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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 September 30, 1998
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the transition period from _____ to _____
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Commission file number 0-22580
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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 September 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.
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<PAGE>
JPE, INC.
INDEX
Page
----
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets ........................... 3
- At September 30, 1998 and 1997 (Unaudited)
- At December 31, 1997 (Audited)
Consolidated Statements of Income and
Comprehensive Income (Unaudited) ...................... 4
- For the Three and Nine Months Ended
September 30, 1998 and 1997
Consolidated Statements of Cash Flows (Unaudited) ..... 5
- For the Nine Months Ended
September 30, 1998 and 1997
Notes to Unaudited Consolidated Financial Statements .. 6-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................... 10-15
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders ... 15
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 BALANCE SHEETS
(Amounts in Thousands, Except Share Data)
<CAPTION>
At September 30, At Dec. 31,
1998 1997 1997
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 408 $ 508 $ 29
Accounts receivable, net 18,968 43,350 37,997
Inventory 26,141 44,394 39,412
Other current assets 3,507 11,916 8,375
-------- -------- --------
Total current assets 49,024 100,168 85,813
Investment in affiliate companies 27,232 -- --
Property, plant and equipment, net 22,138 71,665 72,981
Goodwill, net 7,322 31,632 31,962
Other assets 761 2,600 2,459
-------- -------- --------
Total assets $106,477 $206,065 $193,215
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $104,024 $ 1,603 $105,402
Short-term debt -- 10,545 7,723
Accounts payable 12,049 29,114 25,219
Accrued liabilities 2,779 6,299 6,336
Income taxes payable -- 189 314
Loan guaranty 1,361 -- --
-------- -------- --------
Total current liabilities 120,213 47,750 144,994
Deferred income taxes -- 3,725 3,804
Other liabilities 1,502 1,914 1,651
Long-term debt, non-current 141 117,729 9,272
-------- -------- --------
Total liabilities 121,856 171,118 159,721
-------- -------- --------
Shareholders' equity:
Preferred stock, 3,000,000 authorized,
no shares issued and outstanding -- -- --
Common stock, 15,000,000 authorized,
4,602,180 shares issued and outstanding
at September 30, 1998 and at September 30,
1997, no par value 28,051 28,026 28,051
Retained earnings (deficit) (43,094) 6,932 5,714
Foreign currency translation adjustment (336) (11) (271)
-------- -------- --------
Total shareholders' equity (deficit) (15,379) 34,947 33,494
-------- -------- --------
Total liabilities and shareholders'
equity $106,477 $206,065 $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 Nine Months Ended September 30, 1998 and 1997
(Amounts in Thousands, Except Per Share Data)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 49,150 $70,298 $185,217 $215,330
Cost of goods sold 44,257 59,801 165,885 184,418
-------- ------- -------- --------
Gross profit 4,893 10,497 19,332 30,912
Selling, general and administrative expenses 7,917 7,293 23,031 21,936
Charge for subsidiaries under court ordered
protection 26,555 -- 29,216 --
Loss on sale of subsidiary 5,268 -- 5,268 --
Discontinuance of stamping operations -- -- -- 2,250
Other expense 1,369 8 1,595 194
Equity in affiliate companies (133) -- (133) --
-------- ------- -------- --------
Income (loss) before interest and taxes (36,083) 3,196 (39,645) 6,532
Interest expense, net 3,643 2,730 10,659 7,346
-------- ------- -------- --------
Income (loss) before taxes (39,726) 466 (50,304) (814)
Income tax expense (benefit) (1,582) 275 (1,496) 111
-------- ------- -------- --------
Net income (loss) $(38,144) $ 191 $(48,808) $ (925)
Other comprehensive (expense) income
Foreign currency translation adjustment 44 (258) (65) (271)
-------- ------- -------- --------
Comprehensive loss ($38,100) $ (67) $(48,873) $ (1,196)
======== ======= ======== ========
Basic earnings (loss) per common share $(8.29) $0.04 $(10.61) $(0.20)
====== ===== ======= =======
Weighted average shares outstanding 4,602 4,604 4,602 4,602
===== ===== ===== =====
Earnings (loss) per common share assuming
dilution $(8.29) $0.04 $(10.61) $(0.20)
====== ===== ======= ======
Weighted average shares outstanding
and common stock equivalents 4,602 4,604 4,602 4,602
===== ===== ===== =====
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
JPE, INC.
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September 30, 1998 and 1997
(Amounts in Thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net loss $(48,808) $ (925)
Depreciation and amortization 7,765 7,426
Loss on sale of Allparts, Inc. 5,268 --
Discontinuance of stamping operations -- 2,250
Write-down of assets related to subsidiaries
under court ordered protection 29,216 --
Change to equity accounting 559 --
Disposal of property and equipment -- 33
Adjustments to reconcile net loss to net
cash provided by (used for) operating
activities:
Changes in operating assets and liabilities:
Accounts receivable 7,202 (14,610)
Inventory 3,602 (4,760)
Other current assets 405 (1,690)
Accounts payable (2,726) 8,596
Accrued liabilities and income taxes (774) (1,960)
Deferred income taxes (1,519) 541
-------- --------
Net cash provided by (used for)
operating activities 190 (5,099)
-------- --------
Cash flows from investing activities:
Purchase of property and equipment (2,945) (10,687)
Cash proceeds from sale of property and equipment -- 1,200
Acquisition of BATCO -- (5,518)
-------- --------
Net cash used for investing activities (2,945) (15,005)
-------- ---------
Cash flows from financing activities:
Sale of common stock -- 77
Repayments of other debt (363) (1,540)
Net borrowings under revolving loan 62 15,621
Net borrowings under Canadian credit facility 3,983 3,501
Borrowings (repayments) under capital lease (195) 1,571
Tax benefit from options -- 28
-------- --------
Net cash provided by financing activities 3,487 19,258
-------- --------
Effect of currency translation on cash (353) 38
-------- --------
Cash and cash equivalents:
Net increase (decrease) in cash 379 (808)
Cash, beginning of period 29 1,316
-------- --------
Cash, end of period $ 408 $ 508
======== ========
</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 quarters ended March 31, 1998
and June 30, 1998.
B. INVESTMENT IN AFFILIATE COMPANIES:
During the third quarter, three of the Company's subsidiaries were placed
under court ordered protection. On September 15, 1998, Plastic Trim, Inc.
("PTI") and Starboard Industries, Inc. ("SBI") filed voluntary petitions
for relief under Chapter 11 of the Federal Bankruptcy Code in the United
States Bankruptcy Court for the Eastern District of Michigan. On August 27,
1998, the Ontario Court (General Division) Commercial List issued an order
to appoint an Interim Receiver for JPE Canada Inc. ("JPEC") pursuant to
Section 47 of the Bankruptcy and Insolvency Act of Canada. Under these
conditions, generally accepted accounting principles do not allow the
Company to consolidate these subsidiaries from the dates of their
respective filings. The Company has utilized the equity method of
accounting in preparing the financial statements for the quarter ended
September 30, 1998. The Company has applied the accounting treatment under
various Financial Accounting Standards to write down the assets of these
subsidiaries to estimated net realizable value. The following adjustments
were recorded to these balance sheet accounts:
<TABLE>
<CAPTION>
PTI SBI JPEC Total
--- --- ---- -----
<S> <C> <C> <C> <C>
Goodwill $13,222 $5,333 -- $18,555
Fixed assets 8,000 -- -- 8,000
Accounts receivable 1,156 350 -- 1,506
Inventory 1,759 -- -- 1,759
Patents -- -- $1,300 1,300
Loan guarantee -- -- 1,361 1,361
Other assets -- -- 100 100
------- ------ ------ -------
Total $24,137 $5,683 $2,761 $32,581
======= ====== ====== =======
These charges have been reflected on the income statement in the following
captions:
Cost of sales $ 1,759 -- -- $ 1,759
Selling, general and
administrative 1,156 $ 350 $ 100 1,606
Charge for subsidiaries
under court ordered protection 21,222 5,333 2,661 29,216
------- ------ ------ -------
Total $24,137 $5,683 $2,761 $32,581
======= ====== ====== =======
</TABLE>
<PAGE>
The Investment in affiliate companies on the Balance Sheet at September 30,
1998 is comprised of the following (amounts in thousands):
<TABLE>
<CAPTION>
PTI SBI JPEC Total
--- --- ---- -----
<S> <C> <C> <C> <C>
Cash $ 359 $ 333 -- $ 692
Receivables 9,000 2,497 $ 8,120 19,617
Inventory 5,185 478 3,918 9,581
Other Current Assets 692 781 474 1,947
Property, Plant and Equipment, Net 17,062 4,584 15,075 36,721
Other Assets 420 1,525 -- 1,945
------- ------- ------- -------
Total Assets 32,718 10,198 27,587 70,503
Current Portion of Long-Term Debt 399 100 19,216 19,715
Accounts Payable 5,073 1,485 7,986 14,544
Accrued Liabilities 561 324 1,517 2,402
Other Liabilities 677 781 352 1,810
Debtor-in-Possession Financing 3,455 1,345 -- 4,800
------- ------- ------- -------
Total Liabilities 10,165 4,035 29,071 43,271
Net Equity (Deficit) $22,553 $ 6,163 $(1,484) $27,232
======= -====== ======= =======
</TABLE>
The following unaudited pro forma summary for the nine months ended
September 30, 1998 and 1997 assumes that effective January 1, 1997, the
above companies were no longer treated as consolidated subsidiaries. These
companies will be reflected using the equity method from their filing
dates. The pro forma information reflects the JPE Consolidated Income
Statement with the exclusion of these companies' results and the
elimination of the write-downs noted above that are reflected in JPE,
Inc.'s books at September 30, 1998 and the sale of Allparts, Inc., as
discussed in Note C (amounts in thousands, except per share amounts):
Nine Months Ended Sept. 30,
1998 1997
---- ----
Revenues $85,452 $84,900
Income (loss) before income taxes (2,304) 1,569
Net income (loss) (2,636) 477
Earnings (loss) per common share $(0.57) $0.10
C. SALE OF ALLPARTS, INC.:
On October 28, 1998, the Company completed the sale of substantially all of
the assets of its wholly-owed subsidiary, Allparts, Inc., to R&B, Inc. for
$10,095,000 and the assumption of trade and accrued liabilities of
$1,543,000, for a total sales price of $11,638,000. The expenses related to
this transaction totaled $242,000. The assets of Allparts, Inc. on October
28, 1998 totaled $16,664,000. The loss on the sale of Allparts, Inc. was
$5,268,000 and has been reflected in the September 30, 1998 balance sheet
as a charge to goodwill of $4,614,000 and a charge to fixed assets of
$654,000. The net proceeds of $9,891,000 were used to pay down debt.
<PAGE>
D. INVENTORY:
Inventories by component are as follows:
Sept. 30, 1998 Sept. 30, 1997 Dec. 31, 1997
-------------- -------------- -------------
Finished goods $16,616 $19,030 $19,309
Work in process 1,232 4,337 2,435
Raw material 5,476 18,394 15,211
Tooling 2,817 2,633 2,457
------- ------- -------
$26,141 $44,394 $39,412
======= ======= =======
E. INCOME TAXES:
At September 30, 1998, $4.7 million and $1.7 million in valuation reserves
related to the tax benefits associated with losses in the U.S. and Canada,
respectively, have been recorded. The tax benefit reflected on the income
statement is the result of the elimination of net deferred tax liabilities
due to the losses associated with the bankruptcy filings.
F. DEBT:
The Company was in default under its credit agreement with its U.S. bank
group. The Company has a Forbearance Agreement under which the lender
agreed to grant certain accommodations and to forbear until January 1,
2000. This Agreement provides financing based on an asset formula. At
September 30, 1998, the borrowings under the Forbearance Agreement totaled
$103.9 million. This Agreement provides continued financing for the Company
and its subsidiaries that have not filed for bankruptcy. The Agreement
provides that any proceeds from pre-petition inventory and receivables will
be used to permanently reduce debt under the Forbearance Agreement. In
addition, under the Bankruptcy Court order, any sale of pre-petition
collateral other than inventory and receivables will first reduce debt
under the Forbearance Agreement for PTI of $8.4 million and SBI of $3.6
million and then be used to reduce post-petition debt, with any remaining
proceeds to be applied to debt under the Forbearance Agreement subject to
certain offsets.
PTI and SBI have post-petition loans as provided by a financing order,
which are collateralized by post-petition receivables and inventories. The
debtor-in-possession financing agreements provide for up to $21 million for
PTI and up to $6 million for SBI. These debt instruments are reflected on
the consolidated balance sheet through investment in affiliate companies
(see Note B).
G. 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 SBI. The plan included
resourcing stamped parts to third party suppliers, the sale of stamping
assets and a reduction in the SBI 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.
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 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.
<PAGE>
Year 2000
- - ---------
The Company has several business systems that require updating to become Year
2000 compliant. The Company's manufacturing operations do not rely on highly
sophisticated date driven processes and, as such, compliance with Year 2000
requirements is not significant in the manufacturing area. Each of the Company's
business systems is being updated or a replacement system is being purchased.
The Company estimates that the total cost of becoming compliant with Year 2000
is in the range of $1 million to $1.5 million.
The Company is also in contact with its customers and suppliers and has
requested that they complete questionnaires to determine any impact on the
Company's operations. In general, the suppliers and customers have developed or
are in the process of developing plans to address Year 2000 issues. The Company
will continue to monitor and evaluate the progress of suppliers and customers on
this critical matter.
Based on the progress the Company has made in addressing its Year 2000 issues
and the plans and timelines to complete this project, the Company does not
foresee significant risks associated with its Year 2000 compliance at this time.
The Company has not developed a detailed contingency plan, but given the current
status of its progress, it appears that all systems will be compliant. However,
if the Company identifies significant risks related to its Year 2000 compliance
or its progress deviates from the anticipated timeline, the Company will develop
contingency plans as deemed necessary at that time.
<PAGE>
RESULTS OF OPERATIONS
Third Quarter Ended September 30, 1998 compared to
Third Quarter Ended September 30, 1997
- - --------------------------------------------------
During the third quarter, three of the Company's subsidiaries were placed under
court ordered protection. On September 15, 1998, Plastic Trim, Inc. ("PTI") and
Starboard Industries, Inc. ("SBI") filed voluntary petitions for relief under
Chapter 11 of the Federal Bankruptcy Code in the United States Bankruptcy Court
for the Eastern District of Michigan. On August 27, 1998, the Ontario Court
(General Division) Commercial List issued an order to appoint an Interim
Receiver for JPE Canada Inc. ("JPEC") pursuant to Section 47 of the Bankruptcy
and Insolvency Act of Canada. Collectively, these companies represent the
Company's Trim Group. Under these conditions, generally accepted accounting
principles do not allow the Company to consolidate these subsidiaries from the
dates of their respective filings. The Company has utilized the equity method of
accounting in preparing the financial statements for the quarter ended September
30, 1998. The discussion below compares the third quarter of 1997 to the third
quarter of 1998 which includes JPEC for only 60 days and PTI and SBI for only 77
days.
Net sales for the quarter ended September 30, 1998 were $49.2 million compared
to $70.3 million for the three months ended September 30, 1997. The net sales
decrease of 30% is partially attributable to the exclusion of sales for the
subsidiaries under court ordered protection from their respective filing dates
which totaled $10.0 million. The Company's Original Equipment Manufacturers'
("OEM's") businesses estimated lost sales for the month of July at $6.5 million
due to the strike at GM. In addition, $1.5 million of the sales decline was due
to the discontinuance of SBI's stamping business in the fall of 1997. Sales for
the Aftermarket businesses declined 12% compared to the same quarter last year
due to the uncertainty associated with the Company's financial stability and the
decision to eliminate Dayton Parts' heavy duty drum product line. For the
quarter ended September 30, 1998, net sales were approximately 56% to OEM
customers and 44% to Aftermarket customers.
<PAGE>
Gross profit decreased by $5.6 million to $4.9 million for the three months
ended September 30, 1998 as compared with $10.5 million for the same period of
the prior year. This decrease includes $1.8 million of additional inventory
excess and obsolescence recognized in conjunction with PTI's bankruptcy filing.
The gross profit percentages, excluding the additional excess and obsolescense
adjustment, were 13.5% and 14.9% for 1998 and 1997, respectively. The gross
margin decreased because of the exclusion of the Trim Group from their filing
dates totaling approximately $1 million and the reduction attributable to the GM
strike of approximately $1 million. The remaining difference of $1.9 is
primarily attributable to lower sales volume and pricing pressure in the
Aftermarket business and manufacturing variances at PTI relating to a new
program launch.
Selling, general and administrative expenses increased 8.6% to $7.9 million for
the three months ended September 30, 1998 as compared to $7.3 million for the
three months ended September 30, 1997. The percentage of selling, general and
administrative expenses to net sales was 16.1% for the quarter ended September
30, 1998 as compared to 10.4% for the same period of the prior year. The higher
percentage is partially attributable to recognition of a $1.1 million receivable
offset granted to the two major customers of PTI and SBI in accordance with the
bankruptcy order. Other factors related to the increase in the percentage
include a $300,000 additional allowance for bad debts, fixed costs associated
with lower sales in the Aftermarket business and a charge of $360,000 related to
a workers' compensation claim for the quarter ended September 30, 1998.
The charge for subsidiaries under court ordered protection for the three months
ended September 30, 1998 totaled $26.6 million. This charge related to the
impairment of long-term assets in PTI and SBI as shown in Note B to the
financial statements. The Company believes that the charge reduces the assets of
such businesses to net realizable value in accordance with generally accepted
accounting principles. This charge has no impact on the Company's cash flow.
On October 28, 1998, the Company completed the sale of substantially all the
assets of its subsidiary, Allparts, Inc. The sales price was approximately $11.6
million, consisting of cash of $10.1 million and assumption of accounts payable
and accrued liabilities. The assets on October 28, 1998 were approximately $16.7
million and expenses related to this transaction were $242,000, resulting in a
net loss on the sale of $5.3 million. The Company has recognized this loss in
September by a write-down of goodwill and fixed assets of $4.6 million and
$654,000, respectively. The net cash proceeds after payment of expenses were
used to reduce debt.
Other expense primarily represents costs associated with the bankruptcy filings
for legal professionals and financial advisors.
Interest expense for the third quarter ended September 30, 1998 was $3.6 million
compared to $2.7 million for the same period as last year. The higher interest
expense is the result of the defaults on the Company's debt arrangements,
raising the effective interest rate to approximately 11%.
<PAGE>
Consolidated income tax benefit for the quarter ended September 30, 1998 was
$1.6 million. Although the Company recorded a pretax loss of $39.7 million for
the quarter, the normal tax benefit was reduced by a recording of valuation
reserves of $4.7 million. The tax expense of $275,000 for the quarter ended
September 30, 1997 related to pretax profit for that quarter.
Consolidated net loss for the three months ended September 30, 1998 was $38.1
million as compared to a net income of $191,000 in the third quarter of 1997.
Loss per share for the third quarter of 1998 was $8.29 as compared to earnings
per share of $0.04 during the same period in 1997.
Nine Months Ended September 30, 1998 compared to
Nine Months Ended September 30, 1997
- - ------------------------------------------------
Net sales for the nine months ended September 30, 1998 were $185.2 million
compared to $215.3 million for the nine months ended September 30, 1997. The net
sales decrease of 14% is attributable to the exclusion of the Trim Group's sales
of $10 million from their filing dates, the impact of the strike at GM totaling
$8.5 million and lower sales of $7 million due to discontinuance of SBI's
stamping business in the fall of 1997. For the nine months ended September 30,
1998, net sales were approximately 62% to OEM customers and 38% to Aftermarket
customers.
Gross profit decreased 37% to $19.3 million for the nine months ended September
30, 1998 as compared with $30.9 million for the comparable period of the prior
year. The gross profit percentages were 10.4% and 14.4% for 1998 and 1997,
respectively. This decline in percentages is attributable to the matters
mentioned in the thid quarter discussion, lower margin at PTI and JPEC 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 increased to $23.0 million for the
nine months ended September 30, 1998 over $21.9 million for the nine months
ended September 30, 1997. The percentage of selling, general and administrative
expenses to net sales was 12.4% for the nine months ending September 30, 1998 as
compared to 10.1% for the comparable period of the prior year. In addition to
the items discussed in the third quarter comparison, the higher percentage is
also related to lower sales volume and higher costs associated with the heavy
duty truck Aftermarket business.
The charge for subsidiaries includes the items related to the PTI and SBI
bankruptcy filings as explained in the third quarter discussion above. In the
second quarter, the Company had recorded an asset impairment of $2.7 million
related to JPEC, for which an Interim Receiver was appointed. The total charge
for long-term asset impairment for all companies under court ordered protection
is $29.2 million for the nine months ended September 30, 1998. The substantial
portion of this charge has been for goodwill ($18.6 million) and fixed assets
($8.0 million).
<PAGE>
The loss on sale of subsidiary and other expense is explained in the third
quarter discussion above.
Net interest expense increased to $10.7 million for the nine months ended
September 30, 1998 as compared to $7.3 million for the nine months ended
September 30, 1997. The increase is attributable to higher interest costs
associated with the defaults on the Company's debt arrangements.
Income tax benefit for the nine months ended September 30, 1998 was $1.5 million
as compared to tax expense of $111,000 for the same period of 1997. The tax
benefit is a result of the associated losses relating to the charges for the
court ordered protection filings. The amount of tax benefit was determined by
the elimination of the net deferred tax liabilities previously recognized on the
balance sheet. The Company has recorded a valuation reserve of $6.5 million to
offset deferred tax assets that relate to pre-tax loss, in accordance with
Financial Accounting Standard 109, "Accounting for Income Taxes."
Net loss for the nine months ended September 30, 1998 was $48.8 million compared
to net loss of $925,000 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 nine
months of 1998 was $10.62 as compared to loss per share of $0.20 during the same
period in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are its U.S. and Canadian credit
agreements and its debtor-in-possession financing agreements for SBI and PTI.
U.S. Operations
- - ---------------
The Company's principal source of liquidity for its U.S. companies is the
Forbearance Agreement dated August 10, 1998 (the "Forbearance Agreement"), as
amended by First Amendment dated August 31, 1998, Second Amendment dated
September 4, 1998, Third Amendment dated September 16, 1998 and Fourth Amendment
dated October 1, 1998. The Forbearance Agreement is collateralized by all of the
Company's assets, with the exception of JPEC's assets, the inventories of SBI
and PTI, and the post-bankruptcy petition accounts receivable of SBI and PTI. At
September 30, 1998, borrowings outstanding under the Forbearance Agreement
totaled $103.9 million.
<PAGE>
The Company's 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 expired on October 27, 1998.
Pursuant to the Fourth Amendment to the Forbearance Agreement, the lender agreed
to grant certain accommodations and to forbear until January 1, 2000. The Fourth
Amendment to the Forbearance Agreement provides for financing based on an asset
formula with maximum borrowings ranging from a low of $84.9 million in November
1998 to a high of $95.9 million in October 1998 plus an over-formula ranging
from a low of $42.7 million in November 1998 to a high of $48.2 million in
December 1999.
At September 30, 1998, Current Liabilities exceeded Current Assets by $71.2
million, reflecting the classification of the U.S. debt agreement of $103.9
million as current liability. Excluding the debt agreement, working capital at
September 30, 1998 would have been $32.8 million as compared to $53.9 million at
December 31, 1997. The lower level of working capital is due to the accounting
treatment of the subsidiaries under court ordered protection.
SBI and PTI
- - -----------
In connection with the filing for protection from creditors under Chapter 11 of
the U.S. Bankruptcy Code for SBI and PTI (the "debtor companies"), the debtor
companies entered into separate debtor-in-possession financing agreements to
provide for post-petition financing (the "DIP financing") which expires on
September 15, 2000.
PTI obtained DIP financing which provides for up to $21 million in asset based
loans with an out-of-formula allowance of not to exceed $6 million. PTI paid
closing fees in the amount of $105,000 and will pay monthly service fees of
$3,500 plus a one-time facility fee of $52,500. At September 30, 1998,
borrowings outstanding under PTI's DIP financing totaled $3.5 million.
SBI obtained DIP financing which provides for up to $6 million in asset based
loans with an out-of-formula allowance of not to exceed $2 million. SBI paid
closing fees in the amount of $30,000 and will pay monthly service fees of
$1,000 plus a one-time facility fee of $15,000. At September 30, 1998,
borrowings outstanding under SBI's DIP financing totaled $1.3 million.
<PAGE>
JPE Canada Operations
- - ---------------------
The principal source of liquidity for JPEC is a Cdn. $28.7 million (U.S. $18.7
million) credit agreement with a Canadian bank. The Canadian Credit Facility
permits JPEC 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 JPEC. Interest rates on the
advances are computed at either the Canadian Prime Rate or the Base Rate, as
defined in the agreement. At September 30, 1998, borrowings under the Canadian
Credit Facility totaled Cdn. $29.4 million (U.S. $19.2 million).
JPEC 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, JPEC 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 Cdn. $8.0 million.
The Company has informed the lender and its only customer that JPEC 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 JPEC 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 JPEC debt which was recorded as a liability at June
30, 1998. JPEC's lender has no additional recourse to the assets of JPE, Inc.
<PAGE>
PART II. OTHER INFORMATION
JPE, INC.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of JPE, Inc. was held on September 30, 1998,
for the purpose of electing two directors of JPE, Inc. for a term to expire in
2001. Proxies for the meeting were solicited pursuant to Section 14(a) of the
Securities Exchange Act of 1934 and there was no solicitation in opposition to
management's solicitation.
Management's nominees for directors as listed in the proxy statement were
elected with the following votes:
Shares Shares
Voted "For" "Withheld"
----------- ----------
David E. Cole 2,699,661 31,575
John F. Daly 2,699,661 31,575
Following the election, the Company's Board of Directors consisted of Mr. Cole,
Mr. Daly, Otto Gago and Donald R. Mandich.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits:
10.1 First Amendment dated August 31, 1998 to Forbearance Agreement
dated August 10, 1998 among the Banks, Comerica Bank, as Agent,
JPE, Inc. and its subsidiaries, filed with this report.
10.2 Second Amendment dated September 4, 1998 to Forbearance Agreement
dated August 10, 1998, as amended, among the Banks, Comerica
Bank, as Agent, JPE, Inc. and its subsidiaries, filed with this
report.
10.3 Third Amendment dated September 16, 1998 to Forbearance Agreement
dated August 10, 1998 as amended, among the Banks, Comerica Bank,
as Agent, JPE, Inc. and its subsidiaries, filed with this report.
10.4 Fourth Amendment dated October 1, 1998 to Forbearance Agreement
dated August 10, 1998, as amended, among the Banks, Comerica
Bank, as Agent, JPE, Inc. and its subsidiaries, filed with this
report.
10.5 Final Order Authorizing Postpetition Financing and Providing
Adequate Protection for Plastic Trim, Inc. dated October 29,
1998.
<PAGE>
10.6 Final Order Authorizing Postpetition Financing and Providing
Adequate Protection for Starboard Industries, Inc. dated October
29, 1998.
