October 1, 1998
JPE, Inc.
000 Xxxxxxxxxx Xxxxx
Xxxxx 000
Xxx Xxxxx, Xxxxxxxx 00000
Attention: Xx. Xxxxx X. Xxxxxxx and Xx. Xxxxx X. Xxxxx
RE: FORBEARANCE AGREEMENT 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 ("API"), DAYTON
PARTS, INC. ("DPI"), SAC CORPORATION, STARBOARD INDUSTRIES, INC. ("SBI"),
INDUSTRIAL & AUTOMOTIVE FASTENERS, INC. ("IAF"), PLASTIC TRIM, INC.
("PTI"), BRAKE, AXLE AND TANDEM COMPANY CANADA INC. AND JPE FINISHING, INC.
(COLLECTIVELY, "GUARANTORS") DATED AUGUST 10, 1998, AND AMENDED BY A FIRST
AMENDMENT DATED AUGUST 31, 1998, A SECOND AMENDMENT DATED SEPTEMBER 4, 1998
AND A THIRD AMENDMENT DATED SEPTEMBER 16, 1998 (AS AMENDED, THE
"FORBEARANCE AGREEMENT")
Dear Xx. Xxxxxxx and Xx. Xxxxx:
Company and Guarantors have requested that Banks extend the forbearance provided
for in the Forbearance Agreement.
Subject to written acceptance by Company and Guarantors of the following terms
and conditions, Agent and Banks are willing to grant certain accommodations and
to forbear until January 1, 2000, subject to earlier termination as provided
below, from further action to collect the Indebtedness:
1. All capitalized terms not defined in this fourth amendment ("Fourth
Amendment") to the Forbearance Agreement shall have the meanings described
in the Forbearance Agreement and/or the Loan Documents.
2. Except as modified by this Fourth Amendment, 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
Forbearance Agreement and the Loan Documents, which are ratified and
confirmed. The liens and security interests granted to Agent and Banks
under the Loan Documents and the Forbearance Agreement are also ratified
and confirmed by Company and the undersigned Guarantors. This Fourth
Amendment shall be binding upon and shall inure to the benefit of Agent,
Banks, Company and the undersigned Guarantors, and their respective
successors and assigns.
3. Company and the undersigned Guarantors acknowledge that Agent and Banks are
under no obligation to advance funds or extend credit to Company and
Guarantors under the Forbearance Agreement, as amended, the Credit
Agreement or other Loan Documents, or otherwise.
4. The advisory Advance Formula was revised in the Third Amendment to
eliminate any availability on account of any collateral of PTI and/or SBI.
The fixed asset reliance (set forth in clause (iii) of paragraph 6 of the
Forbearance Agreement) net of the fixed assets of PTI and SBI is
$11,537,000. After the sale of API the fixed assets reliance will be
reduced to $10,923,000. The Cap remains at $107,387,000, subject to
reductions as provided in the Forbearance Agreement. The overformula amount
(set forth in clause (iv) of paragraph 6 of the Forbearance Agreement) and
the Cap are adjusted set forth below. In addition, the aggregate of (i)
Advances under the Revolving Credit and Swing Line and (ii) the Letter of
Credit Obligations as of the end of each month must be less than the Month
End Cap (as set forth below).
MONTH-YEAR OVERFORMULA AMOUNT CAP (1) MONTH END CAP
---------- ------------------ ------- -------------
October 1998 $46,840,000 (2) $84,389,000 83,793,000
November 1998 $42,700,000 (3) $73,400,000 (4) 72,378,000
December 1998 $43,700,000 $73,400,000 71,616,000
January 1999 $45,400,000 $76,000,000 74,993,000
February 1999 $45,100,000 $76,500,000 75,523,000
March 1999 $45,400,000 $76,400,000 75,427,000
April 1999 $45,700,000 $77,100,000 76,114,000
May 1999 $46,300,000 $78,100,000 77,054,000
June 1999 $47,100,000 $78,400,000 77,375,000
July 1999 $47,500,000 $78,300,000 77,320,000
August 1999 $47,600,000 $78,300,000 76,929,000
September 1999 $47,500,000 $78,600,000 77,591,000
October 1999 $47,400,000 $79,000,000 78,036,000
November 1999 $47,700,000 $79,200,000 78,210,000
December 1999 $48,200,000 $79,100,000 78,121,000
(1) Cap is stated net of PTI/SBI Adjustment.
(2) Until closing of API sale, then $42,700,000.
