August 10, 1998
JPE, Inc.
000 Xxxxxxxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxx X. Xxxxxxx and Xx. Xxxxx X. Xxxxx
RE: FINANCING ARRANGEMENTS AMONG COMERICA BANK, NBD BANK, NATIONAL BANK OF
CANADA, XXXXXX TRUST AND SAVINGS BANK, AND BANK ONE, DAYTON, N.A.
(COLLECTIVELY, THE "BANKS"), COMERICA BANK, AS AGENT FOR THE BANKS
("AGENT"), JPE, INC. ("COMPANY") AND ALLPARTS, INCORPORATED, DAYTON PARTS,
INC., SAC CORPORATION, STARBOARD INDUSTRIES, INC., INDUSTRIAL & AUTOMOTIVE
FASTENERS, INC., PLASTIC TRIM, INC., BRAKE, AXLE AND TANDEM COMPANY CANADA
INC. AND JPE FINISHING, INC. (COLLECTIVELY, "GUARANTORS")
Dear Xx. Xxxxxxx and Xx. Xxxxx:
All capitalized terms not defined in this letter agreement ("Agreement") shall
have the meanings described in the Third Amended and Restated JPE, Inc. Credit
Agreement dated as of December 31, 1996 among Company, Agent and the Banks, as
amended by Amendment No. 1 dated as of April 16, 1997, Amendment No. 2 dated as
of June 30, 1997, Amendment No. 3 dated as of February 13, 1998 and Amendment
No. 4 dated as of May 15, 1998. Please refer to the Loan Documents.
As of July 15, 1998, the Indebtedness includes:
Loans
(aggregate amount of notes and date) Principal Interest
------------------------------------ --------- --------
Revolving Credit ($110,000,000; $103,381,288.80 $391,987.38
March 14, 1996
Letters of Credit $ 109,904.11 NA
Swing Line ($5,000,000; March 14, 1996) $ 1,775,000.00 $ 8,301.05
Line of Credit ($10,000,000; $ -0- $ -0-
Aprl 16, 1997
Total $105,266,192.91 $400,288.43
The amounts identified above are exclusive of interest accruing after July 15,
1998 and costs and expenses (including, but not limited to, inside and outside
counsel fees).
Company consultants, Xxxxxx, XxxXxxxxx & Xxxxxxxx, provided Agent and Banks with
amended projections on August 9, 1998. Agent and Xxxxx have relied on these
projections in formulating the offer of forbearance set forth below.
Company and Guarantors acknowledge receipt of the letter from Agent and Banks
dated July 15, 1998 (the "July 15 Letter").
Subject to timely, written acceptance by Company and Guarantors of the following
terms and conditions, Agent and Xxxxx are willing to grant certain
accommodations and to forbear until August 31, 1998, subject to earlier
termination as provided below, from further action to collect the Indebtedness:
1. Company and Guarantors acknowledge the Indebtedness as set forth in the
Loan Documents, the amount of the Indebtedness as stated above and the
existence of the Events of Default identified in the July 15 Letter.
2. Future administration of the Indebtedness and the financing arrangements
among Agent, Banks, Company and Guarantors shall continue to be governed by
the covenants, terms and conditions of the Loan Documents, which are
incorporated by this reference, except to the extent that the Loan
Documents have been superseded, amended, modified or supplemented by this
Agreement or are inconsistent with this Agreement, then this Agreement
shall govern.
3. Company and Guarantors acknowledge that Agent and Banks are under no
obligation to advance funds or extend credit to Company and Guarantors
under the Credit Agreement or other Loan Documents, or otherwise.
4. The Line of Credit Loan is terminated; no Requests for Advances under the
Line of Credit Loan will be considered.
5. Concurrently with execution of this Agreement, Company must provide to
Agent the written agreement of General Motors Corporation, Chrysler
Corporation and Ford Motor Company to expedite payment to Company of
accounts according to the schedule attached as Exhibit A.