10.7 Stay Bonus Agreement, dated as of September 1, 1998, between JPE,
Inc. and Donna L. Bacon.
10.8 Stay Bonus Agreement, dated as of September 21, 1998, between
JPE, Inc. and James J. Fahrner.
10.9 Stay Bonus Agreement, dated as of September 30, 1998, between
JPE, Inc. and Karen A. Radtke.
b. Report on Form 8-K:
On September 29, 1998, Registrant filed a report on Form 8-K reporting
that two of its subsidiaries, Plastic Trim, Inc. and Starboard
Industries, Inc., had filed voluntary petitions for relief under
Chapter 11 of the Federal Bankruptcy Code in the United States
Bankruptcy Court for the Eastern District of Michigan.
On November 12, 1998, Registrant filed a report on Form 8-K reporting
that substantially all of the assets of its wholly-owned subsidiary,
Allparts, Incorporated, had been sold to R&B, Inc., on October 28,
1998.
<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
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Date: November 16, 1998
August 31, 1998
JPE, Inc.
775 Technology Drive
Suite 200
Ann Arbor, Michigan 48108
Attention: Mr. James J. Fahrner and Ms. Donna L. Bacon
RE: FORBEARANCE AGREEMENT 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 ("API"), DAYTON
PARTS, INC. ("DPI"), SAC CORPORATION, STARBOARD INDUSTRIES, INC. ("SBI"),
INDUSTRIAL & AUTOMOTIVE FASTENERS, INC. ("IAF"), PLASTIC TRIM, INC.
("PTI"), BRAKE, AXLE AND TANDEM COMPANY CANADA INC. AND JPE FINISHING, INC.
(COLLECTIVELY, "GUARANTORS") DATED AUGUST 10, 1998 ("FORBEARANCE
AGREEMENT")
Dear Mr. Fahrner and Ms. Bacon:
Company and Guarantors have requested that Banks extend the forbearance provided
for in the Forbearance Agreement.
Subject to written acceptance by Company and Guarantors of the following terms
and conditions, Agent and Banks are willing to grant certain accommodations and
to forbear until September 4, 1998, subject to earlier termination as provided
below, from further action to collect the Indebtedness:
1. All capitalized terms not defined in this first amendment to the
Forbearance Agreement ("First Amendment") shall have the meanings described
in the Forbearance Agreement and/or the Loan Documents.
2. Except as modified by this First Amendment, the Indebtedness and the
financing arrangements among Agent, Banks, Company and Guarantors shall
continue to be governed by the covenants, terms and conditions of the
Forbearance Agreement and the Loan Documents, which are ratified and
confirmed. The liens and security interests granted to Agent and Banks
under the Loan Documents and the Forbearance Agreement are also ratified
and confirmed by Company and Guarantors. This Agreement shall be binding
upon and shall inure to the benefit of Bank, Company and Guarantors, and
their respective successors and assigns.
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 Forbearance Agreement, as amended, the Credit Agreement or other
Loan Documents, or otherwise.
4. Subject to maintaining the advisory Advance Formula equal to or greater
than the aggregate of (i) Advances under the Revolving Credit and Swing
Line and (ii) the Letter of Credit Obligations, and provided there are no
defaults under the terms of the Forbearance Agreement, as amended, and no
further defaults under the Loan Documents, Banks may, in their sole
discretion, continue to advance to Company under the Revolving Credit Loan,
in accordance with the Loan Documents, as amended, through September 4,
1998. Company and Guarantors agree that:
(a) from August 31, 1998 forward, the portion of the funds borrowed by
Company for the benefit of PTI and/or SBI shall be limited to the
aggregate amount of funds collected by PTI and SBI and applied to the
Indebtedness from and after August 31, 1998 (both borrowings and
collections shall be computed on a cumulative basis); and
(b) neither Company nor any of the Guarantors shall make intercompany
transfers of any kind to or for the benefit of PTI and/or SBI, other
than as permitted by subparagraph (a) above.
In order to administer the foregoing covenants, Company agrees to establish
new funding account(s) for PTI and/or SBI.
<PAGE>
5. 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
FIRST AMENDMENT, THE FORBEARANCE AGREEMENT, THE LOAN DOCUMENTS OR THE
INDEBTEDNESS.
6. 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 ON FACTS OR CIRCUMSTANCES ARISING, AT ANY TIME UP THROUGH AND
INCLUDING THE DATE OF THIS FIRST AMENDMENT, WHETHER KNOWN OR UNKNOWN,
AGAINST ANY OR ALL OF AGENT, BANKS, THEIR EMPLOYEES, OFFICERS, DIRECTORS,
ATTORNEYS, STOCKHOLDERS AND SUCCESSORS AND ASSIGNS.
Agent and Banks reserve the right to terminate their forbearance prior to
September 4, 1998 in the event of any new defaults under the Loan Documents,
defaults under this First Amendment, in the event of further deterioration in
the financial condition of Company or Guarantors or further deterioration in
Agent's or Banks' collateral position, and/or in the event Agent or Banks, for
any reason, believes that the prospect of payment or performance is impaired.
Very truly yours,
COMERICA BANK, Agent
By: /s/ 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
COMERICA BANK NBD BANK
By: /s/ Cynthia B. Jones By: /s/ Phillip D. Martin
------------------------- -------------------------
Its: Vice President Its: Vice President
NATIONAL BANK OF CANADA HARRIS TRUST and SAVINGS BANK
By: /s/ Duane K. Bedard By: /s/ Sandra J. Sanders
------------------------- -------------------------
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
<PAGE>
ACKNOWLEDGED AND AGREED:
JPE, INC. DAYTON PARTS, INC.
By: /s/ Donna L. Bacon By: /s/ Donna L. Bacon
------------------------- -------------------------
Its: President Its: Vice President
Date: 9/1/98 Date: 9/1/98
ALLPARTS, INCORPORATED SAC CORPORATION
By: /s/ Donna L. Bacon By: /s/ Donna L. Bacon
------------------------- -------------------------
Its: Vice President Its: Vice President
Date: 9/1/98 Date: 9/1/98
STARBOARD INDUSTRIES, 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: 9/1/98 Date: 9/1/98
INDUSTRIAL & AUTOMOTIVE JPE FINISHING, INC.
FASTENERS, INC.
By: /s/ Donna L. Bacon By: /s/ Donna L. Bacon
------------------------- -------------------------
Its: Vice President Its: Vice President
Date: 9/1/98 Date: 9/1/98
PLASTIC TRIM, INC.
By: /s/ Donna L. Bacon
-------------------------
Its: Vice President
Date: 9/1/98
September 4, 1998
JPE, Inc.
775 Technology Drive
Suite 200
Ann Arbor, Michigan 48108
Attention: Mr. James J. Fahrner and Ms. Donna L. Bacon
RE: FORBEARANCE AGREEMENT 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 ("API"), DAYTON
PARTS, INC. ("DPI"), SAC CORPORATION, STARBOARD INDUSTRIES, INC. ("SBI"),
INDUSTRIAL & AUTOMOTIVE FASTENERS, INC. ("IAF"), PLASTIC TRIM, INC.
("PTI"), BRAKE, AXLE AND TANDEM COMPANY CANADA INC. AND JPE FINISHING, INC.
(COLLECTIVELY, "GUARANTORS") DATED AUGUST 10, 1998, AND AMENDED BY A FIRST
AMENDMENT DATED AUGUST 31, 1998 (AS AMENDED, THE "FORBEARANCE AGREEMENT")
Dear Mr. Fahrner and Ms. Bacon:
Company and Guarantors have requested that Banks extend the forbearance provided
for in the Forbearance Agreement.
Subject to written acceptance by Company and Guarantors of the following terms
and conditions by 10:00 a.m. on September 8, 1998, Agent and Banks are willing
to grant certain accommodations and to forbear until September 11, 1998, subject
to earlier termination as provided below, from further action to collect the
Indebtedness:
1. All capitalized terms not defined in this second amendment to the
Forbearance Agreement ("Second Amendment") shall have the meanings
described in the Forbearance Agreement and/or the Loan Documents.
2. Except as modified by this Second Amendment, the Indebtedness and the
financing arrangements among Agent, Banks, Company and Guarantors shall
continue to be governed by the covenants, terms and conditions of the
Forbearance Agreement and the Loan Documents, which are ratified and
confirmed. The liens and security interests granted to Agent and Banks
under the Loan Documents and the Forbearance Agreement are also ratified
and confirmed by Company and Guarantors. This Second Amendment shall be
binding upon and shall inure to the benefit of Agent, Banks, Company and
Guarantors, and their respective successors and assigns.
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 Forbearance Agreement, as amended, the Credit Agreement or other
Loan Documents, or otherwise.
4. Subject to maintaining the advisory Advance Formula equal to or greater
than the aggregate of (i) Advances under the Revolving Credit and Swing
Line and (ii) the Letter of Credit Obligations, and provided there are no
defaults under the terms of the Forbearance Agreement, as amended, and no
further defaults under the Loan Documents, Banks may, in their sole
discretion, continue to advance to Company under the Revolving Credit Loan,
in accordance with the Loan Documents, as amended, through September 11,
1998. Company and Guarantors agree that:
(a) from August 31, 1998 forward, the portion of the funds borrowed by
Company for the benefit of PTI and/or SBI shall be limited to the
aggregate amount of funds collected by PTI and SBI and applied to the
Indebtedness from and after August 31, 1998 (both borrowings and
collections shall be computed on a cumulative basis); and
(b) neither Company nor any of the Guarantors shall make intercompany
transfers of any kind to or for the benefit of PTI and/or SBI, other
than as permitted by subparagraph (a) above.
<PAGE>
5. 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
SECOND AMENDMENT, THE FORBEARANCE AGREEMENT, THE LOAN DOCUMENTS OR THE
INDEBTEDNESS.
6. 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 ON FACTS OR CIRCUMSTANCES ARISING, AT ANY TIME UP THROUGH AND
INCLUDING THE DATE OF THIS SECOND AMENDMENT, WHETHER KNOWN OR UNKNOWN,
AGAINST ANY OR ALL OF AGENT, BANKS, THEIR EMPLOYEES, OFFICERS, DIRECTORS,
ATTORNEYS, STOCKHOLDERS AND SUCCESSORS AND ASSIGNS.
Agent and Banks reserve the right to terminate their forbearance prior to
September 11, 1998 in the event of any new defaults under the Loan Documents or
a default under the Forbearance Agreement as amended by this Second Amendment,
in the event of further deterioration in the financial condition of Company or
Guarantors or further deterioration in Agent's or Banks' collateral position,
and/or in the event Agent or Banks, for any reason, believes that the prospect
of payment or performance is impaired.
Very truly yours,
COMERICA BANK, Agent
By: /s/ 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
COMERICA BANK NBD BANK
By: /s/ Cynthia B. Jones By: /s/ Phillip D. Martin
------------------------- -------------------------
Its: Vice President Its: Vice President
NATIONAL BANK OF CANADA HARRIS TRUST and SAVINGS BANK
By: /s/ Duane K. Bedard By: /s/ Sandra J. Sanders
------------------------- -------------------------
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
<PAGE>
ACKNOWLEDGED AND AGREED:
JPE, INC. DAYTON PARTS, INC.
By: /s/ Donna L. Bacon By: /s/ Donna L. Bacon
------------------------- -------------------------
Its: President Its: Vice President
Date: 9/4/98 Date: 9/4/98
ALLPARTS, INCORPORATED SAC CORPORATION
By: /s/ Donna L. Bacon By: /s/ Donna L. Bacon
------------------------- -------------------------
Its: Vice President Its: Vice President
Date: 9/4/98 Date: 9/4/98
STARBOARD INDUSTRIES, 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: 9/4/98 Date: 9/4/98
INDUSTRIAL & AUTOMOTIVE JPE FINISHING, INC.
FASTENERS, INC.
By: /s/ Donna L. Bacon By: /s/ Donna L. Bacon
------------------------- -------------------------
Its: Vice President Its: Vice President
Date: 9/4/98 Date: 9/4/98
PLASTIC TRIM, INC.
By: /s/ Donna L. Bacon
-------------------------
Its: Vice President
Date: 9/4/98
September 16, 1998
JPE, Inc.
775 Technology Drive
Suite 200
Ann Arbor, Michigan 48108
Attention: Mr. James J. Fahrner and Ms. Donna L. Bacon
RE: FORBEARANCE AGREEMENT 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 ("API"), DAYTON
PARTS, INC. ("DPI"), SAC CORPORATION, STARBOARD INDUSTRIES, INC. ("SBI"),
INDUSTRIAL & AUTOMOTIVE FASTENERS, INC. ("IAF"), PLASTIC TRIM, INC.
("PTI"), BRAKE, AXLE AND TANDEM COMPANY CANADA INC. AND JPE FINISHING, INC.
(COLLECTIVELY, "GUARANTORS") DATED AUGUST 10, 1998, AND AMENDED BY A FIRST
AMENDMENT DATED AUGUST 31, 1998 AND A SECOND AMENDMENT DATED SEPTEMBER 4,
1998 (AS AMENDED, THE "FORBEARANCE AGREEMENT")
Dear Mr. Fahrner and Ms. Bacon:
Company and Guarantors have requested that Banks extend the forbearance provided
for in the Forbearance Agreement. Company has informed Banks that API has
entered into a definitive agreement to sell substantially all of its assets.
Company has also informed Banks that PTI and SBI filed voluntary chapter 11
bankruptcy petitions on September 15, 1998.
Subject to written acceptance by Company and Guarantors of the following terms
and conditions, Agent and Banks are willing to grant certain accommodations and
to forbear until September 30, 1998, subject to earlier termination as provided
below, from further action to collect the Indebtedness:
1. All capitalized terms not defined in this third amendment ("Third
Amendment") to the Forbearance Agreement shall have the meanings described
in the Forbearance Agreement and/or the Loan Documents.
2. Except as modified by this Third Amendment, the Indebtedness and the
financing arrangements among Agent, Banks, Company and Guarantors shall
continue to be governed by the covenants, terms and conditions of the
Forbearance Agreement and the Loan Documents, which are ratified and
confirmed. The liens and security interests granted to Agent and Banks
under the Loan Documents and the Forbearance Agreement are also ratified
and confirmed by Company and the undersigned Guarantors. This Third
Amendment shall be binding upon and shall inure to the benefit of Agent,
Banks, Company and the undersigned Guarantors, and their respective
successors and assigns.
3. Company and the undersigned Guarantors acknowledge that Agent and Banks are
under no obligation to advance funds or extend credit to Company and
Guarantors under the Forbearance Agreement, as amended, the Credit
Agreement or other Loan Documents, or otherwise.
4. The advisory Advance Formula is revised to eliminate any availability on
account of any collateral of PTI and/or SBI. The overformula amount (set
forth in clause (iv) of paragraph 6 of the Forbearance Agreement is
increased from $42,100,000 to $44,911,000. The Cap is increased to
$107,387,000. All payments received from, or on account of, PTI and/or SBI
shall be applied to the Indebtedness (to principal or interest as elected
by Banks) and to the extent applied to principal shall permanently reduce
the Cap dollar for dollar.
5. Subject to maintaining the sum of availability under the advisory Advance
Formula (as revised in paragraph 4 above) plus the PTI/SBI Adjustment
(defined below) equal to or greater than the aggregate of (i) Advances
under the Revolving Credit and Swing Line and (ii) the Letter of Credit
Obligations, and provided there are no defaults under the terms of the
Forbearance Agreement, as amended, and no further defaults under the Loan
Documents, Banks may, in their sole discretion, continue to advance to
Company under the Revolving Credit Loan, in accordance with the Loan
Documents, as amended, through September 30, 1998. The "PTI/SBI Adjustment"
is $24,000,000 less all payments received from or, on account of PTI and/or
SBI which reduce the Cap. Company and Guarantors agree that:
<PAGE>
(a) from September 14, 1998 forward, the Company shall not borrow for the
benefit of PTI and/or SBI; and
(b) neither Company nor any of the Guarantors shall make intercompany
transfers of any kind to or for the benefit of PTI and/or SBI.
6. Company and the undersigned Guarantors approve the form of the Interim
Order Authorizing Postpetition Financing and Providing Adequate Protection
prepared for each of PTI and SBI and its execution by Agent. It is a
default under the Forbearance Agreement:
(a) If both Financing Orders are not entered in the form approved by the
Agent or if, after entry, one or both are modified (unless Agent
approves the modifications);
(b) If PTI and SBI default under either of the Financing Orders; or
(c) If PTI and/or SBI take action adverse to Banks.
7. Company and the undersigned Guarantors hereby represent and warrant that
(a) execution, delivery and performance of this Third Amendment are not in
contravention of law or the terms of any agreement by which they are bound,
and do not require the consent or approval of any governmental body,
agency, or authority, and this Third Amendment will be valid and binding in
accordance with its terms; (b) the continuing representations and
warranties of Company and the undersigned Guarantors set forth in Loan
Documents are true and correct on and as of the date hereof with the same
force and effect as made on and as of the date hereof other than as
previously specified in writing to Agent and Banks; and (c) no event of
default, or condition or event which, with the giving of notice or the
running of time, or both, would constitute an event of default under the
Forbearance Agreement has occurred and is continuing as of the date hereof
other than as previously specified in writing to Agent and Banks.
8. COMPANY, THE UNDERSIGNED GUARANTORS, AGENT AND BANKS ACKNOWLEDGE AND AGREE
THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE
WAIVED. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO
CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR
THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF
LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY
RELATED TO, THIS THIRD AMENDMENT, THE FORBEARANCE AGREEMENT, THE LOAN
DOCUMENTS OR THE INDEBTEDNESS.
9. COMPANY AND THE UNDERSIGNED GUARANTORS, IN EVERY CAPACITY, INCLUDING, BUT
NOT LIMITED TO, AS SHAREHOLDERS, PARTNERS, OFFICERS, DIRECTORS, INVESTORS
AND/OR CREDITORS OF COMPANY AND/OR GUARANTORS, OR ANY ONE OR MORE OF THEM,
HEREBY WAIVE, DISCHARGE AND FOREVER RELEASE AGENT, BANKS, AND THEIR
EMPLOYEES, OFFICERS, DIRECTORS, ATTORNEYS, STOCKHOLDERS AND SUCCESSORS AND
ASSIGNS, FROM AND OF ANY AND ALL CLAIMS, CAUSES OF ACTION, DEFENSES,
COUNTERCLAIMS OR OFFSETS AND/OR ALLEGATIONS COMPANY AND/OR GUARANTORS MAY
HAVE, OR MAY HAVE MADE, OR ARE BASED ON FACTS OR CIRCUMSTANCES ARISING, AT
ANY TIME UP THROUGH AND INCLUDING THE DATE OF THIS THIRD AMENDMENT, WHETHER
KNOWN OR UNKNOWN, AGAINST ANY OR ALL OF AGENT, BANKS, THEIR EMPLOYEES,
OFFICERS, DIRECTORS, ATTORNEYS, STOCKHOLDERS AND SUCCESSORS AND ASSIGNS.
<PAGE>
Agent and Banks reserve the right to terminate their forbearance prior to
September 30, 1998 in the event of any new defaults under the Loan Documents or
a default under the Forbearance Agreement as amended by this Third Amendment, in
the event of further deterioration in the financial condition of Company or
Guarantors or further deterioration in Agent's or Banks' collateral position,
and/or in the event Agent or Banks, for any reason, believes that the prospect
of payment or performance is impaired.
Very truly yours,
COMERICA BANK, Agent
By: /s/ 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
COMERICA BANK NBD BANK
By: /s/ Cynthia B. Jones By: /s/ Robert J. Izzo
------------------------- -------------------------
Its: Vice President Its: First Vice President
NATIONAL BANK OF CANADA HARRIS TRUST and SAVINGS BANK
By: /s/ Loriann Curnyn By: /s/ Sandra J. Sanders
------------------------- -------------------------
Its: Vice President Its: Sr. Vice President
By: /s/
-------------------------
Its: Group 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: 9/16/98 Date: 9/16/98
ALLPARTS, INCORPORATED INDUSTRIAL & AUTOMOTIVE
FASTENERS, INC.
By: /s/ Donna L. Bacon By: /s/ Donna L. Bacon
------------------------- -------------------------
Its: Vice President Its: Vice President
Date: 9/16/98 Date: 9/16/98
DAYTON PARTS, 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: 9/16/98 Date: 9/16/98
JPE FINISHING, INC.
By: /s/ Donna L. Bacon
-------------------------
Its: Vice President
Date: 9/16/98
October 1, 1998
JPE, Inc.
775 Technology Drive
Suite 200
Ann Arbor, Michigan 48108
Attention: Mr. James J. Fahrner and Ms. Donna L. Bacon
RE: FORBEARANCE AGREEMENT 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 ("API"), DAYTON
PARTS, INC. ("DPI"), SAC CORPORATION, STARBOARD INDUSTRIES, INC. ("SBI"),
INDUSTRIAL & AUTOMOTIVE FASTENERS, INC. ("IAF"), PLASTIC TRIM, INC.
("PTI"), BRAKE, AXLE AND TANDEM COMPANY CANADA INC. AND JPE FINISHING, INC.
(COLLECTIVELY, "GUARANTORS") DATED AUGUST 10, 1998, AND AMENDED BY A FIRST
AMENDMENT DATED AUGUST 31, 1998, A SECOND AMENDMENT DATED SEPTEMBER 4, 1998
AND A THIRD AMENDMENT DATED SEPTEMBER 16, 1998 (AS AMENDED, THE
"FORBEARANCE AGREEMENT")
Dear Mr. Fahrner and Ms. Bacon:
Company and Guarantors have requested that Banks extend the forbearance provided
for in the Forbearance Agreement.
Subject to written acceptance by Company and Guarantors of the following terms
and conditions, Agent and Banks are willing to grant certain accommodations and
to forbear until January 1, 2000, subject to earlier termination as provided
below, from further action to collect the Indebtedness:
1. All capitalized terms not defined in this fourth amendment ("Fourth
Amendment") to the Forbearance Agreement shall have the meanings described
in the Forbearance Agreement and/or the Loan Documents.
2. Except as modified by this Fourth Amendment, the Indebtedness and the
financing arrangements among Agent, Banks, Company and Guarantors shall
continue to be governed by the covenants, terms and conditions of the
Forbearance Agreement and the Loan Documents, which are ratified and
confirmed. The liens and security interests granted to Agent and Banks
under the Loan Documents and the Forbearance Agreement are also ratified
and confirmed by Company and the undersigned Guarantors. This Fourth
Amendment shall be binding upon and shall inure to the benefit of Agent,
Banks, Company and the undersigned Guarantors, and their respective
successors and assigns.
3. Company and the undersigned Guarantors acknowledge that Agent and Banks are
under no obligation to advance funds or extend credit to Company and
Guarantors under the Forbearance Agreement, as amended, the Credit
Agreement or other Loan Documents, or otherwise.
4. The advisory Advance Formula was revised in the Third Amendment to
eliminate any availability on account of any collateral of PTI and/or SBI.
The fixed asset reliance (set forth in clause (iii) of paragraph 6 of the
Forbearance Agreement) net of the fixed assets of PTI and SBI is
$11,537,000. After the sale of API the fixed assets reliance will be
reduced to $10,923,000. The Cap remains at $107,387,000, subject to
reductions as provided in the Forbearance Agreement. The overformula amount
(set forth in clause (iv) of paragraph 6 of the Forbearance Agreement) and
the Cap are adjusted set forth below. In addition, the aggregate of (i)
Advances under the Revolving Credit and Swing Line and (ii) the Letter of
Credit Obligations as of the end of each month must be less than the Month
End Cap (as set forth below).
<PAGE>
<TABLE>
<CAPTION>
MONTH-YEAR OVERFORMULA AMOUNT CAP (1) MONTH END CAP
---------- ------------------ ------- -------------
<S> <C> <C> <C>
October 1998 $46,840,000 (2) $84,389,000 83,793,000
November 1998 $42,700,000 (3) $73,400,000 (4) 72,378,000
December 1998 $43,700,000 $73,400,000 71,616,000
January 1999 $45,400,000 $76,000,000 74,993,000
February 1999 $45,100,000 $76,500,000 75,523,000
March 1999 $45,400,000 $76,400,000 75,427,000
April 1999 $45,700,000 $77,100,000 76,114,000
May 1999 $46,300,000 $78,100,000 77,054,000
June 1999 $47,100,000 $78,400,000 77,375,000
July 1999 $47,500,000 $78,300,000 77,320,000
August 1999 $47,600,000 $78,300,000 76,929,000
September 1999 $47,500,000 $78,600,000 77,591,000
October 1999 $47,400,000 $79,000,000 78,036,000
November 1999 $47,700,000 $79,200,000 78,210,000
December 1999 $48,200,000 $79,100,000 78,121,000
<FN>
(1) Cap is stated net of PTI/SBI Adjustment.
(2) Until closing of API sale, then $42,700,000.
(3) If the API sale has not closed, then $46,800,000 until the earlier
of (i) the closing, or (ii) November 15, 1998.
(4) If the API sale has not closed, then $84,800,000 until the earlier
of (i) the closing, or (ii) November 15, 1998.
</FN>
</TABLE>
To the extent that the Banks consent to a sale of API for net proceeds of
less than $10 million, the Cap and Overformula Amounts will be increased by
the amount of the difference provided, however, that the Overformula
Amount, after the adjustment, shall never exceed $48,200,000. All payments
received from, or on account of, PTI and/or SBI shall be applied to the
Indebtedness (to principal or interest as elected by Banks) and to the
extent applied to principal shall permanently reduce the Cap dollar for
dollar (except for the first $997,000 received after September 30, 1998).
As of October 14, 1998, the Cap is $101,602,162 computed according to the
foregoing requirements..
5. Subject to maintaining the sum of availability under the advisory Advance
Formula (as revised in paragraph 4 above) plus the PTI/SBI Adjustment
(defined below) equal to or greater than the aggregate of (i) Advances
under the Revolving Credit and Swing Line and (ii) the Letter of Credit
Obligations, and provided there are no defaults under the terms of the
Forbearance Agreement, as amended, and no further defaults under the Loan
Documents, Banks may, in their sole discretion, continue to advance to
Company under the Revolving Credit Loan, in accordance with the Loan
Documents, as amended, through December 31, 1999. The "PTI/SBI Adjustment"
is $23,452,632 as of September 30, 1998 and is reduced further by payments
received from or, on account of PTI and/or SBI after September 30, 1998
which reduce the Cap. Company and Guarantors agree that:
(a) the Company shall not borrow for the benefit of PTI and/or SBI; and
(b) neither Company nor any of the Guarantors shall make intercompany
transfers of any kind to or for the benefit of PTI and/or SBI.
6. Company and the undersigned Guarantors approved the Interim Order
Authorizing Postpetition Financing and Providing Adequate Protection for
each of PTI and SBI (collectively, the "Financing Orders") and its
execution by Agent. The Financing Orders were entered as interim orders on
September 18, 1998. It is a default under the Forbearance Agreement:
(a) If either of the Financing Orders are not entered as final orders in
the form approved by the Agent or if, after entry, one or both are
modified (unless Agent approves the modifications);
(b) If PTI and SBI default under either of the Financing Orders; or
(c) If PTI and/or SBI take action adverse to Banks.