(3) If the API sale has not closed, then $46,800,000 until the earlier
of (i) the closing, or (ii) November 15, 1998.
(4) If the API sale has not closed, then $84,800,000 until the earlier
of (i) the closing, or (ii) November 15, 1998.
To the extent that the Banks consent to a sale of API for net proceeds of
less than $10 million, the Cap and Overformula Amounts will be increased by
the amount of the difference provided, however, that the Overformula
Amount, after the adjustment, shall never exceed $48,200,000. All payments
received from, or on account of, PTI and/or SBI shall be applied to the
Indebtedness (to principal or interest as elected by Banks) and to the
extent applied to principal shall permanently reduce the Cap dollar for
dollar (except for the first $997,000 received after September 30, 1998).
As of October 14, 1998, the Cap is $101,602,162 computed according to the
foregoing requirements..
5. Subject to maintaining the sum of availability under the advisory Advance
Formula (as revised in paragraph 4 above) plus the PTI/SBI Adjustment
(defined below) equal to or greater than the aggregate of (i) Advances
under the Revolving Credit and Swing Line and (ii) the Letter of Credit
Obligations, and provided there are no defaults under the terms of the
Forbearance Agreement, as amended, and no further defaults under the Loan
Documents, Banks may, in their sole discretion, continue to advance to
Company under the Revolving Credit Loan, in accordance with the Loan
Documents, as amended, through December 31, 1999. The "PTI/SBI Adjustment"
is $23,452,632 as of September 30, 1998 and is reduced further by payments
received from or, on account of PTI and/or SBI after September 30, 1998
which reduce the Cap. Company and Guarantors agree that:
(a) the Company shall not borrow for the benefit of PTI and/or SBI; and
(b) neither Company nor any of the Guarantors shall make intercompany
transfers of any kind to or for the benefit of PTI and/or SBI.
6. Company and the undersigned Guarantors approved the Interim Order
Authorizing Postpetition Financing and Providing Adequate Protection for
each of PTI and SBI (collectively, the "Financing Orders") and its
execution by Agent. The Financing Orders were entered as interim orders on
September 18, 1998. It is a default under the Forbearance Agreement:
(a) If either of the Financing Orders are not entered as final orders in
the form approved by the Agent or if, after entry, one or both are
modified (unless Agent approves the modifications);
(b) If PTI and SBI default under either of the Financing Orders; or
(c) If PTI and/or SBI take action adverse to Banks.
7. Attached as Exhibit A are projections of the period October 1, 1998 through
December 31, 1998, which were prepared by Company and its consultants,
Xxxxxx, XxxXxxxxx & Xxxxxxxx. It is a default under the Forbearance
Agreement if the Company's performance varies from the projections in a
material, adverse way. Without limitation, it is a default if as of the end
of any month cumulative consolidated earnings before interest and taxes
from October 1, 1998 to date ("Cumulative EBIT") (for IAF/DPI only except
that API earnings in October 1998 are included in the Cumulative EBIT) is
less than the amount shown below:
Month Year Cumulative EBIT
----- ---- ---------------
October 1998 506,000
November 1998 746,000
December 1998 865,000
January 1999 888,000
February 1999 934,000
March 1999 1,009,000
April 1999 1,531,000
May 1999 2,123,000
June 1999 2,577,000
July 1999 3,023,000
August 1999 3,441,000
September 1999 3,829,000
October 1999 4,385,000
November 1999 4,552,000
December 1999 4,804,000
Company shall deliver to Agent and Banks within twenty days of each month
end a report showing actual consolidated EBIT for the previous month and
Cumulative EBIT for October 1, 1998 through the end of the previous month
and the variance from the projections based on the model used for the
projections.
8. Company agrees that if an officer or senior employee leaves Company it will
not pay a replacement officer or employee higher aggregate compensation
that the former officer or employee, without the consent of the Banks. In
addition, Company agrees that it will not pay or agree to pay stay pay or
severance pay or similar benefits to its officers or other senior employees
in excess of the following amounts:
OFFICER STAY PAY
------- --------
Xxxxx X. Xxxxx $250,000
Xxxxx X. Xxxxxxx $175,000
Xxxxx Xxxxxx $125,000
provided, however that:
(a) no such Stay Pay shall be earned and any obligation of Company to pay
shall be terminated if any of the following occur before January 1,
2000: (i) voluntary termination by such employee other than for Good
Reason, as defined ion Exhibit A, (ii) termination of such employee
for Cause, as defined on Exhibit A, or (iii) the death of such
employee;
(b) Stay Pay may not be paid until the earliest of (i) January 1, 2000,
(ii) sale of all of API, DPI, IAF, PTI and SBI, or (iii) determination
of the Board of Directors and consent of Banks that such employee is
no longer necessary; and
(c) The Stay Pay must be borne one half by IAF and DPI and one half by PTI
SBI. If PTI and SBI do not agree (with Bankruptcy Court approval to
the extent necessary) to pay one half of the Stay Pay, then the
Company's authority to pay Stay Pay is reduced by one half.
