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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 (Date of earliest event reported):
February 16, 1996
ABS INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-9556 34-0074580
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation)
Interstate Square I, Suite 300, Willoughby, Ohio 44094
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (216) 946-2274
None
(Former name or former address, if changed since last report)
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Item 3. Bankruptcy or Receivership
On February 16, 1996, the United States Bankruptcy Court for the
Northern District of Ohio entered an order (the "Order") appointing Mr.
Frederick Caruso as designated responsible party to operate Colfor, Inc. and
Colmach, Inc., the operating subsidiaries of the registrant, ABS Industries,
Inc., and directing certain other relief (Case Nos. 96-60306 and 96-60307).
Although the registrant itself is not the subject of bankruptcy proceedings,
Colfor, Inc. and Colmach, Inc. constitute substantially all of the assets and
operations of the registrant.
Pursuant to the Order, Mr. Caruso shall continue as President and
Chief Executive Officer of Colfor, Inc. and Colmach, Inc. and shall have all
the powers, authority and fiduciary obligations of a debtor in
possession/chapter 11 trustee under the Bankruptcy Code.
This summary of the Order is qualified in its entirety by reference to
the attached Exhibit 99.1.
Item 5. Other Events
On February 19, 1996, Porter C. McKinnon resigned, effective
immediately, from the board of directors of the registrant, leaving William J.
McCarthy and David C. Dean as the remaining members of the registrant's board
of directors.
Item 7. Financial Statements and Exhibits
(c) Exhibits.
99.1 Order of the United States
Bankruptcy Court for the Northern District of Ohio, dated February 16, 1996,
with exhibit attached, appointing a designated responsible party to operate
Colfor, Inc. and Colmach, Inc. and directing certain other relief.
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 hereunto duly authorized.
DATED: February 23, 1996
ABS INDUSTRIES, INC.
By: /s/ William J. McCarthy
--------------------------------
Name: William J. McCarthy
Title: President and
Chief Executive Officer
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EXHIBIT INDEX
-------------
Number Subject Matter
- ------ --------------
99.1 Order of the United States Bankruptcy Court for the Northern
District of Ohio, dated February 16, 1996, with exhibit
attached, appointing a designated responsible party to operate
Colfor, Inc. and Colmach, Inc. and directing certain other
relief.
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EXHIBIT 99.1
UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
IN RE: )
) CASE NOS. 96-60306
COLFOR, INC. ) AND 96-60307
AND )
COLMACH, INC., ) CHAPTER 11
)
DEBTORS. ) JUDGE JAMES H. WILLIAMS
- -------------------------- ---
ORDER APPOINTING A DESIGNATED RESPONSIBLE PARTY TO OPERATE
THE DEBTORS' BUSINESSES AND DIRECTING CERTAIN OTHER RELIEF
----------------------------------------------------------
This matter is before the Court on the Motion of the Senior
Lenders for Order Appointing a Chapter 11 Trustee (the "Motion") filed by
National City Bank, Sanwa Business Credit Corporation and Fifth Third Bank
(collectively, the "Senior Lenders") on February 13, 1996; the Court having
reviewed the Motion and having heard the statements of counsel in respect of
the settlement of the issues presented in the Motion (the "Settlement") that
was completed at a hearing on the Motion held on February 15, 1996 (the
"Hearing"); and the Court being fully advised in the premises;
THE COURT HEREBY FINDS AND CONCLUDES THAT:
A. The Court has jurisdiction over this matter pursuant
to 28 U.S.C. Section Section 157 and 1334. This is a core proceeding pursuant
to 28 U.S.C. Section 157(b)(2).
B. The Senior Lenders provided the best notice possible
under the circumstances of the Motion and the Hearing. Given the effectuation
of the Settlement at the Hearing, the notice of the
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Settlement constituted the best possible notice under the circumstances.
C. At the Hearing, the Debtors, the Senior Lenders, the
Customers (as such term is defined in the Motion), ABS Industries, Inc. ("ABS")
and Mr. William J. McCarthy, all having been represented by counsel, agreed to
the terms of the Settlement, which terms were read into the record at the
Hearing and are set forth in this Order.
D. The Debtors consented to the entry of an order for
relief in their chapter 11 cases on the record at the Hearing.
E. There is just cause for the relief granted herein.
IT IS HEREBY ORDERED THAT:
I. Subject to further order of the Court, the Debtors
shall be operated by a "designated responsible party" who shall be their
current President and Chief Executive Officer, Mr. Frederick Caruso (the
"Responsible Party"). The Responsible Party, as both a President and CEO of
the Debtors, shall have all powers, authority and fiduciary obligations of a
debtor in possession/chapter 11 trustee (such powers, authority and duties to
include those granted under, without limitation, sections 1106, 1108 and 1109
of the Bankruptcy Code, 11 U.S.C. Section Section 101-1330 (the "Bankruptcy
Code")). In connection with the operation of the businesses of the Debtors,
and without limitation, the Responsible Party shall have full and exclusive
power and authority to:
A. Employ, discharge and fix the compensation,
salaries and wages for all managers, officers, directors, agents,
employees and servants of the Debtors as he may deem necessary and
advisable for the proper operation of the Debtors' businesses and the
management, preservation and
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protection of their property consistent with past practices of the
Debtors; PROVIDED, HOWEVER, that Mr. Caruso's salary and the salary or
wages for any affiliate of Mr. Caruso's shall be subject to Court
approval;
B. Pay and satisfy out of any funds now or
hereafter coming into the Debtors' possession all claims for wages,
salaries and compensation of all managers, agents, employees and
servants for services rendered after the petition date;
C. Buy and sell merchandise, supplies, goods and
other property necessary and essential for the Debtors' operations in
the ordinary course and render services or manufacture goods for cash
or on credit;
D. Purchase or otherwise acquire for cash or on
credit such materials, equipment, machinery, supplies, services or
other property as he may deem necessary and advisable in connection
with the operation of the businesses and the management and
preservation of the Debtors' property and pay for any such purchases
made postpetition on credit when due;
E. Enter into any contracts incidental to the
normal and usual operation of the Debtors' businesses and the
management and preservation of their property;
F. Keep the property of the Debtors' estates
insured in such manner and to such extent as he may deem necessary and
advisable and pay such postpetition insurance premiums as may become
due thereon;
G. Collect and receive all outstanding accounts,
rents, issues, income, profits and credits due or to become
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due to the Debtors' estates and hold and retain all monies thus
received;
H. Engage and pay professionals in accordance
with sections 327 through 330 of the Bankruptcy Code and the related
Federal Rules of Bankruptcy Procedure;
I. Pay and discharge out of any funds now or
hereafter coming into the possession of the Debtors all postpetition
taxes and similar charges lawfully incurred in the operation,
preservation and maintenance of the Debtors' businesses;
J. Manage accounts receivable and accounts
payable of the Debtors, pay all ordinary course postpetition
liabilities and reconcile the Debtors' financial statements and bank
accounts;
K. Sign checks for and on behalf of the Debtors;
and
L. Ensure that the Debtors comply with the
United States trustee's chapter 11 operating requirements, including
filing timely monthly operating reports.
II. Without limiting the foregoing, the Responsible Party
shall be, and hereby is, specifically directed to: (a) forthwith engage an
investment banker, subject to this Court's approval, to seek to effect the
sale, pursuant to section 363 of the Bankruptcy Code, of all or substantially
all of the Debtors' assets on or before April 21, 1996; and (b) file or cause
to be filed with the Bankruptcy Court a motion and all related pleadings to
effect the sale of all or substantially all of the Debtors' assets (an "Asset
Sale Motion") by said date. The Responsible Party shall be, and hereby is,
authorized to propose, negotiate,
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file and proceed to confirmation on a plan of reorganization for the Debtors.
III. There shall be established separate, independent
boards of directors of the Debtors, the members of which boards shall be chosen
by the Responsible Party and shall be subject to the approval of this Court.
The members of these boards of directors shall not include any of the current
members of, or any entity or person affiliated with, the board of directors of
ABS.
IV. Neither Mr. McCarthy nor ABS shall have any control
over or input into the operations of the Debtors or the operations and
deliberations of the Debtors' new boards of directors. Neither Mr. McCarthy
nor ABS shall have any control over or input into the sale process referred to
in paragraph 2 above; PROVIDED, HOWEVER, that Mr. McCarthy and ABS shall have
the rights of an interested party in these cases and those rights set forth in
paragraph 5 below.
