO CONFIRMATION AND CONSUMMATION OF THE PLAN A. Conditions to Confirmation

The following are conditions precedent to Confirmation of this Plan that must be (i) satisfied or (ii) waived in accordance with Article X.C below: 1. The Bankruptcy Court shall have entered the Confirmation Order in form and substance reasonably acceptable to the Debtors and the Agent. 2. The Plan and the Exhibits hereto (as confirmed or approved by the Confirmation Order) shall be in form and substance satisfactory to the Debtors and the Agent, in consultation with the Prepetition Lenders. 3. The Bankruptcy Court shall have entered a final order (which shall not have been vacated or stayed) approving the Customer Agreement. 4. The Debtors shall have consummated the Soft-Trim Sales Transaction.

5. The Bankruptcy Court shall have entered an order or the Debtors shall have entered into an agreement with the PBGC, either of which shall provide that the Collins & Aikman Pension Plan and other pension obligations for the Debtors United States employees is terminated. 6. The Bankruptcy Court shall have entered an order (which shall not have been vacated or stayed), which shall provide that the Post-Consummation Trust has no OPEB Liability, or the Confirmation Order shall provide for such relief. B. Conditions Precedent to Consummation

The following are conditions precedent to Consummation of this Plan that must be (i) satisfied or (ii) waived in accordance with Article X.C below: 1. 2. 3. All conditions to Confirmation of this Plan set forth in Article X.A shall remain satisfied. Each order of the Bankruptcy Court referred to in Article X.A shall have become a Final Order. The Post-Consummation Trust Agreement and all related agreements shall have been executed.

4. The Residual Assets shall have been transferred to the Post-Consummation Trust and the Residual Assets shall include no less than $3 million in Cash. 5. 6. 7. The Litigation Trust Agreement and all related agreements shall have been executed. The Litigation Trust Assets shall have been transferred to the Litigation Trust. The Professional Escrow Account shall have been funded.

8. All other actions, documents and agreements necessary to implement the Plan as of the Effective Date shall have been delivered and all conditions precedent thereto shall have been satisfied or waived.

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C.

Waiver of Conditions

The Debtors, in the Debtors discretion and with the consent of the Agent, in consultation with the Prepetition Lenders, may waive any of the conditions to Confirmation of the Plan set forth in Article X.A or Consummation of the Plan set forth in Article X.B at any time, without notice, without leave or order of the Bankruptcy Court and without any formal action other than proceeding to confirm or consummate the Plan. D. Effect of Non-Occurrence of Conditions to Consummation

If the Consummation of the Plan does not occur, the Plan will be null and void in all respects and nothing contained in the Plan or the Disclosure Statement will: (1) constitute a waiver or release of any Claims by or against, or any Equity Interests, in any Debtor; (2) prejudice in any manner the rights of any Debtor or any other party; or (3) constitute an admission, acknowledgment, offer or undertaking by any Debtor in any respect. ARTICLE XI. CRAMDOWN The Debtors request Confirmation under section 1129(b) of the Bankruptcy Code with respect to any Impaired Class that does not accept the Plan pursuant to section 1126 of the Bankruptcy Code. The Debtors reserve the right to modify the Plan to the extent, if any, that Confirmation pursuant to section 1129(b) of the Bankruptcy Code requires modification. ARTICLE XII. SETTLEMENT, RELEASE, INJUNCTION AND RELATED PROVISIONS A. Compromise and Settlement

