October 8, 1996
Fruehauf Trailer Corporation
Bank One Center/Tower
000 Xxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxxx, Xxxxxxx 00000
Attn: Xxx Xxxxx
Re: Payoff of Indebtedness of Fruehauf Trailer
Corporation to Congress Financial Corporation
(Central)
Dear Xxx:
Reference is made to that certain Accounts Financing
Agreement [Security Agreement] (as amended, the "Accounts
Financing Agreement") by and between Fruehauf Trailer
Corporation ("Debtor") and Congress Financial Corporation
(Central) ("Congress"), that certain Inventory and
Equipment Security Agreement Supplement to Accounts
Financing Agreement [Security Agreement] (as amended, the
"Inventory and Equipment Supplement") by and between
Debtor and Congress, that certain Rider No. 1 to Accounts
Financing Agreement [Security Agreement] and Inventory and
Equipment Security Agreement Supplement to Accounts
Financing Agreement [Security Agreement] (as amended, the
"Rider") by and between Debtor and Congress and that
certain letter regarding Inventory Loans by and between
Debtor and Congress, each dated as of August 20, 1993, and
each as amended by that certain First Amendment to
Accounts Financing Agreement [Security Agreement] entered
into as of April 4, 1994, by and between Debtor and
Congress, that certain Second Amendment to Accounts
Financing Agreement [Security Agreement] and Waiver
entered into as of April 12, 1994, by and between Debtor
and Congress, that certain Third Amendment to Accounts
Financing Agreement [Security Agreement] entered into as
of May 1, 1995, by and between Debtor and Congress, that
certain Fourth Amendment to Accounts Financing Agreement
[Security Agreement] entered into as of April 19, 1996, by
and between Debtor and Congress and that certain Fifth
Amendment to Accounts Financing Agreement [Security
Agreement] and Limited Waiver ("Fifth Amendment")
entered into as of June 21, 1996, by and between Debtor
and Congress (collectively, as amended, restated,
supplemented or otherwise modified from time to time, the
"Loan Agreement"), and the other Loan Documents, as
defined in the Loan Agreement (all such Loan Documents,
together with the Loan Agreement, collectively, the "Loan
Documents"). Capitalized terms used herein and not
otherwise defined herein shall have the meanings set forth
in the Loan Agreement.
2
The Debtor has requested that the Loan Documents be
terminated and intends to pay all Obligations under the
Loan Documents from the proceeds of a new
debtor-in-possession working capital facility provided by
Xxxxxxxxx, L.L.C. (the "DIP Lender"). This letter
agreement is intended to set forth the terms and
conditions regarding the payment of the Obligations.
1. If received by 12:00 p.m. (Chicago time) on October
8, 1996, the amount necessary to pay all Obligations
outstanding as of such date, including the Letter of
Credit Accommodations incurred in connection with
the Loan Agreement, is $14,519,763.80 (as it may be
increased pursuant to the immediately following sentence,
the "Payoff Amount"), comprised of (i) $7,279,261.47 in
respect of the principal of the outstanding Revolving
Loans, (ii) $22,049.79 in respect of accrued interest for
the period October 1 through October 8, 1996, (iii)
$34,765.63 in respect of letter of credit fees under
Section 2.6 of the Accounts Financing Agreement for the
period from September 1 through October 8, 1996, (iv)
$13,786.44 in accrued unused facility fees under Section
3.5 of the Accounts Financing Agreement from September 1
through October 8, 1996, (v) $50,000 in servicing fees
under Section 3.6 of the Accounts Financing Agreement for
the months of January through October, 1996, (vi) $40.00
in wire charges, (vii) $450,000 constituting the early
termination fee set forth in Section 9.2 of the Accounts
Financing Agreement, (viii) $10,000 constituting the
Forbearance Fee due on October 1, 1996, under Section V.D.
