SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: June 9, 1995
CHAMPION PARTS, INC.
(Exact name of Registrant as specified in its Charter)
Illinois 1-7807 36-2088911
(State or other jurisdiction (Commission File Number) (IRS Employer Ident-
of incorporation) ification No.)
2525 22nd Street, Oak Brook, Illinois 60521
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 573-6600
INFORMATION TO BE INCLUDED IN THE REPORT
Item 5. Other Matters.
On June 9, 1995 the Company announced that it has adopted a
plan to refocus its business and begin to exit the manufacture
and supply of automotive electrical and mechanical product lines
to traditional warehouse distributors in the eastern United
States. It will continue to manufacture and supply
remanufactured carburetors and constant velocity joint
assemblies and service the original equipment market. In the
short term, the Company announced that its electrical and
mechanical customers serviced out of its Hope, Arkansas and
Beech Creek, Pennsylvania plants will be serviced until
mid-July, 1995. It also announced that it is exploring its
options with respect to its Fresno, California plant.
On May 19, the Company entered into a Forbearance Agreement
with its lending banks. Among other things, the Company agreed
that it is in default under the Credit Agreement with the banks,
which also resulted in cross-defaults under two agreements
pertaining to outstanding letter of credit (together with the
Credit Agreement, the "Loan Documents"), and the Company's banks
agreed to forbear from exercising their rights under the Loan
Documents. Under the Forbearance Agreement the Company also
agreed, among other things, to: (a) assign the Company's
interest in two former plant facilities to the banks as
additional collateral, (b) retain, at its expense, a financial
consultant to work with management in preparing plans and
strategies for the Company, (c) present a business plan to the
banks by June 6, 1995 reflecting structural and organizational
changes for the purpose of generating positive cash flow and (d)
reimburse the banks for expenses related to the agreement.
Subject to borrowing base limitations in the Credit Agreement,
the banks agreed to continue to make advances to the Company
during the forbearance period. In addition under the agreement,
the banks raised the Company's interest rate to prime plus three
and one-half percent per annum retroactive to May 1, 1995, from
prime plus one and one-half percent. The Forbearance Agreement
expires June 16, 1995. There can be no assurance that the banks
will extend the Forbearance Agreement upon its expiration.
The above summary of the terms of the Forbearance Agreement is
necessarily incomplete, and is qualified in its entirety by
reference to the Forbearance Agreement, a copy of which is
attached hereto as Exhibit 10(b) and is incorporated herein by
reference.
Item 7. Financial Statements and Exhibits.
Exhibits:
10(a) Press release dated June 9, 1995 announcing refocus of
business.
10(b) Forbearance Agreement dated May 19, 1995 between the
Company and LaSalle National Bank, Harris Trust & Savings Bank
and NBD Bank.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CHAMPION PARTS, INC.
Date: June 9, 1995 By: /s/Thomas W. Blashill
Thomas W. Blashill
Executive Vice President,
Secretary and Treasurer
EXHIBIT INDEX
Exhibit No. Description of Exhibit Page
10(a) Press Release dated June 9, 1995.
10(b) Forbearance Agreement dated May 19, 1995
PRESS RELEASE
Champion Parts, Inc.
2525 22nd Street, Oak Brook, IL 60521
Contact: Thomas W. Blashill
Phone: 708-573-6600
FAX: 708-574-3128
FOR IMMEDIATE RELEASE
CHAMPION PARTS, INC. TO REFOCUS BUSINESS
OAK BROOK, IL, June 9, 1995 -- Champion Parts, Inc.
(NASDAQ:CREB) announced today that it adopted a plan to refocus
its business to exit the manufacture and supply of automotive
electrical (starters and alternators) and mechanical (water
pumps and clutches) product lines to the traditional wholesale
distributor and retail markets in the eastern United States.
The company will continue to manufacture and supply carburetors
and constant velocity joint assemblies to these markets and
maintain all aspects of its relationships with its original
equipment manufacturer aftermarket customers. The company
stated that it presently intends to continue to service its
traditional electrical and mechanical customers out of its Hope,
Arkansas and Beech Creek, Pennsylvania plants until mid July,
1995. The effect of the plan will be a substantial reduction in
the company's sales base and downsizing of all operations. The
effect of the recently adopted plan will result in restructuring
charges, the amount of which remains to be determined.
The company also announced that it has signed a forbearance
agreement with its banks covering defaults under its credit
facility, which expires on June 16, 1995. The company is
currently in discussions with its banks to try to obtain
extension of the forbearance agreement, and a credit facility to
coincide with its restructuring plan.
"Due to recent negative market conditions and the Company's
weakened financial condition, we need to immediately refocus our
company to its core market niches to attempt to return the
company to profitability," said Thomas W. Blashill, Champion's
executive vice president. "We will continue to operate our
Fresno, California plant as a full line supplier in the near
terms as further options are being explored."
