Exhibit 1
[CHANCELLOR LETTERHEAD]
As of December 29, 1995
To the Lenders who are signatory to the Moratorium Agreement referred to below:
Ladies and Gentlemen:
Reference is made to that certain Loan Agreement dated as of April 6, 1990,
and that certain Forbearance Agreement dated as of April 6, 1990 and that
certain Moratorium Agreement dated as of October 29, 1993, each as previously
amended from time to time (collectively the "Governing Documents"). We hereby
request that you agree as follows, and that you indicate your agreement to the
following terms by counter-executing this letter:
1. All capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to them in the Moratorium Agreement, except that the term
"Event of Default" shall also mean and include any breach of any representation,
warranty, covenant or agreement set forth in this Agreement, any failure to
satisfy any obligations set forth in this Agreement, or any event or condition,
which, with the passage of time, giving of notice or otherwise would constitute
such a breach.
2. Subject to the terms and conditions set forth in this letter, the
Lender and the Participants who are signatories hereto agree to forbear from
exercising any of the rights and remedies against the Borrowers with respect to
the Old Debt, the Deferred Payment Notes or the New Loan until the earlier of
(i) January 31, 1996 and (ii) the date of any Event of Default.
3. Provided that no Event of Default has occurred and is continuing and
subject further to the terms and conditions of the Governing Documents, the
Lender agrees to make available to the Borrowers from the Collateral Account for
working capital purposes to the extent of collected funds available in such
account, during the month of January, 1996, the sum of $450,000.
4. Loan Payments, etc.
------------------
On or before January 25, 1996, the Borrowers shall make a mandatory payment
of principal on the Old Debt in the amount of One Hundred and Nine Thousand
Dollars ($109,000) and shall pay all interest on the New Loan, the Old Loan and
the Deferred Payment Notes accrued through and including such date.
The Borrowers hereby direct the Lender to debit all of the foregoing
amounts from the Collateral Account on such date and the Borrowers agree that
an Event of Default shall occur if collected funds are not then on deposit in
the Collateral Account on any such date to make such payments, if such payments
are not
[CHANCELLOR LETTERHEAD]
made, or if as a result of the making of such payments, the covenant set forth
in Section 5(a) of the letter agreement dated April 30, 1995 is breached.
The Borrowers, the Lender and the Participants who are signatories hereto
acknowledge that the Participants, if any, who are not signatories hereto have
not agreed to any extension of or moratorium with respect to their Old Debt.
The parties agree that all principal payments by the Borrowers on the Old Debt
pursuant to this Agreement shall nevertheless be applied pari passu to reduce
the outstanding principal balance on the Old Debt unless and until such time, if
any, that all affected parties agree to a different treatment of such payments.
Interest on the New Loan and on the Old Debt and Deferred Payment Notes
shall continue to accrue at the rates currently in effect. For purposes of
clarity, those rates are:
The interest rate on the Old Debt (and, where applicable, the Deferred
Payment Notes) to each Participant is as follows:
Lender Interest Rate
------ -------------
Atlantic Bank of New York Prime + 3.75%*
The Daiwa Bank, Limited Prime + 3.75%*
FDIC, As Receiver for First Mutual
of Boston Prime + 3.75%*
Shawmut Bank, N.A. Prime + 3.75%*
AMRESCO New Hampshire, Inc.,
successor to First NH Bank, N.A. 15.50%
Northwestern National Life Insurance
Company, SAS 11.66%
Farm Bureau Insurance Company of
Michigan 11.66%
Farm Bureau Annuity Company 11.66%
Farm Bureau Mutual Insurance 11.66%
The CIT Group, Inc. Prime + 3.75%*
*The Prime Rate as in effect from time to time.
The interest rate on the New Loan shall be the Prime Rate as in effect from
time to time, plus three and one-half percent (3 1/2%).
During the continuance of any Event of Default and following any
termination of this Agreement, the interest rate on the Old Debt and on the New
Loan shall be as set forth in Section 8 of the Moratorium Agreement.
5. Obligors; Confirmation of Obligations. Chancellor Corporation and
-------------------------------------
each of the other entities identified on the first two signature pages to this
- 2 -
[CHANCELLOR LETTERHEAD]
letter agreement (each, an "Obligor") ratify and confirm that they are and agree
to be parties to each of the Loan Documents, are and agree to be bound by all
covenants and agreements of the Borrowers, Guarantors and Debtors thereunder,
and are and agree to be jointly and severally liable for all Obligations
thereunder, all as if the undersigned were original parties to the Loan
Documents as of the date of such Loan Documents.
Without limiting the generality of the foregoing, each Obligor
hereby: (i) agrees to perform all obligations and duties required of a
Borrower under the Loan Agreement; (ii) agrees to be jointly and severally
liable as a maker under the Note; (iii) confirms that its property is part of
the Collateral under the Security Agreement, and grants, as a Debtor under the
Security Agreement, a continuing first priority security interest in and to all
of the Obligor's right, title and interest in and to the property described as
collateral under the Security Agreement to the Lender, as agent for the
Participants, and agrees to execute all documents and instruments, including
without limitation, financing statements as may be requested by the Lender to
evidence and perfect the Lender's security interest in such property; (iv) joins
as a Guarantor and guarantees the "Indebtedness" under and in accordance with
Article V of the Forbearance Agreement, and agrees to perform all obligations
and duties of a Guarantor under the Forbearance Agreement; and (v) agrees to
abide by and otherwise be bound by all provisions of each Loan Document as if it
were an original Borrower, Guarantor or Debtor thereunder.