<PAGE>
7. Attached as Exhibit A are projections of the period October 1, 1998 through
December 31, 1998, which were prepared by Company and its consultants,
Conway, MacKenzie & Dunleavy. It is a default under the Forbearance
Agreement if the Company's performance varies from the projections in a
material, adverse way. Without limitation, it is a default if as of the end
of any month cumulative consolidated earnings before interest and taxes
from October 1, 1998 to date ("Cumulative EBIT") (for IAF/DPI only except
that API earnings in October 1998 are included in the Cumulative EBIT) is
less than the amount shown below:
Month Year Cumulative EBIT
----- ---- ---------------
October 1998 506,000
November 1998 746,000
December 1998 865,000
January 1999 888,000
February 1999 934,000
March 1999 1,009,000
April 1999 1,531,000
May 1999 2,123,000
June 1999 2,577,000
July 1999 3,023,000
August 1999 3,441,000
September 1999 3,829,000
October 1999 4,385,000
November 1999 4,552,000
December 1999 4,804,000
Company shall deliver to Agent and Banks within twenty days of each month
end a report showing actual consolidated EBIT for the previous month and
Cumulative EBIT for October 1, 1998 through the end of the previous month
and the variance from the projections based on the model used for the
projections.
8. Company agrees that if an officer or senior employee leaves Company it will
not pay a replacement officer or employee higher aggregate compensation
that the former officer or employee, without the consent of the Banks. In
addition, Company agrees that it will not pay or agree to pay stay pay or
severance pay or similar benefits to its officers or other senior employees
in excess of the following amounts:
OFFICER STAY PAY
------- --------
Donna L. Bacon $250,000
James J. Fahrner $175,000
Karen Radtke $125,000
provided, however that:
(a) no such Stay Pay shall be earned and any obligation of Company to pay
shall be terminated if any of the following occur before January 1,
2000: (i) voluntary termination by such employee other than for Good
Reason, as defined ion Exhibit A, (ii) termination of such employee
for Cause, as defined on Exhibit A, or (iii) the death of such
employee;
(b) Stay Pay may not be paid until the earliest of (i) January 1, 2000,
(ii) sale of all of API, DPI, IAF, PTI and SBI, or (iii) determination
of the Board of Directors and consent of Banks that such employee is
no longer necessary; and
(c) The Stay Pay must be borne one half by IAF and DPI and one half by PTI
SBI. If PTI and SBI do not agree (with Bankruptcy Court approval to
the extent necessary) to pay one half of the Stay Pay, then the
Company's authority to pay Stay Pay is reduced by one half.
<PAGE>
Company may establish at Agent a separate account ("Reserve Account") and,
for each month during the six month period beginning October 1998 and
ending March 1999 may deposit $50,000 ("Authorized Amount") into the
Reserve Account from funds otherwise available to Company. If an officer
who is authorized Stay Pay leaves Company under circumstances which do not
qualify that officer for such Stay Pay then the Authorized Amount will be
reduced accordingly. Company grants to Agent for the benefit of the Banks a
first priority security interest in and lien on all funds now or hereafter
on deposit in the Reserve Account to secure the Indebtedness. Company has
no right to withdraw, and Agent has no right to apply any funds so
deposited, except as provided in this paragraph. Agent may not apply the
funds in the Reserve Account up to the Authorized Amount until such time as
Company has discharged its obligations for Stay Pay including related
taxes; Agent may apply the funds deposited in the Reserve Account to the
Indebtedness after the Company's obligations for Stay Pay including related
taxes, have been satisfied. Company may withdraw funds deposited in the
Reserve Account up to the Authorized Amount free and clear of Agent's
security interest for the sole purpose of funding its obligations for Stay
Pay, including related taxes, and Company agrees to use the funds only for
that purpose.
9. It is a default under the Forbearance Agreement if the freeze approved by
the informal committee of the unsecured creditors of IAF is not extended
through the forbearance period or, if notwithstanding the committee's
approval of an extension of the freeze, creditors who are material in
numbers or dollars take action to collect pre-freeze liabilities.
10. Company ratifies and confirms its undertakings under a certain letter
agreement with Agent dated September 16, 1998; a default by Company under
that letter agreement is a default under the Forbearance Agreement.
11. It is a default under the Forbearance Agreement, if the Company: (a)
extends the exclusive Negotiating Period with DGI Investments, Inc. under
the Letter of Intent dated October 1, 1998, unless DGI has met the Approval
Conditions set forth in Section 4(c)(vi) of the Letter or Intent, or (b)
otherwise restricts Company's ability to solicit offers, enter into any
agreement or understanding in connection with, enter into negotiations
concerning, discuss, consummate or agree to consummate the sale, exchange
or other disposition of all or any portion of the assets of Company, or any
sale, exchange or other disposition of all or any portion of Company or its
Subsidiaries, without the consent of the Banks.
<PAGE>
12. "Year 2000 Problem" is defined as any significant risk that computer
hardware, software, or equipment containing embedded microchips essential
to the business or operations of the Borrower or any of its Subsidiaries
will not, in the case of dates or time periods occurring after December 31,
1999, function at least as efficiently and reliably as in the case of times
or time periods occurring before January 1, 2000, including the making of
accurate leap year calculations. Company has conducted a comprehensive
review and assessment of the computer applications of Company and its
Subsidiaries with respect to any defect in computer software, data bases,
hardware, controls and peripherals related to the occurrence of the year
2000 or the use at any time of any date which is before, on or after
December 31, 1999 in connection therewith. Based on the foregoing review
and assessment, Company believes that no such defect could reasonably be
expected to have a material adverse effect on the business or financial
affairs of Company (or of Company and its Subsidiaries taken on a
consolidated basis). By January 15, 1999, Company will make inquiry of
their material suppliers, vendors (including data processors) and
customers, with respect to any defect in computer software, data bases,
hardware, controls and peripherals related to the occurrence of the year
2000 or the use at any time of any date which is before, on or after
December 31, 1999, in connection therewith. Promptly after completion of
its inquiry, Company will advise whether Company believes that any such
defect exists and could reasonably be expected to have a material adverse
effect on the business or financial affairs of Company (or of Company and
its Subsidiaries taken on a consolidated basis). Company will take all
actions necessary and commit adequate resources to assure that its
computer-based and other systems (and those of all Subsidiaries) are able
to effectively process data, including dates before, on or after January 1,
2000, without experiencing any Year 2000 Problem that could cause a
material adverse effect on the business or financial affairs of Company (or
of Company and its Subsidiaries taken on a consolidated basis). At the
request of Agent, Company will provide Agent with written assurances and
substantiations (including, but not limited to, the results of internal or
external audited reports prepared in the ordinary course of business)
reasonably acceptable to Agent as to the capability of Company and its
Subsidiaries to conduct its and their businesses and operations before, on
and after January 1, 2000, without experiencing a Year 2000 Problem causing
a material adverse effect on the business or financial affairs of Company
(or of Company and its Subsidiaries taken on a consolidated basis).
13. Company and the undersigned Guarantors hereby represent and warrant that
(a) execution, delivery and performance of this Fourth Amendment are not in
contravention of law or the terms of any agreement by which they are bound,
and do not require the consent or approval of any governmental body,
agency, or authority, and this Fourth Amendment will be valid and binding
in accordance with its terms; (b) the continuing representations and
warranties of Company and the undersigned Guarantors set forth in Loan
Documents are true and correct on and as of the date hereof with the same
force and effect as made on and as of the date hereof other than as
previously specified in writing to Agent and Banks; and (c) no event of
default, or condition or event which, with the giving of notice or the
running of time, or both, would constitute an event of default under the
Forbearance Agreement, has occurred and is continuing as of the date hereof
other than as previously specified in writing to Agent and Banks.
14. COMPANY, THE UNDERSIGNED GUARANTORS, AGENT AND BANKS ACKNOWLEDGE AND AGREE
THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE
WAIVED. EACH PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO
CONSULT) WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR
THEIR MUTUAL BENEFIT WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF
LITIGATION REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY
RELATED TO, THIS FOURTH AMENDMENT, THE FORBEARANCE AGREEMENT, THE LOAN
DOCUMENTS OR THE INDEBTEDNESS.
<PAGE>
15. COMPANY AND THE UNDERSIGNED GUARANTORS, IN EVERY CAPACITY, INCLUDING, BUT
NOT LIMITED TO, AS SHAREHOLDERS, PARTNERS, OFFICERS, DIRECTORS, INVESTORS
AND/OR CREDITORS OF COMPANY AND/OR GUARANTORS, OR ANY ONE OR MORE OF THEM,
HEREBY WAIVE, DISCHARGE AND FOREVER RELEASE AGENT, BANKS, AND THEIR
EMPLOYEES, OFFICERS, DIRECTORS, ATTORNEYS, STOCKHOLDERS AND SUCCESSORS AND
ASSIGNS, FROM AND OF ANY AND ALL CLAIMS, CAUSES OF ACTION, DEFENSES,
COUNTERCLAIMS OR OFFSETS AND/OR ALLEGATIONS COMPANY AND/OR GUARANTORS MAY
HAVE, OR MAY HAVE MADE, OR ARE BASED ON FACTS OR CIRCUMSTANCES ARISING, AT
ANY TIME UP THROUGH AND INCLUDING THE DATE OF THIS FOURTH AMENDMENT,
WHETHER KNOWN OR UNKNOWN, AGAINST ANY OR ALL OF AGENT, BANKS, THEIR
EMPLOYEES, OFFICERS, DIRECTORS, ATTORNEYS, STOCKHOLDERS AND SUCCESSORS AND
ASSIGNS.
Agent and Banks reserve the right to terminate their forbearance prior to
January 1, 2000 in the event of any new defaults under the Loan Documents or a
default under the Forbearance Agreement as amended by this Fourth Amendment, in
the event of further deterioration in the financial condition of Company or
Guarantors or further deterioration in Agent's or Banks' collateral position,
and/or in the event Agent or Banks, for any reason, believes that the prospect
of payment or performance is impaired.
Very truly yours,
COMERICA BANK, Agent
By: /s/ 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
COMERICA BANK NBD BANK
By: /s/ Cynthia B. Jones By: /s/ Robert J. Izzo
-------------------------- -------------------------
Its: Vice President Its: First Vice President
NATIONAL BANK OF CANADA HARRIS TRUST and SAVINGS BANK
By: /s/ Loriann Curnyn By: /s/ Sandra J. Sanders
-------------------------- -------------------------
Its: Vice President Its: Sr. Vice President
By: /s/
--------------------------
Its: Group Vice President
BANK ONE, DAYTON, N.A.
By: /s/ Scott E. Roman
--------------------------
Its: Assistant Vice President
<PAGE>
ACKNOWLEDGED AND AGREED:
JPE, INC. INDUSTRIAL & AUTOMOTIVE
FASTENERS, INC.
By: /s/ James J. Fahrner By: /s/ James J. Fahrner
-------------------------- -------------------------
Its: COO and CFO Its: President and CFO
Date: 10/22/98 Date: 10/22/98
ALLPARTS, INCORPORATED BRAKE, AXLE AND TANDEM
COMPANY CANADA INC.
By: /s/ James J. Fahrner By: /s/ James J. Fahrner
-------------------------- -------------------------
Its: President and CFO Its: Vice President and Treasurer
Date: 10/22/98 Date: 10/22/98
DAYTON PARTS, INC. JPE FINISHING, INC.
By: /s/ James J. Fahrner By: /s/ James J. Fahrner
-------------------------- -------------------------
Its: Vice President and CFO Its: President and CFO
Date: 10/22/98 Date: 10/22/98
SAC CORPORATION
By: /s/ James J. Fahrner
--------------------------
Its: President and Treasurer
Date: 10/22/98
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
In re Chapter 11
PLASTIC TRIM, INC., Case No. 98-56104
Hon. Walter Shapero
Debtor.
- - --------------------------------
FINAL ORDER AUTHORIZING POSTPETITION FINANCING
AND PROVIDING ADEQUATE PROTECTION
At a session of said Court held in the U.S.
Courthouse, City of Detroit, Michigan on
October 29, 1998
PRESENT: HONORABLE Walter Shapero
U.S. BANKRUPTCY JUDGE
This matter having come on to be considered upon Plastic Trim, Inc.'s
("Debtor") Motion for Entry of Order Authorizing Postpetition Financing and
Providing Adequate Protection ("Motion"); after notice and hearing, the Court
having reviewed the Motion and having heard the statements of counsel in support
of the relief requested therein and any objections and any evidence offered; and
the Court being fully advised in the premises;
IT APPEARS AND THE COURT FINDS THAT:
A. Debtor filed a petition for relief under Chapter 11 of the Bankruptcy
Code on September 15, 1998 ("Petition Date").
B. On September 15, 1998, after an emergency hearing on the Motion, this
Court entered its Preliminary Interim Order Authorizing Postpetition Financing
and Providing Adequate Protection (the "Preliminary Order"). As part of the
Preliminary Order, this Court directed that the Motion, the Preliminary Order
and notice of the September 18, 1998 hearing be sent to all creditors and
interested parties entitled to notice under Federal Rule of Bankruptcy Procedure
4001; such notice has been given by the Debtor.
C. On September 18, 1998, after notice and a hearing, this Court entered an
Interim Order Authorizing Postpetition Financing and Providing Adequate
Protection (the "Interim Order"). As part of the Interim Order, the Court
directed that notice of entry of the Interim Order and of a final hearing
thereon be sent to all creditors and interested parties entitled to notice under
Federal Rule of Bankruptcy Procedure 4001; such notice has been given by the
Debtor.
D. The Unsecured Creditors' Committee (the "Committee") filed an objection
to entry of the Interim Order as a final order. Subject to the terms of this
Order, the Committee has withdrawn its objection.
E. The Court has jurisdiction over this matter pursuant to 28
U.S.C.Sections 157 and 1334. This is a core proceeding pursuant to 28
U.S.C.Section 157(b)(2) and venue is proper in this judicial district.
F. The procedure set forth in paragraph 34 of this Order constitutes
sufficient "notice and hearing" under 11 U.S.C Sections 102, 363, and 364,
Bankruptcy Rules 2002, 4001, 6004, 6007, and 9006 and all applicable local
rules.
G. Debtor is an automotive supplier manufacturing component parts for sale
to a number of customers, including without limitation, General Motors
Corporation ("GM") and Chrysler Corporation ("Chrysler" or together with GM, the
"Customers"). Pursuant to purchase orders and supply contracts with Debtor as
amended from time to time ("Purchase Orders"), Debtor is obligated to
manufacture component parts for the Customers which are utilized by the
Customers in the manufacture of motor vehicles ("Component Parts").
<PAGE>
H. Should Debtor fail to meet its obligations to timely deliver Component
Parts to the Customers as called for by the Purchase Orders, the Customers will
suffer significant damages and may have claims against Debtor for such damages.
I. Before the commencement of its bankruptcy case, Debtor, and its
affiliate, PTI Industries, Inc. ("PTI" or together with Debtor, the "Debtors"),
together with its parent JPE, Inc. and its other affiliates including without
limitation, Industrial Automotive Fasteners, Inc. ("IAF"), Dayton Parts, Inc.
("DPI"), SAC Corporation ("SAC") and Allparts, Inc. ("API" or together with IAF,
DPI and SAC, the "Non-Debtor Subsidiaries") were parties to loan agreements with
Comerica Bank, as agent for itself and other lenders (the "Prepetition Lenders")
pursuant to the terms of the Third Amended and Restated JPE, Inc. Credit
Agreement dated as of December 31, 1996, as amended (the "Credit Agreement" or
together with all related loan and collateral documents, the "Prepetition Loan
Documents").
J. As part of the Prepetition Loan Documents, the Debtor granted the
Prepetition Lenders a security interest in: all of the tangible and intangible
personal property, real property and fixtures and assets of Debtor, whether now
owned or existing or hereafter acquired or arising and wheresoever located
including, without limitation (the "Prepetition Collateral"): (a) all accounts,
(b) all inventory, (c) all equipment, (d) all general intangibles, and (e) all
real estate owned by the Debtor. The Prepetition Lenders assert a first priority
prepetition security interest in the Prepetition Collateral. Nothing in this
Order is intended to validate or reaffirm any liens or security interests
granted to the Prepetition Lenders.
K. The Prepetition Lenders have not consented to use of cash collateral.
L. Even if Debtor could obtain approval for the use of cash collateral over
the Prepetition Lenders' objection, Debtor has determined that available cash
collateral would be insufficient to fund ongoing operations.
M. There are no funds on hand to meet payroll, purchase raw materials and
other necessary supplies to produce the Component Parts and, therefore, without
postpetition financing, Debtor would not be able to satisfy its obligations
under the Purchase Orders; thus, Debtor has requested that GMAC Business Credit,
LLC ("Lender") provide the postpetition financing set forth in this Order.
N. Clark Credit Corporation, MC Machinery Systems, Inc., Xerox Corporation,
MHI Injection Molding Machinery, Inc. and LaSalle National Leasing Corporation
(collectively, the "PMSI Creditors") may assert purchase money security
interests against a variety of miscellaneous equipment used by Debtor.
O. Other than the Prepetition Lenders and the PMSI Creditors, no entities
are known to assert an interest in property of the estate.
<PAGE>
P. Debtor urgently requires financing and credit under 11 U.S.C. Section
364 to fund day to day operations, purchase inventory and additional capital
equipment and tooling necessary to maintain production for the Customers.
Debtor's inability to fund these activities in a timely manner may result in a
long term negative impact on the value of Debtor and its business, to the
prejudice and detriment of Debtor's creditors, customers, employees, and
stockholders.
Q. Despite good faith efforts, Debtor is unable to obtain (i) unsecured
credit allowable under 11 U.S.C. Section 503(b)(1) as an administrative expense;
(ii) unsecured credit allowable under 11 U.S.C. Section 364(a) or (b); or (iii)
secured credit under 11 U.S.C. Section 364(c)(1) from any source sufficient to
enable the Debtor to continue its business operations. Debtor is also unable to
obtain a borrowing facility without (1) granting the claims of the proposed
lender priority over administrative expenses of the kind specified in 11 U.S.C.
Sections 503(b) and 507(b) in accordance with 11 U.S.C. Section 364(c)(1) and
(2) securing the postpetition obligations with liens on all assets of Debtor in
accordance with 11 U.S.C. Section 364(c)(2) and, to the limited extent provided
by Paragraph 18, Section 364(d).
R. To induce Lender to provide financing hereunder, and subject to the
terms of this Order, the Customers have agreed to provide Lender with the
following credit enhancements: (a) a limitation on setoffs against post-petition
accounts, (b) inventory purchase agreements, and (c) a guaranty of certain
out-of-formula loans to be made by Lender. In turn, to induce the Customers to
grant Lender the credit enhancements detailed below, Debtor has agreed to grant
Customers a "Right of Access" as detailed in paragraph 12 below.
S. Lender is willing to provide Debtor with postpetition financing pursuant
to the terms of this Order. In summary, the Lender's financing to Debtor under
this Order will consist of a credit facility as follows (the "Postpetition
Loans"): A revolving working capital line of credit in favor of Debtor up to a
maximum amount of $21.0 million, based on eligible accounts and inventory and an
out-of-formula allowance in an amount of up to $6.0 million. The proposed
Postpetition Loans are in the best interests of Debtor and all other parties in
interest.
T. Debtor, the Customers, Lender and Prepetition Lenders have exchanged
fair consideration for the rights each obtained in the Order and each acted in
good faith in its negotiations over the terms of this Order.
U. The terms and conditions of this Order are fair and reasonable, were
negotiated by the parties at arms' length and entered into by the parties in
good faith, and are the best available to Debtor under the present market
conditions and financial circumstances of Debtor. Lender's extensions of credit
to Debtor under this Order are and will be made in good faith. Any credit and
loans extended to Debtor by Lender pursuant to this Order, whether interim or
final, shall be deemed to have been extended and made in good faith, as that
term is used in 11 U.S.C. Section 364(e).
V. It is in the best interests of Debtor, its estate, and creditors that
Debtor be authorized to incur secured indebtedness under this Order and to
execute, deliver, perform and consummate this Order and all documents and
instruments referred to herein or contemplated hereby.
<PAGE>
BASED ON THE FOREGOING FINDINGS, no further notice being required and the
Court being otherwise duly advised in the premises,
IT IS HEREBY ORDERED THAT:
[Postpetition Loan Provisions]
1. The Motion is granted. This Order is intended to supersede the Interim
Order; any "Postpetition Loans" as defined in the Interim Order shall be, for
all purposes, treated as Postpetition Loans under this Order.
2. Lender is authorized to make the Postpetition Loans on the terms
provided in this Order.
3. Debtor is authorized to receive financing from Lender on the terms of
this Order and to incur obligations to Lender up to a maximum of $21 million
from Lender at any one time outstanding in the form of the Postpetition Loans
("Maximum Amount") and grant liens and security interests in favor of Lender as
provided herein.
a. all Postpetition Loans will be made on a discretionary basis by
Lender;
b. The following borrowing base formula (the "Borrowing Base") shall
apply to the Postpetition Loans -
(i) up to 85% of "Eligible Accounts"; plus
(ii) the lesser of (A) 75% of Eligible Inventory which is raw
materials or finished goods plus 50% of Eligible Inventory which
is work in process, or (B) $7,000,000; plus
(iii)$6,000,000 (the "Overformula Allowance"). Overformula Allowance
loans will only be made if the same are unconditionally
guaranteed by Customer(s) on terms satisfactory to Lender, in its
discretion.
c. "Eligible Accounts" means bona fide accounts owing by a Customer which
are less than 90 days old (based on billing date), are subject to a
setoff limitation in a form acceptable to Lender in its discretion and
are otherwise acceptable to Lender.
d. "Eligible Inventory" means raw materials, work-in-process and finished
goods as the case may be, related to production of Component Parts for
a Customer which inventory is subject to a repurchase agreement in
form acceptable to Lender in its discretion.
e. The Postpetition Loans shall bear interest at a rate equal to the
"prime rate" (announced from time to time in the Wall Street Journal)
plus 1% per annum on the outstanding day-to-day principal balance.
From and after an Event of Default, the Postpetition Loans (other than
the Overformula Allowance) will accrue interest at 4% per annum above
the "prime rate". Interest on the Postpetition Loans shall be due and
payable on the first business day of each month, in arrears.
<PAGE>
f. In addition to the interim closing fee of $52,500 paid upon entry of
the Interim Order, Debtor shall pay Lender a final closing fee of
$52,500 upon entry of this Order (the "Closing Fees"). The Closing
Fees shall be deemed fully earned on the date the same are due.
g. Upon entry of this Order, Lender shall also be deemed to have earned a
facility fee of $52,500 (the "Facility Fee") which shall be payable
upon the earlier of (i) September 15, 1999, (ii) the occurrence of an
Event of Default, or (iii) Court approval of a sale of substantially
all of the Debtor's assets.
h. Debtor shall pay Lender a servicing fee of $3,500 per month in arrears
for each month or portion thereof that Lender is providing financing
under this Order (the "Servicing Fee" or together with the Closing
Fees, the Facility Fee, the "Loan Fees");
i. Debtor shall pay Lender, upon demand, all reasonable fees and
out-of-pocket costs and expenses incurred by Lender to monitoring,
administering or providing financing or enforcing its rights and
remedies hereunder, or in enforcing rights against any guarantors,
including without limitation, attorneys' fees and costs, appraisal
fees, recording fees, audit fees (at a rate of $650 per man/day plus
out-of-pocket expenses), expert witness fees, together with all
expenses and fees (including attorneys' fees and costs) incurred in
connection with any litigation arising under this Order or in
connection with or related to the financing being provided hereunder,
including in any litigation with or involving the Customers
(collectively, the "Lender Expenses").
j. If the Postpetition Loans are paid in full prior to September 15, 2000
(including, without limitation, if paid after an Event of Default but
excluding if paid because a sale of substantially all of Debtor's
assets is approved by the Court), Debtor shall pay the following Early
Termination fees if the payment occurs:
Prior to September 15, 1999 3% of the Maximum Amount
After September 15, 1999 but 1% of the Maximum Amount
other than on September 15, 2000
<PAGE>
4. Notwithstanding anything to the contrary in the Order:
A. Debtor shall borrow from Lender and escrow up to the "PTI
Debtor's Cap" to be used for the sole purpose of paying any allowed
fees and costs of professionals retained by the Debtor (the "Debtor
Professional Fee Escrow"); to the extent aggregate, allowed
professional fees and costs of Debtor's professionals ("Aggregate
Debtor's Allowed Fees") do not exceed $300,000, the PTI Debtor's Cap
shall be reduced by 50% of the difference between $300,000 and the
Aggregate Debtors' Allowed Fees and any excess in the Debtor
Professional Fee Escrow shall be paid to Lender to reduce the
Postpetition Indebtedness. Lender shall institute a $150,000 borrowing
base reserve upon entry of this Order to insure that the referenced
amount is available for borrowing by Debtor. For purposes of this
Order, the term "PTI Debtor's Cap" means $150,000 plus any unused
portion of the "Starboard Debtor's Cap" as that term is defined in the
Final Order Authorizing Postpetition Financing and Providing Adequate
Protection entered in the Starboard bankruptcy proceedings.
B. Debtor shall Borrow from Lender and escrow $32,500 to be used
for the sole purpose of paying any allowed fees and costs of
professionals retained by the Committee (the "Creditors' Professional
Fee Escrow"). Any portion of the Creditors' Professional Fee Escrow in
excess of allowed fees and costs for the Committee's professionals
shall be paid to Lender to reduce the Postpetition Indebtedness.
Lender shall institute a $32,500 borrowing base reserve upon entry of
this Order to insure that the referenced amount is available for
borrowing by Debtor. Notwithstanding the foregoing, no more than
$10,000 of the Creditors' Professional Fee Escrow shall be used to
investigate claims against the Prepetition Lenders and no more than
$10,000 of the Creditors' Professional Fee Escrow shall be used to
investigate claims against the Customers and/or Lender; in the event
no claims are prosecuted against Lender, Prepetition Lenders or the
Customers on behalf of the estate, the previous limitations on use of
the Creditors' Professional Fee Escrow shall not apply. None of the
Creditors' Professional Fee Escrow may be used to fund prosecution of
claims against or the seeking of relief against Lender, Prepetition
Lenders and/or the Customers.
Except for the Debtor Professional Fee Escrow and the Creditors' Professional
Fee Escrow and as provided below in paragraph 27 below, neither the Lender nor
Customers shall be responsible to fund any other professional fees or costs, and
Lender's collateral shall not be subject to surcharge for any other professional
fees or costs.
5. Absent a written extension from Lender (which extension shall be at
Lender's sole discretion), the Postpetition Loans shall be due on the earliest
of: (a) September 15, 2000; (b) the occurrence of an Event of Default (defined
below) and written notice to Debtor and the Committee; or (c) the closing date
of a sale pursuant to an order authorizing a sale of substantially all of the
assets of Debtor.