FORBEARANCE AGREEMENT
This Forbearance Agreement is made and entered into as of May
19, 1995, by and among Champion Parts, Inc., an Illinois
corporation, with its principal place of business at 2525 22nd
Street, Oak Brook, Illinois 60521 ("Champion"), LaSalle
National Bank, a national banking association ("LaSalle"), as
successor to both Exchange National Bank of Chicago and American
National Bank and Trust Company of Chicago, NBD Bank ("NBD"),
and Harris Trust and Savings Bank, an Illinois banking
corporation ("Harris") [LaSalle, NBD and Harris are each a
"Bank" and collectively, together with their respective
successors and permitted assigns, the "Banks"], and LaSalle in
its capacity as both Agent and Collateral Agent for the Banks.
W I T N E S S E T H:
WHEREAS, the Banks, the Agent and the Collateral Agent have
provided certain extensions of credit, loans and other financial
accommodations to Champion pursuant to (a) that certain Amended
and Restated Credit Agreement dated as of March 31, 1993, as
amended by that certain First Amendment to Amended and Restated
Credit Agreement dated as of March 30, 1994, and as further
amended by that certain Second Amendment to Amended and Restated
Credit Agreement dated March 31, 1995, by and among Champion,
the Banks, the Agent and the Collateral Agent (collectively the
"Credit Agreement"), (b) (i) that certain Reimbursement
Agreement dated as of December 1, 1991, by and between Champion
and NBD (the "IRB Agreement"), and (ii) that certain Standby
Letter of Credit Application and Reimbursement and Security
Agreement dated December 30, 1991, by and between Champion and
NBD (the "Workmen's Compensation Agreement")[the IRB Agreement,
together with the Workmen's Compensation Agreement are
collectively the "Other NBD Documents"], and (c) the other
agreements, documents and instruments referenced in the Credit
Agreement or the Other NBD Documents or executed and delivered
pursuant thereto (collectively the "Other Loan Documents")[the
Credit Agreement, together with the Other NBD Documents and the
Other Loan Documents are collectively the "Champion Loan
Documents"];
WHEREAS, Champion is and continues to be in default under the
terms and provisions of the Champion Loan Documents and the
indebtedness evidenced by the Champion Loan Documents (the
"Champion Indebtedness") is and continues to remain unpaid, due
and owing;
WHEREAS, Champion has requested the Banks, the Agent and the
Collateral Agent to forbear from presently making demand for
payment of the Champion Indebtedness pursuant to the Champion
Loan Documents and from immediately collecting the Champion
Indebtedness by exercising their rights and remedies pursuant to
the Champion Loan Documents, at law, in equity or otherwise; and
WHEREAS, the Banks, the Agent and the Collateral Agent are
willing to forbear from presently making demand for payment of
the Champion Indebtedness pursuant to the Champion Loan
Documents and from immediately collecting the Champion
Indebtedness by exercising their rights and remedies pursuant to
the Champion Loan Documents, at law, in equity or otherwise, but
solely on the terms and subject to the conditions contained in
this Forbearance Agreement.
NOW, THEREFORE, in consideration of the foregoing, the mutual
promises and understandings of the parties hereto set forth
herein and other good and valuable consideration, the receipt
and sufficiency of such consideration is hereby acknowledged,
the Banks, the Agent, the Collateral Agent and Champion hereby
agree as set forth in this Forbearance Agreement.
1. Acknowledgment of Default.
A. Champion acknowledges and agrees that it is and
continues to be in default under the terms and provisions of the Champion
Loan Documents pursuant to Sections 6.1(b), 6.13, 6.15, 6.29 and
9.1(n) of the Credit Agreement, Article V of the IRB Agreement
and Section 5(h) of the Workmen's Compensation Agreement. To
the best of Champion's knowledge after due and diligent inquiry,
Champion represents and warrants unto the Banks, the Agent and
the Collateral Agent that no other breach, default or event of
default exists under the terms and provisions of the Champion
Loan Documents. To the Banks', the Agent's and the Collateral
Agent's knowledge without any inquiry or investigation of any
kind whatsoever, the Banks, the Agent, and the Collateral Agent
are not aware of any other breach, default or event of default
under the terms and provisions of the Champion Loan Documents.
B. Champion hereby acknowledges and agrees that:
1. as of the date hereof, the outstanding principal balance
of the Champion Indebtedness consists of (a) "Advances" of
$13,800,000.00 pursuant to the Credit Agreement; (b) a
contingent obligation of $1,542,946.00 pursuant to the IRB
Agreement; and (c) a contingent obligation of $1,100,000.00
pursuant to the Workmen's Compensation Agreement;
2. Champion is liable for the Champion Indebtedness, all
accrued interest thereon, and all other fees, costs, charges,
obligations and expenses, including, but not limited to, all
attorneys' fees and other professional fees, heretofore, now or
from time to time hereafter incurred by each of and all of the
Banks, the Agent and/or the Collateral Agent in connection with
the Champion Loan Documents, the Champion Indebtedness, the
default by Champion under the Champion Loan Documents and the
negotiation, preparation and enforcement of this Forbearance
Agreement and the "Other Forbearance Documents" (hereinafter
defined);
3. the Banks, the Agent and the Collateral Agent have the
right to immediately initiate and prosecute any of their rights
or remedies pursuant to the Champion Loan Documents, at law, in
equity or otherwise; and
4. effective May 1, 1995, Champion will pay to the Banks
interest at a per annum rate equal to the "Prime Rate" (as
defined in the Credit Agreement) in effect from time to time
plus three and one-half percent (3-1/2%) per annum.
