as of April 11, 2005
UNIVERSAL AUTOMOTIVE, INC.
UNIVERSAL AUTOMOTIVE OF VIRGINIA, INC.
UNIVERSAL BRAKE PARTS, INC.
THE AUTOMOTIVE COMMODITY CONNECTION, INC.
c/o Universal Automotive Industries, Inc.
00000 Xxxxx Xxxxxxx Xxxxxx
Xxxxx, Xxxxxxxx 00000
Re: Forbearance and Amendment Agreement
Ladies and Gentlemen:
We refer to that certain Loan and Security Agreement, dated as of January 9,
2004 (as the same now exists or may hereafter be further amended, modified,
supplemented, extended, renewed, restated or replaced, the "Loan Agreement") by
and among Wachovia Capital Finance Corporation (Central), formerly known as
Congress Financial Corporation (Central), as Agent ("Agent"), the other Lenders
from time to time party thereto ("Lenders"), and Universal Automotive, Inc.
("Universal"), Universal Automotive of Virginia, Inc. ("Virginia"), Universal
Brake Parts, Inc. ("Brake Parts") and The Automotive Commodity Connection, Inc.
("Connection", and together with Universal, Virginia and Brake Parts, each
individually a "Borrower" and collectively, "Borrowers"). All capitalized terms
used herein shall have the meaning assigned thereto in the Loan Agreement,
unless otherwise defined herein.
As set forth in Agent's letter previously delivered to Borrowers dated April 7,
2005 (collectively, the "Reservation of Rights Letter"), Events of Default have
occurred and are continuing under the Loan Agreement, as more particularly
described therein (the "Existing Defaults"). As a result of the occurrence and
continuance of the Existing Defaults, Agent and Lenders have the presently
exercisable right under the Loan Agreement to exercise any and all of their
rights and remedies with respect to the Existing Defaults, including, without
limitation, the right to cease making any further Loans or providing any other
financial accommodations to Borrowers.
Notwithstanding the occurrence and continuance of the Existing Defaults, each
Borrower has requested that Agent and Lenders (a) forbear for a limited period
of time from exercising their rights and remedies with respect to the Existing
Defaults, in order to afford Borrowers a limited period of time within which to
consummate an Approved Sale (as defined in Section 5(a)(i) below) and (b)
continue to make additional Loans to the Borrowers during such limited
forbearance period, and Agent and Lenders are willing to agree to the foregoing,
on and subject to the terms and conditions set forth in this letter agreement
(this "Agreement").
In consideration of the premises and the respective agreements, covenants and
warranties contained herein, the parties hereto hereby agree, covenant and
warrant as follows:
1. Acknowledgment of Existing Defaults. Each Borrower hereby
acknowledges, confirms and agrees that (a) the Existing Defaults have occurred
and are continuing, (b) Agent and Lenders have the presently exercisable right
to exercise all such rights and remedies against Borrowers and/or the Collateral
as are available to Agent and Lenders under the Loan Agreement and the other
Financing Agreements and under applicable law, all without notice to or consent
by Borrowers, except as expressly provided for under the Loan Agreement or
required by applicable law, and (c) such rights and remedies include, without
limitation, the right, exercisable at any time and from time to time, to cease
making any additional Loans or providing any further credit accommodations to
Borrowers.
2. Acknowledgment of Obligations, Security Interests and Financing
Agreements.
(a) Acknowledgment of Obligations. Each Borrower hereby
acknowledges, confirms and agrees that Borrowers are unconditionally indebted to
Agent and Lenders as of the close of business on April 11, 2005, in respect of
the Loans and all other Obligations in the principal amount of $14,857,236.73,
together with interest accrued and accruing thereon, and all fees, costs,
expenses and other sums and charges now or hereafter payable by Borrowers to
Agent and Lenders pursuant to the Loan Agreement and the other Financing
Agreements, all of which are unconditionally owing by Borrowers to Agent and
Lenders pursuant to the Financing Agreements, in each case without offset,
defense or counterclaim of any kind, nature or description whatsoever.
(b) Acknowledgment of Security Interests. Each Borrower hereby
acknowledges, confirms and agrees that Agent, for itself and for the benefit of
Lenders, has, and shall continue to have, valid, enforceable and perfected
security interests in and liens upon the Collateral heretofore granted to Agent
and Lenders pursuant to the Financing Agreements or otherwise granted to or held
by Agent and Lenders.