V. From the time that the Responsible Party files an
Asset Sale Motion with the Bankruptcy Court until the hearing on such motion
scheduled by the Bankruptcy Court (but in any event upon not less than 20 days'
notice), Mr. McCarthy will not be prohibited from attempting to make a higher
and better offer than that proposed in the Asset Sale Motion.
VI. The Senior Lenders agree to the contribution to ABS
by the Debtors of $25,000 per month for a period of three months to be used for
corporate salaries and other necessary expenses; PROVIDED, HOWEVER, that such
sums shall under no circumstances be used to satisfy fees and expenses
associated with the defense of the pending securities or any other lawsuits
filed against ABS and/or Mr. McCarthy. ABS shall be, and hereby is, directed
to
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deliver, within 10 days after the end of each calendar month that it receives
such contributions from the Debtors, to the Senior Lenders, the United States
trustee and any official committees appointed in the Debtors' chapter 11 cases
an accounting of its use of any such contributions made pursuant to this
paragraph 6.
VII. The Responsible Party shall be, and hereby is,
directed to enter into the Accommodation and Forbearance Agreement and the
Access and Security Agreement (collectively, the "Financing Agreements"),
copies of which are attached hereto collectively as Exhibit A and are
incorporated herein by reference, inasmuch as it is understood by the parties
to the Settlement, as expressed on the record at the Hearing, that immediate
execution of the foregoing agreements is necessary to continue essential
funding of the Debtors' operations.
VIII. This Order hereby memorializes the Order issued by
this Court at the Hearing (a) authorizing any immediate, interim use by the
Debtors of cash collateral that may have occurred prior to the entry of this
Order and (b) authorizing, on an interim basis, the Senior Lenders to advance
funds to the Debtors prior to the entry of this Order, all in accordance with
the terms of the Financing Agreements, pursuant to sections 363 and 364 of the
Bankruptcy Code.
IX. Pending the entry of a final order authorizing the
Debtors' use of cash collateral and approving postpetition financing
arrangements and pursuant to sections 363 and 364 of the Bankruptcy Code, the
Senior Lenders shall be, and hereby are, authorized on an interim basis to
advance funds to the Debtors, and the Debtors shall be, and hereby are,
authorized on an interim basis to utilize their cash collateral, all in
accordance with the
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terms of the Financing Agreements. The reversal or modification on appeal of
this Order or the failure to obtain a final order in respect of the Financing
Agreements shall not affect the validity of any debt incurred by the Debtors
under the Financing Agreements or any priority or lien granted in respect of
such debt. Further, (a) any liens in collateral granted to the Senior Lenders
prior to the petition date shall be unaffected by the entry of this Order, and
(b) the Senior Lenders shall be granted replacement liens on the same
collateral and any such collateral created postpetition for any postpetition
advances made to the Debtors under the terms of this Order.
X. The Responsible Party shall be, and hereby is,
directed to file appropriate pleadings to seek this Court's final approval of
the Financing Agreements on an expedited basis inasmuch as it is understood by
the parties to the Settlement, as expressed on the record at the Hearing, that
final Court approval of the foregoing agreements is necessary to continue
essential funding of the Debtors' operations. Accordingly, there shall be a
hearing (the "Financing Hearing") on the entry of a final order authorizing the
Debtors' use of cash collateral and approving the postpetition financing
arrangements to the extent provided for in the Financing Agreements on Friday,
March 8, 1996, at 10:00 a.m. Service of this Order upon parties in interest
shall constitute good and sufficient notice of the Financing Hearing under the
circumstances.
XI. Nothing set forth in this Order shall be construed as
authorizing or directing the Responsible Party to deviate from his fiduciary
obligations or duties.
XII. The entry of this Order shall not affect the rights
of parties in interest that were not present at the Hearing, or the
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right of the United States trustee or any official creditors' committees that
may be appointed in these chapter 11 cases, to file an objection to the
designation of the Responsible Party and the enumeration of his powers herein;
PROVIDED, HOWEVER, that any such objection must be filed with the Court and
served upon the parties in interest that made an appearance at the Hearing at
least two business days prior to the Financing Hearing.
Dated: February 16, 1996
/s/ James H. Williams
------------------------------
UNITED STATES BANKRUPTCY JUDGE
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EXHIBIT A
---------
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ACCOMMODATION AND FORBEARANCE AGREEMENT
---------------------------------------
National City Bank, Fifth Third Bank, Sanwa Business Credit
Corporation (collectively the "Lenders"), GKN Automotive, Inc. ("GKN"), Dana
Corporation ("Dana"), Ford Motor Company ("Ford"), General Motors Corporation
("GM"), American Axle & Manufacturing ("AAM" or together with GKN, Dana, Ford
and GM the "Customers" or a "Customer"), Colfor, Inc. ("Colfor") and Colmach,
Inc. ("Colmach" or together with Colfor, the "Debtors") enter into this
Agreement on February 16, 1996.
RECITALS
--------
A. Pursuant to various purchase orders and/or supply contracts
("Purchase Orders") between Colfor or Colmach on the one hand, and the
respective Customers, on the other hand, the Debtors are obligated to
manufacture and supply the Customers with component parts called for by the
Purchase Orders.
B. The Lenders provide substantially all of the Debtors' working
capital financing pursuant to various loan agreements between the Debtors and
the Lenders (collectively, the "Loan Agreement").
C. The Debtors have requested that the Customers and the Lenders
provide certain financial accommodations to the Debtors.
D. Subject to the terms of this Agreement, the Lenders and the
Customers have agreed to provide certain financial accommodations to the
Debtors.
E. This Agreement is intended to replace (i) the Agreement
Regarding Interim Financing dated January 11, 1996 between the
Lenders, the Customers and the Debtors' parent company, ABS Industries, Inc.,
as amended on January 18, 1996 (the "First
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Amendment") and on January 22, 1996 (the "Second Amendment") (collectively,
the "Interim Agreement") and (ii) the Term Sheet for Financing Colfor, Inc.,
and Colmach, Inc., dated January 26, 1996 (the "Term Sheet").
BASED ON THE FOREGOING RECITALS (which are incorporated as
representations and warranties of the parties) and other good and valuable
consideration, the receipt and adequacy of which are acknowledged, the parties
agree as follows:
TERMS AND CONDITIONS
--------------------
1. ACCOUNTS PAYABLE BALANCES. The Customers represent that their
respective outstanding accounts payable for shipments made by the Debtors on or
before January 21, 1996 are at least the following amounts net of payments made
on or about January 12, 1996 which aggregated $2,000,000 (the "Minimum
Balances"):
GM $ 1,637,880
Ford $ 767,411
Dana $ 1,123,896
GKN $ 1,247,430
AAM $ 460,885.45
It is expressly understood that the Minimum Balances include certain
amounts for shipments to the Customers during the period ending January 21,
1996, which the Debtors have represented were shipped to the Customers on or
before January 21, 1996, but are not reflected on the Customers' books and
records as of January 21, 1996; to the extent the subject shipments were not
received, the Minimum Balances will be adjusted accordingly. To the extent not
paid on or after January 31, 1996, each Customer agrees to pay its respective
Minimum Balance (as adjusted as provided in the preceding sentence) without
setoff or recoupment (except for
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"Ordinary Course of Business Setoffs" as defined below) within 24 hours after
the date of this Agreement.
While the Customers agree that their accounts payable to the
respective Debtors are no less than the Minimum Balances, it is possible that
actual amounts owing as of January 21, 1996 (subject to the setoffs and
deductions noted above) are greater (the "Actual Balances"). Accordingly, the
Customers agree to use their best efforts in good faith to work with the
Lenders and the Debtors to reconcile the Actual Balances with the Debtors'
books and records and complete such reconciliation and pay (without setoff or
recoupment except for Ordinary Course of Business Setoffs) the difference
between the Actual Balances and the Minimum Balances no later than February 25,
1996. For purposes of this Agreement, "Ordinary Course of Business Setoffs"
means setoffs and recoupments for ordinary course of business items such as
defective or nonconforming products (including incidental damages up to $2,000
per week, per customer for inspection and sorting of goods), short shipments,
arithmetic errors and the like but specifically excluding consequential or
special damages, direct loans made by the Customers to the Debtors, guaranties
of vendor shipments made by the Customers, direct purchase orders issued by the
Customers to vendors or similar such transactions.
2. PAYMENT TERMS. For shipments received after January 21,
1996, the Customers will accelerate payment of their respective accounts
payable so that payment is made net 10 days (or a near equivalent) against BONA
FIDE invoices.
