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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _____ to _____
-------------------------------------------------
Commission file number 0-22580
------------------------------
JPE, Inc.
(Exact name of registrant as specified in its charter)
Michigan
(State or other jurisdiction of
incorporation or organization)
38-2958730
(I.R.S. Employer Identification No.)
775 Technology Drive, Suite 200, Ann Arbor, Michigan 48108
(Address of principal executive offices) (Zip Code)
(734) 662-2323
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed, since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ No / /
As of June 30, 1998, there were 4,602,180 shares of the registrant's common
stock outstanding. This Quarterly Report on Form 10-Q contains 17 pages, of
which this is page 1.
<PAGE>
JPE, INC.
INDEX
Page
----
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets ................... 3
- At June 30, 1998 and 1997 (Unaudited)
- At December 31, 1997 (Audited)
Consolidated Statements of Income and
Comprehensive Income (Unaudited) ........................ 4
- For the Three and Six Months Ended
June 30, 1998 and 1997
Consolidated Statements of Cash Flows (Unaudited) ....... 5
- For the Six Months Ended
June 30, 1998 and 1997
Notes to Unaudited Consolidated Financial Statements ... 6-8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ..................... 9-15
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K ........................ 16
Signature ........................................................ 17
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JPE, INC.
<TABLE>
CONSOLIDATED CONDENSED BALANCE SHEETS
(Amounts in Thousands, Except Share Data)
<CAPTION>
At June 30, At Dec. 31,
1998 1997 1997
---- ---- ----
(Unaudited) (Audited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash ................................... $ 493 $ 200 $ 29
Accounts receivable, net ................ 36,219 40,630 37,997
Inventory ............................... 36,338 41,165 39,412
Other current assets .................... 7,923 11,152 8,375
-------- -------- --------
Total current assets .................. 80,973 93,147 85,813
Property, plant and equipment, net ........ 69,888 72,980 72,981
Goodwill, net ............................. 30,770 31,985 31,962
Other assets .............................. 790 2,774 2,459
-------- -------- --------
Total assets .......................... $182,421 $200,886 $193,215
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ....... $114,912 $ 1,212 $105,402
Short-term debt ......................... 9,525 8,678 7,723
Accounts payable ........................ 22,694 25,795 25,219
Accrued liabilities ..................... 5,651 9,288 6,650
Loan guaranty ........................... 1,361 -- --
-------- -------- --------
Total current liabilities ............. 154,143 44,973 144,994
Deferred income taxes ..................... 3,292 3,453 3,804
Other liabilities ......................... 1,788 1,643 1,651
Long-term debt, non-current ............... 517 116,052 9,272
-------- -------- --------
Total liabilities ..................... 159,740 166,121 159,721
-------- -------- --------
Shareholders' equity:
Preferred stock, 3,000,000
authorized, no shares issued
and outstanding ........................ -- -- --
Common stock, 15,000,000 authorized,
4,602,180 issued and outstanding at
June 30, 1998 and at June 30, 1997,
no par value ........................... 28,051 28,026 28,051
Retained earnings (deficit) ............. (4,990) 6,752 5,714
Foreign currency translation
adjustment ............................. (380) (13) (271)
-------- -------- --------
Total shareholders' equity ............ 22,681 34,765 33,494
-------- -------- --------
Total liabilities and
shareholders' equity ................. $182,421 $200,886 $193,215
======== ======== ========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
JPE, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
For the Three and Six Months Ended June 30, 1998 and 1997
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
<CAPTION>
Three Months Six Months
Ended Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales .............................. $66,643 $77,006 $136,067 $145,031
Cost of goods sold ..................... 58,396 65,553 121,628 124,617
------- ------- -------- --------
Gross profit ....................... 8,247 11,453 14,439 20,414
Selling, general and
administrative expenses ............... 7,317 7,608 15,014 14,391
Discontinuance of stamping
operations ............................ -- 2,250 -- 2,250
------- ------- -------- --------
Operating profit (loss) ............ 930 1,595 (575) 3,773
Other expense .......................... 3,122 104 2,987 176
Interest expense, net .................. 3,551 2,657 7,016 4,866
------- ------- -------- --------
Loss before income taxes ........... (5,743) (1,166) (10,578) (1,269)
Income tax expense (benefit) ........... 1,693 (176) 126 (164)
------- ------- -------- --------
Net loss ........................... (7,436) (990) (10,704) (1,105)
Other comprehensive expense
Foreign currency translation
adjustment .......................... (90) 70 (109) (13)
------- ------- -------- --------
Comprehensive loss ..................... $(7,526) $ (920) $(10,813) $ (1,118)
======== ======= ======== ========
Basic loss per common share ............ $ (1.62) $ (0.22) $ (2.33) $ (0.24)
======= ======= ======== ========
Weighted average shares outstanding .... 4,602 4,602 4,602 4,606
===== ===== ===== =====
Loss per common share
assuming dilution ..................... $ (1.62) $ (0.22) $ (2.33) $ (0.24)
======= ======= ======== ========
Weighted average shares outstanding
and common stock equivalents .......... 4,602 4,602 4,602 4,606
===== ===== ===== =====
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
JPE, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
(Unaudited)
<CAPTION>
Six Months
Ended
June 30,
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss ............................................... $(10,704) $ (1,105)
Depreciation and amortization .......................... 5,516 4,678
Loss on disposal of fixed assets ....................... -- 24
Discontinuance of stamping operations .................. -- 2,250
Write-down of assets related to JPE Canada ............. 3,107 --
Accrual of loan guaranty on JPE Canada debt ............ 1,361 --
Adjustments to reconcile net loss to net
cash provided by (used for) operating activities:
Changes in operating assets and liabilities:
Accounts receivable ................................. 1,778 (11,890)
Inventory ........................................... 3,074 (1,531)
Other current assets ................................ 644 (937)
Accounts payable .................................... (2,525) 5,277
Accrued liabilities and income taxes ................ (1,743) (604)
Deferred income taxes ............................... (882) 269
-------- --------
Net cash provided by (used for)
operating activities ............................ 346 (3,569)
Cash flows from investing activities:
Purchase of property and equipment ..................... (2,062) (7,425)
Acquisition of BATCO ................................... -- (5,518)
-------- --------
Net cash used for investing activities ............ (2,062) (12,943)
Cash flows from financing activities:
Sale of common stock ................................... -- 77
Repayments of other debt ............................... (279) (1,297)
Net borrowings under revolving loan .................... 1,781 14,275
Net borrowings under Canadian credit facility .......... 1,596 1,537
Borrowings (repayments) under capital lease ............ (150) 900
Tax benefit from options ............................... -- 28
-------- --------
Net cash provided by financing activities ......... 2,948 15,520
Effect of currency translation on cash ................. (48) (124)
Cash and cash equivalents:
Net increase (decrease) in cash ........................ 464 (1,116)
Cash, beginning of period .............................. 29 1,316
-------- --------
Cash, end of period .................................... $ 493 $ 200
======== ========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements
<PAGE>
JPE, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in Thousands)
A. BASIS OF PRESENTATION:
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information. Accordingly, the financial statements do
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments considered necessary for a fair
presentation have been included, and such adjustments are of a normal
recurring nature except as disclosed below. The consolidated financial
statements should be read in conjunction with the financial statements and
notes thereto contained in the JPE, Inc. Form 10-K for the year ended
December 31, 1997 and the Form 10-Q for the quarter ended March 31, 1998.