Chancellor Corporation represents and warrants that each Obligor is wholly
owned by it, and that such Obligors are all of Chancellor Corporation's direct
and indirect subsidiaries.
6. The Lender's and the Participants' agreements herein are subject to
the Borrowers and the Guarantors delivering to the Lender the following items,
in form and substance satisfactory to the Lender and its counsel and the
Participants and their respective counsel:
(a) Resolutions of the Boards of the Directors of the Borrowers and the
Guarantors authorizing the execution and delivery by the Borrowers and the
Guarantors of this Agreement and of the other documents and instruments referred
to herein; and
(b) such other documents, instruments, opinions of counsel and other
materials that the Lender, any Participant, or their respective counsel may
reasonably require.
- 3 -
[CHANCELLOR LETTERHEAD]
The Borrowers agree that an Event of Default shall occur if any of the
foregoing conditions are not satisfied.
7. Except as explicitly set forth above, the Moratorium Agreement as
previously amended is hereby ratified and confirmed and remains in full force
and effect.
8. By agreeing to the terms of this letter, neither the Lender nor the
Participants shall be deemed to have waived any defaults which may exist under
the Loan Documents or to have in any manner agreed to consider or grant any
further extensions of the Borrowers' absolute and unconditional obligation to
repay all of the principal, interest, fees, costs and other expenses on the Old
Debt, the New Loan, the Deferred Payment Notes or otherwise under the Loan
Documents, or to consider or grant or extend any other or further accommodations
to the Borrowers on account of the Old Debt, the New Loan, the Deferred Payment
Notes, the Loan Documents or otherwise.
Nothing in this letter, nor any communication between any Lender or any
Participant and the Borrowers shall be deemed a waiver of any right or remedy of
the Lender or any Participant, each Participant and the Lender hereby reserving
all of its rights and remedies under the Loan Documents, this Agreement and
applicable law.
[INTENTIONALLY LEFT BLANK]
- 4 -
[CHANCELLOR LETTERHEAD]
Very truly yours,
CHANCELLOR CORPORATION
By: /s/ William J. Guthlein
--------------------------------------
Name: William J. Guthlein
Title: Vice President, Treasurer and C.F.O.
CHANCELLOR FLEET CORPORATION, for itself
and as Trustee of the Trusts listed below
By: /s/ William J. Guthlein
--------------------------------------
Name: William J. Guthlein
Title: Vice President, Treasurer and C.F.O.
Alco 474N Trust
Cains 931D Trust
Cains 931E Trust
Dallas 38329 Trust
Farmland 982A Trust
H.E. Butt 796C Trust
Kraft 79328 Trust
Kraft 993A Trust
PIC B03D Trust
Tyler 3110 Trust
Whirlpool 49434 Trust
CHANCELLOR FINANCIAL SALES
AND SERVICES, INC.
By: /s/ William J. Guthlein
--------------------------------------
Name: William J. Guthlein
Title: Vice President, Treasurer and C.F.O.
- 5 -
[CHANCELLOR LETTERHEAD]
CHANCELLOR FINANCIALEASE, INC.
By: /s/ William J. Guthlein
--------------------------------------
Name: William J. Guthlein
Title: Vice President, Treasurer and C.F.O.
VALMONT FINANCIAL CORPORATION
By: /s/ William J. Guthlein
--------------------------------------
Name: William J. Guthlein
Title: Vice President, Treasurer and C.F.O.
CHANCELLOR FLEET REMARKETING, INC.
By: /s/ William J. Guthlein
--------------------------------------
Name: William J. Guthlein
Title: Vice President, Treasurer and C.F.O.
- 6 -
TERMS SET FORTH IN PARAGRAPHS 1-8 ABOVE
ARE ACCEPTED AND AGREED:
SHAWMUT BANK, N.A. - Corporate Trust
Division, as agent for the Participants
By: /s/ Robert L. Bice II
------------------------------------
Name: Robert L. Bice II
Title: Vice President
NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY
By: /s/ Kenneth Katz
------------------------------------
FARM BUREAU LIFE INSURANCE COMPANY OF
MICHIGAN
By: /s/ Steven R. Harkness
------------------------------------
Steven R. Harkness
Portfolio Manager
F.B. ANNUITY COMPANY
By: /s/ Steven R. Harkness
-------------------------------------
Steven R. Harkness
Portfolio Manager
FARM BUREAU MUTUAL INSURANCE COMPANY OF
MICHIGAN
By: /s/ Steven R. Harkness
-------------------------------------
Steven R. Harkness
Portfolio Manager
SHAWMUT BANK, N.A.
Equipment Leasing Division
By: /s/ Daniel T. Stevens, AVP
-------------------------------------
- 7 -
ATLANTIC BANK OF NEW YORK
By: /s/ Charles J. Margiotti III
-------------------------------------
Charles J. Margiotti III, V.P.
THE DAIWA BANK, LIMITED
By: /s/ Stephen F. O'Sullivan
----------------------------------
By: /s/ Daniel G. Eastman
----------------------------------
THE CIT GROUP/EQUIPMENT FINANCING, INC.
By: /s/ Thomas L. Abbate
----------------------------------
FEDERAL DEPOSIT INSURANCE CORPORATION
In its capacity as receiver for First
Mutual Bank
By: __________________________________
AMRESCO NEW HAMPSHIRE, INC.
(Successor to FIRST NH BANK, N.A.)
By: /s/ Albert F. Buresh
----------------------------------
- 8 -