3. SUSPENSION OF SETOFFS AND RECOUPMENTS.
A. For all accounts payable due Debtors for shipments
made by the Debtors prior to the expiration of the Funding Period
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(defined below), the Customers agree to waive any defenses, rights and claims
for setoffs and/or recoupment other than Ordinary Course of Business Setoffs.
Notwithstanding the foregoing sentence, the Customers do not waive any rights
and claims for damages of any kind or nature against the Debtors arising out of
contract, by operation of law or otherwise. The foregoing reservation of rights
shall not be construed to grant the Customers any right of setoff exercisable
against the Debtors (other than Ordinary Course of Business Set-Offs) which
would allow the Customers to withhold payment of any BONA FIDE accounts payable
due Debtors for shipments made by the Debtors prior to the expiration of the
Funding Period, but instead, the reservation of rights set forth above shall
operate only to preserve the Customers' rights to assert unsecured claims
against the Debtors on account of such damages and claims, if any.
B. Subject to the agreements in paragraph 3A above,
which are intended for the sole benefit of Lenders, the Customers expressly
reserve and DO NOT waive any rights and interests, they may have against the
Debtors. Further, subject to the terms of the Agreement, the Customers shall
have all other rights they would have against Debtors but for this Agreement,
including the right to assert affirmative claims, and the right to cancel or
terminate the Purchase Orders in accordance with their respective terms and
conditions. Notwithstanding the reservation of rights contained in the
preceding sentence, the Customers shall not take any actions against the
collateral granted to the Lenders under the Credit Agreement.
C. In the event Debtor(s) file a voluntary petition
under any Chapter of the Bankruptcy Code or an involuntary petition
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is filed against Debtor(s), and the Bankruptcy Court authorizes Debtor(s) to
use the pre-petition accounts receivable as cash collateral and Lenders are
awarded replacement liens on future accounts receivable owing by the Customers
("Replacement Accounts"), the provisions of this paragraph 3 will apply to such
Replacement Accounts. The Customers and the Debtors agree to the inclusion of a
provision in a financing or cash collateral order to incorporate the terms and
conditions of this paragraph 3.
4. LENDERS' FINANCING.
A. The Lenders will allow the Debtors' working capital
loan to revolve based on the existing formulas and caps through April 21, 1996
(the "Funding Period"). All advances made by the Lenders to the Debtors will
be subject to the terms and conditions of the Credit Agreement dated October
24, 1994, among Colfor, Inc., as borrower, the Lenders and National City Bank,
as agent, and all related documents, which terms and conditions shall remain in
full force and effect except as provided in this Agreement (the "Credit
Agreement").
B. During the Funding Period and absent additional or
further material default under the Credit Agreement or this Agreement, the
Lenders agree not to stop funding or accelerate or foreclose based on defaults
existing as of January 26, 1996. Further, during the Funding Period, the
Lenders will not modify or amend the Loan Agreement if such amendments or
modifications would materially affect this Agreement.
C. Notwithstanding anything to the contrary contained in
this paragraph 4, the Lenders agree to make advances to the Debtors throughout
the Funding Period that are out-of-formula under the Credit Agreement; provided
that aggregate advances under the
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Credit Agreement revolving loan do not exceed $20.5 million at any time. The
Lenders will establish an out-of-formula borrowing base amount of $4.5 million
(to be distributed in accordance with the budget attached to this Agreement as
EXHIBIT 4C) as of January 19, 1996, based on accounts receivable and inventory
generated by the Debtors on or after January 19, 1996, and further provided
that outstanding aggregate advances made from and after the date hereof through
the end of the Funding Period do not exceed $8.5 million at any time.
D. The Lenders will be entitled to receive all principal
and interest payments due during the Funding Period on all loans that the
Debtors may have with any or all of the Lenders.
5. INELIGIBLE ACCOUNTS.
Without acknowledging the validity of any "ineligible" (for
Debtors' borrowing base purposes) Accounts, the Customers and the Debtors will
use their best efforts to promptly determine the status of (and pay, if
applicable), all "ineligible" Accounts.
6. CUSTOMER OWNED PROPERTY.
The Lenders agree to cooperate with the Customers and the
Debtors to determine with precision (a) the tooling, gauges, dies, molds,
assembly fixtures, checking fixtures, returnable dunnage and similar items
(collectively, the "Customers' Property") that are being used by the Debtors
but that are owned by a Customer, and (b) the inventory in the Debtors'
possession that is owned by AAM. The Lenders and Customers acknowledge that the
Debtors assert that Debtors own a property described in clause (a) of the
immediately preceding sentence and that Customers own no such property; the
Customers disagree with Debtors' assertions. No provision of this Agreement
shall be construed as an admission by any party with
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respect to the ownership of such property or a waiver of any rights any party
may have with respect to such property.
7. ACCESS.
The Debtors agree that the Customers and their respective
agents and representatives shall have reasonable access to the Debtors'
operations, books and records at any time during business hours, or outside of
business hours upon reasonable request, for the purposes of monitoring the
Debtors' compliance with the terms of this Agreement and any other agreements
and contracts between the Debtors and the respective Customers; provided
further, (a) the Debtors will not be required to divulge any trade secrets or
proprietary information related to production processes, (b) the Customers
shall not participate in the operation of the Debtors' business, and (c) if
deemed appropriate by the Debtors, the Customers will only have access to the
Debtors' manufacturing/production floor if accompanied by a representative of
the Debtors. The foregoing is not intended to and shall not modify the Lenders'
rights to access otherwise provided in the Credit Agreement.
8. CUSTOMER BUSINESS.
During the Funding Period, each Customer agrees not to
materially reduce its dollar volume purchased from the Debtors (based on 100%
of requirements, if applicable, or trailing 6 months average purchases or
projected future monthly purchases). In all cases, the Customers' commitment
in this paragraph is subject to market fluctuations and any outstanding
spot-buy purchase orders that may not be extended or replaced. The agreements
in this paragraph are also subject to the right of each Customer to (a)
resource in the event of an actual or threatened supply deficiency
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(which deficiency is material), and (b) resource reasonable quantities as
necessary to qualify other sources of production to protect against supply
deficiencies or interruptions. Further, during the Funding Period, unless the
Debtors default on their obligations to a respective Customer or the Lenders
cease funding in accordance with paragraph 4 above (in which event no advance
notice of a re-sourcing or movement of Customer Property will be required),
each Customer agrees to provide Lenders notice (the lesser of 30 days or the
remaining days in the original Funding Period) of re-sourcing or tooling
removal. Notwithstanding anything to the contrary contained in this paragraph,
except for dunnage moved in the ordinary course of business, no Customer
Property shall be removed from the Debtors' premises unless, prior to such
removal, the applicable Customer, the applicable Debtor and the Lenders have
agreed that such property is owned by the applicable Customer, or unless other
arrangements satisfactory to the applicable Debtor and the Lenders are put in
place to protect the Lenders and Debtors in the event the property in question
is not owned by the respective Customer.
9. RESERVATION OF RIGHTS.
Except to the extent expressly provided in this Agreement, (without
limitation, as provided in paragraphs 1 and 3 above), the Customers reserve and
do not waive any claims, rights and remedies that they individually may have
against the Debtors in connection with any prior, existing or future defaults
under the Purchase Orders and expressly reserve all such claims, rights and
remedies they have under any Purchase Orders and otherwise applicable law.
10. RIGHT OF ACCESS
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The Lenders consent to the Debtors' grant to the Customers of the
right to use and occupy the Debtors' premises and assets as provided in the
Access and Security Agreement of even date (the "Access Agreement") being
executed simultaneous with this Agreement and which is incorporated by
reference. Simultaneous with the execution of this Agreement, the Lenders will
formalize their consent to the Access Agreement by signing the Consent attached
as Schedule 10A to the Access Agreement.
11. NO OBJECTION; COOPERATION.
The Customers do not object to (a) delivery by ABS or the Debtors to
the Lenders of their tax refunds, if any, or (b) the Lenders' and Debtors'
agreement to retain an investment banker to effect a sale of the Debtors'
assets as expeditiously as possible. The Customers agree to cooperate with the
Lenders in identifying qualified prospective purchasers of the Debtors' assets.
12. CONTINUATION IN BANKRUPTCY.
The Debtors, the Lenders and Customers agree that this Agreement will
continue if a voluntary/involuntary bankruptcy is filed by or against either or
both Debtors but only upon the entry of an appropriate financing order;
provided that the Debtors, the Customers and the Lenders will submit to the
bankruptcy court the form of a debtor in possession financing order that will
include substantially similar terms and conditions as contained in this
Agreement. It is acknowledged that a bankruptcy filing alone will not be a
default under this Agreement.