Company may establish at Agent a separate account ("Reserve Account") and,
for each month during the six month period beginning October 1998 and
ending March 1999 may deposit $50,000 ("Authorized Amount") into the
Reserve Account from funds otherwise available to Company. If an officer
who is authorized Stay Pay leaves Company under circumstances which do not
qualify that officer for such Stay Pay then the Authorized Amount will be
reduced accordingly. Company grants to Agent for the benefit of the Banks a
first priority security interest in and lien on all funds now or hereafter
on deposit in the Reserve Account to secure the Indebtedness. Company has
no right to withdraw, and Agent has no right to apply any funds so
deposited, except as provided in this paragraph. Agent may not apply the
funds in the Reserve Account up to the Authorized Amount until such time as
Company has discharged its obligations for Stay Pay including related
taxes; Agent may apply the funds deposited in the Reserve Account to the
Indebtedness after the Company's obligations for Stay Pay including related
taxes, have been satisfied. Company may withdraw funds deposited in the
Reserve Account up to the Authorized Amount free and clear of Agent's
security interest for the sole purpose of funding its obligations for Stay
Pay, including related taxes, and Company agrees to use the funds only for
that purpose.
9. It is a default under the Forbearance Agreement if the freeze approved by
the informal committee of the unsecured creditors of IAF is not extended
through the forbearance period or, if notwithstanding the committee's
approval of an extension of the freeze, creditors who are material in
numbers or dollars take action to collect pre-freeze liabilities.
10. Company ratifies and confirms its undertakings under a certain letter
agreement with Agent dated September 16, 1998; a default by Company under
that letter agreement is a default under the Forbearance Agreement.
11. It is a default under the Forbearance Agreement, if the Company: (a)
extends the exclusive Negotiating Period with DGI Investments, Inc. under
the Letter of Intent dated October 1, 1998, unless DGI has met the Approval
Conditions set forth in Section 4(c)(vi) of the Letter or Intent, or (b)
otherwise restricts Company's ability to solicit offers, enter into any
agreement or understanding in connection with, enter into negotiations
concerning, discuss, consummate or agree to consummate the sale, exchange
or other disposition of all or any portion of the assets of Company, or any
sale, exchange or other disposition of all or any portion of Company or its
Subsidiaries, without the consent of the Banks.
12. "Year 2000 Problem" is defined as any significant risk that computer
hardware, software, or equipment containing embedded microchips essential
to the business or operations of the Borrower or any of its Subsidiaries
will not, in the case of dates or time periods occurring after December 31,
1999, function at least as efficiently and reliably as in the case of times
or time periods occurring before January 1, 2000, including the making of
accurate leap year calculations. Company has conducted a comprehensive
review and assessment of the computer applications of Company and its
Subsidiaries with respect to any defect in computer software, data bases,
hardware, controls and peripherals related to the occurrence of the year
2000 or the use at any time of any date which is before, on or after
December 31, 1999 in connection therewith. Based on the foregoing review
and assessment, Company believes that no such defect could reasonably be
expected to have a material adverse effect on the business or financial
affairs of Company (or of Company and its Subsidiaries taken on a
consolidated basis). By January 15, 1999, Company will make inquiry of
their material suppliers, vendors (including data processors) and
customers, with respect to any defect in computer software, data bases,
hardware, controls and peripherals related to the occurrence of the year
2000 or the use at any time of any date which is before, on or after
December 31, 1999, in connection therewith. Promptly after completion of
its inquiry, Company will advise whether Company believes that any such
defect exists and could reasonably be expected to have a material adverse
effect on the business or financial affairs of Company (or of Company and
its Subsidiaries taken on a consolidated basis). Company will take all
actions necessary and commit adequate resources to assure that its
computer-based and other systems (and those of all Subsidiaries) are able
to effectively process data, including dates before, on or after January 1,
2000, without experiencing any Year 2000 Problem that could cause a
material adverse effect on the business or financial affairs of Company (or
of Company and its Subsidiaries taken on a consolidated basis). At the
request of Agent, Company will provide Agent with written assurances and
substantiations (including, but not limited to, the results of internal or
external audited reports prepared in the ordinary course of business)
reasonably acceptable to Agent as to the capability of Company and its
Subsidiaries to conduct its and their businesses and operations before, on
and after January 1, 2000, without experiencing a Year 2000 Problem causing
a material adverse effect on the business or financial affairs of Company
(or of Company and its Subsidiaries taken on a consolidated basis).