2. Forbearance Period. Upon the complete, full and timely
performance of the covenants described in this Paragraph 2 and
provided no other or further breach, default or event of default
occurs under the Champion Loan Documents, this Forbearance
Agreement or the Other Forbearance Documents, the Banks, the
Agent and the Collateral Agent agree to forbear from the date
hereof through and including June 16, 1995 (the "Forbearance
Period"), from exercising any of their rights or remedies
pursuant to the Champion Loan Documents, at law, in equity or
otherwise.
A. Upon presentment, Champion shall reimburse each of and
all of the Banks, the Agent and the Collateral Agent for all
reasonable attorneys' fees, other professional fees, and other
fees, costs, charges, obligations and expenses which the Banks,
the Agent and/or the Collateral Agent have incurred and will
continue to incur in connection with the Champion Loan
Documents, the Champion Indebtedness, the default by Champion
under the Champion Loan Documents, this Forbearance Agreement
and the Other Forbearance Documents.
B. Champion shall fully and timely pay the Champion
Indebtedness as evidenced by the Champion Loan Documents, this
Forbearance Agreement and the Other Forbearance Documents and
fully and timely perform all of the covenants, duties,
obligations and agreements contained in the Champion Loan
Documents, this Forbearance Agreement and the Other Forbearance
Documents.
C. Champion covenants and agrees not to permit the
occurrence of any other or further breach, default or event of default
pursuant to the Champion Loan Documents, this Forbearance
Agreement or the Other Forbearance Documents.
D. Champion's financial consultant, Silverman, Korenthal &
Company, will prepare a written summary for Champion describing
specific plans and strategies, including repayment of the
Champion Indebtedness in full within a reasonable period of
time, and, on or before May 29, 1995, deliver to the Banks, the
Agent, and the Collateral Agent a copy of such written summary,
in form and substance acceptable to the Banks, the Agent and the
Collateral Agent.
E. Upon the earlier to occur of (1) every Friday of each
and every calendar week, or (2) each and every request for an
advance pursuant to the terms and provisions of the Credit
Agreement, Champion will prepare and deliver to the Banks, the
Agent and the Collateral Agent a borrowing base certificate, in
form and substance acceptable to the Banks, the Agent and the
Collateral Agent.
F. Champion will prepare and deliver, on or before May 29,
1995, to the Banks, the Agent and the Collateral Agent a revised
financial forecast reflecting structural and organizational
changes which will result in Champion generating positive cash
flow from the ordinary course of its operations.
G. Upon presentment, Champion shall reimburse the Banks,
the Agent and the Collateral Agent for all fees, costs, charges,
obligations and expenses which the Banks, the Agent, and the
Collateral Agent may incur in connection with (1) retaining a
financial consultant solely for the Banks, the Agent and the
Collateral Agent, and (2) any and all real estate, inventory,
machinery and equipment appraisals, environmental assessment
reports and any other appraisals, reports and summaries.
Notwithstanding the foregoing, Champion acknowledges and agrees
that any and all such appraisals, reports and summaries,
including, but not limited to, any reports and summaries
prepared by the Banks', the Agent's and the Collateral Agent's
financial consultant, are prepared for the sole and exclusive
benefit and review of the Banks, the Agent and the Collateral
Agent. The Banks, the Agent and the Collateral Agent may, but
under no circumstances are obligated to, provide Champion with
copies of any such appraisals, reports or summaries to be
utilized by Champion solely in connection with refinancing the
Champion Indebtedness; provided, however, Champion acknowledges
and agrees that the Banks, the Agent and the Collateral Agent
are not in any way responsible for or liable to Champion for the
preparation or results of such appraisals, reports or summaries,
or any other matter contained therein.
H. Contemporaneously herewith, Champion will execute and
deliver the following documents (collectively the "Other
Forbearance Documents"):
1. Pennsylvania Mortgage and Security Agreement of even
date herewith executed and delivered by Champion to the Banks, the
Agent and the Collateral Agent granting a first position
priority mortgage and lien in and to the real properties
commonly known as 921 Third Avenue, Lock Haven, Pennsylvania, in
the form attached hereto as Exhibit "A" (the "Carburetor
Facility");
2. Secretary's Certificate as to Officers and Directors and
Directors' Resolutions for Champion, in the form attached hereto
as Exhibit "B";
3. Promissory Notes executed and delivered by Champion to
LaSalle, Harris and NBD in the forms of Exhibit "C", Exhibit "D"
and Exhibit "E", respectively. Such Promissory Notes are in
substitution, and not a discharge of, that certain Promissory
Note dated as of March 30, 1994, executed and delivered by
Champion to LaSalle in the amount of Eleven Million Eight
Hundred Seventy Thousand Nine Hundred Sixty-Seven and 69/100
Dollars ($11,870,967.69), that certain Promissory Note dated as
of March 30, 1994, executed and delivered by Champion to Harris
in the principal amount of Four Million Four Hundred Fifty-One
Thousand Six Hundred Twelve and 97/100 Dollars ($4,451,612.97),
and that certain Promissory Note dated as of March 30, 1994,
executed and delivered by Champion to NBD in the principal
amount of Six Million Six Hundred Seventy-Seven Thousand Four
Hundred Nineteen and 34/100 Dollars ($6,677,419.34).