B. SALE OF COMPANY:
On March 23, 1998, the Company announced that it intends to pursue the sale
of the entire Company. The proceeds from the sale of the Company will be
used to retire the debt of the Company, although there can be no assurance
that the proceeds will be adequate for this purpose. These financial
statements have been prepared as a going concern with no provision for loss
on sale of the Company. The Company is in violation of its financial
covenants under the Credit Agreement at June 30, 1998, and has obtained a
forbearance agreement from its lender.
C. INVENTORY:
Inventories by component are as follows:
<TABLE>
<CAPTION>
June 30, 1998 June 30, 1997 Dec. 31, 1997
------------- ------------- -------------
<S> <C> <C> <C>
Finished goods ........ $17,903 $16,673 $19,309
Work in process ....... 1,957 5,712 2,435
Raw material .......... 12,193 16,150 15,211
Tooling ............... 2,705 2,630 2,457
------- ------- -------
$36,338 $41,165 $39,412
======= ======= =======
</TABLE>
D. WRITE-DOWN OF ASSETS OF JPE CANADA:
JPE Canada is not in compliance with its loan covenants and its lender has
made demand for payment and given notice of its intention to enforce its
security interests. In order to ensure production for General Motors
Corporation ("GM"), its only customer, JPE Canada has entered into certain
accommodation agreements with its lender and GM that permit continued
operating activities under certain conditions and covenants, including
additional out-of-formula funding in the amount of $4.0. Due to the impact
of the GM strike on JPE Canada's operations during the months of June and
July, JPE Canada has fully drawn on the additional funding and has
defaulted under the amended loan agreement. The lender has agreed to
provide additional out-of-formula funding in the amount of $2.0 million,
although the Company has informed the lender and GM that JPE Canada is
insolvent and has no present ability to repay in full the indebtedness to
the secured creditors. In addition, the Company does not believe that the
proceeds from the sale of JPE Canada will be adequate to satisfy its debt
obligations to the lender, GM and unsecured creditors.
The Company has applied the accounting treatment under Financial Accounting
Standards to JPE Canada. Under these pronouncements, all of the assets are
adjusted to the carrying amount which will be used to settle JPE Canada's
obligations. The Company has adjusted the value of JPE Canada assets to
approximate fair value by eliminating the deferred tax assets and other
assets that have no value in a liquidation. This resulted in a charge of
approximately $4.5 million which includes the recognition of the JPE, Inc.
unsecured loan guarantee and patent write-down. The amount of the assets
and liabilities of JPE Canada included in the Consolidated Balance Sheet at
June 30, 1998 is as follows (amounts in thousands):
Receivables ................................ $ 3,113
Inventory .................................. 3,723
Other Current Assets ....................... 641
Property, Plant and Equipment .............. 16,258
-------
Total Assets ............................ $23,735
-------
Short-Term Debt ............................ $ 9,525
Current Portion of Long-Term Debt .......... 8,883
Accounts Payable ........................... 4,082
Accrued Liabilities ........................ 1,276
Other Liabilities .......................... 378
-------
Total Liabilities ....................... $24,144
-------
Net Deficit ............................. $ (409)
=======
The following unaudited pro forma summary for the six months ended June 30,
1998 and 1997 assumes that effective January 1, 1997, JPE Canada was no
longer treated as a consolidated subsidiary. The pro forma information
reflects the JPE Consolidated Income Statement with exclusion of the JPE
Canada results and the elimination of the write-down of patents related to
the JPE Canada business and recognition of the unsecured loan guarantee
that are reflected in JPE, Inc.'s books at June 30, 1998 (amounts in
thousands, except per share amounts):
<TABLE>
<CAPTION>
Six months ending June 30,
1998 1997
---- ----
<S> <C> <C>
Revenues ............................... $113,578 $111,582
Operating profit ....................... 3,038 6,127
Loss before income taxes ............... (3,272) (203)
Net loss ............................... (2,381) (415)
Loss per common share .................. (0.51) (0.09)
</TABLE>
E. INCOME TAXES:
The Company has recorded $905,000 and $1.7 million valuation reserves
related to the tax benefits previously recognized in the U.S. and Canada,
respectively.
F. DISCONTINUANCE OF STAMPING OPERATIONS:
On May 15, 1997, the Company announced a plan to discontinue its stamping
operations at its East Tawas, Michigan facility of Starboard Industries,
Inc., a wholly-owned subsidiary of the Company. The plan included
resourcing stamped parts to third party suppliers, the sale of stamping
assets and a reduction in the Starboard workforce. As a result of this
plan, the Company recorded a charge of $2.25 million comprised of the
following:
Loss on sale of fixed assets .......................... $1,348
Severance expenses .................................... 365
Adjustment to scrap value of inventory ................ 407
Other ................................................. 130
------
Total ............................................ $2,250
======
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and notes thereto filed with the Company's Annual Report on
Form 10-K to assist in understanding the Company's results of operations, its
financial position, cash flows, capital structure and other relevant financial
information.
RECENT INFORMATION
On August 12, 1998, the Company announced that JPE Canada's lender has issued a
demand letter along with a Notice of Intention to Enforce Security because JPE
Canada is not in compliance with the financial covenants of its loan agreement.
The lender's loan is secured by substantially all of the assets of JPE Canada
and by none of the assets of JPE, Inc. JPE, Inc. remains obligated on an
unsecured loan guarantee of Cdn. $2.0 million for JPE Canada and the lender has
issued a demand letter for the loan guarantee.
FORWARD LOOKING INFORMATION
This Quarterly Report on Form 10-Q contains, and from time to time the Company
expects to make, certain forward-looking statements regarding its business,
financial condition and results of operations. In connection with the "Safe
Harbor" provisions of the Private Securities Reform Act of 1995 (the "Reform
Act"), the Company intends to caution readers that there are several important
factors that could cause the Company's actual results to differ materially from
those projected in its forward-looking statements, whether written or oral, made
herein or that may be made from time to time by or on behalf of the Company.
Readers are cautioned that such forward-looking statements are only predictions
and that actual events or results may differ materially. The Company undertakes
no obligation to publicly release the results of any revisions to the
forward-looking statements to reflect events or circumstances or to reflect the
occurrence of unanticipated events.