13. Company and the undersigned Guarantors hereby represent and warrant that
(a) execution, delivery and performance of this Fourth Amendment are not in
contravention of law or the terms of any agreement by which they are bound,
and do not require the consent or approval of any governmental body,
agency, or authority, and this Fourth Amendment will be valid and binding
in accordance with its terms; (b) the continuing representations and
warranties of Company and the undersigned Guarantors set forth in Loan
Documents are true and correct on and as of the date hereof with the same
force and effect as made on and as of the date hereof other than as
previously specified in writing to Agent and Banks; and (c) no event of
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
Forbearance Agreement, has occurred and is continuing as of the date hereof
other than as previously specified in writing to Agent and Banks.
14. COMPANY, THE UNDERSIGNED GUARANTORS, AGENT AND BANKS 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 FOURTH AMENDMENT, THE FORBEARANCE AGREEMENT, THE LOAN
DOCUMENTS OR THE INDEBTEDNESS.
15. COMPANY AND THE UNDERSIGNED 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,
HEREBY WAIVE, DISCHARGE AND FOREVER RELEASE AGENT, BANKS, 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 ON FACTS OR CIRCUMSTANCES ARISING, AT
ANY TIME UP THROUGH AND INCLUDING THE DATE OF THIS FOURTH AMENDMENT,
WHETHER KNOWN OR UNKNOWN, AGAINST ANY OR ALL OF AGENT, BANKS, THEIR
EMPLOYEES, OFFICERS, DIRECTORS, ATTORNEYS, STOCKHOLDERS AND SUCCESSORS AND
ASSIGNS.
Agent and Banks reserve the right to terminate their forbearance prior to
January 1, 2000 in the event of any new defaults under the Loan Documents or a
default under the Forbearance Agreement as amended by this Fourth Amendment, in
the event of further deterioration in the financial condition of Company or
Guarantors or further deterioration in Agent's or Banks' 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
X.X. Xxx 00000
Xxxxxxx, Xxxxxxxx 00000-0000
(000) 000-0000
(000) 000-0000 Fax
COMERICA BANK NBD BANK
By: /s/ Xxxxxxx X. Xxxxx By: /s/ Xxxxxx X. Xxxx
-------------------------- -------------------------
Its: Vice President Its: First Vice President
NATIONAL BANK OF CANADA XXXXXX TRUST and SAVINGS BANK
By: /s/ Xxxxxxx Xxxxxx By: /s/ Xxxxxx X. Xxxxxxx
-------------------------- -------------------------
Its: Vice President Its: Sr. Vice President
By: /s/
--------------------------
Its: Group Vice President
BANK ONE, DAYTON, N.A.
By: /s/ Xxxxx X. Xxxxx
--------------------------
Its: Assistant Vice President
ACKNOWLEDGED AND AGREED:
JPE, INC. INDUSTRIAL & AUTOMOTIVE
FASTENERS, INC.
By: /s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxx X. Xxxxxxx
-------------------------- -------------------------
Its: COO and CFO Its: President and CFO
Date: 10/22/98 Date: 10/22/98
ALLPARTS, INCORPORATED BRAKE, AXLE AND TANDEM
COMPANY CANADA INC.
By: /s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxx X. Xxxxxxx
-------------------------- -------------------------
Its: President and CFO Its: Vice President and Treasurer
Date: 10/22/98 Date: 10/22/98
DAYTON PARTS, INC. JPE FINISHING, INC.
By: /s/ Xxxxx X. Xxxxxxx By: /s/ Xxxxx X. Xxxxxxx
-------------------------- -------------------------
Its: Vice President and CFO Its: President and CFO
Date: 10/22/98 Date: 10/22/98
SAC CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
--------------------------
Its: President and Treasurer
Date: 10/22/98