6. To secure Debtor's obligations on account of the Postpetition Loans,
including principal, interest, the Loan Fees and Lender Expenses (collectively,
"Postpetition Indebtedness"), Lender is hereby granted a perfected lien on and
security interest in all property of the estate of Debtor as that term is
defined in 11 U.S.C. Section 541(a), including:
<PAGE>
(a) Pursuant to 11 U.S.C. Section 364(c)(2), a lien and security
interest in any and all property of Debtor's estate arising, created or
acquired subsequent to the filing of the bankruptcy petition (except such
property which is proceeds of Prepetition Collateral), including, without
limitation, (i) all accounts, accounts receivable, contract rights and
general intangibles (including patents, trademarks, patent applications,
copyrights and other intellectual property of whatever description, royalty
payments such as under patent, trademark or other licensing arrangements,
proceeds of condemnation, awards, proceeds of judgments and proceeds of
fire and other property insurance such as business interruption insurance,
proceeds of all causes of action, goodwill and going concern value); (ii)
all inventory including, but not limited to, raw materials, work in process
or finished goods, materials used or usable in the manufacturing,
processing, packaging or shipping of inventory; (iii) all returned goods
and merchandise relating to accounts and accounts receivable; (iv) all
equipment including, but not limited to, machinery, fixtures, furniture and
all accessories, tools, fittings and parts therefore; (v) all documents,
instruments and chattel paper; (vi) all fixtures; (vii) all books and
records of Debtor including books and records evidencing, securing or
relating to accounts and accounts receivable; (viii) all securities,
stocks, options, and warrants, whether certificated or uncertificated and
whether in bearer or registered form, (ix) all tax refunds arising from
taxes paid on or after the Petition Date; (x) all real estate or interests
in real estate; (xi) all amounts owing by the Customers or any of their
subsidiaries to any of Debtor or Debtor's estate; (xii) one-half of the net
proceeds (after fees and costs of litigation) from all causes of action
arising under Chapter 5 of the Bankruptcy Code (the other one-half being
included as part of the "Carve-Out"); (xiii) one-half of the net proceeds
(after fees and costs of litigation) of any transfer, security interest, or
lien that is avoided and preserved for the benefit of the estate of any of
Debtor under Chapter 5 of the Bankruptcy Code (the other one-half being
included as part of the "Carve-Out"); and (xiv) all products and proceeds
thereof arising, created or acquired subsequent to the filing of the
Chapter 11 Petition (collectively, the "Postpetition Collateral").
(b) Pursuant to 11 U.S.C. Section 364(c)(3), a lien and security
interest, junior in priority and right of payment only to the "Existing
Liens" (defined below), in any and all property of Debtor existing prior to
(or which is proceeds of property existing prior to) the filing of the
bankruptcy petition, including, but not limited to (i) all accounts,
accounts receivable, contract rights and general intangibles (including,
without limitation, patents, trademarks, patent applications, copyrights
and other intellectual property of whatever description, royalty payments
such as under patent, trademark or other licensing arrangements, proceeds
of condemnation awards, proceeds of judgments and proceeds of fire and
other property insurance such as business interruption insurance, proceeds
of all causes of action, goodwill and going concern value); (ii) subject to
paragraph 15 below, all inventory including, but not limited to, raw
materials, work in process or finished goods, materials used or usable in
the manufacturing, processing, packaging or shipping of inventory; (iii)
all returned goods and merchandise relating to accounts and accounts
receivable; (iv) all equipment including, but not limited to, machinery,
furniture, fixtures and all accessories, tools, fittings and parts
therefor; (v) all documents, instruments and chattel paper; (vi) all
fixtures; (vii) all books and records evidencing, securing or relating to
accounts, accounts receivable or general intangibles; (viii) all real
estate and rights in real estate owned by Debtor; (ix) all securities,
stocks, options, and warrants, whether certificated or uncertificated and
whether in bearer or registered form; (x) all real estate and interests in
real estate; (xi) all tax refunds arising from taxes paid before the
Petition Date; and (xii) all products and proceeds thereof (collectively
the "Prepetition Collateral" or together with the Postpetition Collateral,
the "Collateral"). For purposes of this Order, the term "Existing Liens"
means valid, enforceable, properly perfected, unavoidable prepetition liens
and security interests.
<PAGE>
7. Except for the Professional Fee Escrows provided for in paragraph 4, the
statutory fees of the United States Trustee as provided for in paragraph 27, and
the Carve-Out (the Carve-Out shall be held in a segregated trust account at
Schaefer & Weiner, P.C., for the benefit of prepetition unsecured creditors and
Committee professionals, however Customers, Lender and Prepetition Lenders shall
have no lien, security interest or charge on or administrative expense claim
against the Carve-Out), the security interests and liens granted to Lender by
this Order and the Postpetition Indebtedness shall have priority pursuant to 11
U.S.C. Section 364(c)(1) over any and all costs and expenses of administration
or other priority claims in these Chapter 11 cases or any subsequent Chapter 7
cases, including those described in 11 U.S.C. Sections 503(b) and 507(b), and
shall not be subordinated to any other security interest or lien granted under
11 U.S.C. Section 364 or ss. 105 or otherwise. No security agreements, mortgages
or financing statements shall be necessary to evidence or perfect the security
interests, liens and mortgages provided under this Order; provided, however,
that Debtor shall execute any documents reasonably requested at any time by
Lender to memorialize or evidence the liens, security interests and mortgages
granted by this Order. Lender shall have all the rights and remedies of a
secured creditor and mortgagee in connection with the security interests, liens
and mortgages granted by this Order, except to the extent that such rights and
remedies may be affected by the Bankruptcy Code.
8. The security interests and liens granted by this Order to Lender shall:
(a) to the extent any of the Prepetition Lenders or the PMSI Creditors
are determined to have a valid, enforceable, properly perfected,
unavoidable prepetition liens and security interests in the Prepetition
Collateral, be a lien and security interest in the Prepetition Collateral
junior in priority only to such liens and security interests pursuant to 11
U.S.C. Section 364(c)(3); and
(b) be a first priority lien and security interest in any of the
Collateral that is not otherwise subject to a lien under 11 U.S.C. Section
364(c)(2).
9. Debtor shall furnish to Lender (and the Customers, the Committee and
Prepetition Lenders, upon request):
(a) By the 15th day of each month, as of the last day of the preceding
month, aging and summary reports of accounts (the "Accounts") in such form
and detail as Lender may request.
(b) With each request for a Postpetition Loan but no less frequently
than the last business day of each week, borrowing base certificates (each,
a "Borrowing Base Certificate") as of the close of business of the
preceding day in a form acceptable to Lender.
<PAGE>
(c) A weekly listing of all inventories of Debtor ("Inventory"),
including raw material, work-in-process, and finished goods in such form
and detail as Lender may reasonably request.
(d) Within 5 business days of Lender's request, a physical inventory
report listing all of Debtor's Inventory, wherever located.
(e) Within 30 calendar days after the end of each of the first eleven
months of each fiscal year, a balance sheet of the Debtor as of the close
of each such month and of the comparable month in the preceding fiscal
year, and statements of income and surplus of the Debtor for each month and
for that part of the fiscal year ending with each such month and for the
corresponding period of the preceding fiscal year, all in reasonable detail
and certified as true and correct (subject to audit and normal year-end
adjustments) by the chief financial officer of the Debtor.
(f) Within 45 calendar days after the end of each quarter of each
fiscal year, a balance sheet of Debtor as of the closing of such quarter
and statements of income and surplus of Debtor for such quarter and for the
corresponding period of the preceding fiscal year, on cumulative basis, all
in reasonable detail and certified as true and correct (subject to audit
and normal year-end adjustments) by the chief financial officer of Debtor.
(g) Within 90 calendar days after the end of each fiscal year, pro
forma cash flow forecasts for the succeeding 12 month period.
(h) Within 60 calendar days after the end of each quarter of each
fiscal year, a letter of "covenant compliance" regarding Debtor's
obligations under this Order, delivered to Lender and prepared, in form and
substance acceptable to Lender, signed by an officer of Debtor.
(i) All other reports, documents and information that Lender may
reasonably request.
10. All postpetition accounts receivable shall be remitted to the blocked
account maintained by Lender. All proceeds of and collections on account of the
Collateral which are not proceeds of the Prepetition Collateral shall be paid to
Lender to reduce the Postpetition Loans. All cash, checks, or funds of any type
which come into the possession of the Prepetition Lenders or Debtor with respect
to the Postpetition Collateral (including payments of insurance proceeds and
proceeds of sales of Postpetition Collateral under 11 U.S.C. Section 363) must
be segregated and accounted for, held in trust for the benefit of Lender and
immediately forwarded to Lender or its designee not later than the next business
day. If there are any issues related to determining whether payments represent
Prepetition Collateral or Postpetition Collateral, Lender and the Prepetition
Lenders will work in good faith to reconcile such payments as soon as possible.
<PAGE>
11. The Postpetition Loans shall be subject to the following terms and
conditions:
A. For the purpose of calculating borrowing base availability for
Postpetition Loans, the receipt by Lender of any wire transfer or electronic
funds transfer of funds, check or other item of payment shall be applied
immediately to provisionally reduce the Obligations, but such receipt shall not
be considered a payment on account unless such wire transfer or electronic funds
transfer is of immediately available federal funds and is made to the
appropriate deposit account of Lender or unless and until such check or other
item of payment is honored when presented for payment. For the purpose of
calculating interest, the receipt by Lender of any wire transfer or electronic
funds transfer, check or other item of payment shall be deemed to have occurred
two (2) business days after the date Lender actually receives such item of
payment. In the event any check or other item of payment is not honored when
presented for payment, Debtor shall be deemed not to have made or received such
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer, electronic funds transfer, check or other item of payment received by
Lender after 1:00 p.m. Southfield time shall be deemed to have been received by
Lender as of the opening of business on the immediately following business day.
B. As an administrative convenience to Debtor to ensure the timely payment
of amounts owing by Debtor to Lender under this Order, Lender will advance for
the account of Debtor an amount each month sufficient to pay interest accrued on
the principal amount of the Postpetition Indebtedness during the immediately
preceding month and amounts from time to time sufficient to pay all Lender
Expenses owing by Debtor under this Order. All such advances will be treated as
Postpetition Loans.
C. Debtor shall maintain adequate fire and extended coverage and liability
insurance covering all of its present and future real and personal property,
including the Collateral, with Lender's loss payable and noncontributory
mortgagee clauses in Lender's favor, protecting Lender's interest, as such
interest may appear, together with such policies of business interruption
insurance and products liability insurance as Lender may reasonably request and
insurance in accordance with all applicable workers' compensation laws. Such
insurance must be in such form, with such companies, and in such amounts as is
acceptable to Lender, insuring against liability for damage to persons or
property, and must provide for thirty (30) days prior written notice to Lender
of cancellation or material alteration. Debtor must provide Lender with the
original policies of insurance for all such coverages or true copies of the
policies, simultaneously with the execution of this Agreement, showing that
Lender's interest has properly been endorsed on the applicable policy. Lender
may, in its sole discretion, on 30 days written notice to Debtor, require the
Debtor to obtain additional or different insurance coverages as Lender may
reasonably request.
D. Lender, through any of its officers, employees or agents, shall have the
right at any time or times during Debtor's usual business hours, or during the
usual business hours of any third party having control over any of Debtor's
records, to inspect such records in order to verify the amount or condition of,
or any other matter relating to, the Collateral or Debtor's financial condition.
Lender also shall have the right at any time or times during Lender's usual
business hours to inspect and examine inventory and the equipment and to check
and test the same as to quality, quantity, value and condition. If an Event of
Default has occurred or if Lender reasonably believes that an Event of Default
has occurred, Lender may conduct any of the inspections referenced in this
section at any time without regard to Debtor's or any third party's usual
business hours.
<PAGE>
12. In consideration of the credit enhancements being provided by the
Customers, the Debtor is authorized to execute and deliver the Access and
Security Agreement in the form attached to the Motion, and the Access and
Security Agreement (the "Access Agreement") are hereby authorized and approved
by the Court and made a part of this Order.
13. The Customers have incurred and will incur attorneys' and consultant's
fees, costs and charges in connection with the handling of all matters arising
in connection with Debtor's bankruptcy case (and any subsequent Chapter 11 or
Chapter 7 case of Debtor), including, without limitation, with respect to the
credit enhancements for the Postpetition Loans and this Order, and in any way
arising from or in connection with any action taken by the Customers to
maintain, advise, enforce or collect the obligations under this Order or any
other document or agreement arising from or relating to the relationship between
Debtor and the Customers. Debtor has agreed that the Customers may setoff up to
$20,000 a month against postpetition accounts receivable or any other
postpetition amounts due Debtor for reasonable attorneys' fees and costs,
incurred with respect to their respective relationships with Debtor; provided,
however, if the Customers' aggregate monthly setoff exceeds the stated amount,
any fees and costs in excess of the stated amount may be carried forward and
setoff in future months so long as aggregate setoffs for attorneys' fees in any
month exceeds the stated amount and all setoffs by the Customers shall be
subject to the setoff limitation agreements executed in favor of Lender.
[Adequate Protection Provisions]
14. Subject to the obligation to disgorge payments if and to the extent
their liens and security interests are not allowed or are invalidated, as
adequate protection of the Prepetition Lenders' interests, all proceeds of and
collections on account of prepetition accounts receivable shall be paid in the
form received to the Prepetition Lenders. All cash, checks, or funds of any type
which come into the possession of Lender or Debtor with respect to the
Prepetition Collateral (including payments made by Debtor for use of prepetition
inventory, insurance proceeds, and proceeds of sales of Prepetition Collateral
under 11 U.S.C. Section 363) must be segregated and accounted for, held in trust
for the benefit of the Prepetition Lenders and immediately forwarded to Comerica
Bank or its designee not later than the next business day. Debtor shall use its
best efforts to collect all Prepetition accounts consistent with its prepetition
practices. As an inducement to the Prepetition Lenders to consent to entry of
this Order and subject to the entry of this Order as a final order without
material modification that negatively impacts the Prepetition Lenders without
their consent, the Customers agree to pay before October 31, 1998, 85% of all
bona fide prepetition accounts due the debtor (net of ordinary course of
business setoffs for short shipments, defective product, non-conforming goods
and materials purchased by the Customers) without setoff or recoupment for
consequential or special damages, in full satisfaction of such accounts. Upon
payment by the Customers in accordance with the above, such prepetition accounts
shall be deemed fully satisfied. The Prepetition Lenders are authorized to apply
to their prepetition loans all payments called for by Paragraphs 14, 15, 16, 17
and 18 of this Order.
<PAGE>
15. Subject to the obligation to disgorge payments if and to the extent
their liens and security interests are not allowed or are invalidated, as
additional adequate protection of the Prepetition Lenders' interests to the
extent not already paid pursuant to the Interim Order, Lender shall advance for
Debtor's account and pay to the Prepetition Lenders for Debtor's prepetition
inventory which is usable in production for the Customers (the "Usable
Inventory"):
(a) for raw materials, eighty percent (80%) of Debtor's actual
invoice cost;
(b) for work in process, the pro-rated current Purchase Order price
for the Component Part in question based on a percentage of
completion as of the Petition Date; and
(c) for finished goods, the price called for by the underlying
Purchase Order.
Upon payment of the forgoing amounts to the Prepetition Lenders, such parties
shall have no further rights in or to, or claims against Debtor relating to, the
Usable Inventory and such inventory shall be deemed to be post-petition
inventory subject to Lender's first priority lien thereon. Without the consent
of the Prepetition Lenders, any prepetition inventory other than the Usable
Inventory shall be segregated by the Debtor and shall not used by the Debtor
pending further order of this Court.
16. As additional adequate protection of the Prepetition Lenders' interests
and in exchange for the Prepetition Lenders' agreement to forbear from enforcing
their rights against Debtor and its property under the Prepetition Loan
Documents and applicable law through the Standstill Period (defined below),
Debtor shall use the Postpetition Loans to pay to the Prepetition Lenders the
sum of $140,000 per 30/31 day period (on or before the 15th day of each month)
during the Standstill Period prorated for the final month of their forbearance
(the "Fixed Asset Adequate Protection Payments"). Except as provided in this
Order, the Prepetition Lenders shall not be entitled to or receive from Debtor,
and Debtor shall not pay, any interest or other payments to the Prepetition
Lenders as adequate protection of their interest in Prepetition Collateral. For
purposes of this Order, the term "Standstill Period" means the earlier of (i)
the term of Postpetition Loans, whether as stated or accelerated; (ii) the date
of a material default under this Order with respect to the adequate protection
due the Prepetition Lenders; or (iii) a material modification of this Order
which negatively impacts the Prepetition Lenders without their consent. The
Prepetition Lenders' rights after the Standstill Period shall be subject to the
"Right of Access" during the "Occupancy Period" as defined in the Access
Agreement.
17. In addition to the other adequate protection payments required to be
paid to the Prepetition Lenders under this Order, Debtor shall provide adequate
protection of the Prepetition Lenders' interest in the Prepetition Collateral as
follows (during the Standstill Period such obligations will be funded as part of
the Postpetition Loans; after the Standstill Period, neither the Lender nor the
Customers shall have an obligation to fund such expenses):
<PAGE>
(a) the payment of postpetition property taxes (real and personal)
accrued from and after the Petition Date;
(b) the payment of casualty insurance (accrued from and after the
Petition Date) on the Prepetition Collateral on the same terms and
conditions as such assets were insured prepetition;
(c) the payment of the costs of all ordinary and necessary repairs and
maintenance to be made to equipment (which is part of the Prepetition
Collateral) to maintain it in at least as good a condition as existed on
the Petition Date, ordinary wear and tear excepted, from and after the
Petition Date; or
(d) Debtor shall reimburse JPE, Inc. monthly for its fair share of
JPE, Inc.'s overhead expenses (not to exceed $45,000 per month based on the
current number of subsidiaries and based on aggregate corporate overhead
estimated at $225,000 per month, exclusive of stay bonuses contemplated to
be paid), exclusive of interest and professional fees related to the
restructuring of the Non-Debtor Subsidiaries. The Committee shall have the
right to raise any objections to the foregoing $45,000 amount or stay
bonuses contemplated to be paid on a prospective basis.
18. Subject to appropriate notice and hearing on the validation of the
liens and security interests of the Prepetition Lenders in the Prepetition
Collateral (if sale(s) occur prior to such validation, proceeds will be paid to
the Prepetition Lenders as adequate protection subject to disgorgement if the
liens are invalidated) and only upon this Order becoming a final order (without
material modification that negatively impacts the Prepetition Lenders without
their consent), proceeds of Prepetition Collateral other than accounts
receivable, inventory, cash proceeds of general intangibles collected in the
ordinary course of business and any assets subject to valid, perfected purchase
money security interests, shall be applied as follows:
First, $8,410,000 million minus 50% of all Fixed Asset Adequate
Protection Payments (actually received by the Prepetition Lenders)
minus the "Fee Surcharge" (defined below) will be paid to the
Prepetition Lenders;
Second, the balance, if any, up to the amount necessary to pay all
Postpetition Indebtedness in full (after application of the proceeds
of all Postpetition Collateral) will be paid to Lender;
Third, the balance, if any, up to the amount of the Fee Surcharge will
be paid to the Prepetition Lenders.
Fourth, the balance, if any (the "Residual Balance"), to the
Prepetition Lenders; provided, however, the Prepetition Lenders agree
to allow the lesser of (i) 20% of the Residual Balance or (ii) the
aggregate amount of all allowed unsecured and administrative expense
claims, to be retained by the estate if and only if within 90 days of
the date of this Order, a final order is entered validating the liens
and security interests of the Prepetition Lenders and waiving any
claims the estate or its creditors may have against the Prepetition
Lenders.
<PAGE>
Notwithstanding the above, if the assets of Debtor are disposed of in a
piece-meal liquidation, proceeds of the sale of general intangibles in excess of
$170,000 shall be paid to the Prepetition Lenders without regard to the above
formula.
19. A. The Prepetition Lenders consent to a surcharge under 11 U.S.C.
Section 506(c) against equipment and real estate which is part of Prepetition
Collateral (the "Fee Surcharge") in an amount not to exceed (a) the lesser of
(i) the PTI Debtors' Cap or (ii) 50% of the allowed fees and costs of
professionals retained by the Debtor, plus (b) up to the lesser of 50% of
allowed professional fees and costs for the Committee's professionals or
$32,500. No portion of the Fee Surcharge shall be used to pay professional fees
or costs incurred in investigating or prosecuting any claims against the
Prepetition Lenders, Customers and/or Lenders. Except and only to the extent of
the Fee Surcharge, Prepetition Lenders and the collateral securing the
Prepetition Lenders' loans shall be exempt from and not be subject to any
surcharges, excises, liens or charges of any nature or type under 11
U.S.C.Section 364, 11 U.S.C. Section 506(c), 11 U.S.C. Section 510 or otherwise
in this Chapter 11 proceeding or in any subsequent Chapter 7 proceeding,
including expenses of administration or liquidation. Further, Prepetition
Lenders do not consent to a surcharge by a subsequently appointed trustee under
11 U.S.C. Section 506(c). Except as provided in this paragraph, the Prepetition
Lenders shall have no obligation to fund any other professional fees or
administrative expenses, whether by surcharge or otherwise. The Fee Surcharge,
the Debtor Professional Fee Escrow and the Creditor's Professional Fee Escrow
are intended to equal $365,000 plus the unused portion of the Debtor
Professional Fee Escrow in the Starboard proceedings.
B. Notwithstanding anything to the contrary in this Order, in the event
that Debtor and Committee agree in writing (in form and substance satisfactory
to the Prepetition Lenders) to (i) validate the Prepetition Lenders' liens (that
is, stipulate that those liens cover all of Debtor's prepetition property, have
first priority, are perfected and are valid, binding and unavoidable), and (ii)
a general release of all claims of any kind against the Prepetition Lenders, and
such agreement has been noticed to parties in interest and approved by the
Bankruptcy Court by a final and nonappealable order, then, after exhaustion of
the Creditors Professional Fee Escrow, the Prepetition Lenders would fund the
Prepetition Lender's $32,500 Fee Surcharge for the Committee's professionals out
of adequate protection payments as such fees and costs of the Committee's
professionals are incurred and allowed by Court order.
[General and Other Provisions]
20. This Order constitutes a modification of the automatic stay under
Section 362 of the Bankruptcy Code subject to the terms of this Order, to the
extent that such modification is required to permit the Customers, Lender or
Prepetition Lenders to take any actions permitted under this Order.
21. The following shall constitute events of default under this Order
("Events of Default"):
<PAGE>
(a) Debtor breaches any of the terms and conditions or covenants of
this Order;
(b) If any written representation or warranty made by Debtor after
entry of this Order or any certificate, report or financial statement
delivered to Lender by Debtor pursuant to this Order proves to have been
false in any material respect as of the time when made or given;
(c) Debtor needs more working capital financing than the Maximum
Amount;
(d) If Debtor's Chapter 11 case is converted to a case under Chapter 7
of the Bankruptcy Code;
(e) If a trustee is appointed in Debtor's Chapter 11 case;
(f) If any modification is made to this Order which affects Lender's
rights or remedies without the consent of Lender;
(g) If PTI defaults on its obligations to Lender or an Event of
Default occurs under any financing order related to financing provided by
Lender to PTI.
(h) If Debtor or any third parties obtain confirmation of a plan of
reorganization or liquidation on terms which are not acceptable to Lender
in its sole discretion; or
(i) Excluding the Existing Liens, if any third party is granted a lien
or security interest in any of the Collateral.
22. Upon the occurrence of an Event of Default, Lender shall have the right
to declare all Postpetition Indebtedness immediately due and payable. Further,
upon five (5) days written notice to Debtor, Customers, Prepetition Lenders and
the Committee after an Event of Default, Lender shall be permitted to exercise
all rights and remedies of a secured creditor and mortgagee without further
order of the Court; provided however, if after receipt of written notice of an
Event of Default from Lender, Debtor or the Committee believes an Event of
Default has not occurred, Debtor shall have the right to file a motion for a
determination thereof (a "Default Motion"), which motion will be heard on an
expedited basis on no less than two (2) business days' notice to Lender and
Prepetition Lenders. At any hearing on a Default Motion, the sole issue to be
litigated will be whether or not an Event of Default has occurred, and Debtor
shall bear the ultimate burden of proof. If the automatic stay is lifted as to
Lender, it shall be automatically lifted as to the Prepetition Lenders without
further order of the Court (subject to the "Right of Access" for the "Occupancy
Period" as defined in the Access Agreement).
23. Lender, the Customers, the Committee's professionals and their agents
and employees, shall be permitted reasonable access to Debtor's premises and
books and records at all or any times during working hours for the purpose of
monitoring Debtor's compliance with the terms and conditions of this Order, the
Purchase Orders and any other agreements with the Customers, and reasonable
access to Debtor's financial consultants, Conway, MacKenzie and Dunleavy,
provided that such access shall not unreasonably interfere with the operation of
Debtor's businesses.
<PAGE>
24. The Prepetition Lenders and their agents and employees shall be
permitted reasonable access to Debtor's premises and books and records at all or
any times during working hours for the purpose of monitoring Debtor's compliance
with the terms and conditions of this Order, the Prepetition Loan Documents and
any other agreements with the Prepetition Lenders, provided that such access
shall not unreasonably interfere with the operation of Debtor's businesses.
25. The provisions of this Order shall be binding upon and inure to the
benefit of Debtor, the Customers, Prepetition Lenders and Lender and their
respective successors and assigns (including any trustee hereafter appointed or
elected as a representative of Debtor's estate, whether in this bankruptcy case
or in any subsequent case under Chapter 7 of the Bankruptcy Code). The
priorities, liens, mortgages and security interests provided for under this
Order shall continue in this or any superseding cases under the Bankruptcy Code,
and such liens, mortgages and security interests shall maintain their priority
as provided by this Order until satisfied and discharged.
26. The Customers and the Lenders (and their agents and consultants) shall
not be deemed to be, for any purpose, the owner or operator of the Collateral or
Debtor's premises or a successor to any of Debtor or an employer of any of
Debtor's employees, and shall not be liable for any of Debtor's prepetition
obligations or indebtedness; provided, however, that in the event the Customers
exercise their Right of Access, the foregoing finding that the Customers are not
an operator of the Collateral or Debtor's premises or an employer of Debtor's
employees shall be limited to the period prior to the exercise of the Right of
Access, which limitation is without prejudice to the Customers' right to assert
that the Customers are not an operator of the Collateral or Debtor's premises or
a successor to Debtor or an employer of Debtor's employees notwithstanding the
exercise of the Right to Access.
27. The Lender and the collateral securing the Postpetition Indebtedness
shall be exempt from and not be subject to any surcharges, excises, liens or
charges of any nature or type pursuant to 11 U.S.C. Section 364, 11 U.S.C.