Notwithstanding anything contained in the Plan to the contrary, the allowance, classification and treatment of all Allowed Claims and Allowed Equity Interests and their respective distributions and treatments hereunder take into account for and conform to the relative priority and rights of the Claims and Equity Interests in each Class in connection with any contractual, legal and equitable subordination rights relating thereto whether arising under general principles of equitable subordination, section 510(b) and (c) of the Bankruptcy Code, substantive consolidation or otherwise. As of the Effective Date, any and all such rights described in the preceding sentence are settled, compromised and released pursuant hereto, including for substantive consolidation purposes. The Confirmation Order shall constitute the Bankruptcy Courts finding and determination that the settlements reflected in the Plan, including all issues pertaining to claims for substantive consolidation (which are settled by the distributions in the Plan), are (1) in the best interests of the Debtors and their Estates, (2) fair, equitable and reasonable, (3) made in good faith and (4) approved by the Bankruptcy Court pursuant to section 363 of the Bankruptcy Code and Bankruptcy Rule 9019. In addition, the allowance, classification and treatment of Allowed Claims take into account any causes of action, claims or counterclaims, whether under the Bankruptcy Code or otherwise under applicable law, that may exist: (1) between the Debtors and the Releasing Parties; and (2) as between the Releasing Parties (to the extent set forth in Article XI.C). As of the Effective Date, any and all such causes of action, claims and counterclaims are settled, compromised and released pursuant hereto. The Confirmation Order will approve all such releases of contractual, legal and equitable subordination rights, causes of action, claims and counterclaims against each such Releasing Party that are satisfied, compromised and settled pursuant hereto. Nothing in this Article XII.A will compromise or settle in any way whatsoever, any Claims or Causes of Action that the Debtors or any Trust may have against the Non-Released Parties. B. Releases by the Debtors

Notwithstanding anything contained in the Plan to the contrary, on the Effective Date and effective as of the Effective Date, for the good and valuable consideration provided by each of the Debtor Releasees, 36
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including: (1) the discharge of claims and all other good and valuable consideration paid pursuant to the Plan; and (2) the services of the officers and directors employed by the Debtors at any time within six months immediately prior to the Effective Date in facilitating the expeditious implementation of the transactions contemplated by the Plan, each of the Debtors will provide a full discharge and release to the Debtor Releasees (and each such Debtor Releasee so released will be deemed released and discharged by the Debtors) and each such Debtor Releasees respective properties from any and all claims, causes of action and any other debts, obligations, rights, suits, damages, actions, interests, Causes of Action, remedies, and liabilities whatsoever, whether known or unknown, foreseen or unforeseen, suspected or unsuspected, liquidated or unliquidated, contingent or fixed, currently existing or hereafter arising, in law, equity or otherwise, whether for tort, fraud, contract, violations of federal or state securities laws, or otherwise, based in whole or in part upon any act or omission, transaction, or other occurrence or circumstances existing or taking place prior to or on the Effective Date arising from or related in any way to the Debtors, including those that any of the Debtors or either Trust would have been legally entitled to assert (whether individually or collectively) or that any Holder of a Claim or Equity Interest or other Person would have been legally entitled to assert for or on behalf of any of the Debtors or any of their Estates and further including those in any way related to the Chapter 11 Cases or the Plan; provided that the foregoing Debtor Release will not operate to waive or release any Debtor Releasee from any Causes of Action set forth on Exhibit A. Notwithstanding anything contained in the Plan to the contrary, the Debtors will not have released nor be deemed to have released by operation of this Article XII.B or otherwise any of the Causes of Action set forth on Exhibit A or any other claims, causes of action, debts, obligations, rights, suits, damages, actions, interests, remedies or liabilities that they or either Trust may have now or in the future against the NonReleased Parties. Entry of the Confirmation Order will constitute the Bankruptcy Courts approval, pursuant to section 363 of the Bankruptcy Code and Bankruptcy Rule 9019, of the releases provided under this Article XII.B, which includes by reference each of the related provisions and definitions contained in the Plan, and further, will constitute the Bankruptcy Courts finding that such release is: (1) in exchange for good and valuable consideration provided by the Debtor Releasees, representing good faith settlement and compromise of the claims released herein; (2) in the best interests of the Debtors and all Holders of Claims; (3) fair, equitable and reasonable; (4) approved after due notice and opportunity for hearing; and (5) a bar to the Debtors and both Trusts asserting any Claim released herein against any of the Debtor Releasees or their property. C. Third Party Releases