13. GENERAL TERMS.
A. This Agreement constitutes the entire understanding
of the parties in connection with the subject matter hereof. This
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Agreement may not be modified, altered or amended except by an agreement in
writing signed by all parties.
B. The parties executing this Agreement as
representatives warrant that they have the power and authority to execute
this Agreement on behalf of the corporation or entity that they represent and
that their signatures bind said corporations or entities to the terms of this
Agreement.
C. The Debtors may not assign or transfer, directly or
indirectly, any of their rights under this Agreement without the prior written
consent of all the parties to this Agreement. Likewise, this Agreement is not
intended for the benefit of any third parties, including, without limitation,
other customers of the Debtors (other than affiliates of the respective
Customers).
D. No delay or failure of the Customers or the Lenders
to exercise any right, power or privilege hereunder shall affect such right,
power or privilege, nor shall any single or partial exercise thereof preclude
any further exercise thereof, nor the exercise of any other right, power or
privilege. The rights of the Customers under the Purchase Orders are
cumulative and are not exclusive of any rights or remedies which the Customers
would otherwise have except as modified herein. Further, nothing in this
Agreement is or shall be deemed to be, a waiver or abandonment of any rights or
remedies of the Lenders under the Credit Agreement, each of which rights and
remedies is specifically reserved. For purposes of this Agreement, time shall
be of the essence.
E. Nothing in this Agreement shall be interpreted to
appoint the Debtors or any agent, employee or representative of the Debtors, as
the agent for the Customers or the Lenders for any purpose.
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F. Should any provision of this Agreement be held
invalid or unenforceable, the remainder of this Agreement will not be affected
thereby.
G. The Debtors agree that they will not enter into any
other arrangements or agreements that would in any way materially impair the
Customers' or the Lenders' rights under this Agreement.
H. As to the Customers, this Agreement is intended to
supplement and modify the terms and conditions of the respective Purchase
Orders, which terms and conditions shall otherwise remain in full force and
effect. To the extent that any term or provision in this Agreement is
inconsistent with any term or condition of the respective Purchase Orders, the
terms and conditions of this Agreement shall control.
I. The Debtors, for themselves and their successors and
assigns, forever waive and release any claims of any kind, whether matured or
unmatured, liquidated or unliquidated, known or unknown, that the Debtors may
have and or may now have against the Lenders or the Customers for any action
taken or omitted to be taken, or any representation made, by the Lenders in
respect of this Agreement or the Credit Agreement or by the Customers in
respect of this Agreement or any Purchase Orders. The foregoing is not intended
to waive or affect any amounts owing by the Customers to the Debtors for goods
or services sold or provided by the Debtors.
J. This Agreement may be executed in counterparts, and
facsimile copies of signatures shall be treated as originals for all purposes.
K. The Customers will cooperate with the Lenders in
evaluating the merchantability of existing finished goods inventory.
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14. THE PARTIES HERETO ACKNOWLEDGE THAT THEY HAVE BEEN GIVEN THE
OPPORTUNITY TO CONSULT WITH COUNSEL BEFORE EXECUTING THIS AGREEMENT AND ARE
DOING SO WITHOUT DURESS OR COERCION AND WITHOUT RELIANCE ON ANY
REPRESENTATIONS, WARRANTIES OR COMMITMENTS OTHER THAN THOSE REPRESENTATIONS,
WARRANTIES AND COMMITMENTS SET FORTH IN THIS AGREEMENT.
15. THE PARTIES HERETO ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY
IS A CONSTITUTIONAL RIGHT, BUT THAT THIS RIGHT MAY BE WAIVED. THE PARTIES EACH
HEREBY KNOWINGLY, VOLUNTARILY AND WITHOUT COERCION, WAIVE ALL RIGHTS TO A TRIAL
BY JURY OF ALL DISPUTES ARISING OUT OF OR IN RELATION TO THIS AGREEMENT OR ANY
OTHER AGREEMENTS BETWEEN THE PARTIES. NO PARTY SHALL BE DEEMED TO HAVE
RELINQUISHED THE BENEFIT OF THIS WAIVER OF JURY TRIAL UNLESS SUCH
RELINQUISHMENT IS IN A WRITTEN INSTRUMENT SIGNED BY THE PARTY TO WHICH SUCH
RELINQUISHMENT WILL BE CHARGED.
25
NATIONAL CITY BANK FIFTH THIRD BANK
By: By:
------------------------------ ------------------------------
Its: Its:
-------------------- -------------------
GKN AUTOMOTIVE, INC. SANWA BUSINESS CREDIT
CORPORATION
By: By:
------------------------------ ------------------------------
Its: Its:
-------------------- -------------------
DANA CORPORATION FORD MOTOR COMPANY
By: By:
------------------------------ ------------------------------
Its: Its:
-------------------- -------------------
AMERICAN AXLE & MANUFACTURING, GENERAL MOTORS CORPORATION
INC.
By: By:
------------------------------ ------------------------------
Its: Its:
-------------------- -------------------
COLFOR, INC. COLMACH, INC.
By: By:
------------------------------ ------------------------------
Its: Its:
-------------------- -------------------
26
ACCESS AND SECURITY AGREEMENT
-----------------------------
Colfor, Inc. ("COLFOR") and Colmach, Inc. ("COLMACH," or collectively
with Colfor, the "DEBTORS") and GKN Automotive, Inc., Dana Corporation, Ford
Motor Company, General Motors Corporation and American Axle & Manufacturing,
Inc. (the "CUSTOMERS"), enter into this Access and Security Agreement (this
"AGREEMENT") on February 16, 1996.
RECITALS
--------
A. Pursuant to certain supply contracts or purchase orders
between the Debtors and the respective Customers (the "PURCHASE ORDERS"), the
Debtors supply component parts to the Customers (the "COMPONENT PARTS").
B. The Debtors have requested certain financial accommodations
from the Customers as provided in an Accommodation and Forbearance Agreement
dated the date hereof (the "ACCOMMODATION AGREEMENT").
C. In consideration for the accommodations set forth in the
Accommodation Agreement and to induce the Customers to defer from immediately
exercising their rights under the Purchase Orders, the Customers have requested
that the Debtors provide to the Customers certain assurances and
acknowledgments.
D. The Debtors acknowledge that any delay in production of the
Component Parts or default under the Purchase Orders may cause the Customers
irreparable harm.
E. The Customers are entering into this Agreement to afford the
Customers the right to use certain of the Debtors' assets (the "OPERATING
ASSETS" and the "REAL ESTATE" as defined below) if a "DEFAULT" (defined below)
occurs.
THEREFORE, in consideration of the above recitals (which are part of
this Agreement) and other good and valuable consideration, the receipt and
sufficiency of which are acknowledged, the Debtors and the Customers agree as
follows:
TERMS AND CONDITIONS
--------------------
1. DEFINED TERMS. In addition to those terms defined elsewhere
in this Agreement, the following terms shall have the indicated meanings,
unless the context otherwise requires:
"ACCOUNTS" means any "account" or "chattel paper", as such
terms are defined in Sections 9-106 and 9-105, respectively, of the
Code, now or hereafter owned by the Debtors, and shall also mean and
include (i) all accounts
27
receivable, contract rights, book debts, notes, drafts, instruments,
documents, acceptances, payments under leases and other forms of
obligations, now owned or hereafter received or acquired by or
belonging or owing to either of the Debtors (including under any trade
names, styles or divisions thereof) whether arising out of goods sold
or leased or services rendered by either of them or from any other
transaction, whether or not the same involves the sale of goods or
services by the Debtors (including, without limitation, any such
payment obligation or right to payment which might be characterized as
an account, contract right, general intangible or chattel paper under
the Uniform Commercial Code in effect in any jurisdiction); and (ii)
all monies due to or to become due to either Debtor under all
contracts for the sale or lease of goods or the performance of
services by either Debtor (whether or not yet earned by performance)
now in existence or hereafter arising.
"CODE" means the Uniform Commercial Code as in effect in the
State of Ohio as of the date of this Agreement.
"CONTRACT RIGHTS" means all rights of each Debtor (including,
without limitation, all rights to payment) under each Contract
(defined below).
"CONTRACTS" means, collectively, all licensing agreements and
any and all other contracts, supply agreements or other agreements in
or under which either Debtor may now or hereafter have any right,
title or interest and which pertain to the lease, sale or other
disposition by either Debtor of Equipment, Inventory, fixtures, real
property or any interest in real property, or the right to use or
acquire personal property, as any of the same may from time to time be
amended, supplemented or otherwise modified.