Section 506(c) and 11 U.S.C. Section 510 in this Chapter 11 proceeding or in any
subsequent Chapter 7 proceeding, including expenses of administration or
liquidation except as expressly provided below. Further, Lender does not consent
to a surcharge by a subsequently appointed trustee under 11 U.S.C. Section
506(c). Notwithstanding the foregoing, Lender consents to a surcharge of its
collateral (in which Lender has a first priority lien, mortgage or security
interest) under 11 U.S.C. Section 506(c) for U.S. Trustee quarterly fees during
periods Lender is making the Postpetition Loans to Debtor. Except as provided in
this paragraph, Lender shall have no obligation to fund any other professional
fees or administrative expenses, whether by surcharge or otherwise.
Notwithstanding the foregoing, or anything in this Order to the contrary, if by
virtue of acts or omissions of Lender, a subsequently appointed trustee is
required to administer the Collateral, nothing in this Order will preclude the
trustee from petitioning for a surcharge under 11 U.S.C. Section 506.
<PAGE>
28. In order to effectuate the terms of this Order, Lender, the Customers,
the Customers consultant, BBK, Ltd., and the Prepetition Lenders and their
financial consultant, if any, and the Committee and its professionals shall be
allowed to directly contact Debtor at any time. Any such contacts shall not be
construed to be violative of the automatic stay provided by 11 U.S.C. Section
362.
29. Debtor shall give notice to Lender, the Customers and the Prepetition
Lenders, through their respective counsel, of all motions, requests,
applications, proposed orders and orders entered relating to this Chapter 11
case and any proceedings in connection with said case. Further, Debtor shall
provide Lender, the Customers and the Prepetition Lenders, through their
respective counsel, with copies of all reports, statements, schedules, motions,
pleadings and other papers filed with or submitted by Debtor to this Court or
the U.S. Trustee.
30. Except as provided in paragraph 18, no modification, amendment or
appeal reversing any provision of this Order shall affect any other provision
thereof. Except as provided in paragraph 18, the protection of 11 U.S.C. Section
364(e) shall apply to the Postpetition Indebtedness and the security interest
liens and mortgages granted to Lender hereunder to the fullest extent possible.
31. No delay on the part of the Customers or Lender in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise of any right, power and privilege hereunder
preclude other or further exercise thereof, or the exercise of any other right,
power or privilege. The rights and remedies hereunder specified are cumulative
and not exclusive of any rights or remedies which the Customers, the Lender, or
Debtor may otherwise have.
32. If any or all of the provisions of this Order are hereafter modified,
vacated, stayed or terminated by subsequent order of this court or any other
court, such modification, vacation or stay shall not affect (i) the validity of
any debt under this Order to Lender that was incurred pursuant to this Order
prior to the effective date of such modification, vacation, stay or termination,
or (ii) the extent, validity, priority and enforceability of any lien or
security interest of Lender granted pursuant to this Order. Notwithstanding such
modification, vacation, stay or termination, any obligations of Debtor pursuant
to this Order arising prior to the effective date of such modification,
vacation, stay or termination shall be governed in all respects by the original
provisions of this Order. Lender shall be entitled to all of its rights,
privileges and benefits hereunder and thereunder including, without limitation,
the liens, security interests, priorities and collection rights granted herein
to or for the benefit of Lender with respect to all borrowings and advances made
pursuant to this Order.
33. Any finding of fact set forth in this Order that is a conclusion of law
shall be deemed to be a conclusion of law incorporated by reference in these
conclusions of law as though fully set forth herein.
34. This Order shall be entered as a final order under Federal Rules of
Bankruptcy Procedure.
/s/ Walter Shapero
---------------------------------
United States Bankruptcy Judge
<PAGE>
Approved for entry:
CARSON FISCHER, PLC HONIGMAN MILLER SCHWARTZ AND COHN
Attorneys for Debtor Attorneys for General Motors
Corporation
By: /s/ Robert A. Weisberg By: /s/ Robert B. Weiss
------------------------------- -------------------------------
Joseph M. Fischer (P13452) Robert B. Weiss (P28249)
Robert A. Weisberg (P26698) Judy B. Calton (P38733)
300 E. Maple Road 2290 First National Building
Birmingham, MI 48009-6317 Detroit, MI 48226
(248) 644-4840 (313) 465-7596
SCHAFER & WEINER, PC DICKINSON WRIGHT PLLC
Counsel to Unsecured Creditors' Counsel to Chrysler Corporation
Committee
By: /s/ Daniel J. Weiner By: /s/ James Plemmons
------------------------------- -------------------------------
Daniel J. Weiner (P32010) James Plemmons (P42892)
Max J. Newman (P51483) 500 Woodward Avenue, Suite 4000
2050 N. Woodward Ave. #100 Detroit, Michigan 48226
Bloomfield Hills, MI 48304 (313) 223-3500
(248) 540-3340
BODMAN LONGLEY & DAHLING LLP HONIGMAN MILLER SCHWARTZ AND COHN
Counsel for Comerica Bank as Agent Counsel for GMAC Business Credit LLC
for the Prepetition Lenders
By: /s/ Robert J. Diehl, Jr. By: /s/ Donald F. Baty, Jr.
------------------------------ -------------------------------
Robert J. Diehl, Jr. (P31264) Donald F. Baty, Jr. (P38087)
Ralph E. McDowell (P39235) Gail A. Eynon (P47964)
100 Renaissance Center, 34th Fl. 2290 First National Building
Detroit, Michigan 48243 Detroit, Michigan 48226-3583
(313) 393-7597 (313) 465-7314
UNITED STATES BANKRUPTCY COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
In re Chapter 11
STARBOARD INDUSTRIES, INC., Case No. 98-56099
Hon. Walter Shapero
Debtor.
- - ---------------------------------
FINAL ORDER AUTHORIZING POSTPETITION FINANCING
AND PROVIDING ADEQUATE PROTECTION
At a session of said Court held in the U.S.
Courthouse, City of Detroit, Michigan on
October 29, 1998
PRESENT: HONORABLE Walter Shapero
U.S. BANKRUPTCY JUDGE
This matter having come on to be considered upon Starboard Industries,
Inc.'s ("Debtor") Motion for Entry of Order Authorizing Postpetition Financing
and Providing Adequate Protection ("Motion"), after notice and hearing, the
Court having reviewed the Motion and having heard the statements of counsel in
support of the relief requested therein and any objections and any evidence
offered; and the Court being fully advised in the premises;
IT APPEARS AND THE COURT FINDS THAT:
A. Debtor filed a petition for relief under Chapter 11 of the Bankruptcy
Code on September 15, 1998 ("Petition Date").
B. On September 15, 1998, after an emergency hearing on the Motion, this
Court entered its Preliminary Interim Order Authorizing Postpetition Financing
and Providing Adequate Protection (the "Preliminary Order"). As part of the
Preliminary Order, this Court directed that the Motion, the Preliminary Order
and notice of the September 18, 1998 hearing be sent to all creditors and
interested parties entitled to notice under Federal Rule of Bankruptcy Procedure
4001; such notice was given by the Debtor.
C. On September 18, 1998, after notice and a hearing, this Court entered an
Interim Order Authorizing Postpetition Financing and Providing Adequate
Protection (the "Interim Order"). As part of the Interim Order, the Court
directed that notice of entry of the Interim Order and of a final hearing
thereon be sent to all creditors and interested parties entitled to notice under
Federal Rule of Bankruptcy Procedure 4001; such notice has been given by the
Debtor.
D. The Unsecured Creditors' Committee (the "Committee") filed an objection
to entry of the Interim Order as a final order. Subject to the terms of this
Order, the Committee has withdrawn its objection.
E. The Court has jurisdiction over this matter pursuant to 28 U.S.C.
Sections 157 and 1334. This is a core proceeding pursuant to 28 U.S.C. Section
157(b)(2) and venue is proper in this judicial district.
F. The procedure set forth in paragraph 34 of the Interim Order constituted
sufficient "notice and hearing" under 11 U.S.C Sections 102, 363, and 364,
Bankruptcy Rules 2002, 4001, 6004, 6007, and 9006 and all applicable local
rules.
G. Debtor is an automotive supplier manufacturing component parts for sale
to a number of customers, including without limitation, General Motors
Corporation ("GM") and Chrysler Corporation ("Chrysler" or together with GM, the
"Customers"). Pursuant to purchase orders and supply contracts with Debtor as
amended from time to time ("Purchase Orders"), Debtor is obligated to
manufacture component parts for the Customers which are utilized by the
Customers in the manufacture of motor vehicles ("Component Parts").
<PAGE>
H. Should Debtor fail to meet its obligations to timely deliver Component
Parts to the Customers as called for by the Purchase Orders, the Customers will
suffer significant damages and may have claims against Debtor for such damages.
I. Before the commencement of its bankruptcy case, Debtor, and its
affiliate, Plastic Trim, Inc. ("PTI" or together with Debtor, the "Debtors"),
together with its parent JPE, Inc. and its other affiliates including without
limitation, Industrial Automotive Fasteners, Inc. ("IAF"), Dayton Parts, Inc.
("DPI"), SAC Corporation ("SAC") and Allparts, Inc. ("API" or together with IAF,
DPI and SAC, the "Non-Debtor Subsidiaries") were parties to loan agreements with
Comerica Bank, as agent for itself and other lenders (the "Prepetition Lenders")
pursuant to the terms of the Third Amended and Restated JPE, Inc. Credit
Agreement dated as of December 31, 1996, as amended (the "Credit Agreement" or
together with all related loan and collateral documents, the "Prepetition Loan
Documents").
J. As part of the Prepetition Loan Documents, the Debtor granted the
Prepetition Lenders a security interest in: all of the tangible and intangible
personal property, real property and fixtures and assets of Debtor, whether now
owned or existing or hereafter acquired or arising and wheresoever located
including, without limitation (the "Prepetition Collateral"): (a) all accounts,
(b) all inventory, (c) all equipment, (d) all general intangibles, and (e) all
real estate owned by the Debtor. The Prepetition Lenders assert a first priority
prepetition security interest in the Prepetition Collateral. Nothing in this
Order is intended to validate or reaffirm any liens or security interests
granted to the Prepetition Lenders.
K. The Prepetition Lenders have not consented to use of cash collateral.
L. Even if Debtor could obtain approval for the use of cash collateral over
the Prepetition Lenders' objection, Debtor has determined that available cash
collateral would be insufficient to fund ongoing operations.
M. There are no funds on hand to meet payroll, purchase raw materials and
other necessary supplies to produce the Component Parts and, therefore, without
postpetition financing, Debtor would not be able to satisfy its obligations
under the Purchase Orders; thus, Debtor has requested that GMAC Business Credit,
LLC ("Lender") provide the postpetition financing set forth in this Order.
N. Caterpillar Financial Services, Inc., Ameritech Credit Corporation and
Mellon First United Leasing (collectively, the "PMSI Creditors") may assert
purchase money security interests against a variety of miscellaneous equipment
used by Debtor.
O. Other than the Prepetition Lenders and the PMSI Creditors, no entities
are known to assert an interest in property of the estate.
P. Debtor urgently requires financing and credit under 11 U.S.C. Section
364 to fund day to day operations, purchase inventory and additional capital
equipment and tooling necessary to maintain production for the Customers.
Debtor's inability to fund these activities in a timely manner may result in a
long term negative impact on the value of Debtor and its business, to the
prejudice and detriment of Debtor's creditors, customers, employees, and
stockholders.
<PAGE>
Q. Despite good faith efforts, Debtor is unable to obtain (i) unsecured
credit allowable under 11 U.S.C. Section 503(b)(1) as an administrative expense;
(ii) unsecured credit allowable under 11 U.S.C. Section 364(a) or (b); or (iii)
secured credit under 11 U.S.C. Section 364(c)(1) from any source sufficient to
enable the Debtor to continue its business operations. Debtor is also unable to
obtain a borrowing facility without (1) granting the claims of the proposed
lender priority over administrative expenses of the kind specified in 11 U.S.C.
Sections 503(b) and 507(b) in accordance with 11 U.S.C. Section 364(c)(1) and
(2) securing the postpetition obligations with liens on all assets of Debtor in
accordance with 11 U.S.C. Section 364(c)(2) and, to the limited extent provided
by Paragraph 18, Section 364(d).
R. To induce Lender to provide financing hereunder, and subject to the
terms of this Order, the Customers have agreed to provide Lender with the
following credit enhancements: (a) a limitation on setoffs against post-petition
accounts, (b) inventory purchase agreements, and (c) a guaranty of certain
out-of-formula loans to be made by Lender. In turn, to induce the Customers to
grant Lender the credit enhancements detailed below, Debtor has agreed to grant
Customers a "Right of Access" as detailed in paragraph 12 below.
S. Lender is willing to provide Debtor with postpetition financing pursuant
to the terms of this Order. In summary, the Lender's financing to Debtor under
this Order will consist of a credit facility as follows (the "Postpetition
Loans"): A revolving working capital line of credit in favor of Debtor up to a
maximum amount of $6.0 million based on eligible accounts and inventory and an
out-of-formula allowance in an amount of up to $2.0 million, together with a
tooling-financing facility of up to $800,000. The Postpetition Loans are in the
best interests of Debtor and all other parties in interest.
T. Debtor, the Customers, Lender and Prepetition Lenders have exchanged
fair consideration for the rights each obtained in the Order and each acted in
good faith in its negotiations over the terms of this Order.
U. The terms and conditions of this Order are fair and reasonable, were
negotiated by the parties at arms' length and entered into by the parties in
good faith, and are the best available to Debtor under the present market
conditions and financial circumstances of Debtor. Lender's extensions of credit
to Debtor under this Order are and will be made in good faith. Any credit and
loans extended to Debtor by Lender pursuant to this Order, whether interim or
final, shall be deemed to have been extended and made in good faith, as that
term is used in 11 U.S.C. Section 364(e).
V. It is in the best interests of Debtor, its estate, and creditors that
Debtor be authorized to incur secured indebtedness under this Order and to
execute, deliver, perform and consummate this Order and all documents and
instruments referred to herein or contemplated hereby.
<PAGE>
BASED ON THE FOREGOING FINDINGS, no further notice being required and the
Court being otherwise duly advised in the premises,
IT IS HEREBY ORDERED THAT:
[Postpetition Loan Provisions]
1. The Motion is granted. This Order is intended to supersede the Interim
Order; any "Postpetition Loans" as defined in the Interim Order shall be, for
all purposes, treated as Postpetition Loans under this Order.
2. Lender is authorized to make the Postpetition Loans on the terms
provided in this Order.
3. Debtor is authorized to receive financing from Lender on the terms of
this Order and to incur obligations to Lender up to a maximum of $6.0 million
from Lender at any one time outstanding in the form of the Postpetition Loans
("Maximum Amount") and grant liens and security interests in favor of Lender as
provided herein.
a. all Postpetition Loans will be made on a discretionary basis by
Lender;
b. The following borrowing base formula (the "Borrowing Base") shall
apply to the Postpetition Loans -
(i) up to 85% of "Eligible Accounts"; plus
(ii) the lesser of (A) 75% of Eligible Inventory which is raw
materials or finished goods plus 50% of Eligible Inventory which
is work in process, or (B) $1,000,000; plus
(iii)$2,000,000 (the "Overformula Allowance"). Overformula Allowance
loans will only be made if the same are unconditionally
guaranteed by Customer(s) on terms satisfactory to Lender, in its
discretion; plus (iv) up to the lesser of $700,000 or 80% of cost
for financing the acquisition of tooling (the "Tooling Loans").
c. "Eligible Accounts" means bona fide accounts owing by a Customer which
are less than 90 days old (based on billing date), are subject to a
setoff limitation in a form acceptable to Lender in its discretion and
are otherwise acceptable to Lender.
d. "Eligible Inventory" means raw materials, work-in-process and finished
goods as the case may be, related to production of Component Parts for
a Customer which inventory is subject to a repurchase agreement in
form acceptable to Lender in its discretion.
<PAGE>
e. The Postpetition Loans shall bear interest at a rate equal to the
"prime rate" (announced from time to time in the Wall Street Journal)
plus 1% per annum on the outstanding day-to-day principal balance.
From and after an Event of Default, the Postpetition Loans (other than
the Overformula Allowance) will accrue interest at 4% per annum above
the "prime rate". Interest on the Postpetition Loans shall be due and
payable on the first business day of each month, in arrears.
f. In addition to the interim closing fee of $15,000 paid upon entry of
the Interim Order, Debtor shall pay Lender a final closing fee of
$15,000 upon entry of this Order (the "Closing Fees"). The Closing
Fees shall be deemed fully earned on the date the same are due.
g. Upon entry of this Order, Lender shall also be deemed to have earned a
facility fee of $15,000 (the "Facility Fee") which shall be payable
upon the earlier of (i) September 15, 1999, (ii) the occurrence of an
Event of Default, and written notice to the Debtor and the Committee,
or (iii) Court approval of a sale of substantially all of the Debtor's
assets.
h. Debtor shall pay Lender a servicing fee of $1,000 per month in arrears
for each month or portion thereof that Lender is providing financing
under this Order (the "Servicing Fee" or together with the Closing
Fees, the Facility Fee, the "Loan Fees");
i. Debtor shall pay Lender, upon demand, all reasonable fees and
out-of-pocket costs and expenses incurred by Lender to monitoring,
administering or providing financing or enforcing its rights and
remedies hereunder, or in enforcing rights against any guarantors,
including without limitation, attorneys' fees and costs, appraisal
fees, recording fees, audit fees (at a rate of $650 per man/day plus
out-of-pocket expenses), expert witness fees, together with all
expenses and fees (including attorneys' fees and costs) incurred in
connection with any litigation arising under this Order or in
connection with or related to the financing being provided hereunder,
including in any litigation with or involving the Customers
(collectively, the "Lender Expenses").
j. If the Postpetition Loans are paid in full prior to September 15, 2000
(including, without limitation, if paid after an Event of Default but
excluding if paid because a sale of substantially all of Debtor's
assets is approved by the Court), Debtor shall pay the following Early
Termination fees if the payment occurs:
Prior to September 15, 1999 3% of the Maximum Amount
After September 15, 1999 but 1% of the Maximum Amount
other than on September 15, 2000
k. Tooling Loans shall be subject to documentation acceptable to Lender
in its discretion, establishing that the tooling in question will be
purchased by a customer upon completion and that the manufacturer of
the tooling will deliver the same on terms acceptable to Lender.
<PAGE>
4. Notwithstanding anything to the contrary in the Order:
A. Debtor shall borrow from Lender and escrow up to the "Starboard
Debtor's Cap" to be used for the sole purpose of paying any allowed fees
and costs of professionals retained by the Debtor (the "Debtor Professional
Fee Escrow"); to the extent aggregate, allowed professional fees and costs
of Debtor's professionals ("Aggregate Debtor's Allowed Fees") do not exceed
$300,000, the Starboard Debtor's Cap shall be reduced by 50% of the
difference between $300,000 and the Aggregate Debtor's Allowed Fees and any
excess in the Debtor Professional Fee Escrow shall be paid to Lender to
reduce the Postpetition Indebtedness. Lender shall institute a $150,000
borrowing base reserve upon entry of this Order to insure that the
referenced amount is available for borrowing by Debtor. For purposes of
this Order, the term "Starboard Debtor's Cap" means $150,000 plus any
unused portion of the "PTI Debtor's Cap" as that term is defined in the
Final Order Authorizing Postpetition Financing and Providing Adequate
Protection entered in the PTI bankruptcy proceedings.
B. Debtor shall borrow from Lender and escrow $32,500 to be used for
the sole purpose of paying any allowed fees and costs of professionals
retained by the Committee (the "Creditors' Professional Fee Escrow"). Any
portion of the Creditors' Professional Fee Escrow in excess of allowed fees
and costs for the Committee's professionals shall be paid to Lender to
reduce the Postpetition Indebtedness. Lender shall institute a $32,500
borrowing base reserve upon entry of this Order to insure that the
referenced amount is available for borrowing by Debtor. Notwithstanding the
foregoing, no more than $10,000 of the Creditors' Professional Fee Escrow
shall be used to investigate claims against the Prepetition Lenders and no
more than $10,000 of the Creditors' Professional Fee Escrow shall be used
to investigate claims against the Customers and/or Lender; in the event no
claims are prosecuted against Lender, Prepetition Lenders or the Customers
on behalf of estate, the previous limitations on use of the Creditors'
Professional Fee Escrow shall not apply. None of the Creditors'
Professional Fee Escrow may be used to fund prosecution of claims against
or the seeking of relief against Lender, Prepetition Lenders and/or the
Customers.
Except for the Debtor Professional Fee Escrow and the Creditors' Professional
Fee Escrow and as provided below in paragraph 27 below, neither the Lender nor
Customers shall be responsible to fund any other professional fees or costs, and
Lender's collateral shall not be subject to surcharge for any other professional
fees or costs.
5. Absent a written extension from Lender (which extension shall be at
Lender's sole discretion), the Postpetition Loans shall be due on the earliest
of: (a) September 15, 2000; (b) the occurrence of an Event of Default (defined
below) and written notice to Debtor and the Committee; or (c) the closing date
of a sale pursuant to an order authorizing a sale of substantially all of the
assets of Debtor.
6. To secure Debtor's obligations on account of the Postpetition Loans,
including principal, interest, the Loan Fees and Lender Expenses (collectively,
"Postpetition Indebtedness"), Lender is hereby granted a perfected lien on and
security interest in all property of the estate of Debtor as that term is
defined in 11 U.S.C. Section 541(a), including:
<PAGE>
(a) Pursuant to 11 U.S.C. Section 364(c)(2), a lien and security
interest in any and all property of Debtor's estate arising, created or
acquired subsequent to the filing of the bankruptcy petition (except such
property which is proceeds of Prepetition Collateral), including, without
limitation, (i) all accounts, accounts receivable, contract rights and
general intangibles (including patents, trademarks, patent applications,
copyrights and other intellectual property of whatever description, royalty
payments such as under patent, trademark or other licensing arrangements,
proceeds of condemnation, awards, proceeds of judgments and proceeds of
fire and other property insurance such as business interruption insurance,
proceeds of all causes of action, goodwill and going concern value); (ii)
all inventory including, but not limited to, raw materials, work in process
or finished goods, materials used or usable in the manufacturing,
processing, packaging or shipping of inventory; (iii) all returned goods
and merchandise relating to accounts and accounts receivable; (iv) all
equipment including, but not limited to, machinery, fixtures, furniture and
all accessories, tools, fittings and parts therefore; (v) all documents,
instruments and chattel paper; (vi) all fixtures; (vii) all books and
records of Debtor including books and records evidencing, securing or
relating to accounts and accounts receivable; (viii) all securities,
stocks, options, and warrants, whether certificated or uncertificated and
whether in bearer or registered form, (ix) all tax refunds arising from
taxes paid on or after the Petition Date; (x) all real estate or interests
in real estate; (xi) all amounts owing by the Customers or any of their
subsidiaries to any of Debtor or Debtor's estate; (xii) one-half of the net
proceeds (after fees and costs of litigation) from all causes of action
arising under Chapter 5 of the Bankruptcy Code (the other one-half being
included as part of the "Carve-Out"); (xiii) one-half of the net proceeds
(after fees and costs of litigation) of any transfer, security interest, or
lien that is avoided and preserved for the benefit of the estate of the
Debtor under Chapter 5 of the Bankruptcy Code (the other one-half being
included as part of the "Carve Out"); and (xiv) all products and proceeds
thereof arising, created or acquired subsequent to the filing of the
Chapter 11 Petition (collectively, the "Postpetition Collateral").
(b) Pursuant to 11 U.S.C. Section 364(c)(3), a lien and security
interest, junior in priority and right of payment only to the "Existing
Liens" (defined below), in any and all property of Debtor existing prior to
(or which is proceeds of property existing prior to) the filing of the
bankruptcy petition, including, but not limited to (i) all accounts,
accounts receivable, contract rights and general intangibles (including,
without limitation, patents, trademarks, patent applications, copyrights
and other intellectual property of whatever description, royalty payments
such as under patent, trademark or other licensing arrangements, proceeds
of condemnation awards, proceeds of judgments and proceeds of fire and
other property insurance such as business interruption insurance, proceeds
of all causes of action, goodwill and going concern value); (ii) subject to
paragraph 15 below, all inventory including, but not limited to, raw
materials, work in process or finished goods, materials used or usable in
the manufacturing, processing, packaging or shipping of inventory; (iii)
all returned goods and merchandise relating to accounts and accounts
receivable; (iv) all equipment including, but not limited to, machinery,
furniture, fixtures and all accessories, tools, fittings and parts
therefor; (v) all documents, instruments and chattel paper; (vi) all
fixtures; (vii) all books and records evidencing, securing or relating to
accounts, accounts receivable or general intangibles; (viii) all real
estate and rights in real estate owned by Debtor; (ix) all securities,
stocks, options, and warrants, whether certificated or uncertificated and
whether in bearer or registered form; (x) all real estate and interests in
real estate; (xi) all tax refunds arising from taxes paid before the
Petition Date; and (xii) all products and proceeds thereof (collectively
the "Prepetition Collateral" or together with the Postpetition Collateral,
the "Collateral"). For purposes of this Order, the term "Existing Liens"
means valid, enforceable, properly perfected, unavoidable prepetition liens
and security interests.
<PAGE>
7. Except for the Professional Fee Escrows provided for in paragraph 4, the
statutory fees of the United States Trustee as provided for in paragraph 27, and
the Carve-Out (the Carve-Out shall be held in a segregated trust account at
Butzel Long for the benefit of prepetition unsecured creditors and Committee
professionals, however Customers, Lender and Prepetition Lenders shall have no
lien, security interest or charge on or administrative expense claim against the
Carve-Out), the security interests and liens granted to Lender by this Order and
the Postpetition Indebtedness shall have priority pursuant to 11 U.S.C. Section
364(c)(1) over any and all costs and expenses of administration or other
priority claims in these Chapter 11 cases or any subsequent Chapter 7 cases,
including those described in 11 U.S.C. Sections 503(b) and 507(b), and shall not
be subordinated to any other security interest or lien granted under 11 U.S.C.
Section 364 or Section 105 or otherwise. No security agreements, mortgages or
financing statements shall be necessary to evidence or perfect the security
interests, liens and mortgages provided under this Order; provided, however,
that Debtor shall execute any documents reasonably requested at any time by
Lender to memorialize or evidence the liens, security interests and mortgages
granted by this Order. Lender shall have all the rights and remedies of a
secured creditor and mortgagee in connection with the security interests, liens
and mortgages granted by this Order, except to the extent that such rights and
remedies may be affected by the Bankruptcy Code.
8. The security interests and liens granted by this Order to Lender shall:
(a) to the extent any of the Prepetition Lenders or the PMSI Creditors
are determined to have a valid, enforceable, properly perfected,
unavoidable prepetition liens and security interests in the Prepetition
Collateral, be a lien and security interest in the Prepetition Collateral
junior in priority only to such liens and security interests pursuant to 11
U.S.C. Section 364(c)(3); and
(b) be a first priority lien and security interest in any of the
Collateral that is not otherwise subject to a lien under 11 U.S.C. Section
364(c)(2).
9. Debtor shall furnish to Lender (and the Customers, the Committee, and
Prepetition Lenders, upon request):
(a) By the 15th day of each month, as of the last day of the preceding
month, aging and summary reports of accounts (the "Accounts") in such form
and detail as Lender may request.