The Company wishes to ensure that any forward-looking statements are accompanied
by meaningful cautionary statements in order to comply with the terms of the
safe harbor provided by the Reform Act. Accordingly, the Company has set forth a
list of important factors that could cause the Company's actual results to
differ materially from those expressed in forward-looking statements or
predictions made herein and from time to time by the Company. Specifically, the
Company's business, financial condition and results of operations could be
materially different from such forward-looking statements and predictions as a
result of (i) customer pressures that could impact sales levels and product mix,
including customer sourcing decisions, customer evaluation of market pricing on
products produced by the Company and customer cost-cutting programs; (ii) the
impact on operations and cash flows of labor strikes at the Company's OEM
customers; (iii) operational difficulties encountered during the launch of major
new OEM programs; (iv) the ability of the Company to control scrap rates at its
operations; (v) the ability of the Company to integrate acquisitions into its
existing operations and achieve expected cost savings; (vi) the ability of the
Aftermarket Group to balance the cyclical nature of the OEM industry; (vii) the
availability of funds to the Company for continued operations during the sale
process; (viii) the granting of compliance waivers by the Company's lenders; and
(ix) the timing and amount of proceeds from the sales of the Company's
businesses.
RESULTS OF OPERATIONS
SECOND QUARTER ENDED JUNE 30, 1998 COMPARED
TO SECOND QUARTER ENDED JUNE 30, 1997
- - -------------------------------------------
JPE CANADA OPERATING RESULTS
Net sales for JPE Canada for the quarter ended June 30, 1998 were $10.3 million
as compared to $17.5 million for the same period in 1997. Lost sales due to the
GM strike in June amounted to approximately $2.2 million. The additional
decrease in sales is attributable to the resourcing of some unprofitable
business in the third quarter of 1997 and lower production on certain car models
that will be replaced by new models in fall of 1998 and spring of 1999. The
weakening of the Canadian dollar also has contributed to the reduction in sales.
In the first quarter of 1998, JPE Canada had a loss before taxes of $2.4 million
which was primarily attributable to production difficulties experienced with the
launch of a truck trim program for GM. JPE Canada had implemented cost reduction
programs and obtained a price increase from GM on two programs that were
expected to return JPE Canada to profitability by the end of the second quarter.
However, due to the impact of the GM strike, significant losses continued at JPE
Canada. JPE Canada's business is 100% for GM. As result of the strike, the fixed
costs for this plant could not be recovered, because of lower sales volumes
without significant reductions in labor costs and overhead resulting in an
underabsorbed burden expense of $570,000. In the second quarter ended June 30,
1998, JPE Canada's loss before taxes was $2.2 million. As a result of the
strike, sales for JPE Canada in July 1998 were only $380,000 compared to June
sales of $1.7 million and it is estimated that JPE Canada will report a loss
before taxes in excess of $1.0 million for the month of July.
JPE Canada has been in default of its loan agreement and the Canadian bank has
issued a demand letter along with a Notice of Intention to Enforce Security. JPE
Canada continues to operate under accommodations which provide funding for JPE
Canada by the Canadian bank and JPE Canada's major customer.
The Company has applied the accounting treatment under Financial Accounting
Standards to JPE Canada's financial reporting for the period ended June 30,
1998. Under the provisions of this pronouncement, all assets are adjusted to
carrying amount which will be used to settle JPE Canada's obligations. JPE
Canada has recorded a 100% valuation allowance on the deferred tax assets
resulting in a charge to earnings of $1.8 million. In addition, the Company has
written down patents related to the JPE Canada business and recorded a liability
for the unsecured loan guarantee resulting in an additional $2.7 million charge
against earnings for the quarter ended June 30, 1998. Upon the legal transfer of
these assets or the filing under the Canadian Bankruptcy and Insolvency Act, the
Company will no longer consolidate the JPE Canada operations into the Company's
financial statements. Pro forma data related to the Company's operating results
without JPE Canada are set forth in Footnote D of the Financial Statements.
U.S. OPERATIONS
The following is a discussion of the U.S. operations of the Company as JPE
Canada operating results are discussed above and a discussion of the U.S.
operating results in comparison to the prior period is important information for
the reader of the Financial Statements.
Net sales for the quarter ended June 30, 1998 for the U.S. operations were $56.4
million compared to $59.5 million for the three months ended June 30, 1997. The
net sales decrease of 5.3% is partially attributable to the strike at GM which
began in June 1998 and continued through the end of July. The Company's Original
Equipment Manufacturers' ("OEM's") businesses estimated lost sales for the month
of June at $2.0 million. In addition, $2.6 million of the rate decline was due
primarily to the discontinuance of Starboard stamping business in the fall of
1997. For the quarter ended June 30, 1998, net sales for the U.S. operations
were approximately 54% to OEM customers and 46% to Aftermarket customers.
Gross profit for the U.S. operations decreased 13.9% to $9.1 million for the
three months ended June 30, 1998 as compared with $10.6 million for the
comparable period of the prior year. The gross profit percentages were 16.2% and
17.8% for 1998 and 1997, respectively. The decline is primarily due to the
strike at GM and lower margins in the Aftermarket business due to pricing
pressure and higher variances in the manufacturing of heavy duty springs.
Selling, general and administrative expenses for the U.S. operations decreased
3.6% to $6.8 million for the three months ended June 30, 1998 as compared to
$7.0 million for the three months ended June 30, 1997. The decrease is primarily
attributable to lower sales commissions and non-recurring costs relating to the
integration of BATCO, which was acquired in the second quarter of 1997. The
percentage of selling, general and administrative expenses to net sales was
12.0% for the quarter ended June 30, 1998 as compared to 11.7% for the
comparable period of the prior year. The slightly higher percentage is
attributable to the greater percentage of Aftermarket sales for the quarter
ended June 30, 1998 as compared to same period last year.
The following is a table of the operating profits for the U.S. operations
adjusted for non-recurring items during the last two years.
Quarter Ended Operating Profit Percent of Sales
- - ------------- ---------------- ----------------
September 30, 1996 $ 993,000 2.0%
December 31, 1996 $1,307,000 2.9%
March 31, 1997 $2,749,000 5.3%
June 30, 1997 $3,630,000 6.1%
September 30, 1997 $3,638,000 6.4%
December 31, 1997 $1,750,000 3.1%
March 31, 1998 $ 685,000 1.2%
June 30, 1998 $2,352,000 4.2%
The above table shows consistent improvement through the third quarter of 1997
due to the actions taken at the Company's Industrial & Automotive Fasteners and
Starboard Industries subsidiaries. In the fourth quarter of 1997, the Company's
Plastic Trim subsidiary experienced excess launch costs and higher scrap rates.
The Company implemented a program to reduce scrap at this location in the first
quarter 1998 which accounted for $850,000 of the improvement in the second
quarter of 1998. The June 1998 quarter was also negatively impacted by lost
sales due to the GM strike which the Company estimates reduced operating profits
by approximately $425,000.
Other expense for the second quarter 1998 included a $1.3 million write-down of
the patents related to JPE Canada owned by the Company to estimated net
realizable value. Also included under this caption is the recording of the
unsecured loan guarantee related to the JPE Canada indebtedness in the amount of
$1.4 million.