of the Fifth Amendment, (ix) $95,000 in estimated
attorneys' fees and related expenses for the period from
September 1, 1996 to October 8, 1996, (x) $312,448.85
constituting a reserve of 5.0% of the principal amount of
the Letters of Credit (as defined below) for the Indemnity
Obligations (as defined below) (such reserve, the "L/C
Extension Reserve"), (xi) $6,248,977 representing the
outstanding principal amount of those certain letters of
credit (collectively, the "Letters of Credit") issued in
connection with the Loan Agreement and set forth in
Exhibit A attached hereto, and (xii) $3,430.62
representing the accrued interest payable for the period
from September 1 through October 8, 1996 under Section 11
of that certain Note Purchase and Assignment Agreement
dated April 19, 1996 and Section 11 of that certain
Supplemental Note Purchase and Assignment Agreement dated
June 21, 1996, in each case by and between Congress and
K-H Corporation and accepted and acknowledged by Debtor.
If the Payoff Amount is received by Congress in accordance
with the provisions hereof after 12:00 p.m. (Chicago time)
on October 8, 1996 (it being understood that any payment
received after 12:00 p.m. (Chicago time) on any particular
day shall be deemed received on the immediately following
Business Day), then the Payoff Amount shall be increased
by the per diem amount of $2,741.08. If the Payoff Amount
has been received by Congress in accordance with the
provisions hereof, and Congress receives additional
collections from any blocked accounts, Congress will
promptly remit same to the DIP Lender to be held or
applied by DIP Lender in accordance with its agreements
with Debtor.
2. Congress shall hold the amounts paid to Congress
pursuant to clauses (ix), (x) and (xi) of Paragraph 1 of
this letter agreement (collectively, the "L/C Security
Deposit") as collateral for the Indemnity Obligations
(as defined below). Congress shall have no duty to invest
the amount of the L/C Security Deposit, but shall pay the
Debtor (at the time of the final remittance of any unused
L/C Security Deposit) interest on the unapplied balance
thereof outstanding from time to time at the prime
commercial rate from time to time announced by CoreStates
Bank, N.A. ("CoreStates") minus 5%, as interest would be
calculated on the Revolving Loans to Debtor under the Loan
Documents. The amount of any such interest shall be added
to and constitute a part of the L/C Security Deposit at
the end of each month that any L/C Security Deposit is
outstanding.
3
3. From time to time, Congress may, without any
requirement for notice to the Debtor, and without any
application or motion to, or order from, the Bankruptcy
Court, charge any and all Indemnity Obligations to
the L/C Security Deposit. Congress shall have any and all
of the rights of a secured creditor with respect to the
L/C Security Deposit and shall be entitled to charge the
same with any and all out-of-pocket costs (including legal
fees and expenses) related to administering or defending
its interest therein. From time to time as Letters of
Credit are terminated without drawings being made thereon,
Congress shall promptly remit to the Debtor an appropriate
portion of the L/C Security Deposit so long as the balance
retained is sufficient to continue to protect Congress for
all reasonably anticipated remaining Indemnity
Obligations; provided that any remaining balance shall be
remitted to the Debtor on the later of (A) the date on
which the last outstanding Letter of Credit has been
terminated or drawn in its entirety (the "Letter of Credit
Termination Date") and (B) if there are any outstanding
Indemnity Obligations on the Letter of Credit Termination
Date or if any claims which would give rise to an
Indemnity Obligation have been asserted or threatened
against Congress or any affiliate on or before the Letter
of Credit Termination Date, the date on which all such
actual or contingent Indemnity Obligations have been paid
or discharged in full.