(b) With each request for a Postpetition Loan but no less frequently
than the last business day of each week, borrowing base certificates (each,
a "Borrowing Base Certificate") as of the close of business of the
preceding day in a form acceptable to Lender.
(c) A weekly listing of all inventories of Debtor ("Inventory"),
including raw material, work-in-process, and finished goods in such form
and detail as Lender may reasonably request.
(d) Within 5 business days of Lender's request, a physical inventory
report listing all of Debtor's Inventory, wherever located.
<PAGE>
(e) Within 30 calendar days after the end of each of the first eleven
months of each fiscal year, a balance sheet of the Debtor as of the close
of each such month and of the comparable month in the preceding fiscal
year, and statements of income and surplus of the Debtor for each month and
for that part of the fiscal year ending with each such month and for the
corresponding period of the preceding fiscal year, all in reasonable detail
and certified as true and correct (subject to audit and normal year-end
adjustments) by the chief financial officer of the Debtor.
(f) Within 45 calendar days after the end of each quarter of each
fiscal year, a balance sheet of Debtor as of the closing of such quarter
and statements of income and surplus of Debtor for such quarter and for the
corresponding period of the preceding fiscal year, on cumulative basis, all
in reasonable detail and certified as true and correct (subject to audit
and normal year-end adjustments) by the chief financial officer of Debtor.
(g) Within 90 calendar days after the end of each fiscal year, pro
forma cash flow forecasts for the succeeding 12 month period.
(h) Within 60 calendar days after the end of each quarter of each
fiscal year, a letter of "covenant compliance" regarding Debtor's
obligations under this Order, delivered to Lender and prepared, in form and
substance acceptable to Lender, signed by an officer of Debtor.
(i) All other reports, documents and information that Lender may
reasonably request.
10. All postpetition accounts receivable shall be remitted to the blocked
account maintained by Lender. All proceeds of and collections on account of the
Collateral which are not proceeds of the Prepetition Collateral shall be paid to
Lender to reduce the Postpetition Loans. All cash, checks, or funds of any type
which come into the possession of the Prepetition Lenders or Debtor with respect
to the Postpetition Collateral (including payments of insurance proceeds and
proceeds of sales of Postpetition Collateral under 11 U.S.C. Section 363) must
be segregated and accounted for, held in trust for the benefit of Lender and
immediately forwarded to Lender or its designee not later than the next business
day. If there are any issues related to determining whether payments represent
Prepetition Collateral or Postpetition Collateral, Lender and the Prepetition
Lenders will work in good faith to reconcile such payments as soon as possible.
11. The Postpetition Loans shall be subject to the following terms and
conditions:
<PAGE>
A. For the purpose of calculating borrowing base availability for
Postpetition Loans, the receipt by Lender of any wire transfer or electronic
funds transfer of funds, check or other item of payment shall be applied
immediately to provisionally reduce the Obligations, but such receipt shall not
be considered a payment on account unless such wire transfer or electronic funds
transfer is of immediately available federal funds and is made to the
appropriate deposit account of Lender or unless and until such check or other
item of payment is honored when presented for payment. For the purpose of
calculating interest, the receipt by Lender of any wire transfer or electronic
funds transfer, check or other item of payment shall be deemed to have occurred
two (2) business days after the date Lender actually receives such item of
payment. In the event any check or other item of payment is not honored when
presented for payment, Debtor shall be deemed not to have made or received such
payment. Notwithstanding anything to the contrary contained herein, any wire
transfer, electronic funds transfer, check or other item of payment received by
Lender after 1:00 p.m. Southfield time shall be deemed to have been received by
Lender as of the opening of business on the immediately following business day.
B. As an administrative convenience to Debtor to ensure the timely payment
of amounts owing by Debtor to Lender under this Order, Lender will advance for
the account of Debtor an amount each month sufficient to pay interest accrued on
the principal amount of the Postpetition Indebtedness during the immediately
preceding month and amounts from time to time sufficient to pay all Lender
Expenses owing by Debtor under this Order. All such advances will be treated as
Postpetition Loans.
C. Debtor shall maintain adequate fire and extended coverage and liability
insurance covering all of its present and future real and personal property,
including the Collateral, with Lender's loss payable and noncontributory
mortgagee clauses in Lender's favor, protecting Lender's interest, as such
interest may appear, together with such policies of business interruption
insurance and products liability insurance as Lender may reasonably request and
insurance in accordance with all applicable workers' compensation laws. Such
insurance must be in such form, with such companies, and in such amounts as is
acceptable to Lender, insuring against liability for damage to persons or
property, and must provide for thirty (30) days prior written notice to Lender
of cancellation or material alteration. Debtor must provide Lender with the
original policies of insurance for all such coverages or true copies of the
policies, simultaneously with the execution of this Agreement, showing that
Lender's interest has properly been endorsed on the applicable policy. Lender
may, in its sole discretion, on 30 days written notice to Debtor, require the
Debtor to obtain additional or different insurance coverages as Lender may
reasonably request.
D. Lender, through any of its officers, employees or agents, shall have the
right at any time or times during Debtor's usual business hours, or during the
usual business hours of any third party having control over any of Debtor's
records, to inspect such records in order to verify the amount or condition of,
or any other matter relating to, the Collateral or Debtor's financial condition.
Lender also shall have the right at any time or times during Lender's usual
business hours to inspect and examine inventory and the equipment and to check
and test the same as to quality, quantity, value and condition. If an Event of
Default has occurred or if Lender reasonably believes that an Event of Default
has occurred, Lender may conduct any of the inspections referenced in this
section at any time without regard to Debtor's or any third party's usual
business hours.
<PAGE>
12. In consideration of the credit enhancements being provided by the
Customers, the Debtor is authorized to execute and deliver the Access and
Security Agreement in the form attached to the Motion, and the Access and
Security Agreement (the "Access Agreement") is hereby authorized and approved by
the Court and made a part of this Order.
13. The Customers have incurred and will incur attorneys' and consultant's
fees, costs and charges in connection with the handling of all matters arising
in connection with Debtor's bankruptcy case (and any subsequent Chapter 11 or
Chapter 7 case of Debtor), including, without limitation, with respect to the
credit enhancements for the Postpetition Loans and this Order, and in any way
arising from or in connection with any action taken by the Customers to
maintain, advise, enforce or collect the obligations under this Order or any
other document or agreement arising from or relating to the relationship between
Debtor and the Customers. Debtor has agreed that the Customers may setoff up to
$20,000 a month against postpetition accounts receivable or any other
postpetition amounts due Debtor for reasonable attorneys' fees and costs,
incurred with respect to their respective relationships with Debtor; provided,
however, if Customers' aggregate monthly setoff exceeds the stated amount, any
fees and costs in excess of the stated amount may be carried forward and setoff
in future months so long as aggregate setoffs for attorneys' fees in any month
exceeds the stated amount and all setoffs by the Customers shall be subject to
the setoff limitation agreements executed in favor of Lender.
[Adequate Protection Provisions]
14. Subject to the obligation to disgorge payments if and to the extent
their liens and security interests are not allowed or are invalidated, as
adequate protection of the Prepetition Lenders' interests, all proceeds of and
collections on account of prepetition accounts receivable shall be paid in the
form received to the Prepetition Lenders. All cash, checks, or funds of any type
which come into the possession of Lender or Debtor with respect to the
Prepetition Collateral (including payments made by Debtor for use of prepetition
inventory, insurance proceeds, and proceeds of sales of Prepetition Collateral
under 11 U.S.C. Section 363) must be segregated and accounted for, held in trust
for the benefit of the Prepetition Lenders and immediately forwarded to Comerica
Bank or its designee not later than the next business day. Debtor shall use its
best efforts to collect all Prepetition accounts consistent with its prepetition
practices. As an inducement to the Prepetition Lenders to consent to entry of
this Order and subject to entry of this Order as a final order without material
modification that negatively impacts the Prepetition Lenders without their
consent, the Customers agree to pay before October 31, 1998, 85% of all bona
fide prepetition accounts due the debtor (net of ordinary course of business
setoffs for short shipments, defective product, non-conforming goods and
materials purchased by the Customers) without setoff or recoupment for
consequential or special damages, in full satisfaction of such accounts. Upon
payment by the Customers in accordance with the above, such prepetition accounts
shall be deemed fully satisfied. The Prepetition Lenders are authorized to apply
to their prepetition loans all payments called for by Paragraphs 14, 15, 16, 17
and 18 of this Order.
<PAGE>
15. Subject to the obligation to disgorge payments if and to the extent
their liens and security interests are not allowed or are invalidated, as
additional adequate protection of the Prepetition Lenders' interests, to the
extent not already paid pursuant to the Interim Order, Lender shall advance for
Debtor's account and pay to the Prepetition Lenders for Debtor's prepetition
inventory which is usable in production for the Customers (the "Usable
Inventory"):
(a) for raw materials, eighty percent (80%) of Debtor's actual
invoice cost;
(b) for work in process, the pro-rated current Purchase Order price
for the Component Part in question based on a percentage of
completion as of the Petition Date; and
(c) for finished goods, the price called for by the underlying
Purchase Order.
Upon payment of the forgoing amounts to the Prepetition Lenders, such parties
shall have no further rights in or to, or claims against Debtor relating to, the
Usable Inventory and such inventory shall be deemed to be post-petition
inventory subject to Lender's first priority lien thereon. Without the consent
of the Prepetition Lenders, any prepetition inventory other than the Usable
Inventory shall be segregated by the Debtor and shall not used by the Debtor
pending further order of this Court.
16. As additional adequate protection of the Prepetition Lenders' interests
and in exchange for the Prepetition Lenders' agreement to forbear from enforcing
their rights against Debtor and its property under the Prepetition Loan
Documents and applicable law through the Standstill Period (defined below),
Debtor shall use the Postpetition Loans to pay to the Prepetition Lenders the
sum of $60,000 per 30/31 day period (on or before the 15th day of each month)
during the Standstill Period prorated for the final month of their forbearance
(the "Fixed Asset Adequate Protection Payments"). Except as provided in this
Order, the Prepetition Lenders shall not be entitled to or receive from Debtor,
and Debtor shall not pay, any interest or other payments to the Prepetition
Lenders as adequate protection of their interest in Prepetition Collateral. For
purposes of this Order, the term "Standstill Period" means the earlier of (i)
the term of Postpetition Loans, whether as stated or accelerated; (ii) the date
of a material default under this Order with respect to the adequate protection
due the Prepetition Lenders; or (iii) a material modification of this Order
which negatively impacts the Prepetition Lenders without their consent. The
Prepetition Lenders' rights after the Standstill Period shall be subject to the
"Right of Access" during the "Occupancy Period" as defined in the Access
Agreement.
<PAGE>
17. In addition to the other adequate protection payments required to be
paid to the Prepetition Lenders under this Order, Debtor shall provide adequate
protection of the Prepetition Lenders' interest in the Prepetition Collateral as
follows (during the Standstill Period such obligations will be funded as part of
the Postpetition Loans; after the Standstill Period, neither the Lender nor the
Customers shall have an obligation to fund such expenses):
(a) the payment of postpetition property taxes (real and personal)
accrued from and after the Petition Date;
(b) the payment of casualty insurance (accrued from and after the
Petition Date) on the Prepetition Collateral on the same terms and
conditions as such assets were insured prepetition;
(c) the payment of the costs of all ordinary and necessary repairs and
maintenance to be made to equipment (which is part of the Prepetition
Collateral) to maintain it in at least as good a condition as existed on
the Petition Date, ordinary wear and tear excepted, from and after the
Petition Date; or
(d) Debtor shall reimburse JPE, Inc. monthly for its fair share of
JPE, Inc.'s overhead expenses, (not to exceed $45,000 per month based on
the current number of subsidiaries and based on aggregate corporate
overhead estimated at $225,000 per month, exclusive of stay bonuses
contemplated to be paid), exclusive of interest and professional fees
related to the restructuring of the Non-Debtor Subsidiaries. The Committee
shall have the right to raise any objections to the foregoing $45,000
amount or stay bonuses contemplated to be paid on a prospective basis.
18. Subject to appropriate notice and hearing on the validation of the
liens and security interests of the Prepetition Lenders in the Prepetition
Collateral (if sale(s) occur prior to such validation, proceeds will be paid to
the Prepetition Lenders as adequate protection, subject to disgorgement if the
liens are not validated) and only upon this Order becoming a final order
(without material modification that negatively impacts the Prepetition Lenders
without their consent), proceeds of Prepetition Collateral other than accounts
receivable, inventory, cash proceeds of general intangibles collected in the
ordinary course of business and any assets subject to valid, perfected purchase
money security interests, shall be applied as follows:
<PAGE>
First, $3,590,000 million minus 50% of all Fixed Asset Adequate Protection
Payments (actually received by the Prepetition Lenders) minus the "Fee
Surcharge" (defined below) will be paid to the Prepetition Lenders;
Second, the balance, if any, up to the amount necessary to pay all
Postpetition Indebtedness in full (after application of the proceeds of all
Postpetition Collateral) will be paid to Lender;
Third, the balance, if any, up to the amount of the Fee Surcharge will be
paid to the Prepetition Lenders.
Fourth, the balance, if any (the "Residual Balance"), to the Prepetition
Lenders; provided, however, the Prepetition Lenders agree to allow the
lesser of (i) 20% of the Residual Balance or (ii) the aggregate amount of
all allowed unsecured and administrative expense claims, to be retained by
the estate if and only if within 90 days of the date of this Order, a final
order is entered validating the liens and security interests of the
Prepetition Lenders and waiving any claims the estate or its creditors may
have against the Prepetition Lenders.
Notwithstanding the above, if the assets of Debtor are disposed of in a
piece-meal liquidation, proceeds of the sale of general intangibles in excess of
$80,000 shall be paid to the Prepetition Lenders without regard to the above
formula.
19. A. The Prepetition Lenders consent to a surcharge under 11 U.S.C.
Section 506(c) against equipment and real estate which is part of Prepetition
Collateral (the "Fee Surcharge") in an amount not to exceed (a) the lesser of
(i) the Starboard Debtor's Cap or (ii) 50% of the allowed fees and costs of
professionals retained by the Debtor, plus (b) up to the lesser of 50% of the
allowed professional fees and costs for the Committee's professionals, or
$32,500. No portion of the Fee Surcharge shall be used to pay professional fees
or costs incurred in investigating or prosecuting any claims against Prepetition
Lenders, Customers and/or Lender. Except and only to the extent of the Fee
Surcharge, Prepetition Lenders and the collateral securing the Prepetition
Lenders' loans shall be exempt from and not be subject to any surcharges,
excises, liens or charges of any nature or type under 11 U.S.C.Section 364, 11
U.S.C. Section 506(c), 11 U.S.C. Section 510 or otherwise in this Chapter 11
proceeding or in any subsequent Chapter 7 proceeding, including expenses of
administration or liquidation. Further, Prepetition Lenders do not consent to a
surcharge by a subsequently appointed trustee under 11 U.S.C. Section 506(c).
Except as provided in this paragraph, the Prepetition Lenders shall have no
obligation to fund any other professional fees or administrative expenses,
whether by surcharge or otherwise. The Fee Surcharge, plus the Debtor's
Professional Fee Escrow and the Creditors' Professional Fee Escrow are intended
to equal $365,000 plus the unused portion of the Debtor Professional Fee Escrow
in the PTI proceedings.
B. Notwithstanding anything to the contrary in this Order, in the event
that Debtor and Committee agree in writing (in form and substance satisfactory
to the Prepetition Lenders) to (i) validate the Prepetition Lenders' liens (that
is, stipulate that those liens cover all of Debtor's prepetition property, have
first priority, are perfected and are valid, binding and unavoidable), and (ii)
a general release of all claims of any kind against the Prepetition Lenders, and
such agreement has been noticed to parties in interest and approved by the
Bankruptcy Court by a final and nonappealable order, then, after exhaustion of
the Creditors Professional Fee Escrow, the Prepetition Lenders would fund the
Prepetition Lender's $32,500 Fee Surcharge for the Committee's professionals out
of adequate protection payments as such fees and costs of the Committee's
professionals are incurred and allowed by Court order.
[General and Other Provisions]
<PAGE>
20. This Order constitutes a modification of the automatic stay under
Section 362 of the Bankruptcy Code subject to the terms of this Order, to the
extent that such modification is required to permit the Customers, Lender or
Prepetition Lenders to take any actions permitted under this Order.
21. The following shall constitute events of default under this Order
("Events of Default"):
(a) Debtor breaches any of the terms and conditions or covenants of
this Order;
(b) If any written representation or warranty made by Debtor after
entry of this Order or any certificate, report or financial statement
delivered to Lender by Debtor pursuant to this Order proves to have been
false in any material respect as of the time when made or given;
(c) Debtor needs more working capital financing than the Maximum
Amount;
(d) If Debtor's Chapter 11 case is converted to a case under Chapter 7
of the Bankruptcy Code;
(e) If a trustee is appointed in Debtor's Chapter 11 case;
(f) If any modification is made to this Order which affects Lender's
rights or remedies without the consent of Lender;
(g) If Starboard defaults on its obligations to Lender or an Event of
Default occurs under any financing order related to financing provided by
Lender to Starboard.
(h) If Debtor or any third parties obtain confirmation of a plan of
reorganization or liquidation on terms which are not acceptable to Lender
in its sole discretion; or
(i) Excluding the Existing Liens, if any third party is granted a lien
or security interest in any of the Collateral.
22. Upon the occurrence of an Event of Default, Lender shall have the right
to declare all Postpetition Indebtedness immediately due and payable. Further,
upon five (5) days written notice to Debtor, Customers, Prepetition Lenders and
the Committee after an Event of Default, Lender shall be permitted to exercise
all rights and remedies of a secured creditor and mortgagee without further
order of the Court; provided however, if after receipt of written notice of an
Event of Default from Lender, Debtor or the Committee believes an Event of
Default has not occurred, Debtor or Committee shall have the right to file a
motion for a determination thereof (a "Default Motion"), which motion will be
heard on an expedited basis on no less than two (2) business days' notice to
Lender and Prepetition Lenders. At any hearing on a Default Motion, the sole
issue to be litigated will be whether or not an Event of Default has occurred,
and Debtor shall bear the ultimate burden of proof. If the automatic stay is
lifted as to Lender, it shall be automatically lifted as to the Prepetition
Lenders without further order of the Court (subject to the "Right of Access" for
the "Occupancy Period" as defined in the Access Agreement).
<PAGE>
23. Lender, the Customers, the Committee's professionals and their agents
and employees, shall be permitted reasonable access to Debtor's premises and
books and records at all or any times during working hours for the purpose of
monitoring Debtor's compliance with the terms and conditions of this Order, the
Purchase Orders and any other agreements with the Customers and reasonable
access to Debtor's financial consultants, Conway, MacKenzie and Dunleavy,
provided that such access shall not unreasonably interfere with the operation of
Debtor's businesses.
24. The Prepetition Lenders and their agents and employees shall be
permitted reasonable access to Debtor's premises and books and records at all or
any times during working hours for the purpose of monitoring Debtor's compliance
with the terms and conditions of this Order, the Prepetition Loan Documents and
any other agreements with the Prepetition Lenders, provided that such access
shall not unreasonably interfere with the operation of Debtor's businesses.
25. The provisions of this Order shall be binding upon and inure to the
benefit of Debtor, the Customers, Prepetition Lenders and Lender and their
respective successors and assigns (including any trustee hereafter appointed or
elected as a representative of Debtor's estate, whether in this bankruptcy case
or in any subsequent case under Chapter 7 of the Bankruptcy Code). The
priorities, liens, mortgages and security interests provided for under this
Order shall continue in this or any superseding cases under the Bankruptcy Code,
and such liens, mortgages and security interests shall maintain their priority
as provided by this Order until satisfied and discharged.
26. The Customers and the Lenders (and their agents and consultants) shall
not be deemed to be, for any purpose, the owner or operator of the Collateral or
Debtor's premises or a successor to any of Debtor or an employer of any of
Debtor's employees, and shall not be liable for any of Debtor's prepetition
obligations or indebtedness; provided, however, that in the event the Customers
exercise their Right of Access, the foregoing finding that the Customers are not
an operator of the Collateral or Debtor's premises or an employer of Debtor's
employees shall be limited to the period prior to the exercise of the Right of
Access, which limitation is without prejudice to the Customers' right to assert
that the Customers are not an operator of the Collateral or Debtor's premises or
a successor to Debtor or an employer of Debtor's employees notwithstanding the
exercise of the Right to Access.
<PAGE>
27. The Lender and the collateral securing the Postpetition Indebtedness
shall be exempt from and not be subject to any surcharges, excises, liens or
charges of any nature or type pursuant to 11 U.S.C. Section 364, 11 U.S.C.
Section 506(c) and 11 U.S.C. Section 510 in this Chapter 11 proceeding or in any
subsequent Chapter 7 proceeding, including expenses of administration or
liquidation except as expressly provided below. Further, Lender does not consent
to a surcharge by a subsequently appointed trustee under 11 U.S.C. Section
506(c). Notwithstanding the foregoing, Lender consents to a surcharge of its
collateral (in which Lender has a first priority lien, mortgage or security
interest) under 11 U.S.C. Section 506(c) for U.S. Trustee quarterly fees during
periods Lender is making the Postpetition Loans to Debtor. Except as provided in
this paragraph, Lender shall have no obligation to fund any other professional
fees or administrative expenses, whether by surcharge or otherwise.
Notwithstanding the foregoing or anything to the contrary in this Order, if by
virtue of acts or omissions of Lender, a subsequently appointed trustee is
required to administer the collateral, nothing in this Order will preclude the
trustee from petitioning for a surcharge under 11 USC Section 506.
28. In order to effectuate the terms of this Order, Lender, the Customers,
the Customers' consultant, BBK, Ltd., the Prepetition Lenders and their
financial consultant, if any, and the Committee and its professionals shall be
allowed to directly contact Debtor at any time. Any such contacts shall not be
construed to be violative of the automatic stay provided by 11 U.S.C. Section
362.
29. Debtor shall give notice to Lender, the Customers and the Prepetition
Lenders, through their respective counsel, of all motions, requests,
applications, proposed orders and orders entered relating to this Chapter 11
case and any proceedings in connection with said case. Further, Debtor shall
provide Lender, the Customers and the Prepetition Lenders, through their
respective counsel, with copies of all reports, statements, schedules, motions,
pleadings and other papers filed with or submitted by Debtor to this Court or
the U.S. Trustee.
30. Except as provided in paragraph 18, no modification, amendment or
appeal reversing any provision of this Order shall affect any other provision
thereof. Except as provided in paragraph 18, the protection of 11 U.S.C. Section
364(e) shall apply to the Postpetition Indebtedness and the security interest
liens and mortgages granted to Lender hereunder to the fullest extent possible.
31. No delay on the part of the Customers or Lender in exercising any
right, power or privilege hereunder shall operate as a waiver thereof nor shall
any single or partial exercise of any right, power and privilege hereunder
preclude other or further exercise thereof, or the exercise of any other right,
power or privilege. The rights and remedies hereunder specified are cumulative
and not exclusive of any rights or remedies which the Customers, the Lender, or
Debtor may otherwise have.
<PAGE>
32. If any or all of the provisions of this Order are hereafter modified,
vacated, stayed or terminated by subsequent order of this court or any other
court, such modification, vacation or stay shall not affect (i) the validity of
any debt under this Order to Lender that was incurred pursuant to this Order
prior to the effective date of such modification, vacation, stay or termination,
or (ii) the extent, validity, priority and enforceability of any lien or
security interest of Lender granted pursuant to this Order. Notwithstanding such
modification, vacation, stay or termination, any obligations of Debtor pursuant
to this Order arising prior to the effective date of such modification,
vacation, stay or termination shall be governed in all respects by the original
provisions of this Order. Lender shall be entitled to all of its rights,
privileges and benefits hereunder and thereunder including, without limitation,
the liens, security interests, priorities and collection rights granted herein
to or for the benefit of Lender with respect to all borrowings and advances made
pursuant to this Order.
33. Any finding of fact set forth in this Order that is a conclusion of law
shall be deemed to be a conclusion of law incorporated by reference in these
conclusions of law as though fully set forth herein.
34. This Order shall be entered as a final Order under the Federal Rules of
Bankruptcy Procedure.
/s/ Walter Shapero
--------------------------------
United States Bankruptcy Judge
<PAGE>
Approved for entry:
CARSON FISCHER, PLC HONIGMAN MILLER SCHWARTZ AND COHN
Attorneys for Debtor Attorneys for General Motors
Corporation
By: /s/Robert A. Weisberg By: /s/ Robert B. Weiss
------------------------------- ----------------------------
Joseph M. Fischer (P13452 Robert B. Weiss (P28249)
Robert A. Weisberg (P26698) Judy B. Calton (P38733)
300 E. Maple Road 2290 First National Building
Birmingham, MI 48009-6317 Detroit, MI 48226
(248) 644-4840 (313) 465-7596
UNITED STATES TRUSTEE DICKINSON WRIGHT PLLC
Counsel to Chrysler Corporation
By: By: /s/ James Plemmons
------------------------------- ----------------------------
Tauras N. Ziedas (P34653) James Plemmons (P42892)
477 Michigan Ave., Ste.1760 500 Woodward Avenue, Suite 4000
Detroit, Michigan 48226 Detroit, Michigan 48226
(313) 226-7952 (313) 223-3500
BODMAN LONGLEY & DAHLING LLP HONIGMAN MILLER SCHWARTZ AND COHN
Counsel for Comerica Bank as Agent Counsel for GMAC Business Credit
for the Prepetition Lenders LLC
By: /s/ Robert J. Diehl, Jr. By: /s/ Donald F. Baty, Jr.
------------------------------- ------------------------------
Robert J. Diehl, Jr. (P31264) Donald F. Baty, Jr. (P38087)
Ralph E. McDowell (P39235) Gail A. Eynon (P47964)
100 Renaissance Center, 34th Fl. 2290 First National Building
Detroit, Michigan 48243 Detroit, Michigan 48226-3583
(313) 393-7597 (313) 465-7314
BUTZEL LONG
Counsel to Unsecured Creditors' Committee
By: /s/ Thomas B. Radom
-------------------------------
Thomas B. Radom (P24631)
Matthew E. Wilkins (P56697)
32270 Telegraph Road, #200
Birmingham, MI 48025-2457
(248) 258-1413
STAY BONUS AGREEMENT
THIS AGREEMENT, dated as of September 1, 1998, by and between JPE, Inc., a
Michigan corporation ("Corporation"), and Donna L. Bacon, presently residing at
3909 Delhi-Overlook Drive, Ann Arbor, Michigan ("Executive").
WITNESSETH:
WHEREAS, the Executive is presently employed by the Corporation as
President, General Counsel and Secretary; and
WHEREAS, the Board of Directors ("Board") recognizes that the Executive has
contributed significantly to the business of the Corporation; and
WHEREAS, the Board desires to retain the services of Executive and reward
her for the performance of her duties to the Corporation, without Executive
being influenced by uncertainties of her own situation and further able to
assess and advise the Board during the Corporation's financial restructuring;
and
WHEREAS, the Executive is willing to continue serving the Corporation on
the terms and conditions provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and obligations hereinafter set forth, the parties agree as follows:
1. Operation and Termination of Agreement. This Agreement shall be
effective immediately upon its execution by both parties. This Agreement shall
terminate upon the earlier of full payment being made hereunder pursuant to
Section 2, voluntary termination by Executive other than for Good Reason (as
defined in Section 2(g)), the termination of Executive's employment for Cause
(as defined in Section 1(b) and following the expiration of the applicable cure
periods), or the termination of the Executive's employment because of death.