CONSOLIDATED OPERATING RESULTS
Net interest expense on a consolidated basis increased to $3.6 million for the
three months ended June 30, 1998 as compared to $2.7 million for the three
months ended June 30, 1997. The higher interest cost is attributable to higher
interest rate and amendment fees being charged under the Credit Agreement. The
Company's borrowing rate in the second quarter of 1998 was approximately 11%
compared to 8% for the second quarter of 1997 (see discussion under Liquidity
and Capital Resources).
Consolidated income tax expense for the quarter ended June 30, 1998 was $1.7
million. Although the Company recorded a pretax loss of $5.7 million for the
quarter, the normal tax benefit was offset by a recording of valuation reserves
of $2.5 million. In addition, a valuation reserve for certain deferred tax
assets related to the U.S. operations was provided for capital losses which will
require the recognition of capital gains to recognize a tax benefit. The tax
benefit of $176,000 for the quarter ended June 30, 1997 is attributable to the
charge recorded for the discontinuance of stamping operations and the pretax
loss at the Company's Canadian operation.
Consolidated net loss for the three months ended June 30, 1998 was $7.4 million
as compared to a net loss of $990,000 in the second quarter of 1997. The
increase in the loss is primarily the result of the $4.5 million or $0.97 per
share charge to write down the assets related to JPE Canada, higher interest
costs, and the operating factors summarized above. Loss per share for the second
quarter of 1998 was $1.62 as compared to loss per share of $0.22 during the same
period in 1997. The net loss for the 1997 quarter includes a loss of $1.5
million or $0.32 per share due to the charge recorded for the discontinuance of
the Starboard stamping operations.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED
TO SIX MONTHS ENDED JUNE 30, 1997
- - ---------------------------------------
JPE CANADA OPERATING RESULTS
Net sales for JPE Canada for the six months ended June 30, 1998 were $22.5
million as compared to $33.5 million for the same period in 1997. Lost sales due
to the GM strike in June amounted to approximately $2.2 million. The additional
decrease is attributable to the resourcing of some unprofitable business in the
third quarter of 1997 and lower production on certain car models that will be
replaced by new models in fall of 1998 and spring of 1999. The weakening of the
Canadian dollar also contributed to the reduction in sales.
The operating loss for JPE Canada was $3.6 million for the six months ended June
30, 1998 as compared to an operating loss of $356,000 for the six months ended
June 30, 1997. The higher operating loss was attributable to the difficult
launch of a truck trim program in the first quarter of 1998, with an estimated
cost of $1.2 million, and the GM strike in June resulting in a $873,000
operating loss for the month of June. Also impacting the operating results in
1998 is lower sales volume without a significant reduction in labor costs and
fixed overhead.
U.S. OPERATIONS
The following is a discussion of the U.S. operations of the Company for the six
months ended June 30, 1998 and 1997, as JPE Canada operating results are
discussed above. A discussion of the U.S. operating results in comparison to the
prior period is important information for the readers of the Financial
Statements.
Net sales for the U.S. operations for the six months ended June 30, 1998 were
$113.6 million compared to $111.6 million for the six months ended June 30,
1997. The net sales increase of 1.8% is attributable to the full year inclusion
of Brake, Axle and Tandem Company ("BATCO") which was acquired in April 1997,
offset by the impact of the strike at GM and lower sales of $5.1 million due to
discontinuance of the stamping business in the fall of 1997. For the six months
ended June 30, 1998, net sales for the U.S. operations were approximately 57% to
OEM customers and 43% to Aftermarket customers.
Gross profit for the U.S. operations decreased 14.2% to $16.9 million for the
six months ended June 30, 1998 as compared with $19.7 million for the comparable
period of the prior year. The gross profit percentages were 12.6% and 17.6% for
1998 and 1997, respectively. This decline is attributable to lower margin at the
Plastic Trim due to high scrap rates in the first quarter and, to a lesser
extent, lower margin in the Aftermarket businesses due to factory variances in
the manufacturing of heavy duty springs and from pricing pressure.
Selling, general and administrative expenses for the U.S. operations increased
4.9% to $13.8 million for the six months ended June 30, 1998 over $13.2 million
for the six months ended June 30, 1997. The increase is a result of the
acquisition of BATCO as discussed above. The percentage of selling, general and
administrative expenses to net sales was 12.2% for the six months ending June
30, 1998 as compared to 11.8% for the comparable period of the prior year.
See quarterly section above for discussion on the charge recorded for the
write-down of JPE Canada related assets.
CONSOLIDATED OPERATING RESULTS
Consolidated net interest expense increased to $7.0 million for the six months
ended June 30, 1998 as compared to $4.9 million for the six months ended June
30, 1997. The higher interest cost is attributable to the factors mentioned in
the quarterly discussion above.
Income tax expense for the six months ending June 30, 1998 was $126,000 as
compared to income tax benefit of $164,000 for the same period in 1997. The tax
expense is a result of the associated factors related to the charges for the JPE
Canada write-down of assets and the elimination of the deferred tax benefit due
to the recording of a valuation reserve.
Net loss for the six months ended June 30, 1998 was $10.7 million as compared to
net loss of $1.1 million over the same period in 1997. The increase in the loss
is a result of the factors summarized above. Loss per share for the first six
months of 1998 was $2.33 as compared to loss per share of $0.24 per share during
the same period in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal source of liquidity is its U.S. and Canadian credit
agreements. At June 30, 1998, both the Company and JPE Canada were in violation
of certain financial covenants under their respective debt agreements. On March
23, 1998, the Company announced that it intends to sell all of JPE and its
businesses, although there can be no assurance that the proceeds or the timing
of such sale(s) will be adequate to retire the debt agreements. Further, the
Company is working with its lenders to provide adequate funding for the
continued operation of the Company and its subsidiaries, although there can be
no assurance that this can be obtained.
U.S. OPERATIONS
The Company's principal source of liquidity for its U.S. companies is the $116.9
million Third Amended and Restated Credit Agreement dated December 31, 1996 (the
"Credit Agreement"), as amended by Amendment No. 1 dated as of April 16, 1997,
Amendment No. 2 dated as of August 14, 1997 (effective June 30, 1997), Amendment
No. 3 dated as of February 13, 1998 and Amendment No. 4 dated as of May 15,
1998. The Credit Agreement is collateralized by all of the Company's assets,
with the exception of JPE Canada's assets. At June 30, 1998, borrowings
outstanding under this Credit Agreement totaled $105.7 million. The Credit
Agreement expires on October 27, 1998.
