ADVANCE FORMULA AGREEMENT
As of May 27, 1999, this Agreement is made between the undersigned borrowers
(collectively, "Debtors") and COMERICA BANK ("Bank"). For and in consideration
of the loans and other credit which Debtor may now or hereafter obtain from Bank
which are secured pursuant to a certain Security Agreements dated May 27, 1999,
("Security Agreement"), and for other good and valuable consideration, Debtors
agree as follows:
1. FORMULA LOANS. The credit which Bank may now or hereafter extend to
Debtors subject to the limitations of this Agreement and to the conditions and
limitations of any other agreement between Debtors and Bank is identified as
follows:
$30,000,000 secured line of credit
and any extensions, renewals or substitutions, whether in a greater or lesser
amount, including any letters of credit issued thereunder ("Formula Loans").
2. ADVANCE FORMULA. Debtors warrant and agree that Debtors' indebtedness to
Bank for the Formula Loans shall never exceed the sum of:
(a) Eighty percent (80%) of their Eligible Accounts, as defined below; and
(b) the lesser of fifty percent (50%) of their Eligible Inventory, as
defined below, or Nine Million Dollars ($9,000,000).
3. FORMULA COMPLIANCE. If the limitations in paragraph 2, above, are
exceeded at any time, Debtors shall immediately pay Bank sums sufficient to
reduce the Formula Loans by the amount of such excess.
4. ELIGIBLE ACCOUNT. "Eligible Account" shall mean an Account (as defined
in the Michigan Uniform Commercial Code, as amended ("UCC"), but shall not
include interest and service charges) arising in the ordinary course of a
Debtor's business which meets each of the following requirements:
(a) it is not owing more than ninety (90) days after the date of the
original invoice or other writing evidencing such Account;
(b) it is not owing by an Account Debtor (as defined in the UCC) who has
failed to pay twenty five percent (25%) or more of the aggregate
amount of its Accounts owing to Debtors within ninety (90) days after
the date of the respective invoices or other writings evidencing such
Accounts;
(c) it arises from the sale or lease of goods and such goods have been
shipped or delivered to the Account Debtor under such Account; or it
arises from services rendered and such services have been performed;
(d) it is evidenced by an invoice, dated not later than the date of
shipment or performance, rendered to such Account Debtor or some other
evidence of billing acceptable to Bank;
(e) it is not evidenced by any note, trade acceptance, draft or other
negotiable instrument or by any chattel paper, unless such note or
other document or instrument previously has been endorsed and
delivered by Debtors to Bank;
(f) it is a valid, legally enforceable obligation of the Account Debtor
thereunder, and is not subject to any offset, counterclaim or other
defense on the part of such Account Debtor or to any claim on the part
of such Account Debtor denying liability thereunder in whole or in
part;
(g) it is not subject to any sale of accounts, any rights of offset,
assignment, lien or security interest whatsoever other than to Bank;
(h) it is not owing by a subsidiary or affiliate of a Debtor, nor by an
Account Debtor which (i) does not maintain its chief executive office
in the United States of America, (ii) is not organized under the laws
of the United States of America, or any state thereof, unless such
Account Debtor is a Canadian subsidiary of General Motors, Ford or
Chrysler, or (iii) is the government of any foreign country or
sovereign state, or of any state, province, municipality or other
instrumentality thereof;
(i) it is not an account owing by the United States of America or any
state or political subdivision thereof, or by any department, agency,
public body corporate or other instrumentality of any of the
foregoing, unless all necessary steps are taken to comply with the
Federal Assignment of Claims Act of 1940, as amended, or with any
comparable state law, if applicable, and all other necessary steps are
taken to perfect Bank's security interest in such account;
(j) it is not owing by an Account Debtor for which a Debtor has received a
notice of (i) the death of the Account Debtor, (ii) the dissolution,
liquidation, termination of existence, insolvency or business failure
of the Account Debtor, (iii) the appointment of a receiver for any
part of the property of the Account Debtor, or (iv) an assignment for
the benefit of creditors, the filing of a petition in bankruptcy, or
the commencement of any proceeding under any bankruptcy or insolvency
laws by or against the Account Debtor;
(k) it is not an account billed in advance, payable on delivery, for
consigned goods, for guaranteed sales, for unbilled sales, for
progress xxxxxxxx, payable at a future date in accordance with its
terms, subject to a retainage or holdback by the Account Debtor or
insured by a surety company; and
(l) it is not owing by any Account Debtor whose obligations Bank, acting
in its reasonable discretion based on a belief that the prospects for
payment of the Accounts owing by such Account Debtor are impaired,
shall have notified Debtors are not deemed to constitute Eligible
Accounts.
An Account which is at any time an Eligible Account, but which subsequently
fails to meet any of the foregoing requirements, shall forthwith cease to be an
Eligible Account.