(c) Binding Effect of Financing Agreements. Each Borrower hereby
acknowledges, confirms and agrees that: (i) each of the Financing Agreements to
which any Borrower is a party has been duly executed and delivered to Agent and
Lenders by such Borrower, and each is in full force and effect as of the date
hereof, (ii) the agreements and obligations of each Borrower contained in such
Financing Agreements to which it is a party constitute the legal, valid and
binding Obligations of such Borrower, enforceable against it in accordance with
their respective terms, and Borrowers have no valid defense to the enforcement
of such Obligations, and (iii) Agent and Lenders are and shall be entitled to
the rights, remedies and benefits provided for in the Financing Agreements and
pursuant to applicable law, but subject to the terms and conditions of this
Agreement.
3. No Waivers; Reservation of Rights. Agent and Lenders have not
waived, are not by this Agreement waiving, and have no intention of waiving, the
Existing Defaults or any other Events of Default which may be continuing on the
date hereof or any Events of Default which may occur after the date hereof
(whether the same or similar to the Existing Defaults or otherwise) or any
provision of the Reservation of Rights Letter.
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4. Limited Forbearance Period; Forbearance Period Loans; Forbearance
Termination.
(a) At Borrowers' request and in reliance upon Borrowers'
representations, warranties and covenants contained in this Agreement, and
subject to the terms and conditions of this Agreement, Agent and Lenders hereby
agree to forbear during the Forbearance Period (as defined below) from
exercising any of Agent's and Lenders' rights and remedies with respect to the
Existing Defaults, whether arising under the Loan Agreement, the other Financing
Agreements or applicable law. For the purposes of this Agreement, the
"Forbearance Period" means the period commencing on the effective date of this
Agreement and terminating on the earlier to occur of (i) May 31, 2005, and (ii)
the date on which any one or more of the following events has occurred and is
continuing (hereinafter referred to as an "Additional Event of Default"): (A)
Borrower's failure to perform or observe any of the terms and conditions of this
Agreement, or (B) the commencement of any enforcement actions against the
Borrowers by Laurus Master Fund, Ltd., or (C) if (1) calculated on an aggregate
cumulative week to date basis, the actual weekly operating cash receipts for any
weekly period are fifteen (15%) percent less than projected weekly operating
cash receipts for any week set forth on the Weekly Budget (as defined in Section
7(b) below) or (2) calculated on an aggregate cumulative week to date basis, the
actual weekly operating cash disbursements for any weekly period are one hundred
and ten (110%) percent more than projected weekly operating cash disbursements
for any week set forth on the Weekly Budget, or (D) the occurrence of any Event
of Default under the Loan Agreement that is not an Existing Default.
(b) During the Forbearance Period, notwithstanding the existence of
the Existing Defaults, at Borrowers' request and as an accommodation to
Borrowers, Agent and Lenders agree to continue making Loans to Borrowers, except
that, notwithstanding anything to the contrary contained in the Loan Agreement,
the aggregate amount of Revolving Loans and Letter of Credit Accommodations
outstanding shall not exceed, at any given time, $15,500,000 in the aggregate.
(c) From and after termination or expiration of the Forbearance
Period (the "Forbearance Termination Date"), the agreement of Agent and Lenders
to forbear shall automatically and without further notice or action terminate
and be of no further force and effect, and Agent and Lenders shall have the
immediate and unconditional right, in their discretion, to exercise any or all
of their rights and remedies under the Loan Agreement, the other Financing
Agreements and applicable law with respect to the Existing Defaults, any other
Event of Default which may be continuing on the date hereof or any Additional
Default or any Event of Default which may occur after the date hereof,
including, without limitation, the election by Agent and Lenders to cease
making, in their sole discretion, any further Loans and/or to enforce their
security interests in and liens upon the Collateral or any portion thereof.
Agent and Lenders have not waived any of such rights or remedies, and nothing in
this Agreement, nor the making of any Loans from and after the date hereof or
after the Forbearance Termination Date, nor any delay on the part of Agent and
Lenders after the Forbearance Termination Date in exercising any such rights or
remedies, should be construed as a waiver of any such rights or remedies.
(d) Notwithstanding anything to the contrary contained in this
Agreement, (i) this Agreement does not constitute the agreement or commitment by
Agent and Lenders to make
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any additional Loans or provide any other credit accommodations to Borrowers
from and after the Forbearance Termination Date, and all Loans made or other
credit accommodations provided by Agent and Lenders from and after the
Forbearance Termination Date shall be made in the sole and exclusive discretion
of Agent and Lenders, and (ii) nothing contained in this Agreement shall limit,
impair or affect the rights of Agent and Lenders under the Loan Agreement with
respect to the making of Loans (including, without limitation, the right to
establish and withhold Reserves in accordance with the Loan Agreement).