As of the Effective Date, in consideration for the obligations of the Debtors and the Trusts under the Plan and the Cash, other contracts, instruments, releases, agreements or documents to be entered into or delivered in connection with the Plan (1) each Holder of a Claim that votes in favor of the Plan and (2) to the fullest extent permissible under applicable law, as such law may be extended or interpreted subsequent to the Effective Date, each Person that has held, holds or may hold a Claim or Equity Interest or at any time was a Holder of a Claim or Equity Interest of any of the Debtors and that does not vote on the Plan or votes against the Plan will be deemed to forever release, waive and discharge all claims (including Derivative Claims), causes of action and any other debts, obligations, rights, suits, damages, actions, interests, remedies and liabilities (other than the right to enforce the obligations of the Debtors or the Trusts under the Plan and the contracts, instruments, releases, agreements and documents delivered thereunder), whether known or unknown, foreseen or unforeseen, suspected or unsuspected, liquidated or unliquidated, contingent or fixed, currently existing or hereafter arising, in law, equity or otherwise, that are based in whole or in part on any act, omission, transaction or other occurrence taking place on or prior to the Effective Date in any way relating to a Debtor, the Chapter 11 Cases or the Plan that such Person has, had or may have against any Debtor Releasee or Releasing Party (which release will be in addition to the discharge of Claims and termination of Equity Interests provided herein and under the Confirmation Order and the Bankruptcy Code).

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Notwithstanding anything contained in the Plan to the contrary, the Releasing Parties will not have released nor deemed to have released by operation of this Article XII.C or otherwise any claims or causes of action that they, the Debtors or either Trust may have now or in the future against the Non-Released Parties. Entry of the Confirmation Order will constitute the Bankruptcy Courts approval pursuant to section 363 of the Bankruptcy Code and Bankruptcy Rule 9019 of the release provided under this Article XII.C, which includes by reference each of the related provisions and definitions contained in the Plan, and further, will constitute the Bankruptcy Courts finding that such release is: (1) in exchange for good and valuable consideration provided by the Debtor Releasees and the Releasing Parties, representing good faith settlement and compromise of the claims released herein; (2) in the best interests of the Debtors and all Holders of Claims; (3) fair, equitable, and reasonable; (4) approved after due notice and opportunity for hearing; and (5) a bar to any of the Releasing Parties asserting any claim released herein against any of the Debtor Releasees or the Releasing Parties or their respective property. D. Exculpation

Notwithstanding anything contained in the Plan to the contrary, the Exculpated Parties will neither have nor incur any liability to any Person for any prepetition or postpetition act taken or omitted to be taken in connection with or related to formulating, negotiating, preparing, disseminating, implementing or administering the Plan, the Disclosure Statement or any contract, instrument, release or other agreement or document created or entered into in connection with the Plan, or any other prepetition or postpetition act taken or omitted to be taken in connection with or in contemplation of the restructuring of the Debtors or confirming or consummating the Plan; provided that the foregoing provisions of this Article XII.D will have no effect on the liability of any Person that results from any such act or omission that is determined in a Final Order to have constituted gross negligence or willful misconduct; provided further that each Exculpated Party will be entitled to rely upon the advice of counsel concerning his, her or its duties pursuant to, or in connection with, the Plan; provided still further that the foregoing Exculpation will not apply to any acts or omissions expressly set forth in and preserved by the Plan. Notwithstanding anything contained in the Plan to the contrary, the Exculpated Parties will not include the Non-Released Parties, and the Plan will not exculpate nor be deemed to have exculpated any of the Non-Released Parties for any acts they have taken, whether in contemplation of the restructuring of the Debtors, in confirming or consummating the Plan, or otherwise. E. Injunction

1. Except as provided in the Plan or the Confirmation Order, as of the Effective Date, all Persons that have held, currently hold or may hold a Claim or other debt or liability that is discharged or an Equity Interest or other right of an equity security holder that is terminated pursuant to the terms of the Plan are permanently enjoined from taking any of the following actions on account of any such discharged Claims, debts or liabilities or terminated Equity Interests or rights: (a) commencing or continuing in any manner any action or other proceeding against the Debtors, either Trust or their respective property, other than to enforce any right to a distribution pursuant to the Plan; (b) enforcing, attaching, collecting or recovering in any manner any judgment, award, decree or order against the Debtors, either Trust or their respective property, other than as permitted pursuant to (a) above; (c) creating, perfecting or enforcing any lien or encumbrance against the Debtors, either Trust or their respective property; (d) asserting a setoff, right of subrogation or recoupment of any kind against any debt, liability or obligation due to the Debtors or either Trust; and (e) commencing or continuing any action, in any manner, in any place that does not comply with or is inconsistent with the provisions of the Plan. 2. As of the Effective Date, all Persons that have held, currently hold or may hold any claims, causes of action and any other debts, obligations, rights, suits, damages, actions, interests, remedies or liabilities that are released pursuant to the Plan are permanently enjoined from taking any of the following actions against any released Person or its property on account of such released claims, obligations, suits,