Amendment No. 3 to the Credit Agreement required the Company to reduce its
borrowings under the Credit Agreement to no more than $70 million on or before
June 30, 1998. In addition, the Amendment increased the interest rate on
borrowings to prime plus 1.25%. There is also an amendment fee equal to $120,000
per month until the debt reduction occurs or the Credit Agreement expires. The
Company was not able to consummate a sale of any of its U.S. companies to make
the required debt payment. The Company has negotiated with its lender a
forbearance agreement to provide required financing. Under this arrangement, the
lender has continued to provide financing based on an asset formula with maximum
borrowing of $105 million plus an over-formula advance of $42.1 million. When
funding in excess of these amounts is required, the Company has made
arrangements with its major OEM customers to expedite payment on their payables
to the Company. The Company is in the process of preparing an 18-month business
plan for the lender and other banks to consider providing a refinancing or
restructuring of the U.S. debt.
JPE CANADA OPERATIONS
The principal source of liquidity for JPE Canada is a Cdn. $28.7 million (U.S.
$19.5 million) credit agreement with a Canadian bank. The Canadian Credit
Facility permits JPE Canada to borrow funds in the form of advances for
operating requirements and capital expenditures. Advances under the Canadian
Credit Facility are collateralized by substantially all of the assets of JPE
Canada. Interest rates on the advances are computed at either the Canadian Prime
Rate or the Base Rate, as defined in the agreement. At June 30, 1998, borrowings
under the Canadian Credit Facility totaled Cdn. $27.1 million (U.S. $18.4
million).
JPE Canada is not in compliance with its loan covenants and its lender has made
demand for payment and given notice of its intention to enforce its security
interests. In order to ensure production for its only customer, JPE Canada has
entered into certain accommodation agreements with its lender and its only
customer that permit continued operating activities under certain conditions and
covenants, including additional out-of-formula funding in the amount of $4.0.
Due to the impact of the GM strike on JPE Canada's operations during the months
of June and July, JPE Canada has fully drawn on the additional funding and has
defaulted under the amended loan agreement. The lender has agreed to provide
additional out-of-formula funding in the amount of $2.0 million, although the
Company has informed the lender and its only customer that JPE Canada is
insolvent and has no present ability to repay in full the indebtedness to the
secured creditors. In addition, the Company does not believe that the proceeds
from the sale of JPE Canada will be adequate to satisfy its debt obligations to
the lender, its only customer and unsecured creditors.
The Company has provided an unsecured guarantee in the amount of Cdn. $2.0
million for a portion of the JPE Canada debt which was recorded as a liability
at June 30, 1998. JPE Canada's lender has no additional recourse to the assets
of JPE, Inc.
At June 30, 1998, Current Liabilities exceeded Current Assets by $73.2 million,
reflecting the classification of the U.S. and Canadian debt agreements of $114.9
million as current liability. Excluding the debt agreements, working capital at
June 30, 1998 would have been $41.7 million as compared to $44.7 million at
December 31, 1997. The lower level of working capital is due to lower
receivables and inventory due to the GM strike.
<PAGE>
PART II. OTHER INFORMATION
JPE, INC.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
10.1 Letter Agreement dated August 10, 1998 among the Banks,
Comerica Bank, as Agent, JPE, Inc. and its subsidiaries,
filed with this report.
10.2 Amendment No. 1 to Executive Severance Agreement dated May
21, 1998 between Registrant and Donna L. Bacon, filed with
this report.
10.3 Amendment No. 1 to Executive Severance Agreement dated May
21, 1998 between Registrant and James J. Fahrner, filed with
this report.
10.4 Amendment No. 4 and Limited Waiver, dated as of May 15,
1998, to Third Amended and Restated Credit Agreement by and
among Comerica Bank, other participants and JPE, Inc., filed
with this report.
b. Report on Form 8-K:
None.
<PAGE>
JPE, INC.
SIGNATURE
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 thereunto duly authorized.
JPE, Inc.
By: /s/ James J. Fahrner
----------------------------------
James J. Fahrner
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Date: August 14, 1998
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT
NO. DESCRIPTION
- - ------- -----------
10.1 Letter Agreement dated August 10, 1998 among the Banks,
Comerica Bank, as Agent, JPE, Inc. and its subsidiaries,
filed with this report.
10.2 Amendment No. 1 to Executive Severance Agreement dated May
21, 1998 between Registrant and Donna L. Bacon, filed with
this report.
10.3 Amendment No. 1 to Executive Severance Agreement dated May
21, 1998 between Registrant and James J. Fahrner, filed with
this report.
10.4 Amendment No. 4 and Limited Waiver, dated as of May 15,
1998, to Third Amended and Restated Credit Agreement by and
among Comerica Bank, other participants and JPE, Inc., filed
with this report.
27 Financial Data Schedule, which is submitted electronically
to the Securities and Exchange Commission for information
only and not filed.
August 10, 1998
JPE, Inc.
775 Technology Drive
Suite 200
Ann Arbor, Michigan 48108
Attention: Mr. James J. Fahrner and Ms. Donna L. Bacon
RE: FINANCING ARRANGEMENTS AMONG COMERICA BANK, NBD BANK, NATIONAL BANK OF
CANADA, HARRIS 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 Mr. Fahrner and Ms. Bacon:
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, Conway, MacKenzie & Dunleavy, provided Agent and Banks with
amended projections on August 9, 1998. Agent and Banks 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 Banks 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, Banks 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 Conway, MacKenzie & Dunleavy, the definition used by Conway, MacKenzie &
Dunleavy 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 Conway, MacKenzie & Dunleavy 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,
Albert. 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 Conway,
MacKenzie & Dunleavy shall deliver to the Agent and Banks a detailed
business plan for the period through December 31, 1999.
11. Banks 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 Conway MacKenzie & Dunleavy 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 Banks, 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 Banks 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 Conway MacKenzie & Dunleavy
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 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
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, 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 N FACTS OR CIRCUMSTANCES ARISING, AT ANY TIME UP THROGH AND
INCLUDING THE DATE OF THIS AGREEMENT, WHETHER KNOWN OR UNKNOWN, AGAINST
ANYOR ALL OF AGENT, BANKS, 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 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/ Cynthia B. Jones
-----------------------
Cynthia B. Jones
Its: Vice President
Special Assets Group
P.O. Box 75000
Detroit, Michigan 48275-3205
(313) 222-3780
(313) 222-5706 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/ Cynthia B. Jones By: /s/ Robert J. Izzo
------------------------ ------------------------
Its: Vice President Its: Vice President
NATIONAL BANK OF CANADA HARRIS TRUST and SAVINGS BANK
By: /s/ Duane K. Bedard By: /s/ Diane Williams
------------------------ ------------------------
Its: Vice President Its: Sr. Vice President
By: /s/ Angus White
------------------------
Its: Vice President
BANK ONE, DAYTON, N.A.
By: /s/ Scott E. Roman
------------------------
Its: Assistant Vice President
ACKNOWLEDGED AND AGREED:
JPE, INC. SAC CORPORATION
By: /s/ Donna L. Bacon By: /s/ Donna L. Bacon
------------------------- ------------------------
Its: President Its: Vice President
Date: 8/12/98 Date: 8/12/98
ALLPARTS, INCORPORATED STARBOARD INDUSTRIES, INC.