4. such other agreements, documents and instruments as the
Banks, the Agent and the Collateral Agent may request,
including, but not limited to, any agreements, documents or
instruments executed and delivered in connection with the "Piper
Facility" (hereinafter defined).
I. A petition under the United States Bankruptcy Code or
any similar federal, state or local law, statute or regulation has
not been filed by or against Champion.
J. With regard to the Carburetor Facility, Champion will,
within seven (7) days from the date hereof, cause to be recorded
a warranty deed evidencing fee simple title to the Carburetor
Facility in Champion, subject only to title exceptions and other
restrictions of record substance acceptable to the Banks, the
Agent and the Collateral Agent.
K. With regard to the Piper Facility, Champion will, within
seven (7) days from the date hereof, execute and deliver, in
form and substance acceptable to the Banks, the Agent and the
Collateral Agent, (1) a recordable collateral assignment of that
certain Installment Sale Agreement dated May 24, 1988, by and
between Pennsylvania Industrial Development Authority, as
assignee of The Industrial Development Corporation of Clinton
County (collectively "IDC") and Champion, as successor in
interest to Champion Parts Rebuilders, Inc. (the "Installment
Agreement"), (2) a Consent and Estoppel Certificate from IDC,
and (iii) such other agreements, documents and instruments as
the Banks, the Agent and the Collateral Agent may request. Upon
payment of all monthly installment payments pursuant to the
Installment Agreement, Champion will promptly execute and
deliver a Mortgage and Security Agreement, together with such
other agreements, documents and instruments as the Banks, the
Agent and the Collateral Agent may request, all in form and
substance acceptable to the Banks, the Agent and the Collateral
Agent.
3. Additional Covenants. At all times during the Forbearance
Period, Champion shall:
A. purchase and maintain in full force and effect all
insurance required to be purchased and maintained pursuant to
the Champion Loan Documents, this Forbearance Agreement and the
Other Forbearance Documents;
B. fully and timely pay all tax liabilities which are
required to be paid pursuant to the Champion Loan Documents, this
Forbearance Agreement and the Other Forbearance Documents;
C. maintain and ensure that all property, real, personal
and mixed, which is pledged to the Banks, the Agent and/or the
Collateral Agent as collateral or security for the Champion
Indebtedness, remains free and clear of liens, security
interests, mortgages, pledges, claims, encumbrances, charges,
agreements, liabilities, equities and rights of other persons
and entities of any kind, nature or description whatsoever
(collectively "Liens"), excepting only the Liens of the Banks,
the Agent and the Collateral Agent and the other Liens, if any,
permitted by the terms of the Champion Loan Documents and the
Other Forbearance Documents;
D. deliver, within fifteen (15) days after the end of each
calendar month, commencing with April, 1995, an aged schedule of
Champion's accounts payable;
E. keep and maintain all of its checking, depository and
other bank accounts solely with any one or more of the Banks,
excepting only an amount not to exceed Ten Thousand and no/100
Dollars ($10,000.00) in each of the bank accounts listed on
Exhibit "F".
4. CPR. Champion represents and warrants that as follows :
A. Champion owns all of the issued and outstanding shares
of stock of CPR Properties, Inc. ("CPR");
B. CPR's only asset is the real property commonly known as
2696 South Maple Street, Fresno, California (the "Fresno
Property");
C. except for the indebtedness owing to Bervin Carpets
Corporation, as assigned to Gulf Life Insurance Company, in
connection with the Fresno Property in a maximum aggregate
amount not to exceed Seven Hundred Ninety-Seven Thousand
Thirty-Nine and 10/100 Dollars ($797,039.10), there are no other
secured or unsecured creditors of CPR; and
D. a true and complete copy of CPR's most recent tax return
is attached hereto as Exhibit "G".
5. Representations and Warranties by Champion.
A. Champion represents, warrants and covenants unto the
Banks, the Agent and the Collateral Agent that:
1. Champion has, at Champion's sole cost and expense,
retained Silverman, Korenthal & Company as a financial consultant;
2. Champion has and at all times hereafter will comply with
the provisions of the Fair Labor Standard Act, and all employees
have been and will be paid in accordance therewith;
3. Champion has and at all times hereafter will comply with
the provisions of the Worker Adjustment and Retraining
Notification Act of 1988, as applicable;
4. Champion has and at all times hereafter will fully and
timely pay all federal, state and local taxes, including, but
not limited to, all payroll and trust fund taxes; and
5. to the best of Champion's knowledge after due and
diligent inquiry, Champion has and at all times hereafter will comply
with all other federal, state and local laws, regulations and
rules.