5. Additional Covenants. In order to induce Agent and Lenders to enter
into this Agreement, make Loans and other financial accommodations to Borrowers
during the Forbearance Period subject to the terms and conditions set forth in
this Agreement, and forbear during the Forbearance Period from exercising the
rights and remedies of Agent and Lenders with respect to the Existing Defaults,
Borrowers covenant and agree as follows:
(a) In addition to all other terms, conditions and provisions set
forth herein and in the other Loan Documents, Borrowers shall deliver or cause
to be delivered to Agent the following items, each to be authorized, executed
and delivered by the parties thereto, in form and substance satisfactory to
Agent, as soon as possible, but in any event, by no later than the date referred
to below with respect to each such item:
(i) on or before May 6, 2005, an executed letter of intent from
at least one (1) person which provides for (A) the purchase of the equity
interests of Borrowers by such person or by one or more parties designated by
such person, or (B) the merger of Borrowers and a third party designated by such
person, or (C) the purchase of all or substantially all of the assets of
Borrowers (such proposed transaction hereinafter referred to as an "Approved
Sale"), or if the prospective purchaser is a public company and is unwilling to
execute a letter of intent, a letter from the Borrowers providing information
and evidence satisfactory to Agent that the Borrowers are proceeding toward the
consummation of an Approved Sale, including the commencement of due diligence by
such purchaser and the negotiation of definitive purchase and sale or merger
agreements, as the case may be. Such letter shall be in form and substance
reasonably acceptable to Agent and Lenders and shall provide that, among other
things, such Approved Sale will generate cash consideration (net of all fees,
expenses and adjustments) sufficient for the Borrowers to repay, in full, in
immediately available funds, the then outstanding Obligations of Borrowers to
Agent and Lenders. If applicable, the letter of intent shall incorporate
provisions that are customary in similar letters of intent or as otherwise may
be required in the context of the contemplated transactions and based on the
nature of the Approved Sale;
(ii) on or before May 25, 2005 (the "Repurchase Date"), repay or
cause to be repaid, in connection with the consummation of the Approved Sale,
the then outstanding Obligations of Borrowers to Agent and Lenders under the
Financing Agreements;
(iii) On or before the third (3rd) Business Day of each week,
Borrowers shall deliver to Agent a report of Borrower's actual results of
operations for the immediately preceding week compared to Borrower's projected
results for such week, as set forth in Weekly Budget (as defined in Section 7(b)
below).
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(b) Borrowers shall at all times continue to engage The Parkland
Group as their financial consultant or such other consultant reasonably
acceptable to Agent (the "Financial Consultant") to assist Borrowers with
respect to the consummation of the Approved Sale.
6. Representations and Warranties. In addition to the continuing
representations and warranties heretofore made by Borrowers to Agent and Lenders
pursuant to the Loan Agreement and the other Financing Agreements and made
hereinabove, Borrowers hereby represent and warrant with and to Agent and
Lenders as follows (which representations, warranties and covenants are
continuing and shall survive the execution and delivery of this Agreement and
shall be incorporated into and made a part of the Financing Agreements ):
(a) Other than the Existing Defaults, no Event of Default exists on
the date of this Agreement; and
(b) This Agreement has been duly executed and delivered by Borrowers
and is in full force and effect as of the date hereof, and the agreements and
obligations of Borrowers contained herein constitute their legal, valid and
binding obligations enforceable against Borrowers in accordance with their
respective terms.
7. Conditions Precedent. This Agreement shall not become effective
unless all of the following conditions precedent have been satisfied in full, as
determined by Agent:
(a) The receipt by Agent of an original (or faxed copy) of this
Agreement, duly authorized, executed and delivered by Borrowers;
(b) The receipt by Agent of a budget for the period commencing April
11, 2005 through and including May 6, 2005 (the "Weekly Budget") setting forth
the projected cash receipts and expenditures of Borrowers on a weekly basis for
the periods covered thereby, and
(c) as of the date of this Agreement, other than the Existing
Defaults, no Default or Event of Default shall have occurred and be continuing.