By: /s/ Donna L. Bacon By: /s/ Donna L. Bacon
------------------------- ------------------------
Its: Vice President Its: Vice President
Date: 8/12/98 Date: 8/12/98
DAYTON PARTS, INC. INDUSTRIAL & AUTOMOTIVE
FASTENERS, INC.
By: /s/ Donna L. Bacon By: /s/ Donna L. Bacon
------------------------- ------------------------
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/ Donna L. Bacon By: /s/ Donna L. Bacon
------------------------- ------------------------
Its: Vice President Its: Vice President
Date: 8/12/98 Date: 8/12/98
JPE FINISHING, INC.
By: /s/ Donna L. Bacon
-------------------------
Its: Vice President
Date: 8/12/98
AMENDMENT NO.1 TO
EXECUTIVE SEVERANCE AGREEMENT
THIS AMENDMENT NO. 1 to the Executive Severance Agreement dated as of
February 20, 1998 ("Agreement") between JPE, Inc. ("Corporation") and Donna L.
Bacon ("Executive") is made as of this 21st day of May, 1998.
WHEREAS, Executive is presently employed by the Corporation as President,
General Counsel and Secretary; and
WHEREAS, the Board of Directors ("Board") recognizes that Executive has
contributed significantly to the effort of selling the Corporation or all of its
businesses separately ("Sale"); and
WHEREAS, the Board wishes to compensate Executive for her contributions and
to provide adequate incentive for Executive to remain with the Corporation
through the completion of the Sale.
NOW, THEREFORE, Executive and the Corporation agree to amend the Agreement,
as follows:
1. Lines 5 and 6 of Section 2.(b)(i) are hereby amended by deleting the
words "(not including the securities beneficially owned by such Person acquired
directly from the Corporation or its affiliates) representing 25%" and inserting
in lieu thereof the words "representing 15%".
2. Section 2.(d) is hereby deleted in its entirety and replaced with the
following:
"Severance Payment Upon Change of Control. Upon completion of a Change
of Control, the Corporation shall pay Executive a bonus equal to 1.5 times
the Executive's annual base salary (the "Base Salary"), which base salary
shall not be less than Executive's annual base salary of $185,000 as of the
date of this Agreement. Further, the Corporation shall make an additional
payment to Executive of 1.49 times the Executive's Base Salary on the
earlier to occur of (i) the selling shareholders of the common stock of the
Corporation (the "Shares") receiving aggregate compensation for their
Shares as a result of the Sale, equal to at least $3.00 per share and (ii)
if at any time within the two (2) years after a Change of Control, the
Executive's employment with the Corporation (x) is terminated by the
Corporation for any reason other than her death, Permanent Disability,
voluntary retirement on or after age sixty-five (65), or Termination For
Cause, or (y) is terminated by the Executive for Good Reason (as hereafter
defined)."
3. The first sentence in Section 2.(f)(i) is hereby amended by deleting the
phrase "the Severance Payment provided in Section 2(d)" and inserting in lieu
thereof "a severance payment equal to 2.99 times the Executive's Base Salary".
4. The penultimate and last line of Section 2.(f)(ii)( C) is hereby amended
by deleting the words "or its affiliates".
For the purposes of this Amendment, defined terms shall have the same
meaning as those contained in the Agreement. Except as otherwise provided
herein, all other terms and conditions of the Agreement are unchanged by this
Amendment and shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Amendment as of the day and year first above written.
JPE, INC.
By: /s/ John Psarouthakis
------------------------------------
John Psarouthakis
Chairman
EXECUTIVE
By: /s/ Donna L. Bacon
------------------------------------
Donna L. Bacon
AMENDMENT NO.1 TO
EXECUTIVE SEVERANCE AGREEMENT
THIS AMENDMENT NO. 1 to the Executive Severance Agreement dated as of
February 20, 1998 ("Agreement") between JPE, Inc. ("Corporation") and James J.
Fahrner ("Executive") is made as of this 21st day of May, 1998.
WHEREAS, Executive is presently employed by the Corporation as Executive
Vice President and Chief Financial Officer; and
WHEREAS, the Board of Directors ("Board") recognizes that Executive has
contributed significantly to the effort of selling the Corporation or all of its
businesses separately ("Sale"); and
WHEREAS, the Board wishes to compensate Executive for his contributions
and to provide adequate incentive for Executive to remain with the Corporation
through the completion of the Sale.
NOW, THEREFORE, Executive and the Corporation agree to amend the Agreement,
as follows:
1. Lines 5 and 6 of Section 2.(b)(i) are hereby amended by deleting the
words "(not including the securities beneficially owned by such Person acquired
directly from the Corporation or its affiliates) representing 25%" and inserting
in lieu thereof the words "representing 15%".
2. Section 2.(d) is hereby deleted in its entirety and replaced with the
following:
"Severance Payment Upon Change of Control. Upon completion of a Change
of Control, the Corporation shall pay Executive a bonus equal to 1.5 times
the Executive's annual base salary (the "Base Salary"), which base salary
shall not be less than Executive's annual base salary of $185,000 as of the
date of this Agreement. Further, the Corporation shall make an additional
payment to Executive of 1.49 times the Executive's Base Salary on the
earlier to occur of (i) the selling shareholders of the common stock of the
Corporation (the "Shares") receiving aggregate compensation for their
Shares as a result of the Sale, equal to at least $3.00 per share and (ii)
if at any time within the two (2) years after a Change of Control, the
Executive's employment with the Corporation (x) is terminated by the
Corporation for any reason other than his death, Permanent Disability,
voluntary retirement on or after age sixty-five (65), or Termination For
Cause, or (y) is terminated by the Executive for Good Reason (as hereafter
defined)."
3. The first sentence in Section 2.(f)(i) is hereby amended by deleting the
phrase "the Severance Payment provided in Section 2(d)" and inserting in lieu
thereof "a severance payment equal to 2.99 times the Executive's Base Salary".
4. The penultimate and last line of Section 2.(f)(ii)( C) is hereby amended
by deleting the words "or its affiliates".
For the purposes of this Amendment, defined terms shall have the same
meaning as those contained in the Agreement. Except as otherwise provided
herein, all other terms and conditions of the Agreement are unchanged by this
Amendment and shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Amendment as of the day and year first above written.
JPE, INC.
By: /s/ John Psarouthakis
-------------------------------------
John Psarouthakis
Chairman
EXECUTIVE
By: /s/ James J. Fahrner
-------------------------------------
James J. Fahrner
AMENDMENT NO. 4
TO
THIRD AMENDED AND RESTATED CREDIT AGREEMENT
AND
LIMITED WAIVER
THIS AMENDMENT AND LIMITED WAIVER dated as of May 15, 1998, by and among
JPE, Inc., a Michigan corporation ("Company"), the undersigned Banks ("Banks")
and Comerica Bank, as agent for the Banks (in such capacity "Agent").