For purposes of this Agreement:
(a) "Permanent Disability" shall mean that by reason of a physical or
mental disability or infirmity for a continuous period of six (6) months,
the Executive is unable to perform the duties of her position. The
determination of Permanent Disability shall be made by a medical board
certified physician mutually acceptable to the Corporation and the
Executive (or the Executive's legal representative, if one has been
appointed). The Executive agrees to submit to the Corporation such medical
evidence regarding such disability or infirmity as the Corporation may
reasonably request.
(b) "Termination For Cause" shall mean any termination of the employment of
the Executive for "Cause." For purposes of this Agreement, only the
following shall be deemed to constitute "Cause":
(i) the Executive's willful engaging in dishonest or fraudulent
actions or omissions resulting or intended to result directly or
indirectly in any demonstrable material financial or economic harm to
the Corporation, or
(ii) if there has been a breach of the Executive's fiduciary duty to
the Corporation resulting or intended to result directly or indirectly
in personal profit to the Executive;
provided that there shall have been delivered to the Executive at least ten
(10) days prior to the effective date of Termination for Cause a Notice of
Termination (as defined in Section 1(d)(iv)), specifying the particulars
thereof in detail. For purposes of subsection (A) or (B) above, no act or
failure to act on the Executive's part shall be considered "willful" unless
done or omitted to be done by her not in good faith and without reasonable
belief that her action or omission was in the best interests of the
Corporation.
If the Executive's employment shall be terminated by the Corporation for
Cause, the Executive shall have the right to contest such termination only
in accordance with the procedures set forth in Section 7.
<PAGE>
(c) "Termination Without Cause" shall mean any termination of the
employment of the Executive by the Corporation other than termination (A)
For Cause, (B) upon death, (C) upon voluntary retirement on or after age 65
or (D) because of Permanent Disability.
(d) Any termination of the Executive's employment by the Corporation or by
the Executive (other than upon death) shall be communicated by written
"Notice of Termination" to the other party hereto. "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision
relied upon in this Agreement and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated.
(e) The "Date of Termination" shall mean (A) if the Executive's employment
is terminated by her death, the date of her death, (B) if the Executive's
employment is terminated due to her Permanent Disability, the date that is
thirty (30) calendar days after Notice of Termination is given, (C) if the
Executive's employment is terminated pursuant to a Termination For Cause,
the date specified in the Notice of Termination, (D) if by terminated by
voluntary retirement on or after age 65, the date of retirement, and (E) if
termination by the Executive's employment is a Termination Without Cause,
the date provided by the Notice of Termination which, in the case of a
termination by the Corporation, shall not be less than thirty (30) calendar
days and, in the case of a termination by the Executive, shall not be less
than ten (10) calendar days nor more than sixty (60) calendar days,
respectively, after the date the Notice of Termination is given.
2. Stay Bonus.
(a) Executive shall be entitled to and shall receive a stay bonus ("Stay
Bonus") of Five Hundred Twenty-Five Thousand Dollars ($525,000.00), payable
as provided in subsection (b) below.
(b) Executive shall receive payment of the Stay Bonus upon the earlier to
occur of:
(1) The dates set forth in Section 2(c) below;
(2) The completion of a debt restructuring on behalf of the
Corporation:
(3) The emergence of the Corporation from a bankruptcy proceeding; and
(4) A Change in Control of the Corporation, as defined in Section
2(d).
(c) Payment Dates. Subject to prior payment as specified in Section
2(b)(2), (3), or (4), payments of the Stay Bonus shall be made in three
equal installments of One Hundred Seventy-Five Thousand Dollars
($175,000.00) on each of December 31, 1998, June 30, 1999 and January 1,
2000.
<PAGE>
(d) Change of Control.
(1) For the purpose of this Agreement, a Change of Control of the
Corporation ("Change of Control") shall be deemed to have occurred if
any of the following events shall have occurred:
(i) any Person (as defined below), other than John Psarouthakis,
is or becomes the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), directly or indirectly, of securities of the
Corporation representing 10% or more of either the then
outstanding shares of common stock of the Corporation or the
combined voting power of the Corporation's then outstanding
securities; or
(ii) a change in the membership of the Board as it existed in the
immediately preceding calendar year (the "Incumbent Board") such
that the directors of the Incumbent Board no longer constitute a
majority of the Board; provided that any individual becoming a
director in a subsequent year whose election, or nomination for
election, by the Company's shareholders was approved by a vote of
at least a majority of the directors then comprising the
Incumbent Board shall be, for purposes of this Agreement,
considered as though such individual were a member of the
Incumbent Board; or
(iii) the shareholders of the Corporation approve a plan of
complete liquidation or dissolution of the Corporation or there
is consummated an agreement for the sale or disposition by the
Corporation of all or substantially all of the Corporation's
assets.
(2) Person. For the purpose of this Agreement, "Person" shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and
used in Sections 13(d) and 14(d) thereof, except that such term shall
not include the Corporation or any of its subsidiaries.
(e) Acceleration of Payments. (i) In the event a transaction described in
Sections 2(b)(2), (3) or (4) occurs prior to the Executive's receipt of all
of the Stay Bonus provided for in Section 2(c) above, or (ii) if at any
time during the period of this Agreement the Executive's employment is
terminated on account of her Permanent Disability, or by the Executive for
Good Reason (as defined in 2(g) below), then the Corporation shall pay to
Executive, in one lump sum, the unpaid portion of the Stay Bonus promptly
upon the occurrence of any such event, but in no event more than fifteen
(15) days following the occurrence of any such event.
(f) Termination of Payments. Payments of the Stay Bonus shall terminate
only in the event (i) of Executive's death or (ii) Executive's employment
with the Corporation is terminated for "Cause" as provided in Section 1(b),
following the expiration of all appropriate cure periods.
<PAGE>
(g) Good Reason. For the purpose of this Section 2 of the Agreement, "Good
Reason" shall mean the occurrence (without the Executive's written consent)
of any one of the following events:
(i) either (1) a significant alteration, as reasonably determined by
the Executive, in the nature of the Executive's reporting
responsibilities, title other than "President," duties or offices as
in effect immediately prior to the Change of Control or Pending Change
of Control, provided, that during any Pending Change of Control,
Executive's duties and offices may be changed by the Corporation to
address the needs of the Corporation taking into consideration
Executive's capabilities and level of experience; or (2) any
diminution of Executive's Base Salary in effect on the date of this
Agreement;
(ii) the requirement by the Corporation that the Executive's principal
place of employment be relocated more than ten (10) miles from her
place of employment on the date of this Agreement;
(iii) either (1) the discontinuance of, or any amendment to, any
compensation plan which is adverse to the Executive and in which the
Executive participated on the date of this Agreement, including but
not limited to the Corporation's 1993 Stock Incentive Plan unless a
substantially equivalent substitute or alternative plan has been made
available to the Executive, or (2) the failure by the Corporation to
continue the Executive's participation therein (or in such substitute
or alternative plan(s)) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants, as existed
at the date of this Agreement; or
(iv) the discontinuance of any benefits enjoyed by the Executive under
any of the Corporation's pension, life insurance, medical, health and
accident, or disability plans in which the Executive was participating
at the date of this Agreement, the taking of any action by the
Corporation that would directly or indirectly materially reduce any of
such benefits enjoyed by the Executive at the date of this Agreement,
or the failure by the Corporation to provide the Executive with the
number of paid vacation days to which she is entitled on the basis of
years of service with the Corporation in accordance with the
Corporation's normal vacation policy in effect at the date of this
Agreement.
3. Successors; Binding Agreement.
(a) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation, by
agreement in form and substance satisfactory to the Executive, to expressly
assume and agree to perform this Agreement in the same manner and to the
same extent that the Corporation would be required to perform this
Agreement if no such succession had taken place. Failure of the Corporation
to obtain such agreement prior to a date that is on or before the date of
the Change of Control shall be a breach of this Agreement and shall entitle
the Executive to compensation from the Corporation in the same amount and
on the same terms as she would receive hereunder if she were to terminate
her employment for Good Reason, except that for purposes of implementing
the foregoing, the date on which such Change of Control becomes effective
shall be deemed the Date of Termination. As used in this Agreement,
"Corporation" shall mean the Corporation as previously defined and any
successor to its business and/or assets as aforesaid, which successor
executes and delivers the agreement provided for in this Section 3 or which
otherwise becomes bound by all the terms and provisions of this Agreement
by operation of law.
<PAGE>
(b) This Agreement and all rights of the Executive hereunder shall inure to
the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die after her
termination while any amounts would still be payable to her hereunder if
she had continued to live, all such amounts, unless otherwise provided
herein, shall be paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee or, if there be no
designee, to the Executive's estate.
4. Notices. Any notice required or permitted by this Agreement shall be in
writing, sent by registered or certified mail, return receipt requested, or by a
national overnight delivery service, addressed to the Board and the Corporation
at the Corporation's then principal office, or to the Executive at the address
set forth in the preamble, or to such other address or addresses as any party
hereto may from time to time specify in writing for the purpose in a notice
given to the other parties in compliance with this Section 4. Notices shall be
deemed given when received.
5. Indemnification and Insurance; Legal Expenses. The Corporation shall
indemnify and hold harmless the Executive (and her legal representatives or
other successors) if she is a party, or is threatened to be made a party to any
threatened, pending or completed action, suit, proceeding or claim, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that the Executive is or was
a director, officer or employee of the Corporation, against expenses (including
reasonable attorney's fees), costs, judgments, fines and other amounts paid in
settlement (if such settlement is approved by the Board of Directors) actually
and reasonably incurred by her in connection with such action, suit or
proceeding to the fullest extent permitted by law. The Corporation shall provide
the Executive (including her heirs, executors and administrators) with coverage
under a standard directors' and officer's liability insurance policy, which
shall be in an amount not less than the directors' and officers' insurance
available to the Executive on the date hereof.
6. Disputes.
(a) The administrator for purposes of this Agreement shall be the
Corporation ("Administrator"), whose address is 775 Technology Drive, Suite
200, Ann Arbor, MI 48108, and whose telephone number is (313) 662-2323. The
"Named Fiduciary" as defined in Section 402(a)(2) of ERISA, also shall be
the Corporation. The Corporation shall have the right to designate one or
more employees of the Corporation as the Administrator and the Named
Fiduciary at any time, and to change the address and telephone number of
the same. The Corporation shall give the Executive written notice of any
change in the Administrator and Named Fiduciary, or in the address or
telephone number of the same.
<PAGE>
(b) The Administrator shall make all determinations as to the right of any
person to receive benefits under the Agreement. Any denial by the
Administrator of a claim for benefits by the Executive ("the claimant")
shall be stated in writing by the Administrator and delivered or mailed to
the claimant within ten (10) days after receipt of the claim, unless
special circumstances require an extension of time for processing the
claim. If such an extension is required, written notice of the extension
shall be furnished to the claimant prior to the termination of the initial
ten (10) day period. In no event shall such extension exceed a period of
ten (10) days from the end of the initial ten (10) day period. Any notice
of denial shall set forth the specific reasons for the denial, specific
reference to pertinent provisions of this Agreement upon which the denial
is based, a description of any additional material or information necessary
for the claimant to perfect his claim, with an explanation of why such
material or information is necessary, and any explanation of claim review
procedures, written to the best of the Administrator's ability in a manner
that may be understood without legal or actuarial counsel.
(c) A claimant whose claim for benefits has been wholly or partially denied
by the Administrator may request on or before the tenth calendar day
following the date of such denial a review of the denial in a written
notice to the Administrator. The claimant shall be entitled to submit such
issues or comments in writing or otherwise, as she shall consider relevant
to a determination of the claim, and she may include a request for a
personal hearing before the Administrator. Prior to submitting her request,
the claimant shall be entitled to review such documents as the
Administrator shall agree are pertinent to the claim. The claimant may, at
all stages of review, including arbitration provided for in Section 6, be
represented by counsel of his choice, legal or otherwise, and the
reasonable fees and expenses of the counsel shall be borne by the
Corporation. All requests for review shall be promptly resolved. The
Administrator's decision with respect to any such review shall be set forth
in writing and shall be mailed to the claimant not later than ten (10) days
following receipt by the Administrator of the claimant's request for review
unless special circumstances, such as the need to hold a hearing, require
an extension of time for processing, in which case the Administrator's
decision shall be so mailed not later than twenty (20) days after receipt
of such request.
(d) A claimant who has followed the procedure in paragraphs (b) and (c) of
this section, but who has not obtained full relief on her claim for
benefits, may, within sixty (60) days following her receipt of the
Administrator's written decision on review, apply in writing to the
Administrator for binding arbitration of the claim before an arbitrator
mutually acceptable to both parties, the arbitration to be held in Ann
Arbor, Michigan, in accordance with the commercial arbitration rules of the
American Arbitration Association, as then in effect. If the parties are
unable to mutually agree upon an arbitrator, then the arbitration
proceedings shall be held before three (3) arbitrators, one (1) of whom
shall be designated by the Corporation, one (1) of whom shall be designated
by the claimant and the third of whom shall be designated mutually by the
first two (2) arbitrators in accordance with the commercial arbitration
rules referenced above. The sole authority of the arbitrator(s) shall be to
interpret and apply the provisions of this Agreement; not to change, add
to, or subtract from, any of its provisions. The arbitrator(s) shall have
the power to compel attendance of witnesses at the hearing. Any court
having jurisdiction may enter a judgment based upon the arbitration.
<PAGE>
7. No Mitigation. The Executive shall not be required to mitigate the
amount of any payments provided for by this Agreement by seeking employment or
otherwise, nor shall the amount of any payment or benefit provided in this
Agreement be reduced by any compensation or benefit earned by the Executive
after her termination.
8. No Set-Off. The Corporation's obligation to make any payments provided
for by this Agreement are absolute and unconditional and shall not be affected
by any circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense, claim of breach of contract or other right which the
Corporation may have against the Executive or others.
9. Nonalienation of Benefits. Except as may be contrary to applicable law,
no sale, transfer, alienation, assignment, pledge, collateralization or
attachment of any benefits under this Agreement shall be valid or recognized by
the Corporation.
10. ERISA. This Agreement is an unfunded compensation arrangement for a
member of a select group of the Corporation's management employees and any
applicable ERISA exemptions for a "top hat" arrangement shall be applicable to
this Agreement.
11. Reporting and Disclosure. The Corporation, from time to time, shall
provide government agencies with reports concerning this Agreement as may be
required by law, and the Corporation shall provide the Executive with such
disclosure concerning this Agreement as may be required by law or as the
Corporation may deem appropriate.
12. Effect on Prior Agreements and Existing Benefits Plans. This Agreement
contains the entire agreement of the parties relating to the subject matter
hereof, and except for that certain Indemnification Agreement between the
Corporation and Executive dated February 8, 1995, which shall remain in full
force and effect, supersedes any prior written or oral agreements or
understandings relating to the same subject matter including that certain
Executive Severance Agreement dated February 20, 1998, except that this
Agreement shall not affect or operate to reduce any benefit or compensation
inuring to the Executive of a type provided elsewhere including, but not limited
to, any pension benefits.
13. Modification and Waiver. No modification or amendment of this Agreement
shall be valid unless in writing and signed by or on behalf of the parties
hereto. A waiver of the breach of any term or condition of this Agreement shall
not be deemed to constitute a waiver of any subsequent breach of the same or any
other term or condition.
14. Severability. This Agreement is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be held invalid or unenforceable, such invalidity and unenforceability shall not
affect the remaining provisions hereof and the application of such provisions to
other persons or circumstances, all of which shall be enforced to the greatest
extent permitted by law.
<PAGE>
15. Withholding. The compensation provided to the Executive pursuant to
this Agreement shall be subject to any withholdings and deductions required by
any applicable income and employment federal, state and local tax laws. In the
event the Corporation fails to withhold such sums for any reason, it may require
the Executive to promptly remit to the Corporation sufficient cash to satisfy
applicable income and employment withholding taxes.
16. Payment Upon Death. Any amounts payable to the Executive hereunder
after the death of the Executive shall be paid to the Executive's estate or
legal representative.
17. Headings. The headings in this Agreement are inserted for convenience
of reference only and shall not be a part of or control or affect the meaning of
any provision hereof.
18. Late Payment of Benefits. If any amount required to be paid by the
Corporation to the Executive hereunder is not paid when due, the Corporation
shall pay such amount to the Executive together with interest at the prime rate
as announced from time to time by Comerica Bank (or its successor) plus two
percentage points, for the period from and after the tenth (10th) day following
the date on which payment was due to and including the date of payment.
19. Attorney Consultation. The Executive has had an opportunity to consult
with an attorney of her choosing prior to executing this Agreement.
20. Governing Law. To the extent not governed by Federal law, this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Michigan.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the day and year first above written.
JPE, INC.
By: /s/ John Psarouthakis
-----------------------------
Title: Chairman & CEO
EXECUTIVE
By: /s/ Donna L. Bacon
-----------------------------
STAY BONUS AGREEMENT
THIS AGREEMENT, dated as of September 21, 1998, by and between JPE, Inc., a
Michigan corporation ("Corporation"), and James J. Fahrner, presently residing
at 41445 Fawn Trail, Novi, Michigan ("Executive").
WITNESSETH:
WHEREAS, the Executive is presently employed by the Corporation as Chief
Operating Officer and Chief Financial Officer.
WHEREAS, the Board of Directors ("Board") recognizes that the Executive has
contributed significantly to the business of the Corporation; and
WHEREAS, the Board desires to retain the services of Executive and reward
him for the performance of him duties to the Corporation, without Executive
being influenced by uncertainties of his own situation and further able to
assess and advise the Board during the Corporation's financial restructuring;
and
WHEREAS, the Executive is willing to continue serving the Corporation on
the terms and conditions provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and obligations hereinafter set forth, the parties agree as follows:
1. Operation and Termination of Agreement. This Agreement shall be
effective immediately upon its execution by both parties. This Agreement shall
terminate upon the earlier of full payment being made hereunder pursuant to
Section 2, voluntary termination by Executive other than for Good Reason (as
defined in Section 2(g)), the termination of Executive's employment for Cause
(as defined in Section 1(b) and following the expiration of the applicable cure
periods), or the termination of the Executive's employment because of death.
For purposes of this Agreement:
(a) "Permanent Disability" shall mean that by reason of a physical or
mental disability or infirmity for a continuous period of six (6) months,
the Executive is unable to perform the duties of his position. The
determination of Permanent Disability shall be made by a medical board
certified physician mutually acceptable to the Corporation and the
Executive (or the Executive's legal representative, if one has been
appointed). The Executive agrees to submit to the Corporation such medical
evidence regarding such disability or infirmity as the Corporation may
reasonably request.
(b) "Termination For Cause" shall mean any termination of the employment of
the Executive for "Cause." For purposes of this Agreement, only the
following shall be deemed to constitute "Cause":
(i) the Executive's willful engaging in dishonest or fraudulent
actions or omissions resulting or intended to result directly or
indirectly in any demonstrable material financial or economic harm to
the Corporation, or
(ii) if there has been a breach of the Executive's fiduciary duty to
the Corporation resulting or intended to result directly or indirectly
in personal profit to the Executive;
provided that there shall have been delivered to the Executive at least ten
(10) days prior to the effective date of Termination for Cause a Notice of
Termination (as defined in Section 1(d)(iv)), specifying the particulars
thereof in detail. For purposes of subsection (A) or (B) above, no act or
failure to act on the Executive's part shall be considered "willful" unless
done or omitted to be done by him not in good faith and without reasonable
belief that his action or omission was in the best interests of the
Corporation.
If the Executive's employment shall be terminated by the Corporation for
Cause, the Executive shall have the right to contest such termination only
in accordance with the procedures set forth in Section 7.
<PAGE>
(c) "Termination Without Cause" shall mean any termination of the
employment of the Executive by the Corporation other than termination (A)
For Cause, (B) upon death, (C) upon voluntary retirement on or after age 65
or (D) because of Permanent Disability.
(d) Any termination of the Executive's employment by the Corporation or by
the Executive (other than upon death) shall be communicated by written
"Notice of Termination" to the other party hereto. "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision
relied upon in this Agreement and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated.
(e) The "Date of Termination" shall mean (A) if the Executive's employment
is terminated by his death, the date of his death, (B) if the Executive's
employment is terminated due to his Permanent Disability, the date that is
thirty (30) calendar days after Notice of Termination is given, (C) if the
Executive's employment is terminated pursuant to a Termination For Cause,
the date specified in the Notice of Termination, (D) if by terminated by
voluntary retirement on or after age 65, the date of retirement, and (E) if
termination by the Executive's employment is a Termination Without Cause,
the date provided by the Notice of Termination which, in the case of a
termination by the Corporation, shall not be less than thirty (30) calendar
days and, in the case of a termination by the Executive, shall not be less
than ten (10) calendar days nor more than sixty (60) calendar days,
respectively, after the date the Notice of Termination is given.
2. Stay Bonus.
(a) Executive shall be entitled to and shall receive a stay bonus ("Stay
Bonus") of Five Hundred Twenty-Five Thousand Dollars ($525,000.00), payable
as provided in subsection (b) below.
(b) Executive shall receive payment of the Stay Bonus upon the earlier to
occur of:
(1) The dates set forth in Section 2(c) below;
(2) The completion of a debt restructuring on behalf of the
Corporation:
(3) The emergence of the Corporation from a bankruptcy proceeding; and
(4) A Change in Control of the Corporation, as defined in Section
2(d).
(c) Payment Dates. Subject to prior payment as specified in Section
2(b)(2), (3), or (4), payments of the Stay Bonus shall be made in three
equal installments of One Hundred Seventy-Five Thousand Dollars
($175,000.00) on each of December 31, 1998, June 30, 1999 and January 1,
2000.
<PAGE>
(d) Change of Control.
(1) For the purpose of this Agreement, a Change of Control of the
Corporation ("Change of Control") shall be deemed to have occurred if
any of the following events shall have occurred:
(i) any Person (as defined below), other than John Psarouthakis,
is or becomes the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), directly or indirectly, of securities of the
Corporation representing 10% or more of either the then
outstanding shares of common stock of the Corporation or the
combined voting power of the Corporation's then outstanding
securities; or
(ii) a change in the membership of the Board as it existed in the
immediately preceding calendar year (the "Incumbent Board") such
that the directors of the Incumbent Board no longer constitute a
majority of the Board; provided that any individual becoming a
director in a subsequent year whose election, or nomination for
election, by the Company's shareholders was approved by a vote of
at least a majority of the directors then comprising the
Incumbent Board shall be, for purposes of this Agreement,
considered as though such individual were a member of the
Incumbent Board; or
(iii) the shareholders of the Corporation approve a plan of
complete liquidation or dissolution of the Corporation or there
is consummated an agreement for the sale or disposition by the
Corporation of all or substantially all of the Corporation's
assets.
(2) Person. For the purpose of this Agreement, "Person" shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and
used in Sections 13(d) and 14(d) thereof, except that such term shall
not include the Corporation or any of its subsidiaries.
(e) Acceleration of Payments. (i) In the event a transaction described in
Sections 2(b)(2), (3) or (4) occurs prior to the Executive's receipt of all
of the Stay Bonus provided for in Section 2(c) above, or (ii) if at any
time during the period of this Agreement the Executive's employment is
terminated on account of his Permanent Disability, or by the Executive for
Good Reason (as defined in 2(g) below), then the Corporation shall pay to
Executive, in one lump sum, the unpaid portion of the Stay Bonus promptly
upon the occurrence of any such event, but in no event more than fifteen
(15) days following the occurrence of any such event.
(f) Termination of Payments. Payments of the Stay Bonus shall terminate
only in the event (i) of Executive's death or (ii) Executive's employment
with the Corporation is terminated for "Cause" as provided in Section 1(b),
following the expiration of all appropriate cure periods.
<PAGE>
(g) Good Reason. For the purpose of this Section 2 of the Agreement, "Good
Reason" shall mean the occurrence (without the Executive's written consent)
of any one of the following events:
(i) either (1) a significant alteration, as reasonably determined by
the Executive, in the nature of the Executive's reporting
responsibilities, title other than "Chief Operating Officer and Chief
Financial Officer," duties or offices as in effect immediately prior
to the Change of Control or Pending Change of Control, provided, that
during any Pending Change of Control, Executive's duties and offices
may be changed by the Corporation to address the needs of the
Corporation taking into consideration Executive's capabilities and
level of experience; or (2) any diminution of Executive's Base Salary
in effect on the date of this Agreement;
(ii) the requirement by the Corporation that the Executive's principal
place of employment be relocated more than ten (10) miles from his
place of employment on the date of this Agreement;
(iii) either (1) the discontinuance of, or any amendment to, any
compensation plan which is adverse to the Executive and in which the
Executive participated on the date of this Agreement, including but
not limited to the Corporation's 1993 Stock Incentive Plan unless a
substantially equivalent substitute or alternative plan has been made
available to the Executive, or (2) the failure by the Corporation to
continue the Executive's participation therein (or in such substitute
or alternative plan(s)) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants, as existed
at the date of this Agreement; or
(iv) the discontinuance of any benefits enjoyed by the Executive under
any of the Corporation's pension, life insurance, medical, health and
accident, or disability plans in which the Executive was participating
at the date of this Agreement, the taking of any action by the
Corporation that would directly or indirectly materially reduce any of
such benefits enjoyed by the Executive at the date of this Agreement,
or the failure by the Corporation to provide the Executive with the
number of paid vacation days to which he is entitled on the basis of
years of service with the Corporation in accordance with the
Corporation's normal vacation policy in effect at the date of this
Agreement.
3. Successors; Binding Agreement.
(a) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation, by
agreement in form and substance satisfactory to the Executive, to expressly
assume and agree to perform this Agreement in the same manner and to the
same extent that the Corporation would be required to perform this
Agreement if no such succession had taken place. Failure of the Corporation
to obtain such agreement prior to a date that is on or before the date of
the Change of Control shall be a breach of this Agreement and shall entitle
the Executive to compensation from the Corporation in the same amount and
on the same terms as he would receive hereunder if he were to terminate his
employment for Good Reason, except that for purposes of implementing the
foregoing, the date on which such Change of Control becomes effective shall
be deemed the Date of Termination. As used in this Agreement, "Corporation"
shall mean the Corporation as previously defined and any successor to its
business and/or assets as aforesaid, which successor executes and delivers
the agreement provided for in this Section 3 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of
law.
<PAGE>
(b) This Agreement and all rights of the Executive hereunder shall inure to
the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If the Executive should die after his
termination while any amounts would still be payable to him hereunder if he
had continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee or, if there be no
designee, to the Executive's estate.
