SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported) June 30, 1995
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AMALGAMATED AUTOMOTIVE INDUSTRIES, INC.
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PENNSYLVANIA 2-37589 23-1716951
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(State or other jurisdictional (Commission File (IRS Employer
of incorporation or organization) Number) Identification Number)
POST OFFICE BOX 2441
1731 SOUTH 19TH STREET, HARRISBURG, PENNSYLVANIA 17104
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 717-939-7893
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NO CHANGE
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(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events
(a) Amended Forbearance Agreement with Provident Bank of Maryland
As reported most recently in the Issuer's Quarterly Report on Form
10-QSB for the six months ended April 30, 1995 ("April 30 Form 10-QSB"), the
Issuer has maintained a revolving line of credit with Provident Bank of
Maryland ("Provident") since May 1992. Under the original loan agreement,
the Issuer was allowed to borrow up to $2,000,000 and at April 30, 1995, the
Issuer had utilized the credit facility to the extent of $1,877,000. The line
of credit is collateralized by accounts receivable, inventory, equipment, and
working fund accounts maintained at the bank. The agreement provides, among
other things, for maintenance of working capital above $750,000 and tangible
net worth above $500,000, the meeting of certain performance ratios and cash
flows (as defined in the agreement).
In the Management's Discussion and Analysis Section of its Annual
Report on Form 10-KSB for the 12 months ended October 31, 1994, the Issuer
reported that although it was in default of certain ratio and cash flow
requirements under its line of credit agreement, Provident had agreed to waive
its rights and remedies allowed per the loan agreement as of October 31, 1994,
but as a condition for the waiver, the loan interest rate under the loan
agreement had been increased from 2% to 4% per annum above the bank's prime
rate effective January 9, 1995.
As reported in the Issuer's Current Report on Form 8-K, dated April
28, 1995, Provident, by letter received April 28, 1995, advised that it was
the bank's intent for the Issuer to repay or replace Provident's credit
facilities by no later than June 1, 1995. The Issuer also reported that it
had engaged a firm to provide consulting services to include such matters as
the structuring of financing alternatives, preparation of financial and
marketing presentations and making inquiries within the industry regarding
interest in the possible acquisition of the Company's stock or assets. The
Issuer further reported that management, with the assistance of the consulting
firm, was in the process of seeking alternative financing arrangements to
replace Provident's credit facilities at the earliest opportunity, but was
uncertain whether it could be accomplished by June 1, 1995. It was also
reported that the Issuer had received some expressions of interest in the
possible purchase of its shares or a substantial portion of its assets and had
commenced discussions of a preliminary nature with firms expressing an interest
and that Shareholders had been advised that management would consider
legitimate proposals and, if they merit it, make a recommendation regarding
same to Shareholders.
By letter dated June 1, 1995, Provident demanded the immediate and
full repayment of all sums outstanding under the Issuer's revolving line of
credit loan agreement. On June 5, 1995, the Issuer and Provident entered into
a Forbearance Agreement ("Forbearance Agreement") which was attached to the
April 30, 1995 Form 10-QSB as Exhibit No. (10.9), whereby Provident agreed to
forbear from the immediate exercise of its enforcement and collection rights
until 5:00 p.m. on June 30, 1995 and to continue to advance funds under the
revolving credit line as modified by the Forbearance Agreement. Under the
terms of the Forbearance Agreement, all payments received on the Issuer's
accounts and receivables and all payments received as a result of the sale or
other disposition of the Issuer's inventory were paid to Provident and applied
to reduce the sums owed by the Issuer to Provident. In addition, the original
$2,000,000 revolving line of credit was modified and the aggregate allowable
principal amount outstanding reduced by $37,500 weekly to $1,824,500 for the
week ended June 30, 1995.
<PAGE>
On June 30, 1995, the Issuer and Provident agreed to an Amendment to the
Forbearance Agreement, whereby Provident agreed to continue to forbear until
5:00 p.m. on July 31, 1995, to continue to advance funds under the revolving
credit line and to increase the credit line as reduced by the Forbearance
Agreement from $1,824,500 to $1,862,000 for the period July 1, 1995 to the
amended Date of Termination on July 31, 1995. Except as specifically modified,
all other terms and provisions of the Forbearance Agreement remain in effect.
For a full and complete description and understanding of the terms and
conditions of the Amended Forbearance Agreement, reference should be made
to the agreement which is attached hereto as Exhibit No. (10.10).
The Issuer continues to actively seek a replacement credit facility
and presently has applications pending with two other lending institutions
which are engaged in due diligence audits of the Issuer. The Issuer has also
received expressions of possible interest in the purchase of the Issuer's
shares and/or assets, but to date has not received any tentative proposal
which management considers worthy of pursuing.