B. Champion shall pay to the Banks, the Agent and the
Collateral Agent the amount of any payments made to any and all
of the Banks, the Agent and/or the Collateral Agent in full or
partial satisfaction of the Champion Indebtedness, which
payments are subsequently invalidated, declared to be
preferential or fraudulent, set aside or required to be repaid
by any or all of the Banks, the Agent and/or the Collateral
Agent to Champion, its estate, a trustee, a receiver or any
other party under the United States Bankruptcy Code or any
similar federal, state or local law, statute or regulation.
6. Piper Facility. Champion hereby represents, warrants and
covenants unto the Banks, the Agent and the Collateral Agent
that, with regard to property commonly known as 935 East Bald
Eagle Street, Lock Haven Industrial Park, Lock Haven,
Pennsylvania (the "Piper Facility"):
A. Champion is the sole and exclusive contract purchaser
under the Installment Agreement. The Installment Agreement has not
been modified, amended or supplemented.
B. Champion has full power and authority to collaterally
assign the Installment Agreement to the Banks, the Agent and the
Collateral Agent, and no prior assignment or any other transfer
of any kind has been or will be made in connection therewith.
C. Champion has and will fully and timely pay all monthly
installment payments due under the Installment Agreement, all
taxes, special assessments, insurance premiums and any other
payments due under the Installment Agreement.
D. Champion is not and will not, at any time hereafter, be
in default in any manner under the Installment Agreement and no
event has occurred and no condition exists which, with the
giving of notice, the lapse of time or both will constitute a
default under the Installment Contract. To the best knowledge
of Champion, IDC is not in default under the Installment
Agreement and no event has occurred and no condition exists
which, with the giving of notice, the lapse of time or both will
constitute a default under the Installment Agreement. No claim,
controversy or dispute exists between Champion and IDC.
E. Upon the full payment of the purchase price under the
Installment Agreement, Champion covenants that (A) title to the
Piper Facility will be held by Champion free and clear of all
liens and encumbrances, except title exceptions and other
restrictions of record acceptable to the Banks, the Agent and
the Collateral Agent.
F. Champion will immediately forward to the Agent a copy of
any notice of default in connection with the Piper Facility.
G. The outstanding balance of any indebtedness relating to
the Piper Facility does not and will not exceed the approximate
aggregate amount of One Hundred Eighty Thousand and no/100
Dollars ($180,000.00), and at all times, the outstanding balance
of the monthly installment payments will be less than the
appraised value of the Piper Facility.
H. Champion will fully and timely pay all indebtedness and
liabilities, and fully and timely perform all duties, covenants,
obligations and agreements pursuant to that certain Mortgage
dated May 24, 1988, by The Industrial Development Corporation of
Clinton County, as assigned to Champion and The Pennsylvania
Industrial Development Authority.
7. Default. Champion shall be in default under the terms and
provisions of this Forbearance Agreement upon the occurrence of
any of the following events, whereupon the Forbearance Period
shall immediately terminate without further notice to or any
demand upon Champion:
A. Champion fails to fully and timely pay all sums due
pursuant to this Forbearance Agreement or the Other Forbearance
Documents;
B. Champion breaches any covenant, agreement or obligation
set forth in this Forbearance Agreement or the Other Forbearance
Documents; or
C. Any other or further breach, default or event of default
occurs under the Champion Loan Documents.
Upon the expiration or termination of the Forbearance Period,
for whatever reason, the Champion Indebtedness shall be
immediately due and payable, and shall be paid by Champion to
the Banks, the Agent and the Collateral Agent, as the case may
be, without any further notice or demand whatsoever, and the
Banks, the Agent and the Collateral Agent, as the case may be,
may, without notice, immediately exercise all of their rights
and remedies under the Champion Loan Documents, this Forbearance
Agreement and the Other Forbearance Documents, as well as any
and all other rights and remedies available at law, in equity or
otherwise and may immediately take any action, legal or
equitable, to collect the Champion Indebtedness and any and all
other sums now or hereafter due and owing from Champion to the
Banks, the Agent and the Collateral Agent.
8. Forbearance Agreement Not Refinancing.
A. The Banks', the Agent's and the Collateral Agent's
agreement to forbear pursuant to this Forbearance Agreement is
not, and shall not be construed as, a refinancing of the
Champion Indebtedness.
B. Champion has requested the Banks to provide additional
"Advances" (as defined in the Credit Agreement) in accordance
with Section 6.27 of the Credit Agreement. Provided, no other
or further breach, default or event of default occurs under the
Champion Loan Documents, this Forbearance Agreement or the Other
Forbearance Documents, the Banks shall, from the date hereof
through the Forbearance Period, provide Advances to Champion
solely in accordance with Section 6.27 of the Credit Agreement.