4. Notices. Any notice required or permitted by this Agreement shall be in
writing, sent by registered or certified mail, return receipt requested, or by a
national overnight delivery service, addressed to the Board and the Corporation
at the Corporation's then principal office, or to the Executive at the address
set forth in the preamble, or to such other address or addresses as any party
hereto may from time to time specify in writing for the purpose in a notice
given to the other parties in compliance with this Section 4. Notices shall be
deemed given when received.
5. Indemnification and Insurance; Legal Expenses. The Corporation shall
indemnify and hold harmless the Executive (and his legal representatives or
other successors) if he is a party, or is threatened to be made a party to any
threatened, pending or completed action, suit, proceeding or claim, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that the Executive is or was
a director, officer or employee of the Corporation, against expenses (including
reasonable attorney's fees), costs, judgments, fines and other amounts paid in
settlement (if such settlement is approved by the Board of Directors) actually
and reasonably incurred by him in connection with such action, suit or
proceeding to the fullest extent permitted by law. The Corporation shall provide
the Executive (including his heirs, executors and administrators) with coverage
under a standard directors' and officer's liability insurance policy, which
shall be in an amount not less than the directors' and officers' insurance
available to the Executive on the date hereof.
6. Disputes.
(a) The administrator for purposes of this Agreement shall be the
Corporation ("Administrator"), whose address is 775 Technology Drive, Suite
200, Ann Arbor, MI 48108, and whose telephone number is (313) 662-2323. The
"Named Fiduciary" as defined in Section 402(a)(2) of ERISA, also shall be
the Corporation. The Corporation shall have the right to designate one or
more employees of the Corporation as the Administrator and the Named
Fiduciary at any time, and to change the address and telephone number of
the same. The Corporation shall give the Executive written notice of any
change in the Administrator and Named Fiduciary, or in the address or
telephone number of the same.
(b) The Administrator shall make all determinations as to the right of any
person to receive benefits under the Agreement. Any denial by the
Administrator of a claim for benefits by the Executive ("the claimant")
shall be stated in writing by the Administrator and delivered or mailed to
the claimant within ten (10) days after receipt of the claim, unless
special circumstances require an extension of time for processing the
claim. If such an extension is required, written notice of the extension
shall be furnished to the claimant prior to the termination of the initial
ten (10) day period. In no event shall such extension exceed a period of
ten (10) days from the end of the initial ten (10) day period. Any notice
of denial shall set forth the specific reasons for the denial, specific
reference to pertinent provisions of this Agreement upon which the denial
is based, a description of any additional material or information necessary
for the claimant to perfect his claim, with an explanation of why such
material or information is necessary, and any explanation of claim review
procedures, written to the best of the Administrator's ability in a manner
that may be understood without legal or actuarial counsel.
<PAGE>
(c) A claimant whose claim for benefits has been wholly or partially denied
by the Administrator may request on or before the tenth calendar day
following the date of such denial a review of the denial in a written
notice to the Administrator. The claimant shall be entitled to submit such
issues or comments in writing or otherwise, as he shall consider relevant
to a determination of the claim, and he may include a request for a
personal hearing before the Administrator. Prior to submitting his request,
the claimant shall be entitled to review such documents as the
Administrator shall agree are pertinent to the claim. The claimant may, at
all stages of review, including arbitration provided for in Section 6, be
represented by counsel of his choice, legal or otherwise, and the
reasonable fees and expenses of the counsel shall be borne by the
Corporation. All requests for review shall be promptly resolved. The
Administrator's decision with respect to any such review shall be set forth
in writing and shall be mailed to the claimant not later than ten (10) days
following receipt by the Administrator of the claimant's request for review
unless special circumstances, such as the need to hold a hearing, require
an extension of time for processing, in which case the Administrator's
decision shall be so mailed not later than twenty (20) days after receipt
of such request.
(d) A claimant who has followed the procedure in paragraphs (b) and (c) of
this section, but who has not obtained full relief on his claim for
benefits, may, within sixty (60) days following his receipt of the
Administrator's written decision on review, apply in writing to the
Administrator for binding arbitration of the claim before an arbitrator
mutually acceptable to both parties, the arbitration to be held in Ann
Arbor, Michigan, in accordance with the commercial arbitration rules of the
American Arbitration Association, as then in effect. If the parties are
unable to mutually agree upon an arbitrator, then the arbitration
proceedings shall be held before three (3) arbitrators, one (1) of whom
shall be designated by the Corporation, one (1) of whom shall be designated
by the claimant and the third of whom shall be designated mutually by the
first two (2) arbitrators in accordance with the commercial arbitration
rules referenced above. The sole authority of the arbitrator(s) shall be to
interpret and apply the provisions of this Agreement; not to change, add
to, or subtract from, any of its provisions. The arbitrator(s) shall have
the power to compel attendance of witnesses at the hearing. Any court
having jurisdiction may enter a judgment based upon the arbitration.
7. No Mitigation. The Executive shall not be required to mitigate the
amount of any payments provided for by this Agreement by seeking employment or
otherwise, nor shall the amount of any payment or benefit provided in this
Agreement be reduced by any compensation or benefit earned by the Executive
after his termination.
8. No Set-Off. The Corporation's obligation to make any payments provided
for by this Agreement are absolute and unconditional and shall not be affected
by any circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense, claim of breach of contract or other right which the
Corporation may have against the Executive or others.
9. Nonalienation of Benefits. Except as may be contrary to applicable law,
no sale, transfer, alienation, assignment, pledge, collateralization or
attachment of any benefits under this Agreement shall be valid or recognized by
the Corporation.
<PAGE>
10. ERISA. This Agreement is an unfunded compensation arrangement for a
member of a select group of the Corporation's management employees and any
applicable ERISA exemptions for a "top hat" arrangement shall be applicable to
this Agreement.
11. Reporting and Disclosure. The Corporation, from time to time, shall
provide government agencies with reports concerning this Agreement as may be
required by law, and the Corporation shall provide the Executive with such
disclosure concerning this Agreement as may be required by law or as the
Corporation may deem appropriate.
12. Effect on Prior Agreements and Existing Benefits Plans. This Agreement
contains the entire agreement of the parties relating to the subject matter
hereof, and except for that certain Indemnification Agreement between the
Corporation and Executive dated February 8, 1995, which shall remain in full
force and effect, supersedes any prior written or oral agreements or
understandings relating to the same subject matter including that certain
Executive Severance Agreement dated February 20, 1998, except that this
Agreement shall not affect or operate to reduce any benefit or compensation
inuring to the Executive of a type provided elsewhere including, but not limited
to, any pension benefits.
13. Modification and Waiver. No modification or amendment of this Agreement
shall be valid unless in writing and signed by or on behalf of the parties
hereto. A waiver of the breach of any term or condition of this Agreement shall
not be deemed to constitute a waiver of any subsequent breach of the same or any
other term or condition.
14. Severability. This Agreement is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be held invalid or unenforceable, such invalidity and unenforceability shall not
affect the remaining provisions hereof and the application of such provisions to
other persons or circumstances, all of which shall be enforced to the greatest
extent permitted by law.
15. Withholding. The compensation provided to the Executive pursuant to
this Agreement shall be subject to any withholdings and deductions required by
any applicable income and employment federal, state and local tax laws. In the
event the Corporation fails to withhold such sums for any reason, it may require
the Executive to promptly remit to the Corporation sufficient cash to satisfy
applicable income and employment withholding taxes.
16. Payment Upon Death. Any amounts payable to the Executive hereunder
after the death of the Executive shall be paid to the Executive's estate or
legal representative.
17. Headings. The headings in this Agreement are inserted for convenience
of reference only and shall not be a part of or control or affect the meaning of
any provision hereof.
18. Late Payment of Benefits. If any amount required to be paid by the
Corporation to the Executive hereunder is not paid when due, the Corporation
shall pay such amount to the Executive together with interest at the prime rate
as announced from time to time by Comerica Bank (or its successor) plus two
percentage points, for the period from and after the tenth (10th) day following
the date on which payment was due to and including the date of payment.
19. Attorney Consultation. The Executive has had an opportunity to consult
with an attorney of his choosing prior to executing this Agreement.
<PAGE>
20. Governing Law. To the extent not governed by Federal law, this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Michigan.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the day and year first above written.
JPE, INC.
By: /s/ Donna L. Bacon
-------------------------
Title: President
EXECUTIVE
By: /s/ James J. Fahrner
-------------------------
STAY BONUS AGREEMENT
THIS AGREEMENT, dated as of September 30, 1998, by and between JPE, Inc., a
Michigan corporation ("Corporation"), and Karen A. Radtke, presently residing at
1918 Lloyd, Royal Oak ("Executive").
WITNESSETH:
WHEREAS, the Executive is presently employed by the Corporation as
Treasurer.
WHEREAS, the Board of Directors ("Board") recognizes that the Executive has
contributed significantly to the growth and success of the Corporation; and
WHEREAS, the Board desires to retain the services of Executive and reward
her for the performance of her duties to the Corporation, without Executive
being influenced by uncertainties of her own situation and further able to
assess and advise the Board during the Corporation's financial restructuring;
and
WHEREAS, the Executive is willing to continue serving the Corporation on
the terms and conditions provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and obligations hereinafter set forth, the parties agree as follows:
1. Operation and Termination of Agreement. This Agreement shall be
effective immediately upon its execution by both parties. This Agreement shall
terminate upon the earlier of full payment being made hereunder pursuant to
Section 2, voluntary termination by Executive other than for Good Reason (as
defined in Section 2(g)), the termination of Executive's employment for Cause
(as defined in Section 1(b) and following the expiration of the applicable cure
periods), or the termination of the Executive's employment because of death.
For purposes of this Agreement:
(a) "Permanent Disability" shall mean that by reason of a physical or
mental disability or infirmity for a continuous period of six (6) months,
the Executive is unable to perform the duties of her position. The
determination of Permanent Disability shall be made by a medical board
certified physician mutually acceptable to the Corporation and the
Executive (or the Executive's legal representative, if one has been
appointed). The Executive agrees to submit to the Corporation such medical
evidence regarding such disability or infirmity as the Corporation may
reasonably request.
(b) "Termination For Cause" shall mean any termination of the employment of
the Executive for "Cause." For purposes of this Agreement, only the
following shall be deemed to constitute "Cause":
(i) the Executive's willful engaging in dishonest or fraudulent
actions or omissions resulting or intended to result directly or
indirectly in any demonstrable material financial or economic harm to
the Corporation, or
(ii) if there has been a breach of the Executive's fiduciary duty to
the Corporation resulting or intended to result directly or indirectly
in personal profit to the Executive;
provided that there shall have been delivered to the Executive at least ten
(10) days prior to the effective date of Termination for Cause a Notice of
Termination (as defined in Section 1(d)(iv)), specifying the particulars
thereof in detail. For purposes of subsection (A) or (B) above, no act or
failure to act on the Executive's part shall be considered "willful" unless
done or omitted to be done by her not in good faith and without reasonable
belief that her action or omission was in the best interests of the
Corporation.
If the Executive's employment shall be terminated by the Corporation for
Cause, the Executive shall have the right to contest such termination only
in accordance with the procedures set forth in Section 7.
<PAGE>
(c) "Termination Without Cause" shall mean any termination of the
employment of the Executive by the Corporation other than termination (A)
For Cause, (B) upon death, (C) upon voluntary retirement on or after age 65
or (D) because of Permanent Disability.
(d) Any termination of the Executive's employment by the Corporation or by
the Executive (other than upon death) shall be communicated by written
"Notice of Termination" to the other party hereto. "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision
relied upon in this Agreement and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Executive's employment under the provision so indicated.
(e) The "Date of Termination" shall mean (A) if the Executive's employment
is terminated by her death, the date of her death, (B) if the Executive's
employment is terminated due to her Permanent Disability, the date that is
thirty (30) calendar days after Notice of Termination is given, (C) if the
Executive's employment is terminated pursuant to a Termination For Cause,
the date specified in the Notice of Termination, (D) if terminated by
voluntary retirement on or after age 65, the date of retirement, and (E) if
termination of the Executive's employment is a Termination Without Cause,
the date provided by the Notice of Termination which, in the case of a
termination by the Corporation, shall not be less than thirty (30) calendar
days and, in the case of a termination by the Executive, shall not be less
than ten (10) calendar days nor more than sixty (60) calendar days,
respectively, after the date the Notice of Termination is given.
2. Stay Bonus.
(a) Executive shall be entitled to and shall receive a stay bonus ("Stay
Bonus") of One Hundred Twenty-Five Thousand Dollars ($125,000.00), payable
as provided in subsection (b) below.
(b) Executive shall receive payment of the Stay Bonus upon the earlier to
occur of:
(1) The dates set forth in Section 2(c) below;
(2) The completion of a debt restructuring on behalf of the
Corporation:
(3) The emergence of the Corporation from a bankruptcy proceeding; and
(4) Change in Control of the Corporation, as defined in Section 2(d).
(c) Payment Dates. Subject to prior payment as specified in Section
2(b)(2), (3), or (4), payments of the Stay Bonus shall be made in three
equal installments of Forty-One Thousand Six Hundred Sixty-Six Dollars
($41,666.67) on each of December 31, 1998, June 30, 1999 and January 1,
2000.
<PAGE>
(d) Change of Control.
(1) For the purpose of this Agreement, a Change of Control of the
Corporation ("Change of Control") shall be deemed to have occurred if
any of the following events shall have occurred:
(i) any Person (as defined below), other than John Psarouthakis,
is or becomes the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), directly or indirectly, of securities of the
Corporation representing 10% or more of either the then
outstanding shares of common stock of the Corporation or the
combined voting power of the Corporation's then outstanding
securities; or
(ii) a change in the membership of the Board as it existed in the
immediately preceding calendar year (the "Incumbent Board") such
that the directors of the Incumbent Board no longer constitute a
majority of the Board; provided that any individual becoming a
director in a subsequent year whose election, or nomination for
election, by the Company's shareholders was approved by a vote of
at least a majority of the directors then comprising the
Incumbent Board shall be, for purposes of this Agreement,
considered as though such individual were a member of the
Incumbent Board; or
(iii) the shareholders of the Corporation approve a plan of
complete liquidation or dissolution of the Corporation or there
is consummated an agreement for the sale or disposition by the
Corporation of all or substantially all of the Corporation's
assets.
(2) Person. For the purpose of this Agreement, "Person" shall have the
meaning given in Section 3(a)(9) of the Exchange Act, as modified and
used in Sections 13(d) and 14(d) thereof, except that such term shall
not include the Corporation or any of its subsidiaries.
(e) Acceleration of Payments. (i) In the event a transaction described in
Sections 2(b)(2), (3) or (4) occurs prior to the Executive's receipt of all
of the Stay Bonus provided for in Section 2(c) above, or (ii) if at any
time during the period of this Agreement the Executive's employment is
terminated on account of his Permanent Disability, or by the Executive for
Good Reason (as defined in 2(g) below), then the Corporation shall pay to
Executive, in one lump sum, the unpaid portion of the Stay Bonus promptly
upon the occurrence of any such event, but in no event more than fifteen
(15) days following the occurrence of any such event.
(f) Termination of Payments. Payments of the Stay Bonus shall terminate
only in the event (i) of Executive's death or (ii) Executive's employment
with the Corporation is terminated for "Cause" as provided in Section 1(b),
following the expiration of all appropriate cure periods.
<PAGE>
(g) Good Reason. For the purpose of this Section 2 of the Agreement, "Good
Reason" shall mean the occurrence (without the Executive's written consent)
of any one of the following events:
(i) either (1) a significant alteration, as reasonably determined by
the Executive, in the nature of the Executive's reporting
responsibilities, title other than "Treasurer," duties or offices as
in effect immediately prior to the Change of Control or Pending Change
of Control, provided, that during any Pending Change of Control,
Executive's duties and offices may be changed by the Corporation to
address the needs of the Corporation taking into consideration
Executive's capabilities and level of experience; or (2) any
diminution of Executive's Base Salary in effect on the date of this
Agreement;
(ii) the requirement by the Corporation that the Executive's principal
place of employment be relocated more than ten (10) miles from his
place of employment on the date of this Agreement;
(iii) either (1) the discontinuance of, or any amendment to, any
compensation plan which is adverse to the Executive and in which the
Executive participated on the date of this Agreement, including but
not limited to the Corporation's 1993 Stock Incentive Plan unless a
substantially equivalent substitute or alternative plan has been made
available to the Executive, or (2) the failure by the Corporation to
continue the Executive's participation therein (or in such substitute
or alternative plan(s)) on a basis not materially less favorable, both
in terms of the amount of benefits provided and the level of the
Executive's participation relative to other participants, as existed
at the date of this Agreement; or
(iv) the discontinuance of any benefits enjoyed by the Executive under
any of the Corporation's pension, life insurance, medical, health and
accident, or disability plans in which the Executive was participating
at the date of this Agreement, the taking of any action by the
Corporation that would directly or indirectly materially reduce any of
such benefits enjoyed by the Executive at the date of this Agreement,
or the failure by the Corporation to provide the Executive with the
number of paid vacation days to which she is entitled on the basis of
years of service with the Corporation in accordance with the
Corporation's normal vacation policy in effect at the date of this
Agreement.
3. Successors; Binding Agreement.
(a) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation, by
agreement in form and substance satisfactory to the Executive, to expressly
assume and agree to perform this Agreement in the same manner and to the
same extent that the Corporation would be required to perform this
Agreement if no such succession had taken place. Failure of the Corporation
to obtain such agreement prior to a date that is on or before the date of
the Change of Control shall be a breach of this Agreement and shall entitle
the Executive to compensation from the Corporation in the same amount and
on the same terms as she would receive hereunder if he were to terminate
his employment for Good Reason, except that for purposes of implementing
the foregoing, the date on which such Change of Control becomes effective
shall be deemed the Date of Termination. As used in this Agreement,
"Corporation" shall mean the Corporation as previously defined and any
successor to its business and/or assets as aforesaid, which successor
executes and delivers the agreement provided for in this Section 3 or which
otherwise becomes bound by all the terms and provisions of this Agreement
by operation of law.
<PAGE>
(b) This Agreement and all rights of the Executive hereunder shall inure to
the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributes,
devisees and legatees. If the Executive should die after her termination
while any amounts would still be payable to her hereunder if she had
continued to live, all such amounts, unless otherwise provided herein,
shall be paid in accordance with the terms of this Agreement to the
Executive's devisee, legatee, or other designee or, if there be no
designee, to the Executive's estate.
4. Notices. Any notice required or permitted by this Agreement shall be in
writing, sent by registered or certified mail, return receipt requested, or by a
national overnight delivery service, addressed to the Board and the Corporation
at the Corporation's then principal office, or to the Executive at the address
set forth in the preamble, or to such other address or addresses as any party
hereto may from time to time specify in writing for the purpose in a notice
given to the other parties in compliance with this Section 4. Notices shall be
deemed given when received.
5. Indemnification and Insurance; Legal Expenses. The Corporation shall
indemnify and hold harmless the Executive (and her legal representatives or
other successors) if she is a party, or is threatened to be made a party to any
threatened, pending or completed action, suit, proceeding or claim, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that the Executive is or was
a director, officer or employee of the Corporation, against expenses (including
reasonable attorney's fees), costs, judgments, fines and other amounts paid in
settlement (if such settlement is approved by the Board of Directors) actually
and reasonably incurred by her in connection with such action, suit or
proceeding to the fullest extent permitted by law. The Corporation shall provide
the Executive (including hers heirs, executors and administrators) with coverage
under a standard directors' and officer's liability insurance policy, which
shall be in an amount not less than the directors' and officers' insurance
available to the Executive on the date hereof.
6. Disputes.
(a) The administrator for purposes of this Agreement shall be the
Corporation ("Administrator"), whose address is 775 Technology Drive, Suite
200, Ann Arbor, MI 48108, and whose telephone number is (313) 662-2323. The
"Named Fiduciary" as defined in Section 402(a)(2) of ERISA, also shall be
the Corporation. The Corporation shall have the right to designate one or
more employees of the Corporation as the Administrator and the Named
Fiduciary at any time, and to change the address and telephone number of
the same. The Corporation shall give the Executive written notice of any
change in the Administrator and Named Fiduciary, or in the address or
telephone number of the same.
<PAGE>
(b) The Administrator shall make all determinations as to the right of any
person to receive benefits under the Agreement. Any denial by the
Administrator of a claim for benefits by the Executive ("the claimant")
shall be stated in writing by the Administrator and delivered or mailed to
the claimant within ten (10) days after receipt of the claim, unless
special circumstances require an extension of time for processing the
claim. If such an extension is required, written notice of the extension
shall be furnished to the claimant prior to the termination of the initial
ten (10) day period. In no event shall such extension exceed a period of
ten (10) days from the end of the initial ten (10) day period. Any notice
of denial shall set forth the specific reasons for the denial, specific
reference to pertinent provisions of this Agreement upon which the denial
is based, a description of any additional material or information necessary
for the claimant to perfect his claim, with an explanation of why such
material or information is necessary, and any explanation of claim review
procedures, written to the best of the Administrator's ability in a manner
that may be understood without legal or actuarial counsel.
(c) A claimant whose claim for benefits has been wholly or partially denied
by the Administrator may request on or before the tenth calendar day
following the date of such denial a review of the denial in a written
notice to the Administrator. The claimant shall be entitled to submit such
issues or comments in writing or otherwise, as she shall consider relevant
to a determination of the claim, and she may include a request for a
personal hearing before the Administrator. Prior to submitting her request,
the claimant shall be entitled to review such documents as the
Administrator shall agree are pertinent to the claim. The claimant may, at
all stages of review, including arbitration provided for in Section 6, be
represented by counsel of her choice, legal or otherwise, and the
reasonable fees and expenses of the counsel shall be borne by the
Corporation. All requests for review shall be promptly resolved. The
Administrator's decision with respect to any such review shall be set forth
in writing and shall be mailed to the claimant not later than ten (10) days
following receipt by the Administrator of the claimant's request for review
unless special circumstances, such as the need to hold a hearing, require
an extension of time for processing, in which case the Administrator's
decision shall be so mailed not later than twenty (20) days after receipt
of such request.
(d) A claimant who has followed the procedure in paragraphs (b) and (c) of
this section, but who has not obtained full relief on her claim for
benefits, may, within sixty (60) days following her receipt of the
Administrator's written decision on review, apply in writing to the
Administrator for binding arbitration of the claim before an arbitrator
mutually acceptable to both parties, the arbitration to be held in Ann
Arbor, Michigan, in accordance with the commercial arbitration rules of the
American Arbitration Association, as then in effect. If the parties are
unable to mutually agree upon an arbitrator, then the arbitration
proceedings shall be held before three (3) arbitrators, one (1) of whom
shall be designated by the Corporation, one (1) of whom shall be designated
by the claimant and the third of whom shall be designated mutually by the
first two (2) arbitrators in accordance with the commercial arbitration
rules referenced above. The sole authority of the arbitrator(s) shall be to
interpret and apply the provisions of this Agreement; not to change, add
to, or subtract from, any of its provisions. The arbitrator(s) shall have
the power to compel attendance of witnesses at the hearing. Any court
having jurisdiction may enter a judgment based upon the arbitration.
<PAGE>
7. No Mitigation. The Executive shall not be required to mitigate the
amount of any payments provided for by this Agreement by seeking employment or
otherwise, nor shall the amount of any payment or benefit provided in this
Agreement be reduced by any compensation or benefit earned by the Executive
after her termination.
8. No Set-Off. The Corporation's obligation to make any payments provided
for by this Agreement are absolute and unconditional and shall not be affected
by any circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense, claim of breach of contract or other right which the
Corporation may have against the Executive or others.
9. Nonalienation of Benefits. Except as may be contrary to applicable law,
no sale, transfer, alienation, assignment, pledge, collateralization or
attachment of any benefits under this Agreement shall be valid or recognized by
the Corporation.
10. ERISA. This Agreement is an unfunded compensation arrangement for a
member of a select group of the Corporation's management employees and any
applicable ERISA exemptions for a "top hat" arrangement shall be applicable to
this Agreement.
11. Reporting and Disclosure. The Corporation, from time to time, shall
provide government agencies with reports concerning this Agreement as may be
required by law, and the Corporation shall provide the Executive with such
disclosure concerning this Agreement as may be required by law or as the
Corporation may deem appropriate.
12. Effect on Prior Agreements and Existing Benefits Plans. This Agreement
contains the entire agreement of the parties relating to the subject matter
hereof, and except for that certain Indemnification Agreement between the
Corporation and Executive dated February 8, 1995, which shall remain in full
force and effect, supersedes any prior written or oral agreements or
understandings relating to the same subject matter including that certain
Executive Severance Agreement dated March 20, 1998, except that this Agreement
shall not affect or operate to reduce any benefit or compensation inuring to the
Executive of a type provided elsewhere including, but not limited to, any
pension benefits.
13. Modification and Waiver. No modification or amendment of this Agreement
shall be valid unless in writing and signed by or on behalf of the parties
hereto. A waiver of the breach of any term or condition of this Agreement shall
not be deemed to constitute a waiver of any subsequent breach of the same or any
other term or condition.
14. Severability. This Agreement is intended to be performed in accordance
with, and only to the extent permitted by, all applicable laws, ordinances,
rules and regulations. If any provision of this Agreement, or the application
thereof to any person or circumstance, shall, for any reason and to any extent,
be held invalid or unenforceable, such invalidity and unenforceability shall not
affect the remaining provisions hereof and the application of such provisions to
other persons or circumstances, all of which shall be enforced to the greatest
extent permitted by law.
15. Withholding. The compensation provided to the Executive pursuant to
this Agreement shall be subject to any withholdings and deductions required by
any applicable income and employment federal, state and local tax laws. In the
event the Corporation fails to withhold such sums for any reason, it may require
the Executive to promptly remit to the Corporation sufficient cash to satisfy
applicable income and employment withholding taxes.
16. Payment Upon Death. Any amounts payable to the Executive hereunder
after the death of the Executive shall be paid to the Executive's estate or
legal representative.
<PAGE>
17. Headings. The headings in this Agreement are inserted for convenience
of reference only and shall not be a part of or control or affect the meaning of
any provision hereof.
18. Late Payment of Benefits. If any amount required to be paid by the
Corporation to the Executive hereunder is not paid when due, the Corporation
shall pay such amount to the Executive together with interest at the prime rate
as announced from time to time by Comerica Bank (or its successor) plus two
percentage points, for the period from and after the tenth (10th) day following
the date on which payment was due to and including the date of payment.
19. Attorney Consultation. The Executive has had an opportunity to consult
with an attorney of her choosing prior to executing this Agreement.
20. Governing Law. To the extent not governed by Federal law, this
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of Michigan.
IN WITNESS WHEREOF, the parties have duly executed and delivered this
Agreement as of the day and year first above written.
JPE, INC.
By: /s/ Donna L. Bacon
--------------------------
Title: President
EXECUTIVE
By: /s/ Karen A. Radtke
--------------------------
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<PERIOD-END> SEP-30-1998
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0
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