(b) Closing of Five Stores
The Issuer effective at the close of business on July 6, 1995, closed
the following jobber stores, none of which was operating at a profit:
Location Square Feet Owned/Leased
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Harrisburg - Third Street 3,000 Owned
Millersburg 3,375 Owned
Middletown 3,200 Leased w/lease expiring 7/31/95
Lititz 3,000 Leased w/lease expiring 7/15/97
Carlisle 3,200 Leased w/lease expiring 1/13/98
The Issuer intends to sell or lease the closed Harrisburg and
Millersburg store buildings which it owns and to sublease the closed Lititz
and Carlisle facilities which are under leases expiring in 1997 and 1998
respectively. As the lease for the closed Middletown store expires on July 31,
1995, the Issuer will not seek a sublease for that facility. The mortgage loan
for the closed Millersburg facility has been paid off. The closed Harrisburg
store building is one of the eight properties securing the commercial mortgage
loan from the Unitas National Bank ("Unitas"). Proceeds from the sale of that
building will be used to pay down the Unitas loan which has a maturity date of
June 1, 1997 and had an outstanding principal balance of $984,849.94 at June
30, 1995.
The closure of the five stores should enable the Issuer to
significantly reduce operating expenses and inventory requirements which in
turn should lower the otherwise applicable interest expense.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMALGAMATED AUTOMOTIVE INDUSTRIES, INC.
(Registrant)
Date July 10, 1995 /s/ Kurt J. Myers
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Kurt J. Myers
President and Chief Executive Officer
AMENDMENT TO FORBEARANCE AGREEMENT
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THIS AMENDMENT TO FORBEARANCE AGREEMENT ("AMENDMENT") is made
as of June 30, 1995 by and between AMALGAMATED AUTOMOTIVE
INDUSTRIES, INC., a Pennsylvania corporation, ACME AUTO
PARTS, INC., a Pennsylvania corporation, LAM CORPORATION, a
Pennsylvania corporation and TALMENS PROPERTIES, INC., a
Pennsylvania corporation (collectively, "BORROWER") and
PROVIDENT BANK OF MARYLAND, a Maryland banking corporation
("LENDER").
RECITALS
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Pursuant to the terms and provisions of a Loan and
Security Agreement between the LENDER and the BORROWER dated
May 7, 1992 ("LOAN AGREEMENT"), the LENDER provided to the
BORROWER a revolving line of credit ("REVOLVER") as evidenced
by a promissory note dated May 7, 1992 from the BORROWER to
the order of the LENDER in the stated principal amount of Two
Million Dollars ($2,000,000.00) ("DEMAND NOTE").
Pursuant to the terms and provisions of the LOAN
AGREEMENT and the DEMAND NOTE all sums outstanding under the
REVOLVER are due and payable in full on the demand of the
LENDER. The BORROWER defaulted under the terms of the LOAN
AGREEMENT and pursuant to the terms of a letter dated June 1,
1995, the LENDER demanded the immediate and full repayment of
all sums outstanding under the REVOLVER.
The BORROWER was unable to repay the sums due under the
REVOLVER and requested that the LENDER forbear from
immediately exercising its enforcement and collection rights
against the BORROWER and the collateral securing the
obligations of the BORROWER to the LENDER and also requested
that the LENDER continue to advance proceeds of the REVOLVER
to the BORROWER.
In accordance with the terms and provisisons of a
Forbearance Agreement dated June 5, 1995 by and between the
BORROWER and the LENDER ("FORBEARANCE AGREEMENT"), the LENDER
agreed: (a) to forbear from the exercise of its enforcement
and collection rights against the BORROWER until 5:00 p.m.
on June 30, 1995; and (b) continue to advance proceeds of the
REVOLVER to the BORROWEER, subject to the limitations
contained in the LOAN AGREEMENT and the FORBEARANCE
AGREEMENT, until 5:00 p.m. on June 30, 1995.
The BORROWER has requested an extension to the
FORBEARANCE AGREEMENT so that the lender would continue to
forbear and advance proceeds of the REVOLVER after June 30,
1995. The LENDER is willing to consent to the BORROWER'S
request subject to the terms and provisions of this
AMENDMENT.
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the
parties agree as follows:
Section 1. RECITALS. The parties acknowledge the
accuracy of the Recitals to this AMENDMENT and agree that the
Recitals are hereby incorporated into this AMENDMENT and made
a part hereof.