C. The amount of each Bank's Commitment and Percentage
Share appearing next to each Banks respective signature line in the
Credit Agreement are hereby amended by deleting such amounts and
percentages in their entirety and substituting therefor the
amounts and percentages set forth next to the signatures lines
appearing on this Forbearance Agreement.
D. Section 6.27(a)(x)(A) of the Credit Agreement is hereby
amended by deleting the phrase "shall not at any time on and
after the earlier to occur of (i) the Initial Equity Infusion,
or (ii) April 17, 1995, exceed $9,000,000.00", and substituting
therefor "shall not under any circumstances exceed
$9,000,000.00".
E. Section 6.27(b) of the Credit Agreement is hereby
amended by deleting Section (z) from the definition of "Applicable
Eligible Inventory Percentage" in Section 6.27(b) and
substituting therefor the following:
"(z) from and after January 1, 1995, through the Forbearance
Period, thirty-five percent (35%)."
F. Champion acknowledges and agrees that the Banks, the
Agent and the Collateral Agent have made no assurances, have not
committed, and are under no obligation to extend the Forbearance
Period.
9. Reaffirmation. Champion hereby reaffirms to the Banks, the
Agent and the Collateral Agent, its pledge and grant of the
liens and security interests described in the Champion Loan
Documents. Champion hereby affirms the continued validity of
the Champion Loan Documents, and acknowledges that all of the
terms and provisions of the Champion Loan Documents are and
remain in full force and effect, are enforceable in accordance
with their terms and the Banks, the Agent and the Collateral
Agent are not in breach or default of any of the terms,
conditions and provisions of the Champion Loan Documents.
10. Forbearance. The forbearance described in this Forbearance
Agreement shall be limited solely to Champion's default of
Sections 6.1(b), 6.13, 6.15, 6.29 and 9.1(n) of the Credit
Agreement, Article V of the IRB Agreement and Section 5(h) of
the Workmen's Compensation Agreement existing prior to the date
of this Forbearance Agreement and shall not be deemed (A) a
forbearance of any other terms or provisions of the Champion
Loan Documents, or any other agreements, documents or
instruments referenced therein or executed and delivered
pursuant thereto, (B) a waiver by the Banks, the Agent and the
Collateral Agent of any default, breach or event of default,
whether now existing or arising or occurring after the date
hereof, or (C) to affect any of the Banks', the Agent's or the
Collateral Agent's rights or remedies pursuant to the Champion
Loan Documents, or any other agreements, documents or
instruments referenced therein or executed and delivered
pursuant thereto, at law, in equity or otherwise. The Banks,
the Agent and the Collateral Agent hereby continue to reserve
all of their rights and remedies pursuant to the Champion Loan
Documents, as well as any rights and remedies at law, in equity
or otherwise. Champion expressly acknowledges and agrees that,
upon the expiration or termination of the Forbearance Period,
the Banks, the Agent and the Collateral Agent may exercise any
of their rights and remedies pursuant to the Champion Loan
Documents, at law, in equity or otherwise, in connection with
Champion's default of Sections 6.1(b), 6.13, 6.15, 6.29 and
9.1(n) of the Credit Agreement, Article V of the IRB Agreement
and Section 5(h) of the Workmen's Compensation Agreement
existing prior to the date of this Forbearance Agreement. Such
forbearance shall not be or be deemed a waiver of, nor shall it
preclude the subsequent exercise of any such right or remedy,
without further notice, and nothing contained in this
Forbearance Agreement shall be or be deemed to be a waiver of
any presently existing or any hereafter arising or occurring
breach, default or event of default, including, but not limited
to, Champion's default of Sections 6.1(b), 6.13, 6.15, 6.29 and
9.1(n) of the Credit Agreement, Article V of the IRB Agreement
and Section 5(h) of the Workmen's Compensation Agreement
existing prior to the date of this Forbearance Agreement.
Nothing contained in this Forbearance Agreement shall affect
Champion's obligation to pay the Champion Indebtedness.
11. Waiver and Release. In consideration of the Banks', the
Agent's and the Collateral Agent's execution and delivery of
this Forbearance Agreement, Champion hereby waives, releases and
forever discharges the Banks, the Agent and the Collateral
Agent, their predecessors, parents, subsidiaries, affiliates,
agents, employees, officers, directors, shareholders, attorneys,
legal representatives, successors and assigns, and each of them,
of and from any and all claims, demands, counterclaims,
set-offs, defenses, debts, liabilities, obligations, costs,
expenses, actions, causes of action and damages of every kind,
nature and description whatsoever, known or unknown, foreseeable
and unforeseeable, liquidated and unliquidated, insured and
uninsured, which Champion heretofore and/or presently owns,
holds or has by reason of any matter, cause or thing whatsoever,
arising from, relating to or in connection with the Champion
Loan Documents, the Champion Indebtedness, the default by
Champion, this Forbearance Agreement or the Other Forbearance
Documents. Champion hereby acknowledges and agrees that the
foregoing release shall not be or be deemed to create, construe
or admit any liability on behalf of the Banks, the Agent and the
Collateral Agent.