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judgments, damages, demands, debts, rights, causes of action or liabilities: (a) commencing or continuing in any manner any action or other proceeding; (b) enforcing, attaching, collecting or recovering in any manner any judgment, award, decree or order; (c) creating, perfecting or enforcing any lien or encumbrance; (d) asserting a setoff, right of subrogation or recoupment of any kind against any debt, liability or obligation due to any released Person; and (e) commencing or continuing any action, in any manner, in any place that does not comply with or is inconsistent with the provisions of the Plan. 3. By accepting distributions pursuant to the Plan, each Holder of an Allowed Claim receiving distributions pursuant to the Plan will be deemed to have specifically consented to the injunctions set forth in this Article XII.E. ARTICLE XIII. RETENTION OF JURISDICTION Notwithstanding the entry of the Confirmation Order and the occurrence of the Effective Date, the Bankruptcy Court will retain such jurisdiction over the Chapter 11 Cases after the Effective Date as is legally permissible, including jurisdiction to: 1. Allow, disallow, determine, liquidate, classify, estimate or establish the priority or secured or unsecured status of any Claim or Equity Interest, including the resolution of any request for payment of any Administrative Claim, Priority Claim, Secured Claim and Unsecured Claim and the resolution of any objections to the allowance, priority or classification of Claims or Equity Interests; 2. Determine any matters related to or in connection with the Soft Trim Sales Transaction and the Remaining Sales Transactions. 3. Grant or deny any applications for allowance of compensation or reimbursement of expenses authorized pursuant to the Bankruptcy Code or the Plan for periods ending on or before the Effective Date; 4. Resolve any matters related to the assumption, assumption and assignment or rejection of any Executory Contract or Unexpired Lease to which any Debtor is a party or with respect to which any Debtor or the Post-Consummation Trust may be liable and to hear, determine and, if necessary, liquidate any Claims arising therefrom, including any Cure Amount Claims; 5. Ensure that distributions to Holders of Allowed Claims are accomplished pursuant to the provisions of the Plan; 6. Decide or resolve any motions, adversary proceedings, contested or litigated matters and any other matters, and grant or deny any applications involving the Debtors that may be pending on the Effective Date or brought thereafter; 7. Enter such orders as may be necessary or appropriate to implement or consummate the provisions of the Plan and all contracts, instruments, releases and other agreements or documents entered into or delivered in connection with the Plan, the Disclosure Statement or the Confirmation Order; 8. Resolve any cases, controversies, suits or disputes that may arise in connection with the Consummation, interpretation or enforcement of the Plan or any contract, instrument, release or other agreement or document that is entered into or delivered pursuant to the Plan or any Persons rights arising from or obligations incurred in connection with the Plan or such documents; 9. Modify the Plan before or after the Effective Date pursuant to section 1127 of the Bankruptcy Code; modify the Disclosure Statement, the Confirmation Order or any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, the Disclosure Statement or the Confirmation Order; or remedy any defect or omission or reconcile any inconsistency in any Bankruptcy Court 39
K&E 11547813.1