5. ELIGIBLE INVENTORY. Unless stated otherwise in paragraph 12 below,
"Eligible Inventory" shall be valued at the lesser of cost or present market
value in accordance with generally accepted accounting principles, consistently
applied, and shall mean all of Debtors' Inventory (as defined in the UCC) which
is in good and merchantable condition, is not obsolete or discontinued, and
which would properly be classified as "raw materials" or as "finished goods
inventory" under generally accepted accounting principles, consistently applied,
excluding (a) Debtors' work in process, consigned goods, inventory located
outside the United States of America, (b) inventory covered by or subject to a
seller's right to repurchase, or any consensual or nonconsensual lien or
security interest (including without limitation purchase money security
interests) other than in favor of Bank, whether senior or junior to Bank's
security interest, and (c) inventory that Bank, acting in its sole discretion,
after having notified Debtors, excludes. Inventory which is at any time Eligible
Inventory, but which subsequently fails to meet any of the foregoing
requirements, shall forthwith cease to be Eligible Inventory.
6. CERTIFICATES, SCHEDULES AND REPORTS. Debtors will within ten (10) days
after and as of the end of each month (and at such other times as Bank may
request), deliver to Bank agings of the Accounts and a schedule identifying each
Eligible Account (not previously so identified) and reports as to the amount of
Eligible Inventory. Debtors will from time to time deliver to Bank such
additional schedules, certificates and reports respecting all or any of the
Collateral (as defined in the Security Agreement), the items or amounts received
by Debtors in full or partial payment of any of the Collateral, and any goods
(the sale or lease of which by Debtors shall have given rise to any of the
Collateral) possession of which has been obtained by Debtors, all and as to such
extent as Bank may request. Any such schedule, certificate or report shall be
executed by a duly authorized officer of Debtors and shall be in such form and
detail as Bank may specify. Any such schedule identifying any Eligible Account
shall be accompanied (if Bank so requests) by a true and correct copy of the
invoice evidencing such Eligible Account and by evidence of shipment or
performance.
7. INSPECTIONS; COMPLIANCE. Debtors shall permit Bank and its designees
from time to time to make such inspections and audits, and to obtain such
confirmations or other information, with respect to any of the Collateral or any
Account Debtor as Bank is entitled to make or obtain under the Security
Agreement, and shall reimburse Bank on demand for all costs and expenses
incurred by Bank in connection with such inspections and audits. Debtors shall
further comply with all of the other terms and conditions of the Security
Agreement.
8. DEFAULT. Any failure by Debtors to comply with this Agreement shall
constitute a default under the Formula Loans and under the Security Agreement
and the Indebtedness, as defined therein.
9. AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
terminated only in writing duly executed by Debtors and Bank. No delay by Bank
in requiring Debtor's compliance herewith shall constitute a waiver of such
right. The rights granted to Bank hereunder are cumulative, and in addition to
any other rights Bank may have by agreement or under applicable law. This
Agreement shall supersede and replace in their entirety any prior advance
formula agreements in effect between Bank and Debtors. This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
Michigan, without regard to conflict of laws principles.
10. DEMAND BASIS FORMULA LOANS. Notwithstanding anything to the contrary
set forth in this Agreement, in the event that the Formula Loans are at any time
on a demand basis, Debtors hereby acknowledge and agree that the formula set
forth in paragraph 2 hereof is merely for advisory and guidance purposes and
Bank shall not be obligated to make any loans or advances under the Formula
Loans, and, notwithstanding the terms of paragraph 3 above, Bank may at any
time, at its option, demand payment of any or all of the Formula Loans,
whereupon the same shall become due and payable.
11. JURY WAIVER. DEBTORS AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY
JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER
CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR
CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR MUTUAL BENEFIT WAIVES ANY RIGHT
TO TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR
ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS AGREEMENT OR THE INDEBTEDNESS.
12. SPECIAL PROVISIONS*
*None, if left blank.
IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year
first above written.
Debtors' Chief Executive Office Address: DEBTORS:
000 Xxxxxxxxxx Xxxxx XXX, INC.
Xxxxx 000
Xxx Xxxxx, XX 00000 By: /s/ Xxxxxxx X. Chrysler
------------------------------
Xxxxxxx X. Chrysler
Its: President and Chief Executive
Officer
BRAKE, AXLE AND TANDEM COMPANY
CANADA, INC.
By: /s/ Xxxxxxx X. Chrysler
------------------------------
Xxxxxxx X. Chrysler
Its: Chief Executive Officer
DAYTON PARTS, INC.
By: /s/ Xxxxxxx X. Chrysler
------------------------------
Xxxxxxx X. Chrysler
Its: Chief Executive Officer
JPE FINISHING, INC.
By: /s/ Xxxxxxx X. Chrysler
------------------------------
Xxxxxxx X. Chrysler
Its: President
PLASTIC TRIM, INC.
By: /s/ Xxxxxxx X. Chrysler
------------------------------
Xxxxxxx X. Chrysler
Its: President
STARBOARD INDUSTRIES, INC.
By: /s/ Xxxxxxx X. Chrysler
------------------------------
Xxxxxxx X. Chrysler
Its: President
Accepted and Approved:
COMERICA BANK
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------
Xxxxxxx X. Xxxxxx
Its: Vice President