4. This letter agreement will also confirm that at the
time, which shall be on or before October 11, 1996, (the
"Effective Date") (i) Congress has received duly executed
counterparts to this letter agreement by each of the
Debtor and the Guarantors listed on the signature pages
hereto, (ii) the Bankruptcy Court has entered an order (in
form and substance satisfactory to Congress, it being
understood that the proposed form of order initially filed
with the Bankruptcy Court is satisfactory to Congress)
approving this letter agreement, including the releases
contained herein (the "Approval Order") as to which no
stay is in effect and no appeal has been filed and is
pending, (iii) Congress has received an original of the
indemnification letter agreement duly executed by the DIP
Lender in the form attached hereto as Exhibit B and (iv)
Congress has received payment by a federal funds wire
transfer of the Payoff Amount in the following account:
CHASE MANHATTAN BANK, New York, NY
for credit to Congress Financial
Corporation (Central)
ABA #000000000
Account #322-020557
re: Fruehauf Trailer Corporation
then, (i) all liabilities, obligations and indebtedness
owing by Debtor to Congress shall be hereby satisfied in
full, (ii) all Loan Documents shall be hereby terminated
in full and (iii) except for the L/C Security Deposit, the
liens and security interests of Congress in any and all of
the Collateral shall be hereby released and terminated;
provided, however, that (A) all of the respective
indemnification and reimbursement obligations of the
Debtor and the Guarantors under the Loan Documents shall
survive such payment and shall remain solely secured by
the L/C Security Deposit; (B) the Indemnity Obligations
(as defined below) shall constitute an expense of
administration in the respective bankruptcy cases of the
Debtor and each applicable Guarantor, which is junior to
the claims of the DIP Lender and (C) all rights of
Congress as secured party with respect to the L/C Security
Deposit shall survive such payment.
4
5. Each of the Debtor and the Guarantors jointly
and severally hereby reaffirms and agrees to promptly pay
and perform all of their respective indemnification and
reimbursement obligations under the Loan Documents,
including, without limitation, their respective
obligations, jointly and severally, to indemnify
and reimburse Congress for (i) any payments made by
Congress to any depository bank involved in Debtor's cash
management system for fees, returned or dishonored checks
or any other amounts owing to such depository bank by the
Debtor or any Guarantor or Congress in connection with
the administration of such cash management system
(including the blocked accounts or lockboxes established
at or maintained by such bank), (ii) any reasonable unpaid
attorneys' fees and expenses or other costs chargeable
under the Loan Documents, (iii) any previously paid
principal, interest, attorneys' fees and expenses or other
costs chargeable under the Loan Documents as to which
payment therefor is subsequently invalidated, set aside or
otherwise required to be disgorged for any reason by
Congress to any person or entity, and (iv) any drawings
under any Letter of Credit or any fees or other amounts
incurred or payable by Congress or CoreStates in respect
of any Letter of Credit or other Letters of Credit
Accommodations, (all of the respective indemnification and
reimbursement obligations of the Debtor and the
Guarantors, collectively the "Indemnity Obligations").
6. Promptly following the Effective Date, Congress
will also deliver to the DIP Lender, or at the request of
DIP Lender, the Debtor executed release and termination
documents covering Congress' liens and security interests
in all of the Collateral except for the L/C Security
Deposit. Congress shall have no responsibility for the
filing of such documents, and the full cost of making such
filings shall be borne by the Debtor. Thereafter,
Congress will from time to time upon the reasonable
request of the DIP Lender or the Debtor (and payment in
advance of any expected associated expenses) further
execute and deliver to the DIP Lender or the Debtor, such
other termination statements, releases and other
agreements reasonably requested and provided by the DIP
Lender or the Debtor which are reasonably necessary to
evidence Congress' release and termination of all of its
liens and security interests in the Collateral other
than the L/C Security Deposit.
7. To further assure Congress of its rights to the L/C
Security Deposit, the Debtor hereby (i) grants Congress a
security interest in all of its rights thereto to secure
the Indemnity Obligations, (ii) acknowledges and agrees
that the only interest of the Debtor in the L/C Security
Deposit is the right to receive the remaining amount, if
any, after payment of the Indemnity Obligations to the
extent provided in Paragraph 3 of this letter agreement,
for the account of DIP Lender with payment to be made
directly to DIP Lender in accordance with this letter
agreement and (iii) represents that no other person, firm
or corporation claiming by or through the Debtor
(including the DIP Lender) has or will have any interest
in the L/C Security Deposit that is prior to the rights of
Congress.