12. Lockbox Arrangement. Champion acknowledges and agrees that
(a) all account debtors have been and will be directed to remit
all payments on accounts receivable directly into the lockbox
previously established with the Agent ("Lockbox Proceeds"), and
(b) it shall remit all payments on accounts receivable or
proceeds of any other collateral or security received by
Champion immediately to the Agent (collectively the "Other
Proceeds")[the Lockbox Proceeds, together with the Other
Proceeds are collectively the "Proceeds"]. Champion hereby
irrevocably designates, makes, constitutes and appoints the
Banks, the Agent and the Collateral Agent as Champion's true and
lawful attorney and agent-in fact, in Champion's, the Banks',
the Agent's and the Collateral Agent's name, to endorse the name
of Champion upon any of the Proceeds. Champion hereby
authorizes the Agent to, and acknowledges and agrees that the
Agent will apply, on a daily basis, all immediately available
Proceeds towards payment of any outstanding costs, fees or
expenses, accrued interest or the principal amount of the
outstanding revolving loans, in any order or manner as the Agent
(as directed by the "Majority Banks", as defined in the Credit
Agreement) may determine. Champion further acknowledges and
agrees that such Proceeds will not under any circumstances be
deposited into Champion's general operating or any other
accounts with any of the Banks.
13. Authority To Execute This Forbearance Agreement. Champion
represents and warrants to the Banks, the Agent and the
Collateral Agent that (a) it has obtained all necessary consents
to enter into, execute, deliver and perform this Forbearance
Agreement, including, but not limited to, resolutions of the
Board of Directors of Champion, (b) Champion has the right,
power and capacity and is duly authorized and empowered to enter
into, execute, deliver and perform this Forbearance Agreement,
and (c) the execution and delivery of this Forbearance Agreement
shall not breach any agreement, instrument or document to which
Champion is a party or by which it is bound.
14. Notices. Any and all notices, demands, requests,
consents, designations, waivers, and other communications required or
desired to be given in connection with this Forbearance
Agreement shall be in writing and shall be effective upon
personal delivery, upon receipted delivery by Federal Express or
another overnight carrier, or three (3) days after mailing if
mailed by certified mail, return receipt requested, postage
prepaid, to Champion or the Banks, the Agent, and the Collateral
Agent at the following address or such other address as they may
respectively designate in like manner; provided, however,
notices of a change of address shall be effective only upon
receipt thereof:
If to LaSalle,
then to: With a copy to:
LaSalle National Bank Fagel & Haber
120 South LaSalle Street 140 South Dearborn, Suite 1400
Chicago, Illinois 60603 Chicago, Illinois 60603
Attention: Mr. Thomas J. Bieke Attention: Gina M. Gentili, Esq.
If to the With a copy to:
Collateral Agent
or the Agent,
then to:
LaSalle National Bank Fagel & Haber
120 South LaSalle Street 140 South Dearborn, Suite 1400
Chicago, Illinois 60603 Chicago, Illinois 60603
Attention: Mr. Thomas J. Bieke Attention: Gina M. Gentili, Esq.
If to Harris, With a copy to:
then to:
Harris Trust and Savings Bank Chapman & Cutler
200 West Monroe Street, 17th Floor 111 West Monroe Street, 17th Floor
Chicago, Illinois 60603 Chicago, Illinois 60603
Attention: Mr. Michael Wood Attention: Edward L. Lembitz, Jr.
If to NBD, With a copy to:
then to:
NBD Bank Honigman, Miller, Schwartz & Cohn
710 First National Building 2290 First National Building
Detroit, Michigan 48226 Detroit, Michigan 48226
Attention: Mr. Andrew Arton Attn.: Theodore Sylwestrazak, Esq.
If to Champion, With a copy to:
then to:
Champion Parts, Inc. Adelman, Gettleman & Merens, Ltd.
2525 22nd Street 53 W. Jackson Boulevard, Suite 1050
Oak Brook, Illinois 60521 Chicago, Illinois 60604
Attention: Executive Vice President Attention: Howard L. Adelman, Esq.
15. Construction. This Forbearance Agreement shall be
interpreted, construed and governed by and under the laws of the
State of Illinois.
A. Wherever possible, each provision of this Forbearance
Agreement shall be interpreted in such manner as to be valid and
enforceable under applicable law, but if any provision of this
Forbearance Agreement is held to be invalid or unenforceable by
a court of competent jurisdiction, such provision shall be
severed herefrom and such invalidity or unenforceability shall
not affect any other provision of this Forbearance Agreement,
the balance of which shall remain in and have its intended full
force and effect; provided, however, if such provision may be
modified so as to be valid and enforceable as a matter of law,
such provision shall be deemed to be modified so as to be valid
and enforceable to the maximum extent permitted by law.