6. Subject to maintaining an advisory "Advance Formula" (defined below) equal
to or greater than the aggregate of (a) Advances under the Revolving Credit
and Swing Line and (b) the Letter of Credit Obligations, and provided there
are no defaults under the terms of this Agreement, and no further defaults
under the Loan Documents, Xxxxx may, in their sole discretion, continue to
advance to Company under the Revolving Credit Loan, in accordance with the
Loan Documents, as amended by this Agreement, through August 28, 1998.
Effective immediately, the maximum amount available (the "Cap") under the
Revolving Credit Loan is $105,000,000. Any payment, which under the Credit
Agreement would have reduced the Revolving Credit Aggregate Commitment,
shall reduce the Cap, dollar for dollar. The Cap is allocated among Banks
as set forth on Exhibit B. The Advance Formula is equal to:
(i) 85% of Eligible Accounts (as defined in Exhibit C), plus
(ii) 50% of Eligible Inventory (as defined in Exhibit D), plus
(iii) $26,815,000 on account of fixed assets (plant, property and
equipment) of Company and Guarantors (subject to reduction as
described below), plus
(iv) An overformula amount of $42,100,000 (subject to adjustment as
described below).
To the extent that Eligible Accounts are defined in Exhibit C in a manner
inconsistent with the computation of eligible accounts as of June 30, 1998
by Xxxxxx, XxxXxxxxx & Xxxxxxxx, the definition used by Xxxxxx, XxxXxxxxx &
Xxxxxxxx shall control, subject to the proviso that reliance on such
non-Eligible Accounts (category by category) may not increase from their
June 30, 1998 level. For example if Xxxxxx, XxxXxxxxx & Xxxxxxxx included
foreign accounts as eligible in its computation as of June 30, 1998, then
foreign accounts (which otherwise meet the definition of Eligible Accounts)
may be included up to the dollar amount of such foreign accounts as of June
30, 1998.
The overformula amount described in subparagraph (iv) above shall be
adjusted (up or down) by the change in Eligible Inventory from June 30,
1998 to July 31, 1998 as measured by the physical count taken on July 31,
1998, as adjusted to August 6, 1998 on an estimated basis (using an
estimation method satisfactory to Agent).
In the event Company, Guarantors, or any of them, desire to sell any of
their assets outside of the ordinary course of business, such sales shall
be subject to the prior written consent of Agent and Banks. The proceeds
from any such sales shall be paid to Banks and applied to the Indebtedness,
which proceeds shall reduce permanently the $26,815,000 fixed asset
component of the advisory Advance Formula and the Cap, dollar for dollar.
If the fixed asset component of the advisory Advance Formula is reduced to
zero, any additional proceeds shall then reduce permanently the overformula
portion of the advisory Advance Formula and the Cap, dollar for dollar.
In the event the aggregate of (a) Advances under the Revolving Credit and
Swing Line ad (b) the Letter of Credit Obligations exceeds the Advance
Formula at any time, no Advances will be allowed.
Each Request for Revolving Credit Advance or accounts receivable collection
must be accompanied by an accounts receivable report with the inventory
portion of that report updated weekly on an estimated basis, in form and
using an estimation method satisfactory to Agent, with a minimum of one
report per week.
Company may include in Eligible Accounts an estimate of those accounts
(which are otherwise Eligible Accounts) to be generated on the day the
report is submitted. The estimate must be a good faith, conservative
estimate and the report must be adjusted the following day to reflect
actual Eligible Accounts which were estimated for the previous day.
7. Concurrently with execution of this Agreement, Company shall executed ten
amended and restated Revolving Credit Notes-Demand inform and substance
satisfactory to Agent and Banks. The Notes shall reflect the total amount
available under the Revolving Credit (i.e., $105,000,000), with a separate
Note to each Bank representing the total overformula amount (i.e.,
$42,100,000).