5
8. Although the Debtor and the Guarantors do not
believe they have any claims against Congress, in order to
facilitate the discharge in full of all Obligations (which
discharge is a precondition under the Loan Agreement for
termination of the Loan Agreement and the liens of
Congress on the Collateral), each of the Debtor and
the Guarantors (in the case of the Debtor and the debtor
Guarantors, as debtors and debtors-in-possession) on
behalf of themselves, their estates and their successors
(including any trustee or estate representative in any
bankruptcy case of which the Debtor or any Guarantor is
the subject or in any subsequent case or proceeding under
the Bankruptcy Code) hereby releases and discharges
Congress and its affiliates (including CoreStates) and
their respective successors and assigns and the officers,
directors, employees, counsel, agents and other
representatives of each of the foregoing (each, a
"Releasee") from any and all actions, causes of action,
suits, suits of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies,
agreements, promises, variances, trespasses, damages,
judgments, extents, executions, losses, liabilities,
costs, expenses, debts, dues, demands, obligations or
other claims of any kind whatsoever, in law, admiralty or
equity, which the Debtor or any Guarantor ever had, now
has or hereafter can, shall or may have against any
Releasee for, upon or by reason of any matter, cause or
theory whatsoever from the beginning of the world to and
including the Effective Date other than any obligations of
Congress under this Letter Agreement.
This letter agreement shall terminate and be null and void
if the Effective Date has not occurred on or
before 12:00 p.m. (Chicago time) October 11, 1996.
This letter agreement may be executed in one or more
counterparts, each of which shall be deemed an original
but all of which shall constitute one and the same
agreement to this letter. Please acknowledge your
agreement to this letter by signing your name where
indicated below, and fax a signed copy of this letter to
our attention at (000) 000-0000.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
(CENTRAL)
By:/s/ Xxxxxx Xxxxxx
-----------------
Its:Vice President
ACKNOWLEDGED AND AGREED:
FRUEHAUF TRAILER CORPORATION
By:/s/ Xxxxxxx X. Xxxxx
-----------------------
Its: Vice President - Treasurer
FGR, INC.
By:/s/ Xxxxxxx X. Xxxxx
-----------------------
Its: Vice President - Treasurer
FRUEHAUF CORPORATION
By:/s/ Xxxxxxx X. Xxxxx
-----------------------
Its: Vice President - Treasurer
MARYLAND SHIPBUILDING & DRYDOCK COMPANY
By:/s/ Xxxx X. Xxxxxx
-----------------------
Its: President
THE XXXXXX CO.
By:/s/ Xxxxxxx X. Xxxxx
-----------------------
Its: Vice President - Treasurer
FRUEHAUF INTERNATIONAL LIMITED
By:/s/ Xxxxxxx X. Xxxxx
-----------------------
Its: Vice President - Treasurer
DEUTSCHE-FRUEHAUF HOLDING CORPORATION
By:/s/ Xxxxxxx X. Xxxxx
-----------------------
Its: Vice President - Treasurer
JACKSONVILLE SHIPYARDS, INC.
By:/s/ Xxxx X. Xxxxxx
-----------------------
Its: President
X.X. HOLDINGS, INC.
By:/s/ Xxxxxxx X. Xxxxx
-----------------------
Its: Vice President - Treasurer
E.L. DEVICES, INC.
By:/s/ Xxxx X. Xxxxxx
-----------------------
Its: President
EXHIBIT A
FRUEHAUF TRAILER CORPORATION
LETTERS OF CREDIT
L/C Number Beneficiary Amount
---------- -------------------------- ------
515485P St. Xxxx Fire & Marine $2,500,000.00
Insurance Co.
515486P Continental Casualty Co. $2,000,000.00
515484P Alabama Dept. of $1,748,977.00
Environmental Management