"DEFAULT" shall mean any of the following events:
(a) An officer or director of either Debtor acknowledges
in writing that such Debtor is unable or unwilling to
timely satisfy any material portion of any Customer's
delivery requirements of the Component Parts in
accordance with the terms and conditions of the
agreements between such Customer and such Debtor;
(b) A voluntary or involuntary petition under Chapter 7
of the Bankruptcy Code is filed against either Debtor
and such petition, is not (i) dismissed within thirty
(30) days, or (ii) converted to a proceeding under
Chapter 11 of the Bankruptcy Code within thirty (30)
days.
(c) Either Debtor makes an assignment for the benefit of
creditors or a similar transfer of or action
involving any Operating Assets or Real Estate for
purposes of liquidating a material portion of the
Operating Assets or Real Estate owned by such
28
Debtor, or a non-bankruptcy trustee, custodian or
receiver is appointed over all or substantially all
of either Debtor's property.
(d) Subject to any performance excuses available under
the respective Purchase Orders or applicable law,
either Debtor fails or refuses for any reason to ship
or produce any Components Parts, the consequence of
which is that material interruption of production at
any of the Customers' plants is imminent.
(e) The Lenders commence a foreclosure action of their
liens, security interests and/or mortgages in or
against a material portion of the Operating Assets of
either Debtor.
"DOCUMENTS" means all "documents" as that term is defined in
Section 9-105(f) of the Code.
"EQUIPMENT" means any "equipment", as such term is defined in
Section 9-109(2) of the Code, now or hereafter owned by either Debtor,
and shall also mean and include all machinery, equipment, vehicles,
furnishings and fixtures (as such term is defined in Section 9-313(a)
of the Code) now owned or hereafter acquired by either Debtor,
including, without limitation, all items of machinery and equipment of
any kind, nature and description, whether affixed to real property or
not, as well as all additions to, substitutions for, replacements of
or accessions to any of the foregoing items and all attachments,
components, parts (including spare parts) and accessories whether
installed thereon or affixed thereto.
"GENERAL INTANGIBLES" means all "general intangibles", as such
term is defined in Section 9-106 of the Code, now or hereafter owned
by either Debtor, including, without limitation, customer lists,
rights in intellectual property, goodwill, trade names, service marks,
trade secrets, patents, trademarks, copyrights, applications therefor,
permits, licenses, now owned or hereafter acquired by either Debtor,
but excluding items described in the definition of Accounts.
"INSTRUMENTS" means all "instruments", as such term is defined
in Section 9-105(i) of the Code.
"INVENTORY" means any "inventory", as such term is defined in
Section 9-109(4) of the Code, wherever located, now owned or hereafter
acquired by either Debtor or in which either Debtor now has or
hereafter may acquire any right, title or interest including, without
limitation, all goods and other personal property now or hereafter
owned by either Debtor which are leased or are held for sale or lease
or are furnished or are to be furnished under a contract of service or
which constitute raw materials, work in process or materials used or
consumed or to be used or consumed in either
29
Debtor's business, or in the processing, packaging or shipping of the
same, and all finished goods.
"LENDERS" means National City Bank, Fifth Third Bank and
Sanwa Business Credit Corporation.
"OBLIGATIONS" means the Debtors' obligations under this
Agreement including, without limitation, the obligation to provide the
Customers (or their designee) the "Right of Access" defined below.
"OPERATING ASSETS" means all assets necessary or helpful for
production of the Component Parts, wherever located, including
Equipment, Contract Rights and General Intangibles (other than deposit
accounts, insurance refunds, tax refunds, tax refund claims and
related cash and cash equivalents), but specifically excluding
Accounts, Inventory, Documents, Instruments, Chattel Paper (and cash
or cash equivalent Proceeds of such excluded items and of General
Intangibles) which are not required for production of the Component
Parts.
"PROCEEDS" shall have the meaning provided it under the Code
and, in any event, shall include, but not be limited to (i) any and
all proceeds of any insurance, indemnity, warranty or guaranty payable
to either Debtor from time to time with respect to any of the
Operating Assets, (ii) any and all payments (in any form whatsoever)
made or due and payable to either Debtor from time to time in
connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Operating Assets by any
governmental body, authority, bureau or agency (or any Person acting
under color of governmental authority) and (iii) any and all other
amounts from time to time paid or payable under or in connection with
any of the Operating Assets.
"REAL ESTATE" means the ownership and/or leasehold interests
and related rights and interests in the premises commonly known as
3255 Alliance Road, Malvern, Ohio 44644 and 461 David Dean Drive,
Minerva, Ohio 44657, which are owned and/or leased by either Debtor.
Each Debtor's rights in the Real Estate and any rights granted to the
Customers hereunder are subject to the terms and conditions of any
underlying real estate leases.
"REQUIREMENT OF LAW" means the charter and By-Laws or other
organizational or governing documents of any entity, and any material
law, treaty, rule or regulation or determination of arbitration or a
court or other governmental authority, in each case applicable to or
binding upon any applicable person or entity or any of its property or
to which such entity or person or any of its property is subject.
2. GRANT OF LIENS AND SECURITY INTERESTS. As collateral security
for the Obligations, each Debtor hereby grants to the Customers a continuing
security interest in its Operating Assets and such Debtor's interest in the
Real Estate whether now owned or
30
hereafter acquired by such Debtor, or in which such Debtor now has or at any
time in the future may acquire any right, title or interest; PROVIDED, HOWEVER,
the forgoing security interest shall be limited to the respective Debtor's
interests in the Operating Assets and if such assets are subject to leases, the
security interest shall only attach to the extent the respective Debtor has the
right to assign or pledge its lessee's interest(s). Further, subject to the
Customers' Right of Access (defined below), the security interest granted to
the Customers shall be subordinate to the Lender's liens and security
interests.
3. RIGHT OF ACCESS
a. GENERAL. Upon a Default, any Customer or its
designee shall have a right to use and occupy the Operating Assets
(necessary for production of the respective Customer's Component
Parts) and the Real Estate (necessary for production of the respective
Customer's Component Parts) to manufacture Component Parts for a
period of up to 180 days from the date of the Default (the "RIGHT OF
ACCESS" and the "ACCESS PERIOD"). Although the Customers' Right of
Access shall accrue if a Default occurs, the Customers agree that they
will give the Debtors and the Lenders as much advance notice as is
practicable of (a) an actual Default, or (b) any condition or action
they believe may or will lead to the occurrence of a Default. Any
Customer (the "INITIAL ELECTING CUSTOMER") may invoke the Right of
Access by delivering written notice to the Debtors and the Lenders
indicating its intention to invoke the Right of Access. Such written
notice shall simultaneously be delivered by the Initial Electing
Customer to each of the other Customers by facsimile or by hand
delivery. Each of the other Customers may elect to join such Initial
Electing Customer in invoking the Right of Access by providing written
notice of such election to the Initial Electing Customer, and to the
Debtors and the Lenders. By electing to join the Initial Electing
Customer in invoking the Right of Access, a Customer also becomes an
Electing Customer (together with the Initial Electing Customer, the
"ELECTING CUSTOMERS") and all of such Electing Customers agree to
abide by and be bound by all of the terms and conditions of this
Agreement including sharing the costs and expenses the Customers are
obligated to pay herein in the event that they invoke the Right of
Access; the Electing Customers agree to allocate productive capacity
in a reasonable and equitable manner. Anything herein to the contrary
notwithstanding, any Customer who does not elect to join the Initial
Electing Customer in invoking the Right of Access shall have no Right
of Access under this Agreement, nor shall such non-electing Customer
have any duties or obligations hereunder, including the obligation to
share in any costs and expenses during the Access Period. The
Customers shall have no right to sell, transfer or dispose of the
Operating Assets and Real Estate (a) as part of their use and
occupancy of the Operating Assets and Real Estate, or (b) by virtue of
the security interests granted hereunder.