8. Company and Guarantors shall at their sole expense establish and maintain,
a United States post office box(es) (the "Lock Box"), to which Agent shall
have exclusive access, and to which Company and Guarantors shall have no
access. Company and Guarantors expressly authorize Agent from time to
times, to remove all contents from the Lock Box, for disposition in
accordance with this Agreement. Company and Guarantors agree to notify all
account debtors and other parties obligated to them (except for those
"after-market" customers who are currently remitting all payments to the
Lock Box) that all payments made on any account, invoice or other
collateral (other than payments by electronic funds) shall be remitted, for
the credit of Agent to the Lock Box, and Company and Guarantors shall
include a like statement on all invoices. Payments made by electronic funds
transfer shall be made directly to the Cash Collateral Account (defined
below), and Company and Guarantors shall so instruct their account debtors
and other parties obligated to them. Company and Guarantors shall execute
all documents, authorizations and other agreements necessary to establish
the Lock Box, and Agent's exclusive access.
Any and all cash, checks, drafts and other instruments for the payment of
money received by Company and Guarantors at any time, in full or partial
payment of any of the Collateral shall forthwith, upon receipt, be
transmitted and delivered to Agent (properly endorsed, where required, so
that such items may be collected by Agent). Any such items received by
Company and Guarantors shall not be commingled with any other funds or
property of Company and Guarantors, but will be held separate and apart
from their own funds or property, and upon express trust for the benefit of
Agent until delivery is made to Agent. Notwithstanding the foregoing,
Brake, Axle and Tandem Company Canada Inc. ("BATCO"), may maintain not more
than $150,000 (Canadian) in its account at CIBC Westgate in Edmonton,
Xxxxxx. In the event that account has a balance of more than $150,000
(Canadian) at any time, the excess shall be transmitted to Agent under this
paragraph.
All items or amounts which are remitted to the Lock Box or otherwise
delivered by or for the benefit of Company and Guarantors to Agent on
account of partial or full payment of, or any amount payable with respect
to, any of the Collateral shall, at Agent's option, (i) be applied to the
payment of the Revolving Credit Loan and then such other Indebtedness,
whether then due or not, in such order of application as Agent may
determine in its sole discretion, or (I) shall be deposited to the credit
of a non-interest bearing deposit account(s) in the name of Agent for the
benefit of Company and Guarantors (the "Cash Collateral Account") to be
established under this paragraph, as security for payment of the
Indebtedness. Company and Guarantors shall have no right whatsoever to
withdraw any funds so deposited. Company and Guarantors further grant to
Agent a first security interest in and lien on all funds on deposit in such
account. Company and Guarantors hereby irrevocably authorize and direct
Agent to endorse all items received for deposit to the Cash Collateral
Account, notwithstanding the inclusion on any such item of a restrictive
notation, e.g., "paid in full", "balance of account", or other restriction.
The parties agree that, in the event of a bankruptcy of Company or
Guarantors, proceeds of accounts receivable and other assets of the debtor
that had not been applied prior to the bankruptcy would be "cash
collateral" under 11 UCS ss.363 and that Agent and Banks and Company and
Guarantors reserve all of their respective rights under the Bankruptcy Code
with respect to that cash collateral.
Company and Guarantors agree that Agent shall not be liable for any loss or
damage which they suffer or may suffer as a result of Agent's processing of
items or its exercise of any other rights or remedies under this Agreement,
except for loss or damage arising solely out of Agent's gross negligence.
In no case shall Agent have liability for indirect, special or
consequential damages, loss of revenues or profits, or any claim, demand or
action by any third party arising out of or in connection with the
processing of items or the exercise of any other rights or remedies
hereunder.
9. The definition of "Prime-based Rate" set forth in Section 1.86 of the
Credit Agreement is amended to read effective as of July 1, 1998 as
follows:
"1.86 `Prime-based Rate' shall mean, for any day, with respect to all
Advances, the sum of two percent (2.0%) plus the greater of (A) the Prime
Rate or (B) the Alternate Base Rate."