Section 2. AMENDMENT TO FORBEARANCE AGREEMENT. The
FORBEARANCE AGREEMENT is hereby amended as follows:
a. Subsection 3.1. Subsection 3.1 of the
FORBEARANCE AGREEMENT is hereby amended by deleting the date
"June 30, 1995" and substituting in lieu therof the date
"July 31, 1995."
b. Subsection 4.3. Subsection 4.3 of the
FORBEARANCE AGREEMENT is hereby amended by deleting the words
"and (d) One million Eight Hundred Twenty-Four Thousand Five
Hundred Dollars ($1,824,500.00) at any time between June 23,
1995 and the DATE OF TERMINATION" and substituting in lieu
thereof the following:
(d) One Million Eight Hundred Twenty-
Four Thousand Five Hundred Dollars ($1,824,500.00)
at any time between June 23, 1995 and June 30,
1995, inclusive; and (e) One Million Eight
Hundred Sixty-Two Thousand Dollars ($1,862,000.00)
at any time between July 1, 1995 and the DATE OF
TERMINATION.
Section 3. OTHER TERMS. Except as specifically modified
herein all other terms and provisions of the FORBEARANCE
AGREEMENT remain in full force and effect and are hereby
ratified and confirmed.
Section 4. INCORPORATION. The terms, provisions and
agreements of the FORBEARANCE AGREEMENT are hereby
incorporated herein by reference and made a part hereof.
Section 5. FEES AND EXPENSES. The BORROWER shall pay
all of the reasonable fees, costs, and expenses, including
the LENDER'S reasonable counsel fees and expenses, in
connection with the preparation and negotiation of this
AMENDMENT. The BORROWER hereby authorizes the LENDER to
debit the BORROWER'S account with the LENDER to make payment
of all such fees, costs and expenses.
Section 6. FINAL AGREEMENT. This AMENDMENT, the
FORBEARANCE AGREEMENT and the LOAN DOCUMENTS (as that term is
defined in the FORBEARANCE AGREEMENT) contain the final
entire agreement of the parties and shall be binding upon and
in order to the benefit of the parties hereto and their
respective successors and assigns.
<PAGE>
Section 7. GOVERNING LAW. The performance and
construction of this AMENDMENT shall be governed by the laws
of the State of Maryland.
Section 8. AMENDMENT. Any further amendment of the
FORBEARANCE AGREEMENT must be in a writing executed by all
other parties hereto.
Section 9. TIME OF THE ESSENCE. Time is of the essence
with respect to all aspects of the FORBEARANCE AGREEMENT, as
amended by this AMENDMENT.
Section 10. JURISDICTION. The BORROWER consents to the
jurisdiction of any of the courts of the state of Maryland as
to any issues related to the FORBEARANCE AGREEMENT as
modified by this AMENDMENT, including the validity,
enforceability and interpretation hereof, which require
judicial resolution.
Section 11. DELIVERY BY TELEFACSIMILE. This AMENDMENT
may be delivered by telefacsimile and a telefacsimile of any
party's signature hereto shall constitute an original
signature for all purposes.
Section 12. WAIVER OF JURY TRIAL. The BORROWER agrees
that any suit, action or proceeding, whether claim or
counterclaim brought or instituted by any party to the
FORBEARANCE AGREEMENT or by of its heirs, successors or
assigns, on or respect to the FORBEARANCE AGREEMENT, as
amended by this AMENDMENT, or any of the LOAN DOCUMENTS, or
which in anyway related directly or indirectly to the
obligations of the BORROWER to the LENDER under the REVOLVER
or the dealings of the parties with respect thereto, shall be
tried only by a court and not by a jury. The BORROWER
expressly waives any right to a trial by jury in any such
actions or proceedings.
IN WITNESS WHEREOF, the parties have executed this
AMENDMENT with the specific intention of creating a document
under seal.
WITNESS/ATTEST: BORROWER:
AMALGAMATED AUTOMOTIVE INDUSTRIES,
INC., A Pennsylvania Corporation
/s/ Timothy L. McMasters By: /s/ Kurt J. Myers (SEAL)
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Treasurer Name: Kurt J. Myers
Title: President/CEO
<PAGE>
ACME AUTO PARTS, INC.,
A Pennsylvania Corporation
/s/ Timothy L. McMasters By: /s/ Kurt J. Myers (SEAL)
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Treasurer Name: Kurt J. Myers
Title: President/CEO
LAM CORPORATION,
A Pennsylvania Corporation
/s/ Timothy L. McMasters By: /s/ Kurt J. Myers (SEAL)
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Treasurer Name: Kurt J. Myers
Title: President/CEO
TALMENS PROPERTIES, INC.,
A Pennsylvania Corporation
/s/ Timothy L. McMasters By: /s/ Kurt J. Myers (SEAL)
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Treasurer Name: Kurt J. Myers
Title: President/CEO
LENDER:
PROVIDENT BANK OF MARYLAND,
A Maryland Banking Corporation
/s/ Jo Ellen Kaufman By: Thomas B. Freeze (SEAL)
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Name: Thomas B. Freeze
Title: Vice President