B. The Paragraph headings contained in this Forbearance
Agreement are solely for the purpose of reference, are not part
of the agreement among Champion, the Banks, the Agent and the
Collateral Agent and shall not in any way affect the meaning or
interpretation of this Forbearance Agreement, any Paragraph or
provision thereof.
C. This Forbearance Agreement shall be binding on Champion
and its successors, and shall inure to the benefit of the Banks, the
Agent and the Collateral Agent, their respective successors,
assigns, affiliates, divisions and parent.
D. This Forbearance Agreement and the Other Forbearance
Documents cannot be assigned by Champion without the Banks', the
Agent's and the Collateral Agent's, prior written consent;
provided, however, the Banks, the Agent and the Collateral Agent
may assign this Forbearance Agreement, the Other Forbearance
Documents or the Champion Loan Documents without notice to or
the consent of Champion.
F. No failure to exercise, and no delay in exercising, any
of the Banks', the Agent's and the Collateral Agent's rights,
powers or privileges shall operate as a waiver thereof.
1. No waiver of any breach of any provision shall
be deemed to be a waiver of any preceding or succeeding breach of the same
or any other provision.
2. No extension of time for the payment of any of
the Champion Indebtedness or any other sum to be paid pursuant to
this Forbearance Agreement, or the performance of any other
obligation or act, shall be deemed to be an extension of the
time for payment or performance of any other obligation or act.
3. This Forbearance Agreement may not be altered,
changed, amended or modified, except in accordance with Section 11.1 of
the Credit Agreement.
G. Whenever required by context, the masculine pronouns
will include the feminine and neuter genders, and the singular will
include the plural, and vice versa.
H. This Forbearance Agreement constitutes the entire
agreement among Champion, the Banks, the Agents and the Collateral Agent
with regard to the subject matter hereof. The Exhibits
referenced herein are attached hereto, made a part hereof and
incorporated herein by this reference thereto.
I. If, and to the extent the terms and provisions of this
Forbearance Agreement contradict or conflict with the terms and
provisions of the Champion Loan Documents, the terms and
provisions of this Forbearance Agreement shall govern and
control; provided, however, to the extent the terms and
provisions of this Forbearance Agreement do not contradict or
conflict with the terms and provisions of the Champion Loan
Documents, then the Champion Loan Documents shall remain in and
have their intended full force and effect, and Champion hereby
affirms, confirms and ratifies the same.
16. Consent to Jurisdiction and Waiver of Jury Trial.
Champion, the Banks, the Agent and the Collateral Agent
irrevocably agree, and hereby consent and submit to the
exclusive jurisdiction of the Circuit Court of Cook County,
Illinois and the United States District Court of the Northern
District of Illinois, Eastern Division, with regard to any
litigation, actions or proceedings arising from, relating to or
in connection with the Champion Loan Documents, the Champion
Indebtedness, the default by Champion under the Champion Loan
Documents, any collateral or security therefor, this Forbearance
Agreement or the Other Forbearance Documents, excepting only any
litigation, actions or proceedings arising from, relating to or
in connection with the IRB Agreement or the Workmen's
Compensation Agreement.
A. Champion hereby waives any right it may have to transfer
or change the venue of any litigation, actions or proceedings filed
in the Circuit Court of Cook County, Illinois, or the United
States District Court for the Northern District of Illinois,
Eastern Division.
B. Champion hereby irrevocably appoints and designates
Howard L. Adelman, Adelman, Gettleman & Merens, Ltd., 53 West Jackson
Boulevard, Suite 1050, Chicago, Illinois 60604, as its true and
lawful attorney-in-fact and duly authorized agent to accept
service of any legal process or any notice which,
notwithstanding Champion's waiver of notice contained in this
Forbearance Agreement, the Banks, the Agent or the Collateral
Agent desire or elect to provide to Champion, and agrees that
service of process upon such attorney-in-fact shall constitute
personal service of process upon Champion, and further waives
any objection to service of process upon such attorney-in-fact.
C. Champion shall direct such attorney-in-fact to forward
any such notice or service of process to each of Champion, at the
addresses set forth in Paragraph 14.
D. CHAMPION, THE BANKS, THE AGENT AND THE COLLATERAL AGENT
EACH HEREBY ABSOLUTELY AND UNCONDITIONALLY WAIVE THEIR
RESPECTIVE RIGHT TO A TRIAL BY JURY.
CHAMPION PARTS, INC., an
Illinois corporation
By: __________________
Title:__________________
Amount of Percentage LA SALLE NATIONAL BANK, individually
Commitment Share as Agent and as Collateral Agent
$9,290,322.54 51.612903% By: ___________________
Title:___________________
Amount of Percentage NBD BANK
Commitment Share
$5,225,806.44 29.032258% By: ___________________
Title:___________________
Amount of Percentage HARRIS TRUST AND
Commitment Share SAVINGS BANK, an
Illinois corporation
$3,483,871.02 19.354839% By: ___________________
Title:___________________
Total
Commitments
$18,000,000.00