This paragraph controls over the statement in the July 15 Letter that
interest would accrue at the default rate.
Upon the occurrence of a default under the terms of this Agreement or any
further defaults under the Loan Documents, then the Indebtedness shall
accrue interest at the rate otherwise provided in this paragraph plus three
percentage points (3%).
10. On or before August 14, 1998 Company and their consultants Xxxxxx,
XxxXxxxxx & Xxxxxxxx shall deliver to the Agent and Xxxxx a detailed
business plan for the period through December 31, 1999.
11. Xxxxx will have the right to assign their interests to "Eligible
Assignees." "Eligible Assignees" shall include (a) a commercial bank or
savings and loan association having total assets in excess of
$5,000,000,000; (b) a finance company, insurance company or other financial
institution or fund, in each case acceptable to Agent, which in the
ordinary course of business extends credit of the type similar to that
extended to Company and has total assets in excess of $500,000,000 and
whose becoming an assignee would not constitute a prohibited transaction
under Section 4975 of ERISA. Each Bank is authorized to disclose to any
prospective assignee, once approved by Agent (if required), any and all
financial information in such Bank's possession concerning Company which
has been delivered t such Bank under the Credit Agreement. Assignments
shall meet the requirements of Section 14.9 of the Credit Agreement.
12. Company will not increase its investment in JPE Canada in violation of the
existing covenant by intercompany advances, payment of its guaranty of the
JPE Canada Facility (identified in Section 9.5(g) of the Credit Agreement),
or otherwise.
13. Company and Xxxxxx XxxXxxxxx & Xxxxxxxx must sign and deliver the letter
attached as Exhibit E concurrently with execution of this Agreement by
Company and Guarantors.
14. Comerica Bank provides certain cash management services to Company and
Guarantors, including controlled disbursement accounts and arrangements for
electronic funds transfers and paperless entries. By letter dated July 15,
1998, Comerica Bank has notified Company and Guarantors of the termination
of those services effective as of the termination date identified in the
notification letter. Company and Guarantors acknowledge that the
notification letter is within Comerica Bank's rights and that, absent any
accommodation from Comerica Bank, the termination of those services would
be fully effective as of the stated termination date. Notwithstanding the
foregoing, Comerica Bank agrees to extend the termination date to August
31, 1998 on the following conditions which are effective immediately: (a)
ACH transfers must be prefunded; and (b) controlled disbursement will be on
a "standard", not "guaranteed" basis.
15. Company and Guarantors acknowledge and agree the Loan Documents presently
provide for and they shall reimburse for any and all costs and expenses of
Agent and Banks, including, but not limited to, all counsel fees of Agent
and Xxxxx, whether in relation to drafting, negotiating or enforcement or
defense of the Loan Documents or this Agreement, including any preference
or disgorgement actions as defined in this Agreement and all of Agent's
audit fees, incurred by Agent or Banks in connection with the Indebtedness,
administration of the Indebtedness and/or any efforts to collect or satisfy
all or any part of the Indebtedness. Company and Guarantors further agree
to indemnify and hold Agent and Banks harmless from and against all such
third party claims, demands or actions, including without limitation
litigation costs and reasonable attorney fees. Company and Guarantors shall
immediately reimburse Agent and Xxxxx for all of their costs and expenses
upon demand.
16. Interest and principal payments on the Indebtedness, loan administration
expenses, including, but not limited to, all inside and outside counsel
fees of Agent and Banks and Agent's audit fees, may be charged directly to
Company's bank accounts maintained with Agent. Company may raise an issue
regarding the reasonableness of counsel fees within fifteen days of its
receipt of a summary statement of the fees.
17. Company and Guarantors will maintain all commercial accounts with Agent,
except that BATCO may maintain its account at CIBC Westgate in Edmonton,
Alberta.