8. Release of Agent and Lenders; Covenant Not to Xxx.
(a) In consideration of the agreements of Agent and Lenders
contained herein and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, each Borrower on behalf of itself,
its successors, assigns, and legal representatives (collectively, "Releasor"),
hereby absolutely, unconditionally and irrevocably releases and forever
discharges Agent and Lenders, their respective successors and assigns, and their
present and former shareholders, affiliates, subsidiaries, divisions, directors,
officers, attorneys, employees, agents and other representatives (Agent and
Lenders and all such other parties being hereinafter referred to collectively as
the " Releasees" and individually as a "Releasee"), of and from all demands,
actions, causes of action, suits, covenants, contracts, controversies,
agreements, promises, sums of money, accounts, bills, reckonings, damages and
any and all other claims, counterclaims, defenses, rights of set-off, demands
and liabilities whatsoever of every kind and nature, known or unknown, suspected
or unsuspected, both at law and in equity (individually, a "Claim" and
collectively, "Claims"), which such Releasor may now or hereafter own, hold,
have or claim to have against the Releasees or any of them for, upon,
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or by reason of any nature, cause or thing whatsoever which arises from the
beginning of the world to the day of execution of this Agreement, for or on
account of, or in relation to, or in any way in connection with the Loan
Agreement or any of the other Financing Agreements, as amended and supplemented
through the date hereof.
(b) Each Borrower understands, acknowledges and agrees that the
release set forth above may be pleaded as a full and complete defense and may be
used as a basis for an injunction against any action, suit or other proceeding
which may be instituted, prosecuted or attempted in breach of the provision of
such release.
(c) Each Borrower agrees that no fact, event, circumstance, evidence
or transaction which could now be asserted or which may hereafter be discovered
shall affect in any manner the final and unconditional nature of the release set
forth above.
(d) Each Borrower, on behalf of itself and its successors, assigns,
and other legal representatives, hereby absolutely, unconditionally and
irrevocably covenants and agrees with each Releasee that it will not xxx (at
law, in equity, in any regulatory proceeding or otherwise) any Releasee on the
basis of any Claim released, remised and discharged by Releasors pursuant to
paragraph 8(a) above. If any Releasor violates the foregoing covenant, such
Releasor agrees to pay, in addition to such other damages as any Releasee may
sustain as a result of such violation, all attorneys' fees and costs incurred by
any Releasee as a result of such violation.
9. Reviewed by Attorneys. Each Borrower represents and warrants that it
(a) understands fully the terms of this Agreement and the consequences of the
execution and delivery hereof, (b) has been afforded an opportunity to have this
Agreement reviewed by, and to discuss the same with, such attorneys and other
persons as Borrowers may wish, and (c) has entered into this Agreement of its
own free will and accord and without threat, duress or other coercion of any
kind by any person. Each Borrower acknowledges and agrees that this Agreement
shall not be construed more favorably in favor of either Borrowers or Agent and
Lenders based upon which party drafted the same, it being acknowledged that
Agent, Lenders and Borrowers contributed substantially to the negotiation and
preparation of this Agreement.
10. Effect of this Agreement. Except as modified pursuant hereto, no
other changes or modifications to the Loan Agreement and the other Financing
Agreements are intended or implied and in all other respects the Loan Agreement
and the other Financing Agreements are hereby specifically ratified, restated
and confirmed by all parties hereto as of the effective date hereof. To the
extent of any conflict between the terms of this Agreement and the Loan
Agreement or any of the other Financing Agreements, the terms of this Agreement
shall control. The Loan Agreement and this Agreement shall be read and construed
as one agreement.
11. Further Assurances. At Agent's request, Borrowers shall execute and
deliver such additional documents and take such additional actions as Agent
reasonably requests to effectuate the provisions and purposes of this Agreement
and to protect and/or maintain perfection of Agent's security interests in and
liens upon the Collateral.
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12. Governing Law; Waiver of Jury Trial. The validity, interpretation
and enforcement of this Agreement in any dispute arising out of the relationship
between the parties hereto, whether in contract, tort, equity or otherwise shall
be governed by the internal laws of the State of Illinois (without giving effect
to principles of conflicts of law). Each of the parties hereto hereby waives all
right to trial by jury and any litigation relating to transactions under this
Agreement, whether sounding in contract, tort or otherwise.
13. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of each of the parties hereto and their respective successors and
assigns.
14. Counterparts. This Agreement may be executed in any number of
counterparts, but all of such counterparts when executed shall together
constitute one and the same Agreement. In making proof of this Agreement, it
shall not be necessary to produce or account for more than one counterpart
thereof signed by each of the parties hereto.
[SIGNATURE PAGE FOLLOWS]
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Very truly yours,
WACHOVIA CAPITAL FINANCE CORPORATION
(CENTRAL), AS AGENT AND AS LENDER
By:
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Title:
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AGREED TO:
UNIVERSAL AUTOMOTIVE, INC.
UNIVERSAL AUTOMOTIVE OF VIRGINIA, INC.
UNIVERSAL BRAKE PARTS, INC.
THE AUTOMOTIVE COMMODITY CONNECTION, INC.
By:
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Title: of each
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