order, the Plan, the Disclosure Statement, the Confirmation Order or any contract, instrument, release or other agreement or document entered into, delivered or created in connection with the Plan, the Disclosure Statement or the Confirmation Order, in such manner as may be necessary or appropriate to consummate the Plan; 10. Issue injunctions, enforce the injunctions contained in the Plan and the Confirmation Order, enter and implement other orders or take such other actions as may be necessary or appropriate to restrain interference by any Person with Consummation, implementation or enforcement of the Plan or the Confirmation Order; 11. Enter and implement such orders as are necessary or appropriate if the Confirmation Order is for any reason or in any respect modified, stayed, reversed, revoked or vacated or distributions pursuant to the Plan are enjoined or stayed; 12. Determine any other matters that may arise in connection with or relate to the Plan, the Disclosure Statement, the Confirmation Order or any contract, instrument, release or other agreement or document entered into or delivered in connection with the Plan, the Disclosure Statement or the Confirmation Order; 13. Determine matters concerning state, local and federal taxes in accordance with sections 346, 505 and 1146 of the Bankruptcy Code, including any Disputed Claims for taxes; and 14. Enter a Final Decree closing the Chapter 11 Cases. ARTICLE XIV. MISCELLANEOUS PROVISIONS A. Dissolution of the Creditors Committee

On the Effective Date, the Creditors Committee will dissolve and the members of the Creditors Committee will be released and discharged from all duties and obligations arising from or related to the Chapter 11 Cases. The Professionals retained by the Creditors Committee and the members thereof will not be entitled to assert any Fee Claim for any services rendered or expenses incurred after the Effective Date, except for services rendered and expenses incurred in connection with any applications for allowance of compensation and reimbursement of expenses pending on the Effective Date or Filed and served after the Effective Date pursuant to Article III.A.1(f)(ii)(A) and in connection with any appeal of the Confirmation Order. B. Modification of the Plan

Subject to the restrictions on modifications set forth in section 1127 of the Bankruptcy Code, the Debtors or the Post-Consummation Trust, as applicable, reserve the right to alter, amend or modify the Plan before its substantial consummation. C. Revocation of the Plan

The Debtors reserve the right to revoke or withdraw the Plan as to any or all of the Debtors prior to the Confirmation Date. If the Debtors revoke or withdraw the Plan as to any or all of the Debtors, or if Confirmation as to any or all of the Debtors does not occur, then, with respect to such Debtors, the Plan will be null and void in all respects, and nothing contained in the Plan will: (1) constitute a waiver or release of any Claims by or against, or any Equity Interests in any Debtor; (2) prejudice in any manner the rights of any Debtor or any other party; or (3) constitute an admission, acknowledgment, offer or undertaking by any Debtor in any respect. D. Severability of Plan Provisions

If, prior to Confirmation, any term or provision of the Plan is held by the Bankruptcy Court to be invalid, void or unenforceable, the Bankruptcy Court will have the power to alter and interpret such term or provision to

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make it valid or enforceable to the maximum extent practicable, consistent with the original purpose of the term or provision held to be invalid, void or unenforceable, and such term or provision then will be applicable as altered or interpreted. Notwithstanding any such holding, alteration or interpretation, the remainder of the terms and provisions of the Plan will remain in full force and effect and will in no way be affected, impaired or invalidated by such holding, alteration or interpretation. The Confirmation Order will constitute a judicial determination and will provide that each term and provision of the Plan, as it may have been altered or interpreted in accordance with the foregoing, is valid and enforceable pursuant to its terms. E. Consultation

Reference in the Plan to in consultation with the Prepetition Lenders or words of similar import shall mean in consultation with the Steering Committee and/or other Prepetition Lenders in such manner and to such extent as the Agent, in its sole discretion, shall determine is appropriate under the circumstances. In no event shall a reference to such consultation require a vote by any Prepetition Lenders. F. Successors and Assigns

The rights, benefits and obligations of any Person named or referred to in the Plan will be binding on, and will inure to the benefit of, any heir, executor, administrator, successor and assign of such Person. G. Service of Certain Plan Exhibits and Disclosure Statement Exhibits

Because the Exhibits to the Plan are voluminous, the Exhibits are not being served with copies of the Plan and the Disclosure Statement. Any party in interest may review the Plan Exhibits during normal business hours (9:30 a.m. to 4:30 p.m., local time) in the Document Reviewing Centers. H. Service of Documents

Any pleading, notice or other document required by the Plan or Confirmation Order to be served on or delivered to the Debtors, the Post-Consummation Trust, the Creditors Committee or the DIP Lenders must be sent by overnight delivery service, facsimile transmission, courier service or messenger to:

41
K&E 11547813.1

The Debtors and the Post-Consummation Trust Richard M. Cieri Kirkland & Ellis LLP Citigroup Center 153 East 53rd Street New York, New York 10022 Telephone: (212) 446-4800 Facsimile: (212) 446-4900 -andDavid L. Eaton Ray C. Schrock Kirkland & Ellis LLP 200 East Randolph Drive Chicago, Illinois 60601 Telephone: (312) 861-2000 Facsimile: (312) 861-2200 -andJoseph M. Fischer Lawrence A. Lichtman Carson Fischer, P.L.C. 4111 West Andover Road -- Second Floor Bloomfield Hills, Michigan 48302 Telephone: (248) 644-4840 Facsimile: (248) 644-1832

The Creditors Committee Michael S. Stamer Akin, Gump, Strauss, Hauer & Feld L.L.P. 590 Madison Avenue New York, New York 10022 Telephone: (212) 872-1000 Facsimile: (212) 872-1002 -andThomas B. Radom Butzel Long, P.C. 100 Bloomfield Hills Parkway Bloomfield Hills, Michigan 48304 Telephone: (248) 258-1616 Facsimile: (248) 258-1439

The DIP Lenders Peter V. Pantaleo Alice B. Eaton Simpson Thacher & Bartlett LLP 425 Lexington Avenue New York, New York 10017 Telephone: (212) 455-2000 Facsimile: (212) 455-2502

The Agent Harold S. Novikoff Gregory E. Pessin Wachtell, Lipton, Rosen & Katz 51 West 52nd Street New York, New York 10019 Telephone: (212) 403-1000 Facsimile: (212) 403-2000

The United States Trustee Stephen E. Spence U.S. Department of Justice Office of the United States Trustee 211 West Fort Street, Suite 700 Detroit, Michigan 48226 Telephone: (313) 226-7911 Facsimile: (313) 226-7952

42
K&E 11547813.1

Respectfully Submitted,

COLLINS & AIKMAN CORPORATION (for itself and on behalf of its Debtor subsidiaries)

/s/ John R. Boken Name: John R. Boken Title: Chief Restructuring Officer

43
K&E 11547813.1

APPENDIX B

Corporate Structure Chart

As of December 22, 2006
Collins & Aikman Products Co.
.

Collins & Aikman

Collins & Aikman Corporation
Collins & Aikman Development Company Southwest Laminates, Inc. Collins & Aikman Interiors, Inc. Dura Convertible Systems, Inc. Comet Acoustics, Inc. Collins & Aikman Accessory Mats, Inc. Collins & Aikman International Corporation Collins & Aikman Fabrics, Inc. Collins & Aikman Automotive Exteriors Inc. JPS Automotive, Inc. Collins & Aikman Canada Domestic Holding Company

Gamble Development Company Collins & Aikman Asset Services, Inc.

(Real Estate) (MN)

Collins & Aikman Properties, Inc.

Wickes Manufacturing Company

Wickes Asset Management, Inc.

(Real Estate)

(Real Estate)

Collins & Aikman Carpet & Acoustics (MI), Inc.

Collins & Aikman Carpet & Acoustics (TN), Inc.

Collins & Aikman Plastics, Inc.

99% 1 2
Collins & Aikman Europe, Inc. Collins & Aikman Automotive International, Inc.. Synova Plastics, LLC Collins & Aikman Automotive Interiors Inc. Amco Convertible Fabrics, Inc. Synova Carpets, LLC CW Management Corporation SAF Services Corporation

49%

45% 3

47%

3
Becker Group, LLC ACAP, L.L.C.

Collins & Aikman Automotive Services, LLC Hopkins Services, Inc. (MN) (Liab. Mgmt.) (Liab. Mgmt.) (Liab. Mgmt.) Collins & Aikman (Gibraltar) Limited (Gibraltar & U.S.)

Collins & Aikman Automotive Mats, LLC

3 3 69%
Collins & Aikman MOBIS, LLC Brut Plastics, Inc.

45%
Engineered Plastic Products, Inc.

Collins & Aikman Automotive (Asia), Inc.