18. In addition to all reporting currently required by the Loan Documents,
Company shall provide Agent and Banks: (a) a summary of accounts payable
and accounts receivable of Company and Guarantors as of the last day of
each month showing which accounts payable and accounts receivable are up to
30, 31 to 60, 61 to 90, and 91 days or more past the invoice date and
listing the names and addresses of creditors and account debtors, as
applicable, which summaries are due by the 10th of the following month; (b)
on Wednesday of each week commencing August 12, 1998 a report comparing
actual performance to the August 9, 1998 Xxxxxx XxxXxxxxx & Xxxxxxxx
projections (the report shall be in the same detail and format as the
projections and shall cover the prior week and the month through the prior
week); (c) daily Company's cash balance report; and (d) other reporting
reasonably requested by Agent..
19. Company and Guarantors acknowledge and agree the Loan Documents presently
provide and they shall permit Agent to conduct such appraisals,
inspections, surveys and/or testing, whether for environmental
contamination or otherwise, that Agent deems necessary, on any and all real
property upon which Agent may possess a mortgage securing the Indebtedness,
and the cost of such appraisals, inspections, surveys and testing are part
of the costs and expenses for which the Company and Guarantors must
reimburse Agent.
20. Company and Guarantors hereby represent and warrant that (a) execution,
delivery and performance of this Agreement and any other documents and
instruments required under this Agreement are not in contravention of law
or the terms of any agreement by which Company and Guarantors or any one of
them is bound, and do not require the consent or approval of any
governmental body, agency, or authority, and this Agreement and any other
documents and instruments required under this Agreement, will be valid and
binding in accordance with their terms; (b) the continuing representations
and warranties of Company and Guarantors set forth in Loan Documents are
true and correct on and as of the date hereof with the same force and
effect as if made on and as of the date hereof; and (c) no default or Event
or Default, or condition or event which, with the giving of notice or the
running of time, or both, would constitute an Event of Default under the
Credit Agreement, has occurred and is continuing as of the date hereof
other than as specified in this Agreement.
21. To the extent any payment received by Agent or any Bank is deemed a
preference, fraudulent transfer or otherwise by a court of competent
jurisdiction which requires Agent or Banks to disgorge such payment, then
such payment will be deemed to have never occurred and the Indebtedness
will be adjusted accordingly.
22. This Agreement shall be governed and controlled in all respects by the laws
of the State of Michigan, without reference to its conflict of law
provisions, including interpretation, enforceability, validity and
construction.
23. Agent and Banks expressly reserve the right to exercise any or all rights
and remedies provided under the Loan Documents and applicable law except as
modified in this Agreement. The failure of Agent or Banks to exercise
immediately such rights and remedies shall not be construed as a waiver or
modification of those rights or an offer of forbearance.
24. This Agreement will inure to the benefit of (a) Agent and Banks and all
their past, present and future parents, subsidiaries, affiliates,
predecessors and successor corporations and all of their subsidiaries and
affiliates, and any Eligible Assignee, and (b) Company and Guarantors.
25. COMPANY, GUARANTORS, AGENT AND XXXXX ACKNOWLEDGE AND AGREE THAT THE RIGHT
TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH
PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH
COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL
BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION
REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS
AGREEMENT, THE LOAN DOCUMENTS OR THE INDEBTEDNESS.
26. COMPANY AND GUARANTORS, IN EVERY CAPACITY, INCLUDING, BUT NOT LIMITED TO,
AS SHAREHOLDERS, PARTNERS, OFFICERS, DIRECTORS, INVESTORS AND/OR CREDITORS
OF COMPANY AND/OR GUARANTORS, OR ANY ONE OR MORE OF THEM, XXXXXX XXXXX,
DISCHARGE AND FOREVER RELEASE AGENT, XXXXX, AND THEIR EMPLOYEES, OFFICERS,
DIRECTORS, ATTORNEYS, STOCKHOLDERS AND SUCCESSORS AND ASSIGNS, FROM AND OF
ANY AND ALL CLAIMS, CAUSES OF ACTION, DEFENSES, COUNTERCLAIMS OR OFFSETS,
AND/OR ALLEGATIONS COMPANY AND/OR GUARANTORS MAY HAVE, OR MAY HAVE MADE, OR
ARE BASED N FACTS OR CIRCUMSTANCES ARISING, AT ANY TIME UP XXXXXX AND
INCLUDING THE DATE OF THIS AGREEMENT, WHETHER KNOWN OR UNKNOWN, AGAINST
ANYOR ALL OF AGENT, XXXXX, THEIR EMPLOYEES, OFFICERS, DIRECTORS, ATTORNEYS,
STOCKHOLDERS AND SUCCESSORS AND ASSIGNS.