R E C I T A L S:
A. Company, Banks and Agent entered into that certain Third Amended and
Restated Credit Agreement dated as of December 31, 1996, as previously amended
by Amendment No. 1 dated as of April 16, 1997, Amendment No. 2 dated as of June
30, 1997 and Amendment No. 3 dated as of February 13, 1998 (as amended, the
"Agreement").
B. Under Section 8.4 of the Agreement, Company is required to maintain a
Funded Debt to EBITDA Ratio of not more than 5.65 to 1.0 as of March 31, 1998.
Company has advised the Agent and the Banks that Company's Funded Debt to EBITDA
Ratio exceeds 5.65 to 1.0 as of March 31, 1998.
C. Under Section 8.5 of the Agreement, Company is required to maintain a
Fixed Charge Coverage Ratio of not less than 1.05 to 1.0 as of March 31, 1998.
Company has advised the Agent and the Banks that Company's Fixed Charge Coverage
Ratio is less than 1.05 to 1.0 as of March 31, 1998.
D. Under Section 9.4 of the Agreement, Company and its Subsidiaries may not
guarantee, endorse or become otherwise liable for the obligations of others,
except by endorsement of cash items for deposit in the ordinary course of
business, the Guaranty and the guaranty by Company of JPE Canada's obligations
to Bank of Nova Scotia under a working capital credit facility ("JPE Canada
Facility") which facility shall not exceed Two Million Canadian Dollars (CDN
$2,000,000) and which shall mature no later than December 31, 1997. Company has
advised Agent and Banks that the maturity date of the JPE Canada Facility has
been extended beyond December 31, 1997, that the JPE Canada Facility has been
accelerated and that Company remains obligated to Bank of Nova Scotia under its
guaranty.
E. Under Section 9.9(i) of the Agreement, Company's Investment in JPE
Canada shall not exceed Ten Million Canadian Dollars (CDN $10,000,000) in the
aggregate at any time. Company has advised Agent and the Banks that Company's
Investment in JPE Canada as of March 31, 1998, is CDN $10,000,000. Company
acknowledges that any payment under its guaranty of the JPE Canada Facility
would increase its Investment in JPE Canada above the cap set forth in Section
9.9 (i).
F. Company and Guarantors have requested that the Banks waive the Events of
Default under the Agreement which result from the failure to comply with
Sections 8.4, 8.5 and 9.4 of the Agreement as set forth above.
Banks agree to do so, subject to the terms and conditions of this
Amendment.
The parties agree as follows:
1. Company acknowledges that each of the matters set forth in Recitals B, C
and D is an Event of Default and further acknowledges that there is no provision
under the Agreement for the giving of notice and/or an opportunity to cure in
respect of those Events of Default.
2. Subject to the terms and conditions of this Agreement and Limited
Waiver, the Banks hereby waive the Events of Default under the Agreement which
result from Company's failure to comply with Sections 8.4, 8.5 and 9.4 of the
Agreement as stated above, provided, however, the limited waivers set forth
herein shall expire and be of no further force and effect on June 30, 1998, and
Banks may thereafter exercise any right or remedy on account of such Events of
Default, unless the limited waivers are extended in writing by Banks in their
sole discretion.
3. Company acknowledges that any additional Investment in JPE Canada
without the prior written consent of all of the Banks would be an Event of
Default under the Agreement from a failure to comply with Section 9.9 (i) of the
Agreement and that such Event of Default would not be covered by the limited
waivers set forth in paragraph 2 above.
4. Notwithstanding the limited waivers set forth herein, at any time
hereafter and without notice to Company, Banks may exercise any or all of their
rights under Section 10.7 of the Agreement.
5. The limited waivers set forth above shall not be deemed to otherwise
amend or alter in any respect the terms and conditions of the Agreement
(including without limitation, all conditions and requirements for advances and
any financial covenants), the Notes or any of the other Loan Documents nor shall
the limited waivers set forth above constitute a waiver or release by Agent or
any of the Banks of any right, remedy, Default or Event of Default under the
Credit Agreement, the Notes or any of the other Loan Documents. Furthermore, the
limited waivers set forth above shall not affect in any manner whatsoever any
right or remedies of the Banks (or Agent) with respect to any other
noncompliance by JPE with the Agreement or the other Loan Documents, whether in
the nature of a Default or Event of Default and whether now in existence or
subsequently arising.
6. The definition of "Revolving Credit Aggregate Commitment" set forth in
Section 1.95 of the Agreement is amended to read as follows:
"1.95 `Resolving Credit Aggregate Commitment' initially shall mean One
Hundred Seven Million One Hundred Eighty One Thousand Two Hundred Eighty
Eight and 80/100 Dollars ($107,181,288.80), subject to reduction or
termination under Section 2.8, 10.2 or 11.2 hereof. On June 30, 1998,
`Revolving Credit Aggregate Commitment' automatically shall be reduced to
Sixty Four Million One Hundred Sixty Six Thousand Six Hundred Sixty Seven
Dollars ($64,166,667), subject to further reduction under Section 2.8 or
11.2 hereof or termination under Section 10.2 hereof."
7. The definition of "Line of Credit Aggregate Commitment" set forth in
Section 1.109 of the Agreement is amended to read as follows:
"1.109 `Line of Credit Aggregate Commitment' initially shall mean Nine
Million Seven Hundred Forty Three Thousand Seven Hundred Eleven and 25/100
Dollars ($9,743,711.25), subject to reduction or termination under Section
2.A.6, 10.2 or 11.2 hereof. On June 30, 1998, `Line of Credit Aggregate
Commitment' automatically shall be reduced to Five Million Eight Hundred
Thirty Three Thousand Three Hundred Thirty Three Dollars ($5,833,333),
subject to further reduction under Section 2.A.6 or 11.2 hereof or
termination under Section 10.2 hereof."
8. Section 8.24 of the Agreement is deleted; provided, however, Company
ratifies and confirms its obligations to reduce the Indebtedness on June 30,
1998, in accordance with the provisions of Section 8.23 of the Agreement.
9. Except as expressly modified hereby, none of the amendments set forth in
paragraphs 4, 5 and 6 above shall be deemed to amend or alter in any respect the
terms and conditions of the Agreement (including without limitation, all
conditions and requirements for advances and any financial covenants), the Notes
or any of the other Loan Documents nor shall the amendments set forth in
paragraphs 4, 5 and 6 above constitute a waiver or release by Agent or any of
the Banks of any right, remedy, Default or Event of Default under the Credit
Agreement, the Notes or any of the other Loan Documents. Furthermore, the
amendments set forth in paragraphs 4, 5 and 6 above shall not affect in any
manner whatsoever any right or remedies of the Banks (or Agent) with respect to
any noncompliance by JPE with the Agreement or the other Loan Documents, whether
in the nature of a Default or Event of Default and whether now in existence or
subsequently arising.