31
b. THE CUSTOMERS'S OBLIGATIONS. If the Right of Access
is invoked, the Electing Customers so invoking the Right of Access
shall:
(i) jointly and severally indemnify and hold the Debtors,
ABS Industries, Inc., ("ABS") and their respective
officers and directors (which officers and directors
exist as of the date hereof or as may exist on the
date of the Default or during the Access Period),
Lenders (and their officers, directors and agents),
and the owners of the Real Estate harmless from any
and all costs, damages, liabilities or injury caused
by the Electing Customers' or their designee's use of
the Operating Assets and the Real Estate during the
Access Period, including, without limitation, any
such costs, damages, liabilities or injury arising
from or related to claims asserted by third party
lessors for the Electing Customers use of any of the
Operating Assets or Real Estate owned by such third
parties; PROVIDED, HOWEVER, that the forgoing
indemnity and hold harmless provision shall not
include any claims asserted by ABS' shareholders or
claims asserted by any third parties against any
officers or directors of ABS or the Debtors for
breach of fiduciary duties, if any;
(ii) insure and maintain the Operating Assets (being used
by the Electing Customers) and the Real Estate (being
used by the Electing Customers) in the same condition
as existed on the date the Initial Electing Customer
exercised the Right of Access, ordinary wear and tear
excepted;
(iii) pay all actual costs and expenses incurred in
connection with the manufacturing of Component Parts
during the Access Period, including, without
limitation, rent on the Real Estate, prorated
property taxes and assessments attributable to the
Operating Assets and Real Estate and any payments due
on account of any of the Operating Assets or Real
Estate which are leased from third parties; and
(iv) subject to the Electing Customers' or their
designee's right to use and occupancy of the
Operating Assets and the Real Estate during the
Access Period, afford the Debtors' representatives
(and representatives of Lenders, and other secured
creditors or mortgagees of the Operating Assets
and/or Real Estate) reasonable access to inspect the
Operating Assets and the Real Estate, to prepare for
a liquidation of the Operating Assets and the Real
Estate at the end of the Access Period, and to
liquidate and realize upon any assets other than the
Operating Assets (the Electing Customers agrees to
identify the Operating
32
Assets within thirty (30) days after exercising the
Right of Access) and the Real Estate prior to
expiration of Access Period;
(v) subject to the Electing Customers' or their
designee's right to use and occupancy of the
Operating Assets and the Real Estate during the
Access Period for purposes of producing Component
Parts, (A) the Electing Customer(s) shall afford
other customers of the Debtors reasonable access to
the Real Estate and any non-Operating Assets located
on or about the Real Estate; and (B) subject to
Debtors' other customers agreeing to (1) make payment
to the Electing Customers or their designee on
account of their allocable share of overhead and
related expenses (including the use and occupancy
charge and employee costs noted below) and all direct
expenses related to such other customers' production,
(2) Debtors making the necessary tangible personal
property available for use during the Access Period,
and (3) such other customers entering into
agreements acceptable to the Lenders, the Electing
Customers agree for themselves and their designee, to
not interfere with such other customers use of the
Debtors' assets during the Access Period; provided,
however, such other customers shall not interfere
with the production of Component Parts;
(vi) pay, in arrears, a use and occupancy charge to
Lenders for the Debtors' account, of $250,000 per
month or any portion thereof commencing thirty (30)
days after the Electing Customers invoke their Right
of Access;
(vii) comply with the following:
(A) If the Right of Access is invoked, Debtors
shall continue to employ some or all of their
employees (the "EMPLOYEES") as required by
and for the benefit of the Electing Customers
or their designee, and the Electing Customers
or their designee shall pay on Debtors'
behalf, all costs and expenses relating to
Debtors' employment of the employees which
are incurred during the Access Period.
Without limiting the generality of the
foregoing, the Electing Customers or their
designee shall pay, on Debtors' behalf, all
amounts incurred by Debtors to make their
regular payroll obligations, including,
without limitation, salaries, wages, payroll
taxes, workers compensation, unemployment
insurance, disability insurance, welfare,
pension and other payment and contributions
required to be made by Debtors with respect
to the employees which are incurred during
the Access Period,
33
but in no event will the Customers be liable
for any costs for unfunded pension liability
relating to service prior to the time the
Right of Access is invoked. Notwithstanding
the foregoing, under no circumstances will
the Customers be responsible for reimbursing
the Debtors for costs and expenses related to
the Debtors' employment of the employees to
the extent the employees are performing
services unrelated to the production of
Component Parts. The payments made pursuant
to this subparagraph (A) and pursuant to
subparagraph 3(b)(iv) above shall not be
setoff or recouped from any amounts owing by
the Electing Customers to Debtors or Lenders.
(B) During the Access Period, the Debtors shall
not increase compensation of benefits of the
employees except as may be required by
applicable law.
(C) The Debtors, jointly and severally, shall
indemnify, defend and hold the Electing
Customers, their designee and their
respective employees and agents harmless from
any and all costs, expenses (including
reasonable attorneys fees), losses, damages,
liabilities or injury arising from claims or
liabilities (the "CLAIMS") arising or
accruing prior to the date of exercise of the
Right of Access which relate to the Operating
Assets and/or the Real Estate, regardless of
when such claims are asserted but only to the
extent the Claims are not exacerbated or
increased by the Electing Customers.
c. RIGHT TO TERMINATE. The Electing Customers shall
jointly have the right to terminate their Right of Access upon 10 days
written notice to the Debtors and Lenders. Upon expiration of the
referenced notice period, the Access Period shall terminate and,
except for the obligations referenced in subparagraph b(i) and payment
of any amounts payable under subparagraphs (i) through (vii) above not
paid as of the termination of the Access Period, the Customers shall
have no further obligations or liabilities to the Debtors or Lenders
on account of the Right of Access.
d. SPECIFIC PERFORMANCE. IN CONNECTION WITH ANY ACTION
OR PROCEEDING TO ENFORCE THE RIGHT OF ACCESS, THE DEBTORS ACKNOWLEDGES
THAT THE CUSTOMERS WILL NOT HAVE AN ADEQUATE REMEDY AT LAW, THAT THE
OPERATING ASSETS AND REAL ESTATE ARE UNIQUE AND THE CUSTOMERS SHALL BE
ENTITLED TO SPECIFIC PERFORMANCE OF THE DEBTORS' OBLIGATION TO AFFORD
THE CUSTOMERS THEIR RIGHT OF ACCESS UNDER THIS AGREEMENT.
e. IRREPARABLE HARM; LIMITATION OF NOTICE. THE DEBTORS
ACKNOWLEDGE THAT THE CUSTOMERS WILL SUFFER IRREPARABLE HARM IF
34
THE CUSTOMERS INVOKE THEIR RIGHT OF ACCESS AND THE DEBTORS FAIL TO
COOPERATE WITH THE CUSTOMERS IN ALLOWING THE CUSTOMERS TO EXERCISE
THEIR RIGHT OF ACCESS UNDER THIS AGREEMENT. ACCORDINGLY, PROVIDED
THAT THE DEBTORS RECEIVE AT LEAST TWENTY-FOUR (24) HOURS ACTUAL NOTICE
OF ANY REQUEST FOR HEARINGS IN CONNECTION WITH PROCEEDINGS INSTITUTED
BY THE CUSTOMERS, THE DEBTORS WAIVE, TO THE FULLEST EXTENT POSSIBLE
UNDER APPLICABLE LAW, THE RIGHT TO NOTICE IN EXCESS OF 48 HOURS IN
CONNECTION WITH ANY JUDICIAL PROCEEDINGS INSTITUTED BY THE CUSTOMERS
IN CONNECTION WITH THE ENFORCEMENT OF THEIR RIGHT OF ACCESS.
4. OBLIGATION TO PURCHASE INVENTORY. If the Right of Access is
invoked, each Electing Customer shall purchase all usable and merchantable raw
materials, work in process and finished goods inventory related to goods
produced by the Debtors for such Customer (the "ELECTING CUSTOMER INVENTORY").
The Electing Customers may not use any Inventory of the Debtors which is not
purchased pursuant to this paragraph. The price for the Electing Customer
Inventory (free and clear of all liens and security interests) shall be:
a. for raw materials, 100% of the Debtors' actual invoice
cost;
b. for work in process, 80% of the Debtors' cost of
producing such work in process, with cost calculated as the value of
raw materials incorporated into the subject parts plus actual
manufacturing costs and a prorated burden allocation for general,
administrative, operating, sales and overhead expenses, but with no
allocation for profit margin, but in no event greater than the
pro-rated current purchase order price for the Component based on a
percentage of completion;
c. for finished goods, the price called for by the
underlying Purchase Order.
Within forty-five (45) days of the date the Initial Electing Customer exercises
the Right of Access, the Electing Customers shall make payment to Lenders
(without setoff or recoupment on any basis), on the Debtors' behalf, for any
Electing Customer Inventory purchased pursuant to this paragraph; provided
however, the Electing Customers agree to cooperate with the Lenders in taking a
physical inventory of the Electing Customer Inventory as soon as practicable
after the beginning of the Access Period. The Debtors and the guarantors of
Colfor's obligations to Lenders (by executing the attached acknowledgement),
acknowledge that the foregoing prices to be paid for the Electing Customer
Inventory by each Electing Customer constitute commercially reasonable prices,
and that any sale by Lenders pursuant to the foregoing shall be deemed to be
commercially reasonable in all respects, including method, time, place and
terms.