27. Company and Guarantors shall properly execute this Agreement and hand
deliver same to the undersigned by no later than 5:00 p.m. on August 10,
1998.
Agent and Banks reserve the right to terminate their forbearance prior to August
31, 1998 in the event of any new defaults under the Loan Documents, defaults
under this Agreement, in the event of further deterioration in the financial
condition of Company or Guarantors or further deterioration in Agent or Xxxxx'
collateral position, and/or in the event Agent or Banks, for any reason,
believes that the prospect of payment or performance is impaired.
Very truly yours,
COMERICA BANK, Agent
By: /s/ Xxxxxxx X. Xxxxx
-----------------------
Xxxxxxx X. Xxxxx
Its: Vice President
Special Assets Group
P.O. Box 75000
Detroit, Michigan 48275-3205
(000) 000-0000
(000) 000-0000 Fax
cc: Allparts, Incorporated
Dayton Parts, Inc.
SAC Corporation
Starboard Industries, Inc.
Industrial & Automotive Fasteners, Inc.
Plastic Trim, Inc.
Brake, Axle and Tandem Company Canada Inc.
JPE Finishing, Inc.
COMERICA BANK NBD BANK
By: /s/ Xxxxxxx X. Xxxxx By: /s/ Xxxxxx X. Xxxx
------------------------ ------------------------
Its: Vice President Its: Vice President
NATIONAL BANK OF CANADA XXXXXX TRUST and SAVINGS BANK
By: /s/ Xxxxx X. Xxxxxx By: /s/ Xxxxx Xxxxxxxx
------------------------ ------------------------
Its: Vice President Its: Sr. Vice President
By: /s/ Xxxxx Xxxxx
------------------------
Its: Vice President
BANK ONE, DAYTON, N.A.
By: /s/ Xxxxx X. Xxxxx
------------------------
Its: Assistant Vice President
ACKNOWLEDGED AND AGREED:
JPE, INC. SAC CORPORATION
By: /s/ Xxxxx X. Xxxxx By: /s/ Xxxxx X. Xxxxx
------------------------- ------------------------
Its: President Its: Vice President
Date: 8/12/98 Date: 8/12/98
ALLPARTS, INCORPORATED STARBOARD INDUSTRIES, INC.
By: /s/ Xxxxx X. Xxxxx By: /s/ Xxxxx X. Xxxxx
------------------------- ------------------------
Its: Vice President Its: Vice President
Date: 8/12/98 Date: 8/12/98
DAYTON PARTS, INC. INDUSTRIAL & AUTOMOTIVE
FASTENERS, INC.
By: /s/ Xxxxx X. Xxxxx By: /s/ Xxxxx X. Xxxxx
------------------------- ------------------------
Its: Vice President Its: Vice President
Date: 8/12/98 Date: 8/12/98
PLASTIC TRIM, INC. BRAKE, AXLE AND TANDEM
COMPANY CANADA INC.
By: /s/ Xxxxx X. Xxxxx By: /s/ Xxxxx X. Xxxxx
------------------------- ------------------------
Its: Vice President Its: Vice President
Date: 8/12/98 Date: 8/12/98
JPE FINISHING, INC.
By: /s/ Xxxxx X. Xxxxx
-------------------------
Its: Vice President
Date: 8/12/98