10. Company acknowledges that under the terms of Section 8.8 of the
Agreement, banks may conduct from time to time, among other inspections,
collateral audits. Company acknowledges that Banks intend to commence audits of
the accounts receivable and inventory of Company and its Subsidiaries and
Company agrees, notwithstanding the limited waivers set forth above, that
Company shall reimburse Agent and Banks immediately upon demand for all costs
and expenses incurred by Agent and Banks in connection with all such audits.
11. This Amendment and Limited Waiver shall be effective as of May 15, 1998
upon payment of all reasonable closing costs and expenses, including without
limitation, attorneys' fees, incurred by Agent in connection with this Amendment
and Limited Waiver, provided that on or before June 2, 1998 Agent shall have
received or shall have been provided access to: (a) agings of each of Company's
Consolidated Subsidiaries' accounts receivable as of April 30, 1998; and (b)
detailed inventory report for each of the Company's Consolidated Subsidiaries as
of April 30, 1998.
12. A default under this Amendment and Limited Waiver shall constitute an
Event of Default under the Agreement.
13. Company hereby waives, discharges and forever releases Agent and each
of the Banks, their respective 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 may
have or may have made or which is based on facts or circumstances arising from
any time up through and including the date of this Amendment and Limited Waiver
against any or all of Agent and the Banks, and their respective employees,
officers, directors, attorneys, stockholders and successors and assigns.
14. Company hereby represents and warrants that, after giving effect to the
amendments contained herein, (a) execution, delivery and performance of this
Amendment and Limited Waiver and any other documents and instruments required
under this Amendment and Limited Waiver or the Agreement are within Company's
corporate powers, have been duly authorized, are not in contravention of law or
the terms of the Company's Articles of Incorporation or Bylaws, and do not
require the consent or approval of any governmental body, agency, or authority;
and this Amendment and Limited Waiver and any other documents and instruments
required under this Amendment and Limited Waiver or the Agreement, will be valid
and binding in accordance with their terms; (b) the continuing representations
and warranties of Company set forth in Sections 7.1 through 7.22 and 7.24 of the
Agreement 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; (c) the continuing
representations and warranties of Company set forth in Section 7.23 of the
Agreement are true and correct as of the date hereof with respect to the most
recent financial statements furnished to the Bank by Company in accordance with
Section 8.3 of the Agreement; and (d) 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 this Agreement, has occurred and is
continuing as of the date hereof.
15. Capitalized terms used but not defined herein shall have the meanings
set forth in the Agreement.
COMPANY: JPE, INC.
By: /s/ Donna L. Bacon
---------------------------------
Its: President
---------------------------------
AGENT: COMERICA BANK
By: /s/ Lana L. Anderson
---------------------------------
Its: Vice President
---------------------------------
REVOLVING CREDIT BANKS
AND LINE OF CREDIT BANKS: COMERICA BANK
By: /s/ Lana L. Anderson
---------------------------------
Its: Vice President
---------------------------------
NBD BANK
By: /s/ Robert J. Izzo
---------------------------------
Its: First Vice President
---------------------------------
NATIONAL BANK OF CANADA
By: /s/ Duane K. Bedard
---------------------------------
Its: Vice President
---------------------------------
and
By: /s/ R. Kevin Finn
---------------------------------
Its: Vice President
---------------------------------
HARRIS TRUST AND SAVINGS BANK
By: /s/ Kirby M. Law
---------------------------------
Its: Vice President
---------------------------------
BANK ONE, DAYTON, N.A.
By: /s/ Scott E. Roman
---------------------------------
Its: Assistant Vice President
---------------------------------
SWING LINE BANK: COMERICA BANK
By: /s/ Lana L. Anderson
---------------------------------
Its: Vice President
---------------------------------
ACKNOWLEDGMENT OF GUARANTORS
Each of the undersigned accepts and agrees to the Third Amended and
Restated JPE, Inc. Credit Agreement and Limited Waiver dated as of December 31,
1996, 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, and ratifies and confirms its
obligations under the Amended and Restated Guaranty dated as of December 31,
1996, to which each of the undersigned is a party, either by execution thereof
or by execution of a Joinder Agreement, and each of the undersigned agrees that
such Guaranty continues to be in full force and effect. In consideration of the
amendments and waivers set forth above, each of the undersigned hereby waives,
discharges and forever releases Agent and the Banks, and their respective
employees, officers, directors, attorneys, stockholders and successors and
assigns, from any and all claims, causes of action, defenses, counterclaims or
offsets and/or allegations any of the undersigned may have or may have made or
which is based on facts or circumstances arising from any time up through and
including the date of this Amendment and Limited Waiver against any or all of
the Agent and the Banks, and their respective employees, officers, directors,
attorneys, stockholders and successors and assigns.
IN WITNESS WHEREOF, each of the undersigned has executed and delivered this
Acknowledgment and Consent as of May 15, 1998.
ALLPARTS, INCOPORATED, a Missouri
corporation
By: /s/ Donna L. Bacon
---------------------------------
Its: Vice President
---------------------------------
DAYTON PARTS, INC., a Michigan
corporation
By: /s/ Donna L. Bacon
---------------------------------
Its: Vice President
---------------------------------
SAC CORPORATION, a Michigan corporation
By: /s/ Donna L. Bacon
---------------------------------
Its: Vice President
---------------------------------
STARBOARD INDUSTRIES, INC., a Michigan
corporation
By: /s/ Donna L. Bacon
---------------------------------
Its: Vice President
---------------------------------
INDUSTRIAL & AUTOMOTIVE FASTENERS, INC.,
a Michigan corporation
By: /s/ Donna L. Bacon
---------------------------------
Its: Vice President
---------------------------------
PLASTIC TRIM, INC., an Ohio corporation
By: /s/ Donna L. Bacon
---------------------------------
Its: Vice President
---------------------------------
BRAKE, AXLE AND TANDEM COMPANY
CANADA INC., a Canadian corporation
By: /s/ Donna L. Bacon
---------------------------------
Its: Vice President
---------------------------------
JPE FINISHING, INC., an Ohio corporation
By: /s/ Donna L. Bacon
---------------------------------
Its: Vice President
---------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 493
<SECURITIES> 0
<RECEIVABLES> 36,970
<ALLOWANCES> (751)
<INVENTORY> 36,338
<CURRENT-ASSETS> 80,973
<PP&E> 94,862
<DEPRECIATION> (24,974)
<TOTAL-ASSETS> 182,421
<CURRENT-LIABILITIES> 154,143
<BONDS> 517
0
0
<COMMON> 22,681
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 182,421
<SALES> 136,067
<TOTAL-REVENUES> 136,067
<CGS> 121,628
<TOTAL-COSTS> 136,642
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,987
<INTEREST-EXPENSE> 7,016
<INCOME-PRETAX> (10,578)
<INCOME-TAX> 126
<INCOME-CONTINUING> (10,704)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,704)
<EPS-PRIMARY> (2.33)
<EPS-DILUTED> (2.33)
</TABLE>