35
5. RIGHTS OF CUSTOMERS; LIMITATIONS ON CUSTOMERS' OBLIGATIONS.
Unless the Customers exercise their Right of Access, in which case the Electing
Customers shall have the obligations outlined in Section 3 above, the Customers
shall not have any obligation or liability by reason of or arising out of this
Agreement nor shall the Customers be required or obligated in any manner to
perform or fulfill any of the obligations of the Debtors.
6. REMEDIES. Upon a Default and the expiration of any applicable
cure periods, the Customers shall have all rights and remedies provided in this
Agreement, in any other agreements with the Debtors and all rights and remedies
available to a secured creditor under applicable law. Further, in connection
with the Customers' rights and remedies under this Agreement:
a. The Debtors waive any right they may have to require
the Customers to foreclose their security interests and liens and/or
reduce the Obligations to a monetary sum;
b. If the Right of Access is invoked, the Electing
Customers shall be treated as a secured party in possession and the
Customers' use and occupancy of the Operating Assets shall not be
deemed to be acceptance of such assets in satisfaction of the
Obligations; and
c. All of the Customers' rights and remedies under this
Agreement are cumulative and not exclusive of any rights and remedies
under any other agreement or under applicable law.
7. INJUNCTIVE RELIEF. Given that the Customers' respective plant
operations may be negatively impacted, and because the Customers do not have an
adequate remedy at law and would be irreparably harmed by such events, the
Debtors agree that the Customers shall be entitled to injunctive relief (both
prohibitive and mandatory) in connection with any violations of any terms or
conditions of this Agreement.
8. REPRESENTATIONS AND WARRANTIES. The Debtors hereby represent
and warrant to the Customers that:
a. TITLE; NO OTHER SECURITY INTERESTS. Except for the
security interest granted hereunder to the Customers, liens and
security interests granted to Lenders, and security interests of
record and leases disclosed by the Debtors as of the date of this
Agreement, the Debtors own the Operating Assets and leases of Real
Estate free and clear of any and all security interests or claims of
others.
b. ADDRESSES. Each Debtor's chief executive offices and
business locations are set forth in paragraph 18 below. The states in
which Operating Assets are located, and each Debtor's chief executive
offices and principal place of business in each state, shall not be
changed without prior written notice to the Customers, but the
Operating Assets,
36
wherever located, are covered by this Agreement. Each Debtor shall
immediately advise the Customers in writing of any change in its name,
trade name, address or form of organization.
c. TRADE NAMES. Any and all trade names under which
either Debtor transacts any part of its business, and all former names
of each Debtor, are those which have been previously disclosed to the
Customers in writing.
9. COVENANTS. The Debtors, jointly and severally, covenant and
agree with the Customers that during the term of this Agreement;
a. FURTHER DOCUMENTATION. At any time and from time to
time, upon the written request of the Customers, and at the sole
expense of the Debtors, the Debtors will promptly and duly execute and
deliver any and all such further instruments and documents and take
such further action as the Customers may reasonably request for the
purpose of obtaining the full benefits of this Agreement and of the
rights and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the Uniform
Commercial Code in effect in any jurisdiction with respect to the
Security Interests granted hereby. A carbon, photographic or other
reproduction of this Agreement shall be sufficient as a financing
statement for filing in any jurisdiction.
b. USE, SALES OR DISPOSITIONS OF OPERATING ASSETS;
CERTAIN USES PROHIBITED. Except as provided in and permitted by, the
Accommodation Agreement, which is incorporated herein by reference, or
the Credit Agreement, the Debtors will not sell or otherwise dispose
of any Operating Assets or the Real Estate except in the ordinary
course of business. Subject to the Debtors not impairing the
Customers' Right of Access and any rights of the Customers under the
applicable Purchase Orders or the course of dealing between the
Customers and the Debtors, the Debtors shall be free to operate their
business and dispose of and/or replace Operating Assets as the Debtors
deem appropriate. Further, the Debtors will not use any of the
Operating Assets or Real Estate in any way which would materially
adversely affect the Right of Access or the Customers' other rights
and remedies under this Agreement.
c. LIMITATIONS ON MODIFICATIONS OF AGREEMENTS, ETC.
Neither Debtor will other than in the ordinary course of business, (i)
amend, modify, terminate or waive any provision of any Contract which
might materially adversely affect the Right of Access, or (ii) fail to
exercise promptly and diligently each and every right which it may
have under each Contract in any manner which could materially
adversely affect the Right of Access or the Customers' other rights
and remedies under this Agreement.
37
d. RIGHT OF INSPECTION; COOPERATION. In addition to any
rights the Customers may have under the Purchase Orders or any other
purchase order or supply contract, the Customers and their
representatives shall, upon reasonable request and reasonable times,
have the right to enter into and upon any premises where any of the
Operating Assets and the Real Estate are located for the purpose of
inspecting the same, observing its use or otherwise protecting the
Customers' interests therein. The Customers will take reasonable
steps to maintain the confidentiality of information obtained by the
Customers, except as required by law.
10. SECURED PARTY ACKNOWLEDGMENTS. Simultaneously with the
execution of this Agreement, Debtors shall deliver the Lenders' consent to this
Agreement in the form of SCHEDULE 10A. If subsequent to the execution of this
Agreement, the Debtors intend to grant additional or further security
interests, liens or mortgages in the Operating Assets or the Real Estate to any
party other than Lenders, within five (5) business days prior of granting such
liens, security interests or mortgages, the Debtors shall deliver to the
Customers an acknowledgment from such secured creditors and/or mortgagees in a
form substantially similar to SCHEDULE 10B.
11. LANDLORD CONSENTS. The Debtors warrant that they will use
their best efforts to secure (within 15 days of the date of this Agreement) the
agreements of its landlords, if any, to the terms and conditions of this
Agreement in the form attached as SCHEDULE 11.
12. TERM. The rights granted the Customers under this Agreement
shall continue until (a) April 21, 1996, or (b) if the Right of Access is
invoked on or before April 21, 1996, then until the earlier of October 15, 1996
or the termination of the Access Period as provided in this Agreement. Further,
the Customers agree to terminate and cancel this Agreement upon a sale of the
stock or assets of the Debtors to a purchaser reasonably satisfactory to the
Customers representing at least 66% of the Debtors' then existing aggregate
sales volume for all Customers.
13. CONFIDENTIAL INFORMATION AND DATA. To the extent the
Operating Assets include, or the Customers' (or their designee) otherwise come
into possession of or become aware of, either Debtor's trade secrets or
proprietary information during the Customers' exercise of their Right of
Access, the Customers (and their designee) shall (a) keep such information,
data and trade secrets confidential, and (b) only use such information, data
and trade secrets during the Access Period in connection with producing
Component Parts. The provisions of this paragraph shall survive termination of
this Agreement.
14. SEVERABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or
38
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
15. SECTION HEADINGS, ETC. The Section headings used in this
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation
hereof. All references to Sections, Schedules and Exhibits are to Sections,
Schedules and Exhibits in or to this Agreement unless otherwise specified.
16. NO WAIVER; CUMULATIVE REMEDIES. The Customers shall not by
any act, delay, indulgence, omission or otherwise be deemed to have waived any
right or remedy under this Agreement or in any breach of the terms and
conditions of this Agreement. A waiver by the Customers of any right or remedy
under this Agreement on any one occasion shall not be construed as a bar to any
right or remedy which the Customers would otherwise have had on any future
occasion. No failure to exercise nor any delay in exercising on the part of
the Customers any right, power or privilege under this Agreement, shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege under this Agreement preclude any other or future exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies under this Agreement are cumulative and may be exercised singly or
concurrently, and are not exclusive of any rights and remedies provided by any
other agreements or applicable law.
17. WAIVERS AND AMENDMENTS; SUCCESSORS AND ASSIGNS; GOVERNING LAW.
None of the terms or provisions of this Agreement may be waived, altered,
modified or amended except by a written instrument, duly executed by all
parties, and consented to by the Lenders. This Agreement and all obligations
of the Debtors hereunder shall be binding upon the successors and assigns of
the Debtors, and shall, together with the rights and remedies of the Customers
hereunder, inure to the benefit of the Customers and their respective
successors and assigns. The Debtors may not assign or transfer any of its
rights or obligations hereunder without the prior written consent of the
Customers. This Agreement shall be governed by, and be construed and
interpreted in accordance with, the laws of the State of Michigan, without
regard to principles regarding conflict of laws (except and then only to the
extent the laws of another jurisdiction govern the perfection of the Customers'
security interest hereunder).