Collins & Aikman Automotive Overseas Investment, Inc. Collins & Aikman Intellimold, Inc.

Owosso Thermal Forming, LLC

Division/Type of Company
Non-Profit Corporations Collins & Aikman Foundation Collins & Aikman Disaster Relief Fund, Inc.

Collins & Aikman Automotive (Argentina), Inc.

Collins & Aikman Automotive International Services, Inc.

Carpet & Acoustics Division Domestic Ownership Notes

Plastics Division

New Baltimore Holdings, LLC

Specialty Automotive Products - Convertible Systems

Specialty Automotive Products - Fabrics

Holding Company

Accounts Receivable Securitization, Finance Company or R&D Company Real Estate, Liability Management or Inactive Company

1 1% of Collins & Aikman Automotive Services, LLC is owned by Wickes Asset Management, Inc. 2 Owns 100% of Class A Shares and no Class B Shares. There are 900 Class A Shares and 100 Class B Shares 3 Remaining ownership by unrelated party

United States Foreign

Only certain foreign entities are shown on this page. See page two of this chart for remaining foreign entities.
Collins & Aikman Holdings, S.A. de C.V. (Mexico) Collins & Aikman (Gibraltar) Limited (Luxembourg)

Type of Entity

Branch

OR

Corporation

Hybrid Partnership

Hybrid Branch

Dual Resident Company

Riopelle Realty Limited (Canada)

Collins & Aikman Automotive (Asia) Inc. (Japan) (Sales Branch)

Collins & Aikman Automotive (Argentina) Inc. (Argentina) (Branch)

Collins & Aikman Holdings Canada, Inc. (Canada)

C&A Canada Holding Company I (Canada)

C&A Canada Holding Company II (Canada)

Page 1 of 2
.

United States
Collins & Aikman Automotive (Argentina), Inc. Collins & Aikman Automotive (Asia), Inc. Collins & Aikman (Gibraltar) Limited (Gibraltar & U.S.)

Only certain domestic entities are shown on this page. See page one of this chart for remaining domestic entities.

Collins & Aikman International Corporation

Collins & Aikman Products Co. .

Collins & Aikman Automotive Interiors, Inc.

Collins & Aikman Canada Domestic Holding Company

ASIA
LUXEMBOURG
Branch of Collins & Aikman (Gibraltar) Limited (Luxembourg)

Foreign

SOUTH AMERICA

MEXICO
>99%

Collins & Aikman Automotive (Argentina), Inc. (Argentina) (Branch) Collins & Aikman Automotive (Asia), Inc. (Japan) (Sales Branch)

C&A Canada Holding Company I (Canada)

C&A Canada Holding Company II (Canada)

Collins & Aikman Holdings, S.A. de C.V. (Mexico) Collins & Aikman Holdings Canada, Inc. (Canada) Riopelle Realty Limited (Canada) C&A Canada International Holding Company (Canada) NSULC

99%

Collins & Aikman Automotive Canada, LP (Canada) Collins & Aikman Canada Inc. (Canada)

1%

CANADA

Collins & Aikman Automotive Canada Co. (Canada)

Minority interest of Mexican companies is owned by Collins & Aikman International Corporation.

25%

75%

>99% >99%

>99%

C&A Canada International Holdings Limited (Canada)

Dura Convertible Systems de Mexico, S.A. de C.V. (Mexico) >99% >99%

Collins & Aikman Automotive Management Services Company Mexico, S.A. de C.V. (Mexico)

Collins & Aikman Carpet & Acoustics, S.A. de C.V. (Mexico) Collins & AikmanCollins & Aikman Automotive Automotive Company de Hermosillo Mexico S.A. de C.V. S.A. de C.V. (Mexico) (Mexico)

<1% Collins & Aikman Management Hermosillo S.A. de C.V. (Mexico)

>99%

Collins & Aikman Servicios, S.A. de C.V. (Mexico)

Collins & Aikman Luxembourg S.A. (Luxembourg) LUXCO 2

Page 2 of 2

APPENDIX C

THE LIQUIDATION ANALYSIS WILL BE PROVIDED IN A SUBSEQUENT FILING NO LATER THAN JANUARY 15, 2007