18. NOTICES. All notices, requests and other communications that
are required or may be given under this Agreement shall be in writing, and
shall be deemed to have been given on the date of delivery, if delivered by
hand, telecopy or courier, or three (3) days after mailing, if mailed by
certified or registered mail, postage prepaid, return receipt requested,
addressed as set forth below (which addresses may be changed, from time to
time, by notice
39
given in the manner provided in this Section) and shall be provided
simultaneously to all parties to this Agreement and to the Lenders.
If to the Debtors: Mr. Fred Caruso
Colfor, Inc.,
State Route #183
Malvern, Ohio 44644
with a copy to: Hugh M. Stanley, Jr., Esq.
Arter & Hadden
1100 Huntington Building
925 Euclid Avenue
Cleveland, Ohio 44115
If to the Customers: c/o General Motors Corporation
3031 West Grand Boulevard, 8th Floor
Detroit, Michigan 48202
Attention: Christopher F. Dubay, Esq.
with a copy to: Donald F. Baty, Esq.
Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit, Michigan 48226
If to the Lenders: c/o National City Bank, as Agent
1900 East Ninth Street
Cleveland, Ohio 44114-3484
Attn: Gregory A. Godec
Jennifer B. DuChene, Esq.
40
with a copy to: David G. Heiman, Esq.
Jones, Day, Reavis & Pogue
North Point
901 Lakeside Avenue
Cleveland, Ohio 44114
19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which when so executed and delivered shall be an original, but all of which
together shall constitute one and the same instrument, and it shall not be
necessary in making proof of this Agreement to produce or account for more than
one such counterpart.
20. THIRD PARTY BENEFICIARIES. Except for the Lenders, there are
no intended third party beneficiaries of this Agreement other than as expressly
provided herein.
21. ENTIRE AGREEMENT; CONFLICTS. This Agreement together with any
other agreements and schedules executed in connection with this Agreement
constitutes the entire understanding of the parties in connection with the
subject matter hereof. This Agreement may not be modified, altered or amended
except by an agreement in writing signed by the Customers and The Debtors. To
the extent any terms or conditions of this Agreement (other than the
Accommodation and Forbearance Agreement of even date) are inconsistent or
conflict with the terms of any other agreements between the parties, the terms
of this Agreement shall govern and control.
COLMACH, INC. COLFOR, INC.
By: By:
------------------------------ ------------------------------
Its: Its:
-------------------- -------------------
STATE OF )
) SS
COUNTY OF ______________________ )
The foregoing instrument was acknowledged before me this ______ day of
_______, 1996 by _______________________________________, the
_______________________ of Colmach, Inc., and Colfor, Inc., on behalf of the
corporations.
_______________________________________
_______________________ , Notary Public
_________________ County, Michigan
My commission expires:_________________
[Signatures continue on next page]
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[Signatures continue from previous page]
GENERAL MOTORS CORPORATION
a Delaware corporation
By:_________________________________
Its:_______________________
STATE OF MICHIGAN )
) SS
COUNTY OF ______________ )
The foregoing instrument was acknowledged before me this _____day of
____________, 1996, by ______________________________, the
_____________________ of General Motors Corporation, a Delaware corporation,
on behalf of the corporation.
_________________________________________
_________________________ , Notary Public
_________________County, Michigan
My commission expires:___________________
GKN AUTOMOTIVE, INC.
By:________________________________
Its:______________________
STATE OF )
) SS
COUNTY OF ______________________ )
The foregoing instrument was acknowledged before me this _____day of
____________, 1996, by ______________________________, the
_____________________ of GKN Automotive, Inc., on behalf of the corporation.
_______________________________________
________________________, Notary Public
_________________County, Michigan
My commission expires:_________________
[Signatures continue on next page]
42
[Signatures continue from previous page]
DANA CORPORATION
By:________________________________
Its:______________________
STATE OF )
) SS
COUNTY OF ______________________ )
The foregoing instrument was acknowledged before me this _____day of
____________, 1996, by ___________________________, the __________________of
Dana Corporation on behalf of the corporation.
________________________________________
_________________________, Notary Public
_________________County, Michigan
My commission expires:__________________
FORD MOTOR COMPANY
By:________________________________
Its:______________________
STATE OF )
) SS
COUNTY OF ______________________ )
The foregoing instrument was acknowledged before me this _____day of
____________, 1996, by ______________________________, the
_____________________ of Ford Motor Company, on behalf of the corporation.
_________________________________________________
__________________________________, Notary Public
_________________County, Michigan
My commission expires:________________
[Signatures continue on next page]
43
[Signatures continue from previous page]
AMERICAN AXLE &
MANUFACTURING, INC.
By:_________________________________
Its:_______________________
STATE OF )
) SS
COUNTY OF ____________________ )
The foregoing instrument was acknowledged before me this _____day of
____________, 1996, by ______________________________, the
_____________________ of American Axle & Manufacturing, Inc., on behalf of the
corporation.
_________________________________________________
__________________________________, Notary Public
_________________County, Michigan
My commission expires:_______________________----
CONSENT
-------
While not a party to the forgoing Agreement, the undersigned is the
shareholder of the Debtors and in such capacity, consents to and agrees to be
bound by the terms and conditions of the forgoing Access and Security
Agreement.
ABS INDUSTRIES, INC.
By: _______________________________________
Title: ___________________________
44
SCHEDULES
10A - Lender's Consent
10B - Secured Party's Consent
11 - Landlord Consent
45
SCHEDULE 10A
ACKNOWLEDGMENT AND CONSENT
--------------------------
While not parties to the Access and Security Agreement between the
Customers and the Debtors dated February 16, 1996 (the "Access Agreement"), the
undersigned (the "Lenders") are parties to various loan and/or security
agreements with the Debtors. In such capacity, the Lenders acknowledge,
consent to, and agree that their security interests in the Debtors' assets
shall be subject to, all terms and conditions of the Access Agreement.
Further, the Lenders agree to release all liens and security interests they may
have in the Debtors' "Electing Customers Inventory" (defined in paragraph 4 of
the Access Agreement) in exchange for the payment provided in paragraph 4 of
the Access Agreement. The fact that the Lenders are executing this
Acknowledgement and Consent shall not in any way make the Lenders guarantors or
sureties for the Debtors' performance under the Access Agreement.
SANWA BUSINESS CREDIT CORPORATION
By:______________________________
Name:___________________
Title:__________________
Date:_____________
NATIONAL CITY BANK
By:______________________________
Name:___________________
Title:__________________
Date:_____________
[Signatures continue on next page]
46
[Signatures continue from previous page]
FIFTH THIRD BANK
By:______________________________
Name:___________________
Title:__________________
Date:_____________
47
SCHEDULE 11
ACKNOWLEDGEMENT AND CONSENT
The undersigned ("Owner") is a party to a lease with Colfor, Inc. and
Colmach, Inc. ("Debtors"), a copy of which is attached (the "Lease"). Owner
has reviewed the Access and Security Agreement between Debtors and certain
customers ("the Customers") dated January ___, 1996 (the "Access Agreement").
Subject to the Customers paying the monthly rent and other charges called for
by the Lease which accrue during the "Access Period" (as defined in the Access
Agreement) and otherwise satisfying its obligations under the Access Agreement,
Owner consents to and agrees to be bound by applicable provisions of the Access
Agreement. The fact that Owner is executing this Acknowledgement and Consent
shall not in any way make Owner a guarantor or surety for the Debtors'
performance under the Access Agreement.
_________________________________
By:_______________________________
Name:___________________
Title:__________________
Date:_____________
48
WRITER'S DIRECT DIAL Number:
(216) 696-3431
February 23, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: ABS Industries, Inc.
Current Report on Form 8-K
--------------------------
Ladies and Gentlemen:
On behalf of our client, ABS Industries, Inc., we transmit
herewith for filing in electronic format pursuant to the Securities Exchange
Act of 1934, as amended, a Current Report on Form 8-K, including all exhibits
thereto.
Please contact the undersigned at (216) 696-3431 or Robert T.
Wilson of this office at (216) 696-2032 if you have any questions concerning
the attached materials.
Very truly yours,
/s/ Glenn E. Morrical
Glenn E. Morrical
cc: William J. McCarthy
Nasdaq National Market